ACM INSTITUTIONAL RESERVES INC, 485BPOS, 1995-08-28

ACM INSTITUTIONAL RESERVES INC
485BPOS, 1995-08-28

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<PAGE>

As filed with the Securities and Exchange
Commission on August 28, 1995

File Nos. 33-34001
811-6068
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF l933

Pre-Effective Amendment No. __ / /

Post-Effective Amendment No. 10 /X/
and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF l940

Amendment No. 11 /X/

ACM INSTITUTIONAL RESERVES, INC.
(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 l0105
(Name and address of agent for service)

It is proposed that this filing will become effective (check
appropriate box)
/X/ immediately upon filing pursuant to paragraph (b)
/ / on (date) pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)

<PAGE>

/ / on (date) pursuant to paragraph (a)
/ / 75 days after filing pursuant to paragraph (a)(ii)
/ / on (date) pursuant to paragraph (a)(ii) of rule 485

If appropriate, check the following box:
/ / This post-effective amendment designates a new effective
date for a previously filed post-effective amendment.

Registrant has registered an indefinite number of shares of
common stock pursuant to Rule 24f-2 under the Investment Company
Act of 1940. Registrant's Rule 24f-2 notice for its fiscal year
ended April 30, 1995 was filed on June 27, 1995.

<PAGE>

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

N-1A Item No. Location in Prospectuses
_____________ ________________________

PART A

Item 1. Cover Page......................... Cover Page

Item 2. Synopsis........................... Expense
Information

Item 3. Financial Highlights............... Financial
Highlights

Item 4. General Description of Registrant.. Investment
Objectives and
Policies

Item 5. Management of the Fund............. Additional
Information

Item 6. Capital Stock and Other Securities. Additional
Information

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

Item 8. Redemption or Repurchase........... Purchase and
Redemption of
Shares

Item 9. Pending Legal Proceedings.......... Not Applicable

<PAGE>

PART B Location in Statements
Of Additional Information
_________________________

Item 10. Cover Page......................... Cover Page

Item 11. Table of Contents.................. Cover Page

Item 12. General Information and History.... Management;
General
Information

Item 13. Investment Objectives and Policies. Investment
Objectives and
Policies;
Investment
Restrictions

Item 14. Management of the Fund............. Management

Item 15. Control Persons and Principal
Holders of Securities...................... Not Applicable

Item 16. Investment Advisory and Other
Services........................ Management

Item 17. Brokerage Allocation............... General
Information

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

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

Item 20. Tax Status......................... Taxes

<PAGE>

Item 21. Underwriters....................... General
Information

Item 22. Calculation of Performance Data.... General
Information

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

<PAGE>

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

SHAREHOLDER SERVICES

Shareholder representatives are available to answer your questions about the
status of your account or other Fund matters. Call toll-free (800) 237-5822
or write the Fund, P.O. Box 1520, Secaucus, New Jersey 07096-1520.
YIELDS. For current recorded yield information on the Fund, call on a
touch-tone telephone toll-free (800) 251-0539 and press the following sequence
of keys: [1] [*] [1] [6] [#] for the Prime Portfolio, [1] [*] [2] [7] [#] for
the Government Portfolio and [1] [*] [3] [8] [#] for the Tax-Free Portfolio.

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

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

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

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

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

A "Statement of Additional Information," dated September , 1995 which pro-
vides a further discussion of certain areas in this prospectus and other mat-
ters and which may be of interest to some investors, has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. For
a free copy, call or write the Fund at the telephone number or address shown
above.

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

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

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

ACM
INSTITUTIONAL
RESERVES

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

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

[LOGO OF ALLIANCE CAPITAL APPEARS HERE]

PROSPECTUS
SEPTEMBER , 1995

----------------------------------------
<PAGE>

--------------------------------------------------------------------------------
EXPENSE INFORMATION
--------------------------------------------------------------------------------

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

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES PRIME GOVERNMENT TAX-FREE
(as a percentage of average net assets, net of PORTFOLIO PORTFOLIO PORTFOLIO
expense reimbursement or fee waiver) --------- ---------- ---------
<S> <C> <C> <C>
Management Fees............................... .04% .02% 0%
Other Expenses................................ .16 .18 .20
--- --- ---
Total Fund Operating Expenses................. .20% .20% .20%
</TABLE>
EXAMPLE

You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return (cumulatively through the end of each time period):

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Prime Portfolio................................ $2 $6 $11 $26
Government Portfolio........................... $ 2 $6 $11 $26
Tax-Free Portfolio............................. $2 $6 $11 $26
</TABLE>

The purpose of the foregoing table is to assist the investor in understanding
the various costs and expenses that an investor in the Prime, Government and
Tax-Free Portfolios will bear directly and indirectly. The expenses listed in
the table for each Portfolio are net of voluntary expense reimbursements and
voluntary fee waivers. The expenses of such Portfolios, before voluntary ex-
pense reimbursements or fee waiver, would be: Prime Portfolio: Management
Fees--.20%, Other Expenses--.16% and Total Fund Operating Expenses--.36%; Gov-
ernment Portfolio: Management Fees--.20%, Other Expenses--.18% and Total Fund
Operating Expenses--.38%; Tax-Free Portfolio: Management Fees--.20%, Other Ex-
penses--.56% and Total Fund Operating Expenses--.76%. The example should not be
considered a representation of past or future expenses; actual expenses may be
greater or less than those shown.

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

The following tables have been audited by McGladrey & Pullen LLP, the Fund's
independent auditors, whose report thereon appears in the Statement of Addi-
tional Information. This information should be read in conjunction with the fi-
nancial statements and notes thereto included in the Statement of Additional
Information.
<TABLE>
<CAPTION>
PRIME PORTFOLIO
--------------------------------------------------------------------
AUGUST 20, 1990(A)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
APRIL 30, APRIL 30, APRIL 30, APRIL 30, APRIL 30,
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period ........ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
INCOME FROM
INVESTMENT
OPERATIONS
Net investment
income......... 0.0502 0.0325 0.0353 0.0535 0.0506
------- ------- ------- ------- -------
LESS:
DISTRIBUTIONS
Dividends from
net investment
income......... (0.0502) (0.0325) (0.0353) (0.0535) (0.0506)
------- ------- ------- ------- -------
Net asset value,
end of period . $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
TOTAL RETURNS
Total investment
return based on
net asset
value(b) ...... 5.15% 3.30% 3.59% 5.50% 7.54%(c)
======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL
DATA
Net assets, end
of period (in
millions) ..... $ 197.8 $ 108.1 $ 64.3 $ 25.0 $ 27.2
Ratio of
expenses to
average net
assets(d) ..... 0.20% 0.20% 0.18%(e) 0.02%(f) -0- (g)
Ratio of net
investment
income to
average net
assets(d) ..... 5.24% 3.25% 3.42%(e) 5.30%(f) 6.84%(c)(g)
<CAPTION>
GOVERNMENT PORTFOLIO
-------------------------------------------------------
JULY 22, 1991(A)
YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
APRIL 30, APRIL 30, APRIL 30, APRIL 30,
1995 1994 1993 1992
---------- ---------- ---------- -------------------
<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......... 0.0493 0.0315 0.0339 0.0377
------- ------- ------- -------
LESS:
DISTRIBUTIONS
Dividends from
net investment
income......... (0.0493) (0.0315) (0.0339) (0.0377)
------- ------- ------- -------
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) ...... 5.06% 3.20% 3.45% 4.98%(c)
======= ======= ======= =======
RATIOS/SUPPLEMENTAL
DATA
Net assets, end
of period (in
millions) ..... $ 104.4 $ 76.6 $ 73.2 $ 24.7
Ratio of
expenses to
average net
assets(d) ..... 0.20% 0.20% 0.18%(e) 0.10%(c)(h)
Ratio of net
investment
income to
average net
assets(d) ..... 4.94% 3.15% 3.30%(e) 4.86%(c)(h)
</TABLE>
-------

(a) Commencement of operations.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends at net asset value during the period and redemption on the last
day of the period.
(c) Annualized.
(d) Net of expense reimbursement.
(e) Net of voluntary expense reimbursement equivalent to .02% of average daily
net assets.
(f) Net of voluntary expense reimbursement equivalent to .18% of average daily
net assets.
(g) Net of voluntary expense reimbursement equivalent to .20% of average daily
net assets.
(h) Net of voluntary expense reimbursement equivalent to .10% of average daily
net assets.
--------------

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 com-
pounding, the dividends paid are assumed to be reinvested. Dividends for the
Prime Portfolio for the seven days ended June 30, 1995 amounted to an
annualized yield of 5.87%, equivalent to an effective yield of 6.06%. Dividends
for the Government Portfolio for the seven days ended June 30, 1995 amounted to
an annualized yield of 5.78%, equivalent to an effective yield of 5.97%. Divi-
dends for the Tax-Free Portfolio for the seven days ended June 30, 1995
amounted to an annualized yield of 3.91%, equivalent to an effective yield of
4.00%. Further information about the Fund's performance is contained in the
Fund's annual report to shareholders which may be obtained without charge by
contacting Alliance Fund Services, Inc. at the address or the telephone number
shown on the cover of this prospectus.

2
<PAGE>

<TABLE>
<CAPTION>
TAX-FREE PORTFOLIO
-------------------------------------------------------
JULY 22, 1991(A)
YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
APRIL 30, APRIL 30, APRIL 30, APRIL 30,
1995 1994 1993 1992
---------- ---------- ---------- ----------------
<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... 0.0326 0.0240 0.0287 0.0334
------- ------- ------- -------
Net unrealized loss on
investments............ (0.0048) --0-- --0-- --0--
------- ------- ------- -------
Net increase in net
asset value from
operations............. 0.0278 0.0240 0.0287 0.0334
------- ------- ------- -------
LESS: DISTRIBUTIONS
Dividends from net
investment income...... (0.0326) (0.0240) (0.0287) (0.0334)
------- ------- ------- -------
ADD: CAPITAL
CONTRIBUTION (SEE NOTE
B)
Capital Contributed by
the Adviser............ 0.0048 --0-- --0-- --0--
------- ------- ------- -------
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) .............. 3.31%(i) 2.43% 2.92% 4.40%(c)
======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
period (in millions) .. $ 35.0 $ 35.6 $ 40.9 $ 8.5
Ratio of expenses to
average net assets(d) . 0.20% 0.20% 0.18%(e) 0.10%(c)(h)
Ratio of net investment
income to average net
assets(d) ............. 3.31% 2.40% 2.73%(e) 4.01%(c)(h)
</TABLE>
-------

--------------------------------------------------------------------------------
INTRODUCTION
--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
--------------------------------------------------------------------------------

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

Each Portfolio will comply with Rule 2a-7 under the Investment Company Act of
1940 (the "Act"), as amended from time to time, including the diversity, qual-
ity and maturity conditions imposed by the Rule (a more detailed description
of Rule 2a-7 is set forth in the Portfolios' Statement of Additional Informa-
tion under "Investment Objectives and Policies").

PRIME PORTFOLIO

The money market securities in which the Prime Portfolio invests include: (1)
marketable obligations of, or guaranteed by, the U.S. Government, its agencies
or instrumentalities (collectively, the "U.S. Government"); (2) certificates
of deposit, bankers' acceptances and interest bearing savings deposits issued
or guaranteed by banks or savings and loan associations having total assets of
more than $1 billion and which are members of the Federal Deposit Insurance
Corporation, and certificates of deposit and bankers' acceptances denominated
in U.S. dollars and issued by U.S. branches of foreign banks having total as-
sets of at least $1 billion that are believed by the Adviser to be of quality
equivalent to that of other such instruments in which it may invest;

3
<PAGE>

(3) commercial paper of prime quality [i.e., rated A-1+ or A-1 by Standard &
Poor's Corporation ("Standard & Poor's") or Prime-1 by Moody's Investors Serv-
ice, Inc. ("Moody's") or, if not rated, issued by companies having outstanding
debt securities rated AAA or AA by Standard & Poor's, or Aaa or Aa by Moody's]
and participation interests in loans extended by banks to such companies; and
(4) repurchase agreements that are collateralized in full each day by liquid
securities of the types listed above. These agreements are entered into with
"primary dealers" (as designated by the Federal Reserve Bank of New York) in
U.S. Government securities or State Street Bank and Trust Company, the Fund's
Custodian. For each repurchase agreement, the Portfolio requires continual
maintenance of the market value of the underlying collateral in amounts equal
to, or in excess of, the agreement amount. In the event of a dealer default,
the Fund might suffer a loss to the extent the proceeds from the sale of the
collateral were less than the repurchase price. The Portfolio may also invest
in certificates of deposit issued by, and time deposits maintained at, foreign
branches of domestic banks described in (2) above and prime quality dollar-de-
nominated commercial paper issued by foreign companies meeting the criteria
specified in (3) above. The Portfolio's commercial paper investments may in-
clude variable amount master demand notes which represent a direct borrowing
arrangement involving periodically fluctuating rates of interest under a let-
ter agreement between a commercial paper issuer and an institutional lender
pursuant to which the lender may determine to invest varying amounts.

The Portfolio may purchase restricted securities that are determined by the
Adviser to be liquid in accordance with procedures adopted by the Board of Di-
rectors of the Fund. Restricted securities are securities subject to contrac-
tual or legal restrictions on resale, such as those arising from an issuer's
reliance upon certain exemptions from registration under the Securities Act of
1933. The Portfolio may purchase restricted securities eligible for resale un-
der Rule 144A under the Securities Act and commercial paper issued in reliance
upon the exemption from registration in Section 4(2) of the Securities Act
and, in each case, determined by the Adviser to be liquid in accordance with
procedures adopted by the Board of Directors of the Fund.

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

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

As a matter of operating policy, fundamental policy number (2) would give the
Portfolio the ability to invest, with respect to 25% of its assets, more than
5% of its assets in any one issuer only in the event Rule 2a-7 is amended in
the future.

GOVERNMENT PORTFOLIO

The securities in which the Government Portfolio invests include: (1) market-
able obligations of, or guaranteed by, the U.S. Government, including issues
of the United States Treasury, such as bills, certificates of indebtedness,
notes and bonds, and issues of agencies and instrumentalities established un-
der the authority of an act of Congress; and (2) repurchase agreements that
are collateralized in full each day by the types of securities listed above.
These agreements are entered into with "primary dealers" (as designated by the
Federal Reserve Bank of New York) in U.S. Government securities or State
Street Bank and Trust Company, the Fund's Custodian. For each repurchase
agreement, the Portfolio requires continual maintenance of the market value of
the underlying collateral in amounts equal to, or in excess of, the agreement
amount. In the
4
<PAGE>

event of a dealer default, the Fund might suffer a loss to the extent the pro-
ceeds from the sale of the collateral were less than the repurchase price. The
Portfolio may commit up to 15% of its net assets to the purchase of when-is-
sued U.S. Government securities. To facilitate such acquisitions, the Fund's
Custodian will maintain, in a separate account of the Portfolio, U.S. Govern-
ment securities or other liquid high-grade debt securities having value equal
to, or greater than, such commitments. The price of when-issued securities,
which is generally expressed in yield terms, is fixed at the time the commit-
ment to purchase is made, but delivery and payment for such securities take
place at a later time. Normally the settlement date occurs from within ten
days to one month after the purchase of issue. The value of when-issued secu-
rities may fluctuate prior to their settlement, thereby creating an unrealized
gain or loss to the Portfolio.

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

TAX-FREE PORTFOLIO

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

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

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

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

The Portfolio may invest in variable rate obligations whose interest rates
are adjusted either at predesignated periodic intervals or whenever there is a
change in the market rate to which the security's interest rate is tied. Such
adjustments minimize changes in the market value of the obligation and, ac-
cordingly, enhance the ability of the Portfolio to maintain a stable net asset
value. Variable rate securities purchased may include participation interests
in private activity bonds backed by letters of credit of Federal Deposit In-
surance Corporation member banks having total assets of more than $1 billion;
the letters of credit of any single bank in respect of all variable rate obli-
gations will not cover more than 10% of the Portfolio's total assets.

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

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

5
<PAGE>

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

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

--------------------------------------------------------------------------------
PURCHASE AND REDEMPTION OF SHARES
--------------------------------------------------------------------------------

OPENING ACCOUNTS

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

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

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

(3) Mail a completed Application Form to:

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

SUBSEQUENT INVESTMENTS

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

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

REDEMPTIONS

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

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

During periods of drastic economic or market developments, such as the 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 share-holder should
issue written instructions to Alliance Fund Services, Inc. at the address
shown on the cover of this prospectus. The Fund reserves the right to suspend
or terminate its telephone redemption service at any time without notice. Nei-
ther the Fund nor the Adviser, or Alliance Fund Services, Inc. will be respon-
sible 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, in-
cluding among others, recording such telephone instructions and causing writ-
ten confirmation of the resulting trans-

6
<PAGE>

actions to be sent to shareholders. If the Fund did not employ such proce-
dures, 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.

