N-CSR 1 edg9911_sr.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811-08294 AllianceBernstein Exchange Reserves (Exact name of registrant as specified in charter) 1345 Avenue of the Americas, New York, New York 10105 (Address of principal executive offices) (Zip code) Mark R. Manley Alliance Capital Management, L.P. 1345 Avenue of the Americas New York, New York 10105 (Name and address of agent for service) Registrant's telephone number, including area code: (800) 221-5672 Date of fiscal year end: September 30, 2004 Date of reporting period: March 31, 2004 ITEM 1. REPORTS TO STOCKHOLDERS. ALLIANCEBERNSTEIN EXCHANGE RESERVES SEMI-ANNUAL REPORT MARCH 31, 2004 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. PORTFOLIO OF INVESTMENTS March 31, 2004 (unaudited) AllianceBernstein Exchange Reserves _______________________________________________________________________________ PRINCIPAL AMOUNT (000) SECURITY YIELD VALUE ------------------------------------------------------------------------------- COMMERCIAL PAPER-76.3% AMSTEL FUNDING CORP. $ 15,000 4/14/04 (a) 1.03% $ 14,994,421 ATLANTIS ONE FUNDING CORP. 9,459 8/12/04 (a) 1.08 9,421,259 BANK OF AMERICA CORP. 6,000 6/08/04 1.04 5,988,213 BARTON CAPITAL CORP. 15,000 4/05/04 (a) 1.04 14,998,267 BETA FINANCE, INC. 15,000 6/14/04 (a) 1.03 14,968,242 CAISSE NATIONALE DES CAISSES D'EPARGNE 12,000 5/04/04 (a) 1.05 11,988,450 CITIGROUP GLOBAL MARKETS HOLDINGS, INC. 12,000 6/02/04 1.03 11,978,713 9,000 5/03/04 1.03 8,991,760 CITIGROUP, INC. 18,000 5/18/04 1.04 17,975,560 CREDIT LYONNAIS BANK NORTH AMERICA, INC. 14,000 6/28/04 1.05 13,964,067 CREDIT SUISSE FIRST BOSTON, INC. 13,000 7/12/04 (a) 1.09 12,959,852 CXC, INC. 15,000 9/14/04 (a) 1.06 14,926,683 DANSKE CORP. 2,800 7/20/04 1.07 2,790,846 DEPFA BANK EUROPE PLC 13,000 4/15/04 (a) 1.04 12,994,742 DEXIA DELAWARE LLC 15,000 5/18/04 (a) 1.03 14,979,829 FALCON ASSET SECURITIZATION CORP. 15,300 4/22/04 (a) 1.03 15,290,807 GENERAL ELECTRIC CAPITAL CORP. 11,000 6/03/04 1.03 10,980,172 10,000 4/07/04 1.11 9,998,150 GENERAL ELECTRIC CAPITAL INTERNATIONAL FUNDING, INC. 10,000 4/29/04 (a) 1.04 9,991,911 GIRO BALANCED FUNDING CORP. 30,000 6/10/04 (a) 1.04 29,939,333 10,861 7/15/04 (a) 1.09 10,826,471 GREENWICH CAPITAL HOLDINGS FUNDING CORP. 8,000 8/17/04 (a) 1.08 7,966,880 HBOS TREASURY SERVICES PLC 12,000 6/14/04 1.03 11,974,594 7,785 7/15/04 1.08 7,760,477 20,000 7/14/04 1.09 19,937,022 HSBC BANK PLC 12,000 4/13/04 1.11 11,995,560 10,000 4/15/04 1.16 9,995,489 ING INSURANCE (UNITED STATES) FUNDING LLC 5,000 6/17/04 1.03 4,988,985 INTERNATIONAL LEASE FINANCE CORP. 9,000 4/20/04 1.02 8,995,155 JUPITER SECURITIZATION CORP. 15,205 4/27/04 (a) 1.03 15,193,689 K2 LLC 13,000 4/20/04 (a) 1.05 12,992,796 KFW INTERNATIONAL FINANCE 25,000 4/23/04 (a) 1.12 24,982,889 KITTY HAWK FUNDING 23,000 4/23/04 (a) 1.03 22,985,523 NATEXIS BANQUES POPULAIR 12,000 9/02/04 1.11 11,943,020 NBNZ INTERNATIONAL, LTD. 12,000 8/03/04 (a) 1.10 11,954,740 NEWPORT FUNDING CORP. 13,000 4/05/04 (a) 1.03 12,998,512 NORDDEUTSCHE LANDESBANK 19,000 4/06/04 (a) 1.04 18,997,256 PRUDENTIAL PLC 10,500 5/06/04 1.04 10,489,383 SANTANDER FINANCE 10,000 8/16/04 1.08 9,958,900 SCALDIS CAPITAL LLC 13,000 7/14/04 (a) 1.09 12,959,064 SIGMA FINANCE, INC. 27,000 4/29/04 (a) 1.04 26,978,160 STATE STREET BANK & TRUST CO. 37,000 6/29/04 1.09 37,000,455 UBS FINANCE, INC. 27,000 4/01/04 1.06 27,000,000 UNICREDITO ITALIANO SPA 12,000 4/13/04 1.07 12,000,000 1 PORTFOLIO OF INVESTMENTS (continued) AllianceBernstein Exchange Reserves _______________________________________________________________________________ PRINCIPAL AMOUNT (000) SECURITY YIELD VALUE ------------------------------------------------------------------------------- WESTDEUTSCHE LANDESBANK $ 10,000 12/27/04 1.15% $ 10,000,000 YORKTOWN CAPITAL LLC 11,540 6/16/04 (a) 1.04 11,514,663 Total Commercial