This is filed pursuant to Rule 497(c).
File Nos. 33-74230 and 811-08294.
<PAGE>
ALLIANCE CAPITAL[LOGO] AFD EXCHANGE RESERVES
Advisor Class
- -------------------------------------------------------------------------------
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618
- -------------------------------------------------------------------------------
AFD Exchange Reserves (the "Fund") is a diversified, open-end management
investment company. The Fund's investment objective is maximum current income
to the extent consistent with safety of principal and liquidity. The Fund
pursues its objective by maintaining a portfolio of high quality U.S. dollar-
denominated money market securities, and is thus referred to as a "money
market fund."
Shares of the Fund should be purchased for cash only as a temporary investment
pending exchange into another Alliance Mutual Fund and should not be held as a
long-term investment.
This Prospectus offers the Advisor Class shares of the Fund which may be
purchased at net asset value without any initial or contingent deferred sales
charges and without ongoing distribution expenses. Advisor Class shares are
offered solely to (i) investors participating in fee-based programs meeting
certain standards established by Alliance Fund Distributors, Inc., the Fund's
principal underwriter, (ii) participants in self-directed defined contribution
employee benefit plans (e.g., 401(k) plans) that meet certain minimum
standards and (iii) investment advisory clients of, and certain other persons
associated with, Alliance Capital Management L.P. and its affiliates or the
Fund. See "Purchase and Sale of Shares."
This Prospectus sets forth concisely the information which a prospective
investor should know about the Fund before investing. A "Statement of
Additional Information" dated October 1, 1996, which provides further
information regarding certain matters discussed in this Prospectus and other
matters which may be of interest to some investors, has been filed with the
Securities and Exchange Commission and is incorporated herein by reference.
For a free copy, call or write Alliance Fund Services, Inc. at the indicated
address or call the "For Literature" telephone number shown above.
(R): This registered service mark used under license from the owner, Alliance
Capital Management L.P.
- -------------------------------------------------------------------------------
An investment in the Fund is not (i) insured or guaranteed by the U.S. Govern-
ment, (ii) a deposit or obligation of, or guaranteed or endorsed by, any bank,
or (iii) federally insured by the Federal Deposit Insurance Corporation, the
Federal Reserve Board or any other agency. There can be no assurance that the
Fund will be able to maintain a stable net asset value of $1.00 per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
PROSPECTUS/October 1, 1996
Investors are advised to read this Prospectus carefully and to retain it for
future reference.
<PAGE>
EXPENSE INFORMATION
SHAREHOLDER TRANSACTION EXPENSES are one of several factors to consider when
you invest in the Fund. The following table summarizes your maximum transac-
tion costs from investing in Advisor Class shares of the Fund and estimated
annual expenses for Advisor Class shares. The "Example" following the table
shows the cumulative expenses attributable to a hypothetical $1,000 investment
in Advisor Class shares for the periods specified.
<TABLE>
<CAPTION>
ADVISOR CLASS SHARES
--------------------
<S> <C>
Maximum sales charge imposed on purchases................ None
Sales charge imposed on dividend reinvestments........... None
Deferred sales charge.................................... None
Exchange Fee............................................. None
ANNUAL FUND OPERATING EXPENSES
Management fees.......................................... .25%
12b-1 fees............................................... None
Other expenses(a)........................................ .48%
----
Total fund operating expenses(b)......................... .73%
====
</TABLE>
- --------
(a) These expenses include a transfer agency fee payable to Alliance Fund
Services, Inc., an affiliate of Alliance Capital Management L.P., based on
a fixed dollar amount charged to the Fund for each shareholder's account.
(b) The expense information does not reflect any charges or expenses imposed
by your financial representative or your employee benefit plan.
EXAMPLE
<TABLE>
<CAPTION>
Cumulative expenses
paid for the period of Advisor Class
---------------------- -------------
<S> <C>
1 year.................................. $ 7
3 years................................. $23
</TABLE>
- --------
The purpose of the foregoing table is to assist the investor in understand-
ing the various costs and expenses that an investor in Advisor Class shares of
the Fund will bear directly or indirectly. "Other Expenses" are based on esti-
mated amounts for the Fund's current fiscal year. The Example set forth above
assumes reinvestment of all dividends and distributions and utilizes a 5% an-
nual rate of return as mandated by Securities and Exchange Commission (the
"Commission") regulations. The Example should not be considered a representa-
tion of future expenses; actual expenses may be greater or less than those
shown.
2
<PAGE>
DESCRIPTION OF THE FUND
INVESTMENT OBJECTIVE AND POLICIES
The Fund is a diversified, open-end management investment company known as a
"mutual fund." The Fund's investment objective is maximum current income to
the extent consistent with safety of principal and liquidity. The Fund pursues
its objective by maintaining a portfolio of high quality U.S. dollar-denomi-
nated money market securities. While the Fund may not change its investment
objective or the "other fundamental investment policies" described in a sepa-
rate section below without shareholder approval, it may, upon notice to share-
holders, but without such approval, change the following investment policies
or create additional classes of shares in order to establish portfolios which
may have different investment objectives. There can, of course, be no assur-
ance that the Fund's objective will be achieved.
MONEY MARKET SECURITIES
The money market securities in which the Fund invests include: (1) market-
able obligations issued or guaranteed by the United States Government, its
agencies or instrumentalities (collectively, the "U.S. Government"); (2) cer-
tificates of deposit and bankers' acceptances issued or guaranteed by, or time
deposits maintained at, banks or savings and loan associations (including for-
eign branches of U.S. banks or U.S. or foreign branches of foreign banks) hav-
ing total assets of more than $500 million; (3) commercial paper of high qual-
ity, i.e., rated A-1 or A-2 by Standard & Poor's Corporation ("S&P"), Prime-1
or Prime-2 by Moody's Investors Service, Inc. ("Moody's"), Fitch-1 or Fitch-2
by Fitch Investors Service, Inc., or Duff 1 or Duff 2 by Duff & Phelps Inc,
or, if not rated, issued by U.S. or foreign companies having outstanding debt
securities rated AAA, AA or A by S&P, or Aaa, Aa or A by Moody's and partici-
pation interests in loans extended by banks to such companies; and (4) repur-
chase agreements that are collateralized in full each day by liquid securities
of the types listed above. Repurchase agreements may be entered into only with
those banks (including State Street Bank and Trust Company, the Fund's Custo-
dian) or broker-dealers ("vendors") that are eligible under the procedures
adopted by the Trustees for evaluating and monitoring the creditworthiness of
such vendors. A repurchase agreement would create a loss to the Fund if, in
the event of a vendor default, the proceeds from the sale of the collateral
were less than the repurchase price.
The Fund may invest up to 25% of its total assets in money market instru-
ments issued by foreign branches of foreign banks and other foreign entities.
To the extent that the Fund makes such investments, consideration will be
given to their domestic marketability, the lower reserve requirements gener-
ally mandated for overseas banking operations, the possible impact of inter-
ruptions in the flow of international currency transactions, potential politi-
cal and social instability or expropriation, imposition of foreign taxes, the
lower level of government supervision of issuers, the difficulty in enforcing
contractual obligations and the lack of uniform accounting and financial re-
porting standards.
3
<PAGE>
The Fund will not invest more than 10% of its net assets in illiquid securi-
ties which include "restricted securities" subject to legal restrictions on
resale arising from an issuer's reliance upon certain exemptions from regis-
tration under the Securities Act of 1933, as amended, (the "Securities Act").
The Fund may purchase restricted securities eligible for resale under Rule
144A under the Securities Act and commercial paper issued in reliance upon the
exemption from registration in Section 4(2) of the Securities Act and, in each
case, determined by Alliance Capital Management L.P. ("Alliance") to be liquid
in accordance with procedures adopted by the Trustees of the Fund.
The Fund may invest in asset-backed securities that meet its existing diver-
sification, quality and maturity criteria. Asset-backed securities are securi-
ties 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 bene-
ficial interest in a special purpose trust, limited partnership interest, or
commercial paper or other debt securities issued by a special purpose corpora-
tion. Although the securities may have some form of credit or liquidity en-
hancement, payments on the securities depend predominately upon collection of
the loans and receivables held by the issuer. It is the Fund's current inten-
tion to limit its investment in such securities to not more than 5% of its net
assets.
The Fund will comply with Rule 2a-7 under the Investment Company Act of 1940
(the "Act"), as such rule is amended from time to time, including the diversi-
ty, quality and maturity limitations imposed by the Rule. In accordance with
Rule 2a-7, the Fund will invest in securities which at the time of investment
have remaining maturities not exceeding 397 days and the average maturity of
the Fund's investment portfolio will not exceed 90 days. A more detailed de-
scription of Rule 2a-7 is set forth in the Fund's Statement of Additional In-
formation under "Investment Objective, Policies and Restrictions."
OTHER FUNDAMENTAL INVESTMENT POLICIES
To maintain portfolio diversification and reduce investment risk, the Fund
may not: (1) invest 25% or more of its assets in the securities of issuers
conducting their principal business activities in any one industry; provided
that, for purposes of this restriction, there is no limitation with respect to
U.S. Government securities or certificates of deposit and bankers' acceptances
issued or guaranteed by, or interest bearing savings deposits maintained at,
banks and savings institutions and loan associations (including foreign
branches of U.S. banks and U.S. branches of foreign 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 one-quarter of its total assets it may
invest without regard to such limitation; (3) invest more than 5% of its as-
sets 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. Govern-
ment); (4) borrow money except from banks on a temporary basis or via entering
into reverse repurchase agreements in aggregate amounts not exceeding 15% of
its 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
4
<PAGE>
borrowings may not be used to purchase investments and the Fund will not pur-
chase any investment while any such borrowings exist; or (5) mortgage, pledge
or hypothecate its assets except to secure such borrowings.
As a matter of operating policy, fundamental policy number (2) would give
the Fund the ability to invest, with respect to 25% of its assets, more than
5% of its assets in any one issuer only in the event Rule 2a-7 is amended in
the future.
PURCHASE AND SALE OF SHARES
Advisor Class shares of the Fund may be purchased for cash and thereafter
exchanged for Advisor Class shares of other Alliance Mutual Funds. Under the
Alliance Dollar Cost Averaging Program, exchanges may be made automatically
each month, thus producing a dollar cost averaging effect. Exchanges also may
be made at other times of an investor's choosing. Advisor Class shares of the
Fund should be purchased for cash only as a temporary investment pending ex-
change into Advisor Class shares of another Alliance Mutual Fund and should
not be held as a long-term investment.
Advisor Class shares of the Fund also are available to holders of advisor
class shares of other Alliance Mutual Funds who wish to exchange their advisor
class shares for advisor class shares of a money market fund. Such an exchange
transaction is effected through the redemption of Alliance Mutual Fund advisor
class shares tendered for exchange and the purchase of Advisor Class shares of
the Fund at their respective net asset values as next determined. Exchange
purchases into the Fund may be made by telephone or written request.
Alliance Fund Services, Inc. ("AFS") is not responsible for the authenticity
of telephone exchange requests. AFS will employ reasonable procedures in order
to verify that telephone requests are genuine, and could be liable if it
failed to use those procedures. An exchange is a taxable capital transaction
for federal tax purposes. The Fund reserves the right to reject any order to
acquire its shares through exchange.
