<PAGE>
As filed with the Securities and Exchange
Commission on June 26, 1998
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. 15 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940
Amendment No. 15 X
ALLIANCE 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)
immediately upon filing pursuant to paragraph (b)
X on June 29, 1998 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)
on (date) pursuant to paragraph (a)
75 days after filing pursuant to paragraph (a)
(ii)
<PAGE>
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.
<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
Item 13. Investment Objectives
and Policies................Investment Objectives
and Policies;
<PAGE>
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
<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,
c/o Alliance Fund Services, Inc.,
P.O. Box 1520, Secaucus, New Jersey
07096-1520.
YIELDS. For recorded current yield
information on the Class A shares
of the Portfolios, call on a touch-
tone telephone toll-free (800) 251-
0539 and press the following se-
quence of keys:
[1] # [1] # [_]1 [_]6 # for the Prime Portfolio
[1] # [1] # [_]2 [_]7 # for the Government Portfolio
[1] # [1] # [_]1 [_]2 [_]8 # for the Treasury Portfolio
[1] # [1] # [_]3 [_]8 # for the Tax-Free Portfolio
Alliance Institutional Reserves, Inc. (the "Fund") is an open-end investment
company. The Prime Portfolio, the Government Portfolio, the Tax-Free Portfolio
and the Treasury Portfolio (each a "Portfolio" and collectively the "Portfo-
lios"), each of which is diversified, are offered by this prospectus. The
Fund's investment objectives 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.
The Fund offers investors a convenient and economical way to invest in managed
portfolios.
This prospectus, which offers the Class A shares of each Portfolio, sets forth
information about the 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 June 29, 1998, which provides a
further discussion of certain matters discussed in this prospectus and certain
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 ref-
erence. For a free copy, call or write the Fund at the telephone number or ad-
dress 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.
ALLIANCE
INSTITUTIONAL
RESERVES
--PRIME PORTFOLIO
--GOVERNMENT PORTFOLIO
--TAX-FREE PORTFOLIO
--TREASURY PORTFOLIO
[LOGO OF ALLIANCE CAPITAL(R) APPEARS HERE]
PROSPECTUS
CLASS A SHARES
JUNE 29, 1998
<PAGE>
EXPENSE INFORMATION--CLASS A SHARES
SHAREHOLDER TRANSACTION EXPENSES
Class A shares of the Fund have no sales load on purchases or reinvested div-
idends, deferred sales load, redemption fee or exchange fee.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net
assets, PRIME GOVERNMENT TAX-FREE TREASURY
net of expense reimbursement or fee PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
waiver) --------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Management Fees..................... .20% .20% .20% .20%
Other Expenses...................... None None None None
---- ---- ---- ----
Total Fund Operating Expenses....... .20% .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
Treasury 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 Class A shares of the
Prime, Government, Tax-Free and Treasury Portfolios will bear directly and in-
directly. The expenses listed in the table for each Portfolio are net of volun-
tary expense reimbursements and voluntary fee waivers. The expenses of such
Portfolios, before voluntary expense reimbursements or fee waivers, would be:
Prime Portfolio: Management Fees--.20%, Other Expenses--.03% and Total Fund Op-
erating Expenses--.23%; Government Portfolio: Management Fees--.20%, Other Ex-
penses--.09% and Total Fund Operating Expenses--.29%; Tax-Free Portfolio: Man-
agement Fees--.20%, Other Expenses--.08% and Total Fund Operating Expenses--
.28%; Treasury Portfolio: Management Fees--.20%, Other Expenses--.09% and Total
Operating Expenses--.29%. Such expenses for the Treasury Portfolio are based on
estimated amounts for the Fund's current fiscal year. The example should not be
considered a representation of past or future expenses; actual expenses may be
greater or less than those shown.
2
<PAGE>
FINANCIAL HIGHLIGHTS
PER SHARE OPERATING PERFORMANCE (FOR A CLASS 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. As of April 30, 1998, the Treasury Portfolio had not yet commenced
operations and accordingly no operating performance information is presented
for such Portfolio.
<TABLE>
<CAPTION>
PRIME PORTFOLIO
--------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR AUG. 20 1990(A)
ENDED ENDED ENDED ENDED ENDED ENDED ENDED THROUGH
APRIL 30, APRIL 30, APRIL 30, APRIL 30, APRIL 30, APRIL 30, APRIL 30, APRIL 30,
1998 1997 1996 1995 1994 1993 1992 1991
--------- --------- --------- --------- --------- --------- --------- ---------------
<S> <C> <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 $ 1.00
-------- -------- -------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income... 0.0552 0.0530 0.0560 0.0502 0.0325 0.0353 0.0535 0.0506
-------- -------- -------- -------- -------- -------- -------- --------
LESS: DISTRIBUTIONS
Dividends from net
investment income...... (0.0552) (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 $ 1.00
======== ======== ======== ======== ======== ======== ======== ========
TOTAL RETURNS
Total investment return
based on net asset
value(b)............... 5.68% 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)... $1,764.7 $ 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% 0.20% 0.18% 0.02% -0-
Expenses, before waivers
and reimbursements..... 0.24% 0.29% 0.32% 0.36% 0.42% 0.54% 0.81% 1.09%
Net investment
income(d).............. 5.52% 5.31% 5.54% 5.24% 3.25% 3.42% 5.30% 6.84%(c)
</TABLE>
<TABLE>
<CAPTION>
GOVERNMENT PORTFOLIO
----------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR JUL. 22, 1991(A)
ENDED ENDED ENDED ENDED ENDED ENDED THROUGH
APRIL 30, APRIL 30, APRIL 30, APRIL 30, APRIL 30, APRIL 30, APRIL 30,
1998 1997 1996 1995 1994 1993 1992
--------- --------- --------- --------- --------- --------- ----------------
<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... 0.0543 0.0519 0.0552 0.0493 0.0315 0.0339 0.0377
-------- -------- -------- -------- -------- -------- --------
LESS: DISTRIBUTIONS
Dividends from net
investment income...... (0.0543) (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 $ 1.00
======== ======== ======== ======== ======== ======== ========
TOTAL RETURNS
Total investment return
based on net asset
value(b)............... 5.58% 5.33% 5.67% 5.06% 3.20% 3.45% 4.98%(c)
======== ======== ======== ======== ======== ======== ========
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
period (in millions)... $ 274.5 $ 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% 0.20% 0.18% 0.10%(c)
Expenses, before waivers
and reimbursements..... 0.28% 0.35% 0.36% 0.38% 0.36% 0.49% 0.86%(c)
Net investment
income(d).............. 5.43% 5.22% 5.50% 4.94% 3.15% 3.30% 4.86%(c)
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE PORTFOLIO
-------------------------------------------------------------------------------------
JUL. 22, 1991(A)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
APRIL 30, APRIL 30, APRIL 30, APRIL 30, APRIL 30, APRIL 30, APRIL 30,
1998 1997 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------- ---------- ----------------
<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... .0363 0.0347 0.0372 0.0326 0.0240 0.0287 0.0334
Net unrealized loss on
investments............ -0- -0- -0- (0.0048) -0- -0- -0-
------ ------- ------- ------- ------- ------- -------
Net increase in net
asset value from
operations............. .0363 0.0347 0.0372 0.0278 0.0240 0.0287 0.0334
------ ------- ------- ------- ------- ------- -------
LESS: DISTRIBUTIONS
Dividends from net
investment income...... (.0363) (0.0347) (0.0372) (0.0326) (0.0240) (0.0287) (0.0334)
------ ------- ------- ------- ------- ------- -------
ADD: CAPITAL
CONTRIBUTION
Capital Contributed by
the Adviser............ -0- -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 $ 1.00
====== ======= ======= ======= ======= ======= =======
TOTAL RETURNS
Total investment return
based on net asset
value(b)............... 3.70% 3.53% 3.79% 3.31%(e) 2.43% 2.92% 4.40%(c)
====== ======= ======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
period (in millions)... $293.8 $ 183.1 $ 183.6 $ 35.5 $ 35.6 $ 40.9 $ 8.5
RATIO TO AVERAGE NET
ASSETS OF:
Expenses, net of waivers
and reimbursements..... .20% 0.20% 0.20% 0.20% 0.20% 0.18% 0.10%(c)
Expenses, before waivers
and reimbursements..... .28% 0.33% 0.48% 0.76% 0.69% 0.95% 2.08%(c)
Net investment
income(d).............. 3.61% 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. Fur-
ther information about each Portfolio's performance is contained in the annual
report to shareholders and Statement of Additional Information which may be ob-
tained without charge by contacting Alliance Fund Services, Inc. at the address
or the telephone number shown on the cover of this prospectus.
4
<PAGE>
INTRODUCTION
The Fund consists of five distinct Portfolios, the Class A shares of four of
which, the Prime Portfolio, the Government Portfolio, the Tax-Free Portfolio
and the Treasury Portfolio, are offered by this prospectus. Each Portfolio in-
vests in a diversified portfolio of money market securities. The Fund is de-
signed for investors who can benefit from money market income. Investors in
the Fund avoid certain administrative burdens that they would incur by invest-
ing in money market instruments directly, such as monitoring of maturity
dates, safeguarding of receipts and deliveries, and the maintenance of tax in-
formation and other records. At the time of investment, no security purchased
by the Prime Portfolio, the Government Portfolio and the Tax-Free Portfolio
can have a maturity exceeding one year, which maturity may extend to 397 days.
The Treasury Portfolio may invest in high-quality money market securities
which, at the time of investment, have remaining maturities of 397 days or
less. 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, except the Treasury 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 re-
maining maturity of one year or less, which maturity may extend to 397 days or
such greater length of time as may be permitted from time to time pursuant to
Rule 2a-7 ("Rule 2a-7") under the Investment Company Act of 1940, as amended
(the "Act"). The Treasury 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, which maturities
may extend to such greater length of time as may be permitted from time to
time pursuant to Rule 2a-7. The fundamental investment policies described be-
low may not be changed for a Portfolio without shareholder approval. The non-
fundamental 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, as amended from time to time, in-
cluding the diversification, quality and maturity requirements imposed by the
Rule (a more detailed description of Rule 2a-7 is set forth in the Portfolios'
Statement of Additional Information under "Investment Objectives and Poli-
cies"). 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 or denominated in U.S. dollars and issued by U.S. branches of for-
eign 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
it may invest; (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 companies hav-
ing 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
5
<PAGE>
such companies; and (4) repurchase agreements that are collateralized fully as
that term is defined in Rule 2a-7. These agreements are entered into with
"primary dealers" (as designated by the Federal Reserve Bank of New York) in
U.S. Government securities or State Street Bank and Trust Company, the Fund's
Custodian. For each repurchase agreement, the Portfolio requires continual
maintenance of the market value of the underlying collateral in amounts equal
to, or in excess of, the agreement amount. In the event of a dealer default,
the 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 in-
vest in the types of instruments described in (2) above issued or maintained
at foreign branches of U.S. banks described in such clause and prime quality
dollar-denominated commercial 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 bor-
rowing arrangement involving periodically fluctuating rates of interest under
a letter agreement between a commercial paper issuer and an institutional
lender pursuant to which the lender may determine to invest varying amounts.
The Portfolio may invest 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, the Portfolio may invest no more than 5% of
its total assets in the securities of any one issuer (as determined pursuant
to Rule 2a-7), except that the Portfolio may invest up to 25% of its total as-
sets in the first tier securities (as defined in Rule 2a-7) of a single issuer
for a period of up to three business days. 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 fully as that term is defined in Rule 2a-7. These agree-
ments are entered into with "primary deal-
6
<PAGE>
ers" (as designated by the Federal Reserve Bank of New York) in U.S. Government
securities or State Street Bank and Trust Company, the Fund's custodian. For
each repurchase agreement, the Portfolio requires continual maintenance of the
market value of the underlying collateral in amounts equal to, or in excess of,
the agreement amount. In the event of a dealer default, the 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 securities. 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 secu-
rities 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 purchase of the issue. The value of
when-issued securities may fluctuate prior to their settlement, thereby creat-
ing an unrealized gain or loss to the Portfolio.
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 Na-
tional 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 Port-
folio will not purchase any investments while borrowings in excess of 5% of to-
tal 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 as-
sets in high-grade municipal securities having maturities of one year or less,
which maturities may extend to 397 days (as opposed to taxable investments de-
scribed below). Normally, substantially 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 munici-
pal securities. Such income may be subject to state or local income taxes. In-
vestors should compare yields (which will fluctuate in response to market con-
ditions) and tax consequences before making an investment decision.
Under current federal income tax law, (1) interest on tax-exempt municipal se-
curities 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-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 have provided, and
may continue to 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 in-
terest 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 matu-
rities of one year or less. Examples include tax anticipation and revenue an-
ticipation notes which are generally issued in anticipation of various seasonal
revenues, bond anticipation notes, and tax-exempt commercial paper. Short-term
municipal bonds may include general obligation bonds, which are secured by the
issuer's pledge of its faith, credit and taxing power for
7
<PAGE>
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 securities that have variable or floating rates of
interest ("variable rate obligations") whose interest rates are adjusted either
at predesignated periodic intervals or whenever there is a change in the market
rate to which the security's interest rate is tied. Such adjustments minimize
changes in the market value of the obligation and, accordingly, enhance the
ability of the Portfolio to maintain a stable net asset value. Variable rate
obligations purchased may include participation interests in private activity
bonds backed by letters of credit of Federal Deposit Insurance Corporation mem-
ber banks having total assets of more than $1 billion. The Portfolio will com-
ply with Rule 2a-7 with respect to its investments in variable rate obligations
supported by letters 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 the Statement of Additional Information.
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.
As a matter of operating policy, the Portfolio may invest no more than 5% of
its total assets in the securities of any one issuer (as determined pursuant to
Rule 2a-7), except that the Portfolio may invest up to 25% of its total assets
in the first tier securities (as defined in Rule 2a-7) of a single issuer for a
period of up to three business days. 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.
TREASURY PORTFOLIO
The securities in which the Treasury Portfolio invests are (1) issues of the
U.S. Treasury, such as bills, certificates of indebtedness, notes and bonds;
and (2) repurchase agreements that are collateralized fully (as that term is
defined in Rule 2a-7). These agreements are en-
8
<PAGE>
tered into with "primary dealers" (as designated by the Federal Reserve Bank
of New York) in U.S. Government securities or State Street Bank and Trust com-
pany, the Fund's Custodian. For each repurchase agreement, the Portfolio re-
quires 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 that the pro-
ceeds from the sale of the collateral were less than the repurchase price. The
Treasury Portfolio may commit up to 15% of its net assets to the purchase of
when-issued U.S. Treasury securities. Delivery and payment for when-issued se-
curities takes place after the transaction date. The payment amount and the
interest rate that will be received on the securities are fixed on the trans-
action date. The value of such securities may fluctuate prior to their settle-
ment, thereby creating an unrealized gain or loss to the Portfolio.
As a matter of operating policy, which may be changed without shareholder ap-
proval, the Treasury Portfolio (i) attempts to invest in securities that com-
ply with the requirements of New Jersey Statutes Section 18A:20-37 so that it
will be an eligible investment for boards of education and other local govern-
ment units within the state of New Jersey, and (ii) does not invest in securi-
ties maintained under the U.S. Treasury STRIPS program or enter into repur-
chase agreements with respect to such securities.
OTHER FUNDAMENTAL INVESTMENT POLICIES. To maintain portfolio diversification
and reduce investment risk, the Treasury Portfolio may not: (1) borrow money
except (a) from banks on a temporary basis or (b) by entering into reverse re-
purchase agreements, in each case in an aggregate amount not exceeding 10% of
its assets and exclusively to facilitate the orderly maturation and sale of
portfolio securities during any periods of abnormally heavy redemption re-
quests, if they should occur; such borrowings may not be used to purchase in-
vestments and the Portfolio will not purchase any investment while any such
borrowings exist; and (2) pledge, hypothecate or in any manner transfer, as
security for indebtedness, its assets except to secure such borrowings.
GENERAL
None of the Portfolios will maintain more than 10% of its net assets in il-
liquid securities. Illiquid securities may include securities that are not
readily marketable, securities subject to legal or contractual restrictions on
resale and repurchase agreements not terminable within seven days. Except with
respect to the Tax-Free Portfolio, which is not permitted to invest in re-
stricted securities, restricted securities that are determined by the Adviser
to be liquid in accordance with procedures adopted by the Directors, including
securities eligible for resale under Rule 144A under the Securities Act of
1933, as amended (the "Securities Act") and commercial paper issued in reli-
ance upon the exemption from registration in Section 4(2) of the Securities
Act, will not be treated as illiquid for purposes of the restriction on illiq-
uid securities. Restricted securities are securities subject to the contrac-
tual or legal restrictions on resale, such as those arising from an issuer's
reliance upon certain exemptions from registration under the Securities Act.
As to illiquid securities, a Portfolio is subject to a risk that, should the
Portfolio's desire to sell them when a ready buyer is not available at a price
the Portfolio deems representative of their value, the value of the Portfo-
lio's net assets could be adversely affected.
Each of the Portfolios may invest in variable rate obligations as permitted
by Rule 2a-7. Variable rate obligations have interest rates which are adjusted
either at predesignated periodic intervals or whenever there is a change in
the market rate to which the interest rate of the variable rate obligation is
tied. Some variable rate obligations allow the holder to demand payment of
principal and accrued interest at any time, or at specified intervals. Each of
the Portfolios follows Rule 2a-7 with respect to the diversification, quality
and maturity of variable rate obligations.
9
<PAGE>
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
Alliance Institutional Reserves, Inc.
--Prime, Government,
Tax-Free or Treasury Portfolio
DDA 9903-279-9
Your account name as registered
Your account number with the Fund
(3) Mail a completed Application Form to:
Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, New Jersey 07096-1520
SUBSEQUENT INVESTMENTS
(1) Telephone Alliance Fund Services, Inc. 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 Alliance Institutional Reserves, Inc. to Al-
liance 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. (Eastern 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. (Eastern time), as described below. If your telephone redemption
order is received by Alliance Fund Services, Inc. prior to 4:00 p.m. (Eastern
time) for the Prime, Government and Treasury Portfolios and prior to 12:00
Noon (Eastern 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 ac-
count that day. Redemptions are made without any charge to you.
During drastic economic or market developments, shareholders might have dif-
ficulty in reaching Alliance Fund Services, Inc. by telephone in which event
the shareholder should issue written instructions to Alliance Fund Services,
Inc. at the address shown in this prospectus. The Funds reserve the right to
suspend or terminate their telephone service at any time without notice. Nei-
ther the Funds nor the Adviser, or Alliance Fund Services, Inc. will be re-
sponsible for the authenticity of telephone requests to purchase or sell
shares. Alliance Fund Services, Inc. will employ reasonable procedures in or-
der to verify that telephone requests are genuine and could be liable for
losses arising from unauthorized transactions if it failed to do so. Selected
dealers or agents may charge a commission for handling telephone requests for
redemptions.
OBTAINING AN APPLICATION
FORM. If you wish to obtain an
Application Form, or you have
questions about the Form, pur-
chasing shares, or other Fund
procedures, please telephone
Alliance Fund Services, Inc.
toll-free at (800) 237-5822.
GENERAL
Each Portfolio offers two other classes of shares, Class B and Class C, by
means of separate prospectuses. The three classes of shares have a common in-
vestment objective and investment portfolio and are identical, ex-
10
<PAGE>
cept that Class B and Class C shares pay a distribution services fee. Because
Class A shares pay no distribution services fee, they are expected to have
performance different from Class B and Class C shares. You can obtain more in-
formation regarding Class B and Class C shares by calling Alliance Fund Serv-
ices, Inc. toll-free at (800) 237-5822 or writing to them at P.O. Box 1520,
Secaucus, New Jersey 07096. Broker-dealers, agents, financial intermediaries
and other financial representatives may receive differing compensation for
selling Class A, Class B and Class C shares.
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 Alliance Institutional Reserves, Inc., c/o Alliance Fund Services,
Inc., P.O. Box 1520, Secaucus, New Jersey 07096, with your signature guaran-
teed by an institution which is an "eligible guarantor" as defined in Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended.
INVESTMENTS MADE BY CHECK. Money transmitted by a check drawn on a member of
the Federal Reserve System is converted to Federal Funds in one business day
following receipt and is then invested in the Fund. Checks drawn on banks
which are not members of the Federal Reserve System may take longer to be con-
verted and invested. All payments must be in United States dollars.
Proceeds from any subsequent redemption by you of Fund shares that were pur-
chased by check will not be forwarded to you until the Fund is reasonably as-
sured that your check has cleared, normally up to fifteen days following the
purchase date.
SHARE PRICE. Shares of each Portfolio of the Fund are sold and redeemed on a
continuous basis without sales or redemption charges at their net asset value
which is expected to be constant at $1.00 per share, although this price is
not guaranteed. The net asset value of each Portfolio's shares, except the
Tax-Free Portfolio, is determined each Fund business day (as defined under
"Purchase and Redemption of Shares--Redemptions," above) at 12:00 Noon and
4:00 p.m. (Eastern time). The net asset value of the Tax-Free Portfolio shares
is determined each Fund business day at 12:00 Noon (Eastern time). The net as-
set value per Class A share of each Portfolio is calculated by taking the sum
of the value of the Portfolio's investments allocable to Class A shares (amor-
tized cost value is used for this purpose) and any cash or other assets allo-
cable to Class A shares, subtracting liabilities allocable to Class A shares,
and dividing by the total number of Class A shares of the Portfolio outstand-
ing. All expenses, including the fees payable to the Adviser, are accrued dai-
ly.
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. (Eastern time). The Tax-Free Portfolio has one transaction time each Fund
business day, 12:00 Noon (Eastern time). Investments receive the full dividend
for a day if the investor's telephone order is placed by 4:00 p.m. (Eastern
time) for the Prime, Government or Treasury 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 (Eastern 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 any time to vary the initial and
subsequent 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.
11
<PAGE>
ADDITIONAL INFORMATION
THE ADVISER. Alliance Capital Management L.P., which is a Delaware limited
partnership with principal offices at 1345 Avenue of the Americas, New York,
New York 10105, has been retained under an advisory agreement to provide in-
vestment advice and, in general, to conduct the management and investment pro-
gram of the Fund, subject to the general supervision and control of the Direc-
tors of the Fund.
The Adviser is a leading international investment manager supervising client
accounts with assets as of March 31, 1998 totaling more than $248 billion (of
which approximately $98 billion represented the assets of investment compa-
nies). The Adviser's clients are primarily major corporate employee benefit
funds, public employee retirement systems, investment companies, foundations
and endowment funds. The 57 registered investment companies managed by the Ad-
viser comprising 121 separate investment portfolios currently have over three
million shareholder accounts. As of March 31, 1998, the Adviser was retained
as an investment manager for employee benefit plan assets of 33 of the Fortune
100 companies.
Alliance Capital Management Corporation, the sole general partner of, and the
owner of a 1% general partnership interest in, the Adviser, is an indirect
wholly-owned subsidiary of The Equitable Life Assurance Society of the United
States ("Equitable"), one of the largest life insurance companies in the
United States, which is a wholly-owned subsidiary of The Equitable Companies
Incorporated, a holding company controlled by AXA-UAP, a French insurance
holding company. Certain information concerning the ownership and control of
Equitable by AXA-UAP is set forth in the Statement of Additional Information
under "Management of the Fund."
For the fiscal year ended April 30, 1998, the Prime, Government and Tax-Free
Portfolios each paid the Adviser a management fee (net of reimbursement) at an
annual rate of .16 of 1%, .12 of 1% and .12 of 1%, respectively, of the aver-
age daily value of its net assets. The Adviser has undertaken until, at its
request, the Fund notifies investors to the contrary, that if, in any fiscal
year, the aggregate expenses with respect to the Class A shares of a Portfo-
lio, exclusive of taxes, brokerage, interest on borrowings and extraordinary
expenses, but including the management fee, exceed .20% of the Portfolio's av-
erage net assets for the fiscal year attributable to its Class A shares, the
Portfolio may deduct from the payment to be made to the Adviser, or the Ad-
viser will bear, such excess expense.
The Adviser may make payments from time to time from its own resources, which
may include the management fees paid by the 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 Class A shares of the Fund, including paying for the preparation,
printing and distribution of prospectuses and sales literature or other promo-
tional activities.
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.
DAILY DIVIDENDS, OTHER DISTRIBUTIONS, TAXES. All net income of the Tax-Free
Portfolio is determined each business day at 12:00 Noon (Eastern time), and
that of the Prime, Government and Treasury Portfolios each business day at
4:00 p.m. (Eastern time), and is paid immediately thereafter pro rata to
shareholders of record via automatic investment in additional full and frac-
tional shares of that Portfolio in each shareholder's account. As such addi-
tional 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
12
<PAGE>
above), but 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 cor-
porate AMT. Distributions out of taxable interest income, other investment in-
come, and short term capital gains are taxable as ordinary income and distri-
butions of long term capital gains, if any, are taxable as long-term capital
gains irrespective of the length of time a shareholder held his shares.
YEAR 2000. Many computer software systems in use today cannot properly proc-
ess date-related information from and after January 1, 2000. Should any of the
computer systems employed by the Fund's major service providers fail to proc-
ess this type of information properly, that could have a negative impact on
the Fund's operations and the services that are provided to the Fund's share-
holders. The Adviser, Alliance Fund Distributors, Inc., and Alliance Fund
Services, Inc. have advised the Fund that they are reviewing all of their com-
puter systems with the goal of modifying or replacing such systems prior to
January 1, 2000 to the extent necessary to foreclose any such negative impact.
In addition, the Adviser has been advised by the Fund's custodian that it is
also in the process of reviewing its systems with the same goal. As of the
date of this prospectus, the Fund and the Adviser have no reason to believe
that these goals will not be achieved. Similarly, the values of certain of the
portfolio securities held by the Fund may be adversely affected by the inabil-
ity of the securities' issuers or of third parties to process this type of in-
formation properly.
FUND ORGANIZATION. The Fund is an open-end management investment company reg-
istered under the Act consisting of the four 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. Generally, shares of each
portfolio and class will vote together as a single class on matters, such as
the election of Directors, that affect each portfolio and class in substan-
tially the same manner.
Maryland law does not require annual meetings of shareholders and it is an-
ticipated that shareholder meetings will be held only when required by federal
or Maryland law. Shareholders have available certain procedures for the re-
moval of directors.
REPORTS. Shareholders will receive a monthly summary of their account, as
well as semi-annual and annual reports. Shareholders may arrange for a copy of
each of their account statements to be sent to other parties.
Shareholders requiring sub-accounting services should contact Alliance Fund
Services, Inc. for a description of such services and fees.
13
<PAGE>
<PAGE>
SHAREHOLDER SERVICES
Shareholder representatives are
available to answer your ques-
tions about the status of your
account or other Fund matters.
Call toll-free (800) 237-5822
or write the Fund, c/o Alliance
Fund Services, Inc., P.O. Box
1520, Secaucus, New Jersey
07096-1520.
YIELDS. For recorded current
yield information on the Class B
shares of the Portfolios, call
on a touch-tone telephone toll-
free (800) 251-0539 and press
the following sequence of keys:
[1] # [1] # [2][1][6] # for the Prime Portfolio
[1] # [1] # [2][2][7] # for the Government Portfolio
[1] # [1] # [2][2][8] # for the Treasury Portfolio
[1] # [1] # [1][3][8] # for the Tax-Free Portfolio
Alliance Institutional Reserves, Inc. (the "Fund") is an open-end investment
company. The Prime Portfolio, the Government Portfolio, the Tax-Free Portfolio
and the Treasury Portfolio (each a "Portfolio" and collectively the "Portfo-
lios"), each of which is diversified, are offered by this prospectus. The
Fund's investment objectives 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.
The Fund offers investors a convenient and economical way to invest in managed
portfolios.
This prospectus, which offers the Class B shares of each Portfolio, sets forth
information about the 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 June 29, 1998, which provides a
further discussion of certain matters discussed in this prospectus and certain
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 ref-
erence. For a free copy, call or write the Fund at the telephone number or ad-
dress 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.
ALLIANCE
INSTITUTIONAL RESERVES
--PRIME PORTFOLIO
--GOVERNMENT PORTFOLIO
--TAX-FREE PORTFOLIO
--TREASURY PORTFOLIO
[LOGO OF ALLIANCE CAPITAL(R) APPEARS HERE]
PROSPECTUS
CLASS B SHARES
JUNE 29, 1998
<PAGE>
EXPENSE INFORMATION--CLASS B SHARES
SHAREHOLDER TRANSACTION EXPENSES
Class B shares of the Fund have no sales load on purchases or reinvested div-
idends, deferred sales load, redemption fee or exchange fee.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net
assets, PRIME GOVERNMENT TAX-FREE TREASURY
net of expense reimbursement or fee PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
waiver) --------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Management Fees..................... .20% .20% .20% .20%
12b-1 Fees.......................... .10% .10% .10% .10%
Other Expenses...................... None None None None
---- ---- ---- ----
Total Fund Operating Expenses....... .30% .30% .30% .30%
</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................................ $ 3 $10 $17 $38
Government Portfolio........................... $ 3 $10 $17 $38
Tax-Free Portfolio............................. $ 3 $10 $17 $38
Treasury Portfolio............................. $ 3 $10 $17 $38
</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 Class B shares of
the Prime, Government, Tax-Free and Treasury 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 expense reimbursements or fee waivers, would
be: Prime Portfolio: Management Fees--.20%, 12b-1 Fees--.10%, Other Expenses--
.03% and Total Fund Operating Expenses--.33%; Government Portfolio: Management
Fees--.20%, 12b-1 Fees--.10%, Other Expenses--.09% and Total Fund Operating
Expenses--.39%; Tax-Free Portfolio: Management Fees--.20%, 12b-1 Fees--.10%,
Other Expenses--.08% and Total Fund Operating Expenses--.38%; Treasury Portfo-
lio: Management Fees--.20%, 12b-1 Fees--.10%, Other Expenses--.09% and Total
Operating Expenses--.39%. Such expenses are based on estimated amounts for the
Fund's current fiscal year. The example should not be considered a representa-
tion of past or future expenses; actual expenses may be greater or less than
those shown.
---------------
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 reinvest-
ed. Further information 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.
2
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INTRODUCTION
The Fund consists of five distinct Portfolios, the Class B shares of four of
which, the Prime Portfolio, the Government Portfolio, the Tax-Free Portfolio
and the Treasury Portfolio, are offered by this prospectus. Each Portfolio in-
vests in a diversified portfolio of money market securities. The Fund is de-
signed for investors who can benefit from money market income. Investors in
the Fund avoid certain administrative burdens that they would incur by invest-
ing in money market instruments directly, such as monitoring of maturity
dates, safeguarding of receipts and deliveries, and the maintenance of tax in-
formation and other records. At the time of investment, no security purchased
by the Prime Portfolio, the Government Portfolio and the Tax-Free Portfolio
can have a maturity exceeding one year, which maturity may extend to 397 days.
The Treasury Portfolio may invest in high-quality money market securities
which, at the time of investment, have remaining maturities of 397 days or
less. 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, except the Treasury 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 re-
maining maturity of one year or less, which maturity may extend to 397 days or
such greater length of time as may be permitted from time to time pursuant to
Rule 2a-7 ("Rule 2a-7") under the Investment Company Act of 1940, as amended
(the "Act"). The Treasury 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, which maturities
may extend to such greater length of time as may be permitted from time to
time pursuant to Rule 2a-7. The fundamental investment policies described be-
low may not be changed for a Portfolio without shareholder approval. The non-
fundamental 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, as amended from time to time, in-
cluding the diversification, quality and maturity requirements imposed by the
Rule (a more detailed description of Rule 2a-7 is set forth in the Portfolios'
Statement of Additional Information under "Investment Objectives and Poli-
cies"). 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, or 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 it may invest; (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 compa-
nies 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
fully as that term is defined in Rule 2a-7.
3
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These agreements are entered into with "primary dealers" (as designated by the
Federal Reserve Bank of New York) in U.S. Government securities or State
Street Bank and Trust Company, the Fund's Custodian. For each repurchase
agreement, the Portfolio requires continual maintenance of the market value of
the underlying collateral in amounts equal to, or in excess of, the agreement
amount. In the event of a dealer default, the Portfolio might suffer a loss to
the extent the proceeds from the sale of the collateral were less than the re-
purchase price. The Portfolio may also invest in the types of instruments de-
scribed in (2) above issued or maintained at foreign branches of U.S. banks
described in such clause and prime quality dollar-denominated commercial 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 involving periodi-
cally fluctuating rates of interest under a letter agreement between a commer-
cial paper issuer and an institutional lender pursuant to which the lender may
determine to invest varying amounts.
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, the Portfolio may invest no more than 5% of
its total assets in the securities of any one issuer (as determined pursuant
to Rule 2a-7), except that the Portfolio may invest up to 25% of its total as-
sets in the first tier securities (as defined in Rule 2a-7) of a single issuer
for a period of up to three business days. 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 fully as that term is defined in Rule 2a-7. These agree-
ments are entered into with "primary dealers" (as designated by the Federal
Reserve Bank of New York) in U.S. Government securities or State Street Bank
and Trust Company, the Fund's custodian. For each repurchase agreement, the
Portfolio requires con-
4
<PAGE>
tinual 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 de-
fault, 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. Govern-
ment securities. 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 gener-
ally 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 purchase of the issue. The value of when-issued securities may fluc-
tuate prior to their settlement, thereby creating an unrealized gain or loss
to the Portfolio.
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, which maturities may extend to 397 days (as opposed to taxable invest-
ments described below). Normally, substantially 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 securities that have variable or floating rates
of interest ("variable rate obliga-
5
<PAGE>
tions") whose interest rates are adjusted either at predesignated periodic in-
tervals 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 obligations 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 the Statement of Additional Information.
TAXABLE INVESTMENTS. The taxable investments in which the Portfolio may in-
vest include obligations of the U.S. Government and its agencies, high-quality
certificates of deposit and bankers' acceptances, prime commercial paper and
repurchase agreements.
OTHER FUNDAMENTAL INVESTMENT POLICIES. To reduce investment risk, the Portfo-
lio may not (1) invest more than 25% of its total assets in municipal securi-
ties whose issuers are located in the same state or in municipal securities
the interest upon which is paid from revenues of similar-type projects; (2)
invest more than 5% of its total assets in the securities of any one issuer
except the U.S. Government, although with respect to 25% of its total assets
the Portfolio may invest up to 10% per issuer; (3) purchase more than 10% of
any class of the voting securities of any one issuer except those of the U.S.
Government; (4) invest more than 10% of its assets in repurchase agreements
not terminable within seven days (whether or not illiquid) or other illiquid
investments; (5) have more than 5% of its assets invested in repurchase agree-
ments with the same vendor; and (6) borrow money except from banks on a tempo-
rary basis for extraordinary or emergency purposes in an aggregate amount not
to exceed 15% of the Portfolio's total assets; the Portfolio will not purchase
any investments while borrowings in excess of 5% of total assets exist.
As a matter of operating policy, the Portfolio may invest no more than 5% of
its total assets in the securities of any one issuer (as determined pursuant
to Rule 2a-7), except that the Portfolio may invest up to 25% of its total as-
sets in the first tier securities (as defined in Rule 2a-7) of a single issuer
for a period of up to three business days. 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.
TREASURY PORTFOLIO
The securities in which the Treasury Portfolio invests are (1) issues of the
U.S. Treasury, such as bills, certificates of indebtedness, notes and bonds;
and (2) repurchase agreements that are collateralized fully (as that term is
defined in Rule 2a-7). These agreements are entered into with "primary deal-
ers" (as designated by the Federal Reserve Bank of New York) in U.S. Govern-
ment securities or State Street Bank and Trust company, the Fund's Custodian.
For each repurchase agreement, the Portfolio requires continual maintenance of
the market value of the underlying collateral in amounts equal to, or in ex-
cess of, the agreement amount. In the event of a dealer default, the Portfolio
might suffer a loss to the extent that the proceeds from the sale of the
collat-
6
<PAGE>
PURCHASE AND REDEMPTION OF SHARES
eral were less than the repurchase price. The Treasury Portfolio may commit up
to 15% of its net assets to the purchase of when-issued U.S. Treasury securi-
ties. Delivery and payment for when-issued securities takes place after the
transaction date. The payment amount and the interest rate that will be re-
ceived on the securities are fixed on the transaction date. The value of such
securities may fluctuate prior to their settlement, thereby creating an
unrealized gain or loss to the Portfolio.
As a matter of operating policy, which may be changed without shareholder ap-
proval, the Treasury Portfolio (i) attempts to invest in securities that com-
ply with the requirements of New Jersey Statutes Section 18A:20-37 so that it
will be an eligible investment for boards of education and other local govern-
ment units within the state of New Jersey, and (ii) does not invest in securi-
ties maintained under the U.S. Treasury STRIPS program or enter into repur-
chase agreements with respect to such securities.
OTHER FUNDAMENTAL INVESTMENT POLICIES. To maintain portfolio diversification
and reduce investment risk, the Treasury Portfolio may not: (1) borrow money
except (a) from banks on a temporary basis or (b) by entering into reverse re-
purchase agreements, in each case in an aggregate amount not exceeding 10% of
its assets and exclusively to facilitate the orderly maturation and sale of
portfolio securities during any periods of abnormally heavy redemption re-
quests, if they should occur; such borrowings may not be used to purchase in-
vestments and the Portfolio will not purchase any investment while any such
borrowings exist; and (2) pledge, hypothecate or in any manner transfer, as
security for indebtedness, its assets except to secure such borrowings.
GENERAL
None of the Portfolios will maintain more than 10% of its net assets in il-
liquid securities. Illiquid securities may include securities that are not
readily marketable, securities subject to legal or contractual restrictions on
resale and repurchase agreements not terminable within seven days. Except with
respect to the Tax-Free Portfolio, which is not permitted to invest in re-
stricted securities, restricted securities that are determined by the Adviser
to be liquid in accordance with procedures adopted by the Directors, including
securities eligible for resale under Rule 144A under the Securities Act of
1933, as amended (the "Securities Act") and commercial paper issued in reli-
ance upon the exemption from registration in Section 4(2) of the Securities
Act, will not be treated as illiquid for purposes of the restriction on illiq-
uid securities. Restricted securities are securities subject to the contrac-
tual or legal restrictions on resale, such as those arising from an issuer's
reliance upon certain exemptions from registration under the Securities Act.
As to illiquid securities, a Portfolio is subject to a risk that, should the
Portfolio's desire to sell them when a ready buyer is not available at a price
the Portfolio deems representative of their value, the value of the Portfo-
lio's net assets could be adversely affected.
Each of the Portfolios may invest in variable rate obligations as permitted
by Rule 2a-7. Variable rate obligations have interest rates which are adjusted
either at predesignated periodic intervals or whenever there is a change in
the market rate to which the interest rate of the variable rate obligation is
tied. Some variable rate obligations allow the holder to demand payment of
principal and accrued interest at any time, or at specified intervals. Each of
the Portfolios follows Rule 2a-7 with respect to the diversification, quality
and maturity of variable rate obligations.
Class B shares are available through your financial intermediary.
OPENING ACCOUNTS
Instruct your financial intermediary to use one or more Portfolios.
SUBSEQUENT INVESTMENTS
BY CHECK. Mail or deliver your check or negotiable draft, payable to your fi-
nancial intermediary, who will deposit it into the Portfolio(s). Please desig-
nate the appropriate Portfolio and indicate your brokerage account (if appli-
cable) number on the check or draft.
7
<PAGE>
BY SWEEP. Your financial intermediary may offer an automatic "sweep" for the
Fund in the operation of brokerage cash accounts. Contact your financial in-
termediary to determine if a sweep is available and what the sweep parameters
are.
REDEMPTIONS
BY CONTACTING YOUR FINANCIAL INTERMEDIARY. Instruct your financial intermedi-
ary to order a withdrawal from your Fund account.
BY SWEEP. If your financial intermediary offers an automatic sweep arrange-
ment, the sweep will automatically transfer from your Fund account sufficient
amounts to cover security purchase in your brokerage account.
GENERAL
A transaction, service, administrative or other similar fee may be charged by
your broker-dealer, agent, financial intermediary or other financial represen-
tative with respect to the purchase, sale or exchange of shares made through
such financial representative. Such financial intermediaries may also impose
requirements with respect to the purchase, sale or exchange of shares that are
different from, or in addition to, those imposed by the Fund.
Each Portfolio offers two other classes of shares, Class A and Class C, by
means of separate prospectuses. The three classes of shares have a common in-
vestment objective and investment portfolio and are identical, except as to
the level of distribution services fee, if any, paid by each class. Because of
the different level of distribution services fees paid by the other two clas-
ses of shares, Class B shares are expected to have performance different from
Class A and Class C shares. You can obtain more information regarding the
other classes by calling Alliance Fund Services, Inc. toll-free at (800) 237-
5822 or writing to them at P.O. Box 1520, Secaucus, New Jersey 07096. Broker-
dealers, agents, financial intermediaries and other financial representatives
may receive differing compensation for selling Class A, Class B and Class C
shares.
INVESTMENTS MADE BY CHECK. Money transmitted by a check drawn on a member of
the Federal Reserve System is converted to Federal Funds in one business day
following receipt and is then invested in the Fund. Checks drawn on banks
which are not members of the Federal Reserve System may take longer to be con-
verted and invested. All payments must be in United States dollars.
Proceeds from any subsequent redemption by you of Fund shares that were pur-
chased by check will not be forwarded to you until the Fund is reasonably as-
sured that your check has cleared, normally up to fifteen days following the
purchase date.
SHARE PRICE. Shares of each Portfolio of the Fund are sold and redeemed on a
continuous basis without sales or redemption charges at their net asset value
which is expected to be constant at $1.00 per share, although this price is
not guaranteed. The net asset value of each Portfolio's shares, except the
Tax-Free Portfolio, is determined each Fund business day (as defined under
"Purchase and Redemption of Shares--Redemptions," above) at 12:00 Noon and
4:00 p.m. (Eastern time). The net asset value of the Tax-Free Portfolio shares
is determined each Fund business day at 12:00 Noon (Eastern time). The net as-
set value per Class B share of each Portfolio is calculated by taking the sum
of the value of the Portfolio's investments allocable to Class B shares (amor-
tized cost value is used for this purpose) and any cash or other assets allo-
cable to Class B shares, subtracting liabilities allocable to Class B shares,
and dividing by the total number of Class B shares of the Portfolio outstand-
ing. All expenses, including the fees payable to the Adviser, are accrued dai-
ly.
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. (Eastern time). The Tax-Free Portfolio has one transaction time each Fund
business day, 12:00 Noon (Eastern time). Investments receive the full dividend
for a day if the investor's telephone order is placed by 4:00 p.m. (Eastern
time) for the Prime, Government or Treasury 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 (Eastern 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.