Paper (amortized cost $644,510,960) 644,510,960 U.S. GOVERNMENT SPONSORED AGENCY OBLIGATIONS-21.5% FEDERAL HOME LOAN BANK 5,000 4/23/04 1.13 4,996,548 60,000 9/27/04 0.98 59,988,217 FEDERAL HOME LOAN MORTGAGE CORP. 13,000 5/20/04 1.14 12,979,828 10,000 4/01/04 1.11 10,000,000 12,000 8/20/04 1.17 12,000,000 FEDERAL NATIONAL MORTGAGE ASSOCIATION 30,000 6/09/04 1.10 29,936,750 14,000 5/12/04 1.14 13,981,823 6,000 4/28/04 1.10 5,995,050 7,191 4/21/04 1.11 7,186,566 15,000 4/07/04 1.10 14,997,250 10,000 12/30/04 1.61 10,000,000 Total U.S. Government Sponsored Agency Obligations (amortized cost $182,062,032) 182,062,032 CORPORATE OBLIGATION-2.4% CENTAURI CORP. 20,000 5/12/04 FRN MTN (amortized cost $19,999,944) 1.06 19,999,944 TOTAL INVESTMENTS-100.2% (amortized cost $846,572,936) 846,572,936 Other assets less liabilities-(0.2%) (1,879,595) NET ASSETS-100% $ 844,693,341 (a) Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At March 31, 2004, the aggregate market value of these securities amounted to $380,764,291 or 45.1% of net assets. Glossary: FRN - Floating Rate Note MTN - Medium Term Note See notes to financial statements. 2 STATEMENT OF ASSETS & LIABILITIES March 31, 2004 (unaudited) AllianceBernstein Exchange Reserves _______________________________________________________________________________ ASSETS Investments in securities, at value (cost $846,572,936) $ 846,572,936 Cash 407,387 Receivable for capital stock sold 279,009 Interest receivable 232,173 Total Assets 847,491,505 LIABILITIES Payable for capital stock redeemed 1,917,358 Distribution fee payable 202,312 Advisory fee payable 179,382 Dividends payable 3,860 Accrued expenses 495,252 Total liabilities 2,798,164 NET ASSETS $ 844,693,341 COMPOSITION OF NET ASSETS Capital stock, at par $ 844,715 Additional paid-in capital 843,870,457 Accumulated net realized loss on investment transactions (21,831) $ 844,693,341 CLASS A SHARES Net asset value, offering and redemption price per share ($286,692,771 / 286,704,564 shares of capital stock issued and outstanding) $ 1.00 CLASS B SHARES Net asset value, offering and redemption price per share ($203,888,173 / 203,891,926 shares of capital stock issued and outstanding) $ 1.00 CLASS C SHARES Net asset value, offering and redemption price per share ($44,333,553 / 44,334,199 shares of capital stock issued and outstanding) $ 1.00 ADVISOR CLASS SHARES Net asset value, offering and redemption price per share ($309,778,844 / 309,784,483 shares of capital stock issued and outstanding) $ 1.00 See notes to financial statements. 3 STATEMENT OF OPERATIONS Six Months Ended March 31, 2004 (unaudited) AllianceBernstein Exchange Reserves _______________________________________________________________________________ INVESTMENT INCOME Interest $ 5,054,097 EXPENSES Advisory fee $ 1,136,841 Distribution fee--Class A 791,268 Distribution fee--Class B 1,220,844 Distribution fee--Class C 202,669 Transfer agency 1,394,403 Custodian 134,043 Registration fees 107,715 Printing 66,849 Administrative 54,796 Audit and legal 56,537 Trustees' fees 16,600 Miscellaneous 20,403 Total expenses 5,202,968 Less: expenses waived (see Note C) (844,508) Less: expense offset arrangement (see Note B) (123) Net expenses 4,358,337 Net investment income 695,760 REALIZED GAIN ON INVESTMENT TRANSACTIONS Net realized gain on investment transactions 491 NET INCREASE IN NET ASSETS FROM OPERATIONS $ 696,251 See notes to financial statements. 