AFD
----------------------------
EXCHANGE
----------------------------
RESERVES
----------------------------
ANNUAL REPORT
SEPTEMBER 30, 2000
<PAGE>
LETTER TO SHAREHOLDERS AFD Exchange Reserves
================================================================================
October 23, 2000
Dear Shareholder:
This report provides an overview of economic conditions during AFD Exchange
Reserves' annual reporting period ended September 30, 2000. AFD Exchange
Reserves (the "Fund") 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 September 30, 2000 totaled approximately $979.9
million, and the average weighted maturity of the Fund's portfolio was 10 days.
ECONOMIC COMMENTARY
The Federal Reserve has held the Federal Funds rate steady at 6.5% since its 50
basis point increase on May 16, 2000.
The U.S. continues to expand robustly, having grown 5.1% in the first half of
2000. Strong consumer and business spending remain the pillars of U.S.
expansion, offsetting poor trade performance. We expect 5.2% Gross Domestic
Product (GDP) growth in 2000 slowing to 3.5% in 2001. The "soft landing"
reflected in our moderate 2001 growth forecast will be the joint product of the
175 basis points' tightening by the Federal Reserve since early 1999, the equity
market correction and the increase in oil prices. The impact of these three
events on financing costs, wealth and real personal income has precipitated a
slowing in consumer and business spending.
Headline inflation edged up in the third quarter due to higher crude oil prices.
The total consumer price index (CPI) rose 3.5% year-over-year versus 3.3% in the
second quarter. The underlying (ex-food and energy) CPI rose 2.6% versus 2.4% in
the second quarter. Our analysis shows that oil prices currently represent
little long-term inflationary danger; but recent developments in the Middle East
highlight continuing risk. In our estimation, next year's 3.5% growth pace - 1%
below the U.S. economy's potential rate of growth - will reduce inflation risks
by unwinding the current tightness in the U.S. labor market and will help
stabilize the U.S. current account deficit, which we expect to reach 5% of the
GDP late this year.
The outlook is for steady Federal Reserve policy. The prospects for slower
growth in 2001 are in line with the central bank's objectives. Once excess
resource utilization is unwound in late 2001, the door will be open for a more
accommodative policy.
We appreciate your continued interest in AFD Exchange Reserves.
Sincerely,
/s/ John D. Carifa
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
<PAGE>
PORTFOLIO OF INVESTMENTS
September 30, 2000 AFD Exchange Reserves
================================================================================
Principal
Amount
(000) Security Yield Value
-----------------------------------------------------------------------
U.S. GOVERNMENT AGENCY
OBLIGATIONS-25.5%
Federal Home Loan Bank
$ 17,500 2/09/01 MTN............... 6.40% $ 17,498,566
50,000 10/25/00.................. 6.43 49,785,667
40,000 10/06/00 FRN.............. 6.96 39,999,626
Federal Home Loan
Mortgage Corp.
27,026 11/14/00.................. 6.44 26,813,275
Federal National
Mortgage Association
37,800 10/02/00.................. 6.32 37,793,364
20,000 10/05/00 FRN MTN.......... 6.93 19,999,893
Student Loan Marketing
Association
17,500 10/04/00 FRN.............. 6.93 17,499,930
40,000 10/12/00 FRN.............. 6.99 39,998,708
------------
Total U.S. Government
Agency Obligations
(amortized cost
$249,389,029)............. 249,389,029
------------
COMMERCIAL PAPER-23.9%
Allstate Corp.
8,200 11/27/00.................. 6.48 8,115,868
Aluminum Co. of America
8,200 11/01/00.................. 6.50 8,154,103
American Express Co.
7,700 11/15/00.................. 6.48 7,637,630
Associates Corp. B.V.
8,000 11/15/00.................. 6.50 7,935,000
AT&T Corp.
8,200 11/27/00.................. 6.48 8,115,868
Bell Atlantic Network
Funding
7,600 11/01/00.................. 6.53 7,557,265
Campbell Soup Co.
6,000 10/31/00.................. 6.48 5,967,600
2,800 12/07/00.................. 6.55 2,765,867
CS First Boston, Inc.
10,000 10/25/00 (a).............. 6.75 9,955,000
DaimlerChrysler Corp.
5,900 11/29/00.................. 6.49 5,837,245
1,100 10/25/00.................. 6.50 1,095,234
Equilon Enterprises LLC
7,000 10/02/00.................. 6.70 6,998,697
Florida Power Corp.
