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This is filed pursuant to Rule 497(c).
File Nos. 33-74230 and 811-08294.
<PAGE>
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AFD EXCHANGE RESERVES
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PROSPECTUS
February 1, 1999
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
ALLIANCE CAPITAL [LOGO]
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TABLE OF CONTENTS
------------------------------
Page
RISK/RETURN SUMMARY .................................................... 2
Performance and Bar Chart Information .................................. 3
FEES AND EXPENSES OF THE FUND .......................................... 4
OTHER INFORMATION ABOUT THE FUND'S
OBJECTIVE, STRATEGIES AND RISKS ........................................ 5
Investment Objective ................................................... 5
Investment Strategy .................................................... 5
Risk Considerations .................................................... 5
MANAGEMENT OF THE FUND ................................................. 6
PURCHASE AND SALE OF SHARES ............................................ 6
General ................................................................ 6
How The Fund Values Its Shares ......................................... 6
How To Buy Shares ...................................................... 6
How To Exchange Shares ................................................. 6
How To Sell Shares ..................................................... 7
DIVIDENDS, DISTRIBUTIONS AND TAXES ..................................... 7
DISTRIBUTION ARRANGEMENTS .............................................. 7
GENERAL INFORMATION .................................................... 9
FINANCIAL HIGHLIGHTS ................................................... 10
AFD Exchange Reserves'investment adviser is Alliance Capital Management L.P., a
global investment manager providing diversified services to institutions and
individuals through a broad line of investments including more than 100 mutual
funds.
RISK/RETURN SUMMARY
The following is a summary of certain key information about the Fund. You will
find additional information about the Fund, including a detailed description of
the risks of an investment in the Fund, after this summary.This prospectus has
additional descriptions of the Fund's investments in the discussion under "Other
Information About the Fund's Objective, Strategies and Risks." That section also
includes more information about the Fund, its investments, and related risks.
2
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AFD EXCHANGE RESERVES
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OBJECTIVE:
The Fund's investment objective is maximum current income to the extent
consistent with safety of principal and liquidity.
PERFORMANCE AND BAR CHART INFORMATION
The table shows the Fund's average annual returns and the bar chart shows the
Fund's annual returns. The table and the bar chart provide an indication of the
historical risk of an investment in the Fund by showing:
. the Fund's average annual returns for one year and the life of the Fund;
and
. changes in the Fund's performance from year to year over the life of the
Fund.
The Fund's past performance does not necessarily indicate how it will perform in
the future.
PRINCIPAL INVESTMENT STRATEGY:
The Fund is a "money market fund" that seeks to maintain a stable net asset
value of $1.00 per share. The Fund invests in a portfolio of high-quality U.S.
dollar-denominated money market securities.
PRINCIPAL RISKS: The principal risks of investing in the Fund are:
. Interest Rate Risk This is the risk that changes in interest rates will
affect the yield or value of the Fund's investments in debt securities.
. Credit Risk This is the risk that the issuer or guarantor of a debt
security, or the counterparty to a derivatives contract, will be unable or
unwilling to make timely interest or principal payments, or to otherwise
honor its obligations. The degree of risk for a particular security may be
reflected in its credit rating. Credit risk includes the possibility that
any of the Fund's investments will have its credit ratings downgraded.
PERFORMANCE TABLE
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1 Year Since Inception(*)
- -----------------------------------------
Class A 4.57% 4.55%
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Class B 4.05% 3.97%
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Class C 4.32% 4.25%
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You may obtain the most current yield information of the Fund by calling
1-800-221-9513.
(*) Inception date: 3/25/94
ANOTHER IMPORTANT THING FOR YOU TO NOTE:
An investment in the Fund is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the Fund seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the Fund.
[BAR CHART]
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The annual returns in the bar chart are for the Fund's Class A shares which do
not carry a sales load. If sales loads were reflected, returns would be
less than those shown.
89 90 91 92 93 94 95 96 97 98
N/A N/A N/A N/A N/A N/A 4.79% 4.12% 4.32% 4.57%
During the period shown in the bar chart, the highest return for a quarter was
1.19% (quarter ending March 31, 1995) and the lowest return for a quarter was
0.49% (quarter ending June 30, 1994).
3
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FEES AND EXPENSES OF THE FUND
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This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
Shareholder Transaction Expenses (fees paid directly from your investment)
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares
-------------- -------------- --------------
<S> <C> <C> <C>
Maximum Deferred Sales Charge (Load) (as a percentage None 4.0% 1.0%
of original purchase price or redemption proceeds, whichever is lower) during the during the
first year, first year,
decreasing 0% thereafter
1.0% annually to 0%
after the 4th year(*)
</TABLE>
(*) For Class B Shares purchased with cash. If purchased by exchange from
another Alliance Mutual Fund, the Deferred Sales Charge is the one charged by
that Fund. In addition, Class B shares purchased with cash automatically convert
to Class A shares after 8 years. If purchased by exchange, the conversion
schedule is the same as the originally purchased Alliance Mutual Fund shares.
Currently, the longest conversion period is 8 years.
Annual Fund Operating Expenses (expenses that are deducted from Fund assets) and
Examples
The examples are to help you compare the cost of investing in the Fund with the
cost of investing in other funds. They assume that you invest $10,000 in the
Fund for the periods indicated and then redeem all of your shares at the end of
those periods. They also assume that your investment has a 5% return each year
and that the Fund's operating expenses stay the same. Your actual costs may be
higher or lower.
<TABLE>
<CAPTION>
Operating Expenses Examples
- ---------------------------------------------------- ------------------------------------------------------------------
Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees .25% .25% .25% After 1 year $ 108 $ 561 $ 161 $ 231 $ 131
Rule 12b-1 Fees .50% 1.00% .75% After 3 years $ 337 $ 699 $ 499 $ 409 $ 409
Other Expenses .31% .33% .29% After 5 years $ 585 $ 860 $ 860 $ 708 $ 708
Total Fund After 10 years $1,294 $1,739(*) $1,739(*) $1,556 $1,556
Operating Expenses 1.06% 1.58% 1.29%
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</TABLE>
+Assumes redemption at the end of the period.
++Assumes no redemption at the end of the period.
(*)Assumes longest conversion schedule of 8 years.
4
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OTHER INFORMATION ABOUT
THE FUND'S OBJECTIVE,
STRATEGIES AND RISKS
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This section of the prospectus provides a more complete description of the
principal investment objective, strategies and risks of the Fund.
Please note:
. Additional descriptions of the Fund's strategies and investments, as well as
other strategies and investments not described below, may be found in the
Fund's Statement of Additional Information or SAI.
. There can be no assurance that the Fund will achieve its investment
objective.
INVESTMENT OBJECTIVE
The Fund's investment objective is maximum current income to the extent
consistent with safety of principal and liquidity. As a money market fund, the
Fund must meet the requirements of SEC Rule 2a-7. The Rule imposes strict
requirements on the investment quality, maturity, and diversification of the
Fund's investments. Under Rule 2a-7, the Fund's investments must have a
remaining maturity of no more than 397 days and its investments must maintain an
average weighted maturity that does not exceed 90 days.
INVESTMENT STRATEGY
The Fund pursues its objective by maintaining a portfolio of high-quality U.S.
dollar-denominated money market securities. The Fund may invest in:
. marketable obligations issued or guaranteed by the U.S. Government or one of
its agencies or instrumentalities;
. 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;
. high-quality commercial paper issued by U.S. or foreign companies (rated or
determined by Alliance to be of comparable quality) and participation
interests in loans extended to such companies;
. adjustable rate obligations;
. asset-backed securities;
. restricted securities (i.e., securities subject to legal or contractual
restrictions on resale); and
. repurchase agreements fully collateralized.
The Fund buys and sells securities based on its objective of maximizing current
income to the extent consistent with safety of principal and liquidity. The
Fund's adviser evaluates investments based on credit analysis and the interest
rate outlook.
The Fund may invest up to 25% of its total assets in money market instruments
issued by foreign branches of foreign banks. To the extent the Fund makes such
investments, consideration will be given to their domestic marketability, the
lower reserve requirements generally mandated for overseas banking operations,
the possible impact of interruptions in the flow of international currency
transactions, potential political and social instability or expropriation,
imposition of foreign taxes, the lower level of government supervision of
issuers, the difficulty in enforcing contractual obligations, and the lack of
uniform accounting and financial reporting standards.
The Fund limits its investment in illiquid securities to 10% of its net assets.
Illiquid securities include restricted securities, except restricted securities
determined by Alliance to be liquid in accordance with procedures adopted by the
Trustees of the Fund.
The Fund may not invest 25% or more of its assets in securities of issuers in
any one industry except for 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).
RISK CONSIDERATIONS
The Fund's primary risks are interest rate risk and credit risk. Because the
Fund invests in short-term securities, a decline in interest rates will affect
the Fund's yield as these securities mature or are sold and the Fund purchases
new short-term securities with a lower yield. Generally, an increase in interest
rates causes the value of a debt instrument to decrease. The change in value for
shorter-term securities is usually smaller than for securities with longer
maturities. Because the Fund invests in securities with short maturities and
seeks to maintain a stable net asset value of $1.00 per share, it is possible,
though unlikely, that an increase in interest rates would change the value of
your investment.
Credit risk is the possibility that a security's credit rating will be
downgraded or that the issuer of the security will default (fail to make
scheduled interest and principal payments).
The Fund invests in highly-rated securities to minimize credit risk. Under Rule
2a-7, 95% of a money market fund's holdings must be rated in the highest credit
category (e.g., A-1 or A-1+) and the remaining 5% must be rated no lower than
the second highest credit category.
The Fund's investments in illiquid securities also may be subject to liquidity
risk, which is the risk that, under certain circumstances, particular
investments may be difficult to sell at an advantageous price. Illiquid
restricted securities also are subject to the risk that the Fund may be unable
to sell the security due to legal or contractual restrictions on resale.
The Fund's investments in U.S. dollar-denominated obligations of foreign banks,
foreign branches of U.S. banks, U.S. branches of foreign banks, and commercial
paper of foreign companies may be subject to foreign risk. Foreign securities
issuers are usually not
5
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subject to the same degree of regulation as U.S. issuers. Reporting, accounting,
and auditing standards of foreign countries differ, in some cases, significantly
from U.S. standards. Foreign risk includes nationalization, expropriation or
confiscatory taxation, political changes or diplomatic developments that could
adversely affect the Fund's investments.
The Fund also is subject to management risk because it is an actively managed
portfolio. Alliance will apply its investment techniques and risk analyses in
making investment decisions for the Fund, but there is no guarantee that its
techniques will produce the intended result.
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MANAGEMENT OF THE FUND
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The Fund's adviser is Alliance Capital Management, L.P., 1345 Avenue of the
Americas, New York, NY 10105. Alliance is a leading international investment
adviser supervising client accounts with assets as of December 31, 1998 totaling
more than $286 billion (of which approximately $118 billion represented assets
of investment companies). Alliance's clients are primarily major corporate
employee benefit plans, public employee retirement systems, investment
companies, foundations, and endowment funds. The 54 registered investment
companies, with more than 118 separate portfolios, managed by Alliance currently
have over 3.5 million shareholder accounts. As of December 31, 1998, Alliance
was retained as investment manager for over 35 of the FORTUNE 100 Companies.
Alliance provides investment advisory services and order placement facilities
for the Fund. For these advisory services, the Fund paid Alliance .25% of
average daily net assets during the fiscal year ended September 30, 1998.
The Fund's SAI has more detailed information about Alliance and other Fund
service providers.
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PURCHASE AND SALE OF SHARES
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GENERAL
You may purchase the Fund's shares for cash and subsequently exchange them 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. The Fund's shares 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. You also may
purchase the Fund's shares through exchange if you hold shares of other Alliance
Mutual Funds.
HOW THE FUND VALUES ITS SHARES
The Fund's net asset value or NAV is expected to be constant at $1.00 per share,
although this value is not guaranteed. The NAV is calculated at 4:00 p.m.
Eastern time each day the New York Stock Exchange (NYSE) is open for business.
To calculate NAV, the Fund's assets are valued and totaled, liabilities are
subtracted, and the balance, called net assets, is divided by the number of
shares outstanding. The Fund values its securities at their amortized cost. This
method involves valuing an instrument at its cost and thereafter applying a
constant amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the investment.
Your order for purchase, sale, or exchange of shares is priced at the next NAV
calculated after your order is received by the Fund. Your purchase of Fund
shares may be subject to an initial sales charge. Sales of Fund shares may be
subject to a contingent deferred sales charge or CDSC. See the next section of
this prospectus, Distribution Arrangements, for details.
HOW TO BUY SHARES
You may purchase the Fund's shares through broker-dealers, banks, or other
financial intermediaries. You may purchase shares directly from the Fund's
principal underwriter, Alliance Fund Distributors, Inc., or AFD, only if you
have a financial intermediary of record.
Minimum investment amounts are:
. Initial: $250
. Subsequent: $ 50
. Automatic Investment Program: $ 25
If you are an existing Fund shareholder, you may purchase shares by electronic
funds transfer in amounts not exceeding $500,000 if you have completed the
appropriate section of the Subscription Application. Call 800-221-5672 to
arrange a transfer from your bank account.
The Fund may refuse any order to purchase shares. In this regard, the Fund
reserves the right to restrict purchases of shares (including through exchanges)
when they appear to evidence a pattern of frequent purchases and sales made in
response to short-term considerations.
HOW TO EXCHANGE SHARES
You may exchange your Fund shares for shares of the same class of other Alliance
Mutual Funds. Exchanges of Class A shares are made at the next determined NAV
less the amount of any applicable initial sales charge, which is described in
the prospectus for the other Alliance Fund. Exchanges of Class B and C shares
are made at the next determined NAV, without sales or service charges. You may
request an
6
<PAGE>
exchange by mail or telephone. You must call by 4:00 p.m. Eastern time to
receive that day's NAV. The Fund may change, suspend, or terminate the exchange
service on 60 days' written notice.
Your exchange of Class A shares may be eligible for a reduced sales charge under
certain circumstances. Under the Alliance Mutual Funds' Right of Accumulation,
exchanges of Class A shares made under the Alliance Dollar Cost Averaging
Program or otherwise have an initial sales charge based on your total Alliance
Mutual Fund holdings, including your Fund shares. Consult with your financial
representative or Alliance to find out if you are eligible for a reduced sales
charge.
HOW TO SELL SHARES
You may "redeem" your shares (i.e., sell your shares to the Fund) on any day the
NYSE is open, either directly or through your financial intermediary. Your sales
price will be the next-determined NAV, less any applicable CDSC, after the Fund
receives your sales request in proper form. Normally, proceeds will be sent to
you within 7 days. If you recently purchased your shares by check or electronic
funds transfer, you cannot redeem any portion of it until the Fund 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 sales request by 4:00 p.m., Eastern time,
and submit it to the Fund by 5:00 p.m., Eastern time, for you to receive
that day's NAV, less any applicable CDSC. Your broker is responsible for
submitting all necessary documentation to the Fund and may charge you
for this service.
. Selling Shares Directly to the Fund
By Mail:
- Send a signed letter of instruction or stock power, along with
certificates, to:
Alliance Fund Services
P.O. Box 1520
Secaucus, NJ 07906-1520
800-221-5672
- For your protection, a bank, a member firm of a national stock exchange,
or other eligible guarantor institution, must guarantee signatures.
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. If you have any questions about these
procedures, contact AFS.
