As filed with the Securities and Exchange
Commission on January 28, 2000
File Nos. 33-74230
811-08294
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 10 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
Amendment No. 11 X
AFD EXCHANGE RESERVES
(Exact Name of Registrant as Specified in Charter)
1345 Avenue of the Americas, New York, New York 10105
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code:(800)
221-5672
______________________
EDMUND P. BERGAN, JR.
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and address of agent for service)
It is proposed that this filing will become effective (Check
appropriate line)
____immediately upon filing pursuant to paragraph (b)
_X__on February 1, 2000 pursuant to paragraph (b)
____60 days after filing pursuant to paragraph (a)(1)
____on (date) pursuant to paragraph (a)(1)
____75 days after filing pursuant to paragraph (a)(2)
____on (date) pursuant to paragraph (a)(2) of rule 485
If appropriate, check the following box:
____this post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
<PAGE>
<PAGE>
AFD EXCHANGE RESERVES
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PROSPECTUS
February 1, 2000
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>
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.
Table of Contents
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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 and Strategies ........................................ 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
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.
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:
o Interest Rate Risk This is the risk that changes in interest rates will
adversely affect the yield or value of the Fund's investments in debt
securities.
o Credit Risk This is the risk that the issuer or guarantor of a debt
security 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.
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.
PERFORMANCE AND BAR CHART INFORMATION
The table shows the Fund's average annual total returns and the bar chart shows
the Fund's annual total returns. The table and the bar chart provide an
indication of the historical risk of an investment in the Fund by showing:
o the Fund's average annual total returns for one and five years and the
life of the Fund; and
o 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.
PERFORMANCE TABLE
1 Year 5 Year Since Inception*
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Class A 4.27% 4.41% 4.22%
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Class B 3.74% 3.89% 3.70%
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Class C 4.01% 4.15% 3.96%
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You may obtain the most current seven-day yield information of the Fund by
calling 1-800-221-9513 or your financial intermediary.
* Inception date: 3/25/94
BAR CHART
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The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
[The following was represented as a bar chart in the printed material]
89 N/A
90 N/A
91 N/A
92 N/A
93 N/A
94 N/A
95 4.79%
96 4.12%
97 4.32%
98 4.57%
99 4.27%
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
0.40% (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)
</TABLE>
* For Class B Shares purchased with cash. For Class B shares, the CDSC decreases
1.00% annually to 0% after the 4th year. 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.
** For Class C Shares, the CDSC is 0% after the 1st year.
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,
that the Fund's operating expenses stay the same and that all dividends and
distributions are reinvested. 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> <C>
Management Fees .25% .25% .25% 1 year $ 101 $ 553 $ 153 $ 226 $ 126
Distribution (12b-1) Fees .50% 1.00% .75% 3 years $ 315 $ 674 $ 474 $ 393 $ 393
Other Expenses .24% .25% .24% 5 years $ 547 $ 818 $ 818 $ 681 $ 681
--- ---- ----
Total Fund 10 years $1,213 $1,653* $1,653* $1,500 $1,500
Operating Expenses .99% 1.50% 1.24%
=== ==== ====
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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
investment objective and principal strategies and risks of the Fund.
Please note:
o 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.
o There can be no assurance that the Fund will achieve its investment
objective.
INVESTMENT OBJECTIVE AND STRATEGIES
As a money market fund, the Fund must meet the requirements of Securities and
Exchange Commission Rule 2a-7. The Rule imposes strict requirements on the
investment quality, maturity, and diversification of the Fund's investments.
Under that Rule, 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.
The Fund may invest in:
o marketable obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities;
o 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;
o high-quality commercial paper (or, if not rated, commercial paper
determined by Alliance to be of comparable quality) issued by U.S. or
foreign companies and participation interests in loans made to companies
that issue such commercial paper;
o adjustable rate obligations;
o asset-backed securities;
o restricted securities (i.e., securities subject to legal or contractual
restrictions on resale); and
o repurchase agreements that are fully collateralized.
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 whose
principal business activities are in the same industry. This limitation does not
apply to investments in securities issued or guaranteed by the U.S. Government,
its agencies or instrumentalities, or to bank obligations, including
certificates of deposit, bankers' acceptances and interest bearing savings
deposits, issued by U.S. banks (including their foreign branches) and U.S.
branches of foreign banks subject to the same regulation as U.S. banks.
RISK CONSIDERATIONS
The Fund's principal 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 lower yields. 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.
Investments in illiquid securities 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 (or credit and
liquidity enhancements) 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 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
5
<PAGE>
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, 1999 totaling
more than $368 billion (of which more than $169 billion represented assets of
investment companies). As of December 31, 1999, Alliance managed retirement
assets for many of the largest public and private employee benefit plans
(including 31 of the nation's FORTUNE 100 companies), for public employee
retirement funds in 31 states, for investment companies, and for foundations,
endowments, banks and insurance companies worldwide. The 52 registered
investment companies managed by Alliance, comprising 105 separate investment
portfolios, currently have approximately 5 million shareholder accounts.
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, 1999.
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 in proper form 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:
o Initial: $250
o Subsequent: $ 50
o 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 particular, 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 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.
6
<PAGE>
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, your redemption payment may be delayed until the Fund is
reasonably satisfied that the check or electronic funds transfer has been
collected (which may take up to 15 days).
o 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.
o 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 calculated at 4:00 p.m., Eastern time, each day the
NYSE is open for business, and paid as dividends to shareholders. The dividends
are 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
- --------------------------------------------------------------------------------
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.
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
7
<PAGE>
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
Securities and Exchange Commission 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 different from, or in addition to, those imposed
by the Fund, including requirements as to the minimum initial and subsequent
investment amounts.
8
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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.
9
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FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the Fund's
financial performance for the past 5 years. 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 PricewaterhouseCoopers LLP, the Fund's
independent auditors, for the fiscal year ended September 30, 1999 and by other
Auditors for the fiscal years before September 30, 1999. The report of
PricewaterhouseCoopers llp, 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
September 30,
-------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
Income from Investment Operations
Net investment income.............................. .0408 .0454 .0411 .0416 .0453
------- ------- ------- ------- -------
Less: Dividends
Dividends from net investment income............... (.0408) (.0454) (.0411) (.0416) (.0453)
------- ------- ------- ------- -------
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(a) 4.16% 4.64% 4.19% 4.24% 4.64%
Ratios/Supplemental Data
Net assets, end of year (in millions).............. $290 $168 $41 $41 $41
Ratios to average net assets of:
Expenses, net of waivers......................... .99% 1.06% 1.38% 1.29% 1.21%
Expenses, before waivers......................... .99% 1.06% 1.38% 1.29% 1.29%
Net investment income............................ 4.06% 4.56% 4.10% 4.15% 4.63%(b)
</TABLE>
- ----------
(a) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the year, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the year. Contingent deferred sales charge
is not reflected in the calculation of total investment return.
(b) Net of expenses waived by the Adviser.
10
<PAGE>
<TABLE>
<CAPTION>
Class B
-------------------------------------------------------------------------------
Year Ended
September 30,
-------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------
Income from Investment Operations
Net investment income........................... .0357 .0404 .0361 .0366 .0404
------ ------ ------ ------ ------
Less: Dividends
Dividends from net investment income............ (.0357) (.0404) (.0361) (.0366) (.0404)
------ ------ ------ ------ ------
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(a) 3.64% 4.13% 3.67% 3.72% 4.12%
Ratios/Supplemental Data
Net assets, end of year (in millions)........... $267 $152 $74 $65 $65
Ratio to average net assets of:
Expenses, net of waivers...................... 1.50% 1.58% 1.88% 1.79% 1.70%
Expenses, before waivers...................... 1.50% 1.58% 1.88% 1.79% 1.78%
Net investment income......................... 3.57% 4.05% 3.61% 3.67% 4.17%(b)
</TABLE>
- ----------
(a) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the year, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the year. Contingent deferred sales charge
is not reflected in the calculation of total investment return.
(b) Net of expenses waived by the Adviser.
<TABLE>
<CAPTION>
Class C
-------------------------------------------------------------------------------
Year Ended
September 30,
-------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- ------- ------- -------
Income from Investment Operations
Net investment income........................... .0383 .0430 .0386 .0390 .0430
-------- -------- ------- ------- -------
Less: Dividends
Dividends from net investment income............ (.0383) (.0430) (.0386) (.0390) (.0430)
-------- -------- ------- ------- -------
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(a) 3.90% 4.39% 3.93% 3.98% 4.39%
Ratios/Supplemental Data
Net assets, end of year (in millions)........... $128 $125 $24 $13 $10
Ratio to average net assets of:
Expenses, net of waivers...................... 1.24% 1.29% 1.61% 1.55% 1.45%
Expenses, before waivers...................... 1.24% 1.29% 1.61% 1.55% 1.52%
Net investment income......................... 3.86% 4.34% 3.90% 3.89% 4.41%(b)
</TABLE>
- ----------
(a) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the year, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the year. Contingent deferred sales charge
is not reflected in the calculation of total investment return.
(b) Net of expenses waived by the Adviser.
11
<PAGE>
For more information about the Fund, the following documents are available upon
request:
o Annual/Semi-Annual Reports To Shareholders
The Fund's annual and semi-annual reports to shareholders contain additional
information on the Fund's investments.
o 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,
or make inquiries concerning the Fund, 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 Securities and Exchange
Commission:
In Person: at the Securities and Exchange Commission's Public Reference
Room in Washington, D.C.
By Phone: (202) 942-8090 (for information on the operation of the public
reference room only)
By Mail: Public Reference Section
Securities and Exchange Commission
Washington, DC 20549-6009
(duplicating fee required)
By Electronic
Mail: [email protected] (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
SEC File No: 811-08294
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:
o Indicate your name(s) exactly as it appears on your
social security card.
o Transfer on Death:
o Ensure that your state participates
o Trust/Other:
o 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:
o 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 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
================================================================================
1. Your Account Registration (Please Print in Capital Letters and Check Boxes
Where Applicable)
================================================================================
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*, (MI) (Last Name)
Transfer On Death Beneficiary
or Minor
|_||_||_| - |_||_| - |_||_||_||_|
Social Security Number of Owner
or Minor (required to open account)
If Joint Tenants Account: * The Account will be registered "Joint Tenants with
right of Survivorship" unless you indicate otherwise below:
If Uniform Gift/Transfer to Minor Account:
|_||_| Minor's State of Residence
|_| In Common |_| By Entirety |_| Community Property
|_| Trust - or - |_| Corporation - or - |_| Other__________________
|_||_||_||_||_||_||_||_||_||_| |_| |_||_||_||_||_||_||_||_||_||_|
Name of Trustee if applicable (MI) (Last Name)
(First 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
Alliance Capital [LOGO]
1
<PAGE>
================================================================================
3. Your Initial Investment The minimum investment is $250
The maximum onvestment in Class B is $250,000;
Class C is $1,000,000
================================================================================
I hereby subscribe for shares of AFD Exchange Reserves Advisor Class and elect
distribution options as indicated.
- --------------------------------------------------------------------------------
Broker/Dealer Use Only: Wire Confirm #
|_||_||_||_||_||_||_||_|
- --------------------------------------------------------------------------------
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 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 checks* payable to:
AFD Exchange Reserves
---------------------
- --------------------------------------------------------------------------------
- ---------------- ---------------------- --------------------------
Indicate three Distributions Options
digit Fund Class *Check One*
number located Indicate Dollar Amount --------------------------
below Dividends Capital Gains
R C D R C D
- ---------------- ---------------------- ----------- -------------
---------------------
|_||_||_| $ |R| |C| |D| |R| |C| |D|
---------------------
---------------------
|_||_||_| $ |R| |C| |D| |R| |C| |D|
---------------------
---------------------
|_||_||_| $ |R| |C| |D| |R| |C| |D|
---------------------
- ---------------- ---------------------
Total Investment $
- ---------------- ---------------------
* Cash and money orders are not accepted
================================================================================
Fund Classes and Numbers
================================================================================
-------------- -------------- -------------
Contingent
Deferred Sales Asset-Based
Charge Sales Charge
A B C
-------------- -------------- -------------
AFD Exchange Resreves 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 other Alliance Funds that offer
Advisor Class shares. See "Your Shareholder Options, Section 4A".
Class A shares will not be subject to any initial sales charge at the time of
purchase. However, Class A shares excheanged into Class A shares of another
Alliance Fund will be subject to applicable sales charges at the time of the
exchange.
2
<PAGE>
================================================================================
4. Your Shareholder Options
================================================================================
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**
================================================================================
Exchanges of Class A shares are made at the net asset value next determined plus
any applicable initial sales charge imposed on the Class A shares of the other
Alliance 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.
3
<PAGE>
================================================================================
4. Your Shareholder Options (CONTINUED)
================================================================================
B. Purchases 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.
|_||_||_| |_||_||_||_| |_||_|,|_||_||_|.00 |_|
Fund Class Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency
Frequency:
M = monthly
Q = quarterly
A = annually
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)
|_| Automatic Investments (Section 4A)
|_| Telephone Transactions (Section 4B)
|_| Withdrawals (Section 4C)
[The following was depicted as a voided check in the printed material]
================================================================================
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 VOID
ANY TOWN, USA 12345
NOTE ___________________ ________________________________________
:0 0 0 0 0 0 0 0 0: 1 0 3 0 0 0 0 0 0 0 0 0: 7 6 5
================================================================================
- ------- --------- --- -- -------- ----------
ABA Routing Number Check Bank Account Number
Number
|_||_||_||_||_||_||_||_||_||_| |_||_||_||_||_||_||_||_||_||_||_||_||_|
Your Bank's ABA Routing Nummber Your Bank Number
|_| Checking Account |_| Savings Account
* 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.
4
<PAGE>
================================================================================
4. Your Shareholder Options (CONTINUED)
================================================================================
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
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]
AFDPRO100 AFD Exchange Prospectus
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 all 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>
<PAGE>
AFD EXCHANGE RESERVES
- --------------------------------------------------------------------------------
ADVISOR CLASS
PROSPECTUS
February 1, 2000
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>
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.
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 and Strategies ........................................ 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
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.
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:
o Interest Rate Risk This is the risk that changes in interest rates
will adversely affect the yield or value of the Fund's investments
in debt securities.
o Credit Risk This is the risk that the issuer or guarantor of a debt
security 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.
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.
PERFORMANCE AND BAR CHART INFORMATION
The table shows the Fund's average annual total returns and the bar chart shows
the Fund's annual total returns. The table and the bar chart provide an
indication of the historical risk of an investment in the Fund by showing:
o the Fund's average annual returns for one year and the life of the
Fund; and
o 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.
PERFORMANCE TABLE
- --------------------------------------------------------------------------------
1 Year Since Inception*
================================================================================
Advisor 4.79% 4.93%
================================================================================
You may obtain the most current seven-day yield information of the Fund by
calling 1-800-221-5672 or your financial intermediary.
* Inception date: 1/30/97
BAR CHART
- --------------------------------------------------------------------------------
[BAR CHART]
89 N/A
90 N/A
91 N/A
92 N/A
93 N/A
94 N/A
95 N/A
96 N/A
97 N/A
98 5.10%
99 4.79%
During the period shown in the bar chart, the highest return for a quarter was
1.30% (quarter ending December 31, 1999) and the lowest return for a quarter was
1.10% (quarter ending June 30, 1997).
3
<PAGE>
- --------------------------------------------------------------------------------
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)
None
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,
that the Fund's operating expenses stay the same and that all dividends and
distributions are reinvested. Your actual costs may be higher or lower.
<TABLE>
<CAPTION>
Operating Expenses Example
- --------------------------------------------------- ----------------------------------
Advisor Class Share Advisor Class Share
------------------- -------------------
<S> <C> <C> <C>
Management Fees .25% 1 Year $ 50
Distribution (12b-1) Fees None 3 Years $157
Other Expenses .24% 5 Years $274
---- 10 Years $616
Total Fund Operating Expenses .49%
====
- -----------------------------------------------------------------------------------------------
</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
investment objective and principal strategies and risks of the Fund.
Please note:
o 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.
o There can be no assurance that the Fund will achieve its investment
objective.
INVESTMENT OBJECTIVE AND STRATEGIES
As a money market fund, the Fund must meet the requirements of Securities and
Exchange Commission Rule 2a-7. The Rule imposes strict requirements on the
investment quality, maturity, and diversification of the Fund's investments.
Under that Rule, 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.
The Fund may invest in:
o marketable obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities;
o 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;
o high-quality commercial paper (or, if not rated, commercial paper
determined by Alliance to be of comparable quality) issued by U.S. or
foreign companies and participation interests in loans made to companies
that issue such commercial paper;
o adjustable rate obligations;
o asset-backed securities;
o restricted securities (i.e., securities subject to legal or contractual
restrictions on resale); and
o repurchase agreements that are fully collateralized.