4 STATEMENT OF CHANGES IN NET ASSETS AllianceBernstein Exchange Reserves _______________________________________________________________________________ SIX MONTHS ENDED YEAR ENDED MARCH 31, 2004 SEPTEMBER 30, (UNAUDITED) 2003 --------------- --------------- INCREASE IN NET ASSETS FROM OPERATIONS Net investment income $ 695,760 $ 5,471,883 Net realized gain on investment transactions 491 53 Net increase in net assets from operations 696,251 5,471,936 DIVIDENDS TO SHAREHOLDERS FROM Net investment income Class A (14,129) (2,959,738) Class B (11,336) (403,696) Class C (2,309) (141,911) Advisor Class (667,986) (1,966,538) TRANSACTION IN SHARES OF BENEFICIAL INTEREST Net decrease (158,664,097) (557,090,321) Total decrease (158,663,606) (557,090,268) NET ASSETS Beginning of period 1,003,356,947 1,560,447,215 End of period $ 844,693,341 $ 1,003,356,947 See notes to financial statements. 5 NOTES TO FINANCIAL STATEMENTS Six Months Ended March 31, 2004 (unaudited) AllianceBernstein Exchange Reserves _______________________________________________________________________________ NOTE A: SIGNIFICANT ACCOUNTING POLICIES AllianceBernstein 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, as described in the prospectus, 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, to the extent described in the prospectus, 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, to the extent described in the prospectus, for Class B shares of other Alliance Mutual Funds. Class B shares also are offered in exchange, to the extent described in the prospectus, 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 accounting principles generally accepted in the United States 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. 6 AllianceBernstein Exchange Reserves _______________________________________________________________________________ 2. 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. 3. 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. 4. 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 Advisor Class shares. Advisor Class shares have no distribution fees. 5. 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 six months ended March 31, 2004, such reimbursements totaled $54,796. For the six months ended March 31, 2004, the Fund's expenses were reduced by $123 under an expense offset arrangement with Alliance Global Investor Services, Inc. (AGIS). AllianceBernstein Investment Research and Management, 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 $86,051, $514,524, and $20,531 in contingent deferred sales charges imposed upon redemption by shareholders of Class A, Class B, and Class C shares, respectively, for the six months ended March 31, 2004. The Fund compensates AGIS, 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 $937,637 for the six months ended March 31, 2004. 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 7 NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Exchange Reserves _______________________________________________________________________________ resources to finance the distribution of the Fund's shares. For the period ending March 31, 2004, the Distributor has voluntarily agreed to waive a portion of the distribution fees in the amount of $86,515, $676,168 and $81,825 for the Class A, Class B and Class C shares, respectively. NOTE D: INVESTMENT TRANSACTIONS, INCOME TAXES AND DISTRIBUTIONS TO SHAREHOLDERS At March 31, 2004, the cost of investments for federal income tax purposes was the same as the cost for financial reporting purposes. At September 30, 2003, the Fund had a capital loss carryforward of $22,322, which expires 2010. To the extent that any net capital loss carryforward is used to offset future capital gains, it is probable that these gains will not be distributed to shareholders. During the year ended September 30, 2003 the Fund utilized $53 of the capital loss carryforward. The dividends paid by the Fund for the six months ended March 31, 2004 are deemed to be ordinary income for federal income tax purposes. NOTE E: TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST An unlimited number of shares ($.001 par value) are authorized. At March 31, 2004, capital paid-in aggregated $844,715,172. Transactions, all at $1.00 per share, were as