<PAGE>
This is filed pursuant to Rule 497(c).
File Nos. 33-34001 and 811-5398.
<PAGE>
<PAGE>
SHAREHOLDER SERVICES
Shareholder representatives are
available to answer your ques-
tions about the status of your
account or other Fund matters.
Call toll-free (800) 237-5822
or write the Fund, P.O. Box
1520, Secaucus, New Jersey
07096-1520.
YIELDS. For current recorded
yield information on the Fund,
call on a touch-tone telephone
toll-free (800) 251-0539 and
press the following sequence of
keys:
[1] [#] [1] [#] [1] [6] [#]
for the Prime Portfolio,
[1] [#] [1] [#] [2] [7] [#]
for the Government Portfolio and
[1] [#] [1] [#] [3] [8] [#]
for the Tax-Free Portfolio.
ACM Institutional Reserves, Inc. (the "Fund"), is an open-end investment 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 10, 1996 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 10, 1996
<PAGE>
- --------------------------------------------------------------------------------
EXPENSE INFORMATION
- --------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
The Fund has no sales load on purchases or reinvested dividends, deferred
sales load, redemption fee or exchange fee.
ANNUAL FUND OPERATING EXPENSES PRIME GOVERNMENT TAX-FREE
(as a percentage of average net assets, net of PORTFOLIO PORTFOLIO PORTFOLIO
expense reimbursement or fee waiver) --------- ---------- ---------
Management Fees............................... .13% .07% .10%
Other Expenses................................ .07 .13 .10
--- --- ---
Total Fund Operating Expenses................. .20% .20% .20%
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):
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Prime Portfolio................................ $2 $6 $11 $26
Government Portfolio........................... $ 2 $6 $11 $26
Tax-Free Portfolio............................. $2 $6 $11 $26
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--.07% and Total Fund Operating Expenses--.27%; Gov-
ernment Portfolio: Management Fees--.20%, Other Expenses--.13% and Total Fund
Operating Expenses--.33%; Tax-Free Portfolio: Management Fees--.20%, Other Ex-
penses--.10% and Total Fund Operating Expenses--.30%. 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 YEAR ENDED THROUGH
APRIL 30, APRIL 30, APRIL 30, APRIL 30, APRIL 30, APRIL 30,
1996 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period ........ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- -------
INCOME FROM
INVESTMENT
OPERATIONS
Net investment
income......... 0.0560 0.0502 0.0325 0.0353 0.0535 0.0506
------- ------- ------- ------- ------- -------
LESS:
DISTRIBUTIONS
Dividends from
net investment
income......... (0.0560) (0.0502) (0.0325) (0.0353) (0.0535) (0.0506)
------- ------- ------- ------- ------- -------
Net asset value,
end of period . $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= =======
TOTAL RETURNS
Total investment
return based on
net asset
value(b) ...... 5.76% 5.15% 3.30% 3.59% 5.50% 7.54%(c)
======= ======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL
DATA
Net assets, end
of period (in
millions)...... $ 493.3 $ 197.8 $ 108.1 $ 64.3 $ 25.0 $ 27.2
RATIO TO AVERAGE
NET ASSETS OF:
Expenses, net of
waivers and
reimbursements. 0.20% 0.20% 0.20% 0.18% 0.02% -0-
Expenses, before
waivers and
reimbursements. 0.32% 0.36% 0.42% 0.54% 0.81% 1.09%
Net investment
income(d)...... 5.54% 5.24% 3.25% 3.42% 5.30% 6.84%(c)
<CAPTION>
GOVERNMENT PORTFOLIO
------------------------------------------------------------
JULY 22, 1991(A)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
APRIL 30, APRIL 30, APRIL 30, APRIL 30, APRIL 30,
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------------
<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......... 0.0552 0.0493 0.0315 0.0339 0.0377
---------- ---------- ---------- ---------- ----------------
LESS:
DISTRIBUTIONS
Dividends from
net investment
income......... (0.0552) (0.0493) (0.0315) (0.0339) (0.0377)
---------- ---------- ---------- ---------- ----------------
Net asset value,
end of period . $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ================
TOTAL RETURNS
Total investment
return based on
net asset
value(b) ...... 5.67% 5.06% 3.20% 3.45% 4.98%(c)
========== ========== ========== ========== ================
RATIOS/SUPPLEMENTAL
DATA
Net assets, end
of period (in
millions)...... $ 150.8 $ 104.4 $ 76.6 $ 73.2 $ 24.7
RATIO TO AVERAGE
NET ASSETS OF:
Expenses, net of
waivers and
reimbursements. 0.20% 0.20% 0.20% 0.18% 0.10%(c)
Expenses, before
waivers and
reimbursements. 0.36% 0.38% 0.36% 0.49% 0.86%(c)
Net investment
income(d)...... 5.50% 4.94% 3.15% 3.30% 4.86%(c)
</TABLE>
- -------
(a) Commencement of operations.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends at net asset value during the period and redemption on the last
day of the period.
(c) Annualized.
(d) Net of expenses reimbursed or waived by the Adviser.
--------------
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, 1996, after expense reim-
bursement, amounted to an annualized yield of 5.24%, equivalent to an effective
yield of 5.38%. Absent such reimbursement, the annualized yield for such period
would have been 5.17%, equivalent to an effective yield of 5.31%. Dividends for
the Government Portfolio for the seven days ended June 30, 1996, after expense
reimbursement, amounted to an annualized yield of 5.17%, equivalent to an ef-
fective yield of 5.31%. Absent such reimbursement, the annualized yield for
such period would have been 5.05%, equivalent to an effective yield of 5.18%.
Dividends for the Tax-Free Portfolio for the seven days ended June 30, 1996
amounted to an annualized yield of 3.46%, equivalent to an effective yield of
3.52%. Absent such reimbursement, the annualized yield for such period would
have been 3.36%, equivalent to an effective yield of 3.42%. Further information
about the Fund's performance is contained in the Fund's annual report to share-
holders and Statement of Additional Information which may be obtained without
charge by contacting Alliance Fund Services, Inc. at the address or the tele-
phone 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 YEAR ENDED THROUGH
APRIL 30, APRIL 30, APRIL 30, APRIL 30, APRIL 30,
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------------
<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... 0.0372 0.0326 0.0240 0.0287 0.0334
Net unrealized loss on
investments............ --0-- (0.0048) --0-- --0-- --0--
------- ------- ------- ------- -------
Net increase in net
asset value from
operations............. 0.0372 0.0278 0.0240 0.0287 0.0334
------- ------- ------- ------- -------
LESS: DISTRIBUTIONS
Dividends from net
investment income...... (0.0372) (0.0326) (0.0240) (0.0287) (0.0334)
------- ------- ------- ------- -------
ADD: CAPITAL
CONTRIBUTION
Capital Contributed by
the Adviser............ --0-- 0.0048 --0-- --0-- --0--
------- ------- ------- ------- -------
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) .............. 3.79% 3.31%(e) 2.43% 2.92% 4.40%(c)
======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
period (in millions) .. $ 183.6 $ 35.5 $ 35.6 $ 40.9 $ 8.5
RATIO TO AVERAGE NET
ASSETS OF:
Expenses, net of waivers
and reimbursements..... 0.20% 0.20% 0.20% 0.18% 0.10%(c)
Expenses, before waivers
and reimbursements..... 0.48% 0.76% 0.69% 0.95% 2.08%(c)
Net investment
income(d).............. 3.73% 3.31% 2.40% 2.73% 4.01%(c)
</TABLE>
- -------
(a) Commencement of operations.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends at net asset value during the period and redemption on the last
day of the period.
(c) Annualized.
(d) Net of expenses reimbursed or waived by the Adviser.
(e) Capital contributed by the Adviser had no material effect on net asset
value, and therefore, no effect on total return.
- --------------------------------------------------------------------------------
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 diversification,
quality and maturity conditions imposed by the Rule (a more detailed descrip-
tion of Rule 2a-7 is set forth in the Portfolios' Statement of Additional In-
formation 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 25% of its total assets it may in-
vest without regard to such limitation; (3) invest more than 5% of its assets
in the securities of any issuer (except the U.S. Government) having less than
three years of continuous operation or purchase more than 10% of any class of
the outstanding securities of any issuer (except the U.S. Government); (4) en-
ter into repurchase agreements if, as a result thereof, more than 10% of its
assets would be committed to repurchase agreements not terminable within seven
days and other illiquid investments; (5) borrow money except from banks on a
temporary basis in aggregate amounts not exceeding 15% of its assets; the
Portfolio will not purchase any investments while borrowings in excess of 5%
of total assets exist; and (6) mortgage, pledge or hypothecate its assets ex-
cept to secure such borrowings.
As a matter of operating policy, fundamental policy number (2) would give the
Portfolio the ability to invest, with respect to 25% of its assets, more than
5% of its assets in any one issuer only in the event Rule 2a-7 is amended in
the future.
GOVERNMENT PORTFOLIO
The securities in which the Government Portfolio invests include: (1) market-
able obligations of, or guaranteed by, the U.S. Government, including issues
of the United States Treasury, such as bills, certificates of indebtedness,
notes and bonds, and issues of agencies and instrumentalities established un-
der the authority of an act of Congress; and (2) repurchase agreements that
are collateralized in full each day by the types of securities listed above.
These agreements are entered into with "primary dealers" (as designated by the
Federal Reserve Bank of New York) in U.S. Government securities or State
Street Bank and Trust Company, the Fund's 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
4
<PAGE>
less than the repurchase price. The Portfolio may commit up to 15% of its net
assets to the purchase of when-issued U.S. Government securities. To facili-
tate such acquisitions, the Fund's Custodian will maintain, in a separate ac-
count of the Portfolio, U.S. Government securities or other liquid high-grade
debt securities having value equal to, or greater than, such commitments. The
price of when-issued securities, which is generally expressed in yield terms,
is fixed at the time the commitment to purchase is made, but delivery and pay-
ment 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 securities 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 August 7, 1986 which are "specified private activity
bonds" will be treated as an item of tax preference for purposes of the alter-
native minimum tax ("AMT") imposed on individuals and corporations, though for
regular Federal income tax purposes such interest will remain fully tax-ex-
empt, and (2) interest on all tax-exempt obligations will be included in "ad-
justed current earnings" of corporations for AMT purposes. The Portfolio may
purchase "private activity" municipal securities because such issues have pro-
vided, and may continue to provide, somewhat higher yields than other compara-
ble municipal securities. However, the Portfolio will limit its investments so
that no more than 20% of its total income is derived from municipal securities
that bear interest subject to the AMT.
MUNICIPAL SECURITIES. The municipal securities in which the Portfolio invests
include municipal notes and short-term municipal bonds. Municipal notes are
generally used to provide for short-term capital needs and generally have ma-
turities of one year or less. Examples include tax anticipation and revenue
anticipation notes which are generally issued in anticipation of various sea-
sonal revenues, bond anticipation notes, and tax-exempt commercial paper.
Short-term municipal bonds may include general obligation bonds, which are se-
cured by the issuer's pledge of its faith, credit and taxing power for payment
of principal and interest, and revenue bonds, which are generally paid from
the revenues of a particular facility or a specific excise or other source.
The Portfolio may invest in variable rate obligations whose interest rates
are adjusted either at predesignated 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.
To further enhance the quality and liquidity of the securities in which the
Tax-Free Portfolio invests, such securities frequently are supported by credit
and liquidity enhancements, such as letters of credit, from third party finan-
cial institutions. The Portfolio continuously monitors the credit quality of
such third parties; however, changes in the credit quality of such a financial
institution could cause the Portfolio's investments backed by that institution
to lose value and affect the Portfolio's share price.
The Portfolio also may invest in stand-by commitments, which may involve cer-
tain expenses and risks, but such commitments are not expected to comprise a
significant portion of its investments. The Portfolio may commit up to 15% of
its net assets to the purchase of when-issued securities. For a description of
when-issued securities, see above.
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 vendor; 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 numberwith 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 shareholder should
issue written instructions to Alliance Fund Services, Inc. at the address
shown on the cover of this prospectus. The Fund reserves the right to suspend
or 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, 1996,
the Adviser reimbursed its advisory fee in the amount of $374,443, $241,498
and $253,985 for the Prime, Government and Tax-Free Portfolios, respectively.
The Adviser has undertaken until, at its request, the Fund notifies investors
to the contrary, that if, in any fiscal year, the aggregate expenses of a
Portfolio, exclusive of taxes, brokerage, interest on borrowings and extraor-
dinary expenses, but including the management fee, exceed .20 of 1% of a Port-
folio's average net assets for the fiscal year, the Portfolio may deduct from
the payment to be made to the Adviser, or the Adviser will bear, such excess
expense.
The Adviser is a leading international investment manager, supervising client
accounts with assets as of June 30, 1996 totaling more than $168 billion (of
which more than $55 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 en-
dowment funds. The 51 registered investment companies managed by the Adviser
comprising 109 separate investment portfolios currently have over two million
shareholders. As of June 30, 1996, the Adviser was retained as an investment
manager of employee benefit fund assets for 33 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
Donald J. Robinson
Robert C. White
OFFICERS
Ronald M. Whitehill, President
Kathleen A. Corbet, Senior Vice President
Drew Biegel, Vice President
John F. Chiodi, Jr., Vice President
Joseph R. LaSpina, 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>
This is filed pursuant to Rule 497(c).
File Nos. 33-34001 and 811-6068.
<PAGE>
LOGO ACM INSTITUTIONAL RESERVES, INC.
-Prime Portfolio
-Government Portfolio
-Tax-Free Portfolio
________________________________________________________________
P.O. Box 1520, Secaucus, New Jersey 07096
Toll Free (800) 221-5672
________________________________________________________________
STATEMENT OF ADDITIONAL INFORMATION
September 10, 1996
________________________________________________________________
This Statement of Additional Information is not a prospectus and
should be read in conjunction with the Fund's current Prospectus
dated September 10, 1996 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. . . . . . . . . . . . . . . . . . . . . . . . 2
Investment Objectives and Policies . . . . . . . . . . . 2
Investment Restrictions . . . . . . . . . . . . . . . . 17
Management. . . . . . . . . . . . . . . . . . . . . . . 23
Purchase and Redemption of Shares . . . . . . . . . . . 30
Daily Dividends-Determination of Net Asset Value. . . . 32
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 34
General Information . . . . . . . . . . . . . . . . . . 35
Appendix A - Commercial Paper and Bond Ratings. . . . . 39
Appendix B - Description of Municipal Securities. . . . 41
Financial Statements. . . . . . . . . . . . . . . . . .
Report of Independent Auditors. . . . . . . . . . . . .
_________________________________________________________________
<PAGE>
(R):This registered service mark used under license from the
owner, Alliance Capital Management L.P.
<PAGE>
_________________________________________________________________
THE FUND
_________________________________________________________________
ACM Institutional Reserves, Inc. (the "Fund") is an open-end
investment company. The Prime Portfolio, the Government
Portfolio and the Tax-Free Portfolio, each of which is
diversified (collectively, the "Portfolios") are described by the
Prospectus which supplements this Statement of Additional
Information. An additional Portfolio of the Fund, the Trust
Portfolio, is described in a separate Prospectus and Statement of
Additional Information.
_________________________________________________________________
INVESTMENT OBJECTIVES AND POLICIES
_________________________________________________________________
The investment objectives of each Portfolio are - in the
following order of priority - safety of principal, excellent
liquidity, and maximum current income (which, in the case of the
Tax-Free Portfolio, is exempt from Federal income taxes) to the
extent consistent with the first two objectives. As a matter of
fundamental policy, each Portfolio pursues its objectives by
maintaining a portfolio of high-quality money market securities,
all of which, at the time of investment, have remaining
maturities of one year or less (which maturities, pursuant to
Rule 2a-7 under the Investment Company Act of 1940 as amended
(the "Act"), may extend to 397 days). The Fund may in the future
establish additional portfolios which may have different
investment objectives. There can be no assurance that any of the
Portfolio's objectives will be achieved.
General
Each of the Portfolios will comply with Rule 2a-7 under the
Act, as amended from time to time, including the diversification,
quality and maturity conditions imposed by the Rule.
Currently, pursuant to Rule 2a-7, each Portfolio may invest
only in "eligible securities" (as that term is defined in the
Rule) that have been determined by the Adviser to present minimal
credit risks pursuant to procedures approved by the Board of
Directors. Generally, an eligible security is a security that
(i) is denominated in U.S. Dollars and has a remaining maturity
of 397 days or less and (ii) is rated, or is issued by an issuer
with short-term debt outstanding that is rated, in one of the two
highest rating categories by two nationally recognized
statistical rating organizations ("NRSROS") or, if only one NRSRO
has issued a rating, by that NRSRO. A security that originally
2
<PAGE>
had a maturity of greater than 397 days is an eligible security
if its remaining maturity at the time of purchase is 397 calendar
days or less and the issuer has outstanding short-term debt that
would be an eligible security. Unrated securities may also be
eligible securities if the Adviser determines that they are of
comparable quality to a rated eligible security pursuant to
guidelines approved by the Board of Directors. A description of
the ratings of some NRSROs appears in Appendix A attached hereto.
Under Rule 2a-7 the Prime Portfolio and the Government
Portfolio may not invest more than five percent of their
respective assets in the securities of any one issuer other than
the United States Government, its agencies and instrumentalities.
When the amendments to Rule 2a-7 adopted by the Securities and
Exchange Commission in March of 1996 become effective, this
limitation will also apply to the Tax-Free Portfolio. In
addition, the Prime Portfolio and the Government Portfolio may
not invest in a security that has received, or is deemed
comparable in quality to a security that has received, the second
highest rating by the requisite number of NRSROs (a "second tier
security") if immediately after the acquisition thereof either
the Prime Portfolio or the Government Portfolio would have
invested more than (A) the greater of one percent of its total
assets or one million dollars in securities issued by that issuer
which are second tier securities, or (B) five percent of its
total assets in second tier securities. The foregoing limitation
on investment in second tier securities will not apply upon the
effectiveness of the amendments to Rule 2a-7 with respect to the
Tax-Free Portfolio except with respect to investment in certain
types of municipal securities issued to financial non-
governmental private projects.
Prime Portfolio
The Prime Portfolio may make the following investments
diversified by maturities and issuers:
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.
3
<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 of
other such instruments in which the Portfolio may invest.
Certificates of deposit are receipts issued by a depository
institution in exchange for the deposit of funds. The issuer
agrees to pay the amount deposited plus interest to the bearer of
the receipt on the date specified on the certificate. Such
certificates may include, for example, those issued by foreign
subsidiaries of such banks which are guaranteed by them. The
certificate usually can be traded in the secondary market prior
to maturity. Bankers' acceptances typically arise from short-
term credit arrangements designed to enable businesses to obtain
funds to finance commercial transactions. Generally, an
acceptance is a time draft drawn on a bank by an exporter or an
importer to obtain a stated amount of funds to pay for specific
merchandise. The draft is then "accepted" by a bank that, in
effect, unconditionally guarantees to pay the face value of the
instrument on its maturity date. The acceptance may then be held
by the accepting bank as an earning asset or it may be sold in
the secondary market at the going rate of discount for a specific
maturity. Although maturities for acceptances can be as long as
270 days, most acceptances have maturities of six months or less.
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, 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
4
<PAGE>
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
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.
5
<PAGE>
The Adviser believes that the principal credit risk
associated with acquiring participation interests from a
co-lender or another participant is the credit risk associated
with the underlying corporate borrower. The Portfolio may incur
additional credit risk, however, when the Portfolio is in the
position of participant rather than a co-lender because the
Portfolio must assume the risk of insolvency of the co-lender
from which the participation interest was acquired and that of
any person interpositioned between the Portfolio and the
co-lender. However, in acquiring participation interests the
Adviser will conduct analysis and evaluation of the financial
condition of each such co-lender and participant to ensure that
the participation interest meet the Portfolio's high quality
standard and will continue to do so as long as it holds a
participation.
4. Repurchase agreements pertaining to the above
securities. For a description of repurchase agreements, see
below, "Additional Investment Policies - Repurchase Agreements."
The Portfolio may make investments in certificates of deposit
issued by foreign branches of domestic banks and certificates of
deposit or bankers' acceptances issued by U.S. branches of
foreign banks specified in paragraph 2 above, and commercial
paper issued by foreign companies meeting the rating criteria
specified in paragraph 3 above. To the extent that the Portfolio
invests in such instruments, consideration is given to their
domestic marketability, the lower reserve requirements generally
mandated for overseas banking operations, the possible impact of
interruptions in the flow of international currency transactions,
potential political and social instability or expropriation,
imposition of foreign taxes, less government supervision of
issuers, difficulty in enforcing contractual obligations and lack
of uniform accounting standards.
The Portfolio may invest in asset-backed securities that meet
its existing diversification, quality and maturity criteria.
Asset-backed securities are securities issued by special purpose
entities whose primary assets consist of a pool of loans or
accounts receivable. The securities may be in the form of a
beneficial interest in a special purpose trust, limited
partnership interest, or commercial paper or other debt
securities issued by a special purpose corporation. Although the
securities may have some form of credit or liquidity enhancement,
payments on the securities depend predominately upon collection
of the loans and receivables held by the issuer. It is the
Portfolio's current intention to limit its investment in such
securities to not more than 5% of its net assets.
The Portfolio's investment objectives may not be changed
without the affirmative vote of a majority of the Portfolio's
6
<PAGE>
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).
The Government Portfolio may make the following investments:
1. Marketable obligations of, or guaranteed by, the United
States Government, its agencies or instrumentalities. These
include issues of the United States Treasury, such as bills,
certificates of indebtedness, notes and bonds, and issues of
agencies and instrumentalities established under the authority of
an act of Congress. The latter issues include, but are not
limited to, obligations of the Bank for Cooperatives, Federal
Financing Bank, Federal Home Loan Bank, Federal Intermediate
Credit Banks, Federal Land Banks, Federal National Mortgage
Association and Tennessee Valley Authority. Some of these
securities are supported by the full faith and credit of the U.S.
Treasury, others are supported by the right of the issuer to
borrow from the Treasury, and still others are supported only by
the credit of the agency or instrumentality.
2. Repurchase agreements pertaining to the above
securities. For a description of repurchase agreements, see
below, "Additional Investment Policies - Repurchase Agreements."
Tax-Free Portfolio
As a matter of fundamental policy, the Tax-Free Portfolio,
except when assuming a temporary defensive position, must
maintain at least 80% of its total assets in high-grade municipal
securities having maturities of one year or less (which
maturities, pursuant to Rule 2a-7 under 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.
7
<PAGE>
Municipal Securities
The term "municipal securities," as used in the Prospectus
and this Statement of Additional Information, means obligations
issued by or on behalf of states, territories, and possessions of
the United States or their political subdivisions, agencies and
instrumentalities, the interest from which is exempt from Federal
income taxes. The municipal securities in which the Portfolio
invests are limited to those obligations which at the time of
purchase:
1. are backed by the full faith and credit of the United
States; or
2. are municipal notes rated MIG-1/VMIG-1 or MIG-2/VMIG-2 by
Moody's or SP-1 or SP-2 by Standard & Poor's or, if not
rated, are of equivalent investment quality as determined
by the Adviser and ultimately reviewed by the Directors;
or
3. are municipal bonds rated Aa or higher by Moody's, AA or
higher by Standard & Poor's or, if not rated, are of
equivalent investment quality as determined by the
Adviser and ultimately reviewed by the Directors; or
4. are other types of municipal securities, provided that
such obligations are rated Prime-1 by Moody's, A-1 or
higher by Standard & Poor's or, if not rated, are of
equivalent investment quality as determined by the
Adviser and ultimately reviewed by the Directors. (See
Appendix B for a description of municipal securities and
Appendix A for a description of these ratings.)
No Portfolio will invest 25% or more of its total assets in
the securities of non-governmental issuers conducting their
principal business activities in any one industry.
