ALLIANCE GOVERNMENT RESERVES INC, 485BPOS, 1997-10-30

ALLIANCE GOVERNMENT RESERVES INC
485BPOS, 1997-10-30

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<PAGE>

As filed with the Securities and Exchange
Commission on October 30, 1997

File No. 2-63315

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Pre-Effective Amendment No.

Post-Effective Amendment No. 25 X
and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

Amendment No. 24 X

ALLIANCE GOVERNMENT RESERVES
(Exact Name of Registrant as Specified in Charter)
1345 Avenue of the Americas, New York, New York 10105
(Address of Principal Executive Office) (Zip Code)

Registrant's Telephone Number,
including Area Code:(800) 221-5672

EDMUND P. BERGAN, JR.
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and address of agent for service)

It is proposed that this filing will become effective (check
appropriate line)

X immediately upon filing pursuant to paragraph (b)
_____on (date) pursuant to paragraph (b)
_____60 days after filing pursuant to paragraph (a)
_____on (date) pursuant to paragraph (a) of rule 485.
_____75 days after filing pursuant to paragraph (a)(2)
_____on (date) pursuant to paragraph (a)(2) of Rule 485

<PAGE>

CROSS REFERENCE SHEET
(as required by Rule 404(c))

N-1A Item No. Location in Prospectus
(Caption)

PART A

Item 1. Cover Page Cover Page

Item 2. Synopsis Expense Information

Item 3. Financial Highlights Financial Highlights

Item 4. General Description Investment Objectives and
of Registrant Policies

Item 5. Management of the Fund Additional Information

Item 6. Capital Stock and Additional Information
Other Securities

Item 7. Purchase of Securities Purchase and Redemption
Being Offered of Shares; Additional
Information

Item 8. Redemption or Purchase and Redemption
Repurchase of Shares

Item 9. Pending Legal Not Applicable
Proceedings

PART B Location in Statement
of Additional Information
(Caption)

Item 10. Cover Page Cover Page

Item 11. Table of Contents Cover Page

Item 12. General Information Management;
and History General Information

Item 13. Investment Objectives Investment Objectives
and policies and policies Investment
Restrictions

Item 14. Management of the Fund Management

Item 15. Control Persons and Management

<PAGE>

Principal Holders of
Securities

Item 16. Investment Advisory and Management
Other Services

Item 17. Brokerage Allocation General Information

Item 18. Capital Stock and Other Daily Dividends -
Securities Determination of Net
Asset Value; General
Information

Item 19. Purchase, Redemption Purchase and Redemption
and Pricing of of Shares; Daily
Securities being Dividends - Determination
offered of Net Asset Value

Item 20. Tax Status Taxes

Item 21. Underwriters General Information

Item 22. Calculation of General Information
Performance Data

Item 23. Financial Statements Financial Statements;
Report of Independent
Accountants

<PAGE>

YIELD MESSAGES

For current recorded yield information on Alliance Government Reserves, call
on a touch-tone telephone toll-free (800) 251-0539 and press the following
sequence of keys: [_]1 [_]# [_]1 [_]# [_]2 [_]5 [_]#. For non-touch-tone
telephones, call toll-free (800) 221-9513.

Alliance Government Reserves (the "Fund") is a series of Alliance Government
Reserves, a diversified, open-end investment company. The Fund is a money
market fund with investment objectives of safety, liquidity and income. This
prospectus sets forth the information about the Fund 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
Corporation, the Federal Reserve Board or any other agency. There can be no
assurance that the Fund will be able to maintain a stable net asset value of
$1.00 per share.

A "Statement of Additional Information," dated November 1, 1997, which
provides a further discussion of certain areas in this prospectus and other
matters 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 (800) 221-5672 or write Alliance Fund Services, Inc. at
the address shown on page 7.

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........................................ 4
Purchase and Redemption of Shares......................................... 5
Additional Information.................................................... 6
</TABLE>

ALLIANCE
GOVERNMENT
RESERVES

[LOGO OF ALLIANCE CAPITAL APPEARS HERE]

PROSPECTUS
NOVEMBER 1, 1997

ALC25PRO7
<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.

ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
<TABLE>
<S> <C>
Management Fees......................................................... .47%
12b-1 Fees.............................................................. .25
Other Expenses.......................................................... .28
----
Total Fund Operating Expenses........................................... 1.00%
</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): $10 $32 $55 $122
</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 Fund will bear di-
rectly or indirectly. 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 . FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR (AUDITED)

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
financial statements and notes thereto included in the Statement of Additional
Information.

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
------ ------ ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of period......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------- ------- ------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income... .0443 .0461(b) .0439(b) .0244(b) .0256(b) .0421 .0640 .0765 .0774 0.0612
Net realized gain on in-
vestments.............. -0- -0- -0- -0- .0001 -0- -0- .0001 -0- -0-
------ ------ ------- ------- ------- ------- ------- ------- ------- -------
Net increase in net
assets from operations. .0443 .0461 .0439 .0244 .0257 .0421 .0640 .0766 .0774 0.0612
------ ------ ------- ------- ------- ------- ------- ------- ------- -------
LESS: DIVIDENDS AND DIS-
TRIBUTIONS
Dividends from net in-
vestment income........ (.0443) (.0461) (.0439) (.0244) (.0256) (.0421) (.0640) (.0765) (.0774) (0.0612)
Distributions from net
realized gains......... -0- -0- -0- -0- (.0001) -0- -0- (.0001) -0- -0-
------ ------ ------- ------- ------- ------- ------- ------- ------- -------
Total dividends and dis-
tributions............. (.0443) (.0461) (.0439) (.0244) (.0257) (.0421) (.0640) (.0766) (.0774) (0.0612)
------ ------ ------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of
period................. $1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURNS
Total investment return
based on:
net asset value(a)..... 4.53% 4.72% 4.48% 2.48% 2.60% 4.30% 6.61% 7.96% 8.04% 6.31%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year
(in millions).......... $3,762 $3,205 $2,514 $2,061 $1,783 $1,572 $1,070 $584 $522 $315
Ratio to average net as-
sets of:
Expenses, net of waivers
and reimbursements..... 1.00% 1.00% 1.00% 1.00% 1.00% .95% .89% .88% .88% .80%
Expenses, before waivers
and reimbursements..... 1.00% 1.01% 1.05% 1.04% 1.02% .97% .93% .98% .98% .90%
Net investment
income(b).............. 4.44% 4.60%(b) 4.42%(b) 2.46%(b) 2.55%(b) 4.17% 6.28% 7.65% 7.86% 6.13%
</TABLE>
- ---------------------
(a) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period.
(b) Net of expenses reimbursed or waived by the Adviser.
- -------------------------------------------------------------------------------

From time to time the Fund advertises its "yield" and "effective yield."
Both yield figures are based on historical earnings and are not intended 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 investment. To
calculate "effective yield," which will be higher than the "yield" because of
compounding, the dividends paid are assumed to be reinvested. Dividends for
the seven days ended June 30, 1997 amounted to an annualized yield of 4.62%,
equivalent to an effective yield of 4.73%.

2
<PAGE>

ALLIANCE GOVERNMENT RESERVES . . . . . with investment objectives of

SAFETY . LIQUIDITY . INCOME

We seek safety for the Fund by investing in a diversified list of
U.S. Government securities which are selected for their liquidity and
stability of principal. Liquidity of the investment portfolio is in-
creased even more by our emphasis on short-term issues. Specifically,
at the time of investment no security purchased can have a maturity
exceeding one year, which maturity may extend to 397 days, and the av-
erage maturity of the portfolio cannot exceed 90 days.

The short average maturity of the portfolio enhances our ability to
maintain the Fund's share price at $1.00--this, in turn, provides both
stability of value and liquidity to you and your fellow shareholders.

Our professional investment managers seek the maximum current income
for the Fund that is consistent with safety and maintenance of liquid-
ity. In addition to their knowledge and experience with money markets,
our managers obtain yield advantages for the Fund by making many secu-
rity purchases in especially large amounts such as $1 million and mul-
tiples thereof. Persons investing for themselves usually cannot ex-
ploit such money market opportunities due to the large investment
sizes required.

WHO SHOULD INVEST IN THE FUND?

The Fund is designed for individuals, brokers, institutions, advis-
ers, custodians, charities, fiduciaries, or corporations who can bene-
fit from money market income--and who place value on an investment
having the extra safety implicit in a portfolio containing U.S. Gov-
ernment securities. The Fund also is suitable for persons and entities
seeking an investment having liquidity, stability, simplicity, and
convenience. Investors using the Fund avoid certain administrative
burdens that they would incur by investing in money market securities
directly, such as monitoring of maturity dates, safeguarding of re-
ceipts and deliveries, and the maintenance of tax information and
other records.

MAJOR FEATURES AND SERVICES OF ALLIANCE GOVERNMENT RESERVES

No withdrawal fees or penalties Checkwriting
Low-expense Distribution Plan Free institutional record-keeping
(.25 of 1% maximum annual rate) services
Daily compounding of dividends IRA, SEP, 403 (b) (7) and employer-
First-day income for investments sponsored retirement plans
Same-day funds for withdrawals Low investment minimums

3
<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

The Fund'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 Fund pursues its objectives by maintaining a portfolio of high
quality money market securities of the types described in the succeeding para-
graph, all of which at the time of investment have remaining maturities of one
year or less, which maturities may extend to 397 days. The Fund may not change
this policy or the other fundamental investment policies described in a sepa-
rate section below without shareholder approval. The Fund may, without such
approval, create additional portfolios which may have different investment ob-
jectives. There can be no assurance, as is true with all investment companies,
that the Fund's objectives will be achieved.

MONEY MARKET SECURITIES

The securities in which the Fund invests are: (1) marketable obligations of,
or guaranteed by, the United States Government, its agencies or instrumentali-
ties (collectively, 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 under 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 Com-
pany, the Fund's Custodian, and would create a loss to the Fund if, in the
event of a dealer default, the proceeds from the sale of the collateral were
less than the repurchase price. The Fund may commit up to 15% of its net as-
sets to the purchase of when-issued U.S. Government securities, whose value
may fluctuate prior to their settlement, thereby creating an unrealized gain
or loss to the Fund. The money market securities in which the Fund may invest
may have variable or floating rates of interest ("variable rate obligations")
as permitted by Rule 2a-7 under the Investment Company Act of 1940, as amended
(the "Act"). Variable rate obligations have interest rates which are adjusted
either at predesignated periodic intervals or whenever there is a change in
the market rate to which the interest rate of the variable rate obligation is
tied. Some variable rate obligations allow the holder to demand payment of
principal at any time, or at specified intervals. The Fund follows Rule 2a-7
with respect to the diversification, quality and maturity of variable rate
obligations.

The Fund will comply with Rule 2a-7, including the diversification, quality
and maturity limitations imposed by the Rule. A more detailed description of
Rule 2a-7 is set forth in the Fund's Statement of Additional Information under
"Investment Objectives and Policies." To the extent that the Fund's limita-
tions are more permissive than Rule 2a-7, the Fund will comply with the more
restrictive provisions of the Rule.

OTHER FUNDAMENTAL INVESTMENT POLICIES

To maintain portfolio diversification and reduce investment risk, the Fund
may not: (1) borrow money except from banks on a temporary basis or via enter-
ing into reverse repurchase agreements in aggregate amounts not exceeding 10%
of its assets and to be used exclusively to facilitate the orderly maturation
and sale of portfolio securities during any periods of abnormally heavy re-
demption requests, if they should occur; such borrowings may not be used to
purchase investments and the Fund will not purchase any investment while any
such borrowings exist; (2) pledge, hypothecate or in any manner transfer, as
security for indebtedness, its assets except to secure such borrowings; or (3)
enter into repurchase agreements if, as a result thereof, more than 10% of its
assets would be subject to repurchase agreements not terminable within seven
days.

4
<PAGE>

PURCHASE AND REDEMPTION OF SHARES
OPENING ACCOUNTS

Instruct your Account Executive to open an account in the Fund in conjunc-
tion with your brokerage account.

SUBSEQUENT INVESTMENTS

A. BY CHECK THROUGH YOUR BROKERAGE FIRM

Mail or deliver your check made payable to your brokerage firm to your Ac-
count Executive who will deposit it into your brokerage account. Please indi-
cate your account number on the check.

B. BY SWEEP

Your brokerage firm may offer an automatic "sweep" for the Fund in the oper-
ation of brokerage cash accounts for its customers. Contact your Account Exec-
utive to determine if a sweep is available and what the sweep parameters are.

REDEMPTIONS

A. BY CHECKWRITING

With this service, you may write checks made payable to any payee in any
amount. Checks cannot be written for more than the principal balance (not in-
cluding any accrued dividends) in your account. You must first fill out the
Signature Card, which you can obtain from your Account Executive. There is a
charge for check reorders. The checkwriting service enables you to receive the
daily dividends declared on the shares to be redeemed until the day that your
check is presented for payment.

B. BY SWEEP

If your brokerage firm offers an automatic sweep service, the sweep will au-
tomatically transfer from your Fund account sufficient cash to cover any debit
balance that may occur in your cash account for any reason.

OPENING AN ACCOUNT DIRECTLY WITH THE FUND; SHAREHOLDER SERVICES

If you wish to obtain an Application Form to open an account directly with
the Fund or if you have any questions about the Form, purchasing shares or
other Fund procedures, please telephone the Fund toll-free (800) 221-5672.

For more information on the purchase and redemption of Fund shares, see the
Statement of Additional Information. The Fund offers a variety of shareholder
services. For more information about these services, call the Fund at (800)
221-5672.

5
<PAGE>

ADDITIONAL INFORMATION

SHARE PRICE. Shares are sold and redeemed on a continuous basis without sales
or redemption charges at their net asset value which is expected to be con-
stant at $1.00 per share, although this price is not guaranteed. The net asset
value of the Fund's shares is determined at 12:00 Noon and 4:00 p.m. (New York
time) each business day. The net asset value per share is calculated by taking
the sum of the value of the Fund'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 outstanding. All expenses, including
the fees payable to the Adviser, are accrued daily.

TIMING OF INVESTMENTS AND REDEMPTIONS. The Fund has two transaction times
each business day, 12:00 Noon and 4:00 p.m. (New York time). New investments
represented by Federal funds or bank wire monies received by State Street Bank
at any time during a day prior to 4:00 p.m. are entitled to the full dividend
to be paid to shareholders for that day. Shares do not earn dividends on the
day a redemption is effected regardless of whether the redemption order is re-
ceived before or after 12:00 Noon. However, if you wish to have Federal funds
wired the same day as your telephone redemption request, make sure that your
request will be received by the Fund prior to 12:00 Noon.

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 in
this Prospectus. The Fund reserves the right to suspend or terminate its tele-
phone redemption service at any time without notice. Neither the Fund nor the
Adviser, or Alliance Fund Services, Inc. will be responsible for the authen-
ticity of telephone requests for redemptions that the Fund reasonably believes
to be genuine. The Fund will employ reasonable procedures in order to verify
that telephone requests for redemptions are genuine, including among others,
recording such telephone instructions and causing written confirmations of the
resulting transactions to be sent to shareholders. If the Fund did not employ
such procedures, it could be liable for losses arising from unauthorized or
fraudulent telephone instructions. Selected dealers or agents may charge a fee
for handling telephone requests for redemptions.

Redemption proceeds are normally wired or mailed either the same or the next
business day, but in no event later than seven days, unless redemptions have
been suspended or postponed due to the determination of an "emergency" by the
Securities and Exchange Commission or to certain other unusual conditions.

If your Fund shares are not maintained through a financial intermediary, pro-
ceeds from any subsequent redemption by you of Fund shares that were purchased
by check or electronic funds transfer will not be forwarded to you until the
Fund is reasonably assured that your check or electronic funds transfer has
cleared, up to fifteen days following the purchase date. If the redemption re-
quest during such period is in the form of a Fund check, the check will be
marked "insufficient funds" and be returned unpaid to the presenting bank.

MINIMUMS. The Fund has minimums of $1,000 for initial investments, $100 for
subsequent investments and a $500 minimum maintenance balance for each ac-
count. These minimums do not apply to shareholder accounts maintained through
brokerage firms or other financial institutions, as such financial intermedi-
aries may maintain their own minimums.

DAILY DIVIDENDS, OTHER DISTRIBUTIONS, TAXES. All net income of the Fund is
determined each business day at 4:00 p.m. (New York time) and is paid immedi-
ately thereafter pro rata to shareholders of

6
<PAGE>

record via automatic investment in additional full and fractional shares in
each shareholder's account. As such additional shares are entitled to divi-
dends on following days, a compounding growth of income occurs.

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

For Federal income tax purposes, distributions out of interest income earned
by the Fund and net realized short-term capital gains are taxable to you as
ordinary income, and distributions of net realized long-term capital gains, if
any, are taxable as long-term capital gains irrespective of the length of time
you may have held your shares. Distributions by the Fund may also be subject
to certain state and local taxes. Each year shortly after December 31, the
Fund will send you tax information stating the amount and type of all its dis-
tributions for the year just ended.

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
investment advice and, in general, to conduct the Fund's management and in-
vestment program, subject to the general supervision and control of the Trust-
ees of the Fund. For the fiscal year ended June 30, 1997, the Fund paid the
Adviser at an annual rate of .48 of 1% of the average daily value of the
Fund's net assets.

The Adviser is a leading international investment manager, supervising client
accounts with assets as of September 30, 1997 totaling more than $199 billion
(of which more than $71 billion represented the assets of investment compa-
nies). The Adviser's clients are primarily major corporate employee benefit
plans, public employee retirement plans, insurance companies, banks, founda-
tions 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 September 30, 1997, the Adviser was retained
as an investment manager of employee benefit fund assets for 29 of the Fortune
100 companies.

Under a Distribution Services Agreement (the "Agreement"), the Fund pays the
Adviser at a maximum annual rate of .25 of 1% of the Fund's aggregate average
daily net assets. For the fiscal year ended June 30, 1997, the Fund paid the
Adviser at an annual rate of .25 of 1% of the average daily value of the
Fund's net assets. Substantially all such monies (together with significant
amounts from the Adviser's own resources) are paid by the Adviser to broker-
dealers and other financial intermediaries for their distribution assistance
and to banks and other depository institutions for administrative and account-
ing services provided to the Fund, with any remaining amounts being used to
partially defray other expenses incurred by the Adviser in distributing Fund
shares. The Fund believes that the administrative services provided by deposi-
tory institutions are permissible activities under present banking laws and
regulations and will take appropriate actions (which should not adversely af-
fect the Fund or its shareholders) in the future to maintain such legal con-
formity should any changes in, or interpretations of, such laws or regulations
occur.

The Adviser will reimburse the Fund to the extent that the Fund's aggregate
operating expenses (including the Adviser's fee and expenses of the Agreement)
exceed 1% of its average daily net assets for any fiscal year.

CUSTODIAN, TRANSFER AGENT AND DISTRIBUTOR. State Street Bank and Trust Compa-
ny, P.O. Box 1912, Boston, MA 02105, is the Fund's Custodian.

7
<PAGE>

Alliance Fund Services, Inc. P.O. Box 1520, Secaucus, NJ 07096-1520, and Alli-
ance Fund Distributors, 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 a series of Alliance Government Reserves (the
"Trust"). The Fund is one of two series of the Trust; shares of the other se-
ries, Alliance Treasury Reserves, are offered by a separate prospectus. The
Trust is a diversified, open-end investment company registered under the Act.
The Trust was reorganized as a Massachusetts business trust in October 1984,
having previously been a Maryland corporation since its formation in December
1978. The Trust's activities are supervised by its Trustees. Normally, each
share of each series is entitled to one vote, and vote as a single series on
matters that affect both series in substantially the same manner. Massachu-
setts law does not require annual meetings of shareholders and it is antici-
pated that shareholder meetings will be held only when required by Federal
law. Shareholders have available certain procedures for the removal of Trust-
ees.

REPORTS. You receive semi-annual and annual reports of the Fund as well as a
monthly summary of your account. You can arrange for a copy of each of your
account statements to be sent to other parties.

<PAGE>

YIELD MESSAGES

For current recorded yield information on Alliance Treasury Reserves, call on
a touch-tone telephone toll-free (800) 251-0539 and press the following
sequence of keys:[_]1 [_]# [_]1 [_]# [_]9 [_]0 [_]#. For non-touch-tone
telephones, call toll-free (800) 221-9513.

Alliance Treasury Reserves (the "Fund") is a series of Alliance Government
Reserves, a diversified, open-end investment company. The Fund is a money
market fund with investment objectives of safety, liquidity and income. This
prospectus sets forth the information about the Fund 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
Corporation, the Federal Reserve Board or any other agency. There can be no
assurance that the Fund will be able to maintain a stable net asset value of
$1.00 per share.

A "Statement of Additional Information," dated November 1, 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 (800) 221-5672 or write Alliance Fund Services, Inc. at
the address shown on page 7.

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

ALLIANCE
TREASURY
RESERVES

[LOGO OF ALLIANCE CAPITAL APPEARS HERE]

PROSPECTUS NOVEMBER 1, 1997

ALC90PRO7
<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.

ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
<TABLE>
<S> <C>
Management Fees......................................................... .50%
12b-1 Fees.............................................................. .25
Other Expenses.......................................................... .25
----
Total Fund Operating Expenses........................................... 1.00%
</TABLE>

FINANCIAL HIGHLIGHTS . FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
(AUDITED)

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
financial statements and notes thereto included in the Statement of Additional
Information.

<TABLE>
<CAPTION>
SEPTEMBER 1, 1993(a)
YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
JUNE 30, 1997 JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994
------------- ------------- ------------- --------------------
<S> <C> <C> <C> <C>
Net asset value, begin-
ning of period......... $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income... .0443 .0466 .0460 .0260
-------- -------- -------- -------
LESS: DIVIDENDS
Dividends from net in-
vestment income........ (.0443) (.0466) (.0460) (.0260)
-------- -------- -------- -------
Net asset value, end of
period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== =======
TOTAL RETURNS
Total investment return
based on: net asset
value (b).............. 4.53% 4.77% 4.71% 3.18%(c)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year
(in thousands)......... $704,084 $700,558 $493,702 $80,720
Ratio to average net as-
sets of:
Expenses, net of waiv-
ers and reimburse-
ments................. .85% .81% .69% .28%(c)
Expenses, before waiv-
ers and reimburse-
ments................. 1.00% 1.05% 1.05% 1.28%(c)
Net investment income
(d)................... 4.43% 4.64% 4.86% 3.24%(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 and distributions 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 Fund advertises its "yield" and "effective yield."
Both yield figures are based on historical earnings and are not intended 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 investment. To
calculate "effective yield," which will be higher than the "yield" because of
compounding, the dividends paid are assumed to be reinvested. Dividends for
the seven days ended June 30, 1997, after expense reimbursement, amounted to
an annualized yield of 4.60%, equivalent to an effective yield of 4.69%.
Absent such reimbursement, the annualized yield for such period would have
been 4.45%, equivalent to an effective yield of 4.54%.

<PAGE>

ALLIANCE TREASURY RESERVES . . . . . with investment objectives of

SAFETY . LIQUIDITY . INCOME

We seek safety for the Fund by investing in issues of the U.S. Trea-
sury and repurchase agreements pertaining to such issues which are se-
lected for their liquidity and stability of principal. Liquidity of
the investment portfolio is increased even more by our emphasis on
short-term issues. Specifically, at the time of investment no security
purchased can have a maturity exceeding 397 days, and the average ma-
turity of the portfolio cannot exceed 90 days.

WHO SHOULD INVEST IN THE FUND?

The Fund is designed for individuals, brokers, institutions, advis-
ers, custodians, charities, fiduciaries, or corporations who can bene-
fit from money market income--and who place value on an investment
having the extra safety implicit in a portfolio containing U.S. Trea-
sury securities. The Fund also is suitable for persons and entities
seeking an investment having liquidity, stability, simplicity, and
convenience. Investors using the Fund avoid certain administrative
burdens that they would incur by investing in money market securities
directly, such as monitoring of maturity dates, safeguarding of re-
ceipts and deliveries, and the maintenance of tax information and
other records.

MAJOR FEATURES AND SERVICES OF ALLIANCE TREASURY RESERVES

3
<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

The Fund'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 Fund pursues its objectives by maintaining a portfolio of high
quality money market securities of the types described in the succeeding para-
graph, all of which at the time of investment have remaining maturities of 397
days or less. The Fund may not change its investment objectives or the other
fundamental investment policies described in a separate section below without
shareholder approval. The Fund may, without such approval, create additional
classes of shares in order to establish portfolios which may have different
investment objectives. There can be no assurance, as is true with all invest-
ment companies, that the Fund's objectives will be achieved.

MONEY MARKET SECURITIES

The securities in which the Fund invests are: (1) issues of the U. S. Trea-
sury, such as bills, certificates of indebtedness, notes and bonds; 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 deal-
ers" (as designated by the Federal Reserve Bank of New York) in U.S. Govern-
ment securities or State Street Bank and Trust Company, the Fund's Custodian.
For each repurchase agreement, the Fund 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 Fund might
suffer a loss to the extent that the proceeds from the sale of the collateral
were less than the repurchase price. The Fund may commit up to 15% of its net
assets to the purchase of when-issued U.S. Treasury securities. Delivery and
payment for when-issued securities takes place after the transaction date. The
payment amount and the interest rate that will be received on the securities
are fixed on the transaction date. The value of such securities may fluctuate
prior to their settlement, thereby creating an unrealized gain or loss to the
Fund. The money market securities in which the Fund may invest may have vari-
able or floating rates of interest ("variable rate obligations") as permitted
by Rule 2a-7 under the Investment Company Act of 1940, as amended (the "Act").
Variable rate obligations have interest rates which are adjusted either at
predesignated periodic intervals or whenever there is a change in the market
rate to which the interest rate of the variable rate obligation is tied. Some
variable rate obligations allow the holder to demand payment of principal at
any time, or at specified intervals. The Fund follows Rule 2a-7 with respect
to the diversification, quality and maturity of variable rate obligations.

OTHER FUNDAMENTAL INVESTMENT POLICIES

To maintain portfolio diversification and reduce investment risk, the Fund
may not: (1) borrow money except from banks on a temporary basis or via enter-
ing into reverse repurchase agreements in aggregate amounts not exceeding 10%
of its assets and to be used exclusively to facilitate the orderly maturation
and sale of portfolio securities during any periods of abnormally heavy re-
demption requests, if they should occur; such borrowings may not be used to
purchase investments and the Fund will not purchase any investment while any
such borrowings exist; (2) pledge, hypothecate or in any manner transfer, as
security for indebtedness, its assets except to secure such borrowings; or (3)
enter into repurchase agreements, if as a result thereof, more than 10% of its
assets would be subject to repurchase agreements not terminable within seven
days.

<PAGE>

PURCHASE AND REDEMPTION OF SHARES
OPENING ACCOUNTS

Instruct your Account Executive to open an account in the Fund in conjunc-
tion with your brokerage account.

SUBSEQUENT INVESTMENTS

A BY CHECK THROUGH YOUR BROKERAGE FIRM

Mail or deliver your check made payable to your brokerage firm to your Ac-
count Executive who will deposit it into your brokerage account. Please indi-
cate your account number on the check.

B. BY SWEEP

REDEMPTIONS

A. BY CHECKWRITING

B. BY SWEEP

OPENING AN ACCOUNT DIRECTLY WITH THE FUND; SHAREHOLDER SERVICES

5
<PAGE>

ADDITIONAL INFORMATION

SHARE PRICE. Shares 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 the Fund's shares is determined at 12:00 Noon and 4:00 p.m.
(New York time) each business day. The net asset value per share is calculated
by taking the sum of the value of the Fund's investments (amortized cost value
is used for this purpose) and any cash or other assets, subtracting liabili-
ties, and dividing by the total number of shares outstanding. All expenses,
including the fees payable to the Adviser, are accrued daily.

During periods of drastic economic or market developments, such as the mar-
ket break of October 1987, it is possible that shareholders would have diffi-
culty in reaching Alliance Fund Services, Inc. by telephone (although no such
difficulty was apparent at any time in connection with the 1987 market break).
If a shareholder were to experience such difficulty, the shareholder should
issue written instructions to Alliance Fund Services, Inc. at the address
shown in this Prospectus. The Fund reserves the right to suspend or terminate
its telephone redemption service at any time without notice. Neither the Fund
nor the Adviser, or Alliance Fund Services, Inc. will be responsible for the
authenticity of telephone requests for redemptions that the Fund reasonably
believes to be genuine. The Fund will employ reasonable procedures in order to
verify that telephone requests for redemptions are genuine, including among
others, recording such telephone instructions and causing written confirma-
tions 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 un-
authorized or fraudulent telephone instructions. Selected dealers or agents
may charge a fee for handling telephone requests for redemptions.

If your Fund shares are not maintained through a financial intermediary,
proceeds from any subsequent redemption by you of Fund shares that were pur-
chased by check or electronic funds transfer will not be forwarded to you un-
til the Fund is reasonably assured that your check or electronic funds trans-
fer has cleared, up to fifteen days following the purchase date. If the re-
demption request during such period is in the form of a Fund check, the check
will be marked "insufficient funds" and be returned unpaid to the presenting
bank.

DAILY DIVIDENDS, OTHER DISTRIBUTIONS, TAXES. All net income of the Fund is
determined each business day at 4:00 p.m. (New York time) and is paid immedi-
ately thereafter pro rata to shareholders of

6
<PAGE>

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
investment advice and, in general, to conduct the Fund's management and in-
vestment program, subject to the general supervision and control of the Trust-
ees of the Fund. For the period ended June 30, 1997, the Fund paid the Adviser
at an annual rate of .49 of 1% of the average daily value of the Fund's net
assets.

The Adviser is a leading international investment manager, supervising cli-
ent accounts with assets as of September 30, 1997 totaling more than $199 bil-
lion (of which more than $71 billion represented the assets of investment com-
panies). The Adviser's clients are primarily major corporate employee benefit
plans, public employee retirement plans, insurance companies, banks, founda-
tions 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 September 30, 1997, the Adviser was retained
as an investment manager of employee benefit fund assets for 29 of the Fortune
100 companies.

Under a Distribution Services Agreement (the "Agreement"), the Fund pays the
Adviser at a maximum annual rate of .25 of 1% of the Fund's aggregate average
daily net assets. For the period ended June 30, 1997, the Fund paid the Ad-
viser at an annual rate of .11% of the average daily value of the Fund's net
assets. Substantially all such monies (together with significant amounts from
the Adviser's own resources) are paid by the Adviser to broker-dealers and
other financial intermediaries for their distribution assistance and to banks
and other depository institutions for administrative services provided to the
Fund, with any remaining amounts being used to partially defray other expenses
incurred by the Adviser in distributing Fund shares. The Fund believes that
the administrative services provided by depository institutions are permissi-
ble activities under present banking laws and regulations and will take appro-
priate actions (which should not adversely affect the Fund or its sharehold-
ers) in the future to maintain such legal conformity should any changes in, or
interpretations of, such laws or regulations occur.

CUSTODIAN, TRANSFER AGENT AND DISTRIBUTOR. State Street Bank and Trust Com-
pany, 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-

7
<PAGE>

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 a series of Alliance Government Reserves (the
"Trust"). The Fund is one of two series of the Trust; shares of the other se-
ries, also named Alliance Government Reserves, are offered by a separate pro-
spectus. The Trust is a diversified, open-end investment company registered
under the Act. The Trust was reorganized in October 1984, as a Massachusetts
business trust having previously been a Maryland corporation since its forma-
tion in December 1978. The Trust's activities are supervised by its Trustees.
Normally, each share of each series is entitled to one vote, and vote as a
single series on matters that affect both series in substantially the same
manner. Massachusetts law does not require annual meetings of shareholders and
it is anticipated that shareholder meetings will be held only when required by
Federal law. Shareholders have available certain procedures for the removal of
Trustees.

<PAGE>

(LOGO) ALLIANCE GOVERNMENT RESERVES

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

STATEMENT OF ADDITIONAL INFORMATION
November 3, 1997

TABLE OF CONTENTS

Page

Investment Objectives and Policies . . . . . . . . 2

Investment Restrictions . . . . . . . . . . . . . 5

Management . . . . . . . . . . . . . . . . . . . . 6

Purchase and Redemption of Shares . . . . . . . . 14

Additional Information . . . . . . . . . . . . . . 18

Daily Dividends-Determination of Net Asset Value . 20

Taxes . . . . . . . . . . . . . . . . . . . . . . 22

General Information . . . . . . . . . . . . . . . 22

Appendix-Commercial Paper and Bond Ratings . . . . 25

Financial Statements . . . . . . . . . . . . . . . 26-30

Independent Auditor's Report . . . . . . . . . . . 31

_________________________________________________________________
This Statement of Additional Information is not a prospectus
but supplements and should be read in conjunction with the Fund's
current Prospectus dated November 1, 1997. A copy of the
Prospectus may be obtained by contacting the Fund at the address
or telephone number shown above.

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

<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

The Fund is a diversified, open-end investment company
whose 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.
The Fund pursues its objectives by maintaining a portfolio of the
following investments diversified by maturities not exceeding 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):

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. A repurchase agreement arises when a buyer purchases
a security and simultaneously agrees to resell it to the vendor
at 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. It is
the Fund's current practice, which may be changed at any time
without shareholder approval, to enter into repurchase agreements
only with such primary dealers or State Street Bank and Trust
Company, the Fund's Custodian. For each repurchase agreement,
the Fund requires continual maintenance of the market value of
the underlying collateral in amounts equal to, or in excess of,
the agreement amount. While the maturities of the underlying
collateral may exceed one year (or 397 days), the term of the
repurchase agreement is always less than one year (or 397 days).
In the event that a vendor defaulted on its repurchase
obligation, the Fund might suffer a loss to the extent that the

<PAGE>

proceeds from the sale of the collateral were less than the
repurchase price. If the vendor became bankrupt, the Fund 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 Fund'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 vendor of a fully collateralized
repurchase agreement is deemed to be the issuer of the underlying
securities.

Reverse Repurchase Agreements. While the Fund has no
present plans to do so, it may enter into reverse repurchase
agreements, which have the characteristics of borrowing and which
involve the sale of securities held by the Fund with an agreement
to repurchase the securities at an agreed-upon price, date and
interest payment.

When-Issued Securities. Certain new issues that the
Fund is permitted to purchase are available on a "when-issued"
basis, that is, delivery and payment for the securities take
place after the transaction date, normally within ten days (the
Fund will not make any such commitments of more than thirty
days). The payment amount and the interest rate that will be
received on the securities are fixed on the transaction date.
The Fund will make commitments for such when-issued transactions
only with the intention of actually acquiring the securities and,
to facilitate such acquisitions, the Fund's Custodian will
maintain, in a separate account, cash, U.S. Government or other
appropriate high-grade debt obligations of the Fund having value
equal to or greater than such commitments. Similarly, a separate
account will be maintained to meet obligations in respect of
reverse repurchase agreements. On delivery dates for such
transactions, the Fund will meet its obligations from maturities
or sales of the securities held in the separate account and/or
from then available cash flow. If the Fund chooses to dispose of
the right to acquire a when-issued security prior to its
acquisition, it could, as with the disposition of any other
portfolio obligation, incur a gain or loss due to market
fluctuation. No when-issued commitments will be made if, as a
result, more than 15% of the Fund's net assets would be so
committed.

____________________

* As used throughout the Prospectus and Statement of Additional
Information, the term "assets" shall refer to the Fund's
total assets.

<PAGE>

While there are many kinds of short-term securities used
by money market investors, the Fund, in keeping with its primary
investment objective of safety of principal, restricts its
portfolio to the types of investments listed above. Net income
to shareholders is aided both by the Fund's ability to make
investments in large denominations and by its efficiencies of
scale. Also, the Fund 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 the Fund's investments tends to decrease during
periods of rising interest rates and to increase during intervals
of falling rates. Except as otherwise provided, the Fund's
investment policies are not designated "fundamental policies"
within the meaning of the Investment Company Act of 1940, as
amended (the "Act") and may, therefore, be changed by the
Trustees of the Trust without a shareholder vote. However, the
Fund will not change its investment policies without
contemporaneous written notice to shareholders. There can be no
assurance, as is true with all investment companies, that the
Fund's objectives will be achieved.

Floating and Variable Rate Obligations. The Fund may
purchase floating and variable rate obligations, including
floating and variable rate demand notes and bonds. The Fund may
invest in variable and floating rate obligations whose interest
rates are adjusted either at predesignated periodic intervals or
whenever there is a change in the market rate to which the
security's interest rate is tied. The Fund may also 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.

Rule 2a-7 under the Act. The Fund will comply with Rule
2a-7 under the Act, as amended from time to time, including the
diversification, quality and maturity limitations imposed by the
Rule. To the extent that the Fund's limitations are more
permissive than Rule 2a-7, the Fund will comply with the more
restrictive provisions of the Rule.

Currently, pursuant to Rule 2a-7, the Fund may invest
only in U.S. dollar-denominated "eligible securities" (as that
term is defined in the Rule) that have been determined by
Alliance Capital Management L.P. (the "Adviser") to present
minimal credit risks pursuant to procedures approved by the
Trustees. Generally, an eligible security is a security that
(i) has a remaining maturity of 397 days or less and (ii) is
rated, or is issued by an issuer with short-term debt outstanding
that is rated, in one of the two highest rating categories by two
nationally recognized statistical rating organizations ("NRSROs")

<PAGE>

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
Trustees. A description of the ratings of some NRSROs appears in
the Appendix attached hereto.

Under Rule 2a-7 the Fund 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 Fund 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 Fund 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.

<PAGE>

_________________________________________________________________

INVESTMENT RESTRICTIONS
_________________________________________________________________

The foregoing investment objectives and policies and the
following restrictions may not, except as otherwise indicated, be
changed without the approval of a majority of the Fund's
outstanding shares. As used in this prospectus, the term
"majority of the Fund's outstanding shares" means the affirmative
vote of the holders of (a) 67% or more of the shares represented
at a meeting at which more than 50% of the outstanding shares are
represented or (b) more than 50% of the outstanding shares,
whichever is less. If a percentage restriction is adhered to at
the time of an investment, a later increase or decrease in
percentage resulting from a change in value of portfolio
securities or in amount of the Fund's assets will not constitute
a violation of that restriction.

The Fund:

1. May not purchase any security which has a maturity
date more than one year* from the date of the Fund's purchase;

2. May not purchase securities other than marketable
obligations of, or guaranteed by, the United States Government,
its agencies or instrumentalities, or repurchase agreements
pertaining thereto;

3. May not enter into repurchase agreements if, as a
result thereof, more than 10% of the Fund's assets would be
subject to repurchase agreements not terminable within seven days
(which may be considered to be illiquid) or with any one seller**
if, as a result thereof, more than 5% of the Fund'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 Fund's obligations with respect to reverse
repurchase agreements would exceed 10% of the Fund's assets;

4. May not 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 Fund's

__________________________

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

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

<PAGE>

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 Fund
will not purchase any investment while any such borrowings exist;

5. May not 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 10% of the
Fund's assets;

6. May not make loans, provided that the Fund may
purchase securities of the type referred to in paragraph 2 above
and enter into repurchase agreements with respect thereto; or

7. May not act as an underwriter of securities.

MANAGEMENT

Trustees and Officers

The Trustees and principal officers of the Fund and
their principal occupations during the past five years are set
forth below. Unless otherwise specified, the address of each
such person is 1345 Avenue of the Americas, New York, New York
10105. Those Trustees whose names are preceded by an asterisk
are "interested persons" of the Fund as determined under the Act.
Each Trustee and officer is also a director, trustee or officer
of other registered companies sponsored by the Adviser.

Trustees

DAVE H. WILLIAMS,* 65, Chairman, is Chairman of the
Board of Directors of Alliance Capital Management Corporation
("ACMC"),** sole general partner of the Adviser with which he has
been associated since prior to 1992.

_________________________

* 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>

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

SAM Y. CROSS, 70, was, since prior to December 1992,
Executive Vice President of The Federal Reserve Bank of New York
and manager for foreign operations for The Federal Reserve
System. He is also a director of Fuji Bank and Trust Co. His
address is 200 East 66th Street, New York, New York 10021.

CHARLES H. P. DUELL, 59, is President of Middleton Place
Foundation with which he has been associated since prior to 1992.
He is also a Director of GRC International, Inc., a Trustee
Emeritus of the National Trust for Historic Preservation and
serves on the Board of Architectural Review, City of Charleston.
His address is Middleton Place Foundation, Ashley River Road,
Charleston, South Carolina 29414.

WILLIAM H. FOULK, JR., 65, is an independent consultant.
He was formerly Senior Manager of Barrett Associates, Inc., a
registered investment adviser, with which he had been associated
since prior to 1992. His address is 2 Greenwich Plaza, Suite
100, Greenwich, CT 06830.

DONALD J. ROBINSON, 63, was formerly a partner at
Orrick, Herrington & Sutcliffe and is currently Senior Counsel to
that firm. 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.

DAVID K. STORRS, 53, is President and Chief Executive
Officer of Alternative Investment Group, LLC (a venture capital
firm). He was formerly President of The Common Fund (investment
management for educational institutions) with which he had been
since prior to 1992. His address is 65 South Gate Lane,
Southport, Connecticut 06490.

SHELBY WHITE, 59, is an author and financial journalist.
Her address is One Sutton Place South, New York, New York
10022.

Officers

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

<PAGE>

KATHLEEN A. CORBET - Senior Vice President, 37, has been
a Senior Vice President of ACMC since July 1993. Prior thereto,
she was employed by Equitable Capital since prior to 1992.

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

JOHN R. BONCZEK - Senior Vice President, 37, is a Vice
President of ACMC with which he has been associated since prior
to 1992.

ROBERT I. KURZWEIL - Senior Vice President, 46, has been
a Vice President of ACMC since May 1994. Previously, he was Vice
President of Sales and Business Development for Automatic Data
Processing with which he had been associated since prior to
1992.

WAYNE D. LYSKI - Senior Vice President, 56, is an
Executive Vice President of ACMC with which he has been
associated since prior to 1992.

PATRICIA NETTER - Senior Vice President, 46, is a Vice
President of ACMC with which she 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.

DORIS T. CILIBERTI - Vice President, 33, is an Assistant
Vice President of ACMC with which she 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.

WILLIAM J. FAGAN - Vice President, 35, is an Assistant
Vice President of ACMC with which he has been associated since
prior to 1992.

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

<PAGE>

LINDA D. NEIL - Vice President, 37, is an Assistant Vice
President of ACMC with which she has been associated since August
1993. Previously, she was an Associate Director of The Reserve
Fund since prior to 1992.

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

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

MARK D. GERSTEN - Treasurer and Chief Financial Officer,
47, is a Senior Vice President of Alliance Fund Services, Inc.
and Alliance Fund Distributors, Inc. with which he has been
associated since prior to 1992.

VINCENT S. NOTO - Controller, 32, is an Assistant Vice
President of Alliance Fund Services, Inc., with which he has been
associated since prior to 1992.

As of October 15, 1997, the Trustees and officers as a
group owned less than 1% of the shares of the Fund.

The Fund does not pay any fees to, or reimburse expenses
of, its Trustees who are considered "interested persons" of the
Fund. The aggregate compensation paid by the Fund to each of the
Trustees during its fiscal year ended June 30, 1997, the
aggregate compensation paid to each of the Trustees during
calendar year 1996 by all of the funds to which the Adviser
provides investment advisory services (collectively, the
"Alliance Fund Complex") and the total number of registered
investment companies (and separate investment portfolios within
those companies) in the Alliance Fund Complex with respect to
which each of the Trustees serves as a director or trustee, are
set forth below. Neither the Fund nor any other fund in the
Alliance Fund Complex provides compensation in the form of
pension or retirement benefits to any of its directors or
trustees.

