As filed with the Securities and Exchange
Commission on August 28, 1997
File Nos. 33-34001
811-6068
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 13 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF l940
Amendment No. 13 X
ACM INSTITUTIONAL RESERVES, INC.
(Exact Name of Registrant as Specified in Charter)
1345 Avenue of the Americas, New York, New York 10105
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including
Area Code:(800) 221-5672
EDMUND P. BERGAN, JR.
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York l0105
(Name and address of agent for service)
It is proposed that this filing will become effective (check
appropriate box)
X immediately upon filing pursuant to paragraph (b)
on (date) pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)
on (date) pursuant to paragraph (a)
<PAGE>
on 75 days after filing pursuant to paragraph (a)
(ii)
on (date) pursuant to paragraph (a) (ii) of Rule
485
If appropriate, check the following box:
/ / This post-effective amendment designates a new
effective date for a previously filed post-
effective amendment.
Registrant has registered an indefinite number of shares of
common stock pursuant to Rule 24f-2 under the Investment
Company Act of 1940. Registrant's Rule 24f-2 notice for its
fiscal year ended April 30, 1997 was filed on June 25, 1997.
2
<PAGE>
CROSS REFERENCE SHEET
(as required by Rule 404(c))
N-1A Item No. Location in Prospectuses
PART A
Item 1. Cover Page..................Cover Page
Item 2. Synopsis....................Expense Information
Item 3. Financial Highlights........Financial Highlights
Item 4. General Description of
Registrant..................Investment Objectives
and Policies
Item 5. Management of the Fund......Additional
Information
Item 6. Capital Stock and Other
Securities..................Additional
Information
Item 7. Purchase of Securities
Being Offered...............Purchase and
Redemption of Shares;
Additional
Information
Item 8. Redemption or Repurchase....Purchase and
Redemption of Shares
Item 9. Pending Legal Proceedings...Not Applicable
PART B Location in Statements
Of Additional Information
Item 10. Cover Page..................Cover Page
Item 11. Table of Contents...........Cover Page
Item 12. General Information and
History.....................Management; General
Information
3
<PAGE>
Item 13. Investment Objectives
and Policies................Investment Objectives
and Policies;
Investment
Restrictions
Item 14. Management of the Fund......Management
Item 15. Control Persons and
Principal Holders of
Securities..................Not Applicable
Item 16. Investment Advisory and
Other Services..............Management
Item 17. Brokerage Allocation........General Information
Item 18. Capital Stock and Other
Securities..................General Information;
Daily Dividends -
Determination of Net
Asset Value
Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered.....................Purchase and
Redemption of Shares;
Daily Dividends-
Determination of Net
Asset Value
Item 20. Tax Status..................Taxes
Item 21. Underwriters................General Information
Item 22. Calculation of Performance
Data........................General Information
Item 23. Financial Statements........Financial Statements;
Report of Independent
Accountants
4
<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 Fund, call on a touch-
tone telephone toll-free (800) 251-0539 and press the following sequence of
keys:
[_]1 [_]# [_]1 [_]# [_]1 [_]6 [_]#
for the Prime Portfolio,
[_]1 [_]# [_]1 [_]# [_]2 [_]7 [_]#
for the Government Portfolio and
[_]1 [_]# [_]1 [_]# [_]3[_]8 [_]#
for the Tax-Free Portfolio.
ACM Institutional Reserves, Inc. (the "Fund") is an open-end investment compa-
ny. The Prime Portfolio, the Government Portfolio and the Tax-Free Portfolio
(singularly a "Portfolio" and collectively "Portfolios"), each of which is di-
versified, are offered by this prospectus. The Fund's investment objectives
are--in the following order of priority--safety of principal, excellent liquid-
ity and maximum current income (which, in the case of the Tax-Free Portfolio,
is exempt from Federal income taxes) to the extent consistent with the first
two objectives.
The Fund offers institutional and corporate investors a convenient and econom-
ical way to invest in managed portfolios.
This prospectus sets forth the information about the Prime, Government and
Tax-Free Portfolios that a prospective investor should know before investing.
Please retain it for future reference.
An investment in the Fund is (i) neither insured nor guaranteed by the U.S.
Government; (ii) not a deposit or obligation of, or guaranteed or endorsed by,
any bank; and (iii) not federally insured by the Federal Deposit Insurance Cor-
poration, the Federal Reserve Board or any other agency. There can be no assur-
ance that a Portfolio of the Fund will be able to maintain a stable net asset
value of $1.00 per share.
A "Statement of Additional Information," dated September , 1997 which pro-
vides a further discussion of certain areas in this prospectus and other mat-
ters and which may be of interest to some investors, has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. For
a free copy, call or write the Fund at the telephone number or address shown
above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
(R)This registered service mark used under license from the owner, Alliance
Capital Management L.P.
ACM
INSTITUTIONAL
RESERVES
--PRIME PORTFOLIO
--GOVERNMENT PORTFOLIO
--TAX-FREE PORTFOLIO
[LOGO OF ALLIANCE CAPITAL APPEARS HERE]
PROSPECTUS
SEPTEMBER , 1997
<PAGE>
EXPENSE INFORMATION
SHAREHOLDER TRANSACTION EXPENSES
The Fund has no sales load on purchases or reinvested dividends, deferred
sales load, redemption fee or exchange fee.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES PRIME GOVERNMENT TAX-FREE
(as a percentage of average net assets, net of PORTFOLIO PORTFOLIO PORTFOLIO
expense reimbursement or fee waiver) --------- ---------- ---------
<S> <C> <C> <C>
Management Fees............................... .11% .05% .07%
Other Expenses................................ .09 .15 .13
--- --- ---
Total Fund Operating Expenses................. .20% .20% .20%
</TABLE>
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return (cumulatively through the end of each time period):
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Prime Portfolio................................ $2 $6 $11 $26
Government Portfolio........................... $2 $6 $11 $26
Tax-Free Portfolio............................. $2 $6 $11 $26
</TABLE>
The purpose of the foregoing table is to assist the investor in understanding
the various costs and expenses that an investor in the Prime, Government and
Tax-Free Portfolios will bear directly and indirectly. The expenses listed in
the table for each Portfolio are net of voluntary expense reimbursements and
voluntary fee waivers. The expenses of such Portfolios, before voluntary ex-
pense reimbursements or fee waiver, would be: Prime Portfolio: Management
Fees--.20%, Other Expenses--.09% and Total Fund Operating Expenses--.29%; Gov-
ernment Portfolio: Management Fees--.20%, Other Expenses--.15% and Total Fund
Operating Expenses--.35%; Tax-Free Portfolio: Management Fees--.20%, Other Ex-
penses--.13% and Total Fund Operating Expenses--.33%. The example should not be
considered a representation of past or future expenses; actual expenses may be
greater or less than those shown.
FINANCIAL HIGHLIGHTS
PER SHARE OPERATING PERFORMANCE (FOR A SHARE OUTSTANDING THROUGHOUT EACH
PERIOD)
The following tables have been audited by McGladrey & Pullen LLP, the Fund's
independent auditors, whose report thereon appears in the Statement of Addi-
tional Information. This information should be read in conjunction with the fi-
nancial statements and notes thereto included in the Statement of Additional
Information.
<TABLE>
<CAPTION>
PRIME PORTFOLIO
----------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR AUG. 20, 1990(a)
ENDED ENDED ENDED ENDED ENDED ENDED THROUGH
APRIL 30, APRIL 30, APRIL 30, APRIL 30, APRIL 30, APRIL 30, APRIL 30,
1997 1996 1995 1994 1993 1992 1991
--------- --------- --------- --------- --------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period ........ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- ------- -------
INCOME FROM
INVESTMENT
OPERATIONS
Net investment
income......... 0.0530 0.0560 0.0502 0.0325 0.0353 0.0535 0.0506
------- ------- ------- ------- ------- ------- -------
LESS:
DISTRIBUTIONS
Dividends from
net investment
income......... (0.0530) (0.0560) (0.0502) (0.0325) (0.0353) (0.0535) (0.0506)
------- ------- ------- ------- ------- ------- -------
Net asset value,
end of period . $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= ======= =======
TOTAL RETURNS
Total investment
return based on
net asset
value(b) ...... 5.44% 5.76% 5.15% 3.30% 3.59% 5.50% 7.54%(c)
======= ======= ======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL
DATA
Net assets, end
of period (in
millions)...... $ 867.3 $ 493.3 $ 197.8 $ 108.1 $ 64.3 $ 25.0 $ 27.2
RATIO TO AVERAGE
NET ASSETS OF:
Expenses, net of
waivers and
reimbursements. 0.20% 0.20% 0.20% 0.20% 0.18% 0.02% -0-
Expenses, before
waivers and
reimbursements. 0.29% 0.32% 0.36% 0.42% 0.54% 0.81% 1.09%
Net investment
income(d)...... 5.31% 5.54% 5.24% 3.25% 3.42% 5.30% 6.84%(c)
<CAPTION>
GOVERNMENT PORTFOLIO
------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR JUL. 22, 1991(a)
ENDED ENDED ENDED ENDED ENDED THROUGH
APRIL 30, APRIL 30, APRIL 30, APRIL 30, APRIL 30, APRIL 30,
1997 1996 1995 1994 1993 1992
--------- --------- --------- --------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period ........ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- --------- ----------------
INCOME FROM
INVESTMENT
OPERATIONS
Net investment
income......... 0.0519 0.0552 0.0493 0.0315 0.0339 0.0377
--------- --------- --------- --------- --------- ----------------
LESS:
DISTRIBUTIONS
Dividends from
net investment
income......... (0.0519) (0.0552) (0.0493) (0.0315) (0.0339) (0.0377)
--------- --------- --------- --------- --------- ----------------
Net asset value,
end of period . $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= ========= ================
TOTAL RETURNS
Total investment
return based on
net asset
value(b) ...... 5.33% 5.67% 5.06% 3.20% 3.45% 4.98%(c)
========= ========= ========= ========= ========= ================
RATIOS/SUPPLEMENTAL
DATA
Net assets, end
of period (in
millions)...... $ 326.5 $ 150.8 $ 104.4 $ 76.6 $ 73.2 $ 24.7
RATIO TO AVERAGE
NET ASSETS OF:
Expenses, net of
waivers and
reimbursements. 0.20% 0.20% 0.20% 0.20% 0.18% 0.10%(c)
Expenses, before
waivers and
reimbursements. 0.35% 0.36% 0.38% 0.36% 0.49% 0.86%(c)
Net investment
income(d)...... 5.22% 5.50% 4.94% 3.15% 3.30% 4.86%(c)
</TABLE>
- -------
(a) Commencement of operations.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends at net asset value during the period and redemption on the last
day of the period.
(c) Annualized.
(d) Net of expenses reimbursed or waived by the Adviser.
2
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE PORTFOLIO
--------------------------------------------------------------------------
JULY 22, 1991(a)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
APRIL 30, APRIL 30, APRIL 30, APRIL 30, APRIL 30, APRIL 30,
1997 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income... 0.0347 0.0372 0.0326 0.0240 0.0287 0.0334
Net unrealized loss on
investments............ --0-- --0-- (0.0048) --0-- --0-- --0--
-------- -------- -------- -------- -------- --------
Net increase in net as-
set value from opera-
tions.................. 0.0347 0.0372 0.0278 0.0240 0.0287 0.0334
-------- -------- -------- -------- -------- --------
LESS: DISTRIBUTIONS
Dividends from net in-
vestment income........ (0.0347) (0.0372) (0.0326) (0.0240) (0.0287) (0.0334)
-------- -------- -------- -------- -------- --------
ADD: CAPITAL CONTRIBU-
TION
Capital Contributed by
the Adviser............ --0-- --0-- 0.0048 --0-- --0-- --0--
-------- -------- -------- -------- -------- --------
Net asset value, end of
period ................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ========
TOTAL RETURNS
Total investment return
based on net asset
value(b) .............. 3.53% 3.79% 3.31%(e) 2.43% 2.92% 4.40%(c)
======== ======== ======== ======== ======== ========
RATIOS/SUPPLEMENTAL DATA
Net assets, end of pe-
riod (in millions) .... $ 183.1 $ 183.6 $ 35.5 $ 35.6 $ 40.9 $ 8.5
RATIO TO AVERAGE NET AS-
SETS OF:
Expenses, net of waivers
and reimbursements..... 0.20% 0.20% 0.20% 0.20% 0.18% 0.10%(c)
Expenses, before waivers
and reimbursements..... 0.33% 0.48% 0.76% 0.69% 0.95% 2.08%(c)
Net investment
income(d).............. 3.46% 3.73% 3.31% 2.40% 2.73% 4.01%(c)
</TABLE>
- -------
(a) Commencement of operations.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends at net asset value during the period and redemption on the last
day of the period.
(c) Annualized.
(d) Net of expenses reimbursed or waived by the Adviser.
(e) Capital contributed by the Adviser had no material effect on net asset val-
ue, and therefore, no effect on total return.
--------------
From time to time each Portfolio advertises its "yield" and "effective
yield." Both yield figures are based on historical earnings and are not in-
tended to indicate future performance. To calculate the "yield," the amount of
dividends paid on a share during a specified seven-day period is assumed to be
paid each week over a 52-week period and is shown as a percentage of the in-
vestment. To calculate "effective yield," which will be higher than the "yield"
because of compounding, the dividends paid are assumed to be reinvested. Divi-
dends for the Prime Portfolio for the seven days ended June 30, 1997, after ex-
pense reimbursement, amounted to an annualized yield of 5.52%, equivalent to an
effective yield of 5.67%. Absent such reimbursement, the annualized yield for
such period would have been 5.43%, equivalent to an effective yield of 5.58%.
Dividends for the Government Portfolio for the seven days ended June 30, 1997,
after expense reimbursement, amounted to an annualized yield of 5.42%, equiva-
lent to an effective yield of 5.57%. Absent such reimbursement, the annualized
yield for such period would have been 5.27%, equivalent to an effective yield
of 5.42%. Dividends for the Tax-Free Portfolio for the seven days ended June
30, 1997 amounted to an annualized yield of 4.01%, equivalent to an effective
yield of 4.09%. Absent such reimbursement, the annualized yield for such period
would have been 3.88%, equivalent to an effective yield of 3.96%. Further in-
formation about each Portfolio's performance is contained in the annual report
to shareholders and Statement of Additional Information which may be obtained
without charge by contacting Alliance Fund Services, Inc. at the address or the
telephone number shown on the cover of this prospectus.
3
<PAGE>
INTRODUCTION
The Fund consists of four distinct Portfolios, three of which, the Prime
Portfolio, the Government Portfolio and the Tax-Free Portfolio, are offered by
this prospectus and each of which invests in a diversified portfolio of money
market securities. The Fund is designed for institutional and corporate in-
vestors who can benefit from money market income. Investors in the Fund avoid
certain administrative burdens that they would incur by investing in money
market instruments directly, such as monitoring of maturity dates, safeguard-
ing of receipts and deliveries, and the maintenance of tax information and
other records. At the time of investment, no security purchased by a Portfolio
can have a maturity exceeding one year, which maturity may extend to 397 days,
and the average maturity of each Portfolio cannot exceed 90 days.
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives of each Portfolio are--in the following order of
priority--safety of principal, excellent liquidity and maximum current income
(which, in the case of the Tax-Free Portfolio, is exempt from Federal income
taxes) to the extent consistent with the first two objectives. As a matter of
fundamental policy, each Portfolio pursues its objectives by maintaining a
portfolio of high-quality U.S. dollar-denominated money market securities each
of which, at the time of investment, has a remaining maturity of one year or
less which maturity may extend to 397 days. While neither this policy, the in-
vestment objectives, nor the "other fundamental investment policies" described
below may be changed for a Portfolio without shareholder approval, the
nonfundamental investment policies may be changed upon notice but without such
approval. The Fund may in the future establish additional portfolios which may
have different investment objectives. There can be no assurance that any Port-
folio's objectives will be achieved.
Each Portfolio will comply with Rule 2a-7 under the Investment Company Act of
1940 (the "Act"), as amended from time to time, including the diversification,
quality and maturity requirements imposed by the Rule (a more detailed de-
scription of Rule 2a-7 is set forth in the Portfolios' Statement of Additional
Information under "Investment Objectives and Policies"). To the extent that a
Portfolio's limitations are more permissive than Rule 2a-7, the Portfolio will
comply with the more restrictive provisions of the Rule.
PRIME PORTFOLIO
The money market securities in which the Prime Portfolio invests include: (1)
marketable obligations of, or guaranteed by, the U.S. Government, its agencies
or instrumentalities (collectively, the "U.S. Government"); (2) certificates
of deposit, bankers' acceptances and interest bearing savings deposits issued
or guaranteed by banks or savings and loan associations having total assets of
more than $1 billion and which are members of the Federal Deposit Insurance
Corporation, and certificates of deposit and bankers' acceptances denominated
in U.S. dollars and issued by U.S. branches of foreign banks having total as-
sets of at least $1 billion that are believed by the Adviser to be of quality
equivalent to that of other such instruments in which it may invest; (3) com-
mercial paper of prime quality [i.e., rated A-1+ or A-1 by Standard & Poor's
Corporation ("Standard & Poor's") or Prime-1 by Moody's Investors Service,
Inc. ("Moody's") or, if not rated, issued by companies having outstanding debt
securities rated AAA or AA by Standard & Poor's, or Aaa or Aa by Moody's] and
participation interests in loans extended by banks to such companies; and (4)
repurchase agreements that are collateralized in full each day by liquid secu-
rities of the types listed above. These agreements are entered into with "pri-
mary dealers" (as designated by the Federal Reserve Bank of New York) in U.S.
Government securities or State Street Bank and Trust Company, the Fund's Cus-
todian. For each repurchase agreement, the Portfolio requires continual main-
tenance of the market
4
<PAGE>
value of the underlying collateral in amounts equal to, or in excess of, the
agreement amount. In the event of a dealer default, the Portfolio might suffer
a loss to the extent the proceeds from the sale of the collateral were less
than the repurchase price. The Portfolio may also invest in certificates of
deposit issued by, and time deposits maintained at, foreign branches of domes-
tic banks described in (2) above and prime quality dollar-denominated commer-
cial paper issued by foreign companies meeting the criteria specified in (3)
above. The Portfolio's commercial paper investments may include variable
amount master demand notes which represent a direct borrowing arrangement in-
volving periodically fluctuating rates of interest under a letter agreement
between a commercial paper issuer and an institutional lender pursuant to
which the lender may determine to invest varying amounts.
The Portfolio may purchase restricted securities that are determined by the
Adviser to be liquid in accordance with procedures adopted by the Board of Di-
rectors of the Fund, such as, securities eligible for resale under Rule 144A
under the Securities Act of 1933 (the "Securities Act") and commercial paper
issued in reliance upon the exemption from registration in Section 4(2) of the
Securities Act. Restricted securities are securities subject to contractual or
legal restrictions on resale, such as those arising from an issuer's reliance
upon certain exemptions from registration under the Securities Act.
The Portfolio may invest in asset-backed securities that meet its existing
diversification, quality and maturity criteria. Asset-backed securities are
securities issued by special purpose entities whose primary assets consist of
a pool of loans or accounts receivable. The securities may be in the form of a
beneficial interest in a special purpose trust, limited partnership interest,
or commercial paper or other debt securities issued by a special purpose cor-
poration. Although the securities may have some form of credit or liquidity
enhancement, payments on the securities depend predominately upon collection
of the loans and receivables held by the issuer. It is the Portfolio's current
intention to limit its investment in such securities to not more than 5% of
its net assets.
OTHER FUNDAMENTAL INVESTMENT POLICIES. To maintain portfolio diversification
and reduce investment risk, the Portfolio may not (1) invest 25% or more of
its total assets in the securities of issuers conducting their principal busi-
ness activities in any one industry although there is no such limitation with
respect to U.S. Government securities or bank obligations, including certifi-
cates of deposit, bankers' acceptances and interest bearing savings deposits
(such bank obligations are issued by domestic banks, including U.S. branches
of foreign banks subject to the same regulation as U.S. banks); (2) invest
more than 5% of its assets in the securities of any one issuer (except the
U.S. Government) although with respect to 25% of its total assets it may in-
vest without regard to such limitation; (3) invest more than 5% of its assets
in the securities of any issuer (except the U.S. Government) having less than
three years of continuous operation or purchase more than 10% of any class of
the outstanding securities of any issuer (except the U.S. Government); (4) en-
ter into repurchase agreements if, as a result thereof, more than 10% of its
assets would be committed to repurchase agreements not terminable within seven
days and other illiquid investments; (5) borrow money except from banks on a
temporary basis in aggregate amounts not exceeding 15% of its assets; the
Portfolio will not purchase any investments while borrowings in excess of 5%
of total assets exist; and (6) mortgage, pledge or hypothecate its assets ex-
cept to secure such borrowings.
As a matter of operating policy, fundamental policy number (2) would give the
Portfolio the ability to invest, with respect to 25% of its assets, more than
5% of its assets in any one issuer only in the event Rule 2a-7 is amended in
the future.
GOVERNMENT PORTFOLIO
The securities in which the Government Portfolio invests include: (1) market-
able obligations of, or guaranteed by, the U.S. Government, including issues
of the United States Treasury, such as bills, certificates of indebtedness,
notes and bonds, and issues of agencies and instrumentalities established un-
der the authority of an act of Congress; and (2) repurchase agreements that
are collateralized in full each day by the types of securities listed above.
These agreements are entered into with "primary dealers" (as designated by the
Federal Reserve Bank of New York) in U.S. Government securities or State
Street Bank and Trust Company, the Fund's
5
<PAGE>
Custodian. For each repurchase agreement, the Portfolio requires continual
maintenance of the market value of the underlying collateral in amounts equal
to, or in excess of, the agreement amount. In the event of a dealer default,
the Portfolio might suffer a loss to the extent the proceeds from the sale of
the collateral were less than the repurchase price. The Portfolio may commit
up to 15% of its net assets to the purchase of when-issued U.S. Government se-
curities. To facilitate such acquisitions, the Fund's Custodian will maintain,
in a separate account of the Portfolio, U.S. Government securities or other
liquid high-grade debt securities having value equal to, or greater than, such
commitments. The price of when-issued securities, which is generally expressed
in yield terms, is fixed at the time the commitment to purchase is made, but
delivery and payment for such securities take place at a later time. Normally
the settlement date occurs from within ten days to one month after the pur-
chase of the issue. The value of when-issued securities may fluctuate prior to
their settlement, thereby creating an unrealized gain or loss to the Portfo-
lio.
As a matter of operating policy, which may be changed without shareholder ap-
proval, the Government Portfolio attempts to invest in securities that the Ad-
viser believes are legal investments for federal credit unions as set forth in
Sections 107(7) and (8) of the Federal Credit Union Act and Part 703 of the
National Credit Union Administration regulations.
OTHER FUNDAMENTAL INVESTMENT POLICIES. To maintain portfolio diversification
and reduce investment risk, the Portfolio may not (1) invest more than 5% of
its assets in repurchase agreements with any one counterparty thereof or more
than 10% of its assets in repurchase agreements not terminable within seven
days and other illiquid investments; (2) borrow money except from banks on a
temporary basis in aggregate amounts not exceeding 10% of its assets; the
Portfolio will not purchase any investments while borrowings in excess of 5%
of total assets exist; and (3) pledge, hypothecate, or in any manner transfer,
as security for indebtedness, its assets except to secure such borrowings.
TAX-FREE PORTFOLIO
As a matter of fundamental policy, the Tax-Free Portfolio, except when assum-
ing a temporary defensive position, must maintain at least 80% of its total
assets in high-grade municipal securities having maturities of one year or
less (as opposed to taxable investments described below). Normally, substan-
tially all of its income will be tax-exempt as described below.
The Portfolio seeks maximum current income that is exempt from Federal income
taxes by investing principally in a diversified portfolio of high-grade munic-
ipal securities. Such income may be subject to state or local income taxes.
Investors should compare yields (which will fluctuate in response to market
conditions) and tax consequences before making an investment decision.
Under current Federal income tax law, (1) interest on tax-exempt municipal
securities issued after August 7, 1986 which are "specified private activity
bonds" will be treated as an item of tax preference for purposes of the alter-
native minimum tax ("AMT") imposed on individuals and corporations, though for
regular Federal income tax purposes such interest will remain fully tax-ex-
empt, and (2) interest on all tax-exempt obligations will be included in "ad-
justed current earnings" of corporations for AMT purposes. The Portfolio may
purchase "private activity" municipal securities because such issues have pro-
vided, and may continue to provide, somewhat higher yields than other compara-
ble municipal securities. However, the Portfolio will limit its investments so
that no more than 20% of its total income is derived from municipal securities
that bear interest subject to the AMT.
MUNICIPAL SECURITIES. The municipal securities in which the Portfolio invests
include municipal notes and short-term municipal bonds. Municipal notes are
generally used to provide for short-term capital needs and generally have ma-
turities of one year or less. Examples include tax anticipation and revenue
anticipation notes which are generally issued in anticipation of various sea-
sonal revenues, bond anticipation notes, and tax-exempt commercial paper.
Short-term municipal bonds may include general obligation bonds, which are se-
cured by the issuer's pledge of its faith, credit and taxing power for payment
of principal and interest, and revenue bonds, which are generally paid from
the revenues of a particular facility or a specific excise or other source.
The Portfolio may invest in variable rate obligations whose interest rates
are adjusted either at predesignated
6
<PAGE>
periodic intervals or whenever there is a change in the market rate to which
the security's interest rate is tied. Such adjustments minimize changes in the
market value of the obligation and, accordingly, enhance the ability of the
Portfolio to maintain a stable net asset value. Variable rate securities pur-
chased may include participation interests in private activity bonds backed by
letters of credit of Federal Deposit Insurance Corporation member banks having
total assets of more than $1 billion. The Portfolio will comply with Rule 2a-7
with respect to its investments in variable rate obligations supported by let-
ters of credit.
All of the Portfolio's municipal securities at the time of purchase are rated
within the two highest quality ratings of Moody's (Aaa and Aa, MIG 1 and MIG 2
or VMIG 1 and VMIG 2) or Standard & Poor's (AAA and AA or SP-1 and SP-2), or
judged by the Adviser to be of comparable quality. Securities must also meet
credit standards applied by the Adviser.
To further enhance the quality and liquidity of the securities in which the
Tax-Free Portfolio invests, such securities frequently are supported by credit
and liquidity enhancements, such as letters of credit, from third party finan-
cial institutions. The Portfolio continuously monitors the credit quality of
such third parties; however, changes in the credit quality of such a financial
institution could cause the Portfolio's investments backed by that institution
to lose value and affect the Portfolio's share price.
The Portfolio also may invest in stand-by commitments, which may involve cer-
tain expenses and risks, but such commitments are not expected to comprise a
significant portion of its investments. The Portfolio may commit up to 15% of
its net assets to the purchase of when-issued securities. For a description of
when-issued securities, see above.
TAXABLE INVESTMENTS. The taxable investments in which the Portfolio may invest
include obligations of the U.S. Government and its agencies, high-quality cer-
tificates of deposit and bankers' acceptances, prime commercial paper and re-
purchase agreements.
OTHER FUNDAMENTAL INVESTMENT POLICIES. To reduce investment risk, the Portfo-
lio may not (1) invest more than 25% of its total assets in municipal securi-
ties whose issuers are located in the same state or in municipal securities the
interest upon which is paid from revenues of similar-type projects; (2) invest
more than 5% of its total assets in the securities of any one issuer except the
U.S. Government, although with respect to 25% of its total assets the Portfolio
may invest up to 10% per issuer; (3) purchase more than 10% of any class of the
voting securities of any one issuer except those of the U.S. Government; (4)
invest more than 10% of its assets in repurchase agreements not terminable
within seven days (whether or not illiquid) or other illiquid investments; (5)
have more than 5% of its assets invested in repurchase agreements with the same
vendor; and (6) borrow money except from banks on a temporary basis for ex-
traordinary or emergency purposes in an aggregate amount not to exceed 15% of
the Portfolio's total assets; the Portfolio will not purchase any investments
while borrowings in excess of 5% of total assets exist.
PURCHASE AND REDEMPTION OF SHARES
OPENING ACCOUNTS
(1) Telephone the Fund toll-free at (800) 237-5822. The Fund will ask for the
(a) name of the account as you wish it to be registered, (b) address of
the account, (c) taxpayer identification number and (d) Portfolio of the
Fund in which you wish to invest. The Fund will then provide you with an
account number.
(2) Instruct your bank to wire Federal funds exactly as follows:
ABA 0110 0002 8
State Street Bank and Trust Company
Boston, MA 02101
ACM Institutional Reserves, Inc.--Prime,
Government or Tax-Free Portfolio
DDA 9903-279-9
Your account name ] as registered
Your account number] with the Fund
7
<PAGE>
(3) Mail a completed Application Form to:
Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, New Jersey 07096-1520
SUBSEQUENT INVESTMENTS
(1) Telephone the Fund toll-free at (800) 237-5822 to place your order for
additional shares.
(2) Instruct your bank to wire Federal funds to State Street Bank and Trust
Company ("State Street Bank") as in (2) above or mail your check or nego-
tiable bank draft payable to ACM Institutional Reserves, Inc. to Alliance
Fund Services, Inc. as in (3) above.
REDEMPTIONS
You may withdraw any amount from your account on any Fund business day (any
weekday exclusive of days on which the New York Stock Exchange or State Street
Bank is closed) between 9:00 a.m. and 5:00 p.m. (New York time) via orders
given to Alliance Fund Services, Inc. by telephone toll-free (800) 237-5822.
Redemption orders must include your account name as registered with the Fund
and the account number.
Telephone redemptions may be made on any Fund business day between 9:00 a.m.
and 4:00 p.m. (New York time), as described below. If your telephone redemp-
tion order is received by Alliance Fund Services, Inc. prior to 4:00 p.m. (New
York time) for the Prime and Government Portfolios and prior to 12:00 Noon
(New York time) for the Tax-Free Portfolio on any Fund business day, we will
send the proceeds in Federal funds by wire to your designated bank account
that day. Redemptions are made without any charge to you.
During periods of drastic economic or market developments, such as the market
break of October 1987, it is possible that shareholders would have difficulty
in reaching Alliance Fund Services, Inc. by telephone (although no such diffi-
culty was apparent at any time in connection with the 1987 market break). If a
shareholder were to experience such difficulty, the shareholder should issue
written instructions to Alliance Fund Services, Inc. at the address shown on
the cover of this prospectus. The Fund reserves the right to suspend or termi-
nate its telephone redemption service at any time without notice. Neither the
Fund nor the Adviser, or Alliance Fund Services, Inc. will be responsible for
the authenticity of telephone requests for redemptions that the Fund reasona-
bly believes to be genuine. The Fund will employ reasonable procedures in or-
der to verify that telephone requests for redemptions are genuine, including
among others, recording such telephone instructions and causing written con-
firmation of the resulting transactions to be sent to shareholders. If the
Fund did not employ such procedures, it could be liable for losses arising
from unauthorized or fraudulent telephone instructions. Selected dealers or
agents may charge a fee for handling telephone requests for redemptions.
OBTAINING AN APPLICATION FORM. If you wish to obtain an Application Form, or
you have questions about the Form, purchasing shares, or other Fund procedures,
please telephone the Fund toll-free at (800) 237-5822.
ADDITIONAL INFORMATION
CHANGES IN APPLICATION FORM. If you decide to change instructions or any
other information already given on your Application Form, send a written no-
tice to ACM Institutional Reserves, Inc., P.O. Box 1520, Secaucus, New Jersey
07096, with your signature guaranteed by an institution which is an "eligible
guarantor" as defined in Rule 17Ad-15 under the Securities Exchange Act of
1934, as amended.
INVESTMENTS MADE BY CHECK. Money transmitted by a check drawn on a member of
the Federal Reserve System is converted to Federal funds in one business
8
<PAGE>
day following receipt and is then invested in the Fund. Checks drawn on banks
which are not members of the Federal Reserve System may take longer to be con-
verted and invested. All payments must be in United States dollars.
Proceeds from any subsequent redemption by you of Fund shares that were pur-
chased by check will not be forwarded to you until the Fund is reasonably as-
sured that your check has cleared, normally up to fifteen days following the
purchase date.
SHARE PRICE. Shares of each Portfolio of the Fund are sold and redeemed on a
continuous basis without sales or redemption charges at their net asset value
which is expected to be constant at $1.00 per share, although this price is
not guaranteed. The net asset value of each Portfolio's shares, except the
Tax-Free Portfolio, is determined each Fund business day (as defined under
"Purchase and Redemption of Shares--Redemptions," above), at 12:00 Noon and
4:00 p.m. (New York time). The net asset value of the Tax-Free Portfolio
shares is determined each Fund business day at 12:00 Noon (New York time). The
net asset value per share of each Portfolio is calculated by taking the sum of
the value of the Portfolio's investments (amortized cost value is used for
this purpose) and any cash or other assets, subtracting liabilities, and di-
viding by the total number of shares of the Portfolio outstanding. All ex-
penses, including the fees payable to the Adviser, are accrued daily.
TIMING OF INVESTMENTS AND REDEMPTIONS. Each Portfolio, except the Tax-Free
Portfolio, has two transaction times each business day, 12:00 Noon and 4:00
p.m. (New York time). The Tax-Free Portfolio has one transaction time each
Fund business day, 12:00 Noon (New York time). Investments receive the full
dividend for a day if the investor's telephone order is placed by 4:00 p.m.
(New York time) for the Prime or Government Portfolio and Federal funds or
bank wire monies are received by State Street Bank before 4:00 p.m. on that
day. Investments receive the full dividend for a day if the investor's tele-
phone order is placed by 12:00 Noon (New York time) and Federal funds or bank
wire monies are secured by State Street Bank before 4:00 p.m. on that day with
respect to the Tax-Free Portfolio.
Redemption proceeds are normally wired the same business day if a redemption
request is received prior to 12:00 Noon, but in no event later than seven
days, unless redemptions have been suspended or postponed due to the determi-
nation of an "emergency" by the Securities and Exchange Commission or to cer-
tain other unusual conditions. Shares do not earn dividends on the day a re-
demption is effected.
MINIMUMS. An initial investment of at least $1,000,000 in the aggregate among
the Portfolios of the Fund is required. There is no minimum for subsequent in-
vestments. The Fund reserves the right at anytime to vary the initial and sub-
sequent investment minimums.
The Fund reserves the right to close out an account that is below $500,000
after at least 60 days' written notice to the shareholder unless the balance
in such account is increased to at least that amount during such period. For
purposes of this calculation, the sum of a shareholder's balance in all of the
Portfolios will be considered as one account.
DAILY DIVIDENDS, OTHER DISTRIBUTIONS, TAXES. All net income of the Tax-Free
Portfolio is determined each business day at 12:00 Noon (New York time), and
that of the Prime and Government 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
9
<PAGE>
may be subject to state or local income taxes. Any exempt-interest dividends
derived from interest on municipal securities subject to the AMT will be a tax
preference item for purposes of the Federal individual and corporate AMT. Dis-
tributions out of taxable interest income, other investment income, and short-
term capital gains are taxable as ordinary income and distributions of long-
term capital gains, if any, are taxable as long-term capital gains irrespec-
tive of the length of time a shareholder held his shares.
THE ADVISER. The Fund retains Alliance Capital Management L.P., 1345 Avenue
of the Americas, New York, NY 10105 under an Advisory Agreement to provide in-
vestment advice and, in general, to supervise its management and investment
program, subject to the general control of the Directors of the Fund. Each
Portfolio pays the Adviser at an annual rate of .20 of 1% of the average daily
value of its net assets. During the Fund's fiscal year ended April 30, 1997,
the Adviser reimbursed its advisory fee in the amount of $661,792, $289,896
and $257,876 for the Prime, Government and Tax-Free Portfolios, respectively.
The Adviser has undertaken until, at its request, the Fund notifies investors
to the contrary, that if, in any fiscal year, the aggregate expenses of a
Portfolio, exclusive of taxes, brokerage, interest on borrowings and extraor-
dinary expenses, but including the management fee, exceed .20 of 1% of a Port-
folio's average net assets for the fiscal year, the Portfolio may deduct from
the payment to be made to the Adviser, or the Adviser will bear, such excess
expense.
The Adviser is a leading international investment manager, supervising client
accounts with assets as of June 30, 1997 totaling more than $199 billion (of
which more than $71 billion represented the assets of investment companies).
The Adviser's clients are primarily major corporate employee benefit funds,
public employee retirement systems, investment companies, foundations and en-
dowment funds. The 54 registered investment companies managed by the Adviser
comprising 116 separate investment portfolios currently have over two million
shareholders. As of June 30, 1997, the Adviser was retained as an investment
manager of employee benefit fund assets for 29 of the Fortune 100 companies.
Alliance Capital Management Corporation, the sole general partner of, and the
owner of a 1% general partnership interest in, the Adviser, is an indirect
wholly-owned subsidiary of The Equitable Life Assurance Society of the United
States, one of the largest life insurance companies in the United States.
The Adviser may make payments from time to time from its own resources, which
may include the management fees paid by the Portfolios of the Fund to compen-
sate broker-dealers, depository institutions, or other persons for providing
distribution assistance and administrative services and to otherwise promote
the sale of shares of the Fund, including paying for the preparation, printing
and distribution of prospectuses and sales literature or other promotional ac-
tivities.
CUSTODIAN, TRANSFER AGENT AND DISTRIBUTOR. State Street Bank and Trust Compa-
ny, P.O. Box 1912, Boston, MA 02105, is the Fund's Custodian. Alliance Fund
Services, Inc., P.O. Box 1520, Secaucus, NJ 07096-1520 and Alliance Fund Dis-
tributors, Inc., 1345 Avenue of the Americas, New York, NY 10105, are the
Fund's Transfer Agent and Distributor, respectively. The transfer agent
charges a fee for its services.
FUND ORGANIZATION. The Fund is an open-end management investment company reg-
istered under the Act consisting of the three Portfolios offered by this Pro-
spectus and the Trust Portfolio, which is offered by a separate prospectus.
The Fund was organized as a Maryland corporation on March 21, 1990. The Fund's
activities are supervised by its Board of Directors. Shareholders of each
Portfolio are entitled to one vote per share and vote as a single series on
matters that affect all series in substantially the same manner.
Maryland law does not require annual meetings of shareholders and it is an-
ticipated that shareholder meetings will be held only when required by Federal
or Maryland law. Shareholders have available certain procedures for the re-
moval of directors.
10
<PAGE>
REPORTS. Shareholders will receive a monthly summary of their account, as well
as semi-annual and annual reports. Shareholders may arrange for a copy of each
of their account statements to be sent to other parties. Shareholders requiring
sub-accounting services should contact Alliance Fund Services, Inc. for a
description of such services and fees.
-------------
BOARD OF DIRECTORS
John D. Carifa, Chairman
Ruth Block
David H. Dievler
John H. Dobkin
William H. Foulk, Jr.
James M. Hester
Clifford L. Michel
Donald J. Robinson
OFFICERS
Ronald M. Whitehill, President
Kathleen A. Corbet, Senior Vice President
Drew Biegel, Senior Vice President
Raymond J. Papera, Senior Vice President
Kenneth T. Carty, Vice President
John F. Chiodi, Jr., Vice President
Maria R. Cona, Vice President
Francis M. Dunn, Vice President
Joseph R. LaSpina, Vice President
Mark D. Gersten, Treasurer and Chief Finl. Officer
Edmund P. Bergan, Jr., Secretary
Vincent S. Noto, Controller
11
<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 investment
company. The Trust Portfolio, which is diversified, is offered by this
prospectus. Three additional Portfolios of the Fund, the Prime Portfolio, the
Government Portfolio and the Tax-Free Portfolio, are offered by a separate
Prospectus. The Trust Portfolio's investment objectives are--in the following
order of priority--safety of principal, excellent liquidity and maximum current
income.
The Trust Portfolio offers institutional and corporate investors a convenient
and economical way to invest in a managed money market portfolio. The Portfolio
is only available through financial intermediaries.
An investment in the Trust Portfolio is (i) neither insured nor guaranteed by
the U.S. Government; (ii) not a deposit or obligation of, or guaranteed or
endorsed by, any bank; and (iii) not federally insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other agency. There
can be no assurance that the Trust Portfolio will be able to maintain a stable
net asset value of $1.00 per share.
A "Statement of Additional Information," dated September , 1997, which
provides a further discussion of certain areas in this prospectus and other
matters and which may be of interest to some investors, has been filed with the
Securities and Exchange Commission and is incorporated herein by reference.
For a free copy, call or write the Trust Portfolio at the telephone number or
address shown above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
/(R)/ This registered service mark used under license from the owner, Alliance
Capital Management L.P.
CONTENTS
--------
<TABLE>
<S> <C>
Expense Information....................................................... 2
Financial Highlights...................................................... 2
Introduction.............................................................. 3
Investment Objectives and Policies........................................ 3
Purchase and Redemption of Shares......................................... 4
Additional Information.................................................... 6
</TABLE>
ACM
INSTITUTIONAL
RESERVES-
TRUST
PORTFOLIO
[LOGO OF ALLIANCE CAPITAL APPEARS HERE]
PROSPECTUS
SEPTEMBER , 1997
<PAGE>
EXPENSE INFORMATION
SHAREHOLDER TRANSACTION EXPENSES
The Trust Portfolio has no sales load on purchases or reinvested dividends,
deferred sales load, redemption fee or exchange fee.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets, net of expense reimbursement or
fee waiver)
<S> <C>
Management Fees......................................................... .38%
Other Expenses.......................................................... .12%
---
Total Fund Operating Expenses........................................... .50%
</TABLE>
EXAMPLE
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment, assuming a 5% annual
return (cumulatively through the end of
each time period): $5 $16 $28 $63
</TABLE>
The purpose of the foregoing table is to assist the investor in understand-
ing the various costs and expenses that an investor in the Trust Portfolio
will bear directly and indirectly. The expenses listed in the table are net of
voluntary expense reimbursements and voluntary fee waivers. The estimated ex-
penses, before voluntary expense reimbursements or fee waiver, would be: Man-
agement Fee--.45%, Other Expenses--.12% and Total Fund Operating Expenses--
.57%. The example should not be considered a representation of past or future
expenses; actual expenses may be greater or less than those shown.
FINANCIAL HIGHLIGHTS
PER SHARE OPERATING PERFORMANCE (FOR A SHARE OUTSTANDING THROUGHOUT EACH
PERIOD)
The following table has been audited by McGladrey & Pullen LLP, the Fund's
independent auditors, whose report thereon appears in the Statement of Addi-
tional Information. This information should be read in conjunction with the
financial statements and notes thereto included in the Statement of Additional
Information.
<TABLE>
<CAPTION>
NOVEMBER 16, 1992(a)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
APRIL 30, 1997 APRIL 30, 1996 APRIL 30, 1995 APRIL 30, 1994 APRIL 30, 1993
-------------- -------------- -------------- -------------- --------------------
<S> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of period......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment income... 0.0492 0.0527 0.0479 0.0309 0.0144
------- ------- ------- ------- -------
LESS: DISTRIBUTIONS
Dividends from net in-
vestment income........ (0.0492) (0.0527) (0.0479) (0.0309) (0.0144)
------- ------- ------- ------- -------
Net asset value, end of
period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
TOTAL RETURNS
Total investment return
based on net asset
value(b)............... 5.04% 5.41% 4.91% 3.14% 3.21%(c)
======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA
Net assets, end of pe-
riod (in millions)..... $ 175.7 $ 170.1 $ 109.2 $ 36.8 $ 5.3
RATIO TO AVERAGE NET AS-
SETS OF:
Expenses, net of waivers
and reimbursements..... 0.50% 0.50% 0.49% 0.14% -0-
Expenses, before waivers
and reimbursements..... 0.57% 0.60% 0.75% 1.23% 0.45%(c)
Net investment
income(d).............. 4.93% 5.28% 5.31% 3.15% 3.17%(c)
</TABLE>
- -------
(a) Commencement of operations.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends at net asset value during the period and redemption on the last
day of the period.
(c) Annualized.
(d) Net of expenses reimbursed or waived by the Adviser.
---------------
From time to time the Trust Portfolio advertises its "yield" and "effective
yield." Both yield figures are based on historical earnings and are not in-
tended to indicate future performance. To calculate the "yield," the amount of
dividends paid on a share during a specified seven-day period is assumed to be
paid each week over a 52-week period and is shown as a percentage of the in-
vestment. To calculate "effective yield," which will be higher than the
"yield" because of compounding, the dividends paid are assumed to be reinvest-
ed. Dividends for the Trust Portfolio for the seven days ended June 30, 1997,
after expense reimbursement, amounted to an annualized yield of 5.27%, equiva-
lent to an effective yield of 5.41%. Absent expense reimbursement, the
annualized yield for this period would have been 5.15%, equivalent to an ef-
fective yield of 5.29%. Further information about the Fund's performance is
contained in the Fund's annual report to shareholders and the Statement of Ad-
ditional Information which may be obtained without charge by contacting Alli-
ance Fund Services, Inc. at the address or the telephone number shown on the
cover of this prospectus.
2
<PAGE>
INTRODUCTION
The Trust Portfolio invests in a diversified portfolio of money market secu-
rities. The Trust Portfolio is designed for institutional and corporate in-
vestors who can benefit from money market income and who are clients of finan-
cial intermediaries. Investors in the Trust Portfolio avoid certain adminis-
trative burdens that they would incur by investing in money market instruments
directly, such as monitoring of maturity dates, safeguarding of receipts and
deliveries, and the maintenance of tax information and other records. At the
time of investment, no security purchased by the Trust Portfolio can have a
maturity exceeding 397 days, and the average maturity of the Trust Portfolio
cannot exceed 90 days.
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives of the Trust Portfolio are--in the following order
of priority--safety of principal, excellent liquidity and maximum current in-
come to the extent consistent with the first two objectives. As a matter of
fundamental policy, the Trust Portfolio pursues its objectives by maintaining
a portfolio of high-quality U.S. dollar-denominated money market securities
each of which, at the time of investment, has a remaining maturity of 397 days
or less. While neither this policy, the investment objectives, nor the "other
fundamental investment policies" described below may be changed for the Trust
Portfolio without shareholder approval, the nonfundamental investment policies
may be changed upon notice but without such approval. The Fund may in the fu-
ture establish additional portfolios which may have different investment ob-
jectives. There can be no assurance that the Portfolio's objectives will be
achieved.
The Trust Portfolio will comply with Rule 2a-7 under the Investment Company
Act of 1940 (the "Act"), as amended from time to time, including the diversi-
fication, quality and maturity requirements imposed by the Rule. A more de-
tailed description of Rule 2a-7 is set forth in the Trust Portfolio's State-
ment of Additional Information under "Investment Objectives and Policies."
MONEY MARKET SECURITIES
The money market securities in which the Trust Portfolio invests include: (1)
marketable obligations of, or guaranteed by, the U.S. Government, its agencies
or instrumentalities (collectively, the "U.S. Government"); (2) certificates
of deposit and bankers' acceptances issued or guaranteed by, or time deposits
maintained at, banks or savings and loan associations (including foreign
branches of U.S. banks or U.S. or foreign branches of foreign banks) having
total assets of more than $500 million; (3) commercial paper of prime quality
[i.e., rated A-1+ or A-1 by Standard & Poor's Corporation ("Standard &
Poor's") or Prime-1 by Moody's Investors Service, Inc. ("Moody's") or, if not
rated, issued by U.S. or foreign companies having outstanding debt securities
rated AAA or AA by Standard & Poor's, or Aaa or Aa by Moody's] and participa-
tion interests in loans extended by banks to such companies; and (4) repur-
chase agreements that are collateralized in full each day by liquid securities
of the types listed above. These agreements are entered into with "primary
dealers" (as designated by the Federal Reserve Bank of New York) in U.S. Gov-
ernment securities or State Street Bank and Trust Company, the Fund's Custodi-
an. For each repurchase agreement, the Trust Portfolio requires continual
maintenance of the market value of the underlying collateral in amounts equal
to, or in excess of, the agreement amount. In the event of a dealer default,
the 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, such as securities eligible for resale under Rule 144A
under the Securities Act of 1933 (the "Securities Act") and commercial paper
issued in reliance upon the exemption from registration in Section 4(2) of the
Securities Act. Restricted securities are securities subject to contractual or
legal restrictions on resale, such as those arising from an issuer's reliance
upon certain exemptions from registration under the Securities Act.
The Portfolio may invest in asset-backed securities that meet its existing
diversification, quality and maturity criteria. Asset-backed securities are
securities issued by special purpose entities whose primary assets consist of
a pool of loans or accounts receivable. The securities may be in the form of a
beneficial interest in a special purpose trust, limited partnership interest,
or commercial paper or other debt securities issued by a special purpose cor-
poration. Although the securities may have some form of credit or liquidity
enhancement, payments on the securities depend predominately upon collection
of the loans and receivables held by the issuer. It is the Portfolio's current
intention to limit its investment in such securities to not more than 5% of
its net assets.
OTHER FUNDAMENTAL INVESTMENT POLICIES.
To maintain portfolio diversification and reduce investment risk, the Trust
Portfolio may not (1) invest 25% or more of its total assets in the securities
of issuers conducting their principal business activities in any one industry
although there is no such limitation with respect to U.S. Government securi-
ties or bank obligations, including certificates of deposit, bankers' accept-
ances and interest bearing savings deposits; (2) invest more than 5% of its
assets in the securities of any one issuer (except the U.S. Government) al-
though with respect to 25% of its total assets it may invest without regard to
such limitation; (3) invest more than 5% of its assets in the securities of
any issuer (except the U.S. Government) having less than three years of con-
tinuous operation or purchase more than 10% of any class of the outstanding
securities of any issuer (except the U.S. Government); (4) enter into repur-
chase agreements if, as a result thereof, more than 10% of its assets would be
committed to repurchase agreements not terminable within seven days and other
illiquid investments; (5) borrow money except from banks on a temporary basis
in aggregate amounts not exceeding 15% of its assets; the Trust Portfolio will
not purchase any investments while borrowings in excess of 5% of total assets
exist; and (6) mortgage, pledge or hypothecate its assets except to secure
such borrowings. To the extent that these limitations are more permissive than
Rule 2a-7, the Portfolio will comply with the more restrictive provisions of
the Rule.
As a matter of operating policy, fundamental policy number (2) would give the
Trust Portfolio the ability to invest, with respect to 25% of its assets, more
than 5% of its assets in any one issuer only in the event Rule 2a-7 is amended
in the future.
PURCHASE AND REDEMPTION OF SHARES
OPENING ACCOUNTS
The Portfolio is available through financial intermediaries.
(1) Telephone the Trust Portfolio toll-free at (800) 237-5822. The Trust
Portfolio will ask for the (a) name of the account as you wish it to be
registered, (b) address of the account, and (c) taxpayer identification
number. The Trust Portfolio will then provide you with an account num-
ber.
(2) Instruct your bank to wire Federal funds exactly as follows:
ABA 011000028
State Street Bank and Trust Company
Boston, MA 02101
DDA 9903-279-9
ACM Institutional Reserves, Inc.--
Trust Portfolio
as registered
Your account name with the Trust
Your account number Portfolio
4
<PAGE>
(3) Mail a completed Application Form to:
Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, New Jersey 07096-1520
SUBSEQUENT INVESTMENTS
(1) Telephone the Trust Portfolio toll-free at (800) 237-5822 to place your
order for additional shares.
(2) Instruct your bank to wire Federal funds to State Street Bank and Trust
Company ("State Street Bank") as in (2) above or mail your check or ne-
gotiable bank draft payable to ACM Institutional Reserves, Inc.--Trust
Portfolio to Alliance Fund Services, Inc. as in (3) above.
REDEMPTIONS
A. BY TELEPHONE
You may withdraw any amount from your account on any Fund business day (any
weekday exclusive of days on which the New York Stock Exchange or State Street
Bank is closed) as discussed below, between 9:00 a.m. and 5:00 p.m. (New York
time) via orders given to Alliance Fund Services, Inc. by telephone toll-free
(800) 237-5822. Redemption orders must include your account name as registered
with the Trust Portfolio and the account number.
Telephone redemptions may be made on any Fund business day between 9:00 a.m.
and 4:00 p.m. (New York time). If your telephone redemption order is received
by Alliance Fund Services, Inc. prior to 4:00 p.m. (New York time) on any Fund
business day, we will send the proceeds in Federal funds by wire to your des-
ignated bank account that day. Redemptions are made without any charge to you.