By Telephone:
- You may redeem your shares for which no stock certificates have been
issued by telephone request. Call AFS at 800-221-5672 with instructions
on how you wish to receive your sale proceeds.
- A telephone redemption request must be received by 4:00 p.m. Eastern
time for you to receive that day's NAV, less any applicable CDSC.
- If you have selected electronic funds transfer in your Subscription
Application, the redemption proceeds may be sent directly to your bank.
Otherwise, the proceeds will be mailed to you.
- Redemption requests by electronic funds transfer may not exceed $100,000
per day and redemption requests by check cannot exceed $50,000 per day.
- Telephone redemption is not available for shares held in nominee or
"street name" accounts, retirement plan accounts, or shares held by a
shareholder who has changed his or her address of record within the
previous 30 calendar days.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund's net income is paid daily to shareholders and automatically invested
in additional shares in your account. These additional shares are entitled to
dividends on following days resulting in compounding growth of income. The Fund
expects that its distributions will primarily consist of net income or, if any,
short-term capital gains as opposed to long-term capital gains. For federal
income tax purposes, the Fund's dividend distributions of net income (or
short-term taxable gains) will be taxable to you as ordinary income. Any capital
gains distributions may be taxable to you as capital gains. The Fund's
distributions also may be subject to certain state and local taxes.
Each year shortly after December 31, the Fund will send you tax information
stating the amount and type of all its distributions for the year.
The sale or exchange of Fund shares is a taxable transaction for Federal income
tax purposes.
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DISTRIBUTION ARRANGEMENTS
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Share Classes. The Fund offers three classes of shares through this prospectus.
Class A Shares--Initial Sales Charge Alternative
Class A shares offer investors the choice of investing pending an investment by
exchange into Class A shares of another Alliance Mutual Fund. You can purchase
Class A shares for cash at NAV without an initial sales charge. Your investment
will be subject to sales charge upon exchange of your Class A shares for the
Class A shares of other Alliance Mutual Funds with sales charges.
You may also purchase Class A shares without a sales charge by exchange from
Class A shares of another Alliance Mutual Fund.
7
<PAGE>
Purchases of Class A shares in the amount of $1,000,000 or more will be subject
to a 1% CDSC if you redeem your shares within 1 year. The 1% CDSC also will
apply to any Class A shares purchased by exchange for Class A shares of another
Alliance Mutual Fund that did not have an initial sales charge because the
purchase was for $1,000,000 or more. The 1-year period for the CDSC begins with
the date of your original purchase, not the date of the exchange for the Fund's
Class A shares.
There is no maximum investment limit on cash purchases of Class A shares.
Class B Shares--Deferred Sales Charge Alternative
Class B shares offer investors the choice of investing pending an investment by
exchange into Class B shares of another Alliance Mutual Fund. You can purchase
Class B shares for cash at NAV without an initial sales charge. Your investment
will be subject to a CDSC if you redeem shares within 4 years of purchase. The
CDSC varies depending on the number of years you hold the shares. The CDSC
amounts are:
Years Since Purchase CDSC
-------------------- ----
First 4.0%
Second 3.0%
Third 2.0%
Fourth 1.0%
Fifth None
The Fund's Class B shares purchased for cash automatically convert to Class A
shares eight years after the end of the month of your purchase. If you exchange
your Class B shares for the Class B shares of another Alliance Mutual Fund, the
conversion period runs from the date of your original purchase. If you purchase
the Fund's Class B shares by exchange from another Alliance Mutual Fund, your
shares will convert to Class A shares 8 years after the date of the original
purchase, not the date of exchange for the Fund's Class B shares.
The maximum cash purchase of Class B shares is $250,000.
Class C Shares--Asset-Based Sales Charge Alternative
Class C shares offer investors the choice of investing in a money market fund
pending an investment by exchange into Class C shares of another Alliance Mutual
Fund. You can purchase Class C shares for cash at NAV without an initial sales
charge. Your investment will be subject to a 1% CDSC if you redeem your shares
within 1 year. If you exchange your shares for the Class C shares of another
Alliance Mutual Fund, the 1% CDSC also will apply to these Class C shares. The
1-year period for the CDSC begins with the date of your original purchase, not
the date of the exchange for the Fund's Class C shares.
Class C shares do not convert to any other class of shares of the Fund.
The maximum cash purchase of Class C shares is $1,000,000.
Asset-Based Sales Charge Or Rule 12b-1 Fees. The Fund has adopted a plan under
SEC Rule 12b-1 that allows the Fund to pay asset-based sales charges or
distribution and service fees for the distribution and sale of its shares. The
amount of these fees for each class of the Fund's shares is:
Rule 12b-1 Fee
(as a percent of
aggregate average
daily net assets)
-----------------
Class A Shares .50%
Class B Shares 1.00%
Class C Shares .75%
Because these fees are paid out of the Fund's assets on an on-going basis, over
time these fees will increase the cost of your investment and may cost you more
than paying other types of sales fees. Class B and Class C shares are subject to
higher distribution fees than Class A shares (Class B shares are subject to
these higher fees for a period of eight years, after which they convert to Class
A shares). The higher fees mean a higher expense ratio, so Class B and Class C
shares pay correspondingly lower dividends and may have a lower net asset value
than Class A shares.
Choosing A Class Of Shares. The decision as to which class of shares is more
beneficial to you depends on the amount and intended length of your investment
and whether you intend to subsequently exchange your shares for shares of
another Alliance Mutual Fund. If you are making a large cash purchase, thus
qualifying for a reduced sales charge on a subsequent exchange, you might
consider purchasing Class A shares. If you are making a smaller cash purchase,
you might consider purchasing Class B shares because no subsequent 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 charge and no CDSC as long as the shares are held for one
year or more. Dealers and agents may receive differing compensation for selling
Class A, Class B, or Class C shares.
You should consult your financial agent to assist in choosing a class of Fund
shares.
Application Of The CDSC. The CDSC is applied to the lesser of the original cost
of shares being redeemed or NAV at the time of redemption (or, as to Fund shares
acquired through an exchange, the cost of the Alliance Mutual Fund shares
originally purchased for cash). Shares obtained from dividend or distribution
reinvestment are not subject to the CDSC. The Fund may waive the CDSC on
redemptions of shares following the death or disability of a shareholder, to
meet the requirements of certain qualified retirement plans, or under a monthly,
bimonthly, or quarterly systematic withdrawal plan. See the Fund's Statement of
Additional Information for further information about CDSC waivers.
Other. 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, or Class C shares made through such financial representative. Such financial
intermediaries also may impose requirements with respect to the purchase, sale,
or exchange of shares that are
8
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different from, or in addition to, those imposed by the Fund, including
requirements as to the minimum initial and subsequent investment amounts.
In addition to the discount or commission paid to dealers or agents, AFD from
time to time pays additional cash incentives to dealers or agents, including EQ
financial Consultants Inc., an affiliate of AFD, for 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 on
the sale of a specified minimum dollar amount of the shares of the Fund and/or
other Alliance Mutual Funds during a specific period of time. Such incentives
may take the form of payment for attendance at seminars, meals, sporting events
or theater performances, or payment for travel, lodging, and entertainment
incurred in connection with travel by persons associated with a dealer or agent
to urban or resort locations within or outside the United States. Such dealer or
agent may elect to receive cash incentives of equivalent amounts in lieu of such
payments.
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GENERAL INFORMATION
- --------------------------------------------------------------------------------
Under unusual circumstances, the Fund may suspend redemptions or postpone
payment for up to seven days or longer, as permitted by federal securities 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.
During drastic economic or market developments, you might have difficulty in
reaching AFS by telephone, in which event you should issue written instructions
to AFS. AFS is not responsible for the authenticity of telephone requests to
purchase, sell, or exchange shares. AFS will employ reasonable procedures 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 telephone
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 shareholder's manual explaining all available services will be
provided upon request. To request a shareholder manual call 800-227-4618.
Employee Benefit Plans. Certain employee benefit plans, including
employer-sponsored tax-qualified 401(k) plans and other defined contribution
retirement plans ("Employee Benefit Plans"), may have 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 participants 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 prospectus. In addition, the Class A, Class B and Class C CDSC
may be waived for investments made through Employee Benefit Plans.
Year 2000. Many computer systems and applications in use today process
transactions using two-digit date fields for the year of the transaction, rather
than the full four digits. If these systems are not modified or replaced,
transactions occurring after 1999 could be processed as year "1900," which could
result in processing inaccuracies and computer system failures. This is commonly
known as the Year 2000 problem. Should any of the computer systems employed by
the Fund's major service providers fail to process Year 2000 information
properly, that could have a significant negative impact on the Fund's operations
and the services that are provided to the Fund's shareholders. In addition, to
the extent that the operations of issuers of securities held by the Fund are
impaired by the Year 2000 problem, or prices of securities held by the Fund
decline as a result of real or perceived problems relating to the Year 2000, the
value of the Fund's shares may be materially affected.
The Fund has been advised that Alliance, AFD, and AFS, the Fund's registrar,
transfer agent, and dividend disbursing agent (collectively, "Alliance") began
to address the Year 2000 issue several years ago in connection with the
replacement or upgrading of certain computer systems and applications. During
1997, Alliance began a formal Year 2000 initiative, which established a
structured and coordinated process to deal with the Year 2000 issue. Alliance
reports that it has completed its assessment of the Year 2000 issues on its
domestic and international computer systems and applications. Currently,
management of Alliance expects that the required modifications for the majority
of its significant systems and applications that will be in use on January 1,
2000 will be completed and tested in early 1999. Full integration testing of
these systems and testing of interfaces with third-party suppliers will continue
through 1999. At this time, management of Alliance believes that the costs
associated with resolving this issue will not have a material adverse effect on
its operations or on its ability to provide the level of services it currently
provides to the Fund.
The Fund's custodian has advised the Fund and Alliance that it also is in the
process of reviewing its systems with the same goals. As of the date of this
prospectus, the Fund and Alliance have no reason to believe that the Fund's
custodian will be unable to achieve these goals.
9
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the Fund's
financial performance for the period of the Fund's operations. Certain
information reflects financial information for a single Fund share. The total
return in the table represents the rate that an investor would have earned (or
lost) on an investment in the Fund (assuming investment of all dividends and
distributions). The information has been audited by McGladrey & Pullen LLP, the
Fund's independent auditors, whose report, along with the Fund's financial
statements, appears in the Statement of Additional Information, which is
available upon request.
<TABLE>
<CAPTION>
Class A
-----------------------------------------------------------------------
Year Ended Mar. 25, 1994(a)
September 30, to
--------------------------------------------------
1998 1997 1996 1995 Sept. 30, 1994
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
--------- ---------- ---------- ---------- ----------
Income From Investment Operations
Net investment income ........... .0454 .0411 .0416 .0453 .0126
Net Gains or Losses on Securities .0000 .0000 .0000 .0000 .0000
--------- ---------- ---------- ---------- ----------
Total from Investment Operations .0454 .0411 .0416 .0453 .0126
--------- ---------- ---------- ---------- ----------
Less: Distributions
Dividends ....................... (.0454) (.0411) (.0416) (.0453) (.0126)
Distributions ................... .0000 .0000 .0000 .0000 .0000
--------- ---------- ---------- ---------- ----------
Total Distributions ............. (.0454) (.0411) (.0416) (.0453) (.0126)
--------- ---------- ---------- ---------- ----------
Net asset value, end of period .. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========== ========== ========== ==========
Total Return
Total investment return based on net asset value(b) 4.64% 4.19% 4.24% 4.64% 1.26%(c)
Ratios/Supplemental Data
Net Assets, end of period (in millions) $ 168 $ 41 $ 41 $ 41 $ 18
Ratio to average net assets of:
Expenses, net of waivers ...... 1.06% 1.38% 1.29% 1.21% 1.82%(d)
Expenses, before waivers ...... 1.06% 1.38% 1.29% 1.29% 1.82%(d)
Net investment income ......... 4.56% 4.10% 4.15% 4.63%(e) 2.62%(d)
- -------------------------------
</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) The total return is not annualized
(d) Annualized
(e) Net of expenses waived by the Adviser
10
<PAGE>
<TABLE>
<CAPTION>
Class B
-----------------------------------------------------------------------
Year Ended Mar. 25, 1994(a)
September 30, to
---------------------------------------------------
1998 1997 1996 1995 Sept. 30, 1994
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income From Investment Operations
Net investment income .............. .0404 .0361 .0366 .0404 .0101
Net Gains or Losses on Securities .. .0000 .0000 .0000 .0000 .0000
-------- -------- -------- -------- -------
Total from Investment Operatio ..... .0404 .0361 .0366 .0404 .0101
Less: Distributions
Dividends .......................... (.0404) (.0361) (.0366) (.0404) (.0101)
Distributions ...................... .0000 .0000 .0000 .0000 .0000
-------- -------- -------- -------- -------
Total Distributions ................ (.0404) (.0361) (.0366) (.0404) (.0101)
-------- -------- -------- -------- -------
Net asset value, end of period ..... $ 1.00 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== =======
Total Return
Total investment return based on net asset value(b) 4.13% 3.67% 3.72% 4.12% 1.01%(c)
Ratios/Supplemental Data
Net Assets, end of period (in millions) $ 152 $ 74 $ 65 $ 65 $ 31
Ratio to average net assets of:
Expenses, net of waivers ......... 1.58% 1.88% 1.79% 1.70% 2.35%(d)
Expenses, before waivers ......... 1.58% 1.88% 1.79% 1.78% 2.35%(d)
Net investment income ............ 4.05% 3.61% 3.67% 4.17%(e) 1.91%(d)
- ------------------------
</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) The total return is not annualized
(d) Annualized
(e) Net of expenses waived by the Adviser
<TABLE>
<CAPTION>
Class C
-----------------------------------------------------------------------
Year Ended Mar. 25, 1994(a)
September 30, to
--------------------------------------------------
1998 1997 1996 1995 Sept. 30, 1994
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period .............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
Income From Investment Operations
Net investment income ............................. .0430 .0386 .0390 .0430 .0112
Net Gains or Losses on Securities ................. .0000 .0000 .0000 .0000 .0000
------- ------- ------- ------- -------
Total from Investment Operations .................. .0430 .0386 .0390 .0430 .0112
------- ------- ------- ------- -------
Less: Distributions
Dividends ......................................... (.0430) (.0386) (.0390) (.0430) (.0112)
Distributions ..................................... .0000 .0000 .0000 .0000 .0000
------- ------- ------- ------- -------
Total Distributions ............................... (.0430) (.0386) (.0390) (.0430) (.0112)
------- ------- ------- ------- -------
Net asset value, end of period .................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
Total Return
Total investment return based on net asset value(b) 4.39% 3.93% 3.98% 4.39% 1.12%(c)
Ratios/Supplemental Data
Net Assets, end of period (in millions) ........... $ 125 $ 24 $ 13 $ 10 $ 5
Ratio to average net assets of:
Expenses, net of waivers ........................ 1.29% 1.61% 1.55% 1.45% 2.08%(d)
Expenses, before waivers ........................ 1.29% 1.61% 1.55% 1.52% 2.08%(d)
Net investment income ........................... 4.34% 3.90% 3.89% 4.41%(e ) 2.14%(d)
- -------------------------
</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) The total return is not annualized
(d) Annualized
(e) Net of expenses waived by the Adviser
11
<PAGE>
For more information about the Fund, the following documents are available upon
request:
. Annual/Semi-Annual Reports To Shareholders
The Fund's annual and semi-annual reports to shareholders contain additional
information on the Fund's investments.