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
8
<PAGE>
than 20% of its total income is derived from municipal securities
that bear interest subject to the AMT.
Investors should consider that, in most instances, no state,
municipality or other governmental unit with taxing power will be
obligated with respect to AMT-subject bonds. AMT-subject bonds
are in most cases revenue bonds and do not generally have the
pledge of the credit or the taxing power, if any, of the issuer
of such bonds. AMT-subject bonds are generally limited
obligations of the issuer supported by payments from private
business entities and not by the full faith and credit of a state
or any governmental subdivision. Typically the obligation of the
issuer of AMT-subject bonds is to make payments to bond holders
only out of and to the extent of, payments made by the private
business entity for whose benefit the AMT-subject bonds were
issued. Payment of the principal and interest on such revenue
bonds depends solely on the ability of the user of the facilities
financed by the bonds to meet its financial obligations and the
pledge, if any, of real and personal property so financed as
security for such payment. It is not possible to provide
specific detail on each of these obligations in which Fund assets
may be invested.
Taxable Securities
Although the Portfolio expects to be largely invested in
municipal securities, the Portfolio may elect to invest up to 20%
of its total assets in taxable money market securities when such
action is deemed to be in the best interests of shareholders.
Such taxable money market securities also are limited to
remaining maturities of one year (which maturities may extend to
397 days pursuant to Rule 2a-7) or less at the time of the
Portfolio's investment, and the Portfolio's municipal and taxable
securities are maintained at a dollar-weighted average of 90 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.)
9
<PAGE>
The Portfolio may also enter into repurchase agreements
pertaining to the types of securities in which it may invest.
For a description of repurchase agreements, see below,
"Additional Investment Policies - Repurchase Agreements."
Variable Rate Obligations
The interest rate payable on certain municipal securities in
which the Portfolio may invest, called "variable rate"
obligations, is not fixed and may fluctuate based upon changes in
market rates. The interest rate payable on a variable rate
municipal security is adjusted either at predesignated periodic
intervals or whenever there is a change in the market rate to
which the security's interest rate is tied. Other features may
include the right of the Portfolio to demand prepayment of the
principal amount of the obligation prior to its stated maturity
and the right of the issuer to prepay the principal amount prior
to maturity. The main benefit of a variable rate municipal
security is that the interest rate adjustment minimizes changes
in the market value of the obligation. As a result, the purchase
of variable rate municipal securities enhances the ability of the
Portfolio to maintain a stable net asset value per share and to
sell an obligation prior to maturity at a price approximating the
full principal amount. The payment of principal and interest by
issuers of certain municipal securities purchased by the
Portfolio may be guaranteed by letter of credit or other credit
facilities offered by banks or other financial institutions.
Such guarantees will be considered in determining whether a
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
<PAGE>
10% of the total assets of the Portfolio. The Portfolio will not
purchase participation interests in variable rate industrial
development bonds unless the interest earned by the Portfolio
from the bonds in which it holds participation interests is
considered to be exempt from Federal income taxes. The Adviser
will monitor the pricing, quality and liquidity of variable rate
demand obligations and participation interests therein held by
the Portfolio on the basis of published financial information,
rating agency reports and other research services to which the
Adviser may subscribe.
Standby Commitments
The Portfolio may purchase municipal securities together with
the right to resell them to the seller at an agreed-upon price or
yield within specified periods prior to their maturity dates.
Such a right to resell is commonly known as a "standby
commitment," and the aggregate price which the Portfolio pays for
securities with a standby commitment may be higher than the price
which otherwise would be paid. The primary purpose of this
practice is to permit the Portfolio to be as fully invested as
practicable in municipal securities while preserving the
necessary flexibility and liquidity to meet unanticipated
redemptions. In this regard, the Portfolio acquires standby
commitments 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
11
<PAGE>
rating of the issue. Municipal securities with longer maturities
tend to produce higher yields and are generally subject to
greater price movements than obligations with shorter maturities.
The achievement of the Portfolio's investment objectives is
dependent in part on the continuing ability of the issuers of
municipal securities in which the Portfolio invests to meet their
obligations for the payment of principal and interest when due.
Municipal securities historically have not been subject to
registration with the Securities and Exchange Commission,
although there have been proposals which would require
registration in the future.
After purchase by the Portfolio, a security may cease to be
rated or its rating may be reduced below the minimum required for
purchase by the Portfolio. Neither event requires sales of such
security by the Portfolio, but the Adviser will consider such
event in its determination of whether the Portfolio should
continue to hold the security. To the extent that the ratings
given by Moody's or Standard & Poor's may change as a result of
changes in such organizations or their rating systems, the
Adviser will attempt to substitute comparable ratings.
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.
12
<PAGE>
Repurchase Agreements
A repurchase agreement arises when a buyer purchases a
security and simultaneously agrees to resell it to the vendor on
an agreed-upon future date. The resale price is greater than the
purchase price, reflecting an agreed-upon market rate which is
effective for the period of time the buyer's money is invested in
the security and which is not related to the coupon rate on the
purchased security. Repurchase agreements may be entered into
with member banks of the Federal Reserve System or "primary
dealers" (as designated by the Federal Reserve Bank of New York)
in U.S. Government securities or with State Street Bank and Trust
Company ("State Street Bank"), the Fund's Custodian. It is each
Portfolio's current practice, which may be changed at any time
without shareholder approval, to enter into repurchase agreements
only with such primary dealers and State Street Bank. For each
repurchase agreement, each Portfolio requires continual
maintenance of the market value of underlying collateral in
amounts equal to, or in excess of, the agreement amount. While
the maturities of the underlying collateral may exceed one year,
the term of the 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. Pursuant to Rule 2a-7, a repurchase agreement is deemed
to be an acquisition of the underlying securities, provided that
the obligation of the seller to repurchase the securities from
the money market fund is collateralized fully (as defined in such
Rule). Accordingly, the vendor of a fully collateralized
repurchase agreement is deemed to be the issuer of the underlying
securities.
Reverse Repurchase Agreements
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
13
<PAGE>
terms, is fixed at the time the commitment to purchase is made,
but delivery and payment for the when-issued securities take
place at a later date. Normally, the settlement date occurs from
within ten days to one month after the purchase of the issue.
The Government Portfolio will not make any such commitments of
more than thirty days. During the period between purchase and
settlement, no payment is made by a Portfolio to the issuer and,
thus, no interest accrues to a Portfolio from the transaction.
When-issued securities may be sold prior to the settlement date,
but each Portfolio makes when-issued commitments only with the
intention of actually acquiring the securities. To facilitate
such acquisitions, the Fund's Custodian will maintain, in a
separate account of each Portfolio, U.S. Government securities or
other liquid high grade debt securities having value equal to or
greater than commitments held by that Portfolio. Similarly, a
separate account will be maintained to meet obligations in
respect of reverse repurchase agreements. On delivery dates for
such transactions, a Portfolio will meet its obligations from
maturities or sales of the securities held in the separate
account and/or from the available cash flow. If a Portfolio,
however, chooses to dispose of the right to acquire a when-issued
security prior to its acquisition, it can incur a gain or loss.
At the time a Portfolio makes the commitment to purchase a
security on a when-issued basis, it records the transaction and
reflects the value of the security in determining its net asset
value. No when-issued commitments will be made if, as a result,
more than 15% of a Portfolio's net assets would be so committed.
Liquid Restricted Securities
The Prime Portfolio may purchase restricted securities that
are determined by the Adviser to be liquid in accordance with
procedures adopted by the Directors. Restricted securities are
securities subject to contractual or legal restrictions on
resale, such as those arising from an issuer's reliance upon
certain exemptions from registration under the Securities Act of
1933 (the "Securities Act").
In recent years, a large institutional market has developed
for certain types of restricted securities including, among
others, private placements, repurchase agreements, commercial
paper, foreign securities and corporate bonds and notes. These
instruments are often restricted securities because they are sold
in transactions not requiring registration. For example,
commercial paper issues in which the Prime Portfolio may invest
include, among others, securities issued by major corporations
without registration under the Securities Act in reliance on the
exemption from registration afforded by Section 3(a)(3) of such
Act and commercial paper issued in reliance on the private
placement exemption from registration which is afforded by
Section 4(2) of the Securities Act ("Section 4(2) paper").
14
<PAGE>
Section 4(2) paper is restricted as to disposition under the
Federal securities laws in that any resale must also be made in
an exempt transaction. Section 4(2) paper is normally resold to
other institutional investors through or with the assistance of
investment dealers who make a market in Section 4(2) paper, thus
providing liquidity. Institutional investors, rather than
selling these instruments to the general public, often depend on
an efficient institutional market in which such restricted
securities can be readily resold in transactions not involving a
public offering. In many instances, therefore, the existence of
contractual or legal restrictions on resale to the general public
does not, in practice, impair the liquidity of such investments
from the perspective of institutional holders.
In 1990, in part to enhance the liquidity in the institutional
markets for restricted securities, the SEC adopted Rule 144A
under the Securities Act to establish a safe harbor from the
Securities Act's registration requirements for resale of certain
restricted securities to qualified institutional buyers. Section
4(2) paper that is issued by a company that files reports under
the Securities Exchange Act of 1934 is generally eligible to be
resold in reliance on the safe harbor of Rule 144A. Pursuant to
Rule 144A, the institutional restricted securities markets may
provide both readily ascertainable values for restricted
securities and the ability to liquidate an investment in order to
satisfy share redemption orders on a timely basis. An
insufficient number of qualified institutional buyers interested
in purchasing certain restricted securities held by the Prime
Portfolio, however, could affect adversely the marketability of
such portfolio securities and the Prime Portfolio might be unable
to dispose of such securities promptly or at reasonable prices.
Rule 144A has already produced enhanced liquidity for many
restricted securities, and market liquidity for such securities
may continue to expand as a result of Rule 144A and the
consequent inception of the PORTAL System sponsored by the
National Association of Securities Dealers, Inc., an automated
system for the trading, clearance and settlement of unregistered
securities.
The Prime Portfolio's Directors have the ultimate
responsibility for determining whether specific securities are
liquid or illiquid. The Directors have delegated the function of
making day-to-day determinations of liquidity to the Adviser,
pursuant to guidelines approved by the Directors. The Adviser
takes into account a number of factors in determining whether a
restricted security being considered for purchase is liquid,
including at least the following:
(i) the frequency of trades and quotations for the
security;
15
<PAGE>
(ii) the number of dealers making quotations to purchase
or sell the security;
(iii) the number of other potential purchasers of the
security;
(iv) the number of dealers undertaking to make a market
in the security;
(v) the nature of the security (including its
unregistered nature) and the nature of the
marketplace for the security (e.g., the time needed
to dispose of the security, the method of
soliciting offers and the mechanics of transfer);
and
(vi) any applicable Securities and Exchange Commission
interpretation or position with respect to such
types of securities.
To make the determination that an issue of Section 4(2) paper
is liquid, Alliance must conclude that the following conditions
have been met:
(i) the Section 4(2) paper must not be traded flat or
in default as to principal or interest; and
(ii) the Section 4(2) paper must be rated in one of the
two highest rating categories by at least two
NRSROs, or if only one NRSRO rates the security, by
that NRSRO; if the security is unrated, Alliance
must determine that the security is of equivalent
quality.
Alliance must also consider the trading market for the
specific security, taking into account all relevant factors.
Following the purchase of a restricted security by the Prime
Portfolio, the Adviser monitors continuously the liquidity of
such security and reports to the Directors regarding purchases of
liquid restricted securities.
General
While there are many kinds of short-term securities used by
money market investors, the Portfolios, in keeping with their
primary investment objective of safety of principal, 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
16
<PAGE>
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.
___________________________________________________________
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 year1 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;
_________________________
1. Which maturity, pursuant to Rule 2a-7, may extend to 397
days.
17
<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 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 an
aggregate amount not to exceed 15% of the Portfolio's
assets and to be used exclusively to facilitate the
orderly maturation and sale of portfolio securities
during any periods of abnormally heavy redemption
requests, if they should occur; such borrowings may not
be used to purchase investments and the Portfolio will
not purchase any investments while borrowings in excess
of 5% of total assets exist;
6. pledge, hypothecate or in any manner transfer, as
security for indebtedness, any securities owned or held
by the Fund except as may be necessary in connection with
any borrowing mentioned above, including reverse
repurchase agreements, and in an aggregate amount not to
exceed 15% of the Portfolio's assets;
7. make loans, provided that the Portfolio may purchase
money market securities and enter into repurchase
agreements;
8. enter into repurchase agreements if, as a result thereof,
more than 10% of the Portfolio's assets would be
committed to repurchase agreements not terminable within
seven days and other illiquid investments; or
9. (a) make investments for the purpose of exercising
control; (b) purchase securities of other investment
companies, except in connection with a merger,
consolidation, acquisition or reorganization; (c) invest
in real estate (other than money market securities
secured by real estate or interests therein or money
market securities issued by companies which invest in
real estate, or interests therein), commodities or
commodity contracts, including futures contracts,
interests in oil, gas and other mineral exploration or
other development programs; (d) purchase securities on
margin; (e) make short sales of securities or maintain a
18
<PAGE>
short position or write, purchase or sell puts, call,
straddles, spreads or combinations thereof; (f) invest in
securities of issuers (other than agencies and
instrumentalities of the United States Government) having
a record, together with predecessors, of less than three
years of continuous operation if more than 5% of the
Portfolio's assets would be invested in such securities;
(g) purchase or retain securities of any issuers if those
officers and directors of the Fund and employees of the
Adviser who own individually more than 1/2% of the
outstanding securities of such issuer together own more
than 5% of the securities of such issuer; or (h) act as
an underwriter of securities.
Government Portfolio
The Portfolio may not:
1. purchase any security which has a maturity date more than
one year from the date of the Portfolio's purchase;2
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;3 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
_________________________
2. Which maturity, pursuant to Rule 2a-7, may extend to 397
days.
3. Pursuant to Rule 2a-7, acquisition of a fully collateralized
repurchase agreement is deemed to be the acquisition of the
underlying securities.
19
<PAGE>
during any periods of abnormally heavy redemption
requests, if they should occur; such borrowings may not
be used to purchase investments and the Portfolio will
not purchase any investments while borrowings in excess
of 5% of total assets exist;
5. pledge, hypothecate or in any manner transfer, as
security for indebtedness, any securities owned or held
by the Portfolio except as may be necessary in connection
with any borrowing mentioned above, including reverse
repurchase agreements, and in an aggregate amount not to
exceed 10% of the Portfolio's assets;
6. make loans, provided that the Portfolio may purchase
securities of the type referred to in paragraph 2 above
and enter into repurchase agreements with respect
thereto; or
7. act as an underwriter of securities.
Tax-Free Portfolio
The Portfolio may not:
1. purchase any security which has a maturity date more than
one year4 from the date of the Portfolio's purchase;
2. invest more than 25% of its total assets in the
securities of issuers conducting their principal business
activities in any one industry, provided that for
purposes of this policy (a) there is no limitation with
respect to investments in municipal securities (including
industrial development bonds), securities issued or
guaranteed by the U.S. Government, its agencies or
instrumentalities, and bank obligations, including
certificates of deposit, bankers' acceptances and
interest-bearing savings deposits, (such bank obligations
are issued by domestic banks, including U.S. branches of
foreign banks subject to the same regulation as U.S.
banks) and (b) consumer finance companies, industrial
finance companies and gas, electric, water and telephone
utility companies are each considered to be separate
industries. For purposes of this restriction and those
set forth in restrictions 4 and 5 below, the Portfolio
will regard the entity which has the primary
responsibility for the payment of interest and principal
as the issuer;
_________________________
4. Which maturity, pursuant to Rule 2a-7, may extend to 397
days.
20
<PAGE>
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
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%
21
<PAGE>
of the Portfolio's total assets would be committed to
such repurchase agreements (whether or not illiquid) or
other illiquid investments, or (ii) with a particular
vendor5 if immediately thereafter more than 5% of the
Portfolio's assets would be committed to repurchase
agreements entered into with such vendor; or
10. (a) make investments for the purpose of exercising
control; (b) purchase securities of other investment
companies, except in connection with a merger,
consolidation, acquisition or reorganization; (c) invest
in real estate (other than securities secured by real
estate or interests therein or securities issued by
companies which invest in real estate or interests
therein), commodities or commodity contracts; (d)
purchase any restricted securities or securities on
margin; (e) make short sales of securities or maintain a
short position or write, purchase or sell puts (except
for standby commitments as described in the Prospectus
and above), calls straddles, spreads or combinations
thereof; (f) invest in securities of issuers (other than
agencies and instrumentalities of the United States
Government) having a record, together with predecessors,
of less than three years of continuous operation if more
than 5% of the Portfolio's assets would be invested in
such securities; (g) purchase or retain securities of any
issuer if those officers and directors of the Fund and of
the Adviser who own individually more than 1/2 of 1% of
the outstanding securities of such issuer together own
more than 5% of the securities of such issuer; or (h) act
as an underwriter of securities.
__________________________________________________________
MANAGEMENT
__________________________________________________________
Directors and Officers
The Directors and principal officers of the Fund and their
primary occupations during the past five years are set forth
below. Unless otherwise specified, the address of each such
person is 1345 Avenue of the Americas, New York, New York 10105.
Those Directors whose names are 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
_________________________
5. Pursuant to Rule 2a-7, acquisition of a fully collateralized
repurchase agreement is deemed to be the acquisition of the
underlying securities.
22
<PAGE>
of the other registered investment companies that are advised by
the Adviser.
Directors
JOHN D. CARIFA,6 51, is the President, the Chief Operating
Officer and a Director of Alliance Capital Management Corporation
("ACMC"),7 with which he has been associated since prior to 1991.
RUTH BLOCK, 65, 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 1991. Her address is Box 4653,
Stamford, Connecticut 06903.
DAVID H. DIEVLER, 66, was formerly a Senior Vice President of
ACMC, with which he had been associated since prior to 1991. He
is currently an independent consultant. His address is P.O. Box
167, Spring Lake, New Jersey 07762.
JOHN H. DOBKIN, 54, has been the President of Historic Hudson
Valley (historic preservation) since prior to 1991. 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., 63, 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 1991. His address is 2 Hekma Road, Greenwich, CT
06831.
DR. JAMES M. HESTER, 72, is President of the Harry Frank
Guggenheim Foundation and a Director of Union Carbide Corporation
with which he has been associated since prior to 1991. 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, 57, is a Partner of the law firm of Cahill
Gordon & Reindel, with which he has been associated since prior
to 1991. He is also Chief Executive Officer and Director of
_________________________
6. An interested person as defined in the Fund.
7. 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.
23
<PAGE>
Wenonah Development Company (investments), a Director of Placer
Dome, Inc. (mining), Tempo Technology Corporation (manufacturer
of abrasives) and Faber-Castell Corporation (writing products).
His address is St. Bernard's Road, Gladstone, New Jersey 07934.
ROBERT C. WHITE, 76, was formerly a Vice President and the
Chief Financial Officer of the Howard Hughes Medical Institute,
with which he has been associated since prior to 1991. 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, 58, is a Senior Vice
President of ACMC and President of Alliance Cash Management
Services, with which he has been associated since 1993.
Previously, he was Senior Vice President and Managing Director of
Reserve Fund since prior to 1991.
KATHLEEN A. CORBET - Senior Vice President, 36, 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 1991.
DREW A. BIEGEL - Vice President, 45, is a Vice President of
ACMC, with which he has been associated since prior to 1991.
JOHN F. CHIODI, JR. - Vice President, 30, is a Vice President
of ACMC with which he has been associated since prior to 1991.
JOSEPH R. LASPINA - Vice President, 36, is an Assistant Vice
President of ACMC with which he has been associated since prior
to 1991.
RAYMOND J. PAPERA - Vice President, 40, is a Vice President of
ACMC with which he has been associated since prior to 1991.
PAMELA F. RICHARDSON - Vice President, 43, is a Vice President
of ACMC, with which she has been associated since prior to 1991.
EDMUND P. BERGAN, Jr. - Secretary, 46, 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 1991.
24
<PAGE>
MARK D. GERSTEN - Treasurer and Chief Financial Officer, 45,
is a Senior Vice President of AFS and AFD, with which he has been
associated since prior to 1991.
JOSEPH J. MANTINEO - Controller, 37, is a Vice President of
AFS with which he has been associated since prior to 1991.
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, 1996, the
aggregate compensation paid to each of the Directors during
calendar year 1995 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.
25
<PAGE>
Total Number of
Funds in the
Alliance Fund
Total Complex, Including
Compensation the Fund, as to
Name Aggregate the Alliance which the Director
of Director Compensation Fund Complex, is a Director
of Fund from the Fund The Fund or Trustee
__________ _____________ ____________ __________________
John D. Carifa $-0- $-0- 48
Ruth Block $3,235 $159,000 35
David H. Dievler $3,235 $179,200 41
John H. Dobkin $3,235 $117,200 28
William H.
Foulk, Jr. $3,235 $143,500 29
James M. Hester $3,235 $156,000 36
Clifford L. Michel $2,235 $131,500 35
Robert C. White $2,735 $133,200 36
As of July 31, 1996, 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, 1996 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 32% and 10% of the Units were owned
by the public and employees of the Adviser and its subsidiaries,
respectively, including employees of the Adviser who serve as
Directors of the Fund, calculated including as outstanding Units
subject to options exercisable by employees within 60 days of
June 30, 1996.
26
<PAGE>
AXA owns approximately 63.9% of the outstanding voting shares
of common stock of ECI. AXA is the holding company for an
international group of insurance and related financial services
companies. AXAs insurance operations are comprised of
activities in life insurance, property and casualty insurance and
reinsurance. The insurance operations are diverse geographically
with activities in France, the United States, the United Kingdom,
Canada and other countries, principally in Europe. AXA is also
engaged in asset management, investment banking and brokerage,
real estate and other financial services activities in the United
States and Europe. Based on information provided by AXA, as of
March 1, 1996, 42.1% of the voting shares (representing 53.4% of
the voting power) of AXA were owned by Midi Participations, a
French corporation that is a holding company (Midi). The voting
shares of Midi Participations are in turn owned 61.4%
(representing 62.5% of the voting power) by Finaxa, a French
corporation that is a holding company, and 38.6% (representing
37.5% of the voting power) by subsidiaries of Assicurazioni
Generali S.p.A., an Italian corporation ("Generali") (one of
which, Belgica Insurance Holding S.A., a Belgian Corporation,
owned 30.8%, representing 33.1% of the voting power). As of
March 1, 1996, 61.1% of the issued shares (representing 73.4% 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 34.7% of the issued shares)
(representing 40.4% of the voting power), and 25.5% of the voting
shares (representing 16% of the voting power) of Finaxa were
owned by Banque Paribas, a French bank ("PARIBAS"). Including
the shares owned by Midi Participations, as of March 1, 1996, the
Mutuelles AXA directly or indirectly owned 51% of the voting
shares (representing 64.7% of the voting power) of AXA. 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, 1996
totaling more than $168 billion (of which more than $55 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,
1996, 33 of the FORTUNE 100 companies. The Adviser and its
subsidiaries employ approximately 1,450 employees who operate out
of domestic offices and the overseas offices of subsidiaries in
Bombay, Istanbul, London, Sao Paulo, Sydney, Tokyo, Toronto,
Bahrain, Luxembourg and Singapore. The 51 registered investment
companies managed by the Adviser comprising 109 separate
investment portfolios currently more than two million
shareholders.
27
<PAGE>
Under the Advisory Agreement, the Adviser provides each
Portfolio of the Fund and pays all compensation of Directors of
the Fund who are affiliated persons of the Adviser. The Adviser
or its affiliates also furnish the Fund without charge with
management supervision and assistance and office facilities.