HOW TO BUY SHARES
The Fund offers multiple classes of shares, of which only the Advisor Class
is offered by this Prospectus. Advisor Class shares of the Fund may be pur-
chased through your financial representative at net asset value without any
initial or contingent deferred sales charges and are not subject to ongoing
distribution expenses. Advisor Class shares may be purchased and held solely
(i) through accounts established under a fee-based program, sponsored and
maintained by a registered broker-dealer or other financial intermediary, and
approved by Alliance Fund Distributors, Inc. ("AFD"), the Fund's principal un-
derwriter, pursuant to which each investor pays an asset-based fee at an an-
nual rate of at least .50% of the assets in the investor's account, to the
broker-dealer or financial intermediary, or its affiliate or agent, (ii)
through a self-directed defined contribution employee benefit plan (e.g., a
401(k) plan) that has at least 1,000 participants or $25 million in assets and
(iii) by investment advisory clients of, and certain other
5
<PAGE>
persons associated with, Alliance and its affiliates or the Fund. For more de-
tailed information about who may purchase and hold Advisor Class shares see
the Statement of Additional Information relating to Advisor Class shares. A
shareholder's Advisor Class shares will automatically convert to Class A
shares of the Fund under certain circumstances. For a more detailed descrip-
tion of the Conversion Feature and Class A shares, see "Conversion Feature."
The minimum initial investment is $250. The minimum for subsequent investments
is $50. In addition, persons investing in Advisor Class shares of the Fund
through a fee-based program may do so only if the fee-based program has an ag-
gregate of at least $250,000 invested in Advisor Class shares of Alliance Mu-
tual Funds, including the Fund. Investments of $25 or more are allowed under
the automatic investment program and under a 403(b)(7) retirement plan. Fee-
based programs through which Advisor Class shares may be purchased may impose
different requirements with respect to minimum initial and subsequent invest-
ment levels than described above. See the Subscription Application and State-
ment of Additional Information for more information.
The Fund may refuse any order to purchase Advisor Class shares. In this re-
gard, the Fund reserves the right to restrict purchases of Advisor Class
shares (including through exchanges) when there appears to be evidence of a
pattern of frequent purchases and sales made in response to short-term consid-
erations.
HOW THE FUND VALUES ITS SHARES
The net asset value of Advisor Class shares is expected to be constant at
$1.00 per share, although this price is not guaranteed. The net asset value
per share is calculated by determining the amount of assets attributable to
each class of shares, subtracting liabilities and dividing by the amount of
outstanding shares for such class. In this connection, the Fund uses the amor-
tized cost value for determining the value of the Fund's investments. Shares
are valued each day the New York Stock Exchange (the "Exchange") is open as of
the close of regular trading (currently 4:00 p.m. Eastern time).
HOW TO EXCHANGE SHARES
You may exchange your investment in Advisor Class shares of the Fund for Ad-
visor Class shares of other Alliance Mutual Funds. Exchanges of Advisor Class
shares are made at the net asset value next determined and without sales or
service charges. Exchanges may be made by telephone or written request. Tele-
phone exchange requests must be received by AFS by 4:00 p.m. Eastern time on a
Fund business day to receive that day's net asset value. Please read carefully
the prospectus of the mutual fund into which you are exchanging before submit-
ting the request. Call AFS at 800-221-5672 to exchange uncertificated shares.
An exchange is a taxable capital transaction for federal tax purposes. The ex-
change service may be changed, suspended or terminated on 60 days' written no-
tice.
HOW TO SELL SHARES
You may "redeem", i.e., sell your shares to the Fund on any day the Exchange
is open, either directly or through your financial representative. The price
you will receive is the net asset value next calculated after the Fund re-
ceives your request in proper form. Proceeds generally will be sent to you
within seven days. However,
6
<PAGE>
for shares recently purchased by check or EFT or for shares acquired in ex-
change for Alliance Mutual Fund shares recently purchased by check or EFT, the
Fund will not send proceeds until it is reasonably satisfied that the check or
EFT has been collected (which may take up to 15 days). If you are in doubt
about what documents are required by your fee-based program or employee bene-
fit plan, you should contact your financial representative.
SELLING SHARES THROUGH YOUR FINANCIAL REPRESENTATIVE
Your financial representative must receive your request before 4:00 p.m.
Eastern time, and your financial representative must transmit your request to
the Fund by 5:00 p.m. Eastern time, to receive that day's net asset value.
Your financial representative is responsible for furnishing all necessary doc-
umentation to the Fund, and may charge you for this service.
SELLING SHARES DIRECTLY TO THE FUND
Send a signed letter of instruction or stock power form to AFS, along with
certificates, if any, that represent the shares you want to sell. For your
protection, signatures must be guaranteed by a bank, a member firm of a na-
tional stock exchange or other eligible guarantor institution. Stock power
forms are available from your financial intermediary, AFS and many commercial
banks. Additional documentation is required for the sale of shares by corpora-
tions, intermediaries, fiduciaries and surviving joint owners. For details
contact:
Alliance Fund Services
P.O. Box 1520
Secaucus, NJ 07096-1520
800-221-5672
Alternatively, a request for redemption of shares for which no stock certif-
icates have been issued can also be made by telephone to 800-221-5672. Tele-
phone redemption requests must be made by 4:00 p.m. Eastern time on a Fund
business day to receive that day's net asset value and, except for certain om-
nibus accounts, may be made only once in any 30-day period. A shareholder who
has completed the Telephone Transactions section of the Subscription Applica-
tion, or the Shareholder Options form obtained from AFS, can elect to have the
proceeds of his or her redemption sent to his or her bank via an EFT. Proceeds
of telephone redemptions also may be sent by check to a shareholder's address
of record. Except for certain omnibus accounts, redemption requests by EFT may
not exceed $100,000 and redemption requests by check may not exceed $50,000.
Telephone redemption is not available for shares held in nominee or "street
name" accounts or retirement plan accounts or shares held by a shareholder who
has changed his or her address of record within the previous 30 calendar days.
See "General" below.
GENERAL
The sale or exchange of shares is a taxable transaction for federal tax pur-
poses. Under unusual circumstances, the Fund may suspend redemptions or post-
pone payment for up to seven days or longer, as permitted by federal securi-
ties law. The Fund reserves the right to close an account that through
redemption has remained be low $200 for 90 days. Shareholders will receive 60
days' written notice to increase the account value before the account is
closed.
Alliance sponsors three other money market funds, Alliance Capital Reserves,
Alliance
7
<PAGE>
MANAGEMENT OF THE FUND
Government Reserves and Alliance Municipal Trust (the "Trusts"). To obtain the
prospectus for any of the Trusts, contact AFS at the Literature telephone num-
ber on the cover of this
Prospectus.
During drastic economic or market developments, you might have difficulty in
reaching AFS by telephone, in which event you should issue written instruc-
tions to AFS. AFS is not responsible for the authenticity of telephone re-
quests to purchase, sell or exchange shares. AFS will employ reasonable proce-
dures to verify that telephone requests are genuine, and could be liable for
losses resulting from unauthorized transactions if it failed to do so. Dealers
and agents may charge a commission for handling telephone requests. The tele-
phone service may be suspended or terminated at any time without notice.
SHAREHOLDER SERVICES
AFS offers a variety of shareholder services. For more information about
these services or your account, call AFS's toll-free number, 800-221-5672.
GENERAL
If you are a Fund shareholder through an account established under a fee-
based program, your fee-based program may impose requirements with respect to
the purchase, sale or exchange of Advisor Class shares of the Fund that are
different from those described in this Prospectus. A transaction fee may be
charged by your financial representative with respect to the purchase, sale or
exchange of Advisor Class shares made through such financial representative.
The Fund offers three classes of shares other than the Advisor Class, which
are Class A, Class B and Class C. All classes of shares of the Fund have a
common investment objective and investment portfolio. Class A shares are of-
fered with an initial sales charge and pay a distribution services fee. Class
B shares have a contingent deferred sales charge (a "CDSC") and also pay a
distribution services fee. Class C shares have no initial sales charge or CDSC
as long as they are not redeemed within one year of purchase, but pay a
distribution services fee. Because Advisor Class shares have no initial sales
charge or CDSC and pay no distribution services fee, Advisor Class shares are
expected to have different performance from Class A, Class B or Class C
shares. You may obtain more information about Class A, Class B and Class C
shares, which are not offered by this Prospectus, by contacting AFS by tele-
phone at 800-221-5672 or by contacting your financial representative.
ADVISER
Alliance Capital Management L.P., a Delaware limited partnership with prin-
cipal offices at 1345 Avenue of the Americas, New York, New York 10105, has
been retained under an advisory agreement (the "Advisory Agreement") to pro-
vide investment advice and, in general, to conduct the management and invest-
ment program of the Fund, subject to the general supervision and control of
the Trustees of the Fund.
8
<PAGE>
Alliance is a leading international investment manager supervising client
accounts with assets as of June 30, 1996 totaling more than $168 billion (of
which more than $55 billion represents the assets of investment companies).
Alliance's clients are primarily major corporate employee benefit funds, pub-
lic employee retirement systems, investment companies, foundations and endow-
ment funds. The 51 registered investment companies managed by Alliance com-
prising more than 100 separate investment portfolios currently have over two
million shareholders. As of June 30, 1996, Alliance was an investment manager
of employee benefit plan assets for 33 of the Fortune 100 companies.
Alliance Capital Management Corporation, the sole general partner of, and
the owner of 1% general partnership interest in, Alliance, 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 Incor-
porated, a holding company controlled by AXA, a French insurance holding com-
pany. Certain information concerning the ownership and control of Equitable by
AXA is set forth in the Statement of Additional Information under "Management
of the Fund."
Under its Advisory Agreement with the Fund, Alliance provides investment ad-
visory services and order placement facilities for the Fund and pays all com-
pensation of Trustees and officers of the Fund who are affiliated persons of
Alliance. Alliance or its affiliates also furnish the Fund, without charge,
management supervision and assistance and office facilities and provide per-
sons satisfactory to the Fund's Trustees to serve as the Fund's officers. Un-
der the Advisory Agreement, the Fund pays Alliance a fee at the annual rate of
.25 of 1% of the first $1.25 billion of the Fund's average daily net assets;
.24 of 1% of the next $.25 billion of such assets; .23 of 1% of the next $.25
billion of such assets; .22 of 1% of the next $.25 billion of such assets; .21
of 1% of the next $1 billion of such assets, and; .20 of 1% of such average
daily net assets in excess of $3 billion. The fee is accrued daily and paid
monthly.
DISTRIBUTION SERVICES AGREEMENT
The Fund has entered into a Distribution Services Agreement with AFD with
respect to the Advisor Class shares. As interpreted by courts and administra-
tive agencies, the Glass-Steagall Act and other applicable laws and regula-
tions limit the ability of a bank or other depository institution to become an
underwriter or distributor of securities. However, in the opinion of the
Fund's management, based on the advice of counsel, these laws and regulations
do not prohibit such depository institutions from providing services for in-
vestment companies such as the administrative, accounting and other services
referred to in the Agreement. In the event that change in these laws prevented
a bank from providing such services, it is expected that other service ar-
rangements would be made and that shareholders would not be adversely affect-
ed. The State of Texas requires that shares of the Fund may be sold in that
state only by dealers or other financial institutions that are registered
there as broker-dealers.
9
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
CONVERSION FEATURE
All net income of the Fund is determined each business day at 4:00 p.m.