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 whose
principal business activities are in the same industry. This limitation does not
apply to investments in securities issued or guaranteed by the U.S. Government,
its agencies or instrumentalities, or to bank obligations, including
certificates of deposit, bankers' acceptances and interest bearing savings
deposits, issued by U.S. banks (including their foreign branches) and U.S.
branches of foreign banks subject to the same regulation as U.S. banks.
RISK CONSIDERATIONS
The Fund's principal 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 lower yields. 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.
Investments in illiquid securities 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 (or credit and
liquidity enhancements) of 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 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.
5
<PAGE>
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, 1999 totaling
more than $368 billion (of which more than $169 billion represented assets of
investment companies). As of December 31, 1999, Alliance managed retirement
assets for many of the largest public and private employee benefit plans
(including 31 of the nation's FORTUNE 100 companies), for public employee
retirement funds in 31 states, for investment companies, and for foundations,
endowments, banks and insurance companies worldwide. The 52 registered
investment companies managed by Alliance, comprising 105 separate investment
portfolios, currently have approximately 5 million shareholder accounts.
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, 1999.
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 in proper form 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:
o 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;
o 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;
o by investment advisory clients of, and certain other persons associated
with, Alliance and its affiliates or the Fund; and
o 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.
The Fund may refuse any order to purchase Advisor Class shares. In particular,
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.
6
<PAGE>
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, your
redemption payment may be delayed 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.
o 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.
o 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 calculated at 4:00 p.m., Eastern time, each day the
NYSE is open for business and paid as dividends to shareholders. The dividends
are 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.
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 PricewaterhouseCoopers LLP,
the Fund's independent auditors, for the fiscal year ended September 30, 1999
and by other auditors for the fiscal periods before September 30, 1999. The
report of PricewaterhouseCoopers LLP, 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 Year Ended to
September 30, 1999 September 30, 1998 September 30, 1997
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period ............... $ 1.00 $ 1.00 $ 1.00
-------- ------- -------
Income from Investment Operations
Net investment income .............................. .0458 .0505 .0254
-------- ------- -------
Less: Dividends
Dividends from net investment income ............... (.0458) (.0505) (.0254)
-------- ------- -------
Net asset value, end of period ..................... $ 1.00 $ 1.00 $ 1.00
======== ======= =======
Total Return
Total investment return based on net asset value (a) 4.68% 5.18% 2.54%(c)
Ratios/Supplemental Data
Net assets, end of period (in millions) ............ $ 11,576 $ 3,240 $ 35
Ratio to average net assets of:
Expenses, net of waivers ......................... .49% .55% .88%(d)
Expenses, before waivers .........................
Net investment income ............................ 4.57% 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:
o Annual/Semi-Annual Reports To Shareholders
The Fund's annual and semi-annual reports to shareholders contain additional
information on the Fund's investments.
o 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,
or make inquiries concerning the Fund, 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 Securities and Exchange
Commission:
In Person: at the Securities and Exchange Commission's Public Reference Room
in Washington, D.C.
By Phone: (202) 942-8090 (for information on the operation of the public
reference room only.)
By Mail: Public Reference Section
Securities and Exchange Commission
Washington, DC 20549-6009
(duplicating fee required)
By Electronic
Mail: [email protected] (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
SEC File No. 811-0829
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:
o Indicate your name(s) exactly as it appears on your
social security card.
o Transfer on Death:
o Ensure that your state participates
o Trust/Other:
o 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:
o 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
================================================================================
1. Your Account Registration (Please Print in Capital Letters and Check Boxes
Where Applicable)
================================================================================
|_| 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*, (MI) (Last Name)
Transfer On Death Beneficiary
or Minor
|_||_||_| - |_||_| - |_||_||_||_|
Social Security Number of Owner
or Minor (required to open account)
If Joint Tenants Account: * The Account will be registered "Joint Tenants with
right of Survivorship" unless you indicate otherwise below:
If Uniform Gift/Transfer to Minor Account:
|_| |_| Minor's State of Residence
|_| In Common |_| By Entirety |_| Community Property
|_| Trust - or - |_| Corporation - or - |_| Other__________________
|_||_||_||_||_||_||_||_||_||_| |_| |_||_||_||_||_||_||_||_||_||_|
Name of Trustee if applicable (MI) (Last Name)
(First 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
Alliance Capital [LOGO]
1
<PAGE>
================================================================================
3. Your Initial Investment
================================================================================
I hereby subscribe for shares of AFD Exchange Reserves Advisor Class and elect
distribution options as indicated.
- --------------------------------------------------------------------------------
Broker/Dealer Use Only: Wire Confirm #
|_||_||_||_||_||_||_||_||_|
- --------------------------------------------------------------------------------
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 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 checks* payable to:
AFD Exchange Reserves
---------------------
- --------------------------------------------------------------------------------
- ---------------- ---------------------- --------------------------
Distributions Options
Three digit *Check One*
Fund Class Indicate Dollar Amount --------------------------
number Dividends Capital Gains
R C D R C D
- ---------------- ---------------------- ----------- -------------
---------------------
|4||3||6| $ |R| |C| |D| |R| |C| |D|
---------------------
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
2
<PAGE>
================================================================================
4. Your Shareholder Options
================================================================================
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**
================================================================================
Exchanges of Advisor Class shares are made at the net asset value next
determined.
Certificates must remain unissued.
** If the date selected for the exchange is not a Fund business day the
transaction will be processed on the next Fund business day.
================================================================================
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.
3
<PAGE>
================================================================================
4. Your Shareholder Options (CONTINUED)
================================================================================
B. Purchases 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.
|4||3||6| |_||_||_||_| |_||_|,|_||_||_|.00 |_|
Fund Class Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency
Frequency:
M = monthly
Q = quarterly
A = annually
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)
|_| Automatic Investments (Section 4A)
|_| Telephone Transactions (Section 4B)
|_| Withdrawals (Section 4C)
[The following was depicted as a voided check in the printed material.]
================================================================================
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 VOID
ANY TOWN, USA 12345
NOTE ___________________ ________________________________________
:0 0 0 0 0 0 0 0 0: 1 0 3 0 0 0 0 0 0 0 0 0: 7 6 5
================================================================================
- ------- --------- --- -- -------- ----------
ABA Routing Number Check Bank Account Number
Number
|_||_||_||_||_||_||_||_||_||_| |_||_||_||_||_||_||_||_||_||_||_||_||_|
Your Bank's ABA Routing Nummber Your Bank Number
|_| Checking Account |_| Savings Account
* 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.
4
<PAGE>
================================================================================
4. Your Shareholder Options (CONTINUED)
================================================================================
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
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]
AFDADVPRO100
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 all 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>
(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 1, 2000
____________________________________________________________
This Statement of Additional Information is not a
prospectus but supplements and should be read in conjunction
with the current Prospectus, dated February 1, 2000, that
offers Class A, Class B and Class C shares of the Fund and
the current Prospectus, dated February 1, 2000, that offers
the Advisor Class shares of the Fund (the "Advisor Class
Prospectus" and, together with the Prospectus for the Fund
that offers the Class A, Class B and Class C shares, the
"Prospectus"). Copies of the Prospectuses may be obtained
by contacting Alliance Fund Services, Inc. at the address or
the "For Literature" telephone number shown above.
TABLE OF CONTENTS
Page
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS..............
MANAGEMENT OF THE FUND.......................................
EXPENSES OF THE FUND.........................................
PURCHASE OF SHARES...........................................
REDEMPTION AND REPURCHASE OF SHARES..........................
SHAREHOLDER SERVICES.........................................
DAILY DIVIDENDS--DETERMINATION OF NET ASSET VALUE............
TAXES........................................................
BROKERAGE AND PORTFOLIO TRANSACTIONS.........................
GENERAL INFORMATION..........................................
FINANCIAL STATEMENTS AND INDEPENDENT ACCOUNTANT'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
2
<PAGE>
funds to pay for specific merchandise. The draft is then
"accepted" by a bank that, in effect, unconditionally guarantees
to pay the face value of the instrument on its maturity date.
The acceptance may then be held by the accepting bank as an
earning 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 and funding agreements, 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 fully
collateralized. 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 determined to be creditworthy by the Adviser. 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
3
<PAGE>
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 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.
4
<PAGE>
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
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.
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
5
<PAGE>
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.
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.
6
<PAGE>
The Fund will comply with Rule 2a-7 under the Act, as
amended from time to time, including the diversification, quality
and maturity limitations imposed by the Rule.
Currently, pursuant to Rule 2a-7, the Fund may invest
only in "eligible securities," as that term is defined in the
Rule. Generally, an eligible security is a security that (i) is
denominated in U.S. Dollars and has a remaining maturity of 397
days or less; (ii) is rated, or is issued by an issuer with
short-term debt outstanding that is rated, in one of the two
highest rating categories by two NRSROs or, if only one NRSRO has
issued a rating, by that NRSRO; and (iii) has been determined by
Alliance to present minimal credit risks pursuant to procedures
approved by the Trustees. A security that originally had a
maturity of greater than 397 days is an eligible security if its
remaining maturity at the time of purchase is 397 calendar days
or less and the issuer has outstanding short-term debt that would
be an eligible security. Unrated securities may also be eligible
securities if Alliance determines that they are of comparable
quality to a rated eligible security pursuant to guidelines
approved by the Trustees. A description of the ratings of some
NRSROs appears in the Appendix attached hereto.
Under Rule 2a-7, the Fund may not invest more than five
percent of its assets in the securities of any one issuer other
than the United States Government, its agencies or
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.
7
<PAGE>
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
Fund's total assets may be invested without regard to such 5%
limitation;1
(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
____________________
1. As a matter of operating policy, pursuant to Rule 2a-7,
the Fund will invest no more than 5% of its assets in the
first tier (as defined in Rule 2a-7) securities of any one
issuer, except that under Rule 2a-7, 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.
Fundamental policy 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.
8
<PAGE>
held by the Fund except as may be necessary in connection with
any borrowing mentioned above, including reverse repurchase
agreements, and in an aggregate amount not to exceed 15% of the
Fund's assets;
(vi) May not make loans, provided that the Fund may
purchase money market securities and enter into repurchase
agreements; or
(vii) May not (a) make investments for the purpose of
exercising control; (b) purchase securities of other investment
companies, except in connection with a merger, consolidation,
acquisition or reorganization; (c) invest in real estate (other
than money market securities secured by real estate or interests
therein or money market securities issued by companies which
invest in real estate, or interests therein), commodities or
commodity contracts, interests in oil, gas and other mineral
exploration or other development programs; (d) purchase
securities on margin; (e) make short sales of securities or
maintain a short position or write, purchase or sell puts, calls,
straddles, spreads or combinations thereof; (f) invest in
securities of issuers (other than agencies and instrumentalities
of the United States Government) having a record, together with
predecessors, of less than three years of continuous operation if
more than 5% of the Fund's assets would be invested in such
securities; (g) purchase or retain securities of any issuers if
those officers and trustees of the Fund and employees of Alliance
who own individually more than 1/2 of 1% of the outstanding
securities of such issuer together own more than 5% of the
securities of such issuer; or (h) act as an underwriter of
securities.
__________________________________________________________
__
MANAGEMENT OF THE FUND
____________________________________________________________
The Adviser
The Fund's investment adviser, Alliance Capital
Management L.P. (the "Adviser" or "Alliance"), a Delaware limited
partnership with principal offices at 1345 Avenue of the
Americas, New York, New York 10105, has been retained under an
investment 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.
9
<PAGE>
The Adviser is a leading global investment adviser
supervising client accounts with assets as of December 31, 1999
totaling $368 billion. The Adviser has eight offices in the
United States. Subsidiaries of the Adviser operate out of
offices in Bahrain, Bangalore, Calcutta, Chennai, Istanbul,
Johannesburg, London, Luxembourg, Madrid, Mumbai, New Delhi,
Paris, Pune, Singapore, Sydney, Tokyo and Toronto, and affiliate
offices are located in Cairo, Hong Kong, Moscow, Sao Paulo,
Seoul, Vienna and Warsaw. The Adviser and its subsidiaries
employ over 2,000 persons worldwide.
The Adviser's clients are primarily major corporate
employee benefit fund, public employee retirement systems,
investment companies, foundations and endowment funds. There are
52 U.S.-registered investment companies managed by the Adviser,
comprising 105 separate investment portfolios. There are also
105 non-U.S. investment companies, comprising 127 separate
investment portfolios, managed by the Adviser and its affiliates.
These investment portfolios currently have approximately 5
million shareholder accounts, in aggregate. As of December 31,
1999, the Adviser was retained as an investment manager of
employee benefit fund assets for 31 of the Fortune 100
companies.
Alliance Capital Management Corporation ("ACMC") is the
general partner of the Adviser and a wholly owned subsidiary of
The Equitable Life Assurance Society of the United States
("Equitable"). Equitable, one of the largest life insurance
companies in the United States, is the beneficial owner of an
approximately 55.4% partnership interest in the Adviser.
Alliance Capital Management Holding L.P. ("Alliance Holding")
owns an approximately 41.9% partnership interest in the Adviser.2
Equity interests in Alliance Holding are traded on the New York
Stock Exchange in the form of units. Approximately 98% of such
interests are owned by the public and management or employees of
____________________
2. Until October 29, 1999, Alliance Holding served as the
investment adviser to the Fund. On that date, Alliance
Holding reorganized by transferring its business to the
Adviser. Prior thereto, the Adviser had no material business
operations. One result of the reorganization was that the
Advisory Agreement, then between the Fund and Alliance
Holding, was transferred to the Adviser by means of a
technical assignment, and ownership of Alliance Fund
Distributors, Inc. and Alliance Fund Services, Inc. the
Fund's principal underwriter and transfer agent,
respectively, also was transferred to the Adviser.
10
<PAGE>
the Adviser and approximately 2% are owned by Equitable.
Equitable is a wholly owned subsidiary of AXA Financial, Inc.
("AXA Financial"), a Delaware corporation whose shares are traded
on the New York Stock Exchange. AXA Financial serves as the
holding company for the Adviser, Equitable and Donaldson, Lufkin
& Jenrette, Inc., an integrated investment and merchant bank. As
of June 30, 1999, AXA, a French insurance holding company, owned
approximately 58.2% of the issued and outstanding shares of
common stock of AXA Financial.
Under the Advisory Agreement, Alliance provides
investment advisory services and order placement facilities for
the Fund and pays all compensation of Trustees and officers of
the Fund who are affiliated persons of Alliance. Alliance or its
affiliates also furnish the Fund without charge with management
supervision and assistance and office facilities. Under the
Advisory Agreement, the Fund pays an advisory fee at an annual
rate of .25 of 1% of the first $1.25 billion of the average daily
net value of the Fund's net assets, .24 of 1% of the next $.25
billion of such assets, .23 of 1% of the next $.25 billion of
such assets, .22 of 1% of the next $.25 billion of such assets,
.21 of 1% of the next $1 billion of such assets and .20 of 1% of
the average daily value of the Fund's net assets in excess of $3
billion. The fee is accrued daily and paid monthly under the
Advisory Agreement. 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, 1999, Alliance received from the Fund advisory fees
of $1,245,776. For the fiscal year ended September 30, 1998 and
1997, Alliance received from the Fund advisory fees of $569,855
and $338,864, 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
11
<PAGE>
purchasing or selling the same security on a given day from the
same broker-dealer, such transactions may be averaged as to
price.
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 business and affairs of the Fund are managed under
the direction of the Board of Trustees. 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 1995.
RUTH BLOCK, 69, 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 1995. Her address is P.O. Box 4623,
Stamford, Connecticut 06903.
DAVID H. DIEVLER, 70, is an independent consultant. He
was formerly a Senior Vice President of ACMC, until December
1994. His address is P.O. Box 167, Spring Lake, New Jersey
07762.
JOHN H. DOBKIN, 57 ,has been the President of Historic
Hudson Valley (historic preservation) since prior to 1995.
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., 67, is an investment adviser and
independent consultant. He was formerly Senior Manager of
Barrett Associates, Inc., a registered investment adviser, with
12
<PAGE>
which he had been associated since prior to 1995. His address is
2 Greenwich Plaza, Suite 100, Greenwich, CT 06830.
DR. JAMES M. HESTER, 75, has been President of the Harry
Frank Guggenheim Foundation with which he has been associated
since prior to 1995. 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, 60, is a Partner in the law firm of
Cahill Gordon & Reindel, with which he has been associated since
prior to 1995. He is also President and Chief Executive Officer
of Wenonah Development Company (investments) and a Director of
Placer Dome, Inc. (mining). His address is St. Bernard's Road,
Gladstone, New Jersey 07934.
DONALD J. ROBINSON, 65, is Senior Counsel of the law
firm of Orrick, Herrington & Sutcliffe and was formerly a senior
partner and a member of the Executive Committee to that firm.
His address is 98 Hell's Peak Road, Weston, VT 05161.
Officers
JOHN D. CARIFA, Chairman and President, see Biography
above.
