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)
Joseph J. Mantineo
AllianceBernstein L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and address of agent for service)
Registrants telephone number, including area code: (800) 221-5672
Date of fiscal year end: September 30, 2012
Date of reporting period: March 31, 2012
ITEM 1. | REPORTS TO STOCKHOLDERS. |
SEMI-ANNUAL REPORT
AllianceBernstein
Exchange Reserves
March 31, 2012
Semi-Annual Report
Investment Products Offered
| Are Not FDIC Insured |
| May Lose Value |
| Are Not Bank Guaranteed |
Investors should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. For copies of our prospectus or summary prospectus, which contain this and other information, visit us online at www.alliancebernstein.com or contact your AllianceBernstein Investments representative. Please read the prospectus and/or summary prospectus carefully before investing.
This shareholder report must be preceded or accompanied by the Funds prospectus for individuals who are not current shareholders of the Fund.
You may obtain a description of the Funds proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Simply visit AllianceBernsteins website at www.alliancebernstein.com, or go to the Securities and Exchange Commissions (the Commission) website at www.sec.gov, or call AllianceBernstein at (800) 227-4618.
The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year on Form N-Q. The Funds Forms N-Q are available on the Commissions website at www.sec.gov. The Funds Forms N-Q may also be reviewed and copied at the Commissions Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330. AllianceBernstein publishes full portfolio holdings for the Fund monthly at www.alliancebernstein.com.
AllianceBernstein Investments, Inc. (ABI) is the distributor of the AllianceBernstein family of mutual funds. ABI is a member of FINRA and is an affiliate of AllianceBernstein L.P., the manager of the funds.
AllianceBernstein® and the AB Logo are registered trademarks and service marks used by permission of the owner, AllianceBernstein L.P.
FUND EXPENSES
(unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below.
Actual Expenses
The table below provides information about actual account values and actual expenses. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled Expenses Paid During Period to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Funds actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Funds actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the hypothetical example is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Account Value October 1, 2011 |
Ending Account Value March 31, 2012 |
Expenses Paid During Period* |
Annualized Expense Ratio* |
|||||||||||||
Class A | ||||||||||||||||
Actual |
$ | 1,000 | $ | 1,000.80 | $ | 0.70 | 0.14 | % | ||||||||
Hypothetical** |
$ | 1,000 | $ | 1,024.43 | $ | 0.71 | 0.14 | % | ||||||||
Class B | ||||||||||||||||
Actual |
$ | 1,000 | $ | 1,000.80 | $ | 0.75 | 0.15 | % | ||||||||
Hypothetical** |
$ | 1,000 | $ | 1,024.38 | $ | 0.76 | 0.15 | % | ||||||||
Class C | ||||||||||||||||
Actual |
$ | 1,000 | $ | 1,000.80 | $ | 0.70 | 0.14 | % | ||||||||
Hypothetical** |
$ | 1,000 | $ | 1,024.43 | $ | 0.71 | 0.14 | % | ||||||||
Advisor Class | ||||||||||||||||
Actual |
$ | 1,000 | $ | 1,000.80 | $ | 0.70 | 0.14 | % | ||||||||
Hypothetical** |
$ | 1,000 | $ | 1,024.43 | $ | 0.71 | 0.14 | % | ||||||||
Class R | ||||||||||||||||
Actual |
$ | 1,000 | $ | 1,000.80 | $ | 0.65 | 0.13 | % | ||||||||
Hypothetical** |
$ | 1,000 | $ | 1,024.48 | $ | 0.66 | 0.13 | % | ||||||||
Class K | ||||||||||||||||
Actual |
$ | 1,000 | $ | 1,000.70 | $ | 0.75 | 0.15 | % | ||||||||
Hypothetical** |
$ | 1,000 | $ | 1,024.38 | $ | 0.76 | 0.15 | % | ||||||||
Class I | ||||||||||||||||
Actual |
$ | 1,000 | $ | 1,000.80 | $ | 0.65 | 0.13 | % | ||||||||
Hypothetical** |
$ | 1,000 | $ | 1,024.48 | $ | 0.66 | 0.13 | % |
* | Expenses are equal to the classes annualized expense ratios multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period). |
** | Assumes 5% return before expenses. |
ALLIANCEBERNSTEIN EXCHANGE RESERVES | 1 |
Fund Expenses
PORTFOLIO OF INVESTMENTS
March 31, 2012 (unaudited)
Yield* | Principal Amount (000) |
U.S. $ Value | ||||||||
|
||||||||||
SHORT-TERM INVESTMENTS 100.0% |
||||||||||
Certificates of Deposit 44.5% |
||||||||||
Bank of Montreal Chicago |
0.140% | $ | 55,000 | $ | 55,000,000 | |||||
Bank of Nova Scotia Houston |
0.325% | 12,600 | 12,600,000 | |||||||
5/10/12(a) |
0.392% | 16,000 | 16,000,000 | |||||||
6/11/12(a) |
0.674% | 2,500 | 2,499,782 | |||||||
7/27/12(a) |
0.757% | 3,750 | 3,753,683 | |||||||
10/18/12(a) |
0.865% | 4,500 | 4,510,750 | |||||||
7/16/12(a) |
1.467% | 15,000 | 15,041,587 | |||||||
Bank of Tokyo Mitsubishi UFJ NY |
0.370% | 10,000 | 10,001,801 | |||||||
6/08/12 |
0.450% | 46,000 | 46,000,000 | |||||||
Canadian Imp Bank Comm NY |
0.258% | 38,250 | 38,250,000 | |||||||
10/15/12(a) |
0.542% | 4,300 | 4,305,470 | |||||||
Credit Suisse NY |
0.723% | 42,500 | 42,510,555 | |||||||
Deutsche Bank NY |
0.400% | 45,000 | 45,000,000 | |||||||
Dnb Nor Bank ASA NY |
0.553% | 42,500 | 42,500,000 | |||||||
National Australia Bank NY |
0.490% | 10,000 | 10,000,000 | |||||||
10/12/12(a) |
0.680% | 43,800 | 43,800,000 | |||||||
Nordea Bank Finland NY |
0.390% | 44,000 | 44,000,000 | |||||||
Nordea Bank Finland PLC |
0.877% | 7,720 | 7,721,477 | |||||||
Norinchukin Bank NY |
0.590% | 57,100 | 57,100,000 | |||||||
Rabobank Nederland NV NY |
0.510% | 41,450 | 41,450,000 | |||||||
Royal Bank of Canada NY |
0.366% | 26,100 | 26,100,000 | |||||||
3/04/13(a) |
0.534% | 15,000 | 15,000,000 | |||||||
7/09/12(a) |
0.593% | 11,050 | 11,050,262 | |||||||
Standard Chartered Bank NY |
0.590% | 44,300 | 44,300,000 | |||||||
Sumitomo Mitsui Bank NY |
0.370% | 45,000 | 45,000,000 | |||||||
Sumitomo Trust & Bank NY |
0.180% | 15,000 | 15,000,000 | |||||||
4/17/12 |
0.510% | 19,750 | 19,752,549 | |||||||
Svenska Handelsbanken NY |
0.300% | 30,000 | 30,000,000 | |||||||
7/23/12 |
0.630% | 15,000 | 15,000,465 |
2 | ALLIANCEBERNSTEIN EXCHANGE RESERVES |
Portfolio of Investments
Yield* | Principal Amount (000) |
U.S. $ Value | ||||||||
|
||||||||||
Toronto-Dominion Bank NY |
0.312% | $ | 26,000 | $ | 26,000,000 | |||||
2/04/13(a) |
0.542% | 29,000 | 29,000,000 | |||||||
Westpac Banking Corp. NY |
0.332% | 10,277 | 10,271,861 | |||||||
7/17/12(a) |
0.342% | 27,000 | 26,984,173 | |||||||
1/17/13(a) |
0.742% | 15,000 | 15,000,000 | |||||||
|
|
|||||||||
870,504,415 | ||||||||||
|
|
|||||||||
Commercial Paper 23.7% |
||||||||||
Australia & New Zealand |
0.461% | 33,600 | 33,596,565 | |||||||
Banque Et Caisse Epargne |
0.350% | 10,000 | 9,991,542 | |||||||
6/26/12 |
0.481% | 45,000 | 44,949,000 | |||||||
Barlcays US Funding LLC |
0.090% | 35,000 | 35,000,000 | |||||||
Commonwealth Bank Australia |
0.100% | 25,000 | 24,986,000 | |||||||
DBS Bank Ltd. |
0.481% | 35,000 | 34,941,200 | |||||||
HSBC Bank PLC |
0.481% | 45,000 | 45,000,000 | |||||||
JP Morgan Chase & Co. |
0.280% | 23,750 | 23,723,400 | |||||||
KFW |
0.220% | 25,000 | 24,990,833 | |||||||
6/19/12 |
0.220% | 30,000 | 29,985,700 | |||||||
State Street Corp. |
0.351% | 8,000 | 7,997,278 | |||||||
6/06/12 |
0.351% | 13,700 | 13,691,342 | |||||||
Straight-A Funding LLC |
0.190% | 25,000 | 24,998,153 | |||||||
Series 1 |
0.180% | 20,000 | 19,992,700 | |||||||
Series CP |
0.190% | 10,000 | 9,998,733 | |||||||
Toyota Motor Credit Corp. |
0.381% | 45,000 | 44,946,800 | |||||||
US Bank NA |
0.270% | 35,000 | 34,961,413 | |||||||
|
|
|||||||||
463,750,659 | ||||||||||
|
|
|||||||||
Short-Term Municipal Notes 13.7% |
||||||||||
Municipal Obligations 13.7% |
||||||||||
California Infra & Eco Dev Bk |
0.170% | 10,005 | 10,005,000 |
ALLIANCEBERNSTEIN EXCHANGE RESERVES | 3 |
Portfolio of Investments
Yield* | Principal Amount (000) |
U.S. $ Value | ||||||||
|
||||||||||
Series 2010A-2 |
0.170% | $ | 25,750 | $ | 25,750,000 | |||||
California Statewide CDA |
0.180% | 10,000 | 10,000,000 | |||||||
Charlotte-Mecklenburg Hosp |
0.140% | 1,695 | 1,695,000 | |||||||
Colorado Edl & Cultural Facs Auth |
0.200% | 3,455 | 3,455,000 | |||||||
Series D |
0.200% | 1,500 | 1,500,000 | |||||||
Connecticut Hlth & Ed Fac Auth |
0.170% | 10,900 | 10,900,000 | |||||||
Series 2001V-2 |
0.190% | 1,800 | 1,800,000 | |||||||
Connecticut Hlth & Ed Fac Auth |
0.190% | 8,100 | 8,100,000 | |||||||
Series 2005 Y-3 |
0.170% | 2,400 | 2,400,000 | |||||||