8
<PAGE>
ADDITIONAL INFORMATION
During drastic economic or market developments shareholders might have
difficulty in reaching Alliance Fund Services, Inc. by telephone, in which
event the shareholder should issue written instructions to Alliance Fund Serv-
ices, Inc. at the address shown in this prospectus. The Fund reserves the
right to suspend or terminate its telephone service at any time without no-
tice. Neither the Fund nor the Adviser, or Alliance Fund Services, Inc. will
be responsible for the authenticity of telephone requests to purchase or sell
shares. Alliance Fund Services, Inc. will employ reasonable procedures in or-
der to verify that telephone requests are genuine, and could be liable for
losses arising from unauthorized transactions if it failed to do so. Selected
dealers or agents may charge a fee for handling telephone requests for redemp-
tions.
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.
THE ADVISER. Alliance Capital Management L.P., which is a Delaware limited
partnership with principal offices at 1345 Avenue of the Americas, New York,
New York 10105, has been retained under an advisory agreement to provide in-
vestment advice and, in general, to conduct the management and investment pro-
gram of the Fund, subject to the general supervision and control of the Direc-
tors of the Fund.
The Adviser is a leading international investment manager supervising client
accounts with assets as of March 31, 1998 totaling more than $248 billion (of
which approximately $98 billion represented the assets of investment compa-
nies). The Adviser's clients are primarily major corporate employee benefit
funds, public employee retirement systems, investment companies, foundations
and endowment funds. The 57 registered investment companies managed by the Ad-
viser comprising 121 separate investment portfolios currently have over three
million shareholder accounts. As of March 31, 1998 the Adviser was retained as
an investment manager for employee benefit plan assets of 33 of the Fortune
100 companies.
Alliance Capital Management Corporation, the sole general partner of, and the
owner of a 1% general partnership interest in, the Adviser, is an indirect
wholly-owned subsidiary of The Equitable Life Assurance Society of the United
States ("Equitable"), one of the largest life insurance companies in the
United States, which is a wholly-owned subsidiary of The Equitable Companies
Incorporated, a holding company controlled by AXA-UAP, a French insurance
holding company. Certain information concerning the ownership and control of
Equitable by AXA-UAP is set forth in the Statement of Additional Information
under "Management of the Fund."
Each Portfolio pays the Adviser at an annual rate of .20% of the average
daily value of its net assets. The Adviser has undertaken until, at its re-
quest, the Fund notifies investors to the contrary, that if, in any fiscal
year, the aggregate expenses with respect to the Class B shares of a Portfo-
lio, exclusive of taxes, brokerage, interest on borrowings and extraordinary
expenses, but including the management fee and distribution services fee, ex-
ceed .30% of the Portfolio's average net assets for the fiscal year attribut-
able to its Class B shares, the Portfolio may deduct from the payment to be
made to the Adviser, or the Adviser will bear, such excess expense.
9
<PAGE>
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 Class B shares of the Fund, including paying for the preparation,
printing and distribution of prospectuses and sales literature or other promo-
tional activities.
DISTRIBUTION AGREEMENT. Rule 12b-1 under the Act permits an investment com-
pany to pay expenses associated with the distribution of its shares in accor-
dance with a duly adopted plan. Effective June 29, 1998, the Fund adopted a
"Rule 12b- 1 Plan" and entered into an amended Distribution Agreement (the
"Agreement") with Alliance Fund Distributors, Inc., the Fund's distributor
("AFD"), in connection with the distribution of each Portfolio's Class B
shares. Pursuant to the Rule 12b-1 Plan, the Fund pays AFD a distribution
services fee at an annual rate of .10% of the aggregate average daily net as-
sets attributable to the Class B shares of each Portfolio. The Glass-Steagall
Act and other applicable laws may limit the ability of a bank or other deposi-
tory institution to become an underwriter or distributor of securities. Howev-
er, in the opinion of the Fund's management, based on the advice of counsel,
these laws do not prohibit such depository institutions from providing serv-
ices for investment companies such as the administrative, accounting and other
services referred to in the Agreement. In the event that a change in these
laws prevented a bank from providing such services, it is expected that other
service arrangements would be made and that shareholders would not be ad-
versely affected.
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.
DAILY DIVIDENDS, OTHER DISTRIBUTIONS, TAXES. All net income of the Tax-Free
Portfolio is determined each business day at 12:00 Noon (Eastern time), and
that of the Prime, Government and Treasury Portfolios each business day at
4:00 p.m. (Eastern time), and is paid immediately thereafter pro rata to
shareholders of record via automatic investment in additional full and frac-
tional shares of that Portfolio in each shareholder's account. As such addi-
tional shares are entitled to dividends on following days, a compounding
growth of income occurs.
A Portfolio's net income consists of all accrued interest income on assets
less expenses applicable to that dividend period. Realized gains and losses
are reflected in net asset value and are not included in net income.
Distributions out of tax-exempt interest income earned by the Tax-Free Port-
folio are not subject to federal income tax (other than the AMT as described
above), but may be subject to state or local income taxes. Any exempt-interest
dividends derived from interest on municipal securities subject to the AMT
will be a tax preference item for purposes of the federal individual and cor-
porate AMT. Distributions out of taxable interest income, other investment in-
come, and short-term capital gains are taxable as ordinary income and distri-
butions of long-term capital gains, if any, are taxable as long-term capital
gains irrespective of the length of time a shareholder held his shares.
YEAR 2000. Many computer software systems in use today cannot properly proc-
ess date-related information from and after January 1, 2000. Should any of the
computer systems employed by the Fund's major service providers fail to proc-
ess this type of information properly, that could have a negative impact on
the Fund's operations and the services that are provided to the Fund's share-
holders. The Adviser, AFD and Alliance Fund Services, Inc., have advised the
Fund that they are reviewing all of their computer systems with the goal of
modifying or replacing such systems prior to January 1, 2000 to the extent
necessary to foreclose any such negative impact. In addition, the Adviser has
been advised by the Fund's custodian that it is also in the process of review-
ing its systems with the same goal. As of the date of this prospectus, the
Fund and the Adviser have no reason to believe that these goals will not be
achieved. Similarly, the values of certain of the portfolio securities held by
the Fund may be adversely affected by the in-
10
<PAGE>
ability of the securities' issuers or of third parties to process this type of
information properly.
FUND ORGANIZATION. The Fund is an open-end management investment company reg-
istered under the Act consisting of the four 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. Generally, shares of each
portfolio and class will vote together as a single class on matters, such as
the election of Directors, that affect each portfolio and class in substan-
tially the same manner.
Maryland law does not require annual meetings of shareholders and it is an-
ticipated that shareholder meetings will be held only when required by federal
or Maryland law. Shareholders have available certain procedures for the re-
moval of directors.
REPORTS. Shareholders will receive a monthly summary of their account, as
well as semi-annual and annual reports. Shareholders may arrange for a copy of
each of their account statements to be sent to other parties.
11
<PAGE>
<PAGE>
SHAREHOLDER SERVICES
Shareholder representatives are
available to answer your ques-
tions about the status of your
account or other Fund matters.
Call toll-free (800) 237-5822
or write the Fund, c/o Alliance
Fund Services, Inc., P.O. Box
1520, Secaucus, New Jersey
07096-1520.
YIELDS. For recorded current
yield information on the Class C
shares of the Portfolios, call
on a touch-tone telephone toll-
free (800) 251-0539 and press
the following sequence of keys:
[1] # [1] # [3][1][6] # for the Prime Portfolio
[1] # [1] # [3][2][7] # for the Government Portfolio
[1] # [1] # [3][2][8] # for the Treasury Portfolio
[1] # [1] # [2][3][8] # for the Tax-Free Portfolio
Alliance Institutional Reserves, Inc. (the "Fund") is an open-end investment
company. The Prime Portfolio, the Government Portfolio, the Tax-Free Portfolio
and the Treasury Portfolio (each a "Portfolio" and collectively the "Portfo-
lios"), each of which is diversified, are offered by this prospectus. The
Fund's investment objectives 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.
The Fund offers investors a convenient and economical way to invest in managed
portfolios.
This prospectus, which offers the Class C shares of each Portfolio, sets forth
information about the 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 June 29, 1998, which provides a
further discussion of certain matters discussed in this prospectus and certain
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 ref-
erence. For a free copy, call or write the Fund at the telephone number or ad-
dress 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.
ALLIANCE
INSTITUTIONAL RESERVES
--PRIME PORTFOLIO
--GOVERNMENT PORTFOLIO
--TAX-FREE PORTFOLIO
--TREASURY PORTFOLIO
[LOGO OF ALLIANCE CAPITAL(R) APPEARS HERE]
PROSPECTUS
CLASS C SHARES
JUNE 29, 1998
<PAGE>
EXPENSE INFORMATION--CLASS C SHARES
SHAREHOLDER TRANSACTION EXPENSES
Class C shares of the Fund have no sales load on purchases or reinvested div-
idends, 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 PRIME GOVERNMENT TAX-FREE TREASURY
or PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
fee waiver) --------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Management Fees..................... .20% .20% .20% .20%
12b-1 Fees.......................... .25% .25% .25% .25%
Other Expenses...................... None None None None
---- ---- ---- ----
Total Fund Operating Expenses....... .45% .45% .45% .45%
</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................................ $ 5 $14 $25 $57
Government Portfolio........................... $ 5 $14 $25 $57
Tax-Free Portfolio............................. $ 5 $14 $25 $57
Treasury Portfolio............................. $ 5 $14 $25 $57
</TABLE>
The purpose of the foregoing table is to assist the investor in understanding
the various costs and expenses that an investor in the Class C shares of the
Prime, Government, Tax-Free and Treasury Portfolios will bear directly and in-
directly. The expenses listed in the table for each Portfolio are net of volun-
tary expense reimbursements and voluntary fee waivers. The expenses of such
Portfolios, before voluntary expense reimbursements or fee waivers, would be:
Prime Portfolio: Management Fees--.20%, 12b-1 Fees--.25% Other Expenses--.03%
and Total Fund Operating Expenses--.48%; Government Portfolio: Management
Fees--.20%, 12b-1 Fees--.25% Other Expenses--.09% and Total Fund Operating Ex-
penses--.54%; Tax-Free Portfolio: Management Fees--.20%, 12b-1 Fees--.25%,
Other Expenses--.08% and Total Fund Operating Expenses--.53%; Treasury Portfo-
lio: Management Fees--.20%, 12b-1 Fees--.25%, Other Expenses--.09% and Total
Operating Expenses--.54%. Such expenses are based on estimated amounts for the
Fund's current fiscal year. The example should not be considered a representa-
tion of past or future expenses; actual expenses may be greater or less than
those shown.
--------------
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. Fur-
ther information about each Portfolio's performance is contained in the annual
report to shareholders and Statement of Additional Information which may be ob-
tained without charge by contacting Alliance Fund Services, Inc. at the address
or the telephone number shown on the cover of this prospectus.
2
<PAGE>
INTRODUCTION
The Fund consists of five distinct Portfolios, the Class C shares of four of
which, the Prime Portfolio, the Government Portfolio, the Tax-Free Portfolio
and the Treasury Portfolio, are offered by this prospectus. Each Portfolio in-
vests in a diversified portfolio of money market securities. The Fund is de-
signed for investors who can benefit from money market income. Investors in
the Fund avoid certain administrative burdens that they would incur by invest-
ing in money market instruments directly, such as monitoring of maturity
dates, safeguarding of receipts and deliveries, and the maintenance of tax in-
formation and other records. At the time of investment, no security purchased
by the Prime Portfolio, the Government Portfolio and the Tax-Free Portfolio
can have a maturity exceeding one year, which maturity may extend to 397 days.
The Treasury Portfolio may invest in high-quality money market securities
which, at the time of investment, have remaining maturities of 397 days or
less. 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, except the Treasury 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 re-
maining maturity of one year or less, which maturity may extend to 397 days or
such greater length of time as may be permitted from time to time pursuant to
Rule 2a-7 ("Rule 2a-7") under the Investment Company Act of 1940, as amended
(the "Act"). The Treasury 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, which maturities
may extend to such greater length of time as may be permitted from time to
time pursuant to Rule 2a-7. The fundamental investment policies described be-
low may not be changed for a Portfolio without shareholder approval. The non-
fundamental 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, as amended from time to time, in-
cluding the diversification, quality and maturity requirements imposed by the
Rule (a more detailed description of Rule 2a-7 is set forth in the Portfolios'
Statement of Additional Information under "Investment Objectives and Poli-
cies"). 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, or 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 it may invest; (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 compa-
nies 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
3
<PAGE>
collateralized fully as that term is defined in Rule 2a-7. These agreements
are entered into with "primary dealers" (as designated by the Federal Reserve
Bank of New York) in U.S. Government securities or State Street Bank and Trust
Company, the Fund's Custodian. For each repurchase agreement, the Portfolio
requires continual maintenance of the market value of the underlying collat-
eral 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 pro-
ceeds from the sale of the collateral were less than the repurchase price. The
Portfolio may also invest in the types of instruments described in (2) above
issued or maintained at foreign branches of U.S. banks described in such
clause and prime quality dollar-denominated commercial paper issued by foreign
companies meeting the criteria specified in (3) above. The 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.
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, the Portfolio may invest no more than 5% of
its total assets in the securities of any one issuer (as determined pursuant
to Rule 2a-7), except that the Portfolio may invest up to 25% of its total as-
sets in the first tier securities (as defined in Rule 2a-7) of a single issuer
for a period of up to three business days. 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 fully as that term is defined in Rule 2a-7. These agree-
ments are entered into with "primary dealers" (as designated by the Federal
Reserve Bank of New
4
<PAGE>
York) in U.S. Government securities or State Street Bank and Trust Company, the
Fund's custodian. For each repurchase agreement, the Portfolio requires contin-
ual 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 de-
fault, 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. Govern-
ment securities. 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 ex-
pressed 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
purchase 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 Na-
tional 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 Port-
folio will not purchase any investments while borrowings in excess of 5% of to-
tal 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 as-
sets in high-grade municipal securities having maturities of one year or less,
which maturities may extend to 397 days (as opposed to taxable investments de-
scribed below). Normally, substantially 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 munici-
pal securities. Such income may be subject to state or local income taxes. In-
vestors should compare yields (which will fluctuate in response to market con-
ditions) and tax consequences before making an investment decision.
Under current federal income tax law, (1) interest on tax-exempt municipal se-
curities 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-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 have provided, and
may continue to 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 in-
terest 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 matu-
rities of one year or less. Examples include tax anticipation and revenue an-
ticipation notes which are generally issued in anticipation of various seasonal
revenues, bond anticipation notes, and tax-exempt commercial paper. Short-term
municipal bonds may include general obligation bonds, which are secured by the
issuer's pledge of its faith, credit and taxing power for
5
<PAGE>
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 securities that have variable or floating rates of
interest ("variable rate obligations") whose interest rates are adjusted either
at predesignated periodic intervals or whenever there is a change in the market
rate to which the security's interest rate is tied. Such adjustments minimize
changes in the market value of the obligation and, accordingly, enhance the
ability of the Portfolio to maintain a stable net asset value. Variable rate
obligations purchased may include participation interests in private activity
bonds backed by letters of credit of Federal Deposit Insurance Corporation mem-
ber banks having total assets of more than $1 billion. The Portfolio will com-
ply with Rule 2a-7 with respect to its investments in variable rate obligations
supported by letters 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 the Statement of Additional Information.
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.
As a matter of operating policy, the Portfolio may invest no more than 5% of
its total assets in the securities of any one issuer (as determined pursuant to
Rule 2a-7), except that the Portfolio may invest up to 25% of its total assets
in the first tier securities (as defined in Rule 2a-7) of a single issuer for a
period of up to three business days. 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.
TREASURY PORTFOLIO
The securities in which the Treasury Portfolio invests are (1) issues of the
U.S. Treasury, such as bills, certificates of indebtedness, notes and bonds;
and (2) repurchase agreements that are collateralized fully (as that term is
defined in Rule 2a-7). These agreements are en-
6
<PAGE>
tered into with "primary dealers" (as designated by the Federal Reserve Bank
of New York) in U.S. Government securities or State Street Bank and Trust com-
pany, the Fund's Custodian. For each repurchase agreement, the Portfolio re-
quires 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 that the pro-
ceeds from the sale of the collateral were less than the repurchase price. The
Treasury Portfolio may commit up to 15% of its net assets to the purchase of
when-issued U.S. Treasury securities. Delivery and payment for when-issued se-
curities takes place after the transaction date. The payment amount and the
interest rate that will be received on the securities are fixed on the trans-
action date. The value of such securities may fluctuate prior to their settle-
ment, thereby creating an unrealized gain or loss to the Portfolio.
As a matter of operating policy, which may be changed without shareholder ap-
proval, the Treasury Portfolio (i) attempts to invest in securities that com-
ply with the requirements of New Jersey Statutes Section 18A:20-37 so that it
will be an eligible investment for boards of education and other local govern-
ment units within the state of New Jersey, and (ii) does not invest in securi-
ties maintained under the U.S. Treasury STRIPS program or enter into repur-
chase agreements with respect to such securities.
OTHER FUNDAMENTAL INVESTMENT POLICIES. To maintain portfolio diversification
and reduce investment risk, the Treasury Portfolio may not: (1) borrow money
except (a) from banks on a temporary basis or (b) by entering into reverse re-
purchase agreements, in each case in an aggregate amount not exceeding 10% of
its assets and exclusively to facilitate the orderly maturation and sale of
portfolio securities during any periods of abnormally heavy redemption re-
quests, if they should occur; such borrowings may not be used to purchase in-
vestments and the Portfolio will not purchase any investment while any such
borrowings exist; and (2) pledge, hypothecate or in any manner transfer, as
security for indebtedness, its assets except to secure such borrowings.
GENERAL
None of the Portfolios will maintain more than 10% of its net assets in il-
liquid securities. Illiquid securities may include securities that are not
readily marketable, securities subject to legal or contractual restrictions on
resale and repurchase agreements not terminable within seven days. Except with
respect to the Tax-Free Portfolio, which is not permitted to invest in re-
stricted securities, restricted securities that are determined by the Adviser
to be liquid in accordance with procedures adopted by the Directors, including
securities eligible for resale under Rule 144A under the Securities Act of
1933, as amended (the "Securities Act") and commercial paper issued in reli-
ance upon the exemption from registration in Section 4(2) of the Securities
Act, will not be treated as illiquid for purposes of the restriction on illiq-
uid securities. Restricted securities are securities subject to the contrac-
tual or legal restrictions on resale, such as those arising from an issuer's
reliance upon certain exemptions from registration under the Securities Act.
As to illiquid securities, a Portfolio is subject to a risk that, should the
Portfolio's desire to sell them when a ready buyer is not available at a price
the Portfolio deems representative of their value, the value of the Portfo-
lio's net assets could be adversely affected.
Each of the Portfolios may invest in variable rate obligations as permitted
by Rule 2a-7. Variable rate obligations have interest rates which are adjusted
either at predesignated periodic intervals or whenever there is a change in
the market rate to which the interest rate of the variable rate obligation is
tied. Some variable rate obligations allow the holder to demand payment of
principal and accrued interest at any time, or at specified intervals. Each of
the Portfolios follows Rule 2a-7 with respect to the diversification, quality
and maturity of variable rate obligations.
7
<PAGE>
PURCHASE AND REDEMPTION OF SHARES
Class C shares are available through your financial intermediary.
OPENING ACCOUNTS
Instruct your financial intermediary to use one or more Portfolios.
SUBSEQUENT INVESTMENTS
BY CHECK. Mail or deliver your check or negotiable draft, payable to your fi-
nancial intermediary, who will deposit it into the Portfolio(s). Please desig-
nate the appropriate Portfolio and indicate your brokerage account number (if
applicable) on the check or draft.
BY SWEEP. Your financial intermediary may offer an automatic "sweep" for the
Fund in the operation of brokerage cash accounts. Contact your financial in-
termediary to determine if a sweep is available and what the sweep parameters
are.
REDEMPTIONS
BY CONTACTING YOUR FINANCIAL INTERMEDIARY. Instruct your financial
intermediary to order a withdrawal from your Fund account.
BY SWEEP. If your financial intermediary offers an automatic sweep arrange-
ment, the sweep will automatically transfer from your Fund account sufficient
amounts to cover security purchases in your brokerage account.
BY CHECKWRITING. With this service, you may write checks made payable to any
payee. Checks cannot be written for more than the principal balance (not in-
cluding any accrued dividends) in your account. First you must fill out the
signature card which you can obtain from your financial intermediary. There is
no separate charge for the checkwriting service. The checkwriting service ena-
bles you to receive the daily dividends declared on the shares to be redeemed
until the day that your check is presented for payment.
GENERAL
A transaction, service, administrative or other similar fee may be charged by
your broker-dealer, agent, financial intermediary or other financial represen-
tative with respect to the purchase, sale or exchange of shares made through
such financial representative. Such financial intermediaries may also impose
requirements with respect to the purchase, sale or exchange of shares that are
different from, or in addition to, those imposed by the Fund.
Each Portfolio offers two other classes of shares, Class A and Class B, by
means of separate prospectuses. The three classes of shares have a common in-
vestment objective and investment portfolio and are identical, except as to
the level of the distribution services fee, if any, paid by each class. Be-
cause of the different level of distribution services fees paid by the other
two classes of shares, Class C shares are expected to have performance differ-
ent from Class A and Class B shares. You can obtain more information regarding
the other classes by calling Alliance Fund Services, Inc. toll-free at (800)
237-5822 or writing to them at P.O. Box 1520, Secaucus, New Jersey 07096. Bro-
ker-dealers, agents, financial intermediaries and other financial representa-
tives may receive differing compensation for selling Class A, Class B and
Class C shares.
INVESTMENTS MADE BY CHECK. Money transmitted by a check drawn on a member of
the Federal Reserve System is converted to Federal Funds in one business day
following receipt and is then invested in the Fund. Checks drawn on banks
which are not members of the Federal Reserve System may take longer to be con-
verted and invested. All payments must be in United States dollars.
Proceeds from any subsequent redemption by you of Fund shares that were pur-
chased by check will not be forwarded to you until the Fund is reasonably as-
sured that your check has cleared, normally up to fifteen days following the
purchase date.
SHARE PRICE. Shares of each Portfolio of the Fund are sold and redeemed on a
continuous basis without sales or redemption charges at their net asset value
which is expected to be constant at $1.00 per share, although this price is
not guaranteed. The net asset value of each Portfolio's shares, except the
Tax-Free Portfolio, is determined each Fund business day (as defined under
"Purchase and Redemption of Shares--Redemptions," above) at 12:00 Noon and
4:00 p.m. (Eastern time). The net asset value of the Tax-Free Portfolio shares
is deter -
8
<PAGE>
ADDITIONAL INFORMATION
mined each Fund business day at 12:00 Noon (Eastern time). The net asset value
per Class C share of each Portfolio is calculated by taking the sum of the
value of the Portfolio's investments allocable to Class C shares (amortized
cost value is used for this purpose) and any cash or other assets allocable to
Class C shares, subtracting liabilities allocable to Class C shares, and di-
viding by the total number of Class C shares of the Portfolio outstanding. All
expenses, 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. (Eastern time). The Tax-Free Portfolio has one transaction time each Fund
business day, 12:00 Noon (Eastern time). Investments receive the full dividend
for a day if the investor's telephone order is placed by 4:00 p.m. (Eastern
time) for the Prime, Government or Treasury 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 (Eastern 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.
During drastic economic or market developments, shareholders might have dif-
ficulty in reaching Alliance Fund Services, Inc. by telephone in which event
the shareholder should issue written instructions to Alliance Fund Services,
Inc. at the address shown in this prospectus. The Funds reserve the right to
suspend or terminate their telephone service at any time without notice. Nei-
ther the Funds nor the Adviser, or Alliance Fund Services, Inc. will be re-
sponsible for the authenticity of telephone requests to purchase or sell
shares. Alliance Fund Services, Inc. will employ reasonable procedures in or-
der to verify that telephone requests are genuine and could be liable for
losses arising from unauthorized transactions if it failed to do so. Selected
dealers or agents may charge a commission for handling telephone requests for
redemptions.
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.
THE ADVISER. Alliance Capital Management L.P., which is a Delaware limited
partnership with principal offices at 1345 Avenue of the Americas, New York,
New York 10105, has been retained under an advisory agreement to provide in-
vestment advice and, in general, to conduct the management and investment pro-
gram of the Fund, subject to the general supervision and control of the Direc-
tors of the Fund.
The Adviser is a leading international investment manager supervising client
accounts with assets as of March 31, 1998 totaling more than $248 billion (of
which approximately $98 billion represented the assets of investment compa-
nies). The Adviser's clients are primarily major corporate employee benefit
funds, public employee retirement systems, investment companies, foundations
and endowment funds. The 57 registered investment companies managed by the Ad-
viser comprising 121 separate investment portfolios currently have over three
million shareholder accounts. As of March 31, 1998, the Adviser was retained
as an investment manager for employee benefit plan assets of 33 of the Fortune
100 companies.
9
<PAGE>
Alliance Capital Management Corporation, the sole general partner of, and the
owner of a 1% general partnership interest in, the Adviser, is an indirect
wholly-owned subsidiary of The Equitable Life Assurance Society of the United
States ("Equitable"), one of the largest life insurance companies in the
United States, which is a wholly-owned subsidiary of The Equitable Companies
Incorporated, a holding company controlled by AXA-UAP, a French insurance
holding company. Certain information concerning the ownership and control of
Equitable by AXA-UAP is set forth in the Statement of Additional Information
under "Management of the Fund."
Each Portfolio pays the Adviser at an annual rate of .20% of the average
daily value of its net assets. The Adviser has undertaken until, at its re-
quest, the Fund notifies investors to the contrary, that if, in any fiscal
year, the aggregate expenses with respect to the Class C shares of a Portfo-
lio, exclusive of taxes, brokerage, interest on borrowings and extraordinary
expenses, but including the management fee and distribution services fee, ex-
ceed .45% of the Portfolio's average net assets for the fiscal year attribut-
able to the Class C shares, the Portfolio may deduct from the payment to be
made to the Adviser, or the Adviser will bear, such excess expense.
The Adviser may make payments from time to time from its own resources, which
may include the management fees paid by the 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 Class C shares of the Fund, including paying for the preparation,
printing and distribution of prospectuses and sales literature or other promo-
tional activities.
DISTRIBUTION AGREEMENT. Rule 12b-1 under the Act permits an investment com-
pany to pay expenses associated with the distribution of its shares in accor-
dance with a duly adopted plan. Effective June 29, 1998, the Fund adopted a
"Rule 12b-1 Plan" and entered into an amended Distribution Agreement (the
"Agreement") with Alliance Fund Distributors, Inc., the Fund's distributor
("AFD"), in connection with the distribution of each Portfolio's Class C
shares. Pursuant to the Rule 12b-1 Plan, the Fund pays AFD a distribution
services fee at an annual rate of .25% of the aggregate average daily net as-
sets attributable to the Class C shares of each Portfolio. The Glass-Steagall
Act and other applicable laws may limit the ability of a bank or other deposi-
tory institution to become an underwriter or distributor of securities. Howev-
er, in the opinion of the Fund's management, based on the advice of counsel,
these laws do not prohibit such depository institutions from providing serv-
ices for investment companies such as the administrative, accounting and other
services referred to in the Agreement. In the event that a change in these
laws prevented a bank from providing such services, it is expected that other
service arrangements would be made and that shareholders would not be ad-
versely affected.
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.
DAILY DIVIDENDS, OTHER DISTRIBUTIONS, TAXES. All net income of the Tax-Free
Portfolio is determined each business day at 12:00 Noon (Eastern time), and
that of the Prime, Government and Treasury Portfolios each business day at
4:00 p.m. (Eastern time), and is paid immediately thereafter pro rata to
shareholders of record via automatic investment in additional full and frac-
tional shares of that Portfolio in each shareholder's account. As such addi-
tional shares are entitled to dividends on following days, a compounding
growth of income occurs.
A Portfolio's net income consists of all accrued interest income on assets
less expenses applicable to that dividend period. Realized gains and losses
are reflected in net asset value and are not included in net income.
Distributions out of tax-exempt interest income earned by the Tax-Free Port-
folio are not subject to federal income tax (other than the AMT as described
above), but may be subject to state or local income taxes. Any exempt-interest
dividends derived from interest on municipal securities subject to the AMT
will be a tax preference item for purposes of the federal individual
10
<PAGE>
and corporate AMT. Distributions out of taxable interest income, other invest-
ment income, and short term capital gains are taxable as ordinary income and
distributions of long term capital gains, if any, are taxable as long-term
capital gains irrespective of the length of time a shareholder held his
shares.
YEAR 2000. Many computer software systems in use today cannot properly proc-
ess date-related information from and after January 1, 2000. Should any of the
computer systems employed by the Fund's major service providers fail to proc-
ess this type of information properly, that could have a negative impact on
the Fund's operations and the services that are provided to the Fund's share-
holders. The Adviser, AFD and Alliance Fund Services, Inc., have advised the
Fund that they are reviewing all of their computer systems with the goal of
modifying or replacing such systems prior to January 1, 2000 to the extent
necessary to foreclose any such negative impact. In addition, the Adviser has
been advised by the Fund's custodian that it is also in the process of review-
ing its systems with the same goal. As of the date of this prospectus, the
Fund and the Adviser have no reason to believe that these goals will not be
achieved. Similarly, the values of certain of the portfolio securities held by
the Fund may be adversely affected by the inability of the securities' issuers
or of third parties to process this type of information properly.
FUND ORGANIZATION. The Fund is an open-end management investment company reg-
istered under the Act consisting of the four 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. Generally, shares of each
portfolio and class will vote together as a single class on matters, such as
the election of Directors, that affect each portfolio and class in substan-
tially the same manner.
Maryland law does not require annual meetings of shareholders and it is an-
ticipated that shareholder meetings will be held only when required by federal
or Maryland law. Shareholders have available certain procedures for the re-
moval of directors.
REPORTS. Shareholders will receive a monthly summary of their account, as
well as semi-annual and annual reports. Shareholders may arrange for a copy of
each of their account statements to be sent to other parties.
11
<PAGE>
[LOGO] ALLIANCE INSTITUTIONAL RESERVES, INC.
-Prime Portfolio
-Government Portfolio
-Tax-Free Portfolio
-Treasury Portfolio
____________________________________________________________
c/o Alliance Fund Services, Inc.
P.O. Box 1520, Secaucus, New Jersey 07096
Toll Free (800) 221-5672
____________________________________________________________
STATEMENT OF ADDITIONAL INFORMATION
June 29, 1998
___________________________________________________________
This Statement of Additional Information is not a
prospectus and should be read in conjunction with the Fund's
current Prospectuses dated June 29, 1998 (the "Prospectus")
which describe the Class A, Class B and Class C shares of
the Prime, Government, Tax-Free and Treasury Portfolios of
the Fund. A copy of this Prospectus may be obtained by
contacting Alliance Fund Services, Inc. at the address or
telephone number shown above.
TABLE OF CONTENTS
Page
The Fund..............................................
Investment Objectives and Policies....................
Investment Restrictions ..............................
Management............................................
Expenses of the Fund..................................
Purchase and Redemption of Shares.....................
Daily Dividends-Determination of Net Asset Value......
Taxes.................................................
General Information...................................
Financial Statements and Report of Independent
Auditors............................................
Appendix A - Commercial Paper and Bond Ratings........
Appendix B - Description of Municipal Securities......
___________________________
(R): This registered service mark used under license from
the owner, Alliance Capital Management L.P.
<PAGE>
____________________________________________________________
THE FUND
____________________________________________________________
Alliance Institutional Reserves, Inc. (the "Fund") is an
open-end investment company. The Prime Portfolio, the
Government Portfolio, the Tax-Free Portfolio and the
Treasury 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. The Fund changed its
name from ACM Institutional Reserves, Inc. to Alliance
Institutional Reserves, Inc. effective June 29, 1998.
____________________________________________________________
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 of the Prime Portfolio,
the Government Portfolio and the Tax-Free 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, or such greater length of time as may be
permitted from time to time pursuant to Rule 2a-7). The
Treasury Portfolio, as a non-fundamental policy, pursues its
objectives by investing in the following investments
diversified by maturities not exceeding 397 days: issues of
the United States Treasury, such as bills, certificates of
indebtedness, notes and bonds and repurchase agreements with
respect to those instruments. 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
2
<PAGE>
the Rule. 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.
Currently, pursuant to Rule 2a-7, each Portfolio may
invest only in U.S. dollar-denominated "Eligible Securities"
(as that term is defined in the Rule) that have been
determined by the Adviser to present minimal credit risks
pursuant to procedures approved by the Board of Directors.
Generally, an eligible security is a security that (i) has a
remaining maturity of 397 days or less and (ii) is rated, or
is issued by an issuer with short-term debt outstanding that
is rated, in one of the two highest rating categories by two
nationally recognized statistical rating organizations
("NRSROS") or, if only one NRSRO has issued a rating, by
that NRSRO (the "requisite NRSROs"). A first tier security
is an Eligible Security that has received a short-term
rating from the requisite NRSROs in the highest short-term
rating category for debt obligations, or is an unrated
security deemed to be of comparable quality. 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. Securities in
which the Portfolios invest may be subject to liquidity or
credit enhancements. These securities are generally
considered to be Eligible Securities if the enhancement or
the issuer of the enhancement has received the appropriate
rating from the requisite NRSROs.
Under Rule 2a-7 the Prime, Government, Tax-Free
(effective July 1, l998) and Treasury Portfolios, as
applicable, 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. Government securities are also
considered to be first tier securities. In addition, the
Prime 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 Prime
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 "second tier security
restriction"). Effective July 1, 1998, the second tier
security restriction applies to the Tax-Free Portfolio with
respect to its investment in the "conduit" securities of
3
<PAGE>
second tier issuers. A conduit security for purposes of
Rule 2a-7 is a security nominally issued by a municipality,
but dependent for principal and interest payments on non-
municipal issuer's revenues from a non-municipal
project.
Prime Portfolio
The Prime Portfolio may make the following investments
diversified by maturities and issuers:
1. Marketable obligations of, or guaranteed by, the
United States Government, its agencies or instrumentalities.
These include issues of the U.S. Treasury, such as bills,
certificates of indebtedness, notes and bonds, and issues of
agencies and instrumentalities established under the
authority of an act of Congress. The latter issues include,
but are not limited to, obligations of the bank for
cooperatives, Federal Financing Bank, Federal Home Loan
Bank, Federal Intermediate Credit Banks, Federal Land Bank,
Federal National Mortgage Association and Tennessee Valley
Authority. Some of the securities are supported by the full
faith and credit of the U.S. Treasury, others are supported
by the right of the issuer to borrow from the Treasury, and
still others are supported only by the credit of the agency
or instrumentality.
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 or denominated in U.S. dollars
and issued by U.S. branches of foreign banks and foreign
branches of U.S. banks, in each case 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
4
<PAGE>
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 [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 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 (the "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
5
<PAGE>
syndication, a number of institutional lenders lend a
corporate borrower a specified sum pursuant to the term and
conditions of a loan agreement. One of the co-lenders
usually agrees to act as the agent bank with respect to the
loan. The loan agreement among the corporate borrower and
the co-lenders identifies the agent bank as well as sets
forth the rights and duties of the parties. The agreement
often (but not always) provides for the collateralization of
the corporate borrower's obligations thereunder and includes
various types of restrictive covenants which must be met by
the borrower.
The participation interests acquired by the Portfolio
may, depending on the transaction, take the form of a direct
co-lending relationship with the corporate borrower, an
assignment of an interest in the loan by a co-lender or
another participant or a participation in the seller's share
of the loan. Typically, the Portfolio will look to the
agent bank to collect principal of and interest on a
participation interest, to monitor compliance with loan
covenants, to enforce all credit remedies, such as
foreclosures on collateral, and to notify co-lenders of any
adverse changes in the borrower's financial condition or
declarations of insolvency. The agent bank in such cases
will be qualified under the Act to serve as a custodian for
a registered investment company such as the Fund. The agent
bank is compensated for these services by the borrower
pursuant to the terms of the loan agreement.
When the Portfolio acts as a co-lender in connection
with a participation interest, or when the Portfolio
acquires a participation interest the terms of which provide
that the Portfolio will be in privity with the corporate
borrower, the Portfolio will have direct recourse against
the borrower in the event the borrower fails to pay
scheduled principal and interest. In cases where the
Portfolio lacks such direct recourse, the Portfolio will
look to the agent bank to enforce appropriate credit
remedies against the borrower.
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
6
<PAGE>
analysis and evaluation of the financial condition of each
such co-lender and participant to ensure that the
participation interest meet the Portfolio's high quality
standard and will continue to do so as long as it holds a
participation.
4. Repurchase agreements pertaining to the above
securities. For a description of repurchase agreements, see
below, "Additional Investment Policies - Repurchase
Agreements."
The Portfolio may make investments in certificates of
deposit, bankers' acceptances and interest-bearing saving
deposits issued by U.S. branches of foreign banks and
foreign branches of U.S. banks, in each case 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. Effective July 1, 1998, these securities must
generally be rated. 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. Generally,
the special purpose entity is deemed to be the issuer of the
asset-backed security. However, the Portfolio is required
to treat any person whose obligations constitute ten percent
or more of the assets of the asset-backed security as the
issuer of the portion of the asset-backed security such
obligations represent. It is the Portfolio's current
intention to limit its investment in such securities to not
more than 5% of its net assets.
7
<PAGE>
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 and accrued interest
at any time, or at specified intervals not exceeding 13
months, in each case upon not more than 30 days notice. The
Portfolio may also invest in master demand notes which are
obligations that permit the Prime Portfolio to invest
fluctuating amounts, at varying rates of interest, pursuant
to direct arrangements between the Prime Portfolio, as
lender, and the borrower. These obligations permit daily
changes in the amounts borrowed. Because these obligations
are direct lending arrangements between the lender and
borrower, it is not contemplated that such instruments
generally will be traded, and there generally is no
established secondary market for these obligations, although
they are redeemable at face value, plus accrued interest.
Accordingly, where these obligations are not secured by
letters of credit or other credit support arrangements, the
Prime Portfolio's 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, or such greater length of time as may be
permitted from time to time pursuant to Rule 2a-7).
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.
8
<PAGE>
The Government Portfolio may make the following
investments:
1. Marketable obligations of, or guaranteed by, the
United States Government, its agencies or instrumentalities.
These include issues of the United States Treasury, such as
bills, certificates of indebtedness, notes and bonds, and
issues of agencies and instrumentalities established under
the authority of an act of Congress. The latter issues
include, but are not limited to, obligations of the Bank for
Cooperatives, Federal Financing Bank, Federal Home Loan
Bank, Federal Intermediate Credit Banks, Federal Land Banks,
Federal National Mortgage Association and Tennessee Valley
Authority. Some of these securities are supported by the
full faith and credit of the U.S. Treasury, others are
supported by the right of the issuer to borrow from the
Treasury, and still others are supported only by the credit
of the agency or instrumentality.
2. Repurchase agreements pertaining to the above
securities. For a description of repurchase agreements, see
below, "Additional Investment Policies - Repurchase
Agreements."
Floating and Variable Rate Obligations. The Portfolio
may also purchase floating and variable rate obligations,
including floating and variable rate demand notes and bonds.
The Portfolio may invest in variable and floating rate
obligations whose interest rates are adjusted either at
predesignated periodic intervals or whenever there is a
change in the market rate to which the security's interest
rate is tied. The Portfolio may also purchase floating and
variable rate demand notes and bonds, which are obligations
ordinarily having stated maturities in excess of 13 months,
but which permit the holder to demand payment of principal
and accrued interest at any time, or at specified intervals
not exceeding 13 months, in each case upon not more than 30
days' notice.
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, or such greater length of
time as may be permitted from time to time pursuant to Rule
2a-7), as opposed to taxable investments described below.
Normally, substantially all of its income will be tax-exempt
as described below.
9
<PAGE>
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
include those obligations which at the time of purchase:
1. are backed by the full faith and credit of the
United States; or
2. are municipal notes rated MIG-1/VMIG-1 or
MIG-2/VMIG-2 by Moody's or SP-1 or SP-2 by Standard
& Poor's or, if not rated, are of equivalent
investment quality as determined by the Adviser;
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; 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. (See Appendix B for a
description of municipal securities and Appendix A
for a description of these ratings.)
The Portfolio will not 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,
10
<PAGE>
though for regular Federal income tax purposes such interest
will remain fully tax-exempt, and (2) interest on all
tax-exempt obligations will be included in "adjusted current
earnings" of corporations for AMT purposes. The Portfolio
may purchase "private activity" municipal securities because
such issues may provide somewhat higher yields than other
comparable municipal securities. However, the Portfolio
will limit its investments so that no more than 20% of its
total income is derived from municipal securities that bear
interest subject to the AMT.
Investors should consider that, in most instances, no
state, municipality or other governmental unit with taxing
power will be obligated with respect to AMT-subject bonds.
AMT-subject bonds are in most cases revenue bonds and do not
generally have the pledge of the credit or the taxing power,
if any, of the issuer of such bonds. AMT-subject bonds are
generally limited obligations of the issuer supported by
payments from private business entities and not by the full
faith and credit of a state or any governmental subdivision.
Typically the obligation of the issuer of AMT-subject bonds
is to make payments to bond holders only out of and to the
extent of, payments made by the private business entity for
whose benefit the AMT-subject bonds were issued. Payment of
the principal and interest on such revenue bonds depends
solely on the ability of the user of the facilities financed
by the bonds to meet its financial obligations and the
pledge, if any, of real and personal property so financed as
security for such payment. It is not possible to provide
specific detail on each of these obligations in which Fund
assets may be invested.
Taxable Securities
Although the Portfolio expects to be largely invested in
municipal securities, the Portfolio may elect to invest up
to 20% of its total assets in taxable money market
securities when such action is deemed to be in the best
interests of shareholders. Such taxable money market
securities also are limited to remaining maturities of one
year (which maturities may extend to 397 days pursuant to
Rule 2a-7, or such greater length of time as may be
permitted from time to time 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 include
those described below:
11
<PAGE>
1. marketable obligations of, or guaranteed by, the
United States Government, its agencies or
instrumentalities; or
2. certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of banks having
total assets of more than $1 billion and which are
members of the Federal Deposit Insurance
Corporation; or
3. commercial paper of prime quality rated A-1 or
higher by Standard & Poor's or Prime-1 by Moody's
or, if not rated, issued by companies which have
an outstanding debt issue rated AA or higher by
Standard & Poor's, or Aa or higher by Moody's.