<PAGE>

Total Number Total Number
of Funds in of Investment
the Alliance Portfolios Within
Total Fund Complex, the Funds,
Compensation Including the Including the
From the Fund, as to Fund, as to
Alliance Fund which the which the
Name of Aggregate Complex, Trustee is a Trustee is a
Trustee Compensation Including the Director or Director or
of the Fund From the Fund Fund Trustee Trustee
___________ ____________ ______________ _____________ _______________

Dave H. Williams $-0- $-0- 6 15
John D. Carifa $-0- $-0- 52 114
Sam Y. Cross $2,466 $ 12,000 3 12
Charles H.P. Duell $2,466 $ 12,000 3 12
William H. Foulk, Jr. $3,020 $144,250 34 70
Elizabeth J. McCormack $1,775 $ 9,750 3 12
Donald J. Robinson $-0- $137,250 42 102
David K. Storrs $2,466 $ 12,000 3 12
Shelby White $2,466 $ 12,000 3 12

On August 11, 1997, Elizabeth J. McCormack resigned as a
Trustee.

On September 8, 1997, Donald J. Robinson was elected as
a Trustee.

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") to
provide investment advice and, in general, to conduct the
management and investment program of the Fund under the
supervision and control of the Fund's Trustees.

The Adviser is a leading international investment
manager supervising client accounts with assets as of September
30, 1997 of more than $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. As of September 30, 1997, the
Adviser was retained as an investment manager of employee benefit
fund assets for 29 of the FORTUNE 100 companies. As of that
date, the Adviser and its subsidiaries employed approximately
1,450 employees who operated out of five domestic offices and the
offices of subsidiaries in , Istanbul, London, Mumbai, Paris, Sao
Paulo, Sydney, Tokyo, Toronto, Bahrain, Luxembourg and Singapore.

<PAGE>

The 54 registered investment companies comprising more than 116
separate investment portfolios managed by the Adviser currently
have more than two million shareholders.

Alliance Capital Management Corporation, the sole
general partner of, and the owner of a 1% general partnership
interest in, the Adviser, is an indirect wholly-owned subsidiary
of The Equitable Life Assurance Society of the United States
("Equitable"), one of the largest life insurance companies in the
United States and a wholly-owned subsidiary of The Equitable
Companies Incorporated ("ECI"), a holding company controlled by
AXA-VAP, 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 57%
of the issued and outstanding units representing assignments of
beneficial ownership of limited partnership interests in the
Adviser ("Units"). As of March 31, 1997, approximately 34% and
9% of the Units were owned by the public and employees of the
Adviser and its subsidiaries, respectively, including an employee
of the Adviser who serves as a Trustee of the Fund.

As of March 1, 1997, AXA-VAP 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-VAP, a French company, is the holding company for
an international group of insurance and related financial
services companies. AXA-VAP'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-VAP 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-VAP, on March 1,
1997, 22.5% of the issued ordinary shares (representing 33.0% of
the voting power) of AXA-VAP 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-VAP.

<PAGE>

Acting as a group, the Mutuelles AXA control AXA-VAP and
Finaxa.

In November 1996, AXA offered (the "Exchange Offer") to
acquire 100% of the ordinary shares ("VAP Shares") of FF10 each
of Compagnie VAP, a societe anonyme organized under the laws of
France ("VAP"), in exchange for ordinary shares ("Shares") and
Certificates of Guaranteed Value ("Certificates") of AXA. Each
VAP shareholder that tendered VAP Shares in the Exchange Offer
received two Shares and two Certificates for every five VAP
Shares so tendered. On January 24, 1997, AXA acquired 91.37% of
the outstanding VAP Shares. AXA-VAP currently intends to merge
(the "Merger") with VAP 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 VAP shareholders who
did not tender VAP 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
indirectly through their interest in Finaxa) 25.1% of the issued
ordinary shares (representing 36.8% of the voting power) of
AXA-VAP. 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 had 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-VAP.

Under the Advisory Agreement, the Adviser provides
investment advisory services and order placement facilities for
the Fund and pays all compensation of Trustees of the Fund who
are affiliated persons of the Adviser. The Adviser or its
affiliates also furnish the Fund without charge with management
supervision and assistance and office facilities. Under the
Advisory Agreement, the Fund pays an advisory fee at an annual
rate of .50 of 1% of up to $1.25 billion of the average daily
value of the Fund's net assets, .49 of 1% of the next $.25
billion of such assets, .48 of 1% of the next $.25 billion of
such assets, .47 of 1% of the next $.25 billion of such assets,
.46 of 1% of the next $1 billion of such assets and .45 of 1% of
the average daily net assets of the Fund in excess of $3 billion.
The fee is accrued daily and paid monthly. The Adviser will

<PAGE>

reimburse the Fund to the extent that its net expenses (excluding
taxes, brokerage, interest and extraordinary expenses) exceed 1%
of its average daily net assets for any fiscal year. For the
fiscal years ended June 30, 1995, 1996 and 1997 the Adviser
received from the Fund, advisory fees (net of reimbursement for
the fiscal year ended June 30, 1995) of $10,057,300, $14,176,991
and $17,412,020, respectively. In accordance with the
Distribution Services Agreement described below, the Fund may pay
a portion of advertising and promotional expenses in connection
with the sale of shares of the Fund. The Fund also pays for
printing of prospectuses and other reports to shareholders and
all expenses and fees related to registration and filing with the
Securities and Exchange Commission and with state regulatory
authorities. The Fund pays all other expenses incurred in its
operations, including the Adviser's management fees; custody,
transfer and dividend disbursing expenses; legal and auditing
costs; clerical, administrative accounting, and other office
costs; fees and expenses of Trustees who are not affiliated with
the Adviser; costs of maintenance of the Trust's existence; and
interest charges, taxes, brokerage fees, and commissions. As to
the obtaining of clerical and accounting services not required to
be provided to the Fund by the Adviser under the Advisory
Agreement, the Fund may employ its own personnel. For such
services, it also may utilize personnel employed by the Adviser;
if so done, the services are provided to the Fund at cost and the
payments therefor must be specifically approved in advance by the
Trustees. The Fund paid to the Adviser a total of $151,500,
$163,000 and $164,000, respectively, for such services for the
fiscal years ended June 30, 1995, 1996 and 1997.

The Fund has made arrangements with certain
broker-dealers whose customers are Fund shareholders pursuant to
which the broker-dealers perform shareholder servicing functions,
such as opening new shareholder accounts, processing purchase and
redemption transactions, and responding to inquiries regarding
the Fund's current yield and the status of shareholder accounts.
The Fund pays for the electronic communications equipment
maintained at the broker-dealers' offices that permits access to
the Fund's computer files and, in addition, reimburses the
broker-dealers at cost for personnel expenses involved in
providing the services. All such reimbursements must be ratified
by the Trustees. For the fiscal years ended June 30, 1995, 1996
and 1997, the Fund reimbursed such broker-dealers a total of
$1,406,467, $1,611,378 and $2,146,522, respectively.

The Advisory Agreement became effective on July 22,
1992. Continuance of the Advisory Agreement until June 30, 1998
was approved by the vote, cast in person by all the Trustees of
the Trust who neither were interested persons of the Trust nor
had any direct or indirect financial interest in the Agreement or

<PAGE>

any related agreement, at a meeting called for that purpose on
June 16, 1997.

The Advisory Agreement will remain in effect thereafter
from year to year provided that such continuance is specifically
approved annually by a vote of a majority of the outstanding
shares of the Fund or by the Fund's Trustees, including in either
case approval by a majority of the Trustees who are not parties
to the Advisory Agreement or interested persons as defined in the
Act. The Advisory Agreement may be terminated without penalty on
60 days' written notice at the option of either party or by a
vote of the outstanding voting securities of the Fund; it will
automatically terminate in the event of assignment. The Adviser
is not liable for any action or inaction in regard to its
obligations under the Advisory Agreement as long as it does not
exhibit willful misfeasance, bad faith, gross negligence, or
reckless disregard of its obligations.

Distribution Services Agreement

Rule 12b-1 adopted by the Securities and Exchange
Commission under the Act permits an investment company to
directly or indirectly pay expenses associated with the
distribution of its shares in accordance with a duly adopted and
approved plan. The Fund has entered into a Distribution Services
Agreement (the "Agreement") which includes a plan adopted
pursuant to Rule 12b-1 (the "Plan") with Alliance Fund
Distributors, Inc. (the "Distributor") and the Adviser. Pursuant
to the Plan, the Fund pays to the Distributor a Rule 12b-1
distribution services fee which may not exceed an annual rate of
.25 of 1% of the Fund's aggregate average daily net assets. In
addition, under the Agreement the Adviser makes payments for
distribution assistance and for administrative and accounting
services from its own resources which may include the management
fee paid by the Fund.

<PAGE>

the Adviser for expenditures, under the Agreement in amounts
aggregating $9,145,567 which constituted .25 of 1% of the Fund's
average daily net assets during the period, and the Adviser made
payments from its own resources as described above aggregating
$10,301,287. Of the $19,446,854 paid by the Adviser and the Fund
under the Agreement, $39,000 was paid for advertising, printing,
and mailing of prospectuses to persons other than current
shareholders; and $19,407,854 was paid to broker-dealers and
other financial intermediaries for distribution assistance.

The administrative and accounting services provided by
banks and other depository institutions may include, but are not
limited to, establishing and maintaining shareholder accounts,
sub-accounting, processing of purchase and redemption orders,
sending confirmations of transactions, forwarding financial
reports and other communications to shareholders and responding
to shareholder inquiries regarding the Fund. As interpreted by
courts and administrative agencies, certain laws and regulations
limit the ability of a bank or other depository institution to
become an underwriter or distributor of securities. However, in
the opinion of the Fund's management based on the advice of
counsel, these laws and regulations do not prohibit such
depository institutions from providing other services for
investment companies such as the administrative and accounting
services described above. The Trustees will consider appropriate
modifications to the Fund's operations, including discontinuance
of payments under the Agreement to banks and other depository
institutions, in the event of any future change in such laws or
regulations which may affect the ability of such institutions to
provide the above-mentioned services.

The Treasurer of the Fund reports the amounts expended
under the Agreement and the purposes for which such expenditures
were made to the Trustees on a quarterly basis. Also, the
Agreement provides that the selection and nomination of
disinterested Trustees (as defined in the Act) are committed to
the discretion of the disinterested Trustees then in office.

The Agreement became effective on July 22, 1992.
Continuance of the Agreement until June 30, 1998 was approved by
the vote, cast in person by all the Trustees of the Fund who
neither were interested persons of the Fund nor had any direct or
indirect financial interest in the Agreement or any related
agreement, at a meeting called for that purpose on June 16, 1997.
The Agreement may be continued annually thereafter if approved by
a majority vote of the Trustees who neither are interested
persons of the Fund nor have any direct or indirect financial
interest in the Agreement or in any related agreement, cast in
person at a meeting called for that purpose.

<PAGE>

All material amendments to the Agreement must be
approved by a vote of the Trustees, including a majority of the
disinterested Trustees, cast in person at a meeting called for
that purpose, and the Agreement may not be amended in order to
increase materially the costs which the Fund may bear pursuant to
the Agreement without the approval of a majority of the
outstanding shares of the Fund. The Agreement may also be
terminated at any time by a majority vote of the disinterested
Trustees, or by a majority of the outstanding shares of the Fund
or by the Distributor. Any agreement with a qualifying
broker-dealer or other financial intermediary may be terminated
without penalty on not more than sixty days' written notice by a
vote of the majority of non-party Trustees, by a vote of a
majority of the outstanding shares of the Fund, or by the
Distributor and will terminate automatically in the event of its
assignment.

The Agreement is in compliance with rules of the
National Association of Securities Dealers, Inc. (the "NASD")
which became effective July 7, 1993 and which limit the annual
asset-based sales charges and service fees that a mutual fund may
impose to .75% and .25%, respectively, of average annual net
assets.

PURCHASE AND REDEMPTION OF SHARES

Generally, shares 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.

Accounts Not Maintained Through Financial Intermediaries

Opening Accounts - New Investments

A. When Funds are Sent by Wire (the wire method
permits immediate credit)

1) Telephone the Fund toll-free at
(800) 824-1916. The Fund will ask for the name
of the account as you wish it to be
registered, address of the account, and
taxpayer identification number (social
security number for an individual). The Fund
will then provide you with an account number.

2) Instruct your bank to wire Federal funds
(minimum $1,000) exactly as follows:

<PAGE>

ABA 0110 0002-8
State Street Bank and Trust Company
Boston, MA 02101
Alliance Government Reserves
DDA 9903-279-9

Your account name as registered with the Fund
Your account number as registered with the
Fund

3) Mail a completed Application Form to:

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

B. When Funds are Sent by Check

1) Fill out an Application Form.

2) Mail the completed Application Form along with
your check or negotiable bank draft (minimum
$1,000), payable to "Alliance Government
Reserves," to Alliance Fund Services, Inc. as
in A(3) above.

Subsequent Investments

A. Investments by Wire (to obtain immediate credit)

Instruct your bank to wire Federal funds (minimum
$100) to State Street Bank and Trust Company ("State
Street Bank") as in A(2) above.

B. Investments by Check

Mail your check or negotiable bank draft (minimum
$100), payable to "Alliance Government Reserves," to
Alliance Fund Services, Inc. as in A(3) above.

Include with the check or draft the "next investment"
stub from one of your previous monthly or interim account
statements. For added identification, place your Fund account
number on the check or draft.

Investments Made by Check

<PAGE>

Reserve System may take longer to be converted and invested. All
payments must be in United States dollars.

PROCEEDS FROM ANY SUBSEQUENT REDEMPTION BY YOU OF FUND
SHARES THAT WERE PURCHASED BY CHECK OR ELECTRONIC FUNDS TRANSFER
WILL NOT BE FORWARDED TO YOU UNTIL THE FUND IS REASONABLY ASSURED
THAT YOUR CHECK OR ELECTRONIC FUNDS TRANSFER HAS CLEARED, UP TO
FIFTEEN DAYS FOLLOWING THE PURCHASE DATE. If the redemption
request during such period is in the form of a Fund check, the
check will be marked "insufficient funds" and be returned unpaid
to the presenting bank.

Redemptions

A. By Telephone

You may withdraw any amount from your account on any
Fund business day (i.e., any weekday exclusive of days on which
the New York Stock Exchange or State Street Bank is closed)
between 9:00 a.m. and 5:00 p.m. (New York time) via orders given
to Alliance Fund Services, Inc. by telephone toll-free (800)
824-1916. Such redemption orders must include your account name
as registered with the Fund and the account number.

If your telephone redemption order is received by
Alliance Fund Services, Inc. prior to 12:00 Noon (New York time),
we will send the proceeds in Federal funds by wire to your
designated bank account that day. The minimum amount for a wire
is $1,000. If your telephone redemption order is received by
Alliance Fund Services, Inc. after 12:00 Noon and before 4:00
p.m., we will wire the proceeds the next business day. You also
may request that proceeds be sent by check to your designated
bank. Redemptions are made without any charge to you.

During periods of drastic economic or market
developments, such as the market break of October 1987, it is
possible that shareholders would have difficulty in reaching
Alliance Fund Services, Inc. by telephone (although no such
difficulty was apparent at any time in connection with the 1987
market break). If a shareholder were to experience such
difficulty, the shareholder should issue written instructions to
Alliance Fund Services, Inc. at the address shown on the cover of
this statement of additional information. The Fund reserves the
right to suspend or terminate its telephone redemption service at
any time without notice. Neither the Fund nor the Adviser, or
Alliance Fund Services, Inc. will be responsible for the
authenticity of telephone requests for redemptions that the Fund
reasonably believes to be genuine. The Fund will employ
reasonable procedures in order to verify that telephone requests
for redemptions are genuine, including among others, recording
such telephone instructions and causing written confirmations of

<PAGE>

the resulting transactions to be sent to shareholders. If the
Fund did not employ such procedures, it could be liable for
losses arising from unauthorized or fraudulent telephone
instructions. Selected dealers or agents may charge a commission
for handling telephone requests for redemptions.

B. By Checkwriting

With this service, you may write checks made payable to
any payee in any amount. Checks cannot be written for more than
the principal balance (not including any accrued dividends) in
your account. First, you must fill out the Signature Card which
is with the Application Form. If you wish to establish this
checkwriting service subsequent to the opening of your Fund
account, contact the Fund by telephone or mail. There is no
separate charge for the checkwriting service, except that State
Street Bank 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. There is a $7.50 charge for
check reorders.

The checkwriting service enables you to receive the daily
dividends declared on the shares to be redeemed until the day
that your check is presented to State Street Bank for payment.

C. By Mail

You may withdraw any amount from your account at any
time by mail. Written orders for withdrawal, accompanied by duly
endorsed certificates, if issued, should be mailed to Alliance
Fund Services, Inc., P.O. Box 1520, Secaucus, New Jersey
07096-1520. Such orders must include the account name as
registered with the Fund and the account number. All written
orders for redemption, and accompanying certificates, if any,
must be signed by all owners of the account with the signatures
guaranteed by an institution which is an "eligible guarantor" as
defined in Rule 17Ad-15 under the Securities Exchange Act of
1934, as amended.

Additional Information

<PAGE>

institution after its deadline, the institution may not effect
the order with the Fund until the next business day.
Accordingly, an investor should familiarize himself or herself
with the deadlines set by his or her institution. (For example,
the Distributor accepts purchase orders from its customers up to
2:15 p.m. New York time for issuance at the 4:00 p.m. transaction
time and price.) A brokerage firm acting on behalf of a customer
in connection with transactions in Fund shares is subject to the
same legal obligations imposed on it generally in connection with
transactions in securities for a customer, including the
obligation to act promptly and accurately.

Orders for the purchase of Fund shares become effective
at the next transaction time after Federal funds or bank wire
monies become available to State Street Bank for a shareholder's
investment. Federal funds are a bank's deposits in a Federal
Reserve Bank. These funds can be transferred by Federal Reserve
wire from the account of one member bank to that of another
member bank on the same day and are considered to be immediately
available funds; similar immediate availability is accorded
monies received at State Street Bank by bank wire. Money
transmitted by a check drawn on a member of the Federal Reserve
System is converted to Federal funds in one business day
following receipt. Checks drawn on banks which are not members
of the Federal Reserve System may take longer. All payments
(including checks from individual investors) must be in United
States dollars.

All shares purchased are confirmed to each shareholder
and are credited to his or her account at the net asset value.
To avoid unnecessary expense to the Fund and to facilitate the
immediate redemption of shares, share certificates, for which no
charge is made, are not issued except upon the written request of
a shareholder. Certificates are not issued for fractional
shares. Shares for which certificates have been issued are not
eligible for any of the optional methods of withdrawal; namely,
the telephone, telegraph, checkwriting or periodic redemption
procedures. The Fund reserves the right to reject any purchase
order.

Arrangements for Telephone Redemptions. If you wish to
use the telephone redemption procedure, indicate this on your
Application Form and designate a bank and account number to
receive the proceeds of your withdrawals. If you decide later
that you wish to use this procedure, or to change instructions
already given, send a written notice to Alliance Fund Services,
Inc., P.O. Box 1520, Secaucus, New Jersey 07096-1520, with your
signature guaranteed by an institution which is an eligible
guarantor. For joint accounts, all owners must sign and have
their signatures guaranteed.

<PAGE>

Automatic Investment Program. A shareholder may
purchase shares of the Fund through an automatic investment
program through a bank that is a member of the National Automated
Clearing House Association. Purchases can be made on a Fund
business day each month designated by the shareholder.
Shareholders wishing to establish an automatic investment program
should write or telephone the Fund or Alliance Fund Services,
Inc. at (800) 221-5672.

Retirement Plans. The Fund's objectives of safety of
principal, excellent liquidity and maximum current income to the
extent consistent with the first two objectives may make it a
suitable investment vehicle for part or all of the assets held in
various tax-deferred retirement plans. The Fund has available
forms of individual retirement account (IRA), simplified employee
pension plans (SEP), 403(b)(7) plans and employer-sponsored
retirement plans (Keogh or HR10 Plan). Certain services
described in this prospectus may not be available to retirement
accounts and plans. Persons desiring information concerning
these plans should write or telephone the Fund or AFS at (800)
221-5672.

The Alliance Plans Division of Frontier Trust Company, a
subsidiary of The Equitable Life Assurance Society of the United
States, is the custodian under these plans. The custodian
charges a nominal account establishment fee and a nominal annual
maintenance fee. A portion of such fees is remitted to AFS to
compensate that organization for services rendered to retirement
plan accounts maintained with the Fund.

Periodic Distribution Plans. Without affecting your
right to use any of the methods of redemption described above, by
checking the appropriate boxes on the Application Form, you may
elect to participate additionally in the following plans without
any separate charge. Under the Income Distribution Plan you
receive monthly payments of all the income earned in your Fund
account, with payments forwarded by check or electronically via
the Automated Clearing House ("ACH") network shortly after the
close of the month. Under the Systematic Withdrawal Plan, you
may request payments by check or electronically via the ACH
network in any specified amount of $50 or more each month or in
any intermittent pattern of months. If desired, you can order,
via a signature- guaranteed letter to the Fund, such periodic
payments to be sent to another person. Shareholders wishing
either of the above plans electronically through the ACH network
should write or telephone the Fund or AFS at (800) 221-5672.

<PAGE>

reinvesting, should continue to use his account number.
Otherwise, the account should be re-opened pursuant to procedures
described above or through instructions given to a financial
intermediary.

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

DAILY DIVIDENDS--DETERMINATION OF NET ASSET VALUE

All net income of the Fund is determined after the close
of each business day, currently 4:00 p.m. New York time (and at
such other times as the Trustees may determine) and is paid
immediately thereafter pro rata to shareholders of record 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.

Net income consists of all accrued interest income on
Fund portfolio assets less the Fund's expenses applicable to that
dividend period. Realized gains and losses are reflected in net
asset value and are not included in net income. Net asset value
per share is expected to remain constant at $1.00 since all net

<PAGE>

income is declared as a dividend each time net income is
determined.

The valuation of the Fund's portfolio securities is
based upon their amortized cost which does not take into account
unrealized securities gains or losses as measured by market
valuations. The amortized cost method involves valuing an
instrument at its cost and thereafter applying a constant
amortization to maturity of any discount or premium, regardless
of the impact of fluctuating interest rates on the market value
of the instrument. During periods of declining interest rates,
the daily yield on shares of the Fund may be higher than that of
a fund with identical investments utilizing a method of valuation
based upon market prices for its portfolio instruments; the
converse would apply in a period of rising interest rates.

The Fund utilizes the amortized cost method of valuation
of portfolio securities in accordance with the provisions of Rule
2a-7 under the Act. Pursuant to such rule, the Fund maintains a
dollar-weighted average portfolio maturity of 90 days or less and
invests only in securities of high quality. The Fund also
purchases instruments which, at the time of investment, have
remaining maturities of no more than one year which maturities
may extend to 397 days. The Fund maintains procedures designed
to stabilize, to the extent reasonably possible, the price per
share as computed for the purpose of sales and redemptions at
$1.00. Such procedures include review of the Fund's portfolio
holdings by the Trustees at such intervals as they deem
appropriate to determine whether and to what extent the net asset
value of the Fund calculated by using available market quotations
or market equivalents deviates from net asset value based on
amortized cost. If such deviation exceeds 1/2 of 1%, the Trustees
will promptly consider what action, if any, should be initiated.
In the event the Trustees determine that such a deviation may
result in material dilution or other unfair results to new
investors or existing shareholders, they will consider corrective
action which might include (1) selling instruments prior to
maturity to realize capital gains or losses or to shorten average
portfolio maturity; (2) withholding dividends of net income on
shares; or (3) establishing a net asset value per share using
available market quotations or equivalents. There can be no
assurance, however, that the Fund's net asset value per share
will remain constant at $1.00.

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

<PAGE>

TAXES

The Fund has qualified in each fiscal year to date and
intends to qualify in each future year to be taxed as a regulated
investment company under the Internal Revenue Code of 1986, as
amended (the "Code") and, as such, will not be liable for Federal
income and excise taxes on the net income and capital gains
distributed to its shareholders. Since the Fund distributes all
of its net income and capital gains, the Fund itself should
thereby avoid all Federal income and excise taxes.

For shareholders' Federal income tax purposes, all
distributions by the Fund out of interest income and net realized
short-term capital gains are treated as ordinary income and
distributions of long-term capital gains, if any, are treated as
long-term capital gains irrespective of the length of time the
shareholder held shares in the Fund. Since the Fund derives
nearly all of its gross income in the form of interest and the
balance in the form of short-term capital gains, it is expected
that for corporate shareholders, none of the Fund's distributions
will be eligible for the dividends-received deduction under
current law.

GENERAL INFORMATION

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

<PAGE>

best price and execution may be obtained from more than one
dealer, the Adviser may, in its discretion, purchase and sell
securities through dealers who provide research, statistical and
other information to the Adviser. Such services may be used by
the Adviser for all of its investment advisory accounts and,
accordingly, not all such services may be used by the Adviser in
connection with the Fund. The supplemental information received
from a dealer is in addition to the services required to be
performed by the Adviser under the Advisory Agreement, and the
expenses of the Adviser will not necessarily be reduced as a
result of the receipt of such information. Portfolio securities
will not be purchased from or sold to the Adviser's parent, or
any subsidiary or affiliate of the parent. During the fiscal
years ended June 30, 1995, 1996 and 1997, the Fund paid no
brokerage commissions.

Capitalization. All shares of the Fund, when issued,
are fully paid and non-assessable. The Trustees are authorized
to reclassify and issue any unissued shares to any number of
additional classes or series without shareholder approval.
Accordingly, the Trustees, in the future, for reasons such as the
desire to establish one or more additional portfolios with
different investment objectives, policies or restrictions, may
create additional classes or series of shares. Any issuance of
shares of another class would be governed by the Act and the law
of the Commonwealth of Massachusetts. If shares of another class
were issued in connection with the creation of a second
portfolio, each share of either portfolio would normally be
entitled to one vote for all purposes. Generally, shares of both
portfolios would vote as a single series for the election of
Trustees and on any other matter that affected both portfolios in
substantially the same manner. As to matters affecting each
portfolio differently, such as approval of the Advisory Agreement
and changes in investment policy, shares of each portfolio would
vote as separate classes. Certain procedures for the removal by
shareholders of trustees of investment trusts, such as the Fund,
are set forth in Section 16(c) of the Act.

At October 15, 1997, there were 4,041,361,169 shares of
beneficial interest of the Fund outstanding. To the knowledge of
the Fund there were no persons who owned of record, or
beneficially, 5% or more of the outstanding shares of the Fund as
of October 15, 1997.

<PAGE>

certificate or undertaking made or issued by the Trustees or
officers of the Trust. The Agreement and Declaration of Trust
provides for indemnification out of the property of the Fund for
all loss and expense of any shareholder of the Fund held
personally liable for the obligations of the Fund. Thus, the
risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which the
Fund would be unable to meet its obligations. In the view of the
Adviser, such risk is not material.

Legal Matters. The legality of the shares offered
hereby has been passed upon by Seward & Kissel, New York, New
York, counsel for the Fund and the Adviser. Seward & Kissel has
relied upon the opinion of Sullivan & Worcester, Boston,
Massachusetts, for matters relating to Massachusetts law.

Accountants. An opinion relating to the Fund's
financial statements is given herein by McGladrey & Pullen, LLP,
New York, New York, independent auditors for the Fund.

Yield Quotations. Advertisements containing yield
quotations for the Fund may from time to time be sent to
investors or placed in newspapers, magazines or other media on
behalf of the Fund. These advertisements may quote performance
rankings, ratings or data from independent organizations or
financial publications such as Lipper Analytical Services, Inc.,
Morningstar, Inc., IBC's Money Fund Report, IBC's Money Market
Insight or Bank Rate Monitor or compare the Fund's performance to
bank money market deposit accounts, certificates of deposit or
various indices. Such yield quotations are calculated in
accordance with the standardized method referred to in Rule 482
under the Securities Act of 1933. Yield quotations are thus
determined by (i) computing the net change over a seven-day
period, exclusive of capital changes, in the value of a
hypothetical pre-existing account having a balance of one share
at the beginning of such period, (ii) dividing the net change in
account value by the value of the account at the beginning of
such period, and (iii) multiplying such base period return the
result by (365/7)--with the resulting yield figure carried to the
nearest hundredth of one percent. The Fund's effective annual
yield represents a compounding of the annualized yield according
to the following formula:

effective yield = [(base period return + 1)365/7] - 1

The Fund's yield for the seven-day period ended June 30,
1997 was 4.62% which is the equivalent of a 4.73% compounded
effective yield. Current yield information for the Fund can be
obtained by a recorded message by telephoning toll-free at (800)
221-9513.

<PAGE>

Additional Information. This Statement of Additional
Information does not contain all the information set forth in the
Registration Statement filed by the Fund with the Securities and
Exchange Commission under the Securities Act of 1933. Copies of
the Registration Statement may be obtained at a reasonable charge
from the Commission or may be examined, without charge, at the
Commission's offices in Washington, D.C.

<PAGE>

ALLIANCE GOVERNMENT RESERVES

ALLIANCE CAPITAL

ANNUAL REPORT
JUNE 30, 1997

STATEMENT OF NET ASSETS
JUNE 30, 1997 ALLIANCE GOVERNMENT RESERVES
_______________________________________________________________________________

PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCIES-44.3%
FEDERAL HOME LOAN BANK-14.0%
$ 50,000 5.51%, 9/24/97 FRN 5.51% $ 49,991,500
60,000 5.62%, 12/04/97 FRN 5.40 59,978,918
52,700 5.87%, 1/30/98 5.87 52,700,000
56,000 5.88%, 3/24/98 6.15 55,865,685
14,000 6.00%, 9/24/97 5.57 14,007,438
53,000 6.11%, 4/17/98 6.14 52,987,940
29,365 9/18/97 5.37 29,018,958
26,000 7/24/97 5.45 25,909,469
9,645 7/22/97 5.49 9,614,112
50,000 8/07/97 5.53 49,716,076
24,000 10/22/97 5.58 23,579,640
24,080 12/22/97 5.60 23,428,235
65,000 7/01/97 6.00 65,000,000
17,000 6/30/98 6.00 17,000,000
-------------
528,797,971

FEDERAL NATIONAL MORTGAGE
ASSOCIATION-10.4%
79,500 5.94%, 10/15/97 FRN 5.94 79,502,942
47,000 6.02%, 4/15/98 6.15 46,957,471
2,000 9/10/97 5.37 1,978,818
7,000 7/24/97 5.44 6,975,671
45,000 9/05/97 5.49 44,547,075
20,000 9/18/97 5.51 19,758,172
25,000 9/25/97 5.51 24,670,931
27,110 7/08/97 5.52 27,080,902
27,000 8/11/97 5.53 26,829,953
45,000 8/12/97 5.53 44,709,675
67,000 8/04/97 5.54 66,649,441
-------------
389,661,051

FEDERAL HOME LOAN MORTGAGE CORP.-8.5%
69,000 5.72%, 3/17/98 5.87 68,929,495
46,000 5.84%, 4/08/98 6.04 45,935,193
4,400 7/14/97 5.43 4,391,372
21,000 7/30/97 5.46 20,907,635
28,000 8/04/97 5.46 27,855,614
22,000 8/13/97 5.46 21,856,523
3,845 7/01/97 5.50 3,845,000
19,000 9/03/97 5.50 18,814,222
37,005 7/18/97 5.51 36,908,715
23,000 8/15/97 5.57 22,839,863
46,500 7/01/97 6.00 46,500,000
318,783,632

FEDERAL FARM CREDIT BANK-7.7%
72,000 5.36%, 10/01/97 FRN 5.36% 71,979,737
80,000 5.39%, 6/01/98 FRN 5.39 79,986,379
75,000 5.43%, 5/01/98 FRN 5.43 75,000,000
30,000 5.60%, 11/03/97 5.60 29,992,122
2,520 9/10/97 5.37 2,493,311
8,000 9/15/97 5.37 7,909,307
24,000 11/19/97 5.60 23,473,600
-------------
290,834,456

STUDENT LOAN MARKETING
ASSOCIATION-3.7%
20,000 5.18%, 11/24/97 FRN 5.18 19,998,126
32,500 5.20%, 9/03/97 FRN 5.20 32,496,699
32,000 5.31%, 2/17/98 FRN 5.31 31,984,429
8,300 5.36%, 1/21/98 FRN 5.36 8,298,667
48,000 5.44%, 12/19/97 5.94 47,888,378
-------------
140,666,299

Total U.S. Government and Agencies
(amortized cost $1,668,743,409) 1,668,743,409

REPURCHASE AGREEMENTS-55.3%
CHASE SECURITIES, INC.
50,000 5.53%, dated 6/11/97,
due 7/14/97 in the amount of
$50,253,458 (cost $50,000,000;
collateralized by $40,000,000
FN 317618, value $30,234,010,
$12,305,000 FN 303814,
value $11,145,491 and
$11,560,000 FN 313040,
value $10,752,908)(a) 5.53 50,000,000

CHASE SECURITIES, INC.
37,000 5.55%, dated 6/18/97,
due 8/18/97 in the amount of
$37,347,954 (cost $37,000,000;
collateralized by $14,648,945
FN 250911, value $14,408,970,
$19,999,000 FN 30372,
value $18,167,979 and
$6,000,000 FN 379176,
value $5,913,833)(a) 5.55 37,000,000

STATEMENT OF NET ASSETS (CONTINUED) ALLIANCE GOVERNMENT RESERVES
_______________________________________________________________________________

PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
CHASE SECURITIES, INC.
$ 52,000 5.58%, dated 6/24/97,
due 9/22/97 in the amount of
$52,725,400 (cost $52,000,000;
collateralized by $20,147,603
FN 377532, value $19,821,895,
$17,977,606 FN 377535,
value $17,599,818 and
$17,840,000 FN 313285,
value $17,339,662)(a) 5.58% $52,000,000

FIRST BOSTON CORP.
50,000 5.52%, dated 6/25/97,
due 7/29/97 in the amount of
$50,260,667 (cost $50,000,000;
collateralized by $34,122,984
FN 303983, value $30,822,960
and $27,758,000 FH 00590,
value $26,834,315)(a) 5.52 50,000,000

FIRST BOSTON CORP.
45,000 5.53%, dated 6/17/97,
due 7/18/97 in the amount of
$45,214,228 (cost $45,000,000;
collateralized by $25,639,370
FH 00605, value $24,520,616
and $23,749,000 FN 303983,
value $45,973,476)(a) 5.53 45,000,000

FIRST BOSTON CORP.
50,000 5.53%, dated 6/13/97,
due 7/21/97 in the amount of
$50,291,861 (cost $50,000,000;
collateralized by $26,527,676
FH 00612, value $25,554,119,
$23,735,204 FN 313472,
value 23,142,245 and
$2,630,000 FH 00546,
value $2,474,838)(a) 5.53 50,000,000

FUJI BANK
100,000 5.51%, dated 6/16/97,
due 7/16/97 in the amount of
$100,459,167 (cost $100,000,000;
collateralized by $100,000,000
FNMA 12/22/05, value
$97,791,674, $1,210,000
VA 10/15/01, value $1,254,299
and $2,850,000 FHLMC
6/23/05, value $2,831,967)(a) 5.51 100,000,000

GOLDMAN SACHS & CO.
37,000 5.51%, dated 6/18/97,
due 7/23/97 in the amount of
$37,198,207 (cost $37,000,000;
collateralized by $38,969,000
FM 00672, value $37,875,735)(a) 5.51 37,000,000

GOLDMAN SACHS & CO.
50,000 5.53%, dated 6/04/97,
due 7/08/97 in the amount of
$50,261,139 (cost $50,000,000;
collateralized by $53,833,000
FM 00517, value $51,494,837)(a) 5.53 50,000,000

GOLDMAN SACHS & CO.
50,000 5.53%, dated 6/04/97,
due 7/09/97 in the amount of
$50,268,819 (cost $50,000,000;
collateralized by $30,703,000
FM 00517, value $29,371,093
and $26,426,000 FN 303074,
value $22,013,443)(a) 5.53 50,000,000

GOLDMAN SACHS & CO.
50,000 5.53%, dated 6/04/97,
due 7/10/97 in the amount of
$50,276,500 (cost $50,000,000;
collateralized by $53,830,000
FM 00536, value $51,543,354)(a) 5.53 50,000,000

LEHMAN BROTHERS
40,000 5.50%, dated 6/20/97,
due 7/21/97 in the amount of
$40,189,444 (cost $40,000,000;
collateralized by $20,000,000
FN 303187, value $14,243,380,
$26,713,415 FN 050643,
value $10,644,559 and
$16,765,000 FN 337174,
value $15,962,946)(a) 5.50 40,000,000

ALLIANCE GOVERNMENT RESERVES
_______________________________________________________________________________

PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
LEHMAN BROTHERS
$ 87,000 5.50%, dated 6/19/97,
due 7/23/97 in the amount of
$87,451,917 (cost $87,000,000;
collateralized by $10,000,000
GN 002122, value $8,057,247,
$24,750,000 FN 250937,
value $24,861,261, $37,017,733
FN 050579, value $10,095,395,
$35,967,747 FN 303187,
value $25,614,584 and
$82,000,000 FN 124852,
value $199,628,789)(a) 5.50% $87,000,000

LEHMAN BROTHERS
40,000 5.50%, dated 6/20/97,
due 7/24/97 in the amount of
$40,207,778 (cost $40,000,000;
collateralized by $29,368,023
FN 303187, value $20,914,972,
$27,839,578 FN 124463,
value $8,064,631 and
$21,184,921 FN 124677,
value $11,947,272)(a) 5.50 40,000,000

LEHMAN BROTHERS
22,000 6.10%, dated 6/30/97,
due 7/01/97 in the amount of
$22,003,728 (cost $22,000,000;
collateralized by $23,526,361
GNMA 780560 6.50%, 5/15/24,
value $22,459,775) 6.10 22,000,000

MORGAN STANLEY GROUP, INC.
60,000 5.49%, dated 6/19/97,
due 7/15/97 in the amount of
$60,237,900 (cost $60,000,000;
collateralized by $17,969,000
FN 250327, value $14,481,919,
$14,500,000 FN 303707,
value $12,260,650, $23,000,000
FG 00236, value $14,286,915
and $21,564,000 FN 313017,
value $20,485,312)(a) 5.49 60,000,000

MORGAN STANLEY GROUP, INC.
79,000 5.51%, dated 6/26/97,
due 7/10/97 in the amount of
$79,169,279 (cost $79,000,000;
collateralized by $10,812,000
FN 250055, value $7,915,300,
$21,000,000 FN 66772,
value $18,140,254 and
$55,535,000 FN 77433,
value $54,982,733)(a) 5.51 79,000,000

MORGAN STANLEY GROUP, INC.
50,000 5.55%, dated 5/02/97,
due 7/01/97 in the amount of
$50,462,500 (cost $50,000,000;
collateralized by $52,292,000
GN 780410, value
$51,433,317)(a) 5.55 50,000,000

NIKKO SECURITIES CO.
40,000 5.52%, dated 6/10/97,
due 7/09/97 in the amount of
$40,177,867 (cost $40,000,000;
collateralized by $41,700,000
FH 00522, value $41,136,284)(a) 5.52 40,000,000

NIKKO SECURITIES CO.
37,000 5.52%, dated 6/17/97,
due 7/17/97 in the amount of
$37,170,200 (cost $37,000,000;
collateralized by $14,912,058
FH 80177, value $14,710,370,
$14,934,224 FH 80685,
value $14,742,866 and
$8,715,000 FH 79859,
value $8,597,358)(a) 5.52 37,000,000

NIKKO SECURITIES CO.
12,000 5.52%, dated 6/24/97,
due 7/24/97 in the amount of
$12,055,200 (cost $12,000,000;
collateralized by $13,066,000
FG 41068, value $12,275,321)(a) 5.52 12,000,000

NIKKO SECURITIES CO.
50,000 5.52%, dated 6/19/97,
due 7/25/97 in the amount of
$50,276,000 (cost $50,000,000;
collateralized by $30,000,000
FH 79503, value $29,560,751,
$10,000,000 FH 78691,
value $9,766,832 and
$12,285,000 FH 79186,
value $12,090,172)(a) 5.52 50,000,000

STATEMENT OF NET ASSETS (CONTINUED) ALLIANCE GOVERNMENT RESERVES
_______________________________________________________________________________

PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
NIKKO SECURITIES CO.
$ 50,000 5.53%, dated 6/13/97,
due 7/11/97 in the amount of
$50,215,056 (cost $50,000,000;
collateralized by $25,323,911
FH 00512, value $24,946,963,
$19,251,102 FH 00497,
value $18,900,733 and
$7,700,000 FH 00504,
value $7,571,504)(a) 5.53% $50,000,000

PAINE WEBBER GROUP, INC.
42,000 5.52%, dated 6/06/97,
due 7/15/97 in the amount of
$42,251,160 (cost $42,000,000;
collateralized by $45,065,000
FG 00595, value $43,430,457)(a) 5.52 42,000,000

PAINE WEBBER GROUP, INC.
38,000 5.55%, dated 6/03/97,
due 7/03/97 in the amount of
$38,175,750 (cost $38,000,000;
collateralized by $50,000,000
FN 190830, value $36,167,606
and $3,715,000 FN 303116,
value $2,728,153)(a) 5.55 38,000,000

PAINE WEBBER GROUP, INC.
30,000 5.56%, dated 6/25/97,
due 7/02/97 in the amount of
$30,032,433 (cost $30,000,000;
collateralized by $31,897,000
FG 00585, value $30,730,343) 5.56 30,000,000

PAINE WEBBER GROUP, INC.
49,000 5.56%, dated 6/24/97,
due 7/03/97 in the amount of
$49,068,110 (cost $49,000,000;
collateralized by $50,000,000
FN 190831, value $35,978,677
and $14,650,000 FG 00584,
value $14,138,024)(a) 5.56 49,000,000

PAINE WEBBER GROUP, INC.
30,000 6.05%, dated 6/30/97,
due 7/01/97 in the amount of
$30,005,042 (cost $30,000,000;
collateralized by $42,815,000
FN 190831 6.50%, 4/01/09,
value $30,808,541) 6.05 30,000,000

PRUDENTIAL SECURITIES, INC.
52,000 5.50%, dated 6/19/97,
due 7/17/97 in the amount of
$52,222,444 (cost $52,000,000;
collateralized by $24,266,680
FN 303714, value $18,938,228,
$19,600,000 FN 231651,
value $12,668,987 and
$26,690,000 FG 00279,
value $21,579,019)(a) 5.50 52,000,000

PRUDENTIAL SECURITIES, INC.
42,000 5.50%, dated 6/24/97,
due 7/28/97 in the amount of
$42,218,167 (cost $42,000,000;
collateralized by $20,620,000
FG 00272, value $17,027,430,
$20,427,808 FH 00678,
value $16,736,215 and
$11,967,000 FH 00377,
value $9,228,899)(a) 5.50 42,000,000

PRUDENTIAL SECURITIES, INC.
45,000 5.53%, dated 6/17/97,
due 7/02/97 in the amount of
$45,103,688 (cost $45,000,000;
collateralized by $14,333,000
FG 51185, value $11,605,511,
$5,122,846 FG 00188,
value $10,202,080 and
$25,669,923 FH 555317,
value $24,475,501)(a) 5.53 45,000,000

PRUDENTIAL SECURITIES, INC.
10,000 5.55%, dated 6/26/97,
due 7/03/97 in the amount of
$10,010,792 (cost $10,000,000;
collateralized by $13,053,000
FN 303675, value $10,253,190) 5.55 10,000,000

PRUDENTIAL SECURITIES, INC.
40,000 6.00%, dated 6/30/97,
due 7/01/97 in the amount of
$40,006,667 (cost $40,000,000;
collateralized by $42,920,000
FG G00629, 7.00%, 12/01/25,
value $40,957,702) 6.00 40,000,000

ALLIANCE GOVERNMENT RESERVES
_______________________________________________________________________________

PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
SBC WARBURG
$ 65,000 5.50%, dated 6/06/97,
due 7/07/97 in the amount of
$65,307,847 (cost $65,000,000;
collateralized by $24,439,000
FN 367910, value $23,530,032,
$21,038,000 FN 341537,
value $16,162,180 and
$30,760,000 FN 304033,
value $26,966,137)(a) 5.50% $65,000,000

SBC WARBURG
25,000 5.50%, dated 6/05/97,
due 7/07/97 in the amount of
$25,122,222 (cost $25,000,000;
collateralized by $15,957,000
FN 368920, value $15,177,348
and $16,146,000 FN 190044,
value $10,461,399)(a) 5.50 25,000,000

SBC WARBURG
26,000 5.50%, dated 6/10/97,
due 7/10/97 in the amount of
$26,119,167 (cost $26,000,000;
collateralized by $21,143,000
FH 00678, value $20,154,286
and $6,872,000 FH 00378,
value $6,550,644)(a) 5.50 26,000,000

SBC WARBURG
71,000 5.50%, dated 6/19/97,
due 7/25/97 in the amount of
$71,390,500 (cost $71,000,000;
collateralized by $36,140,000
FN 050993, value $29,306,266,
$35,882,000 FH 00678,
value $34,204,044 and
$10,380,049 FH 00377,
value $8,981,673)(a) 5.50 71,000,000

SMITH BARNEY
50,000 5.54%, dated 6/03/97,
due 7/07/97 in the amount of
$50,261,611 (cost $50,000,000;
collateralized by $19,800,000
FN 250373, value $20,080,558,
$25,300,765 FH 00517,
value $24,203,434 and
$8,850,000 FN 250029,
value $7,273,940)(a) 5.54 50,000,000

SMITH BARNEY
87,000 5.54%, dated 6/17/97,
due 7/22/97 in the amount of
$87,468,592 (cost $87,000,000;
collateralized by $92,500,000
FH 00612, value $89,075,595)(a) 5.54 87,000,000

SMITH BARNEY
50,000 6.15%, dated 6/30/97,
due 7/01/97 in the amount of
$50,008,542 (cost $50,000,000;
collateralized by $14,604,175
FG C00525 8.00%, 6/01/27
value $15,040,396, $10,978,657
FG D80372 8,00%, 6/01/27
value 11,306,044, $16,181,883
FG G10353 8.00%, 4/01/10
value $9,194,079, $8,419,059
FG D80442 8.00%, 6/01/27
value $8,670,577, $14,100,000
FG L80008 6.50%, 1/01/00
value $7,266,676 and $5,980,000
FN 313568 8.00%, 12/01/17
value $6,077,595) 6.15 50,000,000

UBS FINANCE, INC.
49,000 5.50%, dated 6/24/97,
due 7/14/97 in the amount of
$49,149,722 (cost $49,000,000;
collateralized by $52,111,000
FH 00647, value $46,996,575)(a) 5.50 49,000,000

UBS FINANCE, INC.
65,000 5.50%, dated 6/18/97,
due 7/18/97 in the amount of
$65,297,917 (cost $65,000,000;
collateralized by $50,000,000
FN 250550, value $45,864,009
and $22,123,000 FN 339326,
value $20,581,937)(a) 5.50 65,000,000

UBS FINANCE, INC.
50,000 5.62%, dated 4/29/97,
due 7/30/97 in the amount of
$50,718,111 (cost $50,000,000;
collateralized by $53,885,000
FGG 00647, value $51,665,491)(a) 5.62 50,000,000

STATEMENT OF NET ASSETS (CONTINUED) ALLIANCE GOVERNMENT RESERVES
_______________________________________________________________________________

PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
UBS FINANCE, INC.
$ 25,000 5.65%, dated 4/17/97,
due 7/16/97 in the amount of
$25,353,125 (cost $25,000,000;
collateralized by $26,899,000
FHG 00647, value $25,799,201)(a) 5.65% $ 25,000,000

Total Repurchase Agreements
(amortized cost $2,079,000,000) 2,079,000,000

TOTAL INVESTMENTS-99.6%
(amortized cost $3,747,743,409) $3,747,743,409
Other assets less liabilities-0.4% 14,741,784

NET ASSETS-100%
(offering and redemption
price of $1.00 per share;
3,763,356,075 shares outstanding) $3,762,485,193

# All securities either mature or their interest rate changes in one year or
less.

(a) Repurchase agreements which are terminable within 7 days.

