<PAGE>
As filed with the Securities and Exchange
Commission on January 30, 1998
File Nos. 33-74230 and 811-08294
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. 9
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
Amendment No. 7
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
<PAGE>
If appropriate, check the following box:
this post-effective amendment designates a new
effective date for a previously filed post-effective
amendment.
<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
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(R) APPEARS HERE] AFD EXCHANGE RESERVES
- -------------------------------------------------------------------------------
c/o Alliance Fund Services, Inc.
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618
- -------------------------------------------------------------------------------
AFD Exchange Reserves (the "Fund") is a diversified, open-end management
investment company. The Fund's investment objective is maximum current income
to the extent consistent with safety of principal and liquidity. The Fund
pursues its objective by maintaining a portfolio of high quality U.S. dollar-
denominated money market securities, and is thus referred to as a "money
market fund."
Shares of the Fund should be purchased for cash only as a temporary investment
pending exchange into another Alliance Mutual Fund and should not be held as a
long-term investment.
This Prospectus sets forth concisely the information which a prospective
investor should know about the Fund before investing. A "Statement of
Additional Information" dated February 2, 1998 which provides further
information regarding certain matters discussed in this Prospectus and other
matters which may be of interest to some investors has been filed with the
Securities and Exchange Commission and is incorporated herein by reference.
For a free copy, call or write Alliance Fund Services, Inc. at the indicated
address or call the "For Literature" telephone number shown above.
(R): This registered service mark used under license from the owner, Alliance
Capital Management L.P.
- -------------------------------------------------------------------------------
An investment in the Fund is not (i) insured or guaranteed by the U.S. Govern-
ment, (ii) a deposit or obligation of, or guaranteed or endorsed by, any bank,
or (iii) federally insured by the Federal Deposit Insurance Corporation, the
Federal Reserve Board or any other agency. There can be no assurance that the
Fund will be able to maintain a stable net asset value of $1.00 per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
PROSPECTUS/February 2, 1998
Investors are advised to read this Prospectus carefully and to retain it for
future reference.
<PAGE>
EXPENSE INFORMATION
SHAREHOLDER TRANSACTION EXPENSES are one of several factors to consider when
you invest in the Fund. The following table summarizes your maximum transac-
tion costs from investing in the Fund and annual expenses for each class of
shares. The "Example" following the table shows the cumulative expenses at-
tributable to a hypothetical $1,000 investment in each class for the periods
specified.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS C SHARES
-------------- --------------- ---------------
<S> <C> <C> <C>
Maximum sales charge imposed
on purchases (as a percent-
age of offering price)..... None None None
Sales charge imposed on div-
idend reinvestments........ None None None
Deferred sales charge (as a
percentage of original pur- None(a) 4.0% during 1.0% during
chase price or redemption the first year, the first year,
proceeds, whichever is low- decreasing 1.0% 0% thereafter
er)........................ annually to 0%
after the
fourth
year(b)(c)
Exchange Fee................ None None None
ANNUAL FUND OPERATING EX-
PENSES (as a percentage of
average net assets)
Management fees............. .25% .25% .25%
Rule 12b-1 fees............. .50% 1.00% .75%
Other expenses(d)........... .63% .63% .61%
---- --------------- ---------------
Total fund operating
expenses(d)................ 1.38% 1.88% 1.61%
==== =============== ===============
</TABLE>
- --------
(a) Purchases of Class A shares of $1,000,000 or more (or that were received
in exchange or following a series of exchanges of Class A shares of an Al-
liance Mutual Fund that were part of an original purchase of $1,000,000 or
more) may be subject to a 1.0% deferred sales charge on redemptions within
one year of the original purchase for cash. See "Purchase and Sale of
Shares--How to Buy Shares--Class A Shares" in this Prospectus.
(b) For Class B shares purchased for cash. The contingent deferred sales
charge schedule applicable to a shareholder's redemption of Class B shares
that were received in exchange of Class B shares of an Alliance Mutual
Fund is the schedule applicable to redemptions of Class B shares of the
Alliance Mutual Fund originally purchased for cash by the shareholder.
(c) Class B shares will automatically convert to Class A shares a certain num-
ber of years after the end of the calendar month in which the sharehold-
er's order to purchase was accepted. For Class B shares purchased for
cash, the number of years is eight. For Class B shares that were received
in exchange of Class B shares of an Alliance Mutual Fund, the number of
years depends on the conversion schedule of the Class B shares of the Al-
liance Mutual Fund originally purchased. Currently, the longest such pe-
riod is eight years. See "Purchase and Sale of Shares--How to Buy Shares--
Class B Shares--Deferred Sales Charge Alternative"--in this Prospectus.
(d) These expenses include a transfer agency fee payable to Alliance Fund
Services, Inc., an affiliate of Alliance Capital Management L.P., based on
a fixed dollar amount charged to the Fund for each shareholder's account.
EXAMPLE
<TABLE>
<CAPTION>
Cumulative expenses Class Class Class Class Class
paid for the period of A B+ B++ C+ C++
---------------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
1 year............. $ 14 $ 59 $ 19 $ 26 $ 16
3 years............ $ 44 $ 79 $ 59 $ 51 $ 51
5 years............ $ 76 $102 $102 $ 88 $ 88
10 years............ $166 $207* $207* $191 $191
</TABLE>
- --------
+ Assumes redemption at end of period and the highest applicable deferred
sale charge schedule. See note (b) above.
++ Assumes no redemption at end of period.
* Assumes the longest applicable conversion schedule. See note (c) above.
The purpose of the foregoing table is to assist the investor in understand-
ing the various costs and expenses that an investor in the Fund will bear di-
rectly or indirectly. Long-term shareholders of the Fund may pay aggregate
sales charges totaling more than the economic equivalent of the maximum ini-
tial sales charges permitted by the Rules of Fair Practice of the National As-
sociation of Securities Dealers, Inc. See "Management of the Fund--Rule 12b-1
Distribution Services Agreement." "Other Expenses" are based on estimated
amounts for the Fund's current fiscal year. The Example set forth above as-
sumes reinvestment of all dividends and distributions and utilizes a 5% annual
rate of return as mandated by Securities and Exchange Commission (the "Commis-
sion") regulations. The Example should not be considered a representation of
future expenses; actual expenses may be greater or less than those shown.
2
<PAGE>
FINANCIAL HIGHLIGHTS . FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
(AUDITED)
The following tables have been audited by McGladrey & Pullen LLP, the Fund's
independent auditors, whose report thereon appears in the Statement of Addi-
tional Information. This information should be read in conjunction with the
financial statements and notes thereto included in the Statement of Additional
Information.
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------
YEAR ENDED
SEPTEMBER 30, MARCH 25, 1994(A)
------------------------- TO
1997 1996 1995 SEPTEMBER 30,1994
------- ------- ------- -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- -------
INCOME FROM INVESTMENT OPERA-
TIONS
Net investment income.......... .0411 .0416 .0453 .0126
------- ------- ------- -------
LESS: DIVIDENDS
Dividends from net investment
income........................ (.0411) (.0416) (.0453) (.0126)
------- ------- ------- -------
Net asset value, end of period. $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= =======
TOTAL RETURN
Total investment return based
on net asset value(b)......... 4.19% 4.24% 4.64% 2.45%(c)
======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA
Net Assets, end of period (in
millions)..................... $41 $41 $41 $18
Ratio of average net assets to:
Expenses, net of waivers...... 1.38% 1.29% 1.21% 1.82%(c)
Expenses, before waivers...... 1.38% 1.29% 1.29% 1.82%(c)
Net investment income......... 4.10% 4.15% 4.63%(d) 2.62%(c)
</TABLE>
<TABLE>
<CAPTION>
CLASS B
-----------------------------------------------
YEAR ENDED
SEPTEMBER 30, MARCH 25, 1994(A)
------------------------- TO
1997 1996 1995 SEPTEMBER 30,1994
------- ------- ------- -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- -------
INCOME FROM INVESTMENT OPERA-
TIONS
Net investment income.......... .0361 .0366 .0404 .0101
------- ------- ------- -------
LESS: DIVIDENDS
Dividends from net investment
income........................ (.0361) (.0366) (.0404) (.0101)
------- ------- ------- -------
Net asset value, end of period. $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= =======
TOTAL RETURN
Total investment return based
on net asset value(b)......... 3.67% 3.72% 4.12% 1.95%(c)
======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA
Net Assets, end of period (in
millions)..................... $74 $65 $65 $31
Ratio of average net assets to:
Expenses, net of waivers...... 1.88% 1.79% 1.70% 2.35%(c)
Expenses, before waivers...... 1.88% 1.79% 1.78% 2.35%(c)
Net investment income......... 3.61% 3.67% 4.17%(d) 1.91%(c)
</TABLE>
- --------
(a) Commencement of operations.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and re-
demption on the last day of the period. Contingent deferred sales charge
is not reflected in the calculation of total investment return.
(c) Annualized.
(d) Net of expenses waived by the Adviser.
3
<PAGE>
<TABLE>
<CAPTION>
CLASS C
-------------------------------------------------
YEAR ENDED
SEPTEMBER 30, MARCH 25, 1994(A)
----------------------- TO
1997 1996 1995 SEPTEMBER 30,1994
------ ------ ------- -----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------- -------
INCOME FROM INVESTMENT OPERA-
TIONS
Net investment income........ .0386 .0390 .0430 .0112
------ ------ ------- -------
LESS: DIVIDENDS
Dividends from net investment
income...................... (.0386) (.0390) (.0430) (.0112)
------ ------ ------- -------
Net asset value, end of peri-
od.......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ======= =======
TOTAL RETURN
Total investment return based
on net asset value(b)....... 3.93% 3.98% 4.39% 2.18%(c)
====== ====== ======= =======
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
millions)................... $24 $13 $10 $5
Ratio of average net assets
to:
Expenses, net of waivers.... 1.61% 1.55% 1.45% 2.08%(c)
Expenses, before waivers.... 1.61% 1.55% 1.52% 2.08%(c)
Net investment income....... 3.90% 3.89% 4.41%(d) 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 re-
demption on the last day of the period. Contingent deferred sales charge
is not reflected in the calculation of total investment return.
(c) Annualized.
(d) Net of expenses waived by the Adviser.
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
4
<PAGE>
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 IBCA, 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 participation interests in loans extended by banks
to such companies; and (4) repurchase agreements that are collateralized in
full each day by liquid securities of the types listed above. Repurchase
agreements may be entered into only with those banks (including State Street
Bank and Trust Company, the Fund's Custodian) or broker-dealers ("vendors")
that are eligible under the procedures adopted by the Trustees for evaluating
and monitoring the creditworthiness of such vendors. A repurchase agreement
would create a loss to the Fund if, in the event of a vendor default, the pro-
ceeds from the sale of the collateral were less than the repurchase price.
The money market securities in which the Fund invests may have variable or
floating rates of interest ("variable rate obligations") as permitted by Rule
2a-7 under the Investment Company Act of 1940, as amended (the "Act"). Vari-
able rate obligations have interest rates which are adjusted either at
predesignated periodic intervals or whenever there is a change in the market
rate to which the interest rate of the variable rate obligation is tied. Some
variable rate obligations allow the holder to demand payment of principal at
anytime, or at specified intervals. The Fund follows Rule 2a-7 with respect to
the diversification, quality and maturity of variable rate obligations.
The Fund may invest up to 25% of its total assets in money market instru-
ments issued by foreign branches of foreign banks and other foreign entities.
To the extent that the Fund makes such investments, consideration will be
given to their domestic marketability, the lower reserve requirements gener-
ally mandated for overseas banking operations, the possible impact of inter-
ruptions in the flow of international currency transactions, potential politi-
cal and social instability or expropriation, imposition of foreign taxes, the
lower level of government supervision of issuers, the difficulty in enforcing
contractual obligations and the lack of uniform accounting and financial re-
porting standards.
The Fund will not invest more than 10% of its net assets in illiquid securi-
ties, which include "restricted securities" subject to legal restrictions on
resale arising from an issuer's reliance upon certain exemptions from regis-
tration under the Securities Act of 1933, as amended, (the "Securities Act"),
other than restricted securities determined by Alliance Capital Management
L.P. ("Alliance") to be liquid in accordance with procedures adopted by the
Trustees of the Fund, such as securities eligible for resale under Rule 144A
under the Securities Act and commercial paper issued in reliance upon the ex-
emption from registration in Section 4(2) of the Securities Act.
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 Act, as such rule is amended
from time to time, including the diversification, quality and
5
<PAGE>
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 in-
vestment portfolio will not exceed 90 days. A more detailed description of
Rule 2a-7 is set forth in the Fund's Statement of Additional Information 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 25% of its total assets it may invest
without regard to such limitation; (3) invest more than 5% of its assets 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. Government); (4)
borrow money except from banks on a temporary basis or via entering into re-
verse repurchase agreements in aggregate amounts not exceeding 15% of its as-
sets and to be used exclusively to facilitate the orderly maturation and sale
of portfolio securities during any periods of abnormally heavy redemption re-
quests, if they should occur; such borrowings may not be used to purchase in-
vestments and the Fund will not purchase any investment while any such
borrowings exist; or (5) mortgage, pledge or hypothecate its assets except to
secure such borrowings.
As a matter of operating policy, fundamental policy number (2) would give
the Fund the ability to invest, with respect to 25% of its assets, more than
5% of its assets in any one issuer only in the event Rule 2a-7 is amended in
the future.
PURCHASE AND SALE OF SHARES
Shares of the Fund may be purchased for cash and thereafter exchanged for
shares of the same class of other Alliance Mutual Funds. Under the Alliance
Dollar Cost Averaging Program, exchanges may be made automatically each month,
thus producing a dollar cost averaging effect. Exchanges also may be made at
other times of an investor's choosing. Shares of the Fund should be purchased
for cash only as a temporary investment pending exchange into another Alliance
Mutual Fund and should not be held as a long-term investment.
Shares of the Fund also are available to holders of shares of other Alliance
Mutual Funds who wish to exchange their shares for shares of a money market
fund. Such an exchange transaction is effected through the redemption of the
Alliance Mutual Fund shares tendered for exchange and the purchase of shares
of the Fund at their respective net asset values as next determined, without
sales or service charges. Exchange purchases into the Fund may be made by tel-
ephone or written request.
6
<PAGE>
Alliance Fund Services, Inc. ("AFS") is not responsible for the authenticity
of telephone exchange requests. AFS will employ reasonable procedures in order
to verify that telephone requests are genuine, and could be liable if it
failed to use those procedures. An exchange is a taxable capital transaction
for federal tax purposes. The Fund reserves the right to reject any order to
acquire its shares through exchange.
HOW TO BUY SHARES
You can purchase shares of the Fund for cash at a price based on the next
calculation of their net asset value after receipt of a proper purchase order
either through broker-dealers, banks or other financial intermediaries. Pur-
chases of shares for cash directly through Alliance Fund Distributors, Inc.
("AFD"), the Fund's principal underwriter, may be made only if the purchaser
has a financial intermediary of record. The minimum initial investment is
$250. The minimum for subsequent investments is $50. Investments of $25 or
more are allowed under the automatic investment program. See the Subscription
Application and Statement of Additional Information for more information.
Existing shareholders may make subsequent purchases by electronic funds
transfer if they have completed the appropriate section of the Subscription
Application or the Shareholder Options form obtained from AFS. Telephone pur-
chase orders can be made by calling 800-221-5672 and may not exceed $500,000.
CLASS A SHARES--INITIAL SALES CHARGE ALTERNATIVE
You can purchase Class A shares for cash at net asset value. Class A shares
are sold without any initial sales charge at the time of purchase. On cash
purchases of $1,000,000 or more, however, you may pay a contingent deferred
sales charge ("CDSC") equal to 1% of the lesser of net asset value at the time
of redemption or original cost if you redeem within one year; Alliance may pay
the dealer or agent a fee of up to 1% of the dollar amount purchased. See "Ap-
plication of the CDSC". As discussed below, Class A shares may be exchanged
for Class A shares of other Alliance Mutual Funds, subject, in the case of
Class A shares of the Fund that were purchased for cash, to any applicable
initial sales charge at the time of exchange. On cash purchases of less than
$1,000,000, a commission will not be paid to the dealer or agent until the
shares are exchanged for Class A shares of another Alliance Mutual Fund.
Class A shares of the Fund also are offered in exchange for Class A shares
of other Alliance Mutual Funds without any sales charge at the time of pur-
chase, but on Class A shares that were received in exchange for Alliance Mu-
tual Fund Class A shares that were not subject to an initial sales charge when
originally purchased for cash because the purchase was of $1,000,000 or more
you may pay a 1% CDSC that will be assessed as described below under "Applica-
tion of the CDSC" if you redeem shares of the Fund within one year of your
purchase of the Alliance Mutual Fund Class A shares originally purchased for
cash. Consult the Subscription Application and Statement of Additional Infor-
mation.
CLASS B SHARES--DEFERRED SALES CHARGE ALTERNATIVE
You can purchase Class B shares for cash at net asset value without an ini-
tial sales charge. However, you may pay a CDSC if you redeem shares within
four years after purchase. The amount of the CDSC (expressed as a percentage
of the lesser of net asset value at the time of redemption or original cost)
will vary according to the number of years from the purchase of Class B shares
until the redemption of those
7
<PAGE>
shares. The amount of the CDSC on Class B shares is set forth below.
<TABLE>
<CAPTION>
Year Since
Purchase CDSC
---------- ----
<S> <C>
First.................................................................... 4.0%
Second................................................................... 3.0%
Third.................................................................... 2.0%
Fourth................................................................... 1.0%
Fifth.................................................................... None
</TABLE>
Class B shares purchased for cash will automatically convert to Class A
shares eight years after the end of the calendar month in which the sharehold-
er's order to purchase was accepted. As discussed below, Class B shares may be
exchanged at net asset value for Class B shares of other Alliance Mutual
Funds. Following an exchange, Class B shares will continue to age for purposes
of determining the CDSC, if any, upon redemption and for purposes of conver-
sion to Class A shares.
Class B shares of the Fund also are offered in exchange for Class B shares
of other Alliance Mutual Funds without any initial sales charge. However, you
may pay a CDSC if you redeem shares of the Fund within a certain number of
years of your original purchase of Alliance Mutual Fund Class B shares. When
redemption occurs, the applicable CDSC schedule is that which applied to the
Alliance Mutual Fund Class B shares originally purchased for cash at the time
of their purchase. See "Application of the CDSC" below.
CLASS C SHARES--ASSET-BASED SALES CHARGE ALTERNATIVE
You can purchase Class C shares for cash or in exchange for Class C shares
of another Alliance Mutual Fund at net asset value without any initial sales
charge, and, if you hold your shares for one year or more, you will receive
the entire net asset value of your shares upon redemption. Class C shares do
not convert to any other class of shares of the Fund. As discussed below,
Class C shares may be exchanged at net asset value for Class C shares of other
Alliance Mutual Funds.
Class C shares redeemed within one year of purchase will be subject to a
CDSC equal to 1% of the lesser of the original cost of the shares being re-
deemed or net asset value at the time of redemption.
EMPLOYEE BENEFIT PLANS
Certain employee benefit plans, including employment-sponsored tax-qualified
401(k) plans and other defined-contribution retirement plans ("Employee Bene-
fit Plans"), may establish requirements as to the purchase, sale or exchange
of shares, including maximum and minimum initial investment requirements that
are different from those described in this Prospectus. Employee Benefit Plans
also may not offer all classes of shares of the Fund. In order to enable par-
ticipants investing through Employee Benefit Plans to purchase shares of the
Fund, the maximum and minimum investment amounts may be different for shares
purchased through Employee Benefit Plans from those described in this Prospec-
tus. In addition, the Class A, Class B and Class C CDSC may be waived for in-
vestments made through Employee Benefit Plans.
GENERAL
The decision as to which class of shares is more beneficial to you depends
on the amount and intended length of your investment and whether you intend to
subsequently exchange your shares for shares of another Alliance Mutual Fund.
If you are making a large cash purchase, thus qualifying for a reduced sales
charge on a subsequent exchange, you might consider purchasing Class A shares.
If you are making a smaller cash purchase, you might con-
8
<PAGE>
sider purchasing Class B shares because no sales charge will be assessed on
subsequent exchanges of those shares. If you are unsure of the length of your
investment, you might consider Class C shares because there is no initial
sales charges and no CDSC as long as the shares are held for one year or more.
Consult your financial agent. Dealers and agents may receive different compen-
sation for selling Class A, Class B or Class C shares. Class B and Class C
shares have higher distribution fees, and thus higher expense ratios, and pay
correspondingly lower dividends than Class A shares. There is no size limit on
cash purchases of Class A shares. The maximum cash purchase of Class B shares
is $250,000. The maximum purchase of Class C shares is $1,000,000. The Fund
may refuse any order to purchase shares.
The Fund offers a fourth class of shares, Advisor Class shares, by means of
separate prospectus. Advisor Class shares may be purchased and held solely by
(i) accounts established under a fee-based program sponsored and maintained by
a registered broker-dealer or other financial intermediary and approved by
AFD, (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 and
(iii) certain other categories of investors described in the prospectus for
the Advisor Class, including investment advisory clients of, and certain other
persons associated with, Alliance and its affiliates or the Fund. Advisor
Class shares are offered without any initial sales charge or CDSC and without
an ongoing distribution fee and are expected, therefore, to have different
performance than Class A, Class B or Class C shares. You may obtain more
information about Advisor Class shares by contacting AFS at 800-221-5672 or by
contacting your financial representative.
A transaction, service, administrative or other similar fee may be charged
by your brokerdealer, agent, financial intermediary or other financial repre-
sentative with respect to the purchase, sale or exchange of Class A, Class B
or Class C shares made through such financial representative. Such financial
intermediaries may also impose requirements with respect to the purchase, sale
or exchange of shares that are different from, or in addition to, those im-
posed by the Fund, including requirements as to the minimum initial and subse-
quent investment amounts.
In addition to the discount or commission paid to dealers, AFD from time to
time pays additional cash or other incentives to dealers or agents, including
EQ Financial Consultants Inc., an affiliate of AFD, in connection with the
sale of shares of the Fund. Such additional amounts may be utilized, in whole
or in part, in some cases together with other revenues of such dealers or
agents, to provide additional compensation to registered representatives who
sell shares of the Fund. On some occasions, such cash or other incentives will
be conditioned upon the sale of a specified minimum dollar amount of the
shares of the Fund and/or other Alliance Mutual Funds during a specific period
of time. Such incentives may take the form of payment for attendance at semi-
nars, meals, sporting events or theater performances, or payment for travel,
lodging and entertainment incurred in connection with travel by persons asso-
ciated with a dealer and their immediate family members to urban or resort lo-
cations within or outside the United States. Such a dealer may elect to re-
ceive cash incentives of equivalent amount in lieu of such payments.
APPLICATION OF THE CDSC
The CDSC is applied to the lesser of the net asset value at the time of re-
demption of the shares being redeemed and the cost of such shares (or, as to
Fund shares acquired through an exchange, the cost of the Alliance Mutual
9
<PAGE>
Fund shares originally purchased for cash). Shares obtained from dividend or
distribution reinvestment are not subject to the CDSC.
The CDSC is deducted from the amount of the redemption and is paid to AFD.
The CDSC will be waived on redemptions of shares following the death or dis-
ability of a shareholder, to meet the requirement of certain qualified retire-
ment plans or pursuant to a monthly, bimonthly or quarterly systematic with-
drawal plan. See the Statement of Additional Information.
HOW THE FUND VALUES ITS SHARES
The net asset value of each class' shares is expected to be constant at
$1.00 per share, although this price is not guaranteed. The net asset value
per share is calculated by determining the amount of assets attributable to
each class of shares, subtracting liabilities and dividing by the amount of
outstanding shares for such class. In this connection, the Fund uses the amor-
tized cost value for determining the value of the Fund's investments. Shares
are valued each day the New York Stock Exchange (the "Exchange") is open as of
the close of regular trading (currently 4:00 p.m. Eastern time).
HOW TO EXCHANGE SHARES
You may exchange your investment in the Fund for shares of the same class of
other Alliance Mutual Funds. Exchanges of Class A shares are made at the net
asset value next determined less the amount of any applicable initial sales
charge imposed on the Class A shares of the other Alliance Mutual Fund. Con-
sult the prospectus of the applicable Alliance Mutual Fund for a further ex-
planation of those sales charges. Exchanges of Class B and Class C shares are
made at the net asset values next determined, without sales or service
charges. Exchanges may be made by telephone or written request. Telephone ex-
change requests must be received by AFS by 4:00 p.m. Eastern time on a Fund
business day to receive that day's net asset value (less the amount of any ap-
plicable initial sales charge imposed on the Class A shares of the other Alli-
ance Mutual Fund). The exchange service may be changed, suspended or termi-
nated on 60 days' written notice.
Under the Alliance Mutual Funds' Right of Accumulation, exchanges of Class A
shares made pursuant to the Alliance Dollar Cost Averaging Program or other-
wise will be assessed an initial sales charge based on the shareholder's total
Alliance Mutual Funds holdings, including shares of the Fund, and therefore
may be eligible for a reduced sales charge. Consult with your financial repre-
sentative or Alliance regarding the Alliance Dollar Cost Averaging Program,
Rights of Accumulation and other time and money saving services to investors.
Shares will continue to age without regard to exchanges for purposes of de-
termining the CDSC, if any, upon redemption and, in the case of Class B
shares, for the purposes of conversion to Class A shares. After an exchange,
your Class B shares will automatically convert to Class A shares in accordance
with the conversion schedule applicable to the Class B shares of the Alliance
Mutual Fund you originally purchased for cash ("original shares"). When re-
demption occurs, the CDSC applicable to the original shares is applied.
HOW TO SELL SHARES
You may "redeem" your shares (i.e., sell your shares to the Fund) on any day
the Exchange is open, either directly or through your financial intermediary.
The price you will receive is the net asset value (less any applicable CDSC)
next calculated after the Fund receives your request in proper form. Proceeds
generally will be sent to you within seven days. However, for shares recently
purchased by check or electronic funds transfer or for
10
<PAGE>
shares acquired in exchange for Alliance Mutual Fund shares recently purchased
by check or electronic funds transfer, the Fund will not send proceeds until
it is reasonably satisfied that the check or electronic funds transfer has
been collected (which may take up to 15 days).
SELLING SHARES THROUGH YOUR BROKER
Your broker must receive your request before 4:00 p.m. Eastern time, and
your broker must transmit your request to the Fund by 5:00 p.m. Eastern time,
to receive that day's net asset value (less any applicable CDSC). Your broker
is responsible for furnishing all necessary documentation to the Fund, and may
charge you for this service.
SELLING SHARES DIRECTLY TO THE FUND
Send a signed letter of instruction or stock power form to AFS, along with
certificates, if any, that represent the shares you want to sell. For your
protection, signatures must be guaranteed by a bank, a member firm of a na-
tional stock exchange or other eligible guarantor institution. Stock power
forms are available from your financial intermediary, AFS and many commercial
banks. Additional documentation is required for the sale of shares by corpora-
tions, intermediaries, fiduciaries and surviving joint owners. For details
contact:
Alliance Fund Services
P.O. Box 1520
Secaucus, NJ 07096-1520
800-221-5672
Alternatively, a request for redemption of shares for which no stock certif-
icates have been issued can also be made by telephone to 800-221-5672. Tele-
phone redemption requests must be made by 4:00 p.m. Eastern time on a Fund
business day to receive that day's net asset value (less any applicable CDSC),
and , for redemptions made before March 1, 1998, may be made only once in any
30-day period (except for certain omnibus accounts). A shareholder who has
completed the appropriate 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 electronic funds transfer. Proceeds
of telephone redemptions also may be sent by check to a shareholder's address
of record. Redemption requests by electronic funds transfer may not exceed
$100,000 per day and redemption requests by check may not exceed $50,000 per
day. Telephone redemption is not available for shares held in nominee or
"street name" accounts or retirement plan accounts or shares held by a share-
holder who has changed his or her address of record within the previous 30
calendar days. See "General" below.
GENERAL
The sale or exchange of shares is a taxable transaction for federal tax pur-
poses. Under unusual circumstances, the Fund may suspend redemptions or post-
pone payment for up to seven days or longer, as permitted by federal securi-
ties law. The Fund reserves the right to close an account that through
redemption has remained below $200 for 90 days. Shareholders will receive 60
days' written notice to increase the account value before the account is
closed.
Alliance sponsors four other money market funds, Alliance Money Market Fund,
Alliance Capital Reserves, Alliance Government Reserves and Alliance Municipal
Trust (the "Trusts"). Each of the Trusts offers a class of shares that has a
lower expense ratio and pays correspondingly higher dividends than shares of
the Fund. However, the Trusts do not have an exchange privilege with Alliance
Mutual Funds. Thus, if you held shares of a Trust and wished to transfer your
holdings to an Alliance Mutual Fund, you would be required to redeem shares
11
<PAGE>
of the Trust and purchase shares of that Alliance Mutual Fund with the cash
proceeds of your redemption. Such a transaction would be subject to any sales
charges applicable to an original purchase for cash (or eventual redemption)
of shares of that Alliance Mutual Fund. To obtain the prospectus for any of
the Trusts, contact AFS at the Literature telephone number on the cover of
this Prospectus.
During drastic economic or market developments, you might have difficulty in
reaching AFS by telephone, in which event you should issue written instruc-
tions to AFS. AFS is not responsible for the authenticity of telephone re-
quests to purchase, sell or exchange shares. AFS will employ reasonable proce-
dures to verify that telephone requests are genuine, and could be liable for
losses resulting from unauthorized transactions if it failed to do so. Dealers
and agents may charge a commission for handling telephone requests. The tele-
phone service may be suspended or terminated at any time without notice.
SHAREHOLDER SERVICES
AFS offers a variety of shareholder services. For more information about
these services or your account, call AFS's toll-free number, 800-221-5672.
Some services are described in the attached Subscription Application. A share-
holder's manual explaining all available services will be provided upon re-
quest. To request a shareholder manual call 800-227-4618.
Year 2000. Many computer software systems in use today cannot properly proc-
ess data-related information from and after January 1, 2000. Should any of the
computer systems employed by the Fund's major service providers fail to proc-
ess this type of information properly, that could have a negative impact on
the Fund's operations and the services that are provided to the Fund's share-
holders. Alliance, the Fund's investment adviser, AFD, the Fund's principal
underwriter, and AFS, the Fund's registrar, transfer agent and dividend dis-
bursing agent, have advised the Fund that they are reviewing all of their com-
puter systems with the goal of modifying or replacing such systems prior to
January 1, 2000 to the extent necessary to foreclose any such negative impact.
In addition, Alliance has been advised by the Fund's custodian that it is also
in the process of reviewing its systems with the same goal. As of the date of
this Prospectus, the Fund and Alliance have no reason to believe that these
goals will not be achieved.
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
ADVISER
Alliance Capital Management L.P., a Delaware limited partnership with prin-
cipal offices at 1345 Avenue of the Americas, New York, New York 10105, has
been retained under an advisory agreement (the "Advisory Agreement") to pro-
vide investment advice and, in general, to conduct the management and invest-
ment program of the Fund, subject to the general supervision and control of
the Trustees of the Fund.
Alliance is a leading international investment manager supervising client
accounts with assets as of September 30, 1997 totaling more than $217 billion
(of which approximately $81 billion represented the assets of investment com-
panies). Alliance's clients are primarily major corporate employee benefit
funds, public employee retirement systems, investment companies, foundations
and endowment funds. The 56 registered investment companies managed by Alli-
ance comprising 118 separate investment
12
<PAGE>
portfolios currently have over two million shareholders. As of September 30,
1997, Alliance was retained as an investment manager for 28 of the Fortune 100
companies.
Alliance Capital Management Corporation, the sole general partner of, and
the owner of 1% general partnership interest in, Alliance, is an indirect
wholly-owned subsidiary of The Equitable Life Assurance Society of the United
States ("Equitable"), one of the largest life insurance companies in the
United States and a wholly-owned subsidiary of The Equitable Companies Incor-
porated, a holding company controlled by AXA-UAP, a French insurance holding
company. Certain information concerning the ownership and control of Equitable
by AXA-UAP is set forth in the Statement of Additional Information under "Man-
agement of the Fund."
Under its Advisory Agreement with the Fund, Alliance provides investment ad-
visory services and order placement facilities for the Fund and pays all com-
pensation of Trustees and officers of the Fund who are affiliated persons of
Alliance. Alliance or its affiliates also furnish the Fund, without charge,
management supervision and assistance and office facilities and provide per-
sons satisfactory to the Fund's Trustees to serve as the Fund's officers. Un-
der the Advisory Agreement, the Fund pays Alliance a fee at the annual rate of
.25 of 1% of the first $1.25 billion of the Fund's average daily net assets;
.24 of 1% of the next $.25 billion of such assets; .23 of 1% of the next $.25
billion of such assets; .22 of 1% of the next $.25 billion of such assets; .21
of 1% of the next $1 billion of such assets, and; .20 of 1% of such average
daily net assets in excess of $3 billion. The fee is accrued daily and paid
monthly.
RULE 12B-1 DISTRIBUTION SERVICES AGREEMENT
Rule 12b-1 adopted by the Commission under the Act permits an investment
company to directly or indirectly pay expenses associated with the distribu-
tion of its shares in accordance with a duly adopted and approved plan. The
Fund has entered into a Distribution Services Agreement (the "Agreement"),
which includes a plan adopted pursuant to Rule 12b-1 (the "Plan") with AFD.
Pursuant to the Plan, the Fund pays to AFD a Rule 12b-1 distribution services
fee at an annual rate of .50 of 1% of the Fund's aggregate average daily net
assets attributable to the Class A shares, 1.00% of the Fund's aggregate aver-
age daily net assets attributable to the Class B shares and .75 of 1% of the
Fund's aggregate average daily net assets attributable to the Class C shares
to compensate AFD for distribution services. The Agreement provides that a
portion of the distribution services fee in an amount equal to .25% of the ag-
gregate average daily net assets of the Fund attributable to each of the Class
A, Class B and Class C shares constitutes a service fee that AFD will use for
personal service and/or the maintenance of shareholder accounts.
The Agreement provides that AFD may spend the distribution services fee it
receives from the Fund as it deems appropriate on any activities or expenses
primarily intended to result in the sale of shares of the Fund, including, but
not limited to, compensation of employees of AFD, compensation and expenses,
including overhead and telephone and other communication expenses, of AFD and
other broker-dealers, banks and other financial intermediaries that engage in
or support the distribution of shares of the Fund, the preparation, printing
and distribution of prospectuses, statements of additional information, sales
literature and advertising materials, and other promotional activities. In
this regard, some payments under the Agreement are used to compensate finan-
cial intermediaries with trail or maintenance commissions in an amount equal
to .25%, annualized, with respect to Class A shares and Class B shares, and
13
<PAGE>
.50%, annualized, with respect to Class C shares, of the assets maintained in
the Fund by their customers. The Agreement also provides that AFD may, if it
wishes, retain all or any portion of the distribution services fees received
from the Fund for its own purposes. Distribution services fees are accrued
daily and paid monthly, and are charged as expenses of the Fund as accrued.
The Agreement also provides that Alliance may use its own resources to finance
the distribution of the Fund's shares.
The Fund is not obligated under the Agreement to pay any distribution serv-
ices fee in excess of the amounts set forth above. Since AFD's compensation
with respect to each of the Class A, Class B and Class C shares is not di-
rectly tied to its expenses incurred with respect to such class, the amount of
compensation received by it under the Agreement during any year may be more or
less than its actual expenses.
In the event that the Agreement is terminated or not continued with respect
to the Class A, Class B or Class C shares, (i) no distribution services fees
(other than current amounts accrued but not yet paid) would be owed by the
Fund to AFD with respect to that class, and (ii) the Fund would not be obli-
gated to pay AFD for any amounts expended under the Agreement not previously
recovered by AFD from distribution services fees in respect of shares of such
class or recovered through deferred sales charges.
The Agreement is in compliance with rules of the National Association of Se-
curities Dealers, Inc. which effectively limit the annual asset-based sales
charges and service fees that a mutual fund may pay on a class of shares to
.75% and .25%, respectively, of the average annual net assets attributable to
that class. The rules also limit the aggregate of all front-end, deferred and
asset-based sales charges imposed with respect to a class of shares by a mu-
tual fund that also charges a service fee to 6.25% of cumulative gross sales
of shares of that class, plus interest at the prime rate plus 1% per annum.
As interpreted by courts and administrative agencies, the Glass-Steagall Act
and other applicable laws and regulations limit the ability of a bank or other
depository institution to become an underwriter or distributor of securities.
However, in the opinion of the Fund's management, based on the advice of coun-
sel, these laws and regulations do not prohibit such depository institutions
from providing services for investment companies such as the administrative,
accounting and other services referred to in the Agreement. In the event that
change in these laws prevented a bank from providing such services, it is ex-
pected that other service arrangements would be made and that shareholders
would not be adversely affected. The State of Texas requires that shares of
the Fund may be sold in that state only by dealers or other financial institu-
tions that are registered there as broker-dealers.
- --------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
All net income of the Fund is determined each business day at 4:00 p.m.
(Eastern time) and is paid immediately thereafter pro rata to shareholders of
record of each class via automatic investment in additional full and frac-
tional shares in each shareholder's account. As such additional shares are en-
titled to dividends on following days, a compounding growth of income occurs.
14
<PAGE>
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 taxes on the investment company
taxable income and net capital gains distributed to its shareholders. For fed-
eral 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 cer-
tain 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.
- --------------------------------------------------------------------------------
GENERAL INFORMATION
- --------------------------------------------------------------------------------
ORGANIZATION
AFD Exchange Reserves is a Massachusetts business trust that was organized
on January 14, 1994. It is anticipated that annual shareholder meetings will
not be held; shareholder meetings will be held only when required by federal
or state law. Shareholders have available certain procedures for the removal
of Trustees.
A shareholder in the Fund will be entitled to share pro rata with other
holders of the same class of shares all dividends and distributions arising
from the Fund's assets and, upon redeeming shares, will receive the then cur-
rent net asset value of the Fund represented by the redeemed shares. The Fund
is empowered to establish, without shareholder approval, additional portfolios
which may have different investment objectives.
Shares are normally entitled to one vote for all purposes. Generally, shares
of the Fund vote as a single series on matters, such as the election of Trust-
ees, that affect all shareholders of the Fund in substantially the same man-
ner. Class A, Class B, Class C and Advisor Class shares have identical voting,
dividend, liquidation and other rights, except that each class bears its own
transfer agency expenses, each of Class A, Class B and Class C shares bears
its own distribution expenses and Class B shares and Advisor Class shares con-
vert to Class A shares under certain circumstances. Each class of shares votes
separately with respect to the Fund's Rule 12b-1 distribution plan and other
matters for which separate class voting is appropriate under applicable law.
Shares are freely transferable, are entitled to dividends as determined by the
Trustees and, in liquidation of a Fund, are entitled to receive the net assets
of the Fund. Certain additional matters relating to a Fund's organization are
discussed in its 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
15
<PAGE>
for the Fund. The transfer agency fee with respect to the Class B shares will
be higher than the transfer agency fee with respect to the Class A shares or
Class C shares.
PRINCIPAL UNDERWRITER
Alliance Fund Distributors, Inc., 1345 Avenue of the Americas, New York, New
York 10105, an indirect wholly-owned subsidiary of Alliance, is the Principal
Underwriter of shares of the Fund.
ADDITIONAL INFORMATION
This Prospectus and the Statement of Additional Information, which have been
incorporated by reference herein, do not contain all the information set forth
in the Registration Statement filed by the Fund with the Commission under the
Securities Act. Copies of the Registration Statement may be obtained at a rea-
sonable charge from the Commission or may be examined, without charge, at the
offices of the Commission in Washington, D.C. This Prospectus does not consti-
tute an offering in any state in which such offering may not lawfully be made.
16
<PAGE>
ALLIANCE SUBSCRIPTION APPLICATION
AFD Exchange Reserves
- --------------------------------------------------------------------------------
Information and Instructions
- --------------------------------------------------------------------------------
To Open Your New Alliance Account
Please complete the application and mail it to:
Alliance Fund Services, Inc., P.O. Box 1520, Secaucus, New Jersey 07096-1520
Signatures - Please Be Sure To Sign the Application (Section 6)
If shares are registered in the name of:
. an individual, the individual should sign.
. joint tenants, both should sign.
. a custodian for a minor, the custodian should sign.
. a corporation or other organization, an authorized officer should sign
(please indicate corporate office or title).
. a trustee or other fiduciary, the fiduciary or fiduciaries should sign
(please indicate capacity).
Registration
To ensure proper tax reporting to the IRS:
. Individuals, Joint Tenants and Gift/Transfer to a Minor:
- Indicate your name exactly as it appears on your social security card.
. Trust/Other:
- Indicate the name of the entity exactly as it appeared on the notice you
received from the IRS when your Employer Identification number was
assigned.
Please Note:
. Certain legal documents will be required from corporations or other
organizations, executors and trustees, or if a redemption is requested by
anyone other than the shareholder of record. If you have any questions
concerning a redemption, contact the Fund at the number below.
. In the case of redemptions or repurchases of shares recently purchased by
check or electronic funds transfer, redemption proceeds will not be made
available until the Fund is reasonably assured that the check or electronic
funds transfer has cleared, normally up to 15 calendar days following the
purchase date.
If We Can Assist You In Any Way, Please Do Not Hesitate To Call Us At: 1-(800)
221-5672.
<PAGE>
- --------------------------------------------------------------------------------
SUBSCRIPTION APPLICATION
- --------------------------------------------------------------------------------
AFD Exchange Reserves
(see instructions at the front of the application)
- --------------------------------------------------------------------------------
1. Your Account Registration (Please Print)
- --------------------------------------------------------------------------------
[_] INDIVIDUAL OR JOINT ACCOUNT
----------------------------------------------------------------------------
Owner's Name (First Name) (MI) (Last Name)
-------------------------
Social Security Number (Required to open account)
----------------------------------------------------------------------------
Joint Owner's Name* (First Name) (MI) (Last Name)
*Joint Tenants with right of survivorship unless otherwise indicated.
[_] GIFT/TRANSFER TO A MINOR
----------------------------------------------------------------------------
Custodian - One Name Only(First Name) (MI) (Last Name)
----------------------------------------------------------------------------
Minor's Name First Name (MI) (Last Name)
-------------------------
Minor's Social Security Number (Required to open account)
Under the State of _______ (Minor's Residence) Uniform Gifts/Transfer to
Minor's Act
[_] TRUST ACCOUNT
----------------------------------------------------------------------------
Name of Trustee
----------------------------------------------------------------------------
Name of Trust
----------------------------------------------------------------------------
Name of Trust (cont'd)
--------------- -----------------------------------------------------------
Trust Dated Tax ID or Social Security Number (Required to open account)
[_] OTHER
----------------------------------------------------------------------------
Name of Corporation, Partnership or other Entity
---------------
Tax ID Number
- --------------------------------------------------------------------------------
2. Address
- --------------------------------------------------------------------------------
----------------------------------------------------------------------------
Street
----------------------------------------------------------------------------
City State Zip Code
----------------------------------------------------------------------------
If Non-U.S., Specify Country
------------------------------------ --------------------------------------
Daytime Phone Evening Phone
I am a: [_] U.S. Citizen [_] Non-Resident [_] Resident Alien [_] Other
For Alliance Use Only
<PAGE>
- --------------------------------------------------------------------------------
3. Initial Investment
- --------------------------------------------------------------------------------
Minimum: $250; Maximum: Class B only - $250,000; Class C only - $1,000,000. Make
all checks payable to AFD Exchange Reserves.
I hereby subscribe for shares of AFD Exchange Reserves
[_] Class A [_] Class B (Contingent Deferred Sales Charge)
[_] Class C (Asset-based Sales Charge)
to be purchased with the enclosed check or draft for $ .
-------------------
AFD Exchange Reserves may be used to meet the needs of an investor who wishes to
establish a dollar cost averaging program into other like classes of Alliance
Mutual Funds. See "Shareholder Options, Section 5D", below.
Class A shares will not be subject to any initial sales charge at the time of
purchase. However, Class A shares exchanged into Class A shares of another
Alliance Mutual Fund will be subject to applicable sales charges at the time of
the exchange.
--------------------------------
DEALER USE ONLY
Wire Confirm No.:
- --------------------------------------------------------------------------------
4. Distribution Options
- --------------------------------------------------------------------------------
If no box is checked, all distributions will be reinvested in
additional shares of the Fund
Income Dividends: (elect one) [_] Reinvest dividends
[_] Pay dividends in cash
[_] Use Dividend Direction Plan
Capital Gains Distribution: (elect one) [_] Reinvest capital gains
[_] Pay capital gains in cash
[_] Use Dividend Direction Plan
If you elect to receive your income dividends or capital gains distributions in
cash, please enclose a preprinted voided check from the bank account you wish to
have your dividends deposited into.
If you wish to utilize the Dividend Direction Plan, please designate the
Alliance account you wish to have your dividends reinvested in:
- ------------------------------------- -----------------------------------------
Name Existing Account No.
- --------------------------------------------------------------------------------
5. Shareholder Options
- --------------------------------------------------------------------------------
A. AUTOMATIC INVESTMENT PROGRAM (AIP)
I hereby authorize Alliance Fund Services, Inc. to draw on my bank account,
on or about the ______ day of each month, for a monthly investment in my Fund
account in the amount of $____________ (minimum $25 per month). Please attach a
preprinted voided check from the bank account you wish to use.
NOTE: Your bank must be a member of the National Automated Clearing House
Association.
The Fund requires signatures of bank account owners exactly as they appear on
bank records.
- ----------------------- ---------- ----------------------- ----------
Individual Account Date Joint Account Date
<PAGE>
B. TELEPHONE TRANSACTIONS
You can call our toll-free number 1-800-221-5672 and instruct Alliance Fund
Services, Inc. in a recorded conversation to purchase, redeem or exchange
shares for your account. Purchase and redemption requests will be processed
via electronic funds transfer (EFT) to and from your bank account.
Instructions: . Review the information in the Prospectus about telephone
transaction services.
. Check the box next to the telephone transaction service(s)
you desire.
. If you select the telephone purchase or redemption
privilege, you must write "VOID" across the face of a check
from the bank account you wish to use and attach it to this
application.
Purchases and Redemptions via EFT
[_] I hereby authorize Alliance Fund Services, Inc. to effect the purchase
and/or redemption of Fund shares for my account according to my telephone
instructions or telephone instructions from my Broker/Agent, and to
withdraw money or credit money for such shares via EFT from the bank
account I have selected.
The Fund requires signatures of bank account owners exactly as they appear on
bank records.
- --------------------------- -------- -------------------------- ---------
Individual Account Owner Date Joint Account Owner Date
C. SYSTEMATIC WITHDRAWAL PLAN (SWP)
In order to establish a SWP, an investor must own or purchase shares of the
Fund having a current net asset value of at least:
. $10,000 for monthly payments;
. $5,000 for bi-monthly payments;
. $4,000 for quarterly or less frequent payments
[_] I authorize this service to begin in _______ , 19__, for the amount of
$_______________($50.00 minimum) Month
Frequency: (Please select one) [_] Monthly [_] Bi-Monthly
[_] Quarterly [_] Annually
[_] In the months circled:
J F M A M J J A S O N D
Please send payments to: (please select one)
[_] My checking account. Select the date of the month on or about which you
wish the EFT payments to be made: _______________.
Please enclose a preprinted voided check to ensure accuracy.
[_] My address of record designated in Section 2.
[_] The payee and address specified below:
---------------------------------- -----------------------------------------
Name of Payee Address
---------------------------------- ------------------------- --------------
City State Zip
D. ALLIANCE DOLLAR COST AVERAGING PROGRAM (ADCAP)
[_] I authorize Alliance Fund Services, Inc. to transact monthly exchanges
from my Fund account, into the Alliance Fund(s) listed below:
Dollar Amount Day of Exchange** "To" Fund Account#
($25 minimum) (1st thru 31st) "To" Fund Name (if existing)
[_] New
[_] Existing
------------- ----------------- -------------- --------------------
[_] New
[_] Existing
------------- ----------------- -------------- --------------------
[_] New
[_] Existing
------------- ----------------- -------------- --------------------
[_] New
[_] Existing
------------- ----------------- -------------- --------------------
Exchanges of Class A shares are made at the net asset value next
determined plus any applicable initial sales charge imposed on the Class
A shares of the other Alliance Mutual Fund. Exchanges of Class B and
Class C shares are made at the net asset values next determined, without
sales or service charges. When redemption occurs, the CDSC applicable to
the original shares is applied.
Certificates must remain unissued.
** If the date selected for the exchange is not a Fund business day the
transaction will be processed on the next Fund business day.
<PAGE>
- --------------------------------------------------------------------------------
6. Shareholder Authorization This section MUST be completed
----
- --------------------------------------------------------------------------------
Telephone Exchanges and Redemptions by Check
Unless I have checked one or both boxes below, these privileges will
automatically apply, and by signing this application, I hereby authorize
Alliance Fund Services, Inc. to act on my telephone instructions, or on
telephone instructions from any person representing himself to be an authorized
employee of an investment dealer or agent requesting a redemption or exchange on
my behalf. (NOTE: Telephone exchanges may only be processed between accounts
that have identical registrations.) Telephone redemption checks will only be
mailed to the name and address of record; and the address must have no change
within the last 30 days. The maximum telephone redemption amount is $50,000 per
---
check.
- -----
[_] I do not elect the telephone exchange service.
---
[_] I do not elect the telephone redemption by check service.
---
I certify under penalty of perjury that the number shown in Section 1 of this
form is my correct tax identification number or social security number and that
I have not been notified that this account is subject to backup withholding.
By selecting any of the above telephone privileges, I agree that neither the
Fund nor Alliance, Alliance Fund Distributors, Inc., Alliance Fund Services,
Inc. or other Fund Agent will be liable for any loss, injury, damage or expense
as a result of acting upon telephone instructions purporting to be on my behalf,
that the Fund reasonably believes to be genuine, and that neither the Fund nor
any such party will be responsible for the authenticity of such telephone
instructions. I understand that any or all of these privileges may be
discontinued by me or the Fund at any time. I understand and agree that the Fund
reserves the right to refuse any telephone instructions and that my investment
dealer or agent reserves the right to refuse to issue any telephone instructions
I may request.
For non-residents only: Under penalties of perjury, I certify that to the best
of my knowledge and belief, I qualify as a foreign person as indicated in
Section 2.
I am of legal age and capacity and have received and read the Prospectus and
agree to its terms.
The Internal Revenue Service does not require your consent to any provision of
this document other than the certification required to avoid backup withholding.
- -------------------------------------- -----------------------------------------
Signature Date
- -------------------------------------- ----------------- -----------------------
Signature Date Acceptance Date:
- --------------------------------------------------------------------------------
Dealer/Agent Authorization For selected Dealers or Agents ONLY.
- --------------------------------------------------------------------------------
We hereby authorize Alliance Fund Services, Inc. to act as our agent in
connection with transactions under this authorization form; and we guarantee the
signature(s) set forth in Section 6, as well as the legal capacity of the
shareholder.
<TABLE>
<S> <C>
Dealer/Agent Firm Authorized Signature
---------------------------------- ----------------------------------
Representative First Name MI Last Name
-------------------------- ------------ -----------------------------
Branch Office Address
City State Zip Code
----------------------------------------------- ---------------------- -----------------
Branch Number Branch Phone ( )
-------------------------------------- ---------------------------------
</TABLE>
<PAGE>
SIGNATURE CARD
CLASS A OR CLASS C ACCOUNT # AFD EXCHANGE RESERVES
(if known)
- --------------------------------------------------------------------------------
ACCOUNT NAME(S) AS REGISTERED
- --------------------------------------------------------------------------------
SOCIAL SECURITY NUMBER
- --------------------------------------------------------------------------------
AUTHORIZED SIGNATURE(S) -- for joint accounts, all owners, or their legal
representatives, must sign this card.
1...............................................................................
2...............................................................................
3...............................................................................
- --------------------------------------------------------------------------------
Check One Box
[_]All the above signatures are required on checks written against this account.
[_]Any one signature is acceptable on checks written against this account.
[_]A combination of signatures is required (specify number).
Subject to conditions printed on reverse side.
STATE STREET BANK AND TRUST COMPANY
<PAGE>
The payment of funds is authorized by the signature(s) appearing on the reverse
side.
If this card is signed by more than one person, all checks will require all
signatures appearing on the reverse side unless a lesser number is indicated. If
no indication is given, all checks will require all signatures. Each signatory
guarantees the genuineness of the other signatures.
The Bank is hereby appointed agent by the person(s) signing this card (the
"Depositor[s]") and, as agent, is authorized and directed to present checks
drawn on this checking account to AFD Exchange Reserves ("AFDER") or its
transfer agent as requests to redeem shares of AFDER registered in the name of
the Depositor(s) in the amounts of such checks and to deposit the proceeds of
such redemptions in this checking account. The Bank shall be liable only for its
own negligence.
The Depositor(s) agrees to be subject to the rules and regulations of the Bank
pertaining to this checking account as amended from time to time. The Bank and
AFDER reserve the right to change, modify or terminate this checking account and
authorization at any time.
Checks may not be for less than $500 or such other minimum amount as may from
time to time be established by AFDER upon prior written notice to its
shareholders. Shares purchased by check (including certified or cashier's check)
will not be redeemed within 15 calendar days of such purchase by checkwriting or
any other method of redemption.
50084GEN-AFDSC
<PAGE>
AFD PRO 2/97
This prospectus does not constitute an offering in any state in which such
offering may not lawfully be made.
TABLE OF CONTENTS PAGE
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Expense Information 2
Financial Highlights 3
Description of the Fund 4
Purchase and Sale of Shares 6
Management of the Fund 12
Dividends, Distributions and Taxes 14
General Information 15
</TABLE>
ADVISER
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, NY 10105
AFD
- --------------------------------------------------------------------------------
Exchange
- --------------------------------------------------------------------------------
Reserves
- --------------------------------------------------------------------------------
Prospectus
February 2, 1998
Goal: Maximum
current income
consistent with
safety of
principal and
liquidity.
[LOGO OF ALLIANCE APPEARS HERE]
<PAGE>
<PAGE>
AFD EXCHANGE RESERVES
[LOGO OF ALLIANCE CAPITAL APPEARS HERE] Advisor Class
- -------------------------------------------------------------------------------
c/o Alliance Fund Services, Inc.
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618
- -------------------------------------------------------------------------------
AFD Exchange Reserves (the "Fund") is a diversified, open-end management
investment company. The Fund's investment objective is maximum current income
to the extent consistent with safety of principal and liquidity. The Fund
pursues its objective by maintaining a portfolio of high quality U.S. dollar-
denominated money market securities, and is thus referred to as a "money
market fund."
Shares of the Fund should be purchased for cash only as a temporary investment
pending exchange into another Alliance Mutual Fund and should not be held as a
long-term investment.
This Prospectus offers the Advisor Class shares of the Fund which may be
purchased at net asset value without any initial or contingent deferred sales
charges and without ongoing distribution expenses. Advisor Class shares are
offered solely to (i) investors participating in fee-based programs meeting
certain standards established by Alliance Fund Distributors, Inc., the Fund's
principal underwriter, (ii) participants in self-directed defined contribution
employee benefit plans (e.g., 401(k) plans) that meet certain minimum
standards and (iii) certain other categories of investors described in the
Prospectus, including investment advisory clients of, and certain other
persons associated with, Alliance Capital Management L.P. and its affiliates
or the Fund. See "Purchase and Sale of Shares."
This Prospectus sets forth concisely the information which a prospective
investor should know about the Fund before investing. A "Statement of
Additional Information" dated February 2, 1998 which provides further
information regarding certain matters discussed in this Prospectus and other
matters which may be of interest to some investors, has been filed with the
Securities and Exchange Commission and is incorporated herein by reference.
For a free copy, call or write Alliance Fund Services, Inc. at the indicated
address or call the "For Literature" telephone number shown above.
(R): This registered service mark used under license from the owner, Alliance
Capital Management L.P.
- -------------------------------------------------------------------------------
An investment in the Fund is not (i) insured or guaranteed by the U.S. Govern-
ment, (ii) a deposit or obligation of, or guaranteed or endorsed by, any bank,
or (iii) federally insured by the Federal Deposit Insurance Corporation, the
Federal Reserve Board or any other agency. There can be no assurance that the
Fund will be able to maintain a stable net asset value of $1.00 per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
PROSPECTUS/February 2, 1998
Investors are advised to read this Prospectus carefully and to retain it for
future reference.
<PAGE>
EXPENSE INFORMATION
SHAREHOLDER TRANSACTION EXPENSES are one of several factors to consider when
you invest in the Fund. The following table summarizes your maximum transac-
tion costs from investing in Advisor Class shares of the Fund and estimated
annual expenses for Advisor Class shares. The "Example" following the table
shows the cumulative expenses attributable to a hypothetical $1,000 investment
in Advisor Class shares for the periods specified.
<TABLE>
<CAPTION>
ADVISOR CLASS SHARES
--------------------
<S> <C>
Maximum sales charge imposed on purchases................ None
Sales charge imposed on dividend reinvestments........... None
Deferred sales charge.................................... None
Exchange Fee............................................. None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE
NET ASSETS)
Management fees.......................................... .25%
12b-1 fees............................................... None
Other expenses(a)........................................ .63%
----
Total fund operating expenses(b)......................... .88%
====
</TABLE>
- --------
(a) These expenses include a transfer agency fee payable to Alliance Fund
Services, Inc., an affiliate of Alliance Capital Management L.P., based on
a fixed dollar amount charged to the Fund for each shareholder's account.
(b) The expense information does not reflect any charges or expenses imposed
by your financial representative or your employee benefit plan.
EXAMPLE
<TABLE>
<CAPTION>
Cumulative expenses
paid for the period of Advisor Class
---------------------- -------------
<S> <C>
1 year.................................. $ 9
3 years................................. $ 28
5 years................................. $ 49
10 years................................. $108
</TABLE>
- --------
The purpose of the foregoing table is to assist the investor in understand-
ing the various costs and expenses that an investor in Advisor Class shares of
the Fund will bear directly or indirectly. "Other Expenses" are based on esti-
mated amounts for the Fund's current fiscal year. The Example set forth above
assumes reinvestment of all dividends and distributions and utilizes a 5% an-
nual rate of return as mandated by Securities and Exchange Commission (the
"Commission") regulations. The Example should not be considered a representa-
tion of future expenses; actual expenses may be greater or less than those
shown.
2
<PAGE>
FINANCIAL HIGHLIGHTS . FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD (AUDITED)
The following table has been audited by McGladrey & Pullen LLP, the Fund's
independent auditors, whose report thereon appears in the Statement of Addi-
tional Information. This information should be read in conjunction with the fi-
nancial statements and notes thereto included in the Statement of Additional
Information.
<TABLE>
<CAPTION>
ADVISOR
CLASS
-------------
JANUARY 30,
1997(A)
TO
SEPTEMBER 30,
1997
-------------
<S> <C>
Net asset value, beginning of period.............................. $ 1.00
-------
INCOME FROM INVESTMENT OPERATIONS
Net investment income............................................. .0254
-------
LESS: DIVIDENDS
Dividends from net investment income.............................. (.0254)
-------
Net asset value, end of period.................................... $ 1.00
=======
TOTAL RETURN
Total investment return based on net asset value(b)(c)............ 4.71%
=======
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands).......................... $35
Ratio of expenses to average net assets(c)........................ .88%
Ratio of net investment income to average net assets(c)........... 4.15%
</TABLE>
- --------
(a) Commencement of distribution.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and re-
demption on the last day of the period. Contingent deferred sales charge is
not reflected in the calculation of total investment return.
(c) Annualized.
3
<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 IBCA, Inc., or Duff 1 or Duff 2 by Duff & Phelps Inc, or, if not rat-
ed, 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 participation inter-
ests in loans extended by banks to such companies; and (4) repurchase agree-
ments 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 Custodian) or
broker-dealers ("vendors") that are eligible under the procedures adopted by
the Trustees for evaluating and monitoring the creditworthiness of such ven-
dors. 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 money market securities in which the Fund invests may have variable or
floating rates of interest ("variable rate obligations") as permitted by Rule
2a-7 under the Investment Company Act of 1940, as amended (the "Act"). Vari-
able rate obligations have interest rates which are adjusted either at
predesignated periodic intervals or whenever there is a change in the market
rate to which the interest rate of the variable rate obligation is tied. Some
variable rate obligations allow the holder to demand payment of principal at
anytime, or at specified intervals. The Fund follows Rule 2a-7 with respect to
the diversification, quality and maturity of variable rate obligations.
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 ob-
4
<PAGE>
ligations and the lack of uniform accounting and financial reporting stan-
dards.
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"),
other than restricted securities determined by Alliance Capital Management
L.P. ("Alliance") to be liquid in accordance with procedures adopted by the
Trustees of the Fund, such as securities eligible for resale under Rule 144A
under the Securities Act and commercial paper issued in reliance upon the ex-
emption from registration in Section 4(2) of the Securities Act.
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 Act, as such rule is amended
from time to time, including the diversification, quality and maturity limita-
tions 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 description of Rule 2a-7 is set forth
in the Fund's Statement of Additional Information 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 25% of its total assets it may invest
without regard to such limitation; (3) invest more than 5% of its assets 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. Government); (4)
borrow money except from banks on a temporary basis or via entering into re-
verse repurchase agreements in aggregate amounts not exceeding 15% of its as-
sets and to be used exclusively to facilitate the orderly maturation and sale
of portfolio securities during any periods of abnormally heavy redemption re-
quests, if they should occur; such borrowings may not be used to purchase in-
vestments and the Fund will not purchase any investment while any such
borrowings exist; or (5) mortgage, pledge or hypothecate its assets except to
secure such borrowings.
As a matter of operating policy, fundamental policy number (2) would give
the Fund the ability to invest, with respect to 25% of its assets, more than
5% of its assets in any one issuer only in the event Rule 2a-7 is amended in
the future.
5
<PAGE>
PURCHASE AND SALE OF SHARES
Advisor Class shares of the Fund may be purchased for cash and thereafter
exchanged for Advisor Class shares of other Alliance Mutual Funds. Under the
Alliance Dollar Cost Averaging Program, exchanges may be made automatically
each month, thus producing a dollar cost averaging effect. Exchanges also may
be made at other times of an investor's choosing. Advisor Class shares of the
Fund should be purchased for cash only as a temporary investment pending ex-
change into Advisor Class shares of another Alliance Mutual Fund and should
not be held as a long-term investment.
Advisor Class shares of the Fund also are available to holders of Advisor
Class shares of other Alliance Mutual Funds who wish to exchange their Advisor
Class shares for Advisor Class shares of a money market fund. Such an exchange
transaction is effected through the redemption of Alliance Mutual Fund Advisor
Class shares tendered for exchange and the purchase of Advisor Class shares of
the Fund at their respective net asset values as next determined. Exchange
purchases into the Fund may be made by telephone or written request.
Alliance Fund Services, Inc. ("AFS") is not responsible for the authenticity
of telephone exchange requests. AFS will employ reasonable procedures in order
to verify that telephone requests are genuine, and could be liable if it
failed to use those procedures. An exchange is a taxable capital transaction
for federal tax purposes. The Fund reserves the right to reject any order to
acquire its shares through exchange.
HOW TO BUY SHARES
The Fund offers multiple classes of shares, of which only the Advisor Class
is offered by this Prospectus. Advisor Class shares of the Fund may be pur-
chased through your financial representative at net asset value without any
initial or contingent deferred sales charges and are not subject to ongoing
distribution expenses. Advisor Class shares may be purchased and held solely
(i) through accounts established under a fee-based program, sponsored and
maintained by a registered broker-dealer or other financial intermediary and
approved by Alliance Fund Distributors, Inc. ("AFD"), the Fund's principal un-
derwriter, (ii) through a self-directed defined contribution employee benefit
plan (e.g., a 401(k) plan) that has at least 1,000 participants or $25 million
in assets, (iii) by investment advisory clients of, and certain other persons
associated with, Alliance and its affiliates or the Fund, and (iv) through
registered investment advisers or other financial intermediaries who charge a
management, consulting or other fee for their service and who purchase shares
through a broker or agent approved by AFD and clients of such registered in-
vestment advisers or financial intermediaries whose accounts are linked to the
master account of such investment adviser or financial intermediary on the
books of such approved broker or agent. For more detailed information about
who may purchase and hold Advisor Class shares see the Statement of Additional
Information. A shareholder's Advisor Class shares will automatically convert
to Class A shares of the Fund under certain circumstances. For a more detailed
description of the Conversion Feature and Class A shares, see "Conversion Fea-
ture." Generally, a fee-based program must charge an asset-based or other sim-
ilar fee and must invest at least $250,000 in Advisor Class shares of the Fund
in order to be approved by AFD for investment in Advisor Class shares. For
more detailed information about who may purchase and hold Advisor Class shares
see the Statement of Additional Information. Fee-based and other programs
through which Advisor Class shares may be pur-
6
<PAGE>
chased may impose different requirements with respect to minimum initial and
subsequent investment levels than described above. See the Subscription Appli-
cation and Statement of Additional Information for more information.
The Fund may refuse any order to purchase Advisor Class shares. In this re-
gard, the Fund reserves the right to restrict purchases of Advisor Class
shares (including through exchanges) when there appears to be evidence of a
pattern of frequent purchases and sales made in response to short-term consid-
erations.
HOW THE FUND VALUES ITS SHARES
The net asset value of Advisor Class shares is expected to be constant at
$1.00 per share, although this price is not guaranteed. The net asset value
per share is calculated by determining the amount of assets attributable to
each class of shares, subtracting liabilities and dividing by the amount of
outstanding shares for such class. In this connection, the Fund uses the amor-
tized cost value for determining the value of the Fund's investments. Shares
are valued each day the New York Stock Exchange (the "Exchange") is open as of
the close of regular trading (currently 4:00 p.m. Eastern time).
HOW TO EXCHANGE SHARES
You may exchange your investment in Advisor Class shares of the Fund for Ad-
visor Class shares of other Alliance Mutual Funds. Exchanges of Advisor Class
shares are made at the net asset value next determined and without sales or
service charges. Exchanges may be made by telephone or written request. Tele-
phone exchange requests must be received by AFS by 4:00 p.m. Eastern time on a
Fund business day to receive that day's net asset value. Please read carefully
the prospectus of the mutual fund into which you are exchanging before submit-
ting the request. Call AFS at 800-221-5672 to exchange uncertificated shares.
