AFD EXCHANGE RESERVES, 485BPOS, 1996-01-26

AFD EXCHANGE RESERVES
485BPOS, 1996-01-26

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<PAGE>

As filed with the Securities and Exchange
Commission on January 26, 1996

File No. 33-74230

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Pre-Effective Amendment No.
Post-Effective Amendment No. 3 X
and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940

Amendment No. 4 X

AFD EXCHANGE RESERVES
(Exact Name of Registrant as Specified in Charter)
1345 Avenue of the Americas, New York, New York 10105
(Address of Principal Executive Office) (Zip Code)

Registrant's Telephone Number, including Area Code:(800) 221-5672

EDMUND P. BERGAN, JR.
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and address of agent for service)

Copies of communications to:
Thomas G. MacDonald
Seward & Kissel
One Battery Park Plaza
New York, New York 10004

It is proposed that this filing will become effective (Check
appropriate line)

immediately upon filing pursuant to paragraph (b)
X on January 31, 1996 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)
on (date) pursuant to paragraph (a) of rule 485.
75 days after filing pursuant to paragraph (a)(2)
on (date) pursuant to paragraph (a)(2) of rule 485.

<PAGE>

Registrant has registered an indefinite number of shares of
beneficial interest pursuant to Rule 24f-2 under the Investment
Company Act of 1940. Registrant's Rule 24f-2 notice for its
fiscal year ended September 30, 1995 was filed on November 15,
1995.

<PAGE>

CROSS REFERENCE SHEET
(as required by Rule 404(c))

N-1A Item No. Location in Prospectuses
____________ ________________________
(Caption)

PART A
______

Item 1. Cover Page..................... Cover Page

Item 2. Synopsis....................... Expense Information

Item 3. Financial Highlights........... Financial Highlights

Item 4. General Description of
Registrant..................... Investment Objectives
and Policies

Item 5. Management of the Fund......... Management of the Fund

Item 6. Capital Stock and Other
Securities..................... General Information

Item 7. Purchase of Securities Being
Offered ....................... Purchase and Sale of
Shares; General
Information

Item 8. Redemption or Repurchase....... Purchase and Sale of
Shares

Item 9. Pending Legal Proceedings...... Not Applicable

PART B
______ Location in Statements
Of Additional Information
_________________________
(Caption)

Item 10. Cover Page..................... Cover Page

Item 11. Table of Contents.............. Cover Page

Item 12. General Information and
History ....................... Management of the Fund;
General Information

Item 13. Investment Objectives and
Policies....................... Investment Objectives

<PAGE>

and Policies;
Investment Restrictions

Item 14. Management of the Fund......... Management of the Fund

Item 15. Control Persons and
Principal Holders of
Securities .................... Management of the Fund

Item 16. Investment Advisory and Other
Services....................... Management of the Fund

Item 17. Brokerage Allocation........... General Information

Item 18. Capital Stock and Other
Securities..................... Daily Dividends -
Determination of Net
Asset Value; General
Information

Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered ....................... Purchase and Redemption
of Shares; Daily
Dividends-
Determination of Net
Asset Value

Item 20. Tax Status..................... Taxes

Item 21. Underwriters................... General Information

Item 22. Calculation of Performance
Data........................... General Information

Item 23. Financial Statements........... Financial Statements

<PAGE>

[LOGO OF ALLIANCE CAPITAL APPEARS HERE] AFD EXCHANGE RESERVES
- -------------------------------------------------------------------------------
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 sets forth concisely the information which a prospective
investor should know about the Fund before investing. A "Statement of
Additional Information" dated February 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 "Literature" telephone number.

(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/February 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 the Fund and annual expenses for each class of
shares. The example following the table shows the cumulative expenses attrib-
utable to a hypothetical $1,000 investment in each class for the periods spec-
ified.

<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS C SHARES
-------------- --------------- --------------
<S> <C> <C> <C>
Maximum sales charge imposed on
purchases (as a percentage of
offering price)............... None None None
Sales charge imposed on divi-
dend reinvestments............ None None None
Deferred sales charge (as a
percentage of original pur-
chase price or redemption pro-
ceeds, whichever is lower).... None(a) 4.0% during None
the first year,
decreasing 1.0%
annually to 0%
after the
fourth
year(b)(c)
Exchange Fee................... None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net
assets)
Management fees................ .25% .25% .25%
Rule 12b-1 fees................ .50% 1.00% .75%
Other expenses(d).............. .54% .53% .52%
---- --------------- ----
Total fund operating
expenses(d)................... 1.29% 1.78% 1.52%
==== =============== ====
</TABLE>
- --------

(a) Purchases of Class A shares of $1,000,000 or more (or that were received
in exchange or following a series of exchanges of Class A shares of an Al-
liance Mutual Fund that were part of an original purchase of $1,000,000 or
more) may be subject to a 1% deferred sales charge on redemptions within
one year of the original purchase for cash. See "Purchase and Sale of
Shares--How to Buy Shares--Class A Shares" in this Prospectus.
(b) For Class B shares purchased for cash. The contingent deferred sales
charge schedule applicable to a shareholder's redemption of Class B shares
that were received in exchange of Class B shares of an Alliance Mutual
Fund is the schedule applicable to redemptions of Class B shares of the
Alliance Mutual Fund originally purchased for cash by the shareholder.
(c) Class B shares will automatically convert to Class A shares a certain num-
ber of years after the end of the calendar month in which the sharehold-
er's order to purchase was accepted. For Class B shares purchased for
cash, the number of years is eight. For Class B shares that were received
in exchange of Class B shares of an Alliance Mutual Fund, the number of
years depends on the conversion schedule of the Class B shares of the Al-
liance Mutual Fund originally purchased. Currently, the longest such pe-
riod is eight years. See "Purchase and Sale of Shares--How to Buy Shares--
Class B shares"--page 7.
(d) 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.

EXAMPLE

<TABLE>
<CAPTION>
Cumulative expenses Class Class Class Class
paid for the period of A B+ B++ C
---------------------- ----- ----- ----- -----
<S> <C> <C> <C> <C>
1 year.................... $ 13 $ 58 $ 18 $ 15
3 years................... $ 41 $ 76 $ 56 $ 48
5 years................... $ 71 $ 96 $ 96 $ 83
10 years................... $156 $197* $197* $181
</TABLE>
- --------

+ Assumes redemption at end of period and the highest applicable deferred
sale charge schedule. See note (b) above.
++ Assumes no redemption at end of period.
* Assumes the longest applicable conversion schedule. See note (c) above.

The purpose of the foregoing table is to assist the investor in understand-
ing the various costs and expenses that an investor in the Fund will bear di-
rectly or indirectly. Long-term shareholders of the Fund may pay aggregate
sales charges totaling more than the economic equivalent of the maximum ini-
tial sales charges permitted by the Rules of Fair Practice of the National As-
sociation of Securities Dealers, Inc. See "Management of the Fund--Rule 12b-1
Distribution Services Agreement." "Other Expenses" are based on estimated
amounts for the Fund's current fiscal year. The example set forth above as-
sumes reinvestment of all dividends and distributions and utilizes a 5% annual
rate of return as mandated by Securities and Exchange Commission regulations.
The example should not be considered a representation of future expenses; ac-
tual expenses may be greater or less than those shown.

2
<PAGE>

FINANCIAL HIGHLIGHTS . FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
(AUDITED)

The following tables have been audited by McGladrey & Pullen LLP, the Fund's
independent auditors, whose report thereon appears in the Statement of Addi-
tional Information. This information should be read in conjunction with the
financial statements and notes thereto included in the Statement of Additional
Information.

<TABLE>
<CAPTION>
CLASS A
------------------------------------
MARCH 25, 1994(A)
YEAR ENDED TO
SEPTEMBER 30, 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 mil-
lions)............................... $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>

<TABLE>
<CAPTION>
CLASS B
------------------------------------
MARCH 25, 1994(A)
YEAR ENDED TO
SEPTEMBER 30, 1995 SEPTEMBER 30,1994
------------------ -----------------
<S> <C> <C>
Net asset value, beginning of period.. $ 1.00 $ 1.00
------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income................. .0404 .0101
------- -------
LESS: DISTRIBUTIONS
Dividends from net investment income.. (.0404) (.0101)
------- -------
Net asset value, end of period........ $ 1.00 $ 1.00
======= =======
TOTAL RETURN
Total investment return based on net
asset value(b)....................... 4.12% 1.95%(c)
======= =======
RATIOS/SUPPLEMENTAL DATA
Net Assets, end of period (in mil-
lions)............................... $65 $31
Ratio of average net assets to:
Expenses, net of waivers............. 1.70% 2.35%(c)
Expenses, before waivers............. 1.78% 2.35%(c)
Net investment income(d)............. 4.17% 1.91%(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 re-
demption 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.

3
<PAGE>

<TABLE>
<CAPTION>
CLASS C
------------------------------------
MARCH 25, 1994(A)
YEAR ENDED TO
SEPTEMBER 30, 1995 SEPTEMBER 30,1994
------------------ -----------------
<S> <C> <C>
Net asset value, beginning of period.. $ 1.00 $ 1.00
------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income................. .0430 .0112
------- -------
LESS: DISTRIBUTIONS
Dividends from net investment income.. (.0430) (.0112)
------- -------
Net asset value, end of period........ $ 1.00 $ 1.00
======= =======
TOTAL RETURN
Total investment return based on net
asset value(b)....................... 4.39% 2.18%(c)
======= =======
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in mil-
lions)............................... $10 $5
Ratio of average net assets to:
Expenses, net of waivers............. 1.45% 2.08%(c)
Expenses, before waivers............. 1.52% 2.08%(c)
Net investment income(d)............. 4.41% 2.14%(c)
</TABLE>
- --------

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

4
<PAGE>

paper of high quality, 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 hav-
ing outstanding debt securities rated AAA, AA or A by S&P, or Aaa, Aa or A by
Moody's and participation interests in loans extended by banks to such compa-
nies; and (4) repurchase 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 Com-
pany, the Fund's Custodian) 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.

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

5
<PAGE>

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 ex-
ceed 90 days. A more detailed description of Rule 2a-7 is set forth in the
Fund's Statement of Additional Information under "Investment Objective, Poli-
cies 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 borrowings may not be used to purchase
investments and the Fund will not purchase 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 fu-
ture.
PURCHASE AND SALE OF SHARES

Shares of the Fund may be purchased for cash and thereafter exchanged for
shares of the same class 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. 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.

Shares of the Fund also are available to holders of shares of other Alliance
Mutual Funds who wish to exchange their shares for shares of a money market
fund. Such an exchange transaction is effected through the redemption of the
Alliance Mutual Fund shares tendered for exchange and the purchase of shares
of the Fund
6
<PAGE>

at their respective net asset values as next determined, without sales or
service charges. 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

You can purchase shares of the Fund for cash through broker-dealers, banks
or other financial intermediaries. Purchases of shares for cash directly
through Alliance Fund Distributors, Inc. ("AFD"), the Fund's principal under-
writer, may be made only if the purchaser has a financial intermediary of rec-
ord. The minimum initial investment is $250. The minimum for subsequent in-
vestments is $50. Investments of $25 or more are allowed under the automatic
investment program. See the Subscription Application and Statement of Addi-
tional Information for more information.

Existing shareholders may make subsequent purchases by Electronic Funds
Transfer ("EFT") if they have completed the Telephone Transactions section of
the Subscription Application or the Shareholder Options form obtained from
AFS. Telephone purchase orders can be made by calling (800) 221-5672, may not
exceed $500,000, must be received by the Fund by 3:00 p.m. Eastern time on a
Fund business day and will be made at the next day's net asset value (less any
applicable sales charge).

CLASS A SHARES

You can purchase Class A shares for cash at net asset value. Class A shares
are sold without any initial sales charge at the time of purchase. On cash
purchases of $1,000,000 or more, however, you may pay a contingent deferred
sales charge ("CDSC") equal to 1% of the lesser of net asset value at the time
of redemption or original cost if you redeem within one year; Alliance may pay
the dealer or agent a fee of up to 1% of the dollar amount purchased. See "Ap-
plication of the CDSC". As discussed below, Class A shares may be exchanged
for Class A shares of other Alliance Mutual Funds, subject, in the case of
Class A shares of the Fund that were purchased for cash, to any applicable
initial sales charge at the time of exchange. On cash purchases of less than
$1,000,000, a commission will not be paid to the dealer or agent until the
shares are exchanged for Class A shares of another Alliance Mutual Fund.

Class A shares of the Fund also are offered in exchange for Class A shares
of other Alliance Mutual Funds without any sales charge at the time of pur-
chase, but on Class A shares that were received in exchange for Alliance Mu-
tual Fund Class A shares that were not subject to an initial sales charge when
originally purchased for cash because the purchase was of $1,000,000 or more
you may pay a 1% CDSC that will be assessed as described below under "Applica-
tion of the CDSC" if you redeem shares of the Fund within one year of your
purchase of the Alliance Mutual Fund Class A shares originally purchased for
cash. Consult the Subscription Application and Statement of Additional Infor-
mation.
7
<PAGE>

CLASS B SHARES--DEFERRED SALES CHARGE ALTERNATIVE

You can purchase Class B shares for cash at net asset value without an ini-
tial sales charge. However, you may pay a CDSC if you redeem shares within
four years after purchase. The amount of the CDSC (expressed as a percentage
of the lesser of net asset value at the time of redemption or original cost)
will vary according to the number of years from the purchase of Class B shares
until the redemption of those shares. The amount of the CDSC on Class B shares
is set forth below.

<TABLE>
<CAPTION>
Year Since
Purchase CDSC
---------- ----
<S> <C>
First.................................................................... 4.0%
Second................................................................... 3.0%
Third.................................................................... 2.0%
Fourth................................................................... 1.0%
Fifth.................................................................... None
</TABLE>

Class B shares purchased for cash will automatically convert to Class A
shares eight years after the end of the calendar month in which the sharehold-
er's order to purchase was accepted. As discussed below, Class B shares may be
exchanged at net asset value for Class B shares of other Alliance Mutual
Funds. Following an exchange, Class B shares will continue to age for purposes
of determining the CDSC, if any, upon redemption and for purposes of conver-
sion to Class A shares.

Class B shares of the Fund also are offered in exchange for Class B shares
of other Alliance Mutual Funds without any initial sales charge. However, you
may pay a CDSC if you redeem shares of the Fund within a certain number of
years of your original purchase of Alliance Mutual Fund Class B shares. When
redemption occurs, the applicable CDSC schedule is that which applied to the
Alliance Mutual Fund Class B shares originally purchased for cash at the time
of their purchase. See "Application of the CDSC" below.

CLASS C SHARES--ASSET-BASED SALES CHARGE ALTERNATIVE

You can purchase Class C shares for cash or in exchange for Class C shares
of another Alliance Mutual Fund without any initial sales charge or CDSC. Thus
you will receive the entire net asset value of your shares upon redemption.
Class C shares do not convert to any other class of shares of the Fund. As
discussed below, Class C shares may be exchanged at net asset value for Class
C shares of other Alliance Mutual Funds.

GENERAL

The decision as to which class of shares is more beneficial to you depends
on the amount and intended length of your investment and whether you intend to
subsequently exchange your shares for shares of another Alliance Mutual Fund.
If you are making a large cash purchase, thus qualifying for a reduced sales
charge on a subsequent exchange, you might consider purchasing Class A shares.
If you are making a smaller cash purchase, you might consider purchasing Class
B shares because no sales charge will be assessed on subsequent exchanges of
those shares. If you are unsure of the length of your investment, you might
consider Class C shares because there are no initial or contingent deferred
sales charges. Consult your financial agent. Dealers and agents may receive
different compensation for selling Class A, Class B or Class C shares. Class B
and Class

8
<PAGE>

C shares have higher distribution fees, and thus higher expense ratios, and
pay correspondingly lower dividends than Class A shares. There is no size
limit on cash purchases of Class A shares. The maximum cash purchase of Class
B shares is $250,000. The maximum purchase of Class C shares is $5,000,000.
The Fund may refuse any order to purchase shares.

In addition to the discount or commission paid to dealers, AFD from time to
time pays additional cash or other incentives to dealers or agents, including
Equico Securities, Inc., an affiliate of AFD, in connection with the sale of
shares of the Fund. Such additional amounts may be utilized, in whole or in
part, in some cases together with other revenues of such dealers or agents, to
provide additional compensation to registered representatives who sell shares
of the Fund. On some occasions, such cash or other incentives will be condi-
tioned upon the sale of a specified minimum dollar amount of the shares of the
Fund and/or other Alliance Mutual Funds during a specific period of time. Such
incentives may take the form of payment for attendance at seminars, meals,
sporting events or theater performances, or payment for travel, lodging and
entertainment incurred in connection with travel by persons associated with a
dealer and their immediate family members to urban or resort locations within
or outside the United States. Such a dealer may elect to receive cash incen-
tives of equivalent amount in lieu of such payments.

APPLICATION OF THE CDSC

The CDSC is applied to the lesser of the net asset value at the time of re-
demption of the Class A shares or Class B shares being redeemed and the cost
of such shares (or, as to Fund shares acquired through an exchange, the cost
of the Alliance Mutual Fund shares originally purchased for cash). Shares ob-
tained from dividend or distribution reinvestment are not subject to the CDSC.

The CDSC is deducted from the amount of the redemption and is paid to AFD.
The CDSC will be waived on redemptions of shares following the death or dis-
ability of a shareholder, to meet the requirement of certain qualified retire-
ment plans or pursuant to a monthly, bimonthly or quarterly systematic with-
drawal plan. See the Statement of Additional Information.

HOW THE FUND VALUES ITS SHARES

The net asset value of each 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 the Fund for shares of the same class of
other Alliance Mutual Funds. Exchanges of Class A shares are made at the net
asset value next determined less the amount of any applicable initial sales
charge imposed on the Class A shares of the other Alliance Mutual Fund. Con-
sult the prospectus of the applicable Alliance Mutual Fund for a further ex-
planation of those sales charges.

9
<PAGE>

Exchanges of Class B and Class C shares are made at the net asset values next
determined, without sales or service charges. Exchanges may be made by tele-
phone or written request. Telephone 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 as-
set value (less the amount of any applicable initial sales charge imposed on
the Class A shares of the other Alliance Mutual Fund). The exchange service
may be changed, suspended or terminated on 60 days' written notice.

Under the Alliance Mutual Funds' Right of Accumulation, exchanges of Class A
shares made pursuant to the Alliance Dollar Cost Averaging Program or other-
wise will be assessed an initial sales charge based on the shareholder's total
Alliance Mutual Funds holdings, including shares of the Fund, and therefore
may be eligible for a reduced sales charge. Consult with your financial repre-
sentative or Alliance regarding the Alliance Dollar Cost Averaging Program,
Rights of Accumulation and other time and money saving services to investors.

Class A and Class B shares will age without regard to exchanges for purposes
of determining the CDSC, if any, upon redemption and, in the case of Class B
shares, for the purposes of conversion to Class A shares. After an exchange,
your Class B shares will automatically convert to Class A shares in accordance
with the conversion schedule applicable to the Class B shares of the Alliance
Mutual Fund you originally purchased for cash ("original shares"). When re-
demption occurs, the CDSC applicable to the original shares is applied.

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 intermediary. The price you
will receive is the net asset value (less any applicable CDSC for Class A and
Class B shares) next calculated after the Fund receives your request in proper
form. Proceeds generally will be sent to you within seven days. However, for
shares acquired in exchange for Alliance Mutual Fund shares recently purchased
by check, the Fund will not send proceeds until it is reasonably satisfied
that the check has been collected (which may take up to 15 days).

SELLING SHARES THROUGH YOUR BROKER

Your broker must receive your request before 4:00 p.m. Eastern time, and
your broker must transmit your request to the Fund by 5:00 p.m. Eastern time,
to receive that day's net asset value (less any applicable CDSC for Class A
and Class B shares). Your broker is responsible for furnishing all necessary
documentation 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, Inc.
P.O. Box 1520
Secaucus, NJ 07096-1520
1-800-221-5672
10
<PAGE>

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 (less any applicable CDSC
for Class A and Class B shares) and may be made only once in any 30-day peri-
od. A shareholder who has completed the Telephone Transactions section of the
Subscription Application, or the Shareholder Options form obtained from AFS,
can elect to have the proceeds of their redemption sent to their bank via an
EFT. Proceeds of telephone redemptions also may be sent by check to a share-
holder's address of record. 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 re-
tirement 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 below $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 Government Reserves and Alliance Municipal Trust (the "Trusts"). Each
of the Trusts offers a class of shares that has a lower expense ratio and pays
correspondingly higher dividends than shares of the Fund. However, the Trusts
do not have an exchange privilege with Alliance Mutual Funds. Thus, if you
held shares of a Trust and wished to transfer your holdings to an Alliance Mu-
tual Fund, you would be required to redeem shares of the Trust and purchase
shares of that Alliance Mutual Fund with the cash proceeds of your redemption.
Such a transaction would be subject to any sales charges applicable to an
original purchase for cash (or eventual redemption) of shares of that Alliance
Mutual Fund. To obtain the prospectus for any of the Trusts, contact AFS at
the Literature telephone number 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. A
shareholder's manual explaining all available services will be provided upon
request. To request a shareholder manual call 800-227-4618.
11
<PAGE>

MANAGEMENT OF THE FUND

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.