Dallas Fort Worth TX Intl Arpt |
0.170% | 3,500 | 3,500,000 | |||||||
East Baton Rouge Parish LA |
0.160% | 4,775 | 4,775,000 | |||||||
Houston TX Hgr Ed Fin Corp. |
0.160% | 10,870 | 10,870,000 | |||||||
Series 2008B |
0.190% | 2,400 | 2,400,000 | |||||||
Illinois Finance Auth |
0.200% | 16,545 | 16,545,000 | |||||||
Jackson Cnty MS PCR |
0.170% | 2,300 | 2,300,000 | |||||||
Lancaster Cnty NE Hosp Auth |
0.210% | 2,700 | 2,700,000 |
4 | ALLIANCEBERNSTEIN EXCHANGE RESERVES |
Portfolio of Investments
Yield* | Principal Amount (000) |
U.S. $ Value | ||||||||
|
||||||||||
Lincoln Cnty WY PCR |
0.160% | $ | 12,200 | $ | 12,200,000 | |||||
Loudoun Cnty VA IDA |
0.160% | 12,950 | 12,950,000 | |||||||
Lower Neches Valley Auth TX |
0.160% | 9,200 | 9,200,000 | |||||||
3/01/33(c) |
0.170% | 10,330 | 10,330,000 | |||||||
Massachusetts Dev Fin Agy |
0.160% | 1,531 | 1,531,000 | |||||||
Massachusetts Hlth & Ed Facs Auth |
0.190% | 10,425 | 10,425,000 | |||||||
Mississippi Business Fin Corp. |
0.150% | 15,000 | 15,000,000 | |||||||
Series 2009 B |
0.190% | 1,000 | 1,000,000 | |||||||
Series 2009E |
0.170% | 11,200 | 11,200,000 | |||||||
Series 2010L |
0.170% | 20,000 | 20,000,000 | |||||||
New York St HFA MFHR |
0.150% | 8,000 | 8,000,000 | |||||||
Ohio Air Quality Dev Auth |
0.190% | 4,000 | 4,000,000 | |||||||
Shelby Cnty KY Lease Rev |
0.200% | 3,550 | 3,550,000 | |||||||
Valdez AK Marine Terminal |
0.160% | 14,915 | 14,915,000 | |||||||
Series 1993C |
0.160% | 10,750 | 10,750,000 | |||||||
Washington St Hsg Fin Comm |
0.240% | 3,550 | 3,550,000 | |||||||
|
|
|||||||||
267,296,000 | ||||||||||
|
|
ALLIANCEBERNSTEIN EXCHANGE RESERVES | 5 |
Portfolio of Investments
Yield* | Principal Amount (000) |
U.S. $ Value | ||||||||
|
||||||||||
Repurchase Agreements 10.5% |
||||||||||
Barclays Capital 0.08%, dated 3/30/12 due 4/02/12 in the amount of $40,266,067 (collateralized by $39,900,000 U.S. Treasury Note, 0.125-1.500%, due 12/31/13 to 6/30/18, value $40,800,036) |
$ | 40 | $ | 40,000,000 | ||||||
Mizuho Securities USA 0.25%, dated 3/30/12 due 4/02/12 in the amount of $85,001,771 (collateralized by $55,739,900 U.S. Treasury Bond, 8.000%, due 11/15/21, value $86,700,076) |
85 | 85,000,000 | ||||||||
UBS Financial Services 0.15%, dated 3/30/12 due 4/02/12 in the amount of $80,101,001 (collateralized by $94,863,831 Federal National Mortgage Association and Federal Home Loan Mortgage Corp., 4.500%, due 8/1/40 to 10/1/41, value $81,702,000) |
80 | 80,100,000 | ||||||||
|
|
|||||||||
205,100,000 | ||||||||||
|
|
|||||||||
U.S. Government & Government Sponsored Agency Obligations 3.8% |
||||||||||
Federal Farm Credit Bank |
0.202% | 5,000 | 4,999,546 | |||||||
4/23/12(a) |
0.252% | 5,000 | 5,000,036 | |||||||
4/12/12(a) |
0.272% | 5,470 | 5,470,053 | |||||||
Federal Home Loan Mortgage Corp. |
0.213% | 7,500 | 7,501,276 | |||||||
5/11/12(a) |
0.222% | 1,265 | 1,264,973 | |||||||
U.S. Treasury Bill |
0.091% | 50,000 | 49,994,313 | |||||||
|
|
|||||||||
74,230,197 | ||||||||||
|
|
|||||||||
Corporates Investment Grades 2.0% |
||||||||||
Australia & New Zealand Banking
Group Ltd. |
0.783% | 2,100 | 2,101,114 | |||||||
Coca-Cola Co. (The) |
0.553% | 6,200 | 6,201,541 | |||||||
Commonwealth Bank of Australia |
0.481% | 27,000 | 27,112,839 | |||||||
Wachovia Corp. |
0.691% | 3,400 | 3,400,397 | |||||||
|
|
|||||||||
38,815,891 | ||||||||||
|
|
6 | ALLIANCEBERNSTEIN EXCHANGE RESERVES |
Portfolio of Investments
Yield* | Principal Amount (000) |
U.S. $ Value | ||||||||
|
||||||||||
Time Deposits 1.8% |
||||||||||
HSBC Bank USA |
0.060% | $ | 10,000 | $ | 10,000,000 | |||||
Royal Bank of Canada |
0.100% | 25,000 | 25,000,000 | |||||||
|
|
|||||||||
35,000,000 | ||||||||||
|
|
|||||||||
Total Investments
100.0% |
1,954,697,162 | |||||||||
Other assets less liabilities 0.0% |
(214,491 | ) | ||||||||
|
|
|||||||||
Net Assets 100.0% |
$ | 1,954,482,671 | ||||||||
|
|
(a) | Floating Rate Security. Stated interest rate was in effect at March 31, 2012. |
(b) | Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities are considered liquid and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At March 31, 2012, the aggregate market value of these securities amounted to $87,796,518 or 4.5% of net assets. |
(c) | Variable Rate Demand Notes are instruments whose interest rates change on a specific date (such as coupon date or interest payment date) or whose interest rates vary with changes in a designated base rate (such as the prime interest rate). This instrument is payable on demand and is secured by letters of credit or other credit support agreements from major banks. |
* | Represents annualized yield from date of purchase for discount securities, and stated interest rate for interest-bearing securities. |
Glossary:
CDA Community Development Authority
HFA Housing Finance Authority
IDA Industrial Development Authority/Agency
MFHR Multi-Family Housing Revenue
PCR Pollution Control Revenue Bond
See notes to financial statements.
ALLIANCEBERNSTEIN EXCHANGE RESERVES | 7 |
Portfolio of Investments
STATEMENT OF ASSETS & LIABILITIES
March 31, 2012 (unaudited)
Assets | ||||
Investments in securities, at value (cost $1,749,597,162) |
$ | 1,749,597,162 | ||
Repurchase agreements, at value (cost $205,100,000) |
205,100,000 | |||
Cash |
72,820 | |||
Interest receivable |
712,370 | |||
Receivable for shares of beneficial interest sold |
701,208 | |||
|
|
|||
Total assets |
1,956,183,560 | |||
|
|
|||
Liabilities | ||||
Payable for shares of beneficial interest redeemed |
1,124,058 | |||
Transfer Agent fee payable |
148,210 | |||
Dividends payable |
35,482 | |||
Advisory fee payable |
162,734 | |||
Administrative fee payable |
7,038 | |||
Accrued expenses |
223,367 | |||
|
|
|||
Total liabilities |
1,700,889 | |||
|
|
|||
Net Assets |
$ | 1,954,482,671 | ||
|
|
|||
Composition of Net Assets | ||||
Shares of beneficial interest, at par |
$ | 1,954,444 | ||
Additional paid-in capital |
1,952,500,881 | |||
Distributions in excess of net investment income |
(2,001 | ) | ||
Accumulated net realized gain on investment transactions |
29,347 | |||
|
|
|||
$ | 1,954,482,671 | |||
|
|
Net Asset Value Per Shareunlimited shares authorized, $.001 par value
Class | Net Assets | Shares Outstanding |
Net Asset Value |
|||||||||
A | $ | 184,045,519 | 184,034,659 | $ | 1.00 | |||||||
|
||||||||||||
B | $ | 21,127,295 | 21,124,148 | $ | 1.00 | |||||||
|
||||||||||||
C | $ | 22,552,161 | 22,550,226 | $ | 1.00 | |||||||
|
||||||||||||
Advisor | $ | 731,698,006 | 731,684,410 | $ | 1.00 | |||||||
|
||||||||||||
R | $ | 6,811,727 | 6,811,545 | $ | 1.00 | |||||||
|
||||||||||||
K | $ | 34,247,737 | 34,246,648 | $ | 1.00 | |||||||
|
||||||||||||
I | $ | 954,000,226 | 953,991,986 | $ | 1.00 | |||||||
|
See notes to financial statements.
8 | ALLIANCEBERNSTEIN EXCHANGE RESERVES |
Statement of Assets & Liabilities
STATEMENT OF OPERATIONS
Six Months Ended March 31, 2012 (unaudited)
Investment Income | ||||||||
Interest |
$ | 2,379,060 | ||||||
Expenses | ||||||||
Advisory fee (see Note B) |
$ | 1,946,034 | ||||||
Distribution feeClass A |
301,103 | |||||||
Distribution feeClass B |
119,819 | |||||||
Distribution feeClass C |
102,185 | |||||||
Distribution feeClass R |
16,972 | |||||||
Distribution feeClass K |
49,512 | |||||||
Transfer agencyClass A |
56,597 | |||||||
Transfer agencyClass B |
12,461 | |||||||
Transfer agencyClass C |
9,849 | |||||||
Transfer agencyAdvisor Class |
198,402 | |||||||
Transfer agencyClass R |
2,037 | |||||||
Transfer agencyClass K |
39,609 | |||||||
Transfer agencyClass I |
177,902 | |||||||
Custodian |
98,880 | |||||||
Registration fees |
75,650 | |||||||
Administrative |
48,548 | |||||||
Trustees fees |
26,976 | |||||||
Legal |
18,593 | |||||||
Printing |
18,368 | |||||||
Audit |
17,058 | |||||||
Miscellaneous |
10,436 | |||||||
|
|
|||||||
Total expenses |
3,346,991 | |||||||
Less: expenses waived and reimbursed by the Adviser (see Note B) |
(1,233,775 | ) | ||||||
Less: expenses waived and reimbursed by the Distributor (see Note C) |
(589,591 | ) | ||||||
Less: expenses waived by the Transfer Agent |
(444,246 | ) | ||||||
|
|
|||||||
Net expenses |
1,079,379 | |||||||
|
|
|||||||
Net investment income |
1,299,681 | |||||||
|
|
|||||||
Realized and Unrealized Gain on Investment Transactions | ||||||||
Net realized gain on investment transactions |
28,819 | |||||||
|
|
|||||||
Net Increase in Net Assets from Operations |
$ | 1,328,500 | ||||||
|
|
See notes to financial statements.