KATHLEEN A. CORBET, Senior Vice President, 39 is an
Executive Vice President of ACMC, with which she has been
associated since prior to 1995.
WAYNE D. LYSKI, Senior Vice President, 58, is an
Executive Vice President of ACMC, with which he has been
associated since prior to 1995.
KENNETH T. CARTY - Vice President, 39 is a Vice
President of ACMC with which he has been associated since prior
to 1995.
JOHN F. CHIODI, Jr., Vice President, 33, is a Vice
President of ACMC, with which he has been associated since prior
to 1995.
MARIA R. CONA - Vice President, 45, is a Vice President
of ACMC with which she has been associated since prior to 1995.
MARK D. GERSTEN, Treasurer and Chief Financial Officer,
49, is a Senior Vice President of Alliance Fund Services, Inc.
13
<PAGE>
("AFS") and a Vice President of Alliance Fund Distributors, Inc.
("AFD"), with which he has been associated since prior to 1995.
EDMUND P. BERGAN, Jr., Secretary, 49, is a Senior Vice
President and the General Counsel of AFD and AFS, with which he
has been associated since prior to 1995.
ANDREW L. GANGOLF - Assistant Secretary, 45, is a Vice
President and Assistant General Counsel of AFD, with which he has
been associated since prior to 1995.
DOMENICK PUGLIESE - Assistant Secretary, 38, 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 prior
to 1995.
VINCENT S. NOTO, Controller, 35, is a Vice President of
AFS, with which he has been associated since prior to 1995.
The aggregate compensation paid by the Fund to each of
the Trustees during its fiscal year ended September 30, 1999, the
aggregate compensation paid to each of the Trustees during
calendar year 1999 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.
14
<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 50 103
Ruth Block $3,707 $154,263 38 80
David H. Dievler $3,830 $210,188 45 87
John H. Dobkin $3,830 $206,488 42 84
William H. Foulk, Jr. $3,830 $246,413 45 98
Dr. James M. Hester $3,830 $164,138 39 81
Clifford L. Michel $3,830 $183,388 39 83
Donald J. Robinson $3,097 $154,313 41 92
As of January 5, 2000, the Trustees and officers of the
Fund as a group owned less than 1% of the shares of the Fund.
____________________________________________________________
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
Agreement would benefit the Fund and its shareholders. The
distribution services fee of a particular class will not be used
15
<PAGE>
to subsidize the provision of distribution services with respect
to any other class.
During the Fund's fiscal year ended September 30, 1999,
the Fund paid distribution services fees for expenditures under
the Agreement to the Principal Underwriter with respect to
Class A shares, in amounts aggregating $1,083,551, 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 $2,646,297. Of
the $3,729,848 paid by the Fund and the Adviser under the
Agreement, $82,216 was spent on advertising, $21,409 on the
printing and mailing of prospectuses for persons other than
current shareholders, $428,144 for compensation to broker-
dealers, $1,422,642 for compensation to sales personnel and
$1,775,437 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, 1999,
the Fund paid distribution services fees for expenditures under
the Agreement to the Principal Underwriter with respect to
Class B shares, in amounts aggregating $1,890,624, 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 $4,505,750. Of the $6,396,374
paid by the Fund and the Adviser under the Agreement in the case
of the Class B shares, $47,722 was spent on advertising,
$11,521on the printing and mailing of prospectuses for persons
other than current shareholders, $5,284,764 for compensation to
broker-dealers, $499,440 for compensation paid to sales
personnel, $332,542 for interest on Class B shares financing and
$220,385 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, 1999,
the Fund paid distribution services fees for expenditures under
the Agreement to the Principal Underwriter with respect to
Class C shares, in amounts aggregating $647,157, 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 $219,533. Of
the $866,690 paid by the Fund and the Adviser under the Agreement
in the case of the Class C shares, $12,151 was spent on
advertising, $6,254 on the printing and mailing of prospectuses
for persons other than current shareholders, $609,650 for
compensation to broker-dealers, $155,881 for compensation to
16
<PAGE>
sales personnel, $22,005 for interest on Class C shares financing
and $60,749 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.
The Rule 12b-1 Plan is in compliance with rules of the
National Association of Securities Dealers, Inc. which
effectively limit the annual asset-based sales charges and
service fees that a mutual fund may pay on a class of shares to
.75% and .25%, respectively, of the average annual net assets
attributable to that class. The rules also limit the aggregate
of all front-end, deferred and asset-based sales charges imposed
with respect to a class of shares by a mutual fund that also
charges a service fee to 6.25% of cumulative gross sales of
shares of that class, plus interest at the prime rate plus 1% per
annum.
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.
17
<PAGE>
Transfer Agency Agreement
Alliance Fund Services, Inc. ("AFS"), 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, 1999, the Fund
paid AFS $442,292 pursuant the Transfer Agency Agreement.
____________________________________________________________
PURCHASE OF SHARES
____________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares."
General
Shares of the Fund are offered on a continuous basis at
a price equal to their net asset value. Shares of the Fund are
available to holders of shares of other Alliance Mutual Funds who
wish to exchange their shares for shares of a money market fund
and also may be purchased for cash.
A transaction, service, administrative or other similar
fee may be charged by your broker-dealer, agent, financial
intermediary or other financial representative with respect to
the purchase, sale or exchange of Class A, Class B, Class C or
Advisor Class shares made through such financial representative.
Such financial intermediaries may also impose requirements with
respect to the purchase, sale or exchange of shares that are
different from, or in addition to, those imposed by the Fund,
including requirements as to the minimum initial and subsequent
investment amounts.
If you are a Fund shareholder through an account
established under a fee-based program, your fee-based program may
impose requirements with respect to the purchase, sale or
exchange of Advisor Class shares of the Fund that are different
from those described in the Advisor Class Prospectus and this
Statement of Additional Information. A transaction fee may be
18
<PAGE>
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
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
19
<PAGE>
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
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
20
<PAGE>
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,
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
21
<PAGE>
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.
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
22
<PAGE>
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.
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.
23
<PAGE>
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 in connection with the sale of shares of the Fund. Such
additional amounts may be utilized, in whole or in part, to
provide additional compensation to registered representatives who
sell shares of the Fund. On some occasions, such cash or other
incentives may 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 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
24
<PAGE>
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.
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.
25
<PAGE>
Class A Shares
The public offering price of Class A shares is their net
asset value. No sales charge is imposed on Class A shares at the
time of purchase. If Class A shares of the Fund are purchased
for cash and are exchanged for Class A shares of another Alliance
Mutual Fund, the sales charge applicable to the other Alliance
Mutual Fund will be assessed at the time of the exchange.
With respect to purchases of $1,000,000 or more, Class A
shares redeemed within one year of purchase will be subject to a
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
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
26
<PAGE>
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
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
-Corporate Bond Portfolio
-Quality Bond Portfolio
-U.S. Government Portfolio
Alliance Disciplined Value Fund, Inc.
Alliance Global Dollar Government Fund, Inc.
Alliance Global Environment Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Greater China '97 Fund, Inc.
Alliance Growth and Income Fund, Inc.
Alliance Health Care 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.
Alliance Mortgage Securities Income Fund, Inc.
Alliance Multi-Market Strategy Trust, Inc.
27
<PAGE>
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 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;
28
<PAGE>
(ii) the net asset value (at the close of business
on the previous day) of (a) all shares of the Fund held by the
investor and (b) all shares of any other Alliance Mutual Fund
held by the investor; and
(iii) the net asset value of all shares described
in paragraph (ii) owned by another shareholder eligible to
combine his or her purchase with that of the investor into a
single "purchase" (see above).
For example, if an investor owned shares of the Fund or
another Alliance Mutual Fund worth $200,000 at their then current
net asset value and, subsequently, purchased Class A shares of
another Alliance Mutual Fund worth an additional $100,000, the
sales charge for the $100,000 purchase would be at the rate
applicable to a single $300,000 purchase of shares of that
Alliance Mutual Fund, rather than the rate applicable to a
$100,000 purchase.
To qualify for the Combined Purchase Privilege or to
obtain the Cumulative Quantity Discount on a purchase through a
selected dealer or agent, the investor or selected dealer or
agent must provide the Principal Underwriter with sufficient
information to verify that each purchase qualifies for the
privilege or discount.
Statement of Intention. Class A investors of the Fund
may also obtain reduced sales charges by means of a written
Statement of Intention, which expresses the investor's intention
to invest, including through exchange of their Class A shares of
the Fund, not less than $100,000 within a period of 13 months in
Class A shares (or Class A, Class B, Class C and/or Advisor Class
shares) of another Alliance Mutual Fund. Each purchase of shares
under a Statement of Intention will be made at the public
offering price or prices applicable at the time of such purchase
to a single transaction of the dollar amount indicated in the
Statement of Intention. At the investor's option, a Statement of
Intention may include purchases of shares of any Alliance Mutual
Fund made not more than 90 days prior to the date that the
investor signs a Statement of Intention; however, the 13-month
period during which the Statement of Intention is in effect will
begin on the date of the earliest purchase to be included.
Investors qualifying for the Combined Purchase Privilege
described above may purchase shares of the Alliance Mutual Funds
under a single Statement of Intention. For example, if at the
time an investor signs a Statement of Intention to invest at
least $100,000 in Class A shares of an Alliance Mutual Fund, the
29
<PAGE>
investor and the investor's spouse each purchase shares of the
Fund worth $20,000 (for a total of $40,000), it will be necessary
to invest only a total of $60,000 during the following 13 months
in shares of that Alliance Mutual Fund or any other Alliance
Mutual Fund, to qualify for a reduced initial sales charge on the
total amount being invested (i.e., the initial sales charge
applicable to an investment of $100,000).
The Statement of Intention is not a binding obligation
upon the investor to purchase the full amount indicated. The
minimum initial investment under a Statement of Intention is 5%
of such amount. Shares purchased with the first 5% of such
amount will be held in escrow (while remaining registered in the
name of the investor) to secure payment of the higher 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
30
<PAGE>
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)
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
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<PAGE>
forth below charged as a percentage of the dollar amount subject
thereto. The amount of the contingent deferred sales charge, if
any, will vary depending on the number of years from the time of
cash payment for the purchase of Class B shares until the time of
redemption of such shares.
Year Since Contingent Deferred Sales Charge as 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
32
<PAGE>
Mutual Fund Class B shares purchased, or in the case of Class B
shares of the Fund purchased for cash, on the tenth Fund business
day in the month following the month in which the eighth
anniversary date of the acceptance of the purchase order for the
Class B shares occurs, and will no longer be subject to a higher
distribution services fee following conversion. Such conversion
will occur on the basis of the relative net asset values of the
two classes, without the imposition of any sales charge, fee or
other charge. The purposes of the conversion feature are (i) to
provide a mechanism whereby the time period for the automatic
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
33
<PAGE>
charge so that the Fund will receive the full amount of the
investor's purchase payment and, as long as the shares are held
for one year or more, without a contingent deferred sales charge
so that the investor will receive as proceeds upon redemption the
entire net asset value of his or her Class C shares. The Class C
distribution services fee enables the Fund to sell Class C shares
without either an initial or contingent deferred sales charge, as
long as the shares are held for one year or more. Class C shares
do not convert to any other class of shares of the Fund and incur
higher distribution services fees and transfer agency fees than
Class A shares and Advisor Class shares, and will thus have a
higher expense ratio and pay correspondingly lower dividends than
Class A shares and Advisor Class shares.
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
34
<PAGE>
have a higher expense ratio and to pay lower dividends than those
related to Class A shares and Advisor Class shares.
Class C shares of the Fund are also offered to holders
of Class C shares of other Alliance Mutual Funds without any
sales charge at the time of purchase or redemption.
Conversion of Advisor Class Shares to Class A Shares
Advisor Class shares may be held solely through the fee-
based program accounts, employee benefit plans and registered
investment advisory or other financial intermediary relationships
described above under "Purchase of Shares--Purchase for Cash,"
and by investment advisory clients of, and by certain other
persons associated with, the Adviser and its affiliates or the
Fund. If (i) a holder of Advisor Class shares ceases to
participate in the fee-based program or plan, or to be associated
with the investment adviser or financial intermediary, in each
case, that satisfies 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 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 Fund will provide
the shareholder with at least 30 days' notice of the conversion.
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 have a higher expense ratio
and 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
35
<PAGE>
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.
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.
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Payment of the redemption price may be made either in
cash or in portfolio securities (selected at the discretion of
the Trustees of the Fund and taken at their value used in
determining the redemption price), or partly in cash and partly
in portfolio securities. However, payments will be made wholly
in cash unless the Trustees believe that economic conditions
exist which would make such a practice detrimental to the best
interests of the Fund.
The value of a shareholder's shares on redemption or
repurchase may be more or less than the cost of such shares to
the shareholder, depending upon the market value of the Fund's
portfolio securities at the time of such redemption or repurchase
and the income earned. Redemption proceeds on Class A shares,
Class B shares and Class C shares will reflect the deduction of
the contingent deferred sales charge, if any. Payment (either in
cash or in portfolio securities) received by a shareholder upon
redemption or repurchase of his shares, assuming the shares
constitute capital assets in his hands, will result in long-term
or short-term capital gains (or loss) depending upon the
shareholder's holding period and basis in respect of the shares
redeemed.
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
37
<PAGE>
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.
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
38
<PAGE>
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
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
39
<PAGE>
redemption. In the case of a redemption or repurchase of shares
of a Portfolio recently purchased by check, redemption proceeds
will not be made available until the Fund is reasonably assured
that the check has cleared, normally up to 15 calendar days
following the purchase date.
____________________________________________________________
SHAREHOLDER SERVICES
____________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares--Shareholder Services." The shareholder services set
forth below are applicable to Class A, Class B, Class C and
Advisor Class shares unless otherwise indicated. If you are an
Advisor Class shareholder through an account established under a
fee-based program your fee-based program may impose requirements
with respect to the purchase, sale or exchange of Advisor Class
shares of the Fund that are different from those described
herein. A transaction fee may be charged by your financial
representative with respect to the purchase, sale or exchange of
Advisor Class shares made through such financial representative.
Automatic Investment Program
Investors may purchase shares of the Fund through an
automatic investment program utilizing Electronic Funds Transfer
drafts drawn on the investor's own bank account. Under such a
program, pre-authorized monthly drafts for a fixed amount (at
least $25) are used to purchase shares through the selected
dealer or selected agent designated by the investor at the public
offering price next determined after the Principal Underwriter
receives the proceeds from the investor's bank. In electronic
form, drafts can be made on or about a date each month selected
by the shareholder. 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,
40
<PAGE>
(ii) present Directors or Trustees of any Alliance Mutual Fund
and (iii) certain employee benefit plans for employees of the
Adviser, the Principal Underwriter, Alliance Fund Services, Inc.
and their affiliates may, on a tax-free basis, exchange Class A
shares of the Fund for Advisor Class shares of the Fund.
Exchanges of shares are made at the net asset value next
determined and without sales or service charges. Exchanges may
be made by telephone or written request. Telephone exchange
requests must be received by Alliance Fund Services, Inc. by
4:00 p.m. Eastern time on a Fund business day in order to receive
that day's net asset value.
Shares will continue to age without regard to exchanges
for purpose of determining the CDSC, if any, upon redemption and,
in the case of Class B shares, for the purpose of conversion to
Class A shares. After an exchange, your Class B shares will
automatically convert to Class A shares in accordance with the
conversion schedule applicable to the Class B shares of the
Alliance Mutual Fund you originally purchased for cash("original
shares"). When redemption occurs, the CDSC applicable to the
original shares is applied.
Please read carefully the prospectus of the mutual fund
into which you are exchanging before submitting the request.
Call Alliance Fund Services, Inc. at 800-221-5672 to exchange
uncertificated shares. Except with respect to exchanges of
Class A shares of the Fund for Advisor Class shares of the Fund,
exchanges of shares as described above in this section are
taxable transactions for federal income tax purposes. The
exchange service may be changed, suspended, or terminated on 60
days' written notice.
All exchanges are subject to the minimum investment
requirements and any other applicable terms set forth in the
prospectus for the Alliance Mutual Fund whose shares are being
acquired. An exchange is effected through the redemption of the
shares tendered for exchange and the purchase of shares being
acquired at their respective net asset values as next determined
following receipt by the Alliance Mutual Fund whose shares are
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.
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<PAGE>
Each Fund shareholder, and the shareholder's selected
dealer, agent or financial representative, as applicable, are
authorized to make telephone requests for exchanges unless
Alliance Fund Services, Inc., receives written instruction to the
contrary from the shareholder or the shareholder declines the
privilege by checking the appropriate box on the Subscription
Application found in the Prospectus. Such telephone requests
cannot be accepted with respect to shares then represented by
stock certificates. Shares acquired pursuant to a telephone
request for exchange will be held under the same account
registration as the shares redeemed through such exchange.