Glossary:
FRN - Floating rate note

See notes to financial statements.

STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1997 ALLIANCE GOVERNMENT RESERVES
_______________________________________________________________________________

INVESTMENT INCOME
Interest $198,976,472

EXPENSES
Advisory fee (Note B) $17,412,020
Distribution assistance and administrative
service (Note C) 11,456,089
Transfer agency (Note B) 5,917,904
Registration fees 815,160
Printing 424,268
Custodian fees 420,291
Audit and legal fees 58,410
Trustees' fees 14,637
Miscellaneous 63,489
Total expenses 36,582,268
Net investment income 162,394,204

REALIZED GAIN ON INVESTMENTS
Net realized gain on investment transactions 46,468

NET INCREASE IN NET ASSETS FROM OPERATIONS $162,440,672

See notes to financial statements.

STATEMENT OF CHANGES IN NET ASSETS ALLIANCE GOVERNMENT RESERVES
_______________________________________________________________________________

YEAR ENDED YEAR ENDED
JUNE 30,1997 JUNE 30,1996
--------------- ---------------
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income $ 162,394,204 $ 135,336,143
Net realized gain on investment transactions 46,468 20,063
Net increase in net assets from operations 162,440,672 135,356,206

DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (162,394,204) (135,336,143)

TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase (Note E) 557,419,600 690,690,859
Total increase 557,466,068 690,710,922

NET ASSETS
Beginning of year 3,205,019,125 2,514,308,203
End of year $3,762,485,193 $3,205,019,125

See notes to financial statements.

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997 ALLIANCE GOVERNMENT RESERVES
_______________________________________________________________________________

NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Government Reserves (the "Trust") is an open-end diversified
investment company registered under the Investment Company Act of 1940. The
Trust consists of two portfolios: Alliance Government Reserves (the
"Portfolio") and Alliance Treasury Reserves. Each Portfolio is considered to be
a separate entity for financial reporting and tax purposes. As a matter of
fundamental policy, the Portfolio pursues its objectives by maintaining a
portfolio of high-quality money market securities all of which, at the time of
investment, have remaining maturities of 397 days or less. The following is a
summary of significant accounting policies followed by the Portfolio.

1. VALUATION OF SECURITIES
Securities in which the Portfolio invests are traded primarily in the
over-the-counter market and are valued at amortized cost, under which method a
portfolio instrument is valued at cost and any premium or discount is amortized
on a constant basis to maturity.

2. TAXES
It is the Portfolio's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its investment company taxable income and net realized gains, if applicable,
to its shareholders. Therefore, no provisions for federal income or excise
taxes are required.

3. DIVIDENDS
The Portfolio declares dividends daily and automatically reinvests such
dividends in additional shares at net asset value. Net realized capital gains
on investments, if any, are expected to be distributed near year end.

4. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Interest income is accrued as earned. Investment transactions are recorded on a
trade date basis. Realized gain (loss) from investment transactions is recorded
on the identified cost basis.

5. REPURCHASE AGREEMENTS
It is the Fund's policy to take possession of securities as collateral under
repurchase agreements and to determine on a daily basis that the value of such
securities are sufficient to cover the value of repurchase agreements.

NOTE B: ADVISORY FEE AND TRANSACTIONS WITH AN AFFILIATE OF THE ADVISER
The Portfolio pays its Adviser, Alliance Capital Management L.P., an advisory
fee at the annual rate of .50 of 1% on the first $1.25 billion of average daily
net assets; .49 of 1% on the next $.25 billion; .48 of 1% on the next $.25
billion; .47 of 1% on the next $.25 billion; .46 of 1% on the next $1 billion;
and .45% in excess of $3 billion. The Adviser has agreed to reimburse the
Portfolio to the extent that its aggregate expenses (excluding taxes,
brokerage, interest and, where permitted, extraordinary expenses) exceed 1% of
its average daily net assets for any fiscal year. No reimbursement was required
for the year ended June 30, 1997. The Portfolio compensates Alliance Fund
Services, Inc. (a wholly-owned subsidiary of the Adviser) for providing
personnel and facilities to perform transfer agency services for the Portfolio.
Such compensation amounted to $3,969,178 for the year ended June 30, 1997.

NOTE C: DISTRIBUTION ASSISTANCE AND ADMINISTRATIVE SERVICES PLAN
Under this Plan, the Portfolio pays the Adviser a distribution fee at the
annual rate of up to .25 of 1% of the average daily value of the Portfolio's
net assets. The Plan provides that the Adviser will use such payments in their
entirety for distribution assistance and promotional activities. For the year
ended June 30, 1997, the distribution fee amounted to $9,145,567. In addition,
the Portfolio may reimburse certain broker-dealers for administrative costs
incurred in connection with providing shareholder services, and may reimburse
the Adviser for accounting and bookkeeping, and legal and compliance support.
For the year ended June 30, 1997, such payments by the Portfolio amounted to
$2,310,522 of which $164,000 was paid to the Adviser.

NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE GOVERNMENT RESERVES
_______________________________________________________________________________

NOTE D: INVESTMENT TRANSACTIONS
At June 30, 1997, the cost of portfolio securities for federal income tax
purposes was the same as the cost for financial reporting purposes. At June 30,
1997 the Portfolio had a capital loss carryforward of $870,882, of which
$82,233 expires in 2001, $236,674 expires in 2002 and $551,975 expires in 2003.

NOTE E: TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
An unlimited number of shares ($.001 par value) are authorized. At June 30,
1997, capital paid-in aggregated $3,763,356,075. Transactions, all at $1.00 per
share, were as follows:

YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30,
1997 1996
---------------- ----------------
Shares sold 16,812,712,717 13,672,251,535
Shares issued on reinvestments of dividends 162,394,204 135,336,143
Shares redeemed (16,417,687,321) (13,116,896,819)
Net increase 557,419,600 690,690,859

FINANCIAL HIGHLIGHTS ALLIANCE GOVERNMENT RESERVES
_______________________________________________________________________________

SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
YEAR.

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $1.00 $1.00 $1.00 $1.00 $1.00

INCOME FROM INVESTMENT OPERATIONS
Net investment income .0443 .0461(a) .0439(a) .0244(a) .0256(a)
Net realized gain on investments -0- -0- -0- -0- .0001
Net increase in net assets from operations .0443 .0461 .0439 .0244 .0257

LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.0443) (.0461) (.0439) (.0244) (.0256)
Distributions from net realized gains -0- -0- -0- -0- (.0001)
Total dividends and distributions (.0443) (.0461) (.0439) (.0244) (.0257)
Net asset value, end of year $1.00 $1.00 $1.00 $1.00 $1.00

TOTAL RETURNS
Total investment return based on net
asset value (b) 4.53% 4.72% 4.48% 2.48% 2.60%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in millions) $3,762 $3,205 $2,514 $2,061 $1,783
Ratio to average net assets of:
Expenses, net of waivers and reimbursements 1.00% 1.00% 1.00% 1.00% 1.00%
Expenses, before waivers and reimbursements 1.00% 1.01% 1.05% 1.04% 1.02%
Net investment income 4.44% 4.60%(a) 4.42%(a) 2.46%(a) 2.55%(a)
</TABLE>

(a) Net of expenses reimbursed or waived by the Adviser.

(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period.

INDEPENDENT AUDITOR'S REPORT ALLIANCE GOVERNMENT RESERVES
_______________________________________________________________________________

TO THE BOARD OF TRUSTEES AND SHAREHOLDERS ALLIANCE GOVERNMENT RESERVES
PORTFOLIO

We have audited the accompanying statement of net assets of Alliance Government
Reserves Portfolio as of June 30, 1997 and the related statements of
operations, changes in net assets, and financial highlights for the periods
indicated in the accompanying financial statements. These financial statements
and financial highlights are the responsibility of the Portfolio's management.
Our responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1997, by correspondence with the custodian and brokers.

An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Alliance Government Reserves Portfolio as of June 30, 1997, and the results of
its operations, changes in its net assets, and its financial highlights for the
periods indicated, in conformity with generally accepted accounting principles.

McGladrey & Pullen, LLP
New York, New York
July 29, 1997

<PAGE>

APPENDIX

A-1+, A-1 and Prime-1 Commercial Paper Ratings

"A-1+" is the highest, and "A-1" the second highest,
commercial paper rating assigned by Standard & Poor's Corporation
("Standard & Poor's") and "Prime-1" is the highest commercial
paper rating assigned by Moody's Investors Service, Inc.
("Moody's"). Standard & Poor's uses the numbers 1+, 1, 2 and 3
to denote relative strength within its highest classification of
"A", while Moody's uses the numbers 1, 2 and 3 to denote relative
strength within its highest classification of "Prime." Commercial
paper issuers rated "A" by Standard & Poor's have the following
characteristics: liquidity ratios are better than industry
average; long term debt rating is A or better; the issuer has
access to at least two additional channels of borrowing; basic
earnings and cash flow are in an upward trend; and typically, the
issuer is a strong company in a well-established industry and has
superior management. Commercial paper issuers rated "Prime" by
Moody's have the following characteristics: their short-term debt
obligations carry the smallest degree of investment risk; margins
of support for current indebtedness are large or stable with cash
flow and asset protection well assured; current liquidity
provides ample coverage of near-term liabilities and unused
alternative financing arrangements are generally available; and
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.

AAA & AA and Aaa & Aa Bond Ratings

Bonds rated AAA and Aaa have the highest ratings
assigned to debt obligations by Standard & Poor's and Moody's,
respectively. Standard & Poor's AAA rating indicates an extremely
strong capacity to pay principal and interest. Bonds rated AA by
Standard & Poor's also qualify as high-quality debt obligations.
Capacity to pay principal and interest is very strong, and the
majority of instances they differ from AAA issues only in small
degree. Moody's Aaa rating indicates the ultimate degree of
protection as to principal and interest. Moody's Aa rated bonds,
though also high-grade issues, are rated lower than Aaa bonds
because margins of protection may not be as large or fluctuations
of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear
somewhat larger.

A-1

<PAGE>

(LOGO)
ALLIANCE TREASURY RESERVES
_______________________________________________________________
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
_______________________________________________________________

STATEMENT OF ADDITIONAL INFORMATION
November 3, 1997

_______________________________________________________________

TABLE OF CONTENTS

Page

Investment Objectives and Policies.......................... 2

Investment Restrictions..................................... 5

Management.................................................. 6

Purchase and Redemption of Shares .......................... 16

Additional Information...................................... 19

Daily Dividends-Determination of Net Asset Value............ 22

Taxes....................................................... 23

General Information......................................... 24

Appendix-Commercial Paper and Bond Ratings.................. 28

Financial Statements........................................29-33

Independent Auditor's Report................................ 34

This Statement of Additional Information is not a prospectus
but supplements and should be read in conjunction with the Fund's
current Prospectus dated November 1, 1997. A copy of the
Prospectus may be obtained by contacting the Fund at the address
or telephone number shown above.

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

<PAGE>

_______________________________________________________________

INVESTMENT OBJECTIVES AND POLICIES
_______________________________________________________________

1. Issues of the United States Treasury, such as
bills, certificates of indebtedness, notes and bonds. Such
issues are supported by the full faith and credit of the U.S.
Treasury.

2. 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 vendor
at 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. It is
the Fund's current practice, which may be changed at any time
without shareholder approval, to enter into repurchase agreements
only with such primary dealers or State Street Bank and Trust
Company, the Fund's Custodian. For each repurchase agreement,
the Fund requires continual maintenance of the market value of
the underlying collateral in amounts equal to, or in excess of,
the agreement amount. While the maturities of the underlying
collateral may exceed 397 days, the term of the repurchase
agreement is always less than 397 days. In the event that a
vendor defaulted on its repurchase obligation, the Fund might
suffer a loss to the extent that the proceeds from the sale of
the collateral were less than the repurchase price. If the
vendor became bankrupt, the Fund 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 Fund's assets.** Pursuant to Rule 2a-7, a
repurchase agreement is deemed to be an acquisition of the
____________________

** As used throughout the Prospectus and Statement of Additional
Information, the term "assets" shall refer to the Fund's
total assets.

<PAGE>

underlying securities provided that the obligation of the seller
to repurchase the securities from the money market fund is
collateralized fully (as defined in such Rule). Accordingly, the
vendor of a fully collateralized repurchase agreement is deemed
to be the issuer of the underlying securities.

When-Issued Securities. Certain new issues that the
Fund is permitted to purchase are available on a "when-issued"
basis - that is, delivery and payment for the securities take
place after the transaction date, normally within ten days (the
Fund will not make any such commitments of more than thirty
days). The payment amount and the interest rate that will be
received on the securities are fixed on the transaction date.
The Fund will make commitments for such when-issued transactions
only with the intention of actually acquiring the securities and,
to facilitate such acquisitions, the Fund's Custodian will
maintain, in a separate account, cash, U.S. Government or other
appropriate high-grade debt obligations of the Fund having value
equal to or greater than such commitments. Similarly, a separate
account will be maintained to meet obligations in respect of
reverse repurchase agreements. On delivery dates for such
transactions, the Fund will meet its obligations from maturities
or sales of the securities held in the separate account and/or
from then available cash flow. If the Fund chooses to dispose of
the right to acquire a when-issued security prior to its
acquisition, it could, as with the disposition of any other
portfolio obligation, incur a gain or loss due to market
fluctuation. No when-issued commitments will be made if, as a
result, more than 15% of the Fund's net assets would be so
committed.

<PAGE>

within the meaning of the Investment Company Act of 1940, as
amended, (the "Act") and may, therefore, be changed by the
Trustees of the Trust without a shareholder vote. However, the
Fund will not change its investment policies without
contemporaneous written notice to shareholders. There can be no
assurance, as is true with all investment companies, that the
Fund's objectives will be achieved.

Currently, pursuant to Rule 2a-7, the Fund may invest
only in U.S. dollar-denominated "eligible securities" (as that
term is defined in the Rule) that have been determined by the
Alliance Capital Management L.P. (the "Adviser") to present
minimal credit risks pursuant to procedures approved by the
Trustees. Generally, an eligible security is a security that
(i) has a remaining maturity of 397 days or less and (ii) is
rated, or is issued by an issuer with short-term debt outstanding
that is rated in one of the two highest rating categories by two
nationally recognized statistical rating organizations ("NRSROs")
or, if only one NRSRO has issued a rating, by that NRSRO. A
security that originally had a maturity of greater than 397 days
is an eligible security if 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
Trustees. A description of the ratings of some NRSROs appears in
the Appendix attached hereto.

Under Rule 2a-7 the Fund may not invest more than five
percent of its assets in the securities of any one issuer other

<PAGE>

than the United States Government, its agencies and
instrumentalities. In addition, the Fund 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 Fund 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.

_______________________________________________________________

INVESTMENT RESTRICTIONS
_______________________________________________________________

The Fund:

1. May not purchase any security which has a remaining
maturity of more than 397 days from the date of the Fund's
purchase;

2. May not purchase securities other than marketable
obligations of the United States Treasury, or repurchase
agreements pertaining thereto;

3. May not enter into repurchase agreements if, as a
result thereof, more than 10% of the Fund's net assets would be
subject to repurchase agreements not terminable within seven days
(which may be considered to be illiquid) or with any one
seller*** if, as a result thereof, more than 5% of the Fund's
assets would be invested in repurchase agreements purchased from
____________________

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

<PAGE>

such seller; and may not enter into any reverse repurchase
agreements if, as a result thereof, the Fund's obligations with
respect to reverse repurchase agreements would exceed 10% of the
Fund's assets;

4. May not 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 Fund'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 Fund
will not purchase any investment while any such borrowings exist;

6. May not make loans, provided that the Fund may
purchase securities of the type referred to in paragraph 2 above
and enter into repurchase agreements with respect thereto; or

7. May not (a) make investments for the purpose of
exercising control; (b) purchase securities of other investment
companies, except in connection with a merger, consolidation,
acquisition or reorganization; (c) invest in real estate (other
than 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, interests in oil, gas and other mineral
exploration or other development programs; (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, 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 Fund's assets would
be invested in such securities; (g) purchase or retain securities
of any issuers if those officers and trustees of the Fund and
employees 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.

<PAGE>

_______________________________________________________________

MANAGEMENT
_______________________________________________________________

Trustees and Officers

The Trustees and principal officers of the Trust 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 Trustees whose names are preceded by an asterisk are
"interested persons" of the Trust as determined under the Act.
Each Trustee and officer is affiliated as such with one or more
of the other registered investment companies that are advised by
the Adviser.

Trustees

*DAVE H. WILLIAMS, 65, Chairman, is Chairman of the
Board of Directors of Alliance Capital Management Corporation
("ACMC"),** sole general partner of the Adviser with which he has
been associated since prior to 1992.

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

_______________________

* 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>

DAVID K. STORRS, 53, is President and Chief Executive
Officer of Alternative Investment Group, LLC (a venture capital
firm). He was formerly President of The Common Fund (investment
management for educational institutions) with which he had been
associated since prior to 1992. His address is 65 South Gate
Lane, Southport, Connecticut 06490.

SHELBY WHITE, 59, is an author and financial journalist.
Her address is One Sutton Place South, New York, New York
10022.

Officers

KATHLEEN A. CORBET - Senior Vice President, 37, has been
a Senior Vice President of ACMC since July 1993. Prior thereto,
she was employed by Equitable Capital since prior to 1992.

DREW BIEGEL - Senior Vice President, 45, is a Vice
President of ACMC with which he has been associated since prior
to 1992.

JOHN R. BONCZEK - Senior Vice President, 37, is a Vice
President of ACMC with which he has been associated since prior
to 1992.

<PAGE>

WAYNE D. LYSKI - Senior Vice President, 56, is an
Executive Vice President of ACMC with which he has been
associated since prior to 1992.

PATRICIA NETTER - Senior Vice President, 46, is a Vice
President of ACMC with which she has been associated since prior
to 1992.

KENNETH T. CARTY - Vice President, 36 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.

DORIS T. CILIBERTI - Vice President, 33, is an Assistant
Vice President of ACMC with which she 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.

WILLIAM J. FAGAN - Vice President, 35, is an Assistant
Vice President of ACMC with which he has been associated since
prior to 1992.

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

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

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

<PAGE>

VINCENT S. NOTO - Controller, 32, is an Assistant Vice
President of Alliance Fund Services, Inc., with which he has been
associated since prior to 1992.

As of October 15, 1997, the Trustees and officers as a
group owned less than 1% of the shares of the Fund.

Total Number
Total Number of Investment
of Funds in Portfolios
the Alliance Within the
Total Fund Complex, Funds,
Compensation Including the Including
From the Fund, as to the Fund, as
Alliance Fund which the to which the
Aggregate Complex, Trustee is a Director is
Name of Trustee Compensation Including the Trustee or a Trustee or
of the Fund From the Fund Fund Director Director
________________ _____________ _____________ ______________ _____________

Dave H. Williams $-0- $-0- 6 15
John D. Carifa $-0- $-0- 52 114
Sam Y. Cross $1,781 $ 12,000 3 12
Charles H.P. Duell $1,781 $ 12,000 3 12
William H. Foulk, Jr. $3,020 $144,250 34 70
Elizabeth J. McCormack $1,406 $ 9,750 3 12
Donald J. Robinson $-0- $137,250 42 102
David K. Storrs $1,781 $ 12,000 3 12
Shelby White $1,781 $ 12,000 3 12

On August 11, 1997, Elizabeth J. McCormack resigned as a
Trustee.

On September 8, 1997, Donald J. Robinson was elected as
a Trustee.

<PAGE>

The Adviser

The Adviser is a leading international investment
manager supervising client accounts with assets as of
September 30, 1997 of 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. As of September 30, 1997, the
Adviser was retained as an investment manager of employee benefit
fund assets for 29 of the FORTUNE 100 companies. As of that
date, the Adviser and its subsidiaries employed approximately
1,450 employees who operated out of five domestic offices and the
offices of subsidiaries in , Istanbul, London, Mumbai, Paris, Sao
Paulo, Sydney, Tokyo, Toronto, Bahrain, Luxembourg and Singapore.
The 54 registered investment companies comprising more than 116
separate investment portfolios managed by the Adviser currently
have more than two million shareholders.

<PAGE>

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-VAP 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.

In November 1996, AXA offered (the "Exchange Offer") to
acquire 100% of the ordinary shares ("VAP Shares") of FF10 each
of Compagnie VAP, a societe anonyme organized under the laws of
France ("VAP"), in exchange for ordinary shares ("Shares") and
Certificates of Guaranteed Value ("Certificates") of AXA. Each
VAP shareholder that tendered VAP Shares in the Exchange Offer
received two Shares and two Certificates for every five VAP
Shares so tendered. On January 24, 1997, AXA acquired 91.37% of
the outstanding VAP Shares. AXA-VAP currently intends to merge
(the "Merger") with VAP 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 VAP shareholders who
did not tender VAP 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
indirectly through their interest in Finaxa) 25.1% of the issued
ordinary shares (representing 36.8% of the voting power) of AXA-
VAP. 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 had 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

<PAGE>

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-VAP.

Under the Advisory Agreement, the Adviser provides
investment advisory services and order placement facilities for
the Fund and pays all compensation of Trustees of the Trust 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 Fund pays an advisory fee at an annual
rate of .50 of 1% of up to $1.25 billion of the average daily
value of the Fund's net assets, .49 of 1% of the next $.25
billion of such assets, .48 of 1% of the next $.25 billion of
such assets, .47 of 1% of the next $.25 billion of such assets,
.46 of 1% of the next $1 billion of such assets and .45 of 1% of
the average daily net assets of the Fund in excess of $3 billion.
The fee is accrued daily and paid monthly. The Adviser has
agreed to reimburse the Fund to the extent that its net expenses
(excluding taxes, brokerage, interest and extraordinary expenses)
exceed 1% of its average daily net assets for any fiscal year.
The Adviser also voluntarily agreed to reimburse the Portfolio
from July 1, 1994 to July 14, 1994 for expenses exceeding .45 of
1% of its average daily net assets, from July 15, 1994 to March
8, 1995 for expenses exceeding .60 of 1% of its average daily net
assets, from March 9, 1995 to March 26, 1995 for expenses
exceeding .70 of 1% of its average daily net assets, from
March 27, 1995 to April 25, 1996 for expenses exceeding .80 of 1%
of its average daily net assets and from April 26, 1996 to
June 30, 1997 for expenses exceeding .85 of 1% of its average
daily net assets. Accordingly, for the fiscal periods ended
June 30, 1995, 1996 and 1997, the Adviser received from the Fund
advisory fees of $1,044,322, $2,681,355 and $3,339,651,
respectively (net of reimbursements for the fiscal periods ended
1995 and 1997). In accordance with the Distribution Services
Agreement described below, the Fund may pay a portion of
advertising and promotional expenses in connection with the sale
of shares of the Fund. The Fund also pays for printing of
prospectuses and other reports to shareholders and all expenses
and fees related to registration and filing with the Securities
and Exchange Commission and with state regulatory authorities.
The Fund pays all other expenses incurred in its operations,
including the Adviser's management fees; custody, transfer and
dividend disbursing expenses; legal and auditing costs; clerical,
administrative accounting, and other office costs; fees and
expenses of Trustees who are not affiliated with the Adviser;

<PAGE>

costs of maintenance of the Trust's existence; and interest
charges, taxes, brokerage fees, and commissions. As to the
obtaining of clerical and accounting services not required to be
provided to the Fund by the Adviser under the Advisory Agreement,
the Fund may employ its own personnel. For such services, it
also may utilize personnel employed by the Adviser; if so done,
the services are provided to the Fund at cost and the payments
therefor must be specifically approved in advance by the
Trustees. The Fund paid to the Adviser a total of $119,000,
$127,000 and $131,000 for such services for the fiscal years
ended June 30, 1995. 1996 and 1997, respectively.

The Fund has made arrangements with certain broker-
dealers whose customers are Fund shareholders pursuant to which
the broker-dealers perform shareholder servicing functions, such
as opening new shareholder accounts, processing purchase and
redemption transactions, and responding to inquiries regarding
the Fund's current yield and the status of shareholder accounts.
The Fund pays for the electronic communications equipment
maintained at the broker-dealers' offices that permits access to
the Fund's computer files and, in addition, reimburses the
broker-dealers at cost for personnel expenses involved in
providing the services. All such reimbursements must be ratified
by the Trustees. For the years ended June 30, 1995, 1996 and
1997, the Fund reimbursed such broker-dealers a total of $52,438,
$111,603 and $132,648, respectively.

<PAGE>

Distribution Services Agreement

Rule 12b-1 adopted by the Securities and Exchange
Commission under the Act permits an investment company to
directly or indirectly pay expenses associated with the
distribution of its shares. Pursuant to such rule the Fund has
adopted a Distribution Services Agreement (the "Agreement") with
Alliance Fund Distributors, Inc. (the "Distributor") and the
Adviser under which the Fund makes payments each month to the
Adviser in an amount that will not exceed, on an annualized
basis, of .25 of 1% of the Fund's aggregate average daily net
assets. In addition, under the Agreement the Adviser makes
payments for distribution assistance and for administrative,
accounting and other services from its own resources which may
include the management fee paid by the Fund.

Payments under the Agreement are used in their entirety
for (i) payments to broker-dealers and other financial
intermediaries, including the Distributor and Donaldson, Lufkin &
Jenrette Securities Corporation and its Pershing Division, an
affiliate of the Adviser, for distribution assistance and to
banks and other depository institutions for administrative and
accounting services, and (ii) otherwise promoting the sale of
shares of the Fund such as by paying for the preparation,
printing and distribution of prospectuses and other promotional
materials sent to existing and prospective shareholders and by
directly or indirectly purchasing radio, television, newspaper
and other advertising. In approving the Agreement the Trustees
determined that there was a reasonable likelihood that the
Agreement would benefit the Fund and its shareholders. For the
year ended June 30, 1997, the Fund made payments to the Adviser
for expenditures under the Agreement in amounts aggregating
$787,937 which constituted .11% at an annual rate of the Fund's
average daily net assets during the period, and the Adviser made
payments from its own resources as described above aggregating
$2,484,891. Of the $3,272,828 paid by the Adviser and the Fund
under the Agreement, $28,000 was paid for advertising, printing,
and mailing of prospectuses to persons other than current
shareholders; and $3,244,828 was paid to broker-dealers and other
financial intermediaries for distribution assistance.

The administrative, accounting and other services
provided by broker-dealers, depository institutions and other
financial intermediaries may include, but are not limited to,
establishing and maintaining shareholder accounts, sub-
accounting, processing of purchase and redemption orders, sending
confirmations of transactions, forwarding financial reports and
other communications to shareholders and responding to
shareholder inquiries regarding the Fund. As interpreted by
courts and administrative agencies, certain laws and regulations
limit the ability of a bank or other depository institution to

<PAGE>

become an underwriter or distributor of securities. However, in
the opinion of the Fund's management based on the advice of
counsel, these laws and regulations do not prohibit such
depository institutions from providing other services for
investment companies such as the administrative, accounting and
other services described above. The Trustees will consider
appropriate modifications to the Fund's operations, including
discontinuance of payments under the Agreement to banks and other
depository institutions, in the event of any future change in
such laws or regulations which may affect the ability of such
institutions to provide the above-mentioned services.

The Treasurer of the Trust reports the amounts expended
under the Agreement and the purposes for which such expenditures
were made to the Trustees on a quarterly basis. Also, the
Agreement provides that the selection and nomination of
disinterested Trustees (as defined in the Act) are committed to
the discretion of the disinterested Trustees then in office. The
Agreement was initially approved for the Fund by the Trustees at
a meeting held on June 14, 1993. Continuance of the Agreement
until June 30, 1998 was approved by the vote, cast in person by
all the Trustees of the Fund who neither were interested persons
of the Fund nor had any direct or indirect financial interest in
the Agreement or any related agreement, at a meeting called for
that purpose on June 16, 1997. The Agreement may be continued
annually thereafter if approved by a majority vote of the
Trustees who neither are interested persons of the Trust nor have
any direct or indirect financial interest in the Agreement or in
any related agreement, cast in person at a meeting called for
that purpose.

All material amendments to the Agreement must be
approved by a vote of the Trustees, including a majority of the
disinterested Trustees, cast in person at a meeting called for
that purpose, and the Agreement may not be amended in order to
increase materially the costs which the Fund may bear pursuant to
the Agreement without the approval of a majority of the
outstanding shares of the Fund. The Agreement may also be
terminated at any time by a majority vote of the disinterested
Trustees, or by a majority of the outstanding shares of the Fund
or by the Adviser. Any agreement with a qualifying broker-dealer
or other financial intermediary may be terminated without penalty
on not more than sixty days' written notice by a vote of the
majority of non-party Trustees, by a vote of a majority of the
outstanding shares of the Fund, or by the Adviser and will
terminate automatically in the event of its assignment.

<PAGE>

impose to .75% and .25%, respectively, of average annual net
assets.

_______________________________________________________________

PURCHASE AND REDEMPTION OF SHARES
_______________________________________________________________

Accounts Not Maintained Through Financial Intermediaries

Opening Accounts -- New Investments

A. When Funds are Sent by Wire (the wire method
permits immediate credit)

1) Telephone the Fund toll-free at
(800) 824-1916. The Fund will ask for the
name of the account as you wish it to be
registered, address of the account, and
taxpayer identification number (social
security number for an individual). The Fund
will then provide you with an account number.

2) Instruct your bank to wire Federal funds
(minimum $1,000) exactly as follows:

ABA 0110 0002-8
State Street Bank and Trust Company
DDA 9903-279-9
Attention: Mutual Funds Division
Alliance Treasury Reserves

Your account name as registered with the Fund
Your account number as registered with the
Fund

3) Mail a completed Application Form to:

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

<PAGE>

B. When Funds are Sent by Check

1) Fill out an Application Form.

2) Mail the completed Application Form along with
your check or negotiable bank draft (minimum
$1,000), payable to "Alliance Treasury
Reserves," to Alliance Fund Services, Inc. as
in A(3) above.

Subsequent Investments

A. Investments by Wire (to obtain immediate credit)

Instruct your bank to wire Federal funds (minimum
$100) to State Street Bank and Trust Company ("State Street
Bank") as in A(2) above.

B. Investments by Check

Mail your check or negotiable bank draft (minimum $100),
payable to "Alliance Treasury Reserves," to Alliance Fund
Services, Inc. as in A(3) above.

Investments Made by Check

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

<PAGE>

Redemptions

A. By Telephone

You may withdraw any amount from your account on
any Fund business day (i.e., any weekday exclusive of
days on which the New York Stock Exchange or State
Street Bank is closed) between 9:00 a.m. and 5:00 p.m.
(New York time) via orders given to Alliance Fund
Services, Inc. by telephone toll-free (800) 824-1916.
Such redemption orders must include your account name as
registered with the Fund and the account number.

If your telephone redemption order is received by
Alliance Fund Services, Inc. prior to 12:00 Noon (New York time),
we will send the proceeds in Federal funds by wire to your
designated bank account that day. The minimum amount for a wire
is $1,000. If your telephone redemption order is received by
Alliance Fund Services, Inc. after 12:00 Noon and before
4:00 p.m., we will wire the proceeds the next business day. You
also may request that proceeds be sent by check to your
designated bank. Redemptions are made without any charge to you.

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

B. By Checkwriting

With this service, you may write checks made
payable to any payee in any amount. Checks cannot be
written for more than the principal balance (not

<PAGE>

including any accrued dividends) in your account.
First, you must fill out the Signature Card which is
with the Application Form. If you wish to establish
this checkwriting service subsequent to the opening of
your Fund account, contact the Fund by telephone or
mail. There is no separate charge for the checkwriting
service, except that State Street Bank 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. There is a $7.50 charge
for check reorders.

The checkwriting service enables you to receive the daily
dividends declared on the shares to be redeemed until the day
that your check is presented to State Street Bank for payment.

C. By Mail

You may withdraw any amount from your account at
any time by mail. Written orders for withdrawal,
accompanied by duly endorsed certificates, if issued,
should be mailed to Alliance Fund Services, Inc., P.O.
Box 1520, Secaucus, New Jersey 07096-1520. Such orders
must include the account name as registered with the
Fund and the account number. All written orders for
redemption, and accompanying certificates, if any, must
be signed by all owners of the account with the
signatures guaranteed by an institution which is an
"eligible guarantor" as defined in Rule 17Ad-15 under
the Securities Exchange Act of 1934, as amended.

_______________________________________________________________

ADDITIONAL INFORMATION
_______________________________________________________________

Shareholders maintaining Fund accounts through brokerage
firms and other institutions should be aware that such
institutions necessarily set deadlines for receipt of transaction
orders from their clients that are earlier than the transaction
times of the Fund itself so that the institutions may properly
process such orders prior to their transmittal to State Street
Bank. 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 with the
deadlines set by his institution. (For example, the Distributor
accepts purchase orders from its customers up to 2:15 p.m. New
York time for issuance at the 4:00 p.m. transaction time and
price.) A brokerage firm acting on behalf of a customer in
connection with transactions in Fund shares is subject to the

<PAGE>

same legal obligations imposed on it generally in connection with
transactions in securities for a customer, including the
obligation to act promptly and accurately.

All shares purchased are confirmed to each shareholder
and are credited to his account at the net asset value. To avoid
unnecessary expense to the Fund and to facilitate the immediate
redemption of shares, share certificates, for which no charge is
made, are not issued except upon the written request of a
shareholder. Certificates are not issued for fractional shares.
Shares for which certificates have been issued are not eligible
for any of the optional methods of withdrawal; namely, the
telephone, telegraph, checkwriting or periodic redemption
procedures. The Fund reserves the right to reject any purchase
order.

<PAGE>

Periodic Distribution Plans. Without affecting your
right to use any of the methods of redemption described above, by
checking the appropriate boxes on the Application Form, you may
elect to participate additionally in the following plans without
any separate charge. Under the Income Distribution Plan you
receive monthly payments of all the income earned in your Fund
account, with payments forwarded by check or electronically via
the Automated Clearing House ("ACH") network shortly after the
close of the month. Under the Systematic Withdrawal Plan, you
may request payments by check or electronically via the ACH
network in any specified amount of $50 or more each month or in
any intermittent pattern of months. If desired, you can order,
via a signature-guaranteed letter to the Fund, such periodic
payments to be sent to another person. Shareholders wishing
either of the above plans electronically through the ACH network
should write or telephone the Fund or AFS at (800) 221-5672.

The Fund has the right to close out an account if it has
a zero balance on December 31 and no account activity for the
first six months of the subsequent year. Therefore, unless this
has occurred, a shareholder with a zero balance, when
reinvesting, should continue to use his account number.
Otherwise, the account should be re-opened pursuant to procedures
described above or through instructions given to a financial
intermediary.

<PAGE>

(observed), Good Friday, Memorial Day (observed), Independence
Day, Labor Day, Thanksgiving Day and Christmas Day; if one of
these holidays falls on a Saturday or Sunday, purchases and
redemptions will likewise not be processed on the preceding
Friday or the following Monday, respectively. On any such day
that is an official bank holiday in Massachusetts, neither
purchases nor wired redemptions can become effective because
Federal funds cannot be received or sent by State Street Bank.
On such days, therefore, the Fund can only accept redemption
orders for which shareholders desire remittance by check. The
right of redemption may be suspended or the date of a redemption
payment postponed for any period during which the New York Stock
Exchange is closed (other than customary weekend and holiday
closings), when trading on the New York Stock Exchange is
restricted, or an emergency (as determined by the Securities and
Exchange Commission) exists, or the Commission has ordered such a
suspension for the protection of shareholders. The value of a
shareholder's investment at the time of redemption may be more or
less than his 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
_______________________________________________________________

<PAGE>

of the impact of fluctuating interest rates on the market value
of the instrument. During periods of declining interest rates,
the daily yield on shares of the Fund may be higher than that of
a fund with identical investments utilizing a method of valuation
based upon market prices for its portfolio instruments; the
converse would apply in a period of rising interest rates.

The Fund utilizes the amortized cost method of valuation
of portfolio securities in accordance with the provisions of Rule
2a-7 under the Act. Pursuant to such rule, the Fund maintains a
dollar-weighted average portfolio maturity of 90 days or less,
purchases instruments which, at the time of investment, have
remaining maturities of no more than 397 days and invests only in
eligible securities. The Fund maintains procedures designed to
stabilize, to the extent reasonably possible, the price per share
as computed for the purpose of sales and redemptions at $1.00.
Such procedures include review of the Fund's portfolio holdings
by the Trustees at such intervals as they deem appropriate to
determine whether and to what extent the net asset value of the
Fund calculated by using available market quotations or market
equivalents deviates from net asset value based on amortized
cost. If such deviation exceeds 1/2 of 1%, the Trustees will
promptly consider what action, if any, should be initiated. In
the event the Trustees determine that such a deviation may result
in material dilution or other unfair results to new investors or
existing shareholders, they will consider corrective action which
might include (1) selling instruments prior to maturity to
realize capital gains or losses or to shorten average portfolio
maturity; (2) withholding dividends of net income on shares; or
(3) establishing a net asset value per share using available
market quotations or equivalents. There can be no assurance,
however, that the Fund's net asset value per share will remain
constant at $1.00.

_______________________________________________________________

TAXES
_______________________________________________________________

<PAGE>

income and excise taxes on the net income and capital gains
distributed to its shareholders. Since the Fund intends to
distribute all of its net income and capital gains, the Fund
itself should thereby avoid all Federal income and excise taxes.

_______________________________________________________________

GENERAL INFORMATION
_______________________________________________________________

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

The Fund has no obligations to enter into transactions
in portfolio securities with any dealer, issuer, underwriter or
other entity. In placing orders, it is the policy of the Fund to
obtain the best price and execution for its transactions. Where
best price and execution may be obtained from more than one
dealer, the Adviser may, in its discretion, purchase and sell
securities through dealers who provide research, statistical and
other information to the Adviser. Such services may be used by
the Adviser for all of its investment advisory accounts and,
accordingly, not all such services may be used by the Adviser in
connection with the Fund. The supplemental information received
from a dealer is in addition to the services required to be
performed by the Adviser under the Advisory Agreement, and the

<PAGE>

expenses of the Adviser will not necessarily be reduced as a
result of the receipt of such information. Portfolio securities
will not be purchased from or sold to the Adviser's parent, or
any subsidiary or affiliate of the parent. For the fiscal years
ended June 30, 1995, 1996 and 1997, the Fund paid no brokerage
commissions.

Capitalization. All shares of the Trust, when issued,
are fully paid and non-assessable. The Trustees are authorized
to reclassify and issue any unissued shares to any number of
additional classes or series without shareholder approval.
Accordingly, the Trustees, in the future, for reasons such as the
desire to establish one or more additional portfolios with
different investment objectives, policies or restrictions, may
create additional classes or series of shares. Any issuance of
shares of another class would be governed by the Act and the law
of the Commonwealth of Massachusetts. Shares of each portfolio
are normally entitled to one vote for all purposes. Generally,
shares of all portfolios vote as a single series for the election
of Trustees and on any other matter that affected all portfolios
in substantially the same manner. As to matters affecting each
portfolio differently, such as approval of the Advisory Agreement
and changes in investment policy, shares of each portfolio vote
as separate series. Certain procedures for the removal by
shareholders of trustees of investment trusts, such as the Trust,
are set forth in Section 16(c) of the Act.

At October 15, 1997, there were 701,254,436 shares of
beneficial interest of the Fund outstanding. To the knowledge of
the Fund there were no persons who owned of record or
beneficially 5% or more of the outstanding shares of the Fund as
of October 15, 1997.

Shareholder Liability. Under Massachusetts law,
shareholders could, under certain circumstances, be held
personally liable for the obligations of the Fund. However, the
Agreement and Declaration of Trust disclaims shareholder
liability for acts or obligations of the Fund and requires that
the Trustees use their best efforts to ensure that notice of such
disclaimer be given in each note, bond, contract, instrument,
certificate or undertaking made or issued by the Trustees or
officers of the Trust. The Agreement and Declaration of Trust
provides for indemnification out of the property of the Fund for
all loss and expense of any shareholder of the Fund held
personally liable for the obligations of the Fund. Thus, the
risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which the
Fund would be unable to meet its obligations. In the view of the
Adviser, such risk is not material.