During periods of drastic economic or market developments, such as the market
break of October 1987, it is possible that shareholders would have difficulty
in reaching Alliance Fund Services, Inc. by telephone (although no such diffi-
culty was apparent at any time in connection with the 1987 market break). If a
shareholder were to experience such difficulty, the shareholder should issue
written instructions to Alliance Fund Services, Inc. at the address shown on
the cover of this prospectus. The Fund reserves the right to suspend or termi-
nate its telephone redemption service at any time without notice. Neither the
Fund nor the Adviser, or Alliance Fund Services, Inc. will be responsible for
the authenticity of telephone requests for redemptions that the Fund reasona-
bly believes to be genuine. The Fund will employ reasonable procedures in or-
der to verify that telephone requests for redemptions are genuine, including
among others, recording such telephone instructions and causing written con-
firmations of the resulting transactions to be sent to shareholders. If the
Fund did not employ such procedures, it could be liable for losses arising
from unauthorized or fraudulent telephone instructions. Selected dealers or
agents may charge a fee for handling telephone requests for redemptions.
B. BY CHECK-WRITING
With this service, you may write checks made payable to any payee. Checks
cannot be written for more than the principal balance (not including any ac-
crued dividends) in your account. First, you must fill out the Signature Card
which is available from your financial intermediary. If you wish to establish
this check-writing service subsequent to the opening of your Fund account,
contact the Fund by telephone or mail. There is no separate charge for the
check-writing service, except that State Street Bank will impose its normal
charges for checks which are returned unpaid because of insufficient funds or
for checks upon which you have placed a stop order. The check-writing service
enables you to receive the daily dividends declared on the shares to be re-
deemed until the day that your check is presented to State Street Bank for
payment.
OBTAINING AN APPLICATION FORM. If you wish to obtain an Application Form, or
you have questions about the Form, purchasing shares, or other Trust Portfolio
procedures, please telephone the Trust Portfolio toll-free at (800) 237-5822.
5
<PAGE>
ADDITIONAL INFORMATION
CHANGES IN APPLICATION FORM. If you decide to change instructions or any
other information already given on your Application Form, send a written no-
tice to ACM Institutional Reserves, Inc.--Trust Portfolio, P.O. Box 1520,
Secaucus, New Jersey 07096-1520, with your signature guaranteed by an institu-
tion which is an "eligible guarantor" as defined in Rule 17Ad-15 under the Se-
curities Exchange Act of 1934, as amended.
INVESTMENTS MADE BY CHECK. Money transmitted by a check drawn on a member of
the Federal Reserve System is converted to Federal funds in one business day
following receipt and is then invested in the Fund. Checks drawn on banks
which are not members of the Federal Reserve System may take longer to be con-
verted and invested. All payments must be in United States dollars.
Proceeds from any subsequent redemption by you of Trust Portfolio shares that
were purchased by check will not be forwarded to you until the Trust Portfolio
is reasonably assured that your check has cleared, normally up to fifteen days
following the purchase date.
SHARE PRICE. Shares of the Trust Portfolio are sold and redeemed on a contin-
uous basis without sales or redemption charges at their net asset value which
is expected to be constant at $1.00 per share, although this price is not
guaranteed. The net asset value of the Trust Portfolio's shares is determined
each Fund business day (as defined under "Purchase and Redemption of Shares--
Redemptions," above), at 12:00 Noon and 4:00 p.m. (New York time). The net as-
set value per share of the Trust Portfolio is calculated by taking the sum of
the value of the Trust Portfolio's investments (amortized cost value is used
for this purpose) and any cash or other assets, subtracting liabilities, and
dividing by the total number of shares of the Trust Portfolio outstanding. All
expenses, including the fees payable to the Adviser, are accrued daily.
TIMING OF INVESTMENTS AND REDEMPTIONS. The Trust Portfolio has two transac-
tion times each business day, 12:00 Noon and 4:00 p.m. (New York time). In-
vestments receive the full dividend for a day if the investor's telephone or-
der is placed by 4:00 p.m. (New York time) and Federal funds or bank wire mon-
ies are received by State Street Bank before 4:00 p.m. (New York time) on that
day.
Redemption proceeds are normally wired the same business day if a redemption
request is received prior to 4:00 p.m. (New York time), but in no event later
than seven days, unless redemptions have been suspended or postponed due to
the determination of an "emergency" by the Securities and Exchange Commission
or to certain other unusual conditions. Shares do not earn dividends on the
day a redemption is effected.
MINIMUMS. An initial investment of at least $1,000,000 in the Trust Portfolio
is required. There is no minimum for subsequent investments. The Trust Portfo-
lio reserves the right at anytime to vary the initial and subsequent invest-
ment minimums.
The Trust Portfolio reserves the right to close out an account that is below
$500,000 after at least 60 days' written notice to the shareholder unless the
balance in such account is increased to at least that amount during such peri-
od.
DAILY DIVIDENDS, OTHER DISTRIBUTIONS, TAXES. All net income of the Trust
Portfolio is determined each business day at 4:00 p.m. (New York time) and is
paid immediately thereafter pro rata to shareholders of record via automatic
investment in additional full and fractional shares of the Trust Portfolio in
each shareholder's account. As such additional shares are entitled to divi-
dends on following days, a compounding growth of income occurs.
The Trust Portfolio's net income consists of all accrued interest income on
assets less expenses applicable to that dividend period. Realized gains and
losses are reflected in net asset value and are not included in net income.
Distributions out of taxable interest income, other investment income, and
short-term capital gains are taxable as ordinary income and distributions of
long-term capital gains, if any, are taxable as long-term capital gains irre-
spective of the length of time a shareholder held 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, 1997, the Adviser reimbursed its advisory fee to the Trust Portfolio in
the amount of $144,572.
The Adviser has undertaken until, at its request, the Trust Portfolio noti-
fies investors to the contrary, that if, in any fiscal year, the aggregate ex-
penses of the Trust Portfolio, exclusive of taxes, brokerage, interest on
borrowings and extraordinary expenses, but including the management fee, ex-
ceed .50 of 1% of the Trust Portfolio's average net assets for the fiscal
year, the Trust Portfolio may deduct from the payment to be made to the Advis-
er, or the Adviser will bear, such excess expense.
The Adviser is a leading international investment manager, supervising client
accounts with assets as of June 30, 1997 totaling more than $199 billion (of
which more than $71 billion represented the assets of investment companies).
The Adviser's clients are primarily major corporate employee benefit funds,
public employee retirement systems, investment companies, foundations and en-
dowment funds. The 54 registered investment companies managed by the Adviser
comprising 116 separate investment portfolios currently have over two million
shareholders. As of June 30, 1997, the Adviser was retained as an investment
manager of employee benefit fund assets for 29 of the Fortune 100 companies.
Alliance Capital Management Corporation, the sole general partner of, and the
owner of a 1% general partnership interest in, the Adviser, is an indirect
wholly-owned subsidiary of The Equitable Life Assurance Society of the United
States, one of the largest life insurance companies in the United States.
The Adviser may make payments from time to time from its own resources, which
may include the management fees paid by the 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
OFFICERS
Ronald M. Whitehill, President
Kathleen A. Corbet, Senior Vice President
Drew Biegel, Senior Vice President
Raymond J. Papera, Senior Vice President
Kenneth T. Carty, Vice President
John F. Chiodi, Jr., Vice President
Maria R. Cona, Vice President
Francis M. Dunn, Vice President
Joseph R. LaSpina, Vice President
Mark D. Gersten, Treasurer and Chief
Financial Officer
Edmund P. Bergan, Jr., Secretary
Vincent S. Noto, Controller
8
<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 __, 1997
___________________________________________________________
This Statement of Additional Information is not a prospectus
and should be read in conjunction with the Fund's current
Prospectus dated September --, 1997 which describes shares
of the Prime, Government and Tax-Free Portfolios of the
Fund. A copy of this Prospectus may be obtained by
contacting Alliance Fund Services, Inc. at the address or
telephone number shown above.
TABLE OF CONTENTS
Page
The Fund.............................................. 2
Investment Objectives and Policies.................... 2
Investment Restrictions .............................. 18
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........
Appendix B - Description of Municipal Securities......
Financial Statements..................................
Report of Independent Auditors........................
___________________________
(R): This registered service mark used under license from
the owner, Alliance Capital Management L.P.
<PAGE>
____________________________________________________________
THE FUND
____________________________________________________________
ACM Institutional Reserves, Inc. (the "Fund") is an
open-end investment company. The Prime Portfolio, the
Government Portfolio and the Tax-Free Portfolio, each of
which is diversified (collectively, the "Portfolios") are
described by the Prospectus which supplements this Statement
of Additional Information. An additional Portfolio of the
Fund, the Trust Portfolio, is described in a separate
Prospectus and Statement of Additional Information.
____________________________________________________________
INVESTMENT OBJECTIVES AND POLICIES
____________________________________________________________
The investment objectives of each Portfolio are -
in the following order of priority - safety of principal,
excellent liquidity, and maximum current income (which, in
the case of the Tax-Free Portfolio, is exempt from Federal
income taxes) to the extent consistent with the first two
objectives. As a matter of fundamental policy, each
Portfolio pursues its objectives by maintaining a portfolio
of high-quality money market securities, all of which, at
the time of investment, have remaining maturities of one
year or less (which maturities, pursuant to Rule 2a-7 under
the Investment Company Act of 1940 as amended (the "Act"),
may extend to 397 days). The Fund may in the future
establish additional portfolios which may have different
investment objectives. There can be no assurance that any
of the Portfolio's objectives will be achieved.
General
Each of the Portfolios will comply with Rule 2a-7
under the Act, as amended from time to time, including the
diversification, quality and maturity conditions imposed by
the Rule.
Currently, pursuant to Rule 2a-7, each Portfolio
may invest only in U.S. dollar-denominated "eligible
securities" (as that term is defined in the Rule) that have
been determined by the Adviser to present minimal credit
risks pursuant to procedures approved by the Board of
Directors. Generally, an eligible security is a security
2
<PAGE>
that (i) has a remaining maturity of 397 days or less and
(ii) is rated, or is issued by an issuer with short-term
debt outstanding that is rated, in one of the two highest
rating categories by two nationally recognized statistical
rating organizations ("NRSROS") or, if only one NRSRO has
issued a rating, by that NRSRO. A security that originally
had a maturity of greater than 397 days is an eligible
security if its remaining maturity at the time of purchase
is 397 calendar days or less and the issuer has outstanding
short-term debt that would be an eligible security. Unrated
securities may also be eligible securities if the Adviser
determines that they are of comparable quality to a rated
eligible security pursuant to guidelines approved by the
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.
3
<PAGE>
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, 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
4
<PAGE>
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. For a further
description of variable amount master demand notes, see
below, "Additional Investment Policies."
The Portfolio may invest up to 5% of its net assets
in high quality (as determined by the requisite number of
NRSROs or, if not rated, determined to be of high quality by
the Adviser) participation interests having remaining
maturities not exceeding one year in loans extended by banks
to U.S. and foreign companies. The staff of the Securities
and Exchange Commission is currently considering certain
issues relating to the effect on a registered investment
company of investing in participation interests on the
company's ability to meet the diversification requirements
of the Act and the Internal Revenue Code and its fundamental
policy regarding the concentration of its assets in
particular industries. The Adviser believes that the
purchase of loan participation interests in accordance with
the Portfolio's investment policies will not give rise to
the possibility that, as a result of such purchases, the
Portfolio will no longer meet the diversification
requirements of the Act and the Internal Revenue Code or
violate any fundamental policy regarding the concentration
of the Portfolio's assets in particular industries, but
nevertheless has undertaken to invest in participation
interests only after the resolution of these issues by the
staff. In a typical corporate loan syndication, a number of
institutional lenders lend a corporate borrower a specified
sum pursuant to the term and conditions of a loan agreement.
One of the co-lenders usually agrees to act as the agent
bank with respect to the loan. The loan agreement among the
corporate borrower and the co-lenders identifies the agent
bank as well as sets forth the rights and duties of the
parties. The agreement often (but not always) provides for
the collateralization of the corporate borrower's
5
<PAGE>
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.
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.
6
<PAGE>
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.
Floating and Variable Rate Obligations. The
Portfolio may purchase floating and variable rate demand
notes and bonds, which are obligations ordinarily having
stated maturities in excess of 13 months, but which permit
the holder to demand payment of principal at any time, or at
specified intervals not exceeding 13 months, in each case
upon not more than 30 days notice. Variable rate demand
notes include mater demand notes which are obligations that
permit the Prime Portfolio to invest fluctuating amounts, at
varying rates of interest, pursuant to direct arrangements
between the Prime Portfolio, as lender, and the borrower.
7
<PAGE>
These obligations permit daily changes in the amounts
borrowed. Because these obligations are direct lending
arrangements between the lender and borrower, it is not
contemplated that such instruments generally will be traded,
and there generally is no established secondary market for
these obligations, although they are redeemable at face
value, plus accrued interest. Accordingly, where these
obligations are not secured by letters of credit or other
credit support arrangements, the Prime Portfolios right to
redeem is dependent on the ability of the borrower to pay
principal and interest on demand.
The Portfolio's investment objectives may not be
changed without the affirmative vote of a majority of the
Portfolio's outstanding shares as defined below. Except as
otherwise provided, the investment policies are not
designated "fundamental policies" within the meaning of the
Act and may, therefore, be changed by the Directors without
a shareholder vote. However, the Portfolio will not change
its investment policies without contemporaneous written
notice to shareholders.
Government Portfolio
The Government Portfolio pursues its objectives by
maintaining a portfolio of the following investments
diversified by maturities not exceeding one year (which
maturities, pursuant to Rule 2a-7 under the Act, may extend
to 397 days).
As a matter of operating policy which may be
changed without shareholder approval, the Government
Portfolio attempts to invest in securities that the Adviser
believes are legal investments for federal credit unions as
set forth in Sections 107(7) and (8) of the Federal Credit
Union Act and Part 703 of the National Credit Union
Administration regulations.
The Government Portfolio may make the following
investments:
1. Marketable obligations of, or guaranteed by,
the United States Government, its agencies or
instrumentalities. These include issues of the United
States Treasury, such as bills, certificates of
indebtedness, notes and bonds, and issues of agencies and
instrumentalities established under the authority of an act
of Congress. The latter issues include, but are not limited
8
<PAGE>
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.
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
9
<PAGE>
& 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 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
10
<PAGE>
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.)
The Portfolio may also enter into repurchase
agreements pertaining to the types of securities in which it
11
<PAGE>
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
12
<PAGE>
of the interest paid on such variable rate industrial
development bonds as their fees for servicing such
instruments and the issuance of related letters of credit
and repurchase commitments. No single bank will issue its
letters of credit with respect to variable rate obligations
or participation interests therein covering more than 10% of
the total assets of the Portfolio. The Portfolio will not
purchase participation interests in variable rate industrial
development bonds unless the interest earned by the
Portfolio from the bonds in which it holds participation
interests is considered to be exempt from Federal income
taxes. The Adviser will monitor the pricing, quality and
liquidity of variable rate demand obligations and
participation interests therein held by the Portfolio on the
basis of published financial information, rating agency
reports and other research services to which the Adviser may
subscribe.
Standby Commitments
The Portfolio may purchase municipal securities
together with the right to resell them to the seller at an
agreed-upon price or yield within specified periods prior to
their maturity dates. Such a right to resell is commonly
known as a "standby commitment," and the aggregate price
which the Portfolio pays for securities with a standby
commitment may be higher than the price which otherwise
would be paid. The primary purpose of this practice is to
permit the Portfolio to be as fully invested as practicable
in municipal securities while preserving the necessary
flexibility and liquidity to meet unanticipated redemptions.
In this regard, the Portfolio acquires standby commitments
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
13
<PAGE>
depreciation for the period during which the commitment is
held. Standby commitments do not affect the average
weighted maturity of the Portfolio's portfolio of
securities. The Portfolio does not currently intend to
invest more than 5% of its net assets in standby commitments
in the coming year.
General
Yields on municipal securities are dependent on a
variety of factors, including the general condition of the
money market and of the municipal bond and municipal note
market, the size of a particular offering, the maturity of
the obligation and the rating of the issue. Municipal
securities with longer maturities tend to produce higher
yields and are generally subject to greater price movements
than obligations with shorter maturities. The achievement
of the Portfolio's investment objectives is dependent in
part on the continuing ability of the issuers of municipal
securities in which the Portfolio invests to meet their
obligations for the payment of principal and interest when
due. Municipal securities historically have not been
subject to registration with the Securities and Exchange
Commission, although there have been proposals which would
require registration in the future.
After purchase by the Portfolio, a security may
cease to be rated or its rating may be reduced below the
minimum required for purchase by the Portfolio. Neither
event requires sales of such security by the Portfolio, but
the Adviser will consider such event in its determination of
whether the Portfolio should continue to hold the security.
To the extent that the ratings given by Moody's or Standard
& Poor's may change as a result of changes in such
organizations or their rating systems, the Adviser will
attempt to substitute comparable ratings.
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
14
<PAGE>
pay, when due, the principal or the interest on its
municipal securities may be materially affected.
Except as otherwise provided above, the Portfolio's
investment objectives and policies are not designated
"fundamental policies" within the meaning of the Act and
may, therefore, be changed without a shareholder vote.
However, the Portfolio will not change its investment
policies without contemporaneous written notice to
shareholders.
Additional Investment Policies
The following investment policies supplement those
set forth above for each Portfolio. Except as otherwise
indicated below, such additional policies apply to all
Portfolios.
Repurchase Agreements
A repurchase agreement arises when a buyer
purchases a security and simultaneously agrees to resell it
to the vendor on an agreed-upon future date. The resale
price is greater than the purchase price, reflecting an
agreed-upon market rate which is effective for the period of
time the buyer's money is invested in the security and which
is not related to the coupon rate on the purchased security.
Repurchase agreements may be entered into with member banks
of the Federal Reserve System or "primary dealers" (as
designated by the Federal Reserve Bank of New York) in U.S.
Government securities or with State Street Bank and Trust
Company ("State Street Bank"), the Fund's Custodian. It is
each Portfolio's current practice, which may be changed at
any time without shareholder approval, to enter into
repurchase agreements only with such primary dealers and
State Street Bank. For each repurchase agreement, each
Portfolio requires continual maintenance of the market value
of underlying collateral in amounts equal to, or in excess
of, the agreement amount. While the maturities of the
underlying collateral may exceed one year, the term of the
repurchase agreement is always less than one year. In the
event that a counterparty defaulted on its repurchase
obligation, a Portfolio might suffer a loss to the extent
that the proceeds from the sale of the collateral were less
than the repurchase price. If the vendor became bankrupt, a
Portfolio might be delayed in selling the collateral.
Repurchase agreements often are for short periods such as
one day or a week, but may be longer. Repurchase agreements
15
<PAGE>
not terminable within seven days will be limited to no more
than 10% of a Portfolio's assets. Pursuant to Rule 2a-7, a
repurchase agreement is deemed to be an acquisition of the
underlying securities, provided that the obligation of the
seller to repurchase the securities from the money market
fund is collateralized fully (as defined in such Rule).
Accordingly, the counterparty of a fully collateralized
repurchase agreement is deemed to be the issuer of the
underlying securities.
Reverse Repurchase Agreements
Each Portfolio may also enter into reverse
repurchase agreements, which involve the sale of money
market securities held by a Portfolio with an agreement to
repurchase the securities at an agreed-upon price, date and
interest payment. The Portfolios do not currently intend to
enter into such agreements during the coming year.
When-Issued Securities
Certain issues that the Government and Tax-Free
Portfolios are permitted to purchase are offered on a
"when-issued" basis. When so offered, the price, which is
generally expressed in yield terms, is fixed at the time the
commitment to purchase is made, but delivery and payment for
the when-issued securities take place at a later date.
Normally, the settlement date occurs from within ten days to
one month after the purchase of the issue. The Government
Portfolio will not make any such commitments of more than
thirty days. During the period between purchase and
settlement, no payment is made by a Portfolio to the issuer
and, thus, no interest accrues to a Portfolio from the
transaction. When-issued securities may be sold prior to
the settlement date, but each Portfolio makes when-issued
commitments only with the intention of actually acquiring
the securities. To facilitate such acquisitions, the Fund's
Custodian will maintain, in a separate account of each
Portfolio, U.S. Government securities or other liquid high
grade debt securities having value equal to or greater than
commitments held by that Portfolio. Similarly, a separate
account will be maintained to meet obligations in respect of
reverse repurchase agreements. On delivery dates for such
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
16
<PAGE>
can incur a gain or loss. At the time a Portfolio makes the
commitment to purchase a security on a when-issued basis, it
records the transaction and reflects the value of the
security in determining its net asset value. No when-issued
commitments will be made if, as a result, more than 15% of a
Portfolio's net assets would be so committed.
Liquid Restricted Securities
The Prime Portfolio may purchase restricted
securities that are determined by the Adviser to be liquid
in accordance with procedures adopted by the Directors.
Restricted securities are securities subject to contractual
or legal restrictions on resale, such as those arising from
an issuer's reliance upon certain exemptions from
registration under the Securities Act of 1933 (the
"Securities Act").
In recent years, a large institutional market has
developed for certain types of restricted securities
including, among others, private placements, repurchase
agreements, commercial paper, foreign securities and
corporate bonds and notes. These instruments are often
restricted securities because they are sold in transactions
not requiring registration. For example, commercial paper
issues in which the Prime Portfolio may invest include,
among others, securities issued by major corporations
without registration under the Securities Act in reliance on
the exemption from registration afforded by Section 3(a)(3)
of such Act and commercial paper issued in reliance on the
private placement exemption from registration which is
afforded by Section 4(2) of the Securities Act ("Section
4(2) paper"). Section 4(2) paper is restricted as to
disposition under the Federal securities laws in that any
resale must also be made in an exempt transaction. Section
4(2) paper is normally resold to other institutional
investors through or with the assistance of investment
dealers who make a market in Section 4(2) paper, thus
providing liquidity. Institutional investors, rather than
selling these instruments to the general public, often
depend on an efficient institutional market in which such
restricted securities can be readily resold in transactions
not involving a public offering. In many instances,
therefore, the existence of contractual or legal
restrictions on resale to the general public does not, in
practice, impair the liquidity of such investments from the
perspective of institutional holders.
17
<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 Prime Portfolio, however, could affect adversely the
marketability of such portfolio securities and the Prime
Portfolio might be unable to dispose of such securities
promptly or at reasonable prices. Rule 144A has already
produced enhanced liquidity for many restricted securities,
and market liquidity for such securities may continue to
expand as a result of Rule 144A and the consequent inception
of the PORTAL System sponsored by the National Association
of Securities Dealers, Inc., an automated system for the
trading, clearance and settlement of unregistered
securities.
The Prime Portfolio's Directors have the ultimate
responsibility for determining whether specific securities
are liquid or illiquid. The Directors have delegated the
function of making day-to-day determinations of liquidity to
the Adviser, pursuant to guidelines approved by the
Directors. The Adviser takes into account a number of
factors in determining whether a restricted security being
considered for purchase is liquid, including at least the
following:
(i) the frequency of trades and quotations for the
security;
(ii) the number of dealers making quotations to
purchase or sell the security;
(iii) the number of other potential purchasers of
the security;
(iv) the number of dealers undertaking to make a
market in the security;
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<PAGE>
(v) the nature of the security (including its
unregistered nature) and the nature of the
marketplace for the security (e.g., the time
needed to dispose of the security, the method
of soliciting offers and the mechanics of
transfer); and
(vi) any applicable Securities and Exchange
Commission interpretation or position with
respect to such types of securities.
To make the determination that an issue of Section
4(2) paper is liquid, the Adviser must conclude that the
following conditions have been met:
(i) the Section 4(2) paper must not be traded flat
or in default as to principal or interest; and
(ii) the Section 4(2) paper must be rated in one of
the two highest rating categories by at least
two NRSROs, or if only one NRSRO rates the
security, by that NRSRO; if the security is
unrated, Alliance must determine that the
security is of equivalent quality.
The Adviser must also consider the trading market
for the specific security, taking into account all relevant
factors.
Following the purchase of a restricted security by
the Prime Portfolio, the Adviser monitors continuously the
liquidity of such security and reports to the Directors
regarding purchases of liquid restricted securities.
General
While there are many kinds of short-term securities
used by money market investors, the Portfolios, in keeping
with their primary investment objective of safety of
principal, generally restrict their investments to the types
summarized above. Net income to shareholders is aided both
by each Portfolio's ability to make investments in large
denominations and by efficiencies of scale. Also, each
Portfolio may seek to improve its income by selling certain
portfolio securities prior to maturity in order to take
advantage of yield disparities that occur in money markets.
The market value of each Portfolio's investments tends to
19
<PAGE>
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.
20
<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
21
<PAGE>
mineral exploration or other development programs; (d)
purchase securities on margin; (e) make short sales of
securities or maintain a short position or write, purchase
or sell puts, call, straddles, spreads or combinations
thereof; (f) invest in securities of issuers (other than
agencies and instrumentalities of the United States
Government) having a record, together with predecessors, of
less than three years of continuous operation if more than
5% of the Portfolio's assets would be invested in such
securities; (g) purchase or retain securities of any issuers
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 year2 from the date of the Portfolio's
purchase;
2. purchase securities other than marketable
obligations of, or guaranteed by, the United States
Government, its agencies or instrumentalities, or repurchase
agreements pertaining thereto;
3. enter into repurchase agreements if, as a
result thereof, more than 10% of the Portfolio's assets
would be committed to repurchase agreements not terminable
within seven days and other illiquid investments or with any
one seller if, as a result thereof, more than 5% of the
Portfolio's assets would be invested in repurchase
agreements purchased from such seller;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;
_________________________
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.
22
<PAGE>
4. borrow money except from banks on a temporary
basis or via entering into reverse repurchase agreements in
aggregate amounts not to exceed 10% of the Portfolio's
assets and to be used exclusively to facilitate the orderly
maturation and sale of portfolio securities during any
periods of abnormally heavy redemption requests, if they
should occur; such borrowings may not be used to purchase
investments and the Portfolio will not purchase any
investments while borrowings in excess of 5% of total assets
exist;
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)
_________________________
4. Which maturity, pursuant to Rule 2a-7, may extend to 397
days.
23
<PAGE>
and (b) consumer finance companies, industrial finance
companies and gas, electric, water and telephone utility
companies are each considered to be separate industries.
For purposes of this restriction and those set forth in
restrictions 4 and 5 below, the Portfolio will regard the
entity which has the primary responsibility for the payment
of interest and principal as the issuer;
3. invest more than 25% of its total assets in
municipal securities (a) whose issuers are located in the
same state, or (b) the interest upon which is paid from
revenues of similar-type projects;
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
24
<PAGE>
total assets, valued at market, so long as shares of the
Portfolio are being sold in those states;
8. make loans of money or securities except by
the purchase of debt obligations in which the Portfolio may
invest consistent with its investment objectives and
policies and by investment in repurchase agreements;
9. enter into repurchase agreements (i) not
terminable within seven days if, as a result thereof, more
than 10% of the Portfolio's total assets would be committed
to such repurchase agreements (whether or not illiquid) or
other illiquid investments, or (ii) with a particular
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.
_________________________
5. Pursuant to Rule 2a-7, acquisition of a fully
collateralized repurchase agreement is deemed to be the
acquisition of the underlying securities.
25
<PAGE>
____________________________________________________________
MANAGEMENT
____________________________________________________________
Directors and Officers
The Directors and principal officers of the Fund
and their primary occupations during the past five years are
set forth below. Unless otherwise specified, the address of
each such person is 1345 Avenue of the Americas, New York,
New York 10105. Those Directors whose names are followed by
an asterisk are "interested persons" of the Fund as
determined under the Act. Each Director and officer is
affiliated as such with one or more of the other registered
investment companies that are advised by the Adviser.
Directors
JOHN D. CARIFA (52),6 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 1992.
RUTH BLOCK (66), is a Director of Ecolab
Incorporated (specialty chemicals) and Amoco Corporation
(oil and gas). Previously, she was an Executive Vice
President and Chief Insurance Officer of The Equitable Life
Assurance Society of the United States since prior to 1992.
Her address is Box 4653, Stamford, Connecticut 06903.
DAVID H. DIEVLER (67), was formerly a Senior Vice
President of ACMC, with which he had been associated since
prior to 1992. He is currently an independent consultant.
His address is P.O. Box 167, Spring Lake, New Jersey
07762.
JOHN H. DOBKIN (55), has been the President of
Historic Hudson Valley (historic preservation) since prior
to 1992. From 1987 to 1992, he was a Director of ACMC. His
_________________________
6. An interested person as defined in the Act.
7. For purposes of this Statement of Additional
Information, ACMC refers Alliance Capital Management
Corporation, the sole general partner of the Adviser,
and to the predecessor general partner of the Adviser of
the same name.
26
<PAGE>
address is 105 West 55th Street, New York, New York
10019.
WILLIAM H. FOULK, JR. (65), is an Independent
Consultant. He was formerly Senior Manager of Barrett
Associates, Inc., a registered investment adviser, with
which he had been associated since prior to 1992. His
address is 2 Hekma Road, Greenwich, CT 06831.
DR. JAMES M. HESTER (73), is President of the Harry
Frank Guggenheim Foundation and a Director of Union Carbide
Corporation with which he has been associated since prior to
1992. He was formerly President of New York University, the
New York Botanical Garden and Rector of the United Nations
University. His address is 45 East 89th Street, Apt. 39C,
New York, New York 10128.
CLIFFORD L. MICHEL (58), is a Partner of the law
firm of Cahill Gordon & Reindel, with which he has been
associated since prior to 1992. He is also President, Chief
Executive Officer and Director of Wenonah Development
Company (investment holding company) since 1976 and a
Director and Member of the Human Resources, Environmental
and Safety, and Executive Committees of Placer Dome, Inc.
(mining) and since 1996 he is Director, vice Chairman and
Treasurer of Atlantic Health Systems Inc. and Atlantic
Hospital. From 1988-1994 he was Director of Faber-Castell
Corporation (writing instruments),from 1988 to 1993 he was
President of the Board of Trustees of St. Marks School and
from 1991 to 1996 he was Chairman of the Board of Trustees
of Morristown Memorial Hospital (and Memorial Health
Foundation). His address is St. Bernard's Road, Gladstone,
New Jersey 07934.
DONALD J. ROBINSON (63), is currently Senior
Counsel of the law firm of Orrick, Herrington & Sutcliffe,
from July 1987 to December 1994 he was Senior Partner of
that firm and from January to December 1994 he was a Member
of the Executive Committee. He was a Trustee of the Museum
of the City of New York from 1977 to 1995. His address is
666 Fifth Avenue, 19th Floor, New York, New York 10103.
Officers
RONALD M. WHITEHILL - President (59), is a Senior
Vice President of ACMC and President of Alliance Cash
Management Services, with which he has been associated since
27
<PAGE>
1993. Previously, he was Senior Vice President and Managing
Director of Reserve Fund since prior to 1992.
KATHLEEN A. CORBET - Senior Vice President (37),
has been a Senior Vice President of ACMC since July 1993.
Previously, she held various responsibilities as head of
Equitable Capital Management Corporation's Fixed Income
Management Department, Private Placement Secondary Trading
and Fund Management since prior to 1992.
DREW A. BIEGEL - Senior Vice President (46), is a
Vice President of ACMC, with which he has been associated
since prior to 1992.
RAYMOND J. PAPERA - Senior Vice President (41), is
a Vice President of ACMC with which he has been associated
since prior to 1992.
KENNETH T. CARTY - Vice President (37), is an
Assistant Vice President of ACMC with which he has been
associated since prior to 1992.
JOHN F. CHIODI, JR. - Vice President (31), is a
Vice President of ACMC with which he has been associated
since prior to 1992.
MARIA R. CONA - Vice President (42), is an
Assistant Vice President of ACMC with which she has been
associated since prior to 1992.
FRANCIS M. DUNN - Vice President (27), is an
Administrative Officer of ACMC with which she has been
associated since June 1992. Previously, she was a mutual
fund accountant for Dreyfus.
JOSEPH R. LASPINA - Vice President (37), is an
Assistant Vice President of ACMC with which he has been
associated since prior to 1992.
EDMUND P. BERGAN, Jr. - Secretary (47), is a Senior
Vice President and the General Counsel of Alliance Fund
Distributors, Inc. ("AFD") and Alliance Fund Services, Inc.
("AFS"), with which he has been associated since prior to
1992.
MARK D. GERSTEN - Treasurer and Chief Financial
Officer (46), is a Senior Vice President of AFS and AFD,
with which he has been associated since prior to 1992.
28
<PAGE>
VINCENT S. NOTO - Controller (32), is a Money
Market Fund Manager, Mutual Funds of Alliance Fund Services,
Inc., with which he has been associated since prior to
1992.
The Fund does not pay any fees to, or reimburse
expenses of, its Directors who are considered "interested
persons" of the Fund. The aggregate compensation paid by
the Fund to each of the Directors during its fiscal year
ended April 30, 1997, the aggregate compensation paid to
each of the Directors during calendar year 1996 by all of
the registered investment companies to which the Adviser
provides investment advisory services (collectively, the
"Alliance Fund Complex") and the total number of funds in
the Alliance Fund Complex with respect to which each of the
Directors serves as a director or trustee, are set forth
below. Neither the Fund nor any other fund in the Alliance
Fund Complex provides compensation in the form of pension or
retirement benefits to any of its directors or trustees.
Total Number of Funds
Total in the Alliance Fund
Compensation Complex, Including the
Aggregate from the Alliance Fund, as to which
Name of Director Compensation Fund Complex, the Director is a
of the Fund from the Fund Including the Fund Director or Trustee
_______________ _____________ __________________ ______________________
John D. Carifa $-0- $-0- 50
Ruth Block $2,259 $157,500 38
David H. Dievler $2,259 $182,000 44
John H. Dobkin $2,286 $121,250 31
William H. Foulk, Jr. $2,298 $144,250 32
James M. Hester $2,250 $148,500 39
Clifford L. Michel $2,076 $146,068 39
Donald J. Robinson $1,320- $137,250 39
Robert C. White $1,635 $130,750 36
Mr. Robinson was elected as a Director of the Fund
on September 10, 1996.
As of August 15, 1997, the Directors and officers
of the Fund as a group owned less than 1% of the outstanding
shares of each Portfolio.
29
<PAGE>
The Adviser
Alliance Capital Management L.P., a New York Stock
Exchange listed company with principal offices at 1345
Avenue of the Americas, New York, New York 10105, has been
retained under an investment advisory agreement (the
"Advisory Agreement") as the Fund's Adviser (see "Management
of the Fund" in the Prospectus). ACMC, the sole general
partner of, and the owner of a 1% general partnership
interest in, the Adviser, is an indirect wholly-owned
subsidiary of The Equitable Life Assurance Society of the
United States ("Equitable"), one of the largest life
insurance companies in the United States and a wholly-owned
subsidiary of The Equitable Companies Incorporated ("ECI"),
a holding company controlled by AXA-UAP, a French insurance
holding company. As of March 1, 1997 ACMC, Inc. and
Equitable Capital Management Corporation, each a wholly-
owned direct or indirect subsidiary of Equitable, together
with Equitable, owned in the aggregate approximately 58% of
the issued and outstanding units representing assignments of
beneficial ownership of limited partnership interests in the
Adviser ("Units"), and approximately 33% and 9% of the Units
were owned by the public and employees of the Adviser and
its subsidiaries, respectively, including employees of the
Adviser who serve as Directors of the Fund.
As of March 1, 1997, AXA-UAP and its subsidiaries
owned 60.7% of the issued and outstanding shares of the
capital stock of ECI. ECI is a public company with shares
traded on the Exchange. AXA-UAP, a French company, is the
holding company for an international group of insurance and
related financial services companies. AXA-UAP's insurance
operations include activities in life insurance, property
and casualty insurance and reinsurance. The insurance
operations are diverse geographically with activities,
principally in Western Europe, North America and the
Asia/Pacific area. AXA-UAP is also engaged in asset
management, investment banking, securities trading,
brokerage, real estate and other financial services
activities principally in the United States, as well as in
Western Europe and the Asia/Pacific area.
Based on information provided by AXA-UAP, on March
1, 1997, 22.5% of the issued ordinary shares (representing
33.0% of the voting power) of AXA-UAP were controlled
directly and indirectly by Finaxa, a French holding company.
As of March 1, 1997, 61.4% of the shares (representing 72.0%
of the voting power) of Finaxa were owned by four French
30
<PAGE>
mutual insurance companies (the "Mutuelles AXA") (one of
which, AXA Assurances I.A.R.D. Mutuelle, owned 34.9% of the
shares, representing 40.0% of the voting power), and 23.7%
of the shares of Finaxa (representing 14.6% of the voting
power) were owned by Banque Paribas, a French bank
("Paribas"). Including the ordinary shares owned by Finaxa,
on March 1, 1997, the Mutuelles AXA directly or indirectly
controlled 26.0% of the issued ordinary shares (representing
38.1% of the voting power) of AXA-UAP. Acting as a group,
the Mutuelles AXA control AXA-UAP and Finaxa.
In November 1996, AXA offered (the "Exchange
Offer") to acquire 100% of the ordinary shares ("UAP
Shares") of FF10 each of Compagnie UAP, a socPete anonyme
organized under the laws of France ("UAP"), in exchange for
ordinary shares ("Shares") and Certificates of Guaranteed
Value ("Certificates") of AXA. Each UAP shareholder that
tendered UAP Shares in the Exchange Offer received two
Shares and two Certificates for every five UAP Shares so
tendered. On January 24, 1997, AXA acquired 91.37% of the
outstanding UAP Shares. AXA-UAP currently intends to merge
(the "Merger") with UAP at some future date in 1997. It is
anticipated that approximately 11,706,826 additional Shares
will be issued in connection with the Merger to UAP
shareholders who did not tender UAP Shares in the Exchange
Offer. If the Merger had been completed at March 1, 1997,
Finaxa would have beneficially owned (directly and
indirectly) approximately 21.7% of the Shares (representing
approximately 32.0% of the voting power), and the Mutuelles
AXA would have controlled (directly or indirectly through
their interest in Finaxa) 25.1% of the issued ordinary
shares (representing 36.8% of the voting power) of AXA- UAP.
On January 17, 1997, AXA announced its intention to redeem
its outstanding 6% Bonds (the "Bonds"). Between February
14, 1997 and May 14, 1997, holders of the Bonds has the
option to convert each Bond into 5.15 Shares. On May 15,
1997, each Bond still outstanding was redeemed into cash at
FF1,285 plus FF9.29 accrued interest. Finaxa converted the
Bonds it had owned into 2,153,308 Shares. After giving
effect to the conversion of all outstanding Bonds into
Shares and to the Merger as if it had been completed at
March 1, 1997, Finaxa would have beneficially owned
(directly and indirectly) approximately 21.4% of the Shares
(representing 31.3% of the voting power), and the Mutuelles
AXA would have controlled (directly or indirectly through
their interest in Finaxa) 24.7% of the issued ordinary
shares (representing 36.0% of the voting power) of AXA-
UAP.
31
<PAGE>
The Adviser is a leading international investment
manager supervising client accounts with assets as of June
30, 1997 totaling more than $199 billion (of which more than
$71 billion represented the assets of investment companies).
The Adviser's clients are primarily major corporate employee
benefit funds, public employee retirement systems,
investment companies, foundations and endowment funds and
included, as of June 30, 1997, 29 of the FORTUNE 100
companies. The Adviser and its subsidiaries employ
approximately 1,450 employees who operate out of domestic
offices and the overseas offices of subsidiaries in Bombay,
Istanbul, London, Paris, Sao Paulo, Sydney, Tokyo, Toronto,
Bahrain, Luxembourg and Singapore. The 54 registered
investment companies managed by the Adviser comprising 116
separate investment portfolios currently have more than two
million shareholders.
Under the Advisory Agreement, the Adviser provides
each Portfolio of the Fund and pays all compensation of
Directors of the Fund who are affiliated persons of the
Adviser. The Adviser or its affiliates also furnish the
Fund without charge with management supervision and
assistance and office facilities. Under the Advisory
Agreement, each Portfolio pays the Adviser at an annual rate
of .20 of 1% of the average daily value of its net assets.
The fee is accrued daily and paid monthly. The Adviser has
undertaken, until, at its request, the Fund notifies
investors to the contrary that if, in any fiscal year, the
aggregate expenses of a Portfolio, exclusive of taxes,
brokerage, interest on borrowings and extraordinary
expenses, but including the management fee, exceed .20 of 1%
of a Portfolio's average net assets for the fiscal year, the
Portfolio may deduct from the payment to be made to the
Adviser, or the Adviser will bear, such excess expenses.
For the fiscal year ended April 30, 1997, the Adviser
reimbursed $661,792, all of which represented advisory fees,
$289,896, all of which represented advisory fees and
$257,876 all of which represented advisory fees for the
Prime, Government and Tax-Free Portfolios, respectively.
For the fiscal year ended April 30, 1996 the Adviser
reimbursed $374,443, all of which represented advisory fees;
$241,498, all of which represented advisory fees and
$253,985, of which $183,789 represented advisory fees for
the Prime, Government and Tax-Free Portfolios, respectively.
For the fiscal year ended April 30, 1995, the Adviser
reimbursed $239,602, all of which represented advisory fees;
$168,311 all of which represented advisory fees and
32
<PAGE>
$181,950, of which $64,550 represented advisory fees for the
Prime, Government and Tax-Free Portfolios, respectively.
The Adviser may make payments from time to time from its own
resources, which may include the management fees paid by the
Portfolios of the Fund to compensate broker-dealers,
depository institutions, or other persons for providing
distribution assistance and administrative services and to
otherwise promote the sale of shares of the Fund, including
paying for the preparation, printing and distribution of
prospectuses and other literature or other promotional
activities. The Portfolios also pay for printing of
prospectuses and other reports to shareholders and all
expenses and fees related to registrations and filings with
the Securities and Exchange Commission and with state
regulatory authorities. The Portfolios pay all other
expenses incurred in its operations, including the Adviser's
management fees; custody, transfer and dividend disbursing
expenses; legal and auditing costs; clerical,
administrative, accounting, and other office costs; fees and
expenses of Directors who are not affiliated with the
Adviser; costs of maintenance of the Fund's existence; and
interest charges, taxes, brokerage fees, and commissions.
As to the obtaining of clerical and accounting services not
required to be provided to each Portfolio by the Adviser
under the Advisory Agreement, the Fund may employ its own
personnel. For such services, it also may utilize personnel
employed by the Adviser; if so done, the services are
provided to the Fund at cost and the payments therefor must
be specifically approved in advance by the Directors.
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, 1997, and thereafter for successive twelve
month periods computed from each January 1, provided that
33
<PAGE>
such continuance is specifically approved at least annually
by a vote of a majority of each Portfolio's outstanding
voting securities or by the Fund's Board of Directors,
including in either case approval by a majority of the
Directors who are not parties to the Advisory Agreement or
interested persons as defined in the Act. The Advisory
Agreement may be terminated with respect to any Portfolio
without penalty on 60 days' written notice at the option of
either party or by vote of a majority of the outstanding
voting securities of such Portfolio; it will automatically
terminate in the event of assignment. The Adviser is not
liable for any action or inaction with regard to its
obligations under the Advisory Agreement as long as it does
not exhibit willful misfeasance, bad faith, gross
negligence, or reckless disregard of its obligations.
____________________________________________________________
PURCHASE AND REDEMPTION OF SHARES
____________________________________________________________
The Fund may refuse any order for the purchase of
shares. The Fund reserves the right to suspend the sale of
a Portfolio's shares to the public in response to conditions
in the securities markets or for other reasons.
Shareholders maintaining accounts in a Portfolio of
the Fund through brokerage firms and other institutions
should be aware that such institutions necessarily set
deadlines for receipt of transaction orders from their
clients that are earlier than the transaction times of the
Fund itself so that the institutions may properly process
such orders prior to their transmittal to State Street Bank.
Should an investor place a transaction order with such an
institution after its deadline, the institution may not
effect the order with the Fund until the next business day.
Accordingly, an investor should familiarize himself or
herself with the deadlines set by his or her institution.
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
34
<PAGE>
purchased will receive the dividend on shares declared on
that day, if such order is placed by 4:00 p.m. (New York
time) and Federal funds or bank wire monies are received by
State Street bank prior to 4:00 p.m. (New York time) of such
day, with respect to the Prime and Government Portfolios.
With respect to the Tax-Free Portfolio, a telephone order
for the purchase of shares will become effective, and the
shares purchased will receive the dividend on shares
declared on that day, if such order is placed by 12:00 Noon
(New York time) and Federal funds or bank wire monies are
received by State Street bank prior to 12:00 Noon (New York
time) of such day. Federal funds are a bank's deposits in
a Federal Reserve Bank. These funds can be transferred by
Federal Reserve wire from the account of one member bank to
that of another member bank on the same day and are
considered to be immediately available funds; similar
immediate availability is accorded monies received at State
Street Bank by bank wire. Money transmitted by a check
drawn on a member of the Federal Reserve System is converted
to Federal funds in one business day following receipt.
Checks drawn on banks which are not members of the Federal
Reserve System may take longer. All payments (including
checks from individual investors) must be in United States
dollars.
All shares purchased are confirmed to each
shareholder and are credited to his or her account at net
asset value. To avoid unnecessary expense to the Fund and
to facilitate the immediate redemption of shares, stock
certificates, for which no charge is made, are not issued
except upon the written request of the shareholder.
Certificates are not issued for fractional shares. Shares
for which certificates have been issued are not eligible for
any of the optional methods of withdrawal. The Fund
reserves the right to reject any purchase order.
The Fund reserves the right to close out an account
that is below $500,000 after at least 60 days' written
notice to the shareholder unless the balance in such account
is increased to at least that amount during such period.
For purposes of this calculation, the sum of a shareholder's
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
35
<PAGE>
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) applicable to that dividend period. Realized
36
<PAGE>
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
37
<PAGE>
instruments held by the affected Portfolio prior to maturity
to realize capital gains or losses or to shorten average
portfolio maturity; (2) withholding dividends of net income
on shares of that Portfolio; or (3) establishing a net asset
value per share of the Portfolio by using available market
quotations or equivalents.
The net asset value of the shares of each
Portfolio, except the Tax-Free Portfolio, is determined each
Fund business day (and on such other days as the Directors
deem necessary) at 12:00 Noon and 4:00 p.m. (New York time).
The net asset value of the shares of the Tax-Free Portfolio
is determined each Fund business day (and on such other days
as the Directors deem necessary) at 12:00 Noon (New York
time). The net asset value per share of a Portfolio is
calculated by taking the sum of the value of the Portfolio's
investments and any cash or other assets, subtracting
liabilities, and dividing by the total number of shares of
that Portfolio outstanding. All expenses, including the
fees payable to the Adviser, are accrued daily.
____________________________________________________________
TAXES
____________________________________________________________
Federal Income Tax Considerations
The Prime, Government and Tax-Free Portfolios
qualified for the fiscal year ended April 30, 1997 as
regulated investment companies under the Internal Revenue
Code of 1986, as amended (the "Code") and, as such, will not
be liable for Federal income and excise taxes on the
investment company taxable income and net capital gains
distributed to their shareholders. Since each Portfolio of
the Fund distributes all of its investment company taxable
income and net capital gains, each Portfolio should thereby
avoid all Federal income and excise taxes.
Distributions out of taxable interest income, other
investment income, and short-term capital gains are taxable
to shareholders as ordinary income. Since each Portfolio's
investment income is derived from interest rather than
dividends, no portion of such distributions is eligible for
the dividends-received deduction available to corporations.
Long-term capital gains, if any, distributed by a Portfolio
to a shareholder are taxable to the shareholder as long-term
capital gain, irrespective of the length of time he may have
38
<PAGE>
held his shares. Any loss realized on shares held for six
months or less will be treated as a long-term loss for
Federal income tax purposes to the extent of any long-term
capital gain distributions received on such shares.
Distributions of short and long-term capital gains, if any,
are normally made once each year shortly before the close of
the Fund's fiscal year, although such distributions may be
made more frequently if necessary in order to maintain the
Portfolio's net asset value at $1.00 per share.
With respect to the Tax-Free Portfolio, for
shareholder's Federal income tax purposes, distributions to
shareholders out of tax-exempt interest income earned by
such Portfolio generally is not subject to Federal income
tax. Any loss realized on shares of the Tax-Free Portfolio
that are held for six months or less will not be realized
for Federal income tax purposes to the extent of any exempt-
interest dividends received on such shares. Shareholders of
the Tax-Free Portfolio may be subject to state and local
taxes on distributions. Each investor should consult his
own tax adviser to determine the status of distributions in
his particular state or locality. See, however, above
"Alternative Minimum Tax."
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
39
<PAGE>
entire year and, thus, is an annual average rather than
day-by-day determination for each shareholder.
____________________________________________________________
GENERAL INFORMATION
____________________________________________________________
Portfolio Transactions. Subject to the general
supervision of the Directors of the Fund, the Adviser is
responsible for the investment decisions and the placing of
the orders for portfolio transactions for the Portfolios.
Because the Portfolios invest in securities with short
maturities, there is a relatively high portfolio turnover
rate. However, the turnover rate does not have an adverse
effect upon the net yield and net asset value of the
Portfolio's shares since the portfolio transactions occur
primarily with issuers, underwriters or major dealers in
money market instruments acting as principals. Such
transactions are normally on a net basis which do not
involve payment of brokerage commissions. The cost of
securities purchased from an underwriter usually includes a
commission paid by the issuer to the underwriters;
transactions with dealers normally reflect the spread
between bid and asked prices.
The Portfolios have no obligation to enter into
transactions in portfolio securities with any dealer,
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.
40
<PAGE>
Capitalization
All shares of each Portfolio participate equally in
dividends and distributions from that Portfolio, including
any distributions in the event of a liquidation. Each share
of a Portfolio is entitled to one vote for all purposes.
Shares of all classes vote for the election of Directors and
on any other matter that affects all Portfolios in
substantially the same manner as a single class, except as
otherwise required by law. As to matters affecting each
Portfolio differently, such as approval of the Advisory
Agreement, shares of each Portfolio vote as a separate
class. There are no conversion or preemptive rights in
connection with any shares of the Fund. Since voting rights
are noncumulative, holders of more than 50% of the shares
voting for the election of Directors can elect all of the
Directors. Procedures for calling a shareholders' meeting
for the removal of Directors of the Fund, similar to those
set forth in Section 16(c) of the Act and in the Fund's
By-Laws, will be available to shareholders of each
Portfolio. Special meetings of stockholders for any purpose
may be called by 10% of its outstanding shareholders. All
shares of each Portfolio when duly issued will be fully paid
and non-assessable. The rights of the holders of shares of
a class may not be modified except by the vote of a majority
of the outstanding shares of such class.
The Board of Directors is authorized to reclassify
and issue any unissued shares to any number of additional
series without shareholder approval. Accordingly, the
Directors in the future, for reasons such as the desire to
establish one or more additional portfolios with different
investment objectives, policies or restrictions, may create
additional series of shares. Any issuance of shares of
another class would be governed by the Act and Maryland law.
As of the close of business on August 15, 1997,
there were 1,174,919,455.57 shares of the Prime Portfolio,
248,669,204.94 shares of the Government Portfolio and
269,629,255.95 shares of the Tax-Free Portfolio outstanding.
Set forth and discussed below is certain information as to
all persons who owned of record or beneficially 5% or more
of the outstanding shares of a portfolio at August 15,
1997.
41
<PAGE>
No. of % of
Name and Address Shares Class
Prime Portfolio
The J Fund LP 76,219,893.71 6.49%
(Hellman Jordan)
75 State Street
Suite 2420
Boston, MA 02109-1807
Government Portfolio
Herzog Heine Geduld Inc. 36,582,285.41 14.71%
Firm Investment
26 Broadway
New York, NY 10004-1703
Meadow Walk Limited Partnership 18,810,838.87 7.56%
1 Wall Street Court
Suite 980
New York, NY 10005-3302
Ewal Manufacturing 38,500,145.87 15.48%
c/o K W Sawyer
PO Box 923
Sparta, NJ 07871-0923
Davenport & Co of Virginia 66,765,004.23 26.85%
As Agent Omnibus A/C for
Exclusive Benefit of Customers
One James Center
901 E Cary Street
Richmond, VA 23219-4057
TJS Partners 14,973,383.61 6.02%
Attn: Thomas J Salvatore
52 Vanderbilt Avenue 5th Fl
New York, NY 10017-3808
42
<PAGE>
Tax-Free Portfolio
Steven B Kalafer 33,586,356.09 12.46%
PO Box 1007
Route 202 and 31
Flemington, NJ 08822-1007
Davenport & Co of Virginia Inc 13,656,650.66 5.06%
As Agent Omnibus A/C
for Exclusive
Benefit of Customers
One James Center
901 E Cary Street
Richmond, VA 23219-4057
U S Clearing/Omnibus Acct 90,939,111.84 33.73%
FBO Customers
26 Broadway 12th Fl
New York, NY 10004-1801
Legal Matters. The legality of the shares offered
hereby has been passed upon by Seward & Kissel, New York, New
York, counsel for the Fund and the Adviser. Seward & Kissel has
relied upon the opinion of Venable, Baetjer and Howard LLP, 1800
Mercantile Bank & Trust Building, 2 Hopkins Plaza, Baltimore,
Maryland 21201, for matters relating to Maryland law.