---------------------------------
OBTAINING AN APPLICATION FORM.
If you wish to obtain an Appli-
cation Form, or you have ques-
tions about the Form, purchas-
ing shares, or other Fund pro-
cedures, please telephone the
Fund toll-free at (800) 237-
5822.
---------------------------------

--------------------------------------------------------------------------------
ADDITIONAL INFORMATION
--------------------------------------------------------------------------------

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

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

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

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

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

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

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

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

DAILY DIVIDENDS, OTHER DISTRIBUTIONS, TAXES. All net income of the Tax-Free
Portfolio is determined each business day at 12:00 Noon (New York time), and
that of the Prime and Government Portfolio each business day at 4:00 p.m. (New
York time), and is paid immediately thereafter pro rata to shareholders of
record via automatic investment in additional full and fractional shares of that
Portfolio in each shareholder's account. As such additional shares are entitled
to dividends on following days, a compounding growth of income occurs.

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

Distributions out of tax-exempt interest income earned by the Tax-Free Port-
folio are not subject to Federal income tax (other than the AMT as described
above), but may be subject to state or local income taxes. Any exempt-interest
dividends derived from interest

7
<PAGE>

on municipal securities subject to the AMT will be a tax preference item for
purposes of the Federal individual and corporate AMT. Distributions out of
taxable interest income, other investment income, and short-term capital gains
are taxable as ordinary income and distributions of long-term capital gains, if
any, are taxable as long-term capital gains irrespective of the length of time a
shareholder held his shares.

THE ADVISER. The Fund retains Alliance Capital Management L.P., 1345 Avenue of
the Americas, New York, NY 10105 under an Advisory Agreement to provide in-
vestment advice and, in general, to supervise its management and investment
program, subject to the general control of the Directors of the Fund. Each
Portfolio pays the Adviser at an annual rate of .20 of 1% of the average daily
value of its net assets. During the Fund's fiscal year ended April 30, 1995, the
Adviser reimbursed its advisory fee in the amount of $239,602 and $168,311 for
the Prime and Government Portfolios, respectively. For the fiscal year ended
April 30, 1995, the Adviser reimbursed the Tax-Free Portfolio in the amount of
$181,950.

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

The Adviser is a leading international investment manager, supervising client
accounts with assets as of June 30, 1995 totaling over $135.8 billion (of
which approximately $43 billion represented the assets of investment compa-
nies). The Adviser's clients are primarily major corporate employee benefit
funds, public employee retirement systems, investment companies, foundations
and endowment funds. The 51 registered investment companies managed by the Ad-
viser comprising 103 separate investment portfolios currently have over one
million shareholders. As of June 30, 1995, the Adviser was retained as an in-
vestment manager of employee benefit fund assets for 29 of the Fortune 100
companies.

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

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

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

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

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

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

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

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

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

OFFICERS

Ronald M. Whitehill, President
Kathleen A. Corbet, Senior Vice President
Drew Biegel, Vice President
John F. Chiodi, Jr., Vice President
Raymond J. Papera, Vice President
Pamela F. Richardson, Vice President
Mark D. Gersten, Treasurer and Chief Financial Officer
Edmund P. Bergan, Jr., Secretary
Joseph J. Mantineo, Controller

8
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SHAREHOLDER SERVICES

Shareholder representatives are available to answer your questions about the
status of your account or other Fund matters. Call toll-free (800) 237-5822 or
write the Fund, P.O. Box 1520, Secaucus, New Jersey 07096-1520. YIELDS. For
current recorded yield information on the Trust Portfolio, call on a touch-tone
telephone toll-free (800) 251-0539 and press the following sequence of keys:
[1][*][6][0][#]. For non-touch-tone telephones, call toll-free (800) 221-9513.
--------------------------------------------------------------------------------

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

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

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

A "Statement of Additional Information," dated September , 1995, which
provides a further discussion of certain areas in this prospectus and other
matters and which may be of interest to some investors, has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. For
a free copy, call or write the Trust Portfolio at the telephone number or
address shown above.

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

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

-------------------------------------------------
<TABLE>
<CAPTION>

CONTENTS
--------
<S> <C>
Expense Information....................... 2
Financial Highlights...................... 2
Introduction.............................. 3
Investment Objectives and Policies........ 3
Purchase and Redemption of Shares......... 4
Additional Information.................... 5
</TABLE>
-------------------------------------------------

-----------------------
ACM
INSTITUTIONAL
RESERVES-
TRUST
PORTFOLIO
-----------------------

[LOGO OF ALLIANCE
CAPITAL APPEARS HERE]

PROSPECTUS
SEPTEMBER , 1995

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

--------------------------------------------------------------------------------
<PAGE>

--------------------------------------------------------------------------------
EXPENSE INFORMATION
--------------------------------------------------------------------------------

SHAREHOLDER TRANSACTION EXPENSES
The Trust Portfolio has no sales load on purchases or reinvested dividends,
deferred sales load, redemption fee or exchange fee.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets, net of expense reimbursement or
fee waiver)
<S> <C>
Management Fees......................................................... .17%
Other Expenses.......................................................... .33%
---
Total Fund Operating Expenses........................................... .50%
</TABLE>

EXAMPLE
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment, assuming a 5% annual
return (cumulatively through the end of
each time period): $5 $16 $28 $63
</TABLE>

The purpose of the foregoing table is to assist the investor in understanding
the various costs and expenses that an investor in the Trust Portfolio will
bear directly and indirectly. Expense information has been restated to reflect
current fees. The expenses listed in the table are net of voluntary expense re-
imbursements and voluntary fee waivers. The estimated expenses, before volun-
tary expense reimbursements or fee waiver, would be: Management Fees--.45%,
Other Expenses--.30% and Total Fund Operating Expenses--.75%. The example
should not be considered a representation of past or future expenses; actual
expenses may be greater or less than those shown.

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

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

<TABLE>
<CAPTION>
NOVEMBER 16, 1992(A)
YEAR ENDED YEAR ENDED THROUGH
APRIL 30, 1995 APRIL 30, 1994 APRIL 30, 1993
-------------- -------------- --------------------
<S> <C> <C> <C>
Net asset value, beginning
of period.................. $ 1.00 $ 1.00 $ 1.00
------- ------- -------
INCOME FROM INVESTMENT OPER-
ATIONS
Net Investment income....... 0.0479 0.0309 0.0144
------- ------- -------
LESS: DISTRIBUTIONS
Dividends from net invest-
ment income................ (0.0479) (0.0309) (0.0144)
------- ------- -------
Net asset value, end of pe-
riod....................... $ 1.00 $ 1.00 $ 1.00
======= ======= =======
TOTAL RETURN
Total investment return
based on net asset
value(b)(c)................ 4.91% 3.14% 3.21%(e)
======= ======= =======
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in millions).............. $ 109.2 $ 36.8 $ 5.3
Ratio of expenses to average
net assets(d).............. 0.49%(g) 0.14%(h) -0-(i)
Ratio of net investment in-
come to average net
assets(d).................. 5.31%(g) 3.15%(h) 3.17%(c)(i)
</TABLE>
-------

(a) Commencement of operations.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends at net asset value during the period and redemption on the last
day of the period.
(c) Annualized.
(d) Net of expense reimbursement.
(e) Net of voluntary expense reimbursement equivalent to .02% of average daily
net assets.
(f) Net of voluntary expense reimbursement equivalent to .10% of average daily
net assets.
(g) Net of voluntary expense reimbursement equivalent to .01% of average daily
net assets.
(h) Net of voluntary expense reimbursement equivalent to .31% of average daily
net assets.
(i) Net of voluntary expense reimbursement equivalent to .45% of average daily
net assets.

--------------
From time to time the Trust Portfolio advertises its "yield" and "effective
yield." Both yield figures are based on historical earnings and are not in-
tended to indicate future performance. To calculate the "yield," the amount of
dividends paid on a share during a specified seven-day period is assumed to be
paid each week over a 52-week period and is shown as a percentage of the in-
vestment. To calculate "effective yield," which will be higher than the "yield"
because of compounding, the dividends paid are assumed to be reinvested. Divi-
dends for the Trust Portfolio for the seven days ended June 30, 1995 amounted
to an annualized yield of 5.50%, equivalent to an effective yield of 5.67%.
Further information about the Fund's performance is contained in the Fund's an-
nual report to shareholders which may be obtained without charge by contacting
Alliance Fund Services, Inc. at the address or the telephone number shown on
the cover of this prospectus.

2
<PAGE>

--------------------------------------------------------------------------------
INTRODUCTION
--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
--------------------------------------------------------------------------------

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

The Trust Portfolio will comply with Rule 2a-7 under the Investment Company
Act of 1940 (the "Act"), as amended from time to time, including the diversi-
ty, quality and maturity conditions imposed by the Rule. A more detailed de-
scription of Rule 2a-7 is set forth in the Trust Portfolio's Statement of Ad-
ditional Information under "Investment Objectives and Policies."

MONEY MARKET SECURITIES

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

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

3
<PAGE>

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

The Trust Portfolio may purchase restricted securities that are determined by
the Adviser to be liquid in accordance with procedures adopted by the Board of
Directors of the Fund. Restricted securities are securities subject to contrac-
tual or legal restrictions on resale, such as those arising from an issuer's
reliance upon certain exemptions from registration under the Securities Act of
1933. The Portfolio may purchase restricted securities eligible for resale un-
der Rule 144A under the Securities Act and commercial paper issued in reliance
upon the exemption from registration in Section 4(2) of the Securities Act and,
in each case, determined by the Adviser to be liquid in accordance with proce-
dures adopted by the Board of Directors of the Fund.

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

OTHER FUNDAMENTAL INVESTMENT POLICIES.

To maintain portfolio diversification and reduce investment risk, the Trust
Portfolio may not (1) invest 25% or more of its total assets in the securities
of issuers conducting their principal business activities in any one industry
although there is no such limitation with respect to U.S. Government securities
or bank obligations, including certificates of deposit, bankers' acceptances
and interest bearing savings deposits; (2) invest more than 5% of its assets in
the securities of any one issuer (except the U.S. Government) although with re-
spect to one-quarter of its total assets it may invest without regard to such
limitation; (3) invest more than 5% of its assets in the securities of any is-
suer (except the U.S. Government) having less than three years of continuous
operation or purchase more than 10% of any class of the outstanding securities
of any issuer (except the U.S. Government); (4) enter into repurchase agree-
ments if, as a result thereof, more than 10% of its assets would be committed
to repurchase agreements not terminable within seven days and other illiquid
investments; (5) borrow money except from banks on a temporary basis in aggre-
gate amounts not exceeding 15% of its assets; the Trust Portfolio will not pur-
chase any investments while borrowings in excess of 5% of total assets exist;
and (6) mortgage, pledge or hypothecate its assets except to secure such
borrowings.

As a matter of operating policy, fundamental policy number (2) would give the
Trust Portfolio the ability to invest, with respect to 25% of its assets, more
than 5% of its assets in any one issuer only in the event Rule 2a-7 is amended
in the future.

--------------------------------------------------------------------------------
PURCHASE AND REDEMPTION OF SHARES
--------------------------------------------------------------------------------

OPENING ACCOUNTS

The Portfolio is available through financial intermediaries.

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

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

ABA01100002
State Street Bank and Trust Company
Boston, MA 02101
DDA9903-279-9
Attention: Mutual Funds Division
ACM Institutional Reserves, Inc.--
Trust Portfolio
++
Your account name + as registered
Your account number + with the Trust
++ Portfolio

4
<PAGE>

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

SUBSEQUENT INVESTMENTS

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

REDEMPTIONS

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

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

During periods of drastic economic or market developments, such as the market
break of October 1987, it is possible that shareholders would have difficulty
in reaching Alliance Fund Services, Inc. by telephone (although no such diffi-
culty was apparent at any time in connection with the 1987 market break). If a
shareholder were to experience such difficulty, the share-holder should issue
written instructions to Alliance Fund Services, Inc. at the address shown on
the cover of this prospectus. The Fund reserves the right to suspend or termi-
nate its telephone redemption service at any time without notice. Neither the
Fund nor the Adviser, or Alliance Fund Services, Inc. will be responsible for
the authenticity of telephone requests for redemptions that the Fund 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.

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

--------------------------------------------------------------------------------
ADDITIONAL INFORMATION
--------------------------------------------------------------------------------

CHANGES IN APPLICATION FORM. If you decide to change instructions or any other
information already given on your Application Form, send a written notice to
ACM Institutional Reserves, Inc.--Trust Portfolio, P.O. Box 1520, Secaucus, New
Jersey 07096-1520, with your signature guaranteed by an institution which is an
"eligible guarantor" as defined in Rule 17Ad-15 under the Securities Exchange
Act of 1934, as amended.

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

5
<PAGE>

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

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

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

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

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

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

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

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

THE ADVISER. The Trust Portfolio retains Alliance Capital Management L.P.,
1345 Avenue of the Americas, New York, NY 10105 under an Advisory Agreement to
provide investment advice and, in general, to supervise its management and in-
vestment program, subject to the general control of the Directors of the Fund.
The Trust Portfolio pays the Adviser at an annual rate of .45 of 1% of the av-
erage daily value of its net assets. During the Fund's fiscal year ended April
30, 1995, the Adviser reimbursed its advisory fee to the Trust Portfolio in
the amount of $182,478.

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

6
<PAGE>

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

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

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

FUND ORGANIZATION. The Trust Portfolio is a series of ACM Institutional Re-
serves, Inc. (the "Fund"). The Trust Portfolio is one of four series of the
Fund; shares of the other series, the Prime Portfolio, the Government Portfo-
lio and the Tax-Free Portfolio, are offered by a separate prospectus. The Fund
was organized as a Maryland corporation on March 21, 1990. The Trust Portfo-
lio's activities are supervised by its Board of Directors. Shareholders of
each Portfolio are entitled to one vote per share and vote as a single series
on matters that affect all series in substantially the same manner.

7
<PAGE>

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

OFFICERS

<PAGE>

(LOGO)(R) ACM INSTITUTIONAL RESERVES
-Prime Portfolio
-Government Portfolio
-Tax-Free Portfolio

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

________________________________________________________________

STATEMENT OF ADDITIONAL INFORMATION

September --, 1995

________________________________________________________________

This Statement of Additional Information is not a prospectus and
should be read in conjunction with the Fund's current Prospectus
dated September --, 1995 which describes shares of the Prime,
Government and Tax-Free Portfolios of the Fund. A copy of this
Prospectus may be obtained by contacting Alliance Fund Services,
Inc. at the address or telephone number shown above.

TABLE OF CONTENTS
Page
____
The Fund. . . . . . . . . . . . . . . . . . . . . . . .

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

Investment Restrictions . . . . . . . . . . . . . . . .

Management. . . . . . . . . . . . . . . . . . . . . . .

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

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

Taxes . . . . . . . . . . . . . . . . . . . . . . . . .

General Information . . . . . . . . . . . . . . . . . .

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

Appendix B - Description of Municipal Securities. . . .

<PAGE>

Report of Independent Auditors and Financial Statements

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

<PAGE>

________________________________________________________________

THE FUND
________________________________________________________________

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

________________________________________________________________

INVESTMENT OBJECTIVES AND POLICIES
________________________________________________________________

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

General

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

Currently, pursuant to Rule 2a-7, each Portfolio may
invest only in "eligible securities," as that term is defined in
the Rule. Generally, an eligible security is a security that (i)
is denominated in U.S. Dollars and has a remaining maturity of
397 days or less; (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

<PAGE>

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

Under Rule 2a-7 the Prime Portfolio and the Government
Portfolio may not invest more than five percent of their
respective assets in the securities of any one issuer other than
the United States Government, its agencies and
instrumentalities. In addition, the Prime Portfolio and the
Government Portfolio may not invest in a security that has
received, or is deemed comparable in quality to a security that
has received, the second highest rating by the requisite number
of NRSROs (a "second tier security") if immediately after the
acquisition thereof either the Prime Portfolio or the Government
Portfolio would have invested more than (A) the greater of one
percent of its total assets or one million dollars in securities
issued by that issuer which are second tier securities, or (B)
five percent of its total assets in second tier securities.

Prime Portfolio

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

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

<PAGE>

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

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

The Portfolio may invest up to 5% of its net assets in
high quality (as determined by the requisite number of NRSROs or,

<PAGE>

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

The participation interests acquired by the Portfolio
may, depending on the transaction, take the form of a direct
co-lending relationship with the corporate borrower, an
assignment of an interest in the loan by a co-lender or another
participant or a participation in the seller's share of the
loan. Typically, the Portfolio will look to the agent bank to
collect principal of and interest on a participation interest, to
monitor compliance with loan covenants, to enforce all credit
remedies, such as foreclosures on collateral, and to notify
co-lenders of any adverse changes in the borrower's financial
condition or declarations of insolvency. The agent bank in such
cases will be qualified under the Act to serve as a custodian for
a registered investment company such as the Fund. The agent bank
is compensated for these services by the borrower pursuant to the
terms of the loan agreement.

When the Portfolio acts as a co-lender in connection
with a participation interest, or when the Portfolio acquires a
participation interest the terms of which provide that the

<PAGE>

Portfolio will be in privity with the corporate borrower, the
Portfolio will have direct recourse against the borrower in the
event the borrower fails to pay scheduled principal and
interest. In cases where the Portfolio lacks such direct
recourse, the Portfolio will look to the agent bank to enforce
appropriate credit remedies against the borrower.

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

4. Repurchase agreements pertaining to the above
securities. For a description of repurchase agreements, see
below, "Additional Investment Policies - Repurchase Agreements."
The Portfolio does not invest in letters of credit.