follows: CLASS A ---------------------------------- SIX MONTHS ENDED YEAR ENDED MARCH 31, 2004 SEPTEMBER 30, (UNAUDITED) 2003 --------------- --------------- Shares sold 132,184,592 16,790,806,054 Shares issued on reinvestment of dividends 14,129 2,959,738 Shares converted from Class B 6,768,084 4,416,210 Shares redeemed (214,656,041) (17,221,881,973) Net decrease (75,689,236) (423,699,971) CLASS B ---------------------------------- SIX MONTHS ENDED YEAR ENDED MARCH 31, 2004 SEPTEMBER 30, (UNAUDITED) 2003 --------------- --------------- Shares sold 44,232,809 205,045,129 Shares issued on reinvestment of dividends 11,336 403,696 Shares converted to Class A (6,768,084) (4,416,210) Shares redeemed (126,510,602) (340,195,716) Net decrease (89,034,541) (139,163,101) CLASS C ---------------------------------- SIX MONTHS ENDED YEAR ENDED MARCH 31, 2004 SEPTEMBER 30, (UNAUDITED) 2003 --------------- --------------- Shares sold 22,929,846 406,705,423 Shares issued on reinvestment of dividends 2,309 141,911 Shares redeemed (46,245,033) (447,562,375) Net decrease (23,312,878) (40,715,041) 8 AllianceBernstein Exchange Reserves _______________________________________________________________________________ ADVISOR CLASS ---------------------------------- SIX MONTHS ENDED YEAR ENDED MARCH 31, 2004 SEPTEMBER 30, (UNAUDITED) 2003 --------------- --------------- Shares sold 37,166,498 74,601,750 Shares issued on reinvestment of dividends 667,986 1,966,538 Shares redeemed (8,461,926) (30,080,496) Net increase 29,372,558 46,487,792 NOTE F: LEGAL PROCEEDINGS As has been previously reported in the press, the Staff of the U.S. Securities and Exchange Commission ("SEC") and the Office of the New York Attorney General ("NYAG") have been investigating practices in the mutual fund industry identified as "market timing" and "late trading" of mutual fund shares. Certain other regulatory authorities have also been conducting investigations into these practices within the industry and have requested that Alliance Capital Management L.P. ("Alliance Capital"), the Fund's Adviser, provide information to them. Alliance Capital has been cooperating and will continue to cooperate with all of these authorities. On December 18, 2003, Alliance Capital confirmed that it had reached terms with the SEC and the NYAG for the resolution of regulatory claims relating to the practice of "market timing" mutual fund shares in some of the AllianceBernstein Mutual Funds. The agreement with the SEC is reflected in an Order of the Commission ("SEC Order"). The agreement with the NYAG is subject to final, definitive documentation. Among the key provisions of these agreements are the following: (i) Alliance Capital agreed to establish a $250 million fund (the "Reimbursement Fund") to compensate mutual fund shareholders for the adverse effects of market timing attributable to market timing relationships described in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be paid, in order of priority, to fund investors based on (i) their aliquot share of losses suffered by the fund due to market timing, and (ii) a proportionate share of advisory fees paid by such fund during the period of such market timing; (ii) Alliance Capital agreed to reduce the advisory fees it receives from some of the AllianceBernstein long-term, open-end retail funds, commencing January 1, 2004, for a period of at least five years. The determination of which funds will have their fees reduced and to what degree is subject to the terms of the definitive agreement with the NYAG, however, it is not expected that the Fund will have its fee reduced; and (iii) Alliance Capital agreed to implement changes to its governance and compliance procedures. Additionally, the SEC Order contemplates that Alliance Capital's registered investment company clients, including the Fund, will introduce