<PAGE>

Accountants. An opinion relating to the Fund's
financial statements is given herein by McGladrey & Pullen, LLP,
New York, New York, independent auditors for the Trust.

effective yield = [(base period return + 1)365/7] - 1

The Fund's yield for the seven-day period ended June 30,
1997, after expense reimbursement, was 4.60% which is the
equivalent of a 4.69% compounded effective yield. Absent such
reimbursement, the annualized yield for such period would have
been 4.45%, equivalent to an effective yield of 4.54%. Current
yield information for the Fund can be obtained by a recorded
message by telephoning toll-free at (800) 221-9513.

<PAGE>

ALLIANCE TREASURY RESERVES

ALLIANCE CAPITAL

ANNUAL REPORT
JUNE 30, 1997

PORTFOLIO OF INVESTMENTS
JUNE 30, 1997 ALLIANCE TREASURY RESERVES
_______________________________________________________________________________

PRINCIPAL
AMOUNT
(000) SECURITY YIELD VALUE
- -------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS-50.2%
U.S. TREASURY NOTES-48.1%
$ 30,000 5.25%, 12/31/97 5.80% $ 29,911,558
10,000 5.50%, 7/31/97 5.15 10,001,674
30,000 5.63%, 10/31/97 5.43 30,014,520
20,000 5.75%, 10/31/97 5.36 20,008,309
55,000 5.75%, 9/30/97 5.41 55,026,269
50,000 5.88%, 7/31/97 5.28 50,020,369
10,000 6.00%, 12/31/97 5.77 10,007,525
10,000 6.13%, 3/31/98 6.01 10,008,387
33,000 6.50%, 8/15/97 5.20 33,047,782
75,000 8.50%, 7/15/97 5.12 75,093,708
15,000 8.63%, 8/15/97 5.41 15,057,387
-------------
338,197,488

U.S. TREASURY BILL-2.1%
15,000 7/24/97 5.25 14,950,981
Total U.S. Government Obligations
(amortized cost $353,148,469) 353,148,469

REPURCHASE AGREEMENTS-48.2%
BZW SECURITIES
34,000 5.90%, dated 6/30/97, due 7/01/97
in the amount of $34,005,572
(cost $34,000,000; collateralized
by $29,605,000 U.S. Treasury Bond,
8.125%, 8/15/19, value $34,591,234) 5.90 34,000,000

CHASE SECURITIES, INC.
10,000 5.70%, dated 6/30/97,
due 7/01/97 in the amount of
$10,001,583 (cost $10,000,000;
collateralized by $10,000,000
U.S. Treasury Note, 5.875%,
1/31/99, value $10,215,314) 5.70 10,000,000

DEUTSCHE BANK
34,000 5.85%, dated 6/30/97,
due 7/01/97 in the amount of
$34,005,525 (cost $34,000,000;
collateralized by $23,101,000
U.S. Treasury Bond, 11.25%,
2/15/15, value $34,429,544) 5.85 34,000,000

FIRST BOSTON CORP.
15,000 5.40%, dated 6/18/97,
due 7/09/97 in the amount of
$15,047,250 (cost $15,000,000;
collateralized by $10,502,000
U.S. Treasury Bond, 12.00%,
8/15/13, value $15,241,698)(a) 5.40 15,000,000

FIRST BOSTON CORP.
18,000 5.42%, dated 6/04/97,
due 7/03/97 in the amount of
$18,078,590 (cost $18,000,000;
collateralized by $17,739,000
U.S. Treasury Bond, 7.25%,
5/15/16, value $18,659,210)(a) 5.42 18,000,000

GOLDMAN SACHS & CO.
18,000 5.40%, dated 6/11/97,
due 7/01/97 in the amount of
$18,054,000 (cost $18,000,000;
collateralized by $14,115,000
U.S. Treasury Note, 11.625%,
11/15/04, value $18,492,855)(a) 5.40 18,000,000

GOLDMAN SACHS & CO.
15,000 5.44%, dated 6/18/97,
due 7/02/97 in the amount of
$15,031,733 (cost $15,000,000;
collateralized by $12,525,000
U.S. Treasury Bond, 8.50%,
2/15/20, value $15,235,239)(a) 5.44 15,000,000

PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE TREASURY RESERVES
_______________________________________________________________________________

PRINCIPAL
AMOUNT
(000) SECURITY YIELD VALUE
- -------------------------------------------------------------------------
J.P. MORGAN & CO.
$ 17,000 5.41%, dated 6/26/97,
due 7/17/97 in the amount of
$17,053,649 (cost $17,000,000;
collateralized by $12,869,000
U.S. Treasury Note, 12.75%,
5/15/05, value $17,320,869)(a) 5.41% $17,000,000

J.P. MORGAN & CO.
17,000 5.95%, dated 6/30/97,
due 7/01/97 in the amount of
$17,002,810 (cost $17,000,000;
collateralized by $11,418,000
U.S. Treasury Bond, 12.50%,
8/15/14, value $17,298,881) 5.95 17,000,000

MORGAN STANLEY GROUP, INC.
16,000 5.39%, dated 6/24/97,
due 7/10/97 in the amount of
$16,038,329 (cost $16,000,000;
collateralized by $11,580,000
U.S. Treasury Bond, 12.75%,
11/15/10, value $16,244,568)(a) 5.39 16,000,000

SANWA BANK
17,000 5.40%, dated 6/26/97,
due 7/11/97 in the amount of
$17,038,250 (cost $17,000,000;
collateralized by $17,027,000
U.S. Treasury Note, 6.375%,
3/31/01, value $17,307,526)(a) 5.40 17,000,000

SANWA BANK
17,000 5.40%, dated 6/26/97,
due 7/16/97 in the amount of
$17,051,000 (cost $17,000,000;
collateralized by $17,017,000
U.S. Treasury Note, 6.50%,
6/31/01, value $17,458,147)(a) 5.40 17,000,000

SBC WARBURG
20,000 5.39%, dated 6/06/97,
due 7/02/97 in the amount of
$20,077,856 (cost $20,000,000;
collateralized by $14,677,000
U.S. Treasury Bond, 12.75%,
11/15/10, value $20,589,079) (a) 5.39 20,000,000

SBC WARBURG
14,000 5.85%, dated 6/30/97,
due 7/01/97 in the amount of
$14,002,275 (cost $14,000,000;
collateralized by $11,345,000
U.S. Treasury Bond, 9.125%,
5/15/18, value $14,268,110) 5.85 14,000,000

SMITH BARNEY
18,000 5.41%, dated 6/19/97,
due 7/02/97 in the amount of
$18,035,165 (cost $18,000,000;
collateralized by $13,216,000
U.S. Treasury Note, 9.00%,
5/15/98, value $13,723,990
and $4,710,000
U.S. Treasury Note 5.75%,
8/15/03 value $4,646,148)(a) 5.41 18,000,000

SMITH BARNEY
15,000 5.44%, dated 6/03/97,
due 7/07/97 in the amount of
$15,077,067 (cost $15,000,000;
collateralized by $12,495,000
U.S. Treasury Bond, 8.75%,
8/15/20, value $15,581,343)(a) 5.44 15,000,000

STATE STREET BANK AND TRUST CO.
10,700 5.60%, dated 6/30/97,
due 7/01/97 in the amount of
$10,701,664 (cost $10,700,000;
collateralized by $10,985,000
U.S. Treasury Note, 5.25%,
12/31/97, value $10,967,835) 5.60 10,700,000

UBS FINANCE, INC.
20,000 5.57%, dated 4/09/97,
due 7/08/97 in the amount of
$20,278,500 (cost $20,000,000;
collateralized by $18,999,000
U.S. Treasury Note, 7.25%,
8/15/04, value $20,308,264)(a) 5.57 20,000,000

ALLIANCE TREASURY RESERVES
_______________________________________________________________________________

PRINCIPAL
AMOUNT
(000) SECURITY YIELD VALUE
- -------------------------------------------------------------------------
UBS FINANCE, INC.
$ 14,000 5.90%, dated 6/30/97,
due 7/01/97 in the amount of
$14,002,294 (cost $14,000,000;
collateralized by $12,206,000
U.S. Treasury Bond, 8.125%,
8/15/21, value $14,311,388) 5.90% $ 14,000,000

Total Repurchase Agreements
(amortized cost $339,700,000) 339,700,000

TOTAL INVESTMENTS-98.4%
(amortized cost $692,848,469) $692,848,469
Other assets less liabilities-1.6% 11,235,958

NET ASSETS-100%
(offering and redemption
price of $1.00 per share;
704,067,835 shares outstanding) $704,084,427

(a) Repurchase agreements which are terminable within 7 days.

See notes to financial statements.

STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997 ALLIANCE TREASURY RESERVES
_______________________________________________________________________________

ASSETS
Investments in securities, at value (cost $692,848,469) $692,848,469
Receivable for investments sold 46,041,178
Interest receivable 7,810,768
Receivable for capital stock sold 450,107
Deferred organization expense 10,614
Total assets 747,161,136

LIABILITIES
Due to custodian 350,690
Payable for investments purchased 41,619,074
Payable for capital stock redeemed 545,260
Investment advisory fee payable 242,536
Distribution fee payable 67,291
Accrued expenses 251,858
Total liabilities 43,076,709

NET ASSETS $704,084,427

COMPOSITION OF NET ASSETS
Paid-in-capital $704,067,835
Accumulated net realized gain on investment transactions 16,592
$704,084,427

STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1997 ALLIANCE TREASURY RESERVES
_______________________________________________________________________________

INVESTMENT INCOME
Interest $36,226,981

EXPENSES
Advisory fee (Note B) $ 3,430,146
Distribution assistance and administrative
service (Note C) 1,978,721
Transfer agency (Note B) 924,875
Registration expense 193,296
Custodian fees 158,554
Printing 82,231
Audit and legal fees 42,671
Trustees' fees 11,255
Amortization of organization expense 9,125
Miscellaneous 18,005
Total expenses 6,848,879
Less: expense reimbursement and fee waiver (1,017,631)
Net expenses 5,831,248
Net investment income 30,395,733

REALIZED GAIN ON INVESTMENTS
Net realized gain on investment transactions 17,487

NET INCREASE IN NET ASSETS FROM OPERATIONS $30,413,220

STATEMENT OF CHANGES IN NET ASSETS
_______________________________________________________________________________

YEAR ENDED YEAR ENDED
JUNE 30, 1997 JUNE 30, 1996
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 30,395,733 $ 24,908,350
Net realized gain on investment transactions 17,487 3,652
Net increase in net assets from operations 30,413,220 24,912,002

DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (30,395,733) (24,908,350)

TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase (Note E) 3,509,283 206,852,122
Total increase 3,526,770 206,855,774

NET ASSETS
Beginning of year 700,557,657 493,701,883
End of year $704,084,427 $700,557,657

See notes to financial statements

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997 ALLIANCE TREASURY RESERVES
_______________________________________________________________________________

NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Government Reserves (the "Trust") is an open-end diversified
investment company registered under the Investment Company Act of 1940. The
Trust consists of two portfolios: Alliance Government Reserves and Alliance
Treasury Reserves (the "Portfolio"). Each Portfolio is considered to be a
separate entity for financial reporting and tax purposes. As a matter of
fundamental policy, the Portfolio pursues its objectives by maintaining a
portfolio of high-quality money market securities all of which, at the time of
investment, have remaining maturities of 397 days or less. The following is a
summary of significant accounting policies followed by the Portfolio.

2. ORGANIZATION EXPENSES
The organization expenses of the Portfolio are being amortized against income
on a straight-line basis through September, 1998.

3. TAXES
It is the Portfolio's policy to comply with the require-ments of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its investment company taxable income and net realized gains, if applicable,
to its shareholders. Therefore, no provisions for federal income or excise
taxes are required.

4. DIVIDENDS
The Portfolio declares dividends daily and automatically reinvests such
dividends in additional shares at net asset value. Net realized capital gains
on investments, if any, are expected to be distributed near year end.

5. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Interest income is accrued as earned. Investment transactions are recorded on a
trade date basis. Realized gain (loss) from investment transactions is recorded
on the identified cost basis.

6. REPURCHASE AGREEMENTS
It is the Fund's policy to take possession of securities as collateral under
repurchase agreements and to determine on a daily basis that the value of such
securities are sufficient to cover the value of the repurchase agreements.

The Adviser has agreed, pursuant to the advisory agreement, to reimburse the
Portfolio to the extent that its aggregate expenses (excluding taxes,
brokerage, interest and, where permitted, extraordinary expenses) exceed 1% of
its average daily net assets for any fiscal year. The Adviser also voluntarily
agreed to reimburse the Portfolio for the year ended June 30, 1997 for expenses
exceeding .85 of 1% of its average daily net assets. For the year ended June
30, 1997 the reimbursement amounted to $90,495. The Portfolio compensates
Alliance Fund Services, Inc. (a wholly-owned subsidiary of the Adviser) for
providing personnel and facilities to perform transfer agency services for the
Portfolio. Such compensation amounted to $508,795 for the year ended June 30,
1997.

ALLIANCE TREASURY RESERVES
_______________________________________________________________________________

NOTE C: DISTRIBUTION ASSISTANCE AND ADMINISTRATIVE SERVICES PLAN
Under this Plan, the Portfolio pays the Adviser a distribution fee at the
annual rate of up to .25% of 1% of the average daily value of the Portfolio's
net assets. The Plan provides that the Adviser will use such payments in their
entirety for distribution assistance and promotional activities. For the year
ended June 30, 1997, the distribution fee amounted to $1,715,073 of which
$927,136 was waived. In addition, the Portfolio may reimburse certain
broker-dealers for administrative costs incurred in connection with providing
shareholder services and may reimburse the Adviser for accounting and
bookkeeping, and legal and compliance support. For the year ended June 30,
1997, such payments by the Portfolio amounted to $263,648 of which $131,000 was
paid to the Adviser.

NOTE D: INVESTMENT TRANSACTIONS
At June 30, 1997, the cost of securities for federal income tax purposes was
the same as the cost for financial reporting purposes.

NOTE E: TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
An unlimited number of shares ($.001 par value) are authorized. At June 30,
1997, capital paid-in aggregated $704,067,835. Transactions, all at $1.00 per
share, were as follows:

YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30,
1997 1996
--------------- ---------------
Shares sold 3,406,513,740 3,173,100,216
Shares issued on reinvestments of dividends 30,395,733 24,908,350
Shares redeemed (3,433,400,190) (2,991,156,444)
Net increase 3,509,283 206,852,122

FINANCIAL HIGHLIGHTS ALLIANCE TREASURY RESERVES
_______________________________________________________________________________

SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD.

<TABLE>
<CAPTION>
SEPTEMBER 1,
YEAR ENDED JUNE 30, 1993(A)
---------------------------------- THROUGH
1997 1996 1995 JUNE 30, 1994
---------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00

INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .0443 .0466 .0460 .0260

LESS: DIVIDENDS
Dividends from net investment income (.0443) (.0466) (.0460) (.0260)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00

TOTAL RETURNS
Total investment return based on:
net asset value (c) 4.53% 4.77% 4.71% 3.18%(d)

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $704,084 $700,558 $493,702 $80,720
Ratio to average net assets of:
Expenses, net of waivers and reimbursements .85% .81% .69% .28%(d)
Expenses, before waivers and reimbursements 1.00% 1.05% 1.05% 1.28%(d)
Net investment income (b) 4.43% 4.64% 4.86% 3.24%(d)
</TABLE>

(a) Commencement of operations.

(b) Net of expenses reimbursed or waived by the Adviser.

(c) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period.

(d) Annualized.

INDEPENDENT AUDITOR'S REPORT ALLIANCE TREASURY RESERVES
_______________________________________________________________________________

TO THE BOARD OF TRUSTEES AND SHAREHOLDER ALLIANCE TREASURY RESERVES PORTFOLIO

We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Alliance Treasury Reserves Portfolio as of
June 30, 1997 and the related statement of operations, changes in net assets,
and financial highlights for the periods indicated in the accompanying
financial statements. These financial statements and financial highlights are
the responsibility of the Portfolio's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Alliance Treasury Reserves Portfolio as of June 30, 1997, and the results of
its operations, changes in its net assets, and its financial highlights for the
periods indicated, in conformity with generally accepted accounting principles.

McGladrey & Pullen, LLP
New York, New York
July 29, 1997

<PAGE>

_______________________________________________________________

APPENDIX
_______________________________________________________________

A-1+, A-1 and Prime-1 Commercial Paper Ratings

AAA & AA and Aaa & Aa Bond Ratings

A-1

<PAGE>

OTHER INFORMATION

ITEM 24. Financial Statements and Exhibits for the Fund

(a) Financial Highlights

Included in the Prospectuses:

Financial Information

Included in the Statement of Additional Information:

Statement of Net Assets, June 30, 1997
Statement of Operations, June 30, 1997
Statement of Changes in Net Assets
for the years ended June 30, 1996 and June 30, 1997
Notes to Financial Highlights, June 30, 1997
Report of Independent Auditors

Included in Part C of the Registration Statement

All other schedules are omitted as the required
information is inapplicable

(b) Exhibits

(1) Declaration of Trust - Filed herewith.

(2) By-Laws - Filed herewith.

(3) Not applicable.

(4) (a) Specimen form of Share Certificate for Alliance
Government Reserves - Incorporated by reference to
Exhibit 4 to Post-Effective Amendment No. 14 of the
Registrant's Registration Statement on Form N-1A,
filed October 28, 1988.

(4) (b) Specimen form of Share Certificate for Alliance
Treasury Reserves - Incorporated by reference to
Exhibit 4(b) to Post-Effective Amendment No. 19 of
the Registrant's Registration Statement on
Form N-1A, filed June 21, 1993.

(5) Advisory Agreement between the Registrant and
Alliance Capital Management L.P. - Filed herewith.

(6) Distribution Services Agreement between the
Registrant and Alliance Fund Distributors, Inc. -
Filed herewith.

C-1

<PAGE>

(7) Not applicable.

(8) (a) Custodian Contract between the Registrant and
State Street Bank and Trust Company - Filed
herewith.

(8) (b) Amendment to Custodian Contract between the
Registrant and State Street Bank and Trust
Company - Filed herewith.

(9) Transfer Agency Agreement between the Registrant
and Alliance Fund Services, Inc. - Filed herewith.

(10) Not applicable.

(11) Consent of Independent Auditors - Filed herewith.

(12) Not applicable.

(13) Not applicable.

(14) Not applicable.

(15) Rule 12b-1 Plan - See Exhibit 6 hereto.

(16) Schedule of Computation of Performance Quotation
Provided in Response to Item 22 - Filed herewith.

(27) Not applicable.

Other Exhibits:

Powers of Attorney of: John D. Carifa, Charles
H.P. Duell, William H. Foulk, Jr., Alfred Lee
Loomis, III, Elizabeth J. McCormack, David K.
Storrs, Dave. H. Williams, John Winthrop -
Incorporated by reference to Other Exhibits to
Post-Effective Amendment No. 14 of the Registrant's
Registration Statement on Form N-1A, filed
October 28, 1988.

Power of Attorney of Hon. James D. Hodgson -
Incorporated by reference to Other Exhibits to
Post-Effective Amendment No. 16 of the Registrant's
Registration Statement on Form N-1A, filed
August 30, 1990.

Powers of Attorney of: Sam Y. Cross and Shelby
White - Incorporated by reference to Other Exhibits
to Post-Effective Amendment No. 18 of the

C-2

<PAGE>

Registrant's Registration Statement on Form N-1A,
filed October 13, 1992.

Powers of Attorney of: John D. Carifa, Sam Y.
Cross, Charles H.P. Duell, William H. Foulk, Jr.,
Elizabeth J. McCormack, David K. Storrs, Shelby
White, Dave. H. Williams - Incorporated by
reference to Other Exhibits to Post-Effective
Amendment No. 24 of the Registrant's Registration
Statement on Form N-1A, filed on October 31, 1996.

Powers of Attorney of: John D. Carifa, Sam Y.
Cross, Charles H.P. Duell, William H. Foulk, Jr.,
Donald J. Robinson, David K. Storrs, Shelby White,
Dave. H. Williams - Filed herewith.

ITEM 25. Persons Controlled by or under Common Control with
Registrant.

None.

ITEM 26. Number of Holders of Securities.

Registrant had, as of October 15, 1997, record holders
of shares of beneficial interest:

Alliance Government Reserves 59,791
Alliance Treasury Reserves 26,510

ITEM 27. Indemnification

It is the Registrant's policy to indemnify its trustees
and officers, employees and other agents as set forth in
Article V of Registrant's Agreement and Declaration of
Trust, filed as Exhibit 1 in response to Item 24 and
Section 7 of the Distribution Agreement filed as
Exhibit 6 in response to Item 24, all as set forth
below. The liability of the Registrant's trustees and
officers is also dealt with in Article V of Registrant's
Agreement and Declaration of Trust. The Adviser's
liability for loss suffered by the Registrant or its
shareholders is set forth in Section 4 of the Advisory
Agreement filed as Exhibit 5 in response to Item 24, as
set forth below.

Article V of Registrant's Agreement and Declaration of
Trust reads as follows:

Section 5.1 - No Personal Liability of Shareholders,

C-3

<PAGE>

Trustees, etc.
No Shareholder shall be subject to any personal
liability whatsoever to any Person in connection with
Trust Property, including the or any series thereof. No
Trustee, officer, employee or agent of the Trust shall
property of any series of the Trust, or the acts,
obligations or affairs of the Trust be subject to any
personal liability whatsoever to any Person, other than
the Trust or applicable series thereof or its
Shareholders, in connection with Trust Property or the
property of any series thereof or the affairs of the
Trust or any series thereof, save only that arising from
bad faith, willful misfeasance, gross negligence or
reckless disregard for his duty to such Person; and all
such Persons shall look solely to the Trust Property or
the property of the appropriate series of the Trust for
satisfaction of claims of any nature arising in
connection with the affairs of the Trust or any series
thereof. If any Shareholder, Trustee, officer, employee
or agent, as such, of the Trust is made a party to any
suit or proceeding to enforce any such liability, he
shall not, on account thereof, be held to any personal
liability. The Trust shall indemnify and hold each
Shareholder harmless from and against all claims by
reason of his being or having been a Shareholder, and
shall reimburse such Shareholder for all legal and other
expenses reasonably incurred by him in connection with
any such claim or liability, provided that any such
expenses shall be paid solely out of the funds and
property of the series of the Trust with respect to
which such Shareholder's Shares are issued. The rights
accruing to a Shareholder under this Section 5.1 shall
not exclude any other right to which such Shareholder
may be lawfully entitled, nor shall anything herein
contained restrict the right of the Trust to indemnify
or reimburse a Shareholder in any appropriate situation
even though not specifically provided herein.

Section 5.2 - Non-Liability of Trustees, etc. No
Trustee, officer, employee or agent of the Trust shall
be liable to the Trust, its Shareholders, or to any
Shareholder, Trustee, officer, employee, or agent
thereof for any action or failure to act (including
without limitation the failure to compel in any way any
former or acting Trustee to redress any breach of trust)
except for his own bad faith, willful misfeasance, gross
negligence or reckless disregard of his duties.

Section 5.3 - Indemnification.
(a) The Trustees shall provide for indemnification by
the Trust (or by the appropriate series thereof) of

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<PAGE>

every person who is, or has been, a Trustee or officer
of the Trust against all liability and against all
expenses reasonably incurred or paid by him in
connection with any claim, action, suit or proceeding in
which he becomes involved as a party or otherwise by
virtue of his being or having been a Trustee or officer
and against amounts paid or incurred by him in the
settlement thereof, in such manner as the Trustees may
provide from time to time in the By-Laws.

(b) The words "claim," "action," "suit," or
"proceeding" shall apply to all claims, actions, suits
or proceedings (civil, criminal, or other, including
appeals), actual or threatened; and the words
"liability" and "expenses" shall include, without
limitation, attorneys' fees, costs, judgments, amounts
paid in settlement, fines, penalties and other
liabilities.

Section 5.4 - No Bond Required of Trustees. No Trustee
shall be obligated to give any bond or other security
for performance of any of his duties hereunder.

Section 5.5 - No Duty of Investigation; Notice in Trust
Instruments, Insurance. No purchaser, lender, transfer
agent or other Person dealing with the Trustees or any
officer, employee or agent of the Trust shall be bound
to make any inquiry concerning the validity of any
transaction purporting to be made by the Trustees or by
said officer, employee or agent or be liable for the
application of money or property paid, loaned, or
delivered to or on the order of the Trustees or of said
officer, employee or agent. Every obligation, contract,
instrument, certificate, Share, other security of the
Trust or undertaking, and every other act or thing
whatsoever executed in connection with the Trust shall
be conclusively presumed to have been executed or done
by the executors thereof only in their capacity as
Trustees under the Declaration or in their capacity as
officers, employees or agents of the Trust. Every
written obligation, contract, instrument, certificate,
Share, other security of the Trust or undertaking made
or issued by the Trustees shall recite that the same is
executed or made by them not individually, but as
Trustees under the Declaration, and that the obligations
of any such instrument are not binding upon any of the
Trustees or Shareholders, individually, but bind only
the Trust Property or the property of the appropriate
series of the Trust, and may contain any further recital
which they or he may deem appropriate, but the omission
of such recital shall not operate to bind the Trustees

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<PAGE>

or Shareholders individually. The Trustees shall at all
times maintain insurance for the protection of the Trust
Property, its Shareholders, Trustees, officers,
employees and agents in such amount as the Trustees
shall deem adequate to cover possible tort liability,
and such other insurance as the Trustees in their sole
judgment shall deem advisable.

Section 5.6 - Reliance on Experts, etc. Each Trustee
and officer or employee of the Trust shall, in the
performance of his duties, be fully and completely
justified and protected with regard to any act or any
failure to act resulting from reliance in good faith
upon the books of account or other records of the Trust,
upon an opinion of counsel or upon reports made to the
Trust by any of its officers or employees or by the
Investment Adviser, the Distributor, Transfer Agent,
selected dealers, accountants, appraisers or other
experts or consultants selected with reasonable care by
the Trustees, officers or employees of the Trust,
regardless of whether such counsel or expert may also be
a Trustee.

The Advisory Agreement between Registrant and Alliance
Capital Management L.P. provides that Alliance Capital
Management L.P. will not be liable under such agreement
for any mistake of judgment or in any event whatsoever
except for lack of good faith and that nothing therein
shall be deemed to protect, or purport to protect,
Alliance Capital Management L.P. against any liability
to Registrant or its security holders to which it would
otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in the performance of its
duties thereunder, or by reason of reckless disregard of
its obligations and duties thereunder.

The Distribution Agreement between the Registrant and
Alliance Fund Distributors, Inc. provides that the
Registrant will indemnify, defend and hold Alliance Fund
Distributors, Inc., and any person who controls it
within the meaning of Section 15 of the Investment
Company Act of 1940, free and harmless from and against
any and all claims, demands, liabilities and expenses
which Alliance Fund Distributors, Inc. or any
controlling person may incur arising out of or based
upon any alleged untrue statement of a material fact
contained in Registrant's Registration Statement or
Prospectus or Statement of Additional Information or
arising out of, or based upon any alleged omission to
state a material fact required to be stated in or
necessary to make the statements in either thereof not

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<PAGE>

misleading; provided, however that nothing therein shall
be so construed as to protect Alliance Fund
Distributors, Inc. against any liability to Registrant
or its security holders to which it would otherwise be
subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties
thereunder, or by reason of reckless disregard of its
obligations and duties thereunder.

The foregoing summaries are qualified by the entire text
of Registrant's Agreement and Declaration of Trust, the
Advisory Agreement between Registrant and Alliance
Capital Management L.P. and the Distribution Agreement
between Registrant and Alliance Fund Distributors, Inc.

Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to trustees,
officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of the
Securities and Exchange Commission, such indemnification
is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses
incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such
trustee, officer or controlling person in connection
with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of
whether such indemnification by it is against public
policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.

In accordance with Release No. IC-11330 (September 2,
1980) the Registrant will indemnify its directors,
officers, investment manager and principal underwriters
only if (1) a final decision on the merits was issued by
the court or other body before whom the proceeding was
brought that the person to be indemnified (the
"indemnitee") was not liable by reason or willful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his
office ("disabling conduct") or (2) a reasonable
determination is made, based upon a review of the facts,
that the indemnitee was not liable of disabling conduct,
by (a) the vote of a majority of a quorum of the
directors who are neither "interested persons" of the

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<PAGE>

Registrant as defined in section 2(a)(19) of the
Investment Company Act of 1940 nor parties to the
proceeding ("disinterested, non-party directors"), or
(b) an independent legal counsel in a written opinion.
The Registrant will advance attorneys fees or other
expenses incurred by its directors, officers, investment
adviser or principal underwriters in defending a
proceeding, upon the undertaking by or on behalf of the
indemnitee to repay the advance unless it is ultimately
determined that he is entitled to indemnification and,
as a condition to the advance, (1) the indemnitee shall
provide a security for his undertaking, (2) the
Registrant shall be insured against losses arising by
reason of any lawful advances, or (3) a majority of a
quorum of disinterested, non-party directors of the
Registrant, or an independent legal counsel in a written
opinion, shall determine, based on a review of readily
available facts (as opposed to a full trial-type
inquiry), that there is reason to believe that the
indemnitee ultimately will be found entitled to
indemnification.

The Registrant participates in a joint directors and
officers liability insurance policy issued by the ICI
Mutual Insurance Company. Coverage under this policy
has been extended to directors, trustees and officers of
the investment companies managed by Alliance Capital
Management L.P. Under this policy, outside trustees and
directors would be covered up to the limits specified
for any claim against them for acts committed in their
capacities as trustee or director. A pro rata share of
the premium for this coverage is charged to each
investment company.

ITEM 28. Business and Other Connections of Investment Adviser.

The descriptions of Alliance Capital Management L.P.
under the caption "The Adviser" in the Prospectus and
"Management of the Fund" in the Prospectus and in the
Statement of Additional Information constituting Parts A
and B, respectively, of this Registration Statement are
incorporated by reference herein.

The information as to the directors and executive
officers of Alliance Capital Management Corporation, the
general partner of Alliance Capital Management L.P., set
forth in Alliance Capital Management L.P.'s Form ADV
filed with the Securities and Exchange Commission on
April 21, 1988 (File No. 801-32361) and amended through
the date hereof, is incorporated by reference.

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<PAGE>

ITEM 29. Principal Underwriters

(a) Alliance Fund Distributors, Inc., the Registrant's
Principal Underwriter in connection with the sale of
shares of the Registrant, also acts as Principal
Underwriter or Distributor for the following investment
companies:

ACM Institutional Reserves, Inc.
AFD Exchange Reserves
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
Alliance Capital Reserves
Alliance Developing Markets Fund, Inc.
Alliance Global Dollar Government Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Growth and Income Fund, Inc.
Alliance Greater China '97 Fund, Inc.
Alliance Income Builder Fund, Inc.
Alliance International Fund
Alliance Limited Maturity Government Fund,
Inc.
Alliance Money Market Fund
Alliance Mortgage Securities Income Fund, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
Alliance Municipal Income Fund II
Alliance Municipal Trust
Alliance New Europe Fund, Inc.
Alliance North American Government Income
Trust, Inc.
Alliance Premier Growth Fund, Inc.
Alliance Quasar Fund, Inc.
Alliance Real Estate Investment Fund, Inc.
Alliance/Regent Sector Opportunity Fund, Inc.
Alliance Short-Term Multi-Market Trust, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance Variable Products Series Fund, Inc.
Alliance World Income Trust, Inc.
Alliance Worldwide Privatization Fund, Inc.
Fiduciary Management Associates
The Alliance Fund, Inc.
The Alliance Portfolios

(b) The following are the Directors and Officers
of Alliance Fund Distributors, Inc., the
principal place of business of which is 1345

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<PAGE>

Avenue of the Americas, New York, New York,
10105.

Name Positions and Positions and
Offices With Offices With
Underwriter Registrant

Michael J. Laughlin Chairman

Robert L. Errico President

Edmund P. Bergan, Jr. Senior Vice President, Secretary
Secretary &
General Counsel

James S. Comforti Senior Vice President

James L. Cronin Senior Vice President

Daniel J. Dart Senior Vice President

Richard A. Davies Senior Vice President,
Managing Director

Byron M. Davis Senior Vice President

Anne S. Drennan Senior Vice President
& Treasurer

Mark J. Dunbar Senior Vice President

Bradley F. Hanson Senior Vice President

Geoffrey L. Hyde Senior Vice President

Robert H. Joseph, Jr. Senior Vice President
& Chief Financial Officer

Richard E. Khaleel Senior Vice President

Stephen R. Laut Senior Vice President

Daniel D. McGinley Senior Vice President

Ryne A. Nishimi Senior Vice President

Antonios G. Poleonadkis Senior Vice President

Robert E. Powers Senior Vice President

Richard K. Saccullo Senior Vice President

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<PAGE>

Gregory K. Shannahan Senior Vice President

Joseph F. Sumanski Senior Vice President

Peter J. Szabo Senior Vice President

Nicholas K. Willett Senior Vice President

Richard A. Winge Senior Vice President

Jamie A. Atkinson Vice President

Benji A. Baer Vice President

Kenneth F. Barkoff Vice President

Casimir F. Bolanowski Vice President

Timothy W. Call Vice President

Kevin T. Cannon Vice President

John R. Carl Vice President

William W. Collins, Jr. Vice President

Leo H. Cook Vice President

Richard W. Dabney Vice President

John F. Dolan Vice President

Sohaila S. Farsheed Vice President

William C. Fisher Vice President

Gerard J. Friscia Vice President
& Controller

Andrew L. Gangolf Vice President & Assistant
Assistant General Secretary
Counsel

Mark D. Gersten Vice President Treasurer &
Chief
Financial
Officer

Joseph W. Gibson Vice President

Charles M. Greenberg Vice President

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<PAGE>

Alan Halfenger Vice President

William B. Hanigan Vice President

Daniel M. Hazard Vice President

George R. Hrabovsky Vice President

Valerie J. Hugo Vice President

Scott Hutton Vice President

Thomas K. Intoccia Vice President

Larry P. Johns Vice President

Richard D. Keppler Vice President

Gwenn M. Kessler Vice President

Donna M. Lamback Vice President

James M. Liptrot Vice President

James P. Luisi Vice President

Shawn P. McClain Vice President

Christopher J.
MacDonald Vice President

Michael F. Mahoney Vice President

Lori E. Master Vice President

Shawn P. McClain Vice President

Maura A. McGrath Vice President

Thomas F. Monnerat Vice President

Joanna D. Murray Vice President

Jeanette M. Nardella Vice President

Nicole Nolan-Koester Vice President

John C. O'Connell Vice President

John J. O'Connor Vice President

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<PAGE>

Robert T. Pigozzi Vice President

James J. Posch Vice President

Domenick Pugliese Vice President Assistant
& Assistant Secretary
General Counsel

Bruce W. Reitz Vice President

Dennis A. Sanford Vice President

Karen C. Satterberg Vice President

Robert C. Schultz Vice President

Raymond S. Sclafani Vice President

Richard J. Sidell Vice President

Andrew D. Strauss Vice President

Michael J. Tobin Vice President

Joseph T. Tocyloski Vice President

Martha D. Volcker Vice President

Patrick E. Walsh Vice President

William C. White Vice President

Emilie D. Wrapp Vice President Assistant
& Special Counsel Secretary

Charles M. Barrett Assistant Vice President

Robert F. Brendli Assistant Vice President

Maria L. Carreras Assistant Vice President

John W. Cronin Assistant Vice President

John P. Chase Assistant Vice President

Russell R. Corby Assistant Vice President

Ralph A. DiMeglio Assistant Vice President

Faith Dunn Assistant Vice President

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<PAGE>

John C. Endahl Assistant Vice President

John E. English Assistant Vice President

Duff C. Ferguson Assistant Vice President

John Grambone Assistant Vice President

Brian S. Hanigan Assistant Vice President

James J. Hill Assistant Vice President

Edward W. Kelly Assistant Vice President

Michael Laino Assistant Vice President

Nicholas J. Lapi Assistant Vice President

Patrick Look Assistant Vice President
& Assistant Treasurer

Richard F. Meier Assistant Vice President

Catherine N. Peterson Assistant Vice President

Carol H. Rappa Assistant Vice President

Clara Sierra Assistant Vice President

Vincent T. Strangio Assistant Vice President

Wesley S. Williams Assistant Vice President

Christopher J. Zingaro Assistant Vice President

Mark R. Manley Assistant Secretary

ITEM 30. Location of Accounts and Records.

The majority of the accounts, books and other documents
required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and the Rules thereunder
are maintained as follows: journals, ledgers, securities
records and other original records are maintained
principally at the offices of Alliance Fund Services,
Inc. 500 Plaza Drive, Secaucus, New Jersey 07094 and at
the offices of State Street Bank and Trust Company, the
Registrant's Custodian, 225 Franklin Street, Boston,
Massachusetts 02110. All other records so required to

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<PAGE>

be maintained are maintained at the offices of Alliance
Capital Management L.P., 1345 Avenue of the Americas,
New York, New York 10105.

ITEM 3l. Management Services.
Not applicable.

ITEM 32. Undertakings.
The Registrant undertakes to furnish each person to whom
a prospectus is delivered with a copy of the
Registrant's latest report to shareholders, upon request
and without charge.

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<PAGE>

SIGNATURE

Pursuant to the requirements of the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as
amended, the Registrant certifies that it meets all of the
requirements for effectiveness of this Amendment to its
Registration pursuant to Rule 485(b) under the Securities Act of
1933 and has duly caused this Amendment to its Registration
Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York and State of
New York on the 30th day of October 1997.

ALLIANCE GOVERNMENT RESERVES
by/s/ Ronald M. Whitehill
__________________________
Ronald M. Whitehill
President

Pursuant to the requirements of the Securities Act of
l933, as amended, this Amendment to the Registration Statement
has been signed below by the following persons in the capacities
and on the dates indicated:

Signature Title Date

1) Principal
Executive Officer

/s/ Ronald M. Whitehill President October 30, 1997
______________________
Ronald M. Whitehill

2) Principal Financial and
Accounting Officer

/s/ Mark D. Gersten Treasurer and October 30, 1997
_______________________ Chief Financial
Mark D. Gersten Officer

3) All of the Trustees

John D. Carifa Donald J. Robinson
Sam Y. Cross David K. Storrs
Charles H.P. Duell Shelby White
William H. Foulk, Jr. Dave H. Williams

by/s/ Edmund P. Bergan, Jr. October 30, 1997
_________________________
(Attorney-in-fact)
Edmund P. Bergan, Jr.

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<PAGE>

Index to Exhibits

Page
(1) Declaration of Trust

(2) By-Laws

(5) Advisory Agreement

(6) Distribution Services Agreement

(8)(a) Custodian Contract
(8)(b) Amendment to Custodian Contract

(9) Transfer Agency Agreement

(11) Consent of Independent Auditors

(16) Schedule of Computation of Performance Quotation
in Response to Item 22

Other Exhibits:
Power of Attorney for:

John D. Carifa
Sam Y. Cross
Charles H.P. Duell
William H. Foulk, Jr.
Donald J. Robinson
David K. Storrs
Shelby White
Dave H. Williams

17
00250083.AE0

<PAGE>

ALLIANCE GOVERNMENT RESERVES

DECLARATION OF TRUST

Dated: October 15, 1984

<PAGE>

TABLE OF CONTENTS

PAGE

ARTICLE I -- Name and Definitions 1

Section 1.1. Name 1
Section 1.2. Definitions 1

ARTICLE II -- Trustees 3

Section 2.1. Number of Trustees 3
Section 2.2. Election and Term 3
Section 2.3. Resignation and Removal 4
Section 2.4. Vacancies 4
Section 2.5. Delegation of power to Other
Trustees 5

ARTICLE III -- Powers of Trustees 5

Section 3.1. General 5
Section 3.2. Investments 6
Section 3.3. Legal Title 7
Section 3.4. Issuance and Repurchase of
Securities 7
Section 3.5. Borrowing Money; Lending Trust
Assets 7
Section 3.6. Delegation; Committees 7
Section 3.7. Collection and Payment 8
Section 3.8. Expenses 8
Section 3.9. Manner of Acting; By-Laws 8
Section 3.10. Miscellaneous Powers 8
Section 3.11. Principal Transactions 9

ARTICLE IV -- Investment Adviser, Distributor
and Transfer Agent 9

Section 4.1. Investment Adviser 9
Section 4.2. Distributor 10
Section 4.3. Transfer Agent 10
Section 4.4. Parties to Contract 10

ARTICLE V -- Limitations of Liability of
Shareholders, Trustees and Others 11

Section 5.1. No Personal Liability of
Shareholders, Trustees, etc. 11
Section 5.2. Non-Liability of Trustees, etc. 11
Section 5.3. Indemnification 12
Section 5.4. No Bond Required of Trustees 12

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<PAGE>

Section 5.5. No Duty of Investigation;
Notice in Trust Instruments,
Insurance 12
Section 5.6. Reliance on Experts, etc. 13

ARTICLE VI -- Shares of Beneficial Interest 13

Section 6.1. Beneficial Interest 13
Section 6.2. Rights of Shareholders 13
Section 6.3. Trust Only 14
Section 6.4. Issuance of Shares 14
Section 6.5. Register of Shares 14
Section 6.6. Transfer of Shares 15
Section 6.7. Notices 15
Section 6.8. Voting Powers 15
Section 6.9. Series or Classes of Shares 16

ARTICLE VII -- Redemptions 19

Section 7.1. Redemptions 19
Section 7.2. Redemption of Shares Disclosure
of Holding 19
Section 7.3. Redemptions of Accounts of Less
Than $500 20
Section 7.4. Other Redemptions 20

ARTICLE VIII -- Determination of Net Asset Value,
net Income and Distributions 20

Section 8.1. Net Asset Value 20
Section 8.2. Distributions to Shareholders 20
Section 8.3. Determination of Net Income 21
Section 8.4. Power to Modify Foregoing
Procedures 22

ARTICLE IX -- Duration; Termination of Trust;
Amendment; Mergers, Etc. 22

Section 9.1. Duration 22
Section 9.2. Termination of Trust 22
Section 9.3. Amendment Procedure 23
Section 9.4. Merger, Consolidation and Sale
of Assets 24
Section 9.5. Incorporation 25

ARTICLE X -- Reports to Shareholders 25

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<PAGE>

ARTICLE XI -- Miscellaneous 25

Section 11.1. Filing 25
Section 11.2. Resident Agent 26
Section 11.3. Governing Law 26
Section 11.4. Counterparts 26
Section 11.5. Reliance by Third Parties 26
Section 11.6. Provisions in Conflict with
Law or Regulations 27

SIGNATURE PAGE 27

Notary Page 28

Notary Page 29

-iii-

<PAGE>

DECLARATION OF TRUST

ALLIANCE GOVERNMENT RESERVES

Dated October 15, 1984

THE DECLARATION OF TRUST of Alliance Government Reserves
is made the 15th day of October, 1984 by the parties signatory
hereto, as trustees (such persons, so long as they shall continue
in office in accordance with the terms of this Declaration of
Trust, and all other persons who at the time in question have
been duly elected or appointed as trustees in accordance with the
provisions of this Declaration of trust and are then in office,
being hereinafter called the "Trustees").

W I T N E S S E T H

WHEREAS, the Trustees desire to form a trust fund under
the laws of Massachusetts for the investment and reinvestment of
funds contributed thereto; and

WHEREAS, it is proposed that the beneficial interest in
the trust assets be divided into transferable shares of
beneficial interest as hereinafter provided;

NOW, THEREFORE, the Trustees declare that all money and
property contributed to the trust established hereunder shall be
held and managed in trust for the benefit of the holders, from
time to time, of the shares of beneficial interest issued
hereunder and subject to the provisions hereof, to wit:

ARTICLE I

NAME AND DEFINITIONS

Section 1.1. - Name. The name of the trust created
hereby is Alliance Government Reserves.