(See Appendix A for description of these ratings.)
The Portfolio may also enter into repurchase agreements
pertaining to the types of securities in which it may
invest. For a description of repurchase agreements, see
below, "Additional Investment Policies - Repurchase
Agreements."
Variable Rate Obligations
The interest rate payable on certain municipal
securities in which the Portfolio may invest, called
"variable rate" obligations, is not fixed and may fluctuate
based upon changes in market rates. The interest rate
payable on a variable rate municipal security is adjusted
either at predesignated periodic intervals or whenever there
is a change in the market rate to which the security's
interest rate is tied. Other features may include the right
of the Portfolio to demand prepayment of the principal
amount and accrued interest of the obligation prior to its
stated maturity and the right of the issuer to prepay the
principal amount and accrued interest 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.
12
<PAGE>
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 generally do so only (i) as required to
provide liquidity to the Portfolio, (ii) to maintain a high
quality investment portfolio, or (iii) upon a default under
the terms of the demand instrument. Banks retain portions
of the interest paid on such variable rate industrial
development bonds as their fees for servicing such
instruments and the issuance of related letters of credit
and repurchase commitments. The Portfolio follows Rule 2a-7
with respect to its investments in variable rate instruments
supported by letters of credit and participation interests.
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
13
<PAGE>
ability of the standby commitment writer to meet its
obligation to repurchase, the Portfolio's policy is to enter
into standby commitment transactions only with municipal
securities dealers which are determined to present minimal
credit risks.
The acquisition of a standby commitment does not affect
the valuation or maturity of underlying municipal securities
which continue to be valued in accordance with the amortized
cost method. Standby commitments acquired by the Portfolio
are valued at zero in determining net asset value. Where
the Portfolio pays directly or indirectly for a standby
commitment, its cost is reflected as unrealized depreciation
for the period during which the commitment is held. Standby
commitments do not affect the average weighted maturity of
the Portfolio's portfolio of securities. The Portfolio does
not currently intend to invest more than 5% of its net
assets in standby commitments in the coming year.
General
Yields on municipal securities are dependent on a
variety of factors, including the general condition of the
money market and of the municipal bond and municipal note
market, the size of a particular offering, the maturity of
the obligation and the rating of the issue. Municipal
securities with longer maturities tend to produce higher
yields and are generally subject to greater price movements
than obligations with shorter maturities. The achievement
of the Portfolio's investment objectives is dependent in
part on the continuing ability of the issuers of municipal
securities in which the Portfolio invests to meet their
obligations for the payment of principal and interest when
due. Municipal securities historically have not been
subject to registration with the 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,
pursuant to Rule 2a-7. 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
14
<PAGE>
other laws affecting the rights and remedies of creditors,
such as the Bankruptcy Code. In addition, the obligations
of such issuers may become subject to laws enacted in the
future by Congress, state legislatures, or referenda
extending the time for payment of principal and/or interest,
or imposing other constraints upon enforcement of such
obligations or upon ability of municipalities to levy taxes.
There is also the possibility that, as a result of
litigation or other conditions, the ability of any issuer to
pay, when due, the principal or the interest on its
municipal securities may be materially affected.
Except as otherwise provided above, the Portfolio's
investment objectives and policies are not designated
"fundamental policies" within the meaning of the Act and
may, therefore, be changed without a shareholder vote.
However, the Portfolio will not change its investment
policies without contemporaneous written notice to
shareholders.
Treasury Portfolio
The Portfolio pursues its objectives by maintaining a
portfolio of the following investments diversified by
maturities not exceeding 397 days:
1. Issues of the United States Treasury, such as
bills, certificates of indebtedness, notes and bonds. Such
issues are supported by the full faith and credit of the
U.S. Treasury.
2. Repurchase agreements pertaining to the above
securities. For a description of repurchase agreements, see
below, "Additional Investment Policies - Repurchase
Agreements."
Reverse Repurchase Agreements. While the Portfolio has
no present plans to do so, it may enter into reverse
repurchase agreements, which have the characteristics of
borrowing and which involve the sale of securities held by
the Fund with an agreement to repurchase the securities at
an agreed-upon price, date and interest payment.
When-Issued Securities. For a description of when-
issued securities, see below, "Additional Investment
Policies - When-Issued Securities".
Floating and Variable Rate Obligations. The Portfolio
may purchase floating and variable rate obligations,
including floating and variable rate demand notes and bonds.
The Portfolio may invest in variable and floating rate
15
<PAGE>
obligations whose interest rates are adjusted either at
predesignated periodic intervals or whenever there is a
change in the market rate to which the security's interest
rate is tied. The Portfolio may also purchase floating and
variable rate demand notes and bonds, which are obligations
ordinarily having stated maturities in excess of 13 months,
but which permit the holder to demand payment of principal
and accrued interest at any time, or at specified intervals
not exceeding 13 months, in each case upon not more than 30
days' notice.
Except as otherwise provided, the Portfolio's investment
policies are not designated "fundamental policies" within
the meaning of the Act and may, therefore, be changed by the
Directors of the Fund without a shareholder vote. However,
the Portfolio will not change its investment policies
without contemporaneous written notice to shareholders.
There can be no assurance, as is true with all investment
companies, that the Portfolio's objectives will be
achieved.
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 397 days, the term of the
repurchase agreement is always less than 397 days. In the
16
<PAGE>
event that a counterparty defaulted on its repurchase
obligation, a Portfolio might suffer a loss to the extent
that the proceeds from the sale of the collateral were less
than the repurchase price. If the vendor became bankrupt, a
Portfolio might be delayed in selling the collateral.
Repurchase agreements often are for short periods such as
one day or a week, but may be longer. Repurchase agreements
not terminable within seven days will be limited to no more
than 10% of a Portfolio's assets. Pursuant to Rule 2a-7, a
repurchase agreement is deemed to be an acquisition of the
underlying securities, provided that the obligation of the
seller to repurchase the securities from the money market
fund is collateralized fully (as defined in such Rule).
Accordingly, the counterparty of a fully collateralized
repurchase agreement is deemed to be the issuer of the
underlying securities.
Reverse Repurchase Agreements
Each Portfolio may also enter into reverse repurchase
agreements, which involve the sale of money market
securities held by a Portfolio with an agreement to
repurchase the securities at an agreed-upon price, date and
interest payment. The Portfolios do not currently intend to
enter into such agreements during the coming year.
When-Issued Securities
Certain issues that the 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. 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
17
<PAGE>
Portfolio, however, chooses to dispose of the right to
acquire a when-issued security prior to its acquisition, it
can incur a gain or loss. At the time a Portfolio makes the
commitment to purchase a security on a when-issued basis, it
records the transaction and reflects the value of the
security in determining its net asset value. No when-issued
commitments will be made if, as a result, more than 15% of a
Portfolio's net assets would be so committed.
Illiquid Securities and Restricted Securities
None of the Portfolios will maintain more than 10% of
its net assets in illiquid securities. Illiquid securities
may include securities that are not readily marketable,
securities subject to legal or contractual restrictions on
resale and repurchase agreements not terminable within seven
days. Except with respect to the Tax-Free Portfolio, which
is not permitted to invest in restricted securities,
restricted securities that are determined by the Adviser to
be liquid in accordance with procedures adopted by the
Directors, including securities eligible for resale under
Rule 144A under the Securities Act of 1933, as amended (the
"Securities Act") and commercial paper issued in reliance
upon the exemption from registration in Section 4(2) of the
Securities Act, will not be treated as illiquid for purposes
of the restriction on illiquid securities. Restricted
securities are securities subject to the contractual or
legal restrictions on resale, such as those arising from an
issuer's reliance upon certain exemptions from registration
under the Securities Act. As to illiquid securities, a
Portfolio is subject to a risk that, should the Portfolio's
desire to sell them when a ready buyer is not available at a
price the Portfolio deems representative of their value, the
value of the Portfolio's net assets could be adversely
affected.
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
18
<PAGE>
disposition under the Federal securities laws in that any
resale must also be made in an exempt transaction. Section
4(2) paper is normally resold to other institutional
investors through or with the assistance of investment
dealers who make a market in Section 4(2) paper, thus
providing liquidity. Institutional investors, rather than
selling these instruments to the general public, often
depend on an efficient institutional market in which such
restricted securities can be readily resold in transactions
not involving a public offering. In many instances,
therefore, the existence of contractual or legal
restrictions on resale to the general public does not, in
practice, impair the liquidity of such investments from the
perspective of institutional holders.
In 1990, in part to enhance the liquidity in the
institutional markets for restricted securities, the
Commission 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 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:
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(i) the frequency of trades and quotations for the
security;
(ii) the number of dealers making quotations to
purchase or sell the security;
(iii) the number of other potential purchasers of
the security;
(iv) the number of dealers undertaking to make a
market in the security;
(v) the nature of the security (including its
unregistered nature) and the nature of the
marketplace for the security (e.g., the time
needed to dispose of the security, the method
of soliciting offers and the mechanics of
transfer); and
(vi) any applicable 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, the Adviser 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 a
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,
20
<PAGE>
generally restrict their investments to the types summarized
above. Net income to shareholders is aided both by each
Portfolio's ability to make investments in large
denominations and by efficiencies of scale. Also, each
Portfolio may seek to improve its income by selling certain
portfolio securities prior to maturity in order to take
advantage of yield disparities that occur in money markets.
The market value of each Portfolio's investments tends to
decrease during periods of rising interest rates and to
increase during intervals of falling rates. There can be no
assurance, as is true with all investment companies, that a
Portfolio's objectives will be achieved.
____________________________________________________________
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
_________________________
1. Which maturity, pursuant to Rule 2a-7, may extend to
397 days, or such greater length of time as may be
permitted from time to time pursuant to Rule 2a-7.
21
<PAGE>
(such bank obligations are issued by domestic banks,
including U.S. branches of foreign banks subject to the same
regulation as U.S. banks) and (b) consumer finance
companies, industrial finance companies and gas, electric,
water and telephone utility companies are each considered to
be separate industries;
3. invest more than 5% of its assets in the securities
of any one issuer2 (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
_________________________
2. As a matter of operating policy, pursuant to Rule
2a-7, the Portfolio will invest no more than 5% of its
assets in the securities of any one issuer, unless
permitted by Rule 2a-7. The issuer of a security is
determined pursuant to Rule 2a-7.
22
<PAGE>
committed to repurchase agreements not terminable within
seven days and other illiquid investments; or
9. (a) make investments for the purpose of exercising
control; (b) purchase securities of other investment
companies, except in connection with a merger,
consolidation, acquisition or reorganization; (c) invest in
real estate (other than money market securities secured by
real estate or interests therein or money market securities
issued by companies which invest in real estate, or
interests therein), commodities or commodity contracts,
including futures contracts, interests in oil, gas and other
mineral exploration or other development programs;
(d) purchase securities on margin; (e) make short sales of
securities or maintain a short position or write, purchase
or sell puts, call, straddles, spreads or combinations
thereof; (f) invest in securities of issuers (other than
agencies and instrumentalities of the United States
Government) having a record, together with predecessors, of
less than three years of continuous operation if more than
5% of the Portfolio's assets would be invested in such
securities; (g) purchase or retain securities of any issuers
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 year3 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
_________________________
3. Which maturity, pursuant to Rule 2a-7, may extend to 397
days, or such greater length of time as may be permitted
from time to time pursuant to Rule 2a-7.
23
<PAGE>
Portfolio's assets would be invested in repurchase
agreements purchased from such seller;4 and may not enter
into any reverse repurchase agreements if, as a result
thereof, the Portfolio's obligations with respect to reverse
repurchase agreements would exceed 10% of the Portfolio's
assets;
4. borrow money except from banks on a temporary basis
or via entering into reverse repurchase agreements in
aggregate amounts not to exceed 10% of the Portfolio's
assets and to be used exclusively to facilitate the orderly
maturation and sale of portfolio securities during any
periods of abnormally heavy redemption requests, if they
should occur; such borrowings may not be used to purchase
investments and the Portfolio will not purchase any
investments while borrowings in excess of 5% of total assets
exist;
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 year5 from the date of the Portfolio's
purchase;
_________________________
4. Pursuant to Rule 2a-7, acquisition of a fully
collateralized repurchase agreement is deemed to be the
acquisition of the underlying securities.
5. Which maturity, pursuant to Rule 2a-7, may extend to
397 days, or such greater length of time as may be
permitted from time to time pursuant to Rule 2a-7.
24
<PAGE>
2. invest more than 25% of its total assets in the
securities of issuers conducting their principal business
activities in any one industry, provided that for purposes
of this policy (a) there is no limitation with respect to
investments in municipal securities (including industrial
development bonds), securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities, and bank
obligations, including certificates of deposit, bankers'
acceptances and interest-bearing savings deposits, (such
bank obligations are issued by domestic banks, including
U.S. branches of foreign banks subject to the same
regulation as U.S. banks) and (b) consumer finance
companies, industrial finance companies and gas, electric,
water and telephone utility companies are each considered to
be separate industries. For purposes of this restriction
and those set forth in restrictions 4 and 5 below, the
Portfolio will regard the entity which has the primary
responsibility for the payment of interest and principal as
the issuer;
3. invest more than 25% of its total assets in
municipal securities (a) whose issuers are located in the
same state, or (b) the interest upon which is paid from
revenues of similar-type projects;
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.6 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
_________________________
6. As a matter of operating policy, pursuant to Rule
2a-7 the Tax-Free Portfolio, effective July 1, 1998,
will invest no more than 5% of its assets in the
securities of any one issuer, unless permitted by Rule
2a-7. The issuer of a security is determined pursuant
to Rule 2a-7.
25
<PAGE>
extraordinary or emergency purposes in an aggregate amount
not to exceed 15% of the Portfolio's total assets. Such
borrowings may be used, for example, to facilitate the
orderly maturation and sale of portfolio securities during
periods of abnormally heavy redemption requests, if they
should occur, such borrowings may not be used to purchase
investments and the Portfolio will not purchase any
investments while borrowings in excess of 5% of total assets
exist;
7. pledge, hypothecate, mortgage or otherwise encumber
its assets except to secure borrowings, including reverse
repurchase agreements, effected within the limitations set
forth in restriction 6. To meet the requirements of
regulations in certain states, the Portfolio, as a matter of
operating policy, will limit any such pledging,
hypothecating or mortgaging to 10% of its total assets,
valued at market, so long as shares of the Portfolio are
being sold in those states;
8. make loans of money or securities except by the
purchase of debt obligations in which the Portfolio may
invest consistent with its investment objectives and
policies and by investment in repurchase agreements;
9. enter into repurchase agreements (i) not terminable
within seven days if, as a result thereof, more than 10% of
the Portfolio's total assets would be committed to such
repurchase agreements (whether or not illiquid) or other
illiquid investments, or (ii) with a particular vendor7 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
_________________________
7. Pursuant to Rule 2a-7, acquisition of a fully
collateralized repurchase agreement is deemed to be the
acquisition of the underlying securities.
26
<PAGE>
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.
Treasury Portfolio
The Portfolio:
1. May not borrow money except from banks on a
temporary basis or via entering into reverse repurchase
agreements in aggregate amounts not to exceed 10% of the
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
investment while any such borrowings exist;
2. May not 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;
3. May not 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;
4. May not invest in real estate (other than money
market securities secured by real estate or interests
therein or money market securities issued by companies which
invest in real estate, or interests therein), commodities or
commodity contracts, interests in oil, gas and other mineral
exploration or other development programs; and
5. May not act as an underwriter of securities.
27
<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,8 53, Chairman of the Board of Directors,
is the President, Chief Operating Officer and a Director of
Alliance Capital Management Corporation ("ACMC"), with which
he has been associated since prior to 1992.
RUTH BLOCK, 67, was formerly Executive Vice President
and Chief Insurance Officer of Equitable. She is a Director
of Ecolab Incorporated (specialty chemicals) and Amoco
Corporation (oil and gas). Her address is Box 4653,
Stamford, Connecticut, 06903.
DAVID H. DIEVLER, 68, was formerly a Senior Vice
President of ACMC, with which he was associated since prior
to 1992 through 1994. He is currently an independent
consultant. His address is P.O. Box 167, Spring Lake, New
Jersey, 07762.
JOHN H. DOBKIN, 56, has been the President of Historic
Hudson Valley (historic preservation) since prior to 1992.
Previously, he was Director of the National Academy of
Design. His address is 150 White Plains Road, Tarrytown,
New York 10591.
WILLIAM H. FOULK, JR., 66, is an Investment Advisor and
Independent Consultant. He was formerly Senior Manager of
Barrett Associates, Inc., a registered investment adviser,
since 1986. His address is Suite 100, 2 Greenwich Plaza,
Greenwich, Connecticut 06830.
_________________________
8. An interested person as defined in the Act.
28
<PAGE>
DR. JAMES M. HESTER, 74, 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, 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 Chief Executive Officer of
Wenonah Development Company (investment holding company) and
a Director of Placer Dome, Inc. (mining). His address is 80
Pine Street, New York, New York 10005.
DONALD J. ROBINSON, 63, was formerly a partner of the
law firm of Orrick, Herrington & Sutcliffe since prior to
1992 and is currently of counsel to that firm. His address
is 666 Fifth Avenue, 19th Floor, New York, New York
10103.
Officers
RONALD M. WHITEHILL - President, 60, 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 1993.
KATHLEEN A. CORBET, Senior Vice President, 38, 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 1993.
DREW A. BIEGEL - Senior Vice President, 47, is a Vice
President of ACMC, with which he has been associated since
prior to 1993.
RAYMOND J. PAPERA - Senior Vice President, 42, is a Vice
President of ACMC with which he has been associated since
prior to 1993.
KENNETH T. CARTY - Vice President, 37, is an Assistant
Vice President of ACMC with which he has been associated
since prior to 1993.
JOHN F. CHIODI, JR. - Vice President, 32, is a Vice
President of ACMC with which he has been associated since
prior to 1993.
29
<PAGE>
MARIA R. CONA - Vice President, 43, is an Assistant Vice
President of ACMC with which she has been associated since
prior to 1993.
FRANCIS M. DUNN - Vice President, 27, is an
Administrative Officer of ACMC with which she has been
associated since prior to 1993. 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 1993.
EDMUND P. BERGAN, JR., Secretary, 48, is a Senior Vice
President and the General Counsel of Alliance Fund
Distributors, Inc. ("AFD"), with which he has been
associated since prior to 1993.
MARK D. GERSTEN, Treasurer and Chief Financial Officer,
48, is a Senior Vice President of Alliance Fund Services,
Inc. ("AFS"), with which he has been associated since prior
to 1993.
The aggregate compensation paid by the Fund to each of
the Directors during its fiscal year ended April 30, 1998,
the aggregate compensation paid to each of the Directors
during calendar year 1997 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 registered
investment companies (and separate investment portfolios
within those companies) 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
registered investment company in the Alliance Fund Complex
provides compensation in the form of pension or retirement
benefits to any of its directors or trustees. Each of the
Directors is a director or trustee of one or more other
registered investment companies in the Alliance Fund
Complex.
30
<PAGE>
Total Number
Total Number of Investment
of Registered Portfolios
Investment within the
Companies in Alliance
Total the Alliance Fund Complex,
Compensation Fund Complex, Including
from the Including the the Fund,
Alliance Fund, as to which as to which
Aggregate Fund Complex, the Director the Director
Compensation Including is a Director is a Director
Name of Director From the Fund the Fund or Trustee or Trustee
John D. Carifa $-0- $-0- 54 118
Ruth Block $4,557 $157,500 40 80
David H. Dievler $4,557 $182,000 47 83
John H. Dobkin $4,702 $121,250 44 80
William H. Foulk, Jr. $4,555 $144,250 48 113
Dr. James M. Hester $4,561 $148,500 40 76
Clifford L. Michel $4,561 $146,068 41 92
Donald J. Robinson $4,557 $217,358 41 94
As of June 15, 1998, 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 Delaware limited
partnership with principal offices at 1345 Avenue of the
Americas, New York, New York 10105, has been retained under
an investment advisory agreement (the "Advisory Agreement")
to provide investment advice and, in general, to conduct the
management and investment program of the Fund under the
supervision and control of the Fund's Board of
Directors.
The Adviser is a leading international investment
manager supervising client accounts with assets as of
March 31, 1998 totaling more than $248 billion (of which
more than $98 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. The 57 registered investment companies managed by
the Adviser comprising 121 separate investment portfolios
currently have more than three million shareholder. As of
March 31, 1998, the Adviser and its subsidiaries employed
approximately 1,500 employees who operate out of domestic
offices and the offices of subsidiaries in Bahrain,
Bangalore, Chennai, Istanbul, London, Madrid, Mumbai, Paris,
31
<PAGE>
Singapore, Tokyo and Toronto and affiliate offices in
Vienna, Warsaw, Hong Kong, Sao Paulo and Moscow. As of
March 31, 1998, the Adviser was retained as an investment
manager for employee benefit plan assets of 33 of the
FORTUNE 100 companies.
Alliance Capital Management Corporation, the sole
general partner of, and the owner of a 1% general
partnership interest in, the Adviser, is an indirect wholly-
owned subsidiary of the Equitable Life Assurance Society of
the United States ("Equitable"), one of the largest life
insurance companies in the United States and a wholly-owned
subsidiary of the Equitable Companies Incorporated ("ECI").
ECI is a holding company controlled by AXA-UAP ("AXA") a
French insurance holding company which at March 1, 1998,
beneficially owned approximately 59% of the outstanding
voting shares of ECI. As of March 1, 1998, ACMC, Inc. and
Equitable Capital Management Corporation, each a
wholly-owned direct or indirect subsidiary of Equitable,
together with Equitable, owned in the aggregate
approximately 57% of the issued and outstanding units
representing assignments of beneficial ownership of limited
partnership interests in the Adviser.
AXA is a holding company for an international group of
insurance and related financial services companies. AXA'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 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, as of March 1,
1998, more than 30% of the voting power of AXA was
controlled directly and indirectly by FINAXA, a French
holding company. As of March 1, 1998 approximately 74% of
the voting power of FINAXA was controlled directly and
indirectly by four French mutual insurance companies (the
"Mutuelles AXA"), one of which, AXA Assurances I.A.R.D.
Mutuelle, itself controlled directly and indirectly more
than 42% of the voting power of FINAXA. Acting as a group,
the Mutuelles AXA control AXA and FINAXA.
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
32
<PAGE>
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 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 with respect to a class
of shares of a Portfolio, exclusive of taxes, brokerage,
interest on borrowings and extraordinary expenses, but
including the management fee and any applicable distribution
services fee, exceed .20%, .30% or .45% of a Portfolio's
average net assets for the fiscal year attributable to the
Portfolio's Class A shares, Class B shares or Class C
shares, respectively, the Portfolio may deduct from the
payment to be made to the Adviser, or the Adviser will
otherwise bear, such excess expenses. For the fiscal year
ended April 30, 1998, the Prime Portfolio paid the Adviser a
management fee of .16 of 1% and the Adviser reimbursed
$562,608, all of which represented advisory fees, the
Government Portfolio paid the Adviser a management fee of
.12 of 1% and the Adviser reimbursed $243,394, all of which
represented advisory fees and the Tax-Free Portfolio paid
the Adviser a management fee of .12 of 1% and the Adviser
reimbursed $205,077, all of which represented advisory fees.
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.
No information is presented regarding the Class B and
Class C shares as those classes will initially be offered on
June 29, 1998. 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, including Donaldson, Lufkin &
Jenrette Securities Corp. and its Pershing Division,
affiliates of the Adviser, depository institutions and other
financial intermediaries that engage in or support the
distribution of shares of the Fund, and to pay for the
preparation, printing and distribution of prospectuses and
other literature or other promotional activities.
The Advisory Agreement will remain in effect until
December 31, 1998, and thereafter for successive twelve-
33
<PAGE>
month periods computed from each January 1, provided that
such continuance is specifically approved at least annually
by a vote of a majority of each Portfolio's outstanding
voting securities or by the Fund's Board of Directors,
including in either case approval by a majority of the
Directors who are not parties to the Advisory Agreement or
interested persons as defined in the Act. The Advisory
Agreement may be terminated with respect to any Portfolio
without penalty on 60 days' written notice at the option of
either party or by vote of a majority of the outstanding
voting securities of such Portfolio; it will automatically
terminate in the event of assignment. The Adviser is not
liable for any action or inaction with regard to its
obligations under the Advisory Agreement as long as it does
not exhibit willful misfeasance, bad faith, gross
negligence, or reckless disregard of its obligations.
____________________________________________________________
EXPENSES OF THE FUND
____________________________________________________________
Distribution Agreement
The Fund has entered into a Distribution Agreement (the
"Agreement") with Alliance Fund Distributors, Inc., the
Fund's principal underwriter (the "Principal Underwriter"),
to permit the Fund to pay distribution services fees to
defray expenses associated with distribution of its Class B
and Class C shares in accordance with a plan of distribution
which is included in the Agreement and has been duly adopted
and approved in accordance with Rule 12b-1 adopted by the
Commission under the Act (the "Rule 12b-1 Plan").
Under the Agreement, the Treasurer of the Fund will
report the amounts expended under the Rule 12b-1 Plan and
the purposes for which such expenditures were made to the
Directors of the Fund for their review on a quarterly basis.
Also, the Agreement provides that the selection and
nomination of Directors who are not interested persons of
the Fund (as defined in the Act) are committed to the
discretion of such disinterested Directors then in office.
The Agreement was initially approved by the Directors of the
Fund at a meeting held on June 22, 1998.
In approving the Agreement, the Directors of the Fund
determined that there was a reasonable likelihood that the
Agreement would benefit the Fund and its shareholders.
Information with respect to distribution services fees and
other revenues and expenses of the Principal Underwriter
will be presented to the Directors each year for their
34
<PAGE>
consideration in connection with their deliberations as to
the continuance of the Agreement. In their review of the
Agreement, the Directors will be asked to take into
consideration separately with respect to each class the
distribution expenses incurred with respect to such class.
The distribution services fee of a particular class will not
be used to subsidize the provision of distribution services
with respect to any other class.
Distribution services fees will be accrued daily and
paid monthly and are charged as expenses of the Fund as
accrued. The distribution services fees attributable to the
Class B shares and Class C shares are designed to permit an
investor to purchase such shares through broker-dealers,
depository institutions or other financial intermediaries
and at the same time to permit the Principal Underwriter to
compensate such broker-dealers, including Donaldson, Lufkin
& Jenrette Securities Corp. and its Pershing Division,
affiliates of the Adviser, depository institutions or other
financial intermediaries in connection with the sale of such
shares or the provision of administrative or other services
to the holders of such shares. The distribution services
fee for a Portfolio is an amount equal to, on an annualized
basis, .10% of the aggregate average daily net assets
attributable to the Class B shares of the Portfolio and .25%
of the aggregate average daily net assets attributable to
the Class C shares of the Portfolio.
The Agreement became effective on July 22, 1992, and was
amended to become effective with respect to shares in the
Treasury Portfolio and the Class B shares and Class C shares
of the other Portfolios on June 29, 1998. The Agreement
will continue in effect until December 31, 1998 and
thereafter with respect to a class of shares of a Portfolio,
provided, however, that such continuance with respect to
that class is specifically approved annually by the
Directors of the Fund or by vote of the holders of a
majority of the outstanding voting securities (as defined in
the Act) of that class, 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 Act, of
any such party (other than as trustees of the Fund) and who
have no direct or indirect financial interest in the
operation of the Rule 12b-1 Plan or any agreement related
thereto. In the event that the Agreement is terminated or
not continued with respect to the Class B shares or Class C
shares, (i) no distribution services fees (other than
current amounts accrued but not yet paid) would be owed by
the Fund to the Principal Underwriter with respect to that
class, and (ii) the Fund would not be obligated to pay the
Principal Underwriter for any amounts expended under the
35
<PAGE>
Agreement not previously recovered by the Principal
Underwriter from distribution services fees in respect of
shares of such class or through deferred sales charges.
All material amendments to the Agreement will become
effective only upon approval as provided in the preceding
paragraph; and the Agreement may not be amended in order to
increase materially the costs that of the Fund may bear
pursuant to the Agreement without the approval of a majority
of the holders of the outstanding voting shares of the Fund
or the class or classes of the Fund affected. The Agreement
may be terminated (a) by the Fund without penalty at any
time by a majority vote of the holders of the Fund's
outstanding voting securities, voting separately by class,
or by a majority vote of the disinterested Directors or
(b) by the Principal Underwriter. To terminate the
Agreement, any party must give the other parties 60 days'
written notice; to terminate the Rule 12b-1 Plan only, the
Fund is not required to give prior notice to the Principal
Underwriter. The Agreement will terminate automatically in
the event of its assignment.
Transfer Agency Agreement
Alliance Fund Services, Inc., an indirect wholly-owned
subsidiary of Alliance, receives a transfer agency fee per
account holder of each of the Class A shares, Class B shares
and Class C shares of the Fund, plus reimbursement for out-
of-pocket expenses.
____________________________________________________________
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, depository institutions or
other financial intermediaries 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
36
<PAGE>
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. (Eastern time) will become
shareholders on, and will receive the dividend declared,
that day, with respect to the Prime, Government and Treasury
Portfolios. An investor's purchase order with respect to
the Tax-Free Portfolio must be received by State Street Bank
by 12:00 Noon (Eastern time). A telephone order for the
purchase of shares will become effective, and the shares
purchased will receive the dividend on shares declared on
that day, if such order is placed by 4:00 p.m. (Eastern
time) and Federal Funds or bank wire monies are received by
State Street bank prior to 4:00 p.m. (Eastern time) of such
day, with respect to the Prime, Government and Treasury
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 (Eastern time) and Federal Funds or
bank wire monies are received by State Street bank prior to
12:00 Noon (Eastern 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
37
<PAGE>
increased to at least that amount during such period. For
purposes of this calculation, the sum of a shareholder's
balance in all of the Portfolios will be considered as one
account.
A "business day," during which purchases and redemptions
of Fund shares can become effective and the transmittal of
redemption proceeds can occur, is considered for Fund
purposes as any weekday exclusive of national holidays on
which the New York Stock Exchange is closed and of 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 Commission) exists, or the Commission has ordered
such a suspension for the protection of shareholders. The
value of a shareholder's investment at the time of
redemption may be more or less than his cost, depending on
the market value of the securities held by the Fund at such
time and the income earned.
____________________________________________________________
DAILY DIVIDENDS - DETERMINATION OF NET ASSET VALUE
____________________________________________________________
All net income of each Portfolio, except the Tax-Free
Portfolio, is determined at 12:00 Noon and 4:00 p.m.
(Eastern 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 (Eastern 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.
38
<PAGE>
A Portfolio's net income consists of all accrued
interest income on assets less expenses allocable to that
Portfolio (including accrued expenses and fees payable to
the Adviser) applicable to that dividend period. Realized
gains and losses of each Portfolio are reflected in its net
asset value and are not included in net income. Net asset
value per share of each Portfolio is expected to remain
constant at $1.00 since all net income of each Portfolio is
declared as a dividend each time net income is determined
and net realized gains and losses, if any, are expected to
be relatively small.
The valuation of each Portfolio's portfolio securities
is based upon their amortized cost which does not take into
account unrealized securities gains or losses as measured by
market valuations. The amortized cost method involves
valuing an instrument at its cost and thereafter applying a
constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest
rates on the market value of the instrument. During periods
of declining interest rates, the daily yield on shares of a
Portfolio may be higher than that of a fund with identical
investments utilizing a method of valuation based upon
market prices for its portfolio instruments; the converse
would apply in a period of rising interest rates.
Each Portfolio of the Fund utilizes the amortized cost
method of valuation of portfolio securities in accordance
with the provisions of Rule 2a-7 under the Act. Pursuant to
such rule, each Portfolio maintains a dollar-weighted
average portfolio maturity of 90 days or less and invests
only in securities of high quality. Each Portfolio also
purchases instruments having remaining maturities of no more
than 397 days, or such greater length of time as may be
permitted from time to time pursuant to Rule 2a-7. The
Portfolios determine the maturity of a security 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
39
<PAGE>
which might include (1) selling instruments held by the
affected Portfolio prior to maturity to realize capital
gains or losses or to shorten average portfolio maturity;
(2) withholding dividends of net income on shares of that
Portfolio; or (3) establishing a net asset value per share
of the Portfolio by using available market quotations or
equivalents.
The net asset value of the shares of each Portfolio,
except the Tax-Free Portfolio, is determined each Fund
business day (and on such other days as the Directors deem
necessary) at 12:00 Noon and 4:00 p.m. (Eastern 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 (Eastern 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, Tax-Free and Treasury Portfolios
intend to qualify for each taxable year as "regulated
investment companies" under the Internal Revenue Code of
1986, as amended (the "Code") and, as such, will not be
liable for Federal income and excise taxes on the investment
company taxable income and net capital gains distributed to
their shareholders. Since each Portfolio of the Fund
distributes all of its investment company taxable income and
net capital gains, each Portfolio should thereby avoid all
Federal income and excise taxes.
Distributions out of taxable interest income, other
investment income, and short-term capital gains are taxable
to shareholders as ordinary income. Since each Portfolio's
investment income is derived from interest rather than
dividends, no portion of such distributions is eligible for
the dividends-received deduction available to corporations.
Long-term capital gains, if any, distributed by a Portfolio
to a shareholder are taxable to the shareholder as long-term
capital gain, irrespective of the length of time he may have
held his shares. Any loss realized on shares held for six
months or less will be treated as a long-term loss for
40
<PAGE>
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 entire year and,
thus, is an annual average rather than day-by-day
determination for each shareholder.
41
<PAGE>
____________________________________________________________
GENERAL INFORMATION
____________________________________________________________
Portfolio Transactions. Subject to the general
supervision of the Directors of the Fund, the Adviser is
responsible for the investment decisions and the placing of
the orders for portfolio transactions for the 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.
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
42
<PAGE>
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 June 15, 1998, there were
1,598,822,861 shares of the Prime Portfolio, 294,065,990
shares of the Government Portfolio and 325,740,323 shares of
the Tax-Free Portfolio outstanding. Set forth and discussed
below is certain information as to all persons who owned of
record or beneficially 5% or more of the outstanding shares
of a portfolio at June 15, 1998:
No. of % of
Name and Address Shares Class
Prime Portfolio
The Bank of New York as Agent 100,000,000 6.25%
For its Securities Lending
Customers
101 Carclay Street
New York, NY 10286
Government Portfolio
Herzog Hein Geduld Inc. 59,464,868 20.22%
Firm Investment
26 Broadway
New York, NY 10004-1703
43
<PAGE>
Kenneth Sawyer 21,647,274 7.36%
P.O. Box 923
Sparta, New Jersey 07871-0923
Tax-Free Portfolio
Davenport & Co. of Virginia Inc. 16,653,002 5.11%
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 87,711,083 26.93%
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, 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.
From time to time each Portfolio advertises its "yield" and
"effective yield." Both yield figures are based on historical
earnings and are not intended to indicate future performance. To
calculate the "yield," the amount of dividends paid on a share
during a specified seven-day period is assumed to be paid each
week over a 52-week period and is shown as a percentage of the
investment. To calculate "effective yield," which will be higher
than the "yield" because of compounding, the dividends paid are
assumed to be reinvested. Dividends for the Prime Portfolio for
the seven days ended April 30, 1998, after expense reimbursement,
44
<PAGE>
amounted to an annualized yield of 5.46%, equivalent to an
effective yield of 5.61%. Absent such reimbursement, the
annualized yield for such period would have been 5.52% equivalent
to an effective yield of 5.67% Dividends for the Government
Portfolio for the seven days ended April 30, 1998, after expense
reimbursement, amounted to an annualized yield of 5.34%,
equivalent to an effective yield of 5.48%. Absent such
reimbursement, the annualized yield for such period would have
been 5.45%, equivalent to an effective yield of 5.60%. Dividends
for the Tax-Free Portfolio for the seven days ended April 30,
1998 amounted to an annualized yield of 4.20%, equivalent to an
effective yield of 4.29%. Absent such reimbursement, the
annualized yield for such period would have been 4.28% equivalent
to an effective yield of 4.37%.
Yield quotations for a Portfolio are thus determined by
(i) computing the net change over a seven-day period, exclusive
of the capital changes, in the value of a hypothetical
pre-existing account having a balance of one share of such
Portfolio at the beginning of such period, (ii) dividing the net
change in account value by the value of the account at the
beginning of the base period to obtain the base period return,
and (iii) multiplying the base period return by (365/7) with the
resulting yield figure carried to the nearest hundredth of one
percent. A Portfolio's effective annual yield represents a
compounding of the annualized yield according to the formula:
effective yield + [(base period return + 1) 365/7] - 1.
45
<PAGE>
FINANCIAL STATEMENTS AND REPORT OF
INDEPENDENT AUDITORS
<PAGE>
ACM INSTITUTIONAL RESERVES
ANNUAL REPORT
APRIL 30, 1998
STATEMENT OF NET ASSETS
APRIL 30, 1998 ACM INSTITUTIONAL RESERVES - PRIME PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY YIELD VALUE
- -------------------------------------------------------------------------------
COMMERCIAL PAPER-60.0%
AKZO NOBEL, INC.
$ 20,000 6/15/98 5.54% $ 19,861,500
ALLIANZ OF AMERICA FINANCE CORP.
12,000 5/29/98 (a) 5.46 11,949,040
7,000 6/23/98 (a) 5.51 6,943,216
12,000 6/25/98 (a) 5.51 11,898,983
10,400 6/11/98 (a) 5.52 10,334,619
14,600 6/12/98 (a) 5.52 14,505,976
APEX FUNDING CORP.
27,000 5/26/98 (a) 5.87 26,889,938
ASSOCIATES CORP. OF NORTH AMERICA
10,000 6/25/98 5.48 9,916,278
BAA PLC
19,000 6/03/98 5.52 18,903,860
20,000 6/09/98 5.52 19,880,400
18,000 6/10/98 5.52 17,889,600
BANCA CRT FINANCIAL CORP.
6,000 5/20/98 5.52 5,982,520
BANCO DE SANTANDER
35,100 5/01/98 5.54 35,100,000
BANQUE CAISSE D' EPARGNE
10,000 6/22/98 5.50 9,920,556
5,000 6/03/98 5.53 4,974,654
BBV FINANCE DELAWARE, INC.
8,000 5/01/98 5.58 8,000,000
CAISSE CENTRALE JARDINS DU QUEBEC
10,000 9/21/98 5.46 9,783,117
2,000 5/15/98 5.60 1,995,644
CAISSE D' AMORTISSEMENT
3,000 7/10/98 5.60 2,967,333
CREGEM NORTH AMERICA, INC.
15,000 6/19/98 5.50 14,887,708
15,000 6/10/98 5.51 14,908,167
30,000 6/03/98 5.53 29,847,925
CS FIRST BOSTON, INC.
12,000 5/26/98 5.50 11,954,167
5,000 6/11/98 5.50 4,968,681
40,000 6/17/98 5.51 39,712,517
10,000 6/22/98 5.51 9,920,411
5,000 6/22/98 5.52 4,960,133
DEN DANSKE BANK
30,000 5/26/98 5.53 29,884,792
50,000 5/20/98 5.55 49,853,542
DEN NORSKE BANK
30,000 5/29/98 5.50 29,871,667
15,000 6/24/98 5.51 14,876,025
10,900 6/08/98 5.52 10,836,489
DIAGEO CAPITAL
5,000 5/29/98 5.45 4,978,806
10,000 5/29/98 5.50 9,957,222
21,500 6/17/98 5.51 21,345,337
GENERAL ELECTRIC CAPITAL CORP.
20,000 6/30/98 5.50 19,816,666
20,000 6/11/98 5.52 19,874,267
30,000 5.55%, 11/17/98 FRN 5.58 30,000,000
GENERAL MOTORS ACCEPTANCE CORP.
35,000 6/11/98 5.51 34,780,365
10,000 6/12/98 5.51 9,935,717
25,000 5/18/98 5.53 24,934,715
GENERAL RE CORP.
10,000 6/29/98 5.51 9,909,697
GENERALE BANK, INC.
5,000 5/27/98 5.50 4,980,139
GOVERNMENT DEVELOPMENT BANK
OF PUERTO RICO
35,000 7/22/98 5.52 34,559,933
IMI FUNDING CORP. (USA)
9,000 6/02/98 5.35 8,955,760
25,000 6/24/98 5.44 24,796,000
3,700 6/08/98 5.70 3,677,738
3,257 6/09/98 5.70 3,236,888
MORGAN STANLEY GROUP, INC.
30,000 6/15/98 5.50 29,793,750
RABOBANK USA
75,000 5/01/98 5.55 75,000,000
SALOMON SMITH BARNEY, INC.
10,000 6/15/98 5.51 9,931,125
25,000 6/04/98 5.52 24,869,667
35,000 6/10/98 5.52 34,785,333
SVENSKA HANDELSBANKEN
20,000 6/30/98 5.50 19,816,667
THAMES ASSET GLOBAL SECURITIZATION
20,000 6/11/98 (a) 5.55 19,873,583
UNI FUNDING, INC.
20,000 6/25/98 5.50 19,831,944
UNIBANCO
13,000 6/15/98 5.53 12,910,138
VENANTIUS AB
33,000 5/20/98 5.52 32,903,860
---------------
Total Commercial Paper
(amortized cost $1,059,634,775) 1,059,634,775
CORPORATE OBLIGATIONS-10.4%
ABBEY NATIONAL TREASURY SERVICES
15,000 5.54%, 2/17/99 FRN 5.60 14,993,058
ALLSTATE LIFE INSURANCE
FUNDING AGREEMENT
25,000 5.74%, 5/01/98 FRN (b) 5.74 25,000,000
1
STATEMENT OF NET ASSETS (CONTINUED)
ACM INSTITUTIONAL RESERVES - PRIME PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY YIELD VALUE
- -------------------------------------------------------------------------------
GENERAL AMERICAN FUNDING CORP.
$ 55,000 5.89%, 7/10/98 FRN 5.89% $ 55,000,000
MERRILL LYNCH & CO., INC.
25,000 5.61%, 1/29/99 FRN 5.61 25,000,000
15,000 5.61%, 2/16/99 FRN 5.61 15,000,000
4,000 5.88%, 8/26/98 5.88 4,000,000
TRAVELERS LIFE FUNDING AGREEMENT
20,000 5.64%, 4/14/99 FRN (b) 5.66 20,000,000
25,000 5.67%, 10/21/98 FRN (b) 5.67 25,000,000
---------------
Total Corporate Obligations
(amortized cost $183,993,058) 183,993,058
BANK OBLIGATIONS-10.0%
BAYERISCHE LANDESBANK
35,000 5.53%, 2/25/99 FRN 5.61 34,977,973
18,000 5.53%, 3/23/99 FRN 5.61 17,987,380
13,000 5.69%, 10/02/98 FRN 5.69 13,000,000
BAYERISCHE VEREINSBANK
20,000 5.53%, 6/30/98 FRN 5.59 19,998,086
DEUTSCHE BANK
10,000 5.52%, 7/01/98 FRN 5.62 9,998,378
LASALLE NATIONAL BANK
15,000 5.60%, 9/18/98 5.60 15,000,000
10,000 5.60%, 12/10/98 5.60 10,000,000
MORGAN GUARANTY TRUST CO.