Alliance is a leading international investment manager supervising client
accounts with assets as of September 30, 1995 totaling more than $143.9 bil-
lion (of which more than $47 billion represents the assets of investment com-
panies). Alliance's clients are primarily major corporate employee benefit
funds, public employee retirement systems, investment companies, foundations
and endowment funds. The 50 registered investment companies managed by Alli-
ance comprising 104 separate investment portfolios currently have over two
million shareholders. As of September, 1995, Alliance was retained as an in-
vestment manager for 29 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.

RULE 12B-1 DISTRIBUTION SERVICES AGREEMENT

Rule 12b-1 adopted by the Securities and Exchange Commission (the "Commis-
sion") under the Act permits an investment company to directly or indirectly
pay expenses associated with the distribution of its shares in accordance with
a duly adopted and approved plan. The Fund has entered into a Distribution
Services Agreement (the "Agreement"), which includes a plan adopted pursuant
to Rule 12b-1 (the "Plan") with AFD. Pursuant to the Plan, the

12
<PAGE>

Fund pays to AFD a Rule 12b-1 distribution services fee at an annual rate of
.50 of 1% of the Fund's aggregate average daily net assets attributable to the
Class A shares, 1.00% of the Fund's aggregate average daily net assets attrib-
utable to the Class B shares and .75 of 1% of the Fund's aggregate average
daily net assets attributable to the Class C shares to compensate AFD for dis-
tribution services. The Agreement provides that a portion of the distribution
services fee in an amount equal to .25% of the aggregate average daily net as-
sets of the Fund attributable to each of the Class A shares, Class B shares
and Class C shares constitutes a service fee that AFD will use for personal
service and/or the maintenance of shareholder accounts.

The Agreement provides that AFD may spend the distribution services fee it
receives from the Fund as it deems appropriate on any activities or expenses
primarily intended to result in the sale of shares of the Fund, including, but
not limited to, compensation of employees of AFD, compensation and expenses,
including overhead and telephone and other communication expenses, of AFD and
other broker-dealers, banks and other financial intermediaries that engage in
or support the distribution of shares of the Fund, the preparation, printing
and distribution of prospectuses, statements of additional information, sales
literature and advertising materials, and other promotional activities. In
this regard, some payments under the Agreement are used to compensate finan-
cial intermediaries with trail or maintenance commissions in an amount equal
to .25%, annualized, with respect to Class A shares and Class B shares, and
.50%, annualized, with respect to Class C shares, of the assets maintained in
the Fund by their customers. The Agreement also provides that AFD may, if it
wishes, retain all or any portion of the distribution services fees received
from the Fund for its own purposes. Distribution services fees are accrued
daily and paid monthly, and are charged as expenses of the Fund as accrued.
The Agreement also provides that Alliance may use its own resources to finance
the distribution of the Fund's shares.

The Fund is not obligated under the Agreement to pay any distribution serv-
ices fee in excess of the amounts set forth above. Since AFD's compensation
with respect to each of the Class A shares, Class B shares and Class C shares
is not directly tied to its expenses incurred with respect to such class, the
amount of compensation received by it under the Agreement during any year may
be more or less than its actual expenses.

In the event that the Agreement is terminated or not continued with respect
to the Class A shares, Class B shares or Class C shares, (i) no distribution
services fees (other than current amounts accrued but not yet paid) would be
owed by the Fund to AFD with respect to that class, and (ii) the Fund would
not be obligated to pay AFD for any amounts expended under the Agreement not
previously recovered by AFD from distribution services fees in respect of
shares of such class or recovered through deferred sales charges.

The Agreement is in compliance with rules of the National Association of Se-
curities Dealers, Inc. which effectively limit the annual asset-based sales
charges and service fees that a mu-

13
<PAGE>

tual fund may pay on a class of shares to .75% and .25%, respectively, of the
average annual net assets attributable to that class. The rules also limit the
aggregate of all front-end, deferred and asset-based sales charges imposed
with respect to a class of shares by a mutual fund that also charges a service
fee to 6.25% of cumulative gross sales of shares of that class, plus interest
at the prime rate plus 1% per annum.

As interpreted by courts and administrative agencies, the Glass-Steagall Act
and other applicable laws and regulations 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 coun-
sel, these laws and regulations do not prohibit such depository institutions
from providing services for investment 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 ex-
pected that other service arrangements would be made and that shareholders
would not be adversely affected. The State of Texas requires that shares of
the Fund may be sold in that state only by dealers or other financial institu-
tions that are registered there as broker-dealers.

DIVIDENDS, DISTRIBUTIONS AND TAXES

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.

14
<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
law. Shareholders have available certain procedures for the removal of Trust-
ees.

A shareholder in the Fund will be entitled to his pro rata share of all div-
idends and distributions arising from the Fund's assets and, upon redeeming
shares, will receive the then current net asset value of the Fund represented
by the redeemed shares. The Fund is empowered to establish, without share-
holder approval, additional portfolios which may have different investment ob-
jectives.

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. Class A, Class B and Class C shares have identical voting, dividend, liq-
uidation and other rights, except that each class bears its own distribution
and transfer agency expenses. Each class of shares votes separately with re-
spect to the Fund's Rule 12b-1 distribution plan and other matters for which
separate class voting is appropriate under applicable law. Shares are freely
transferable, are entitled to dividends as determined by the Trustees and, in
liquidation of the Fund, are entitled to receive the net assets of the Fund.
Certain additional matters relating to the organization of the Fund are dis-
cussed 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. The transfer
agency fee with respect to the Class B shares will be higher than the transfer
agency fee with respect to the Class A shares or Class C shares.

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, without 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.

15
<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
Financial Highlights 3
Description of the Fund 4
Purchase and Sale of Shares 6
Management of the Fund 12
Dividends, Distributions and Taxes 14
General Information 15
</TABLE>

ADVISER
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, NY 10105

AFD
- --------------------------------------------------------------------------------
Exchange
- --------------------------------------------------------------------------------
Reserves
- --------------------------------------------------------------------------------

Prospectus
February 1, 1996

Goal: Maximum current income consistent with safety of principal and liquidity.

[LOGO OF ALLIANCE APPEARS HERE]
-------------------------------

<PAGE>

(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
February 1, 1996

This Statement of Additional Information is not a prospectus but
supplements and should be read in conjunction with the Fund's
current Prospectus dated February 1, 1996. Copies of such
Prospectus may be obtained by contacting Alliance Fund Services,
Inc. at the address or the Literature telephone number shown
above.
TABLE OF CONTENTS
Page

Investment Objective, Policies
and Restrictions ............................... [ ]

Management of the Fund............................ [ ]

Expenses of the Fund.............................. [ ]

Purchase of Shares................................ [ ]

Redemption and Repurchase of Shares............... [ ]

Shareholder Services.............................. [ ]

Daily Dividends--Determination of
Net Asset Value................................. [ ]

Taxes............................................. [ ]

Portfolio Transactions............................ [ ]

General Information............................... [ ]

Appendix--Commercial Paper and
Bond Ratings.................................... [ ]

Financial Statements.............................. [ ]

Independent Auditor's Report...................... [ ]

<PAGE>

(R) This registered service mark used under license from the
owner, Alliance Capital Management L.P.

<PAGE>

INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS

AFD Exchange Reserves (the "Fund") is a diversified,
open- end investment company. The Fund's 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. In accordance with Rule 2a-7 under the Investment
Company Act of 1940 (the "Act"), 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. Accordingly,
the Fund may make the following investments diversified by
maturities and issuers:

1. Marketable obligations of, or guaranteed by, the
United States Government, its agencies or instrumentalities.
These include issues of the U.S. Treasury, such as bills,
certificates of indebtedness, notes and bonds, and issues of
agencies and instrumentalities established under the authority of
an act of Congress. The latter issues include, but are not
limited to, obligations of the Bank for Cooperatives, Federal
Financing Bank, Federal Home Loan Bank, Federal Intermediate
Credit Banks, Federal Land Banks, Federal National Mortgage
Association and Tennessee Valley Authority. Some of the
securities are supported by the full faith and credit of the U.S.
Treasury, others are supported by the right of the issuer to
borrow from the Treasury, and still others are supported only by
the credit of the agency or instrumentality.

2. Certificates of deposit and bankers' acceptances
issued or guaranteed by, or time deposits maintained at, banks or
savings and loan associations (including foreign branches of U.S.
banks or U.S. or foreign branches of foreign banks) having total
assets of more than $500 million. Certificates of deposit are
receipts issued by a depository institution in exchange for the
deposit of funds. The issuer agrees to pay the amount deposited
plus interest to the bearer of the receipt on the date specified
on the certificate. The certificate usually can be traded in the
secondary market prior to maturity. Bankers' acceptances
typically arise from short-term credit arrangements designed to
enable businesses to obtain funds to finance commercial
transactions. Generally, an acceptance is a time draft drawn on
a bank by an exporter or an importer to obtain a stated amount of
funds to pay for specific merchandise. The draft is then
"accepted" by a bank that, in effect, unconditionally guarantees
to pay the face value of the instrument on its maturity date. The
acceptance may then be held by the accepting bank as an earning

<PAGE>

asset or it may be sold in the secondary market at the going rate
of discount for a specific maturity. Although maturities for
acceptances can be as long as 270 days, most acceptances have
maturities of six months or less.

3. Commercial paper, including variable amount master
demand notes, of high quality (i.e., rated A-1 or A-2 by Standard
& Poor's Corporation ("Standard & Poor's"), 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
which have an outstanding debt issue rated AAA, AA or A by
Standard & Poor's, or Aaa, Aa or A by Moody's and participation
interests in loans extended by banks to such companies). For a
description of such ratings see the Appendix. Commercial paper
consists of short-term (usually from 1 to 270 days) unsecured
promissory notes issued by corporations in order to finance their
current operations. A variable amount master demand note
represents a direct borrowing arrangement involving periodically
fluctuating rates of interest under a letter agreement between a
commercial paper issuer and an institutional lender pursuant to
which the lender may determine to invest varying amounts.

4. Repurchase agreements that are collateralized in
full each day by liquid securities of the types listed above. A
repurchase agreement arises when a buyer purchases a security and
simultaneously agrees to resell it to the vendor at an agreed-
upon future date. The resale price is greater than the purchase
price, reflecting an agreed-upon market rate which is effective
for the period of time the buyer's money is invested in the
security and which is not related to the coupon rate on the
purchased security. Repurchase agreements may be entered into
only with those banks (including State Street Bank and Trust
Company, the Fund's Custodian) or broker-dealers ("vendors") that
are eligible under the procedures adopted by the Trustees of the
Trust for evaluating and monitoring such vendors'
creditworthiness. For each repurchase agreement, the Fund
requires continual maintenance of the market value of underlying
collateral in amounts equal to, or in excess of, the agreement
amount. While the maturities of the underlying collateral may
exceed one year, the term of the repurchase agreement is always
less than one year. In the event that a vendor defaulted on its
repurchase obligation, the Fund might suffer a loss to the extent
that the proceeds from the sale of the collateral were less than
the repurchase price. If the vendor became bankrupt, the Fund
might be delayed in selling the collateral. Repurchase
agreements often are for short periods such as one day or a week,
but may be longer. Repurchase agreements not terminable within
seven days will be limited to no more than 10% of the Fund's
assets. Pursuant to Rule 2a-7, a repurchase agreement is deemed
to be an acquisition of the underlying securities provided that

<PAGE>

the obligation of the seller to repurchase the securities from
the fund is collateralized fully (as defined in such Rule).
Accordingly, the vendor of a fully collateralized repurchase
agreement is deemed to be the issuer of the underlying
securities.

Reverse Repurchase Agreements. While the Fund has no
plans to do so, it may enter into reverse repurchase agreements,
which involve the sale of money market securities held by the
Fund with an agreement to repurchase the securities at an agreed-
upon price, date and interest payment.

Asset-backed Securities. The Fund may invest in asset-
backed securities that meet its existing diversification, quality
and maturity criteria. Asset-backed securities are securities
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 beneficial interest in a special purpose trust,
limited partnership interest, or commercial paper or other debt
securities issued by a special purpose corporation. Although the
securities may have some form of credit or liquidity enhancement,
payments on the securities depend predominately upon collection
of the loans and receivables held by the issuer. It is the
Fund's current intention to limit its investment in such
securities to not more than 5% of its net assets.

Illiquid Securities. The Fund has adopted the following
investment policy which may be changed by the vote of the
Trustees: The Fund will not invest in illiquid securities if
immediately after such investment more than 10% of the Fund's net
assets (taken at market value) would be invested in such
securities. For this purpose, illiquid securities include, among
others, (a) securities that are illiquid by virtue of the absence
of a readily available market or legal or contractual restriction
on resale and (b) repurchase agreements not terminable within
seven days.

The Fund may purchase restricted securities that are
determined by Alliance to be liquid in accordance with procedures
adopted by the Trustees. Restricted securities are securities
subject to contractual or legal restrictions on resale, such as
those arising from an issuer's reliance upon certain exemptions
from registration 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 to be liquid in
accordance with procedures adopted by the Trustees of the Fund.

<PAGE>

In recent years, a large institutional market has
developed for certain types of restricted securities including,
among others, private placements, repurchase agreements,
commercial paper, foreign securities and corporate bonds and
notes. These instruments are often restricted securities because
they are sold in transactions not requiring registration. For
example, commercial paper issues in which the Fund may invest
include, among others, securities issued by major corporations
without registration under the Securities Act in reliance on the
exemption from registration afforded by Section 3(a)(3) of such
Act and commercial paper issued in reliance on the private
placement exemption from registration which is afforded by
Section 4(2) of the Securities Act ("Section 4(2) paper").
Section 4(2) paper is restricted as to disposition under the
Federal securities laws in that any resale must also be made in
an exempt transaction. Section 4(2) paper is normally resold to
other institutional investors through or with the assistance of
investment dealers who make a market in Section 4(2) paper, thus
providing liquidity. Institutional investors, rather than
selling these instruments to the general public, often depend on
an efficient institutional market in which such restricted
securities can be readily resold in transactions not involving a
public offering. In many instances, therefore, the existence of
contractual or legal restrictions on resale to the general public
does not, in practice, impair the liquidity of such investments
from the perspective of institutional holders. In recognition of
this fact, the Staff of the Securities and Exchange Commission
("Commission") has stated that Section 4(2) paper may be
determined to be liquid by the Fund's Trustees, so long as
certain conditions, which are described below, are met.

In 1990, in part to enhance the liquidity in the
institutional markets for restricted securities, the Commission
adopted Rule 144A under the Securities Act to establish a safe
harbor from the Securities Act's registration requirements for
resale of certain restricted securities to qualified
institutional buyers. Pursuant to Rule 144A, the institutional
restricted securities markets may provide both readily
ascertainable values for restricted securities and the ability to
liquidate an investment in order to satisfy share redemption
orders on a timely basis. An insufficient number of qualified
institutional buyers interested in purchasing certain restricted
securities held by the Fund, however, could affect adversely the
marketability of such portfolio securities and the Fund might be
unable to dispose of such securities promptly or at reasonable
prices. Rule 144A has already produced enhanced liquidity for
many restricted securities, and market liquidity for such
securities may continue to expand as a result of Rule 144A and
the consequent inception of the PORTAL System sponsored by the
National Association of Securities Dealers, Inc., an automated

<PAGE>

system for the trading, clearance and settlement of unregistered
securities.

The Fund's Trustees have the ultimate responsibility for
determining whether specific securities are liquid or illiquid.
The Trustees have delegated the function of making day-to-day
determinations of liquidity to Alliance, pursuant to guidelines
approved by the Trustees.

Alliance Capital Management L.P. ("Alliance") takes into
account a number of factors in determining whether a restricted
security eligible for resale under Rule 144A of the Securities
Act being considered for purchase is liquid, including at least
the following:

(i) the frequency of trades and quotations for the
security;

(ii) the number of dealers making quotations to purchase
or sell the security;

(iii) the number of other potential purchasers of the
security;

(iv) the number of dealers undertaking to make a market
in the security;

(v) the nature of the security (including its
unregistered nature) and the nature of the
marketplace for the security (e.g., the time needed
to dispose of the security, the method of
soliciting offers and the mechanics of transfer);
and

(vi) any applicable Commission interpretation or
position with respect to such types of securities.

To make the determination that an issue of Section 4(2)
paper is liquid, Alliance must conclude that the following
conditions have been met:

(i) the Section 4(2) paper must not be traded flat or
in default as to principal or interest; and

(ii) the Section 4(2) paper must be rated in one of the
two highest rating categories by at least two
nationally recognized statistical rating
organizations ("NRSROS"), or if only NRSRO rates
the security, by that NRSRO; if the security is
unrated, Alliance must determine that the security
is of equivalent quality.

<PAGE>

Alliance must also consider the trading market for the
specific security, taking into account all relevant factors.

Following the purchase of a restricted security by the
Fund, Alliance monitors continuously the liquidity of such
security and reports to the Trustees regarding purchases of
liquid restricted securities.

Subject to its policy of not investing 25% or more of
its total assets in instruments issued by foreign branches of
foreign banks and other foreign entities, the Fund may make
investments in certificates of deposit and bankers' acceptances
issued or guaranteed by, or time deposits maintained at, foreign
branches of U.S. banks and U.S. and foreign branches of foreign
banks, and commercial paper issued by foreign companies. To the
extent that the Fund makes such investments, consideration is
given to their domestic marketability, the lower reserve
requirements generally mandated for overseas banking operations,
the possible impact of interruptions in the flow of international
currency transactions, potential political 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 reporting standards. There can be no assurance, as is
true with all investment companies, that the Fund's objective
will be achieved.

Net income to shareholders is aided both by the Fund's
ability to make investments in large denominations and by its
efficiencies of scale. Also, the Fund may seek to improve
portfolio income by selling certain portfolio securities prior to
maturity in order to take advantage of yield disparities that
occur in money markets. The Fund's investment objective may not
be changed without the affirmative vote of a majority of the
Fund's outstanding shares as defined below. Except as otherwise
provided, the Fund's investment policies are not designated
"fundamental policies" within the meaning of the Act and may,
therefore, be changed by the Trustees of the Fund without a
shareholder vote. However, the Fund will not change its
investment policies without contemporaneous written notice to
shareholders.

The Fund will comply with Rule 2a-7 under the Act, as
amended from time to time, including the diversity, quality and
maturity limitations imposed by the Rule.

Currently, pursuant to Rule 2a-7, the Fund may invest
only in "eligible securities," as that term is defined in the
Rule. Generally, an eligible security is a security that (i) is
denominated in U.S. Dollars and has a remaining maturity of 397
days or less; (ii) is rated, or is issued by an issuer with

<PAGE>

short-term debt outstanding that is rated, in one of the two
highest rating categories by two NRSROs or, if only one NRSRO has
issued a rating, by that NRSRO; and (iii) has been determined by
Alliance to present minimal credit risks pursuant to procedures
approved by the Trustees. A security that originally had a
maturity of greater than 397 days is an eligible security if its
remaining maturity at the time of purchase is 397 calendar days
or less and the issuer has outstanding short-term debt that would
be an eligible security. Unrated securities may also be eligible
securities if Alliance determines that they are of comparable
quality to a rated eligible security pursuant to guidelines
approved by the Trustees. A description of the ratings of some
NRSROs appears in the Appendix attached hereto.

Under Rule 2a-7 the Fund may not invest more than five
percent of its assets in the securities of any one issuer other
than the United States Government, its agencies or
instrumentalities. In addition, the Fund may not invest in a
security that has received, or is deemed comparable in quality to
a security that has received, the second highest rating by the
requisite number of NRSROs (a "second tier security") if
immediately after the acquisition thereof the Fund would have
invested more than (A) the greater of one percent of its total
assets or one million dollars in securities issued by that issuer
which are second tier securities and (B) five percent of its
total assets in second tier securities.

