-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J12cyl79swPLZ8s358tpgNjDypNEkMfu15qULyCiOeLogbjINEJzCZxOlvD5jnKv uRIh1V9sbHl/UkAljUQd0A== 0000936772-98-000135.txt : 19980522 0000936772-98-000135.hdr.sgml : 19980522 ACCESSION NUMBER: 0000936772-98-000135 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980521 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AFD EXCHANGE RESERVES CENTRAL INDEX KEY: 0000917713 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: MD FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-08294 FILM NUMBER: 98629781 BUSINESS ADDRESS: STREET 1: ALLIANCE CAPITAL MANAGEMENT LP STREET 2: 1345 AVE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10105 BUSINESS PHONE: 2125544623 MAIL ADDRESS: STREET 1: ALLIANCE CAPITAL MANAGEMENT LP STREET 2: 1345 AVENUE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10105 N-30D 1 AFD EXCHANGE RESERVES SEMI-ANNUAL REPORT MARCH 31, 1998 (UNAUDITED) LETTER TO SHAREHOLDERS AFD EXCHANGE RESERVES _______________________________________________________________________________ May 27, 1998 Dear Shareholder: We are pleased to provide an overview of market and Fund activity during AFD Exchange Reserves semi-annual reporting period ended March 31, 1998. AFD Exchange Reserves serves as the money market fund exchange vehicle for the Alliance Mutual Funds. The Fund's investment objective is to provide maximum current income consistent with safety of principal and liquidity. The Fund's net assets as of March 31, 1998 totaled approximately $227.8 million. The Fund remains invested in high quality money market securities which include marketable obligations issued or guaranteed by the U.S. government and its agencies, and commercial paper. As of March 31, 1998, the average weighted maturity of the portfolio was 25 days. ECONOMIC COMMENTARY During the reporting period ended March 31, 1998, the Federal Reserve kept rates steady at 5.5%. The U.S. economy grew at an unsustainable 4.2% rate in the first quarter of 1998 following 1997's 3.8% pace. We expect the economy to decelerate to a 2.0% to 2.5% growth pace for the remainder of the year. Consumer prices rose 1.5% in the first quarter from the same period in 1997. We expect inflation as measured by the Consumer Price Index (CPI) to drift up to and above 2.0% by year-end as the disinflationary benefits of the strong dollar and weak commodity prices wane. On March 31, 1998, the Federal Reserve shifted from a "neutral" stance to one biased toward higher rates. By returning to the "tightening" bias it held through most of 1997, the Fed has signaled that its main focus is the inflationary threat posed by labor cost and equity price appreciation. We believe that no Fed move is imminent, but we would not rule out one or more Fed tightenings later this year or early in 1999. We appreciate your continued interest in AFD Exchange Reserves. Sincerely, John D. Carifa Chairman and President AN INVESTMENT IN THE FUND IS NOT (I) INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, (II) A DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR ENDORSED BY ANY BANK, OR (III) FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE. 1 STATEMENT OF NET ASSETS MARCH 31, 1998 (UNAUDITED) AFD EXCHANGE RESERVES _______________________________________________________________________________ PRINCIPAL AMOUNT (000) SECURITY YIELD VALUE - ------------------------------------------------------------------------------- COMMERCIAL PAPER-59.9% Allianz of America Finance Corp. $ 7,000 5/13/98 (a) 5.47% $6,955,328 Allstate Corp. 7,000 4/30/98 5.55 6,968,704 American Express Co. 7,000 5/14/98 5.55 6,953,596 Associates Corp. of North America 10,000 4/01/98 6.10 10,000,000 Banc One Funding Corp. 3,700 4/30/98 (a) 5.50 3,683,607 Bell South Capital Funding Corp. 7,000 5/04/98 5.54 6,964,452 Cargill Global Funding 7,000 4/22/98 5.52 