<PAGE>
As filed with the Securities and Exchange
Commission on June 21, 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. 5 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
Amendment No. 6 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)
It is proposed that this filing will become effective (Check
appropriate line)
X immediately upon filing pursuant to paragraph (b)
on (date) pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(1)
on (date) pursuant to paragraph (a)(1)
75 days after filing pursuant to paragraph (a)(2)
on (date) pursuant to paragraph (a)(2) of rule 485
If appropriate, check the following box:
<PAGE>
this post-effective amendment designates a new
effective date for a previously filed post-effective
amendment.
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
and Policies;
Investment Restrictions
<PAGE>
Item 14. Management of the Fund . . Management of the Fund
Item 15. Control Persons and Principal
Holders of Securities . . Management of the Fund
<PAGE>
CROSS REFERENCE SHEET
(as required by Rule 404(c))
N-1A Item No. Location in Statements of
Additional Information
(Caption)
PART B (continued)
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>
<PAGE>
[LOGO OF ALLIANCE CAPITAL APPEARS HERE] AFD EXCHANGE RESERVES
Advisor Class
- -------------------------------------------------------------------------------
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618
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AFD Exchange Reserves (the "Fund") is a diversified, open-end management
investment company. The Fund's investment objective is maximum current income
to the extent consistent with safety of principal and liquidity. The Fund
pursues its objective by maintaining a portfolio of high quality U.S. dollar-
denominated money market securities, and is thus referred to as a "money
market fund."
Shares of the Fund should be purchased for cash only as a temporary investment
pending exchange into another Alliance Mutual Fund and should not be held as a
long-term investment.
This Prospectus offers the Advisor Class shares of the Fund which may be
purchased at net asset value without any initial or contingent deferred sales
charges and without ongoing distribution expenses. Advisor Class shares are
offered solely to (i) investors participating in fee-based programs meeting
certain standards established by Alliance Fund Distributors, Inc., the Fund's
principal underwriter, and (ii) participants in self-directed defined
contribution employee benefit plans (e.g., 401(k) plans) that meet certain
minimum standards. See "Purchase and Sale of Shares."
This Prospectus sets forth concisely the information which a prospective
investor should know about the Fund before investing. A "Statement of
Additional Information" dated June [ ], 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, write Alliance Fund Services, Inc. at the indicated address
or call the "For Literature" telephone number shown above.
(R): This registered service mark used under license from the owner, Alliance
Capital Management L.P.
- -------------------------------------------------------------------------------
An investment in the Fund is not (i) insured or guaranteed by the U.S. Govern-
ment, (ii) a deposit or obligation of, or guaranteed or endorsed by, any bank,
or (iii) federally insured by the Federal Deposit Insurance Corporation, the
Federal Reserve Board or any other agency. There can be no assurance that the
Fund will be able to maintain a stable net asset value of $1.00 per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
PROSPECTUS/June [ ], 1996
Investors are advised to read this Prospectus carefully and to retain it for
future reference.
<PAGE>
EXPENSE INFORMATION
SHAREHOLDER TRANSACTION EXPENSES are one of several factors to consider when
you invest in the Fund. The following table summarizes your maximum transac-
tion costs from investing in Advisor Class shares of the Fund and estimated
annual expenses for Advisor Class shares. The example following the table
shows the cumulative expenses attributable to a hypothetical $1,000 investment
in each class for the periods specified.
<TABLE>
<CAPTION>
ADVISOR CLASS SHARES
--------------------
<S> <C>
Maximum sales charge imposed on purchases................ None
Sales charge imposed on dividend reinvestments........... None
Deferred sales charge.................................... None
Exchange Fee............................................. None
ANNUAL FUND OPERATING EXPENSES
Management fees.......................................... .25%
Other expenses(a)........................................ .48%
----
Total fund operating expenses(a)......................... .73%
====
</TABLE>
- --------
(a) These expenses include a transfer agency fee payable to Alliance Fund
Services, Inc., an affiliate of Alliance Capital Management L.P., based on
a fixed dollar amount charged to the Fund for each shareholder's account.
EXAMPLE
<TABLE>
<CAPTION>
Cumulative expenses
paid for the period of Advisor Class
---------------------- -------------
<S> <C>
1 year.................................. $ 7
3 years................................. $23
</TABLE>
- --------
The purpose of the foregoing table is to assist the investor in understand-
ing the various costs and expenses that an investor in Advisor Class shares of
the Fund will bear directly or indirectly. The example does not reflect any
charges or expenses imposed by your financial representative or your employee
benefit plan. "Other Expenses" are based on esti-mated amounts for the Fund's
current fiscal year. The example set forth above assumes reinvestment of all
dividends and distributions and utilizes a 5% annual rate of return as mandated
by Securities and Exchange Commission regulations. The example should not be
considered a representation of future expenses; actual expenses may be greater
or less than those shown.
2
<PAGE>
DESCRIPTION OF THE FUND
INVESTMENT OBJECTIVE AND POLICIES
The Fund is a diversified, open-end management investment company known as a
"mutual fund." The Fund's investment objective is maximum current income to
the extent consistent with safety of principal and liquidity. The Fund pursues
its objective by maintaining a portfolio of high quality U.S. dollar-denomi-
nated money market securities. While the Fund may not change its investment
objective or the "other fundamental investment policies" described in a sepa-
rate section below without shareholder approval, it may, upon notice to share-
holders, but without such approval, change the following investment policies
or create additional classes of shares in order to establish portfolios which
may have different investment objectives. There can, of course, be no assur-
ance that the Fund's objective will be achieved.
MONEY MARKET SECURITIES
The money market securities in which the Fund invests include: (1) market-
able obligations issued or guaranteed by the United States Government, its
agencies or instrumentalities (collectively, the "U.S. Government"); (2) cer-
tificates of deposit and bankers' acceptances issued or guaranteed by, or time
deposits maintained at, banks or savings and loan associations (including for-
eign branches of U.S. banks or U.S. or foreign branches of foreign banks) hav-
ing total assets of more than $500 million; (3) commercial paper of high qual-
ity, i.e., rated A-1 or A-2 by Standard & Poor's Corporation ("S&P"), Prime-1
or Prime-2 by Moody's Investors Service, Inc. ("Moody's"), Fitch-1 or Fitch-2
by Fitch Investors Service, Inc., or Duff 1 or Duff 2 by Duff & Phelps Inc,
or, if not rated, issued by U.S. or foreign companies having outstanding debt
securities rated AAA, AA or A by S&P, or Aaa, Aa or A by Moody's and partici-
pation interests in loans extended by banks to such companies; and (4) repur-
chase agreements that are collateralized in full each day by liquid securities
of the types listed above. Repurchase agreements may be entered into only with
those banks (including State Street Bank and Trust Company, the Fund's Custo-
dian) or broker-dealers ("vendors") that are eligible under the procedures
adopted by the Trustees for evaluating and monitoring the creditworthiness of
such vendors. A repurchase agreement would create a loss to the Fund if, in
the event of a vendor default, the proceeds from the sale of the collateral
were less than the repurchase price.
The Fund may invest up to 25% of its total assets in money market instru-
ments issued by foreign branches of foreign banks and other foreign entities.
To the extent that the Fund makes such investments, consideration will be
given to their domestic marketability, the lower reserve requirements gener-
ally mandated for overseas banking operations, the possible impact of inter-
ruptions in the flow of international currency transactions, potential politi-
cal and social instability or expropriation, imposition of foreign taxes, the
lower level of government supervision of issuers, the difficulty in enforcing
contractual obligations and the lack of uniform accounting and financial re-
porting standards.