Investment Restrictions

The following restrictions may not be changed without
the affirmative vote of a majority of the Fund's outstanding
shares, which means the vote of (1) 67% or more of the shares
represented at a meeting at which more than 50% of the
outstanding shares are represented or (2) more than 50% of the
outstanding shares, whichever is less.

The Fund:

1. May not 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
investments in securities issued or guaranteed by the United
States Government, its agencies or instrumentalities 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);

<PAGE>

2. May not invest more than 5% of its assets in the
securities of any one issuer (exclusive of securities issued or
guaranteed by the United States Government, its agencies or
instrumentalities), except that up to 25% of the value of the
Fund's total assets may be invested without regard to such 5%
limitation;

3. May not invest in more than 10% of any one class of
an issuer's outstanding securities (exclusive of securities
issued or guaranteed by the United States Government, its
agencies or instrumentalities);

4. May not borrow money except from banks on a
temporary basis or via entering into reverse repurchase
agreements in aggregate amounts not to exceed 15% of the Fund's
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
borrowings may not be used to purchase investments and the Fund
will not purchase any investment while any such borrowings exist;

5. May not pledge, hypothecate or in any manner
transfer, as security for indebtedness, any securities owned or
held by the Fund except as may be necessary in connection with
any borrowing mentioned above, including reverse repurchase
agreements, and in an aggregate amount not to exceed 15% of the
Fund's assets;

6. May not make loans, provided that the Fund may
purchase money market securities and enter into repurchase
agreements; or

7. May not (a) make investments for the purpose of
exercising control; (b) purchase securities of other investment
companies, except in connection with a merger, consolidation,
acquisition or reorganization; (c) invest in real estate (other
than money market securities secured by real estate or interests
therein or money market securities issued by companies which
invest in real estate, or interests therein), commodities or
commodity contracts, interests in oil, gas and other mineral
exploration or other development programs; (d) purchase
securities on margin; (e) make short sales of securities or
maintain a short position or write, purchase or sell puts, calls,
straddles, spreads or combinations thereof; (f) invest in
securities of issuers (other than agencies and instrumentalities
of the United States Government) having a record, together with
predecessors, of less than three years of continuous operation if
more than 5% of the Fund's assets would be invested in such
securities; (g) purchase or retain securities of any issuers if
those officers and trustees of the Fund and employees of Alliance
who own individually more than 1/2 of 1% of the outstanding

<PAGE>

securities of such issuer together own more than 5% of the
securities of such issuer; or (h) act as an underwriter of
securities.

As a matter of operating policy, fundamental investment
restriction 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.

In connection with the qualification or registration of
the Fund's shares for sale under the securities laws of certain
states, the Fund has agreed, in addition to the foregoing
investment restrictions, that it (i) will not invest more than 5%
of the value of its total assets at the time of purchase in the
commercial paper, including variable amount master demand notes,
of any one issuer, and (ii) will not pledge, hypothecate or in
any manner transfer, as security for indebtedness, securities
owned by the Fund if such pledge, hypothecation, or transfer
would then result in more than 10% of the Fund's net assets being
so encumbered.

MANAGEMENT OF THE FUND

Trustees and Officers

The Trustees and principal officers of the Trust, their
ages and their principal occupations during the past five years
are set forth below. Unless otherwise specified, the address of
each such person is 1345 Avenue of the Americas, New York, New
York 10105. Those Trustees whose names are preceded by an
asterisk are "interested persons" of the Trust as determined
under the Act. Each Trustee and officer is also a director,
trustee or officer of other registered investment companies
sponsored by Alliance.

Trustees

RUTH BLOCK, 65, is a Director of Ecolab Incorporated
(specialty chemicals) and Amoco Corporation (oil and gas). She
was formerly an Executive Vice President and the Chief Insurance
Officer of the Equitable Life Assurance Society of the United
States since prior to 1991. Her address is P.O. Box 4653,
Stamford, Connecticut 06903.

<PAGE>

JOHN D. CARIFA*, 50, is the President, Chief Operating
Officer and a Director of Alliance Capital Management Corporation
("ACMC")**, with which he has been associated since prior to
1991.

DAVID H. DIEVLER, 66, was formerly a Senior Vice
President of ACMC with which he had been associated since prior
to 1991. He is currently an independent consultant. His address
is P.O. Box 167, Spring Lake, New Jersey 07762.

JOHN H. DOBKIN, 53, has been President of Historic
Hudson Valley (historic preservation) since prior to 1991.
Previously, he was Director of the National Academy of Design.
From 1987 to 1992 he was a Director of ACMC. His address is 105
West 55th Street, New York, New York 10019.

WILLIAM H. FOULK, JR., 63, was formerly Senior Manager
of Barrett Associates, Inc., a registered investment adviser,
with which he had been associated since prior to 1991. His
address is 2 Hekma Road, Greenwich, CT 06831.

DR. JAMES M. HESTER, 71, is President of the Harry Frank
Guggenheim Foundation and a Director of Union Carbide
Corporation, with which he has been associated since prior to
1991. His address is 45 East 89th Street, New York, New York
10128.

CLIFFORD L. MICHEL, 56, is a member of the law firm of
Cahill Gordon & Reindel with which he has been associated since
prior to 1991. He is Chief Executive Officer of Wenonah
Development Company (investments) and a Director of Placer Dome,
Inc. (mining) and Faber-Castell Corporation (writing
instruments). His address is St. Bernard's Road, Gladstone, New
Jersey 07934.

________________________

* An "interested person" of the Fund as defined in the Act.

** For purposes of this Statement of Additional Information,
ACMC refers to Alliance Capital Management Corporation, the
sole general partner of Alliance, and to the predecessor
general partner of Alliance of the same name.

<PAGE>

ROBERT C. WHITE, 75, was formerly a Vice President and
the Chief Financial Officer of the Howard Hughes Medical
Institute, with which he has been associated since prior to 1991.
He is also a Trustee of St. Clair Fixed Income Fund, St. Clair
Tax-Free Fund and St. Clair Equity Fund (registered investment
companies) and Director of MEDSTAAT, Systems, Inc. (health care
information). His address is 30835 River Crossing, Bingham
Farms, Michigan 48025.

Officers

KATHLEEN A. CORBET - Senior Vice President, 35, 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, 29, is a Vice
President of ACMC, with which he has been associated since prior
to 1991.

PAMELA F. RICHARDSON - Vice President, 42, is a Vice
President of ACMC, with which she has been associated since prior
to 1991.

MARK D. GERSTEN - Treasurer and Chief Financial Officer,
45, is a Senior Vice President of Alliance Fund Services, Inc.
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.

PATRICK J. FARRELL - Assistant Controller, 36, is a Vice
President of Alliance Fund Services, Inc., with which he has been
associated since prior to 1991.

<PAGE>

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- 49
Ruth Block $3,000 $159,000 36
David H. Dievler $2,250 $179,200 42
John H. Dobkin $3,000 $117,200 29
William H. Foulk, Jr. $3,000 $143,500 30
Dr. James M. Hester $3,000 $156,000 37
Clifford L. Michel $2,750 $131,500 36
Robert C. White $3,000 $133,200 36

As of January 5, 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 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 Trustees.

<PAGE>

The Adviser is a leading international investment
manager supervising client accounts with assets as of September
30, 1995 of more than $140 billion (of which more than $47
billion represented the assets of investment companies). The
Adviser's clients are primarily major corporate employee benefit
funds, public employee retirement systems, investment companies,
foundations and endowment funds. The Adviser and its
subsidiaries employ approximately 1,350 employees who operate out
of domestic offices and the overseas offices of subsidiaries in
Bombay, Istanbul, London, Sydney, Tokyo, Toronto, Bahrain,
Luxembourg and Singapore. The 50 registered investment companies
comprising 104 separate investment portfolios managed by the
Adviser currently have more than two million shareholders. As of
September 30, 1995, the Adviser was retained as an investment
manager by 29 of the FORTUNE 100 Companies.

ACMC, the sole general partner of, and the owner of a 1%
general partnership interest in, the Adviser, 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, 1995, 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 59% of the issued and outstanding units
representing assignments of beneficial ownership of limited
partnership interests in the Adviser ("Units"). As of June 30,
1995, approximately 33% and 8% of the Units were owned by the
public and employees of the Adviser and its subsidiaries,
respectively, including employees of the Adviser who serve as
Trustees of the Fund.

AXA owns approximately 60% of the outstanding voting
shares of common stock of ECI. AXA is a member of a group of
companies (the "AXA Group") that is the second largest insurance
group in France (measured by gross premiums written worldwide)
and one of the largest insurance groups in Europe. Principally
engaged in property and casualty insurance and life insurance in
Europe and elsewhere in the world, the AXA Group is also involved
in real estate operations and certain other financial services,
including mutual fund management, lease financing services and
brokerage services. Based on information provided by AXA, as of
January 1, 1995, 42.3% of the issued shares (representing 54.7%
of the voting power) of AXA were owned by Midi Participations, a
French corporation that is a holding company. The voting shares
of Midi Participations are in turn owned 60% by Finaxa, a French
corporation that is a holding company, and 40% by subsidiaries of
Assicurazioni Generali S.p.A., an Italian corporation (one of
which, Belgica Insurance Holding S.A., a Belgian Corporation,

<PAGE>

owned 34.1%). As of January 1, 1995, 62.1% of the issued shares
(representing 75.7% 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 31.8% of the
issued shares) (representing 39.0% of the voting power), and
26.5% of the issued shares (representing 16.6% of the voting
power) of Finaxa were owned by Banque Paribas, a French bank.
Including the shares owned by Midi Participations, as of January
1, 1995, the Mutuelles AXA directly or indirectly owned 51.3% of
the issued shares (representing 65.8% of the voting power) of
AXA. In addition, certain subsidiaries of AXA own 0.4% of the
shares of AXA which are not entitled to be voted. Acting as a
group, the Mutuelles AXA control AXA, Midi Participations and
Finaxa.

Under the Advisory Agreement, Alliance provides
investment advisory services and order placement facilities for
the Fund and pays all compensation of Trustees and officers of
the Fund who are affiliated persons of Alliance. Alliance or its
affiliates also furnish the Fund without charge with management
supervision and assistance and office facilities. Under the
Advisory Agreement, the Fund pays an advisory fee at an annual
rate of .25 of 1% of the first $1.25 billion of the average daily
net value of the Fund's 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
the average daily value of the Fund's net assets in excess of $3
billion. The fee is accrued daily and paid monthly. As to the
obtaining of clerical and accounting services not required to be
provided to the Fund by Alliance under the Advisory Agreement,
the Fund may employ its own personnel. For such services, it
also may utilize personnel employed by Alliance; if so done, the
services are provided to the Fund at cost and the payments
therefor must be specifically approved in advance by the
Trustees. For the fiscal period ended September 30, 1994,
Alliance received from the Fund advisory fees of $60,163. For
the fiscal year ended September 30, 1995, Alliance received from
the Fund advisory fees of $297,892.

The Advisory Agreement provides that Alliance will
reimburse the Fund for its expenses (exclusive of interest,
taxes, brokerage, expenditures pursuant to the Distribution
Services Agreement described above, and extraordinary expenses,
all to the extent permitted by applicable state securities laws
and regulations) which in any year exceed the limits prescribed
by any state in which the Fund's shares are qualified for sale.
The Fund may not qualify its shares for sale in every state. The
Fund believes that presently the most restrictive state expense
ratio limitation imposed by any state in which the Fund has
qualified its shares for sale is 2.5% of the first $30 million of

<PAGE>

the mutual fund's average net assets, 2.0% of the next $70
million of its average net assets and 1.5% of its average net
assets in excess of $100 million. For the fiscal period ended
September 30, 1994 and for the fiscal year ended September 30,
1995, no reimbursements were required to be made pursuant to the
most restrictive expense limitation.

The Advisory Agreement is terminable without penalty by
a vote of a majority of the Fund's outstanding voting securities
or by a vote of a majority of the Fund's Trustees on 60 days'
written notice, or by Alliance on 60 days' written notice, and
will automatically terminate in the event of its assignment. The
Advisory Agreement provides that in the absence of willful
misfeasance, bad faith or gross negligence on the part of
Alliance, or of reckless disregard of its obligations thereunder,
Alliance shall not be liable for any action or failure to act in
accordance with its duties thereunder.

The Advisory Agreement became effective on March 23,
1994 having been approved by the unanimous vote, cast in person,
of the Fund's Trustees, including the Trustees who are not
parties to the Advisory Agreement or interested persons as
defined in the Act of any such party, at a meeting called for
that purpose and held on January 18, 1994, and by the Fund's
initial shareholder on March 14, 1994.

The Advisory Agreement will remain in effect until
September 30, 1996 and thereafter for successive twelve-month
periods (computed from each October 1), provided that such
continuance is approved at least annually by a vote of a majority
of the Fund's outstanding voting securities or by the Fund's
Trustees, including in either case, approval by a majority of the
Trustees who are not parties to the Advisory Agreement or
interested persons of any such party as defined by the Act.

Certain other clients of Alliance may have investment
objectives and policies similar to those of the Fund. Alliance
may, from time to time, make recommendations which result in the
purchase or sale of a particular security by its other clients
simultaneously with the Fund. If transactions on behalf of more
than one client during the same period increase the demand for
securities being purchased or the supply of securities being
sold, there may be an adverse effect on price or quantity. It is
the policy of Alliance to allocate advisory recommendations and
the placing of orders in a manner which is deemed equitable by
Alliance to the accounts involved, including the Fund. When two
or more of the clients of Alliance (including the Fund) are
purchasing or selling the same security on a given day from the
same broker-dealer, such transactions may be averaged as to
price.

<PAGE>

EXPENSES OF THE FUND

Distribution Services Agreement

The Fund has entered into a Distribution Services
Agreement (the "Agreement") with the Fund's principal
underwriter, AFD, to permit the Fund directly or indirectly to
pay expenses associated with the distribution of its shares in
accordance with a plan of distribution which is included in the
Agreement and has been duly adopted and approved in accordance
with Rule 12b-1 adopted by the Commission under the Act (the
"Rule 12b-1 Plan").

Under the Agreement, the Treasurer of the Fund reports
the amounts expended under the Rule 12b-1 Plan and the purposes
for which such expenditures were made to the Directors of the
Fund for their review on a quarterly basis. Also, the Agreement
provides that the selection and nomination of Trustees who are
not interested persons of the Fund (as defined in the Act) are
committed to the discretion of such disinterested Trustees then
in office. The Agreement was initially approved by the Directors
of the Fund at a meeting held on January 18, 1994, and by the
Fund's initial shareholder on March 14, 1994.

In approving the Agreement, the Trustees of the Fund
determined that there was a reasonable likelihood that the
Agreement would benefit the Fund and its shareholders.
Information with respect to distribution services fees and other
revenues and expenses of AFD will be presented to the Trustees
each year for their consideration in connection with their
deliberations as to the continuance of the Agreement. In their
review of the Agreement, the Trustees will be asked to take into
consideration separately with respect to each class the
distribution expenses incurred with respect to such class. The
distribution services fee of a particular class will not be used
to subsidize the provision of distribution services with respect
to any other class.

During the Fund's fiscal year ended September 30, 1995,
the Fund paid distribution services fees for expenditures under
the Agreement to AFD with respect to Class A in amounts
aggregating $186,700, which constituted .50 of 1% of Class A's
average daily net assets during such fiscal year, and Alliance
made payments from its own resources aggregating $71,077. Of the
$257,777 paid by the Fund and Alliance under the Agreement in the
case of the Class A shares, $24,387 was spent on advertising,
$4,917 on the printing and mailing of prospectuses for persons
other than current shareholders, $87,693 for compensation to

<PAGE>

broker-dealers, $55,977 for compensation to sales personnel and
$84,803 was spent on the printing of sales literature, due
diligence, travel, entertainment, occupancy, communications,
taxes, depreciation and other promotional expenses.

During the Funds's fiscal year ended September 30, 1995,
the Fund paid distribution services fees for expenditures under
the Agreement to AFD with respect to Class B shares in amounts
aggregating $688,887, which constituted 1% of Class B's average
daily net assets during such fiscal year, and Alliance made
payments from its own resources aggregating $1,717,318. Of the
$2,406,205 paid by the Fund and Alliance under the Agreement in
the case of the Class B shares, $44,323 was spent on advertising,
$-0- on the printing and mailing of prospectuses for persons
other than current shareholders, $172,189 for compensation to
broker-dealers, $1,875,666 for compensation paid to sales
personnel, $162,378 for interest on Class B shares financing and
$151,649 was spent on the printing of sales literature, due
diligence, travel, entertainment, occupancy, communications,
taxes, depreciation and other promotional expenses.

During the Fund's fiscal year ended September 30, 1995,
the Fund paid distribution services fees for expenditures under
the Agreement to AFD with respect to Class C shares in amounts
aggregating $96,961, which constituted .75 of 1% of Class C's
average daily net assets during such fiscal year, and Alliance
made payments from its own resources aggregating $21,335. Of the
$118,296 paid by the Fund and Alliance under the Agreement in the
case of the Class C shares, $8,298 was spent on advertising, $-0-
on the printing and mailing of prospectuses for persons other
than current shareholders, $63,509 for compensation to broker-
dealers, $19,138 for compensation to sales personnel and $27,351
was spent on the printing of sales literature, due diligence,
travel, entertainment, occupancy, communications, taxes,
depreciation and other promotional expenses.

Distribution services fees are accrued daily and paid
monthly and are charged as expenses of the Fund as accrued. The
distribution services fees attributable to the Class B shares and
Class C shares are designed to permit an investor to purchase
such shares through broker-dealers without the assessment of an
initial sales charge, and, in the case of Class C shares, without
the assessment of a contingent deferred sales charge, and at the
same time to permit AFD to compensate broker-dealers in
connection with the sale of such shares. In this regard, the
purpose and function of the combined contingent deferred sales
charge and distribution services fee on the Class B shares, and
the distribution services fee on the Class C shares, are the same
as those of the initial sales charge (or contingent deferred
sales charge, when applicable) and distribution services fee with
respect to the Class A shares in that in each case the sales

<PAGE>

charge and/or distribution services fee provide for the financing
of the distribution of the Fund's shares.

The Agreement became effective on March 23, 1994. The
Agreement will continue in effect until September 30, 1996 and
thereafter for successive twelve-month periods (computed from
each October 1) with respect to each class of the Fund, 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 Act) of that class, and in either case, by a majority of the
Trustees of the Fund who are not parties to this agreement or
interested persons, as defined in the Act, of any such party
(other than as trustees of the Fund) and who have no direct or
indirect financial interest in the operation of the Rule 12b-1
Plan or any agreement related thereto.

In the event that the Agreement is terminated or not
continued with respect to the Class A shares, Class B shares or
Class C shares, (i) no distribution services fees (other than
current amounts accrued but not yet paid) would be owed by the
Fund to AFD with respect to that class, and (ii) the Fund would
not be obligated to pay AFD for any amounts expended under the
Agreement not previously recovered by AFD from distribution
services fees in respect of shares of such class or through
deferred sales charges.

All material amendments to the Agreement will become
effective only upon approval as provided in the preceding
paragraph; and the Agreement may not be amended in order to
increase materially the costs that the Fund or a particular class
of the Fund may bear pursuant to the Agreement without the
approval of a majority of the holders of the outstanding voting
shares of the Fund or the class of the Fund affected. The
Agreement may be terminated (a) by the Fund without penalty at
any time by a majority vote of the holders of the Fund's
outstanding voting securities, voting separately by class, or by
a majority vote of the disinterested Trustees or (b) by AFD. To
terminate the Agreement, any party must give the other parties 60
days' written notice; to terminate the Rule 12b-1 Plan only, the
Fund is not required to give prior notice to AFD. The Agreement
will terminate automatically in the event of its assignment.

Transfer Agency Agreement

Alliance Fund Services, Inc., an indirect wholly-owned
subsidiary of Alliance, receives a transfer agency fee per
account holder for each of the Class A, Class B and Class C
shares of each portfolio of the Fund, plus reimbursement for
out-of-pocket expenses. The transfer agency fee with respect to
the Class B shares is higher than the transfer agency fee with

<PAGE>

respect to the Class A shares or the Class C shares reflecting
the additional costs associated with Class B contingent deferred
sales charge. 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

Shares of the Fund are offered on a continuous basis at
a price equal to their net asset value. 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.