ALLIANCEBERNSTEIN EXCHANGE RESERVES | 9 |
Statement of Operations
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended March 31, 2012 (unaudited) |
Year Ended September 30, 2011 |
|||||||
Increase in Net Assets from Operations | ||||||||
Net investment income |
$ | 1,299,681 | $ | 68,509 | ||||
Net realized gain on investment transactions |
28,819 | 4,716 | ||||||
|
|
|
|
|||||
Net increase in net assets from operations |
1,328,500 | 73,225 | ||||||
Dividends to Shareholders from | ||||||||
Net investment income |
||||||||
Class A |
(156,894 | ) | (24,865 | ) | ||||
Class B |
(17,934 | ) | (2,995 | ) | ||||
Class C |
(20,840 | ) | (3,203 | ) | ||||
Advisor Class |
(573,192 | ) | (30,169 | ) | ||||
Class R |
(5,786 | ) | (792 | ) | ||||
Class K |
(28,753 | ) | (3,909 | ) | ||||
Class I |
(498,283 | ) | (2,576 | ) | ||||
Transactions in Shares of Beneficial Interest | ||||||||
Net increase |
925,116,917 | 541,840,538 | ||||||
|
|
|
|
|||||
Total increase |
925,143,735 | 541,845,254 | ||||||
Net Assets | ||||||||
Beginning of period |
1,029,338,936 | 487,493,682 | ||||||
|
|
|
|
|||||
End of Period |
$ | 1,954,482,671 | $ | 1,029,338,936 | ||||
|
|
|
|
See notes to financial statements.
10 | ALLIANCEBERNSTEIN EXCHANGE RESERVES |
Statement of Changes in Net Assets
NOTES TO FINANCIAL STATEMENTS
March 31, 2012 (unaudited)
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 Funds 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, Advisor Class, Class R, Class K and Class I shares. All seven classes of shares have identical voting, dividend, liquidation and other rights, except that the classes bear different distribution and transfer agency expenses. Each class 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 AllianceBernstein 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 AllianceBernstein Mutual Funds without any sales charge at the time of purchase, but on Class A shares of the Fund that were received in exchange for another AllianceBernstein 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 AllianceBernstein 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. Effective January 31, 2009, sales of Class B shares of the Fund to new investors were suspended. Class B shares will only be issued (i) upon the exchange of Class B shares from another AllianceBernstein Mutual Fund, (ii) for purposes of dividend reinvestment, (iii) through the Funds Automatic Investment Program (the Program) for accounts that established the Program prior to January 31, 2009, and (iv) for purchases of additional shares by Class B shareholders as of January 31, 2009. The ability to establish a new Program for accounts containing Class B shares was suspended as of January 31, 2009. 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 AllianceBernstein Mutual Funds. Class B shares also are offered in exchange, to the extent described in the prospectus, for Class B shares of other AllianceBernstein Mutual Funds without an initial sales charge. However, a CDSC may be charged if shares are redeemed within a certain number of years
ALLIANCEBERNSTEIN EXCHANGE RESERVES | 11 |
Notes to Financial Statements
of the original purchase of AllianceBernstein Mutual Fund Class B shares. When redemption occurs, the applicable CDSC schedule is that which applied to the AllianceBernstein 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 AllianceBernstein 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 AllianceBernstein Mutual Funds.
Advisor Class shares are sold for cash or in exchange for Advisor Class shares of another AllianceBernstein Mutual Fund without an initial sales charge or CDSC and are not subject to ongoing distribution expenses.
Class R, Class K, and Class I shares are sold for cash or in exchange of the same class of shares of another AllianceBernstein Mutual Fund without an initial sales charge or CDSC. Class I shares are not subject to ongoing distribution expenses. Class I shares are also available for the investment of cash collateral related to the AllianceBernstein Funds securities lending programs.
The financial statements have been prepared in conformity with U.S. generally accepted accounting principles (U.S. GAAP) 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. Security Valuation
Securities in which the Fund invests are traded primarily in the over-the-counter market and are valued at amortized cost, which approximates market value. Under such method a portfolio instrument is valued at cost and any premium or discount is amortized or accreted, respectively, on a constant basis to maturity.
2. Fair Value Measurements
In accordance with U.S. GAAP regarding fair value measurements, fair value is defined as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The U.S. GAAP disclosure requirements establish a framework for measuring fair value, and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability. Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset
12 | ALLIANCEBERNSTEIN EXCHANGE RESERVES |
Notes to Financial Statements
or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Funds own assumptions about the assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-tier hierarchy of inputs is summarized below.
| Level 1quoted prices in active markets for identical investments |
| Level 2other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
| Level 3significant unobservable inputs (including the Funds own assumptions in determining the fair value of investments) |
The following table summarizes the valuation of the Funds investments by the above fair value hierarchy levels as of March 31, 2012:
Investments in Securities: |
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets: |
||||||||||||||||
Certificates of Deposit |
$ | 0 | | $ | 870,504,415 | $ | 0 | | $ | 870,504,415 | ||||||
Commercial Paper |
0 | | 463,750,659 | 0 | | 463,750,659 | ||||||||||
Short-Term Municipal Notes |
0 | | 267,296,000 | 0 | | 267,296,000 | ||||||||||
Repurchase Agreements |
0 | | 205,100,000 | 0 | | 205,100,000 | ||||||||||
U.S. Government & Government Sponsored Agency Obligations |
0 | | 74,230,197 | 0 | | 74,230,197 | ||||||||||
CorporatesInvestment Grades |
0 | | 38,815,891 | 0 | | 38,815,891 | ||||||||||
Time Deposits |
0 | | 35,000,000 | 0 | | 35,000,000 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 0 | | $ | 1,954,697,162 | $ | 0 | | $ | 1,954,697,162 | ||||||
|
|
|
|
|
|
|
|
3. Taxes
It is the Funds policy to meet 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 shareholders. Therefore, no provisions for federal income or excise taxes are required.
In accordance with U.S. GAAP requirements regarding accounting for uncertainties in income taxes, management has analyzed the Funds tax positions taken or expected to be taken on federal and state income tax returns for all open tax years (the current and the prior three tax years) and has concluded that no provision for income tax is required in the Funds financial statements.
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 annually.
5. Class Allocations
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
ALLIANCEBERNSTEIN EXCHANGE RESERVES | 13 |
Notes to Financial Statements
the Fund represented by the net assets of such class, except for class specific expenses which are allocated to the respective class. Realized and unrealized gains and losses are allocated among the various share classes based on respective net assets.
6. Investment Income and Investment Transactions
Interest income is accrued daily and includes amortization of premiums and accretions of discounts as adjustments to interest income. Investment transactions are accounted for on the date the securities are purchased or sold. It is the Funds 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.
7. Repurchase Agreements
It is the Funds policy that its custodian or designated subcustodian take control 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. If the seller defaults and the value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of collateral by the Fund may be delayed or limited.
NOTE B
Advisory Fee and Other Transactions with Affiliates
The Fund pays AllianceBernstein L.P. (the Adviser) 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. For the six months ended March 31, 2012, the Adviser has voluntarily agreed to waive a portion of such fees in the amount of $1,190,453.
Pursuant to the investment advisory agreement, the Fund may reimburse the Adviser for certain legal and accounting services provided to the Fund by the Adviser. For the six months ended March 31, 2012, the Adviser voluntarily agreed to waive such fees in the amount of $43,322.
The Fund compensates AllianceBernstein Investor Services, Inc. (ABIS), 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. ABIS may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. Such compensation retained by ABIS amounted to $46,885 for the six months ended March 31, 2012.
For the six months ended March 31, 2012, the Transfer Agent has voluntarily agreed to waive a portion of transfer agency fees in the amount of $45,865, $10,437, $8,098, $164,478 and $35,429 for Class A, Class B, Class C, Adviser
14 | ALLIANCEBERNSTEIN EXCHANGE RESERVES |
Notes to Financial Statements
Class and Class K shares, respectively. The Transfer Agent has voluntarily agreed to waive all transfer agency fees in the amount of $2,037 and $177,902 for Class R and Class I shares, respectively.
AllianceBernstein Investments, Inc. (the Distributor), a wholly-owned subsidiary of the Adviser, serves as the distributor of the Funds shares. The Distributor has advised the Fund that it has received $698, $14,663 and $9,255 in contingent deferred sales charges imposed upon redemptions by shareholders of Class A, Class B and Class C shares, respectively, for the six months ended March 31, 2012.
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, Class C, Class R and Class K. Under the Agreement, the Fund pays distribution and servicing fees to the Distributor at an annual rate of .30% of the Funds average daily net assets attributable to Class A shares, 1% of the Funds average daily net assets attributable to Class B shares, .75% of the Funds average daily net assets attributable to Class C shares, .50% of the Funds average daily net assets attributable to Class R shares and .25% of the Funds average daily net assets attributable to Class K shares. There are no distribution and servicing fees on the Advisor Class and Class I shares. The fees are accrued daily and paid monthly. The Agreement provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities. For the six months ended March 31, 2012, the Distributor has voluntarily agreed to waive all of the distribution fees in the amount of $301,103, $119,819, $102,185, $16,972 and $49,512 for Class A, B, C, R and K shares, respectively, limiting the effective annual rate to 0% for the Class A, Class B, Class C, Class R and Class K shares.
NOTE D
Investment Transactions, Income Taxes and Distributions to Shareholders
At March 31, 2012, the cost of investments for federal income tax purposes was the same as the cost for financial reporting purposes. The tax character of distributions to be paid for the year ending September 30, 2012 will be determined at the end of the current fiscal year. The tax character of distributions paid during the fiscal years ended September 30, 2011 and September 30, 2010 were as follows:
2011 | 2010 | |||||||
Distributions paid from: |
||||||||
Ordinary income |
$ | 68,509 | $ | 117,911 | ||||
|
|
|
|
|||||
Total distributions paid |
$ | 68,509 | $ | 117,911 | ||||
|
|
|
|
ALLIANCEBERNSTEIN EXCHANGE RESERVES | 15 |
Notes to Financial Statements
As of September 30, 2011, the components of accumulated earnings/(deficit) on a tax basis were as follows:
Undistributed ordinary income |
$ | 528 | ||
Accumulated capital and other losses |
0 | (a) | ||
|
|
|||
Total accumulated earnings/(deficit) |
$ | 528 | ||
|
|
(a) | During the fiscal year ended September 30, 2011, the Fund utilized capital loss carryforwards of $4,188. |
For tax purposes, net capital losses may be carried over to offset future capital gains, if any. Under the Regulated Investment Company Modernization Act of 2010, funds are permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an indefinite period. These post-enactment capital losses must be utilized prior to the pre-enactment capital losses, which are subject to expiration. Post-enactment capital loss carryforwards will retain their character as either short-term or long-term capital losses rather than being considered short-term as under previous regulation.