Under the Advisory Agreement, each Portfolio pays the Adviser at
an annual rate of .20 of 1% of the average daily value of its net
assets. The fee is accrued daily and paid monthly. The Adviser
has undertaken, until, at its request, the Fund notifies
investors to the contrary that if, in any fiscal year, the
aggregate expenses of a Portfolio, exclusive of taxes, brokerage,
interest on borrowings and extraordinary expenses, but including
the management fee, exceed .20 of 1% of a Portfolio's average net
assets for the fiscal year, the Portfolio may deduct from the
payment to be made to the Adviser, or the Adviser will bear, such
excess expenses. For the fiscal year ended April 30, 1996 the
Adviser reimbursed $374,443, all of which represented advisory
fees; $241,498, all of which represented advisory fees and
$253,985, of which $183,789 represented advisory fees for the
Prime, Government and Tax-Free Portfolios, respectively. For the
fiscal year ended April 30, 1995, the Adviser reimbursed
$239,602, all of which represented advisory fees; $168,311 all of
which represented advisory fees and $181,950, of which $64,550
represented advisory fees for the Prime, Government and Tax-Free
Portfolios, respectively. For the fiscal year ended April 30,
1994, the Adviser reimbursed $206,818, of which $185,655
represented advisory fees; $124,408, all of which represented
advisory fees and $153,934, of which $62,871 represented advisory
fees for the Prime, Government and Tax-Free Portfolios,
respectively. The Adviser may make payments from time to time
from its own resources, which may include the management fees
paid by the Portfolios of the Fund to compensate broker-dealers,
depository institutions, or other persons for providing
distribution assistance and administrative services and to
otherwise promote the sale of shares of the Fund, including
paying for the preparation, printing and distribution of
prospectuses and other literature or other promotional
activities. The Portfolios also pay for printing of prospectuses
and other reports to shareholders and all expenses and fees
related to registrations and filings with the Securities and
Exchange Commission and with state regulatory authorities. The
Portfolios pay all other expenses incurred in its operations,
including the Adviser's management fees; custody, transfer and
dividend disbursing expenses; legal and auditing costs; clerical,
administrative, accounting, and other office costs; fees and
expenses of Directors who are not affiliated with the Adviser;
costs of maintenance of the Fund's existence; and interest
charges, taxes, brokerage fees, and commissions. As to the
obtaining of clerical and accounting services not required to be
provided to each Portfolio by the Adviser under the Advisory
Agreement, the Fund may employ its own personnel. For such
28
<PAGE>
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,
1996, and thereafter for successive twelve month periods computed
from each January 1, provided that such continuance is
specifically approved at least annually by a vote of a majority
of each Portfolio's outstanding voting securities or by the
Fund's Board of Directors, including in either case approval by a
majority of the Directors who are not parties to the Advisory
Agreement or interested persons as defined in the Act. The
Advisory Agreement may be terminated with respect to any
Portfolio without penalty on 60 days' written notice at the
option of either party or by vote of a majority of the
outstanding voting securities of such Portfolio; it will
automatically terminate in the event of assignment. The Adviser
is not liable for any action or inaction with regard to its
obligations under the Advisory Agreement as long as it does not
exhibit willful misfeasance, bad faith, gross negligence, or
reckless disregard of its obligations.
___________________________________________________________
PURCHASE AND REDEMPTION OF SHARES
___________________________________________________________
The Fund may refuse any order for the purchase of shares.
The Fund reserves the right to suspend the sale of a Portfolio's
shares to the public in response to conditions in the securities
markets or for other reasons.
Shareholders maintaining accounts in a Portfolio of the Fund
through brokerage firms and other institutions should be aware
that such institutions necessarily set deadlines for receipt of
transaction orders from their clients that are earlier than the
29
<PAGE>
transaction times of the Fund itself so that the institutions may
properly process such orders prior to their transmittal to State
Street Bank. Should an investor place a transaction order with
such an institution after its deadline, the institution may not
effect the order with the Fund until the next business day.
Accordingly, an investor should familiarize himself or herself
with the deadlines set by his or her institution.
Except with respect to telephone orders, investors whose
payment in Federal funds or bank wire monies are received by
State Street Bank by 4:00 p.m. (New York time) will become
shareholders on, and will receive the dividend declared, that
day, with respect to the Prime and Government Portfolios. An
investor's purchase order with respect to the Tax-Free Portfolio
must be received by State Street Bank by 12:00 Noon (New York
time). A telephone order for the purchase of shares will become
effective, and the shares purchased will receive the dividend on
shares declared on that day, if such order is placed by 4:00 p.m.
(New York time) and Federal funds or bank wire monies are
received by State Street bank prior to 4:00 p.m. (New York time)
of such day, with respect to the Prime and Government Portfolios.
With respect to the Tax-Free Portfolio, a telephone order for the
purchase of shares will become effective, and the shares
purchased will receive the dividend on shares declared on that
day, if such order is placed by 12:00 Noon (New York time) and
Federal funds or bank wire monies are received by State Street
bank prior to 12:00 Noon (New York time) of such day. Federal
funds are a bank's deposits in a Federal Reserve Bank. These
funds can be transferred by Federal Reserve wire from the account
of one member bank to that of another member bank on the same day
and are considered to be immediately available funds; similar
immediate availability is accorded monies received at State
Street Bank by bank wire. Money transmitted by a check drawn on
a member of the Federal Reserve System is converted to Federal
funds in one business day following receipt. Checks drawn on
banks which are not members of the Federal Reserve System may
take longer. All payments (including checks from individual
investors) must be in United States dollars.
All shares purchased are confirmed to each shareholder and
are credited to his or her account at net asset value. To avoid
unnecessary expense to the Fund and to facilitate the immediate
redemption of shares, stock certificates, for which no charge is
made, are not issued except upon the written request of the
shareholder. Certificates are not issued for fractional shares.
Shares for which certificates have been issued are not eligible
for any of the optional methods of withdrawal. The Fund reserves
the right to reject any purchase order.
The Fund reserves the right to close out an account that is
below $500,000 after at least 60 days' written notice to the
30
<PAGE>
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
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)
31
<PAGE>
applicable to that dividend period. Realized gains and losses of
each Portfolio are reflected in its net asset value and are not
included in net income. Net asset value per share of each
Portfolio is expected to remain constant at $1.00 since all net
income of each Portfolio is declared as a dividend each time net
income is determined and net realized gains and losses, if any,
are expected to be relatively small.
The valuation of each Portfolio's portfolio securities is
based upon their amortized cost which does not take into account
unrealized securities gains or losses as measured by market
valuations. The amortized cost method involves valuing an
instrument at its cost and thereafter applying a constant
amortization to maturity of any discount or premium, regardless
of the impact of fluctuating interest rates on the market value
of the instrument. During periods of declining interest rates,
the daily yield on shares of a Portfolio may be higher than that
of a fund with identical investments utilizing a method of
valuation based upon market prices for its portfolio instruments;
the converse would apply in a period of rising interest rates.
Each Portfolio of the Fund utilizes the amortized cost method
of valuation of portfolio securities in accordance with the
provisions of Rule 2a-7 under the Act. Pursuant to such rule,
each Portfolio maintains a dollar-weighted average portfolio
maturity of 90 days or less and invests only in securities of
high quality. Each Portfolio also purchases instruments having
remaining maturities of no more than one year, which maturities
may extend to 397 days. The Portfolios determine the maturity of
a security which has a variable or floating rate of interest
pursuant to Rule 2a-7. The Fund maintains procedures designed to
stabilize, to the extent reasonably possible, the price per share
of each Portfolio as computed for the purpose of sales and
redemptions at $1.00. Such procedures include review of a
Portfolio's portfolio holdings by the Directors at such intervals
as they deem appropriate to determine whether and to what extent
the net asset value of each Portfolio calculated by using
available market quotations or market equivalents deviates from
net asset value based on amortized cost. If such deviation as to
any Portfolio exceeds 1/2 of 1%, the Directors will promptly
consider what action, if any, should be initiated. In the event
the Directors determine that such a deviation may result in
material dilution or other unfair results to new investors or
existing shareholders, they will consider corrective action which
might include (1) selling instruments held by the affected
Portfolio prior to maturity to realize capital gains or losses or
to shorten average portfolio maturity; (2) withholding dividends
of net income on shares of that Portfolio; or (3) establishing a
net asset value per share of the Portfolio by using available
market quotations or equivalents.
32
<PAGE>
The net asset value of the shares of each Portfolio, except
the Tax-Free Portfolio, is determined each Fund business day (and
on such other days as the Directors deem necessary) at 12:00 Noon
and 4:00 p.m. (New York time). The net asset value of the shares
of the Tax-Free Portfolio is determined each Fund business day
(and on such other days as the Directors deem necessary) at 12:00
Noon (New York time). The net asset value per share of a
Portfolio is calculated by taking the sum of the value of the
Portfolio's investments and any cash or other assets, subtracting
liabilities, and dividing by the total number of shares of that
Portfolio outstanding. All expenses, including the fees payable
to the Adviser, are accrued daily.
____________________________________________________________
TAXES
____________________________________________________________
Federal Income Tax Considerations
The Prime, Government and Tax-Free Portfolios qualified for
the fiscal year ended April 30, 1996 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
33
<PAGE>
not subject to Federal income tax. Any loss realized on shares
of the Tax-Free Portfolio that are held for six months or less
will not be realized for Federal income tax purposes to the
extent of any exempt-interest dividends received on such shares.
Shareholders of the Tax-Free Portfolio may be subject to state
and local taxes on distributions. Each investor should consult
his own tax adviser to determine the status of distributions in
his particular state or locality. See, however, above
"Alternative Minimum Tax."
Interest on indebtedness incurred by shareholders to purchase
or carry shares of the Tax-Free Portfolio is not deductible for
Federal income tax purposes. Under rules of the Internal Revenue
Service for determining when borrowed funds are used for
purchasing or carrying particular assets, Tax-Free Portfolio
shares may be considered to have been purchased or carried with
borrowed funds even though those funds are not directly linked to
the shares. Further, with respect to the Tax-Free Portfolio,
persons who are "substantial users" (or related persons) of
facilities financed by private activity bonds (within the meaning
of Section 147(a) of the Internal Revenue Code) should consult
their tax advisers before purchasing shares of the Tax-Free
Portfolio.
Substantially all of the dividends paid by the Tax-Free
Portfolio are anticipated to be exempt from Federal income taxes.
Shortly after the close of each calendar year, a notice is sent
to each shareholder advising him of the total dividends paid into
his or her account for the year and the portion of such total
that is exempt from Federal income taxes. This portion is
determined by the ratio of the tax-exempt income to total income
for the entire year and, thus, is an annual average rather than
day-by-day determination for each shareholder.
____________________________________________________________
GENERAL INFORMATION
____________________________________________________________
Portfolio Transactions. Subject to the general supervision
of the Directors of the Fund, the Adviser is responsible for the
investment decisions and the placing of the orders for portfolio
transactions for the Portfolios. Because the Portfolios invest
in securities with short maturities, there is a relatively high
portfolio turnover rate. However, the turnover rate does not
have an adverse effect upon the net yield and net asset value of
the Portfolio's shares since the portfolio transactions occur
primarily with issuers, underwriters or major dealers in money
market instruments acting as principals. Such transactions are
normally on a net basis which do not involve payment of brokerage
commissions. The cost of securities purchased from an
34
<PAGE>
underwriter usually includes a commission paid by the issuer to
the underwriters; transactions with dealers normally reflect the
spread between bid and asked prices.
The Portfolios have no obligation to enter into transactions
in portfolio securities with any dealer, issuer, underwriter or
other entity. In placing orders, it is the policy of each
Portfolio to obtain the best price and execution for its
transactions. Where best price and execution may be obtained
from more than one dealer, the Adviser may, in its discretion,
purchase and sell securities through dealers who provide
research, statistical and other information to the Adviser. Such
services may be used by the Adviser for all of its investment
advisory accounts and, accordingly, not all such services may be
used by the Adviser in connection with a Portfolio. The
supplemental information received from a dealer is in addition to
the services required to be performed by the Adviser under the
Advisory Agreement, and the expenses of the Adviser will not
necessarily be reduced as a result of the receipt of such
information.
Capitalization
All shares of each Portfolio participate equally in dividends
and distributions from that Portfolio, including any
distributions in the event of a liquidation. Each share of a
Portfolio is entitled to one vote for all purposes. Shares of
all classes vote for the election of Directors and on any other
matter that affects all Portfolios in substantially the same
manner as a single class, except as otherwise required by law.
As to matters affecting each Portfolio differently, such as
approval of the Advisory Agreement, shares of each Portfolio vote
as a separate class. There are no conversion or preemptive
rights in connection with any shares of the Fund. Since voting
rights are noncumulative, holders of more than 50% of the shares
voting for the election of Directors can elect all of the
Directors. Procedures for calling a shareholders' meeting for
the removal of Directors of the Fund, similar to those set forth
in Section 16(c) of the Act and in the Fund's By-Laws, will be
available to shareholders of each Portfolio. Special meetings of
stockholders for any purpose may be called by 10% of its
outstanding shareholders. All shares of each Portfolio when duly
issued will be fully paid and non-assessable. The rights of the
holders of shares of a class may not be modified except by the
vote of a majority of the outstanding shares of such class.
The Board of Directors is authorized to reclassify and issue
any unissued shares to any number of additional series without
shareholder approval. Accordingly, the Directors in the future,
for reasons such as the desire to establish one or more
additional portfolios with different investment objectives,
35
<PAGE>
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 July 31, 1996, there were
744,384,692 shares of the Prime Portfolio, 184,875,195 shares of
the Government Portfolio and 206,420,300 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 July 31,
1996.
No. of % of
Name and Address Shares Class
Prime Portfolio
Price Communications Company 61,618,027 8.28%
Attn: Robert Price
45 Rockefeller Plaza
Suite 3200
New York, NY 10111
Energy Ventures 80,750,000 10.85%
5 Post Oak Park
Suite 1760
Houston, Texas 77027
Government Portfolio
Herzog Heine Geduld Inc. 71,074,942 38.44%
Firm Investment
26 Broadway
New York, NY 10004-1703
T.J.S. Partners 15,759,418 8.52%
Attn: Thomas J. Salvatore
52 Vanderbilt Avenue
5th Floor
New York, New York 10017
Tax-Free Portfolio
Biosource International Inc. 11,459,982 5.55%
Attn: Anna Anderson
820 Flynn Road
Camarillo, California 93012
36
<PAGE>
Robert J. Earle TTEE of the 11,187,992 5.42%
Robert J. Earle Rev Tr
16611 93rd Street SE
Sadhomish, WA 98290
Arthur C Tauck Jr 23,530,575 11.4%
6 Bluff Point
Westport, CT 06880
Legal Matters. The legality of the shares offered hereby has
been passed upon by Seward & Kissel, New York, New York, counsel
for the Fund and the Adviser. Seward & Kissel has relied upon
the opinion of Venable, Baetjer and Howard LLP, 1800 Mercantile
Bank & Trust Building, 2 Hopkins Plaza, Baltimore, Maryland
21201, for matters relating to Maryland law.
Accountants. McGladrey & Pullen LLP, New York, New York, are
the independent auditors for the Fund.
Yield Quotations and Performance Information. Advertisements
containing yield quotations for one or more Portfolios for the
Fund may from time to time be sent to investors or placed in
newspapers, magazines or other media on behalf of the Fund.
These advertisements may quote performance rankings, ratings or
data from independent organizations or financial publications
such as Lipper Analytical Services, Inc., Morningstar, Inc.,
IBC's Money Fund Report, IBC's Money Market Insight or Bank Rate
Monitor or compare the Fund's performance to bank money market
deposit accounts, certificates of deposit or various indices.
Yield quotations are calculated in accordance with the
standardized method referred to in Rule 482 under the Securities
Act of 1933.
Yield quotations for a Portfolio are thus determined by
(i) computing the net change over a seven-day period, exclusive
of the capital changes, in the value of a hypothetical
pre-existing account having a balance of one share of such
Portfolio at the beginning of such period, (ii) dividing the net
change in account value by the value of the account at the
beginning of the base period to obtain the base period return,
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.
37
<PAGE>
____________________________________________________________
APPENDIX A
COMMERCIAL PAPER AND BOND RATINGS
____________________________________________________________
Municipal and Corporate Bonds
The two higher ratings of Moody's Investors Service, Inc.
("Moody"s) for municipal and corporate bonds are Aaa an Aa.
Bonds rated Aaa are judged by Moody's to be of the best quality.
Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally
known as high-grade bonds. Moody's states that Aa bonds are
rated lower than the best bonds because margins of protection or
other elements make long-term risks appear somewhat larger than
Aaa securities. The generic rating Aa may be modified by the
addition of the numerals 1, 2 or 3. The modifier 1 indicates
that the security ranks in the higher end of the Aa rating
category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in the lower end of
such rating category.
The two highest ratings of Standard & Poor's for municipal
and corporate bonds AAA and AA. Bonds rated AAA have the highest
rating assigned by Standard & Poor's to debt obligation.
Capacity to pay interest and repay principal is extremely strong.
Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in
a small degree. The AA rating may be modified by the addition of
a plus (+) or Minus (-) sign to show relative standing within
rating category.
Short-Term Municipal Securities
Moody's highest rating for short-term municipal loans is
MIG-1/VMIG-1. Moody's states that short-term municipal
securities rated MIG-1/VMIG-1 are of the best quality, enjoying
strong protection from established cash flows of funds for their
servicing or from established and broad-based access to the
market for refinancing, or both. Loans bearing the MIG-2/VMIG-2
designation are of high quality, with margins of protection ample
although not so large as in the MIG-1/VMIG-1 group.
Standard & Poor's highest rating for short-term municipal
loans is SP-1. Standard & Poor's stated that short-term
municipal securities bearing the SP-1 designation have very
strong or strong capacity to pay principal and interest. Those
issues rated SP-1 which are determined to possess overwhelming
safety characteristics will be given a plus (+) designation.
38
<PAGE>
Issues rate SP-2 have satisfactory capacity to pay principal and
interest.
Other Municipal Securities and Commercial Paper
"Prime-1" is the highest rating assigned by Moody's for other
short-term municipal securities and commercial paper, and "A-1+"
and "A-1" are the two highest ratings for commercial paper
assigned by Standard & Poor's (Standard & Poor's does not rate
short-term tax-free obligations). Moody's uses the numbers 1, 2,
and 3 to denote relative strength within its highest
classification of "Prime", while Standard & Poor's uses the
number 1+, 1, 2 and 3 to denote relative strength within its
highest classification of "A". Issuers rated "Prime" by Moody's
have the following characteristics: their short-term debt
obligations carry the smallest degree of investment risk, margins
of support for current indebtedness are large or stable with cash
flow an asset protection well assured, current liquidity provides
ample coverage of near-term liabilities and unused alternative
financing arrangements are generally available. While protective
elements may change over the intermediate or longer term, such
changes are most unlikely to impair the fundamentally strong
position of short-term obligations. Commercial paper issuers
rates "A" by Standard & Poor's have the following
characteristics: liquidity ratios are better than industry
average, long-term debt rating is A or better, the issuer has
access to at least two additional channels of borrowing, and
basic earnings and cash flow are in an upward trend. Typically,
the issuer is a strong company in a well-established industry and
has superior management.
39
<PAGE>
____________________________________________________________
APPENDIX B
DESCRIPTION OF MUNICIPAL SECURITIES
____________________________________________________________
Municipal Notes generally are used to provide for short-term
capital needs and usually have maturities of one year or less.
They include the following:
1. Project Notes, which carry a U.S. Government
guarantee, are issued by public bodies (called
"local issuing agencies") created under the laws of
a state, territory, or U.S. possession. They have
maturities that range up to one year from the date
of issuance.. Project Notes are backed by an
agreement between the local issuing agency and the
Federal Department of Housing and Urban
Development. These Notes provide financing for a
wide range of financial assistance programs for
housing, redevelopment, and related needs (such as
low-income housing programs and renewal programs).
2. Tax Anticipation Notes are issued to finance
working capital needs of municipalities.
Generally, they are issued in anticipation of
various seasonal tax revenues, such as income,
sales use and business taxes, and are payable from
these specific future taxes.
3. Revenue Anticipation Notes are issued in
expectation of receipt of other types of revenues,
such as Federal revenues available under the
Federal Revenue Sharing Programs.
4. Bond Anticipation Notes are issued to provide
interim financing until long-term financing can be
arranged. In most cases, the long-term bonds then
provide the money for the repayment of the Notes.
5. Construction Loan Notes are sold to provide
construction financing. After successful
completion and Acceptance, many projects receive
permanent financing through the Federal Housing
Administration under the Federal National Mortgage
Association or the Government National Mortgage
Association.
6. Tax-Exempt Commercial Paper is a short-term
obligation with a state maturity of 365 days or
less. It is issued by agencies of state and local
40
<PAGE>
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.
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
41
<PAGE>
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.
42
00250072.AJ7
<PAGE>
STATEMENT OF NET ASSETS
April 30, 1996 ACM Institutional Reserves - Prime Portfolio
_______________________________________________________________________________
Principal
Amount
(000) Security Yield Value
- ---------------------------------------------------------------------------
COMMERCIAL PAPER--49.5%
AGA Capital, Inc.
$ 15,000 5/17/96 5.38% $ 14,964,133
4,300 5/07/96 5.42 4,296,116
Allianz of America Finance Corp.
5,000 5/16/96 5.18 4,989,208
7,000 5/24/96 5.32 6,976,208
Banca CRT Financial Corp.
16,000 5/08/96 5.36 15,983,324
Beta Finance, Inc.
10,000 9/12/96 5.20 9,806,444
Bil North America, Inc.
8,000 6/06/96 5.11 7,959,120
Chiao Tung Bank Co., Ltd.
2,000 5/31/96 5.45 1,990,917
Corporate Asset Securitization
Australia Ltd.
7,000 5/24/96 5.36 6,976,029
CS First Boston, Inc.
12,000 5/16/96 5.34 11,973,300
Den Danske Corp.
5,000 5/01/96 5.21 5,000,000
Embarcadero Center Venture (Four)
5,270 5/28/96 5.40 5,248,657
Generale Bank, Inc.
5,000 5/28/96 5.10 4,980,875
International Securitization Corp.
10,000 5/20/96 5.37 9,971,658
Kaempfer Capital Corp.
2,000 5/03/96 5.37 1,999,403
Market Street Funding Corp.
16,000 5/23/96 5.37 15,947,493
Merrill Lynch & Co.
6,000 6/28/96 5.25 5,949,250
14,000 5/22/96 5.35 13,956,308
Mitsubishi Motors Credit
10,000 6/06/96 5.40 9,946,000
Morgan Stanley Group, Inc.
4,000 5/31/96 5.10 3,983,000
7,000 5/02/96 5.15 6,998,999
National Australia Funding
5,000 5/29/96 5.43 4,978,883
Premium Funding, Inc.
2,524 6/03/96 Series B 5.35 2,511,622
3,215 5/15/96 Series B 5.40 3,208,248
4,303 5/20/96 Series E 5.40 4,290,736
Sumitomo Corp. of America
5,000 6/18/96 5.36 4,964,267
10,000 5/31/96 5.37 9,955,250
5,000 6/13/96 5.37 4,967,930
Triple-A-One Funding Corp.
3,196 5/07/96 5.40 3,193,124
Wal-Mart Stores, Inc.
15,221 5/02/96 5.26 15,218,776
Working Capital Management Co., L.P.
5,000 5/07/96 5.38 4,995,517
16,000 5/17/96 5.50 15,960,889
Total Commercial Paper
(amortized cost $244,141,684) 244,141,684
CERTIFICATES OF DEPOSIT--36.1%
American Express Centurion Bank
20,000 5.31%, 5/24/96 5.31 20,000,000
Bank of Nova Scotia
5,000 5.37%, 7/12/96 5.35 5,000,095
Bank of Tokyo - Mitsubishi
10,000 5.50%, 7/15/96 5.50 10,000,000
Banque Nationale de Paris
10,000 5.34%, 6/03/96 5.32 10,000,183
Dai Ichi Kangyo Bank Ltd.
