<PAGE>
LETTER TO SHAREHOLDERS AFD EXCHANGE RESERVES
================================================================================
April 25, 1995
Dear Shareholder:
AFD Exchange Reserves marked it first year of operations on March 25, 1995,
which closely coincided with its March 31 semi-annual reporting period. As you
know, AFD Exchange Reserves is available only to shareholders of other
Alliance mutual funds who wish to exchange their shares for shares of a money
market fund.* The Fund's investment objective is to provide maximum current
income consistent with liquidity and safety of principal.
During the six-month reporting period, total assets have grown from $55
million to $128 million. AFD Exchange Reserves distributed dividends totaling
$.0219 per Class A share, $.0194 per Class B share and $.0207 per Class C
share over the six-month period.
The Fund remains invested in high quality money market securities, which
include marketable obligations issued or guaranteed by the U.S. government and
its agencies. As of March 31, the average weighted maturity of the Fund was 56
days.
ECONOMIC COMMENTARY
During the reporting period, the Federal Reserve Board continued raising
short-term interest rates in an effort to slow economic growth. In the last
twelve months, as a result of these rate hikes, short-term rates have doubled,
from 3.00% to 6.00%.
Recent economic data suggest the beginning of a slowdown in the U.S. economy.
However, our view is that if gross domestic product should exceed 3% and
inflationary pressures persist, the Federal Reserve will resume tightening
later this year. Should this occur, your Fund will remain biased toward a
shorter average weighted maturity in an environment of rising short-term
rates.
We appreciate your investment in AFD Exchange Reserves and look forward to
reporting to you again later in the year.
Sincerely,
/s/ John D. Carifa
John D. Carifa
Chairman and President
*Investments in money market funds are neither insured nor guaranteed by the
U.S. Government and there is no assurance that the funds will be able to
maintain a stable net asset value of $1.00.
<PAGE>
STATEMENT OF NET ASSETS
MARCH 31, 1995 (UNAUDITED) AFD EXCHANGE RESERVES
================================================================================
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
AMOUNT AMOUNT
(000) SECURITY YIELD VALUE (000) SECURITY YIELD VALUE
- - ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
U.S. GOVERNMENT AND FEDERAL FARM CREDIT BANK-3.9%
AGENCIES-100.3% $ 5,100 6/05/95 5.99% $ 5,044,842
FEDERAL HOME LOAN ------------
MORTGAGE CORPORATION-75.3% TOTAL INVESTMENTS-100.3%
$ 4,000 4/04/95 ......... 5.92% $ 3,998,028 (amortized cost
43,300 4/20/95 ......... 5.92 43,164,712 $128,645,725) 128,645,725
4,000 4/24/95 ......... 5.88 3,984,973 Other assets less
2,500 5/02/95 ......... 5.96 2,487,169 liabilities-(0.3%) (398,595)
1,440 5/02/95 ......... 5.97 1,432,597 --------------
20,000 5/04/95 ......... 5.92 19,891,467 NET ASSETS-100%
4,000 6/05/95 ......... 6.00 3,956,667 (offering and redemption
17,900 6/29/95 ......... 5.95 17,636,696 price of $1.00 per share;
------------- 37,746,634 Class A shares;
74,811,401 Class B shares
96,552,309 and 15,691,289 Class C shares
--------------- outstanding) $128,247,130
============
FEDERAL NATIONAL MORTGAGE
ASSOCIATION-21.1%
17,600 4/20/95 5.90 17,545,196
10,000 1/22/96 6.04 9,503,378
-------------
27,048,574
================
________________________________________________________________________________________________
</TABLE>
See notes to financial statements.
<PAGE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 1995 (UNAUDITED) AFD EXCHANGE RESERVES
================================================================================
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME
Interest....................................... $ 3,356,326
EXPENSES
Advisory fee................................... $ 145,015
Distribution fee-Class A....................... 86,476
Distribution fee-Class B....................... 337,296
Distribution fee-Class C....................... 52,360
Transfer agency................................ 81,807
Custodian...................................... 38,739
Registration................................... 36,709
Administrative................................. 58,000
Amortization of organizational expense......... 25,118
Audit and legal................................ 17,647
Trustees' fees................................. 12,335
Printing....................................... 5,309
Miscellaneous.................................. 473
----------
Total expenses................................. 897,284
Less: fee waiver............................... (29,000) 868,284
---------- ------------
2,488,042
REALIZED LOSS ON INVESTMENTS
Net realized loss on investments............... (1,159)
------------
NET INCREASE IN NET ASSETS FROM OPERATIONS...... $ 2,486,883
============
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
================================================================================
<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH 25,1994 (A)
MARCH 31, 1995 TO
(UNAUDITED) SEPTEMBER 30, 1994
----------------- -------------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income......................... $ 2,488,042 $ 504,187
Net realized loss on investments.............. (1,159) (1,035)
------------ -----------
Net increase in net assets from operations.... 2,486,883 503,152
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income
Class A...................................... (788,684) (129,869)
Class B...................................... (1,392,855) (292,791)
Class C...................................... (306,503) (81,527)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase.................................. 73,647,203 54,501,921
------------ -----------
Total increase................................ 73,646,044 54,500,886
NET ASSETS
Beginning of period........................... 54,601,086 100,200
------------ -----------
End of period................................. $128,247,130 $54,601,086
============ ===========
_______________________________________________________________________________________
</TABLE>
(a) Commencement of operations.
