AFD EXCHANGE RESERVES
SEMI-ANNUAL REPORT
MARCH 31, 1996
(UNAUDITED)
Letter To Shareholders AFD Exchange Reserves
_______________________________________________________________________________
April 25, 1996
Dear Shareholder:
We are pleased to provide an overview of market and Fund activity during AFD
Exchange Reserves' semi-annual reporting period ended March 31, 1996. AFD
Exchange Reserves serves as the money market fund* exchange vehicle for the
Alliance mutual funds. The Fund's investment objective is to provide maximum
current income consistent with safety of principal and liquidity.
The Fund's assets at the end of March totaled approximately $116.9 million. The
Fund remains invested in high quality money market securities, which include
marketable obligations issued or guaranteed by the U.S. Government and its
agencies. As of March 31, the average weighted maturity of the portfolio was 45
days.
Economic Commentary
During the reporting period, the Federal Reserve Board lowered short-term
interest rates twice, in 25 basis-point increments, bringing the Federal Funds
rate to 5.25%. The U.S. economy appears to be healthy, with modest growth
expected in the period ahead and falling into the 2%-2.5% range by year end.
With a gradually strengthening economy and steady inflation, we expect no
Federal Reserve action on interest rates over the medium term.
Thank you for your interest and your investment in AFD Exchange Reserves.
Sincerely,
John D. Carifa
Chairman and President
* Investments in money market funds are neither insured nor guaranteed by the
U.S. Government and there is no assurance that they will be able to maintain a
stable net asset value of $1.00.
STATEMENT OF NET ASSETS
March 31, 1996 (unaudited) AFD Exchange Reserves
_______________________________________________________________________________
Principal
Amount
(000) Security Yield Value
- ------------------------------------------------------------------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS--99.8%
FEDERAL NATIONAL MORTGAGE ASSOCIATION--47.8%
25,000 5/14/96 4.97% $ 24,851,590
15,000 4/10/96 5.16 14,980,650
6,000 4/24/96 5.30 5,979,683
10,000 5.12%, 4/04/97 FRN 5.22 9,995,282
-----------
55,807,205
FEDERAL HOME LOAN MORTGAGE CORP.--21.7%
3,000 5/06/96 5.02 2,985,358
12,000 4/08/96 5.28 11,987,680
4,000 4/22/96 5.28 3,987,680
6,341 4/04/96 5.37 6,338,163
-----------
25,298,881
FEDERAL HOME LOAN BANK--13.3%
4,000 5/15/96 4.99 3,975,604
4,650 6/14/96 5.02 4,602,017
7,000 5/13/96 5.33 6,956,472
-----------
15,534,093
FEDERAL FARM CREDIT BANK--12.7%
15,000 5/29/96 5.35 14,870,708
U.S. TREASURY NOTES--4.3%
5,000 6.88%, 3/31/97 5.52 5,065,217
TOTAL INVESTMENTS--99.8%
(amortized cost $116,576,104) 116,576,104
Other assets less liabilities--0.2% 284,292
NET ASSETS--100%
(offering and redemption price of $1.00
per share; 35,873,496 Class A shares;
66,412,287 Class B shares and 14,576,601
Class C shares outstanding) $116,860,396
Glossary of Terms:
FRN - Floating Rate Note
See notes to financial statements.
STATEMENT OF OPERATIONS
Six Months Ended March 31, 1996 (unaudited) AFD Exchange Reserves
_______________________________________________________________________________
INVESTMENT INCOME
Interest $3,331,541
EXPENSES
Advisory fee $150,236
Distribution fee-Class A 99,911
Distribution fee-Class B 338,744
Distribution fee-Class C 46,783
Transfer Agency 98,603
Administrative 46,250
Registration fees 45,477
Custodian 26,436
Amortization of organizational expense 25,256
Audit and legal 23,416
Trustees' fees 12,075
Printing 9,502
Miscellaneous 4,500
Total expenses 927,189
Net investment income 2,404,352
REALIZED GAIN ON INVESTMENTS
Net realized gain on investments 303
NET INCREASE IN NET ASSETS FROM OPERATIONS $2,404,655
STATEMENTS OF CHANGES IN NET ASSETS
_______________________________________________________________________________
Six Months Ended
March 31,1996 Year Ended
(unaudited) Sep. 30,1995
-------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 2,404,352 $ 5,170,964
Net realized gain (loss) on investments 303 (1,256)
Net increase in net assets from operations 2,404,655 5,169,708
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income
Class A (856,394) (1,730,554)
Class B (1,296,715) (2,869,673)
Class C (251,243) (570,737)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase 202,520 62,057,743
Total increase 202,823 62,056,487
NET ASSETS
Beginning of period 116,657,573 54,601,086
End of period $116,860,396 $116,657,573
See notes to financial statements.