(Eastern time) and is paid immediately thereafter pro rata to shareholders of
record of each class via automatic investment in additional full and frac-
tional shares in each shareholder's account. As such additional shares are en-
titled to dividends on following days, a compounding growth of income occurs.
Net income consists of all accrued interest income on Fund assets less the
Fund's expenses applicable to that dividend period. Realized gains and losses
are reflected in net asset value and are not included in net income.
The Fund intends to qualify for each taxable year to be taxed as a regulated
investment company under the Internal Revenue Code of 1986, as amended, and,
as such, will not be liable for federal income and excise taxes on the invest-
ment company taxable income and net capital gains distributed to its share-
holders. For federal income tax purposes, distributions out of interest income
earned by the Fund and net realized short-term capital gains are taxable to
you as ordinary income, and distributions of net realized long-term capital
gains, if any, are taxable as long-term capital gains irrespective of the
length of time you may have held your shares. Distributions by the Fund may
also be subject to certain state and local taxes. Each year shortly after
December 31, the Fund will send you tax information stating the amount and
type of all its distributions for the year just ended.
CONVERSION TO CLASS A SHARES
Advisor Class shares may be held solely through the fee-based program ac-
counts and employee benefit plans described above under "--How to Buy Shares,"
by investment advisory clients of, and by certain persons associated with, Al-
liance and its affiliates or the Fund. If (i) a holder of Advisor Class shares
ceases to participate in a fee-based program or plan that satisfies the re-
quirements to purchase shares set forth under "--How to Buy Shares" or (ii)
the holder is otherwise no longer eligible to purchase Advisor Class shares as
described in this Prospectus (each, a "Conversion Event"), then all Advisor
Class shares held by the shareholder will convert automatically and without
notice to the shareholder, other than the notice contained in this Prospectus,
to Class A shares of the Fund during the calendar month following the month in
which the Fund is informed of the occurrence of the Conversion Event. The
failure of a shareholder or a fee-based program to satisfy the minimum invest-
ment requirements to purchase Advisor Class shares will not constitute a Con-
version Event. The conversion would occur on the basis of the relative net as-
set values of the two classes and without the imposition of any sales load,
fee or other charge.
DESCRIPTION OF CLASS A SHARES
The following sets forth maximum transaction costs, annual expenses, per share
income and
10
<PAGE>
capital changes for Class A shares of the Fund. Class A shares are subject to
a distribution fee that may not exceed an annual rate of .30%. The higher fees
mean a higher expense ratio, so Class A shares pay correspondingly lower divi-
dends and may have a lower net asset value than Advisor Class shares.
SHAREHOLDER TRANSACTION EXPENSES are one of several factors to consider when
you invest in the Fund. The following table summarizes your maximum
transaction costs from investing in Class A shares of the Fund and annual
expenses for Class A shares of the Fund. The Example below the table below
shows the cumulative expenses attributable to a hypothetical $1,000 investment
for the periods specified.
CLASS A SHARES
<TABLE>
<S> <C>
Maximum sales charge imposed on purchases (as a percentage of of-
fering price)(a)................................................. None
Sales charge imposed on dividend reinvestments.................... None
Deferred sales charge (as a percentage of original purchase price
or redemption proceeds, whichever is lower)...................... None
Exchange fee...................................................... None
ANNUAL FUND OPERATING EXPENSES
Management fees................................................... .25%
12b-1 Fees........................................................ .50
Other expenses(b)................................................. .48
----
Total fund operating expenses..................................... 1.23%
</TABLE>
EXAMPLES(a)
<TABLE>
<CAPTION>
AFTER 1 YEAR AFTER 3 YEARS AFTER 5 YEARS AFTER 10 YEARS
------------ ------------- ------------- --------------
<S> <C> <C> <C> <C>
Class A........... $13 $39 $68 $149
</TABLE>
- --------
(a) Advisor Class shares convert to Class A shares at net asset value and
without the imposition of any sales charge and accordingly the maximum
sales charge of 4.25% on most purchases of Class A shares for cash does
not apply.
(b) These expenses include a transfer agency fee payable to Alliance Fund
Services, Inc., an affiliate of Alliance, based on a fixed dollar amount
charged to the Fund for each shareholder's account.
The purpose of the foregoing table is to assist the investor in
understanding the various costs and expenses that an investor in the Fund will
bear directly or indirectly. Long-term shareholders of Class A shares of the
Fund may pay aggregate sales charges totaling more than the economic
equivalent of the maximum initial sales charges permitted by the Conduct Rules
of the National Association of Securities Dealers, Inc. "Other Expenses" are
based on estimated amounts for the Fund's current fiscal year. The Example set
forth above assumes reinvestment of all dividends and distributions and
utilizes a 5% annual rate of return as mandated by Commission regulations. The
Example should not be considered representative of past or future expenses;
actual expenses may be greater or less than those shown.
FINANCIAL HIGHLIGHTS. The following table presents per share income and
capital changes for a Class A share outstanding throughout each period
indicated. The information in the table has been audited by McGladrey &
Pullen, LLP, the independent accountants for the Fund. A report of McGladrey &
Pullen, LLP on the information with respect to the Fund appears in the Fund's
Statement of Additional
11
<PAGE>
Information. The following information should be read in conjunction with the
financial statements and related notes which are included in the Fund's
Statement of Additional Information.
<TABLE>
<CAPTION>
CLASS A
--------------------------------
YEAR ENDED MARCH 25, 1994(a)
SEPTEMBER 30, TO
1995 SEPTEMBER 30, 1994
------------- ------------------
<S> <C> <C>
Net asset value, beginning of period.......... $1.00 $1.00
------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income......................... .0453 .0126
------ ------
LESS: DISTRIBUTIONS
Dividends from net investment income.......... (.0453) (.0126)
------ ------
Net asset value, end of period................ $1.00 $1.00
====== ======
TOTAL RETURN
Total investment return based on net asset
value(b)..................................... 4.64% 2.45%(c)
====== ======
RATIOS/SUPPLEMENTAL DATA
Net Assets, end of period (in millions)....... $41 $18
Ratio of average net assets to:
Expenses, net of waivers..................... 1.21% 1.82%(c)
Expenses, before waivers..................... 1.29% 1.82%(c)
Net investment income(d)..................... 4.63% 2.62%(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 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) Net of expenses waived by Alliance Capital Management L.P.
12
<PAGE>
GENERAL INFORMATION
ORGANIZATION
AFD Exchange Reserves is a Massachusetts business trust that was organized
on January 14, 1994. It is anticipated that annual shareholder meetings will
not be held; shareholder meetings will be held only when required by federal
or state law. Shareholders have available certain procedures for the removal
of Trustees.
A shareholder in the Fund will be entitled to share pro rata with other
holders of the same class of shares all dividends and distributions arising
from the Fund's assets and, upon redeeming shares, will receive the then cur-
rent net asset value of the Fund represented by the redeemed shares. The Fund
is empowered to establish, without shareholder approval, additional portfolios
which may have different investment objectives.
Shares are normally entitled to one vote for all purposes. Generally, shares
of the Fund vote as a single series on matters, such as the election of Trust-
ees, that affect all shareholders of the Fund in substantially the same man-
ner. Advisor Class, Class A, Class B and Class C shares have identical voting,
dividend, liquidation and other rights, except that each class bears its own
transfer agency expenses, each of Class A, Class B and Class C shares bears
its own distribution expenses and Class B and Advisor Class shares convert to
Class A shares under certain circumstances. Each class of shares votes sepa-
rately with respect to matters for which separate class voting is appropriate
under applicable law. Shares are freely transferable, are entitled to divi-
dends as determined by the Trustees and, in liquidation of the Fund, are enti-
tled to receive the net assets of the Fund. Certain additional matters relat-
ing to the organization of the Fund are discussed in the Statement of
Additional Information.
REGISTRAR, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
Alliance Fund Services, Inc., an indirect wholly-owned subsidiary of Alli-
ance, located at 500 Plaza Drive, Secaucus, New Jersey 07094, acts as the
Fund's registrar, transfer agent and dividend-disbursing agent for a fee based
upon the number of shareholder accounts maintained for the Fund.
PRINCIPAL UNDERWRITER
Alliance Fund Distributors, Inc., 1345 Avenue of the Americas, New York, New
York 10105, an indirect wholly-owned subsidiary of Alliance, is the Principal
Underwriter of shares of the Fund.
ADDITIONAL INFORMATION
This Prospectus and the Statement of Additional Information, which have been
incorporated by reference herein, do not contain all the information set forth
in the Registration Statement filed by the Fund with the Commission under the
Securities Act. Copies of the Registration Statement may be obtained at a rea-
sonable charge from the Commission or may be examined, with out charge, at the
offices of the Commission in Washington, D.C. This Prospectus does not consti-
tute an offering in any state in which such offering may not lawfully be made.
13
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY STATE IN WHICH SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
<PAGE>
SIGNATURE CARD
ADVISOR CLASS ACCOUNT # AFD Exchange Reserves
(if known)
- --------------------------------------------------------------------------------
ACCOUNT NAME(S) AS REGISTERED
- --------------------------------------------------------------------------------
SOCIAL SECURITY NUMBER
- --------------------------------------------------------------------------------
AUTHORIZED SIGNATURE(S) -- for joint accounts, all owners, or their legal
representatives, must sign this card.
1...............................................................................
2...............................................................................
3...............................................................................
- --------------------------------------------------------------------------------
Check One Box [ ] All the above signatures are required on checks written
against this account.
[ ] Any one signature is acceptable on checks written against
this account.
[ ] A combination of signatures is required (specify number).
SUBJECT TO CONDITIONS PRINTED ON REVERSE SIDE.
STATE STREET BANK AND TRUST COMPANY
<PAGE>
The payment of funds is authorized by the signature(s) appearing on the reverse
side.
If this card is signed by more than one person, all checks will require all
signatures appearing on the reverse side unless a lesser number is indicated.
If no indication is given, all checks will require all signatures. Each
signatory guarantees the genuineness of the other signatures.
The Bank is hereby appointed agent by the person(s) signing this card (the
"Depositor[s]") and, as agent, is authorized and directed to present checks
drawn on this checking account to AFD Exchange Reserves ("AFDER") or its
transfer agent as requests to redeem shares of AFDER registered in the name of
the Depositor(s) in the amounts of such checks and to deposit the proceeds of
such redemptions in this checking account. The Bank shall be liable only for its
own negligence.
The Depositor(s) agrees to be subject to the rules and regulations of the Bank
pertaining to this checking account as amended from time to time. The Bank and
AFDER reserve the right to change, modify or terminate this checking account and
authorization at any time.
CHECKS MAY NOT BE FOR LESS THAN $500 or such other minimum amount as may from
time to time be established by AFDER upon prior written notice to its
shareholders. Shares purchased by check (including certified or cashier's
check) will not be redeemed within 15 calendar days of such purchase by
checkwriting or any other method of redemption.
60084GEN-AFDSC
<PAGE>
ALLIANCE SUBSCRIPTION APPLICATION
AFD EXCHANGE RESERVES
ADVISOR CLASS
- --------------------------------------------------------------------------------
Information And Instructions
- --------------------------------------------------------------------------------
TO OPEN YOUR NEW ALLIANCE ACCOUNT
Please complete the application and mail it to:
Alliance Fund Services, Inc., P.O. Box 1520, Secaucus, New Jersey
07096-1520
SIGNATURES - PLEASE BE SURE TO SIGN THE APPLICATION (SECTION 6)
If shares are registered in the name of:
o an individual, the individual should sign.
o joint tenants, both should sign.
o a custodian for a minor, the custodian should sign
o a corporation or other organization, an authorized officer should sign (please
indicate corporate office or title).
o a trustee or other fiduciary, the fiduciary or fiduciaries
should sign (please indicate capacity).