3
<PAGE>
The Fund will not invest more than 10% of its net assets in illiquid securi-
ties which include "restricted securities" subject to legal restrictions on
resale arising from an issuer's reliance upon certain exemptions from regis-
tration under the Securities Act of 1933, as amended, (the "Securities Act").
The Fund may purchase restricted securities eligible for resale under Rule
144A under the Securities Act and commercial paper issued in reliance upon the
exemption from registration in Section 4(2) of the Securities Act and, in each
case, determined by Alliance Capital Management L.P. ("Alliance") to be liquid
in accordance with procedures adopted by the Trustees of the Fund.
The Fund may invest in asset-backed securities that meet its existing diver-
sification, quality and maturity criteria. Asset-backed securities are securi-
ties issued by special purpose entities whose primary assets consist of a pool
of loans or accounts receivable. The securities may be in the form of a bene-
ficial interest in a special purpose trust, limited partnership interest, or
commercial paper or other debt securities issued by a special purpose corpora-
tion. Although the securities may have some form of credit or liquidity en-
hancement, payments on the securities depend predominately upon collection of
the loans and receivables held by the issuer. It is the Fund's current inten-
tion to limit its investment in such securities to not more than 5% of its net
assets.
The Fund will comply with Rule 2a-7 under the Investment Company Act of 1940
(the "Act"), as such rule is amended from time to time, including the diversi-
ty, quality and maturity limitations imposed by the Rule. In accordance with
Rule 2a-7, the Fund will invest in securities which at the time of investment
have remaining maturities not exceeding 397 days and the average maturity of
the Fund's investment portfolio will not exceed 90 days. A more detailed de-
scription of Rule 2a-7 is set forth in the Fund's Statement of Additional In-
formation under "Investment Objective, Policies and Restrictions."
OTHER FUNDAMENTAL INVESTMENT POLICIES
To maintain portfolio diversification and reduce investment risk, the Fund
may not: (1) invest 25% or more of its assets in the securities of issuers
conducting their principal business activities in any one industry; provided
that, for purposes of this restriction, there is no limitation with respect to
U.S. Government securities or certificates of deposit and bankers' acceptances
issued or guaranteed by, or interest bearing savings deposits maintained at,
banks and savings institutions and loan associations (including foreign
branches of U.S. banks and U.S. branches of foreign banks); (2) invest more
than 5% of its assets in the securities of any one issuer (except the U.S.
Government) although with respect to one-quarter of its total assets it may
invest without regard to such limitation; (3) invest more than 5% of its as-
sets in the securities of any issuer (except the U.S. Government) having less
than three years of continuous operation or purchase more than 10% of any
class of the outstanding securities of any issuer (except the U.S. Govern-
ment); (4) borrow money except from banks on a temporary basis or via entering
into reverse repurchase agreements in aggregate amounts not exceeding 15% of
its assets and to be used exclusively to facilitate the orderly maturation and
sale of portfolio securities during any periods of abnormally heavy redemption
requests, if they should occur; such
4
<PAGE>
borrowings may not be used to purchase investments and the Fund will not pur-
chase any investment while any such borrowings exist; or (5) mortgage, pledge
or hypothecate its assets except to secure such borrowings.
As a matter of operating policy, fundamental policy number (2) would give
the Fund the ability to invest, with respect to 25% of its assets, more than
5% of its assets in any one issuer only in the event Rule 2a-7 is amended in
the future.
PURCHASE AND SALE OF SHARES
Advisor Class shares of the Fund may be purchased for cash and thereafter
exchanged for Advisor Class shares of other Alliance Mutual Funds. Under the
Alliance Dollar Cost Averaging Program, exchanges may be made automatically
each month, thus producing a dollar cost averaging effect. Exchanges also may
be made at other times of an investor's choosing. Advisor Class shares of the
Fund should be purchased for cash only as a temporary investment pending ex-
change into Advisor Class shares of another Alliance Mutual Fund and should
not be held as a long-term investment.
Advisor Class shares of the Fund also are available to holders of Advisor
Class shares of other Alliance Mutual Funds who wish to exchange their Advisor
Class shares for Advisor Class shares of a money market fund. Such an exchange
transaction is effected through the redemption of Alliance Mutual Fund Advisor
Class shares tendered for exchange and the purchase of Advisor Class shares of
the Fund at their respective net asset values as next determined. Exchange
purchases into the Fund may be made by telephone or written request.
Alliance Fund Services, Inc. ("AFS") is not responsible for the authenticity
of telephone exchange requests. AFS will employ reasonable procedures in order
to verify that telephone requests are genuine, and could be liable if it
failed to use those procedures. An exchange is a taxable capital transaction
for federal tax purposes. The Fund reserves the right to reject any order to
acquire its shares through exchange.
HOW TO BUY SHARES
The Fund offers multiple classes of shares, of which only the Advisor Class
is offered by this Prospectus. Advisor Class shares of the Fund may be pur-
chased through your financial representative at net asset value without any
initial or contingent deferred sales charges and without distribution ex-
penses. Advisor Class shares may be purchased solely by investors (i) through
accounts established under a fee-based program, sponsored and maintained by a
registered broker-dealer or other financial intermediary, and approved by Al-
liance Fund Distributors, Inc. ("AFD"), the Fund's principal underwriter, pur-
suant to which each investor pays an asset-based fee at an annual rate of at
least .50% of the assets in the investor's account, to the broker-dealer or
financial intermediary, or its affiliate or agent, for investment advisory or
administrative services, or (ii) through a self-directed defined contribution
employee benefit plan (e.g., a 401(k) plan) that has at least 1,000 partici-
pants or $25 million in assets. The minimum initial investment is $250. The
minimum for subsequent investments is $50. Investments of $25 or more are al-
lowed under the automatic investment program and under a 403(b)(7) retirement
plan. Fee-based programs through which Advisor Class shares may be purchased may
impose
5
<PAGE>
different requirements with respect to minimum initial and subsequent invest-
ment levels than described above. See the Subscription Application and State-
ment of Additional Information for more information.
The Fund may refuse any order to purchase Advisor Class shares. In this regard,
the Fund reserves the right to restrict purchases of Advisor Class shares
(including exchanges) when there appears to be evidence of a pattern of frequent
purchases and sales made in response to short-term fluctuations in share price.
HOW THE FUND VALUES ITS SHARES
The net asset value of Advisor Class shares is expected to be constant at
$1.00 per share, although this price is not guaranteed. The net asset value
per share is calculated by determining the amount of assets attributable to
each class of shares, subtracting liabilities and dividing by the amount of
outstanding shares for such class. In this connection, the Fund uses the amor-
tized cost value for determining the value of the Fund's investments. Shares
are valued each day the New York Stock Exchange (the "Exchange") is open as of
the close of regular trading (currently 4:00 p.m. Eastern time).
HOW TO EXCHANGE SHARES
You may exchange your investment in Advisor Class shares of the Fund for Ad-
visor Class shares of the same class of other Alliance Mutual Funds. Exchanges
of Advisor Class shares are made at the net asset values next determined. Ex-
changes may be made by telephone or written request. Telephone exchange re-
quests must be received by AFS by 4:00 p.m. Eastern time on a Fund business
day to receive that day's net asset value. The exchange service may be
changed, suspended or terminated on 60 days' written notice.