5,000 5.96%, 6/22/98 5.88 4,999,762
ROYAL BANK OF CANADA
10,000 5.65%, 9/30/98 FRN 5.65 10,000,000
SMM TRUST
20,000 5.66%, 12/14/98 FRN (a) 5.66 20,000,000
20,000 5.69%, 12/16/98 FRN (a) 5.69 20,000,000
---------------
Total Bank Obligations
(amortized cost $175,961,579) 175,961,579
TIME DEPOSITS-7.5%
FIRST UNION NATIONAL BANK
52,000 5.56%, 5/01/98 5.56 52,000,000
WESTDEUTSCHE LANDESBANK
80,000 5.56%, 5/01/98 5.56 80,000,000
---------------
Total Time Deposits
(amortized cost $132,000,000) 132,000,000
CERTIFICATES OF DEPOSIT-6.3%
BAYERISCHE VEREINSBANK
30,000 5.64%, 2/25/99 5.64 30,000,000
CREDIT AGRICOLE
3,000 5.99%, 6/16/98 5.80 3,000,166
DEUTSCHE BANK
8,000 5.67%, 2/26/99 5.73 7,998,046
20,000 5.70%, 3/05/99 5.70 19,991,916
10,000 5.95%, 10/21/98 5.99 9,997,735
DRESDNER BANK
7,000 5.51%, 1/15/99 5.68 6,990,869
HESSISCHE LANDESBANK
5,000 5.94%, 6/19/98 5.81 4,999,986
NATIONAL WESTMINSTER BANK
14,000 5.65%, 3/03/99 5.71 13,994,273
SWISS BANK
14,000 5.66%, 3/04/99 5.70 13,995,485
---------------
Total Certificates of Deposit
(amortized cost $110,968,476) 110,968,476
PROMISSORY NOTES-4.5%
GOLDMAN SACHS GROUP LP
15,000 5.61%, 8/07/98 5.61 15,000,000
35,000 5.63%, 10/13/98 5.63 35,000,000
30,000 5.68%, 5/27/98 5.68 30,000,000
---------------
Total Promissory Notes
(amortized cost $80,000,000) 80,000,000
U.S. GOVERNMENT & AGENCY
OBLIGATIONS-1.0%
FEDERAL FARM CREDIT BANK
7,000 5.41%, 8/03/98 FRN 5.46 6,999,154
FEDERAL NATIONAL MORTGAGE ASSOCIATION
10,000 5.59%, 11/04/98 5.68 9,995,787
---------------
Total U.S. Government & Agency
Obligations
(amortized cost $16,994,941) 16,994,941
TOTAL INVESTMENTS-99.7%
(amortized cost $1,759,552,829) 1,759,552,829
Other assets less liabilities-0.3% 5,140,029
NET ASSETS-100%
(offering and redemption price of
$1.00 per share; 1,764,876,578
shares outstanding) $ 1,764,692,858
See Glossary of Terms on page 12.
See notes to financial statements.
2
STATEMENT OF NET ASSETS
APRIL 30, 1998 ACM INSTITUTIONAL RESERVES - GOVERNMENT PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY YIELD VALUE
- -------------------------------------------------------------------------------
U.S. GOVERNMENT & AGENCY
OBLIGATIONS-68.2%
FEDERAL NATIONAL MORTGAGE
ASSOCIATION-31.2%
$ 3,000 5.35%, 7/16/98 5.49% $ 2,998,343
7,000 5.46%, 3/03/99 FRN 5.50 6,997,946
6,000 5.54%, 10/20/98 FRN 5.67 5,998,770
7,000 5.57%, 3/05/99 5.62 6,997,046
6,000 5.57%, 4/28/99 FRN 5.62 5,997,025
6,500 5.59%, 11/04/98 FRN 5.68 6,498,868
6,500 5.59%, 11/04/98 5.79 6,497,261
10,000 5.68%, 6/19/98 5.60 10,000,955
2,000 6.41%, 7/17/98 5.67 2,002,664
5,500 8.15%, 5/11/98 5.52 5,503,573
9,375 5/26/98 5.43 9,339,718
5,000 6/17/98 5.48 4,964,685
2,000 6/12/98 5.49 1,987,377
5,000 6/30/98 5.50 4,954,792
5,000 6/26/98 5.51 4,957,767
---------------
85,696,790
FEDERAL HOME LOAN MORTGAGE
CORP.-20.4%
5,000 5/18/98 5.43 4,987,226
3,200 5/29/98 5.48 3,186,535
2,000 6/08/98 5.48 1,988,579
2,000 6/10/98 5.48 1,987,978
7,000 5/13/98 5.49 6,987,272
4,184 5/15/98 5.49 4,175,148
2,000 5/21/98 5.49 1,993,967
3,500 5/29/98 5.49 3,485,246
12,600 5/07/98 5.50 12,588,513
7,000 5/08/98 5.50 6,992,568
3,500 5/28/98 5.50 3,485,694
4,000 6/18/98 5.51 3,971,040
---------------
55,829,766
FEDERAL HOME LOAN BANK-14.3%
8,000 5.39%, 7/30/98 FRN 5.53 7,998,488
5,700 5.56%, 3/25/99 5.71 5,693,119
10,000 5.65%, 3/12/99 5.69 10,000,000
5,000 5.65%, 3/30/99 5.62 5,000,000
3,500 5.71%, 3/04/99 5.71 3,500,000
5,000 5.71%, 3/17/99 5.73 4,998,685
2,000 5.72%, 7/07/98 5.58 2,000,308
---------------
39,190,600
STUDENT LOAN MARKETING
ASSOCIATION-1.6%
4,500 5.36%, 7/12/99 FRN 6.17 4,480,141
FEDERAL FARM CREDIT BANK-0.7%
2,000 5.50%, 6/01/98 5.57 1,999,531
---------------
Total U.S. Government & Agency
Obligations
(amortized cost $187,196,828) 187,196,828
REPURCHASE AGREEMENTS-31.4%
CHASE SECURITIES, INC.
8,000 5.49%, dated 4/29/98,
due 5/11/98 in the amount
of $8,014,640 (cost $8,000,000;
collateralized by $9,515,000
FN334614, 6.50%, 12/01/23,
value $8,255,017) (c) 5.49 8,000,000
CIBC/WOOD GUNDY, INC.
7,000 5.56%, dated 4/30/98,
due 5/01/98 in the amount
of $7,001,081 (cost $7,000,000;
collateralized by $7,044,135
FN266385, 5.56%, 12/01/33,
value $7,185,052) (c) 5.56 7,000,000
NIKKO SECURITIES CO.
5,000 5.50%, dated 4/28/98,
due 5/13/98 in the amount
of $5,011,458 (cost $5,000,000;
collateralized by $5,335,000
FN419493, 6.00%, 3/01/28,
value $5,175,646) (c) 5.50 5,000,000
NIKKO SECURITIES CO.
9,000 5.51%, dated 4/02/98,
due 5/06/98 in the amount
of $9,046,835 (cost $9,000,000;
collateralized by $9,590,000
FN251802, 6.00%, 4/01/28,
value $9,312,689) (c) 5.51 9,000,000
PAINE WEBBER, INC.
7,000 5.51%, dated 4/28/98,
due 5/27/98 in the amount
of $7,031,070 (cost $7,000,000;
collateralized by $7,930,000
FN394706, 7.00%, 7/01/04,
value $7,219,778) (c) 5.51 7,000,000
PRUDENTIAL SECURITIES, INC.
6,000 5.50%, dated 4/29/98,
due 5/20/98 in the amount
of $6,019,250 (cost $6,000,000;
collateralized by $6,269,000
FH00815, 7.00%, 12/01/27,
value $6,183,341) (c) 5.50 6,000,000
PRUDENTIAL SECURITIES, INC.
8,000 5.52%, dated 4/01/98,
due 5/04/98 in the amount
of $8,040,480 (cost $8,000,000;
collateralized by $8,324,000
FH00557, 7.00%, 10/01/27,
value $8,219,337) (c) 5.52 8,000,000
3
STATEMENT OF NET ASSETS
(CONTINUED) ACM INSTITUTIONAL RESERVES - GOVERNMENT PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY YIELD VALUE
- -------------------------------------------------------------------------------
SALOMON SMITH BARNEY, INC.
$ 8,000 5.49%, dated 4/29/98,
due 5/12/98 in the amount
of $8,015,860 (cost $8,000,000;
collateralized by $8,352,000
FH00557, 7.00%, 10/01/27,
value $8,246,985) (c) 5.49% $ 8,000,000
SALOMON SMITH BARNEY, INC.
6,000 5.50%, dated 4/28/98,
due 5/19/98 in the amount
of $6,019,250 (cost $6,000,000;
collateralized by $8,398,000
FN328331, 6.50%, 8/01/10,
value $6,146,605) (c) 5.50 6,000,000
SBC WARBURG, LTD.
8,000 5.48%, dated 4/22/98,
due 5/05/98 in the amount
of $8,015,831 (cost $8,000,000;
collateralized by $14,358,000
FN190044, 6.50%, 9/01/08,
value $8,165,296) (c) 5.48 8,000,000
SBC WARBURG, LTD.
7,000 5.50%, dated 4/15/98,
due 5/20/98 in the amount
of $7,037,431 (cost $7,000,000;
collateralized by $7,203,000
FN424858, 6.50%, 4/01/28,
value $7,168,686) (c) 5.50 7,000,000
STATE STREET BANK AND TRUST CO.
7,100 5.40%, dated 4/30/98,
due 5/01/98 in the amount
of $7,101,065 (cost $7,100,000;
collateralized by $7,025,000
US T-Note, 6.25%, 5/31/99,
value $7,255,435) 5.40 7,100,000
---------------
Total Repurchase Agreements
(amortized cost $86,100,000) 86,100,000
TOTAL INVESTMENTS-99.6%
(amortized cost $273,296,828) 273,296,828
Other assets less liabilities-0.4% 1,164,547
NET ASSETS-100%
(offering and redemption
price of $1.00 per share;
274,591,724 shares
outstanding) $ 274,461,375
See Glossary of Terms on page 12.
See notes to financial statements.
4
STATEMENT OF NET ASSETS
APRIL 30, 1998 ACM INSTITUTIONAL RESERVES - TAX-FREE PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------------
MUNICIPAL BONDS-98.8%
ALABAMA-1.8%
ARAB IDB
(SCI Manufacturing Inc.)
Series '89 VRDN (d)
$ 150 8/01/00 4.40% $ 150,000
HUNTSVILLE IDA
(Seiki USA Project)
Series '88 AMT VRDN (d)
5,000 9/01/98 4.48 5,000,000
-------------
5,150,000
ALASKA-2.4%
ALASKA HOUSING FINANCE CORP.
(University of Alaska)
Series '97A VRDN (d)
4,000 12/01/27 4.10 4,000,000
ALASKA IDA
(Fairbanks Gold Mining Inc.)
Series '97 AMT VRDN (d)
2,500 5/01/09 4.20 2,500,000
ANCHORAGE GO
Series A FGIC
535 9/01/98 3.98 535,030
-------------
7,035,030
ARIZONA-3.7%
APACHE COUNTY IDA
PCR
(Tuscon Electric Power Co. Project)
Series '81B VRDN (d)
2,500 10/01/21 4.45 2,500,000
APACHE COUNTY IDR
(Tuscon Electric Power Co. Project)
Series '83C VRDN (d)
7,100 12/15/18 4.25 7,100,000
APACHE COUNTY PCR
(Tucson Electric Power Co. Project)
Series '85A VRDN (d)
1,300 12/01/20 4.20 1,300,000
-------------
10,900,000
ARKANSAS-0.4%
JONESBORO SALES AND USE
TAX REVENUE
Series '97 FSA
1,250 11/15/98 3.90 1,250,000
CALIFORNIA-1.7%
CALIFORNIA HIGHER EDUCATION
STUDENT LOAN REVENUE
Series D-2 PPB (d)
5,000 4/01/00 4.00 5,000,000
COLORADO-4.8%
DOUGLAS COUNTY
MFHR
(Parker Hilltop Apartments Project)
Series '97 AMT PPB (d)
5,935 12/01/27 4.00 5,935,000
ENGLEWOOD IDR
(Swedish Mob I Ltd. Project)
Series '85 VRDN (d)
885 12/01/10 4.40 885,000
WESTMINISTER MFHR
(Cascade Village Apartments)
Series '97 VRDN (d)
7,375 12/01/07 4.10 7,375,000
-------------
14,195,000
DELAWARE-1.8%
DELAWARE IDR
(Delmarva Power & Light)
Series '93C VRDN (d)
5,150 10/01/28 4.25 5,150,000
DISTRICT OF COLUMBIA-6.2%
DISTRICT OF COLUMBIA GO
Series '92A-3 VRDN (d)
5,000 10/01/07 4.35 5,000,000
Series '92A-4 VRDN (d)
7,700 10/01/07 4.35 7,700,000
DISTRICT OF COLUMBIA
HFA MFHR
(Tyler Housing)
AMT VRDN (d)
2,400 8/01/25 4.45 2,400,000
5
STATEMENT OF NET ASSETS
(CONTINUED) ACM INSTITUTIONAL RESERVES - TAX-FREE PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------------
DISTRICT OF COLUMBIA
HFA SFMR
Series '97C AMT PPB (d)
$ 3,000 9/01/98 4.05% $ 3,000,000
-------------
18,100,000
FLORIDA-8.6%
BROWARD COUNTY
HFA MFHR
(Jacaranda Village Apartments)
Series '97 VRDN (d)
3,500 9/01/22 4.20 3,500,000
BROWARD COUNTY
MFHR
(Harbour Town Jacaranda Project)
Series '95B VRDN (d)
3,400 12/01/25 4.20 3,400,000
BROWARD COUNTY
MFHR
(Margate Investments Project)
VRDN (d)
1,000 11/01/05 4.20 1,000,000
FLORIDA HFA MFHR
(EEE-Carlton Arms II)
VRDN (d)
1,500 12/01/08 4.10 1,500,000
FLORIDA HFA MFHR
(Oaks at Orange Park)
Series '90 VRDN (d)
5,100 7/01/07 4.15 5,100,000
HIGHLANDS COUNTY HEALTH FACILITIES
(Adventist/Sunbelt)
Series A VRDN (d)
5,600 11/15/26 4.15 5,600,000
PALM BEACH COUNTY
HFA MFHR
(Village Crossing Project)
Series '97B VRDN (d)
3,000 10/01/27 4.20 3,000,000
VOLUSIA COUNTY
HFA MFHR
(Ocean Oaks Apartments)
Series '97B VRDN (d)
2,000 10/01/27 4.20 2,000,000
-------------
25,100,000
GEORGIA-2.6%
COLLEGE PARK IDR
(Wynefield 1 Project)
AMT VRDN (d)
1,700 12/01/16 4.05 1,700,000
JACKSON COUNTY IDA
(Mitsubishi Consumer Electronic)
VRDN (d)
3,000 12/01/15 4.55 3,000,000
SAVANNAH ECONOMIC
DEVELOPMENT AUTHORITY
(Georgia Kaolin)
Series '97 AMT VRDN (d)
3,000 7/01/27 4.20 3,000,000
-------------
7,700,000
HAWAII-2.9%
HAWAII HOUSING FINANCE &
DEVELOPMENT AUTHORITY
(Kamakee Vista)
Series '90A VRDN (d)
6,500 7/01/25 4.70 6,500,000
HAWAII HOUSING FINANCE &
DEVELOPMENT AUTHORITY
(Rental Housing System)
Series '90B VRDN (d)
1,900 7/01/25 4.70 1,900,000
-------------
8,400,000
IDAHO-0.4%
CUSTER COUNTY SOLID WASTE REVENUE
(Hecla Mining Co. Project)
Series '97 AMT VRDN (d)
1,300 7/01/07 4.25 1,300,000
ILLINOIS-14.5%
CHICAGO AIRPORT
(O'Hare International Airport)
Series B AMT VRDN (d)
2,300 1/01/18 4.20 2,300,000
Series C VRDN (d)
3,400 1/01/18 4.05 3,400,000
6
ACM INSTITUTIONAL RESERVES - TAX-FREE PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------------
CHICAGO HFA MFHR
(Waveland Assoc)
Series '85D VRDN (d)
$ 6,300 11/01/10 4.15% $ 6,300,000
DES PLAINES COOK COUNTY IDR
(CP Partners LLC Project)
Series '97A VRDN (d)
6,775 11/01/15 4.20 6,775,000
ELMHURST HOSPITAL REVENUE
(Joint Comm. Health Org.)
Series '88 VRDN (d)
6,780 7/01/18 4.10 6,780,000
ILLINOIS DEVELOPMENT
FINANCE AUTHORITY
(D.E. Akin Seed Project)
AMT VRDN (d)
1,000 11/01/04 4.30 1,000,000
ILLINOIS DEVELOPMENT
FINANCE AUTHORITY
(U.G.N. Inc. Project)
Series '86 AMT VRDN (d)
3,500 9/15/11 4.95 3,500,000
ILLINOIS EDUCATIONAL
FACILITIES AUTHORITY
(Cultural Pooled Financing
Program)
Series '85 VRDN (d)
4,000 12/01/25 4.10 4,000,000
ILLINOIS HEALTH FACILITIES AUTHORITY
(Rehab Institute of Chicago)
Series '97 VRDN (d)
7,000 4/01/32 4.15 7,000,000
VERNON HILLS IDR
(Kinder Care Center)
VRDN (d)
550 2/01/01 4.35 550,000
WEST CHICAGO IDR
(Acme Printing Co.)
Series '89 AMT VRDN (d)
1,100 5/01/99 5.03 1,100,000
-------------
42,705,000
INDIANA-3.1%
CITY OF INDIANAPOLIS
(Visiting Nurse Service Foundation)
Series '98 VRDN (d)
3,100 3/01/13 4.20 3,100,000
GARY ENVIRONMENTAL IMPROVEMENT
REVENUE
(U.S. Steel Corp.)
Series '84 VRDN (d)
4,100 7/15/02 3.85 4,100,000
SEYMOUR ECONOMIC DEVELOPMENT REVENUE
(Kobelco Metal Powder Co. Project)
Series '97 AMT VRDN (d)
2,000 12/01/07 4.95 2,000,000
-------------
9,200,000
LOUISIANA-2.4%
WEST BATON ROUGE IDR
(Dow Chemical #3)
Series '94B VRDN (d)
7,100 12/01/16 4.30 7,100,000
MAINE-0.9%
MAINE FINANCE AUTHORITY
(Barber Foods Inc.)
Series '90B AMT VRDN (d)
1,675 12/01/06 4.50 1,675,000
ORRINGTON RESOURCE RECOVERY REVENUE
(Penobscot Energy Project)
Series B AMT VRDN (d)
905 5/01/03 4.65 905,000
-------------
2,580,000
MICHIGAN-3.7%
MICHIGAN HOSPITAL FINANCE AUTHORITY
(Hospital Equipment Revenue)
Series '98A VRDN (d)
10,900 12/01/23 4.15 10,900,000
MINNESOTA-0.5%
COTTAGE GROVE
(Minnesota Mining & Manufacturing
Co. Project)
VRDN (d)
1,000 8/01/12 4.73 1,000,000
7
STATEMENT OF NET ASSETS
(CONTINUED) ACM INSTITUTIONAL RESERVES - TAX-FREE PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------------
EDEN PRAIRIE IDA
(Kinder Care Project)
Series C VRDN (d)
$ 465 2/01/01 4.35% $ 465,000
-------------
1,465,000
MISSISSIPPI-0.1%
JONES COUNTY HOSPITAL REVENUE
(South Central Registered
Medical Center Project)
MBIA
420 8/01/98 3.98 422,911
MISSOURI-4.4%
BLUE SPRINGS IDA
(Kinder Care Project)
Series C VRDN (d)
540 2/01/01 4.35 540,000
BOONE COUNTY IDA
(Minnesota Mining &
Manufacturing Co. Project)
VRDN (d)
500 12/01/25 4.10 500,000
MISSOURI HEALTH &
EDUCATIONAL FACILITY
(Barnes Hospital Project)
Series '85 VRDN (d)
10,000 12/01/15 4.10 10,000,000
MISSOURI HEALTH & EDUCATIONAL FACILITY
(Stowers Institute)
Series '98 VRDN (d)
2,000 4/01/38 4.15 2,000,000
-------------
13,040,000
NEW HAMPSHIRE-0.4%
MERRIMACK COUNTY
GO BAN
Lot B
1,200 8/07/98 4.00 1,200,782
NEW JERSEY-1.6%
JERSEY CITY BAN
Renewal Notes
2,250 9/18/98 3.90 2,254,024
NEW JERSEY ECONOMIC DEVELOPMENT
AUTHORITY
(Newark Recycling Facility)
Series '97 AMT PPB (d)
2,500 12/01/22 3.96 2,500,000
-------------
4,754,024
NEW MEXICO-0.5%
NEW MEXICO HFA
SFMR
(Home Mortgage Revenue)
Series '97-1 PPB (d)
1,415 7/01/28 3.85 1,415,000
NEW YORK-1.8%
HEMPSTEAD IDA
(American Ref-Fuel)
Series '97 VRDN (d)
5,300 12/01/10 4.10 5,300,000
NORTH CAROLINA-1.0%
NORTH CAROLINA MEDICAL CARE FACILITY
(The Givens Estates Inc. Project)
Series '97 VRDN (d)
3,000 12/01/26 4.25 3,000,000
OHIO-0.9%
WARREN COUNTY IDR
(Pioneer Industrial Components
Project)
Series '85 VRDN (d)
2,500 12/01/05 4.40 2,500,000
OREGON-0.9%
BEAVERTON WATER REVENUE
FGIC
295 6/01/98 4.00 295,060
OREGON ECONOMIC DEVELOPMENT REVENUE
(Kyotaru Oregon Project)
Series '89 AMT VRDN (d)
2,400 12/01/99 4.47 2,400,000
-------------
2,695,060
PENNSYLVANIA-7.8%
ALLEGHENY COUNTY IDR
(United Jewish Federation Project)
Series '96A VRDN (d)
9,930 10/01/26 4.20 9,930,000
MONTGOMERY COUNTY HIGHER
EDUCATION & HEALTH LOAN REVENUE
Series '96A VRDN (d)
4,370 4/01/17 4.15 4,370,000
8
ACM INSTITUTIONAL RESERVES - TAX-FREE PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------------
MONTGOMERY COUNTY
IDA
(Kinder Care Project)
Series D VRDN (d)
$ 400 10/01/00 4.35% $ 400,000
PENNSYLVANIA ECONOMIC DEVELOPMENT
FINANCE AUTHORITY
(National Gypsum Co. Project)
Series '97A AMT VRDN (d)
3,400 11/01/27 4.15 3,400,000
PHILADELPHIA GO TRAN
Series '97A
4,500 6/30/98 4.50 4,503,175
VENAGO IDR
(Penzoil Co. Project)
Series '82A VRDN (d)
285 12/01/12 4.30 285,000
-------------
22,888,175
TENNESSEE-1.1%
DICKSON COUNTY IDA
(Tennessee Bun Co. Project)
Series '96 AMT VRDN (d)
2,000 7/01/06 4.35 2,000,000
VOLUNTEER STATE STUDENT LOAN REVENUE
(Student Funding Corp.)
Series '87A-3
AMT VRDN (d)
1,200 12/01/17 4.50 1,200,000
-------------
3,200,000
TEXAS-3.6%
MIDLOTHIAN IDA
(Box-Crow Cement Co.)
VRDN (d)
5,000 12/01/09 4.15 5,000,000
PORT ARTHUR NAVIGATION DISTRICT
(Texaco Inc. Project)
Series '94 VRDN (d)
5,400 10/01/24 4.25 5,400,000
TRINITY RIVER IDA
(Radiation Sterilizers)
Series A VRDN (d)
150 11/01/05 3.70 150,000
-------------
10,550,000
UTAH-1.0%
UTAH BOARD OF REGENTS STUDENT
LOAN REVENUE
Series O AMBAC
2,000 5/01/98 3.96 2,000,000
UTAH HFA SFMR
(Home Mortgage Revenue)
Series '97-3 VRDN (d)
900 7/01/16 4.15 900,000
-------------
2,900,000
VERMONT-3.4%
VERMONT HEFA
(Capital Asset Financing Program)
Series '97-1 VRDN (d)
5,000 6/01/22 4.25 5,000,000
Series '97-2 VRDN (d)
5,000 6/01/27 4.25 5,000,000
-------------
10,000,000
VIRGINIA-5.5%
CHESTERFIELD COUNTY
IDR
(Philip Morris Co.)
VRDN (d)
11,100 4/01/09 4.25 11,100,000
LOUDOUN COUNTY IDA RESIDENTIAL
CARE FACILITY
(Falcons Landing Project)
Series '98 VRDN (d)
5,000 11/01/28 4.05 5,000,000
-------------
16,100,000
WASHINGTON-0.4%
WASHINGTON STUDENT LOAN FINANCE
ASSOCIATION
Series '88A AMT VRDN (d)
1,300 1/01/04 4.20 1,300,000
WEST VIRGINIA-0.7%
KEYSER IDR
(Keyser Associates Project)
VRDN (d)
1,900 7/01/14 4.20 1,900,000
9
STATEMENT OF NET ASSETS
(CONTINUED) ACM INSTITUTIONAL RESERVES - TAX-FREE PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------------
WISCONSIN-1.3%
MANITOWOC IDR
(Jagemann Stamping Co.)
Series '98 AMT VRDN (d)
$ 1,618 4/01/11 4.40% $ 1,618,000
WAUSAU PCR
(Minnesota Mining &
Manufacturing Co. Project)
VRDN (d)
500 12/01/01 4.73 500,000
1,600 8/01/17 4.73 1,600,000
-------------
3,718,000
TOTAL INVESTMENTS-98.8%
(amortized cost $290,113,982) 290,113,982
Other assets less liabilities-1.2% 3,649,664
NET ASSETS-100%
(offering and redemption price
of $1.00 per share; 293,847,141
shares outstanding) $ 293,763,646
# All securities either mature or their interest rate changes in one year or
less.
See Glossary of Terms on page 12.
See notes to financial statements.
10
STATEMENT OF NET ASSETS
APRIL 30, 1998 ACM INSTITUTIONAL RESERVES - TRUST PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY YIELD VALUE
- -------------------------------------------------------------------------------
COMMERCIAL PAPER-55.7%
ALLIANZ OF AMERICA
FINANCE CORP.
$ 4,000 5/29/98 (a) 5.46% $ 3,983,013
3,000 6/23/98 (a) 5.51 2,975,664
APEX FUNDING CORP.
4,700 5/26/98 (a) 5.87 4,680,841
ASSOCIATES CORP. OF NORTH AMERICA
5,000 6/25/98 5.48 4,958,139
5,000 6/24/98 5.52 4,958,600
BAA PLC
10,000 6/03/98 5.52 9,949,400
5,000 6/09/98 5.52 4,970,100
BANCA CRT FINANCIAL CORP.
2,400 5/20/98 5.52 2,393,008
BANCO DE SANTANDER
18,000 5/01/98 5.54 18,000,000
BANQUE CAISSE D'EPARGNE
5,000 6/22/98 5.50 4,960,278
2,000 6/03/98 5.53 1,989,862
BBV FINANCE DELAWARE, INC.
2,000 5/01/98 5.58 2,000,000
CAISSE CENTRALE JARDINS DU QUEBEC
3,455 9/21/98 5.46 3,380,067
CAISSE D' AMORTISSEMENT
1,000 7/10/98 5.60 989,111
CITICORP
10,000 5/01/98 5.54 10,000,000
CREGEM NORTH AMERICA, INC.
5,000 6/19/98 5.50 4,962,569
10,000 6/10/98 5.51 9,938,778
4,000 6/03/98 5.53 3,979,723
CS FIRST BOSTON, INC.
5,000 6/17/98 5.51 4,964,065
5,000 6/22/98 5.52 4,960,133
5,000 7/29/98 5.54 4,931,519
DEN DANSKE BANK
10,000 5/20/98 5.55 9,970,708
DEN NORSKE BANK
5,000 5/29/98 5.50 4,978,611
GENERAL ELECTRIC CAPITAL CORP.
4,000 5.55%, 11/17/98 FRN 5.55 4,000,000
GE FINANCIAL ASSURANCE HOLDINGS
15,000 6/11/98 5.52 14,905,700
GENERAL MOTORS ACCEPTANCE CORP.
10,000 6/11/98 5.51 9,937,247
IMI FUNDING CORP.
(USA)
5,000 6/24/98 5.44 4,959,200
5,000 9/04/98 5.47 4,904,275
4,000 6/10/98 5.52 3,975,467
2,500 6/04/98 5.60 2,486,778
MORGAN STANLEY GROUP, INC.
3,000 6/15/98 5.50 2,979,375
NORWEST CORP.
13,000 5/21/98 5.52 12,960,133
SALOMON SMITH BARNEY, INC.
18,000 6/02/98 5.52 17,911,680
UNIBANCO
5,000 6/15/98 5.53 4,965,438
VENANTIUS AB
4,485 6/29/98 5.50 4,444,573
---------------
Total Commercial Paper
(amortized cost $217,304,055) 217,304,055
CERTIFICATES OF DEPOSIT-13.3%
BAYERISCHE LANDESBANK
10,000 5.53%, 2/25/99 FRN 5.61 9,993,707
BAYERISCHE VEREINSBANK
10,000 5.64%, 2/25/99 5.64 10,000,000
CANADIAN IMPERIAL BANK OF COMMERCE
13,000 5.54%, 5/28/98 5.54 13,000,000
DEUTSCHE BANK
2,000 5.67%, 2/26/99 5.73 1,999,511
5,000 5.70%, 3/05/99 5.70 4,997,979
2,000 5.95%, 10/21/98 5.99 1,999,547
DRESDNER BANK
3,000 5.51%, 1/15/99 5.68 2,996,087
HESSISCHE LANDESBANK
1,000 5.94%, 6/19/98 5.81 999,997
NATIONAL WESTMINSTER BANK
3,000 5.65%, 3/03/99 5.71 2,998,773
SWISS BANK
3,000 5.66%, 3/04/99 5.71 2,999,033
---------------
Total Certificates of Deposit
(amortized cost $51,984,634) 51,984,634
CORPORATE OBLIGATIONS-9.7%
ALLSTATE LIFE INSURANCE
FUNDING AGREEMENT
5,000 5.69%, 8/31/98 FRN (b) 5.69 5,000,000
GENERAL AMERICAN FUNDING CORP.
4,000 5.86%, 7/10/98 FRN 5.86 4,000,000
8,000 5.89%, 7/10/98 FRN 5.89 8,000,000
MERRILL LYNCH & CO., INC.
8,000 5.61%, 1/29/99 FRN 5.61 8,000,000
3,000 5.88%, 8/26/98 5.88 3,000,000
11
STATEMENT OF NET ASSETS
(CONTINUED) ACM INSTITUTIONAL RESERVES - TRUST PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY YIELD VALUE
- -------------------------------------------------------------------------------
TRAVELERS LIFE FUNDING AGREEMENT
$ 5,000 5.64%, 4/14/99 FRN (b) 5.66% $ 5,000,000
5,000 5.67%, 10/21/98 FRN (b) 5.66 5,000,000
---------------
Total Corporate Obligations
(amortized cost $38,000,000) 38,000,000
BANK OBLIGATIONS-9.7%
BAYERISCHE LANDESBANK
7,000 5.53%, 3/23/99 FRN 5.61 6,995,092
2,000 5.69%, 10/02/98 FRN 5.69 2,000,000
BAYERISCHE VEREINSBANK
5,000 5.56%, 6/30/98 FRN 5.59 4,999,521
CITIBANK
10,000 5.52%, 6/15/98 5.52 9,931,000
DEUTSCHE BANK
2,000 5.52%, 7/01/98 FRN 5.62 1,999,676
MORGAN GUARANTY TRUST CO.
1,000 5.96%, 6/22/98 5.88 999,952
ROYAL BANK OF CANADA
2,000 5.65%, 9/30/98 FRN 5.65 2,000,000
SMM TRUST
5,000 5.66%, 12/14/98 FRN (a) 5.66 5,000,000
4,000 5.69%, 12/16/98 FRN (a) 5.69 4,000,000
---------------
Total Bank Obligations
(amortized cost $37,925,241) 37,925,241
TIME DEPOSITS-6.3%
FIRST UNION NATIONAL BANK
9,500 5.56%, 5/01/98 5.56 9,500,000
WESTDEUTSCHE LANDESBANK
15,000 5.56%, 5/01/98 5.56 15,000,000
---------------
Total Time Deposits
(amortized cost $24,500,000) 24,500,000
PROMISSORY NOTES-4.6%
GOLDMAN SACHS GROUP LP
4,000 5.61%, 8/07/98 5.61 4,000,000
7,000 5.63%, 10/13/98 5.63 7,000,000
7,000 5.68%, 5/27/98 5.68 7,000,000
---------------
Total Promissory Notes
(amortized cost $18,000,000) 18,000,000
U.S. GOVERNMENT & AGENCY
OBLIGATIONS-0.5%
FEDERAL NATIONAL MORTGAGE
ASSOCIATION
2,000 5.78%, 11/04/98
(amortized cost $1,999,158) 5.79 1,999,158
TOTAL INVESTMENTS-99.8%
(amortized cost $389,713,088) 389,713,088
Other assets less liabilities-0.2% 778,945
NET ASSETS-100%
(offering and redemption price
of $1.00 per share; 390,535,793
shares outstanding) $ 390,492,033
(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, 1998, these securities amounted to $142,395,355, representing 8.1% of net
assets on the Prime Portfolio, and $20,639,518, representing 5.3% of net assets
on the Trust Portfolio.
(b) Funding agreements are illiquid securities subject to restrictions as to
resale. These securities amounted to $70,000,000, representing 4.0% of net
assets on the Prime Portfolio, and $15,000,000, representing 3.8% of net assets
on the Trust Portfolio (see Note A to the financial statements).
(c) Repurchase agreement which is terminable within 7 days.
(d) 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
FGIC Financial Guaranty Insurance Company
FRN Floating Rate Note
FSA Financial Security Assurance, Inc.
GO General Obligation
HEFA Health & Educational Facility 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
SFMR Single Family Mortgage Revenue
TRAN Tax & Revenue Anticipation Note
See notes to financial statements.
12
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1998 ACM INSTITUTIONAL RESERVES
_______________________________________________________________________________
PRIME GOVERNMENT TAX-FREE TRUST
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------ ------------
INVESTMENT INCOME
Interest $ 74,337,440 $ 16,920,793 $ 9,838,311 $ 15,589,391
EXPENSES
Advisory fee
(Note B) 2,597,281 600,906 516,640 1,225,381
Registration 257,929 86,249 60,277 88,229
Custodian 212,071 96,762 93,728 91,078
Audit and legal 37,281 15,674 14,196 14,363
Transfer agency 29,327 27,888 20,351 25,814
Printing 7,980 4,006 4,142 12,358
Directors' fees 7,979 7,979 7,979 7,979
Miscellaneous 10,041 4,836 4,404 4,670
Total expenses 3,159,889 844,300 721,717 1,469,872
Less: expense
reimbursement (562,608) (243,394) (205,077) (128,100)
Net expenses 2,597,281 600,906 516,640 1,341,772
Net investment
income 71,740,159 16,319,887 9,321,671 14,247,619
REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain
on investment
transactions 84 1,000 168 13,207
Net change in
unrealized
appreciation of
investments -0- -0- (351) -0-
Net gain (loss)
on investments 84 1,000 (183) 13,207
NET INCREASE IN NET
ASSETS FROM
OPERATIONS $ 71,740,243 $ 16,320,887 $ 9,321,488 $ 14,260,826
See notes to financial statements.
13
STATEMENT OF CHANGES IN NET ASSETS ACM INSTITUTIONAL RESERVES
_______________________________________________________________________________
PRIME PORTFOLIO
---------------------------------
YEAR ENDED YEAR ENDED
APRIL 30, 1998 APRIL 30, 1997
--------------- ---------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income $ 71,740,159 $ 40,100,886
Net realized gain (loss) on
investment transactions 84 1,928
Net change in unrealized appreciation
of investments -0- -0-
Net increase in net assets from
operations 71,740,243 40,102,814
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (71,740,159) (40,100,886)
CAPITAL STOCK TRANSACTIONS
Net increase (decrease) 897,353,419 374,018,204
Total increase (decrease) 897,353,503 374,020,132
NET ASSETS
Beginning of year 867,339,355 493,319,223
End of year $ 1,764,692,858 $ 867,339,355
See notes to financial statements.
14
ACM INSTITUTIONAL RESERVES
_______________________________________________________________________________
GOVERNMENT PORTFOLIO TAX-FREE PORTFOLIO
--------------------------------- ---------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
APRIL 30, 1998 APRIL 30, 1997 APRIL 30, 1998 APRIL 30, 1997
--------------- --------------- --------------- ---------------
$ 16,319,887 $ 10,174,707 $ 9,321,671 $ 7,081,373
1,000 (2,140) 168 (90)
-0- -0- (351) 229
16,320,887 10,172,567 9,321,488 7,081,512
(16,319,887) (10,174,707) (9,321,671) (7,081,373)
(52,059,333) 175,705,670 110,698,884 (546,863)
(52,058,333) 175,703,530 110,698,701 (546,724)
326,519,708 150,816,178 183,064,945 183,611,669
$ 274,461,375 $ 326,519,708 $ 293,763,646 $ 183,064,945
TRUST PORTFOLIO
---------------------------------
YEAR ENDED YEAR ENDED
APRIL 30, 1998 APRIL 30, 1997
--------------- ---------------
$ 14,247,619 $ 9,713,883
13,207 (4,087)
-0- -0-
14,260,826 9,709,796
(14,247,619) (9,713,883)
214,797,663 5,619,828
214,810,870 5,615,741
175,681,163 170,065,422
$ 390,492,033 $ 175,681,163
15
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1998 ACM INSTITUTIONAL RESERVES
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
ACM Institutional Reserves, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as an open-end investment company. The Fund
operates as a series company currently consisting of four Portfolios: Prime
Portfolio, Government Portfolio, Tax-Free Portfolio and Trust Portfolio. Each
Portfolio 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 financial statements have been prepared in conformity with
generally accepted accounting principles which require management to make
certain estimates and assumptions that affect the reported amounts of assets
and liabilities in the financial statements and amounts of income and expenses
during the reporting period. Actual results could differ from those estimates.
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. Certain illiquid securities containing
unconditional par puts are also valued at amortized cost. Amortization of
premium is charged to income. Accretion of market discount is credited to
unrealized gain.
2. TAXES
It is the Fund's policy to meet 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 any, to its
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
3. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Interest income is accrued daily. Investment transactions are recorded on the
date securities are purchased or sold. Investment gains and losses are
determined on the identified cost basis.
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 year
end. Dividends paid by Tax-Free Portfolio from net investment income for the
year ended April 30, 1998 are exempt from federal income taxes. However,
certain shareholders may be subject to the alternative minimum tax.
5. REPURCHASE AGREEMENTS
It is the Fund's policy to take possession of securities as collateral under
repurchase agreements and to determine on a daily basis that the value of such
securities are sufficient to cover the value of the repurchase agreements.
NOTE B: ADVISORY FEE AND TRANSACTIONS WITH AN AFFILIATE OF THE ADVISER
Under the terms of an investment advisory agreement, the Fund pays Alliance
Capital Management L.P., (the "Adviser"), an advisory fee at the annual rate of
.20% of average daily net assets for the Prime, Government and Tax-Free
Portfolios and .45% 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 their average daily net assets for any fiscal year, and with respect to the
Trust Portfolio, from May 1, 1997 to July 13, 1997 for expenses exceeding .45%
of its average daily net assets and from July 14, 1997 to April 30, 1998 for
expenses exceeding .50% of its average daily net assets. For the year ended
April 30, 1998, reimbursement was $562,608, $243,394, $205,077 and $128,100 for
the Prime, Government, Tax-Free and Trust Portfolios, respectively.
Each Portfolio compensates Alliance Fund Services, Inc., a wholly-owned
subsidiary of the Adviser, under a Transfer Agency Agreement 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, 1998, was $18,000 per Portfolio.
NOTE C: INVESTMENT TRANSACTIONS
At April 30, 1998, 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 gains at April 30, 1998 of $183,720, of
which $1,293 expires in 1999, $3,535 in 2000, $6,777 in 2001, $29,045 in 2002,
16
ACM INSTITUTIONAL RESERVES
_______________________________________________________________________________
$77,316 in 2003, $40,007 in 2004 and $25,747 in the year 2005; the Government
Portfolio had a capital loss carryforward of $130,349, of which $340 expires in
2000, $9,174 in 2001, $51,091 in 2002, $23,230 in 2003, $30,512 in 2004 and
$16,002 in the year 2005; the Tax-Free Portfolio had a capital loss
carryforward of $83,495, of which $6,110 expires in 2002, $76,925 in 2004, $400
in 2005 and $60 in the year 2006; and the Trust Portfolio had a capital loss
carryforward of $43,760, of which $6,915 expires in 2003, $30,219 in 2004,
$2,251 in 2005 and $4,375 in the year 2006.