REGISTRATION
To ensure proper tax reporting to the IRS:
o Individuals, Joint Tenants and Gift/Transfer to a Minor:
- Indicate your name exactly as it appears on your social security card.
0 Trust/Other:
- Indicate the name of the entity exactly as it appeared on the notice you
received from the IRS when your Employer Identification number was
assigned.
PLEASE NOTE:
o Certain legal documents will be required from corporations or other
organizations, executors and trustees, or if a redemption is requested by
anyone other than the shareholder of record. If you have any questions
concerning a redemption, contact the Fund at the number below.
o In the case of redemptions or repurchases of shares recently purchased by
check or electronic funds transfer, redemption proceeds will not be made
available until the Fund is reasonably assured that the check or electronic
funds transfer has cleared, normally up to 15 CALENDAR DAYS following the
purchase date.
IF WE CAN ASSIST YOU IN ANY WAY, PLEASE DO NOT HESITATE TO CALL US AT: 1-(800)
221-5672.
<PAGE>
- --------------------------------------------------------------------------------
SUBSCRIPTION APPLICATION
- --------------------------------------------------------------------------------
AFD Exchange Reserves
(see instructions at the front of the application)
- --------------------------------------------------------------------------------
1. Your Account Registration (Please Print)
- --------------------------------------------------------------------------------
[ ] INDIVIDUAL OR JOINT ACCOUNT
[ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]
Owner's Name (First Name) (MI) (Last Name)
[ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]
Social Security Number (Required to open account)
[ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]
Joint Owner's Name* (First Name) (MI) (Last Name)
*Joint Tenants with right of survivorship unless otherwise indicated.
[ ] GIFT/TRANSFER TO A MINOR
[ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]
Custodian - One Name Only (First Name) (MI) (Last Name)
[ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]
Minor's Name First Name (MI) (Last Name)
[ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]
Minor's Social Security Number (Required to open account)
Under the State of __ (Minor's Residence) Uniform Gifts/Transfer to Minor's
Act
[ ] TRUST ACCOUNT
[ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]
Name of Trustee
[ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]
Name of Trust
[ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]
Name of Trust (cont'd)
[ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]
Trust Dated Tax ID or Social Security Number (Required to open account)
[ ] OTHER
[ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]
Name of Corporation, Partnership, Investment only retirement plan, or other
Entity
[ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]
Tax ID Number Trustee Name (Retirement Plans only)
- --------------------------------------------------------------------------------
2. Address
- --------------------------------------------------------------------------------
[ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]
Street
[ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]
City State Zip Code
[ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]
If Non-U.S., Specify Country
[ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]
Daytime Phone Evening Phone
I am a: [ ]U.S. Citizen [ ]Non-Resident [ ] Resident Alien
[ ]Other___________________________
[ ]
For Alliance Use Only
[ ]
<PAGE>
- --------------------------------------------------------------------------------
3. Initial Investment
- --------------------------------------------------------------------------------
Minimum: $250. Make all checks payable to AFD Exchange Reserves.
I hereby subscribe for Advisor Class shares of AFD Exchange Reserves
to be purchased with the enclosed check or draft for $______________________.
AFD Exchange Reserves may be used to meet the needs of an investor who wishes to
establish a dollar cost averaging program into other like classes of Alliance
Mutual Funds. See "Shareholder Options, Section 5D", below.
--------------------------------
DEALER USE ONLY
WIRE CONFIRM NO.:
--------------------------------
- --------------------------------------------------------------------------------
4. Distribution Options
- --------------------------------------------------------------------------------
If no box is checked, all distributions will be reinvested in additional shares
of the Fund
Income Dividends: (elect one)
[ ]Reinvest dividends
[ ]Pay dividends in cash
[ ]Use Dividend Direction Plan
Capital Gains Distribution: (elect one)
[ ]Reinvest capital gains
[ ]Pay capital gains in cash
[ ]Use Dividend Direction Plan
If you elect to receive your income dividends or capital gains distributions in
cash, please enclose a PREPRINTED VOIDED CHECK from the bank account you wish to
have your dividends deposited into.
If you wish to utilize the Dividend Direction Plan, please designate the
Alliance account you wish to have your dividends reinvested in:
- ----------------------------------- -------------------------------------------
Name Existing Account No.
- --------------------------------------------------------------------------------
5. Shareholder Options
- --------------------------------------------------------------------------------
A. AUTOMATIC INVESTMENT PROGRAM (AIP)
I hereby authorize Alliance Fund Services, Inc. to draw on my bank account,
on or about the ____day of each month, for a monthly investment in my Fund
account in the amount of $_____(minimum $25 per month). Please attach a
PREPRINTED VOIDED CHECK from the bank account you wish to use.
NOTE: Your bank must be a member of the National Automated Clearing
House Association.
The Fund requires signatures of bank account owners exactly as they appear
on bank records.
- ------------------------- ---------------- ------------------ --------------
Individual Account Date Joint Account Date
<PAGE>
B. TELEPHONE TRANSACTIONS
You can call our toll-free number 1-800-221-5672 and instruct Alliance Fund
Services, Inc. in a recorded conversation to purchase, redeem or exchange
shares for your account. Purchase and redemption requests will be processed
via electronic funds transfer (EFT) to and from your bank account.
Instructions: o Review the information in the Prospectus about telephone
transaction services.
o Check the box next to the telephone transaction service(s) you
desire.
o If you select the telephone purchase or redemtion privilege,
you must write "VOID" across the face of a check from the bank
account you wish to use and attach it to this application.
PURCHASES AND REDEMPTIONS VIA EFT
[ ] I hereby authorize Alliance Fund Services, Inc. to effect the purchase
and/or redemption of Fund shares for my account according to my telephone
instructions or telephone instructions from my Broker/Agent, and to withdraw
money or credit money for such shares via EFT from the bank account I have
selected.
The Fund requires signatures of bank account owners exactly as they appear on
bank records.
- -------------------------- ----------- ---------------------- -------------
Individual Account Owner Date Joint Account Owner Date
C. SYSTEMATIC WITHDRAWAL PALN (SWP)
In order to establish a SWP, an investor must own or purchase shares of the
Fund having a current net asset value of at least:
o $10,000 for monthly payments;
o $5,000 for bi-monthly payments;
o $4,000 for quarterly or less frequent payments
[ ] I authorize this service to begin in ________, 19__, for the amount of
$___________($50.00 minimum)
Frequency: (Please select one)
Month
[ ]Monthly [ ]Bi-Monthly [ ]Quarterly [ ]Annually [ ]In the months circled:
J F M A M J J A S O N D
Please send payments to: (please select one)
[ ] My checking account. Select the date of the month on or about which you wish
the EFT payments to be made:_________.
Pleae enclose a PREPRINTED VOIDED CHECK to ensure accuracy.
[ ] My address of record designated in Section 2.
[ ] The payee and address specified below:
- --------------------------------------------------------------------------------
Name of Payee Address
- --------------------------------------------------------------------------------
City State Zip
D. ALLIANCE DOLLAR COST AVERAGING PROGRAM (ADCAP)
[ ] I authorize Alliance Fund Services, Inc. to transact monthly exchanges
with the same class of share from my Fund account, into the Alliance
Fund(s) listed below:
Dollar Amount Day of Exchange** "To" Fund Account #
($25 minimum) (1st thru 31st) "To" Fund Name (if existing)
[ ]New
[ ]Existing
- ---------------- ------------------ -------------- ---------------------
[ ]New
[ ]Existing
- ---------------- ------------------ -------------- ---------------------
[ ]New
[ ]Existing
- ---------------- ------------------ -------------- ---------------------
[ ]New
[ ]Existing
- ---------------- ------------------ -------------- ---------------------
Exchanges of Advisor Class shares are made at the net asset value next
determined.
Certificates must remain unissued.
** If the date selected for the exchange is not a Fund business day the
transaction will be processed on the next Fund business day.
<PAGE>
- --------------------------------------------------------------------------------
6. Shareholder Authorization This section MUST be completed
----
- --------------------------------------------------------------------------------
TELEPHONE EXCHANGES AND REDEMPTIONS BY CHECK
Unless I have checked one or both boxes below, these privileges will
automatically apply, and by signing this application, I hereby authorize
Alliance Fund Services,Inc. to act on my telephone instructions, or on telephone
instructions from any person representing himself to be an authorized employee
of an investment dealer or agent requesting a redemption or exchange on my
behalf. (NOTE: Telephone exchanges may only be processed between accounts that
have identical registrations.) Telephone redemption checks will only be mailed
to the name and address of record; and the address must have no change within
the last 30 days. The maximum telephone redemption amount is $50,000. This
service can be enacted once every 30 days.
[ ]I do not elect the telephone exchange service.
---
[ ]I do not elect the telephone redemption by check service.
---
I CERTIFY UNDER PENALTY OF PERJURY THAT THE NUMBER SHOWN IN SECTION 1 OF THIS
FORM IS MY CORRECT TAX IDENTIFICATION NUMBER OR SOCIAL SECURITY NUMBER AND THAT
I HAVE NOT BEEN NOTIFIED THAT THIS ACCOUNT IS SUBJECT TO BACKUP WITHHOLDING.
By selecting any of the above telephone privileges, I agree that neither the
Fund nor Alliance, Alliance Fund Distributors, Inc., Alliance Fund Services,
Inc. or other Fund Agent will be liable for any loss, injury, damage or expense
as a result of acting upon telephone instructions purporting to be on my behalf,
that the Fund reasonably believes to be genuine, and that neither the Fund nor
any such party will be responsible for the authenticity of such telephone
instructions. I understand that any or all of these privileges may be
discontinued by me or the Fund at any time. I understand and agree that the
Fund reserves the right to refuse any telephone instructions and that my
investment dealer or agent reserves the right to refuse to issue any telephone
instructions I may request.
For non-residents only: Under penalties of perjury, I certify that to the best
of my knowledge and belief, I qualify as a foreign person as indicated in
Section 2.
I am of legal age and capacity and have received and read the Prospectus and
agree to its terms.
The Internal Revenue Service does not require your consent to any provision of
this document other than the certification required to avoid back-up
withholding.
- --------------------------------------------------------------------------------
Signature Date
- --------------------------------------------------------------------------------
Signature Date Acceptance Date:
- --------------------------------------------------------------------------------
Dealer/Agent Authorization For selected Dealers or Agents ONLY.
- --------------------------------------------------------------------------------
We hereby authorize Alliance Fund Services, Inc. to act as our agent in
connection with transactions under this authorization form; and we guarantee the
signature(s) set forth in Section 6, as well as the legal capacity of the
shareholder.
Dealer/Agent Firm_________________________ Authorized Signature_________________
Representative First Name_______________MI_______________Last Name______________
<PAGE>
AFD PRO 2/96
This prospectus does not constitute an offering in any state in which such
offering may not lawfully be made.