HOW TO SELL SHARES
You may "redeem", i.e., sell your shares to the Fund on any day the Exchange
is open, either directly or through your financial representative. The price
you will receive is the net asset value next calculated after the Fund re-
ceives your request in proper form. Proceeds generally will be sent to you
within seven days. However, for shares recently purchased by check or EFT or
for shares acquired in exchange for Alliance Mutual Fund shares recently pur-
chased by check or EFT, the Fund will not send proceeds until it is reasonably
satisfied that the check or EFT has been collected (which may take up to 15
days). If you are in doubt about what documents are required by your fee-based
program or employee benefit plan, you should contact your financial represen-
tative.
SELLING SHARES THROUGH YOUR FINANCIAL REPRESENTATIVE
Your financial representative must receive your request before 4:00 p.m.
Eastern time, and your financial representative must transmit your request to
the Fund by 5:00 p.m. Eastern time, to receive that day's net asset value.
Your financial representative is responsible for furnishing all necessary doc-
umentation to the Fund, and may charge you for this service.
SELLING SHARES DIRECTLY TO THE FUND
Send a signed letter of instruction or stock power form to Alliance Fund
Services, Inc. ("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 national 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
6
<PAGE>
the sale of shares by corporations, 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
Alternatively, a request for redemption of shares for which no stock certif-
icates have been issued can also be made by telephone to 800-221-5672. Tele-
phone redemption requests must be made by 4:00 p.m. Eastern time on a Fund
business day to receive that day's net asset value and, except for certain
omnibus accounts, may be made only once in any 30-day period. A shareholder who
has completed the Telephone Transac-tions 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 shareholder's address of
record. Except for certain omnibus accounts, redemption requests by EFT may not
exceed $100,000 and redemption requests by check may not exceed $50,000. Tele-
phone redemption is not available for shares held in nominee or "street name"
accounts or retirement plan accounts or shares held by a shareholder who has
changed his or her address of record within the previous 30 calendar days. See
"General" below.
GENERAL
The sale or exchange of shares is a taxable transaction for federal tax pur-
poses. Under unusual circumstances, the Fund may suspend redemptions or post-
pone payment for up to seven days or longer, as permitted by federal securi-
ties law. The Fund reserves the right to close an account that through
redemption has remained be low $200 for 90 days. Shareholders will receive 60
days' written notice to increase the account value before the account is
closed.
Alliance sponsors three other money market funds, Alliance Capital Reserves,
Alliance Government Reserves and Alliance Municipal Trust (the "Trusts"). 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.
GENERAL
If you are a Fund shareholder through an account established under a fee-
based program, your fee-based program may impose requirements with respect to
the purchase, sale or exchange of Advisor Class shares of the Fund that are
different from those described in this Prospectus. A transaction fee may be
charged by your financial representative with respect to the purchase, sale
or exchange of Advisor Class shares made through such financial representative.
7
<PAGE>
The Fund offers three classes of shares other than the Advisor Class, which
are Class A, Class B and Class C. All classes of shares of the Fund have a
common investment objective and investment portfolio. Class A shares are of-
fered with an initial sales charge and pay a distribution services fee. Class
B shares have a contingent deferred sales charge (a "CDSC") and also pay a
distribution services fee. Class C shares have no initial sales charge or CDSC
but pay a distribution services fee. Because Advisor Class shares have no ini-
tial sales charge or CDSC and pay no distribution services fee, Advisor Class
shares are expected to have different performance from Class A, Class B or
Class C shares. You may obtain more information about Class A, Class B and
Class C shares, which are not offered by this Prospectus, by contacting AFS by
telephone at 1-800-221-5672 or by contacting your financial representative.
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 March 1, 1996 totaling more than $156 billion (of
which more than $48 billion represents the assets of investment companies).
Alliance's clients are primarily major corporate employee benefit funds, pub-
lic employee retirement systems, investment companies, foundations and endow-
ment funds. The 50 registered investment companies managed by Alliance com-
prising 107 separate investment portfolios currently have over two million
shareholders. As of March 1, 1996, Alliance was retained as an investment man-
ager for 34 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 subsid-iary 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, a holding
company controlled by AXA, a French insurance holding company. Certain infor-
mation 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
8
<PAGE>
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
as-sets; .22 of 1% of the next $.25 billion of such assets; .21 of 1% of the
next $1 billion of such assets, and; .20 of 1% of such average daily net assets
in excess of $3 billion. The fee is accrued daily and paid monthly.
DISTRIBUTION SERVICES AGREEMENT
The Fund has entered into a Distribution Services Agreement with AFD with
respect to Advisor Class shares. 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 un-
derwriter or distributor of securities. However, in the opinion of the Fund's
management, based on the advice of counsel, these laws and regulations do not
prohibit such depository institutions from providing services for 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 expected 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 institutions 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.
9
<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. Advisor Class, Class A, Class B and Class C shares have identical voting,
dividend, liquidation and other rights, except that each class bears its own
transfer agency expenses and each of Class A, Class B and Class C shares bears
its own distribution expenses. Each class of shares votes separately with re-
spect to matters for which separate class voting is appropriate under applica-
ble law. Shares are freely transferable, are entitled to dividends as deter-
mined 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 organi-
zation of the Fund are discussed in the Statement of Additional Information.
REGISTRAR, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
Alliance Fund Services, Inc., an indirect wholly-owned subsidiary of Alli-
ance, located at 500 Plaza Drive, Secaucus, New Jersey 07094, acts as the
Fund's registrar, transfer agent and dividend-disbursing agent for a fee based
upon the number of shareholder accounts maintained for the Fund.
PRINCIPAL UNDERWRITER
Alliance Fund Distributors, Inc., 1345 Avenue of the Americas, New York, New
York 10105, an indirect wholly-owned subsidiary of Alliance, is the Principal
Underwriter of shares of the Fund.
ADDITIONAL INFORMATION
This Prospectus and the Statement of Additional Information, which have been
incorporated by reference herein, do not contain all the information set forth
in the Registration Statement filed by the Fund with the Commission under the
Securities Act. Copies of the Registration Statement may be obtained at a rea-
sonable charge from the Commission or may be examined, with out charge, at the
offices of the Commission in Washington, D.C. This Prospectus does not consti-
tute an offering in any state in which such offering may not lawfully be made.
10
<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
- -------------------------------------------
Expense Information 2
Description of the Fund 3
Purchase and Sale of Shares 5
Management of the Fund 8
Dividends, Distributions and Taxes 9
General Information 10
ADVISER
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, NY 10105
AFD
-----------
Exchange
-----------
Reserves
-----------
Prospectus
(Advisor Class)
June [ ], 1996
Goal: Maximum current income consistent with safety of principal and liquidity.
[LOGO OF ALLIANCE]
<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
(Advisor Class)
June [ ], 1996
This Statement of Additional Information relating to Advisor
Class shares of the Fund is not a prospectus but supplements and
should be read in conjunction with the Fund's current Prospectus
relating to Advisor Class shares. Copies of such Prospectus
relating to Advisor Class shares 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...............................
Financial Statements and
Independent Auditor's Report......................
<PAGE>
Appendix--Commercial Paper and
Bond Ratings.................................... A-1
(R) This registered service mark used under license from the
owner, Alliance Capital Management L.P.
<PAGE>
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
Incorporated by reference from the section "Investment
Objective, Policies and Restrictions" contained in the Statement
of Additional Information of AFD Exchange Reserves (the "Fund")
dated February 1, 1996 relating to Class A, Class B and Class C
shares of the Fund as filed with the Securities and Exchange
Commission (the "Commission") pursuant to Rule 497(c) on February
13, 1996 (file nos. 33-74230 and 811-08294) (the "Rule 497 SAI").