. Statement Of Additional Information (SAI)
The Fund has an SAI, which contains more detailed information about the Fund,
including its operations and investment policies.
The Fund's SAI is incorporated by reference into (and is legally part of) this
prospectus.
You may request a free copy of the current annual/semi-annual report or the SAI,
by contacting your broker or other financial intermediary, or by contacting
Alliance:
By Mail: c/o Alliance Fund Services, Inc.
P.O. Box 1520, Secaucus, N.J. 07096-1520
By Phone: For Information: (800) 221-5672
For Literature: (800) 227-4618
Or you may view or obtain these documents from the SEC:
In Person: at the SEC's Public Reference Room in Washington, D.C.
By Phone: 1-800-SEC-0330
By Mail: Public Reference Section
Securities and Exchange Commission
Washington, DC 20549-6009
(duplicating fee required)
On the Internet: www.sec.gov
You may also find more information about Alliance and the Fund on the Internet
at: www.Alliancecapital.com
Investment Products Offered Are
- --------------------------------------------------------
.Not FDIC Insured .May Lose Value .Not Bank Guaranteed
- --------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
AFD Exchange Reserves
Subscription Application
- --------------------------------------------------------------------------------
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
For certified or overnight deliveries, send to:
Alliance Fund Services, Inc.
500 Plaza Drive
Secaucus, New Jersey 07094
Section 1 Your Account Registration
(Required)
Complete one of the available choices. To ensure proper tax reporting to the
IRS:
o Individuals, Joint Tenants, Transfer on Death
and Gift/Transfer to a Minor:
. Indicate your name(s) exactly as it appears on
your social security card.
o Transfer on Death:
. Ensure that your state participates
o 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.
Section 2 Your Address (Required)
Complete in full.
o Non-Resident Alien:
. Indicate your permanent country of residence.
Section 3 Your Initial Investment (Required)
(1) Write the three digit fund class number in the column titled `Indicate three
digit fund class number located below'.
(2) Write the dollar amount of your initial purchase in the column titled
`Indicate Dollar Amount'.
(3) Check off a distribution option for your dividends.
(4) Check off a distribution option for your capital gains. All distributions
(dividends and capital gains) will be reinvested into your fund account unless
you direct otherwise. If you want distributions sent directly to your bank
account, then you must complete Section 4D and attach a preprinted, voided check
for that account. If you want your distributions sent to a third party you must
complete Section 4E.
<PAGE>
Section 4 Your Shareholder Options
(Complete only those options you want)
A. Automatic Investment Plans (AIP) - You can make periodic investments into the
Funds in one of three ways. First, by a periodic withdrawal ($25 minimum)
directly from your bank account and invested into the Fund. Second, you can
direct your distributions (dividends and capital gains) from the Fund into
another Alliance Fund. Or third, you can automatically exchange monthly ($25
minimum) shares of the Fund for shares of another Alliance Fund (ADCAP). To
elect one of these options, complete the appropriate portion of Section 4A & 4D.
If more than one dividend direction or monthly exchange is desired, please call
our Literature Center to obtain a Shareholder Account Services Options Form for
completion.
B. Telephone Transactions via EFT - Complete this option if you would like to be
able to transact via telephone between your fund account and your bank account.
C. Systematic Withdrawal Plans (SWP) Complete this option if you wish to
periodically redeem dollars from your fund account. Payments can be made via
Electronic Funds Transfer (EFT) to your bank account or by check.
D. Bank Information - If you have elected any options that involve transactions
between your bank account and your fund account or have elected cash
distribution options and would like the payments sent to your bank account,
please tape a preprinted, voided check of the account you wish to use to this
section of the application.
E. Third Party Payment Details - If you have chosen cash distributions and/or a
Systematic Withdrawal Plan and would like the payments sent to a person and/or
address other than those provided in section 1 or 2, complete this option.
Medallion Signature Guarantee is equired if your account is not maintained by a
broker dealer.
Section 5 Shareholder Authorization (Required) All owners must sign. If it is a
custodial, corporate, or trust account, the custodian, an authorized officer, or
the trustee respectively must sign.
If We Can Assist You In Any Way, Please Do Not Hesitate To Call Us At: (800)
221-5672.
Or visit our website at www.alliancecapital.com
- --------------------------------------
For Literature Call: (800) 227-4618
- --------------------------------------
<PAGE>
AFD Exchange Reserves Subscription Application
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
1. YOUR ACCOUNT REGISTRATION (Please Print in Capital Letters and Mark Check Boxes Where Applicable)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
|_| Individual Account { |_| Male |_| Female } --or-- |_| Joint Account --or--
|_| Transfer On Death { |_| Male |_| Female } --or-- |_| Gift/Transfer to a Minor
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Owner or Custodian (First Name) (MI) (Last Name)
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
(First Name) Joint Owner*, Transfer On Death Beneficiary or Minor (MI) (Last Name)
|_|_|_|-|_|_|-|_|_|_|_| If Uniform Gift/Transfer
Social Security Number of Owner or Minor (required to open account) to Minor Account:
|_| |_| Minor's State of Residence
If Joint Tenants Account: *The Account will be registered
"Joint Tenants with right of Survivorship" unless you indicate
otherwise below:
|_| In Common |_| By Entirety |_| Community Property
|_| Trust --or-- |_| Corporation --or-- |_| Other_____________________________
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Name of Trustee if applicable (First Name) (MI) (Last Name)
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Name of Trust or Corporation or Other Entity
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Name of Trust or Corporation or Other Entity continued
|_|_|_|_|_|_|_|_| |_|_|_|_|_|_|_|_|_|
Trust Dated (MM,DD,YYYY) Tax ID Number (required to open account)
|_| Employer ID Number --or-- |_| Social Security
Number
- --------------------------------------------------------------------------------------------------------------------------
2. Your Address
- --------------------------------------------------------------------------------------------------------------------------
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Street Number Street Name
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_| |_|_|_|_|_|
City State Zip code
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_|_| - |_|_|_| - |_|_|_|_|
If Non-U.S., Specify Country Daytime Phone Number
|_| U.S. Citizen |_| Resident Alien |_| Non-Resident Alien
</TABLE>
Alliance Capital[LOGO](R)
90000GEN-AFDERApp-P1
1
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
3. YOUR INITIAL INVESTMENT The minimum investment is $250.
The maximum investment in Class B is $250,000; Class C is $1,000,000.
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
I hereby subscribe for shares of AFD Exchange Reserves and elect distribution options as indicated.
Dividend and Capital Gain Distribution Options:
R Reinvest distributions into my fund account.
- ----------------------
- ------------------------------------------ C Send my distributions in cash to the address I have provided in
Broker/Dealer Use Only: Wire Confirm # - -----------------------------
|_|_|_|_|_|_|_|_| Section 2. (Complete Section 4D for direct deposit to your bank
- ------------------------------------------ account. Complete Section 4E for payment to a third party).
D Direct my distributions to another Alliance Fund. Complete the
- ------------------------------------------------
appropriate portion of Section 4A to direct your distributions
(dividends and capital gains) to another Alliance Fund (the $250
minimum investment requirement applies to Funds into which
distributions are directed).
- ------------- ============== ======================== =============================
Indicate three Distributions Options
Make all digit Fund Class *Check One*
checks* number located Indicate Dollar Amount =============================
payable to: below Dividends Capital Gains
AFD R C D R C D
--- ============== ======================== =============================
Funds
----- |_|_|_| $ R C D R C D
Exchange
-------- |_|_|_| $ R C D R C D
Reserves
-------- |_|_|_| $ R C D R C D
- -------------
==========================
Total Investment $
==========================
*Cash and money orders are not accepted
- --------------------------------------------------------------------------------------------------------------------------
Fund Class Names and Numbers
- --------------------------------------------------------------------------------------------------------------------------
============= ============== =================
Contingent
Deferred Sales Asset-Based Sales
Charge Charge
A B C
============= ============== =================
AFD Exchange Reserves 136 236 336
AFD Exchange Reserves may be used to meet the needs of an investor who wishes to establish a dollar cost averaging program into like
classes of other Alliance Funds. See "Your Shareholders Options, Section 4A".
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 Fund will be subject to applicable sales charges at the time of the exchange.
</TABLE>
90000GEN-AFDERApp-P2
2
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
4. YOUR SHAREHOLDER OPTIONS
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
A. Automatic Investment Plans (AIP)
|_| Withdraw From My Bank Account Via EFT*
I authorize Alliance to draw on my bank account for investment in my Fund account as indicated below
(Complete Section 4D also for the bank account you wish to use).
|_|_|_| |_|_|_|_| |_|_| , |_|_|_| .00 |_|
Fund Class Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency
Frequency:
M = monthly
Q = quarterly
A = Annually
*Electronic Funds Transfer. Your bank must be a member of the National Automated Clearing House Association (NACHA)
|_| Direct My Distributions
As indicated in Section 3, I would like my dividends and/or capital gains directed to the same class of shares of
another Alliance Fund.
FROM: |_|_|_| |_|_|_|_|_|_|_|_|_|_| - |_|
Fund Class Number Account Number
TO: |_|_|_| |_|_|_|_|_|_|_|_|_|_| - |_|
Fund Number Account Number (if existing)
|_| Alliance Dollar Cost Averaging Program (ADCAP). Exchange My Shares Monthly
I authorize Alliance to transact monthly exchanges from my Fund account, within the same class of shares, to my Alliance
Fund accounts as listed below.
TO: |_|_|_| |_|_|_|_|_|_|_|_|_|_| - |_|
Fund Number Account Number (if existing)
|_|_| , |_|_|_| .00 |_|_|
Amount ($25 minimum) Day of Exchange**
TO: |_|_|_| |_|_|_|_|_|_|_|_|_|_| - |_|
Fund Number Account Number (if existing)
|_|_| , |_|_|_| .00 |_|_|
Amount ($25 minimum) Day of Exchange**
- ------------------------------------------------------------------------------------------------------------------------------------
Exchange of Class A shares are made at the net asset value next determined plus any applicable initial sales charges imposed on
the Class A shares of the other Alliance Funds. 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.
- ------------------------------------------------------------------------------------------------------------------------------------
B. Purchases and Redemptions Via EFT
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: o Review the information in the Prospectus about telephone transaction services.
o 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 Section 4D of this application.
</TABLE>
90000GEN-AFDERApp-P3
3
<PAGE>
- --------------------------------------------------------------------------------
4. YOUR SHAREHOLDER OPTIONS (CONTINUED)
- --------------------------------------------------------------------------------
B. Purchase and Redemptions Via EFT (CONTINUED)
[_] 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.
For shares recently purchased by check or electronic funds transfer
redemption proceeds will not be made available until the Fund is
reasonably assured the check or electronic funds transfer has been
collected, normally 15 calendar days after the purchase date.
C. Systematic Withdrawal Plans (SWP)
In order to establish a SWP, you must reinvest all dividends and capital
gains.
[_] I authorize Alliance to transact periodic redemptions from my Fund
account and send the proceeds to me as indicated below.
<TABLE>
<S> <C> <C> <C> <C> <C>
[_] [_] [_] [_] [_] [_] [_] [_] [_],[_] [_] [_].00 [_] Frequency:
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency M = monthly
Q = quarterly
A = annually
</TABLE>
Please send my SWP proceeds to:
[_] My Address of Record (via check)
[_] The Payee and address specified in section 4E (via check)(Medallion
Signature Guarantee required)
[_] My checking account-via EFT (complete section 4D) Your bank must be a
member of the National Automated Clearing House Association (NACHA)
in order for you to receive SWP proceeds directly into your bank
account. Otherwise payment will be made by check
D. Bank Information This bank account information will be used for:
[_] Distributions (Section 3) [_] Telephone Transactions
(Section 4B)
[_] Automatic Investments (Section 4A) [_] Withdrawals (Section 4C)
103
J. SMITH
123 MAIN STREET
ANYTOWN, USA 12345 ____ 19 __
Pay to the
Order of ________________________________________$ _______________
Please Tape a Pre-printed Voided Check Here*
____________________________________________________________Dollars
YOUR BANK
123 STREET
ANYTOWN, USA 12345 VOID
Note ___________________________ _______________________________
:000000000:103 000000000:765
ABA Routing Number Check Bank Account Number
Number
* The above services cannot be established without a pre-printed voided check.
For EFT transactions, the Fund requires signatures of bank account owners
exactly as they appear on bank records. If the registration at the bank differs
from that on the Alliance Fund, all parties must sign in Section 5.
[_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_]
Your Bank's ABA Routing Number Your Bank Account Number
[_] Checking Account [_] Savings Account
90000GEN-AFDERApp-P4
4
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
4. YOUR SHAREHOLDER OPTIONS (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
E. Third Party Payment Details Your signature(s) in Section 5 must be Medallion Signature Guaranteed if your account is
not maintained by a broker/dealer. This third party payee information will be used for:
|_| Distributions (section 3) |_| Systematic Withdrawals (section 4C)
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_| |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_||_|_|_|_|
Name (First Name) (MI) (Last Name)
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Street Number Street Name
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_| |_|_|_|_|_|
City State Zip code
- --------------------------------------------------------------------------------------------------------------------------
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 5, as well as the legal capacity of
the shareholder.
|_____________________________________________________________| |_______________________________________________________|
Dealer/Agent Firm Authorized Signature
|________________________________________________________| |__| |_______________________________________________________|
Representative First Name MI Last Name
|_____________________________________________________________| |_______________________________________________________|
Dealer/Agent Firm Number Representative Number
|_____________________________________________________________| |_______________________________________________________|
Branch Number Branch Telephone Number
|_____________________________________________________________| |_______________________________________________________|
Branch Office Address
|_____________________________________________________________| |_||_| |_______________________________________________|
City State Zip Code
</TABLE>
90000GEN-AFDERApp-P5
5
<PAGE>
- --------------------------------------------------------------------------------
5. 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 not have changed within the last 30 days. The maximum
telephone redemption amount is $50,000 for redemptions by check.
|_| I do not elect the telephone exchange service.
|_| I do not elect the telephone redemption by check service.
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-resident aliens 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.
I CERTIFY UNDER PENALTY OF PERJURY THAT THE NUMBER SHOWN IN SECTION 1 OF
THIS FORM IS MY CORRECT TAX IDENTIFICATION NUMBER OR I AM WAITING FOR A
NUMBER TO BE ISSUED TO ME AND THAT I HAVE NOT BEEN NOTIFIED THAT THIS
ACCOUNT IS SUBJECT TO BACKUP WITHHOLDING.
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
- ----------------------------------------------
Medallion Signature Guarantee required if
completing Section 4E and your mutual fund is
not maintained by a broker dealer
Alliance Capital [LOGO]
90000GEN-AFDERApp-P6
6
<PAGE>
=====================
Signature Card
AFD Exchange Reserves
=====================
................................................................................
Alliance Capital [LOGO]
Medallion Signature Guarantee (see reverse)
================================================================================
................................................................................
Class A or Class C FUND ACCOUNT# (IF KNOWN)
................................................................................
ACCOUNT NAME(S) AS REGISTERED:
................................................................................
................................................................................
SOCIAL SECURITY OR TAX IDENTIFICATION NUMBER:
................................................................................
AUTHORIZED SIGNATURE(S) - for joint accounts, all owners, or their legal
representatives, must sign this card.
1. .............................................................................
2. .............................................................................
3. .............................................................................
Check one box: [ ] All 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).
STATE STREET BANK AND TRUST COMPANY Subject to conditions on reverse side.
<PAGE>
=====================
Signature Card
AFD Exchange Reserves
=====================
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.