governance and compliance changes. The special committee of Alliance Capital's Board of Directors, comprised of the members of Alliance Capital's Audit Committee and the other independent member of the Board, is continuing to direct and oversee an internal investigation and a comprehensive review of the facts and circumstances relevant to the SEC's and the NYAG's investigations. In addition, the Independent Directors of the Fund ("the Independent Directors") have initiated an investigation of the above-mentioned matters with the advice of an independent economic consultant and independent counsel. The Independent Directors have formed a special committee to supervise the investigation. On October 2, 2003, a putative class action complaint entitled HINDO ET AL. V. ALLIANCEBERNSTEIN GROWTH & INCOME FUND ET AL. (the "Hindo Complaint") was filed against Alliance Capital; Alliance Capital Management Holding L.P.; Alliance 9 NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Exchange Reserves _______________________________________________________________________________ Capital Management Corporation; AXA Financial, Inc.; certain of the AllianceBernstein Mutual Funds; Gerald Malone; Charles Schaffran (collectively, the "Alliance Capital defendants"); and certain other defendants not affiliated with Alliance Capital. The Hindo Complaint was filed in the United States District Court for the Southern District of New York by alleged shareholders of two of the AllianceBernstein Mutual Funds. The Hindo Complaint alleges that certain of the Alliance Capital defendants failed to disclose that they improperly allowed certain hedge funds and other unidentified parties to engage in late trading and market timing of AllianceBernstein Fund securities, violating Sections 11 and 15 of the Securities Act, Sections 10(b) and 20(a) of the Exchange Act, and Sections 206 and 215 of the Advisers Act. Plaintiffs seek an unspecified amount of compensatory damages and rescission of their contracts with Alliance Capital, including recovery of all fees paid to Alliance Capital pursuant to such contracts. Since October 2, 2003, numerous additional lawsuits making factual allegations similar to those in the Hindo Complaint were filed against Alliance Capital and certain other defendants, some of which name the Fund as a defendant. All of these lawsuits seek an unspecified amount of damages. As a result of the matters discussed above, investors in the AllianceBernstein Mutual Funds may choose to redeem their investments. This may require the AllianceBernstein Mutual Funds to sell investments held by those funds to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the AllianceBernstein Mutual Funds. 10 FINANCIAL HIGHLIGHTS AllianceBernstein Exchange Reserves _______________________________________________________________________________ Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
CLASS A ------------------------------------------------------------------------------ SIX MONTHS ENDED MARCH 31, YEAR ENDED SEPTEMBER 30, 2004 --------------------------------------------------------------- (UNAUDITED) 2003 2002 2001 2000 1999 ----------- ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 INCOME FROM INVESTMENT OPERATIONS Net investment income .00005(a) .0040(a) .0100 .0414 .0511 .0408 Net realized gain (loss) on investment transactions (b) -0- -0- -0- -0- -0- -0- Net increase in net asset value from operations .00005 .0040 .0100 .0414 .0511 .0408 LESS: DIVIDENDS Dividends from net investment income (.00005) (.0040) (.0100) (.0414) (.0511) (.0408) Distributions from net realized gain on investment transactions -0- -0- -0-(b) -0- -0- -0- Total Dividends and Distributions (.00005) (.0040) (.0100) (.0414) (.0511) (.0408) Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 TOTAL RETURN Total investment return based on net asset value (c) 0.005% .37% 1.01% 4.23% 5.24% 4.16% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $287 $362 $786 $664 $680 $290 Ratio to average net assets of: Expenses, net of waivers/reimbursements 1.10% .95% .97% .96% .99% .99% Expenses, before waivers/reimbursements 1.15% 1.03% .97% .96% .99% .99% Net investment income .01%(a) .40%(a) .99% 4.09% 5.14% 4.06%