NOTE E
Transactions in Shares of Beneficial Interest
Transactions, all at $1.00 per share, were as follows:
Shares | ||||||||||
Six Months Ended March 31, 2012 (unaudited) |
Year Ended September 30, 2011 |
|||||||||
|
|
|||||||||
Class A | ||||||||||
Shares sold |
49,435,043 | 162,795,124 | ||||||||
|
||||||||||
Shares issued in reinvestment of dividends |
153,559 | 24,864 | ||||||||
|
||||||||||
Shares converted from Class B |
1,340,119 | 2,386,604 | ||||||||
|
||||||||||
Shares redeemed |
(87,984,133 | ) | (169,484,730 | ) | ||||||
|
||||||||||
Net decrease |
(37,055,412 | ) | (4,278,138 | ) | ||||||
|
||||||||||
Class B | ||||||||||
Shares sold |
2,369,280 | 9,209,209 | ||||||||
|
||||||||||
Shares issued in reinvestment of dividends |
17,547 | 2,995 | ||||||||
|
||||||||||
Shares converted to Class A |
(1,340,119 | ) | (2,386,604 | ) | ||||||
|
||||||||||
Shares redeemed |
(5,960,523 | ) | (17,010,833 | ) | ||||||
|
||||||||||
Net decrease |
(4,913,815 | ) | (10,185,233 | ) | ||||||
|
||||||||||
Class C | ||||||||||
Shares sold |
6,507,949 | 31,213,837 | ||||||||
|
||||||||||
Shares issued in reinvestment of dividends |
20,429 | 3,203 | ||||||||
|
||||||||||
Shares redeemed |
(14,516,333 | ) | (27,859,681 | ) | ||||||
|
||||||||||
Net increase (decrease) |
(7,987,955 | ) | 3,357,359 | |||||||
|
||||||||||
16 | ALLIANCEBERNSTEIN EXCHANGE RESERVES |
Notes to Financial Statements
Shares | ||||||||||
Six Months Ended March 31, 2012 (unaudited) |
Year Ended September 30, 2011 |
|||||||||
|
|
|||||||||
Advisor Class | ||||||||||
Shares sold |
61,868,220 | 577,123,541 | ||||||||
|
||||||||||
Shares issued in reinvestment of dividends |
559,911 | 30,169 | ||||||||
|
||||||||||
Shares redeemed |
(31,118,686 | ) | (26,052,530 | ) | ||||||
|
||||||||||
Net increase |
31,309,445 | 551,101,180 | ||||||||
|
||||||||||
Class R | ||||||||||
Shares sold |
8,318,122 | 19,471,930 | ||||||||
|
||||||||||
Shares issued in reinvestment of dividends |
5,663 | 793 | ||||||||
|
||||||||||
Shares redeemed |
(7,783,567 | ) | (19,514,878 | ) | ||||||
|
||||||||||
Net increase (decrease) |
540,218 | (42,155 | ) | |||||||
|
||||||||||
Class K | ||||||||||
Shares sold |
34,535,387 | 73,416,443 | ||||||||
|
||||||||||
Shares issued in reinvestment of dividends |
28,131 | 3,909 | ||||||||
|
||||||||||
Shares redeemed |
(43,424,667 | ) | (71,074,139 | ) | ||||||
|
||||||||||
Net increase (decrease) |
(8,861,149 | ) | 2,346,213 | |||||||
|
||||||||||
Class I | ||||||||||
Shares sold |
4,021,803,772 | 3,159,980 | ||||||||
|
||||||||||
Shares issued in reinvestment of dividends |
480,958 | 2,576 | ||||||||
|
||||||||||
Shares redeemed |
(3,070,199,145 | ) | (3,621,244 | ) | ||||||
|
||||||||||
Net increase (decrease) |
952,085,585 | (458,688 | ) | |||||||
|
||||||||||
NOTE F
Risks Involved in Investing in the Fund
Money Market Fund RiskMoney market funds are sometimes unable to maintain a net asset value (NAV) at $1.00 per share and, as it is generally referred to, break the buck. In that event, an investor in a money market fund would, upon redemption, receive less than $1.00 per share. The Funds shareholders should not rely on or expect an affiliate of the Fund to purchase distressed assets from the Fund, make capital infusions, enter into credit support agreements or take other actions to prevent the Fund from breaking the buck. In addition, you should be aware that significant redemptions by large investors in the Fund could have a material adverse effect on the Funds other shareholders. The Funds NAV could be affected by forced selling during periods of high redemption pressures and/or illiquid markets. Money market funds are also subject to regulatory risk. The Commission continues to evaluate the rules governing money market funds, including Rule 2a-7. It is possible that changes to Rule 2a-7 could significantly impact the money market fund industry generally and, therefore, could affect the operation or performance of the Fund.
Interest Rate Risk and Credit RiskThe Funds primary risks are interest rate risk and credit risk. Because the Fund invests in short-term securities, a decline in
ALLIANCEBERNSTEIN EXCHANGE RESERVES | 17 |
Notes to Financial Statements
interest rates will affect the Funds yield as the securities mature or are sold and the Fund purchases new short-term securities with a lower yield. Generally, an increase in interest rates causes the value of a debt instrument to decrease. The change in value for shorter-term securities is usually smaller than for securities with longer maturities. In addition, if interest rates remain low for an extended period of time, the Fund may have difficulties in maintaining a positive yield, paying expenses out of the Funds assets, or maintaining a stable $1.00 NAV.
Credit risk is the possibility that a securitys credit rating will be downgraded or that the issuer of the security will default (fail to make scheduled interest and principal payments). Credit quality can change rapidly in certain market environments and the default of a single holding could have the potential to cause significant NAV deterioration.
Foreign (Non-U.S.) RiskInvestment in securities of non-U.S. issuers may involve more risk than those of U.S. issuers. These securities may fluctuate more widely in price and may be less liquid due to adverse market, economic, political, regulatory or other factors.
Liquidity RiskLiquidity risk exists when particular investments are difficult to purchase or sell, which may prevent the Fund from selling out of these securities at an advantageous time or price.
Indemnification RiskIn the ordinary course of business, the Fund enters into contracts that contain a variety of indemnifications. The Funds maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. Therefore, the Fund has not accrued any liability in connection with these indemnification provisions.
NOTE G
Recent Accounting Pronouncements
In April 2011, the Financial Accounting Standards Board (FASB) issued an Accounting Standard Update (ASU) related to the accounting for repurchase agreements and similar agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. The ASU modifies the criteria for determining effective control of transferred assets and, as a result, certain agreements may now be accounted for as secured borrowings. The ASU is effective prospectively for new transfers and existing transactions that are modified in the first interim or annual period beginning on or after December 15, 2011. At this time, management is evaluating the implications of this ASU and its impact on the financial statements has not been determined.
In May 2011, the FASB issued an ASU to develop common requirements for measuring fair value and for disclosing information about fair value measurements in U.S. GAAP and International Financial Reporting Standards (IFRS).
18 | ALLIANCEBERNSTEIN EXCHANGE RESERVES |
Notes to Financial Statements
The amendments are intended to improve the comparability of fair value measurements presented and disclosed in the financial statements prepared in accordance with U.S. GAAP and IFRS. The ASU is effective during interim or annual periods beginning after December 15, 2011. At this time, management is evaluating the implication of this ASU and its impact on the financial statements has not been determined.
In December 2011, the FASB issued an ASU related to disclosures about offsetting assets and liabilities in financial statements. The amendments in this update require an entity to disclose both gross and net information for derivatives and other financial instruments that are either offset in the statement of assets and liabilities or subject to an enforceable master netting arrangement or similar agreement. The ASU is effective during interim or annual reporting periods beginning on or after January 1, 2013. At this time, management is evaluating the implication of this ASU and its impact on the financial statements has not been determined.
NOTE H
Subsequent Events
Management has evaluated subsequent events for possible recognition or disclosure in the financial statements through the date the financial statements are issued. Management has determined that there are no material events that would require disclosure in the Funds financial statements through this date.
ALLIANCEBERNSTEIN EXCHANGE RESERVES | 19 |
Notes to Financial Statements
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
Class A | ||||||||||||||||||||||||
Six Months Ended March 31, 2012 (unaudited) |
Year Ended September 30, | |||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||
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 |
.0008 | (a) | .0001 | (a) | .0001 | (a) | .0057 | (a) | .0272 | .0446 | ||||||||||||||
Net realized gain (loss) on investment transactions |
.00 | (b) | .00 | (b) | 0 | | (.00 | )(b) | 0 | | 0 | | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net increase in net asset value from operations |
.0008 | .0001 | .0001 | .0057 | .0272 | .0446 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Less: Dividends |
||||||||||||||||||||||||
Dividends from net investment income |
(.0008 | ) | (.0001 | ) | (.0001 | ) | (.0057 | ) | (.0272 | ) | (.0446 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
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) |
.08 | % | .01 | % | .01 | % | .57 | % | 2.76 | % | 4.55 | % | ||||||||||||
Ratios/Supplemental Data |
||||||||||||||||||||||||
Net assets, end of period (in millions) |
$184 | $221 | $225 | $288 | $288 | $257 | ||||||||||||||||||
Ratio to average net assets of: |
||||||||||||||||||||||||
Expenses, net of waivers/reimbursements |
.14 | %(d) | .23 | % | .28 | %(e) | .76 | % | .82 | % | .91 | %(f) | ||||||||||||
Expenses, before waivers/reimbursements |
.65 | %(d) | .86 | % | .84 | %(e) | .83 | % | .82 | % | .91 | %(f) | ||||||||||||
Net investment income |
.16 | %(a)(d) | .01 | %(a) | .01 | %(a)(e) | .58 | %(a) | 2.69 | % | 4.46 | % |
See footnote summary on page 27.
20 | ALLIANCEBERNSTEIN EXCHANGE RESERVES |
Financial Highlights
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
Class B | ||||||||||||||||||||||||
Six Months Ended March 31, 2012 (unaudited) |
Year Ended September 30, | |||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||||
|
|
|||||||||||||||||||||||
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(a) |
.0008 | .0001 | .0001 | .0027 | .0228 | .0401 | ||||||||||||||||||
Net realized gain (loss) on investment transactions |
.00 | (b) | .00 | (b) | 0 | | (.00 | )(b) | 0 | | 0 | | ||||||||||||
|
|
|||||||||||||||||||||||
Net increase in net asset value from operations |
.0008 | .0001 | .0001 | .0027 | .0228 | .0401 | ||||||||||||||||||
|
|
|||||||||||||||||||||||
Less: Dividends |
||||||||||||||||||||||||
Dividends from net investment income |
(.0008 | ) | (.0001 | ) | (.0001 | ) | (.0027 | ) | (.0228 | ) | (.0401 | ) | ||||||||||||
|
|
|||||||||||||||||||||||
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) |
.08 | % | .01 | % | .01 | % | .27 | % | 2.30 | % | 4.08 | % | ||||||||||||
Ratios/Supplemental Data |
||||||||||||||||||||||||
Net assets, end of period (in millions) |
$21 | $26 | $36 | $62 | $62 | $54 | ||||||||||||||||||
Ratio to average net assets of: |
||||||||||||||||||||||||
Expenses, net of waivers/reimbursements |
.15 | %(d) | .23 | % | .29 | %(e) | 1.08 | % | 1.27 | % | 1.36 | %(f) | ||||||||||||
Expenses, before waivers/reimbursements |
1.39 | %(d) | 1.61 | % | 1.59 | %(e)(g) | 1.59 | % | 1.52 | % | 1.61 | %(f) | ||||||||||||
Net investment income(a) |
.15 | %(d) | .01 | % | .01 | %(e) | .28 | % | 2.25 | % | 4.01 | % |
See footnote summary on page 27.