<PAGE>
This is filed pursuant to Rule 497(c).
File Nos. 33-74230 and 811-08294.
<PAGE>
<PAGE>
AFD EXCHANGE RESERVES
- --------------------------------------------------------------------------------
ADVISOR CLASS
PROSPECTUS
February 1, 1999
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
ALLIANCE CAPITAL [LOGO]
<PAGE>
TABLE OF CONTENTS
-------------------------------
Page
RISK/RETURN SUMMARY ..................................................... 2
Performance and Bar Chart Information ................................... 3
FEES AND EXPENSES OF THE FUND ........................................... 4
OTHER INFORMATION ABOUT THE FUND'S
OBJECTIVE, STRATEGIES AND RISKS ......................................... 5
Investment Objective .................................................... 5
Investment Strategy ..................................................... 5
Risk Considerations ..................................................... 5
MANAGEMENT OF THE FUND .................................................. 6
PURCHASE AND SALE OF SHARES ............................................. 6
General ................................................................. 6
How The Fund Values Its Shares .......................................... 6
How To Buy Shares ....................................................... 6
How To Exchange Shares .................................................. 7
How To Sell Shares ...................................................... 7
DIVIDENDS, DISTRIBUTIONS AND TAXES ...................................... 7
CONVERSION FEATURE ...................................................... 8
GENERAL INFORMATION ..................................................... 8
FINANCIAL HIGHLIGHTS .................................................... 9
AFD Exchange Reserves' investment adviser is Alliance Capital Management L.P., a
global investment manager providing diversified services to institutions and
individuals through a broad line of investments including more than 100 mutual
funds.
RISK/RETURN SUMMARY
The following is a summary of certain key information about the Fund. You will
find additional information about the Fund, including a detailed description of
the risks of an investment in the Fund, after this summary. This prospectus has
additional descriptions of the Fund's investments in the discussion under "Other
Information About the Fund's Objective, Strategies and Risks." That section also
includes more information about the Fund, its investments, and related risks.
2
<PAGE>
AFD EXCHANGE RESERVES
- --------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is maximum current income to the extent
consistent with safety of principal and liquidity.
PERFORMANCE AND BAR CHART INFORMATION
The table shows the Fund's average annual returns and the bar chart shows the
Fund's annual returns. The table and the bar chart provide an indication of the
historical risk of an investment in the Fund.
The Fund's past performance does not necessarily indicate how it will perform in
the future.
PRINCIPAL INVESTMENT STRATEGY:
The Fund is a "money market fund" that seeks to maintain a stable net asset
value of $1.00 per share. The Fund invests in a portfolio of high-quality, U.S.
dollar-denominated money market securities.
PRINCIPAL RISKS: The principal risks of investing in the Fund are:
. Interest Rate Risk This is the risk that changes in interest rates will
affect the yield or value of the Fund's investments in debt securities.
. Credit Risk This is the risk that the issuer or guarantor of a debt
security, or the counterparty to a derivatives contract, will be unable or
unwilling to make timely interest or principal payments, or to otherwise
honor its obligations. The degree of risk for a particular security may be
reflected in its credit rating. Credit risk includes the possibility that
any of the Fund's investments will have its credit ratings downgraded.
PERFORMANCE TABLE
- --------------------------------------------------------------------------------
1 Year Since Inception(*)
- ---------------------------------------------------------
Advisor 5.10% 5.10%
- ---------------------------------------------------------
You may obtain the most current yield information of the Fund by calling
1-800-221-5672.
(*) Inception date: 1/30/97
ANOTHER IMPORTANT THING FOR YOU TO NOTE:
An investment in the Fund is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the Fund seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the Fund.
[BAR CHART]
- --------------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98
N/A N/A N/A N/A N/A N/A N/A N/A N/A 5.10%
During the period shown in the bar chart, the highest return for a quarter was
1.29% (quarter ending September 30, 1998) and the lowest return for a quarter
was 1.10% (quarter ending June 30, 1997).
3
<PAGE>
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FEES AND EXPENSES OF THE FUND
- --------------------------------------------------------------------------------
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
Shareholder Transaction Expenses (fees paid directly from your investment)
Advisor Class Share
-------------------
Maximum Deferred Sales Charge (Load) (as a percentage None
of original purchase price or redemption proceeds,
whichever is lower)
Annual Fund Operating Expenses (expenses that are deducted from Fund assets) and
Example
The example is to help you compare the cost of investing in the Fund with the
cost of investing in other funds. It assumes that you invest $10,000 in the Fund
for the time periods indicated and then redeem all of your shares at the end of
those periods. It also assumes that your investment has a 5% return each year
and that the Fund's operating expenses stay the same. Your actual costs may be
higher or lower.
<TABLE>
<CAPTION>
Operating Expenses Example
- ------------------------------------------------------------------ -----------------------------------------------------
Advisor Class Share Advisor Class Share
------------------- -------------------
<S> <C>
Management Fees .25% After 1 Year $ 56
Rule 12b-1 Fees None After 3 Years $176
Other Expenses .30% After 5 Years $307
Total Fund
Operating Expenses .55% After 10 Years $689
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
- --------------------------------------------------------------------------------
OTHER INFORMATION ABOUT
THE FUND'S OBJECTIVE,
STRATEGIES AND RISKS
- --------------------------------------------------------------------------------
This section of the prospectus provides a more complete description of the
principal investment objective, strategies and risks of the Fund.
Please note:
. Additional descriptions of the Fund's strategies and investments, as well
as other strategies and investments not described below, may be found in
the Fund's Statement of Additional Information or SAI.
. There can be no assurance that the Fund will achieve its investment
objective.
INVESTMENT OBJECTIVE
The Fund's investment objective is maximum current income to the extent
consistent with safety of principal and liquidity. As a money market fund, the
Fund must meet the requirements of SEC Rule 2a-7. The Rule imposes strict
requirements on the investment quality, maturity, and diversification of the
Fund's investments. Under Rule 2a-7, the Fund's investments must have a
remaining maturity of no more than 397 days and its investments must maintain an
average weighted maturity that does not exceed 90 days.
INVESTMENT STRATEGY
The Fund pursues its objective by maintaining a portfolio of high-quality U.S.
dollar-denominated money market securities. The Fund may invest in:
. marketable obligations issued or guaranteed by the U.S. Government or one
of its agencies or instrumentalities;
. 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;
. high-quality commercial paper issued by U.S. or foreign companies (rated
or determined by Alliance to be of comparable quality) and participation
interests in loans extended to such companies;
. adjustable rate obligations;
. asset-backed securities;
. restricted securities (i.e., securities subject to legal or contractual
restrictions on resale); and
. repurchase agreements fully collateralized.
The Fund buys and sells securities based on its objective of maximizing current
income to the extent consistent with safety of principal and liquidity. The
Fund's adviser evaluates investments based on credit analysis and the interest
rate outlook.
The Fund may invest up to 25% of its total assets in money market instruments
issued by foreign branches of foreign banks. To the extent the Fund makes such
investments, consideration will be given to their domestic marketability, the
lower reserve requirements generally mandated for overseas banking operations,
the possible impact of interruptions in the flow of international currency
transactions, potential political and social instability or expropriation,
imposition of foreign taxes, the lower level of government supervision of
issuers, the difficulty in enforcing contractual obligations, and the lack of
uniform accounting and financial reporting standards.
The Fund limits its investment in illiquid securities to 10% of its net assets.
Illiquid securities include restricted securities, except restricted securities
determined by Alliance to be liquid in accordance with procedures adopted by
the Trustees of the Fund.
The Fund may not invest 25% or more of its assets in securities of issuers in
any one industry except for 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 associ-
ations (including foreign branches of U.S. banks and U.S. branches of foreign
banks).
RISK CONSIDERATIONS
The Fund's primary risks are interest rate risk and credit risk. Because the
Fund invests in short-term securities, a decline in interest rates will affect
the Fund's yield as these securities mature or are sold and the Fund purchases
new short-term securities with a lower yield. Generally, an increase in interest
rates causes the value of a debt instrument to decrease. The change in value for
shorter-term securities is usually smaller than for securities with longer
maturities. Because the Fund invests in securities with short maturities and
seeks to maintain a stable net asset value of $1.00 per share, it is possible,
though unlikely, that an increase in interest rates would change the value of
your investment.
Credit risk is the possibility that a security's credit rating will be
downgraded or that the issuer of the security will default (fail to make
scheduled interest and principal payments). The Fund invests in highly-rated
securities to minimize credit risk. Under Rule 2a-7, 95% of a money market
fund's holdings must be rated in the highest credit category (e.g., A-1 or A-1+)
and the remaining 5% must be rated no lower than the second highest credit
category.
The Fund's investments in illiquid securities also may be subject to liquidity
risk, which is the risk that, under certain circumstances, particular
investments may be difficult to sell at an advantageous price. Illiquid
restricted securities also are subject to the risk that the Fund may be unable
to sell the security due to legal or contractual restrictions on resale.
The Fund's investments in U.S. dollar-denominated obligations of foreign banks,
foreign branches of U.S. banks, U.S. branches of foreign banks, and commercial
paper of foreign companies may
5
<PAGE>
be subject to foreign risk. Foreign securities issuers are usually not subject
to the same degree of regulation as U.S. issuers. Reporting, accounting, and
auditing standards of foreign countries differ, in some cases, significantly
from U.S. standards. Foreign risk includes nationalization, expropriation or
confiscatory taxation, political changes or diplomatic developments that could
adversely affect the Fund's investments.
The Fund also is subject to management risk because it is an actively managed
portfolio. Alliance will apply its investment techniques and risk analyses in
making investment decisions for the Fund, but there is no guarantee that its
techniques will produce the intended result.
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
The Fund's adviser is Alliance Capital Management, L.P., 1345 Avenue of the
Americas, New York, NY 10105. Alliance is a leading international investment
adviser supervising client accounts with assets as of December 31, 1998 totaling
more than $286 billion (of which approximately $118 billion represented assets
of investment companies). Alliance's clients are primarily major corporate
employee benefit plans, public employee retirement systems, investment
companies, foundations, and endowment funds. The 54 registered investment
companies, with more than 118 separate portfolios, managed by Alliance currently
have over 3.5 million shareholder accounts. As of December 31, 1998, Alliance
was retained as investment manager for over 35 of the FORTUNE 100 Companies.
Alliance provides investment advisory services and order placement facilities
for the Fund. For these advisory services, the Fund paid Alliance .25% of
average daily net assets during the fiscal year ended September 30, 1998.
The Fund's SAI has more detailed information about Alliance and other Fund
service providers.
- --------------------------------------------------------------------------------
PURCHASE AND SALE OF SHARES
- --------------------------------------------------------------------------------
GENERAL
You may purchase the Advisor Class shares for cash and subsequently exchange
them 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 should be purchased
for cash only as a temporary investment pending exchange into Advisor Class
shares of another Alliance Mutual Fund and should not be held as a long-term
investment. You may also purchase Advisor Class shares through exchange if you
hold shares of Advisor Class shares of other Alliance Mutual Funds.
HOW THE FUND VALUES ITS SHARES
The Fund's net asset value or NAV is expected to be constant at $1.00 per share,
although this value is not guaranteed. The NAV is calculated at 4 p.m. Eastern
time each day the New York Stock Exchange (NYSE) is open for business. To
calculate NAV, the Fund's assets are valued and totaled, liabilities are
subtracted, and the balance, called net assets, is divided by the number of
shares outstanding. The Fund values its securities at their amortized cost. This
method involves valuing an instrument at its cost and thereafter applying a
constant amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the investment.
Your order for purchase, sale, or exchange of shares is priced at the next NAV
calculated after your order is received by the Fund.
HOW TO BUY SHARES
You may purchase Advisor Class shares through your financial representative at
NAV. Advisor Class shares are not subject to any initial or contingent sales
charges or distribution expenses. You may purchase and hold shares solely:
. through accounts established under a fee-based program, sponsored and
maintained by a registered broker-dealer or other financial intermediary
and approved by the Fund's principal underwriter, Alliance Fund
Distributors, Inc., or AFD;
. 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;
. by investment advisory clients of, and certain other persons associated
with, Alliance and its affiliates or the Fund; and
. through registered investment advisers or other financial intermediaries
who charge a management, consulting, or other fee for their services and
who purchase shares through a broker or agent approved by AFD 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.
Generally, a fee-based program must charge an asset-based or other similar fee
and must invest at least $250,000 in Advisor Class shares to be approved by AFD
for investment in Advisor Class shares. The Fund's Statement of Additional
Information has more detailed information about who may purchase and hold
Advisor Class shares.
6
<PAGE>
The Fund may refuse any order to purchase Advisor Class shares. In this regard,
the Fund reserves the right to restrict purchases of Advisor Class shares
(including through exchanges) when there appears to be evidence of a pattern of
frequent purchases and sales made in response to short-term considerations.
HOW TO EXCHANGE SHARES
You may exchange your Advisor Class shares for shares of Advisor Class shares of
other Alliance Mutual Funds. Exchanges of Advisor Class shares are made at the
next determined NAV without any sales or service charge. You may request an
exchange by mail or telephone. You must call by 4:00 p.m. Eastern time to
receive that day's NAV. The Fund may change, suspend, or terminate the exchange
service on 60 days' written notice.
HOW TO SELL SHARES
You may "redeem" your shares (i.e., sell your shares to the Fund) on any day the
NYSE is open, either directly or through your financial intermediary. Your sales
price will be the next-determined NAV after the Fund receives your sales request
in proper form. Normally, proceeds will be sent to you within 7 days. If you
recently purchased your shares by check or electronic funds transfer, you cannot
redeem any portion of it until the Fund 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 procedures or documents are required by your fee-
based program or employee benefit plan to sell your shares, you should contact
your financial representative.
. Selling Shares Through Your Financial Representative
Your broker must receive your sales request by 4:00 p.m., Eastern time,
and submit it to the Fund by 5:00 p.m., Eastern time, for you to receive
that day's NAV. Your broker is responsible for submitting all necessary
documentation to the Fund and may charge you for this service.
. Selling Shares Directly to the Fund
By Mail:
- Send a signed letter of instruction or stock power, along with
certificates, to:
Alliance Fund Services
P.O. Box 1520
Secaucus, NJ 07906-1520
800-221-5672
- For your protection, a bank, a member firm of a national stock
exchange, or other eligible guarantor institution, must guarantee
signatures. 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. If you have any questions
about these procedures, contact AFS.
By Telephone:
- You may redeem your shares for which no stock certificates have been
issued by telephone request. Call AFS at 800-221-5672 with
instructions on how you wish to receive your sale proceeds.
- A telephone redemption request must be received by 4:00 p.m., Eastern
time, for you to receive that day's NAV.
- If you have selected electronic funds transfer in your Subscription
Application, the redemption proceeds may be sent directly to your
bank. Otherwise the proceeds will be mailed to you.
- Redemption requests by electronic funds transfer may not exceed
$100,000 per day and redemption requests by check cannot exceed
$50,000 per day.
- Telephone redemption is not available for shares held in nominee or
"street name" accounts, retirement plan accounts, or shares held by a
shareholder who has changed his or her address of record within the
previous 30 calendar days.