The Fund's three classes of 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 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 class has
exclusive voting rights with respect to provisions of the Rule
12b-1 Plan pursuant to which its distribution services fee is
paid which relates to a specific class and other matters for
which separate class voting is appropriate under applicable law,
provided that, if the Fund submits to a vote of both the Class A
shareholders and the Class B 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, the Class A
shareholders and the Class B shareholders will vote separately by
Class, and (iv) only the Class B shares are subject to a
conversion feature. Each class has different exchange privileges
and certain different shareholder service options available.

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 value. The Alliance
Mutual Fund the shares of which are being exchanged must receive
(i) proper instructions and any necessary supporting documents as

<PAGE>

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 of shares recently purchased
by check will be permitted only after reasonable assurance that
the check has cleared, which normally takes up to 15 calendar
days following the purchase date. Exchanges of shares will
generally result in the realization of gain or loss for federal
income tax purposes. Each shareholder, and the shareholder's
selected dealer or agent, are authorized to make telephone
requests for exchanges unless Alliance Fund Services, Inc.
receives written instructions to the contrary from the
shareholder. Such telephone requests cannot be accepted with
respect to shares then represented by 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. Telephone requests for exchanges 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

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.
Class A, Class B and Class C shares are offered for purchase for
cash on a continuous basis 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) depository
institutions and other financial intermediaries or their
affiliates that have entered into selected agent agreements with
the Principal Underwriter ("selected agents"), and (iii) the
Principal Underwriter. The minimum for initial investments is
$250; subsequent investments (other than reinvestments of
dividends and capital gains distributions in shares) must be in
the minimum amount of $50. As described under "Shareholder
Services," the Fund offers an automatic investment program and a

<PAGE>

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 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 or Class C shares.

Investors may purchase shares of the Fund in the United
States for cash through selected dealers or agents or, if the
purchaser has a financial intermediary of record, directly
through the Principal Underwriter. Shares may also be sold in
foreign countries where permissible.

The Fund will accept unconditional orders for its 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 shares placed
through selected dealers or agents, the applicable public
offering price will be the net asset value as so determined, but
only if the selected dealer or agent 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
or agent is responsible for transmitting such orders by 5:00 p.m.
If the selected dealer or agent fails to do so, the investor's
right to that day's closing price must be settled between the
investor and the selected dealer or agent. If the selected
dealer or agent 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 Fund shares,
a shareholder may place orders to purchase additional 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 "Literature"
telephone number shown on the cover of this Statement of
Additional Information. Payment for 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 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

<PAGE>

close of business on such following business day. A Fund
business day is any weekday, exclusive of national holidays on
which the Exchange is closed and Good Friday. Full and
fractional shares are credited to a subscriber's account in the
amount of his or her subscription.

The per share net asset value of the Fund's 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). 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 acquisition of
shares. The Fund reserves the right to suspend the sale of its
shares to the public in response to conditions in the securities
markets or for other reasons. In addition, the Fund reserves the
right, on 60 days' written notice to its shareholders to modify,
restrict or terminate the exchange privilege.

All shares purchased are confirmed to each shareholder
and are credited to his or her account at the net asset value.
To avoid unnecessary expense to the Fund and to facilitate the
immediate redemption of shares, share certificates, for which no
charge is made, are not issued except upon the written request of
a shareholder. Certificates are not issued for fractional
shares. 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.

In addition to the discount or commission amount paid to
dealers or agents, the Principal Underwriter from time to time
pays additional cash bonuses or other incentives to dealers or
agents, including Equico Securities, Inc., an affiliate of the
Principal Underwriter, in connection with the sale of shares of
the Fund. Such additional amounts may be utilized, in whole or
in part, to provide additional compensation to registered
representatives who sell shares of the Fund. On some occasions,
such cash or other incentives may be conditioned upon the sale of
a specified minimum dollar amount of the shares of the Fund
and/or other Alliance Mutual Funds, as defined below, during a
specific period of time. On some occasions, such cash or other
incentives may take the form of payment for attendance at
seminars, meals, sporting events or theater performances, or
payment for travel, lodging and entertainment incurred in
connection with travel by persons associated with a dealer or
agent and their immediate family members to urban or resort
locations within or outside the United States. Such dealer or

<PAGE>

agent may elect to receive cash incentives of equivalent amount
in lieu of such payments.

The alternative purchase arrangements permit an investor
to choose the method of purchasing shares that is most beneficial
given the amount of the purchase, the length of time the investor
expects to hold the shares, whether the investor intends to
subsequently exchange shares for shares of another Alliance
Mutual Fund and other circumstances. The Principal Underwriter
will reject any order (except orders from certain retirement
plans) for more than $250,000 for Class B shares. In addition,
the Principal Underwriter will reject any order for more than
$5,000,000 of Class C shares.

Class A shares are subject to a lower distribution
services fee and, accordingly, pay correspondingly higher
dividends per share than Class B shares or Class C shares.
However, because sales charges are deducted at the time Class A
shares are exchanged for Class A shares of other Alliance Mutual
Funds, investors not qualifying for reduced Class A sales charges
who expect to exchange their shares for Class A shares of another
Alliance Mutual Fund and to maintain their investment for an
extended period of time might consider purchasing Class A shares
because the accumulated continuing distribution charges on Class
B shares or Class C shares may exceed the initial sales charge on
Class A shares during the life of the investment. Again,
however, such investors must weigh this consideration against the
fact that sales charges will be imposed at the time Class A
shares are exchanged for Class A shares of other Alliance Mutual
Funds.

Other investors might determine, however, that it would
be more advantageous to purchase Class B shares or Class C
shares, although these classes are subject to higher continuing
distribution charges and, in the case of Class B shares, are
subject to a contingent deferred sales charge for a four-year
period. This might be true of investors who do not wish to pay
sales charges on subsequent exchanges of shares. Those investors
who prefer to have all of their funds invested initially but may
not wish to retain their investment for the four-year period
during which Class B shares are subject to a contingent deferred
sales charge may find it more advantageous to purchase Class C
shares.

The Trustees of the Fund have determined that currently
no conflict of interest exists among the Class A, Class B and
Class C 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.

<PAGE>

Class A Shares

The public offering price of Class A shares is their net
asset value. No sales charge is imposed on Class A shares at the
time of purchase. If Class A shares of the Fund are purchased
for cash and are exchanged for Class A shares of another Alliance
Mutual Fund, the sales charge applicable to the other Alliance
Mutual Fund will be assessed at the time of the exchange.

With respect to purchases of $1,000,000 or more, Class A
shares redeemed within one year of purchase will be subject to a
1% contingent deferred sales charge at the time of redemption.
Class A shares that were received in exchange of Class A shares
of another Alliance Mutual Fund that were not subject to an
initial sales charge when originally purchased for cash because
the purchase was of $1,000,000 or more and that are redeemed
within one year of the original purchase will be subject to a 1%
contingent deferred sales charge. No charge will be assessed on
shares derived from reinvestment of dividends or capital gains
distributions. The contingent deferred sales charge on Class A
shares will be waived on certain redemptions, and such charge
will be applied to redemptions of shares by shareholders who hold
both Class A and Class B shares, as described below under "Class
B Shares--Contingent Deferred Sales Charge" and "Class B
Shares--Waivers of the Contingent Deferred Sales Charges on Class
A Shares and Class B Shares." Proceeds from the contingent
deferred sales charge on Class A shares are paid to the Principal
Underwriter and are used by the Principal Underwriter to defray
the expenses of the Principal Underwriter related to providing
distribution-related services in connection with the sales of
Class A shares, such as the payment of compensation to selected
dealers and agents for selling Class A Shares. With respect to
purchases of $1,000,000 or more made through selected dealers or
agents, the Adviser may, pursuant to the Distribution Services
Agreement described above, pay such dealers or agents from its
own resources a fee of up to 1% of the amount invested to
compensate such dealers or agents for their distribution
assistance in connection with such purchases.

Combined Purchase Privilege. Certain persons may
qualify for the sales charge reductions on Class A shares of
other Alliance Mutual Funds by combining purchases of shares of
the Fund and shares of other Alliance Mutual Funds into a single
"purchase," if the resulting "purchase" totals at least $100,000.
The term "purchase" refers to: (i) a single purchase by an
individual, or concurrent purchases, which in the aggregate are
at least equal to the prescribed amounts, by an individual, his
or her spouse and their children under the age of 21 years
purchasing shares for his, her or their own account(s); (ii) a
single purchase by a trustee or other fiduciary purchasing shares
for a single trust, estate or single fiduciary account although

<PAGE>

more than one beneficiary is involved; or (iii) a single purchase
for the employee benefit plans of a single employer. The term
"purchase" also includes purchases by any "company," as the term
is defined in the 1940 Act, but does not include purchases by any
such company which has not been in existence for at least six
months or which has no purpose other than the purchase of shares
of Alliance Mutual Funds or shares of other registered investment
companies at a discount. The term "purchase" does not include
purchases by any group of individuals whose sole organizational
nexus is that the participants therein are credit card holders of
a company, policy holders of an insurance company, customers of
either a bank or broker-dealer or clients of an investment
adviser. Currently, the Alliance Mutual Funds include:

AFD Exchange Reserves
The Alliance Fund, Inc.
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
-Corporate Bond Portfolio
-U.S. Government Portfolio
Alliance Developing Markets Fund, Inc.
Alliance Global Dollar Government Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Growth and Income Fund, Inc.
Alliance Income Builder Fund, Inc.
Alliance International Fund
Alliance Mortgage Securities Income Fund, Inc.
Alliance Mortgage Strategy Trust, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
-California Portfolio
-Insured California Portfolio
-Insured National Portfolio
-National Portfolio
-New York Portfolio
Alliance Municipal Income Fund II
-Arizona Portfolio
-Florida Portfolio
-Massachusetts Portfolio
-Michigan Portfolio
-Minnesota Portfolio
-New Jersey Portfolio
-Ohio Portfolio
-Pennsylvania Portfolio
-Virginia Portfolio
Alliance New Europe Fund, Inc.
Alliance North American Government Income Trust, Inc.
Alliance Premier Growth Fund, Inc.
Alliance Quasar Fund, Inc.

<PAGE>

Alliance Short-Term Multi-Market Trust, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance World Income Trust, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance Portfolios
-Alliance Growth Fund
-Alliance Conservative Investors Fund
-Alliance Growth Investors Fund
-Alliance Strategic Balanced Fund
-Alliance Short-Term U.S. Government Fund

Prospectuses for the Alliance Mutual Funds may be
obtained without charge by contacting Alliance Fund Services,
Inc. at the address or the "Literature" telephone number shown on
the front cover of this Statement of Additional Information.

Cumulative Quantity Discount (Right of Accumulation).
An investor's exchange of Class A shares of the Fund for Class A
shares of another Alliance Mutual Fund may qualify for a
Cumulative Quantity Discount from any applicable sales charge.
The applicable sales charge will be based on the total of:

(i) the investor's current purchase;

(ii) the net asset value (at the close of business on
the previous day) of (a) all Class A, Class B and
Class C shares of the Fund held by the investor and
(b) all shares of any other Alliance Mutual Fund
held by the investor; and

(iii) the net asset value of all shares described in
paragraph (ii) owned by another shareholder
eligible to combine his or her purchase with that
of the investor into a single "purchase" (see
above).

For example, if an investor owned shares of the Fund or
another Alliance Mutual Fund worth $200,000 at their then current
net asset value and, subsequently, purchased Class A shares of
another alliance Mutual Fund worth an additional $100,000, the
initial sales charge for the $100,000 purchase would be at the
rate applicable to a single $300,000 purchase of shares of that
Alliance Mutual Fund, rather than the rate applicable to a
$100,000 purchase.

To qualify for the Combined Purchase Privilege or to
obtain the Cumulative Quantity Discount on a purchase through a
selected dealer or agent, the investor or selected dealer or
agent must provide the Principal Underwriter with sufficient

<PAGE>

information to verify that each purchase qualifies for the
privilege or discount.

Statement of Intention. Class A investors of the Fund
may also obtain reduced initial sales charges by means of a
written Statement of Intention, which expresses the investor's
intention to invest, including through exchange of their Class A
shares of the Fund, not less than $100,000 within a period of 13
months in Class A shares (or Class A, Class B, and/or Class C
shares) of another Alliance Mutual Fund. Each purchase of shares
under a Statement of Intention will be made at the public
offering price or prices applicable at the time of such purchase
to a single transaction of the dollar amount indicated in the
Statement of Intention. At the investor's option, a Statement of
Intention may include purchases of shares of any Alliance Mutual
Fund made not more than 90 days prior to the date that the
investor signs the Statement of Intention; however, the 13-month
period during which the Statement of Intention is in effect will
begin on the date of the earliest purchase to be included.

Investors qualifying for the Combined Purchase Privilege
described above may purchase shares of the Alliance Mutual Funds
under a single Statement of Intention. For example, if at the
time an investor signs a Statement of Intention to invest at
least $100,000 in Class A shares of an Alliance Mutual Fund, the
investor and the investor's spouse each purchase shares of the
Fund worth $20,000 (for a total of $40,000), it will be necessary
to invest only a total of $60,000 during the following 13 months
in shares of that Alliance Mutual Fund or any other Alliance
Mutual Fund, to qualify for a reduced initial sales charge on the
total amount being invested (i.e., the initial sales charge
applicable to an investment of $100,000).

The Statement of Intention is not a binding obligation
upon the investor to purchase the full amount indicated. The
minimum initial investment under a Statement of Intention is 5%
of such amount. Shares purchased with the first 5% of such
amount will be held in escrow (while remaining registered in the
name of the investor) to secure payment of the higher initial
sales charge applicable to the shares actually purchased if the
full amount indicated is not purchased, and such escrowed shares
will be involuntarily redeemed to pay the additional sales
charge, if necessary. Dividends on escrowed shares, whether paid
in cash or reinvested in additional Alliance Mutual Fund shares,
are not subject to escrow. When the full amount indicated has
been purchased, the escrow will be released. To the extent that
an investor purchases more than the dollar amount indicated on
the Statement of Intention and qualifies for a further reduced
sales charge, the initial sales charge will be adjusted for the
entire amount purchased at the end of the 13-month period. The
difference in the initial sales charge will be used to purchase

<PAGE>

additional shares of that Alliance Mutual Fund subject to the
rate of the initial sales charge applicable to the actual amount
of the aggregate purchases.

Investors wishing to enter into a Statement of Intention
in conjunction with their initial investment in Class A shares of
that Alliance Mutual Fund should complete the appropriate portion
of the Subscription Application found in the Prospectus of that
Alliance Mutual Fund. Current Class A shareholders of that
Alliance Mutual Fund desiring to do so can obtain a form of
Statement of Intention by contacting Alliance Fund Services, Inc.
at the address or telephone numbers shown on the cover of that
Alliance Mutual Fund's Statement of Additional Information.

Certain Retirement Plans. Multiple participant payroll
deduction retirement plans may also purchase shares of any
Alliance Mutual Fund, including through the exchanges of their
Class A shares of the Fund, at a reduced initial sales charge on
a monthly basis during the 13-month period following such a
plan's initial purchase of that Alliance Mutual Fund's shares.
The initial sales charge applicable to such initial purchase of
shares of that Alliance Mutual Fund will be that normally
applicable, under the schedule of the initial sales charges set
forth in the Statement of Additional Information of that Alliance
Mutual Fund, to an investment 13 times larger than such initial
purchase. The sales charge applicable to each succeeding monthly
purchase will be that normally applicable, under such schedule,
to an investment equal to the sum of (i) the current month's
purchase multiplied by the number of months (including the
current month) remaining in the 13-month period and (ii) the
total purchase previously made during the 13-month period. Sales
charges previously paid during such period will not be
retroactively adjusted on the basis of later purchases.

Class B Shares

Investors choosing the deferred sales charge alternative
purchase Class B shares for cash at the public offering price
equal to the net asset value per share of the Class B shares on
the date of purchase without the imposition of a sales charge at
the time of purchase. Proceeds from the contingent deferred
sales charge on the Class B shares purchased for cash are paid to
the Principal Underwriter and are used by the Principal
Underwriter to defray the expenses of the Principal Underwriter
related to providing distribution-related services to the Fund in
connection with the sale of the Class B shares, such as the
payment of compensation to selected dealers and agents for
selling Class B shares. The higher distribution services fee
incurred by Class B shares will cause such shares to have a
higher expense ratio and to pay lower dividends than those
related to Class A shares.

<PAGE>

Class B shares of the Fund are also offered to holders
of Class B shares of other Alliance Mutual Funds without any
sales charge at the time of purchase in an exchange transaction.
When Class B shares acquired in an exchange are redeemed, the
applicable contingent deferred sales charge and conversion
schedules will be the schedules that applied to Class B shares of
the Alliance Mutual Fund originally purchased by the shareholder
at the time of their purchase.

Contingent Deferred Sales Charge. Class B shares that
are redeemed within four years of their cash purchase will be
subject to a contingent deferred sales charge at the rates set
forth below charged as a percentage of the dollar amount subject
thereto. The amount of the contingent deferred sales charge, if
any, will vary depending on the number of years from the time of
cash payment for the purchase of Class B shares until the time of
redemption of such shares.

Year Since Contingent Deferred Sales Charge as
Cash Purchase a % of Dollar Amount Subject to Charge
_________________ ___________________________________

First 4.00%
Second 3.00%
Third 2.00%
Fourth 1.00%
Fifth None

In determining the contingent deferred sales charge
applicable to a redemption, it will be assumed that the
redemption is first of any shares in the shareholder's Fund
account that are not subject to a contingent deferred sales
charge, second of Class B shares held for over three years and
third of Class A shares that are subject to a contingent deferred
sales charge held shortest during the one-year period during
which such shares are subject to the sales charge. The CDSC is
applied to the lesser of the net asset value at the time of
redemption of the Class A shares or Class B shares being redeemed
and the cost of such shares (or, as to Fund shares acquired
through an exchange, the cost of the Alliance Mutual Fund shares
originally purchased for cash). Accordingly, no sales charge
will be imposed on increases in net asset value above the initial
purchase price. In addition, no charge will be assessed on
shares derived from reinvestment of dividends or capital gains
distributions.

Waivers of the Contingent Deferred Sales Charges on
Class A Shares and Class B Shares. The contingent deferred sales
charges on Class A and Class B shares are waived on redemptions

<PAGE>

of shares (i) following the death or disability, as defined in
the Internal Revenue Code of 1986, as amended (the "Code"), of a
shareholder, or (ii) to the extent that the redemption represents
a minimum required distribution from an individual retirement
account or other retirement plan to a shareholder who has
attained the age of 70-1/2, or (iii) that had been purchased by
present or former Trustees of the Fund, by the relative of any
such person, by any trust, individual retirement account or
retirement plan for the benefit of any such person or relative,
or by the estate of any such person or relative, or (iv) pursuant
to a Systematic Withdrawal Plan (see "Shareholder
Services--Systematic Withdrawal Plan").

Conversion Feature. Class B shares of the Fund will
automatically convert to Class A shares of the Fund in accordance
with the conversion schedule applicable to the original Alliance
Mutual Fund Class B shares purchased, or in the case of Class B
shares of the Fund purchased for cash, on the tenth Fund business
day in the month following the month in which the eighth
anniversary date of the acceptance of the purchase order for the
Class B shares occurs, and will no longer be subject to a higher
distribution services fee following conversion. Such conversion
will be on the basis of the relative net asset values of the two
classes, without the imposition of any sales charge, fee or other
charge. The purposes of the conversion feature are (i) to
provide a mechanism whereby the time period for the automatic
conversion of Class B shares to Class A shares will continue to
elapse in the event the Class B shares originally purchased for
cash are subsequently exchanged for Class B shares of the Fund or
Class B shares of another Alliance Mutual Fund and (ii) to reduce
the distribution services fee paid by holders of Class B shares
that have been outstanding long enough for the Principal
Underwriter to have been compensated for distribution expenses
incurred in the original sale of such shares. See "Shareholder
Services--Exchange Privilege."

For purposes of conversion to Class A shares, Class B
shares purchased through the reinvestment of dividends and
distributions paid in respect of Class B shares in a
shareholder's account will be considered to be held in a separate
subaccount. Each time any Class B shares in the shareholder's
account (other than those in the subaccount) convert to Class A
shares, an equal pro-rata portion of the Class B shares in the
subaccount will also convert to Class A shares.