Capitalized terms used herein that are not otherwise
defined herein are used as defined in the Rule 497 SAI.
MANAGEMENT OF THE FUND
Incorporated by reference from the section "Management
of the Fund" contained in the Rule 497 SAI, except that the
officer biographies and the last paragraph of the sub-section
"Officers" and the second, third and fourth paragraphs of the
sub-section "The Adviser" are restated as set forth below:
Officers
KATHLEEN A. CORBET - Senior Vice President, 36, has been
a Senior Vice President of ACMC since July 1993. Previously, she
held various responsibilities as head of Equitable Capital
Management Corporation's Fixed Income Management Department,
Private Placement Secondary Trading and Fund Management since
prior to 1991.
WAYNE D. LYSKI - Senior Vice President, 54, is an
Executive Vice President of ACMC, with which he has been
associated since prior to 1991.
JOHN F. CHIODI, Jr. - Vice President, 30, is a Vice
President of ACMC, with which he has been associated since prior
to 1991.
PAMELA F. RICHARDSON - Vice President, 43, is a Vice
President of ACMC, with which she has been associated since prior
to 1991.
MARK D. GERSTEN - Treasurer and Chief Financial Officer,
45, is a Senior Vice President of Alliance Fund Services, Inc.
2
<PAGE>
and a Vice President of Alliance Fund Distributors, Inc., with
which he has been associated since prior to 1991.
EDMUND P. BERGAN - Jr. - Secretary, 45, is a Senior Vice
President and General Counsel of Alliance Fund Distributors, Inc.
and Alliance Fund Services, Inc. and Vice President and Associate
General Counsel of ACMC, with which he has been associated since
prior to 1991.
JOSEPH J. MANTINEO - Controller, 36, is a Vice President
of Alliance Fund Services, Inc., with which he has been
associated since prior to 1991.
VINCENT S. NOTO - Assistant Controller, 31, is a Money
Market Fund Manager, Mutual Funds of Alliance Fund Services,
Inc., with which he has been associated since prior to 1991.
EMILIE D. WRAPP - Assistant Secretary, 40, is Special
Counsel and Vice President of AFD, with which she has been
associated since prior to 1991.
As of April 5, 1996, the Trustees and officers of
the Fund as a group owned less than 1% of the shares of the
Fund.
The Adviser
The Adviser is a leading international investment
manager supervising client accounts with assets as of
March 1, 1996 of more than $156 billion (of which more than
$48 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 and
included, as of March 1, 1996, 34 of the FORTUNE 100
Companies. As of that date, the Adviser and its
subsidiaries employed approximately 1,350 employees who
operated 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 107 separate
investment portfolios managed by the Adviser currently have
more than two million shareholders.
Alliance Capital Management Corporation, the sole
general partner of, and the owner of a 1% general
partnership interest in, 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"),
3
<PAGE>
a holding company controlled by AXA, a French insurance
holding company. As of March 1, 1996, ACMC, Inc. and
Equitable Capital Management Corporation, each a wholly-
owned direct or indirect subsidiary of Equitable, together
with Equitable, owned in the aggregate approximately 57.6%
of the issued and outstanding units representing assignments
of beneficial ownership of limited partnership interests in
the Adviser ("Units"). As of March 1, 1996, approximately
32.4% and 10.0% 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 Directors of
the Fund.
AXA and its subsidiaries own approximately 63.9% of
the issued and outstanding shares of capital stock of ECI.
AXA is the holding company for an international group of
insurance and related financial services companies. AXA's
insurance operations include activities in life insurance,
property and casualty insurance and reinsurance. The
insurance operations are diverse geographically, with
activities in France, the United States, Australia, the
United Kingdom, Canada and other countries, principally in
Europe and the Asia Pacific area. AXA is also engaged in
asset management, investment banking, securities trading,
brokerage, real estate and other financial services
activities in the United States, Europe and the Asia Pacific
area. Based on information provided by AXA, as of March 1,
1996, 42.1% of the issued ordinary shares (representing
53.4% of the voting power) of AXA were owned by Midi
Participations, a French holding company ("Midi"). The
shares of Midi were, in turn, owned 61.4% (representing
62.5% of the voting power) by Finaxa, a French holding
company, and 38.6% (representing 37.5% of the voting power)
by subsidiaries of Assicurazioni Generali S.p.A., an Italian
corporation (one of which, Belgica Insurance Holding S.A., a
Belgian corporation, owned 30.8%, representing 33.1% of the
voting power). As of March 1, 1996, 61.1% of the voting
shares (representing 73.4% of the voting power) of Finaxa
were owned by five French mutual insurance companies (the
"Mutuelles AXA") (one of which, AXA Assurances I.A.R.D.
Mutuelle, owned 34.7% of the voting shares representing
40.4% of the voting power), and 25.5% of the voting shares
(representing 16% of the voting power) of Finaxa were owned
by Banque Paribas, a French bank. Including the ordinary
shares owned by Midi, as of March 1, 1996, the Mutuelles AXA
directly or indirectly owned 51% of the issued ordinary
shares (representing 64.7% of the voting power) of AXA.
Acting as a group, the Mutuelles AXA control AXA, Midi and
Finaxa.
4
<PAGE>
EXPENSES OF THE FUND
Distribution Services Agreement
The Fund has entered into a Distribution Services
Agreement (the "Agreement") with Alliance Fund Distributor,
Inc., the Fund's principal underwriter (the "Principal
Underwriter"), to permit the Principal Underwriter to
distribute the Fund's Advisor Class shares.
The Agreement became effective on March 14, 1994,
and was amended as of June 4, 1996 to permit the
distribution of the Advisor Class shares. The amendment to
the Agreement was approved by a vote of the Trustees on
June 4, 1996.
The Agreement will continue in effect for
successive twelve-month periods with respect to Advisor
Class shares (computed from each October 1) provided,
however, that such continuance is specifically approved at
least annually by the Trustees of the Fund or by vote of the
holders of a majority of the outstanding voting securities
(as defined in the 1940 Act) of that class, and in either
case, by a majority of the Trustees of the Fund who are not
parties to the Agreement or interested persons, as defined
in the 1940 Act, of any such party (other than as trustees
of the Fund). All amendments to the Agreement must be
approved by a vote of the Trustees of the Fund.
Transfer Agency Agreement
Alliance Fund Services, Inc., an indirect wholly-
owned subsidiary of Alliance, receives a transfer agency fee
per account holder of each Class A, Class B, Class C and
Advisor Class share of the Fund, plus reimbursement for out-
of-pocket expenses. For the fiscal year ended September 30,
1995, the Fund paid Alliance Fund Services, Inc. $144,631
for transfer agency services.
PURCHASE OF SHARES
The following information supplements that set
forth in the Fund's Prospectus under the heading "Purchase
and Sale of Shares."
5
<PAGE>
General
If you are a Fund shareholder through an account
established under a fee-based program, your fee-based
program may impose requirements with respect to the
purchase, sale or exchange of Advisor Class shares of the
Fund that are different from those described in the
Prospectus and this Statement of Additional Information. A
transaction fee may be charged by your financial
representative with respect to the purchase or sale of
Advisor Class shares made through such financial
representative.
Advisor Class shares of the Fund are offered on a
continuous basis at a price equal to their net asset value.
Advisor Class shares of the Fund are available to holders of
shares of other Alliance Mutual Funds who wish to exchange
their shares for shares of a money market fund and also may
be purchased for cash.