Section 1.2. - Definitions. Wherever they are used
herein, the following terms have the following respective
meanings:

(a) "By-Laws" means the By-Laws referred to in Section
3.9 hereof, as from time to time amended.

(b) the terms "Commission," "Affiliated Person" and
"Interested Person" have the meanings given them in the 1940 Act.

<PAGE>

17(f) of the 1940 Act, but does not include a system for the
central handling of securities described in said section 17(f).

(d) "Declaration" means this Declaration of Trust as
amended from time to time. Reference in this Declaration of
Trust to "Declaration", "hereof", "herein" and "hereunder shall
be deemed to refer to this Declaration rather than the article or
section in which such words appear.

(e) "Distributor" means the party, other than the
Trust, to the contract described in Section 4.2 hereof.

(f) "Fundamental Policies" shall mean the investment
restrictions set forth in the Prospectus and designated as
fundamental policies therein.

(g) "Investment Adviser" means the party, other than
the Trust, to the contract described in Section 4.1 hereof.

(h) "Majority Shareholder Vote" means the vote of the
holders of a majority of Shares which shall consist of: (i) a
majority of Shares represented in person or by proxy and entitled
to vote at a meeting of Shareholders at which a quorum, as
determined in accordance with the By-Laws, is present; (ii) a
majority of Shares issued and outstanding and entitled to vote
when action is taken by written consent of Shareholders; or
(iii) a "majority of the outstanding voting securities", as that
phrase is defined in the 1940 Act, when action is taken by
Shareholders with respect to approval of an investment advisory
or management contract, a distribution assistance and
administrative services plan adopted pursuant to Rule 12b-1 under
the 1940 Act or an underwriting or distribution agreement or
continuance thereof.

(i) "1940 Act" means the Investment Company Act of 1940
and the rules and regulations thereunder as amended from time to
time.

(j) "Person" means and includes individuals,
corporations, partnerships, trusts, associations, joint ventures
and other entities, whether or not legal entities, and
governments and agencies and political subdivisions thereof.

(k) "Prospectus" means the prospectus (including the
statement of additional information to the extent incorporated by
reference therein) constituting part of the Registration
Statement of the Trust under the Securities Act of 1933, as
amended, as such prospectus may be amended or supplemented and
filed with the Commission from time to time.

<PAGE>

(l) "Shareholder" means a record owner of outstanding
Shares.

(m) "Shares" means the units of interest into which the
beneficial interest in the Trust, par value $.001 per share,
shall be divided from time to time, including the shares of any
and all series or classes which may be established by the
Trustees, and includes fractions of Shares as well as whole
Shares.

(n) "Transfer Agent" means the party, other than the
Trust, to the contract described in Section 4.3 hereof.

(o) "Trust" means Alliance Government Reserves.

(p) "Trust Property" means any and all property, real
or personal, tangible or intangible, which is owned or held by or
for the account of the Trust or the Trustees.

(q) "Trustees" means the person or persons who have
signed the Declaration, so long as he or they shall continue in
office in accordance with the terms hereof, and all other persons
who may from time to time be duly elected, qualified and serving
as Trustees in accordance with the provisions hereof, and
reference herein to a Trustee or the Trustees shall refer to such
person or persons in their capacity as trustees hereunder.

ARTICLE II

TRUSTEES

Section 2.1. - Number of Trustees. The number of
Trustees shall be such number as shall be fixed from time to time
by a written instrument signed by a majority of the Trustees,
provided, however, that at all times after the sale of assets and
liabilities of Alliance Government Reserves, Inc. to the Trust
and the issuance of Trust shares in exchange therefor pursuant to
an agreement and plan of reorganization and liquidation, the
number of Trustees shall in no event be less than three (3) nor
more than fifteen (15).

Section 2.2. - Election and Term. At a date and time
fixed by the Trustees which shall be prior to the effective time
of the sale of assets and liabilities of Alliance Government
Reserves, Inc. to the Trust and the issuance of Trust shares in
exchange therefor pursuant to an agreement and plan of
reorganization and liquidation, Alliance Government Reserves,
Inc., as sole shareholder of the Trust and acting with the
authorization of its own shareholders, shall elect Trustees to
hold office in accordance with the provisions of this Declaration
of Trust. The Trustees shall have the power to set and alter the

<PAGE>

terms of office of the Trustees, and they may at any time
lengthen or lessen their own terms or make their terms of
unlimited duration, subject to the resignation and removal
provisions of Section 2.3 hereof. Subject to Section 16(a) of
the 1940 Act, the Trustees may elect their own successors and
may, pursuant to Section 2.4 hereof, appoint Trustees to fill
vacancies. The Trustees shall adopt By-Laws not inconsistent
with this Declaration or any provisions of law to provide for
election of Trustees by Shareholders at such time or times as the
Trustees shall determine to be necessary or advisable.

Section 2.3. - Resignation and Removal. Any Trustee may
resign his trust without need for prior or subsequent accounting)
by an instrument in writing signed by him and delivered to the
other Trustees and such resignation shall be effective upon such
delivery, or at a later date according to the terms of the
instrument. Any of the Trustees may be removed (i), with cause,
by the action of two-thirds of the remaining Trustees; (ii) at
any special meeting of Shareholders of the Trust by a vote of
two-thirds of the outstanding Shares, or (iii) upon the filing
with the custodian of the Trust of a written declaration signed
by Shareholders owning in the aggregate two-thirds of the
outstanding Shares. The Trustees or the officers of the Trust
given such authority in the By-Laws shall promptly call a special
meeting of Shareholders for the purpose of voting upon the
question of removal of any Trustee at a place designated by them
upon the written request of Shareholders owning at least one-
tenth of the outstanding Shares entitled to vote. Shareholders
shall be entitled to at least ten days' notice of any such
meeting. Upon the resignation or removal of a Trustee, or his
otherwise ceasing to be a Trustee, he shall execute and deliver
such documents as the remaining Trustees shall require for the
purpose of conveying to the Trust or the remaining Trustees any
Trust Property or property of any series of the Trust held in the
name of the resigning or removed Trustee. Upon the incapacity or
death of any Trustees, his legal representative shall execute and
deliver on his behalf such documents as the remaining Trustees
shall require as provided in the preceding sentence.

Section 2.4. - Vacancies. The term of office of a
Trustee shall terminate and a vacancy shall occur in the event of
the death, resignation, removal, bankruptcy, adjudicated
incompetence or other incapacity to perform the duties of the
office of a Trustee. No such vacancy shall operate to annul the
Declaration or to revoke any existing agency created pursuant to
the terms of the Declaration. In the case of an existing
vacancy, including a vacancy existing by reason of an increase in
the number of Trustees, subject to the provisions of Section
16(a) of the 1940 Act, the remaining Trustees or, prior to the
public offering of Shares of the Trust, if only one Trustee shall
then remain in office, the remaining Trustee, shall fill such

<PAGE>

vacancy by the appointment of such other person as they or he, in
their or his discretion shall see fit, made by a written
instrument signed by a majority of the remaining Trustees or by
the remaining Trustee, as the case may be. Any such appointment
shall not become effective, however, until the person named in
the written instrument of appointment shall have accepted in
writing such appointment and agreed in writing to be bound by the
terms of the Declaration. An appointment of a Trustee may be
made in anticipation of a vacancy to occur at a later date by
reason of retirement, resignation or increase in the number of
Trustees, provided that such appointment shall not become
effective prior to such retirement, resignation or increase in
the number of Trustees. Whenever a vacancy in the number of
Trustees shall occur, until such vacancy is filled as provided in
this Section 2.4, the Trustees in office, regardless of their
number, shall have all the powers granted to the Trustees and
shall discharge all the duties imposed upon the Trustees by the
Declaration. A written instrument certifying the existence of
such vacancy signed by the majority of the Trustees shall be
conclusive evidence of the existence of such vacancy.

Section 2.5. - Delegation of Power to Other Trustees.
Any Trustee may, by power of attorney, delegate his power for a
period not exceeding six (6) months at any one time to any other
Trustee or Trustees; provided that in no case shall less than two
(2) Trustees personally exercise the powers granted to the
Trustees under the Declaration except as herein otherwise
expressly provided.

ARTICLE III

POWERS OF TRUSTEES

Section 3.1. - General. The Trustees shall have
exclusive and absolute control over the property and business of
the Trust and of any series of the Trust to the same extent as if
the Trustees were the sole owners of such property and business
in their own right, but with such powers of delegation as may be
permitted by the Declaration. The Trustees shall have power to
conduct the business of the Trust and carry on its operations in
any and all of its branches and maintain offices both within and
without the Commonwealth of Massachusetts, in any and all states
of the United States of America, in the District of Columbia, and
in any and all commonwealths, territories, dependencies,
colonies, possessions, agencies or instrumentalities of the
United States of America and of foreign governments, and to do
all such other things and execute all such instruments as they
deem necessary, proper or desirable in order to promote the
interests of the Trust although such things are not herein
specifically mentioned. Any determination as to what is in the
interests of the Trust or any series of the Trust made by the

<PAGE>

Trustees in good faith shall be conclusive. In construing the
provisions of the Declaration, the presumption shall be in favor
of a grant of power to the Trustees.

The enumeration of any specific power herein shall not
be construed as limiting the aforesaid power. Such powers of the
Trustees may be exercised without order of or resort to any
court.

Section 3.2. - Investments. The Trustees shall have the
power to:

(a) conduct, operate and carry on the business of an
investment company;

(b) subscribe for, invest in, reinvest in, purchase or
otherwise acquire, hold, pledge, sell, assign, transfer,
exchange, distribute, lend or otherwise deal in or dispose of
common stocks or securities exchangeable or convertible into
common stocks, preferred stocks, convertible and
nonconvertible debt securities, negotiable or non-negotiable
instruments, obligations, evidences of indebtedness,
certificates of deposit or indebtedness, commercial paper,
repurchase agreements, reverse repurchase agreements,
options, warrants, futures, forwards and other securities of
any kind, including, without limitation, those issued,
guaranteed or sponsored by any and all Persons including,
without limitation, states, territories and possessions of
the United States, the District of Columbia and any of the
political subdivisions, agencies or instrumentalities
thereof, and by the United States Government or its agencies
or instrumentalities, or international instrumentalities, or
by any bank or savings institution, or by any corporation or
organization organized under the laws of the United States or
of any state, territory or possession thereof, and of
corporations or organizations organized under foreign laws,
or in "when issued" contracts for any such securities, or in
commodities and options, futures and forwards on commodities,
or retain assets of the Trust or any series thereof in cash
and from time to time change the investment of the assets of
the Trust or any series thereof; and to exercise any and all
rights, powers and privileges of ownership or interest in
respect of any and all such investments of every kind and
description, including, without limitation, the right to
consent and otherwise act with respect thereto, with power to
designate one or more persons, firms, associations or
corporations to exercise any of said rights, powers and
privileges in respect of any of said instruments; and the
Trustees shall be deemed to have the foregoing powers with
respect to any additional securities in which the Trust or

<PAGE>

any series of the Trust may invest should the Fundamental
Policies be amended.

The Trustees shall not be limited to investing in obligations
maturing before the possible termination of the Trust, nor shall
the Trustees be limited by any law limiting the investments which
may be made by fiduciaries.

Section 3.3. - Legal Title. Legal title to all of the
Trust Property, including the property of any series of the
Trust, shall be vested in the Trustees as joint tenants except
that the Trustees shall have power to cause legal title to any
Trust Property or property of any series of the Trust to be held
by or in the name of one or more of the Trustees, or in the name
of the Trust or the series, or in the name of any other Person as
nominee, on such terms as the Trustees may determine, provided
that the interest of the Trust therein is appropriately
protected. The right, title and interest of the Trustees in the
Trust Property and the property of each series of the Trust shall
vest automatically in each Person who ray hereafter become a
Trustee. Upon the resignation, removal or death of a Trustee he
shall automatically cease to have any right, title or interest in
any of the Trust Property or the property of any series of the
Trust, and the right, title and interest of such Trustee in all
such property shall vest automatically in the remaining Trustees.
Such vesting and cessation of title shall be effective without
the requirement that conveyancing documents be executed and
delivered.

Section 3.4. - Issuance and Repurchase of Securities.
The Trustees shall have the power to issue, sell, repurchase,
redeem, retire, cancel, acquire, hold, resell, reissue, dispose
of, transfer, and otherwise deal in Shares and subject to the
provisions set forth in Articles VII, VIII and IX and Section 6.9
hereof, to apply to any such repurchase, redemption, retirement,
cancellation or acquisition of Shares any funds or property of
the particular series of the Trust with respect to which such
Shares are issued, whether capital or surplus or otherwise, to
the full extent now or hereafter permitted by laws of the
Commonwealth of Massachusetts governing business corporations.

Section 3.5. - Borrowing Money; Lending Trust Assets.
The Trustees shall have power to borrow money or otherwise obtain
credit and to secure the same by mortgaging, pledging or
otherwise subjecting as security the assets of the Trust, to
endorse, guarantee or undertake the performance of any
obligation, contract or engagement of any other Person and to
lend Trust assets.

Section 3.6. - Delegation; Committees. The Trustees
shall have power, consistent with their continuing exclusive

<PAGE>

authority over the management of the Trust and the Trust
Property, to delegate from time to time to such of their number
or to officers, employees or agents of the Trust the doing of
such things and the execution of such instruments either in the
name of the Trust or the names of the Trustees or otherwise as
the Trustees may deem expedient.

Section 3.7. - Collection and Payment. The Trustees
shall have power to collect all property due to the Trust or any
series thereof; to pay all claims, including taxes, against the
Trust Property or the property of any series of the Trust; to
prosecute, defend, compromise or abandon any claims relating to
the Trust Property or the property of any series of the Trust; to
foreclose any security interest securing any obligations, by
virtue of which any property is owed to the Trust or any series
thereof; and to enter into releases, agreements and other
instruments.

Section 3.8. - Expenses. The Trustees shall have the
power to incur and pay any expenses which in the opinion of the
Trustees are necessary or incidental to carry out any of the
purposes of the Declaration, and to pay reasonable compensation
from the funds of the Trust to themselves as Trustees. The
Trustees shall fix the compensation of all officers, employees
and Trustees.

Section 3.9. - Manner of Acting; By-Laws. Except as
otherwise provided herein or in the By-Laws or by any provision
of law, any action to be taken by the Trustees may be taken by a
majority of the Trustees present at a meeting of Trustees (a
quorum being present), including any meeting held by means of a
conference telephone circuit or similar communications equipment
by means of which all persons participating in the meeting can
hear each other, or by written consent of all the Trustees. The
Trustees may adopt By-Laws not inconsistent with this Declaration
to provide for the conduct of the business of the Trust and may
amend or repeal such By-Laws to the extent such power is not
reserved to the Shareholders.

Section 3.10. - Miscellaneous Powers. The Trustees
shall have the power to: (a) employ or contract with such Persons
as the Trustees may deem desirable for the transaction of the
business of the Trust; (b) enter into joint ventures,
partnerships and any other combinations or associations;
(c) remove Trustees or fill vacancies in or add to their number,
elect and remove such officers and appoint and terminate such
agents or employees as they consider appropriate, and appoint
from their own number or otherwise, and terminate, any one or
more committees which may exercise some or all o the power and
authority of the Trustees as the Trustees may determine;
(d) purchase, and pay for out of Trust Property or the property

<PAGE>

of the appropriate series of the Trust, insurance policies
insuring the Shareholders, Trustees, officers, employees, agents,
investment advisers, distributors, selected dealers or
independent contractors of the Trust against all claims arising
by reason of holding any such position or by reason of any action
taken or omitted to be taken by any such Person in such capacity,
whether or not constituting negligence, or whether or not the
Trust would have the power to indemnify such Person against such
liability; (e) establish pension, profit-sharing, Share purchase,
and other retirement, incentive and benefit plans for any
Trustees, officers, employees and agents of the Trust; (f) to the
extent permitted by law, indemnify any person with whom the Trust
has dealings, including the Investment Adviser, Distributor,
Transfer Agent and selected dealers, to such extent as the
Trustees shall determine; (g) guarantee indebtedness or
contractual obligations of others; (h) determine and change the
fiscal year of the Trust or any series of the Trust and the
method by which its accounts shall be kept; and (i) adopt a seal
for the Trust, but the absence of such seal shall not impair the
validity of any instrument executed on behalf of the Trust.

Section 3.11. - Principal Transactions. Except in
transactions permitted by the 1940 Act or any rule or regulation
thereunder, or any order of exemption issued by the Commission,
or effected to implement the provisions of any agreement to which
the Trust is a party, the Trustees shall not, on behalf of the
Trust, buy any securities (other than Shares) from or sell any
securities (other than Shares) to, or lend any assets of the
Trust to, any Trustee or officer of the Trust or any firm of
which any such Trustee or officer is a member acting as
principal, or have any such dealings with the Investment Adviser,
Distributor or Transfer Agent or with any Affiliated Person of
such Person; but the Trust may employ any such Person, or firm or
Company in which such Person is an Interested Person, as broker,
legal counsel, registrar, transfer agent, dividend disbursing
agent or custodian upon customary terms.

ARTICLE IV

INVESTMENT ADVISER, DISTRIBUTOR AND TRANSFER AGENT

Section 4.1. - Investment Adviser. Subject to approval
by a Majority Shareholder Vote, the Trustees may in their
discretion from time to time enter into an investment advisory or
management contract whereby the other party to such contract
shall undertake to furnish the Trust or any series thereof such
management, investment advisory, administration, accounting,
legal, statistical and research facilities and services,
promotional activities, and such other facilities and services,
if any, as the trustees shall from time to time consider
desirable and all upon such terms and conditions as the Trustees

<PAGE>

may in their discretion determine. Notwithstanding any
provisions of the Declaration, the Trustees may authorize the
Investment Adviser (subject to such general or specific
instructions as the Trustees may from time to time adopt) to
effect purchases, sales, loans or exchanges of portfolio
securities of the Trust or any series thereof on behalf of the
Trustees or may authorize any officer or employee pursuant to
recommendations of the Investment Adviser and all without further
action by the Trustees. Any such purchases, sales, loans and
exchanges shall be deemed to have been authorized by all of the
Trustees. The Trustees may, in their sole discretion, call a
meeting of Shareholders in order to submit to a vote of
Shareholders at such meeting the approval of continuance of any
such investment advisory or management contract.

Section 4.2. - Distributor. The Trustees may in their
discretion from time to time enter into a contract providing for
the sale of Shares to net the Trust or the applicable series
thereof not less than the net asset value per Share (as described
in Article VII hereof) and pursuant to which the Trust or series
thereof may either agree to sell the Shares to the other party to
the contract or appoint such other party its sales agent for such
Shares. In either case, the contract shall be on such terms and
conditions as the Trustees may in their discretion determine not
inconsistent with the provisions of this Article IV, including,
without limitation, the provision for the repurchase or sale of
shares of the Trust or any series thereof by such other party as
principal or as agent of the Trust.

Section 4.3. - Transfer Agent. The Trustees may in
their discretion from time to time enter into a transfer agency
and shareholder service contract whereby the other party to such
contract shall undertake to furnish transfer agency and
shareholder services to the Trust or any series thereof. The
Contract shall have such terms and conditions as the Trustees may
in their discretion determine which are not inconsistent with the
Declaration. Such services may be provided by one or more
Persons.

Section 4.4. - Parties to Contract. Any contract of the
character described in Sections 4.1, 4.2 or 4.3 of this Article
IV and any other contract may be entered into with any Person,
although one or more of the Trustees or officers of the Trust may
be an officer, director, trustee, shareholder or member of such
other party to the contract, and no such contract shall be
invalidated or rendered voidable by reason of the existence of
any such relationship; nor shall any Person holding such
relationship be liable merely by reason of such relationship for
any loss or expense to the Trust or any series thereof under or
by reason of said contract or accountable for any profit realized
directly or indirectly therefrom, provided that the contract when

<PAGE>

entered into was not inconsistent with the provisions of this
Article IV. The same Person may be the other party to any
contracts entered into pursuant to Sections 4.1, 4.2 or 4.3 above
or otherwise, and any individual may be financially interested or
otherwise affiliated with Persons who are parties to any or all
of the contracts referred to in this Section 4.4.

ARTICLE V

LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS

Section 5.1. - No Personal Liability of Shareholders,
Trustees, etc. No Shareholder shall be subject to any personal
liability whatsoever to any Person in connection with Trust
Property, including the property of any series of the Trust, or
the acts, obligations or affairs of the Trust or any series
thereof. No Trustee, officer, employee or agent of the Trust
shall be subject to any personal liability whatsoever to any
Person, other than the Trust or applicable series thereof or its
Shareholders, in connection with Trust Property or the property
of any series thereof or the affairs of the Trust or any series
thereof, save only that arising from bad faith, willful
misfeasance, gross negligence or reckless disregard for his duty
to such Person; and all such Persons shall look solely to the
Trust Property or the property of the appropriate series of the
Trust for satisfaction of claims of any nature arising in
connection with the affairs of the Trust or any series thereof.
If any Shareholder, Trustee, officer, employee or agent, as such,
of the Trust is made a party to any suit or proceeding to enforce
any such liability, he shall not, on account thereof, be held to
any personal liability. The Trust shall indemnify and hold each
Shareholder harmless from and against all claims by reason of his
being or having been a Shareholder, and shall reimburse such
shareholder for all legal and other expenses reasonably incurred
by him in connection with any such claim or liability, provided
that any such expenses shall be paid solely out of the funds and
property of the series of the Trust with respect to which such
Shareholder's Shares are issued. The rights accruing to a
Shareholder under this Section 5.1 shall not exclude any other
right to which such Shareholder may be lawfully entitled, nor
shall anything herein contained restrict the right of the Trust
to indemnify or reimburse a Shareholder in any appropriate
situation even though not specifically provided herein.

Section 5.2. - Non-Liability of Trustees, etc. No
Trustee, officer, employee or agent of the Trust shall be liable
to the Trust, its Shareholders, or to any Shareholder, Trustee,
officer, employee, or agent thereof for any action or failure to
act (including without limitation the failure to compel in any
way any former or acting Trustee to redress any breach of trust)

<PAGE>

except for his own bad faith, willful misfeasance, gross
negligence or reckless disregard of his duties.

Section 5.3. - Indemnification.

(a) The Trustees shall provide for indemnification by
the Trust (or by the appropriate series thereof) of every person
which, or has been, a Trustee or officer of the Trust against all
liability and against all expenses reasonably incurred or paid by
him in connection with any claim, action, suit or proceeding in
which he becomes involved as a party or otherwise by virtue of
his being or having been a Trustee or officer and against amounts
paid or incurred by him in the settlement thereof, in such manner
as the Trustees may provide from time to time in the By-Laws.

(b) The words "claim," "action," "suit," or
"proceeding" shall apply to all claims, actions, suits or
proceedings (civil, criminal, or other, including appeals),
actual or threatened; and the words "liability" and "expenses"
shall include, without limitation, attorneys' fees, costs,
judgments, amounts paid in settlement, fines, penalties and other
liabilities.

Section 5.4. - No Bond Required of Trustees. No Trustee
shall be obligated to give any bond or other security for
performance of any of his duties hereunder.

Section 5.5 - No Duty of Investigation. Notice in Trust
Instruments, Insurance. No purchaser, lender, transfer agent or
other Person dealing with the Trustees or any officer, employee
or agent of the Trust shall be bound to make any inquiry
concerning the validity of any transaction purporting to be made
by the Trustees or by said officer, employee or agent or be
liable for the application of money or property paid, loaned, or
delivered to or on the order of the Trustees or of said officer,
employee or agent. Every obligation, contract, instrument,
certificate, Share, other securities of the Trust or undertaking,
and every other act or thing whatsoever executed in connection
with the Trust shall be conclusively presumed to have been
executed or done by the executors thereof only in their capacity
as Trustees under the Declaration or in their capacity as
officers, employees or agents of the Trust. Every written
obligation, contract, instrument, certificate, Share, other
security of the Trust or undertaking made or issued by the
Trustees shall recite that the same is executed or made by them
not individually, but as Trustees under the Declaration, and that
the obligations of any such instrument are not binding upon any
of the trustees or Shareholders, individually, but bind only the
Trust Property or the property of the appropriate series of the
Trust, and may contain any further recital which they or he may
deem appropriate, but the omission of such recital shall not

<PAGE>

operate to bind the Trustees or Shareholders individually. The
Trustees shall at all times maintain insurance for the protection
of the Trust Property, its Shareholders, Trustees, officers,
employees and agents in such amount as the Trustees shall deem
adequate to cover possible tort liability, and such other
insurance as the Trustees in their sole judgment shall deem
advisable.

Section 5.6. - Reliance on Experts, etc. Each Trustee
and officer or employee of the Trust shall, in the performance of
his duties, be fully and completely justified and protected with
regard to any act or any failure to act resulting from reliance
in good faith upon the books of account or other records of the
Trust, upon an opinion of counsel or upon reports made to the
Trust by any of its officers or employees or by the Investment
Adviser, the Distributor, Transfer Agent, selected dealers,
accountants, appraisers or other experts or consultants selected
with reasonable care by the Trustees, officers or employees of
the Trust, regardless of whether such counsel or expert may also
be a Trustee.

ARTICLE VI

SHARES OF BENEFICIAL

Section 6.1. - Beneficial Interest. The interest of the
beneficiaries hereunder shall be divided into transferable shares
of beneficial interest having a par value of $.001 per share.
The number of such shares of beneficial interest authorized
hereunder is unlimited. The Trustees may initially issue whole
and fractional Shares of a single class, each of which shall
represent an equal proportionate share in the Trust with each
other Share. Subject to the provisions of Section 6.9 hereof,
the Trustees may, initially or thereafter, also authorize the
creation of additional series of Shares (the proceeds of which
may be invested in separate, independently managed portfolios)
and additional classes of shares within any series. The Trustees
may divide or combine the shares into a greater or lesser number
of Shares without thereby changing the proportionate interests in
the Trust. All Shares issued hereunder including, without
limitation, Shares issued in connection with a dividend in Shares
or a split in Shares, shall be fully paid and non-assessable.

Section 6.2. - Rights of Shareholders. The ownership of
the Trust Property and the property of each series of the Trust
of every description and the right to conduct any business
hereinbefore described are vested exclusively in the Trustees,
and the Shareholders shall have no interest therein other than
the beneficial interest conferred by their Shares, and they shall
have no right to call for any partition or division of any
property, profits, rights or interests of the Trust (or series

<PAGE>

thereof) nor can they be called upon to assume any losses of the
Trust (or series thereof) or suffer an assessment of any kind by
virtue of their ownership of Shares. The Shares shall be
personal property giving only the rights specifically set forth
in the Declaration. The Shares shall not entitle the holder to
preference, preemptive, appraisal, conversion or exchange rights,
except as the Trustees may determine with respect to any series
of Shares.

Section 6.3. - Trust Only. It is the intention of the
Trustees to create only the relationship of Trustee and
beneficiary between the Trustees and each Shareholder from time
to time. It is not the intention of the Trustees to create a
general partnership, limited partnership, joint stock
association, corporation, bailment or any form of legal
relationship other than a trust. Nothing in the Declaration
shall be construed to make the Shareholders, either by themselves
or with the Trustees, partners or members of a joint stock
association.

Section 6.4. - Issuance of Shares. The Trustees, in
their discretion may, from time to time without vote of the
Shareholders, issue Shares, in addition to the then issued and
outstanding Shares and Shares held in the treasury, to such party
or parties and for such amount and type of consideration,
including cash or property, at such time or times (including,
without limitation, each business day), and on such terms as the
Trustees may deem best, and may in such manner acquire other
assets (including the acquisition of assets subject to, and in
connection with, the assumption of liabilities) and businesses.
In connection with any issuance of Shares, the Trustees may issue
fractional Shares. The Trustees may from time to time divide or
combine the Shares into a greater or lesser number without
thereby changing the proportionate beneficial interests in the
Trust. Reductions in the number of outstanding Shares may be
made pursuant to the provisions of Section 8.3. Contributions to
the Trust may be accepted for, and Shares shall be redeemed as,
whole Shares and/or fractions of a Share as described in the
Prospectus.

Section 6.5. - Register of Shares. A register shall be
kept at the principal office of the Trust or at an office of the
Transfer Agent which shall contain the names and addresses of the
Shareholders and the number of Shares held by each of them and a
record of all transfers thereof. Such register may be in written
form or any other form capable of being converted into written
form within a reasonable time for visual inspection. Such
register shall be conclusive as to who are the holders of the
Shares and who shall be entitled to receive dividends or
distributions or otherwise to exercise or enjoy the rights of
Shareholders. No Shareholder shall be entitled to receive

<PAGE>

payment of any dividend or distribution, nor to have notice given
to him as herein or in the By-Laws provided, until he has given
his address to the Transfer Agent or such other officer or agent
of the Trustees as shall keep the said register for entry
thereon. It is not contemplated that certificates will be issued
for the Shares; however, the Trustees, in their discretion, may
authorize the issuance of Share certificates and promulgate
appropriate rules and regulations as to their use.

Section 6.6. - Transfer of Shares. Shares shall be
transferable on the records of the Trust only by the record
holder thereof or by his agent thereunto duly authorized in
writing, upon delivery to the Trustees or the Transfer Agent of a
duly executed instrument of transfer, together with such evidence
of the genuineness of each such execution and authorization and
of other matters as may reasonably be required. Upon such
delivery the transfer shall be recorded on the register of the
Trust. Until such record is made, the Shareholder of record
shall be deemed to be the holder of such Shares for all purposes
hereunder and neither the Trustees nor any Transfer Agent or
registrar nor any officer, employee or agent of the Trust shall
be affected by any notice of the proposed transfer.

Any person becoming entitled to any Shares in
consequence of the death, bankruptcy or incompetence of any
Shareholder, or otherwise by operation of law, shall be recorded
on the register of Shares as the holder of such Shares upon
production of the proper evidence thereof to the Trustees or the
Transfer Agent, but until such record is made, the Shareholder of
record shall be deemed to be the holder of such Shares for all
purposes hereunder and neither the Trustees nor any Transfer
Agent or registrar nor any officer or agent of the Trust shall be
affected by any notice of such death, bankruptcy or incompetence,
or other operation of law, except as may otherwise be provided by
the laws of the Commonwealth of Massachusetts.

Section 6.7 - Notices. Any and all notices to which any
Shareholder may be entitled and any and all communications shall
be deemed duly served or given if mailed, postage prepaid,
addressed to any Shareholder of record at his last known address
as recorded on the register of the Trust.

Section 6.8. - Voting Powers. The Shareholders shall
have power to vote only (i) for the election of Trustees as
provided in Section 2.2 hereof, (ii) for the removal of Trustees
as provided in Section 2.3 hereof, (iii) with respect to any
investment advisory or management contract as provided in Section
4.1 hereof, (iv) with respect to termination of the Trust or any
series thereof as provided in Section 9.2 hereof, (v) with
respect to any amendment of the Declaration to the extent and as
provided in Section 9.3 hereof, (vi) with respect to any merger,

<PAGE>

consolidation or sale of assets as provided in Section 9.4
hereof, (vii) with respect to incorporation of the Trust to the
extent and as provided in Section 9.5 hereof, (viii) to the same
extent as the stockholders of a Massachusetts business
corporation as to whether or not a court action, proceeding or
claim should or should not be brought or maintained derivatively
or as a class action on behalf of the Trust or the Shareholders,
and (ix) with respect to such additional matters relating to the
Trust as may be required by law, the Declaration, the By-Laws or
any registration of the Trust with the Commission (or any
successor agency) or any state, or as and when the Trustees may
consider necessary or desirable. Each whole Share shall be
entitled to one vote as to any matter on which it is entitled to
vote and each fractional Share shall be entitled to a
proportionate fractional vote, except that Shares held in the
treasury of the Trust as of the record date, as determined in
accordance with the By-Laws, shall not be voted and except that
the Trustees may, in conjunction with the establishment of any
series or classes of Shares, establish conditions under which the
several series or classes shall have separate voting rights or no
voting rights. Unless otherwise required by the 1940 Act or the
Rules thereunder, any vote of Shareholders shall be taken on a
series by series basis. There shall be no cumulative voting in
the election of Trustees. Until Shares are issued, the Trustees
may exercise all rights of Shareholders and may take any action
required by law, the Declaration or the By-Laws to be taken by
Shareholders. The By-Laws may include further provisions for
Shareholders' votes and meetings and related matters.

Section 6.9. - Series or Classes of Shares. If the
Trustees shall divide the shares of the Trust into two or more
series or two or more classes of any series, as provided in
Section 6.1 hereof, the following provisions shall be applicable:

(a) All provisions herein relating to the Trust shall
apply equally to each series of the trust except as the context
otherwise requires.

(b) The number of authorized shares and the number of
shares of each series or of each class that may be issued shall
be unlimited. The Trustees may classify or reclassify any
unissued shares or any shares previously issued and reacquired of
any series or class into one or more series or one or more
classes that may be established and designated from time to time.
The Trustees may hold any treasury shares (of the same or some
other series or class), reissue for such consideration and on
such terms as they may determine, or cancel any shares of any
series or any class reacquired by the Trust at their discretion
from time to time.

<PAGE>

(c) The power of the Trustees to invest and reinvest
the Trust Property shall be governed by Section 3.2 of this
Declaration with respect to any one or more series which
represents the interest in the assets of the Trust immediately
prior to the establishment of two or more series and the power of
the Trustees to invest and reinvest assets applicable to any
other series shall be as set forth in the instrument of the
Trustees establishing such series which is hereinafter described.

(d) All consideration received by the Trust for the
issue or sale of Shares of a particular series or class together
with all assets in which such consideration is invested or
reinvested, all income, earnings, profits, and proceeds thereof,
including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived
from any reinvestment of such proceeds in whatever form the same
may be, shall irrevocably belong to that series or class for all
purposes, subject only to the rights of creditors of such series
and except as may otherwise be required by applicable tax laws,
and shall be so recorded upon the books of account of the Trust.
In the event that there are any assets, income, earnings,
profits, and proceeds thereof, funds, or payments which are not
readily identifiable as belonging to any particular series or
class, the Trustees shall allocate them among any one or more of
the series or classes established and designated from time to
time in such manner and on such basis as they, in their sole
discretion, deem fair and equitable. Each such allocation by the
Trustees shall be conclusive and binding upon the shareholders of
all series or classes for all purposes.

(e) The assets belonging to each particular series
shall be charged with the liabilities of the Trust in respect of
that series and all expenses, costs, charges and reserves
attributable to that series, and any general liabilities,
expenses, costs, charges or reserves of the Trust which are not
readily identifiable as belonging to any particular series shall
be allocated and charged by the Trustees to and among any one or
more of the series established and designated from time to time
in such manner and on such basis as the Trustees in their sole
discretion deem fair and equitable. Each allocation of
liabilities, expenses, costs, charges and reserves by the
Trustees shall be conclusive and binding upon the holders of
Shares of all series for all purposes. The Trustees shall have
full discretion, to the extent not inconsistent with the 1940
Act, to determine which items shall be treated as income and
which items as capital; and each such determination and
allocation shall be conclusive and binding upon the Shareholders.
The assets of a particular series of the Trust shall, under no
circumstances, be charged with liabilities attributable to any
other series of the Trust. All persons extending credit to, or
contracting with or having any claim against a particular series

<PAGE>

of the Trust shall look only to the assets of that particular
series for payment of such credit, contract or claim.

(f) The power of the Trustees to pay dividends and make
distributions shall be governed by Section 8.2 of this
Declaration with respect to any one or more series or classes
which represents the interests in the assets of the Trust
immediately prior to the establishment of two or more series or
classes. With respect to any other series or class, dividends
and distributions on Shares of a particular series or class may
be paid with such frequency as the Trustees may determine, which
may be daily or otherwise, pursuant to a standing resolution or
resolutions adopted only once or with such frequency as the
Trustees may determine, to the holders of Shares of that series
or class, from such of the income and capital gains, accrued or
realized, from the assets belonging to that series or class, as
the Trustees may determine, after providing for actual and
accrued liabilities belonging to that series or class. All
dividends and distributions on Shares of a particular series or
class shall be distributed pro-rata to the Shareholders of that
series or class in proportion to the number of Shares of that
series or class held by such Shareholders at the date and time of
record established for the payment of such dividends or
distribution.

(g) Each Share of a series of the Trust shall represent
a beneficial interest in the net assets of such series. Each
holder of Shares of a series shall be entitled to receive his
pro-rata share of distributions of income and capital gains made
with respect to such series. Upon redemption of his Shares or
indemnification for liabilities incurred by reason of his being
or having been a Shareholder of a series, such Shareholder shall
be paid solely out of the funds and property of such series of
the Trust. Upon liquidation or termination of a series of the
Trust, Shareholders of such series shall be entitled to receive a
pro-rata share of the net assets of such series. A Shareholder
of a particular series of the Trust shall not be entitled to
participate in a derivative or class action on behalf of any
other series or the Shareholders of any other series of the
Trust.

(h) Notwithstanding any other provision hereof, on any
matter submitted to a vote of Shareholders of the Trust, all
Shares then entitled to vote shall be voted by individual series,
except that (1) when required by the 1940 Act, Shares shall be
voted in the aggregate and not by individual series, and (2) when
the Trustees have determined that the matter affects only the
interests of Shareholders of a limited number of series, then
only the Shareholders of such series shall be entitled to vote
thereon. Except as otherwise provided in this Article VI, the
Trustees shall have the power to determine the designations,

<PAGE>

preferences, privileges, limitations and rights, including voting
and dividend rights, of each class and series of Shares.

(i) The establishment and designation of any series or
class of Shares shall be effective upon the execution by a
majority of the then Trustees of an instrument setting forth such
establishment and designation and the relative rights and
preferences of such series or class, or as otherwise provided in
such instrument. At any time that there are no Shares
outstanding of any particular series or class previously
established and designated, the Trustees may by an instrument
executed by a majority of their number abolish that series or
class and the establishment and designation thereof. Each
instrument referred to in this paragraph shall have the status of
an amendment to this Declaration.

ARTICLE VII

REDEMPTIONS

Section 7.1. - Redemptions. All outstanding Shares may
be redeemed at the option of the holders thereof, upon and
subject to the terms and conditions provided in this Article VII.
The Trust shall, upon application of any Shareholder or pursuant
to authorization from any Shareholder, redeem or repurchase from
such Shareholder outstanding Shares for an amount per share
determined by the Trustees in accordance with any applicable laws
and regulations; provided that (a) such amount per share shall
not exceed the cash equivalent of the proportionate interest of
each share or of any class or series of shares in the assets of
the Trust at the time of the redemption or repurchase and (b) if
so authorized by the Trustees, the Trust may, at any time and
from time to time, charge fees for effecting such redemption or
repurchase, at such rates as the Trustees may establish, as and
to the extent permitted under the 1940 Act, and may, at any time
and from time to time, pursuant to such Act, suspend such right
of redemption. The procedures for effecting and suspending
redemption shall be as set forth in the Prospectus from time to
time. Payment will be made in such manner as described in the
Prospectus.

Section 7.2. - Redemption of Shares; Disclosure of
Holding. If the Trustees shall, at any time and in good faith,
be of the opinion that direct or indirect ownership of Shares or
other Securities of the Trust or any series thereof has or may
become concentrated in any Person to an extent which would
disqualify the Trust or any series thereof as a regulated
investment company under the Internal Revenue Code, then the
Trustees shall have the power by lot or other means deemed
equitable by them (i) to call for redemption by any such Person a
number, or principal amount, of Shares or other securities of the

<PAGE>

Trust or the appropriate series thereof sufficient, in the
opinion of the Trustees, to maintain or bring the direct or
indirect ownership of Shares or other securities of the Trust or
series thereof into conformity with the requirements for such
qualification and (ii) to refuse to transfer or issue Shares or
other securities of the Trust or any series thereof to any Person
whose acquisition of the Shares or other securities of the Trust
in question would in the opinion of the Trustees result in such
disqualification. The redemption shall be effected at a
redemption price determined in accordance with Section 7.1
hereof.

The holders of Shares or other securities of the Trust
shall upon demand disclose to the Trustees in writing such
information with respect to direct and indirect ownership of
Shares or other securities of the Trust or any series thereof as
the Trustees deem necessary to comply with the provisions of the
Internal Revenue Code, or to comply with the requirements of any
other authority.

Section 7.3. - Redemptions of Accounts of Less than
$500. The Trustees shall have the power at any time to redeem
Shares of any Shareholder at a redemption price determined in
accordance with Section 7.1 if at such time the aggregate net
asset value of the Shares in such Shareholder's account is less
than $500. A Shareholder will be notified that the value of his
account is less than $500 and allowed at least sixty (60) days to
make an additional investment before redemption is processed.

Section 7 4. - Other Redemptions. The Trust may also
reduce the number of outstanding Shares pursuant to the
provisions of Section 8.3 hereof.

ARTICLE VIII

DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS

Section 8.1. - Net Asset Value. The net asset value of
each outstanding Share of the Trust or series thereof shall be
determined on such days and at such time or times as the Trustees
may determine. The method of determination of net asset value
shall be determined by the Trustees and shall be as set forth in
the Prospectus. The power and duty to make the daily
calculations may be delegated by the Trustees to the Investment
Adviser, the Custodian, the Transfer Agent or such other person
as the Trustees by resolution may determine. The Trustees may
suspend the daily determination of net asset value to the extent
permitted by the 1940 Act.

<PAGE>

Section 8.2. - Distributions to Shareholders. The
Trustees shall from time to time distribute ratably among the
Shareholders of a series such proportion of the net profits,
surplus (including paid-in surplus), capital or assets of such
series held by the Trustees as they may deem proper. Such
distribution may be made in cash or property (including without
limitation any type of obligations of such series or any assets
thereof), and the Trustees may distribute ratably among the
Shareholders additional Shares of such series issuable hereunder
in such manner, at such times and on such terms as the Trustees
may deem proper. Such distributions may be among the
Shareholders of record at the time of declaring a distribution or
among the Shareholders of record at such later date as the
Trustees shall determine. The Trustees may always retain from
the net profits such amount as they may deem necessary to pay the
debts or expenses of the series or to meet obligations of the
series, or as they may deem desirable to use in the conduct of
its affairs or to retain for future requirements or extensions of
the business. The Trustees may adopt and offer to Shareholders
such dividend reinvestment plans, cash dividend payout plans or
related plans as the Trustees shall deem appropriate.

Inasmuch as the computation of net income and gains for
Federal income tax purposes may vary from the computation thereof
on the books, the above provisions shall be interpreted to give
the Trustees the power in their discretion to distribute for any
fiscal year as ordinary dividends and as capital gains
distributions, respectively, additional amounts sufficient to
enable the Trust or the series to avoid or reduce liability for
taxes.

Section 8.3. - Determination of Net Income. The
Trustees shall have the power to determine the net income of each
series of the Trust one or more times on each business day and at
each such determination declare such net income as dividends in
additional Shares of such series. The determination of net
income and the resultant declaration of dividends shall be as set
forth in the Prospectus. It is expected that each such series
will have a positive net income at the time of each
determination. If for any reason the net income of a series is a
negative amount, the Trustees shall have authority to reduce the
number of outstanding Shares of such series. Such reduction will
be effected by having each Shareholder of such series
proportionately contribute to the capital of such series the
necessary Shares of such series that represent the amount of the
excess upon such determination. Each Shareholder will be deemed
to have agreed to such contribution in these circumstances by his
investment in such series of the Trust. The Trustees shall have
full discretion to determine whether any cash or property
received shall be treated as income or as principal and whether
any item of expenses shall be charged to the income or the

<PAGE>

principal account, and their determination made in good faith
shall be conclusive upon the Shareholders. In the case of stock
dividends received, the Trustees shall have full discretion to
determine, in the light of the particular circumstances, how
much, if any, of the value thereof shall be treated as income,
with the balance, if any, to be treated as principal.