An exchange is a taxable capital transaction for federal tax purposes. The ex-
change service may be changed, suspended or terminated on 60 days' written no-
tice.
HOW TO SELL SHARES
You may "redeem" your shares (i.e., sell your shares to the Fund) on any day
the Exchange is open, either directly or through your financial representa-
tive. The price you will receive is the net asset value next calculated after
the Fund receives your request in proper form. Proceeds generally will be sent
to you within seven days. However, for shares recently purchased by check or
electronic funds transfer or for shares acquired in exchange for Alliance Mu-
tual Fund shares recently purchased by check or electronic funds transfer, the
Fund will not send proceeds until it is reasonably satisfied that the check or
electronic funds transfer has been collected (which may take up to 15 days).
If you are in doubt about what documents are required by your fee-based pro-
gram or employee benefit plan, you should contact your financial representa-
tive.
SELLING SHARES THROUGH YOUR FINANCIAL REPRESENTATIVE
Your financial representative must receive your request before 4:00 p.m.
Eastern time, and your financial representative must transmit your request to
the Fund by 5:00 p.m. Eastern time, to receive that day's net asset value.
Your financial representative is responsible for furnishing all necessary doc-
umentation to the Fund, and may charge you for this service.
SELLING SHARES DIRECTLY TO THE FUND
Send a signed letter of instruction or stock power form to AFS, along with
certificates, if any, that represent the shares you want to sell. For your
protection, signatures must be guaranteed by a bank, a member firm of a na-
tional stock exchange or other eligible guarantor insti-
7
<PAGE>
tution. Stock power forms are available from your financial intermediary, AFS
and many commercial banks. Additional documentation is required for the sale
of shares by corporations, intermediaries, fiduciaries and surviving joint
owners. For details contact:
Alliance Fund Services
P.O. Box 1520
Secaucus, NJ 07096-1520
800-221-5672
Alternatively, a request for redemption of shares for which no stock certif-
icates have been issued can also be made by telephone to 800-221-5672. Tele-
phone redemption requests must be made by 4:00 p.m. Eastern time on a Fund
business day to receive that day's net asset value, and, for redemptions made
before March 1, 1998, may be made only once in any 30-day period (except for
certain omnibus accounts). A shareholder who has completed the appropriate
section of the Subscription Application, or the Shareholder Options form ob-
tained from AFS, can elect to have the proceeds of his or her redemption sent
to his or her bank via an electronic funds transfer. Proceeds of telephone re-
demptions also may be sent by check to a shareholder's address of record. Ex-
cept for certain omnibus accounts, redemption requests by electronic funds
transfer may not exceed $100,000 per day and redemption requests by check may
not exceed $50,000 per day. Telephone redemption is not available for shares
held in nominee or "street name" accounts or retirement plan accounts or
shares held by a shareholder who has changed his or her address of record
within the previous 30 calendar days. See "General" below.
GENERAL
The sale or exchange of shares is a taxable transaction for federal tax pur-
poses. Under unusual circumstances, the Fund may suspend redemptions or post-
pone payment for up to seven days or longer, as permitted by federal securi-
ties law. The Fund reserves the right to close an account that through
redemption has remained be- low $200 for 90 days. Shareholders will receive 60
days' written notice to increase the account value before the account is
closed.
Alliance sponsors four other money market funds, Alliance Money Market Fund,
Alliance Capital Reserves, Alliance Government Reserves and Alliance Municipal
Trust (the "Trusts"). To obtain the prospectus for any of the Trusts, call the
"For 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.
Year 2000. Many computer software systems in use today cannot properly proc-
ess data-related information from and after January 1, 2000. Should any of the
computer systems employed by the Fund's major service providers fail to proc-
ess this type of information properly, that could have a negative impact on
the Fund's operations and the services that are provided to the Fund's share-
holders. Alliance, the Fund's investment adviser, AFD, the Fund's principal
underwriter, and AFS, the Fund's registrar, transfer agent and dividend dis-
bursing agent, have ad -
8
<PAGE>
vised the Fund that they are reviewing all of their computer systems with the
goal of modifying or replacing such systems prior to January 1, 2000 to the
extent necessary to foreclose any such negative impact. In addition, Alliance
has been advised by the Fund's custodian that it is also in the process of re-
viewing its systems with the same goal. As of the date of this Prospectus, the
Fund and Alliance have no reason to believe that these goals will not be
achieved.
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, service, ad-
ministrative or other similar fee may be charged by your broker-dealer, agent,
financial intermediary or other financial representative with respect to the
purchase, sale or exchange of Advisor Class shares made through such financial
representative. Such financial intermediaries may also impose requirements with
respect to the purchase, sale or exchange of shares that are different from, or
in addition to, those imposed by the Fund, including requirements as to the
minimum initial and subsequent investment amounts.
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 pay a
distribution services fee. Class B shares have a contingent deferred sales
charge (a "CDSC") and also pay a distribution services fee. Class C shares
have no initial sales charge or CDSC as long as they are not redeemed within
one year of purchase, but pay a distribution services fee. Because Advisor
Class shares have no initial sales charge or CDSC and pay no distribution
services fee, Advisor Class shares are expected to have different performance
from Class A, Class B or Class C shares. You can 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 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 September 30, 1997 totaling more than $217 billion
(of which approximately $81 billion represented the assets of investment com-
panies). Alliance's clients are primarily major corporate employee benefit
funds, public employee retirement systems, investment companies, foundations
and endowment funds. The 56 registered investment companies managed by Alli-
ance comprising 118 separate investment portfolios currently have over two
million shareholders. As of September 30, 1997, Alliance was retained as an
investment manager of employee benefit plan assets for 28 of the Fortune 100
companies.
Alliance Capital Management Corporation, the sole general partner of, and
the owner of 1%
9
<PAGE>
general partnership interest in, Alliance, is an indirect wholly-owned subsid-
iary of The Equitable Life Assurance Society of the United States ("Equita-
ble"), 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-UAP, a French insurance holding company. Certain in-
formation concerning the ownership and control of Equitable by AXA-UAP is set
forth in the Statement of Additional Information under "Management of the
Fund."
Under its Advisory Agreement with the Fund, Alliance provides investment ad-
visory services and order placement facilities for the Fund and pays all com-
pensation of Trustees and officers of the Fund who are affiliated persons of
Alliance. Alliance or its affiliates also furnish the Fund, without charge,
management supervision and assistance and office facilities and provide per-
sons satisfactory to the Fund's Trustees to serve as the Fund's officers. Un-
der the Advisory Agreement, the Fund pays Alliance a fee at the annual rate of
.25 of 1% of the first $1.25 billion of the Fund's average daily net assets;
.24 of 1% of the next $.25 billion of such assets; .23 of 1% of the next $.25
billion of such assets; .22 of 1% of the next $.25 billion of such assets; .21
of 1% of the next $1 billion of such assets, and; .20 of 1% of such average
daily net assets in excess of $3 billion. The fee is accrued daily and paid
monthly.
DISTRIBUTION SERVICES AGREEMENT
The Fund has entered into a Distribution Services Agreement with AFD with
respect to the Advisor Class shares. As interpreted by courts and administra-
tive agencies, the Glass-Steagall Act and other applicable laws and regula-
tions limit the ability of a bank or other depository institution to become an
underwriter or distributor of securities. However, in the opinion of the
Fund's management, based on the advice of counsel, these laws and regulations
do not prohibit such depository institutions from providing services for in-
vestment companies such as the administrative, accounting and other services
referred to in the Agreement. In the event that change in these laws prevented
a bank from providing such services, it is expected that other service ar-
rangements would be made and that shareholders would not be adversely affect-
ed. The State of Texas requires that shares of the Fund may be sold in that
state only by dealers or other financial institutions that are registered
there as broker-dealers.
- --------------------------------------------------------------------------------
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 taxes on the investment company
taxable income and net capital gains distributed to its shareholders. For fed-
eral 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
in-
10
<PAGE>
come, 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 cer-
tain state and local taxes. Each year shortly after December 31, the Fund will
send you tax information stating the amount and type of all its distributions
for the year just ended.
- --------------------------------------------------------------------------------
CONVERSION FEATURE
- --------------------------------------------------------------------------------
CONVERSION TO CLASS A SHARES
Advisor Class shares may be held solely through the fee-based program ac-
counts, employee benefit plans and registered investment advisory or other fi-
nancial intermediary relationship described above under "Purchase and Sale of
Shares--How to Buy Shares," by investment advisory clients of, and by certain
persons associated with, Alliance and its affiliates or the Fund. If (i) a
holder of Advisor Class shares ceases to participate in the fee-based program
or plan, or to be associated with an investment advisory or financial interme-
diary, in each case that satisfies the requirements to purchase shares set
forth under "Purchase and Sale of Shares--How to Buy Shares" or (ii) the
holder is otherwise no longer eligible to purchase Advisor Class shares as de-
scribed in this Prospectus (each, a "Conversion Event"), then all Advisor
Class shares held by the shareholder will convert automatically and without
notice to the shareholder, other than the notice contained in this Prospectus,
to Class A shares of the Fund during the calendar month following the month in
which the Fund is informed of the occurrence of the Conversion Event. The
failure of a shareholder or a fee-based program to satisfy the minimum invest-
ment requirements to purchase Advisor Class shares will not constitute a Con-
version Event. The conversion would occur on the basis of the relative net as-
set values of the two classes and without the imposition of any sales load,
fee or other charge.
DESCRIPTION OF CLASS A SHARES
The following sets forth maximum transaction costs, annual expenses, per share
income and capital changes for Class A shares of the Fund. Class A shares are
subject to a distribution fee that may not exceed an annual rate of .30%. The
higher fees mean a higher expense ratio, so Class A shares pay correspondingly
lower dividends and may have a lower net asset value than Advisor Class
shares.
11
<PAGE>
SHAREHOLDER TRANSACTION EXPENSES are one of several factors to consider when
you invest in the Fund. The following table summarizes your maximum transaction
costs from investing in Class A shares of the Fund and annual expenses for
Class A shares of the Fund. The "Example" below the table shows the cumulative
expenses attributable to a hypothetical $1,000 investment for the periods
specified.
<TABLE>
<CAPTION>
CLASS A
SHARES
-------
<S> <C>
Maximum sales charge imposed on purchases (as a percentage
of offering price)(a)..................................... None
(sales charge
waived)
Sales charge imposed on dividend reinvestments............. None
Deferred sales charge (as a percentage of original purchase
price or redemption proceeds, whichever is lower)......... None
Exchange fee............................................... None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management fees............................................ .25%
12b-1 fees................................................. .50%
Other expenses(b).......................................... .63%
----
Total fund operating expenses.............................. 1.38%
====
</TABLE>
EXAMPLE
<TABLE>
<CAPTION>
AFTER 1 YEAR AFTER 3 YEARS AFTER 5 YEARS AFTER 10 YEARS
------------ ------------- ------------- --------------
<S> <C> <C> <C> <C>
Class A........... $14 $44 $76 $166
</TABLE>
- --------
(a) Advisor Class shares convert to Class A shares at net asset value and
without the imposition of any sales charge and accordingly the maximum
sales charge of 4.25% on most purchases of Class A shares for cash does not
apply.
(b) These expenses include a transfer agency fee payable to AFS an affiliate of
Alliance, based on a fixed dollar amount charged to the Fund for each
shareholder's account.
The purpose of the foregoing table is to assist the investor in understanding
the various costs and expenses that an investor in the Fund will bear directly
or indirectly. Long-term shareholders of Class A shares of the Fund may pay
aggregate sales charges totaling more than the economic equivalent of the
maximum initial sales charges permitted by the Conduct Rules of the National
Association of Securities Dealers, Inc. "Other Expenses" are based on estimated
amounts for the Fund's current fiscal year. The Example set forth above assumes
reinvestment of all dividends and distributions and utilizes a 5% annual rate
of return as mandated by Commission regulations. The Example should not be
considered representative of past or future expenses; actual expenses may be
greater or less than those shown.
12
<PAGE>
FINANCIAL HIGHLIGHTS. The following table presents per share income and
capital changes for a Class A share outstanding throughout each period
indicated. The information in the table has been audited by McGladrey &
Pullen, LLP, the independent accountants for the Fund. A report of McGladrey &
Pullen, LLP on the information with respect to the Fund appears in the Fund's
Statement of Additional Information. The following information should be read
in conjunction with the financial statements and related notes which are
included in the Fund's Statement of Additional Information.
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED MARCH 25, 1994(A)
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, TO
1997 1996 1995 SEPTEMBER 30, 1994
------------- ------------- ------------- ------------------
<S> <C> <C> <C> <C>
Net asset value, begin-
ning of period......... $1.00 $1.00 $1.00 $1.00
------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income... .0411 .0416 .0453 .0126
------ ------ ------ ------
LESS: DIVIDENDS
Dividends from net
investment income...... (.0411) (.0416) (.0453) (.0126)
------ ------ ------ ------
Net asset value, end of
period................. $1.00 $1.00 $1.00 $1.00
====== ====== ====== ======
TOTAL RETURN
Total investment return
based on net asset
value(b)............... 4.19% 4.24% 4.64% 2.45%(c)
====== ====== ====== ======
RATIOS/SUPPLEMENTAL DATA
Net Assets, end of
period
(in millions).......... $41 $41 $41 $18
Ratio of average net as-
sets to:
Expenses, net of waiv-
ers................... 1.38% 1.29% 1.21% 1.82%(c)
Expenses, before waiv-
ers................... 1.38% 1.29% 1.29% 1.82%(c)
Net investment income.. 4.10% 4.15% 4.63%(d) 2.62%(c)
</TABLE>
- --------
(a) Commencement of operations.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Contingent deferred sales charge
is not reflected in the calculation of total investment return.
(c) Annualized.
(d) Net of expenses waived by the Adviser.
- --------------------------------------------------------------------------------
GENERAL INFORMATION
- --------------------------------------------------------------------------------
ORGANIZATION
AFD Exchange Reserves is a Massachusetts business trust that was organized
on January 14, 1994. It is anticipated that annual shareholder meetings will
not be held; shareholder meetings will be held only when required by federal
or state law. Shareholders have available certain procedures for the removal
of Trustees.
A shareholder in the Fund will be entitled to share pro rata with other
holders of the same class of shares all dividends and distributions arising
from the Fund's assets and, upon redeeming shares, will receive the then cur-
rent net asset value of the Fund represented by the redeemed shares. The Fund
is empowered to establish, without shareholder approval, additional portfolios
which may have different investment objectives.
Shares are normally entitled to one vote for all purposes. Generally, shares
of the Fund vote
13
<PAGE>
as a single series on matters, such as the election of Trustees, that affect
all shareholders of the Fund in substantially the same manner. Advisor Class,
Class A, Class B and Class C shares have identical voting, dividend, liquida-
tion and other rights, except that each class bears its own transfer agency
expenses, each of Class A, Class B and Class C shares bears its own distribu-
tion expenses and Class B shares and Advisor Class shares convert to Class A
shares under certain circumstances. Each class of shares votes separately with
respect to matters for which separate class voting is appropriate under appli-
cable 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
constitute an offering in any state in which such offering may not lawfully be
made.
14
<PAGE>
ALLIANCE SUBSCRIPTION APPLICATION
AFD Exchange Reserves
Advisor Class
- --------------------------------------------------------------------------------
INFORMATION AND INSTRUCTIONS
- --------------------------------------------------------------------------------
To Open Your New Alliance Account
Please complete the application and mail it to:
Alliance Fund Services, Inc., P.O. Box 1520, Secaucus, New Jersey 07096-1520
Signatures - Please Be Sure To Sign the Application (Section 6)
If shares are registered in the name of:
. an individual, the individual should sign.
. joint tenants, both should sign.
. a custodian for a minor, the custodian should sign.
. a corporation or other organization, an authorized officer should sign
(please indicate corporate office or title).
. a trustee or other fiduciary, the fiduciary or fiduciaries should sign
(please indicate capacity).
Registration
To ensure proper tax reporting to the IRS:
. Individuals, Joint Tenants and Gift/Transfer to a Minor:
- Indicate your name exactly as it appears on your social security card.
. Trust/Other:
- Indicate the name of the entity exactly as it appeared on the notice you
received from the IRS when your Employer Identification number was
assigned.
Please Note:
. Certain legal documents will be required from corporations or other
organizations, executors and trustees, or if a redemption is requested by
anyone other than the shareholder of record. If you have any questions
concerning a redemption, contact the Fund at the number below.
. In the case of redemptions or repurchases of shares recently purchased by
check or electronic funds transfer, redemption proceeds will not be made
available until the Fund is reasonably assured that the check or electronic
funds transfer has cleared, normally up to 15 calendar days following the
purchase date.
If We Can Assist You In Any Way, Please Do Not Hesitate To Call Us At:
1-(800) 221-5672.
<PAGE>
- --------------------------------------------------------------------------------
SUBSCRIPTION APPLICATION
- --------------------------------------------------------------------------------
AFD Exchange Reserves
(see instructions at the front of the application)
- --------------------------------------------------------------------------------
1. Your Account Registration (Please Print)
- --------------------------------------------------------------------------------
[_] INDIVIDUAL OR JOINT ACCOUNT
----------------------------------------------------------------------------
Owner's Name (First Name) (MI) (Last Name)
------------------------
Social Security Number (Required to open account)
----------------------------------------------------------------------------
Joint Owner's Name* (First Name ) (MI) (Last Name)
*Joint Tenants with right of survivorship unless otherwise indicated.
[_] GIFT/TRANSFER TO A MINOR
----------------------------------------------------------------------------
Custodian - One Name Only (First Name) (MI) (Last Name)
----------------------------------------------------------------------------
Minor's Name First Name (MI) (Last Name)
Under the State of
-------------------------- ----------------------
Minor's Social Security Number (Minor's Residence)
Required to open account) Uniform Gifts/Transfer to Minor's Act
[_] TRUST ACCOUNT
----------------------------------------------------------------------------
Name of Trustee
----------------------------------------------------------------------------
Name of Trust
----------------------------------------------------------------------------
Name of Trust (cont'd)
----------------------- ------------------------------------------
Trust Dated Tax ID or Social Security Number
(Required to open account)
[_] OTHER
----------------------------------------------------------------------------
Name of Corporation, Partnership, Investment only retirement plan,
or other Entity
----------------------- ------------------------------------------------
Tax ID Number Trustee Name (Retirement Plans only)
- --------------------------------------------------------------------------------
2. Address
- --------------------------------------------------------------------------------
----------------------------------------------------------------------------
Street
----------------------------------------------------------------------------
City State Zip Code
----------------------------------------------------------------------------
If Non-U.S., Specify Country
----------------------------------------------------------------------------
Daytime Phone Evening Phone
I am a: [_] U.S. Citizen [_] Non-Resident [_] Resident Alien [_] Other
For Alliance Use Only
<PAGE>
- --------------------------------------------------------------------------------
3. Initial Investment
- --------------------------------------------------------------------------------
Minimum: $250. Make all checks payable to AFD Exchange Reserves.
I hereby subscribe for Advisor Class shares of AFD Exchange Reserves
to be purchased with the enclosed check or draft for $______________.
AFD Exchange Reserves may be used to meet the needs of an investor who wishes to
establish a dollar cost averaging program into other Alliance Mutual Funds that
offer Advisor Class shares. See "Shareholder Options, Section 5D", below.
-------------------------------------
DEALER USE ONLY
Wire Confirm No.:
-------------------------------------
- --------------------------------------------------------------------------------
4. Distribution Options
- --------------------------------------------------------------------------------
If no box is checked, all distributions will be reinvested in additional shares
of the Fund
Income Dividends: (elect one)
[_] Reinvest dividends
[_] Pay dividends in cash
[_] Use Dividend Direction Plan
Capital Gains Distribution: (elect one)
[_] Reinvest capital gains
[_] Pay capital gains in cash
[_] Use Dividend Direction Plan
If you elect to receive your income dividends or capital gains distributions in
cash, please enclose a preprinted voided check from the bank account you wish to
have your dividends deposited into.
If you wish to utilize the Dividend Direction Plan, please designate the
Alliance account you wish to have your dividends reinvested in:
- ------------------------------------ ------------------------------------------
Name Existing Account No.
- --------------------------------------------------------------------------------
5. Shareholder Options
- --------------------------------------------------------------------------------
A. AUTOMATIC INVESTMENT PROGRAM (AIP)
I hereby authorize Alliance Fund Services, Inc. to draw on my bank account,
on or about the ______ day of each month, for a monthly investment in my Fund
account in the amount of $____________ (minimum $25 per month). Please attach a
preprinted voided check from the bank account you wish to use.
NOTE: Your bank must be a member of the National Automated Clearing House
Association.
The Fund requires signatures of bank account owners exactly as they appear on
bank records.
- -------------------------- ------------------ --------------------- ------------
Individual Account Date Joint Account Date
<PAGE>
B. TELEPHONE TRANSACTIONS
You can call our toll-free number 1-800-221-5672 and instruct Alliance Fund
Services, Inc. in a recorded conversation to purchase, redeem or exchange
shares for your account. Purchase and redemption requests will be processed
via electronic funds transfer (EFT) to and from your bank account.
Instructions: . Review the information in the Prospectus about telephone
transaction services.
. Check the box next to the telephone transaction service(s)
you desire.
. If you select the telephone purchase or redemption
privilege, you must write "VOID" across the face of a check
from the bank account you wish to use and attach it to this
application.
Purchases and Redemptions via EFT
[_] I hereby authorize Alliance Fund Services, Inc. to effect the purchase
and/or redemption of Fund shares for my account according to my telephone
instructions or telephone instructions from my Broker/Agent, and to
withdraw money or credit money for such shares via EFT from the bank
account I have selected.
The Fund requires signatures of bank account owners exactly as they appear on
bank records.
- -------------------------- ------------- -------------------------- ------------
Individual Account Owner Date Joint Account Owner Date
C. SYSTEMATIC WITHDRAWAL PLAN (SWP)
In order to establish a SWP, an investor must own or purchase shares of the
Fund having a current net asset value of at least:
. $10,000 for monthly payments; . $5,000 for bi-monthly payments;
. $4,000 for quarterly or less frequent payments
[_] I authorize this service to begin in __________________, 19____,
Month
for the amount of $_______________($50.00 minimum)
Frequency: (Please select one) [_] Monthly [_] Bi-Monthly [_] Quarterly
[_] Annually [_] In the months circled: J F M A M J J A S O N D
Please send payments to: (please select one)
[_] My checking account. Select the date of the month on or about which you
wish the EFT payments to be made: _______________. Please enclose a
preprinted voided check to ensure accuracy.
[_] My address of record designated in Section 2.
[_] The payee and address specified below:
- ------------------------------------------------ -------------------------------
Name of Payee Address
- ------------------------------------------------ --------------------- ---------
City State Zip
D. ALLIANCE DOLLAR COST AVERAGING PROGRAM (ADCAP)
[_] I authorize Alliance Fund Services, Inc. to transact monthly exchanges
from my Fund account into Advisor Class shares of the Alliance Fund(s)
listed below:
<TABLE>
<CAPTION>
Dollar Amount Day of Exchange** "To" Fund Account #
($25 minimum) (1st thru 31st) "To" Fund Name (if existing)
<S> <C> <C> <C>
[_] New
[_] Existing
------------- --------------- ------------- --------------------------------
[_] New
[_] Existing
------------- --------------- ------------- --------------------------------
[_] New
[_] Existing
------------- --------------- ------------- --------------------------------
[_] New
[_] Existing
------------- --------------- ------------- --------------------------------
</TABLE>
Exchanges of Advisor Class shares are made at the net asset value next
determined.
Certificates must remain unissued.
** If the date selected for the exchange is not a Fund business day the
transaction will be processed on the next Fund business day.
<PAGE>
- --------------------------------------------------------------------------------
6. Shareholder Authorization This section MUST be completed
----
- --------------------------------------------------------------------------------
Telephone Exchanges and Redemptions by Check
Unless I have checked one or both boxes below, these privileges will
automatically apply, and by signing this application, I hereby authorize
Alliance Fund Services, Inc. to act on my telephone instructions, or on
telephone instructions from any person representing himself to be an authorized
employee of an investment dealer or agent requesting a redemption or exchange on
my behalf. (NOTE: Telephone exchanges may only be processed between accounts
that have identical registrations.) Telephone redemption checks will only be
mailed to the name and address of record; and the address must have no change
within the last 30 days. The maximum telephone redemption amount is $50,000 per
check.
[_] I do not elect the telephone exchange service.
---
[_] I do not elect the telephone redemption by check service.
---
I certify under penalty of perjury that the number shown in Section 1 of this
form is my correct tax identification number or social security number and that
I have not been notified that this account is subject to backup withholding.
By selecting any of the above telephone privileges, I agree that neither the
Fund nor Alliance, Alliance Fund Distributors, Inc., Alliance Fund Services,
Inc. or other Fund Agent will be liable for any loss, injury, damage or expense
as a result of acting upon telephone instructions purporting to be on my behalf,
that the Fund reasonably believes to be genuine, and that neither the Fund nor
any such party will be responsible for the authenticity of such telephone
instructions. I understand that any or all of these privileges may be
discontinued by me or the Fund at any time. I understand and agree that the Fund
reserves the right to refuse any telephone instructions and that my investment
dealer or agent reserves the right to refuse to issue any telephone instructions
I may request.
For non-residents only: Under penalties of perjury, I certify that to the best
of my knowledge and belief, I qualify as a foreign person as indicated in
Section 2.
I am of legal age and capacity and have received and read the Prospectus and
agree to its terms.
The Internal Revenue Service does not require your consent to any provision of
this document other than the certification required to avoid backup withholding.
- -------------------------------- ----------------------------------------------
Signature Date
- -------------------------------- -------------------------- -------------------
Signature Date Acceptance Date:
- --------------------------------------------------------------------------------
Dealer/Agent Authorization For selected Dealers or Agents ONLY
- --------------------------------------------------------------------------------
We hereby authorize Alliance Fund Services, Inc. to act as our agent in
connection with transactions under this authorization form; and we guarantee the
signature(s) set forth in Section 6, as well as the legal capacity of the
shareholder.
Dealer/Agent Firm Authorized Signature
--------------------- ---------------------
Representative First Name MI Last Name
-------------- -------- ----------------------
<PAGE>
SIGNATURE CARD
ADVISOR CLASS ACCOUNT # AFD EXCHANGE RESERVES
(if known)
- --------------------------------------------------------------------------------
ACCOUNT NAME(S) AS REGISTERED
- --------------------------------------------------------------------------------
SOCIAL SECURITY NUMBER
- --------------------------------------------------------------------------------
AUTHORIZED SIGNATURE(S) -- for joint accounts, all owners, or their legal
representatives, must sign this card.
1...............................................................................
2...............................................................................
3...............................................................................
- --------------------------------------------------------------------------------
Check One Box [_] All the above signatures are required on checks written
against this account.
[_] Any one signature is acceptable on checks written against this
account.
[_] A combination of signatures is required (specify number).
Subject to conditions printed on reverse side.
STATE STREET BANK AND TRUST COMPANY
<PAGE>
The payment of funds is authorized by the signature(s) appearing on the reverse
side.
If this card is signed by more than one person, all checks will require all
signatures appearing on the reverse side unless a lesser number is indicated. If
no indication is given, all checks will require all signatures. Each signatory
guarantees the genuineness of the other signatures.
The Bank is hereby appointed agent by the person(s) signing this card (the
"Depositor[s]") and, as agent, is authorized and directed to present checks
drawn on this checking account to AFD Exchange Reserves ("AFDER") or its
transfer agent as requests to redeem shares of AFDER registered in the name of
the Depositor(s) in the amounts of such checks and to deposit the proceeds of
such redemptions in this checking account. The Bank shall be liable only for its
own negligence.
The Depositor(s) agrees to be subject to the rules and regulations of the Bank
pertaining to this checking account as amended from time to time. The Bank and
AFDER reserve the right to change, modify or terminate this checking account and
authorization at any time.
Checks may not be for less than $500 or such other minimum amount as may from
time to time be established by AFDER upon prior written notice to its
shareholders. Shares purchased by check (including certified or cashier's check)
will not be redeemed within 15 calendar days of such purchase by checkwriting or
any other method of redemption.
60084GEN-AFDSC
<PAGE>
AFD PRO 2/98
This prospectus does not constitute an offering in any state in which such
offering may not lawfully be made.
TABLE OF CONTENTS PAGE
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Expense Information 2
Financial Highlights 3
Description of the Fund 4
Purchase and Sale of Shares 6
Management of the Fund 9
Dividends, Distributions and Taxes 10
Conversion Feature 10
General Information 13
</TABLE>
ADVISER
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, NY 10105
AFD
- --------------------------------------------------------------------------------
Exchange
- --------------------------------------------------------------------------------
Reserves
- --------------------------------------------------------------------------------
Prospectus
(Advisor Class)
February 2, 1998
Goal: Maximum
current income
consistent with
safety of
principal and
liquidity.
[LOGO OF ALLIANCE APPEARS HERE]
<PAGE>
[LOGO] AFD EXCHANGE RESERVES
_________________________________________________________________
c/o Alliance Fund Services, Inc.
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618
_________________________________________________________________
STATEMENT OF ADDITIONAL INFORMATION
February 2, 1998
________________________________________________________________
This Statement of Additional Information is not a prospectus
but supplements and should be read in conjunction with the
current Prospectus that offers Class A, Class B and Class C
shares of the Fund and the current Prospectus that offers the
Advisor Class shares of the Fund (the "Advisor Class Prospectus"
and, together with the Prospectus for the Fund that offers the
Class A, Class B and Class C shares, the "Prospectus"). Copies
of the Prospectuses may be obtained by contacting Alliance Fund
Services, Inc. at the address or the "For Literature" telephone
number shown above.
TABLE OF CONTENTS
Page
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
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
BROKERAGE AND PORTFOLIO TRANSACTIONS
GENERAL INFORMATION
FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR'S REPORT F-1
APPENDIX A-1
________
This registered service mark used under license from the owner,
Alliance Capital Management L.P.
<PAGE>
________________________________________________________________
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
________________________________________________________________
AFD Exchange Reserves (the "Fund") is a diversified, open-end
investment company. The Fund's objective is maximum current
income to the extent consistent with safety of principal and
liquidity. The Fund pursues its objective by maintaining a
portfolio of high quality U.S. dollar-denominated money market
securities. In accordance with Rule 2a-7 under the Investment
Company Act of 1940 (the "Act"), the Fund will invest in
securities which at the time of investment have remaining
maturities not exceeding 397 days and the average maturity of the
Fund's investment portfolio will not exceed 90 days. Accordingly,
the Fund may make the following investments diversified by
maturities and issuers:
1. Marketable obligations of, or guaranteed by, the United
States Government, its agencies or instrumentalities. These
include issues of the U.S. Treasury, such as bills, certificates
of indebtedness, notes and bonds, and issues of agencies and
instrumentalities established under the authority of an act of
Congress. The latter issues include, but are not limited to,
obligations of the Bank for Cooperatives, Federal Financing Bank,
Federal Home Loan Bank, Federal Intermediate Credit Banks,
Federal Land Banks, Federal National Mortgage Association and
Tennessee Valley Authority. Some of the securities are supported
by the full faith and credit of the U.S. Treasury, others are
supported by the right of the issuer to borrow from the Treasury,
and still others are supported only by the credit of the agency
or instrumentality.
2. Certificates of deposit and bankers' acceptances issued
or guaranteed by, or time deposits maintained at, banks or
savings and loan associations (including foreign branches of U.S.
banks or U.S. or foreign branches of foreign banks) having total
assets of more than $500 million. Certificates of deposit are
receipts issued by a depository institution in exchange for the
deposit of funds. The issuer agrees to pay the amount deposited
plus interest to the bearer of the receipt on the date specified
on the certificate. The certificate usually can be traded in the
secondary market prior to maturity. Bankers' acceptances
typically arise from short-term credit arrangements designed to
enable businesses to obtain funds to finance commercial
transactions. Generally, an acceptance is a time draft drawn on
a bank by an exporter or an importer to obtain a stated amount of
funds to pay for specific merchandise. The draft is then
"accepted" by a bank that, in effect, unconditionally guarantees
to pay the face value of the instrument on its maturity date. The
acceptance may then be held by the accepting bank as an earning
2
<PAGE>
asset or it may be sold in the secondary market at the going rate
of discount for a specific maturity. Although maturities for
acceptances can be as long as 270 days, most acceptances have
maturities of six months or less.
3. Commercial paper, including variable amount master
demand notes, of high quality (i.e., rated A-1 or A-2 by Standard
& Poor's Corporation ("Standard & Poor's"), Prime-1 or Prime-2 by
Moody's Investors Service, Inc. ("Moody's"), Fitch-1 or Fitch-2
by Fitch IBCA, Inc., or Duff 1 or Duff 2 by Duff & Phelps Inc.
or, if not rated, issued by U.S. or foreign companies which have
an outstanding debt issue rated AAA, AA or A by Standard &
Poor's, or Aaa, Aa or A by Moody's and participation interests in
loans extended by banks to such companies). For a description of
such ratings see the Appendix. Commercial paper consists of
short-term (usually from 1 to 270 days) unsecured promissory
notes issued by corporations in order to finance their current
operations. A variable amount master demand note represents a
direct borrowing arrangement involving periodically fluctuating
rates of interest under a letter agreement between a commercial
paper issuer and an institutional lender pursuant to which the
lender may determine to invest varying amounts. For a further
description of variable amount master demand notes, see "Floating
and Variable Rate Obligations" below.
4. Repurchase agreements that are collateralized in full
each day by liquid securities of the types listed above. A
repurchase agreement arises when a buyer purchases a security and
simultaneously agrees to resell it to the vendor at an agreed-
upon future date. The resale price is greater than the purchase
price, reflecting an agreed-upon market rate which is effective
for the period of time the buyer's money is invested in the
security and which is not related to the coupon rate on the
purchased security. Repurchase agreements may be entered into
only with those banks (including State Street Bank and Trust
Company, the Fund's Custodian) or broker-dealers ("vendors") that
are eligible under the procedures adopted by the Trustees of the
Trust for evaluating and monitoring such vendors'
creditworthiness. For each repurchase agreement, the Fund
requires continual maintenance of the market value of underlying
collateral in amounts equal to, or in excess of, the agreement
amount. While the maturities of the underlying collateral may
exceed one year, the term of the repurchase agreement is always
less than one year. In the event that a vendor defaulted on its
repurchase obligation, the Fund might suffer a loss to the extent
that the proceeds from the sale of the collateral were less than
the repurchase price. If the vendor became bankrupt, the Fund
might be delayed in selling the collateral. Repurchase
agreements often are for short periods such as one day or a week,
but may be longer. Repurchase agreements not terminable within
seven days will be limited to no more than 10% of the Fund's
3
<PAGE>
assets. Pursuant to Rule 2a-7, a repurchase agreement is deemed
to be an acquisition of the underlying securities provided that
the obligation of the seller to repurchase the securities from
the fund is collateralized fully (as defined in such Rule).
Accordingly, the vendor of a fully collateralized repurchase
agreement is deemed to be the issuer of the underlying
securities.
Floating and Variable Rate Obligations. The Fund may
purchase floating and variable rate obligations, including
floating and variable rate demand notes and bonds. The Fund may
invest in variable and floating rate obligations whose interest
rates are adjusted either at pre-designated periodic intervals or
whenever there is a change in the market rate to which the
security's interest rate is tied. The Fund may also purchase
floating and variable rate demand notes and bonds, which are
obligations ordinarily having stated maturities in excess of 13
months, but which permit the holder to demand payment of
principal at any time, or at specified intervals not exceeding 13
months, in each case upon not more than 30 days' notice.
The Fund also invests in variable amount master demand notes
(which may have demand features in excess of 30 days) which are
obligations that permit the Fund to invest fluctuating amounts,
at varying rates of interest, pursuant to direct arrangements
between the Fund, as lender, and the borrower. Because these
obligations are direct lending arrangements between the lender
and the borrower, it is not contemplated that such instruments
generally will be traded, and there generally is no established
secondary market for these obligations, although they are
redeemable at face value, plus accrued interest. Accordingly,
when these obligations are not secured by letters of credit or
other credit support arrangements, the Fund's right to redeem is
dependent on the ability of the borrower to pay principal and
interest on demand.
Reverse Repurchase Agreements. While the Fund has no plans to
do so, it may enter into reverse repurchase agreements, which
involve the sale of money market securities held by the Fund with
an agreement to repurchase the securities at an agreed-upon
price, date and interest payment.
Asset-Backed Securities. The Fund may invest in asset-
backed securities that meet its existing diversification, quality
and maturity criteria. Asset-backed securities are securities
issued by special purpose entities whose primary assets consist
of a pool of loans or accounts receivable. The securities may be
in the form of a beneficial interest in a special purpose trust,
limited partnership interest, or commercial paper or other debt
securities issued by a special purpose corporation. Although the
securities may have some form of credit or liquidity enhancement,
4
<PAGE>
payments on the securities depend predominately upon collection
of the loans and receivables held by the issuer. It is the
Fund's current intention to limit its investment in such
securities to not more than 5% of its net assets. a
Illiquid Securities. The Fund has adopted the following
investment policy which may be changed by the vote of the
Trustees: The Fund will not invest in illiquid securities if
immediately after such investment more than 10% of the Fund's net
assets (taken at market value) would be invested in such
securities. For this purpose, illiquid securities include, among
others, (a) securities that are illiquid by virtue of the absence
of a readily available market or legal or contractual restriction
on resale, other than restricted securities determined by
Alliance Capital Management L.P. ("Alliance") to be liquid in
accordance with procedures adopted by the Trustees of the Fund
and (b) repurchase agreements not terminable within seven days.
As to these securities, the Fund is subject to a risk that should
the Fund desire to sell them when a ready buyer is not available
at a price the Fund deems representative of their value, the
value of the Fund's net assets could be adversely affected.
The Fund may purchase restricted securities that are
determined by Alliance to be liquid in accordance with procedures
adopted by the Trustees. Restricted securities are securities
subject to contractual or legal restrictions on resale, such as
those arising from an issuer's reliance upon certain exemptions
from registration under the Securities Act of 1933, as amended
(the "Securities Act"). For example, the Fund may purchase
restricted securities eligible for resale under Rule 144A under
the Securities Act and commercial paper issued in reliance upon
the exemption from registration in Section 4(2) of the Securities
Act and, in each case, determined by Alliance to be liquid in
accordance with procedures adopted by the Trustees of the Fund.
In recent years, a large institutional market has developed
for certain types of restricted securities including, among
others, private placements, repurchase agreements, commercial
paper, foreign securities and corporate bonds and notes. These
instruments are often restricted securities because they are sold
in transactions not requiring registration. For example,
commercial paper issues in which the Fund may invest include,
among others, securities issued by major corporations without
registration under the Securities Act in reliance on the
exemption from registration afforded by Section 3(a)(3) of such
Act and commercial paper issued in reliance on the private
placement exemption from registration which is afforded by
Section 4(2) of the Securities Act ("Section 4(2) paper").
Section 4(2) paper is restricted as to disposition under the
Federal securities laws in that any resale must also be made in
an exempt transaction. Section 4(2) paper is normally resold to
5
<PAGE>
other institutional investors through or with the assistance of
investment dealers who make a market in Section 4(2) paper, thus
providing liquidity. Institutional investors, rather than
selling these instruments to the general public, often depend on
an efficient institutional market in which such restricted
securities can be readily resold in transactions not involving a
public offering. In many instances, therefore, the existence of
contractual or legal restrictions on resale to the general public
does not, in practice, impair the liquidity of such investments
from the perspective of institutional holders. In recognition of
this fact, the Staff of the Securities and Exchange Commission
("Commission") has stated that Section 4(2) paper may be
determined to be liquid by the Fund's Trustees, so long as
certain conditions, which are described below, are met.
In 1990, in part to enhance the liquidity in the
institutional markets for restricted securities, the Commission
adopted Rule 144A under the Securities Act to establish a safe
harbor from the Securities Act's registration requirements for
resale of certain restricted securities to qualified
institutional buyers. Pursuant to Rule 144A, the institutional
restricted securities markets may provide both readily
ascertainable values for restricted securities and the ability to
liquidate an investment in order to satisfy share redemption
orders on a timely basis. An insufficient number of qualified
institutional buyers interested in purchasing certain restricted
securities held by the Fund, however, could affect adversely the
marketability of such portfolio securities and the Fund might be
unable to dispose of such securities promptly or at reasonable
prices. Rule 144A has already produced enhanced liquidity for
many restricted securities, and market liquidity for such
securities may continue to expand as a result of Rule 144A and
the consequent inception of the PORTAL System sponsored by the
National Association of Securities Dealers, Inc., an automated
system for the trading, clearance and settlement of unregistered
securities.
The Fund's Trustees have the ultimate responsibility for
determining whether specific securities are liquid or illiquid.
The Trustees have delegated the function of making day-to-day
determinations of liquidity to Alliance, pursuant to guidelines
approved by the Trustees.
Alliance takes into account a number of factors in
determining whether a restricted security eligible for resale
under Rule 144A of the Securities Act being considered for
purchase is liquid, including at least the following:
(i) the frequency of trades and quotations for the
security;
6
<PAGE>
(ii) the number of dealers making quotations to purchase
or sell the security;
(iii) the number of other potential purchasers of the
security;
(iv) the number of dealers undertaking to make a market
in the security;
(v) the nature of the security (including its
unregistered nature) and the nature of the
marketplace for the security (e.g., the time needed
to dispose of the security, the method of
soliciting offers and the mechanics of transfer);
and
(vi) any applicable Commission interpretation or
position with respect to such types of securities.
To make the determination that an issue of Section 4(2) paper
is liquid, Alliance must conclude that the following conditions
have been met:
(i) the Section 4(2) paper must not be traded flat or
in default as to principal or interest; and
(ii) the Section 4(2) paper must be rated in one of the
two highest rating categories by at least two
nationally recognized statistical rating
organizations ("NRSROS"), or if only NRSRO rates
the security, by that NRSRO; if the security is
unrated, Alliance must determine that the security
is of equivalent quality.
Alliance must also consider the trading market for the
specific security, taking into account all relevant factors.
Following the purchase of a restricted security by the Fund,
Alliance monitors continuously the liquidity of such security and
reports to the Trustees regarding purchases of liquid restricted
securities.
Subject to its policy of not investing 25% or more of its
total assets in instruments issued by foreign branches of foreign
banks and other foreign entities, the Fund may make investments
in certificates of deposit and bankers' acceptances issued or
guaranteed by, or time deposits maintained at, foreign branches
of U.S. banks and U.S. and foreign branches of foreign banks, and
commercial paper issued by foreign companies. To the extent that
the Fund makes such investments, consideration is given to their
domestic marketability, the lower reserve requirements generally
7
<PAGE>
mandated for overseas banking operations, the possible impact of
interruptions in the flow of international currency transactions,
potential political and social instability or expropriation,
imposition of foreign taxes, the lower level of government
supervision of issuers, the difficulty in enforcing contractual
obligations and the lack of uniform accounting and financial
reporting standards. There can be no assurance, as is true with
all investment companies, that the Fund's objective will be
achieved.
Net income to shareholders is aided both by the Fund's
ability to make investments in large denominations and by its
efficiencies of scale. Also, the Fund may seek to improve
portfolio income by selling certain portfolio securities prior to
maturity in order to take advantage of yield disparities that
occur in money markets. The Fund's investment objective may not
be changed without the affirmative vote of a majority of the
Fund's outstanding shares as defined below. Except as otherwise
provided, the Fund's investment policies are not designated
"fundamental policies" within the meaning of the Act and may,
therefore, be changed by the Trustees of the Fund without a
shareholder vote. However, the Fund will not change its
investment policies without contemporaneous written notice to
shareholders.
The Fund will comply with Rule 2a-7 under the Act, as amended
from time to time, including the diversification, quality and
maturity limitations imposed by the Rule.
Currently, pursuant to Rule 2a-7, the Fund may invest only in
"eligible securities," as that term is defined in the Rule.
Generally, an eligible security is a security that (i) is
denominated in U.S. Dollars and has a remaining maturity of 397
days or less; (ii) is rated, or is issued by an issuer with
short-term debt outstanding that is rated, in one of the two
highest rating categories by two NRSROs or, if only one NRSRO has
issued a rating, by that NRSRO; and (iii) has been determined by
Alliance to present minimal credit risks pursuant to procedures
approved by the Trustees. A security that originally had a
maturity of greater than 397 days is an eligible security if its
remaining maturity at the time of purchase is 397 calendar days
or less and the issuer has outstanding short-term debt that would
be an eligible security. Unrated securities may also be eligible
securities if Alliance determines that they are of comparable
quality to a rated eligible security pursuant to guidelines
approved by the Trustees. A description of the ratings of some
NRSROs appears in the Appendix attached hereto.
Under Rule 2a-7 the Fund may not invest more than five
percent of its assets in the securities of any one issuer other
than the United States Government, its agencies or
8
<PAGE>
instrumentalities. In addition, the Fund may not invest in a
security that has received, or is deemed comparable in quality to
a security that has received, the second highest rating by the
requisite number of NRSROs (a "second tier security") if
immediately after the acquisition thereof the Fund would have
invested more than (A) the greater of one percent of its total
assets or one million dollars in securities issued by that issuer
which are second tier securities and (B) five percent of its
total assets in second tier securities.
Certain Fundamental Investment Policies
The following restrictions may not be changed without the
affirmative vote of a majority of the Fund's outstanding shares,
which means the vote of (1) 67% or more of the shares represented
at a meeting at which more than 50% of the outstanding shares are
represented or (2) more than 50% of the outstanding shares,
whichever is less.
As a matter of fundamental policy, the Fund may not:
The Fund:
(i) May not invest 25% or more of its assets in the
securities of issuers conducting their principal business
activities in any one industry; provided that, for purposes of
this restriction, there is no limitation with respect to
investments in securities issued or guaranteed by the United
States Government, its agencies or instrumentalities or
certificates of deposit and bankers' acceptances issued or
guaranteed by, or interest-bearing savings deposits maintained
at, banks and savings institutions and loan associations
(including foreign branches of U.S. banks and U.S. branches of
foreign banks);
(ii) May not invest more than 5% of its assets in the
securities of any one issuer (exclusive of securities issued or
guaranteed by the United States Government, its agencies or
instrumentalities), except that up to 25% of the value of the
Fund's total assets may be invested without regard to such 5%
limitation;
(iii) May not invest in more than 10% of any one class of an
issuer's outstanding securities (exclusive of securities issued
or guaranteed by the United States Government, its agencies or
instrumentalities);
(iv) May not borrow money except from banks on a temporary
basis or via entering into reverse repurchase agreements in
aggregate amounts not to exceed 15% of the Fund's assets and to
be used exclusively to facilitate the orderly maturation and sale
9
<PAGE>
of portfolio securities during any periods of abnormally heavy
redemption requests, if they should occur; such borrowings may
not be used to purchase investments and the Fund will not
purchase any investment while any such borrowings exist;
(v) May not pledge, hypothecate or in any manner transfer,
as security for indebtedness, any securities owned or held by the
Fund except as may be necessary in connection with any borrowing
mentioned above, including reverse repurchase agreements, and in
an aggregate amount not to exceed 15% of the Fund's assets;
(vi) May not make loans, provided that the Fund may purchase
money market securities and enter into repurchase agreements;
or
(vii) May not (a) make investments for the purpose of
exercising control; (b) purchase securities of other investment
companies, except in connection with a merger, consolidation,
acquisition or reorganization; (c) invest in real estate (other
than money market securities secured by real estate or interests
therein or money market securities issued by companies which
invest in real estate, or interests therein), commodities or
commodity contracts, interests in oil, gas and other mineral
exploration or other development programs; (d) purchase
securities on margin; (e) make short sales of securities or
maintain a short position or write, purchase or sell puts, calls,
straddles, spreads or combinations thereof; (f) invest in
securities of issuers (other than agencies and instrumentalities
of the United States Government) having a record, together with
predecessors, of less than three years of continuous operation if
more than 5% of the Fund's assets would be invested in such
securities; (g) purchase or retain securities of any issuers if
those officers and trustees of the Fund and employees of Alliance
who own individually more than 1/2 of 1% of the outstanding
securities of such issuer together own more than 5% of the
securities of such issuer; or (h) act as an underwriter of
securities.
As a matter of operating policy, fundamental investment
restriction number 2 would give the Fund the ability to invest,
with respect to 25% of its assets, more than 5% of its assets in
any one issuer only in the event Rule 2a-7 is amended in the
future.
In connection with the qualification or registration of the
Fund's shares for sale under the securities laws of certain
states, the Fund has agreed, in addition to the foregoing
investment restrictions, that it (i) will not invest more than 5%
of the value of its total assets at the time of purchase in the
commercial paper, including variable amount master demand notes,
of any one issuer, and (ii) will not pledge, hypothecate or in
10
<PAGE>
any manner transfer, as security for indebtedness, securities
owned by the Fund if such pledge, hypothecation, or transfer
would then result in more than 10% of the Fund's net assets being
so encumbered.
________________________________________________________________
MANAGEMENT OF THE FUND
________________________________________________________________
Trustees and Officers
The Trustees and principal officers of the Trust, their ages
and their principal occupations during the past five years are
set forth below. Unless otherwise specified, the address of each
such person is 1345 Avenue of the Americas, New York, New York
10105. Each Trustee and officer is also a director, trustee or
officer of other registered investment companies sponsored by
Alliance.
Trustees
JOHN D. CARIFA,1 52, is the President, Chief Operating
Officer and a Director of Alliance Capital Management Corporation
("ACMC"),2 with which he has been associated since prior to
1993.
RUTH BLOCK, 67, is a Director of Ecolab Incorporated
(specialty chemicals) and Amoco Corporation (oil and gas). She
was formerly an Executive Vice President and the Chief Insurance
Officer of the Equitable Life Assurance Society of the United
States since prior to 1993. Her address is P.O. Box 4653,
Stamford, Connecticut 06903.
DAVID H. DIEVLER, 68, was formerly a Senior Vice President of
ACMC, with which he had been associated since prior to 1993. He
is currently an independent consultant. His address is P.O. Box
167, Spring Lake, New Jersey 07762.
JOHN H. DOBKIN, 55, has been President of Historic Hudson
Valley (historic preservation) since prior to 1993. Previously,
he was Director of the National Academy of Design. From 1987 to
1992 he was a Director of ACMC. His address is 105 West 55th
Street, New York, New York 10019.
_________________________
1An "interested person" of the Fund as defined in the Act.
2For purposes of this Statement of Additional Information,
ACMC refers to Alliance Capital Management Corporation, the
sole general partner of Alliance, and to the predecessor
general partner of Alliance of the same name.
11
<PAGE>
WILLIAM H. FOULK, JR., 65, is an investment adviser and
independent consultant. He was formerly Senior Manager of
Barrett Associates, Inc., a registered investment adviser, with
which he had been associated since prior to 1993. His address is
2 Greenwich Plaza, Suite 100, Greenwich, CT 06830.
DR. JAMES M. HESTER, 73, is President of the Harry Frank
Guggenheim Foundation with which he has been associated since
prior to 1993. He was formerly President of New York University,
The New York Botanical Garden and Rector of the United Nations
University. His address is 45 East 89th Street, New York, New
York 10128.
CLIFFORD L. MICHEL, 58, is a Partner in the law firm of
Cahill Gordon & Reindel, with which he has been associated since
prior to 1993. He is also President, Chief Executive Officer and
a Director of Wenonah Development Company (investments) and a
Director of Placer Dome, Inc. (mining) and since 1996, he is
Director, Vice Chairman and Treasurer of Atlantic Health Systems
Inc. and Atlantic Hospital. His address is 80 Pine Street, New
York, New York 10005.
DONALD J. ROBINSON, 63, was formerly a Senior Partner of the
law firm of Orrick, Herrington & Sutcliffe and is currently
Senior Counsel to that firm. His address is 666 Fifth Avenue,
19th Floor, New York, New York 10103.
Officers
JOHN D. CARIFA, Chairman and President, see Biography above.
KATHLEEN A. CORBET, Senior Vice President, 37, is an
Executive Vice President of ACMC, with which she has been
associated since prior to 1993. Prior thereto, she headed
Equitable Capital Management Corporation's Fixed Income
Management Department since prior to 1993.
WAYNE D. LYSKI, Senior Vice President, 56, is an Executive
Vice President of ACMC, with which he has been associated since
prior to 1993.
JOHN F. CHIODI, Jr., Vice President, 31, is a Vice President
of ACMC, with which he has been associated since prior to 1993.
MARK D. GERSTEN, Treasurer and Chief Financial Officer, 47,
is a Senior Vice President of Alliance Fund Services, Inc.
("AFS") and a Vice President of Alliance Fund Distributors, Inc.
("AFD"), with which he has been associated since prior to
1993.
12
<PAGE>
EDMUND P. BERGAN, Jr., Secretary, 47, is a Senior Vice
President and General Counsel of AFD and Vice President and
Associate General Counsel of ACMC, with which he has been
associated since prior to 1993.
EMILIE D. WRAPP, Assistant Secretary, 42, is a Vice President
and Special Counsel of AFD, with which she has been associated
since prior to 1993.
VINCENT S. NOTO - Controller, 33, is an Assistant Vice
President of AFS, with which he has been associated since prior
to 1993.
The Fund does not pay any fees to, or reimburse expenses of,
its Trustees who are considered "interested persons" of the Fund.
The aggregate compensation paid by the Fund to each of the
Trustees during its fiscal year ended September 30, 1997, and the
aggregate compensation paid to each of the Trustees during
calendar year 1997 by all of the registered investment companies
to which Alliance provides investment advisory services
(collectively, the "Alliance Fund Complex"), are set forth below.
Each of the Trustees is a director or trustee of one or more
other registered investment companies in the Alliance Fund
Complex.
13
<PAGE>
Total Number
of Investment Total Number
Companies in of Investment
the Alliance Portfolios
Total Complex, within the
Compensation Including Funds, Including
From the the Fund, as the Fund, as
Aggregate Alliance Fund to which the to which the
Compensation Complex, Trustee is Trustee is a
Name of from the Including the a Director Director or
Trustee of the Fund Fund Fund or Trustee Trustee
________________ ____________ _____________ ____________ ______________
John D. Carifa $0 $0 54 118
Ruth Block $3,497 $163,997 40 80
David H. Dievler $3,001 $188,526 47 83
John H. Dobkin $3,030 $127,775 44 80
William H. Foulk, Jr. $3,044 $174,996 48 113
Dr. James M. Hester $2,984 $156,499 40 76
Clifford L. Michel $2,753 $194,499 41 92
Donald J. Robinson $2,971 $235,500 41 94
Robert C. White $ 731 $ 88,500
As of January 12, 1998, the Trustees and officers of the Fund
as a group owned less than 1% of the shares of the Fund.
The Adviser
Alliance Capital Management L.P., a New York Stock Exchange
listed company with principal offices at 1345 Avenue of the
Americas, New York, New York 10105, has been retained under an
advisory agreement (the "Advisory Agreement") to provide
investment advice and, in general, to conduct the management and
investment program of the Fund under the supervision and control
of the Fund's Trustees.
The Adviser is a leading international investment manager
supervising client accounts with assets as of September 30, 1997
totaling more than $217.3 billion (of which approximately $81
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 September 30,
1997, 28 of the FORTUNE 100 Companies. As of that date, the
Adviser and its subsidiaries employed approximately 1,500
employees who operated out of domestic offices and the offices of
subsidiaries in Bahrain, Bangalore, Chennai, Istanbul, London,
Madrid, Mumbai, Paris, Singapore, Tokyo and Toronto and affiliate
offices of Vienna, Warsaw, Hong Kong, Sao Paulo and Moscow. The
56 registered investment companies comprising 118 separate
14
<PAGE>
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"). ECI is a holding company
controlled by AXA-UAP, a French insurance holding company which at
September 30, 1997, beneficially owned approximately 59% of the
outstanding voting shares of ECI. As of June 30, 1997, ACMC, Inc.
and Equitable Capital Management Corporation, each a wholly-owned
direct or indirect subsidiary of Equitable, together with
Equitable, owned in the aggregate approximately 57% of the issued
and outstanding units representing assignments of beneficial
ownership of limited partnership interests in the Adviser.
AXA-UAP is a holding company for an international group of
insurance and related financial services companies. AXA-UAP's
insurance operations include activities in life insurance,
property and casualty insurance and reinsurance. The insurance
operations are diverse geographically, with activities principally
in Western Europe, North America and the Asia/Pacific area. AXA-
UAP is also engaged in asset management, investment banking,
securities trading, brokerage, real estate and other financial
services activities principally in the United States, as well as
in Western Europe and the Asia/Pacific area.
Based on information provided by AXA-UAP, as of September 30,
1997 more than 25% of the voting power of AXA-UAP was controlled
directly and indirectly by FINAXA, a French holding company. As
of September 30, 1997 more than 25% of the voting power of FINAXA
was controlled directly and indirectly by four French mutual
insurance companies (the "Mutuelles AXA"), one of which, AXA
Assurances I.A.R.D. Mutuelle, itself controlled directly and
indirectly more than 25% of the voting power of FINAXA. Acting as
a group, the Mutuelles AXA control AXA-UAP and FINAXA.
Under the Advisory Agreement, Alliance provides investment
advisory services and order placement facilities for the Fund and
pays all compensation of Trustees and officers of the Fund who are
affiliated persons of Alliance. Alliance or its affiliates also
furnish the Fund without charge with management supervision and
assistance and office facilities. Under the Advisory Agreement,
the Fund pays an advisory fee at an annual rate of .25 of 1% of
the first $1.25 billion of the average daily net value of the
Fund's net assets, .24 of 1% of the next $.25 billion of such
assets, .23 of 1% of the next $.25 billion of such assets, .22 of
1% of the next $.25 billion of such assets, .21 of 1% of the next
15
<PAGE>
$1 billion of such assets and .20 of 1% of the average daily value
of the Fund's net assets in excess of $3 billion. The fee is
accrued daily and paid monthly. As to the obtaining of clerical
and accounting services not required to be provided to the Fund by
Alliance under the Advisory Agreement, the Fund may employ its own
personnel. For such services, it also may utilize personnel
employed by Alliance; if so done, the services are provided to the
Fund at cost and the payments therefor must be specifically
approved in advance by the Trustees. For the fiscal year ended
September 30, 1997, Alliance received from the Fund advisory fees
of $338,864. For the fiscal year ended September 30, 1996,
Alliance received from the Fund advisory fees of $297,876.
The Advisory Agreement is terminable without penalty by a vote
of a majority of the Fund's outstanding voting securities or by a
vote of a majority of the Fund's Trustees on 60 days' written
notice, or by Alliance on 60 days' written notice, and will
automatically terminate in the event of its assignment. The
Advisory Agreement provides that in the absence of willful
misfeasance, bad faith or gross negligence on the part of
Alliance, or of reckless disregard of its obligations thereunder,
Alliance shall not be liable for any action or failure to act in
accordance with its duties thereunder.
The Advisory Agreement became effective on March 23, 1994
having been approved by the unanimous vote, cast in person, of the
Fund's Trustees, including the Trustees who are not parties to the
Advisory Agreement or interested persons as defined in the Act of
any such party, at a meeting called for that purpose and held on
January 18, 1994, and by the Fund's initial shareholder on
March 14, 1994.
The Advisory Agreement will remain in effect until
September 30, 1998 and thereafter for successive twelve-month
periods (computed from each October 1), provided that such
continuance is approved at least annually by a vote of a majority
of the Fund's outstanding voting securities or by the Fund's
Trustees, including in either case, approval by a majority of the
Trustees who are not parties to the Advisory Agreement or
interested persons of any such party as defined by the Act.
Certain other clients of Alliance may have investment
objectives and policies similar to those of the Fund. Alliance
may, from time to time, make recommendations which result in the
purchase or sale of a particular security by its other clients
simultaneously with the Fund. If transactions on behalf of more
than one client during the same period increase the demand for
securities being purchased or the supply of securities being sold,
there may be an adverse effect on price or quantity. It is the
policy of Alliance to allocate advisory recommendations and the
placing of orders in a manner which is deemed equitable by
16
<PAGE>
Alliance to the accounts involved, including the Fund. When two
or more of the clients of Alliance (including the Fund) are
purchasing or selling the same security on a given day from the
same broker-dealer, such transactions may be averaged as to price.
________________________________________________________________
EXPENSES OF THE FUND
________________________________________________________________
Distribution Services Agreement
The Fund has entered into a Distribution Services Agreement
(the "Agreement") with Alliance Fund Distributors, Inc. the Fund's
principal underwriter(the "Principal Underwriter") to permit the
Fund to pay distribution services fees to defray expenses
associated with distribution of its Class A, Class B and Class C
shares in accordance with a plan of distribution which is included
in the Agreement and has been duly adopted and approved in
accordance with Rule 12b-1 adopted by the Commission under the Act
(the "Rule 12b-1 Plan").
Under the Agreement, the Treasurer of the Fund reports the
amounts expended under the Rule 12b-1 Plan and the purposes for
which such expenditures were made to the Trustees of the Fund for
their review on a quarterly basis. Also, the Agreement provides
that the selection and nomination of Trustees who are not
interested persons of the Fund (as defined in the Act) are
committed to the discretion of such disinterested Trustees then in
office. The Agreement was initially approved by the Trustees of
the Fund at a meeting held on January 18, 1994, and by the Fund's
initial shareholder on March 14, 1994.
In approving the Agreement, the Trustees of the Fund
determined that there was a reasonable likelihood that the
Agreement would benefit the Fund and its shareholders. Information
with respect to distribution services fees and other revenues and
expenses of the Principal Underwriter will be presented to the
Trustees each year for their consideration in connection with
their deliberations as to the continuance of the Agreement. In
their review of the Agreement, the Trustees will be asked to take
into consideration separately with respect to each class the
distribution expenses incurred with respect to such class. The
distribution services fee of a particular class will not be used
to subsidize the provision of distribution services with respect
to any other class.
During the Fund's fiscal year ended September 30, 1997, the
Fund paid distribution services fees for expenditures under the
Agreement to the Principal Underwriter with respect to Class A
shares, in amounts aggregating $199,655, which constituted .50 of
17
<PAGE>
1% of the average daily net assets attributable to Class A during
such fiscal year, and the Adviser made payments from its own
resources aggregating $402,234. Of the $601,889 paid by the Fund
and the Adviser under the Agreement, $35,372 was spent on
advertising, $6,647 on the printing and mailing of prospectuses
for persons other than current shareholders, $170,360 for
compensation to broker-dealers, $286,458 for compensation to sales
personnel and $103,052 was spent on the printing of sales
literature, due diligence, travel, entertainment, occupancy,
communications, taxes, depreciation and other promotional
expenses.
During the Fund's fiscal year ended September 30, 1997, the
Fund paid distribution services fees for expenditures under the
Agreement to The Principal Underwriter with respect to Class B
shares, in amounts aggregating $749,018, which constituted 1% of
the average daily net assets attributable to Class B during such
fiscal year, and the Adviser made payments from its own resources
aggregating $1,110,296. Of the $1,859,314 paid by the Fund and
the Adviser under the Agreement in the case of the Class B shares,
$56,514 was spent on advertising, $9,141 on the printing and
mailing of prospectuses for persons other than current
shareholders, $1,386,170 for compensation to broker-dealers,
$189,869 for compensation paid to sales personnel, $92,693 for
interest on Class B shares financing and $124,927 was spent on the
printing of sales literature, due diligence, travel,
entertainment, occupancy, communications, taxes, depreciation and
other promotional expenses.
During the Fund's fiscal year ended September 30, 1997, the
Fund paid distribution services fees for expenditures under the
Agreement to the Principal Underwriter with respect to Class C
shares, in amounts aggregating $155,080, which constituted .75 of
1% of the average daily net assets attributable to Class C during
such fiscal year, and the Adviser made payments from its own
resources aggregating $257,779. Of the $412,859 paid by the Fund
and the Adviser under the Agreement in the case of the Class C
shares, $17,225 was spent on advertising, $3,119 on the printing
and mailing of prospectuses for persons other than current
shareholders, $179,247 for compensation to broker-dealers,
$146,438 for compensation to sales personnel, $24,649 for interest
on Class C shares financing and $42,181 was spent on the printing
of sales literature, due diligence, travel, entertainment,
occupancy, communications, taxes, depreciation and other
promotional expenses.
Distribution services fees are accrued daily and paid monthly
and are charged as expenses of the Fund as accrued. The
distribution services fees attributable to the Class B shares and
Class C shares are designed to permit an investor to purchase such
shares through broker-dealers without the assessment of an initial
18
<PAGE>
sales charge, and, in the case of Class C shares, without the
assessment of a contingent deferred sales charge, and at the same
time to permit the Principal Underwriter to compensate broker-
dealers in connection with the sale of such shares. In this
regard, the purpose and function of the combined contingent
deferred sales charge and distribution services fee on the Class B
shares, and the distribution services fee on the Class C shares,
are the same as those of the initial sales charge (or contingent
deferred sales charge, when applicable) and distribution services
fee with respect to the Class A shares in that in each case the
sales charge and/or distribution services fee provide for the
financing of the distribution of the Fund's shares.
The Agreement became effective on March 23, 1994 with respect
to the Class A shares, Class B shares and Class C shares and June
4, 1996 with respect to the Advisor Class shares. The Agreement
will continue in effect until September 30, 1998 and thereafter
for successive twelve-month periods (computed from each October 1)
with respect to each class of the Fund, provided, however, that
such continuance is specifically approved at least annually by the
Trustees of the Fund or by vote of the holders of a majority of
the outstanding voting securities (as defined in the Act) of that
class, and in either case, by a majority of the Trustees of the
Fund who are not parties to this agreement or interested persons,
as defined in the Act, of any such party (other than as trustees
of the Fund) and who have no direct or indirect financial interest
in the operation of the Rule 12b-1 Plan or any agreement related
thereto. In the event that the Agreement is terminated or not
continued with respect to the Class A shares, Class B shares or
Class C shares, (i) no distribution services fees (other than
current amounts accrued but not yet paid) would be owed by the
Fund to the Principal Underwriter with respect to that class, and
(ii) the Fund would not be obligated to pay the Principal
Underwriter for any amounts expended under the Agreement not
previously recovered by the Principal Underwriter from
distribution services fees in respect of shares of such class or
through deferred sales charges.