Eligible shareholders desiring to make an exchange
should telephone Alliance Fund Services, Inc. with their account
number and other details of the exchange, at (800) 221-5672
before 4:00 p.m., Eastern time, on a Fund business day as defined
above. Telephone requests for exchange received before 4:00 p.m.
Eastern time on a Fund business day will be processed as of the
close of business on that day. During periods of drastic
economic or market developments, such as the market break of
October 1987, it is possible that shareholders would have
difficulty in reaching Alliance Fund Services, Inc. by telephone
(although no such difficulty was apparent at any time in
connection with the 1987 market break). If a shareholder were to
experience such difficulty, the shareholder should issue written
instructions to Alliance Fund Services, Inc. at the address shown
on the cover of this Statement of Additional Information.
A shareholder may elect to initiate a monthly "Auto
Exchange" whereby a specified dollar amount's worth of his or her
Fund shares (minimum $25) is automatically exchanged for shares
of another Alliance Mutual Fund. Auto Exchange transactions
normally occur on the 12th day of each month, or the Fund
business day prior thereto.
None of the Alliance Funds, Alliance, the Principal
Underwriter or Alliance Fund Services, Inc. will be responsible
for the authenticity of telephone requests for exchanges that the
Fund reasonably believes to be genuine. The Fund will employ
reasonable procedures in order to verify that telephone requests
for exchanges are genuine, including, among others, recording
such 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
42
<PAGE>
representatives, as applicable, may charge a commission for
handling telephone requests for exchanges.
The exchange privilege is available only in states where
shares of the Alliance funds being acquired may be legally sold.
Each Alliance fund reserves the right, at any time on 60 days'
notice to its shareholders, to reject any order to acquire its
shares through exchange or otherwise to modify, restrict or
terminate the exchange privilege.
Retirement Plans
The Fund may be a suitable investment vehicle for part
or all of the assets held in various types of retirement plans,
such as those listed below. The Fund has available forms of such
plans pursuant to which investments can be made in the Fund and
other Alliance Mutual Funds. Persons desiring information
concerning these plans should contact Alliance Fund Services,
Inc. at the "For Literature" telephone number on the cover of
this Statement of Additional Information, or write to:
Alliance Fund Services, Inc.
Retirement Plans
P.O. Box 1520
Secaucus, New Jersey 07096-1520
Individual Retirement Account ("IRA"). Individuals who
receive compensation, including earnings from self-employment,
are entitled to establish and make contributions to an IRA.
Taxation of the income and gains paid to an IRA by the Fund is
deferred until distribution from the IRA. An individual's
eligible contribution to an IRA will be deductible if neither the
individual nor his or her spouse is an active participant in an
employer-sponsored retirement plan. If the individual or his or
her spouse is an active participant in an employer-sponsored
retirement plan, the individual's contributions to an IRA may be
deductible, in whole or in part, depending on the amount of the
adjusted gross income of the individual and his or her spouse.
Employer-Sponsored Qualified Retirement Plans. Sole
proprietors, partnerships and corporations may sponsor qualified
money purchase pension and profit-sharing plans, including
Section 401(k) plans ("qualified plans"), under which annual tax-
deductible contributions are made within prescribed limits based
on compensation paid to participating individuals. The minimum
initial investment requirement may be waived with respect to
certain of these qualified plans.
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<PAGE>
If the aggregate net asset value of shares of Alliance
funds held by a qualified plan reaches $5 million on or before
December 15 in any year, all Class B or Class C shares of the
Fund held by the plan can be exchanged at the plan's request,
without any sales charge, for Class A shares of the Fund.
Simplified Employee Pension Plan ("SEP"). Sole
proprietors, partnerships and corporations may sponsor a SEP
under which they make annual tax-deductible contributions to an
IRA established by each eligible employee within prescribed
limits based on employee compensation.
403(b)(7) Retirement Plan. Certain tax-exempt
organizations and public educational institutions may sponsor
retirements plans under which an employee may agree that monies
deducted from his or her compensation (minimum $25 per pay
period) may be contributed by the employer to a custodial account
established for the employee under the plan.
The Alliance Plans Division of Frontier Trust Company, a
subsidiary of Equitable, which serves as custodian or trustee
under the retirement plan prototype forms available from the
Fund, charges certain nominal fees for establishing an account
and for annual maintenance. A portion of these fees is remitted
to Alliance as compensation for its services to the retirement
plan accounts maintained with the Fund.
Distributions from retirement plans are subject to
certain Code requirements in addition to normal redemption
procedures. For additional information please contact Alliance
Fund Services, Inc.
Dividend Direction Plan
A shareholder who already maintains, in addition to his
or her Class A, Class B, Class C or Advisor Class Fund account, a
Class A, Class B, Class C or Advisor Class account(s) with one or
more other Alliance Mutual Funds may direct that income dividends
and/or capital gains paid on his or her Class A, Class B, Class C
or Advisor Class Fund shares be automatically reinvested, in any
amount, without the payment of any sales or service charges, in
shares of the same class of such other Alliance Mutual Fund(s).
Further information can be obtained by contacting Alliance Fund
Services, Inc. at the address or the "For Literature" telephone
number shown on the cover of this Statement of Additional
Information. Investors wishing to establish a dividend direction
plan in connection with their initial investment should complete
the appropriate section of the Subscription Application found in
44
<PAGE>
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
Fund shareholders desiring to do so can obtain an application
form by contacting Alliance Fund Services, Inc. at the address or
45
<PAGE>
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, Pricewaterhouse-
Coopers 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
46
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(excluding for this purpose the current month's accumulated
dividends and shares for which certificates have been issued).
Corporations, fiduciaries and institutional investors are
required to furnish a certified resolution or other evidence of
authorization. This checkwriting service will be subject to the
Bank's customary rules and regulations governing checking
accounts, and the Fund and the Bank each reserve the right to
change or suspend the checkwriting service. There is no charge
to the shareholder for the initiation and maintenance of this
service or for the clearance of any checks.
When a check is presented to the Bank for payment, the
Bank, as the shareholder's agent, causes the Fund to redeem, at
the net asset value next determined, a sufficient number of full
and fractional shares in the shareholder's account to cover the
check. A shareholder should not attempt to close his or her
account by use of a check. In this regard, the Bank has the
right to return checks (marked "insufficient funds") unpaid to
the presenting bank if the amount of the check exceeds 90% of the
assets in the account. Cancelled (paid) checks are returned to
the shareholder. The checkwriting service enables the
shareholder to receive the daily dividends declared on the shares
to be redeemed until the day that the check is presented to the
Bank for payment.
____________________________________________________________
DAILY DIVIDENDS--DETERMINATION OF NET ASSET VALUE
____________________________________________________________
All net income of the Fund is determined after the close
of each business day, currently 4:00 p.m., Eastern time, (and at
such other times as the Trustees may determine) and is paid
immediately thereafter pro rata to shareholders of record via
automatic investment in additional full and fractional shares in
each shareholder's account at the rate of one share for each
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.
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Dividends paid by the Fund, with respect to Class A,
Class B and Class C shares will be calculated in the same manner
at the same time on the same day and will be in the same amount,
except that the higher distribution services fees applicable to
Class B and Class C shares, and any incremental transfer agency
costs relating to Class B shares, will be borne exclusively by
the class to which they relate.
The valuation of the Fund's portfolio securities is
based upon their amortized cost which does not take into account
unrealized securities gains or losses as measured by market
valuations. The amortized cost method involves valuing an
instrument at its cost and thereafter applying a constant
amortization to maturity of any discount or premium, regardless
of the impact of fluctuating interest rates on the market value
of the instrument. During periods of declining interest rates,
the daily yield on shares of the Fund may be higher than that of
a fund with identical investments utilizing a method of valuation
based upon market prices for its portfolio instruments; the
converse would apply in a period of rising interest rates.
The Fund 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
48
<PAGE>
income and excise taxes on the net income and capital gains
distributed to its shareholders. Since the Fund distributes all
of its net income and capital gains, the Fund itself should
thereby avoid all Federal income and excise taxes.
For shareholders' Federal income tax purposes, all
distributions by the Fund out of interest income and net realized
short-term capital gains are treated as ordinary income, and
distributions of long-term capital gains, if any, are treated as
long-term capital gains irrespective of the length of time the
shareholder held shares in the Fund. Since the Fund derives
nearly all of its gross income in the form of interest and the
balance in the form of short-term capital gains, it is expected
that for corporate shareholders, none of the Fund's distributions
will be eligible for the dividends-received deduction under
current law.
____________________________________________________________
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
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<PAGE>
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, 1997, 1998 and 1999, the Fund incurred
no brokerage commissions.
____________________________________________________________
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 5, 2000, there
were 901,252,186 shares of beneficial interest of the Fund
outstanding. Of this amount, 494,184,376 shares were Class A
shares, 255,092,251 shares were Class B shares, 141,598,243
50
<PAGE>
shares were Class C shares and 10,377,316 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 5, 2000:
No. of
% of % of
Name and Address Shares Class
Advisor Class Shares
Alliance Plans Div/FTC 572,631 5.52%
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
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.
51
<PAGE>
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 Accountants
An opinion relating to the Fund's financial statements
is given herein by PricewaterhouseCoopers LLP, 1177 Avenue of the
Americas, New York, New York, independent auditors for the
Fund.
Counsel
Legal matters in connection with the issuance of the
shares offered hereby have been passed upon by Seward & Kissel,
One Battery Park Plaza, New York, New York, counsel for the Fund
and the Adviser. Seward & Kissel has relied upon the opinion of
Sullivan & Worcester, Boston, Massachusetts, for matters relating
to Massachusetts law.
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
52
<PAGE>
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, 1999
for Class A amounted to an annualized yield of 4.31% equivalent
to an effective yield of 4.42%, for Class B an annualized yield
of 3.82% equivalent to an effective yield of 3.90%, for Class C
an annualized yield of 4.07% equivalent to an effective yield of
4.16% and for Advisor Class an annualized yield of 4.82%
equivalent to an effective yield of 4.95%. Current yield
information can be obtained by a recorded message by telephoning
toll-free at (800) 221-9513 or in New York State at
(212) 785-9106.
Additional Information
Any shareholder inquiries may be directed to the
shareholder's broker or AFS at the address or telephone numbers
shown on the front cover of this Statement of Additional
Information. This Statement of Additional Information does not
contain all the information set forth in the Registration
Statement filed by the Trust with the Commission under the
Securities Act. Copies of the Registration Statement may be
obtained at a reasonable charge from the Commission or may be
examined, without charge, at the Commission's offices in
Washington, D.C.
53
<PAGE>
_______________________________________________________________
FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR'S REPORT
_______________________________________________________________
54
<PAGE>
AFD EXCHANGE RESERVES
ANNUAL REPORT
SEPTEMBER 30, 1999
STATEMENT OF NET ASSETS
SEPTEMBER 30, 1999 AFD EXCHANGE RESERVES
_______________________________________________________________________________
Principal
Amount
(000) Security Yield Value
- -------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS-69.7%
Federal Farm Credit Bank
$ 83,600 10/01/99 5.18% $ 83,600,000
Federal Home Loan Bank
147,200 10/01/99 5.17 147,200,000
40,000 10/06/00 FRN 5.65 39,972,636
Federal National Mortgage Association
96,569 10/01/99 5.18 96,569,000
23,498 10/25/99 5.22 23,416,227
20,000 10/05/00 MTN 5.62 19,990,222
Student Loan Marketing Association
35,000 10/04/00 FRN 5.62 34,982,888
40,000 10/12/00 FRN 5.68 39,957,004
------------
Total U.S. Government Agency
Obligations
(Amortized Cost $485,687,977) 485,687,977
COMMERCIAL PAPER-60.8%
Albertson's, Inc.
9,000 10/14/99 (a) 5.34 8,982,645
Allstate Corp.
8,000 3/14/00 (a) 5.75 7,789,167
American Express Co.
10,000 10/28/99 5.29 9,960,325
Associates Corp. Of North America
12,500 10/28/99 5.31 12,450,219
At&T Corp.
12,500 10/27/99 5.29 12,452,243
Bell Atlantic Network Funding
9,200 10/27/99 5.29 9,164,851
Bellsouth Telecommunications, Inc.
9,000 10/27/99 5.30 8,965,550
Campbell Soup Co.
10,000 10/26/99 5.28 9,963,333
Cargill Global Funding
9,550 10/15/99 (A) 5.40 9,529,945
Caterpillar Financial Services
5,200 10/27/99 5.27 5,180,208
Chevron Usa, Inc.
12,500 10/29/99 5.29 12,448,570
Coca-Cola Co.
8,000 11/15/99 5.28 7,947,200
Daimler-Benz NA
10,000 10/15/99 5.26 9,979,544
Dupont (E. I.) De Nemours & Co.
10,000 10/28/99 (a) 5.28 9,960,400
Eastman Kodak Co.
10,000 11/01/99 5.30 9,954,361
Equilon Enterprise LLC
10,000 11/08/99 5.30 9,944,056
Florida Power Corp.
8,300 10/15/99 5.35 8,282,731
Ford Motor Credit Co.
10,000 10/26/99 5.29 9,963,264
Ge Capital International Funding
6,058 10/01/99 (a) 5.65 6,058,000
General Electric Co.
10,000 12/23/99 5.34 9,876,883
General Motors Acceptance Corp.
10,000 10/29/99 5.27 9,959,011
Gillette Co.
10,000 11/10/99 (a) 5.30 9,941,111
Government Development Bank Of
Puerto Rico
8,000 11/09/99 5.34 7,953,720
International Lease Finance Corp.
10,000 10/21/99 5.27 9,970,722
J.P. Morgan & Co., Inc.
10,000 10/15/99 5.30 9,979,389
Koch Industries
38,000 10/01/99 (a) 5.55 38,000,000
Metlife Funding, Inc.
10,000 10/29/99 5.30 9,958,778
2
AFD EXCHANGE RESERVES
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY YIELD VALUE
- -------------------------------------------------------------------------------
National City Corp.
$ 9,000 10/29/99 5.32% $ 8,962,760
National Rural Utilities Corp.
8,000 3/14/00 5.75 7,789,167
Norwest Financial, Inc.
10,000 10/29/99 5.31 9,958,700
Paccar Financial Corp.
4,300 10/15/99 5.29 4,291,154
Pfizer, Inc.
10,000 10/28/99 (a) 5.30 9,960,250
Prudential Funding Corp.
10,000 10/29/99 5.30 9,958,778
Republic New York Corp.
8,000 11/08/99 5.30 7,955,244
Salomon Smith Barney, Inc.
8,000 3/10/00 5.79 7,792,847
Sbc Communications, Inc.
35,000 10/01/99 (a) 5.55 35,000,000
Tampa Electric Co.
7,300 10/29/99 (a) 5.27 7,270,078
Teachers Insurance
10,000 10/29/99 (a) 5.33 9,958,544
Wal-Mart Stores, Inc.
10,000 10/12/99 (a) 5.28 9,983,867
10,000 10/25/99 (a) 5.31 9,964,600
------------
Total Commercial Paper
(amortized cost $423,462,215) 423,462,215
CERTIFICATES OF DEPOSIT-7.9%
Chase Manhattan Bank
7,000 5.37%, 5/22/00 5.86 6,974,102
Fifth Third Bank
10,000 5.29%, 10/01/99 5.29 10,000,000
First Tennessee Bank
10,000 5.32%, 10/25/99 5.32 10,000,102
Harris Trust & Savings Bank
10,000 5.32%, 11/01/99 5.32 10,000,000
Southtrust Bank National Associates
10,000 5.33%, 10/29/99 5.33 10,000,077
Wachovia Bank NA
8,000 5.95%, 9/11/00 5.95 8,000,000
------------
Total Certificates Of Deposit
(Amortized Cost $54,974,281) 54,974,281
BANKERS ACCEPTANCE-2.3%
First Union National Bank
6,000 10/14/99 5.30 5,988,517
Mellon Bank Corp.
10,000 11/02/99 5.30 9,952,889
------------
Total Bankers Acceptance
(amortized cost $15,941,406) 15,941,406
TIME DEPOSIT-1.5%
State Street Bank And Trust Co.
10,700 5.50%, 10/01/99
(amortized cost $10,700,000) 5.50 10,700,000
PROMISSORY NOTE-1.4%
Goldman Sachs Group LP
10,000 5.46%, 11/19/99 (a)
(amortized cost $10,000,000) 5.46 10,000,000
CORPORATE DEBT OBLIGATION-1.2%
Dorada Finance, Inc.