The Portfolio may make investments in certificates of
deposit issued by foreign branches of domestic banks and
certificates of deposit or bankers' acceptances issued by U.S.
branches of foreign banks specified in paragraph 2 above, and
commercial paper issued by foreign companies meeting the rating
criteria specified in paragraph 3 above. To the extent that the
Portfolio invests in such instruments, consideration is given to
their domestic marketability, the lower reserve requirements
generally mandated for overseas banking operations, the possible
impact of interruptions in the flow of international currency
transactions, potential political and social instability or
expropriation, imposition of foreign taxes, less government
supervision of issuers, difficulty in enforcing contractual
obligations and lack of uniform accounting standards.

<PAGE>

beneficial interest in a special purpose trust, limited
partnership interest, or commercial paper or other debt
securities issued by a special purpose corporation. Although the
securities may have some form of credit or liquidity enhancement,
payments on the securities depend predominately upon collection
of the loans and receivables held by the issuer. It is the
Portfolio's current intention to limit its investment in such
securities to not more than 5% of its net assets.

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

Government Portfolio

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

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

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

<PAGE>

Tax-Free Portfolio

As a matter of fundamental policy, the Tax-Free
Portfolio, except when assuming a temporary defensive position,
must maintain at least 80% of its total assets in high-grade
municipal securities having maturities of one year or less (which
maturities, pursuant to Rule 2a-7 under the Act, may extend to
397 days), as opposed to taxable investments described below.
Normally, substantially all of its income will be tax-exempt as
described below.

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

Municipal Securities

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

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

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

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

4. are other types of municipal securities, provided
that such obligations are rated Prime-1 by Moody's,
A-1 or higher by Standard & Poor's or, if not
rated, are of equivalent investment quality as
determined by the Adviser and ultimately reviewed

<PAGE>

by the Directors. (See Appendix B for a
description of municipal securities and Appendix A
for a description of these ratings.)

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

Alternative Minimum Tax

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

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

<PAGE>

Taxable Securities

Although the Portfolio expects to be largely invested in
municipal securities, the Portfolio may elect to invest up to 20%
of its total assets in taxable money market securities when such
action is deemed to be in the best interests of shareholders.
Such taxable money market securities also are limited to
remaining maturities of one year or less at the time of the
Portfolio's investment, and the Portfolio's municipal and taxable
securities are maintained at a dollar-weighted average of 90 days
or less. Taxable money market securities purchased by the
Portfolio are limited to those described below:

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

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

3. commercial paper of prime quality rated A-1 or
higher by Standard & Poor's or Prime-1 by Moody's
or, if not rated, issued by companies which have an
outstanding debt issue rated AA or higher by
Standard & Poor's, or Aa or higher by Moody's.
(See Appendix A for description of these ratings.)
[5~
The Portfolio may also enter into repurchase agreements
pertaining to the types of securities in which it may invest.
For a description of repurchase agreements, see below,
"Additional Investment Policies - Repurchase Agreements."

Variable Rate Obligations

The interest rate payable on certain municipal
securities in which the Portfolio may invest, called "variable
rate"obligations, is not fixed and may fluctuate based upon
changes in market rates. The interest rate payable on a variable
rate municipal security is adjusted either at predesignated
periodic intervals or whenever there is a change in the market
rate to which the security's interest rate is tied. Other
features may include the right of the Portfolio to demand
prepayment of the principal amount of the obligation prior to its
stated maturity and the right of the issuer to prepay the
principal amount prior to maturity. The main benefit of a

<PAGE>

variable rate municipal security is that the interest rate
adjustment minimizes changes in the market value of the
obligation. As a result, the purchase of variable rate municipal
securities enhances the ability of the Portfolio to maintain a
stable net asset value per share and to sell an obligation prior
to maturity at a price approximating the full principal amount.
The payment of principal and interest by issuers of certain
municipal securities purchased by the Portfolio may be guaranteed
by letter of credit or other credit facilities offered by banks
or other financial institutions. Such guarantees will be
considered in determining whether a municipal security meets the
Portfolio's investment quality requirements.

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

<PAGE>

Standby Commitments

The Portfolio may purchase municipal securities together
with the right to resell them to the seller at an agreed-upon
price or yield within specified periods prior to their maturity
dates. Such a right to resell is commonly known as a "standby
commitment," and the aggregate price which the Portfolio pays for
securities with a standby commitment may be higher than the price
which otherwise would be paid. The primary purpose of this
practice is to permit the Portfolio to be as fully invested as
practicable in municipal securities while preserving the
necessary flexibility and liquidity to meet unanticipated
redemptions. In this regard, the Portfolio acquires standby
commitments solely to facilitate portfolio liquidity and does not
exercise its rights thereunder for trading purposes. Since the
value of a standby commitment is dependent on the ability of the
standby commitment writer to meet its obligation to repurchase,
the Portfolio's policy is to enter into standby commitment
transactions only with municipal securities dealers which are
determined to present minimal credit risks.

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

General

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

<PAGE>

subject to registration with the Securities and Exchange
Commission, although there have been proposals which would
require registration in the future.

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

Obligations of issuers of municipal securities are
subject to the provisions of bankruptcy, insolvency, and other
laws affecting the rights and remedies of creditors, such as the
Bankruptcy Code. In addition, the obligations of such issuers
may become subject to laws enacted in the future by Congress,
state legislatures, or referenda extending the time for payment
of principal and/or interest, or imposing other constraints upon
enforcement of such obligations or upon ability of municipalities
to levy taxes. There is also the possibility that, as a result
of litigation or other conditions, the ability of any issuer to
pay, when due, the principal or the interest on its municipal
securities may be materially affected.

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

Additional Investment Policies

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

Repurchase Agreements

A repurchase agreement arises when a buyer purchases a
security and simultaneously agrees to resell it to the vendor on
an agreed-upon future date. The resale price is greater than the
purchase price, reflecting an agreed-upon market rate which is
effective for the period of time the buyer's money is invested in
the security and which is not related to the coupon rate on the

<PAGE>

purchased security. Repurchase agreements may be entered into
with member banks of the Federal Reserve System or "primary
dealers" (as designated by the Federal Reserve Bank of New York)
in U.S. Government securities or with State Street Bank and Trust
Company ("State Street Bank"), the Fund's Custodian. It is each
Portfolio's current practice, which may be changed at any time
without shareholder approval, to enter into repurchase agreements
only with such primary dealers and State Street Bank. For
eachrepurchase agreement, each Portfolio requires continual
maintenance of the market value of underlying collateral in
amounts equal to, or in excess of, the agreement amount. While
the maturities of the underlying collateral may exceed one year,
the term of the repurchase agreement is always less than one
year. In the event that a vendor defaulted on its repurchase
obligation, a Portfolio might suffer a loss to the extent that
the proceeds from the sale of the collateral were less than the
repurchase price. If the vendor became bankrupt, a Portfolio
might be delayed in selling the collateral. Repurchase
agreements often are for short periods such as one day or a week,
but may be longer. Repurchase agreements not terminable within
seven days will be limited to no more than 10% of a Portfolio's
assets.

Reverse Repurchase Agreements

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

When-Issued Securities

Certain issues that the Government and Tax-Free
Portfolios are permitted to purchase are offered on a
"when-issued" basis. When so offered, the price, which is
generally expressed in yield terms, is fixed at the time the
commitment to purchase is made, but delivery and payment for the
when-issued securities take place at a later date. Normally, the
settlement date occurs from within ten days to one month after
the purchase of the issue. The Government Portfolio will not
make any such commitments of more than thirty days. During the
period between purchase and settlement, no payment is made by a
Portfolio to the issuer and, thus, no interest accrues to a
Portfolio from the transaction. When-issued securities may be
sold prior to the settlement date, but each Portfolio makes
when-issued commitments only with the intention of actually

<PAGE>

acquiring the securities. To facilitate such acquisitions, the
Fund's Custodian will maintain, in a separate account of each
Portfolio, U.S. Government securities or other liquid high grade
debt securities having value equal to or greater than commitments
held by that Portfolio. Similarly, a separate account will be
maintained to meet obligations in respect of reverse repurchase
agreements. On delivery dates for such transactions, a Portfolio
will meet its obligations from maturities or sales of the
securities held in the separate account and/or from the available
cash flow. If a Portfolio, however, chooses to dispose of the
right to acquire a when-issued security prior to its acquisition,
it can incur a gain or loss. At the time a Portfolio makes the
commitment to purchase asecurity on a when-issued basis, it
records the transaction and reflects the value of the security in
determining its net asset value. No when-issued commitments will
be made if, as a result, more than 15% of a Portfolio's net
assets would be so committed.

Liquid Restricted Securities

The Prime Portfolio may purchase restricted securities
that are determined by the Adviser to be liquid in accordance
with procedures adopted by the Directors. Restricted securities
are securities subject to contractual or legal restrictions on
resale, such as those arising from an issuer's reliance upon
certain exemptions from registration under the Securities Act of
1933 (the "Securities Act").

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

<PAGE>

an efficient institutional market in which such restricted
securities can be readily resold in transactions not involving a
public offering. In many instances, therefore, the existence of
contractual or legal restrictions on resale to the general public
does not, in practice, impair the liquidity of such investments
from the perspective of institutional holders.

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

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

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

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

<PAGE>

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

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

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

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

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

General

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

<PAGE>

________________________________________________________________

INVESTMENT RESTRICTIONS
________________________________________________________________

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

Prime Portfolio

The Portfolio may not:

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

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

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

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

<PAGE>

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

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

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

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

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

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

<PAGE>

more than 5% of the securities of such issuer; or (h) act as an
underwriter of securities.

In connection with the qualification or registration of
the Portfolio's shares for sale under the securities laws of
certain states, the Portfolio has agreed, in addition to the
foregoing investment restrictions, that it (i) will not invest
more than 5% of the value of its total assets at the time of
purchase in the commercial paper, including variable amount
master demand notes, of any one issuer, and (ii) will not pledge,
hypothecate or in any manner transfer, as security for
indebtedness, securities owned by the Portfolio if such pledge,
hypothecation, or transfer would then result in more than 10% of
the Portfolio's net assets being so encumbered.

Government Portfolio

The Portfolio may not:

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

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

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

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

<PAGE>

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

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

7. act as an underwriter of securities.

In connection with qualification or registration of the
Portfolio's shares for sale under the securities laws of certain
states, the Portfolio has agreed, in addition to the foregoing
investment restrictions, that it will not (i) invest in
securities of issuers (other than agencies and instrumentalities
of the United State Government) having a record, together with
predecessors, of less than three years of continuous operation if
more than 5% of the Portfolio's assets would be invested in such
securities; (ii) purchase any restricted securities or securities
on margin; and (iii) make short sales of securities or maintain a
short position or write, purchase or sell puts, calls, straddles,
spreads or combinations thereof.

Tax-Free Portfolio

The Portfolio may not:

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

2. invest more than 25% of its total assets in the
securities of issuers conducting their principal business
activities in any one industry, provided that for purposes of
this policy (a) there is no limitation with respect to
investments in municipal securities (including industrial
development bonds), securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, and bank
obligations, including certificates of deposit, bankers'
acceptances and interest-bearing savings deposits, (such bank
obligations are issued by domestic banks, including U.S. branches
of foreign banks subject to the same regulation as U.S. banks)
and (b) consumer finance companies, industrial finance companies
and gas, electric, water and telephone utility companies are each
considered to be separate industries. For purposes of this
restriction and those set forth in restrictions 4 and 5 below,the

<PAGE>

Portfolio will regard the entity which has the primary
responsibility for the payment of interest and principal as the
issuer;

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

4. invest more than 5% of its total assets in the
securities of any one issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or
instrumentalities) except that with respect to 25% of its total
assets it may invest not more than 10% of such total assets in
the securities of any one issuer. For purposes of such 5% and
10% limitations, the issuer of the letter of credit or other
guarantee backing a participation interest in a variable rate
industrial development bond is deemed to be the issuer of such
participation interest;

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

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

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

8. make loans of money or securities except by the
purchase of debt obligations in which the Portfolio may invest

<PAGE>

consistent with its investment objectives and policies and by
investment in repurchase agreements;

9. enter into repurchase agreements (i) not terminable
within seven days if, as a result thereof, more than 10% of
thePortfolio's total assets would be committed to such repurchase
agreements (whether or not illiquid) or other illiquid
investments, or (ii) with a particular vendor if immediately
thereafter more than 5% of the Portfolio's assets would be
committed to repurchase agreements entered into with such vendor;
or

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

In connection with qualification or registration of the
Portfolio's shares for sale under the securities laws of certain
states, the Portfolio has agreed in addition to the foregoing
investment restrictions that it will not invest in interests in
oil, gas or other mineral exploration or development programs.

<PAGE>

________________________________________________________________

MANAGEMENT
________________________________________________________________

Directors and Officers

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

Directors

JOHN D. CARIFA*,50, is the President, the Chief
Operating Officer and a Director of Alliance Capital Management
Corporation ("ACMC")**, with which he has been associated since
prior to 1990.

RUTH BLOCK, 64, is a Director of Ecolab Incorporated
(specialty chemicals) and Amoco Corporation (oil and gas).
Previously, she was an Executive Vice President and Chief
Insurance Officer of The Equitable Life Assurance Society of the
United States since prior to 1990. Her address is Box 4653,
Stamford, Connecticut 06903.

________________________________________________________________

* 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 H. DIEVLER, 65, was formerly a Senior Vice
President of ACMC, with which he had been associated since prior
to 1990. He is currently an independent consultant. His address
is P.O. Box 167, Spring Lake, New Jersey 07762.

JOHN H. DOBKIN, 53, has been the President of Historic
Hudson Valley (historic preservation) since 1990. Previously, he
was Director of the National Academy of Design. From 1987 to
1992, he was a Director of ACMC. His address is 105 West 55th
Street, New York, New York 10019.

WILLIAM H. FOULK, JR., 62, 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 1990. His address is 2 Hekma Road, Greenwich, CT
06831.

DR. JAMES M. HESTER, 71, is President of the Harry Frank
Guggenheim Foundation and a Director of Union Carbide Corporation
with which he has been associated since prior to 1990. He was
formerly President of New York University, The New York Botanical
Garden and Rector of the United Nations University. His address
is 45 East 89th Street, Apt. 39C, New York, New York 10128.

CLIFFORD L. MICHEL, 56, is a Partner of the law firm of
Cahill Gordon & Reindel, with which he has been associated since
prior to 1990. He is also Chief Executive Officer of Wenonah
Development Company (investments) and a Director of Placer Dome,
Inc. (mining) and Faber-Castell Corporation (writing products).
His address is St. Bernard's Road, Gladstone, New Jersey 07934.

ROBERT C. WHITE, 75, is a Vice President and Chief
Financial Officer of the Howard Hughes Medical Institute, with
which he has been associated since prior to 1990. He is also a
Trustee of St. Claire Fixed Income Fund, St. Clair Tax-Free Fund
and St. Clair Equity Fund (registered investment companies) and a
Director of MEDSTAAT, Systems, Inc. (health care information).
His address is 30835 River Crossing, Bingham Farms, Michigan
48025.

Officers

RONALD M. WHITEHILL - President, 56, is a Vice President
of ACMC and Executive Vice President of Alliance Cash Management
Services, with which he has been associated since 1993.

<PAGE>

Previously, he was Senior Vice President and Managing Director of
Reserve Fund since prior to 1990.

KATHLEEN A. CORBET - Senior Vice President, 35, has been
a Senior Vice President of ACMC since July 1993. Previously, she
held various responsibilities as head of Equitable Capital
Management Corporation's Fixed Income Management Department,
Private Placement Secondary Trading and Fund Management since
prior to 1990.

DREW A. BIEGEL - Vice President, 44, is a Vice President
of ACMC, with which he has been associated since prior to 1990.

PAMELA F. RICHARDSON - Vice President, 42, is a Vice
President of ACMC, with which she has been associated since prior
to 1990.

EDMUND P. BERGAN, Jr. - Secretary, 45, is a Senior Vice
President and the General Counsel of Alliance Fund Distributors,
Inc. ("AFD") and Alliance Fund Services, Inc. ("AFS"), with which
he has been associated since prior to 1990.

MARK D. GERSTEN - Treasurer and Chief Financial Officer,
44, is a Senior Vice President of AFS and AFD, with which he has
been associated since prior to 1990.

JOSEPH J. MANTINEO - Controller, 36, is a Vice President
of AFS, with which he has been associated since prior to 1990.

The Fund does not pay any fees to, or reimburse expenses
of, its Directors who are considered "interested persons" of the
Fund. The aggregate compensation paid by the Fund to each of the
Directors during its fiscal year ended April 30, 1995, the
aggregate compensation paid to each of the Directors during
calendar year 1994 by all of the registered investment companies
to which the Adviser provides investment advisory services
(collectively, the "Alliance Fund Complex") and the total number
of funds in the Alliance Fund Complex with respect to which each
of the Directors serves as a director or trustee, are set forth
below. Neither the fund nor any other fund in the Alliance Fund
Complex provides compensation in the form of pension or
retirement benefits to any of its directors or trustees.