All material amendments to the Agreement will become effective
only upon approval as provided in the preceding paragraph; and the
Agreement may not be amended in order to increase materially the
costs that of the Fund may bear pursuant to the Agreement without
the approval of a majority of the holders of the outstanding
voting shares of the Fund or the class or classes of the Fund
affected. The Agreement may be terminated (a) by the Fund without
penalty at any time by a majority vote of the holders of the
Fund's outstanding voting securities, voting separately by class,
or by a majority vote of the disinterested Trustees or (b) by the
Principal Underwriter. To terminate the Agreement, any party must
give the other parties 60 days' written notice; to terminate the
Rule 12b-1 Plan only, the Fund is not required to give prior
19
<PAGE>
notice to the Principal Underwriter. The Agreement will terminate
automatically in the event of its assignment.
Transfer Agency Agreement
Alliance Fund Services, Inc., an indirect wholly-owned
subsidiary of Alliance, receives a transfer agency fee per account
holder of each of the Class A shares, Class B shares, Class C
shares and Advisor Class shares of the Fund, plus reimbursement
for out-of-pocket expenses. The transfer agency fee with respect
to the Class B shares and Class C shares is higher than the
transfer agency fee with respect to the Class A shares and Advisor
Class shares reflecting the additional costs associated with the
Class B and Class C contingent deferred sales charges. For the
fiscal year ended September 30, 1997, the Fund paid AFS $160,742
pursuant the Transfer Agency Agreement.
________________________________________________________________
PURCHASE OF SHARES
________________________________________________________________
The following information supplements that set forth in the
Fund's Prospectus under the heading "Purchase and Sale of Shares."
General
Shares of the Fund are offered on a continuous basis at a
price equal to their net asset value. Shares of the Fund are
available to holders of shares of other Alliance Mutual Funds who
wish to exchange their shares for shares of a money market fund
and also may be purchased for cash.
A transaction, service, administrative or other similar fee
may be charged by your broker-dealer, agent, financial
intermediary or other financial representative with respect to the
purchase, sale or exchange of Class A, Class B, Class C or Advisor
Class shares made through such financial representative. Such
financial intermediaries may also impose requirements with respect
to the purchase, sale or exchange of shares that are different
from, or in addition to, those imposed by the Fund, including
requirements as to the minimum initial and subsequent investment
amounts.
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 Advisor Class Prospectus and this Statement of
Additional Information. A transaction fee may be charged by your
20
<PAGE>
financial representative with respect to the purchase or sale of
Advisor Class shares made through such financial representative.
The Fund's four classes of shares each represent an interest
in the same portfolio of investments of the Fund, have the same
rights and are identical in all respects, except that (i) Class A
and Class B shares bear the expense of their respective contingent
deferred sales charges, (ii) Class B and Class C shares bear the
expense of a higher distribution services fee and higher transfer
agency costs, (iii) each class has exclusive voting rights with
respect to provisions of the Rule 12b-1 Plan pursuant to which its
distribution services fee is paid which relates to a specific
class and other matters for which separate class voting is
appropriate under applicable law, provided that, if the Fund
submits to a vote of both the Class A shareholders and the Class B
shareholders an amendment to the Rule 12b-1 Plan that would
materially increase the amount to be paid thereunder with respect
to the Class A shares, the Class A shareholders and the Class B
shareholders will vote separately by Class, and (iv) only the
Class B shares are subject to a conversion feature. Each class
has different exchange privileges and certain different
shareholder service options available.
Acquisitions By Exchange
An exchange is effected through the redemption of the Alliance
Mutual Fund shares tendered for exchange and the purchase of
shares of the Fund at net asset value. The Alliance Mutual Fund
the shares of which are being exchanged must receive (i) proper
instructions and any necessary supporting documents as described
in such Fund's Prospectus, or (ii) a telephone request for such
exchange in accordance with the procedures set forth in the
following paragraph. Exchanges involving the redemption of shares
recently purchased by check will be permitted only after the
Alliance Mutual Fund whose shares have been tendered for exchange
is reasonable assured that the check has cleared, which normally
takes up to 15 calendar days following the purchase date.
Exchanges of shares of Alliance Mutual Funds will generally result
in the realization of gain or loss for federal income tax
purposes.
Eligible shareholders desiring to make an exchange should
telephone Alliance Fund Services, Inc. with their account number
and other details of the exchange, at (800) 221-5672 between
9:00 a.m. and 4:00 p.m., Eastern time, on a Fund business day. A
Fund business day is any day the New York Stock Exchange (the
"Exchange") is open for trading. Telephone requests for exchanges
received before 4:00 p.m. Eastern time on a Fund business day will
be processed as of the close of business on that day. During
periods of drastic economic or market developments, such as the
market break of October 1987, it is possible that shareholders
21
<PAGE>
would have difficulty in reaching AFS 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
AFS at the address shown on the cover of this Statement of
Additional Information.
Each Fund shareholder, and the shareholder's selected dealer,
agent or financial representative, as applicable, are authorized
to make telephone requests for exchanges unless AFS receives
written instructions to the contrary from the shareholder or the
shareholder declines the privilege by checking the appropriate box
on the Subscription Application found in the Prospectus. Such
telephone requests cannot be accepted with respect to shares then
represented by stock certificates. Shares acquired pursuant to a
telephone request for exchange will be held under the same account
registration as the shares redeemed through such exchange.
Purchases for Cash
Shares of the Fund should be purchased for cash only as a
temporary investment pending exchange into another Alliance Mutual
Fund and should not be held as a long-term investment.
Shares of the Fund are offered on a continuous basis at a
price equal to their net asset value ("Class A shares"), with a
contingent deferred sales charge ("Class B shares"), without any
initial sales charge, and, as long as the shares are held for a
year or more, without any contingent deferred sales charge ("Class
C shares"), or, to investors eligible to purchase Advisor class
shares without any initial, contingent deferred, or asset-based
sales charge, in each case described below. Shares of the Fund
that are offered subject to a sales charge are offered through
(i) investment dealers that are members of the National
Association of Securities Dealers, Inc. and have entered into
selected dealer agreements with the Principal Underwriter
("selected dealers"), (ii) depository institutions and other
financial intermediaries or their affiliates that have entered
into selected agent agreements with the Principal Underwriter
("selected agents"), and (iii) the Principal Underwriter.
Advisor Class shares of the Fund may be purchased and held
solely (i) through accounts established under fee-based programs,
sponsored and maintained by registered broker-dealers or other
financial intermediaries and approved by the Principal
Underwriter, (ii) through self-directed defined contribution
employee benefit plans (e.g., 401(k) plans) that have at least
1,000 participants or $25 million in assets, (iii) by investment
management clients of Alliance or its affiliates, (iv) by officers
and present or former Trustees of the Fund; present or former
directors and trustees of other investment companies managed by
22
<PAGE>
Alliance; present or retired full-time employees of Alliance, the
Principal Underwriter, AFS and their affiliates; officers and
directors of ACMC, the Principal Underwriter, AFS and their
affiliates; officers, directors and present full-time employees of
selected dealers or agents; or the spouse, sibling, direct
ancestor or direct descendent (collectively, "relatives") of any
such person; or any trust, individual retirement account or
retirement plan account for the benefit of any such person or
relative; or the estate of any such person or relative, if such
shares are purchased for investment purposes (such shares may not
be resold except to the Fund), (v) by Alliance, the Principal
Underwriter, AFS and their affiliates; certain employee benefit
plans for employees of Alliance, the Principal Underwriter, AFS
and their affiliates, (vi) registered investment advisers or other
financial intermediaries who charge a management, consulting or
other fee for their service and who purchase shares through a
broker or agent approved by the Principal Underwriter and clients
of such registered investment advisers or financial intermediaries
whose accounts are linked to the master account of such investment
adviser or financial intermediary on the books of such approved
broker or agent; (vii) by persons participating in a fee-based
program, sponsored and maintained by a registered broker-dealer or
other financial intermediary and approved by the Principal
Underwriter, pursuant to which such persons pay an asset-based fee
to such broker-dealer, or its affiliate or agent, for service in
the nature of investment advisory or administrative services;
(vii) by persons who establish to the Principal Underwriter's
satisfaction that they are investing, within such time period as
may be designated by the Principal Underwriter, proceeds of
redemption of shares of such other registered investment companies
as may be designated from time to time by the Principal
Underwriter; (ix) by employer-sponsored qualified pension or
profit-sharing plans (including Section 401(k) plans), custodial
accounts maintained pursuant to Section 403(b)(7) retirement plans
and individual retirement accounts (including individual
retirement accounts to which simplified employee pension ("SEP")
contributions are made), if such plans or accounts are established
or administered under programs sponsored by administrators or
other persons that have been approved by the Principal
Underwriter; and (x) by directors and present or retired full-time
employees of CB Commercial Real Estate Group, Inc.
The respective per share net asset values of the Class A,
Class B, Class C and Advisor Class shares are expected to be
substantially the same. Under certain circumstances, however, the
per share net asset values of the Class B and Class C shares may
be lower than the per share net asset value of the Class A and
Advisor Class shares, as a result of the differential daily
expense accruals of the distribution and transfer agency fees
applicable with respect to those classes of shares. Even under
those circumstances, the per share net asset values of the four
23
<PAGE>
classes eventually will tend to converge immediately after the
payment of dividends, which will differ by approximately the
amount of the expense accrual differential among the classes.
Investors may purchase shares of the Fund either through
selected dealers, agents or financial representatives or directly
through the Principal Underwriters. 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. Shares may also be sold in foreign
countries where permissible. The Fund reserves the right to
suspend the sale of its shares to the public in response to
conditions in the securities markets or for other reasons.
The Fund will accept unconditional orders for its shares to be
executed at the public offering price equal to their net asset
value next determined as described below. Orders received by the
Principal Underwriter prior to the close of regular trading on the
Exchange on each day the Exchange is open for trading are priced
at the net asset value computed as of the close of regular trading
on the Exchange on that day. In the case of orders for purchase
of shares placed through selected dealers, agents or financial
representatives, as applicable, the applicable public offering
price will be the net asset value as so determined, but only if
the selected dealer, agent or financial representative receives
the order prior to the close of regular trading on the Exchange
and transmits it to the Principal Underwriter prior to its close
of business that same day (normally 5:00 p.m. Eastern time). The
selected dealer, agent or financial representative is responsible
for transmitting such orders by 5:00 p.m. If the selected dealer,
agent or financial representative fails to do so, the investor's
right to that day's closing price must be settled between the
investor and the selected dealer, agent or financial
representative. If the selected dealer, agent or financial
representative, as applicable, receives the order after the close
of regular trading on the Exchange, the price will be based on the
net asset value determined as of the close of regular trading on
the Exchange on the next day it is open for trading.
Following the initial purchase for cash of Fund shares, a
shareholder may place orders to purchase additional shares for
cash by telephone if the shareholder has completed the appropriate
portion of the Subscription Application or an "Autobuy"
application obtained by calling the "For Literature" telephone
number shown on the cover of this Statement of Additional
Information. Except with respect to certain Omnibus accounts,
telephone purchase orders may not exceed $500,000. Payment for
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
24
<PAGE>
request is received before 3:00 p.m. Eastern time on a Fund
business day, the order to purchase shares is automatically placed
the following Fund business day, and the applicable public
offering price will be the public offering price determined as of
the close of business on such following business day. Full and
fractional shares are credited to a subscriber's account in the
amount of his or her subscription.
The per share net asset value of the Fund's shares is computed
in accordance with the Fund's Agreement and Declaration of Trust
as of the next close of regular trading on the Exchange (currently
4:00 p.m. Eastern time) by dividing the value of the Fund's total
assets, less its liabilities, by the total number of its shares
then outstanding. For purposes of this computation, the
securities in the Fund's portfolio are valued at their amortized
cost value. For more information concerning the amortized cost
method of valuation of securities, see "Daily Dividends-
- -Determination of Net Asset Value."
The Fund may refuse any order for the acquisition of shares.
The Fund reserves the right to suspend the sale of its shares to
the public in response to conditions in the securities markets or
for other reasons. In addition, the Fund reserves the right, on
60 days' written notice to its shareholders to reject any order to
acquire its shares through exchange or otherwise to modify,
restrict or terminate the exchange privilege.
All shares purchased are confirmed to each shareholder and are
credited to his or her account at the net asset value. As a
convenience to the Subscriber, and to avoid unnecessary expense to
the Fund, stock certificates representing shares of the Fund are
not issued except upon written request by the shareholder or his
or her authorized selected dealer or agent. This facilitates
later redemption and relieves the shareholder of the
responsibility for any inconvenience of lost or stolen stock
certificates. No certificates are issued for fractional shares,
although such shares remain in the shareholder's account on the
books of the Fund. 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.
In addition to the discount or commission paid to dealers or
agents, the Principal Underwriter from time to time pays
additional cash bonuses or other incentives to dealers or agents,
including EQ Financial Consultants Inc., an affiliate of the
25
<PAGE>
Principal Underwriter, in connection with the sale of shares of
the Fund. Such additional amounts may be utilized, in whole or in
part, to provide additional compensation to registered
representatives who sell shares of the Fund. On some occasions,
cash or other incentives will be conditioned upon the sale of a
specified minimum dollar amount of the shares of the Fund and/or
other Alliance Mutual Funds, as defined below, during a specific
period of time. On some occasions, such cash or other incentives
may take the form of payment for attendance at seminars, meals,
sporting events or theater performances, or payment for travel,
lodging and entertainment incurred in connection with travel by
persons associated with a dealer or agent and their immediate
family members to urban or resort locations within or outside the
United States. Such dealer or agent may elect to receive cash
incentives of equivalent amount in lieu of such payments.
The Trustees of the Fund have determined that currently no
conflict of interest exists among the Class A, Class B, Class C
and Advisor Class shares. On an ongoing basis, the Trustees of
the Fund, pursuant to their fiduciary duties under the 1940 Act
and state laws, will seek to ensure that no such conflict arises.
Alternative Retail Purchase Arrangements -- Class A, Class B and
Class C shares3
The alternative purchase arrangements available with respect
to Class A, Class B and Class C shares permit an investor to
choose the method of purchasing shares that is most beneficial
given the amount of the purchase, the length of time the investor
expects to hold the shares, whether the investor intends to
subsequently exchange shares for shares of another Alliance Mutual
Fund and other circumstances. The Principal Underwriter will
reject any order (except orders from certain retirement plans) for
more than $250,000 for Class B shares. In addition, the Principal
Underwriter will reject any order for more than $1,000,000 of
Class C shares.
Class A shares are subject to a lower distribution services
fee and, accordingly, pay correspondingly higher dividends per
share than Class B shares or Class C shares. However, because
sales charges are deducted at the time Class A shares are
exchanged for Class A shares of other Alliance Mutual Funds,
investors not qualifying for reduced Class A sales charges who
expect to exchange their shares for Class A shares of another
Alliance Mutual Fund and to maintain their investment for an
extended period of time might consider purchasing Class A shares
because the accumulated continuing distribution charges on Class B
_________________________
3Advisor Class shares are sold only to investors described
above in this section under "-- Purchase for Cash."
26
<PAGE>
shares or Class C shares may exceed the initial sales charge on
Class A shares during the life of the investment. Again, however,
such investors must weigh this consideration against the fact that
sales charges will be imposed at the time Class A shares are
exchanged for Class A shares of other Alliance Mutual Funds.
Other investors might determine, however, that it would be
more advantageous to purchase Class B shares or Class C shares,
although these classes are subject to higher continuing
distribution charges and, in the case of Class B shares, are
subject to a contingent deferred sales charge for a four-year
period. This might be true of investors who do not wish to pay
sales charges on subsequent exchanges of shares. Those investors
who prefer to have all of their funds invested initially but may
not wish to retain their investment for the four-year period
during which Class B shares are subject to a contingent deferred
sales charge may find it more advantageous to purchase Class C
shares.
Class A Shares
The public offering price of Class A shares is their net asset
value. No sales charge is imposed on Class A shares at the time
of purchase. If Class A shares of the Fund are purchased for cash
and are exchanged for Class A shares of another Alliance Mutual
Fund, the sales charge applicable to the other Alliance Mutual
Fund will be assessed at the time of the exchange.
With respect to purchases of $1,000,000 or more, Class A
shares redeemed within one year of purchase will be subject to a
contingent deferred sales charge equal to 1% of the lesser of the
cost of the shares being redeemed or their net asset value at the
time of redemption. Class A shares that were received in exchange
of Class A shares of another Alliance Mutual Fund that were not
subject to an initial sales charge when originally purchased for
cash because the purchase was of $1,000,000 or more and that are
redeemed within one year of the original purchase will be subject
to a 1% contingent deferred sales charge. No charge will be
assessed on shares derived from reinvestment of dividends or
capital gains distributions. The contingent deferred sales charge
on Class A shares will be waived on certain redemptions. In
determining the contingent deferred sales charge applicable to a
redemption of Class A shares, it will be assumed that the
redemption is, first, of any shares that are not subject to a
contingent deferred sales charge (for example, because an initial
sales charge was paid with respect to the shares, or they have
been held beyond the period during which the charge applies or
were acquired upon the reinvestment of dividends or distributions)
and, second, of shares held longest during the time they are
subject to the sales charge. Proceeds from the contingent
deferred sales charge on Class A shares are paid to the Principal
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<PAGE>
Underwriter and are used by the Principal Underwriter to defray
the expenses of the Principal Underwriter related to providing
distribution-related services to the Fund in connection with the
sales of Class A shares, such as the payment of compensation to
selected dealers and agents for selling Class A shares. With
respect to purchases of $1,000,000 or more made through selected
dealers or agents, the Adviser may, pursuant to the Distribution
Services Agreement described above, pay such dealers or agents
from its own resources a fee of up to 1% of the amount invested to
compensate such dealers or agents for their distribution
assistance in connection with such purchases.
Combined Purchase Privilege. Certain persons may qualify for
the sales charge reductions on Class A shares of other Alliance
Mutual Funds by combining purchases of shares of the Fund and
shares of other Alliance Mutual Funds into a single "purchase," if
the resulting "purchase" totals at least $100,000. The term
"purchase" refers to: (i) a single purchase by an individual, or
concurrent purchases, which in the aggregate are at least equal to
the prescribed amounts, by an individual, his or her spouse and
their children under the age of 21 years purchasing shares for
his, her or their own account(s); (ii) a single purchase by a
trustee or other fiduciary purchasing shares for a single trust,
estate or single fiduciary account although more than one
beneficiary is involved; or (iii) a single purchase for the
employee benefit plans of a single employer. The term "purchase"
also includes purchases by any "company," as the term is defined
in the 1940 Act, but does not include purchases by any such
company which has not been in existence for at least six months or
which has no purpose other than the purchase of shares of Alliance
Mutual Funds or shares of other registered investment companies at
a discount. The term "purchase" does not include purchases by any
group of individuals whose sole organizational nexus is that the
participants therein are credit card holders of a company, policy
holders of an insurance company, customers of either a bank or
broker-dealer or clients of an investment adviser. Currently, the
Alliance Mutual Funds include:
AFD Exchange Reserves
The Alliance Fund, Inc.
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
-Corporate Bond Portfolio
-U.S. Government Portfolio
Alliance Developing Markets Fund, Inc.
Alliance Global Dollar Government Fund, Inc.
Alliance Global Environment Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Greater China '97 Fund, Inc.
28
<PAGE>
Alliance Growth and Income Fund, Inc.
Alliance Income Builder Fund, Inc.
Alliance International Fund
Alliance International Premier Growth Fund, Inc.
Alliance Limited Maturity Government Fund, Inc.
Alliance Mortgage Securities Income Fund, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
-California Portfolio
-Insured California Portfolio
-Insured National Portfolio
-National Portfolio
-New York Portfolio
Alliance Municipal Income Fund II
-Arizona Portfolio
-Florida Portfolio
-Massachusetts Portfolio
-Michigan Portfolio
-Minnesota Portfolio
-New Jersey Portfolio
-Ohio Portfolio
-Pennsylvania Portfolio
-Virginia Portfolio
Alliance New Europe Fund, Inc.
Alliance North American Government Income Trust, Inc.
Alliance Premier Growth Fund, Inc.
Alliance Quasar Fund, Inc.
Alliance Real Estate Investment Fund, Inc.
Alliance/Regent Sector Opportunity Fund, Inc.
Alliance Short-Term Multi-Market Trust, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance World Income Trust, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance Portfolios
-Alliance Growth Fund
-Alliance Conservative Investors Fund
-Alliance Growth Investors Fund
-Alliance Strategic Balanced Fund
-Alliance Short-Term U.S. Government Fund
Prospectuses for the Alliance Mutual Funds may be obtained
without charge by contacting Alliance Fund Services, Inc. at the
address or the "For Literature" telephone number shown on the
front cover of this Statement of Additional Information.
Cumulative Quantity Discount (Right of Accumulation). An
investor's exchange of Class A shares of the Fund for Class A
shares of another Alliance Mutual Fund may qualify for a
Cumulative Quantity Discount from any applicable sales charge. The
applicable sales charge will be based on the total of:
29
<PAGE>
(i) the investor's current purchase;
(ii) the net asset value (at the close of business on
the previous day) of (a) all shares of the Fund held by the
investor and (b) all shares of any other Alliance Mutual Fund
held by the investor; and
(iii) the net asset value of all shares described in
paragraph (ii) owned by another shareholder eligible to
combine his or her purchase with that of the investor into a
single "purchase" (see above).
For example, if an investor owned shares of the Fund or
another Alliance Mutual Fund worth $200,000 at their then current
net asset value and, subsequently, purchased Class A shares of
another alliance Mutual Fund worth an additional $100,000, the
sales charge for the $100,000 purchase would be at the rate
applicable to a single $300,000 purchase of shares of that
Alliance Mutual Fund, rather than the rate applicable to a
$100,000 purchase.
To qualify for the Combined Purchase Privilege or to obtain
the Cumulative Quantity Discount on a purchase through a selected
dealer or agent, the investor or selected dealer or agent must
provide the Principal Underwriter with sufficient information to
verify that each purchase qualifies for the privilege or discount.
Statement of Intention. Class A investors of the Fund may
also obtain reduced sales charges by means of a written Statement
of Intention, which expresses the investor's intention to invest,
including through exchange of their Class A shares of the Fund,
not less than $100,000 within a period of 13 months in Class A
shares (or Class A, Class B, Class C and/or Advisor Class shares)
of another Alliance Mutual Fund. Each purchase of shares under a
Statement of Intention will be made at the public offering price
or prices applicable at the time of such purchase to a single
transaction of the dollar amount indicated in the Statement of
Intention. At the investor's option, a Statement of Intention may
include purchases of shares of any Alliance Mutual Fund made not
more than 90 days prior to the date that the investor signs a
Statement of Intention; however, the 13-month period during which
the Statement of Intention is in effect will begin on the date of
the earliest purchase to be included.
Investors qualifying for the Combined Purchase Privilege
described above may purchase shares of the Alliance Mutual Funds
under a single Statement of Intention. For example, if at the
time an investor signs a Statement of Intention to invest at least
$100,000 in Class A shares of an Alliance Mutual Fund, the
investor and the investor's spouse each purchase shares of the
Fund worth $20,000 (for a total of $40,000), it will be necessary
30
<PAGE>
to invest only a total of $60,000 during the following 13 months
in shares of that Alliance Mutual Fund or any other Alliance
Mutual Fund, to qualify for a reduced initial sales charge on the
total amount being invested (i.e., the initial sales charge
applicable to an investment of $100,000).
The Statement of Intention is not a binding obligation upon
the investor to purchase the full amount indicated. The minimum
initial investment under a Statement of Intention is 5% of such
amount. Shares purchased with the first 5% of such amount will be
held in escrow (while remaining registered in the name of the
investor) to secure payment of the higher sales charge applicable
to the shares actually purchased if the full amount indicated is
not purchased, and such escrowed shares will be involuntarily
redeemed to pay the additional sales charge, if necessary.
Dividends on escrowed shares, whether paid in cash or reinvested
in additional Alliance Mutual Fund shares, are not subject to
escrow. When the full amount indicated has been purchased, the
escrow will be released. To the extent that an investor purchases
more than the dollar amount indicated on the Statement of
Intention and qualifies for a further reduced sales charge, the
sales charge will be adjusted for the entire amount purchased at
the end of the 13-month period. The difference in the sales
charge will be used to purchase additional shares of that Alliance
Mutual Fund subject to the rate of the initial sales charge
applicable to the actual amount of the aggregate purchases.
Investors wishing to enter into a Statement of Intention in
conjunction with their initial investment in Class A shares of
that Alliance Mutual Fund should complete the appropriate portion
of the Subscription Application found in the Prospectus of that
Alliance Mutual Fund. Current Class A shareholders of that
Alliance Mutual Fund desiring to do so can obtain a form of
Statement of Intention by contacting Alliance Fund Services, Inc.
at the address or telephone numbers shown on the cover of that
Alliance Mutual Fund's Statement of Additional Information.
Certain Retirement Plans. Multiple participant payroll
deduction retirement plans may also purchase shares of any
Alliance Mutual Fund, including through the exchanges of their
Class A shares of the Fund, at a reduced sales charge on a monthly
basis during the 13-month period following such a plan's initial
purchase of that Alliance Mutual Fund's shares. The sales charge
applicable to such initial purchase of shares of that Alliance
Mutual Fund will be that normally applicable, under the schedule
of the sales charges set forth in the Statement of Additional
Information of that Alliance Mutual Fund, to an investment 13
times larger than such initial purchase. The sales charge
applicable to each succeeding monthly purchase will be that
normally applicable, under such schedule, to an investment equal
to the sum of (i) the total purchase previously made during the
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<PAGE>
13-month period and (ii) the current month's purchase multiplied
by the number of months (including the current month) remaining in
the 13-month period. Sales charges previously paid during such
period will not be retroactively adjusted on the basis of later
purchases.
Class B Shares
Investors may purchase Class B shares for cash at the public
offering price equal to the net asset value per share of the
Class B shares on the date of purchase without the imposition of a
sales charge at the time of purchase. The Class B shares are sold
without an initial sales charge so that the Fund will receive the
full amount of the investors purchase payment.
Proceeds from the contingent deferred sales charge on the
Class B shares purchased for cash are paid to the Principal
Underwriter and are used by the Principal Underwriter to defray
the expenses of the Principal Underwriter related to providing
distribution-related services to the Fund in connection with the
sale of the Class B shares, such as the payment of compensation to
selected dealers and agents for selling Class B shares. The
combination of the contingent deferred sales charge and the
distribution services fee enables the Fund to sell the Class B
shares without a sales charge being deducted at the time of
purchase. The higher distribution services fee incurred by
Class B shares will cause such shares to have a higher expense
ratio and to pay lower dividends than those related to Class A
shares.
Class B shares of the Fund are also offered to holders of
Class B shares of other Alliance Mutual Funds without any sales
charge at the time of purchase in an exchange transaction. When
Class B shares acquired in an exchange are redeemed, the
applicable contingent deferred sales charge and conversion
schedules will be the schedules that applied to Class B shares of
the Alliance Mutual Fund originally purchased by the shareholder
at the time of their purchase.
Contingent Deferred Sales Charge. Class B shares that are
redeemed within four years of their cash purchase will be subject
to a contingent deferred sales charge at the rates set forth below
charged as a percentage of the dollar amount subject thereto. The
amount of the contingent deferred sales charge, if any, will vary
depending on the number of years from the time of cash payment for
the purchase of Class B shares until the time of redemption of
such shares.
32
<PAGE>
Year Since Contingent Deferred Sales Charge as a
Cash Purchase % of Dollar Amount Subject to Charge
First 4.0%
Second 3.0%
Third 2.0%
Fourth 1.0%
Fifth and thereafter None
In determining the contingent deferred sales charge applicable
to a redemption of Class B shares, it will be assumed that the
redemption is, first, of any shares that were acquired upon the
reinvestment of dividends or distributions, and, second, of shares
held the longest during the time they are subject to the sales
charge. The CDSC is applied to the lesser of the net asset value
at the time of redemption of the Class A shares or Class B shares
being redeemed and the cost of such shares (or, as to Fund shares
acquired through an exchange, the cost of the Alliance Mutual Fund
shares originally purchased for cash). Accordingly, no sales
charge will be imposed on increases in net asset value above the
initial purchase price. In addition, no charge will be assessed
on shares derived from reinvestment of dividends or capital gains
distributions.
The contingent deferred sales charges is waived on redemptions
of shares (i) following the death or disability, as defined in the
Internal Revenue Code of 1986, as amended (the "Code"), of a
shareholder, or (ii) to the extent that the redemption represents
a minimum required distribution from an individual retirement
account or other retirement plan to a shareholder who has attained
the age of 70-1/2, or (iii) that had been purchased by present or
former Trustees of the Fund, by the relative of any such person,
by any trust, individual retirement account or retirement plan for
the benefit of any such person or relative, or by the estate of
any such person or relative, or (iv) pursuant to a Systematic
Withdrawal Plan (see "Shareholder Services--Systematic Withdrawal
Plan").
Conversion Feature. Class B shares of the Fund will
automatically convert to Class A shares of the Fund in accordance
with the conversion schedule applicable to the original Alliance
Mutual Fund Class B shares purchased, or in the case of Class B
shares of the Fund purchased for cash, on the tenth Fund business
day in the month following the month in which the eighth
anniversary date of the acceptance of the purchase order for the
Class B shares occurs, and will no longer be subject to a higher
distribution services fee following conversion. Such conversion
will occur on the basis of the relative net asset values of the
two classes, without the imposition of any sales charge, fee or
other charge. The purposes of the conversion feature are (i) to
provide a mechanism whereby the time period for the automatic
33
<PAGE>
conversion of Class B shares to Class A shares will continue to
elapse in the event the Class B shares originally purchased for
cash are subsequently exchanged for Class B shares of the Fund or
Class B shares of another Alliance Mutual Fund and (ii) to reduce
the distribution services fee paid by holders of Class B shares
that have been outstanding long enough for the Principal
Underwriter to have been compensated for distribution expenses
incurred in the original sale of such shares. See "Shareholder
Services--Exchange Privilege."
For purposes of conversion to Class A shares, Class B shares
purchased through the reinvestment of dividends and distributions
paid in respect of Class B shares in a shareholder's account will
be considered to be held in a separate sub-account. Each time any
Class B shares in the shareholder's account (other than those in
the subaccount) convert to Class A shares, an equal pro-rata
portion of the Class B shares in the sub-account will also convert
to Class A shares.
The conversion of Class B shares to Class A shares is subject
to the continuing availability of an opinion of counsel to the
effect that the conversion of Class B shares to Class A shares
does not constitute a taxable event under federal income tax law.
The conversion of Class B shares to Class A shares may be
suspended if such an opinion is no longer available at the time
such conversion is to occur. In that event, no further
conversions of Class B shares would occur, and shares might
continue to be subject to the higher distribution services fee for
an indefinite period which may extend beyond the period ending
eight years after the end of the calendar month in which the
shareholder's purchase order was accepted.
Class C Shares. Investors may purchase Class C shares at the
public offering price equal to the net asset value per share of
the Class C shares on the date of purchase without the imposition
of a sales charge either at the time of purchase or, as long as
the shares are held for one year or more, upon redemption. Class C
shares are sold without an initial sales charge so that the Fund
will receive the full amount of the investor's purchase payment
and, as long as the shares are held for one year or more, without
a contingent deferred sales charge so that the investor will
receive as proceeds upon redemption the entire net asset value of
his or her Class C shares. The Class C distribution services fee
enables the Fund to sell Class C shares without either an initial
or contingent deferred sales charge, as long as the shares are
held for one year or more. Class C shares do not convert to any
other class of shares of the Fund and incur higher distribution
services fees and transfer agency fees than Class A shares and
Advisor Class shares, and will thus have a higher expense ratio
and pay correspondingly lower dividends than Class A shares and
Advisor Class shares.
34
<PAGE>
Class C shares that are redeemed within one year of purchase
will be subject to a contingent deferred sales charge of 1%,
charged as a percentage of the dollar amount subject thereto. The
charge will be assessed on an amount equal to the lesser of the
cost of the shares being redeemed or their net asset value at the
time of redemption. Accordingly, no sales charge will be imposed
on increases in net asset value above the initial purchase price.
In addition, no charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions. The
contingent deferred sales charge on Class C shares will be waived
on certain redemptions, as described above under "--Class B
Shares."
In determining the contingent deferred sales charge applicable
to a redemption of Class C shares, it will be assumed that the
redemption is, first, of any shares that are not subject to a
contingent deferred sales charge (for example, because the shares
have been held beyond the period during which the charge applies
or were acquired upon the reinvestment of dividends or
distributions) and, second, of shares held longest during the time
they are subject to the sales charge.
Proceeds from the contingent deferred sales charge are paid to
the Principal Underwriter and are used by the Principal
Underwriter to defray the expenses of the Principal Underwriter
related to providing distribution-related services to the Fund in
connection with the sale of the Class C shares, such as the
payment of compensation to selected dealers and agents for selling
Class C shares. The combination of the contingent deferred sales
charge and the distribution services fee enables the Fund to sell
the Class C shares without a sales charge being deducted at the
time of purchase. The higher distribution services fee incurred
by Class C shares will cause such shares to have a higher expense
ratio and to pay lower dividends than those related to Class A
shares and Advisor Class shares.
Class C shares of the Fund are also offered to holders of
Class C shares of other Alliance Mutual Funds without any sales
charge at the time of purchase or redemption.
Conversion of Advisor Class Shares to Class A Shares
Advisor Class shares may be held solely through the fee- based
program accounts, employee benefit plans and registered investment
advisory or other financial intermediary relationships described
above under "Purchase of Shares--Purchase for Cash," and by
investment advisory clients of, and by certain other persons
associated with, the Adviser and its affiliates or the Fund. If
(i) a holder of Advisor Class shares ceases to participate in the
fee-based program or plan, or to be associated with the investment
adviser or financial intermediary, in each case, that satisfies
35
<PAGE>
the requirements to purchase shares set forth under "Purchase of
Shares--Purchase for Cash" or (ii) the holder is otherwise no
longer eligible to purchase Advisor Class shares as described in
the Advisor Class Prospectus and this Statement of Additional
Information (each, a "Conversion Event"), then all Advisor Class
shares held by the shareholder will convert automatically and
without notice to the shareholder, other than the notice contained
in the Advisor Class Prospectus and this Statement of Additional
Information, to Class A shares of the Fund during the calendar
month following the month in which the Fund is informed of the
occurrence of the Conversion Event. The failure of a shareholder
or a fee-based program to satisfy the minimum investment
requirements to purchase Advisor Class shares will not constitute
a Conversion Event. The conversion would occur on the basis of
the relative net asset values of the two classes and without the
imposition of any sales load, fee or other charge. Class A shares
currently bear a .30% distribution services fee and have a higher
expense ratio than Advisor Class shares. As a result, Class A
shares may pay correspondingly lower dividends and have a lower
net asset value than Advisor Class shares.
The conversion of Advisor Class shares to Class A shares is
subject to the continuing availability of an opinion of counsel to
the effect that the conversion of Advisor Class shares to Class A
shares does not constitute a taxable event under federal income
tax law. The conversion of Advisor Class shares to Class A shares
may be suspended if such an opinion is no longer available at the
time such conversion is to occur. In that event, the Advisor
Class shareholder would be required to redeem his or her Advisor
Class shares, which would constitute a taxable event under federal
income tax law.
________________________________________________________________
REDEMPTION AND REPURCHASE OF SHARES
________________________________________________________________
The following information supplements that set forth in the
Fund's Prospectus under the heading "Purchase and Sale of Shares-
- -How to Sell Shares." If you are an Advisor Class 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 herein. 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.
36
<PAGE>
Redemption
Subject only to the limitations described below, the Fund will
redeem shares tendered to it, as described below, at a redemption
price equal to their net asset value, which is expected to remain
constant at $1.00 per share, following the receipt of shares
tendered for redemption in proper form. Except for any contingent
deferred sales charge which may be applicable to Class A, Class B
or Class C shares, there is no redemption charge. Payment of the
redemption price will be made within seven days after the Fund's
receipt of such tender for redemption. If a shareholder is in
doubt about what documents are required by his or her fee-based
program or employee benefit plan, the shareholder should contact
his or her financial representative.
The right of redemption may not be suspended or the date of
payment upon redemption postponed for more than seven days after
shares are tendered for redemption, except for any period during
which the Exchange is closed (other than customary weekend and
holiday closings) or during which the Commission determines that
trading thereon is restricted, or for any period during which an
emergency (as determined by the Commission) exists as a result of
which disposal by the Fund of securities owned by it is not
reasonably practicable or as a result of which it is not
reasonably practicable for the Fund fairly to determine the value
of its net assets, or for such other periods as the Commission may
by order permit for the protection of security holders of the
Fund.
Payment of the redemption price may be made either in cash or
in portfolio securities (selected at the discretion of the
Trustees of the Fund and taken at their value used in determining
the redemption price), or partly in cash and partly in portfolio
securities. However, payments will be made wholly in cash unless
the Trustees believe that economic conditions exist which would
make such a practice detrimental to the best interests of the
Fund.
The value of a shareholder's shares on redemption or
repurchase may be more or less than the cost of such shares to the
shareholder, depending upon the market value of the Fund's
portfolio securities at the time of such redemption or repurchase
and the income earned. Redemption proceeds on Class A shares,
Class B shares and Class C shares will reflect the deduction of
the contingent deferred sales charge, if any. Payment (either in
cash or in portfolio securities) received by a shareholder upon
redemption or repurchase of his shares, assuming the shares
constitute capital assets in his hands, will result in long-term
or short- term capital gains (or loss) depending upon the
shareholder's holding period and basis in respect of the shares
redeemed.
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<PAGE>
To redeem shares of a Portfolio for which no share
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 shares of the Fund represented by stock
certificates, the investor should forward the appropriate stock
certificate or certificates, endorsed in blank or with blank stock
powers attached, to the Fund with the request that the shares
represented thereby, or a specified portion thereof, be redeemed.
The stock assignment form on the reverse side of each stock
certificate surrendered to the Fund for redemption must be signed
by the registered owner or owners exactly as the registered name
appears on the face of the certificate or, alternatively, a stock
power signed in the same manner may be attached to the stock
certificate or certificates or, where tender is made by mail,
separately mailed to the Fund. The signature or signatures on the
assignment form must be guaranteed in the manner described above.
Telephone Redemption By Electronic Funds Transfer. Each Fund
shareholder is entitled to request redemption by Electronic Funds
Transfer, of shares for which no stock certificates have been
issued by telephone at (800) 221-5672 by a shareholder who has
completed the appropriate portion of the Subscription Application
or, in the case of an existing shareholder, an "Autosell"
application obtained from Alliance Fund Services, Inc. Prior to
March 1, 1998, this service can be employed only once in any 30
day period (except for omnibus accounts). A telephone redemption
request by electronic funds transfer 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. Each Fund shareholder is
eligible to request redemption by check of Fund shares for which
no stock certificates have been issued by telephone at (800) 221-
5672 before 4:00 p.m. Eastern time on a Fund business day in an
amount not exceeding $50,000. Prior to March 1, 1998, this
service can be employed only once in any 30 day period (except for
omnibus accounts). Proceeds of such redemptions are remitted by
check to the shareholder's address of record. 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.
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<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. Telephone
redemption is not available with respect to shares (i) for which
certificates have been issued, (ii) held on 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. Neither the Fund nor
Alliance, AFD or Alliance Fund Services, Inc. will be responsible
for the authenticity of telephone requests for redemptions that
the Fund reasonably believes to be genuine. The Fund will employ
reasonable procedures in order to verify that telephone requests
for redemptions are genuine, including, among others, recording
such telephone instructions and causing written confirmations of
the resulting transactions to be sent to shareholders. If the
Fund did not employ such procedures, it could be liable for losses
arising from unauthorized or fraudulent telephone instructions.
Selected dealers or agents may charge a commission for handling
telephone requests for redemptions.
Repurchase
The Fund may repurchase shares through the Principal
Underwriter, selected financial intermediaries or selected dealers
or agents. The repurchase price will be the net asset value next
determined after the Principal Underwriter receives the request
(less the contingent deferred sales charge, if any, with respect
to the Class A, Class B and Class C shares), except that requests
placed through selected dealers or agents before the close of
regular trading on the Exchange on any day will be executed at the
net asset value determined as of such close of regular trading on
that day if received by the Principal Underwriter prior to its
close of business on that day (normally 5:00 p.m. Eastern time).
The financial intermediary or selected dealer or agent is
responsible for transmitting the request to the Principal
Underwriter by 5:00 p.m. If the financial intermediary or
selected dealer or agent fails to do so, the shareholder's right
to receive that day's closing price must be settled between the
shareholder and the dealer or agent. A shareholder may offer
shares of the Fund to the Principal Underwriter either directly or
through a selected dealer or agent. Neither the Fund nor the
Principal Underwriter charges a fee or commission in connection
with the repurchase of shares (except for the contingent deferred
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<PAGE>
sales charge, if any, with respect to Class A, Class B and Class C
shares). Normally, if shares of the Fund are offered through a
selected dealer or agent, the repurchase is settled by the
shareholder as an ordinary transaction with or through the
selected dealer or agent, who may charge the shareholder for this
service. The repurchase of shares of the Fund as described above
is a voluntary service of the Fund and the Fund may suspend or
terminate this practice at any time.
General
The Fund reserves the right to close out an account that
through redemption has remained below $200 for 90 days.
Shareholders will receive 60 days' written notice to increase the
account value before the account is closed. No contingent
deferred sales charge will be deducted from the proceeds of this
redemption. In the case of a redemption or repurchase of shares
of a Portfolio recently purchased by check, redemption proceeds
will not be made available until the Fund is reasonably assured
that the check has cleared, normally up to 15 calendar days
following the purchase date.
________________________________________________________________
SHAREHOLDER SERVICES
________________________________________________________________
The following information supplements that set forth in the
Fund's Prospectus under the heading "Purchase and Sale of Shares-
- -Shareholder Services." The shareholder services set forth below
are applicable to Class A, Class B, Class C and Advisor Class
shares unless otherwise indicated. If you are an Advisor Class
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 herein. 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.
Automatic Investment Program
Investors may purchase shares of the Fund through an automatic
investment program utilizing Electronic Funds Transfer drafts
drawn on the investor's own bank account. Under such a program,
pre-authorized monthly drafts for a fixed amount (at least $25)
are used to purchase shares through the selected dealer or
selected agent designated by the investor at the public offering
price next determined after the Principal Underwriter receives the
proceeds from the investor's bank. In electronic form, drafts can
be made on or about a date each month selected by the shareholder.
40
<PAGE>
Investors wishing to establish an automatic investment program in
connection with their initial investment should complete the
appropriate portion of the Subscription Application found in the
Prospectus. Current shareholders should contact Alliance Fund
Services, Inc. at the address or telephone numbers shown on the
cover of this Statement of Additional Information to establish an
automatic investment program.
Exchange Privilege
You may exchange your investment in the Fund for shares of the
same class of other Alliance Mutual Funds. In addition, (i)
present officers and full-time employees of the Adviser, (ii)
present Directors or Trustees of any Alliance Mutual Fund and
(iii) certain employee benefit plans for employees of the Adviser,
the Principal Underwriter, Alliance Fund Services, Inc. and their
affiliates may, on a tax-free basis, exchange Class A shares of
the Fund for Advisor Class shares of the Fund. Exchanges of
shares are made at the net asset value next determined and without
sales or service charges. Exchanges may be made by telephone or
written request. Telephone exchange requests must be received by
Alliance Fund Services, Inc. by 4:00 p.m. Eastern time on a Fund
business day in order to receive that day's net asset value.
Shares will continue to age without regard to exchanges for
purpose of determining the CDSC, if any, upon redemption and, in
the case of Class B shares, for the purpose of conversion to
Class A shares. After an exchange, your Class B shares will
automatically convert to Class A shares in accordance with the
conversion schedule applicable to the Class B shares of the
Alliance Mutual Fund you originally purchased for cash("original
shares"). When redemption occurs, the CDSC applicable to the
original shares is applied.
Please read carefully the prospectus of the mutual fund into
which you are exchanging before submitting the request. Call
Alliance Fund Services, Inc. at 800-221-5672 to exchange
uncertificated shares. Except with respect to exchanges of Class
A shares of the Fund for Advisor Class shares of the Fund,
exchanges of shares as described above in this section are taxable
transactions for federal income tax purposes. The exchange
service may be changed, suspended, or terminated on 60 days'
written notice.
All exchanges are subject to the minimum investment
requirements and any other applicable terms set forth in the
prospectus for the Alliance Mutual Fund whose shares are being
acquired. An exchange is effected through the redemption of the
shares tendered for exchange and the purchase of shares being
acquired at their respective net asset values as next determined
following receipt by the Alliance Mutual Fund whose shares are
41
<PAGE>
being exchanged of (i) proper instructions and all necessary
supporting documents as described in such fund's prospectus, or
(ii) a telephone request for such exchange in accordance with the
procedures set forth in the following paragraph. Exchanges
involving the redemption of shares recently purchased by check
will be permitted only after the Alliance Mutual Fund whose shares
have been tendered for exchange is reasonably assured that the
check has cleared, normally up to 15 calendar days following the
purchase date.
Each Fund shareholder, and the shareholder's selected dealer,
agent or financial representative, as applicable, are authorized
to make telephone requests for exchanges unless Alliance Fund
Services, Inc., receives written instruction to the contrary from
the shareholder or the shareholder declines the privilege by
checking the appropriate box on the Subscription Application found
in the Prospectus. Such telephone requests cannot be accepted
with respect to shares then represented by stock certificates.
Shares acquired pursuant to a telephone request for exchange will
be held under the same account registration as the shares redeemed
through such exchange.
Eligible shareholders desiring to make an exchange should
telephone Alliance Fund Services, Inc. with their account number
and other details of the exchange, at (800) 221-5672 before
4:00 p.m., Eastern time, on a Fund business day as defined above.
Telephone requests for exchange received before 4:00 p.m. Eastern
time on a Fund business day will be processed as of the close of
business on that day. During periods of drastic economic or
market developments, such as the market break of October 1987, it
is possible that shareholders would have difficulty in reaching
Alliance Fund Services, Inc. by telephone (although no such
difficulty was apparent at any time in connection with the 1987
market break). If a shareholder were to experience such
difficulty, the shareholder should issue written instructions to
Alliance Fund Services, Inc. at the address shown on the cover of
this Statement of Additional Information.
A shareholder may elect to initiate a monthly "Auto Exchange"
whereby a specified dollar amount's worth of his or her Fund
shares (minimum $25) is automatically exchanged for shares of
another Alliance Mutual Fund. Auto Exchange transactions normally
occur on the 12th day of each month, or the Fund business day
prior thereto.
None of the Alliance Funds, Alliance, the Principal
Underwriter or Alliance Fund Services, Inc. will be responsible
for the authenticity of telephone requests for exchanges that the
Fund reasonably believes to be genuine. The Fund will employ
reasonable procedures in order to verify that telephone requests
for exchanges are genuine, including, among others, recording such
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<PAGE>
telephone instructions and causing written confirmations of the
resulting transactions to be sent to shareholders. If the Fund
did not employ such procedures, it could be liable for losses
arising from unauthorized or fraudulent telephone instructions.
Selected dealers, agents or financial representatives, as
applicable, may charge a commission for handling telephone
requests for exchanges.
The exchange privilege is available only in states where
shares of the Alliance funds being acquired may be legally sold.
Each Alliance fund reserves the right, at any time on 60 days'
notice to its shareholders, to reject any order to acquire its
shares through exchange or otherwise to modify, restrict or
terminate the exchange privilege.
Retirement Plans
The Fund may be a suitable investment vehicle for part or all
of the assets held in various types of retirement plans, such as
those listed below. The Fund has available forms of such plans
pursuant to which investments can be made in the Fund and other
Alliance Mutual Funds. Persons desiring information concerning
these plans should contact Alliance Fund Services, Inc. at the
"For Literature" telephone number on the cover of this Statement
of Additional Information, or write to:
Alliance Fund Services, Inc.
Retirement Plans
P.O. Box 1520
Secaucus, New Jersey 07096-1520
Individual Retirement Account ("IRA"). Individuals who
receive compensation, including earnings from self-employment, are
entitled to establish and make contributions to an IRA. Taxation
of the income and gains paid to an IRA by the Fund is deferred
until distribution from the IRA. An individual's eligible
contribution to an IRA will be deductible if neither the
individual nor his or her spouse is an active participant in an
employer-sponsored retirement plan. If the individual or his or
her spouse is an active participant in an employer-sponsored
retirement plan, the individual's contributions to an IRA may be
deductible, in whole or in part, depending on the amount of the
adjusted gross income of the individual and his or her spouse.
Employer-Sponsored Qualified Retirement Plans. Sole
proprietors, partnerships and corporations may sponsor qualified
money purchase pension and profit-sharing plans, including Section
401(k) plans ("qualified plans"), under which annual tax-
deductible contributions are made within prescribed limits based
on compensation paid to participating individuals. The minimum
43
<PAGE>
initial investment requirement may be waived with respect to
certain of these qualified plans.
If the aggregate net asset value of shares of Alliance funds
held by a qualified plan reaches $5 million on or before
December 15 in any year, all Class B or Class C shares of the Fund
held by the plan can be exchanged at the plan's request, without
any sales charge, for Class A shares of the Fund.
Simplified Employee Pension Plan ("SEP"). Sole proprietors,
partnerships and corporations may sponsor a SEP under which they
make annual tax-deductible contributions to an IRA established by
each eligible employee within prescribed limits based on employee
compensation.
403(b)(7) Retirement Plan. Certain tax-exempt organizations
and public educational institutions may sponsor retirements plans
under which an employee may agree that monies deducted from his or
her compensation (minimum $25 per pay period) may be contributed
by the employer to a custodial account established for the
employee under the plan.
The Alliance Plans Division of Frontier Trust Company, a
subsidiary of Equitable, which serves as custodian or trustee
under the retirement plan prototype forms available from the Fund,
charges certain nominal fees for establishing an account and for
annual maintenance. A portion of these fees is remitted to
Alliance as compensation for its services to the retirement plan
accounts maintained with the Fund.
Distributions from retirement plans are subject to certain
Code requirements in addition to normal redemption procedures. For
additional information please contact Alliance Fund Services, Inc.
Dividend Direction Plan
A shareholder who already maintains, in addition to his or her
Class A, Class B, Class C or Advisor Class Fund account, a
Class A, Class B, Class C or Advisor Class account(s) with one or
more other Alliance Mutual Funds may direct that income dividends
and/or capital gains paid on his or her Class A, Class B, Class C
or Advisor Class Fund shares be automatically reinvested, in any
amount, without the payment of any sales or service charges, in
shares of the same class of such other Alliance Mutual Fund(s).
Further information can be obtained by contacting Alliance Fund
Services, Inc. at the address or the "For Literature" telephone
number shown on the cover of this Statement of Additional
Information. Investors wishing to establish a dividend direction
plan in connection with their initial investment should complete
the appropriate section of the Subscription Application found in
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<PAGE>
the Prospectus. Current shareholders should contact Alliance Fund
Services, Inc. to establish a dividend direction plan.
Systematic Withdrawal Plan
General. Any shareholder who owns or purchases shares of the
Fund having a current net asset value of at least $4,000 (for
quarterly or less frequent payments), $5,000 (for bi-monthly
payments) or $10,000 (for monthly payments) may establish a
systematic withdrawal plan under which the shareholder will
periodically receive a payment in a stated amount of not less than
$50 on a selected date. Systematic withdrawal plan participants
must elect to have their dividends and distributions from the Fund
automatically reinvested in additional shares of the Fund.
Shares of the Fund owned by a participant in the Fund's
systematic withdrawal plan will be redeemed as necessary to meet
withdrawal payments and such payments will be subject to any taxes
applicable to redemptions and, except as discussed below, any
applicable contingent deferred sales charge. Shares acquired with
reinvested dividends and distributions will be liquidated first to
provide such withdrawal payments and thereafter other shares will
be liquidated to the extent necessary, and depending upon the
amount withdrawn, the investor's principal may be depleted. A
systematic withdrawal plan may be terminated at any time by the
shareholder or the Fund.
Withdrawal payments will not automatically end when a
shareholder's account reaches a certain minimum level. Therefore,
redemptions of shares under the plan may reduce or even liquidate
a shareholder's account and may subject the shareholder to the
Fund's involuntary redemption provisions. See "Redemption and
Repurchase of Shares--General." Purchases of additional shares
concurrently with withdrawals maybe undesirable because of the
imposition of sales charges. While an occasional lump-sum
investment may be made by a shareholder of Class A shares who is
maintaining a systematic withdrawal plan, such investment should
normally be an amount equivalent to three times the annual
withdrawal or $5,000, whichever is less.
Payments under a systematic withdrawal plan may be made by
check or electronically via the Automated Clearing House ("ACH")
network. Investors wishing to establish a systematic withdrawal
plan in conjunction with their initial investment in shares of the
Fund should complete the appropriate portion of the Subscription
Application found in the Prospectus, while current Fund
shareholders desiring to do so can obtain an application form by
contacting Alliance Fund Services, Inc. at the address or the "For
Literature" telephone number shown on the cover of this Statement
of Additional Information.
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<PAGE>
CDSC Waiver for Class B Shares and Class C Shares. Under a
systematic withdrawal plan, up to 1% monthly, 2% bi-monthly or 3%
quarterly of the value at the time of redemption of the Class B or
Class C shares in a shareholder's account may be redeemed free of
any contingent deferred sales charge.
With respect to Class B shares, the waiver applies only with
respect to shares acquired after July 1, 1995. Class B shares
that are not subject to a contingent deferred sales charge (such
as shares acquired with reinvested dividends or distributions)
will be redeemed first and will count toward the foregoing
limitations. Remaining Class B shares that are held the longest
will be redeemed next. Redemptions of Class B shares in excess of
the foregoing limitations will be subject to any otherwise
applicable contingent deferred sales charge.
With respect to Class C shares, shares held the longest will
be redeemed first and will count toward the foregoing limitations.
Redemptions in excess of those limitations will be subject to any
otherwise applicable contingent deferred sales charge.
Statements and Reports
Each shareholder of the Fund receives semi-annual and annual
reports which include a portfolio of investments, financial
statements and, in the case of the annual report, the report of
the Fund's independent auditors, McGladrey & Pullen LLP, as well
as a 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
A New Class A or Class C investor may fill out a Signature
Card to authorize the Fund to arrange for a checkwriting service
through State Street Bank and Trust Company (the "Bank") to draw
against Class A or Class C shares of the Fund redeemed from the
investor's account. A Class A or Class C shareholder wishing to
establish this checkwriting service should contact the Fund by
telephone or mail. Under this service, checks may be made payable
to any payee in any amount not less than $500 and not more than
90% of the net asset value of the Class A or Class C shares in the
investor's account (excluding for this purpose the current month's
accumulated dividends and shares for which certificates have been
issued). Corporations, fiduciaries and institutional investors
are required to furnish a certified resolution or other evidence
of authorization. This checkwriting service will be subject to
the Bank's customary rules and regulations governing checking
accounts, and the Fund and the Bank each reserve the right to
change or suspend the checkwriting service. There is no charge to
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<PAGE>
the shareholder for the initiation and maintenance of this service
or for the clearance of any checks.
When a check is presented to the Bank for payment, the Bank,
as the shareholder's agent, causes the Fund to redeem, at the net
asset value next determined, a sufficient number of full and
fractional shares in the shareholder's account to cover the check.
A shareholder should not attempt to close his or her account by
use of a check. In this regard, the Bank has the right to return
checks (marked "insufficient funds") unpaid to the presenting bank
if the amount of the check exceeds 90% of the assets in the
account. Cancelled (paid) checks are returned to the shareholder.
The checkwriting service enables the shareholder to receive the
daily dividends declared on the shares to be redeemed until the
day that the check is presented to the Bank for payment.
________________________________________________________________
DAILY DIVIDENDS--DETERMINATION OF NET ASSET VALUE
________________________________________________________________
All net income of the Fund is determined after the close of
each business day, currently 4:00 p.m. (Eastern time) (and at such
other times as the Trustees may determine) and is paid immediately
thereafter pro rata to shareholders of record via automatic
investment in additional full and fractional shares in each
shareholder's account at the rate of one share for each dollar
distributed. As such additional shares are entitled to dividends
on following days, a compounding growth of income occurs.
Net income consists of all accrued interest income on Fund
portfolio assets less the Fund's expenses applicable to that
dividend period. Realized gains and losses are reflected in net
asset value and are not included in net income. Net asset value
per share of each class is expected to remain constant at $1.00
since all net income is declared as a dividend each time net
income is determined.
Dividends paid by the Fund, with respect to Class A, Class B
and Class C shares will be calculated in the same manner at the
same time on the same day and will be in the same amount, except
that the higher distribution services fees applicable to Class B
and Class C shares, and any incremental transfer agency costs
relating to Class B shares, will be borne exclusively by the class
to which they relate.
The valuation of the Fund's portfolio securities is based upon
their amortized cost which does not take into account unrealized
securities gains or losses as measured by market valuations. The
amortized cost method involves valuing an instrument at its cost
and thereafter applying a constant amortization to maturity of any
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discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument. During
periods of declining interest rates, the daily yield on shares of
the Fund may be higher than that of a fund with identical
investments utilizing a method of valuation based upon market
prices for its portfolio instruments; the converse would apply in
a period of rising interest rates.
The Fund utilizes the amortized cost method of valuation of
portfolio securities in accordance with the provisions of Rule 2a-
7 under the Act. Pursuant to such rule, the Fund maintains a
dollar-weighted average portfolio maturity of 90 days or less and
invests only in securities of high quality. The Fund also
purchases instruments which, at the time of investment, have
remaining maturities of no more than 397 days. The Fund maintains
procedures designed to stabilize, to the extent reasonably
possible, the price per share as computed for the purpose of sales
and redemptions at $1.00. Such procedures include review of the
Fund's portfolio holdings by the Trustees at such intervals as
they deem appropriate to determine whether and to what extent the
net asset value of the Fund calculated by using available market
quotations or market equivalents deviates from net asset value
based on amortized cost. If such deviation exceeds 1/2 of 1%, the
Trustees will promptly consider what action, if any, should be
initiated. In the event the Trustees determine that such a
deviation may result in material dilution or other unfair results
to new investors or existing shareholders, they will consider
corrective action which might include (1) selling instruments
prior to maturity to realize capital gains or losses or to shorten
average portfolio maturity; (2) withholding dividends of net
income on shares; or (3) establishing a net asset value per share
using available market quotations or equivalents. There can be no
assurance, however, that the Fund's net asset value per share will
remain constant at $1.00.
The net asset value of the shares is determined each business
day as of the close of regular trading in the Exchange currently
4:00 p.m. (Eastern time). The net asset value per share of each
class is calculated by determining the amount of assets
attributable to each class of shares, subtracting liabilities, and
dividing by the total number of shares outstanding. All expenses,
including the fees payable to Alliance, are accrued daily.
________________________________________________________________
TAXES
________________________________________________________________
The Fund has qualified to date and intends to qualify in each
future year to be taxed as a regulated investment company under
the Code, and as such, will not be liable for Federal income and
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<PAGE>
excise taxes on the net income and capital gains distributed to
its shareholders. Since the Fund distributes all of its net
income and capital gains, the Fund itself should thereby avoid all
Federal income and excise taxes.
For shareholders' Federal income tax purposes, all
distributions by the Fund out of interest income and net realized
short-term capital gains are treated as ordinary income, and
distributions of long-term capital gains, if any, are treated as
long-term capital gains irrespective of the length of time the
shareholder held shares in the Fund. Since the Fund derives
nearly all of its gross income in the form of interest and the
balance in the form of short-term capital gains, it is expected
that for corporate shareholders, none of the Fund's distributions
will be eligible for the dividends-received deduction under
current law.
________________________________________________________________
BROKERAGE AND PORTFOLIO TRANSACTIONS
________________________________________________________________
Subject to the general supervision of the Trustees of the
Fund, the Adviser is responsible for the investment decisions and
the placing of the orders for portfolio transactions for the Fund.
Because the Fund invests in securities with short maturities,
there is a relatively high portfolio turnover rate. However, the
turnover rate does not have an adverse effect upon the net yield
and net asset value of the Fund's shares since the Fund's
portfolio transactions occur primarily with issuers, underwriters
or major dealers in money market instruments acting as principals.
Such transactions are normally on a net basis which does not
involve payment of brokerage commissions. The cost of securities
purchased from an underwriter usually includes a commission paid
by the issuer to the underwriters; transactions with dealers
normally reflect the spread between bid and asked prices.
The Fund has no obligations to enter into transactions in
portfolio securities with any dealer, issuer, underwriter or other
entity. In placing orders, it is the policy of the Fund to obtain
the best price and execution for its transactions. Where best
price and execution may be obtained from more than one dealer, the
Adviser, in its discretion, purchases and sells securities through
dealers who provide research, statistical and other information to
the Adviser. Such services may be used by the Adviser for all of
its investment advisory accounts and, accordingly, not all such
services may be used by the Adviser in connection with the Fund.
The supplemental information received from a dealer is in addition
to the services required to be performed by the Adviser under
Advisory Agreement, and the expenses of the the Adviser will not
necessarily be reduced as a result of the receipt of such
49
<PAGE>
information. During the fiscal year ended September 30, 1996 and
for the fiscal year ended September 30, 1997, the Fund incurred no
brokerage commissions.
________________________________________________________________
GENERAL INFORMATION
________________________________________________________________
Capitalization
The Fund has an unlimited number of authorized Class A,
Class B, Class C and Advisor Class shares of beneficial interest
par value $.001 per share, which may, without shareholder
approval, be divided into an unlimited number of series. All
shares of the Fund, when issued, are fully paid and non-
assessable. The Trustees are authorized to reclassify and issue
any unissued shares to any number of additional classes or series
without shareholder approval. Accordingly, the Trustees in the
future, for reasons such as the desire to establish one or more
additional portfolios with different investment objectives,
policies or restrictions, may create additional classes or series
of shares. Any issuance of shares of another class would be
governed by the Act and the law of the Commonwealth of
Massachusetts. Shares of 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.
As of the close of business on January 12, 1998, there were
180,869,863 shares of beneficial interest of the Fund
outstanding. Of this amount, 66,498,010 shares were Class A
shares, 79,701,025 shares were Class B shares,33,341,067 shares
were Class C shares and 1,329,761 were Adviser Class shares. Set
forth below is certain information as to all persons who, of
record or beneficially, held 5% or more of any of the classes of
the Fund's shares outstanding at January 12, 1998:
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No. of
Name and Address % of % of
Shares Class
Class A Shares
Unibank Sa Luxembourg 4,276,187 6.43%
c/o Unibank A/S New York
13-15 West 54th Street
New York, NY 10019-5404
Independent Trust Corp. 15,531,940 23.36%
c/f Funds 84
15255 S 94th Ave Ste 300
Orland Park, IL 604-3817
Independent Trust Corp. 4,364,945 6.56%
FBO AMIC
15255 S 94th Ave Ste 300
Orland Park, IL 604-3817
Class C Shares
Advest Inc. 2,076,252 6.23%
436-05835-14
90 State House Square
Hartford, CT 06103-370
Peconic Capital Fund LP 4,045,531 12.13%
515 Madison Avenue
New York, NY 10022-5403
Adviser Class Shares
Robert Pigozzi & 106,037 7.97%
Cecilia Pigozi JTWROS
10 Mooring Point
Annapolis, MD 21403-3475
Publix Super Markets PSP 1,038,477 78.09%
Hoyt R Barnett TTEE
1936 George Jenkins Blvd
P.O. Box 407
Lakeland, FL 33802-0407
Shareholder Liability
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of
the Fund. However, the Agreement and Declaration of Trust
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disclaims shareholder liability for acts or obligations of the
Fund and requires that the Trustees use their best efforts to
ensure that notice of such disclaimer be given in each note, bond,
contract, instrument, certificate or undertaking made or issued by
the Trustees or officers of the Fund. The Agreement and
Declaration of Trust provides for indemnification out of the
property of the Fund for all loss and expense of any shareholder
of the Fund held personally liable for the obligations of the
Fund. Thus, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in
which the Fund would be unable to meet its obligations. In the
view of Alliance, such risk is not material.
Custodian
State Street Bank and Trust Company, 225 Franklin Street,
Boston, Massachusetts 02110, acts as custodian for the securities
and cash of the Fund but plays no part in deciding the purchase or
sale of portfolio securities.
Principal Underwriter
Alliance Fund Distributors, Inc., 1345 Avenue of the Americas,
New York, New York 10105, serves as the Fund's principal
underwriter, and as such may solicit orders from the public to
purchase shares of the Fund. AFD is not obligated to sell any
specific amount of shares and will purchase shares for resale only
against orders for shares. Under the Agreement between the Fund
and AFD, the Fund has agreed to indemnify the distributors, in the
absence of its willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations thereunder, against certain
civil liabilities, including liabilities under the Securities Act,
as amended.
Independent Auditors
An opinion relating to the Fund's financial statements is
given herein by McGladrey & Pullen LLP, 555 Fifth Avenue, New
York, New York, independent auditors for the Fund.
Counsel
Legal matters in connection with the issuance of the shares
offered hereby have been passed upon by Seward & Kissel, One
Battery Park Plaza, New York, New York, counsel for the Fund and
the Adviser. Seward & Kissel has relied upon the opinion of
Sullivan & Worcester, Boston, Massachusetts, for matters relating
to Massachusetts law.
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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 September 30, 1997 for
Class A amounted to an annualized yield of 4.03% equivalent to an
effective yield of 4.11%, for Class B an annualized yield of 3.57%
equivalent to an effective yield of 3.63% and for Class C an
annualized yield of 3.80% equivalent to an effective yield of
3.87%. Current yield information can be obtained by a recorded
message by telephoning toll-free at (800) 221-9513 or in New York
State at (212) 785-9106.
Additional Information.
Any shareholder inquiries may be directed to the shareholder's
broker or AFS at the address or telephone numbers shown on the
front cover of this Statement of Additional Information. This
Statement of Additional Information does not contain all the
information set forth in the Registration Statement filed by the
Trust with the Commission under the Securities Act. Copies of the
Registration Statement may be obtained at a reasonable charge from
the Commission or may be examined, without charge, at the
Commission's offices in Washington, D.C.