See footnote summary on page 14. 11 FINANCIAL HIGHLIGHTS (continued) AllianceBernstein Exchange Reserves _______________________________________________________________________________ Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
CLASS B ------------------------------------------------------------------------------ SIX MONTHS ENDED MARCH 31, YEAR ENDED SEPTEMBER 30, 2004 --------------------------------------------------------------- (UNAUDITED) 2003 2002 2001 2000 1999 ----------- ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 INCOME FROM INVESTMENT OPERATIONS Net investment income .00005(a) .0011(a) .0051 .0364 .0461 .0357 Net realized gain (loss) on investment transactions (b) -0- -0- -0- -0- -0- -0- Net increase in net asset value from operations .00005 .0011 .0051 .0364 .0461 .0357 LESS: DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (.00005) (.0011) (.0051) (.0364) (.0461) (.0357) Distributions from net realized gain on investment transactions -0- -0- -0-(b) -0- -0- -0- Total dividends and distributions (.00005) (.0011) (.0051) (.0364) (.0461) (.0357) Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 TOTAL RETURN Total investment return based on net asset value (c) .005% .10% .51% 3.71% 4.72% 3.64% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $204 $293 $432 $386 $169 $267 Ratio to average net assets of: Expenses, net of waivers/reimbursements 1.10% 1.24% 1.48% 1.47% 1.50% 1.50% Expenses, before waivers/reimbursements 1.66% 1.54% 1.48% 1.47% 1.50% 1.50% Net investment income .01%(a) .11%(a) .51% 3.43% 4.54% 3.57%
See footnote summary on page 14. 12 AllianceBernstein Exchange Reserves _______________________________________________________________________________ Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
CLASS C ------------------------------------------------------------------------------ SIX MONTHS ENDED MARCH 31, YEAR ENDED SEPTEMBER 30, 2004 --------------------------------------------------------------- (UNAUDITED) 2003 2002 2001 2000 1999 ----------- ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 INCOME FROM INVESTMENT OPERATIONS Net investment income .00005(a) .0017(a) .0075 .0389 .0486 .0383 Net realized gain (loss) on investment transactions (b) -0- -0- -0- -0- -0- -0- Net increase in net asset value from operations .00005 .0017 .0075 .0389 .0486 .0383 LESS: DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (.00005) (.0017) (.0075) (.0389) (.0486) (.0383) Distributions from net realized gain on investment transactions -0- -0- -0-(b) -0- -0- -0- Total dividends and distributions (.00005) (.0017) (.0075) (.0389) (.0486) (.0383) Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 TOTAL RETURN Total investment return based on net asset value (c) .005% .15% 0.76% 3.97% 4.98% 3.90% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $44 $68 $108 $113 $129 $128 RATIO TO AVERAGE NET ASSETS OF: Expenses, net of waivers/reimbursements 1.11% 1.18% 1.22% 1.22% 1.24% 1.24% Expenses, before waivers/reimbursements 1.41% 1.29% 1.22% 1.22% 1.24% 1.24% Net investment income .01%(a) .17%(a) .77% 3.85% 4.85% 3.86%
See footnote summary on page 14. 13 FINANCIAL HIGHLIGHTS (continued) AllianceBernstein Exchange Reserves _______________________________________________________________________________ Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