6,977,460 Chase Manhattan Bank 6,000 5/04/98 5.48 5,969,860 Colgate Palmolive Co. 7,000 4/30/98 5.53 6,968,817 Duke Power 4,000 4/29/98 5.50 3,982,889 3,494 5/29/98 5.50 3,463,039 Dupont (E. I.) de Nemours & Co. 8,000 5/06/98 5.48 7,957,378 Ford Motor Credit Corp. 7,000 5/20/98 5.51 6,947,502 General Electric Capital Corp. 7,000 6/03/98 5.57 6,933,238 General Motors Acceptance Corp. 7,500 5/18/98 5.53 7,445,852 International Lease Finance Corp. 7,000 5/06/98 5.51 6,962,501 Koch Industries 8,950 4/01/98 (a) 6.05 8,950,000 Merrill Lynch & Co., Inc. 7,500 6/15/98 5.51% 7,413,906 Motorola Corp. 7,905 4/22/98 5.51 7,879,592 Salomon Smith Barney Holdings Inc. 7,000 5/04/98 5.54 6,964,452 Total Commercial Paper (amortized cost $136,342,173) 136,342,173 U.S. GOVERNMENT & AGENCY OBLIGATIONS-36.7% Federal Home Loan Bank 8,000 5.64%, 3/12/99 5.64 8,000,000 75,700 4/01/98 5.70 75,700,000 Total U.S. Government & Agency Obligations (amortized cost $83,700,000) 83,700,000 PROMISSORY NOTE-3.1% Goldman Sachs Group LP 7,000 5.88%, 5/27/98 (amortized cost $7,000,000) 5.88 7,000,000 TOTAL INVESTMENTS-99.7% (amortized cost $227,042,173) 227,042,173 Other assets less liabilities-0.3% 728,616 NET ASSETS-100% (offering and redemption price of $1.00 per share; 105,619,185 Class A shares; 78,768,509 Class B shares; 43,038,977 Class C shares and 345,855 Advisor Class shares outstanding) $ 227,770,789 (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 March 31, 1998, these securities amounted to $19,588,935, representing 8.6% of net assets. See notes to financial statements. 2 STATEMENT OF OPERATIONS SIX MONTHS ENDED MARCH 31, 1998 (UNAUDITED) AFD EXCHANGE RESERVES _______________________________________________________________________________ INVESTMENT INCOME Interest $ 4,995,137 EXPENSES Advisory fee $ 220,361 Distribution fee - Class A 153,486 Distribution fee - Class B 383,201 Distribution fee - Class C 139,690 Transfer agency 111,372 Registration fees 66,964 Custodian 48,912 Administrative 49,000 Printing 24,336 Audit and legal 21,966 Amortization of organization expenses 13,080 Trustees' fees 11,054 Miscellaneous 3,067 Total expenses 1,246,489 Net investment income 3,748,648 REALIZED GAIN ON INVESTMENTS Net realized gain on investment transactions 760 NET INCREASE IN NET ASSETS FROM OPERATIONS $ 3,749,408 See notes to financial statements. 3 STATEMENT OF CHANGES IN NET ASSETS AFD EXCHANGE RESERVES _______________________________________________________________________________ SIX MONTHS ENDED YEAR ENDED MARCH 31, 1998 SEPTEMBER 30, (UNAUDITED) 1997 --------------- --------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income $ 3,748,648 $ 5,152,750 Net realized gain (loss) on investment transactions 760 (311) Net increase in net assets from operations 3,749,408 5,152,439 DIVIDENDS TO SHAREHOLDERS FROM: Net investment income Class A (1,386,019) (1,638,799) Class B (1,537,667) (2,707,243) Class C (799,571) (806,371) Advisor Class (25,391) (337) TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST Net increase 88,163,154 19,187,747 Total increase 88,163,914 19,187,436 NET ASSETS Beginning of year 139,606,875 120,419,439 End of period $ 227,770,789 $ 139,606,875 See notes to financial statements. 4 NOTES TO FINANCIAL STATEMENTS MARCH 31, 1998 (UNAUDITED) AFD EXCHANGE RESERVES _______________________________________________________________________________ NOTE A: SIGNIFICANT ACCOUNTING POLICIES AFD Exchange Reserves (the "Fund") is registered under the Investment Company Act of 1940 as a diversified, open-end investment company. The Fund's investment objective is to provide maximum current income to the extent consistent with safety of principal and liquidity. The Fund offers Class A, Class B, Class C and Advisor Class shares. All four classes of shares have identical voting, dividend, liquidation and other rights, except