53
<PAGE>
________________________________________________________________
FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR'S REPORT
________________________________________________________________
54
<PAGE>
AFD EXCHANGE RESERVES
ANNUAL REPORT
SEPTEMBER 30, 1997
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1997 AFD EXCHANGE RESERVES
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY YIELD VALUE
- -------------------------------------------------------------------------------
COMMERCIAL PAPER-79.0%
AGA Capital Corp.
$ 2,975 10/09/97 (a) 5.57% $ 2,971,318
Allianz of America Finance Corp.
6,000 11/12/97 (a) 5.53 5,961,290
BAA Plc
3,000 10/06/97 5.52 2,997,700
Banca CRT Financial Corp.
4,400 10/08/97 5.58 4,395,226
Banque Nationale de Paris
6,600 11/21/97 5.55 6,548,107
BAT Capital Corp.
3,000 10/14/97 (a) 5.53 2,994,009
3,000 10/24/97 (a) 5.55 2,989,362
Bayerische Vereinsbank
3,900 10/07/97 5.51 3,896,418
Bil North America, Inc.
6,000 10/20/97 5.52 5,982,520
Chiao Tung Bank Co., Ltd.
4,000 10/28/97 5.67 3,982,990
Cregem North America, Inc.
3,000 2/23/98 5.56 2,932,817
Eksportfinans
2,550 10/29/97 5.55 2,538,993
2,825 12/08/97 5.55 2,795,385
General Electric Capital Corp.
5,000 12/31/97 5.50 4,930,486
Glencore Finance, Ltd.
6,000 2/04/98 5.58 5,882,820
IMI Funding Corp. (USA)
3,146 2/17/98 5.55 3,078,584
3,000 2/19/98 5.57 2,934,553
International Lease Finance Corp.
6,000 11/21/97 5.55 5,952,825
International Nederland Bank
3,000 10/02/97 5.53 2,999,539
3,000 11/26/97 5.53 2,974,193
Merrill Lynch & Co., Inc.
2,700 10/16/97 5.53 2,693,779
4,000 10/31/97 5.53 3,981,567
Morgan Stanley Group, Inc.
3,000 10/22/97 5.51 2,990,357
ROSE Funding
3,000 11/03/97 (a) 5.57 2,984,683
Svenska Handelsbanken
6,000 11/25/97 5.53 5,949,308
Swedish Export Credit Corp.
6,000 11/25/97 5.52 5,949,400
UNI Funding, Inc.
6,000 11/10/97 5.53 5,963,133
Total Commercial Paper
(amortized cost $110,251,362) 110,251,362
CERTIFICATES OF DEPOSIT-7.9%
Norinchukin Bank
5,000 5.70%, 10/27/97 5.66 4,999,941
Sanwa Bank
6,000 5.65%, 10/23/97 5.63 6,000,034
Total Certificates of Deposit
(amortized cost $10,999,975) 10,999,975
U.S. GOVERNMENT AND AGENCY OBLIGATION-3.7%
Federal National Mortgage Association
5,200 10/30/97
(amortized cost $5,176,500) 5.61 5,176,500
TOTAL INVESTMENTS-90.6%
(amortized cost $126,427,837) 126,427,837
Other assets less liabilities-9.4% 13,179,038
NET ASSETS-100%
(offering and redemption price of $1.00
per share; 41,167,958 Class A shares;
74,456,561 Class B shares;
23,949,949 Class C shares and 34,904
Advisor Class shares outstanding) $139,606,875
(a) Securities issued in reliance on Section (4) 2 or Rule 144A of the
Securities Act of 1933. Rule 144A securities may be resold in transactions
exempt from registration, normally to qualified institutional buyers. At
September 30, 1997, these securities amounted to $17,900,662, representing
12.8% of net assets.
See notes to financial statements.
2
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1997 AFD EXCHANGE RESERVES
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $126,427,837) $ 126,427,837
Cash 628,919
Receivable for capital stock sold 15,147,402
Interest receivable 62,158
Other assets 46,139
Total assets 142,312,455
LIABILITIES
Payable for capital stock redeemed 2,414,587
Advisory fee payable 28,760
Distribution fee payable 751
Accrued expenses 261,482
Total liabilities 2,705,580
NET ASSETS $ 139,606,875
COMPOSITION OF NET ASSETS
Paid-in-capital $ 139,609,372
Accumulated net realized loss on investment transactions (2,497)
$ 139,606,875
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and offering price per share ($41,167,119/
41,167,958 shares of beneficial interest issued
and outstanding) $1.00
CLASS B SHARES
Net asset value and offering price per share ($74,455,256/
74,456,561 shares of beneficial interest issued
and outstanding) $1.00
CLASS C SHARES
Net asset value and offering price per share ($23,949,596/
23,949,949 shares of beneficial interest issued
and outstanding) $1.00
ADVISOR CLASS
Net asset value and offering price per share ($34,904/
34,904 shares of beneficial interest issued and
outstanding) $1.00
See notes to financial statements.
3
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1997 AFD EXCHANGE RESERVES
_______________________________________________________________________________
INVESTMENT INCOME
Interest $ 7,444,584
EXPENSES
Advisory fee $ 338,864
Distribution fee - Class A 199,655
Distribution fee - Class B 749,018
Distribution fee - Class C 155,080
Transfer agency 211,226
Registration fees 208,108
Custodian 102,235
Audit and legal 101,008
Administrative 96,000
Printing 66,168
Amortization of organization expenses 31,408
Trustees' fees 24,710
Miscellaneous 8,354
Total expenses 2,291,834
Net investment income 5,152,750
REALIZED LOSS ON INVESTMENTS
Net realized loss on investment transactions (311)
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 5,152,439
STATEMENT OF CHANGES IN NET ASSETS
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
SEPT. 30,1997 SEPT. 30,1996
- -------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income $ 5,152,750 $ 4,590,571
Net realized gain (loss) on investment
transactions (311) 105
Net increase in net assets from operations 5,152,439 4,590,676
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income
Class A (1,638,799) (1,654,846)
Class B (2,707,243) (2,424,825)
Class C (806,371) (510,900)
Advisor Class (337) -0-
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase 19,187,747 3,761,761
Total increase 19,187,436 3,761,866
NET ASSETS
Beginning of year 120,419,439 116,657,573
End of year $139,606,875 $120,419,439
See notes to financial statements.
4
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 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's investment
objective is to provide maximum current income to the extent consistent with
safety of principal and liquidity. The Fund offers Class A, Class B, Class C
and Advisor Class shares. All four 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. Class C shares are subject to a contingent deferred sales
charge of 1% on redemptions made within the first year after purchase. 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.
Advisor Class shares are sold for cash or in exchange for Advisor Class shares
of another Alliance Mutual Fund without any initial sales charge or contingent
CDSC and are not subject to ongoing distribution expenses. Advisor Class shares
are offered solely to (i) investors participating in fee-based programs and to
certain retirement plan accounts.
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 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
NOTES TO FINANCIAL STATEMENTS (CONTINUED) AFD EXCHANGE RESERVES
_______________________________________________________________________________
5. INCOME AND EXPENSES
All income earned and expenses incurred by the Fund are borne on a pro-rata
basis by each outstanding class of shares, based on the proportionate interest
in the Fund represented by the shares of such class, except that the Fund's
Class B and Class C shares bear higher distribution and transfer agent fees
than Class A shares and the Advisory Class shares have no distribution fees.
6. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Interest income is accrued daily. Investment transactions are recorded on the
date securities are purchased or sold. Investment 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, 1997, the Fund
incurred costs of $96,000.
The Fund compensates Alliance Fund Services, Inc., a wholly-owned subsidiary of
the Adviser, under a Transfer Agency Agreement for providing personnel and
facilities to perform transfer agency services. Such compensation amounted to
$160,742 for the year ended September 30, 1997.
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. There is no distribution fee on the
Advisor Class 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, 1997, the cost of securities for federal income tax purposes
was the same as the cost for financial reporting purposes. At September 30,
1997, the Fund had a capital loss carryforward of $2,497, of which $2,186
expires in 2003 and $311 expires in the year 2004.
6
AFD EXCHANGE RESERVES
_______________________________________________________________________________
NOTE E: TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
An unlimited number of shares ($.001 par value) are authorized. At September
30, 1997, capital paid-in aggregated $41,167,958 for Class A, $74,456,561 for
Class B, $23,949,949 for Class C and $34,904 for Advisor Class. Transactions,
all at $1.00 per share, were as follows:
CLASS A
-----------------------------
YEAR ENDED YEAR ENDED
SEPT. 30, SEPT. 30,
1997 1996
------------- -------------
Shares sold 396,646,176 382,975,223
Shares issued on reinvestments of dividends 1,638,799 1,654,846
Shares converted from Class B 2,779,625 1,090,820
Shares redeemed (402,092,046) (384,645,564)
Net increase (decrease) (1,027,446) 1,075,325
CLASS B
-----------------------------
YEAR ENDED YEAR ENDED
SEPT. 30, SEPT. 30,
1997 1996
------------- -------------
Shares sold 248,115,983 166,636,823
Shares issued on reinvestments of dividends 2,707,243 2,424,825
Shares converted to Class A (2,779,625) (1,090,820)
Shares redeemed (238,596,718) (168,231,937)
Net increase (decrease) 9,446,883 (261,109)
CLASS C
-----------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
------------- -------------
Shares sold 263,291,205 90,072,507
Shares issued on reinvestments of dividends 806,371 510,900
Shares redeemed (253,364,170) (87,635,862)
Net increase 10,733,406 2,947,545
ADVISOR CLASS
-----------------------------
JAN. 30, 1997(a)
TO
SEPT. 30,
1997
----------------
Shares sold 120,464
Shares issued on reinvestments of dividends 337
Shares redeemed (85,897)
Net increase 34,904
(a) Commencement of distribution.
7
FINANCIAL HIGHLIGHTS AFD EXCHANGE RESERVES
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------
MARCH 25,
1994(A)
YEAR ENDED SEPTEMBER 30, TO
--------------------------------------- SEPT. 30,
1997 1996 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .0411 .0416 .0453 .0126
LESS: DIVIDENDS
Dividends from net investment income (.0411) (.0416) (.0453) (.0126)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN
Total investment return based on net
asset value (b) 4.19% 4.24% 4.64% 2.45%(c)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $41 $41 $41 $18
Ratio of average net assets to:
Expenses, net of waivers 1.38% 1.29% 1.21% 1.82%(c)
Expenses, before waivers 1.38% 1.29% 1.29% 1.82%(c)
Net investment income 4.10% 4.15% 4.63%(d) 2.62%(c)
</TABLE>
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------
MARCH 25,
1994(A)
YEAR ENDED SEPTEMBER 30, TO
--------------------------------------- SEPT. 30,
1997 1996 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .0361 .0366 .0404 .0101
LESS: DIVIDENDS
Dividends from net investment income (.0361) (.0366) (.0404) (.0101)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN
Total investment return based on net
asset value (b) 3.67% 3.72% 4.12% 1.95%(c)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $74 $65 $65 $31
Ratio of average net assets to:
Expenses, net of waivers 1.88% 1.79% 1.70% 2.35%(c)
Expenses, before waivers 1.88% 1.79% 1.78% 2.35%(c)
Net investment income 3.61% 3.67% 4.17%(d) 1.91%(c)
</TABLE>
See footnote summary on page 9.
8
FINANCIAL HIGHLIGHTS (CONTINUED) AFD EXCHANGE RESERVES
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
CLASS C
----------------------------------------------------
MARCH 25,
1994(A)
YEAR ENDED SEPTEMBER 30, TO
--------------------------------------- SEPT. 30,
1997 1996 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .0386 .0390 .0430 .0112
LESS: DIVIDENDS
Dividends from net investment income (.0386) (.0390) (.0430) (.0112)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN
Total investment return based on
net asset value (b) 3.93% 3.98% 4.39% 2.18%(c)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $24 $13 $10 $5
Ratio of average net assets to:
Expenses, net of waivers 1.61% 1.55% 1.45% 2.08%(c)
Expenses, before waivers 1.61% 1.55% 1.52% 2.08%(c)
Net investment income 3.90% 3.89% 4.41%(d) 2.14%(c)
</TABLE>
ADVISOR CLASS
---------------------
JANUARY 30, 1997(A)
TO
SEPTEMBER 30, 1997
---------------------
Net asset value, beginning of period $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .0254
LESS: DIVIDENDS
Dividends from net investment income (.0254)
Net asset value, end of period $1.00
TOTAL RETURN
Total investment return based on net asset value (b) (c) 4.71%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $35
Ratio of expenses to average net assets (c) .88%
Ratio of net investment income to average net assets (c) 4.15%
(a) Commencement of distribution.
(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.
9
REPORT OF INDEPENDENT ACCOUNTANTS AFD EXCHANGE RESERVES
_______________________________________________________________________________
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS AFD EXCHANGE RESERVES
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments of AFD Exchange Reserves as of September 30, 1997
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, 1997 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, 1997, 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 23, 1997
10
<PAGE>
________________________________________________________________
APPENDIX
________________________________________________________________
Prime-1, Prime-2, A-1, A-2, Fitch-1, Fitch-2,
Duff 1 and Duff 2 Commercial Paper Ratings
The Fund will invest only in paper maintaining a high quality
rating.
"Prime-1" is the highest commercial paper rating assigned by
Moody's Investors Services, Inc. ("Moody's"), and indicates
superior ability for repayment of senior short-term debt
obligations. "Prime-2" is the second highest, and denotes a
strong, but somewhat lesser degree of assurance. Commercial paper
issuers rated "Prime" have the following characteristics: their
short-term debt obligations carry the smallest degree of
investment risk; margins of support for current indebtedness are
large or stable with cash flow and asset protection well assured;
current liquidity provides ample coverage of near-term liabilities
and unused alternative financing arrangements are generally
available; and while protective elements may change over the
intermediate or longer term, such changes are most unlikely to
impair the fundamentally strong position of short- term
obligations.
Commercial paper issuers rate "A" by Standard & Poor's have
the following characteristics: liquidity ratios are better than
industry average; long term debt is "A" or better; the issuer has
access to at least two additional channels of borrowing; basic
earnings and cash flow are in an upward trend; and typically, the
issuer is a strong company in a well-established industry with
superior management. Standard & Poor's uses the numbers 1+, 1, 2
and 3 to denote relative strength within its highest
classification of "A". The numbers 1 and 2 indicate the relative
degree of safety regarding timely payment with "A-1" paper being
somewhat higher than "A-3".
Commercial paper rated "Fitch-1" is considered to be the
highest grade paper and is regarded as having the strongest degree
of assurance for timely payment. "Fitch-2" is considered very
good grade paper and reflects an assurance of timely payment only
slightly less in degree than the strongest issue.
Commercial paper issues rated "Duff 1" by Duff & Phelps, Inc.
have the following characteristics: very high certainty of timely
payment, excellent liquidity factors supported by strong
fundamental protection factors, and risk factors which are very
small. Issues rated "Duff 2" have a good certainty of timely
A-1
<PAGE>
payment, sound liquidity factors and company fundamentals, small
risk factors, and good access to capital markets.
Bonds rated "AAA" and "Aaa" have the highest ratings assigned
to debt obligations by Standard & Poor's and Moody's,
respectively. Standard & Poor's "AAA" rating indicates an
extremely strong capacity to pay principal and interest. Bonds
rated "AA" by Standard & Poor's also qualify as high-quality debt
obligations. Capacity to pay principal and interest is very
strong, and in the majority of instances they differ from "AAA"
issues only in small degree. Standard & Poor's "A" rated bonds
have a strong capacity to pay interest and repay principal but are
somewhat more susceptible to the adverse effects of change in
circumstances and economic conditions than are higher rated bonds.
Moody's "Aaa" rating indicates the ultimate degree of
protection as to principal and interest. Moody's "Aa" rated
bonds, though also high-grade issues, are rated lower than "Aaa"
bonds because margins of protection may not be as large,
fluctuations of protective elements may be of greater amplitude or
there may be other elements present which make the long term risks
appeal somewhat larger. Moody's "A" rated bonds are considered
upper medium grade obligations possessing many favorable
investment attributes. Although factors giving security to
principal and interest are considered adequate, elements may exist
which suggest that the bonds may be susceptible to impairment
sometime in the future.
A-2
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits for the Fund.
(a) Financial Statements
Included in the Prospectus:
Financial Highlights
Included in the Statement of Additional Information:
Portfolio of Investments - September 30, 1997.
Statement of Assets and Liabilities - September 30,
1997.
Statement of Operations for year ended
September 30, 1997.
Statement of Changes in Net Assets for years ended
September 30, 1996 and September 30, 1997.
Notes to Financial Statements - September 30,
1997.
Financial Highlights - For Class A, B and C shares years
ended September 30, 1997, September 30, 1996,
September 30, 1995 and period March 25, 1994
(commencement of distribution) to September 30, 1994;
for Advisor Class shares period January 30, 1997
(commencement of distribution) to September 30, 1997.
Report of Independent Accountants
Included in Part C of the Registration Statement
All other schedules are omitted as the required
information is inapplicable
(b) Exhibits
(1) (a) Agreement and Declaration of Trust of the
Registrant - Filed herewith.
(b) 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 N-1A,
filed January 26, 1996.
(c) Certificate of Amendment of the Agreement and
Declaration of Trust - Incorporated by
reference to Exhibit 1(c) to Post-Effective
C-1
<PAGE>
Amendment No. 6 of the Registrant's Form N-1A,
filed February 3, 1997.
(2) By-Laws of the Registrant - Filed herewith.
(3) Not applicable.
(4) (a) Form of Share Certificate for Class A Shares -
Incorporated by reference from Registration
Statement on Form N-1A (File Nos. 33-74230 and
811-08294) 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
Registration Statement on Form N-1A (File
Nos. 33-74230 and 811-08294) as filed with the
Securities and Exchange Commission on March 16,
1994.
(c) Form of Share Certificate for Class C
Shares - Incorporated by reference from
Registration Statement on Form N-1A (File
Nos. 33-74230 and 811-08294) as filed with the
Securities and Exchange Commission on March 16,
1994.
(5) Advisory Agreement between the Registrant and
Alliance Capital Management L.P. - Filed herewith.
(6) (a) Distribution Services Agreement between the
Registrant and Alliance Fund Distributors,
Inc. - Filed herewith.
(b) Amendment to Distribution Services Agreement
between Registrant and Alliance Fund
Distributors, Inc. - Incorporated by reference
to Exhibit No. 6(a) to Post-Effective
Amendment No. 6 of the Registrant's Form N-1A
filed, February 3, 1997.
(c) Form of Selected Dealer Agreement between
Alliance Fund Distributors, Inc. and selected
dealers offering shares of Registrant - Filed
herewith.
(d) Form of Selected Agent Agreement between
Alliance Fund Distributors, Inc. and selected
agents making available shares of Registrant -
Filed herewith.
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(7) Not applicable.
(8) Custodian Contract between the Registrant and State
Street Bank and Trust Company - Filed herewith.
(9) Transfer Agency Agreement between the Registrant
and Alliance Fund Services, Inc. - Filed herewith.
(10) (a) Opinion and Consent of Seward & Kissel - Filed
herewith.
(b) Opinion and Consent of Sullivan & Worcester -
Incorporated by reference from Registration
Statement on Form N-1A (File Nos. 33-74230 and
811-08294) 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. - Filed herewith.
(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
Registration Statement on Post-Effective Amendment
No. 3 of the Form N-1A, filed January 26, 1996.
(18) Rule 18f-3 Plan -Incorporated by reference to
Exhibit No. 18 to Post-Effective Amendment No. 3 of
the Registration Statement on Form N-1A, filed
January 26, 1996.
(27) Financial Data Schedule - Filed herewith.
Other Exhibits: Powers of Attorney of David H. Dievler,
Ruth Block, John D. Carifa, William H. Foulk, Jr.,
James M. Hester, Clifford L. Michel and Robert C.
White - Incorporated by reference from Registration
Statement on Form N-1A (File Nos. 33-74230 and
811-08294) 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 Registration Statement on
Form N-1A (File Nos. 33-74230 and 811-08294) as filed
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with the Securities and Exchange Commission on March 16,
1994.
Other Exhibits: Power of Attorney of Ruth Block,
John D. Carifa, David H. Dievler, John H. Dobkin,
William H. Foulk, Jr., James M. Hester, Clifford L.
Michel, Donald J. Robinson - Filed herewith.
ITEM 25. Persons Controlled by or Under Common Control with
Registrant.
None.
ITEM 26. Number of Holders of Securities.
Registrant had, as of January 12, 1998, the following
record holders of shares of Beneficial Interest:
Class A 2,018
Class B 4,413
Class C 1,150
Advisor Class 26
ITEM 27. Indemnification.
It is the Registrant's policy to indemnify its trustees
and officers, employees and other agents as set forth in
Article VIII and Article III of Registrant's Agreement
and Declaration of Trust, filed as Exhibit 1 in response
to Item 24 and Section 10 of the proposed Distribution
Services Agreement filed as Exhibit 6(a), all as set
forth below. The liability of the Registrant's trustees
and officers is dealt with in Article VIII of
Registrant's Agreement and Declaration of Trust, as set
forth below. The Adviser's liability for any loss
suffered by the Registrant or its shareholders is set
forth in Section 4 of the proposed Advisory Agreement
filed as Exhibit 5 to this Registration Statement, as
set forth below.
Article VIII of Registrant's Agreement and Declaration
of Trust reads as follows:
"Section 8.1. Trustees, Shareholders, etc. Not
Personally Liable; Notice. The Trustees and officers of
the Trust, in incurring any debts, liabilities or
obligations, or in limiting or omitting any other
actions for or in connection with the Trust, are or
shall be deemed to be acting as Trustees or officers of
the Trust and not in their own capacities. No
Shareholder shall be subject to any personal liability
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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 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
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office of Trustee, and for nothing else, and shall not
be liable for errors of judgment or mistakes of fact or
law. Subject to the foregoing, (i) the Trustees shall
not be responsible or liable in any event for any
neglect or wrongdoing of any officer, agent, employee,
consultant, Investment Adviser, Administrator,
Distributor or Principal Underwriter, Custodian or
Transfer Agent, Dividend Disbursing Agent, Shareholder
Servicing Agent or Accounting Agent of the Trust, nor
shall any Trustee be responsible for the act or omission
of any other Trustee; (ii) the Trustees may take advice
of counsel or other experts with respect to the meaning
and operation of this Declaration of Trust and their
duties as Trustees, and shall be under no liability for
any act or omission in accordance with such advice or
for failing to follow such advice; and (iii) in
discharging their duties, the Trustees, when acting in
good faith, shall be entitled to rely upon the books of
account of the Trust and upon written reports made to
the Trustees by any officer appointed by them, any
independent public accountant, and (with respect to the
subject matter of the contract involved) any officer,
partner or responsible employee of a Contracting Party
appointed by the Trustees pursuant to Section 5.2
hereof. The trustees as such shall not be required to
give any bond or surety or any other security for the
performance of their duties.
SECTION 8.3. Indemnification of Shareholders. If any
Shareholder (or former Shareholder) of the Trust shall
be charged or held to be personally liable for any
obligation or liability of the Trust solely by reason of
being or having been a Shareholder and not because of
such Shareholder's acts or omissions or for some other
reason, the Trust (upon proper and timely request by the
Shareholder) shall assume the defense against such
charge and satisfy any judgment thereon, and the
Shareholder or former Shareholder (or the heirs,
executors, administrators or other legal representatives
thereof, or in the case of a corporation or other
entity, its corporate or other general successor) shall
be entitled (but solely out of the assets of the
Portfolio of which such Shareholder or former
Shareholder is or was the holder of Shares) to be held
harmless from and indemnified against all loss and
expense arising from such liability.
SECTION 8.4. Indemnification of Trustees, Officers,
etc. Subject to the limitations set forth hereinafter
in this Section 8.4, the Trust shall indemnify (from the
assets of the Portfolio or Portfolios to which the
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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 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
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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.
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
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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
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
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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.
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
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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.
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
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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 Environment Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Government Reserves
Alliance Greater China '97 Fund, Inc.
Alliance Growth and Income Fund, Inc.
Alliance Income Builder Fund, Inc.
Alliance Institutional Funds, Inc.
Alliance International Fund
Alliance International Premier Growth Fund, Inc.
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.
Alliance Real Estate Investment Fund, Inc.
Alliance/Regent Sector Opportunity Fund, Inc.
Alliance Short-Term Multi-Market Trust, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance Variable Products Series Fund, Inc.
Alliance World Income Trust, Inc.
Alliance Worldwide Privatization Fund, Inc.
Fiduciary Management Associates
The Alliance Fund, Inc.
The Alliance Portfolios
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(b) The following are the Directors and Officers of Alliance
Fund Distributors, Inc., the principal place of business
of which is 1345 Avenue of the Americas, New York, New
York, 10105.
Positions and Positions and
Offices With Offices with
Name Underwriter Registrant
Michael J. Laughlin Chairman
Robert L. Errico President
Edmund P. Bergan, Jr. Senior Vice President, Secretary
General Counsel
and Secretary
Karen J. Bullot Senior Vice President
James S. Comforti Senior Vice President
James L. Cronin Senior Vice President
Daniel J. Dart Senior Vice President
Richard A. Davies Senior Vice President
Managing Director
Byron M. Davis Senior Vice President
Anne S. Drennan Senior Vice President &
Treasurer
Mark J. Dunbar Senior Vice President
Bradley F. Hanson Senior Vice President
Geoffrey L. Hyde Senior Vice President
Robert H. Joseph, Jr. Senior Vice President
and Chief Financial
Officer
Richard E. Khaleel Senior Vice President
Stephen R. Laut Senior Vice President
Daniel D. McGinley Senior Vice President
Ryne A. Nishimi Senior Vice President
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Antonios G. Poleondakis Senior Vice President
Robert E. Powers Senior Vice President
Richard K. Saccullo Senior Vice President
Gregory K. Shannahan Senior Vice President
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
Kenneth F. Barkoff Vice President
Casimir F. Bolanowski Vice President
Michael E. Brannan Vice President
Timothy W. Call Vice President
Kevin T. Cannon Vice President
John R. Carl Vice President
William W. Collins, Jr. Vice President
Leo H. Cook Vice President
Richard W. Dabney Vice President
John F. Dolan Vice President
John C. Endahl Vice President
Sohaila S. Farsheed Vice President
William C. Fisher Vice President
Gerard J. Friscia Vice President &
Controller
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Andrew L. Gangolf Vice President and Assistant
Assistant General Secretary
Counsel
Mark D. Gersten Vice President Treasurer and
Chief
Financial
Officer
Joseph W. Gibson Vice President
Charles M. Greenberg Vice President
Alan Halfenger Vice President
William B. Hanigan Vice President
Scott F. Heyer Vice President
Daniel M. Hazard Vice President
George R. Hrabovsky Vice President
Valerie J. Hugo Vice President
Scott Hutton Vice President
Thomas K. Intoccia Vice President
Larry P. Johns Vice President
Richard D. Keppler Vice President
Gwenn M. Kessler Vice President
Donna M. Lamback Vice President
James M. Liptrot Vice President
James P. Luisi Vice President
Christopher J. MacDonald Vice President
Michael F. Mahoney Vice President
Shawn P. McClain Vice President
Maura A. McGrath Vice President
Thomas F. Monnerat Vice President
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Joanna D. Murray Vice President
Jeanette M. Nardella Vice President
Nicole Nolan-Koester Vice President
John C. O'Connell Vice President
John J. O'Connor Vice President
James J. Posch Vice President
Domenick Pugliese Vice President and Assistant
Assistant General Secretary
Counsel
Bruce W. Reitz Vice President
Dennis A. Sanford Vice President
Karen C. Satterberg Vice President
Robert C. Schultz Vice President
Raymond S. Sclafani Vice President
Richard J. Sidell Vice President
Teris A. Sinclair Vice President
Andrew D. Strauss Vice President
Michael J. Tobin Vice President
Joseph T. Tocyloski Vice President
Martha D. Volcker Vice President
Patrick E. Walsh Vice President
William C. White Vice President
Emilie D. Wrapp Vice President and Assistant
Special Counsel Secretary
Michael W. Alexander Assistant Vice President
Richard J. Appaluccio Assistant Vice President
Charles M. Barrett Assistant Vice President
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Robert F. Brendli Assistant Vice President
Maria L. Carreras Assistant Vice President
John P. Chase Assistant Vice President
Russell R. Corby Assistant Vice President
John W. Cronin Assistant Vice President
Terri J. Daly Assistant Vice President
Ralph A. DiMeglio Assistant Vice President
Faith C. Dunn Assistant Vice President
John E. English Assistant Vice President
Duff C. Ferguson Assistant Vice President
John Grambone Assistant Vice President
Brian S. Hanigan Assistant Vice President
James J. Hill Assistant Vice President
Edward W. Kelly Assistant Vice President
Michael Laino Assistant Vice President
Nicholas J. Lapi Assistant Vice President
Kristine J. Luisi Assistant Vice President
Patrick Look Assistant Vice President
& Assistant Treasurer
Richard F. Meier Assistant Vice President
Richard J. Olszewski Assistant Vice President
Catherine N. Peterson Assistant Vice President
Carol H. Rappa Assistant Vice President
Clara Sierra Assistant Vice President
Gayle S. Stamer Assistant Vice President
Vincent T. Strangio Assistant Vice President
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Wesley S. Williams Assistant Vice President
Christopher J. Zingaro 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.
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SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as
amended, the Registrant certifies that it meets all of the
requirements for effectiveness of this Amendment to its
Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to its
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York
and State of New York on the 30th day of January, 1998.
AFD EXCHANGE RESERVES
by /s/ John D. Carifa
_________________________
John D. Carifa
Chairman and 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/ John D. Carifa Chairman and President January 30, 1998
______________
John D. Carifa
2) Principal Financial
and Accounting
Officer
/s/ Mark D. Gersten Treasurer and Chief January 30, 1998
_______________ Financial Officer
Mark D. Gersten
C-19
<PAGE>
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 Donald J. Robinson
by /s/ Edmund P. Bergan, Jr. January 30, 1998
____________________
(Attorney-in-fact)
Edmund P. Bergan, Jr.
C-20
<PAGE>
Index to Exhibits
(1) (a) Agreement and Declaration of Trust
(2) By-Laws
(6) (a) Distribution Services Agreement between
Registrant and Alliance Fund Distributors, Inc.
(b) Selected Dealer Agreement Agreement between Alliance
Fund Distributors, Inc. and selected dealers making
available shares of Registrant.
(c) Selected Agent Agreement between Alliance Fund
Distributors, Inc. and selected agents making available
shares of Registrant.
(8) Custodian Agreement
(9) Transfer Agency Agreement
(11) Consent of Independent Auditors
(13) Investment Representation Letter
(27) Financial Data Schedule
Other Exhibits - Powers of Attorney of Ruth Block, John D.
Carifa, David H. Dievler, John H. Dobkin, William H. Foulk, Jr.,
James M. Hester, Clifford L. Michel and Donald J. Robinson.
C-21
00250163.AN0
<PAGE>
AFD EXCHANGE RESERVES
----------------------------------
AGREEMENT AND DECLARATION OF TRUST
----------------------------------
Dated: January 14, 1994
Principal Office:
1345 Avenue of the Americas
New York, New York 10105
Address of Initial Trustee and
Massachusetts Office:
Thomas E. Weesner, Esq.
Sullivan & Worcester
One Post Office Square
<PAGE>
AFD EXCHANGE RESERVES
AGREEMENT AND DECLARATION OF TRUST
Index
Page
RECITALS 1
ARTICLE 1 THE TRUST 2
Section 1.1 Name 2
Section 1.2 Location 2
Section 1.3 Nature of Trust 2
Section 1.4 Definitions 2
Section 1.5 Real Property to be Converted into
Personal Property 7
ARTICLE 2 PURPOSE OF THE TRUST 8
ARTICLE 3 POWERS OF THE TRUSTEES 8
Section 3.1 Powers in General 8
(a) Investments 9
(b) Disposition of Assets 9
(c) Ownership Powers 10
(d) Form of Holding 10
(e) Reorganization, etc. 10
(f) Voting Trusts, etc. 10
(g) Contracts, etc. 10
(h) Guarantees, etc. 11
(i) Partnerships, etc. 11
(j) Insurance 11
(k) Pensions, etc. 11
(l) Power of Collection and
Litigation 11
(m) Issuance and Repurchase of
Shares 12
(n) Offices 12
(o) Expenses 12
(p) Agent's, etc. 12
(q) Accounts 12
(r) Valuation 12
(s) Indemnification 13
(t) General 13
i
<PAGE>
Section 3.2 Borrowings; Financings; Issuance of
Securities 13
Section 3.3 Deposits 13
Section 3.4 Allocations 13
Section 3.5 Further Powers; Limitations 14
ARTICLE 4 TRUSTEES AND OFFICERS 14
Section 4.1 Number, Designation, Election, Term,
etc. 14
(a) Initial Trustee 14
(b) Number 14
(c) Election and Term 15
(d) Resignation and Retirement 15
(e) Removal 15
(f) Vacancies 16
(g) Acceptance of Trusts 16
(h) Effect of Death, Resignation, etc. 16
(i) Conveyance 16
(j) No Accounting 17
Section 4.2 Trustees' Meetings; Participation by
Telephone, etc. 17
Section 4.3 Committees; Delegation 17
Section 4.4 Officers 18
Section 4.5 Compensation of Trustees and Officers 18
Section 4.6 Ownership of Shares and Securities of
the Trust 18
Section 4.7 Right of Trustees and Officers to Own
Property or to Engage in Business;
Authority of Trustees to Permit
Others to Do Likewise 18
Section 4.8 Reliance on Experts 19
Section 4.9 Surety Bonds 19
Section 4.10 Apparent Authority of Trustees and
Officers 19
Section 4.11 Other Relationships Not Prohibited 19
Section 4 12 Payment of Trust Expenses 20
Section 4.13 Ownership of the Trust Property 20
ARTICLE 5 DELEGATION OF MANAGERIAL RESPONSIBILITIES 21
Section 5.1 Appointment; Action by Less than All
Trustees 21
Section 5.2 Certain Contracts 21
(a) Advisory 22
(b) Administration 22
(c) Distribution 22
(d) Custodian 23
ii
<PAGE>
(e) Transfer and Dividend Disbursing
Agency 23
(f) Shareholder Servicing 23
(g) Accounting 23
ARTICLE 6 PORTFOLIOS AND SHARES 24
Section 6.1 Description of Portfolios and Shares 24
(a) Shares; Portfolios; Series of Shares 24
(b) Establishment, etc. of Portfolios;
Authorization of Shares 24
(c) Character of Separate Portfolios and
Shares Thereof 25
(d) Consideration for Shares 25
Section 6.2 Establishment and Designation of the
AFD Exchange Reserves Portfolio;
Classes of Shares; General Provisions
for All Portfolios and Series of
Shares 25
(a) Assets Belonging to Portfolios 26
(b) Liabilities of Portfolios 27
(c) Dividends 27
(d) Liquidation 28
(e) Redemption by Shareholder 28
(f) Redemption at the Option of the Trust 29
(g) Net Asset Value 29
(h) Transfer 30
(i) Equality 30
(j) Rights of Fractional Shares 30
(k) Conversion Rights; Conversion of
Class B Shares 30
(l) Suspension of Automatic Conversion
of Class B Shares 32
Section 6.3 Ownership of Shares 33
Section 6.4 Investments in the Trust 33
Section 6.5 No Pre-emptive Rights 34
Section 6.6 Status of Shares 34
ARTICLE 7 SHAREHOLDERS' VOTING POWERS AND MEETINGS 34
Section 7.1 Voting Powers 34
Section 7.2 Number of Votes and Manner of Voting;
Proxies 35
Section 7.3 Meetings 35
Section 7.4 Record Dates 36
Section 7.5 Quorum and Required Vote 36
Section 7.6 Action by Written Consent 36
iii
<PAGE>
Section 7.7 Inspection of Records 37
Section 7.8 Additional Provisions 37
ARTICLE 8 LIMITATION OF LIABILITY; INDEMNIFICATION 37
Section 8.1 Trustees, Shareholders, etc. Not
Personally Liable; Notice 37
Section 8.2 Trustees' Good Faith Action; Expert
Advice; No Bond or Surety 38
Section 8.3 Indemnification of Shareholders 38
Section 8.4 Indemnification of Trustees, Officers,
etc. 38
Section 8.5 Compromise Payment 40
Section 8.6 Indemnification Not Exclusive, etc. 40
Section 8.7 Liability of Third Persons Dealing with
Trustees 40
ARTICLE 9 DURATION; REORGANIZATION: AMENDMENTS 40
Section 9.1 Duration and Termination of Trust 40
Section 9.2 Reorganization 41
Section 9.3 Amendments; etc. 41
Section 9.4 Filing of Copies of Declaration and
Amendments 43
ARTICLE 10 MISCELLANEOUS 43
Section 10.1 Governing Law 43
Section 10.2 Counterparts 43
Section 10.3 Reliance by Third Parties 43
Section 10.4 References; Headings . 43
Section 10.5 Use of the Names "AFD" and "Alliance" 44
Signatures 44
Acknowledgments 45
iv
<PAGE>
AGREEMENT AND DECLARATION OF TRUST
OF
AFD EXCHANGE RESERVES
This AGREEMENT AND DECLARATION OF TRUST, made at Boston,
Massachusetts this 14th day of January, 1994 by and between the
Settlor and the Trustee whose signature is set forth below (the
"Initial Trustee"),
W I T N E S S E T H T H A T:
WHEREAS, Kathleen M. Miskiewicz, an individual residing
in Brookline, Massachusetts (the "Settlor"), proposes to deliver
to the Initial Trustee the sum of one hundred dollars ($100.00)
lawful money of the United States of America in trust hereunder
and to authorize the Initial Trustee and all other Persons acting
as Trustees hereunder to employ such funds, and any other funds
coming into their hands or the hands of their successor or
successors as such Trustees, to carry on the business of an
investment company, and as such of buying, selling, investing in
or otherwise dealing in and with stocks, bonds, debentures,
warrants, options, futures contracts and other securities and
interests therein, or calls or puts with respect to any of the
same, or such other and further investment media and other
property as the Trustees may deem advisable, which are not
prohibited by law or the terms of this Declaration; and
WHEREAS, the Initial Trustee is willing to accept such
sum, together with any and all additions thereto and the income
or increments thereof, upon the terms, conditions and trusts
hereinafter set forth; and
WHEREAS, it is proposed that the assets held by the
Trustees shall initially be held in a single portfolio, and may
from time to time hereafter be divided into separate portfolios,
each with its own separate investment assets, investment
objectives, policies and purposes, and that the beneficial
interest in each such portfolio shall be divided into
transferable Shares of Beneficial Interest, a separate Series o:E
Shares for each portfolio, all in accordance with the provisions
hereinafter set forth; and
WHEREAS, it is desired that the trust established hereby
(the "Trust") be managed and operated as a trust with
transferable shares under the laws of Massachusetts, of the type
commonly known as and referred to as a Massachusetts business
trust, in accordance with the provisions hereinafter set forth,
NOW, THEREFORE, the Initial Trustee, for himself and his
successors as Trustees, hereby declares, and agrees with the
Settlor, for herself and for all Persons who shall hereafter
<PAGE>
become holders of Shares of Beneficial Interest of the Trust, of
any Series, that the Trustees will hold the sum delivered to them
upon the execution hereof, and all other and further cash,
securities and other property of every type and description which
they may in any way acquire in their capacity as such Trustees,
together with the income therefrom and the proceeds thereof, IN
TRUST NEVERTHELESS, to manage and dispose of the same for the
benefit of the holders from time to time of the Shares of
Beneficial Interest of the several Series being issued and to be
issued here- under and in the manner and subject to the
provisions hereof, to wit:
ARTICLE 1
THE TRUST
SECTION 1.1 Name. The name of the Trust shall be
"AFD EXCHANGE RESERVES"
and so far as may be practicable the Trustees shall conduct the
Trust's activities, execute all documents and sue or be sued
under that name, which name (and the word "Trust" wherever used
in this Agreement and Declaration of Trust, except where the
context otherwise requires) shall refer to the Trustees in their
capacity as Trustees, and not individually or personally, and
shall not refer to the officers, agents or employees of the Trust
or of such Trustees, or to the holders of the Shares of
Beneficial Interest of the Trust, of any Series. If the Trustees
determine that the use of such name is not practicable, legal or
convenient at any time or in any jurisdiction, or if the Trust is
required to discontinue the use of such name pursuant to Section
10.5 hereof, then subject to that Section, the Trustees may use
such other designation, or they may adopt such other name for the
Trust as they deem proper, and the Trust may hold property and
conduct its activities under such designation or name.
SECTION 1.2 Location. The Trust shall have an office
in Boston, Massachusetts, unless changed by the Trustees to
another location in Massachusetts or elsewhere, but such office
need not be the sole or principal office of the Trust. The Trust
may have such other offices or places of business as the Trustees
may from time to time determine to be necessary or expedient.
SECTION 1.3 Nature of Trust. The Trust shall be a
trust with transferable shares under the laws of The Commonwealth
of Massachusetts, of the type referred to in Section 1 of
Chapter 182 of the Massachusetts General Laws and commonly termed
a Massachusetts business trust. The Trust is not intended to be,
shall not be deemed to be, and shall not be treated as, a general
partnership, limited partnership, joint venture, corporation or
2
<PAGE>
joint stock company. The Shareholders shall be beneficiaries and
their relationship to the Trustees shall be solely in that
capacity in accordance with the rights conferred upon them
hereunder.
SECTION 1.4 Definitions. As used in this Agreement and
Declaration of Trust, the following terms shall have the meanings
set forth below unless the context thereof otherwise requires:
"Accounting Agent" shall have the meaning designated in
Section 5.2(q) hereof.
"Administrator" shall have the meaning designated in
Section 5.2(b) hereof.
"Affiliated Person" shall have the meaning assigned to
it in the 1940 Act.
"By-Laws" shall mean the By-Laws of the Trust, as
amended from time to time.
"Certificate of Designation" shall have the meaning
designated in Section 6.1(b) hereof.
"Certificate of Termination" shall have the meaning
designated in Section 6.1(b) hereof.
"Class" shall mean, with respect to the Series of Shares
representing the beneficial interests in any separate Portfolio
of the Trust, any distinct and separate category of Shares of
such Series which are specifically denominated as a separate
Class, and are subject to provisions (whether set forth in this
Declaration, the Certificate of Designation providing for such
Series, the Prospectus under which Shares of such category are
sold, and/or another instrument or document by which the Trust
and the holders of such Shares are bound) distinct and separate
from those applying to the other category or categories of Shares
of such Series, as to some or all of the matters which, under
Article 6 of this Declaration, may differ for different Classes.
"Class A Shares" shall mean, with respect to Shares of
any Portfolio established and designated by this Declaration,
that Class of Shares which is so designated by Section 6.2
hereof.
"Class B Shares" shall mean, with respect to Shares of
any Portfolio established and designated by this Declaration,
that Class of Shares which is so designated by Section 6.2
hereof.
3
<PAGE>
"Class C Shares" shall mean, with respect to Shares of
any Portfolio established and designated by this Declaration,
that Class of Shares which is so designated by Section 6.2
hereof.
"Contingent Deferred Sales Charge", or "CDSC", shall
mean a charge which may, under the terms governing any Class of
Shares, be imposed upon the proceeds of the redemption of Shares
of such Class if the conditions specified by such terms are met.
"Commission" shall have the same meaning as in the 1940
Act.
"Contracting Party" shall have the meaning designated in
the preamble to Section 5.2 hereof.
"Conversion Date" shall have the meaning designated in
paragraph (ii) of Section 6.2(k) hereof.
"Covered Person" shall have the meaning designated in
Section 8.4 hereof.
"Custodian" shall have the meaning designated in Section
5.2(d) hereof.
"Declaration" and "Declaration of Trust" shall mean this
Agreement and Declaration of Trust and all amendments or
modifications thereof as from time to time in effect. References
in this Agreement and Declaration of Trust to "hereof", "herein"
and "thereunder" shall be deemed to refer to the Declaration of
Trust generally, and shall not be limited to the particular text,
Article or Section in which such words appear.
"Disabling Conduct" shall have the meaning designated in
Section 8.4 hereof.
"Distributor" shall have the meaning designated in
Section 5.2(c) hereof.
"Dividend Disbursing Agent" shall have the meaning
designated in Section 5.2(e) hereof.
"General Items" shall have the meaning defined in
Section 6.2(a) hereof.
"Initial Portfolio" shall have the meaning assigned to
such term in the preamble to Section 6.2 hereof.
"Initial Trustee" shall have the meaning defined in the
preamble hereto.
4
<PAGE>
"Internal Revenue Code" shall mean the Internal Revenue
Code of 1986, as from time to time amended and in effect, or any
substituted statute dealing with the same general subject matter
as the Internal Revenue Code of 1986, as in effect on January 1,
1994, and in either case the rules and regulations thereunder, as
from time to time interpreted and applied by applicable case law
thereunder.
"Investment Adviser" shall have the meaning stated in
Section 5.2(a) hereof.
"Majority of the Trustees" shall mean a majority of the
Trustees in office at the time in question. At any time at which
there shall be only one (1) Trustee in office, such term shall
mean such Trustee.
"Majority Shareholder Vote," as used with respect to the
election of any Trustee at a meeting of Shareholders, shall mean
the vote for the election of such Trustee of a plurality of all
outstanding Shares of the Trust, without regard to Series or
Class, represented in person or by proxy at such meeting and
entitled to vote thereon, provided that a quorum (as determined
in accordance with the By-Laws) is present, and as used with
respect to any other action required or permitted to be taken by
Shareholders, shall mean the affirmative vote for such action of
the holders of that number of all outstanding Shares of the Trust
(or, where a separate vote of Shares of any particular Series or
Class is to be taken, the affirmative vote of that number of the
outstanding Shares of that Series or Class) which constitutes:
(i) a majority of all Shares (or of Shares of the particular
Series or Class) represented in person or by proxy and entitled
to vote on such action at the meeting of Shareholders at which
such action is to be taken, provided that a quorum (as determined
in accordance with the By-Laws) is present; or (ii) if such vote
is to be given or such action is to be taken by written consent
of Shareholders without a meeting, a majority of all Shares (or
of Shares of the particular Series or Class) issued and
outstanding and entitled to vote on such action; provided, that
(iii) as used with respect to any action requiring the
affirmative vote of "a majority of the outstanding voting
securities", as the quoted phrase is defined in the 1940 Act, of
the Trust or of any Series or Class, "Majority Shareholder Vote"
means the vote for such action at a meeting of Shareholders of
the smallest majority of all outstanding Shares of the Trust (or
of Shares of the particular Series or Class) entitled to vote on
such action which satisfies such 1940 Act voting requirement.
"1940 Act" shall mean the provisions of the Investment
Company Act of 1940 and the rules and regulations thereunder,
both as amended from time to time, and any order or orders
5
<PAGE>
thereunder which may from time to time be applicable to the
Trust.
"Person" shall mean and include individuals, as well as
corporations, limited partnerships, general partnerships, joint
stock companies, joint ventures, associations, banks, trust
companies, land trusts, business trusts or other organizations
established under the laws of any jurisdiction, whether or not
considered to be legal entities, and governments and agencies and
political subdivisions thereof.
"Portfolio" or "Portfolios" shall mean one or more of
the separate components of the assets of the Trust which are now
or hereafter established and designated under or in accordance
with the provisions.of Article 6 hereof.
"Portfolio Assets" shall have the meaning defined in
Section 6.2(a) hereof.
"Principal Underwriter" shall have the meaning
designated in Section 5.2(c) hereof.
"Prospectus," as used with respect to any Portfolio or
Series of Shares, shall mean the prospectus relating to such
Portfolio or Series which constitutes part of the currently
effective Registration Statement of the Trust under the
Securities Act of 1933, as such prospectus may be amended or
supplemented from time to time.
"Security" or "Securities," shall mean any and all
bills, notes, bonds, debentures or other obligations or evidences
of indebtedness, certificates of deposit, bankers' acceptances,
commercial paper, repurchase agreements or other money market
instruments; stocks, shares or other equity ownership interests;
and warrants, options or other instruments representing rights to
subscribe for, purchase, receive or otherwise acquire or to sell,
transfer, assign or otherwise dispose of, and scrip,
certificates, receipts or other instruments evidencing any
ownership rights or interests in, any of the foregoing and "when
issued" and "delayed delivery" contracts for securities, issued,
guaranteed or sponsored by any governments, political
subdivisions or governmental authorities, agencies or
instrumentalities, by any individuals, firms, companies,
corporations, syndicates, associations or trusts, or by any other
organizations or entities whatsoever, irrespective of their forms
or the names by which they may be described, whether or not they
be organized and operated for profit, and whether they be
domestic or foreign with respect to The Commonwealth of
Massachusetts or the United States of America.
6
<PAGE>
"Securities of the Trust" shall mean any Securities
issued by the Trust.
"Series" shall mean one or more of the series of Shares
authorized by the Trustees to represent the beneficial interest
in one or more of the Portfolios.
"Settlor" shall have the meaning stated in the first
"Whereas" clause set forth above.
"Shareholder" shall mean as of any particular time any
Person shown of record at such time on the books of the Trust as
a holder of outstanding Shares of any Series, and shall include a
pledgee into whose name any such Shares are transferred in
pledge.
"Shareholder Servicing Agent" shall have the meaning
designated in Section 5.2(f) hereof.
"Shares" and "Shares of Beneficial Interest" shall mean
the transferable units into which the beneficial interest in the
Trust and each Portfolio of the Trust (as the context may
require) shall be divided from time to time, and includes
fractions of Shares as well as whole Shares. All references
herein to "Shares" which are not accompanied by a reference to
any particular Series or Portfolio shall be deemed to apply to
outstanding Shares without regard to Series.
"Single Class Voting," as used with respect to any
matter to be acted upon at a meeting or by written consent of
Shareholders, shall mean a style of voting in which each holder
of one or more Shares shall be entitled to one vote on the matter
in question for each Share standing in his name on the records of
the Trust, irrespective of Series, and all outstanding Shares of
all Series vote as a single class.
"Source Investment Company" shall have the meaning
defined in Section 6.1(d) hereof.
"Statement of Additional Information," as used with
respect to any Portfolio or Series of Shares, shall mean the
statement of additional information relating to such Portfolio or
Series, which constitutes part of the currently effective
Registration Statement of the Trust under the Securities Act of
1933, as such statement of additional information may be amended
or supplemented from time to time.
"Transfer Agent" shall have the meaning defined in
Section 5.2(e) hereof.
7
<PAGE>
"Trust" shall have the meaning stated in the fourth
"Whereas" clause set forth above.
"Trust Property" shall mean, as of any particular time,
any and all property which shall have been transferred, conveyed
or paid to the Trust or the Trustees, and all interest,
dividends, income, earnings, profits and gains therefrom, and
proceeds thereof, including any proceeds derived from the sale,
exchange or liquidation thereof, and any funds or payments
derived from any reinvestment of such proceeds in whatever form
the same may be, and which at such time is owned or held by, or
for the account of, the Trust or the Trustees, without regard to
the Portfolio to which such property is allocated.
"Trustees" shall mean, collectively, the Initial
Trustee, so long as he shall continue in office, and all other
individuals who at the time in question have been duly elected or
appointed as Trustees of the Trust in accordance with the
provisions hereof and who have qualified and are then in office.
At any time at which there shall be only one (1) Trustee in
office, such term shall mean such single Trustee.
SECTION 1.5 Real Property to be Converted into Personal
Property. Notwithstanding any other provision hereof, any real
property at any time forming part of the Trust Property shall be
held in trust for sale and conversion into personal property at
such time or times and in such manner and upon such terms as the
Trustees shall approve, but the Trustees shall have power until
the termination of this Trust to postpone such conversion as long
as they in their uncontrolled discretion shall think fit, and for
the purpose of determining the nature of the interest of the
Shareholders therein, all such real property shall at all times
be considered as personal property.
ARTICLE 2
PURPOSE OF THE TRUST
The purpose of the Trust shall be to engage in the
business of being an investment company, and as such of
subscribing for, purchasing or otherwise acquiring, holding for
investment or trading in, borrowing, lending and selling short,
selling, assigning, negotiating or exchanging and otherwise
disposing of, and turning to account, realizing upon and
generally dealing in and with, in any manner, (a) Securities of
all kinds, (b) precious metals and other minerals, contracts to
purchase and sell, and other interests of every nature and kind
in, such metals or minerals, and (c) rare coins and other
numismatic items, and all as the Trustees in their discretion
shall determine to be necessary, desirable or appropriate, and to
exercise and perform any and every act, thing or power necessary,
8
<PAGE>
suitable or desirable for the accomplishment of such purpose, the
attainment of any of the objects or the furtherance of any of the
powers given hereby which are lawful purposes, objects or powers
of a trust with transferable shares of the type commonly termed a
Massachusetts business trust; and to do every other act or acts
or thing or things incidental or appurtenant to or growing out of
or in connection with the aforesaid objects, purposes or powers,
or any of them, which a trust of the type commonly termed a
Massachusetts business trust is not now or hereafter prohibited
from doing, exercising or performing.
ARTICLE 3
POWERS OF THE TRUSTEES
SECTION 3.1 Powers in General. The Trustees shall
have, without other or further authorization, full, entire,
exclusive and absolute power, control and authority over, and
management of, the business of the Trust and over the Trust
Property, to the same extent as if the Trustees were the sole
owners of the business and property of the Trust in their own
right, and with such powers of delegation as may be permitted by
this Declaration, subject only to such limitations as may be
expressly imposed by this Declaration of Trust or by applicable
law. The enumeration of any specific power or authority herein
shall not be construed as limiting the aforesaid power or
authority or any specific power or authority. Without limiting
the foregoing, the Trustees may adopt By-Laws not inconsistent
with this Declaration of Trust providing for the conduct of the
business and affairs of the Trust and may amend and repeal them
to the extent that such By-Laws do not reserve that right to the
Shareholders; they may select, and from time to time change, the
fiscal year of the Trust; they may adopt and use a seal for the
Trust, provided, that unless otherwise required by the Trustees,
it shall not be necessary to place the seal upon, and its absence
shall not impair the validity of, any document, instrument or
other paper executed and delivered by or on behalf of the Trust;
they may from time to time in accordance with the provisions of
Section 6.1 hereof establish one or more Portfolios to which they
may allocate such of the Trust Property, subject to such
liabilities, as they shall deem appropriate, each such Portfolio
to be operated by the Trustees as a separate and distinct
investment medium and with separately defined investment
objectives and policies and distinct investment purposes, all as
established by the Trustees, or from time to time changed by
them; they may as they consider appropriate elect and remove
officers and appoint and terminate agents and consultants and
h.ire and terminate employees, any one or more of the foregoing
of whom may be a Trustee; they may appoint from their own number,
and terminate, any one or more committees consisting of one or
more Trustees, including without implied limitation an Executive
9
<PAGE>
Committee, which may, when the Trustees are not in session and
subject to the 1940 Act, exercise some or all of the power and
authority of the Trustees as the Trustees may determine; in
accordance with Section 5.2 they may employ one or more
Investment Advisers, Administrators and Custodians and may
authorize any Custodian to employ subcustodians or agents and to
deposit all or any part of such assets in a system or systems for
the central handling of Securities, retain Transfer, Dividend
Disbursing, Accounting or Shareholder Servicing Agents or any of
the foregoing, provide for the distribution of Shares by the
Trust through one or more Distributors, Principal Underwriters or
otherwise, set record dates or times for the determination of
Shareholders entitled to participate in, benefit from or act with
respect to various matters; and in general they may delegate to
any officer of the Trust, to any Committee of the Trustees and to
any employee, Investment Adviser, Administrator, Distributor,
Custodian, Transfer Agent, Dividend Disbursing Agent, or any
other agent or consultant of the Trust, such authority, powers,
functions and duties as they consider desirable or appropriate
for the conduct of the business and affairs of the Trust,
including without imp:lied limitation the power and authority to
act in the name of the Trust and of the Trustees, to sign
documents and to act as attorney-in-fact for the Trustees.
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:
(a) Investments. To invest and reinvest cash and
other property; to buy, for cash or on margin, and
otherwise acquire and hold, Securities created or issued
by any Persons, including Securities maturing after the
possible termination of the Trust; to make payment
therefor in any lawful manner in exchange for any of the
Trust Property; and to hold cash or other property
uninvested without in any event being bound or limited
by any present or future law or custom in regard to
investments by trustees;
(b) Disposition of Assets. Upon such terms and
conditions as they deem best, to lend, sell, exchange,
mortgage, pledge, hypothecate, grant security interests
in, encumber, negotiate, convey, transfer or otherwise
dispose of, and to trade in, any and all of the Trust
Property, free and clear of all trusts, for cash or on
terms, with or without advertisement, and on such terms
as to payment, security or otherwise, all as they shall
deem necessary or expedient;
(c) Ownership Powers. To vote or give assent, or
exercise any and all other rights, powers and privileges
of ownership with respect to, and to perform any and all
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duties and obligations as owners of, any Securities or
other property forming part of the Trust Property, the
same as any individual might do; to exercise powers and
rights of subscription or otherwise which in any manner
arise out of ownership of Securities, and to receive
powers of attorney from, and to execute and deliver
proxies or powers of attorney to, such Person or Persons
as the Trustees shall deem proper, receiving from or
granting to such Person or Persons such power and
discretion with relation to Securities or other property
of the Trust, all as the Trustees shall deem proper;
(d) Form of Holding. To hold any Security or
other property in a form not indicating any trust,
whether in bearer, unregistered or other negotiable
form, or in the name of the Trustees or of the Trust, or
of the Portfolio to which such Securities or property
belong, or in the name of a Custodian, subcustodian or
other depository or a nominee or nominees, or otherwise,
upon such terms, in such manner or with such powers, as
the Trustees may determine, and with or without
indicating any trust or the interest of the Trustees
therein;
(e) Reorganization, etc. To consent to or
participate in any plan for the reorganization,
consolidation or merger of any corporation or issuer,
any Security of which is or was held in the Trust or any
Portfolio; to consent to any contract, lease, mortgage,
purchase or sale of property by such corporation or
issuer, and to pay calls or subscriptions with respect
to any Security forming part of the Trust Property;
(f) Voting Trusts, etc. To join with other
holders of any Securities in acting through a committee,
depository, voting trustee or otherwise, and in that
connection to deposit any Security with, or transfer any
Security to, any such committee, depository or trustee,
and to delegate to them such power and authority with
relation to any Security (whether or not so deposited or
transferred) as the Trustees shall deem proper, and to
agree to pay, and to pay, such portion of the expenses
and compensation of such committee, depository or
trustee as the Trustees shall deem proper;
(g) Contracts, etc. To enter into, make and
perform all such obligations, contracts, agreements and
undertakings of every kind and description, with any
Person or Persons, as the Trustees shall in their
discretion deem expedient in the conduct of the business
of the Trust, for such terms as they shall see fit,
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whether or not extending beyond the term of office of
the Trustees, or beyond the possible expiration of the
Trust; to amend, extend, release or cancel any such
obligations, contracts, agreements or understandings;
and to execute, acknowledge, deliver and record all
written instruments which they may deem necessary or
expedient in the exercise of their powers;
(h) Guarantees etc. To endorse or guarantee the
payment of any notes or other obligations of any Person;
to make contracts of guaranty or suretyship, or
otherwise assume liability for payment thereof; and to
mortgage and pledge the Trust Property or any part
thereof to secure any or all such obligations;
(i) Partnerships, etc. To enter into joint
ventures, general or limited partnerships and any other
combinations or associations;
(j) Insurance. To purchase and pay for entirely
out of Trust Property such insurance as they may deem
necessary or appropriate for the conduct of the
business, including, without limitation, insurance
policies insuring the assets of the Trust and payment of
distributions and principal on its portfolio
investments, and insurance policies insuring the
Shareholders, Trustees, officers, employees, agents,
consultants, Investment Advisers, managers,
Administrators, Distributors, Principal Underwriters, or
other independent contractors, or any thereof (or any
Person connected therewith), of the Trust, individually,
against all claims and liabilities of every nature
arising by reason of holding, being or having held any
such office or position, or by reason of any action
alleged to have been taken or omitted by any such Person
in any such capacity, including any action taken or
omitted that may be determined to constitute negligence,
whether or not the Trust would have the power to
indemnify such Person against such liability;
(k) Pensions, etc. To pay pensions for faithful
service, as deemed appropriate by the Trustees, and to
adopt, establish and carry out pension, profit-sharing,
share bonus, share purchase, savings, thrift and other
retirement, incentive and benefit plans, trusts and
provisions, including the purchasing of life insurance
and annuity contracts as a means of providing such
retirement and other benefits, for any or all of the
Trustees, officers, employees and agents of the Trust;
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(l) Power of Collection and Litigation. To
collect, sue for and receive all sums of money coming
due to the Trust, to employ counsel, and to commence,
engage in, prosecute, intervene in, join, defend,
compound, compromise, adjust or abandon, in the name of
the Trust, any and all actions, suits, proceedings,
disputes, claims, controversies, demands or other
litigation or legal proceedings relating to the Trust,
the business of the Trust, the Trust Property, or the
Trustees, officers, employees, agents and other
independent contractors of the Trust, in their capacity
as such, at law or in equity, or before any other other
bodies or tribunals, and to compromise, arbitrate or
otherwise adjust any dispute to which the Trust may be a
party, whether or not any suit is commenced or any claim
shall have been made or asserted;
(m) Issuance and Repurchase of Shares. To issue,
sell, repurchase, redeem, retire, cancel, acquire, hold,
resell, reissue, dispose of, transfer, and otherwise
deal in Shares of any Series, and, subject to Article 6
hereof, to apply to any such repurchase, redemption,
retirement, cancellation or acquisition of Shares of any
Series, any of the Portfolio Assets belonging to the
Portfolio to which such Series relates, whether
constituting capital or surplus or otherwise, to the
full extent now or hereafter permitted by applicable
law; provided, that any Shares belonging to the Trust
shall not be voted, directly or indirectly;
(n) Offices. To have one or more offices, and to
carry on all or any of the operations and business of
the Trust, in any of the States, Districts or
Territories of the United States, and in any and all
foreign countries, subject to the laws of such State,
District, Territory or country;
(o) Expenses. To incur and pay any and all such
expenses and charges as they may deem advisable
(including without limitation appropriate fees to
themselves as Trustees), and to pay all such sums of
money for which they may be held liable by way of
damages, penalty, fine or otherwise;
(p) Agents, etc. To retain and employ any and all
such servants, agents, employees, attorneys, brokers,
in- vestment advisers, accountants, architects,
engineers, builders, escrow agents, depositories,
consultants, ancillary trustees, custodians, agents for
collection, insurers, banks and officers, as they think
best for the business of the Trust or any Portfolio, to
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supervise and direct the acts of any of the same, and to
fix and pay their compensation and define their duties;
(q) Accounts. To determine, and from time to time
change, the method or form in which the accounts of the
Trust shall be kept;
(r) Valuation. Subject to the requirements of the
1940 Act, to determine from time to time the value of
all or any part of the Trust Property and of any
services, Securities, property or other consideration to
be furnished to or acquired by the Trust, and from time
to time to revalue all or any part of the Trust Property
in accordance with such appraisals or other information
as is, in the Trustees' sole judgment, necessary and
satisfactory;
(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; and
(t) General. To do all such other acts and things
and to conduct, operate, carry on and engage in such
other lawful businesses or business activities as they
shall in their sole and absolute discretion consider to
be incidental to the business of the Trust or any
Portfolio as an investment company, and to exercise all
powers which they shall in their discretion consider
necessary, useful or appropriate to carry on the
business of the Trust or any Portfolio, to promote any
of the purposes for which the Trust is formed, whether
or not such things are specifically mentioned herein, in
order to protect or promote the interests of the Trust
or any Portfolio, or otherwise to carry out the
provisions of this Declaration.
SECTION 3.2 Borrowings; Financings: Issuance of
Securities. The Trustees shall have power to borrow or in any
other manner raise such sum or sums of money, and to incur such
other indebtedness for goods or services, or for or in connection
with the purchase or other acquisition of property, as they shall
deem advisable for the purposes of the Trust, in any manner and
on any terms, and to evidence the same by negotiable or non-
negotiable Securities which may mature at any time or times, even
beyond the possible date of termination of the Trust; to issue
Securities of any type for such cash, property, services or other
considerations, and at such time or times and upon such terms, as
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they may deem advisable; and to reacquire any such Securities.
Any such Securities of the Trust may, at the discretion of the
Trustees, be made convertible into Shares of any Series, or may
evidence the right to purchase, subscribe for or otherwise
acquire Shares of any Series, at such times and on such terms as
the Trustees may prescribe.
SECTION 3.3 Deposits. Subject to the requirements of
the 1940 Act, the Trustees shall have power to deposit any moneys
or Securities included in the Trust Property with any one or more
banks, trust companies or other banking institutions, whether or
not such deposits will draw interest. Such deposits are to be
subject to withdrawal in such manner as the Trustees may
determine, and the Trustees shall have no responsibility for any
loss which may occur by reason of the failure of the bank, trust
company or other banking institution with which any such moneys
or Securities have been deposited, other than liability based on
their gross negligence or willful fault.
SECTION 3.4 Allocations. The Trustees shall have power
to determine whether moneys or other assets received by the Trust
shall be charged or credited to income or capital, or allocated
between income and capital, including the power to amortize or
fail to amortize any part or all of any premium or discount, to
treat any part or all of the profit resulting from the maturity
or sale of any asset, whether purchased at a premium or at a
discount, as income or capital, or to apportion the same between
income and capital, to apportion the sale price of any asset
between income and capital, and to determine in what manner any
expenses or disbursements are to be borne as between income and
capital, whether or not in the absence of the power and authority
conferred by this Section 3.4 such assets would be regarded as
income or as capital or such expense or disbursement would be
charged to income or to capital; to treat any dividend or other
distribution on any investment as income or capital, or to
apportion the same between income and capital; to provide or fail
to provide reserves, including reserves for depreciation,
amortization or obsolescence in respect of any Trust Property in
such amounts and by such methods as they shall determine; to
allocate less than all of the consideration paid for Shares of
any Series to the shares of beneficial interest account of the
Portfolio to which such Shares relate and to allocate the balance
thereof to paid in capital of that Portfolio, and to reallocate
such amounts from time to time; all as the Trustees may
reasonably deem proper.