8,000 6.02%, 9/15/00 MTN (a)
(amortized cost $8,000,000) 6.02 8,000,000
3
STATEMENT OF NET ASSETS
(CONTINUED) AFD EXCHANGE RESERVES
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY YIELD VALUE
- -------------------------------------------------------------------------------
BANK OBLIGATION-1.1%
First National Bank Of Chicago
$ 8,000 5.60%, 6/14/00
(amortized cost $7,997,300) 5.65% $7,997,300
TOTAL INVESTMENTS-145.9%
(amortized cost $1,016,763,179) 1,016,763,179
Payable for shares of beneficial
interest redeemed-(24.8%) (172,538,679)
Payable for investment securities
purchased- (22.2%) (154,814,651)
Other assets less liabilities-1.1% 7,652,594
NET ASSETS-100%
(offering and redemption
price of $1.00 per share;
289,686,085 Class A shares;
267,491,259 Class B shares;
128,302,922 Class C shares
and 11,575,860 Advisor Class
shares outstanding) $697,062,443
(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, 1999, these securities amounted to $190,398,607, representing
27.3% of net assets.
Glossary of Terms:
FRN - Floating Rate Note
MTN - Medium Term Note
See notes to financial statements.
4
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1999 AFD EXCHANGE RESERVES
_______________________________________________________________________________
INVESTMENT INCOME
Interest $25,261,783
EXPENSES
Advisory fee $1,245,776
Distribution fee - Class A 1,083,551
Distribution fee - Class B 1,890,624
Distribution fee - Class C 647,157
Transfer agency 566,652
Registration fees 233,761
Custodian 175,412
Administrative 100,520
Audit and legal 50,327
Printing 49,792
Trustees' fees 23,067
Amortization of organization expenses 17,641
Miscellaneous 11,379
Total expenses 6,095,659
Net investment income 19,166,124
REALIZED GAIN ON INVESTMENTS
Net realized gain on investment transactions 7,937
NET INCREASE IN NET ASSETS FROM OPERATIONS $19,174,061
See notes to financial statements.
5
STATEMENTS OF CHANGES IN NET ASSETS AFD EXCHANGE RESERVES
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1998
------------- ---------------
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income $ 19,166,124 $ 9,833,512
Net realized gain on investment
transactions 7,937 877
Net increase in net assets from
operations 19,174,061 9,834,389
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income
Class A (8,793,553) (3,899,068)
Class B (6,755,553) (3,613,425)
Class C (3,331,654) (2,241,450)
Advisor Class (285,364) (79,569)
TRANSACTIONS IN SHARES OF BENEFICIAL
INTEREST
Net increase 248,788,147 308,658,607
Total increase 248,796,084 308,659,484
NET ASSETS
Beginning of year 448,266,359 139,606,875
End of year $697,062,443 $448,266,359
See notes to financial statements.
6
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 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 may 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 were deferred and 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, 1999, such reimbursements totaled $100,520.
Alliance Fund Distributors, Inc. (the "Distributor"), a wholly-owned subsidiary
of the Adviser, serves as the Distributor of the Fund's shares. The Distributor
has advised the Fund that it has received front-end sales charges $16,813 from
the sales of Class A shares and $317,381, $1,061,946, and $72,998 in contingent
deferred sales charges imposed upon redemption by shareholders of Class A,
Class B, and Class C shares, respectively, for the year ended September 30,
1999.
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 $442,292 for the year ended September 30, 1999.
NOTE C: DISTRIBUTION SERVICES AGREEMENT
The Fund has adopted a Distribution Services Agreement (the "Agreement")
pursuant to Rule 12b-1 under the Investment Company Act of 1940 for Class A,
Class B and Class C. Under the Agreement, the Fund pays distribution and
servicing fees to the Distributor at an annual rate of up to .50% of the Fund's
average daily net assets attributable to Class A shares, 1.00% of the average
daily net assets attributable to Class B shares and .75% of the average daily
net assets attributable to Class C shares. There are no distribution and
servicing fees on the Advisor Class shares. Such fee is accrued daily and paid
monthly. The Agreement provides that the Distributor will use such payments in
their entirety for distribution assistance and promotional activities. The
Agreement also provides that the Adviser may use its own resources to finance
the distribution of the Fund's shares.
NOTE D: INVESTMENT TRANSACTIONS
At September 30, 1999, the cost of securities for federal income tax purposes
was the same as the cost for financial reporting purposes.
8
AFD EXCHANGE RESERVES
_______________________________________________________________________________
NOTE E: TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
An unlimited number of shares ($.001 par value) are authorized. At September
30, 1999, capital paid-in aggregated $289,686,085 for Class A, $267,491,259 for
Class B, $128,302,922 for Class C and $11,575,860 for Advisor Class.
Transactions, all at $1.00 per share, were as follows:
CLASS A
------------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1998
------------- -------------
Shares sold 7,526,806,604 2,641,690,288
Shares issued on reinvestments of
dividends 8,793,553 3,899,068
Shares converted from Class B 5,089,768 2,022,278
Shares redeemed (7,419,466,877) (2,520,316,554)
Net increase 121,223,048 127,295,080
CLASS B
------------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1998
------------- -------------
Shares sold 691,292,049 465,260,947
Shares issued on reinvestments of
dividends 6,755,553 3,613,425
Shares converted to Class A (5,089,768) (2,022,278)
Shares redeemed (577,199,891) (389,575,340)
Net increase 115,757,943 77,276,754
CLASS C
------------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1998
------------- -------------
Shares sold 2,430,472,681 1,472,287,040
Shares issued on reinvestments of
dividends 3,331,654 2,241,450
Shares redeemed (2,430,333,424) (1,373,646,429)
Net increase 3,470,911 100,882,061
ADVISOR CLASS
------------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1998
------------- -------------
Shares sold 255,695,937 38,173,285
Shares issued on reinvestments of
dividends 285,364 79,569
Shares redeemed (247,645,056) (35,048,142)
Net increase 8,336,245 3,204,712
9
FINANCIAL HIGHLIGHTS AFD EXCHANGE RESERVES
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
YEAR
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .0408 .0454 .0411 .0416 .0453
LESS: DIVIDENDS
Dividends from net investment income (.0408) (.0454) (.0411) (.0416) (.0453)
Net asset value, end of year $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURN
Total investment return based on net
asset value (a) 4.16% 4.64% 4.19% 4.24% 4.64%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in millions) $290 $168 $41 $41 $41
Ratios to average net assets of:
Expenses, net of waivers .99% 1.06% 1.38% 1.29% 1.21%
Expenses, before waivers .99% 1.06% 1.38% 1.29% 1.29%
Net investment income 4.06% 4.56% 4.10% 4.15% 4.63%(b)
</TABLE>
<TABLE>
<CAPTION>
CLASS B
-----------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .0357 .0404 .0361 .0366 .0404
LESS: DIVIDENDS
Dividends from net investment income (.0357) (.0404) (.0361) (.0366) (.0404)
Net asset value, end of year $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURN
Total investment return based on net
asset value (a) 3.64% 4.13% 3.67% 3.72% 4.12%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in millions) $267 $152 $74 $65 $65
Ratios to average net assets of:
Expenses, net of waivers 1.50% 1.58% 1.88% 1.79% 1.70%
Expenses, before waivers 1.50% 1.58% 1.88% 1.79% 1.78%
Net investment income 3.57% 4.05% 3.61% 3.67% 4.17%(b)
</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
-----------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .0383 .0430 .0386 .0390 .0430
LESS: DIVIDENDS
Dividends from net investment income (.0383) (.0430) (.0386) (.0390) (.0430)
Net asset value, end of year $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURN
Total investment return based on net
asset value (a) 3.90% 4.39% 3.93% 3.98% 4.39%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in millions) $128 $125 $24 $13 $10
Ratios to average net assets of:
Expenses, net of waivers 1.24% 1.29% 1.61% 1.55% 1.45%
Expenses, before waivers 1.24% 1.29% 1.61% 1.55% 1.52%
Net investment income 3.86% 4.34% 3.90% 3.89% 4.41%(b)
</TABLE>
ADVISOR CLASS
----------------------------------------
JANUARY 30,
1997(C)
YEAR ENDED SEPTEMBER 30, TO
------------------------ SEPTEMBER 30,
1999 1998 1997
----------- ----------- ------------
Net asset value, beginning of period $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .0458 .0505 .0254
LESS: DIVIDENDS
Dividends from net investment income (.0458) (.0505) (.0254)
Net asset value, end of period $1.00 $1.00 $1.00
TOTAL RETURN
Total investment return based on net
asset value (a) 4.68% 5.18% 3.14%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in thousands) $11,576 $3,240 $35
Ratio of expenses to average net assets .49% .55% .88%(d)
Ratio of net investment income to average
net assets .57% 5.08% 4.15%(d)
(a) 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. Total investment return calculated
for a period less than one year is not annualized.
(b) Net of expenses waived by the Adviser.
(c) Commencement of distribution.
(d) Annualized.
11
REPORT OF INDEPENDENT ACCOUNTANTS AFD EXCHANGE RESERVES
_______________________________________________________________________________
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF
AFD EXCHANGE RESERVES
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
AFD Exchange Reserves (the "Fund") at September 30, 1999, and the results of
its operations, the changes in its net assets and the financial highlights for
the year then ended, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit, which included
confirmation of securities at September 30, 1999 by correspondence with the
custodian and brokers, provides a reasonable basis for the opinion expressed
above. The financial statements for the year ended September 30, 1998,
including the financial highlights for each of the four years in the period
then ended, were audited by other independent accountants whose report dated
October 16, 1998 expressed an unqualified opinion on those financial statements.
PricewaterhouseCoopers LLP
New York, New York
October 29, 1999
12
CHANGE IN INDEPENDENT ACCOUNTANT AFD EXCHANGE RESERVES
_______________________________________________________________________________
On July 13, 1999, McGladrey & Pullen, LLP ("McGladrey") notified the Fund of
its intention to resign as independent auditors of the Fund pursuant to an
agreement by PricewaterhouseCoopers LLP ("PwC") to acquire McGladrey's
investment company practice. The McGladrey partners and professionals serving
the Fund at the time of the acquisition joined PwC.
The reports of McGladrey on the financial statements of the Fund during the
past two fiscal years contained no adverse opinion or disclaimer of opinion,
and were not qualified or modified as to uncertainty, audit scope or accounting
principles.
In connection with its audits for the two most recent fiscal years and through
July 13, 1999, there were no disagreements with McGladrey on any matter of
accounting principle or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements, if not resolved to the satisfaction of
McGladrey would have caused it to make reference to the subject matter of
disagreement in connection with its report.
On July 13, 1999, the Fund, with the approval of its Board of Trustees and its
Audit Committee, engaged PwC as its independent auditors.
13
55
<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
A-1
<PAGE>
fundamental protection factors, and risk factors which are very
small. Issues rated "Duff 2" have a good certainty of timely
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.
B-1
<PAGE>
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
(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.AR0
<PAGE>
PART C
OTHER INFORMATION
ITEM 23. Exhibits
(a) (1) Agreement and Declaration of Trust of the
Registrant - Incorporated by reference to
Exhibit 1 to Post-Effective Amendment No. 8 of
the Registrant's Registration Statement on
Form N-1A (File Nos. 33-74230 and 811-08294)
filed with the Securities and Exchange
Commission on January 30, 1998.
(2) Certificate of Amendment of the Agreement and
Declaration of Trust dated November 8, 1995 -
Incorporated by reference to Exhibit 1(a) to
Post-Effective Amendment No. 3 of the
Registrant's Registration Statement on
Form N-1A (File Nos. 33-74230 and 811-08294)
filed with the Securities and Exchange
Commission on January 26, 1996.
(3) Certificate of Amendment of the Agreement and
Declaration of Trust dated September 30,
1996 - Incorporated by reference to Exhibit 1
to Post-Effective Amendment No. 6 of the
Registrant's Registration Statement on Form
N-1A (File Nos. 33-74230 and 811-08294) filed
with the Securities and Exchange Commission on
February 3, 1997.
(b) By-Laws of the Registrant - Incorporated by
reference to Exhibit 2 to Post-Effective Amendment
No. 8 of the Registrant's Registration Statement on
Form N-1A (File Nos. 33-74230 and 811-08294) filed
with the Securities and Exchange Commission on
January 30, 1998.
(c) Not applicable.
(d) Advisory Agreement between the Registrant and
Alliance Capital Management L.P. - Incorporated by
reference to Exhibit 5 to Post-Effective Amendment
No. 8 of the Registrant's Registration Statement on
Form N-1A (File Nos. 33-74230 and 811-08294) filed
with the Securities and Exchange Commission on
January 30, 1998.
C-1
<PAGE>
(e) (1) Distribution Services Agreement between the
Registrant and Alliance Fund Distributors,
Inc. - Incorporated by reference to
Exhibit 6(a) to Post-Effective Amendment No. 8
of the Registrant's Registration Statement on
Form N-1A (File Nos. 33-74230 and 811-08294)
filed with the Securities and Exchange
Commission on January 30, 1998.
(2) Amendment to Distribution Services Agreement
between Registrant and Alliance Fund
Distributors, Inc. dated June 4, 1996 -
Incorporated by reference to Exhibit No. 6(a)
to Post-Effective Amendment No. 6 of the
Registrant's Registration Statement on Form
N-1A (File Nos. 33-74230 and 811-08294) filed
with the Securities and Exchange Commission on
February 3, 1997.
(3) Form of Selected Dealer Agreement between
Alliance Fund Distributors, Inc. and selected
dealers offering shares of Registrant -
Incorporated by reference to Exhibit 6(c) to
Post-Effective Amendment No. 8 of the
Registrant's Registration Statement on
Form N-1A (File Nos. 33-74230 and 811-08294)
filed with the Securities and Exchange
Commission on January 30, 1998.
(4) Form of Selected Agent Agreement between
Alliance Fund Distributors, Inc. and selected
agents making available shares of Registrant -
Incorporated by reference to Exhibit 6(d) to
Post-Effective Amendment No. 8 of the
Registrant's Registration Statement on
Form N-1A (File Nos. 33-74230 and 811-08294)
filed with the Securities and Exchange
Commission on January 30, 1998.
(f) Not applicable.
(g) Custodian Contract between the Registrant and State
Street Bank and Trust Company - Incorporated by
reference to Exhibit 8 to Post-Effective Amendment
No. 9 of the Registrant's Registration Statement on
Form N-1A (File Nos. 33-74230 and 811-08294) filed
with the Securities and Exchange Commission on
C-2
<PAGE>
January 30, 1998.
(h) Transfer Agency Agreement between the Registrant
and Alliance Fund Services, Inc. - Incorporated by
reference to Exhibit 8 to Post-Effective Amendment
No. 9 of the Registrant's Registration Statement on
Form N-1A (File Nos. 33-74230 and 811-08294) filed
with the Securities and Exchange Commission on
January 30, 1998.
(i) Opinion and Consent of Seward & Kissel LLP - Filed
herewith.
(j) Consent of Independent Auditors - Filed herewith.
(k) Not applicable.
(l) Investment representation letter of Alliance
Capital Management L.P. - Incorporated by reference
to Exhibit 13 to Post-Effective Amendment No. 8 of
the Registrant's Registration Statement on
Form N-1A (File Nos. 33-74230 and 811-08294) filed
with the Securities and Exchange Commission on
January 30, 1998.
(m) Rule 12b-1 Plan - See Exhibit e(1) hereto.
(n) Financial Data Schedule - Filed herewith.
(o) Rule 18f-3 Plan -Incorporated by reference to
Exhibit No. 18 to Post-Effective Amendment No. 6 of
the Registrant's Registration Statement on Form
N-1A (File Nos. 33-74230 and 811-08294) filed with
the Securities and Exchange Commission on
February 3, 1997.
Other Exhibits: Power of Attorney of Ruth Block,
John D. Carifa, David H. Dievler, John H. Dobkin,
William H. Foulk, Jr., Dr. James M. Hester,
Clifford L. Michel, Donald J. Robinson - Filed
herewith.
ITEM 24. Persons Controlled by or Under Common Control with
Registrant.
None.
C-3
<PAGE>
ITEM 25. Indemnification.
It is the Registrant's policy to indemnify its
trustees and officers, employees and other agents as set
forth in Article VIII and Article III of Registrant's
Agreement and Declaration of Trust, filed as Exhibit (a)
in response to Item 23 and Section 10 of the proposed
Distribution Services Agreement filed as Exhibit (e)(1),
all as set forth below. The liability of the
Registrant's trustees and officers is dealt with in
Article VIII of Registrant's Agreement and Declaration
of Trust, as set forth below. The Adviser's liability
for any loss suffered by the Registrant or its
shareholders is set forth in Section 4 of the proposed
Advisory Agreement filed as Exhibit (d) to this
Registration Statement, as set forth below.