OTHER
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,
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 Advisor class shares made through such
financial representative. Such financial intermediaries also may impose
requirements with respect to the purchase, sale, or exchange of shares that are
different from, or in addition to, those imposed by a Fund, including
requirements as to the minimum initial and subsequent investment amounts.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund's net income is paid daily to shareholders and automatically invested
in additional shares in your account. These additional shares are entitled to
dividends on following days resulting in compounding growth of income. The Fund
expects that its distributions will primarily consist of net income or, if any,
short-term capital gains as opposed to long-term capital gains. For federal
income tax purposes, the Fund's dividend distributions of net income (or
short-term taxable gains) will be taxable to you as ordinary income. Any capital
gains distributions may be taxable to you as capital gains. The Fund's
distributions also may be subject to certain state and local taxes.
Each year shortly after December 31, the Fund will send you tax information
stating the amount and type of all its distributions for the year.
The sale or exchange of Fund shares is a taxable transaction for Federal income
tax purposes.
7
<PAGE>
- --------------------------------------------------------------------------------
CONVERSION FEATURE
- --------------------------------------------------------------------------------
CONVERSION
As described above, Advisor Class shares may be held solely through certain
fee-based program accounts, employee benefit plans, and registered investment
advisory or financial intermediary relationships, and by investment advisory
clients of, and certain persons associated with, Alliance and its affiliates or
the Fund. If a holder of Advisor Class shares (i) ceases to participate in the
fee-based program or plan, or to be associated with an eligible investment
advisory or financial intermediary or (ii) is otherwise no longer eligible to
purchase Advisor Class shares ("Conversion Event"), then all Advisor Class
shares held by the shareholder will convert automatically, without notice, to
Class A shares of the same 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.
DESCRIPTION OF CLASS A SHARES
The Class A shares have a distribution fee of .50% under the Fund's Rule 12b-1
plan that allows the Fund to pay distribution and service fees for the
distribution and sale of its shares. Because this fee is paid out of the Fund's
assets, Class A shares have a higher expense ratio and may pay lower dividends
and have a lower NAV than Advisor Class shares.
- --------------------------------------------------------------------------------
GENERAL INFORMATION
- --------------------------------------------------------------------------------
Under unusual circumstances, the Fund may suspend redemptions or postpone
payment for up to seven days or longer, as permitted by federal securities 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.
During drastic economic or market developments, you might have difficulty in
reaching AFS by telephone, in which event you should issue written instructions
to AFS. AFS is not responsible for the authenticity of telephone requests to
purchase, sell or exchange shares. AFS will employ reasonable procedures 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 telephone
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 shareholder's manual explaining all available services will be
provided upon request. To request a shareholder manual call 800-227-4618.
Year 2000. Many computer systems and applications in use today process
transactions using two-digit date fields for the year of the transaction, rather
than the full four digits. If these systems are not modified or replaced,
transactions occurring after 1999 could be processed as year "1900," which could
result in processing inaccuracies and computer system failures. This is commonly
known as the Year 2000 problem. Should any of the computer systems employed by
the Fund's major service providers fail to process Year 2000 information
properly, that could have a significant negative impact on the Fund's operations
and the services that are provided to the Fund's shareholders. In addition, to
the extent that the operations of issuers of securities held by the Fund are
impaired by the Year 2000 Problem, or prices of securities held by the Fund
decline as a result of real or perceived problems relating to the Year 2000, the
value of the Fund's shares may be materially affected.
The Fund has been advised that Alliance, AFD, and AFS, the Fund's registrar,
transfer agent, and dividend disbursing agent (collectively, "Alliance") began
to address the Year 2000 issue several years ago in connection with the
replacement or upgrading of certain computer systems and applications. During
1997, Alliance began a formal Year 2000 initiative, which established a
structured and coordinated process to deal with the Year 2000 issue. Alliance
reports that it has completed its assessment of the Year 2000 issues on its
domestic and international computer systems and applications. Currently,
management of Alliance expects that the required modifications for the majority
of its significant systems and applications that will be in use on January 1,
2000 will be completed and tested in early 1999. Full integration testing of
these systems and testing of interfaces with third-party suppliers will continue
through 1999. At this time, management of Alliance believes that the costs
associated with resolving this issue will not have a material adverse effect on
its operations or on its ability to provide the level of services it currently
provides to the Fund.
The Fund's custodian has advised the Fund and Alliance that it also is in the
process of reviewing its systems with the same goals. As of the date of this
prospectus, the Fund and Alliance have no reason to believe that the Fund's
custodian will be unable to achieve these goals.
8
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the Fund's
financial performance for the period of the Fund's operations. Certain
information reflects financial information for a single Fund share. The total
return in the table represents the rate that an investor would have earned (or
lost) on an investment in the Fund (assuming investment of all dividends and
distributions). The information has been audited by McGladrey & Pullen LLP, the
Fund's independent auditors, whose report, along with the Fund's financial
statements, appears in the Statement of Additional Information, which is
available upon request.
<TABLE>
<CAPTION>
Advisor Class
------------------------------------------------------------
January 30, 1997(a)
Year Ended to
September 30, 1998 September 30, 1997
------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period .............. $ 1.00 $1.00
------- -----
Income From Investment Operations
Net investment income ............................. .0505 .0254
Net Gains or Losses on Securities ................. .0000 .0000
------- -----
Total from Investment Operations .................. .0505 .0254
------- -----
Less: Distributions
Dividends.......................................... (.0505) (.0254)
Distributions ..................................... .0000 (.0000)
------- -----
Net asset value, end of period .................... $ 1.00 $1.00
======= =====
Total Return
Total investment return based on net asset value(b) 5.18% 2.54%(c)
Ratios/Supplemental Data
Net Assets, end of period (in millions) ........... $ 3,240 $35
Ratio to average net assets of:
Expenses .55% .88%
Net investment income ........................... 5.08% 4.15%(d)
- ---------------------------------
</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) The total return is not annualized
(d) Annualized
9
<PAGE>
For more information about the Fund, the following documents are available upon
request:
. Annual/Semi-Annual Reports To Shareholders
The Fund's annual and semi-annual reports to shareholders contain additional
information on the Fund's investments.
. Statement Of Additional Information (SAI)
The Fund has an SAI, which contains more detailed information about the Fund,
including its operations and investment policies.
The Fund's SAI is incorporated by reference into (and is legally part of) this
prospectus.
You may request a free copy of the current annual/semi-annual report or the SAI,
by contacting your broker or other financial intermediary, or by contacting
Alliance:
By Mail: c/o Alliance Fund Services, Inc.
P.O. Box 1520, Secaucus, N.J. 07096-1520
By Phone: For Information: (800) 221-5672
For Literature: (800) 227-4618
Or you may view or obtain these documents from the SEC:
In Person: at the SEC's Public Reference Room in Washington, D.C.
By Phone: 1-800-SEC-0330
By Mail: Public Reference Section
Securities and Exchange Commission
Washington, DC 20549-6009
(duplicating fee required)
On the Internet: www.sec.gov
You may also find more information about Alliance and the Fund on the Internet
at: www.Alliancecapital.com
Investment Products Offered Are
- ---------------------------------------------------------
.Not FDIC Insured .May Lose Value .Not Bank Guaranteed
- ---------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
AFD Exchange Reserves
Subscription Application
- - Advisor Class
- --------------------------------------------------------------------------------
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
For certified or overnight deliveries, send to:
Alliance Fund Services, Inc.
500 Plaza Drive
Secaucus, New Jersey 07094
Section 1 Your Account Registration
(Required)
Complete one of the available choices. To ensure proper tax reporting to the
IRS:
o Individuals, Joint Tenants, Transfer on Death and
Gift/Transfer to a Minor:
. Indicate your name(s) exactly as it appears on
your social security card.
o Transfer on Death:
. Ensure that your state participates
o 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.
Section 2 Your Address (Required)
Complete in full.
o Non-Resident Alien:
. Indicate your permanent country of residence.
Section 3 Your Initial Investment (Required)
(1) Write the dollar amount of your initial purchase in the column titled
`Indicate Dollar Amount'.
(2) Check off a distribution option for your dividends.
(3) Check off a distribution option for your capital gains.
All distributions (dividends and capital gains) will be reinvested into your
fund account unless you direct otherwise. If you want distributions sent
directly to your bank account, then you must complete Section 4D and attach a
preprinted, voided check for that account. If you want your distributions sent
to a third party you must complete Section 4E.
<PAGE>
Section 4 Your Shareholder Options
(Complete only those options you want)
A. Automatic Investment Plans (AIP) - You can make periodic investments into the
Funds in one of three ways. First, by a periodic withdrawal ($25 minimum)
directly from your bank account and invested into the Fund. Second, you can
direct your distributions (dividends and capital gains) from the Fund into
another Alliance Fund. Or third, you can automatically exchange monthly ($25
minimum) shares of the Fund for shares of another Alliance Fund (ADCAP). To
elect one of these options, complete the appropriate portion of Section 4A & 4D.
If more than one dividend direction or monthly exchange is desired, please call
our Literature Center to obtain a Shareholder Account Services Options Form for
completion.
B. Telephone Transactions via EFT - Complete this option if you would like to be
able to transact via telephone between your fund account and your bank account.
C. Systematic Withdrawal Plans (SWP) - Complete this option if you wish to
periodically redeem dollars from your fund account. Payments can be made via
Electronic Funds Transfer (EFT) to your bank account or by check.
D. Bank Information - If you have elected any options that involve transactions
between your bank account and your fund account or have elected cash
distribution options and would like the payments sent to your bank account,
please tape a preprinted, voided check of the account you wish to use to this
section of the application.
E. Third Party Payment Details - If you have chosen cash distributions and/or a
Systematic Withdrawal Plan and would like the payments sent to a person and/or
address other than those provided in section 1 or 2, complete this option.
Medallion Signature Guarantee is required if your account is not maintained by a
broker dealer.
Section 5 Shareholder Authorization
(Required) All owners must sign. If it is a custodial, corporate, or trust
account, the custodian, an authorized officer, or the trustee respectively must
sign.
If We Can Assist You In Any Way, Please Do Not Hesitate To Call Us At:
(800) 221-5672.
Or visit our website at www.alliancecapital.com
- --------------------------------------
For Literature Call: (800) 227-4618
- --------------------------------------
<PAGE>
AFD Exchange Reserves Subscription Application
- -Advisor Class
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
1. YOUR ACCOUNT REGISTRATION (Please Print in Capital Letters and Mark Check Boxes Where Applicable)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
|_| Individual Account { |_| Male |_| Female } --or-- Joint Account --or--
|_| Transfer On Death { |_| Male |_| Female } --or-- Gift/Transfer to a Minor
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Owner or Custodian (First Name) (MI) (Last Name)
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
(First Name) Joint Owner*, Transfer On Death Beneficiary or Minor (MI) (Last Name)
|_|_|_|-|_|_|-|_|_|_|_| If Uniform Gift/Transfer
Social Security Number of Owner or Minor (required to open account) to Minor Account:
|_| |_| Minor's State of Residence
If Joint Tenants Account: *The Account will be registered
"Joint Tenants with right of Survivorship" unless you indicate
otherwise below:
|_| In Common |_| By Entirety |_| Community Property
|_| Trust --or-- |_| Corporation --or-- |_| Other_____________________________
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Name of Trustee if applicable (First Name) (MI) (Last Name)
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Name of Trust or Corporation or Other Entity
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Name of Trust or Corporation or Other Entity continued
|_|_|_|_|_|_|_|_| |_|_|_|_|_|_|_|_|_|
Trust Dated (MM,DD,YYYY) Tax ID Number (required to open account)
|_| Employer ID Number --or-- |_| Social Security
Number
- --------------------------------------------------------------------------------------------------------------------------
2. YOUR ADDRESS
- --------------------------------------------------------------------------------------------------------------------------
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Street Number Street Name
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_| |_|_|_|_|_|
City State Zip code
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_|_| - |_|_|_| - |_|_|_|_|
If Non-U.S., Specify Country Daytime Phone Number
|_| U.S. Citizen |_| Resident Alien |_| Non-Resident Alien
</TABLE>
Alliance Capital[LOGO](R)
90000GEN-AFDERApp-P1
1
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
3. YOUR INITIAL INVESTMENT
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
I hereby subscribe for shares of AFD Exchange Reserves Advisor Class and elect distribution options as indicated.
Dividend and Capital Gain Distribution Options:
R Reinvest distributions into my fund account.
- ----------------------
- ------------------------------------------ C Send my distributions in cash to the address I have provided in
Broker/Dealer Use Only: Wire Confirm # - -----------------------------
|_|_|_|_|_|_|_|_| Section 2. (Complete Section 4D for direct deposit to your bank
- ------------------------------------------ account. Complete Section 4E for payment to a third party).
D Direct my distributions to another Alliance Fund. Complete the
- ------------------------------------------------
appropriate portion of Section 4A to direct your distributions
(dividends and capital gains) to another Alliance Fund (the $250
minimum investment requirement applies to Funds into which
distributions are directed).
- ------------- ============== ======================== =============================
Make all Three digit Distributions Options
checks* Fund Class *Check One*
payable to: number Indicate Dollar Amount =============================
AFD Dividends Captital Gains
--- ============== ======================== =============================
Exchange
-------- |4|3|6| $ R C D R C D
Reserves
--------
- -------------
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 Funds that offer Advisor Class shares. See "Your Shareholder Options, Section 4A".
*Cash and money orders are not accepted
</TABLE>
90000GEN-AFDERApp-P2
2
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
4. YOUR SHAREHOLDER OPTIONS
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
A. Automatic Investment Plans (AIP)
|_| Withdraw From My Bank Account Via EFT*
I authorize Alliance to draw on my bank account for investment in my fund account as indicated below
(Complete Section 4D also for the bank account you wish to use).
|4|3|6| |_|_|_|_| |_|_| , |_|_|_| .00 |_|
Fund Class Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency
Frequency:
M = monthly
Q = quarterly
A = Annually
*Electronic Funds Transfer. Your bank must be a member of the National Automated Clearing House Association (NACHA)
|_| Direct My Distributions
As indicated in Section 3, I would like my dividends and/or capital gains directed to the same class of shares of
another Alliance Fund.
FROM: |4|3|6| |_|_|_|_|_|_|_|_|_|_| - |_|
Fund Class Number Account Number
TO: |_|_|_| |_|_|_|_|_|_|_|_|_|_| - |_|
Fund Number Account Number (if existing)
|_| Alliance Dollar Cost Averaging Program (ADCAP). Exchange My Shares Monthly
I authorize Alliance to transact monthly exchanges from my Fund account, within the same class of shares, to my Alliance
Fund accounts as listed below.
TO: |_|_|_| |_|_|_|_|_|_|_|_|_|_| - |_|
Fund Number Account Number (if existing)
|_|_| , |_|_|_| .00 |_|_|
Amount ($25 minimum) Day of Exchange**
TO: |_|_|_| |_|_|_|_|_|_|_|_|_|_| - |_|
Fund Number Account Number (if existing)
|_|_| , |_|_|_| .00 |_|_|
Amount ($25 minimum) Day of Exchange**
- ------------------------------------------------------------------------------------------------------------------------------------
Exchange 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.
- ------------------------------------------------------------------------------------------------------------------------------------
B. Purchases and Redemptions Via EFT
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: o Review the information in the Prospectus about telephone transaction services.
o 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 Section 4D of this application.
</TABLE>
90000GEN-AFDERApp-P3
3
<PAGE>
- --------------------------------------------------------------------------------
4. YOUR SHAREHOLDER OPTIONS (CONTINUED)
- --------------------------------------------------------------------------------
B. Purchase and Redemptions Via EFT (CONTINUED)
[_] 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 fo such shares
via EFT from the bank account I have selected.