SECTION 3.5 Further Powers; Limitations. The Trustees
shall have power to do all such other matters and things, and to
execute all such instruments, as they deem necessary, proper or
desirable in order to carry out, promote or advance the interests
of the Trust, although such matters or things are not herein
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specifically mentioned. Any determination as to what is in the
interests of the Trust made by the Trustees in good faith shall
be conclusive. In construing the provisions of this Declaration
of Trust, the presumption shall be in favor of a grant of power
to the Trustees. The Trustees shall not be required to obtain
any court order to deal with the Trust Property. The Trustees
may limit their right to exercise any of their powers through
express restrictive provisions in the instruments evidencing or
providing the terms for any Securities of the Trust or in other
contractual instruments adopted on behalf of the Trust.
ARTICLE 4
TRUSTEES AND OFFICERS
(a) Initial Trustee. Upon his execution of this
Declaration of Trust or a counterpart hereof or some
other writing in which he accepts such Trusteeship and
agrees to the provisions hereof, the individual whose
signature is affixed hereto as Initial Trustee shall
become the Initial Trustee hereof.
(b) Number. The Trustees serving as such, whether
named above or hereafter becoming Trustees, may increase
(to not more than twenty (20)) or decrease the number of
Trustees to a number other than the number theretofore
determined by a written instrument signed by a Majority
of the Trustees (or by an officer of the Trust pursuant
to the vote of a Majority of the Trustees). No decrease
in the number of Trustees shall have the effect of
removing any Trustee from office prior to the expiration
of his term, but the number of Trustees may be decreased
in conjunction with the removal of a Trustee pursuant to
subsection (e) of this Section 4.1.
(c) Election and Term. The Trustees shall be
elected by the Shareholders of the Trust at the first
meeting of Shareholders immediately prior to the initial
public offering of Shares of the Trust, and the term of
office of any Trustees in office before such election
shall terminate at the time of such election. Subject to
Section 16(a) of the 1940 Act and to the preceding
sentence of this subsection (c), the Trustees shall have
the power to set and alter the terms of office of the
Trustees, and at any time to lengthen or shorten their
own terms or make their terms of unlimited duration, to
elect their own successors and, pursuant to subsection
(f) of this Section 4.1, to appoint Trustees to fill
vacancies; provided, that Trustees shall be elected by a
Majority Shareholder Vote at any such time or times as
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the Trustees shall determine that such action is required
under Section 16(a) of the 1990 Act or, if not so
required, that such action is advisable; and further
provided, that, after the initial election of Trustees by
the Shareholders, the term of office of any incumbent
Trustee shall continue until the termination of this
Trust or his earlier death, resignation, retirement,
bankruptcy, adjudicated incompetency or other incapacity
or removal, or if not so terminated, until the election
of such Trustee's successor in office has become
effective in accordance with this subsection (c).
(d) Resignation and Retirement. Any Trustee may
resign his trust or retire as a Trustee, by a written
instrument signed by him and delivered to the other
Trustees or to any officer of the Trust, and such
resignation or retirement shall take effect upon such
delivery or upon such later date as is specified in such
instrument.
(e) Removal. Any Trustee may be removed with or
without cause at any time: (i) by written instrument,
signed by at least two-thirds (2/3) of the number of
Trustees prior to such removal, specifying the date upon
which such removal shall become effective; or (ii) by
vote of Shareholders holding not less than two-thirds
(2/3) of the Shares of each Series then outstanding, cast
in person or by proxy at any meeting called for the
purpose; or (iii) by a written declaration signed by
Shareholders holding not less than two-thirds (2/3) of
the Shares of each Series then outstanding and filed with
the Trust's Custodian.
(f) Vacancies. Any vacancy or anticipated vacancy
resulting from any reason, including an increase in the
number of Trustees, may (but need not unless required by
the 1940 Act) be filled by a Majority of the Trustees,
subject to the provisions of Section 16(a) of the 1940
Act, through the appointment in writing of such other
individual as such remaining Trustees in their discretion
shall determine; provided, that if there shall be no
Trustees in office, such vacancy or vacancies shall be
filled by vote of the Shareholders. Any such appointment
or election shall be effective upon such individual's
written acceptance of his appointment as a Trustee and
his agreement to be bound by the provisions of this
Declaration of Trust, except that any such appointment in
anticipation of a vacancy to occur by reason of
retirement, resignation or increase in the number of
Trustees to be effective at a later date shall become
effective only at or after the effective date of said
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retirement, resignation or increase in the number of
Trustees.
(g) Acceptance of Trusts. Any individual
appointed as a Trustee under subsection (f), and any
individual elected as a Trustee under subsection (c), of
this Section 4.1 who was not, immediately prior to such
election, acting as a Trustee, shall accept such
appointment or election in writing and agree in such
writing to be bound by the provisions hereof, and
whenever such individual shall have executed such writing
and any conditions to such appointment or election shall
have been satisfied, such individual shall become a
Trustee and the Trust Property shall vest in the new
Trustee, together with the continuing Trustees, without
any further act or conveyance.
(h) Effect of Death, Resignation, etc. No
vacancy, whether resulting from the death, resignation,
retirement, removal or incapacity of any Trustee, an
increase in the number of Trustees or otherwise, shall
operate to annul or terminate the Trust hereunder or to
revoke or terminate any existing agency or contract
created or entered into pursuant to the terms of this
Declaration of Trust. Until such vacancy is filled as
provided in this Section 4.1, the Trustees in office (if
any), regardless of their number, shall have all the
powers granted to the Trustees and shall discharge all
the duties imposed upon the Trustees by this Declaration.
A written instrument certifying the existence of such
vacancy signed by a Majority of the Trustees (or by an
officer of the Trust pursuant to the vote or direction of
a Majority of the Trustees) shall be conclusive evidence
of the existence of such vacancy.
(i) Conveyance. In the event of the resignation
or removal of a Trustee or his otherwise ceasing to be a
Trustee, such former Trustee or his legal representative
shall, upon request of the continuing Trustees, execute
and deliver such documents as may be required for the
purpose of consummating or evidencing the conveyance to
the Trust or the remaining Trustees of any Trust Property
held in such former Trustee's name, but the execution and
delivery of such documents shall not be requisite to the
vesting of title to the Trust Property in the remaining
Trustees, as provided in subsection (q) of this Section
4.1 and in Section 4.13 hereof.
(j) No Accounting. Except to the extent required
by the 1940 Act or under circumstances which would
justify his removal for cause, no Person ceasing to be a
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Trustee (nor the estate of any such Person) shall be
required to make an accounting to the Shareholders or
remaining Trustees upon such cessation.
SECTION 4.2 Trustees' Meetings; Participation by
Telephone, etc. An annual meeting of Trustees shall be held not
later than the last day of the fourth month after the end of each
fiscal year of the Trust and special meetings may be held from
time to time, in each case, upon the call of such officers as may
be "hereunto authorized by the By-Laws or vote of the Trustees,
or by any two (2) Trustees, or pursuant to a vote of the Trustees
adopted at a duly constituted meeting of the Trustees, and upon
such notice as shall be provided in the By-Laws. The Trustees
may act with or without a meeting, and a written consent to any
matter, signed by a Majority of the Trustees, shall be equivalent
to action duly taken at a meeting of the Trustees, duly called
and held. Except as otherwise provided by the 1940 Act or other
applicable law, or by this Declaration of Trust or the By-Laws,
any action to be taken by the Trustees may be taken by a majority
of the Trustees present at a meeting of Trustees (a quorum,
consisting of at least a Majority of the Trustees, being
present), within or without Massachusetts. If authorized by the
By-Laws, all or any one or more Trustees may participate in a
meeting of the Trustees or any Committee thereof by means of
conference telephone or similar means of communication by means
of which all Persons participating in the meeting can hear each
other, and participation in a meeting pursuant to such means of
communication shall constitute presence in person at such
meeting. The minutes of any meeting thus held shall be prepared
in the same manner as a meeting at which all participants were
present in person.
SECTION 4.3 Committees; Delegation. The Trustees shall
have power, consistent with their ultimate responsibility to
supervise the affairs of the Trust, to delegate from time to time
to an Executive Committee, and to one or more other Committees,
or to any single Trustee, the doing of such things and the
execution of such deeds or other instruments, either in the name
of the Trust or the names of the Trustees or as their attorney or
attorneys in fact, or otherwise as the Trustees may from time to
time deem expedient, and any agreement, deed, mortgage, lease or
other instrument or writing executed by the Trustee or Trustees
or other Person to whom such delegation was made shall be valid
and binding upon the Trustees and upon the Trust.
SECTION 4.4 Officers. The Trustees shall annually
elect such officers or agents, who shall have such powers, duties
and responsibilities as the Trustees may deem to be advisable,
and as they shall specify by resolution or in the By-Laws.
Except as may be provided in the By-Laws, any officer elected by
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the Trustees may be removed at any time with or without cause.
Any two (2) or more offices may be held by the same individual.
SECTION 4.5 Compensation of Trustees and Officers. The
Trustees shall fix the compensation of all officers and Trustees.
Without limiting the generality of any of the provisions hereof,
the Trustees shall be entitled to receive reasonable compensation
for their general services as such, and to fix the amount of such
compensation, and to pay themselves or any one or more of
themselves such compensation for special services, including
legal, accounting, or other professional services, as they in
good faith may deem reasonable. No Trustee or officer resigning
and (except where a right to receive compensation for a definite
future period shall be expressly provided in a written agreement
with the Trust, duly approved by the Trustees) no Trustee or
officer removed shall have any right to any compensation as such
Trustee or officer for any period following his resignation or
removal, or any right to damages on account of his removal,
whether his compensation be by the month, by the year or
otherwise.
SECTION 4.6 Ownership of Shares and Securities of the
Trust. Any Trustee, and any officer, employee or agent of the
Trust, and any organization in which any such Person is
interested, may acquire, own, hold and dispose of Shares of any
Series and other Securities of the Trust for his or its
individual account, and may exercise all rights of a holder of
such Shares or Securities to the same extent and in the same
manner as if such Person were not such a Trustee, officer,
employee or agent of the Trust; subject, in the case of Trustees
and officers, to the same limitations as directors or officers
(as the case may be) of a Massachusetts business corporation; and
the Trust may issue and sell or cause to be issued and sold and
may purchase any such Shares or other Securities from any such
Person or any such organization, subject only to the general
limitations, restrictions or other provisions applicable to the
sale or purchase of Shares of such Series or other Securities of
the Trust generally.
SECTION 4.7 Right of Trustees and Officers to Own
Property or to Engage in Business; Authority of Trustees to
Permit Others to Do Likewise. The Trustees, in their capacity as
Trustees, and (unless otherwise specifically directed by vote of
the Trustees) the officers of the Trust in their capacity as
such, shall not be required to devote their entire time to the
business and affairs of the Trust. Except as otherwise
specifically provided by vote of the Trustees, or by agreement in
any particular case, any Trustee or officer of the Trust may
acquire, own, hold and dispose of, for his own individual
account, any property, and acquire, own, hold, carry on and
dispose of, for his own individual account, any business entity
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or business activity, whether similar or dissimilar to any
property or business entity or business activity invested in or
carried on by the Trust, and without first offering the same as
an investment opportunity to the Trust, and may exercise all
rights in respect thereof as if he were not a Trustee or officer
of the Trust. The Trustees shall also have power, generally or
in specific cases, to permit employees or agents of the Trust to
have the same rights (or lesser rights) to acquire, hold, own and
dispose of property and businesses, to carry on businesses, and
to accept investment opportunities without offering them to the
Trust, as the Trustees have by virtue of this Section 4.7.
SECTION 4.8 Reliance on Experts. The Trustees and
officers may consult with counsel, engineers, brokers,
appraisers, auctioneers, accountants, investment bankers,
securities analysts or other Persons (any of which may be a firm
in which one or more of the Trustees or officers is or are
members or otherwise interested) whose profession gives authority
to a statement made by them on the subject in question, and who
are reasonably deemed by the Trustees or officers in question to
be competent, and the advice or opinion of such Persons shall be
full and complete personal protection to all of the Trustees and
officers in respect of any action taken or suffered by them in
good faith and in reliance on or in accordance with such advice
or opinion. In discharging their duties, Trustees and officers,
when acting in good faith, may rely upon financial statements of
the Trust represented to them to be correct by any officer of the
Trust having charge of its books of account, or stated in a
written report by an independent certified public accountant
fairly to present the financial position of the Trust. The
Trustees and officers may rely, and shall be personally protected
in acting, upon any instrument or other document believed by them
to be genuine.
SECTION 4.9 Surety Bonds. No Trustee, officer,
employee or agent of the Trust shall, as such, be obligated to
give any bond or surety or other security for the performance of
any of his duties, unless required by applicable law or
regulation, or unless the Trustees shall otherwise determine in
any particular case.
SECTION 4.10 Apparent Authority of Trustees and
Officers. No purchaser, lender, transfer agent or other Person
dealing with the Trustees or any officer of the Trust shall be
bound to make any inquiry concerning the validity of any
transaction purporting to be made by the Trustees or by such
officer, or to make inquiry concerning or be liable for the
application of money or property paid, loaned or delivered to or
on the order of the Trustees or of such officer.
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SECTION 4.11 Other Relationships Not Prohibited. The
fact that:
(i) any of the Shareholders, Trustees or officers
of the Trust is a shareholder, director, officer,
partner, trustee, employee, manager, adviser, principal
underwriter or distributor or agent of or for any
Contracting Party (as defined in Section 5.2 hereof), or
of or for any parent or affiliate of any Contracting
Party, or that the Contracting Party or any parent or
affiliate thereof is a Shareholder or has an interest in
the Trust or any Portfolio, or that
(ii) any Contracting Party may have a contract
providing for the rendering of any similar services to
one or more other corporations, trusts, associations,
partnerships, limited partnerships or other
organizations, or have other business or interests,
shall not affect the validity of any contract for the performance
and assumption of services, duties and responsibilities to, for
or of the Trust and/or the Trustees or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or
executing the same or create any liability or accountability to
the Trust or to the holders of Shares of any Series; provided,
that, in the case of any relationship or interest referred to in
the preceding clause (i) on the part of any Trustee or officer of
the Trust, either (x) the material facts as to such relationship
or interest have been disclosed to or are known by the Trustees
not having any such relationship or interest and the contract
involved is approved in good faith by a majority of such Trustees
not having any such relationship or interest (even though such
unrelated or disinterested Trustees are less than a quorum of all
of the Trustees), (y) the material facts as to such relationship
or interest and as to the contract have been disclosed to or are
known by the Shareholders entitled to vote thereon and the
contract involved is specifically approved in good faith by vote
of the Shareholders, or (z) the specific contract involved is
fair to the Trust as of the time it is authorized, approved or
ratified by the Trustees or by the Shareholders.
SECTION 4.12 Payment of Trust Expenses. The Trustees
are authorized to pay or to cause to be paid out of the principal
or income of the Trust, or partly out of principal and partly out
of income, and according to any allocation to particular
Portfolios made by them pursuant to Section 6.2 (b) hereof, all
expenses, fees, charges, taxes and liabilities incurred or
arising in connection with the business and affairs of the Trust
or in connection with the management thereof, including, but not
limited to, the Trustees' compensation and such expenses and
charges for the servicer of the Trust's officers, employees,
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Investment Adviser, Administrator, Distributor, Principal
Underwriter, auditor, counsel, Custodian, Transfer Agent,
Dividend Disbursing Agent, Accounting Agent, Shareholder
Servicing Agent, and such other agents, consultants, and
independent contractors and such other expenses and charges as
the Trustees may deem necessary or proper to incur.
SECTION 4.13 Ownership of the Trust Property. Legal
title to all the Trust Property shall be vested in the Trustees
as joint tenants, except that the Trustees shall have power to
cause legal title to any Trust Property to be held by or in the
name of one or more of the Trustees, or in the name of the Trust,
or of any particular Portfolio, or in the name of any other
Person as nominee, on such terms as the Trustees may determine;
provided, that the interest of the Trust and of the respective
Portfolio therein is appropriately protected. The right, title
and interest of the Trustees in the Trust Property shall vest
automatically in each Person who may hereafter become a Trustee.
Upon the termination of the term of office of a Trustee as
provided in Section 4.1(c), (d) or (e) hereof, such Trustee shall
automatically cease to have any right, title or interest in any
of the Trust Property, and the right, title and interest of such
Trustee in the Trust Property shall vest automatically in the
remaining Trustees. Such vesting and cessation of title shall be
effective whether or not conveyancing documents have been
executed and delivered pursuant to Section 4.1(i) hereof.
ARTICLE 5
DELEGATION OF MANAGERIAL RESPONSIBILITIES
SECTION 5.1 Appointment; Action by Less than All
Trustees. The Trustees shall be responsible for the general
operating policy of the Trust and for the general supervision of
the business of the Trust conducted by officers, agents,
employees or advisers of the Trust or by independent contractors,
but the Trustees shall not be required personally to conduct all
the business of the Trust and, consistent with their ultimate
responsibility as stated herein, the Trustees may appoint, employ
or contract with one or more officers, employees and agents to
conduct, manage and/or supervise the operations of the Trust, and
may grant or delegate such authority to such officers, employees
and/or agents as the Trustees may, in their sole discretion, deem
to be necessary or desirable, without regard to whether such
authority is normally granted or delegated by trustees. With
respect to those matters of the operation and business of the
Trust which they shall elect to conduct themselves, except as
otherwise provided by this Declaration or the By-Laws, if any,
the Trustees may authorize any single Trustee or defined group of
Trustees, or any committee consisting of a number of Trustees
less than the whole number of Trustees then in office without
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specification of the particular Trustees required to be included
therein, to act for and to bind the Trust, to the same extent as
the whole number of Trustees could do, either with respect to one
or more particular matters or classes of matters, or generally.
SECTION 5.2 Certain Contracts. Subject to compliance
with the provisions of the 1940 Act, but notwithstanding any
limitations of present and future law or custom in regard to
delegation of powers by trustees generally, the Trustees may, at
any time and from time to time in their discretion and without
limiting the generality of their powers and authority otherwise
set forth herein, enter into one or more contracts with any one
or more corporations, trusts, associations, partnerships, limited
partnerships or other types of organizations, or individuals
("Contracting Party"), to provide for the performance and
assumption of some or all of the following services, duties and
responsibilities to, for or on behalf of the Trust and/or any
Portfolio, and/or the Trustees, and to provide for the
performance and assumption of such other services, duties and
responsibilities in addition to those set forth below, as the
Trustees may deem appropriate:
(a) Advisory. An investment advisory or
management agreement whereby an investment adviser or
investment manager (each such Person being referred to
herein as an "Investment Adviser") shall undertake to
furnish the Trust such management, investment advisory
or supervisory, administrative, accounting, legal,
statistical and research facilities and services, and
such other facilities and services, if any, as the
Trustees shall from time to time consider desirable, all
upon such terms and conditions as the Trustees may in
their discretion determine to be not inconsistent with
this Declaration, the applicable provisions of the 1940
Act or any applicable provisions of the By-Laws. Any
such advisory or management agreement and any amendment
thereto shall be subject to approval by a Majority
Shareholder Vote at a meeting of the Shareholders of the
Trust. Notwithstanding any provisions of this
Declaration, the Trustees may authorize the Investment
Adviser (subject to such general or specific
instructions as the Trustees may from time to time
adopt) to effect purchases, sales, loans or exchanges of
portfolio securities of the Trust on behalf of the
Trustees or may authorize any officer or employee of the
Trust or any Trustee to effect such purchases, sales,
loans or exchanges pursuant to recommendations of the
Investment Adviser (and all without further action by
the Trustees). Any such purchases, sales, loans and
exchanges shall be deemed to have been authorized by all
of the Trustees. The Trustees may, in their sole
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discretion, call a meeting of Shareholders in order to
submit to a vote of Shareholders at such meeting the
approval of continuance of any such investment advisory
or management agreement. If the Shareholders of any
Portfolio should fail to approve any such investment
advisory or management agreement, the Investment Adviser
may nonetheless serve as Investment Adviser with respect
to any other Portfolio whose Shareholders shall have
approved such contract.
(b) Administration. An agreement whereby the
agent, subject to the general supervision of the
Trustees and in conformity with any policies of the
Trustees with respect to the operations of the Trust and
each Portfolio, will supervise all or any part of the
operations of the Trust and each Portfolio, and will
provide all or any part of the administrative and
clerical personnel, office space and office equipment
and services appropriate for the efficient
administration and operations of the Trust and each
Portfolio (any such agent being herein referred to as an
"Administrator").
(c) Distribution. An agreement providing for the
sale of Shares of any one or more Series, or one or more
Classes of one or more Series, to net the Trust not less
than the net asset value per Share (as described in
Section 6.2(g) hereof) and pursuant to which the Trust
may appoint the other party to such agreement as its
principal underwriter or sales agent for the
distribution of such Shares. The agreement shall
contain such terms and conditions as the Trustees may in
their discretion determine to be not inconsistent with
this Declaration, the applicable provisions of the 1940
Act and any applicable provisions of the By-Laws (any
such agent being herein referred to as a "Distributor"
or a "Principal Underwriter", as the case may be).
(d) Custodian. The appointment of a bank or trust
company having an aggregate capital, surplus and
undivided profits (as shown in its last published
report) of at least two million dollars ($2,000,000) as
custodian of the Securities and cash of the Trust and of
each Portfolio and of the accounting records in
connection therewith (any such agent being herein
referred to as a "Custodian").
(e) Transfer and Dividend Disbursing Agency. An
agreement with an agent to maintain records of the
ownership of outstanding Shares, the issuance and
redemption and the transfer thereof (any such agent
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being herein referred to as a "Transfer Agent"), and to
disburse any dividends declared by the Trustees and in
accordance with the policies of the Trustees and/or the
instructions of any particular Shareholder to reinvest
any such dividends (any such agent being herein referred
to as a "Dividend Disbursing Agent").
(f) Shareholder Servicing. An agreement with an
agent to provide service with respect to the
relationship of the Trust and its Shareholders, records
with respect to Shareholders and their Shares, and
similar matters (any such agent being herein referred to
as a "Shareholder Servicing Agent").
(g) Accounting. An agreement with an agent to
handle all or any part of the accounting
responsibilities, whether with respect to the Trust's
properties, Shareholders or otherwise (any such agent
being herein referred to as an "Accounting Agent").
The same Person may be the Contracting Party for some or all of
the services, duties and responsibilities to, for and of the
Trust and/or the Trustees, and the contracts with respect thereto
may contain such terms interpretive of or in addition to the
delineation of the services, duties and responsibilities provided
for, including provisions that are not inconsistent with the 1940
Act relating to the standard of duty of and the rights to
indemnification of the Contracting Party and others, as the
Trustees may determine. Nothing herein shall preclude, prevent
or limit the Trust or a Contracting Party from entering into sub-
contractual arrangements relative to any of the matters referred
to in subsections (a) through (g) of this Section 5.2.
ARTICLE 6
PORTFOLIOS AND SHARES
SECTION 6.1 Description of Portfolios and Shares.
(a) Shares; Portfolios; Series and Classes of Shares.
The beneficial interest in the Trust shall be divided into Shares
having a nominal or par value of one mill ($.001) per Share, of
which an unlimited number may be issued. The Trustees shall have
the power and authority, without any requirement of Shareholder
approval, from time to time to establish and designate one or
more separate, distinct and independent Portfolios, in addition
to the Initial Portfolio established and designated by Section
6.2 hereof, into which the assets of the Trust shall be divided,
to authorize a separate Series of Shares for each such additional
Portfolio (each of which Series shall represent interests only in
the Portfolio for which such Series was authorized), and to
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authorize two or more separate Classes of Shares of any such
Series, as they deem necessary or desirable. The Trustees shall
have the power to classify or reclassify any unissued Shares of
any Series, or any Shares of any Series previously issued and
reacquired by the Trust (including in either case any Shares of
the Portfolios established and designated by Section 6.2 hereof)
into any number of additional Classes of such Series by from time
to time setting or changing in one or more respects provisions
applicable to such Class or Classes relating to sales charges,
any rights of redemption and the price, terms and manner of
redemption, special and relative rights as to dividends and other
distributions and on liquidation, sinking or purchase fund
provisions and conversion rights, and (subject to Article 7
hereof) the conditions under which the Shareholders of the
several Classes shall have separate voting rights or no voting
rights. Except as otherwise provided as to a particular
Portfolio herein or in the Certificate of Designation therefor,
the Trustees shall have all the rights and powers, and be subject
to all the duties and obligations, with respect to each such
Portfolio and the assets and affairs thereof as they have under
this Declaration with respect to the Trust and the Trust Property
in general.
(b) Establishment, etc. of Portfolios; Authorization of
Shares. In order to establish and designate any Portfolio in
addition to the Initial Portfolio established and designated by
Section 6.2 hereof, and to authorize the Shares thereof, a
Majority of the Trustees (or by an officer of the Trust pursuant
to the vote of a Majority of the Trustees) shall execute an
instrument setting forth such establishment and designation and
the relative rights and preferences of the Shares of the Series
representing interests in such Portfolio and the manner in which
the same may be amended (a "Certificate of Designation"), which
may provide that the number of Shares of such Series or any Class
thereof which may be issued is unlimited, or may limit the number
issuable. At any time that there are outstanding no Shares of
any particular Series or Class previously established and
designated, including any Class of the Portfolios established and
designated by Section 6.2 hereof, and also, in the case of any
Class of a Series, of which there are outstanding no Shares of
any other Class of such Series which are convertible into Shares
of the particular Class, the Trustees may by an instrument
executed by a Majority of the Trustees (or by an officer of the
Trust pursuant to the vote of a Majority of the Trustees)
terminate such Series or Class and the establishment and
designation thereof and the authorization of its Shares (a
"Certificate of Termination"). Each Certificate of Designation
or Certificate of Termination and any instrument amending a
Certificate of Designation shall have the status of an amendment
to this Declaration of Trust, and shall be filed and become
effective as provided in Section 9.4 hereof.
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(c) Character of Separate Portfolios and Shares
Thereof. Each Portfolio established hereunder shall be a
separate component of the assets of the Trust, and the holders of
Shares of the Series representing interests in that Portfolio
shall be considered Shareholders of such Portfolio, but such
Shareholders shall also be considered Shareholders of the Trust
for purposes of receiving reports and notices and, except as
otherwise provided herein or in the Certificate of Designation of
a particular Portfolio as to such Portfolio, or as required by
the 1940 Act or other applicable law, the right to vote, all
without distinction by Series.
(d) Consideration for Shares. The Trustees may issue
Shares of any Series for such consideration (which may include
property subject to, or acquired in connection with the
assumption of, liabilities) and on such terms as they may
determine (or for no consideration if pursuant to a Share
dividend or splitup), and, without limitation, may issue Shares
in exchange for shares of the corresponding class of shares of
any other investment company registered as such under the 1940
Act and designated for that purpose in the Trust's prospectus for
the Shares so issued (the investment company which issued the
shares for which the Shares of any Portfolio of this Trust are so
exchanged is sometimes referred to herein as the "Source
Investment Company" for such Shares of such Portfolio) all
without action or approval of the Shareholders. All Shares when
so issued on the terms determined by the Trustees shall be fully
paid and nonassessable (but may be subject to mandatory
contribution back to the Trust as provided in Section 6.2(g)
hereof).
SECTION 6.2 Establishment and Designation of the AFD
Exchange Reserves Portfolio; Classes of Shares; General
Provisions for All Portfolios and all Series of Shares. Without
limiting the authority of the Trustees set forth in Section
6.1(a) hereof to establish and designate additional Portfolios,
there is hereby established and designated the AFD Exchange
Reserves Portfolio (the "Initial Portfolio"), the Shares of which
shall be divided into three separate Classes, designated Class A,
Class B and Class C, which shall represent interests only in the
Initial Portfolio. Prior to issuing Shares of any Class of a
Series, the Trustees shall have power to provide, by resolution
duly adopted by a Majority of the Trustees, that the Shares of
such Class shall have rights and obligations different from any
other Class or Classes of such Series, which may include (but
without limitation) differences as to sales loads (or no loads),
CDSCs, sales charges, shareholder servicing fees, distribution
services fees and other charges and expenses to which such Class
is subject, rights of redemption and the prices, terms and
manners of redemption, special or relative rights as to dividends
and other distributions and on liquidation, any sinking or
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purchase fund provisions, differing conversion or exchange
rights, and (subject to Article 7 hereof) the conditions under
which the holders of Shares of such Class shall have separate
voting rights or no voting rights. The differing rights and
obligations of each Class of Shares shall be set forth in the
Prospectus under which the Shares of such Class are sold, and the
Trustee may not change such rights and obligations in a manner
adverse to the holders of outstanding Shares of such Class, or
grant any preferences over such Class to the holders of Shares of
any other Class without the affirmative vote or consent of the
holders of "a majority of the outstanding voting securities" of
such Class, as the quoted phrase is used in the 1940 Act. An
unlimited number of Shares of each such Class may be issue.
Subject to the power of the Trustees to classify or reclassify
any unissued Shares of a Series pursuant to Section 6.1 (a)
above, the Shares of the Initial Portfolio shall have, and the
Shares of any further Portfolios that may from time to time be
established and designated by the Trustees (unless the Trustees
otherwise determine with respect to some further Portfolio at the
time of establishing and designating the same) shall have, the
following relative rights and preferences:
(a) Assets Belonging to Portfolios. Any portion of the
Trust Property allocated to a particular Portfolio, and all
consideration received by the Trust for the issue or sale of
Shares of such Portfolio, together with all assets in which such
consideration is invested or reinvested, all interest, dividends,
income, earnings, profits and gains therefrom, and proceeds
thereof, including any proceeds derived from the sale, exchange
or liquidation of such assets, and any funds or payments derived
from any reinvestment of such proceeds in whatever form the same
may be, shall be held by the Trustees in trust for the benefit of
the holders of Shares of that Portfolio and shall irrevocably
belong to that Portfolio for all purposes, and shall be so
recorded upon the books of account of the Trust, and the
Shareholders of such Portfolio shall not have, and shall be
conclusively deemed to have waived, any claims to the assets of
any Portfolio of which they are not Shareholders. Such
consideration, assets, interest, dividends, income, earnings,
profits, gains and proceeds, together with any General Items
allocated to that Portfolio as provided in the following
sentence, are herein referred to collectively as "Portfolio
Assets" of such Portfolio, and as assets "belonging to" that
Portfolio. If the Trust shall have or realize any assets,
interest, dividends, income, earnings, profits, gains or proceeds
which are not readily identifiable as belonging to any particular
Portfolio (collectively, "General Items"),the Trustees shall
allocate such General Items to and among any one or more of the
Portfolios of the Trust in such manner and on such basis as they,
in their sole discretion, deem fair and equitable; and any
General Items so allocated to a particular Portfolio shall belong
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to and be part of the Portfolio Assets of that Portfolio. Each
such allocation by the Trustees shall be conclusive and binding
upon the Shareholders of all Portfolios for all purposes.
(b) Liabilities of Portfolios. The assets belonging to
each Portfolio shall be charged with the liabilities incurred by
or arising in respect of t:hat Portfolio, and all expenses,
costs, charges and reserves attributable to that Portfolio, and
any general liabilities, expenses, costs, charges or reserves of
the Trust which are not readily identifiable as pertaining to any
particular Portfolio shall be allocated and charged by the
Trustees to and among any one or more of the Portfolios of the
Trust in such manner and on such basis as the Trustees in their
sole discretion deem fair and equitable. The liabilities,
expenses, costs, charges and reserves so allocated and so charged
to a particular Portfolio are herein referred to as "liabilities
of" that Portfolio. Each allocation or liabilities, expenses,
costs, charges and reserves by the Trustees shall be conclusive
and binding upon the Shareholders of all Portfolios for all
purposes. The creditors of a particular Portfolio may look only
to the assets of that Portfolio to satisfy such creditors'
claims, and the creditors of a particular Class of a Portfolio
may look only to the share of that Class in the assets of the
Portfolio of which it is a part to satisfy their claims.
(c) Dividends. Dividends and distributions on Shares of
a particular Portfolio may be paid with such frequency as the
Trustees may determine, which may be daily or otherwise pursuant
to a standing resolution or resolutions adopted only once or with
such frequency as the Trustees may determine, to the holders of
Shares of that Portfolio, from such of the income, accrued or
realized, and capital gains, realized or unrealized, and out of
the assets belonging to such Portfolio, as the Trustees may
determine, after providing for actual and accrued liabilities of
that Portfolio. Dividends and distributions on Shares of a
Portfolio without separate Classes of Shares shall be distributed
pro rata to the holders of Shares of that Portfolio in proportion
to the number of such Shares held by such holders at the date and
time of record established for the payment of such dividends or
distributions. Dividends and distributions on the Shares of a
Portfolio having separate Classes of Shares shall be in such
amount as may be declared from time to time by the Trustees, and
such dividends and distributions may vary as between such Classes
to reflect differing allocations among such Classes of the
liabilities, expenses, costs, charges and reserves of such
Portfolio, and any resultant differences between the net asset
value of such several Classes, to such extent and for such
purposes as the Trustees may deem appropriate, but dividends and
distributions on the Shares of a particular Class shall be
distributed pro rata to the Shareholders of that Clear, in
proportion to the number of such Shares held by such holders at
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the date and time of record established for the payment of such
dividends and distributions. Notwithstanding the last two
preceding sentences, the Trustees may determine, in connection
with any dividend or distribution program or procedure, that no
dividend or distribution shall be payable on newly-purchased
Shares as to which the purchase order and/or payment have not
been received by the time or times established by the Trustees
under such program or procedure, or that dividends or
distributions shall be payable on Shares which have been tendered
by the holder thereof for redemption or repurchase, but the
redemption or repurchase proceeds of which have not yet been paid
to such Shareholder. Dividends and distributions on the Shares of
a Portfolio may be made in cash or Shares of any Class of that
Portfolio or a combination thereof as determined by the Trustees,
or pursuant to any program that the Trustees may have in effect
at the time for the election by each Shareholder of the mode of
the making of such dividend or distribution to that Shareholder.
Any such dividend or distribution paid in Shares will be paid at
the net asset value thereof as determined in accordance with
subsection (g) of this Section 6.2.
(d) Liquidation. In the event of the liquidation or
dissolution of the Trust, the Shareholders of each Portfolio of
which Shares are outstanding shall be entitled to receive, when
and as declared by the Trustees, the excess of the Portfolio
Assets over the liabilities of such Portfolio. The assets so
distributable to the Shareholders of any Portfolio without
separate Classes of Shares shall be distributed among such
Shareholders in proportion to the number of Shares of that
Portfolio held by them and recorded on the books of the Trust.
The assets so distributable to the Shareholders of any Portfolio
having separate Classes of Shares shall be allocated among such
Classes in proportion to the respective aggregate net asset value
of the outstanding Shares thereof, and shall be distributed to
the Shareholders of each such Class in proportion to the number
of Shares of that Class held by them and recorded on the books of
the Trust. The liquidation of any Portfolio, or any Class of any
Portfolio, may be authorized by vote of a Majority of the
Trustees, subject to the affirmative vote of "a majority of the
outstanding voting securities" of that Portfolio or Class, as the
quoted phrase is defined in the 1940 Act, determined in
accordance with clause (iii) of the definition of "Majority
Shareholder Vote" in Section 1.4 hereof.
(e) Redemption by Shareholder. Each holder of Shares of
a particular Series or Class shall have the right at such times
as may be permitted by the Trust, but no less frequently than
once each week, to require the Trust to redeem all or any part of
such Shares at a redemption price equal to the net asset value
per Share of that Series or Class next determined in accordance
with subsection (g) of this Section 6.2 after the Shares are
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properly tendered for redemption; provided, that the Trustees may
from time to time, in their discretion, determine and impose a
fee for such redemption, and the proceeds of the redemption of
Shares (including a fractional Share) of any Series or Class
shall be reduced by the amount of any applicable contingent
deferred sales charge payable on such redemption pursuant to the
terms of the initial issuance of the Shares of such Series or
Class (to the extent consistent with the 1940 Act or regulations
or exemptions thereunder). The redemption price of Shares
redeemed under this subsection (e) shall be paid in cash;
provided, however, that if the Trustees determine, which
determination shall be conclusive, that conditions exist with
respect to any Portfolio, or one or more Classes of any
Portfolio, which make payment wholly in cash unwise or
undesirable, the Trust may make payment wholly or partly in
Securities or other assets belonging to such Portfolio, or to the
Portfolio of which such Class or Classes are a part, at the value
of such Securities or assets used in such determination of net
asset value. Notwithstanding the foregoing, the Trust may
postpone payment of the redemption price and may suspend the
right of the holders of Shares of any Series or Class to require
the Trust to redeem Shares of that Series or Class during any
period or at any time when and to the extent permissible under
the 1940 Act.
(f) Redemption at the Option of the Trust. Each Share of
any Portfolio shall be subject to redemption at the option of the
Trust at the redemption price which would be applicable if such
Share were then being redeemed by the Shareholder pursuant to
subsection (e) of this Section 6.2: (i) at any time, if the
Trustees determine in their sole discretion that failure to so
redeem may have materially adverse consequences to the holders of
the Shares of the Trust or of any Portfolio, or (ii) upon such
other conditions with respect to maintenance of Shareholder
accounts of a minimum amount as may from time to time be
determined by the Trustees and set forth in the then-current
Prospectus of such Portfolio. Upon such redemption the holders of
the Shares so redeemed shall have no further right with respect
thereto other than to receive payment of such redemption price.
(g) Net Asset Value. Subject to the provisions of the
two sentences immediately following, the net asset value per
Share of any Portfolio without Classes, or of any Class of a
Portfolio having separate Classes of Shares, at any time shall be
the quotient obtained by dividing the value of the net assets of
such Portfolio or the share of such Class in such assets, as the
case may be, at such time (being the current value of the assets
belonging to such Portfolio, or the share of such Class therein,
less the then-existing liabilities of such Portfolio, or the
share of such Class in such liabilities) by the total number of
Shares of that Portfolio or Class then outstanding, all
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determined in accordance with the methods and procedures,
including without limitation those with respect to rounding,
established by the Trustees from time to time. The aggregate net
asset value of the several Classes of a Portfolio having separate
Classes of Shares shall be separately computed, and may vary from
one another. The Trustees shall establish procedures for the
allocation of investment income or capital gains and expenses and
liabilities of a Portfolio having separate Classes of Shares
among the several Classes of such Portfolio, in order to reflect
the varying net asset values of, and the liabilities and expenses
attributable to, such Classes. The Trustees may determine to
maintain the net asset value per Share of any Portfolio at a
designated constant dollar amount and in connection therewith may
adopt procedures not inconsistent with the 1940 Act for the
continuing declaration of income attributable to that Portfolio
as dividends payable in additional Shares of that Portfolio at
the designated constant dollar amount and for the handling of any
losses attributable to that Portfolio. Such procedures may
provide that in the event of any loss each Shareholder shall be
deemed to have contributed to the shares of beneficial interest
account of that Portfolio such Shareholder's pro rata portion of
the total number of Shares required to be canceled in order to
permit the net asset value per Share of that Portfolio to be
maintained, after reflecting such loss, at the designated
constant dollar amount. Each Shareholder of the Trust shall be
deemed to have expressly agreed, by investing in any Portfolio
with respect to which the Trustees shall have adopted any such
procedure, to make the contribution referred to in the preceding
sentence in the event of any such loss.
(h) Transfer. All Shares of the Trust shall be
transferable, but transfers of Shares of a particular Portfolio
will be recorded on the Share transfer records of the Trust
applicable to that Portfolio only at such times as Shareholders
shall have the right to require the Trust to redeem Shares of
that Portfolio and at such other times as may be permitted by the
Trustees.
(i) Equality. All Shares of each Portfolio without
Classes shall represent an equal proportionate interest in the
assets belonging to that Portfolio, subject to the liabilities of
that Portfolio, and each Share of any such Portfolio shall be
equal to each other Share thereof. All Shares of each Class of
Shares of any Portfolio having separate Classes of Shares shall
represent an equal proportionate interest in the share of such
Class in the assets belonging to that Portfolio, subject to a
like share of the liabilities of such Portfolio, adjusted for any
liabilities specifically allocable to that Class, and each Share
of any such Class shall be equal to each other Share thereof; but
the interests represented by the Shares of the different Classes
of a Portfolio having separate Classes of Shares shall reflect
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any distinctions among the several Classes of such Portfolio
existing under this Section 6.2 or Section 7.1 hereof, or under
the Certificate of Designation for such Portfolio. The Trustees
may from time to time divide or combine the Shares of any
Portfolio, or any Class of any Portfolio, into a greater or
lesser number of Shares of that Portfolio or Class without
thereby changing the proportionate beneficial interest in the
assets belonging to that Portfolio or in any way affecting the
rights of the holders of Shares of any other Portfolio or Class.
(j) Rights of Fractional Shares. Any fractional Share
of any Series or Class of Shares shall carry proportionately all
the rights and obligations of a whole Share of that Series or
Class, including rights and obligations with respect to voting,
receipt of dividends and distributions, redemption of Shares, and
liquidation of the Trust or of the Portfolio or Class to which
such Shares pertain.
(k) Conversion Rights; Conversion of Class B Shares of
the Portfolios. (i) Subject to compliance with the requirements
of the 1940 Act, the Trustees shall have the authority to provide
(A) that holders of Shares of any Portfolio shall have the right
to convert said Shares into Shares of any other investment
company registered as such under the 1940 Act and designated for
that purpose in the Trust's prospectus for the Shares being
converted, (B) that holders of any Class of Shares of a Portfolio
shall have the right to convert such Shares into Shares of one or
more other Classes of such Portfolio, and (C) that Shares of any
Class of a Portfolio shall be automatically converted into Shares
of another Class of such Portfolio, in each case in accordance
with such requirements and procedures as the Trustees may
establish.
(ii) Without limitation of the foregoing, each Class B
Share of any Portfolio (including without limitation the Class B
Shares of the Initial Portfolio), other than Shares purchased
through the automatic reinvestment of dividends or distributions
with respect to the Class B Shares of such Portfolio, shall be
converted automatically, and without any action or choice on the
part of the holder thereof, into Class A Shares of such Portfolio
on (1) the date that would have been the conversion date of the
class B shares of the Source Investment Company for which such
Class B Shares of the Trust were originally exchanged pursuant to
Section 6.1(d) had such shares of the Source Investment Company
not been so exchanged, or (ii) if the shares of the Source
Investment Company were held as the result of a series of
exchanges, the date that would have been the conversion date of
the class B shares of the investment company to which the holder
originally subscribed had such shares to which the holder
originally subscribed not been so exchanged (the date established
under clause (i) or clause (ii) of this sentence being herein
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sometimes referred to as the "Conversion Date" of the Class B
Shares of this Trust so converted). Class B Shares of a Portfolio
purchased through the automatic reinvestment of a dividend or a
distribution-with respect to the Class B Shares of such Portfolio
shall be segregated in a separate sub-account on the share
records of the Trust for each of the Shareholders of record
thereof. On any Conversion Date, a number of the Shares held in
the sub-account of the Shareholder of record of the Share or
Shares being converted, calculated in accordance with the next
following sentence, shall be converted automatically, and without
any action or choice on the part of the Shareholder, into Class A
Shares of such Portfolio. The number of shares in the
Shareholder's sub-account so converted shall bear the same
relation to the total number of Shares maintained in the sub-
account on the Conversion Date (immediately prior to conversion)
as the number of Shares of the Shareholder converted on the
Conversion Date pursuant to paragraph (i) of this subsection (k)
bears to the total number of Class B Shares of such Portfolio
held by the Shareholder on the Conversion Date (immediately prior
to conversion) not purchased through the automatic reinvestment
of dividends or distributions with respect to the Class B Shares
of such Portfolio.
(iii) The number of Class A Shares of any Portfolio into
which a Class B Share of such Portfolio is converted pursuant to
paragraph (ii) of this subsection (k) shall be the quotient
(including for this purpose fractions of a Share) obtained by
dividing the net asset value per Share of the Class B Shares by
the net asset value per Share of the Class A Shares, each
determined as of the close of business on the Conversion Date of
such Class B Shares.
(iv) Class B Shares of any Portfolio converted into
Class A Shares of such Portfolio will cease to accrue dividends
at the close of business on the Conversion Date thereof, and will
thenceforth no longer be deem~ad outstanding, and the rights of
the holders thereof (except (~) the right to receive the number
of Class A Shares into which such Class B Shares have been
converted and (B) dividends declared on such Class B Shares but
not paid prior to the close of business on such Conversion Date),
and (C) the right to vote or to give any consent in respect of
Class B Shares so converted that were held as of any record date
occurring before the Conversion Date and theretofore set with
respect to any meeting held or any written consent for which the
final date is set after the Conversion Date) will cease, and such
holder shall instead have all rights of a holder of Class A
Shares in respect of the Class A Shares issuable upon such
conversion, effective from and after the close of business on
such Conversion Date. Certificates representing Class A Shares
resulting from the conversion need not be issued until
certificates representing Class B Shares converted, if issued,
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have been received by the Trust or its agent, duly endorsed for
transfer.
(v) The Trust will appropriately reflect the conversion
of Class B Shares of any Portfolio into Class A Shares of such
Portfolio on the first periodic statements of account sent to
Shareholders of record affected which provide account information
with respect to a reporting period which includes the Conversion
Date.
(vi) Without limiting the generality of the foregoing,
except as otherwise expressly provided by the Trustees pursuant
to paraqraph (i) of this subsection (k), neither the Class A
Shares nor the Class C Shares of any Portfolio shall be
convertible into shares of any other Class or Series.
1() Suspension of Automatic Conversion of Class B Shares.
Notwithstanding the provisions of subsection (k) of this Section
6.2, the automatic conversion of Class B Shares into Class A
Shares shall be subject to suspension, as follows:
(I) Such conversion shall be suspended at any time that
the Trustees determine (i) that there is not available a
reasonably satisfactory opinion of counsel to the effect that,
under the Internal Revenue Code (x) the assessment of the higher
distribution services fee and transfer agency costs with respect
to the Class B Shares does not result in the Trust's dividends or
distributions constituting a "preferential dividend", and (y) the
conversion of the Class B Shares does not constitute a taxable
event, or (ii) any other condition to conversion set forth in the
Trust's prospectus for the Class B Shares, as such prospectus may
be amended from time to time, is not satisfied; and
(II) Such conversion may be suspended at any time that
the Trustees determine such suspension to be appropriate in order
to comply with, or satisfy the requirements of, the 1940 Act,
relating to voting by the holders of the Class B Shares on any
plan with respect to the Class A Shares proposed pursuant to Rule
12b-1 under the 1940 Act, and in connection with, or in lieu of,
any such suspension, the Trustees may provide holders of Class B
Shares with alternative conversion or exchange rights into other
Classes or Series of Shares of the Trust in a manner consistent
with the provision of the 1940 Act giving rise to the possible
suspension of such conversion right.
SECTION 6.3 Ownership of Shares. The ownership of Shares
shall be recorded on the books of the Trust or of a Transfer
Agent or similar agent for the Trust, which books shall be
maintained separately for the Shares of each Series that has been
authorized. Certificates evidencing the ownership of Shares need
not be issued except as the Trustees-may otherwise determine from
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time to time, and the Trustees shall have power to call
outstanding Share certificates and to replace them with book
entries. The Trustees may make such rules as they consider
appropriate for the issuance of Share certificates, the use of
facsimile signatures, the transfer of Shares and similar matters.
The record books of the Trust as kept by the Trust or any
Transfer Agent or similar agent, as the case may be, shall be
conclusive as to who are the Shareholders and as to the number of
Shares of each Portfolio held from time to time by each such
Shareholder.
The holders of Shares of each Portfolio shall upon
demand disclose to the Trustees in writing such information with
respect to their direct and indirect ownership of Shares of such
Portfolio as the Trustees deem necessary to comply with the
provisions of the Internal Revenue Code, or to comply with the
requirements of any other authority.
SECTION 6.4 Investments in the Trust. The Trustees may
accept investments in any Portfolio of the Trust from such
Persons and on such terms and for such consideration, not
inconsistent with the provisions of the 1940 Act, as they from
time to time authorize. The Trustees may authorize any
Distributor, Principal Underwriter, Custodian, Transfer Agent or
other Person to accept orders for the purchase of Shares that
conform to such authorized terms and to reject any purchase
orders for Shares, whether or not conforming to such authorized
terms.
SECTION 6.5 No Pre-emptive Rights. No Shareholder, by
virtue of holding Shares of any Portfolio, shall have any
preemptive or other right to subscribe to any additional Shares
of that Portfolio, or to any shares of any other Portfolio, or
any other Securities issued by the Trust.
SECTION 6.6 Status of Shares. Every Shareholder, by
virtue of having become a Shareholder, shall be held to have
expressly assented and agreed to the terms hereof and to have
become a party hereto. Shares shall be deemed to be personal
property, giving only the rights provided herein. Ownership of
Shares shall not entitle the Shareholder to any title in or to
the whole or any part of the Trust Property or right to call for
a partition or division of the same or for an accounting, nor
shall the ownership of Shares constitute the Shareholders
partners. The death of a Shareholder during the continuance of
the Trust shall not operate to terminate the Trust or any
Portfolio, nor entitle the representative of any deceased
Shareholder to an accounting or to take any action in court: or
elsewhere against the Trust or the Trustees, but only to the
rights of said decedent under this Declaration of Trust.
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ARTICLE 7
SHAREHOLDERS' VOTING POWERS AND MEETINGS
SECTION 7.1 Voting Powers. The Shareholders shall have
power to vote only (i) for the election or removal of Trustees as
provided in Sections 4.l(c) and hereof, (ii) with respect to the
approval or termination in accordance with the 1940 Act of any
contract with a Contracting Party as provided in Section 5.2
hereof as to which Shareholder approval is required by the 1940
Act, (iii) with respect to any termination or reorganization of
the Trust or any Portfolio to the extent and as provided in
Sections 9.1 and 9.2 hereof, (iv) with respect to any amendment
of this Declaration of Trust to the extent and as provided in
Section 9.3 hereof, (v) to the same extent as the stockholders of
a Massachusetts business corporation as to whether or not a court
action, proceeding or claim should or should not be brought or
maintained derivatively or as a class action on behalf of the
Trust or any Portfolio, or the Shareholders of any of them
(provided, however, that a Shareholder of a particular Portfolio
shall not in any event be entitled to maintain a derivative or
class action on behalf of any other Portfolio or the Shareholders
thereof), and (vi) with respect to such additional matters
relating to the Trust as may be required by the 1940 Act, this
Declaration of Trust, the By-Laws or any registration of the
Trust with the Commission (or any successor agency) or any State,
or as the Trustees may consider necessary or desirable. If and to
the extent that the Trustees shall determine that such action is
required by law or by this Declaration, they shall cause each
matter required or permitted to be voted upon at a meeting or by
written consent of Shareholders to be submitted to a separate
vote of the outstanding Shares, of each Series entitled to vote
thereon; provided, that (l) when expressly required by the 1940
Act or other law, actions of Shareholders shall be taken by
Single Class Voting of all outstanding Shares of each Series and
Class whose holders are entitled to vote thereon, and (ii) when
the Trustees determine that any matter to be submitted to a vote
of Shareholders affects only the rights or interests of the
holders of Shares one or more but not all Series or of one or
more but not all Classes of a single Series (including without
limitation any distribution plan pursuant to Rule 12b-1 under the
1940 Act applicable to any such Series or Class), then only the
Shareholders of the Series or Classes so affected shall be
entitled to vote thereon. Without limiting the generality of the
foregoing, and except as required by the 1940 Act or other law,
the Shareholders of each Class shall have exclusive voting rights
with respect to the provisions of any distribution plan adopted
by the Trustees pursuant to Rule 12b-1 under the 1940 Act
applicable to such Class.
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SECTION 7.2 Number of Votes and Manner of Voting;
Proxies. On each matter submitted to a vote of the Shareholders,
each holder of Shares of any Series shall be entitled to a number
of votes equal to the number of Shares of such Series standing in
his name on the books of the Trust. There shall be no cumulative
voting in the election of Trustees. Shares may be voted in person
or by proxy. A proxy wit:h respect to Shares held in the name of
two (2) or more Persons shall be valid if executed by any one of
them unless at or prior to exercise of the proxy the Trust
receives a specific written not:ice to the contrary from any one
of them. A proxy purporting to be executed by or on behalf of a
Shareholder shall be deemed valid unless challenged at or prior
to its exercise and the burden of proving invalidity shall rest
on the challenger. Until Shares are issued, the Trustees may
exercise all rights of Shareholders and may take any action
required by law, this Declaration of Trust or the By-Laws to be
taken by Shareholders.
SECTION 7.3 Meetings. Meetings of Shareholders may be
called by the Trustees from time to time for the purpose of
taking action upon any matter requiring the vote or authority of
the Shareholders as herein provided, or upon any other matter
deemed by the Trustees to be necessary or desirable. Written
notice of any meeting of Shareholders shall be given or caused to
be given by the Trustees by mailing such notice at least seven
(7) days before such meeting, postage prepaid, stating the time,
place and purpose of the meeting, to each Shareholder at the
Shareholder's address as it appears on the records of the Trust.
The Trustees shall promptly call and give notice of a meeting of
Shareholders for the purpose of voting upon removal of any
Trustee of the Trust when requested to do so in writing by
Shareholders holding not less than ten percent (10%) of the
Shares then outstanding. If the Trustees shall fail to call or
give notice of any meeting of Shareholders for a period of thirty
(30) days after written application by Shareholders holding at
least ten percent (10%) of the Shares then outstanding requesting
that a meeting be called for any other purpose requiring action
by the Shareholders as provided herein or in the By-Laws, then
Shareholders holding at least ten percent (10%) of the Shares
then outstanding may call and give notice of such meeting, and
thereupon the meeting shall be held in the manner provided for
herein in case of call thereof by the Trustees.
SECTION 7.4 Record Dates. For the purpose of determining
the Shareholders who are entitled to vote or act at any meeting
or any adjournment thereof, or who are entitled to participate in
any dividend or distribution, or for the purpose of any other
action, the Trustees may from time to time close the transfer
books for such period, not exceeding thirty (30) days (except at
or in connection with the termination of the Trust), as the
Trustees may determine; or without closing the transfer books the
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Trustees may fix a date and time not more than sixty (60) days
prior to the date of any meeting of Shareholders or other action
as the date and time of record for the determination of
Shareholders entitled to vote at such meeting or any adjournment
thereof or to be treated as Shareholders of record for purposes
of such other action, and any Shareholder who was a Shareholder
at the date and time so fixed shall be entitled to vote at such
meeting or any adjournment thereof or to be treated as a
Shareholder of record for purposes of such other action, even
though he has since that date and time disposed of his Shares,
and no Shareholder becoming such after that date and time shall
be so entitled to vote at such meeting or any adjournment thereof
or to be treated as a Shareholder of record for purposes of such
other action.
SECTION 7.5 Quorum and Required Vote. A majority of the
Shares entitled to vote shall be a quorum for the transaction of
business at a Shareholders' meeting, but any lesser number shall
be sufficient for adjournments. Any adjourned session or sessions
may be held within a reasonable time after the date set for the
original meeting without the necessity of further notice. A
Majority Shareholder Vote at a meeting of which a quorum is
present shall decide any question, except when a different vote
is required or permitted by any provision of the 1940 Act or
other applicable law or by this Declaration of Trust or the By-
Laws, or when the Trustees shall in their discretion require a
larger vote or the vote of a majority or Larger fraction of the
Shares of one or more particular Series.
SECTION 7.6 Action by Written Consent. Subject to the
provisions of the 1940 Act and other applicable law, any action
taken by Shareholders may be taken without a meeting if a
majority of Shareholders entitled to vote on the matter (or such
larger proportion thereof or of the Shares of any particular
Series as shall be required by the 14340 Act or by any express
provision of this Declaration of Trust or the By-Laws or as shall
be permitted by the Trustees) consent to the action in writing
and if the writings in which such consent is given are filed with
the records of the meetings of Shareholders, to the same extent
and for the same period as proxies given in connection with a
Shareholders, meeting. Such consent shall be treated for all
purposes as a vote taken at a meeting of Shareholders.
SECTION 7.7 Inspection of Records. The records of the
Trust shall be open to inspection by Shareholders to the same
extent as is permitted stockholders of a Massachusetts business
corporation under the Massachusetts Business Corporation Law,
M.G.L. ch. 156B.
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SECTION 7.8 Additional Provisions. The By-Laws may
include further provisions for Shareholders' votes and meetings
and related matters not inconsistent with the provisions hereof.
ARTICLE 8
LIMITATION OF LIABILITY: INDEMNIFICATION
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 t:he 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 a-rising
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 or
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
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Portfolio Assets of any Portfolio to the obligations of any other
Portfolio.
SECTION 8.2 Trustees' Good Faith Action; Expert Advice;
No Bond or Surety. The exercise by the Trustees of their powers
and discretions hereunder shall be binding upon everyone
interested. Subject to Section 8.4 hereof, a Trustee shall be
liable for his own willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of the office of Trustee, and for nothing else, and shall
not be liable for errors of judgment or mistakes of fact or law.
Subject to the foregoing, (i) the Trustees shall not be
responsible or liable in any event for any neglect or wrongdoing
of any officer, agent, employee, consultant, Investment Adviser,
Administrator, Distributor or Principal Underwriter, Custodian or
Transfer Agent, Dividend Disbursing Agent, Shareholder Servicing
Agent or Accounting Agent of the Trust, nor shall. any Trustee be
responsible for the act or omission of any other Trustee; (ii)
the Trustees may take advice of counsel or other experts with
respect to the meaning and operation of this Declaration of Trust
and their duties as Trustees, and shall be under no liability for
any act or omission in accordance with such advice or for failing
to follow such advice; and (iii) in discharging their duties, the
Trustees, when acting in good faith, shall be entitled to rely
upon the books of account of the Trust and upon written reports
made to the Trustees by any officer appointed by them, any
independent public accountant, and (with respect to the-subject
matter of the contract involved) any officer, partner or
responsible employee of a Contracting Party appointed by the
Trustees pursuant to Section 5.2 hereof. The Trustees as such
shall not be required to give any bond or surety or any other
security for the performance of their duties.
SECTION 8.3 Indemnification of Shareholders. If any
Shareholder (or former Shareholder) of the Trust shall be charged
or held to be personally liable for any obligation or liability
of the Trust solely by reason of being or having been a
Shareholder and not because of such Shareholder's acts or
omissions or for some other reason, the Trust (upon proper and
timely request by the Shareholder) shall assume the defense
against such charge and satisfy any judgment thereon, and the
Shareholder or former Shareholder (or the heirs, executors,
administrators or other legal representatives thereof, or in the
case of a corporation or other entity, its corporate or other
general successor) shall be entitled (but solely out of the
assets of the Portfolio of which such Shareholder or former
Shareholder is or was the holder of Shares) to be held harmless
from and indemnified against all loss and expense arising from
such liability.
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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 (i)
and (ii) being referred to hereafter as "Disabling Conduct"). A
determination that the Covered Person is entitled to
indemnification may be made by (i) a final decision on the merits
by a court or other body before whom the proceeding was brought
that the Covered Person to be indemnified was not liable by
reason of Disabling Conduct, (ii) dismissal of a court action or
an administrative proceeding against a Covered Person for
insufficiency of evidence of Disabling Conduct, or (iii) a
reasonable determination, based upon a review of the facts, that
the indemnitee was not liable by reason of Disabling Conduct by
(a) a vote of a majority of a quorum of Trustees who are neither
"interested persons" of the Trust as defined in Section 2(a)(19)
of the 1940 Act nor parties to the proceeding, or (b) an
independent legal counsel in a written opinion. Expenses,
including accountants' and counsel fees so incurred by any such
Covered Person (but excluding amounts paid in satisfaction of
judgments, in compromise or as fines or penalties), may be paid
from time to time by the Portfolio or Portfolios to which the
conduct in question related in advance of the final disposition
of any such action, suit or proceeding; Provided, that the
Covered Person shall have undertaken to repay the amounts so paid
to such Portfolio or Portfolios if it is ultimately determined
that indemnification of such expenses is not authorized under
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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.
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
or to be made by the Trustees or to see to the application of any
payments made or property transferred to the Trust or upon its
order.
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ARTICLE 9
DURATION; REORGANIZATION; AMENDMENTS
SECTION 9.1 Duration and Termination of Trust. Unless
terminated as provided herein, the Trust shall continue without
limitation of time and, without limiting the generality of the
foregoing, no change, alteration or modification with respect to
any Portfolio or Series of Shares shall operate to terminate the
Trust. The Trust may be terminated at any time by a Majority of
the Trustees, subject to the favorable vote of the holders of not
less than a majority of the Shares outstanding and entitled to
vote of each Portfolio of the Trust, or by an instrument or
instruments in writing without a meeting, consented to by the
holders of not less than a majority of such Shares, or by such
greater or different vote of Shareholders of any Series as may be
established by the Certificate of Designation by which such
Series was authorized. Upon termination, after paying or
otherwise providing for all charges, taxes, expenses and
liabilities, whether due or accrued or anticipated as may be
determined by the Trustees, the Trust shall in accordance with
such procedures as the Trustees consider appropriate reduce the
remaining assets to distributable form in cash, Securities or
other property, or any combination thereof, and distribute the
proceeds to the Shareholders, in conformity with the provisions
of Section 6.2(d) hereof.
SECTION 9.2 Reorganization. The Trustees may sell,
convey and transfer all or substantially all of the assets of the
Trust, or the assets belonging to any one or more Portfolios, to
another trust, partnership, association or corporation organized
under the laws of any state of the United States, or may transfer
such assets to another Portfolio of the Trust, in exchange for
cash, Shares or other Securities (including, in the case of a
transfer to another Portfolio of the Trust, Shares of such other
Portfolio), or to the extent permitted by law then in effect may
merge or consolidate the Trust or any Portfolio with any other
Trust or any corporation, partnership, or association organized
under the laws of any state of the United States, all upon such
terms and conditions and for such consideration when and as
authorized by vote or written consent of a Majority of the
Trustees and approved by the affirmative vote of the holders of
not less than a majority of the Shares outstanding and entitled
to vote of each Portfolio whose assets are affected by such
transaction, or by an instrument or instruments in writing
without a meeting, consented to by the holders of not less than a
majority of such Shares, and/or by such other vote of any Series
as may be established by the Certificate of Designation with
respect to such Series. Following such transfer, the Trustees
shall distribute the cash, Shares or other Securities or other
consideration received in such transaction (giving due effect to
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the assets belonging to and indebtedness of, and any other
differences among, the various Portfolios of which the assets
have so been transferred) among the Shareholders of the Portfolio
of which the assets have been so transferred; and if all of the
assets of the Trust have been so transferred, the Trust shall be
terminated. Nothing in this Section 9.2 shall be construed as
requiring approval of Shareholders for the Trustees to organize
or assist in organizing one or more corporations, trusts,
partnerships, associations or other organizations, and to sell,
convey or transfer less than substantially all of the Trust
Property or the assets belonging to any Portfolio to such
organizations or entities.
SECTION 9.3 Amendments; etc. All rights granted to the
Shareholders under this Declaration of Trust are granted subject
to the reservation of the right to amend this Declaration of
Trust as herein provided, except that no amendment shall repeal
the limitations on personal liability of any Shareholder or
Trustee or the prohibition of assessment upon the Shareholders
(otherwise than as permitted under Section 6.2(q)) without the
express consent of each Shareholder or Trustee involved. Subject
to the foregoing, the provisions of this Declaration of Trust
(whether or not related to the rights of Shareholders) may be
amended at any time, so long as such amendment does not adversely
affect the rights of any Shareholder with respect to which such
amendment is or purports to be applicable and so long as such
amendment is not in contravention of applicable law, including
the 1940 Act, by an instrument in writing signed by a Majority of
the Trustees (or by an officer of the Trust pursuant to the vote
of a Majority of the Trustees). Any amendment to this Declaration
of Trust that adversely affects the rights of all Shareholders
may be adopted at any time by an instrument in writing signed by
a Majority of the Trustees (or by an officer of the Trust
pursuant to a vote of a Majority of the Trustees) when authorized
to do so by the vote in accordance with Section 7.1 hereof of
Shareholders holding a majority of all the Shares outstanding and
entitled to vote, without regard to Series, or if said amendment
adversely affects the rights of the Shareholders of less than all
of the Series or of less than all of the Classes of Shares of any
Series, by the vote of the holders of a majority of all the
Shares entitled to vote of each Series or of each Class, as the
case may be, so affected. Subject to the foregoing, any such
amendment shall be effective when the instrument containing the
terms thereof and a certificate (which may be a part of such
instrument) to the effect that such amendment has been duly
adopted, and setting forth the circumstances thereof, shall have
been executed and acknowledged by a Trustee or officer of the
Trust and filed as provided in Section 9.4 hereof.
SECTION 9.4 Filing of Copies of Declaration and
Amendments. The original or a copy of this Declaration and of
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each amendment hereto (including each Certificate of Designation
and Certificate of Termination), shall be kept at the office of
the Trust where it may be inspected by any Shareholder, and one
copy of each such instrument shall be filed with the Secretary of
The Commonwealth of Massachusetts, as well as with any other
governmental office where such filing may from time to time be
required by the laws of Massachusetts. A restated Declaration,
integrating into a single instrument all of the provisions of
this Declaration which are then in effect and operative, may be
executed from time to time by a Majority of the Trustees and
shall, upon filing with the Secretary of The Commonwealth of
Massachusetts, be conclusive evidence of all amendments contained
therein and may thereafter be referred to in lieu of the original
Declaration and the various amendments thereto.
ARTICLE 10
MISCELLANEOUS
SECTION 10.1 Governing Law. This Declaration of Trust is
executed and delivered in The Commonwealth of Massachusetts and
with reference to the laws thereof, and the rights of all parties
and the construction and effect of every provision hereof shall
be subject to and construed according to the laws of said
Commonwealth.
SECTION 10.2 Counterparts. This Declaration of Trust and
any amendment thereto may be simultaneously executed in several
counterparts, each of which so executed shall be deemed to be an
original, and such counterparts, together, shall constitute but
one and the same instrument, which shall be sufficiently
evidenced by any such original counterpart.