Article VIII of Registrant's Agreement and
Declaration of Trust reads as follows:
"Section 8.1. Trustees, Shareholders, etc. Not
Personally Liable; Notice. The Trustees and officers of
the Trust, in incurring any debts, liabilities or
obligations, or in limiting or omitting any other
actions for or in connection with the Trust, are or
shall be deemed to be acting as Trustees or officers of
the Trust and not in their own capacities. No
Shareholder shall be subject to any personal liability
whatsoever in tort, contract or otherwise to any other
Person or Persons in connection with the assets or the
affairs of the Trust or of any Portfolio, and subject to
Section 8.4 hereof, no Trustee, officer, employee or
agent of the Trust shall be subject to any personal
liability whatsoever in tort, contract, or otherwise, to
any other Person or Persons in connection with the
assets or affairs of the Trust or of any Portfolio, save
only that arising from his own willful misfeasance, bad
faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office or the
discharge of his functions. The Trust (or if the matter
relates only to a particular Portfolio, that Portfolio)
shall be solely liable for any and all debts, claims,
demands, judgments, decrees, liabilities or obligations
of any and every kind, against or with respect to the
Trust or such Portfolio in tort, contract or otherwise
in connection with the assets or the affairs of the
Trust or such Portfolio, and all Persons dealing with
C-4
<PAGE>
the Trust or any Portfolio shall be deemed to have
agreed that resort shall be had solely to the Trust
Property of the Trust or the Portfolio Assets of such
Portfolio, as the case may be, for the payment or
performance thereof.
The Trustees shall use their best efforts to
ensure that every note, bond, contract, instrument,
certificate of undertaking made or issued by the
Trustees or by any officers or officer shall give notice
that this Declaration of Trust is on file with the
Secretary of The Commonwealth of Massachusetts and shall
recite to the effect that the same was executed or made
by or on behalf of the Trust or by them as Trustees or
Trustee or as officers or officer, and not individually,
and that the obligations of such instrument are not
binding upon any of them or the Shareholders
individually but are binding only upon the assets and
property of the Trust, or the particular Portfolio in
question, as the case may be, but the omission thereof
shall not operate to bind any Trustees or Trustee or
officers or officer or Shareholders or Shareholder
individually, or to subject the Portfolio Assets of any
Portfolio to the obligations of any other Portfolio.
SECTION 8.2. Trustees' Good Faith Action; Expert
Advice; No Bond or Surety. The exercise by the Trustees
of their powers and discretion hereunder shall be
binding upon everyone interested. Subject to Section
8.4 hereof, a Trustee shall be liable for his own
willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct
of the office of Trustee, and for nothing else, and
shall not be liable for errors of judgment or mistakes
of fact or law. Subject to the foregoing, (i) the
Trustees shall not be responsible or liable in any event
for any neglect or wrongdoing of any officer, agent,
employee, consultant, Investment Adviser, Administrator,
Distributor or Principal Underwriter, Custodian or
Transfer Agent, Dividend Disbursing Agent, Shareholder
Servicing Agent or Accounting Agent of the Trust, nor
shall any Trustee be responsible for the act or omission
of any other Trustee; (ii) the Trustees may take advice
of counsel or other experts with respect to the meaning
and operation of this Declaration of Trust and their
duties as Trustees, and shall be under no liability for
any act or omission in accordance with such advice or
for failing to follow such advice; and (iii) in
C-5
<PAGE>
discharging their duties, the Trustees, when acting in
good faith, shall be entitled to rely upon the books of
account of the Trust and upon written reports made to
the Trustees by any officer appointed by them, any
independent public accountant, and (with respect to the
subject matter of the contract involved) any officer,
partner or responsible employee of a Contracting Party
appointed by the Trustees pursuant to Section 5.2
hereof. The trustees as such shall not be required to
give any bond or surety or any other security for the
performance of their duties.
SECTION 8.3. Indemnification of Shareholders. If
any Shareholder (or former Shareholder) of the Trust
shall be charged or held to be personally liable for any
obligation or liability of the Trust solely by reason of
being or having been a Shareholder and not because of
such Shareholder's acts or omissions or for some other
reason, the Trust (upon proper and timely request by the
Shareholder) shall assume the defense against such
charge and satisfy any judgment thereon, and the
Shareholder or former Shareholder (or the heirs,
executors, administrators or other legal representatives
thereof, or in the case of a corporation or other
entity, its corporate or other general successor) shall
be entitled (but solely out of the assets of the
Portfolio of which such Shareholder or former
Shareholder is or was the holder of Shares) to be held
harmless from and indemnified against all loss and
expense arising from such liability.
SECTION 8.4. Indemnification of Trustees,
Officers, etc. Subject to the limitations set forth
hereinafter in this Section 8.4, the Trust shall
indemnify (from the assets of the Portfolio or
Portfolios to which the conduct in question relates)
each of its Trustees and officers (including Persons who
serve at the Trust's request as directors, officers or
trustees of another organization in which the Trust has
any interest as a shareholder, creditor or otherwise
[hereinafter, together with such Person's heirs,
executors, administrators or personal representative,
referred to as a "Covered Person"]) against all
liabilities, including but not limited to amounts paid
in satisfaction of judgments, in compromise or as fines
and penalties, and expenses, including reasonable
accountants' and counsel fees, incurred by any Covered
Person in connection with the defense or disposition of
C-6
<PAGE>
any action, suit or other proceeding, whether civil or
criminal, before any court or administrative or
legislative body, in which such Covered Person may be or
may have been involved as a party or otherwise or with
which such Covered Person may be or may have been
threatened, while in office or thereafter, by reason of
being or having been such a Trustee or officer, director
or trustee, except with respect to any matter as to
which it has been determined that such Covered Person
(i) did not act in good faith in the reasonable belief
that such Covered Person's action was in or not opposed
to the best interests of the Trust or (ii) had acted
with willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct
of such Covered Person's office (either and both of the
conduct described in clauses (i) and (ii) of this
sentence being referred to hereafter as "Disabling
Conduct"). A determination that the Covered Person is
entitled to indemnification may be made by (i) a final
decision on the merits by a court or other body before
whom the proceeding was brought that the Covered Person
to be indemnified was not liable by reason of Disabling
Conduct, (ii) dismissal of a court action or an
administrative proceeding against a Covered Person for
insufficiency of evidence of Disabling Conduct, or
(iii) a reasonable determination, based upon a review of
the facts, that the indemnitee was not liable by reason
of Disabling Conduct by (a) a vote of a majority of a
quorum of Trustees who are neither "interested persons"
of the Trust as defined in Section 2(a)(19) of the 1940
Act nor parties to the proceeding, or (b) an independent
legal counsel in a written opinion. Expenses, including
accountants' and counsel fees so incurred by any such
Covered Person (but excluding amounts paid in
satisfaction of judgments, in compromise or as fines or
penalties), may be paid from time to time by the
Portfolio or Portfolios to which the conduct in question
related in advance of the final disposition of any such
action, suit or proceeding; provided, that the Covered
Person shall have undertaken to repay the amounts so
paid to such Portfolio or Portfolios if it is ultimately
determined that indemnification of such expenses is not
authorized under this Article 8 and (i) the Covered
Person shall have provided security for such
undertaking, (ii) the Trust shall be insured against
losses arising by reason of any lawful advances, or
(iii) a majority of a quorum of the disinterested
Trustees, or an independent legal counsel in a written
C-7
<PAGE>
opinion, shall have determined, based on a review of
readily available facts (as opposed to a full trial-type
inquiry), that there is reason to believe that the
Covered Person ultimately will be found entitled to
indemnification.
SECTION 8.5. Compromise Payment. As to any
matter disposed of by a compromise payment by any such
Covered Person referred to in Section 8.4 hereof,
pursuant to a consent decree or otherwise, no such
indemnification either for said payment or for any other
expenses shall be provided unless such indemnification
shall be approved (i) by a majority of a quorum of the
disinterested Trustees or (ii) by an independent legal
counsel in a written opinion. Approval by the Trustees
pursuant to clause (i) or by independent legal counsel
pursuant to clause (ii) shall not prevent the recovery
from any Covered Person of any amount paid to such
Covered Person in accordance with either of such clauses
as indemnification if such Covered Person is
subsequently adjudicated by a court of competent
jurisdiction not to have acted in good faith in the
reasonable belief that such Covered Person's action was
in or not opposed to the best interests of the Trust or
to have been liable to the Trust or its Shareholders by
reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved
in the conduct of such Covered Person's office.
SECTION 8.6. Indemnification Not Exclusive, etc.
The right of indemnification provided by this Article 8
shall not be exclusive of or affect any other rights to
which any such Covered Person may be entitled. As used
in this Article 8, a "disinterested" Person is one
against whom none of the actions, suits or other
proceedings in question, and no other action, suit or
other proceeding on the same or similar grounds is then
or has been pending or threatened. Nothing contained in
this Article 8 shall affect any rights to
indemnification to which personnel of the Trust, other
than Trustees and officers, and other Persons [6~may be
entitled by contract or otherwise under law, nor the
power of the Trust to purchase and maintain liability
insurance on behalf of any such Person.
SECTION 8.7. Liability of Third Persons Dealing
with Trustees. No person dealing with the Trustees
shall be bound to make any inquiry concerning the
C-8
<PAGE>
validity of any transaction made by the Trustees or to
see to the application of any payments made or property
transferred to the Trust or upon its order."
Article III of Registrant's Agreement and
Declaration of Trust reads, in pertinent part, as
follows:
"Without limiting the foregoing and to the extent
not inconsistent with the 1940 Act or other applicable
law, the Trustees shall have power and authority:
(s) Indemnification. In addition to the mandatory
indemnification provided for in Article 8
hereof and to the extent permitted by law, to
indemnify or enter into agreements with
respect to indemnification with any Person
with whom this Trust has dealings, including,
without limitation, any independent
contractor, to such extent as the Trustees
shall determine."
The Advisory Agreement to be between the
Registrant and Alliance Capital Management L.P. provides
that Alliance Capital Management L.P. will not be liable
under such agreements for any mistake of judgment or in
any event whatsoever except for lack of good faith and
that nothing therein shall be deemed to protect Alliance
Capital Management L.P. against any liability to the
Registrant or its security holders to which it would
otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in the performance of its
duties thereunder, or by reason of reckless disregard of
its duties and obligations thereunder.
The Distribution Services Agreement between the
Registrant and Alliance Fund Distributors, Inc. provides
that the Registrant will indemnify, defend and hold
Alliance Fund Distributors, Inc., and any person who
controls it within the meaning of Section 15 of the
Securities Act of 1933 (the "Securities Act"), free and
harmless from and against any and all claims, demands,
liabilities and expenses which Alliance Fund
Distributors, Inc. or any controlling person may incur
arising out of or based upon any alleged untrue
statement of a material fact contained in the
Registrant's Registration Statement, Prospectus or
Statement of Additional Information or arising out of,
C-9
<PAGE>
or based upon any alleged omission to state a material
fact required to be stated in any one of the foregoing
or necessary to make the statements in any one of the
foregoing not misleading.
The foregoing summaries are qualified by the
entire text of Registrant's Agreement and Declaration of
Trust, the proposed Advisory Agreement between
Registrant and Alliance Capital Management L.P. and the
proposed Distribution Services Agreement between
Registrant and Alliance Fund Distributors, Inc. which
are filed herewith as Exhibits (a), (d) and (e)(1),
respectively, in response to Item 23 and each of which
are incorporated by reference herein.
Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to trustees,
officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of the
Securities and Exchange Commission, such indemnification
is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities
(other than the payment by the Registrant in the
successful defense of any action, suit or proceeding) is
asserted by such trustee, officer or controlling person
in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is
against public policy as expressed in the Securities Act
and will be governed by the final adjudication of such
issue.
In accordance with Release No. IC-11330
(September 2, 1980), the Registrant will indemnify its
trustees, officers, investment manager and principal
underwriters only if (1) a final decision on the merits
was issued by the court or other body before whom the
proceeding was brought that the person to be indemnified
(the "indemnitee") was not liable by reason or willful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his
office ("disabling conduct") or (2) a reasonable
determination is made, based upon a review of the facts,
that the indemnitee was not liable by reason of
C-10
<PAGE>
disabling conduct, by (a) the vote of a majority of a
quorum of the trustees who are neither "interested
persons" of the Registrant as defined in section
2(a)(19) of the Investment Company Act of 1940 nor
parties to the proceeding ("disinterested non-party
trustees"), or (b) an independent legal counsel in a
written opinion. The Registrant will advance attorneys
fees or other expenses incurred by its trustees,
officers, investment adviser or principal underwriters
in defending a proceeding, upon the undertaking by or on
behalf of the indemnitee to repay the advance unless it
is ultimately determined that he is entitled to
indemnification and, as a condition to the advance,
(1) the indemnitee shall provide a security for his
undertaking, (2) the Registrant shall be insured against
losses arising by reason of any lawful advances, or
(3) a majority of a quorum of disinterested, non-party
trustees of the Registrant, or an independent legal
counsel in a written opinion, shall determine, based on
a review of readily available facts (as opposed to a
full trial-type inquiry), that there is reason to
believe that the indemnitee ultimately will be found
entitled to indemnification.
The Registrant participates in a joint
trustees/directors and officers liability insurance
policy issued by the ICI Mutual Insurance Company.
Coverage under this policy has been extended to
directors, trustees and officers of the investment
companies managed by Alliance Capital Management L.P.
Under this policy, outside trustees and directors are
covered up to the limits specified for any claim against
them for acts committed in their capacities as trustee
or director. A pro rata share of the premium for this
coverage is charged to each investment company and to
the Adviser.
ITEM 26. Business and Other Connections of Investment
Adviser.
The descriptions of Alliance Capital Management
L.P. under the caption "The Adviser" in the Prospectus
and "Management of the Fund" in the Prospectus and in
the Statement of Additional Information constituting
Parts A and B, respectively, of this Registration
Statement are incorporated by reference herein.
C-11
<PAGE>
The information as to the directors and executive
officers of Alliance Capital Management Corporation, the
general partner of Alliance Capital Management L.P., set
forth in Alliance Capital Management L.P.'s Form ADV
filed with the Securities and Exchange Commission on
April 21, 1988 (File No. 801-32361) and amended through
the date hereof, is incorporated by reference.
ITEM 27. Principal Underwriters.
(a) Alliance Fund Distributors, Inc., the Registrant's
Principal Underwriter in connection with the sale of
shares of the Registrant. Alliance Fund Distributors,
Inc. also acts as Principal Underwriter or Distributor
for the following investment companies:
AFD Exchange Reserves
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
Alliance Capital Reserves
Alliance Disciplined Value Fund, Inc,
Alliance Global Dollar Government Fund, Inc.
Alliance Global Environment Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Government Reserves
Alliance Greater China '97 Fund, Inc.
Alliance Growth and Income Fund, Inc.
Alliance Health Care Fund, Inc.
Alliance High Yield Fund, Inc.
Alliance Institutional Funds, Inc.
Alliance Institutional Reserves, Inc.
Alliance International Fund
Alliance International Premier Growth Fund, Inc.
Alliance Limited Maturity Government Fund, Inc.
Alliance Money Market Fund
Alliance Mortgage Securities Income Fund, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
Alliance Municipal Income Fund II
Alliance Municipal Trust
Alliance New Europe Fund, Inc.
Alliance North American Government Income Trust, Inc.
Alliance Premier Growth Fund, Inc.
Alliance Quasar Fund, Inc.
Alliance Real Estate Investment Fund, Inc.
Alliance Select Investor Series, Inc.
C-12
<PAGE>
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance Variable Products Series Fund, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance Fund, Inc.
The Alliance Portfolios
(b) The following are the Directors and Officers of Alliance
Fund Distributors, Inc., the principal place of business
of which is 1345 Avenue of the Americas, New York, New
York, 10105.