The conversion of Class B shares to Class A shares is
subject to the continuing availability of an opinion of counsel
to the effect that (i) the assessment of the higher distribution
services fee and transfer agency costs with respect to Class B
shares does not result in the Fund's dividends or distributions
constituting "preferential dividends" under the Code, and

<PAGE>

(ii) the conversion of Class B shares to Class A shares does not
constitute a taxable event under federal income tax law. The
conversion of Class B 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, no further conversions of
Class B shares would occur, and shares might continue to be
subject to the higher distribution services fee for an indefinite
period which may extend beyond the period ending eight years
after the end of the calendar month in which the shareholder's
purchase order was accepted.

Class C Shares. Investors choosing the asset-based
sales charge alternative purchase Class C shares at the public
offering price equal to the net asset value per share of the
Class C shares on the date of purchase without the imposition of
a sales charge either at the time of purchase or upon redemption.
Class C shares are sold without an initial sales charge so that
the Fund will receive the full amount of the investor's purchase
payment and without a contingent deferred sales charge so that
the investor will receive as proceeds upon redemption the entire
net asset value of his or her Class C shares. The Class C
distribution services fee enables the Fund to sell Class C shares
without either an initial or contingent deferred sales charge.
Class C shares do not convert to any other class of shares of the
Fund.

Class C shares of the Fund are also offered to holders
of Class C shares of other Alliance Mutual Funds without any
sales charge at the time of purchase or redemption.

Class C shares incur higher distribution services fees
than Class A shares, and will thus have a higher expense ratio
and pay correspondingly lower dividends than Class A shares.

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."

Redemption

Subject only to the limitations described below, the
Fund will redeem 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 shares tendered for redemption in proper form. Except
for any contingent deferred sales charge which may be applicable

<PAGE>

to Class A or Class B shares, there is no redemption charge.
Payment of the redemption price will be made within seven days
after the Fund's receipt of such tender for redemption.

The right of redemption may not be suspended or the date
of payment upon redemption postponed for more than seven days
after 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 shares on redemption or
repurchase may be more or less than the cost of such shares to
the shareholder, depending upon the market value of the Fund's
portfolio securities at the time of such redemption or repurchase
and the income earned. Redemption proceeds on Class A shares and
Class B shares will reflect the deduction of the contingent
deferred sales charge, if any. Payment (either in cash or in
portfolio securities) received by a shareholder upon redemption
or repurchase of his shares, assuming the 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 shares redeemed.

To redeem shares of a Portfolio for which no stock
certificates have been issued, the registered owner or 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 institution that is an "eligible guarantor" as
defined in Rule 17Ad-15 under the Securities Exchange Act of
1934, as amended.

Telephone Redemption By Electronic Funds Transfer. Each
Fund shareholder is entitled to request redemption by Electronic
Funds Transfer, once in any 30 day period, of shares for which no

<PAGE>

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, and must be made before 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 as noted below,
each Fund shareholder is eligible to request redemption by check,
once in any 30-day period, of Fund 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 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
may cancel the privilege by written instruction to Alliance Fund
Services, Inc., or by checking the appropriate box on the
shareholder or options form.

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, AFD 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 commission
for handling telephone requests for redemptions.

<PAGE>

To redeem 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
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.

Repurchase

The Fund may repurchase shares through the AFD or
selected dealers or agents. The repurchase price will be the net
asset value next determined after AFD receives the request (less
the contingent deferred sales charge, if any, with respect to the
Class A shares and Class B shares), 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 AFD prior to its close of business on
that day (normally 5:00 p.m. Eastern time). The selected dealer
or agent is responsible for transmitting the request to AFD by
5:00 p.m. If the 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 shares of the Fund to AFD either directly
or through a selected dealer or agent. Neither the Fund nor AFD
charges a fee or commission in connection with the repurchase of
shares (except for the contingent deferred sales charge, if any,
with respect to Class A shares and Class B shares). Normally, if
shares of the Fund are offered through a selected dealer or
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 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. No contingent
deferred sales charge will be deducted from the proceeds of this

<PAGE>

redemption. In the case of a redemption or repurchase of shares
of a Portfolio 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."

Exchange Privilege

Class A shareholders of the Fund can exchange their
Class A shares for Class A shares of any Alliance fund without
the payment of any sales or service charges. For purposes of
applying any applicable contingent deferred sales charge upon the
newly acquired Class A shares, the period of time the Class A
shares surrendered in the exchange have been held is added to the
period of time the newly acquired shares have been held.
Prospectuses for each Alliance fund may be obtained by contacting
Alliance Fund Services, Inc. at the address shown on the cover of
this Statement of Additional Information or by telephone at
(800) 227-4618 or, in Illinois, (800) 227-4170.

Class B shareholders of the Fund can exchange their
Class B shares ("original Class B shares") for Class B shares of
any other Alliance fund that offers Class B shares ("new Class B
shares") without the payment of any contingent deferred sales or
service charges. For purposes of computing both the time
remaining before the new Class B shares convert to Class A shares
of that fund and the contingent deferred sales charge payable
upon disposition of the new Class B shares, the period of time
for which the original Class B shares have been held is added to
the period of time for which the new Class B shares have been
held. When redemption occurs, the applicable CDSC schedule is
that which applied at that time to the Alliance Class B shares
purchased by the shareholder for cash.

Class C shareholders of the Fund can exchange their
Class shares for Class C shares of the other Alliance funds.

All exchanges are subject to the minimum investment
requirements and any other applicable terms set forth in the
Prospectus for the Alliance fund whose shares are being acquired.
An exchange is effected through the redemption of the shares
tendered for exchange and the purchase of shares being acquired

<PAGE>

at their respective net asset values as next determined following
receipt by the Alliance 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 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 funds will generally result in the realization of a
capital gain or loss for Federal income tax purposes.

Each shareholder, and the shareholder's selected dealer
or agent, are authorized to make telephone requests for exchanges
unless Alliance Fund Services, Inc., receives written instruction
to the contrary from the shareholder. 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
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
(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.

Neither the Alliance Funds nor Alliance, AFD 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 or agents may charge a commission for handling
telephone requests for exchanges.

<PAGE>

The exchange privilege is available only in states where
shares of the Alliance funds being acquired may be legally sold.
Each Alliance fund reserves the right, at any time on 60 days'
notice to its shareholders, to reject any order to acquire its
shares through exchange or otherwise to modify, restrict or
terminate the exchange privilege.

Automatic Investment Program

Investors may purchase shares of the Fund through an
automatic investment program utilizing "pre-authorized check"
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 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. Drafts may be
made in paper form or, if the investor's bank is a member of the
NACHA, in electronic form. If made in paper form, the draft is
normally made on the 20th day of each month, or the next business
day thereafter. If made 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.

A shareholder may elect to initiate a monthly "Auto
Exchange" whereby a specified dollar amount's worth of his or her
Fund shares (minimum $25) is automatically exchanged for 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.

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 "Literature" telephone number on the cover of this
Statement of Additional Information, or write to:

<PAGE>

Alliance Fund Services, Inc.
Retirement Plans
P.O. Box 1520
Secaucus, New Jersey 07096-1520

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.

If the aggregate net asset value of shares of Alliance
funds held by a qualified plan reaches $5 million on or before
December 15 in any year, all Class C shares of the Fund held by
such plan can be exchanged at the plan's request, without any
sales charge, for Class A shares of such Fund.

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 as compensation for its services to the retirement
plan accounts maintained with the Fund.

<PAGE>

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.

Dividend Direction Plan

A shareholder who already maintains, in addition to his
or her Class A, Class B or Class C Fund account, a Class A,
Class B or Class C account(s) with one or more other Alliance
Mutual Funds may direct that income dividends and/or capital
gains paid on his or her Class A, Class B or Class C Fund shares
be automatically reinvested, in any amount, without the payment
of any sales or service charges, in shares of the same class of
such other Alliance Mutual Fund(s). Further information can be
obtained by contacting Alliance Fund Services, Inc. at the
address or the "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 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 withdrawal 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.

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 withdrawal payments will be subject
to any taxes applicable to redemptions and, except as discussed
below, any applicable contingent deferred sales charge. Shares
acquired with reinvested dividends and distributions will be
liquidated first to provide such withdrawal payments and
thereafter other 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.

<PAGE>

Withdrawal payments will not automatically end when a
shareholder's account reaches a certain minimum level. Therefore,
redemptions of 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." Purchases of additional shares
concurrently with withdrawals maybe undesirable because of the
imposition of sales charges. While an occasional lump-sum
investment may be made by a shareholder of Class A shares who is
maintaining a systematic withdrawal plan, such investment should
normally be an amount equivalent to three times the annual
withdrawal or $5,000, whichever is less.

Payments under a systematic withdrawal plan may be made
by check or electronically via the Automated Clearing House
("ACH") network. Investors wishing to establish a systematic
withdrawal plan in conjunction with their initial investment in
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 "Literature" telephone number shown on the cover of this
Statement of Additional Information.

Class B CDSC Waiver for Shares Acquired After July 1,
1995. Under a systematic withdrawal plan, up to 1% monthly, 2%
bi-monthly or 3% quarterly of the value at the time of redemption
of the Class B shares in a shareholder's account originally
acquired for cash after July 1, 1995 may be redeemed free of any
contingent deferred sales charge. Class B shares acquired after
July 1, 1995 that are not subject to a contingent deferred sales
charge (such as shares acquired with reinvested dividends or
distributions) will be redeemed first and will count toward these
limitations. Remaining Class B shares acquired after July 1,
1995 that are held the longest will be redeemed next. Redemptions
of Class B shares acquired after July 1, 1995 in excess of the
foregoing limitations and redemptions of Class B shares acquired
before July 1, 1995 will be subject to any otherwise applicable
contingent deferred sales charge.

Statements and Reports

Each shareholder of the Fund receives semi-annual and
annual reports which include a portfolio of investments,
financial statements and, in the case of the annual report, the
report of the Fund's independent auditors, McGladrey & Pullen
LLP, as well as a monthly cumulative dividend statement and a
confirmation of each purchase and redemption. By contacting his
or her broker or Alliance Fund Services, Inc., a shareholder can

<PAGE>

arrange for copies of his or her account statements to be sent to
another person.

Checkwriting

A New Class A or Class C 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 Class A or Class C shares of the
Fund redeemed from the investor's account. A Class A or Class C
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
Class A or Class C 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 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. Cancelled (paid) checks are returned to
the shareholder. The checkwriting service enables the
shareholder to receive the daily dividends declared on the shares
to be redeemed until the day that the check is presented to the
Bank for payment.

DAILY DIVIDENDS--DETERMINATION OF NET ASSET VALUE

All net income of the Fund is determined after the close
of each business day, currently 4:00 p.m. (Eastern time) (and at
such other times as the Trustees may determine) and is paid
immediately thereafter pro rata to shareholders of record via
automatic investment in additional full and fractional shares in
each shareholder's account at the rate of one share for each

<PAGE>

dollar distributed. As such additional shares are entitled to
dividends on following days, a compounding growth of income
occurs.

Net income consists of all accrued interest income on
Fund portfolio 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. Net asset value
per share of each class is expected to remain constant at $1.00
since all net income is declared as a dividend each time net
income is determined.

Dividends paid by the Fund, with respect to Class A,
Class B and Class C shares will be calculated in the same manner
at the same time on the same day and will be in the same amount,
except that the higher distribution services fees applicable to
Class B and Class C shares, and any incremental transfer agency
costs relating to Class B shares, will be borne exclusively by
the class to which they relate.

The valuation of the Fund's portfolio securities is
based upon their amortized cost which does not take into account
unrealized securities gains or losses as measured by market
valuations. The amortized cost method involves valuing an
instrument at its cost and thereafter applying a constant
amortization to maturity of any discount or premium, regardless
of the impact of fluctuating interest rates on the market value
of the instrument. During periods of declining interest rates,
the daily yield on shares of the Fund may be higher than that of
a fund with identical investments utilizing a method of valuation
based upon market prices for its portfolio instruments; the
converse would apply in a period of rising interest rates.

The Fund utilizes the amortized cost method of valuation
of portfolio securities in accordance with the provisions of Rule
2a-7 under the Act. Pursuant to such rule, the Fund maintains a
dollar-weighted average portfolio maturity of 90 days or less and
invests only in securities of high quality. The Fund also
purchases instruments which, at the time of investment, have
remaining maturities of no more than 397 days. The Fund
maintains procedures designed to stabilize, to the extent
reasonably possible, the price per share as computed for the
purpose of sales and redemptions at $1.00. Such procedures
include review of the Fund's portfolio holdings by the Trustees
at such intervals as they deem appropriate to determine whether
and to what extent the net asset value of the Fund calculated by
using available market quotations or market equivalents deviates
from net asset value based on amortized cost. If such deviation
exceeds 1/2 of 1%, the Trustees will promptly consider what
action, if any, should be initiated. In the event the Trustees
determine that such a deviation may result in material dilution

<PAGE>

or other unfair results to new investors or existing
shareholders, they will consider corrective action which might
include (1) selling instruments prior to maturity to realize
capital gains or losses or to shorten average portfolio maturity;
(2) withholding dividends of net income on shares; or
(3) establishing a net asset value per share using available
market quotations or equivalents. There can be no assurance,
however, that the Fund's net asset value per share will remain
constant at $1.00.

The net asset value of the shares is determined each
business day as of the close of regular trading in the Exchange
currently 4:00 p.m. (Eastern time). The net asset value per
share of each class is calculated by determining the amount of
assets attributable to each class of shares, subtracting
liabilities, and dividing by the total number of shares
outstanding. All expenses, including the fees payable to
Alliance, are accrued daily.

TAXES

The Fund has qualified to date and intends to qualify in
each future year to be taxed as a regulated investment company
under the Code, and as such, will not be liable for Federal
income and excise taxes on the net income and capital gains
distributed to its shareholders. Since the Fund distributes all
of its net income and capital gains, the Fund itself should
thereby avoid all Federal income and excise taxes.

For shareholders' Federal income tax purposes, all
distributions by the Fund out of interest income and net realized
short-term capital gains are treated as ordinary income, and
distributions of long-term capital gains, if any, are treated as
long-term capital gains irrespective of the length of time the
shareholder held shares in the Fund. Since the Fund derives
nearly all of its gross income in the form of interest and the
balance in the form of short-term capital gains, it is expected
that for corporate shareholders, none of the Fund's distributions
will be eligible for the dividends-received deduction under
current law.

<PAGE>

PORTFOLIO TRANSACTIONS

Subject to the general supervision of the Trustees of
the Fund, Alliance is responsible for the investment decisions
and the placing of the orders for portfolio transactions for the
Fund. Because the Fund invests in securities with short
maturities, there is a relatively high portfolio turnover rate.
However, the turnover rate does not have an adverse effect upon
the net yield and net asset value of the Fund's shares since the
Fund's portfolio transactions occur primarily with issuers,
underwriters or major dealers in money market instruments acting
as principals. Such transactions are normally on a net basis
which does not involve payment of brokerage commissions. The
cost of securities purchased from an underwriter usually includes
a commission paid by the issuer to the underwriters; transactions
with dealers normally reflect the spread between bid and asked
prices.

The Fund has no obligations to enter into transactions
in portfolio securities with any dealer, issuer, underwriter or
other entity. In placing orders, it is the policy of the Fund to
obtain the best price and execution for its transactions. Where
best price and execution may be obtained from more than one
dealer, Alliance, in its discretion, purchases and sells
securities through dealers who provide research, statistical and
other information to Alliance. Such services may be used by
Alliance for all of its investment advisory accounts and,
accordingly, not all such services may be used by Alliance in
connection with the Fund. The supplemental information received
from a dealer is in addition to the services required to be
performed by Alliance under Advisory Agreement, and the expenses
of the Alliance will not necessarily be reduced as a result of
the receipt of such information. During the fiscal period ended
September 30, 1994 and for the fiscal year ended September 30,
1995, the Fund incurred no brokerage commissions.

GENERAL INFORMATION

Capitalization

The Fund has an unlimited number of authorized Class A,
Class B and Class C 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

<PAGE>

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 each
portfolio participate equally in dividends and distributions from
that Portfolio, including any distributions in the event of a
liquidation. Shares of each portfolio are normally entitled to
one vote for all purposes. Generally, shares of all portfolios
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 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.

An order has been received from the Commission
permitting the issuance and sale of multiple classes of shares
representing interests in the Fund's investment portfolio.

As of the close of business of January 5, 1996, there
were 118,162,479 shares of beneficial interest of the Fund
outstanding. Of this amount, 37,869,927 shares were Class A
shares, 68,676,273 shares were Class B shares and 11,616,279
shares were Class C shares. 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 January 5, 1996:

No. of % of
Name and Address Shares Class

Class C Shares

Verlin R. Eppert 1,090,412 9%
Rosalie A. Eppert Jt Ten
31490 Bellvine Trail
Birmingham, MI 48025-3703

Shareholder Liability

Under Massachusetts law, shareholders could, under
certain circumstances, be held personally liable for the
obligations of the Fund. However, the Agreement and Declaration
of Trust disclaims shareholder liability for acts or obligations
of the Fund and requires that the Trustees use their best efforts

<PAGE>

to ensure that notice of such disclaimer be given in each note,
bond, contract, instrument, certificate or undertaking made or
issued by the Trustees or officers of the Fund. The Agreement
and Declaration of Trust provides for indemnification out of the
property of the Fund for all loss and expense of any shareholder
of the Fund held personally liable for the obligations of the
Fund. Thus, the risk of a shareholder incurring financial loss
on account of shareholder liability is limited to circumstances
in which the Fund would be unable to meet its obligations. In
the view of Alliance, such risk is not material.

Custodian

State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts 02110, acts as custodian for the
securities and cash of the Fund but plays no part in deciding the
purchase or sale of portfolio securities.

Principal Underwriter

Alliance Fund Distributors, Inc., 1345 Avenue of the
Americas, New York, New York 10105, serves as the Fund's
principal underwriter, and as such may solicit orders from the
public to purchase shares of the Fund. Alliance Fund
Distributors, Inc. is not obligated to sell any specific amount
of shares and will purchase shares for resale only against orders
for shares. Under the Agreement between the Fund and Alliance
Fund Distributors, Inc., the Fund has agreed to indemnify the
distributors, in the absence of its willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations
thereunder, against certain civil liabilities, including
liabilities under the Securities Act, as amended.

Independent Auditors

An opinion relating to the Fund's financial statements
is given herein by McGladrey & Pullen LLP, 555 Fifth Avenue, New
York, New York, independent auditors for the Fund.

Counsel

Legal matters in connection with the issuance of the
shares offered hereby have been passed upon by Seward & Kissel,
One Battery Park Plaza, New York, New York, counsel for the Fund
and the Adviser. Seward & Kissel has relied upon the opinion of
Sullivan & Worcester, Boston, Massachusetts, for matters relating
to Massachusetts law.

<PAGE>

Yield Quotations

Advertisements containing yield quotations which are
computed separately for Class A, Class B and Class C 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:

effective yield = ((base period return + 1)365/7) - 1.

Dividends for the seven days ended September 30, 1995
for Class A amounted to an annualized yield of 4.48% equivalent
to an effective yield of 4.58%, for Class B an annualized yield
of 3.98% equivalent to an effective yield of 4.06% and for Class
C an annualized yield of 4.25% equivalent to an effective yield
of 4.34%. 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.

Additional Information. Any shareholder inquiries may
be directed to the shareholder's broker or Alliance Fund
Services, Inc. at the address or telephone numbers shown on the
front cover of this Statement of Additional Information. This
Statement of Additional Information does not contain all the
information set forth in the Registration Statement filed by the
Trust with the Commission under the Securities Act. Copies of
the Registration Statement may be obtained at a reasonable charge
from the Commission or may be examined, without charge, at the
Commission's offices in Washington, D.C.

<PAGE>

APPENDIX

_______________________________________________________________

Prime-1, Prime-2, A-1, A-2, Fitch-1, Fitch-2,
Duff 1 and Duff 2 Commercial Paper Ratings

The Fund will invest only in paper maintaining a high
quality rating.

"Prime-1" is the highest commercial paper rating
assigned by Moody's Investors Services, Inc. ("Moody's"), and
indicates superior ability for repayment of senior short-term
debt obligations. "Prime-2" is the second highest, and denotes a
strong, but somewhat lesser degree of assurance. Commercial
paper issuers rated "Prime" have the following characteristics:
their short-term debt obligations carry the smallest degree of
investment risk; margins of support for current indebtedness are
large or stable with cash flow and asset protection well assured;
current liquidity provides ample coverage of near-term
liabilities and unused alternative financing arrangements are
generally available; and while protective elements may change
over the intermediate or longer term, such changes are most
unlikely to impair the fundamentally strong position of short-
term obligations.