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 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
6
<PAGE>
business day will be processed as of the close of business
on that day. During periods of drastic economic or market
developments, such as the market break of October 1987, it
is possible that shareholders would have difficulty in
reaching Alliance Fund Services, Inc. by telephone (although
no such difficulty was apparent at any time in connection
with the 1987 market break). If a shareholder were to
experience such difficulty, the shareholder should issue
written instructions to Alliance Fund Services, Inc. at the
address shown on the cover of this Statement of Additional
Information.
Purchases for Cash
Advisor Class shares of the Fund should be
purchased for cash only as a temporary investment pending
exchange into another Alliance Mutual Fund and should not be
held as a long-term investment. Advisor Class shares are
offered for purchase for cash on a continuous basis through
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"). 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 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,
Class C or Advisor Class shares.
Investors may purchase Advisor Class shares of the
Fund for cash solely through (i) accounts established under
a fee-based program, sponsored and maintained by registered
broker-dealers or other financial intermediaries and
approved by the Principal Underwriter pursuant to which each
investor pays an asset-based fee at an annual rate of at
least .50% of the assets in the investor's account, to the
broker-dealer or financial intermediary, or its affiliate or
agent, for investment advisory or administrative services,
or (ii) a self-directed defined contribution employee
benefit plan (e.g., a 401(k) plan) that has at least 1,000
participants or $25 million in assets.
The Fund will accept unconditional orders for its
Advisor Class shares to be executed at the public offering
price equal to their net asset value next determined as
7
<PAGE>
described below. Orders received by the Principal
Underwriter prior to the close of regular trading on the New
York Stock Exchange (the "Exchange") on each day the
Exchange is open for trading are priced at the net asset
value computed as of the close of regular trading on the
Exchange on that day. In the case of orders for purchase of
Advisor Class shares placed through a shareholder's
financial representative, the applicable public offering
price will be the net asset value as so determined, but only
if the financial representative receives the order prior to
the close of regular trading on the Exchange and transmits
it to the Principal Underwriter prior to its close of
business that same day (normally 5:00 p.m. Eastern time).
The financial representative is responsible for transmitting
such orders by 5:00 p.m. If the financial representative
fails to do so, the investor's right to that day's closing
price must be settled between the investor and the financial
representative. If the financial representative receives
the order after the close of regular trading on the
Exchange, the price will be based on the net asset value
determined as of the close of regular trading on the
Exchange on the next day it is open for trading.
Following the initial purchase for cash of Advisor
Class shares, a shareholder may place orders to purchase
additional Advisor Class shares for cash by telephone if the
shareholder has completed the appropriate portion of the
Subscription Application. Except with respect to certain
omnibus accounts, a telephone purchase order may not exceed
$500,000. Payment for Advisor Class shares purchased by
telephone can be made only by Electronic Funds Transfer from
a bank account maintained by the shareholder at a bank that
is a member of the National Automated Clearing House
Association ("NACHA"). If a shareholder's telephone
purchase request is received before 3:00 p.m. Eastern time
on a Fund business day, the order to purchase Advisor Class
shares is automatically placed the following Fund business
day, and the applicable public offering price will be the
public offering price determined as of the close of business
on such following business day. A Fund business day is any
weekday, exclusive of days on which the Exchange is closed
(most national holidays and Good Friday). Full and
fractional Advisor Class shares are credited to a
subscriber's account in the amount of his or her
subscription.
The per share net asset value of the Advisor Class
shares is computed in accordance with the Fund's Agreement
and Declaration of Trust as of the next close of regular
trading on the Exchange (currently 4:00 p.m. Eastern time).
For purposes of this computation, the securities in the
8
<PAGE>
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 Advisor Class shares. The Fund reserves the right to
suspend the sale of its Advisor Class shares to the public
in response to conditions in the securities markets or for
other reasons. In addition, the Fund reserves the right, on
60 days' written notice to its shareholders to modify,
restrict or terminate the exchange privilege.
All Advisor Class shares purchased are confirmed to
each shareholder and are credited to his or her account at
the net asset value. To avoid unnecessary expense to the
Fund and to facilitate the immediate redemption of Advisor
Class shares, stock certificates, for which no charge is
made, are not issued except upon the written request of a
shareholder. Certificates are not issued for fractional
Advisor Class shares. Advisor Class shares for which
certificates have been issued are not eligible for any of
the optional methods of withdrawal, namely, the telephone,
check-writing or periodic redemption procedures. The Fund
reserves the right to reject any purchase order.
Advisor Class shares of the Fund are offered to
holders of Advisor Class shares of other Alliance Mutual
Funds without any sales charge at the time of purchase or
redemption.
____________________________________________________________
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 Advisor Class shares tendered to it, as
described below, at a redemption price equal to their net
asset value, which is expected to remain constant at $1.00
per share, following the receipt of Advisor Class shares
tendered for redemption in proper form. Payment of the
redemption price will be made within seven days after the
Fund's receipt of such tender for redemption. If a
shareholder is in doubt about what documents are required by
9
<PAGE>
his or her fee-based program or employee benefit plan, the
shareholder should contact his or her financial
representative.
The right of redemption may not be suspended or the
date of payment upon redemption postponed for more than
seven days after Advisor Class shares are tendered for
redemption, except for any period during which the Exchange
is closed (other than customary weekend and holiday
closings) or during which the Commission determines that
trading thereon is restricted, or for any period during
which an emergency (as determined by the Commission) exists
as a result of which disposal by the Fund of securities
owned by it is not reasonably practicable or as a result of
which it is not reasonably practicable for the Fund fairly
to determine the value of its net assets, or for such other
periods as the Commission may by order permit for the
protection of security holders of the Fund.
Payment of the redemption price may be made either
in cash or in portfolio securities (selected at the
discretion of the Trustees of the Fund and taken at their
value used in determining the redemption price), or partly
in cash and partly in portfolio securities. However,
payments will be made wholly in cash unless the Trustees
believe that economic conditions exist which would make such
a practice detrimental to the best interests of the Fund.
The value of a shareholder's Advisor Class shares
on redemption or repurchase may be more or less than the
cost of such Advisor Class shares to the shareholder,
depending upon the market value of the Fund's portfolio
securities at the time of such redemption or repurchase and
the income earned. Payment (either in cash or in portfolio
securities) received by a shareholder upon redemption or
repurchase of his or her Advisor Class shares, assuming the
Advisor Class shares constitute capital assets in his or her
hands, will result in long-term or short-term capital gains
(or loss) depending upon the shareholder's holding period
and basis in respect of the Advisor Class shares redeemed.
To redeem Advisor Class shares of the Fund for
which no stock certificates have been issued, the registered
owner or owners should forward a letter to the Fund
containing a request for redemption. The signature or
signatures on the letter must be guaranteed by an "eligible
guarantor institution" as defined in Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended.
To redeem Advisor Class shares of the Fund
represented by stock certificates, the investor should
10
<PAGE>
forward the appropriate stock certificate or certificates,
endorsed in blank or with blank stock powers attached, to
the Fund with the request that the Advisor Class shares
represented thereby, or a specified portion thereof, be
redeemed. The stock assignment form on the reverse side of
each stock certificate surrendered to the Fund for
redemption must be signed by the registered owner or owners
exactly as the registered name appears on the face of the
certificate or, alternatively, a stock power signed in the
same manner may be attached to the stock certificate or
certificates or, where tender is made by mail, separately
mailed to the Fund. The signature or signatures on the
assignment form must be guaranteed in the manner described
above.