C-13
<PAGE>
POSITIONS AND POSITIONS AND
OFFICES WITH OFFICES WITH
NAME UNDERWRITER REGISTRANT
Michael J. Laughlin Director and Chairman
John D. Carifa Director President,
Trustee
Robert L. Errico Director and President
Geoffrey L. Hyde Director and Senior
Vice President
Dave H. Williams Director
David Conine Executive Vice President
Richard K. Saccullo Executive Vice President
Edmund P. Bergan, Jr. Senior Vice President, Clerk
General Counsel and
Secretary
Richard A. Davies Senior Vice President
and Managing Director
Robert H. Joseph, Jr. Senior Vice President
and Chief Financial Officer
Anne S. Drennan Senior Vice President
and Treasurer
Benji A. Baer Senior Vice President
Karen J. Bullot Senior Vice President
John R. Carl Senior Vice President
James S. Comforti Senior Vice President
James L. Cronin Senior Vice President
Daniel J. Dart Senior Vice President
Byron M. Davis Senior Vice President
Mark J. Dunbar Senior Vice President
Donald N. Fritts Senior Vice President
Bradley F. Hanson Senior Vice President
George H. Keith Senior Vice President
Richard E. Khaleel Senior Vice President
Stephen R. Laut Senior Vice President
Susan L. Matteson-King Senior Vice President
Daniel D. McGinley Senior Vice President
Antonios G. Poleondakis Senior Vice President
Robert E. Powers Senior Vice President
Kevin A. Rowell Senior Vice President
Raymond S. Sclafani Senior Vice President
Gregory K. Shannahan Senior Vice President
Joseph F. Sumanski Senior Vice President
Peter J. Szabo Senior Vice President
William C. White Senior Vice President
Nicholas K. Willett Senior Vice President
Richard A. Winge Senior Vice President
Gerard J. Friscia Vice President and
Controller
Ricardo Arreola Vice President
Kenneth F. Barkoff Vice President
Charles M. Barrett Vice President
Gregory P. Best Vice President
Casimir F. Bolanowski Vice President
Robert F. Brendli Vice President
Christopher L. Butts Vice President
Timothy W. Call Vice President
Kevin T. Cannon Vice President
William W. Collins, Jr. Vice President
Leo H. Cook Vice President
Russell R. Corby Vice President
John W. Cronin Vice President
William J. Crouch Vice President
Robert J. Cruz Vice President
Richard W. Dabney Vice President
John F. Dolan Vice President
Richard P. Dyson Vice President
John C. Endahl Vice President
John E. English Vice President
Sohaila S. Farsheed Vice President
Duff C. Ferguson Vice President
Daniel J. Frank Vice President
Shawn C. Gage Vice President
Andrew L. Gangolf Vice President and Assistant
Assistant General Clerk
Counsel
Michael J. Germain Vice President
Mark D. Gersten Vice President Treasurer and
Chief
Financial
Officer
John Grambone Vice President
Charles M. Greenberg Vice President
Alan Halfenger Vice President
William B. Hanigan Vice President
Michael S. Hart Vice President
Timothy A. Hill Vice President
Brian R. Hoegee Vice President
George R. Hrabovsky Vice President
Valerie J. Hugo Vice President
Michael J. Hutten Vice President
Scott Hutton Vice President
Oscar J. Isoba Vice President
Richard D. Keppler Vice President
Richard D. Kozlowski Vice President
Daniel W. Krause Vice President
Donna M. Lamback Vice President
P. Dean Lampe Vice President
Nicholas J. Lapi Vice President
Henry Michael Lesmeister Vice President
Eric L. Levinson Vice President
James M. Liptrot Vice President
James P. Luisi Vice President
Michael F. Mahoney Vice President
Shawn P. McClain Vice President
David L. McGuire Vice President
Jeffrey P. Mellas Vice President
Michael V. Miller Vice President
Thomas F. Monnerat Vice President
Timothy S. Mulloy Vice President
Joanna D. Murray Vice President
Michael F. Nash, Jr. Vice President
Nicole Nolan-Koester Vice President
Daniel A. Notto Vice President
Peter J. O'Brien Vice President
John C. O'Connell Vice President
John J. O'Connor Vice President
Christopher W. Olson Vice President
Richard J. Olszewski Vice President
Catherine N. Peterson Vice President
James J. Posch Vice President
Domenick Pugliese Vice President and Assistant
Assistant General Clerk
Counsel
Bruce W. Reitz Vice President
Karen C. Satterberg Vice President
John P. Schmidt Vice President
Robert C. Schultz Vice President
Richard J. Sidell Vice President
Clara Sierra Vice President
Teris A. Sinclair Vice President
Scott C. Sipple Vice President
Martine H. Stansbery, Jr. Vice President
Vincent T. Strangio Vice President
Andrew D. Strauss Vice President
Michael J. Tobin Vice President
Joseph T. Tocyloski Vice President
Benjamin H. Travers Vice President
David R. Turnbough Vice President
Martha D. Volcker Vice President
Patrick E. Walsh Vice President
Mark E. Westmoreland Vice President
Stephen P. Wood Vice President
Emilie D. Wrapp Vice President and
Assistant General
Counsel
Michael W. Alexander Assistant Vice
President
Richard J. Appaluccio Assistant Vice
President
Paul G. Bishop Assistant Vice
President
Masrk S. Burns Assistant Vice
President
John M. Capeci Assistant Vice
President
Maria L. Carreras Assistant Vice
President
John P. Chase Assistant Vice
President
William P. Condon Assistant Vice
President
Jean A. Coomber Assistant Vice
President
Terri J. Daly Assistant Vice
President
Ralph A. DiMeglio Assistant Vice
President
Faith C. Deutsch Assistant Vice
President
Timothy J. Donegan Assistant Vice
President
Adam E. Engelhardt Assistant Vice
President
Michele Grossman Assistant Vice
President
Theresa Iosca Assistant Vice
President
Erik A. Jorgensen Assistant Vice
President
Eric G. Kalender Assistant Vice
President
Edward W. Kelly Assistant Vice
President
Victor Kopelakis Assistant Vice
President
Evamarie C. Lombardo Assistant Vice
President
Kristine J. Luisi Assistant Vice
President
Kathryn Austin Masters Assistant Vice
President
Richard F. Meier Assistant Vice
President
Rizwan A. Raja Assistant Vice
President
Carol H. Rappa Assistant Vice
President
Mark V. Spina Assistant Vice
President
Eileen Stauber Assistant Vice
President
Margaret M. Tompkins Assistant Vice
President
Marie R. Vogel Assistant Vice Assistant
President Clerk
Wesley S. Williams Assistant Vice
President
Matthew Witschel Assistant Vice
President
David M. Wolf Assistant Vice
President
Mark R. Manley Assistant Secretary
(c) Not applicable.
ITEM 28. Location of Accounts and Records.
The majority of the accounts, books and other
documents required to be maintained by Section
31(a) of the Investment Company Act of 1940 and the
Rules thereunder are maintained as follows:
journals, ledgers, securities records and other
original records are maintained principally at the
offices of Alliance Fund Services, Inc. 500 Plaza
Drive, Secaucus, New Jersey 07094-1520 and at the
offices of State Street Bank and Trust Company, the
Registrant's Custodian, 225 Franklin Street,
Boston, Massachusetts 02110. All other records so
required to be maintained are maintained at the
offices of Alliance Capital Management L.P., 1345
Avenue of the Americas, New York, New York 10105.
ITEM 29. Management Services.
Not applicable.
ITEM 30. Undertakings.
Registrant undertakes to furnish each person to
whom a prospectus is delivered with a copy of
Registrant's latest report to shareholders, upon
request and without charge.
The Registrant undertakes to provide assistance to
shareholders in communications concerning the
removal of any Trustee of the Fund in accordance
with Section 16 of the Investment Company Act of
1940.
C-14
<PAGE>
C-15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
as amended, and the Investment Company Act of 1940, as amended,
the Registrant certifies that it meets all of the requirements
for effectiveness of this Amendment to its Registration pursuant
to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Amendment to its Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in
the City of New York and State of New York on the 27th day of
January, 2000.
AFD EXCHANGE RESERVES
by /s/ John D. Carifa
_________________________
John D. Carifa
Chairman and President
Pursuant to the requirements of the Securities Act of
1933, as amended, this Amendment to the Registration Statement
has been signed below by the following persons in the capacities
and on the dates indicated:
Signature Title Date
1) Principal
Executive Officer
/s/ John D. Carifa Chairman and
President January 27, 2000
______________
John D. Carifa
2) Principal Financial
and Accounting
Officer
/s/ Mark D. Gersten Treasurer and
Chief January 27, 2000
_______________ Financial Officer
Mark D. Gersten
3. All of the Trustees
David H. Dievler William H. Foulk, Jr.
C-16
<PAGE>
Ruth Block James M. Hester
John D. Carifa Clifford L. Michel
John H. Dobkin Donald J. Robinson
by /s/ Edmund P. Bergan, Jr. January 27, 2000
____________________
(Attorney-in-fact)
Edmund P. Bergan, Jr.
C-17
<PAGE>
Index to Exhibits
(i) Opinion and Consent of Seward & Kissel LLP
(j) Consent of Independent Auditors
(n) Financial Data Schedule
Other Powers of Attorney
C-18
00250163.AR9
<PAGE>
Exhibit (i)
SEWARD & KISSEL LLP
ONE BATTERY PARK PLAZA
NEW YORK, NY 10004
Telephone: (212) 574-1200
Facsimile: (212) 480-8421
www.sewkis.com
January 28, 2000
AFD Exchange Reserves
1345 Avenue of the Americas
New York, New York 10105
Ladies and Gentlemen:
We have acted as counsel for AFD Exchange Reserves (the
"Company") in connection with the registration under the
Securities Act of 1933, as amended (the "Securities Act"), of an
indefinite number of shares representing the beneficial interest
in the Company, par value $.001 per share (the "Shares"). The
Company is a trust with transferable shares of the type commonly
called a "Massachusetts business trust" and is registered under
the Investment Company Act of 1940, as amended, as an open-end
management investment company. This opinion relates to Shares of
each class being registered pursuant to the Post-Effective
Amendment to the Registration Statement on Form N-1A to be filed
with the Securities and Exchange Commission (the "Commission") to
become effective on February 1, 2000 pursuant to paragraph (b) of
Rule 485 under the Securities Act (as so amended, the
"Registration Statement") in which this letter is included as
Exhibit (i).
As counsel for the Company, we have participated in the
preparation of the Company's Registration Statement. We have
examined the Charter and By-laws of the Company and any
amendments and supplements thereto and have relied upon a
certificate of an officer of the Company certifying the
resolutions of the Trustees of the Company authorizing the sale
and issuance of the Shares. We have also examined and relied
upon such records of the Company and such other documents and
certificates as to factual matters as we have deemed to be
necessary to render the opinion expressed herein.
<PAGE>
Based on such examination, we are of the opinion that the
Shares to be offered for sale pursuant to the Registration
Statement are duly authorized, and, when sold, issued and paid
for as contemplated by the Registration Statement, will have been
validly issued and will be fully paid and non-assessable Shares
of the Company under the laws of the State of Massachusetts.
Under Massachusetts law, shareholders of a trust could,
under certain circumstances, be held personally liable for the
obligations of the Trust. However, the Charter of the Trust
disclaims shareholder liability for acts or obligations of the
Trust and requires that the notice of such disclaimer be given in
each agreement, obligation or instrument entered into or executed
by the Trust or its Trustees. The Charter of the Trust provides
for indemnification out of the property of the Trust for all loss
and expense of any shareholder held personally liable for the
obligations of the Trust by reason of being or having been a
shareholder of the Trust. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is
limited to circumstances in which the Trust itself would be
unable to meet its obligations.
We do not express an opinion with respect to any laws other
than the laws of Massachusetts applicable the issuance of shares
of beneficial interest in a domestic business trust.
Accordingly, our opinion does not extend to, among other laws,
the federal securities laws or the securities or "blue sky" laws
of Massachusetts or any other jurisdiction. Members of this firm
are admitted to the bar in the State of New York and the District
of Columbia.
We hereby consent to the filing of this opinion with the
Commission as an exhibit to the Registration Statement and to the
reference to our firm under the caption "General Information-
- -Counsel" in the Part B thereof. In giving this consent, we do
not thereby admit that we are included in the category of persons
whose consent is required under Section 7 of the Securities Act
or the rules and regulations of the Commission.
Very truly yours,
/s/ Seward & Kissel LLP
________________________
2
00250163.AS0
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on
Form N-1A of our report dated October 29, 1999, relating to the
financial statements and financial highlights of AFD Exchange
Reserves, which appear in such Registration Statement. We also
consent to the references to us under the headings "Financial
Highlights" and "Independent Accountants" in such Registration
Statement.
PricewaterhouseCoopers LLP
New York, New York
January 25, 2000
00250163.AR8
<PAGE>
[ARTICLE] 6
[CIK] 00097713
[SERIES]
[NUMBER] 001
[NAME] AFD EXCHANGE RESERVES INC.
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] SEP-30-1999
[PERIOD-START] OCT-01-1998
[PERIOD-END] SEP-30-1999
[INVESTMENTS-AT-COST] 1,016,763,179
[INVESTMENTS-AT-VALUE] 1,016,763,179
[RECEIVABLES] 8,504,745
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 1,025,267,924
[PAYABLE-FOR-SECURITIES] 154,814,651
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 173,390,830
[TOTAL-LIABILITIES] 328,205,481
[SENIOR-EQUITY] 697,056
[PAID-IN-CAPITAL-COMMON] 696,359,070
[SHARES-COMMON-STOCK] 289,686,085
[SHARES-COMMON-PRIOR] 168,463,037
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 6,317
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 697,062,443
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 25,261,783
[OTHER-INCOME] 0
[EXPENSES-NET] (6,095,659)
[NET-INVESTMENT-INCOME] 19,166,124
[REALIZED-GAINS-CURRENT] 7,937
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 19,174,061
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (8,793,553)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 7,531,896,372
[NUMBER-OF-SHARES-REDEEMED] (7,419,466,877)
[SHARES-REINVESTED] 8,793,553
[NET-CHANGE-IN-ASSETS] 248,796,084
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (1,620)
[OVERDISTRIB-NII-PRIOR] 0
<PAGE>
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1,246,000
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 6,096,000
[AVERAGE-NET-ASSETS] 216,710,220
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] 0.04
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] (0.04)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] .99
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
00250163.AR2
2
<PAGE>
[ARTICLE] 6
[CIK] 0000917713
[NAME] AFD EXCHANGE RESERVES, INC.
[SERIES]
[NUMBER] 002
[NAME] AFD EXCHANGE RESERVES, INC.
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] SEP-30-1999
[PERIOD-START] OCT-01-1998
[PERIOD-END] 9EP-30-1999
[INVESTMENTS-AT-COST] 1,016,763,179
[INVESTMENTS-AT-VALUE] 1,016,763,179
[RECEIVABLES] 8,504,745
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 1,025,267,924
[PAYABLE-FOR-SECURITIES] 154,814,651
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 173,390,830
[TOTAL-LIABILITIES] 328,205,481
[SENIOR-EQUITY] 697,056
[PAID-IN-CAPITAL-COMMON] 696,359,070
[SHARES-COMMON-STOCK] 267,491,259
[SHARES-COMMON-PRIOR] 151,733,316
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 6,317
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 697,062,443
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 25,261,783
[OTHER-INCOME] 0
[EXPENSES-NET] (6,095,659)
[NET-INVESTMENT-INCOME] 19,166,124
[REALIZED-GAINS-CURRENT] 7,937
<APPREC-INCREASE-CLTRRENT> 0
[NET-CHANGE-FROM-OPS] 19,174,061
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (6,755,553)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 691,292,049
[NUMBER-OF-SHARES-REDEEMED] (582,289,659)
[SHARES-REINVESTED] 6,755,553
[NET-CHANGE-IN-ASSETS] 248,796,084
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (1,620)
<PAGE>
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1,246,000
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 6,096,000
[AVERAGE-NET-ASSETS] 189,062,418
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] 0.04
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] (0.04)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] 1.50
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
00250163.AR3
<PAGE>
[ARTICLE] 6
[CIK] 0000917713
[NAME] AFD EXCHANGE RESERVES1 INC.
[SERIES]
[NUMBER] 003
[NAME] AFD EXCHANGE RESERVES, INC.
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] SEP-30-1999
[PERIOD-START] OCT-01-1998
[PERIOD-END] SEP-30-1999
[INVESTMENTS-AT-COST] 1,016,763,179
[INVESTMENTS-AT-VALUE] 1,016,763,179
[RECEIVABLES] 8,504,745
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 1,025,267,924
[PAYABLE-FOR-SECURITIES] 154,814,651
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 173,390,830
[TOTAL-LIABILITIES] 328,205,481
[SENIOR-EQUITY] 697,056
[PAID-IN-CAPITAL-COMMON] 696,359,070
[SHARES-COMMON-STOCK] 128,302,922
[SHARES-COMMON-PRIOR] 124,832,011
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 6,317
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 697,062,443
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 25,261,783
[OTHER-INCOME] 0
[EXPENSES-NET] (6,095,659)
[NET-INVESTMENT-INCOME] 19,166,124
[REALIZED-GAINS-CURRENT] 7,937
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 19,174,061
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (3,331,654)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 2,430,472,681
[NUMBER-OF-SHARES-REDEEMED] (2,430,333,424)
[SHARES-REINVESTED] 3,331,654
[NET-CHANGE-IN-ASSETS] 248,796,084
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (1,620)
[OVERDISTRIB-NII-PRIOR] 0
<PAGE>
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1,246,000
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 6,096,000
[AVERAGE-NET-ASSETS] 86,287,607
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] 0.04
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] (0.04)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] 1.24
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
00250163.AR4
<PAGE>
[ARTICLE] 6
[CIK] 0000917713
[NAME] AFD EXCHANGE RESERVES, INC.
[SERIES]
[NUMBER] 004
[NAME] AFD EXCHANGE RESERVES, INC.