7,800 10/24/00.................. 6.54 7,767,409
GE Capital International
Funding
20,000 11/15/00 (a).............. 6.51 19,837,250
General Motors
Acceptance Corp.
7,800 11/15/00.................. 6.49% 7,736,722
Gillette Co.
5,800 10/02/00.................. 6.68 5,798,924
Goldman Sachs Group L.P.
7,800 11/15/00 (a).............. 6.50 7,736,625
Home Depot Real Estate
Funding
8,000 11/06/00.................. 6.77 7,945,840
Illinois Tool Works, Inc.
7,700 11/30/00.................. 6.48 7,616,840
National Rural Utility
Corp.
1,500 11/15/00.................. 6.50 1,487,812
Pfizer, Inc.
20,000 10/30/00 (a).............. 6.47 19,895,761
Philip Morris Capital
Corp.
8,200 10/27/00 (a).............. 6.50 8,161,505
Potomac Electric Power
Co.
8,200 11/14/00.................. 6.50 8,134,856
Proctor & Gamble Co.
7,700 10/16/00.................. 6.51 7,679,114
Sara Lee Corp.
7,700 10/23/00.................. 6.55 7,669,179
SBC Communications, Inc.
8,200 12/04/00.................. 6.48 8,105,536
Southern California
Edison Co.
4,935 10/31/00.................. 6.50 4,908,269
Tampa Electric Co.
7,800 10/30/00.................. 6.50 7,759,158
Teacher's Insurance
8,200 10/30/00.................. 6.49 8,157,130
Wal-Mart Stores, Inc.
8,200 11/28/00.................. 6.48 8,114,392
------------
Total Commercial Paper
(amortized cost
$234,647,699)............. 234,647,699
------------
CERTIFICATES OF
DEPOSIT-2.9%
First Tennessee Bank
8,000 6.53%, 10/16/00........... 6.53 8,000,000
State Street Bank & Trust
20,000 6.59%, 12/29/00........... 6.59 20,000,000
------------
Total Certificates of Deposit
(amortized cost
$28,000,000).............. 28,000,000
------------
2
<PAGE>
AFD Exchange Reserves
================================================================================
Value
-----------------------------------------------------------------------
TOTAL INVESTMENTS-52.3%
(amortized cost
$512,036,728)............. $512,036,728
Other assets less
liabilities-47.7%......... 467,812,662
------------
NET ASSETS-100%
(offering and redemption
price of $1.00 per share;
680,460,971 Class A shares;
168,773,762 Class B shares;
128,783,050 Class C shares
and 1,786,356 Advisor Class
shares outstanding)....... $979,849,390
============
--------------------------------------------------------------------------------
(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, 2000, these securities amounted to $65,586,141, representing
6.7% of net assets.
Glossary of Terms:
FRN - Floating Rate Note
MTN - Medium Term Note
See notes to financial statements.
3
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
September 30, 2000 AFD Exchange Reserves
================================================================================
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost $512,036,728) .......................... $ 512,036,728
Cash ............................................................................. 1,181,177
Receivable for shares of beneficial interest sold ................................ 493,433,217
Interest receivable .............................................................. 2,083,931
-------------
Total assets ..................................................................... 1,008,735,053
-------------
LIABILITIES
Payable for shares of beneficial interest redeemed ............................... 28,083,950
Distribution fee payable ......................................................... 397,519
Advisory fee payable ............................................................. 154,480
Accrued expenses ................................................................. 249,714
-------------
Total liabilities ................................................................ 28,885,663
-------------
NET ASSETS .......................................................................... $ 979,849,390
==============
COMPOSITION OF NET ASSETS
Capital shares ................................................................... $ 979,804,139
Accumulated net realized gain on investment transactions ......................... 45,251
-------------
$ 979,849,390
==============
CALCULATION OF MAXIMUM OFFERING PRICE
Class A Shares
Net asset value and offering price per share ($680,482,256 / 680,460,971 shares of
beneficial interest issued and outstanding) ...................................... $1.00
=====
Class B Shares
Net asset value and offering price per share ($168,792,354 / 168,773,762 shares of
beneficial interest issued and outstanding) ...................................... $1.00
=====
Class C Shares
Net asset value and offering price per share ($128,788,051 / 128,783,050 shares of
beneficial interest issued and outstanding) ...................................... $1.00
=====
Advisor Class Shares
Net asset value and offering price per share ($1,786,729 / 1,786,356 shares of
beneficial interest issued and outstanding) ...................................... $1.00
=====
</TABLE>
--------------------------------------------------------------------------------
See notes to financial statements.