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1995 (UNAUDITED) AFD EXCHANGE RESERVES
================================================================================
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
AFD Exchange Reserves (the "Fund") is registered under the Investment Company
Act of 1940 as a diversified open-end investment company. The Fund offers Class
A, Class B and Class C shares. Class A shares are offered to holders of Class A
shares of other Alliance funds without any sales charge at the time of purchase
or redemption. Class B shares are offered to holders of Class B shares of other
Alliance funds without any sales charge at the time of purchase. Class B shares
which are redeemed within a certain number of years of the original purchase of
Alliance fund Class B shares will be subject to a contingent deferred sales
charges. Class B shares will automati-cally convert to Class A shares in
accordance with the conversion schedule applicable to the original Alliance fund
Class B shares purchased. Class C shares are offered to holders of Class C
shares of other Alliance funds without any sales charge at the time of purchase
or redemption. All three classes of shares have identi-cal voting, dividend,
liquidation and other rights, except that each class bears its own distribution
and transfer agency expenses and has exclusive voting rights with respect to its
distribution plan. The follow-ing is a summary of significant accounting
policies fol-lowed by the Fund.
1. VALUATION OF SECURITIES
Securities in which the Fund invests are traded primari-ly in the over-the-
counter market and are valued at amortized cost, under which method a portfolio
instru-ment is valued at cost and any premium or discount is amortized on a
constant basis to maturity.
2. ORGANIZATION EXPENSES
Organization expenses of approximately $252,000 have been deferred and are being
amortized on a straight-line basis through March, 1999.
3. TAXES
It is the Fund's policy to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if applicable, to its
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
4. DIVIDENDS
The Fund declares dividends daily and automatically reinvests such dividends in
additional shares at net asset value. Net realized capital gains on investments,
if any, are expected to be distributed near calendar year end.
5. INVESTMENT INCOME AND SECURITY TRANSACTIONS
Interest income is accrued daily. Security transactions are recorded on the date
securities are purchased or sold. Security gains and losses are determined on
the identified cost basis. 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 OTHER TRANSACTIONS WITH AFFILIATES
The Fund pays its Adviser, Alliance Capital Manage-ment L.P. an advisory fee at
the annual rate of .25 of 1% on the first $1.25 billion of average daily net
assets; .24 of 1% on the next $.25 billion; .23 of 1% on the next $.25 billion;
.22 of 1% on the next $.25 billion; .21 of 1% on the next $1 billion; and .20 of
1% in excess of $3 billion. Pursuant to the advisory agreement, for the six
months ended March 31, 1995, the Fund incurred costs of $58,000 of which $29,000
was waived. These costs represent the cost of certain legal and accounting
services provided to the Fund by the Adviser.
The Fund compensates Alliance Fund Services, Inc. (a wholly-owned subsidiary of
the Adviser) for providing personnel and facilities to perform transfer agency
services. Such compensation amounted to $71,785 for the six months ended March
31, 1995.
<PAGE>
AFD EXCHANGE RESERVES
================================================================================
NOTE C: DISTRIBUTION SERVICES AGREEMENT
The Fund has adopted a Distribution Services Agree-ment (the "Agreement")
pursuant to Rule 12B-1 under the Investment Company Act of 1940 for Class A,
Class B and Class C. Under the Agreement, the Fund pays a distribution fee to
the Distributor at an annual rate of up to .50 of 1% of the Fund's average daily
net assets attributable to Class A shares, 1.00% of the average daily net assets
attributable to Class B shares and .75 of 1% of the average daily net assets
attribut-able to Class C shares. Such fee is accrued daily and paid monthly. The
Agreement provides that the Distributor will use such payments in their entirety
for distribution assistance and promotional activities. The Distributor has
incurred expenses from March 25, 1994 (commencement of operations) in excess of
the distribution costs reimbursed by the Fund in the amount of $1,976,053 for
Class B and $35,724 for Class C. Such costs may be recovered from the Fund in
future periods so long as the Agreement is in effect. In accordance with the
Agreement, there is no provi-sion for recovery of unreimbursed distribution
costs incurred by the Distributor beyond the current fiscal year for Class A
shares. The Agreement also provides that the Adviser may use its own resources
to finance the distribution of the Fund's shares.