Telephone Redemption By Electronic Funds Transfer.
Each Fund shareholder is entitled to request redemption by
Electronic Funds Transfer, once in any 30 day period (except
for certain omnibus accounts) of Advisor Class shares for
which no stock certificates have been issued by telephone at
(800) 221-5672 by a shareholder who has completed the
appropriate portion of the Subscription Application. A
telephone redemption request may not exceed $100,000 (except
for certain omnibus accounts) 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 for certain
omnibus accounts or as otherwise noted below, each Fund
shareholder is eligible to request redemption by check, once
in any 30-day period, of Advisor Class shares for which no
stock certificates have been issued by telephone at
(800) 221-5672 before 4:00 p.m. Eastern time on a Fund
business day in an amount not exceeding $50,000. Proceeds
of such redemptions are remitted by check to the
shareholder's address of record. Telephone redemption by
check is not available with respect to Advisor Class shares
(i) for which certificates have been issued, (ii) held in
nominee or "street name" accounts, (iii) held by a
shareholder who has changed his or her address of record
within the preceding 30 calendar days or (iv) held in any
retirement plan account. A shareholder otherwise eligible
for telephone redemption by check may cancel the privilege
by written instruction to Alliance Fund Services, Inc., or
by checking the appropriate box on the shareholder or
options form.
11
<PAGE>
Telephone Redemption -- General. During periods of
drastic economic or market developments, such as the market
break of October 1987, it is possible that shareholders
would have difficulty in reaching Alliance Fund Services,
Inc. by telephone (although no such difficulty was apparent
at any time in connection with the 1987 market break). If a
shareholder were to experience such difficulty, the
shareholder should issue written instructions to Alliance
Fund Services, Inc. at the address shown on the cover of
this Statement of Additional Information. The Fund reserves
the right to suspend or terminate its telephone redemption
service at any time without notice. Neither the Fund nor
Alliance, the Principal Underwriter or Alliance Fund
Services, Inc. will be responsible for the authenticity of
telephone requests for redemptions that the Fund reasonably
believes to be genuine. The Fund will employ reasonable
procedures in order to verify that telephone requests for
redemptions are genuine, including, among others, recording
such telephone instructions and causing written
confirmations of the resulting transactions to be sent to
shareholders. If the Fund did not employ such procedures,
it could be liable for losses arising from unauthorized or
fraudulent telephone instructions. A shareholder's
financial representative may charge a fee for handling
telephone requests for redemptions.
Repurchase
The Fund may repurchase Advisor Class shares
through the Principal Underwriter or selected financial
intermediaries. The repurchase price will be the net asset
value next determined after the Principal Underwriter
receives the request, except that requests placed through
selected financial intermediaries before the close of
regular trading on the Exchange on any day will be executed
at the net asset value determined as of such close of
regular trading on that day if received by the Principal
Underwriter prior to its close of business on that day
(normally 5:00 p.m. Eastern time). The financial
intermediary is responsible for transmitting the request to
the Principal Underwriter by 5:00 p.m. If the financial
intermediary fails to do so, the shareholder's right to
receive that day's closing price must be settled between the
shareholder and the financial intermediary. A shareholder
may offer Advisor Class shares of the Fund to the Principal
Underwriter either directly or through a financial
intermediary. Neither the Fund nor the Principal
Underwriter charges a fee or commission in connection with
the repurchase of Advisor Class shares. Normally, if
Advisor Class shares of the Fund are offered through a
financial intermediary, the repurchase is settled by the
12
<PAGE>
shareholder as an ordinary transaction with or through the
financial intermediary, who may charge the shareholder for
this service. The repurchase of Advisor Class shares of the
Fund as described above is a voluntary service of the Fund
and the Fund may suspend or terminate this practice at any
time.
General
The Fund reserves the right to close out an account
that through redemption has remained below $200 for 90 days.
Shareholders will receive 60 days' written notice to
increase the account value before the account is closed. In
the case of a redemption or repurchase of Advisor Class
shares of 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."
Automatic Investment Program
Investors may purchase Advisor Class 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 Advisor Class shares through the financial
intermediary 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. Current
shareholders should contact Alliance Fund Services, Inc. at
the address or telephone numbers shown on the cover of this
13
<PAGE>
Statement of Additional Information to establish an
automatic investment program.
Exchange Privilege
Advisor Class shareholders of the Fund can exchange
their Advisor Class shares for Advisor Class 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 Advisor Class shares
are being acquired. An exchange is effected through the
redemption of the Advisor Class shares tendered for exchange
and the purchase of Advisor Class shares being acquired at
their respective net asset values as next determined
following receipt by the Alliance fund whose Advisor Class
shares are being exchanged of (i) proper instructions and
all necessary supporting documents as described in such
fund's Prospectus, or (ii) a telephone request for such
exchange in accordance with the procedures set forth in the
following paragraph. Exchanges involving the redemption of
Advisor Class shares recently purchased by check will be
permitted only after the Alliance fund whose Advisor Class
shares have been tendered for exchange is reasonably assured
that the check has cleared, normally up to 15 calendar days
following the purchase date. Exchanges of Advisor Class
shares of Alliance funds will generally result in the
realization of a capital gain or loss for Federal income tax
purposes.
Each Fund shareholder, and the shareholder's
financial representative, 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 Advisor Class shares then represented by
stock certificates. Advisor Class shares acquired pursuant
to a telephone request for exchange will be held under the
same account registration as the Advisor Class shares
redeemed through such exchange.
Eligible shareholders desiring to make an exchange
should telephone Alliance Fund Services, Inc. with their
account number and other details of the exchange, at
(800) 221-5672 before 4:00 p.m., Eastern time, on a Fund
business day as defined above. Telephone requests for
exchange received before 4:00 p.m. Eastern time on a Fund
business day will be processed as of the close of business
on that day. During periods of drastic economic or market
developments, such as the market break of October 1987, it
14
<PAGE>
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 Mutual Funds nor Alliance, the
Principal Underwriter or Alliance Fund Services, Inc. will
be responsible for the authenticity of telephone requests
for exchanges that the Fund reasonably believes to be
genuine. The Fund will employ reasonable procedures in
order to verify that telephone requests for exchanges are
genuine, including, among others, recording such telephone
instructions and causing written confirmations of the
resulting transactions to be sent to shareholders. If the
Fund did not employ such procedures, it could be liable for
losses arising from unauthorized or fraudulent telephone
instructions. A shareholder's financial representative may
charge a fee for handling telephone requests for exchanges.
The exchange privilege is available only in states
where Advisor Class shares of the Alliance Mutual Fund being
acquired may be legally sold. Each Alliance fund reserves
the right, at any time on 60 days' notice to its
shareholders, to reject any order to acquire its Advisor
Class shares through exchange or otherwise to modify,
restrict or terminate the exchange privilege.
A shareholder may elect to initiate a monthly "Auto
Exchange" whereby a specified dollar amount's worth of his
or her Advisor Class Fund shares (minimum $25) is
automatically exchanged for Advisor Class shares of another
Alliance Mutual Fund. Auto Exchange transactions normally
occur on the 12th day of each month, or the Fund business
day prior thereto.
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:
15
<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, under which annual tax-
deductible contributions are made within prescribed limits
based on compensation paid to participating individuals.
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.
Distributions from retirement plans are subject to
certain Code requirements in addition to normal redemption
16
<PAGE>
procedures. For additional information please contact
Alliance Fund Services, Inc.
