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010 B000001 801-32361
010 C010001 NEW YORK
010 C020001 NY
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011 B000001 8-30851
011 C010001 SECUACUS
011 C020001 NJ
011 C030001 07094
012 A000001 ALLIANCE FUND SERVICES, INC.
012 B000001 84-001187
012 C010001 SECAUCUS
<PAGE> PAGE 2
012 C020001 NJ
012 C030001 07094
013 A000001 MCGLADREY & PULLEN, LLP
013 B010001 NEW YORK
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013 B030001 10017
014 A000001 DONALDSON, LUFKIN & JENRETTE SECURITIES CORP.
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<PAGE> PAGE 3
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SIGNATURE CATHY WHITE
TITLE ASST VICE PRESIDENT
<TABLE> <S> <C>
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<NUMBER> 001
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<DISTRIBUTIONS-OF-GAINS> 0
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<TABLE> <S> <C>
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<CIK> 0000917713
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<INVESTMENTS-AT-VALUE> 118,434,130
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<DISTRIBUTIONS-OF-GAINS> 0
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</TABLE>
[DESCRIPTION]Auditor's Report of Internal Control
Board of Directors
AFD Exchange Reserves, Inc.
In planning and performing our audit of the financial statements of AFD
Exchange Reserves, Inc. for the year ended September 30, 1996, we
considered its internal control structure, including procedures for
safeguarding securities, in order to determine our auditing procedures
for the purpose of expressing our opinion on the financial statements
and to comply with the requirements of Form N-SAR, not to provide
assurance on the internal control structure.
The management of AFD Exchange Reserves, Inc. is responsible for
establishing and maintaining an internal control structure. In
fulfilling this responsibility, estimates and judgments by management
are required to assess the expected benefits and related costs of
internal control structure policies and procedures. Two of the
objectives of an internal control structure are to provide management
with reasonable, but not absolute, assurance that assets are safeguarded
against loss from unauthorized use or disposition and that transactions
are executed in accordance with management's authorization and recorded
properly to permit preparation of financial statements in conformity
with generally accepted accounting principles.
Because of inherent limitations in any internal control structure,
errors or irregularities may occur and not be detected. Also,
projection of any evaluation of the structure to future periods is
subject to the risk that it may become inadequate because of changes in
conditions or that the effectiveness of the design and operation may
deteriorate.
Our consideration of the internal control structure would not
necessarily disclose all matters in the internal control structure that
might be material weaknesses under standards established by the American
Institute of Certified Public Accountants. A material weakness is a
condition in which the design or operation of the specific internal
control structure elements does not reduce to a relatively low level the
risk that errors or irregularities in amounts that would be material in
relation to the financial statements being audited may occur and not be
detected within a timely period by employees in the normal course of
performing their assigned functions. However, we noted no matters
involving the internal control structure, including procedures for
safeguarding securities, that we consider to be material weaknesses as
defined above as of September 30, 1996.
This report is intended solely for the information and use of management
and the Securities and Exchange Commission.
New York, New York
October 21, 1996