For shares recently purchased by check or electronic funds transfer
redemption proceeds will not be made available until the Fund is
reasonably assured the check or electronic funds transfer has been
collected, normally 15 calendar days after the purchase date.
C. Systematic Withdrawal Plans (SWP)
In order to establish a SWP, you must reinvest all dividends and capital
gains.
[_] I authorize Alliance to transact periodic redemptions from my fund
account and send the proceeds to me as indicated below.
<TABLE>
<S> <C> <C> <C> <C> <C>
[4] [3] [6] [_] [_] [_] [_] [_] [_],[_] [_] [_].00 [_] Frequency:
Fund Class Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency M = monthly
Q = quarterly
A = annually
</TABLE>
Please send my SWP proceeds to:
[_] My Address of Record (via check)
[_] The Payee and address specified in section 4E (via check)(Medallion
Signature Guarantee required)
[_] My checking account-via EFT (complete section 4D) Your bank must be a
member of the National Automated Clearing House Association (NACHA)
in order for you to receive SWP proceeds directly into your bank
account. Otherwise payment will be made by check
D. Bank Information This bank account information will be used for:
[_] Distributions (Section 3) [_] Telephone Transactions
(Section 4B)
[_] Automatic Investments (Section 4A) [_] Withdrawals (Section 4C)
103
J. Smith
123 Main Street
ANYTOWN, USA 12345 ____ 19 __
Pay to the
Order of ________________________________________$ _______________
Please Tape a Pre-printed Voided Check Here*
____________________________________________________________Dollars
YOUR BANK
123 STREET
ANYTOWN, USA 12345 VOID
Note ___________________________ _______________________________
:000000000:103 000000000:765
ABA Routing Number Check Bank Account Number
Number
* The above services cannot be established without a pre-printed voided check.
For EFT transactions, the fund requires signatures of bank account owners
exactly as they appear on bank records. If the registration at the bank differs
from that on the Alliance mutual fund, all parties must sign in Section 5.
[_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_]
Your Bank's ABA Routing Number Your Bank Account Number
[_] Checking Account [_] Savings Account
90000GEN-AFDERApp-P4
4
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
4. YOUR SHAREHOLDER OPTIONS (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
E. THIRD PARTY PAYMENT DETAILS Your signautre(s) in Section 5 must be Medallion Signature Guaranteed if your account is
not maintained by a dealer/broker. This third party payee information will be used for:
|_| Distributions (section 3) |_| Systematic Withdrawals (section 4C)
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_| |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_||_|_|_|_|
Name (First Name) (MI) (Last Name)
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Street Number Street Name
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_| |_|_|_|_|_|
City State Zip code
- --------------------------------------------------------------------------------------------------------------------------
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 5, as well as the legal capacity of
the shareholder.
|_____________________________________________________________| |_______________________________________________________|
Dealer/Agent Firm Authorized Signature
|________________________________________________________| |__| |_______________________________________________________|
Representative First Name MI Last Name
|_____________________________________________________________| |_______________________________________________________|
Dealer/Agent Firm Number Representative Number
|_____________________________________________________________| |_______________________________________________________|
Branch Number Branch Telephone Number
|_________________________________________________________________________________________________________________________|
Branch Office Address
|_____________________________________________________________| |_||_| |_______________________________________________|
City State Zip Code
</TABLE>
90000GEN-AFDERApp-P5
5
<PAGE>
- --------------------------------------------------------------------------------
5. 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 not have changed within the last 30 days. The maximum
telephone redemption amount is $50,000 for redemptions by check.
|_| I do not elect the telephone exchange service.
|_| I do not elect the telephone redemption by check service.
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.
I CERTIFY UNDER PENALTY OF PERJURY THAT THE NUMBER SHOWN IN SECTION 1 OF
THIS FORM IS MY CORRECT TAX IDENTIFICATION NUMBER OR I AM WAITING FOR A
NUMBER TO BE ISSUED TO ME AND THAT I HAVE NOT BEEN NOTIFIED THAT THIS
ACCOUNT IS SUBJECT TO BACKUP WITHHOLDING.
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
- ----------------------------------------------
Medallion Signature Guarantee required if
completing Section 4E and your mutual fund is
not maintained by a broker dealer
Alliance Capital [LOGO](R)
90000GEN-AFDERApp-P6
6
<PAGE>
=====================
Signature Card
AFD Exchange Reserves
=====================
................................................................................
Alliance Capital [LOGO]
Medallion Signature Guarantee (see reverse)
================================================================================
................................................................................
Advisor Class ACCOUNT#(IF KNOWN):
................................................................................
ACCOUNT NAME(S) AS REGISTERED:
................................................................................
................................................................................
SOCIAL SECURITY OR TAX IDENTIFICATION NUMBER:
................................................................................
AUTHORIZED SIGNATURE(S) - for joint accounts, all owners, or their legal
representatives, must sign this card.
1. .............................................................................
2. .............................................................................
3. .............................................................................
Check one box: [ ] All 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).
STATE STREET BANK AND TRUST COMPANY Subject to conditions on reverse side.
<PAGE>
=========================
Signature Card
AFD Exchange Reserves
=========================
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.
<PAGE>
This is filed pursuant to Rule 497(c).
File Nos. 33-74230 and 811-08294.
<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, 1999
____________________________________________________________
This Statement of Additional Information is not a prospectus
but supplements and should be read in conjunction with the
current Prospectus dated February 2, 1999 that offers Class A,
Class B and Class C shares of the Fund and the current Prospectus
dated February 2, 1999 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.............. 2
MANAGEMENT OF THE FUND....................................... 8
EXPENSES OF THE FUND.........................................13
PURCHASE OF SHARES...........................................16
REDEMPTION AND REPURCHASE OF SHARES..........................32
SHAREHOLDER SERVICES.........................................36
DAILY DIVIDENDS--DETERMINATION OF NET ASSET VALUE............43
TAXES........................................................44
BROKERAGE AND PORTFOLIO TRANSACTIONS.........................45
GENERAL INFORMATION..........................................46
FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR'S
REPORT...................................................F-1
APPENDIX.....................................................A-1
__________________________
(R) This registered service mark used under license from the
owner, Alliance Capital Management L.P.
<PAGE>
____________________________________________________________
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
____________________________________________________________
AFD Exchange Reserves (the "Fund") is a diversified,
open-end investment company. The Fund's objective is maximum
current income to the extent consistent with safety of principal
and liquidity. As is true with all investment companies, there
can be no assurance that the Fund's objective will be achieved.
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.
2
<PAGE>
The acceptance may then be held by the accepting bank as an
earning 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 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 397 days, the term of the repurchase agreement is always
less than one year. If a counterparty 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 counterparty 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
3
<PAGE>
seven days will be limited to no more than 10% of the Fund's
assets. A repurchase agreement is deemed to be an acquisition of
the underlying securities if the obligation of the seller to
repurchase the securities from the fund is collateralized fully
(as defined in such Rule). Accordingly, the counterparty 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 397
days, but which permit the holder to demand payment of principal
at any time, or at specified intervals not exceeding 397 days, in
each case upon not more than 30 days' notice.
The Fund also invests in variable amount master demand
notes (which may have put 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. These securities must generally be rated,
as required by Rule 2a-7. 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 entity. Although the
4
<PAGE>
securities may have some form of credit or liquidity enhancement,
payments on the securities depend predominately upon collection
of the loans and receivables held by the issuer. Generally, as
required by Rule 2a-7, the special purpose entity is deemed to be
the issuer of the asset-backed security, however, the Portfolio
is required to treat any obligor whose obligations constitute ten
percent or more of the assets of the asset-backed security as the
issuer of the portion of the asset-backed security such
obligations represent. It is the Fund's current intention to
limit its investment in such securities to not more than 5% of
its net assets.
Illiquid Securities. The Fund has adopted the following
investment policy which may be changed by the vote of the
Trustees: The Fund will not invest in illiquid securities if
immediately after such investment more than 10% of the Fund's net
assets (taken at market value) would be invested in such
securities. For this purpose, illiquid securities include, among
others, (a) securities that are illiquid by virtue of the absence
of a readily available market or legal or contractual restriction
on resale, 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 also 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.
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.
5
<PAGE>
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.
The Fund may invest up to 25% of its total assets in
money market instruments issued by foreign branches of foreign
banks.
The Fund may make investments in dollar-denominated
certificates of deposit and bankers' acceptances issued or
guaranteed by, or dollar-denominated time deposits maintained at,
foreign branches of U.S. banks and U.S. and foreign branches of
foreign banks, and commercial paper issued by foreign companies.
To the extent that the Fund makes such investments, consideration
is given to their domestic marketability, the lower reserve
requirements generally mandated for overseas banking operations,
the possible impact of interruptions in the flow of international
currency transactions, potential political and social instability
or expropriation, imposition of foreign taxes, the lower level of
government supervision of issuers, the difficulty in enforcing
contractual obligations and the lack of uniform accounting and
financial reporting standards.
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
6
<PAGE>
Alliance to present minimal credit risks pursuant to procedures
approved by the Trustees. A security that originally had a
maturity of greater than 397 days is an eligible security if its
remaining maturity at the time of purchase is 397 calendar days
or less and the issuer has outstanding short-term debt that would
be an eligible security. Unrated securities may also be eligible
securities if Alliance determines that they are of comparable
quality to a rated eligible security pursuant to guidelines
approved by the Trustees. A description of the ratings of some
NRSROs appears in the Appendix attached hereto.
Under Rule 2a-7, the Fund may not invest more than five
percent of its assets in the securities of any one issuer other
than the United States Government, its agencies or
instrumentalities. In addition, the Fund may not invest in a
security that has received, or is deemed comparable in quality
to a security that has received, the second highest rating by the
requisite number of NRSROs (a "second tier security") if
immediately after the acquisition thereof the Fund would have
invested more than (A) the greater of one percent of its total
assets or one million dollars in securities issued by that issuer
which are second tier securities and (B) five percent of its
total assets in second tier securities.
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:
(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
7
<PAGE>
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 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
____________________
* As a matter of operating policy, pursuant to Rule 2a-7,
the Fund will invest no more than 5% of its assets in the
securities of any one issuer, except that the Fund may
invest up to 25% of its total assets in the first tier
securities of a single issuer for a period of up to three
business days. The issuer of a security is determined
pursuant to Rule 2a-7.
8
<PAGE>
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 (ii) 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.
____________________________________________________________
MANAGEMENT OF THE FUND
____________________________________________________________
Alliance provides investment advice and, in general,
conducts the management and investment program of the Fund,
subject to the general supervision and control of the Trustees of
the Fund.
Trustees and Officers
The Trustees and principal officers of the Fund, 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, 54, is the President, Chief Operating
Officer and a Director of Alliance Capital Management
Corporation, the general partner of Alliance ("ACMC"), with which
he has been associated since prior to 1994.
RUTH BLOCK, 67, is a Director of Ecolab Incorporated
(specialty chemicals) and BP 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 1994. Her address is P.O. Box 4653,
Stamford, Connecticut 06903.
DAVID H. DIEVLER, 69, is an independent consultant. He
was formerly a Senior Vice President of ACMC, with which he had
9
<PAGE>
been associated since prior to 1994. His address is P.O. Box
167, Spring Lake, New Jersey 07762.
JOHN H. DOBKIN, 56, has been the President of Historic
Hudson Valley (historic preservation) since prior to 1994.
Previously, he was Director of the National Academy of Design.
His address is 150 White Plains Road, Tarrytown, New York 10591
WILLIAM H. FOULK, JR., 66, 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 1994. His address is
2 Greenwich Plaza, Suite 100, Greenwich, CT 06830.
DR. JAMES M. HESTER, 74, is President of the Harry Frank
Guggenheim Foundation with which he has been associated since
prior to 1994. He was formerly President of New York University,
The New York Botanical Garden and Rector of the United Nations
University. His address is 25 Cleveland Lane, Princeton, New
Jersey 08540.
CLIFFORD L. MICHEL, 59, is a Partner in the law firm of
Cahill Gordon & Reindel, with which he has been associated since
prior to 1994. 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, 64, 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, 38 is an
Executive Vice President of ACMC, with which she has been
associated since prior to 1994.
WAYNE D. LYSKI, Senior Vice President, 57, is an
Executive Vice President of ACMC, with which he has been
associated since prior to 1994.
JOHN F. CHIODI, Jr., Vice President, 32, is a Vice
President of ACMC, with which he has been associated since prior
to 1994.
10
<PAGE>
MARK D. GERSTEN, Treasurer and Chief Financial Officer,
48, is a Senior Vice President of Alliance Fund Services, Inc.
("AFS") with which he has been associated since prior to 1994.
EDMUND P. BERGAN, Jr., Secretary, 48, is a Senior Vice
President and the General Counsel of Alliance Fund Distributors,
Inc. ("AFD") and AFS, with which he has been associated since
prior to 1994.
ANDREW L. GANGOLF - Assistant Secretary, 44, is a Vice
President and Assistant General Counsel of AFD with which he has
been associated since December 1994. Prior thereto, he was Vice
President and Assistant Secretary of Delaware Management Co.,
Inc.
DOMENICK PUGLIESE - Assistant Secretary, 37, is a Vice
President and Assistant General Counsel of AFD with which he has
been associated since May 1995. Prior thereto, he was Vice
President and Counsel of Concord Holding Corporation since 1994
and Vice President and Associate General Counsel of Prudential
Securities since 1992.
EMILIE D. WRAPP, Assistant Secretary, 43, is a Vice
President and Assistant General Counsel of AFD, with which she
has been associated since prior to 1994.
VINCENT S. NOTO, Controller, 33, is an Assistant Vice
President of AFS, with which he has been associated since prior
to 1994.
The aggregate compensation paid by the Fund to each of
the Trustees during its fiscal year ended September 30, 1998, the
aggregate compensation paid to each of the Trustees during
calendar year 1998 by all of the registered investment companies
to which the Adviser provides investment advisory services
(collectively, the "Alliance Fund Complex") and the total number
of registered investment companies (and separate investment
portfolios within those companies) in the Alliance Fund Complex
with respect to which each of the Trustees serves as a director
or trustee, are set forth below. Neither the Fund nor any other
registered investment company in the Alliance Fund Complex
provides compensation in the form of pension or retirement
benefits to any of its directors or trustees.
11
<PAGE>
Total Number
Total Number of Investment
of Investment Portfolios
Companies in within the
the Alliance Alliance Fund
Total Complex, Complex,
Compensation Including Including the
From the the Fund, as Fund, as to
Aggregate Alliance Fund to which the 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 50 114
Ruth Block $3,664 $180,763 37 77
David H. Dievler $3,664 $216,288 43 80
John H. Dobkin $3,667 $185,363 41 91
William H. Foulk, Jr. $3,661 $241,003 45 109
Dr. James M. Hester $3,667 $172,913 37 74
Clifford L. Michel $3,667 $187,763 38 90
Donald J. Robinson $3,664 $193,709 41 103
As of January 8, 1999, 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
December 31, 1998 totaling more than $286 billion (of which
approximately $118 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. As of
December 31, 1998 ,the Adviser was retained as an investment
manager for employee benefit plan assets for 35 of the FORTUNE
100 companies. As of December 31, 1998, the Adviser and its
subsidiaries employed approximately 2,000 employees who operate
out of domestic offices and the offices of subsidiaries in
Bahrain, Bangalore, Cairo, Chennai, Hong Kong, Istanbul,
Johannesburg, London, Luxembourg, Madrid, Moscow, Mumbai, New
Delhi, Paris, Pune, Sao Paolo, Seoul, Singapore, Sydney, Tokyo,
12
<PAGE>
Toronto, Vienna and Warsaw. The 54 registered investment
companies comprising 118 separate investment portfolios managed
by the Adviser currently have more than 3.5 million shareholder
accounts.