Dividend Direction Plan
A shareholder who already maintains, in addition to
his or her Advisor Class Fund account, an Advisor Class
account with one or more other Alliance Mutual Funds may
direct that income dividends and/or capital gains paid on
his or her Advisor Class Fund shares be automatically
reinvested, in any amount, without the payment of any
service charges, in Advisor Class 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.
Current shareholders should contact Alliance Fund Services,
Inc. to establish a dividend direction plan.
Systematic Withdrawal Plan
General. Any shareholder who owns or purchases
Advisor Class shares of the Fund having a current net asset
value of at least $4,000 (for quarterly or less frequent
payments), $5,000 (for bi-monthly payments) or $10,000 (for
monthly payments) may establish a systematic 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.
Advisor Class shares of the Fund owned by a
participant in the Fund's systematic withdrawal plan will be
redeemed as necessary to meet withdrawal payments and such
withdrawal payments will be subject to any taxes applicable
to redemptions. Advisor Class shares acquired with
reinvested dividends and distributions will be liquidated
first to provide such withdrawal payments and thereafter
other Advisor Class shares will be liquidated to the extent
necessary, and depending upon the amount withdrawn, the
investor's principal may be depleted. A systematic
withdrawal plan may be terminated at any time by the
shareholder or the Fund.
Withdrawal payments will not automatically end when
a shareholder's account reaches a certain minimum level.
17
<PAGE>
Therefore, redemptions of Advisor Class shares under the
plan may reduce or even liquidate a shareholder's account
and may subject the shareholder to the Fund's involuntary
redemption provisions. See "Redemption and Repurchase of
Shares--General."
Payments under a systematic withdrawal plan may be
made by check or electronically via the Automated Clearing
House network. Investors wishing to establish a systematic
withdrawal plan in conjunction with their initial investment
in Advisor Class shares of the Fund should complete the
appropriate portion of the Subscription Application, 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.
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 arrange for copies of
his or her account statements to be sent to another person.
Checkwriting
An Advisor Class investor may fill out a Signature
Card to authorize the Fund to arrange for a checkwriting
service through State Street Bank and Trust Company (the
"Bank") to draw against Advisor Class shares of the Fund
redeemed from the investor's account. An Advisor Class
shareholder wishing to establish this checkwriting service
should contact the Fund by telephone or mail. Under this
service, checks may be made payable to any payee in any
amount not less than $500 and not more than 90% of the net
asset value of the Advisor Class shares in the investor's
account (excluding for this purpose the current month's
accumulated dividends and shares for which certificates have
been issued). Corporations, fiduciaries and institutional
investors are required to furnish a certified resolution or
other evidence of authorization. This checkwriting service
will be subject to the Bank's customary rules and
regulations governing checking accounts, and the Fund and
the Bank each reserve the right to change or suspend the
checkwriting service. There is no charge to the shareholder
18
<PAGE>
for the initiation and maintenance of this service or for
the clearance of any checks.
When a check is presented to the Bank for payment,
the Bank, as the shareholder's agent, causes the Fund to
redeem, at the net asset value next determined, a sufficient
number of full and fractional Advisor Class shares in the
shareholder's account to cover the check. A shareholder
should not attempt to close his or her account by use of a
check. In this regard, the Bank has the right to return
checks (marked "insufficient funds") unpaid to the
presenting bank if the amount of the check exceeds 90% of
the assets in the account. Canceled (paid) checks are
returned to the shareholder. The checkwriting service
enables the shareholder to receive the daily dividends
declared on the Advisor Class shares to be redeemed until
the day that the check is presented to the Bank for payment.
DAILY DIVIDENDS--DETERMINATION OF NET ASSET VALUE
Incorporated by reference from the section "Daily
Dividends--Determination of Net Asset Value" contained in
the Rule 497 SAI.
TAXES
Incorporated by reference from the section "Taxes"
contained in the Rule 497 SAI.
PORTFOLIO TRANSACTIONS
Incorporated by reference from the section
"Portfolio Transactions" contained in the Rule 497 SAI.
GENERAL INFORMATION
Incorporated by reference from the Section "General
Information" in the Rule 497 SAI, except that the sub-
19
<PAGE>
sections entitled "Capitalization" and "Performance
Information" are restated as set forth below:
Capitalization
The Fund has an unlimited number of authorized
Class A, Class B, Class C and Class Y shares, designated
Advisor Class shares, Shares of beneficial interest par
value $.001 per share, which may, without shareholder
approval, be divided into an unlimited number of series.
All shares of the Fund, when issued, are fully paid and non-
assessable. The Trustees are authorized to reclassify and
issue any unissued shares to any number of additional
classes or series without shareholder approval.
Accordingly, the Trustees in the future, for reasons such as
the desire to establish one or more additional portfolios
with different investment objectives, policies or
restrictions, may create additional classes or series of
shares. Any issuance of shares of another class would be
governed by the Act and the law of the Commonwealth of
Massachusetts. Shares of 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.
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
April 5, 1996:
20
<PAGE>
No. of % of % of % of
Name and Address Shares Class A Class B Class C
Merrill Lynch 5,352,806 12.80
Confidential 626-07423
141 W. Jackson Blvd.
Room 290
Chicago, IL 60604
Verlin R. Eppert 1,099,483 7.49
Rosalie A. Eppert Jt Ten
31490 Bellvine Trail
Birmingham, MI 48025-3703
2,444,385 16.55
Fahnestock & Co., Inc.
Acct. #SBFNA01521 4968
110 Wall Street
New York, NY 10005
Yield Quotations
Advertisements containing yield quotations which are
computed separately for Class A, Class B, Class C and Advisor
Class shares may from time to time be sent to investors or placed
in newspapers, magazines or other media on behalf of the Fund.
Such yield quotations are calculated in accordance with the
standardized method referred to in Rule 482 under the Securities
Act. Yield quotations are thus determined by (i) computing the
net changes over a seven-day period, exclusive of capital
changes, in the value of a hypothetical pre-existing account
having a balance of one share at the beginning of such period,
(ii) dividing the net change in account value by the value of the
account at the beginning of such period, and (iii) multiplying
such base period return by (365/7)--with the resulting yield
figure carried to the nearest hundredth of one percent.
Effective annual yield represents a compounding of the annualized
yield according to the following formula:
effective yield = ((base period return + 1)365/7) - 1.
Dividends for the seven days ended March 31, 1996 for
Class A amounted to an annualized yield of 4.02% equivalent to an
effective yield of 4.10%, for Class B an annualized yield of
3.56% equivalent to an effective yield of 3.62% and for Class C
an annualized yield of 3.81% equivalent to an effective yield of
3.88%. Current yield information can be obtained by a recorded
message by telephoning toll-free at (800) 221-9513 or in New York
State at (212) 785-9106.
21
00250229.AH0
<PAGE>
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.
<PAGE>
<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
7
<PAGE>
APPENDIX A
COMMERCIAL PAPER RATING
Incorporated by reference from "Appendix A" in the Rule
497 SAI.
A-1
00250229.AH0
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits for the Fund
(a) Financial Highlights
Included in the Prospectus
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
Statement of Net Assets for six months ended -
March 31, 1996 (unaudited)
Statement of Operations for six months ended -
March 31, 1996 (unaudited)
Statement of Changes in Net Assets for
for year ended September 30, 1995 and six months
March 31, 1996 (unaudited)
Notes to Financial Statements - March 31, 1996
(unaudited)
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 - Incorporated by reference
to Exhibit 1(a) to Post-Effective Amendment No. 3
of the Registrant's Form N1-A, filed January 26,
1996.