ALLIANCEBERNSTEIN EXCHANGE RESERVES | 21 |
Financial Highlights
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
Class C | ||||||||||||||||||||||||
Six Months Ended March 31, 2012 (unaudited) |
Year Ended September 30, | |||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||||
|
|
|||||||||||||||||||||||
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(a) |
.0008 | .0001 | .0001 | .0043 | .0252 | .0426 | ||||||||||||||||||
Net realized gain (loss) on investment transactions |
.00 | (b) | .00 | (b) | 0 | | (.00 | )(b) | 0 | | 0 | | ||||||||||||
|
|
|||||||||||||||||||||||
Net increase in net asset value from operations |
.0008 | .0001 | .0001 | .0043 | .0252 | .0426 | ||||||||||||||||||
|
|
|||||||||||||||||||||||
Less: Dividends |
||||||||||||||||||||||||
Dividends from net investment income |
(.0008 | ) | (.0001 | ) | (.0001 | ) | (.0043 | ) | (.0252 | ) | (.0426 | ) | ||||||||||||
|
|
|||||||||||||||||||||||
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) |
.08 | % | .01 | % | .01 | % | .43 | % | 2.55 | % | 4.34 | % | ||||||||||||
Ratios/Supplemental Data |
||||||||||||||||||||||||
Net assets, end of period (in millions) |
$23 | $31 | $27 | $40 | $48 | $30 | ||||||||||||||||||
Ratio to average net assets of: |
||||||||||||||||||||||||
Expenses, net of waivers/reimbursements |
.14 | %(d) | .23 | % | .29 | %(e) | .93 | % | 1.02 | % | 1.10 | %(f) | ||||||||||||
Expenses, before waivers/reimbursements |
1.11 | %(d) | 1.32 | % | 1.31 | %(e)(g) | 1.30 | % | 1.27 | % | 1.35 | %(f) | ||||||||||||
Net investment income(a) |
.15 | %(d) | .01 | % | .01 | %(e) | .47 | % | 2.39 | % | 4.27 | % |
See footnote summary on page 27.
22 | ALLIANCEBERNSTEIN EXCHANGE RESERVES |
Financial Highlights
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
Advisor Class | ||||||||||||||||||||||||
Six Months (unaudited) |
Year Ended September 30, | |||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||||
|
|
|||||||||||||||||||||||
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 |
.0008 | (a) | .0001 | (a) | .0004 | (a) | .0081 | (a) | .0302 | .0476 | ||||||||||||||
Net realized gain (loss) on investment transactions |
.00 | (b) | .00 | (b) | 0 | | (.00 | )(b) | 0 | | 0 | | ||||||||||||
|
|
|||||||||||||||||||||||
Net increase in net asset value from operations |
.0008 | .0001 | .0004 | .0081 | .0302 | .0476 | ||||||||||||||||||
|
|
|||||||||||||||||||||||
Less: Dividends |
||||||||||||||||||||||||
Dividends from net investment income |
(.0008 | ) | (.0001 | ) | (.0004 | ) | (.0081 | ) | (.0302 | ) | (.0476 | ) | ||||||||||||
|
|
|||||||||||||||||||||||
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) |
.08 | % | .01 | % | .04 | % | .82 | % | 3.06 | % | 4.86 | % | ||||||||||||
Ratios/Supplemental Data |
||||||||||||||||||||||||
Net assets, end of period (in millions) |
$732 | $700 | $149 | $122 | $141 | $133 | ||||||||||||||||||
Ratio to average net assets of: |
||||||||||||||||||||||||
Expenses, net of waivers/reimbursements |
.14 | %(d) | .22 | % | .25 | %(e) | .51 | % | .52 | % | .60 | %(f) | ||||||||||||
Expenses, before waivers/reimbursements |
.34 | %(d) | .54 | % | .54 | %(e) | .53 | % | .52 | % | .60 | %(f) | ||||||||||||
Net investment income |
.16 | %(a)(d) | .02 | %(a) | .04 | %(a)(e) | .86 | %(a) | 3.01 | % | 4.76 | % |
See footnote summary on page 27.
ALLIANCEBERNSTEIN EXCHANGE RESERVES | 23 |
Financial Highlights
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
Class R | ||||||||||||||||||||||||
Six Months Ended March 31, 2012 (unaudited) |
Year Ended September 30, | |||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||||
|
|
|||||||||||||||||||||||
Net asset value, beginning of |
$ 1.00 | $ 1.00 | $ 1.00 | $ 1.00 | $ 1.00 | $ 1.00 | ||||||||||||||||||
|
|
|||||||||||||||||||||||
Income From Investment Operations |
||||||||||||||||||||||||
Net investment |
.0008 | (a) | .0001 | (a) | .0001 | (a) | .0045 | (a) | .0246 | .0423 | ||||||||||||||
Net realized gain (loss) on investment transactions |
.00 | (b) | .00 | (b) | 0 | | (.00 | )(b) | 0 | | 0 | | ||||||||||||
|
|
|||||||||||||||||||||||
Net increase in net asset value from operations |
.0008 | .0001 | .0001 | .0045 | .0246 | .0423 | ||||||||||||||||||
|
|
|||||||||||||||||||||||
Less: Dividends |
||||||||||||||||||||||||
Dividends from net investment |
(.0008 | ) | (.0001 | ) | (.0001 | ) | (.0045 | ) | (.0246 | ) | (.0423 | ) | ||||||||||||
|
|
|||||||||||||||||||||||
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) |
.08 | % | .01 | % | .01 | % | .45 | % | 2.49 | % | 4.31 | % | ||||||||||||
Ratios/ |
||||||||||||||||||||||||
Net assets, end of period (in thousands) |
$6,812 | $6,271 | $6,313 | $5,676 | $9,579 | $5,264 | ||||||||||||||||||
Ratio to average net assets of: |
||||||||||||||||||||||||
Expenses, net of waivers/reimbursements |
.13 | %(d) | .22 | % | .28 | %(e) | .92 | % | 1.08 | % | 1.20 | %(f) | ||||||||||||
Expenses, before waivers/reimbursements |
.85 | %(d) | .97 | % | 1.08 | %(e) | 1.06 | % | 1.08 | % | 1.20 | %(f) | ||||||||||||
Net investment income |
.17 | %(a)(d) | .01 | %(a) | .01 | %(a)(e) | .58 | %(a) | 2.47 | % | 4.18 | % |
See footnote summary on page 27.
24 | ALLIANCEBERNSTEIN EXCHANGE RESERVES |
Financial Highlights
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
Class K | ||||||||||||||||||||||||
Six Months (unaudited) |
Year Ended September 30, | |||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||||
|
|
|||||||||||||||||||||||
Net asset value, beginning of |
$ 1.00 | $ 1.00 | $ 1.00 | $ 1.00 | $ 1.00 | $ 1.00 | ||||||||||||||||||
|
|
|||||||||||||||||||||||
Income From Investment Operations |
||||||||||||||||||||||||
Net investment |
.0007 | (a) | .0001 | (a) | .0002 | (a) | .0059 | (a) | .0280 | .0452 | ||||||||||||||
Net realized gain (loss) on investment transactions |
.00 | (b) | .00 | (b) | 0 | | (.00 | )(b) | 0 | | 0 | | ||||||||||||
|
|
|||||||||||||||||||||||
Net increase in net asset value from operations |
.0007 | .0001 | .0002 | .0059 | .0280 | .0452 | ||||||||||||||||||
|
|
|||||||||||||||||||||||
Less: Dividends |
||||||||||||||||||||||||
Dividends from net investment |
(.0007 | ) | (.0001 | ) | (.0002 | ) | (.0059 | ) | (.0280 | ) | (.0452 | ) | ||||||||||||
|
|
|||||||||||||||||||||||
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) |
.07 | % | .01 | % | .02 | % | .59 | % | 2.84 | % | 4.61 | % | ||||||||||||
Ratios/ |
||||||||||||||||||||||||
Net assets, end of period (in thousands) |
$34,248 | $43,108 | $40,762 | $39,198 | $25,594 | $18,172 | ||||||||||||||||||
Ratio to average net assets of: |
||||||||||||||||||||||||
Expenses, net of waivers/reimbursements |
.15 | %(d) | .23 | % | .27 | %(e) | .73 | % | .75 | % | .86 | %(f) | ||||||||||||
Expenses, before waivers/reimbursements |
.74 | %(d) | .82 | % | .83 | %(e) | .81 | % | .75 | % | .86 | %(f) | ||||||||||||
Net investment income |
.14 | %(a)(d) | .01 | %(a) | .02 | %(a)(e) | .53 | %(a) | 2.63 | % | 4.50 | % |
See footnote summary on page 27.
ALLIANCEBERNSTEIN EXCHANGE RESERVES | 25 |
Financial Highlights
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
Class I | ||||||||||||||||||||||||
Six Months (unaudited) |
Year Ended September 30, | |||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||||
|
|
|||||||||||||||||||||||
Net asset value, beginning of |
$ 1.00 | $ 1.00 | $ 1.00 | $ 1.00 | $ 1.00 | $ 1.00 | ||||||||||||||||||
|
|
|||||||||||||||||||||||
Income From Investment Operations |
||||||||||||||||||||||||
Net investment |
.0008 | (a) | .0011 | (a) | .0015 | (a) | .0089 | (a) | .0316 | .0485 | ||||||||||||||
Net realized gain (loss) on investment transactions |
.00 | (b) | .00 | (b) | 0 | | (.00 | )(b) | 0 | | 0 | | ||||||||||||
|
|
|||||||||||||||||||||||
Net increase in net asset value from operations |
.0008 | .0011 | .0015 | .0089 | .0316 | .0485 | ||||||||||||||||||
|
|
|||||||||||||||||||||||
Less: Dividends |
||||||||||||||||||||||||
Dividends from net investment |
(.0008 | ) | (.0011 | ) | (.0015 | ) | (.0089 | ) | (.0316 | ) | (.0485 | ) | ||||||||||||
|
|
|||||||||||||||||||||||
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) |
.08 | % | .11 | % | .15 | % | .89 | % | 3.20 | % | 4.96 | % | ||||||||||||
Ratios/ |
||||||||||||||||||||||||
Net assets, end of period (in thousands) |
$954,000 | $1,906 | $2,365 | $6,586 | $5,115 | $5,157 | ||||||||||||||||||
Ratio to average net assets of: |
||||||||||||||||||||||||
Expenses, net of waivers/reimbursements |
.13 | %(d) | .13 | % | .15 | %(e) | .44 | % | .38 | % | .52 | %(f) | ||||||||||||
Expenses, before waivers/reimbursements |
.35 | %(d) | .40 | % | .41 | %(e) | .46 | % | .38 | % | .52 | %(f) | ||||||||||||
Net investment income |
.18 | %(a)(d) | .12 | %(a) | .15 | %(a)(e) | .86 | %(a) | 3.16 | % | 4.85 | % |
See footnote summary on page 27.
26 | ALLIANCEBERNSTEIN EXCHANGE RESERVES |
Financial Highlights
(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 deduction 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. |
(d) | Annualized. |
(e) | The ratio includes expenses attributable to costs of proxy solicitation. |
(f) | Ratios reflect expenses grossed up, where applicable, for expense offset arrangement with the Transfer Agent. For the period shown below, the net expense ratios were as follows: |
Year Ended September 30, 2007 |
||||
Class A |
.89 | % | ||
Class B |
1.34 | % | ||
Class C |
1.08 | % | ||
Advisor Class |
.58 | % | ||
Class R |
1.18 | % | ||
Class K |
.84 | % | ||
Class I |
.50 | % |
(g) | Ratios restated from 1.34% and 1.06% for Class B and Class C, respectively. |
See notes to financial statements.