<PAGE>

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

John D. Carifa $-0- $-0- 42

Ruth Block $2,737 $157,000 31
David H. Dievler $1,064 $-0- 49
John H. Dobkin $4,160 $110,750 29
William H. Foulk, Jr. $4,191 $141,500 30
James M. Hester $4,582 $154,500 32
Clifford L. Michel $3,114 $120,500 31
Robert C. White $3,769 $133,500 36

As of June 30, 1995, the Directors and officers of the
Fund as a group owned less than 1% of the outstanding shares of
each Portfolio.

The Adviser

Alliance Capital Management L.P., a New York Stock
Exchange listed company with principal offices at 1345 Avenue of
the Americas, New York, New York 10105, has been retained under
an investment advisory agreement (the "Advisory Agreement") as
the Fund's Adviser (see "Management of the Fund" in the
Prospectus). ACMC, the sole general partner of, and the owner of
a 1% general partnership interest in, the Adviser, is an indirect
wholly-owned subsidiary of The Equitable Life Assurance Society
of the United States ("Equitable"), one of the largest life
insurance companies in the United States and a wholly-owned
subsidiary of The Equitable Companies Incorporated ("ECI"), a
holding company controlled by AXA, a French insurance holding
company. As of June 30, 1995, ACMC, Inc. and Equitable Capital
Management Corporation, each a wholly-owned direct or indirect
subsidiary of Equitable, owned in the aggregate approximately 59%
of the issued and outstanding units representing assignments of
beneficial ownership of limited partnership interests in the
Adviser ("Units"), and approximately 33% and 8% of the Units were
owned by the public and employees of the Adviser and its
subsidiaries, respectively, including employees of the Adviser

<PAGE>

who serve as Directors of the Fund, calculated including as
outstanding Units subject to options exercisable by employees
within 60 days of June 30, 1995.

AXA owns approximately 60% of the outstanding voting
shares of common stock of ECI. AXA is a member of a group of
companies (the "AXA Group") that is the second largest insurance
group in France (measured by gross premiums written worldwide)
and one of the largest insurance groups in Europe. Principally
engaged in property and casualty insurance and life insurance in
Europe and elsewhere in the world, the AXA Group is also involved
in real estate operations and certain other financial services,
including mutual fund management, lease financing services and
brokerage services. Based on information provided by AXA, as of
Janury 1, 1995, 42.3% of the voting shares (representing 54.7% of
the voting power) of AXA were owned by Midi Participations, a
French corporation that is a holding company. The voting shares
of Midi Participations are in turn owned 60% by Finaxa, a French
corporation that is a holding company, and 40% by subsidiaries of
Assicurazioni Generali S.p.A., an Italian corporation
("Generali") (one of which, Belgica Insurance Holding S.A., a
Belgian Corporation, owned 34.1%). As of January 1, 1995, 62.1%
of the issued shares (representing 75.7% of the voting power) of
Finaxa were owned by five French mutual insurance companies (the
"Mutuelles AXA") (one of which, AXA Assurances I.A.R.D. Mutuelle,
owned 31.8% of the issued shares) (representing 39.0% of the
voting power), and 26.5% of the voting shares (representing 16.6%
of the voting power) of Finaxa were owned by Banque Paribas, a
French bank ("PARIBAS"). Including the shares owned by Midi
Participations, as of January 1, 1995, the Mutuelles AXA directly
or indirectly owned 51.3% of the voting shares (representing
65.8% of the voting power) of AXA. In addition, certain
subsidiaries of AXA own 0.4% of the shares of AXA which are not
entitled to be voted. Acting as a group, the Mutuelles AXA
control AXA, Midi Participations and Finaxa.

The Adviser is a leading international investment
manager supervising client accounts with assets as of June 30,
1995 totaling over $135.8 billion (of which more than $43 billion
represented the assets of investment companies). The Adviser's
clients are primarily major corporate employee benefit funds,
public employee retirement systems, investment companies,
foundations and endowment funds and included, as of June 30,
1995, 29 of the FORTUNE 100 companies. The Adviser and its

<PAGE>

subsidiaries employ approximately 1,350 employees who operate out
of domestic offices and the overseas offices of subsidiaries in
Bombay, Istanbul, London, Sydney, Tokyo, Toronto, Bahrain,
Luxembourg and Singapore. The 51 registered investment companies
managed by the Adviser comprising 103 separate investment
portfolios currently more than one million shareholders.

Under the Advisory Agreement, the Adviser provides
investment advisory services and order placement facilities for
each Portfolio of the Fund and pays all compensation of Directors
of the Fund who are affiliated persons of the Adviser. The
Adviser or its affiliates also furnish the Fund without
chargewith management supervision and assistance and office
facilities. Under the Advisory Agreement, each Portfolio pays
the Adviser at an annual rate of .20 of 1% of the average daily
value of its net assets. The fee is accrued daily and paid
monthly. The Adviser has undertaken, until, at its request, the
Fund notifies investors to the contrary that if, in any fiscal
year, the aggregate expenses of a Portfolio, exclusive of taxes,
brokerage, interest on borrowings and extraordinary expenses, but
including the management fee, exceed .20 of 1% of a Portfolio's
average net assets for the fiscal year, the Portfolio may deduct
from the payment to be made to the Adviser, or the Adviser will
bear, such excess expenses. For the period ended April 30, 1995,
the Adviser reimbursed its advisory fee in the amount of $239,602
and $168,311 for the Prime and Government Portfolios,
respectively. For the period ended April 30, 1995, the Adviser
reimbursed the Tax-Free Portfolio in the amount of $181,950. For
the period ended April 30, 1994, the Adviser waived the advisory
fee of $185,655, $124,408 and $62,871 for the Prime, Government
and Tax-Free Portfolios, respectively. For the period ended
April 30, 1993, the Adviser waived the advisory fees of $116,291,
$105,776 and $44,905 for the Prime, Government and Tax-Free
Portfolios, respectively. For the year ended April 30, 1995, the
Adviser voluntarily and contractually reimbursed expenses in the
amount of $239,602, $168,311 and $181,950 for the Prime,
Government and Tax-Free Portfolios, respectively. For the year
ended April 30, 1994, the Adviser voluntarily and contractually
reimbursed expenses in the amount of $21,163 and $91,063 for the
Prime and Tax-Free Portfolios, respectively. For the year ended
April 30, 1993, the Adviser voluntarily and contractually
reimbursed expenses of $90,300, $85,400 and $152,300 for the
Prime, Government and Tax-Free Portfolios, respectively. The
Adviser may make payments from time to time from its own
resources, which may include the management fees paid by the
Portfolios of the Fund to compensate broker-dealers, depository

<PAGE>

institutions, or other persons for providing distribution
assistance and administrative services and to otherwise promote
the sale of shares of the Fund, including paying for the
preparation, printing and distribution of prospectuses and other
literature or other promotional activities. The Portfolios also
pay for printing of prospectuses and other reports to
shareholders and all expenses and fees related to registrations
and filings with the Securities and Exchange Commission and with
state regulatory authorities. The Portfolios pay all other
expenses incurred in its operations, including the Adviser's
management fees; custody, transfer and dividend disbursing
expenses; legal and auditing costs; clerical, administrative,
accounting, and other office costs; fees and expenses of
Directors who are not affiliated with the Adviser; costs of
maintenance of the Fund's existence; and interest charges, taxes,
brokerage fees, and commissions. As to the obtaining of clerical
and accounting services not required to be provided to each
Portfolio by the Adviser under the Advisory Agreement, the
Fundmay employ its own personnel. For such services, it also may
utilize personnel employed by the Adviser; if so done, the
services are provided to the Fund at cost and the payments
therefor must be specifically approved in advance by the
Directors.

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

The Advisory Agreement remains in effect until December
31, 1995, and thereafter for successive twelve month periods
computed from each January 1, provided that such continuance is
specifically approved at least annually by a vote of a majority
of each Portfolio's outstanding voting securities or by the
Fund's Board of Directors, including in either case approval by a
majority of the Directors who are not parties to the Advisory
Agreement or interested persons as defined in the Act. The

<PAGE>

Advisory Agreement may be terminated with respect to any
Portfolio without penalty on 60 days' written notice at the
option of either party or by vote of a majority of the
outstanding voting securities of such Portfolio; it will
automatically terminate in the event of assignment. The Adviser
is not liable for any action or inaction with regard to its
obligations under the Advisory Agreement as long as it does not
exhibit willful misfeasance, bad faith, gross negligence, or
reckless disregard of its obligations.

________________________________________________________________

PURCHASE AND REDEMPTION OF SHARES
________________________________________________________________

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

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

Except with respect to telephone orders, investors whose
payment in Federal funds or bank wire monies are received by
State Street Bank by 4:00 p.m. (New York time) will become
shareholders on, and will receive the dividend declared, that
day, with respect to the Prime and Government Portfolios. An
investor's purchase order with respect to the Tax-Free Portfolio
must be received by State Street Bank by 12:00 Noon (New York
time). A telephone order for the purchase of shares will become
effective, and the shares purchased will receive the dividend on
shares declared on that day, if such order is placed by 4:00 p.m.
(New York time) and Federal funds or bank wire monies are
received by State Street bank prior to 4:00 p.m. (New York time)
of such day, with respect to the Prime and Government
Portfolios. With respect to the Tax-Free Portfolio, a telephone

<PAGE>

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

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

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

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

<PAGE>

for any period during which the New York Stock Exchange is closed
(other than customary weekend and holiday closings), when trading
on the New York Stock Exchange is restricted, or an emergency (as
determined by the Securities and Exchange Commission) exists, or
the Securities and Exchange Commission has ordered such a
suspension for the protection of shareholders. The value of a
shareholder's investment at the time of redemption may be more or
less than his cost, depending on the market value of the
securities held by the Fund at such time and the income earned.

________________________________________________________________

DAILY DIVIDENDS - DETERMINATION OF NET ASSET VALUE
________________________________________________________________

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

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

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

<PAGE>

the daily yield on shares of a Portfolio may be higher than that
of a fund with identical investments utilizing a method of
valuation based upon market prices for its portfolio instruments;
the converse would apply in a period of rising interest rates.

Each Portfolio of the Fund utilizes the amortized cost
method of valuation of portfolio securities in accordance with
the provisions of Rule 2a-7 under the Act. Pursuant to such
rule, each Portfolio maintains a dollar-weighted average
portfolio maturity of 90 days or less and invests only in
securities of high quality. Each Portfolio also purchases
instruments having remaining maturities of no more than one year.
Under Rule 2a-7, the Tax-Free Portfolio treats a municipal
security which has a variable or floating rate of interest as
having a maturity equal to the longer of either the period, if
any, remaining until the interest rate is next scheduled to be
readjusted or the period remaining until the principal amount can
be recovered by exercising the security's demand feature. The
Fund maintains procedures designed to stabilize, to the extent
reasonably possible, the price per share of each Portfolio as
computed for the purpose of sales and redemptions at $1.00. Such
procedures include review of a Portfolio's portfolio holdings by
the Directors at such intervals as they deem appropriate to
determine whether and to what extent the net asset value of each
Portfolio calculated by using available market quotations or
market equivalents deviates from net asset value based on
amortized cost. If such deviation as to any Portfolio exceeds
1/2 of 1%, the Directors will promptly consider what action, if
any, should be initiated. In the event the Directors determine
that such a deviation may result in material dilution or other
unfair results to new investors or existing shareholders, they
will consider corrective action which might include (1) selling
instruments held by the affected Portfolio prior to maturity to
realize capital gains or losses or to shorten average portfolio
maturity; (2) withholding dividends of net income on shares of
that Portfolio; or (3) establishing a net asset value per shareof
the Portfolio by using available market quotations or
equivalents.

The net asset value of the shares of each Portfolio,
except the Tax-Free Portfolio, is determined each Fund business
day (and on such other days as the Directors deem necessary) at
12:00 Noon and 4:00 p.m. (New York time). The net asset value of
the shares of the Tax-Free Portfolio is determined each Fund
business day (and on such other days as the Directors deem
necessary) at 12:00 Noon (New York time). The net asset value
per share of a Portfolio is calculated by taking the sum of the
value of the Portfolio's investments and any cash or other

<PAGE>

assets, subtracting liabilities, and dividing by the total number
of shares of that Portfolio outstanding. All expenses, including
the fees payable to the Adviser, are accrued daily.

________________________________________________________________

TAXES
________________________________________________________________

Federal Income Tax Considerations

The Prime, Government and Tax-Free Portfolios qualified
for the fiscal year ended April 30, 1995 as regulated investment
companies under the Internal Revenue Code of 1986, as amended
(the "Code") and, as such, will not be liable for Federal income
and excise taxes on the investment company taxable income and net
capital gains distributed to their shareholders. Since each
Portfolio of the Fund distributes all of its investment company
taxable income and net capital gains, each Portfolio should
thereby avoid all Federal income and excise taxes.

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

With respect to the Tax-Free Portfolio, for
shareholder's Federal income tax purposes, distributions to
shareholders out of tax-exempt interest income earned by such
Portfolio generally is not subject to Federal income tax. Any
loss realized on shares of the Tax-Free Portfolio that are held
for six months or less will not be realized for Federal income
tax purposes to the extent of any exempt-interest dividends
received on such shares. Shareholders of the Tax-Free Portfolio

<PAGE>

may be subject to state and local taxes on distributions. Each
investor should consult his own tax adviser to determine the
status of distributions in his particular state or locality.
See, however, above "Alternative Minimum Tax."

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

Substantially all of the dividends paid by the Tax-Free
Portfolio are anticipated to be exempt from Federal income
taxes. Shortly after the close of each calendar year, a notice
is sent to each shareholder advising him of the total dividends
paid into his or her account for the year and the portion of such
total that is exempt from Federal income taxes. This portion is
determined by the ratio of the tax-exempt income to total income
for the entire year and, thus, is an annual average rather than
day-by-day determination for each shareholder.
________________________________________________________________

GENERAL INFORMATION
________________________________________________________________

Portfolio Transactions. Subject to the general
supervision of the Directors of the Fund, the Adviser is
responsible for the investment decisions and the placing of the
orders for portfolio transactions for the Portfolios. Because
the Portfolios invest in securities with short maturities, there
is a relatively high portfolio turnover rate. However, the
turnover rate does not have an adverse effect upon the net yield
and net asset value of the Portfolio's shares since the portfolio
transactions occur primarily with issuers, underwriters or major
dealers in money market instruments acting as principals. Such
transactions are normally on a net basis which do not involve
payment of brokeragecommissions. 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>

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

Capitalization

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

<PAGE>

objectives,policies or restrictions, may create additional series
of shares. Any issuance of shares of another class would be
governed by the Act and Maryland law.

As of the close of business on June 30, 1995, there were
212,941,114 shares of the Prime Portfolio,145,446,484 shares of
the Government Portfolio and 47,058,490 shares of the Tax-Free
Portfolio outstanding. Set forth and discussed below is certain
information as to all persons who owned of record or beneficially
5% or more of the outstanding shares of a portfolio at June 30,
1995.

No. of % of
Name and Address Shares Class
________________ ______ _____

Prime Portfolio

Corestates Bank NA 20,033,775 9%
ATTN: John Derderian
530 Walnut Street FC 1-9-1
Philadephia, PA 19106-3694

First Bank National Assoc TTEE 14,041,129 6%
For the Trump Hotel & Casino
Resort Holdings LP $155,000,00
15 1/2 Sen Secured Nts Due 200
180 E Fifth Street
St. Paul, MN 55101-1631

Chemical Management Co. Inc. 10,773,749 5%
ATTN: Ann S. Billian
P.O. Box 121874
Fort Worth, TX 76121-1874

Government Portfolio

Gotham Partners 7,819,666 5%
A/C Gotham PTNRS
237 Park Avenue
9th Floor
New York, NY 10017-3142

John Birmingham 14,960,354 10%
282 Beacon Street

<PAGE>

Boston, MA 02116-1101

Robert Birmingham 14,143,163 9%
44 Young Road
Weston, VA 02193-2322

Herzog Heine Geduld Inc. 45,162,512 31%
Firm Investment
26 Broadway
New York, NY 10004-1703

Tax-Free Portfolio

Amre Inc. 2,908,097 6%
Attn: Carol Glover
8585 N Stemmons Freeway
South Tower Ste 102
Dallas, TX 75247-3805

Mr. Walter Leeds 12,075,892 25%
c/o Polo Club
6000 Hollows Lane
Delray Beach, FL 33484-6960

Lam Research Corp. 5,000,000 10%
Attn: Brian Sereda
4650 Cushing Parkway

Summercourt Properties LP 2,566,216 5%
Excess Bond Account
1050 Crown Point Pkwy Suite 500
Atlanta, GA 30338-7702

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

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

<PAGE>

Yield Quotations and Performance Information.
Advertisements containing yield quotations for one or more
Portfolios for the Fund may from time to time be sent to
investors or placed in newspapers, magazines or other media on
behalf of the Fund. These advertisements may quote performance
rankings, ratings or data from independent organizations or
financial publications such as Lipper Analytical Services, Inc.,
Morningstar, Inc., IBC's Money Fund Report, IBC's Money Market
Insight or Bank Rate Monitor or compare the Fund's performance to
bank money market deposit accounts, certificates of deposit or
various indices. Yield quotations are calculated in accordance
with the standardized method referred to in Rule 482 under the
Securities Act of 1933.