NOTE D: CAPITAL STOCK
There are 4,000,000,000 shares of $.01 par value capital stock authorized. At
April 30, 1998, capital paid-in aggregated $1,764,876,578 on Prime Portfolio,
$274,591,724 on Government Portfolio, $293,847,141 on Tax-Free Portfolio, and
$390,535,793 on Trust Portfolio. Transactions, all at $1.00 per share, were as
follows:
YEAR ENDED YEAR ENDED
APRIL 30, 1998 APRIL 30, 1997
------------------ ------------------
PRIME PORTFOLIO
Shares sold 18,859,885,064 12,695,838,675
Shares issued on reinvestments
of dividends 71,740,159 40,100,886
Shares redeemed (18,034,271,804) (12,361,921,357)
Net increase 897,353,419 374,018,204
YEAR ENDED YEAR ENDED
APRIL 30, 1998 APRIL 30, 1997
------------------ ------------------
GOVERNMENT PORTFOLIO
Shares sold 1,463,678,015 1,074,902,562
Shares issued on reinvestments
of dividends 16,319,887 10,174,707
Shares redeemed (1,532,057,235) (909,371,599)
Net increase (decrease) (52,059,333) 175,705,670
YEAR ENDED YEAR ENDED
APRIL 30, 1998 APRIL 30, 1997
------------------ ------------------
TAX-FREE PORTFOLIO
Shares sold 2,187,340,593 1,486,189,526
Shares issued on reinvestments
of dividends 9,321,671 7,081,373
Shares redeemed (2,085,963,380) (1,493,817,762)
Net increase (decrease) 110,698,884 (546,863)
YEAR ENDED YEAR ENDED
APRIL 30, 1998 APRIL 30, 1997
------------------ ------------------
TRUST PORTFOLIO
Shares sold 1,732,157,312 1,074,544,780
Shares issued on reinvestments
of dividends 14,247,619 9,713,883
Shares redeemed (1,531,607,268) (1,078,638,835)
Net increase 214,797,663 5,619,828
17
FINANCIAL HIGHLIGHTS ACM INSTITUTIONAL RESERVES
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
PRIME PORTFOLIO
---------------------------------------------------------------
YEAR ENDED APRIL 30,
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------
<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 .0552 .0530 .0560 .0502 .0325
LESS: DIVIDENDS
Dividends from net investment income (.0552) (.0530) (.0560) (.0502) (.0325)
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN
Total investment return based on
net asset value (a) 5.68% 5.44% 5.76% 5.15% 3.30%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in millions) $1,764.7 $867.3 $493.3 $197.8 $108.1
Ratios to average net assets of:
Expenses, net of waivers
and reimbursements .20% .20% .20% .20% .20%
Expenses, before waivers
and reimbursements .24% .29% .32% .36% .42%
Net investment income (b) 5.52% 5.31% 5.54% 5.24% 3.25%
</TABLE>
<TABLE>
<CAPTION>
GOVERNMENT PORTFOLIO
---------------------------------------------------------------
YEAR ENDED APRIL 30,
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------
<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 .0543 .0519 .0552 .0493 .0315
LESS: DIVIDENDS
Dividends from net investment income (.0543) (.0519) (.0552) (.0493) (.0315)
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN
Total investment return based on
net asset value (a) 5.58% 5.33% 5.67% 5.06% 3.20%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in millions) $274.5 $326.5 $150.8 $104.4 $76.6
Ratios to average net assets of:
Expenses, net of waivers
and reimbursements .20% .20% .20% .20% .20%
Expenses, before waivers
and reimbursements .28% .35% .36% .38% .36%
Net investment income (b) 5.43% 5.22% 5.50% 4.94% 3.15%
</TABLE>
See footnote summary on page 19.
18
ACM INSTITUTIONAL RESERVES
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
TAX-FREE PORTFOLIO
---------------------------------------------------------------
YEAR ENDED APRIL 30,
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------
<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 .0363 .0347 .0372 .0326 .0240
Net unrealized loss on investments -0- -0- -0- (.0048) -0-
Net increase in net asset value
from operations .0363 .0347 .0372 .0278 .0240
LESS: DIVIDENDS
Dividends from net investment income (.0363) (.0347) (.0372) (.0326) (.0240)
ADD: CAPITAL CONTRIBUTION
Capital Contributed by the Adviser -0- -0- -0- .0048 -0-
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN
Total investment return based on
net asset value (a) 3.70% 3.53% 3.79% 3.31%(c) 2.43%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in millions) $293.8 $183.1 $183.6 $35.5 $35.6
Ratios to average net assets of:
Expenses, net of waivers
and reimbursements .20% .20% .20% .20% .20%
Expenses, before waivers
and reimbursements .28% .33% .48% .76% .69%
Net investment income (b) 3.61% 3.46% 3.73% 3.31% 2.40%
</TABLE>
<TABLE>
<CAPTION>
TRUST PORTFOLIO
---------------------------------------------------------------
YEAR ENDED APRIL 30,
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------
<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 .0523 .0492 .0527 .0479 .0309
LESS: DIVIDENDS
Dividends from net investment income (.0523) (.0492) (.0527) (.0479) (.0309)
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN
Total investment return based on
net asset value (a) 5.37% 5.04% 5.41% 4.91% 3.14%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in millions) $390.5 $175.7 $170.1 $109.2 $36.8
Ratios to average net assets of:
Expenses, net of waivers
and reimbursements .49% .50% .50% .49% .14%
Expenses, before waivers
and reimbursements .54% .57% .60% .75% 1.23%
Net investment income (b) 5.23% 4.93% 5.28% 5.31% 3.15%
</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) Net of expenses reimbursed or waived by the Adviser.
(c) Capital contributed by the Adviser had no material effect on net asset
value, and therefore, no effect on total return.
19
INDEPENDENT AUDITOR'S REPORT ACM INSTITUTIONAL RESERVES
_______________________________________________________________________________
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS ACM INSTITUTIONAL RESERVES, INC.
We have audited the accompanying statements of net assets of ACM Institutional
Reserves--Prime, Government, Tax-Free and Trust Portfolios as of April 30, 1998
and the related statements of operations, changes in net assets, and financial
highlights for the periods indicated in the accompanying financial statements.
These financial statements and financial highlights are the responsibility of
the Portfolios' management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
April 30, 1998 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of ACM
Institutional Reserves--Prime, Government, Tax-Free and Trust Portfolios as of
April 30, 1998, and the results of their operations, changes in their net
assets, and financial highlights for the periods indicated, in conformity with
generally accepted accounting principles.
McGladrey & Pullen, LLP
New York, New York
May 22, 1998
20
<PAGE>
____________________________________________________________
APPENDIX A
COMMERCIAL PAPER AND BOND RATINGS
____________________________________________________________
Municipal and Corporate Bonds
The two higher ratings of Moody's Investors Service, Inc.
("Moody"s) for municipal and corporate bonds are Aaa an Aa.
Bonds rated Aaa are judged by Moody's to be of the best quality.
Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally
known as high-grade bonds. Moody's states that Aa bonds are
rated lower than the best bonds because margins of protection or
other elements make long-term risks appear somewhat larger than
Aaa securities. The generic rating Aa may be modified by the
addition of the numerals 1, 2 or 3. The modifier 1 indicates
that the security ranks in the higher end of the Aa rating
category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in the lower end of
such rating category.
The two highest ratings of Standard & Poor's for municipal
and corporate bonds AAA and AA. Bonds rated AAA have the highest
rating assigned by Standard & Poor's to debt obligation.
Capacity to pay interest and repay principal is extremely strong.
Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in
a small degree. The AA rating may be modified by the addition of
a plus (+) or Minus (-) sign to show relative standing within
rating category.
Short-Term Municipal Securities
Moody's highest rating for short-term municipal loans is
MIG-1/VMIG-1. Moody's states that short-term municipal
securities rated MIG-1/VMIG-1 are of the best quality, enjoying
strong protection from established cash flows of Funds for their
servicing or from established and broad-based access to the
market for refinancing, or both. Loans bearing the MIG-2/VMIG-2
designation are of high quality, with margins of protection ample
although not so large as in the MIG-1/VMIG-1 group.
Standard & Poor's highest rating for short-term municipal
loans is SP-1. Standard & Poor's stated that short-term
municipal securities bearing the SP-1 designation have very
strong or strong capacity to pay principal and interest. Those
issues rated SP-1 which are determined to possess overwhelming
safety characteristics will be given a plus (+) designation.
A-1
<PAGE>
Issues rate SP-2 have satisfactory capacity to pay principal and
interest.
Other Municipal Securities and Commercial Paper
"Prime-1" is the highest rating assigned by Moody's for other
short-term municipal securities and commercial paper, and "A-1+"
and "A-1" are the two highest ratings for commercial paper
assigned by Standard & Poor's (Standard & Poor's does not rate
short-term tax-free obligations). Moody's uses the numbers 1, 2,
and 3 to denote relative strength within its highest
classification of "Prime", while Standard & Poor's uses the
number 1+, 1, 2 and 3 to denote relative strength within its
highest classification of "A". Issuers rated "Prime" by Moody's
have the following characteristics: their short-term debt
obligations carry the smallest degree of investment risk, margins
of support for current indebtedness are large or stable with cash
flow an asset protection well assured, current liquidity provides
ample coverage of near-term liabilities and unused alternative
financing arrangements are generally available. While protective
elements may change over the intermediate or longer term, such
changes are most unlikely to impair the fundamentally strong
position of short-term obligations. Commercial paper issuers
rates "A" by Standard & Poor's have the following
characteristics: liquidity ratios are better than industry
average, long-term debt rating is A or better, the issuer has
access to at least two additional channels of borrowing, and
basic earnings and cash flow are in an upward trend. Typically,
the issuer is a strong company in a well-established industry and
has superior management.
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.
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.
B-1
<PAGE>
Municipal Bonds, which meet longer term capital needs and
generally have maturities of more than one year when issued, have
three principal classifications:
1. General Obligation Bonds are issued by such entities as
states, countries, cities, towns, and regional
districts. The proceeds of these obligations are used
to fund a wide range of public projects, including
construction or improvement of schools, highways and
roads, and water and sewer systems. The basic security
behind General Obligation Bonds is the issuer's pledge
of its full faith and credit and taxing power for the
payment of principal and interest. The taxes that can
be levied for the payment of debt service may be limited
or unlimited as to the rate or amount of special
assessments.
2. Revenue Bonds generally are secured by the net revenues
derived from a particular facility, group of facilities,
or, in some cases, the proceeds of a special excise of
other specific revenue source. Revenue Bonds are issued
to finance a wide variety of capital projects including
electric, gas, water and sewer systems; highways,
bridges and tunnels; port and airport facilities;
colleges and universities; and hospitals. Many of
these Bonds provide additional security in the form of a
debt service reserve fund to be used to make principal
and interest payments. Housing authorities have a wide
range of security, including partially or fully insured
mortgages, rent subsidized and/or collateralized
mortgages, and/or the net revenues from housing or other
public projects. Some authorities provide further
security in the form of a state's ability (without
obligation) to make up deficiencies in the debt service
reserve fund.
3. Industrial Development Bonds are considered municipal
bonds if the interest paid thereon is exempt from
Federal income tax and are issued by or on behalf of
public authorities to raise money to finance various
privately operated facilities for business and
manufacturing, housing, sports, and pollution control.
These Bonds are also used to finance public facilities
such as airports, mass transit systems, ports, and
parking. The payment of the principal and interest on
such Bonds is dependent solely on the ability of the
facility's user to meet its financial obligations and
the pledge, if any, of real and personal property as
security for such payment.
B-2
<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] [#].
Alliance Institutional Reserves, Inc. (the "Fund") is an open-end investment
company. The Trust Portfolio, which is diversified, is offered by this pro-
spectus. Four additional Portfolios of the Fund, the Prime Portfolio, the
Government Portfolio, the Tax-Free Portfolio and the Treasury Portfolio, are
offered by a separate prospectus. The Trust Portfolio's investment objectives
are--in the following order of priority--safety of principal, excellent li-
quidity and maximum current income.
The Trust Portfolio offers institutional and corporate investors a conve-
nient 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 sta-
ble net asset value of $1.00 per share.
A "Statement of Additional Information," dated June 29, 1998, 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 Secu-
rities and Exchange Commission and is incorporated herein by reference. For a
free copy, call or write the Trust Portfolio at the telephone number or ad-
dress shown above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECU-
RITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CON-
TRARY 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......................................... 5
Additional Information.................................................... 6
</TABLE>
ALLIANCE
INSTITUTIONAL RESERVES- TRUST PORTFOLIO
[LOGO OF ALLIANCE CAPITAL(R) APPEARS HERE]
PROSPECTUS
JUNE 29, 1998
<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......................................................... .43%
Other Expenses.......................................................... .07%
---
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--.07% and Total Fund Operating Expenses--
.52%. 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 YEAR ENDED THROUGH
APRIL 30, 1998 APRIL 30, 1997 APRIL 30, 1996 APRIL 30, 1995 APRIL 30, 1994 APRIL 30, 1993
-------------- -------------- -------------- -------------- -------------- --------------------
<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... .0523 .0492 .0527 .0479 .0309 0.0144
------ ------ ------ ------ ------ -------
LESS: DIVIDENDS
Dividends from net
investment income...... (.0523) (.0492) (.0527) (.0479) (.0309) (0.0144)
------ ------ ------ ------ ------ -------
Net asset value, end of
period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ====== =======
TOTAL RETURN
Total investment return
based on net asset
value(b)............... 5.37% 5.04% 5.41% 4.91% 3.14% 3.21%(c)
====== ====== ====== ====== ====== =======
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
period (in millions)... $390.5 $175.7 $170.1 $109.2 $ 36.8 $ 5.3
RATIO TO AVERAGE NET AS-
SETS OF:
Expenses, net of waivers
and reimbursements..... .49% .50% .50% .49% .14% -0-
Expenses, before waivers
and reimbursements..... .54% .57% .60% .75% 1.23% 0.45%(c)
Net investment
income(d).............. 5.23% 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. Further information about the Fund's performance is contained in the
Fund's annual report to shareholders and the Statement of Additional Informa-
tion which may be obtained without charge by contacting Alliance Fund Servic-
es, 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 fully as that term is defined in Rule
2a-7. These agreements are entered into with "primary dealers" (as designated
by the Federal Reserve Bank of New York) in U.S. Government securities or
State Street Bank and Trust Company, the Fund's Custodian. For each repurchase
agreement, the Trust Portfolio requires continual maintenance of the market
value of the underlying collateral in amounts equal to, or in excess of, the
agreement amount. In the event of a dealer default, the Trust Portfolio might
suffer a loss to the extent the proceeds from the sale of the collateral were
less than the repurchase price. The Trust Portfolio's commercial paper invest-
ments may include variable amount master demand notes which represent a direct
borrowing arrangement involving periodically fluctuating rates of interest un-
der a letter agreement between a commercial paper issuer and an institutional
lender pursuant to which the lender may determine to invest varying amounts.
The Trust Portfolio will not maintain more than 10% of its net assets in il-
liquid securities. Illiquid securities may include securities that are not
readily marketable,
3
<PAGE>
securities subject to legal or contractual restrictions on resale and repur-
chase agreements not terminable within seven days. Restricted securities that
are determined by the Adviser to be liquid in accordance with procedures
adopted by the Directors, including securities eligible for resale under Rule
144A under the Securities Act of 1933, as amended (the "Securities Act") and
commercial paper issued in reliance upon the exemption from registration in
Section 4(2) of the Securities Act, will not be treated as illiquid for pur-
poses of the restriction on illiquid securities. Restricted securities are se-
curities subject to the contractual or legal restrictions on resale, such as
those arising from an issuer's reliance upon certain exemptions from registra-
tion under the Securities Act. As to such illiquid securities, a Portfolio is
subject to a risk that, should the Portfolio's desire to sell them when a
ready buyer is not available at a price the Portfolio deems representative of
their value, the value of the Portfolio's net assets could be adversely
affected.
The Trust Portfolio may invest in variable rate obligations as permitted by
Rule 2a-7. Variable rate obligations have interest rates which are adjusted
either at predesignated periodic intervals or whenever there is a change in
the market rate to which the interest rate of the variable rate obligation is
tied. Some variable rate obligations allow the holder to demand payment of
principal and accrued interest at any time, or at specified intervals. The
Trust Portfolio follows Rule 2a-7 with respect to the diversification, quality
and maturity of variable rate obligations.
To the extent the Trust Portfolio purchases money market instruments issued
by foreign entities, consideration 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 invest in asset-backed securities that meet its ex-
isting diversification, quality and maturity criteria. Asset-backed securities
are securities issued by special purpose entities whose primary assets consist
of a pool of loans or accounts receivable. The securities may be in the form
of a beneficial interest in a special purpose trust, limited partnership in-
terest, or commercial paper or other debt securities issued by a special pur-
pose corporation. Although the securities may have some form of credit or li-
quidity enhancement, payments on the securities depend predominately upon col-
lection of the loans and receivables held by the issuer. It is the Trust Port-
folio's current intention to limit its investment in such securities to not
more than 5% of its net assets.
OTHER FUNDAMENTAL INVESTMENT POLICIES
To maintain portfolio diversification and reduce investment risk, the Trust
Portfolio may not (1) invest 25% or more of its total assets in the securities
of issuers conducting their principal business activities in any one industry
although there is no such limitation with respect to U.S. Government securi-
ties or bank obligations, including certificates of deposit, bankers' accept-
ances and interest bearing savings deposits; (2) invest more than 5% of its
assets in the securities of any one issuer (except the U.S. Government) al-
though with respect to 25% of its total assets it may invest without regard to
such limitation; (3) invest more than 5% of its assets in the securities of
any issuer (except the U.S. Government) having less than three years of con-
tinuous operation or purchase more than 10% of any class of the outstanding
securities of any issuer (except the U.S. Government); (4) enter into repur-
chase agreements if, as a result thereof, more than 10% of its assets would be
committed to repurchase agreements not terminable within seven days and other
illiquid investments; (5) borrow money except from banks on a temporary basis
in aggregate amounts not exceeding 15% of its assets; the Trust Portfolio will
not purchase any investments while borrowings in excess of 5% of total assets
exist; and (6) mortgage, pledge or hypothecate its assets except to secure
such borrowings. To the extent that these limitations are more permissive than
Rule 2a-7, the Trust Portfolio will comply with the more restrictive provi-
sions of the Rule.
As a matter of operating policy, the Trust Portfolio may invest no more than
5% of its total assets in the securities of any one issuer (as determined pur-
suant to Rule 2a-7), except that the Portfolio may invest up to 25% of its to-
tal assets in the first tier securities (as defined in Rule 2a-7) of a single
issuer for a period of up to three business days. 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.
4
<PAGE>
PURCHASE AND REDEMPTION OF SHARES
OPENING ACCOUNTS
The Trust Portfolio is available through financial intermediaries.
(1) Telephone the Trust Portfolio toll-free at (800) 237-5822. The Trust
Portfolio will ask for the (a) name of the account as you wish it to be
registered, (b) address of the account and (c) taxpayer identification
number. The Trust Portfolio will then provide you with an account num-
ber.
(2) Instruct your bank to wire Federal funds exactly as follows:
ABA 011000028
State Street Bank and Trust Company
Boston, MA 02101
DDA 9903-279-9
Alliance Institutional Reserves, Inc.--
Trust Portfolio
as registered
Your account name with the Trust
Your account number Portfolio
(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 Alliance 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. (Eastern
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. (Eastern time). If your telephone redemption order is received
by Alliance Fund Services, Inc. prior to 4:00 p.m. (Eastern York time) 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 drastic economic or market developments, shareholders might have dif-
ficulty in reaching Alliance Fund Services, Inc. by telephone in which event
the shareholder should issue written instructions to Alliance Fund Services,
Inc. at the address shown in this prospectus. The Funds reserve the right to
suspend or terminate their telephone service at any time without notice. Nei-
ther the Funds nor the Adviser, or Alliance Fund Services, Inc. will be re-
sponsible for the authenticity of telephone requests to purchase or sell
shares. Alliance Fund Services, Inc. will employ reasonable procedures in or-
der to verify that telephone requests are genuine and could be liable for
losses arising from unauthorized transactions if it failed to do so. Selected
dealers or agents may charge a commission for handling telephone requests for
redemptions.
B. BY CHECKWRITING
With this service, you may write checks made payable to any payee. 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 checkwriting service subsequent to the opening of your Fund account, con-
tact the Fund by telephone or mail. There is no separate charge for the
checkwriting service, except that State Street Bank will impose its normal
charges for checks which
5
<PAGE>
ADDITIONAL INFORMATION
are returned unpaid because of insufficient funds or for checks upon which you
have placed a stop order. The checkwriting service enables you to receive the
daily dividends declared on the shares to be redeemed until the day that your
check is presented to State Street Bank for payment.
OBTAINING AN APPLICATION FORM. If
you wish to obtain an Application
Form, or you have questions about
the Form, purchasing shares, or
other Trust Portfolio procedures,
please telephone the Trust Portfo-
lio toll-free at (800) 237-5822.
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 Alliance 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. (Eastern 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 (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 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. (Eastern time). Invest-
ments receive the full dividend for a day if the investor's telephone order is
placed by 4:00 p.m. (Eastern time) and Federal funds or bank wire monies are
received by State Street Bank before 4:00 p.m. (Eastern 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. (Eastern 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. (Eastern 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 ac-
6
<PAGE>
count. 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 applicable to that dividend period. Realized gains and
losses are reflected in net asset value and are not included in net income.
Distributions out of taxable interest income, other investment income and
short-term capital gains are taxable as ordinary income and distributions of
long-term capital gains, if any, are taxable as long-term capital gains irre-
spective of the length of time a shareholder held the shares.
YEAR 2000. Many computer software systems in use today cannot properly proc-
ess date-related information from and after January 1, 2000. Should any of the
computer systems employed by the Fund's major service providers fail to proc-
ess this type of information properly, that could have a negative impact on
the Fund's operations and the services that are provided to the Fund's share-
holders. The Adviser, Alliance Fund Distributors, Inc. and Alliance Fund Serv-
ices, Inc. have advised the Fund that they are reviewing all of their computer
systems with the goal of modifying or replacing such systems prior to January
1, 2000 to the extent necessary to foreclose any such negative impact. In ad-
dition, the Adviser has been advised by the Fund's custodian that it is also
in the process of reviewing its systems with the same goal. As of the date of
this Prospectus, the Fund and the Adviser have no reason to believe that these
goals will not be achieved. Similarly, the values of certain of the portfolio
securities held by the Fund may be adversely affected by the inability of the
securities' issuers or of third parties to process this type of information
properly.
THE ADVISER. The Trust Portfolio retains Alliance Capital Management L.P.,
1345 Avenue of the Americas, New York, NY 10105, under an Advisory Agreement
to provide investment advice and, in general, to supervise its management and
investment program, subject to the general control of the Directors of the
Fund. For the fiscal year ended April 30, 1998, the Trust Portfolio paid the
Adviser at an annual rate of .40 of 1% of the average daily value of its net
assets, net of reimbursements.
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 March 31, 1998 totaling more than $248 billion (of
which approximately $98 billion represented the assets of investment compa-
nies). The Adviser's clients are primarily major corporate employee benefit
funds, public employee retirement systems, investment companies, foundations
and endowment funds. The 57 registered investment companies managed by the Ad-
viser comprising 121 separate investment portfolios currently have over three
million shareholder accounts. As of March 31, 1998, the Adviser was retained
as an investment manager for employee benefit plan assets of 33 of the Fortune
100 companies.
Alliance Capital Management Corporation, the sole general partner of and the
owner of a 1% general partnership interest in, the Adviser, is an indirect
wholly-owned subsidiary of The Equitable Life Assurance Society of the United
States ("Equitable"), one of the largest life insurance companies in the
United States, which is a wholly-owned subsidiary of The Equitable Companies
Incorporated, a holding company controlled by AXA-UAP, a French insurance
holding company. Certain information concerning the ownership and control of
Equitable by AXA-UAP is set forth in the Statement of Additional Information
under "Management of the Fund."
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 dis-
tribution assistance and administrative services and to otherwise promote the
sale of shares of
7
<PAGE>
the Trust Portfolio, including paying for the preparation, printing and dis-
tribution of prospectuses and sales literature or other promotional activi-
ties.
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.
FUND ORGANIZATION. The Trust Portfolio is a series of the Fund. The Trust
Portfolio is one of five series of the Fund; shares of the other series, the
Prime Portfolio, the Government Portfolio, the Tax-Free Portfolio and the
Treasury Portfolio, are offered by a separate prospectus. The Fund was orga-
nized as a Maryland corporation on March 21, 1990. The Trust Portfolio's ac-
tivities are supervised by its Board of Directors. Shareholders of each Port-
folio are entitled to one vote per share and vote as a single series on mat-
ters that affect all series in substantially the same manner.
Maryland law does not require annual meetings of shareholders and it is an-
ticipated that shareholder meetings will be held only when required by Federal
or Maryland law. Shareholders have available certain procedures for the re-
moval of directors.
REPORTS. Shareholders will receive a monthly summary of their account, as
well as semi-annual and annual reports. Shareholders may arrange for a copy of
each of their account statements to be sent to other parties.
8
B-3
<PAGE>
[LOGO]
ALLIANCE INSTITUTIONAL RESERVES, INC.
- Trust Portfolio
c/o Alliance Fund Services, Inc.
P.O. Box 1520, Secaucus, New Jersey 07096
Toll Free (800) 221-5672
_________________________________________________________________
STATEMENT OF ADDITIONAL INFORMATION
June 29, 1998
_________________________________________________________________
This Statement of Additional Information is not a prospectus
and should be read in conjunction with the Trust Portfolio's
current Prospectus dated June 29, 1998 which describes shares of
the Trust Portfolio of the Fund. A copy of this Prospectus may
be obtained by contacting Alliance Fund Services, Inc. at the
address or telephone number shown above.
_________________________________________________________________
TABLE OF CONTENTS
Page
The Fund. . . . . . . . . . . . . . . . . . . . . . . .
Investment Objective and Policies . . . . . . . . . . .
Investment Restrictions . . . . . . . . . . . . . . . .
Management. . . . . . . . . . . . . . . . . . . . . . .
Purchase and Redemption of Shares . . . . . . . . . . .
Daily Dividends-Determination of Net Asset Value. . . .
Taxes . . . . . . . . . . . . . . . . . . . . . . . . .
General Information . . . . . . . . . . . . . . . . . .
Report of Independent Auditors and Financial Statements.
Appendix A - Commercial Paper and Bond Ratings. . . . . . A-1
_________________________________________________________________
(R): This registered service mark used under license from the
owner, Alliance Capital Management L.P.
<PAGE>
_________________________________________________________________
THE FUND
_________________________________________________________________
Alliance 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. Four additional
Portfolios of the Fund, the Prime Portfolio, the Government
Portfolio, the Tax-Free Portfolio and the Treasury Portfolio, are
described in a separate Prospectus and Statement of Additional
Information. The Fund changed its name from ACM Institutional
Reserves, Inc. to Alliance Institutional Reserves, Inc. effective
June 29, 1998.
_________________________________________________________________
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. To the extent that the Trust
Portfolios limitations are more permissive than Rule 2a-7, the
Portfolio will comply with the more restrictive provisions of 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. Unrated securities may also
be Eligible Securities if the Adviser determines that they are of
comparable quality to a rated Eligible Security pursuant to
2
<PAGE>
guidelines approved by the Board of Directors. A description of
the ratings of some NRSROs appears in Appendix attached hereto.
Securities in which the Trust Portfolio may invest may be subject
to liquidity or credit enhancements. These securities are
generally considered to be Eligible Securities if the enhancement
or the issuer of the enhancement has received the appropriate
rating from an NRSRO.
Under Rule 2a-7 the Trust Portfolio may not invest more than
five percent of its assets in the first tier securities of any
one issuer other than the United States Government, its agencies
and instrumentalities. Generally, a first tier security is an
Eligible Security that has received a short-term rating from the
requisite NRSROs in the highest short-term rating category for
debt obligations, or is an unrated security deemed to be of
comparable quality. Government securities are also considered to
be first tier securities. 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
3
<PAGE>
the deposit of funds. The issuer agrees to pay the amount
deposited plus interest to the bearer of the receipt on the date
specified on the certificate. The certificate usually can be
traded in the secondary market prior to maturity. Bankers'
acceptances typically arise from short-term credit arrangements
designed to enable businesses to obtain funds to finance
commercial transactions. Generally, an acceptance is a time
draft drawn on a bank by an exporter or an importer to obtain a
stated amount of funds to pay for specific merchandise. The
draft is then "accepted" by a bank that, in effect,
unconditionally guarantees to pay the face value of the
instrument on its maturity date. The 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
4
<PAGE>
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 397 days, the term of the repurchase
agreement is always less than 397 days. In the event that a
vendor defaulted on its repurchase obligation, the 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. Effective July 1, 1998, these securities must
generally be rated. 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 entity. 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. Generally, as
required by Rule 2a-7, the special purpose entity is deemed to be
the issuer of the asset-backed security, however the Trust
Portfolio is required to treat any person whose obligations
constitute ten percent or more of the assets of the asset-backed
security as the issuer of the portion of the asset-backed
security that such obligations represent. It is the Trust
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
5
<PAGE>
payment of principal and accrued interest at any time, or at
specified intervals not exceeding 13 months, in each case upon
not more than 30 days notice. The Portfolio may also invest in
master demand notes which are obligations that permit the Trust
Portfolio to invest fluctuating amounts, at varying rates of
interest, pursuant to direct arrangements between the Trust
Portfolio, as lender, and the borrower. These obligations permit
daily changes in the amounts borrowed. Because these obligations
are direct lending arrangements between the lender and borrower,
it is not contemplated that such instruments generally will be
traded, and there generally is no established secondary market
for these obligations, although they are redeemable at face
value, plus accrued interest. Accordingly, where these
obligations are not secured by letters of credit or other credit
support arrangements, the Trust Portfolios 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.
Illiquid Securities and Restricted Securities
The Trust Portfolio will not maintain more than 10% of its
net assets in illiquid securities. Illiquid securities may
include securities that are not readily marketable, securities
subject to legal or contractual restrictions on resale and
repurchase agreements not terminable within seven days.
Restricted securities that are determined by the Adviser to be
liquid in accordance with procedures adopted by the Directors,
including securities eligible for resale under Rule 144A under
the Securities Act of 1933, as amended (the "Securities Act") and
commercial paper issued in reliance upon the exemption from
registration in Section 4(2) of the Securities Act, will not be
treated as illiquid for purposes of the restriction on illiquid
securities. Restricted securities are securities subject to the
contractual or legal restrictions on resale, such as those
arising from an issuers reliance upon certain exemptions from
registration under the Securities Act. As to illiquid
securities, a Portfolio is subject to a risk that, should the
Portfolio's desire to sell them when a ready buyer is not
available at a price the Portfolio deems representative of their
value, the value of the Portfolio's net assets could be adversely
affected.
In recent years, a large institutional market has developed
for certain types of restricted securities including, among
others, private placements, repurchase agreements, commercial
6
<PAGE>
paper, foreign securities and corporate bonds and notes. These
instruments are often restricted securities because they are sold
in transactions not requiring registration. For example,
commercial paper issues in which the Trust Portfolio may invest
include, among others, securities issued by major corporations
without registration under the Securities Act in reliance on the
exemption from registration afforded by Section 3(a)(3) of such
Act and commercial paper issued in reliance on the private
placement exemption from registration which is afforded by
Section 4(2) of the Securities Act ("Section 4(2) paper").
Section 4(2) paper is restricted as to disposition under the
Federal securities laws in that any resale must also be made in
an exempt transaction. Section 4(2) paper is normally resold to
other institutional investors through or with the assistance of
investment dealers who make a market in Section 4(2) paper, thus
providing liquidity. Institutional investors, rather than
selling these instruments to the general public, often depend on
an efficient institutional market in which such restricted
securities can be readily resold in transactions not involving a
public offering. In many instances, therefore, the existence of
contractual or legal restrictions on resale to the general public
does not, in practice, impair the liquidity of such investments
from the perspective of institutional holders.
In 1990, in part to enhance the liquidity in the
institutional markets for restricted securities, the Securities
and Exchange Commission (the "Commission") 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.
7
<PAGE>
The Fund's Directors have the ultimate responsibility for
determining whether specific securities are liquid or illiquid.
The Directors have delegated the function of making day-to-day
determinations of liquidity to the Adviser, pursuant to
guidelines approved by the Directors. The Adviser takes into
account a number of factors in determining whether a restricted
security being considered for purchase is liquid, including at
least the following:
(i) the frequency of trades and quotations for the
security;
(ii) the number of dealers making quotations to
purchase or sell the security;
(iii) the number of other potential purchasers of
the security;
(iv) the number of dealers undertaking to make a
market in the security;
(v) the nature of the security (including its
unregistered nature) and the nature of the
marketplace for the security (e.g., the time
needed to dispose of the security, the method
of soliciting offers and the mechanics of
transfer); and
(vi) any applicable 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, the Adviser 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
8
<PAGE>
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. The
Trust Portfolio may make investments in certificates of deposit
and banker's acceptances issued or guaranteed by, or time
deposits maintained at, foreign branches of U.S. banks and U.S.
and foreign branches of foreign banks, and commercial paper
issued by foreign companies. To the extent that the Trust
Portfolio makes such investments, consideration is given to their
domestic marketability, the lower reserve requirements generally
mandated for overseas banking operations, the possible impact of
interruptions in the flow of international currency transactions,
potential political and social instability or expropriation,
imposition of foreign taxes, the lower level of government
supervision of issuers, the difficulty in enforcing contractual
obligations and lack of uniform accounting standards. There can
be no assurance that any of the Trust Portfolio's objectives will
be achieved. The market value of the Trust Portfolio's
investments tends to decrease during periods of rising interest
rates and to increase during intervals of falling rates.
Net income to shareholders is aided both by the Trust
Portfolio's ability to make investments in large denominations
and by efficiencies of scale. Also, the Trust Portfolio may seek
to improve its income by selling certain portfolio securities
prior to maturity in order to take advantage of yield disparities
that occur in money markets.
The Trust Portfolio's investment objectives may not be
changed without the affirmative vote of a majority of the Trust
Portfolio's outstanding shares as defined below. Except as
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.
9
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_________________________________________________________________
INVESTMENT RESTRICTIONS
_________________________________________________________________
Unless otherwise specified to the contrary, the following
restrictions may not be changed without the affirmative vote of
(1) 67% or more of the shares represented at a meeting at which
more than 50% of the outstanding shares are present in person or
by proxy or (2) more than 50% of the outstanding shares,
whichever is less. If a percentage restriction is adhered to at
the time of an investment, a later increase or decrease in
percentage resulting from a change in values of portfolio
securities or in the amount of the Trust Portfolio's assets will
not constitute a violation of that restriction.
The Trust Portfolio may not:
1. purchase any security which has a maturity date of more
than 397 days from the date of the Trust Portfolio's purchase;
2. invest 25% or more of its total assets in the securities
of issuers conducting their principal business activities in any
one industry provided that for purposes of this restriction
(a) there is no limitation with respect to investments in
securities issued or guaranteed by the United States Government,
its agencies or instrumentalities, certificates of deposit,
bankers' acceptances and interest-bearing savings deposits and
(b) all finance companies as a group and all utility companies as
a group are each considered to be a separate industry;
3. invest more than 5% of its assets in the securities of
any one issuer (exclusive of securities issued or guaranteed by
the United States Government, its agencies or instrumentalities),
except that up to 25% of the value of the Trust Portfolio's total
assets may be invested without regard to such 5% limitation;*
4. invest in more than 10% of any one class of an issuer's
outstanding securities (exclusive of securities issued 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
_________________
* As a matter of operating policy, pursuant to Rule 2a-7, the
Trust Portfolio will invest no more than 5% of its assets in
the securities of any one issuer, unless permitted by Rule
2a-7. The issuer of a security is determined pursuant to Rule
2a-7.
10
<PAGE>
be used exclusively to facilitate the orderly maturation and sale
of portfolio securities during any periods of abnormally heavy
redemption requests, if they should occur; such borrowings may
not be used to purchase investments and the Trust Portfolio will
not purchase any investments while borrowings in excess of 15% of
total assets exist;
6. pledge, hypothecate or in any manner transfer, as
security for indebtedness, any securities owned or held by the
Trust Portfolio except as may be necessary in connection with any
borrowing mentioned above, including reverse repurchase
agreements, and in an aggregate amount not to exceed 5% of the
Trust Portfolio's assets;
7. make loans, provided that the Trust Portfolio may
purchase money market securities and enter into repurchase
agreements;
8. enter into repurchase agreements if, as a result
thereof, more than 10% of the Trust Portfolio's assets would be
subject to repurchase agreements not terminable within seven days
and other illiquid investments; or
9. (a) make investments for the purpose of exercising
control; (b) purchase securities of other investment companies,
except in connection with a merger, consolidation, acquisition or
reorganization; (c) invest in real estate (other than money
market securities secured by real estate or interests therein or
money market securities issued by companies which invest in real
estate, or interests therein), commodities or commodity
contracts, including futures contracts, interests in oil, gas and
other mineral exploration or other development programs;
(d) purchase securities on margin; (e) make short sales of
securities or maintain a short position or write, purchase or
sell puts, call, straddles, spreads or combinations thereof;
(f) invest in securities of issuers (other than agencies and
instrumentalities of the United States Government) having a
record, together with predecessors, of less than three years of
continuous operation if more than 5% of the Trust Portfolio's
assets would be invested in such securities; (g) purchase or
retain securities of any issuers if those officers and directors
of the Fund and of the Adviser who own individually more than
1/2% of the outstanding securities of such issuer together own
more than 5% of the securities of such issuer; or (h) act as an
underwriter of securities.
11
<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,** 53, Chairman of the Board of Directors, is
the President, Chief Operating Officer and a Director of Alliance
Capital Management Corporation ("ACMC"), with which he has been
associated since prior to 1992.
RUTH BLOCK, 67, was formerly Executive Vice President and
Chief Insurance Officer of Equitable. She is a Director of
Ecolab Incorporated (specialty chemicals) and Amoco Corporation
(oil and gas). Her address is Box 4653, Stamford, Connecticut,
06903.
DAVID H. DIEVLER, 68, was formerly a Senior Vice President of
ACMC, with which he was associated since prior to 1992 through
1994. He is currently an independent consultant. His address is
P.O. Box 167, Spring Lake, New Jersey, 07762.
JOHN H. DOBKIN, 56 has been the President of Historic Hudson
Valley (historic preservation) since prior to 1992. Previously,
he was Director of the National Academy of Design. His address is
150 White Plains Road, Tarrytown, New York 10591.
WILLIAM H. FOULK, JR., 66 is an Investment Advisor and
Independent Consultant. He was formerly Senior Manager of
Barrett Associates, Inc., a registered investment adviser, since
1986. His address is Suite 100, 2 Greenwich Plaza, Greenwich,
Connecticut 06830.
______________________
** An "interested person" of the Fund as defined in the 1940 Act.
12
<PAGE>
DR. JAMES M. HESTER, 74 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, 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 Chief Executive Officer of Wenonah
Development Company (investment holding company) and a Director
of Placer Dome, Inc. (mining). His address is 80 Pine Street,
New York, New York 10005.
DONALD J. ROBINSON, 63, was formerly a partner of the law
firm of Orrick, Herrington & Sutcliffe since prior to 1992 and is
currently of counsel to that firm. His address is 666 Fifth
Avenue, 19th Floor, New York, New York 10103.
Officers
RONALD M. WHITEHILL - President, 60, is a Senior Vice
President of ACMC and President of Alliance Cash Management
Services, with which he has been associated since prior to
1993.
KATHLEEN A. CORBET, Senior Vice President, 38, 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 1993.
DREW A. BIEGEL - Senior Vice President, 47, is a Vice
President of ACMC, with which he has been associated since prior
to 1993.
RAYMOND J. PAPERA Senior Vice President, 42, is a Senior
Vice President of ACMC with which he has been associated since
prior to 1993.
KENNETH T. CARTY - Vice President, 37, is a Vice President of
ACMC with which he has been associated since prior to 1993.
JOHN F. CHIODI, JR. - Vice President, 32, is a Vice President
of ACMC with which he has been associated since prior to
1993.
13
<PAGE>
MARIA R. CONA - Vice President, 43, is an Assistant Vice
President of ACMC with which she has been associated since prior
to 1993.
FRANCIS M. DUNN - Vice President, 27, is an Administrative
Officer of ACMC with which she has been associated since prior to
1993.
JOSEPH R. LASPINA - Vice President, 37, is an Assistant Vice
President of ACMC, with which he has been associated since prior
to 1993.
EDMUND P. BERGAN, JR., Secretary, 48 is a Senior Vice
President and the General Counsel of Alliance Fund Distributors,
Inc. ("AFD"), with which he has been associated since prior to
1993.
MARK D. GERSTEN, Treasurer and Chief Financial Officer, 48,
is a Senior Vice President of Alliance Fund Services, Inc.
("AFS"), with which he has been associated since prior to
1993.
VINCENT S. NOTO, Controller, 33, is a Vice President of AFS,
with which he has been associated since prior to 1993.
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, 1998, the
aggregate compensation paid to each of the Directors during
calendar year 1997 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 registered investment companies (and separate investment
portfolios within those companies) 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
registered investment company in the Alliance Fund Complex
provides compensation in the form of pension or retirement
benefits to any of its directors or trustees. Each of the
Directors is a director or trustee of one or more other
registered investment companies in the Alliance Fund Complex.
14
<PAGE>
Total Number Total Number
of Registered of Investment
Investment Portfolios
Companies Within the
Total the Alliance Alliance Fund
Compensation Fund Complex, Complex,
from the Including the Including the
Alliance Fund, as to Fund, as to
Aggregate Fund which the which the
Compensation Complex, Director is Director is
from the Including a Director a Director
Name of Director Fund the Fund or Trustee or Trustee
John D. Carifa $-0- $-0- 54 118
Ruth Block $4,557 $157,500 40 80
David H. Dievler $4,557 $182,000 47 83
John H. Dobkin $4,702 $121,250 44 80
William H. Foulk, Jr. $4,555 $144,250 48 113
James M. Hester $4,561 $148,500 40 76
Clifford L. Michel $4,561 $146,068 41 92
Donald J. Robinson $4,557 $217,358 41 94
As of June 15, 1998, the Directors and officers of the Fund
as a group owned less than 1% of the outstanding shares of the
Trust Portfolio.
The Adviser
Alliance Capital Management L.P., a Delaware limited
partnership with principal offices at 1345 Avenue of the
Americas, New York, New York 10105, has been retained under an
investment advisory agreement (the "Advisory Agreement") to
provide investment advice and, in general, to conduct the
management and investment program of the Fund under the
supervision and control of the Fund's Board of Directors.
The Adviser is a leading international investment manager
supervising client accounts with assets as of March 31, 1998
totaling more than $248 billion (of which more than $98 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. The 57 registered investment
companies managed by the Adviser comprising 121 separate
investment portfolios currently have more than three million
shareholders. As of March 31, 1998, the Adviser and its
subsidiaries employed approximately 1,500 employees who operate
out of domestic offices and the offices of subsidiaries in
Bahrain, Bangalore, Chennai, Istanbul, London, Madrid, Mumbai,
Paris, Singapore, Tokyo and Toronto and affiliate offices in
Vienna, Warsaw, Hong Kong, Sao Paulo and Moscow. As of March 31,
15
<PAGE>
1998, the Adviser was retained as an investment manager for
employee benefit plan assets of 33 of the FORTUNE 100
companies.