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] SEP-30-1999
[PERIOD-START] OCT-01-1998
[PERIOD-END] SEP-30-1999
[INVESTMENTS-AT-COST] 1,016,763,179
[INVESTMENTS-AT-VALUE] 1,016,763,179
[RECEIVABLES] 8,504,745
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 1,025,267,924
[PAYABLE-FOR-SECURITIES] 154,814,651
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 173,390,830
[TOTAL-LIABILITIES] 328,205,481
[SENIOR-EQUITY] 697,056
[PAID-IN-CAPITAL-COMMON] 696,359,070
[SHARES-COMMON-STOCK] 11,575,860
[SHARES-COMMON-PRIOR] 3,239,615
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 6,317
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 697,062,443
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 25,261,783
[OTHER-INCOME] 0
[EXPENSES-NET] (6,095,659)
[NET-INVESTMENT-INCOME] 19,166,124
[REALIZED-GAINS-CURRENT] 7,937
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 19,174,061
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (285,364)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 255,695,937
[NUMBER-OF-SHARES-REDEEMED] (247,645,056)
[SHARES-REINVESTED] 285,364
[NET-CHANGE-IN-ASSETS] 248,796,084
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (1,620)
[OVERDISTRIB-NII-PRIOR] 0
<PAGE>
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1,246,000
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 6,096,000
[AVERAGE-NET-ASSETS] 6,250,096
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] 0.05
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] (0.05)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] .49
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
00250163.AR5
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior powers
granted by the undersigned to the extent inconsistent herewith
and constitutes and appoints John D. Carifa, Edmund P. Bergan,
Jr., Domenick Pugliese, Andrew L. Gangolf and Emilie D. Wrapp and
each of them, to act severally as attorneys-in-fact and agents,
with power of substitution and resubstitution, for the
undersigned in any and all capacities, solely for the purpose of
signing the respective Registration Statements, and any
amendments thereto, on Form N-1A of AFD Exchange Reserves,
Alliance Balanced Shares, Inc., Alliance Bond Fund, Inc.,
Alliance Global Dollar Government Fund, Inc., Alliance Global
Small Cap Fund, Inc., Alliance Global Strategic Income Trust,
Inc., Alliance Growth and Income Fund, Inc., Alliance Health Care
Fund, Inc., Alliance High Yield Fund, Inc., Alliance
Institutional Funds, Inc., Alliance Institutional Reserves, Inc.,
Alliance International Premier Growth Fund, Inc., Alliance
Limited Maturity Government Fund, Inc., Alliance Mortgage
Securities Income Fund, Inc., Alliance Multi-Market Strategy
Trust, Inc., Alliance Municipal Income Fund, Inc., Alliance
Municipal Income Fund II, Alliance North American Government
Income Trust, Inc., Alliance Premier Growth Fund, Inc., Alliance
Quasar Fund, Inc., Alliance Real Estate Investment Fund, Inc.,
Alliance Select Investor Series, Inc., Alliance Utility Income
Fund, Inc., Alliance Variable Products Series Fund, Inc.,
Alliance Worldwide Privatization Fund, Inc., The Alliance Fund,
Inc. and The Alliance Portfolios, and filing the same, with
exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, hereby ratifying and
confirming all that said attorneys-in-fact, or their substitute
or substitutes, may do or cause to be done by virtue hereof.
/s/ Ruth Block
____________________
Ruth Block
Dated: August 18, 1999
00250157.BX7
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior powers
granted by the undersigned to the extent inconsistent herewith
and constitutes and appoints John D. Carifa, Edmund P. Bergan,
Jr., Domenick Pugliese, Andrew L. Gangolf and Emilie D. Wrapp and
each of them, to act severally as attorneys-in-fact and agents,
with power of substitution and resubstitution, for the
undersigned in any and all capacities, solely for the purpose of
signing the respective Registration Statements, and any
amendments thereto, on Form N-1A of AFD Exchange Reserves,
Alliance All-Asia Investment Fund, Inc., Alliance Balanced
Shares, Inc., Alliance Bond Fund, Inc., Alliance Capital
Reserves, Alliance Global Dollar Government Fund, Inc., Alliance
Global Environment Fund, Inc., Alliance Global Small Cap Fund,
Inc., Alliance Global Strategic Income Trust, Inc., Alliance
Government Reserves, Alliance Greater China '97 Fund, Inc.,
Alliance Growth and Income Fund, Inc., Alliance Health Care Fund,
Inc., Alliance High Yield Fund, Inc., Alliance Institutional
Funds, Inc., Alliance Institutional Reserves, Inc., Alliance
International Fund, Alliance International Premier Growth Fund,
Inc., Alliance Limited Maturity Government Fund, Inc., Alliance
Money Market Fund, Alliance Mortgage Securities Income Fund,
Inc., Alliance Multi-Market Strategy Trust, Inc., Alliance
Municipal Income Fund, Inc., Alliance Municipal Income Fund II,
Alliance Municipal Trust, Alliance New Europe Fund, Inc.,
Alliance North American Government Income Trust, Inc., Alliance
Premier Growth Fund, Inc., Alliance Quasar Fund, Inc., Alliance
Real Estate Investment Fund, Inc., Alliance Select Investor
Series, Inc., Alliance Technology Fund, Inc., Alliance Utility
Income Fund, Inc., Alliance Variable Products Series Fund, Inc.,
Alliance Worldwide Privatization Fund, Inc., The Alliance Fund,
Inc., The Alliance Portfolios, and The Hudson River Trust, and
filing the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may do or
cause to be done by virtue hereof.
/s/ John D. Carifa
_______________________
John D. Carifa
Dated: August 18, 1999
00250157.BX7
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior powers
granted by the undersigned to the extent inconsistent herewith
and constitutes and appoints John D. Carifa, Edmund P. Bergan,
Jr., Domenick Pugliese, Andrew L. Gangolf and Emilie D. Wrapp and
each of them, to act severally as attorneys-in-fact and agents,
with power of substitution and resubstitution, for the
undersigned in any and all capacities, solely for the purpose of
signing the respective Registration Statements, and any
amendments thereto, on Form N-1A of AFD Exchange Reserves,
Alliance All-Asia Investment Fund, Inc., Alliance Balanced
Shares, Inc., Alliance Bond Fund, Inc., Alliance Global Dollar
Government Fund, Inc., Alliance Global Environment Fund, Inc.,
Alliance Global Small Cap Fund, Inc., Alliance Global Strategic
Income Trust, Inc., Alliance Greater China '97 Fund, Inc.,
Alliance Growth and Income Fund, Inc., Alliance Health Care Fund,
Inc., Alliance High Yield Fund, Inc., Alliance Institutional
Funds, Inc., Alliance Institutional Reserves, Inc., Alliance
International Fund, Alliance International Premier Growth Fund,
Inc., Alliance Limited Maturity Government Fund, Inc., Alliance
Mortgage Securities Income Fund, Inc., Alliance Multi-Market
Strategy Trust, Inc., Alliance Municipal Income Fund, Inc.,
Alliance Municipal Income Fund II, Alliance New Europe Fund,
Inc., Alliance North American Government Income Trust, Inc.,
Alliance Premier Growth Fund, Inc., Alliance Quasar Fund, Inc.,
Alliance Real Estate Investment Fund, Inc., Alliance Select
Investor Series, Inc., Alliance Technology Fund, Inc., Alliance
Utility Income Fund, Inc., Alliance Variable Products Series
Fund, Inc., Alliance Worldwide Privatization Fund, Inc., The
Alliance Fund, Inc., and The Alliance Portfolios, and filing the
same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that said attorneys-in-fact, or
their substitute or substitutes, may do or cause to be done by
virtue hereof.
/s/ David H. Dievler
______________________
David H. Dievler
Dated: August 18, 1999
00250157.BX7
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior powers
granted by the undersigned to the extent inconsistent herewith
and constitutes and appoints John D. Carifa, Edmund P. Bergan,
Jr., Domenick Pugliese, Andrew L. Gangolf and Emilie D. Wrapp and
each of them, to act severally as attorneys-in-fact and agents,
with power of substitution and resubstitution, for the
undersigned in any and all capacities, solely for the purpose of
signing the respective Registration Statements, and any
amendments thereto, on Form N-1A of AFD Exchange Reserves,
Alliance All-Asia Investment Fund, Inc., Alliance Balanced
Shares, Inc., Alliance Bond Fund, Inc., Alliance Global Dollar
Government Fund, Inc., Alliance Global Environment Fund, Inc.,
Alliance Global Small Cap Fund, Inc., Alliance Global Strategic
Income Trust, Inc., Alliance Growth and Income Fund, Inc.,
Alliance Health Care Fund, Inc., Alliance High Yield Fund, Inc.,
Alliance Institutional Funds, Inc., Alliance Institutional
Reserves, Inc., Alliance International Fund, Alliance
International Premier Growth Fund, Inc., Alliance Limited
Maturity Government Fund, Inc., Alliance Mortgage Securities
Income Fund, Inc., Alliance Multi-Market Strategy Trust, Inc.,
Alliance Municipal Income Fund, Inc., Alliance Municipal Income
Fund II, Alliance New Europe Fund, Inc., Alliance North American
Government Income Trust, Inc., Alliance Premier Growth Fund,
Inc., Alliance Quasar Fund, Inc., Alliance Real Estate Investment
Fund, Inc., Alliance Select Investor Series, Inc., Alliance
Utility Income Fund, Inc., Alliance Variable Products Series
Fund, Inc., Alliance Worldwide Privatization Fund, Inc., The
Alliance Fund, Inc., The Alliance Portfolios, and The Hudson
River Trust, and filing the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact, or their substitute or substitutes, may
do or cause to be done by virtue hereof.
/s/ John H. Dobkin
_______________________
John H. Dobkin
Dated: August 18, 1999
00250157.BX7
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior powers
granted by the undersigned to the extent inconsistent herewith
and constitutes and appoints John D. Carifa, Edmund P. Bergan,
Jr., Domenick Pugliese, Andrew L. Gangolf and Emilie D. Wrapp and
each of them, to act severally as attorneys-in-fact and agents,
with power of substitution and resubstitution, for the
undersigned in any and all capacities, solely for the purpose of
signing the respective Registration Statements, and any
amendments thereto, on Form N-1A of AFD Exchange Reserves,
Alliance Bond Fund, Inc., Alliance Balanced Shares, Inc.,
Alliance Capital Reserves, Alliance Global Dollar Government
Fund, Inc., Alliance Global Small Cap Fund, Inc., Alliance Global
Strategic Income Trust, Inc., Alliance Government Reserves,
Alliance Greater China '97 Fund, Inc., Alliance Growth and Income
Fund, Inc., Alliance Health Care Fund, Inc., Alliance High Yield
Fund, Inc., Alliance Institutional Funds, Inc., Alliance
Institutional Reserves, Inc., Alliance International Premier
Growth Fund, Inc., Alliance Limited Maturity Government Fund,
Inc., Alliance Money Market Fund, Alliance Mortgage Securities
Income Fund, Inc., Alliance Multi-Market Strategy Trust, Inc.,
Alliance Municipal Income Fund, Inc., Alliance Municipal Income
Fund II, Alliance Municipal Trust, Alliance 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., Alliance
Technology Fund, Inc., Alliance Utility Income Fund, Inc.,
Alliance Variable Products Series Fund, Inc., Alliance Worldwide
Privatization Fund, Inc., The Alliance Fund, Inc., The Alliance
Portfolios and The Hudson River Trust, and filing the same, with
exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, hereby ratifying and
confirming all that said attorneys-in-fact, or their substitute
or substitutes, may do or cause to be done by virtue hereof.
/s/ William H. Foulk, Jr.
__________________________
William H. Foulk, Jr.
Dated: August 18, 1999
00250157.BX7
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior powers
granted by the undersigned to the extent inconsistent herewith
and constitutes and appoints John D. Carifa, Edmund P. Bergan,
Jr., Domenick Pugliese, Andrew L. Gangolf and Emilie D. Wrapp and
each of them, to act severally as attorneys-in-fact and agents,
with power of substitution and resubstitution, for the
undersigned in any and all capacities, solely for the purpose of
signing the respective Registration Statements, and any
amendments thereto, on Form N-1A of AFD Exchange Reserves,
Alliance Balanced Shares, Inc., Alliance Bond Fund, Inc.,
Alliance Global Dollar Government Fund, Inc., Alliance Global
Small Cap Fund, Inc., Alliance Global Strategic Income Trust,
Inc., Alliance Growth and Income Fund, Inc., Alliance Health Care
Fund, Inc., Alliance High Yield Fund, Inc., Alliance
Institutional Funds, Inc., Alliance Institutional Reserves, Inc.,
Alliance International Premier Growth Fund, Inc., Alliance
Limited Maturity Government Fund, Inc., Alliance Mortgage
Securities Income Fund, Inc., Alliance Multi-Market Strategy
Trust, Inc., Alliance Municipal Income Fund, Inc., Alliance
Municipal Income Fund II, Alliance North American Government
Income Trust, Inc., Alliance Premier Growth Fund, Inc., Alliance
Quasar Fund, Inc., Alliance Real Estate Investment Fund, Inc.,
Alliance Select Investor Series, Inc., Alliance Utility Income
Fund, Inc., Alliance Variable Products Series Fund, Inc.,
Alliance Worldwide Privatization Fund, Inc., The Alliance Fund,
Inc., and The Alliance Portfolios and filing the same, with
exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, hereby ratifying and
confirming all that said attorneys-in-fact, or their substitute
or substitutes, may do or cause to be done by virtue hereof.
/s/ Dr. James M. Hester
_______________________
Dr. James M. Hester
Dated: August 18, 1999
00250157.BX7
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior powers
granted by the undersigned to the extent inconsistent herewith
and constitutes and appoints John D. Carifa, Edmund P. Bergan,
Jr., Domenick Pugliese, Andrew L. Gangolf and Emilie D. Wrapp and
each of them, to act severally as attorneys-in-fact and agents,
with power of substitution and resubstitution, for the
undersigned in any and all capacities, solely for the purpose of
signing the respective Registration Statements, and any
amendments thereto, on Form N-1A of AFD Exchange Reserves,
Alliance Balanced Shares, Inc., Alliance Bond Fund, Inc.,
Alliance Global Dollar Government Fund, Inc., Alliance Global
Small Cap Fund, Inc., Alliance Global Strategic Income Trust,
Inc., Alliance Growth and Income Fund, Inc., Alliance Health Care
Fund, Inc., Alliance High Yield Fund, Inc., Alliance
Institutional Funds, Inc., Alliance Institutional Reserves, Inc.,
Alliance International Premier Growth Fund, Inc., Alliance
Limited Maturity Government Fund, Inc., Alliance Money Market
Fund, Alliance Mortgage Securities Income Fund, Inc., Alliance
Multi-Market Strategy Trust, Inc., Alliance Municipal Income
Fund, Inc., Alliance Municipal Income Fund II, Alliance 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.,
Alliance Utility Income Fund, Inc., Alliance Variable Products
Series Fund, Inc., Alliance Worldwide Privatization Fund, Inc.,
The Alliance Fund, Inc., The Alliance Portfolios and The Hudson
River Trust, and filing the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact, or their substitute or substitutes, may
do or cause to be done by virtue hereof.
/s/ Clifford J. Michel
______________________
Clifford L. Michel
Dated: August 18, 1999
00250157.BX7
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior powers
granted by the undersigned to the extent inconsistent herewith
and constitutes and appoints John D. Carifa, Edmund P. Bergan,
Jr., Domenick Pugliese, Andrew L. Gangolf and Emilie D. Wrapp and
each of them, to act severally as attorneys-in-fact and agents,
with power of substitution and resubstitution, for the
undersigned in any and all capacities, solely for the purpose of
signing the respective Registration Statements, and any
amendments thereto, on Form N-1A of AFD Exchange Reserves,
Alliance Balanced Shares, Inc., Alliance Bond Fund, Inc.,
Alliance Capital Reserves, Alliance Global Dollar Government
Fund, Inc., Alliance Global Small Cap Fund, Inc., Alliance Global
Strategic Income Trust, Inc., Alliance Government Reserves,
Alliance Growth and Income Fund, Inc., Alliance Health Care Fund,
Inc., Alliance High Yield Fund, Inc., Alliance Institutional
Funds, Inc., Alliance Institutional Reserves, Inc., Alliance
International Premier Growth Fund, Inc., Alliance Limited
Maturity Government Fund, Inc., Alliance Mortgage Securities
Income Fund, Inc., Alliance Multi-Market Strategy Trust, Inc.,
Alliance Municipal Income Fund, Inc., Alliance Municipal Income
Fund II, Alliance Municipal Trust, Alliance North American
Government Income Trust, Inc., Alliance Premier Growth Fund,
Inc., Alliance Quasar Fund, Inc., Alliance Real Estate Investment
Fund, Inc., Alliance Select Investor Series, Inc., Alliance
Utility Income Fund, Inc., Alliance Variable Products Series
Fund, Inc., Alliance Worldwide Privatization Fund, Inc., The
Alliance Fund, Inc., The Alliance Portfolios and The Hudson River
Trust, and filing the same, with exhibits thereto, and other
documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact, or their substitute or substitutes, may
do or cause to be done by virtue hereof.
/s/ Donald J. Robinson
______________________
Donald J. Robinson
Dated: August 18, 1999
00250157.BX7