Section 8.4. - Power to Modify Foregoing Procedures.
Notwithstanding any of the foregoing provisions of this Article
VIII, the Trustees may prescribe, in their absolute discretion,
such other bases and times for determining the per Share net
asset value of the Shares or net income, or the declaration and
payment of dividends and distributions, as they may deem
necessary or desirable to enable each series to comply with any
provision of the 1940 Act, or any rule or regulation thereunder,
including any rule or regulation adopted pursuant to Section 22
of the 1940 Act by the Commission or any securities association
registered under the Securities Exchange Act of 1934, or any
order of exemption issued by said Commission, all as in effect
now or hereafter amended or modified. Without limiting the
generality of the foregoing, the Trustees may establish classes
or series of Shares in accordance with Section 6.9 hereof.

ARTICLE IX

DURATION; TERMINATION OF
TRUST; AMENDMENT; MERGERS, ETC.

Section 9.1. - Duration. The Trust and each series of
the Trust shall continue without limitation of time but subject
to the provisions of this Article IX.

Section 9.2. - Termination of Trust.

(a) The Trust or any series of the Trust may be
terminated (i) by the affirmative vote of the holders of not less
than two-thirds of the Shares of the Trust or such series
outstanding and entitled to vote at any meeting of Shareholders,
or (ii) by an instrument in writing, without a meeting, signed by
a majority of the Trustees and consented to by the holders of not
less than two-thirds of such Shares, or by such other vote as may
be established by the Trustees with respect to any class or
series of Shares, or (iii) by the Trustees by written notice to
the Shareholders. Upon the termination of the Trust or any
series of the Trust:

(i) The Trust or series shall carry on no business
except for the purpose of winding up its affairs.

(ii) The Trustees shall proceed to wind up the affairs
of the Trust or series and all of the powers of the Trustees

<PAGE>

under this Declaration shall continue until the affairs of the
Trust or series shall have been wound up, including the power to
fulfill or discharge the contracts of the Trust or series,
collect its assets, sell, convey, assign, exchange, transfer or
otherwise dispose of all or any part of the remaining Trust
Property or property of such series to one or more persons at
public or private sale for consideration which may consist in
whole or in part of cash, securities or other property of any
kind, discharge or pay its liabilities, and to do all other acts
appropriate to liquidate its business; provided that any sale,
conveyance, assignment, exchange, transfer or other disposition
of all or substantially all the Trust Property or property of
such series shall require Shareholder approval in accordance with
Section 9.4 hereof.

(iii) After paying or adequately providing for the
payment of all liabilities, and upon receipt of such releases,
indemnities and refunding agreements as they deem necessary for
their protection, the Trustees may distribute the remaining Trust
Property or property of such series, in cash or in kind or partly
each, among the Shareholders of the Trust or such series
according to their respective rights.

(b) After termination of the Trust or any series and
distribution to the Shareholders of the Trust or such series as
herein provided, a majority of the Trustees shall execute and
lodge among the records of the Trust an instrument in writing
setting forth the fact of such termination, and the Trustees
shall thereupon be discharged from all further liabilities and
duties hereunder with respect to the Trust or such series, and
the rights and interests of all Shareholders of the Trust or such
series shall thereupon cease.

Section 9.3. - Amendment Procedure.

(a) This Declaration may be amended by a Majority
Shareholder Vote, at a meeting of Shareholders, or by written
consent without a meeting. The Trustees may also amend this
Declaration without the vote or consent of Shareholders to change
the name of the Trust, to supply any omission, to cure, correct
or supplement any ambiguous, defective or inconsistent provision
hereof, or if they deem it necessary to conform this Declaration
to the requirements of applicable federal laws or regulations or
the requirements of the regulated investment company provisions
of the Internal Revenue Code, but the Trustees shall not be
liable for failing so to do.

(b) No amendment may be made under this Section 9.3
which would change any rights with respect to any Shares of the
Trust by reducing the amount payable thereon upon liquidation of
the Trust or by diminishing or eliminating any voting rights

<PAGE>

pertaining thereto, except with the vote or consent of the
holders of two-thirds of the Shares outstanding and entitled to
vote, or by such other vote as may be established by the Trustees
with respect to any series or class of Shares. Nothing contained
in this Declaration shall permit the amendment of this
Declaration to impair the exemption from personal liability of
the Shareholders, Trustees, officers, employees and agents of the
Trust or to permit assessments upon Shareholders.

(c) A certificate signed by a majority of the Trustees
or by the Secretary or any Assistant Secretary of the Trust,
setting forth an amendment and reciting that it was duly adopted
by the Shareholders or by the Trustees as aforesaid or a copy of
the Declaration, as amended, and executed by a majority of the
Trustees or certified by the Secretary or any Assistant Secretary
of the Trust, shall be conclusive evidence of such amendment when
lodged among the records of the Trust.

Notwithstanding any other provision hereof, until such
time as the Trust succeeds to the Registration Statement of
Alliance Government Reserves, Inc. under the 1940 Act and the
Securities Act of 1933, as amended, this Declaration may be
terminated or amended in any respect by the affirmative vote of a
majority of the Trustees or by an instrument signed by a majority
of the Trustees.

Section 9.4. - Merger, Consolidation and Sale of Assets.
The Trust may merge or consolidate with any other corporation,
association, trust or other organization or may sell, lease or
exchange all or substantially all of the Trust Property or the
property of any series thereof, including its good will, upon
such terms and conditions and for such consideration when and as
authorized, at any meeting of Shareholders called for the
purpose, by the affirmative vote of the holders of not less than
two-thirds of such Shares, or by such other vote as may be
established by the Trustees with respect to any series or class
of Shares; provided, however, that, if such merger,
consolidation, sale, lease or exchange is recommended by the
Trustees, a Majority Shareholder Vote shall be sufficient
authorization; and any such merger, consolidation, sale, lease or
exchange shall be deemed for all purposes to have been
accomplished under and pursuant to the statutes of the
Commonwealth of Massachusetts. In respect of any such merger,
consolidation, sale or exchange of assets, any Shareholder shall
be entitled to rights of appraisal of his Shares to the same
extent as a shareholder of a Massachusetts business corporation
in respect of a merger, consolidation, sale or exchange of assets
of a Massachusetts business corporation, and such rights shall be
his exclusive remedy in respect of his dissent from any such
action.

<PAGE>

Section 9.5. - Incorporation. With approval of a
Majority Shareholder Vote, or by such other vote as may be
established by the Trustees with respect to any series or class
of Shares, the Trustees may cause to be organized or assist in
organizing a corporation or corporations under the laws of any
jurisdiction or any other trust, partnership, association or
other organization to take over all of the Trust Property or the
property of any series thereof or to carry on any business in
which the Trust shall directly or indirectly have any interest,
and to sell, convey and transfer the Trust Property or the
property of such series to any such corporation, trust,
association or organization in exchange for the shares or
securities thereof or otherwise, and to lend money to, subscribe
for the Shares or securities of, and enter into any contracts
with any such corporation, trust, partnership, association or
organization in which the Trust holds or is about to acquire
shares or any other interest. The Trustees may also cause a
merger or consolidation between the Trust (or any series thereof)
or any successor thereto and any such corporation, trust,
partnership, permitted by law, as provided under the law then in
effect. Nothing contained herein shall be construed as requiring
approval of Shareholders for the Trustees to organize or assist
in organizing one or more corporations, trusts, partnerships,
associations or other organizations and selling, conveying or
transferring a portion of the Trust Property to such organization
and entities.

ARTICLE X

REPORTS TO SHAREHOLDERS

The Trustees shall at least semi-annually submit to the
Shareholders a written financial report of the transactions of
the Trust, including financial statements which shall at least
annually be certified by independent public accountants.

ARTICLE XI

MISCELLANEOUS

Section 11.1. - Filing. This Declaration and any
amendment hereto shall be filed in the office of the Secretary of
the Commonwealth of Massachusetts and in such other places as may
be required under the laws of Massachusetts and may also be filed
or recorded in such other places as the Trustees deem
appropriate. Each amendment so filed shall be accompanied by a
certificate signed and acknowledged by a Trustee or by the
Secretary or any Assistant Secretary of the Trust stating that
such action was duly taken in a manner provided herein, and
unless such amendment or such certificate sets forth some later
time for the effectiveness of such amendment, such amendment

<PAGE>

shall be effective upon its filing. A restated Declaration,
integrating into a single instrument all of the provisions of the
Declaration which are then in effect and operative, may be
executed from time to time by a majority of the Trustees and
shall, upon filing with the Secretary of the Commonwealth of
Massachusetts, be conclusive evidence of all amendments contained
therein and may thereafter be referred to in lieu of the original
Declaration and the various amendments thereto.

Section 11.2. - Resident Agent. The Trust may appoint
and maintain a resident agent in the Commonwealth of
Massachusetts.

Section 11.3. - Governing Law. This Declaration is
executed by the Trustees with reference to the laws of the
Commonwealth of Massachusetts, and the rights of all parties and
the validity and construction of every provision hereof shall be
subject to and construed according to the laws of said
Commonwealth, notwithstanding any Massachusetts law governing
choice of law which may require the construction of this
Declaration in accordance with the laws of another state or
jurisdiction.

Section 11.4. - Counterparts. The Declaration may be
simultaneously executed in several counterparts, each of which
shall be deemed to be an original, and such counterparts,
together, shall constitute one and the same instrument, which
shall be sufficiently evidenced by any such original counterpart.

Section 11.5. - Reliance by Third Parties. Any
certificate executed by an individual who, according to the
records of the Trust, appears to be a Trustee hereunder, or
Secretary or Assistant Secretary of the Trust, certifying to:
(a) the number or identity of Trustees or Shareholders, (b) the
due authorization of the execution of any instrument or writing,
(c) the form of any vote passed at a meeting of Trustees or
Shareholders, (d) the fact that the number of Trustees or
shareholders present at any meeting or executing any written
instrument satisfies the requirements of this Declaration,
(e) the form of any By-Laws adopted by or the identity of any
officers elected by the Trustees, or (f) the existence of any
fact or facts which in any manner relate to the affairs of the
Trust, shall be conclusive evidence as to the matters so
certified in favor of any Person dealing with the trustees and
their successors.

<PAGE>

Section 11.6. - Provisions in Conflict with Law or
Regulations.

(a) The provisions of the Declaration are severable,
and if the Trustees shall determine, with the advice of counsel,
that any of such provisions is in conflict with the 1940 Act, the
regulated investment company provisions of the Internal Revenue
Code or with other applicable laws and regulations, the
conflicting provisions shall be deemed never to have constituted
a part of the Declaration; provided, however, that such
determination shall not affect any of the remaining provisions of
the Declaration or render invalid or improper any action taken or
omitted prior to such determination.

(b) If any provision of the Declaration shall be held
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall affect only such provision in such
jurisdiction and shall not in any manner affect such provision in
any other jurisdiction or any other provision of the Declaration
in any jurisdiction.

IN WITNESS WHEREOF, the undersigned have executed this
instrument as of the 15th day of October, 1984.

/s/ Philip H. Didriksen, Jr.
_______________________________
Philip H. Didriksen, Jr.

/s/ Sheldon A. Jones
_______________________________
Sheldon A. Jones

<PAGE>

STATE OF NEW YORK )
ss: October 15, 1984
COUNTY OF NEW YORK)

Then personally appeared the above-named Philip H.
Didriksen, Jr., who acknowledged the foregoing instrument to be
his free act and deeds.

Before me.

/s/ James Peter Wallin
________________________________
Notary Public

My Commission expires:
March 30, 1985

<PAGE>

COMMONWEALTH OF MASSACHUSETTS

COMMONWEALTH OF MASSACHUSETTS)
ss: October 16, 1984
COUNTY OF SUFFOLK )

Then personally appeared the above-named Sheldon A.
Jones, who acknowledged the foregoing instrument to be his free
act and deed.

Before me.

/s/ Judith B. Bonaffini
______________________________
Notary Public

My Commission expires:
October 1, 1987

29
00250083.AD7

<PAGE>

BY-LAWS

ALLIANCE GOVERNMENT RESERVES

ARTICLE I

DEFINITIONS

The terms "Commission", "Custodian", "Declaration",

"Distributor", "Investment Adviser", "1940 Act", "Shareholder",

"Shares", "Transfer Agent", "Trust", "Trust Property",

"Trustees", and "Majority Shareholder Vote", have the respective

meanings given them in the Declaration of Trust of Alliance

Government Reserves dated October 16, 1984, as amended from time

to time.

ARTICLE II

OFFICES

Section 1, Principal Office. Until changed by the

Trustees, the principal office of the Trust in the Commonwealth

of Massachusetts shall be in the City of Boston, County of

Suffolk.

Section 2, Other Offices. The Trust may have offices in

such other places without as well as within the Commonwealth as

the Trustees may from time to time determine.

<PAGE>

ARTICLE III

SHAREHOLDERS

Section 2, Meetings. Meetings of the Shareholders shall

be held to the extent provided in the Declaration at such place

within or without the Commonwealth of Massachusetts as the

Trustees shall designate. The holders of one-fourth of the total

number of outstanding Shares of the Trust or series of the Trust

present in person or by proxy and entitled to vote shall

constitute a quorum with respect to Shares of the Trust or such

series at any meeting of the Shareholders.

Section 2, Notice of Meetings. Notice of all meetings

of the Shareholders, stating the time, place and purposes of the

meeting, shall be given by the Trustees by mail to each

Shareholder at his address as recorded on the register of the

Trust mailed at least ten (10) days and not more than ninety (90)

days before the meeting. Only the business stated in the notice

of the meeting shall be considered at such meeting. Any

adjourned meeting may be held as adjourned without further

notice. No notice need be given to any Shareholder who shall

have failed to inform the Trust of his current address or if a

written waiver of notice, executed before or after the meeting by

the Shareholder or his attorney thereunto authorized, is filed

with the records of the meeting.

Section 3, Record Date for Meetings and Other Purposes.

For the purpose of determining the Shareholders who are entitled

<PAGE>

to notice of and to vote at any meeting, or to participate in any

distribution, or for the purpose of any action, the Trustees may

from time to time close the transfer books for such periods, not

exceeding thirty (30) days, as the trustees may determine; or

without closing the transfer books the trustees may fix a date

not more than ninety (90) days prior to the date of any meeting

of shareholders or distribution or other action as a record date

for the determination of the persons to be treated as

Shareholders of record for such purposes, except for dividend

payments which shall be governed by the Declaration.

Section 4, Proxies. At any meeting of Shareholders, any

holder of Shares entitled to vote thereat may vote by proxy,

provided that no proxy shall be voted at any meeting unless it

shall have been placed on file with the Secretary, or with such

other officer or agent of the Trust as the Secretary may direct,

for verification prior to the time at which such vote shall be

taken. Proxies may be solicited in the name of one or more

Trustees or one or more of the officers of the Trust. Only

Shareholders of record shall be entitled to vote. Each whole

share shall be entitled to one vote as to any matter on which it

is entitled by the Declaration to vote, and each fractional Share

shall be entitled to a proportionate fractional vote. Then any

Share is held jointly by several persons, any one of them may

vote at any meeting in person or by proxy in respect of such

Share, but if more than one of them shall be present at such

<PAGE>

meeting in person or by proxy, and such joint owners or their

proxies so present disagree as to any vote to be cast, such vote

shall not be received in respect of such Share. A proxy

purporting to be executed by or on behalf of a Shareholder shall

be deemed valid unless challenged at or prior to its exercise,

and the burden of proving invalidity shall rest on the

challenger. If the holder of any such Share is a miner or a

person of unsound mind, and subject to guardianship or the

legal control of any other person as regards the charge or

management of such Share, he may vote by his guardian or such

other person appointed or having such control, and such vote may

be given in person or by proxy.

Section 5, Inspection of Records. The records of the

Trust shall be open to inspection by Shareholders to the same

extent as is permitted shareholders of a Massachusetts business

corporation.

Section 6, Action without Meeting. Any action which may

be taken by Shareholders may be taken without a meeting if a

majority of Shareholders of the Trust or the applicable series of

the Trust entitled to vote on the matter (or such larger

proportion thereof as shall be required by law, the Declaration

or these By-Laws for approval of such matter) consent to the

action in writing and the written consents are filed with the

records of the meetings of Shareholders. Such consents shall be

<PAGE>

treated for all purposes as a vote taken at a meeting of

Shareholders.

ARTICLE IV

TRUSTEES

Section 1, Meetings of the Trustees. The Trustees may

in their discretion provide for regular or stated meetings of the

Trustees. Notice of regular or stated meetings need not be

given. Meetings of the Trustees other than regular or stated

meetings shall be held whenever called by the President, or by

any one of the Trustees, at the time being in office. Notice of

the time and place of each meeting other than regular or

stated meetings shall be given by the Secretary or an Assistant

Secretary or by the officer or Trustee calling the meeting and

shall be mailed to each Trustee at least two days before the

meeting, or shall be telegraphed, cabled, or wirelessed to each

Trustee at his business address, or personally delivered to him

at least one day before the meeting. Such notice may,

however be waived by any Trustee. Notice of a meeting need not

be given to any Trustee if a written waiver of notice, executed

by him before or after the meeting, is filed with the records of

the meeting, or to any Trustee who attends the meeting without

protesting prior thereto or at its commencement the lack of

notice to him. A notice or waiver of notice need not specify the

purpose of any meeting. The Trustees may meet by means of a

telephone conference circuit or similar communications

<PAGE>

equipment by means of which all persons participating in the

meeting are connected, which meeting shall be deemed to have been

held at a place designated by the Trustees at the meeting.

Participation in a telephone conference meeting shall constitute

presence in person at such meeting. Any action required or

permitted to be taken at any meeting of the Trustees may be taken

by the Trustees without a meeting if all the trustees consent to

the action in writing and the written consents are filed with

the records of the Trustees' meetings. Such consents shall

be treated for all purposes as a vote taken at a meeting of the

Trustees.

Section 2, Quorum and Manner of Acting. A majority of

the Trustees shall be present in person at any regular or special

meeting of the Trustees in order to constitute a quorum for the

transaction of business at such meeting and (except as otherwise

required by law, the Declaration or these By-Laws) the act of a

majority of the Trustees present at any such meeting, at which a

quorum is present, shall be the act of the Trustees. In the

absence of the quorum, a majority of the Trustees present may

adjourn the meeting from time to time until a quorum shall be

present. Notice of an adjourned meeting need not be given.

<PAGE>

ARTICLE V

COMMITTEES

Section 1, Executive and Other Committees. The Trustees

by vote of a majority of all the Trustees may elect from their

own number an Executive Committee to consist of not less than

three (3) Trustees to hold office at the pleasure of the

Trustees, which shall have the power to conduct the current and

ordinary business of the Trust while the Trustees are not in

session, including the purchase and sale of securities and

the designation of securities to be delivered upon redemption of

Shares of the Trust, and such other powers of the Trustees as the

trustees may, from time to time, delegate to them except those

powers which by law, the Declaration or these By-Laws they are

prohibited from delegating. The Trustees may also elect from

their own number or otherwise other Committees from time to time,

the number composing such Committees, the powers conferred upon

the same (subject to the same limitations as with respect to

the Executive Committee) and the term of membership on such

Committees to be determined by the Trustees. The Trustees may

designate a chairman of any such Committee. In the absence of

such designation the Committee may elect its own Chairman.

Section 2, Meetings, Quorum and Manner of Acting. The

Trustees may (1) provide for stated meetings of any Committee

(2) specify the manner of calling and notice required for special

meetings of any Committee, (3) specify the number of members of a

<PAGE>

Committee required to constitute a quorum and the number of

members of a Committee required to exercise specified powers

delegated to such Committee, (4) authorize the making of

decisions to exercise specified powers by written assent of

the requisite number of members of a Committee without a meeting,

and (5) authorize the members of a Committee to meet by means of

a telephone conference circuit.

The Executive Committee shall keep regular minutes of

its meetings and records of decisions taken without a meeting and

cause them to be recorded in a book designated for that purpose

and kept in the office of the Trust.

ARTICLE VI

OFFICERS

Section 1, General Provisions. The officers of the must

shall be a Chairman of the Board of Trustees, a President, a

Treasurer and a Secretary, who shall be elected by the trustees.

The Trustees may elect or appoint such other officers or agents

as the business of the Trust may require, including one or more

Vice Presidents, one or more Assistant Vice Presidents, one or

more Assistant Secretaries, and one or more Assistant Treasurers.

The Trustees may delegate to any officer or committee the power

to appoint any subordinate officers or agents.

Section 2, Term of Office and Qualifications. Except as

otherwise provided by law, the Declaration or these By-Laws, the

President, the Treasurer and the Secretary shall each hold office

<PAGE>

until his successor shall have been duly elected and qualified,

and all other officers shall hold office at the pleasure of the

Trustees. Any number of offices may be held by the same person.

Any officer may be but none need be a Trustee or Shareholder.

Section 3, Removal. The Trustees at any regular or

special meeting of the Trustees may remove any officer without

cause by a vote of a majority of the Trustees then in office.

Any officer or agent appointed by an officer or committee may be

removed with or without cause by such appointing officer or

committee.

Section 4, Powers and Duties of the Chairman of the

Board of Trustees. The Chairman of the Board of Trustees shall

preside at all meetings of the shareholders and of the Board of

Trustees. He shall execute on behalf of the Trust, and may affix

the seal or cause the seal to be affixed to, all instruments

requiring such execution except to the extent that signing and

execution thereof shall be expressly delegated by the Board of

Trustees to some other officer or agent of the Trust.

Section 5, Powers and Duties of the President. The

President shall be the principal executive officer of the Trust.

He may call meetings of the Trustees and of any Committee thereof

when he deems it necessary and shall, in the absence of the

Chairman of the Board of Trustees, preside at all meetings of the

Shareholders. Subject to the control of the Trustees and to the

control of any Committees of the Trustees, within their

<PAGE>

respective spheres, as provided by the Trustees, he shall at all

times exercise a general supervision and direction over the

affairs of the Trust. He shall have the power to employ

attorneys and counsel for the Trust and to employ such

subordinate officers, agents, clerks and employees as he may find

necessary to transact the business of the Trust. He shall also

have the power to grant, issue, execute or sign such powers of

attorney, proxies or other documents as may be deemed advisable

or necessary in furtherance of the interests of the Trust. The

President shall have such other powers and duties as from time to

time may he conferred upon or assigned to him by the trustees.

Section 6, Powers and Duties of Vice President. In the

absence or disability of the President, the Vice President or, if

there be more than one Vice President, any Vice President

designated by the Trustees shall perform all the duties and may

exercise any of the powers of the President, subject to the

control of the Trustees. Each Vice President shall perform such

other duties as may be assigned to him from time to time by the

Trustees and the President.

Section 7, Powers and Duties of the Treasurer. The

Treasurer shall be the principal financial and accounting officer

of the Trust. He shall deliver all funds of the Trust which may

come into his hands to such Custodian as the Trustees may employ

pursuant to Article X of these By-Laws. He shall render a

statement of condition of the finances of the Trust to the

<PAGE>

Trustees as often as they shall require the same and he shall in

general perform all the duties incident to the office of

Treasurer and such other duties as from time to time may be

assigned to him by the Trustees. The Treasurer shall give a bond

for the faithful discharge of his duties, if required so to do by

the Trustees, in such sum and with such surety or sureties as the

Trustees shall require.

Section 8, Powers and Duties of the Secretary. The

Secretary shall keep the minutes of all meetings of the Trustees

and of the Shareholders in proper books provided for that

purpose, he shall have custody of the seal of the Trust; he shall

have charge of the Share transfer books, lists and records unless

the same are in the charge of the Transfer Agent. He shall

attend to the giving and serving of all notices by the Trust in

accordance with the provisions of these By-Laws and as required

by law, and subject to these By-Laws, he shall in general perform

all duties incident to the office of Secretary and such other

duties as from time to time may be assigned to him by the

Trustees.

Section 9, Powers and Duties of Assistant Treasurers.

In the absence or disability of the Treasurer, any Assistant

Treasurer designated by the Trustees shall perform all the

duties, and may exercise any of the powers, of the Treasurer.

Each Assistant Treasurer shall perform such other duties as from

time to time may be assigned to him by the Trustees. Each

<PAGE>

Assistant Treasurer shall give a bond for the faithful discharge

of his duties, if required so to do by the Trustees, in such sum

and with such surety or sureties as the Trustees shall require.

Section 10, Powers and Duties of Assistant Secretaries.

In the absence or disability of the Secretary, any Assistant

Secretary designated by the Trustees shall perform all the

duties, and may exercise any of the powers, of the Secretary.

Each Assistant Secretary shall perform such other duties as from

time to time may be assigned to him by the Trustees.

Section 11, Compensation of Officers and Trustees and

Members of the Advisory Board. Subject to any applicable

provisions of the Declaration, the compensation of the officers

and Trustees any members of the Advisory Board shall be fixed

from time to time by the Trustees or, in the case of officers, by

any Committee or officer upon whom such power may be conferred by

the Trustees. No officer shall be prevented from receiving such

compensation as such officers by reason of the fact that he is

also a Trustee.

ARTICLE VII

FISCAL YEAR

The fiscal year of the Trust shall begin on the first

day of July in each year and shall end on the thirtieth day of

June in each year, provided, however, that the trustees may from

time to time change the fiscal year.

<PAGE>

ARTICLE VIII

SEAL

The Trustees may adopt a seal which shall be in such

form and shall have such inscription thereon as the Trustees may

from time to time prescribe.

ARTICLE IX

WAIVERS OF NOTICE

Whenever any notice whatever is required to be given by

law, the Declaration or these By-Laws, a waiver thereof in

writing, signed by the person or persons entitled to said notice,

whether before or after the time stated therein, shall be deemed

equivalent thereto. A notice shall be deemed to have been

telegraphed, cabled or wirelessed for the purposes of these

By-Laws when it has been delivered to a representative of any

telegraph, cable or wireless company with instructions that it be

telegraphed, cabled, or wirelessed.

ARTICLE X

CUSTODY OF SECURITIES

Section 1, Employment of a Custodian. The Trust shall

place and at all times maintain in the custody of a Custodian

(including any sub-custodian for the Custodian) all funds,

securities and similar investments included in the Trust

Property. The Custodian (and any sub-custodian) shall be a bank

having not less than $2,000,000 aggregate capital, surplus and

<PAGE>

undivided profits and shall be appointed from time to time by the

Trustees, who shall fix its remuneration.

Section 2, Central Certificate System. Subject to

applicable rules, regulations and orders adopted by the

Commission, the Trustees may direct the Custodian to deposit all

or any part of the securities owned by the Trust in a system for

the central handling of securities established by a national

securities exchange or a national securities association

registered with the Commission under the Securities Exchange Act

of 1934, or such other person as may be permitted by the

Commission, or otherwise in accordance with the 1940 Act,

pursuant to which system all securities of any particular class

or series of any issuer deposited within the system are treated

as fungible and may be transferred or pledged by bookkeeping

entry without physical delivery of such securities, provided that

all such deposits shall be subject to withdrawal only upon the

order of the Trust.

ARTICLE XI

INDEMNIFICATION

A representative of the Trust shall be indemnified by

the Trust with respect to each proceeding against such

representative, except a proceeding brought by or on behalf of

the Trust, against expenses (including attorneys' fees),

judgments, fines and amounts paid in settlement actually and

reasonably incurred by such representative in connection with

<PAGE>

such proceeding, provided that such representative acted in good

faith and in a manner he reasonably believed to be in or not

opposed to the best interests of the Trust and, with respect to

any criminal proceeding, had no reasonable cause to believe his

conduct was unlawful. The termination of any proceeding by

judgment, order, settlement, conviction or upon a plea of nolo

contendere or its equivalent, shall not, or itself, create a

presumption that the person did not act in good faith and in a

manner which he reasonably believed to be in or not opposed to

the best interest of the Trust and, with respect to any criminal

proceeding, had reasonable cause to believe that his conduct was

unlawful.

A representative of the Trust shall be indemnified by

the Trust, with respect to each proceeding brought by or on

behalf of the Trust to obtain judgment or decree in its favor,

against expenses (including attorneys' fees) actually and

reasonably incurred by him in connection with the defense or

settlement of such proceeding, if he acted in good faith and in a

manner he reasonably believed to be in or not opposed to the best

interests of the Trust; except that no indemnification shall be

made in respect of any claim, issue, or matter as to which such

representative has been adjudged to be liable for negligence or

misconduct in the performance of his duty to the Trust, unless

and only to the extent that the court in which the proceeding was

brought, or a court of equity in the county in which the Trust

<PAGE>

has its principal office, determines upon application that,

despite adjudication of liability but in view of all

circumstances of the case, such representative is fairly and

reasonably entitled to indemnity for the expenses which the court

considers proper.

To the extent that the representative of the Trust has

been successful on the merits or otherwise in defense of any

proceeding referred to in the preceding two paragraphs, or in

defense of any claim, issue or matter therein, the Trust shall

indemnify him against all expenses (including attorneys' fees)

actually and reasonably incurred by him in connection therewith.

Except as provided in the following paragraph any

indemnification under the first two paragraphs of this Article XI

(unless ordered by the court) shall be made by the Trust only as

authorized in the specific case upon a determination that

indemnification of the representative of the Trust is proper in

the circumstances because he has met the applicable standard of

conduct set forth in this Article XI. The determination shall be

made (1) by the Trustees by a majority vote of a quorum

consisting of disinterested Trustees who were not parties to the

proceeding, or (2) if a quorum is not obtainable or if a quorum

of disinterested Trustees so directs, by independent legal

counsel in a written opinion, or (3) by a Majority Shareholder

Vote.

<PAGE>

Expenses (including attorneys' fees) incurred in

defending a proceeding may be paid by the Trust in advance of the

final disposition thereof if (1) authorized by the Trustees in

the specific case, and (2) the Trust receives a secured

undertaking by or on behalf of the representative of the Trust to

repay the advance if it is not ultimately determined that he is

entitled to be indemnified by the Trust as authorized in this

Article XI.

The indemnification provided by this Article XI shall

not be deemed exclusive of any other rights to which a

representative of the Trust or other person may be entitled under

any agreement, vote of Shareholders or disinterested trustees or

otherwise, both as to action in his official capacity and as to

action in another capacity while holding the office, and shall

continue as to a person who has ceased to be a Trustee, officer,

employee or agent and inure to the benefit of his heirs and

personal representatives.

The Trust may purchase and maintain insurance on behalf

of any person who is or was a Trustee, officer, employee or agent

of the Trust, or is or was serving at the request of the Trust as

a trustee, director, officer, employee, or agent of another

trust, corporation, partnership, joint venture or other

enterprise, against any liability asserted against him and

incurred by him in any such capacity or arising out of his status

as such, regardless of whether the Trust would have the power to

<PAGE>

indemnify him against the liability under the provisions of this

Article XI.

Nothing contained in this Article XI shall be construed

to indemnify any representative of the Trust against any

liability to the Trust or to its Shareholders to which he would

otherwise be subject by reason of willful misfeasance, bad faith,

gross negligence or reckless disregard of the duties involved in

the conduct of his office.

As used in this Article XI "representative of the Trust"

means an individual (1) who is a present or former Trustee,

officer, agent or employee of the Trust or who serves or has

served another trust, corporation, partnership, joint venture or

other enterprise in one of such capacities at the request of the

Trust, and (2) who by reason of his position is, has been or is

threatened to be made a party to a proceeding; and "proceeding"

includes any threatened, pending or completed action, suit or

proceeding, whether civil, criminal, administrative or

investigative.

These By-Laws, or any of them, may be altered, amended

or repealed, or new By-Laws may be adopted by (a) a Majority

Shareholder Vote or (b) by the Trustees, provided, however, that

no By-Law may be amended, adopted or repealed by the Trustees if

such amendment, adoption or repeal requires, pursuant to law, the

Declaration or these By-Laws, a vote of the Shareholder.

00250083.AD9

<PAGE>

ADVISORY AGREEMENT

ALLIANCE GOVERNMENT RESERVES
1345 Avenue of the Americas
New York, New York 10105

July 22, 1992

Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105

Dear Sirs:

We herewith confirm our agreement with you as follows:

1. We are an open-end, diversified management
investment company registered under the Investment Company Act of
1940 (the "Act"). We are currently authorized to issue one class
of shares and our Trustees are authorized to reclassify and issue
any unissued shares to any number of additional classes or series
(Portfolios) each having its own investment objective, policies
and restrictions, all as more fully described in the Prospectus
and Statement of Additional Information constituting a part of
the Registration Statement filed on our behalf under the
Securities Act of 1933 and the Act. We are engaged in the
business of investing and reinvesting our assets in securities of
the type and in accordance with the limitations specified in our
Declaration of Trust, By-Laws, Registration Statements filed with
the Securities and Exchange Commission under the Securities Act
of 1933 and the Act, and any representations made in our
Prospectus and Statement of Additional Information, all in such
manner and to such extent as may from time to time be authorized
by our Trustees. We enclose copies of the documents listed above
and will from time to time furnish you with any amendments
thereof.

2. (a) We hereby employ you to manage the investment
and reinvestment of the assets in each of our Portfolios as above
specified, and, without limiting the generality of the foregoing,
to provide management and other services specified below.

(b) You will make decisions with respect to all
purchases and sales of securities in each of our Portfolios. To
carry out such decisions, you are hereby authorized, as our agent
and attorney in fact, for our account and at our risk and in our
name, to place orders for the investment and reinvestment of our

<PAGE>

assets. In all purchases, sales and other transactions in
securities in each of our Portfolios you are authorized to
exercise full discretion and act for us in the same manner and
with the same force and effect as we might or could do with
respect to such purchases, sales or other transactions, as well
as with respect to all other things necessary or incidental to
the furtherance or conduct of such purchases, sales or other
transactions.

(c) You will report to our Trustees at each
meeting thereof all changes in each Portfolio since the prior
report, and will also keep us in touch with important
developments affecting any Portfolio and on your own initiative
will furnish us from time to time with such information as you
may believe appropriate for this purpose, whether concerning the
individual banks or other companies whose securities are included
in our Portfolios, the banking or other industries in which they
engage, or the conditions prevailing in the money market or the
economy generally. You will also furnish us with such
statistical and analytical information with respect to securities
in each of our Portfolios as you may believe appropriate or as we
reasonably may request. In making such purchases and sales of
securities in each of our Portfolios, you will bear in mind the
policies set from time to time by our Trustees as well as the
limitations imposed by our Declaration of Trust and in our
Registration Statements under the Act and the Securities Act of
1933, the limitations in the Act and of the Internal Revenue Code
in respect of regulated investment companies and the investment
objective, policies and restrictions for each of our Portfolios.

(d) It is understood that you will from time to
time employ or associate with yourselves such persons as you
believe to be particularly fitted to assist you in the execution
of your duties hereunder, the cost of performance of such duties
to be borne and paid by you. No obligation may be incurred on
our behalf in any such respect. During the continuance of this
agreement at our request you will provide to us persons
satisfactory to our Trustees to serve as our officers. You or
your affiliates will also provide persons, who may be our
officers, to render such clerical, accounting, administrative and
other services to us as we may from time to time request of you.
Such personnel may be employees of you or your affiliates. We
will pay to you or your affiliates the cost of such personnel for
rendering such services to us at such rates as shall from time to
time be agreed upon between us, provided that all time devoted to
the investment or reinvestment of securities in each of our
Portfolios or to the promotion of the sale of our shares shall be
for your account. Nothing contained herein shall be construed to
restrict our right to hire our own employees or to contract for
services to be performed by third parties. Furthermore, you or
your affiliates (other than us) shall furnish us without charge

<PAGE>

with such administrative and management supervision and
assistance and such office facilities as you may believe
appropriate or as we may reasonably request subject to the
requirements of any regulatory authority to which you may be
subject. You or your affiliates (other than us) shall also be
responsible for the payment of any expenses incurred in promoting
the sale of our shares (other than the portion of the promotional
expenses to be borne by us in accordance with an effective plan
pursuant to Rule 12b-1 under the Act and the costs of printing
our prospectuses and other reports to shareholders and fees
related to registration with the Securities and Exchange
Commission and with state regulatory authorities).

3. It is further agreed that you shall be responsible
for the portion of the net expenses of all our Portfolios (except
taxes, brokerage, interest, and extraordinary expenses) incurred
by us during each of our fiscal years or portion thereof that
this agreement is in effect between us which portion shall be the
excess of the aggregate of such expenses over one per cent (1%)
of our net assets computed on a daily average basis for such
fiscal year (reduced pro rata for any portion of less than a
year). We hereby confirm that, subject to the foregoing, we
shall be responsible and hereby assume the obligation for payment
of all our other expenses, including: (a) payment of the fee
payable to you under paragraph 5 hereof; (b) custody, transfer,
and dividend disbursing expenses; (c) fees of trustees who are
not your affiliated persons; (d) legal and auditing expenses;
(e) clerical, accounting, administrative, and other office costs;
(f) the cost of personnel providing services to us, as provided
in subparagraph (d) of paragraph 2 above; (g) costs of printing
our prospectuses and shareholder reports; (h) expenses and fees
related to registration and filing with the Securities and
Exchange Commission and with state regulatory authorities; and
(i) such promotional expenses as may be contemplated by an
effective plan pursuant to Rule 12b-1 under the Act; provided,
however, that our payment of such promotional expenses shall be
in the amounts, and in accordance with the procedures, set forth
in such plan.

4. We shall expect of you, and you will give us the
benefit of, your best judgment and efforts in rendering these
services to us, and we agree as an inducement to your undertaking
these services that you shall not be liable hereunder for any
mistake of judgment or in any event whatsoever, except for lack
of good faith, provided that nothing herein shall be deemed to
protect, or purport to protect, you against any liability to us
or to our security holders to which you would otherwise be
subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of your duties hereunder, or by
reason of your reckless disregard of your obligations and duties
hereunder.

<PAGE>

5. In consideration of the foregoing we will pay you a
fee for each Portfolio at the annual rate of: .50 of 1% of the
first $1.25 billion of that Portfolio's average daily net assets;
.49 of 1% of the next $.25 billion of such assets; .48 of 1% of
the next $.25 billion of such assets; .47 of 1% of the next $.25
billion of such assets; .46 of 1% of the next $1 billion of such
assets, and; .45 of 1% of such average daily net assets in excess
of $3 billion. Such fee shall be accrued by us daily and shall
be payable in arrears on the last day of each calendar month for
services performed hereunder during such month. Your
reimbursement, if any, of our expenses, as provided in paragraph
3 hereof, shall be estimated and paid to us monthly in arrears,
at the same time as our payment to you for such month.

6. This agreement shall become effective on the date
hereof and shall remain in effect until June 30, 1993 and
thereafter for successive twelve-month periods (computed from
each July 1), with respect to each Portfolio provided that such
continuance is specifically approved at least annually by our
Trustees or by majority vote of the holders of the outstanding
voting securities (as defined in the Act) of such Portfolio, and,
in either case, by a majority of our trustees who are not parties
to this agreement or interested persons, as defined in the Act,
of any such party (other than as trustees of our Trust) provided
further, however, that if the continuation of this agreement is
not approved as to a Portfolio, you may continue to render to
such Portfolio the services described herein in the manner and to
the extent permitted by the Act and the rules and regulations
thereunder. Upon the effectiveness of this agreement, it shall
supersede all previous agreements between us covering the subject
matter hereof. This agreement may be terminated with respect to
any Portfolio at any time, without the payment of any penalty, by
vote of a majority of the outstanding voting securities (as so
defined) of such Portfolio, or by a vote of a majority of our
Trustees on sixty days' written notice to you, or by you with
respect to any Portfolio on sixty days' written notice to us.

7. This agreement may not be transferred, assigned,
sold or in any manner hypothecated or pledged by you and this
agreement shall terminate automatically in the event of any such
transfer, assignment, sale, hypothecation or pledge by you. The
terms "transfer", "assignment" and "sale" as used in this
paragraph shall have the meanings ascribed thereto by governing
law and any interpretation thereof contained in rules or
regulations promulgated by the Securities and Exchange Commission
thereunder.
8. (a) Except to the extent necessary to perform your
obligations hereunder, nothing herein shall be deemed to limit or
restrict your right, or the right of any of your employees,
officers, or any of the Directors of Alliance Capital Management
Corporation, general partner, or employees who may also be a

<PAGE>

trustee, officer or employee of ours, or persons otherwise
affiliated with us (within the meaning of the Act) to engage in
any other business or to devote time and attention to the
management or other aspects of any other business, whether of a
similar or dissimilar nature, or to render services of any kind
to any other trust, corporation, firm, individual or association.

(b) You will notify us of any change in general
partners or your partnership within a reasonable time after such
change.

9. Notice is hereby given that this agreement is
entered into on our behalf by an officer of our Trust in his
capacity as an officer and not individually and that the
obligations of or arising out of this agreement are not binding
upon any of our Trustees, officers, shareholders, employees or
agents individually but are binding only upon the assets and
property of our Trust.

If the foregoing is in accordance with your
understanding, you will kindly so indicate by signing and
returning to us the enclosed copy hereof.

Very truly yours,

ALLIANCE GOVERNMENT RESERVES

By /s/ James P. Syrett
___________________________
James P. Syrett
President

Accepted: As of July 22, 1992

ALLIANCE CAPITAL MANAGEMENT L.P.

By ALLIANCE CAPITAL MANAGEMENT CORPORATION,
general partner

By /s/ John D. Carifa
____________________________
John D. Carifa
Executive Vice President
& Chief Financial Officer

5
00250083.AE3

<PAGE>

DISTRIBUTION SERVICES AGREEMENT

ALLIANCE GOVERNMENT RESERVES
1345 Avenue of the Americas
New York, New York 10105

July 22, 1992, as
amended as of June 16, 1997

Alliance Fund Distributors, Inc.
1345 Avenue of the Americas
New York, New York 10105

Dear Sirs:

This is to confirm that, on the terms and conditions set
forth herein, we have agreed that you shall be, for the period of
this Distribution Services Agreement (the "Agreement"), a
distributor, as our agent, for the unsold portion of such number
of shares of beneficial interest of our Trust, par value $.01 per
share (the "Trust Shares") as may from time to time be
effectively registered under the Securities Act of 1933, as
amended (the "Act").

1. We hereby agree to offer through you as our agent,
and to solicit, through you as our agent, offers to subscribe to,
the unsold balance of the Trust Shares as shall then be
effectively registered under the Act, and you are appointed our
agent for such purpose. All subscriptions for Trust Shares
obtained by you shall be directed to us for acceptance and shall
not be binding on us until accepted by us. You shall have no
authority to make binding subscriptions on our behalf. We reserve
the right to sell Trust Shares through other distributors or
directly to investors through subscriptions received by us at our
principal office in New York, New York. The right given to you
under this agreement shall not apply to Trust Shares issued in
connection with (a) the merger or consolidation of any other
investment company with us, (b) our acquisition by purchase or
otherwise of all or substantially all of the assets or stock of
any other investment company or (c) the reinvestment in Trust
Shares by our shareholders of dividends or other distributions or
any other offering of shares to our shareholders.

2. You will use your best efforts to obtain
subscriptions to Trust Shares upon the terms and conditions
contained herein and in the then current Prospectus and Statement
of Additional Information, including the offering price. You
will send to us promptly all subscriptions placed with you. We
shall advise you of the approximate net asset value per share or

<PAGE>

net asset value per share (as used in the Prospectus and
Statement of Additional Information) on any date requested by you
and at such other times as it shall have been determined by us.
We shall furnish you from time to time, for use in connection
with the offering of Trust Shares, such other information with
respect to us and the Trust Shares as you may reasonably request.
We shall supply you with such copies of our current Prospectus
and Statement of Additional Information in effect from time to
time as you may request. You are not authorized to give any
information or to make any representations, other than those
contained in the Registration Statement, Prospectus and Statement
of Additional Information, as then in effect, filed under the Act
covering Trust Shares or which we may authorize in writing. You
may use employees and agents at your cost and expense to assist
you in carrying out your obligations hereunder but no such
employee or agent shall be deemed to be our agent or have any
rights under this agreement.

3. We reserve the right to suspend the offering of
Trust Shares at any time, in the absolute discretion of our Board
of Trustees, and upon notice of such suspension you shall cease
to offer Trust Shares hereunder.