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 ("AXA"), a French insurance holding company
which at March 31, 1998, beneficially owned approximately 59% of
the outstanding voting shares of ECI. As of June 30, 1998, 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 is a holding company for an international group of
insurance and related financial services companies. AXA's
insurance operations include activities in life insurance,
property and casualty insurance and reinsurance. The insurance
operations are diverse geographically, with activities
principally in Western Europe, North America and the Asia/Pacific
area. AXA 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, as of March 31,
1998, more than 30% of the voting power of AXA was controlled
directly and indirectly by FINAXA, a French holding company. As
of March 31, 1998 approximately 74% 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 42% of the voting power of FINAXA. Acting
as a group, the Mutuelles AXA control AXA 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
13
<PAGE>
billion of such assets, .23 of 1% of the next $.25 billion of
such assets, .22 of 1% of the next $.25 billion of such assets,
.21 of 1% of the next $1 billion of such assets and .20 of 1% of
the average daily value of the Fund's net assets in excess of $3
billion. The fee is accrued daily and paid monthly. As to the
obtaining of clerical and accounting services not required to be
provided to the Fund by Alliance under the Advisory Agreement,
the Fund may employ its own personnel. For such services, it
also may utilize personnel employed by Alliance; if so done, the
services are provided to the Fund at cost and the payments
therefor must be specifically approved in advance by the
Trustees. For the fiscal year ended September 30, 1998, Alliance
received from the Fund advisory fees of $569,855. For the fiscal
year ended September 30, 1997 and 1996, Alliance received from
the Fund advisory fees of $338,864 and $297,876, respectively.
Certain other clients of Alliance may have investment
objectives and policies similar to those of the Fund. Alliance
may, from time to time, make recommendations which result in the
purchase or sale of a particular security by its other clients
simultaneously with the Fund. If transactions on behalf of more
than one client during the same period increase the demand for
securities being purchased or the supply of securities being
sold, there may be an adverse effect on price or quantity. It is
the policy of Alliance to allocate advisory recommendations and
the placing of orders in a manner which is deemed equitable by
Alliance to the accounts involved, including the Fund. When two
or more of the clients of Alliance (including the Fund) are
purchasing or selling the same security on a given day from the
same broker-dealer, such transactions may be averaged as to
price.
____________________________________________________________
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 under the Act (the "Rule 12b-1
Plan").
In approving the Agreement, the Trustees of the Fund
determined that there was a reasonable likelihood that the
14
<PAGE>
Agreement would benefit the Fund and its shareholders. 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, 1998,
the Fund paid distribution services fees for expenditures under
the Agreement to the Principal Underwriter with respect to
Class A shares, in amounts aggregating $427,298, which
constituted .50 of 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 $724,103. Of
the $1,151,401 paid by the Fund and the Adviser under the
Agreement, $55,483 was spent on advertising, $4,539 on the
printing and mailing of prospectuses for persons other than
current shareholders, $278,324 for compensation to broker-
dealers, $433,324 for compensation to sales personnel and
$379,731 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, 1998,
the Fund paid distribution services fees for expenditures under
the Agreement to The Principal Underwriter with respect to
Class B shares, in amounts aggregating $892,262, 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 $2,133,452. Of the $3,025,714
paid by the Fund and the Adviser under the Agreement in the case
of the Class B shares, $32,264 was spent on advertising, $2,362
on the printing and mailing of prospectuses for persons other
than current shareholders, $2,627,662 for compensation to broker-
dealers, $153,958 for compensation paid to sales personnel,
$101,995 for interest on Class B shares financing and $107,473
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, 1998,
the Fund paid distribution services fees for expenditures under
the Agreement to the Principal Underwriter with respect to
Class C shares, in amounts aggregating $387,684, 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 $336,980. Of
the $724,664 paid by the Fund and the Adviser under the Agreement
in the case of the Class C shares, $21,339 was spent on
advertising, $1,457 on the printing and mailing of prospectuses
for persons other than current shareholders, $484,440 for
compensation to broker-dealers, $85,976 for compensation to sales
personnel, $65,446 for interest on Class C shares financing and
15
<PAGE>
$66,006 was spent on the printing of sales literature, due
diligence, travel, entertainment, occupancy, communications,
taxes, depreciation and other promotional expenses.
Distribution services fees are accrued daily and paid
monthly and are charged as expenses of the Fund as accrued. The
distribution services fees attributable to the Class B shares and
Class C shares are designed to permit an investor to purchase
such shares through broker-dealers without the assessment of an
initial sales charge, and, in the case of Class C shares, without
the assessment of a contingent deferred sales charge, and at the
same time to permit 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.
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.
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, 1998, the Fund
paid AFS $213,994 pursuant the Transfer Agency Agreement.
16
<PAGE>
____________________________________________________________
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 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
17
<PAGE>
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. A shareholder
exchanging shares of an Alliance Mutual Fund must give (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 reasonably 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 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
18
<PAGE>
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 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,
19
<PAGE>
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; (viii) 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 Richard Ellis, 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 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.
20
<PAGE>
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. (Certain selected dealers, agents or
financial representatives may enter into operating agreements
permitting them to transmit purchase information to the Principal
Underwriter after 5:00 p.m. Eastern time and receive that day's
net asset value.) 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 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.
21
<PAGE>
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 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
22
<PAGE>
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 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 shares
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 and certain employee benefit plans) for more than $250,000
for Class B shares. (See Appendix B for information concerning
the eligibility of certain employee benefit plans to purchase
Class B shares at net asset value without being subject to a
contingent deferred sales charge and the ineligibility of certain
such plans to purchase Class A 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 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.
23
<PAGE>
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 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
24
<PAGE>
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 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 Institutional Funds, Inc.
Alliance International Fund
Alliance International Premier Growth Fund, Inc.
Alliance Limited Maturity Government Fund, Inc.
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<PAGE>
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 Select Investor Series, Inc.
-Premier Portfolio
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance Portfolios
-Alliance Conservative Investors Fund
-Alliance Growth Fund
-Alliance Growth Investors 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:
(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
26
<PAGE>
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
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
27
<PAGE>
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 13-month period and (ii) the current month's purchase
multiplied by the number of months (including the current month)
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<PAGE>
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.
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<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 contingent deferred sales charge 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
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<PAGE>
provide a mechanism whereby the time period for the automatic
conversion of Class B shares to Class A shares will continue to
elapse in the event the Class B shares originally purchased for
cash are subsequently exchanged for Class B shares of the Fund or
Class B shares of another Alliance Mutual Fund and (ii) to reduce
the distribution services fee paid by holders of Class B shares
that have been outstanding long enough for the Principal
[6~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
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<PAGE>
higher expense ratio and pay correspondingly lower dividends than
Class A shares and Advisor Class shares.
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
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<PAGE>
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 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.
33
<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
34
<PAGE>
shareholder's holding period and basis in respect of the shares
redeemed.
To redeem shares 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.
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. 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.
35
<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 in nominee or "street
name" accounts, (iii) held by a shareholder who has changed his
or her address of record within the preceding 30 calendar days or
(iv) held in any retirement plan account. 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. (Certain selected
dealers, agents of financial representatives may enter into
operating agreements permitting them to transmit purchase
information to the Principal Underwriter after 5:00 p.m. Eastern
time and receive that day's net asset value.) 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
36
<PAGE>
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 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.
[6~
____________________________________________________________
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
37
<PAGE>
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. 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.
38
<PAGE>
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
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.
39
<PAGE>
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 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.
40
<PAGE>
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
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).
41
<PAGE>
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
the Prospectus. Current shareholders should contact Alliance
Fund Services, Inc. to establish a dividend direction 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
42
<PAGE>
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.
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
[6~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
43
<PAGE>
dividends and shares for which certificates have been issued).
Corporations, fiduciaries and institutional investors are
required to furnish a certified resolution or other evidence of
authorization. This checkwriting service will be subject to the
Bank's customary rules and regulations governing checking
accounts, and the Fund and the Bank each reserve the right to
change or suspend the checkwriting service. There is no charge
to the shareholder for the initiation and maintenance of this
service or for the clearance of any checks.
When a check is presented to the Bank for payment, the
Bank, as the shareholder's agent, causes the Fund to redeem, at
the net asset value next determined, a sufficient number of full
and fractional shares in the shareholder's account to cover the
check. A shareholder should not attempt to close his or her
account by use of a check. In this regard, the Bank has the
right to return checks (marked "insufficient funds") unpaid to
the presenting bank if the amount of the check exceeds 90% of the
assets in the account. Cancelled (paid) checks are returned to
the shareholder. The checkwriting service enables the
shareholder to receive the daily dividends declared on the shares
to be redeemed until the day that the check is presented to the
Bank for payment.
____________________________________________________________
DAILY DIVIDENDS--DETERMINATION OF NET ASSET VALUE
____________________________________________________________
All net income of the Fund is determined after the close
of each business day, currently 4:00 p.m., Eastern time, (and at
such other times as the Trustees may determine) and is paid
immediately thereafter pro rata to shareholders of record via
automatic investment in additional full and fractional shares in
each shareholder's account at the rate of one share for each
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
44
<PAGE>
Class B and Class C shares, and any incremental transfer agency
costs relating to Class B shares, will be borne exclusively by
the class to which they relate.
The valuation of the Fund's portfolio securities is
based upon their amortized cost which does not take into account
unrealized securities gains or losses as measured by market
valuations. The amortized cost method involves valuing an
instrument at its cost and thereafter applying a constant
amortization to maturity of any discount or premium, regardless
of the impact of fluctuating interest rates on the market value
of the instrument. During periods of declining interest rates,
the daily yield on shares of the Fund may be higher than that of
a fund with identical investments utilizing a method of valuation
based upon market prices for its portfolio instruments; the
converse would apply in a period of rising interest rates.
The Fund maintains procedures designed to maintain its
share price 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. There can be no assurance, however,
that the Fund's net asset value per share will remain constant at
$1.00.
The net asset value of the shares is determined each
business day as of the close of regular trading in the Exchange
currently 4:00 p.m., Eastern time. The net asset value per share
of each class is calculated by determining the amount of assets
attributable to each class of shares, subtracting liabilities,
and dividing by the total number of shares outstanding. All
expenses, including the fees payable to Alliance, are accrued
daily.
____________________________________________________________
TAXES
____________________________________________________________
The Fund has qualified to date and intends to qualify in
each future year to be taxed as a regulated investment company
under the Code, and as such, will not be liable for Federal
income and excise taxes on the net income and capital gains
distributed to its shareholders. Since the Fund distributes all
of its net income and capital gains, the Fund itself should
thereby avoid all Federal income and excise taxes.
For shareholders' Federal income tax purposes, all
distributions by the Fund out of interest income and net realized
45
<PAGE>
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 information. During the fiscal
years ended September 30, 1996, 1997 and 1998, the Fund incurred
no brokerage commissions.
46
<PAGE>
____________________________________________________________
GENERAL INFORMATION
____________________________________________________________
Capitalization
The Fund is a Massachusetts business trust that was
organized on January 14, 1994. 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. Shares of each class
participate equally in dividends and distributions from that
class, including any distributions in the event of a liquidation
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 shares
convert to Class A shares under certain circumstances. Shares of
the Fund are normally entitled to one vote for all purposes.
Generally, shares of the Fund vote as a single series for the
election of Trustees and on any other matter affecting the Fund.
As to matters affecting a class differently, such as approval of
the Rule 12b-1 plan, each class votes separately. 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. Shareholder meetings will be held only when
required by federal or state law.
As of the close of business on January 8, 1999, there
were 319,384,310 shares of beneficial interest of the Fund
outstanding. Of this amount, 123,521,563 shares were Class A
shares, 164,319,135 shares were Class B shares, 29,703,611 shares
were Class C shares and 1,840,001 were Advisor 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 8, 1999:
47
<PAGE>
No. of
% of % of
Name and Address Shares Class
Class A Shares
Unibank Sa Luxembourg 8,161,960 6.61%
672 Rue De Neudorf
Findel
PO Box 562
L-2015 Luxembourg
Unibank Sa Luxembourg 8,030,498 6.50%
Findel
PO Box 562
L-2015 Luxembourg
Advisor Class Shares
Alliance Plans Div/FTC C/F 109,587 5.96%
Robert D Weedon Jr
12 Harvard Drive
Tinton Falls, NJ 07724-9765
Ryne A Nishimi & 404,510 21.98%
Michelle B Nishimi JTTEN
27001 La Paz Rd Ste 342
Mission Viejo, CA 92691-5526
Amy Bonoff 550,730 29.93%
TOD Peter Bonoff
Subject to STA TOD Rules
12 Split Tree Road
Scarsdale, NY 10583
Alliance Plans Div/FTC 295,539 16.06%
FBO Maurice S Mandel Rollover IRA
14 Hillside Avenue
Port Washington, NY 11050-2747
Shareholder Liability
Under Massachusetts law, shareholders could, under
certain circumstances, be held personally liable for the
obligations of the Fund. However, the Agreement and Declaration
of Trust disclaims shareholder liability for acts or obligations
of the Fund and requires that the Trustees use their best efforts
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
48
<PAGE>
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.
Registrar, Transfer Agent and Dividend Disbursing Agent
Alliance Fund Services, Inc., an indirect wholly-owned
subsidiary of Alliance, located at 500 Plaza Drive, Secaucus, New
Jersey 07094, acts as the Fund's registrar, transfer agent and
dividend disbursing agent for a fee based upon the number of
shareholder accounts maintained for the Fund. The transfer
agency fee for the Class B shares will be higher than the
transfer agency fee for the Class A, Class C or Advisor shares.
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, an indirect wholly-owned
subsidiary of Alliance, 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
49
<PAGE>
Sullivan & Worcester, Boston, Massachusetts, for matters relating
to Massachusetts law.
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
[6~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, 1998
for Class A amounted to an annualized yield of 4.47% equivalent
to an effective yield of 4.57%, for Class B an annualized yield
of 3.97% equivalent to an effective yield of 4.05%, for Class C
an annualized yield of 4.25% equivalent to an effective yield of
4.34% and for Advisor Class an annualized yield of 4.98%
equivalent to an effective yield of 5.11%. 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.
50
<PAGE>
_______________________________________________________________
FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR'S REPORT
_______________________________________________________________
51
<PAGE>
AFD EXCHANGE RESERVES
ANNUAL REPORT
SEPTEMBER 30, 1998
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1998 AFD EXCHANGE RESERVES
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY YIELD VALUE
- -------------------------------------------------------------------------
COMMERCIAL PAPER-56.9%
American Express Co.
$ 13,000 10/14/98 5.31% $12,975,073
Associates Corp. of North America
13,000 10/01/98 5.76 13,000,000
Bell Atlantic Network Funding
13,000 10/14/98 5.30 12,975,119
Bemis Co., Inc.
13,000 10/01/98 5.80 13,000,000
Citicorp
10,000 10/30/98 5.55 9,955,292
Dupont (E. I.) de Nemours & Co.
8,000 10/15/98 5.26 7,983,636
Eastman Kodak Co.
9,000 10/20/98 5.51 8,973,828
Emerson Electric
8,800 10/21/98 5.26 8,774,284
First Chicago Financial Corp.
13,000 11/10/98 5.28 12,923,733
Ford Motor Credit Corp.