4
<PAGE>
STATEMENT OF OPERATIONS
Year Ended September 30, 2000 AFD Exchange Reserves
================================================================================
INVESTMENT INCOME
Interest...................................... $44,262,169
EXPENSES
Advisory fee.................................. $ 1,815,474
Distribution fee - Class A.................... 2,080,754
Distribution fee - Class B.................... 2,096,130
Distribution fee - Class C.................... 720,563
Transfer agency............................... 797,377
Registration fees............................. 357,608
Custodian..................................... 256,173
Printing...................................... 121,138
Administrative................................ 102,043
Audit and legal............................... 75,312
Trustees' fees................................ 28,467
Miscellaneous................................. 11,895
-----------
Total expenses................................ 8,462,934
-----------
Net investment income......................... 35,799,235
REALIZED GAIN ON INVESTMENTS
Net realized gain on investment transactions.. 38,934
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS....... $35,838,169
===========
--------------------------------------------------------------------------------
See notes to financial statements.
5
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS AFD Exchange Reserves
================================================================================
Year Ended Year Ended
September 30, September 30,
2000 1999
============= =============
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income......................... $ 35,799,235 $ 19,166,124
Net realized gain on investment transactions.. 38,934 7,937
------------ ------------
Net increase in net assets from operations.... 35,838,169 19,174,061
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income
Class A.................................... (21,378,152) (8,793,553)
Class B.................................... (9,518,947) (6,755,553)
Class C.................................... (4,661,494) (3,331,654)
Advisor Class.............................. (240,642) (285,364)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase.................................. 282,748,013 248,788,147
------------ ------------
Total increase................................ 282,786,947 248,796,084
NET ASSETS
Beginning of period........................... 697,062,443 448,266,359
------------ ------------
End of period................................. $979,849,390 $697,062,443
============ ============
--------------------------------------------------------------------------------
See notes to financial statements.
6
<PAGE>
NOTES TO FINANCIAL STATEMENTS
September 30, 2000 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 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.
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
7
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued) AFD Exchange Reserves
================================================================================
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 Advisory 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 year
ended September 30, 2000, such reimbursements totaled $102,043.
For the year ended September 30, 2000, the Fund's expenses were reduced by
$32,559 under an expense offset arrangement with Alliance Fund Services, Inc.
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 of $366,005
from the sales of Class A shares and $573,469, $1,629,554, and $148,940 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, 2000.
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 $609,014 for the year ended September 30, 2000.
--------------------------------------------------------------------------------
NOTE C: Distribution Services Agreement
The Fund has adopted a Distribution Services Agreement (the "Agreement")
pursuant to Rule 12b-1 under the Investment Company Act of 1940 for Class A,
Class B and Class C. Under the Agreement, the Fund pays distribution and
servicing fees to the Distributor at an annual rate of up to .50% of the Fund's
average daily net assets attributable to Class A shares, 1.00% of the average
daily net assets attributable to Class B shares and .75% of the average daily
net assets attributable to Class C shares. There are no distribution and
servicing fees on the Advisor Class shares. Such fee is accrued daily and paid
monthly. The Agreement provides that the Distributor will use such payments in
their entirety for distribution assistance and promotional activities. The
Agreement also provides that the Adviser may use its own resources to finance
the distribution of the Fund's shares.
--------------------------------------------------------------------------------
NOTE D: Investment Transactions
At September 30, 2000, the cost of securities for federal income tax purposes
was the same as the cost for financial reporting purposes.
8
<PAGE>
AFD Exchange Reserves
================================================================================
NOTE E: Transactions in Shares of Beneficial Interest
An unlimited number of shares ($.001 par value) are authorized. At September 30,
2000, capital paid-in aggregated $680,460,971 for Class A, $168,773,762 for
Class B, $128,783,050 for Class C and $1,786,356 for Advisor Class.