________________________________________________________________________________
NOTE D: INVESTMENT TRANSACTIONS
At March 31, 1995, the cost of securities for federal income tax purposes was
the same as the cost for financial reporting purposes.
- - --------------------------------------------------------------------------------
NOTE E: TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
An unlimited number of shares ($.001 par value) are authorized. At March 31,
1995, capital paid-in aggre-gated $37,746,634 for Class A, $74,811,401 for Class
B and $15,691,289 for Class C. Transactions, all at $1.00 per share, were as
follows:
<TABLE>
<CAPTION>
CLASS A
- - ------------------------------------
<S> <C> <C>
SIX MONTHS ENDED MARCH
25, 1994(A)
MARCH 31, 1995
TO
(UNAUDITED)
SEPTEMBER 30, 1994
---------------
- - ------------------
Shares sold.................................................... 141,091,810
79,563,777
Shares issued on reinvestments of dividends.................... 783,672
129,869
Shares redeemed................................................ (122,344,167)
(61,578,327)
-------------
- - ------------
Net increase................................................... 19,531,315
18,115,319
=============
============
<CAPTION>
CLASS B
- - -----------------------------------
SIX MONTHS ENDED MARCH
25, 1994(A)
MARCH 31, 1995
TO
(UNAUDITED)
SEPTEMBER 30, 1994
---------------
- - ------------------
Shares sold.................................................... 166,105,953
87,623,275
Shares issued on reinvestments of dividends.................... 1,383,938
292,791
Shares redeemed................................................ (123,918,547)
(56,676,109)
-------------
- - ------------
Net increase................................................... 43,571,344
31,239,957
=============
============
<CAPTION>
CLASS C
- - -----------------------------------
SIX MONTHS ENDED MARCH
25, 1994(A)
MARCH 31, 1995
TO
(UNAUDITED)
SEPTEMBER 30, 1994
-----------------
- - ------------------
Shares sold.................................................... 49,834,352
41,236,143
Shares issued on reinvestments of dividends.................... 304,515
81,527
Shares redeemed................................................ (39,594,323)
(36,171,025)
--------------
- - ------------
Net increase................................................... 10,544,544
5,146,645
==============
============
</TABLE>
________________________________________________________________________________
(a) Commencement of operations.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED) AFD EXCHANGE RESERVES
================================================================================
NOTE F: FINANCIAL HIGHLIGHTS
Selected data for a share outstanding throughout the period.
<TABLE>
<CAPTION>
CLASS A
- - ----------------------------------
SIX MONTHS ENDED MARCH
25, 1994(A)
MARCH 31, 1995
TO
(UNAUDITED)
SEPTEMBER 30, 1994
---------------
- - ------------------
<S> <C> <C>
Net asset value, beginning of period........................... $ 1.00
$ 1.00
INCOME FROM INVESTMENT OPERATIONS
--------
- - ---------------------------------
Net investment income.......................................... .0219
.0126
LESS: DISTRIBUTIONS ----------
----------
- - -------------------
Dividends from net investment income........................... (.0219)
(.0126)
----------
----------
Net asset value, end of period................................. $ 1.00
$ 1.00
========
==========
TOTAL RETURNS
- - -------------
Total investment return based on
net asset value (b)(c)..................................... 4.43%
2.45%
---------
----------
RATIOS/SUPPLEMENTAL DATA
- - ------------------------
Net assets, end of period (in millions)........................ $38
$18
Ratio of expenses to average net assets(c)..................... 1.19%(d)
1.82%
Ratio of net investment income to
average net assets(c)...................................... 4.56%(d)
2.62%
<CAPTION>
CLASS B
- - -----------------------------------
SIX MONTHS ENDED MARCH
25, 1994(A)
MARCH 31, 1995
TO
(UNAUDITED)
SEPTEMBER 30, 1994
---------------
- - ------------------
Net asset value, beginning of period........................... $ 1.00
$ 1.00
INCOME FROM INVESTMENT OPERATIONS ---------
---------
Net investment income.......................................... .0194
.0101
LESS: DISTRIBUTIONS -----------
-----------
Dividends from net investment income........................... (.0194)
(.0101)
-----------
-----------
Net asset value, end of period................................. $ 1.00
$ 1.00
=========
=========
TOTAL RETURNS
Total investment return based on
net asset value (b)(c)..................................... 3.92%
1.95%
=========
=========
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions)........................ $75
$31
Ratio of expenses to average net assets(c)..................... 1.67%(e)
2.35%
Ratio of net investment income to
average net assets(c)...................................... 4.13%(e)
1.91%
____________________________________________________________________________________________________
_______________
</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 and distributions at net asset value during the period, and
redemption on the last day of the period. Contingent deferred sales charge
is not reflected in the calculation of total investment return.