Accountants. McGladrey & Pullen LLP, New York, New
York, are the independent auditors for the Fund.
Yield Quotations and Performance Information.
Advertisements containing yield quotations for one or more
Portfolios for the Fund may from time to time be sent to
investors or placed in newspapers, magazines or other media on
behalf of the Fund. These advertisements may quote performance
rankings, ratings or data from independent organizations or
financial publications such as Lipper Analytical Services, Inc.,
Morningstar, Inc., IBC's Money Fund Report, IBC's Money Market
Insight or Bank Rate Monitor or compare the Fund's performance to
bank money market deposit accounts, certificates of deposit or
various indices. Yield quotations are calculated in accordance
with the standardized method referred to in Rule 482 under the
Securities Act of 1933.
Yield quotations for a Portfolio are thus determined by
(i) computing the net change over a seven-day period, exclusive
of the capital changes, in the value of a hypothetical
pre-existing account having a balance of one share of such
43
<PAGE>
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.
44
<PAGE>
ACM INSTITUTIONAL RESERVES
ANNUAL REPORT
APRIL 30, 1997
PORTFOLIO OF INVESTMENTS
APRIL 30, 1997 ACM INSTITUTIONAL RESERVES - PRIME PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY YIELD VALUE
- --------------------------------------------------------------------------
COMMERCIAL PAPER-59.3%
ALLIANZ OF AMERICA FINANCE CORP.
$ 5,949 7/01/97 (a) 5.50% $ 5,893,559
10,000 8/18/97 (a) 5.72 9,826,811
BANCA CRT FINANCIAL CORP.
3,400 5/01/97 5.50 3,400,000
9,060 5/14/97 5.55 9,041,842
7,500 5/05/97 5.58 7,495,350
BANCO NACIONAL DE COMMON
10,000 9/17/97 5.55 9,785,708
BHF FINANCE DELAWARE, INC.
5,000 6/30/97 5.60 4,953,333
BIL NORTH AMERICA, INC.
18,500 5/16/97 5.52 18,457,450
CAISSE CENTRALE JARDINS DU QUEBEC
20,000 7/16/97 5.39 19,772,422
CAISSE D' AMORTISSEMENT
5,550 10/03/97 5.38 5,421,440
1,300 5/07/97 5.50 1,298,808
CHIAO TUNG BANK CO., LTD.
5,000 8/26/97 5.33 4,913,388
20,000 7/23/97 5.45 19,748,694
COMMONWEALTH BANK OF AUSTRALIA
16,500 10/03/97 5.72 16,093,642
COPLEY FINANCING CORP.
13,016 5/12/97 (a) 5.54 12,993,967
3,000 5/21/97 (a) 5.54 2,990,767
6,207 5/21/97 (a) 5.55 6,187,862
CREGEM NORTH AMERICA, INC.
10,000 6/18/97 5.33 9,928,933
CS FIRST BOSTON, INC.
5,000 8/19/97 5.40 4,917,500
5,000 7/01/97 5.62 4,952,386
5,000 10/08/97 5.70 4,873,333
5,000 10/08/97 5.73 4,872,667
EKSPORTFINANS
5,000 6/18/97 5.35 4,964,333
5,820 6/04/97 5.60 5,789,219
19,685 6/18/97 5.60 19,538,019
6,215 6/26/97 5.60 6,160,861
EMBARCADERO CENTER VENTURE (FOUR)
5,600 5/19/97 5.63 5,584,236
13,000 6/04/97 5.72 12,929,771
EMBARCADERO CENTER VENTURE (TWO-A)
6,250 5/19/97 5.67 6,232,281
GENERAL ELECTRIC CAPITAL CORP.
10,000 7/28/97 5.63 9,862,378
GLENCORE FINANCE LTD.
5,000 8/25/97 5.43 4,912,517
5,000 8/26/97 5.43 4,911,763
GOVERNMENT DEVELOPMENT BANK OF
PUERTO RICO
6,500 5/12/97 5.35 6,489,374
10,000 6/13/97 5.58 9,933,350
3,200 6/16/97 5.60 3,177,102
IMI FUNDING CORP. (USA)
3,080 8/05/97 5.35 3,036,059
3,260 7/23/97 5.37 3,219,639
13,430 7/15/97 5.44 13,277,793
INDUSTRIAL BANK OF KOREA
5,000 6/04/97 5.44 4,974,311
5,000 6/18/97 5.50 4,963,333
5,000 6/23/97 5.62 4,958,631
15,000 7/02/97 5.68 14,853,267
INTERNATIONAL NEDERLAND BANK
30,000 6/03/97 5.57 29,846,963
KOREAN DEVELOPMENT BANK
10,000 5/12/97 5.34 9,983,683
KREDIETBANK NORTH
AMERICA FINANCE CORP.
25,000 6/02/97 5.38 24,880,445
MITSUBISHI MOTORS CREDIT
3,000 5/23/97 5.58 2,989,770
MORGAN STANLEY GROUP, INC.
15,000 5/21/97 5.36 14,955,333
10,000 5/21/97 5.52 9,969,333
NESTLE CAPITAL CORP.
5,000 5/05/97 5.50 4,996,944
1
PORTFOLIO OF INVESTMENTS (CONTINUED)
ACM INSTITUTIONAL RESERVES - PRIME PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY YIELD VALUE
- --------------------------------------------------------------------------
PACCAR FINANCIAL CORPORATION
$ 6,380 5/05/97 5.50% $ 6,376,101
PHH CORP.
4,057 5/01/97 5.53 4,057,000
6,000 5/05/97 5.53 5,996,313
PROVINCE OF QUEBEC
6,900 6/30/97 5.60 6,835,600
SOCIETE GENERALE N.A., INC.
2,500 7/14/97 5.32 2,472,661
UNI FUNDING, INC.
5,000 5/05/97 5.33 4,997,039
10,000 6/30/97 5.62 9,906,333
VATTENFALL TREASURY, INC.
14,000 5/21/97 5.36 13,958,311
VENANTIUS
10,000 7/24/97 5.40 9,874,000
15,000 5/07/97 5.50 14,986,250
Total Commercial Paper
(amortized cost $514,670,178) 514,670,178
CERTIFICATES OF DEPOSIT-21.6%
BANK OF TOKYO
10,000 5.54%, 6/11/97 5.50 10,000,353
5,000 5.59%, 5/05/97 5.59 5,000,000
5,000 5.80%, 7/08/97 5.80 5,000,000
22,000 5.84%, 7/18/97 5.84 22,000,000
CANADIAN IMPERIAL BANK
10,000 5.60%, 6/18/97 5.60 10,000,000
CARIPLO
5,000 5.75%, 7/17/97 5.74 5,000,106
DAI ICHI KANGYO BANK LTD.
15,000 5.53%, 5/14/97 5.53 14,999,914
HESSISCHE LANDESBANK
5,000 6.13%, 4/07/98 6.25 4,994,655
KOREAN DEVELOPMENT BANK
30,000 5.78%, 6/11/97 5.76 30,000,677
NORINCHUKIN BANK
20,000 5.60%, 5/07/97 5.59 20,000,033
10,000 5.75%, 6/09/97 5.74 10,000,107
SANWA BANK
13,000 5.52%, 5/07/97 5.52 13,000,000
27,000 5.70%, 5/27/97 5.70 27,000,000
SUMITOMO BANK
10,000 5.57%, 5/14/97 5.57 10,000,000
Total Certificates of Deposit
(amortized cost $186,995,845) 186,995,845
CORPORATE OBLIGATIONS-10.4%
ABBEY NATIONAL TREASURY SERVICES
6,000 5.56%, 5/16/97 FRN 5.62 5,999,853
BETA FINANCE, INC.
5,000 5.92%, 6/06/97 (a) 6.00 4,999,619
GENERAL ELECTRIC CAPITAL CORP.
10,000 5.74%, 6/27/97 FRN 5.71 10,000,768
5,000 5.75%, 1/05/98 FRN 5.75 5,000,000
MERRILL LYNCH & CO.
5,000 5.57%, 12/24/97 FRN 5.59 4,999,370
7,000 5.60%, 1/22/98 FRN 5.63 6,998,765
5,000 5.66%, 3/16/98 5.73 4,999,584
7,000 5.78%, 1/29/98 FRN 5.80 6,998,973
SALTS II CAYMAN ISLANDS CORP.
5,000 5.61%, 6/19/97 (a) 5.61 5,000,000
SALTS III CAYMAN ISLANDS CORP.
35,000 5.79%, 7/23/97 (a) 5.79 35,000,000
Total Corporate Obligations
(amortized cost $89,996,932) 89,996,932
BANK OBLIGATIONS-3.6%
FCC NATIONAL BANK
10,000 5.63%, 6/04/97 5.63 10,000,000
FIRST CHICAGO CORP.
5,000 6.25%, 7/15/97 5.73 5,004,327
JP MORGAN & CO.
10,000 5.75%, 8/15/97 FRN 5.80 9,998,604
KOREAN DEVELOPMENT BANK
6,000 7.71%, 5/05/97 5.47 6,001,504
Total Bank Obligations
(amortized cost $31,004,435) 31,004,435
2
ACM INSTITUTIONAL RESERVES - PRIME PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY YIELD VALUE
- --------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY
OBLIGATIONS-2.5%
FEDERAL FARM CREDIT BANK
$ 7,000 5.66%, 8/03/98 FRN 5.71% $ 6,995,869
FEDERAL NATIONAL MORTGAGE ASSN.
10,000 5.74%, 8/25/97 FRN 5.78 9,998,772
STUDENT LOAN MARKETING ASSN.
5,000 5.71%, 1/21/98 FRN 5.74 4,998,957
Total U.S. Government and Agency
Obligations
(amortized cost $21,993,598) 21,993,598
PROMISSORY NOTE-2.3%
GOLDMAN SACHS GROUP LP
20,000 5.69%, 10/14/97 FRN 5.69%
(cost $20,000,000) $20,000,000
TOTAL INVESTMENTS-99.7%
(amortized cost$864,660,988) 864,660,988
Other assets less liabilities-0.3% 2,678,367
NET ASSETS-100%
(offering and redemption price of
$1.00 per share; 867,523,159 shares
outstanding) $867,339,355
See Glossary of Terms on page 13.
See notes to financial statements.
3
PORTFOLIO OF INVESTMENTS
APRIL 30, 1997 ACM INSTITUTIONAL RESERVES - GOVERNMENT PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY YIELD VALUE
- --------------------------------------------------------------------------
U.S. GOVERNMENT & AGENCY
OBLIGATIONS-52.8%
FEDERAL HOME LOAN BANK-18.9%
$ 20,000 5/01/97 5.25% $ 20,000,000
19,000 5/01/97 5.28 19,000,000
5,000 6/05/97 5.30 4,974,236
2,000 9/18/97 5.37 1,958,233
695 9/18/97 5.60 679,865
5,000 5.35%, 12/04/97 FRN 5.44 4,997,556
3,000 5.87%, 1/30/98 5.87 3,000,000
4,060 5.88%, 3/24/98 6.15 4,048,029
3,000 6.11%, 4/17/98 6.15 2,999,174
-------------
61,657,093
FEDERAL NATIONAL MORTGAGE
ASSOCIATION-14.7%
2,000 5/05/97 5.22 1,998,840
1,130 5/09/97 5.25 1,128,682
5,000 6/03/97 5.28 4,975,800
5,000 6/05/97 5.28 4,974,333
2,080 9/10/97 5.37 2,039,045
3,000 6/24/97 5.47 2,975,385
695 6/19/97 5.50 689,797
800 6/25/97 5.50 793,278
3,000 9/24/97 5.50 2,933,083
6,000 8/04/97 5.54 5,912,283
185 5/12/97 5.60 184,683
590 6/13/97 5.60 586,054
4,000 5.38%, 9/12/97 FRN 5.45 3,999,405
2,895 5.39%, 7/17/97 5.39 2,895,000
5,000 5.78%, 6/11/97 FRN 5.83 4,999,728
5,000 5.94%, 10/15/97 FRN 5.95 5,000,259
2,000 6.02%, 4/15/98 6.15 1,997,807
-------------
48,083,462
STUDENT LOAN MARKETING
ASSOCIATION-8.2%
15,765 5/01/97 5.28 15,765,000
4,500 5.68%, 7/12/99 FRN 6.08 4,463,554
4,000 5.71%, 1/21/98 FRN 5.74 3,999,166
2,500 5.87%, 6/30/97 FRN 5.86 2,500,236
-------------
26,727,956
FEDERAL FARM CREDIT BANK-6.1%
1,790 9/15/97 5.37 1,753,420
3,175 7/07/97 5.49 3,142,559
2,500 5.26%, 5/20/97 FRN 5.38 2,499,848
5,100 5.60%, 11/03/97 5.57 5,098,007
7,500 5.73%, 6/26/97 FRN 5.78 7,499,448
-------------
19,993,282
FEDERAL HOME LOAN MORTGAGE CORP.-4.9%
2,000 5/06/97 5.22 1,998,550
2,000 5/07/97 5.22 1,998,260
2,000 5/09/97 5.22 1,997,680
2,000 5/12/97 5.22 1,996,810
447 6/11/97 5.60 444,149
170 7/01/97 5.60 168,387
210 7/15/97 5.60 207,550
4,000 5.72%, 3/17/98 5.87 3,994,950
3,000 5.84%, 4/08/98 6.04 2,994,856
-------------
15,801,192
Total U.S. Government & Agency
Obligations
(amortized cost $172,262,985) 172,262,985
REPURCHASE AGREEMENTS-46.9%
CHASE SECURITIES, INC.
7,000 5.58%, dated 4/08/97, due
6/11/97 in the amount of
$7,069,440 (cost $7,000,000;
collateralized by $8,100,000
FN 303814, 6.50%, 4/01/16,
value $7,346,400)
(amortized cost $7,000,000) (b) 5.58 7,000,000
CHASE SECURITIES, INC.
5,000 5.63%, dated 4/01/97, due
6/30/97 in the amount of
$5,070,312 (cost $5,000,000;
collateralized by $5,580,000
FH 00604, 7.00%, 11/01/26,
value $5,373,069)
(amortized cost $5,000,000) (b) 5.63 5,000,000
FIRST BOSTON CORP.
7,000 5.50%, dated 4/09/97, due
5/08/97 in the amount of
$7,031,014 (cost $7,000,000;
collateralized by $7,472,000
FN 313472, 7.00%, 2/01/27,
value $7,251,245)
(amortized cost $7,000,000) (b) 5.50 7,000,000
4
ACM INSTITUTIONAL RESERVES - GOVERNMENT PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY YIELD VALUE
- --------------------------------------------------------------------------
FIRST BOSTON CORP.
$ 7,000 5.52%, dated 4/30/97, due
5/30/97 in the amount of
$7,032,200 (cost $7,000,000;
collateralized by $9,115,000
FN 302833, 8.00%, 10/01/24,
value $7,178,590)
(amortized cost $7,000,000) (b) 5.52% $ 7,000,000
GOLDMAN SACHS & CO.
12,000 5.50%, dated 4/09/97, due
5/14/97 in the amount of
$12,064,167 (cost $12,000,000;
collateralized by $12,992,000
FN 00618, 7.00%, 11/01/26,
value $12,456,960)
(amortized cost $12,000,000) (b) 5.50 12,000,000
LEHMAN BROTHERS, INC.
5,000 5.40%, dated 3/19/97, due
5/21/97 in the amount of
$5,047,250 (cost $5,000,000;
collateralized by $6,119,213
FGG 000474, 9.00%, 4/01/25,
value $5,196,326)
(amortized cost $5,000,000) (b) 5.40 5,000,000
LEHMAN BROTHERS, INC.
7,000 5.55%, dated 4/09/97, due
6/09/97 in the amount of
$7,065,829 (cost $7,000,000;
collateralized by $9,969,734
FN 10267, 7.00%, 10/01/09,
value $7,294,149)
(amortized cost $7,000,000) (b) 5.55 7,000,000
MORGAN STANLEY GROUP, INC.
12,000 5.44%, dated 4/18/97, due
5/02/97 in the amount of
$12,025,387 (cost $12,000,000;
collateralized by $12,976,000
GN 780452, 7.00%, 10/15/26,
value $12,425,262)
(amortized cost $12,000,000) (b) 5.44 12,000,000
NIKKO SECURITIES CO.
5,000 5.48%, dated 4/16/97, due
5/13/97 in the amount of
$5,020,550 (cost $5,000,000;
collateralized by $5,406,000
FN 377155, 7.00%, 4/01/27,
value $5,267,546)
(amortized cost $5,000,000) (b) 5.48 5,000,000
NIKKO SECURITIES CO.
9,000 5.57%, dated 4/30/97, due
7/02/97 in the amount of
$9,087,727 (cost $9,000,000;
collateralized by $9,652,000
FN 250911, 7.00%, 5/01/27,
value $9,374,639)
(amortized cost $9,000,000) (b) 5.57 9,000,000
PAINE WEBBER, INC.
7,000 5.50%, dated 4/30/97, due
5/12/97 in the amount of
$7,012,833 (cost $7,000,000;
collateralized by $7,279,000
FN 250888, 7.00%, 4/01/12,
value $7,204,383)
(amortized cost $7,000,000) (b) 5.50 7,000,000
PAINE WEBBER, INC.
7,000 5.50%, dated 4/30/97, due
5/16/97 in the amount of
$7,017,111 (cost $7,000,000;
collateralized by $7,694,000
FN 313040, 7.00%, 8/01/11,
value $7,203,855)
(amortized cost $7,000,000) (b) 5.50 7,000,000
PRUDENTIAL SECURITIES, INC.
7,000 5.46%, dated 4/23/97, due
5/15/97 in the amount of
$7,023,357 (cost $7,000,000;
collateralized by $11,330,000
FN 100042, 11.00%, 10/15/20,
value $7,097,833, and $125,000
FN 283820, 6.00%, 5/01/01,
value $102,769)
(amortized cost $7,000,000) (b) 5.46 7,000,000
5
PORTFOLIO OF INVESTMENTS
(CONTINUED) ACM INSTITUTIONAL RESERVES - GOVERNMENT PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY YIELD VALUE
- --------------------------------------------------------------------------
PRUDENTIAL SECURITIES, INC.
$ 6,000 5.47%, dated 4/16/97, due
5/07/97 in the amount of
$6,019,145 (cost $6,000,000;
collateralized by $7,225,000
GN 780197, 7.00%, 7/15/25,
value $6,232,164)
(amortized cost $6,000,000) (b) 5.47% $ 6,000,000
SBC WARBURG, LTD.
6,000 5.45%, dated 4/21/97, due
5/05/97 in the amount of
$6,012,717 (cost $6,000,000;
collateralized by $8,552,000
FN 313311, 6.246%, 12/01/26,
value $6,161,719)
(amortized cost $6,000,000) (b) 5.45 6,000,000
SBC WARBURG, LTD.
6,000 5.53%, dated 4/17/97, due
6/18/97 in the amount of
$6,057,143 (cost $6,000,000;
collateralized by $7,594,000
FN 50993, 7.00%, 2/01/24,
value $6,167,556)
(amortized cost $6,000,000) (b) 5.53 6,000,000
SMITH BARNEY, INC.
12,000 5.50%, dated 4/09/97, due
5/13/97 in the amount of
$12,062,333 (cost $12,000,000;
collateralized by $12,899,893
FN 00567, 9.50%, 4/01/25,
value $12,393,073)
(amortized cost $12,000,000) (b) 5.50 12,000,000
STATE STREET BANK AND TRUST CO.
10,200 5.27%, dated 4/30/97, due
5/01/97 in the amount of
$10,201,493 (cost $10,200,000;
collateralized by $8,730,000
US T-Note, 8.875%, 8/15/20,
value $10,469,828)
(amortized cost $10,200,000) 5.27 10,200,000
UBS SECURITIES, INC.
3,000 5.53%, dated 4/08/97, due
5/07/97 in the amount of
$3,013,364 (cost $3,000,000;
collateralized by $3,231,000
FN 361936, 7.50%, 9/01/26,
value $3,191,616)
(amortized cost $3,000,000) (b) 5.53 3,000,000
UBS SECURITIES, INC.
4,000 5.55%, dated 4/30/97, due
5/01/97 in the amount of
$4,000,617 (cost $4,000,000;
collateralized by $4,277,000
FHG 00647, 7.00%, 1/01/27,
value $4,079,275)
(amortized cost $4,000,000) 5.55 4,000,000
UBS SECURITIES, INC.
5,000 5.62%, dated 4/29/97, due
7/30/97 in the amount of
$5,071,811 (cost $5,000,000;
collateralized by $5,242,000
FN 361936, 7.50%, 9/01/26,
value $5,182,968)
(amortized cost $5,000,000) (b) 5.62 5,000,000
UBS SECURITIES, INC.
4,000 5.65%, dated 4/17/97, due
7/16/97 in the amount of
$4,056,500 (cost $4,000,000;
collateralized by $4,304,000
FHG 00647, 7.00%, 1/01/27,
value $4,145,207)
(amortized cost $4,000,000) (b) 5.65 4,000,000
Total Repurchase Agreements
(amortized cost $153,200,000) 153,200,000
TOTAL INVESTMENTS-99.7%
(amortized cost $325,462,985) 325,462,985
Other assets less liabilities-0.3% 1,056,723
NET ASSETS-100%
(offering and redemption price
of $1.00 per share; 326,651,057
shares outstanding) $326,519,708
See Glossary of Terms on page 13.
See notes to financial statements.
6
PORTFOLIO OF INVESTMENTS
APRIL 30, 1997 ACM INSTITUTIONAL RESERVES - TAX-FREE PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- --------------------------------------------------------------------------
MUNICIPAL BONDS-65.3%
ALABAMA-2.8%
ARAB IDB
(SCI Manufacturing Inc.)
Series '89 VRDN (c)
$ 150 8/01/00 4.70% $ 150,000
HUNTSVILLE IDA
(Seiki USA Project)
Series '88 AMT
VRDN (c)
5,000 9/01/98 4.88 5,000,000
-------------
5,150,000
ALASKA-1.1%
ALASKA IDR
(American President Lines) Series '91
VRDN (c)
1,945 11/01/09 4.30 1,945,000
ARIZONA-0.2%
CHANDLER IDA
(Parsons Municipal Services Inc.)
Series '83
VRDN (c)
400 12/15/09 3.75 400,000
CALIFORNIA-9.2%
ALAMEDA COUNTY TRAN
BOARD OF EDUCATION
Series '96
3,640 7/01/97 4.03 3,642,721
CALIFORNIA COMMUNITY
COLLEGE TRAN FSA
Series A
2,500 7/02/97 3.90 2,502,996
CALIFORNIA HIGHER EDUCATION
STUDENT LOAN REV.
Series D-2 Putable
5,000 7/01/97 3.95 5,000,000
LOS ANGELES COUNTY TRAN
LOCAL FSA EDUCATIONAL AGENCY
1,600 6/30/97 4.05 1,601,758
SOUTH COAST TRAN
LOCAL AGENCY POOLED
Loan Series '96A
4,000 6/30/97 4.07 4,004,291
-------------
16,751,766
CONNECTICUT-1.5%
CONNECTICUT DEV. AUTH. PCR
(Connecticut Light & Power Co. Project)
Series '93A VRDN (c)
2,800 9/01/28 4.50 2,800,000
DELAWARE-1.4%
DELAWARE ECON. DEV. AUTH.
(Delmarva Power & Light) Series '93C
VRDN (c)
2,500 10/01/28 4.55 2,500,000
DISTRICT OF COLUMBIA-2.7%
DISTRICT OF COLUMBIA GO
Series B-1 AMBAC
1,030 6/01/97 3.75 1,030,378
DISTRICT OF COLUMBIA HFA MFHR
(McLean Apts.)
Series '85A VRDN (c)
2,000 12/01/05 4.70 2,000,000
DISTRICT OF COLUMBIA SFHR
Series C Putable AMT
2,000 12/01/97 3.90 2,000,000
-------------
5,030,378
GEORGIA-2.7%
CARTERSVILLE ECON. DEV.
(Sekisui Jushi America)
Series '92 VRDN (c)
300 6/01/12 4.40 300,000
COLLEGE PARK IDR
(Wynefield 1 Project)
AMT VRDN (c)
1,700 12/01/16 3.85 1,700,000
JACKSON COUNTY IDA
(Mitsubishi Consumer Electronic)
VRDN (c)
3,000 12/01/15 5.00 3,000,000
-------------
5,000,000
7
PORTFOLIO OF INVESTMENTS
(CONTINUED) ACM INSTITUTIONAL RESERVES - TAX-FREE PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- --------------------------------------------------------------------------
ILLINOIS-12.3%
ELMHURST HOSPITAL REVENUE
(Joint Comm. Health Org.) Series '88
VRDN (c)
$ 16,300 7/01/18 4.75% $ 16,300,000
ILLINOIS DEV. FINANCE AUTH.
(Akin Seed Project)
AMT VRDN (c)
1,000 11/01/04 4.95 1,000,000
ILLINOIS DEV. FINANCE AUTH.
(U.G.N. Inc. Project)
Series '86 AMT
VRDN (c)
3,500 9/15/11 4.40 3,500,000
VERNON HILLS IDR
(Kinder Care Center)
VRDN (c)
550 2/01/01 4.75 550,000
WEST CHICAGO IDR
(Acme Printing Co.)
Series '89 AMT
VRDN (c)
1,100 5/01/99 4.53 1,100,000
-------------
22,450,000
INDIANA-1.4%
PORTAGE ECON. DEV. MFHR
(Pedcor Inv. Apts. Project)
Series '95A
AMT VRDN (c)
600 8/01/30 4.70 600,000
SEYMOUR ECON. DEV.
(Kobelco Metal Powder Co. Project)
Series '87 AMT
VRDN (c)
2,000 12/01/97 4.40 2,000,000
-------------
2,600,000
KANSAS-1.9%
WICHITA COUNTY
(CSJ Health Systems Project)
Series XXV '85
VRDN (c)
3,400 10/01/11 4.70 3,400,000
KENTUCKY-0.2%
BOONE COUNTY
(Cincinnati Gas & Elec. Co.)
Series '85A
VRDN (c)
295 8/01/13 3.65 295,000
MAINE-1.1%
MAINE FINANCE AUTH.
(Barber Foods Inc.)
Series '90B AMT
VRDN (c)
2,050 12/01/06 4.80 2,050,000
MICHIGAN-0.4%
MICHIGAN HDA MFHR
(Woodland Meadows Apts.)
AMT VRDN (c)
400 3/01/13 4.60 400,000
MICHIGAN JOB DEV. AUTH.
(Kentwood Residence Assoc.)
Series '84
VRDN (c)
300 11/01/14 3.60 300,000
-------------
700,000
MINNESOTA-0.3%
EDEN PRAIRIE IDA
(Kinder Care Project)
Series C VRDN (c)
465 2/01/01 4.75 465,000
MISSOURI-0.4%
BLUE SPRINGS IDA
(Kinder Care Project)
Series C VRDN (c)
540 2/01/01 4.75 540,000
MISSOURI ECON. DEV. AUTH.
(Plastic Enterprises)
Series '90A AMT
VRDN (c)
135 9/01/05 4.75 135,000
-------------
675,000
NEW HAMPSHIRE-0.4%
NEW HAMPSHIRE MUNI. BOND BANK
Series D FSA
760 1/15/98 4.04 767,090
8
ACM INSTITUTIONAL RESERVES - TAX-FREE PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- --------------------------------------------------------------------------
NEW JERSEY-2.7%
JERSEY CITY BAN
$ 3,500 9/26/97 4.05% $ 3,506,134
PLEASANTVILLE SCHOOL
DISTRICT TEMPORARY NOTES
1,500 8/28/97 4.00 1,501,170
-------------
5,007,304
NORTH CAROLINA-0.8%
LENOIR COUNTY IDR PCR
(Carolina Energy Project)
AMT VRDN (c)
1,500 7/01/22 4.75 1,500,000
OREGON-1.3%
OREGON ECON. DEV.
(Kyotaru Oregon Project) Series '89
AMT VRDN (c)
2,400 12/01/99 4.88 2,400,000
PENNSYLVANIA-2.1%
EMMAUS GENERAL AUTH. REV.
Series '89F-06
VRDN (c)
1,200 3/01/24 4.60 1,200,000
MONTGOMERY COUNTY IDA
(Kinder Care Project)
Series D VRDN (c)
400 10/01/00 4.75 400,000
PHILADELPHIA GO TRAN
Series '96A
2,000 6/30/97 3.95 2,001,737
VENAGO IDR
(Penzoil Co. Project) Series '82A
VRDN (c)
285 12/01/12 4.50 285,000
-------------
3,886,737
SOUTH DAKOTA-1.1%
SOUTH DAKOTA HFA SFMR
(Homeownership Mortgage) Series F
1,000 5/01/97 3.78 1,000,000
SOUTH DAKOTA HFA SFMR
(Homeownership Mortgage) Series G
1,000 5/01/97 3.90 1,000,000
-------------
2,000,000
TENNESSEE-3.8%
DICKSON COUNTY IDA
(Tennessee Bun Co. Project)
Series '96
AMT VRDN (c)
2,000 7/01/06 4.75 2,000,000
TENNESSEE HDA SFMR
(Homeownership Program) Series
'96-5 AMT
5,000 8/21/97 4.00 5,000,397
-------------
7,000,397
TEXAS-3.1%
GREATER EAST TEXAS HIGHER EDUCATION
STUDENT LOAN REV.
Series '95A Putable AMT
1,000 5/01/98 4.10 1,000,000
TEXAS GO TRAN
Series '96
4,050 8/29/97 4.00 4,059,557
TRINITY RIVER IDA
(Radiation Sterilizers)
Series A VRDN (c)
150 11/01/05 3.75 150,000
TRINITY RIVER IDA
(Radiation Sterilizers)
Series B VRDN (c)
450 11/01/05 3.75 450,000
-------------
5,659,557
UTAH-4.7%
PROVO CITY HFA MFHR
(Branbury Project)
Series A VRDN (c)
3,000 12/15/10 4.80 3,000,000
9
PORTFOLIO OF INVESTMENTS
(CONTINUED) ACM INSTITUTIONAL RESERVES - TAX-FREE PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- --------------------------------------------------------------------------
UTAH HFA SFMR
(Home Mortgage Rev.) Series '96-2
VRDN (c)
$ 3,500 7/01/16 4.60% $ 3,500,000
UTAH STUDENT LOAN REV.
Series O AMBAC
2,000 5/01/98 3.95 2,014,506
-------------
8,514,506
VERMONT-0.3%
SWANTON VILLAGE ELECTRIC SYSTEM REV.
MBIA
185 12/01/97 4.10 187,953
VERMONT STUDENT LOAN REV.
Series '85 VRDN (c)
430 1/01/04 3.65 430,000
-------------
617,953
VIRGINIA-4.1%
CHESTERFIELD COUNTY IDR
(Phillip Morris Co.) VRDN (c)
7,500 4/01/09 4.75 7,500,000
WASHINGTON-0.3%
WASHINGTON STUDENT LOAN FINANCE
(Third Program) Series B AMT
VRDN (c)
500 12/01/02 4.70 500,000
WISCONSIN-1.0%
WAUSAU PCR
(Minnesota Mining & Manufacturing)
VRDN (c)
1,600 8/01/17 4.86 1,600,000
300 12/01/01 4.86 300,000
-------------
1,900,000
Total Municipal Bonds
(amortized cost $119,465,688) 119,465,688
COMMERCIAL PAPER-11.8%
ARIZONA-1.5%
MARICOPA COUNTY PCR
(So. California Edison Project)
Series F
2,700 5/01/97 3.50 2,700,000
FLORIDA-1.2%
SUNSHINE STATE GOVERNMENT
FINANCE AGENCY
(Comm. Rev. Bonds) Series '86
2,200 8/22/97 3.80 2,200,000
ILLINOIS-1.1%
ILLINOIS EDUCATIONAL FACILITIES AUTH.
(Pooled Financing Program)
2,000 8/20/97 3.80 2,000,000
INDIANA-0.6%
MOUNT VERNON PCR
(General Electric Co. Project)
Series '89A
1,100 8/20/97 3.80 1,100,000
KANSAS-0.5%
BURLINGTON PCR
(Kansas City Power & Light Co.)
Series '87A
1,000 8/14/97 3.80 1,000,000
MICHIGAN-4.4%
DELTA COUNTY ECON. DEV. AUTH.
(Mead Paper Corp.) Series A
1,500 7/22/97 3.80 1,500,000
DELTA COUNTY ECON. DEV. AUTH.
(Mead Paper Corp.) Series B
4,040 7/22/97 3.80 4,040,000
MICHIGAN BUILDING AUTH.
2,500 5/01/97 3.50 2,500,000
-------------
8,040,000
10
ACM INSTITUTIONAL RESERVES - TAX-FREE PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- --------------------------------------------------------------------------
NORTH CAROLINA-0.8%
NORTH CAROLINA MUNICIPAL POWER AGENCY
(Catawba Project #1)
$ 1,500 8/21/97 3.80% $ 1,500,000
TEXAS-1.1%
DALLAS AREA RAPID TRANSIT
Sales Series A
2,000 8/20/97 3.80 2,000,000
WYOMING-0.6%
LINCOLN COUNTY PCR
(PacifiCorp Project)
Series '91
1,100 8/14/97 3.80 1,100,000
Total Commercial Paper
(amortized cost $21,639,649) 21,640,000
TOTAL INVESTMENTS-77.1%
(amortized cost $141,105,337) $141,105,688
Other assets less liabilities-22.9% 41,959,257
NET ASSETS-100%
(offering and redemption price of
$1.00 per share; 183,148,257 shares
outstanding) $183,064,945
# All securities either mature or their interest rate changes in one year or
less.
See Glossary of Terms on page 13.
See notes to financial statements.
11
PORTFOLIO OF INVESTMENTS
APRIL 30, 1997 ACM INSTITUTIONAL RESERVES - TRUST PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY YIELD VALUE
- --------------------------------------------------------------------------
COMMERCIAL PAPER-52.2%
AGA CAPITAL, INC.
$ 4,000 5/20/97 (a) 5.55% $ 3,988,283
ALLIANZ OF AMERICA FINANCE CORP.
2,000 7/10/97 (a) 5.65 1,978,028
1,000 7/21/97 (a) 5.67 987,242
ASSOCIATES CORP. OF NORTH AMERICA
8,000 6/27/97 5.72 7,927,547
BANCA CRT FINANCIAL CORP.
4,000 5/22/97 5.53 3,987,097
BIL NORTH AMERICA, INC.
5,000 8/18/97 5.29 4,919,915
3,000 5/16/97 5.52 2,993,100
CAISSE CENTRALE JARDINS DU QUEBEC
7,379 5/08/97 5.50 7,371,109
CHIAO TUNG BANK CO., LTD.
2,000 8/26/97 5.33 1,965,355
CREGEM NORTH AMERICA, INC.
7,000 6/26/97 5.29 6,942,398
3,000 6/18/97 5.33 2,978,680
CS FIRST BOSTON, INC.
3,000 8/19/97 5.40 2,950,500
1,000 7/01/97 5.62 990,477
1,000 10/08/97 5.70 974,667
EMBARCADERO CENTER VENTURE (FOUR)
3,000 6/04/97 5.72 2,983,793
GLENCORE FINANCE LTD.
1,000 8/25/97 5.43 982,503
IMI FUNDING CORP. (USA)
5,000 5/22/97 5.52 4,983,900
INDUSTRIAL BANK OF KOREA
2,000 6/23/97 5.62 1,983,452
6,000 7/17/97 5.70 5,926,850
KOREAN DEVELOPMENT BANK
2,000 5/27/97 5.60 1,991,911
MERRILL LYNCH & CO., INC.
1,000 1/14/98 5.85 958,075
MITSUBISHI MOTORS CREDIT
7,000 5/23/97 5.58 6,976,130
PHH CORP.
4,000 5/21/97 5.52 3,987,733
UNI FUNDING, INC.
2,000 6/30/97 5.62 1,981,267
VENANTIUS AB
8,000 5/07/97 5.50 7,992,667
Total Commercial Paper
(amortized cost $91,702,679) 91,702,679
U.S. GOVERNMENT & AGENCY
OBLIGATIONS-32.6%
FEDERAL FARM CREDIT BANK
2,500 5.26%, 5/20/97 FRN 5.38 2,499,848
7,500 5.73%, 6/26/97 FRN 5.78 7,499,448
FEDERAL HOME LOAN BANK
5,000 5.35%, 12/04/97 FRN 5.44 4,997,556
3,000 5.87%, 1/30/98 5.87 3,000,000
FEDERAL NATIONAL MORTGAGE ASSN.
2,000 5.39%, 7/17/97 5.39 2,000,000
5,000 5.78%, 6/11/97 FRN 5.83 4,999,728
5,000 5.94%, 10/15/97 FRN 5.93 5,000,259
STUDENT LOAN MARKETING ASSN.
2,500 5.55%, 9/03/97 FRN 5.61 2,499,504
22,300 5.71%, 11/20/97 FRN 5.65 22,307,219
2,500 5.87%, 6/30/97 FRN 5.86 2,500,236
Total U.S. Government & Agency
Obligations
(amortized cost $57,303,798) 57,303,798
CORPORATE OBLIGATIONS-8.6%
ABBEY NATIONAL TREASURY SERVICES
3,000 5.56%, 5/16/97 FRN 5.62 2,999,927
GENERAL ELECTRIC CAPITAL CORP.
2,000 5.75%, 1/05/98 FRN 5.75 2,000,000
MERRILL LYNCH & CO.
2,000 5.66%, 3/16/98 5.73 1,999,833
12
ACM INSTITUTIONAL RESERVES - TRUST PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY YIELD VALUE
- --------------------------------------------------------------------------
SALTS II CAYMAN ISLANDS CORP. (A)
$ 8,000 5.61%, 6/19/97 5.61% $ 8,000,000
Total Corporate Obligations
(amortized cost $14,999,760) 14,999,760
CERTIFICATES OF DEPOSIT-3.4%
BANK OF TOKYO
1,000 5.80%, 7/08/97 5.80 1,000,000
CARIPLO FINANCE, INC.
1,000 5.75%, 7/17/97 5.74 1,000,021
DAI ICHI KANGYO BANK LTD.
3,000 5.53%, 5/14/97 5.53 2,999,983
HESSISCHE LANDESBANK
1,000 6.13%, 4/07/98 6.25 998,931
Total Certificates of Deposit
(amortized cost $5,998,935) 5,998,935
PROMISSORY NOTE-2.3%
GOLDMAN SACHS GROUP L.P.
4,000 5.69%, 10/14/97 FRN
(cost $4,000,000) 5.69 4,000,000
TIME DEPOSIT-1.0%
REPUBLIC NATIONAL BANK
1,800 5.63%, 5/01/97
(cost $1,800,000) 5.63 1,800,000
TOTAL INVESTMENTS-100.1%
(amortized cost $175,805,172) 175,805,172
Other assets less liabilities-(0.1%) (124,009)
NET ASSETS-100%
(offering and redemption
price of $1.00 per share;
175,738,130 shares outstanding) $175,681,163
(a) Securities issued in reliance on Section (4) 2 or Rule 144A of the
Securities Act of 1933. Rule 144A securities may be resold in transactions
exempt from registration, normally to qualified institutional buyers. At April
30, 1997, these securities amounted to $82,892,585, representing 9.6% of net
assets on the Prime Portfolio, and $14,953,553, representing 8.5% of net assets
on Trust Portfolio.
(b) Repurchase agreements which are terminable within 7 days.
(c) 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 of Terms:
AMBAC American Municipal Bond Assurance Corporation
AMT Alternative Minimum Tax
BAN Bond Anticipation Note
FRN Floating Rate Note
FSA Financial Security Assurance, Inc.
GO General Obligation
HDA Housing Development Authority
HFA Housing Finance Agency/Authority
IDA Industrial Development Authority
IDB Industrial Development Board
IDR Industrial Development Revenue
MBIA Municipal Bond Investors Assurance
MFHR Multi-Family Housing Revenue
PCR Pollution Control Revenue
SFHR Single Family Housing Revenue
SFMR Single Family Mortgage Revenue
TRAN Tax & Revenue Anticipation Note
See notes to financial statements.
13
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1997 ACM INSTITUTIONAL RESERVES
_______________________________________________________________________________
<TABLE>
<CAPTION>
PRIME GOVERNMENT TAX-FREE TRUST
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Investments in securities, at
value (cost $864,660,988,
$325,462,985, $141,105,337,
$175,805,172, respectively) $864,660,988 $325,462,985 $141,105,688 $175,805,172
Cash -0- -0- 2,285,418 89,537
Interest receivable 2,868,492 1,108,688 1,550,683 854,771
Receivable for investments sold -0- -0- 39,354,888 -0-
Receivable for fund shares sold -0- -0- -0- 248
Receivable due from Adviser -0- 14,210 -0- -0-
Total assets 867,529,480 326,585,883 184,296,677 176,749,728
LIABILITIES
Due to custodian 3,690 11,150 -0- -0-
Payable for fund shares repurchased 3,568 -0- -0- 317
Advisory fee payable 782 -0- 3,127 62,397
Payable for investments purchased -0- -0- 1,188,463 958,075
Accrued expenses 182,085 55,025 40,142 47,776
Total liabilities 190,125 66,175 1,231,732 1,068,565
NET ASSETS $867,339,355 $326,519,708 $183,064,945 $175,681,163
COMPOSITION OF NET ASSETS
Capital shares $867,523,159 $326,651,057 $183,148,257 $175,738,130
Accumulated net realized loss on
investments (183,804) (131,349) (83,663) (56,967)
Net unrealized appreciation of
investments -0- -0- 351 -0-
$867,339,355 $326,519,708 $183,064,945 $175,681,163
</TABLE>
See notes to financial statements.
14
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1997 ACM INSTITUTIONAL RESERVES
_______________________________________________________________________________
<TABLE>
<CAPTION
PRIME GOVERNMENT TAX-FREE TRUST
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest $41,610,016 $10,564,511 $ 7,490,721 $10,692,908
EXPENSES
Advisory fee (Note B) 1,509,130 389,803 409,348 886,804
Registration 425,097 154,933 106,408 101,201
Custodian 154,937 77,854 93,135 73,744
Audit and legal 33,353 15,798 19,037 14,988
Transfer agency 24,226 23,771 20,534 22,867
Printing 5,788 4,056 3,634 8,703
Directors' fees 5,525 5,525 5,525 5,525
Amortization of organization
expenses -0- 2,076 2,076 -0-
Miscellaneous 12,866 5,884 7,527 9,765
Total expenses 2,170,922 679,700 667,224 1,123,597
Less: expense reimbursement (661,792) (289,896) (257,876) (144,572)
Net expenses 1,509,130 389,804 409,348 979,025
Net investment income 40,100,886 10,174,707 7,081,373 9,713,883
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on
investment transactions 1,928 (2,140) (90) (4,087)
Net change in unrealized
appreciation of investments -0- -0- 229 -0-
Net gain (loss) on investments 1,928 (2,140) 139 (4,087)
NET INCREASE IN NET ASSETS FROM
OPERATIONS $40,102,814 $10,172,567 $7,081,512 $9,709,796
</TABLE>
See notes to financial statements.
15
STATEMENT OF CHANGES IN NET ASSETS ACM INSTITUTIONAL RESERVES
_______________________________________________________________________________
<TABLE>
<CAPTION>
PRIME PORTFOLIO GOVERNMENT PORTFOLIO
---------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
APRIL 30,1997 APRIL 30,1996 APRIL 30,1997 APRIL 30,1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 40,100,886 $ 18,016,970 $ 10,174,707 $ 8,116,764
Net realized gain (loss) on investment transactions 1,928 (67,682) (2,140) (44,374)
Net change in unrealized appreciation of investments -0- -0- -0- -0-
Net increase in net assets from operations 40,102,814 17,949,288 10,172,567 8,072,390
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (40,100,886) (18,016,970) (10,174,707) (8,116,764)
CAPITAL STOCK TRANSACTIONS
Net increase (decrease) 374,018,204 295,597,513 175,705,670 46,450,680
Total increase (decrease) 374,020,132 295,529,831 175,703,530 46,406,306
NET ASSETS
Beginning of year 493,319,223 197,789,392 150,816,178 104,409,872
End of year $867,339,355 $493,319,223 $326,519,708 $150,816,178
</TABLE>
See notes to financial statements.
16
ACM INSTITUTIONAL RESERVES
_______________________________________________________________________________
<TABLE>
<CAPTION>
TAX-FREE PORTFOLIO TRUST PORTFOLIO
---------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
APRIL 30,1997 APRIL 30,1996 APRIL 30,1997 APRIL 30,1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 7,081,373 $ 3,429,135 $ 9,713,883 $ 8,045,961
Net realized gain (loss) on investment transactions (90) (66,276) (4,087) (32,758)
Net change in unrealized appreciation of investments 229 (44) -0- -0-
Net increase in net assets from operations 7,081,512 3,362,815 9,709,796 8,013,203
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (7,081,373) (3,429,135) (9,713,883) (8,045,961)
CAPITAL STOCK TRANSACTIONS
Net increase (decrease) (546,863) 148,180,832 5,619,828 60,921,819
Total increase (decrease) (546,724) 148,114,512 5,615,741 60,889,061
NET ASSETS
Beginning of year 183,611,669 35,497,157 170,065,422 109,176,361
End of year 183,064,945 $183,611,669 $175,681,163 $170,065,422
</TABLE>
17
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1997 ACM INSTITUTIONAL RESERVES
_______________________________________________________________________________
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 were being amortized against income on a
straight-line basis through August 1996 on the Government and Tax-Free
Portfolios.
3. TAXES
It is the Fund's policy to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if applicable, to its
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
4. DIVIDENDS
The Fund declares dividends daily from net investment income and automatically
reinvests such dividends in additional shares at net asset value. Net realized
capital gains on investments, if any, are expected to be distributed near
calendar year end. Dividends paid by Tax-Free Portfolio from net investment
income for the year ended April 30, 1997 are exempt from federal income taxes.
However, certain shareholders may be subject to the alternative minimum tax
(AMT).
5. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Interest income is accrued daily. Investment transactions are recorded on the
date securities are purchased or sold. Realized gain (loss) from investment
transactions is recorded on the identified cost basis.
6. REPURCHASE AGREEMENTS
It is the Fund's policy to take possession of securities as collateral under
repurchase agreements and to determine on a daily basis that the value of such
securities are sufficient to cover the value of the repurchase agreements.
NOTE B: ADVISORY FEE AND TRANSACTIONS WITH AN AFFILIATE OF THE ADVISER
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 with respect to the Trust Portfolio, from May 1, 1996 to
April 6, 1997 for expenses exceeding .50 of 1% of its average daily net assets
and from April 7, 1997 to April 30, 1997 for expenses exceeding .45 of 1% of
its average daily net assets. For the year ended April 30, 1997, reimbursement
was $661,792, $289,896, $257,876 and $144,572 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, 1997, was approximately
$18,000 per Portfolio.
18
ACM INSTITUTIONAL RESERVES
_______________________________________________________________________________
NOTE C: INVESTMENT TRANSACTIONS
At April 30, 1997, the cost of investments 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 available to offset future capital gains at April 30, 1997 of
$183,804, of which $2,984 expires 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 carryforward of $131,349, of which $1,340 expires in 2000, $9,174
in 2001, $51,091 in 2002, $23,230 in 2003, $44,374 in 2004 and $2,140 in the
year 2005; the Tax-Free Portfolio had a capital loss carryforward of $83,663,
of which $87 expires in 2000, $6,191 in 2002, $11,019 in 2003 and $66,276 in
2004 and $90 in the year 2005; and the Trust Portfolio had a capital loss
carryforward of $56,967, of which $3,347 expires in 2002, $16,775 in 2003,
$32,758 in 2004 and $4,087 in the year 2005.
NOTE D: CAPITAL STOCK
There are 1,000,000,000 shares of $.01 par value capital stock authorized. At
April 30, 1997, capital paid-in aggregated $867,523,159 on Prime Portfolio,
$326,651,057 on Government Portfolio, $183,148,257 on Tax-Free Portfolio, and
$175,738,130 on Trust Portfolio. Transactions, all at $1.00 per share, were as
follows:
YEAR ENDED YEAR ENDED
APRIL 30, 1997 APRIL 30, 1996
---------------- ---------------
PRIME PORTFOLIO
Shares sold 12,695,838,675 4,839,076,341
Shares issued on reinvestments of dividends 40,100,886 18,016,970
Shares redeemed (12,361,921,357) (4,561,495,798)
Net increase 374,018,204 295,597,513
YEAR ENDED YEAR ENDED
APRIL 30, 1997 APRIL 30, 1996
---------------- ---------------
GOVERNMENT PORTFOLIO
Shares sold 1,074,902,562 1,212,530,228
Shares issued on reinvestments of dividends 10,174,707 8,116,764
Shares redeemed (909,371,599) (1,174,196,312)
Net increase 175,705,670 46,450,680
YEAR ENDED YEAR ENDED
APRIL 30, 1997 APRIL 30, 1996
---------------- ---------------
TAX-FREE PORTFOLIO
Shares sold 1,486,189,526 1,044,165,922
Shares issued on reinvestments of dividends 7,081,373 3,429,135
Shares redeemed (1,493,817,762) (899,414,225)
Net increase (decrease) (546,863) 148,180,832
19
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ACM INSTITUTIONAL RESERVES
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
APRIL 30, 1997 APRIL 30, 1996
---------------- ---------------
TRUST PORTFOLIO
Shares sold 1,074,544,780 989,948,926
Shares issued on reinvestments of dividends 9,713,883 8,045,961
Shares redeemed (1,078,638,835) (937,073,068)
Net increase 5,619,828 60,921,819
20
FINANCIAL HIGHLIGHTS ACM INSTITUTIONAL RESERVES
_______________________________________________________________________________
PER SHARE OPERATING PERFORMANCE FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
PRIME PORTFOLIO
------------------------------------------------
YEAR ENDED APRIL 30,
------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .0530 .0560 .0502 .0325 .0353
LESS: DISTRIBUTIONS
Dividends from net investment income (.0530) (.0560) (.0502) (.0325) (.0353)
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURNS
Total investment return based on
net asset value (a) 5.44% 5.76% 5.15% 3.30% 3.59%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in millions) $867.3 $493.3 $197.8 $108.1 $64.3
Ratio to average net assets of:
Expenses, net of waivers and reimbursements .20% .20% .20% .20% .18%
Expenses, before waivers and reimbursements .29% .32% .36% .42% .54%
Net investment income (b) 5.31% 5.54% 5.24% 3.25% 3.42%
</TABLE>
<TABLE>
<CAPTION>
GOVERNMENT PORTFOLIO
------------------------------------------------
YEAR ENDED APRIL 30,
------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .0519 .0552 .0493 .0315 .0339
LESS: DISTRIBUTIONS
Dividends from net investment income (.0519) (.0552) (.0493) (.0315) (.0339)
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURNS
Total investment return based on net
asset value (a) 5.33% 5.67% 5.06% 3.20% 3.45%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in millions) $326.5 $150.8 $104.4 $76.6 $73.2
Ratio to average net assets of:
Expenses, net of waivers and reimbursements .20% .20% .20% .20% .18%
Expenses, before waivers and reimbursements .35% .36% .38% .36% .49%
Net investment income (b) 5.22% 5.50% 4.94% 3.15% 3.30%
</TABLE>
(a) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the year, reinvestment of all
dividends at net asset value during the year and redemption on the last day of
the year.
(b) Net of expenses reimbursed or waived by the Adviser.