15,290 5.48%, 5/17/96 5.45 15,290,203
Deutsche Bank
5,000 5.48%, 1/03/97 5.65 4,991,449
5,000 5.53%, 4/02/97 5.80 4,987,688
Hessische Landesbank
15,000 5.10%, 9/06/96 5.15 14,997,402
Norinchukin Bank
5,000 5.48%, 7/26/96 5.47 5,000,118
18,000 5.56%, 7/10/96 5.55 18,000,345
Sanwa Bank
4,000 5.40%, 5/10/96 5.39 4,000,010
5,000 5.43%, 5/22/96 5.40 5,000,080
16,000 5.47%, 5/10/96 5.46 16,000,040
Societe Generale N.A., Inc.
20,000 5.34%, 6/03/96 5.32 20,000,350
Sumitomo Bank
4,000 5.42%, 5/08/96 5.46 3,999,952
5,000 5.44%, 5/28/96 5.40 5,000,149
16,000 5.49%, 5/07/96 5.50 15,999,965
Total Certificates of Deposit
(amortized cost $178,268,029) 178,268,029
U.S. GOVERNMENT & AGENCY OBLIGATIONS--6.5%
Federal Home Loan Bank
5,000 5.25%, 11/13/96 FRN 5.32 4,998,182
5,000 5.30%, 10/16/96 FRN 5.43 4,997,206
Federal National Mortgage Assn.
2,000 5.44%, 9/27/96 FRN 5.44 2,000,000
Federal National Mortgage Assn.
5,000 5.16%, 1/27/97 FRN 5.28 4,995,692
Student Loan Marketing Assn.
5,000 5.45%, 1/21/98 FRN 5.48 4,997,521
U.S. Treasury Note
10,000 6.63%, 3/31/97 5.15 10,122,703
Total U.S. Government &
Agency Obligations
(amortized cost $32,111,304) 32,111,304
CORPORATE OBLIGATIONS--5.1%
Eksportfinans
5,000 5.50%, 2/17/97 5.25 5,008,306
General Electric Capital Corp.
5,000 5.27%, 7/22/96 FRN 5.47 4,997,744
Goldman Sachs Group LP
10,000 5.51%, 9/13/96 FRN 5.51 10,000,000
Toyota Motor Credit Corp.
5,000 5.00%, 2/26/97 5.10 4,995,271
Total Corporate Obligations
(amortized cost $25,001,321) 25,001,321
BANK OBLIGATIONS--3.0%
Morgan Guaranty Trust Co.
5,000 5.50%, 1/08/97 5.50 5,000,000
Wachovia Bank
5,000 5.31%, 1/03/97 FRN 5.41 4,996,878
5,000 6.30%, 7/15/96 5.78 5,004,934
Total Bank Obligations
(amortized cost $15,001,812) 15,001,812
TOTAL INVESTMENTS--100.2%
(amortized cost $494,524,150) 494,524,150
Other assets less liabilities--(0.2%) (1,204,927)
NET ASSETS--100%
(offering and redemption price of
$1.00 per share; 493,504,955 shares
outstanding) $493,319,223
Glossary:
FRN Floating Rate Note.
See notes to financial statements.
STATEMENT OF NET ASSETS
April 30, 1996 ACM Institutional Reserves - Government Portfolio
_______________________________________________________________________________
Principal
Amount
(000) Security Yield Value
- --------------------------------------------------------------------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS--98.8%
FEDERAL NATIONAL MORTGAGE ASSOCIATION--43.6%
$ 12,000 7/30/96 5.20% $ 11,844,000
3,000 7/23/96 5.20 2,964,033
5,000 5.21%, 9/03/96 FRN 5.25 4,999,341
10,000 5.21%, 4/04/97 FRN 5.24 9,997,088
4,000 5.24%, 10/15/96 FRN 5.31 3,998,729
15,000 5.28%, 10/01/96 FRN 5.36 14,994,558
2,000 5.44%, 9/27/96 FRN 5.44 2,000,000
5,000 5.56%, 10/15/97 FRN 5.56 5,000,825
10,000 5.62%, 7/02/96 5.12 10,007,378
------------
65,805,952
FEDERAL HOME LOAN BANK--14.9%
6,000 6/10/96 4.90 5,967,333
2,500 5.19%, 8/05/96 FRN 5.34 2,499,077
2,500 5.25%, 11/13/96 FRN 5.32 2,499,091
1,500 5.29%, 2/06/97 5.30 1,499,827
5,000 8.00%, 7/25/96 5.30 5,029,646
5,000 8.25%, 5/27/96 5.26 5,009,622
------------
22,504,596
U.S. TREASURY NOTES--11.4%
5,000 6.50%, 9/30/96 5.02 5,028,168
5,000 6.88%, 2/28/97 5.38 5,059,180
7,000 7.50%, 1/31/97 5.12 7,118,885
------------
17,206,233
FEDERAL FARM CREDIT BANK--11.1%
5,000 4.95%, 3/03/97 5.00 4,997,562
7,300 5.19%, 9/03/96 FRN 5.19 7,300,000
4,000 5.23%, 6/20/96 FRN 5.28 3,999,727
500 5.60%, 7/01/96 5.61 499,919
------------
16,797,208
STUDENT LOAN MARKETING ASSOCIATION--9.4%
4,500 5.22%, 7/12/99 FRN 5.62 4,446,966
1,715 5.25%, 7/19/96 FRN 5.22 1,715,099
4,000 5.45%, 1/21/98 FRN 5.48 3,998,017
4,000 5.50%, 1/23/97 FRN 5.45 4,006,423
------------
14,166,505
FEDERAL HOME LOAN MORTGAGE CORP.--8.3%
4,000 5/20/96 5.18 3,989,064
5,000 5/20/96 5.20 4,986,278
3,000 5/28/96 5.21 2,988,278
500 5/01/96 5.88 500,000
------------
12,463,620
TOTAL INVESTMENTS--98.8%
(amortized cost $148,944,114) 148,944,114
Other assets less liabilities--1.2% 1,872,064
NET ASSETS--100%
(offering and redemption price of
$1.00 per share; 150,945,387
shares outstanding) $150,816,178
Glossary:
FRN Floating Rate Note.
See notes to financial statements.
STATEMENT OF NET ASSETS
April 30, 1996 ACM Institutional Reserves - Tax-Free Portfolio
_______________________________________________________________________________
Principal
Amount
(000) Security+ Yield Value
- --------------------------------------------------------------------------
MUNICIPAL BONDS--75.4%
ALASKA--0.4%
Anchorage Electric Utility Rev.
Pre-refunded AMBAC
$ 800 6/01/96 3.60% $ 801,563
ARIZONA--4.0%
Maricopa County Pollution Control PCR
(Arizona Public Service Co. - Palo
Verde Project) Series '94B VRDN*
2,800 5/01/29 4.10 2,800,000
Maricopa County Pollution Control PCR
(Arizona Public Service Co. - Palo
Verde Project) Series '94E VRDN*
4,500 5/01/29 4.10 4,500,000
-----------
7,300,000
CALIFORNIA--6.1%
Alameda County TRAN
Board of Education
750 7/05/96 4.00 750,632
Los Angeles Regional Airport
(American Airlines) Series '84D VRDN*
2,600 12/01/24 4.05 2,600,000
Los Angeles Regional Airport Improvement Airport Rev.
(LAX International Airport) AMT VRDN*
6,900 12/01/25 4.15 6,900,000
Santa Clara TRAN
Unified School District Series '95
1,000 7/10/96 4.00 1,000,919
-----------
11,251,551
COLORADO--2.3%
Arapahoe County COP
AMBAC
610 12/01/96 3.80 615,552
Colorado HFA MFHR
(Hunters) VRDN*
1,960 3/01/12 4.80 1,960,000
Colorado TRAN
Series A
1,600 6/27/96 3.60 1,602,024
-----------
4,177,576
DISTRICT OF COLUMBIA--6.2%
District of Columbia GO
Series '92 A-1 VRDN*
3,000 10/01/07 4.30 3,000,000
District of Columbia GO
Series '92 A-2 VRDN*
2,500 10/01/07 4.30 2,500,000
District of Columbia GO
Series '92 A-4 VRDN*
2,000 10/01/07 4.30 2,000,000
District of Columbia GO
Series '92 A-6 VRDN*
1,300 10/01/07 4.30 1,300,000
District of Columbia HFA MFHR
(McLean Apts.) Series '85A VRDN*
2,600 12/01/05 4.40 2,600,000
-----------
11,400,000
FLORIDA--2.8%
Pinellas County Health Facilities Auth.
(Mease Manor, Inc.) Series '95 VRDN*
5,100 11/01/15 4.30 5,100,000
GEORGIA--0.9%
College Park IDR
(Wynefield I Project) AMT VRDN*
1,700 12/01/16 3.75 1,700,000
HAWAII--1.4%
Hawaii State Housing Finance & Dev. Corp.
(Kamakee Vista) Series '90A VRDN*
2,600 7/01/25 4.35 2,600,000
IDAHO--0.8%
Idaho GO TRAN
Series '95
1,500 6/27/96 3.60 1,501,888
ILLINOIS--4.7%
Elmhurst Hospital Revenue
(Joint Comm. Health Org.)
Series '88 VRDN*
4,400 7/01/18 4.35 4,400,000
Southwestern Illinois Dev. Auth.
(Shell Oil/Wood River Project)
Series '91 AMT VRDN*
2,500 8/01/21 4.25 2,500,000
Vernon Hills IDR
(Kinder Care Center) VRDN*
550 2/01/01 4.40 550,000
West Chicago IDR
(Acme Printing Co.) Series '89
AMT VRDN*
1,100 5/01/99 4.28 1,100,000
-----------
8,550,000
INDIANA--1.1%
Seymour Econ. Dev.
(Kobelco Metal Powder Co.)
Series '87 AMT VRDN*
2,000 12/01/97 4.75 2,000,000
KANSAS--0.5%
Butler County
(Texaco Refining & Marketing)
Series A AMT VRDN*
1,000 8/01/24 4.45 1,000,000
LOUISIANA--1.3%
West Baton Rouge Industrial District #3
(Dow Chemical) Series '94B VRDN*
2,300 12/01/16 4.15 2,300,000
MARYLAND--1.3%
Maryland Health & Education Facilities
(Loyola College Issue) Series '85 VRDN*
2,300 10/01/10 3.65 2,300,000
MICHIGAN--3.0%
Michigan Strategic Funding PCR
(Consumers Power Co.)
Series '88A VRDN*
5,550 4/15/18 4.10 5,550,000
MINNESOTA--0.3%
Eden Prairie IDA
(Kinder Care Project) Series C VRDN*
465 2/01/01 4.40 465,000
MISSOURI--0.3%
Blue Springs IDA
(Kinder Care Project) Series C VRDN*
540 2/01/01 4.40 540,000
NEW HAMPSHIRE--2.6%
Nashua Housing Auth. MFHR
(Clocktower Project) AMT VRDN*
201 10/20/99 4.75 201,000
Nashua Housing Auth. MFHR
(Clocktower Project) AMT VRDN*
626 10/20/06 4.75 626,000
Nashua Housing Authority MFHR
(Clocktower Project) AMT VRDN*
4,000 10/20/28 4.75 4,000,000
-----------
4,827,000
NEW JERSEY--1.6%
Jersey City
School Promissory Note
1,000 3/07/97 3.55 1,001,615
Jersey City BAN
2,000 9/27/96 4.02 2,005,714
-----------
3,007,329
NEW YORK--6.2%
New York Airport Revenue
(Nippon Cargo Airlines Co.)
Series '92 AMT VRDN*
2,000 11/01/15 4.75 2,000,000
New York City GO
Series '94C VRDN*
2,300 10/01/23 4.25 2,300,000
Port Authority of New York and New Jersey
(Versatile Structure) Series 3 VRDN*
7,000 6/01/20 3.90 7,000,000
-----------
11,300,000
OHIO--2.3%
Hamilton County Health Systems
(Franciscan Sisters) Series '87A VRDN*
4,300 3/01/17 3.90 4,300,000
OREGON--4.4%
Port Morrow
(Portland General Electric) VRDN*
3,900 10/01/13 4.25 3,900,000
Port St. Helens
(Portland General Electric)
Series B VRDN*
4,200 6/01/10 4.10 4,200,000
-----------
8,100,000
PENNSYLVANIA--1.3%
Montgomery County IDA
(Kinder Care Project) Series D VRDN*
400 10/01/00 4.40 400,000
Philadelphia GO TRAN
Series A
1,000 6/27/96 3.90 1,000,857
Philadelphia School District TRAN
1,000 6/28/96 3.95 1,000,840
-----------
2,401,697
RHODE ISLAND--0.7%
Rhode Island Housing & Mortgage Finance
(Homeownership Opportunity)
Series 19C Putable
1,255 1/30/97 3.45 1,255,000
SOUTH CAROLINA--1.4%
Berkeley County PCR
(Amoco Chemical Co.) Series '94 VRDN*
2,600 7/01/12 4.00 2,600,000
SOUTH DAKOTA--1.1%
South Dakota HFA SFMR
(Homeownership Mortgage) Series F
1,000 5/01/97 3.78 1,004,537
South Dakota HFA SFMR
(Homeownership Mortgage) Series G
1,000 5/01/97 3.90 1,003,381
-----------
2,007,918
TEXAS--10.8%
Brazos River Texas Harbor District
(Dow Chemical) Series '92A AMT VRDN*
4,000 12/01/18 4.30 4,000,000
El Paso HFA MFHR
(Viva Apartments Project)
Series '93 AMT Putable
1,500 9/01/96 4.25 1,500,000
Grapevine Dev. Corp. Rev.
(American Airlines) Series B-3 VRDN*
1,600 12/01/24 4.05 1,600,000
Gulf Coast Waste Disposal Auth.
(Amoco Oil Co. Project)
Series '94 AMT VRDN*
600 8/01/23 4.25 600,000
Harris County IDR
(Nippon Pigment USA Project)
Series '87 AMT VRDN*
1,500 7/01/02 4.60 1,500,000
Harris County Toll Road
Multimode-A
1,030 8/15/96 3.70 1,038,085
Midlothian Industrial Dev. Corp.
(Box-Crow Cement Co.) VRDN*
2,300 12/01/09 4.30 2,300,000
Southwest Higher Education Auth.
(Southern Methodist Univ.) VRDN*
7,300 7/01/15 4.10 7,300,000
-----------
19,838,085
VIRGINIA--2.8%
King George County IDA
(Birchwood Power Partners) AMT VRDN*
1,500 4/01/26 4.40 1,500,000
Peninsula Port Authority
(Dominion Terminal Project)
Series '87C VRDN*
400 7/01/16 3.95 400,000
Peninsula Port Authority
(Dominion Terminal Project)
Series '87D VRDN*
3,205 7/01/16 4.10 3,205,000
-----------
5,105,000
WASHINGTON--1.6%
Washington Public Power Supply
(Nuclear Project #2)
3,000 7/01/96 3.50 3,005,616
WISCONSIN--1.2%
Wausau PCR
(Minnesota Mining & Manufacturing) VRDN*
900 8/01/17 3.88 900,000
Wisconsin GO
Series '95
1,300 6/17/96 3.77 1,301,108
-----------
2,201,108
Total Municipal Bonds
(amortized cost $138,486,331) 138,486,331
COMMERCIAL PAPER--26.0%
ARIZONA--1.3%
Salt River Project
Agricultural Imp. & Power District
2,324 8/16/96 3.50 2,324,000
CALIFORNIA--1.3%
Irvine Assessment District
Series '85-7
2,400 5/08/96 4.00 2,400,000
COLORADO--2.6%
Denver Airport Revenue
Series B AMT
2,000 5/03/96 3.60 2,000,000
Denver Airport Revenue
Series B AMT
2,000 5/13/96 3.60 2,000,000
Denver Airport Revenue
Series B AMT
800 8/14/96 3.85 800,000
-----------
4,800,000
FLORIDA--3.0%
Florida Local Government Comm.
(Association of Counties)
2,000 7/25/96 3.45 2,000,000
Jacksonville Pollution Control
1,000 8/15/96 3.50 1,000,000
Sarasota Public Hospital District
Hospital Revenue
(Sarasota Memorial Hospital) Series C
1,200 7/22/96 3.80 1,200,000
Sunshine State Government Finance Agency
Series '86
1,300 5/02/96 3.40 1,299,995
-----------
5,499,995
GEORGIA--1.0%
Georgia Municipal Gas Auth.
(Transco Portfolio 1) Series B
1,900 8/28/96 3.60 1,900,000
ILLINOIS--0.8%
Decatur Water Rev.
1,500 5/09/96 3.45 1,500,000
LOUISIANA--2.7%
Plaquemines Port Harbor & Terminal
(Electro-Coal Corp./Tampa Electric)
2,500 8/13/96 3.45 2,500,000
Plaquemines Port Harbor & Terminal
(Electro-Coal Corp./Tampa Electric)
2,500 5/10/96 3.50 2,500,000
-----------
5,000,000
MASSACHUSETTS--1.6%
Massachusetts Bay Trans. Auth.
3,000 5/16/96 3.50 3,000,000
NEW YORK--1.7%
New York City GO
Series '96
2,000 8/22/96 3.50 2,000,000
New York City Municipal Water Auth.
1,200 8/12/96 3.80 1,200,000
-----------
3,200,000
OHIO--1.1%
Montgomery County Hospital Rev.
(Miami Valley Hospital) Series C
2,000 9/09/96 3.65 2,000,000
PENNSYLVANIA--0.5%
Philadelphia Gas Works
Series B
1,000 5/02/96 3.40 999,996
TEXAS--6.9%
Austin Utility Systems
(Travis & Williamson County) Series A
1,000 5/07/96 3.35 1,000,000
Austin Utility Systems
(Travis & Williamson County) Series A
1,969 8/22/96 3.40 1,969,000
Austin Utility Systems
(Travis & Williamson County) Series A
1,400 8/29/96 3.70 1,400,000
Brownsville Utility Systems
Series A
2,000 7/12/96 3.45 2,000,000
Dallas Area Rapid Transit
Sales Series A
2,000 8/22/96 3.50 2,000,000
Dallas Area Rapid Transit
Sales Series A
2,000 9/10/96 3.65 2,000,000
University of Texas
Board of Regents Series A
2,210 7/16/96 3.40 2,210,000
-----------
12,579,000
UTAH--0.6%
Intermountain Power Agency Power
Supply Rev.
Series '85F
1,000 9/10/96 3.50 1,000,000
VERMONT--0.3%
Vermont GO
Series H
500 6/03/96 3.40 499,998
WISCONSIN--0.6%
Wisconsin Health & Education Facilities
(Alexian Village of Milwaukee)
Series '88A
1,000 5/01/96 3.50 1,000,000
Total Commercial Paper
(amortized cost $47,702,867) 47,702,989
TOTAL INVESTMENTS--101.4%
(amortized cost $186,189,198) 186,189,320
Other assets less liabilities--(1.4%) (2,577,651)
NET ASSETS--100%
(offering and redemption price of
$1.00 per share; 183,695,120 shares
outstanding) $183,611,669
+ 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.
Glossary:
AMBAC American Municipal Bond Assurance Corporation
AMT Alternative Minimum Tax
BAN Bond Anticipation Note
COP Certificate of Participation
GO General Obligation
HFA Housing Finance Agency/Authority
IDA Industrial Development Authority
IDR Industrial Development Revenue
MFHR Multi-Family Housing Revenue
PCR Pollution Control Revenue
SFMR Single Family Mortgage Revenue
TRAN Tax & Revenue Anticipation Note
VRDN Variable Rate Demand Note
See notes to financial statements.
STATEMENT OF NET ASSETS
April 30, 1996 ACM Institutional Reserves - Trust Portfolio
_______________________________________________________________________________
Principal
Amount
(000) Security Yield Value
- --------------------------------------------------------------------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS--99.3%
FEDERAL NATIONAL MORTGAGE ASSOCIATION--33.2%
$ 2,000 5/14/96 4.97% $ 1,996,411
5,365 6/26/96 5.05 5,322,855
2,500 7/12/96 5.20 2,474,000
4,000 7/30/96 5.20 3,948,000
10,000 7/05/96 FRN 5.27 9,998,775
5,000 5/10/96 5.29 4,993,387
1,750 5/13/96 5.35 1,746,885
3,000 5/24/96 5.35 2,989,746
5,000 5.21%, 9/03/96 FRN 5.25 4,999,341
6,000 5.24%, 10/15/96 FRN 5.31 5,998,094
2,000 5.44%, 9/27/96 FRN 5.44 2,000,000
5,000 5.56%, 10/15/97 FRN 5.56 5,000,825
5,000 5.76%, 9/03/96 5.30 5,004,806
-----------
56,473,125
FEDERAL HOME LOAN MORTGAGE CORP.--22.0%
5,000 5/20/96 5.18 4,986,331
5,000 5/28/96 5.21 4,980,462
10,000 5/30/96 5.24 9,957,789
17,000 5/01/96 5.30 17,000,000
500 5/01/96 5.88 500,000
-----------
37,424,582
STUDENT LOAN MARKETING ASSOCIATION--15.9%
1,680 5.25%, 7/19/96 FRN 5.30 1,679,841
22,300 5.45%, 11/20/97 FRN 5.40 22,320,198
2,960 5.50%, 11/01/96 FRN 5.30 2,962,807
-----------
26,962,846
U.S. TREASURY NOTES--10.1%
5,000 6.50%, 9/30/96 5.02 5,028,168
5,000 6.88%, 2/28/97 5.38 5,059,180
7,000 7.50%, 1/31/97 5.12 7,118,885
-----------
17,206,233
FEDERAL HOME LOAN BANK--9.6%
2,000 6/10/96 4.90 1,989,111
2,000 5/15/96 4.99 1,996,119
4,000 8/12/96 5.19 3,940,603
2,500 5.25%, 11/13/96 FRN 5.32 2,499,091
1,500 5.29%, 2/06/97 5.30 1,499,827
4,350 5.30%, 10/16/96 FRN 5.43 4,347,569
-----------
16,272,320
FEDERAL FARM CREDIT BANK--8.5%
10,000 5.19%, 9/03/96 FRN 5.19 10,000,000
4,000 5.23%, 6/20/96 FRN 5.28 3,999,727
500 5.60%, 7/01/96 5.61 499,919
-----------
14,499,646
TOTAL INVESTMENTS--99.3%
(amortized cost $168,838,752) 168,838,752
Other assets less liabilities--0.7% 1,226,670
NET ASSETS--100%
(offering and redemption price of
$1.00 per share; 170,118,302 shares
outstanding) $170,065,422
Glossary:
FRN Floating Rate Note.
See notes to financial statements.
STATEMENT OF OPERATIONS
Year Ended April 30, 1996 ACM Institutional Reserves - Prime Portfolio
_______________________________________________________________________________
INVESTMENT INCOME
Interest $18,667,854
EXPENSES
Advisory fee (Note B) $650,885
Registration fees 229,188
Custodian fees 88,024
Transfer agency 24,037
Audit and legal fees 9,533
Directors' fees 5,825
Amortization of organization expenses 1,936
Printing 1,500
Miscellaneous 14,399
Total expenses 1,025,327
Less: expense reimbursement (374,443) 650,884
Net investment income 18,016,970
REALIZED LOSS ON INVESTMENTS
Net realized loss on investments (67,682)
NET INCREASE IN NET ASSETS FROM OPERATIONS $17,949,288
STATEMENT OF CHANGES IN NET ASSETS
_______________________________________________________________________________
Year Ended Year Ended
April 30,1996 April 30,1995
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 18,016,970 $ 8,084,553
Net realized loss on investments (67,682) (77,316)
Net increase in net assets from operations 17,949,288 8,007,237
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (18,016,970) (8,084,553)
CAPITAL STOCK TRANSACTIONS
Net increase 295,597,513 89,756,927
Total increase 295,529,831 89,679,611
NET ASSETS
Beginning of year 197,789,392 108,109,781
End of year $493,319,223 $197,789,392
See notes to financial statements.
