UNITED STATES
 

SECURITIES AND EXCHANGE COMMISSION
 

WASHINGTON. D.C. 20549
 

,IVISION OF
 

INVESTMENT MANAGEMENT 

July 14, 1995
 ACT X(!it- l(J


SEON I 7 (tL T : 

RULE

Mr. Bruce Senzel
 PULIC /

Seward & Kissel A V AILABILITY '7 (Vi Cf S 

One Battery Park Plaza 

New York, NY 10004 

Re: ACM Institutional Reserves. Inc. - Tax Free Portfolio .
 

Dear Mr. Senzel: 

Your letter of July 13, 1995 requests our assurace that we would not recommend 

that the Commission tae any enforcement action under sections 17(a) and 17(d) of the 

Investment Company Act of 1940 ("1940 Act") and the rules thereunder if ACM 

Institutional Reserves, Inc. - Tax Free Portfolio ("Fund") and Alance Capital Management, 

L.P., the investment adviser to the Fund ("Alance") effect the transaction summared 

below and more fully described in the letter. 

The Fund is a money market fund that seeks to maintain a stable net asset value per 

share of $1.00 and uses the amortized cost method of valuation as permitted by rule 2a-7 

under the 1940 Act. The Fund holds ta and revenue anticipation notes issued by Orage 

County, California that mature on July 19, 1995 ("Securities")! in the pricipal amount of 

$500,000 (approximately 1.11 % of the Fund's net assets). The Securities pay interest at a 

rate of 4.5 % per year, and all interest due on the Securities is payable on July 19, 1995.

As a result of the Orange County bankptcy filg on December 6, 1994, the Fund was 

unable to obtain reliable market quotes for the Securities then held, and it determined the 

fair values of those Securities to be less than their amortized cost values. 

In December 1994, The Chase Manhatt Ban, N.A. ("Chase"), upon the 

application of Alance, issued a letter of credit on behal of the Fund ("LOC") in order to 

avoid any potential losses to shareholders of the Fund. on the Securities then held by reason 

of the nonpayment by Orange County of pricipal and interest thereon at maturity ("LOC 2 The LOC Arngement provided for the full payment of pricipal and Arngement"). 

interest when due on the Securities then held by the Fund if Orage County faied to make 

In your letter of July 13, 1995, you represented that the principal amount of the Securities 

held by the Fund in December 1994 was $1,000,000. Since that time, you state that the 

Fund has sold Securities having a principal amount of $500,000. 

In Allance's letter of December 8, 1994, it represented that Chase had the highest ratings on 

its short-term debt obligations from the "Requisite NRSROs" (as this term is defined in 

paragraph (a)(13) of rule 2a-7 under the 1940 Act). 
Mr. Bruce Senzel
 

Page 2
 

these payments on July 19, 1995 (the final maturity date of the Securities). Under the LOC

Arngement, Alance agree to reimburse Chase for any amounts drawn by the Fund

pursuant to the LOC. The LOC Argement was entered into after the staf of the 

Division of Investment Management inormed the Fund and Alance that it would not 

recommend enforcement action to the Commission if the LOC Argement was effected. 

The Fund continues to hold Securities as indicated above and values them based on the LOC 

Argement. 

Orage County, in al lieliood, wil not make the scheduled pricipal payment due
 

on the Securities on July 19, 1995. Rather, Orage County has proposed, the Banptcy 

Court has approved, and holders of certin short-term notes issued by Orage County have 

agreed to, a mandatory amendment of the Securities ("Amendment") that wil, among other 

thigs, extend the maturity date of the Securities to June 30, 1996 ("Amended Securities"). 

The Amendment provides that al interest accrued and payable on the Securities wil be paid 

on July 19, 1995 (the maturity date of the Securities). 

Alliance has offered to purchase the Securities now held by the Fund from the Fund on July 19, 1995 at an amount equal to their pricipal values ($500,000). If Orage County 

fails to make interest payments on the Securities pursuant to the Amendment, Alance has 

offered to purchase the Securities from the Fund at their amortized cost values (the pricipal
 

values of the Securities plus al accrued but unpaid interest) ("Purchase Offer"). 