ADVISOR CLASS ------------------------------------------------------------------------------ SIX MONTHS ENDED MARCH 31, YEAR ENDED SEPTEMBER 30, 2004 --------------------------------------------------------------- (UNAUDITED) 2003 2002 2001 2000 1999 ----------- ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 INCOME FROM INVESTMENT OPERATIONS Net investment income .0023(a) .0076 .0150 .0464 .0561 .0458 Net realized gain (loss) on investment transactions (b) -0- -0- -0- -0- -0- -0- Net increase in net asset value from operations .0023 .0076 .0150 .0464 .0561 .0458 LESS: DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (.0023) (.0076) (.0150) (.0464) (.0561) (.0458) Distributions from net realized gain on investment transactions -0- -0- -0-(b) -0- -0- -0- Total dividends and distributions (.0023) (.0076) (.0150) (.0464) (.0561) (.0458) Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 TOTAL RETURN Total investment return based on net asset value (c) 0.23% .78% 1.51% 4.75% 5.77% 4.68% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands) $309,779 $280,406 $233,919 $69,835 $1,787 $11,576 Ratio of expenses to average net assets .66% .55% .48% .47% .47% .49% Net investment income .45%(a) .76% 1.39% 3.76% 5.53% 4.57%
(a) Net of fees waived and expenses reimbursed. (b) Amount is less than $0.0001. (c) 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 return does not reflect the deuction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Total investment return calculated for a period of less than one year is not annualized. 14 AllianceBernstein Exchange Reserves _______________________________________________________________________________ ALLIANCEBERNSTEIN EXCHANGE RESERVES 1345 Avenue of the Americas New York, NY 10105 Toll-Free (800) 221-5672 TRUSTEES WILLIAM H. FOULK, JR. (1), CHAIRMAN MARC O. MAYER, PRESIDENT RUTH BLOCK (1) DAVID H. DIEVLER (1) JOHN H. DOBKIN (1) CLIFFORD L. MICHEL (1) DONALD J. ROBINSON (1) OFFICERS JOHN J. KELLEY, SENIOR VICE PRESIDENT RAYMOND J. PAPERA, SENIOR VICE PRESIDENT JOHN F. CHIODI, JR., VICE PRESIDENT MARIA R. CONA, VICE PRESIDENT JOSEPH C. DONA, VICE PRESIDENT MARK R. MANLEY, SECRETARY MARK D. GERSTEN, TREASURER AND CHIEF FINANCIAL OFFICER THOMAS R. MANLEY, CONTROLLER CUSTODIAN STATE STREET BANK AND TRUST COMPANY 225 Franklin Street Boston, MA 02110 LEGAL COUNSEL SEWARD & KISSEL LLP One Battery Park Plaza New York, NY 10004 INDEPENDENT AUDITORS PRICEWATERHOUSECOOPERS LLP 1177 Avenue of the Americas New York, NY 10036 TRANSFER AGENT ALLIANCE GLOBAL INVESTOR SERVICES, INC. P.O. Box 786003 San Antonio, TX 78278-6003 Toll-Free (800) 221-5672 DISTRIBUTOR ALLIANCEBERNSTEIN INVESTMENT RESEARCH AND MANAGEMENT, INC. 1345 Avenue of the Americas New York, NY 10105 (1) MEMBER OF THE AUDIT COMMITTEE. 15 ALLIANCEBERNSTEIN FAMILY OF FUNDS AllianceBernstein Exchange Reserves _______________________________________________________________________________ WEALTH STRATEGIES FUNDS --------------------------------------------- BALANCED WEALTH STRATEGY WEALTH APPRECIATION STRATEGY WEALTH PRESERVATION STRATEGY TAX-MANAGED BALANCED WEALTH STRATEGY* TAX-MANAGED WEALTH APPRECIATION STRATEGY TAX-MANAGED WEALTH PRESERVATION STRATEGY** BLENDED STYLE FUNDS --------------------------------------------- U.S. LARGE CAP PORTFOLIO INTERNATIONAL PORTFOLIO TAX-MANAGED INTERNATIONAL PORTFOLIO GROWTH FUNDS --------------------------------------------- DOMESTIC GROWTH FUND HEALTH CARE FUND MID-CAP GROWTH FUND PREMIER GROWTH FUND SMALL CAP GROWTH FUND TECHNOLOGY FUND GLOBAL & INTERNATIONAL ALL-ASIA INVESTMENT FUND GLOBAL RESEARCH GROWTH FUND GLOBAL SMALL CAP FUND GREATER CHINA '97 FUND INTERNATIONAL PREMIER GROWTH FUND NEW EUROPE FUND WORLDWIDE PRIVATIZATION FUND SELECT INVESTOR SERIES BIOTECHNOLOGY PORTFOLIO PREMIER PORTFOLIO TECHNOLOGY PORTFOLIO VALUE FUNDS --------------------------------------------- DOMESTIC BALANCED SHARES DISCIPLINED VALUE FUND GROWTH & INCOME FUND REAL ESTATE INVESTMENT FUND SMALL CAP VALUE FUND