STATEMENT OF OPERATIONS
Year Ended April 30, 1996 ACM Institutional Reserves - Government Portfolio
_______________________________________________________________________________
INVESTMENT INCOME
Interest $8,411,860
EXPENSES
Advisory fee (Note B) $ 295,096
Registration fees 111,308
Custodian fees 67,505
Transfer agency 24,669
Audit and legal fees 14,095
Amortization of organization expenses 7,320
Directors' fees 5,704
Printing 1,500
Miscellaneous 9,397
Total expenses 536,594
Less: expense reimbursement (241,498) 295,096
Net investment income 8,116,764
REALIZED LOSS ON INVESTMENTS
Net realized loss on investments (44,374)
NET INCREASE IN NET ASSETS FROM OPERATIONS $8,072,390
STATEMENT OF CHANGES IN NET ASSETS
_______________________________________________________________________________
Year Ended Year Ended
April 30,1996 April 30,1995
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 8,116,764 $ 4,532,827
Net realized loss on investments (44,374) (23,230)
Net increase in net assets from operations 8,072,390 4,509,597
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (8,116,764) (4,532,827)
CAPITAL STOCK TRANSACTIONS
Net increase 46,450,680 27,878,851
Total increase 46,406,306 27,855,621
NET ASSETS
Beginning of year 104,409,872 76,554,251
End of year $150,816,178 $104,409,872
See notes to financial statements.
STATEMENT OF OPERATIONS
Year Ended April 30, 1996 ACM Institutional Reserves - Tax-Free Portfolio
_______________________________________________________________________________
INVESTMENT INCOME
Interest $3,612,924
EXPENSES
Advisory fee (Note B) $ 183,789
Registration fees 117,197
Custodian fees 69,030
Audit and legal fees 20,709
Transfer agency 20,319
Directors' fees 11,200
Amortization of organization expenses 7,320
Printing 1,500
Miscellaneous 6,710
Total expenses 437,774
Less: expense reimbursement (253,985) 183,789
Net investment income 3,429,135
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss on investments (66,276)
Net change in unrealized appreciation of investments (44)
Net loss on investments (66,320)
NET INCREASE IN NET ASSETS FROM OPERATIONS $3,362,815
STATEMENT OF CHANGES IN NET ASSETS
_______________________________________________________________________________
Year Ended Year Ended
April 30,1996 April 30,1995
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 3,429,135 $ 1,069,590
Net realized loss on investments (66,276) (11,019)
Net change in unrealized appreciation
of investments (44) (154,369)
Net increase in net assets from operations 3,362,815 904,202
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (3,429,135) (1,069,590)
CAPITAL STOCK TRANSACTIONS
Net increase (decrease) 148,180,832 (133,564)
OTHER CAPITAL CONTRIBUTIONS 0 154,387
Total increase (decrease) 148,114,512 (144,565)
NET ASSETS
Beginning of year 35,497,157 35,641,722
End of year $183,611,669 $35,497,157
See notes to financial statements.
STATEMENT OF OPERATIONS
Year Ended April 30, 1996 ACM Institutional Reserves - Trust Portfolio
_______________________________________________________________________________
INVESTMENT INCOME
Interest $8,807,446
EXPENSES
Advisory fee (Note B) $ 685,336
Registration fees 107,261
Custodian fees 62,435
Transfer agency 20,740
Audit and legal fees 17,417
Directors' fees 5,735
Printing 3,500
Miscellaneous 6,419
Total expenses 908,843
Less: expense reimbursement (147,358) 761,485
Net investment income 8,045,961
REALIZED LOSS ON INVESTMENTS
Net realized loss on investments (32,758)
NET INCREASE IN NET ASSETS FROM OPERATIONS $8,013,203
STATEMENT OF CHANGES IN NET ASSETS
_______________________________________________________________________________
Year Ended Year Ended
April 30,1996 April 30,1995
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 8,045,961 $ 3,667,921
Net realized loss on investments (32,758) (16,775)
Net increase in net assets from operations 8,013,203 3,651,146
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (8,045,961) (3,667,921)
CAPITAL STOCK TRANSACTIONS
Net increase 60,921,819 72,386,158
Total increase 60,889,061 72,369,383
NET ASSETS
Beginning of year 109,176,361 36,806,978
End of year $170,065,422 $109,176,361
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
April 30, 1996 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 consisting of four Portfolios: 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. 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 397 days or less. 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 July 1996 on Government and Tax-Free Portfolios.
3. Federal Income Taxes
It is the Fund's policy to comply with the require-
ments of the Internal Revenue Code applicable to regulated investment companies
and to distribute all of its investment company taxable income and net realized
gains, if applicable, to its shareholders. Therefore, no provisions for federal
income or excise taxes are required.
4. Dividends
The 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 Tax-Free Portfolio from net investment
income for the year ended April 30, 1996 are exempt from federal income taxes.
However, certain shareholders may be subject to the alternative minimum tax
(AMT).
5. Accounting Estimates
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the reporting
period. Actual results could differ from those estimates.
6. 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.
NOTES TO FINANCIAL STATEMENTS (continued) ACM Institutional Reserves, Inc.
_______________________________________________________________________________
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 Tax-Free 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. For the year ended April 30, 1996, reimbursement was
$374,443, $241,498 $253,985 and $147,358 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, 1996, amounted to $18,000 per
portfolio. The Adviser purchased tax and revenue anticipation notes issued by
Orange County, California and held by the Tax-Free Portfolio on July 19, 1995
for $500,000.
NOTE C: Investment Transactions
At April 30, 1996, 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, 1996 of $185,732, of which $1,377 expires in 1999,
$3,535 in 2000, $6,777 in 2001, $29,045 in 2002, $77,316 in 2003 and $67,682 in
the year 2004; the Government Portfolio had a capital loss carry-forward of
$129,209, of which $1,340 expires in 2000, $9,174 in 2001, $51,091 in 2002,
$23,230 in 2003 and $44,374 in the year 2004; the Tax-Free Portfolio had a
capital loss carryforward of $83,573, of which $87 expires in 2000, $6,191 in
2002, $11,019 in 2003 and $66,276 in the year 2004; and the Trust Portfolio
had a capital loss carryforward of $52,880, of which $3,347 expires in 2002,
$16,775 in 2003 and $32,758 in the year 2004.
NOTES TO FINANCIAL STATEMENTS (continued) ACM Institutional Reserves, Inc.
_______________________________________________________________________________
NOTE D: Capital Stock
There are 1,000,000,000 shares of $.01 par value capital stock authorized. At
April 30, 1996, capital paid-in aggregated $493,504,955 on Prime Portfolio,
$150,945,387 on Government Portfolio, $183,695,120 on Tax-Free Portfolio, and
$170,118,302 on Trust Portfolio. Transactions, all at $1.00 per share, were as
follows:
Year Ended Year Ended
PRIME PORTFOLIO April 30,1996 April 30,1995
- ------------------------------------------- --------------- ---------------
Shares sold 4,839,076,341 1,407,213,884
Shares issued on reinvestments of dividends 18,016,970 8,106,776
Shares redeemed (4,561,495,798) (1,325,563,733)
Net increase 295,597,513 89,756,927
Year Ended Year Ended
GOVERNMENT PORTFOLIO April 30,1996 April 30,1995
- ------------------------------------------- --------------- ---------------
Shares sold 1,212,530,228 608,886,851
Shares issued on reinvestments of dividends 8,116,764 4,548,358
Shares redeemed (1,174,196,312) (585,556,358)
Net increase 46,450,680 27,878,851
Year Ended Year Ended
TAX-FREE PORTFOLIO April 30,1996 April 30,1995
- ------------------------------------------- --------------- ---------------
Shares sold 1,044,165,922 295,718,756
Shares issued on reinvestments of dividends 3,429,135 1,075,771
Shares redeemed (899,414,225) (296,928,091)
Net increase (decrease) 148,180,832 (133,564)
Year Ended Year Ended
TRUST PORTFOLIO April 30,1996 April 30,1995
- ------------------------------------------- --------------- ---------------
Shares sold 989,948,926 415,936,022
Shares issued on reinvestments of dividends 8,045,961 3,675,366
Shares redeemed (937,073,068) (347,225,230)
Net increase 60,921,819 72,386,158
NOTES TO FINANCIAL STATEMENTS (continued) ACM Institutional Reserves, Inc.
_______________________________________________________________________________
NOTE E: Financial Highlights
Per share operating performance for a share outstanding throughout each period.
<TABLE>
<CAPTION>
Year Ended April 30,
------------------------------------------------
PRIME PORTFOLIO 1996 1995 1994 1993 1992
- -------------------------------------- -------- -------- -------- -------- --------
<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 0.0560 0.0502 0.0325 0.0353 0.0535
LESS: DISTRIBUTIONS
Dividends from net investment income (0.0560) (0.0502) (0.0325) (0.0353) (0.0535)
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) 5.76% 5.15% 3.30% 3.59% 5.50%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $493.3 $197.8 $108.1 $64.3 $25.0
Ratio to average net assets of:
Expenses, net of waivers
and reimbursements 0.20% 0.20% 0.20% 0.18% 0.02%
Expenses, before waivers
and reimbursements 0.32% 0.36% 0.42% 0.54% 0.81%
Net investment income (d) 5.54% 5.24% 3.25% 3.42% 5.30%
</TABLE>
<TABLE>
<CAPTION>
Year Ended April 30, July 22,1991(a)
-------------------------------------- Through
GOVERNMENT PORTFOLIO 1996 1995 1994 1993 April 30,1992
- -------------------------------------- -------- -------- -------- -------- --------------
<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 0.0552 0.0493 0.0315 0.0339 0.0377
LESS: DISTRIBUTIONS
Dividends from net investment income (0.0552) (0.0493) (0.0315) (0.0339) (0.0377)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURNS
Total investment return based on
net asset value (b) 5.67% 5.06% 3.20% 3.45% 4.98%(c)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $150.8 $104.4 $76.6 $73.2 $24.7
Ratio to average net assets of:
Expenses, net of waivers
and reimbursements 0.20% 0.20% 0.20% 0.18% 0.10%(c)
Expenses, before waivers
and reimbursements 0.36% 0.38% 0.36% 0.49% 0.86%(c)
Net investment income (d) 5.50% 4.94% 3.15% 3.30% 4.86%(c)
</TABLE>
(a) Commencement of operations.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends at net asset value during the period and redemption on the last day
of the period.
(c) Annualized.
(d) Net of expenses reimbursed or waived by the Adviser.
ACM Institutional Reserves, Inc.
_______________________________________________________________________________
<TABLE>
<CAPTION>
Year Ended April 30, July 22,1991(a)
--------------------------------------- Through
TAX-FREE PORTFOLIO 1996 1995 1994 1993 April 30,1992
- --------------------------------------- --------- -------- -------- -------- --------------
<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 0.0372 0.0326 0.0240 0.0287 0.0334
Net unrealized loss on investments -0- (0.0048) -0- -0- -0-
Net increase in net asset value
from operations 0.0372 0.0278 0.0240 0.0287 0.0334
LESS: DISTRIBUTIONS
Dividends from net investment income (0.0372) (0.0326) (0.0240) (0.0287) (0.0334)
ADD: CAPITAL CONTRIBUTION
Capital Contributed by the Adviser -0- 0.0048 -0- -0- -0-
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) 3.79% 3.31%(e) 2.43% 2.92% 4.40%(c)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $183.6 $35.5 $35.6 $40.9 $8.5
Ratio to average net assets of:
Expenses, net of waivers
and reimbursements 0.20% 0.20% 0.20% 0.18% 0.10%(c)
Expenses, before waivers
and reimbursements 0.48% 0.76% 0.69% 0.95% 2.08%(c)
Net investment income (d) 3.73% 3.31% 2.40% 2.73% 4.01%(c)
</TABLE>
<TABLE>
<CAPTION>
Year Ended April 30, Nov. 16,1992(a)
---------------------------- Through
TRUST PORTFOLIO 1996 1995 1994 April 30,1993
- --------------------------------------- --------- -------- -------- --------------
<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 0.0527 0.0479 0.0309 0.0144
LESS: DISTRIBUTIONS
Dividends from net investment income (0.0527) (0.0479) (0.0309) (0.0144)
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) 5.41% 4.91% 3.14% 3.21%(c)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $170.1 $109.2 $36.8 $5.3
Ratio to average net assets of:
Expenses, net of waivers
and reimbursements 0.50% 0.49% 0.14% -0-
Expenses, before waivers
and reimbursements 0.60% 0.75% 1.23% 0.45%(c)
Net investment income (d) 5.28% 5.31% 3.15% 3.17%(c)
</TABLE>
(a) Commencement of operations.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends at net asset value during the period and redemption on the last day
of the period.
(c) Annualized.
(d) Net of expenses reimbursed or waived by the Adviser.
(e) Capital contributed by the Adviser had no material effect on net asset
value, and therefore, no effect on total return.
INDEPENDENT AUDITOR'S REPORT ACM Institutional Reserves, Inc.
_______________________________________________________________________________
To the Board of Directors 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, 1996 and the related statements of opera-tions, 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, 1996 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, 1996, and the results of its operations, changes in its net
assets, and financial highlights for the periods indicated, in conformity with
generally accepted accounting principles.
McGladrey & Pullen, LLP
New York, New York
June 6, 1996
<PAGE>
This is filed pursuant to Rule 497(c).
File Nos. 33-34001 and 811-6068.
<PAGE>
<PAGE>
SHAREHOLDER SERVICES
Shareholder representatives are available to answer your questions about the
status of your account or other Fund matters. Call toll-free (800) 237-5822 or
write the Fund, P.O. Box 1520, Secaucus, New Jersey 07096-1520.
YIELDS. For current recorded yield information on the Trust Portfolio, call on
a touch-tone telephone toll-free (800) 251-0539 and press the following
sequence of keys: [_]1 [_]# [_]1 [_]# [_]6 [_]0 [_]#.
ACM Institutional Reserves, Inc. (the "Fund") is an open-end invest-ment
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 of-fered by a separate
Prospectus. The Trust Portfolio's investment objec-tives are--in the following
order of priority--safety of principal, excellent liquidity and maximum
current income.
The Trust Portfolio offers insti-tutional and corporate investors a
convenient and economical way to invest in a managed money market portfolio.
The Portfolio is only available through financial inter-mediaries.
AN INVESTMENT IN THE TRUST PORTFO-LIO 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
IN-SURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. THERE
CAN BE NO ASSURANCE THAT THE TRUST PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE
NET ASSET VALUE OF $1.00 PER SHARE.
A "Statement of Additional Infor-mation," dated September 10, 1996, 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 incorpo-rated 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 AP-PROVED OR DISAPPROVED BY THE SECU-RITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
(R)This registered service mark used under license from the owner, Alliance
Capital Management L.P.
CONTENTS
--------
<TABLE>
<S> <C>
Expense Information....................................................... 2
Financial Highlights...................................................... 2
Introduction.............................................................. 3
Investment Objectives and Policies........................................ 3
Purchase and Redemption of Shares......................................... 4
Additional Information.................................................... 6
</TABLE>
ACM
INSTITUTIONAL RESERVES- TRUST PORTFOLIO
LOGO
PROSPECTUS
SEPTEMBER 10, 1996
<PAGE>
- -------------------------------------------------------------------------------
EXPENSE INFORMATION
- -------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
The Trust Portfolio has no sales load on purchases or reinvested dividends,
deferred sales load, redemption fee or exchange fee.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets, net of expense reimbursement or
fee waiver)
<S> <C>
Management Fees......................................................... .38%
Other Expenses.......................................................... .12%
---
Total Fund Operating Expenses........................................... .50%
</TABLE>
EXAMPLE
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment, assuming a 5% annual
return (cumulatively through the end of
each time period): $5 $16 $28 $63
</TABLE>
The purpose of the foregoing table is to assist the investor in understand-
ing the various costs and expenses that an investor in the Trust Portfolio
will bear directly and indirectly. The expenses listed in the table are net of
voluntary expense reimbursements and voluntary fee waivers. The estimated ex-
penses, before voluntary expense reimbursements or fee waiver, would be: Man-
agement Fee--.45%, Other Expenses--.12% and Total Fund Operating Expenses--
.57%. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES; ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
PER SHARE OPERATING PERFORMANCE (FOR A SHARE OUTSTANDING THROUGHOUT EACH
PERIOD)
- --------------------------------------------------------------------------------
The following table has been audited by McGladrey & Pullen LLP, the Fund's
independent auditors, whose report thereon appears in the Statement of Addi-
tional Information. This information should be read in conjunction with the
financial statements and notes thereto included in the Statement of Additional
Information.
<TABLE>
<CAPTION>
NOVEMBER 16, 1992(A)
YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
APRIL 30, 1996 APRIL 30, 1995 APRIL 30, 1994 APRIL 30, 1993
-------------- -------------- -------------- --------------------
<S> <C> <C> <C> <C>
Net asset value, begin-
ning of period......... $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment income... 0.0527 0.0479 0.0309 0.0144
------- ------- ------- -------
LESS: DISTRIBUTIONS
Dividends from net in-
vestment income........ (0.0527) (0.0479) (0.0309) (0.0144)
------- ------- ------- -------
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)............... 5.41% 4.91% 3.14% 3.21%(c)
======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA
Net assets, end of pe-
riod (in millions)..... $ 170.1 $ 109.2 $ 36.8 $ 5.3
RATIO TO AVERAGE NET AS-
SETS OF:
Expenses, net of waivers
and reimbursements..... 0.50% 0.49% 0.14% -0-
Expenses, before waivers
and reimbursements..... 0.60% 0.75% 1.23% 0.45%(c)
Net investment
income(d).............. 5.28% 5.31% 3.15% 3.17%(c)
</TABLE>
- -------
(a) Commencement of operations.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends at net asset value during the period and redemption on the last
day of the period.
(c) Annualized.
(d) Net of expenses reimbursed or waived by the Adviser.
---------------
From time to time the Trust Portfolio advertises its "yield" and "effective
yield." Both yield figures are based on historical earnings and are not in-
tended to indicate future performance. To calculate the "yield," the amount of
dividends paid on a share during a specified seven-day period is assumed to be
paid each week over a 52-week period and is shown as a percentage of the in-
vestment. To calculate "effective yield," which will be higher than the
"yield" because of compounding, the dividends paid are assumed to be reinvest-
ed. Dividends for the Trust Portfolio for the seven days ended June 30, 1996,
after expense reimbursement, amounted to an annualized yield of 4.89%, equiva-
lent to an effective yield of 5.01%. Absent expense reimbursement, the
annualized yield for this period would have been 4.83%, equivalent to an ef-
fective yield of 4.95%. Further information about the Fund's performance is
contained in the Fund's annual report to shareholders and the Statement of Ad-
ditional Information which may be obtained without charge by contacting Alli-
ance Fund Services, Inc. at the address or the telephone number shown on the
cover of this prospectus.
2
<PAGE>
- -------------------------------------------------------------------------------
INTRODUCTION
- --------------------------------------------------------------------------------
The Trust Portfolio invests in a diversified portfolio of money market secu-
rities. The Trust Portfolio is designed for institutional and corporate in-
vestors who can benefit from 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-
fication, quality and maturity conditions imposed by the Rule. A more detailed
description of Rule 2a-7 is set forth in the Trust Portfolio's Statement of
Additional Information under "Investment Objectives and Policies."
MONEY MARKET SECURITIES
The money market securities in which the Trust Portfolio invests include: (1)
marketable obligations of, or guaranteed by, the U.S. Government, its agencies
or instrumentalities (collectively, the "U.S. Government"); (2) certificates
of deposit and bankers' acceptances issued or guaranteed by, or time deposits
maintained at, banks or savings and loan associations (including foreign
branches of U.S. banks or U.S. or foreign branches of foreign banks) having
total assets of more than $500 million; (3) commercial paper of prime quality
[i.e., rated A-1+ or A-1 by Standard & Poor's Corporation ("Standard &
Poor's") or Prime-1 by Moody's Investors Service, Inc. ("Moody's") or, if not
rated, issued by U.S. or foreign companies having outstanding debt securities
rated AAA or AA by Standard & Poor's, or Aaa or Aa by Moody's] and participa-
tion interests in loans extended by banks to such companies; and (4) repur-
chase agreements that are collateralized in full each day by liquid securities
of the types listed above. These agreements are entered into with "primary
dealers" (as designated by the Federal Reserve Bank of New York) in U.S. Gov-
ernment securities or State Street Bank and Trust Company, the Fund's Custodi-
an. For each repurchase agreement, the Trust Portfolio requires continual
maintenance of the market value of the underlying collateral in amounts equal
to, or in excess of, the agreement amount. In the event of a dealer default,
the 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
transactions.
The Trust Portfolio may purchase restricted securities that are determined by
the Adviser to be liquid in accordance with procedures adopted by the Board of
Directors of the Fund. Restricted securities are securities subject to con-
tractual or legal restrictions on resale, such as those arising from an is-
suer's reliance upon certain exemptions from registration under the Securities
Act of 1933. The Portfolio may purchase restricted securities eligible for re-
sale under Rule 144A under the Securities Act and commercial paper issued in
reliance upon the exemption from registration in Section 4(2) of the Securi-
ties Act and, in each case, determined by the Adviser to be liquid in accor-
dance 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 Trust
Portfolio may not (1) invest 25% or more of its total assets in the securities
of issuers conducting their principal business activities in any one industry
although there is no such limitation with respect to U.S. Government securi-
ties or bank obligations, including certificates of deposit, bankers' accept-
ances and interest bearing savings deposits; (2) invest more than 5% of its
assets in the securities of any one issuer (except the U.S. Government) al-
though with respect to 25% of its total assets it may invest without regard to
such limitation; (3) invest more than 5% of its assets in the securities of
any issuer (except the U.S. Government) having less than three years of con-
tinuous operation or purchase more than 10% of any class of the outstanding
securities of any issuer (except the U.S. Government); (4) enter into repur-
chase agreements if, as a result thereof, more than 10% of its assets would be
committed to repurchase agreements not terminable within seven days and other
illiquid investments; (5) borrow money except from banks on a temporary basis
in aggregate amounts not exceeding 15% of its assets; the Trust Portfolio will
not purchase any investments while borrowings in excess of 5% of total assets
exist; and (6) mortgage, pledge or hypothecate its assets except to secure
such borrowings.
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 num-
ber.
(2) Instruct your bank to wire Federal funds exactly as follows:
ABA 011000028
State Street Bank and Trust Company
Boston, MA 02101
DDA 9903-279-9
ACM Institutional Reserves, Inc.--
Trust Portfolio
as registered
Your account name with the Trust
Your account number Portfolio
4
<PAGE>
(3) Mail a completed Application Form to:
Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, New Jersey 07096-1520
SUBSEQUENT INVESTMENTS
(1) Telephone the Trust Portfolio toll-free at (800) 237-5822 to place your
order for additional shares.
(2) Instruct your bank to wire Federal funds to State Street Bank and Trust
Company ("State Street Bank") as in (2) above or mail your check or ne-
gotiable bank draft payable to ACM Institutional Reserves, Inc.--Trust
Portfolio to Alliance Fund Services, Inc. as in (3) above.
REDEMPTIONS
A. BY TELEPHONE
You may withdraw any amount from your account on any Fund business day (any
weekday exclusive of days on which the New York Stock Exchange or State Street
Bank is closed) as discussed below, between 9:00 a.m. and 5:00 p.m. (New York
time) via orders given to Alliance Fund Services, Inc. by telephone toll-free
(800) 237-5822. Redemption orders must include your account name as registered
with the Trust Portfolio and the account number.
Telephone redemptions may be made on any Fund business day between 9:00 a.m.
and 4:00 p.m. (New York time). If your telephone redemption order is received
by Alliance Fund Services, Inc. prior to 4:00 p.m. (New York time) on any Fund
business day, we will send the proceeds in Federal funds by wire to your des-
ignated bank account that day. Redemptions are made without any charge to you.