that each class bears its own distribution and transfer agency expenses and has exclusive voting rights with respect to its distribution plan. Class A shares are sold for cash without any initial sales charge at the time of purchase. On cash purchases of $1,000,000 or more, however, a contingent deferred sales charge ("CDSC") equal to 1% of the lesser of net asset value at the time of redemption or original cost if redeemed within one year will be charged. Class A shares may be exchanged for Class A shares of other Alliance Mutual Funds, subject, in the case of Class A shares of the Fund that were purchased for cash, to any applicable initial sales charge at the time of exchange. Class A shares of the Fund also are offered in exchange for Class A shares of other Alliance Mutual Funds without any sales charge at the time of purchase, but on Class A shares that were received in exchange for Alliance Mutual Fund Class A shares that were not subject to an initial sales charge when originally purchased for cash because the purchase was of $1,000,000 or more, a 1% CDSC may be assessed if shares of the Fund are redeemed within one year of the Alliance Mutual Fund Class A shares originally purchased for cash. Class B shares are sold for cash without an initial sales charge. However, a CDSC is charged if shares are redeemed within four years after purchase. The CDSC charge declines from 4% to zero depending on the period of time the shares are held. Class B shares purchased for cash will automatically convert to Class A shares after eight years. Class B shares may be exchanged for Class B shares of other Alliance Mutual Funds. Class B shares also are offered in exchange for Class B shares of other Alliance Mutual Funds without any initial sales charge. However, a CDSC may be charged if shares are redeemed within a certain number of years of the original purchase of Alliance Mutual Fund Class B shares. When redemption occurs, the applicable CDSC schedule is that which applied to the Alliance Mutual Fund Class B shares originally purchased for cash at the time of their purchase. Class C shares are sold for cash or in exchange for Class C shares of another Alliance Mutual Fund. Class C shares are subject to a 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 any initial sales charge or CDSC and are not subject to ongoing distribution expenses. Advisor Class shares are offered solely to investors participating in fee-based programs and to certain retirement plan accounts. The financial statements have been prepared in conformity with generally accepted accounting principles which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Fund. 1. VALUATION OF SECURITIES Securities in which the Fund invests are traded primarily in the over-the-counter market and are valued at amortized cost, under which method a portfolio instrument is valued at cost and any premium or discount is amortized on a constant basis to maturity. 2. ORGANIZATION EXPENSES Organization expenses have been deferred and are being amortized on a straight-line basis through March, 1999. 3. TAXES It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to its shareholders. Therefore, no provisions for federal income or excise taxes are required. 5 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 outstanding class of shares, based on the proportionate interest in the Fund represented by the shares of such class, except that the Fund's Class B and Class C shares bear higher distribution and transfer agent fees than Class A shares and the Advisory Class shares have no distribution fees. 6. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS Interest income is accrued daily. Investment transactions are recorded on the date securities are purchased or sold. Investment gains and losses are determined on the identified cost basis. It is the Fund's policy to take possession of securities as collateral under repurchase agreements and to determine on a daily basis that the value of such securities are sufficient to cover the value of the repurchase agreements. NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES The Fund pays its Adviser, Alliance Capital Management L.P. an advisory fee at the annual rate of .25% 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, 1998, such reimbursements totaled $49,000. The Fund compensates Alliance Fund Services, Inc., a wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for providing personnel and facilities to perform transfer agency services for the Fund. Such compensation amounted to $87,480 for the six months ended March 31, 1998. NOTE C: DISTRIBUTION SERVICES AGREEMENT The Fund has adopted a Distribution Services Agreement (the "Agreement") pursuant to Rule 12b-1 under the Investment Company Act of 1940 for Class A, Class B and Class C. Under the Agreement, the Fund pays a distribution fee to the Distributor at an annual rate of up to .50% of the Fund's average daily net assets attributable to Class A shares, 1.00% of the average daily net assets attributable to Class B shares and .75% of the average daily net assets attributable to Class C shares. There is no distribution fee on the Advisor Class shares. Such fee is accrued daily and paid monthly. The Agreement provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities. The Agreement also provides that the Adviser may use its own resources to finance the distribution of the Fund's shares. NOTE D: INVESTMENT TRANSACTIONS At March 31, 1998, the cost of securities for federal income tax purposes was the same as the cost for financial reporting purposes. At September 30, 1997, the Fund had a capital loss carryforward of $2,497, of which $2,186 expires in 2003 and $311 expires in the year 2004. 6 AFD EXCHANGE RESERVES _______________________________________________________________________________ NOTE E: TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST An unlimited number of shares ($.001 par value) are authorized. At March 31, 1998, capital paid-in aggregated $105,619,185 for Class A, $78,768,509 for Class B, $43,038,977 for Class C and $345,855 for Advisor Class. Transactions, all at $1.00 per share, were as follows: CLASS A ------------------------------- SIX MONTHS ENDED YEAR ENDED MARCH 31, 1998 SEPTEMBER 30, (UNAUDITED) 1997 --------------- ------------- Shares sold 1,035,484,985 396,646,176 Shares issued on reinvestments of dividends 1,386,019 1,638,799 Shares converted from Class B 1,045,834 2,779,625 Shares redeemed (973,465,611) (402,092,046) Net increase (decrease) 64,451,227 (1,027,446) CLASS B ------------------------------- SIX MONTHS ENDED YEAR ENDED MARCH 31, 1998 SEPTEMBER 30, (UNAUDITED) 1997 --------------- ------------- Shares sold 190,343,677 248,115,983 Shares issued on reinvestments of dividends 1,537,667 2,707,243 Shares converted to Class A (1,045,834) (2,779,625) Shares redeemed (186,523,562) (238,596,718) Net increase 4,311,948 9,446,883 CLASS C ------------------------------- SIX MONTHS ENDED YEAR ENDED MARCH 31, 1998 SEPTEMBER 30, (UNAUDITED) 1997 --------------- ------------- Shares sold 541,366,526 263,291,205 Shares issued on reinvestments of dividends 799,571 806,371 Shares redeemed (523,077,069) (253,364,170) Net increase 19,089,028 10,733,406 ADVISOR CLASS ------------------------------- JANUARY 30, SIX MONTHS ENDED 1997(A) TO MARCH 31, 1998 SEPTEMBER 30, (UNAUDITED) 1997 --------------- ------------- Shares sold 13,131,013 120,464 Shares issued on reinvestments of dividends 25,391 337 Shares redeemed (12,845,453) (85,897) Net increase 310,951 34,904 7 (a) Commencement of distribution. FINANCIAL HIGHLIGHTS AFD EXCHANGE RESERVES _______________________________________________________________________________ SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH PERIOD