4. Both of us will cooperate with each other in taking
such action as may be necessary to qualify Trust Shares for sale
under the securities laws of such states as we may designate.
Pursuant to our Advisory Agreement dated July 22, 1992 with
Alliance Capital Management L.P. (the "Adviser"), we will pay all
fees and expenses of registering Trust Shares under the Act and
of qualification of Trust Shares and our qualification under
applicable state securities laws. You shall pay all expenses
relating to your broker-dealer qualification.

5. It is understood that paragraphs 5, 10 and 13
hereof constitutes a plan of distribution (the "Plan") within the
meaning of Rule 12b-1 adopted by the Securities and Exchange
Commission under the Investment Company Act of 1940 (the "1940
Act") and is a part of this Agreement. The material aspects of
the Plan are as follows:

(a) The Trust will pay to the Adviser each month a
distribution services fee with respect to each Portfolio of the
Trust ("Portfolio") which will not exceed, on an annualized
basis, .25 of 1% of the Trust's average daily net assets. The
Adviser will use the entire amount so received from the Trust
(i) to make payments to you to compensate broker-dealers or other
persons for providing distribution assistance, (ii) to make
payments to compensate banks and other institutions for providing
administrative and accounting services with respect to Trust
shareholders and (iii) to otherwise promote the sale of shares of
the Trust, including paying for the preparation, printing and

<PAGE>

distribution of prospectuses and sales literature or other
promotional activities.

(b) The Adviser will as long as the Plan is in effect
make similar payments to you for distribution services performed
by you and for distribution assistance provided by broker-dealers
or other persons as described above and to banks or other
institutions for administrative and accounting services. These
payments will be made by the Adviser from its own resources,
which may include the management fee it receives from the Trust.
The Adviser may in its sole discretion increase or decrease the
amount of distribution assistance payments.

(c) Payments for distribution assistance or
administrative and accounting services are subject to the terms
and conditions of the written agreements between each
broker-dealer or other person and you. Such agreements will be
in a form satisfactory to the Trustees of the Trust.

(d) The Treasurer of the Trust will prepare and furnish
to the Trustees of the Trust at least quarterly a written report
complying with the requirements to Rule 12b-1 setting forth all
amounts expended under the Plan and the purposes for which such
expenditures were made.

(e) The Trust is not obligated to pay any distribution
expense in excess of the distribution services fee described in
subparagraph (a) hereof and any expenses of distribution of the
Trust's shares accrued by the Adviser or you in one fiscal year
of the Trust may not be paid from distribution services fees
received from the Trust in subsequent fiscal years of the Trust.
Distribution services fees received from the Trust also will not
be used to pay any interest expense, carrying charges or other
financing costs, or allocation of overhead.

(f) All agreements with any persons relating to the
implementation of the Plan will be subject to termination,
without penalty, upon not more than sixty days' written notice,
pursuant to the provisions of paragraph 10 hereof.

(g) Neither the Adviser nor you are obligated by the
Plan to execute agreements with qualifying banks, broker-dealers
or other persons and any termination of an agreement with a
particular financial intermediary under the Plan will have no
effect on similar agreements between the Adviser or you and other
participating banks, broker-dealers or other persons pursuant to
the Plan.

6. We represent to you that our Registration
Statement, Prospectus and Statement of Additional Information (as
in effect from time to time) under the Act have been or will be,

<PAGE>

as the case may be, carefully prepared in conformity with the
requirements of the Act and the rules and regulations of the
Securities and Exchange Commission thereunder. We represent and
warrant to you that our Registration Statement, Prospectus and
Statement of Additional Information contain or will contain all
statements required to be stated therein in accordance with the
Act and the rules and regulations of said Commission, and that
all statements of fact contained or to be contained therein are
or will be true and correct at the time indicated or the
effective date as the case may be; that none of our Registration
Statement, our Prospectus or our Statement of Additional
Information, when it shall become effective or be authorized for
use, will include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or
necessary to make the statements therein not misleading to a
purchaser of Trust Shares. We will from time to time file such
amendment or amendments to our Registration Statement, Prospectus
and Statement of Additional Information as, in the light of
future developments, shall, in the opinion of our counsel, be
necessary in order to have our Registration Statement, Prospectus
and Statement of Additional Information at all times contain all
material facts required to be stated therein or necessary to make
any statements therein not misleading to a purchaser of Trust
Shares, but, if we shall not file such amendment or amendments
within fifteen days after receipt by us of a written request from
you to do so, you may, at your option, terminate this Agreement
immediately. We shall not file any amendment to our Registration
Statement, Prospectus or Statement of Additional Information
without giving you reasonable notice thereof in advance;
provided, however, that nothing in this agreement contained shall
in any way limit our right to file at any such time such
amendments to our Registration Statement, Prospectus or Statement
of Additional Information, of whatever character, as we may deem
advisable, such right being in all respects absolute and
unconditional. We represent and warrant to you that any
amendment to our Registration Statement, Prospectus or Statement
of Additional Information hereafter filed by us will, when it
becomes effective, contain all statements required to be stated
therein in accordance with the Act and the rules and regulations
of said Commission, that all statements of fact contained therein
will, when the same shall become effective, be true and correct
and that no such amendment, when it becomes effective, will
include an untrue statement of a material fact or will omit to
state a material fact required to be stated therein or necessary
to make the statements therein not misleading to a purchaser of
Trust Shares.

7. We agree to indemnify, defend and hold you, and any
person who controls you within the meaning of Section 15 of the
Act, free and harmless from and against any and all claims,
demands, liabilities and expenses (including the cost of

<PAGE>

investigating or defending such claims, demands or liabilities
and any reasonable counsel fees incurred in connection therewith)
which you or any such controlling person may incur, under the
Act, or under common law or otherwise, arising out of or based
upon any alleged untrue statement of a material fact contained in
our Registration Statement, Prospectus or Statement of Additional
Information in effect from time to time under the Act or arising
out of or based upon any alleged omission to state a material
fact required to be stated in either thereof or necessary to make
the statements in either thereof not misleading; provided,
however, that in no event shall anything herein contained be so
construed as to protect you against any liability to us or our
security holders to which you would otherwise be subject by
reason of willful misfeasance, bad faith, or gross negligence, in
the performance of your duties, or by reason of your reckless
disregard of your obligations and duties under this agreement.
Our agreement to indemnify you and any such controlling person as
aforesaid is expressly conditioned upon our being notified of any
action brought against you or any such controlling person, such
notification to be given by letter or by telegram addressed to us
at our principal office in New York, New York, and sent to us by
the person against whom such action is brought within ten days
after the summons or other first legal process shall have been
served. The failure to so notify us of any such action shall not
relieve us from any liability which we may have to the person
against whom such action is brought by reason of any such alleged
untrue statement or omission otherwise than on account of our
indemnity agreement contained in this paragraph 7. We will be
entitled to assume the defense of any suit brought to enforce any
such claim, and to retain counsel of good standing chosen by us
and approved by you. In the event we do elect to assume the
defense of any suit and retain counsel of good standing approved
by you, the defendant or defendants in such suit shall bear the
fees and expenses of any additional counsel retained by any of
them; but in case we do not elect to assume the defense of any
such suit, or in case you do not approve of counsel chosen by us,
we will reimburse you or the controlling person or persons named
as defendant or defendants in such suit, for the fees and
expenses of any counsel retained by you or them. Our
indemnification agreement contained in this paragraph 7 and our
representations and warranties in this Agreement shall remain
operative and in full force and effect regardless of any
investigation made by or on behalf of you or any controlling
person and shall survive the sale of any of Trust Shares made
pursuant to subscriptions obtained by you. This agreement of
indemnity will inure exclusively to your benefit, to the benefit
of your successors and assigns, and to the benefit of any
controlling persons and their successors and assigns. We agree
promptly to notify you of the commencement of any litigation or
processing against us in connection with the issue and sale of
any Trust Shares.

<PAGE>

8. You agree to indemnify, defend and hold us, our
several officers and trustees, and any person who controls us
within the meaning of Section 15 of the Act, free and harmless
from and against any and all claims, demands, liabilities, and
expenses (including the cost of investigating or defending such
claims, demands or liabilities and any reasonable counsel fees
incurred in connection therewith) which we, our officers or
trustees, or any such controlling person may incur under the Act
or under common law or otherwise, but only to the extent that
such liability, or expense incurred by us, our officers or
trustees or such controlling person resulting from such claims or
demands shall arise out of or be based upon any alleged untrue
statement of a material fact contained in information furnished
in writing by you to us for use in our Registration Statement or
Prospectus in effect from time to time under the Act, or shall
arise out of or be based upon any alleged omission to state a
material fact in connection with such information required to be
stated in the Registration Statement or Prospectus or necessary
to make such information not misleading. Your agreement to
indemnify us, our officers and trustees, and any such controlling
person as aforesaid is expressly conditioned upon you being
notified of any action brought against us, our officers or
trustees or any such controlling person, such notification to be
given by letter or telegram addressed to you at your principal
office in New York, New York, and sent to you by the person
against whom such action is brought, within ten days after the
summons or other first legal process shall have been served. You
shall have a right to control the defense of such action, with
counsel of your own choosing, satisfactory to us, if such action
is based solely upon such alleged misstatement or omission on
your part, and in any other event you and we, our officers or
trustees or such controlling person shall each have the right to
participate in the defense or preparation of the defense of any
such action. The failure to so notify you of any such action
shall not relieve you from any liability which you may have to
us, to our officers or trustees, or to such controlling person by
reason of any such untrue statement or omission on your part
otherwise than on account of your indemnity agreement contained
in this paragraph 8.

9. We agree to advise you immediately:

(a) of any request by the Securities and Exchange
Commission for amendments to our Registration Statement or
Prospectus or for additional information,

(b) In the event of the issuance by the Securities and
Exchange Commission of any stop order suspending the
effectiveness of our Registration Statement or Prospectus or the
initiation of any proceedings for that purpose,

<PAGE>

(c) of the happening of any material event which makes
untrue any statement made in our Registration Statement or
Prospectus or which requires the making of a change in either
thereof in order to make the statements therein not misleading,
and

(d) of all action of the Securities and Exchange
Commission with respect to any amendments to our Registration
Statement or Prospectus which may from time to time be filed with
the Securities and Exchange Commission under the Act.

10. (a) This agreement shall become effective in
respect of each Portfolio of the Trust on the date hereof, shall
remain in effect until June 30, 1998, and shall continue in
effect thereafter for successive twelve-month periods (computed
from each July 1); provided, however, that such continuance is
specifically approved at least annually by the Trustees of the
Trust or by majority vote of the holders of the outstanding
voting securities (as defined in the 1940 Act) of the relevant
Portfolio of the Trust, and, in either case, by a majority of the
Trustees of the Trust who are not parties to this Agreement or
interested persons (as defined in the 1940 Act) of any such party
(other than as Trustees of the Trust) and who have no direct or
indirect financial interest in the operation of the Plan or any
agreement related thereto. Upon the effectiveness of this
Agreement, it shall supersede all previous agreements between the
parties hereto covering the subject matter hereof. This
Agreement may be terminated in respect of a Portfolio of the
Trust (i) by the Trust at any time, without the payment of any
penalty, by the vote of a majority of the outstanding voting
securities (as so defined) of such Portfolio, or by a vote of a
majority of the Trustees of the Trust who are not interested
persons (as defined in the 1940 Act) of the Trust and have no
direct or indirect financial interest in the operation of the
Plan or any agreement related thereto, in either event on sixty
days written notice to you; provided, however, that no such
notice shall be required if such termination is stated by the
Trust to relate only to paragraphs 5 and 13 hereof (in which
event paragraphs 5 and 13 shall be deemed to have been severed
herefrom and all other provisions of this Agreement shall
continue in full force and effect), or (ii) by you on sixty days
written notice to the Trust.

(b) This Agreement may be amended at any time with the
approval of the Trustees of the Trust; provided, however, that
(i) any material amendments of the terms hereof will become
effective with respect to a Portfolio only upon approval as
provided in the first proviso of paragraph 10(a) hereof, and
(ii) any amendment to increase materially the amount to be
expended by a Portfolio for distribution assistance,
administrative and accounting services and other activities

<PAGE>

designed to promote the sale of shares of such Portfolio
hereunder will be effective with respect to a Portfolio only upon
the additional approval by a vote of a majority of the
outstanding voting securities of such Portfolio as defined in the
1940 Act.

11. This Agreement may not be transferred, assigned,
sold or in any manner hypothecated or pledged by you and this
Agreement shall terminate automatically in the event of any such
transfer, assignment, sale, hypothecation or pledge. The terms
"transfer", "assignment", and "sale" as used in this paragraph
shall have the meanings ascribed thereto by governing law and any
interpretation thereof contained in rules or regulations
promulgated by the Securities and Exchange Commission thereunder.

12. Except to the extent necessary to perform your
obligation hereunder, nothing herein shall be deemed to limit or
restrict your right, or the right of any of your officers,
directors or employees who may also be a trustee, officer or
employee of ours, to engage in any other business or to devote
time and attention to the management or other aspects of any
other business, whether of a similar or dissimilar nature, or to
render services of any kind to any other corporation, firm,
individual or association.

13. While the Plan is in effect, the selection and
nomination of the trustees who are not "interested persons" of
the Trust (as defined in the 1940 Act) will be committed to the
discretion of such disinterested trustees.

14. Notice is hereby given that this Agreement is
entered into on our behalf by an officer of our Trust in his
capacity as an officer and not individually and that the
obligations of or arising out of this Agreement are not binding
upon any of our Trustees, officers, shareholders, employees or
agents individually but are binding only upon the assets and
property of our Trust.

<PAGE>

If the foregoing is in accordance with your
understanding, will you kindly so indicate by signing and
returning to us the enclosed copy hereof.

Very truly yours,

Alliance Government Reserves

By/s/ Ronald M. Whitehill
_______________________
Ronald M. Whitehill
President

Accepted: July 22, 1992, as amended
as of June 16, 1997

Alliance Fund Distributors, Inc.

By /s/ Edmund P. Bergan, Jr.
___________________________
Edmund P. Bergan, Jr.
Senior Vice President

ALLIANCE CAPITAL MANAGEMENT L.P.

By Alliance Capital Management Corporation,
general partner

By/s/ John D. Carifa
___________________________
John D. Carifa
President & Chief Operating Officer

9
00250083.AE2

<PAGE>

CUSTODIAN CONTRACT

Between

ALLIANCE GOVERNMENT RESERVES

and

STATE STREET BANK AND TRUST COMPANY

<PAGE>

TABLE OF CONTENTS
Page

1. Employment of Custodian and Property to be Held By
It ................................................... 1

2. Duties of the Custodian with Respect to Property
of the Fund Held by the Custodian..................... 2
2.1 Holding Securities............................... 2
2.2 Delivery of Securities........................... 2
2.3 Registration of Securities....................... 7
2.4 Bank Accounts.................................... 8
2.5 Payments for Shares.............................. 9
2.6 Investment and Availability of Federal Funds..... 9
2.7 Collection of Income............................. 10
2.8 Payment of Fund Moneys........................... 10
2.9 Liability for Payment in Advance of Receipt of
Securities Purchased............................. 13
2.10 Payments for Repurchases or Redemptions
of Shares of the Fund............................ 14
2.11 Appointment of Agents............................ 15
2.12 Deposit of Fund Assets in Securities System...... 15
2.13 Segregated Account............................... 18
2.14 Ownership Certificates for Tax Purposes.......... 20
2.15 Proxies.......................................... 20
2.16 Communications Relating to Fund
Portfolio Securities............................. 20
2.17 Proper Instructions.............................. 21
2.18 Actions Permitted Without Express Authority...... 22
2.19 Evidence of Authority............................ 23

3. Duties of Custodian With Respect to the Books of Account
and Calculation of Net Asset Value and Net
Income................................................ 23
4. Records............................................... 24
5. Opinion of Fund's Independent Accountants............. 25
6. Reports to Fund by Independent Public Accountants..... 25
7. Compensation of Custodian............................. 26
8. Responsibility of Custodian........................... 26
9. Effective Period, Termination and Amendment........... 27
10. Successor Custodian................................... 29
11. Interpretive and Additional Provisions................ 30
12. Massachusetts Law to Apply............................ 31
13. Prior Contracts....................................... 31

<PAGE>

CUSTODIAN CONTRACT

This Contract between Alliance Government Reserves, a

business trust organized and existing under the laws of

Massachusetts, having its principal place of business at

140 Broadway, New York, New York 10005 hereinafter called the

"Fund", and State Street Bank and Trust Company, a Massachusetts

trust company, having its principal place of business at

225 Franklin Street, Boston, Massachusetts, 02110, hereinafter

called the "Custodian",

WITNESSETH: That in consideration of the mutual

covenants and agreements hereinafter contained, the parties

hereto agree as follows:

1. Employment of Custodian and Property to be Held by It

The Fund hereby employs the Custodian as the custodian

of its assets pursuant to the provisions of the Declaration of

Trust. The Fund agrees to deliver to the Custodian all

securities and cash owned by it, and all payments of income,

payments of principal or capital distributions received by it

with respect to all securities owned by the Fund from time to

time, and the cash consideration received by it for such new or

treasury shares of beneficial interest ("Shares") of the Fund as

may be issued or sold from time to time. The Custodian shall not

be responsible for any property of the Fund held or received by

the Fund and not delivered to the Custodian.

<PAGE>

Upon receipt of "Proper Instructions" (within the

meaning of Section 2.17), the Custodian shall from time to time

employ one or more sub-custodians, but only in accordance with an

applicable vote by the Trustees of the Fund, and provided that

the Custodian shall have no more or less responsibility or

liability to the Fund on account of any actions or omissions of

any sub-custodian so employed than any such sub-custodian has to

the Custodian.

2. Duties of the Custodian with Respect to Property of the

Fund Held By the Custodian

2.1 Holding Securities. The Custodian shall hold and

physically segregate for the account of the Fund all

non-cash property, including all securities owned by the

Fund, other than securities which are maintained

pursuant to Section 2.12 in a clearing agency which acts

as a securities depository or in a book-entry system

authorized by the U.S. Department of the Treasury,

collectively referred to herein as "Securities System".

2.2 Delivery of Securities. The Custodian shall release and

deliver securities owned by the Fund held by the

Custodian or in a Securities System account of the

Custodian only upon receipt of Proper Instructions,

which may be continuing instructions when deemed

appropriate by the parties, and only in the following

cases:

<PAGE>

1) Upon sale of such securities for the account

of the Fund and receipt of payment therefor;

2) Upon the receipt of payment in connection with

any repurchase agreement related to such

securities entered into by the Fund;

3) In the case of a sale effected through a

Securities System, in accordance with the

provisions of Section 2.12 hereof;

4) To the depository agent in connection with

tender or other similar offers for portfolio

securities of the Fund;

5) To the issuer thereof or its agent when such

securities are called, redeemed, retired or

otherwise become payable; provided that, in

any such case, the cash or other consideration

is to be delivered to the Custodian;

6) To the issuer thereof, or its agent, for

transfer into the name of the Fund or into the

name of any nominee or nominees of the

Custodian or into the name or nominee name of

any agent appointed pursuant to Section 2.11

or into the name or nominee name of any sub-

custodian appointed pursuant to Article 1; or

for exchange for a different number of bonds,

certificates or other evidence representing

<PAGE>

the same aggregate face amount or number of

units; provided that, in any such case, the

new securities are to be delivered to the

Custodian;

7) To the broker selling the same for examination

in accordance with the "street delivery"

custom;

8) For exchange or conversion pursuant to any

plan of merger, consolidation,

recapitalization, reorganization or

readjustment of the securities of the issuer

of such securities, or pursuant to provisions

for conversion contained in such securities,

or pursuant to any deposit agreement; provided

that, in any such case, the new securities and

cash, if any, are to be delivered to the

Custodian;

9) In the case of warrants, rights or similar

securities, the surrender thereof in the

exercise of such warrants, rights or similar

securities or the surrender of interim

receipts or temporary securities for

definitive securities; provided that, in any

such case, the new securities and cash, if

any, are to be delivered to the Custodian;

<PAGE>

10) For delivery in connection with any loans of

securities made by the Fund, but only against

receipt of adequate collateral as agreed upon

from time to time by the Custodian and the

Fund, which may be in the form of cash or

obligations issued by the United States

government, its agencies or instrumentalities,

except that in connection with any loans for

which collateral is to be credited to the

Custodian's account in the book-entry system

authorized by the U.S. Department of the

Treasury, the Custodian will not be held

liable or responsible for the delivery of

securities owned by the Fund prior to the

receipt of such collateral;

11) For delivery as security in connection with

any borrowings by the Fund requiring a pledge

of assets by the Fund, but only against

receipt of amounts borrowed;

12) For delivery in accordance with the provisions

of any agreement among the Fund, the Custodian

and a broker-dealer registered under the

Securities Exchange Act of 1934 ("the Exchange

Act") and a member of The National Association

of Securities Dealers, Inc. ("NASD"), relating

<PAGE>

to compliance with the rules of The Options

Clearing Corporation and of any registered

national securities exchange, or of any

similar organization or organizations,

regarding escrow or other arrangements in

connection with transactions by the Fund;

13) For delivery in accordance with the provisions

of any agreement among the Fund, the

Custodian, and a Futures Commission Merchant

registered under the Commodity Exchange Act,

relating to compliance with the rules of the

Commodity Futures Trading Commission and/or

any Contract Market, or any similar

organization or organizations, regarding

account deposits in connection with

transactions by the Fund;

14) Upon receipt of instructions from the transfer

agent ("Transfer Agent") for the Fund, for

delivery to such Transfer Agent or to the

holders of shares in connection with

distributions in kind, as may be described

from time to time in the Fund's currently

effective prospectus and statement of

additional information ("prospectus"), in

<PAGE>

satisfaction of requests by holders of Shares

for repurchase or redemption; and

15) For any other proper corporate purpose, but

only upon receipt of, in addition to Proper

Instructions, a certified copy of a resolution

of the Trustees or of the Executive Committee

signed by an officer of the Fund and certified

by the Secretary or an Assistant Secretary,

specifying the securities to be delivered,

setting forth the purpose for which such

delivery is to be made, declaring such

purposes to be proper corporate purposes, and

naming the person or persons to whom delivery

of such securities shall be made.

2.3 Registration of Securities. Securities held by the

Custodian (other than bearer securities) shall be

registered in the name of the Fund or in the name of any

nominee of the Fund or of any nominee of the Custodian

which nominee shall be assigned exclusively to the Fund,

unless the Fund has authorized in writing the

appointment of a nominee to be used in common with other

registered investment companies having the same

investment adviser as the Fund, or in the name or

nominee name of any agent appointed pursuant to

Section 2.11 or in the name or nominee name of any

<PAGE>

sub-custodian appointed pursuant to Article 1. All

securities accepted by the Custodian on behalf of the

Fund under the terms of this Contract shall be in

"street name" or other good delivery form.

2.4 Bank Accounts. The Custodian shall open and maintain a

separate bank account or accounts in the name of the

Fund, subject only to draft or order by the Custodian

acting pursuant to the terms of this Contract, and shall

hold in such account or accounts, subject to the

provisions hereof, all cash received by it from or for

the account of the Fund, other than cash maintained by

the Fund in a bank account established and used in

accordance with Rule 17f-3 under the Investment Company

Act of 1940. Funds held by the Custodian for the Fund

may be deposited by it to its credit as Custodian in the

Banking Department of the Custodian or in such other

banks or trust companies as it may in its discretion

deem necessary or desirable; provided, however, that

every such bank or trust company shall be qualified to

act as a custodian under the Investment Company Act of

1940 and that each such bank or trust company and the

funds to be deposited with each such bank or trust

company shall be approved by vote of a majority of the

Trustees of the Fund. Such funds shall be deposited by

<PAGE>

the Custodian in its capacity as Custodian and shall be

withdrawable by the Custodian only in that capacity.

2.5 Payments for Shares. The Custodian shall receive from

the distributor for the Fund's Shares or from the

Transfer Agent of the Fund and deposit into the Fund's

account such payments as are received for Shares of the

Fund issued or sold from time to time by the Fund. The

Custodian will provide timely notification to the Fund

and the Transfer Agent of any receipt by it of payments

for Shares of the Fund.

2.6 Investment and Availability of Federal Funds. Upon

mutual agreement between the Fund and the Custodian, the

Custodian shall, upon the receipt of Proper

Instructions,

1) invest in such instruments as may be set forth

in such instructions on the same day as

received all federal funds received after a

time agreed upon between the Custodian and the

Fund; and

2) make federal funds available to the Fund as of

specified times agreed upon from time to time

by the Fund and the Custodian in the amount of

checks received in payment for Shares of the

Fund which are deposited into the Fund's

account.

<PAGE>

2.7 Collection of Income. The Custodian shall collect on a

timely basis all income and other payments with respect

to registered securities held hereunder to which the

Fund shall be entitled either by law or pursuant to

custom in the securities business, and shall collect on

a timely basis all income and other payments with

respect to bearer securities if, on the date of payment

by the issuer, such securities are held by the Custodian

or agent thereof and shall credit such income, as

collected, to the Fund's custodian account. Without

limiting the generality of the foregoing, the Custodian

shall detach and present for payment all coupons and

other income items requiring presentation as and when

they become due and shall collect interest when due on

securities held hereunder. Income due the Fund on

securities loaned pursuant to the provisions of

Section 2.2 (10) shall be the responsibility of the

Fund. The Custodian will have no duty or responsibility

in connection therewith, other than to provide the Fund

with such information or data as may be necessary to

assist the Fund in arranging for the timely delivery to

the Custodian of the income to which the Fund is

properly entitled.

2.8 Payment of Fund Moneys. Upon receipt of Proper

Instructions, which may be continuing instructions when

<PAGE>

deemed appropriate by the parties, the Custodian shall

pay out moneys of the Fund in the following cases only:

(l) Upon the purchase of securities, futures

contracts or options on futures contracts for

the account of the Fund but only (a) against

the delivery of such securities, or evidence

of title to futures contracts or options on

futures contracts, to the Custodian (or any

bank, banking firm or trust company doing

business in the United States or abroad which

is qualified under the Investment Company Act

of 1940, as amended, to act as a custodian and

has been designated by the Custodian as its

agent for this purpose) registered in the name

of the Fund or in the name of a nominee of the

Custodian referred to in Section 2.3 hereof or

in proper form for transfer; (b) in the case

of a purchase effected through a Securities

System, in accordance with the conditions set

forth in Section 2.12 hereof or (c) in the

case of repurchase agreements entered into

between the Fund and the Custodian, or another

bank, or a broker-dealer which is a member of

NASD, (i) against delivery of the securities

either in certificate form or through an entry

<PAGE>

crediting the Custodian's account at the

Federal Reserve Bank with such securities or

(ii) against delivery of the receipt

evidencing purchase by the Fund of securities

owned by the Custodian along with written

evidence of the agreement by the Custodian to

repurchase such securities from the Fund

2) In connection with conversion, exchange or

surrender of securities owned by the Fund as

set forth in Section 2.2 hereof;

3) For the redemption or repurchase of Shares

issued by the Fund as set forth in

Section 2.10 hereof;

4) For the payment of any expense or liability

incurred by the Fund, including but not

limited to the following payments for the

account of the Fund: interest, taxes,

management, accounting, transfer agent and

legal fees, and operating expenses of the Fund

whether or not such expenses are to be in

whole or part capitalized or treated as

deferred expenses;

5) For the payment of any dividends declared

pursuant to the governing documents of the

Fund;

<PAGE>

6) For payment of the amount of dividends

received in respect of securities sold short;

7) For any other proper purpose, but only upon

receipt of, in addition to Proper

Instructions, a certified copy of a resolution

of the Trustees or of the Executive Committee

of the Fund signed by an officer of the Fund

and certified by its Secretary or an Assistant

Secretary, specifying the amount of such

payment, setting forth the purpose for which

such payment is to be made, declaring such

purpose to be a proper purpose, and naming the

person or persons to whom such payment is to

be made.

2.9 Liability for Payment in Advance of Receipt of

Securities Purchased. In any and every case where

payment for purchase of securities for the account of

the Fund is made by the Custodian in advance of receipt

of the securities purchased in the absence of specific

written instructions from the Fund to so pay in advance,

the Custodian shall be absolutely liable to the Fund for

such securities to the same extent as if the securities

had been received by the Custodian, except that in the

case of repurchase agreements entered into by the Fund

with a bank which is a member of the Federal Reserve

<PAGE>

System, the Custodian may transfer funds to the account

of such bank prior to the receipt of written evidence

that the securities subject to such repurchase agreement

have been transferred by book-entry into a segregated

non-proprietary account of the custodian maintained with

the Federal Reserve Bank of Boston or of the safe-

keeping receipt, provided that such securities have in

fact been so transferred by book-entry.

2.10 Payments for Repurchases or Redemptions of Shares of the

Fund. From such funds as may be available for the

purpose but subject to the limitations of the

Declaration of Trust and any applicable votes of the

Trustees of the Fund pursuant thereto, the Custodian

shall, upon receipt of instructions from the Transfer

Agent, make funds available for payment to holders of

Shares who have delivered to the Transfer Agent a

request for redemption or repurchase of their Shares.

In connection with the redemption or repurchase of

Shares of the Fund, the Custodian is authorized upon

receipt of instructions from the Transfer Agent to wire

funds to or through a commercial bank designated by the

redeeming shareholders. In connection with the

redemption or repurchase of Shares of the Fund, the

Custodian shall honor checks drawn on the Custodian by a

holder of Shares, which checks have been furnished by

<PAGE>

the Fund to the holder of Shares, when presented to the

Custodian in accordance with such procedures and

controls as are mutually agreed upon from time to time

between the Fund and the Custodian.

2.11 Appointment of Agents. The Custodian may at any time or

times in its discretion appoint (and may at any time

remove) any other bank or trust company which is itself

qualified under the Investment Company Act of 1940, as

amended, to act as a custodian, as its agent to carry

out such of the provisions of this Article 2 as the

Custodian may from time to time direct; provided,

however, that the appointment of any agent shall not

relieve the Custodian of its responsibilities or

liabilities hereunder.

2.12 Deposit of Trust Assets in Securities Systems. The

Custodian may deposit and/or maintain securities owned

by the Fund in a clearing agency registered with the

Securities and Exchange Commission under Section 17A of

the Securities Exchange Act of 1934, which acts as a

securities depository, or in the book-entry system

authorized by the U.S. Department of the Treasury and

certain federal agencies, collectively referred to

herein as "Securities System" in accordance with

applicable Federal Reserve Board and Securities and

<PAGE>

Exchange Commission rules and regulations, if any, and

subject to the following provisions:

1) The Custodian may keep securities of the Fund

in a Securities System provided that such

securities are represented in an account

("Account") of the Custodian in the Securities

System which shall not include any assets of

the Custodian other than assets held as a

fiduciary, custodian or otherwise for

customers;

2) The records of the Custodian with respect to

securities of the Fund which are maintained in

a Securities System shall identify by

book-entry those securities belonging to the

Fund;

3) The Custodian shall pay for securities

purchased for the account of the Fund upon

(i) receipt of advice from the Securities

System that such securities have been

transferred to the Account, and (ii) the

making of an entry on the records of the

Custodian to reflect such payment and transfer

for the account of the Fund. The Custodian

shall transfer securities sold for the account

of the Fund upon (i) receipt of advice from

<PAGE>

the Securities System that payment for such

securities has been transferred to the

Account, and (ii) the making of an entry on

the records of the Custodian to reflect such

transfer and payment for the account of the

Fund. Copies of all advices from the

Securities System of transfers of securities

for the account of the Fund shall identify the

Fund, be maintained for the Fund by the

Custodian and be provided to the Fund at its

request. Upon request, the Custodian shall

furnish the Fund confirmation of each transfer

to or from the account of the Fund in the form

of a written advice or notice and shall

furnish to the Fund copies of daily

transaction sheets reflecting each day's

transactions in the Securities System for the

account of the Fund.

4) The Custodian shall provide the Fund with any

report obtained by the Custodian on the

Securities System's accounting system,

internal accounting control and procedures for

safeguarding securities deposited in the

Securities System;

<PAGE>

5) The Custodian shall have received the initial

or annual certificate, as the case may be,

required by Article 9 hereof;

6) Anything to the contrary in this Contract

notwithstanding, the Custodian shall be liable

to the Fund for any loss or damage to the Fund

resulting from use of the Securities System by

reason of any negligence, misfeasance or

misconduct of the Custodian or any of its

agents or of any of its or their employees or

from failure of the Custodian or any such

agent to enforce effectively such rights as it

may have against the Securities System; at the

election of the Fund, it shall be entitled to

be subrogated to the rights of the Custodian

with respect to any claim against the

Securities System or any other person which

the Custodian may have as a consequence of any

such loss or damage if and to the extent that

the Fund has not been made whole for any such

loss or damage.

2.13 Segregated Account. The Custodian shall upon receipt of

Proper Instructions establish and maintain a segregated

account or accounts for and on behalf of the Fund, into

which account or accounts may be transferred cash and/or

<PAGE>

securities, including securities maintained in an

account by the Custodian pursuant to Section 2.12

hereof, (i) in accordance with the provisions of any

agreement among the Fund, the Custodian and a broker-

dealer registered under the Exchange Act and a member of

the NASD (or any futures commission merchant registered

under the Commodity Exchange Act), relating to

compliance with the rules of The Options Clearing

Corporation and of any registered national securities

exchange (or the Commodity Futures Trading Commission or

any registered contract market), or of any similar

organization or organizations, regarding escrow or other

arrangements in connection with transactions by the

Fund, (ii) for purposes of segregating cash or

government securities in connection with options

purchased, sold or written by the Fund or commodity

futures contracts or options thereon purchased or sold

by the Fund, (iii) for the purposes of compliance by the

Fund with the procedures required by Investment Company

Act Release No. 10666, or any subsequent release or

releases of the Securities and Exchange Commission

relating to the maintenance of segregated accounts by

registered investment companies and (iv) for other

proper corporate purposes, but only, in the case of

clause (iv), upon receipt of, in addition to Proper

<PAGE>

Instructions, a certified copy of a resolution of the

Trustees or of the Executive Committee signed by an

officer of the Fund and certified by the Secretary or an

Assistant Secretary, setting forth the purpose or

purposes of such segregated account and declaring such

purposes to be proper corporate purposes.

2.14 Ownership Certificates for Tax Purposes. The Custodian

shall execute ownership and other certificates and

affidavits for all federal and state tax purposes in

connection with receipt of income or other payments with

respect to securities of the Fund held by it and in

connection with transfers of securities.

2.15 Proxies. The Custodian shall, with respect to the

securities held hereunder, cause to be promptly executed

by the registered holder of such securities, if the

securities are registered otherwise than in the name of

the Fund or a nominee of the Fund, all proxies, without

indication of the manner in which such proxies are to be

voted, and shall promptly deliver to the Fund such

proxies, all proxy soliciting materials and all notices

relating to such securities.

2.16 Communications Relating to Fund Portfolio Securities.

The Custodian shall transmit promptly to the Fund all

written information (including, without limitation,

pendency of calls and maturates of securities and

<PAGE>

expirations of rights in connection therewith and

notices of exercise of call and put options written by

the Fund and the maturity of futures contracts purchased

or sold by the Fund) received by the Custodian from

issuers of the securities being held for the Fund. With

respect to tender or exchange offers, the Custodian

shall transmit promptly to the Fund all written

information received by the Custodian from issuers of

the securities whose tender or exchange is sought and

from the party (or his agents) making the tender or

exchange offer. If the Fund desires to take action with

respect to any tender offer, exchange offer or any other

similar transaction, the Fund shall notify the Custodian

at least three business days prior to the date on which

the Custodian is to take such action.

2.17 Proper Instructions. Proper Instructions as used

throughout this Article 2 means a writing signed or

initialled by one or more person or persons as the

Trustees shall have from time to time authorized. Each

such writing shall set forth the specific transaction or

type of transaction involved, including a specific

statement of the purpose for which such action is

requested. Oral instructions will be considered Proper

Instructions if the Custodian reasonably believes them

to have been given by a person authorized to give such

<PAGE>

instructions with respect to the transaction involved.

The Fund shall cause all oral instructions to be

confirmed in writing. Upon receipt of a certificate of

the Secretary or an Assistant Secretary as to the

authorization by the Trustees of the Fund accompanied by

a detailed description of procedures approved by the

Trustees, Proper Instructions may include communications

effected directly between electro-mechanical or

electronic devices provided that the Trustees and the

Custodian are satisfied that such procedures afford

adequate safeguards for the Fund's assets.

2.18 Actions Permitted without Express Authority. The

Custodian may in its discretion, without express

authority from the Fund:

1) make payments to itself or others for minor

expenses of handling securities or other

similar items relating to its duties under

this Contract, provided that all such payments

shall be accounted for to the Fund;

2) surrender securities in temporary form for

securities in definitive form;

3) endorse for collection, in the name of the

Fund, checks, drafts and other negotiable

instruments; and

<PAGE>

4) in general, attend to all non-discretionary

details in connection with the sale, exchange,

substitution, purchase, transfer and other

dealings with the securities and property of

the Fund except as otherwise directed by the

Trustees of the Fund.

2.19 Evidence of Authority. The Custodian shall be protected

in acting upon any instructions, notice, request,

consent, certificate or other instrument or paper

believed by it to be genuine and to have been properly

executed by or on behalf of the Fund. The Custodian may

receive and accept a certified copy of a vote of the

Trustees of the Fund as conclusive evidence (a) of the

authority of any person to act in accordance with such

vote or (b) of any determination or of any action by the

Trustees pursuant to the Declaration of Trust as

described in such vote, and such vote may be considered

as in full force and effect until receipt by the

Custodian of written notice to the contrary.

3. Duties of Custodian with Respect to the Books of Account

and Calculation of Net Asset Value and Net Income.

The Custodian shall cooperate with and supply necessary

information to the entity or entities appointed by the Trustees

of the Fund to keep the books of account of the Fund and/or

compute the net asset value per share of the outstanding shares

<PAGE>

of the Fund or, if directed in writing to do so by the Fund,

shall itself keep such books of account and/or compute such net

asset value per share. If so directed, the Custodian shall also

calculate daily the net income of the Fund as described in the

Fund's currently effective prospectus and shall advise the Fund

and the Transfer Agent daily of the total amounts of such net

income and, if instructed in writing by an officer of the Fund to

do so, shall advise the Transfer Agent periodically of the

division of such net income among its various components. The

calculations of the net asset value per share and the daily

income of the Fund shall be made at the time or times described

from time to time in the Fund's currently effective prospectus.

4. Records

The Custodian shall create and maintain all records

relating to its activities and obligations under this Contract in

such manner as will meet the obligations of the Fund under the

Investment Company Act of 1940, with particular attention to

Section 31 thereof and Rules 31a-1 and 31a-2 thereunder,

applicable federal and state tax laws and any other law or

administrative rules or procedures which may be applicable to the

Fund. All such records shall be the property of the Fund and

shall at all times during the regular business hours of the

Custodian be open for inspection by duly authorized officers,

employees or agents of the Fund and employees and agents of the

Securities and Exchange Commission. The Custodian shall, at the

<PAGE>

Fund's request, supply the Fund with a tabulation of securities

owned by the Fund and held by the Custodian and shall, when

requested to do so by the Fund and for such compensation as shall

be agreed upon between the Fund and the Custodian, include

certificate numbers in such tabulations.

5. Opinion of Fund's Independent Accountant

The Custodian shall take all reasonable action, as the

Fund may from time to time request, to obtain from year to year

favorable opinions from the Fund's independent accountants with

respect to its activities hereunder in connection with the

preparation of the Fund's Form N-1A, and Form N-SAR or other

annual reports to the Securities and Exchange Commission and with

respect to any other requirements of such Commission.

6. Reports to Fund by Independent Public Accountants

The Custodian shall provide the Fund, at such times as

the Fund may reasonably require, with reports by independent

public accountants on the accounting system, internal accounting

control and procedures for safeguarding securities, futures

contracts and options on futures contracts, including securities

deposited and/or maintained in a Securities System, relating to

the services provided by the Custodian under this Contract; such

reports, which shall be of sufficient scope and in sufficient

detail, as may reasonably be required by the Fund, to provide

reasonable assurance that any material inadequacies would be

<PAGE>

disclosed by such examination, and, if there are no such

inadequacies, shall so state.

7. Compensation of Custodian

The Custodian shall be entitled to reasonable

compensation for its services and expenses as Custodian, as

agreed upon from time to time between the Fund and the Custodian.

8. Responsibility of Custodian

So long as and to the extent that it is in the exercise

of reasonable care, the Custodian shall not be responsible for

the title, validity or genuineness of any property or evidence of

title thereto received by it or delivered by it pursuant to this

Contract and shall be held harmless in acting upon any notice,

request, consent, certificate or other instrument reasonably

believed by it to be genuine and to be signed by the proper party

or parties. The Custodian shall be held to the exercise of

reasonable care in carrying out the provisions of this Contract,

but shall be kept indemnified by and shall be without liability

to the Fund for any action taken or omitted by it in good faith

without negligence. It shall be entitled to rely on and may act

upon advice of counsel (who may be counsel for the Fund) on all

matters, and shall be without liability for any action reasonably

taken or omitted pursuant to such advice. Notwithstanding the

foregoing, the responsibility of the Custodian with respect to

redemptions effected by check shall be in accordance with a

<PAGE>

separate Agreement entered into between the Custodian and the

Fund.

If the Fund requires the Custodian to take any action

with respect to securities, which action involves the payment of

money or which action may, in the opinion of the Custodian,

result in the Custodian or its nominee assigned to the Fund being

liable for the payment of money or incurring liability of some

other form, the Fund, as a prerequisite to requiring the

Custodian to take such action, shall provide indemnity to the

Custodian in an amount and form satisfactory to it.

If the Fund requires the Custodian to advance cash or

securities for any purpose or in the event that the Custodian or

its nominee shall incur or be assessed any taxes, charges,

expenses, assessments, claims or liabilities in connection with

the performance of this Contract, except such as may arise from

its or its nominee's own negligent action, negligent failure to

act or willful misconduct, any property at any time held for the

account of the Fund shall be security therefor and should the

Fund fail to repay the Custodian promptly, the Custodian shall be

entitled to utilize available cash and to dispose of Fund assets

to the extent necessary to obtain reimbursement.

9. Effective Period, Termination and Amendment

This Contract shall become effective as of its

execution, shall continue in full force and effect until

terminated as hereinafter provided, may be amended at any time by

<PAGE>

mutual agreement of the parties hereto and may be terminated by

either party by an instrument in writing delivered or mailed,

postage prepaid to the other party, such termination to take

effect not sooner than thirty (30) days after the date of such

delivery or mailing; provided, however that the Custodian shall

not act under Section 2.12 hereof in the absence of receipt of an

initial certificate of the Secretary or an Assistant Secretary

that the Trustees of the Fund have approved the initial use of a

particular Securities System and the receipt of an annual

certificate of the Secretary or an Assistant Secretary that the

Trustees have reviewed the use by the Fund of such Securities

System, as required in each case by Rule 17f-4 under the

Investment Company Act of 1940, as amended; provided further,

however, that the Fund shall not amend or terminate this Contract

in contravention of any applicable federal or state regulations,

or any provision of the Declaration of Trust, and further

provided, that the Fund may at any time by action of its Trustees

(i) substitute another bank or trust company for the Custodian by

giving notice as described above to the Custodian, or

(ii) immediately terminate this Contract in the event of the

appointment of a conservator or receiver for the Custodian by the

Comptroller of the Currency or upon the happening of a like event

at the direction of an appropriate regulatory agency or court of

competent jurisdiction.

<PAGE>

Upon termination of the Contract, the Fund shall pay to

the Custodian such compensation as may be due as of the date of

such termination and shall likewise reimburse the Custodian for

its costs, expenses and disbursements.

10. Successor Custodian

If a successor custodian shall be appointed by the

Trustees of the Fund, the Custodian shall, upon termination,

deliver to such successor custodian at the office of the

Custodian, duly endorsed and in the form for transfer, all

securities then held by it hereunder and shall transfer to an

account of the successor custodian all of the Fund's securities

held in a Securities System.