On the basis of the facts and representations in your letter, and a telephone 

conference on July 14, 1995 with Maiorie Riegel of the staf, we wil not recommend and the rules thereunder 

if the Purchase Offer is effected. You should note that any different facts or representations 

might require a different conclusion. Moreover, this response expresses the Division's 

position on enforcement action only and does not express any legal conclusions on the issues 

presented. 

enforcement action under sections 17(a) and 17(d) of the 1940 Act 


Sincerely,

Robert E. Plaze
 

¡;'2~

Assistat Director
 
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JO""TI'AN BEIOGliR
 

THOMAS G. ....eDONALIl 

HARK A. BRODY investment Company Act
 PAUL H. GOTTLIEB 

JOHN". CLEA'l of 1940 /17 (a) and 17 (d) Mle,t.,AE.L.J. ticNAMAII 

KAL.TAN O~ 

JO"N r. lllC:NeY 

PATRICIA A. POc:~l.ieo
 

-AO"iTTl:1) I~ D.C. ONLY 

Mr. Robert E. P laze 

Assistant Director
 

Office of Disclosure and Investment
 

Adviser Regulation
 

U. S. Securities and Exchange Commission
 

450 5th Street, N.W.
 

Mail Stop 10-6
 

washington, D.C. 20549
 

ACM Institutional Reserves. Inc. - Tax Free Portfolio
 

Dear Mr. Plaze: 

This letter is submitted on behalf of ACM Institutional
 

Reserves, Inc. - Tax Free Portfolio (the IIFund") and Alliance
 

Capital Management L.P., the investment adviser of the Fund
 

("Aiiiance"), to seek assurance from the staff of the Division of
 

Investment Management (the "Division") of the U. S. Securities and
 

Exchange Commission (the "Commission") that the Division would not
 

recommend any enforcement action to the Commission with reference
 

to Section 17 (a) or Section i 7 (d) of the Investment Company Act of
 

1940, as amended (the "1940 Act"), or the rules thereunder, if the
 

Fund and Alliance enter into the transaction described below.
 

The Fund is a "money market fund" registered with the
 

Commission under the 1940 Act as an open-end management investment
 

company which seeks to maintain a stable net asset value per share
 

of $1.00 and uses the amortized cost method of valuation in valuing
 

its portfolio securities. On the date hereof, the Fund owns the
 

following securities (the IISecurities") having a maturity date of
 

July 19, 1995:
 

..." ~ "'0 in'" ii n 
Mr. Robert E. P laze 2 July 13, 1995 

County of Orange, California, 1994-95 Tax and
 

Revenue Anticipation Notes, Series A, having
 

a principal amount of $500,000.
 

The Securities, including interest accrued thereon, represented
 

approximately 1.11% of the net assets of the Fund based on asset
 

valuations as of the close of business on July 12, 1995.
 

By letter dated December 8, 1994 to you, relief was
 

requested from the Division regarding the proposed issuance to the
 

Fund by The Chase Manhattan Bank, N .A. ("Chase") of an irrevocable
 

standby letter of credit for the benefit of the Fund providing for
 

the payment in full to the Fund of principal and interest at
 

maturity of the Securities. T£e relief requested was granted by
 

telephone on December 8, 1994. By letter to you dated
 

December 12, 1994, Alliance confirmed that the letter of credit was
 

issued. Alliance paid for the letter of credit and is obligated to
 

pay to Chase any amounts paid by Chase thereunder. A copy of each
 

of the December 8 and 12 letters accompanies this letter.
 

Alliance has offered to purchase the Securities on
 

July 19, 1995 directly from the Fund for cash at the then value of
 

the Securities reflected on the books of the Fund as determined
 

using the amortized cost method of valuation, i. e., at the
 

principal amount of the Securities plus accrued intere~t not paid
 

by the County of Orange when due on that date, if any. Same-day
 

1. When the letter of credit was issued, the principal amount of
 

the Securities held by the Fund was $1,000,000. Since that
 

time, the Fund has sold Securities having a principal amount of


$500,000. 

2. As we understand the staff is aware, the principal of the
 

Securities is not to be repaid at maturity on July 19, 1995 and
 

the County of Orange, issuer of the Securities, presented a
 

Modification and Extension Agreement (the "Agreement") to
 

owners of certain County obligations, including the Securities,
 

pursuant to which such owners could irrevocably elect by
 

July 7, 1995 to an extension of the original maturity date of
 

the Securities upon the effectiveness of which (which is
 

subject to certain conditions) the Securities would become
 

Extension Obligations (as defined in the Agreement). We
 

understand that the staff is familiar with this Agreement. At
 

a special .meeting of the Trustees of the Fund held on July 5,
 

1995, Alliance informed the Trustees that Alliance had
 

determined that it would be advisable for the Fund to make the
 

election with respect to all of the Securities. The Trustees
 

concurred in Alliance's conclusion, which was implemented
 

promptly thereafter. We understand that timely elections were
 

(Footnote continued)
 