During periods of drastic economic or market developments, such as the market
break of October 1987, it is possible that shareholders would have difficulty
in reaching Alliance Fund Services, Inc. by telephone (although no such diffi-
culty was apparent at any time in connection with the 1987 market break). If a
shareholder were to experience such difficulty, the shareholder should issue
written instructions to Alliance Fund Services, Inc. at the address shown on
the cover of this prospectus. The Fund reserves the right to suspend or termi-
nate its telephone redemption service at any time without notice. Neither the
Fund nor the Adviser, or Alliance Fund Services, Inc. will be responsible for
the authenticity of telephone requests for redemptions that the Fund reasona-
bly believes to be genuine. The Fund will employ reasonable procedures in or-
der to verify that telephone requests for redemptions are genuine, including
among others, recording such telephone instructions and causing written con-
firmations of the resulting transactions to be sent to shareholders. If the
Fund did not employ such procedures, it could be liable for losses arising
from unauthorized or fraudulent telephone instructions. Selected dealers or
agents may charge a commission for handling telephone requests for redemp-
tions.
B. BY CHECK-WRITING
With this service, you may write checks made payable to any payee in any
amount of $100 or more. Checks cannot be written for more than the principal
balance (not including any accrued dividends) in your account. First, you must
fill out the Signature Card which is available from your financial intermedi-
ary. If you wish to establish this check-writing service subsequent to the
opening of your Fund account, contact the Fund by telephone or mail. There is
no separate charge for the check-writing service, except that State Street
Bank will impose its normal charges for checks which are returned unpaid be-
cause of insufficient funds or for checks upon which you have placed a stop
order. The check-writing service enables you to receive the daily dividends
declared on the shares to be redeemed until the day that your check is pre-
sented to State Street Bank for payment.
- --------------------------------------
OBTAINING AN APPLICATION FORM. If
you wish to obtain an Application
Form, or you have questions about
the Form, purchasing shares, or
other Trust Portfolio procedures,
please telephone the Trust Portfo-
lio toll-free at (800) 237-5822.
- --------------------------------------
5
<PAGE>
- -------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
CHANGES IN APPLICATION FORM. If you decide to change instructions or any
other information already given on your Application Form, send a written no-
tice to ACM Institutional Reserves, Inc.--Trust Portfolio, P.O. Box 1520,
Secaucus, New Jersey 07096-1520, with your signature guaranteed by an institu-
tion which is an "eligible guarantor" as defined in Rule 17Ad-15 under the Se-
curities Exchange Act of 1934, as amended.
INVESTMENTS MADE BY CHECK. Money transmitted by a check drawn on a member of
the Federal Reserve System is converted to Federal funds in one business day
following receipt and is then invested in the Fund. Checks drawn on banks
which are not members of the Federal Reserve System may take longer to be con-
verted and invested. All payments must be in United States dollars.
Proceeds from any subsequent redemption by you of Trust Portfolio shares that
were purchased by check will not be forwarded to you until the Trust Portfolio
is reasonably assured that your check has cleared, normally up to fifteen days
following the purchase date.
SHARE PRICE. Shares of the Trust Portfolio are sold and redeemed on a contin-
uous basis without sales or redemption charges at their net asset value which
is expected to be constant at $1.00 per share, although this price is not
guaranteed. The net asset value of the Trust Portfolio's shares is determined
each Fund business day (as defined under "Purchase and Redemption of Shares--
Redemptions," above), at 12:00 Noon and 4:00 p.m. (New York time). The net as-
set value per share of the Trust Portfolio is calculated by taking the sum of
the value of the Trust Portfolio's investments (amortized cost value is used
for this purpose) and any cash or other assets, subtracting liabilities, and
dividing by the total number of shares of the Trust Portfolio outstanding. All
expenses, including the fees payable to the Adviser, are accrued daily.
TIMING OF INVESTMENTS AND REDEMPTIONS. The Trust Portfolio has two transac-
tion times each business day, 12:00 Noon and 4:00 p.m. (New York time). In-
vestments receive the full dividend for a day if the investor's telephone or-
der is placed by 4:00 p.m. (New York time) and Federal funds or bank wire mon-
ies are received by State Street Bank before 4:00 p.m. (New York time) on that
day.
Redemption proceeds are normally wired the same business day if a redemption
request is received prior to 4:00 p.m. (New York time), but in no event later
than seven days, unless redemptions have been suspended or postponed due to
the determination of an "emergency" by the Securities and Exchange Commission
or to certain other unusual conditions. Shares do not earn dividends on the
day a redemption is effected.
MINIMUMS. An initial investment of at least $1,000,000 in the Trust Portfolio
is required. There is no minimum for subsequent investments. The Trust Portfo-
lio reserves the right at anytime to vary the initial and subsequent invest-
ment minimums.
The Trust Portfolio reserves the right to close out an account that is below
$500,000 after at least 60 days' written notice to the shareholder unless the
balance in such account is increased to at least that amount during such peri-
od.
DAILY DIVIDENDS, OTHER DISTRIBUTIONS, TAXES. All net income of the Trust
Portfolio is determined each business day at 4:00 p.m. (New York time) and is
paid immediately thereafter pro rata to shareholders of record via automatic
investment in additional full and fractional shares of the Trust Portfolio in
each shareholder's account. As such additional shares are entitled to divi-
dends on following days, a compounding growth of income occurs.
The Trust Portfolio's net income consists of all accrued interest income on
assets less expenses applicable to that dividend period. Realized gains and
losses are reflected in net asset value and are not included in net income.
Distributions out of taxable interest income, other investment income, and
short-term capital gains are taxable as ordinary income and distributions of
long-term capital gains, if any, are taxable as long-term capital gains irre-
spective of the length of time a shareholder held its shares.
6
<PAGE>
THE ADVISER. The Trust Portfolio retains Alliance Capital Management L.P.,
1345 Avenue of the Americas, New York, NY 10105 under an Advisory Agreement to
provide investment advice and, in general, to supervise its management and 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, 1996, the Adviser reimbursed its advisory fee to the Trust Portfolio in
the amount of $147,358.
The Adviser has undertaken until, at its request, the Trust Portfolio noti-
fies investors to the contrary, that if, in any fiscal year, the aggregate ex-
penses of the Trust Portfolio, exclusive of taxes, brokerage, interest on
borrowings and extraordinary expenses, but including the management fee, ex-
ceed .50 of 1% of the Trust Portfolio's average net assets for the fiscal
year, the Trust Portfolio may deduct from the payment to be made to the Advis-
er, or the Adviser will bear, such excess expense.
The Adviser is a leading international investment manager, supervising client
accounts with assets as of June 30, 1996 totaling more than $168 billion (of
which more than $55 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 en-
dowment funds. The 51 registered investment companies managed by the Adviser
comprising 109 separate investment portfolios currently have over two million
shareholders. As of June 30, 1996, the Adviser was retained as an investment
manager of employee benefit fund assets for 33 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 Trust Portfolio to compensate bro-
ker-dealers, depository institutions, or other persons for providing distribu-
tion assistance and administrative services and to otherwise promote the sale
of shares of the Trust Portfolio, including paying for the preparation, print-
ing and distribution of prospectuses and sales literature or other promotional
activities.
SHAREHOLDER SERVICING AGENT. The shareholder servicing agent is responsible
for shareholder account and administrative servicing functions. Such responsi-
bilities may include, among other things, answering shareholder inquiries re-
garding account status and history and the manner in which purchases and re-
demptions of Trust Portfolio shares may be effected; assisting shareholders in
designating and changing dividend options, account designations and addresses;
providing necessary personnel and facilities to establish and maintain certain
shareholder accounts and records as may be requested from time to time by the
Trust Portfolio; assisting in processing purchase and redemption transactions;
arranging for the wiring of funds; transmitting and receiving funds in connec-
tion with shareholder orders to purchase or redeem shares; verifying share-
holder signatures on check- writing drafts in connection with redemption or-
ders, transfers among and changes in shareholder-designated accounts; provid-
ing periodic statements showing a shareholder's account balances; furnishing
(either separately or on an integrated basis with other reports sent to a
shareholder by the shareholder servicing agent) monthly and annual statements
and confirmations of all purchases and redemptions of shares in a sharehold-
er's account; transmitting, on behalf of the Fund, proxy statements, annual
reports, updated prospectuses and other communications to shareholders of the
Fund; receiving, tabulating and transmitting to the Fund proxies executed by
shareholders with respect to meetings of shareholders of the Fund; and provid-
ing such other related services as the Trust Portfolio or a shareholder may
reasonably request.
For the services provided, the shareholder servicing agent may receive a fee
for services performed.
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.
7
<PAGE>
FUND ORGANIZATION. The Trust Portfolio is a series of the Fund. The Trust
Portfolio is one of four series of the Fund; shares of the other series, the
Prime Portfolio, the Government Portfolio and the Tax-Free Portfolio, are of-
fered by a separate prospectus. The Fund was organized as a Maryland corpora-
tion on March 21, 1990. The Trust Portfolio's activities are supervised by its
Board of Directors. Shareholders of each Portfolio are entitled to one vote per
share and vote as a single series on matters that affect all series in substan-
tially the same manner.
Maryland law does not require annual meetings of shareholders and it is antic-
ipated that shareholder meetings will be held only when required by Federal or
Maryland law. Shareholders have available certain procedures for the removal of
directors.
REPORTS. Shareholders will receive a monthly summary of their account, as
well as semi-annual and annual reports. Shareholders may arrange for a copy of
each of their account statements to be sent to other parties.
BOARD OF DIRECTORS
John D. Carifa, Chairman
Ruth Block
David H. Dievler
John H. Dobkin
William H. Foulk, Jr.
James M. Hester
Clifford L. Michel
Donald J. Robinson
Robert C. White
OFFICERS
Ronald M. Whitehill, President
Kathleen A. Corbet, Senior Vice President
Drew Biegel, Vice President
John F. Chiodi, Jr., Vice President
Joseph R. LaSpina, 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>
This is filed pursuant to Rule 497(c).
File Nos. 33-34001 and 811-6068.
<PAGE>
LOGO
ACM INSTITUTIONAL RESERVES, INC.
- Trust Portfolio
P.O. Box 1520, Secaucus, New Jersey 07096
Toll Free (800) 221-5672
________________________________________________________________
STATEMENT OF ADDITIONAL INFORMATION
September 10, 1996
________________________________________________________________
This Statement of Additional Information is not a prospectus and
should be read in conjunction with the Trust Portfolio's current
Prospectus dated September 10, 1996 which describes shares of the
Trust Portfolio of the Fund. A copy of this Prospectus may be
obtained by contacting Alliance Fund Services, Inc. at the
address or telephone number shown above.
TABLE OF CONTENTS
Page
____
The Fund. . . . . . . . . . . . . . . . . . . . . . . . 2
Investment Objective and Policies . . . . . . . . . . . 2
Investment Restrictions . . . . . . . . . . . . . . . . 8
Management. . . . . . . . . . . . . . . . . . . . . . . 10
Purchase and Redemption of Shares . . . . . . . . . . . 16
Daily Dividends-Determination of Net Asset Value. . . . 18
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 20
General Information . . . . . . . . . . . . . . . . . . 20
Appendix - Commercial Paper and Bond Ratings. . . . . . 24
Financial Statements. . . . . . . . . . . . . . . . . . 26-44
Report of Independent Auditors. . . . . . . . . . . . . 45
(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) that have been determined by the Adviser to present
minimal credit risks pursuant to procedures approved by the Board
of Directors. Generally, an eligible security is a security that
(i) is denominated in U.S. Dollars and has a remaining maturity
of 397 days or less and (ii) is rated, or is issued by an issuer
with short-term debt outstanding that is rated, in one of the two
highest rating categories by two nationally recognized
statistical rating organizations ("NRSROs") or, if only one NRSRO
has issued a rating, by that NRSRO. A security that originally
had a maturity of greater than 397 days is an eligible security
if its remaining maturity at the time of purchase is 397 calendar
days or less and the issuer has outstanding short-term debt that
would be an eligible security. Unrated securities may also be
eligible securities if the Adviser determines that they are of
comparable quality to a rated eligible security pursuant to
guidelines approved by the Board of Directors. A description of
the ratings of some NRSROs appears in Appendix attached hereto.
2
<PAGE>
Under Rule 2a-7 the Trust Portfolio may not invest more than
five percent of its assets in the securities of any one issuer
other than the United States Government, its agencies and
instrumentalities. In addition, the Trust Portfolio may not
invest in a security that has received, or is deemed comparable
in quality to a security that has received, the second highest
rating by the requisite number of NRSROs (a "second tier
security") if immediately after the acquisition thereof the Trust
Portfolio would have invested more than (A) the greater of one
percent of its total assets or one million dollars in securities
issued by that issuer which are second tier securities, or (B)
five percent of its total assets in second tier securities.
The Trust Portfolio may make the following investments
diversified by maturities and issuers:
1. Marketable obligations of, or guaranteed by, the United
States Government, its agencies or instrumentalities. These
include issues of the U.S. Treasury, such as bills, certificates
of indebtedness, notes and bonds, and issues of agencies and
instrumentalities established under the authority of an act of
Congress. The latter issues include, but are not limited to,
obligations of the bank for cooperatives, Federal Financing Bank,
Federal Home Loan Bank, Federal Intermediate Credit Banks,
Federal Land Bank, Federal National Mortgage Association and
Tennessee Valley Authority. Some of the securities are supported
by the full faith and credit of the U.S. Treasury, others are
supported by the right of the issuer to borrow from the Treasury,
and still others are supported only by the credit of the agency
or instrumentality.
2. Certificates of deposit and bankers' acceptances issued
or guaranteed by, or time deposits maintained at, banks or
savings and loans associations (including foreign branches of
U.S. banks or U.S. or foreign branches of foreign banks) having
total assets of more than $500 million. Certificates of deposit
are receipts issued by a depository institution in exchange for
the deposit of funds. The issuer agrees to pay the amount
deposited plus interest to the bearer of the receipt on the date
specified on the certificate. The certificate usually can be
traded in the secondary market prior to maturity. Bankers'
acceptances typically arise from short-term credit arrangements
designed to enable businesses to obtain funds to finance
commercial transactions. Generally, an acceptance is a time
draft drawn on a bank by an exporter or an importer to obtain a
stated amount of funds to pay for specific merchandise. The
draft is 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
3
<PAGE>
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
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. Pursuant to Rule 2a-7, a
repurchase agreement is deemed to be an acquisition of the
underlying securities, provided that the obligation of the seller
to repurchase the securities from the money market fund is
4
<PAGE>
collateralized fully (as defined in such Rule). Accordingly, the
vendor of a fully collateralized repurchase agreement is deemed
to be the issuer of the underlying securities.
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
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.
5
<PAGE>
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;
(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
6
<PAGE>
of soliciting offers and the mechanics of
transfer); and
(vi) any applicable Securities and Exchange
Commission interpretation or position with
respect to such types of securities.
To make the determination that an issue of Section 4(2)
paper is liquid, Alliance must conclude that the following
conditions have been met:
(i) the Section 4(2) paper must not be traded
flat or in default as to principal or
interest: and
(ii) the Section 4(2) paper must be rated in
one of the two highest rating categories
by at least two NRSROs, or if only one
NRSRO rates the security, by that NRSRO:
if the security is unrated, Alliance must
determine that the security is of
equivalent quality.
Alliance must also consider the trading market for the
specific security, taking into account all relevant factors.
Following the purchase of a restricted security by the
Trust Portfolio, the Adviser monitors continuously the liquidity
of such security and reports to the Directors regarding purchases
of liquid restricted securities.
General
While there are many kinds of short-term securities used
by money market investors, the Trust Portfolio, in keeping with
its primary investment objective of safety of principal,
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
7
<PAGE>
be no assurance that any of the Trust Portfolio's objectives will
be achieved. The market value of the Trust Portfolio's
investments tends to decrease during periods of rising interest
rates and to increase during intervals of falling rates.
Net income to shareholders is aided both by the Trust
Portfolio's ability to make investments in large denominations
and by efficiencies of scale. Also, the Trust Portfolio may seek
to improve its income by selling certain portfolio securities
prior to maturity in order to take advantage of yield disparities
that occur in money markets.
The Trust Portfolio's investment objectives may not be
changed without the affirmative vote of a majority of the Trust
Portfolio's outstanding shares as defined below. Except as
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,
8
<PAGE>
certificates of deposit, bankers' acceptances and
interest-bearing savings deposits and (b) all finance companies
as a group and all utility companies as a group are each
considered to be a separate industry;
3. invest more than 5% of its assets in the securities
of any one issuer (exclusive of securities issued or guaranteed
by the United States Government, its agencies or
instrumentalities), except that up to 25% of the value of the
Trust Portfolio's total assets may be invested without regard to
such 5% limitation;
4. invest in more than 10% of any one class of an
issuer's outstanding securities (exclusive of securities issued
or guaranteed by the United States Government, its agencies or
instrumentalities);
5. borrow money except from banks on a temporary basis
or via entering into reverse repurchase agreements in aggregate
amounts not to exceed 15% of the Trust Portfolio's assets and to
be used exclusively to facilitate the orderly maturation and sale
of portfolio securities during any periods of abnormally heavy
redemption requests, if they should occur; such borrowings may
not be used to purchase investments and the Trust Portfolio will
not purchase any investments while borrowings in excess of 15% of
total assets exist;
6. pledge, hypothecate or in any manner transfer, as
security for indebtedness, any securities owned or held by the
Trust Portfolio except as may be necessary in connection with any
borrowing mentioned above, including reverse repurchase
agreements, and in an aggregate amount not to exceed 5% of the
Trust Portfolio's assets;
7. make loans, provided that the Trust Portfolio may
purchase money market securities and enter into repurchase
agreements;
8. enter into repurchase agreements if, as a result
thereof, more than 10% of the Trust Portfolio's assets would be
subject to repurchase agreements not terminable within seven days
and other illiquid investments; or
9. (a) make investments for the purpose of exercising
control; (b) purchase securities of other investment companies,
except in connection with a merger, consolidation, acquisition or
reorganization; (c) invest in real estate (other than money
market securities secured by real estate or interests therein or
money market securities issued by companies which invest in real
estate, or interests therein), commodities or commodity
contracts, including futures contracts, interests in oil, gas and
9
<PAGE>
other mineral exploration or other development programs; (d)
purchase securities on margin; (e) make short sales of securities
or maintain a short position or write, purchase or sell puts,
call, straddles, spreads or combinations thereof; (f) invest in
securities of issuers (other than agencies and instrumentalities
of the United States Government) having a record, together with
predecessors, of less than three years of continuous operation if
more than 5% of the Trust Portfolio's assets would be invested in
such securities; (g) purchase or retain securities of any issuers
if those officers and directors of the Fund and of the Adviser
who own individually more than 1/2% of the outstanding securities
of such issuer together own more than 5% of the securities of
such issuer; or (h) act as an underwriter of securities.
________________________________________________________________
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.
10
<PAGE>
Directors
JOHN D. CARIFA8 , 51, is the President, the Chief
Operating Officer and a Director of Alliance Capital Management
Corporation ("ACMC")9 , with which he has been associated since
prior to 1991.
RUTH BLOCK, 65, 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 1991. Her address is Box 4653,
Stamford, Connecticut 06903.
DAVID H. DIEVLER, 66, was formerly a Senior Vice
President of ACMC, with which he had been associated since prior
to 1991. He is currently an independent consultant. His address
is P.O. Box 167, Spring Lake, New Jersey 07762.
JOHN H. DOBKIN, 54, has been the President of Historic
Hudson Valley (historic preservation) since prior to 1991.
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., 63, 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 1991. His address is 2 Hekma Road, Greenwich, CT
06831.
DR. JAMES M. HESTER, 72, is President of the Harry Frank
Guggenheim Foundation and a Director of Union Carbide Corporation
with which he has been associated since prior to 1991. 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, 57, is a Partner of the law firm of
Cahill Gordon & Reindel, with which he has been associated since
prior to 1991. He is also Chief Executive Officer of Wenonah
Development Company (investments) and a Director of Placer Dome,
_________________________
8. An interested person of the Fund as defined in the Act.
9. 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.
11
<PAGE>
Inc. (mining) and Faber-Castell Corporation (writing products).
His address is St. Bernard's Road, Gladstone, New Jersey 07934.
ROBERT C. WHITE, 76, is a Vice President and Chief
Financial Officer of the Howard Hughes Medical Institute, with
which he has been associated since prior to 1991. His address is
8101 Connecticut Avenue, Apt. S501, Chevy Chase, Maryland 20815.
Officers
RONALD M. WHITEHILL - President, 58, is a Senior Vice
President of ACMC and President of Alliance Cash Management
Services, with which he has been associated since 1993.
Previously, he was Senior Vice President and Managing Director of
Reserve Fund since prior to 1991.
KATHLEEN A. CORBET - Senior Vice President, 36, 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 1991.
DREW A. BIEGEL - Vice President, 45, is a Vice President
of ACMC, with which he has been associated since prior to 1991.
JOHN F. CHIODI, JR. - Vice President, 30, is a Vice
President of ACMC with which he has been associated since prior
to 1991.
JOSEPH R. LASPINA - Vice President, 36, is an Assistant
Vice President of ACMC, with which he has been associated since
prior to 1991.
RAYMOND J. PAPERA - Vice President, 40, is a Vice
President of ACMC with which he has been associated since prior
to 1991.
PAMELA F. RICHARDSON - Vice President, 43, is a Vice
President of ACMC, with which she has been associated since prior
to 1991.
EDMUND P. BERGAN, Jr. - Secretary, 46, 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 1991.
MARK D. GERSTEN - Treasurer and Chief Financial Officer,
45, is a Senior Vice President of AFS and AFD, with which he has
been associated since prior to 1991.
12
<PAGE>
JOSEPH J. MANTINEO - Controller, 37, is a Vice President
of AFS, with which he has been associated since prior to 1991.
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, 1996, the
aggregate compensation paid to each of the Directors during
calendar year 1995 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.
Total Number of Funds
Total in the Alliance Fund
Compensation Complex Including
from the the Fund, as to
Aggregate Alliance Fund which the Director
Name of Director Compensation Complex Including is a Director of
of the Fund from the Fund the Fund Trustee
________________ ______________ _________________ ____________________
John D. Carifa $-0- $-0- 48
Ruth Block $745 $159,000 35
David H. Dievler $745 $179,200 41
John H. Dobkin $745 $117,200 28
William H. Foulk, Jr. $745 $143,500 29
James M. Hester $745 $156,000 36
Clifford L. Michel $745 $131,000 35
Robert C. White $745 $133,200 36
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, 1996, ACMC, Inc. and Equitable Capital
Management Corporation, each a wholly-owned direct or indirect
13
<PAGE>
subsidiary of Equitable, owned in the aggregate approximately 58%
of the issued and outstanding units representing assignments of
beneficial ownership of limited partnership interests in the
Adviser ("Units"), and approximately 32% and 10% of the Units
were owned by the public and employees of the Adviser and its
subsidiaries, respectively, including employees of the Adviser
who serve as Directors of the Fund, calculated including as
outstanding Units subject to options exercisable by employees
within 60 days of June 30, 1996.