Yield quotations for a Portfolio are thus determined by
(i) computing the net change over a seven-day period, exclusive
of the capital changes, in the value of a hypothetical
pre-existingaccount having a balance of one share of such
Portfolio at the beginning of such period, (ii) dividing the net
change in account value by the value of the account at the
beginning of the base period to obtain the base period return,
and (iii) multiplying the base period return by (365/7) with the
resulting yield figure carried to the nearest hundredth of one
percent. A Portfolio's effective annual yield represents a
compounding of the annualized yield according to the formula:
effective yield + [(base period return + 1) 365/7] - 1.

<PAGE>

________________________________________________________________

APPENDIX A

COMMERCIAL PAPER AND BOND RATINGS

________________________________________________________________

Municipal and Corporate Bonds

The two higher ratings of Moody's Investors Service,
Inc. ("Moody"s) for municipal and corporate bonds are Aaa an Aa.
Bonds rated Aaa are judged by Moody's to be of the best quality.
Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally
known as high-grade bonds. Moody's states that Aa bonds are
rated lower than the best bonds because margins of protection or
other elements make long-term risks appear somewhat larger than
Aaa securities. The generic rating Aa may be modified by the
addition of the numerals 1, 2 or 3. The modifier 1 indicates
that the security ranks in the higher end of the Aa rating
category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in the lower end of
such rating category.

The two highest ratings of Standard & Poor's for
municipal and corporate bonds AAA and AA. Bonds rated AAA have
the highest rating assigned by Standard & Poor's to debt
obligation. Capacity to pay interest and repay principal is
extremely strong. Bonds rated AA have a very strong capacity to
pay interest and repay principal and differ from the highest
rated issues only in a small degree. The AA rating may be
modified by the addition of a plus (+) or Minus (-) sign to show
relative standing within rating
category.

Short-Term Municipal Securities

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

<PAGE>

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

Issues rate SP-2 have satisfactory capacity to pay
principal and interest.

Other Municipal Securities and Commercial Paper

"Prime-1" is the highest rating assigned by Moody's for
other short-term municipal securities and commercial paper, and
"A-1+" and "A-1" are the two highest ratings for commercial paper
assigned by Standard & Poor's (Standard & Poor's does not rate
short-term tax-free obligations). Moody's uses the numbers 1, 2,
and 3 to denote relative strength within its highest
classification of "Prime", while Standard & Poor's uses the
number 1+, 1, 2 and 3 to denote relative strength within its
highest classification of "A". Issuers rated "Prime" by Moody's
have the following characteristics: their short-term debt
obligations carry the smallest degree of investment risk, margins
of support for current indebtedness are large or stable with cash
flow an asset protection well assured, current liquidity provides
ample coverage of near-term liabilities and unused alternative
financing arrangements are generally available. While protective
elements may change over the intermediate or longer term, such
changes are most unlikely to impair the fundamentally strong
position of short-term obligations. Commercial paper issuers
rates "A" by Standard & Poor's have the following
characteristics: liquidity ratios are better than industry
average, long-term debt rating is A or better, the issuer has
access to at least two additional channels of borrowing, and
basic earnings and cash flow are in an upward trend. Typically,
the issuer is a strong company in a well-established industry and
has superior management.

<PAGE>

________________________________________________________________

APPENDIX B

DESCRIPTION OF MUNICIPAL SECURITIES

________________________________________________________________

Municipal Notes generally are used to provide for
short-term capital needs and usually have maturities of one year
or less. They include the following:

1. Project Notes, which carry a U.S. Government
guarantee, are issued by public bodies (called
"local issuing agencies") created under the laws of
a state, territory, or U.S. possession. They have
maturities that range up to one year from the date
of issuance.. Project Notes are backed by an
agreement between the local issuing agency and the
Federal Department of Housing and Urban Development
. These Notes provide financing for a wide range
of financial assistance programs for housing,
redevelopment, and related needs (such as
low-income housing programs and renewal programs).

2. Tax Anticipation Notes are issued to finance
working capital needs of municipalities.
Generally, they are issued in anticipation of
various seasonal tax revenues, such as income,
sales use and business taxes, and are payable from
these specific future taxes.

3. Revenue Anticipation Notes are issued in
expectation of receipt of other types of revenues,
such as Federal revenues available under the
Federal Revenue Sharing Programs.

4. Bond Anticipation Notes are issued to provide
interim financing until long-term financing can be
arranged. In most cases, the long-term bonds then
provide the money for the repayment of the Notes.

5. Construction Loan Notes are sold to provide
construction financing. After successful
completion and Acceptance, many projects receive
permanent financing through the Federal Housing
Administration under the Federal National Mortgage

<PAGE>

Association or the Government National Mortgage
Association.

6. Tax-Exempt Commercial Paper is a short-term
obligation with a state maturity of 365 days or
less. It is issued by agencies of state and local
governments to finance seasonal working capital
needs or as short-term financing in anticipation of
longer term financing.

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

1. General Obligation Bonds are issued by such
entities as states, countries, cities, towns, and
regional districts. The proceeds of these
obligations are used to fund a wide range of public
projects, including construction or improvement of
schools, highways and roads, and water and sewer
systems. The basic security behind General
Obligation Bonds is the issuer's pledge of its full
faith and credit and taxing power for the payment
of principal and interest. The taxes that can be
levied for the payment of debt service may be
limited or unlimited as to the rate or amount of
special assessments.

2. Revenue Bonds generally are secured by the net
revenues derived from a particular facility, group
of facilities, or, in some cases, the proceeds of a
special excise of other specific revenue source.
Revenue Bonds are issued to finance a wide variety
of capital projects including electric, gas, water
and sewer systems; highways, bridges and tunnels;
port and airport facilities; colleges and
universities; and hospitals. Many of these Bonds
provide additional security in the form of a debt
service reserve fund to be used to make principal
and interest payments. Housing authorities have a
wide range of security, including partially or
fully insured mortgages, rent subsidized and/or
collateralized mortgages, and/or the net revenues
from housing or other public projects. Some
authorities provide further security in the form of
a state's ability (without obligation) to make up
deficiencies in the debt service reserve fund.

<PAGE>

3. Industrial Development Bonds are considered
municipal bonds if the interest paid thereon is
exempt from Federal income tax and are issued by or
on behalf of public authorities to raise money to
finance various privately operated facilities for
business and manufacturing, housing, sports, and
pollution control. These Bonds are also used to
finance public facilities such as airports, mass
transit systems, ports, and parking. The payment
of the principal and interest on such Bonds is
dependent solely on the ability of the facility's
user to meet its financial obligations and the
pledge, if any, of real and personal property as
security for such payment.

45
00250072.AFO

<PAGE>

ACM INSTITUTIONAL RESERVES, INC.

ANNUAL REPORT
APRIL 30, 1995

STATEMENT OF NET ASSETS
April 30, 1995 ACM Institutional Reserves - Prime Portfolio
-------------------------------------------------------------------------------
Principal
Amount
(000) Security Yield Value
---------------------------------------------------------------------
COMMERCIAL PAPER-58.7%
AES Barbers Point, Inc.
$ 5,000 7/07/95 6.06% $4,943,608
Bausch & Lomb, Inc.
5,000 6/19/95 6.07 4,958,690
Casco Co. Ltd.
5,000 5/30/95 5.99 4,975,874
Copley Financing Corp.
4,000 6/08/95 6.00 3,974,667
Dupont E I De Nemours & Co.
3,000 10/24/95 6.04 2,911,413
Finance One Funding Corp.
5,000 6/30/95 6.05 4,949,583
General Electric Capital Corp.
5,000 7/26/95 6.00 4,928,333
International Nederlanden Group
5,000 5/19/95 5.97 4,985,075
Kamehameha Schools Bishop Estate
5,000 6/08/95 6.10 4,967,806
Kubota Finance (USA), Inc.
5,000 5/16/95 6.06 4,987,375
8,000 5/16/95 6.07 7,979,767
Mitsubishi Motors Credit of America
5,000 7/25/95 6.02 4,928,931
Mitsui and Co. USA, Inc.
6,000 6/21/95 6.10 5,948,150
New Zealand, Government of
5,000 7/18/95. 6.00 4,935,000
Pacific Dunlop Holdings, Inc.
3,000 5/22/95 6.03 2,989,447
Petroleo Brasileiro SA
5,000 6/19/95 6.10 4,958,486
Premium Funding, Inc.
(Series A)
8,000 6/02/95 6.08 7,956,764
Province of Quebec
3,000 12/06/95 6.10 2,888,675
Santander Finance Delaware, Inc.
5,000 5/25/95 6.52 4,978,267
Sierra Funding Corp.
3,000 5/15/95 6.13 2,992,848
Sumitomo Corp. of America
3,000 10/06/95 6.08 2,919,947
U.B.F.C., Inc.
4,000 5/02/95 6.05 3,999,328
WMC Finance
$7,000 5/22/95 6.05% $6,975,296
Younkers Funding Corp.
5,000 5/01/95 6.00 5,000,000

Total Commercial Paper
(amortized cost $116,033,330) 116,033,330

CORPORATE OBLIGATIONS-30.0%
Abbey National Treasury Service
5,000 7.40%, 12/15/95 6.60 5,021,074
Bankers Trust Corp.
5,000 6.22%, 6/20/95 FRN. 6.29 4,999,520
Bear Stearns Cos., Inc.
3,000 6.23%, 10/20/95 FRN 6.23 3,000,000
Boatmens First National Bank
of Kansas City
4,000 6.19%, 8/18/95 FRN 6.25 3,999,292
Comerica Bank
2,000 5.95%, 11/22/95 FRN 6.11 1,998,192
Comerica Bank Illinois
3,000 5.97%, 9/29/95 FRN 6.04 2,999,159
CS First Boston Group, Inc.
2,000 6.19%, 6/16/95 FRN 6.19 2,000,000
FCC National Bank Wilmington Del.
5,000 6.09%, 2/16/96 FRN 6.05 5,001,510
First Bank N A Milwaukee WI
8,000 6.01%, 5/04/95 FRN 6.08 7,999,989
Goldman Sachs Group
3,000 5.97%, 11/02/95 FRN 5.97 3,000,000
Merrill Lynch & Co., Inc.
2,000 5.99%, 6/20/95 FRN 5.99 2,000,000
4,000 6.06%, 3/25/96 FRN 6.06 4,000,000
Nationsbank North Carolina
3,000 5.75%, 7/21/95 5.77 2,999,493
Ontario Hydro
350 9.25%, 5/01/95 5.21 350,000
PNC Bank Ohio
2,000 5.94%, 6/15/95 FRN. 6.01 1,999,832
Wachovia Bank
8,000 6.02%, 6/13/95 6.04 7,999,753

Total Corporate Obligations
(amortized cost $59,367,814) 59,367,814

U.S. GOVERNMENT & AGENCY OBLIGATIONS-3.7%
Student Loan Marketing Association
$ 3,000 6.27%, 2/14/97 5.99% $3,011,445
Student Loan Marketing
Association FRN
4,200 6.22%, 11/27/96 5.98 4,212,262

Total U.S. Government & Agency Obligations
(amortized cost $7,223,707) 7,223,707

CERTIFICATE OF DEPOSIT-2.5%
American Express Centurion Bank
5,000 6.05%, 6/28/95 6.05 5,000,000

BANKER'S ACCEPTANCE-2.0%
Daiichi Kangyo Bank Ltd.
4,000 8/28/95 6.20 3,918,022

SHORT TERM INVESTMENTS-2.5%
State Street Bank and Trust Euro
5,000 5.88%, 5/01/95 5.88% $5,000,000

TOTAL INVESTMENTS-99.4%
(amortized cost $196,542,873) 196,542,873
Other assets less liabilities-0.6% 1,246,519

NET ASSETS-100% (offering and
redemption price of $1.00 per share;
197,907,442 shares outstanding) $197,789,392

Glossary of Terms:

FRN Floating Rate Note

See notes to financial statements.

STATEMENT OF NET ASSETs
April 30, 1995 ACM Institutional Reserves - Government Portfolio
-------------------------------------------------------------------------------
Principal
Amount
(000) Security Yield Value
-------------------------------------------------------------------
U.S. GOVERNMENT & AGENCY
OBLIGATIONS-89.5%
Federal Home Loan
Mortgage Corp.-29.9%
$ 3,000 5/25/95 5.88% $ 2,988,240
750 7/12/95 5.91 741,135
6,000 6/26/95 5.93 5,944,653
9,000 6/02/95 5.95 8,952,400
1,000 5/02/95 5.96 999,835
1,000 3/29/96 5.97 944,778
7,000 5/05/95 5.98 6,995,349
2,000 6/02/95 6.00 1,989,333
1,000 4/01/96 6.20 942,133
750 6.45%, 4/08/96 6.50 749,523
31,247,379

Federal National Mortgage
Association-21.0%
2,000 5.25%, 6/30/95 5.41 1,999,486
5,000 5/30/95 5.97 4,975,954
7,000 5.97%, 4/04/97 6.07 6,993,682
5,000 6/30/95 5.99 4,950,083
3,000 6.11%, 7/19/95 6.14 2,999,806
21,919,011

Federal Farm Credit Bank-16.4%
10,000 5/08/95 5.86 9,988,605
5,170 5/02/95 5.96 5,169,144
2,000 6.76%, 2/28/96 6.71 2,000,467
17,158,216

Student Loan Marketing
Association-10.8%
1,715 5.99%, 7/19/96 5.96 1,715,556
500 6.14%, 6/02/95 6.00 500,063
4,000 6.24%, 1/23/97 6.02 4,015,227
5,000 6.27%, 2/14/97 6.02 5,019,832
11,250,678

Federal Home Loan Bank-9.5%
2,500 5.94%, 8/05/96 6.09% $2,495,557
4,000 9/27/95 6.00 3,900,667
3,500 6.06%, 10/20/95 6.27 3,498,679
9,894,903

U.S. Treasury Notes-1.9%
2,000 3.88%, 8/31/95 5.67 1,988,543
Total U.S. Government & Agency
Obligations
(amortized cost $93,458,730) 93,458,730

REPURCHASE AGREEMENT-7.7%
State Street Repo
8,000 5.50%, dated 4/28/95,
due 5/01/95 in the amount of
$8,003,667 (cost $8,000,000;
collateralized by $7,380,000 U.S.
Treasury Note, 8.875%, 11/15/98
value-$8,163,347 5.50 8,000,000

TOTAL INVESTMENTS-97.2%
(amortized cost $101,458,730) 101,458,730
Other assets less liabilities-2.8% 2,951,142
NET ASSETS-100% (offering and redemption
price of $1.00 per share; 104,494,707
shares outstanding) $104,409,872

See notes to financial statements.