SECTION 10.3 Reliance by Third Parties. Any certificate
executed by an individual who, according to the records in the
office of the Secretary of The Commonwealth of Massachusetts
appears to be a Trustee hereunder, certifying to: (a) the number
or identity of Trustees or Shareholders, (b) the due
authorization of the execution of any instrument or writing, (c)
the form of any vote passed as a meeting of Trustees or
Shareholders, (d) the fact that the number of Trustees or
Shareholders present at any meeting or executing any written
instrument satisfies the requirements of this Declaration of
Trust, (e) the form of any By Law adopted, or the identity of any
officers elected, by the Trustees, or (f) the existence or non-
existence of any fact or facts which in any manner relate to the
affairs of the Trust, shall be conclusive evidence as to the
matters so certified in favor of any Person dealing with the
Trustees, or any of them, and the successors of such Person.
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SECTION 10.4 References; Headings. The masculine gender
shall include the feminine and neuter genders. Headings are
placed herein for convenience of reference only and shall not be
taken as a part of this Declaration or control or affect the
meaning, construction or effect hereof.
SECTION 10.5 Use of the Names "AFD" and "Alliance".
Alliance Capital Management Corporation ("Alliance") has
consented to the use by the Trust of the identifying names "AFD"
and "Alliance", each of which is a property right of Alliance.
The Trust will only use the names "AFD" and/or "Alliance" as a
component of its name and for no other purpose, and will not
purport to grant to any third party the right to use the names
"AFD" and/or "Alliance" for any purpose. Alliance or any
corporate affiliate of Alliance may use or grant to others the
right to use the names "AFD" and/or "Alliance", as all or a
portion of a corporate or business name or for any commercial
purpose, including a grant of such right to any other investment
company. At the request of Alliance, the Trust will take such
action as may be required to provide its consent to the use of
such name by Alliance, or any corporate affiliate of Alliance, or
by any Person to whom Alliance or an affiliate of Alliance shall
have granted the right to the use of the names "AFD" and/or
"Alliance". Upon the termination of any investment advisory or
management agreement into which Alliance and the Trust may enter,
the Trust shall, upon request by Alliance, cease to use the names
"AFD" and/or "Alliance" as a component of its name, and shall not
use such name or initials as a part of its name or for any other
commercial purpose, and shall cause its officers and Trustees to
take any and all actions which Alliance may request to effect the
foregoing and to reconvey to Alliance or such corporate affiliate
any and all rights to such name.
IN WITNESS WHEREOF, the undersigned has hereunto set his
hand and seal, for himself and his assigns, and has thereby
accepted the Trusteeship as the Initial Trustee of AFD Exchange
Reserves hereby granted and agreed to the provisions hereof, all
as of the day and year first above written.
/s/ Thomas E. Weesner
__________________________
Thomas E. Weesner
48
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The undersigned Settlor of AFD Exchange Reserves, hereby
accepts, approves and authorizes the foregoing Agreement and
Declaration of Trust of AFD Exchange Reserves.
Dated: January 14, 1994
/s/ Kathleen M. Miskiewicz
__________________________
Kathleen M. Miskiewicz
49
<PAGE>
ACKNOWLEDGMENTS
M A S S A C H U S E T T S
Suffolk, ss.: January 14, 1994
Then personally appeared the above named Thomas E.
Weesner and acknowledged the foregoing instrument to be his free
act and deed.
Before me,
/s/ Linda M. Rose
___________________
Notary Public
MY COMMISSION EXPIRES
DECEMBER 16, 1939
M A S S A C H U S E T T S
Suffolk, ss.: January 14, 1994
Then personally appeared the above named Kathleen M.
Miskiewicz and acknowledged the foregoing instrument to be her
free act and deed.
Before me,
/s/ Linda M. Rose
________________________
Notary Public
50
00250163.AM0
<PAGE>
AFD EXCHANGE RESERVES
By-Laws
<PAGE>
AFD EXCHANGE RESERVES
By-Laws
Index
Page No
RECITALS . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 1 - SHAREHOLDERS AND SHAREHOLDERS'
MEETINGS . . . . . . . . . . . . . . . 1
Section 1.1 Meetings. . . . . . . . . . . . . . . . 1
Section 1.2 Presiding Officer; Secretary. . . . . . 1
Section 1.3 Authority of Chairman of Meeting
to Interpret Declaration and By-Laws . 1
Section 1.4 Voting; Quorum. . . . . . . . . . . . . 2
Section 1.5 Inspectors. . . . . . . . . . . . . . . 2
Section 1.6 Shareholders' Action in Writing . . . . 2
ARTICLE 2 - TRUSTEES AND TRUSTEES' MEETINGS. . . . . 2
Section 2.1 Number of Trustees. . . . . . . . . . . 2
Section 2.2 Regular Meetings of Trustees. . . . . . 2
Section 2.3 Special Meetings of Trustees. . . . . . 3
Section 2.4 Notice of Meetings. . . . . . . . . . . 3
Section 2.5 Quorum . . . . . . . . . . . . . . . . 3
Section 2.6 Participation by Telephone. . . . . . . 3
Section 2.7 Location of Meetings . . . . . . . . . 3
Section 2.8 Votes . . . . . . . . . . . . . . . . . 4
Section 2.9 Rulings of Chairman . . . . . . . . . . 4
Section 2.10 Trustees Action in Writing. . . . . . 4
Section 2.11 Resignations . . . . . . . . . . . . . 4
ARTICLE 3 - OFFICERS . . . . . . . . . . . . . . . . 4
(i)
<PAGE>
Section 3.1 Officers of the Trust . . . . . . . . . 4
Section 3.2 Time and Terms of Election. . . . . . . 4
Section 3.3 Resignation and Removal . . . . . . . . 4
Section 3.4 Fidelity Bond . . . . . . . . . . . . . 5
Section 3.5 Chairman of the Trustees . . . . . . . 5
Section 3.6 Vice Chairmen . . . . . . . . . . . . . 5
Section 3.7 President . . . . . . . . . . . . . . . 5
Section 3.8 Vice Presidents . . . . . . . . . . . . 5
Section 3.9 Treasurer and Assistant Treasurers. . . 6
Section 3.10 Controller and Assistant Controllers . 6
Section 3.11 Secretary and Assistant Secretaries . 6
Section 3.12 Substitutions . . . . . . . . . . . . 7
Section 3.13 Execution of Deeds, etc. . . . . . . . 7
Section 3.14 Power to Vote Securities . . . . . . . 7
ARTICLE 4 - COMMITTEES . . . . . . . . . . . . . . . 7
Section 4.1 Power of Trustees to Designate
Committees . . . . . . . . . . . . . . . . 7
Section 4.2 Rules for Conduct of Committee Affairs. 8
Section 4.3 Trustees May Alter, Abolish, etc.,
Committees . . . . . . . . . . . . . . . . . . . 8
Section 4.4 Minutes; Review by Trustees. . . . . . . 8
ARTICLE 5 - SEAL . . . . . . . . . . . . . . . . . . 8
ARTICLE 6 - SHARES . . . . . . . . . . . . . . . . . 8
Section 6.1 Issuance of Shares. . . . . . . . . . . 8
Section 6.2 Uncertificated Shares . . . . . . . . . 8
Section 6.3 Share Certificates . . . . . . . . . . 9
Section 6.4 Lost, Stolen, etc., Certificates . . . 9
(ii)
<PAGE>
Section 6.5 Record Transfer of Pledged Shares . . . 9
ARTICLE 7 - CUSTODIAN . . . . . . . . . . . . . . . 10
ARTICLE 8 - AMENDMENTS . . . . . . . . . . . . . . . 10
Section 8.1 By-Laws Subject to Amendment. . . . . . 10
Section 8.2 Notice of Proposal to Amend
By-Laws Required. . . . . . . . . . . . 10
(iii)
<PAGE>
AFD EXCHANGE RESERVES
BY-LAWS
These Articles are the By-Laws of AFD Exchange Reserves,
a trust with transferable shares established under the laws of
The Commonwealth of Massachusetts (the "Trust"), pursuant to an
Agreement and Declaration of Trust of the Trust (the
"Declaration") made the 18th day of January, 1994, and filed in
the office of the Secretary of the Commonwealth. These By-Laws
have been adopted by the Trustees pursuant to the authority
granted by Section 3.1 of the Declaration.
All words and terms capitalized in these By-Laws, unless
otherwise defined herein, shall have the same meanings as they
have in the Declaration.
ARTICLE 1
SHAREHOLDERS AND SHAREHOLDERS' MEETINGS
SECTION 1.1. Meetings. A meeting of the Shareholders of
the Trust shall be held whenever called by the Trustees and
whenever election of a Trustee or Trustees by Shareholders is
required by the provisions of the 1940 Act. Meetings of
Shareholders shall also be called by the Trustees when requested
in writing by Shareholders holding at least ten percent (10%) of
the Shares then outstanding for the purpose of voting upon
removal of any Trustee, or if the Trustees shall fail to call or
give notice of any such meeting of Shareholders for a period of
thirty (30) days after such application, then Shareholders
holding at least ten percent (10%) of the Shares then outstanding
may call and give notice of such meeting. Notice of Shareholders'
meetings shall be given as provided in the Declaration.
SECTION 1.2. Presiding Officer; Secretary. The Chairman
of the Trustees, or in his absence the Vice Chairman or Chairmen,
if any, in the order of their seniority or as the Trustees shall
otherwise determine, and in the absence of the Chairman and all
Vice Chairmen, if any, the President, shall preside at each
Shareholders' meeting as chairman of the meeting, or in the
absence of the Chairman, all Vice Chairmen and the President, the
Trustees present at the meeting shall elect one of their number
as chairman of the meeting. Unless otherwise provided for by the
Trustees, the Secretary of the Trust shall be the secretary of
all meetings of Shareholders and shall record the minutes
thereof.
SECTION 1.3. Authority of Chairman of Meeting to
Interpret Declaration and By-Laws. At any Shareholders, meeting
the chairman of the meeting shall be empowered to determine the
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construction or interpretation of the Declaration or these By-
Laws, or any part thereof or hereof, and his ruling shall be
final.
SECTION 1.4. Voting; Quorum. At each meeting of
Shareholders, except as otherwise provided by the Declaration,
every holder of record of Shares entitled to vote shall be
entitled to a number of votes equal to the number of Shares
standing in his name on the Share register of the Trust.
Shareholders may vote by proxy and the form of any such proxy may
be prescribed from time to time by the Trustees. A quorum shall
exist if the holders of a majority of the outstanding Shares of
the Trust entitled to vote without regard to Series are present
in person or by proxy, but any lesser number shall be sufficient
for adjournments. At all meetings of the Shareholders, votes
shall be taken by ballot for all matters which may be binding
upon the Trustees pursuant to Section 7.1 of the Declaration. On
other matters, votes of Shareholders need not be taken by ballot
unless otherwise provided for by the Declaration or by vote of
the Trustees, or as required by the 1940 Act, but the chairman of
the meeting may in his discretion authorize any matter to be
voted upon by ballot.
SECTION 1.5. Inspectors. At any meeting of Shareholders,
the chairman of the meeting may appoint one or more Inspectors of
Election or Balloting to supervise the voting at such meeting or
any adjournment thereof. If Inspectors are not so appointed, the
chairman of the meeting may, and on the request of any
Shareholder present or represented and entitled to vote shall,
appoint one or more Inspectors for such purpose. Each Inspector,
before entering upon the discharge of his duties, shall take and
sign an oath faithfully to execute the duties of Inspector of
Election or Balloting, as the case may be, at such meeting with
strict impartiality and according to the best of his ability. If
appointed, Inspectors shall take charge of the polls and, when
the vote is completed, shall make a certificate of the result of
the vote taken and of such other facts as may be required by law
SECTION 1.6. Shareholders' Action in Writing. Nothing in
this Article 1 shall limit the power of the Shareholders to take
any action by means of written instruments without a meeting, as
permitted by Section 7.6 of the Declaration.
ARTICLE 2
TRUSTEES AND TRUSTEES' MEETINGS
SECTION 2.1. Number of Trustees. There shall initially
be one (1) Trustee, and the number of Trustees shall thereafter
be such number, authorized by the Declaration, as from time to
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<PAGE>
time shall be fixed by a vote adopted by a Majority of the
Trustees.
SECTION 2.2. Regular Meetings of Trustees. Regular
meetings of the Trustees may be held without call or notice at
such places and at such times as the Trustees may from time to
time determine; provided, that notice of such determination, and
of the time, place and purposes of the first regular meeting
thereafter, shall be given to each absent Trustee in accordance
with Section 2.4 hereof.
SECTION 2.3. Special Meetings of Trustees. Special
meetings of the Trustees may be held at any time and at any place
when called by the Chairman of the Trustees, any Vice Chairman,
the President or the Treasurer or by two (2) or more Trustees, or
if there shall be fewer than three (3) Trustees, by any Trustee;
provided, that notice of the time, place and purposes thereof is
given to each Trustee in accordance with Section 2.4 hereof by
the Secretary or an Assistant Secretary or by the officer or the
Trustees-calling the meeting.
SECTION 2.4. Notice of Meetings. Notice of any regular
or special meeting of the Trustees shall be sufficient if given
in writing to each Trustee, and if sent by mail at least five (5)
days, or by telegram, Federal Express or other similar delivery
service at least twenty-four (24) hours, before the meeting, ad-
dressed to his usual or last known business or residence address,
or if delivered to him in person at least twenty-four (24) hours
before the meeting. Notice of a special meeting need not be given
to any Trustee who was present at an earlier meeting, not more
than thirty-one (31) days prior to the subsequent meeting, at
which the subsequent meeting was called. Notice of a meeting may
be waived by any Trustee by written waiver of notice, executed by
him before or after the meeting, and such waiver shall be filed
with the records of the meeting Attendance by a Trustee at a
meeting shall constitute a waiver of notice, except where a
Trustee attends a meeting for the purpose of protesting prior
thereto or at its commencement the lack of notice
SECTION 2.5. Quorum; Presiding Officer. At any meeting
of the Trustees, a Majority of the Trustees shall constitute a
quorum. Any meeting may be adjourned from time to time by a
majority of the votes cast upon the question, whether or not a
quorum is present, and the meeting may be held as adjourned
without further notice. Unless the Trustees shall otherwise
elect, generally or in a particular case, the Chairman of the
Trustees, or in his absence the Vice Chairman or Vice Chairmen,
if any, in the order of their seniority or as the Trustees shall
otherwise determine, or in the absence of the Chairman and all
Vice Chairmen, if any, the President, shall preside at each
meeting of the Trustees as chairman of the meeting.
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SECTION 2.6. Participation by Telephone. One or more of
the Trustees may participate in a meeting thereof or of any
Committee of the Trustees by means of a conference telephone or
similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time.
Participation by such means shall constitute presence in person
at a meeting.
SECTION 2.7. Location of Meetings. Trustees' meetings
may be held at any place, within or without Massachusetts.
SECTION 2.8. Votes. voting at Trustees' meetings may be
conducted orally, by show of hands or, if requested by any
Trustee, by written ballot. The results of all voting shall be
recorded by the Secretary in the minute book.
SECTION 2.9. Rulings of Chairman. All other rules of
conduct adopted and used at any Trustees' meeting shall be
determined by the chairman of such meeting, whose ruling on all
procedural matters shall be final.
SECTION 2.10. Trustees' Action in Writing. Nothing in
this Article 2 shall limit the power of the Trustees to take
action by means of a written instrument without a meeting, as
provided in Section 4.2 of the Declaration.
SECTION 2.11. Resignations. Any Trustee may resign at
any time by written instrument signed by him and delivered to the
Chairman, the President or the Secretary or to a meeting of the
Trustees. Such resignation shall be effective upon receipt unless
specified to be effective at some other time.
ARTICLE 3
OFFICERS
SECTION 3.1. Officers of the Trust. The officers of the
Trust shall consist of a Chairman of the Trustees, a President, a
Treasurer and a Secretary, and may include one or more Vice
Chairmen, Vice Presidents, Assistant Treasurers and Assistant
Secretaries, and such other officers as the Trustees may
designate. Any person may hold more than one office. Except for
the Chairman and any Vice Chairmen, no officer need be a Trustee.
SECTION 3.2. Time and Terms of Election. The Chairman,
the President, the Treasurer and the Secretary shall be elected
by the Trustees at their first meeting and thereafter at the
annual meeting of the Trustees, as provided in Section 4.2 of the
Declaration. Such officers shall hold office until the next
annual meeting of the Trustees and until their successors shall
have been duly elected and qualified, and may be removed at any
4
<PAGE>
meeting by the affirmative vote of a Majority of the Trustees.
All other officers of the Trust may be elected or appointed at
any meeting of the Trustees. Such officers shall hold office for
any term, or indefinitely, as determined by the Trustees, and
shall be subject to removal, with or without cause, at any time
by the Trustees.
SECTION 3.3. Resignation and Removal. Any officer may
resign at any time by giving written notice to the Trustees. Such
resignation shall take effect at the time specified therein, and,
unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective. If the
office of any officer or agent becomes vacant by reason of death,
resignation, retirement, disqualification, removal from office or
otherwise, the Trustees may choose a successor, who shall hold
office for the unexpired term in respect of which such "vacancy
occurred. Except to the extent expressly provided in a written
agreement with the Trust, no officer resigning or removed shall
have any right to any compensation for any period following such
resignation or removal, or any right to damage on account of such
removal.
SECTION 3.4. Fidelity Bond. The Trustees may, in their
discretion, direct any officer appointed by them to furnish at
the expense of the Trust a fidelity bond approved by the
Trustees, in such amount as the Trustees may prescribe.
SECTION 3.5. Chairman of the Trustees. Unless the
Trustees otherwise provide, the Chairman of the Trustees shall
preside at all meetings of the Shareholders and of the Trustees.
The Chairman, subject to the supervision of the Trustees, shall
have general charge and supervision of the business, property and
affairs of the Trust and such other powers and duties as the
Trustees may prescribe, and unless otherwise provided by law, the
Declaration, these By-Laws or specific vote of the Trustees,
shall have and may exercise all of the powers given to the
Trustees by the Declaration and by these By-Laws.
SECTION 3.6. Vice Chairmen. If the Trustees shall elect
one or more Vice Chairmen, the Vice Chairman or if there shall be
more than one, such Vice Chairmen in the order of their seniority
or as otherwise designated by the Trustees, shall preside at
meetings of the Shareholders and of the Trustees, and shall
exercise such other powers and duties of the Chairman as the
Trustees shall determine.
SECTION 3.7. President. The President shall be the chief
administrative officer of the Trust and, subject to the
supervision of the Chairman, shall have general charge of the
operations of the Trust and general supervision of the personnel
of the Trust, and such other powers and duties as the Trustees or
5
<PAGE>
the Chairman shall prescribe. In the absence or disability of the
Chairman, the President shall exercise the powers and duties of
the Chairman, except to the extent that the Trustees shall have
delegated such powers and duties to the Vice Chairman or
Chairmen, and except that he shall not preside at meetings of the
Trustees if he is not himself a Trustee.
SECTION 3.8. Vice Presidents. In the absence or
disability of the President, the Vice President or, if there
shall be more than one, the Vice Presidents in the order of their
seniority or as otherwise designated by the Trustees, shall
exercise all of the powers and duties of the President. The Vice
Presidents shall have the power to execute bonds, notes,
mortgages and other contracts, agreements and instruments in the
name of the Trust, and shall do and perform such other duties as
the Trustees, the Chairman or the President shall direct.
SECTION 3.9. Treasurer and Assistant Treasurers. The
Treasurer shall be the chief financial officer of the Trust, and
shall have the custody of the Trust's funds and Securities, and
shall keep-full and accurate accounts of receipts and
disbursements in books belonging to the Trust and shall deposit
all moneys, and other valuable effects in the name and to the
credit of the Trust, in such depositories as may be designated by
the Trustees, taking proper vouchers for such disbursements,
shall have such other duties and powers as may be prescribed from
time to time by the Trustees or the Chairman, and shall render to
the Trustees, whenever they may require it, an account of all his
transactions as Treasurer and of the financial condition of the
Trust. If no Controller is elected, the Treasurer shall also have
the duties and powers of the Controller, as provided in these By-
Laws. Any Assistant Treasurer shall have such duties and powers
as shall be prescribed from time to time by the Trustees or the
Treasurer, and shall be responsible to and shall report to the
Treasurer. In the absence or disability of the Treasurer, the
Assistant Treasurer or, if there shall be more than one, the
Assistant Treasurers in the order of their seniority or as
otherwise designated by the Trustees or the Chairman, shall have
the powers and duties of the Treasurer.
SECTION 3.10. Controller and Assistant Controllers. If a
Controller is elected, he shall be the chief accounting officer
of the Trust and shall be in charge of its books of account and
accounting records and of its accounting procedures, and shall
have such duties and powers as are commonly incident to the
office of a controller, and such other duties and powers as may
be prescribed from time to time by the Trustees. The Controller
shall be responsible to and shall report to the Trustees, but in
the ordinary conduct of the Trust's business, shall be under the
supervision of the Treasurer. Any Assistant Controller shall have
such duties and powers as shall be prescribed from time to time
6
<PAGE>
by the Trustees or the Controller, and shall be responsible to
and shall report to the Controller. In the absence or disability
of the Controller, the Assistant Controller or, if there shall be
more than one, the Assistant Controllers in the order of their
seniority or as otherwise designated by the Trustees or the
Chairman, shall have the powers and duties of the Controller.
SECTION 3.11. Secretary and Assistant Secretaries. The
Secretary shall, if and to the extent requested by the Trustees,
attend all meetings of the Trustees, any Committee of the
Trustees and/or the Shareholders and record all votes and the
minutes of proceedings in a book to be kept for that purpose,
shall give or cause to be given notice of all meetings of the
Trustees, any Committee of the Trustees, and of the Shareholders
and shall perform such other duties as may be prescribed by the
Trustees. The Secretary, or in his absence any Assistant
Secretary, shall affix the Trust's seal to any instrument
requiring it, and when so affixed, it shall be attested by the
signature of the Secretary or an Assistant Secretary. The
Secretary shall be the custodian of the Share records and all
other books, records and papers of the Trust (other than
financial) and shall see that all books, reports, statements,
certificates and other documents and records required by law are
properly kept and filed. In the absence or disability of the
Secretary, the Assistant Secretary or, if there shall be more
than one, the Assistant Secretaries in the order of their
seniority or as otherwise designated by the Trustees or the
Chairman, shall have the powers and duties of the Secretary.
SECTION 3.12. Substitutions. In case of the absence or
disability of any officer of the Trust, or for any other reason
that the Trustees may deem sufficient, the Trustees may delegate
for the time being the powers or duties, or any of them, of such
officer to any other officer, or to any Trustee.
SECTION 3.13. Execution of Deeds, etc. Except as the
Trustees may generally or in particular cases otherwise authorize
or direct, all deeds, leases, transfers, contracts, proposals,
bonds, notes, checks, drafts and other obligations made, accepted
or endorsed by the Trust shall be signed or endorsed on behalf of
the Trust by the Chairman, the President, one of the Vice
Presidents or the Treasurer.
SECTION 3.14. Power to Vote Securities. Unless otherwise
ordered by the Trustees, the Treasurer and the Secretary each
shall have full power and authority on behalf of the Trust to
give proxies for and/or to attend and to act and to vote at any
meeting of stockholders of any corporation in which the Trust may
hold stock, and at any such meeting the Treasurer or the
Secretary, as the case may be, his proxy shall possess and may
exercise any and all rights and powers incident to the ownership
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of such stock which, as the owner thereof, the Trust might have
possessed and exercised if present. The Trustees, by resolution
from time to time, or, in the absence thereof, either the
Treasurer or the Secretary, may confer like powers upon any other
person or persons as attorneys and proxies of the Trust.
ARTICLE 4
COMMITTEES
SECTION 4.1. Power of Trustees to Designate Committees.
The Trustees, by vote of a Majority of the Trustees, may elect
from their number an Executive Committee and any other Committees
and may delegate thereto some or all of their powers except those
which by law, by the Declaration or by these By-Laws may not be
delegated; provided, that the Executive Committee shall not be
empowered to elect the Chairman of the Trustees, the President,
the Treasurer or the Secretary', to amend the By-Laws, to
exercise the powers of the Trustees under this Section 4.1 or
under Section 4.3 hereof, or to perform any act for which the
action of a Majority of the Trustees is required by law, by the
Declaration or by these By-Laws. The members off any such
Committee shall serve at the pleasure of the Trustees.
SECTION 4.2. Rules for Conduct of Committee Affairs.
Except as otherwise provided by the trustees, each Committee
elected or appointed pursuant to this Article 4 may adopt such
standing rules and regulations for the conduct of its affairs as
it may deem desirable, subject to review and approval of such
rules and regulations by the Trustees at the next succeeding
meeting of the Trustees, but in the absence of any such action or
any contrary provisions by the Trustees, the business of each
Committee shall be conducted, so far as practicable, in the same
manner as provided herein and in the Declaration for the
Trustees.
SECTION 4.3. Trustees May Alter, Abolish, etc.,
Committees. The Trustees may at any time alter or abolish any
Committee, change the membership of any Committee, or revoke,
rescind or modify any action of any Committee or the authority of
any Committee with respect to any matter or class of matters;
provided, that no such action shall impair the rights of any
third parties.
SECTION 4.4. Minutes; Review by Trustees. Any Committee
to which the Trustees delegate any of their powers or duties
shall keep records of its meetings and shall report its actions
to the Trustees.
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ARTICLE 5
SEAL
The seal of the Trust shall consist of a flat-faced
circular die with the word "Massachusetts", together with the
name of the Trust, the words "Trust Seal", and the year of its
organization cut or engraved thereon, but, unless otherwise
required by the Trustees, the seal shall not be necessary to be
placed on, and its absence shall not impair the validity of, any
document, instrument or other paper executed and delivered by or
on behalf of the Trust.
ARTICLE 6
SHARES
SECTION 6.1. Issuance of Shares. The Trustees may issue
Shares of any or all Series either in certificated or
uncertificated form, they may issue certificates to the holders
of Shares of a Series which was originally issued in
uncertificated form, and if they have issued Shares of any Series
in certificated form, they may at any time discontinue the
issuance of Share certificates for such Series and may, by
written notice to such Shareholders of such Series require the
surrender of their Share certificates to the Trust for
cancellation, which surrender and cancellation shall not affect
the ownership of Shares for such Series.
SECTION 6.2. Uncertificated Shares. For any Series of
Shares for which the Trustees issue Shares without certificates,
the Trust or the Transfer Agent may either issue receipts
therefor or may keep accounts upon the books of the Trust for the
record holders of such Shares, who shall in either case be
deemed, for all purposes hereunder, to be the holders of such
Shares as if they had received certificates therefor and shall be
held to have expressly assented and agreed to the terms hereof
and of the Declaration.
SECTION 6.3. Share Certificates. For any Series of
Shares for which the Trustees shall issue Share certificates,
each Shareholder of such Series shall be entitled to a
certificate stating the number of Shares owned by him in such
form as shall be prescribed from time to time by the Trustees.
Such certificate shall be signed by the Chairman or a Vice
Chairman, or the President or a Vice-President, and by the
Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary of the Trust. Such signatures may be
facsimiles if the certificate is countersigned by a Transfer
Agent, or by a Registrar, other than a Trustee, officer or
employee of the Trust. In case any officer who has signed or
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whose facsimile signature has been placed on such certificate
shall cease to be such officer before such certificate is issued,
it may be issued by the Trust with the same effect as if he were
such officer at the time of its issue.
SECTION 6.4. Lost, Stolen, etc., Certificates. If any
certificate for certificated Shares shall be lost, stolen,
destroyed or mutilated, the Trustees may authorize the issuance
of a new certificate of the same tenor and for the same number of
Shares in lieu thereof. The Trustees shall require the surrender
of any mutilated certificate in respect of which a new
certificate is issued, and may, in their discretion, before the
issuance of a new certificate, require the owner of a lost,
stolen or destroyed certificate, or the owner's legal
representative, to make an affidavit or affirmation setting forth
such facts as to the loss, theft or destruction as they deem
necessary, and to give the Trust a bond in such reasonable sum as
the Trustees direct, in order to indemnify the Trust.
SECTION 6.5. Record Transfer of Pledged Shares. A
pledgee of Shares pledged as collateral security shall be
entitled to a new certificate in his name as pledgee, in the case
of certificated Shares, or to be registered as the holder in
pledge of such Shares in the case of uncertificated Shares;
provided, that the instrument of pledge substantially describes
the debt or duty that is intended to be secured thereby. Any such
new certificate shall express on its face that it is held as
collateral security, and the name of the pledgor shall be stated
thereon, and any such registration of uncertificated Shares shall
be in a form which indicates that the registered holder holds
such Shares in pledge. After such issue or registration, and
unless and until such pledge is released, such pledgee and his
successors and assigns shall alone be entitled to the rights of a
Shareholder, and entitled to vote such Shares.
ARTICLE 7
CUSTODIAN
The Trust shall at all times employ a bank or trust
company having a capital, surplus and undivided profits of at
least Two Million Dollars ($2,000,000) as Custodian of the
capital assets of the Trust. The Custodian shall be compensated
for its services by the Trust upon such basis as shall be agreed
upon from time to time between the Trust and the Custodian.
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ARTICLE 8
AMENDMENTS
SECTION 8.1. By-Laws Subject to Amendment. These By-Laws
may be altered, amended or repealed, in whole or in part, at any
time by vote of the holders of a majority of the Shares (or when-
ever there shall be more than one Series of Shares, of the
holders of a majority of the Shares of each Series) issued,
outstanding and entitled to vote. The Trustees, by vote of a
Majority of the Trustees, may alter, amend or repeal these By-
Laws, in whole or in part, including By-Laws adopted by the
Shareholders, except with respect to any provision hereof which
by law, the Declaration or these By-Laws requires action by the
Shareholders. By-Laws adopted by the Trustees may be altered,
amended or repealed by the Shareholders.
SECTION 8.2. Notice of Proposal to Amend By-Laws
Required. No proposal to amend or repeal these By-Laws or to
adopt new By-Laws shall be acted upon at a meeting unless either
(i) such proposal is stated in the notice or in the waiver of
notice, as the case may be, of the meeting of the Trustees or
Shareholders at which such action is taken, or (ii) all of the
Trustees or Shareholders, as the case may be, are present at such
meeting and all agree to consider such proposal without
protesting the lack of notice.
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00250163.AM1
<PAGE>
ADVISORY AGREEMENT
AFD EXCHANGE RESERVES
1345 Avenue of the Americas
New York, New York 10105
March 23, 1994
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105
Dear Sirs:
We herewith agree with you as follows:
1. We are an open-end, diversified management
investment company registered under the Investment Company Act of
1940 (the "Act"). We are currently authorized to issue three
classes of shares and our Trustees are authorized to reclassify
and issue any unissued shares to any number of additional classes
or series (Portfolios) each having its own investment objective,
policies and restrictions, all as more fully described in the
Prospectus and Statement of Additional Information constituting a
part of the Registration Statement filed on our behalf under the
Securities Act of 1933 and the Act ("Registration Statement").
We are engaged in the business of investing and reinvesting our
assets in securities of the type and in accordance with the
limitations specified in our Agreement and Declaration of Trust
("Declaration of Trust"), By-Laws, Registration Statement, and
any representations made in our Prospectus and Statement of
Additional Information, all in such manner and to such extent as
may from time to time be authorized by our Trustees. We enclose
copies of the documents listed above and will from time to time
furnish you with any amendments thereof.
2. (a) We hereby employ you to manage the
investment and reinvestment of the assets in each of our
Portfolios as above specified, and, without limiting the
generality of the foregoing, to provide management and other
services specified below.
<PAGE>
(b) You will make decisions with respect to
all purchases and sales of securities in each of our Portfolios.
To carry out such decisions, you are hereby authorized, as our
agent and attorney in fact, for our account and at our risk and
in our name, to place orders for the investment and reinvestment
of our assets. In all purchases, sales and other transactions in
securities in each of our Portfolios you are authorized to
exercise full discretion and act for us in the same manner and
with the same force and effect as we might or could do with
respect to such purchases, sales or other transactions, as well
as with respect to all other things necessary or incidental to
the furtherance or conduct of such purchases, sales or other
transactions.
(c) You will report to our Trustees at each
meeting thereof all changes in each Portfolio since the prior
report, and will also inform us of important developments
affecting any Portfolio and on your own initiative will furnish
us from time to time with such information as you may believe
appropriate for this purpose, whether concerning the individual
banks or other companies whose securities are included in our
Portfolios, the banking or other industries in which they engage,
or the conditions prevailing in the money market or the economy
generally. You will also furnish us with such statistical and
analytical information with respect to securities in each of our
Portfolios as you may believe appropriate or as we reasonably may
request. In making such purchases and sales of securities in
each of our Portfolios, you will bear in mind the policies set
from time to time by our Trustees as well as the limitations
imposed by our Declaration of Trust and in our Registration
Statement, the limitations in the Act and of the Internal Revenue
Code in respect of regulated investment companies and the
investment objective, policies and restrictions for each of our
Portfolios.
(d) It is understood that you will from time
to time employ or associate with yourselves such persons as you
believe to be particularly fitted to assist you in the execution
of your duties hereunder, the cost of performance of such duties
to be borne and paid by you. No obligation may be incurred on
our behalf in any such respect. During the continuance of this
agreement at our request you will provide to us persons
satisfactory to our Trustees to serve as our officers. You or
your affiliates will also provide persons, who may be our
officers, to render such clerical, accounting and other services
to us as we may from time to time request of you. Such personnel
may be employees of you or your affiliates. We will pay to you
or your affiliates the cost of such personnel for rendering such
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services to us at such rates as shall from time to time be agreed
upon between us, provided that all time devoted to the investment
or reinvestment of securities in each of our Portfolios or to the
promotion of the sale of our shares shall be for your account.
Nothing contained herein shall be construed to restrict our right
to hire our own employees or to contract for services to be
performed by third parties. Furthermore, you or your affiliates
(other than us) shall furnish us without charge with such
administrative and management supervision and assistance and such
office facilities as you may believe appropriate or as we may
reasonably request subject to the requirements of any regulatory
authority to which you may be subject. You or your affiliates
(other than us) shall also be responsible for the payment of any
expenses incurred in promoting the sale of our shares (other than
the portion of the promotional expenses to be borne by us in
accordance with an effective plan pursuant to Rule 12b-1 under
the Act and the costs of printing our prospectuses and other
reports to shareholders and fees related to registration with the
Securities and Exchange Commission and with state regulatory
authorities).
3. It is further agreed that you shall be
responsible for the portion of the net expenses of each of our
Portfolios (except interest, taxes, brokerage, fees paid in
accordance with an effective plan pursuant to Rule 12b-1 under
the Act, expenditures which are capitalized in accordance with
generally accepted accounting principles and extraordinary
expenses, all to the extent permitted by applicable state law and
regulation) incurred by us during each of our fiscal years or
portion thereof that this agreement is in effect between us
which, as to a Portfolio, in any such year exceeds the limits
applicable to such Portfolio under the laws or regulations of any
state in which our shares are qualified for sale (reduced pro
rata for any portion of less than a year). We hereby confirm
that, subject to the foregoing, we shall be responsible and
hereby assume the obligation for payment of all our other
expenses, including: (a) payment of the fee payable to you under
paragraph 5 hereof; (b) custody, transfer, and dividend
disbursing expenses; (c) fees of trustees who are not your
affiliated persons; (d) legal and auditing expenses;
(e) clerical, accounting and other office costs; (f) the cost of
personnel providing services to us, as provided in subparagraph
(d) of paragraph 2 above; (g) costs of printing our prospectuses
and shareholder reports; (h) cost of maintaining our existence;
(i) interest charges, taxes, brokerage fees and commissions;
(j) cost of stationery and supplies; (k) expenses and fees
related to registration and filing with the Securities and
Exchange Commission and with state regulatory authorities; and
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(l) such promotional expenses as may be contemplated by an
effective plan pursuant to Rule 12b-1 under the Act; provided,
however, that our payment of such promotional expenses shall be
in the amounts, and in accordance with the procedures, set forth
in such plan.
4. We shall expect of you, and you will give us
the benefit of, your best judgment and efforts in rendering these
services to us, and we agree as an inducement to your undertaking
these services that you shall not be liable hereunder for any
mistake of judgment or in any event whatsoever, except for lack
of good faith, provided that nothing herein shall be deemed to
protect, or purport to protect, you against any liability to us
or to our security holders to which you would otherwise be
subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of your duties hereunder, or by
reason of your reckless disregard of your obligations and duties
hereunder.
5. In consideration of the foregoing we will pay
you a fee for each Portfolio at the annual rate of: .25 of 1% of
the first $1.25 billion of that Portfolio's average daily net
assets; .24 of 1% of the next $.25 billion of such assets; .23 of
1% of the next $.25 billion of such assets; .22 of 1% of the next
$.25 billion of such assets; .21 of 1% of the next $1 billion of
such assets, and; .20 of 1% of such average daily net assets in
excess of $3 billion. Such fee shall be accrued by us daily and
shall be payable in arrears on the last day of each calendar
month for services performed hereunder during such month. Your
reimbursement, if any, of our expenses, as provided in paragraph
3 hereof, shall be estimated and paid to us monthly in arrears,
at the same time as our payment to you for such month.
6. This agreement shall become effective on the
date hereof and shall remain in effect until September 30, 1995
and thereafter for successive twelve-month periods (computed from
each October 1), with respect to each Portfolio provided that
such continuance is specifically approved at least annually by
our Trustees or by majority vote of the holders of the
outstanding voting securities (as defined in the Act) of such
Portfolio, and, in either case, by a majority of our trustees who
are not parties to this agreement or interested persons, as
defined in the Act, of any such party (other than as trustees of
our Trust) provided further, however, that if the continuation of
this agreement is not approved as to a Portfolio, you may
continue to render to such Portfolio the services described
herein in the manner and to the extent permitted by the Act and
the rules and regulations thereunder. Upon the effectiveness of
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this agreement, it shall supersede all previous agreements
between us covering the subject matter hereof. This agreement
may be terminated with respect to any Portfolio at any time,
without the payment of any penalty, by vote of a majority of the
outstanding voting securities (as so defined) of such Portfolio,
or by a vote of a majority of our Trustees on sixty days' written
notice to you, or by you with respect to any Portfolio on sixty
days' written notice to us.
7. This agreement may not be transferred,
assigned, sold or in any manner hypothecated or pledged by you
and this agreement shall terminate automatically in the event of
any such transfer, assignment, sale, hypothecation or pledge by
you. The terms "transfer", "assignment" and "sale" as used in
this paragraph shall have the meanings ascribed thereto by
governing law and any interpretation thereof contained in rules
or regulations promulgated by the Securities and Exchange
Commission thereunder.
8. (a) Except to the extent necessary to perform
your obligations hereunder, nothing herein shall be deemed to
limit or restrict your right, or the right of any of your
employees, officers, or any of the Directors of Alliance Capital
Management Corporation, your general partner, or employees who
may also be a trustee, officer or employee of ours, or persons
otherwise affiliated with us (within the meaning of the Act) to
engage in any other business or devote time and attention to the
management or other aspects of any other business, whether of a
similar or dissimilar nature, or to render services of any kind
to any other trust, corporation, firm, individual or association.
(b) You will notify us of any change in
general partners or your partnership within a reasonable time
after such change.
9. Notice is hereby given that this agreement is
entered into on our behalf by an officer of our Trust in his
capacity as an officer and not individually and that the
obligations of or arising out of this agreement are not binding
upon any of our Trustees, officers, shareholders, employees or
agents individually but are binding only upon the assets and
property of our Trust.
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If the foregoing is in accordance with your
understanding, you will kindly so indicate by signing and
returning to us the enclosed copy hereof.
Very truly yours,
AFD EXCHANGE RESERVES
By /s/ David H. Dievler
_________________________
President
Accepted: As of March 23, 1994
ALLIANCE CAPITAL MANAGEMENT L.P.
By ALLIANCE CAPITAL MANAGEMENT CORPORATION,
General Partner
By /s/ John D. Carifa
__________________________
President
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00250163.AA3
<PAGE>
DISTRIBUTION SERVICES AGREEMENT
AGREEMENT made as of March 23, 1994 between AFD
EXCHANGE RESERVES, a Massachusetts business trust (the "Trust"),
and ALLIANCE FUND DISTRIBUTORS, INC., a Delaware corporation (the
"Underwriter").
WITNESSETH
WHEREAS, the Trust is registered under the
Investment Company Act of 1940, as amended (the "Investment
Company Act"), as a diversified, open-end management investment
company and it is in the interest of the Trust to offer its
shares for sale continuously;
WHEREAS, the Underwriter is a securities firm
engaged in the business of selling shares of investment companies
either directly to purchasers or through other securities
dealers;
WHEREAS, the Trust and the Underwriter wish to
enter into an agreement with each other with respect to the
continuous offering of the Trust's shares in order to promote the
growth of the Trust and facilitate the distribution of its
shares;
NOW, THEREFORE, the parties agree as follows:
SECTION 1. Appointment of the Underwriter. The
Trust hereby appoints the Underwriter as the principal
underwriter and distributor of the Trust to sell to the public
shares of its Class A shares, Class B shares and Class C shares,
the Class A shares, the Class B shares and the Class C shares
being collectively referred to herein as the "shares"). The
Trust hereby agrees during the term of this Agreement to sell
shares to the Underwriter upon the terms and conditions herein
set forth.
SECTION 2. Exclusive Nature of Duties. The
Underwriter shall be the exclusive representative of the Trust to
act as principal underwriter and distributor except that the
rights given under this Agreement to the Underwriter shall not
apply to shares issued in connection with (a) the merger or
consolidation of any other investment company with the Trust,
(b) the Trust's acquisition by purchase or otherwise of all or
substantially all of the assets or stock of any other investment
company or (c) the reinvestment in shares by the Trust's
shareholders of dividends or other distributions.
<PAGE>
SECTION 3. Purchase of Shares from the Trust.
(a) The Underwriter shall have the right to buy
from the Trust the shares needed to fill unconditional orders for
shares of the Trust placed with the Underwriter by investors or
securities dealers, depository institutions or other financial
intermediaries acting as agent for their customers. The price
which the Underwriter shall pay for the shares so purchased from
the Trust shall be the net asset value, determined as set forth
in Section 3(d) hereof, used in determining the public offering
price on which such orders are based.
(b) The shares so purchased are to be resold by
the Underwriter to investors at a public offering price, as set
forth in Section 3(c) hereof, or to securities dealers,
depository institutions or other financial intermediaries acting
as agent for their customers having agreements with the
Underwriter upon the terms and conditions set forth in Section 8
hereof.
(c) The public offering price of the shares, i.e.,
the price per share at which the Underwriter or selected dealers
or selected agents (each as defined in Section 8(a) below) may
sell shares to the public, shall be the public offering price
determined in accordance with the then current Prospectus and
Statement of Additional Information of the Trust (the
"Prospectus" and "Statement of Additional Information,"
respectively) under the Securities Act of 1933, as amended (the
"Securities Act"), relating to such shares, but not to exceed the
net asset value at which the Underwriter is to purchase such
shares. All payments to the Fund hereunder shall be made in the
manner set forth in Section 3(f) hereof.
(d) The net asset value of shares of the Trust
shall be determined by the Trust, or any agent of the Trust, as
of the close of regular trading on the New York Stock Exchange on
each Trust business day in accordance with the method set forth
in the Prospectus and Statements of Additional Information and
guidelines established by the Trustees of the Trust.
(e) The Trust reserves the right to suspend the
offering of its shares at any time in the absolute discretion of
its Trustees.
(f) The Trust, or any agent of the Trust
designated in writing to the Underwriter by the Trust, shall be
promptly advised by the Underwriter of all purchase orders for
shares received by the Underwriter. Any order may be rejected by
the Trust; provided, however, that the Trust will not arbitrarily
or without reasonable cause refuse to accept or confirm orders
for the purchase of shares. The Trust (or its agent) will
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<PAGE>
confirm orders upon their receipt, will make appropriate book
entries and upon receipt by the Trust (or its agent) of payment
thereof, will deliver deposit receipts or certificates for such
shares pursuant to the instructions of the Underwriter. The
Underwriter agrees to cause such instructions to be delivered
promptly to the Trust (or its agent).
SECTION 4. Repurchase or Redemption of
Shares by the Trust.
(a) Any of the outstanding shares may be tendered
for redemption at any time, and the Trust agrees to redeem or
repurchase the shares so tendered in accordance with its
obligations as set forth in Section 6.2 of Article 6 of its
Agreement and Declaration of Trust and in accordance with the
applicable provisions set forth in the relevant Prospectus and
Statement of Additional Information. The price to be paid to
redeem or repurchase the shares shall be equal to the net asset
value calculated in accordance with the provisions of
Section 3(d) hereof less, in the case of Class B shares, a
deferred sales charge equal to a specified percentage or
percentages of the net asset value of the Class B shares or their
cost, whichever is less. Class B shares that have been
outstanding for a specified period of time may be redeemed
without payment of a deferred sales charge as from time to time
set forth in the relevant Prospectus. All payments by the Trust
hereunder shall be made in the manner set forth below. The
redemption or repurchase by the Trust of any of the Class A
shares will not affect the sales charge secured by the
Underwriter or any selected dealer or compensation paid to any
selected agent (unless such selected dealer or selected agent has
otherwise agreed with the Underwriter), in the course of the sale
to such Class A shareholder of the mutual fund shares exchanged
for such Class A shares (or exchanged for other mutual fund
shares that, ultimately through one or a series of exchanges,
were exchanged for such Class A shares), regardless of the length
of the time period between purchase by an investor and his
tendering for redemption or repurchase.
The Trust (or its agent) shall pay the total amount
of the redemption price and, except as may be otherwise required
by the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. (the "NASD") and any interpretations
thereof ("NASD rules and interpretations"), the deferred sales
charges, if any, as defined in the above paragraph, pursuant to
the instructions of the Underwriter in New York Clearing House
funds on or before the seventh business day subsequent to its
having received the notice of redemption in proper form.
(b) Redemption of shares or payment may be
suspended at times when the New York Stock Exchange is closed,
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when trading thereon is closed, when trading thereon is
restricted, when an emergency exists as a result of which
disposal by the Trust of securities owned by it is not reasonably
practicable or it is not reasonably practicable for the Trust
fairly to determine the value of its net assets, or during any
other period when the Securities and Exchange Commission, by
order, so permits.
SECTION 5. Plan of Distribution.
(a) It is understood that Sections 5, 12, and 16
hereof together constitute a plan of distribution (the "Plan")
within the meaning of Rule 12b-1 adopted by the Securities and
Exchange Commission under the Investment Company Act ("Rule 12b-
1").
(b) Except as may be required by NASD rules and
interpretations, the Trust will pay to the Underwriter each month
a distribution services fee with respect to each Portfolio equal,
on an annualized basis, to .50 of 1% of the aggregate average
daily net assets of the Portfolio attributable to the Class A
shares, 1.00% of the aggregate average daily net assets of the
Portfolio attributable to the Class B shares and .75 of 1% of the
aggregate average daily net assets of the Portfolio attributable
to the Class C shares. The Underwriter may spend such amounts as
it deems appropriate on any activities or expenses primarily
intended to result in the sale of shares of the Portfolio,
including, but not limited to, compensation of its employees,
compensation and expenses, including overhead and telephone and
other communication expenses, of the Underwriter and other
broker-dealers, depository institutions and other financial
intermediaries that engage in or support the distribution of
shares of the Trust, the preparation, printing and distribution
of Prospectuses, Statements of Additional Information, sales
literature and advertising materials, and other promotional
activities. The Underwriter may, if it wishes, retain all or any
portion of the distribution services fees received pursuant
hereto for its own purposes. A portion of the distribution
services fee that will not exceed, on an annualized basis, .25 of
1% of the aggregate average daily net assets of the Portfolio
attributable to each of the Class A shares, Class B shares and
Class C shares will constitute a service fee that will used by
the Underwriter for personal service and/or the maintenance of
shareholder accounts within the meaning of NASD rules and
interpretations.
(c) The Adviser may make payments from time to
time from its own resources for the purposes described in
Section 5(b) hereof.
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(d) Payments to broker-dealers, depository
institutions and other financial intermediaries for the purposes
set forth in Section 5(b) are subject to the terms and conditions
of the written agreements between the Underwriter and each
broker-dealer, depository institution or other financial
intermediary. Such agreements will be in a form satisfactory to
the Trustees of the Trust.
(e) The Treasurer of the Trust will prepare and
furnish to the Trust's Trustees, and the Trustees will review, at
least quarterly, a written report complying with the requirements
of Rule 12b-1 setting forth all amounts expended hereunder and
the purposes for which such expenditures were made.
(f) The Trust is not obligated to pay any
distribution expense in excess of the distribution services fee
described above in Section 5(b) hereof. The amount of
distribution services fees payable by the Trust with respect to
each of the Class A shares, the Class B shares and the Class C
shares is not related directly to the amount of expenses incurred
by the Underwriter with respect to each such class in connection
with providing distribution services, which expenses may be
greater or less than such fees and the Trust will not be
obligated to reimburse the Underwriter for such expenses. The
distribution services fee payable by the Trust with respect to
each such class of shares may be paid in respect of services
rendered and expenses borne in the past in connection with each
such class of shares as to which, on account of the limitations
described above in Section 5(b), no distribution services fee was
paid. The distribution services fees payable by the Trust with
respect to each such class of shares are to be paid by the Trust
to the Underwriter until either the Plan or this Agreement is
terminated or is not continued with respect to that class as
provided in Section 12 below. In the event this Agreement is
terminated by either party or is not continued with respect to a
class of shares as provided in Section 12 below: (i) no
distribution services fees (other than current amounts accrued
but not yet paid) will be owed by the Trust to the Underwriter
with respect to that class, and (ii) the Trust will not be
obligated to pay the Underwriter for any amounts expended
hereunder not previously reimbursed by the Trust from
distribution services fees in respect of shares of such class or
recovered through deferred sales charges described in Section
4(a) above. The distribution services fee of a particular class
of shares may not be used to subsidize the sale of shares of any
other class.
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SECTION 6. Duties of the Trust.
(a) The Trust shall furnish to the Underwriter
copies of all information, financial statements and other papers
that the Underwriter may reasonably request for use in connection
with the distribution of shares of the Trust, and this shall
include one certified copy, upon request by the Underwriter, of
all financial statements prepared for the Trust by independent
public accountants. The Trust shall make available to the
Underwriter such number of copies of the Prospectuses as the
Underwriter shall reasonably request.
(b) The Trust shall take, from time to time, such
steps as may be necessary to register the shares under the
Securities Act, to the end that there will be available for sale
such number of shares as the Underwriter reasonably may be
expected to sell.
(c) The Trust shall use its best efforts to
qualify and maintain the qualification of an appropriate number
of its shares under the securities laws of such states as the
Underwriter and the Trust may approve. Any such qualification
may be withheld, terminated or withdrawn by the Trust at any time
in its discretion. As provided in Section 9(b) hereof, the
expense of qualification and maintenance of qualification shall
be borne by the Trust. The Underwriter shall furnish such
information and other material relating to its affairs and
activities as may be required by the Trust in connection with
such qualification.
(d) The Trust will furnish, in reasonable
quantities upon request by the Underwriter, copies of annual and
interim reports of the Trust.
SECTION 7. Duties of the Underwriter.
(a) The Underwriter shall devote reasonable time
and effort to effect sales of shares of the Trust, but shall not
be obligated to sell any specific number of shares. The services
of the Underwriter to the Trust hereunder are not to be deemed
exclusive and nothing in this Agreement shall prevent the
Underwriter from entering into like arrangements with other
investment companies so long as the performance of its
obligations hereunder is not impaired thereby.
(b) In selling shares of the Trust, the
Underwriter shall use its best efforts in all material respects
duly to conform with the requirements of all federal and state
laws relating to the sale of such securities. Neither the
Underwriter, any selected dealer, any selected agent nor any
other person is authorized by the Trust to give any information
6
<PAGE>
or to make any representations, other than those contained in the
Trust's Registration Statement (the "Registration Statement"), as
amended from time to time, under the Securities Act and the
Investment Company Act or the Prospectus and Statement of
Additional Information or any sales literature specifically
approved in writing by the Fund.
(c) The Underwriter shall adopt and follow
procedures, as approved by the officers of the Trust, for the
confirmation of sales to investors and selected dealers, the
collection of amounts payable by investors and selected dealers
on such sales, and the cancellation of unsettled transactions, as
may be necessary to comply with the requirements of the NASD, as
such requirements may from time to time exist.
SECTION 8. Selected Dealer and Agent Agreements.
(a) The Underwriter shall have the right to enter
into selected dealer agreements with securities dealers of its
choice ("selected dealers") and selected agent agreements with
depository institutions and other financial intermediaries of its
choice ("selected agents") for the sale of shares and fix therein
the portion of the sales charge that may be allocated to the
selected dealers and selected agents; provided that the Trust
shall approve the forms of agreements with selected dealers and
selected agents and the selected dealer and selected agent
compensation set forth therein and shall evidence such approval
by filing said forms and amendments thereto as exhibits to its
then currently effective Registration Statement. Shares sold to
selected dealers or through selected agents shall be for resale
by such selected dealers and selected agents only at the public
offering price set forth in the relevant Prospectus and relevant
Statement of Additional Information.
(b) Within the United States, the Underwriter
shall offer and sell shares only to such selected dealers as are
members in good standing of the NASD.
SECTION 9. Payment of Expenses.
(a) The Trust shall bear all costs and expenses of
the Trust, including fees and disbursements of its counsel and
auditors, in connection with the preparation and filing of its
Registration Statement and Prospectus and Statement of Additional
Information, and all amendments and supplements thereto, and
preparing and mailing annual and interim reports and proxy
materials to shareholders (including but not limited to the
expense of setting in type any such registration statements,
prospectuses, annual or interim reports or proxy materials).
7
<PAGE>
(b) The Trust shall bear the cost of expenses of
qualification of shares for sale, and, if necessary or advisable
in connection therewith, of qualifying the Trust as an issuer or
as a broker or dealer, in such states of the United States or
other jurisdiction as shall be selected by the Trust and the
Underwriter pursuant to Section 6(c) hereof and the cost and
expenses payable to each such state for continuing qualification
therein until the Trust decides to discontinue such qualification
pursuant to Section 6(c) hereof.
SECTION 10. Indemnification.
(a) The Trust agrees to indemnify, defend and hold
the Underwriter, and any person who controls the Underwriter
within the meaning of Section 15 of the Securities Act, free and
harmless from and against any and all claims, demands,
liabilities and expenses (including the cost of investigating or
defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which the Underwriter or
any such controlling person may incur, under the Securities Act,
or under common law or otherwise, arising out of or based upon
any alleged untrue statement of a material fact contained in the
Trust's Registration Statement, Prospectuses or Statements of
Additional Information in effect from time to time under the
Securities Act or arising out of or based upon any alleged
omission to state a material fact required to be stated in any
one thereof or necessary to make the statements in any one
thereof not misleading; provided, however, that in no event shall
anything herein contained be so construed as to protect the
Underwriter against any liability to the Trust or its security
holders to which the Underwriter would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence in
the performance of its duties, or by reason of the Underwriter's
reckless disregard of its obligations and duties under this
Agreement. The Trust's agreement to indemnify the Underwriter
and any such controlling person as aforesaid is expressly
conditioned upon the Trust's being notified of the commencement
of any action brought against the Underwriter or any such
controlling person, such notification to be given by letter or by
telegram addressed to the Trust at its principal office in New
York, New York, and sent to the Trust by the person against whom
such action is brought within ten days after the summons or other
first legal process shall have been served. The failure to so
notify the Trust of the commencement of any such action shall not
relieve the Trust from any liability which it may have to the
person against whom such action is brought by reason of any such
alleged untrue statement or omission otherwise than on account of
the indemnity agreement contained in this Section 10. The Trust
will be entitled to assume the defense of any suit brought to
enforce any such claim, and to retain counsel of good standing
chosen by the Trust and approved by the Underwriter. In the
8
<PAGE>
event the Trust does not elect to assume the defense of any such
suit and retain counsel of good standing approved by the
Underwriter, the defendant or defendants in such suit shall bear
the fees and expenses of any additional counsel retained by any
of them; but in case the Trust does not elect to assume the
defense of any such suit, or in case the Underwriter does not
approve of counsel chosen by the Trust, the Trust will reimburse
the Underwriter or the controlling person or persons named as
defendant or defendants in such suit, for the fees and expenses
of any counsel retained by the Underwriter or such persons. The
indemnification agreement contained in this Section 10 shall
remain operative and in full force and effect regardless of any
investigation made by or on behalf of the Underwriter or any
controlling person and shall survive the sale of any of the
Trust's shares made pursuant to subscriptions obtained by the
Underwriter. This agreement of indemnity will inure exclusively
to the benefit of the Underwriter, to the benefit of its
successors and assigns, and to the benefit of any controlling
persons and their successors and assigns. The Trust agrees
promptly to notify the Underwriter of the commencement of any
litigation or proceeding against the Trust in connection with the
issue and sale of any of its shares.
(b) The Underwriter agrees to indemnify, defend
and hold the Trust, its several officers and trustees, and any
person who controls the Trust within the meaning of Section 15 of
the Securities Act, free and harmless from and against any and
all claims, demands, liabilities, and expenses (including the
cost of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection
therewith) which the Trust, its officers or directors, or any
such controlling person may incur under the Securities Act or
under common law or otherwise, but only to the extent that such
liability, or expense incurred by the Trust, its officers,
trustees or such controlling person resulting from such claims or
demands shall arise out of or be based upon any alleged untrue
statement of a material fact contained in information furnished
in writing by the Underwriter to the Trust for use in its
Registration Statement, Prospectuses or Statements of Additional
Information in effect from time to time under the Securities Act,
or shall arise out of or be based upon any alleged omission to
state a material fact in connection with such information
required to be stated in the Registration Statement, Prospectuses
or Statements of Additional Information or necessary to make such
information not misleading. The Underwriter's agreement to
indemnify the Trust, its officers and trustees, and any such
controlling person as aforesaid is expressly conditioned upon the
Underwriter being notified of the commencement of any action
brought against the Trust, its officers or trustees or any such
controlling person, such notification to be given by letter or
telegram addressed to the Underwriter at its principal office in
9
<PAGE>
New York, and sent to the Underwriter by the person against whom
such action is brought, within ten days after the summons or
other first legal process shall have been served. The failure so
to notify the Underwriter of the commencement of any such action
shall not relieve the Underwriter from any liability which it may
have to the Trust, to its officers and trustees, or to such
controlling person by reason of any such untrue statement or
omission on the part of the Underwriter otherwise than on account
of the indemnity agreement contained in this Section 10. The
Underwriter shall have a right to control the defense of such
action, with counsel of its own choosing, satisfactory to the
Trust, if such action is based solely upon such alleged
misstatement or omission on its part, and in any other event the
Underwriter and the Trust, and their officers and trustees or
such controlling person, shall each have the right to participate
in the defense or preparation of the defense of any such action.
SECTION 11. Notification by the Trust.
The Trust agrees to advise the Underwriter
immediately:
(a) of any request by the Securities and Exchange
Commission for amendments to the Trust's Registration
Statement, Prospectus or Statement of Additional Information
or for additional information,
(b) in the event of the issuance by the Securities
and Exchange Commission of any stop order suspending the
effectiveness of the Trust's Registration Statement,
Prospectus or Statement of Additional Information or the
initiation of any proceeding for that purpose,
(c) of the happening of any material event which
makes untrue any statement made in the Fund's Registration
Statement, Prospectus or Statement of Additional Information
or which requires the making of a change in any one thereof
in order to make the statements therein not misleading, and
(d) of all actions of the Securities and Exchange
Commission with respect to any amendments to the Trust's
Registration Statement, Prospectuses or Statements of
Additional Information which may from time to time be filed
with the Securities and Exchange Commission under the
Securities Act.
SECTION 12. Term of Agreement.
(a) This Agreement shall become effective on the
date hereof and shall continue in effect until September 30,
1994, and thereafter for successive twelve-month periods
10
<PAGE>
(computed from each October 1) with respect to each class;
provided, however, that such continuance is specifically
approved at least annually by the Trustees of the Trust or
by vote of the holders of a majority of the outstanding
voting securities (as defined in the Investment Company Act)
of that class, and, in either case, by a majority of the
Trustees of the Trust who are not parties to this Agreement
or interested persons, as defined in the Investment Company
Act, of any such party (other than as trustees of the Trust)
and who have no direct or indirect financial interest in the
operation of the Plan or any agreement related thereto;
provided further, however, that if the continuation of this
Agreement is not approved as to a class or a Portfolio, the
Underwriter may continue to render to such class or
Portfolio the services described herein in the manner and to
the extent permitted by the Act and the rules and
regulations thereunder. Upon effectiveness of this
Agreement, it shall supersede all previous agreements
between the parties hereto covering the subject matter
hereof. This Agreement may be terminated (i) by the Trust
with respect to any class or Portfolio at any time, without
the payment of any penalty, by vote of a majority of the
outstanding voting securities (as so defined) of such class
or Portfolio, or by vote of a majority of the Trustees of
the Trust who are not interested persons, as defined in the
Investment Company Act, of the Trust (other than as trustees
of the Trust) and have no direct and indirect financial
interest in the operation of the Plan or any agreement
related thereto, in any such event on sixty days' written
notice to the Underwriter; provided, however, that no such
notice shall be required if such termination is stated by
the Trust to relate only to Sections 5 and 16 hereof (in
which event Sections 5 and 16 shall be deemed to have been
severed herefrom and all other provisions of this Agreement
shall continue in full force and effect), or (ii) by the
Underwriter with respect to any Portfolio on sixty days'
written notice to the Trust.
(b) This Agreement may be amended at any time with
the approval of the Trustees of the Trust, provided that
(i) any material amendments of the terms hereof will become
effective only upon approval as provided in the first
proviso of the first sentence of Section 12(a) hereof, and
(ii) any amendment to increase materially the amount to be
expended for distribution services fees pursuant to Section
5(b) hereof will be effective only upon the additional
approval by a vote of majority of the outstanding voting
securities as defined in the Investment Company Act of the
class or Portfolio affected.
11
<PAGE>
SECTION 13. No Assignment. This Agreement may not
be transferred, assigned, sold or in any manner hypothecated
or pledged by either party hereto and this Agreement shall
terminate automatically in the event of any such transfer,
assignment, sale, hypothecation or pledge. The terms
"transfer", "assignment", and "sale" as used in this
paragraph shall have the meanings ascribed thereto by
governing law and any interpretation thereof contained in
rules or regulations promulgated by the Securities and
Exchange Commission thereunder.
SECTION 14. Notices. Any notice required or
permitted to be given hereunder by either party to the other
shall be deemed sufficiently given if sent by registered
mail, postage prepaid, addressed by the party giving such
notice to the other party at the address last furnished by
such other party to the party given notice, and unless and
until changed pursuant to the foregoing provisions hereof
addressed to the Trust or the Underwriter.
SECTION 15. Governing Law. The provisions of this
Agreement shall be, to the extent applicable, construed and
interpreted in accordance with the laws of the State of New
York.
SECTION 16. Disinterested Trustees of the Trust.
While the Agreement is in effect, the selection and
nomination of the Trustees who are not "interested persons"
of the Trust (as defined in the Investment Company Act) will
be committed to the discretion of such disinterested
Trustees.
Section 17. Notice is hereby given that this
Agreement is entered into on our behalf by an officer of our
Trust in his capacity as an officer and not individually and
that the obligations of or arising out of this Agreement are
not binding upon any of our Trustees, officers,
shareholders, employees or agents individually but are
binding only upon that assets and property of our Trust.
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement.
AFD EXCHANGE RESERVES
By /s/ David H. Dievler
-------------------------
President
ALLIANCE FUND DISTRIBUTORS,
INC.
By /s/ Robert L. Errico
-------------------------
President
Accepted as to
Sections 5, 12 and 16
as of March 23, 1994:
ALLIANCE CAPITAL MANAGEMENT L.P.
By Alliance Capital Management Corporation,
General Partner
By /s/ John D. Carifa
--------------------------
President
13
00250163.AA2
<PAGE>
(LOGO) ALLIANCE FUND DISTRIBUTORS, INC.
1345 AVENUE OF THE AMERICAS
NEW YORK, N.Y. 10105
(800) 221-5672
, 1997
Selected Dealer Agreement
For Broker/Dealers (other than Bank Subsidiaries)
Dear Sirs:
As the principal underwriter of shares of certain
registered investment companies presently or hereafter managed by
Alliance Capital Management LP, shares of which companies are
distributed by us pursuant to our Distribution Services Agreements
with such companies (the "Funds"), we invite you to participate as
principal in the distribution of shares of any and all of the
Funds upon the following terms and conditions:
1. You are to offer and sell such shares only at the
public offering prices which shall be currently in effect, in
accordance with the terms of the then current prospectuses and
statements of additional information of the Funds. You agree to
act only as principal in such transactions and shall not have
authority to act as agent for the Funds, for us, or for any other
dealer in any respect. All orders are subject to acceptance by us
and become effective only upon confirmation by us.
2. On each purchase of shares by you from us, the total
sales charges and discount to selected dealer, if any, shall be as
stated in each Fund's then current prospectus.
Such sales charges and discount to selected dealers are
subject to reductions under a variety of circumstances as
described in each Fund's then current prospectus and statement of
additional information. To obtain these reductions, we must be
notified when the sale takes place which would qualify for the
reduced charge.
There is no sales charge or discount to selected dealers
on the reinvestment of dividends.
3. As a selected dealer, you are hereby authorized
(i) to place orders directly with the Funds for their shares to be
resold by us to you subject to the applicable terms and conditions
governing the placement of orders by us set forth in the
Distribution Services Agreement between each fund and us and
<PAGE>
subject to the applicable compensation provisions set forth in
each Fund's then current prospectus and statement of additional
information and (ii) to tender shares directly to the Funds or
their agent for redemption subjected to the applicable terms and
conditions set forth in the Distribution Services Agreement.
4. Repurchases of shares will be made at the net asset
value of such shares in accordance with the then current
prospectuses and statements of additional information of the
Funds.
5. You represent that you are a member of the National
Association of Securities Dealers, Inc. and that you agree to
abide by the Rules of Fair Practice of such Association.
6. This Agreement is in all respects subject to Rule 26
of the Rules of Fair Practice of the National Association of
Securities Dealer, Inc. which shall control any provision to the
contrary in this Agreement.
7. You agree:
(a) To purchase shares only from us or only from
your customers.
(b) To purchase shares from us only for the purpose
of covering purchase orders already received or
for your own bona fide investment.