TABLE OF CONTENTS PAGE
- ---------------------------------------
<TABLE>
<S> <C>
Expense Information 2
Description of the Fund 3
Purchase and Sale of Shares 5
Management of the Fund 8
Dividends, Distributions and Taxes 10
Conversion Feature 10
General Information 13
</TABLE>
ADVISER
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, NY 10105
AFD
-------------
Exchange
-------------
Reserves
-------------
Prospectus
(Advisor Class)
October 1, 1996
Goal: Maximum current income consistent with safety of principal and liquidity.
ALLIANCE(R)
INVESTING WITHOUT THE MYSTERY.(SM)
This is filed pursuant to Rule 497(c).
File Nos. 33-74230 and 811-08294.
(LOGO) AFD EXCHANGE RESERVES
_________________________________________________________________
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618
STATEMENT OF ADDITIONAL INFORMATION
(Advisor Class)
October 1, 1996
This Statement of Additional Information relating to Advisor
Class shares of AFD Exchange Reserves (the "Fund") is not a
prospectus but supplements and should be read in conjunction with
the Fund's current Prospectus relating to Advisor Class shares
(the "Advisor Class Prospectus"). Copies of the Advisor Class
Prospectus may be obtained by contacting Alliance Fund Services,
Inc. at the address or the "For Literature" telephone number
shown above.
TABLE OF CONTENTS
Page
Investment Objective, Policies
and Restrictions ............................... 2
Management of the Fund............................ 2
Expenses of the Fund.............................. 5
Purchase of Shares................................ 6
Redemption and Repurchase of Shares............... 12
Shareholder Services.............................. 16
Daily Dividends--Determination of
Net Asset Value................................. 22
Taxes............................................. 22
Portfolio Transactions............................ 22
General Information............................... 22
Financial Statements and
Independent Auditor's Report...................... 24
Appendix--Commercial Paper and
Bond Ratings.................................... A-1
(R) This registered service mark used under license from the
owner, Alliance Capital Management L.P.
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
Incorporated by reference from the section "Investment
Objective, Policies and Restrictions" contained in the Statement
of Additional Information ofthe Fund dated February 1, 1996
relating to Class A, Class B and Class C shares of the Fund as
filed with the Securities and Exchange Commission (the
"Commission") pursuant to Rule 497(c) on February 13, 1996 (file
nos. 33-74230 and 811-08294) (the "Rule 497 SAI").
Capitalized terms used herein that are not otherwise
defined herein are used as defined in the Rule 497 SAI.
MANAGEMENT OF THE FUND
Incorporated by reference from the section "Management
of the Fund" contained in the Rule 497 SAI, except that the sub-
section "Officers" and the first, second, third and fourth
paragraphs of the sub-section "The Adviser" are restated as set
forth below:
Officers
KATHLEEN A. CORBET - Senior Vice President, 36, 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 1991.
WAYNE D. LYSKI - Senior Vice President, 54, is an
Executive Vice President of ACMC, with which he has been
associated since prior to 1991.
JOHN F. CHIODI, Jr. - Vice President, 30, is a Vice
President of ACMC, with which he has been associated since prior
to 1991.
PAMELA F. RICHARDSON - Vice President, 43, is a Vice
President of ACMC, with which she has been associated since prior
to 1991.
MARK D. GERSTEN - Treasurer and Chief Financial Officer,
46, is a Senior Vice President of Alliance Fund Services, Inc.
2
and a Vice President of Alliance Fund Distributors, Inc., with
which he has been associated since prior to 1991.
EDMUND P. BERGAN - Jr. - Secretary, 45, is a Senior Vice
President and General Counsel of Alliance Fund Distributors, Inc.
and Alliance Fund Services, Inc. and Vice President and Associate
General Counsel of ACMC, with which he has been associated since
prior to 1991.
JOSEPH J. MANTINEO - Controller, 36, is a Vice President
of Alliance Fund Services, Inc., with which he has been
associated since prior to 1991.
VINCENT S. NOTO - Assistant Controller, 31, is a Money
Market Fund Manager, Mutual Funds of Alliance Fund Services,
Inc., with which he has been associated since prior to 1991.
EMILIE D. WRAPP - Assistant Secretary, 40, is Special
Counsel and Vice President of AFD, with which she has been
associated since prior to 1991.
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
Trustees during its fiscal period ended September 30, 1995, and
the aggregate compensation paid to each of the Trustees during
calendar year 1995 by all of the registered investment companies
to which Alliance provides investment advisory services
(collectively, the "Alliance Fund Complex"), are set forth below.
Each of the Trustees is a director or trustee of one or more
other registered investment companies in the Alliance Fund
Complex.
Total Total Number of
Compensation funds in the Alliance
Aggregate From the Alliance Fund Complex, Including
Name of Compensation Fund Complex, the Fund, as to which
Trustee of from the including the Trustee is a
the Fund Fund the Fund Director or Trustee
__________ ____________ _________________ ______________________
John D. Carifa $-0- $-0- 50
Ruth Block $3,000 $159,000 37
David H. Dievler $2,250 $179,200 43
John H. Dobkin $3,000 $117,200 30
William H. Foulk, Jr. $3,000 $143,500 31
Dr. James M. Hester $3,000 $156,000 38
Clifford L. Michel $2,750 $131,500 37
Robert C. White $3,000 $133,200 36
3
As of September 30, 1996, the Trustees and officers of
the Fund as a group owned less than 1% of the shares of the Fund.
The Adviser
Alliance Capital Management L.P., a New York Stock
Exchange listed company with principal offices at 1345 Avenue of
the Americas, New York, New York 10105, has been retained under
an investment advisory agreement (the "Advisory Agreement") 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.
Alliance is a leading international investment manager
supervising client accounts with assets as of June 30, 1996 of
more than $168 billion (of which more than $55 billion
represented the assets of investment companies). Alliance's
clients are primarily major corporate employee benefit funds,
public employee retirement systems, investment companies,
foundations and endowment funds. As of June 30, 1996, Alliance
was an investment manager of employee benefit fund assets for 33
of the FORTUNE 100 companies. As of that date, Alliance and its
subsidiaries employed approximately 1,450 employees who operated
out of domestic offices and the offices of subsidiaries in
Bombay, Istanbul, London, Paris, Sao Paulo, Sydney, Tokyo,
Toronto, Bahrain, Luxembourg and Singapore. The 51 registered
investment companies comprising more than 100 separate investment
portfolios managed by Alliance currently have more than two
million shareholders.
Alliance Capital Management Corporation, the sole
general partner of, and the owner of a 1% general partnership
interest in, Alliance, is an indirect wholly-owned subsidiary of
The Equitable Life Assurance Society of the United States
("Equitable"), one of the largest life insurance companies in the
United States and a wholly-owned subsidiary of The Equitable
Companies Incorporated ("ECI"), a holding company controlled by
AXA, a French insurance holding company. As of June 30, 1996,
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
Alliance ("Units"). As of June 30, 1996, approximately 33% and
10% of the Units were owned by the public and employees of
Alliance and its subsidiaries, respectively, including employees
of Alliance who serve as Directors of the Fund.
As of September 6, 1996, AXA and its subsidiaries owned
approximately 60.7% of the issued and outstanding shares of
capital stock of ECI. AXA is a holding company for an
4
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
in more than 20 countries, including France, the United States,
Australia, the United Kingdom, Canada and other countries,
principally in Western Europe 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 September 9,
1996, 36.3% of the issued ordinary shares (representing 49.1% of
the voting power) of AXA were owned directly or indirectly by
Finaxa, a French holding company ("Finaxa"). As of September 6,
1996, 61.3% of the voting shares (representing 73.5% of the
voting power) of Finaxa were owned by five French mutual
insurance companies (the "Mutuelles AXA") (one of which, AXA
Assurances I.A.R.D. Mutuelle, owned 34.8% of the voting shares
representing 40.6% of the voting power), and 23.7% of the voting
shares of Finaxa (representing 15.0% of the voting power) were
owned by Banque Paribas, a French bank. Including the ordinary
shares directly or indirectly owned by Finaxa, the Mutuelles AXA
directly or indirectly owned 42.0% of the issued ordinary shares
(representing 56.8% of the voting power) of AXA as of September
9, 1996. Acting as a group, the Mutuelles AXA control AXA and
Finaxa. In addition, as of September 9, 1996, 7.8% of the issued
ordinary shares of AXA without the power to vote were owned by
subsidiaries of AXA.
EXPENSES OF THE FUND
Distribution Services Agreement
The Fund has entered into a Distribution Services
Agreement (the "Agreement") with Alliance Fund Distributor, Inc.,
the Fund's principal underwriter (the "Principal Underwriter"),
to permit the Principal Underwriter to distribute the Fund's
Advisor Class shares.
The Agreement became effective on March 14, 1994, and
was amended as of July 19, 1996 to permit the distribution of the
Advisor Class shares. The amendment to the Agreement was
approved by a vote of the Trustees on July 19, 1996.
The Agreement will continue in effect for successive
twelve-month periods with respect to Advisor Class shares
5
(computed from each October 1) provided, however, that such
continuance is specifically approved at least annually by the
Trustees of the Fund 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 the Trustees of
the Fund who are not parties to the Agreement or interested
persons, as defined in the 1940 Act, of any such party (other
than as trustees of the Fund). All amendments to the Agreement
must be approved by a vote of the Trustees of the Fund.
Transfer Agency Agreement
Alliance Fund Services, Inc., an indirect wholly-owned
subsidiary of Alliance, receives a transfer agency fee per
account holder of each Class A, Class B, Class C and Advisor
Class share of the Fund, plus reimbursement for out-of-pocket
expenses. For the fiscal year ended September 30, 1995, the Fund
paid Alliance Fund Services, Inc. $144,631 for transfer agency
services.
PURCHASE OF SHARES
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares."
General
If you are a Fund shareholder through an account
established under a fee-based program, your fee-based program may
impose requirements with respect to the purchase, sale or
exchange of Advisor Class shares of the Fund that are different
from those described in the Prospectus and this Statement of
Additional Information. A transaction fee may be charged by your
financial representative with respect to the purchase or sale of
Advisor Class shares made through such financial representative.
Advisor Class shares of the Fund are offered on a
continuous basis at a price equal to their net asset value.
Advisor Class shares of the Fund are available to holders of
shares of other Alliance Mutual Funds who wish to exchange their
shares for shares of a money market fund and also may be
purchased for cash.
Class A, Class B, Class C and Advisor Class shares each
represent an interest in the same portfolio of investments of the
Fund, have the same rights and are identical in all respects,
except that (i) Class A and Class B shares bear the expense of
6
their respective contingent deferred sales charges, (ii) Class B
and Class C shares bear the expense of a higher distribution
services fee and higher transfer agency costs, (iii) each of
Class A, Class B and Class C shares has exclusive voting rights
with respect to provisions of the Rule 12b-1 Plan pursuant to
which its distribution services fee is paid and other matters for
which separate class voting is appropriate under applicable law,
provided that, if the Fund submits to a vote of the Class A
shareholders an amendment to the Rule 12b-1 Plan that would
materially increase the amount to be paid thereunder with respect
to the Class A shares, then such amendment will also be submitted
to the Class B shareholders and the Advisor Class shareholders
and the Class A shareholders, the Class B shareholders and the
Advisor Class shareholders will vote separately by class, and
(iv) Class B and Advisor Class shares are subject to a conversion
feature. Each class has different exchange privileges and
certain different shareholder service options available.