Alliance Capital Management Corporation, the sole general
partner of, and the owner of a 1% general partnership interest
in, the Adviser, is an indirect wholly-owned subsidiary of the
Equitable Life Assurance Society of the United States
("Equitable"), one of the largest life insurance companies in the
United States and a wholly-owned subsidiary of the Equitable
Companies Incorporated ("ECI"). ECI is a holding company
controlled by AXA-UAP ("AXA") a French insurance holding company
which at March 1, 1998, beneficially owned approximately 59% of
the outstanding voting shares of ECI. As of March 1, 1998, ACMC,
Inc. and Equitable Capital Management Corporation, each a wholly-
owned direct or indirect subsidiary of Equitable, together with
Equitable, owned in the aggregate approximately 57% of the issued
and outstanding units representing assignments of beneficial
ownership of limited partnership interests in the Adviser.
AXA is a holding company for an international group of
insurance and related financial services companies. AXA'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 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, as of March 31, 1998,
more than 30% of the voting power of AXA was controlled directly
and indirectly by FINAXA, a French holding company. As of March
31, 1998 approximately 74% of the voting power of FINAXA was
controlled directly and indirectly by four French mutual
insurance companies (the "Mutuelles AXA"), one of which, AXA
Assurances I.A.R.D. Mutuelle, itself controlled directly and
indirectly more than 42% of the voting power of FINAXA. Acting
as a group, the Mutuelles AXA control AXA and FINAXA.
Under the Advisory Agreement, the Adviser provides
investment advisory services and order placement facilities for
the Trust 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
16
<PAGE>
Fund notifies investors to the contrary that if, in any fiscal
year, the aggregate expenses of the Trust Portfolio, exclusive of
taxes, brokerage, interest on borrowings and extraordinary
expenses, but including the management fee, exceed .50 of 1% of
the Trust Portfolio's average net assets for the fiscal year, the
Trust Portfolio may deduct from the payment to be made to the
Adviser, or the Adviser will bear, such excess expenses. For the
fiscal year ended April 30, 1998, the Trust Portfolio paid the
Adviser at an annual rate of .40 of 1% of average daily net
assets and the Adviser reimbursed $128,100, all of which
represented advisory fees. 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. 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, (including
Donaldson, Lufkin & Jenrette Securities Corp. and its Pershing
Division, affiliates of the Adviser) 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 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 remains in effect with respect to the
Trust Portfolio until December 31, 1998, 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
17
<PAGE>
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.
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. (Eastern 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.
(Eastern time) and Federal funds or bank wire monies are received
by State Street bank prior to 4:00 p.m. (Eastern 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
18
<PAGE>
monies received at State Street Bank by bank wire. Money
transmitted by a check drawn on a member of the Federal Reserve
System is converted to Federal funds in one business day
following receipt. Checks drawn on banks which are not members
of the Federal Reserve System may take longer. All payments
(including checks from individual investors) must be in United
States dollars.
All shares purchased are confirmed to each shareholder and
are credited to his or her account at net asset value. To avoid
unnecessary expense to the Trust Portfolio and to facilitate the
immediate redemption of shares, stock certificates, for which no
charge is made, are not issued except upon the written request of
the shareholder. Certificates are not issued for fractional
shares. Shares for which certificates have been issued are not
eligible for any of the optional methods of withdrawal, such as
telephone, telegraph and check-writing procedures. The Trust
Portfolio reserves the right to reject any purchase order.
The Trust Portfolio reserves the right to close out an
account that is below $500,000 after at least 60 days' written
notice to the shareholder unless the balance in such account is
increased to at least that amount during such period. For
purposes of this calculation, the sum of a shareholder's balance
in all of the Portfolios will be considered as one account.
A "business day," during which purchases and redemptions of
Trust Portfolio shares can become effective and the transmittal
of redemption proceeds can occur, is considered for Trust
Portfolio purposes as any weekday exclusive of national holidays
on which the New York Stock Exchange is closed and Good Friday;
if one of these holidays falls on a Saturday or Sunday, purchases
and redemptions will likewise not be processed on the preceding
Friday or the following Monday, respectively. On any such day
that is an official bank holiday in Massachusetts, neither
purchases nor wire redemptions can become effective because
Federal funds cannot be received or sent by State Street Bank.
On such days, therefore, the Trust Portfolio can only accept
redemption orders for which shareholders desire remittance by
check. The right of redemption may be suspended or the date of a
redemption payment postponed for any period during which the New
York Stock Exchange is closed (other than customary weekend and
holiday closings), when trading on the New York Stock Exchange is
restricted, or an emergency (as determined by the 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.
19
<PAGE>
________________________________________________________________
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. (Eastern time) and is paid immediately
thereafter pro rata to shareholders of record of the Trust
Portfolio via automatic investment in additional full and
fractional shares in each shareholder's account at the rate of
one share for each dollar distributed. As such additional shares
are entitled to dividends on following days, a compounding growth
of income occurs.
The Trust Portfolio's net income consists of all accrued
interest income on assets less expenses allocable to the Trust
Portfolio (including accrued expenses and fees payable to the
Adviser) applicable to that dividend period. Realized gains and
losses of the Trust Portfolio are reflected in its net asset
value and are not included in net income. Net asset value per
share of the Trust Portfolio is expected to remain constant at
$1.00 since all net income of the Trust Portfolio is declared as
a dividend each time net income is determined and net realized
gains and losses, if any, are expected to be relatively small.
The valuation of the Trust Portfolio's securities is based
upon its amortized cost which does not take into account
unrealized securities gains or losses as measured by market
valuations. The amortized cost method involves valuing an
instrument at its cost and thereafter applying a constant
amortization to maturity of any discount or premium, regardless
of the impact of fluctuating interest rates on the market value
of the instrument. During periods of declining interest rates,
the daily yield on shares of the Trust Portfolio may be higher
than that of a fund with identical investments utilizing a method
of valuation based upon market prices for its portfolio
instruments; the converse would apply in a period of rising
interest rates.
The Trust Portfolio utilizes the amortized cost method of
valuation of portfolio securities in accordance with the
provisions of Rule 2a-7 under the Act. Pursuant to such rule,
the Trust Portfolio maintains a dollar-weighted average portfolio
maturity of 90 days or less and invests only in securities of
high quality. The Trust Portfolio also purchases instruments
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
20
<PAGE>
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. (Eastern
time). The net asset value per share of the Trust Portfolio is
calculated by taking the sum of the value of the Trust
Portfolio's investments and any cash or other assets, subtracting
liabilities, and dividing by the total number of shares of that
Trust Portfolio outstanding. All expenses, including the fees
payable to the Adviser, are accrued daily.
________________________________________________________________
TAXES
________________________________________________________________
Federal Income Tax Considerations
The Trust Portfolio qualified, for the period ended April
30, 1998, 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
21
<PAGE>
long-term capital gain, irrespective of the length of time he or
she may have held his or her shares. Any loss realized on shares
held for six months or less will be treated as long-term loss for
Federal income tax purposes to the extent of any long-term
capital gain distributions received on such shares.
Distributions of short and long-term capital gains, if any, are
normally made once each year shortly before the close of the
Trust Portfolio's fiscal year, although such distributions may be
made more frequently if necessary in order to maintain the Trust
Portfolio's net asset value at $1.00 per share.
________________________________________________________________
GENERAL INFORMATION
________________________________________________________________
Portfolio Transactions. Subject to the general supervision
of the Directors of the Fund, the Adviser is responsible for the
investment decisions and the placing of the orders for portfolio
transactions for the Trust Portfolio. Because the Trust
Portfolio invests in securities with short maturities, there is a
relatively high portfolio turnover rate. However, the turnover
rate does not have an adverse effect upon the net yield and net
asset value of the Trust Portfolio's shares since the portfolio
transactions occur primarily with issuers, underwriters or major
dealers in money market instruments acting as principals. Such
transactions are normally on a net basis which do not involve
payment of brokerage commissions. The cost of securities
purchased from an underwriter usually includes a commission paid
by the issuer to the underwriters; transactions with dealers
normally reflect the spread between bid and asked prices.
The Trust Portfolio has no obligation to enter into
transactions in portfolio securities with any dealer, issuer,
underwriter or other entity. In placing orders, it is the policy
of the Trust Portfolio to obtain the best price and execution for
its transactions. Where best price and execution may be obtained
from more than one dealer, the Adviser may, in its discretion,
purchase and sell securities through dealers who provide
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.
22
<PAGE>
Capitalization
All shares of the Trust Portfolio participate equally in
dividends and distributions from the Trust Portfolio, including
any distributions in the event of a liquidation. Each share of
the Trust Portfolio is entitled to one vote for all purposes.
Shares of all classes vote for the election of Directors and on
any other matter that affects all Portfolios of the Fund in
substantially the same manner as a single class, except as
otherwise required by law. As to matters affecting each
Portfolio differently, such as approval of the Advisory
Agreement, shares of each Portfolio vote as a separate class.
There are no conversion or preemptive rights in connection with
any shares of the Trust Portfolio. Since voting rights are
noncumulative, holders of more than 50% of the shares voting for
the election of Directors can elect all of the Directors.
Procedures for calling a shareholders' meeting for the removal of
Directors of the Fund, similar to those set forth in Section
16(c) of the Act and in the Fund's By-Laws, will be available to
shareholders of each Portfolio. Special meetings of stockholders
for any purpose may be called by 10% of its outstanding
shareholders. All shares of the Trust Portfolio when duly issued
will be fully paid and non-assessable. The rights of the holders
of shares of a class may not be modified except by the vote of a
majority of the outstanding shares of such class.
The Board of Directors is authorized to reclassify and issue
any unissued shares to any number of additional series without
shareholder approval. Accordingly, the Directors in the future,
for reasons such as the desire to establish one or more
additional portfolios with different investment objectives,
policies or restrictions, may create additional series of shares.
Any issuance of shares of another class would be governed by the
Act and Maryland law.
As of the close of business on June 15, 1998, there were
393,288,606 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 June 15, 1998.
No. of % of
Name and Address Shares Class
Pershing as Agent 241,727,968 61.46%
Omnibus Account
For Exclusive Benefit of Customers
1 Pershing Plaza
Jersey City, NJ 07399-0002
23
<PAGE>
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,
Baltimore, Maryland, for matters relating to Maryland law.
Accountants. McGladrey & Pullen, LLP, New York, New York,
are the independent auditors for the Trust Portfolio.
Yield Quotations and Performance Information.
Advertisements containing yield quotations for the Trust
Portfolio may from time to time be sent to investors or placed in
newspapers, magazines or other media on behalf of the Fund.
These advertisements may quote performance rankings, ratings or
data from independent organizations or financial publications
such as Lipper Analytical Services, Inc., Morningstar, Inc.,
IBC's Money Fund Report, IBC's Money Market Insight or Bank Rate
Monitor or compare the Portfolio's performance to bank money
market deposit accounts, certificates of deposit or various
indices. Yield quotations are calculated in accordance with the
standardized method referred to in Rule 482 under the Securities
Act of 1933.
Yield quotations for the Trust Portfolio are thus determined
by (i) computing the net change over a seven-day period,
exclusive of the capital changes, in the value of a hypothetical
pre-existing account having a balance of one share of the Trust
Portfolio at the beginning of such period, (ii) dividing the net
change in account value by the value of the account at the
beginning of the base period to obtain the base period return,
and (iii) multiplying the base period return by (365/7) with the
resulting yield figure carried to the nearest hundredth of one
percent. The Trust Portfolio's effective annual yield represents
a compounding of the annualized yield according to the formula:
effective yield + [(base period return + 1) 365/7] - 1.
24
<PAGE>
________________________________________________________________
FINANCIAL STATEMENTS AND REPORT OF
INDEPENDENT AUDITORS
________________________________________________________________
25
<PAGE>
ACM INSTITUTIONAL RESERVES
ANNUAL REPORT
APRIL 30, 1998
STATEMENT OF NET ASSETS
APRIL 30, 1998 ACM INSTITUTIONAL RESERVES - PRIME PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY YIELD VALUE
- -------------------------------------------------------------------------------
COMMERCIAL PAPER-60.0%
AKZO NOBEL, INC.
$ 20,000 6/15/98 5.54% $ 19,861,500
ALLIANZ OF AMERICA FINANCE CORP.
12,000 5/29/98 (a) 5.46 11,949,040
7,000 6/23/98 (a) 5.51 6,943,216
12,000 6/25/98 (a) 5.51 11,898,983
10,400 6/11/98 (a) 5.52 10,334,619
14,600 6/12/98 (a) 5.52 14,505,976
APEX FUNDING CORP.
27,000 5/26/98 (a) 5.87 26,889,938
ASSOCIATES CORP. OF NORTH AMERICA
10,000 6/25/98 5.48 9,916,278
BAA PLC
19,000 6/03/98 5.52 18,903,860
20,000 6/09/98 5.52 19,880,400
18,000 6/10/98 5.52 17,889,600
BANCA CRT FINANCIAL CORP.
6,000 5/20/98 5.52 5,982,520
BANCO DE SANTANDER
35,100 5/01/98 5.54 35,100,000
BANQUE CAISSE D' EPARGNE
10,000 6/22/98 5.50 9,920,556
5,000 6/03/98 5.53 4,974,654
BBV FINANCE DELAWARE, INC.
8,000 5/01/98 5.58 8,000,000
CAISSE CENTRALE JARDINS DU QUEBEC
10,000 9/21/98 5.46 9,783,117
2,000 5/15/98 5.60 1,995,644
CAISSE D' AMORTISSEMENT
3,000 7/10/98 5.60 2,967,333
CREGEM NORTH AMERICA, INC.
15,000 6/19/98 5.50 14,887,708
15,000 6/10/98 5.51 14,908,167
30,000 6/03/98 5.53 29,847,925
CS FIRST BOSTON, INC.
12,000 5/26/98 5.50 11,954,167
5,000 6/11/98 5.50 4,968,681
40,000 6/17/98 5.51 39,712,517
10,000 6/22/98 5.51 9,920,411
5,000 6/22/98 5.52 4,960,133
DEN DANSKE BANK
30,000 5/26/98 5.53 29,884,792
50,000 5/20/98 5.55 49,853,542
DEN NORSKE BANK
30,000 5/29/98 5.50 29,871,667
15,000 6/24/98 5.51 14,876,025
10,900 6/08/98 5.52 10,836,489
DIAGEO CAPITAL
5,000 5/29/98 5.45 4,978,806
10,000 5/29/98 5.50 9,957,222
21,500 6/17/98 5.51 21,345,337
GENERAL ELECTRIC CAPITAL CORP.
20,000 6/30/98 5.50 19,816,666
20,000 6/11/98 5.52 19,874,267
30,000 5.55%, 11/17/98 FRN 5.58 30,000,000
GENERAL MOTORS ACCEPTANCE CORP.
35,000 6/11/98 5.51 34,780,365
10,000 6/12/98 5.51 9,935,717
25,000 5/18/98 5.53 24,934,715
GENERAL RE CORP.
10,000 6/29/98 5.51 9,909,697
GENERALE BANK, INC.
5,000 5/27/98 5.50 4,980,139
GOVERNMENT DEVELOPMENT BANK
OF PUERTO RICO
35,000 7/22/98 5.52 34,559,933
IMI FUNDING CORP. (USA)
9,000 6/02/98 5.35 8,955,760
25,000 6/24/98 5.44 24,796,000
3,700 6/08/98 5.70 3,677,738
3,257 6/09/98 5.70 3,236,888
MORGAN STANLEY GROUP, INC.
30,000 6/15/98 5.50 29,793,750
RABOBANK USA
75,000 5/01/98 5.55 75,000,000
SALOMON SMITH BARNEY, INC.
10,000 6/15/98 5.51 9,931,125
25,000 6/04/98 5.52 24,869,667
35,000 6/10/98 5.52 34,785,333
SVENSKA HANDELSBANKEN
20,000 6/30/98 5.50 19,816,667
THAMES ASSET GLOBAL SECURITIZATION
20,000 6/11/98 (a) 5.55 19,873,583
UNI FUNDING, INC.
20,000 6/25/98 5.50 19,831,944
UNIBANCO
13,000 6/15/98 5.53 12,910,138
VENANTIUS AB
33,000 5/20/98 5.52 32,903,860
---------------
Total Commercial Paper
(amortized cost $1,059,634,775) 1,059,634,775
CORPORATE OBLIGATIONS-10.4%
ABBEY NATIONAL TREASURY SERVICES
15,000 5.54%, 2/17/99 FRN 5.60 14,993,058
ALLSTATE LIFE INSURANCE
FUNDING AGREEMENT
25,000 5.74%, 5/01/98 FRN (b) 5.74 25,000,000
1
STATEMENT OF NET ASSETS (CONTINUED)
ACM INSTITUTIONAL RESERVES - PRIME PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY YIELD VALUE
- -------------------------------------------------------------------------------
GENERAL AMERICAN FUNDING CORP.
$ 55,000 5.89%, 7/10/98 FRN 5.89% $ 55,000,000
MERRILL LYNCH & CO., INC.
25,000 5.61%, 1/29/99 FRN 5.61 25,000,000
15,000 5.61%, 2/16/99 FRN 5.61 15,000,000
4,000 5.88%, 8/26/98 5.88 4,000,000
TRAVELERS LIFE FUNDING AGREEMENT
20,000 5.64%, 4/14/99 FRN (b) 5.66 20,000,000
25,000 5.67%, 10/21/98 FRN (b) 5.67 25,000,000
---------------
Total Corporate Obligations
(amortized cost $183,993,058) 183,993,058
BANK OBLIGATIONS-10.0%
BAYERISCHE LANDESBANK
35,000 5.53%, 2/25/99 FRN 5.61 34,977,973
18,000 5.53%, 3/23/99 FRN 5.61 17,987,380
13,000 5.69%, 10/02/98 FRN 5.69 13,000,000
BAYERISCHE VEREINSBANK
20,000 5.53%, 6/30/98 FRN 5.59 19,998,086
DEUTSCHE BANK
10,000 5.52%, 7/01/98 FRN 5.62 9,998,378
LASALLE NATIONAL BANK
15,000 5.60%, 9/18/98 5.60 15,000,000
10,000 5.60%, 12/10/98 5.60 10,000,000
MORGAN GUARANTY TRUST CO.
5,000 5.96%, 6/22/98 5.88 4,999,762
ROYAL BANK OF CANADA
10,000 5.65%, 9/30/98 FRN 5.65 10,000,000
SMM TRUST
20,000 5.66%, 12/14/98 FRN (a) 5.66 20,000,000
20,000 5.69%, 12/16/98 FRN (a) 5.69 20,000,000
---------------
Total Bank Obligations
(amortized cost $175,961,579) 175,961,579
TIME DEPOSITS-7.5%
FIRST UNION NATIONAL BANK
52,000 5.56%, 5/01/98 5.56 52,000,000
WESTDEUTSCHE LANDESBANK
80,000 5.56%, 5/01/98 5.56 80,000,000
---------------
Total Time Deposits
(amortized cost $132,000,000) 132,000,000
CERTIFICATES OF DEPOSIT-6.3%
BAYERISCHE VEREINSBANK
30,000 5.64%, 2/25/99 5.64 30,000,000
CREDIT AGRICOLE
3,000 5.99%, 6/16/98 5.80 3,000,166
DEUTSCHE BANK
8,000 5.67%, 2/26/99 5.73 7,998,046
20,000 5.70%, 3/05/99 5.70 19,991,916
10,000 5.95%, 10/21/98 5.99 9,997,735
DRESDNER BANK
7,000 5.51%, 1/15/99 5.68 6,990,869
HESSISCHE LANDESBANK
5,000 5.94%, 6/19/98 5.81 4,999,986
NATIONAL WESTMINSTER BANK
14,000 5.65%, 3/03/99 5.71 13,994,273
SWISS BANK
14,000 5.66%, 3/04/99 5.70 13,995,485
---------------
Total Certificates of Deposit
(amortized cost $110,968,476) 110,968,476
PROMISSORY NOTES-4.5%
GOLDMAN SACHS GROUP LP
15,000 5.61%, 8/07/98 5.61 15,000,000
35,000 5.63%, 10/13/98 5.63 35,000,000
30,000 5.68%, 5/27/98 5.68 30,000,000
---------------
Total Promissory Notes
(amortized cost $80,000,000) 80,000,000
U.S. GOVERNMENT & AGENCY
OBLIGATIONS-1.0%
FEDERAL FARM CREDIT BANK
7,000 5.41%, 8/03/98 FRN 5.46 6,999,154
FEDERAL NATIONAL MORTGAGE ASSOCIATION
10,000 5.59%, 11/04/98 5.68 9,995,787
---------------
Total U.S. Government & Agency
Obligations
(amortized cost $16,994,941) 16,994,941
TOTAL INVESTMENTS-99.7%
(amortized cost $1,759,552,829) 1,759,552,829
Other assets less liabilities-0.3% 5,140,029
NET ASSETS-100%
(offering and redemption price of
$1.00 per share; 1,764,876,578
shares outstanding) $ 1,764,692,858
See Glossary of Terms on page 12.
See notes to financial statements.
2
STATEMENT OF NET ASSETS
APRIL 30, 1998 ACM INSTITUTIONAL RESERVES - GOVERNMENT PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY YIELD VALUE
- -------------------------------------------------------------------------------
U.S. GOVERNMENT & AGENCY
OBLIGATIONS-68.2%
FEDERAL NATIONAL MORTGAGE
ASSOCIATION-31.2%
$ 3,000 5.35%, 7/16/98 5.49% $ 2,998,343
7,000 5.46%, 3/03/99 FRN 5.50 6,997,946
6,000 5.54%, 10/20/98 FRN 5.67 5,998,770
7,000 5.57%, 3/05/99 5.62 6,997,046
6,000 5.57%, 4/28/99 FRN 5.62 5,997,025
6,500 5.59%, 11/04/98 FRN 5.68 6,498,868
6,500 5.59%, 11/04/98 5.79 6,497,261
10,000 5.68%, 6/19/98 5.60 10,000,955
2,000 6.41%, 7/17/98 5.67 2,002,664
5,500 8.15%, 5/11/98 5.52 5,503,573
9,375 5/26/98 5.43 9,339,718
5,000 6/17/98 5.48 4,964,685
2,000 6/12/98 5.49 1,987,377
5,000 6/30/98 5.50 4,954,792
5,000 6/26/98 5.51 4,957,767
---------------
85,696,790
FEDERAL HOME LOAN MORTGAGE
CORP.-20.4%
5,000 5/18/98 5.43 4,987,226
3,200 5/29/98 5.48 3,186,535
2,000 6/08/98 5.48 1,988,579
2,000 6/10/98 5.48 1,987,978
7,000 5/13/98 5.49 6,987,272
4,184 5/15/98 5.49 4,175,148
2,000 5/21/98 5.49 1,993,967
3,500 5/29/98 5.49 3,485,246
12,600 5/07/98 5.50 12,588,513
7,000 5/08/98 5.50 6,992,568
3,500 5/28/98 5.50 3,485,694
4,000 6/18/98 5.51 3,971,040
---------------
55,829,766
FEDERAL HOME LOAN BANK-14.3%
8,000 5.39%, 7/30/98 FRN 5.53 7,998,488
5,700 5.56%, 3/25/99 5.71 5,693,119
10,000 5.65%, 3/12/99 5.69 10,000,000
5,000 5.65%, 3/30/99 5.62 5,000,000
3,500 5.71%, 3/04/99 5.71 3,500,000
5,000 5.71%, 3/17/99 5.73 4,998,685
2,000 5.72%, 7/07/98 5.58 2,000,308
---------------
39,190,600
STUDENT LOAN MARKETING
ASSOCIATION-1.6%
4,500 5.36%, 7/12/99 FRN 6.17 4,480,141
FEDERAL FARM CREDIT BANK-0.7%
2,000 5.50%, 6/01/98 5.57 1,999,531
---------------
Total U.S. Government & Agency
Obligations
(amortized cost $187,196,828) 187,196,828
REPURCHASE AGREEMENTS-31.4%
CHASE SECURITIES, INC.
8,000 5.49%, dated 4/29/98,
due 5/11/98 in the amount
of $8,014,640 (cost $8,000,000;
collateralized by $9,515,000
FN334614, 6.50%, 12/01/23,
value $8,255,017) (c) 5.49 8,000,000
CIBC/WOOD GUNDY, INC.
7,000 5.56%, dated 4/30/98,
due 5/01/98 in the amount
of $7,001,081 (cost $7,000,000;
collateralized by $7,044,135
FN266385, 5.56%, 12/01/33,
value $7,185,052) (c) 5.56 7,000,000
NIKKO SECURITIES CO.
5,000 5.50%, dated 4/28/98,
due 5/13/98 in the amount
of $5,011,458 (cost $5,000,000;
collateralized by $5,335,000
FN419493, 6.00%, 3/01/28,
value $5,175,646) (c) 5.50 5,000,000
NIKKO SECURITIES CO.
9,000 5.51%, dated 4/02/98,
due 5/06/98 in the amount
of $9,046,835 (cost $9,000,000;
collateralized by $9,590,000
FN251802, 6.00%, 4/01/28,
value $9,312,689) (c) 5.51 9,000,000
PAINE WEBBER, INC.
7,000 5.51%, dated 4/28/98,
due 5/27/98 in the amount
of $7,031,070 (cost $7,000,000;
collateralized by $7,930,000
FN394706, 7.00%, 7/01/04,
value $7,219,778) (c) 5.51 7,000,000
PRUDENTIAL SECURITIES, INC.
6,000 5.50%, dated 4/29/98,
due 5/20/98 in the amount
of $6,019,250 (cost $6,000,000;
collateralized by $6,269,000
FH00815, 7.00%, 12/01/27,
value $6,183,341) (c) 5.50 6,000,000
PRUDENTIAL SECURITIES, INC.
8,000 5.52%, dated 4/01/98,
due 5/04/98 in the amount
of $8,040,480 (cost $8,000,000;
collateralized by $8,324,000
FH00557, 7.00%, 10/01/27,
value $8,219,337) (c) 5.52 8,000,000
3
STATEMENT OF NET ASSETS
(CONTINUED) ACM INSTITUTIONAL RESERVES - GOVERNMENT PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY YIELD VALUE
- -------------------------------------------------------------------------------
SALOMON SMITH BARNEY, INC.
$ 8,000 5.49%, dated 4/29/98,
due 5/12/98 in the amount
of $8,015,860 (cost $8,000,000;
collateralized by $8,352,000
FH00557, 7.00%, 10/01/27,
value $8,246,985) (c) 5.49% $ 8,000,000
SALOMON SMITH BARNEY, INC.
6,000 5.50%, dated 4/28/98,
due 5/19/98 in the amount
of $6,019,250 (cost $6,000,000;
collateralized by $8,398,000
FN328331, 6.50%, 8/01/10,
value $6,146,605) (c) 5.50 6,000,000
SBC WARBURG, LTD.
8,000 5.48%, dated 4/22/98,
due 5/05/98 in the amount
of $8,015,831 (cost $8,000,000;
collateralized by $14,358,000
FN190044, 6.50%, 9/01/08,
value $8,165,296) (c) 5.48 8,000,000
SBC WARBURG, LTD.
7,000 5.50%, dated 4/15/98,
due 5/20/98 in the amount
of $7,037,431 (cost $7,000,000;
collateralized by $7,203,000
FN424858, 6.50%, 4/01/28,
value $7,168,686) (c) 5.50 7,000,000
STATE STREET BANK AND TRUST CO.
7,100 5.40%, dated 4/30/98,
due 5/01/98 in the amount
of $7,101,065 (cost $7,100,000;
collateralized by $7,025,000
US T-Note, 6.25%, 5/31/99,
value $7,255,435) 5.40 7,100,000
---------------
Total Repurchase Agreements
(amortized cost $86,100,000) 86,100,000
TOTAL INVESTMENTS-99.6%
(amortized cost $273,296,828) 273,296,828
Other assets less liabilities-0.4% 1,164,547
NET ASSETS-100%
(offering and redemption
price of $1.00 per share;
274,591,724 shares
outstanding) $ 274,461,375
See Glossary of Terms on page 12.
See notes to financial statements.
4
STATEMENT OF NET ASSETS
APRIL 30, 1998 ACM INSTITUTIONAL RESERVES - TAX-FREE PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------------
MUNICIPAL BONDS-98.8%
ALABAMA-1.8%
ARAB IDB
(SCI Manufacturing Inc.)
Series '89 VRDN (d)
$ 150 8/01/00 4.40% $ 150,000
HUNTSVILLE IDA
(Seiki USA Project)
Series '88 AMT VRDN (d)
5,000 9/01/98 4.48 5,000,000
-------------
5,150,000
ALASKA-2.4%
ALASKA HOUSING FINANCE CORP.
(University of Alaska)
Series '97A VRDN (d)
4,000 12/01/27 4.10 4,000,000
ALASKA IDA
(Fairbanks Gold Mining Inc.)
Series '97 AMT VRDN (d)
2,500 5/01/09 4.20 2,500,000
ANCHORAGE GO
Series A FGIC
535 9/01/98 3.98 535,030
-------------
7,035,030
ARIZONA-3.7%
APACHE COUNTY IDA
PCR
(Tuscon Electric Power Co. Project)
Series '81B VRDN (d)
2,500 10/01/21 4.45 2,500,000
APACHE COUNTY IDR
(Tuscon Electric Power Co. Project)
Series '83C VRDN (d)
7,100 12/15/18 4.25 7,100,000
APACHE COUNTY PCR
(Tucson Electric Power Co. Project)
Series '85A VRDN (d)
1,300 12/01/20 4.20 1,300,000
-------------
10,900,000
ARKANSAS-0.4%
JONESBORO SALES AND USE
TAX REVENUE
Series '97 FSA
1,250 11/15/98 3.90 1,250,000
CALIFORNIA-1.7%
CALIFORNIA HIGHER EDUCATION
STUDENT LOAN REVENUE
Series D-2 PPB (d)
5,000 4/01/00 4.00 5,000,000
COLORADO-4.8%
DOUGLAS COUNTY
MFHR
(Parker Hilltop Apartments Project)
Series '97 AMT PPB (d)
5,935 12/01/27 4.00 5,935,000
ENGLEWOOD IDR
(Swedish Mob I Ltd. Project)
Series '85 VRDN (d)
885 12/01/10 4.40 885,000
WESTMINISTER MFHR
(Cascade Village Apartments)
Series '97 VRDN (d)
7,375 12/01/07 4.10 7,375,000
-------------
14,195,000
DELAWARE-1.8%
DELAWARE IDR
(Delmarva Power & Light)
Series '93C VRDN (d)
5,150 10/01/28 4.25 5,150,000
DISTRICT OF COLUMBIA-6.2%
DISTRICT OF COLUMBIA GO
Series '92A-3 VRDN (d)
5,000 10/01/07 4.35 5,000,000
Series '92A-4 VRDN (d)
7,700 10/01/07 4.35 7,700,000
DISTRICT OF COLUMBIA
HFA MFHR
(Tyler Housing)
AMT VRDN (d)
2,400 8/01/25 4.45 2,400,000
5
STATEMENT OF NET ASSETS
(CONTINUED) ACM INSTITUTIONAL RESERVES - TAX-FREE PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------------
DISTRICT OF COLUMBIA
HFA SFMR
Series '97C AMT PPB (d)
$ 3,000 9/01/98 4.05% $ 3,000,000
-------------
18,100,000
FLORIDA-8.6%
BROWARD COUNTY
HFA MFHR
(Jacaranda Village Apartments)
Series '97 VRDN (d)
3,500 9/01/22 4.20 3,500,000
BROWARD COUNTY
MFHR
(Harbour Town Jacaranda Project)
Series '95B VRDN (d)
3,400 12/01/25 4.20 3,400,000
BROWARD COUNTY
MFHR
(Margate Investments Project)
VRDN (d)
1,000 11/01/05 4.20 1,000,000
FLORIDA HFA MFHR
(EEE-Carlton Arms II)
VRDN (d)
1,500 12/01/08 4.10 1,500,000
FLORIDA HFA MFHR
(Oaks at Orange Park)
Series '90 VRDN (d)
5,100 7/01/07 4.15 5,100,000
HIGHLANDS COUNTY HEALTH FACILITIES
(Adventist/Sunbelt)
Series A VRDN (d)
5,600 11/15/26 4.15 5,600,000
PALM BEACH COUNTY
HFA MFHR
(Village Crossing Project)
Series '97B VRDN (d)
3,000 10/01/27 4.20 3,000,000
VOLUSIA COUNTY
HFA MFHR
(Ocean Oaks Apartments)
Series '97B VRDN (d)
2,000 10/01/27 4.20 2,000,000
-------------
25,100,000
GEORGIA-2.6%
COLLEGE PARK IDR
(Wynefield 1 Project)
AMT VRDN (d)
1,700 12/01/16 4.05 1,700,000
JACKSON COUNTY IDA
(Mitsubishi Consumer Electronic)
VRDN (d)
3,000 12/01/15 4.55 3,000,000
SAVANNAH ECONOMIC
DEVELOPMENT AUTHORITY
(Georgia Kaolin)
Series '97 AMT VRDN (d)
3,000 7/01/27 4.20 3,000,000
-------------
7,700,000
HAWAII-2.9%
HAWAII HOUSING FINANCE &
DEVELOPMENT AUTHORITY
(Kamakee Vista)
Series '90A VRDN (d)
6,500 7/01/25 4.70 6,500,000
HAWAII HOUSING FINANCE &
DEVELOPMENT AUTHORITY
(Rental Housing System)
Series '90B VRDN (d)
1,900 7/01/25 4.70 1,900,000
-------------
8,400,000
IDAHO-0.4%
CUSTER COUNTY SOLID WASTE REVENUE
(Hecla Mining Co. Project)
Series '97 AMT VRDN (d)
1,300 7/01/07 4.25 1,300,000
ILLINOIS-14.5%
CHICAGO AIRPORT
(O'Hare International Airport)
Series B AMT VRDN (d)
2,300 1/01/18 4.20 2,300,000
Series C VRDN (d)
3,400 1/01/18 4.05 3,400,000
6
ACM INSTITUTIONAL RESERVES - TAX-FREE PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------------
CHICAGO HFA MFHR
(Waveland Assoc)
Series '85D VRDN (d)
$ 6,300 11/01/10 4.15% $ 6,300,000
DES PLAINES COOK COUNTY IDR
(CP Partners LLC Project)
Series '97A VRDN (d)
6,775 11/01/15 4.20 6,775,000
ELMHURST HOSPITAL REVENUE
(Joint Comm. Health Org.)
Series '88 VRDN (d)
6,780 7/01/18 4.10 6,780,000
ILLINOIS DEVELOPMENT
FINANCE AUTHORITY
(D.E. Akin Seed Project)
AMT VRDN (d)
1,000 11/01/04 4.30 1,000,000
ILLINOIS DEVELOPMENT
FINANCE AUTHORITY
(U.G.N. Inc. Project)
Series '86 AMT VRDN (d)
3,500 9/15/11 4.95 3,500,000
ILLINOIS EDUCATIONAL
FACILITIES AUTHORITY
(Cultural Pooled Financing
Program)
Series '85 VRDN (d)
4,000 12/01/25 4.10 4,000,000
ILLINOIS HEALTH FACILITIES AUTHORITY
(Rehab Institute of Chicago)
Series '97 VRDN (d)
7,000 4/01/32 4.15 7,000,000
VERNON HILLS IDR
(Kinder Care Center)
VRDN (d)
550 2/01/01 4.35 550,000
WEST CHICAGO IDR
(Acme Printing Co.)
Series '89 AMT VRDN (d)
1,100 5/01/99 5.03 1,100,000
-------------
42,705,000
INDIANA-3.1%
CITY OF INDIANAPOLIS
(Visiting Nurse Service Foundation)
Series '98 VRDN (d)
3,100 3/01/13 4.20 3,100,000
GARY ENVIRONMENTAL IMPROVEMENT
REVENUE
(U.S. Steel Corp.)
Series '84 VRDN (d)
4,100 7/15/02 3.85 4,100,000
SEYMOUR ECONOMIC DEVELOPMENT REVENUE
(Kobelco Metal Powder Co. Project)
Series '97 AMT VRDN (d)
2,000 12/01/07 4.95 2,000,000
-------------
9,200,000
LOUISIANA-2.4%
WEST BATON ROUGE IDR
(Dow Chemical #3)
Series '94B VRDN (d)
7,100 12/01/16 4.30 7,100,000
MAINE-0.9%
MAINE FINANCE AUTHORITY
(Barber Foods Inc.)
Series '90B AMT VRDN (d)
1,675 12/01/06 4.50 1,675,000
ORRINGTON RESOURCE RECOVERY REVENUE
(Penobscot Energy Project)
Series B AMT VRDN (d)
905 5/01/03 4.65 905,000
-------------
2,580,000
MICHIGAN-3.7%
MICHIGAN HOSPITAL FINANCE AUTHORITY
(Hospital Equipment Revenue)
Series '98A VRDN (d)
10,900 12/01/23 4.15 10,900,000
MINNESOTA-0.5%
COTTAGE GROVE
(Minnesota Mining & Manufacturing
Co. Project)
VRDN (d)
1,000 8/01/12 4.73 1,000,000
7
STATEMENT OF NET ASSETS
(CONTINUED) ACM INSTITUTIONAL RESERVES - TAX-FREE PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------------
EDEN PRAIRIE IDA
(Kinder Care Project)
Series C VRDN (d)
$ 465 2/01/01 4.35% $ 465,000
-------------
1,465,000
MISSISSIPPI-0.1%
JONES COUNTY HOSPITAL REVENUE
(South Central Registered
Medical Center Project)
MBIA
420 8/01/98 3.98 422,911
MISSOURI-4.4%
BLUE SPRINGS IDA
(Kinder Care Project)
Series C VRDN (d)
540 2/01/01 4.35 540,000
BOONE COUNTY IDA
(Minnesota Mining &
Manufacturing Co. Project)
VRDN (d)
500 12/01/25 4.10 500,000
MISSOURI HEALTH &
EDUCATIONAL FACILITY
(Barnes Hospital Project)
Series '85 VRDN (d)
10,000 12/01/15 4.10 10,000,000
MISSOURI HEALTH & EDUCATIONAL FACILITY
(Stowers Institute)
Series '98 VRDN (d)
2,000 4/01/38 4.15 2,000,000
-------------
13,040,000
NEW HAMPSHIRE-0.4%
MERRIMACK COUNTY
GO BAN
Lot B
1,200 8/07/98 4.00 1,200,782
NEW JERSEY-1.6%
JERSEY CITY BAN
Renewal Notes
2,250 9/18/98 3.90 2,254,024
NEW JERSEY ECONOMIC DEVELOPMENT
AUTHORITY
(Newark Recycling Facility)
Series '97 AMT PPB (d)
2,500 12/01/22 3.96 2,500,000
-------------
4,754,024
NEW MEXICO-0.5%
NEW MEXICO HFA
SFMR
(Home Mortgage Revenue)
Series '97-1 PPB (d)
1,415 7/01/28 3.85 1,415,000
NEW YORK-1.8%
HEMPSTEAD IDA
(American Ref-Fuel)
Series '97 VRDN (d)
5,300 12/01/10 4.10 5,300,000
NORTH CAROLINA-1.0%
NORTH CAROLINA MEDICAL CARE FACILITY
(The Givens Estates Inc. Project)
Series '97 VRDN (d)
3,000 12/01/26 4.25 3,000,000
OHIO-0.9%
WARREN COUNTY IDR
(Pioneer Industrial Components
Project)
Series '85 VRDN (d)
2,500 12/01/05 4.40 2,500,000
OREGON-0.9%
BEAVERTON WATER REVENUE
FGIC
295 6/01/98 4.00 295,060
OREGON ECONOMIC DEVELOPMENT REVENUE
(Kyotaru Oregon Project)
Series '89 AMT VRDN (d)
2,400 12/01/99 4.47 2,400,000
-------------
2,695,060
PENNSYLVANIA-7.8%
ALLEGHENY COUNTY IDR
(United Jewish Federation Project)
Series '96A VRDN (d)
9,930 10/01/26 4.20 9,930,000
MONTGOMERY COUNTY HIGHER
EDUCATION & HEALTH LOAN REVENUE
Series '96A VRDN (d)
4,370 4/01/17 4.15 4,370,000
8
ACM INSTITUTIONAL RESERVES - TAX-FREE PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------------
MONTGOMERY COUNTY
IDA
(Kinder Care Project)
Series D VRDN (d)
$ 400 10/01/00 4.35% $ 400,000
PENNSYLVANIA ECONOMIC DEVELOPMENT
FINANCE AUTHORITY
(National Gypsum Co. Project)
Series '97A AMT VRDN (d)
3,400 11/01/27 4.15 3,400,000
PHILADELPHIA GO TRAN
Series '97A
4,500 6/30/98 4.50 4,503,175
VENAGO IDR
(Penzoil Co. Project)
Series '82A VRDN (d)
285 12/01/12 4.30 285,000
-------------
22,888,175
TENNESSEE-1.1%
DICKSON COUNTY IDA
(Tennessee Bun Co. Project)
Series '96 AMT VRDN (d)
2,000 7/01/06 4.35 2,000,000
VOLUNTEER STATE STUDENT LOAN REVENUE
(Student Funding Corp.)
Series '87A-3
AMT VRDN (d)
1,200 12/01/17 4.50 1,200,000
-------------
3,200,000
TEXAS-3.6%
MIDLOTHIAN IDA
(Box-Crow Cement Co.)
VRDN (d)
5,000 12/01/09 4.15 5,000,000
PORT ARTHUR NAVIGATION DISTRICT
(Texaco Inc. Project)
Series '94 VRDN (d)
5,400 10/01/24 4.25 5,400,000
TRINITY RIVER IDA
(Radiation Sterilizers)
Series A VRDN (d)
150 11/01/05 3.70 150,000
-------------
10,550,000
UTAH-1.0%
UTAH BOARD OF REGENTS STUDENT
LOAN REVENUE
Series O AMBAC
2,000 5/01/98 3.96 2,000,000
UTAH HFA SFMR
(Home Mortgage Revenue)
Series '97-3 VRDN (d)
900 7/01/16 4.15 900,000
-------------
2,900,000
VERMONT-3.4%
VERMONT HEFA
(Capital Asset Financing Program)
Series '97-1 VRDN (d)
5,000 6/01/22 4.25 5,000,000
Series '97-2 VRDN (d)
5,000 6/01/27 4.25 5,000,000
-------------
10,000,000
VIRGINIA-5.5%
CHESTERFIELD COUNTY
IDR
(Philip Morris Co.)