Transactions, all at $1.00 per share, were as follows:
----------------------------------
CLASS A
----------------------------------
Year Ended Year Ended
September 30, September 30,
2000 1999
=============== ===============
Shares sold ............................... 23,131,444,029 7,526,806,604
Shares issued on reinvestments of dividends 21,378,152 8,793,553
Shares converted from Class B ............. 4,284,931 5,089,768
Shares redeemed ........................... (22,766,332,226) (7,419,466,877)
--------------- ---------------
Net increase .............................. 390,774,886 121,223,048
=============== ===============
----------------------------------
CLASS B
----------------------------------
Year Ended Year Ended
September 30, September 30,
2000 1999
=============== ===============
Shares sold ............................... 649,983,177 691,292,049
Shares issued on reinvestments of dividends 9,518,947 6,755,553
Shares converted to Class A ............... (4,284,931) (5,089,768)
Shares redeemed ........................... (753,934,690) (577,199,891)
--------------- ---------------
Net increase (decrease) ................... (98,717,497) 115,757,943
=============== ===============
----------------------------------
CLASS C
----------------------------------
Year Ended Year Ended
September 30, September 30,
2000 1999
=============== ===============
Shares sold ............................... 3,783,586,471 2,430,472,681
Shares issued on reinvestments of dividends 4,661,494 3,331,654
Shares redeemed ........................... (3,787,767,837) (2,430,333,424)
--------------- ---------------
Net increase .............................. 480,128 3,470,911
=============== ===============
----------------------------------
ADVISOR CLASS
----------------------------------
Year Ended Year Ended
September 30, September 30,
2000 1999
=============== ===============
Shares sold ............................... 275,642,828 255,695,937
Shares issued on reinvestments of dividends 240,642 285,364
Shares redeemed ........................... (285,672,974) (247,645,056)
--------------- ---------------
Net increase (decrease) ................... (9,789,504) 8,336,245
=============== ===============
9
<PAGE>
FINANCIAL HIGHLIGHTS AFD Exchange Reserves
================================================================================
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each
Period
<TABLE>
<CAPTION>
--------------------------------------------------------
CLASS A
--------------------------------------------------------
Year Ended September 30,
========================================================
2000 1999 1998 1997 1996
======== ======== ======== ======== ========
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
Income from Investment Operations
Net investment income ................................ .0511 .0408 .0454 .0411 .0416
------- ------- ------- ------- -------
Less: Dividends
Dividends from net investment income ................. (.0511) (.0408) (.0454) (.0411) (.0416)
------- ------- ------- ------- -------
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) . 5.24% 4.16% 4.64% 4.19% 4.24%
Ratios/Supplemental Data
Net assets, end of period (in millions) .............. $680 $290 $168 $41 $41
Ratio of expenses to average net assets .............. .99% .99% 1.06% 1.38% 1.29%
Ratio of net investment income to average net assets . 5.14% 4.06% 4.56% 4.10% 4.15%
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------
CLASS B
--------------------------------------------------------
Year Ended September 30,
========================================================
2000 1999 1998 1997 1996
======== ======== ======== ======== ========
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
Income from Investment Operations
Net investment income ................................ .0461 .0357 .0404 .0361 .0366
------- ------- ------- ------- -------
Less: Dividends
Dividends from net investment income ................. (.0461) (.0357) (.0404) (.0361) (.0366)
------- ------- ------- ------- -------
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) . 4.72% 3.64% 4.13% 3.67% 3.72%
Ratios/Supplemental Data
Net assets, end of period (in millions) .............. $169 $267 $152 $74 $65
Ratio of expenses to average net assets .............. 1.50% 1.50% 1.58% 1.88% 1.79%
Ratio of net investment income to average net assets . 4.54% 3.57% 4.05% 3.61% 3.67%
</TABLE>
--------------------------------------------------------------------------------
See footnote summary on page 11.