Mr. Robert E. P laze 3 July 13, 1995 

funds in the principal amount will be deposited in the Fund's
 

account on July 19. If the County does not pay the full amount of
 

accrued interest on July 19, Alliance will pay the amount of unpaid
 

accrued interest to the Fund's account in same-day funds on
 

July 20, the day on which the Fund would have received same-day
 

funds from the County's disbursing agent if the County had timely
 

paid such interest or if the Fund had drawn on the Chase letter of
 

credit. Thus, the purchase price to be paid by Alliance will be
 

the same amount the Fund would otherwise have received under the
 

letter of credit or from the County had there been no default in
 

the payment of principal or interest, and the timing of the Fund's
 

receipt of the amount involved in same-day funds will be the same.
 

As the Fund's investment adviser, Alliance is an
 

"affiliated person" of the Fund under Section 2 (a) (3) of the 1940
 

Act . Given that status and the nature and background of the
 

proposed purchase, the purchase of the Securities by Alliance would
 

fall within Section 17 (a) of the 1940 Act, which makes it unlawful
 

for any affiliated person of a registered investment company to
 

knowingly purchase any security from the investment company, and
 

might be considered as falling within Section 17 (d) of the 1940
 

Act, which makes it unlawful for an affiliated person of a
 

registered investment company to effect any transaction in which
 

such registered investment company is a joint and several
 

participant with such person.
 

The purchase of the Securities by Alliance at their
 

current amortized cost value (the principal amount of the
 

Securities plus accrued but unpaid interest) would avoid portfolio
 

shareholder loss on the Securities. To attain a corresponding
 

objective, the Fund and Alliance understand that no action relief
 

covering corresponding purchases shortly after the County's
 

bankruptcy filing last December was in fact granted to a number of
 

other money market funds and their advisers soon after the County
 

filed for bankruptcy last year. The Fund and Alliance do not
 

believe the relief now requested with respect to Alliance's
 

acquiring the Securities to be substantively distinguishable from
 

the corresponding situation of those other funds and advisers. The
 

Fund and Alliance do not believe there is any meaningful difference
 

to the Fund between a purchase occurring as proposed as contrasted
 

wi th a purchase which might have been made last December.
 

(Footnote continued)
 

made with respect to a sufficient percentage of the obligations
 

covered by the Agreement for the Agreement to become effective
 

and binding on all holders of such obligations.
 
Mr. Robert E. P laze 4 July 13, 1995 

I f the staff is unable to agree with this request for
 

relief, an opportunity is requested to discuss the subject with the
 

staff prior to the issuance of the staff's written response.
 

In accordance with Release No. 33-6269 (December 5,
 

1980), seven additional copies of this letter are enclosed. Please
 

direct any questions or requests for further information concerning
 

the foregoing to the undersigned ((212) 574-1267) or Edmund P.
 

Bergan, Jr. of the Fund ((212) 969-2108).
 

Very truly yours,
 

BDS : bac 

Enclosures ~~).l~ 

00250215.AB6 
Allian Fl.nd
 

Disibutors. Inc. 

1345 Avnue Of the Amrica 

NewYOfk, NY 10105
 

(212) 969-2156 

Gerg O. Marinez 

Vic Ptent and
 

Aste General Counl


1I~Capita. . .. 

December 8, .:1994 

VIA FACS'IMI~E
 

Robert E. Plaze
 

Assistant Director
 

Office of Disclosure and Znvestment
 

. Adviser Regulation
 

Division of 'Investment Management
 

u.s. Securities and Exchange Commission
 

450 Fifth street, N.W.
 Mail stop J.0-6 

Washington, D.C. 20549
 

Re: Alliance Municipal Trust - General Portfolio
 

ACM '~nsti tutional Reserves, 'Inc. - Tax Free
 portfolio 

Dear r-i. Plaza:
 

We are writing on behalf of Alliance capital Management L.P.
 