Notes To Financial Statements
March 31, 1996 (unaudited) AFD Exchange Reserves
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
AFD Exchange Reserves (the "Fund") is registered under the Investment Company
Act of 1940 as a diversified open-end investment company. The Fund offers Class
A, Class B and Class C shares. 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.
Class A shares are sold for cash without any initial sales charge at the time
of purchase. On cash purchases of $1,000,000 or more, however, 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 redeemed within one year will be
charged. 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. 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
purchase, but on Class A shares that were received in exchange for Alliance
Mutual 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, a 1% CDSC may be assessed if shares of the Fund are redeemed within one
year of the Alliance Mutual Fund Class A shares originally purchased for cash.
Class B shares are sold for cash without an initial sales charge. However, a
CDSC is charged if shares are redeemed within four years after purchase. The
CDSC charge declines from 4% to zero depending on the period of time the shares
are held. Class B shares purchased for cash will automatically convert to Class
A shares after eight years. Class B shares may be exchanged for Class B shares
of other Alliance Mutual Funds. Class B shares also are offered in exchange for
Class B shares of other Alliance Mutual Funds without any initial sales charge.
However, a CDSC may be charged if shares are redeemed within a certain number
of years of the 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.
Class C shares are sold for cash or in exchange for Class C shares of another
Alliance Mutual Fund without any initial sales charge or CDSC. Class C shares
do not convert to any other class of shares of the Fund. Class C shares may be
exchanged for Class C shares of other Alliance Mutual Funds.
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.
AFD Exchange Reserves
_______________________________________________________________________________
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 six months ended March 31, 1996, the Fund
incurred costs of $46,250.
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 $70,032 for the six months ended March
31, 1996.
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 March 31, 1996, the cost of securities for federal income tax purposes was
the same as the cost for financial reporting purposes. At March 31, 1996, 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 March 31,
1996, capital paid-in aggre-gated $35,873,496 for Class A, $66,412,287 for
Class B and $14,576,601 for Class C. Transactions, all at $1.00 per share,
were as follows:
Class A
-------------------------------
Six Months Ended
March 31,1996 Year Ended
(unaudited) Sep. 30,1995
------------- -------------
Shares sold. . . . . . . . . . . . . . . . . 207,427,884 254,814,516
Shares issued on reinvestments of dividends. 844,886 1,730,554
Shares redeemed. . . . . . . . . . . . . . . (213,519,353) (233,640,310)
Net increase (decrease). . . . . . . . . . . (5,246,583) 22,904,760
Class B
-------------------------------
Six Months Ended
March 31,1996 Year Ended
(unaudited) Sep. 30,1995
------------- -------------
Shares sold. . . . . . . . . . . . . . . . . 84,091,853 235,826,904
Shares issued on reinvestments of dividends. 1,277,772 2,869,673
Shares redeemed. . . . . . . . . . . . . . . (84,228,125) (204,665,847)
Net increase . . . . . . . . . . . . . . . . 1,141,500 34,030,730
Class C
-------------------------------
Six Months Ended
March 31,1996 Year Ended
(unaudited) Sep. 30,1995
------------- -------------
Shares sold. . . . . . . . . . . . . . . . . 34,051,660 72,011,656
Shares issued on reinvestments of dividends. 246,784 570,737
Shares redeemed. . . . . . . . . . . . . . . (29,990,841) (67,460,140)
Net increase . . . . . . . . . . . . . . . . 4,307,603 5,122,253
Notes To Financial Statements (continued) AFD Exchange Reserves
_______________________________________________________________________________
NOTE F: FINANCIAL HIGHLIGHTS
Selected data for a share outstanding throughout each period.