STATEMENT OF NET ASSETS
April 30, 1995 ACM Institutional Reserves - Tax-Free Portfolio
-------------------------------------------------------------------------------
Principal
Amount
(000) Security Yield Value
--------------------------------------------------------------------
ALABAMA-4.4%
Alabama HFA Series '89A MFHR
(Northbrook Project) VRDN*
560 4/01/14 5.15% $560,000
Phenix City CP Series '88 AMT
1,000 5/01/95 4.10 1,000,000
1,560,000
CALIFORNIA-13.0%
California GO RAN Series A
1,100 6/28/95 4.37 1,101,054
Kern County California
Community College TRAN
2,500 7/20/95 4.45 2,503,340
Orange County GO TRAN
1,000 7/19/95 3.78 866,666
Irrevocable standby letter of credit
dated December 8, 1994 with Chase
Manhattan Bank, of which the Portfolio
is the beneficiary, for account of
Alliance Capital Management, L.P.,
securing, under certain circumstances.
Orange County GO TRAN 7/19/95** 134,895
1,001,561
4,605,955

FLORIDA-1.1%
Sunshine State Government
Finance Commission CP Series '86
400 5/02/95 4.10 399,998

GEORGIA-1.1%
Macon-Bibb County Hospital Rev.
(Charter Med/Macon)Series '86 VRDN*
400 3/01/05 4.65 400,000

ILLINOIS-7.0%
Decatur Illinois Water Revenue CP
(New South Water Treatment)
Series '85
1,000 5/01/95 4.25 1,000,000
Illinois GO Certificates
1,500 6/15/95 4.20 1,500,684
2,500,684

INDIANA-4.8%
Indiana Dev. Fin. Auth.
Solid Waste Series '91A
$1,000 5/08/95 4.15% $1,000,000
Indiana Emp. Dev. Comm. IDR
(O'Neal Metals) AMT VRDN*
700 4/01/10 4.90 700,000
1,700,000

LOUISIANA-2.8%
Calcasieu Parish IDR
(Citgo Petroleum Corporation)
Series '94 AMT VRDN*
1,000 12/01/24 5.10 1,000,000

MASSACHUSETTS-2.8%
Massachusetts GO Series '93A
VRDN*AMBAC
1,000 2/01/06 4.74 1,000,000

MISSOURI-9.4%
Missouri Health & Educational
Facilities Authority (School District
Advance Funding Project) Series B
1,330 9/19/95 4.41 1,331,400
St Louis Industrial Dev. Auth.
(United Industries Corp./
Rex Realty Co.) Series A
1,000 1/01/01 5.00 1,000,000
St. Louis County IDR
(Schnuck Mkts.) VRDN*
1,000 12/01/15 5.20 1,000,000
3,331,400

NEW YORK-5.6%
New York State ERDA PCR
(Niagra Mohawk) Series '86A
AMT VRDN*
1,500 12/01/26 5.05 1,500,000
New York State Thruway Auth.
(General Revenue Project)
Series B FGIC VRDN*
500 1/01/24 4.90 500,000
2,000,000

OHIO-3.6%
Toledo Ohio Special Assessment Note
1,260 12/01/95 4.57 1,261,168

OKLAHOMA-0.6%
Bartlesville Health Fac.Auth.
(Heritage Villa Nursing Center)
Series '85 VRDN*
200 1/01/09 5.20% $200,000

OREGON-1.4%
Port Morrow Oregon
(Portland General Electric) VRDN*
500 10/01/13 5.00 500,000

PENNSYLVANIA-3.7%
Philadelphia CP Gas Work Revenue Notes
Series B
1,300 8/15/95 4.20 1,300,000

SOUTH CAROLINA-2.8%
Laurens County IDR (Nicca USA Project)
AMT VRDN*
1,000 4/01/09 4.80 1,000,000

TENNESSEE-4.2%
Sullivan County IDR
(Modern Forge Co. Project) VRDN*
1,500 7/01/10 4.80 1,500,000

TEXAS-15.2%
Austin Texas CP
(Travis & Williamson Utility System)
Series A
2,000 5/03/95 4.05 2,000,000
Dallas County IDR
(Crane CR/PL, Inc.) Series '85 VRDN*
700 5/01/10 4.60 700,000
Midlothian Texas Industrial
Development Corporation
(Box-Crow Cement Co.)
600 12/01/09 4.85 600,000
San Antonio Texas Industrial
Development Auth.
(Grima Corporation) AMT VRDN*
1,500 11/01/09 4.85 1,500,000
Texas GO TRAN
$600 8/31/95 4.21% $ 601,555
5,401,555

UTAH-4.3%
Emery County PCR(Pacificorp Project)
Series '91
1,000 5/31/95 4.20 1,000,000
Intermountain Power Agency
Utah Power Supply Revenue
Pre-Refunded
500 7/01/95 4.69 509,784
1,509,784

VIRGINIA-3.7%
Chesterfield County Industrial
Development Auth. PCR CP
(Virginia Electric & Power Co.
Project) Series '87B
1,300 5/05/95 4.00 1,300,000

WASHINGTON-3.7%
Pilchuck IDR
(Crystal Creek Association)
Series III '89 VRDN*
436 8/01/10 4.90 436,000
Pilchuck IDR
(Trinity at Canyon Park)
Series III '89 VRDN*
884 8/01/10 4.90 884,000
1,320,000

WISCONSIN-3.1%
Wisconsin Health & Educational
Fac. Auth. CP
(Alexian Village of Milwaukee)
Series '88A
1,100 5/24/95 4.25 1,100,000

TOTAL INVESTMENTS-98.3%
(amortized cost $34,890,378) 34,890,544
Other assets less liabilities-1.7% 606,613

NET ASSETS-100% (offering
and redemption price of $1.00
per share; 35,514,288 shares
outstanding) $35,497,157

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

* Variable Rate Demand Notes (VRDN) are instruments whose interest rates
change on a specified date (such as a coupon date or interest payment date) or
whose interest rates vary with changes in a designated base rate (such as the
prime interest rate). These instruments are payable on demand and are secured
by letters of credit or other credit support agreements from major banks.
Periodic Put Bonds (PPB) are payable on demand quarterly, semi-annually or
annually and their interest rates change less frequently than rates on Variable
Rate Demand Notes.

** See Note B to financial statements.

Glossary of terms:

AMBAC American Municipal Bond Assurance Corporation
AMT Alternative Minimum Tax
CP Commercial Paper
ERDA Energy Research & Development Authority
FGIC Financial Guaranty Insurance Company
GO General Obligation
HFA Housing Finance Agency/Authority
IDR Industrial Development Revenue
MFHR Multi-Family Housing Revenue
PCR Pollution Control Revenue
RAN Revenue Anticipation Note
TRAN Tax & Revenue Anticipation Note
VRDN Variable Rate Demand Note

See notes to financial statements.

STATEMENT OF NET ASSETS
April 30, 1995 ACM Institutional Reserves - Trust Portfolio
-------------------------------------------------------------------------------
Principal
Amount
(000) Security Yield Value
--------------------------------------------------------------------
U.S. GOVERNMENT & AGENCY
OBLIGATIONS-98.6%
Student Loan Marketing
Association-47.2%
$5,000 5.96%, 12/01/95 6.08% $ 4,996,310
1,680 5.99%, 7/19/96 6.04 1,679,107
22,300 6.19%, 11/20/97 6.14 22,333,212
2,000 6.22%, 11/27/96 6.05 2,005,485
2,960 6.24%, 11/01/96 6.04 2,968,390
17,500 6.27%, 2/14/97 6.09 17,554,304
51,536,808

Federal Home Loan Mortgage Corp.-17.7%
1,000 8/18/95 5.90 982,136
1,000 6/02/95 5.91 994,747
10,000 6/02/95 5.95 9,947,111
500 5/02/95 5.97 499,917
1,000 3/29/96 5.97 944,778
500 5/05/95 5.98 499,668
700 6/02/95 6.00 696,267
4,000 4/01/96 6.20 3,768,533
1,000 6.45%, 4/08/96 6.52 999,364
19,332,521

Federal National Mortgage
Association-13.7%
4,000 5.82%, 6/01/95 5.94 3,999,551
5,000 5.91%, 10/30/95 5.96 4,998,164
1,000 6/19/95 5.97 991,874
5,000 6/30/95 5.99 4,950,083
14,939,672

Federal Farm Credit Bank-11.0%
$10,000 6.20%, 5/01/95 6.20% $10,000,000
2,000 6.76%, 2/28/96 6.71 2,000,467
12,000,467

Federal Home Loan Bank-9.0%
3,000 9/27/95 6.00 2,925,500
5,000 6.06%, 10/20/95 6.14 4,998,113
2,000 2/14/96 6.20 1,900,456
9,824,069

TOTAL INVESTMENTS---98.6%
(amortized cost $107,633,537) 107,633,537
Other assets less liabilities-1.4% 1,542,824

NET ASSETS--100%
(offering and redemption price
of $1.00 per share; 109,196,483
shares outstanding) $109,176,361

See notes to financial statements.

STATEMENT OF OPERATIONS
Year Ended April 30, 1995 ACM Institutional Reserves - Prime Portfolio
-------------------------------------------------------------------------------

INVESTMENT INCOME
Interest $8,393,029
EXPENSES
Advisory fee (Note B) $ 308,476
Registration fees 124,344
Custodian fees 63,153
Transfer agency 24,898
Audit and legal fees 7,532
Amortization of organization expenses 7,300
Directors' fees 5,250
Printing 1,224
Miscellaneous 5,901
Total expenses 548,078
Less: expense reimbursement (239,602) 308,476
Net investment income 8,084,553

REALIZED LOSS ON INVESTMENTS
Net realized loss on investments (77,316)

NET INCREASE IN NET ASSETS FROM OPERATIONS $8,007,237

STATEMENTS OF CHANGES IN NET ASSETS
-------------------------------------------------------------------------------
Year Ended Year Ended
April 30,1995 April 30,1994
-------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 8,084,553 $ 3,017,781
Net realized loss on investments (77,316) (29,045)
Net increase in net assets from operations 8,007,237 2,988,736

DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (8,084,553) (3,017,781)

CAPITAL SHARE TRANSACTIONS
Net increase 89,756,927 43,836,689
Total increase 89,679,611 43,807,644

NET ASSETS
Beginning of year 108,109,781 64,302,137
End of year $197,789,392 $108,109,781

See notes to financial statements.

STATEMENT OF OPERATIONS
Year Ended April 30, 1995 ACM Institutional Reserves - Government Portfolio
-------------------------------------------------------------------------------

INVESTMENT INCOME
Interest $4,716,390

EXPENSES
Advisory fee (Note B) $ 183,563
Registration fees 65,261
Custodian fees 53,842
Transfer agency 23,537
Amortization of organization expenses 7,300
Audit and legal fees 6,575
Directors' fees 5,250
Printing 1,716
Miscellaneous 4,830
Total expenses 351,874
Less: expense reimbursement (168,311) 183,563
Net investment income 4,532,827

REALIZED LOSS ON INVESTMENTS
Net realized loss on investments (23,230)

NET INCREASE IN NET ASSETS FROM OPERATIONS $4,509,597

STATEMENTS OF CHANGES IN NET ASSETS
-------------------------------------------------------------------------------
Year Ended Year Ended
April 30,1995 April 30,1994
-------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 4,532,827 $ 2,518,517
Net realized loss on investments (23,230) (51,091)
Net increase in net assets from operations 4,509,597 2,467,426

DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (4,532,827) (2,518,517)

CAPITAL SHARE TRANSACTIONS
Net increase 27,878,851 3,356,435
Total increase 27,855,621 3,305,344

NET ASSETS
Beginning of year 76,554,251 73,248,907
End of year $104,409,872 $76,554,251

See notes to financial statements.

STATEMENT OF OPERATIONS
Year Ended April 30, 1995 ACM Institutional Reserves - Tax-Free Portfolio
-------------------------------------------------------------------------------

INVESTMENT INCOME
Interest $1,134,140

EXPENSES
Advisory fee (Note B) $64,550
Registration fees 77,194
Custodian fees 52,121
Transfer agency 20,982
Directors' fees 10,967
Audit and legal fees 7,887
Amortization of organization expenses 7,300
Printing 1,583
Miscellaneous 3,916
Total expenses 246,500
Less: expense reimbursement (181,950) 64,550
Net investment income 1,069,590

REALIZED AND UNREALIZED GAIN LOSS ON INVESTMENTS
Net realized loss on investments (11,019)
Net change in unrealized appreciation of investments (154,369)
Net loss on investments (165,388)

NET INCREASE IN NET ASSETS FROM OPERATIONS $ 904,202

STATEMENTS OF CHANGES IN NET ASSETS
-------------------------------------------------------------------------------

Year Ended Year Ended
April 30,1995 April 30,1994
-------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 1,069,590 $ 755,018
Net realized loss on investments (11,019) (6,191)
Net change in unrealized appreciation of investments (154,369) 148
Net increase in net assets from operations 904,202 748,975

DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (1,069,590) (755,018)

CAPITAL SHARE TRANSACTIONS
Net decrease (133,564) (5,210,690)

OTHER CAPITAL CONTRIBUTIONS 154,387 -0-
Total decrease (144,565) (5,216,733)

NET ASSETS
Beginning of year 35,641,722 40,858,455
End of year $35,497,157 $35,641,722

See notes to financial statements.

STATEMENT OF OPERATIONS
Year Ended April 30, 1995 ACM Institutional Reserves - Trust Portfolio
-------------------------------------------------------------------------------

INVESTMENT INCOME
Interest $4,005,071

EXPENSES
Advisory fee (Note B $ 311,103
Registration fees 108,322
Custodian fees 55,471
Transfer agency 21,496
Audit and legal fees 11,367
Directors' fees 5,250
Printing 1,574
Miscellaneous 5,045
Total expenses 519,628
Less: expense reimbursement (182,478) 337,150
Net investment income 3,667,921

REALIZED LOSS ON INVESTMENTS
Net realized loss on investments (16,775)

NET INCREASE IN NET ASSETS FROM OPERATIONS $3,651,146

STATEMENTS OF CHANGES IN NET ASSETS
-------------------------------------------------------------------------------

Year Ended Year Ended
April 30,1995 April 30,1994
-------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 3,667,921 $ 570,971
Net realized loss on investments (16,775) (3,347)
Net increase in net assets from operations 3,651,146 567,624

DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (3,667,921) (570,971)
Net realized gain on investments 0 (24)

CAPITAL SHARE TRANSACTIONS
Net increase 72,386,158 31,473,164
Total increase 72,369,383 31,469,793

NET ASSETS
Beginning of year 36,806,978 5,337,185
End of year $109,176,361 $36,806,978

See notes to financial statements.

NOTES TO FINANCIAL STATEMENTS
April 30, 1995 ACM Institutional Reserves, Inc.
-------------------------------------------------------------------------------

NOTE A: SIGNIFICANT ACCOUNTING POLICIES
ACM Institutional Reserves, Inc. (the "Fund") is an open-end investment company
registered under the Investment Company Act of 1940. The Fund operates as a
series company currently issuing four classes of capital stock: Prime
Portfolio, Government Portfolio, Tax-Free Portfolio and Trust Portfolio. Each
series is considered to be a separate entity for financial reporting and tax
purposes. The following is a summary of significant accounting policies
followed by the Fund.

1. VALUATION OF SECURITIES
Securities in which the Fund invests are traded primarily in the
over-the-counter market and are valued at amortized cost, under which method a
portfolio instrument is valued at cost and any premium or discount is amortized
on a constant basis to maturity. Amortization of premium is charged to income.
Accretion of market discount is credited to unrealized gain.

2. ORGANIZATION EXPENSES
The organization expenses of the Fund are being amortized against income on a
straight-line basis through August 1995 on Prime Portfolio and through July
1996 on Government and Tax-Free Portfolios, respectively.

3. FEDERAL INCOME TAXES
It is the Fund'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.

4. DIVIDENDS
The Fund declares dividends daily from net investment income and automatically
reinvests such dividends in additional shares at net asset value. Net realized
capital gains on investments, if any, are expected to be distributed near
calendar year end. Dividends paid by TaxFree Portfolio from net investment
income for the year ended April 30, 1995 are exempt from federal income taxes.
However, certain shareholders may be subject to the alternative minimum tax
(AMT).

5. GENERAL
Interest income is accrued daily. Security transactions are recorded on the
date securities are purchased or sold. Realized gain (loss) from security
transactions is recorded on the identified cost basis.

NOTE B: Advisory Fee and Transactions with an Affiliate of the Adviser
The Fund pays its Adviser, Alliance Capital Management L.P., an advisory fee at
the annual rate of .20 of 1% of average daily net assets for the Prime,
Government and Tax-Free Portfolios and .45 of 1% of average daily net assets
for the Trust Portfolio. The Adviser has agreed to reimburse the Prime,
Government and TaxFree Portfolios to the extent that their annual aggregate
operating expenses (excluding taxes, brokerage, interest and, where permitted,
extraordinary expenses) exceed .20 of 1% of their average daily net assets for
any fiscal year, and in regard to the Trust Portfolio exceed .50 of 1% of its
average daily net assets. The Adviser voluntarily agreed to reimburse the
Trust Portfolio from May 1, 1994, to October 9, 1994, for expenses exceeding
.45 of 1% of its average daily net assets. For the year ended April 30, 1995,
reimbursement was $239,602, $168,311, $181,950, and $182,478 for the Prime,
Government, Tax-Free and Trust Portfolios, respectively. The Prime,
Government, Tax-Free and Trust Portfolios compensate Alliance Fund Services,
Inc. (a wholly-owned subsidiary of the Adviser) for providing personnel and
facilities to perform transfer agency services. Such compensation for the
Prime, Government, Tax-Free and Trust Portfolios, for the year ended April 30,
1995, amounted to $18,000 per portfolio.

The Adviser established an irrevocable standby letter of credit with a
commercial bank, for the benefit of the Tax-Free Portfolio, which allows the
Portfolio to draw down up to $1,046,750 if Orange County, California, fails to
pay all principal and interest due at maturity on certain Orange County
securities owned by the Portfolio. The letter of credit will be reduced
prorata for any subsequent sales of these debt obligations, and the Adviser has
undertaken in certain circumstances to reimburse the Tax-Free Portfolio for an
amount up to the realized losses it may incur.

NOTE C: INVESTMENT TRANSACTIONS
At April 30, 1995, the cost of securities for federal income tax purposes was
the same as the cost for financial reporting purposes for all portfolios. For
federal income tax purposes, the Prime Portfolio had a capital loss
carryforward at April 30, 1995 of $118,050, of which $1,377 expires in 1999,
$3,535 in 2000, $6,777 in 2001, $29,045 in 2002 and $77,316 in 2003; the
Government Portfolio had a capital loss carryforward of $84,835, of which
$1,340 expires in 2000, $9,174 in 2001, $51,091 in 2002 and $23,230 in 2003;
the Tax-Free Portfolio had a capital loss carryforward of $17,297, of which $87
expires in 2000, $6,191 in 2002 and 11,019 in 2003; and the Trust Portfolio had
a capital loss carryforward of $20,122, of which $3,347 expires in 2002 and
$16,775 in 2003.

