SEC Division of Investment Management staff letter: ACM Institutional Reserves, Inc.

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).