10
<PAGE>
AFD Exchange Reserves
================================================================================
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each
Period
<TABLE>
<CAPTION>
--------------------------------------------------------
CLASS C
--------------------------------------------------------
Year Ended September 30,
========================================================
2000 1999 1998 1997 1996
======== ======== ======== ======== ========
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
Income from Investment Operations
Net investment income ................................ .0486 .0383 .0430 .0386 .0390
------- ------- ------- ------- -------
Less: Dividends
Dividends from net investment income ................. (.0486) (.0383) (.0430) (.0386) (.0390)
------- ------- ------- ------- -------
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) . 4.98% 3.90% 4.39% 3.93% 3.98%
Ratios/Supplemental Data
Net assets, end of period (in millions) .............. $129 $128 $125 $24 $13
Ratio of expenses to average net assets .............. 1.24% 1.24% 1.29% 1.61% 1.55%
Ratio of net investment income to average net assets . 4.85% 3.86% 4.34% 3.90% 3.89%
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------
ADVISOR CLASS
---------------------------------------------
January 30,
1997(b)
Year Ended September 30, to
============================== September 30,
2000 1999 1998 1997
======= ======= ======= =============
<S> <C> <C> <C> <C>
Net asset value, beginning of period ............... $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- -------
Income from Investment Operations
Net investment income .............................. .0561 .0458 .0505 .0254
------- ------- ------- -------
Less: Dividends
Dividends from net investment income ............... (.0561) (.0458) (.0505) (.0254)
------- ------- ------- -------
Net asset value, end of period ..................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= =======
Total Return
Total investment return based on net asset value (a) 5.77% 4.68% 5.18% 3.14%
Ratios/Supplemental Data
Net assets, end of period (in thousands) ........... $1,787 $11,576 $3,240 $35
Ratio of expenses to average net assets ............ .47% .49% .55% .88%(c)
Ratio of net investment income to average net assets 5.53% 4.57% 5.08% 4.15%(c)
</TABLE>
--------------------------------------------------------------------------------
(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 of less than one year is not annualized.
(b) Commencement of distribution.
(c) Annualized.
11
<PAGE>
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 assets and liabilities, including
the portfolio of investments, 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, 2000, the results of its operations for the year then ended and
the changes in its net assets and the financial highlights for each of the two
years in the period then ended, in conformity with accounting principles
generally accepted in the United States of America. 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 audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States of America, 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 audits, which included confirmation of securities at
September 30, 2000 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above. The financial highlights for each of the
three years in the period ended September 30, 1998, were audited by other
independent accountants whose report dated October 16, 1998 expressed an
unqualified opinion on those statements.
PricewaterhouseCoopers LLP
New York, New York
October 27, 2000
12
<PAGE>
AFD Exchange Reserves
================================================================================
AFD Exchange Reserves
1345 Avenue of the Americas
New York, NY 10105
Toll-free 1(800) 221-5672
CUSTODIAN
State Street Bank and Trust Company
P.O. Box 1912
Boston, MA 02105
LEGAL COUNSEL
Seward & Kissel LLP
One Battery Park Plaza
New York, NY 10004
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
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
--------------------------------------------------------------------------------
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.
13
<PAGE>
THE ALLIANCE FAMILY OF MUTUAL FUNDS
================================================================================
Domestic Equity Funds
Balanced Shares
Conservative Investors Fund
Disciplined Value Fund
Growth & Income Fund
Growth Fund
Growth Investors Fund
Health Care Fund
Premier Growth Fund
Quasar Fund
Real Estate Investment Fund
Technology Fund
The Alliance Fund
Utility Income Fund
Global & International Equity Funds
All-Asia Investment Fund
Global Small Cap Fund
Greater China '97 Fund
International Fund
International Premier Growth Fund
New Europe Fund
Worldwide Privatization Fund
Select Investor Series
Biotechnology Portfolio
Premier Portfolio
Technology Portfolio
Fixed Income Funds
Corporate Bond Portfolio
Global Dollar Government Fund
Global Strategic Income Trust
High Yield Fund
Multi-Market Strategy Trust
North American Government Income Trust
Quality Bond Portfolio
U.S. Government Portfolio
Municipal Income Funds
National
Insured National
Arizona
California
Insured California
Florida
Massachusetts
Michigan
Minnesota
New Jersey
New York
Ohio
Pennsylvania
Virginia
<PAGE>
Closed-End Funds
The Spain Fund
ACM Municipal Securities Income Fund
All-Market Advantage Fund
ACM Government Income Fund
ACM Managed Income Fund
The Southern Africa Fund
The Austria Fund
World Dollar Government Fund
ACM Managed Dollar Income Fund
The Korean Investment Fund
World Dollar Government Fund II
AFD Exchange Reserves serves as the money market fund exchange vehicle for the
Alliance mutual funds.
To obtain a prospectus for any Alliance Capital fund, call your investment
professional, or call Alliance at (800) 227-4618.
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AFDSR900
001129