(c) Annualized.
(d) If the Fund had borne all expenses, the expense ratio would have been 1.24%.
The net investment income ratio would have been 4.51%.
(e) If the Fund had borne all expenses, the expense ratio would have been 1.72%.
The net investment income ratio would have been 4.08%.
<PAGE>
AFD EXCHANGE RESERVES
================================================================================
<TABLE>
<CAPTION>
CLASS C
- - ---------------------------------
SIX MONTHS ENDED
MARCH 25, 1994(A)
MARCH 31, 1995
TO
(UNAUDITED)
SEPTEMBER 30, 1994
-----------------
- - ------------------
<S> <C> <C>
Net asset value, beginning of period................................ $ 1.00
$ 1.00
---------
---------
INCOME FROM INVESTMENT OPERATIONS
- - ---------------------------------
Net investment income............................................... .0207
.0112
-----------
------------
LESS: DISTRIBUTIONS
- - -------------------
Dividends from net investment income................................ (.0207)
(.0112)
-----------
------------
Net asset value, end of period...................................... $ 1.00
$ 1.00
=========
==========
TOTAL RETURNS
- - -------------
Total investment return based on
net asset value (b)(c)............................................ 4.19%
2.18%
=========
==========
RATIOS/SUPPLEMENTAL DATA
- - ------------------------
Net assets, end of period (in millions)............................. $16
55
Ratio of expenses to average net assets(c).......................... 1.42%(d)
2.08%
Ratio of net investment income to
average net assets(c)............................................. 4.39%(d)
2.14%
____________________________________________________________________________________________________
________________________
</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 and distributions at net asset value during the period, and
redemption on the last day of the period. Contingent deferred sales charge
is not reflected in the calculation of total investment return.
(c) Annualized.
(d) If the Fund had borne all expenses, the expense ratio would have been
1.47%. The net investment income ratio would have been 4.34%.
<PAGE>
AFD EXCHANGE RESERVES
================================================================================
<TABLE>
<S> <C>
AFD EXCHANGE RESERVES
1345 Avenue of the Americas
New York, NY 10105
Toll-free 1(800) 221-5672
TRUSTEES
JOHN D. CARIFA, Chairman and President WILLIAM H. FOULK, JR. /(1)/
RUTH BLOCK /(1)/ JAMES M. HESTER /(1)/
DAVID H. DIEVLER, /(1)/ CLIFFORD L. MICHEL /(1)/
JOHN H. DOBKIN /(1)/ ROBERT C. WHITE /(1)/
OFFICERS
KATHLEEN A. CORBET, Senior Vice President EDMUND P. BERGAN, JR., Secretary
WAYNE D. LYSKI, Senior Vice President MARK D. GERSTEN, Treasurer & Chief Financial Officer
JOHN F. CHIODI, JR., Vice President JOSEPH J. MANTINEO, Controller
PAMELA F. RICHARDSON, Vice President
CUSTODIAN TRANSFER AGENT
STATE STREET BANK AND TRUST COMPANY ALLIANCE FUND SERVICES, INC.
P.O. Box 1912 P.O. Box 1520
Boston, MA 02105 Secaucus, NJ 07096-1520
LEGAL COUNSEL DISTRIBUTOR
SEWARD & KISSEL ALLIANCE FUND DISTRIBUTORS, INC.
One Battery Park Plaza 1345 Avenue of the Americas
New York, NY 10004 New York, NY 10105
AUDITORS
MCGLADREY & PULLEN
555 Fifth Avenue
New York, NY 10017
____________________________________________________________________________________________________
_______
</TABLE>
/(1)/ Member of the audit committee.
Distribution of this report other than to shareholders must be preceded
or accompanied by the Fund's current prospectus, which contains further
information about the Fund.
(R) These registered service marks used under license from the owner,
Alliance Capital Management L.P.