Investors may purchase and hold Advisor Class shares of
the Fund solely (i) through accounts established under fee-based
programs, sponsored and maintained by registered broker-dealers
or other financial intermediaries and approved by the Principal
Underwriter, pursuant to which each investor pays an asset-based
fee at an annual rate of at least .50% of the assets in the
investor's account, to the sponsor, or its affiliate or agent,
(ii) through self-directed defined contribution employee benefit
plans (e.g., 401(k) plans) that have at least 1,000 participants
or $25 million in assets or (iii) by the categories of investors
described in clauses (a), (b) and (c) below:
(a) investment management clients of Alliance or its
affiliates;
(b) officers and present or former Directors of the
Fund; present or former directors and trustees of
other investment companies managed by Alliance;
present or retired full-time employees of
Alliance, the Principal Underwriter, Alliance Fund
Services, Inc. and their affiliates; officers and
directors of ACMC, the Principal Underwriter,
Alliance Fund Services, Inc. and their affiliates;
officers, directors and present full-time
employees of selected dealers or agents; or the
spouse, sibling, direct ancestor or direct
descendent (collectively, "relatives") of any such
person; or any trust, individual retirement
account or retirement plan account for the benefit
of any such person or relative; or the estate of
any such person or relative; and
7
(c) Alliance, Principal Underwriter, Alliance Fund
Services, Inc. and their affiliates; certain
employee benefit plans for employees of Alliance,
the Principal Underwriter, Alliance Fund Services,
Inc. and their affiliates.
The respective per share net asset values of the
Class A, Class B, Class C and Advisor Class shares are expected
to be substantially the same. Under certain circumstances,
however, the per share net asset values of the Class B and
Class C shares may be lower than the per share net asset value of
the Class A and Advisor Class shares, as a result of the
differential daily expense accruals of the distribution and
transfer agency fees applicable with respect to those classes of
shares. Even under those circumstances, the per share net asset
values of the four classes eventually will tend to converge
immediately after the payment of dividends, which will differ by
approximately the amount of the expense accrual differential
among the classes.
Acquisitions By Exchange
An exchange is effected through the redemption of the
Alliance Mutual Fund shares tendered for exchange and the
purchase of shares of the Fund at net asset values as next
determined following receipt by the Alliance Mutual Fund whose
shares are being exchanged of (i) proper instructions and all
necessary supporting documents as described in such Fund's
Prospectus, or (ii) a telephone request for such exchange in
accordance with the procedures set forth in the following
paragraph. Exchanges involving the redemption of shares recently
purchased by check will be permitted only after the Alliance
Mutual Fund whose shares have been tendered for exchange is
reasonably assured that the check has cleared, normally up to 15
calendar days following the purchase date. Exchanges of shares
of Alliance Mutual Funds will generally result in the realization
of a capital gain or loss for federal income tax purposes.
You may exchange your investment in the Fund for shares
of the same class of other Alliance Mutual Funds. In addition,
(i) present officers and full-time employees of Alliance, (ii)
present Directors or Trustees of any Alliance Mutual Fund and
(iii) certain employee benefit plans for employees of Alliance,
the Principal Underwriter, Alliance Fund Services, Inc. and their
affiliates may, on a tax-free basis, exchange Class A shares of
the Fund for Advisor Class shares of the Fund. Exchanges of
shares are made at the net asset value next determined and
without sales or services charges. Exchanges may be made by
telephone or written request. Telephone exchange requests must
be received by Alliance Fund Services, Inc. by 4:00 p.m. Eastern
8
time on a Fund business day in order to receive that day's net
asset value.
Each Fund shareholder, and the shareholder's selected
dealer, agent or financial representative, as applicable, are
authorized to make telephone requests for exchanges unless
Alliance Fund Services, Inc. receives written instructions to the
contrary from the shareholder, or the shareholder declines the
privilege by checking the appropriate box on the Subscription
Application found in the Prospectus. Such telephone requests
cannot be accepted with respect to shares then represented by
stock certificates. Shares acquired pursuant to a telephone
request for exchange will be held under the same account
registration as the shares redeemed through such exchange.
Eligible shareholders desiring to make an exchange
should telephone Alliance Fund Services, Inc. with their account
number and other details of the exchange, at (800) 221-5672
between 9:00 a.m. and 4:00 p.m., Eastern time, on a Fund business
day. A Fund business day is any day the Exchange is open for
trading. Telephone requests for exchange received before
4:00 p.m. Eastern time on a Fund business day will be processed
as of the close of business on that day. During periods of
drastic economic or market developments, such as the market break
of October 1987, it is possible that shareholders would have
difficulty in reaching Alliance Fund Services, Inc. by telephone
(although no such difficulty was apparent at any time in
connection with the 1987 market break). If a shareholder were to
experience such difficulty, the shareholder should issue written
instructions to Alliance Fund Services, Inc. at the address shown
on the cover of this Statement of Additional Information.
Purchases for Cash
Advisor Class shares of the Fund should be purchased for
cash only as a temporary investment pending exchange into another
Alliance Mutual Fund and should not be held as a long-term
investment. Advisor Class shares are offered for purchase for
cash on a continuous basis without any initial, contingent
deferred or asset-based sales charge at a price equal to their
net asset value through (i) investment dealers that are members
of the National Association of Securities Dealers, Inc. and have
entered into selected dealer agreements with the Principal
Underwriter ("selected dealers"), (ii) depositary institutions
and other financial intermediaries or their affiliates that have
entered into selected agent agreements with the Principal
Underwriter ("selected agents") or (iii) the Principal
Underwriter. As described under "Shareholder Services," the Fund
offers an automatic investment program and a 403(b)(7) retirement
plan which permit investments of $25 or more. The subscriber may
use the Subscription Application found in the Prospectus for his
9
or her initial investment. Sales personnel of selected dealers
and agents distributing the Fund's shares may receive differing
compensation for selling Class A, Class B, Class C or Advisor
Class shares.
The Fund will accept unconditional orders for its
Advisor Class shares to be executed at the public offering price
equal to their net asset value next determined as described
below. Orders received by the Principal Underwriter prior to the
close of regular trading on the New York Stock Exchange (the
"Exchange") on each day the Exchange is open for trading are
priced at the net asset value computed as of the close of regular
trading on the Exchange on that day. In the case of orders for
purchase of Advisor Class shares placed through a shareholder's
selected dealer, agent or financial representatives, the
applicable public offering price will be the net asset value as
so determined, but only if the selected dealer, agent or
financial representative receives the order prior to the close of
regular trading on the Exchange and transmits it to the Principal
Underwriter prior to its close of business that same day
(normally 5:00 p.m. Eastern time). The selected dealer, agent or
financial representative, as applicable, is responsible for
transmitting such orders by 5:00 p.m. If the selected dealer,
agent or financial representative fails to do so, the investor's
right to that day's closing price must be settled between the
investor and the selected dealer, agent or financial
representative. If the selected dealer, agent or financial
representative, as applicable, receives the order after the close
of regular trading on the Exchange, the price will be based on
the net asset value determined as of the close of regular trading
on the Exchange on the next day it is open for trading.
Following the initial purchase for cash of Advisor Class
shares, a shareholder may place orders to purchase additional
Advisor Class shares for cash by telephone if the shareholder has
completed the appropriate portion of the Subscription Application
or an "Autobuy" application obtained by calling the "For
Literature" telephone number shown on the cover of this Statement
of Additional Information. Except with respect to certain
omnibus accounts, telephone purchase orders may not exceed
$500,000. Payment for Advisor Class shares purchased by
telephone can be made only by Electronic Funds Transfer from a
bank account maintained by the shareholder at a bank that is a
member of the National Automated Clearing House Association
("NACHA"). If a shareholder's telephone purchase request is
received before 3:00 p.m. Eastern time on a Fund business day,
the order to purchase Advisor Class shares is automatically
placed the following Fund business day, and the applicable public
offering price will be the public offering price determined as of
the close of business on such following business day. Full and
10
fractional Advisor Class shares are credited to a subscriber's
account in the amount of his or her subscription.
The per share net asset value of the Advisor Class
shares is computed in accordance with the Fund's Agreement and
Declaration of Trust as of the next close of regular trading on
the Exchange (currently 4:00 p.m. Eastern time) by dividing the
value of the Fund's total assets, less its liabilities, by the
total number of its shares then outstanding. For purposes of
this computation, the securities in the Fund's portfolio are
valued at their amortized cost value. For more information
concerning the amortized cost method of valuation of securities,
see "Daily Dividends--Determination of Net Asset Value."
The Fund may refuse any order for the purchase of
Advisor Class shares. The Fund reserves the right to suspend the
sale of its Advisor Class shares to the public in response to
conditions in the securities markets or for other reasons. In
addition, the Fund reserves the right, at any time on 60 days'
written notice to its shareholders, to reject any order to
acquire its shares through exchange or otherwise to modify,
restrict or terminate the exchange privilege.
All Advisor Class shares purchased are confirmed to each
shareholder and are credited to his or her account at the net
asset value. As a convenience to the Subscriber, and to avoid
unnecessary expense to the Fund, stock certificates representing
shares of the Fund are not issued except upon written request to
the Fund by the Shareholder or his or her authorized selected
dealer or agent. This facilitates later redemption and relieves
the shareholder of the responsibility for and inconvenience of
lost or stolen certificates. No certificates are issued for
fractional shares, although such shares remain in the
shareholder's account on the books of the Fund. Advisor Class
shares for which certificates have been issued are not eligible
for any of the optional methods of withdrawal, namely, the
telephone, check-writing or periodic redemption procedures. The
Fund reserves the right to reject any purchase order.
Advisor Class shares of the Fund are offered to holders
of Advisor Class shares of other Alliance Mutual Funds without
any sales charge at the time of purchase or redemption.
The Trustees of the Fund have determined that currently
no conflict of interest exists among the Class A, Class B
Class C and Advisor Class shares. On an ongoing basis, the
Trustees of the Fund, pursuant to their fiduciary duties under
the 1940 Act and state laws, will seek to ensure that no such
conflict arises.
11
Conversion of Advisor Class Shares to Class A Shares
Advisor Class shares may be held solely through the fee-
based program accounts and employee benefit plans described above
under "Purchase of Shares--General," by investment advisory
clients of, and certain other persons associated with, Alliance
and its affiliates or the Fund. If (i) a holder of Advisor Class
shares ceases to participate in a fee-based program or plan that
satisfies the requirements to purchase shares set forth under
"Purchase of Shares--General" or (ii) the holder is otherwise no
longer eligible to purchase Advisor Class shares as described in
the Advisor Class Prospectus and this Statement of Additional
Information (each, a "Conversion Event"), then all Advisor Class
shares held by the shareholder will convert automatically and
without notice to the shareholder, other than the notice
contained in the Advisor Class Prospectus and this Statement of
Additional Information, to Class A shares of the Fund during the
calendar month following the month in which the Fund is informed
of the occurrence of the Conversion Event. The failure of a
shareholder or a fee-based program to satisfy the minimum
investment requirements to purchase Advisor Class shares will not
constitute a Conversion Event. The conversion would occur on the
basis of the relative net asset values of the two classes and
without the imposition of any sales load, fee or other charge.
Class A shares currently bear a .30% distribution services fee
and have a higher expense ratio than Advisor Class shares. As a
result, Class A shares may pay correspondingly lower dividends
and have a lower net asset value than Advisor Class shares.