("Affiliate"), an affiliated per$on Of. Allianoe Municipal Trust-


General Portfolio ("AM-General") ana ACM 'Institutional Reserves,
 

Inc.-Tax Free Portfolio ("A1:R-Tax FreeU) (jointly, "Funds"). We
 

seek assurance from the staff of ebe Division of Investment
 

Management (liD! vision") that it will. not recommend enforcement
 

action to the Commission under Section 17 (d) of the 'Investment
 

Company Act of 1940 (111940 Act"), or the rules thereunder if the
 

Funds and the Affiliate enter into the arrangement described


below. 

Each Fund is reqistered with the commission under the 1940
 

Act as an open-end management investment company. The Funds,


each a money market fund, seek to maintain a stable net asset
 

value per share of $1.00, and use the amortized cost method of
 

valuation in valuing portfolio securities. As of December. 7,
 

1994, -AMT-General had approximately 2.27% of its net assets and
 

AIR-Tax Free had approximately 2.6% of its net assets in the
 

below-referenced securities ("securities"). The Securities are:
 

1. County of orange, California; 1994-95 Tax and Revenue
 

AntiCipation Notes, Series A (COSIP No. 684201EK8);
 
2. Based on Decemer 7, 1994 market values, the Funds held tha
 following amounts of the saeurities:
 AM-General - $27,550,000 

AIR-Tax Free - 6950,000; and
 

3. Final Maturity - July 19, 1995.
 

As a result of orange. County filing for bauptcy, the
 

Funds may not ~e ablê to obtain reliaÐle mark~t quot~s for the
 securities~ On Decemr 8, 1994, the Affiliate applied for two

irrevocable standby letters of credit to be issued DY Chase
 

Manhattan Bank ("Chase") t a. national bank with a short-term
 

rating of A-i/p-1, for the benefit of each Fund providing for the
 

full payment of principal and interest at maturity of the


securities to each FUd to avoid any potential portfolio


shareholder loss on the Securities. The Affiliate will pay to
 

Chase any amounts paid by Chase under the letters of oradi t.
 

Each Fud i S Board has been advised of this proposed arrangement.
 . .-"
 

The Affiliate is an "affiliated person" under Section
 2 (a) (3) of the 1940 Act because it is the investment adviser of

each Fund. ~he proposed arrangement may fall within Seotion
 

17 Cd) of the 1940 Act, which makes it unlawful for any affiliated
 

person of a registered investment company or an affiliated person
 

of such person to effect any transaction in which such registered
 

company is a joint or a joint and several participant with such
 

person. 

The Funds and the Affiliate believe that it would be in the
 

best interests of each Fund's shareholders if the irrevocable
 

standby letters of credit are issued and the Affiliate is
 

Obligated to pay to Chase ~ny amounts paid by' it to the Funds.
 

On behalf of the Funds and the Affiiiate, we hereby request that
 

the Division staff give its assurance that it wiii not recommend
 

that the commission take enforcement action against ~he Funds or
 

the Affiliate under Section i 7 (d) if the Affiliate acts in such
 capacity. 

If you have any questions or other communications concerning
 

this matter, please call the undersigned at (2i2) 969-2156" or Ms.
 

Emilie Wrapp at (212) 969-2154 (facsimile (212) 969-2290).
 

~o~~ 
Allice Fud 

Diiburs. Inc. 

1345 ..ue of th America
 

Ne YOl NY 10105
 

(2121969-2156 

A-..4ceCapita Gøo O. Marnez . . 

VI Prnt and
 

Asia~ General Counl
 

Decemer 12, 1994
 

VIA 'FAOSnaLE 

Robert E. Plaze
 

Assistant Director
 

Office of Disclosure and Investment
 

Adviser Regulation
 

u.s. securities and Exchange Commission
 

450 Firth street, N.W.
 

Washington, CC 20549
 

Re: Alliance Muicipal Trust-General Portfolio
 

ACM Institutional Reserves, Inc. -Tax Free
 port-folio 

Dear Hr. Plaze:
 

This letter will eonf 1rm to the staff that Alliance Capital
 

Management L.P., an affiliated person. of tha above-referenced
 

money market funds, received on oeoémer 9, 1994 two letters of
 

credit for the benefit of each of the above-referenced funds as
 

described in our le~~er to the staff dated Deoember 8, 1994
 

requesting no-aotion assuranoes. Each . 
 Fud 's board was advised
 

of this transaction.
 

If you have any further questions or comments regarding
 

this matter, please feel free to contact me at the telephone
 

number set forth above or Ms. Emi11e wrapp at (202) 969-2154.
 

Sincereiy, t~l) 

GOM/ j nd