NOTE D: CAPITAL STOCK
There are 1,000,000,000 shares of $.Ol par value capital stock authorized. At
April 30, 1995, capital paid-in aggregated $197,907,442 on Prime Portfolio,
$104,494,707 on Government Portfolio, $35,514,288 on Tax-Free Portfolio, and
$109,196,483 on Trust Portfolio. Transactions, all at $1.00 per share, were as
follows:

Year Ended Year Ended
PRIME PORTFOLIO April 30,1995 April 30,1994
--------------- ------------- -------------
Shares sold 1,407,213,884 624,694,567
Shares issued on reinvestments of dividends 8,106,776 3,003,812
Shares redeemed (1,325,563,733) (583,861,690)
Net increase 89,756,927 43,836,689

Year Ended Year Ended
GOVERNMENT PORTFOLIO April 30,1995 April 30,1994
-------------------- ------------- -------------
Shares sold 608,886,851 353,347,971
Shares issued on reinvestments of dividends 4,548,358 2,507,438
Shares redeemed (585,556,358) (352,498,974)
Net increase 27,878,851 3,356,435

Year Ended Year Ended
TAX-FREE PORTFOLIO April 30,1995 April 30,1994
------------------ ------------- -------------
Shares sold 295,718,756 581,733,361
Shares issued on reinvestments of dividends 1,075,771 751,896
Shares redeemed (296,928,091) (587,695,947)
Net decrease (133,564) (5,210,690)

Year Ended Year Ended
TRUST PORTFOLIO April 30,1995 April 30,1994
---------------- ------------- -------------
Shares sold 415,936,022 176,630,000
Shares issued on reinvestments of dividends 3,675,366 563,938
Shares redeemed (347,225,230) (145,720,774)
Net increase 72,386,158 31,473,164

NOTE E: FINANCIAL HIGHLIGHTS.
Per share operating performance for a share outstanding throughout each period.

<TABLE>
<CAPTION>
Year Ended April 30, August 20,1990(a)
--------------------------------------------------------- Through
PRIME PORTFOLIO 1995 1994 1993 1992 April 30, 1991
--------------- ------------ ------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00

INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.0502 0.0325 0.0353 0.0535 0.0506

LESS: DISTRIBUTIONS
Dividends from net investment income (0.0502) (0.0325) (0.0353) (0.0535) (0.0506)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 1.00 1.00

TOTAL RETURNS
Total investment return based on net
asset value (b) 5.15% 3.30% 3.59% 5.50% 7.54%(c)

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $197.8 $108.1 $64.3 $25.0 $27.2
Ratio of expenses to average net assets (d) 0.20% 0.20% 0.18%(e) 0.02%(f) -0-(g)
Ratio of net investment income to average
net assets (d) 5.24% 3.25% 3.42%(e) 5.30%(f) 6.84%(c)(g)
</TABLE>

<TABLE>
<CAPTION>
Year Ended April 30, July 22,1991(a)
------------------------------------------- Through
GOVERNMENT PORTFOLIO 1995 1994 1993 April 30, 1992
-------------------- ------------- ------------- ------------- ---------------
<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 0.0493 0.0315 0.0339 0.0377

LESS: DISTRIBUTIONS
Dividends from net investment income (0.0493) (0.0315) (0.0339) (0.0377)
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) 5.06% 3.20% 3.45% 4.98%(c)

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $104.4 $76.6 $73.2 $ 24.7
Ratio of expenses to average net assets (d) 0.20% 0.20% 0.18%(e) 0.10%(c)(h)
Ratio of net investment income to average
net assets (d) 4.94% 3.15% 3.30%(e) 4.86%(c)(h)
</TABLE>

<TABLE>
<CAPTION>
Year Ended April 30, July 22, 1991(a)
-------------------------------------------- Through
TAX-FREE PORTFOLIO 1995 1994 1993 April 30, 1992
------------------ ------------- ------------- ------------- ----------------
<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 0.0326 0.0240 0.0287 0.0334
Net unrealized loss on investments (0.0048) -0- -0- -0-
Net increase in net asset value
from operations 0.0278 0.0240 0.0287 0.0334

LESS: DISTRIBUTIONS
Dividends from net investment income (0.0326) (0.0240) (0.0287) (0.0334)
Add: Capital Contribution (See Note B)
Capital Contributed by the Adviser 0.0048 -0- -0- -0-
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) 3.31%(j) 2.43% 2.92% 4.40%(c)

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $35.0 $35.6 $40.9 $8.5
Ratio of expenses to average net assets (d) 0.20% 0.20% 0. 18%(e) 0.10%(c)(f)
Ratio of net investment income to average
net assets (d) 3.31% 2.40% 2.73%(e) 4.01%(c)(f)
</TABLE>

November 16,
Year Ended April 30, 1992(a)
----------------------- Through
TRUST PORTFOLIO 1995 1994 Apr.30,1993
--------------- ----------- ---------- -------------
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00

INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.0479 0.0309 0.0144

LESS: DISTRIBUTIONS
Dividends from net investment income (0.0479) (0.0309) (0.0144)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00

TOTAL RETURNS
Total investment return based
on net asset value (b) 4.91% 3.14% 3.21 %(c)

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $109.2 $36.8 $5.3
Ratio of expenses to average
net assets (d) 0.49%(g) 0.14%(h) -0-(i)
Ratio of net investment income to
average net assets (d) 5.31%(g) 3.15%(h) 3.17%(c)(i)

(a) Commencement of operations.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends at net asset value during the period and redemption on the last
day of the period.
(c) Annualized.
(d) Net of expense reimbursement.
(e) Net of voluntary expense reimbursement equivalent to .02% of average daily
net assets.
(f) Net of voluntary expense reimbursement equivalent to .10% of average daily
net assets.
(g) Net of voluntary expense reimbursement equivalent to .01% of average daily
net assets.
(h) Net of voluntary expense reimbursement equivalent to .31% of average daily
net assets.
(I) Net of voluntary expense reimbursement equivalent to .45% of average daily
net assets.
(J) Capital contributed by the Adviser had no material effect on net asset
value, and therefore, effect on total return.

INDEPENDENT AUDITOR'S REPORT ACM Institutional Reserves, Inc.
-------------------------------------------------------------------------------
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS ACM INSTITUTIONAL RESERVES, INC.

We have audited the accompanying statements of net assets of ACM Institutional
Reserves, Inc. - Prime, Government, Tax-Free and Trust Portfolios as of April
30, 1995 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 Portfolios' 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 April 30, 1995 by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of ACM
Institutional Reserves, Inc. - Prime, Government, Tax-Free and Trust Portfolios
as of April 30, 1995, and the results of their operations, changes in their net
assets, and financial highlights for the periods indicated, in conformity with
generally accepted accounting principles.

McGladrey & Pullen, LLP
New York, New York
June 1, 1995

<PAGE>

(LOGO)(R) ACM INSTITUTIONAL RESERVES, INC.
- Trust Portfolio

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

STATEMENT OF ADDITIONAL INFORMATION

September --, 1995

_________________________________________________________________

This Statement of Additional Information is not a prospectus and
should be read in conjunction with the Trust Portfolio's current
Prospectus dated September --, 1995 which describes shares of the
Trust Portfolio of the Fund. A copy of this Prospectus may be
obtained by contacting Alliance Fund Services, Inc. at the
address or telephone number shown above.

TABLE OF CONTENTS
Page

The Fund ..................................................
Investment Objective and Policies .........................
Investment Restrictions ...................................
Management ................................................
Purchase and Redemption of Shares .........................
Daily Dividends-Determination of Net Asset Value ..........
Taxes .....................................................
General Information .......................................
Appendix - Commercial Paper and Bond Ratings ..............
Report of Independent Auditors and Financial Statement .... ---

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

<PAGE>

_________________________________________________________________

THE FUND
_________________________________________________________________

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

_________________________________________________________________

INVESTMENT OBJECTIVES AND POLICIES
_________________________________________________________________

The Trust Portfolio's investment objectives are -- in the
following order of priority -- safety of principal, excellent
liquidity, and maximum current income to the extent consistent
with the first two objectives. As a matter of fundamental
policy, the Trust Portfolio pursues its objectives by maintaining
a portfolio of high-quality U.S.-dollar denominated money market
securities, all of which, at the time of investment, have
remaining maturities of 397 days or less.

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

Currently, pursuant to Rule 2a-7, the Trust Portfolio may
invest only in "eligible securities," as that term is defined in
the Rule. Generally, an eligible security is a security that (i)
is denominated in U.S. Dollars and has a remaining maturity of
397 days or less; (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; and (iii) has been determined
by the Adviser to present minimal credit risks pursuant to
procedures approved by the Board of Directors. 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

<PAGE>

are of comparable quality to a rated eligible security pursuant
to guidelines approved by the Board of Directors. A description
of the ratings of some NRSROs appears in Appendix attached
hereto.

Under Rule 2a-7 the Trust Portfolio may not invest more than
five percent of its assets in the securities of any one issuer
other than the United States Government, its agencies and
instrumentalities. In addition, the Trust Portfolio may not
invest in a security that has received, or is deemed comparable
in quality to a security that has received, the second highest
rating by the requisite number of NRSROs (a "second tier
security") if immediately after the acquisition thereof the Trust
Portfolio would have invested more than (A) the greater of one
percent of its total assets or one million dollars in securities
issued by that issuer which are second tier securities, or (B)
five percent of its total assets in second tier securities.

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

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

2. Certificates of deposit and bankers' acceptances issued
or guaranteed by, or time deposits maintained at, banks or
savings and loans associations (including foreign branches of
U.S. banks or U.S. or foreign branches of foreign banks) having
total assets of more than $500 million. Certificates of deposit
are receipts issued by a depository institution in exchange for
the deposit of funds. The issuer agrees to pay the amount
deposited plus interest to the bearer of the receipt on the date
specified on the certificate. The certificate usually can be
traded in the secondary market prior to maturity. Bankers'
acceptances typically arise from short-term credit arrangements
designed to enable businesses to obtain funds to finance

<PAGE>

commercial transactions. Generally, an acceptance is a time
draft drawn on a bank by an exporter or an importer to obtain a
stated amount of funds to pay for specific merchandise. The
draft is them "accepted" by a bank that, in effect,
unconditionally guarantees to pay the face value of the
instrument on its maturity date. The acceptance may then be held
by the accepting bank as an earning asset or it may be sold in
the secondary market at the going rate of discount for a specific
maturity. Although maturities for acceptances can be as long as
270 days, most acceptances have maturities of six months or less.

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

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

<PAGE>

repurchase obligation, the Trust Portfolio might suffer a loss to
the extent that the proceeds from the sale of the collateral were
less than the repurchase price. If the vendor became bankrupt,
the Trust Portfolio might be delayed in selling the collateral.
Repurchase agreements often are for short periods such as one day
or a week, but may be longer. Repurchase agreements not
terminable within seven days will be limited to no more than 10%
of the Trust Portfolio's assets.

Additional Investment Policies

The following investment policies supplement those set forth
above.

Reserve Repurchase Agreements. While the Trust Portfolio has
no plans to do so, it may enter into reverse repurchase
agreements, which involve the sale of money market securities
held by the Trust Portfolio with an agreement to repurchase the
securities at an agreed-upon price, date and interest payment.

Liquid Restricted Securities

The Trust Portfolio may purchase restricted securities that
are determined by the Adviser to be liquid in accordance with
procedures adopted by the Directors. Restricted securities are
securities subject to contractual or legal restrictions on
resale, such as those arising from an issuer's reliance upon
certain exemptions from registration under the Securities Act of
1933 (the "Securities Act").

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

<PAGE>

providing liquidity. Institutional investors, rather than
selling these instruments to the general public, often depend on
an efficient institutional market in which such restricted
securities can be readily resold in transactions not involving a
public offering. In many instances, therefore, the existence of
contractual or legal restrictions on resale to the general public
does not, in practice, impair the liquidity of such investments
from the perspective of institutional holders.

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

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

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

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

<PAGE>

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

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

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

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

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

General

While there are many kinds of short-term securities used by
money market investors, the Trust Portfolio, in keeping with its
primary investment objective of safety of principal, restricts
its investments to the types listed above. Of note, the Trust
Portfolio does not invest in letters of credit. The Trust
Portfolio may make investments in certificates of deposit and
banker's acceptances issued or guaranteed by, or time deposits
maintained at, foreign branches of U.S. banks and U.S. and
foreign branches of foreign banks, and commercial paper issued by
foreign companies. To the extent that the Trust Portfolio makes
such investments, consideration is given to their domestic
marketability, the lower reserve requirements generally mandated
for overseas banking operations, the possible impact of
interruptions in the flow of international currency transactions,
potential political and social instability or expropriation,
imposition of foreign taxes, the lower level of government
supervision of issuers, the difficulty in enforcing contractual
obligations and lack of uniform accounting standards. There can
be no assurance that any of the Trust Portfolio's objectives will
be achieved. The market value of the Trust Portfolio's
investments tends to decrease during periods of rising interest
rates and to increase during intervals of falling rates.

<PAGE>

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

The Trust Portfolio's investment objectives may not be
changed without the affirmative vote of a majority of the Trust
Portfolio's outstanding shares as defined below. Except as
otherwise provided, the Trust Portfolio's investment policies are
not designated "fundamental policies" within the meaning of the
Act and may, therefore, be changed by the Directors without a
shareholder vote. However, the Trust Portfolio will not change
its investment policies without contemporaneous written notice to
shareholders.
_________________________________________________________________

INVESTMENT RESTRICTIONS
_________________________________________________________________

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

The Trust Portfolio may not:

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

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

<PAGE>

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

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

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

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

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

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

<PAGE>

or maintain a short position or write, purchase or sell puts,
call, straddles, spreads or combinations thereof; (f) invest in
securities of issuers (other than agencies and instrumentalities
of the United States Government) having a record, together with
predecessors, of less than three years of continuous operation if
more than 5% of the Trust Portfolio's assets would be invested in
such securities; (g) purchase or retain securities of any issuers
if those officers and directors of the Fund and of the Adviser
who own individually more than 1/2% of the outstanding securities
of such issuer together own more than 5% of the securities of
such issuer; or (h) act as an underwriter of securities.

In connection with the qualification or registration of the
Trust Portfolio's shares for sale under the securities laws of
certain states, the Trust Portfolio has agreed, in addition to
the foregoing investment restrictions, that it (i) will not
invest more than 5% of the value of its total assets at the time
of purchase in the commercial paper, including variable amount
master demand notes, of any one issuer, and (ii) will not pledge,
hypothecate or in any manner transfer, as security for
indebtedness, securities owned by the Trust Portfolio if such
pledge, hypothecation, or transfer would then result in more than
10% of the Trust Portfolio's net assets being so encumbered.

_________________________________________________________________

MANAGEMENT
_________________________________________________________________

Directors and Officers

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

Directors

JOHN D. CARIFA*,50, is the President, the Chief Operating
Officer and a Director of Alliance Capital Management Corporation
("ACMC")**, with which he has been associated since prior to
1990.

<PAGE>

DAVID H. DIEVLER, 65, was formerly a Senior Vice President of
ACMC, with which he had been associated since prior to 1990.
He is currently an independent consultant. His address is P.O.
Box 167, Spring Lake, New Jersey 07762.

* 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 H. DOBKIN, 53, has been the President of Historic Hudson
Valley (historic preservation) since 1990. Previously, he was
Director of the National Academy of Design. From 1987 to 1992,
he was a Director of ACMC. His address is 105 West 55th Street,
New York, New York 10019.

WILLIAM H. FOULK, JR., 62, 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 1990. His address is 2 Hekma Road, Greenwich, CT
06831.

DR. JAMES M. HESTER, 71, is President of the Harry Frank
Guggenheim Foundation and a Director of Union Carbide
Corporation. He was formerly President of New York University,
The New York Botanical Garden and Rector of the United Nations
University. His address is 45 East 89th Street, Apt. 39C, New
York, New York 10128.

ROBERT C. WHITE, 75, is a Vice President and Chief Financial
Officer of the Howard Hughes Medical Institute, with which he has
been associated since prior to 1990. His address is 8101
Connecticut Avenue, Apt. S501, Chevy Chase, Maryland 20815.

Officers

RONALD M. WHITEHILL - President, 56, is a Vice President of
ACMC and Executive Vice 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 1990.

KATHLEEN A. CORBET - Senior Vice President, 35, has been a
Senior Vice President of ACMC since July 1993. Previously, she
held various responsibilities as head of Equitable Capital
Management Corporation's Fixed Income Management Department,
Private Placement Secondary Trading and Fund Management since
prior to 1990.

<PAGE>

DREW A. BIEGEL - Vice President, 44, is a Vice President of
ACMC, with which he has been associated since prior to 1990.

PAMELA F. RICHARDSON - Vice President, 42, is a Vice
President of ACMC, with which she has been associated since prior
to 1990.

MARK D. GERSTEN - Treasurer and Chief Financial Officer, 44,
is a Senior Vice President of AFS and AFD, with which he has been
associated since prior to 1990.

JOSEPH J. MANTINEO - Controller, 36, is a Vice President of
AFS, with which he has been associated since prior to 1990.

The Fund does not pay any fees to, or reimburse expenses of,
its Directors who are considered "interested persons" of the
Fund. The aggregate compensation paid by the Fund to each of the
Directors during its fiscal year ended April 30, 1995, the
aggregate compensation paid to each of the Directors during
calendar year 1994 by all of the registered investment companies
to which the Adviser provides investment advisory services
(collectively, the "Alliance Fund Complex") and the total number
of funds in the Alliance Fund Complex with respect to which each
of the Directors serves as a director or trustee, are set forth
below. Neither the Fund nor any other fund in the Alliance Fund
Complex provides compensation in the form of pension or
retirement benefits to any of its directors or trustees.