10,000 10/21/98 5.25 9,970,833
GE Financial Assurance Holdings
10,000 10/28/98 5.54 9,958,450
General Motors Acceptance Corp.
13,000 10/07/98 5.55 12,987,975
Henkel Corp.
12,000 11/06/98 5.24 11,937,120
Household Finance Corp.
13,000 10/29/98 5.27 12,946,714
J.P. Morgan & Co.
13,000 10/01/98 5.75 13,000,000
Koch Industries
13,000 10/01/98 (a) 5.75 13,000,000
Morgan Stanley Group, Inc.
12,000 10/28/98 5.53 11,950,230
Norwest Corp.
13,000 11/04/98 5.23 12,935,787
PACCAR Financial Corp.
8,000 10/01/98 5.75 8,000,000
Pacific Gas & Electric Corp.
13,000 10/07/98 5.31 12,988,495
Pepsico, Inc.
11,000 10/21/98 5.25 10,967,917
1,000 10/14/98 5.32 998,079
Prudential Funding Corp.
13,000 10/21/98 5.25 12,962,083
Total Commercial Paper
(amortized cost $255,164,648) 255,164,648
U.S. GOVERNMENT & AGENCY
OBLIGATIONS-26.7%
Federal Farm Credit Bank
79,500 10/01/98 5.40 79,500,000
Federal Home Loan Bank
40,000 10/01/98 5.40 40,000,000
Total U.S. Government &
Agency Obligations
(amortized cost $119,500,000) 119,500,000
CERTIFICATES OF DEPOSIT-6.9%
Harris Trust & Savings
8,000 5.56%, 10/07/98 5.35 8,000,219
Suntrust Bank
10,000 5.25%, 11/04/98 5.24 10,000,094
Wachovia Bank
13,000 5.24%, 10/30/98 5.24 13,000,000
Total Certificates of Deposit
(amortized cost $31,000,313) 31,000,313
BANKERS ACCEPTANCE-3.2%
Chase Manhattan Bank
14,324 5.25%, 10/30/98
(amortized cost $14,263,196) 5.25 14,263,196
2
AFD EXCHANGE RESERVES
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY YIELD VALUE
- -------------------------------------------------------------------------
BANK OBLIGATIONS-2.9%
Bank of America National Trust
$ 13,000 5.55%, 10/21/98
(amortized cost $13,000,000) 5.55% $ 13,000,000
PROMISSORY NOTE-2.2%
Goldman Sachs Group LP
10,000 5.66%, 11/24/98
(amortized cost $10,000,000) (a) 5.66 10,000,000
TOTAL INVESTMENTS-98.8%
(amortized cost $442,928,157) $442,928,157
Other assets less liabilities-1.2% 5,338,202
NET ASSETS-100% $448,266,359
(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, 1998, these securities amounted to $23,000,000, representing 5.1%
of net assets.
See notes to financial statements.
3
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1998 AFD EXCHANGE RESERVES
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $442,928,157) $442,928,157
Cash 4,313,899
Receivable for shares of beneficial interest sold 34,699,398
Interest receivable 142,776
Other assets 18,180
Total assets 482,102,410
LIABILITIES
Payable for investment securities purchased 22,331,371
Payable for shares of beneficial interest redeemed 10,975,947
Distribution fee payable 263,583
Advisory fee payable 88,619
Accrued expenses and other liabilities 176,531
Total liabilities 33,836,051
NET ASSETS $448,266,359
COMPOSITION OF NET ASSETS
Paid-in-capital $448,267,979
Accumulated net realized loss on investment transactions (1,620)
$448,266,359
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and offering price per share ($168,463,344/
168,463,037 shares of beneficial interest issued and outstanding) $1.00
CLASS B SHARES
Net asset value and offering price per share ($151,731,931/
151,733,316 shares of beneficial interest issued and outstanding) $1.00
CLASS C SHARES
Net asset value and offering price per share ($124,831,450/
124,832,011 shares of beneficial interest issued and outstanding) $1.00
ADVISOR CLASS
Net asset value and offering price per share ($3,239,634/
3,239,615 shares of beneficial interest issued and outstanding) $1.00
See notes to financial statements.
4
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1998 AFD EXCHANGE RESERVES
_______________________________________________________________________________
INVESTMENT INCOME
Interest $12,816,318
EXPENSES
Advisory fee $569,855
Distribution fee - Class A 427,298
Distribution fee - Class B 892,262
Distribution fee - Class C 387,684
Transfer agency 257,323
Custodian 106,401
Administrative 98,457
Registration fees 86,643
Printing 54,714
Audit and legal 40,218
Trustees' fees 31,043
Amortization of organization expenses 28,827
Miscellaneous 2,081
Total expenses 2,982,806
Net investment income 9,833,512
REALIZED GAIN ON INVESTMENTS
Net realized gain on investment transactions 877
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 9,834,389
See notes to financial statements.
5
STATEMENT OF CHANGES IN NET ASSETS AFD EXCHANGE RESERVES
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1997
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 9,833,512 $ 5,152,750
Net realized gain (loss) on investment
transactions 877 (311)
Net increase in net assets from operations 9,834,389 5,152,439
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income
Class A (3,899,068) (1,638,799)
Class B (3,613,425) (2,707,243)
Class C (2,241,450) (806,371)
Advisor Class (79,569) (337)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase 308,658,607 19,187,747
Total increase 308,659,484 19,187,436
NET ASSETS
Beginning of year 139,606,875 120,419,439
End of year $448,266,359 $139,606,875
See notes to financial statements.
6
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 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 an 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 an initial sales charge.
However, a CDSC may be charged if shares are redeemed within a certain number
of years of the original purchase of Alliance Mutual Fund Class B shares. When
redemption occurs, the applicable CDSC schedule is that which applied to the
Alliance Mutual Fund Class B shares originally purchased for cash at the time
of their purchase.
Class C shares are sold for cash or in exchange for Class C shares of another
Alliance Mutual Fund without an initial sales charge at the time of purchase.
Class C shares are subject to a CDSC 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 an initial sales charge or CDSC and are
not subject to ongoing distribution expenses. Advisor Class shares are offered
solely to investors participating in fee-based programs and to certain
retirement plan accounts.
The financial statements have been prepared in conformity with generally
accepted accounting principles which require management to make certain
estimates and assumptions that affect the reported amounts of assets and
liabilities in the financial statements and amounts of income and expenses
during the reporting period. Actual results could differ from those estimates.
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 any, to its
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
7
NOTES TO FINANCIAL STATEMENTS (CONTINUED) AFD EXCHANGE RESERVES
_______________________________________________________________________________
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 year end.
5. INCOME AND EXPENSES
All income earned and expenses incurred by the Fund are borne on a pro-rata
basis by each settled 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% on the first $1.25 billion of average daily net assets;
.24% on the next $.25 billion; .23% on the next $.25 billion; .22% on the next
$.25 billion; .21% on the next $1 billion; and .20% 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, 1998, such reimbursements totaled $98,457.
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 for the Fund. Such compensation
amounted to $213,994 for the year ended September 30, 1998.
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 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 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, 1998, the cost of securities for federal income tax purposes
was the same as the cost for financial reporting purposes. At September 30,
1998, the Fund had a capital loss carryforward of $1,620, which expires in the
year 2003.
8
AFD EXCHANGE RESERVES
_______________________________________________________________________________
NOTE E: TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
An unlimited number of shares ($.001 par value) are authorized. At September
30, 1998, capital paid-in aggregated $168,463,037 for Class A, $151,733,316 for
Class B, $124,832,011 for Class C and $3,239,615 for Advisor Class.
Transactions, all at $1.00 per share, were as follows:
CLASS A
--------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1997
--------------- ---------------
Shares sold 2,641,690,288 396,646,176
Shares issued on reinvestments of dividends 3,899,068 1,638,799
Shares converted from Class B 2,022,278 2,779,625
Shares redeemed (2,520,316,554) (402,092,046)
Net increase (decrease) 127,295,080 (1,027,446)
CLASS B
--------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1997
--------------- ---------------
Shares sold 465,260,947 248,115,983
Shares issued on reinvestments of dividends 3,613,425 2,707,243
Shares converted to Class A (2,022,278) (2,779,625)
Shares redeemed (389,575,340) (238,596,718)
Net increase 77,276,754 9,446,883
CLASS C
--------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1997
--------------- ---------------
Shares sold 1,472,287,040 263,291,205
Shares issued on reinvestments of dividends 2,241,450 806,371
Shares redeemed (1,373,646,429) (253,364,170)
Net increase 100,882,061 10,733,406
ADVISOR CLASS
--------------------------------
JAN. 30,1997(A)
YEAR ENDED TO
SEPTEMBER 30, SEPTEMBER 30,
1998 1997
--------------- ---------------
Shares sold 38,173,285 120,464
Shares issued on reinvestments of dividends 79,569 337
Shares redeemed (35,048,142) (85,897)
Net increase 3,204,712 34,904
(a) Commencement of distribution.
9
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
-------------------------------------------------- SEP. 30,
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .0454 .0411 .0416 .0453 .0126
LESS: DIVIDENDS
Dividends from net investment income (.0454) (.0411) (.0416) (.0453) (.0126)
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURN
Total investment return based on
net asset value (b) 4.64% 4.19% 4.24% 4.64% 2.45%(c)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $168 $41 $41 $41 $18
Ratios to average net assets of:
Expenses, net of waivers 1.06% 1.38% 1.29% 1.21% 1.82%(c)
Expenses, before waivers 1.06% 1.38% 1.29% 1.29% 1.82%(c)
Net investment income 4.56% 4.10% 4.15% 4.63%(d) 2.62%(c)
</TABLE>
<TABLE>
<CAPTION>
CLASS B
-----------------------------------------------------------------
MARCH 25,
1994(A)
YEAR ENDED SEPTEMBER 30, TO
-------------------------------------------------- SEP. 30,
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .0404 .0361 .0366 .0404 .0101
LESS: DIVIDENDS
Dividends from net investment income (.0404) (.0361) (.0366) (.0404) (.0101)
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURN
Total investment return based on
net asset value (b) 4.13% 3.67% 3.72% 4.12% 1.95%(c)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $152 $74 $65 $65 $31
Ratios to average net assets of:
Expenses, net of waivers 1.58% 1.88% 1.79% 1.70% 2.35%(c)
Expenses, before waivers 1.58% 1.88% 1.79% 1.78% 2.35%(c)
Net investment income 4.05% 3.61% 3.67% 4.17%(d) 1.91%(c)
</TABLE>
See footnote summary on page 11.
10
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
-------------------------------------------------- SEP. 30,
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .0430 .0386 .0390 .0430 .0112
LESS: DIVIDENDS
Dividends from net investment income (.0430) (.0386) (.0390) (.0430) (.0112)
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURN
Total investment return based on
net asset value (b) 4.39% 3.93% 3.98% 4.39% 2.18%(c)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $125 $24 $13 $10 $5
Ratios to average net assets of:
Expenses, net of waivers 1.29% 1.61% 1.55% 1.45% 2.08%(c)
Expenses, before waivers 1.29% 1.61% 1.55% 1.52% 2.08%(c)
Net investment income 4.34% 3.90% 3.89% 4.41%(d) 2.14%(c)
</TABLE>
ADVISOR CLASS
------------------------
JANUARY 30,
1997(A)
YEAR ENDED TO
SEP. 30, SEP. 30,
1998 1997
---------- ------------
Net asset value, beginning of period $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .0505 .0254
LESS: DIVIDENDS
Dividends from net investment income (.0505) (.0254)
Net asset value, end of period $1.00 $1.00
TOTAL RETURN
Total investment return based on net asset value (b) 5.18% 4.71%(c)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $3,240 $35
Ratio of expenses to average net assets .55% .88%(c)
Ratio of net investment income to average net assets 5.08% 4.15%(c)
(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.
11
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, 1998
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, 1998 by correspondence with the custodian and brokers. 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, 1998, 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 16, 1998
12
<PAGE>
____________________________________________________________
APPENDIX A
____________________________________________________________
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>
APPENDIX B:
CERTAIN EMPLOYEE BENEFIT PLANS
Employee benefit plans described below which are
intended to be tax-qualified under section 401(a) of the Internal
Revenue Code of 1986, as amended ("Tax Qualified Plans"), for
which Merrill Lynch, Pierce, Fenner & Smith Incorporated or an
affiliate thereof ("Merrill Lynch") is recordkeeper (or with
respect to which recordkeeping services are provided pursuant to
certain arrangements as described in paragraph (ii) below)
("Merrill Lynch Plans") are subject to specific requirements as
to the Fund shares which they may purchase. Notwithstanding
anything to the contrary contained elsewhere in this Statement of
Additional Information, the following Merrill Lynch Plans are not
eligible to purchase Class A shares and are eligible to purchase
Class B shares of the Fund at net asset value without being
subject to a contingent deferred sales charge:
(i) Plans for which Merrill Lynch is the recordkeeper
on a daily valuation basis, if when the plan is
established as an active plan on Merrill Lynch's
recordkeeping system:
(a) the plan is one which is not already investing
in shares of mutual funds or interests in
other commingled investment vehicles of which
Merrill Lynch Asset Management, L.P. is
investment adviser or manager ("MLAM Funds"),
and either (A) the aggregate assets of the
plan are less than $3 million or (B) the total
of the sum of (x) the employees eligible to
participate in the plan and (y) those persons,
not including any such employees, for whom a
plan account having a balance therein is
maintained, is less than 500, each of (A) and
(B) to be determined by Merrill Lynch is
established as an active plan on Merrill
Lynch's recordkeeping system (an "Active
Plan"); or
(b) the plan is one which is already investing in
shares of or interests in MLAM Funds and the assets
of the plan have an aggregate value of less than $5
million, as determined by Merrill Lynch as of the
date the plan becomes an Active Plan.
For purposes of applying (a) and (b), there are to
be aggregated all assets of any Tax-Qualified Plan
maintained by the sponsor of the Merrill Lynch Plan
B-1
<PAGE>
(or any of the sponsor's affiliates) (determined to
be such by Merrill Lynch) which are being invested
in shares of or interests in MLAM Funds, Alliance
Mutual Funds or other mutual funds made available
pursuant to an agreement between Merrill Lynch and
the principal underwriter thereof (or one of its
affiliates) and which are being held in a Merrill
Lynch account.
(ii) Plans for which the recordkeeper is not Merrill
Lynch, but which are recordkept on a daily
valuation basis by a recordkeeper with which
Merrill Lynch has a subcontracting or other
Alliance arrangement for the performance of
recordkeeping services, if the plan is determined
by Merrill Lynch to be so eligible and the assets
of the plan are less than $3 million.
Class B shares of the Fund held by any of the above-
described Merrill Lynch Plans are to be replace at Merrill
Lynch's direction through conversion, exchange or otherwise by
Class A shares of the Fund on the earlier of the date that the
value of the plan's aggregate assets first equals or exceeds $5
million or the date on which any Class B share of the Fund held
by the plan would convert to a Class A share of the Fund as
described under "Purchase of Shares" and "Redemption and
Repurchase of Shares."
Any Tax Qualified Plan, including any Merrill Lynch
Plan, which does not purchase Class B shares of the Fund without
being subject to a contingent deferred sales charge under the
above criteria is eligible to purchase Class B shares subject to
a contingent deferred sales charge as well as other classes of
shares of the Fund as set forth above under "Purchase of Shares"
and "Redemption and Repurchase of Shares."
B-2
00250163.AQ4