21
FINANCIAL HIGHLIGHTS (CONTINUED) ACM INSTITUTIONAL RESERVES
_______________________________________________________________________________
PER SHARE OPERATING PERFORMANCE FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
TAX-FREE PORTFOLIO
------------------------------------------------
YEAR ENDED APRIL 30,
------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .0347 .0372 .0326 .0240 .0287
Net unrealized loss on investments -0- -0- (0.0048) -0- -0-
Net increase in net asset value from
operations .0347 .0372 .0278 .0240 .0287
LESS: DISTRIBUTIONS
Dividends from net investment income (.0347) (.0372) (.0326) (.0240) (.0287)
ADD: CAPITAL CONTRIBUTION
Capital Contributed by the Adviser -0- -0- 0.0048 -0- -0-
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURNS
Total investment return based on net
asset value (a) 3.53% 3.79% 3.31%(b) 2.43% 2.92%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in millions) $183.1 $183.6 $35.5 $35.6 $40.9
Ratio to average net assets of:
Expenses, net of waivers and reimbursements .20% .20% .20% .20% .18%
Expenses, before waivers and reimbursements .33% .48% .76% .69% .95%
Net investment income (c) 3.46% 3.73% 3.31% 2.40% 2.73%
</TABLE>
<TABLE>
<CAPTION>
TRUST PORTFOLIO
---------------------------------------------------
NOVEMBER 16,
1992 (D)
YEAR ENDED APRIL 30, THROUGH
-------------------------------------- APRIL 30,
1997 1996 1995 1994 1993
-------- -------- -------- -------- -----------
<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 .0492 .0527 .0479 .0309 .0144
LESS: DISTRIBUTIONS
Dividends from net investment income (.0492) (.0527) (.0479) (.0309) (.0144)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURNS
Total investment return based on net
asset value (a) 5.04% 5.41% 4.91% 3.14% 3.21%(e)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $175.7 $170.1 $109.2 $36.8 $5.3
Ratio to average net assets of:
Expenses, net of waivers and reimbursements .50% .50% .49% .14% -0-
Expenses, before waivers and reimbursements .57% .60% .75% 1.23% .45%(e)
Net investment income (c) 4.93% 5.28% 5.31% 3.15% 3.17%(e)
</TABLE>
(a) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends at net asset value during the period and redemption on the last day
of the period.
(b) Capital contributed by the Adviser had no material effect on net asset
value, and therefore, no effect on total return.
(c) Net of expenses reimbursed or waived by the Adviser.
(d) Commencement of operations.
(e) Annualized.
22
<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.
A-1
<PAGE>
Those issues rated SP-1 which are determined to possess
overwhelming safety characteristics will be given a plus (+)
designation. Issues rate SP-2 have satisfactory capacity to pay
principal and interest.
Other Municipal Securities and Commercial Paper
"Prime-1" is the highest rating assigned by Moody's for
other short-term municipal securities and commercial paper, and
"A-1+" and "A-1" are the two highest ratings for commercial paper
assigned by Standard & Poor's (Standard & Poor's does not rate
short-term tax-free obligations). Moody's uses the numbers 1, 2,
and 3 to denote relative strength within its highest
classification of "Prime", while Standard & Poor's uses the
number 1+, 1, 2 and 3 to denote relative strength within its
highest classification of "A". Issuers rated "Prime" by Moody's
have the following characteristics: their short-term debt
obligations carry the smallest degree of investment risk, margins
of support for current indebtedness are large or stable with cash
flow an asset protection well assured, current liquidity provides
ample coverage of near-term liabilities and unused alternative
financing arrangements are generally available. While protective
elements may change over the intermediate or longer term, such
changes are most unlikely to impair the fundamentally strong
position of short-term obligations. Commercial paper issuers
rates "A" by Standard & Poor's have the following
characteristics: liquidity ratios are better than industry
average, long-term debt rating is A or better, the issuer has
access to at least two additional channels of borrowing, and
basic earnings and cash flow are in an upward trend. Typically,
the issuer is a strong company in a well-established industry and
has superior management.
A-2
<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.
B-1
<PAGE>
6. Tax-Exempt Commercial Paper is a short-term
obligation with a state maturity of 365 days or
less. It is issued by agencies of state and local
governments to finance seasonal working capital
needs or as short-term financing in anticipation of
longer term financing.
Municipal Bonds, which meet longer term capital needs
and generally have maturities of more than one year when issued,
have three principal classifications:
1. General Obligation Bonds are issued by such
entities as states, countries, cities, towns, and
regional districts. The proceeds of these
obligations are used to fund a wide range of public
projects, including construction or improvement of
schools, highways and roads, and water and sewer
systems. The basic security behind General
Obligation Bonds is the issuer's pledge of its full
faith and credit and taxing power for the payment
of principal and interest. The taxes that can be
levied for the payment of debt service may be
limited or unlimited as to the rate or amount of
special assessments.
2. Revenue Bonds generally are secured by the net
revenues derived from a particular facility, group
of facilities, or, in some cases, the proceeds of a
special excise of other specific revenue source.
Revenue Bonds are issued to finance a wide variety
of capital projects including electric, gas, water
and sewer systems; highways, bridges and tunnels;
port and airport facilities; colleges and
universities; and hospitals. Many of these Bonds
provide additional security in the form of a debt
service reserve fund to be used to make principal
and interest payments. Housing authorities have a
wide range of security, including partially or
fully insured mortgages, rent subsidized and/or
collateralized mortgages, and/or the net revenues
from housing or other public projects. Some
authorities provide further security in the form of
a state's ability (without obligation) to make up
deficiencies in the debt service reserve fund.
3. Industrial Development Bonds are considered
municipal bonds if the interest paid thereon is
exempt from Federal income tax and are issued by or
B-2
<PAGE>
on behalf of public authorities to raise money to
finance various privately operated facilities for
business and manufacturing, housing, sports, and
pollution control. These Bonds are also used to
finance public facilities such as airports, mass
transit systems, ports, and parking. The payment
of the principal and interest on such Bonds is
dependent solely on the ability of the facility's
user to meet its financial obligations and the
pledge, if any, of real and personal property as
security for such payment.
B-3
<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 __, 1997
________________________________________________________________
This Statement of Additional Information is not a prospectus and
should be read in conjunction with the Trust Portfolio's current
Prospectus dated September __, 1997 which describes shares of the
Trust Portfolio of the Fund. A copy of this Prospectus may be
obtained by contacting Alliance Fund Services, Inc. at the
address or telephone number shown above.
TABLE OF CONTENTS
Page
The Fund................................................ 2
Investment Objective and Policies....................... 2
Investment Restrictions................................. 9
Management.............................................. 11
Purchase and Redemption of Shares....................... 18
Daily Dividends-Determination of Net Asset Value........ 20
Taxes................................................... 21
General Information..................................... 22
Appendix - Commercial Paper and Bond Ratings............
Financial Statements....................................
Report of Independent Auditors..........................
________________________________________________________________
(R): This registered service mark used under license from the
owner, Alliance Capital Management L.P.
4
<PAGE>
________________________________________________________________
THE FUND
________________________________________________________________
ACM Institutional Reserves, Inc. (the "Fund") is an open-
end investment company. The Trust Portfolio, which is
diversified, is described in the Prospectus which supplements this
Statement of Additional Information. Three additional Portfolios
of the Fund, the Prime Portfolio, the Government Portfolio and the
Tax-Free Portfolio, are described in a separate Prospectus and
Statement of Additional Information.
________________________________________________________________
INVESTMENT OBJECTIVES AND POLICIES
________________________________________________________________
The Trust Portfolio's investment objectives are -- in the
following order of priority -- safety of principal, excellent
liquidity, and maximum current income to the extent consistent
with the first two objectives. As a matter of fundamental policy,
the Trust Portfolio pursues its objectives by maintaining a
portfolio of high-quality U.S.-dollar denominated money market
securities, all of which, at the time of investment, have
remaining maturities of 397 days or less.
The Trust Portfolio will comply with Rule 2a-7 under the
Investment Company Act of 1940 (the "Act"), as amended from time
to time, including the diversification, quality and maturity
conditions imposed by the Rule.
Currently, pursuant to Rule 2a-7, the Trust Portfolio may
invest only in U.S. dollar-denominated "eligible securities" (as
that term is defined in the Rule) that have been determined by the
Adviser to present minimal credit risks pursuant to procedures
approved by the Board of Directors. Generally, an eligible
security is a security that (i) has a remaining maturity of 397
days or less and (ii) is rated, or is issued by an issuer with
short-term debt outstanding that is rated, in one of the two
highest rating categories by two nationally recognized statistical
rating organizations ("NRSROs") or, if only one NRSRO has issued a
rating, by that NRSRO. A security that originally had a maturity
of greater than 397 days is an eligible security if its remaining
maturity at the time of purchase is 397 calendar days or less and
the issuer has outstanding short-term debt that would be an
eligible security. Unrated securities may also be eligible
securities if the Adviser determines that they are of comparable
2
<PAGE>
quality to a rated eligible security pursuant to guidelines
approved by the Board of Directors. A description of the ratings
of some NRSROs appears in Appendix attached hereto.
Under Rule 2a-7 the Trust Portfolio may not invest more
than five percent of its assets in the securities of any one
issuer other than the United States Government, its agencies and
instrumentalities. In addition, the Trust Portfolio may not
invest in a security that has received, or is deemed comparable in
quality to a security that has received, the second highest rating
by the requisite number of NRSROs (a "second tier security") if
immediately after the acquisition thereof the Trust Portfolio
would have invested more than (A) the greater of one percent of
its total assets or one million dollars in securities issued by
that issuer which are second tier securities, or (B) five percent
of its total assets in second tier securities.
The Trust Portfolio may make the following investments
diversified by maturities and issuers:
1. Marketable obligations of, or guaranteed by, the
United States Government, its agencies or instrumentalities.
These include issues of the U.S. Treasury, such as bills,
certificates of indebtedness, notes and bonds, and issues of
agencies and instrumentalities established under the authority of
an act of Congress. The latter issues include, but are not
limited to, obligations of the bank for cooperatives, Federal
Financing Bank, Federal Home Loan Bank, Federal Intermediate
Credit Banks, Federal Land Bank, Federal National Mortgage
Association and Tennessee Valley Authority. Some of the
securities are supported by the full faith and credit of the U.S.
Treasury, others are supported by the right of the issuer to
borrow from the Treasury, and still others are supported only by
the credit of the agency or instrumentality.
2. Certificates of deposit and bankers' acceptances
issued or guaranteed by, or time deposits maintained at, banks or
savings and loans associations (including foreign branches of U.S.
banks or U.S. or foreign branches of foreign banks) having total
assets of more than $500 million. Certificates of deposit are
receipts issued by a depository institution in exchange for the
deposit of funds. The issuer agrees to pay the amount deposited
plus interest to the bearer of the receipt on the date specified
on the certificate. The certificate usually can be traded in the
secondary market prior to maturity. Bankers' acceptances
typically arise from short-term credit arrangements designed to
enable businesses to obtain funds to finance commercial
transactions. Generally, an acceptance is a time draft drawn on a
3
<PAGE>
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]. For a description of such ratings see the Appendix.
Commercial paper consists of short-term (usually from 1 to 270
days) unsecured promissory notes issued by corporations in order
to finance their current operations. A variable amount master
demand note represents a direct borrowing arrangement involving
periodically fluctuating rates of interest under a letter
agreement between a commercial paper issuer and an institutional
lender pursuant to which the lender may determine to invest
varying amounts. For a further description of variable amount
master demand notes, see "Additional Investment Policies"
below.
4. Repurchase agreements pertaining to the above
securities. A repurchase agreement arises when a buyer purchases
a security and simultaneously agrees to resell it to the
counterparty at an agreed-upon future date. The resale price is
greater than the purchase price, reflecting an agreed-upon market
rate which is effective for the period of time the buyer's money
is invested in the security and which is not related to the coupon
rate on the purchased security. Repurchase agreements may be
entered into with member banks of the Federal Reserve System or
"primary dealers" (as designated by the Federal Reserve Bank of
New York) in U.S. Government securities or with State Street Bank
and Trust Company ("State Street Bank"), the Fund's Custodian. It
is the Trust Portfolio's current practice, which may be changed at
any time without shareholder approval, to enter into repurchase
agreements only with such primary dealers and State Street Bank.
For each repurchase agreement, the Trust Portfolio requires
continual maintenance of the market value of underlying collateral
in amounts equal to, or in excess of, the agreement amount. While
the maturities of the underlying collateral may exceed one year,
the term of the repurchase agreement is always less than one year.
4
<PAGE>
In the event that a counterparty defaulted on its repurchase
obligation, the Trust Portfolio might suffer a loss to the extent
that the proceeds from the sale of the collateral were less than
the repurchase price. If the counterparty became bankrupt, the
Trust Portfolio might be delayed in selling the collateral.
Repurchase agreements often are for short periods such as one day
or a week, but may be longer. Repurchase agreements not
terminable within seven days will be limited to no more than 10%
of the Trust Portfolio's assets. Pursuant to Rule 2a-7, a
repurchase agreement is deemed to be an acquisition of the
underlying securities, provided that the obligation of the seller
to repurchase the securities from the money market fund is
collateralized fully (as defined in such Rule). Accordingly, the
counterparty of a fully collateralized repurchase agreement is
deemed to be the issuer of the underlying securities.
The Trust Portfolio may invest in asset-backed securities
that meet its existing diversification, quality and maturity
criteria. Asset-backed securities are securities issued by
special purpose entities whose primary assets consist of a pool of
loans or accounts receivable. The securities may be in the form
of a beneficial interest in a special purpose trust, limited
partnership interest, or commercial paper or other debt securities
issued by a special purpose corporation. Although the securities
may have some form of credit or liquidity enhancement, payments on
the securities depend predominately upon collection of the loans
and receivables held by the issuer. It is the Portfolio's current
intention to limit its investment in such securities to not more
than 5% of its net assets.
Additional Investment Policies
The following investment policies supplement those set
forth above.
Floating and Variable Rate Obligations. The Trust
Portfolio may purchase floating and variable rate demand notes and
bonds, which are obligations ordinarily having stated maturities
in excess of 13 months, but which permit the holder to demand
payment of principal at any time, or at specified intervals not
exceeding 13 months, in each case upon not more than 30 days'
notice. Variable rate demand notes include master demand notes
which are obligations that permit the Trust Portfolio to invest
fluctuating amounts, at varying rates of interest, pursuant to
direct arrangements between the Trust Portfolio, as lender, and
the borrower. These obligations permit daily changes in the
amounts borrowed. Because these obligations are direct lending
arrangements between the lender and borrower, it is not
5
<PAGE>
contemplated that such instruments generally will be traded, and
there generally is no established secondary market for these
obligations, although they are redeemable at face value, plus
accrued interest. Accordingly, where these obligations are not
secured by letters of credit or other credit support arrangements,
the Trust Portfolio's right to redeem is dependent on the ability
of the borrower to pay principal and interest on demand.
Reverse Repurchase Agreements. While the Trust Portfolio
has no plans to do so, it may enter into reverse repurchase
agreements, which involve the sale of money market securities held
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
6
<PAGE>
does not, in practice, impair the liquidity of such investments
from the perspective of institutional holders.
In 1990, in part to enhance the liquidity in the
institutional markets for restricted securities, the SEC adopted
Rule 144A under the Securities Act to establish a safe harbor from
the Securities Act's registration requirements for resale of
certain restricted securities to qualified institutional buyers.
Section 4(2) paper that is issued by a company that files reports
under the Securities Exchange Act of 1934 is generally eligible to
be resold in reliance on the safe harbor of Rule 144A. Pursuant
to Rule 144A, the institutional restricted securities markets may
provide both readily ascertainable values for restricted
securities and the ability to liquidate an investment in order to
satisfy share redemption orders on a timely basis. An
insufficient number of qualified institutional buyers interested
in purchasing certain restricted securities held by the Trust
Portfolio, however, could affect adversely the marketability of
such portfolio securities and the Trust Portfolio might be unable
to dispose of such securities promptly or at reasonable prices.
Rule 144A has already produced enhanced liquidity for many
restricted securities, and market liquidity for such securities
may continue to expand as a result of Rule 144A and the consequent
inception of the PORTAL System sponsored by the National
Association of Securities Dealers, Inc., an automated system for
the trading, clearance and settlement of unregistered securities.
The Fund's Directors have the ultimate responsibility for
determining whether specific securities are liquid or illiquid.
The Directors have delegated the function of making day-to-day
determinations of liquidity to the Adviser, pursuant to guidelines
approved by the Directors. The Adviser takes into account a
number of factors in determining whether a restricted security
being considered for purchase is liquid, including at least the
following:
(i) the frequency of trades and quotations for the
security;
(ii) the number of dealers making quotations to purchase
or sell the security;
(iii) the number of other potential purchasers of the
security;
(iv) the number of dealers undertaking to make a market
in the security;
7
<PAGE>
(v) the nature of the security (including its
unregistered nature) and the nature of the
marketplace for the security (e.g., the time needed
to dispose of the security, the method of soliciting
offers and the mechanics of transfer); and
(vi) any applicable Securities and Exchange Commission
interpretation or position with respect to such
types of securities.
To make the determination that an issue of Section 4(2)
paper is liquid, the Adviser must conclude that the following
conditions have been met:
(i) the Section 4(2) paper must not be traded flat or
in default as to principal or interest: and
(ii) the Section 4(2) paper must be rated in one of the
two highest rating categories by at least two
NRSROs, or if only one NRSRO rates the security, by
that NRSRO: if the security is unrated, Alliance
must determine that the security is of equivalent
quality.
The Adviser must also consider the trading market for
the specific security, taking into account all relevant
factors.
Following the purchase of a restricted security by the
Trust Portfolio, the Adviser monitors continuously the liquidity
of such security and reports to the Directors regarding purchases
of liquid restricted securities.
General
While there are many kinds of short-term securities used
by money market investors, the Trust Portfolio, in keeping with
its primary investment objective of safety of principal,
generally restricts its investments to the types summarized
above. Of note, the Trust Portfolio does not invest in letters
of credit. The Trust Portfolio may make investments in
certificates of deposit and banker's acceptances issued or
guaranteed by, or time deposits maintained at, foreign branches
of U.S. banks and U.S. and foreign branches of foreign banks, and
commercial paper issued by foreign companies. To the extent that
the Trust Portfolio makes such investments, consideration is
given to their domestic marketability, the lower reserve
requirements generally mandated for overseas banking operations,
8
<PAGE>
the possible impact of interruptions in the flow of international
currency transactions, potential political and social instability
or expropriation, imposition of foreign taxes, the lower level of
government supervision of issuers, the difficulty in enforcing
contractual obligations and lack of uniform accounting standards.
There can be no assurance that any of the Trust Portfolio's
objectives will be achieved. The market value of the Trust
Portfolio's investments tends to decrease during periods of
rising interest rates and to increase during intervals of falling
rates.
Net income to shareholders is aided both by the Trust
Portfolio's ability to make investments in large denominations
and by efficiencies of scale. Also, the Trust Portfolio may seek
to improve its income by selling certain portfolio securities
prior to maturity in order to take advantage of yield disparities
that occur in money markets.
The Trust Portfolio's investment objectives may not be
changed without the affirmative vote of a majority of the Trust
Portfolio's outstanding shares as defined below. Except as
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.
9
<PAGE>
The Trust Portfolio may not:
1. purchase any security which has a maturity date of
more than 397 days from the date of the Trust Portfolio's
purchase;
2. invest 25% or more of its total assets in the
securities of issuers conducting their principal business
activities in any one industry provided that for purposes of this
restriction (a) there is no limitation with respect to
investments in securities issued or guaranteed by the United
States Government, its agencies or instrumentalities,
certificates of deposit, bankers'' acceptances and
interest-bearing savings deposits and (b) all finance companies
as a group and all utility companies as a group are each
considered to be a separate industry;
3. invest more than 5% of its assets in the securities
of any one issuer (exclusive of securities issued or guaranteed
by the United States Government, its agencies or
instrumentalities), except that up to 25% of the value of the
Trust Portfolio's total assets may be invested without regard to
such 5% limitation;
4. invest in more than 10% of any one class of an
issuer's outstanding securities (exclusive of securities issued
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;
10
<PAGE>
7. make loans, provided that the Trust Portfolio may
purchase money market securities and enter into repurchase
agreements;
8. enter into repurchase agreements if, as a result
thereof, more than 10% of the Trust Portfolio's assets would be
subject to repurchase agreements not terminable within seven days
and other illiquid investments; or
9. (a) make investments for the purpose of exercising
control; (b) purchase securities of other investment companies,
except in connection with a merger, consolidation, acquisition or
reorganization; (c) invest in real estate (other than money
market securities secured by real estate or interests therein or
money market securities issued by companies which invest in real
estate, or interests therein), commodities or commodity
contracts, including futures contracts, interests in oil, gas and
other mineral exploration or other development programs; (d)
purchase securities on margin; (e) make short sales of securities
or maintain a short position or write, purchase or sell puts,
call, straddles, spreads or combinations thereof; (f) invest in
securities of issuers (other than agencies and instrumentalities
of the United States Government) having a record, together with
predecessors, of less than three years of continuous operation if
more than 5% of the Trust Portfolio's assets would be invested in
such securities; (g) purchase or retain securities of any issuers
if those officers and directors of the Fund and of the Adviser
who own individually more than 1/2% of the outstanding securities
of such issuer together own more than 5% of the securities of
such issuer; or (h) act as an underwriter of securities.
________________________________________________________________
MANAGEMENT
________________________________________________________________
Directors and Officers
The Directors and principal officers of the Fund and
their primary occupations during the past five years are set
forth below. Unless otherwise specified, the address of each
such person is 1345 Avenue of the Americas, New York, New York
10105. Those Directors whose names are followed by an asterisk
are "interested persons" of the Fund as determined under the Act.
Each Director and officer is affiliated as such with one or more
of the other registered investment companies that are advised by
the Adviser.
11
<PAGE>
Directors
JOHN D. CARIFA (52),8 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 1992.
RUTH BLOCK (66), is a Director of Ecolab Incorporated
(specialty chemicals) and Amoco Corporation (oil and gas).
Previously, she was an Executive Vice President and Chief
Insurance Officer of The Equitable Life Assurance Society of the
United States since prior to 1992. Her address is Box 4653,
Stamford, Connecticut 06903.
DAVID H. DIEVLER (67), was formerly a Senior Vice
President of ACMC, with which he had been associated since prior
to 1992. He is currently an independent consultant. His address
is P.O. Box 167, Spring Lake, New Jersey 07762.
JOHN H. DOBKIN (55), has been the President of Historic
Hudson Valley (historic preservation) since prior to 1992. From
1987 to 1992, he was a Director of ACMC. His address is 105 West
55th Street, New York, New York 10019.
WILLIAM H. FOULK, JR. (65), is an independent
consultant. He was formerly Senior Manager of Barrett
Associates, Inc., a registered investment adviser, with which he
had been associated since prior to 1992. His address is 2 Hekma
Road, Greenwich, CT 06831.
DR. JAMES M. HESTER (73), is President of the Harry
Frank Guggenheim Foundation and a Director of Union Carbide
Corporation with which he has been associated since prior to
1992. He was formerly President of New York University, The New
York Botanical Garden and Rector of the United Nations
University. His address is 45 East 89th Street, Apt. 39C, New
York, New York 10128.
CLIFFORD L. MICHEL (58), is a Partner of the law firm of
Cahill Gordon & Reindel, with which he has been associated since
prior to 1992. He is also President, Chief Executive Officer and
_________________________
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.
12
<PAGE>
Director of Wenonah Development Company (investment holding
company) since 1976 and a Director and Member of the Human
Resources, Environmental and Safety, and Executive Committees of
Placer Dome, Inc. (mining) and since 1996 he is Director, vice
Chairman and Treasurer of Atlantic Health Systems Inc. and
Atlantic Hospital. From 1988-1994 he was Director of Faber-
Castell Corporation (writing instruments),from 1988 to 1993 he
was President of the Board of Trustees of St. Mark's School and
from 1991 to 1996 he was Chairman of the Board of Trustees of
Morristown Memorial Hospital (and Memorial Health Foundation).
His address is St. Bernard's Road, Gladstone, New Jersey
07934.
DONALD J. ROBINSON (63), is currently Senior Counsel of
the law firm of Orrick, Herrington & Sutcliffe, from July 1987 to
December 1994 he was Senior Partner of that firm and from January
to December 1994 he was a Member of the Executive Committee. He
was a Trustee of the Museum of the City of New York from 1977 to
1995. His address is 666 Fifth Avenue, 19th Floor, New York, New
York 10103.
Officers
RONALD M. WHITEHILL - President (59), is a Senior Vice
President of ACMC and President of Alliance Cash Management
Services, with which he has been associated since 1993.
Previously, he was Senior Vice President and Managing Director of
Reserve Fund since prior to 1992.
KATHLEEN A. CORBET - Senior Vice President (37), has
been a Senior Vice President of ACMC since July 1993.
Previously, she held various responsibilities as head of
Equitable Capital Management Corporation's Fixed Income
Management Department, Private Placement Secondary Trading and
Fund Management since prior to 1992.
DREW A. BIEGEL - Senior Vice President (46), is a Vice
President of ACMC, with which he has been associated since prior
to 1992.
RAYMOND J. PAPERA - Senior Vice President (41), is a
Vice President of ACMC with which he has been associated since
prior to 1992.
KENNETH T. CARTY - Vice President (37), is an Assistant
Vice President of ACMC with which he has been associated since
prior to 1992.
13
<PAGE>
JOHN F. CHIODI, JR. - Vice President (31), is a Vice
President of ACMC with which he has been associated since prior
to 1992.
MARIA R. CONA - Vice President (42), is an Assistant
Vice President of ACMC with which she has been associated since
prior to 1992.
FRANCIS M. DUNN - Vice President (27), is an
Administrative Officer of ACMC with which she has been associated
since June 1992. Previously, she was a mutual fund accountant
for Dreyfus.
JOSEPH R. LASPINA - Vice President (37), is an Assistant
Vice President of ACMC, with which he has been associated since
prior to 1992.
EDMUND P. BERGAN, Jr. - Secretary (47), is a Senior Vice
President and the General Counsel of Alliance Fund Distributors,
Inc. ("AFD") and Alliance Fund Services, Inc. ("AFS"), with which
he has been associated since prior to 1992.
MARK D. GERSTEN - Treasurer and Chief Financial Officer
(46), is a Senior Vice President of AFS and AFD, with which he
has been associated since prior to 1992.
VINCENT S. NOTO - Controller (32), is a Money Market
Fund Manager, Mutual Funds of Alliance Fund Services, Inc., with
which he has been associated since prior to 1992.
The Fund does not pay any fees to, or reimburse expenses
of, its Directors who are considered "interested persons" of the
Fund. The aggregate compensation paid by the Fund to each of the
Directors during its fiscal year ended April 30, 1997, the
aggregate compensation paid to each of the Directors during
calendar year 1996 by all of the registered investment companies
to which the Adviser provides investment advisory services
(collectively, the "Alliance Fund Complex") and the total number
of funds in the Alliance Fund Complex with respect to which each
of the Directors serves as a director or trustee, are set forth
below. Neither the Fund nor any other fund in the Alliance Fund
Complex provides compensation in the form of pension or
retirement benefits to any of its directors or trustees.
14
<PAGE>
Total Number of Funds
Total in the Alliance Fund
Compensation Complex Including the
Aggregate from the Alliance Fund, as to which the
Name of Director Compensation Fund Complex, Director is a Director
of the Fund from the Fund Including the Fund or Trustee
John D. Carifa $-0- $-0- 50
Ruth Block $753 $157,500 38
David H. Dievler $753 $182,000 44
John H. Dobkin $762 $121,250 31
William H. Foulk, Jr. $766 $144,250 32
James M. Hester $750 $148,500 39
Clifford L. Michel $692 $146,068 39
Donald J. Robinson $440 $137,250 39
Robert C. White $545 $130,750 36
Mr. Robinson was elected as a Director of the Fund on
September 10, 1996.
As of August 15, 1997, the Directors and officers of the
Fund as a group owned less than 1% of the outstanding shares of
each Portfolio.
The Adviser
Alliance Capital Management L.P., a New York Stock
Exchange listed company with principal offices at 1345 Avenue of
the Americas, New York, New York 10105, has been retained under
an investment advisory agreement (the "Advisory Agreement") as
the Fund's Adviser (see "Management of the Fund" in the
Prospectus). ACMC, the sole general partner of, and the owner of
a 1% general partnership interest in, the Adviser, is an indirect
wholly-owned subsidiary of The Equitable Life Assurance Society
of the United States ("Equitable"), one of the largest life
insurance companies in the United States and a wholly-owned
subsidiary of The Equitable Companies Incorporated ("ECI"), a
holding company controlled by AXA-UAP, a French insurance holding
company. As of March 1, 1997, ACMC, Inc. and Equitable Capital
Management Corporation, each a wholly-owned direct or indirect
subsidiary of Equitable, together with Equitable, owned in the
aggregate approximately 58% of the issued and outstanding units
representing assignments of beneficial ownership of limited
partnership interests in the Adviser ("Units"), and approximately
33% and 9% of the Units were owned by the public and employees of
the Adviser and its subsidiaries, respectively, including
employees of the Adviser who serve as Directors of the Fund.
15
<PAGE>
As of March 1, 1997, AXA-UAP and its subsidiaries owned
60.7% of the issued and outstanding shares of the capital stock
of ECI. ECI is a public company with shares traded on the
Exchange. AXA-UAP, a French company, is the holding company for
an international group of insurance and related financial
services companies. AXA-UAP's insurance operations include
activities in life insurance, property and casualty insurance and
reinsurance. The insurance operations are diverse geographically
with activities, principally in Western Europe, North America and
the Asia/Pacific area. AXA-UAP is also engaged in asset
management, investment banking, securities trading, brokerage,
real estate and other financial services activities principally
in the United States, as well as in Western Europe and the
Asia/Pacific area.
Based on information provided by AXA-UAP, on March 1,
1997, 22.5% of the issued ordinary shares (representing 33.0% of
the voting power) of AXA-UAP were controlled directly and
indirectly by Finaxa, a French holding company. As of March 1,
1997, 61.4% of the shares (representing 72.0% of the voting
power) of Finaxa were owned by four French mutual insurance
companies (the "Mutuelles AXA") (one of which, AXA Assurances
I.A.R.D. Mutuelle, owned 34.9% of the shares, representing 40.0%
of the voting power), and 23.7% of the shares of Finaxa
(representing 14.6% of the voting power) were owned by Banque
Paribas, a French bank ("Paribas"). Including the ordinary
shares owned by Finaxa, on March 1, 1997, the Mutuelles AXA
directly or indirectly controlled 26.0% of the issued ordinary
shares (representing 38.1% of the voting power) of AXA-UAP.
Acting as a group, the Mutuelles AXA control AXA-UAP and
Finaxa.
In November 1996, AXA offered (the "Exchange Offer") to
acquire 100% of the ordinary shares ("UAP Shares") of FF10 each
of Compagnie UAP, a socPete anonyme organized under the laws of
France ("UAP"), in exchange for ordinary shares ("Shares") and
Certificates of Guaranteed Value ("Certificates") of AXA. Each
UAP shareholder that tendered UAP Shares in the Exchange Offer
received two Shares and two Certificates for every five UAP
Shares so tendered. On January 24, 1997, AXA acquired 91.37% of
the outstanding UAP Shares. AXA-UAP currently intends to merge
(the "Merger") with UAP at some future date in 1997. It is
anticipated that approximately 11,706,826 additional Shares will
be issued in connection with the Merger to UAP shareholders who
did not tender UAP Shares in the Exchange Offer. If the Merger
had been completed at March 1, 1997, Finaxa would have
beneficially owned (directly and indirectly) approximately 21.7%
of the Shares (representing approximately 32.0% of the voting
16
<PAGE>
power), and the Mutuelles AXA would have controlled (directly or
indirectly through their interest in Finaxa) 25.1% of the issued
ordinary shares (representing 36.8% of the voting power) of AXA-
UAP. On January 17, 1997, AXA announced its intention to redeem
its outstanding 6% Bonds (the "Bonds"). Between February 14,
1997 and May 14, 1997, holders of the Bonds has the option to
convert each Bond into 5.15 Shares. On May 15, 1997, each Bond
still outstanding was redeemed into cash at FF1,285 plus FF9.29
accrued interest. Finaxa converted the Bonds it had owned into
2,153,308 Shares. After giving effect to the conversion of all
outstanding Bonds into Shares and to the Merger as if it had been
completed at March 1, 1997, Finaxa would have beneficially owned
(directly and indirectly) approximately 21.4% of the Shares
(representing 31.3% of the voting power), and the Mutuelles AXA
would have controlled (directly or indirectly through their
interest in Finaxa) 24.7% of the issued ordinary shares
(representing 36.0% of the voting power) of AXA-UAP.
The Adviser is a leading international investment
manager supervising client accounts with assets as of June 30,
1997 totaling more than $199 billion (of which more than $71
billion represented the assets of investment companies). The
Adviser's clients are primarily major corporate employee benefit
funds, public employee retirement systems, investment companies,
foundations and endowment funds and included, as of June 30,
1997, 2933 of the FORTUNE 100 companies. The Adviser and its
subsidiaries employ approximately 1,450 employees who operate out
of domestic offices and the overseas offices of subsidiaries in
Bombay, Istanbul, London, Paris, Sao Paulo, Sydney, Tokyo,
Toronto, Bahrain, Luxembourg and Singapore. The 54 registered
investment companies managed by the Adviser comprising 116
separate investment portfolios currently have more than two
million shareholders.
Under the Advisory Agreement, the Adviser provides
investment advisory services and order placement facilities for
each Portfolio of the Fund and pays all compensation of Directors
of the Fund who are affiliated persons of the Adviser. The
Adviser or its affiliates also furnish the Fund without charge
with management supervision and assistance and office facilities.
Under the Advisory Agreement, the Trust Portfolio pays the
Adviser at an annual rate of .45 of 1% of the average daily value
of its net assets. The fee is accrued daily and paid monthly.
The Adviser has undertaken, until, at its request, the Fund
notifies investors to the contrary that if, in any fiscal year,
the aggregate expenses of the Trust Portfolio, exclusive of
taxes, brokerage, interest on borrowings and extraordinary
expenses, but including the management fee, exceed .50 of 1% of
17
<PAGE>
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, 1997, the Adviser
reimbursed $144,572, all of which represented advisory fees. For
the fiscal year ended April 30, 1996, the Adviser reimbursed
$147,358, all of which represented advisory fees. For the fiscal
year ended April 30, 1995, the Adviser reimbursed $182,478, all
of which represented advisory fees. The Adviser may make
payments from time to time from its own resources, which may
include the management fees paid by the Trust Portfolio to
compensate broker-dealers, depository institutions, or other
persons for providing distribution assistance and administrative
services and to otherwise promote the sale of shares of the Trust
Portfolio, including paying for the preparation, printing and
distribution of prospectuses and other literature or other
promotional activities. The Trust Portfolio also pays for
printing of prospectuses and other reports to shareholders and
all expenses and fees related to registrations and filings with
the Securities and Exchange Commission and with state regulatory
authorities. The Trust Portfolio pays all other expenses
incurred in its operations, including the Adviser's management
fees; custody, transfer and dividend disbursing expenses; legal
and auditing costs; clerical, administrative, accounting, and
other office costs; fees and expenses of Directors who are not
affiliated with the Adviser; costs of maintenance of the Fund's
existence; and interest charges, taxes, brokerage fees, and
commissions. As to the obtaining of clerical and accounting
services not required to be provided to the Trust Portfolio by
the Adviser under the Advisory Agreement, the Fund may employ its
own personnel. For such services, it also may utilize personnel
employed by the Adviser; if so done, the services are provided to
the Fund at cost and the payments therefor must be specifically
approved in advance by the Directors.
The Advisory Agreement became effective on July 22,
1992. The Advisory Agreement replaced an earlier agreement (the
"First Advisory Agreement") that terminated because of its
technical assignment as a result of AXA's acquisition of control
over Equitable. In anticipation of the assignment of the First
Advisory Agreement, the advisory agreement was approved by the
unanimous vote, cast in person, of the Fund's Directors
(including the Directors who are not parties to the Advisory
18
<PAGE>
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, 1997, and thereafter for
successive twelve month periods computed from each January 1,
provided that such continuance is specifically approved at least
annually by a vote of a majority of the Trust Portfolio's
outstanding voting securities or by the Fund's Board of
Directors, including in either case approval by the majority of
the Directors who are not parties to the Advisory Agreement or
interested persons as defined in the Act. The Advisory Agreement
may be terminated with respect to the Trust Portfolio without
penalty on 60 days'' written notice at the option of either party
or by vote of a majority of the outstanding voting securities of
the Trust Portfolio; it will automatically terminate in the event
of assignment. The Adviser is not liable for any action or
inaction with regard to its obligations under the Advisory
Agreement as long as it does not exhibit willful misfeasance, bad
faith, gross negligence, or reckless disregard of its
obligations.
________________________________________________________________
PURCHASE AND REDEMPTION OF SHARES
________________________________________________________________
The Trust Portfolio may refuse any order for the
purchase of shares and reserves the right to suspend the sale of
its shares to the public in response to conditions in the
securities markets or for other reasons. The Trust Portfolio is
only available through financial intermediaries.
Shareholders maintaining accounts in the Trust Portfolio
through brokerage firms and other institutions should be aware
that such institutions necessarily set deadlines for receipt of
transaction orders from their clients that are earlier than the
transaction times of the Trust Portfolio itself so that the
institutions may properly process such orders prior to their
transmittal to State Street Bank. Should an investor place a
transaction order with such an institution after its deadline,
the institution may not effect the order with the Trust Portfolio
until the next business day. Accordingly, an investor should
familiarize himself or herself with the deadlines set by his or
her institution.
19
<PAGE>
Except with respect to telephone orders, investors whose
payment in Federal funds or bank wire monies are received by
State Street Bank by 4:00 p.m. (New York time) will become
shareholders on, and will receive the dividend declared, that
day. 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
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,
20
<PAGE>
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
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
21
<PAGE>
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
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.
22
<PAGE>
________________________________________________________________
TAXES
________________________________________________________________
Federal Income Tax Considerations
The Trust Portfolio qualified, for the period ended
April 30, 1997, as a regulated investment company under the
Internal Revenue Code of 1986, as amended (the "Code) and, as
such, will not be liable for Federal income and excise taxes on
the investment company taxable income and net capital gains
distributed to its shareholders. Since the Trust Portfolio
distributes all of its investment company taxable income and net
capital gains, the Trust Portfolio should thereby avoid all
Federal income and excise taxes.
Distributions out of taxable interest income, other
investment income, and short-term capital gains are taxable to
shareholders as ordinary income. Since the Trust Portfolio's
investment income is derived from interest rather than dividends,
no portion of such distributions is eligible for the
dividends-received deduction available to corporations.
Long-term capital gains, if any, distributed by the Trust
Portfolio to a shareholder are taxable to the shareholder as
long-term capital gain, irrespective of the length of time he or
she may have held his or her shares. Any loss realized on shares
held for six months or less will be treated as long-term loss for
Federal income tax purposes to the extent of any long-term
capital gain distributions received on such shares.
Distributions of short and long-term capital gains, if any, are
normally made once each year shortly before the close of the
Trust Portfolio's fiscal year, although such distributions may be
made more frequently if necessary in order to maintain the Trust
Portfolio's net asset value at $1.00 per share.
________________________________________________________________
GENERAL INFORMATION
________________________________________________________________
Portfolio Transactions. Subject to the general
supervision of the Directors of the Fund, the Adviser is
responsible for the investment decisions and the placing of the
orders for portfolio transactions for the Trust Portfolio.
Because the Trust Portfolio invests in securities with short
maturities, there is a relatively high portfolio turnover rate.
However, the turnover rate does not have an adverse effect upon
23
<PAGE>
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
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
24
<PAGE>
shareholders. All shares of the Trust Portfolio when duly issued
will be fully paid and non-assessable. The rights of the holders
of shares of a class may not be modified except by the vote of a
majority of the outstanding shares of such class.
The Board of Directors is authorized to reclassify and
issue any unissued shares to any number of additional series
without shareholder approval. Accordingly, the Directors in the
future, for reasons such as the desire to establish one or more
additional portfolios with different investment objectives,
policies or restrictions, may create additional series of shares.
Any issuance of shares of another class would be governed by the
Act and Maryland law.
As of the close of business on August 15, 1997, there
were 246,159,934.67 shares of the Trust Portfolio outstanding.
Set forth and discussed below is certain information as to all
persons who owned of record or beneficially 5% or more of the
outstanding shares of the Trust Portfolio at August 15, 1997.
No. of % of
Name and Address Shares Class
Trust Portfolio
Hare & Co. 23,082,966.86 9.38%
c/o Bank of New York
One Wall Street, 5th Fl
New York, NY 10005-2501
Legal Matters. The legality of the shares offered
hereby has been passed upon by Seward & Kissel, New York, New
York, counsel for the Trust Portfolio and the Adviser. Seward &
Kissel has relied upon the opinion of Venable, Baetjer and
Howard, LLP, 1800 Mercantile Bank & Trust Building, 2 Hopkins
Plaza, Baltimore, Maryland 21201, for matters relating to
Maryland law.
Accountants. McGladrey & Pullen, LLP, New York, New
York, are the independent auditors for the Trust Portfolio.
Yield Quotations and Performance Information.
Advertisements containing yield quotations for the Trust
Portfolio may from time to time be sent to investors or placed in
newspapers, magazines or other media on behalf of the Fund.
These advertisements may quote performance rankings, ratings or
data from independent organizations or financial publications
such as Lipper Analytical Services, Inc., Morningstar, Inc.,
25
<PAGE>
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.
26
<PAGE>
ACM INSTITUTIONAL RESERVES
ANNUAL REPORT
APRIL 30, 1997
PORTFOLIO OF INVESTMENTS
APRIL 30, 1997 ACM INSTITUTIONAL RESERVES - PRIME PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY YIELD VALUE
- --------------------------------------------------------------------------
COMMERCIAL PAPER-59.3%
ALLIANZ OF AMERICA FINANCE CORP.
$ 5,949 7/01/97 (a) 5.50% $ 5,893,559
10,000 8/18/97 (a) 5.72 9,826,811
BANCA CRT FINANCIAL CORP.
3,400 5/01/97 5.50 3,400,000
9,060 5/14/97 5.55 9,041,842
7,500 5/05/97 5.58 7,495,350
BANCO NACIONAL DE COMMON
10,000 9/17/97 5.55 9,785,708
BHF FINANCE DELAWARE, INC.
5,000 6/30/97 5.60 4,953,333
BIL NORTH AMERICA, INC.
18,500 5/16/97 5.52 18,457,450
CAISSE CENTRALE JARDINS DU QUEBEC
20,000 7/16/97 5.39 19,772,422
CAISSE D' AMORTISSEMENT
5,550 10/03/97 5.38 5,421,440
1,300 5/07/97 5.50 1,298,808
CHIAO TUNG BANK CO., LTD.
5,000 8/26/97 5.33 4,913,388
20,000 7/23/97 5.45 19,748,694
COMMONWEALTH BANK OF AUSTRALIA
16,500 10/03/97 5.72 16,093,642
COPLEY FINANCING CORP.
13,016 5/12/97 (a) 5.54 12,993,967
3,000 5/21/97 (a) 5.54 2,990,767
6,207 5/21/97 (a) 5.55 6,187,862
CREGEM NORTH AMERICA, INC.
10,000 6/18/97 5.33 9,928,933
CS FIRST BOSTON, INC.
5,000 8/19/97 5.40 4,917,500
5,000 7/01/97 5.62 4,952,386
5,000 10/08/97 5.70 4,873,333
5,000 10/08/97 5.73 4,872,667
EKSPORTFINANS
5,000 6/18/97 5.35 4,964,333
5,820 6/04/97 5.60 5,789,219
19,685 6/18/97 5.60 19,538,019
6,215 6/26/97 5.60 6,160,861
EMBARCADERO CENTER VENTURE (FOUR)
5,600 5/19/97 5.63 5,584,236
13,000 6/04/97 5.72 12,929,771
EMBARCADERO CENTER VENTURE (TWO-A)
6,250 5/19/97 5.67 6,232,281
GENERAL ELECTRIC CAPITAL CORP.
10,000 7/28/97 5.63 9,862,378
GLENCORE FINANCE LTD.
5,000 8/25/97 5.43 4,912,517
5,000 8/26/97 5.43 4,911,763
GOVERNMENT DEVELOPMENT BANK OF
PUERTO RICO
6,500 5/12/97 5.35 6,489,374
10,000 6/13/97 5.58 9,933,350
3,200 6/16/97 5.60 3,177,102
IMI FUNDING CORP. (USA)
3,080 8/05/97 5.35 3,036,059
3,260 7/23/97 5.37 3,219,639
13,430 7/15/97 5.44 13,277,793
INDUSTRIAL BANK OF KOREA
5,000 6/04/97 5.44 4,974,311
5,000 6/18/97 5.50 4,963,333
5,000 6/23/97 5.62 4,958,631
15,000 7/02/97 5.68 14,853,267
INTERNATIONAL NEDERLAND BANK
30,000 6/03/97 5.57 29,846,963
KOREAN DEVELOPMENT BANK
10,000 5/12/97 5.34 9,983,683
KREDIETBANK NORTH
AMERICA FINANCE CORP.
25,000 6/02/97 5.38 24,880,445
MITSUBISHI MOTORS CREDIT
3,000 5/23/97 5.58 2,989,770
MORGAN STANLEY GROUP, INC.
15,000 5/21/97 5.36 14,955,333
10,000 5/21/97 5.52 9,969,333
NESTLE CAPITAL CORP.
5,000 5/05/97 5.50 4,996,944
1
PORTFOLIO OF INVESTMENTS (CONTINUED)
ACM INSTITUTIONAL RESERVES - PRIME PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY YIELD VALUE
- --------------------------------------------------------------------------
PACCAR FINANCIAL CORPORATION
$ 6,380 5/05/97 5.50% $ 6,376,101
PHH CORP.
4,057 5/01/97 5.53 4,057,000
6,000 5/05/97 5.53 5,996,313
PROVINCE OF QUEBEC
6,900 6/30/97 5.60 6,835,600
SOCIETE GENERALE N.A., INC.
2,500 7/14/97 5.32 2,472,661
UNI FUNDING, INC.
5,000 5/05/97 5.33 4,997,039
10,000 6/30/97 5.62 9,906,333
VATTENFALL TREASURY, INC.
14,000 5/21/97 5.36 13,958,311
VENANTIUS
10,000 7/24/97 5.40 9,874,000
15,000 5/07/97 5.50 14,986,250
Total Commercial Paper
(amortized cost $514,670,178) 514,670,178
CERTIFICATES OF DEPOSIT-21.6%
BANK OF TOKYO
10,000 5.54%, 6/11/97 5.50 10,000,353
5,000 5.59%, 5/05/97 5.59 5,000,000
5,000 5.80%, 7/08/97 5.80 5,000,000
22,000 5.84%, 7/18/97 5.84 22,000,000
CANADIAN IMPERIAL BANK
10,000 5.60%, 6/18/97 5.60 10,000,000
CARIPLO
5,000 5.75%, 7/17/97 5.74 5,000,106
DAI ICHI KANGYO BANK LTD.
15,000 5.53%, 5/14/97 5.53 14,999,914
HESSISCHE LANDESBANK
5,000 6.13%, 4/07/98 6.25 4,994,655
KOREAN DEVELOPMENT BANK
30,000 5.78%, 6/11/97 5.76 30,000,677
NORINCHUKIN BANK
20,000 5.60%, 5/07/97 5.59 20,000,033
10,000 5.75%, 6/09/97 5.74 10,000,107
SANWA BANK
13,000 5.52%, 5/07/97 5.52 13,000,000
27,000 5.70%, 5/27/97 5.70 27,000,000
SUMITOMO BANK
10,000 5.57%, 5/14/97 5.57 10,000,000
Total Certificates of Deposit
(amortized cost $186,995,845) 186,995,845
CORPORATE OBLIGATIONS-10.4%
ABBEY NATIONAL TREASURY SERVICES
6,000 5.56%, 5/16/97 FRN 5.62 5,999,853
BETA FINANCE, INC.
5,000 5.92%, 6/06/97 (a) 6.00 4,999,619
GENERAL ELECTRIC CAPITAL CORP.
10,000 5.74%, 6/27/97 FRN 5.71 10,000,768
5,000 5.75%, 1/05/98 FRN 5.75 5,000,000
MERRILL LYNCH & CO.
5,000 5.57%, 12/24/97 FRN 5.59 4,999,370
7,000 5.60%, 1/22/98 FRN 5.63 6,998,765
5,000 5.66%, 3/16/98 5.73 4,999,584
7,000 5.78%, 1/29/98 FRN 5.80 6,998,973
SALTS II CAYMAN ISLANDS CORP.
5,000 5.61%, 6/19/97 (a) 5.61 5,000,000
SALTS III CAYMAN ISLANDS CORP.
35,000 5.79%, 7/23/97 (a) 5.79 35,000,000
Total Corporate Obligations
(amortized cost $89,996,932) 89,996,932
BANK OBLIGATIONS-3.6%
FCC NATIONAL BANK
10,000 5.63%, 6/04/97 5.63 10,000,000
FIRST CHICAGO CORP.
5,000 6.25%, 7/15/97 5.73 5,004,327
JP MORGAN & CO.
10,000 5.75%, 8/15/97 FRN 5.80 9,998,604
KOREAN DEVELOPMENT BANK
6,000 7.71%, 5/05/97 5.47 6,001,504
Total Bank Obligations
(amortized cost $31,004,435) 31,004,435
2
ACM INSTITUTIONAL RESERVES - PRIME PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY YIELD VALUE
- --------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY
OBLIGATIONS-2.5%
FEDERAL FARM CREDIT BANK
$ 7,000 5.66%, 8/03/98 FRN 5.71% $ 6,995,869
FEDERAL NATIONAL MORTGAGE ASSN.
10,000 5.74%, 8/25/97 FRN 5.78 9,998,772
STUDENT LOAN MARKETING ASSN.
5,000 5.71%, 1/21/98 FRN 5.74 4,998,957
Total U.S. Government and Agency
Obligations
(amortized cost $21,993,598) 21,993,598
PROMISSORY NOTE-2.3%
GOLDMAN SACHS GROUP LP
20,000 5.69%, 10/14/97 FRN 5.69%
(cost $20,000,000) $20,000,000
TOTAL INVESTMENTS-99.7%
(amortized cost$864,660,988) 864,660,988
Other assets less liabilities-0.3% 2,678,367
NET ASSETS-100%
(offering and redemption price of
$1.00 per share; 867,523,159 shares
outstanding) $867,339,355
See Glossary of Terms on page 13.
See notes to financial statements.
3
PORTFOLIO OF INVESTMENTS
APRIL 30, 1997 ACM INSTITUTIONAL RESERVES - GOVERNMENT PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY YIELD VALUE
- --------------------------------------------------------------------------
U.S. GOVERNMENT & AGENCY
OBLIGATIONS-52.8%
FEDERAL HOME LOAN BANK-18.9%
$ 20,000 5/01/97 5.25% $ 20,000,000
19,000 5/01/97 5.28 19,000,000
5,000 6/05/97 5.30 4,974,236
2,000 9/18/97 5.37 1,958,233
695 9/18/97 5.60 679,865
5,000 5.35%, 12/04/97 FRN 5.44 4,997,556
3,000 5.87%, 1/30/98 5.87 3,000,000
4,060 5.88%, 3/24/98 6.15 4,048,029
3,000 6.11%, 4/17/98 6.15 2,999,174
-------------
61,657,093
FEDERAL NATIONAL MORTGAGE
ASSOCIATION-14.7%
2,000 5/05/97 5.22 1,998,840
1,130 5/09/97 5.25 1,128,682
5,000 6/03/97 5.28 4,975,800
5,000 6/05/97 5.28 4,974,333
2,080 9/10/97 5.37 2,039,045
3,000 6/24/97 5.47 2,975,385
695 6/19/97 5.50 689,797
800 6/25/97 5.50 793,278
3,000 9/24/97 5.50 2,933,083
6,000 8/04/97 5.54 5,912,283
185 5/12/97 5.60 184,683
590 6/13/97 5.60 586,054
4,000 5.38%, 9/12/97 FRN 5.45 3,999,405
2,895 5.39%, 7/17/97 5.39 2,895,000
5,000 5.78%, 6/11/97 FRN 5.83 4,999,728
5,000 5.94%, 10/15/97 FRN 5.95 5,000,259
2,000 6.02%, 4/15/98 6.15 1,997,807
-------------
48,083,462
STUDENT LOAN MARKETING
ASSOCIATION-8.2%
15,765 5/01/97 5.28 15,765,000
4,500 5.68%, 7/12/99 FRN 6.08 4,463,554
4,000 5.71%, 1/21/98 FRN 5.74 3,999,166
2,500 5.87%, 6/30/97 FRN 5.86 2,500,236
-------------
26,727,956
FEDERAL FARM CREDIT BANK-6.1%
1,790 9/15/97 5.37 1,753,420
3,175 7/07/97 5.49 3,142,559
2,500 5.26%, 5/20/97 FRN 5.38 2,499,848
5,100 5.60%, 11/03/97 5.57 5,098,007
7,500 5.73%, 6/26/97 FRN 5.78 7,499,448
-------------
19,993,282
FEDERAL HOME LOAN MORTGAGE CORP.-4.9%
2,000 5/06/97 5.22 1,998,550
2,000 5/07/97 5.22 1,998,260
2,000 5/09/97 5.22 1,997,680
2,000 5/12/97 5.22 1,996,810
447 6/11/97 5.60 444,149
170 7/01/97 5.60 168,387
210 7/15/97 5.60 207,550
4,000 5.72%, 3/17/98 5.87 3,994,950
3,000 5.84%, 4/08/98 6.04 2,994,856
-------------
15,801,192
Total U.S. Government & Agency
Obligations
(amortized cost $172,262,985) 172,262,985
REPURCHASE AGREEMENTS-46.9%
CHASE SECURITIES, INC.