VRDN (d)
11,100 4/01/09 4.25 11,100,000
LOUDOUN COUNTY IDA RESIDENTIAL
CARE FACILITY
(Falcons Landing Project)
Series '98 VRDN (d)
5,000 11/01/28 4.05 5,000,000
-------------
16,100,000
WASHINGTON-0.4%
WASHINGTON STUDENT LOAN FINANCE
ASSOCIATION
Series '88A AMT VRDN (d)
1,300 1/01/04 4.20 1,300,000
WEST VIRGINIA-0.7%
KEYSER IDR
(Keyser Associates Project)
VRDN (d)
1,900 7/01/14 4.20 1,900,000
9
STATEMENT OF NET ASSETS
(CONTINUED) ACM INSTITUTIONAL RESERVES - TAX-FREE PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------------
WISCONSIN-1.3%
MANITOWOC IDR
(Jagemann Stamping Co.)
Series '98 AMT VRDN (d)
$ 1,618 4/01/11 4.40% $ 1,618,000
WAUSAU PCR
(Minnesota Mining &
Manufacturing Co. Project)
VRDN (d)
500 12/01/01 4.73 500,000
1,600 8/01/17 4.73 1,600,000
-------------
3,718,000
TOTAL INVESTMENTS-98.8%
(amortized cost $290,113,982) 290,113,982
Other assets less liabilities-1.2% 3,649,664
NET ASSETS-100%
(offering and redemption price
of $1.00 per share; 293,847,141
shares outstanding) $ 293,763,646
# All securities either mature or their interest rate changes in one year or
less.
See Glossary of Terms on page 12.
See notes to financial statements.
10
STATEMENT OF NET ASSETS
APRIL 30, 1998 ACM INSTITUTIONAL RESERVES - TRUST PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY YIELD VALUE
- -------------------------------------------------------------------------------
COMMERCIAL PAPER-55.7%
ALLIANZ OF AMERICA
FINANCE CORP.
$ 4,000 5/29/98 (a) 5.46% $ 3,983,013
3,000 6/23/98 (a) 5.51 2,975,664
APEX FUNDING CORP.
4,700 5/26/98 (a) 5.87 4,680,841
ASSOCIATES CORP. OF NORTH AMERICA
5,000 6/25/98 5.48 4,958,139
5,000 6/24/98 5.52 4,958,600
BAA PLC
10,000 6/03/98 5.52 9,949,400
5,000 6/09/98 5.52 4,970,100
BANCA CRT FINANCIAL CORP.
2,400 5/20/98 5.52 2,393,008
BANCO DE SANTANDER
18,000 5/01/98 5.54 18,000,000
BANQUE CAISSE D'EPARGNE
5,000 6/22/98 5.50 4,960,278
2,000 6/03/98 5.53 1,989,862
BBV FINANCE DELAWARE, INC.
2,000 5/01/98 5.58 2,000,000
CAISSE CENTRALE JARDINS DU QUEBEC
3,455 9/21/98 5.46 3,380,067
CAISSE D' AMORTISSEMENT
1,000 7/10/98 5.60 989,111
CITICORP
10,000 5/01/98 5.54 10,000,000
CREGEM NORTH AMERICA, INC.
5,000 6/19/98 5.50 4,962,569
10,000 6/10/98 5.51 9,938,778
4,000 6/03/98 5.53 3,979,723
CS FIRST BOSTON, INC.
5,000 6/17/98 5.51 4,964,065
5,000 6/22/98 5.52 4,960,133
5,000 7/29/98 5.54 4,931,519
DEN DANSKE BANK
10,000 5/20/98 5.55 9,970,708
DEN NORSKE BANK
5,000 5/29/98 5.50 4,978,611
GENERAL ELECTRIC CAPITAL CORP.
4,000 5.55%, 11/17/98 FRN 5.55 4,000,000
GE FINANCIAL ASSURANCE HOLDINGS
15,000 6/11/98 5.52 14,905,700
GENERAL MOTORS ACCEPTANCE CORP.
10,000 6/11/98 5.51 9,937,247
IMI FUNDING CORP.
(USA)
5,000 6/24/98 5.44 4,959,200
5,000 9/04/98 5.47 4,904,275
4,000 6/10/98 5.52 3,975,467
2,500 6/04/98 5.60 2,486,778
MORGAN STANLEY GROUP, INC.
3,000 6/15/98 5.50 2,979,375
NORWEST CORP.
13,000 5/21/98 5.52 12,960,133
SALOMON SMITH BARNEY, INC.
18,000 6/02/98 5.52 17,911,680
UNIBANCO
5,000 6/15/98 5.53 4,965,438
VENANTIUS AB
4,485 6/29/98 5.50 4,444,573
---------------
Total Commercial Paper
(amortized cost $217,304,055) 217,304,055
CERTIFICATES OF DEPOSIT-13.3%
BAYERISCHE LANDESBANK
10,000 5.53%, 2/25/99 FRN 5.61 9,993,707
BAYERISCHE VEREINSBANK
10,000 5.64%, 2/25/99 5.64 10,000,000
CANADIAN IMPERIAL BANK OF COMMERCE
13,000 5.54%, 5/28/98 5.54 13,000,000
DEUTSCHE BANK
2,000 5.67%, 2/26/99 5.73 1,999,511
5,000 5.70%, 3/05/99 5.70 4,997,979
2,000 5.95%, 10/21/98 5.99 1,999,547
DRESDNER BANK
3,000 5.51%, 1/15/99 5.68 2,996,087
HESSISCHE LANDESBANK
1,000 5.94%, 6/19/98 5.81 999,997
NATIONAL WESTMINSTER BANK
3,000 5.65%, 3/03/99 5.71 2,998,773
SWISS BANK
3,000 5.66%, 3/04/99 5.71 2,999,033
---------------
Total Certificates of Deposit
(amortized cost $51,984,634) 51,984,634
CORPORATE OBLIGATIONS-9.7%
ALLSTATE LIFE INSURANCE
FUNDING AGREEMENT
5,000 5.69%, 8/31/98 FRN (b) 5.69 5,000,000
GENERAL AMERICAN FUNDING CORP.
4,000 5.86%, 7/10/98 FRN 5.86 4,000,000
8,000 5.89%, 7/10/98 FRN 5.89 8,000,000
MERRILL LYNCH & CO., INC.
8,000 5.61%, 1/29/99 FRN 5.61 8,000,000
3,000 5.88%, 8/26/98 5.88 3,000,000
11
STATEMENT OF NET ASSETS
(CONTINUED) ACM INSTITUTIONAL RESERVES - TRUST PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY YIELD VALUE
- -------------------------------------------------------------------------------
TRAVELERS LIFE FUNDING AGREEMENT
$ 5,000 5.64%, 4/14/99 FRN (b) 5.66% $ 5,000,000
5,000 5.67%, 10/21/98 FRN (b) 5.66 5,000,000
---------------
Total Corporate Obligations
(amortized cost $38,000,000) 38,000,000
BANK OBLIGATIONS-9.7%
BAYERISCHE LANDESBANK
7,000 5.53%, 3/23/99 FRN 5.61 6,995,092
2,000 5.69%, 10/02/98 FRN 5.69 2,000,000
BAYERISCHE VEREINSBANK
5,000 5.56%, 6/30/98 FRN 5.59 4,999,521
CITIBANK
10,000 5.52%, 6/15/98 5.52 9,931,000
DEUTSCHE BANK
2,000 5.52%, 7/01/98 FRN 5.62 1,999,676
MORGAN GUARANTY TRUST CO.
1,000 5.96%, 6/22/98 5.88 999,952
ROYAL BANK OF CANADA
2,000 5.65%, 9/30/98 FRN 5.65 2,000,000
SMM TRUST
5,000 5.66%, 12/14/98 FRN (a) 5.66 5,000,000
4,000 5.69%, 12/16/98 FRN (a) 5.69 4,000,000
---------------
Total Bank Obligations
(amortized cost $37,925,241) 37,925,241
TIME DEPOSITS-6.3%
FIRST UNION NATIONAL BANK
9,500 5.56%, 5/01/98 5.56 9,500,000
WESTDEUTSCHE LANDESBANK
15,000 5.56%, 5/01/98 5.56 15,000,000
---------------
Total Time Deposits
(amortized cost $24,500,000) 24,500,000
PROMISSORY NOTES-4.6%
GOLDMAN SACHS GROUP LP
4,000 5.61%, 8/07/98 5.61 4,000,000
7,000 5.63%, 10/13/98 5.63 7,000,000
7,000 5.68%, 5/27/98 5.68 7,000,000
---------------
Total Promissory Notes
(amortized cost $18,000,000) 18,000,000
U.S. GOVERNMENT & AGENCY
OBLIGATIONS-0.5%
FEDERAL NATIONAL MORTGAGE
ASSOCIATION
2,000 5.78%, 11/04/98
(amortized cost $1,999,158) 5.79 1,999,158
TOTAL INVESTMENTS-99.8%
(amortized cost $389,713,088) 389,713,088
Other assets less liabilities-0.2% 778,945
NET ASSETS-100%
(offering and redemption price
of $1.00 per share; 390,535,793
shares outstanding) $ 390,492,033
(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, 1998, these securities amounted to $142,395,355, representing 8.1% of net
assets on the Prime Portfolio, and $20,639,518, representing 5.3% of net assets
on the Trust Portfolio.
(b) Funding agreements are illiquid securities subject to restrictions as to
resale. These securities amounted to $70,000,000, representing 4.0% of net
assets on the Prime Portfolio, and $15,000,000, representing 3.8% of net assets
on the Trust Portfolio (see Note A to the financial statements).
(c) Repurchase agreement which is terminable within 7 days.
(d) 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
FGIC Financial Guaranty Insurance Company
FRN Floating Rate Note
FSA Financial Security Assurance, Inc.
GO General Obligation
HEFA Health & Educational Facility 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
SFMR Single Family Mortgage Revenue
TRAN Tax & Revenue Anticipation Note
See notes to financial statements.
12
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1998 ACM INSTITUTIONAL RESERVES
_______________________________________________________________________________
PRIME GOVERNMENT TAX-FREE TRUST
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------ ------------
INVESTMENT INCOME
Interest $ 74,337,440 $ 16,920,793 $ 9,838,311 $ 15,589,391
EXPENSES
Advisory fee
(Note B) 2,597,281 600,906 516,640 1,225,381
Registration 257,929 86,249 60,277 88,229
Custodian 212,071 96,762 93,728 91,078
Audit and legal 37,281 15,674 14,196 14,363
Transfer agency 29,327 27,888 20,351 25,814
Printing 7,980 4,006 4,142 12,358
Directors' fees 7,979 7,979 7,979 7,979
Miscellaneous 10,041 4,836 4,404 4,670
Total expenses 3,159,889 844,300 721,717 1,469,872
Less: expense
reimbursement (562,608) (243,394) (205,077) (128,100)
Net expenses 2,597,281 600,906 516,640 1,341,772
Net investment
income 71,740,159 16,319,887 9,321,671 14,247,619
REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain
on investment
transactions 84 1,000 168 13,207
Net change in
unrealized
appreciation of
investments -0- -0- (351) -0-
Net gain (loss)
on investments 84 1,000 (183) 13,207
NET INCREASE IN NET
ASSETS FROM
OPERATIONS $ 71,740,243 $ 16,320,887 $ 9,321,488 $ 14,260,826
See notes to financial statements.
13
STATEMENT OF CHANGES IN NET ASSETS ACM INSTITUTIONAL RESERVES
_______________________________________________________________________________
PRIME PORTFOLIO
---------------------------------
YEAR ENDED YEAR ENDED
APRIL 30, 1998 APRIL 30, 1997
--------------- ---------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income $ 71,740,159 $ 40,100,886
Net realized gain (loss) on
investment transactions 84 1,928
Net change in unrealized appreciation
of investments -0- -0-
Net increase in net assets from
operations 71,740,243 40,102,814
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (71,740,159) (40,100,886)
CAPITAL STOCK TRANSACTIONS
Net increase (decrease) 897,353,419 374,018,204
Total increase (decrease) 897,353,503 374,020,132
NET ASSETS
Beginning of year 867,339,355 493,319,223
End of year $ 1,764,692,858 $ 867,339,355
See notes to financial statements.
14
ACM INSTITUTIONAL RESERVES
_______________________________________________________________________________
GOVERNMENT PORTFOLIO TAX-FREE PORTFOLIO
--------------------------------- ---------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
APRIL 30, 1998 APRIL 30, 1997 APRIL 30, 1998 APRIL 30, 1997
--------------- --------------- --------------- ---------------
$ 16,319,887 $ 10,174,707 $ 9,321,671 $ 7,081,373
1,000 (2,140) 168 (90)
-0- -0- (351) 229
16,320,887 10,172,567 9,321,488 7,081,512
(16,319,887) (10,174,707) (9,321,671) (7,081,373)
(52,059,333) 175,705,670 110,698,884 (546,863)
(52,058,333) 175,703,530 110,698,701 (546,724)
326,519,708 150,816,178 183,064,945 183,611,669
$ 274,461,375 $ 326,519,708 $ 293,763,646 $ 183,064,945
TRUST PORTFOLIO
---------------------------------
YEAR ENDED YEAR ENDED
APRIL 30, 1998 APRIL 30, 1997
--------------- ---------------
$ 14,247,619 $ 9,713,883
13,207 (4,087)
-0- -0-
14,260,826 9,709,796
(14,247,619) (9,713,883)
214,797,663 5,619,828
214,810,870 5,615,741
175,681,163 170,065,422
$ 390,492,033 $ 175,681,163
15
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1998 ACM INSTITUTIONAL RESERVES
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
ACM Institutional Reserves, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as an open-end investment company. The Fund
operates as a series company currently consisting of four Portfolios: Prime
Portfolio, Government Portfolio, Tax-Free Portfolio and Trust Portfolio. Each
Portfolio 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 financial statements have been prepared in conformity with
generally accepted accounting principles which require management to make
certain estimates and assumptions that affect the reported amounts of assets
and liabilities in the financial statements and amounts of income and expenses
during the reporting period. Actual results could differ from those estimates.
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. Certain illiquid securities containing
unconditional par puts are also valued at amortized cost. Amortization of
premium is charged to income. Accretion of market discount is credited to
unrealized gain.
2. TAXES
It is the Fund's policy to meet 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 any, to its
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
3. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Interest income is accrued daily. Investment transactions are recorded on the
date securities are purchased or sold. Investment gains and losses are
determined on the identified cost basis.
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 year
end. Dividends paid by Tax-Free Portfolio from net investment income for the
year ended April 30, 1998 are exempt from federal income taxes. However,
certain shareholders may be subject to the alternative minimum tax.
5. REPURCHASE AGREEMENTS
It is the Fund's policy to take possession of securities as collateral under
repurchase agreements and to determine on a daily basis that the value of such
securities are sufficient to cover the value of the repurchase agreements.
NOTE B: ADVISORY FEE AND TRANSACTIONS WITH AN AFFILIATE OF THE ADVISER
Under the terms of an investment advisory agreement, the Fund pays Alliance
Capital Management L.P., (the "Adviser"), an advisory fee at the annual rate of
.20% of average daily net assets for the Prime, Government and Tax-Free
Portfolios and .45% 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 their average daily net assets for any fiscal year, and with respect to the
Trust Portfolio, from May 1, 1997 to July 13, 1997 for expenses exceeding .45%
of its average daily net assets and from July 14, 1997 to April 30, 1998 for
expenses exceeding .50% of its average daily net assets. For the year ended
April 30, 1998, reimbursement was $562,608, $243,394, $205,077 and $128,100 for
the Prime, Government, Tax-Free and Trust Portfolios, respectively.
Each Portfolio compensates Alliance Fund Services, Inc., a wholly-owned
subsidiary of the Adviser, under a Transfer Agency Agreement 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, 1998, was $18,000 per Portfolio.
NOTE C: INVESTMENT TRANSACTIONS
At April 30, 1998, 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 gains at April 30, 1998 of $183,720, of
which $1,293 expires in 1999, $3,535 in 2000, $6,777 in 2001, $29,045 in 2002,
16
ACM INSTITUTIONAL RESERVES
_______________________________________________________________________________
$77,316 in 2003, $40,007 in 2004 and $25,747 in the year 2005; the Government
Portfolio had a capital loss carryforward of $130,349, of which $340 expires in
2000, $9,174 in 2001, $51,091 in 2002, $23,230 in 2003, $30,512 in 2004 and
$16,002 in the year 2005; the Tax-Free Portfolio had a capital loss
carryforward of $83,495, of which $6,110 expires in 2002, $76,925 in 2004, $400
in 2005 and $60 in the year 2006; and the Trust Portfolio had a capital loss
carryforward of $43,760, of which $6,915 expires in 2003, $30,219 in 2004,
$2,251 in 2005 and $4,375 in the year 2006.
NOTE D: CAPITAL STOCK
There are 4,000,000,000 shares of $.01 par value capital stock authorized. At
April 30, 1998, capital paid-in aggregated $1,764,876,578 on Prime Portfolio,
$274,591,724 on Government Portfolio, $293,847,141 on Tax-Free Portfolio, and
$390,535,793 on Trust Portfolio. Transactions, all at $1.00 per share, were as
follows:
YEAR ENDED YEAR ENDED
APRIL 30, 1998 APRIL 30, 1997
------------------ ------------------
PRIME PORTFOLIO
Shares sold 18,859,885,064 12,695,838,675
Shares issued on reinvestments
of dividends 71,740,159 40,100,886
Shares redeemed (18,034,271,804) (12,361,921,357)
Net increase 897,353,419 374,018,204
YEAR ENDED YEAR ENDED
APRIL 30, 1998 APRIL 30, 1997
------------------ ------------------
GOVERNMENT PORTFOLIO
Shares sold 1,463,678,015 1,074,902,562
Shares issued on reinvestments
of dividends 16,319,887 10,174,707
Shares redeemed (1,532,057,235) (909,371,599)
Net increase (decrease) (52,059,333) 175,705,670
YEAR ENDED YEAR ENDED
APRIL 30, 1998 APRIL 30, 1997
------------------ ------------------
TAX-FREE PORTFOLIO
Shares sold 2,187,340,593 1,486,189,526
Shares issued on reinvestments
of dividends 9,321,671 7,081,373
Shares redeemed (2,085,963,380) (1,493,817,762)
Net increase (decrease) 110,698,884 (546,863)
YEAR ENDED YEAR ENDED
APRIL 30, 1998 APRIL 30, 1997
------------------ ------------------
TRUST PORTFOLIO
Shares sold 1,732,157,312 1,074,544,780
Shares issued on reinvestments
of dividends 14,247,619 9,713,883
Shares redeemed (1,531,607,268) (1,078,638,835)
Net increase 214,797,663 5,619,828
17
FINANCIAL HIGHLIGHTS ACM INSTITUTIONAL RESERVES
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
PRIME PORTFOLIO
---------------------------------------------------------------
YEAR ENDED APRIL 30,
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------
<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 .0552 .0530 .0560 .0502 .0325
LESS: DIVIDENDS
Dividends from net investment income (.0552) (.0530) (.0560) (.0502) (.0325)
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN
Total investment return based on
net asset value (a) 5.68% 5.44% 5.76% 5.15% 3.30%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in millions) $1,764.7 $867.3 $493.3 $197.8 $108.1
Ratios to average net assets of:
Expenses, net of waivers
and reimbursements .20% .20% .20% .20% .20%
Expenses, before waivers
and reimbursements .24% .29% .32% .36% .42%
Net investment income (b) 5.52% 5.31% 5.54% 5.24% 3.25%
</TABLE>
<TABLE>
<CAPTION>
GOVERNMENT PORTFOLIO
---------------------------------------------------------------
YEAR ENDED APRIL 30,
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------
<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 .0543 .0519 .0552 .0493 .0315
LESS: DIVIDENDS
Dividends from net investment income (.0543) (.0519) (.0552) (.0493) (.0315)
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN
Total investment return based on
net asset value (a) 5.58% 5.33% 5.67% 5.06% 3.20%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in millions) $274.5 $326.5 $150.8 $104.4 $76.6
Ratios to average net assets of:
Expenses, net of waivers
and reimbursements .20% .20% .20% .20% .20%
Expenses, before waivers
and reimbursements .28% .35% .36% .38% .36%
Net investment income (b) 5.43% 5.22% 5.50% 4.94% 3.15%
</TABLE>
See footnote summary on page 19.
18
ACM INSTITUTIONAL RESERVES
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
TAX-FREE PORTFOLIO
---------------------------------------------------------------
YEAR ENDED APRIL 30,
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------
<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 .0363 .0347 .0372 .0326 .0240
Net unrealized loss on investments -0- -0- -0- (.0048) -0-
Net increase in net asset value
from operations .0363 .0347 .0372 .0278 .0240
LESS: DIVIDENDS
Dividends from net investment income (.0363) (.0347) (.0372) (.0326) (.0240)
ADD: CAPITAL CONTRIBUTION
Capital Contributed by the Adviser -0- -0- -0- .0048 -0-
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN
Total investment return based on
net asset value (a) 3.70% 3.53% 3.79% 3.31%(c) 2.43%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in millions) $293.8 $183.1 $183.6 $35.5 $35.6
Ratios to average net assets of:
Expenses, net of waivers
and reimbursements .20% .20% .20% .20% .20%
Expenses, before waivers
and reimbursements .28% .33% .48% .76% .69%
Net investment income (b) 3.61% 3.46% 3.73% 3.31% 2.40%
</TABLE>
<TABLE>
<CAPTION>
TRUST PORTFOLIO
---------------------------------------------------------------
YEAR ENDED APRIL 30,
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------
<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 .0523 .0492 .0527 .0479 .0309
LESS: DIVIDENDS
Dividends from net investment income (.0523) (.0492) (.0527) (.0479) (.0309)
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN
Total investment return based on
net asset value (a) 5.37% 5.04% 5.41% 4.91% 3.14%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in millions) $390.5 $175.7 $170.1 $109.2 $36.8
Ratios to average net assets of:
Expenses, net of waivers
and reimbursements .49% .50% .50% .49% .14%
Expenses, before waivers
and reimbursements .54% .57% .60% .75% 1.23%
Net investment income (b) 5.23% 4.93% 5.28% 5.31% 3.15%
</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) Net of expenses reimbursed or waived by the Adviser.
(c) Capital contributed by the Adviser had no material effect on net asset
value, and therefore, no effect on total return.
19
INDEPENDENT AUDITOR'S REPORT ACM INSTITUTIONAL RESERVES
_______________________________________________________________________________
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS ACM INSTITUTIONAL RESERVES, INC.
We have audited the accompanying statements of net assets of ACM Institutional
Reserves--Prime, Government, Tax-Free and Trust Portfolios as of April 30, 1998
and the related statements of operations, changes in net assets, and financial
highlights for the periods indicated in the accompanying financial statements.
These financial statements and financial highlights are the responsibility of
the Portfolios' management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
April 30, 1998 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of ACM
Institutional Reserves--Prime, Government, Tax-Free and Trust Portfolios as of
April 30, 1998, and the results of their operations, changes in their net
assets, and financial highlights for the periods indicated, in conformity with
generally accepted accounting principles.
McGladrey & Pullen, LLP
New York, New York
May 22, 1998
20
26
<PAGE>
________________________________________________________________
APPENDIX A
COMMERCIAL PAPER AND BOND RATINGS
________________________________________________________________
Municipal and Corporate Bonds
The two higher ratings of Moody's Investors Service, Inc.
("Moody's") for municipal and corporate bonds are Aaa an Aa.
Bonds rated Aaa are judged by Moody's to be of the best quality.
Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally
known as high-grade bonds. Moody's states that Aa bonds are
rated lower than the best bonds because margins of protection or
other elements make long-term risks appear somewhat larger than
Aaa securities. The generic rating Aa may be modified by the
addition of the numerals 1, 2 or 3. The modifier 1 indicates
that the security ranks in the higher end of the Aa rating
category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in the lower end of
such rating category.
The two highest ratings of Standard & Poor's for municipal
and corporate bonds AAA and AA. Bonds rated AAA have the highest
rating assigned by Standard & Poor's to debt obligation.
Capacity to pay interest and repay principal is extremely strong.
Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in
a small degree. The AA rating may be modified by the addition of
a plus (+) or Minus (-) sign to show relative standing within
rating category.
Short-Term Municipal Securities
Moody's highest rating for short-term municipal loans is
MIG-1/VMIG-1. Moody's states that short-term municipal
securities rated MIG-1/VMIG-1 are of the best quality, enjoying
strong protection from established cash flows of funds for their
servicing or from established and broad-based access to the
market for refinancing, or both. Loans bearing the MIG-2/VMIG-2
designation are of high quality, with margins of protection ample
although not so large as in the MIG-1/VMIG-1 group.
Standard & Poor's highest rating for short-term municipal
loans is SP-1. Standard & Poor's stated that short-term
municipal securities bearing the SP-1 designation have very
strong or strong capacity to pay principal and interest. Those
issues rated SP-1 which are determined to possess overwhelming
safety characteristics will be given a plus (+) designation.
A-1
<PAGE>
Issues rate SP-2 have satisfactory capacity to pay principal and
interest.
Other Municipal Securities and Commercial Paper
"Prime-1" is the highest rating assigned by Moody's for
other short-term municipal securities and commercial paper, and
"A-1+" and "A-1" are the two highest ratings for commercial paper
assigned by Standard & Poor's (Standard & Poor's does not rate
short-term tax-free obligations). Moody's uses the numbers 1, 2,
and 3 to denote relative strength within its highest
classification of "Prime", while Standard & Poor's uses the
number 1+, 1, 2 and 3 to denote relative strength within its
highest classification of "A". Issuers rated "Prime" by Moody's
have the following characteristics: their short-term debt
obligations carry the smallest degree of investment risk, margins
of support for current indebtedness are large or stable with cash
flow an asset protection well assured, current liquidity provides
ample coverage of near-term liabilities and unused alternative
financing arrangements are generally available. While protective
elements may change over the intermediate or longer term, such
changes are most unlikely to impair the fundamentally strong
position of short-term obligations. Commercial paper issuers
rates "A" by Standard & Poor's have the following
characteristics: liquidity ratios are better than industry
average, long-term debt rating is A or better, the issuer has
access to at least two additional channels of borrowing, and
basic earnings and cash flow are in an upward trend. Typically,
the issuer is a strong company in a well-established industry and
has superior management.
A-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) Statement of Net Assets for fiscal year ended
April 30, 1998.
(2) Statement of Operations for fiscal year ended
April 30, 1998.
(3) Statement of Changes in Net Assets for fiscal years
ended April 30, 1998 and April 30, 1997.
(5) Notes to Financial Statements April 30, 1998.
(6) Report of Independent Auditors.
(b) Exhibits
(1) (a) Articles of Incorporation of the Registrant
dated March 22, 1998 - Incorporated by
reference to Exhibit 1(a) to Post-Effective
Amendment No. 13 to Registrant's Registration
Statement on Form N-1A, filed with the
Securities and Exchange Commission on
August 28, 1997.
(b) Certificate of Correction to Articles of
Incorporation of the Registrant dated June 21,
1990 - Incorporated by reference to Exhibit
1(a) to Post-Effective Amendment No. 13 to
Registrant's Registration Statement on Form
N-1A, filed with the Securities and Exchange
Commission on August 28, 1997.
(c) Articles Supplementary of the Registrant dated
July 17, 1992 - Incorporated by reference to
Exhibit 1(b) to Post-Effective Amendment
No. 13 to Registrant's Registration Statement
on Form N-1A, filed with the Securities and
Exchange Commission on August 28, 1997.
C-1
<PAGE>
(d) Articles of Amendment of the Registrant dated
June 2, 1998 - filed herewith.
(e) Articles Supplementary of the Registrant dated
June 2, 1998 - filed herewith.
(f) Articles of Amendment of the Registrant dated
June 25, 1998 - filed herewith.
(2) By-Laws - Amended and Restated - Incorporated
by reference to Exhibit 2 to Post-Effective
Amendment No. 13 to Registrant's Registration
Statement on Form N-1A, filed with the
Securities and Exchange Commission on
August 28, 1997.
(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) (a) Advisory Agreement between the Registrant and
Alliance Capital Management L.P. -
Incorporated by reference to Exhibit 5 to
Post-Effective Amendment No. 13 to
Registrant's Registration Statement on Form
N-1A, filed with the Securities and Exchange
Commission on August 28, 1997.
(b) Advisory Agreement between the Registrant and
Alliance Capital Management L.P., as amended
as of June 29, 1998 - filed herewith.
(6) (a) Distribution Agreement between the Registrant
and Alliance Fund Distributors, Inc. -
Incorporated by reference to Exhibit No. 6 to
Post-Effective Amendment No. 13 of the
Registrant's Form N-1A, filed August 28, 1997.
(b) Distribution Agreement between the Registrant
and Alliance Fund Distributors, Inc., as
amended as of June 29, 1998 - filed herewith.
(7) Not applicable.
C-2
<PAGE>
(8) Custodian Contract between the Registrant and
State Street Bank - Incorporated by reference
to Exhibit 8 to Post-Effective Amendment
No. 13 to Registrant's Registration Statement
on Form N-1A, filed with the Securities and
Exchange Commission on August 28, 1997.
(9) Transfer Agency Agreement between the
Registrant and Alliance Fund Services, Inc. -
Incorporated by reference to Exhibit 9 to
Post-Effective Amendment No. 13 to
Registrant's Registration Statement on Form
N-1A, filed with the Securities and Exchange
Commission on August 28, 1997.
(10)(a) Opinion of Messrs. Seward & Kissel - filed
herewith.
(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.
(17) Financial Data Schedules - filed herewith.
(18) Rule 18f-3 Plan - filed herewith.
Other Exhibits:
Powers of Attorney of Messrs. Carifa, Dievler, Dobkin,
Foulk, Hester, Michel, Robinson and Ms. Block - 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).
ITEM 26. Number of Holders of Securities.
Number of Record Holders
Title of Class (as of June 15, 1998)
Common Stock -
Prime Portfolio 2,112
Common Stock -
Government Portfolio 345
Common Stock - Tax-Free
Portfolio 294
Common Stock - Trust Portfolio 1,049
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.
C-4
<PAGE>
(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,
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
C-5
<PAGE>
2. Was the result of active and
deliberate dishonesty; or
(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
expenses incurred by the director in connection
with the proceeding.
C-6
<PAGE>
(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
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;
C-7
<PAGE>
(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
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.
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<PAGE>
(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
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
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<PAGE>
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.
(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:
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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
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
C-11
<PAGE>
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
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 willful 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
C-12
<PAGE>
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
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
C-13
<PAGE>
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:
Alliance Institutional Reserves, Inc.
AFD Exchange Reserves
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
Alliance Capital Reserves
Alliance Developing Markets Fund, Inc.
Alliance Global Dollar Government Fund, Inc.
Alliance Global Environment 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 Institutional Funds, Inc.
Alliance International Fund
Alliance International Premier Growth Fund,
Inc.
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.
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<PAGE>
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.
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.
Positions and Offices Positions and Offices
Name With Underwriter With Registrant
Michael J. Laughlin Chairman
Robert L. Errico President
David Conine Executive Vice President
Richard K. Saccullo Executive Vice President
Edmund P. Bergan, Jr. Senior Vice President, Secretary
General Counsel and
Secretary
Karen J. Bullot Senior Vice President
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
and Treasurer
C-15
<PAGE>
Mark J. Dunbar Senior Vice President
Donald N. Fritts Senior Vice President
Bradley F. Hanson Senior Vice President
Geoffrey L. Hyde Senior Vice President
Robert H. Joseph, Jr. Senior Vice President
and Chief Financial Officer
Richard E. Khaleel Senior Vice President
Stephen R. Laut Senior Vice President
Susan L. Matteson-King 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. Sacculo Senior Vice President
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
Michael E. Brannan Vice President
Timothy W. Call Vice President
Kevin T. Cannon Vice President
C-16
<PAGE>
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
John C. Endahl Vice President
Sohaila S. Farsheed Vice President
Gerard J. Friscia Vice President
& Controller
Andrew L. Gangolf Vice President Assistant
and Assistant Secretary
General Counsel
Mark D. Gersten Vice President Treasurer and
Chief Financial
Officer
Joseph W. Gibson Vice President
John Grambone Vice President
George C. Grant Vice President
Charles M. Greenberg Vice President
Alan Halfenger Vice President
William B. Hanigan Vice President
Scott F. Heyer Vice President
George R. Hrabovsky Vice President
Valerie J. Hugo Vice President
Scott Hutton Vice President
Richard D. Keppler Vice President
Gwenn M. Kessler Vice President
Donna M. Lamback Vice President
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<PAGE>
Henry Michael Lesmeister Vice President
James M. Liptrot Vice President
James P. Luisi Vice President
Christopher J. MacDonald Vice President
Michael F. Mahoney Vice President
Shawn P. McClain Vice President
Jeffrey P. Mellas Vice President
Thomas F. Monnerat Vice President
Christopher W. Moore Vice President
Joanna D. Murray Vice President
Nicole Nolan-Koester Vice President
John C. O'Connell Vice President
John J. O'Connor Vice President
James J. Posch Vice President
Domenick Pugliese Vice President Assistant
and Assistant Secretary
General Counsel
Bruce W. Reitz Vice President
Karen C. Satterberg Vice President
John P. Schmidt Vice President
Robert C. Schultz Vice President
Raymond S. Sclafani Vice President
Richard J. Sidell Vice President
Teris A. Sinclair Vice President
Scott C. Sipple Vice President
Andrew D. Strauss Vice President
Michael J. Tobin Vice President
C-18
<PAGE>
Joseph T. Tocyloski Vice President
Thomas J. Vaughn Vice President
Martha D. Volcker Vice President
Patrick E. Walsh Vice President
William C. White Vice President
Emilie D. Wrapp Vice President Assistant
and Assistant Secretary
General Counsel
Michael W. Alexander Assistant Vice
President
Richard J. Appaluccio Assistant Vice
President
Charles M. Barrett Assistant Vice
President
Robert F. Brendli Assistant Vice
President
Maria L. Carreras Assistant Vice
President
John P. Chase Assistant Vice
President
Russell R. Corby Assistant Vice
President
John A. Cronin Assistant Vice
President
John W. Cronin Assistant Vice
President
Terri J. Daly Assistant Vice
President
Faith C. Dunn Assistant Vice
President
John E. English Assistant Vice
President
C-19
<PAGE>
Duff C. Ferguson Assistant Vice
President
Brian S. Hanigan Assistant Vice
President
James J. Hill Assistant Vice
President
Theresa Iosca Assistant Vice
President
Eric G. Kalendar Assistant Vice
President
Robin L. Kraebel Assistant Vice
President
Edward W. Kelly Assistant Vice
President
Michael Laino Assistant Vice
President
Nicholas J. Lapi Assistant Vice
President
Kristine J. Luisi Assistant Vice
President
Patrick Look Assistant Vice President
& Assistant Treasurer
Kathryn Austin Masters Assistant Vice
President
Richard F. Meier Assistant Vice
President
Mary K. Moore Assistant Vice
President
Richard J. Olszewski Assistant Vice
President
Catherine N. Peterson Assistant Vice
President
Rizwan A. Raja Assistant Vice
President
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<PAGE>
Carol H. Rappa Assistant Vice
President
Clara Sierra Assistant Vice
President
Eileen Stauber Assistant Vice
President
Gayle S. Stamer Assistant Vice
President
Vincent T. Strangio Assistant Vice
President
Marie R. Vogel Assistant Vice
President
Wesley S. Williams Assistant Vice
President
Matthew Witschel Assistant Vice
President
Christopher J. Zingaro Assistant Vice
President
Mark R. Manley Assistant Secretary
(c) Not applicable.
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.
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<PAGE>
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 25th day of April, 1998.
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 June 25, 1998
_____________________
John D. Carifa
2) Principal Financial and
Accounting Officer
/s/ Mark D. Gersten Treasurer June 25, 1998
_____________________ and Chief
Mark D. Gersten Financial
Officer
All of the Directors:
____________________
Ruth Block
John D. Carifa
David H. Dievler
John H. Dobkin
William H. Foulk, Jr.
James M. Hester
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<PAGE>
Clifford L. Michel
Donald J. Robinson
By: /s/ Edmund P. Bergan, Jr. June 25, 1998
_______________________
(Attorney-in-Fact)
C-24
<PAGE>
Index to Exhibits
(1) (d) Articles of Amendment of the Registrant
dated June 2, 1998
(1) (e) Articles Supplementary of the Registrant
dated June 2, 1998
(1) (f) Articles of Amendment of the Registrant
dated June 25, 1998
(5) (b) Advisory Agreement between the Registrant
and Alliance Capital Management L.P., as
amended as of June 29, 1998
(6) (b) Distribution Agreement between the
Registrant and Alliance Fund
Distributors, Inc., as amended as of
June 29, 1998
(10) (a) Opinion of Messrs. Seward & Kissel
(11) Consent of Independent Auditors
(17) Financial Data Schedules
(18) Rule 18f-3 Plan
Other Exhibits - Powers of attorney of Messrs. Carifa,
Dievler, Dobkin, Foulk, Hester, Michel,
Robinson and Ms. Block
C-25
00250072.AS6
<PAGE>
ACM INSTITUTIONAL RESERVES, INC.
ARTICLES OF AMENDMENT
ACM Institutional Reserves, Inc., a Maryland corporation
having its principal office in Maryland in Baltimore City,
Maryland (hereinafter called the "Corporation"), certifies to the
State Department of Assessments and Taxation of Maryland that:
FIRST: The charter of the Corporation is hereby amended
by changing the designations of all of the issued and unissued
shares of the Corporation's Prime Portfolio, Government Portfolio
and Tax-Free Portfolio Common Stock as follows:
Current Name Amended Name
Prime Portfolio Common Stock Prime Portfolio Class A Common Stock
Government Portfolio Common Stock Government Portfolio Class A Common Stock
Tax-Free Portfolio Common Stock Tax-Free Portfolio Class A Common Stock
SECOND: The amendment to the charter of the Corporation
as herein set forth was approved by a majority of the entire
Board of Directors of the Corporation. The charter amendment is
limited to changes expressly permitted by Section 2-605 of the
Maryland General Corporation Law to be made without action by the
stockholders of the Corporation. The Corporation is registered
as an open-end investment company under the Investment Company
Act of 1940.
IN WITNESS WHEREOF, ACM Institutional Reserves, Inc.,
has caused these Articles of Amendment to be executed in its name
and on its behalf by its Chairman of the Board of Directors,
John D. Carifa, and witnessed by its Secretary, Edmund P. Bergan,
Jr., as of the 28th day of May, 1998. The undersigned Chairman
of the Board of Directors of the Corporation acknowledges these
Articles of Amendment to be the corporate act of the Corporation
and states that to the best of his knowledge, information and
belief, the matters and facts set forth in these Articles with
respect to the authorization and approval of the amendment of the
Corporation's charter are true in all material respects, and that
this statement is made under the penalties of perjury.
ACM INSTITUTIONAL RESERVES, INC.
/s/ John D. Carifa
By:___________________________
John D. Carifa
Chairman
<PAGE>
WITNESS:
/s/ Edmund P. Bergan, Jr.
_________________________
Edmund P. Bergan, Jr.
Secretary
2
00250072.AP7
<PAGE>
ACM INSTITUTIONAL RESERVES, INC.
ARTICLES SUPPLEMENTARY
ACM Institutional Reserves, Inc., a Maryland corporation
having its principal office in the City of Baltimore (hereinafter
called the "Corporation"), certifies that:
FIRST: The Board of Directors of the Corporation hereby
increases the aggregate number of shares of capital stock that
the Corporation has authority to issue by 61,000,000,000 shares
and classifies such additional shares as 4,000,000,000 shares of
Common Stock of the Trust Portfolio, 4,000,000,000 shares of
Class A Common Stock of the Prime Portfolio, 4,000,000,000 shares
of Class A Common Stock of the Government Portfolio,
4,000,000,000 shares of Class A Common Stock of the Tax-Free
Portfolio, 5,000,000,000 shares of Class A Common Stock of the
Treasury Portfolio, created hereby, 5,000,000,000 shares of Class
B Common Stock of the Prime Portfolio, 5,000,000,000 shares of
Class B Common Stock of the Government Portfolio, 5,000,000,000
shares of Class B Common Stock of the Tax-Free Portfolio,
5,000,000,000 shares of Class B Common Stock of the Treasury
Portfolio, 5,000,000,000 shares of Class C Common Stock of the
Prime Portfolio, 5,000,000,000 shares of Class C Common Stock of
the Government Portfolio, 5,000,000,000 shares of Class C Common
Stock of the Tax-Free Portfolio and 5,000,000,000 shares of
Class C Common Stock of the Treasury Portfolio. Each portfolio
of the Corporation is referred to herein as a "Portfolio."
SECOND: The shares of the Class B Common Stock and
Class C Common Stock of the Prime Portfolio, Government Portfolio
and Tax-Free Portfolio, respectively, of the Corporation as so
classified by the Corporation's Board of Directors shall have the
preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and
terms and conditions of redemption set forth in the Corporation's
Charter with respect to the applicable Portfolios (other than
those provisions of the Charter which by their terms are
applicable solely to other classes of the Corporation's Common
Stock) and shall be subject to all provisions of the Charter
relating to stock of the Corporation generally, and those set
forth as follows:
(1) The assets attributable to the Class B Common
Stock and Class C Common Stock of a Portfolio shall be
invested in the same investment portfolio of the
Corporation as the assets attributable to the Class A
Common Stock of that Portfolio.
(2) The dividends and distributions of investment
income and capital gains with respect to the Class B
<PAGE>
Common Stock and Class C Common Stock of a Portfolio
shall be in such amount, which may vary between the
classes, as may be declared from time to time by the
Board of Directors of the Corporation, and such
dividends and distributions may vary from dividends and
distributions of investment income and capital gains
with respect to each of the other classes of that
Portfolio to reflect differing allocations of the
expenses of the Corporation among the holders of the
classes of that Portfolio and any resultant differences
among the net asset values per share of the classes, to
such extent and for such purposes as the Board of
Directors of the Corporation may deem appropriate. The
allocation of investment income, realized and unrealized
capital gains and losses, expenses and liabilities of
the Corporation and amounts distributable in the event
of dissolution of the Corporation or liquidation of the
Corporation or of a Portfolio among the various classes
of a Portfolio shall be determined by the Board of
Directors of the Corporation in a manner that is
consistent with the Investment Company Act of 1940, the
rules and regulations thereunder, and the
interpretations thereof, in each case as from time to
time amended, modified or superseded.