The conversion of Advisor Class shares to Class A shares
is subject to the continuing availability of an opinion of
counsel to the effect that the conversion of Advisor Class shares
to Class A shares does not constitute a taxable event under
federal income tax law. The conversion of Advisor Class shares
to Class A shares may be suspended if such an opinion is no
longer available at the time such conversion is to occur. In
that event, the Advisor Class shareholder would be required to
redeem his Advisor Class shares, which would constitute a taxable
event under federal income tax law.
____________________________________________________________
REDEMPTION AND REPURCHASE OF SHARES
____________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares--How to Sell Shares."
12
Redemption
Subject only to the limitations described below, the
Fund will redeem Advisor Class shares tendered to it, as
described below, at a redemption price equal to their net asset
value, which is expected to remain constant at $1.00 per share,
following the receipt of Advisor Class shares tendered for
redemption in proper form. Payment of the redemption price will
be made within seven days after the Fund's receipt of such tender
for redemption. If a shareholder is in doubt about what
documents are required by his or her fee-based program or
employee benefit plan, the shareholder should contact his or her
financial representative.
The right of redemption may not be suspended or the date
of payment upon redemption postponed for more than seven days
after Advisor Class shares are tendered for redemption, except
for any period during which the Exchange is closed (other than
customary weekend and holiday closings) or during which the
Commission determines that trading thereon is restricted, or for
any period during which an emergency (as determined by the
Commission) exists as a result of which disposal by the Fund of
securities owned by it is not reasonably practicable or as a
result of which it is not reasonably practicable for the Fund
fairly to determine the value of its net assets, or for such
other periods as the Commission may by order permit for the
protection of security holders of the Fund.
Payment of the redemption price may be made either in
cash or in portfolio securities (selected at the discretion of
the Trustees of the Fund and taken at their value used in
determining the redemption price), or partly in cash and partly
in portfolio securities. However, payments will be made wholly
in cash unless the Trustees believe that economic conditions
exist which would make such a practice detrimental to the best
interests of the Fund.
The value of a shareholder's Advisor Class shares on
redemption or repurchase may be more or less than the cost of
such Advisor Class shares to the shareholder, depending upon the
market value of the Fund's portfolio securities at the time of
such redemption or repurchase . Payment (either in cash or in
portfolio securities) received by a shareholder upon redemption
or repurchase of his or her Advisor Class shares, assuming the
Advisor Class shares constitute capital assets in his hands, will
result in long-term or short-term capital gains (or loss)
depending upon the shareholder's holding period and basis in
respect of the Advisor Class shares redeemed.
To redeem Advisor Class shares of the Fund for which no
stock certificates have been issued, the registered owner or
13
owners should forward a letter to the Fund containing a request
for redemption. The signature or signatures on the letter must
be guaranteed by an "eligible guarantor institution" as defined
in Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended.
To redeem Advisor Class shares of the Fund represented
by stock certificates, the investor should forward the
appropriate stock certificate or certificates, endorsed in blank
or with blank stock powers attached, to the Fund with the request
that the Advisor Class shares represented thereby, or a specified
portion thereof, be redeemed. The stock assignment form on the
reverse side of each stock certificate surrendered to the Fund
for redemption must be signed by the registered owner or owners
exactly as the registered name appears on the face of the
certificate or, alternatively, a stock power signed in the same
manner may be attached to the stock certificate or certificates
or, where tender is made by mail, separately mailed to the Fund.
The signature or signatures on the assignment form must be
guaranteed in the manner described above.
Telephone Redemption By Electronic Funds Transfer. Each
Fund shareholder is entitled to request redemption by Electronic
Funds Transfer once in any 30 day period (except for certain
omnibus accounts) of Advisor Class shares for which no stock
certificates have been issued by telephone at (800) 221-5672 by a
shareholder who has completed the appropriate portion of the
Subscription Application or, in the case of an existing
shareholder, an "Autosell" application obtained from Alliance
Fund Services, Inc. A telephone redemption request may not
exceed $100,000 (except for certain omnibus accounts) and must be
made by 4:00 p.m. Eastern time on a Fund business day as defined
above. Proceeds of telephone redemptions will be sent by
Electronic Funds Transfer to a shareholder's designated bank
account at a bank selected by the shareholder that is a member of
the NACHA.
Telephone Redemption By Check. Except for certain
omnibus accounts or as noted below, each Fund shareholder is
eligible to request redemption by check, once in any 30-day
period, of Advisor Class shares for which no stock certificates
have been issued by telephone at (800) 221-5672 before 4:00 p.m.
Eastern time on a Fund business day in an amount not exceeding
$50,000. Proceeds of such redemptions are remitted by check to
the shareholder's address of record. Telephone redemption by
check is not available with respect to Advisor Class shares
(i) for which certificates have been issued, (ii) held in nominee
or "street name" accounts, (iii) held by a shareholder who has
changed his or her address of record within the preceding 30
calendar days or (iv) held in any retirement plan account. A
shareholder otherwise eligible for telephone redemption by check
14
may cancel the privilege by written instruction to Alliance Fund
Services, Inc., or by checking the appropriate box on the
shareholder or options form.
Telephone Redemption -- General. During periods of
drastic economic or market developments, such as the market break
of October 1987, it is possible that shareholders would have
difficulty in reaching Alliance Fund Services, Inc. by telephone
(although no such difficulty was apparent at any time in
connection with the 1987 market break). If a shareholder were to
experience such difficulty, the shareholder should issue written
instructions to Alliance Fund Services, Inc. at the address shown
on the cover of this Statement of Additional Information. The
Fund reserves the right to suspend or terminate its telephone
redemption service at any time without notice. Neither the Fund
nor Alliance, the Principal Underwriter or Alliance Fund
Services, Inc. will be responsible for the authenticity of
telephone requests for redemptions that the Fund reasonably
believes to be genuine. The Fund will employ reasonable
procedures in order to verify that telephone requests for
redemptions are genuine, including, among others, recording such
telephone instructions and causing written confirmations of the
resulting transactions to be sent to shareholders. If the Fund
did not employ such procedures, it could be liable for losses
arising from unauthorized or fraudulent telephone instructions.
Selected dealers or agents may charge a fee for handling
telephone requests for redemptions.
Repurchase
The Fund may repurchase Advisor Class shares through the
Principal Underwriter, selected financial intermediaries or
selected dealers or agents. The repurchase price will be the net
asset value next determined after the Principal Underwriter
receives the request, except that requests placed through
selected dealers or agents before the close of regular trading on
the Exchange on any day will be executed at the net asset value
determined as of such close of regular trading on that day if
received by the Principal Underwriter prior to 5:00 p.m. Eastern
time. The financial intermediary, selected dealer or agent is
responsible for transmitting the request to the Principal
Underwriter by 5:00 p.m. If the financial intermediary, selected
dealer or agent fails to do so, the shareholder's right to
receive that day's closing price must be settled between the
shareholder and the dealer or agent. A shareholder may offer
Advisor Class shares of the Fund to the Principal Underwriter
either directly or through a selected dealer or agent. Neither
the Fund nor the Principal Underwriter charges a fee or
commission in connection with the repurchase of Advisor Class
shares. Normally, if Advisor Class shares of the Fund are
offered through a financial intermediary or selected dealer or
15
agent, the repurchase is settled by the shareholder as an
ordinary transaction with or through the selected dealer or
agent, who may charge the shareholder for this service. The
repurchase of Advisor Class shares of the Fund as described above
is a voluntary service of the Fund and the Fund may suspend or
terminate this practice at any time.
General
The Fund reserves the right to close out an account that
through redemption has remained below $200 for 90 days.
Shareholders will receive 60 days' written notice to increase the
account value before the account is closed. In the case of a
redemption or repurchase of Advisor Class shares of the Fund
recently purchased by check, redemption proceeds will not be made
available until the Fund is reasonably assured that the check has
cleared, normally up to 15 calendar days following the purchase
date.
____________________________________________________________
SHAREHOLDER SERVICES
____________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares--Shareholder Services."
Automatic Investment Program
Investors may purchase Advisor Class shares of the Fund
through an automatic investment program utilizing Electronic
Funds Transfers drafts drawn on the investor's own bank account.
Under such a program, pre-authorized monthly drafts for a fixed
amount (at least $25) are used to purchase Advisor Class shares
through the selected dealer or selected agent designated by the
investor at the public offering price next determined after the
Principal Underwriter receives the proceeds from the investor's
bank. In electronic form, drafts can be made on or about a date
each month selected by the shareholder. Investors wishing to
establish an automatic investment program in connection with
their initial investment should complete the appropriate portion
of the Subscription Application found in the Prospectus. Current
shareholders should contact Alliance Fund Services, Inc. at the
address or telephone numbers shown on the cover of this Statement
of Additional Information to establish an automatic investment
program.
16
Exchange Privilege
Advisor Class shareholders of the Fund can exchange
their Advisor Class shares for Advisor Class shares of the other
Alliance Mutual Funds.
Please read carefully the prospectus of the mutual fund
into which you are exchanging before submitting the request. All
exchanges are subject to the minimum investment requirements and
any other applicable terms set forth in the Prospectus for the
Alliance Mutual Fund whose Advisor Class shares are being
acquired. An exchange is effected through the redemption of the
Advisor Class shares tendered for exchange and the purchase of
Advisor Class shares being acquired at their respective net asset
values as next determined following receipt by the Alliance
Mutual Fund whose Advisor Class shares are being exchanged of
(i) proper instructions and all necessary supporting documents as
described in such fund's Prospectus, or (ii) a telephone request
for such exchange in accordance with the procedures set forth in
the following paragraph. Exchanges involving the redemption of
Advisor Class shares recently purchased by check will be
permitted only after the Alliance Mutual Fund whose Advisor Class
shares have been tendered for exchange is reasonably assured that
the check has cleared, normally up to 15 calendar days following
the purchase date. Exchanges of Advisor Class shares of Alliance
Mutual Funds will generally result in the realization of a
capital gain or loss for Federal income tax purposes.
Each Fund shareholder, and the shareholder's selected
dealer, agent or financial representative, as applicable, are
authorized to make telephone requests for exchanges unless
Alliance Fund Services, Inc., receives written instruction to the
contrary from the shareholder, or the shareholder declines the
privilege by checking the appropriate box on the Subscription
Application found in the Prospectus. Such telephone requests
cannot be accepted with respect to Advisor Class shares then
represented by stock certificates. Advisor Class shares acquired
pursuant to a telephone request for exchange will be held under
the same account registration as the Advisor Class shares
redeemed through such exchange.
Eligible shareholders desiring to make an exchange
should telephone Alliance Fund Services, Inc. with their account
number and other details of the exchange, at (800) 221-5672
before 4:00 p.m., Eastern time, on a Fund business day as defined
above. Telephone requests for exchange received before 4:00 p.m.
Eastern time on a Fund business day will be processed as of the
close of business on that day. During periods of drastic
economic or market developments, such as the market break of
October 1987, it is possible that shareholders would have
difficulty in reaching Alliance Fund Services, Inc. by telephone
17
(although no such difficulty was apparent at any time in
connection with the 1987 market break). If a shareholder were to
experience such difficulty, the shareholder should issue written
instructions to Alliance Fund Services, Inc. at the address shown
on the cover of this Statement of Additional Information.
A shareholder may elect to initiate a monthly "Auto
Exchange" whereby a specified dollar amount's worth of his or her
Advisor Class Fund shares (minimum $25) is automatically
exchanged for Advisor Class shares of another Alliance Mutual
Fund. Auto Exchange transactions normally occur on the 12th day
of each month, or the Fund business day prior thereto.