7,000 5.58%, dated 4/08/97, due
6/11/97 in the amount of
$7,069,440 (cost $7,000,000;
collateralized by $8,100,000
FN 303814, 6.50%, 4/01/16,
value $7,346,400)
(amortized cost $7,000,000) (b) 5.58 7,000,000
CHASE SECURITIES, INC.
5,000 5.63%, dated 4/01/97, due
6/30/97 in the amount of
$5,070,312 (cost $5,000,000;
collateralized by $5,580,000
FH 00604, 7.00%, 11/01/26,
value $5,373,069)
(amortized cost $5,000,000) (b) 5.63 5,000,000
FIRST BOSTON CORP.
7,000 5.50%, dated 4/09/97, due
5/08/97 in the amount of
$7,031,014 (cost $7,000,000;
collateralized by $7,472,000
FN 313472, 7.00%, 2/01/27,
value $7,251,245)
(amortized cost $7,000,000) (b) 5.50 7,000,000
4
ACM INSTITUTIONAL RESERVES - GOVERNMENT PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY YIELD VALUE
- --------------------------------------------------------------------------
FIRST BOSTON CORP.
$ 7,000 5.52%, dated 4/30/97, due
5/30/97 in the amount of
$7,032,200 (cost $7,000,000;
collateralized by $9,115,000
FN 302833, 8.00%, 10/01/24,
value $7,178,590)
(amortized cost $7,000,000) (b) 5.52% $ 7,000,000
GOLDMAN SACHS & CO.
12,000 5.50%, dated 4/09/97, due
5/14/97 in the amount of
$12,064,167 (cost $12,000,000;
collateralized by $12,992,000
FN 00618, 7.00%, 11/01/26,
value $12,456,960)
(amortized cost $12,000,000) (b) 5.50 12,000,000
LEHMAN BROTHERS, INC.
5,000 5.40%, dated 3/19/97, due
5/21/97 in the amount of
$5,047,250 (cost $5,000,000;
collateralized by $6,119,213
FGG 000474, 9.00%, 4/01/25,
value $5,196,326)
(amortized cost $5,000,000) (b) 5.40 5,000,000
LEHMAN BROTHERS, INC.
7,000 5.55%, dated 4/09/97, due
6/09/97 in the amount of
$7,065,829 (cost $7,000,000;
collateralized by $9,969,734
FN 10267, 7.00%, 10/01/09,
value $7,294,149)
(amortized cost $7,000,000) (b) 5.55 7,000,000
MORGAN STANLEY GROUP, INC.
12,000 5.44%, dated 4/18/97, due
5/02/97 in the amount of
$12,025,387 (cost $12,000,000;
collateralized by $12,976,000
GN 780452, 7.00%, 10/15/26,
value $12,425,262)
(amortized cost $12,000,000) (b) 5.44 12,000,000
NIKKO SECURITIES CO.
5,000 5.48%, dated 4/16/97, due
5/13/97 in the amount of
$5,020,550 (cost $5,000,000;
collateralized by $5,406,000
FN 377155, 7.00%, 4/01/27,
value $5,267,546)
(amortized cost $5,000,000) (b) 5.48 5,000,000
NIKKO SECURITIES CO.
9,000 5.57%, dated 4/30/97, due
7/02/97 in the amount of
$9,087,727 (cost $9,000,000;
collateralized by $9,652,000
FN 250911, 7.00%, 5/01/27,
value $9,374,639)
(amortized cost $9,000,000) (b) 5.57 9,000,000
PAINE WEBBER, INC.
7,000 5.50%, dated 4/30/97, due
5/12/97 in the amount of
$7,012,833 (cost $7,000,000;
collateralized by $7,279,000
FN 250888, 7.00%, 4/01/12,
value $7,204,383)
(amortized cost $7,000,000) (b) 5.50 7,000,000
PAINE WEBBER, INC.
7,000 5.50%, dated 4/30/97, due
5/16/97 in the amount of
$7,017,111 (cost $7,000,000;
collateralized by $7,694,000
FN 313040, 7.00%, 8/01/11,
value $7,203,855)
(amortized cost $7,000,000) (b) 5.50 7,000,000
PRUDENTIAL SECURITIES, INC.
7,000 5.46%, dated 4/23/97, due
5/15/97 in the amount of
$7,023,357 (cost $7,000,000;
collateralized by $11,330,000
FN 100042, 11.00%, 10/15/20,
value $7,097,833, and $125,000
FN 283820, 6.00%, 5/01/01,
value $102,769)
(amortized cost $7,000,000) (b) 5.46 7,000,000
5
PORTFOLIO OF INVESTMENTS
(CONTINUED) ACM INSTITUTIONAL RESERVES - GOVERNMENT PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY YIELD VALUE
- --------------------------------------------------------------------------
PRUDENTIAL SECURITIES, INC.
$ 6,000 5.47%, dated 4/16/97, due
5/07/97 in the amount of
$6,019,145 (cost $6,000,000;
collateralized by $7,225,000
GN 780197, 7.00%, 7/15/25,
value $6,232,164)
(amortized cost $6,000,000) (b) 5.47% $ 6,000,000
SBC WARBURG, LTD.
6,000 5.45%, dated 4/21/97, due
5/05/97 in the amount of
$6,012,717 (cost $6,000,000;
collateralized by $8,552,000
FN 313311, 6.246%, 12/01/26,
value $6,161,719)
(amortized cost $6,000,000) (b) 5.45 6,000,000
SBC WARBURG, LTD.
6,000 5.53%, dated 4/17/97, due
6/18/97 in the amount of
$6,057,143 (cost $6,000,000;
collateralized by $7,594,000
FN 50993, 7.00%, 2/01/24,
value $6,167,556)
(amortized cost $6,000,000) (b) 5.53 6,000,000
SMITH BARNEY, INC.
12,000 5.50%, dated 4/09/97, due
5/13/97 in the amount of
$12,062,333 (cost $12,000,000;
collateralized by $12,899,893
FN 00567, 9.50%, 4/01/25,
value $12,393,073)
(amortized cost $12,000,000) (b) 5.50 12,000,000
STATE STREET BANK AND TRUST CO.
10,200 5.27%, dated 4/30/97, due
5/01/97 in the amount of
$10,201,493 (cost $10,200,000;
collateralized by $8,730,000
US T-Note, 8.875%, 8/15/20,
value $10,469,828)
(amortized cost $10,200,000) 5.27 10,200,000
UBS SECURITIES, INC.
3,000 5.53%, dated 4/08/97, due
5/07/97 in the amount of
$3,013,364 (cost $3,000,000;
collateralized by $3,231,000
FN 361936, 7.50%, 9/01/26,
value $3,191,616)
(amortized cost $3,000,000) (b) 5.53 3,000,000
UBS SECURITIES, INC.
4,000 5.55%, dated 4/30/97, due
5/01/97 in the amount of
$4,000,617 (cost $4,000,000;
collateralized by $4,277,000
FHG 00647, 7.00%, 1/01/27,
value $4,079,275)
(amortized cost $4,000,000) 5.55 4,000,000
UBS SECURITIES, INC.
5,000 5.62%, dated 4/29/97, due
7/30/97 in the amount of
$5,071,811 (cost $5,000,000;
collateralized by $5,242,000
FN 361936, 7.50%, 9/01/26,
value $5,182,968)
(amortized cost $5,000,000) (b) 5.62 5,000,000
UBS SECURITIES, INC.
4,000 5.65%, dated 4/17/97, due
7/16/97 in the amount of
$4,056,500 (cost $4,000,000;
collateralized by $4,304,000
FHG 00647, 7.00%, 1/01/27,
value $4,145,207)
(amortized cost $4,000,000) (b) 5.65 4,000,000
Total Repurchase Agreements
(amortized cost $153,200,000) 153,200,000
TOTAL INVESTMENTS-99.7%
(amortized cost $325,462,985) 325,462,985
Other assets less liabilities-0.3% 1,056,723
NET ASSETS-100%
(offering and redemption price
of $1.00 per share; 326,651,057
shares outstanding) $326,519,708
See Glossary of Terms on page 13.
See notes to financial statements.
6
PORTFOLIO OF INVESTMENTS
APRIL 30, 1997 ACM INSTITUTIONAL RESERVES - TAX-FREE PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- --------------------------------------------------------------------------
MUNICIPAL BONDS-65.3%
ALABAMA-2.8%
ARAB IDB
(SCI Manufacturing Inc.)
Series '89 VRDN (c)
$ 150 8/01/00 4.70% $ 150,000
HUNTSVILLE IDA
(Seiki USA Project)
Series '88 AMT
VRDN (c)
5,000 9/01/98 4.88 5,000,000
-------------
5,150,000
ALASKA-1.1%
ALASKA IDR
(American President Lines) Series '91
VRDN (c)
1,945 11/01/09 4.30 1,945,000
ARIZONA-0.2%
CHANDLER IDA
(Parsons Municipal Services Inc.)
Series '83
VRDN (c)
400 12/15/09 3.75 400,000
CALIFORNIA-9.2%
ALAMEDA COUNTY TRAN
BOARD OF EDUCATION
Series '96
3,640 7/01/97 4.03 3,642,721
CALIFORNIA COMMUNITY
COLLEGE TRAN FSA
Series A
2,500 7/02/97 3.90 2,502,996
CALIFORNIA HIGHER EDUCATION
STUDENT LOAN REV.
Series D-2 Putable
5,000 7/01/97 3.95 5,000,000
LOS ANGELES COUNTY TRAN
LOCAL FSA EDUCATIONAL AGENCY
1,600 6/30/97 4.05 1,601,758
SOUTH COAST TRAN
LOCAL AGENCY POOLED
Loan Series '96A
4,000 6/30/97 4.07 4,004,291
-------------
16,751,766
CONNECTICUT-1.5%
CONNECTICUT DEV. AUTH. PCR
(Connecticut Light & Power Co. Project)
Series '93A VRDN (c)
2,800 9/01/28 4.50 2,800,000
DELAWARE-1.4%
DELAWARE ECON. DEV. AUTH.
(Delmarva Power & Light) Series '93C
VRDN (c)
2,500 10/01/28 4.55 2,500,000
DISTRICT OF COLUMBIA-2.7%
DISTRICT OF COLUMBIA GO
Series B-1 AMBAC
1,030 6/01/97 3.75 1,030,378
DISTRICT OF COLUMBIA HFA MFHR
(McLean Apts.)
Series '85A VRDN (c)
2,000 12/01/05 4.70 2,000,000
DISTRICT OF COLUMBIA SFHR
Series C Putable AMT
2,000 12/01/97 3.90 2,000,000
-------------
5,030,378
GEORGIA-2.7%
CARTERSVILLE ECON. DEV.
(Sekisui Jushi America)
Series '92 VRDN (c)
300 6/01/12 4.40 300,000
COLLEGE PARK IDR
(Wynefield 1 Project)
AMT VRDN (c)
1,700 12/01/16 3.85 1,700,000
JACKSON COUNTY IDA
(Mitsubishi Consumer Electronic)
VRDN (c)
3,000 12/01/15 5.00 3,000,000
-------------
5,000,000
7
PORTFOLIO OF INVESTMENTS
(CONTINUED) ACM INSTITUTIONAL RESERVES - TAX-FREE PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- --------------------------------------------------------------------------
ILLINOIS-12.3%
ELMHURST HOSPITAL REVENUE
(Joint Comm. Health Org.) Series '88
VRDN (c)
$ 16,300 7/01/18 4.75% $ 16,300,000
ILLINOIS DEV. FINANCE AUTH.
(Akin Seed Project)
AMT VRDN (c)
1,000 11/01/04 4.95 1,000,000
ILLINOIS DEV. FINANCE AUTH.
(U.G.N. Inc. Project)
Series '86 AMT
VRDN (c)
3,500 9/15/11 4.40 3,500,000
VERNON HILLS IDR
(Kinder Care Center)
VRDN (c)
550 2/01/01 4.75 550,000
WEST CHICAGO IDR
(Acme Printing Co.)
Series '89 AMT
VRDN (c)
1,100 5/01/99 4.53 1,100,000
-------------
22,450,000
INDIANA-1.4%
PORTAGE ECON. DEV. MFHR
(Pedcor Inv. Apts. Project)
Series '95A
AMT VRDN (c)
600 8/01/30 4.70 600,000
SEYMOUR ECON. DEV.
(Kobelco Metal Powder Co. Project)
Series '87 AMT
VRDN (c)
2,000 12/01/97 4.40 2,000,000
-------------
2,600,000
KANSAS-1.9%
WICHITA COUNTY
(CSJ Health Systems Project)
Series XXV '85
VRDN (c)
3,400 10/01/11 4.70 3,400,000
KENTUCKY-0.2%
BOONE COUNTY
(Cincinnati Gas & Elec. Co.)
Series '85A
VRDN (c)
295 8/01/13 3.65 295,000
MAINE-1.1%
MAINE FINANCE AUTH.
(Barber Foods Inc.)
Series '90B AMT
VRDN (c)
2,050 12/01/06 4.80 2,050,000
MICHIGAN-0.4%
MICHIGAN HDA MFHR
(Woodland Meadows Apts.)
AMT VRDN (c)
400 3/01/13 4.60 400,000
MICHIGAN JOB DEV. AUTH.
(Kentwood Residence Assoc.)
Series '84
VRDN (c)
300 11/01/14 3.60 300,000
-------------
700,000
MINNESOTA-0.3%
EDEN PRAIRIE IDA
(Kinder Care Project)
Series C VRDN (c)
465 2/01/01 4.75 465,000
MISSOURI-0.4%
BLUE SPRINGS IDA
(Kinder Care Project)
Series C VRDN (c)
540 2/01/01 4.75 540,000
MISSOURI ECON. DEV. AUTH.
(Plastic Enterprises)
Series '90A AMT
VRDN (c)
135 9/01/05 4.75 135,000
-------------
675,000
NEW HAMPSHIRE-0.4%
NEW HAMPSHIRE MUNI. BOND BANK
Series D FSA
760 1/15/98 4.04 767,090
8
ACM INSTITUTIONAL RESERVES - TAX-FREE PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- --------------------------------------------------------------------------
NEW JERSEY-2.7%
JERSEY CITY BAN
$ 3,500 9/26/97 4.05% $ 3,506,134
PLEASANTVILLE SCHOOL
DISTRICT TEMPORARY NOTES
1,500 8/28/97 4.00 1,501,170
-------------
5,007,304
NORTH CAROLINA-0.8%
LENOIR COUNTY IDR PCR
(Carolina Energy Project)
AMT VRDN (c)
1,500 7/01/22 4.75 1,500,000
OREGON-1.3%
OREGON ECON. DEV.
(Kyotaru Oregon Project) Series '89
AMT VRDN (c)
2,400 12/01/99 4.88 2,400,000
PENNSYLVANIA-2.1%
EMMAUS GENERAL AUTH. REV.
Series '89F-06
VRDN (c)
1,200 3/01/24 4.60 1,200,000
MONTGOMERY COUNTY IDA
(Kinder Care Project)
Series D VRDN (c)
400 10/01/00 4.75 400,000
PHILADELPHIA GO TRAN
Series '96A
2,000 6/30/97 3.95 2,001,737
VENAGO IDR
(Penzoil Co. Project) Series '82A
VRDN (c)
285 12/01/12 4.50 285,000
-------------
3,886,737
SOUTH DAKOTA-1.1%
SOUTH DAKOTA HFA SFMR
(Homeownership Mortgage) Series F
1,000 5/01/97 3.78 1,000,000
SOUTH DAKOTA HFA SFMR
(Homeownership Mortgage) Series G
1,000 5/01/97 3.90 1,000,000
-------------
2,000,000
TENNESSEE-3.8%
DICKSON COUNTY IDA
(Tennessee Bun Co. Project)
Series '96
AMT VRDN (c)
2,000 7/01/06 4.75 2,000,000
TENNESSEE HDA SFMR
(Homeownership Program) Series
'96-5 AMT
5,000 8/21/97 4.00 5,000,397
-------------
7,000,397
TEXAS-3.1%
GREATER EAST TEXAS HIGHER EDUCATION
STUDENT LOAN REV.
Series '95A Putable AMT
1,000 5/01/98 4.10 1,000,000
TEXAS GO TRAN
Series '96
4,050 8/29/97 4.00 4,059,557
TRINITY RIVER IDA
(Radiation Sterilizers)
Series A VRDN (c)
150 11/01/05 3.75 150,000
TRINITY RIVER IDA
(Radiation Sterilizers)
Series B VRDN (c)
450 11/01/05 3.75 450,000
-------------
5,659,557
UTAH-4.7%
PROVO CITY HFA MFHR
(Branbury Project)
Series A VRDN (c)
3,000 12/15/10 4.80 3,000,000
9
PORTFOLIO OF INVESTMENTS
(CONTINUED) ACM INSTITUTIONAL RESERVES - TAX-FREE PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- --------------------------------------------------------------------------
UTAH HFA SFMR
(Home Mortgage Rev.) Series '96-2
VRDN (c)
$ 3,500 7/01/16 4.60% $ 3,500,000
UTAH STUDENT LOAN REV.
Series O AMBAC
2,000 5/01/98 3.95 2,014,506
-------------
8,514,506
VERMONT-0.3%
SWANTON VILLAGE ELECTRIC SYSTEM REV.
MBIA
185 12/01/97 4.10 187,953
VERMONT STUDENT LOAN REV.
Series '85 VRDN (c)
430 1/01/04 3.65 430,000
-------------
617,953
VIRGINIA-4.1%
CHESTERFIELD COUNTY IDR
(Phillip Morris Co.) VRDN (c)
7,500 4/01/09 4.75 7,500,000
WASHINGTON-0.3%
WASHINGTON STUDENT LOAN FINANCE
(Third Program) Series B AMT
VRDN (c)
500 12/01/02 4.70 500,000
WISCONSIN-1.0%
WAUSAU PCR
(Minnesota Mining & Manufacturing)
VRDN (c)
1,600 8/01/17 4.86 1,600,000
300 12/01/01 4.86 300,000
-------------
1,900,000
Total Municipal Bonds
(amortized cost $119,465,688) 119,465,688
COMMERCIAL PAPER-11.8%
ARIZONA-1.5%
MARICOPA COUNTY PCR
(So. California Edison Project)
Series F
2,700 5/01/97 3.50 2,700,000
FLORIDA-1.2%
SUNSHINE STATE GOVERNMENT
FINANCE AGENCY
(Comm. Rev. Bonds) Series '86
2,200 8/22/97 3.80 2,200,000
ILLINOIS-1.1%
ILLINOIS EDUCATIONAL FACILITIES AUTH.
(Pooled Financing Program)
2,000 8/20/97 3.80 2,000,000
INDIANA-0.6%
MOUNT VERNON PCR
(General Electric Co. Project)
Series '89A
1,100 8/20/97 3.80 1,100,000
KANSAS-0.5%
BURLINGTON PCR
(Kansas City Power & Light Co.)
Series '87A
1,000 8/14/97 3.80 1,000,000
MICHIGAN-4.4%
DELTA COUNTY ECON. DEV. AUTH.
(Mead Paper Corp.) Series A
1,500 7/22/97 3.80 1,500,000
DELTA COUNTY ECON. DEV. AUTH.
(Mead Paper Corp.) Series B
4,040 7/22/97 3.80 4,040,000
MICHIGAN BUILDING AUTH.
2,500 5/01/97 3.50 2,500,000
-------------
8,040,000
10
ACM INSTITUTIONAL RESERVES - TAX-FREE PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- --------------------------------------------------------------------------
NORTH CAROLINA-0.8%
NORTH CAROLINA MUNICIPAL POWER AGENCY
(Catawba Project #1)
$ 1,500 8/21/97 3.80% $ 1,500,000
TEXAS-1.1%
DALLAS AREA RAPID TRANSIT
Sales Series A
2,000 8/20/97 3.80 2,000,000
WYOMING-0.6%
LINCOLN COUNTY PCR
(PacifiCorp Project)
Series '91
1,100 8/14/97 3.80 1,100,000
Total Commercial Paper
(amortized cost $21,639,649) 21,640,000
TOTAL INVESTMENTS-77.1%
(amortized cost $141,105,337) $141,105,688
Other assets less liabilities-22.9% 41,959,257
NET ASSETS-100%
(offering and redemption price of
$1.00 per share; 183,148,257 shares
outstanding) $183,064,945
# All securities either mature or their interest rate changes in one year or
less.
See Glossary of Terms on page 13.
See notes to financial statements.
11
PORTFOLIO OF INVESTMENTS
APRIL 30, 1997 ACM INSTITUTIONAL RESERVES - TRUST PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY YIELD VALUE
- --------------------------------------------------------------------------
COMMERCIAL PAPER-52.2%
AGA CAPITAL, INC.
$ 4,000 5/20/97 (a) 5.55% $ 3,988,283
ALLIANZ OF AMERICA FINANCE CORP.
2,000 7/10/97 (a) 5.65 1,978,028
1,000 7/21/97 (a) 5.67 987,242
ASSOCIATES CORP. OF NORTH AMERICA
8,000 6/27/97 5.72 7,927,547
BANCA CRT FINANCIAL CORP.
4,000 5/22/97 5.53 3,987,097
BIL NORTH AMERICA, INC.
5,000 8/18/97 5.29 4,919,915
3,000 5/16/97 5.52 2,993,100
CAISSE CENTRALE JARDINS DU QUEBEC
7,379 5/08/97 5.50 7,371,109
CHIAO TUNG BANK CO., LTD.
2,000 8/26/97 5.33 1,965,355
CREGEM NORTH AMERICA, INC.
7,000 6/26/97 5.29 6,942,398
3,000 6/18/97 5.33 2,978,680
CS FIRST BOSTON, INC.
3,000 8/19/97 5.40 2,950,500
1,000 7/01/97 5.62 990,477
1,000 10/08/97 5.70 974,667
EMBARCADERO CENTER VENTURE (FOUR)
3,000 6/04/97 5.72 2,983,793
GLENCORE FINANCE LTD.
1,000 8/25/97 5.43 982,503
IMI FUNDING CORP. (USA)
5,000 5/22/97 5.52 4,983,900
INDUSTRIAL BANK OF KOREA
2,000 6/23/97 5.62 1,983,452
6,000 7/17/97 5.70 5,926,850
KOREAN DEVELOPMENT BANK
2,000 5/27/97 5.60 1,991,911
MERRILL LYNCH & CO., INC.
1,000 1/14/98 5.85 958,075
MITSUBISHI MOTORS CREDIT
7,000 5/23/97 5.58 6,976,130
PHH CORP.
4,000 5/21/97 5.52 3,987,733
UNI FUNDING, INC.
2,000 6/30/97 5.62 1,981,267
VENANTIUS AB
8,000 5/07/97 5.50 7,992,667
Total Commercial Paper
(amortized cost $91,702,679) 91,702,679
U.S. GOVERNMENT & AGENCY
OBLIGATIONS-32.6%
FEDERAL FARM CREDIT BANK
2,500 5.26%, 5/20/97 FRN 5.38 2,499,848
7,500 5.73%, 6/26/97 FRN 5.78 7,499,448
FEDERAL HOME LOAN BANK
5,000 5.35%, 12/04/97 FRN 5.44 4,997,556
3,000 5.87%, 1/30/98 5.87 3,000,000
FEDERAL NATIONAL MORTGAGE ASSN.
2,000 5.39%, 7/17/97 5.39 2,000,000
5,000 5.78%, 6/11/97 FRN 5.83 4,999,728
5,000 5.94%, 10/15/97 FRN 5.93 5,000,259
STUDENT LOAN MARKETING ASSN.
2,500 5.55%, 9/03/97 FRN 5.61 2,499,504
22,300 5.71%, 11/20/97 FRN 5.65 22,307,219
2,500 5.87%, 6/30/97 FRN 5.86 2,500,236
Total U.S. Government & Agency
Obligations
(amortized cost $57,303,798) 57,303,798
CORPORATE OBLIGATIONS-8.6%
ABBEY NATIONAL TREASURY SERVICES
3,000 5.56%, 5/16/97 FRN 5.62 2,999,927
GENERAL ELECTRIC CAPITAL CORP.
2,000 5.75%, 1/05/98 FRN 5.75 2,000,000
MERRILL LYNCH & CO.
2,000 5.66%, 3/16/98 5.73 1,999,833
12
ACM INSTITUTIONAL RESERVES - TRUST PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY YIELD VALUE
- --------------------------------------------------------------------------
SALTS II CAYMAN ISLANDS CORP. (A)
$ 8,000 5.61%, 6/19/97 5.61% $ 8,000,000
Total Corporate Obligations
(amortized cost $14,999,760) 14,999,760
CERTIFICATES OF DEPOSIT-3.4%
BANK OF TOKYO
1,000 5.80%, 7/08/97 5.80 1,000,000
CARIPLO FINANCE, INC.
1,000 5.75%, 7/17/97 5.74 1,000,021
DAI ICHI KANGYO BANK LTD.
3,000 5.53%, 5/14/97 5.53 2,999,983
HESSISCHE LANDESBANK
1,000 6.13%, 4/07/98 6.25 998,931
Total Certificates of Deposit
(amortized cost $5,998,935) 5,998,935
PROMISSORY NOTE-2.3%
GOLDMAN SACHS GROUP L.P.
4,000 5.69%, 10/14/97 FRN
(cost $4,000,000) 5.69 4,000,000
TIME DEPOSIT-1.0%
REPUBLIC NATIONAL BANK
1,800 5.63%, 5/01/97
(cost $1,800,000) 5.63 1,800,000
TOTAL INVESTMENTS-100.1%
(amortized cost $175,805,172) 175,805,172
Other assets less liabilities-(0.1%) (124,009)
NET ASSETS-100%
(offering and redemption
price of $1.00 per share;
175,738,130 shares outstanding) $175,681,163
(a) Securities issued in reliance on Section (4) 2 or Rule 144A of the
Securities Act of 1933. Rule 144A securities may be resold in transactions
exempt from registration, normally to qualified institutional buyers. At April
30, 1997, these securities amounted to $82,892,585, representing 9.6% of net
assets on the Prime Portfolio, and $14,953,553, representing 8.5% of net assets
on Trust Portfolio.
(b) Repurchase agreements which are terminable within 7 days.
(c) 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 of Terms:
AMBAC American Municipal Bond Assurance Corporation
AMT Alternative Minimum Tax
BAN Bond Anticipation Note
FRN Floating Rate Note
FSA Financial Security Assurance, Inc.
GO General Obligation
HDA Housing Development Authority
HFA Housing Finance Agency/Authority
IDA Industrial Development Authority
IDB Industrial Development Board
IDR Industrial Development Revenue
MBIA Municipal Bond Investors Assurance
MFHR Multi-Family Housing Revenue
PCR Pollution Control Revenue
SFHR Single Family Housing Revenue
SFMR Single Family Mortgage Revenue
TRAN Tax & Revenue Anticipation Note
See notes to financial statements.
13
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1997 ACM INSTITUTIONAL RESERVES
_______________________________________________________________________________
<TABLE>
<CAPTION>
PRIME GOVERNMENT TAX-FREE TRUST
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Investments in securities, at
value (cost $864,660,988,
$325,462,985, $141,105,337,
$175,805,172, respectively) $864,660,988 $325,462,985 $141,105,688 $175,805,172
Cash -0- -0- 2,285,418 89,537
Interest receivable 2,868,492 1,108,688 1,550,683 854,771
Receivable for investments sold -0- -0- 39,354,888 -0-
Receivable for fund shares sold -0- -0- -0- 248
Receivable due from Adviser -0- 14,210 -0- -0-
Total assets 867,529,480 326,585,883 184,296,677 176,749,728
LIABILITIES
Due to custodian 3,690 11,150 -0- -0-
Payable for fund shares repurchased 3,568 -0- -0- 317
Advisory fee payable 782 -0- 3,127 62,397
Payable for investments purchased -0- -0- 1,188,463 958,075
Accrued expenses 182,085 55,025 40,142 47,776
Total liabilities 190,125 66,175 1,231,732 1,068,565
NET ASSETS $867,339,355 $326,519,708 $183,064,945 $175,681,163
COMPOSITION OF NET ASSETS
Capital shares $867,523,159 $326,651,057 $183,148,257 $175,738,130
Accumulated net realized loss on
investments (183,804) (131,349) (83,663) (56,967)
Net unrealized appreciation of
investments -0- -0- 351 -0-
$867,339,355 $326,519,708 $183,064,945 $175,681,163
</TABLE>
See notes to financial statements.
14
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1997 ACM INSTITUTIONAL RESERVES
_______________________________________________________________________________
<TABLE>
<CAPTION
PRIME GOVERNMENT TAX-FREE TRUST
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest $41,610,016 $10,564,511 $ 7,490,721 $10,692,908
EXPENSES
Advisory fee (Note B) 1,509,130 389,803 409,348 886,804
Registration 425,097 154,933 106,408 101,201
Custodian 154,937 77,854 93,135 73,744
Audit and legal 33,353 15,798 19,037 14,988
Transfer agency 24,226 23,771 20,534 22,867
Printing 5,788 4,056 3,634 8,703
Directors' fees 5,525 5,525 5,525 5,525
Amortization of organization
expenses -0- 2,076 2,076 -0-
Miscellaneous 12,866 5,884 7,527 9,765
Total expenses 2,170,922 679,700 667,224 1,123,597
Less: expense reimbursement (661,792) (289,896) (257,876) (144,572)
Net expenses 1,509,130 389,804 409,348 979,025
Net investment income 40,100,886 10,174,707 7,081,373 9,713,883
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on
investment transactions 1,928 (2,140) (90) (4,087)
Net change in unrealized
appreciation of investments -0- -0- 229 -0-
Net gain (loss) on investments 1,928 (2,140) 139 (4,087)
NET INCREASE IN NET ASSETS FROM
OPERATIONS $40,102,814 $10,172,567 $7,081,512 $9,709,796
</TABLE>
See notes to financial statements.
15
STATEMENT OF CHANGES IN NET ASSETS ACM INSTITUTIONAL RESERVES
_______________________________________________________________________________
<TABLE>
<CAPTION>
PRIME PORTFOLIO GOVERNMENT PORTFOLIO
---------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
APRIL 30,1997 APRIL 30,1996 APRIL 30,1997 APRIL 30,1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 40,100,886 $ 18,016,970 $ 10,174,707 $ 8,116,764
Net realized gain (loss) on investment transactions 1,928 (67,682) (2,140) (44,374)
Net change in unrealized appreciation of investments -0- -0- -0- -0-
Net increase in net assets from operations 40,102,814 17,949,288 10,172,567 8,072,390
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (40,100,886) (18,016,970) (10,174,707) (8,116,764)
CAPITAL STOCK TRANSACTIONS
Net increase (decrease) 374,018,204 295,597,513 175,705,670 46,450,680
Total increase (decrease) 374,020,132 295,529,831 175,703,530 46,406,306
NET ASSETS
Beginning of year 493,319,223 197,789,392 150,816,178 104,409,872
End of year $867,339,355 $493,319,223 $326,519,708 $150,816,178
</TABLE>
See notes to financial statements.
16
ACM INSTITUTIONAL RESERVES
_______________________________________________________________________________
<TABLE>
<CAPTION>
TAX-FREE PORTFOLIO TRUST PORTFOLIO
---------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
APRIL 30,1997 APRIL 30,1996 APRIL 30,1997 APRIL 30,1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 7,081,373 $ 3,429,135 $ 9,713,883 $ 8,045,961
Net realized gain (loss) on investment transactions (90) (66,276) (4,087) (32,758)
Net change in unrealized appreciation of investments 229 (44) -0- -0-
Net increase in net assets from operations 7,081,512 3,362,815 9,709,796 8,013,203
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (7,081,373) (3,429,135) (9,713,883) (8,045,961)
CAPITAL STOCK TRANSACTIONS
Net increase (decrease) (546,863) 148,180,832 5,619,828 60,921,819
Total increase (decrease) (546,724) 148,114,512 5,615,741 60,889,061
NET ASSETS
Beginning of year 183,611,669 35,497,157 170,065,422 109,176,361
End of year 183,064,945 $183,611,669 $175,681,163 $170,065,422
</TABLE>
17
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1997 ACM INSTITUTIONAL RESERVES
_______________________________________________________________________________
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 were being amortized against income on a
straight-line basis through August 1996 on the Government and Tax-Free
Portfolios.
3. TAXES
It is the Fund's policy to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if applicable, to its
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
4. DIVIDENDS
The Fund declares dividends daily from net investment income and automatically
reinvests such dividends in additional shares at net asset value. Net realized
capital gains on investments, if any, are expected to be distributed near
calendar year end. Dividends paid by Tax-Free Portfolio from net investment
income for the year ended April 30, 1997 are exempt from federal income taxes.
However, certain shareholders may be subject to the alternative minimum tax
(AMT).
5. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Interest income is accrued daily. Investment transactions are recorded on the
date securities are purchased or sold. Realized gain (loss) from investment
transactions is recorded on the identified cost basis.
6. REPURCHASE AGREEMENTS
It is the Fund's policy to take possession of securities as collateral under
repurchase agreements and to determine on a daily basis that the value of such
securities are sufficient to cover the value of the repurchase agreements.
NOTE B: ADVISORY FEE AND TRANSACTIONS WITH AN AFFILIATE OF THE ADVISER
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 with respect to the Trust Portfolio, from May 1, 1996 to
April 6, 1997 for expenses exceeding .50 of 1% of its average daily net assets
and from April 7, 1997 to April 30, 1997 for expenses exceeding .45 of 1% of
its average daily net assets. For the year ended April 30, 1997, reimbursement
was $661,792, $289,896, $257,876 and $144,572 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, 1997, was approximately
$18,000 per Portfolio.
18
ACM INSTITUTIONAL RESERVES
_______________________________________________________________________________
NOTE C: INVESTMENT TRANSACTIONS
At April 30, 1997, the cost of investments 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 available to offset future capital gains at April 30, 1997 of
$183,804, of which $2,984 expires 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 carryforward of $131,349, of which $1,340 expires in 2000, $9,174
in 2001, $51,091 in 2002, $23,230 in 2003, $44,374 in 2004 and $2,140 in the
year 2005; the Tax-Free Portfolio had a capital loss carryforward of $83,663,
of which $87 expires in 2000, $6,191 in 2002, $11,019 in 2003 and $66,276 in
2004 and $90 in the year 2005; and the Trust Portfolio had a capital loss
carryforward of $56,967, of which $3,347 expires in 2002, $16,775 in 2003,
$32,758 in 2004 and $4,087 in the year 2005.
NOTE D: CAPITAL STOCK
There are 1,000,000,000 shares of $.01 par value capital stock authorized. At
April 30, 1997, capital paid-in aggregated $867,523,159 on Prime Portfolio,
$326,651,057 on Government Portfolio, $183,148,257 on Tax-Free Portfolio, and
$175,738,130 on Trust Portfolio. Transactions, all at $1.00 per share, were as
follows:
YEAR ENDED YEAR ENDED
APRIL 30, 1997 APRIL 30, 1996
---------------- ---------------
PRIME PORTFOLIO
Shares sold 12,695,838,675 4,839,076,341
Shares issued on reinvestments of dividends 40,100,886 18,016,970
Shares redeemed (12,361,921,357) (4,561,495,798)
Net increase 374,018,204 295,597,513
YEAR ENDED YEAR ENDED
APRIL 30, 1997 APRIL 30, 1996
---------------- ---------------
GOVERNMENT PORTFOLIO
Shares sold 1,074,902,562 1,212,530,228
Shares issued on reinvestments of dividends 10,174,707 8,116,764
Shares redeemed (909,371,599) (1,174,196,312)
Net increase 175,705,670 46,450,680
YEAR ENDED YEAR ENDED
APRIL 30, 1997 APRIL 30, 1996
---------------- ---------------
TAX-FREE PORTFOLIO
Shares sold 1,486,189,526 1,044,165,922
Shares issued on reinvestments of dividends 7,081,373 3,429,135
Shares redeemed (1,493,817,762) (899,414,225)
Net increase (decrease) (546,863) 148,180,832
19
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ACM INSTITUTIONAL RESERVES
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
APRIL 30, 1997 APRIL 30, 1996
---------------- ---------------
TRUST PORTFOLIO
Shares sold 1,074,544,780 989,948,926
Shares issued on reinvestments of dividends 9,713,883 8,045,961
Shares redeemed (1,078,638,835) (937,073,068)
Net increase 5,619,828 60,921,819
20
FINANCIAL HIGHLIGHTS ACM INSTITUTIONAL RESERVES
_______________________________________________________________________________
PER SHARE OPERATING PERFORMANCE FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
PRIME PORTFOLIO
------------------------------------------------
YEAR ENDED APRIL 30,
------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .0530 .0560 .0502 .0325 .0353
LESS: DISTRIBUTIONS
Dividends from net investment income (.0530) (.0560) (.0502) (.0325) (.0353)
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURNS
Total investment return based on
net asset value (a) 5.44% 5.76% 5.15% 3.30% 3.59%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in millions) $867.3 $493.3 $197.8 $108.1 $64.3
Ratio to average net assets of:
Expenses, net of waivers and reimbursements .20% .20% .20% .20% .18%
Expenses, before waivers and reimbursements .29% .32% .36% .42% .54%
Net investment income (b) 5.31% 5.54% 5.24% 3.25% 3.42%
</TABLE>
<TABLE>
<CAPTION>
GOVERNMENT PORTFOLIO
------------------------------------------------
YEAR ENDED APRIL 30,
------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .0519 .0552 .0493 .0315 .0339
LESS: DISTRIBUTIONS
Dividends from net investment income (.0519) (.0552) (.0493) (.0315) (.0339)
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURNS
Total investment return based on net
asset value (a) 5.33% 5.67% 5.06% 3.20% 3.45%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in millions) $326.5 $150.8 $104.4 $76.6 $73.2
Ratio to average net assets of:
Expenses, net of waivers and reimbursements .20% .20% .20% .20% .18%
Expenses, before waivers and reimbursements .35% .36% .38% .36% .49%
Net investment income (b) 5.22% 5.50% 4.94% 3.15% 3.30%
</TABLE>
(a) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the year, reinvestment of all
dividends at net asset value during the year and redemption on the last day of
the year.
(b) Net of expenses reimbursed or waived by the Adviser.
21
FINANCIAL HIGHLIGHTS (CONTINUED) ACM INSTITUTIONAL RESERVES
_______________________________________________________________________________
PER SHARE OPERATING PERFORMANCE FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
TAX-FREE PORTFOLIO
------------------------------------------------
YEAR ENDED APRIL 30,
------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .0347 .0372 .0326 .0240 .0287
Net unrealized loss on investments -0- -0- (0.0048) -0- -0-
Net increase in net asset value from
operations .0347 .0372 .0278 .0240 .0287
LESS: DISTRIBUTIONS
Dividends from net investment income (.0347) (.0372) (.0326) (.0240) (.0287)
ADD: CAPITAL CONTRIBUTION
Capital Contributed by the Adviser -0- -0- 0.0048 -0- -0-
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURNS
Total investment return based on net
asset value (a) 3.53% 3.79% 3.31%(b) 2.43% 2.92%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in millions) $183.1 $183.6 $35.5 $35.6 $40.9
Ratio to average net assets of:
Expenses, net of waivers and reimbursements .20% .20% .20% .20% .18%
Expenses, before waivers and reimbursements .33% .48% .76% .69% .95%
Net investment income (c) 3.46% 3.73% 3.31% 2.40% 2.73%
</TABLE>
<TABLE>
<CAPTION>
TRUST PORTFOLIO
---------------------------------------------------
NOVEMBER 16,
1992 (D)
YEAR ENDED APRIL 30, THROUGH
-------------------------------------- APRIL 30,
1997 1996 1995 1994 1993
-------- -------- -------- -------- -----------
<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 .0492 .0527 .0479 .0309 .0144
LESS: DISTRIBUTIONS
Dividends from net investment income (.0492) (.0527) (.0479) (.0309) (.0144)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURNS
Total investment return based on net
asset value (a) 5.04% 5.41% 4.91% 3.14% 3.21%(e)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $175.7 $170.1 $109.2 $36.8 $5.3
Ratio to average net assets of:
Expenses, net of waivers and reimbursements .50% .50% .49% .14% -0-
Expenses, before waivers and reimbursements .57% .60% .75% 1.23% .45%(e)
Net investment income (c) 4.93% 5.28% 5.31% 3.15% 3.17%(e)
</TABLE>
(a) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends at net asset value during the period and redemption on the last day
of the period.
(b) Capital contributed by the Adviser had no material effect on net asset
value, and therefore, no effect on total return.
(c) Net of expenses reimbursed or waived by the Adviser.
(d) Commencement of operations.
(e) Annualized.
22
<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
<PAGE>
very strong or strong capacity to pay principal and interest.
Those issues rated SP-1 which are determined to possess
overwhelming safety characteristics will be given a plus (+)
designation. Issues 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.
2
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
(a) Financial Statements
Included in the Prospectus:
Financial Highlights
Included in Registrant's Statement of Additional
Information filed herewith:
(1) Portfolio of Investments for fiscal year ended
April 30, 1997.
(2) Statement of Assets and Liabilities for fiscal
year ended April 30, 1997.
(3) Statement of Operations for fiscal year ended
April 30, 1997.
(4) Statement of Changes in Net Assets for fiscal
years ended April 30, 1997 and April 30, 1996.
(5) Notes to Financial Statements April 30, 1997.
(6) Report of Independent Auditors.
(b) Exhibits
(1)(a) Articles of Incorporation-Certificate of
Correction - Filed herewith.
(b) Articles Supplementary - Filed herewith.
(2) By-Laws - Amended and Restated - Filed
herewith.
(3) Not applicable.
(4) Specimen of Stock Certificate -
Incorporated by reference to Exhibit 4 to
Pre-Effective Amendment No. 2 to
Registrant's Registration Statement on
Form N-1A, filed on June 18, 1990.
(5) Advisory Agreement between the Registrant
and Alliance Capital Management L.P. -
Filed herewith.
(6) Distribution Agreement between the
Registrant and Alliance Fund
Distributors, Inc. - Filed herewith.
C-1
<PAGE>
(7) Not applicable.
(8) Custodian Contract between the Registrant
and State Street Bank - Filed herewith.
(9) Transfer Agency Agreement between the
Registrant and Alliance Fund Services,
Inc. - Filed herewith.
C-2
<PAGE>
(10)(a) Opinion of Messrs. Seward & Kissel -
Incorporated by reference to Exhibit
10(a) to Pre-Effective Amendment No. 2 to
Registrant's Registration Statement on
Form N-1A, filed on June 18, 1990.
(b) Opinion of Messrs. Venable, Baetjer and
Howard - Incorporated by reference to
Exhibit 10(b) to Pre-Effective Amendment
No. 2 to Registrant's Registration
Statement on Form N-1A, filed on June 18,
1990.
(11) Consent of Independent Auditors - Filed
herewith.
(12) Not applicable.
(13) Not applicable.
(14) Not applicable.
(15) Not applicable.
(16) Not applicable.
Other Exhibits:
Powers of Attorney of Messrs. Carifa, Foulk,
Hodgson and White - Incorporated by Reference to
Other Exhibits to Pre-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-1A,
filed on May 10, 1990.
Powers of Attorney of Ms. Block and Messrs.
Dievler, Dobkin, Hester and Michel - Incorporated
by reference to Other Exhibits to Post-Effective
Amendment No. 5 to Registrant's Registration
Statement on Form N-1A, filed on July 16, 1992.
Power of Attorney of Donald J. Robinson - Filed
herewith.
C-3
<PAGE>
ITEM 25. Persons Controlled by or under Common Control
with Registrant.
Registrant does not control any person.
Information regarding the persons under common
control with the Registrant is contained in Exhibit
22 to the Registration Statement on Form S-1 under
the Securities Act of 1933 of The Equitable Holding
Companies Incorporated (Registration No. 33-48115).
C-4
<PAGE>
ITEM 26. Number of Holders of Securities.
Number of Record Holders
Title of Class (as of August 15, 1997)
Common Stock -
Prime Portfolio 1,703
Common Stock -
Government Portfolio 139
Common Stock - Tax-Free
Portfolio 129
Common Stock - Trust Portfolio 1,947
ITEM 27. Indemnification
It is the Registrant's policy to indemnify its
directors and officers, employees and other agents
to the maximum extent permitted by Section 2-418 of
the General Corporation Law of the State of
Maryland and as set forth in Articles EIGHTH and
NINTH of Registrant's Articles of Incorporation,
filed as Exhibit 1, and Section 7 of the
Distribution Services Agreement filed as
Exhibit 6(a), all as set forth below. The
liability of the Registrant's directors and
officers is dealt with in Articles EIGHTH and NINTH
of Registrant's Articles of Incorporation, as set
forth below. The Adviser's liability for any loss
suffered by the Registrant or its shareholders is
set forth in Section 4 of the Advisory Agreement
filed as Exhibit 5 to this Registration Statement,
as set forth below.
Section 2-418 of the Maryland General Corporation
Law reads as follows:
"2-418 INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES AND AGENTS.--(a) In this
section the following words have the meaning
indicated.
(1) "Director" means any person who is or was
a director of a corporation and any person who,
while a director of a corporation, is or was
serving at the request of the corporation as a
director, officer, partner, trustee, employee, or
agent of another foreign or domestic corporation,
C-5
<PAGE>
partnership, joint venture, trust, other
enterprise, or employee benefit plan.
(2) "Corporation" includes any domestic or
foreign predecessor entity of a corporation in a
merger, consolidation, or other transaction in
which the predecessor's existence ceased upon
consummation of the transaction.
(3) "Expenses" include attorney's fees.
(4) "Official capacity" means the following:
(i) When used with respect to a
director, the office of director in the
corporation; and
(ii) When used with respect to a person
other than a director as contemplated in subsection
(j), the elective or appointive office in the
corporation held by the officer, or the employment
or agency relationship undertaken by the employee
or agent in behalf of the corporation.
(iii) "Official capacity" does not
include service for any other foreign or domestic
corporation or any partnership, a person who was,
is, or is threatened to be made a named defendant
or respondent in a proceeding.
(6) "Proceeding" means any threatened,
pending or completed action, suit or proceeding,
whether civil, criminal, administrative, or
investigative.
(b)(1) A corporation may indemnify any
director made a party to any proceeding by reason
of service in that capacity unless it is
established that:
(i) The act or omission of the director was
material to the matter giving rise to the
proceeding; and
1. Was committed in bad faith; or
2. Was the result of active and
deliberate dishonesty; or
C-6
<PAGE>
(ii) The director actually received an
improper personal benefit in money, property, or
services; or
(iii) In the case of any criminal proceeding,
the director had reasonable cause to believe that
the act or omission was unlawful.
(2) (i) Indemnification may be against
judgments, penalties, fines, settlements, and
reasonable expenses actually incurred by the
director in connection with the proceeding.
(ii) However, if the proceeding was one
by or in the right of the corporation,
indemnification may not be made in respect of any
proceeding in which the director shall have been
adjudged to be liable to the corporation.
(3) (i) The termination of any proceeding by
judgment, order or settlement does not create a
presumption that the director did not meet the
requisite standard of conduct set forth in this
subsection.
(ii) The termination of any proceeding
by conviction, or a plea of nolo contendere or its
equivalent, or an entry of an order of probation
prior to judgment, creates a rebuttable presumption
that the director did not meet that standard of
conduct.
(c) A director may not be indemnified under
subsection (b) of this section in respect of any
proceeding charging improper personal benefit to
the director, whether or not involving action in
the director's official capacity, in which the
director was adjudged to be liable on the basis
that personal benefit was improperly received.
(d) Unless limited by the charter:
(1) A director who has been successful, on
the merits or otherwise, in the defense of any
proceeding referred to in subsection (b) of this
section shall be indemnified against reasonable
C-7
<PAGE>
expenses incurred by the director in connection
with the proceeding.
(2) A court of appropriate jurisdiction upon
application of a director and such notice as the
court shall require, may order indemnification in
the following circumstances:
(i) If it determines a director is entitled
to reimbursement under paragraph (1) of this
subsection, the court shall order indemnification,
in which case the director shall be entitled to
recover the expenses of securing such
reimbursement; or
(ii) If it determines that the director is
fairly and reasonably entitled to indemnification
in view of all the relevant circumstances, whether
or not the director has met the standards of
conduct set forth in subsection (b) of this section
or has been adjudged liable under the circumstances
described in subsection (c) of this section, the
court may order such indemnification as the court
shall deem proper. However, indemnification with
respect to any proceeding by or in the right of the
corporation or in which liability shall have been
adjudged in the circumstances described in
subsection (c) shall be limited to expenses.
(3) A court of appropriate jurisdiction may
be the same court in which the proceeding involving
the director's liability took place.
(e)(1) Indemnification under subsection (b)
of this section may not be made by the corporation
unless authorized for a specific proceeding after a
determination has been made that indemnification of
the director is permissible in the circumstances
because the director has met the standard of
conduct set forth in subsection (b) of this
section.
(2) Such determination shall be made:
(i) By the board of directors by a majority
vote of a quorum consisting of directors not, at
the time, parties to the proceeding, or, if such a
quorum cannot be obtained, then by a majority vote
C-8
<PAGE>
of a committee of the board consisting solely of
two or more directors not, at the time, parties to
such proceeding and who were duly designated to act
in the matter by a majority vote of the full board
in which the designated directors who are parties
may participate;
(ii) By special legal counsel selected by the
board or a committee of the board by vote as set
forth in subparagraph (I) of this paragraph, or, if
the requisite quorum of the full board cannot be
obtained therefor and the committee cannot be
established, by a majority vote of the full board
in which director who are parties may participate;
or
(iii) By the stockholders.
(3) Authorization of indemnification and
determination as to reasonableness of expenses
shall be made in the same manner as the
determination that indemnification is permissible.
However, if the determination that indemnification
is permissible is made by special legal counsel,
authorization of indemnification and determination
as to reasonableness of expenses shall be made in
the manner specified in subparagraph (ii) of
paragraph (2) of this subsection for selection of
such counsel.
(4) Shares held by directors who are parties
to the proceeding may not be voted on the subject
matter under this subsection.
(f)(1) Reasonable expenses incurred by a
director who is a party to a proceeding may be paid
or reimbursed by the corporation in advance of the
final disposition of the proceeding, upon receipt
by the corporation of:
(i) A written affirmation by the director of
the director's good faith belief that the standard
of conduct necessary for indemnification by the
corporation as authorized in this section has been
met; and
(ii) A written undertaking by or on behalf of
the director to repay the amount if it shall
C-9
<PAGE>
ultimately be determined that the standard of
conduct has not been met.
(2) The undertaking required by subparagraph
(ii) of paragraph (1) of this subsection shall be
an unlimited general obligation of the director but
need not be secured and may be accepted without
reference to financial ability to make the
repayment.
(3) Payments under this subsection shall be
made as provided by the charter, bylaws, or
contract or as specified in subsection (e) of this
section.
(g) The indemnification and advancement of
expenses provided or authorized by this section may
not be deemed exclusive of any other rights, by
indemnification or otherwise, to which a director
may be entitled under the charter, the bylaws, a
resolution of stockholders or directors, an
agreement or otherwise, both as to action in an
official capacity and as to action in another
capacity while holding such office.
(h) This section does not limit the
corporation's power to pay or reimburse expenses
incurred by a director in connection with an
appearance as a witness in a proceeding at a time
when the director has not been made a named
defendant or respondent in the proceeding.