AXA owns approximately 63.9% of the outstanding voting
shares of common stock of ECI. AXA is the holding company for an
international group of insurance and related financial services
companies. AXAs insurance operations are comprised of
activities in life insurance, property and casualty insurance and
reinsurance. The insurance operations are diverse geographically
with activities in France, the United States, the United Kingdom,
Canada and other countries, principally in Europe. AXA is also
engaged in asset management, investment banking and brokerage,
real estate and other financial services activities in the United
States and Europe. Based on information provided by AXA, as of
March 1, 1996, 42.1% of the voting shares (representing 53.4% of
the voting power) of AXA were owned by Midi Participations, a
French corporation that is a holding company (Midi). The voting
shares of Midi Participations are in turn owned 61.4%
(representing 62.5% of the voting power) by Finaxa, a French
corporation that is a holding company, and 38.6% (representing
37.5% of the voting power) by subsidiaries of Assicurazioni
Generali S.p.A., an Italian corporation ("Generali") (one of
which, Belgica Insurance Holding S.A., a Belgian Corporation,
owned 30.8%, representing 33.1% of the voting power). As of
March 1, 1996, 61.1% of the issued shares (representing 73.4% 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 34.7% of the issued shares)
(representing 40.4% of the voting power), and 25.5% of the voting
shares (representing 16% of the voting power) of Finaxa were
owned by Banque Paribas, a French bank ("PARIBAS"). Including
the shares owned by Midi Participations, as of March 1, 1996, the
Mutuelles AXA directly or indirectly owned 51% of the voting
shares (representing 64.7% of the voting power) of AXA. 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,
1996 totaling more than $168 billion (of which more than $55
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,
14
<PAGE>
1996, 33 of the FORTUNE 100 companies. The Adviser and its
subsidiaries employ approximately 1,450 employees who operate out
of domestic offices and the overseas offices of subsidiaries in
Bombay, Istanbul, London, Sao Paulo, Sydney, Tokyo, Toronto,
Bahrain, Luxembourg and Singapore. The 51 registered investment
companies managed by the Adviser comprising 109 separate
investment portfolios currently more than two million
shareholders.
Under the Advisory Agreement, the Adviser provides
investment advisory services and order placement facilities for
each Portfolio of the Fund and pays all compensation of Directors
of the Fund who are affiliated persons of the Adviser. The
Adviser or its affiliates also furnish the Fund without charge
with management supervision and assistance and office facilities.
Under the Advisory Agreement, the Trust Portfolio pays the
Adviser at an annual rate of .45 of 1% of the average daily value
of its net assets. The fee is accrued daily and paid monthly.
The Adviser has undertaken, until, at its request, the Fund
notifies investors to the contrary that if, in any fiscal year,
the aggregate expenses of the Trust Portfolio, exclusive of
taxes, brokerage, interest on borrowings and extraordinary
expenses, but including the management fee, exceed .50 of 1% of
the Trust Portfolio's average net assets for the fiscal year, the
Trust Portfolio may deduct from the payment to be made to the
Adviser, or the Adviser will bear, such excess expenses. The
Adviser voluntarily agreed to reimburse the Trust Portfolio from
May 1, 1994 to October 9, 1994 for expenses exceeding .45 of 1%
of its average daily net assets. The Adviser also voluntarily
reimbursed the Trust Portfolio from October 15, 1993 to April 30,
1994 for expenses exceeding .20 of 1% of its average daily net
assets. For the fiscal year ended April 30, 1996, the Adviser
reimbursed $147,358, all of which represented advisory fees. For
the fiscal year ended April 30, 1995, the Adviser reimbursed
$182,478, all of which represented advisory fees. For the fiscal
year ended April 30, 1994, the Adviser reimbursed $198,160, of
which $81,648 represented advisory fees. The Adviser may make
payments from time to time from its own resources, which may
include the management fees paid by the Trust Portfolio to
compensate broker-dealers, depository institutions, or other
persons for providing distribution assistance and administrative
services and to otherwise promote the sale of shares of the Trust
Portfolio, including paying for the preparation, printing and
distribution of prospectuses and other literature or other
promotional activities. The Trust Portfolio also pays for
printing of prospectuses and other reports to shareholders and
all expenses and fees related to registrations and filings with
the Securities and Exchange Commission and with state regulatory
authorities. The Trust Portfolio pays all other expenses
incurred in its operations, including the Adviser's management
fees; custody, transfer and dividend disbursing expenses; legal
15
<PAGE>
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, 1996, and thereafter for
successive twelve month periods computed from each January 1,
provided that such continuance is specifically approved at least
annually by a vote of a majority of the Trust Portfolio's
outstanding voting securities or by the Fund's Board of
Directors, including in either case approval by the majority of
the Directors who are not parties to the Advisory Agreement or
interested persons as defined in the Act. The Advisory Agreement
may be terminated with respect to the Trust Portfolio without
penalty on 60 days' written notice at the option of either party
or by vote of a majority of the outstanding voting securities of
the Trust Portfolio; it will automatically terminate in the event
of assignment. The Adviser is not liable for any action or
inaction 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.
16
<PAGE>
________________________________________________________________
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
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
17
<PAGE>
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, 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
18
<PAGE>
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
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
19
<PAGE>
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, 1996, 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.
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.
20
<PAGE>
________________________________________________________________
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
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
21
<PAGE>
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 July 31, 1996, there were
185,912,596 shares of the Trust Portfolio outstanding. Set forth
and discussed below is certain information as to all persons who
owned of record or beneficially 5% or more of the outstanding
shares of the Trust Portfolio at July 31, 1996.
No. of % of
Name and Address Shares Class
Trust Portfolio
Hare & Co. 15,666,086 8.43%
c/o Bank of New York
One Wall Street
5th Floor
New York, NY 10286-0001
Mrs. Frances L. Loeb 17,324,228 9.32%
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
22
<PAGE>
Plaza, Baltimore, Maryland 21201, for matters relating to
Maryland law.
Accountants. McGladrey & Pullen, LLP, New York, New
York, are the independent auditors for the Trust Portfolio.
Yield Quotations and Performance Information.
Advertisements containing yield quotations for the Trust
Portfolio may from time to time be sent to investors or placed in
newspapers, magazines or other media on behalf of the Fund.
These advertisements may quote performance rankings, ratings or
data from independent organizations or financial publications
such as Lipper Analytical Services, Inc., Morningstar, Inc.,
IBC's Money Fund Report, IBC's Money Market Insight or Bank Rate
Monitor or compare the Portfolio's performance to bank money
market deposit accounts, certificates of deposit or various
indices. Yield quotations are calculated in accordance with the
standardized method referred to in Rule 482 under the Securities
Act of 1933.
Yield quotations for the Trust Portfolio are thus
determined by (i) computing the net change over a seven-day
period, exclusive of the capital changes, in the value of a
hypothetical pre-existing account having a balance of one share
of the Trust Portfolio at the beginning of such period, (ii)
dividing the net change in account value by the value of the
account at the beginning of the base period to obtain the base
period return, and (iii) multiplying the base period return by
(365/7) with the resulting yield figure carried to the nearest
hundredth of one percent. The Trust Portfolio's effective annual
yield represents a compounding of the annualized yield according
to the formula: effective yield + [(base period return + 1)
365/7] - 1.
23
<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
Moody's highest rating for short-term municipal loans is
MIG-1/VMIG-1. Moody's states that short-term municipal
securities rated MIG-1/VMIG-1 are of the best quality, enjoying
strong protection from established cash flows of funds for their
servicing or from established and broad-based access to the
market for refinancing, or both. Loans bearing the MIG-2/VMIG-2
designation are of high quality, with margins of protection ample
although not so large as in the MIG-1/VMIG-1 group.
Standard & Poor's highest rating for short-term
municipal loans is SP-1. Standard & Poor's stated that
short-term municipal securities bearing the SP-1 designation have
very strong or strong capacity to pay principal and interest.
Those issues rated SP-1 which are determined to possess
overwhelming safety characteristics will be given a plus (+)
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<PAGE>
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.
25
00250072.AJ8
<PAGE>
STATEMENT OF NET ASSETS
April 30, 1996 ACM Institutional Reserves - Prime Portfolio
_______________________________________________________________________________
Principal
Amount
(000) Security Yield Value
- ---------------------------------------------------------------------------
COMMERCIAL PAPER--49.5%
AGA Capital, Inc.
$ 15,000 5/17/96 5.38% $ 14,964,133
4,300 5/07/96 5.42 4,296,116
Allianz of America Finance Corp.
5,000 5/16/96 5.18 4,989,208
7,000 5/24/96 5.32 6,976,208
Banca CRT Financial Corp.
16,000 5/08/96 5.36 15,983,324
Beta Finance, Inc.
10,000 9/12/96 5.20 9,806,444
Bil North America, Inc.
8,000 6/06/96 5.11 7,959,120
Chiao Tung Bank Co., Ltd.
2,000 5/31/96 5.45 1,990,917
Corporate Asset Securitization
Australia Ltd.
7,000 5/24/96 5.36 6,976,029
CS First Boston, Inc.
12,000 5/16/96 5.34 11,973,300
Den Danske Corp.
5,000 5/01/96 5.21 5,000,000
Embarcadero Center Venture (Four)
5,270 5/28/96 5.40 5,248,657
Generale Bank, Inc.
5,000 5/28/96 5.10 4,980,875
International Securitization Corp.
10,000 5/20/96 5.37 9,971,658
Kaempfer Capital Corp.
2,000 5/03/96 5.37 1,999,403
Market Street Funding Corp.
16,000 5/23/96 5.37 15,947,493
Merrill Lynch & Co.
6,000 6/28/96 5.25 5,949,250
14,000 5/22/96 5.35 13,956,308
Mitsubishi Motors Credit
10,000 6/06/96 5.40 9,946,000
Morgan Stanley Group, Inc.
4,000 5/31/96 5.10 3,983,000
7,000 5/02/96 5.15 6,998,999
National Australia Funding
5,000 5/29/96 5.43 4,978,883
Premium Funding, Inc.
2,524 6/03/96 Series B 5.35 2,511,622
3,215 5/15/96 Series B 5.40 3,208,248
4,303 5/20/96 Series E 5.40 4,290,736
Sumitomo Corp. of America
5,000 6/18/96 5.36 4,964,267
10,000 5/31/96 5.37 9,955,250
5,000 6/13/96 5.37 4,967,930
Triple-A-One Funding Corp.
3,196 5/07/96 5.40 3,193,124
Wal-Mart Stores, Inc.
15,221 5/02/96 5.26 15,218,776
Working Capital Management Co., L.P.
5,000 5/07/96 5.38 4,995,517
16,000 5/17/96 5.50 15,960,889
Total Commercial Paper
(amortized cost $244,141,684) 244,141,684
CERTIFICATES OF DEPOSIT--36.1%
American Express Centurion Bank
20,000 5.31%, 5/24/96 5.31 20,000,000
Bank of Nova Scotia
5,000 5.37%, 7/12/96 5.35 5,000,095
Bank of Tokyo - Mitsubishi
10,000 5.50%, 7/15/96 5.50 10,000,000
Banque Nationale de Paris
10,000 5.34%, 6/03/96 5.32 10,000,183
Dai Ichi Kangyo Bank Ltd.
15,290 5.48%, 5/17/96 5.45 15,290,203
Deutsche Bank
5,000 5.48%, 1/03/97 5.65 4,991,449
5,000 5.53%, 4/02/97 5.80 4,987,688
Hessische Landesbank
15,000 5.10%, 9/06/96 5.15 14,997,402
Norinchukin Bank
5,000 5.48%, 7/26/96 5.47 5,000,118
18,000 5.56%, 7/10/96 5.55 18,000,345
Sanwa Bank
4,000 5.40%, 5/10/96 5.39 4,000,010
5,000 5.43%, 5/22/96 5.40 5,000,080
16,000 5.47%, 5/10/96 5.46 16,000,040
Societe Generale N.A., Inc.
20,000 5.34%, 6/03/96 5.32 20,000,350
Sumitomo Bank
4,000 5.42%, 5/08/96 5.46 3,999,952
5,000 5.44%, 5/28/96 5.40 5,000,149
16,000 5.49%, 5/07/96 5.50 15,999,965
Total Certificates of Deposit
(amortized cost $178,268,029) 178,268,029
U.S. GOVERNMENT & AGENCY OBLIGATIONS--6.5%
Federal Home Loan Bank
5,000 5.25%, 11/13/96 FRN 5.32 4,998,182
5,000 5.30%, 10/16/96 FRN 5.43 4,997,206
Federal National Mortgage Assn.
2,000 5.44%, 9/27/96 FRN 5.44 2,000,000
Federal National Mortgage Assn.
5,000 5.16%, 1/27/97 FRN 5.28 4,995,692
Student Loan Marketing Assn.
5,000 5.45%, 1/21/98 FRN 5.48 4,997,521
U.S. Treasury Note
10,000 6.63%, 3/31/97 5.15 10,122,703
Total U.S. Government &
Agency Obligations
(amortized cost $32,111,304) 32,111,304
CORPORATE OBLIGATIONS--5.1%
Eksportfinans
5,000 5.50%, 2/17/97 5.25 5,008,306
General Electric Capital Corp.
5,000 5.27%, 7/22/96 FRN 5.47 4,997,744
Goldman Sachs Group LP
10,000 5.51%, 9/13/96 FRN 5.51 10,000,000
Toyota Motor Credit Corp.
5,000 5.00%, 2/26/97 5.10 4,995,271
Total Corporate Obligations
(amortized cost $25,001,321) 25,001,321
BANK OBLIGATIONS--3.0%
Morgan Guaranty Trust Co.
5,000 5.50%, 1/08/97 5.50 5,000,000
Wachovia Bank
5,000 5.31%, 1/03/97 FRN 5.41 4,996,878
5,000 6.30%, 7/15/96 5.78 5,004,934
Total Bank Obligations
(amortized cost $15,001,812) 15,001,812
TOTAL INVESTMENTS--100.2%
(amortized cost $494,524,150) 494,524,150
Other assets less liabilities--(0.2%) (1,204,927)
NET ASSETS--100%
(offering and redemption price of
$1.00 per share; 493,504,955 shares
outstanding) $493,319,223
Glossary:
FRN Floating Rate Note.
See notes to financial statements.
STATEMENT OF NET ASSETS
April 30, 1996 ACM Institutional Reserves - Government Portfolio
_______________________________________________________________________________
Principal
Amount
(000) Security Yield Value
- --------------------------------------------------------------------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS--98.8%
FEDERAL NATIONAL MORTGAGE ASSOCIATION--43.6%
$ 12,000 7/30/96 5.20% $ 11,844,000
3,000 7/23/96 5.20 2,964,033
5,000 5.21%, 9/03/96 FRN 5.25 4,999,341
10,000 5.21%, 4/04/97 FRN 5.24 9,997,088
4,000 5.24%, 10/15/96 FRN 5.31 3,998,729
15,000 5.28%, 10/01/96 FRN 5.36 14,994,558
2,000 5.44%, 9/27/96 FRN 5.44 2,000,000
5,000 5.56%, 10/15/97 FRN 5.56 5,000,825
10,000 5.62%, 7/02/96 5.12 10,007,378
------------
65,805,952
FEDERAL HOME LOAN BANK--14.9%
6,000 6/10/96 4.90 5,967,333
2,500 5.19%, 8/05/96 FRN 5.34 2,499,077
2,500 5.25%, 11/13/96 FRN 5.32 2,499,091
1,500 5.29%, 2/06/97 5.30 1,499,827
5,000 8.00%, 7/25/96 5.30 5,029,646
5,000 8.25%, 5/27/96 5.26 5,009,622
------------
22,504,596
U.S. TREASURY NOTES--11.4%
5,000 6.50%, 9/30/96 5.02 5,028,168
5,000 6.88%, 2/28/97 5.38 5,059,180
7,000 7.50%, 1/31/97 5.12 7,118,885
------------
17,206,233
FEDERAL FARM CREDIT BANK--11.1%
5,000 4.95%, 3/03/97 5.00 4,997,562
7,300 5.19%, 9/03/96 FRN 5.19 7,300,000
4,000 5.23%, 6/20/96 FRN 5.28 3,999,727
500 5.60%, 7/01/96 5.61 499,919
------------
16,797,208
STUDENT LOAN MARKETING ASSOCIATION--9.4%
4,500 5.22%, 7/12/99 FRN 5.62 4,446,966
1,715 5.25%, 7/19/96 FRN 5.22 1,715,099
4,000 5.45%, 1/21/98 FRN 5.48 3,998,017
4,000 5.50%, 1/23/97 FRN 5.45 4,006,423
------------
14,166,505
FEDERAL HOME LOAN MORTGAGE CORP.--8.3%
4,000 5/20/96 5.18 3,989,064
5,000 5/20/96 5.20 4,986,278
3,000 5/28/96 5.21 2,988,278
500 5/01/96 5.88 500,000
------------
12,463,620
TOTAL INVESTMENTS--98.8%
(amortized cost $148,944,114) 148,944,114
Other assets less liabilities--1.2% 1,872,064
NET ASSETS--100%
(offering and redemption price of
$1.00 per share; 150,945,387
shares outstanding) $150,816,178
Glossary:
FRN Floating Rate Note.
See notes to financial statements.
STATEMENT OF NET ASSETS
April 30, 1996 ACM Institutional Reserves - Tax-Free Portfolio
_______________________________________________________________________________
Principal
Amount
(000) Security+ Yield Value
- --------------------------------------------------------------------------
MUNICIPAL BONDS--75.4%
ALASKA--0.4%
Anchorage Electric Utility Rev.
Pre-refunded AMBAC
$ 800 6/01/96 3.60% $ 801,563
ARIZONA--4.0%
Maricopa County Pollution Control PCR
(Arizona Public Service Co. - Palo
Verde Project) Series '94B VRDN*
2,800 5/01/29 4.10 2,800,000
Maricopa County Pollution Control PCR
(Arizona Public Service Co. - Palo
Verde Project) Series '94E VRDN*
4,500 5/01/29 4.10 4,500,000
-----------
7,300,000
CALIFORNIA--6.1%
Alameda County TRAN
Board of Education
750 7/05/96 4.00 750,632
Los Angeles Regional Airport
(American Airlines) Series '84D VRDN*
2,600 12/01/24 4.05 2,600,000
Los Angeles Regional Airport Improvement Airport Rev.
(LAX International Airport) AMT VRDN*
6,900 12/01/25 4.15 6,900,000
Santa Clara TRAN
Unified School District Series '95
1,000 7/10/96 4.00 1,000,919
-----------
11,251,551
COLORADO--2.3%
Arapahoe County COP
AMBAC
610 12/01/96 3.80 615,552
Colorado HFA MFHR
(Hunters) VRDN*
1,960 3/01/12 4.80 1,960,000
Colorado TRAN
Series A
1,600 6/27/96 3.60 1,602,024
-----------
4,177,576
DISTRICT OF COLUMBIA--6.2%
District of Columbia GO
Series '92 A-1 VRDN*
3,000 10/01/07 4.30 3,000,000
District of Columbia GO
Series '92 A-2 VRDN*
2,500 10/01/07 4.30 2,500,000
District of Columbia GO
Series '92 A-4 VRDN*
2,000 10/01/07 4.30 2,000,000
District of Columbia GO
Series '92 A-6 VRDN*
1,300 10/01/07 4.30 1,300,000
District of Columbia HFA MFHR
(McLean Apts.) Series '85A VRDN*
2,600 12/01/05 4.40 2,600,000
-----------
11,400,000
FLORIDA--2.8%
Pinellas County Health Facilities Auth.
(Mease Manor, Inc.) Series '95 VRDN*
5,100 11/01/15 4.30 5,100,000
GEORGIA--0.9%
College Park IDR
(Wynefield I Project) AMT VRDN*
1,700 12/01/16 3.75 1,700,000
HAWAII--1.4%
Hawaii State Housing Finance & Dev. Corp.
(Kamakee Vista) Series '90A VRDN*
2,600 7/01/25 4.35 2,600,000
IDAHO--0.8%
Idaho GO TRAN
Series '95
1,500 6/27/96 3.60 1,501,888
ILLINOIS--4.7%
Elmhurst Hospital Revenue
(Joint Comm. Health Org.)
Series '88 VRDN*
4,400 7/01/18 4.35 4,400,000
Southwestern Illinois Dev. Auth.
(Shell Oil/Wood River Project)
Series '91 AMT VRDN*
2,500 8/01/21 4.25 2,500,000
Vernon Hills IDR
(Kinder Care Center) VRDN*
550 2/01/01 4.40 550,000
West Chicago IDR
(Acme Printing Co.) Series '89
AMT VRDN*
1,100 5/01/99 4.28 1,100,000
-----------
8,550,000
INDIANA--1.1%
Seymour Econ. Dev.
(Kobelco Metal Powder Co.)
Series '87 AMT VRDN*
2,000 12/01/97 4.75 2,000,000
KANSAS--0.5%
Butler County
(Texaco Refining & Marketing)
Series A AMT VRDN*
1,000 8/01/24 4.45 1,000,000
LOUISIANA--1.3%
West Baton Rouge Industrial District #3
(Dow Chemical) Series '94B VRDN*
2,300 12/01/16 4.15 2,300,000
MARYLAND--1.3%
Maryland Health & Education Facilities
(Loyola College Issue) Series '85 VRDN*
2,300 10/01/10 3.65 2,300,000
MICHIGAN--3.0%
Michigan Strategic Funding PCR
(Consumers Power Co.)
Series '88A VRDN*
5,550 4/15/18 4.10 5,550,000
MINNESOTA--0.3%
Eden Prairie IDA
(Kinder Care Project) Series C VRDN*
465 2/01/01 4.40 465,000
MISSOURI--0.3%
Blue Springs IDA
(Kinder Care Project) Series C VRDN*
540 2/01/01 4.40 540,000
NEW HAMPSHIRE--2.6%
Nashua Housing Auth. MFHR
(Clocktower Project) AMT VRDN*
201 10/20/99 4.75 201,000
Nashua Housing Auth. MFHR
(Clocktower Project) AMT VRDN*
626 10/20/06 4.75 626,000
Nashua Housing Authority MFHR
(Clocktower Project) AMT VRDN*
4,000 10/20/28 4.75 4,000,000
-----------
4,827,000
NEW JERSEY--1.6%
Jersey City
School Promissory Note
1,000 3/07/97 3.55 1,001,615
Jersey City BAN
2,000 9/27/96 4.02 2,005,714
-----------
3,007,329
NEW YORK--6.2%
New York Airport Revenue
(Nippon Cargo Airlines Co.)
Series '92 AMT VRDN*
2,000 11/01/15 4.75 2,000,000
New York City GO
Series '94C VRDN*
2,300 10/01/23 4.25 2,300,000
Port Authority of New York and New Jersey
(Versatile Structure) Series 3 VRDN*
7,000 6/01/20 3.90 7,000,000
-----------
11,300,000
OHIO--2.3%
Hamilton County Health Systems
(Franciscan Sisters) Series '87A VRDN*
4,300 3/01/17 3.90 4,300,000
OREGON--4.4%
Port Morrow
(Portland General Electric) VRDN*
3,900 10/01/13 4.25 3,900,000
Port St. Helens
(Portland General Electric)
Series B VRDN*
4,200 6/01/10 4.10 4,200,000
-----------
8,100,000
PENNSYLVANIA--1.3%
Montgomery County IDA
(Kinder Care Project) Series D VRDN*
400 10/01/00 4.40 400,000
Philadelphia GO TRAN
Series A
1,000 6/27/96 3.90 1,000,857
Philadelphia School District TRAN
1,000 6/28/96 3.95 1,000,840
-----------
2,401,697
RHODE ISLAND--0.7%
Rhode Island Housing & Mortgage Finance
(Homeownership Opportunity)
Series 19C Putable
1,255 1/30/97 3.45 1,255,000
SOUTH CAROLINA--1.4%
Berkeley County PCR
(Amoco Chemical Co.) Series '94 VRDN*
2,600 7/01/12 4.00 2,600,000
SOUTH DAKOTA--1.1%
South Dakota HFA SFMR
(Homeownership Mortgage) Series F
1,000 5/01/97 3.78 1,004,537
South Dakota HFA SFMR
(Homeownership Mortgage) Series G
1,000 5/01/97 3.90 1,003,381
-----------
2,007,918
TEXAS--10.8%
Brazos River Texas Harbor District
(Dow Chemical) Series '92A AMT VRDN*
4,000 12/01/18 4.30 4,000,000
El Paso HFA MFHR
(Viva Apartments Project)
Series '93 AMT Putable
1,500 9/01/96 4.25 1,500,000
Grapevine Dev. Corp. Rev.