(c) That you will not purchase any shares from your
customers at prices lower than the redemption
or repurchase prices then quoted by the Fund.
You shall, however, be permitted to sell shares
for the account of their record owners to the
Funds at the repurchase prices currently
established for such shares and may charge to
owner a fair commission for handling the
transaction.
(d) That you will not withhold placing customers'
orders for shares so as to profit yourself as a
result of such withholding.
(e) That if any shares confirmed to you hereunder
are redeemed or repurchased by any of the Funds
within seven business days after such
confirmation of your original order, you shall
forth with refund to us the full discount
allowed to you on such sales. We shall notify
you of such redemption or repurchase within ten
days from the date of delivery of the request
2
<PAGE>
therefor or certificates to us or such fund.
Termination or cancellation of this Agreement
shall not relieve you or us from the
requirements of this subparagraph.
8. We shall not accept from you conditional orders for
shares. Delivery of certificates for shares purchased shall be
made by the Funds only against receipt of the purchase price,
subject to deduction for the discount reallowed to you and our
portion of the sales charge on such sales. If payment for the
shares purchased is not received within the time customary for
such payments, the sale may be cancelled forthwith without any
responsibility or liability on our part or on the part of the
Funds (in which case we may hold you responsible for any loss,
including loss of profit, suffered by the Funds resulting from
your failure to make payment as aforesaid), or, at our option, we
may sell the shares ordered back to the Funds (in which case we
may hold you responsible for any loss, including loss of profit
suffered by us resulting from your failure to make payments as
aforesaid).
9. You will not offer or sell any of the shares except
under circumstances that will result in compliance with the
applicable Federal and State securities laws and in connection
with sales and offers to sell shares you will furnish to each
person to whom any such sale or offer is made a copy of the
applicable then current prospectus. We shall be under no
liability to you except for lack of good faith and for obligations
expressly assumed by us herein. Nothing herein contained however,
shall be deemed to be a condition, stipulation or provision
binding any persons acquiring any security to waive compliance
with any provision of the Securities Act of 1933, or of the Rules
and Regulations of the Securities and Exchanges Commission, or to
relieve the parties hereto from any liability arising under the
Securities Act of 1933.
10. From time to time during the term of this Agreement
we may make payments to you pursuant to one or more of the
distribution plans adopted by certain of the Funds pursuant to
Rule 12b-1 under the Investment Company Act of 1940 (the "Act") in
consideration, with respect to each such Fund, of your furnishing
distribution services hereunder and providing administrative,
accounting and other services, including personal service and/or
the maintenance of shareholder accounts. We have no obligation to
make any such payments and you waive any such payment until we
receive monies therefor from the Fund. Any such payments made
pursuant to this Section 10 shall be subject to the following
terms and conditions:
(a) Any such payments shall be in such amounts as
we may from time to time advise you in writing
3
<PAGE>
but in any event not in excess of the amounts
permitted by the plan in effect with respect to
each particular Fund. Any such payments shall
be in addition to the selling concession, if
any, allowed to you pursuant to this Agreement.
Such payments shall include a service fee in
the amount of .25 of 1% per annum of the
average daily net assets of certain Funds
attributable to you clients. Any such service
fee shall be paid to you solely for personal
service and/or the maintenance of shareholder
accounts.
(b) The provisions of this Section 10 relate to the
plan adopted by a particular Fund pursuant to
Rule 12b-1. In accordance with Rule 12b-1, any
person authorized to direct the disposition of
monies paid or payable by a Fund pursuant to
this Section 10 shall provide the Fund's Board
of Directors, and the Directors shall review,
at least quarterly, a written report of the
amounts so expended and the purposes for which
such expenditures were made.
(c) The provisions of this Section 10 applicable to
each Fund shall remain in effect for not more
than a year and thereafter for successive
annual periods only so long as such continuance
is specifically approved at least annually in
conformity with Rule 12b-1 and the Act. The
provisions of this Section 10 shall
automatically terminate with respect to a
particular Plan in the event of the assignment
(as defined by the Act) of this Agreement, in
the event such Plan terminates or is not
continued or in the event this Agreement
terminates or ceases to remain in effect. In
addition, the provisions of this Section 10 may
be terminated any any time, without penalty, by
either party with respect to any particular
Plan on not more than 60 days' nor less than 30
days' written notice delivered or mailed by
registered mail, postage prepaid, to the other
party.
11. No person is authorized to make any representations
concerning shares of the Funds except hose contained in the
current prospectus, statement of additional information, and
printed information issued by each Fund or by us as information
supplemental to each prospectus. We shall supple prospectuses and
statements of additional information, reasonable quantities of
4
<PAGE>
reports to shareholders, supplemental sales literature, sales
bulletins, and additional information as issued. You agree to
distribute prospectuses and reports to shareholders of the Funds
to your customers in compliance with the applicable requirements,
except to the extent that we expressly undertake to do so on your
behalf. You agree not to use other advertising or sales material
relating to the Funds, unless approved in writing by us in advance
of such use. Any printed information furnished by us other than
the then current prospectus and statement of additional
information for each Fund, periodic reports and proxy solicitation
materials are our sole responsibility and not the responsibility
of the Funds, and you agree that the Funds shall have no liability
or responsibility to you in these respects unless expressly assume
in connection therewith.
12. In connection with your distribution of shares of a
Fund, you shall conform to such written compliance standards as we
have provided you in the past or may from time to time provide to
you in the future.
13. We, our affiliates and the Funds shall not be liable
for any loss, expense, damages, costs or other claim arising out
of any redemption or exchange pursuant to telephone instructions
from any person or our refusal to execute such instructions for
any reason.
14. Either party to this Agreement may cancel this
Agreement by giving written notice to the other. Such notice
shall be deemed to have been given on the date on which it was
either delivered personally to the other party or any officer or
member thereof, or was mailed postpaid or delivered to a telegraph
office for transmission to the other party at his or its address
as shown below. This Agreement may be amended by us at any time
and your placing of an order after the effective date of any such
amendment shall constitute your acceptance thereof.
5
<PAGE>
15. This Agreement shall be construed in accordance with
the laws of the State of New York and shall be binding upon both
parties thereto when signed by us and accepted by you in the space
provided below.
Very truly yours
ALLIANCE FUND DISTRIBUTORS, INC.
By:________________________________
(Authorized Signature)
Firm Name_______________________________________________________
Address_________________________________________________________
City____________________________ State_________ Zip Code________
ACCEPTED BY (signature)__________________ Title_________________
Name(printed)____________________________ Title_________________
Date____________________________ 199_____ Phone #_______________
Please return two signed copies of this Agreement
(one of which will be signed above by us
and thereafter returned to you)
in the accompanying return envelope to:
Alliance Fund Distributors, Inc.
1345 Avenue of the Americas, 38th Floor
New York, NY 10105
6
00250163.AL7
<PAGE>
(LOGO) ALLIANCE FUND DISTRIBUTORS, INC.
1345 AVENUE OF THE AMERICAS
NEW YORK, N.Y. 10105
(800) 221-5672
, 1997
Selected Agent Agreement
For Depository Institutions and Their Subsidiaries
Dear Sirs:
As the principal underwriter of shares of certain
registered investment companies presently or hereafter managed by
Alliance Capital Management L.P., shares of which companies are
distributed by us pursuant to our Distribution Services Agreements
with such companies (the "Funds"), we invite you, acting as agent
for your customers, to make available to your customers shares of
any or all of the funds upon the following terms and conditions:
1. The customers in question will be for all purposes
your customers. We all execute transactions in shares of the
Funds for each of your customers only upon your authorization, if
being understood in all causes that (a) you are acting as the
agent for the customer; (b) each transaction is initiated solely
upon the order of the customer; (c) each transaction is for the
account of the customer and not for your account; (d) the
transactions are without recourse against you by the customer;
(e) except as we otherwise agree, each transaction is reflected on
a fully disclosed basis; (f) as between you and the customer, the
customer will have full beneficial ownership of the shares;
(g) you shall provide no investment advice and exercise no
investment discretion regarding the purchase, sale, or redemption
of the shares; and (h) you shall make appropriate disclosure to
your customer that any Fund's shares are not endorsed by you, do
not constitute your obligation and are not entitled to federal
deposit insurance.
2. You are to sell shares of the Funds only at the
public offering prices which shall be currently in effect, in
accordance with the terms of the then current prospectuses and
statements of additional information of the Funds. You agree to
act only as agent for your customers in such transactions and
shall not have authority to act as agent for the Funds or for us
in any respect. All orders are subject to acceptance by us and
become effective only upon confirmation by us.
<PAGE>
3. On each purchase of shares of a Fund authorized by
you, the total sales charge and commission, if any, shall be as
stated in the Fund's then current prospectus. Such sales charges
and commissions are subject to reductions under a variety of
circumstances as described in each Fund's then current prospectus
and statement of additional information. To obtain such a
reduction, you must provide us with such information as we may
request to establish that a particular transaction qualifies for
the reduction. There is no sales charge or commission to selected
agents on the reinvestment of dividends.
4. As a selected agent, you are hereby authorized
(i) to place orders directly with the Funds for their shares to be
resold by us through you subject to the applicable terms and
conditions governing the placement of orders by us set forth in
the Distribution Services Agreement between each Fund and us and
subject to the applicable compensation provisions set forth in
each Fund's then current prospectus and statement of additional
information, and (ii) to tender shares directly to the Funds or
their agent for redemption or repurchase subject to the applicable
terms and conditions set forth in the Distribution Services
Agreement.
5. Redemptions and repurchases of shares will be made
at the net asset value of such shares in accordance with the then
current prospectuses and statements of additional information of
the Funds.
6. You represent that you are either:
(a) a bank as defined in Section 3(o)(6) of the
Securities Exchange Act of 1934, as amended
(the "1934 Act"), duly authorized to engage in
the transactions to be performed hereunder and
not required to register as a broker-dealer
pursuant to the 1934 Act; or
(b) a bank (as so defined) or an affiliate of a
bank, in either case registered as a
broker-dealer pursuant to the 1934 Act and a
member of the National Association of
Securities Dealers, Inc., and that you agree to
abide by the rules and regulations of the
National Association of Securities Dealers,
Inc., and that you agree to abide by the rules
and regulations of the National Association of
Securities Dealers, Inc.
2
<PAGE>
7. You Agree:
(a) to order shares of the Funds only from us and
to act as agent only for your customers;
(b) to order shares from us only for the purpose of
covering purchase orders already received;
(c) that you will not purchase any shares from your
customers at prices lower than the redemption
or repurchase prices then quoted by the Funds,
provided, however, that you shall be permitted
to sell shares for the accounts of their record
owners to the Funds at the repurchase prices
currently established for such shares and may
charge the owner a fair commission for handling
the transaction; repurchase prices currently
established for such shares and may charge the
owner a fair commission for handling the
transaction;
(d) that you will not withhold placing customers'
orders for shares so as to profit yourself as a
result of such withholding; and
(e) that if any shares confirmed through you
hereunder are redeemed or repurchased by any of
the Funds within seven business days after such
confirmation of your original order, you shall
forthwith refund to us the full commission
reallowed to you on such sales. We shall
notify you of such redemption or repurchase
within ten days from the date of delivery of
the request therefor or certificates to us or
such Fund. Termination or cancellation of this
Agreement shall not relieve you or us from the
requirements of this subparagraph.
8. We shall not accept from you any conditional orders
for shares. Delivery of certificates for shares purchased shall
be made by the Funds only against receipt of the purchase price,
subject to deduction for the commission reallowed to you and our
portion of the sales charge on such sale. If payment for the
shares purchased is not received within the time customary for
such payments, the sale may be cancelled forthwith without any
responsibility or liability on our part or on the part of the
Funds (in which case you will be responsible for any loss,
including loss of profit, suffered by the Funds resulting from
your failure to make payment as aforesaid).
3
<PAGE>
9. You will not accept orders for shares of any of the
Funds except under circumstances that will result in compliance
with the applicable Federal and State securities laws and banking
laws, and in connection with sale of shares to your customers you
will furnish, unless we agree otherwise, to each customer who has
ordered shares a copy of the applicable then current prospectus.
We shall be under no liability to you except for lack of good
faith and for obligations expressly assumed by us herein. Nothing
herein contained, however, shall be deemed to be a condition,
stipulation or provision binding any persons acquiring any
security to waive compliance with any provision of the Securities
Act of 1933 or of the rules and regulations of the Securities and
Exchange Commission, or to relieve the parties hereto from any
liability arising under the Securities Act of 1933.
10. From time to time during the term of this Agreement
we may make payments to you pursuant to one or more of the
distribution plans adopted by certain of the Funds pursuant to
Rule 12b-1 under the Investment Company Act of 1940 (the "Act"),
to compensate you with respect to the shareholder accounts of your
customers in such Funds for providing administrative, accounting
and other services, including personal service and/or the
maintenance of such accounts. We have no obligation to make any
such payments and you waive any such payment until we receive
monies therefor from the Fund. Any such payments made pursuant to
this Section 10 shall be subject to the following terms and
conditions.
(a) Any such payments shall be in such amounts as
we may from time to time advise you in writing
but in any event not in excess of the amounts
permitted by the plan in effect with respect to
each particular Fund. Such payments shall
include a service fee in the amount of .25% of
1% per annum of the average daily net assets of
certain Funds attributable to your clients.
Any such service fee shall be paid to you
solely for personal service and/or the
maintenance of shareholder accounts.
(b) The provisions of this Section 10 relate to the
plan adopted by a particular Fund pursuant to
Rule 12b-1. In accordance with Rule 12b-1, any
person authorized to direct the disposition of
monies paid or payable by a Fund pursuant to
this Section 10 shall provide the Fund's Board
of Directors, and the Directors shall review,
at least quarterly, a written report of the
amounts so expended and the purposes for which
such expenditures were made.
4
<PAGE>
(c) The provisions of this Section 10 applicable to
each fund remain in effect for not more than a
year and thereafter for successive annual
periods only so long as such continuance is
specifically approved at least annually in
conformity with Rule 12~1 and the Act. The
provisions of this Section 10 shall
automatically terminate with respect to a
particular Plan in the event of the assignment
(as defined by the Act) of this Agreement, in
the event such Plan terminates or in the event
this Agreement terminates or ceases to remain
in effect. In addition, the provisions of this
Section 10 may be terminated at any time,
without penalty, by either party with respect
to any particular Plan on not more than 60
days' nor less than 30 days' written notice
delivered or mailed by registered mail, postage
prepaid, to the other party.
11. No person is authorized to make any representation
concerning shares of the Fund except those contained in the
current prospectus, statement of additional information, and
printed information issued by each Fund or by us as information
supplemental to each prospectus. We shall supply prospectuses and
statements of additional information, reasonable quantities of
reports to shareholders, supplemental sales literature, sales
bulletins, and additional information as issued. You agree to
distribute prospectuses and reports to shareholders of the Funds
to your customers in compliance with applicable requirements,
except to the extent that we expressly undertake to do so on your
behalf. You agree to use other advertising or sales material
relating to the Funds except in compliance with all laws and
regulations applicable to you and unless approved in writing by us
in advance of such use. Any printed information furnished by us
other than the current prospectus and statement of additional
information for each Fund, periodic reports and proxy solicitation
material are our sole responsibility and not the responsibility of
the Funds, and you agree that the Funds shall have no liability or
responsibility to you in these respects unless expressly assumed
in connection therewith.
12. In connection with your making shares of a Fund
available to your customers, you shall conform to such written
compliance standards as we have provided you in the past or may
from time to time provide to you in the future.
13. We, our affiliates and the Funds shall not be liable
for any loss, expense, damages, costs or other claim arising out
of any redemption or exchange pursuant to telephone instruction
5
<PAGE>
from any person or our refusal to execute such instruction for any
reason.
14. Either party to this Agreement may cancel this
Agreement by giving written notice to the other. Such notice
shall be deemed to have been given as of the date on which it was
either delivered personally to the other party or any officer or
member thereof, or was mailed postpaid or delivered to a telegraph
office for transmission to the other party at his or its address
as show below. This Agreement may be amended by us at any time
and your placing of an order after the effective date of any such
amendment shall constitute your acceptance thereof. If you are a
bank or an affiliate of a bank, this agreement will automatically
terminate if you cease to be, or the bank of which you are an
affiliate ceases to be, a bank as defined in the 1934 Act.
15. The Agreement shall be construed in accordance with
the laws of the State of New York and shall be binding upon both
parties hereto when signed by us and accepted by you in the space
provided below.
Very truly yours,
ALLIANCE FUND DISTRIBUTORS, INC.
By:_________________________________
(Authorized Signature)
Bank or Firm Name_______________________________________________
Address_________________________________________________________
City____________________________ State_________ Zip Code________
ACCEPTED BY (signature)
Name (print)____________________________ Title__________________
Date____________________________199_____ Phone #________________
Please return two signed copies of this Agreement
(one of which will be signed by us and
thereafter returned to you) in the
accompanying return envelope to:
Alliance Fund Distributors, Inc.
1345 Avenue of the Americas, 38th Floor
New York, NY 10105
6
00250163.AL8
<PAGE>
CUSTODIAN CONTRACT
Between
AFD EXCHANGE RESERVES
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to be
Held By It........................................... 1
2. Duties of the Custodian with Respect to
Property of the Fund Held by the Custodian
in the United States................................. 2
2.1 Holding Securities............................. 2
2.2 Delivery of Securities......................... 3
2.3 Registration of Securities..................... 7
2.4 Bank Accounts.................................. 8
2.5 Availability of Federal Funds.................. 9
2.6 Collection of Income........................... 9
2.7 Payment of Fund Monies ........................ 10
2.8 Liability for Payment in Advance of
Receipt of Securities Purchased................ 13
2.9 Appointment of Agents.......................... 13
2.10 Deposit of Securities in Securities
System......................................... 14
2.11 Fund Assets Held in the Custodian's
Direct Paper System............................ 17
2.12 Segregated Account............................. 18
2.13 Ownership Certificates for Tax
Purposes....................................... 20
2.14 Proxies........................................ 20
2.15 Communications Relating to Fund
Portfolio Securities........................... 20
3. Duties of the Custodian with Respect to
Property of the Fund Held Outside of the
United States........................................ 21
3.1 Appointment of Foreign Sub-Custodians.......... 21
3.2 Assets to be Held.............................. 22
3.3 Foreign Securities Depositories................ 22
3.4 Agreements with Foreign Banking
Institutions................................... 22
3.5 Access of Independent Accountants of
the Fund....................................... 23
3.6 Reports by Custodian........................... 24
3.7 Transactions in Foreign Custody
Account........................................ 24
3.8 Liability of Foreign Sub-Custodians............ 25
3.9 Liability of Custodian......................... 25
3.10 Reimbursement for Advances..................... 26
3.11 Monitoring Responsibilities.................... 27
3.12 Branches of U.S. Banks......................... 28
3.13 Tax Law........................................ 28
2
<PAGE>
4. Payments for Repurchases or Redemptions and
Sales of Shares of the Fund.......................... 29
5. Proper Instructions.................................. 30
6. Actions Permitted Without Express Authority.......... 31
7. Evidence of Authority................................ 31
8. Duties of Custodian with Respect to the
Books of Account and Calculation of Net
Asset Value and Net Income........................... 32
9. Records.............................................. 32
10. Opinion of Fund's Independent Accountant............. 33
11. Reports to Fund by Independent Public
Accountants..........................................
12. Compensation of Custodian............................
13. Responsibility of Custodian..........................
14. Effective Period, Termination and Amendment..........
15. Successor Custodian..................................
16. Interpretive and Additional Provisions...............
17. Massachusetts Law to Apply...........................
18. Prior Contracts......................................
19. Shareholder Communications...........................
3
<PAGE>
CUSTODIAN CONTRACT
This Contract between AFD Exchange Reserves, a business
trust organized and existing under the laws of Massachusetts,
having its principal place of business at 1285 Avenue of the
Americas, New York, New York, 10019, hereinafter called the
"Fund", and State Street Bank and Trust Company, a Massachusetts
trust company, having its principal place of business at 225
Franklin Street, Boston, Massachusetts, 02110, hereinafter called
the "Custodian",
WITNESSETH: That in consideration of the mutual
covenants and agreements hereinafter contained, the parties
hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian
of its assets, including securities it desires to be held in
places within the United States ("domestic securities") and
securities it desires to be held outside the United States
("foreign securities") pursuant to the provisions of the
Declaration of Trust. The Fund agrees to deliver to the Custodian
all securities and cash owned by it, and all payments of income,
payments of principal or capital distributions received by it
with respect to all securities owned by the Fund from time to
time, and the cash consideration received by it for such new or
treasury shares of beneficial interest ("Shares") of the Fund as
4
<PAGE>
may be issued or sold from time to time. The Custodian shall not
be responsible for any property of the Fund held or received by
the Fund and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the
meaning of Article 5), the Custodian shall from time to time
employ one or more sub-custodians located in the United States,
but only in accordance with an applicable vote by the Board of
Trustees of the Fund, and provided that the Custodian shall have
no more or less responsibility or liability to the Fund on
account of any actions or omissions of any sub-custodian so
employed than any such sub-custodian has to the Custodian. The
Custodian may employ as sub-custodians for the Fund's foreign
securities and other assets the foreign banking institutions and
foreign securities depositories designated in Schedule "A" hereto
but only in accordance with the provisions of Article 3.
2. Duties of the Custodian with Respect to Property of the
Fund Held By the Custodian in the United States
2.1 Holding Securities. The Custodian shall hold and
physically segregate for the account of the Fund all
non-cash property, to be held by it in the United
States, including all domestic securities owned by the
Fund, other than (a) securities which are maintained
pursuant to Section 2.10 in a clearing agency which acts
as a securities depository or in a book-entry system
authorized by the U.S. Department of the Treasury,
5
<PAGE>
collectively referred to herein as "Securities System"
and (b) commercial paper of an issuer for which State
Street Bank and Trust Company acts as issuing and paying
agent ("Direct Paper") which is deposited and/or
maintained in the Direct Paper System of the Custodian
pursuant to Section 2.11.
2.2 Delivery of Securities. The Custodian shall release and
deliver domestic securities owned by the Fund held by
the Custodian or in a Securities System account of the
Custodian or in the Custodian's Direct Paper book-entry
system account ("Direct Paper System Account") only upon
receipt of Proper Instructions, which may be continuing
instructions when deemed appropriate by the parties, and
only in the following cases:
1) Upon sale of such securities for the account of the
Fund and receipt of payment therefor;
2) Upon the receipt of payment in connection with any
repurchase agreement related to such securities
entered into by the Fund;
3) In the case of a sale effected through a Securities
System, in accordance with the provisions of
Section 2.10 hereof;
4) To the depository agent in connection with tender
or other similar offers for portfolio securities of
the Fund;
6
<PAGE>
5) To the issuer thereof or its agent when such
securities are called, redeemed, retired or
otherwise become payable; provided that, in any
such case, the cash or other consideration is to be
delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer
into the name of the Fund or into the name of any
nominee or nominees of the Custodian or into the
name or nominee name of any agent appointed
pursuant to Section 2.9 or into the name or nominee
name of any sub-custodian appointed pursuant to
Article 1; or for exchange for a different number
of bonds, certificates or other evidence
representing the same aggregate face amount or
number of units; provided that, in any such case,
the new securities are to be delivered to the
Custodian;
7) Upon the sale of such securities for the account.
of the Fund, to the broker or its clearing agent,
against a receipt, for examination in accordance
with "street delivery" custom; provided that in any
such case, the Custodian shall have no
responsibility or liability for any loss arising
from the delivery of such securities prior to
receiving payment for such securities except as may
7
<PAGE>
arise from the Custodian's own negligence or
willful misconduct;
8) For exchange or conversion pursuant to any plan of
merger, consolidation, recapitalization,
reorganization or readjustment of the securities of
the issuer of such securities, or pursuant to
provisions for conversion contained in such
securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities
and cash, if any, are to be delivered to the
Custodian;
9) In the case of warrants, rights or similar
securities, the surrender thereof in the exercise
of such warrants, rights or similar securities or
the surrender of interim receipt:s or temporary
securities for definitive securities; provided
that, in any such case, the new securities and
cash, if any, are to be delivered to the Custodian;
10) For delivery in connection with any loans of
securities made by the Fund, but only against
receipt of adequate collateral as agreed upon from
time to time by the Custodian and the Fund, which
may be in the form of cash or obligations issued by
the United States government, its agencies or
instrumentalities, except that in connection with
8
<PAGE>
any loans for which collateral is to be credited to
the Custodian's account in the book-entry system
authorized by the U.S. Department of the Treasury,
the Custodian will not be held liable or
responsible for the delivery of securities owned by
the Fund prior to the receipt of such collateral;
11) For delivery as security in connection with any
borrowings by the Fund requiring a pledge of assets
by the Fund, but only against receipt of amounts
borrowed;
12) For delivery in accordance with the provisions of
any agreement among the Fund, the Custodian and a
broker-dealer registered under the Securities
Exchange Act of 1934 (the "Exchange Act") and a
member of The National Association of Securities
Dealers, Inc. ("NASD"), relating to compliance with
the rules of The Options Clearing Corporation and
of any registered national securities exchange, or
of any similar organization or organizations,
regarding escrow or other arrangements in
connection with transactions by the Fund;
13) For delivery in accordance with the provisions of
any agreement among the Fund, the Custodian, and a
Futures Commission Merchant registered under the
Commodity Exchange Act, relating to compliance with
9
<PAGE>
the rules of the Commodity Futures Trading
Commission and/or any Contract Market, or any
similar organization or organizations, regarding
account deposits in connection with transactions by
the Fund;
14) Upon receipt of instructions from the transfer
agent ("Transfer Agent") for the Fund, for delivery
to such Transfer Agent or to the holders of shares
in connection with distributions in kind, as may be
described from time to time in the Fund's currently
effective prospectus and statement of additional
information ("prospectus"), in satisfaction of
requests by holders of Shares for repurchase or
redemption; and
15) For any other proper corporate purpose, but only
upon receipt of, in addition to Proper
Instructions, a certified copy of a resolution of
the Board of Trustees or of the Executive Committee
signed by an officer of the Fund and certified by
the Secretary or an Assistant Secretary, specifying
the securities to be delivered, setting forth the
purpose for which such delivery is to be made,
declaring such purpose to be a proper corporate
purpose, and naming the person or person; to whom
delivery of such securities shall be made.
10
<PAGE>
2.3 Registration of Securities. Domestic securities held by
the Custodian (other than bearer securities) shall be
registered in the name of the Fund or in the name of any
nominee of the Fund or of any nominee of the Custodian
which nominee shall be assigned exclusively to the Fund,
unless the Fund has authorized in writing the
appointment of a nominee to be used in common with other
registered investment companies having the same
investment adviser as the Fund, or in the name or
nominee name of any agent appointed pursuant to Section
2.9 or in the name or nominee name of any sub-custodian
appointed pursuant to Article 1. All securities accepted
by the Custodian on behalf of the Fund under the terms
of this Contract shall be in "street name" or other good
delivery form. If, however, the Fund directs the
Custodian to maintain securities in "street name", the
Custodian shall utilize its best efforts only to timely
collect income due the Fund on such securities and to
notify the Fund on a best efforts basis only of relevant
corporate actions including, without limitation,
pendency of calls, maturities, tender or exchange
offers.
2.4 Bank Accounts. The Custodian shall open and maintain a
separate bank account or accounts in the United States
in the name of the Fund, subject only to draft or order
11
<PAGE>
by the Custodian acting pursuant to the terms of this
Contract, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by
it from or for the account of the Fund, other than cash
maintained by the Fund in a bank account established and
used in accordance with Rule 17f-3 under the Investment
Company Act of 1940. Funds held by the Custodian for the
Fund may be deposited by it to its credit as Custodian
in the Banking Department of the Custodian or in such
other banks or trust companies as it may in its
discretion deem necessary or desirable; provided,
however, that every such bank or trust company shall be
qualified to act as a custodian under the Investment
Company Act of 1940 and that each such bank or trust
company and the funds to be deposited with each such
bank or trust company shall be approved by vote of a
majority of the Board of Trustees of the Fund. Such
funds shall be deposited by the Custodian in its
capacity as Custodian and shall be withdrawable by the
Custodian only in that capacity.
2.5 Availability of Federal Funds. Upon mutual agreement
between the Fund and the Custodian, the Custodian shall,
upon the receipt of Proper Instructions, make federal
funds available to the Fund as of specified times agreed
upon from time to time by the Fund and the Custodian in
12
<PAGE>
the amount of checks received in payment for Shares of
the Fund which are deposited into the Fund's account.
2.6 Collection of Income. Subject to the provisions of
Section 2.3, the Custodian shall collect on a timely
basis all income and other payments with respect to
United States registered securities held hereunder to
which the Fund shall be entitled either by law or
pursuant to custom in the securities business, and shall
collect on a timely basis all income and other payments
with respect to United States bearer securities if, on
the date of payment by the issuer, such securities are
held by the Custodian or its agent thereof and shall
credit such income, as collected, to the Fund's
custodian account. Without limiting the generality of
the foregoing, the Custodian shall detach and present
for payment all coupons and other income items requiring
presentation as and when they become due and shall
collect interest when due on securities held hereunder.
Income due the Fund on United States securities loaned
pursuant to the provisions of Section 2.2 (10) shall be
the responsibility of the Fund. The Custodian will have
no duty or responsibility in connection therewith, other
than to provide the Fund with such information or data
as may be necessary to assist the Fund in arranging for
13
<PAGE>
the timely delivery to the Custodian of the income to
which the Fund is properly entitled.
2.7 Payment of Fund Monies. Upon receipt of Proper
Instructions, which may be continuing instructions when
deemed appropriate by the parties, the Custodian shall
pay out monies of the Fund in the following cases only:
1) Upon the purchase of domestic securities, options,
futures contracts or options on futures contracts
for the account of the Fund but only (a) against
the delivery of such securities, or evidence of
title to such options, futures contracts or options
on futures contracts, to the Custodian (or any
bank, banking firm or trust company doing business
in the United States or abroad which is qualified
under the Investment Company Act of 1940, as
amended, to act as a custodian and has been
designated by the Custodian as its agent for this
purpose) registered in the name of the Fund or in
the name of a nominee of the Custodian referred to
in Section 2.3 hereof or in proper form for
transfer; (b) in the case of a purchase effected
through a Securities System, in accordance with the
conditions set forth in Section 2.10 hereof; (c) in
the case of a purchase involving the Direct Paper
System, in accordance with the conditions set forth
14
<PAGE>
in Section 2.11; (d) in the case of repurchase
agreements entered into between the Fund and the
Custodian, or another bank, or a broker-dealer
which is a member of NASD, (i) against delivery of
the securities either in certificate form or
through an entry crediting the Custodian's account
at the Federal Reserve Bank with such securities or
(ii) against delivery of the receipt evidencing
purchase by the Fund of securities owned by the
Custodian along with written evidence of the
agreement by the Custodian to repurchase such
securities from the Fund or (e) for transfer to a
time deposit account of the Fund in any bank,
whether domestic or foreign; such transfer may be
effected prior to receipt of a confirmation from a
broker and/or the applicable bank pursuant to
Proper Instructions from the Fund as defined in
Article 5;
2) In connection with conversion, exchange or
surrender of securities owned by the Fund as set
forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued
by the Fund as set forth in Article 4 hereof;
4) For the payment of any expense or liability
incurred by the Fund, including but not limited to
15
<PAGE>
the following payments for the account of the Fund:
interest, taxes, management, accounting, transfer
agent and legal fees, and operating expenses of the
Fund whether or not such expenses are to be in
whole or part capitalized or treated as deferred
expenses;
5) For the payment of any dividends declared pursuant
to the governing documents of the Fund;
6) For payment of the amount of dividends received in
respect of securities sold short;
7) For any other proper purpose, but only upon receipt
of, in addition to Property Instructions, a
certified copy of a resolution of the Board of
Trustees or of the Executive Committee of the Fund
signed by an officer of the Fund and certified by
its Secretary or an Assistant Secretary, specifying
the amount of such payment, setting forth the
purpose for which such payment is to be made,
declaring such purpose to be a proper purpose, and
naming the person or persons to whom such payment
is to be made.
2.8 Liability for Payment in Advance of Receipt of
Securities Purchased. Except as specifically stated
otherwise in this Contract, in any and every case where
payment for purchase of domestic securities for the
16
<PAGE>
account of the Fund is made by the Custodian in advance
of receipt of the securities purchased in the absence of
specific written instructions from the Fund to so pay in
advance, the Custodian shall be absolutely liable to the
Fund for such securities to the same extent as if the
securities had been received by the Custodian.
2.9 Appointment of Agents. The Custodian may at any time or
times in its discretion appoint (and may at any time
remove) any other bank or trust company which is itself
qualification under the Investment Company Act of 1940,
as amended, to act as a custodian, as its agent to carry
out such of the provisions of this Article 2 as the
Custodian may from time to time direct; provided,
however, that the appointment of any agent shall not
relieve the Custodian of its responsibilities or
liabilities hereunder.
2.10 Deposit of Securities in Securities Systems. The
Custodian may deposit and/or maintain domestic
securities owned by the Fund in a clearing agency
registered with the Securities and Exchange Commission
under Section 17A of the Securities Exchange Act of
1934, which acts as a securities depository, or in the
book~entry system authorized by the U.S. Department of
the Treasury and certain federal agencies, collectively
referred to herein as "Securities System" in accordance
17
<PAGE>
with applicable Federal Reserve Board and Securities and
Exchange Commission rules and regulations, if any, and
subject to the following provisions:
1) The Custodian may keep domestic securities of the
Fund in a Securities System provided that such
securities are represented in an account
("Account") of the Custodian in the Securities
System which shall not include any assets of the
Custodian other than assets held as a fiduciary,
custodian or otherwise for customers;
2) The records of the Custodian with respect to
domestic securities of the Fund which are
maintained in a Securities System shall identify by
book-entry those securities belonging to the Fund;
3) The Custodian shall pay for domestic securities
purchased for the account of the Fund upon (i)
receipt of advice from the Securities System that
such securities have been transferred to the
Account, and (ii) the making of an entry on the
records of the Custodian to reflect such payment
and transfer for the account of the Fund. The
Custodian shall transfer domestic securities sold
for the account of the Fund upon (i) receipt of
advice from the Securities System that payment for
such securities has been transferred to the
18
<PAGE>
Account, and (ii) the making of an entry on the
records of the Custodian to reflect such transfer
and payment for the account of the Fund. Copies of
all advices from the Securities System of transfers
of domestic securities for the account of the Fund
shall identify the Fund, be maintained for the Fund
by the Custodian and be provided to the Fund at its
request. Upon request, the Custodian shall furnish
the Fund confirmation of each transfer to or from
the account of the Fund in the form of a written
advice or notice and shall furnish to the Fund
copies of daily transaction sheets reflecting each
day's transactions in the Securities System for the
account of the Fund.
4) The Custodian shall provide the Fund with any
report obtained by the Custodian on the Securities
System's accounting system, internal accounting
control and procedures for safeguarding domestic
securities deposited in the Securities System;
5) The Custodian shall have received the initial or
annual certificate, as the case may be, required by
Article 15 hereof;
6) Anything to the contrary in this Contract
notwithstanding, the Custodian shall be liable to
the Fund for any loss or damage to the Fund
19
<PAGE>
resulting from use of the Securities System by
reason of any negligence, misfeasance or misconduct
of the Custodian or any of its agents or of any of
its or their employees or from failure of the
Custodian or any such agent to enforce effectively
such rights as it may have against the Securities
System; at the election of the Fund, it shall be
entitled to be subrogated to the rights of the
Custodian with respect to any claim against the
Securities System or any other person which the
Custodian may have as a consequence of any such
loss or damage if and to the extent that the Fund
has not been made whole or any such loss or damage.
2.11 Fund Assets Held in the Custodian's Direct Paper System
The Custodian may deposit and/or maintain securities
owned by the Fund in the Direct Paper System of the
Custodian subject to the following provisions:
1) No transaction relating to securities in the Direct
Paper System will be effected in the absence of
Proper Instructions;
2) The Custodian may keep securities of the Fund in
the Direct Paper System only if such securities are
represented in an account ("Account") of the
Custodian in the Direct Paper System which shall
not include any assets of the Custodian other than
20
<PAGE>
assets held as a fiduciary, custodian or otherwise
for customers;
3) The records of the Custodian with respect to
securities of the Fund which are maintained in the
Direct Paper System shall identify by book-entry
those securities belonging to the Fund;
4) The Custodian shall pay for securities purchased
for the account of the Fund upon the making of an
entry on the records of the Custodian to reflect
such payment and transfer of securities to the
account of the Fund. The Custodian shall transfer
securities sold for the account of the Fund upon
the making of an entry on the records of the
Custodian to reflect such transfer and receipt of
payment for the account of the Fund;
5) The Custodian shall furnish the Fund confirmation
of each transfer to or from the account of the
Fund, in the form of a written advice or notice, of
Direct Paper on the next business day following
such transfer and shall furnish to the Fund copies
of daily transaction sheets reflecting each day's
transaction in the Securities System for the
account of the Fund;
6) The Custodian shall provide the Fund with any
report on its system of internal accounting control
21
<PAGE>
as the Fund may reasonably request from time to
time;
2.12 Segregated Account. The Custodian shall upon receipt of
Proper Instructions establish and maintain a segregated
account or account; for and on behalf of the Fund, into
which account or accounts may be transferred cash and/or
securities, including securities maintained in an
account by the Custodian pursuant to Section 2.10
hereof, (i) in accordance with the provisions of any
agreement among the Fund, the Custodian and a broker-
dealer registered under the Exchange Act and a member of
the NASD (or any futures commission merchant registered
under the Commodity Exchange Act), relating to
compliance with the rules of The Options Clearing
Corporation and of any registered national securities
exchange (or the Commodity Futures Trading Commission or
any registered contract market), or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions by the
Fund, (ii) for purposes of segregating cash or
government securities in connection with options
purchased, sold or written by the Fund or commodity
futures contracts or options thereon purchased or sold
by the Fund, (iii) for the purposes of compliance by the
Fund with t]he procedures required by Investment Company
22
<PAGE>
Act Release No. 10666, or any subsequent release or
releases of the Securities and Exchange Commission
relating to the maintenance of segregated accounts by
registered investment companies and (iv) for other
proper corporate purposes, but only, in the case of
clause (iv), upon receipt of, in addition to Proper
Instructions, a certified copy of a resolution of the
Board of Trustees or of the Executive Committee signed
by an officer of the Fund and certified by the Secretary
or an Assistant Secretary, setting forth the purpose or
purposes of such segregated account and declaring such
purposes to be proper corporate purposes.
2.13 Ownership Certificates for Tax Purposes. The Custodian
shall execute ownership and other certificates and
affidavits for all federal and state tax purposes in
connection with receipt of income or other payments with
respect to domestic securities of the Fund held by it
and in connection with transfers of such securities.
2.14 Proxies. The Custodian shall, with respect to the
domestic securities held hereunder, cause to be promptly
executed by the registered holder of such securities, if
the securities are registered otherwise than in the name
of the Fund or a nominee of the Fund, all proxies,
without indication of the manner in which such proxies
are to be voted, and shall promptly deliver to the Fund
23
<PAGE>
such proxies, all proxy soliciting materials and all
notices relating to such securities.
2.15 Communications Relating to Fund Portfolio Securities
Subject to the provisions of Section 2.3, the Custodian
shall transmit promptly to the Fund all written
information (including, without limitation, pendency of
calls and maturities of domestic securities and
expirations of rights in connection therewith and
notices of exercise of call and put options written by
the Fund and the maturity of futures contracts purchased
or sold by the Fund) received by the Custodian from
issuers of the domestic securities being held for the
Fund. With respect to tender or exchange offers, the
Custodian shall transmit promptly to the Fund all
written information received by the Custodian from
issuers of the domestic securities whose tender or
exchange is sought and from the party (or his agents)
making the tender or exchange offer. If the Fund desires
to take action with respect to any tender offer,
exchange offer or any other similar transaction, the
Fund shall notify the Custodian at least three business
days prior to the date on which the Custodian is to take
such action.
24
<PAGE>
3. Duties of the Custodian with Respect to Property of the
Fund Held Outside of the United States
3.1 Appointment of Foreign Sub-Custodians
The Fund hereby authorizes and instructs the Custodian
to employ as sub-custodians for the Fund's securities
and other assets maintained outside the United States
the foreign banking institutions and foreign securities
depositories designated on Schedule A hereto ("foreign
sub-custodians"). Upon receipt of "Proper Instructions",
as defined in Section 5 of this Contract, together with
a certified resolution of the Fund's Board of Trustees,
the Custodian and the Fund may agree to amend Schedule A
hereto from time to time to designate additional foreign
banking institutions and foreign securities depositories
to act as sub-custodian. Upon receipt of Proper
Instructions, the Fund may instruct the Custodian to
cease the employment of any one or more such sub-
custodians for maintaining custody of the Fund's assets.
3.2 Assets to be Held. The Custodian shall limit the
securities and other assets maintained in the custody of
the foreign sub-custodians to: (a) "foreign securities",
as defined in paragraph (c)(l) of Rule 17f-5 under the
Investment Company Act of 1940, and (b) cash and cash
equivalents in such amounts as the Custodian or the Fund
may determine to be reasonably necessary to effect the
25
<PAGE>
Fund's foreign securities transactions. The Custodian
shall identify on its books as belonging to the Fund,
the foreign securities of the Fund held by each foreign
sub-custodian.
3.3 Foreign Securities Depositories. Except as may
otherwise be agreed upon in writing by the Custodian and
the Fund, assets of the Fund shall be maintained in
foreign securities depositories only through
arrangements implemented by the foreign banking
institutions serving as sub-custodians pursuant to the
terms hereof. Where possible, such arrangements shall
include entry into agreements containing the provisions
set forth in Section 3.4 hereof.
3.4 Agreements with Foreign Banking Institutions. Each
agreement with a foreign banking institution shall be
substantially in the form set forth in Exhibit 1 hereto
and shall provide that: (a) the Fund's assets will not
be subject to any right, charge, security interest, lien
or claim of any kind in favor of the foreign banking
institution or its creditors or agent, except a claim of
payment for their safe custody or administration; (b)
beneficial ownership of the Fund~s assets will be freely
transferable without the payment of money or value other
than for custody or administration; (c) adequate records
will be maintained identifying the assets as belonging
26
<PAGE>
to the Fund; (d) officers of or auditors employed by, or
other representatives of the Custodian, including to the
extent permitted under applicable law the independent
public accountants for the Fund, will be given access to
the books and records of the foreign banking institution
relating to its actions under its agreement with the
Custodian; and (e) assets of the Fund held by the
foreign sub-custodian will be subject only to the
instructions of the Custodian or its agents.
3.5 Access of Independent Accountants of the Fund. Upon
request of the Fund, the Custodian will use its best
efforts to arrange for the independent accountants of
the Fund to be afforded access to the books and records
of any foreign banking institution employed as a foreign
sub-custodian insofar as such books and records relate
to the performance of such foreign banking institution
under its agreement with the Custodian.
3.6 Reports by Custodian. The Custodian will supply to the
Fund from time to time, as mutually agreed upon,
statements in respect of the securities and other assets
of the Fund held by foreign sub-custodians, including
but not limited to an identification of entities having
possession of the Fund's securities and other assets and
advices or notifications of any transfers of securities
to or from each custodial account maintained by a
27
<PAGE>
foreign banking institution, for the Custodian on behalf
of the Fund indicating, as to securities acquired for
the Fund,the identity of the entity having physical
possession of such securities.
3.7 Transactions in Foreign Custody Account (a) Except as
otherwise provided in paragraph (b) of this Section 3.7,
the provision of Sections 2.2 and 2.7 of this Contract
shall apply, mutatis mutandis to the foreign securities
of the Fund held outside the United States by foreign
sub-custodians.(b) Notwithstanding any provision of this
Contract to the contrary, settlement and payment for
securities received for the account of the Fund and
delivery of securities maintained for the account of the
Fund may be effected in accordance with the customary
established securities trading or securities processing
practices and procedures in the jurisdiction or market
in which the transaction occurs, including, without
limitation, delivering securities to the purchaser
thereof or to a dealer therefor (or an agent for such
purchaser or dealer)against a receipt with the
expectation of receiving later payment for such
securities from such purchaser or dealer.(c) Securities
maintained in the custody of a foreign sub-custodian may
be maintained in the name of such entity's nominee to
the same extent as set forth in Section 2.3 of this
28
<PAGE>
Contract, and the Fund agrees to hold any such nominee
harmless from any liability as a holder of record of
such securities.
3.8 Liability of Foreign Sub-Custodians. Each agreement
pursuant to which the Custodian employs a foreign
banking institution as a foreign sub-custodian shall
require the institution to exercise reasonable care in
the performance of its duties and to indemnify, and hold
harmless, the Custodian and the Fund from and against
any loss, damage, cost, expense, liability or claim
arising out of or in connection with the institution's
performance of such obligations. At the election of the
Fund, it shall be entitled to be subrogated to the
rights of the Custodian with respect to any claims
against a foreign banking institution as a consequence
of any such loss, damage, cost, expense, liability or
claim if and to the extent that the Fund has not been
made whole for any such loss, damage, cost, expense,
liability or claim.
3.9 Liability of Custodian. The Custodian shall be liable
for the acts or omissions of a foreign banking
institution to the same extent as set forth with respect
to sub-custodians generally in this Contract and,
regardless of whether assets are maintained in the
custody of a foreign banking institution, a foreign
29
<PAGE>
securities depository or a branch of a U.S. bank as
contemplated by paragraph 3.12 hereof, the Custodian
shall not be liable for any loss, damage, cost, expense,
liability or claim resulting from nationalization,
expropriation, currency restrictions, or acts of war or
terrorism or any loss where the sub-custodian has
otherwise exercised reasonable care. Notwithstanding the
foregoing provisions of this paragraph 3.9, in
delegating custody duties to State Street London Ltd.,
the Custodian shall not be relieved of any
responsibility to the Fund for any loss due to such
delegation, except such loss as may result from (a)
political risk (including, but not limited to, exchange
control restrictions, confiscation, expropriation,
nationalization, insurrection, civil strife or armed
hostilities) or (b) other losses (excluding a bankruptcy
or insolvency of State Street London Ltd. not caused by
political risk) due to Acts of God, nuclear incident or
other losses under circumstances where the Custodian and
State Street London Ltd. have exercised reasonable care.
3.10 Reimbursement for Advances. If the Fund requires the
Custodian to advance cash or securities for any purpose
including the purchase or sale of foreign exchange or of
contracts for foreign exchange, or in the event that the
Custodian or its nominee shall incur or be assessed any
30
<PAGE>
taxes, charges, expenses, assessments, claims or
liabilities in connection with the performance of this
Contract, except such as may arise from its or its
nominee's own negligent action, negligent failure to act
or willful misconduct, any property at any time held for
the account of the Fund shall be security therefor and
should the Fund fail to repay the Custodian promptly,
the Custodian shall be entitled to utilize available
cash and to dispose of the Fund assets to the extent
necessary to obtain reimbursement.
3.11 Monitoring Responsibilities. The Custodian shall furnish
annually to the Fund, during the month of June,
information concerning the foreign sub-custodians
employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Fund
"in connection with the initial approval of this
Contract. In addition, the Custodian will promptly
inform the Fund in the event that the Custodian learns
of a material adverse change in the financial condition
of a foreign sub-custodian or any material loss of the
assets of the Fund or in the case of any foreign sub-
custodian not the subject of an exemptive order from the
Securities and Exchange Commission is notified by such
foreign sub-custodian that there appears to be a
substantial likelihood that its shareholders' equity
31
<PAGE>
will decline below $200 million (U.S. dollars or the
equivalent thereof) or that its shareholders' equity has
declined below $200 million (in each case computed in
accordance with generally accepted U.S. accounting
principles).
3.12 Branches of U.S. Banks
(a) Except as otherwise set forth in this Contract, the
provisions hereof shall not apply where the custody of
the Fund assets are! maintained in a foreign branch of a
banking institution which is a "bank" as defined by
Section 2(a)(5) of the Investment Company Act of 1940
meeting the qualification set forth in Section 26(a) of
said Act. The appointment of any such branch as a sub-
custodian shall be governed by paragraph 1 of this
Contract. (b) Cash held for the Fund in the United
Kingdom shall be maintained in an interest bearing
account established for the Fund with the Custodian's
London branch, which account shall be subject to the
direction of the Custodian, State Street London Ltd. or
both.
3.13 Tax Law
The Custodian shall have no responsibility or liability
for any obligations now or hereafter imposed on the Fund
or the Custodian as custodian of the Fund by the tax law
32
<PAGE>
of the United States of America or any state or
political subdivision thereof. It shall be the
responsibility of the Fund to notify the Custodian of
the obligations imposed on the Fund or the Custodian as
custodian of the Fund by the tax law of jurisdictions
other than those mentioned in the above sentence,
including responsibility for withholding and other
taxes, assessments or other governmental charges,
certifications and governmental reporting. The sole
responsibility of the Custodian with regard to such tax
law shall be to use reasonable efforts to assist the
Fund with respect to any claim for exemption or refund
under the tax law of jurisdictions for which the Fund
has provided such information.
4. Payments for Repurchases or Redemptions and Sales of
Shares of the Fund
From such funds as may be available for the purpose but
subject to the limitations of the Declaration of Trust and any
applicable votes of the Board of Trustees of the Fund pursuant
thereto, the Custodian shall, upon receipt of instructions from
the Transfer Agent, make funds available for payment to holders
of Shares who have delivered to the Transfer Agent a request for
redemption or repurchase of their Shares. In connection with the
redemption or repurchase of Shares of the Fund, the Custodian is
authorized upon receipt of instructions from the Transfer Agent
33
<PAGE>
to wire funds to or through a commercial bank designated by the
redeeming shareholders. In connection with the redemption or
repurchase of Shares of the Fund, the Custodian shall honor
checks drawn on the Custodian by a holder of Shares, which checks
have been furnished by the Fund to the holder of Shares, when
presented to the Custodian in accordance with such procedures and
controls as are mutually agreed upon from time to time between
the Fund and the Custodian.
The Custodian shall receive from the distributor for the
Fund's Shares or from the Transfer Agent of the Fund and deposit
into the Fund's account such payments as are received for Shares
of the Fund issued or sold from time to time by the Fund. The
Custodian will provide timely notification to the Fund and the
Transfer Agent of any receipt by it of payments for Shares of the
Fund.
5. Proper Instructions
Proper Instructions as used herein means a writing
signed or initialed by one or more person or persons as the Board
of Trustees shall have from time to time authorized. Each such
writing shall set forth the specific transaction or type of
transaction involved, including a specific statement of the
purpose for which such action is requested. Oral instructions
will be considered Property Instructions if the Custodian
reasonably believes them to have been given by a person
authorized to give such instructions with respect to the
34
<PAGE>
transaction involved. The Fund shall cause all oral instructions
to be confirmed in writing. Upon receipt of a certificate of the
Secretary or an Assistant Secretary as to the authorization by
the Board of Trustees of the Fund accompanied by a detailed
description of procedures approved by the Board of Trustees,
Proper Instructions may include communications effected directly
between electro-mechanical or electronic devices provided that
the Board of Trustees and the Custodian are satisfied that such
procedures afford adequate safeguards for the Fund's assets. For
purposes of this Section, Proper Instructions shall include
instructions received by the Custodian pursuant to any three-
party agreement which requires a segregated asset account in
accordance with Section 2.12.
6. Actions Permitted without Express Authority
The Custodian may in its discretion, without express
authority from the Fund:
1) make payments to itself or others for minor
expenses of handling securities or other similar items relating
to its duties under this Contract, provided that all such
payments shall be accounted for to the Fund;
2) surrender securities in temporary form for
securities in definitive form;
3) endorse for collection, in the name of the Fund,
checks, drafts and other negotiable instruments; and
35
<PAGE>
4) in general, attend to all non-discretionary details
in connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and property of
the Fund except as otherwise directed by the Board of Trustees of
the Fund.
7. Evidence of Authority
The Custodian shall be protected in acting upon any
instructions, notice, request, consent, certificate or other
instrument or paper believed by it to be genuine and to have been
properly executed by or on behalf of the Fund. The Custodian may
receive and accept a certified copy of a vote of the Board of
Trustees of the Fund as conclusive evidence (a) of the authority
of any person to act in accordance with such vote or (b) of any
determination or of any action by the Board of Trustees pursuant
to the Declaration of Trust as described in such vote, and such
vote may be considered as in full force and effect until receipt
by the Custodian of written notice to the contrary.
8. Duties of Custodian with Respect to the Books of Account
and Calculation of Net Asset Value and Net Income
The Custodian shall cooperate with and supply necessary
information to the entity or entities appointed by the Board of
Trustees of the Fund to keep the books of account of the Fund
and/or compute the net asset value per share of the outstanding
shares of the Fund or, if directed in writing to do so by the
Fund, shall itself keep such books of account and/or compute such
36
<PAGE>
net asset value per share. If so directed, the Custodian shall
also calculate daily the net income of the Fund as described in
the Fund's currently effective prospectus and shall advise the
Fund and the Transfer Agent daily of the total amounts of such
net income and, if instructed in writing by an officer of the
Fund to do so, shall advise the Transfer Agent periodically of
the division of such net income among its various components. The
calculations of the net asset value per share and the daily
income of the Fund shall be made at the time or times described
from time to time in the Fund's currently effective prospectus.
9. Records
The Custodian shall create and maintain all records
relating to its activities and obligations under this Contract in
such manner as will meet the obligations of the Fund under the
Investment Company Act of 1940, with particular attention to
Section.31 thereof and Rules 31a-1 and 31a-2 thereunder. All such
records shall be the property of the Fund and shall at all times
during the regular business hours of the Custodian be open for
inspection by duly authorized officers, employees or agents of
the Fund and employees and agents of the Securities and Exchange
Commission. The Custodian shall, at the Fund's request, supply
the Fund with a tabulation of securities owned by the Fund and
held by the Custodia.n and shall, when requested to do so by the
Fund and for such compensation as shall be agreed upon between
37
<PAGE>
the Fund and the Custodian, include certificate numbers in such
tabulations.
10. Opinion of Fund's Independent Accountant
The Custodian shall take all reasonable action, as the
Fund may from time to time request, to obtain from year to year
favorable opinions from the Fund's independent accountants with
respect to its activities hereunder in connection with the
preparation of the Fund's Form N-1A, and Form N-SAR or other
annual reports to the Securities and Exchange Commission and with
respect to any other requirements of such Commission.
11. Reports to Fund by Independent Public Accountants
The Custodian shall provide the Fund, at such times as
the Fund may reasonably require, with reports by independent
public accountants on the accounting system, internal accounting
control and procedures for safeguarding securities, futures
contracts and options on futures contracts, including domestic
securities deposited and/or maintained in a Securities System,
relating to the services provided by the Custodian under this
Contract; such reports shall be of sufficient scope and in
sufficient detail, as may reasonably be required by the Fund to
provide reasonable assurance that any material inadequacies would
be disclosed by such examination, and, if there are no such
inadequacies, the reports shall so state.
38
<PAGE>
12. Compensation of Custodian
The Custodian shall. be entitled to reasonable
compensation for its services and expenses as Custodian, as
agreed upon from time to time between the Fund and the Custodian.
13. Responsibility of Custodian
So long as and to the extent that it is in the exercise
of reasonable care, the Custodian shall not be responsible for
the title, validity or genuineness of any property or evidence of
title thereto received by it or delivered by it pursuant to this
Contract and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party
or parties, including any futures commission merchant acting
pursuant to the terms of a three-party futures or options
agreement. The Custodian shall be held to the exercise of
reasonable care in carrying out the provisions of this Contract,
but shall be kept indemnified by and shall be without liability
to the Fund for any action taken or omitted by it in good faith
without negligence. It shall be entitled to rely on and may act
upon advice of counsel (who may be counsel for the Fund) on all
matters, and shall be without liability for any action reasonably
taken or omitted pursuant to such advice.
The Custodian shall be liable for the acts or omissions
of a foreign banking institution appointed pursuant to the
provisions of Article 3 to the same extent as set forth in
39
<PAGE>
Article 1 hereof with respect to sub-custodians located in the
United States (except as specifically provided in Article 3.9)
and, regardless of whether assets are maintained in the custody
of a foreign banking institution, a foreign securities depository
or a branch of a U.S. bank as contemplated by paragraph 3.12
hereof, the Custodian shall not be liable for any loss, damage,
cost, expense, liability or claim resulting from, or caused by,
the direction of or authorization by the Fund to maintain custody
or any securities or cash of the Fund in a foreign country
including, but not limited to, losses resulting from
nationalization, expropriation, currency restrictions, or acts of
war or terrorism.
If the Fund requires the Custodian to take any action
with respect to securities, which action involves the payment of
money or which action may, in the opinion of the Custodian,
result in the Custodian or its nominee assigned to the Fund being
liable for the payment of money or incurring liability of some
other form, the Fund, as a prerequisite to requiring the
Custodian to take such action, shall provide indemnity to the
Custodian in an amount and form satisfactory to it.
If the Fund requires the Custodian, its affiliates,
subsidiaries or agents, to advance cash or securities for any
purpose (including but not limited to securities settlements,
foreign exchange contracts and assumed settlement) or in the
event that the Custodian or its nominee shall incur or be
40
<PAGE>
assessed any taxes, charges, expenses, assessments, claims or
liabilities in connection with the performance of this Contract,
except such as may arise from its or its nominee's own negligent
action, negligent failure to act or willful misconduct, any
property at any time held for the account of the Fund shall be
security therefor and should the Fund fail to repay the Custodian
promptly, the Custodian shall be entitled to utilize available
cash and to dispose of the Fund assets to the extent necessary to
obtain reimbursement.
14. Effective Period, Termination and Amendment
This Contract shall become effective as of its
execution, shall continue in full force and effect until
terminated as hereinafter provided, may be amended at any time by
mutual agreement of the parties hereto and may be terminated by
either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take
effect not sooner than thirty (30) days after the date of such
delivery or mailing; provided, however that the Custodian shall
not act under Section 2.10 hereof in the absence of receipt of an
initial certificate of the Secretary or an Assistant Secretary
that the Board of Trustees of the Fund has approved the initial
use of a particular Securities System and the receipt of an
annual certificate of the Secretary or an Assistant Secretary
that the Board of Trustees has reviewed the use by the Fund of
such Securities System, as required in each case by Rule 17f-4
41
<PAGE>
under the Investment Company Act of 1940, as amended and that the
Custodian shall not act under Section 2.11 hereof in the absence
of receipt of an initial certificate of the Secretary or an
Assistant Secretary that the Board of Trustees has approved the
initial use of the Direct Paper System and the receipt of an
annual certificate of the Secretary or an Assistant Secretary
that the Board of Trustees has reviewed the use by the Fund of
the Direct Paper System; provided further, however, that the Fund
shall not amend or terminate this Contract in contravention of
any applicable federal or state regulations, or any provision of
the Declaration of Trust, and further provided, that the Fund may
at any time by action of its Board of Trustees (i) substitute
another bank or trust company for the Custodian by giving notice
as described above to the Custodian, or (ii) immediately
terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the Comptroller of
the Currency or upon the happening of a like event at the
direction of an appropriate regulatory agency or court of
competent jurisdiction.
Upon termination of the Contract, the Fund shall pay to
the Custodian such compensation as may be due as of the date of
such termination and shall likewise reimburse the Custodian for
its costs, expenses and disbursements.
42
<PAGE>
15. Successor Custodian
If a successor custodian shall be appointed by the Board
of Trustees of the Fund, the Custodian shall, upon termination,
deliver to such successor custodian at the office of the
Custodian, duly endorsed and in the form for transfer, all
securities then held by it hereunder and shall transfer to an
account of the successor custodian all of the Fund's securities
held in a Securities System.
If no such successor custodian shall be appointed, the
Custodian shall, in like manner, upon receipt of a certified copy
of a vote of the Board of Trustees of the Fund, deliver at the
office of the Custodian and transfer such securities, funds and
other properties in accordance with such vote.
In the event that no written order designating a
successor custodian or certified copy of a vote of the Board of
Trustees shall have been delivered to the Custodian on or before
the date when such termination shall become effective, then the
Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company
Act of 1940, doing business in Boston, Massachusetts, of its own
selection, having an aggregate capital, surplus, and undivided
profits, as shown by its last published report, of not less than
$25,000,000, all securities, funds and other properties held by
the Custodian and all instruments held by the Custodian relative
thereto and all other property held by it under this Contract and
43
<PAGE>
to transfer to an account of such successor custodian all of the
Fund's securities held in any Securities System. Thereafter, such
bank or trust company shall be the successor of the Custodian
under this Contract.
In the event that securities, funds and other properties
remain in the possession of the Custodian after the date of
termination hereof owing to failure of the Fund to procure the
certified copy or the vote referred to or of the Board of
Trustees to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period
as the Custodian retains possession of such securities, funds and
other properties and the provisions of this Contract relating to
the duties and obligations of the Custodian shall remain in full
force and effect.
16. Interpretive and Additional Provisions
In connection with the operation of this Contract, the
Custodian and the Fund may from time to time agree on such
provisions interpretive of or in addition to the provisions of
this Contract as may in their joint opinion be consistent with
the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both
parties and shall be annexed hereto, provided that no such
interpretive or additional provisions shall contravene any
applicable federal or state regulations or any provision of the
Declaration of Trust of the Fund. No interpretive or additional
44
<PAGE>
provisions made as provided in the preceding sentence shall be
deemed to be an amendment of this Contract.
17. Massachusetts Law to Apply
This Contract shall be construed and the provisions
thereof interpreted under and in accordance with laws of the
Commonwealth of Massachusetts.
18. Prior Contracts
This Contract supersedes and terminates, as of the date
hereof, all prior contracts between the Fund and the Custodian
relating to the custody of the Fund's assets.
19. Shareholder Communications
Securities and Exchange Commission Rule 14b-2 requires
banks which hold securities for the account of customers to
respond to requests by issuers of securities for the names,
addresses and holdings of beneficial owners of securities of that
issuer held by the bank unless the beneficial owner has expressly
objected to disclosure of this information. In order to comply
with the rule, the Custodian needs the Fund to indicate whether
it authorizes the Custodian to provide the Fund's name, address,
and share position to requesting companies whose securities the
Fund owns. If the Fund tells the Custodian "no", the Custodian
will not provide this information to requesting companies. If the
Fund tells the Custodian "yes" or does not check either "yes" or
"no" below, the Custodian is required by the rule to treat the
Fund as consenting to disclosure of this information for all
45
<PAGE>
securities owned by the Fund or any funds or accounts established
by the Fund. For the Fund's protection, the Rule prohibits the
requesting company from using the Fund's name and address for any
purpose other than corporate communications. Please indicate
below whether the Fund consents or objects by checking one of the
alternatives below.
YES [ ] The Custodian is authorized to release the
Fund's name, address, and share positions.
NO [ ] The Custodian is not authorized to release the
Fund's name, address, and share positions.
IN WITNESS WHEREOF, each of the parties has caused this
instrument to be executed in its name and behalf by its duly
authorized representative and its seal to be hereunder affixed as
of the 18 day of January , 1994.
ATTEST AFD EXCHANGE RESERVES
/s/ Emilie D. Wrapp /s/ Wayne D. Lyski
___________________ _____________________
Emilie D. Wrapp Wayne D. Lyski
Assistant Secretary Senior Vice President
ATTEST STATE STREET BANK AND TRUST
COMPANY
/s/ By /s/ Ronald E. Logue
___________________ _________________________
Assistant Secretary Executive Vice President
46
<PAGE>
Schedule A
The following foreign banking institutions and foreign
securities depositories have been approved by the Board of
Trustees of AFD Exchange Reserves for use as sub-custodians for
the Fund's securities and other assets:
(Insert banks and securities depositories)
Certified:
/s/
____________________________
Fund's Authorized Officer
Date: January 18, 1994
47
<PAGE>
EXHIBIT 1
SUBCUSTODIAN AGREEMENT
AGREEMENT made this ______________; between State Street
Bank and Trust Company, A Massachusetts Trust Company
(hereinafter referred to as the "Custodian"), having its
principal place of business at 225 Franklin Street, Boston, MA,
and __________________ (hereinafter referred to as the
"Subcustodian"), a bank organized under the laws of
________________ and having its registered office at ____________
________________________________________________________________.
WHEREAS, Custodian has been appointed to act as Trustee,
Custodian or Subcustodian of securities and monies on behalf of
certain of its customers including, without limitation,
collective investment undertakings, investment companies subject
to the U.S. Investment Company Act of 1940, as amended, and
employee benefit plans subject to the U.S. Employee Retirement
Income Security Act of 1974, as amended;
WHEREAS, Custodian wishes to establish Accounts (the
"Accounts") with the Subcustodian to hold and maintain certain
property for which Custodian is responsible as custodian; and
WHEREAS, Subcustodian agrees to establish the Accounts
and to hold and maintain all Property in the Accounts in
accordance with the terms and conditions herein set forth.
NOW THEREFORE, in consideration of the mutual covenants
and agreements hereinafter contained, the Custodian and the
Subcustodian agree as follows:
I. The Account
A. Establishment of the Account
Custodian hereby, requests that subcustodian establish
for each client of the Custodian an Account which shall be
composed of:
1. A Custody Account for any and all Securities (as
hereinafter defined) from time to time received by Subcustodian
therefor, and
2. A Deposit Account for any and all Cash (as
hereinafter defined) from time to time received by Subcustodian
therefor.
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<PAGE>
B. Use of the Account
The Account shall be used exclusively to hold, acquire,
transfer or otherwise care for, on behalf of Custodian as
custodian and the customers of Custodian and not for custodian's
own interest, Securities, and such Cash or cash equivalents as
are transferred to subcustodian or as are received in payment of
any transfer of, or as payment on, or interest on, or dividend
from, any such Securities (herein collectively called "Cash").
C. Transfer of Property in the Account
Beneficial ownership of the Securities and Cash in the
Account shall be freely transferable without payment of money or
value other than for safe custody and administration.
D. Ownership and Segregation of Property in Account
The ownership of the property in the Account, whether
Securities, Cash or both, and whether any such property is held
by Subcustodian in an Eligible Depository, shall be clearly
recorded on Subcustodian's books as belonging to custodian on
behalf of Custodian's customers, and not for custodian' S own
interest and, to the extent that Securities are physically held
in the Account, such Securities shall also be physically
segregated from the general assets of Subcustodian, the assets of
Custodian in its individual capacity and the assets of
Subcustodian's other customers. In addition, Subcustodian shall
maintain such other records as may be necessary to identify the
property hereunder as belonging to each Account.