CLASS A ----------------------------------------------------------------- SIX MONTHS MARCH 25, ENDED 1994(A) MARCH 31, YEAR ENDED SEPTEMBER 30, TO 1998 ------------------------------------- SEPTEMBER 30, (UNAUDITED) 1997 1996 1995 1994 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 INCOME FROM INVESTMENT OPERATIONS Net investment income .0225 .0411 .0416 .0453 .0126 LESS: DIVIDENDS Dividends from net investment income (.0225) (.0411) (.0416) (.0453) (.0126) Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 TOTAL RETURN Total investment return based on net asset value (b) 4.56%(c) 4.19% 4.24% 4.64% 2.45%(c) RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $106 $41 $41 $41 $18 Ratios to average net assets of: Expenses, net of waivers 1.14%(c) 1.38% 1.29% 1.21% 1.82%(c) Expenses, before waivers 1.14%(c) 1.38% 1.29% 1.29% 1.82%(c) Net investment income 4.52%(c) 4.10% 4.15% 4.63%(d) 2.62%(c)
CLASS B ----------------------------------------------------------------- SIX MONTHS MARCH 25, ENDED 1994(A) MARCH 31, YEAR ENDED SEPTEMBER 30, TO 1998 ------------------------------------- SEPTEMBER 30, (UNAUDITED) 1997 1996 1995 1994 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 INCOME FROM INVESTMENT OPERATIONS Net investment income .0200 .0361 .0366 .0404 .0101 LESS: DIVIDENDS Dividends from net investment income (.0200) (.0361) (.0366) (.0404) (.0101) Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 TOTAL RETURN Total investment return based on net asset value (b) 4.06%(c) 3.67% 3.72% 4.12% 1.95%(c) RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $79 $74 $65 $65 $31 Ratios to average net assets of: Expenses, net of waivers 1.66%(c) 1.88% 1.79% 1.70% 2.35%(c) Expenses, before waivers 1.66%(c) 1.88% 1.79% 1.78% 2.35%(c) Net investment income 4.01%(c) 3.61% 3.67% 4.17%(d) 1.91%(c)
See footnote summary on page 9. 8 AFD EXCHANGE RESERVES _______________________________________________________________________________ SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH PERIOD
CLASS C ----------------------------------------------------------------- SIX MONTHS MARCH 25, ENDED 1994(A) MARCH 31, YEAR ENDED SEPTEMBER 30, TO 1998 ------------------------------------- SEPTEMBER 30, (UNAUDITED) 1997 1996 1995 1994 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 INCOME FROM INVESTMENT OPERATIONS Net investment income .0213 .0386 .0390 .0430 .0112 LESS: DIVIDENDS Dividends from net investment income (.0213) (.0386) (.0390) (.0430) (.0112) Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 TOTAL RETURN Total investment return based on net asset value (b) 4.32%(c) 3.93% 3.98% 4.39% 2.18%(c) RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $43 $24 $13 $10 $5 Ratios to average net assets of: Expenses, net of waivers 1.38%(c) 1.61% 1.55% 1.45% 2.08%(c) Expenses, before waivers 1.38%(c) 1.61% 1.55% 1.52% 2.08%(c) Net investment income 4.29%(c) 3.90% 3.89% 4.41%(d) 2.14%(c)
ADVISOR CLASS -------------------------- SIX MONTHS JANUARY 30, ENDED 1997(A) MARCH 31, TO 1998 SEPTEMBER 30, (UNAUDITED) 1997 ---------- ---------- Net asset value, beginning of period $ 1.00 $ 1.00 INCOME FROM INVESTMENT OPERATIONS Net investment income .0250 .0254 LESS: DIVIDENDS Dividends from net investment income (.0250) (.0254) Net asset value, end of period $ 1.00 $ 1.00 TOTAL RETURN Total investment return based on net asset value (b) (c) 5.08% 4.71% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands) $346 $35 Ratio of expenses to average net assets (c) .64% .88% Ratio of net investment income to average net assets (c) 5.06% 4.15% (a) Commencement of distribution. (b) Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption on the last day of the period. Contingent deferred sales charge is not reflected in the calculation of total investment return. (c) Annualized. (d) Net of expenses waived by the Adviser. 