Commercial paper issuers rate "A" by Standard & Poor's
have the following characteristics: liquidity ratios are better
than industry average; long term debt is "A" or better; the
issuer has access to at least two additional channels of
borrowing; basic earnings and cash flow are in an upward trend;
and typically, the issuer is a strong company in a well-
established industry with superior management. Standard & Poor's
uses the numbers 1+, 1, 2 and 3 to denote relative strength
within its highest classification of "A". The numbers 1 and 2
indicate the relative degree of safety regarding timely payment
with "A-1" paper being somewhat higher than "A-3".

Commercial paper rated "Fitch-1" is considered to be the
highest grade paper and is regarded as having the strongest
degree of assurance for timely payment. "Fitch-2" is considered
very good grade paper and reflects an assurance of timely payment
only slightly less in degree than the strongest issue.

Commercial paper issues rated "Duff 1" by Duff & Phelps,
Inc. have the following characteristics: very high certainty of
timely payment, excellent liquidity factors supported by strong
fundamental protection factors, and risk factors which are very
small. Issues rated "Duff 2" have a good certainty of timely

<PAGE>

payment, sound liquidity factors and company fundamentals, small
risk factors, and good access to capital markets.

Bonds rated "AAA" and "Aaa" have the highest ratings
assigned to debt obligations by Standard & Poor's and Moody's,
respectively. Standard & Poor's "AAA" rating indicates an
extremely strong capacity to pay principal and interest. Bonds
rated "AA" by Standard & Poor's also qualify as high-quality debt
obligations. Capacity to pay principal and interest is very
strong, and in the majority of instances they differ from "AAA"
issues only in small degree. Standard & Poor's "A" rated bonds
have a strong capacity to pay interest and repay principal but
are somewhat more susceptible to the adverse effects of change in
circumstances and economic conditions than are higher rated
bonds.

Moody's "Aaa" rating indicates the ultimate degree of
protection as to principal and interest. Moody's "Aa" rated
bonds, though also high-grade issues, are rated lower than "Aaa"
bonds because margins of protection may not be as large,
fluctuations of protective elements may be of greater amplitude
or there may be other elements present which make the long term
risks appeal somewhat larger. Moody's "A" rated bonds are
considered upper medium grade obligations possessing many
favorable investment attributes. Although factors giving
security to principal and interest are considered adequate,
elements may exist which suggest that the bonds may be
susceptible to impairment sometime in the future.

50
00250163.AG8

<PAGE>

STATEMENT OF NET ASSETS
September 30, 1995 AFD Exchange Reserves
============================================================

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) SECURITY YIELD VALUE
- ------------------------------------------------------------
U.S. GOVERNMENT & AGENCY
OBLIGATIONS--99.2%
FEDERAL NATIONAL
MORTGAGE ASSOCIATION--57.8%
<S> <C> <C> <C>
$ 1,800 11/21/95............. 5.57% $ 1,785,796
24,000 11/29/95............. 5.58 23,780,520
2,000 10/12/95............. 5.60 1,996,578
20,100 10/20/95............. 5.65 20,040,063
10,000 1/22/96.............. 6.04 9,810,411
10,000 5.45%, 4/04/97 FRN 5.55 9,992,935
------------
67,406,303
------------
<CAPTION>
FEDERAL HOME LOAN
MORTGAGE CORPORATION--34.6%
<S> <C> <C> <C>
30,000 10/23/95............ 5.58 29,897,700
4,500 10/23/95............ 5.60 4,484,600
1,000 11/06/95............ 5.62 994,380
3,000 10/16/95............ 5.64 2,992,950
2,000 10/16/95............ 5.65 1,995,292
------------
40,364,922
------------
<CAPTION>
PRINCIPAL
AMOUNT
(000) SECURITY YIELD VALUE
===========================================================

FEDERAL HOME LOAN BANK--6.8%
<S> <C> <C>
$7,000 11/17/95............... 5.61% $ 6,948,731
1,000 11/28/95............... 5.61 990,962
------------
7,939,693
------------

TOTAL INVESTMENTS--99.2%
(amortized cost
$115,710,918)... 115,710,918
Other assets less
liabilities--0.8%. 946,655
------------

NET ASSETS--100%
(offering and redemption
price of $1.00 per share;
41,120,079 Class A shares;
65,270,787 Class B shares and
10,268,998 Class C shares
outstanding).......... $ 116,657,573
=============
</TABLE>

- ----------------------------------------------------------

GLOSSARY OF TERMS:
FRN - Floating Rate Note

See notes to financial statements.

1
<PAGE>

STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1995 AFD EXCHANGE RESERVES
===============================================================================

<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME
Interest...................................... $ 6,984,634

EXPENSES
Advisory fee.................................. $ 297,892
Distribution fee-Class A...................... 186,700
Distribution fee-Class B...................... 688,887
Distribution fee-Class C...................... 96,961
Transfer agency............................... 197,666
Administrative................................ 116,000
Registration fees............................. 113,960
Custodian..................................... 70,098
Amortization of organizational expense........ 50,374
Audit and legal............................... 44,062
Trustees' fees................................ 19,767
Printing...................................... 11,397
Miscellaneous................................. 6,906
------------
Total expenses................................ 1,900,670
Less: fee waiver.............................. (87,000) 1,813,670
------------ -----------
Net investment income......................... 5,170,964

REALIZED LOSS ON INVESTMENTS
Net realized loss on investments.............. (1,256)
-----------

NET INCREASE IN NET ASSETS FROM OPERATIONS..... $ 5,169,708
===========
</TABLE>

STATEMENTS OF CHANGES IN NET ASSETS
================================================================================

<TABLE>
<CAPTION>
MARCH 25,1994(A)
YEAR ENDED TO
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
------------------ ------------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income......................... $ 5,170,964 $ 504,187
Net realized loss on investments.............. (1,256) (1,035)
------------ -----------
Net increase in net assets from operations.... 5,169,708 503,152

DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income
Class A...................................... (1,730,554) (129,869)
Class B...................................... (2,869,673) (292,791)
Class C...................................... (570,737) (81,527)

TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase.................................. 62,057,743 54,501,921
------------ -----------
Total increase................................ 62,056,487 54,500,886

NET ASSETS
Beginning of period........................... 54,601,086 100,200
------------ -----------
End of period................................. $116,657,573 $54,601,086
============ ===========
- ------------------------------------------------------------------------------------------
</TABLE>

(a) Commencement of operations.
See notes to financial statements.

2
<PAGE>

NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AFD EXCHANGE RESERVES
================================================================================

NOTE A: SIGNIFICANT ACCOUNTING POLICIES

AFD Exchange Reserves (the "Fund") is registered under the Investment Company
Act of 1940 as a diversified open-end investment company. The Fund offers Class
A, Class B and Class C shares. Class A shares are offered to holders of Class A
shares of other Alliance funds without any sales charge at the time of purchase
or redemption. Class B shares are offered to holders of Class B shares of other
Alliance funds without any sales charge at the time of purchase. Class B shares
which are redeemed within a certain number of years of the original purchase of
Alliance fund Class B shares will be subject to a contingent deferred sales
charges. Class B shares will automatically convert to Class A shares in
accordance with the conversion schedule applicable to the original Alliance fund
Class B shares purchased. Class C shares are offered to holders of Class C
shares of other Alliance funds without any sales charge at the time of purchase
or redemption. All three classes of shares have identical voting, dividend,
liquidation and other rights, except that each class bears its own distribution
and transfer agency expenses and has exclusive voting rights with respect to its
distribution plan. The following is a summary of significant accounting
policies followed by the Fund.

1. VALUATION OF SECURITIES

Securities in which the Fund invests are traded primarily in the over-the-
counter market and are valued at amortized cost, under which method a portfolio
instrument is valued at cost and any premium or discount is amortized on a
constant basis to maturity.

2. ORGANIZATION EXPENSES

Organization expenses of approximately $252,000 have been deferred and are
being amortized on a straight-line basis through March, 1999.

3. TAXES

It is the Fund's policy to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if applicable, to its
shareholders. Therefore, no provisions for federal income or excise taxes are
required.

4. DIVIDENDS

The Fund declares dividends daily and automatically reinvests such dividends in
additional shares at net asset value. Net realized capital gains on investments,
if any, are expected to be distributed near calendar year end.

5. INVESTMENT INCOME AND SECURITY TRANSACTIONS

Interest income is accrued daily. Security transactions are recorded on the date
securities are purchased or sold. Security gains and losses are determined on
the identified cost basis. It is the Fund's policy to take possession of
securities as collateral under repurchase agreements and to determine on a daily
basis that the value of such securities are sufficient to cover the value of the
repurchase agreements.
- --------------------------------------------------------------------------------
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

The Fund pays its Adviser, Alliance Capital Management L.P. an advisory fee at
the annual rate of .25 of 1% on the first $1.25 billion of average daily net
assets; .24 of 1% on the next $.25 billion; .23 of 1% on the next $.25 billion;
.22 of 1% on the next $.25 billion; .21 of 1% on the next $1 billion; and .20 of
1% in excess of $3 billion. In addition to the advisory fee, the Fund also
reimburses the Adviser for certain legal and accounting services provided to the
Fund by the Adviser. For the year ended September 30, 1995, the Fund incurred
costs of $116,000, of which $87,000 was waived by the Adviser.

The Fund compensates Alliance Fund Services, Inc. (a wholly-owned subsidiary of
the Adviser) for providing personnel and facilities to perform transfer agency
services. Such compensation amounted to $144,631 for the year ended September
30, 1995.

3
<PAGE>
AFD EXCHANGE RESERVES
===============================================================================

NOTE C: DISTRIBUTION SERVICES AGREEMENT

The Fund has adopted a Distribution Services Agreement (the "Agreement")
pursuant to Rule 12B-1 under the Investment Company Act of 1940 for Class A,
Class B and Class C . Under the Agreement, the Fund pays a distribution fee to
the Distributor at an annual rate of up to .50 of 1% of the Fund's average daily
net assets attributable to Class A shares, 1.00% of the average daily net assets
attributable to Class B shares and .75 of 1% of the average daily net assets
attributable to Class C shares. Such fee is accrued daily and paid monthly. The
Agreement provides that the Distributor will use such payments in their entirety
for distribution assistance and promotional activities. The Agreement also
provides that the Adviser may use its own resources to finance the distribution
of the Fund's shares.
- -------------------------------------------------------------------------------

NOTE D: INVESTMENT TRANSACTIONS

At September 30, 1995, the cost of securities for federal income tax purposes
was the same as the cost for financial reporting purposes. At September 30,
1995, the Portfolio had a capital loss carryforward of $2,291 of which $1,035
expires in 2002 and $1,256 expires in 2003.
- -------------------------------------------------------------------------------

NOTE E: TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST

An unlimited number of shares ($.001 par value) are authorized. At September 30,
1995, capital paid-in aggregated $41,120,079 for Class A, $65,270,787 for Class
B and $10,268,998 for Class C. Transactions, all at $1.00 per share, were as
follows:

<TABLE>
<CAPTION>
CLASS A
------------------------------------------------
MARCH 25, 1994(A)
YEAR ENDED TO
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
------------------ ------------------
<S> <C> <C>
Shares sold............................................ 254,814,516 79,563,777
Shares issued on reinvestments of dividends............ 1,730,554 129,869
Shares redeemed........................................ (233,640,310) (61,578,327)
------------ -----------
Net increase........................................... 22,904,760 18,115,319
============ ===========
<CAPTION>
CLASS B
------------------------------------------------
MARCH 25, 1994(A)
YEAR ENDED TO
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
------------------- ------------------
<S> <C> <C>
Shares sold............................................ 235,826,904 87,623,275
Shares issued on reinvestments of dividends............ 2,869,673 292,791
Shares redeemed........................................ (204,665,847) (56,676,109)
------------ -----------
Net increase........................................... 34,030,730 31,239,957
============ ===========
<CAPTION>
CLASS C
-----------------------------------------------
MARCH 25, 1994(A)
YEAR ENDED TO
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
------------------ ------------------
<S> <C> <C>
Shares sold............................................ 72,011,656 41,236,143
Shares issued on reinvestments of dividends............ 570,737 81,527
Shares redeemed........................................ (67,460,140) (36,171,025)
------------ -----------
Net increase........................................... 5,122,253 5,146,645
============ ===========
</TABLE>
- ------------------------------------------------------------------------------

(a) Commencement of operations.

4
<PAGE>

NOTES TO FINANCIAL STATEMENTS (CONTINUED) AFD EXCHANGE RESERVES
================================================================================

NOTE F: FINANCIAL HIGHLIGHTS
Selected data for a share outstanding throughout each period.

<TABLE>
<CAPTION>
CLASS A
----------------------------------------
MARCH 25, 1994(A)
YEAR ENDED TO
SEPTEMBER 30, 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)

<CAPTION>
CLASS B
-------------------------------------------
MARCH 25, 1994(A)
YEAR ENDED TO
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
-------------------- --------------------
<S> <C> <C>
Net asset value, beginning of period.................. $ 1.00 $ 1.00
------- -------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
Net investment income................................. .0404 .0101
------- -------
LESS: DISTRIBUTIONS
- -------------------
Dividends from net investment income.................. (.0404) (.0101)
------- -------
Net asset value, end of period........................ $ 1.00 $ 1.00
======= =======

TOTAL RETURN
- ------------
Total investment return based on
net asset value (b)................................. 4.12% 1.95%(c)
======= =======

RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net assets, end of period (in millions)............... $ 65 $ 31
Ratio of average net assets to:
Expenses, net of waivers............................ 1.70% 2.35%(c)
Expenses, before waivers............................ 1.78% 2.35%(c)
Net investment income (d)........................... 4.17% 1.91%(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 the Adviser.

5
<PAGE>

AFD EXCHANGE RESERVES
================================================================================

<TABLE>
<CAPTION>
CLASS C
-------------------------------------------
MARCH 25, 1994(A)
YEAR ENDED TO
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
------------------- ----------------------
<S> <C> <C>
Net asset value, beginning of period..... $ 1.00 $ 1.00
------- -------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
Net investment income.................... .0430 .0112
------- -------
LESS: DISTRIBUTIONS
- -------------------
Dividends from net investment income..... (.0430) (.0112)
------- --------
Net asset value, end of period........... $ 1.00 $ 1.00
======= ========

TOTAL RETURN
- ------------
Total investment return based on
net asset value (b).................... 4.39% 2.18%(c)
======= =======

RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net assets, end of period (in millions).. $10 $5
Ratio of average net assets to:
Expenses, net of waivers............... 1.45% 2.08%(c)
Expenses, before waivers............... 1.52% 2.08%(c)
Net investment income (d).............. 4.41% 2.14%(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 the Adviser.

6
<PAGE>

INDEPENDENT AUDITOR'S REPORT AFD EXCHANGE RESERVES
===============================================================================

TO THE BOARD OF TRUSTEES AND SHAREHOLDERS
AFD EXCHANGE RESERVES

We have audited the accompanying statement of net assets of AFD Exchange
Reserves as of September 30, 1995 and the related statements of operations,
changes in net assets, and financial highlights for the periods indicated in the
accompanying financial statements. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1995 by correspondence with the custodian.

An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AFD
Exchange Reserves as of September 30, 1995, and the results of its operations,
changes in its net assets, and financial highlights for the periods indicated,
in conformity with generally accepted accounting principles.

McGladrey & Pullen, LLP
New York, New York
October 20, 1995

<PAGE>

PART C
OTHER INFORMATION

ITEM 24. Financial Statements and Exhibits for the Fund

(a) Financial Highlights

Included in the Prospectus
Condensed Financial Information

Included in the Statement of Additional Information

Statement of Net Assets for year ended -
September 30, 1995
Statement of Operations for year ended -
September 30, 1995
Statement of Changes in Net Assets for
March 25, 1994* to September 30, 1994 and for year
ended September 30, 1995
Notes to Financial Statements - September 30, 1995

Included in Part C of the Registration Statement

All other schedules are omitted as the required
information is inapplicable

(b) Exhibits

(1) Copy of Agreement and Declaration of Trust of the
Registrant - Incorporated by reference from
Registrant's Registration Statement on Form N-1A
(File Nos. 33-74230 and 811-8294) as filed with the
Securities and Exchange Commission on January 18,
1994.

(a) Certificate of Amendment of the Agreement and
Declaration of Trust - Filed herewith.

(2) Copy of By-Laws of the Registrant - Incorporated by
reference from Registrant's Registration Statement
on Form N-1A (File Nos. 33-74230 and 811-8294) as
filed with the Securities and Exchange Commission
on January 18, 1994.

(3) Not applicable.

(4) (a) Form of Share Certificate for Class A Shares -
Incorporated by reference from Registrant's
Registration Statement on Form N-1A (File Nos. 33-
74230 and 811-8294) as filed with the Securities
and Exchange Commission on March 16, 1994.

C-1

<PAGE>

(b) Form of Share Certificate for Class B Shares -
Incorporated by reference from Registrant's
Registration Statement on Form N-1A (File Nos. 33-
74230 and 811-8294) as filed with the Securities
and Exchange Commission on March 16, 1994.

(c) Form of Share Certificate for Class C Shares -
Incorporated by reference from Registrant's
Registration Statement on Form N-1A (File Nos. 33-
74230 and 811-8294) as filed with the Securities
and Exchange Commission on March 16, 1994.

(5) Copy of Advisory Agreement between the Registrant
and Alliance Capital Management L.P. -
Incorporated by reference to Exhibit No. 5 to Post-
Effective Amendment No. 2 of the Registrant's Form
N1-A, filed January 27, 1995.

(6) (a) Copy of Distribution Services Agreement
between the Registrant and Alliance Fund
Distributors, Inc. - Incorporated by reference to
Exhibit No.6(a) to Post-Effective Amendment No. 2
of the Registrant's Form N1-A, filed January 27,
1995.

(b) Form of Selected Dealer Agreement between
Alliance Fund Distributors, Inc. and selected
dealers offering shares of Registrant -
Incorporated by reference from Registrant's
Registration Statement on Form N-1A (File Nos. 33-
74230 and 811-8294) as filed with the Securities
and Exchange Commission on March 16, 1994.

(c) Form of Selected Agent Agreement between
Alliance Fund Distributors, Inc. and selected
agents making available shares of Registrant -
Incorporated by reference from Registrant's
Registration Statement on Form N-1A (File Nos. 33-
74230 and 811-8294) as filed with the Securities
and Exchange Commission on March 16, 1994.

(7) Not applicable.

(8) Copy of Custodian Contract between the Registrant
and State Street Bank and Trust Company -
Incorporated by reference to Exhibit No. 8 to Post-
Effective Amendment No. 2 of the Registrant's Form
N1-A, filed January 27, 1995.

(9) Copy of Transfer Agency Agreement between the
Registrant and Alliance Fund Services, Inc. -

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<PAGE>

Incorporated by reference to Exhibit No. 9 to Post-
Effective Amendment No. 2 of the Registrant's Form
N1-A, filed January 27, 1995.

(10) (a) Opinion and Consent of Seward & Kissel -
Incorporated by reference from Registrant's
Registration Statement on Form N-1A (File Nos. 33-
74230 and 811-8294) as filed with the Securities
and Exchange Commission on March 16, 1994.

(b) Opinion and Consent of Sullivan & Worcester -
Incorporated by reference from Registrant's
Registration Statement on Form N-1A (File Nos. 33-
74230 and 811-8294) as filed with the Securities
and Exchange Commission on March 16, 1994.

(11) Consent of Independent Auditors - filed herewith.

(12) Not applicable.

(13) Investment representation letter of Alliance
Capital Management L.P. - Incorporated by reference
from Registrant's Registration Statement on Form N-
1A (File Nos. 33-74230 and 811-8294) as filed with
the Securities and Exchange Commission on March 16,
1994.

(14) Not applicable.

(15) Rule 12b-1 Plan - See Exhibit 6 (a) hereto.

(16) Schedule of Computation of Performance Quotation -
filed herewith.

(18) Rule 18f-3 Plan - filed herewith.

(27) Financial Data Schedule - filed herewith.

Other Exhibits: Powers of Attorney of David H. Dievler,
Ruth Block, John D. Carifa, William H. Foulk, Jr., James
M. Hester, Clifford L. Michel and Robert C. White -
Incorporated by reference from Registrant's Registration
Statement on Form N-1A (File Nos. 33-74230 and 811-8294)
as filed with the Securities and Exchange Commission on
January 18, 1994.

Other Exhibit: Power of Attorney of John H. Dobkin -
Incorporated by reference from Registrant's Registration
Statement on Form N-1A (File Nos. 33-74230 and 811-8294)
as filed with the Securities and Exchange Commission on
March 16, 1994.