____________________
* Commencement of operations.
C-1
<PAGE>
(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.
(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
- 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-
C-2
<PAGE>
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. -
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 -
Incorporated by reference to Exhibit No. 16 to
Post- Effective Amendment No. 3 of the
Registrant's Form N1- A, filed January 26, 1996.
(18) Rule 18f-3 Plan -Incorporated by reference to
Exhibit No. 18 to Post-Effective Amendment No. 3
C-3
<PAGE>
of the Registrant's Form N1-A, filed January 26,
1996.
(27) Financial Data Schedules - 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.
ITEM 25. Persons Controlled by or Under Common Control with
Registrant.
None.
ITEM 26. Number of Holders of Securities.
Registrant had, as of May 31, 1996, the following
record holders of shares of Beneficial Interest:
Class A Shares 1,452
Class B Shares 3,212
Class C Shares 484
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:
C-4
<PAGE>
"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 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
C-5
<PAGE>
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 judgement 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 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
C-6
<PAGE>
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
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
C-7
<PAGE>
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
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.
C-8
<PAGE>
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
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
C-9
<PAGE>
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.
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.
C-10
<PAGE>
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,
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.
C-11
<PAGE>
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 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 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 Limited Maturity Government Fund, Inc.
Alliance Money Market Fund
Alliance Mortgage Securities Income Fund, 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.
C-12
<PAGE>
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.
Name Positions and Offices Positions and Offices
With Underwriter With Registrant
Michael J. Laughlin Chairman
Robert L. Errico President
Edmund P. Bergan, Jr. Senior Vice President, Secretary
General Counsel and
Secretary
Daniel J. Dart Senior Vice President
Richard A. Davies Senior Vice President,
Managing Director
Byron M. Davis Senior Vice President
Kimberly A. Gardner Senior Vice President
Geoffrey L. Hyde Senior Vice President
Richard E. Khaleel Senior Vice President
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
C-13
<PAGE>
Joseph F. Sumanski Senior Vice President
Peter J. Szabo Senior Vice President
Nicholas K. Willett Senior Vice President
Richard A. Winge Senior Vice President
Jamie A. Atkinson Vice President
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
William W. Collins, Jr. Vice President
Leo H. Cook Vice President
Richard W. Dabney Vice President
John F. Dolan 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
and Assistant
General Counsel
C-14
<PAGE>
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
Daniel M. Hazard Vice President
George R. Hrabovsky Vice President
Valerie J. Hugo Vice President
Thomas K. Intoccia Vice President
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
Shawn P. McClain Vice President
Christopher J. MacDonald Vice President
Michael F. Mahoney 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
C-15
<PAGE>
Robert T. Pigozzi Vice President
James J. Posch Vice President
Robert E. Powers Vice President
Domenick Pugliese Vice President
and Assistant
General Counsel
Bruce W. Reitz Vice President
Dennis A. Sanford Vice President
Karen C. Satterberg 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
Emilie D. Wrapp Vice President
and Special Counsel
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
John C. Hershock Assistant Vice President
James J. Hill Assistant Vice President
Kalen H. Holliday Assistant Vice President
Edward W. Kelly Assistant Vice President
Nicholas J. Lapi Assistant Vice President
C-16
<PAGE>
Patrick Look Assistant Vice President
& Assistant Treasurer
Thomas F. Monnerat Assistant Vice President
Jeanette M. Nardella Assistant Vice President
Carol H. Rappa Assistant Vice President
Lisa Robinson-Cronin Assistant Vice President
Robert M. Smith Assistant Vice President
Wesley S. Williams Assistant Vice President
Mark R. Manley Assistant Secretary
(c) Not applicable.
ITEM 30. Location of Accounts and Records.
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.
C-17
<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 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 14th day of June 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
/s/ Wayne D. Lyski Senior Vice President June 14, 1996
___________________
Wayne D. Lyski
2) Principal Financial and
Accounting Officer
/s/ Mark D. Gersten Treasurer and Chief June 14, 1996
___________________ Financial Officer
Mark D. Gersten
3) All of the Trustees
___________________
David H. Dievler William H. Foulk, Jr.
Ruth Block James M. Hester
John D. Carifa Clifford L. Michel
John H. Dobkin Robert C. White
by/s/ Edmund P. Bergan, Jr. June 14, 1996
____________________________
(Attorney-in-fact)
Edmund P. Bergan, Jr.
C-18
<PAGE>
Index to Exhibits
Page
(11) Consent of Independent Auditors
(27) Financial Data Schedules
C-19
00250229.AH0
<PAGE>
LOGO
McGladrey & Pullen, LLP
Certified Public Accountants and Consultants
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. 5 to
the Registration Statement on Form N-A, 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 "Statement
and Reports" and "Independent Auditors".
McGladery & Pullen, LLP
New York, New York
June 18, 1996
00250229.AI7
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<PAGE>
<ARTICLE> 6
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<NAME> AFD EXCHANGE RESERVES
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<NUMBER> 001
<NAME> AFD EXCHANGE RESERVES
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 116,576,104
<INVESTMENTS-AT-VALUE> 116,576,104
<RECEIVABLES> 497,431
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 150,149
<TOTAL-ASSETS> 117,223,684
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<OTHER-ITEMS-LIABILITIES> 363,288
<TOTAL-LIABILITIES> 363,288
<SENIOR-EQUITY> 116,862
<PAID-IN-CAPITAL-COMMON> 116,745,522
<SHARES-COMMON-STOCK> 35,873,496
<SHARES-COMMON-PRIOR> 41,120,079
<ACCUMULATED-NII-CURRENT> 0
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<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 116,860,396
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,331,541
<OTHER-INCOME> 0
<EXPENSES-NET> (927,189)
<NET-INVESTMENT-INCOME> 2,404,352
<REALIZED-GAINS-CURRENT> 303
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 2,404,655
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (856,394)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 207,427,884
<NUMBER-OF-SHARES-REDEEMED> (213,519,353)
<SHARES-REINVESTED> 844,886
<NET-CHANGE-IN-ASSETS> 202,823
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (2,291)
<OVERDISTRIB-NII-PRIOR> 0
<PAGE>
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 150,236
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 927,189
<AVERAGE-NET-ASSETS> 39,964,523
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.02
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.02)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 1.23
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
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<NAME> AFD EXCHANGE RESERVES
<SERIES>
<NUMBER> 002
<NAME> AFD EXCHANGE RESERVES
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 116,576,104
<INVESTMENTS-AT-VALUE> 116,576,104
<RECEIVABLES> 497,431
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 150,149
<TOTAL-ASSETS> 117,223,684
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 363,288
<TOTAL-LIABILITIES> 363,288
<SENIOR-EQUITY> 116,862
<PAID-IN-CAPITAL-COMMON> 116,745,522
<SHARES-COMMON-STOCK> 66,412,287
<SHARES-COMMON-PRIOR> 65,270,787
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,988)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 116,860,396
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,331,541
<OTHER-INCOME> 0
<EXPENSES-NET> (927,189)
<NET-INVESTMENT-INCOME> 2,404,352
<REALIZED-GAINS-CURRENT> 303
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 2,404,655
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,296,715)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 84,091,853
<NUMBER-OF-SHARES-REDEEMED> (84,228,125)
<SHARES-REINVESTED> 1,277,772
<NET-CHANGE-IN-ASSETS> 202,823
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (2,291)
<OVERDISTRIB-NII-PRIOR> 0
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