ALLIANCEBERNSTEIN EXCHANGE RESERVES | 27 |
Financial Highlights
TRUSTEES
William H. Foulk, Jr.(1), Chairman | Robert M. Keith, President and Chief Executive Officer Garry L. Moody(1) Marshall C. Turner, Jr.(1) Earl D. Weiner(1) | |
John H. Dobkin(1) Michael J. Downey(1) D. James Guzy(1) Nancy P. Jacklin(1) |
OFFICERS
Philip L. Kirstein, Raymond J. Papera, Senior Vice President Maria R. Cona, Vice President Edward J. Dombrowski, Vice President |
John Giaquinta, Vice President Emilie D. Wrapp, Secretary Joseph J. Mantineo, Treasurer and Chief Financial Officer Stephen M. Woetzel, Controller |
Custodian and Accounting Agent | Transfer Agent | |
State Street Bank and Trust Company One Lincoln Street Boston, MA 02111 |
AllianceBernstein Investor Services, Inc. P.O. Box 786003 San Antonio, TX 78278-6003 Toll-Free (800) 221-5672 |
Legal Counsel | Principal Underwriter | |
Seward & Kissel LLP One Battery Park Plaza New York, NY 10004 |
AllianceBernstein Investments, Inc. 1345 Avenue of the Americas New York, NY 10105 | |
Independent Registered Public Accounting Firm Ernst & Young LLP 5 Times Square New York, NY 10036 |
(1) | Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee. Mr. Foulk is the sole member of the Fair Value Pricing Committee. |
28 | ALLIANCEBERNSTEIN EXCHANGE RESERVES |
Trustees
Information Regarding the Review and Approval of the Funds Advisory Agreement
The disinterested trustees (the trustees) of AllianceBernstein Exchange Reserves (the Fund) unanimously approved the continuance of the Funds Advisory Agreement with the Adviser at a meeting held on November 1-3, 2011.
Prior to approval of the continuance of the Advisory Agreement, the trustees had requested from the Adviser, and received and evaluated, extensive materials. They reviewed the proposed continuance of the Advisory Agreement with the Adviser and with experienced counsel who are independent of the Adviser, who advised on the relevant legal standards. The trustees also reviewed an independent evaluation prepared by the Funds Senior Officer (who is also the Funds Independent Compliance Officer) of the reasonableness of the advisory fee in the Advisory Agreement, in which the Senior Officer concluded that the contractual fee for the Fund was reasonable. The trustees also discussed the proposed continuance in private sessions with counsel and the Funds Senior Officer.
The trustees considered their knowledge of the nature and quality of the services provided by the Adviser to the Fund gained from their experience as trustees or directors of most of the registered investment companies advised by the Adviser, their overall confidence in the Advisers integrity and competence they have gained from that experience, the Advisers initiative in identifying and raising potential issues with the trustees and its responsiveness, frankness and attention to concerns raised by the trustees in the past, including the Advisers willingness to consider and implement organizational and operational changes designed to improve investment results and the services provided to the AllianceBernstein Funds. The trustees noted that they have four regular meetings each year, at each of which they receive presentations from the Adviser on the investment results of the Fund and review extensive materials and information presented by the Adviser.
The trustees also considered all other factors they believed relevant, including the specific matters discussed below. In their deliberations, the trustees did not identify any particular information that was all-important or controlling, and different trustees may have attributed different weights to the various factors. The trustees determined that the selection of the Adviser to manage the Fund and the overall arrangements between the Fund and the Adviser, as provided in the Advisory Agreement, including the advisory fee, were fair and reasonable in light of the services performed, expenses incurred and such other matters as the trustees considered relevant in the exercise of their business judgment. The material factors and conclusions that formed the basis for the trustees determinations included the following:
Nature, Extent and Quality of Services Provided
The trustees considered the scope and quality of services provided by the Adviser under the Advisory Agreement, including the quality of the investment research
ALLIANCEBERNSTEIN EXCHANGE RESERVES | 29 |
capabilities of the Adviser and the other resources it has dedicated to performing services for the Fund. They also noted the professional experience and qualifications of the Funds portfolio management team and other senior personnel of the Adviser. The trustees also considered that the Advisory Agreement provides that the Fund will reimburse the Adviser for the cost to it of providing certain clerical, accounting, administrative and other services provided at the Funds request by employees of the Adviser or its affiliates. Requests for these reimbursements are approved by the trustees on a quarterly basis and, to the extent requested and paid, result in a higher rate of total compensation from the Fund to the Adviser than the fee rate stated in the Funds Advisory Agreement. The trustees noted that the methodology used to determine the reimbursement amounts had been reviewed by an independent consultant retained by the Funds Senior Officer. The quality of administrative and other services, including the Advisers role in coordinating the activities of the Funds other service providers, also were considered. The trustees concluded that, overall, they were satisfied with the nature, extent and quality of services provided to the Fund under the Advisory Agreement.
Costs of Services Provided and Profitability
The trustees reviewed a schedule of the revenues, expenses and related notes indicating the profitability of the Fund to the Adviser for calendar years 2009 and 2010 that had been prepared with an expense allocation methodology arrived at in consultation with an independent consultant retained by the Funds Senior Officer. The trustees reviewed the assumptions and methods of allocation used by the Adviser in preparing fund-specific profitability data and noted that there are a number of potentially acceptable allocation methodologies for information of this type. The trustees noted that the profitability information reflected all revenues and expenses of the Advisers relationship with the Fund, including those relating to its subsidiaries which provide transfer agency and distribution services to the Fund. The trustees recognized that it is difficult to make comparisons of profitability between fund advisory contracts because comparative information is not generally publicly available and is affected by numerous factors. The trustees focused on the profitability of the Advisers relationship with the Fund before taxes and distribution expenses. The trustees noted that the Advisers relationship with the Fund was not profitable to it in 2010. The trustees concluded that they were satisfied that the Advisers level of profitability from its relationship with the Fund in 2009 was not unreasonable.
Fall-Out Benefits
The trustees considered the other benefits to the Adviser and its affiliates from their relationships with the Fund, including but not limited to benefits relating to soft dollar arrangements (whereby the Adviser receives brokerage and research services from many of the brokers that execute securities transactions on an agency basis on behalf of its clients that invest in equity securities), 12b-1 fees and sales charges received by the Funds principal underwriter (which is a wholly
30 | ALLIANCEBERNSTEIN EXCHANGE RESERVES |
owned subsidiary of the Adviser) in respect of certain classes of the Funds shares and transfer agency fees paid by the Fund to a wholly owned subsidiary of the Adviser. The trustees recognized that the Advisers profitability would be somewhat lower without these benefits. The trustees understood that the Adviser also might derive reputational and other benefits from its association with the Fund.
Investment Results
In addition to the information reviewed by the trustees in connection with the meeting, the trustees receive detailed performance information for the Fund at each regular Board meeting during the year. At the November 2011 meeting, the trustees reviewed information prepared by Lipper showing the performance of the Class A Shares of the Fund as compared with that of a group of similar funds selected by Lipper (the Performance Group) and as compared with a broader array of funds selected by Lipper (the Performance Universe), and information prepared by the Adviser showing performance of the Class A Shares as compared with the Lipper Money Market Funds Average (the Lipper Average) and the Barclays Capital U.S. Treasury Bills Index (the Index), in each case for the 1-, 3-, 5- and 10-year periods ended July 31, 2011 and (in the case of comparisons with the Lipper Average) the since inception period (March 1994 inception). The trustees noted that, on a net return basis, the Fund was in the 2nd quintile of the Performance Group and the Performance Universe for the 1-year period, in the 3rd quintile of the Performance Group and the Performance Universe for the 3-year period, in the 4th quintile of the Performance Group and 5th quintile of the Performance Universe for the 5-year period, and in the 5th quintile of the Performance Group and the Performance Universe for the 10-year period. On a gross return basis, the Fund was in the 3rd quintile of the Performance Group and 4th quintile of the Performance Universe for the 1-year period, in the 1st quintile of the Performance Group and 2nd quintile of the Performance Universe for the 3-year period, in the 2nd quintile of the Performance Group and 3rd quintile of the Performance Universe for the 5-year period, and in the 4th quintile of the Performance Group and the Performance Universe for the 10-year period. The trustees noted that the Fund was essentially even with the Lipper Average in the 1-, 3- and 5-year periods and noted the underperformance in the 10-year and the since inception periods. The Fund underperformed the Index in all periods. Based on their review, the trustees concluded that the Funds relative performance was satisfactory.
Advisory Fees and Other Expenses
The trustees considered the advisory fee rate paid by the Fund to the Adviser and information prepared by Lipper concerning advisory fee rates paid by other funds in the same Lipper category as the Fund at a common asset level. The trustees recognized that it is difficult to make comparisons of advisory fees because there are variations in the services that are included in the fees paid by other funds.
ALLIANCEBERNSTEIN EXCHANGE RESERVES | 31 |
The Adviser informed the trustees that there were no institutional products managed by it that have a substantially similar investment style. The trustees reviewed the relevant fee information from the Advisers Form ADV and noted that the Adviser charged institutional clients lower fees for advising comparably sized institutional accounts using strategies that differ from those of the Fund but which invest in the same type of securities (i.e., fixed income taxable securities). The trustees also noted that the Adviser advises a portfolio of another AllianceBernstein fund that invests in different types of money market securities, pays no advisory fee but is offered only as a cash management vehicle for selected institutional clients, including most of the AllianceBernstein funds, that pay advisory fees at various rates.
The Adviser reviewed with the trustees the significantly greater scope of the services it provides to the Fund relative to institutional clients. The Adviser also noted that because mutual funds are constantly issuing and redeeming shares, they are more difficult to manage than an institutional account, where the assets tend to be relatively stable. In light of the substantial differences in services rendered by the Adviser to institutional clients as compared to funds such as the Fund, the trustees considered these fee comparisons inapt and did not place significant weight on them in their deliberations.
The trustees also considered the total expense ratio of the Class A shares of the Fund in comparison to the fees and expenses of funds within two comparison groups created by Lipper: an Expense Group and an Expense Universe. Lipper described an Expense Group as a representative sample of funds similar to the Fund and an Expense Universe as a broader group, consisting of all funds in the Funds investment classification/objective with a similar load type as the Fund. The Class A expense ratio of the Fund was based on the Funds latest fiscal year. The trustees noted that it was likely that the expense ratios of some of the other funds in the Funds Lipper category were lowered by waivers or reimbursements by those funds investment advisers, which in some cases might be voluntary or temporary. The trustees view the expense ratio information as relevant to their evaluation of the Advisers services because the Adviser is responsible for coordinating services provided to the Fund by others.
The information reviewed by the trustees showed that, at the Funds current size, its contractual effective advisory fee rate of 25 basis points, plus the 2 basis point impact of the administrative expense reimbursement in the latest fiscal year, was lower than the Expense Group median. The trustees noted that a portion of the 2 basis point reimbursement had been waived by the Adviser. The trustees noted that the Funds total expense ratio was higher than the Expense Group median and lower than the Expense Universe median. The trustees concluded that the Funds expense ratio was satisfactory.