(American Airlines) Series B-3 VRDN*
1,600 12/01/24 4.05 1,600,000
Gulf Coast Waste Disposal Auth.
(Amoco Oil Co. Project)
Series '94 AMT VRDN*
600 8/01/23 4.25 600,000
Harris County IDR
(Nippon Pigment USA Project)
Series '87 AMT VRDN*
1,500 7/01/02 4.60 1,500,000
Harris County Toll Road
Multimode-A
1,030 8/15/96 3.70 1,038,085
Midlothian Industrial Dev. Corp.
(Box-Crow Cement Co.) VRDN*
2,300 12/01/09 4.30 2,300,000
Southwest Higher Education Auth.
(Southern Methodist Univ.) VRDN*
7,300 7/01/15 4.10 7,300,000
-----------
19,838,085
VIRGINIA--2.8%
King George County IDA
(Birchwood Power Partners) AMT VRDN*
1,500 4/01/26 4.40 1,500,000
Peninsula Port Authority
(Dominion Terminal Project)
Series '87C VRDN*
400 7/01/16 3.95 400,000
Peninsula Port Authority
(Dominion Terminal Project)
Series '87D VRDN*
3,205 7/01/16 4.10 3,205,000
-----------
5,105,000
WASHINGTON--1.6%
Washington Public Power Supply
(Nuclear Project #2)
3,000 7/01/96 3.50 3,005,616
WISCONSIN--1.2%
Wausau PCR
(Minnesota Mining & Manufacturing) VRDN*
900 8/01/17 3.88 900,000
Wisconsin GO
Series '95
1,300 6/17/96 3.77 1,301,108
-----------
2,201,108
Total Municipal Bonds
(amortized cost $138,486,331) 138,486,331
COMMERCIAL PAPER--26.0%
ARIZONA--1.3%
Salt River Project
Agricultural Imp. & Power District
2,324 8/16/96 3.50 2,324,000
CALIFORNIA--1.3%
Irvine Assessment District
Series '85-7
2,400 5/08/96 4.00 2,400,000
COLORADO--2.6%
Denver Airport Revenue
Series B AMT
2,000 5/03/96 3.60 2,000,000
Denver Airport Revenue
Series B AMT
2,000 5/13/96 3.60 2,000,000
Denver Airport Revenue
Series B AMT
800 8/14/96 3.85 800,000
-----------
4,800,000
FLORIDA--3.0%
Florida Local Government Comm.
(Association of Counties)
2,000 7/25/96 3.45 2,000,000
Jacksonville Pollution Control
1,000 8/15/96 3.50 1,000,000
Sarasota Public Hospital District
Hospital Revenue
(Sarasota Memorial Hospital) Series C
1,200 7/22/96 3.80 1,200,000
Sunshine State Government Finance Agency
Series '86
1,300 5/02/96 3.40 1,299,995
-----------
5,499,995
GEORGIA--1.0%
Georgia Municipal Gas Auth.
(Transco Portfolio 1) Series B
1,900 8/28/96 3.60 1,900,000
ILLINOIS--0.8%
Decatur Water Rev.
1,500 5/09/96 3.45 1,500,000
LOUISIANA--2.7%
Plaquemines Port Harbor & Terminal
(Electro-Coal Corp./Tampa Electric)
2,500 8/13/96 3.45 2,500,000
Plaquemines Port Harbor & Terminal
(Electro-Coal Corp./Tampa Electric)
2,500 5/10/96 3.50 2,500,000
-----------
5,000,000
MASSACHUSETTS--1.6%
Massachusetts Bay Trans. Auth.
3,000 5/16/96 3.50 3,000,000
NEW YORK--1.7%
New York City GO
Series '96
2,000 8/22/96 3.50 2,000,000
New York City Municipal Water Auth.
1,200 8/12/96 3.80 1,200,000
-----------
3,200,000
OHIO--1.1%
Montgomery County Hospital Rev.
(Miami Valley Hospital) Series C
2,000 9/09/96 3.65 2,000,000
PENNSYLVANIA--0.5%
Philadelphia Gas Works
Series B
1,000 5/02/96 3.40 999,996
TEXAS--6.9%
Austin Utility Systems
(Travis & Williamson County) Series A
1,000 5/07/96 3.35 1,000,000
Austin Utility Systems
(Travis & Williamson County) Series A
1,969 8/22/96 3.40 1,969,000
Austin Utility Systems
(Travis & Williamson County) Series A
1,400 8/29/96 3.70 1,400,000
Brownsville Utility Systems
Series A
2,000 7/12/96 3.45 2,000,000
Dallas Area Rapid Transit
Sales Series A
2,000 8/22/96 3.50 2,000,000
Dallas Area Rapid Transit
Sales Series A
2,000 9/10/96 3.65 2,000,000
University of Texas
Board of Regents Series A
2,210 7/16/96 3.40 2,210,000
-----------
12,579,000
UTAH--0.6%
Intermountain Power Agency Power
Supply Rev.
Series '85F
1,000 9/10/96 3.50 1,000,000
VERMONT--0.3%
Vermont GO
Series H
500 6/03/96 3.40 499,998
WISCONSIN--0.6%
Wisconsin Health & Education Facilities
(Alexian Village of Milwaukee)
Series '88A
1,000 5/01/96 3.50 1,000,000
Total Commercial Paper
(amortized cost $47,702,867) 47,702,989
TOTAL INVESTMENTS--101.4%
(amortized cost $186,189,198) 186,189,320
Other assets less liabilities--(1.4%) (2,577,651)
NET ASSETS--100%
(offering and redemption price of
$1.00 per share; 183,695,120 shares
outstanding) $183,611,669
+ 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.
Glossary:
AMBAC American Municipal Bond Assurance Corporation
AMT Alternative Minimum Tax
BAN Bond Anticipation Note
COP Certificate of Participation
GO General Obligation
HFA Housing Finance Agency/Authority
IDA Industrial Development Authority
IDR Industrial Development Revenue
MFHR Multi-Family Housing Revenue
PCR Pollution Control Revenue
SFMR Single Family Mortgage Revenue
TRAN Tax & Revenue Anticipation Note
VRDN Variable Rate Demand Note
See notes to financial statements.
STATEMENT OF NET ASSETS
April 30, 1996 ACM Institutional Reserves - Trust Portfolio
_______________________________________________________________________________
Principal
Amount
(000) Security Yield Value
- --------------------------------------------------------------------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS--99.3%
FEDERAL NATIONAL MORTGAGE ASSOCIATION--33.2%
$ 2,000 5/14/96 4.97% $ 1,996,411
5,365 6/26/96 5.05 5,322,855
2,500 7/12/96 5.20 2,474,000
4,000 7/30/96 5.20 3,948,000
10,000 7/05/96 FRN 5.27 9,998,775
5,000 5/10/96 5.29 4,993,387
1,750 5/13/96 5.35 1,746,885
3,000 5/24/96 5.35 2,989,746
5,000 5.21%, 9/03/96 FRN 5.25 4,999,341
6,000 5.24%, 10/15/96 FRN 5.31 5,998,094
2,000 5.44%, 9/27/96 FRN 5.44 2,000,000
5,000 5.56%, 10/15/97 FRN 5.56 5,000,825
5,000 5.76%, 9/03/96 5.30 5,004,806
-----------
56,473,125
FEDERAL HOME LOAN MORTGAGE CORP.--22.0%
5,000 5/20/96 5.18 4,986,331
5,000 5/28/96 5.21 4,980,462
10,000 5/30/96 5.24 9,957,789
17,000 5/01/96 5.30 17,000,000
500 5/01/96 5.88 500,000
-----------
37,424,582
STUDENT LOAN MARKETING ASSOCIATION--15.9%
1,680 5.25%, 7/19/96 FRN 5.30 1,679,841
22,300 5.45%, 11/20/97 FRN 5.40 22,320,198
2,960 5.50%, 11/01/96 FRN 5.30 2,962,807
-----------
26,962,846
U.S. TREASURY NOTES--10.1%
5,000 6.50%, 9/30/96 5.02 5,028,168
5,000 6.88%, 2/28/97 5.38 5,059,180
7,000 7.50%, 1/31/97 5.12 7,118,885
-----------
17,206,233
FEDERAL HOME LOAN BANK--9.6%
2,000 6/10/96 4.90 1,989,111
2,000 5/15/96 4.99 1,996,119
4,000 8/12/96 5.19 3,940,603
2,500 5.25%, 11/13/96 FRN 5.32 2,499,091
1,500 5.29%, 2/06/97 5.30 1,499,827
4,350 5.30%, 10/16/96 FRN 5.43 4,347,569
-----------
16,272,320
FEDERAL FARM CREDIT BANK--8.5%
10,000 5.19%, 9/03/96 FRN 5.19 10,000,000
4,000 5.23%, 6/20/96 FRN 5.28 3,999,727
500 5.60%, 7/01/96 5.61 499,919
-----------
14,499,646
TOTAL INVESTMENTS--99.3%
(amortized cost $168,838,752) 168,838,752
Other assets less liabilities--0.7% 1,226,670
NET ASSETS--100%
(offering and redemption price of
$1.00 per share; 170,118,302 shares
outstanding) $170,065,422
Glossary:
FRN Floating Rate Note.
See notes to financial statements.
STATEMENT OF OPERATIONS
Year Ended April 30, 1996 ACM Institutional Reserves - Prime Portfolio
_______________________________________________________________________________
INVESTMENT INCOME
Interest $18,667,854
EXPENSES
Advisory fee (Note B) $650,885
Registration fees 229,188
Custodian fees 88,024
Transfer agency 24,037
Audit and legal fees 9,533
Directors' fees 5,825
Amortization of organization expenses 1,936
Printing 1,500
Miscellaneous 14,399
Total expenses 1,025,327
Less: expense reimbursement (374,443) 650,884
Net investment income 18,016,970
REALIZED LOSS ON INVESTMENTS
Net realized loss on investments (67,682)
NET INCREASE IN NET ASSETS FROM OPERATIONS $17,949,288
STATEMENT OF CHANGES IN NET ASSETS
_______________________________________________________________________________
Year Ended Year Ended
April 30,1996 April 30,1995
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 18,016,970 $ 8,084,553
Net realized loss on investments (67,682) (77,316)
Net increase in net assets from operations 17,949,288 8,007,237
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (18,016,970) (8,084,553)
CAPITAL STOCK TRANSACTIONS
Net increase 295,597,513 89,756,927
Total increase 295,529,831 89,679,611
NET ASSETS
Beginning of year 197,789,392 108,109,781
End of year $493,319,223 $197,789,392
See notes to financial statements.
STATEMENT OF OPERATIONS
Year Ended April 30, 1996 ACM Institutional Reserves - Government Portfolio
_______________________________________________________________________________
INVESTMENT INCOME
Interest $8,411,860
EXPENSES
Advisory fee (Note B) $ 295,096
Registration fees 111,308
Custodian fees 67,505
Transfer agency 24,669
Audit and legal fees 14,095
Amortization of organization expenses 7,320
Directors' fees 5,704
Printing 1,500
Miscellaneous 9,397
Total expenses 536,594
Less: expense reimbursement (241,498) 295,096
Net investment income 8,116,764
REALIZED LOSS ON INVESTMENTS
Net realized loss on investments (44,374)
NET INCREASE IN NET ASSETS FROM OPERATIONS $8,072,390
STATEMENT OF CHANGES IN NET ASSETS
_______________________________________________________________________________
Year Ended Year Ended
April 30,1996 April 30,1995
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 8,116,764 $ 4,532,827
Net realized loss on investments (44,374) (23,230)
Net increase in net assets from operations 8,072,390 4,509,597
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (8,116,764) (4,532,827)
CAPITAL STOCK TRANSACTIONS
Net increase 46,450,680 27,878,851
Total increase 46,406,306 27,855,621
NET ASSETS
Beginning of year 104,409,872 76,554,251
End of year $150,816,178 $104,409,872
See notes to financial statements.
STATEMENT OF OPERATIONS
Year Ended April 30, 1996 ACM Institutional Reserves - Tax-Free Portfolio
_______________________________________________________________________________
INVESTMENT INCOME
Interest $3,612,924
EXPENSES
Advisory fee (Note B) $ 183,789
Registration fees 117,197
Custodian fees 69,030
Audit and legal fees 20,709
Transfer agency 20,319
Directors' fees 11,200
Amortization of organization expenses 7,320
Printing 1,500
Miscellaneous 6,710
Total expenses 437,774
Less: expense reimbursement (253,985) 183,789
Net investment income 3,429,135
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss on investments (66,276)
Net change in unrealized appreciation of investments (44)
Net loss on investments (66,320)
NET INCREASE IN NET ASSETS FROM OPERATIONS $3,362,815
STATEMENT OF CHANGES IN NET ASSETS
_______________________________________________________________________________
Year Ended Year Ended
April 30,1996 April 30,1995
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 3,429,135 $ 1,069,590
Net realized loss on investments (66,276) (11,019)
Net change in unrealized appreciation
of investments (44) (154,369)
Net increase in net assets from operations 3,362,815 904,202
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (3,429,135) (1,069,590)
CAPITAL STOCK TRANSACTIONS
Net increase (decrease) 148,180,832 (133,564)
OTHER CAPITAL CONTRIBUTIONS 0 154,387
Total increase (decrease) 148,114,512 (144,565)
NET ASSETS
Beginning of year 35,497,157 35,641,722
End of year $183,611,669 $35,497,157
See notes to financial statements.
STATEMENT OF OPERATIONS
Year Ended April 30, 1996 ACM Institutional Reserves - Trust Portfolio
_______________________________________________________________________________
INVESTMENT INCOME
Interest $8,807,446
EXPENSES
Advisory fee (Note B) $ 685,336
Registration fees 107,261
Custodian fees 62,435
Transfer agency 20,740
Audit and legal fees 17,417
Directors' fees 5,735
Printing 3,500
Miscellaneous 6,419
Total expenses 908,843
Less: expense reimbursement (147,358) 761,485
Net investment income 8,045,961
REALIZED LOSS ON INVESTMENTS
Net realized loss on investments (32,758)
NET INCREASE IN NET ASSETS FROM OPERATIONS $8,013,203
STATEMENT OF CHANGES IN NET ASSETS
_______________________________________________________________________________
Year Ended Year Ended
April 30,1996 April 30,1995
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 8,045,961 $ 3,667,921
Net realized loss on investments (32,758) (16,775)
Net increase in net assets from operations 8,013,203 3,651,146
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (8,045,961) (3,667,921)
CAPITAL STOCK TRANSACTIONS
Net increase 60,921,819 72,386,158
Total increase 60,889,061 72,369,383
NET ASSETS
Beginning of year 109,176,361 36,806,978
End of year $170,065,422 $109,176,361
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
April 30, 1996 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 consisting of four Portfolios: 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. 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 397 days or less. 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 July 1996 on Government and Tax-Free Portfolios.
3. Federal Income Taxes
It is the Fund's policy to comply with the require-
ments of the Internal Revenue Code applicable to regulated investment companies
and to distribute all of its investment company taxable income and net realized
gains, if applicable, to its shareholders. Therefore, no provisions for federal
income or excise taxes are required.
4. Dividends
The 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 Tax-Free Portfolio from net investment
income for the year ended April 30, 1996 are exempt from federal income taxes.
However, certain shareholders may be subject to the alternative minimum tax
(AMT).
5. Accounting Estimates
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the reporting
period. Actual results could differ from those estimates.
6. 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.
NOTES TO FINANCIAL STATEMENTS (continued) ACM Institutional Reserves, Inc.
_______________________________________________________________________________
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 Tax-Free 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. For the year ended April 30, 1996, reimbursement was
$374,443, $241,498 $253,985 and $147,358 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, 1996, amounted to $18,000 per
portfolio. The Adviser purchased tax and revenue anticipation notes issued by
Orange County, California and held by the Tax-Free Portfolio on July 19, 1995
for $500,000.
NOTE C: Investment Transactions
At April 30, 1996, 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, 1996 of $185,732, of which $1,377 expires in 1999,
$3,535 in 2000, $6,777 in 2001, $29,045 in 2002, $77,316 in 2003 and $67,682 in
the year 2004; the Government Portfolio had a capital loss carry-forward of
$129,209, of which $1,340 expires in 2000, $9,174 in 2001, $51,091 in 2002,
$23,230 in 2003 and $44,374 in the year 2004; the Tax-Free Portfolio had a
capital loss carryforward of $83,573, of which $87 expires in 2000, $6,191 in
2002, $11,019 in 2003 and $66,276 in the year 2004; and the Trust Portfolio
had a capital loss carryforward of $52,880, of which $3,347 expires in 2002,
$16,775 in 2003 and $32,758 in the year 2004.
NOTES TO FINANCIAL STATEMENTS (continued) ACM Institutional Reserves, Inc.
_______________________________________________________________________________
NOTE D: Capital Stock
There are 1,000,000,000 shares of $.01 par value capital stock authorized. At
April 30, 1996, capital paid-in aggregated $493,504,955 on Prime Portfolio,
$150,945,387 on Government Portfolio, $183,695,120 on Tax-Free Portfolio, and
$170,118,302 on Trust Portfolio. Transactions, all at $1.00 per share, were as
follows:
Year Ended Year Ended
PRIME PORTFOLIO April 30,1996 April 30,1995
- ------------------------------------------- --------------- ---------------
Shares sold 4,839,076,341 1,407,213,884
Shares issued on reinvestments of dividends 18,016,970 8,106,776
Shares redeemed (4,561,495,798) (1,325,563,733)
Net increase 295,597,513 89,756,927
Year Ended Year Ended
GOVERNMENT PORTFOLIO April 30,1996 April 30,1995
- ------------------------------------------- --------------- ---------------
Shares sold 1,212,530,228 608,886,851
Shares issued on reinvestments of dividends 8,116,764 4,548,358
Shares redeemed (1,174,196,312) (585,556,358)
Net increase 46,450,680 27,878,851
Year Ended Year Ended
TAX-FREE PORTFOLIO April 30,1996 April 30,1995
- ------------------------------------------- --------------- ---------------
Shares sold 1,044,165,922 295,718,756
Shares issued on reinvestments of dividends 3,429,135 1,075,771
Shares redeemed (899,414,225) (296,928,091)
Net increase (decrease) 148,180,832 (133,564)
Year Ended Year Ended
TRUST PORTFOLIO April 30,1996 April 30,1995
- ------------------------------------------- --------------- ---------------
Shares sold 989,948,926 415,936,022
Shares issued on reinvestments of dividends 8,045,961 3,675,366
Shares redeemed (937,073,068) (347,225,230)
Net increase 60,921,819 72,386,158
NOTES TO FINANCIAL STATEMENTS (continued) ACM Institutional Reserves, Inc.
_______________________________________________________________________________
NOTE E: Financial Highlights
Per share operating performance for a share outstanding throughout each period.
<TABLE>
<CAPTION>
Year Ended April 30,
------------------------------------------------
PRIME PORTFOLIO 1996 1995 1994 1993 1992
- -------------------------------------- -------- -------- -------- -------- --------
<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 0.0560 0.0502 0.0325 0.0353 0.0535
LESS: DISTRIBUTIONS
Dividends from net investment income (0.0560) (0.0502) (0.0325) (0.0353) (0.0535)
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) 5.76% 5.15% 3.30% 3.59% 5.50%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $493.3 $197.8 $108.1 $64.3 $25.0
Ratio to average net assets of:
Expenses, net of waivers
and reimbursements 0.20% 0.20% 0.20% 0.18% 0.02%
Expenses, before waivers
and reimbursements 0.32% 0.36% 0.42% 0.54% 0.81%
Net investment income (d) 5.54% 5.24% 3.25% 3.42% 5.30%
</TABLE>
<TABLE>
<CAPTION>
Year Ended April 30, July 22,1991(a)
-------------------------------------- Through
GOVERNMENT PORTFOLIO 1996 1995 1994 1993 April 30,1992
- -------------------------------------- -------- -------- -------- -------- --------------
<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 0.0552 0.0493 0.0315 0.0339 0.0377
LESS: DISTRIBUTIONS
Dividends from net investment income (0.0552) (0.0493) (0.0315) (0.0339) (0.0377)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURNS
Total investment return based on
net asset value (b) 5.67% 5.06% 3.20% 3.45% 4.98%(c)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $150.8 $104.4 $76.6 $73.2 $24.7
Ratio to average net assets of:
Expenses, net of waivers
and reimbursements 0.20% 0.20% 0.20% 0.18% 0.10%(c)
Expenses, before waivers
and reimbursements 0.36% 0.38% 0.36% 0.49% 0.86%(c)
Net investment income (d) 5.50% 4.94% 3.15% 3.30% 4.86%(c)
</TABLE>
(a) Commencement of operations.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends at net asset value during the period and redemption on the last day
of the period.
(c) Annualized.
(d) Net of expenses reimbursed or waived by the Adviser.
ACM Institutional Reserves, Inc.
_______________________________________________________________________________
<TABLE>
<CAPTION>
Year Ended April 30, July 22,1991(a)
--------------------------------------- Through
TAX-FREE PORTFOLIO 1996 1995 1994 1993 April 30,1992
- --------------------------------------- --------- -------- -------- -------- --------------
<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 0.0372 0.0326 0.0240 0.0287 0.0334
Net unrealized loss on investments -0- (0.0048) -0- -0- -0-
Net increase in net asset value
from operations 0.0372 0.0278 0.0240 0.0287 0.0334
LESS: DISTRIBUTIONS
Dividends from net investment income (0.0372) (0.0326) (0.0240) (0.0287) (0.0334)
ADD: CAPITAL CONTRIBUTION
Capital Contributed by the Adviser -0- 0.0048 -0- -0- -0-
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) 3.79% 3.31%(e) 2.43% 2.92% 4.40%(c)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $183.6 $35.5 $35.6 $40.9 $8.5
Ratio to average net assets of:
Expenses, net of waivers
and reimbursements 0.20% 0.20% 0.20% 0.18% 0.10%(c)
Expenses, before waivers
and reimbursements 0.48% 0.76% 0.69% 0.95% 2.08%(c)
Net investment income (d) 3.73% 3.31% 2.40% 2.73% 4.01%(c)
</TABLE>
<TABLE>
<CAPTION>
Year Ended April 30, Nov. 16,1992(a)
---------------------------- Through
TRUST PORTFOLIO 1996 1995 1994 April 30,1993
- --------------------------------------- --------- -------- -------- --------------
<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 0.0527 0.0479 0.0309 0.0144
LESS: DISTRIBUTIONS
Dividends from net investment income (0.0527) (0.0479) (0.0309) (0.0144)
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) 5.41% 4.91% 3.14% 3.21%(c)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $170.1 $109.2 $36.8 $5.3
Ratio to average net assets of:
Expenses, net of waivers
and reimbursements 0.50% 0.49% 0.14% -0-
Expenses, before waivers
and reimbursements 0.60% 0.75% 1.23% 0.45%(c)
Net investment income (d) 5.28% 5.31% 3.15% 3.17%(c)
</TABLE>
(a) Commencement of operations.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends at net asset value during the period and redemption on the last day
of the period.
(c) Annualized.
(d) Net of expenses reimbursed or waived by the Adviser.
(e) Capital contributed by the Adviser had no material effect on net asset
value, and therefore, no effect on total return.
INDEPENDENT AUDITOR'S REPORT ACM Institutional Reserves, Inc.
_______________________________________________________________________________
To the Board of Directors 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, 1996 and the related statements of opera-tions, 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, 1996 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, 1996, and the results of its operations, changes in its net
assets, and financial highlights for the periods indicated, in conformity with
generally accepted accounting principles.
McGladrey & Pullen, LLP
New York, New York
June 6, 1996