(3) Except as may otherwise be required by law
pursuant to any applicable order, rule or interpretation
issued by the Securities and Exchange Commission, or
otherwise, the holders of the Class B Common Stock and
Class C Common Stock, respectively, of a Portfolio shall
have (i) exclusive voting rights with respect to any
matter submitted to a vote of stockholders that affects
only holders of the Class B Common Stock or Class C
Common Stock, respectively, of that Portfolio and
(ii) no voting rights with respect to any other matter
submitted to a vote of stockholders which does not
affect holders of the Class B Common Stock or Class C
Common Stock, respectively, of that Portfolio.
THIRD: The shares of Class A Common Stock, Class B
Common Stock and Class C Common Stock of the Treasury Portfolio
as so classified by the Corporation's Board of Directors shall
have the preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and
terms and conditions of redemption set forth in Article FIFTH(3)
of the Corporation's Charter and shall be subject to all
provisions of the Charter relating to stock of the Corporation
generally, and those set forth as follows:
(1) The assets attributable to the Class A Common
Stock, Class B Common Stock and Class C Common Stock of
2
<PAGE>
the Treasury Portfolio shall be invested in the same
investment portfolio of the Corporation.
(2) The dividends and distributions of investment
income and capital gains with respect to the Class A
Common Stock, Class B Common Stock and Class C Common
Stock of the Treasury Portfolio shall be in such
amounts, which may vary among the classes, as may be
declared from time to time by the Board of Directors of
the Corporation, and such dividends and distributions
may vary among the classes of the Treasury Portfolio to
reflect differing allocations of the expenses of the
Corporation among the holders of the classes and any
resultant differences among the net asset values per
share of the classes, to such extent and for such
purposes as the Board of Directors of the Corporation
may deem appropriate. The allocation of investment
income, realized and unrealized capital gains and
losses, expenses and liabilities of the Corporation and
amounts distributable in the event of dissolution of the
Corporation or liquidation of the Corporation the
Treasury Portfolio among the various classes of the
Treasury Portfolio shall be determined by the Board of
Directors of the Corporation in a manner that is
consistent with the Investment Company Act of 1940, the
rules and regulations thereunder, and the
interpretations thereof, in each case as from time to
time amended, modified or superseded.
(3) Except as may otherwise be required by law
pursuant to any applicable order, rule or interpretation
issued by the Securities and Exchange Commission, or
otherwise, the holders of the Class A Common Stock,
Class B Common Stock and Class C Common Stock,
respectively, of the Treasury Portfolio shall have
(i) exclusive voting rights with respect to any matter
submitted to a vote of stockholders that affects only
holders of the applicable class of the Treasury
Portfolio and (ii) no voting rights with respect to any
other matter submitted to a vote of stockholders which
does not affect holders of the applicable class of the
Treasury Portfolio.
FOURTH: The shares of the Class A Common Stock of the
Prime Portfolio, Government Portfolio and Tax-Free Portfolio,
respectively, of the Corporation, as so classified by the
Corporation's Board of Directors, shall have the preferences,
conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and
conditions of redemption as heretofore set forth in the
Corporation's Charter with respect to such shares. The shares of
3
<PAGE>
the Common Stock of the Trust Portfolio, as so classified by the
Corporation's Board of Directors, shall have the preferences,
conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and
conditions of redemption as heretofore set forth in the
Corporation's Charter with respect to such shares.
FIFTH: A. Immediately before the increase in
authorized capital stock provided for herein, the total number of
shares of stock of all classes which the Corporation had
authority to issue was 4,000,000,000 shares, the par value of
each class of stock being $.01 per share, with an aggregate par
value of $40,000,000, classified as follows:
Name of Portfolio Number of Shares
Prime Portfolio Class A Common Stock 1,000,000,000
Government Portfolio Class A Common Stock 1,000,000,000
Tax-Free Portfolio Class A Common Stock 1,000,000,000
Trust Portfolio Common Stock 1,000,000,000
B. Immediately after the increase in
authorized capital stock provided for herein, the total
number of shares of stock of all classes which the
Corporation has authority to issue is 65,000,000,000 shares,
the par value of each class of stock being $.01 per share,
with an aggregate par value of $650,000,000, classified as
follows:
Class A Class B Class C
Name of Portfolio Common Stock Common Stock Common Stock Common Stock
Prime Portfolio 5,000,000,000 5,000,000,000 5,000,000,000
Government
Portfolio 5,000,000,000 5,000,000,000 5,000,000,000
Tax-Free
Portfolio 5,000,000,000 5,000,000,000 5,000,000,000
Treasury
Portfolio 5,000,000,000 5,000,000,000 5,000,000,000
Trust
Portfolio 5,000,000,000
SIXTH: The Corporation is registered as an open-end
company under the Investment Company Act of 1940.
SEVENTH: The total number of shares that the
Corporation has authority to issue has been increased by the
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<PAGE>
Board of Directors of the Corporation in accordance with Section
2-105(c) of the Maryland General Corporation Law.
EIGHTH: 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.
IN WITNESS WHEREOF, ACM Institutional Reserves, Inc. has
caused these Articles Supplementary to be executed by its
Chairman of the Board of Directors and witnessed by its Secretary
as of this 29th day of May, 1998. The Chairman of the Board of
Directors 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 set
forth herein relating to authorization and approval hereof are
true in all material respects.
ACM INSTITUTIONAL RESERVES, INC.
/s/ John D. Carifa
By:___________________________
John D. Carifa
Chairman
WITNESS:
/s/ Edmund P. Bergan, Jr.
_________________________
Edmund P. Bergan, Jr.
Secretary
5
00250072.AP6
<PAGE>
ACM INSTITUTIONAL RESERVES, INC.
ARTICLES OF AMENDMENT
(Changing its Name to Alliance Institutional Reserves, Inc.)
ACM Institutional Reserves, Inc., a Maryland corporation
having its principal office in Maryland in Baltimore City,
Maryland (hereinafter called the "Corporation"), certifies to the
State Department of Assessments and Taxation of Maryland that:
FIRST: The charter of the Corporation is hereby amended
by striking out Article SECOND of the Articles of Incorporation
and inserting in lieu thereof the following:
SECOND: The name of the corporation (hereinafter called
the "Corporation") is Alliance Institutional Reserves,
Inc.
SECOND: The amendment to the charter of the Corporation
as herein set forth was approved by a majority of the entire
Board of Directors of the Corporation. The charter amendment is
limited to changes expressly permitted by Section 2-605 of the
Maryland General Corporation Law to be made without action by the
stockholders of the Corporation. The Corporation is registered
as an open-end investment company under the Investment Company
Act of 1940.
IN WITNESS WHEREOF, ACM Institutional Reserves, Inc.,
has caused these Articles of Amendment to be executed in its name
and on its behalf by its Chairman of the Board of Directors,
John D. Carifa, and witnessed by its Secretary, Edmund P. Bergan,
Jr., as of the 22nd day of June, 1998. The undersigned Chairman
of the Board of Directors of the Corporation acknowledges these
Articles of Amendment to be the corporate act of the Corporation
and states that to the best of his knowledge, information and
belief, the matters and facts set forth in these Articles with
respect to the authorization and approval of the amendment of the
Corporation's charter are true in all material respects, and that
this statement is made under the penalties of perjury.
ACM INSTITUTIONAL RESERVES, INC.
/s/ John D. Carifa
By:___________________________
John D. Carifa
Chairman
<PAGE>
WITNESS:
/s/ Edmund P. Bergan, Jr.
_________________________
Edmund P. Bergan, Jr.
Secretary
2
00250072.AQ7
<PAGE>
ADVISORY AGREEMENT
ALLIANCE INSTITUTIONAL RESERVES, INC.
1345 Avenue of the Americas
New York, New York 10105
July 22, 1992 (as amended
as of June 29, 1998)
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 risk and in our
name, to place orders for the investment and reinvestment of our
assets. In all purchases, sales and other transactions in
<PAGE>
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 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
2
<PAGE>
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.
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
3
<PAGE>
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,
Tax-Free and Treasury 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, 1998 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 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
4
<PAGE>
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,
Alliance Institutional Reserves, Inc.
By /s/ Ronald M. Whitehill
------------------------------
Ronald M. Whitehill
President
5
<PAGE>
Accepted as amended as of June 29, 1998
ALLIANCE CAPITAL MANAGEMENT L.P.
By Alliance Capital Management Corporation,
general partner
By /s/ John D. Carifa
--------------------------
John D. Carifa
Executive Vice President
& Chief Operating Officer
6
00250072.AQ8
<PAGE>
DISTRIBUTION AGREEMENT
ALLIANCE INSTITUTIONAL RESERVES, INC.
1345 Avenue of the Americas
New York, New York 10105
July 22, 1992 (as amended as
of June 29, 1998)
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 "1933 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 1933 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 Prospectuses and Statements 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 Prospectuses and Statements
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 Prospectuses and Statements
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, Prospectuses and Statements of Additional
Information, as then in effect, filed under the 1933 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 (as amended as of
June 29, 1998) with Alliance Capital Management L.P. (the
"Adviser"), we will pay all fees and expenses of registering
Shares under the 1933 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, Prospectuses and Statements of Additional Information
(as in effect from time to time) under the 1933 Act have been or
will be, as the case may be, carefully prepared in conformity
with the requirements of the 1933 Act and the rules and
regulations of the Securities and Exchange Commission
thereunder. We represent and warrant to you that our
Registration Statement, Prospectuses and Statements of Additional
Information contain or will contain all statements required to be
stated therein in accordance with the 1933 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
2
<PAGE>
correct at the time indicated or the effective date as the case
may be; that none of our Registration Statement, our Prospectuses
or our Statements 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, Prospectuses and Statements 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, Prospectuses and Statements 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, Prospectuses or
Statements 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, Prospectuses or Statements 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,
Prospectuses or Statements of Additional Information hereafter
filed by us will, when it becomes effective, contain all
statements required to be stated therein in accordance with the
1933 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. (a) It is understood that paragraphs 6, 11 and 15
together constitute a plan of distribution (the "Plan") within
the meaning of Rule 12b-1 ("Rule 12b-1") under the Investment
Company Act of 1940, as amended (the "1940 Act").
(b) Except as may be required by the Conduct Rules
of the National Association of Securities Dealers, Inc. (the
"NASD") and any interpretation thereof ("NASD rules and
interpretations"), we will pay you each month a distribution
services fee with respect to each Portfolio equal, on an
annualized basis, to .10% of the aggregate average daily net
assets of the Portfolio attributable to the Class B shares and
.25% of the aggregate average daily net assets of the Portfolio
3
<PAGE>
attributable to the Class C shares. You may spend such amounts
as you deem appropriate on any activities or expenses primarily
intended to result in the sale of shares of the Portfolio,
including, but not limited to, compensation of your employees,
compensation and expenses, including overhead and telephone and
other communication expenses, of you and other broker-dealers,
depository institutions and other financial intermediaries that
engage in or support the distribution of shares of the Portfolio,
the preparation, printing and distribution of Prospectuses,
Statements of Additional Information, sales literature and
advertising materials, and other promotional activities. You
may, if you wish, retain all or any portion of the distribution
services fees received pursuant hereto for your own purposes.
All or a portion of the distribution services fee may constitute
a service fee to be used by you for personal service and/or the
maintenance of shareholder accounts within the meaning of NASD
rules and interpretations.
(c) The Adviser may make payments from time to
time from its own resources for the purposes described in
paragraph 6(b).
(d) Payments to broker-dealers, depository
institutions and other financial intermediaries for the purposes
set forth in paragraph 6(b) are subject to the terms and
conditions of the written agreements between you and each broker-
dealer, depository institution or other financial intermediary.
Such agreements will be in a form satisfactory to our directors.
(e) Our Treasurer will prepare and furnish to our
directors, and our directors will review, at least quarterly, a
written report complying with the requirements of Rule 12b-1
setting forth all amounts expended hereunder and the purposes for
which such expenditures were made.
(f) We are not obligated to pay any distribution
expense in excess of the distribution services fee described in
paragraph 6(b). The amount of distribution services fees payable
by us with respect to each of the Class B shares and the Class C
shares is not related directly to the amount of expenses incurred
by you with respect to each such class in connection with
providing distribution services, which expenses may be greater or
less than such fees and we will not be obligated to reimburse you
for such expenses. The distribution services fee payable by us
with respect to each such class of shares may be paid in respect
of services rendered and expenses borne in the past in connection
with each such class of shares as to which, on account of the
limitations described in paragraph 6(b), no distribution services
fee was paid. The distribution services fees payable by us with
respect to each such class of shares are to be paid to you until
either the Plan or this Agreement is terminated or is not
4
<PAGE>
continued with respect to that class as provided in paragraph 11.
In the event this Agreement is terminated by either party or is
not continued with respect to a class of shares as provided in
paragraph 11 below: (i) no distribution services fees (other than
current amounts accrued but not yet paid) will be owed by us to
you with respect to that class, and (ii) we will not be obligated
to pay you for any amounts expended hereunder not previously
reimbursed by us from distribution services fees in respect of
shares of such class. The distribution services fee of a
particular class of shares may not be used to subsidize the sale
of shares of any other class.
7. (a) You shall have the right to enter into selected
dealer agreements with securities dealers of your choice
("selected dealers") and selected agent agreements with
depository institutions and other financial intermediaries of
your choice ("selected agents") for the sale of shares; provided,
that we shall approve the forms of agreements with selected
dealers and selected agents and the selected dealer and selected
agent compensation set forth therein. Shares sold to selected
dealers or through selected agents shall be for resale by such
selected dealers and for sale through such selected agents only
at the public offering price set forth in the Prospectuses and/or
Statements of Additional Information.
(b) Within the United States, you shall offer and
sell shares only to such selected dealers as are members in good
standing of the NASD.
8. We agree to indemnify, defend and hold you, and any
person who controls you within the meaning of Section 15 of the
1933 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 person may incur, under the
1933 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, Prospectuses or
Statements of Additional Information in effect from time to time
under the 1933 Act or arising out of or based upon any alleged
omission to state a material fact required to be stated in any
one thereof or necessary to make the statements in any one
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
5
<PAGE>
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 8. 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 8 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 the Shares made pursuant to subscriptions obtained
by you. This agreement of indemnity will inure exclusively to
your benefit, to the benefit of your successors and assigns, and
to the benefit of any controlling persons and their successors
and assigns. We agree promptly to notify you of the commencement
of any litigation or processing against us in connection with the
issue and sale of any Shares.
9. 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 1933 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 1933 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, Prospectuses or Statements of Additional
Information in effect from time to time under the 1933 Act, or
shall arise out of or be based upon any alleged omission to state
6
<PAGE>
a material fact in connection with such information required to
be stated in the Registration Statement, Prospectuses or
Statements of Additional Information 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
9.
10. We agree to advise you immediately:
(a) of any request by the Securities and Exchange
Commission for amendments to our Registration Statement,
Prospectuses or Statements of Additional Information or for
additional information,
(b) in the event of the issuance by the Securities
and Exchange Commission of any stop order suspending the
effectiveness of our Registration Statement, Prospectuses or
Statements of Additional Information 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,
Prospectuses or Statements of Additional Information or which
requires the making of a change in any one thereof in order to
make the statements therein not materially misleading, and
(d) of all action of the Securities and Exchange
Commission with respect to any amendments to our Registration
Statement, Prospectuses or Statements of Additional Information
which may from time to time be filed with the Securities and
Exchange Commission under the 1933 Act or the 1940 Act.
7
<PAGE>
11. (a) This Agreement shall become effective on the
date hereof, shall remain in effect until December 31, 1998 and
shall continue in effect thereafter with respect to a class of
shares of a Portfolio so long as its continuance with respect to
that class is specifically approved annually by our directors or
by vote of the holders of a majority of the outstanding voting
securities (as defined in the 1940 Act) of that class, and, in
either case, by a majority of our directors who are not parties
to this Agreement or interested persons (as defined in the 1940
Act) of any such party (other than as our directors) and who have
no direct or indirect financial interest in the operation of the
Plan or any agreement related thereto; provided, however, that if
the continuation of this Agreement is not approved as to a class
or a Portfolio, you may continue to render to such class or
Portfolio the services described herein in the manner and to the
extent permitted by the 1940 Act and the rules and regulations
thereunder. Upon effectiveness of this Agreement, it shall
supersede all previous agreements between the parties hereto
covering the subject matter hereof. This Agreement may be
terminated (i) by us with respect to any class or Portfolio at
any time, without the payment of any penalty, by the vote of a
majority of the outstanding voting securities (as defined in the
1940 Act) of such class or Portfolio, or by a vote of a majority
of our directors who are not interested persons (as defined in
the 1940 Act) of any such party (other than as our directors) and
have no direct and indirect financial interest in the operation
of the Plan or any agreement related thereto, in any such event
on sixty days' written notice to you; provided, however, that no
such notice shall be required if such termination is stated by us
to relate only to paragraphs 6 and 15 (in which event paragraphs
6 and 15 shall be deemed to have been severed herefrom and all
other provisions of this Agreement shall continue in full force
and effect), or (ii) by you with respect to any class or
Portfolio on sixty days' written notice to us.
(b) This Agreement may be amended at any time with
the approval of our directors, provided that (i) any material
amendments of the terms hereof will become effective only upon
approval as provided in the first sentence of paragraph 11(a),
and (ii) any amendment to increase materially the amount to be
expended for distribution services fees pursuant to paragraph
6(b) will be effective only upon the additional approval by a
vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of the class or Portfolio affected.
12. This Agreement may not be transferred, assigned,
sold or in any manner hypothecated or pledged by either party
hereto, and this Agreement shall terminate automatically in the
event of any such transfer, assignment, sale, hypothecation or
pledge. The terms "transfer", "assignment", and "sale" as used
in this paragraph shall have the meanings ascribed thereto by
8
<PAGE>
governing law and any interpretation thereof contained in rules
or regulations promulgated by the Securities and Exchange
Commission thereunder.
13. 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 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.
14. 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.
9
<PAGE>
15. While this Agreement is in effect, the selection
and nomination of our directors who are not "interested persons"
(as defined in the 1940 Act) of our Fund will be committed to the
discretion of such disinterested directors.
If the foregoing is in accordance with your
understanding, will you kindly so indicate by signing and
returning to us the enclosed copy hereof.
Very truly yours,
ALLIANCE INSTITUTIONAL RESERVES, INC.
By /s/ Ronald M. Whitehill
---------------------------
President
Accepted as amended as of June 29, 1998
ALLIANCE FUND DISTRIBUTORS, INC.
By /s/ Edmund P. Bergan, Jr.
--------------------------------
Senior Vice President
ALLIANCE CAPITAL MANAGEMENT L.P.
By Alliance Capital Management Corporation,
general partner
By /s/ John D. Carifa
-----------------------------------
President & Chief Operating Officer
10
00250072.AN6
<PAGE>
SEWARD & KISSEL
ONE BATTERY PARK PLAZA
NEW YORK, N.Y. 10004
TELEPHONE: (212) 574-1200
FACSIMILE: (212) 480-8421
June 26, 1998
Alliance Institutional Reserves, Inc.
1345 Avenue of the Americas
New York, New York 10105
Dear Sirs:
We have acted as counsel for Alliance Institutional
Reserves, Inc., a Maryland corporation (the "Company"), in
connection with the registration under the Securities Act of
1933, as amended, of an indefinite number of shares of designated
classes and series of the Company's common stock, par value $.01
per share (the "Common Stock").
As counsel for the Company we have participated in the
preparation of Post-Effective Amendment No. 15 to the
Registration Statement on Form N-1A relating to such shares (the
"Registration Statement") and have examined and relied upon such
corporate records of the Company and such other documents as we
have deemed to be necessary to render the opinion expressed
herein.
Based on such examination, we are of the opinion that
the shares of the respective classes and series of Common Stock
of the Company to be offered for sale pursuant to the
Registration Statement are, to the extent authorized to be issued
by the Company in its Charter (i) duly authorized and (ii) when
sold, issued and paid for as contemplated by the Registration
Statement, will have been validly and legally issued and will be
fully paid and nonassessable shares of Common Stock of the
Company under the General Corporation Law of the State of
Maryland.
<PAGE>
We hereby consent to the filing of this opinion with the
Securities and Exchange Commission as an exhibit to the
Registration Statement and to the reference to our firm under the
caption "General Information--Legal Matters" in the Statements of
Additional Information included therein.
Very truly yours,
/s/ Seward & Kissel
2
00250072.AS7
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use of our report dated May 22,
1998, on the financial statements of the Prime Portfolio,
Government Portfolio, Tax-Free Portfolio, and Trust
Portfolio of Alliance Institutional Reserves, Inc. (formerly
ACM Institutional Reserves, Inc. referred to
therein in Post-Effective Amendment No. 15 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
June 22, 1998
00250072.AM0
<PAGE>
[ARTICLE] 6
[CIK] 0000862021
[NAME] ACM INSTITUTIONAL RESERVES
[SERIES]
[NUMBER] 01
[NAME] PRIME PORTFOLIO
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] APR-30-1998
[PERIOD-START] MAY-01-1997
[PERIOD-END] APR-30-1998
[INVESTMENTS-AT-COST] 1,759,552,829
[INVESTMENTS-AT-VALUE] 1,759,552,829
[RECEIVABLES] 4,491,986
[ASSETS-OTHER] 1,169,893
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 1,795,214,708
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 521,850
[TOTAL-LIABILITIES] 521,850
[SENIOR-EQUITY] 17,648,766
[PAID-IN-CAPITAL-COMMON] 1,747,227,812
[SHARES-COMMON-STOCK] 1,764,876,578
[SHARES-COMMON-PRIOR] 867,523,159
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (183,720)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 1,764,692,858
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 74,337,440
[OTHER-INCOME] 0
[EXPENSES-NET] (2,597,281)
[NET-INVESTMENT-INCOME] 71,740,159
[REALIZED-GAINS-CURRENT] 84
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 71,740,243
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (71,740,159)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 18,859,885,064
[NUMBER-OF-SHARES-REDEEMED] (18,034,271,804)
[SHARES-REINVESTED] 71,740,159
[NET-CHANGE-IN-ASSETS] 897,353,503
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (183,804)
[OVERDISTRIB-NII-PRIOR] 0
<PAGE>
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 2,597,000
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 3,160,000
[AVERAGE-NET-ASSETS] 1,298,640,289
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] 0.05
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] (0.05)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] .20
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
00250072.AS1
<PAGE>
[ARTICLE] 6
[CIK] 0000862021
[NAME] ACM INSTITUTIONAL RESERVES
[SERIES]
[NUMBER] 02
[NAME] GOVERNMENT PORTFOLIO
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] APR-30-1998
[PERIOD-START] MAY-01-1997
[PERIOD-END] APR-30-1998
[INVESTMENTS-AT-COST] 273,296,828
[INVESTMENTS-AT-VALUE] 273,296,828
[RECEIVABLES] 1,233,696
[ASSETS-OTHER] 63,958
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 274,594,482
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 133,107
[TOTAL-LIABILITIES] 133,107
[SENIOR-EQUITY] 2,745,917
[PAID-IN-CAPITAL-COMMON] 271,845,807
[SHARES-COMMON-STOCK] 274,591,724
[SHARES-COMMON-PRIOR] 326,651,057
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (130,349)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 274,461,375
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 16,920,793
[OTHER-INCOME] 0
[EXPENSES-NET] (600,906)
[NET-INVESTMENT-INCOME] 16,319,887
[REALIZED-GAINS-CURRENT] 1,000
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 16,320,887
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (16,319,887)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1,463,678,015
[NUMBER-OF-SHARES-REDEEMED] (1,532,057,235)
[SHARES-REINVESTED] 16,319,887
[NET-CHANGE-IN-ASSETS] (52,058,333)
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (131,350)
[OVERDISTRIB-NII-PRIOR] 0
<PAGE>
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 601,000
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 844,000
[AVERAGE-NET-ASSETS] 300,453,036
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] 0.05
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] (0.05)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] .20
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
00250072.AS2
<PAGE>
[ARTICLE] 6
[CIK] 0000862021
[NAME] ACM INSTITUTIONAL RESERVES
[SERIES]
[NUMBER] 03
[NAME] TAX-FREE PORTFOLIO
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] APR-30-1998
[PERIOD-START] MAY-01-1997
[PERIOD-END] APR-30-1998
[INVESTMENTS-AT-COST] 290,113,982
[INVESTMENTS-AT-VALUE] 290,113,982
[RECEIVABLES] 5,024,824
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 295,138,806
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 1,375,162
[TOTAL-LIABILITIES] 1,375,162
[SENIOR-EQUITY] 2,938,471
[PAID-IN-CAPITAL-COMMON] 290,908,670
[SHARES-COMMON-STOCK] 293,847,141
[SHARES-COMMON-PRIOR] 183,148,257
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (83,495)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 293,763,646
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 9,838,311
[OTHER-INCOME] 0
[EXPENSES-NET] (516,640)
[NET-INVESTMENT-INCOME] 9,321,671
[REALIZED-GAINS-CURRENT] 168
[APPREC-INCREASE-CURRENT] (351)
[NET-CHANGE-FROM-OPS] 9,321,488
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (9,321,671)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 2,187,340,593
[NUMBER-OF-SHARES-REDEEMED] (2,085,963,380)
[SHARES-REINVESTED] 9,321,671
[NET-CHANGE-IN-ASSETS] 110,698,701
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (83,663)
[OVERDISTRIB-NII-PRIOR] 0
<PAGE>
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 517,000
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 722,000
[AVERAGE-NET-ASSETS] 258,320,216
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] 0.04
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] (0.04)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] .20
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
00250072.AS3
<PAGE>
[ARTICLE] 6
[CIK] 0000862021
[NAME] ACM INSTITUTIONAL RESERVES
[SERIES]
[NUMBER] 04
[NAME] TRUST PORTFOLIO
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] APR-30-1998
[PERIOD-START] MAY-01-1997
[PERIOD-END] APR-30-1998
[INVESTMENTS-AT-COST] 389,713,088
[INVESTMENTS-AT-VALUE] 389,713,088
[RECEIVABLES] 969,021
[ASSETS-OTHER] 5,842
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 390,687,951
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 195,918
[TOTAL-LIABILITIES] 195,918
[SENIOR-EQUITY] 3,905,358
[PAID-IN-CAPITAL-COMMON] 386,630,435
[SHARES-COMMON-STOCK] 390,535,793
[SHARES-COMMON-PRIOR] 175,738,130
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (43,760)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 390,492,033
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 15,589,391
[OTHER-INCOME] 0
[EXPENSES-NET] (1,341,772)
[NET-INVESTMENT-INCOME] 14,247,619
[REALIZED-GAINS-CURRENT] 13,207
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 14,260,826
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (14,247,619)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1,732,157,312
[NUMBER-OF-SHARES-REDEEMED] (1,531,607,268)
[SHARES-REINVESTED] 14,247,619
[NET-CHANGE-IN-ASSETS] 214,810,870
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (56,967)
[OVERDISTRIB-NII-PRIOR] 0
<PAGE>
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1,225,000
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1,470,000
[AVERAGE-NET-ASSETS] 272,306,833
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] 0.05
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] (0.05)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] .49
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
00250072.AS4
<PAGE>
ALLIANCE INSTITUTIONAL RESERVES, INC.
Plan pursuant to Rule 18f-3
under the Investment Company Act of 1940
This Plan (the "Plan") pursuant to Rule 18f-3 under the
Investment Company Act of 1940 (the "Act") of Alliance
Institutional Reserves, Inc. (the "Fund") sets forth the general
characteristics of, and the general conditions under which the
Fund may offer, multiple classes of shares of its now existing
and hereafter created portfolios.* This Plan may be revised or
amended from time to time as provided below.
Class Designations
The Fund** may from time to time issue one or more of
the following classes of shares: Class A shares, Class B shares
and Class C shares. Each of the three classes of shares will
represent interests in the same portfolio of investments of the
Fund and, except as described herein, shall have the same rights
and obligations as each other class. Each class shall be subject
to such investment minimums and other conditions of eligibility
as are set forth in one or more prospectuses or statements of
additional information through which such shares are issued, as
from time to time in effect (collectively, the "Prospectus").
Class Characteristics
Each class of shares is offered at a public offering
price that is equal to net asset value without any initial,
deferred or asset-based sales charge. Class B and Class C shares
may also be subject to a Rule 12b-1 fee, which may include a
service fee.
____________________
* This Plan is intended to allow the Fund to offer multiple
classes of shares to the full extent and in the manner
permitted by Rule 18f-3 under the Act (the "Rule"),
subject to the requirements and conditions imposed by the
Rule.
** For purposes of this Plan, when the Fund has existing more
than one portfolio pursuant to which multiple classes of
shares are issued, then references in this Plan to the
"Fund" shall be deemed to refer instead to each portfolio.
<PAGE>
Allocations to Each Class
Expense Allocations
Rule 12b-1 fees payable by the Fund to the distributor
or principal underwriter of the Fund's shares (the "Distributor")
shall be allocated on a class-by-class basis. Subject to the
approval of the Fund's Board of Directors, including a majority
of the independent Directors, the following expenses may be
allocated on a class-by-class basis and designated as "Class
Expenses": (a) printing and postage expenses related to preparing
and distributing materials such as shareholder reports,
prospectuses and proxy statements to current shareholders of a
specific class, (b) SEC registration fees incurred with respect
to a specific class, (c) blue sky and foreign registration fees
and expenses incurred with respect to a specific class, (d) the
expenses of administrative personnel and services required to
support shareholders of a specific class (including, but not
limited to, maintaining telephone lines and personnel to answer
shareholder inquiries about their accounts or about the Fund),
(e) litigation and other legal expenses relating to a specific
class of shares, (f) Directors' fees or expenses incurred as a
result of issues relating to a specific class of shares,
(g) accounting and consulting expenses relating to a specific
class of shares, (h) any fees imposed pursuant to a non-Rule 12b-
1 shareholder services plan that relate to a specific class of
shares, (i) transfer agency costs attributable to a specific
class and (j) any additional expenses, not including advisory or
custodial fees or other expenses related to the management of the
Fund's assets, if these expenses are actually incurred in a
different amount with respect to a class, or if services are
provided with respect to a class that are of a different kind or
to a different degree than with respect to one or more other
classes.
All expenses not now or hereafter designated as Class
Expenses ("Fund Expenses") will be allocated to each class on the
basis of the net asset value of that class in relation to the net
asset value of the Fund.
However, notwithstanding the above, and subject to
compliance with the Rule, the Fund may allocate Fund Expenses to
each share without regard to class or on the basis of relative
net assets (settled shares).
Waivers and Reimbursements
The Adviser or Distributor may choose to waive or
reimburse Rule 12b-1 fees or any Class Expenses on a voluntary,
temporary basis. Such waiver or reimbursement may be applicable
2
<PAGE>
to some or all of the classes and may be in different amounts for
one or more classes.
Income, Gains and Losses
Income, and realized and unrealized capital gains and
losses shall be allocated to each class on the basis of the net
asset value of that class in relation to the net asset value of
the Fund.
However, notwithstanding the above, and subject to
compliance with the Rule, income, and realized and unrealized
capital gains and losses may be allocated to each share without
regard to class or on the basis of relative net assets (settled
shares).
Exchange Features
Shares of each class generally will be permitted to be
exchanged only for shares of a class with similar characteristics
in another portfolio of the Fund and shares of certain other
money market funds sponsored by the Adviser. All exchange
features applicable to each class will be described in the
Prospectus.
Dividends
Dividends paid by the Fund with respect to its Class A,
Class B and Class C shares, to the extent any dividends are paid,
will be calculated in the same manner, at the same time and will
be in the same amount, except that any Rule 12b-1 fee payments
relating to a class of shares will be borne exclusively by that
class and, if applicable, any Class Expenses relating to a class
shall be borne exclusively by that class.
Voting Rights
Each share of a Fund entitles the shareholder of record
to one vote. Each class of shares of the Fund will vote
separately as a class with respect to the Rule 12b-1 plan
applicable to that class and on other matters for which class
voting is required under applicable law.
Responsibilities of the Directors
On an ongoing basis, the Directors will monitor the Fund
for the existence of any material conflicts among the interests
of the classes of shares. The Directors shall further monitor on
an ongoing basis the use of waivers or reimbursement by the
Adviser and the Distributor of expenses to guard against cross-
subsidization between classes. The Directors, including a
3
<PAGE>
majority of the independent Directors, shall take such action as
is reasonably necessary to eliminate any such conflict that may
develop. If a conflict arises, the Adviser and Distributor, at
their own cost, will remedy such conflict up to and including
establishing one or more new registered management investment
companies.
Reports to the Directors
The Adviser and Distributor will be responsible for
reporting any potential or existing conflicts among the classes
of shares to the Directors. In addition, the Directors will
receive quarterly and annual statements concerning distributions
and shareholder servicing expenditures complying with paragraph
(b)(3)(ii) of Rule 12b-1. In the statements, only expenditures
properly attributable to the sale or servicing of a particular
class of shares shall be used to justify any distribution or
service fee charged to that class. The statements, including the
allocations upon which they are based, will be subject to the
review of the independent Directors in the exercise of their
fiduciary duties. At least annually, the Directors shall receive
a report from an expert, acceptable to the Directors, (the
"Expert"), with respect to the methodology and procedures for
calculating the net asset value, dividends and distributions for
the classes, and the proper allocation of income and expenses
among the classes. The report of the Expert shall also address
whether the Fund has adequate facilities in place to ensure the
implementation of the methodology and procedures for calculating
the net asset value, dividends and distributions for the classes,
and the proper allocation of income and expenses among the
classes. The Fund and the Adviser will take immediate corrective
measures in the event of any irregularities reported by the
Expert.
Amendments
The Plan may be amended from time to time in accordance
with the provisions and requirements of Rule 18f-3 under the Act.
Adopted effective as of June 29, 1998, by action of the Board of
Directors.
By: /s/ Edmund P. Bergan, Jr.
---------------------------
Edmund P. Bergan, Jr.
Secretary
4
00250072.AN7
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior
powers granted by the undersigned to the extent inconsistent
herewith and constitutes and appoints John D. Carifa, Edmund
P. Bergan, Jr., Domenick Pugliese, Andrew L. Gangolf and
Emilie D. Wrapp and each of them, to act severally as
attorneys-in-fact and agents, with power of substitution and
resubstitution, for the undersigned in any and all
capacities, solely for the purpose of signing the respective
Registration Statements, and any amendments thereto, on Form
N-1A of ACM Institutional Reserves, Inc., AFD Exchange
Reserves, Alliance All-Asia 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
Environment 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, and The Hudson River Trust,
and filing the same, with exhibits thereto, and other
documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all
that said attorneys-in-fact, or their substitute or
substitutes, may do or cause to be done by virtue hereof.
/s/ John D. Carifa
___________________________
John D. Carifa
Dated: September 9, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior
powers granted by the undersigned to the extent inconsistent
herewith and constitutes and appoints John D. Carifa, Edmund
P. Bergan, Jr., Domenick Pugliese, Andrew L. Gangolf and
Emilie D. Wrapp and each of them, to act severally as
attorneys-in-fact and agents, with power of substitution and
resubstitution, for the undersigned in any and all
capacities, solely for the purpose of signing the respective
Registration Statements, and any amendments thereto, on Form
N-1A of ACM Institutional Reserves, Inc., AFD Exchange
Reserves, Alliance Balanced Shares, Inc., Alliance Bond
Fund, Inc., Alliance Global Dollar Government Fund, Inc.,
Alliance Global Small Cap Fund, Inc., Alliance Global
Strategic Income Trust, Inc., Alliance Growth and Income
Fund, Inc., Alliance High Yield Fund, Inc., Alliance Income
Builder Fund, Inc., Alliance Limited Maturity Government
Fund, Inc., Alliance Mortgage Securities Income Fund, Inc.,
Alliance Multi-Market Strategy Trust, Inc., Alliance
Municipal Income Fund, Inc., Alliance Municipal Income Fund
II, 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 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. and The Alliance Portfolios, 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/ Ruth Block
___________________________
Ruth Block
Dated: September 9, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior
powers granted by the undersigned to the extent inconsistent
herewith and constitutes and appoints John D. Carifa, Edmund
P. Bergan, Jr., Domenick Pugliese, Andrew L. Gangolf and
Emilie D. Wrapp and each of them, to act severally as
attorneys-in-fact and agents, with power of substitution and
resubstitution, for the undersigned in any and all
capacities, solely for the purpose of signing the respective
Registration Statements, and any amendments thereto, on Form
N-1A of ACM Institutional Reserves, Inc., AFD Exchange
Reserves, Alliance All-Asia Fund, Inc., Alliance Balanced
Shares, Inc., Alliance Bond Fund, Inc., Alliance Developing
Markets Fund, Inc. Alliance Global Dollar Government Fund,
Inc., Alliance Global Environment Fund, Inc., Alliance
Global Small Cap Fund, Inc., Alliance Global Strategic
Income Trust, Inc., 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 Mortgage Securities Income Fund, Inc.,
Alliance Multi-Market Strategy Trust, Inc., Alliance
Municipal Income Fund, Inc., Alliance Municipal Income Fund
II, 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
and The Alliance Fund, 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/ David H. Dievler
___________________________
David H. Dievler
Dated: September 9, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior
powers granted by the undersigned to the extent inconsistent
herewith and constitutes and appoints John D. Carifa, Edmund
P. Bergan, Jr., Domenick Pugliese, Andrew L. Gangolf and
Emilie D. Wrapp and each of them, to act severally as
attorneys-in-fact and agents, with power of substitution and
resubstitution, for the undersigned in any and all
capacities, solely for the purpose of signing the respective
Registration Statements, and any amendments thereto, on Form
N-1A of ACM Institutional Reserves, Inc., AFD Exchange
Reserves, Alliance All-Asia Fund, Inc., Alliance Balanced
Shares, Inc., Alliance Bond Fund, Inc., Alliance Developing
Markets Fund, Inc., Alliance Global Dollar Government Fund,
Inc., Alliance Global Environment Fund, Inc., Alliance
Global Small Cap Fund, Inc., Alliance Global Strategic
Income Trust, 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 Mortgage Securites
Incoem Fund, Inc., Alliance Multi-Market Strategy Trust,
Inc., Alliance Municipal Income Fund, Inc., Alliance
Municipal Income Fund II, 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 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., and filing the same, with exhibits
thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and
confirming all that said attorneys-in-fact, or their
substitute or substitutes, may do or cause to be done by
virtue hereof.
/s/ John H. Dobkin
___________________________
John H. Dobkin
Dated: September 9, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior
powers granted by the undersigned to the extent inconsistent
herewith and constitutes and appoints John D. Carifa, Edmund
P. Bergan, Jr., Domenick Pugliese, Andrew L. Gangolf and
Emilie D. Wrapp and each of them, to act severally as
attorneys-in-fact and agents, with power of substitution and
resubstitution, for the undersigned in any and all
capacities, solely for the purpose of signing the respective
Registration Statements, and any amendments thereto, on Form
N-1A of ACM Institutional Reserves, Inc., AFD Exchange
Reserves, Alliance Balanced Shares, Inc., Alliance Bond
Fund, Inc., Alliance Capital Reserves, 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 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 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 and the
Hudson River Trust, and filing the same, with exhibits
thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and
confirming all that said attorneys-in-fact, or their
substitute or substitutes, may do or cause to be done by
virtue hereof.
/s/ William H. Foulk, Jr.
___________________________
William H. Foulk, Jr.
Dated: September 9, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior powers
granted by the undersigned to the extent inconsistent herewith
and constitutes and appoints John D. Carifa, Edmund P. Bergan,
Jr., Domenick Pugliese, Andrew L. Gangolf and Emilie D. Wrapp and
each of them, to act severally as attorneys-in-fact and agents,
with power of substitution and resubstitution, for the
undersigned in any and all capacities, solely for the purpose of
signing the respective Registration Statements, and any
amendments thereto, on Form N-1A of ACM Institutional Reserves,
Inc., AFD Exchange Reserves, Alliance Balanced Shares, Inc.,
Alliance Bond Fund, Inc., Alliance Global Dollar Government Fund,
Inc., Alliance Global Small Cap Fund, Inc., Alliance Global
Strategic Income Trust, Inc., Alliance Growth and Income Fund,
Inc., Alliance High Yield Fund, Inc., Alliance Income Builder
Fund, Inc., Alliance Limited Maturity Government Fund, Inc.,
Alliance Mortgage Securities Income Fund, Inc., Alliance Multi-
Market Strategy Trust, Inc., Alliance Municipal Income Fund,
Inc., Alliance Municipal Income Fund II, 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 Utility
Income Fund, Inc., Alliance Variable Products Series Fund, Inc.,
Alliance World Income Trust, Inc., Alliance Worldwide
Privatization Fund, Inc., Fiduciary Management Associates and The
Alliance Fund, 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/ Dr. James M. Hester
___________________________
Dr. James M. Hester
Dated: September 9, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior powers
granted by the undersigned to the extent inconsistent herewith
and constitutes and appoints John D. Carifa, Edmund P. Bergan,
Jr., Domenick Pugliese, Andrew L. Gangolf and Emilie D. Wrapp and
each of them, to act severally as attorneys-in-fact and agents,
with power of substitution and resubstitution, for the
undersigned in any and all capacities, solely for the purpose of
signing the respective Registration Statements, and any
amendments thereto, on Form N-1A of ACM Institutional Reserves,
Inc., AFD Exchange Reserves, Alliance Balanced Shares, Inc.,
Alliance Bond Fund, Inc., Alliance Global Dollar Government Fund,
Inc., Alliance Global Small Cap Fund, Inc., Alliance Global
Strategic Income Trust, Inc., Alliance Growth and Income Fund,
Inc., Alliance High Yield Fund, Inc., Alliance Income Builder
Fund, Inc., 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 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 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. and The Hudson River Trust,
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/ Clifford L. Michel
___________________________
Clifford L. Michel
Dated: September 9, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior powers
granted by the undersigned to the extent inconsistent herewith
and constitutes and appoints John D. Carifa, Edmund P. Bergan,
Jr., Domenick Pugliese, Andrew L. Gangolf and Emilie D. Wrapp and
each of them, to act severally as attorneys-in-fact and agents,
with power of substitution and resubstitution, for the
undersigned in any and all capacities, solely for the purpose of
signing the respective Registration Statements, and any
amendments thereto, on Form N-1A of ACM Institutional Reserves,
Inc., AFD Exchange Reserves, Alliance Balanced Shares, Inc.,
Alliance Bond Fund, Inc., Alliance Capital Reserves, Alliance
Global Dollar Government Fund, Inc., Alliance Global Small Cap
Fund, Inc., Alliance Global Strategic Income Trust, Inc.,
Alliance Government Reserves, Alliance Growth and Income Fund,
Inc., Alliance High Yield Fund, Inc., Alliance Income Builder
Fund, Inc., Alliance Limited Maturity Government Fund, Inc.,
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 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 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 and The Hudson River Trust, 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 9, 1997
00250072.AO8