(i) For purposes of this section:
(1) The corporation shall be deemed to have
requested a director to serve an employee benefit
plan where the performance of the director's duties
to the corporation also imposes duties on, or
otherwise involves services by, the director to the
plan or participants or beneficiaries of the plan:
(2) Excise taxes assessed on a director with
respect to an employee benefit plan pursuant to
applicable law shall be deemed fines; and
(3) Action taken or omitted by the director
with respect to an employee benefit plan in the
performance of the director's duties for a purpose
C-10
<PAGE>
reasonably believed by the director to be in the
interest of the participants and beneficiaries of
the plan shall be deemed to be for a purpose which
is not opposed to the best interests of the
corporation.
(j) Unless limited by the charter:
(1) An officer of the corporation shall be
indemnified as and to the extent provided in
subsection (d) of this section for a director and
shall be entitled, to the same extent as a
director, to seek indemnification pursuant to the
provisions of subsection (d);
(2) A corporation may indemnify and advance
expenses to an officer, employee, or agent of the
corporation to the same extent that it may
indemnify directors under this section; and
(3) A corporation, in addition, may indemnify
and advance expenses to an officer, employee, or
agent who is not a director to such further extent,
consistent with law, as may be provided by its
charter, bylaws, general or specific action of its
board of directors or contract.
(k)(1) A corporation may purchase and maintain
insurance on behalf of any person who is or was a
director, officer, employee, or agent of the
corporation, or who, while a director, officer,
employee, or agent of the corporation, is or was
serving at the request, of the corporation as a
director, officer, partner, trustee, employee, or
agent of another foreign or domestic corporation,
partnership, joint venture, trust, other
enterprise, or employee benefit plan against any
liability asserted against and incurred by such
person in any such capacity or arising out of such
person's position, whether or not the corporation
would have the power to indemnify against liability
under the provisions of this section.
(2) A corporation may provide similar
protection, including a trust fund, letter of
credit, or surety bond, not inconsistent with this
section.
C-11
<PAGE>
(3) The insurance or similar protection may
be provided by a subsidiary or an affiliate of the
corporation.
(l) Any indemnification of, or advance of
expenses to, a director in accordance with this
section, if arising out of a proceeding by or in
the right of the corporation, shall be reported in
writing to the stockholders with the notice of the
next stockholders' meeting or prior to the
meeting."
Articles EIGHTH and NINTH of the
Registrant's Articles of Incorporation provide as
follows:
EIGHTH: (a) To the full extent that limitations on the
liability of directors and officers are permitted
by the Maryland General Corporation Law, no
director or officer of the Corporation shall have
any liability to the Corporation or its
stockholders for damages. This limitation on
liability applies to events occurring at the time a
person serves as a director or officer of the
Corporation whether or not such person is a
director or officer at the time of any proceeding
in which liability is asserted.
(b) The Corporation shall indemnify and advance
expenses to its currently acting and its former
directors to the full extent that indemnification
of directors is permitted by the Maryland General
Corporation Law. The Corporation shall indemnify
and advance expenses to its officers to the same
extent as its directors and to such further extent
as is consistent with law. The Board of Directors
may by By-Law, resolution or agreement make further
provisions for indemnification of directors,
officers, employees and agents to the full extent
permitted by the Maryland General Corporation Law.
(c) No provision of this Article shall be effective
to protect or purport to protect any director or
officer of the Corporation against any liability to
the Corporation or its stockholders to which he
would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or
C-12
<PAGE>
reckless disregard of the duties involved in the
conduct of his office.
(d) References to the Maryland General Corporation
Law in this Article are to that law as from time to
time amended. No amendment to the Charter of the
Corporation shall affect any right of any person
under this Article based on any event, omission or
proceeding prior to the amendment."
NINTH: A director or officer of the Corporation, in his
capacity as such director or officer, shall not be
personally liable to the Corporation or its
stockholders for monetary damages except for
liability (i) to extent that it is proved that the
person actually received an improper benefit or
profit in money, property or services, for the
amount of the benefit or profit in money, property
or services actually received, or (ii) to the
extent that a judgment or other final adjudication
adverse to the person is entered in a proceeding
based on a finding in the proceeding that the
person's actions, or failure to act, was the result
of active and deliberate dishonesty and was
material to the cause of action adjudicated in the
proceeding; provided that nothing herein shall
protect any director or officer of the Corporation
against any liability to the Corporation or to its
security holders to which he would otherwise be
subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of
the duties involved in the conduct of his office.
If the Maryland General Corporation Law is amended
to authorize corporate action further eliminating
or limiting the personal liability of directors or
officers, then the liability of the director or
officer of the Corporation shall be eliminated to
the fullest extent permitted by the Maryland
General Corporation Law, as so amended. Any repeal
or modification of this Article NINTH by the
stockholders of the Corporation shall not adversely
affect any right or protection of a director or
officer of the Corporation existing at the time of
such repeal or modification based on events or
omissions prior thereto.
The Advisory Agreement between the Registrant and
Alliance Capital Management L.P. provides that Alliance
C-13
<PAGE>
Capital Management L.P. will not be liable under such
agreement for any mistake of judgment or in any event
whatsoever except for lack of good faith and that nothing
therein shall be deemed to protect Alliance Capital
Management L.P. against any liability to the Registrant or
its security holders to which it would otherwise be subject
by reason of wilful misfeasance, bad faith or gross
negligence in the performance of its duties thereunder, or
by reason of reckless disregard of its duties and
obligations thereunder.
The Distribution Agreement between the Registrant
and Alliance Fund Distributors, Inc. provides that the
Registrant will indemnify, defend and hold Alliance Fund
Distributors, Inc., and any person who controls it within
the meaning of Section 15 of the Investment Company Act of
1940, free and harmless from and against any and all claims,
demands, liabilities and expenses which Alliance Fund
Distributors, Inc. or any controlling person may incur
arising out of or based upon any alleged untrue statement of
a material fact contained in Registrant's Registration
Statement, Prospectus or Statement of Additional Information
or arising out of, or based upon any alleged omission to
state a material fact required to be stated in any one of
the foregoing or necessary to make the statements in any one
of the foregoing not misleading.
The foregoing summaries are qualified by the entire
text of Registrant's Articles of Incorporation, the Advisory
Agreement between Registrant and Alliance Capital Management
L.P. and the Distribution Agreement between Registrant and
Alliance Fund Distributors, Inc. which are filed herewith as
Exhibits 1, 5 and 6(a), respectively, in response to Item 24
and each of which are incorporated by reference herein.
Insofar as indemnification for liabilities arising
under the Securities Act of 1933 (the "Securities Act") may
be permitted to directors, officer and controlling persons
of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that, in the
opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or
C-14
<PAGE>
controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
The Registrant participates in a joint directors
and officers liability insurance policy issued by the ICI
Mutual Insurance Company. Coverage under this policy has
been extended to directors, trustees and officers of the
investment companies managed by Alliance Capital Management
L.P. Under this policy, outside trustees and directors
would be covered up to the limits specified for any claim
against them for acts committed in their capacities as
trustee or director. A pro rata share of the premium for
this coverage is charged to each investment company and to
the Adviser.
ITEM 28. Business and Other Connections of Investment
Adviser.
The descriptions of Alliance Capital
Management L.P. under the caption "The Adviser" in
the Prospectus and "Management of the Fund" in the
Prospectus and in the Statement of Additional
Information constituting Parts A and B,
respectively, of this Registration Statement are
incorporated by reference herein.
The information as to the directors and
executive officers of Alliance Capital Management
Corporation, the general partner of Alliance
Capital Management L.P., set forth in Alliance
Capital Management L.P.'s Form ADV filed with the
Securities and Exchange Commission on April 21,
1988 (File No. 801-32361) and amended through the
date hereof, is incorporated by reference.
Item 29. Principal Underwriters
(a) Alliance Fund Distributors, Inc., the Registrant's
Principal Underwriter in connection with the sale
of shares of the Registrant, also acts as Principal
Underwriter for the following registered investment
companies:
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<PAGE>
AFD Exchange Reserves
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
Alliance Capital Reserves
Alliance Developing Markets Fund, Inc.
Alliance Global Dollar Government Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Government Reserves
Alliance Greater China '97 Fund, Inc.
Alliance Growth and Income Fund, Inc.
Alliance High Yield Fund, Inc.
Alliance Income Builder Fund, Inc.
Alliance International Fund
Alliance Limited Maturity Government Fund, Inc.
Alliance Money Market Fund
Alliance Mortgage Securities Income Fund, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
Alliance Municipal Income Fund II
Alliance Municipal Trust
Alliance New Europe Fund, Inc.
Alliance North American Government Income
Trust, Inc.
Alliance Premier Growth Fund, Inc.
Alliance Quasar Fund, Inc.
Alliance Real Estate Investment Fund, Inc.
Alliance/Regent Sector Opportunity Fund, Inc.
Alliance Short-Term Multi-Market Trust, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance Variable Products Series Fund, Inc.
Alliance World Income Trust, Inc.
Alliance Worldwide Privatization Fund, Inc.
Fiduciary Management Associates
The Alliance Fund, Inc.
The Alliance Portfolios
(b) The following are the Directors and Officers of
Alliance Fund Distributors, Inc. the principal
place of business of which is 1345 Avenue of the
Americas, New York, New York, 10105.
C-16
<PAGE>
Name Positions and Offices Positions and Offices
With Underwriter With Registrant
Michael J. Laughlin Chairman
Robert L. Errico President
Edmund P. Bergan, Jr. Senior Vice President, Secretary
Secretary & General
Counsel
James S. Comforti Senior Vice President
James L. Cronin Senior Vice President
Daniel J. Dart Senior Vice President
Richard A. Davies Senior Vice President,
Managing Director
Byron M. Davis Senior Vice President
Anne S. Drennan Senior Vice President
& Treasurer
Mark J. Dunbar Senior Vice President
Bradley F. Hanson Senior Vice President
Geoffrey L. Hyde Senior Vice President
Robert H. Joseph, Jr. Senior Vice President
& Chief Financial Officer
Richard E. Khaleel Senior Vice President
Stephen R. Laut Senior Vice President
Daniel D. McGinley Senior Vice President
Ryne A. Nishimi Senior Vice President
Antonios G. Poleonadkis Senior Vice President
Robert E. Powers Senior Vice President
Richard K. Saccullo Senior Vice President
C-17
<PAGE>
Gregory K. Shannahan Senior Vice President
Joseph F. Sumanski Senior Vice President
Peter J. Szabo Senior Vice President
Nicholas K. Willett Senior Vice President
Richard A. Winge Senior Vice President
Jamie A. Atkinson Vice President
Benji A. Baer Vice President
Kenneth F. Barkoff Vice President
Casimir F. Bolanowski Vice President
Timothy W. Call Vice President
Kevin T. Cannon Vice President
John R. Carl Vice President
William W. Collins, Jr. Vice President
Leo H. Cook Vice President
Richard W. Dabney Vice President
John F. Dolan Vice President
Sohaila S. Farsheed Vice President
William C. Fisher Vice President
Gerard J. Friscia Vice President
& Controller
Andrew L. Gangolf Vice President and Assistant
Assistant General Secretary
Counsel
Mark D. Gersten Vice President Treasurer and
Chief Financial
Officer
Joseph W. Gibson Vice President
C-18
<PAGE>
Charles M. Greenberg Vice President
Alan Halfenger Vice President
William B. Hanigan Vice President
Daniel M. Hazard Vice President
George R. Hrabovsky Vice President
Valerie J. Hugo Vice President
Scott Hutton Vice President
Thomas K. Intoccia Vice President
Larry P. Johns Vice President
Richard D. Keppler Vice President
Gwenn M. Kessler Vice President
Donna M. Lamback Vice President
James M. Liptrot Vice President
James P. Luisi Vice President
Shawn P. McClain Vice President
Christopher J.
MacDonald Vice President
Michael F. Mahoney Vice President
Lori E. Master Vice President
Shawn P. McClain Vice President
Maura A. McGrath Vice President
Thomas F. Monnerat Vice President
Joanna D. Murray Vice President
Jeanette M. Nardella Vice President
C-19
<PAGE>
Nicole Nolan-Koester Vice President
John C. O'Connell Vice President
John J. O'Connor Vice President
Robert T. Pigozzi Vice President
James J. Posch Vice President
Domenick Pugliese Vice President Assistant
and Assistant Secretary
General Counsel
Bruce W. Reitz Vice President
Dennis A. Sanford Vice President
Karen C. Satterberg Vice President
Robert C. Schultz Vice President
Raymond S. Sclafani Vice President
Richard J. Sidell Vice President
Andrew D. Strauss Vice President
Michael J. Tobin Vice President
Joseph T. Tocyloski Vice President
Martha D. Volcker Vice President
Patrick E. Walsh Vice President
William C. White Vice President
Emilie D. Wrapp Vice President Assistant
and Special Counsel Secretary
Charles M. Barrett Assistant Vice President
Robert F. Brendli Assistant Vice President
Maria L. Carreras Assistant Vice President
John W. Cronin Assistant Vice President
C-20
<PAGE>
John P. Chase Assistant Vice President
Russell R. Corby Assistant Vice President
Ralph A. DiMeglio Assistant Vice President
Faith Dunn Assistant Vice President
John C. Endahl Assistant Vice President
John E. English Assistant Vice President
Duff C. Ferguson Assistant Vice President
John Grambone Assistant Vice President
Brian S. Hanigan Assistant Vice President
James J. Hill Assistant Vice President
Edward W. Kelly Assistant Vice President
Michael Laino Assistant Vice President
Nicholas J. Lapi Assistant Vice President
Patrick Look Assistant Vice President
& Assistant Treasurer
Richard F. Meier Assistant Vice President
Catherine N. Peterson Assistant Vice President
Carol H. Rappa Assistant Vice President
Clara Sierra Assistant Vice President
Vincent T. Strangio Assistant Vice President
Wesley S. Williams Assistant Vice President
Christopher J. Zingaro Assistant Vice President
Mark R. Manley Assistant Secretary
(c) Not applicable.
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<PAGE>
ITEM 30. Location of Accounts and Records.
The accounts, books and other documents required to
be maintained by Section 31(a) of the Investment Company Act
of 1940 and the Rules thereunder are maintained as follows:
journals, ledgers, securities records and other original
records are maintained principally at the offices of
Alliance Fund Services, Inc. 500 Plaza Drive, Secaucus, New
Jersey 07094 and at the offices of State Street Bank and
Trust Company, the Registrant's Custodian, 225 Franklin
Street, Boston, Massachusetts 02110. All other records so
required to be maintained are maintained at the offices of
Alliance Capital Management L.P., 1345 Avenue of the
Americas, New York, New York 10105.
ITEM 3l. Management Services.
Not applicable.
ITEM 32. Undertakings.
Subject to the terms and conditions of Section
15(d) of the Securities Exchange Act of 1934, the
undersigned Registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and
periodic information, documents and reports as may be
prescribed by any rule or regulation of the Commission
heretofore or hereafter duly adopted pursuant to authority
conferred in that section.
The Registrant undertakes to furnish each person to
whom a prospectus is delivered with a copy of the
Registrant's latest annual report to shareholders, upon
request and without charge.
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<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Act
of 1933, as amended, and the Investment Company Act of 1940,
as amended, the Registrant certifies that it meets all of
the requirements for effectiveness of this Amendment to its
Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to
its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New
York and State of New York on the 28th day of August, 1997.
ACM INSTITUTIONAL RESERVES, INC.
By /s/ John D. Carifa
___________________________
John D. Carifa
Chairman
Pursuant to the requirements of the Securities Act
of l933, as amended, this Amendment to the Registration
Statement has been signed below by the following persons in
the capacities and on the date indicated:
Signature Title Date
1) Principal
Executive Officer
/s/ John D. Carifa Chairman August 28, 1997
_____________________
John D. Carifa
2) Principal Financial and
Accounting Officer
/s/ Mark D. Gersten Treasurer August 28, 1997
_____________________ and Chief
Mark D. Gersten Financial
Officer
All of the Directors:
____________________
Ruth Block
John D. Carifa
David H. Dievler
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<PAGE>
John H. Dobkin
William H. Foulk, Jr.
James M. Hester
Clifford L. Michel
Donald J. Robinson
By: /s/ Edmund P. Bergan, Jr. August 28, 1997
_______________________
(Attorney-in-Fact)
Edmund P. Bergan, Jr.
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<PAGE>
Index to Exhibits
Page
(1)(a) Articles of Incorporation-Certificate of Correction
(1)(b) Articles Supplementary
(2) By-Laws-Amended and Restated
(5) Advisory Agreement
(6) Distribution Agreement
(8) Custodian Contract
(9) Transfer Agency Agreement
(11) Consent of Independent Auditors
Other Exhibit
Power of Attorney
Donald J. Robinson
C-25
00250072.AL4
<PAGE>
ARTICLES OF INCORPORATION
OF
ACM INSTITUTIONAL RESERVES, INC.
___________________________________
FIRST: (1) The name of the incorporator is Frank J.
Nasta.
(2) The incorporator's post office address is
Wall Street Plaza, New York, New York 10005.
(3) The incorporator is over eighteen years
of age.
(4) The incorporator is forming the
corporation named in these Articles of Incorporation under the
general laws of the State of Maryland.
SECOND: The name of the corporation (hereinafter
called the "Corporation") is ACM Institutional Reserves, Inc.
THIRD: (1) The purposes for which the Corporation is
formed is to conduct, operate and carry on the business of an
investment company.
(2) The Corporation may engage in any other
business and shall have all powers conferred upon or permitted to
corporations by the Maryland General Corporation Law.
FOURTH: The post office address of the principal
office of the Corporation within the State of Maryland is 32
South Street, Baltimore, Maryland 21202 in care of The
Corporation Trust, Incorporated; and the resident agent of the
<PAGE>
Corporation in the State of Maryland is The Corporation Trust,
Incorporated, 32 South Street, Baltimore, Maryland 21202.
FIFTH: (1) The total number of shares of stock of all
classes which the Corporation shall have authority to issue is
Three Billion (3,000,000,000), all of which stock shall have a
par value of One Cent ($.01) per share. The aggregate par value
of all authorized shares of stock of the Corporation is Thirty
Million Dollars ($30,000,000). Until such time as the Board of
Directors shall provide otherwise in accordance with section (2)
of this Article FIFTH, One Billion (1,000,000,000) of the
authorized shares of stock of the Corporation are designated as
Prime Portfolio Common Stock, One Billion (1,000,000,000) of such
shares are designated as U.S. Government Portfolio Common Stock,
and One Billion (1,000,000,000) of such shares are designated as
Tax-Free Portfolio Common Stock.
(2) The Board of Directors is authorized to
classify or to reclassify, from time to time, any unissued shares
of stock of the Corporation, whether now or hereafter authorized,
by setting, changing or eliminating the preferences, conversion
or other rights, voting powers, restrictions, limitations as to
dividends, qualifications or terms and conditions of or rights to
require redemption of the stock.
(3) The provisions of these Articles of
Incorporation including those in this Section shall apply to each
2
<PAGE>
class of stock unless otherwise provided by the Board of
Directors prior to issuance of any shares of that class:
(a) As more fully set forth hereafter, the
assets and liabilities and the income and expenses of each class
of the Corporation's stock may be determined separately and,
accordingly, the net asset value, the dividends payable to
holders, and the amounts distributable in the event of
dissolution of the Corporation to holders of shares of the
Corporation's stock may vary from class to class. Except for
these differences and certain other differences hereafter set
forth, each class of the Corporation's stock shall have the same
preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and
terms and conditions of and rights to require redemption.
(b) All consideration received by the
Corporation for the issue or sale of shares of a class of the
Corporation's stock, together with all funds derived from any
investment and reinvestment thereof, shall irrevocably belong to
that class for all purposes, subject only to the rights of
creditors, and shall be so recorded upon the books of account of
the Corporation. Such consideration and any funds derived from
any investment and reinvestment are herein referred to as "assets
belonging to" that class.
(c) The assets belonging to a class of the
Corporation's stock shall be charged with the liabilities of the
3
<PAGE>
Corporation with respect to that class and with that class' share
of the liabilities of the Corporation not attributable to any
particular class, in the latter case in the proportion that the
net asset value of that class (determined without regard to such
liabilities) bears to the net asset value of all classes of the
Corporation's stock (determined without regard to such
liabilities). The determination of the Board of Directors shall
be conclusive as to the allocation of liabilities, including
accrued expenses and reserves, and assets to a particular class
or classes.
(d) Shares of each class of stock shall be
entitled to such dividends or distributions, in stock or in cash
or both, as may declared from time to time by the Board of
Directors with respect to such class. Dividends or distributions
shall be paid on shares of a class of stock only out of the
assets belonging to that class.
(e) All holders of shares of stock shall
vote as a single class except with respect to any matter which
affects only one or more classes of stock, in which case only the
holders of shares of the classes affected shall be entitled to
vote.
(f) In the event of the liquidation or
dissolution of the Corporation, the stockholders of a class of
the Corporation's stock shall be entitled to receive, as a class,
out of the assets of the Corporation available for distribution
4
<PAGE>
to stockholders, the assets belonging to that class less the
liabilities allocated to that class. The assets so distributable
to the stockholders of class shall be distributed among such
stockholders in proportion to the number of shares of that class
held by them and recorded on the books of the Corporation. In
the event that there are any assets available for distribution
that are not attributable to any particular class of stock, such
assets shall be allocated to all classes in proportion to the net
asset value of the respective classes.
(4) Unless otherwise provided by the Board of
Directors with respect to a class of stock prior to issuance, the
holders of each class of stock shall be subject to the following
provisions:
(a) Each holder of stock may require the
Corporation to redeem all or any part of the stock owned by that
holder, upon request to the Corporation or its designated agent,
at the net asset value of the shares of stock next determined
following receipt of the request in a form approved by the
Corporation and accompanied by surrender of the certificate or
certificates for the shares, if any. The Board of Directors may
establish procedures for redemption of stock. Payment of the
redemption price by the Corporation or its designated agent shall
be made within seven days after redemption. The right of
redemption may be suspended and payment of the redemption price
may be postponed when permitted or required by applicable law.
5
<PAGE>
The right of a holder of stock redeemed by the Corporation to
receive dividends thereon and all other rights with respect to
the shares shall terminate at the time as of which the redemption
price has been determined, except the right to receive the
redemption price and any dividend or distribution to which that
holder had become entitled as the record stockholder on the
record date for that dividend.
(b)(i) The term "Minimum Amount" when used
herein shall mean One Million Dollars ($1,000,000) unless
otherwise fixed by the Board of Directors from time to time,
provided that the Minimum Amount may not in any event exceed Five
Million Dollars ($5,000,000). The Board of Directors may
establish differing Minimum Amounts for categories of holders of
stock based on such criteria as the Board of Directors may deem
appropriate.
(ii) If the net asset value of the
shares of the stock held by a stockholder shall be less than the
Minimum Amount then in effect with respect to the category of
holders in which the stockholder is included, the Corporation may
redeem all of those shares, upon notice given to the holder in
accordance with paragraph (iii) of this subsection (b), to the
extent that the Corporation may lawfully effect such redemption
under the laws of the State of Maryland.
(iii) The notice referred to in
paragraph (ii) of this subsection (b) shall be in writing
6
<PAGE>
personally delivered or deposited in the mail, at least thirty
days (or such other number of days as may be specified from time
to time by the Board of Directors) prior to such redemption. If
mailed, the notice shall be addressed to the stockholder at his
post office address as shown on the books of the Corporation, and
sent by first class mail, postage prepaid. The price for shares
acquired by the Corporation pursuant to this subsection (b) shall
be an amount equal to the net asset value of such shares.
(c) Payment by the Corporation for shares of
stock of the Corporation surrendered to it for redemption shall
be made by the Corporation within seven business days of such
surrender out of the funds legally available therefor, provided
that the Corporation may suspend the right of the stockholders to
redeem shares of stock and may postpone the right of those
holders to receive payment for any shares when permitted or
required to do so by applicable statutes or regulations. Payment
of the aggregate price of shares surrendered for redemption may
be made in cash or, at the option of the Corporation, wholly or
partly in such portfolio securities of the Corporation as the
Corporation shall select.
(d) Shares of stock shall be entitled to
dividends or distributions, in stock or in cash or both, as may
be declared from time to time by the Board of Directors, acting
in its sole discretion, out of the assets lawfully available
therefor. The Board of Directors may provide that dividends
7
<PAGE>
shall be payable only with respect to those shares of stock that
have been held of record continuously by the stockholder for a
specified period, not to exceed 72 hours, prior to the record
date of the dividend.
(e) On each matter submitted to a vote of
the stockholders, each holder of stock shall be entitled to one
vote for each share standing in his name on the books of the
Corporation.
(f) The Corporation may issue shares of
stock in fractional denominations to the same extent as its whole
shares, and shares in fractional denominations shall be shares of
stock having proportionately to the respective fractions
represented thereby all the rights of whole shares, including
without limitation, the right to vote, the right to receive
dividends and distributions, and the right to participate upon
liquidation of the Corporation, but excluding the right to
receive a stock certificate representing fractional shares.
(g) For the purpose of allowing the net
asset value per share of the stock to remain constant, the
Corporation shall be entitled to declare, pay and credit as
dividends daily the net income (which may include or give effect
to realized and unrealized gains and losses, as determined in
accordance with the Corporation's accounting and portfolio
valuation policies) of the Corporation. If the amount so
determined for any day is negative, the Corporation shall be
8
<PAGE>
entitled, without the payment of monetary compensation but in
consideration of the interest of the Corporation and its
stockholders in maintaining a constant net asset value per share
of the stock, to redeem pro rata from all the holders of record
of shares of stock at the time of such redemption (in proportion
to their respective holdings thereof) sufficient outstanding
shares of stock, or fractions thereof, as shall permit the net
asset value per share of the stock to remain constant.
(5) No stockholder shall be entitled to any
preemptive right other than as the Board of Directors may
establish.
SIXTH: The number of directors of the Corporation,
until such number shall be increased pursuant to the By-Laws of
the Corporation, shall be one. The number of directors shall
never be less than the number prescribed by the Maryland
Corporation Law and shall never be more than twenty. The name of
the person who shall act as director of the Corporation until the
first annual meeting or until his successor is duly chosen and
qualifies is John D. Carifa.
SEVENTH: The following provisions are inserted for the
purpose of defining, limiting and regulating the powers of the
Corporation and of the Board of Directors and stockholders.
(a) In addition to its other powers
explicitly or implicitly granted under those Articles of
9
<PAGE>
Incorporation, by law or otherwise, the Board of Directors of the
Corporation:
(i) is expressly authorized to make,
alter, amend or repeal the By-Laws of the Corporation;
(ii) may from time to time determine
whether, to what extent, at what times and places, and under what
conditions and regulations the accounts and books of the
Corporation, or any of them, shall be open to the inspection of
the stockholders, and no stockholder shall have any right to
inspect any account, book or document of the Corporation except
as conferred by statute or as authorized by the Board of
Directors of the Corporation;
(iii) is empowered to authorize,
without stockholder approval, the issuance and sale from time to
time of shares of stock of the Corporation whether now or
hereafter authorized; and
(iv) is authorized to adopt procedures
for determination of and to maintain constant the net asset value
of shares of any class of the Corporation's stock.
(b) Notwithstanding any provision of the
Maryland General Corporation Law requiring a greater proportion
than a majority of the votes of all classes or of any class of
the Corporation's stock entitled to be cast in order to take or
authorize any action, any such action may be taken or authorized
upon the concurrence of a majority of the aggregate number of
10
<PAGE>
votes entitled to be cast thereon subject to any applicable
requirements of the Investment Company Act of 1940, as from time
to time in effect, or rules or orders of the Securities and
Exchange Commission or any successor thereto.
(c) The presence in person or by proxy of
the holders of one-third of the shares of stock of the
Corporation entitled to vote (without regard to class) shall
constitute a quorum at any meeting of the stockholders, except
with respect to any matter which, under applicable statutes or
regulatory requirements, requires approval by a separate vote of
one or more classes of stock, in which case the presence in
person or by proxy of the holders of one-third of the shares of
stock of each class required to vote as a class on the matter
shall constitute a quorum.
(d) Any determination made in good faith by
or pursuant to the direction of the Board of Directors, as to the
amount of the assets, debts, obligations, or liabilities of the
Corporation, as to the amount of any reserves or charges set up
and the propriety thereof, as to the time of or purpose for
creating such reserves or charges, as to the use, alteration or
cancellation of any reserves or charges (whether or not any debt,
obligation, or liability for which such reserves or charges shall
have been created shall be then or thereafter required to be paid
or discharged), as to the value of or the method of valuing any
investment owned or held by the Corporation, as to market value
11
<PAGE>
or fair value of any investment or fair value of any other asset
of the Corporation, as to the allocation of any asset of the
Corporation to a particular class or classes of the Corporation's
stock, as to the charging of any liability of the Corporation to
a particular class or classes of the Corporation's stock, as to
the number of shares of the Corporation outstanding, as to the
estimated expense to the Corporation in connection with purchases
of its shares, as to the ability to liquidate investments in
orderly fashion, or as to any other matters relating to the
issue, sale, redemption or other acquisition or disposition of
investments or shares of the Corporation, shall be final and
conclusive and shall be binding upon the Corporation and all
holders of its shares, past, present and future, and shares of
the Corporation are issued and sold on the condition and
understanding that any and all such determinations shall be
binding as aforesaid.
EIGHTH: (1) To the full extent that limitations on the
liability of directors and officers are permitted by the Maryland
General Corporation Law, no director or officer of the
Corporation shall have any liability to the Corporation or its
stockholders for damages. This limitation on liability applies
to events occurring at the time a person serves as a director or
officer of the Corporation whether or not that person is a
director or officer at the time of any proceeding in which
liability is asserted.
12
<PAGE>
(2) The Corporation shall indemnify and
advance expenses to its currently acting and its former directors
to the full extent that indemnification of directors is permitted
by the Maryland General Corporation Law. The Corporation shall
indemnify and advance expenses to its officers to the same extent
as its directors and may do so to such further extent as is
consistent with law. The Board of Directors may by Bylaw,
resolution or agreement make further provision for
indemnification of directors, officers, employees and agents to
the full extent permitted by the Maryland Corporation Law.
(3) No provision of this Article shall be
effective to protect or purport to protect any director or
officer of the Corporation against any liability to the
Corporation or its stockholders to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of his office.
(4) References to the Maryland General
Corporation Law in this Article are to that law as from time to
time amended. No amendment to the charter of the Corporation
shall affect any right of any person under this Article based on
any event, omission or proceeding prior to the amendment.
NINTH: The Corporation reserves the right to amend,
alter, change or repeal any provision contained in these Articles
of Incorporation or in any amendment hereto in the manner now or
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hereafter prescribed by the laws of the State of Maryland,
including any amendment which alters the contract rights, as
expressly set forth in these Articles of Incorporation, of any
outstanding stock, and all rights conferred upon stockholders
herein are granted subject to this reservation.
IN WITNESS WHEREOF, the undersigned, being the
incorporator of the Corporation, has adopted and signed these
Articles of Incorporation and does hereby acknowledge that the
adoption and signing are his act.
_______________________
Dated: March 21, 1990
14
00250072.AA6
<PAGE>
ACM INSTITUTIONAL RESERVES, INC.
CERTIFICATE OF CORRECTION
ACM Institutional Reserves, Inc., a Maryland corporation,
certifies that:
FIRST: This Certificate of Correction corrects the Articles
of Incorporation of ACM Institutional Reserves, Inc. filed March
22, 1990.
SECOND: The Articles of Incorporation as filed on March 22,
1990 incorrectly stated the third sentence of Section (1) of
Article FIFTH. The third sentence of Section (1) of Article FIFTH
reads as filed:
"Until such time as the Board of Directors shall provide
otherwise in accordance with section (2) of this Article FIFTH,
One Billion (1,000,000,000) of the authorized shares of stock of
the Corporation are designated as Prime Portfolio Common Stock,
One Billion (1,000,000,000) of such shares are designated as U.S.
Government Portfolio Common Stock and One Billion (1,000,000,000)
of such shares are designated as Tax-Free Portfolio Common Stock."
The third sentence of Section (1) of Article FIFTH as
corrected reads:
"Until such time as the Board of Directors shall provide
otherwise in accordance with section (2) of this Article FIFTH,
One Billion (1,000,000,000) of the authorized shares of stock of
the Corporation are designated as Prime Portfolio Common Stock,
One Billion (1,000,000,000) of such shares are designated as
Government Portfolio Common Stock and One Billion (1,000,000,000)
of such shares are designated as Tax-Free Portfolio Common Stock."
THIRD: The Articles of Incorporation as filed on March 22,
1990 incorrectly stated Section (4)(b)(i) of Article FIFTH.
Section (4)(b)(i) of Article FIFTH reads as filed:
"(b)(i) The term "Minimum Amount" when used herein shall mean
One Million Dollars ($1,000,000) unless otherwise fixed by the
Board of Directors from time to time, provided that the Minimum
Amount may not in any event exceed Five Million Dollars
($5,000,000). The Board of Directors may establish differing
Minimum Amounts for categories of holders of stock based on such
criteria as the Board of Directors may deem appropriate."
Section (4)(b)(i) of Article FIFTH as corrected reads:
<PAGE>
"(b)(i) The term "Minimum Amount" when used herein shall mean
Five Hundred Thousand Dollars ($500,000) unless otherwise fixed by
the Board of Directors from time to time, provided that the
Minimum Amount may not in any event exceed Five Million Dollars
($5,000,000). The Board of Directors may establish differing
Minimum Amounts for categories of holders of stock based on such
criteria as the Board of Directors may deem appropriate."
IN WITNESS WHEREOF, the undersigned, being the sole
incorporator of ACM Institutional Reserves, Inc., has adopted and
signed this Certificate of Correction for the purpose of
correcting errors in the Articles of Incorporation described
herein pursuant to the General Corporation Law of the State of
Maryland and does hereby acknowledge that the adoption and signing
are his act.
June 20, 1990
2
00250072.AB0
<PAGE>
ACM INSTITUTIONAL RESERVES, INC.
ARTICLES SUPPLEMENTARY
ACM INSTITUTIONAL RESERVES, INC., a Maryland corporation
having its principal office within the state of Maryland in the
City of Baltimore (hereinafter called the "Corporation"),
certifies that:
FIRST: The total number of shares of capital stock that
the Corporation has authority to issue has been
increased to Four Billion (4,000,000,000) shares of
common stock of the Corporation, par value $.01 per
share, by the Corporation's Board of Directors in
accordance with Section 2-105(c) of the Maryland General
Corporation Law.
SECOND: Immediately before the increase, the
Corporation was authorized to issue Three Billion
(3,000,000,000) shares of common stock, par value $.01
per share, such shares having the following
designations:
Number of Shares Designations
1,000,000,000 Prime Portfolio Common Stock
1,000,000,000 Government Portfolio Common Stock
1,000,000,000 Tax-Free Portfolio Common Stock
and having an aggregate par value of Thirty Million
Dollars ($30,000,000.00). As increased, the Corporation
is authorized to issue a total of Four Billion
(4,000,000,000) shares of common stock, par value $.01
per share, having an aggregate par value of Forty
Million Dollars ($40,000,000.00). Immediately after the
increase and without giving effect to the classification
and reclassification of shares set forth in Articles
FOURTH and FIFTH hereof, such shares were classified as
follows:
Number of Shares Designations
1,000,000,000 Prime Portfolio Common Stock
1,000,000,000 Government Portfolio Common Stock
1,000,000,000 Tax-Free Portfolio Common Stock
1,000,000,000 (Not Designated)
<PAGE>
THIRD: The Corporation is registered as an open-end
investment company under the Investment Company Act of
1940, as amended.
FOURTH: The Corporation's Board of Directors classified
the One Billion (1,000,000,000) unissued shares of
common stock, par value $.01 per share, resulting from
the increase in the number of shares of capital stock
that the Corporation is authorized to issue as ACM
Institutional Reserves--Trust Portfolio Common Stock by
setting or changing the preferences, conversion or other
rights, voting powers, restrictions, limitations as to
dividends, qualifications, or terms or conditions of
redemption thereof as are hereinafter set forth.
FIFTH: The shares of ACM Institutional Reserves-- Trust
Portfolio Common Stock as so classified by the
Corporation's Board of Directors shall have the
preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends,
qualifications, or terms or conditions of redemption set
forth in Article FIFTH, Paragraph 3, of the
Corporation's Articles of Incorporation and shall be
subject to all provisions of the Articles of
Incorporation relating to stock of the Corporation
generally.
SIXTH: The shares aforesaid have been duly classified
by the Corporation's Board of Directors pursuant to
authority and power contained in the Corporation's
Articles of Incorporation.
2
<PAGE>
IN WITNESS WHEREOF, ACM Institutional Reserves, Inc. has
caused these Articles Supplementary to be executed by its
President and attested by its Secretary and its corporate seal to
be affixed on this day of , 1992. The President of
the Corporation who signed these Articles Supplementary
acknowledges them to be the act of the Corporation and states
under the penalties of perjury that to the best of his knowledge,
information and belief the matters and facts relating to approval
hereof are true in all material respects.
ACM INSTITUTIONAL RESERVES, INC.
[CORPORATE SEAL] By: ______________________________
President
Attested: _______________________
Secretary
3
00250072.AB5
<PAGE>
AMENDED AND RESTATED
BY-LAWS
OF
ACM INSTITUTIONAL RESERVES, INC.
_____________________
ARTICLE I
Offices
Section 1. Principal Office in Maryland. The
Corporation shall have a principal office in the City of
Baltimore, State of Maryland.
Section 2. Other Offices. The Corporation may have
offices also in such other places within and without the State of
Maryland as the Board of Directors may from time to time
determine or as the business of the Corporation may require.
ARTICLE II
Meetings of Stockholders
Section 1. Place of Meeting. Meetings of stockholders
shall be held at such place, either within the State of Maryland
or at such other place within the United States, as shall be
fixed from time to time by the Board of Directors.
Section 2. Annual Meetings. Annual Meetings of
stockholders shall be held on a date fixed from time to time by
the Board of Directors not less than two hundred and forty nor
more than two hundred and seventy days following the end of each
fiscal year of the Corporation, for the election of directors and
<PAGE>
the transaction of any other business within the powers of the
Corporation; provided, however, that the Corporation shall not be
required to hold an annual meeting in any year in which none of
the following is required to be acted on by stockholders under
the Investment Company Act of 1940: (1) election of directors;
(2) approval of an investment advisory agreement; (3)
ratification of the selection of independent public accountants;
and (4) approval of a distribution agreement.
Section 3. Notice of Annual Meeting. Written or
printed notice of any annual meeting, stating the place, date and
hour thereof, shall be given to each stockholder entitled to
notice thereof or to vote thereat not less than ten nor more than
ninety days before the date of the meeting.
Section 4. Special Meetings. Special meetings of
stockholders may be called by the chairman, the president or by
the Board of Directors and shall be called by the secretary upon
the written request of holders of shares entitled to cast not
less than twenty-five percent of all the votes entitled to be
cast at such meeting. Such request shall state the purpose or
purposes of such meeting and the matters proposed to be acted on
thereat. In the case of such request for a special meeting, upon
payment by such stockholders to the Corporation of the estimated
reasonable cost of preparing and mailing a notice of such
meeting, the secretary shall give the notice of such meeting.
The secretary shall not be required to call a special meeting to
2
<PAGE>
consider any matter which is substantially the same as a matter
acted upon at any special meeting of stockholders held within the
preceding twelve months unless requested to do so by holders of
shares entitled to cast not less than a majority of all votes
entitled to be cast at such meeting. Notwithstanding the
foregoing, to the extent required by the Investment Company Act
of 1940, special meetings of stockholders for the purpose of
voting upon the question of removal of any director or directors
of the Corporation shall be called by the secretary upon the
written request of holders of shares entitled to cast not less
than ten percent of all the votes entitled to be cast at such
meeting.
Section 5. Notice of Special Meeting. Written or
printed notice of a special meeting of stockholders, stating the
place, date, hour and purpose thereof, shall be given by the
secretary to each stockholder entitled to notice thereof or to
vote thereat not less than ten nor more than ninety days before
the date fixed for the meeting.
Section 6. Business of Special Meetings. Business
transacted at any special meeting of stockholders shall be
limited to the purposes stated in the notice thereof.
Section 7. Quorum. The holders of one-third of the
stock entitled to vote thereat, present in person or represented
by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business, except with respect
3
<PAGE>
to any matter which, under applicable statutes or regulatory
requirements, requires approval by a separate vote of one or more
classes of stock, in which case the presence in person or by
proxy of the holders of one-third of the shares of stock of each
class required to vote as a class on the matter shall constitute
a quorum.
A meeting of stockholders convened on the date for which
it was called may be adjourned from time to time by vote of a
majority of the shares present in person or by proxy even if less
than a quorum without further notice to a date not more than 120
days after the original record date. At such reconvened meeting
at which a quorum shall be present, any business may be
transacted which might have been transacted at the meeting
originally called. The stockholders present at a duly organized
meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave
less than a quorum.
Section 8. Voting. When a quorum is present at any
meeting, the affirmative vote of a majority of the votes cast,
or, with respect to any matter requiring a class vote, the
affirmative vote of a majority of the votes cast of each class
entitled to vote as a class on the matter, shall decide any
question brought before such meeting (except that directors may
be elected by the affirmative vote of a plurality of the votes
cast), unless the question is one upon which by express provision
4
<PAGE>
of the Investment Company Act of 1940, as from time to time in
effect, or other statutes or rules or orders of the Securities
and Exchange Commission or any successor thereto or of the
Articles of Incorporation a different vote is required, in which
case such express provision shall govern and control the decision
of such question.
Section 9. Proxies. Each stockholder shall at every
meeting of stockholders be entitled to vote in person or by
written proxy signed by the stockholder or his duly authorized
attorney in fact. The authority of an attorney in fact to
execute a proxy on behalf of a stockholder need not be in writing
or signed by the stockholder. No proxy shall be voted after
eleven months from its date, unless otherwise provided in the
proxy.
Section 10. Record Date. In order that the Corporation
may determine the stockholders entitled to notice of or to vote
at any meeting of stockholders or any adjournment thereof, to
express consent to corporate action in writing without a meeting,
or to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may
fix, in advance, a record date which shall be not more than
ninety days and, in the case of a meeting of stockholders, not
less than ten days prior to the date on which the particular
5
<PAGE>
action requiring such determination of stockholders is to be
taken. In lieu of fixing a record date, the Board of Directors
may provide that the stock transfer books shall be closed for a
stated period, but not to exceed, in any case, twenty days. If
the stock transfer books are closed for the purpose of
determining stockholders entitled to notice of or to vote at a
meeting of stockholders, such books shall be closed for at least
ten days immediately preceding such meeting. If no record date
is fixed and the stock transfer books are not closed for the
determination of stockholders: (1) The record date for the
determination of stockholders entitled to notice of, or to vote
at, a meeting of stockholders shall be at the close of business
on the day on which notice of the meeting of stockholders is
mailed or the day thirty days before the meeting, whichever is
the closer date to the meeting; and (2) The record date for the
determination of stockholders entitled to receive payment of a
dividend or an allotment of any rights shall be at the close of
business on the day on which the resolution of the Board of
Directors, declaring the dividend or allotment of rights, is
adopted, provided that the payment or allotment date shall not be
more than sixty days after the date of the adoption of such
resolution.
Section 11. Inspectors of Election. The directors, in
advance of any meeting, may, but need not, appoint one or more
inspectors to act at the meeting or any adjournment thereof. If
6
<PAGE>
an inspector or inspectors are not appointed, the person
presiding at the meeting may, but need not, appoint one or more
inspectors. In case any person who may be appointed as an
inspector fails to appear or act, the vacancy may be filled by
appointment made by the directors in advance of the meeting or at
the meeting by the person presiding thereat. Each inspector, if
any, before entering upon the discharge of his duties, may be
required to take or sign an oath faithfully to execute the duties
of inspector at such meeting with strict impartiality and
according to the best of his ability. The inspectors, if any,
shall determine the number of shares outstanding and the voting
power of each, the shares represented at the meeting, the
existence of a quorum, the validity and effect of proxies, and
shall receive votes or ballots, hear and determine all challenges
and questions arising in connection with the right to vote, count
and tabulate all votes, ballots, determine the result, and do
such acts as are proper to conduct the election or vote with
fairness to all stockholders. On request of the person presiding
at the meeting or any stockholder, the inspector or inspectors,
if any, shall make a report in writing of any challenge, question
or matter determined by him or them and execute a certificate of
any fact found by him or them.
Section 12. Informal Action by Stockholders. Except to
the extent prohibited by the Investment Company Act of 1940, as
from time to time in effect, or rules or orders of the Securities
7
<PAGE>
and Exchange Commission or any successor thereto, any action
required or permitted to be taken at any meeting of stockholders
may be taken without a meeting if a consent in writing, setting
forth such action, is signed by all the stockholders entitled to
vote on the subject matter thereof and any other stockholders
entitled to notice of a meeting of stockholders (but not to vote
thereat) have waived in writing any rights which they may have to
dissent from such action, and such consent and waiver are filed
with the records of the Corporation.
ARTICLE III
Board of Directors
Section 1. Number of Directors. The number of
directors constituting the entire Board of Directors (which
initially was fixed at one in the Corporation's Articles of
Incorporation) may be increased or decreased from time to time by
the vote of a majority of the entire Board of Directors within
the limits permitted by law but at no time may be more than
twenty as provided in the Articles of Incorporation. The tenure
of office of a director in office at the time of any decrease in
the number of directors shall not be affected as a result
thereof. Each director shall hold office until the next annual
meeting of stockholders or until his successor is elected and
qualified. Any director may resign at any time upon written
notice to the Corporation. Any director may be removed, either
with or without cause, at any meeting of stockholders duly called
8
<PAGE>
and at which a quorum is present by the affirmative vote of the
majority of the votes entitled to be cast thereon, and the
vacancy in the Board of Directors caused by such removal may be
filled by the stockholders at the time of such removal.
Directors need not be stockholders.
Section 2. Vacancies and Newly-Created Directorships.
Any vacancy occurring in the Board of Directors for any cause
other than by reason of an increase in the number of directors
may be filled by a majority of the remaining members of the Board
of Directors although such majority is less than a quorum. Any
vacancy occurring by reason of an increase in the number of
directors may be filled by a majority of the directors then in
office. A director elected by the Board of Directors to fill a
vacancy shall be elected to hold office until the next annual
meeting of stockholders or until his successor is elected and
qualifies.
Section 3. Powers. The business and affairs of the
Corporation shall be managed under the direction of the Board of
Directors which may exercise all such powers of the Corporation
and do all such lawful acts and things as are not by statute or
by the Articles of Incorporation or by these By-Laws conferred
upon or reserved to the stockholders.
Section 4. Meetings. The Board of Directors of the
Corporation or any committee thereof may hold meetings, both
regular and special, either within or without the State of
9
<PAGE>
Maryland. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as shall from time
to time be determined by the Board of Directors. Special
meetings of the Board of Directors may be called by the chairman,
the president or by two or more directors. Notice of special
meetings of the Board of Directors shall be given by the
secretary to each director at least three days before the meeting
if by mail or at least 24 hours before the meeting if given in
person or by telephone or by telegraph. The notice need not
specify the business to be transacted.
Section 5. Quorum and Voting. During such times when
the Board of Directors shall consist of more than one director, a
quorum for the transaction of business at meetings of the Board
of Directors shall consist of one-third of the entire Board of
Directors but in no event less than two directors. The action of
a majority of the directors present at a meeting at which a
quorum is present shall be the action of the Board of Directors.
If a quorum shall not be present at any meeting of the Board of
Directors, the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Section 6. Committees. The Board of Directors may
appoint from among its members an executive committee and other
committees of the Board of Directors, each committee to be
composed of two or more of the directors of the Corporation. The
10
<PAGE>
Board of Directors may, to the extent provided in the resolution,
delegate to such committees any or all of the powers of the Board
of Directors, except those powers which may not by law be
delegated to a committee. Such committee or committees shall
have the name or names as may be determined from time to time by
resolution adopted by the Board of Directors. Unless the Board
of Directors designates one or more directors as alternate
members of any committee, who may replace an absent or
disqualified member at any meeting of the committee, the members
of any such committee present at any meeting and not disqualified
from voting may, whether or not they constitute a quorum, appoint
another member of the Board of Directors to act at the meeting in
the place of any absent or disqualified member of such committee.
At meetings of any such committee, a majority of the members or
alternate members of such committee shall constitute a quorum for
the transaction of business and the act of a majority of the
members or alternate members present at any meeting at which a
quorum is present shall be the act of the committee.
Section 7. Minutes of Committee Meetings. The
committees shall keep regular minutes of their proceedings.
Section 8. Informal Action by Board of Directors and
Committees. Any action required or permitted to be taken at any
meeting of the Board of Directors or of any committee thereof may
be taken without a meeting if a written consent thereto is signed
by all members of the Board of Directors or of such committee, as
11
<PAGE>
the case may be, and such written consent is filed with the
minutes of proceedings of the Board of Directors or committee.
Section 9. Meetings by Conference Telephone. The
members of the Board of Directors or any committee thereof may
participate in a meeting of the Board of Directors or committee
by means of a conference telephone or similar communications
equipment by means of which all persons participating in the
meeting can hear each other at the same time and such
participation shall constitute presence in person at such
meeting.
Section 10. Fees and Expenses. The directors may be
paid their expenses of attendance at each meeting of the Board of
Directors and may be paid a fixed sum for attendance at each
meeting of the Board of Directors, a stated salary as director or
such other compensation as the Board of Directors may approve.
No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be
allowed like reimbursement and compensation for attending
committee meetings.
ARTICLE IV
Notices
Section 1. General. Notices to directors and
stockholders mailed to them at their post office addresses
12
<PAGE>
appearing on the books of the Corporation shall be deemed to be
given at the time when deposited in the United States mail.
Section 2. Waiver of Notice. Whenever any notice is
required to be given under the provisions of the statutes, of the
Articles of Incorporation or of these By-Laws, a waiver thereof
in writing, signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be
deemed the equivalent of notice. Attendance of a person at a
meeting shall constitute a waiver of notice of such meeting
except when the person attends a meeting for the express purpose
of objecting, at the beginning of the meeting, to the transaction
of any business because the meeting is not lawfully called or
convened.
ARTICLE V
Officers
Section 1. General. The officers of the Corporation
shall be chosen by the Board of Directors and shall be a chairman
of the Board of Directors, a president, a secretary and a
treasurer. The Board of Directors may choose also such vice
presidents and additional officers or assistant officers as it
may deem advisable. Any number of offices, except the offices of
president and vice president, may be held by the same person. No
officer shall execute, acknowledge or verify any instrument in
more than one capacity if such instrument is required by law to
be executed, acknowledged or verified by two or more officers.
13
<PAGE>
Section 2. Other Officers and Agents. The Board of
Directors may appoint such other officers and agents as it
desires who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be
determined from time to time by the Board of Directors.
Section 3. Tenure of Officers. The officers of the
Corporation shall hold office at the pleasure of the Board of
Directors. Each officer shall hold his office until his
successor is elected and qualifies or until his earlier
resignation or removal. Any officer may resign at any time upon
written notice to the Corporation. Any officer elected or
appointed by the Board of Directors may be removed at any time by
the Board of Directors when, in its judgment, the best interests
of the Corporation will be served thereby. Any vacancy occurring
in any office of the Corporation by death, resignation, removal
or otherwise shall be filled by the Board of Directors.
Section 4. Chairman of the Board of Directors. The
chairman of the Board of Directors shall preside at all meetings
of the stockholders and of the Board of Directors. He shall
execute on behalf of the Corporation, and may affix the seal or
cause the seal to be affixed to, all instruments requiring such
execution except to the extent that signing and execution thereof
shall be expressly delegated by the Board of Directors to some
other officer or agent of the Corporation.
14
<PAGE>
Section 5. President. The president shall, in the
absence of the chairman of the Board of Directors, preside at all
meetings of the stockholders or of the Board of Directors. He
shall be the chief executive officer and shall have general and
active management of the business of the Corporation and shall
see that all orders and resolutions of the Board of Directors are
carried into effect. He shall be ex officio a member of all
committees designated by the Board of Directors. He shall
execute bonds, mortgages and other contracts requiring a seal,
under the seal of the Corporation, except where required or
permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be expressly
delegated by the Board of Directors to some other officer or
agent of the Corporation.
Section 6. Vice Presidents. The vice presidents shall
act under the direction of the president and in the absence or
disability of the president shall perform the duties and exercise
the powers of the president. They shall perform such other
duties and have such other powers as the president or the Board
of Directors may from time to time prescribe. The Board of
Directors may designate one or more executive vice presidents or
may otherwise specify the order of seniority of the vice
presidents and, in that event, the duties and powers of the
president shall descend to the vice presidents in the specified
order of seniority.