<PAGE>

<TABLE>
<CAPTION>
Total Total Number of Funds
Compensation in the Alliance Fund Complex
Aggregate from the Alliance Including the Fund, as to
Name of Director Compensation Fund Complex, which the Director is a
of the Fund from the Fund Including the Fund Director or Trustee
<S> <C> <C> <C>

John D. Carifa $-0- $-0- 42
Ruth Block $747 $157,000 31
David H. Dievler $188 $-0- 49
John H. Dobkin $887 $110,750 29
William H. Foulk, Jr. $897 $141,500 30
James M. Hester $839 $154,500 32
Clifford L. Michel $558 $120,500 31
Robert C. White $829 $133,500 36
</TABLE>

As of June 30, 1995, the Directors and Officers of the Fund
as a group owned less than 1% of the outstanding shares of each
Portfolio.

The Adviser

Alliance Capital Management L.P., a New York Stock Exchange
listed company with principal offices at 1345 Avenue of the
Americas, New York, New York 10105, has been retained under an
investment advisory agreement (the "Advisory Agreement") as the
Fund's Adviser (see "Management of the Fund" in the Prospectus).
ACMC, the sole general partner of, and the owner of a 1% general
partnership interest in, the Adviser, is an indirect wholly-owned
subsidiary of The Equitable Life Assurance Society of the United
States ("Equitable"), one of the largest life insurance companies
in the United States and a wholly-owned subsidiary of The
Equitable Companies Incorporated ("ECI"), a holding company
controlled by AXA, a French insurance holding company. As of
June 30, 1995, ACMC, Inc. and Equitable Capital Management
Corporation, each a wholly-owned direct or indirect subsidiary of
Equitable, owned in the aggregate approximately 59% of the issued
and outstanding units representing assignments of beneficial
ownership of limited partnership interests in the Adviser
("Units"), and approximately 33% and 8% of the Units were owned

<PAGE>

by the public and employees of the Adviser and its subsidiaries,
respectively, including employees of the Adviser who serve as
Directors of the Fund, calculated including as outstanding Units
subject to options exercisable by employees within 60 days of
June 30, 1995.

AXA owns approximately 60% of the outstanding voting shares
of common stock of ECI. AXA is a member of a group of companies
(the "AXA Group") that is the second largest insurance group in
France (measured by gross premiums written worldwide) and one of
the largest insurance groups in Europe. Principally engaged in
property and casualty insurance and life insurance in Europe and
elsewhere in the world, the AXA Group is also involved in real
estate operations and certain other financial services, including
mutual fund management, lease financing services and brokerage
services. Based on information provided by AXA, as of January 1,
1995, 42.3% of the voting shares (representing 54.7% of the
voting power) of AXA were owned by Midi Participations, a French
corporation that is a holding company. The voting shares of Midi
Participations are in turn owned 60% by Finaxa, a French
corporation that is a holding company, and 40% by subsidiaries of
Assicurazioni Generali S.p.A., an Italian corporation
("Generali") (one of which, Belgica Insurance Holding S.A., a
Belgian Corporation, owned 34.1%). As of January 1, 1995, 62.1%
of the issued shares (representing 75.7% of the voting power) of
Finaxa were owned by five French mutual insurance companies (the
"Mutuelles AXA") (one of which, AXA Assurances I.A.R.D. Mutuelle,
owned 31.8% of the issued shares) (representing 44.7% of the
voting power), and 26.5% of the voting shares (representing 16.6%
of the voting power) of Finaxa were owned by Banque Paribas, a
French bank ("PARIBAS"). Including the shares owned by Midi
Participations, as of January 1, 1995, the Mutuelles AXA directly
or indirectly owned 51.3% of the voting shares (representing
65.8% of the voting power) of AXA. In addition, certain
subsidiaries of AXA own 0.4% of the shares of AXA which are not
entitled to be voted. Acting as a group, the Mutuelles AXA
control AXA, Midi Participations and Finaxa.

The Adviser is a leading international investment manager
supervising client accounts with assets as of June 30, 1995
totaling over $135.8 billion (of which more than $43 billion
represented the assets of investment companies). The Adviser's
clients are primarily major corporate employee benefit funds,
public employee retirement systems, investment companies,

<PAGE>

foundations and endowment funds and included, as of June 30,
1995, 29 of the FORTUNE 100 companies. The Adviser and its
subsidiaries employ approximately 1,350 employees who operate out
of domestic offices and the overseas offices of subsidiaries in
Bombay, Istanbul, London, Sydney, Tokyo, Toronto, Bahrain,
Luxembourg and Singapore. The 51 registered investment companies
managed by the Adviser comprising 103 separate investment
portfolios currently more than one million shareholders.

Under the Advisory Agreement, the Adviser provides investment
advisory services and order placement facilities for each
Portfolio of the Fund and pays all compensation of Directors of
the Fund who are affiliated persons of the Adviser. The Adviser
or its affiliates also furnish the Fund without charge with
management supervision and assistance and office facilities.
Under the Advisory Agreement, the Trust Portfolio pays the
Adviser at an annual rate of .45 of 1% of the average daily value
of its net assets. The fee is accrued daily and paid monthly.
The Adviser has undertaken, until, at its request, the Fund
notifies investors to the contrary that if, in any fiscal year,
the aggregate expenses of the Trust Portfolio, exclusive of
taxes, brokerage, interest on borrowings and extraordinary
expenses, but including the management fee, exceed .50 of 1% of
the Trust Portfolio's average net assets for the fiscal year, the
Trust Portfolio may deduct from the payment to be made to the
Adviser, or the Adviser will bear, such excess expenses. The
Adviser voluntarily agreed to reimburse the Trust Portfolio from
May 1, 1994 to October 9, 1994 for expenses exceeding .45 of 1%
of its average daily net assets. The Adviser also voluntarily
reimbursed the Trust Portfolio from October 15, 1993 to April 30,
1994 for expenses exceeding .20 of 1% of its average daily net
assets. For the year ended April 30, 1995, the Adviser
reimbursed its advisory fee of $182,478. For the period ended
April 30, 1994, the Adviser reimbursed the advisory fee of
$81,648 for the Trust Portfolio. For the period November 16,
1992 (commencement of operations) to April 30, 1993, the Adviser
reimbursed its advisory fee of $11,718. For the year ended April
30, 1994, the Adviser voluntarily and contractually reimbursed
expenses of the Trust Portfolio in the amount of $198,160. For
the period ended April 30, 1993, reimbursement was $58,200. The
Adviser may make payments from time to time from its own
resources, which may include the management fees paid by the
Trust Portfolio to compensate broker-dealers, depository
institutions, or other persons for providing distribution
assistance and administrative services and to otherwise promote
the sale of shares of the Trust Portfolio, including paying for

<PAGE>

the preparation, printing and distribution of prospectuses and
other literature or other promotional activities. The Trust
Portfolio also pays for printing of prospectuses and other
reports to shareholders and all expenses and fees related to
registrations and filings with the Securities and Exchange
Commission and with state regulatory authorities. The Trust
Portfolio pays all other expenses incurred in its operations,
including the Adviser's management fees; custody, transfer and
dividend disbursing expenses; legal and auditing costs; clerical,
administrative, accounting, and other office costs; fees and
expenses of Directors who are not affiliated with the Adviser;
costs of maintenance of the Fund's existence; and interest
charges, taxes, brokerage fees, and commissions. As to the
obtaining of clerical and accounting services not required to be
provided to the Trust Portfolio by the Adviser under the Advisory
Agreement, the Fund may employ its own personnel. For such
services, it also may utilize personnel employed by the Adviser;
if so done, the services are provided to the Fund at cost and the
payments therefor must be specifically approved in advance by the
Directors.

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

The Advisory Agreement remains in effect with respect to the
Trust Portfolio until December 31, 1995, and thereafter for
successive twelve month periods computed from each January 1,
provided that such continuance is specifically approved at least
annually by a vote of a majority of the Trust Portfolio's
outstanding voting securities or by the Fund's Board of
Directors, including in either case approval by the majority of
the Directors who are not parties to the Advisory Agreement or
interested persons as defined in the Act. The Advisory Agreement
may be terminated with respect to the Trust Portfolio without
penalty on 60 days' written notice at the option of either party

<PAGE>

or by vote of a majority of the outstanding voting securities of
the Trust Portfolio; it will automatically terminate in the event
of assignment. The Adviser is not liable for any action or
inaction 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.

_________________________________________________________________

PURCHASE AND REDEMPTION OF SHARES
_________________________________________________________________

The Trust Portfolio may refuse any order for the purchase of
shares and reserves the right to suspend the sale of its shares
to the public in response to conditions in the securities markets
or for other reasons. The Trust Portfolio is only available
through financial intermediaries.

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

Except with respect to telephone orders, investors whose
payment in Federal funds or bank wire monies are received by
State Street Bank by 4:00 p.m. (New York time) will become
shareholders on, and will receive the dividend declared, that
day. A telephone order for the purchase of shares will become
effective, and the shares purchased will receive the dividend on
shares declared on that day, if such order is placed by 4:00 p.m.
(New York time) and Federal funds or bank wire monies are
received by State Street bank prior to 4:00 p.m. (New York time)
of such day. 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

<PAGE>

transmitted by a check drawn on a member of the Federal Reserve
System is converted to Federal funds in one business day
following receipt. Checks drawn on banks which are not members
of the Federal Reserve System may take longer. All payments
(including checks from individual investors) must be in United
States dollars.

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

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

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

<PAGE>

depending on the market value of the securities held by the Trust
Portfolio at such time and the income earned.

_________________________________________________________________

DAILY DIVIDENDS - DETERMINATION OF NET ASSET VALUE
_________________________________________________________________

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

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

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

The Trust Portfolio utilizes the amortized cost method of
valuation of portfolio securities in accordance with the
provisions of Rule 2a-7 under the Act. Pursuant to such rule,
the Trust Portfolio maintains a dollar-weighted average portfolio
maturity of 90 days or less and invests only in securities of
high quality. The Trust Portfolio also purchases instruments

<PAGE>

having remaining maturities of no more than 397 days. The Trust
Portfolio maintains procedures designed to stabilize, to the
extent reasonably possible, the price per share of the Trust
Portfolio as computed for the purpose of sales and redemptions at
$1.00. Such procedures include review of the Trust Portfolio's
portfolio holdings by the Directors at such intervals as they
deem appropriate to determine whether and to what extent the net
asset value of the Trust Portfolio calculated by using available
market quotations or market equivalents deviates from net asset
value based on amortized cost. If such deviation as to the Trust
Portfolio exceeds 1/2 of 1%, the Directors will promptly consider
what action, if any, should be initiated. In the event the
Directors determine that such a deviation may result in material
dilution or other unfair results to new investors or existing
shareholders, they will consider corrective action which might
include (1) selling instruments held by the Trust Portfolio prior
to maturity to realize capital gains or losses or to shorten
average portfolio maturity; (2) withholding dividends of net
income on shares of the Trust Portfolio; or (3) establishing a
net asset value per share of the Trust Portfolio by using
available market quotations or equivalents.

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

_________________________________________________________________

TAXES
_________________________________________________________________

Federal Income Tax Considerations

The Trust Portfolio qualified, for the period ended April 30,
1995, as a regulated investment company under the Internal
Revenue Code of 1986, as amended (the "Code) and, as such, will
not be liable for Federal income and excise taxes on the
investment company taxable income and net capital gains
distributed to its shareholders. Since the Trust Portfolio
distributes all of its investment company taxable income and net
capital gains, the Trust Portfolio should thereby avoid all
Federal income and excise taxes.

<PAGE>

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

_________________________________________________________________

GENERAL INFORMATION
_________________________________________________________________

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

The Trust Portfolio has no obligation to enter into
transactions in portfolio securities with any dealer, issuer,
underwriter or other entity. In placing orders, it is the policy
of the Trust Portfolio to obtain the best price and execution for
its transactions. Where best price and execution may be obtained
from more than one dealer, the Adviser may, in its discretion,
purchase and sell securities through dealers who provide

<PAGE>

research, statistical and other information to the Adviser. Such
services may be used by the Adviser for all of its investment
advisory accounts and, accordingly, not all such services may be
used by the Adviser in connection with the Trust Portfolio. The
supplemental information received from a dealer is in addition to
the services required to be performed by the Adviser under the
Advisory Agreement, and the expenses of the Adviser will not
necessarily be reduced as a result of the receipt of such
information.

Capitalization

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

The Board of Directors is authorized to reclassify and issue
any unissued shares to any number of additional series without
shareholder approval. Accordingly, the Directors in the future,
for reasons such as the desire to establish one or more
additional portfolios with different investment objectives,
policies or restrictions, may create additional series of shares.
Any issuance of shares of another class would be governed by the
Act and Maryland law.

As of the close of business on June 30, 1995, there were
120,097,158 shares of the Trust Portfolio outstanding. Set forth
and discussed below is certain information as to all persons who

<PAGE>

owned of record or beneficially 5% or more of the outstanding
shares of the Trust Portfolio at June 30, 1995.

No. of % of
Name and Address Shares Class

Trust Portfolio

Hare & Co. 20,189,899 16%
c/o Bank of New York
One Wall Street
5th Floor
New York, NY 10286-0001

Mrs. Frances L. Loeb 12,425,322 10%
730 Park Avenue
New York, NY 10021-4945

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

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

Yield Quotations and Performance Information. Advertisements
containing yield quotations for the Trust Portfolio may from time
to time be sent to investors or placed in newspapers, magazines
or other media on behalf of the Fund. These advertisements may
quote performance rankings, ratings or data from independent
organizations or financial publications such as Lipper Analytical
Services, Inc., Morningstar, Inc., IBC's Money Fund Report, IBC's
Money Market Insight or Bank Rate Monitor or compare the
Portfolio's performance to bank money market deposit accounts,
certificates of deposit or various indices. Yield quotations are
calculated in accordance with the standardized method referred to
in Rule 482 under the Securities Act of 1933.

<PAGE>

Yield quotations for the Trust Portfolio are thus determined
by (i) computing the net change over a seven-day period,
exclusive of the capital changes, in the value of a hypothetical
pre-existing account having a balance of one share of the Trust
Portfolio at the beginning of such period, (ii) dividing the net
change in account value by the value of the account at the
beginning of the base period to obtain the base period return,
and (iii) multiplying the base period return by (365/7) with the
resulting yield figure carried to the nearest hundredth of one
percent. The Trust Portfolio's effective annual yield represents
a compounding of the annualized yield according to the formula:
effective yield + [(base period return + 1) 365/7] - 1.

<PAGE>

_________________________________________________________________

APPENDIX
COMMERCIAL PAPER AND BOND RATINGS
_________________________________________________________________

Municipal and Corporate Bonds

The two higher ratings of Moody's Investors Service, Inc.
("Moody"s) for municipal and corporate bonds are Aaa an Aa.
Bonds rated Aaa are judged by Moody's to be of the best quality.
Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally
known as high-grade bonds. Moody's states that Aa bonds are
rated lower than the best bonds because margins of protection or
other elements make long-term risks appear somewhat larger than
Aaa securities. The generic rating Aa may be modified by the
addition of the numerals 1, 2 or 3. The modifier 1 indicates
that the security ranks in the higher end of the Aa rating
category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in the lower end of
such rating category.

The two highest ratings of Standard & Poor's for municipal
and corporate bonds AAA and AA. Bonds rated AAA have the highest
rating assigned by Standard & Poor's to debt obligation.
Capacity to pay interest and repay principal is extremely strong.
Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in
a small degree. The AA rating may be modified by the addition of
a plus (+) or Minus (-) sign to show relative standing within
rating category.

Short-Term Municipal Securities

Standard & Poor's highest rating for short-term municipal
loans is SP-1. Standard & Poor's stated that short-term
municipal securities bearing the SP-1 designation have very

<PAGE>

strong or strong capacity to pay principal and interest. Those
issues rated SP-1 which are determined to possess overwhelming
safety characteristics will be given a plus (+) designation.
Issues rate SP-2 have satisfactory capacity to pay principal and
interest.

Other Municipal Securities and Commercial Paper

"Prime-1" is the highest rating assigned by Moody's for other
short-term municipal securities and commercial paper, and "A-1+"
and "A-1" are the two highest ratings for commercial paper
assigned by Standard & Poor's (Standard & Poor's does not rate
short-term tax-free obligations). Moody's uses the numbers 1, 2,
and 3 to denote relative strength within its highest
classification of "Prime", while Standard & Poor's uses the
number 1+, 1, 2 and 3 to denote relative strength within its
highest classification of "A". Issuers rated "Prime" by Moody's
have the following characteristics: their short-term debt
obligations carry the smallest degree of investment risk, margins
of support for current indebtedness are large or stable with cash
flow an asset protection well assured, current liquidity provides
ample coverage of near-term liabilities and unused alternative
financing arrangements are generally available. While protective
elements may change over the intermediate or longer term, such
changes are most unlikely to impair the fundamentally strong
position of short-term obligations. Commercial paper issuers
rates "A" by Standard & Poor's have the following
characteristics: liquidity ratios are better than industry
average, long-term debt rating is A or better, the issuer has
access to at least two additional channels of borrowing, and
basic earnings and cash flow are in an upward trend. Typically,
the issuer is a strong company in a well-established industry and
has superior management.

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