E. Registration of Securities in the Account
Securities which are eligible for deposit in a
depository as provided for in Paragraph III may be maintained
with the depository in an account for Subcustodian's customers.
Securities which are not held in a depository and that are
ordinarily held in registered form will be registered in the name
of the Sub-custodian or in the name of Sub-custodian's nominee,
unless alternate Instructions are furnished by custodian.
II. Services to be Provided by the Subcustodian
The Services Subcustodian will provide to Custodian and
the manner in which such services will be performed will be as
set forth below in this Agreement.
49
<PAGE>
A. Services Performed Pursuant to Instructions
All transactions involving the Securities and Cash in
the Account shall be ~executed solely in accordance with
custodian's Instructions as that term is defined in Paragraph IV
hereof, except those described in Paragraph B below.
B. Services to be Performed without Instructions
Subcustodian will, unless it receives Instructions from
custodian to the contrary:
1. Collect Cash
Promptly collect and receive all dividends, income,
principal, proceeds from transfer and other payments with respect
to property held in the Account, and present for payment all
Securities held in the Account which are called, redeemed or
retired or otherwise become payable and all coupons and other
income items which call for payment upon presentation, and credit
Cash receipts therefrom to the Deposit Account.
2. Exchange Securities
Promptly exchange Securities where the exchange is
purely ministerial including, without limitation, the exchange of
temporary Securities for those in definitive form and the
exchange of warrants, or other documents of entitlement to
Securities, for the Securities themselves.
3. Sale of Rights and Fractional Interests
Whenever notification of a rights entitlement or a
fractional interest resulting from a rights issue, stock dividend
or stock split is received for the Account and such rights
entitlement or fractional interest bears an expiration date,
Subcustodian will promptly endeavor to obtain Custodian's
Instructions, but should these not be received in time for
Subcustodian to take timely action, subcustodian is authorized to
sell such rights entitlement or fractional interest and to credit
the Account.
4. Execute Certificates
Execute in Custodians name for the Account, whenever
subcustodian deems it appropriate, such ownership and other
certificates as may be required to obtain the payment of income
from the Securities held in the Account.
50
<PAGE>
5. Pay Taxes and Receive Refunds
To pay or cause to be paid from the Account any and all
taxes and levies in the nature of taxes imposed on the property
in the Account by any governmental authority, and to take all
steps necessary to obtain all tax exemptions, privileges or other
benefits, including reclaiming and recovering any withholding
tax, relating to the Account and to execute any declarations,
affidavits, or certificates of ownership which may be necessary
in connection therewith.
6. Prevent Losses
Take such steps as may be reasonably necessary to
secure, or otherwise ]prevent the loss of, entitlements attached
to or otherwise relating to property held in the Account.
C. Additional Services
1. Transmission of Notices of Corporate Action
By such means as will permit custodian to take timely
action with respect thereto, Subcustodian will promptly notify
Custodian upon receiving notices or reports, or otherwise
becoming aware, of corporate action affecting Securities held in
the Account (including, but not limited to, calls for redemption,
mergers, consolidations, reorganizations, recapitalizations,
tender offers, rights offerings, exchanges, subscriptions and
other offerings) and dividend, interest and other income payments
relating to such Securities.
2. Communications Regarding the Exercise of
Entitlements
Upon request by Custodian, subcustodian will promptly
deliver, or cause any Eligible Depository authorized and acting
hereunder to deliver, to Custodian all notices, proxies, proxy
soliciting materials and other communications that call for
voting or the exercise of rights or other specific action
(including material relative to legal proceedings intended to be
transmitted to security holders) relating to Securities held in
the Account to the extent received by Subcustodian or said
Eligible Depository, such proxies or any voting instruments to be
executed by the registered holder of the Securities, but without
indicating the manner in which such Securities are to be voted.
3. Monitor Financial Service
In furtherance of its obligations under this Agreement,
Subcustodian will monitor a leading financial service with
respect to announcements and other information respecting
51
<PAGE>
property held in the Account, including announcements and other
information with respect to corporate actions and dividend,
interest and other income payments.
III. Use of Securities Depository
Subcustodian may, with the prior written approval of
custodian, maintain all or any part of the Securities in the
Account with a securities depository or clearing agency which is
incorporated or organized under the laws of a country other than
the United States of America and is supervised or regulated by a
government agency or regulatory authority in the foreign
jurisdiction having authority over such depositories or agencies,
and which operates (a) the central system for handling of
designated securities or equivalent book entries in or (b) a
transnational system for the central handling of securities or
equivalent book entries (herein called "Eligible Depository"),
provided however, that, while so maintained, such Securities
shall be subject only to the directions of Subcustodian, and that
Subcustodian duties, obligations and responsibilities with regard
to such Securities shall be the same as if such Securities were
held by subcustodian on its premises.
IV. Claims Against Property in the Account
The property in the account shall not be subject to any
right, charge, security interest, lien or claim of any kind
(collectively "Charges") in favor of Subcustodian or any Eligible
Depository or any creditor of Subcustodian or of any Eligible
Depository except a claim for payment by Subcustodian for such
property's safe custody or administration in accordance with the
terms of this Agreement. Subcustodian will immediately notify
Custodian of any attempt by any party to assert any Charge
against the property held in the Account and shall take all
lawful actions to protect such property from such Charges until
custodian has had reasonable time to respond to such notice.
V. Subcustodian's Warranty
Subcustodian Represents and Warrants That:
(A) It is a branch of a "qualified U.S. bank" or it is an
"eligible foreign custodian" as those terms are defined in Rule
17f-5 of the investment Company Act of 1940, a copy of which is
attached hereto as Attachment A (the "Rule"), and Subcustodian
shall immediately notify Custodian, in writing or by other
authorized means, in the event that there appears to be a
substantial likelihood that Subcustodian will cease to qualify
under the Rule as currently in effect or as hereafter amended, or
(b) It is the subject of an exemptive order issued by the
United States Securities and Exchange Commission which order
52
<PAGE>
permits Custodian to employ Subcustodian notwithstanding the fact
that Subcustodian fails to qualify under the terms of the Rule,
and Subcustodian shall immediately notify Custodian, in writing
or by other authorized means, if for any reason it is no longer
covered by such exemptive order.
Upon receipt of any such notification required under (A)
or (B) of this section, Custodian may terminate this Agreement
immediately without prior notice to Subcustodian.
VI. Definitions
A. Instructions
The term "Instructions" means
1. instructions in writing signed by authorized
individuals designated as such by custodian;
2. telex or tested telex instructions of Custodian;
3. other forms of instructions in computer readable
form as shall customarily be used for the transmission of like
information, and
4. such other forms of communication as from time to
time may be agreed upon by Custodian and Subcustodian, which
Subcustodian believes in good faith to have been given by
custodian or which are transmitted with proper testing or
authentication pursuant to terms and conditions which custodian
may specify.
Unless otherwise expressly provided, all Instructions
shall continue in full force and effect until canceled or
superseded. Subcustodian shall act in accordance with
Instructions and shall not be liable for any act or omission in
respect of any Instruction except in the case of willful default,
negligence, fraud, bad faith, willful misconduct, or reckless
disregard of duties on the part of Subcustodian. Subcustodian in
executing all Instructions will take relevant action in
accordance with accepted industry practice and local settlement
practices.
B. Account
The term "Account" means collectively the Custody
Account, and the Deposit Account.
53
<PAGE>
C. Securities
The term "Securities" includes, without limitation,
stocks, shares, bonds, debentures, debt securities (convertible
or non-convertible), notes, or other obligations or securities
and any certificates, receipts, futures contracts, foreign
exchange contracts, options, warrants, scrip or other instruments
representing rights to receive, purchase or subscribe for the
same, or evidencing or representing any other rights or interests
therein, or in any property or assets.
VII. Miscellaneous Provisions
A. Statements Regarding the Account
Subcustodian will supply custodian with such statements
regarding the Account as Custodian may request, including the
identity and location of any Eligible Depository authorized and
acting hereunder. In addition, Subcustodian will supply custodian
an advice or notification of any transfers of Securities to or
from the Account indicating, as to Securities acquired for the
Account, if applicable, the Eligible Depository having physical
possession of such securities.
B. Examination of Books and Records
Subcustodian agrees that its books and records relating
to the Account and Sub-custodian's actions under this agreement
shall be open to the physical, on-premises inspection and audit
at reasonable times by officers of, auditors employed by, or
other representatives of Custodian including (to the extent
permitted under the laws of ________________) the independent
public accountants for any customer of subcustodian whose
property is being held hereunder) and such books and records
shall be retained for such period as shall be agreed upon by
Custodian and Subcustodian.
As Custodian may reasonably request from time to time,
subcustodian will furnish its auditor's reports on its system of
internal controls, and subcustodian will use its best efforts to
obtain and furnish similar reports of any Eligible Depository
authorized and acting hereunder.
C. Standard of Care
In holding, maintaining, servicing and disposing of
Property under this Agreement, and in fulfilling any other
obligations hereunder, Subcustodian shall exercise the same
standard of care that it exercises over its own assets, provided
that Subcustodian shall exercise at least the degree of care and
maintain adequate insurance as expected of a prudent professional
54
<PAGE>
Subcustodian for hire and shall assume the burden of proving that
it has exercised such care in its maintenance of Property held by
Subcustodian in its Accounts. The maintenance of the Property in
an Eligible Depository shall not affect Subcustodian's standard
of care, and Subcustodian will remain as fully responsible for
any loss or damage to such securities as if it had itself
retained physical possession of them. Subcustodian shall
indemnify and hold harmless Custodian and each of custodian's
customers from and against any loss, damage, cost, expense,
liability or claim (including reasonable attorney's fees) arising
out of or in connection with the improper or negligent
performance or the nonperformance of the duties of Subcustodian.
Subcustodian shall be responsible for complying with all
provisions of the laws of _ , or any other law, applicable to
Subcustodian in connection with its duties hereunder, including
(but not limited to) the payment of all transfer taxes or other
taxes and compliance with any currency restrictions and
securities laws in connection with its duties as Subcustodian.
D. Loss of Cash or Securities
Subcustodian agrees that, in the event of any loss of
Securities or Cash in the Account, subcustodian will use its best
efforts to ascertain the circumstances relating to such loss and
will promptly report the same to Custodian and shall use every
legal means available to it to effect the quickest possible
recovery.
E. Compensation of Subcustodian
Custodian agrees to pay to subcustodian from time to
time such compensation for its services and such out-of-pocket or
incidental expenses of Subcustodian pursuant to this Agreement as
may be mutually agreed upon in writing from time to time.
F. Operating Requirements
The Subcustodian agrees to follow such Operating
Requirements as the Custodian may establish from time to time. A
copy of the current custodian Operating Requirements is attached
as Attachment B to this Agreement.
G. Termination
This Agreement may be terminated by Subcustodian or
custodian on 60 days' written notice to the other party, sent by
registered mail, provided that any such notice, whether given by
Subcustodian or custodian, shall be followed within 60 days by
instructions specifying the names of the persons to whom
Subcustodian shall deliver the Securities in the Account and to
55
<PAGE>
whom the Cash in the Account shall be paid. If within 60 days
following the giving of such notice of termination, Subcustodian
does not receive such Instructions, Subcustodian shall continue
to hold such Securities and Cash subject to this Agreement until
such Instructions are given. The obligations of the parties under
this Agreement shall survive the termination of this Agreement.
H. Notices
Unless otherwise specified in this Agreement, all
notices and communications with respect to matters contemplated
by this Agreement shall be in writing, and delivered by mail,
postage prepaid, telex, SWIFT, or other mutually agreed
telecommunication methods to the following addresses (or to such
other address as either party hereto may from time to time
designate by notice duly given in accordance with this
paragraph):
To Subcustodian:
To Custodian: State Street Bank and Trust
Company
Securities Operations/Network
Administration
P.O. Box 1631
Boston, Massachusetts 02105
I. Confidentiality
Subcustodian and Custodian shall each use its best
efforts to maintain the confidentiality of the property in the
Account and the beneficial owners thereof, subject, however, to
the provisions of any laws requiring disclosure. In addition,
Subcustodian shall safeguard any test keys, identification codes
or other security devices which custodian shall make available to
it. The Subcustodian further agrees it will not disclose the
existence of this Agreement or any current business relationship
unless compelled by applicable law or regulation or unless it has
secured the Custodian's written consent.
J. Assignment
This Agreement shall not be assignable by either party
but shall bind any successor in interest of Custodian and
Subcustodian respectively.
K. Governing Law
This Agreement shall be governed by and construed in
accordance with the laws of ___________________________. To the
extent inconsistent with this Agreement or Custodian's Operating
56
<PAGE>
Requirements as attached hereto, Subcustodian's rules and
conditions regarding accounts generally or custody accounts
specifically shall not apply.
CUSTODIAN: STATE STREET BANK AND TRUST COMPANY
By:________________________
Date:______________________
AGREED TO BY SUBCUSTODIAN:
By:_______________________
Date:_____________________
57
00250163.AM2
<PAGE>
ALLIANCE FUND SERVICES, INC.
TRANSFER AGENCY AGREEMENT
AGREEMENT, dated as of January 18, 1994, between
AFD Exchange Reserves, a Massachusetts business trust and an
open-end investment company registered with the Securities
and Exchange Commission (the "SEC") under the Investment
Company Act of 1940 (the "Investment Company Act"), having
its principal place of business at 1345 Avenue of Americas,
New York, New York 10105 (the "Fund"), and ALLIANCE FUND
SERVICES, INC., a Delaware corporation registered with the
SEC as a transfer agent under the Securities Exchange Act of
1934, having its principal place of business at 500 Plaza
Drive, Secaucus, New Jersey 07094 ("Fund Services"),
provides as follows:
WHEREAS, Fund Services has agreed to act as
transfer agent to the Fund for the purpose of recording the
transfer, issuance and redemption of shares of each series
of the common stock or shares of beneficial interest, as
applicable, of the Fund ("Shares" or "Shares of a Series"),
transferring the Shares, disbursing dividends and other
distributions to shareholders of the Fund, and performing
such other services as may be agreed to pursuant hereto;
NOW THEREFORE, for and in consideration of the
mutual covenants and agreements contained herein, the
parties do hereby agree as follows:
<PAGE>
SECTION 1. The Fund hereby appoints Fund Services
as its transfer agent, dividend disbursing agent and
shareholder servicing agent for the Shares, and Fund
Services agrees to act in such capacities upon the terms set
forth in this Agreement. Capitalized terms used in this
Agreement and not otherwise defined shall have the meanings
assigned to them in SECTION 30.
SECTION 2.
(a) The Fund shall provide Fund Services with
copies of the following documents:
(1) Specimens of all forms of certificates
for Shares;
(2) Specimens of all account application
forms and other documents relating to Shareholders'
accounts;
(3) Copies of each Prospectus;
(4) Specimens of all documents relating to
withdrawal plans instituted by the Fund, as described in
SECTION 16; and
(5) Specimens of all amendments to any of the
foregoing documents.
(b) The Fund shall furnish to Fund Services a
supply of blank Share Certificates for the Shares and, from
time to time, will renew such supply upon Fund Services'
request. Blank Share Certificates shall be signed manually
2
<PAGE>
or by facsimile signatures of officers of the Fund
authorized to sign by law or pursuant to the by-laws of the
Fund and, if required by Fund Services, shall bear the
Fund's seal or a facsimile thereof.
SECTION 3. Fund Services shall make original
issues of Shares in accordance with SECTIONS 13 and 14 and
the Prospectus upon receipt of (i) Written Instructions
requesting the issuance, (ii) a certified copy of a
resolution of the Fund's Board of Directors or Trustees
authorizing the issuance, (iii) necessary funds for the
payment of any original issue tax applicable to such Shares,
and (iv) an opinion of the Fund's counsel as to the legality
and validity of the issuance, which opinion may provide that
it is contingent upon the filing by the Fund of an
appropriate notice with the SEC, as required by Rule 24f-2
of the Investment Company Act, as amended from time to time.
SECTION 4. Transfers of Shares shall be registered
and, subject to the provisions of SECTION 10 in the case of
Shares evidenced by Share Certificates, new Share
Certificates shall be issued by Fund Services upon surrender
of outstanding Share Certificates in the form deemed by Fund
Services to be properly endorsed for transfer, which form
shall include (i) all necessary endorsers' signatures
guaranteed by a member firm of a national securities
exchange or a domestic commercial bank or through other
3
<PAGE>
procedures mutually agreed to between the Fund and Fund
Services, (ii) such assurances as Fund Services may deem
necessary to evidence the genuineness and effectiveness of
each endorsement and (iii) satisfactory evidence of
compliance with all applicable laws relating to the payment
or collection of taxes.
SECTION 5. Fund Services shall forward Share
Certificates in "non-negotiable" form by first-class or
registered mail, or by whatever means Fund Services deems
equally reliable and expeditious. While in transit to the
addressee, all deliveries of Share Certificates shall be
insured by Fund Services as it deems appropriate. Fund
Services shall not mail Share Certificates in "negotiable"
form, unless requested in writing by the Fund and fully
indemnified by the Fund to Fund Services' satisfaction.
SECTION 6. In registering transfers of Shares,
Fund Services may rely upon the Uniform Commercial Code as
in effect from time to time in the State in which the Fund
is incorporated or organized or, if appropriate, in the
State of New Jersey; provided, that Fund Services may rely
in addition or alternatively on any other statutes in effect
in the State of New Jersey or in the state under the laws of
which the Fund is incorporated or organized that, in the
opinion of Fund Services' counsel, protect Fund Services and
the Fund from liability arising from (i) not requiring
4
<PAGE>
complete documentation in connection with an issuance or
transfer, (ii) registering a transfer without an adverse
claim inquiry, (iii) delaying registration for purposes of
an adverse claim inquiry or (iv) refusing registration in
connection with an adverse claim.
SECTION 7. Fund Services may issue new Share
Certificates in place of those lost, destroyed or stolen,
upon receiving indemnity satisfactory to Fund Services; and
may issue new Share Certificates in exchange for, and upon
surrender of, mutilated Share Certificates as Fund Services
deems appropriate.
SECTION 8. Unless otherwise directed by the Fund,
Fund Services may issue or register Share Certificates
reflecting the signature, or facsimile thereof, of an
officer who has died, resigned or been removed by the Fund.
The Fund shall file promptly with Fund Services' approval,
adoption or ratification of such action as may be required
by law or by Fund Services.
SECTION 9. Fund Services shall maintain customary
stock registry records for Shares of each Series noting the
issuance, transfer or redemption of Shares and the issuance
and transfer of Share Certificates. Fund Services may also
maintain for Shares of each Series an account entitled
"Unissued Certificate Account," in which Fund Services will
record the Shares, and fractions thereof, issued and
5
<PAGE>
outstanding from time to time for which issuance of Share
Certificates has not been requested. Fund Services is
authorized to keep records for Shares of each Series
containing the names and addresses of record of
Shareholders, and the number of Shares, and fractions
thereof, from time to time owned by them for which no Share
Certificates are outstanding. Each Shareholder will be
assigned a single account number for Shares of each Series,
even though Shares for which Certificates have been issued
will be accounted for separately.
SECTION 10. Fund Services shall issue Share
Certificates for Shares only upon receipt of a written
request from a Shareholder and as authorized by the Fund.
If Shares are purchased or transferred without a request for
the issuance of a Share Certificate, Fund Services shall
merely note on its stock registry records the issuance or
transfer of the Shares and fractions thereof and credit or
debit, as appropriate, the Unissued Certificate Account and
the respective Shareholders' accounts with the Shares.
Whenever Shares, and fractions thereof, owned by
Shareholders are surrendered for redemption, Fund Services
may process the transactions by making appropriate entries
in the stock transfer records, and debiting the Unissued
Certificate Account and the record of issued Shares
6
<PAGE>
outstanding; it shall be unnecessary for Fund Services to
reissue Share Certificates in the name of the Fund.
SECTION 11. Fund Services shall also perform the
usual duties and function required of a stock transfer agent
for a corporation, including but not limited to (i) issuing
Share Certificates as treasury Shares, as directed by
Written Instructions, and (ii) transferring Share
Certificates from one Shareholder to another in the usual
manner. Fund Services may rely conclusively and act without
further investigation upon any list, instruction,
certification, authorization, Share Certificate or other
instrument or paper reasonably believed by it in good faith
to be genuine and unaltered, and to have been signed,
countersigned or executed or authorized by a duly-authorized
person or persons, or by the Fund, or upon the advice of
counsel for the Fund or for Fund Services. Fund Services
may record any transfer of Share Certificates which it
reasonably believes in good faith to have been duly
authorized, or may refuse to record any transfer of Share
Certificates if, in good faith, it reasonably deems such
refusal necessary in order to avoid any liability on the
part of either the Fund or Fund Services.
SECTION 12. Fund Services shall notify the Fund of
any request or demand for the inspection of the Fund's share
records. Fund Services shall abide by the Fund's
7
<PAGE>
instructions for granting or denying the inspection;
provided, however, Fund Services may grant the inspection
without such instructions if it is advised by its counsel
that failure to do so will result in liability to Fund
Services.
SECTION 13. Fund Services shall observe the
following procedures in handling funds received:
(a) Upon receipt at the office designated by the
Fund of any check or other order drawn or endorsed to the
Fund or otherwise identified as being for the account of the
Fund, and, in the case of a new account, accompanied by a
new account application or sufficient information to
establish an account as provided in the Prospectus, Fund
Services shall stamp the transmittal document accompanying
such check or other order with the name of the Fund and the
time and date of receipt and shall forthwith deposit the
proceeds thereof in the custodial account of the Fund.
(b) In the event that any check or other order for
the purchase of Shares is returned unpaid for any reason,
Fund Services shall, in the absence of other instructions
from the Fund, advise the Fund of the returned check and
prepare such documents and information as may be necessary
to cancel promptly any Shares purchased on the basis of such
returned check and any accumulated income dividends and
capital gains distributions paid on such Shares.
8
<PAGE>
(c) As soon as possible after 4:00 p.m., Eastern
time or at such other times as the Fund may specify in
Written or Oral Instructions for any Series (the "Valuation
Time") on each Business Day Fund Services shall obtain from
the Fund's Adviser a quotation (on which it may conclusively
rely) of the net asset value, determined as of the Valuation
Time on that day. On each Business Day Fund Services shall
use the net asset value(s) determined by the Fund's Adviser
to compute the number of Shares and fractional Shares to be
purchased and the aggregate purchase proceeds to be
deposited with the Custodian. As necessary but no more
frequently than daily (unless a more frequent basis is
agreed to by Fund Services), Fund Services shall place a
purchase order with the Custodian for the proper number of
Shares and fractional Shares to be purchased and promptly
thereafter shall send written confirmation of such purchase
to the Custodian and the Fund.
SECTION 14. Having made the calculations required
by SECTION 13, Fund Services shall thereupon pay the
Custodian the aggregate net asset value of the Shares
purchased. The aggregate number of Shares and fractional
Shares purchased shall then be issued daily and credited by
Fund Services to the Unissued Certificate Account. Fund
Services shall also credit each Shareholder's separate
account with the number of Shares purchased by such
9
<PAGE>
Shareholder. Fund Services shall mail written confirmation
of the purchase to each Shareholder or the Shareholder's
representative and to the Fund if requested. Each
confirmation shall indicate the prior Share balance, the new
Share balance, the Shares for which Stock Certificates are
outstanding (if any), the amount invested and the price paid
for the newly-purchased Shares.
SECTION 15. Prior to the Valuation Time on each
Business Day, as specified in accordance with SECTION 13,
Fund Services shall process all requests to redeem Shares
and, with respect to each Series, shall advise the Custodian
of (i) the total number of Shares available for redemption
and (ii) the number of Shares and fractional Shares
requested to be redeemed. Upon confirmation of the net
asset value by the Fund's Adviser, Fund Services shall
notify the Fund and the Custodian of the redemption, apply
the redemption proceeds in accordance with SECTION 16 and
the Prospectus, record the redemption in the stock registry
books, and debit the redeemed Shares from the Unissued
Certificates Account and the individual account of the
Shareholder.
In lieu of carrying out the redemption procedures
described in the preceding paragraph, Fund Services may, at
the request of the Fund, sell Shares to the Fund as
repurchases from Shareholders, provided that the sale price
10
<PAGE>
is not less than the applicable redemption price. The
redemption procedures shall then be appropriately modified.
SECTION 16. Fund Services will carry out the
following procedures with respect to Share redemptions:
(a) As to each request received by the Fund from
or on behalf of a Shareholder for the redemption of Shares,
and unless the right of redemption has been suspended as
contemplated by the Prospectus, Fund Services shall, within
seven days after receipt of such redemption request, either
(i) mail a check in the amount of the proceeds of such
redemption to the person designated by the Shareholder or
other person to receive such proceeds or, (ii) in the event
redemption proceeds are to be wired through the Federal
Reserve Wire System or by bank wire pursuant to procedures
described in the Prospectus, cause such proceeds to be wired
in Federal funds to the bank or trust company account
designated by the Shareholder to receive such proceeds.
Funds Services shall also prepare and send a confirmation of
such redemption to the Shareholder. Redemptions in kind
shall be made only in accordance with such Written
Instructions as Fund Services may receive from the Fund.
The requirements as to instruments of transfer and other
documentation, the determination of the appropriate
redemption price and the time of payment shall be as
provided in the Prospectus, subject to such additional
11
<PAGE>
requirements consistent therewith as may be established by
mutual agreement between the Fund and Fund Services. In the
case of a request for redemption that does not comply in all
respects with the requirements for redemption, Fund Services
shall promptly so notify the Shareholder and shall effect
such redemption at the price in effect at the time of
receipt of documents complying with such requirements. Fund
Services shall notify the Fund's Custodian and the Fund on
each Business Day of the amount of cash required to meet
payments made pursuant to the provisions of this paragraph
and thereupon the Fund shall instruct the Custodian to make
available to Fund Services in timely fashion sufficient
funds therefor.
(b) Procedures and standards for effecting and
accepting redemption orders from Shareholders by telephone
or by such check writing service as the Fund may institute
may be established by mutual agreement between Fund Services
and the Fund consistent with the Prospectus.
(c) For purposes of redemption of Shares that have
been purchased by check within fifteen (15) days prior to
receipt of the redemption request, the Fund shall provide
Fund Services with Written Instructions concerning the time
within which such requests may be honored.
(d) Fund Services shall process withdrawal orders
duly executed by Shareholders in accordance with the terms
12
<PAGE>
of any withdrawal plan instituted by the Fund and described
in the Prospectus. Payments upon such withdrawal orders and
redemptions of Shares held in withdrawal plan accounts in
connection with such payments shall be made at such times as
the Fund may determine in accordance with the Prospectus.
(e) The authority of Fund Services to perform its
responsibilities under SECTIONS 15 and 16 with respect to
the Shares of any Series shall be suspended if Fund Services
receives notice of the suspension of the determination of
the net asset value of the Series.
SECTION 17. Upon the declaration of each dividend
and each capital gains distribution by the Fund's Board of
Directors or Trustees, the Fund shall notify Fund Services
of the date of such declaration, the amount payable per
Share, the record date for determining the Shareholders
entitled to payment, the payment and the reinvestment date
price.
SECTION 18. Upon being advised by the Fund of the
declaration of any income dividend or capital gains
distribution on account of its Shares, Fund Services shall
compute and prepare for the Fund records crediting such
distributions to Shareholders. Fund Services shall, on or
before the payment date of any dividend or distribution,
notify the Fund and the Custodian of the estimated amount
required to pay any portion of a dividend or distribution
13
<PAGE>
which is payable in cash, and thereupon the Fund shall, on
or before the payment date of such dividend or distribution,
instruct the Custodian to make available to Fund Services
sufficient funds for the payment of such cash amount. Fund
Services will, on the designated payment date, reinvest all
dividends in additional shares and promptly mail to each
Shareholder at his address of record a statement showing the
number of full and fractional Shares (rounded to three
decimal places) then owned by the Shareholder and the net
asset value of such Shares; provided, however, that if a
Shareholder elects to receive dividends in cash, Fund
Services shall prepare a check in the appropriate amount and
mail it to the Shareholder at his address of record within
five (5) business days after the designated payment date, or
transmit the appropriate amount in Federal funds in
accordance with the Shareholder's agreement with the Fund.
SECTION 19. Fund Services shall prepare and
maintain for the Fund records showing for each Shareholder's
account the following:
A. The name, address and tax identification
number of the Shareholder;
B. The number of Shares of each Series held by
the Shareholder;
C. Historical information including dividends
paid and date and price for all transactions;
14
<PAGE>
D. Any stop or restraining order placed against
such account;
E. Information with respect to the withholding of
any portion of income dividends or capital gains
distributions as are required to be withheld under
applicable law;
F. Any dividend or distribution reinvestment
election, withdrawal plan application, and correspondence
relating to the current maintenance of the account;
G. The certificate numbers and denominations of
any Share Certificates issued to the Shareholder; and
H. Any additional information required by Fund
Services to perform the services contemplated by this
Agreement.
Fund Services agrees to make available upon request
by the Fund or the Fund's Adviser and to preserve for the
periods prescribed in Rule 31a-2 of the Investment Company
Act any records related to services provided under this
Agreement and required to be maintained by Rule 31a-1 of
that Act, including:
(i) Copies of the daily transaction register for each
Business Day of the Fund;
(ii) Copies of all dividend, distribution and
reinvestment blotters;
15
<PAGE>
(iii) Schedules of the quantities of Shares of each
Series distributed in each state for purposes of
any state's laws or regulations as specified in
Oral or Written Instructions given to Fund
Services from time to time by the Fund or its
agents; and
(iv) Such other information, including Shareholder
lists, and statistical information as may be
agreed upon from time to time by the Fund and Fund
Services.
SECTION 20. Fund Services shall maintain those
records necessary to enable the Fund to file, in a timely
manner, form N-SAR (Semi-Annual Report) or any successor
report required by the Investment Company Act or rules and
regulations thereunder.
SECTION 21. Fund Services shall cooperate with the
Fund's independent public accountants and shall take
reasonable action to make all necessary information
available to such accountants for the performance of their
duties.
SECTION 22. In addition to the services described
above, Fund Services will perform other services for the
Fund as may be mutually agreed upon in writing from time to
time, which may include preparing and filing Federal tax
forms with the Internal Revenue Service, and, subject to
16
<PAGE>
supervisory oversight by the Fund's Adviser, mailing Federal
tax information to Shareholders, mailing semi-annual
Shareholder reports, preparing the annual list of
Shareholders, mailing notices of Shareholders' meetings,
proxies and proxy statements and tabulating proxies. Fund
Services shall answer the inquiries of certain Shareholders
related to their share accounts and other correspondence
requiring an answer from the Fund. Fund Services shall
maintain dated copies of written communications from
Shareholders, and replies thereto.
SECTION 23. Nothing contained in this Agreement is
intended to or shall require Fund Services, in any capacity
hereunder, to perform any functions or duties on any day
other than a Business Day. Functions or duties normally
scheduled to be performed on any day which is not a Business
Day shall be performed on, and as of, the next Business Day,
unless otherwise required by law.
SECTION 24. For the services rendered by Fund
Services as described above, the Fund shall pay to Fund
Services an annualized fee at a rate to be mutually agreed
upon from time to time. Such fee shall be prorated for the
months in which this Agreement becomes effective or is
terminated. In addition, the Fund shall pay, or Fund
Services shall be reimbursed for, all out-of-pocket expenses
incurred in the performance of this Agreement, including but
17
<PAGE>
not limited to the cost of stationery, forms, supplies,
blank checks, stock certificates, proxies and proxy
solicitation and tabulation costs, all forms and statements
used by Fund Services in communicating with Shareholders of
the Fund or especially prepared for use in connection with
its services hereunder, specific software enhancements as
requested by the Fund, costs associated with maintaining
withholding accounts (including non-resident alien, Federal
government and state), postage, telephone, telegraph (or
similar electronic media) used in communicating with
Shareholders or their representatives, outside mailing
services, microfiche/microfilm, freight charges and off-site
record storage. It is agreed in this regard that Fund
Services, prior to ordering any form in such supply as it
estimates will be adequate for more than two years' use,
shall obtain the written consent of the Fund. All forms for
which Fund Services has received reimbursement from the Fund
shall be the property of the Fund.
SECTION 25. Fund Services shall not be liable for
any taxes, assessments or governmental charges that may be
levied or assessed on any basis whatsoever in connection
with the Fund or any Shareholder, excluding taxes assessed
against Fund Services for compensation received by it
hereunder.
18
<PAGE>
SECTION 26.
(a) Fund Services shall at all times act in good
faith and with reasonable care in performing the services to
be provided by it under this Agreement, but shall not be
liable for any loss or damage unless such loss or damage is
caused by the negligence, bad faith or willful misconduct of
Fund Services or its employees or agents.
(b) The Fund shall indemnify and hold Fund
Services harmless from all loss, cost, damage and expense,
including reasonable expenses for counsel, incurred by it
resulting from any claim, demand, action or suit in
connection with the performance of its duties hereunder, or
as a result of acting upon any instruction reasonably
believed by it to have been properly given by a duly
authorized officer of the Fund, or upon any information,
data, records or documents provided to Fund Services or its
agents by computer tape, telex, CRT data entry or other
similar means authorized by the Fund; provided that this
indemnification shall not apply to actions or omissions of
Fund Services in cases of its own bad faith, willful
misconduct or negligence, and provided further that if in
any case the Fund may be asked to indemnify or hold Fund
Services harmless pursuant to this Section, the Fund shall
have been fully and promptly advised by Fund Services of all
material facts concerning the situation in question. The
19
<PAGE>
Fund shall have the option to defend Fund Services against
any claim which may be the subject of this indemnification,
and in the event that the Fund so elects it will so notify
Fund Services, and thereupon the Fund shall retain competent
counsel to undertake defense of the claim, and Fund Services
shall in such situations incur no further legal or other
expenses for which it may seek indemnification under this
paragraph. Fund Services shall in no case confess any claim
or make any compromise in any case in which the Fund may be
asked to indemnify Fund Services except with the Fund's
prior written consent.
Without limiting the foregoing:
(i) Fund Services may rely upon the advice of the Fund
or counsel to the Fund or Fund Services, and upon statements of
accountants, brokers and other persons believed by Fund Services
in good faith to be expert in the matters upon which they are
consulted. Fund Services shall not be liable for any action
taken in good faith reliance upon such advice or statements;
(ii) Fund Services shall not be liable for any action
reasonably taken in good faith reliance upon any Written
Instructions or certified copy of any resolution of the Fund's
Board of Directors or Trustees, including a Written Instruction
authorizing Fund Services to make payment upon redemption of
Shares without a signature guarantee; provided, however, that
upon receipt of a Written Instruction countermanding a prior
20
<PAGE>
Instruction that has not been fully executed by Fund Services,
Fund Services shall verify the content of the second Instruction
and honor it, to the extent possible. Fund Services may rely
upon the genuineness of any such document, or copy thereof,
reasonably believed by Fund Services in good faith to have been
validly executed;
(iii) Fund Services may rely, and shall be protected by
the Fund in acting, upon any signature, instruction, request,
letter of transmittal, certificate, opinion of counsel,
statement, instrument, report, notice, consent, order, or other
paper or document reasonably believed by it in good faith to be
genuine and to have been signed or presented by the purchaser,
the Fund or other proper party or parties; and
(d) Fund Services may, with the consent of the
Fund, subcontract the performance of any portion of any
service to be provided hereunder, including with respect to
any Shareholder or group of Shareholders, to any agent of
Fund Services and may reimburse the agent for the services
it performs at such rates as Fund Services may determine;
provided that no such reimbursement will increase the amount
payable by the Fund pursuant to this Agreement; and provided
further, that Fund Services shall remain ultimately
responsible as transfer agent to the Fund.
SECTION 27. The Fund shall deliver or cause to be
delivered over to Fund Services (i) an accurate list of
21
<PAGE>
Shareholders, showing each Shareholder's address of record,
number of Shares of each Series owned and whether such
Shares are represented by outstanding Share Certificates or
by non-certificated Share accounts and (ii) all Shareholder
records, files, and other materials necessary or appropriate
for proper performance of the functions assumed by the under
this Agreement (collectively referred to as the
"Materials"). The Fund shall indemnify Fund Services and
hold it harmless from any and all expenses, damages, claims,
suits, liabilities, actions, demands and losses arising out
of or in connection with any error, omission, inaccuracy or
other deficiency of such Materials, or out of the failure of
the Fund to provide any portion of the Materials or to
provide any information in the Fund's possession needed by
Fund Services to knowledgeably perform its functions;
provided the Fund shall have no obligation to indemnify Fund
Services or hold it harmless with respect to any expenses,
damages, claims, suits, liabilities, actions, demands or
losses caused directly or indirectly by acts or omissions of
Fund Services or the Fund's Adviser.
SECTION 28. This Agreement may be amended from
time to time by a written supplemental agreement executed by
the Fund and Fund Services and without notice to or approval
of the Shareholders; provided this Agreement may not be
amended in any manner which would substantially increase the
22
<PAGE>
Fund's obligations hereunder unless the amendment is first
approved by the Fund's Board of Directors or Trustees,
including a majority of the Directors or Trustees who are
not a party to this Agreement or interested persons of any
such party, at a meeting called for such purpose, and
thereafter is approved by the Fund's Shareholders if such
approval is required under the Investment Company Act or the
rules and regulations thereunder. The parties hereto may
adopt procedures as may be appropriate or practical under
the circumstances, and Fund Services may conclusively rely
on the determination of the Fund that any procedure that has
been approved by the Fund does not conflict with or violate
any requirement of its Articles of Incorporation or
Declaration of Trust, By-Laws or Prospectus, or any rule,
regulation or requirement of any regulatory body.
SECTION 29. The Fund shall file with Fund Services
a certified copy of each operative resolution of its Board
of Directors or Trustees authorizing the execution of
Written Instructions or the transmittal of Oral Instructions
and setting forth authentic signatures of all signatories
authorized to sign on behalf of the Fund and specifying the
person or persons authorized to give Oral Instructions on
behalf of the Fund. Such resolution shall constitute
conclusive evidence of the authority of the person or
persons designated therein to act and shall be considered in
23
<PAGE>
full force and effect, with Fund Services fully protected in
acting in reliance therein, until Fund Services receives a
certified copy of a replacement resolution adding or
deleting a person or persons authorized to give Written or
Oral Instructions. If the officer certifying the resolution
is authorized to give Oral Instructions, the certification
shall also be signed by a second officer of the Fund.
SECTION 30. The terms, as defined in this Section,
whenever used in this Agreement or in any amendment or
supplement hereto, shall have the meanings specified below,
insofar as the context will allow.
(a) Business Day: Any day on which the Fund is
open for business as described in the Prospectus.
(b) Custodian: The term Custodian shall mean the
Fund's current custodian or any successor custodian acting
as such for the Fund.
(c) Fund's Adviser: The term Fund's Adviser shall
mean Alliance Capital Management L.P. or any successor
thereto who acts as the investment adviser or manager of the
Fund.
(d) Oral Instructions: The term Oral Instructions
shall mean an authorization, instruction, approval, item or
set of data, or information of any kind transmitted to Fund
Services in person or by telephone, vocal telegram or other
electronic means, by a person or persons reasonably believed
24
<PAGE>
in good faith by Fund Services to be a person or persons
authorized by a resolution of the Board of Directors or
Trustees of the Fund to give Oral Instructions on behalf of
the Fund. Each Oral Instruction shall specify whether it is
applicable to the entire Fund or a specific Series of the
Fund.
(e) Prospectus: The term Prospectus shall mean a
prospectus and related statement of additional information
forming part of a currently effective registration statement
under the Investment Company Act and, as used with the
respect to Shares or Shares of a Series, shall mean the
prospectuses and related statements of additional
information covering the Shares or Shares of the Series.
(f) Securities: The term Securities shall mean
bonds, debentures, notes, stocks, shares, evidences of
indebtedness, and other securities and investments from time
to time owned by the Fund.
(g) Series: The term Series shall mean any series
of Shares of the common stock of the Fund that the Fund may
establish from time to time.
(h) Share Certificates: The term Share
Certificates shall mean the stock certificates or
certificates representing shares of beneficial interest for
the Shares.
25
<PAGE>
(i) Shareholders: The term Shareholders shall
mean the registered owners from time to time of the Shares,
as reflected on the stock registry records of the Fund.
(j) Written Instructions: The term Written
Instructions shall mean an authorization, instruction,
approval, item or set of data, or information of any kind
transmitted to Fund Services in original writing containing
original signatures, or a copy of such document transmitted
by telecopy, including transmission of such signature, or
other mechanical or documentary means, at the request of a
person or persons reasonably believed in good faith by Fund
Services to be a person or persons authorized by a
resolution of the Board of Directors or Trustees of the Fund
to give Written Instruction shall specify whether it is
applicable to the entire Fund or a specific Series of the
Fund.
SECTION 31. Fund Services shall not be liable for
the loss of all or part of any record maintained or
preserved by it pursuant to this Agreement or for any delays
or errors occurring by reason of circumstances beyond its
control, including but not limited to acts of civil or
military authorities, national emergencies, fire, flood or
catastrophe, acts of God, insurrection, war, riot, or
failure of transportation, communication or power supply,
except to the extent that Fund Services shall have failed to
26
<PAGE>
use its best efforts to minimize the likelihood of
occurrence of such circumstances or to mitigate any loss or
damage to the Fund caused by such circumstances.
SECTION 32. The Fund may give Fund Services sixty
(60) days and Fund Services may give the Fund (90) days
written notice of the termination of this Agreement, such
termination to take effect at the time specified in the
notice. Upon notice of termination, the Fund shall use its
best efforts to obtain a successor transfer agent. If a
successor transfer agent is not appointed within ninety (90)
days after the date of the notice of termination, the Board
of Directors or Trustees of the Fund shall, by resolution,
designate the Fund as its own transfer agent. Upon receipt
of written notice from the Fund of the appointment of the
successor transfer agent and upon receipt of Oral or Written
Instructions Fund Services shall, upon request of the Fund
and the successor transfer agent and upon payment of Fund
Services reasonable charges and disbursements, promptly
transfer to the successor transfer agent the original or
copies of all books and records maintained by Fund Services
hereunder and cooperate with, and provide reasonable
assistance to, the successor transfer agent in the
establishment of the books and records necessary to carry
out its responsibilities hereunder.
27
<PAGE>
SECTION 33. Any notice or other communication
required by or permitted to be given in connection with this
Agreement shall be in writing, and shall be delivered in
person or sent by first-class mail, postage prepaid, to the
respective parties.
Notice to the Fund shall be given as follows until
further notice:
1345 Avenue of the Americas
New York, New York 10105
Attention: Secretary
Notice to Fund Services shall be given as follows
until further notice:
Alliance Fund Services, Inc.
500 Plaza Drive
Secaucus, New Jersey 07094
SECTION 34. The Fund represents and warrants to
Fund Services that the execution and delivery of this
Agreement by the undersigned officer of the Fund has been
duly and validly authorized by resolution of the Fund's
Board of Directors or Trustees. Fund Services represents
and warrants to the Fund that the execution and delivery of
this Agreement by the undersigned officer of Fund Services
has also been duly and validly authorized.
SECTION 35. This Agreement may be executed in more
than one counterpart, each of which shall be deemed to be an
original, and shall become effective on the last date of
signature below unless otherwise agreed by the parties.
28
<PAGE>
Unless sooner terminated pursuant to SECTION 32, this
Agreement will continue until and will continue
in effect thereafter for successive 12 month periods only if
such continuance is specifically approved at least annually
by the Board of Directors or Trustees or by a vote of the
stockholders of the Fund and in either case by a majority of
the Directors or Trustees who are not parties to this
Agreement or interested persons of any such party, at a
meeting called for the purpose of voting on this Agreement.
SECTION 36. This Agreement shall extend to and
shall bind the parties hereto and their respective
successors and assigns; provided, however, that this
Agreement shall not be assignable by the Fund without the
written consent of Fund Services or by Fund Services without
the written consent of the Fund, authorized or approved by a
resolution of the Fund's Board of Directors or Trustees.
Notwithstanding the foregoing, either party may assign this
Agreement without the consent of the other party so long as
the assignee is an affiliate, parent or subsidiary of the
assigning party and is qualified to act under the Investment
Company Act, as amended from time to time.
SECTION 38. This Agreement shall be governed by
the laws of the State of New Jersey.
29
<PAGE>
WITNESS the following signatures:
AFD EXCHANGE RESERVES
By: /s/ David H. Dievler
______________________________
David H. Dievler
Title: President
ALLIANCE FUND SERVICES, INC.
By: /s/ Valerie Hugo
______________________________
Valerie Hugo
Title: Senior Vice President
30
00250163.AL9
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
To the Board of Trustees
AFD Exchange Reserves
We hereby consent to the use of our report dated October 23, 1997
on the financial statements of AFD Exchange Reserves referred to
therein in Post-Effective Amendment No. 7 to the Registration
Statement on Form N-1A, File No. 33-74230, as filed with the
Securities and Exchange Commission.
We also consent to the reference to our firm in each Prospectus
under the caption "Financial Highlights" and in the Statement of
Additional Information under the captions "Statements and
Reports" and "Independent Auditors".
/s/ McGladrey & Pullen, LLP
New York, New York
January 28, 1998
00250163.AN6
<PAGE>
March 14, 1994
AFD Exchange Reserves
1345 Avenue of the Americas
New York, New York 10105
Gentlemen:
In connection with, our purchase of 100,200 shares of
beneficial interest of AFD Exchange Reserves, for an aggregate
cash consideration of one hundred thousand two hundred dollars
(6100,200.00), representing 100,000 Class A shares, 100 Class B
shares and 100 Class C shares, this will confirm that we are
buying such shares for investment for our own account only, and
not with a view to reselling or otherwise distributing them.
Very truly yours,
Alliance Capital Management L.P.
By Alliance Capital Management
Corporation, its general partner
By /S/ Edmund P. Bergan, Jr.
____________________________
Edmund P. Bergan, Jr.
1
00250163.AM3
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior
powers granted by the undersigned to the extent inconsistent
herewith and constitutes and appoints John D. Carifa, Edmund
P. Bergan, Jr., Domenick Pugliese, Andrew L. Gangolf and
Emilie D. Wrapp and each of them, to act severally as
attorneys-in-fact and agents, with power of substitution and
resubstitution, for the undersigned in any and all
capacities, solely for the purpose of signing the respective
Registration Statements, and any amendments thereto, on Form
N-1A of ACM Institutional Reserves, Inc., AFD Exchange
Reserves, Alliance All-Asia 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
Environment Fund, Inc., Alliance Global Small Cap Fund,
Inc., Alliance Global Strategic Income Trust, Inc., Alliance
Government Reserves, Alliance Greater China 97 Fund, Inc.,
Alliance Growth and Income Fund, Inc., Alliance High Yield
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., Alliance Real Estate Investment
Fund, Inc., Alliance/Regent Sector Opportunity Fund, Inc.,
Alliance Short-Term Multi-Market Trust, Inc., Alliance
Technology Fund, Inc., Alliance Utility Income Fund, Inc.,
Alliance Variable Products Series Fund, Inc., Alliance World
Income Trust, Inc., Alliance Worldwide Privatization Fund,
Inc., Fiduciary Management Associates, The Alliance Fund,
Inc., The Alliance Portfolios, and The Hudson River Trust,
and filing the same, with exhibits thereto, and other
documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all
that said attorneys-in-fact, or their substitute or
substitutes, may do or cause to be done by virtue hereof.
/s/ John D. Carifa
___________________________
John D. Carifa
Dated: September 9, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior
powers granted by the undersigned to the extent inconsistent
herewith and constitutes and appoints John D. Carifa, Edmund
P. Bergan, Jr., Domenick Pugliese, Andrew L. Gangolf and
Emilie D. Wrapp and each of them, to act severally as
attorneys-in-fact and agents, with power of substitution and
resubstitution, for the undersigned in any and all
capacities, solely for the purpose of signing the respective
Registration Statements, and any amendments thereto, on Form
N-1A of ACM Institutional Reserves, Inc., AFD Exchange
Reserves, Alliance Balanced Shares, Inc., Alliance Bond
Fund, Inc., Alliance Global Dollar Government Fund, Inc.,
Alliance Global Small Cap Fund, Inc., Alliance Global
Strategic Income Trust, Inc., Alliance Growth and Income
Fund, Inc., Alliance High Yield Fund, Inc., Alliance Income
Builder Fund, Inc., Alliance Limited Maturity Government
Fund, Inc., Alliance Mortgage Securities Income Fund, Inc.,
Alliance Multi-Market Strategy Trust, Inc., Alliance
Municipal Income Fund, Inc., Alliance Municipal Income Fund
II, Alliance North American Government Income Trust, Inc.,
Alliance Premier Growth Fund, Inc., Alliance Quasar Fund,
Inc., Alliance Real Estate Investment Fund, Inc.,
Alliance/Regent Sector Opportunity Fund, Inc., Alliance
Short-Term Multi-Market Trust, 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. and The Alliance Portfolios, and
filing the same, with exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may
do or cause to be done by virtue hereof.
/s/ Ruth Block
___________________________
Ruth Block
Dated: September 9, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior
powers granted by the undersigned to the extent inconsistent
herewith and constitutes and appoints John D. Carifa, Edmund
P. Bergan, Jr., Domenick Pugliese, Andrew L. Gangolf and
Emilie D. Wrapp and each of them, to act severally as
attorneys-in-fact and agents, with power of substitution and
resubstitution, for the undersigned in any and all
capacities, solely for the purpose of signing the respective
Registration Statements, and any amendments thereto, on Form
N-1A of ACM Institutional Reserves, Inc., AFD Exchange
Reserves, Alliance All-Asia Fund, Inc., Alliance Balanced
Shares, Inc., Alliance Bond Fund, Inc., Alliance Developing
Markets Fund, Inc. Alliance Global Dollar Government Fund,
Inc., Alliance Global Environment Fund, Inc., Alliance
Global Small Cap Fund, Inc., Alliance Global Strategic
Income Trust, Inc., Alliance Greater China 97 Fund, Inc.,
Alliance Growth and Income Fund, Inc., Alliance High Yield
Fund, Inc., Alliance Income Builder Fund, Inc., Alliance
International Fund, Alliance Limited Maturity Government
Fund, Inc., Alliance Mortgage Securities Income Fund, Inc.,
Alliance Multi-Market Strategy Trust, Inc., Alliance
Municipal Income Fund, Inc., Alliance Municipal Income Fund
II, Alliance New Europe Fund, Inc., Alliance North American
Government Income Trust, Inc., Alliance Premier Growth Fund,
Inc., Alliance Quasar Fund, Inc., Alliance Real Estate
Investment Fund, Inc., Alliance/Regent Sector Opportunity
Fund, Inc., Alliance Short-Term Multi-Market Trust, Inc.,
Alliance Technology Fund, Inc., Alliance Utility Income
Fund, Inc., Alliance Variable Products Series Fund, Inc.,
Alliance World Income Trust, Inc., Alliance Worldwide
Privatization Fund, Inc., Fiduciary Management Associates
and The Alliance Fund, Inc. and filing the same, with
exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that said attorneys-in-
fact, or their substitute or substitutes, may do or cause to
be done by virtue hereof.
/s/ David H. Dievler
___________________________
David H. Dievler
Dated: September 9, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior
powers granted by the undersigned to the extent inconsistent
herewith and constitutes and appoints John D. Carifa, Edmund
P. Bergan, Jr., Domenick Pugliese, Andrew L. Gangolf and
Emilie D. Wrapp and each of them, to act severally as
attorneys-in-fact and agents, with power of substitution and
resubstitution, for the undersigned in any and all
capacities, solely for the purpose of signing the respective
Registration Statements, and any amendments thereto, on Form
N-1A of ACM Institutional Reserves, Inc., AFD Exchange
Reserves, Alliance All-Asia Fund, Inc., Alliance Balanced
Shares, Inc., Alliance Bond Fund, Inc., Alliance Developing
Markets Fund, Inc., Alliance Global Dollar Government Fund,
Inc., Alliance Global Environment Fund, Inc., Alliance
Global Small Cap Fund, Inc., Alliance Global Strategic
Income Trust, Inc., Alliance Growth and Income Fund, Inc.,
Alliance High Yield Fund, Inc., Alliance Income Builder
Fund, Inc., Alliance International Fund, Alliance Limited
Maturity Government Fund, Inc., Alliance Mortgage Securites
Incoem Fund, Inc., Alliance Multi-Market Strategy Trust,
Inc., Alliance Municipal Income Fund, Inc., Alliance
Municipal Income Fund II, Alliance New Europe Fund, Inc.,
Alliance North American Government Income Trust, Inc.,
Alliance Premier Growth Fund, Inc., Alliance Quasar Fund,
Inc., Alliance Real Estate Investment Fund, Inc.,
Alliance/Regent Sector Opportunity Fund, Inc., Alliance
Short-Term Multi-Market Trust, 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., and filing the same, with exhibits
thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and
confirming all that said attorneys-in-fact, or their
substitute or substitutes, may do or cause to be done by
virtue hereof.
/s/ John H. Dobkin
___________________________
John H. Dobkin
Dated: September 9, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior
powers granted by the undersigned to the extent inconsistent
herewith and constitutes and appoints John D. Carifa, Edmund
P. Bergan, Jr., Domenick Pugliese, Andrew L. Gangolf and
Emilie D. Wrapp and each of them, to act severally as
attorneys-in-fact and agents, with power of substitution and
resubstitution, for the undersigned in any and all
capacities, solely for the purpose of signing the respective
Registration Statements, and any amendments thereto, on Form
N-1A of ACM Institutional Reserves, Inc., AFD Exchange
Reserves, Alliance Balanced Shares, Inc., Alliance Bond
Fund, Inc., Alliance Capital Reserves, Alliance Global
Dollar Government Fund, Inc., Alliance Global Small Cap
Fund, Inc., Alliance Global Strategic Income Trust, Inc.,
Alliance Government Reserves, Alliance Greater China 97
Fund, Inc., Alliance Growth and Income Fund, Inc., Alliance
High Yield Fund, Inc., Alliance Income Builder Fund, Inc.,
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 North American
Government Income Trust, Inc., Alliance Premier Growth Fund,
Inc., Alliance Quasar Fund, Inc., Alliance Real Estate
Investment Fund, Inc., Alliance/Regent Sector Opportunity
Fund, Inc., Alliance Short-Term Multi-Market Trust, Inc.,
Alliance Technology Fund, Inc., Alliance Utility Income
Fund, Inc., Alliance Variable Products Series Fund, Inc.,
Alliance World Income Trust, Inc., Alliance Worldwide
Privatization Fund, Inc., Fiduciary Management Associates,
The Alliance Fund, Inc., The Alliance Portfolios and the
Hudson River Trust, and filing the same, with exhibits
thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and
confirming all that said attorneys-in-fact, or their
substitute or substitutes, may do or cause to be done by
virtue hereof.
/s/ William H. Foulk, Jr.
___________________________
William H. Foulk, Jr.
Dated: September 9, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior
powers granted by the undersigned to the extent inconsistent
herewith and constitutes and appoints John D. Carifa, Edmund
P. Bergan, Jr., Domenick Pugliese, Andrew L. Gangolf and
Emilie D. Wrapp and each of them, to act severally as
attorneys-in-fact and agents, with power of substitution and
resubstitution, for the undersigned in any and all
capacities, solely for the purpose of signing the respective
Registration Statements, and any amendments thereto, on Form
N-1A of ACM Institutional Reserves, Inc., AFD Exchange
Reserves, Alliance Balanced Shares, Inc., Alliance Bond
Fund, Inc., Alliance Global Dollar Government Fund, Inc.,
Alliance Global Small Cap Fund, Inc., Alliance Global
Strategic Income Trust, Inc., Alliance Growth and Income
Fund, Inc., Alliance High Yield Fund, Inc., Alliance Income
Builder Fund, Inc., Alliance Limited Maturity Government
Fund, Inc., Alliance Mortgage Securities Income Fund, Inc.,
Alliance Multi-Market Strategy Trust, Inc., Alliance
Municipal Income Fund, Inc., Alliance Municipal Income Fund
II, Alliance North American Government Income Trust, Inc.,
Alliance Premier Growth Fund, Inc., Alliance Quasar Fund,
Inc., Alliance Real Estate Investment Fund, Inc.,
Alliance/Regent Sector Opportunity Fund, Inc., Alliance
Short-Term Multi-Market Trust, 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
and The Alliance Fund, Inc., and filing the same, with
exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that said attorneys-in-
fact, or their substitute or substitutes, may do or cause to
be done by virtue hereof.
/s/ Dr. James M. Hester
___________________________
Dr. James M. Hester
Dated: September 9, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior
powers granted by the undersigned to the extent inconsistent
herewith and constitutes and appoints John D. Carifa, Edmund
P. Bergan, Jr., Domenick Pugliese, Andrew L. Gangolf and
Emilie D. Wrapp and each of them, to act severally as
attorneys-in-fact and agents, with power of substitution and
resubstitution, for the undersigned in any and all
capacities, solely for the purpose of signing the respective
Registration Statements, and any amendments thereto, on Form
N-1A of ACM Institutional Reserves, Inc., AFD Exchange
Reserves, Alliance Balanced Shares, Inc., Alliance Bond
Fund, Inc., Alliance Global Dollar Government Fund, Inc.,
Alliance Global Small Cap Fund, Inc., Alliance Global
Strategic Income Trust, Inc., Alliance Growth and Income
Fund, Inc., Alliance High Yield Fund, Inc., Alliance Income
Builder Fund, Inc., 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 North American Government
Income Trust, Inc., Alliance Premier Growth Fund, Inc.,
Alliance Quasar Fund, Inc., Alliance Real Estate Investment
Fund, Inc., Alliance/Regent Sector Opportunity Fund, Inc.,
Alliance Short-Term Multi-Market Trust, 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. and The Hudson River
Trust, and filing the same, with exhibits thereto, and other
documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all
that said attorneys-in-fact, or their substitute or
substitutes, may do or cause to be done by virtue hereof.
/s/ Clifford L. Michel
___________________________
Clifford L. Michel
Dated: September 9, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior
powers granted by the undersigned to the extent inconsistent
herewith and constitutes and appoints John D. Carifa, Edmund
P. Bergan, Jr., Domenick Pugliese, Andrew L. Gangolf and
Emilie D. Wrapp and each of them, to act severally as
attorneys-in-fact and agents, with power of substitution and
resubstitution, for the undersigned in any and all
capacities, solely for the purpose of signing the respective
Registration Statements, and any amendments thereto, on Form
N-1A of ACM Institutional Reserves, Inc., AFD Exchange
Reserves, Alliance Balanced Shares, Inc., Alliance Bond
Fund, Inc., Alliance Capital Reserves, 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 High Yield Fund, Inc., Alliance Income
Builder Fund, Inc., Alliance Limited Maturity Government
Fund, Inc., 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 North American
Government Income Trust, Inc., Alliance Premier Growth Fund,
Inc., Alliance Quasar Fund, Inc., Alliance Real Estate
Investment Fund, Inc., Alliance/Regent Sector Opportunity
Fund, Inc., Alliance Short-Term Multi-Market Trust, 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 and The Hudson River Trust, and filing the same,
with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that said attorneys-in-
fact, or their substitute or substitutes, may do or cause to
be done by virtue hereof.
/s/ Donald J. Robinson
___________________________
Donald J. Robinson
Dated: September 9, 1997
00250163.AN3
<PAGE>
[ARTICLE] 6
[CIK] 0000917713
[NAME] AFD EXCHANGE RESERVES, INC.
[SERIES]
[NUMBER] 001
[NAME] AFD EXCHANGE RESERVES, INC.
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] SEP-30-1997
[PERIOD-START] OCT-01-1996
[PERIOD-END] SEP-30-1997
[INVESTMENTS-AT-COST] 126,427,837
[INVESTMENTS-AT-VALUE] 126,427,837
[RECEIVABLES] 15,209,560
[ASSETS-OTHER] 675,058
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 142,312,455
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 2,705,580
[TOTAL-LIABILITIES] 2,705,580
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 139,609,372
[SHARES-COMMON-STOCK] 41,167,958
[SHARES-COMMON-PRIOR] 42,195,404
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (2,497)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 139,606,875
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 7,444,584
[OTHER-INCOME] 0
[EXPENSES-NET] (2,291,834)
[NET-INVESTMENT-INCOME] 5,152,750
[REALIZED-GAINS-CURRENT] (311)
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 5,152,439
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (1,638,799)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 399,425,801
[NUMBER-OF-SHARES-REDEEMED] (402,092,046)
[SHARES-REINVESTED] 1,638,799
[NET-CHANGE-IN-ASSETS] 19,187,436
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (2,186)
[OVERDISTRIB-NII-PRIOR] 0
<PAGE>
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 339,000
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 2,292,000
[AVERAGE-NET-ASSETS] 39,931,090
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] 0.0411
[PER-SHARE-GAIN-APPREC] 0.000
[PER-SHARE-DIVIDEND] (0.0411)
[PER-SHARE-DISTRIBUTIONS] 0.000
[RETURNS-OF-CAPITAL] 0.000
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] 1.38
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
00250163.AM5
<PAGE>
[ARTICLE] 6
[CIK] 0000917713
[NAME] AFD EXCHANGE RESERVES, INC.
[SERIES]
[NUMBER] 002
[NAME] AFD EXCHANGE RESERVES, INC.
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] SEP-30-1997
[PERIOD-START] OCT-01-1996
[PERIOD-END] SEP-30-1997
[INVESTMENTS-AT-COST] 126,427,837
[INVESTMENTS-AT-VALUE] 126,427,837
[RECEIVABLES] 15,209,560
[ASSETS-OTHER] 675,058
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 142,312,455
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 2,705,580
[TOTAL-LIABILITIES] 2,705,580
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 139,609,372
[SHARES-COMMON-STOCK] 74,456,561
[SHARES-COMMON-PRIOR] 65,009,678
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (2,497)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 139,606,875
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 7,444,584
[OTHER-INCOME] 0
[EXPENSES-NET] (2,291,834)
[NET-INVESTMENT-INCOME] 5,152,750
[REALIZED-GAINS-CURRENT] (311)
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 5,152,439
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (2,707,243)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 248,115,983
[NUMBER-OF-SHARES-REDEEMED] (241,376,343)
[SHARES-REINVESTED] 2,707,243
[NET-CHANGE-IN-ASSETS] 19,187,436
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (2,186)
[OVERDISTRIB-NII-PRIOR] 0
<PAGE>
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 339,000
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 2,292,000
[AVERAGE-NET-ASSETS] 74,901,765
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] 0.0361
[PER-SHARE-GAIN-APPREC] 0.000
[PER-SHARE-DIVIDEND] (0.0361)
[PER-SHARE-DISTRIBUTIONS] 0.000
[RETURNS-OF-CAPITAL] 0.000
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] 1.88
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
00250163.AM6
<PAGE>
[ARTICLE] 6
[CIK] 0000917713
[NAME] AFD EXCHANGE RESERVES, INC.
[SERIES]
[NUMBER] 003
[NAME] AFD EXCHANGE RESERVES, INC.
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] SEP-30-1997
[PERIOD-START] OCT-01-1996
[PERIOD-END] SEP-30-1997
[INVESTMENTS-AT-COST] 126,427,837
[INVESTMENTS-AT-VALUE] 126,427,837
[RECEIVABLES] 15,209,560
[ASSETS-OTHER] 675,058
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 142,312,455
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 2,705,580
[TOTAL-LIABILITIES] 2,705,580
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 139,609,372
[SHARES-COMMON-STOCK] 23,949,949
[SHARES-COMMON-PRIOR] 13,216,543
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (2,497)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 139,606,875
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 7,444,584
[OTHER-INCOME] 0
[EXPENSES-NET] (2,291,834)
[NET-INVESTMENT-INCOME] 5,152,750
[REALIZED-GAINS-CURRENT] (311)
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 5,152,439
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (806,371)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 263,291,205
[NUMBER-OF-SHARES-REDEEMED] (253,364,170)
[SHARES-REINVESTED] 806,371
[NET-CHANGE-IN-ASSETS] 19,187,436
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (2,186)
[OVERDISTRIB-NII-PRIOR] 0
<PAGE>
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 339,000
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 2,292,000
[AVERAGE-NET-ASSETS] 20,677,289
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] 0.0386
[PER-SHARE-GAIN-APPREC] 0.000
[PER-SHARE-DIVIDEND] (0.0386)
[PER-SHARE-DISTRIBUTIONS] 0.000
[RETURNS-OF-CAPITAL] 0.000
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] 1.61
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
00250163.AM7
<PAGE>
[ARTICLE] 6
[CIK] 0000917713
[NAME] AFD EXCHANGE RESERVES, INC.
[SERIES]
[NUMBER] 004
[NAME] AFD EXCHANGE RESERVES, INC.
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] SEP-30-1997
[PERIOD-START] OCT-01-1996
[PERIOD-END] SEP-30-1997
[INVESTMENTS-AT-COST] 126,427,837
[INVESTMENTS-AT-VALUE] 126,427,837
[RECEIVABLES] 15,209,560
[ASSETS-OTHER] 675,058
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 142,312,455
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 2,705,580
[TOTAL-LIABILITIES] 2,705,580
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 139,609,372
[SHARES-COMMON-STOCK] 34,904
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (2,497)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 139,606,875
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 7,444,584
[OTHER-INCOME] 0
[EXPENSES-NET] (2,291,834)
[NET-INVESTMENT-INCOME] 5,152,750
[REALIZED-GAINS-CURRENT] (311)
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 5,152,439
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (337)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 120,464
[NUMBER-OF-SHARES-REDEEMED] (85,897)
[SHARES-REINVESTED] 337
[NET-CHANGE-IN-ASSETS] 19,187,436
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (2,186)
[OVERDISTRIB-NII-PRIOR] 0
<PAGE>
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 339,000
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 2,292,000
[AVERAGE-NET-ASSETS] 14,922
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] 0.0254
[PER-SHARE-GAIN-APPREC] 0.000
[PER-SHARE-DIVIDEND] (0.0254)
[PER-SHARE-DISTRIBUTIONS] 0.000
[RETURNS-OF-CAPITAL] 0.000
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] 0.88
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
00250163.AM8