32 | ALLIANCEBERNSTEIN EXCHANGE RESERVES |
Economies of Scale
The trustees noted that the advisory fee schedule for the Fund contains breakpoints that reduce the fee rates on assets above specified levels. The trustees took into consideration presentations by an independent consultant on economies of scale in the mutual fund industry and for the AllianceBernstein Funds, and by the Adviser concerning certain of its views on economies of scale. The trustees also had requested and received from the Adviser certain updates on economies of scale at the May 2011 meetings. The trustees believe that economies of scale may be realized (if at all) by the Adviser across a variety of products and services, and not only in respect of a single fund. The trustees noted that there is no established methodology for establishing breakpoints that give effect to the fund-specific services provided by a funds adviser and to the economies of scale that an adviser may realize in its overall mutual fund business or those components of it which directly or indirectly affect a funds operations. The trustees observed that in the mutual fund industry as a whole, as well as among funds similar to the Fund, there is no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. The trustees also noted that the advisory agreements for many funds do not have breakpoints at all. Having taken these factors into account, the trustees concluded that the Funds shareholders would benefit from a sharing of economies of scale in the event the Funds net assets exceed a breakpoint in the future.
ALLIANCEBERNSTEIN EXCHANGE RESERVES | 33 |
THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
SUMMARY OF SENIOR OFFICERS EVALUATION OF INVESTMENT ADVISORY AGREEMENT1
The following is a summary of the evaluation of the Investment Advisory Agreement between AllianceBernstein L.P. (the Adviser) and AllianceBernstein Exchange Reserves (the Fund).2 The evaluation of the Investment Advisory Agreement was prepared by Philip L. Kirstein, the Senior Officer of the Fund, for the Trustees of the Fund, as required by the September 1, 2004 Assurance of Discontinuance (AoD) between the Adviser and the New York State Attorney General (the NYAG). The Senior Officers evaluation of the Investment Advisory Agreement is not meant to diminish the responsibility or authority of the Board of Trustees of the Fund to perform its duties pursuant to Section 15 of the Investment Company Act of 1940 (the 40 Act) and applicable state law. The purpose of the summary is to provide shareholders with a synopsis of the independent evaluation of the reasonableness of the advisory fees proposed to be paid by the Fund which was provided to the Trustees in connection with their review of the proposed approval of the continuance of the Investment Advisory Agreement. The Senior Officers evaluation considered the following factors:
1. | Advisory fees charged to institutional and other clients of the Adviser for like services; |
2. | Advisory fees charged by other mutual fund companies for like services; |
3. | Costs to the Adviser and its affiliates of supplying services pursuant to the advisory agreement, excluding any intra-corporate profit; |
4. | Profit margins of the Adviser and its affiliates from supplying such services; |
5. | Possible economies of scale as the Fund grows larger; and |
6. | Nature and quality of the Advisers services including the performance of the Fund. |
These factors, with the exception of the first factor, are generally referred to as the Gartenberg factors, which were articulated by the United States Court of Appeals for the Second Circuit in 1982. Gartenberg v. Merrill Lynch Asset Management, Inc., 694 F. 2d 923 (2d Cir. 1982). On March 30, 2010, the Supreme Court held the Gartenberg decision was correct in its basic formulation of what §36(b) requires: to face liability under §36(b), an investment adviser must charge a fee that is so disproportionately large that it bears no reasonable relationship to the services rendered and could not have been the product of
1 | The Senior Officers fee evaluation was completed on October 20, 2011 and presented to the Board of Trustees on November 1-3, 2011. |
2 | Future references to the Fund do not include AllianceBernstein. References in the fee summary pertaining to performance and expense ratios refer to the Class A shares of the Fund. |
34 | ALLIANCEBERNSTEIN EXCHANGE RESERVES |
arms length bargaining Jones v. Harris Associates L.P., 130 S. Ct. 1418 (2010). In Jones, the Court stated the Gartenberg approach fully incorporates the correct understanding of fiduciary duty within the context of section 36(b) and noted with approval that Gartenberg insists that all relevant circumstances be taken into account and uses the range of fees that might result from arms-length bargaining as the benchmark for reviewing challenged fees.3
FUND ADVISORY FEES, EXPENSE REIMBURSEMENTS & RATIOS
The Adviser proposed that the Fund pays the advisory fee set forth below for receiving the services to be provided pursuant to the Investment Advisory Agreement.4 Also shown below are the Funds net assets as of September 30, 2011.
Fund | Advisory Fee Based on % of Average Daily Net Assets |
Net Assets 09/30/11 |
||||
Exchange Reserves | 25 bp on 1st $1.25 billion 24 bp on next $0.25 billion 23 bp on next $0.25 billion 22 bp on next $0.25 billion 21 bp on next $1.0 billion 20 bp on the balance |
$1,028.8 |
The Adviser is reimbursed as specified in the Investment Advisory Agreement for certain clerical, legal, accounting, administrative and other services provided to the Fund. During the most recently completed fiscal year, the Adviser was entitled to receive $108,499 (0.02% of the Funds average daily net assets) for such services but voluntarily waived $101,580.
In response to low interest rates5 in the marketplace that have depressed money market yield, the Adviser or its affiliates are waiving advisory fees and reimbursing additional expenses on its proprietary money market products, including Exchange Reserves, in order for those products to achieve a target yield of 0.01%.
3 | Jones v. Harris at 1427. |
4 | The Fund was not affected by the Advisers agreement with the NYAG since the Funds fee schedule already had lower breakpoints than the NYAG related fee schedule for AllianceBernstein Mutual Funds with a category of Low Risk Income. |
5 | The Federal Reserve has kept the Federal Funds Rate between zero and 0.25% since December 2008. |
ALLIANCEBERNSTEIN EXCHANGE RESERVES | 35 |
Set forth below are the Funds total expense ratios, annualized for the most recent semi-annual period:
03/31/11 Total Expense Ratio6 |
||||||||||||
Fund | Class | Net | Gross | Fiscal Year | ||||||||
Exchange Reserves | Advisor Class A Class B Class C Class R Class K Class I |
|
0.26 0.26 0.26 0.26 0.26 0.26 0.13 |
% % % % % % % |
|
0.56 0.86 1.61 1.33 0.99 0.82 0.41 |
% % % % % % % |
September 30 |
I. | ADVISORY FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS |
The advisory fees charged to investment companies which the Adviser manages and sponsors are normally higher than those charged to similar sized institutional accounts, including pension plans and sub-advised investment companies. The fee differential reflects, among other things, different services provided to such clients, and different liabilities assumed. Services provided by the Adviser to the Fund that are not provided to non-investment company clients and sub-advised investment companies include providing office space and personnel to serve as Fund Officers, who among other responsibilities make the certifications required under the Sarbanes-Oxley Act of 2002, and coordinating with and monitoring the Funds third party service providers such as Fund counsel, auditors, custodians, transfer agents and pricing services. The accounting, administrative, legal and compliance requirements for the Fund are more costly than those for institutional client assets due to the greater complexities and time required for investment companies, although as previously noted, the Adviser is reimbursed for providing some of these services. Also, retail mutual funds managed by the Adviser are widely held. Servicing the Funds investors is more time consuming and labor intensive compared to institutional clients since the Adviser needs to communicate with a more extensive network of financial intermediaries and shareholders. The Adviser also believes that it incurs substantial entrepreneurial risk when offering a new mutual fund since establishing a new mutual fund requires a large upfront investment and it may take a long time for the fund to achieve profitability since the fund must be priced to scale from inception in order to be competitive and assets are acquired one account at a time. In addition, managing the cash flow of an investment company may be more difficult than that of a stable pool of assets, such as an institutional account with little cash movement in either direction, particularly if the fund is in net redemption and the Adviser is frequently forced to sell securities to raise cash for redemptions. However, managing a fund with positive cash flow may be easier at times than managing a stable pool of assets. Finally, in recent years, investment advisers have been sued by institutional clients and have suffered reputational
6 | Annualized. |
36 | ALLIANCEBERNSTEIN EXCHANGE RESERVES |
damage both by the attendant publicity and outcomes other than complete victories. Accordingly, the legal and reputational risks associated with institutional accounts are greater than previously thought, although arguably still not equal to those related to the mutual fund industry.
Notwithstanding the Advisers view that managing an investment company is not comparable to managing other institutional accounts because the services provided are different, the Supreme Court has indicated consideration should be given to the advisory fees charged to institutional accounts that have a substantially similar investment style as the Fund.7 However, with respect to the Fund, the Adviser represented that there is no institutional product in the Advisers Form ADV that has a similar investment style as the Fund.
The adviser manages the AllianceBernstein Variable Products Series Fund, Inc. (AVPS), which is available through variable annuity and variable life contracts offered by other financial institutions, offers policyholders the option to utilize certain AVPS portfolios as the investment option underlying their insurance contracts. Set forth below is the fee schedule of the AVPS portfolio that has a similar investment style as the Fund.8 Also shown is what would have been the effective advisory fee of the Fund had the advisory fee schedule of the AVPS portfolio been applicable to the Fund versus the Funds advisory fee based on September 30, 2011 net assets:
Fund | AVPS Portfolio |
Fee Schedule | AVPS Effective Fee |
Fund Advisory Fee |
||||||||
Exchange Reserves | Money Market Portfolio | 0.45% on first $2.5 billion 0.40% on next $2.5 billion 0.35% on the balance |
0.450% | 0.250% |
7 | The Supreme Court stated that courts may give such comparisons the weight that they merit in light of the similarities and differences between the services that the clients in question require, but the courts must be wary of inapt comparisons. Among the significant differences the Supreme Court noted that may exist between services provided to mutual funds and institutional accounts are higher marketing costs. Jones v. Harris at 1428. |
8 | AVPS was affected by the settlement between the Adviser and the NYAG. |
ALLIANCEBERNSTEIN EXCHANGE RESERVES | 37 |
The Adviser also manages and sponsors retail mutual funds, which are organized in jurisdictions outside the United States, generally Luxembourg and Japan, and sold to non-United States resident investors. The Adviser charges the following all-in fee for Short Maturity Dollar, a Luxembourg fund, which has a somewhat similar investment style as the Fund:
Fund | Luxembourg Fund | Fee9 | ||
Exchange Reserves | Short Maturity Dollar Class A |
1.05% on 1st $100 million 1.00% on next $100 million 0.95% on the balance | ||
Class I (Institutional) | 0.50% on 1st $100 million 0.45% on next $100 million 0.40% on the balance |
The Adviser represented that it does not sub-advise any registered investment company with a substantially similar investment style as the Fund.
II. | MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES. |
Lipper, Inc., an analytical service that is not affiliated with the Adviser, compared the fees charged to the Fund with fees charged to other investment companies for similar services by other investment advisers.10 Lippers analysis included the comparison of the Funds contractual management fee,11,12 estimated at the approximate current asset level of the subject Fund, to the median of the Funds Lipper Expense Group (EG) and the Funds contractual management fee ranking.