If no such successor custodian shall be appointed, the

Custodian shall, in like manner, upon receipt of a certified copy

of a vote of the Trustees of the Fund, deliver at the office of

the Custodian and transfer such securities, funds and other

properties in accordance with such vote.

In the event that no written order designating a

successor custodian or certified copy of a vote of the Trustees

shall have been delivered to the Custodian on or before the date

when such termination shall become effective, then the Custodian

shall have the right to deliver to a bank or trust company, which

is a "bank" as defined in the Investment Company Act of 1940,

doing business in Boston, Massachusetts, of its own selection,

having an aggregate capital, surplus, and undivided profits, as

<PAGE>

shown by its last published report, of not less than $25,000,000,

all securities, funds and other properties held by the Custodian

and all instruments held by the Custodian relative thereto and

all other property held by it under this Contract and to transfer

to an account of such successor custodian all of the Fund's

securities held in any Securities System. Thereafter, such bank

or trust company shall be the successor of the Custodian under

this Contract.

In the event that securities, funds and other properties

remain in the possession of the Custodian after the date of

termination hereof owing to failure of the Fund to procure the

certified copy of vote referred to or of the Trustees to appoint

a successor custodian, the Custodian shall be entitled to fair

compensation for its services during such period as the Custodian

retains possession of such securities, funds and other properties

and the provisions of this Contract relating to the duties and

obligations of the Custodian shall remain in full force and

effect.

11. Interpretive and Additional Provisions

In connection with the operation of this Contract, the

Custodian and the Fund may from time to time agree on such

provisions interpretive of or in addition to the provisions of

this Contract as may in their joint opinion be consistent with

the general tenor of this Contract. Any such interpretive or

additional provisions shall be in a writing signed by both

<PAGE>

parties and shall be annexed hereto, provided that no such

interpretive or additional provisions shall contravene any

applicable federal or state regulations or any provision of the

Declaration of Trust of the Fund. No interpretive or additional

provisions made as provided in the preceding sentence shall be

deemed to be an amendment of this Contract.

12. Massachusetts Law to Apply

This Contract shall be construed and the provisions

thereof interpreted under and in accordance with laws of The

Commonwealth of Massachusetts.

13. Prior Contracts

This Contract supersedes and terminates, as of the date

hereof, all prior contracts between the Fund and the Custodian

relating to the custody of the Fund's assets.

<PAGE>

IN WITNESS WHEREOF, each of the parties has caused this

instrument to be executed in its name and behalf by its duly

authorized representative and its seal to be hereunder affixed as

of the 1st day of June, 1985.

ATTEST ALLIANCE GOVERNMENT RESERVES

/s/William A. Bennet /s/ James P. Syrett
_________________________ By ________________________________
Secretary President

ATTEST STATE STREET BANK AND TRUST COMPANY

/s/ K. M. Kubit /s/ Charles Cassidy
_________________________ By ________________________________
Assistant Secretary Vice President

32
00250083.AD6

<PAGE>

AMENDMENT TO THE

CUSTODIAN CONTRACT

AGREEMENT made this 23rd day of May, 1989 by and between

STATE STREET BANK AND TRUST COMPANY ("Custodian") and ALLIANCE

GOVERNMENT RESERVES (the "Fund").

WITNESSETH THAT:

WHEREAS, the Custodian and the Fund are parties to a

Custodian Contract dated June 1, 1985, (as amended to date, the

"Contract") which governs the terms and conditions under which

the Custodian maintains custody of the securities and other

assets of the Fund:

NOW THEREFORE, the Custodian and the Fund hereby amend

the terms of the Custodian Contract and mutually agree to the

following:

Replace subsection 7 of Section 2.2 Delivery of

Securities with the following new subsection 7:

7) Upon the sale of such securities for the account
of the Fund, to the broker or its clearing agent,
against a receipt, for examination in accordance
with "street delivery" custom; the Custodian shall
have no responsibility or liability for any loss
arising from the delivery of such securities prior
to receiving payment for such securities except as
may arise from the Custodian's own negligence or
willful misconduct;

<PAGE>

IN WITNESS WHEREOF, each of the parties has caused this

Amendment to be executed in its name and on its behalf by a duly

authorized officer as of the day and year first above written.

ATTEST ALLIANCE GOVERNMENT RESERVES

/s/ Edmund P. Bergan, Jr. /s/ James P. Syrett
__________________________ ____________________________________
Secretary President

ATTEST STATE STREET BANK AND TRUST COMPANY

/s/ P. McClure /s/ E. D. Hawkes, Jr.
__________________________ ____________________________________
Assistant Secretary Vice President

2
00250083.AD5

<PAGE>

ALLIANCE FUND SERVICES, INC.

TRANSFER AGENCY AGREEMENT

AGREEMENT, dated as of September 13, 1988, between

ALLIANCE GOVERNMENT RESERVES, a Massachusetts business trust

and an open-end investment company registered with the

Securities and Exchange Commission (the "SEC") under the

Investment Company Act of 1940 (the "Investment Company

Act"), having its principal place of business at 1345 Avenue

of Americas, New York, New York 10105 (the "Fund"), and

ALLIANCE FUND SERVICES, INC., a Delaware corporation

registered with the SEC as a transfer agent under the

Securities Exchange Act of 1934, having its principal place

of business at 500 Plaza Drive, Secaucus, New Jersey 07094

("Fund Services"), provides as follows:

WHEREAS, Fund Services has agreed to act as

transfer agent to the Fund for the purpose of recording the

transfer, issuance and redemption of shares of each series

of the common stock or shares of beneficial interest, as

applicable, of the Fund ("Shares" or "Shares of a Series"),

transferring the Shares, disbursing dividends and other

distributions to shareholders of the Fund, and performing

such other services as may be agreed to pursuant hereto;

NOW THEREFORE, for and in consideration of the

mutual covenants and agreements contained herein, the

parties do hereby agree as follows:

<PAGE>

SECTION 1. The Fund hereby appoints Fund Services

as its transfer agent, dividend disbursing agent and

shareholder servicing agent for the Shares, and Fund

Services agrees to act in such capacities upon the terms set

forth in this Agreement. Capitalized terms used in this

Agreement and not otherwise defined shall have the meanings

assigned to them in SECTION 30.

SECTION 2.

(a) The Fund shall provide Fund Services with

copies of the following documents:

(1) Specimens of all forms of certificates

for Shares;

(2) Specimens of all account application

forms and other documents relating to Shareholders'

accounts;

(3) Copies of each Prospectus;

(4) Specimens of all documents relating to

withdrawal plans instituted by the Fund, as described in

SECTION 16; and

(5) Specimens of all amendments to any of the

foregoing documents.

(b) The Fund shall furnish to Fund Services a

supply of blank Share Certificates for the Shares and, from

time to time, will renew such supply upon Fund Services'

request. Blank Share Certificates shall be signed manually

<PAGE>

or by facsimile signatures of officers of the Fund

authorized to sign by law or pursuant to the by-laws of the

Fund and, if required by Fund Services, shall bear the

Fund's seal or a facsimile thereof.

SECTION 3. Fund Services shall make original

issues of Shares in accordance with SECTIONS 13 and 14 and

the Prospectus upon receipt of (i) Written Instructions

requesting the issuance, (ii) a certified copy of a

resolution of the Fund's Board of Directors or Trustees

authorizing the issuance, (iii) necessary funds for the

payment of any original issue tax applicable to such Shares,

and (iv) an opinion of the Fund's counsel as to the legality

and validity of the issuance, which opinion may provide that

it is contingent upon the filing by the Fund of an

appropriate notice with the SEC, as required by Rule 24f-2

of the Investment Company Act, as amended from time to time.

SECTION 4. Transfers of Shares shall be registered

and, subject to the provisions of SECTION 10 in the case of

Shares evidenced by Share Certificates, new Share

Certificates shall be issued by Fund Services upon surrender

of outstanding Share Certificates in the form deemed by Fund

Services to be properly endorsed for transfer, which form

shall include (i) all necessary endorsers' signatures

guaranteed by a member firm of a national securities

exchange or a domestic commercial bank or through other

<PAGE>

procedures mutually agreed to between the Fund and Fund

Services, (ii) such assurances as Fund Services may deem

necessary to evidence the genuineness and effectiveness of

each endorsement and (iii) satisfactory evidence of

compliance with all applicable laws relating to the payment

or collection of taxes.

SECTION 5. Fund Services shall forward Share

Certificates in "non-negotiable" form by first-class or

registered mail, or by whatever means Fund Services deems

equally reliable and expeditious. While in transit to the

addressee, all deliveries of Share Certificates shall be

insured by Fund Services as it deems appropriate. Fund

Services shall not mail Share Certificates in "negotiable"

form, unless requested in writing by the Fund and fully

indemnified by the Fund to Fund Services' satisfaction.

SECTION 6. In registering transfers of Shares,

Fund Services may rely upon the Uniform Commercial Code as

in effect from time to time in the State in which the Fund

is incorporated or organized or, if appropriate, in the

State of New Jersey; provided, that Fund Services may rely

in addition or alternatively on any other statutes in effect

in the State of New Jersey or in the state under the laws of

which the Fund is incorporated or organized that, in the

opinion of Fund Services' counsel, protect Fund Services and

the Fund from liability arising from (i) not requiring

<PAGE>

complete documentation in connection with an issuance or

transfer, (ii) registering a transfer without an adverse

claim inquiry, (iii) delaying registration for purposes of

an adverse claim inquiry or (iv) refusing registration in

connection with an adverse claim.

SECTION 7. Fund Services may issue new Share

Certificates in place of those lost, destroyed or stolen,

upon receiving indemnity satisfactory to Fund Services; and

may issue new Share Certificates in exchange for, and upon

surrender of, mutilated Share Certificates as Fund Services

deems appropriate.

SECTION 8. Unless otherwise directed by the Fund,

Fund Services may issue or register Share Certificates

reflecting the signature, or facsimile thereof, of an

officer who has died, resigned or been removed by the Fund.

The Fund shall file promptly with Fund Services' approval,

adoption or ratification of such action as may be required

by law or by Fund Services.

SECTION 9. Fund Services shall maintain customary

stock registry records for Shares of each Series noting the

issuance, transfer or redemption of Shares and the issuance

and transfer of Share Certificates. Fund Services may also

maintain for Shares of each Series an account entitled

"Unissued Certificate Account," in which Fund Services will

record the Shares, and fractions thereof, issued and

<PAGE>

outstanding from time to time for which issuance of Share

Certificates has not been requested. Fund Services is

authorized to keep records for Shares of each Series

containing the names and addresses of record of

Shareholders, and the number of Shares, and fractions

thereof, from time to time owned by them for which no Share

Certificates are outstanding. Each Shareholder will be

assigned a single account number for Shares of each Series,

even though Shares for which Certificates have been issued

will be accounted for separately.

SECTION 10. Fund Services shall issue Share

Certificates for Shares only upon receipt of a written

request from a Shareholder and as authorized by the Fund.

If Shares are purchased or transferred without a request for

the issuance of a Share Certificate, Fund Services shall

merely note on its stock registry records the issuance or

transfer of the Shares and fractions thereof and credit or

debit, as appropriate, the Unissued Certificate Account and

the respective Shareholders' accounts with the Shares.

Whenever Shares, and fractions thereof, owned by

Shareholders are surrendered for redemption, Fund Services

may process the transactions by making appropriate entries

in the stock transfer records, and debiting the Unissued

Certificate Account and the record of issued Shares

<PAGE>

outstanding; it shall be unnecessary for Fund Services to

reissue Share Certificates in the name of the Fund.

SECTION 11. Fund Services shall also perform the

usual duties and function required of a stock transfer agent

for a corporation, including but not limited to (i) issuing

Share Certificates as treasury Shares, as directed by

Written Instructions, and (ii) transferring Share

Certificates from one Shareholder to another in the usual

manner. Fund Services may rely conclusively and act without

further investigation upon any list, instruction,

certification, authorization, Share Certificate or other

instrument or paper reasonably believed by it in good faith

to be genuine and unaltered, and to have been signed,

countersigned or executed or authorized by a duly-authorized

person or persons, or by the Fund, or upon the advice of

counsel for the Fund or for Fund Services. Fund Services

may record any transfer of Share Certificates which it

reasonably believes in good faith to have been duly

authorized, or may refuse to record any transfer of Share

Certificates if, in good faith, it reasonably deems such

refusal necessary in order to avoid any liability on the

part of either the Fund or Fund Services.

SECTION 12. Fund Services shall notify the Fund of

any request or demand for the inspection of the Fund's share

records. Fund Services shall abide by the Fund's

<PAGE>

instructions for granting or denying the inspection;

provided, however, Fund Services may grant the inspection

without such instructions if it is advised by its counsel

that failure to do so will result in liability to Fund

Services.

SECTION 13. Fund Services shall observe the

following procedures in handling funds received:

(a) Upon receipt at the office designated by the

Fund of any check or other order drawn or endorsed to the

Fund or otherwise identified as being for the account of the

Fund, and, in the case of a new account, accompanied by a

new account application or sufficient information to

establish an account as provided in the Prospectus, Fund

Services shall stamp the transmittal document accompanying

such check or other order with the name of the Fund and the

time and date of receipt and shall forthwith deposit the

proceeds thereof in the custodial account of the Fund.

(b) In the event that any check or other order for

the purchase of Shares is returned unpaid for any reason,

Fund Services shall, in the absence of other instructions

from the Fund, advise the Fund of the returned check and

prepare such documents and information as may be necessary

to cancel promptly any Shares purchased on the basis of such

returned check and any accumulated income dividends and

capital gains distributions paid on such Shares.

<PAGE>

time or at such other times as the Fund may specify in

Written or Oral Instructions for any Series (the "Valuation

Time") on each Business Day Fund Services shall obtain from

the Fund's Adviser a quotation (on which it may conclusively

rely) of the net asset value, determined as of the Valuation

Time on that day. On each Business Day Fund Services shall

use the net asset value(s) determined by the Fund's Adviser

to compute the number of Shares and fractional Shares to be

purchased and the aggregate purchase proceeds to be

deposited with the Custodian. As necessary but no more

frequently than daily (unless a more frequent basis is

agreed to by Fund Services), Fund Services shall place a

purchase order with the Custodian for the proper number of

Shares and fractional Shares to be purchased and promptly

thereafter shall send written confirmation of such purchase

to the Custodian and the Fund.

SECTION 14. Having made the calculations required

by SECTION 13, Fund Services shall thereupon pay the

Custodian the aggregate net asset value of the Shares

purchased. The aggregate number of Shares and fractional

Shares purchased shall then be issued daily and credited by

Fund Services to the Unissued Certificate Account. Fund

Services shall also credit each Shareholder's separate

account with the number of Shares purchased by such

<PAGE>

Shareholder. Fund Services shall mail written confirmation

of the purchase to each Shareholder or the Shareholder's

representative and to the Fund if requested. Each

confirmation shall indicate the prior Share balance, the new

Share balance, the Shares for which Stock Certificates are

outstanding (if any), the amount invested and the price paid

for the newly-purchased Shares.

SECTION 15. Prior to the Valuation Time on each

Business Day, as specified in accordance with SECTION 13,

Fund Services shall process all requests to redeem Shares

and, with respect to each Series, shall advise the Custodian

of (i) the total number of Shares available for redemption

and (ii) the number of Shares and fractional Shares

requested to be redeemed. Upon confirmation of the net

asset value by the Fund's Adviser, Fund Services shall

notify the Fund and the Custodian of the redemption, apply

the redemption proceeds in accordance with SECTION 16 and

the Prospectus, record the redemption in the stock registry

books, and debit the redeemed Shares from the Unissued

Certificates Account and the individual account of the

Shareholder.

In lieu of carrying out the redemption procedures

described in the preceding paragraph, Fund Services may, at

the request of the Fund, sell Shares to the Fund as

repurchases from Shareholders, provided that the sale price

<PAGE>

is not less than the applicable redemption price. The

redemption procedures shall then be appropriately modified.

SECTION 16. Fund Services will carry out the

following procedures with respect to Share redemptions:

(a) As to each request received by the Fund from

or on behalf of a Shareholder for the redemption of Shares,

and unless the right of redemption has been suspended as

contemplated by the Prospectus, Fund Services shall, within

seven days after receipt of such redemption request, either

(i) mail a check in the amount of the proceeds of such

redemption to the person designated by the Shareholder or

other person to receive such proceeds or, (ii) in the event

redemption proceeds are to be wired through the Federal

Reserve Wire System or by bank wire pursuant to procedures

described in the Prospectus, cause such proceeds to be wired

in Federal funds to the bank or trust company account

designated by the Shareholder to receive such proceeds.

Funds Services shall also prepare and send a confirmation of

such redemption to the Shareholder. Redemptions in kind

shall be made only in accordance with such Written

Instructions as Fund Services may receive from the Fund.

The requirements as to instruments of transfer and other

documentation, the determination of the appropriate

redemption price and the time of payment shall be as

provided in the Prospectus, subject to such additional

<PAGE>

requirements consistent therewith as may be established by

mutual agreement between the Fund and Fund Services. In the

case of a request for redemption that does not comply in all

respects with the requirements for redemption, Fund Services

shall promptly so notify the Shareholder and shall effect

such redemption at the price in effect at the time of

receipt of documents complying with such requirements. Fund

Services shall notify the Fund's Custodian and the Fund on

each Business Day of the amount of cash required to meet

payments made pursuant to the provisions of this paragraph

and thereupon the Fund shall instruct the Custodian to make

available to Fund Services in timely fashion sufficient

funds therefor.

(b) Procedures and standards for effecting and

accepting redemption orders from Shareholders by telephone

or by such check writing service as the Fund may institute

may be established by mutual agreement between Fund Services

and the Fund consistent with the Prospectus.

been purchased by check within fifteen (15) days prior to

receipt of the redemption request, the Fund shall provide

Fund Services with Written Instructions concerning the time

within which such requests may be honored.

(d) Fund Services shall process withdrawal orders

duly executed by Shareholders in accordance with the terms

<PAGE>

of any withdrawal plan instituted by the Fund and described

in the Prospectus. Payments upon such withdrawal orders and

redemptions of Shares held in withdrawal plan accounts in

connection with such payments shall be made at such times as

the Fund may determine in accordance with the Prospectus.

(e) The authority of Fund Services to perform its

responsibilities under SECTIONS 15 and 16 with respect to

the Shares of any Series shall be suspended if Fund Services

receives notice of the suspension of the determination of

the net asset value of the Series.

SECTION 17. Upon the declaration of each dividend

and each capital gains distribution by the Fund's Board of

Directors or Trustees, the Fund shall notify Fund Services

of the date of such declaration, the amount payable per

Share, the record date for determining the Shareholders

entitled to payment, the payment and the reinvestment date

price.

SECTION 18. Upon being advised by the Fund of the

declaration of any income dividend or capital gains

distribution on account of its Shares, Fund Services shall

compute and prepare for the Fund records crediting such

distributions to Shareholders. Fund Services shall, on or

before the payment date of any dividend or distribution,

notify the Fund and the Custodian of the estimated amount

required to pay any portion of a dividend or distribution

<PAGE>

which is payable in cash, and thereupon the Fund shall, on

or before the payment date of such dividend or distribution,

instruct the Custodian to make available to Fund Services

sufficient funds for the payment of such cash amount. Fund

Services will, on the designated payment date, reinvest all

dividends in additional shares and promptly mail to each

Shareholder at his address of record a statement showing the

number of full and fractional Shares (rounded to three

decimal places) then owned by the Shareholder and the net

asset value of such Shares; provided, however, that if a

Shareholder elects to receive dividends in cash, Fund

Services shall prepare a check in the appropriate amount and

mail it to the Shareholder at his address of record within

five (5) business days after the designated payment date, or

transmit the appropriate amount in Federal funds in

accordance with the Shareholder's agreement with the Fund.

SECTION 19. Fund Services shall prepare and

maintain for the Fund records showing for each Shareholder's

account the following:

A. The name, address and tax identification

number of the Shareholder;

B. The number of Shares of each Series held by

the Shareholder;

C. Historical information including dividends

paid and date and price for all transactions;

<PAGE>

D. Any stop or restraining order placed against

such account;

E. Information with respect to the withholding of

any portion of income dividends or capital gains

distributions as are required to be withheld under

applicable law;

F. Any dividend or distribution reinvestment

election, withdrawal plan application, and correspondence

relating to the current maintenance of the account;

G. The certificate numbers and denominations of

any Share Certificates issued to the Shareholder; and

H. Any additional information required by Fund

Services to perform the services contemplated by this

Agreement.

Fund Services agrees to make available upon request

by the Fund or the Fund's Adviser and to preserve for the

periods prescribed in Rule 31a-2 of the Investment Company

Act any records related to services provided under this

Agreement and required to be maintained by Rule 31a-1 of

that Act, including:

(i) Copies of the daily transaction register for each

Business Day of the Fund;

(ii) Copies of all dividend, distribution and

reinvestment blotters;

<PAGE>

(iii) Schedules of the quantities of Shares of each

Series distributed in each state for purposes of

any state's laws or regulations as specified in

Oral or Written Instructions given to Fund

Services from time to time by the Fund or its

agents; and

(iv) Such other information, including Shareholder

lists, and statistical information as may be

agreed upon from time to time by the Fund and Fund

Services.

SECTION 20. Fund Services shall maintain those

records necessary to enable the Fund to file, in a timely

manner, form N-SAR (Semi-Annual Report) or any successor

report required by the Investment Company Act or rules and

regulations thereunder.

SECTION 21. Fund Services shall cooperate with the

Fund's independent public accountants and shall take

reasonable action to make all necessary information

available to such accountants for the performance of their

duties.

SECTION 22. In addition to the services described

above, Fund Services will perform other services for the

Fund as may be mutually agreed upon in writing from time to

time, which may include preparing and filing Federal tax

forms with the Internal Revenue Service, and, subject to

<PAGE>

supervisory oversight by the Fund's Adviser, mailing Federal

tax information to Shareholders, mailing semi-annual

Shareholder reports, preparing the annual list of

Shareholders, mailing notices of Shareholders' meetings,

proxies and proxy statements and tabulating proxies. Fund

Services shall answer the inquiries of certain Shareholders

related to their share accounts and other correspondence

requiring an answer from the Fund. Fund Services shall

maintain dated copies of written communications from

Shareholders, and replies thereto.

SECTION 23. Nothing contained in this Agreement is

intended to or shall require Fund Services, in any capacity

hereunder, to perform any functions or duties on any day

other than a Business Day. Functions or duties normally

scheduled to be performed on any day which is not a Business

Day shall be performed on, and as of, the next Business Day,

unless otherwise required by law.

SECTION 24. For the services rendered by Fund

Services as described above, the Fund shall pay to Fund

Services an annualized fee at a rate to be mutually agreed

upon from time to time. Such fee shall be prorated for the

months in which this Agreement becomes effective or is

terminated. In addition, the Fund shall pay, or Fund

Services shall be reimbursed for, all out-of-pocket expenses

incurred in the performance of this Agreement, including but

<PAGE>

not limited to the cost of stationery, forms, supplies,

blank checks, stock certificates, proxies and proxy

solicitation and tabulation costs, all forms and statements

used by Fund Services in communicating with Shareholders of

the Fund or especially prepared for use in connection with

its services hereunder, specific software enhancements as

requested by the Fund, costs associated with maintaining

withholding accounts (including non-resident alien, Federal

government and state), postage, telephone, telegraph (or

similar electronic media) used in communicating with

Shareholders or their representatives, outside mailing

services, microfiche/microfilm, freight charges and off-site

record storage. It is agreed in this regard that Fund

Services, prior to ordering any form in such supply as it

estimates will be adequate for more than two years' use,

shall obtain the written consent of the Fund. All forms for

which Fund Services has received reimbursement from the Fund

shall be the property of the Fund.

SECTION 25. Fund Services shall not be liable for

any taxes, assessments or governmental charges that may be

levied or assessed on any basis whatsoever in connection

with the Fund or any Shareholder, excluding taxes assessed

against Fund Services for compensation received by it

hereunder.

<PAGE>

SECTION 26.

(a) Fund Services shall at all times act in good

faith and with reasonable care in performing the services to

be provided by it under this Agreement, but shall not be

liable for any loss or damage unless such loss or damage is

caused by the negligence, bad faith or willful misconduct of

Fund Services or its employees or agents.

(b) The Fund shall indemnify and hold Fund

Services harmless from all loss, cost, damage and expense,

including reasonable expenses for counsel, incurred by it

resulting from any claim, demand, action or suit in

connection with the performance of its duties hereunder, or

as a result of acting upon any instruction reasonably

believed by it to have been properly given by a duly

authorized officer of the Fund, or upon any information,

data, records or documents provided to Fund Services or its

agents by computer tape, telex, CRT data entry or other

similar means authorized by the Fund; provided that this

indemnification shall not apply to actions or omissions of

Fund Services in cases of its own bad faith, willful

misconduct or negligence, and provided further that if in

any case the Fund may be asked to indemnify or hold Fund

Services harmless pursuant to this Section, the Fund shall

have been fully and promptly advised by Fund Services of all

material facts concerning the situation in question. The

<PAGE>

Fund shall have the option to defend Fund Services against

any claim which may be the subject of this indemnification,

and in the event that the Fund so elects it will so notify

Fund Services, and thereupon the Fund shall retain competent

counsel to undertake defense of the claim, and Fund Services

shall in such situations incur no further legal or other

expenses for which it may seek indemnification under this

paragraph. Fund Services shall in no case confess any claim

or make any compromise in any case in which the Fund may be

asked to indemnify Fund Services except with the Fund's

prior written consent.

Without limiting the foregoing:

(i) Fund Services may rely upon the advice of the

Fund or counsel to the Fund or Fund Services, and upon

statements of accountants, brokers and other persons

believed by Fund Services in good faith to be expert in the

matters upon which they are consulted. Fund Services shall

not be liable for any action taken in good faith reliance

upon such advice or statements;

(ii) Fund Services shall not be liable for any

action reasonably taken in good faith reliance upon any

Written Instructions or certified copy of any resolution of

the Fund's Board of Directors or Trustees, including a

Written Instruction authorizing Fund Services to make

payment upon redemption of Shares without a signature

<PAGE>

guarantee; provided, however, that upon receipt of a Written

Instruction countermanding a prior Instruction that has not

been fully executed by Fund Services, Fund Services shall

verify the content of the second Instruction and honor it,

to the extent possible. Fund Services may rely upon the

genuineness of any such document, or copy thereof,

reasonably believed by Fund Services in good faith to have

been validly executed;

(iii) Fund Services may rely, and shall be protected

by the Fund in acting, upon any signature, instruction,

request, letter of transmittal, certificate, opinion of

counsel, statement, instrument, report, notice, consent,

order, or other paper or document reasonably believed by it

in good faith to be genuine and to have been signed or

presented by the purchaser, the Fund or other proper party

or parties; and

(d) Fund Services may, with the consent of the

Fund, subcontract the performance of any portion of any

service to be provided hereunder, including with respect to

any Shareholder or group of Shareholders, to any agent of

Fund Services and may reimburse the agent for the services

it performs at such rates as Fund Services may determine;

provided that no such reimbursement will increase the amount

payable by the Fund pursuant to this Agreement; and provided

<PAGE>

further, that Fund Services shall remain ultimately

responsible as transfer agent to the Fund.

SECTION 27. The Fund shall deliver or cause to be

delivered over to Fund Services (i) an accurate list of

Shareholders, showing each Shareholder's address of record,

number of Shares of each Series owned and whether such

Shares are represented by outstanding Share Certificates or

by non-certificated Share accounts and (ii) all Shareholder

records, files, and other materials necessary or appropriate

for proper performance of the functions assumed by the under

this Agreement (collectively referred to as the

"Materials"). The Fund shall indemnify Fund Services and

hold it harmless from any and all expenses, damages, claims,

suits, liabilities, actions, demands and losses arising out

of or in connection with any error, omission, inaccuracy or

other deficiency of such Materials, or out of the failure of

the Fund to provide any portion of the Materials or to

provide any information in the Fund's possession needed by

Fund Services to knowledgeably perform its functions;

provided the Fund shall have no obligation to indemnify Fund

Services or hold it harmless with respect to any expenses,

damages, claims, suits, liabilities, actions, demands or

losses caused directly or indirectly by acts or omissions of

Fund Services or the Fund's Adviser.

<PAGE>

SECTION 28. This Agreement may be amended from

time to time by a written supplemental agreement executed by

the Fund and Fund Services and without notice to or approval

of the Shareholders; provided this Agreement may not be

amended in any manner which would substantially increase the

Fund's obligations hereunder unless the amendment is first

approved by the Fund's Board of Directors or Trustees,

including a majority of the Directors or Trustees who are

not a party to this Agreement or interested persons of any

such party, at a meeting called for such purpose, and

thereafter is approved by the Fund's Shareholders if such

approval is required under the Investment Company Act or the

rules and regulations thereunder. The parties hereto may

adopt procedures as may be appropriate or practical under

the circumstances, and Fund Services may conclusively rely

on the determination of the Fund that any procedure that has

been approved by the Fund does not conflict with or violate

any requirement of its Articles of Incorporation or

Declaration of Trust, By-Laws or Prospectus, or any rule,

regulation or requirement of any regulatory body.

SECTION 29. The Fund shall file with Fund Services

a certified copy of each operative resolution of its Board

of Directors or Trustees authorizing the execution of

Written Instructions or the transmittal of Oral Instructions

and setting forth authentic signatures of all signatories

<PAGE>

authorized to sign on behalf of the Fund and specifying the

person or persons authorized to give Oral Instructions on

behalf of the Fund. Such resolution shall constitute

conclusive evidence of the authority of the person or

persons designated therein to act and shall be considered in

full force and effect, with Fund Services fully protected in

acting in reliance therein, until Fund Services receives a

certified copy of a replacement resolution adding or

deleting a person or persons authorized to give Written or

Oral Instructions. If the officer certifying the resolution

is authorized to give Oral Instructions, the certification

shall also be signed by a second officer of the Fund.

SECTION 30. The terms, as defined in this Section,

whenever used in this Agreement or in any amendment or

supplement hereto, shall have the meanings specified below,

insofar as the context will allow.

(a) Business Day: Any day on which the Fund is

open for business as described in the Prospectus.

(b) Custodian: The term Custodian shall mean the

Fund's current custodian or any successor custodian acting

as such for the Fund.

mean Alliance Capital Management L.P. or any successor

thereto who acts as the investment adviser or manager of the

Fund.

<PAGE>

(d) Oral Instructions: The term Oral Instructions

shall mean an authorization, instruction, approval, item or

set of data, or information of any kind transmitted to Fund

Services in person or by telephone, vocal telegram or other

electronic means, by a person or persons reasonably believed

in good faith by Fund Services to be a person or persons

authorized by a resolution of the Board of Directors or

Trustees of the Fund to give Oral Instructions on behalf of

the Fund. Each Oral Instruction shall specify whether it is

applicable to the entire Fund or a specific Series of the

Fund.

(e) Prospectus: The term Prospectus shall mean a

prospectus and related statement of additional information

forming part of a currently effective registration statement

under the Investment Company Act and, as used with the

respect to Shares or Shares of a Series, shall mean the

prospectuses and related statements of additional

information covering the Shares or Shares of the Series.

(f) Securities: The term Securities shall mean

bonds, debentures, notes, stocks, shares, evidences of

indebtedness, and other securities and investments from time

to time owned by the Fund.

(g) Series: The term Series shall mean any series

of Shares of the common stock of the Fund that the Fund may

establish from time to time.

<PAGE>

(h) Share Certificates: The term Share

Certificates shall mean the stock certificates or

certificates representing shares of beneficial interest for

the Shares.

(i) Shareholders: The term Shareholders shall

mean the registered owners from time to time of the Shares,

as reflected on the stock registry records of the Fund.

(j) Written Instructions: The term Written

Instructions shall mean an authorization, instruction,

approval, item or set of data, or information of any kind

transmitted to Fund Services in original writing containing

original signatures, or a copy of such document transmitted

by telecopy, including transmission of such signature, or

other mechanical or documentary means, at the request of a

person or persons reasonably believed in good faith by Fund

Services to be a person or persons authorized by a

resolution of the Board of Directors or Trustees of the Fund

to give Written Instruction shall specify whether it is

applicable to the entire Fund or a specific Series of the

Fund.

SECTION 31. Fund Services shall not be liable for

the loss of all or part of any record maintained or

preserved by it pursuant to this Agreement or for any delays

or errors occurring by reason of circumstances beyond its

control, including but not limited to acts of civil or

<PAGE>

military authorities, national emergencies, fire, flood or

catastrophe, acts of God, insurrection, war, riot, or

failure of transportation, communication or power supply,

except to the extent that Fund Services shall have failed to

use its best efforts to minimize the likelihood of

occurrence of such circumstances or to mitigate any loss or

damage to the Fund caused by such circumstances.

SECTION 32. The Fund may give Fund Services sixty

(60) days and Fund Services may give the Fund (90) days

written notice of the termination of this Agreement, such

termination to take effect at the time specified in the

notice. Upon notice of termination, the Fund shall use its

best efforts to obtain a successor transfer agent. If a

successor transfer agent is not appointed within ninety (90)

days after the date of the notice of termination, the Board

of Directors or Trustees of the Fund shall, by resolution,

designate the Fund as its own transfer agent. Upon receipt

of written notice from the Fund of the appointment of the

successor transfer agent and upon receipt of Oral or Written

Instructions Fund Services shall, upon request of the Fund

and the successor transfer agent and upon payment of Fund

Services reasonable charges and disbursements, promptly

transfer to the successor transfer agent the original or

copies of all books and records maintained by Fund Services

hereunder and cooperate with, and provide reasonable

<PAGE>

assistance to, the successor transfer agent in the

establishment of the books and records necessary to carry

out its responsibilities hereunder.

SECTION 33. Any notice or other communication

required by or permitted to be given in connection with this

Agreement shall be in writing, and shall be delivered in

person or sent by first-class mail, postage prepaid, to the

respective parties.

Notice to the Fund shall be given as follows until

further notice:

1345 Avenue of the Americas
New York, New York 10105
Attention: Secretary

Notice to Fund Services shall be given as follows

until further notice:

Alliance Fund Services, Inc.
500 Plaza Drive
Secaucus, New Jersey 07094

SECTION 34. The Fund represents and warrants to

Fund Services that the execution and delivery of this

Agreement by the undersigned officer of the Fund has been

duly and validly authorized by resolution of the Fund's

Board of Directors or Trustees. Fund Services represents

and warrants to the Fund that the execution and delivery of

this Agreement by the undersigned officer of Fund Services

has also been duly and validly authorized.

<PAGE>

SECTION 35. This Agreement may be executed in more

than one counterpart, each of which shall be deemed to be an

original, and shall become effective on the last date of

signature below unless otherwise agreed by the parties.

Unless sooner terminated pursuant to SECTION 32, this

Agreement will continue until and will continue

in effect thereafter for successive 12 month periods only if

such continuance is specifically approved at least annually

by the Board of Directors or Trustees or by a vote of the

stockholders of the Fund and in either case by a majority of

the Directors or Trustees who are not parties to this

Agreement or interested persons of any such party, at a

meeting called for the purpose of voting on this Agreement.

SECTION 36. This Agreement shall extend to and

shall bind the parties hereto and their respective

successors and assigns; provided, however, that this

Agreement shall not be assignable by the Fund without the

written consent of Fund Services or by Fund Services without

the written consent of the Fund, authorized or approved by a

resolution of the Fund's Board of Directors or Trustees.

Notwithstanding the foregoing, either party may assign this

Agreement without the consent of the other party so long as

the assignee is an affiliate, parent or subsidiary of the

assigning party and is qualified to act under the Investment

Company Act, as amended from time to time.

<PAGE>

SECTION 38. This Agreement shall be governed by

the laws of the State of New Jersey.

WITNESS the following signatures:

ALLIANCE GOVERNMENT RESERVES

BY: /s/ James P. Syrett
___________________________

TITLE: President
________________________

ALLIANCE FUND SERVICES, INC.

BY: /s/ Robert H. Joseph, Jr.
___________________________

TITLE: Vice President
________________________

30
00250083.AD4

<PAGE>

CONSENT OF INDEPENDENT AUDITORS

We hereby consent to the use of our reports dated
July 29, 1997 on the financial statements of the Government
Reserves Portfolio and the Treasury Reserves Portfolio, series of
Alliance Government Reserves, referred to therein in Post-
Effective Amendment No. 25 to the Registration Statement on Form
N-1A, File No. 2-63315, as filed with the Securities and Exchange
Commission.

We also consent to the reference to our firm in the
Prospectus under the caption "Financial Highlights" and in the
Statement of Additional Information under the caption
"Accountants."

New York, New York
October 28, 1997

00250083.AE9

Exhibit 16
__________

Alliance Government Reserves and Alliance Treasury Reserves
Hypothetical Yield Computation

1. Add last seven days of dividends.

Hypothetical
Date Daily Dividend

XX/YY/97 a
XX/YY/97 b
XX/YY/97 c
XX/YY/97 d
XX/YY/97 e
XX/YY/97 f
XX/YY/97 g
Total: h

2. Divide total of last 7 days of dividends by 7
to get average daily dividend.

h divided by 7 = i

3. Take average daily dividend and multiply by
365 to get 7-day yield.

i multiplied by 365 = A.AA%

4. Take 7-day yield and compound over a 365-day
period to obtain effective yield.

((A.AA% divided by 365)+1) compounded by
365 = B.BB%

00250083.AE8

Other Exhibit

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the person whose

signature appears below hereby revokes all prior powers granted

by the undersigned to the extent inconsistent herewith and

constitutes and appoints Edmund P. Bergan, Jr. and Emilie D.

Wrapp, and each of them, to act severally as attorneys-in-fact

and agents, with power of substitution and resubstitution, for

the undersigned, solely for the purpose of signing on such

person's behalf any Registration Statement on Form N-1A, and any

amendments thereto, of Alliance Government Reserves and filing

the same, with exhibits thereto, and other documents in

connection therewith, with the Securities and Exchange

Commission, hereby ratifying and confirming all that said

attorneys-in-fact, or their substitute or substitutes, may do or

cause to be done by virtue hereof.

/s/ John D. Carifa
___________________
John D. Carifa

Dated: October 29, 1997

<PAGE>

Other Exhibit

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the person whose

signature appears below hereby revokes all prior powers granted

by the undersigned to the extent inconsistent herewith and

constitutes and appoints John D. Carifa, Edmund P. Bergan, Jr.

and Emilie D. Wrapp, and each of them, to act severally as

attorneys-in-fact and agents, with power of substitution and

resubstitution, for the undersigned, solely for the purpose of

signing on such person's behalf any Registration Statement on

Form N-1A, and any amendments thereto, of Alliance Government

Reserves and filing the same, with exhibits thereto, and other

documents in connection therewith, with the Securities and

Exchange Commission, hereby ratifying and confirming all that

said attorneys-in-fact, or their substitute or substitutes, may

do or cause to be done by virtue hereof.

/s/ Sam Y. Cross
_________________
Sam Y. Cross

Dated: October 29, 1997

00250083.AE6

<PAGE>

Other Exhibit

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the person whose

signature appears below hereby revokes all prior powers granted

by the undersigned to the extent inconsistent herewith and

constitutes and appoints John D. Carifa, Edmund P. Bergan, Jr.

and Emilie D. Wrapp, and each of them, to act severally as

attorneys-in-fact and agents, with power of substitution and

resubstitution, for the undersigned, solely for the purpose of

signing on such person's behalf any Registration Statement on

Form N-1A, and any amendments thereto, of Alliance Government

Reserves and filing the same, with exhibits thereto, and other

documents in connection therewith, with the Securities and

Exchange Commission, hereby ratifying and confirming all that

said attorneys-in-fact, or their substitute or substitutes, may

do or cause to be done by virtue hereof.

/s/ Charles H.P. Duell
_______________________
Charles H.P. Duell

Dated: October 29, 1997

00250083.AE6

<PAGE>

Other Exhibit

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the person whose

signature appears below hereby revokes all prior powers granted

by the undersigned to the extent inconsistent herewith and

constitutes and appoints John D. Carifa, Edmund P. Bergan, Jr.

and Emilie D. Wrapp, and each of them, to act severally as

attorneys-in-fact and agents, with power of substitution and

resubstitution, for the undersigned, solely for the purpose of

signing on such person's behalf any Registration Statement on

Form N-1A, and any amendments thereto, of Alliance Government

Reserves and filing the same, with exhibits thereto, and other

documents in connection therewith, with the Securities and

Exchange Commission, hereby ratifying and confirming all that

said attorneys-in-fact, or their substitute or substitutes, may

do or cause to be done by virtue hereof.

/s/ William H. Foulk, Jr.
__________________________
William H. Foulk, Jr.

Dated: October 29, 1997

00250083.AE6

<PAGE>

Other Exhibit

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the person whose

signature appears below hereby revokes all prior powers granted

by the undersigned to the extent inconsistent herewith and

constitutes and appoints John D. Carifa, Edmund P. Bergan, Jr.

and Emilie D. Wrapp, and each of them, to act severally as

attorneys-in-fact and agents, with power of substitution and

resubstitution, for the undersigned, solely for the purpose of

signing on such person's behalf any Registration Statement on

Form N-1A, and any amendments thereto, of Alliance Government

Reserves and filing the same, with exhibits thereto, and other

documents in connection therewith, with the Securities and

Exchange Commission, hereby ratifying and confirming all that

said attorneys-in-fact, or their substitute or substitutes, may

do or cause to be done by virtue hereof.

/s/ Donald J. Robinson
_______________________
Donald J. Robinson

Dated: October 29, 1997

00250083.AE6

<PAGE>

Other Exhibit

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the person whose

signature appears below hereby revokes all prior powers granted

by the undersigned to the extent inconsistent herewith and

constitutes and appoints John D. Carifa, Edmund P. Bergan, Jr.

and Emilie D. Wrapp, and each of them, to act severally as

attorneys-in-fact and agents, with power of substitution and

resubstitution, for the undersigned, solely for the purpose of

signing on such person's behalf any Registration Statement on

Form N-1A, and any amendments thereto, of Alliance Government

Reserves and filing the same, with exhibits thereto, and other

documents in connection therewith, with the Securities and

Exchange Commission, hereby ratifying and confirming all that

said attorneys-in-fact, or their substitute or substitutes, may

do or cause to be done by virtue hereof.

/s/ David K. Storrs
____________________
David K. Storrs

Dated: October 29, 1997

00250083.AE6

<PAGE>

Other Exhibit

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the person whose

signature appears below hereby revokes all prior powers granted

by the undersigned to the extent inconsistent herewith and

constitutes and appoints John D. Carifa, Edmund P. Bergan, Jr.

and Emilie D. Wrapp, and each of them, to act severally as

attorneys-in-fact and agents, with power of substitution and

resubstitution, for the undersigned, solely for the purpose of

signing on such person's behalf any Registration Statement on

Form N-1A, and any amendments thereto, of Alliance Government

Reserves and filing the same, with exhibits thereto, and other

documents in connection therewith, with the Securities and

Exchange Commission, hereby ratifying and confirming all that

said attorneys-in-fact, or their substitute or substitutes, may

do or cause to be done by virtue hereof.

/s/ Shelby White
_________________
Shelby White

Dated: October 29, 1997

00250083.AE6

<PAGE>

Other Exhibit

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the person whose

signature appears below hereby revokes all prior powers granted

by the undersigned to the extent inconsistent herewith and

constitutes and appoints John D. Carifa, Edmund P. Bergan, Jr.

and Emilie D. Wrapp, and each of them, to act severally as

attorneys-in-fact and agents, with power of substitution and

resubstitution, for the undersigned, solely for the purpose of

signing on such person's behalf any Registration Statement on

Form N-1A, and any amendments thereto, of Alliance Government

Reserves and filing the same, with exhibits thereto, and other

documents in connection therewith, with the Securities and

Exchange Commission, hereby ratifying and confirming all that

said attorneys-in-fact, or their substitute or substitutes, may

do or cause to be done by virtue hereof.

/s/ Dave H. Williams
_____________________
Dave H. Williams

Dated: October 29, 1997

00250083.AE6