UTILITY INCOME FUND VALUE FUND GLOBAL & INTERNATIONAL GLOBAL VALUE FUND INTERNATIONAL VALUE FUND TAXABLE BOND FUNDS --------------------------------------------- AMERICAS GOVERNMENT INCOME TRUST CORPORATE BOND PORTFOLIO EMERGING MARKET DEBT FUND GLOBAL STRATEGIC INCOME TRUST HIGH YIELD FUND MULTI-MARKET STRATEGY TRUST QUALITY BOND PORTFOLIO SHORT DURATION PORTFOLIO U.S. GOVERNMENT PORTFOLIO MUNICIPAL BOND FUNDS --------------------------------------------- NATIONAL INSURED NATIONAL ARIZONA CALIFORNIA INSURED CALIFORNIA FLORIDA MASSACHUSETTS MICHIGAN MINNESOTA NEW JERSEY NEW YORK OHIO PENNSYLVANIA VIRGINIA INTERMEDIATE MUNICIPAL BOND FUNDS --------------------------------------------- INTERMEDIATE CALIFORNIA INTERMEDIATE DIVERSIFIED INTERMEDIATE NEW YORK CLOSED-END FUNDS --------------------------------------------- ALL-MARKET ADVANTAGE FUND ACM INCOME FUND ACM GOVERNMENT OPPORTUNITY FUND ACM MANAGED DOLLAR INCOME FUND ACM MANAGED INCOME FUND ACM MUNICIPAL SECURITIES INCOME FUND CALIFORNIA MUNICIPAL INCOME FUND NATIONAL MUNICIPAL INCOME FUND NEW YORK MUNICIPAL INCOME FUND THE SPAIN FUND WORLD DOLLAR GOVERNMENT FUND WORLD DOLLAR GOVERNMENT FUND II WE ALSO OFFER EXCHANGE RESERVES,# WHICH SERVES AS THE MONEY MARKET FUND EXCHANGE VEHICLE FOR THE ALLIANCEBERNSTEIN MUTUAL FUNDS. For more complete information on any AllianceBernstein mutual fund, including investment objectives and policies, sales charges, expenses, risks and other matters of importance to prospective investors, visit our web site at www.alliancebernstein.com or call us at (800) 227-4618 for a current prospectus. Please read the prospectus carefully before you invest or send money. * Formerly Growth Investors Fund. ** Formerly Conservative Investors Fund. # 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. 16 AFDSR0304 ITEM 2. CODE OF ETHICS. Not applicable when filing a Semi-Annual report to shareholders. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable when filing a Semi-Annual report to shareholders. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable when filing a Semi-Annual report to shareholders. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable to the registrant. ITEM 6. [RESERVED] ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable to the registrant. ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable to the registrant. ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. On March 17, 2004 the Fund adopted procedures effective April 1, 2004, by which shareholders may recommend nominees to the Fund's Board of Directors. Prior thereto, the Fund's Board did not accept shareholder recommendations for nominees to the Fund's Board. ITEM 10. CONTROLS AND PROCEDURES. (a) The registrant's principal executive officer and principal financial officer have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940, as amended) are effective at the reasonable assurance level based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this document. (b) There were no significant changes in the registrant's internal controls that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. ITEM 11. EXHIBITS. The following exhibits are attached to this Form N-CSR: Exhibit No. DESCRIPTION OF EXHIBIT ----------- ---------------------- 11 (b) (1) Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 11 (b) (2) Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 11 (c) Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant): AllianceBernstein Exchange Reserves By: /s/Marc O. Mayer -------------------------------- Marc O. Mayer President Date: June 7, 2004 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/Marc O. Mayer -------------------------------- Marc O. Mayer President Date: June 7, 2004 By: /s/Mark D. Gersten ------------------------------- Mark D. Gersten Treasurer and Chief Financial Officer Date: June 7, 2004