Class A
---------------------------------------
March 25,
Six Months Ended Year Ended 1994(a) to
Mar. 31,1996 Sep. 30, Sep. 30,
(unaudited) 1995 1994
-------------- --------- ------------
Net asset value, beginning of period . $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income. . . . . . . . . .0216 .0453 .0126
LESS: DISTRIBUTIONS
Dividends from net investment income . (.0216) (.0453) (.0126)
Net asset value, end of period . . . . $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN
Total investment return based on
net asset value (b). . . . . . . . . 4.36%(c) 4.64% 2.45%(c)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $36 $41 $18
Ratio of average net assets to:
Expenses, net of waivers . . . . . . 1.23%(c) 1.21% 1.82%(c)
Expenses, before waivers . . . . . . 1.23%(c) 1.29% 1.82%(c)
Net investment income (d). . . . . . 4.29%(c) 4.63% 2.62%(c)
Class B
---------------------------------------
March 25,
Six Months Ended Year Ended 1994(a) to
Mar. 31,1996 Sep. 30, Sep. 30,
(unaudited) 1995 1994
-------------- --------- ------------
Net asset value, beginning of period . $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income. . . . . . . . . .0191 .0404 .0101
LESS: DISTRIBUTIONS
Dividends from net investment income . (.0191) (.0404) (.0101)
Net asset value, end of period . . . . $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN
Total investment return based on
net asset value (b). . . . . . . . . 3.85%(c) 4.12% 1.95%(c)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $66 $65 $31
Ratio of average net assets to:
Expenses, net of waivers . . . . . . 1.74%(c) 1.70% 2.35%(c)
Expenses, before waivers . . . . . . 1.74%(c) 1.78% 2.35%(c)
Net investment income (d). . . . . . 3.83%(c) 4.17% 1.91%(c)
(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.
AFD Exchange Reserves
_______________________________________________________________________________
a Class C
---------------------------------------
March 25,
Six Months Ended Year Ended 1994(a) to
Mar. 31,1996 Sep. 30, Sep. 30,
(unaudited) 1995 1994
-------------- --------- ------------
Net asset value, beginning of period . $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income. . . . . . . . . .0203 .0430 .0112
LESS: DISTRIBUTIONS
Dividends from net investment income . (.0203) (.0430) (.0112)
Net asset value, end of period . . . . $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN
Total investment return based on
net asset value (b). . . . . . . . . 4.10%(c) 4.39% 2.18%(c)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $15 $10 $5
Ratio of average net assets to:
Expenses, net of waivers . . . . . . 1.48%(c) 1.45% 2.08%(c)
Expenses, before waivers . . . . . . 1.48%(c) 1.52% 2.08%(c)
Net investment income (d). . . . . . 4.03%(c) 4.41% 2.14%(c)
(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.
AFD Exchange Reserves
_______________________________________________________________________________
AFD Exchange Reserves
1345 Avenue of the Americas
New York, NY 10105
Toll-free 1(800) 221-5672
TRUSTEES
John D. Carifa, Chairman and President
Ruth Block (1)
David H. Dievler (1)
John H. Dobkin (1)
William H. Foulk, Jr. (1)
James M. Hester (1)
Clifford L. Michel (1)
Robert C. White (1)
OFFICERS
Kathleen A. Corbet, Senior Vice President
Wayne D. Lyski, Senior Vice President
John F. Chiodi, Jr., Vice President
Pamela F. Richardson, Vice President
Edmund P. Bergan, Jr., Secretary
Mark D. Gersten, Treasurer & Chief Financial Officer
Joseph J. Mantineo, Controller
CUSTODIAN
State Street Bank and Trust Company
P.O. Box 1912
Boston, MA 02105
LEGAL COUNSEL
Seward & Kissel
One Battery Park Plaza
New York, NY 10004
AUDITORS
McGladrey & Pullen, LLP
555 Fifth Avenue
New York, NY 10017
TRANSFER AGENT
Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, NJ 07096-1520
DISTRIBUTOR
Alliance Fund Distributors, Inc.
1345 Avenue of the Americas
New York, NY 10105
(1) Member of the audit committee.
Distribution of this report other than to shareholders must be preceded or
accompanied by the Fund's current prospectus, which contains further
information about the Fund.
R These registered service marks used under license from the owner, Alliance
Capital Management L.P.