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<PAGE>

ITEM 25. Persons Controlled by or Under Common Control with
Registrant.

None.

ITEM 26. Number of Holders of Securities.

Registrant had, as of January 5, 1996, the following
record holders of shares of Beneficial Interest:

Class A Shares 1,505
Class B Shares 3,559
Class C Shares 459

ITEM 27. Indemnification

It is the Registrant's policy to indemnify its trustees
and officers, employees and other agents as set forth in
Article VIII and Article III of Registrant's Agreement
and Declaration of Trust, filed as Exhibit 1 in response
to Item 24 and Section 10 of the proposed Distribution
Services Agreement filed as Exhibit 6(a), all as set
forth below. The liability of the Registrant's trustees
and officers is dealt with in Article VIII of
Registrant's Agreement and Declaration of Trust, as set
forth below. The Adviser's liability for any loss
suffered by the Registrant or its shareholders is set
forth in Section 4 of the proposed Advisory Agreement
filed as Exhibit 5 to this Registration Statement, as
set forth below.

Article VIII of Registrant's Agreement and Declaration
of Trust reads as follows:

"Section 8.1. Trustees, Shareholders, etc. Not
Personally Liable; Notice. The Trustees and officers of
the Trust, in incurring any debts, liabilities or
obligations, or in limiting or omitting any other
actions for or in connection with the Trust, are or
shall be deemed to be acting as Trustees or officers of
the Trust and not in their own capacities. No
Shareholder shall be subject to any personal liability
whatsoever in tort, contract or otherwise to any other
Person or Persons in connection with the assets or the
affairs of the Trust or of any Portfolio, and subject to
Section 8.4 hereof, no Trustee, officer, employee or
agent of the Trust shall be subject to any personal
liability whatsoever in tort, contract, or otherwise, to
any other Person or Persons in connection with the
assets or affairs of the Trust or of any Portfolio, save
only that arising from his own willful misfeasance, bad

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<PAGE>

faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office or the
discharge of his functions. The Trust (or if the matter
relates only to a particular Portfolio, that Portfolio)
shall be solely liable for any and all debts, claims,
demands, judgments, decrees, liabilities or obligations
of any and every kind, against or with respect to the
Trust or such Portfolio in tort, contract or otherwise
in connection with the assets or the affairs of the
Trust or such Portfolio, and all Persons dealing with
the Trust or any Portfolio shall be deemed to have
agreed that resort shall be had solely to the Trust
Property of the Trust or the Portfolio Assets of such
Portfolio, as the case may be, for the payment or
performance thereof.

The Trustees shall use their best efforts to ensure that
every note, bond, contract, instrument, certificate of
undertaking made or issued by the Trustees or by any
officers or officer shall give notice that this
Declaration of Trust is on file with the Secretary of
The Commonwealth of Massachusetts and shall recite to
the effect that the same was executed or made by or on
behalf of the Trust or by them as Trustees or Trustee or
as officers or officer, and not individually, and that
the obligations of such instrument are not binding upon
any of them or the Shareholders individually but are
binding only upon the assets and property of the Trust,
or the particular Portfolio in question, as the case may
be, but the omission thereof shall not operate to bind
any Trustees or Trustee or officers or officer or
Shareholders or Shareholder individually, or to subject
the Portfolio Assets of any Portfolio to the obligations
of any other Portfolio.

SECTION 8.2. Trustees' Good Faith Action; Expert Advice;
No Bond or Surety. The exercise by the Trustees of
their powers and discretion hereunder shall be binding
upon everyone interested. Subject to Section 8.4
hereof, a Trustee shall be liable for his own willful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the
office of Trustee, and for nothing else, and shall not
be liable for errors of judgment or mistakes of fact or
law. Subject to the foregoing, (i) the Trustees shall
not be responsible or liable in any event for any
neglect or wrongdoing of any officer, agent, employee,
consultant, Investment Adviser, Administrator,
Distributor or Principal Underwriter, Custodian or
Transfer Agent, Dividend Disbursing Agent, Shareholder
Servicing Agent or Accounting Agent of the Trust, nor

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<PAGE>

shall any Trustee be responsible for the act or omission
of any other Trustee; (ii) the Trustees may take advice
of counsel or other experts with respect to the meaning
and operation of this Declaration of Trust and their
duties as Trustees, and shall be under no liability for
any act or omission in accordance with such advice or
for failing to follow such advice; and (iii) in
discharging their duties, the Trustees, when acting in
good faith, shall be entitled to rely upon the books of
account of the Trust and upon written reports made to
the Trustees by any officer appointed by them, any
independent public accountant, and (with respect to the
subject matter of the contract involved) any officer,
partner or responsible employee of a Contracting Party
appointed by the Trustees pursuant to Section 5.2
hereof. The trustees as such shall not be required to
give any bond or surety or any other security for the
performance of their duties.

SECTION 8.3. Indemnification of Shareholders. If any
Shareholder (or former Shareholder) of the Trust shall
be charged or held to be personally liable for any
obligation or liability of the Trust solely by reason of
being or having been a Shareholder and not because of
such Shareholder's acts or omissions or for some other
reason, the Trust (upon proper and timely request by the
Shareholder) shall assume the defense against such
charge and satisfy any judgment thereon, and the
Shareholder or former Shareholder (or the heirs,
executors, administrators or other legal representatives
thereof, or in the case of a corporation or other
entity, its corporate or other general successor) shall
be entitled (but solely out of the assets of the
Portfolio of which such Shareholder or former
Shareholder is or was the holder of Shares) to be held
harmless from and indemnified against all loss and
expense arising from such liability.

SECTION 8.4. Indemnification of Trustees, Officers,
etc. Subject to the limitations set forth hereinafter in
this Section 8.4, the Trust shall indemnify (from the
assets of the Portfolio or Portfolios to which the
conduct in question relates) each of its Trustees and
officers (including Persons who serve at the Trust's
request as directors, officers or trustees of another
organization in which the Trust has any interest as a
shareholder, creditor or otherwise [hereinafter,
together with such Person's heirs, executors,
administrators or personal representative, referred to
as a "Covered Person"]) against all liabilities,
including but not limited to amounts paid in

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<PAGE>

satisfaction of judgments, in compromise or as fines and
penalties, and expenses, including reasonable
accountants' and counsel fees, incurred by any Covered
Person in connection with the defense or disposition of
any action, suit or other proceeding, whether civil or
criminal, before any court or administrative or
legislative body, in which such Covered Person may be or
may have been involved as a party or otherwise or with
which such Covered Person may be or may have been
threatened, while in office or thereafter, by reason of
being or having been such a Trustee or officer, director
or trustee, except with respect to any matter as to
which it has been determined that such Covered Person
(i) did not act in good faith in the reasonable belief
that such Covered Person's action was in or not opposed
to the best interests of the Trust or (ii) had acted
with willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct
of such Covered Person's office (either and both of the
conduct described in clauses (i) and (ii) of this
sentence being referred to hereafter as "Disabling
Conduct"). A determination that the Covered Person is
entitled to indemnification may be made by (i) a final
decision on the merits by a court or other body before
whom the proceeding was brought that the Covered Person
to be indemnified was not liable by reason of Disabling
Conduct, (ii) dismissal of a court action or an
administrative proceeding against a Covered Person for
insufficiency of evidence of Disabling Conduct, or (iii)
a reasonable determination, based upon a review of the
facts, that the indemnitee was not liable by reason of
Disabling Conduct by (a) a vote of a majority of a
quorum of Trustees who are neither "interested persons"
of the Trust as defined in Section 2(a)(19) of the 1940
Act nor parties to the proceeding, or (b) an independent
legal counsel in a written opinion. Expenses, including
accountants' and counsel fees so incurred by any such
Covered Person (but excluding amounts paid in
satisfaction of judgments, in compromise or as fines or
penalties), may be paid from time to time by the
Portfolio or Portfolios to which the conduct in question
related in advance of the final disposition of any such
action, suit or proceeding; provided, that the Covered
Person shall have undertaken to repay the amounts so
paid to such Portfolio or Portfolios if it is ultimately
determined that indemnification of such expenses is not
authorized under this Article 8 and (i) the Covered
Person shall have provided security for such
undertaking, (ii) the Trust shall be insured against
losses arising by reason of any lawful advances, or
(iii) a majority of a quorum of the disinterested

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<PAGE>

Trustees, or an independent legal counsel in a written
opinion, shall have determined, based on a review of
readily available facts (as opposed to a full trial-type
inquiry), that there is reason to believe that the
Covered Person ultimately will be found entitled to
indemnification.

SECTION 8.5. Compromise Payment. As to any matter
disposed of by a compromise payment by any such Covered
Person referred to in Section 8.4 hereof, pursuant to a
consent decree or otherwise, no such indemnification
either for said payment or for any other expenses shall
be provided unless such indemnification shall be
approved (i) by a majority of a quorum of the
disinterested Trustees or (ii) by an independent legal
counsel in a written opinion. Approval by the Trustees
pursuant to clause (i) or by independent legal counsel
pursuant to clause (ii) shall not prevent the recovery
from any Covered Person of any amount paid to such
Covered Person in accordance with either of such clauses
as indemnification if such Covered Person is
subsequently adjudicated by a court of competent
jurisdiction not to have acted in good faith in the
reasonable belief that such Covered Person's action was
in or not opposed to the best interests of the Trust or
to have been liable to the Trust or its Shareholders by
reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved
in the conduct of such Covered Person's office.

SECTION 8.6. Indemnification Not Exclusive, etc. The
right of indemnification provided by this Article 8
shall not be exclusive of or affect any other rights to
which any such Covered Person may be entitled. As used
in this Article 8, a "disinterested" Person is one
against whom none of the actions, suits or other
proceedings in question, and no other action, suit or
other proceeding on the same or similar grounds is then
or has been pending or threatened. Nothing contained in
this Article 8 shall affect any rights to
indemnification to which personnel of the Trust, other
than Trustees and officers, and other Persons may be
entitled by contract or otherwise under law, nor the
power of the Trust to purchase and maintain liability
insurance on behalf of any such Person.

SECTION 8.7. Liability of Third Persons Dealing with
Trustees. No person dealing with the Trustees shall be
bound to make any inquiry concerning the validity of any
transaction made by the Trustees or to see to the

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<PAGE>

application of any payments made or property transferred
to the Trust or upon its order."

Article III of Registrant's Agreement and Declaration of
Trust reads, in pertinent part, as follows:

"Without limiting the foregoing and to the extent not
inconsistent with the 1940 Act or other applicable law,
the Trustees shall have power and authority:

(s) Indemnification. In addition to the mandatory
indemnification provided for in Article 8 hereof
and to the extent permitted by law, to indemnify or
enter into agreements with respect to
indemnification with any Person with whom this
Trust has dealings, including, without limitation,
any independent contractor, to such extent as the
Trustees shall determine."

The Advisory Agreement to be between the Registrant and
Alliance Capital Management L.P. provides that Alliance
Capital Management L.P. will not be liable under such
agreements for any mistake of judgment or in any event
whatsoever except for lack of good faith and that
nothing therein shall be deemed to protect Alliance
Capital Management L.P. against any liability to the
Registrant or its security holders to which it would
otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in the performance of its
duties thereunder, or by reason of reckless disregard of
its duties and obligations thereunder.

The Distribution Services Agreement between the
Registrant and Alliance Fund Distributors, Inc. provides
that the Registrant will indemnify, defend and hold
Alliance Fund Distributors, Inc., and any person who
controls it within the meaning of Section 15 of the
Securities Act of 1933 (the "Securities Act"), free and
harmless from and against any and all claims, demands,
liabilities and expenses which Alliance Fund
Distributors, Inc. or any controlling person may incur
arising out of or based upon any alleged untrue
statement of a material fact contained in the
Registrant's Registration Statement, Prospectus or
Statement of Additional Information or arising out of,
or based upon any alleged omission to state a material
fact required to be stated in any one of the foregoing
or necessary to make the statements in any one of the
foregoing not misleading.

C-9

<PAGE>

The foregoing summaries are qualified by the entire text
of Registrant's Agreement and Declaration of Trust, the
proposed Advisory Agreement between Registrant and
Alliance Capital Management L.P. and the proposed
Distribution Services Agreement between Registrant and
Alliance Fund Distributors, Inc. which are filed
herewith as Exhibits 1, 5 and 6(a), respectively, in
response to Item 24 and each of which are incorporated
by reference herein.

Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to trustees,
officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of the
Securities and Exchange Commission, such indemnification
is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities
(other than the payment by the Registrant in the
successful defense of any action, suit or proceeding) is
asserted by such trustee, officer or controlling person
in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is
against public policy as expressed in the Securities Act
and will be governed by the final adjudication of such
issue.

In accordance with Release No. IC-11330 (September 2,
1980), the Registrant will indemnify its trustees,
officers, investment manager and principal underwriters
only if (1) a final decision on the merits was issued by
the court or other body before whom the proceeding was
brought that the person to be indemnified (the
"indemnitee") was not liable by reason or willful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his
office ("disabling conduct") or (2) a reasonable
determination is made, based upon a review of the facts,
that the indemnitee was not liable by reason of
disabling conduct, by (a) the vote of a majority of a
quorum of the trustees who are neither "interested
persons" of the Registrant as defined in section
2(a)(19) of the Investment Company Act of 1940 nor
parties to the proceeding ("disinterested non-party
trustees"), or (b) an independent legal counsel in a
written opinion. The Registrant will advance attorneys
fees or other expenses incurred by its trustees,

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<PAGE>

officers, investment adviser or principal underwriters
in defending a proceeding, upon the undertaking by or on
behalf of the indemnitee to repay the advance unless it
is ultimately determined that he is entitled to
indemnification and, as a condition to the advance, (1)
the indemnitee shall provide a security for his
undertaking, (2) the Registrant shall be insured against
losses arising by reason of any lawful advances, or (3)
a majority of a quorum of disinterested, non-party
trustees of the Registrant, or an independent legal
counsel in a written opinion, shall determine, based on
a review of readily available facts (as opposed to a
full trial-type inquiry), that there is reason to
believe that the indemnitee ultimately will be found
entitled to indemnification.

The Registrant participates in a joint
trustees/directors and officers liability insurance
policy issued by the ICI Mutual Insurance Company.
Coverage under this policy has been extended to
directors, trustees and officers of the investment
companies managed by Alliance Capital Management L.P.
Under this policy, outside trustees and directors are
covered up to the limits specified for any claim against
them for acts committed in their capacities as trustee
or director. A pro rata share of the premium for this
coverage is charged to each investment company and to
the Adviser.

ITEM 28. Business and Other Connections of Investment Adviser.

The descriptions of Alliance Capital Management L.P.
under the caption "The Adviser" in the Prospectus and
"Management of the Fund" in the Prospectus and in the
Statement of Additional Information constituting Parts A
and B, respectively, of this Registration Statement are
incorporated by reference herein.

The information as to the directors and executive
officers of Alliance Capital Management Corporation, the
general partner of Alliance Capital Management L.P., set
forth in Alliance Capital Management L.P.'s Form ADV
filed with the Securities and Exchange Commission on
April 21, 1988 (File No. 801-32361) and amended through
the date hereof, is incorporated by reference.

ITEM 29. Principal Underwriters

(a) Alliance Fund Distributors, Inc., the Registrant's
Principal Underwriter in connection with the sale
of shares of the Registrant, also acts as Principal

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<PAGE>

Underwriter for the following registered investment
companies:

ACM Institutional Reserves, Inc.
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
Alliance Capital Reserves
Alliance Counterpoint Fund
Alliance Developing Markets Fund, Inc.
Alliance Global Dollar Government Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Government Reserves
Alliance Growth and Income Fund, Inc.
Alliance Income Builder Fund, Inc.
Alliance International Fund
Alliance Money Market Fund
Alliance Mortgage Securities Income Fund, Inc.
Alliance Mortgage Strategy Trust, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
Alliance Municipal Income Fund II
Alliance Municipal Trust
Alliance New Europe Fund, Inc.
Alliance North American Government Income
Trust, Inc.
Alliance Premier Growth Fund, Inc.
Alliance Quasar Fund, Inc.
Alliance Short-Term Multi-Market Trust, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance Variable Products Series Fund, Inc.
Alliance World Income Trust, Inc.
Alliance Worldwide Privatization Fund, Inc.
Fiduciary Management Associates
The Alliance Fund, Inc.
The Alliance Portfolios

(b) The following are the Directors and Officers of
Alliance Fund Distributors, Inc., the principal
place of business of which is 1345 Avenue of the
Americas, New York, New York, 10105.

Positions and Positions and

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<PAGE>

Offices With Offices with
Name Underwriter Registrant
_____ _____________ _____________

Michael J. Laughlin Chairman

Robert L. Errico President

Kimberly A. Baumgardner Senior Vice
President

Edmund P. Bergan, Jr. Senior Vice Secretary
President,
General Counsel
and Secretary

Daniel J. Dart Senior Vice
President

Byron M. Davis Senior Vice
President

Geoffrey L. Hyde Senior Vice
President

Robert H. Joseph Senior Vice
President
and Treasurer

Barbara J. Krumseik Senior Vice President

Stephen R. Laut Senior Vice President

Daniel D. McGinley Senior Vice President

Dusty W. Paschall Senior Vice President

Antonios G. Poleonadkis Senior Vice President

Gregory K. Shannahan Senior Vice President

Joseph F. Sumanski Senior Vice President

Peter J. Szabo Senior Vice President

Richard A. Winge Senior Vice President

Nicholas K. Willett Senior Vice President

Richard A. Winge Senior Vice President

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<PAGE>

Benji A. Baer Vice President

Warren W. Babcock III Vice President

Kenneth F. Barkoff Vice President

William P. Beanblossom Vice President

Jack C. Bixler Vice President

Casimir F. Bolanowski Vice President

Kevin T. Cannon Vice President

Leo H. Cook Vice President

Richard W. Dabney Vice President

Mark J. Dunbar Vice President

Sohaila S. Farsheed Vice President

Linda A. Finnerty Vice President

William C. Fisher Vice President

Robert M. Frank Vice President

Gerard J. Friscia Vice President
& Controller

Andrew L. Gangolf Vice President

Mark D. Gersten Vice President Treasurer and
Chief Financial
Officer

Joseph W. Gibson Vice President

Troy L. Glawe Vice President

Herbert H. Goldman Vice President

James E. Gunter Vice President

Alan Halfenger Vice President

George R. Hrabovsky Vice President

Valerie J. Hugo Vice President

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<PAGE>

Robert H. Joseph, Jr. Vice President
and Treasurer

Richard D. Keppler Vice President

Sheila F. Lamb Vice President

Donna M. Lamback Vice President

Thomas Leavitt, III Vice President

James M. Liptrot Vice President

James P. Luisi Vice President

Christopher J. MacDonald Vice President

Maura A. McGrath Vice President

Matthew P. Mintzer Vice President

Joanna D. Murray Vice President

Nicole Nolan-Koester Vice President

Daniel J. Phillips Vice President

Robert T. Pigozzi Vice President

James J. Posch Vice President

Robert E. Powers Vice President

Domenick Pugliese Vice President

Bruce W. Reitz Vice President

Dennis A. Sanford Vice President

Raymond S. Sclafani Vice President

Richard J. Sidell Vice President

J. William Strott, Jr. Vice President

Richard E. Tambourine Vice President

Joseph T. Tocyloski Vice President

Neil S. Wood Vice President

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<PAGE>

Emilie D. Wrapp Vice President

Maria L. Carreras Assistant Vice President

Sarah A. Chodera Assistant Vice President

John W. Cronin Assistant Vice President

Leon M. Fern Assistant Vice President

William B. Hanigan Assistant Vice President

Vicky M. Hayes Assistant Vice President

Daniel M. Hazard Assistant Vice President

John C. Hershock Assistant Vice President

James J. Hill Assistant Vice President

Kalen H. Holliday Assistant Vice President

Thomas K. Intoccia Assistant Vice President

Edward W. Kelly Assistant Vice President

Patrick Look Assistant Vice President
& Assistant Treasurer

Michael F. Mahoney Assistant Vice President

Shawn P. McClain Assistant Vice President

Thomas F. Monnerat Assistant Vice President

Jeanette M. Nardella Assistant Vice President

Carol H. Rappa Assistant Vice President

Lisa Robinson-Cronin Assistant Vice President

Karen C. Satterberg Assistant Vice President

Robert M. Smith Assistant Vice President

Mark R. Manley Assistant Secretary

ITEM 30. Location of Accounts and Records.