9 AFD EXCHANGE RESERVES _______________________________________________________________________________ AFD EXCHANGE RESERVES 1345 Avenue of the Americas New York, NY 10105 Toll-free 1(800) 221-5672 TRUSTEES JOHN D. CARIFA, CHAIRMAN AND PRESIDENT RUTH BLOCK (1) DAVID H. DIEVLER (1) JOHN H. DOBKIN (1) WILLIAM H. FOULK, JR. (1) JAMES M. HESTER (1) CLIFFORD L. MICHEL (1) DONALD J. ROBINSON (1) OFFICERS KATHLEEN A. CORBET, SENIOR VICE PRESIDENT WAYNE D. LYSKI, SENIOR VICE PRESIDENT RAYMOND J. PAPERA, SENIOR VICE PRESIDENT KENNETH T. CARTY, VICE PRESIDENT JOHN F. CHIODI, JR., VICE PRESIDENT MARIA R. CONA, VICE PRESIDENT EDMUND P. BERGAN, JR., SECRETARY MARK D. GERSTEN, TREASURER & CHIEF FINANCIAL OFFICER VINCENT S. NOTO, CONTROLLER CUSTODIAN STATE STREET BANK AND TRUST COMPANY P.O. Box 1912 Boston, MA 02105 LEGAL COUNSEL SEWARD & KISSEL ONE BATTERY PARK PLAZA New York, NY 10004 AUDITORS MCGLADREY & PULLEN, LLP 555 Fifth Avenue New York, NY 10017 TRANSFER AGENT ALLIANCE FUND SERVICES, INC. P.O. Box 1520 Secaucus, NJ 07096-1520 DISTRIBUTOR ALLIANCE FUND DISTRIBUTORS, INC. 1345 Avenue of the Americas New York, NY 10105 (1) Member of the audit committee. DISTRIBUTION OF THIS REPORT OTHER THAN TO SHAREHOLDERS MUST BE PRECEDED OR ACCOMPANIED BY THE FUND'S CURRENT PROSPECTUS, WHICH CONTAINS FURTHER INFORMATION ABOUT THE FUND. R THESE REGISTERED SERVICE MARKS USED UNDER LICENSE FROM THE OWNER, ALLIANCE CAPITAL MANAGEMENT L.P. 10 THE ALLIANCE FAMILY OF MUTUAL FUNDS _______________________________________________________________________________ FIXED INCOME Alliance Bond Fund U.S. Government Portfolio Corporate Bond Portfolio Alliance Global Dollar Government Fund Alliance Global Strategic Income Trust Alliance High Yield Fund Alliance Mortgage Securities Income Fund Alliance Limited Maturity Government Fund Alliance Multi-Market Strategy Trust Alliance North American Government Income Trust Alliance Short-Term Multi-Market Trust Alliance Short-Term U.S. Government Fund Alliance World Income Trust TAX-FREE INCOME Alliance Municipal Income Fund 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 MONEY MARKET AFD Exchange Reserves GROWTH The Alliance Fund Alliance Global Environment Fund Alliance Growth Fund Alliance Premier Growth Fund Alliance/Regent Sector Opportunity Fund GROWTH & INCOME Alliance Strategic Balanced Fund Alliance Balanced Shares Alliance Conservative Investors Fund Alliance Growth & Income Fund Alliance Growth Investors Fund Alliance Income Builder Fund Alliance Real Estate Investment Fund Alliance Utility Income Fund AGGRESSIVE GROWTH Alliance Global Small Cap Fund Alliance Quasar Fund Alliance Technology Fund INTERNATIONAL Alliance All-Asia Investment Fund Alliance Greater China '97 Fund Alliance International Fund Alliance New Europe Fund Alliance Worldwide Privatization Fund CLOSED-END FUNDS Alliance All-Market Advantage Fund ACM Government Income Fund ACM Government Opportunity Fund ACM Government Securities Fund ACM Government Spectrum Fund ACM Managed Dollar Income Fund ACM Managed Income Fund ACM Municipal Securities Income Fund Alliance World Dollar Government Fund Alliance World Dollar Government Fund II The Austria Fund The Korean Investment Fund The Spain Fund The Southern Africa Fund CASH MANAGEMENT SERVICES ACM Institutional Reserves Government Portfolio Prime Portfolio Tax-Free Portfolio Trust Portfolio Alliance Capital Reserves Alliance Government Reserves Alliance Insured Account Alliance Money Reserves Alliance Municipal Trust California Portfolio Connecticut Portfolio Florida Portfolio General Portfolio Massachusetts Portfolio New Jersey Portfolio New York Portfolio Virginia Portfolio Alliance Treasury Reserves Alliance Money Market Fund Prime Portfolio Government Portfolio General Municipal Portfolio 11 -----END PRIVACY-ENHANCED MESSAGE-----