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<PAGE>
Section 7. Secretary. The secretary shall act under
the direction of the president. Subject to the direction of the
president he shall attend all meetings of the Board of Directors
and all meetings of stockholders and record the proceedings in a
book to be kept for that purpose and shall perform like duties
for the committees designated by the Board of Directors when
required. He shall give, or cause to be given, notice of all
meetings of stockholders and special meetings of the Board of
Directors, and shall perform such other duties as may be
prescribed by the president or the Board of Directors. He shall
keep in safe custody the seal of the Corporation and shall affix
the seal or cause it to be affixed to any instrument requiring
it.
Section 8. Assistant Secretaries. The assistant
secretaries in the order of their seniority, unless otherwise
determined by the president or the Board of Directors, shall, in
the absence or disability of the secretary, perform the duties
and exercise the powers of the secretary. They shall perform
such other duties and have such other powers as the president or
the Board of Directors may from time to time prescribe.
Section 9. Treasurer. The treasurer shall act under
the direction of the president. Subject to the direction of the
president he shall have the custody of the corporate funds and
securities and shall keep full and accurate accounts of receipts
and disbursements in books belonging to the Corporation and shall
16
<PAGE>
deposit all moneys and other valuable effects in the name and to
the credit of the Corporation in such depositories as may be
designated by the Board of Directors. He shall disburse the
funds of the Corporation as may be ordered by the president or
the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the president and the Board of
Directors, at its regular meetings, or when the Board of
Directors so requires, an account of all his transactions as
treasurer and of the financial condition of the Corporation.
Section 10. Assistant Treasurers. The assistant
treasurers in the order of their seniority, unless otherwise
determined by the president or the Board of Directors, shall, in
the absence or disability of the treasurer, perform the duties
and exercise the powers of the treasurer. They shall perform
such other duties and have such other powers as the president or
the Board of Directors may from time to time prescribe.
ARTICLE VI
Certificates of Stock
Section 1. General. Every holder of stock of the
Corporation who has made full payment of the consideration for
such stock shall be entitled upon request to have a certificate,
signed by, or in the name of the Corporation by the chairman of
the board, the president or a vice president and countersigned by
the treasurer or an assistant treasurer or the secretary or an
17
<PAGE>
assistant secretary of the Corporation, certifying the number and
class of whole shares of stock owned by him in the Corporation.
Section 2. Fractional Share Interests. The Corporation
may issue fractions of a share of stock. Fractional shares of
stock shall have proportionately to the respective fractions
represented thereby all the rights of whole shares, including the
right to vote, the right to receive dividends and distributions
and the right to participate upon liquidation of the Corporation,
excluding, however, the right to receive a stock certificate
representing such fractional shares.
Section 3. Signatures on Certificates. Any of or all
the signatures on a certificate may be a facsimile. In case any
officer who has signed or whose facsimile signature has been
placed upon a certificate shall cease to be such officer before
such certificate is issued, it may be issued with the same effect
as if he were such officer at the date of issue. The seal of the
Corporation or a facsimile thereof may, but need not, be affixed
to certificates of stock.
Section 4. Lost, Stolen or Destroyed Certificates. The
Board of Directors may direct a new certificate or certificates
to be issued in place of any certificate or certificates
theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of any affidavit of that
fact by the person claiming the certificate or certificates to be
lost, stolen or destroyed. When authorizing such issue if a new
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certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed certificate
or certificates, or his legal representative, to give the
Corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the Corporation with
respect to the certificate or certificates alleged to have been
lost, stolen or destroyed.
Section 5. Transfer of Shares. Upon request by the
registered owner of shares, and if a certificate has been issued
to represent such shares upon surrender to the Corporation or a
transfer agent of the Corporation of a certificate for shares of
stock duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, subject to the
Corporation's rights to redeem or purchase such shares, it shall
be the duty of the Corporation, if it is satisfied that all
provisions of the Articles of Incorporation, of the By-Laws and
of the law regarding the transfer of shares have been duly
complied with, to record the transaction upon its books, issue a
new certificate to the person entitled thereto upon request for
such certificate, and cancel the old certificate, if any.
Section 6. Registered Owners. The Corporation shall be
entitled to recognize the person registered on its books as the
owner of shares to be the exclusive owner for all purposes
including redemption, voting and dividends, and the Corporation
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shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice
thereof, except as otherwise provided by the laws of Maryland.
ARTICLE VII
Indemnification
Section 1. Indemnification of Directors and Officers.
The Corporation shall indemnify its directors to the fullest
extent that indemnification of directors is permitted by the
Maryland General Corporation Law. The Corporation shall
indemnify its officers to the same extent as its directors and to
such further extent as is consistent with law. The Corporation
shall indemnify its directors and officers who while serving as
directors or officers also serve at the request of the
Corporation as a director, officer, partner, trustee, employee,
agent or fiduciary of another corporation, partnership, joint
venture, trust, other enterprise or employee benefit plan to the
fullest extent consistent with law. The indemnification and
other rights provided by this Article shall continue as to a
person who has ceased to be a director or officer and shall inure
to the benefit of the heirs, executors and administrators of such
a person. This Article shall not protect any such person against
any liability to the Corporation or any stockholder thereof to
which such person would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of
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the duties involved in the conduct of his office ("disabling
conduct").
Section 2. Advances. Any current or former director or
officer of the Corporation seeking indemnification within the
scope of this Article shall be entitled to advances from the
Corporation for payment of the reasonable expenses incurred by
him in connection with the matter as to which he is seeking
indemnification in the manner and to the fullest extent
permissible under the Maryland General Corporation Law. The
person seeking indemnification shall provide to the Corporation a
written affirmation of his good faith belief that the standard of
conduct necessary for indemnification by the Corporation has been
met and a written undertaking to repay any such advance if it
should ultimately be determined that the standard of conduct has
not been met. In addition, at least one of the following
additional conditions shall be met: (a) the person seeking
indemnification shall provide a security in form and amount
acceptable to the Corporation for his undertaking; (b) the
Corporation is insured against losses arising by reason of the
advance; or (c) a majority of a quorum of directors of the
Corporation who are neither "interested persons" as defined in
Section 2(a)(19) of the Investment Company Act of 1940, as
amended, nor parties to the proceeding ("disinterested non-party
directors"), or independent legal counsel, in a written opinion,
shall have determined, based on a review of facts readily
21
<PAGE>
available to the Corporation at the time the advance is proposed
to be made, that there is reason to believe that the person
seeking indemnification will ultimately be found to be entitled
to indemnification.
Section 3. Procedure. At the request of any person
claiming indemnification under this Article, the Board of
Directors shall determine, or cause to be determined, in a manner
consistent with the Maryland General Corporation Law, whether the
standards required by this Article have been met.
Indemnification shall be made only following: (a) a final
decision on the merits by a court or other body before whom the
proceeding was brought that the person to be indemnified was not
liable by reason of disabling conduct or (b) in the absence of
such a decision, a reasonable determination, based upon a review
of the facts, that the person to be indemnified was not liable by
reason of disabling conduct by (i) the vote of a majority of a
quorum of disinterested non-party directors or (ii) an
independent legal counsel in a written opinion.
Section 4. Indemnification of Employees and Agents.
Employees and agents who are not officers or directors of the
Corporation may be indemnified, and reasonable expenses may be
advanced to such employees or agents, as may be provided by
action of the Board of Directors or by contract, subject to any
limitations imposed by the Investment Company Act of 1940.
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<PAGE>
Section 5. Other Rights. The Board of Directors may
make further provision consistent with law for indemnification
and advance of expenses to directors, officers, employees and
agents by resolution, agreement or otherwise. The
indemnification provided by this Article shall not be deemed
exclusive of any other right, with respect to indemnification or
otherwise, to which those seeking indemnification may be entitled
under any insurance or other agreement or resolution of
stockholders or disinterested directors or otherwise. The rights
provided to any person by this Article shall be enforceable
against the Corporation by such person who shall be presumed to
have relied upon it in serving or continuing to serve as a
director, officer, employee, or agent as provided above.
Section 6. Amendments. References in this Article are
to the Maryland General Corporation Law and to the Investment
Company Act of 1940 as from time to time amended. No amendment
of these By-laws shall effect any right of any person under this
Article based on any event, omission or proceeding prior to the
amendment.
ARTICLE VIII
Miscellaneous
Section 1. Reserves. There may be set aside out of any
funds of the Corporation available for dividends such sum or sums
as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet
23
<PAGE>
contingencies, or for such other purpose as the Board of
Directors shall think conducive to the interest of the
Corporation, and the Board of Directors may modify or abolish any
such reserve.
Section 2. Dividends. Dividends or distributions upon
the shares of each class of stock by the Corporation may, subject
to the provisions of the Articles of Incorporation and of the
provisions of applicable law, be declared by the Board of
Directors, acting in its sole discretion, with respect to each
class, provided that the dividends or distributions shall be paid
on shares of a class of stock out of the lawfully available
assets belonging to that class. Dividends may be paid in stock
in cash or both subject to the provisions of the Articles of
Incorporation and of applicable law.
Section 3. Capital Gains Distributions. The amount and
number of capital gains distributions paid to the stockholders
during each fiscal year shall be determined by the Board of
Directors. Each such payment shall be accompanied by a statement
as to the source of such payment, to the extent required by law.
Section 4. Checks. All checks or demands for money and
notes of the Corporation shall be signed by such officer or
officers or such other person or persons as the Board of
Directors may from time to time designate.
24
<PAGE>
Section 5. Fiscal Year. The fiscal year of the
Corporation shall be fixed by resolution of the Board of
Directors.
Section 6. Seal. The corporate seal shall have
inscribed thereon the name of the Corporation, the year of its
organization and the words "Corporate Seal, Maryland". The seal
may be used by causing it or a facsimile thereof to be impressed
or affixed or in another manner reproduced.
ARTICLE IX
Amendments
The Board of Directors shall have the power to make,
alter and repeal by-laws of the Corporation.
25
00250072.AL0
<PAGE>
ADVISORY AGREEMENT
ACM INSTITUTIONAL RESERVES, INC.
1345 Avenue of the Americas
New York, New York 10105
July 22, 1992
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105
Dear Sirs:
We herewith confirm our agreement with you as follows:
1. We are an open-end, diversified management investment
company registered under the Investment Company Act of 1940
(the "Act"). We are currently authorized to issue separate
classes of shares and our Directors are authorized to
reclassify and issue any unissued shares to any number of
additional classes or series (Portfolios) each having its
own investment objective, policies and restrictions, all as
more fully described in the Prospectus and the Statement of
Additional Information constituting parts of the
Registration Statement filed on our behalf under the
Securities Act of 1933 and the Act. We are engaged in the
business of investing and reinvesting our assets in
securities of the type and in accordance with the
limitations specified in our Articles of Incorporation,
By-Laws, Registration Statement filed with the Securities
and Exchange Commission under the Securities Act of 1933 and
the Act, and any representations made in our Prospectus and
Statement of Additional Information, all in such manner and
to such extent as may from time to time be authorized by our
Directors. We enclose copies of the documents listed above
and will from time to time furnish you with any amendments
thereof.
2. (a) We hereby employ you to manage the investment and
reinvestment of the assets in each of our Portfolios as
above specified, and, without limiting the generality of the
foregoing, to provide management and other services
specified below.
(b) You will make decisions with respect to all
purchases and sales of securities in each of our Portfolios.
To carry out such decisions, you are hereby authorized, as
our agent and attorney-in-fact, for our account and at our
<PAGE>
risk and in our name, to place orders for the investment and
reinvestment of our assets. In all purchases, sales and
other transactions in securities in each of our Portfolios
you are authorized to exercise full discretion and act for
us in the same manner and with the same force and effect as
we might or could do with respect to such purchases, sales
or other transactions, as well as with respect to all other
things necessary or incidental to the furtherance or conduct
of such purchases, sales or other transactions.
(c) You will report to our Directors at each meeting
thereof all changes in each Portfolio since the prior
report, and will also keep us in touch with important
developments affecting any Portfolio and on your own
initiative will furnish us from time to time with such
information as you may believe appropriate for this purpose,
whether concerning the individual companies whose securities
are included in our Portfolios, the industries in which they
engage, or the conditions prevailing in the economy
generally. You will also furnish us with such statistical
and analytical information with respect to securities in
each of our Portfolios as you may believe appropriate or as
we reasonably may request. In making such purchases and
sales of securities in each of our Portfolios, you will bear
in mind the policies set from time to time by our Directors
as well as the limitations imposed by our Articles of
Incorporation and in our Registration Statements under the
Act and the Securities Act of 1933, the limitations in the
Act and of the Internal Revenue Code in respect of regulated
investment companies and the investment objective, policies
and restrictions for each of our Portfolios.
(d) It is understood that you will from time to time
employ or associate with yourselves such persons as you
believe to be particularly fitted to assist you in the
execution of your duties hereunder, the cost of performance
of such duties to be borne and paid by you. No obligation
may be incurred on our behalf in any such respect. During
the continuance of this agreement at our request you will
provide to us persons satisfactory to our Directors to serve
as our officers. You or your affiliates will also provide
persons, who may be our officers, to render such clerical,
accounting and other services to us as we may from time to
time request of you. Such personnel may be employees of you
or your affiliates. We will pay to you or your affiliates
the cost of such personnel for rendering such services to us
at such rates as shall from time to time be agreed upon
between us, provided that all time devoted to the investment
or reinvestment of securities in each of our Portfolios
shall be for your account. Nothing contained herein shall be
construed to restrict our right to hire our own employees or
2
<PAGE>
to contract for services to be performed by third parties.
Furthermore, you or your affiliates (other than us) shall
furnish us without charge with such management supervision
and assistance and such office facilities as you may believe
appropriate or as we may reasonably request subject to the
requirements of any regulatory authority to which you may be
subject. You or your affiliates (other than us) shall also
be responsible for the payment of any expenses incurred in
promoting the sale of our shares (other than the portion of
the promotional expenses to be borne by us in accordance
with an effective plan pursuant to Rule 12b-1 under the Act
and the costs of printing our prospectuses and other reports
to stockholders and fees related to registration with the
Securities and Exchange Commission and with state regulatory
authorities).
3. It is further agreed that you shall be responsible
for the portion of the net expenses of each of our
Portfolios (except interest, taxes, brokerage, fees paid in
accordance with an effective plan pursuant to Rule 12b-1
under the Act, expenditures which are capitalized in
accordance with generally accepted accounting principles and
extraordinary expenses, all to the extent permitted by
applicable state law and regulation) incurred by us during
each of our fiscal years or portion thereof that this
agreement is in effect between us which, as to a Portfolio,
in any such year exceeds the limits applicable to such
Portfolio under the laws or regulations of any state in
which our shares are qualified for sale (reduced pro rata
for any portion of less than a year). We hereby confirm
that, subject to the foregoing, we shall be responsible and
hereby assume the obligation for payment of all our other
expenses, including: (a) payment of the fee payable to you
under paragraph 5 hereof; (b) custody, transfer, and
dividend disbursing expenses; (c) fees of directors who are
not your affiliated persons; (d) legal and auditing
expenses; (e) clerical, accounting and other office costs;
(f) the cost of personnel providing services to us, as
provided in subparagraph (d) of paragraph 2 above; (g) costs
of printing our prospectuses and stockholder reports; (h)
cost of maintenance of corporate existence; (i) interest
charges, taxes, brokerage fees and commissions; (j) costs of
stationery and supplies; (k) expenses and fees related to
registration and filing with the Securities and Exchange
Commission and with state regulatory authorities; and (1)
such promotional expenses as may be contemplated by an
effective plan pursuant to Rule 12b-1 under the Act
provided, however, that our payment of such promotional
expenses shall be in the amounts, and in accordance with the
procedures, set forth in such plan.
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<PAGE>
4. We shall expect of you, and you will give us the
benefit of, your best judgment and efforts in rendering
these services to us, and we agree as an inducement to your
undertaking these services that you shall not be liable
hereunder for any mistake of judgment or in any event
whatsoever, except for lack of good faith, provided that
nothing herein shall be deemed to protect, or purport to
protect, you against any liability to us or to our security
holders to which you would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the
performance of your duties hereunder, or by reason of your
reckless disregard of your obligations and duties hereunder.
5. In consideration of the foregoing we will pay you a
fee at the annual percentage rate of .20 of 1% of the
average daily value of the net assets of each of our Prime,
Government and Tax-Free Portfolios and .45 of 1% of the
average daily value of the net assets of our Trust
Portfolio. Such fee shall be accrued by us daily and shall
be payable in arrears on the last day of each calendar month
for services performed hereunder during such month. Your
reimbursement, if any, of our expenses as provided in
paragraph 3 hereof, shall be estimated and paid to us
monthly in arrears, at the same time as our payment to you
for such month. Payment of the advisory fee will be reduced
or postponed, if necessary, with any adjustments made after
the end of the year.
6. This agreement shall become effective on the date
hereof and shall remain in effect until December 31, 1992
and thereafter for successive twelve-month periods (computed
from each January 1) with respect to each Portfolio provided
that such continuance is specifically approved at least
annually by our Directors or by majority vote of the holders
of the outstanding voting securities (as defined in the Act)
of such Portfolio, and, in either case, by a majority of our
Directors who are not parties to this agreement or
interested persons, as defined in the Act, of any such party
(other than as directors of the Fund) provided further,
however, that if the continuation of this agreement is not
approved as to a Portfolio, you may continue to render to
such Portfolio the services described herein in the manner
and to the extent permitted by the Act and the rules and
regulations thereunder. Upon the effectiveness of this
agreement, it shall supersede all previous agreements
between us covering the subject matter hereof. This
agreement may be terminated with respect to any Portfolio at
any time, without the payment of any penalty, by vote of a
majority of the outstanding voting securities (as so
defined) of such Portfolio, or by a vote of a majority of
our Directors on sixty days' written notice to you, or by
4
<PAGE>
you with respect to any Portfolio on sixty days' written
notice to us.
7. This agreement may not be transferred, assigned, sold
or in any manner hypothecated or pledged by you and this
agreement shall terminate automatically in the event of any
such transfer, assignment, sale, hypothecation or pledge by
you. The terms "transfer", "assignment" and "sale" as used
in this paragraph shall have the meanings ascribed thereto
by governing law and any interpretation thereof contained in
rules or regulations promulgated by the Securities and
Exchange Commission thereunder.
8. (a) Except to the extent necessary to perform your
obligations hereunder, nothing herein shall be deemed to
limit or restrict your right, or the right of any of your
employees, or any of the Directors of Alliance Capital
Management Corporation, general partner, who may also be a
trustee, officer or employee of ours, or persons otherwise
affiliated with us (within the meaning of the Act) to engage
in any other business or to devote time and attention to the
management or other aspects of any other business, whether
of a similar or dissimilar nature, or to render services of
any kind to any other trust, corporation, firm, individual
or association.
(b) You will notify us of any change in the general
partners of your partnership within a reasonable time after
such change.
9. If you cease to act as our investment adviser, or, in
any event, if you so request in writing, we agree to take
all necessary action to change the name of our corporation
to a name not including the word "Alliance". You may from
time to time make available without charge to us for our use
such marks or symbols owned by you, including marks or
symbols containing the name "Alliance" or any variation
thereof, as you may consider appropriate. Any such marks or
symbols so made available will remain your property and you
will have the right, upon notice in writing, to require us
to cease the use of such mark or symbol at any time.
If the foregoing is in accordance with your
understanding, will you kindly so indicate by signing and
returning to us the enclosed copy hereof.
Very truly yours,
ACM Institutional Reserves, Inc.
5
<PAGE>
By
James P. Syrett
President
Accepted: As of July 22, 1992
ALLIANCE CAPITAL MANAGEMENT L.P.
By Alliance Capital Management Corporation,
general partner
By
John D. Carifa
Executive Vice President
& Chief Financial Officer
6
00250072.AL1
<PAGE>
necessary action to change the name of our corporation to a
name not including the word "Alliance". You may from time to
time make available without charge to us for our use such
marks or symbols owned by you, including marks or symbols
containing the name "Alliance" or any variation thereof, as
you may consider appropriate. Any such marks or symbols so
made available will remain your property and you will have
the right, upon notice in writing, to require us to cease
the use of such mark or symbol at any time.
If the foregoing is in accordance with your
understanding, will you kindly so indicate by signing and
returning to us the enclosed copy hereof.
Very truly yours,
ACM Institutional Reserves, Inc.
By /s/ James P. Syrett
_______________________________
James P. Syrett
President
Accepted: As of July 22, 1992
ALLIANCE CAPITAL MANAGEMENT L.P.
By Alliance Capital Management Corporation,
general partner
By /s/ John D. Carifa
_____________________________
John D. Caifa
Executive Vice President
00250072.AL1
<PAGE>
DISTRIBUTION AGREEMENT
ACM INSTITUTIONAL RESERVES, INC.
1345 Avenue of the Americas
New York, New York 10105
July 22, 1992
Alliance Fund Distributors, Inc.
1345 Avenue of the Americas
New York, New York 10105
Dear Sirs:
This is to confirm that, on the terms and conditions set
forth herein, we have agreed that you shall be, for the
period of this Distribution Agreement ("the Agreement"), a
distributor, as our agent, for the unsold portion of such
number of shares of common stock of our Fund (the "Shares")
as may from time to time be effectively registered under the
Securities Act of 1933, as amended (the "Act").
1. We hereby agree to offer through you as our agent,
and to solicit, through you as our agent, offers to
subscribe to, the unsold balance of the Shares as shall then
be effectively registered under the Act, and you are
appointed our agent for such purpose. All subscriptions for
Shares obtained by you shall be directed to us for
acceptance and shall not be binding on us until accepted by
us. You shall have no authority to make binding
subscriptions on our behalf. We reserve the right to sell
Shares through other distributors or directly to investors
through subscriptions received by us at our principal office
in New York, New York. The right given to you under this
agreement shall not apply to Shares issued in connection
with (a) the merger or consolidation of any other investment
company with us, (b) our acquisition by purchase or
otherwise of all or substantially all of the assets or stock
of any other investment company or (c) the reinvestment in
Shares by our shareholders of dividends or other
distributions or any other offering of shares to our
shareholders.
<PAGE>
2. You will use your best efforts to obtain
subscriptions to Shares upon the terms and conditions
contained herein and in the then current Prospectus and
Statement of Additional Information, including the offering
price. You will send to us promptly all subscriptions
placed with you. We shall advise you of the approximate net
asset value per share or net asset value per share (as used
in the Prospectus and Statement of Additional Information)
on any date requested by you and at such other times as it
shall have been determined by us. We shall furnish you from
time to time, for use in connection with the offering of
Shares, such other information with respect to us and the
Shares as you may reasonably request. We shall supply you
with such copies of our current Prospectus and Statement of
Additional Information in effect from time to time as you
may request. You are not authorized to give any information
or to make any representations, other than those contained
in the Registration Statement, Prospectus and Statement of
Additional Information, as then in effect, filed under the
Act covering Shares or which we may authorize in writing.
You may use employees and agents at your cost and expense to
assist you in carrying out your obligations hereunder but no
such employee or agent shall be deemed to be our agent or
have any rights under this agreement.
3. We reserve the right to suspend the offering of
Shares at any time, in the absolute discretion of our Board
of Directors, and upon notice of such suspension you shall
cease to offer Shares hereunder.
4. Both of us will cooperate with each other in taking
such action as may be necessary to qualify Shares for sale
under the securities laws of such states as we may
designate. Pursuant to our Advisory Agreement dated July
22, 1992 with Alliance Capital Management L.P. (the
"Adviser"), we will pay all fees and expenses of registering
Shares under the Act and of qualification of Shares and our
qualification under applicable state securities laws. You
shall pay all expenses relating to your broker-dealer
qualification.
5. We represent to you that our Registration
Statement, Prospectus and Statement of Additional
Information (as in effect from time to time) under the Act
have been or will be, as the case may be, carefully prepared
in conformity with the requirements of the Act and the rules
and regulations of the Securities and Exchange Commission
thereunder. We represent and warrant to you that our
Registration Statement, Prospectus and Statement of
Additional Information contain or will contain all
statements required to be stated therein in accordance with
2
<PAGE>
the Act and the rules and regulations of said Commission,
and that all statements of fact contained or to be contained
therein are or will be true and correct at the time
indicated or the effective date as the case may be; that
none of our Registration Statement, our Prospectus or our
Statement of Additional Information, when it shall become
effective or be authorized for use, will include an untrue
statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading to a purchaser of Shares.
We will from time to time file such amendment or amendments
to our Registration Statement, Prospectus and Statement of
Additional Information as, in the light of future
developments, shall, in the opinion of our counsel, be
necessary in order to have our Registration Statement,
Prospectus and Statement of Additional Information at all
times contain all material facts required to be stated
therein or necessary to make any statements therein not
misleading to a purchaser of Shares, but, if we shall not
file such amendment or amendments within fifteen days after
receipt by us of a written request from you to do so, you
may, at your option, terminate this Agreement immediately.
We shall not file any amendment to our Registration
Statement, Prospectus or Statement of Additional Information
without giving you reasonable notice thereof in advance;
provided, however, that nothing contained in this agreement
shall in any way limit our right to file at any time such
amendments to our Registration Statement, Prospectus or
Statement of Additional Information, of whatever character,
as we may deem advisable, such right being in all respects
absolute and unconditional. We represent and warrant to you
that any amendment to our Registration Statement, Prospectus
or Statement of Additional Information hereafter filed by us
will, when it becomes effective, contain all statements
required to be stated therein in accordance with the Act and
the rules and regulations of said Commission, that all
statements of fact contained therein will, when the same
shall become effective, be true and correct and that no such
amendment, when it becomes effective, will include an untrue
statement of a material fact or will omit to state a
material fact required to be stated therein or necessary to
make the statements therein not misleading to a purchaser of
Shares.
6. We agree to indemnify, defend and hold you, and any
person who controls you within the meaning of Section 15 of
the Act, free and harmless from and against any and all
claims, demands, liabilities and expenses (including the
cost of investigating or defending such claims, demands or
liabilities and any reasonable counsel fees incurred in
connection therewith) which you or any such controlling
3
<PAGE>
person may incur, under the Act, or under common law or
otherwise, arising out of or based upon any alleged untrue
statement of a material fact contained in our Registration
Statement, Prospectus or Statement of Additional Information
in effect from time to time under the Act or arising out of
or based upon any alleged omission to state a material fact
required to be stated in either thereof or necessary to make
the statements in either thereof not misleading; provided,
however, that in no event shall anything herein contained be
so construed as to protect you against any liability to us
or our security holders to which you would otherwise be
subject by reason of willful misfeasance, bad faith, or
gross negligence, in the performance of your duties, or by
reason of your reckless disregard of your obligations and
duties under this agreement. Our agreement to indemnify you
and any such controlling person as aforesaid is expressly
conditioned upon our being notified of any action brought
against you or any such controlling person, such
notification to be given by letter or by telegram addressed
to us at our principal office in New York, New York, and
sent to us by the person against whom such action is brought
within ten days after the summons or other first legal
process shall have been served. The failure to so notify us
of any such action shall not relieve us from any liability
which we may have to the person against whom such action is
brought by reason of any such alleged untrue statement or
omission otherwise than on account of our indemnity
agreement contained in this paragraph 6. We will be
entitled to assume the defense of any suit brought to
enforce any such claim, and to retain counsel of good
standing chosen by us and approved by you. In the event we
do elect to assume the defense of any such suit and retain
counsel of good standing approved by you, the defendant or
defendants in such suit shall bear the fees and expenses of
any additional counsel retained by any of them; but in case
we do not elect to assume the defense of any such suit, or
in case you do not approve of counsel chosen by us, we will
reimburse you or the controlling person or persons named as
defendant or defendants in such suit, for the fees and
expenses of any counsel retained by you or them. Our
indemnification agreement contained in this paragraph 6 and
our representations and warranties in this Agreement shall
remain operative and in full force and effect regardless of
any investigation made by or on behalf of you or any
controlling person and shall survive the sale of any of
Shares made pursuant to subscriptions obtained by you. This
agreement of indemnity will inure exclusively to your
benefit, to the benefit of your successors and assigns, and
to the benefit of any controlling persons and their
successors and assigns. We agree promptly to notify you of
4
<PAGE>
the commencement of any litigation or processing against us
in connection with the issue and sale of any Shares.
7. You agree to indemnify, defend and hold us, our
several officers and directors, and any person who controls
us within the meaning of Section 15 of the Act, free and
harmless from and against any and all claims, demands,
liabilities, and expenses (including the cost of
investigating or defending such claims, demands or
liabilities and any reasonable counsel fees incurred in
connection therewith) which we, our officers or directors,
or any such controlling person may incur under the Act or
under common law or otherwise, but only to the extent that
such liability, or expense incurred by us, our officers or
directors or such controlling person resulting from such
claims or demands shall arise out of or be based upon any
alleged untrue statement of a material fact contained in
information furnished in writing by you to us for use in our
Registration Statement or Prospectus in effect from time to
time under the Act, or shall arise out of or be based upon
any alleged omission to state a material fact in connection
with such information required to be stated in the
Registration Statement or Prospectus or necessary to make
such information not misleading. Your agreement to
indemnify us, our officers and directors, and any such
controlling person as aforesaid is expressly conditioned
upon your being notified of any action brought against us,
our officers or directors or any such controlling person,
such notification to be given by letter or telegram
addressed to you at your principal office in New York, New
York, and sent to you by the person against whom such action
is brought, within ten days after the summons or other first
legal process shall have been served. You shall have a
right to control the defense of such action, with counsel of
your own choosing, satisfactory to us, if such action is
based solely upon such alleged misstatement or omission on
your part, and in any other event you and we, our officers
or directors or such controlling person shall each have the
right to participate in the defense or preparation of the
defense of any such action. The failure to so notify you of
any such action shall not relieve you from any liability
which you may have to us, to our officers or directors, or
to such controlling person by reason of any such untrue
statement or omission on your part otherwise than on account
of your indemnity agreement contained in this paragraph 7.
8. We agree to advise you immediately:
(a) of any request by the Securities and Exchange
Commission for amendments to our Registration Statement or
Prospectus or for additional information,
5
<PAGE>
(b) In the event of the issuance by the Securities
and Exchange Commission of any stop order suspending the
effectiveness of our Registration Statement or Prospectus or
the initiation of any proceedings for that purpose,
(c) of the happening of any material event which
makes untrue any statement made in our Registration
Statement or Prospectus or which requires the making of a
change in either thereof in order to make the statements
therein not misleading, and
(d) of all action of the Securities and Exchange
Commission with respect to any amendments to our
Registration Statement or Prospectus which may from time to
time be filed with the Securities and Exchange Commission
under the Act.
9. (a) This agreement shall become effective on the
date hereof, shall remain in effect as to each Portfolio
until December 31, 1992 and shall continue in effect
thereafter for successive twelve-month periods (computed
from each January 1); provided, however, that such
continuance is specifically approved at least annually by
the Directors of the Fund or by majority vote of the holders
of the outstanding voting securities (as defined in the 1940
Act) of such Portfolio, and, in either case, by a majority
of the Directors of the Fund who are not parties to this
Agreement or interested persons (as defined in the 1940 Act)
of any such party; provided further; however, that if the
continuation of this agreement is not approved as to a
Portfolio, you may continue to render to such Portfolio the
services described herein in the manner and to the extent
permitted by the 1940 Act and the rules and regulations
thereunder. This Agreement may be terminated (i) by the
Fund with respect to any Portfolio at any time, without the
payment of any penalty, by the vote of a majority of the
outstanding voting securities (as so defined) of such
Portfolio, or by a vote of a majority of the Directors of
the Fund on sixty days written notice to you; or (ii) by you
with respect to any Portfolio on sixty days written notice
to the Fund.
(b) This Agreement may be amended at any time with
the approval of the Directors of the Fund; provided,
however, that any material amendments of the terms hereof
will become effective only upon approval as provided in the
first proviso of paragraph 9(a) hereof.
10. This Agreement may not be transferred, assigned,
sold or in any manner hypothecated or pledged by you and
this Agreement shall terminate automatically in the event of
6
<PAGE>
any such transfer, assignment, sale, hypothecation or
pledge. The terms "transfer", "assignment", and "sale" as
used in this paragraph shall have the meanings ascribed
thereto by governing law and any interpretation thereof
contained in rules or regulations promulgated by the
Securities and Exchange Commission thereunder.
11. Except to the extent necessary to perform your
obligation hereunder, nothing herein shall be deemed to
limit or restrict your right, or the right of any of your
officers, directors or employees who may also be a director,
officer or employee of ours, to engage in any other business
or to devote time and attention to the management or other
aspects of any other business, whether of a similar or
dissimilar nature, or to render services of any kind to any
other corporation, firm, individual or association.
12. Notice is hereby given that this Agreement is
entered into on our behalf by an officer of our Fund in his
capacity as an officer and not individually and that the
obligations of or arising out of this Agreement are not
binding upon any of our Directors, officers, shareholders,
employees or agents individually but are binding only upon
the assets and property of our Fund.
7
<PAGE>
If the foregoing is in accordance with your
understanding, will you kindly so indicate by signing and
returning to us the enclosed copy hereof.
Very truly yours,
ACM INSTITUTIONAL RESERVES, INC.
By
James P. Syrett
President
Accepted: July 22, 1992
ALLIANCE FUND DISTRIBUTORS, INC.
By
David H. Dievler
Senior Vice President
ALLIANCE CAPITAL MANAGEMENT L.P.
By Alliance Capital Management Corporation,
general partner
By
John D. Carifa
Executive Vice President and
Chief Financial Officer
8
00250072.AL2
<PAGE>
If the foregoing is in accordance with your
understanding, will you kindly so indicate by signing and
returning to us the enclosed copy hereof.
Very truly yours,
ACM INSTITUTIONAL RESERVES, INC.
By /s/ James P. Syrett
___________________________
James P. Syrett
President
Accepted: July 22, 1992
ALLIANCE FUND DISTRIBUTORS, INC.
By /s/ David H. Dievler
____________________________
David H. Dievler
Senior Vice President
ALLIANCE CAPITAL MANAGEMENT L.P.
By Alliance Capital Management Corporation,
general partner
By /s/ John D. Carifa
____________________________
John D. Carifa
Executive Vice President and
Chief Financial Officer
00250072.AL2
<PAGE>
CUSTODIAN CONTRACT
Between
ACM INSTITUTIONAL RESERVES, INC.
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to be Held by
It..........................................................1
2. Duties of the Custodian with Respect to Property
of the Fund Held by the Custodian...........................2
2.1 Holding Securities................................2
2.2 Delivery of Securities............................3
2.3 Registration of Securities........................9
2.4 Bank Accounts.....................................9
2.5 Payments for Shares..............................10
2.6 Availability of Federal Funds....................11
2.7 Collection of Income.............................12
2.8 Payment of Fund Monies...........................12
2.9 Liability for Payment in Advance of
Receipt of Securities Purchased..................15
2.10 Payments for Repurchases or Redemptions
of Shares of the Fund............................16
2.11 Appointment of Agents............................17
2.12 Deposit of Fund Assets in Securities System......17
2.12A Fund Assets Held in the Custodian's Direct
Paper System.....................................21
2.13 Segregated Account...............................22
2.14 Ownership Certificates for Tax Purposes..........24
2.15 Proxies..........................................24
2.16 Communications Relating to Portfolio
Securities.......................................24
2.17 Proper Instructions..............................25
2.18 Actions Permitted Without Express Authority......26
2.19 Evidence of Authority............................27
3. Duties of Custodian With Respect to the Books of
Account and Calculation of Net Asset Value and Net
Income.....................................................28
4. Records....................................................29
5. Opinion of Fund's Independent Accountants..................29
6. Reports to Fund by Independent Public Accountants..........30
7. Compensation of Custodian..................................30
8. Responsibility of Custodian................................30
9. Effective Period, Termination and Amendment................32
10. Successor Custodian........................................34
i
<PAGE>
11. Interpretive and Additional Provisions.....................36
12. Additional Funds...........................................36
13. Massachusetts Law to Apply.................................37
14. Prior Contracts............................................37
ii
<PAGE>
CUSTODIAN CONTRACT
This Contract between ACM Institutional Reserves, Inc.,
a corporation organized and existing under the laws of Maryland,
having its principal place of business at 1345 Avenue of the
Americas, New York, New York, 10045 hereinafter called the
"Fund", and State Street Bank and Trust Company, a Massachusetts
trust company, having its principal place of business at 225
Franklin Street, Boston, Massachusetts, 02110, hereinafter called
the "Custodian",
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in
separate series, with each such series representing interests in
a separate portfolio of securities and other assets; and
WHEREAS, the Fund intends to initially offer shares in
three series, the Prime Portfolio, the Government Portfolio, and
the Tax Free Portfolio (such series together with all other
series subsequently established by the Fund and made subject to
this Contract in accordance with paragraph 12, being herein
referred to as the "Portfolio(s)");
NOW THEREFOR, in consideration of the mutual covenants
and agreements hereinafter contained, the parties hereto agree as
follows:
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian
of the assets of the Portfolios of the Fund pursuant to the
1
<PAGE>
provisions of the Articles of Incorporation. The Fund on behalf
of the Portfolio(s) agrees to deliver to the Custodian all
securities and cash of the Portfolios, and all payments of
income, payments of principal or capital distributions received
by it with respect to all securities owned by the Portfolio(s)
from time to time, and the cash consideration received by it for
such new or treasury shares of beneficial interest of the Fund
representing interests in the Portfolios, ("Shares") as may be
issued or sold from time to time. The Custodian shall not be
responsible for any property of a Portfolio held or received by
the Portfolio and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the
meaning of Section 2.17), the Custodian shall on behalf of the
applicable Portfolio(s) from time to time employ one or more sub-
custodians, but only in accordance with an applicable vote by the
Board of Directors of the Fund on behalf of the applicable
Portfolio(s), and provided that the Custodian shall have no more
or less responsibility or liability to the Fund on account of any
actions or omissions of any sub-custodian so employed than any
such sub-custodian has to the Custodian.
2. Duties of the Custodian with Respect to Property of the
Fund Held by the Custodian
2.1 Holding Securities. The Custodian shall hold and
physically segregate for the account of each Portfolio
all non-cash property, including all securities owned by
2
<PAGE>
such Portfolio, other than (a) securities which are
maintained pursuant to Section 2.12 in a clearing agency
which acts as a securities depository or in a book-entry
system authorized by the U.S. Department of the
Treasury, collectively referred to herein as "Securities
System" and (b) commercial paper of an issuer for which
State Street Bank and Trust Company acts as issuing and
paying agent ("Direct Paper") which is deposited and/or
maintained in the Direct Paper System of the Custodian
pursuant to Section 2.12A.
2.2 Delivery of Securities. The Custodian shall release and
deliver securities owned by a Portfolio held by the
Custodian or in a Securities System account of the
Custodian or in the Custodian's Direct Paper book entry
system account ("Direct Paper System Account") only upon
receipt of Proper Instructions from the Fund on behalf
of the applicable Portfolio, which may be continuing
instructions when deemed appropriate by the parties, and
only in the following cases:
1) Upon sale of such securities for the account
of the Portfolio and receipt of payment
therefor;
2) Upon the receipt of payment in connection with
any repurchase agreement related to such
securities entered into by the Portfolio;
3
<PAGE>
3) In the case of a sale effected through a
Securities System, in accordance with the
provisions of Section 2.12 hereof;
4) To the depository agent in connection with
tender or other similar offers for securities
of the Portfolio;
5) To the issuer thereof or its agent when such
securities are called, redeemed, retired or
otherwise become payable; provided that, in
any such case, the cash or other consideration
is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for
transfer into the name of the Portfolio or
into the name of any nominee or nominees of
the Custodian or into the name or nominee name
of any agent appointed pursuant to Section
2.11 or into the name or nominee name of any
sub-custodian appointed pursuant to Article 1;
or for exchange for a different number of
bonds, certificates or other evidence
representing the same aggregate face amount or
number of units; provided that, in any such
case, the new securities are to be delivered
to the Custodian;
4
<PAGE>
7) Upon the sale of such securities for the
account of the Portfolio, to the broker or its
clearing agent, against a receipt, for
examination in accordance with "street
delivery" custom; provided that in any such
case, the Custodian shall have no
responsibility or liability for any loss
arising from the delivery of such securities
prior to receiving payment for such securities
except as may arise from the Custodian's own
negligence or willful misconduct;
8) For exchange or conversion pursuant to any
plan of merger, consolidation,
recapitalization, reorganization or
readjustment of the securities of the issuer
of such securities, or pursuant to provisions
for conversion contained in such securities,
or pursuant to any deposit agreement; provided
that, in any such case, the new securities and
cash, if any, are to be delivered to the
Custodian;
9) In the case of warrants, rights or similar
securities, the surrender thereof in the
exercise of such warrants, rights or similar
securities or the surrender of interim
5
<PAGE>
receipts or temporary securities for
definitive securities; provided that, in any
such case, the new securities and cash, if
any, are to be delivered to the Custodian;
10) For delivery in connection with any loans of
securities made by the Portfolio, but only
against receipt of adequate collateral as
agreed upon from time to time by the Custodian
and the Fund on behalf of the Portfolio, which
may be in the form of cash or obligations
issued by the United States government, its
agencies or instrumental ities, except that in
connection with any loans for which collateral
is to be credited to the Custodian's account
in the book-entry system authorized by the
U.S. Department of the Treasury, the Custodian
will not be held liable or responsible for the
delivery of securities owned by the Portfolio
prior to the receipt of such collateral;
11) For delivery as security in connection with
any borrowings by the Fund on behalf of the
Portfolio requiring a pledge of assets by the
Fund on behalf of the Portfolio, but only
against receipt of amounts borrowed;
6
<PAGE>
12) For delivery in accordance with the provisions
of any agreement among the Fund on behalf of
the Portfolio, the Custodian and a broker-
dealer registered under the Securities
Exchange Act of 1934 (the "Exchange Act") and
a member of The National Association of
Securities Dealers, Inc. ("NASD"), relating to
compliance with the rules of The Options
Clearing Corporation and of any registered
national securities exchange, or of any
similar organization or organizations,
regarding escrow or other arrangements in
connection with transactions by the Portfolio
of the Fund;
13) For delivery in accordance with the provisions
of any agreement among the Fund on behalf of
the Portfolio, the Custodian, and a Futures
Commission Merchant registered under the
Commodity Exchange Act, relating to compliance
with the rules of the Commodity Futures
Trading Commission and/or any Contract Market,
or any similar organization or organizations,
regarding account deposits in connection with
transactions by the Portfolio of the Fund;
7
<PAGE>
14) Upon receipt of instructions from the transfer
agent ("Transfer Agent") for the Fund, for
delivery to such Transfer Agent or to the
holders of shares in connection with
distributions in kind, as may be described
from time to time in the currently effective
prospectus and statement of additional
information of the Fund, related to the
Portfolio ("Prospectus"), in satisfaction of
requests by holders of Shares for repurchase
or redemption; and
15) For any other proper corporate purpose, but
only upon receipt of, in addition to Proper
Instructions from the Fund on behalf of the
applicable Portfolio, a certified copy of a
resolution of the Board of Directors or of the
Executive Committee signed by an officer of
the Fund and certified by the Secretary or an
Assistant Secretary, specifying the securities
of the Portfolio to be delivered, setting
forth the purpose for which such delivery is
to be made, declaring such purpose to be a
proper corporate purpose, and naming the
person or persons to whom delivery of such
securities shall be made.
8
<PAGE>
2.3 Registration of Securities. Securities held by the
Custodian (other than bearer securities) shall be
registered in the name of the Portfolio or in the name
of any nominee of the Fund on behalf of the Portfolio or
of any nominee of the Custodian which nominee shall be
assigned exclusively to the Portfolio, unless the Fund
has authorized in writing the appointment of a nominee
to be used in common with other registered investment
companies having the same investment adviser as the
Portfolio, or in the name or nominee name of any agent
appointed pursuant to Section 2.11 or in the name or
nominee name of any sub-custodian appointed pursuant to
Article 1. All securities accepted by the Custodian on
behalf of the Portfolio under the terms of this Contract
shall be in "street name" or other good delivery form.
If, however, the Fund directs the Custodian to maintain
securities in "street name", the Custodian shall utilize
its best efforts only to timely collect income due the
Fund on such securities and to notify the Fund on a best
efforts basis only of relevant corporate actions
including, without limitation, pendency of calls,
maturities, tender or exchange offers.
2.4 Bank Accounts. The Custodian shall open and maintain a
separate bank account or accounts in the name of each
Portfolio of the Fund, subject only to draft or order by
9
<PAGE>
the Custodian acting pursuant to the terms of this
Contract, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by
it from or for the account of the Portfolio, other than
cash maintained by the Portfolio in a bank account
established and used in accordance with Rule 17f-3 under
the Investment Company Act of 1940. Funds held by the
Custodian for a Portfolio may be deposited by it to its
credit as Custodian in the Banking Department of the
Custodian or in such other banks or trust companies as
it may in its discretion deem necessary or desirable;
provided, however, that every such bank or trust company
shall be qualified to act as a custodian under the
Investment Company Act of 1940 and that each such bank
or trust company and the funds to be deposited with each
such bank or trust company shall on behalf of each
applicable Portfolio be approved by vote of a majority
of the Board of Directors of the Fund. Such funds shall
be deposited by the Custodian in its capacity as
Custodian and shall be withdrawable by the Custodian
only in that capacity.
2.5 Payments for Shares. The Custodian shall receive from
the distributor for the Shares or from the Transfer
Agent of the Fund and deposit into the account of the
appropriate Portfolio such payments as are received for
10
<PAGE>
Shares of that Portfolio issued or sold from time to
time by the Fund. The Custodian will provide timely
notification to the Fund on behalf of each such
Portfolio and the Transfer Agent of any receipt by it of
payments for Shares of such Portfolio.
2.6 Availability of Federal Funds. Upon mutual agreement
between the Fund on behalf of each applicable Portfolio
and the Custodian, the Custodian shall, upon the receipt
of Proper Instructions from the Fund on behalf of a
Portfolio, make federal funds available to such
Portfolio as of specified times agreed upon from time to
time by the Fund and the Custodian in the amount of
checks received in payment for Shares of such Portfolio
which are deposited into the Portfolio's account.
2.7 Collection of Income. Subject to the provisions of
Section 2.3, the Custodian shall collect on a timely
basis all income and other payments with respect to
registered securities held hereunder to which each
Portfolio shall be entitled either by law or pursuant to
custom in the securities business, and shall collect on
a timely basis all income and other payments with
respect to bearer securities if, on the date of payment
by the issuer, such securities are held by the Custodian
or its agent thereof and shall credit such income, as
collected, to such Portfolio's custodian account.
11
<PAGE>
Without limiting the generality of the foregoing, the
Custodian shall detach and present for payment all
coupons and other income items requiring presentation as
and when they become due and shall collect interest when
due on securities held hereunder. Income due each
Portfolio on securities loaned pursuant to the
provisions of Section 2.2 (10) shall be the
responsibility of the Fund. The Custodian will have no
duty or responsibility in connection therewith, other
than to provide the Fund with such information or data
as may be necessary to assist the Fund in arranging for
the timely delivery to the Custodian of the income to
which the Portfolio is properly entitled.
2.8 Payment of Fund Monies. Upon receipt of Proper
Instructions from the Fund on behalf of the applicable
Portfolio, which may be continuing instructions when
deemed appropriate by the parties, the Custodian shall
pay out monies of a Portfolio in the following cases
only:
1) Upon the purchase of securities, options,
futures contracts or options on futures
contracts for the account of the Portfolio but
only (a) against the delivery of such
securities or evidence of title to such
options, futures contracts or options on
12
<PAGE>
futures contracts to the Custodian (or any
bank, banking firm or trust company doing
business in the United States or abroad which
is qualified under the Investment Company Act
of 1940, as amended, to act as a custodian and
has been designated by the Custodian as its
agent for this purpose) registered in the name
of the Portfolio or in the name of a nominee
of the Custodian referred to in Section 2.3
hereof or in proper form for transfer; (b) in
the case of a purchase effected through a
Securities System, in accordance with the
conditions set forth in Section 2.12 hereof;
(c) in the case of a purchase involving the
Direct Paper System, in accordance with the
conditions set forth in Section 2.12A; (d) in
the case of repurchase agreements entered into
between the Fund on behalf of the Portfolio
and the Custodian, or another bank, or a
broker-dealer which is a member of NASD, (i)
against delivery of the securities either in
certificate form or through an entry crediting
the Custodian's account at the Federal Reserve
Bank with such securities or (ii) against
delivery of the receipt evidencing purchase by
13
<PAGE>
the Portfolio of securities owned by the
Custodian along with written evidence of the
agreement by the Custodian to repurchase such
securities from the Portfolio or (e) for
transfer to a time deposit account of the Fund
in any bank, whether domestic or foreign; such
transfer may be effected prior to receipt of a
confirmation from a broker and/or the
applicable bank pursuant to Proper
Instructions from the Fund as defined in
Section 2.17;
2) In connection with conversion, exchange or
surrender of securities owned by the Portfolio
as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares
issued by the Portfolio as set forth in
Section 2.10 hereof;
4) For the payment of any expense or liability
incurred by the Portfolio, including but not
limited to the following payments for the
account of the Portfolio: interest, taxes,
management, accounting, transfer agent and
legal fees, and operating expenses of the Fund
whether or not such expenses are to be in
14
<PAGE>
whole or part capitalized or treated as
deferred expenses;
5) For the payment of any dividends on Shares of
the Portfolio declared pursuant to the
governing documents of the Fund;
6) For payment of the amount of dividends
received in respect of securities sold short;
7) For any other proper purpose, but only upon
receipt of, in addition to Proper Instructions
from the Fund on behalf of the Portfolio, a
certified copy of a resolution of the Board of
Directors or of the Executive Committee of the
Fund signed by an officer of the Fund and
certified by its Secretary or an Assistant
Secretary, specifying the amount of such
payment, setting forth the purpose for which
such payment is to be made, declaring such
purpose to be a proper purpose, and naming the
person or persons to whom such payment is to
be made.
2.9 Liability for Payment in Advance of Receipt of
Securities Purchased. Except as specifically stated
otherwise in this Contract, in any and every case where
payment for purchase of securities for the account of a
Portfolio is made by the Custodian in advance of receipt
15
<PAGE>
of the securities purchased in the absence of specific
written instructions from the Fund on behalf of such
Portfolio to so pay in advance, the Custodian shall be
absolutely liable to the Fund for such securities to the
same extent as if the securities had been received by
the Custodian.
2.10 Payments for Repurchases or Redemptions of Shares of the
Fund. From such funds as may be available for the
purpose but subject to the limitations of the Articles
of Incorporation and any applicable votes of the Board
of Directors of the Fund pursuant thereto, the Custodian
shall, upon receipt of instructions from the Transfer
Agent, make funds available for payment to holders of
Shares who have delivered to the Transfer Agent a
request for redemption or repurchase of their Shares.
In connection with the redemption or repurchase of
Shares of a Portfolio, the Custodian is authorized upon
receipt of instructions from the Transfer Agent to wire
funds to or through a commercial bank designated by the
redeeming shareholders. In connection with the
redemption or repurchase of Shares of the Fund, the
Custodian shall honor checks drawn on the Custodian by a
holder of Shares, which checks have been furnished by
the Fund to the holder of Shares, when presented to the
Custodian in accordance with such procedures and
16
<PAGE>
controls as are mutually agreed upon from time to time
between the Fund and the Custodian.
2.11 Appointment of Agents. The Custodian may at any time or
times in its discretion appoint (and may at any time
remove) any other bank or trust company which is itself
qualified under the Investment Company Act of 1940, as
amended, to act as a custodian, as its agent to carry
out such of the provisions of this Article 2 as the
Custodian may from time to time direct; provided,
however, that the appointment of any agent shall not
relieve the Custodian of its responsibilities or
liabilities hereunder.
2.12 Deposit of Fund Assets in Securities System. The
Custodian may deposit and/or maintain securities owned
by a Portfolio in a clearing agency registered with the
Securities and Exchange Commission under Section 17A of
the Securities Exchange Act of 1934, which acts as a
securities depository, or in the book-entry system
authorized by the U.S. Department of the Treasury and
certain federal agencies, collectively referred to
herein as "Securities System" in accordance with
applicable Federal Reserve Board and Securities and
Exchange Commission rules and regulations, if any, and
17
<PAGE>
subject to the following provisions:
1) The Custodian may keep securities of the
Portfolio in a Securities System provided that
such securities are represented in an account
("Account") of the Custodian in the Securities
System which shall not include any assets of
the Custodian other than assets held as a
fiduciary, custodian or otherwise for
customers;
2) The records of the Custodian with respect to
securities of the Portfolio which are
maintained in a Securities System shall
identify by book-entry those securities
belonging to the Portfolio;
3) The Custodian shall pay for securities
purchased for the account of the Portfolio
upon (i) receipt of advice from the Securities
System that such securities have been
transferred to the Account, and (ii) the
making of an entry on the records of the
Custodian to reflect such payment and transfer
for the account of the Portfolio. The
Custodian shall transfer securities sold for
the account of the Portfolio upon (i) receipt
of advice from the Securities System that
18
<PAGE>
payment of such securities has been
transferred to the Account, and (ii) the
making of an entry on the records of the
Custodian to reflect such transfer and payment
for the account of the Portfolio. Copies of
all advices from the Securities System of
transfers of securities for the account of the
Portfolio shall identify the Portfolio, be
maintained for the Portfolio by the Custodian
and be provided to the Fund at its request.