None of the Alliance Mutual Funds, Alliance, the
Principal Underwriter or Alliance Fund Services, Inc. will be
responsible for the authenticity of telephone requests for
exchanges that the Fund reasonably believes to be genuine. The
Fund will employ reasonable procedures in order to verify that
telephone requests for exchanges are genuine, including, among
others, recording such telephone instructions and causing written
confirmations of the resulting transactions to be sent to
shareholders. If the Fund did not employ such procedures, it
could be liable for losses arising from unauthorized or
fraudulent telephone instructions. Selected dealers, agents or
financial representative, as applicable may charge a Commission
for handling telephone requests for exchanges.
The exchange privilege is available only in states where
Advisor Class shares of the Alliance Mutual Fund being acquired
may be legally sold. Each Alliance Mutual Fund reserves the
right, at any time on 60 days' notice to its shareholders, to
reject any order to acquire its Advisor Class shares through
exchange or otherwise to modify, restrict or terminate the
exchange privilege.
Retirement Plans
The Fund may be a suitable investment vehicle for part
or all of the assets held in various types of retirement plans,
such as those listed below. The Fund has available forms of such
plans pursuant to which investments can be made in the Fund and
other Alliance Mutual Funds. Persons desiring information
concerning these plans should contact Alliance Fund Services,
Inc. at the "For Literature" telephone number on the cover of
this Statement of Additional Information, or write to:
Alliance Fund Services, Inc.
Retirement Plans
P.O. Box 1520
Secaucus, New Jersey 07096-1520
18
Individual Retirement Account ("IRA"). Individuals who
receive compensation, including earnings from self-employment,
are entitled to establish and make contributions to an IRA.
Taxation of the income and gains paid to an IRA by the Fund is
deferred until distribution from the IRA. An individual's
eligible contribution to an IRA will be deductible if neither the
individual nor his or her spouse is an active participant in an
employer-sponsored retirement plan. If the individual or his or
her spouse is an active participant in an employer-sponsored
retirement plan, the individual's contributions to an IRA may be
deductible, in whole or in part, depending on the amount of the
adjusted gross income of the individual and his or her spouse.
Employer-Sponsored Qualified Retirement Plans. Sole
proprietors, partnerships and corporations may sponsor qualified
money purchase pension and profit-sharing plans, including
Section 401(k) plans ("qualified plans"), under which annual tax-
deductible contributions are made within prescribed limits based
on compensation paid to participating individuals. The minimum
initial investment requirement may be waived with respect to
certain of the qualified plans.
Simplified Employee Pension Plan ("SEP"). Sole
proprietors, partnerships and corporations may sponsor a SEP
under which they make annual tax-deductible contributions to an
IRA established by each eligible employee within prescribed
limits based on employee compensation.
403(b)(7) Retirement Plan. Certain tax-exempt
organizations and public educational institutions may sponsor
retirements plans under which an employee may agree that monies
deducted from his or her compensation (minimum $25 per pay
period) may be contributed by the employer to a custodial account
established for the employee under the plan.
The Alliance Plans Division of Frontier Trust Company, a
subsidiary of Equitable, which serves as custodian or trustee
under the retirement plan prototype forms available from the
Fund, charges certain nominal fees for establishing an account
and for annual maintenance. A portion of these fees is remitted
to Alliance Fund Services, Inc. as compensation for its services
to the retirement plan accounts maintained with the Fund.
Distributions from retirement plans are subject to
certain Code requirements in addition to normal redemption
procedures. For additional information please contact Alliance
Fund Services, Inc.
19
Dividend Direction Plan
A shareholder who already maintains, in addition to his
or her Advisor Class Fund account, an Advisor Class account with
one or more other Alliance Mutual Funds may direct that income
dividends and/or capital gains paid on his or her Advisor Class
Fund shares be automatically reinvested, in any amount, without
the payment of any sales or service charges, in Advisor Class
shares of such other Alliance Mutual Fund(s). Further
information can be obtained by contacting Alliance Fund Services,
Inc. at the address or the "For Literature" telephone number
shown on the cover of this Statement of Additional Information.
Investors wishing to establish a dividend direction plan in
connection with their initial investment should complete the
appropriate section of the Subscription Application found in the
Prospectus. Current shareholders should contact Alliance Fund
Services, Inc. to establish a dividend direction plan.
Systematic Withdrawal Plan
General. Any shareholder who owns or purchases Advisor
Class shares of the Fund having a current net asset value of at
least $4,000 (for quarterly or less frequent payments), $5,000
(for bi-monthly payments) or $10,000 (for monthly payments) may
establish a systematic plan under which the shareholder will
periodically receive a payment in a stated amount of not less
than $50 on a selected date. Systematic withdrawal plan
participants must elect to have their dividends and distributions
from the Fund automatically reinvested in additional shares of
the Fund.
Advisor Class shares of the Fund owned by a participant
in the Fund's systematic withdrawal plan will be redeemed as
necessary to meet withdrawal payments and such payments will be
subject to any taxes applicable to redemptions. Advisor Class
shares acquired with reinvested dividends and distributions will
be liquidated first to provide such withdrawal payments and
thereafter other Advisor Class shares will be liquidated to the
extent necessary, and depending upon the amount withdrawn, the
investor's principal may be depleted. A systematic withdrawal
plan may be terminated at any time by the shareholder or the
Fund.
Withdrawal payments will not automatically end when a
shareholder's account reaches a certain minimum level. Therefore,
redemptions of Advisor Class shares under the plan may reduce or
even liquidate a shareholder's account and may subject the
shareholder to the Fund's involuntary redemption provisions. See
"Redemption and Repurchase of Shares--General."
20
Payments under a systematic withdrawal plan may be made
by check or electronically via the Automated Clearing House
network. Investors wishing to establish a systematic withdrawal
plan in conjunction with their initial investment in Advisor
Class shares of the Fund should complete the appropriate portion
of the Subscription Application found in the Prospectus, while
current Fund shareholders desiring to do so can obtain an
application form by contacting Alliance Fund Services, Inc. at
the address or the "For Literature" telephone number shown on the
cover of this Statement of Additional Information.
Checkwriting
An Advisor Class investor may fill out a Signature Card
to authorize the Fund to arrange for a checkwriting service
through State Street Bank and Trust Company (the "Bank") to draw
against Advisor Class shares of the Fund redeemed from the
investor's account. An Advisor Class shareholder wishing to
establish this checkwriting service should contact the Fund by
telephone or mail. Under this service, checks may be made
payable to any payee in any amount not less than $500 and not
more than 90% of the net asset value of the Advisor Class shares
in the investor's account (excluding for this purpose the current
month's accumulated dividends and shares for which certificates
have been issued). Corporations, fiduciaries and institutional
investors are required to furnish a certified resolution or other
evidence of authorization. This checkwriting service will be
subject to the Bank's customary rules and regulations governing
checking accounts, and the Fund and the Bank each reserve the
right to change or suspend the checkwriting service. There is no
charge to the shareholder for the initiation and maintenance of
this service or for the clearance of any checks.
When a check is presented to the Bank for payment, the
Bank, as the shareholder's agent, causes the Fund to redeem, at
the net asset value next determined, a sufficient number of full
and fractional Advisor Class shares in the shareholder's account
to cover the check. A shareholder should not attempt to close
his or her account by use of a check. In this regard, the Bank
has the right to return checks (marked "insufficient funds")
unpaid to the presenting bank if the amount of the check exceeds
90% of the assets in the account. Canceled (paid) checks are
returned to the shareholder. The checkwriting service enables
the shareholder to receive the daily dividends declared on the
Advisor Class shares to be redeemed until the day that the check
is presented to the Bank for payment.
21
DAILY DIVIDENDS--DETERMINATION OF NET ASSET VALUE
Incorporated by reference from the section "Daily
Dividends--Determination of Net Asset Value" contained in the
Rule 497 SAI.
TAXES
Incorporated by reference from the section "Taxes"
contained in the Rule 497 SAI.
PORTFOLIO TRANSACTIONS
Incorporated by reference from the section "Portfolio
Transactions" contained in the Rule 497 SAI.
GENERAL INFORMATION
Incorporated by reference from the Section "General
Information" in the Rule 497 SAI, except that the sub-sections
entitled "Capitalization" and "Performance Information" are
restated as set forth below:
Capitalization
The Fund has an unlimited number of authorized Class A,
Class B, Class C and Advisor Class shares of beneficial interest
par value $.001 per share, which may, without shareholder
approval, be divided into an unlimited number of series. All
shares of the Fund, when issued, are fully paid and non-
assessable. The Trustees are authorized to reclassify and issue
any unissued shares to any number of additional classes or series
without shareholder approval. Accordingly, the Trustees 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 classes or series
of shares. Any issuance of shares of another class would be
governed by the Act and the law of the Commonwealth of
Massachusetts. Shares of a portfolio participate equally in
22
dividends and distributions from that portfolio, including any
distributions in the event of a liquidation. Shares of each
portfolio would normally be entitled to one vote for all
purposes. Generally, shares of all portfolios would vote as a
single series for the election of Trustees and on any other
matter affecting all portfolios in substantially the same manner.
As to matters affecting each portfolio differently, such as
approval of the Advisory Agreement and changes in investment
policy, shares of each portfolio would vote as a separate series.
Certain procedures for the removal by shareholders of Trustees of
investment trusts, such as the Fund, are set forth in Section
16(c) of the Act.
Set forth below is certain information as to all persons
who, of record or beneficially, held 5% or more of any of the
classes of the Fund's shares outstanding at September 30, 1996:
No. of % of % of % of
Name and Address Shares Class A Class B Class C
Merrill Lynch 5,462,802.1 12.96
141 West Jackson Blvd.
Chicago, IL 60604-2904
Verlin R. Eppert & 1,001,014.26 7.59
Rosalie A. Eppert
31490 Bellvine Trail
Birmingham, MI 48025-3705
Carolyn Burke-Martinez 1,120,608.9 8.49
2 Farmstead Lane
Wayne, NJ 07470-5300
Yield Quotations
Advertisements containing yield quotations which are
computed separately for Class A, Class B, Class C and Advisor
Class shares may from time to time be sent to investors or placed
in newspapers, magazines or other media on behalf of the Fund.
Such yield quotations are calculated in accordance with the
standardized method referred to in Rule 482 under the Securities
Act. Yield quotations are thus determined by (i) computing the
net changes over a seven-day period, exclusive of capital
changes, in the value of a hypothetical pre-existing account
having a balance of one share at the beginning of such period,
(ii) dividing the net change in account value by the value of the
account at the beginning of such period, and (iii) multiplying
such base period return by (365/7)--with the resulting yield
figure carried to the nearest hundredth of one percent.
Effective annual yield represents a compounding of the annualized
yield according to the following formula:
23
effective yield = ((base period return + 1)365/7) - 1.
Dividends for the seven days ended March 31, 1996 for
Class A amounted to an annualized yield of 4.02% equivalent to an
effective yield of 4.10%, for Class B an annualized yield of
3.56% equivalent to an effective yield of 3.62% and for Class C
an annualized yield of 3.81% equivalent to an effective yield of
3.88%. Current yield information can be obtained by a recorded
message by telephoning toll-free at (800) 221-9513 or in New York
State at (212) 785-9106.
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00250163.AI5