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<PAGE>

The majority of the accounts, books and other
documents required to be maintained by Section
31(a) of the Investment Company Act of 1940 and the
Rules thereunder are maintained as follows:
journals, ledgers, securities records and other
original records are maintained principally at the
offices of Alliance Fund Services, Inc. 500 Plaza
Drive, Secaucus, New Jersey 07094- 1520 and at the
offices of State Street Bank and Trust Company, the
Registrant's Custodian, 225 Franklin Street,
Boston, Massachusetts 02110. All other records so
required to be maintained are maintained at the
offices of Alliance Capital Management L.P., 1345
Avenue of the Americas, New York, New York 10105.

ITEM 31. Management Services.

Not applicable.

ITEM 32. Undertakings.

Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of Registrant's
latest report to shareholders, upon request and without
charge.

The Registrant undertakes to provide assistance to
shareholders in communications concerning the removal of
any Trustee of the Fund in accordance with Section 16 of
the Investment Company Act of 1940.

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<PAGE>

SIGNATURE

Pursuant to the requirements of the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as
amended, the Registrant certifies that it meets all of the
requirements for effectiveness of this Amendment to its
Registration pursuant to Rule 485(b) under the Securities Act of
1933 and has duly caused this Amendment to its Registration
Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York and State of
New York on the 26th day of January 1996.

AFD EXCHANGE RESERVES

by: /s/ Wayne D. Lyski
________________________
Wayne D. Lyski
Senior Vice President

Pursuant to the requirements of the Securities Act of
1933, as amended, this Amendment to the Registration Statement
has been signed below by the following persons in the capacities
and on the dates indicated:

Signature Title Date
_________ _____ ____

1) Principal
Executive Officer
Senior Vice
/s/ Wayne D. Lyski Vice President January 26, 1996
_____________________
Wayne D. Lyski

2) Principal Financial and
Accounting Officer

/s/ Mark D. Gersten Treasurer January 26, 1996
_____________________ and Chief
Mark D. Gersten Financial
Officer

3) All of the Trustees
____________________

John D. Carifa William H. Foulk, Jr.
Ruth Block James M. Hester
David H. Dievler Clifford L. Michel
John H. Dobkin Robert C. White

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<PAGE>

by: /s/ Edmund P. Bergan, Jr. January 26, 1996
_____________________________
(Attorney-in-fact)
Edmund P. Bergan, Jr.

C-19
00250163.AG8

<PAGE>

Index to Exhibits
_________________

Page
____

(1)(a) Certificate of Amendment of the Agreement
and Declaration of Trust

(11) Consent of Independent Auditors

(16) Schedule of Computation of Performance Quotation

(18) Rule 18f-3 Plan

(27) Financial Data Schedule

00250163.AG8

<PAGE>

Exhibit 1(a)
____________

AFD EXCHANGE RESERVES

Certificate of Amendment of the
Agreement and Declaration of Trust
__________________________________

The undersigned, being the Secretary of AFD Exchange
Reserves (the "Trust"), a trust with transferable shares of the
type commonly called a Massachusetts business trust, DOES HEREBY
CERTIFY that, pursuant to the authority conferred upon the
Trustees of the Trust by Section 9.3 of its Agreement and
Declaration of Trust, dated January 14, 1994 (the "Declaration"),
the Declaration is hereby amended as follows:

The first sentence of paragraph (ii) of Section 6.2(k)
of the Declaration is amended in its entirety to read as follows:

"(ii) Without limitation of the foregoing,
each Class B Share of any Portfolio (including
without limitation the Class B Shares of the
Initial Portfolio), other than Shares purchased
through the automatic reinvestment of dividends or
distributions with respect to the Class B Shares of
such Portfolio, shall be converted automatically,
and without any action or choice on the part of the
holder thereof, into Class A Shares of such
Portfolio on (i) the date that would have been the
conversion date of the class B shares of the Source
Investment Company for which the converting Class B
Shares of the Trust were originally exchanged
pursuant to Section 6.1(d) had such shares of the
Source Investment Company not been so exchanged, or
(ii) if the shares of the Source Investment Company
were held as the result of a series of exchanges,
the date that would have been the conversion date
of the class B shares of the investment company to
which the holder originally subscribed had such
shares to which the holder originally subscribed
not been so exchanged, or (iii) such date as may be
from time to time established by the Trustees and
specified in the Prospectus in effect when such
Shares were issued, or in a notice subsequently
given to the holders thereof, provided, that the
Trustees may not change the date on which any Class
B Shares shall automatically convert into Class A

<PAGE>

Shares to a date later than that in effect at the
date on which such Class B Shares are issued
without the consent of the holders thereof (the
date established in accordance with clause (i),
clause (ii) or clause (iii) of this sentence being
herein sometimes referred to as the "Conversion
Date" of the Class B Shares so converted)."

IN WITNESS WHEREOF, the undersigned has set his hand and seal
this 8th day of November, 1995.

/s/ Edmund P. Bergan, Jr.
Name: Edmund P. Bergan, Jr.
Title: Secretary

ACKNOWLEDGEMENT
_______________

STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK) November 8, 1995

Then personally appeared the above named Edmund P.
Bergan, Jr. and acknowledged the foregoing instrument to be his
free act and deed.

Before me,

/s/ Mary Ann Milley
Notary Public

My commission expires: January 6, 1996

MARY ANN MILLEY
Notary Public State of New York
No. 24-4850080
Qualified in Kings County
Commission Expires Jan 6, 1996

00250163.AH3

<PAGE>

Exhibit 11
__________

CONSENT OF INDEPENDENT AUDITORS

To the Board of Trustees
AFD Exchange Reserves

We hereby consent to the use of our report dated
October 20, 1995 on the financial statements of AFD Exchange
Reserves referred to therein in Post-Effective Amendment No. 3 to
the Registration Statement on Form N-1A, File No. 33-74230, as
filed with the Securities and Exchange Commission.

We also consent to the reference to our firm in the
Prospectus under the caption "Financial Highlights" and in the
Statement of Additional Information under the captions
"Statements and Reports" and "Independent Auditors".

/s/ McGladrey & Pullen, LLP

New York, New York
January 24, 1996

00250163.AH4

<PAGE>

Exhibit 16
__________

AFD Exchange Reserves Class A
Yield Computation

1. Add last seven days of dividends.

Date Daily Dividend

09/24/95 0.000124185
09/25/95 0.000123110
09/26/95 0.000122585
09/27/95 0.000122935
09/28/95 0.000122847
09/29/95 0.000121807
09/30/95 0.000121807
0.000859276

2. Divide total of last 7 days of dividend by 7
to get average daily dividend.

0.000859276 divided by 7 = 0.000122754

3. Take average daily amount and multiply by 365
to get 7 day yield.

0.000122754 multiplied by 365 = 4.48%

4. Take 7 day yield and compound over a 365 day
period to get effective yield.

((3.17% divided by 365)+1) compounded by
365 = 4.58%

<PAGE>

AFD Exchange Reserves Class B
Yield Computation

1. Add last seven days of dividends.

Date Daily Dividend

09/24/94 0.000110377
09/25/94 0.000109159
09/26/94 0.000109375
09/27/94 0.000109204
09/28/94 0.000110125
09/29/94 0.000107320
09/30/94 0.000107320
0.000762880

2. Divide total of last 7 days of dividend by 7
to get average daily dividend.

0.00076288 divided by 7 = 0.000108983

3. Take average daily amount and multiply by 365
to get 7 day yield.

0.000108983 multiplied by 365 = 3.98%

4. Take 7 day yield and compound over a 365 day
period to get effective yield.

((2.68% divided by 365)+1) compounded by
365 = 4.06%

00250163.AH1

<PAGE>

AFD Exchange Reserves Class C
Yield Computation

1. Add last seven days of dividends.

Date Daily Dividend

09/24/94 0.000117514
09/25/94 0.000117386
09/26/94 0.000116600
09/27/94 0.000116676
09/28/94 0.000117029
09/29/94 0.000114803
09/30/94 0.000114803
0.000814811

2. Divide total of last 7 days of dividend by 7
to get average daily dividend.

0.000814811 divided by 7 = 0.000116402

3. Take average daily amount and multiply by 365
to get 7 day yield.

0.000116402 multiplied by 365 = 4.25%

4. Take 7 day yield and compound over a 365 day
period to get effective yield.

((2.95% divided by 365)+1) compounded by
365 = 4.34%

00250163.AH1

<PAGE>

Exhibit 18
__________

AFD EXCHANGE RESERVES

Plan pursuant to Rule 18f-3 under the
Investment Company Act of 1940
______________________________________

Effective November 28, 1995

This Plan (the "Plan") is adopted by AFD Exchange
Reserves (the "Fund") pursuant to Rule 18f-3 under the
Investment Company Act of 1940 (the "Act") and sets forth
the general characteristics of, and the general conditions
under which the Fund may offer, multiple classes of shares
of its now existing and hereafter created portfolios.1 This
Plan may be revised or amended from time to time as provided
below.

Class Designations

The Fund2 may from time to time issue one or more of the
following classes of shares: Class A shares, Class B
shares, Class C shares and Class Y shares. Each of the four
classes of shares will represent interests in the same
portfolio of investments of the Fund and, except as
described herein, shall have the same rights and obligations
as each other class. Each class shall be subject to such
investment minimums and other conditions of eligibility as
are set forth in the Fund's prospectus or statement of
additional information as from time to time in effect (the
"Prospectus").

____________________

1. Prior to the effectiveness of this Plan, the Fund has
been offering multiple classes of shares pursuant to an
exemptive order of the Securities and Exchange
Commission. This Plan is intended to allow the Fund to
offer multiple classes of shares to the full extent and
in the manner permitted by Rule 18f-3 under the Act (the
"Rule"), subject to the requirements and conditions
imposed by the Rule.

2. For purposes of this Plan, if the Fund has existing more
than one portfolio pursuant to which multiple classes of
shares are issued, then references in this Plan to the
"Fund" shall be deemed to refer instead to each
portfolio.

<PAGE>

Class Characteristics

Class A shares are offered at a public offering price
that is equal to their net asset value ("NAV") plus an
initial sales charge, as set forth in the Prospectus. Class
A shares may also be subject to a Rule 12b-1 fee, which may
include a service fee and, under certain circumstances, a
contingent deferred sales charge ("CDSC"), as described in
the Prospectus.

Class B shares are offered at their NAV, without an
initial sales charge, but may be subject to a CDSC and a
Rule 12b-1 fee, which may include a service fee, as
described in the Prospectus.

Class C shares are offered at their NAV, without an
initial sales charge, and may be subject to a Rule 12b-1
fee, which may include a service fee, and a CDSC, as
described in the Prospectus.

Class Y Shares are offered at their NAV, without any
initial sales charge, CDSC or Rule 12b-1 fee.

The initial sales charge on Class A shares and CDSC on
Class A, B and C shares are each subject to reduction or
waiver as permitted by the Act, and as described in the
Prospectus.

Allocations to Each Class

Expense Allocations

The following expenses shall be allocated, to the extent
practicable, on a class-by-class basis: (i) Rule 12b-1 fees
payable by the Fund to the distributor or principal
underwriter of the Fund's shares (the "Distributor"), and
(ii) transfer agency costs attributable to each class.
Subject to the approval of the Fund's Trustees, including a
majority of the independent Trustees, the following "Class
Expenses" may be allocated on a class-by-class basis: (a)
printing and postage expenses related to preparing and
distributing materials such as shareholder reports,
prospectuses and proxy statements to current shareholders of
a specific class,3 (b) SEC registration fees incurred with
____________________

3. For Class Y shares, the expenses of preparation,
printing and distribution of prospectuses and
shareholder reports, as well as other distribution-
related expenses, will be borne by the investment
adviser of the Fund (the "Adviser") or the Distributor
from their own resources.

<PAGE>

respect to a specific class, (c) blue sky and foreign
registration fees and expenses incurred with respect to a
specific class, (d) the expenses of administrative personnel
and services required to support shareholders of a specific
class (including, but not limited to, maintaining telephone
lines and personnel to answer shareholder inquiries about
their accounts or about the Fund), (e) litigation and other
legal expenses relating to a specific class of shares, (f)
Trustees' fees or expenses incurred as a result of issues
relating to a specific class of shares, (g) accounting and
consulting expenses relating to a specific class of shares,
(h) any fees imposed pursuant to a non- Rule 12b-1
shareholder services plan that relate to a specific class of
shares, and (i) any additional expenses, not including
advisory or custodial fees or other expenses related to the
management of the Fund's assets, if these expenses are
actually incurred in a different amount with respect to a
class, or if services are provided with respect to a class
that are of a different kind or to a different degree than
with respect to one or more other classes.

All expenses not now or hereafter designated as Class
Expenses ("Fund Expenses") will be allocated to each class
on the basis of the net asset value of that class in
relation to the net asset value of the Fund.

However, notwithstanding the above, the Fund may
allocate all expenses other than Class Expenses on the basis
of relative net assets (settled shares), as permitted by
rule 18f-3(c)(2) under the Act.

Waivers and Reimbursements

The Adviser or Distributor may choose to waive or
reimburse Rule 12b-1 fees, transfer agency fees or any Class
Expenses on a voluntary, temporary basis. Such waiver or
reimbursement may be applicable to some or all of the
classes and may be in different amounts for one or more
classes.

Income, Gains and Losses

Income, and realized and unrealized capital gains and
losses shall be allocated to each class on the basis of the
net asset value of that class in relation to the net asset
value of the Fund.

The Fund may allocate income, and realized and
unrealized capital gains and losses to each share based on
relative net assets (i.e. settled shares), as permitted by
Rule 18f-3(c)(2) under the Act.

<PAGE>

Conversion and Exchange Features

Conversion Features

Class B shares of the Fund automatically convert to
Class A shares of the Fund after a certain number of months
or years after the end of the calendar month in which the
shareholder's purchase order was accepted as described in
the Prospectus. Class B shares purchased through
reinvestment of dividends and distributions will be treated
as Class B shares for all purposes except that such Class B
shares will be considered held in a separate sub-account.
Each time any Class B shares in the shareholder's account
convert to Class A shares, an equal pro- rata portion of the
Class B shares in the sub-account will also convert to Class
A shares. The conversion of Class B shares to Class A shares
may be suspended if the opinion of counsel obtained by the
Fund that the conversion does not constitute a taxable event
under current federal income tax law is no longer available.
Class B shares will convert into Class A shares on the basis
of the relative net asset value of the two classes, without
the imposition of any sales load, fee or other charge.

In the event of any material increase in payments
authorized under the Rule 12b-1 Plan (or, if presented to
shareholders, any material increase in payments authorized
by a non-Rule 12b-1 shareholder services plan) applicable to
Class A shares, existing Class B shares will stop converting
into Class A shares unless the Class B shareholders, voting
separately as a class, approve the increase in such
payments. Pending approval of such increase, or if such
increase is not approved, the Trustees shall take such
action as is necessary to ensure that existing Class B
shares are exchanged or converted into a new class of shares
("New Class A") identical in all material respects to Class
A shares as existed prior to the implementation of the
increase in payments, no later than such shares were
previously scheduled to convert to Class A shares. If deemed
advisable by the Trustees to implement the foregoing, such
action may include the exchange of all existing Class B
shares for a new class of shares ("New Class B"), identical
to existing Class B shares, except that New Class B shares
shall convert to New Class A shares. Exchanges or
conversions described in this paragraph shall be effected in
a manner that the Trustees reasonably believe will not be
subject to federal taxation. Any additional cost associated
with the creation, exchange or conversion of New Class A or
New Class B shares shall be borne by the Adviser and the
Distributor. Class B shares sold after the implementation
of the fee increase may convert into Class A shares subject
to the higher maximum payment, provided that the material

<PAGE>

features of the Class A plan and the relationship of such
plan to the Class B shares are disclosed in an effective
registration statement.

Exchange Features

Shares of each class generally will be permitted to be
exchanged only for shares of a class with similar
characteristics in another Alliance Mutual Fund and shares
of certain Alliance money market funds. Class Y shares may
be exchanged for Class Y shares of another Alliance Mutual
Fund and shares of certain Alliance money market funds. If
the aggregate net asset value of shares of all Alliance
Mutual Funds held by an investor in the Fund reaches the
minimum amount at which an investor may purchase Class A
shares at net asset value without a front-end sales load on
or before December 15 in any year, then all Class B and
Class C shares of the Fund held by that investor may
thereafter be exchanged, at the investor's request, at net
asset value and without any front-end sales load or CDSC for
Class A shares of the Fund. All exchange features applicable
to each class will be described in the Prospectus.

Dividends

Dividends paid by the Fund with respect to its Class A,
Class B, Class C and Class Y shares, to the extent any
dividends are paid, will be calculated in the same manner,
at the same time and will be in the same amount, except that
any Rule 12b-1 fee payments relating to a class of shares
will be borne exclusively by that class and any incremental
transfer agency costs or, if applicable, Class Expenses
relating to a class shall be borne exclusively by that
class.

Voting Rights

Each share of a Fund entitles the shareholder of record
to one vote. Each class of shares of the Fund will vote
separately as a class with respect to the Rule 12b-1 plan
applicable to that class and on other matters for which
class voting is required under applicable law. Both Class A
and Class B shareholders will vote separately as a class to
approve any material increase in payments authorized under
the Rule 12b-1 plan applicable to Class A shares.

Responsibilities of the Trustees

On an ongoing basis, the Trustees will monitor the Fund
for the existence of any material conflicts among the
interests of the four classes of shares. The Trustees shall

<PAGE>

further monitor on an ongoing basis the use of waivers or
reimbursement by the Adviser and the Distributor of expenses
to guard against cross- subsidization between classes. The
Trustees, including a majority of the independent Trustees,
shall take such action as is reasonably necessary to
eliminate any such conflict that may develop. If a conflict
arises, the Adviser and Distributor, at their own cost, will
remedy such conflict up to and including establishing one or
more new registered management investment companies.

Reports to the Trustees

The Adviser and Distributor will be responsible for
reporting any potential or existing conflicts among the four
classes of shares to the Trustees. In addition, the Trustees
will receive quarterly and annual statements concerning
distributions and shareholder servicing expenditures
complying with paragraph (b)(3)(ii) of Rule 12b-1. In the
statements, only expenditures properly attributable to the
sale or servicing of a particular class of shares shall be
used to justify any distribution or service fee charged to
that class. The statements, including the allocations upon
which they are based, will be subject to the review of the
independent Trustees in the exercise of their fiduciary
duties. At least annually, the Trustees shall receive a
report from an expert, acceptable to the Trustees, (the
"Expert") with respect to the methodology and procedures for
calculating the net asset value, dividends and distributions
for the classes, and the proper allocation of income and
expenses among the classes. The report of the Expert shall
also address whether the Fund has adequate facilities in
place to ensure the implementation of the methodology and
procedures for calculating the net asset value, dividends
and distributions for the classes, and the proper allocation
of income and expenses among the classes. The Fund and the
Adviser will take immediate corrective measures in the event
of any irregularities reported by the Expert.

<PAGE>

Amendments

The Plan may be amended from time to time in accordance
with the provisions and requirements of Rule 18f-3 under the
Act.

Adopted this 28th day of November, 1995

By:/s/ Edmund P. Bergan, Jr.
________________________________
Edmund P. Bergan, Jr.
Secretary

7
00250163.AH5

WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<PAGE>

<ARTICLE> 6
<CIK> 0000917713
<NAME> AFD EXCHANGE RESERVES

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 115710918
<INVESTMENTS-AT-VALUE> 115710918
<RECEIVABLES> 2662775
<ASSETS-OTHER> 690111
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 119063804
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2406231
<TOTAL-LIABILITIES> 2406231
<SENIOR-EQUITY> 116660
<PAID-IN-CAPITAL-COMMON> 116543204
<SHARES-COMMON-STOCK> 116659864
<SHARES-COMMON-PRIOR> 54602121
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 2291
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 116657573
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6984634
<OTHER-INCOME> 0
<EXPENSES-NET> 1813670
<NET-INVESTMENT-INCOME> 5170964
<REALIZED-GAINS-CURRENT> (1256)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 5169708
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5170964
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 562653076
<NUMBER-OF-SHARES-REDEEMED> 505766297
<SHARES-REINVESTED> 5170964
<NET-CHANGE-IN-ASSETS> 62056487
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 1035
<GROSS-ADVISORY-FEES> 297892
<INTEREST-EXPENSE> 0

<PAGE>

<GROSS-EXPENSE> 1900670
<AVERAGE-NET-ASSETS> 119215021
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

00250163.AG6

</TABLE>