Upon request, the Custodian shall furnish the
Fund on behalf of the Portfolio confirmation
of each transfer to or from the account of the
Portfolio in the form of a written advice or
notice and shall furnish to the Fund on behalf
of the Portfolio copies of daily transaction
sheets reflecting each day's transactions in
the Securities System for the account of the
Portfolio.
4) The Custodian shall provide the Fund for the
Portfolio with any report obtained by the
Custodian on the Securities System's
accounting system, internal accounting control
and procedures for safeguarding securities
deposited in the Securities System;
19
<PAGE>
5) The Custodian shall have received from the
Fund on behalf of the Portfolio the initial or
annual certificate, as the case may be,
required by Article 9 hereof;
6) Anything to the contrary in this Contract
notwithstanding, the Custodian shall be liable
to the Fund for the benefit of the Portfolio
for any loss or damage to the Portfolio
resulting from use of the Securities System by
reason of any negligence, misfeasance or
misconduct of the Custodian or any of its
agents or of any of its or their employees or
from failure of the Custodian or any such
agent to enforce effectively such rights as it
may have against the Securities System; at the
election of the Fund, it shall be entitled to
be subrogated to the rights of the Custodian
with respect to any claim against the
Securities System or any other person which
the Custodian may have as a consequence of any
such loss or damage if and to the extent that
the Portfolio has not been made whole for any
such loss or damage.
20
<PAGE>
2.12A Fund Assets Held in the Custodian's Direct Paper System
The Custodian may deposit and/or maintain securities
owned by a Portfolio in the Direct Paper System of the
Custodian subject to the following provisions:
1) No transaction relating to securities in the
Direct Paper System will be effected in the
absence of Proper Instructions from the Fund
on behalf of the Portfolio;
2) The Custodian may keep securities of the
Portfolio in the Direct Paper System only if
such securities are represented in an account
("Account") of the Custodian in the Direct
Paper System which shall not include any
assets of the Custodian other than assets held
as a fiduciary, custodian or otherwise for
customers;
3) The records of the Custodian with respect to
securities of the Portfolio which are
maintained in the Direct Paper System shall
identify by book-entry those securities
belonging to the Portfolio;
4) The Custodian shall pay for securities
purchased for the account of the Portfolio
upon the making of an entry on the records of
the Custodian to reflect such payment and
21
<PAGE>
transfer of securities to the account of the
Portfolio. The Custodian shall transfer
securities sold for the account of the
Portfolio upon the making of an entry on the
records of the Custodian to reflect such
transfer and receipt of payment for the
account of the Portfolio;
5) The Custodian shall furnish the Fund on behalf
of the Portfolio confirmation of each transfer
to or from the account of the Portfolio, in
the form of a written advice or notice, of
Direct Paper on the next business day
following such transfer and shall furnish to
the Fund on behalf of the Portfolio copies of
daily transaction sheets reflecting each day's
transaction in the Securities System for the
account of the Portfolio;
6)The Custodian shall provide the Fund on
behalf of the Portfolio with any report on its
system of internal accounting control as the
Fund may reasonably request from time to time.
2.13 Segregated Account. The Custodian shall upon receipt of
Proper Instructions from the Fund on behalf of each
applicable Portfolio establish and maintain a segregated
account or accounts for and on behalf of each such
22
<PAGE>
Portfolio, into which account or accounts may be
transferred cash and/or securities, including securities
maintained in an account by the Custodian pursuant to
Section 2.12 hereof, (i) in accordance with the
provisions of any agreement among the Fund on behalf of
the Portfolio, the Custodian and a broker-dealer
registered under the Exchange Act and a member of the
NASD (or any futures commission merchant registered
under the Commodity Exchange Act), relating to
compliance with the rules of The Options Clearing
Corporation and of any registered national securities
exchange (or the Commodity Futures Trading Commission or
any registered contract market), or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions by the
Portfolio, (ii) for purposes of segregating cash or
government securities in connection with options
purchased, sold or written by the Portfolio or commodity
futures contracts or options thereon purchased or sold
by the Portfolio, (iii) for the purposes of compliance
by the Portfolio with the procedures required by
Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and
Exchange Commission relating to the maintenance of
segregated accounts by registered investment companies
23
<PAGE>
and (iv) for other proper corporate purposes, but only,
in the case of clause (iv), upon receipt of, in addition
to Proper Instructions from the Fund on behalf of the
applicable Portfolio, a certified copy of a resolution
of the Board of Directors or of the Executive Committee
signed by an officer of the Fund and certified by the
Secretary or an Assistant Secretary, setting forth the
purpose or purposes of such segregated account and
declaring such purposes to be proper corporate purposes.
2.14 Ownership Certificates for Tax Purposes. The Custodian
shall execute ownership and other certificates and
affidavits for all federal and state tax purposes in
connection with receipt of income or other payments with
respect to securities of each Portfolio held by it and
in connection with transfers of securities.
2.15 Proxies. The Custodian shall, with respect to the
securities held hereunder, cause to be promptly executed
by the registered holder of such securities, if the
securities are registered otherwise than in the name of
the Portfolio or a nominee of the Portfolio, all
proxies, without indication of the manner in which such
proxies are to be voted, and shall promptly deliver to
the Portfolio such proxies, all proxy soliciting
materials and all notices relating to such securities.
2.16 Communications Relating to Portfolio Securities
24
<PAGE>
Subject to the provisions of Section 2.3, the Custodian
shall transmit promptly to the Fund for each Portfolio
all written information (including, without limitation,
pendency of calls and maturities of securities and
expirations of rights in connection therewith and
notices of exercise of call and put options written by
the Fund on behalf of the Portfolio and the maturity of
futures contracts purchased or sold by the Portfolio)
received by the Custodian from issuers of the securities
being held for the Portfolio. With respect to tender or
exchange offers, the Custodian shall transmit promptly
to the Portfolio all written information received by the
Custodian from issuers of the securities whose tender or
exchange is sought and from the party (or his agents)
making the tender or exchange offer. If the Portfolio
desires to take action with respect to any tender offer,
exchange offer or any other similar transaction, the
Portfolio shall notify the Custodian at least three
business days prior to the date on which the Custodian
is to take such action.
2.17 Proper Instructions. Proper Instructions as used
throughout this Article 2 means a writing signed or
initialled by one or more person or persons as the Board
of Directors shall have from time to time authorized.
Each such writing shall set forth the specific
25
<PAGE>
transaction or type of transaction involved, including a
specific statement of the purpose for which such action
is requested. Oral instructions will be considered
Proper Instructions if the Custodian reasonably believes
them to have been given by a person authorized to give
such instructions with respect to the transaction
involved. The Fund shall cause all oral instructions to
be confirmed in writing. Upon receipt of a certificate
of the Secretary or an Assistant Secretary as to the
authorization by the Board of Directors of the Fund
accompanied by a detailed description of procedures
approved by the Board of Directors, Proper Instructions
may include communications effected directly between
electro-mechanical or electronic devices provided that
the Board of Directors and the Custodian are satisfied
that such procedures afford adequate safeguards for the
Portfolios' assets. For purposes of this Section,
Proper Instructions shall include instructions received
by the Custodian pursuant to any three-party agreement
which requires a segregated asset account in accordance
with Section 2.13.
2.18 Actions Permitted Without Express Authority. The
Custodian may in its discretion, without express
authority from the Fund on behalf of each applicable
26
<PAGE>
Portfolio:
1) make payments to itself or others for minor
expenses of handling securities or other
similar items relating to its duties under
this Contract, provided that all such payments
shall be accounted for to the Fund on behalf
of the Portfolio;
2) surrender securities in temporary form for
securities in definitive form;
3) endorse for collection, in the name of the
Portfolio, checks, drafts and other negotiable
instruments; and
4) in general, attend to all non-discretionary
details in connection with the sale, exchange,
substitution, purchase, transfer and other
dealings with the securities and property of
the Portfolio except as otherwise directed by
the Board of Directors of the Fund.
2.19 Evidence of Authority. The Custodian shall be protected
in acting upon any instructions, notice, request,
consent, certificate or other instrument or paper
believed by it to be genuine and to have been properly
executed by or on behalf of the Fund. The Custodian may
receive and accept a certified copy of a vote of the
Board of Directors of the Fund as conclusive evidence
27
<PAGE>
(a) of the authority of any person to act in accordance
with such vote or (b) of any determination or of any
action by the Board of Directors pursuant to the
Articles of Incorporation as described in such vote, and
such vote may be considered as in full force and effect
until receipt by the Custodian of written notice to the
contrary.
3. Duties of Custodian With Respect to the Books of Account
and Calculation of Net Asset Value and Net Income
The Custodian shall cooperate with and supply necessary
information to the entity or entities appointed by the Board of
Directors of the Fund to keep the books of account of each
Portfolio and/or compute the net asset value per share of the
outstanding shares of each Portfolio or, if directed in writing
to do so by the Fund on behalf of the Portfolio, shall itself
keep such books of account and/or compute such net asset value
per share. If so directed, the Custodian shall also calculate
daily the net income of the Portfolio as described in the Fund's
currently effective prospectus related to such Portfolio and
shall advise the Fund and the Transfer Agent daily of the total
amounts of such net income and, if instructed in writing by an
officer of the Fund to do so, shall advise the Transfer Agent
periodically of the division of such net income among its various
components. The calculations of the net asset value per share
and the daily income of each Portfolio shall be made at the time
28
<PAGE>
or times described from time to time in the Fund's currently
effective prospectus related to such Portfolio.
4. Records
The Custodian shall with respect to each Portfolio
create and maintain all records relating to its activities and
obligations under this Contract in such manner as will meet the
obligations of the Fund under the Investment Company Act of 1940,
with particular attention to Section 31 thereof and Rules 31a-1
and 31a-2 thereunder. All such records shall be the property of
the Fund and shall at all times during the regular business hours
of the Custodian be open for inspection by duly authorized
officers, employees or agents of the Fund and employees and
agents of the Securities and Exchange Commission. The Custodian
shall, at the Fund's request, supply the Fund with a tabulation
of securities owned by each Portfolio and held by the Custodian
and shall, when requested to do so by the Fund and for such
compensation as shall be agreed upon between the Fund and the
Custodian, include certificate numbers in such tabulations.
5. Opinion of Fund's Independent Accountants
The Custodian shall take all reasonable action, as the
Fund on behalf of each applicable Portfolio may from time to time
request, to obtain from year to year favorable opinions from the
Fund's independent accountants with respect to its activities
hereunder in connection with the preparation of the Fund's Form
N-1A, and Form N-SAR or other annual reports to the Securities
29
<PAGE>
and Exchange Commission and with respect to any other
requirements of such Commission.
6. Reports to Fund by Independent Public Accountants
The Custodian shall provide the Fund, on behalf of each
of the Portfolios at such times as the Fund may reasonably
require, with reports by independent public accountants on the
accounting system, internal accounting control and procedures for
safeguarding securities, futures contracts and options on futures
contracts, including securities deposited and/or maintained in a
Securities System, relating to the services provided by the
Custodian under this Contract; such reports, shall be of
sufficient scope and in sufficient detail, as may reasonably be
required by the Fund to provide reasonable assurance that any
material inadequacies would be disclosed by such examination,
and, if there are no such inadequacies, the reports shall so
state.
7. Compensation of Custodian
The Custodian shall be entitled to reasonable
compensation for its services and expenses as Custodian, as
agreed upon from time to time between the Fund on behalf of each
applicable Portfolio and the Custodian.
8. Responsibility of Custodian
So long as and to the extent that it is in the exercise
of reasonable care, the Custodian shall not be responsible for
the title, validity or genuineness of any property or evidence of
30
<PAGE>
title thereto received by it or delivered by it pursuant to this
Contract and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party
or parties, including any futures commission merchant acting
pursuant to the terms of a three-party futures or options
agreement. The Custodian shall be held to the exercise of
reasonable care in carrying out the provisions of this Contract,
but shall be kept indemnified by and shall be without liability
to the Fund for any action taken or omitted by it in good faith
without negligence. It shall be entitled to rely on and may act
upon advice of counsel (who may be counsel for the Fund) on all
matters, and shall be without liability for any action reasonably
taken or omitted pursuant to such advice. Notwithstanding the
foregoing, the responsibility of the Custodian with respect to
redemptions effected by check shall be in accordance with a
separate Agreement entered into between the Custodian and the
Fund.
If the Fund on behalf of a Portfolio requires the
Custodian to take any action with respect to securities, which
action involves the payment of money or which action may, in the
opinion of the Custodian, result in the Custodian or its nominee
assigned to the Fund or the Portfolio being liable for the
payment of money or incurring liability of some other form, the
Fund on behalf of the Portfolio, as a prerequisite to requiring
31
<PAGE>
the Custodian to take such action, shall provide indemnity to the
Custodian in an amount and form satisfactory to it.
If the Fund requires the Custodian to advance cash or
securities for any purpose for the benefit of a Portfolio or in
the event that the Custodian or its nominee shall incur or be
assessed any taxes, charges, expenses, assessments, claims or
liabilities in connection with the performance of this Contract,
except such as may arise from its or its nominee's own negligent
action, negligent failure to act or willful misconduct, any
property at any time held for the account of the applicable
Portfolio shall be security therefor and should the Fund fail to
repay the Custodian promptly, the Custodian shall be entitled to
utilize available cash and to dispose of such Portfolio's assets
to the extent necessary to obtain reimbursement.
9. Effective Period, Termination and Amendment
This Contract shall become effective as of its
execution, shall continue in full force and effect until
terminated as hereinafter provided, may be amended at any time by
mutual agreement of the parties hereto and may be terminated by
either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take
effect not sooner than thirty (30) days after the date of such
delivery or mailing; provided, however that the Custodian shall
not with respect to a Portfolio act under Section 2.12 hereof in
the absence of receipt of an initial certificate of the Secretary
32
<PAGE>
or an Assistant Secretary that the Board of Directors of the Fund
has approved the initial use of a particular Securities System by
such Portfolio and the receipt of an annual certificate of the
Secretary or an Assistant Secretary that the Board of Directors
has reviewed the use by such Portfolio of such Securities System,
as required in each case by Rule 17f-4 under the Investment
Company Act of 1940, as amended and that the Custodian shall not
with respect to a Portfolio act under Section 2.12A hereof in the
absence of receipt of an initial certificate of the Secretary or
an Assistant Secretary that the Board of Directors has approved
the initial use of the Direct Paper System by such Portfolio and
the receipt of an annual certificate of the Secretary or an
Assistant Secretary that the Board of Directors has reviewed the
use by such Portfolio of the Direct Paper System; provided
further, however, that the Fund shall not amend or terminate this
Contract in contravention of any applicable federal or state
regulations, or any provision of the Articles of Incorporation,
and further provided, that the Fund on behalf of one or more of
the Portfolios may at any time by action of its Board of
Directors (i) substitute another bank or trust company for the
Custodian by giving notice as described above to the Custodian,
or (ii) immediately terminate this Contract in the event of the
appointment of a conservator or receiver for the Custodian by the
Comptroller of the Currency or upon the happening of a like event
33
<PAGE>
at the direction of an appropriate regulatory agency or court of
competent jurisdiction.
Upon termination of the Contract, the Fund on behalf of
each applicable Portfolio shall pay to the Custodian such
compensation as may be due as of the date of such termination and
shall likewise reimburse the Custodian for its costs, expenses
and disbursements.
10. Successor Custodian
If a successor custodian for the Fund, of one or more of
the Portfolios shall be appointed by the Board of Directors of
the Fund, the Custodian shall, upon termination, deliver to such
successor custodian at the office of the Custodian, duly endorsed
and in the form for transfer, all securities of each applicable
Portfolio then held by it hereunder and shall transfer to an
account of the successor custodian all of the securities of each
such Portfolio held in a Securities System.
If no such successor custodian shall be appointed, the
Custodian shall, in like manner, upon receipt of a certified copy
of a vote of the Board of Directors of the Fund, deliver at the
office of the Custodian and transfer such securities, funds and
other properties in accordance with such vote.
In the event that no written order designating a
successor custodian or certified copy of a vote of the Board of
Directors shall have been delivered to the Custodian on or before
the date when such termination shall become effective, then the
34
<PAGE>
Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company
Act of 1940, doing business in Boston, Massachusetts, of its own
selection, having an aggregate capital, surplus, and undivided
profits, as shown by its last published report, of not less than
$25,000,000, all securities, funds and other properties held by
the Custodian on behalf of each applicable Portfolio and all
instruments held by the Custodian relative thereto and all other
property held by it under this Contract on behalf of each
applicable Portfolio and to transfer to an account of such
successor custodian all of the securities of each such Portfolio
held in any Securities System. Thereafter, such bank or trust
company shall be the successor of the Custodian under this
Contract.
In the event that securities, funds and other properties
remain in the possession of the Custodian after the date of
termination hereof owing to failure of the Fund to procure the
certified copy of the vote referred to or of the Board of
Directors to appoint a successor custodian, the Custodian shall
be entitled to fair compensation for its services during such
period as the Custodian retains possession of such securities,
funds and other properties and the provisions of this Contract
relating to the duties and obligations of the Custodian shall
remain in full force and effect.
35
<PAGE>
11. Interpretive and Additional Provisions
In connection with the operation of this Contract, the
Custodian and the Fund on behalf of each of the Portfolios, may
from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint
opinion be consistent with the general tenor of this Contract.
Any such interpretive or additional provisions shall be in
awriting signed by both parties and shall be annexed hereto,
provided that no such interpretive or additional provisions shall
contravene any applicable federal or state regulations or any
provision of the Articles of Incorporation of the Fund. No
interpretive or additional provisions made as provided in the
preceding sentence shall be deemed to be an amendment of this
Contract.
12. Additional Funds
In the event that the Fund establishes one or more
series of Shares in addition to the Prime Portfolio, the
Government Portfolio, and the Tax Free Portfolio with respect to
which it desires to have the Custodian render services as
custodian under the terms hereof, it shall so notify the
Custodian in writing, and if the Custodian agrees in writing to
provide such services, such series of Shares shall become a
Portfolio hereunder.
36
<PAGE>
13. Massachusetts Law to Apply
This Contract shall be construed and the provisions
thereof interpreted under and in accordance with laws of The
Commonwealth of Massachusetts.
14. Prior Contracts
This Contract supersedes and terminates, as of the date
hereof, all prior contracts between the Fund on behalf of each of
the Portfolios and the Custodian relating to the custody of the
Fund's assets.
IN WITNESS WHEREOF, each of the parties has caused this
instrument to be executed in its name and behalf by its duly
authorized representative and its seal to be hereunder affixed as
of the 17th day of April, 1990.
ATTEST ACM INSTITUTIONAL RESERVES, INC.
/s/ Edmund P. Bergan, Jr. By /s/ James P. Syrett
__________________________ __________________________
Edmund P. Bergan, Jr. James P. Syrett
ATTEST STATE STREET BANK AND TRUST COMPANY
/s/ Eric Greene By /s/ Al O'Neal
__________________________ __________________________
Eric Greene Al O'Neal
Assistant Secretary Vice President
37
00250072.AL3
<PAGE>
ALLIANCE FUND SERVICES, INC.
TRANSFER AGENCY AGREEMENT
AGREEMENT, dated as of September 13, 1988, between
ACM Institutional Reserves, Inc., a Massachusetts business
trust and an open-end investment company registered with the
Securities and Exchange Commission (the "SEC") under the
Investment Company Act of 1940 (the "Investment Company
Act"), having its principal place of business at 1345 Avenue
of Americas, New York, New York 10105 (the "Fund"), and
ALLIANCE FUND SERVICES, INC., a Delaware corporation
registered with the SEC as a transfer agent under the
Securities Exchange Act of 1934, having its principal place
of business at 500 Plaza Drive, Secaucus, New Jersey 07094
("Fund Services"), provides as follows:
WHEREAS, Fund Services has agreed to act as
transfer agent to the Fund for the purpose of recording the
transfer, issuance and redemption of shares of each series
of the common stock or shares of beneficial interest, as
applicable, of the Fund ("Shares" or "Shares of a Series"),
transferring the Shares, disbursing dividends and other
distributions to shareholders of the Fund, and performing
such other services as may be agreed to pursuant hereto;
NOW THEREFORE, for and in consideration of the
mutual covenants and agreements contained herein, the
parties do hereby agree as follows:
<PAGE>
SECTION 1. The Fund hereby appoints Fund Services
as its transfer agent, dividend disbursing agent and
shareholder servicing agent for the Shares, and Fund
Services agrees to act in such capacities upon the terms set
forth in this Agreement. Capitalized terms used in this
Agreement and not otherwise defined shall have the meanings
assigned to them in SECTION 30.
SECTION 2.
(a) The Fund shall provide Fund Services with
copies of the following documents:
(1) Specimens of all forms of certificates
for Shares;
(2) Specimens of all account application
forms and other documents relating to Shareholders'
accounts;
(3) Copies of each Prospectus;
(4) Specimens of all documents relating to
withdrawal plans instituted by the Fund, as described in
SECTION 16; and
(5) Specimens of all amendments to any of the
foregoing documents.
(b) The Fund shall furnish to Fund Services a
supply of blank Share Certificates for the Shares and, from
time to time, will renew such supply upon Fund Services'
request. Blank Share Certificates shall be signed manually
2
<PAGE>
or by facsimile signatures of officers of the Fund
authorized to sign by law or pursuant to the by-laws of the
Fund and, if required by Fund Services, shall bear the
Fund's seal or a facsimile thereof.
SECTION 3. Fund Services shall make original
issues of Shares in accordance with SECTIONS 13 and 14 and
the Prospectus upon receipt of (i) Written Instructions
requesting the issuance, (ii) a certified copy of a
resolution of the Fund's Board of Directors or Trustees
authorizing the issuance, (iii) necessary funds for the
payment of any original issue tax applicable to such Shares,
and (iv) an opinion of the Fund's counsel as to the legality
and validity of the issuance, which opinion may provide that
it is contingent upon the filing by the Fund of an
appropriate notice with the SEC, as required by Rule 24f-2
of the Investment Company Act, as amended from time to time.
SECTION 4. Transfers of Shares shall be registered
and, subject to the provisions of SECTION 10 in the case of
Shares evidenced by Share Certificates, new Share
Certificates shall be issued by Fund Services upon surrender
of outstanding Share Certificates in the form deemed by Fund
Services to be properly endorsed for transfer, which form
shall include (i) all necessary endorsers' signatures
guaranteed by a member firm of a national securities
exchange or a domestic commercial bank or through other
3
<PAGE>
procedures mutually agreed to between the Fund and Fund
Services, (ii) such assurances as Fund Services may deem
necessary to evidence the genuineness and effectiveness of
each endorsement and (iii) satisfactory evidence of
compliance with all applicable laws relating to the payment
or collection of taxes.
SECTION 5. Fund Services shall forward Share
Certificates in "non-negotiable" form by first-class or
registered mail, or by whatever means Fund Services deems
equally reliable and expeditious. While in transit to the
addressee, all deliveries of Share Certificates shall be
insured by Fund Services as it deems appropriate. Fund
Services shall not mail Share Certificates in "negotiable"
form, unless requested in writing by the Fund and fully
indemnified by the Fund to Fund Services' satisfaction.
SECTION 6. In registering transfers of Shares,
Fund Services may rely upon the Uniform Commercial Code as
in effect from time to time in the State in which the Fund
is incorporated or organized or, if appropriate, in the
State of New Jersey; provided, that Fund Services may rely
in addition or alternatively on any other statutes in effect
in the State of New Jersey or in the state under the laws of
which the Fund is incorporated or organized that, in the
opinion of Fund Services' counsel, protect Fund Services and
the Fund from liability arising from (i) not requiring
4
<PAGE>
complete documentation in connection with an issuance or
transfer, (ii) registering a transfer without an adverse
claim inquiry, (iii) delaying registration for purposes of
an adverse claim inquiry or (iv) refusing registration in
connection with an adverse claim.
SECTION 7. Fund Services may issue new Share
Certificates in place of those lost, destroyed or stolen,
upon receiving indemnity satisfactory to Fund Services; and
may issue new Share Certificates in exchange for, and upon
surrender of, mutilated Share Certificates as Fund Services
deems appropriate.
SECTION 8. Unless otherwise directed by the Fund,
Fund Services may issue or register Share Certificates
reflecting the signature, or facsimile thereof, of an
officer who has died, resigned or been removed by the Fund.
The Fund shall file promptly with Fund Services' approval,
adoption or ratification of such action as may be required
by law or by Fund Services.
SECTION 9. Fund Services shall maintain customary
stock registry records for Shares of each Series noting the
issuance, transfer or redemption of Shares and the issuance
and transfer of Share Certificates. Fund Services may also
maintain for Shares of each Series an account entitled
"Unissued Certificate Account," in which Fund Services will
record the Shares, and fractions thereof, issued and
5
<PAGE>
outstanding from time to time for which issuance of Share
Certificates has not been requested. Fund Services is
authorized to keep records for Shares of each Series
containing the names and addresses of record of
Shareholders, and the number of Shares, and fractions
thereof, from time to time owned by them for which no Share
Certificates are outstanding. Each Shareholder will be
assigned a single account number for Shares of each Series,
even though Shares for which Certificates have been issued
will be accounted for separately.
SECTION 10. Fund Services shall issue Share
Certificates for Shares only upon receipt of a written
request from a Shareholder and as authorized by the Fund.
If Shares are purchased or transferred without a request for
the issuance of a Share Certificate, Fund Services shall
merely note on its stock registry records the issuance or
transfer of the Shares and fractions thereof and credit or
debit, as appropriate, the Unissued Certificate Account and
the respective Shareholders' accounts with the Shares.
Whenever Shares, and fractions thereof, owned by
Shareholders are surrendered for redemption, Fund Services
may process the transactions by making appropriate entries
in the stock transfer records, and debiting the Unissued
Certificate Account and the record of issued Shares
6
<PAGE>
outstanding; it shall be unnecessary for Fund Services to
reissue Share Certificates in the name of the Fund.
SECTION 11. Fund Services shall also perform the
usual duties and function required of a stock transfer agent
for a corporation, including but not limited to (i) issuing
Share Certificates as treasury Shares, as directed by
Written Instructions, and (ii) transferring Share
Certificates from one Shareholder to another in the usual
manner. Fund Services may rely conclusively and act without
further investigation upon any list, instruction,
certification, authorization, Share Certificate or other
instrument or paper reasonably believed by it in good faith
to be genuine and unaltered, and to have been signed,
countersigned or executed or authorized by a duly-authorized
person or persons, or by the Fund, or upon the advice of
counsel for the Fund or for Fund Services. Fund Services
may record any transfer of Share Certificates which it
reasonably believes in good faith to have been duly
authorized, or may refuse to record any transfer of Share
Certificates if, in good faith, it reasonably deems such
refusal necessary in order to avoid any liability on the
part of either the Fund or Fund Services.
SECTION 12. Fund Services shall notify the Fund of
any request or demand for the inspection of the Fund's share
records. Fund Services shall abide by the Fund's
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<PAGE>
instructions for granting or denying the inspection;
provided, however, Fund Services may grant the inspection
without such instructions if it is advised by its counsel
that failure to do so will result in liability to Fund
Services.
SECTION 13. Fund Services shall observe the
following procedures in handling funds received:
(a) Upon receipt at the office designated by the
Fund of any check or other order drawn or endorsed to the
Fund or otherwise identified as being for the account of the
Fund, and, in the case of a new account, accompanied by a
new account application or sufficient information to
establish an account as provided in the Prospectus, Fund
Services shall stamp the transmittal document accompanying
such check or other order with the name of the Fund and the
time and date of receipt and shall forthwith deposit the
proceeds thereof in the custodial account of the Fund.
(b) In the event that any check or other order for
the purchase of Shares is returned unpaid for any reason,
Fund Services shall, in the absence of other instructions
from the Fund, advise the Fund of the returned check and
prepare such documents and information as may be necessary
to cancel promptly any Shares purchased on the basis of such
returned check and any accumulated income dividends and
capital gains distributions paid on such Shares.
8
<PAGE>
(c) As soon as possible after 4:00 p.m., Eastern
time or at such other times as the Fund may specify in
Written or Oral Instructions for any Series (the "Valuation
Time") on each Business Day Fund Services shall obtain from
the Fund's Adviser a quotation (on which it may conclusively
rely) of the net asset value, determined as of the Valuation
Time on that day. On each Business Day Fund Services shall
use the net asset value(s) determined by the Fund's Adviser
to compute the number of Shares and fractional Shares to be
purchased and the aggregate purchase proceeds to be
deposited with the Custodian. As necessary but no more
frequently than daily (unless a more frequent basis is
agreed to by Fund Services), Fund Services shall place a
purchase order with the Custodian for the proper number of
Shares and fractional Shares to be purchased and promptly
thereafter shall send written confirmation of such purchase
to the Custodian and the Fund.
SECTION 14. Having made the calculations required
by SECTION 13, Fund Services shall thereupon pay the
Custodian the aggregate net asset value of the Shares
purchased. The aggregate number of Shares and fractional
Shares purchased shall then be issued daily and credited by
Fund Services to the Unissued Certificate Account. Fund
Services shall also credit each Shareholder's separate
account with the number of Shares purchased by such
9
<PAGE>
Shareholder. Fund Services shall mail written confirmation
of the purchase to each Shareholder or the Shareholder's
representative and to the Fund if requested. Each
confirmation shall indicate the prior Share balance, the new
Share balance, the Shares for which Stock Certificates are
outstanding (if any), the amount invested and the price paid
for the newly-purchased Shares.
SECTION 15. Prior to the Valuation Time on each
Business Day, as specified in accordance with SECTION 13,
Fund Services shall process all requests to redeem Shares
and, with respect to each Series, shall advise the Custodian
of (i) the total number of Shares available for redemption
and (ii) the number of Shares and fractional Shares
requested to be redeemed. Upon confirmation of the net
asset value by the Fund's Adviser, Fund Services shall
notify the Fund and the Custodian of the redemption, apply
the redemption proceeds in accordance with SECTION 16 and
the Prospectus, record the redemption in the stock registry
books, and debit the redeemed Shares from the Unissued
Certificates Account and the individual account of the
Shareholder.
In lieu of carrying out the redemption procedures
described in the preceding paragraph, Fund Services may, at
the request of the Fund, sell Shares to the Fund as
repurchases from Shareholders, provided that the sale price
10
<PAGE>
is not less than the applicable redemption price. The
redemption procedures shall then be appropriately modified.
SECTION 16. Fund Services will carry out the
following procedures with respect to Share redemptions:
(a) As to each request received by the Fund from
or on behalf of a Shareholder for the redemption of Shares,
and unless the right of redemption has been suspended as
contemplated by the Prospectus, Fund Services shall, within
seven days after receipt of such redemption request, either
(i) mail a check in the amount of the proceeds of such
redemption to the person designated by the Shareholder or
other person to receive such proceeds or, (ii) in the event
redemption proceeds are to be wired through the Federal
Reserve Wire System or by bank wire pursuant to procedures
described in the Prospectus, cause such proceeds to be wired
in Federal funds to the bank or trust company account
designated by the Shareholder to receive such proceeds.
Funds Services shall also prepare and send a confirmation of
such redemption to the Shareholder. Redemptions in kind
shall be made only in accordance with such Written
Instructions as Fund Services may receive from the Fund.
The requirements as to instruments of transfer and other
documentation, the determination of the appropriate
redemption price and the time of payment shall be as
provided in the Prospectus, subject to such additional
11
<PAGE>
requirements consistent therewith as may be established by
mutual agreement between the Fund and Fund Services. In the
case of a request for redemption that does not comply in all
respects with the requirements for redemption, Fund Services
shall promptly so notify the Shareholder and shall effect
such redemption at the price in effect at the time of
receipt of documents complying with such requirements. Fund
Services shall notify the Fund's Custodian and the Fund on
each Business Day of the amount of cash required to meet
payments made pursuant to the provisions of this paragraph
and thereupon the Fund shall instruct the Custodian to make
available to Fund Services in timely fashion sufficient
funds therefor.
(b) Procedures and standards for effecting and
accepting redemption orders from Shareholders by telephone
or by such check writing service as the Fund may institute
may be established by mutual agreement between Fund Services
and the Fund consistent with the Prospectus.
(c) For purposes of redemption of Shares that have
been purchased by check within fifteen (15) days prior to
receipt of the redemption request, the Fund shall provide
Fund Services with Written Instructions concerning the time
within which such requests may be honored.
(d) Fund Services shall process withdrawal orders
duly executed by Shareholders in accordance with the terms
12
<PAGE>
of any withdrawal plan instituted by the Fund and described
in the Prospectus. Payments upon such withdrawal orders and
redemptions of Shares held in withdrawal plan accounts in
connection with such payments shall be made at such times as
the Fund may determine in accordance with the Prospectus.
(e) The authority of Fund Services to perform its
responsibilities under SECTIONS 15 and 16 with respect to
the Shares of any Series shall be suspended if Fund Services
receives notice of the suspension of the determination of
the net asset value of the Series.
SECTION 17. Upon the declaration of each dividend
and each capital gains distribution by the Fund's Board of
Directors or Trustees, the Fund shall notify Fund Services
of the date of such declaration, the amount payable per
Share, the record date for determining the Shareholders
entitled to payment, the payment and the reinvestment date
price.
SECTION 18. Upon being advised by the Fund of the
declaration of any income dividend or capital gains
distribution on account of its Shares, Fund Services shall
compute and prepare for the Fund records crediting such
distributions to Shareholders. Fund Services shall, on or
before the payment date of any dividend or distribution,
notify the Fund and the Custodian of the estimated amount
required to pay any portion of a dividend or distribution
13
<PAGE>
which is payable in cash, and thereupon the Fund shall, on
or before the payment date of such dividend or distribution,
instruct the Custodian to make available to Fund Services
sufficient funds for the payment of such cash amount. Fund
Services will, on the designated payment date, reinvest all
dividends in additional shares and promptly mail to each
Shareholder at his address of record a statement showing the
number of full and fractional Shares (rounded to three
decimal places) then owned by the Shareholder and the net
asset value of such Shares; provided, however, that if a
Shareholder elects to receive dividends in cash, Fund
Services shall prepare a check in the appropriate amount and
mail it to the Shareholder at his address of record within
five (5) business days after the designated payment date, or
transmit the appropriate amount in Federal funds in
accordance with the Shareholder's agreement with the Fund.
SECTION 19. Fund Services shall prepare and
maintain for the Fund records showing for each Shareholder's
account the following:
A. The name, address and tax identification
number of the Shareholder;
B. The number of Shares of each Series held by
the Shareholder;
C. Historical information including dividends
paid and date and price for all transactions;
14
<PAGE>
D. Any stop or restraining order placed against
such account;
E. Information with respect to the withholding of
any portion of income dividends or capital gains
distributions as are required to be withheld under
applicable law;
F. Any dividend or distribution reinvestment
election, withdrawal plan application, and correspondence
relating to the current maintenance of the account;
G. The certificate numbers and denominations of
any Share Certificates issued to the Shareholder; and
H. Any additional information required by Fund
Services to perform the services contemplated by this
Agreement.
Fund Services agrees to make available upon request
by the Fund or the Fund's Adviser and to preserve for the
periods prescribed in Rule 31a-2 of the Investment Company
Act any records related to services provided under this
Agreement and required to be maintained by Rule 31a-1 of
that Act, including:
(i) Copies of the daily transaction register for each
Business Day of the Fund;
(ii) Copies of all dividend, distribution and
reinvestment blotters;
15
<PAGE>
(iii) Schedules of the quantities of Shares of each
Series distributed in each state for purposes of
any state's laws or regulations as specified in
Oral or Written Instructions given to Fund
Services from time to time by the Fund or its
agents; and
(iv) Such other information, including Shareholder
lists, and statistical information as may be
agreed upon from time to time by the Fund and Fund
Services.
SECTION 20. Fund Services shall maintain those
records necessary to enable the Fund to file, in a timely
manner, form N-SAR (Semi-Annual Report) or any successor
report required by the Investment Company Act or rules and
regulations thereunder.
SECTION 21. Fund Services shall cooperate with the
Fund's independent public accountants and shall take
reasonable action to make all necessary information
available to such accountants for the performance of their
duties.
SECTION 22. In addition to the services described
above, Fund Services will perform other services for the
Fund as may be mutually agreed upon in writing from time to
time, which may include preparing and filing Federal tax
forms with the Internal Revenue Service, and, subject to
16
<PAGE>
supervisory oversight by the Fund's Adviser, mailing Federal
tax information to Shareholders, mailing semi-annual
Shareholder reports, preparing the annual list of
Shareholders, mailing notices of Shareholders' meetings,
proxies and proxy statements and tabulating proxies. Fund
Services shall answer the inquiries of certain Shareholders
related to their share accounts and other correspondence
requiring an answer from the Fund. Fund Services shall
maintain dated copies of written communications from
Shareholders, and replies thereto.
SECTION 23. Nothing contained in this Agreement is
intended to or shall require Fund Services, in any capacity
hereunder, to perform any functions or duties on any day
other than a Business Day. Functions or duties normally
scheduled to be performed on any day which is not a Business
Day shall be performed on, and as of, the next Business Day,
unless otherwise required by law.
SECTION 24. For the services rendered by Fund
Services as described above, the Fund shall pay to Fund
Services an annualized fee at a rate to be mutually agreed
upon from time to time. Such fee shall be prorated for the
months in which this Agreement becomes effective or is
terminated. In addition, the Fund shall pay, or Fund
Services shall be reimbursed for, all out-of-pocket expenses
incurred in the performance of this Agreement, including but
17
<PAGE>
not limited to the cost of stationery, forms, supplies,
blank checks, stock certificates, proxies and proxy
solicitation and tabulation costs, all forms and statements
used by Fund Services in communicating with Shareholders of
the Fund or especially prepared for use in connection with
its services hereunder, specific software enhancements as
requested by the Fund, costs associated with maintaining
withholding accounts (including non-resident alien, Federal
government and state), postage, telephone, telegraph (or
similar electronic media) used in communicating with
Shareholders or their representatives, outside mailing
services, microfiche/microfilm, freight charges and off-site
record storage. It is agreed in this regard that Fund
Services, prior to ordering any form in such supply as it
estimates will be adequate for more than two years' use,
shall obtain the written consent of the Fund. All forms for
which Fund Services has received reimbursement from the Fund
shall be the property of the Fund.
SECTION 25. Fund Services shall not be liable for
any taxes, assessments or governmental charges that may be
levied or assessed on any basis whatsoever in connection
with the Fund or any Shareholder, excluding taxes assessed
against Fund Services for compensation received by it
hereunder.
18
<PAGE>
SECTION 26.
(a) Fund Services shall at all times act in good
faith and with reasonable care in performing the services to
be provided by it under this Agreement, but shall not be
liable for any loss or damage unless such loss or damage is
caused by the negligence, bad faith or willful misconduct of
Fund Services or its employees or agents.
(b) The Fund shall indemnify and hold Fund
Services harmless from all loss, cost, damage and expense,
including reasonable expenses for counsel, incurred by it
resulting from any claim, demand, action or suit in
connection with the performance of its duties hereunder, or
as a result of acting upon any instruction reasonably
believed by it to have been properly given by a duly
authorized officer of the Fund, or upon any information,
data, records or documents provided to Fund Services or its
agents by computer tape, telex, CRT data entry or other
similar means authorized by the Fund; provided that this
indemnification shall not apply to actions or omissions of
Fund Services in cases of its own bad faith, willful
misconduct or negligence, and provided further that if in
any case the Fund may be asked to indemnify or hold Fund
Services harmless pursuant to this Section, the Fund shall
have been fully and promptly advised by Fund Services of all
material facts concerning the situation in question. The
19
<PAGE>
Fund shall have the option to defend Fund Services against
any claim which may be the subject of this indemnification,
and in the event that the Fund so elects it will so notify
Fund Services, and thereupon the Fund shall retain competent
counsel to undertake defense of the claim, and Fund Services
shall in such situations incur no further legal or other
expenses for which it may seek indemnification under this
paragraph. Fund Services shall in no case confess any claim
or make any compromise in any case in which the Fund may be
asked to indemnify Fund Services except with the Fund's
prior written consent.
Without limiting the foregoing:
(i) Fund Services may rely upon the advice of the
Fund or counsel to the Fund or Fund Services, and upon
statements of accountants, brokers and other persons
believed by Fund Services in good faith to be expert in the
matters upon which they are consulted. Fund Services shall
not be liable for any action taken in good faith reliance
upon such advice or statements;
(ii) Fund Services shall not be liable for any
action reasonably taken in good faith reliance upon any
Written Instructions or certified copy of any resolution of
the Fund's Board of Directors or Trustees, including a
Written Instruction authorizing Fund Services to make
payment upon redemption of Shares without a signature
20
<PAGE>
guarantee; provided, however, that upon receipt of a Written
Instruction countermanding a prior Instruction that has not
been fully executed by Fund Services, Fund Services shall
verify the content of the second Instruction and honor it,
to the extent possible. Fund Services may rely upon the
genuineness of any such document, or copy thereof,
reasonably believed by Fund Services in good faith to have
been validly executed;
(iii) Fund Services may rely, and shall be protected
by the Fund in acting, upon any signature, instruction,
request, letter of transmittal, certificate, opinion of
counsel, statement, instrument, report, notice, consent,
order, or other paper or document reasonably believed by it
in good faith to be genuine and to have been signed or
presented by the purchaser, the Fund or other proper party
or parties; and
(d) Fund Services may, with the consent of the
Fund, subcontract the performance of any portion of any
service to be provided hereunder, including with respect to
any Shareholder or group of Shareholders, to any agent of
Fund Services and may reimburse the agent for the services
it performs at such rates as Fund Services may determine;
provided that no such reimbursement will increase the amount
payable by the Fund pursuant to this Agreement; and provided
21
<PAGE>
further, that Fund Services shall remain ultimately
responsible as transfer agent to the Fund.
SECTION 27. The Fund shall deliver or cause to be
delivered over to Fund Services (i) an accurate list of
Shareholders, showing each Shareholder's address of record,
number of Shares of each Series owned and whether such
Shares are represented by outstanding Share Certificates or
by non-certificated Share accounts and (ii) all Shareholder
records, files, and other materials necessary or appropriate
for proper performance of the functions assumed by the under
this Agreement (collectively referred to as the
"Materials"). The Fund shall indemnify Fund Services and
hold it harmless from any and all expenses, damages, claims,
suits, liabilities, actions, demands and losses arising out
of or in connection with any error, omission, inaccuracy or
other deficiency of such Materials, or out of the failure of
the Fund to provide any portion of the Materials or to
provide any information in the Fund's possession needed by
Fund Services to knowledgeably perform its functions;
provided the Fund shall have no obligation to indemnify Fund
Services or hold it harmless with respect to any expenses,
damages, claims, suits, liabilities, actions, demands or
losses caused directly or indirectly by acts or omissions of
Fund Services or the Fund's Adviser.
22
<PAGE>
SECTION 28. This Agreement may be amended from
time to time by a written supplemental agreement executed by
the Fund and Fund Services and without notice to or approval
of the Shareholders; provided this Agreement may not be
amended in any manner which would substantially increase the
Fund's obligations hereunder unless the amendment is first
approved by the Fund's Board of Directors or Trustees,
including a majority of the Directors or Trustees who are
not a party to this Agreement or interested persons of any
such party, at a meeting called for such purpose, and
thereafter is approved by the Fund's Shareholders if such
approval is required under the Investment Company Act or the
rules and regulations thereunder. The parties hereto may
adopt procedures as may be appropriate or practical under
the circumstances, and Fund Services may conclusively rely
on the determination of the Fund that any procedure that has
been approved by the Fund does not conflict with or violate
any requirement of its Articles of Incorporation or
Declaration of Trust, By-Laws or Prospectus, or any rule,
regulation or requirement of any regulatory body.
SECTION 29. The Fund shall file with Fund Services
a certified copy of each operative resolution of its Board
of Directors or Trustees authorizing the execution of
Written Instructions or the transmittal of Oral Instructions
and setting forth authentic signatures of all signatories
23
<PAGE>
authorized to sign on behalf of the Fund and specifying the
person or persons authorized to give Oral Instructions on
behalf of the Fund. Such resolution shall constitute
conclusive evidence of the authority of the person or
persons designated therein to act and shall be considered in
full force and effect, with Fund Services fully protected in
acting in reliance therein, until Fund Services receives a
certified copy of a replacement resolution adding or
deleting a person or persons authorized to give Written or
Oral Instructions. If the officer certifying the resolution
is authorized to give Oral Instructions, the certification
shall also be signed by a second officer of the Fund.
SECTION 30. The terms, as defined in this Section,
whenever used in this Agreement or in any amendment or
supplement hereto, shall have the meanings specified below,
insofar as the context will allow.
(a) Business Day: Any day on which the Fund is
open for business as described in the Prospectus.
(b) Custodian: The term Custodian shall mean the
Fund's current custodian or any successor custodian acting
as such for the Fund.
(c) Fund's Adviser: The term Fund's Adviser shall
mean Alliance Capital Management L.P. or any successor
thereto who acts as the investment adviser or manager of the
Fund.
24
<PAGE>
(d) Oral Instructions: The term Oral Instructions
shall mean an authorization, instruction, approval, item or
set of data, or information of any kind transmitted to Fund
Services in person or by telephone, vocal telegram or other
electronic means, by a person or persons reasonably believed
in good faith by Fund Services to be a person or persons
authorized by a resolution of the Board of Directors or
Trustees of the Fund to give Oral Instructions on behalf of
the Fund. Each Oral Instruction shall specify whether it is
applicable to the entire Fund or a specific Series of the
Fund.
(e) Prospectus: The term Prospectus shall mean a
prospectus and related statement of additional information
forming part of a currently effective registration statement
under the Investment Company Act and, as used with the
respect to Shares or Shares of a Series, shall mean the
prospectuses and related statements of additional
information covering the Shares or Shares of the Series.
(f) Securities: The term Securities shall mean
bonds, debentures, notes, stocks, shares, evidences of
indebtedness, and other securities and investments from time
to time owned by the Fund.
(g) Series: The term Series shall mean any series
of Shares of the common stock of the Fund that the Fund may
establish from time to time.
25
<PAGE>
(h) Share Certificates: The term Share
Certificates shall mean the stock certificates or
certificates representing shares of beneficial interest for
the Shares.
(i) Shareholders: The term Shareholders shall
mean the registered owners from time to time of the Shares,
as reflected on the stock registry records of the Fund.
(j) Written Instructions: The term Written
Instructions shall mean an authorization, instruction,
approval, item or set of data, or information of any kind
transmitted to Fund Services in original writing containing
original signatures, or a copy of such document transmitted
by telecopy, including transmission of such signature, or
other mechanical or documentary means, at the request of a
person or persons reasonably believed in good faith by Fund
Services to be a person or persons authorized by a
resolution of the Board of Directors or Trustees of the Fund
to give Written Instruction shall specify whether it is
applicable to the entire Fund or a specific Series of the
Fund.
SECTION 31. Fund Services shall not be liable for
the loss of all or part of any record maintained or
preserved by it pursuant to this Agreement or for any delays
or errors occurring by reason of circumstances beyond its
control, including but not limited to acts of civil or
26
<PAGE>
military authorities, national emergencies, fire, flood or
catastrophe, acts of God, insurrection, war, riot, or
failure of transportation, communication or power supply,
except to the extent that Fund Services shall have failed to
use its best efforts to minimize the likelihood of
occurrence of such circumstances or to mitigate any loss or
damage to the Fund caused by such circumstances.
SECTION 32. The Fund may give Fund Services sixty
(60) days and Fund Services may give the Fund (90) days
written notice of the termination of this Agreement, such
termination to take effect at the time specified in the
notice. Upon notice of termination, the Fund shall use its
best efforts to obtain a successor transfer agent. If a
successor transfer agent is not appointed within ninety (90)
days after the date of the notice of termination, the Board
of Directors or Trustees of the Fund shall, by resolution,
designate the Fund as its own transfer agent. Upon receipt
of written notice from the Fund of the appointment of the
successor transfer agent and upon receipt of Oral or Written
Instructions Fund Services shall, upon request of the Fund
and the successor transfer agent and upon payment of Fund
Services reasonable charges and disbursements, promptly
transfer to the successor transfer agent the original or
copies of all books and records maintained by Fund Services
hereunder and cooperate with, and provide reasonable
27
<PAGE>
assistance to, the successor transfer agent in the
establishment of the books and records necessary to carry
out its responsibilities hereunder.
SECTION 33. Any notice or other communication
required by or permitted to be given in connection with this
Agreement shall be in writing, and shall be delivered in
person or sent by first-class mail, postage prepaid, to the
respective parties.
Notice to the Fund shall be given as follows until
further notice:
1345 Avenue of the Americas
New York, New York 10105
Attention: Secretary
Notice to Fund Services shall be given as follows
until further notice:
Alliance Fund Services, Inc.
500 Plaza Drive
Secaucus, New Jersey 07094
SECTION 34. The Fund represents and warrants to
Fund Services that the execution and delivery of this
Agreement by the undersigned officer of the Fund has been
duly and validly authorized by resolution of the Fund's
Board of Directors or Trustees. Fund Services represents
and warrants to the Fund that the execution and delivery of
this Agreement by the undersigned officer of Fund Services
has also been duly and validly authorized.
28
<PAGE>
SECTION 35. This Agreement may be executed in more
than one counterpart, each of which shall be deemed to be an
original, and shall become effective on the last date of
signature below unless otherwise agreed by the parties.
Unless sooner terminated pursuant to SECTION 32, this
Agreement will continue until and will continue
in effect thereafter for successive 12 month periods only if
such continuance is specifically approved at least annually
by the Board of Directors or Trustees or by a vote of the
stockholders of the Fund and in either case by a majority of
the Directors or Trustees who are not parties to this
Agreement or interested persons of any such party, at a
meeting called for the purpose of voting on this Agreement.
SECTION 36. This Agreement shall extend to and
shall bind the parties hereto and their respective
successors and assigns; provided, however, that this
Agreement shall not be assignable by the Fund without the
written consent of Fund Services or by Fund Services without
the written consent of the Fund, authorized or approved by a
resolution of the Fund's Board of Directors or Trustees.
Notwithstanding the foregoing, either party may assign this
Agreement without the consent of the other party so long as
the assignee is an affiliate, parent or subsidiary of the
assigning party and is qualified to act under the Investment
Company Act, as amended from time to time.
29
<PAGE>
SECTION 38. This Agreement shall be governed by
the laws of the State of New Jersey.
WITNESS the following signatures:
BY:___________________________
TITLE:
ALLIANCE FUND SERVICES, INC.
BY:___________________________
TITLE:________________________
30
00250072.AM1
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use of our report dated May 30,
1997, on the financial statements of the Prime Portfolio,
Government Portfolio, Tax-Free Portfolio, and Trust
Portfolio of ACM Institutional Reserves, Inc. referred to
therein in Post-Effective Amendment No. 13 to the
Registration Statement on Form N-1A, File No. 33-34001 as
filed with the Securities and Exchange Commission.
We also consent to the reference to our firm in each
Prospectus under the caption "Financial Highlights" and in
the Statements of Additional Information under the caption
"Accountants".
/s/ McGladrey & Pullen, LLP
_______________________________
McGladrey & Pullen, LLP
New York, New York
August 25, 1997
00250072.AM0
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior
powers granted by the undersigned to the extent inconsistent
herewith and constitutes and appoints John D. Carifa, Emilie
D. Wrapp and Edmund P. Bergan, Jr., and each of them, to act
severally as attorneys-in-fact and agents, with power of
substitution and resubstitution, for the undersigned in any
and all capacities, solely for the purpose of signing the
Registration Statement, and any amendments thereto, on Form
N-1A of ACM Institutional Reserves, Inc. and filing the
same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may
do or cause to be done by virtue hereof.
/s/ Donald J. Robinson
_______________________
Donald J. Robinson
Dated: September 30, 1996
00250272.AM2