Lipper describes an EG as a representative sample of comparable funds. Lippers standard methodology for screening funds to be included in an EG entails the consideration of several fund criteria, including fund type, investment classi-
9 | Each all-in fee shown is for the Class A shares of Short Maturity Dollar. This fee covers investment advisory services and distribution related services. |
10 | The Supreme Court cautioned against accepting mutual fund fee comparisons without careful scrutiny since these comparisons are problematic because these fees, like those challenged, may not be the product of negotiations conducted at arms length. Jones v. Harris at 1429. |
11 | The contractual management fee is calculated by Lipper using the Funds contractual management fee rate at a hypothetical asset level. The hypothetical asset level is based on the combined net assets of all classes of the Fund, rounded up to the next $25 million. Lippers total expense ratio information is based on the most recent annual report except as otherwise noted. A ranking of 1 means that the Fund has the lowest effective fee rate in the Lipper peer group. |
12 | The contractual management fee does not reflect any expense reimbursements made by the Fund to the Adviser for certain clerical, legal, accounting, administrative, and other services. In addition, the contractual management fee does not reflect any advisory fee waivers or expense reimbursements made by the Adviser that would effectively reduce the actual effective management fee. |
38 | ALLIANCEBERNSTEIN EXCHANGE RESERVES |
fication/objective, load type and similar 12b-1/non-12b-1 service fees, asset (size) comparability, expense components and attributes. An EG will typically consist of seven to twenty funds.
Fund | Contractual Fee (%)13 |
Lipper Exp. Group Median (%) |
Lipper Rank |
|||||||||
Exchange Reserves | 0.250 | 0.450 | 1/15 |
Lipper also compared the Funds total expense ratio to the medians of the Funds EG and Lipper Expense Universe (EU). The EU14 is a broader group compared to the EG, consisting of all funds that have the same investment classification/objective and load type as the subject Fund.
Fund | Expense Ratio (%)15 |
Lipper Exp. Group Median (%) |
Lipper Group Rank |
Lipper Exp. Universe Median (%) |
Lipper Rank |
|||||||||||||||
Exchange Reserves | 0.283 | 0.266 | 9/15 | 0.315 | 30/75 | |||||||||||||||
excluding 12b-1/ non-12b-1 service fee |
0.258 | 0.245 | 10/15 | 0.251 | 39/75 |
Based on this analysis, the Fund has a more favorable ranking on a management fee basis than it does on a total expense ratio basis.
III. | COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO THE ADVISORY FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT. |
The Adviser utilizes two profitability reporting systems, which operate independently but are aligned with each other, to estimate the Advisers profitability in connection with investment advisory services provided to the Fund. The Senior Officer has retained a consultant to provide independent advice regarding the alignment of the two profitability systems as well as the methodologies and allocations utilized by both profitability systems. See Section IV for additional discussion.
IV. | PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH SERVICES. |
The profitability information for the Fund prepared by the Adviser for the Board of Trustees was reviewed by the Senior Officer and the consultant. The Advisers
13 | The contractual management fee does not reflect any expense reimbursements made by the Fund to the Adviser for certain clerical, legal, accounting, administrative, and other services. |
14 | Except for asset (size) comparability, Lipper uses the same criteria for selecting an EG when selecting an EU. Unlike the EG, the EU allows for the same adviser to be represented by more than just one fund. |
15 | Most recently completed fiscal year Class A share total expense ratio. |
ALLIANCEBERNSTEIN EXCHANGE RESERVES | 39 |
profitability from providing investment advisory services to the Fund decreased in the calendar year 2010, relative to 2009.
In addition to the Advisers direct profits from managing the Fund, certain of the Advisers affiliates have business relationships with the Fund and may earn a profit from providing other services to the Adviser. The courts have referred to this type of business opportunity as fall-out benefits to the Adviser and indicated that such benefits should be factored into the evaluation of the total relationship between the Fund and the Adviser. Neither case law nor common business practice precludes the Advisers affiliates from earning a reasonable profit on this type of relationship provided the affiliates charges and services are competitive. These affiliates provide transfer agent and distribution related services to the Fund and receive transfer agent fees, Rule 12b-1 payments, and contingent deferred sales charges (CDSC). During the Funds most recently completed fiscal year, ABI received from the Fund $1,613,580 and $112,107 in Rule 12b-1 and CDSC fees, respectively.16
AllianceBernstein Investments, Inc. (ABI), an affiliate of the Adviser, is the Funds principal underwriter. ABI and the Adviser have disclosed in the Funds prospectus that they may make revenue sharing payments from their own resources, in addition to revenues derived from sales loads and Rule 12b-1 fees, to firms that sell shares of the Fund. In 2010, ABI paid approximately 0.04% of the average monthly assets of the AllianceBernstein Mutual Funds or approximately $13.8 million for distribution services and educational support (revenue sharing payments).
Fees and reimbursements for out of pocket expenses charged by AllianceBernstein Investor Services, Inc. (ABIS), the affiliated transfer agent for the Fund, are charged on a per account basis, based on the level of service provided and the class of share held by the account. ABIS also receives a fee per shareholder sub-account for each account maintained by an intermediary on an omnibus basis. During the Funds most recently completed fiscal year, ABIS received $544,938 in fees from the Fund.
V. | POSSIBLE ECONOMIES OF SCALE |
The Adviser has indicated that economies of scale are being shared with shareholders through fee structures,17 subsidies and enhancement to services. Based on some of the professional literature that has considered economies of scale in
16 | For the Funds most recently completed fiscal year, ABI voluntarily waived a portion of the Rule 12b-1 distribution fees in the amounts of $699,612, $466,008, $233,247, $30,015 and $102,886 for Class A, B, C, R and K shares, respectively, limiting the effective annual rates to 0.03%, 0.01%, 0.02%, 0.06% and 0.004% for Class A, B, C, R and K shares, respectively. |
17 | Fee structures include fee reductions, pricing at scale and breakpoints in advisory fee schedules. |
40 | ALLIANCEBERNSTEIN EXCHANGE RESERVES |
the mutual fund industry, it is thought that to the extent economies of scale exist, they may more often exist across a fund family as opposed to a specific fund. This is because the costs incurred by the Adviser, such as investment research or technology for trading or compliance systems, can be spread across a greater asset base as the fund family increases in size. It is also possible that as the level of services required to operate a successful investment company has increased over time, and advisory firms have made such investments in their business to provide services, there may be a sharing of economies of scale without a reduction in advisory fees.
In February 2008, an independent consultant, retained by the Senior Officer, provided the Board of Trustees an update of the Deli18 study on advisory fees and various fund characteristics.19 The independent consultant first reiterated the results of his previous two dimensional comparison analysis (fund size and family size) with the Board of Trustees.20 The independent consultant then discussed the results of the regression model that was utilized to study the effects of various factors on advisory fees. The regression model output indicated that the bulk of the variation in fees predicted were explained by various factors, but substantially by fund assets under management (AUM), family AUM, index fund indicator and investment style. The independent consultant also compared the advisory fees of the AllianceBernstein Mutual Funds to similar funds managed by 19 other large asset managers, regardless of fund size and the large asset managers proportion of mutual fund assets to non-mutual fund assets.
VI. | NATURE AND QUALITY OF THE ADVISERS SERVICES, INCLUDING THE PERFORMANCE OF THE FUND |
With assets under management of approximately $402 billion as of September 30, 2011, the Adviser has the investment experience to manage and provide non-investment services (described in Section I) to the Fund.
18 | The Deli study, originally published in 2002 based on 1997 data and updated for the February 2008 presentation, may be of diminished value due to the age of the data used in the presentation and the changes experienced in the industry over the last four years. |
19 | As mentioned previously, the Supreme Court cautioned against accepting mutual fund fee comparisons without careful scrutiny since the fees may not be the product of negotiations conducted at arms length. See Jones V. Harris at 1429. |
20 | The two dimensional analysis showed patterns of lower advisory fees for funds with larger asset sizes and funds from larger family sizes compared to funds with smaller asset sizes and funds from smaller family sizes, which according to the independent consultant is indicative of a sharing of economies of scale and scope. However, in less liquid and active markets, such is not the case, as the empirical analysis showed potential for diseconomies of scale in those markets. The empirical analysis also showed diminishing economies of scale and scope as funds surpassed a certain high level of assets. |
ALLIANCEBERNSTEIN EXCHANGE RESERVES | 41 |
The information below, prepared by Lipper, shows the 1, 3, 5 and 10 year net and gross performance returns and rankings of the Fund21 relative to the Funds Lipper Performance Group (PG) and Lipper Performance Universe (PU)22 for the periods ended July 31, 2011.23
Fund Return |
PG Median (%) |
PU Median (%) |
PG Rank | PU Rank | ||||||||||||
Net |
||||||||||||||||
1 year |
0.01 | 0.01 | 0.01 | 6/15 | 47/132 | |||||||||||
3 year |
0.31 | 0.30 | 0.34 | 7/15 | 74/125 | |||||||||||
5 year |
1.74 | 1.82 | 1.88 | 10/15 | 99/120 | |||||||||||
10 year |
1.52 | 1.73 | 1.83 | 14/14 | 102/106 | |||||||||||
Gross |
||||||||||||||||
1 year |
0.29 | 0.29 | 0.32 | 8/15 | 86/132 | |||||||||||
3 year |
0.79 | 0.71 | 0.75 | 3/15 | 45/125 | |||||||||||
5 year |
2.39 | 2.34 | 2.37 | 6/15 | 49/120 | |||||||||||
10 year |
2.36 | 2.38 | 2.39 | 9/14 | 67/106 |
Set forth below are the 1, 3, 5 and 10 year and since inception net performance returns of the Fund (in bold)24 versus its benchmark.25
Periods Ending July 31, 2011 Annualized Net Performance |
||||||||||||||||||||
1 Year (%) |
3 Year (%) |
5 Year (%) |
10 Year (%) |
Since Inception (%) |
||||||||||||||||
Exchange Reserves | 0.01 | 0.30 | 1.73 | 1.52 | 2.72 | |||||||||||||||
Lipper Money Market Funds Average | 0.02 | 0.29 | 1.74 | 1.65 | 3.11 | |||||||||||||||
Barclays Capital U.S. Treasury Bills Index | 0.18 | 0.52 | 2.03 | 2.13 | 3.52 | |||||||||||||||
Inception Date: March 25, 1994 |
21 | The performance returns and rankings are for the Class A shares of the Fund. It should be noted that the performance returns of the Fund that are shown were provided by Lipper. Lipper maintains its own database that includes the Funds performance returns. |
22 | The Funds PG is identical to the EG. The Funds PU is not identical to the Funds EU as the criteria for including/excluding a fund in/from a PU are somewhat different from that of an EU. |
23 | Note that the current Lipper investment classification/objective dictates the PG and PU throughout the life of the Fund even if the Fund may have had a different investment classification/objective at different points in time. |
24 | The performance returns and risk measures shown in the table are for the Class A shares of the Fund. |
25 | The Adviser provided Fund and benchmark performance return information for periods through July 31, 2011. |
42 | ALLIANCEBERNSTEIN EXCHANGE RESERVES |
CONCLUSION:
Based on the factors discussed above the Senior Officers conclusion is that the proposed advisory fee for the Fund is reasonable and within the range of what would have been negotiated at arms-length in light of all the surrounding circumstances. This conclusion in respect of the Fund is based on an evaluation of all of these factors and no single factor was dispositive.
Dated: November 28, 2011
ALLIANCEBERNSTEIN EXCHANGE RESERVES | 43 |
THIS PAGE IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
ALLIANCEBERNSTEIN FAMILY OF FUNDS
Retirement Strategies Funds
2000 Retirement Strategy |
2020 Retirement Strategy |
2040 Retirement Strategy | ||
2005 Retirement Strategy |
2025 Retirement Strategy |
2045 Retirement Strategy | ||
2010 Retirement Strategy |
2030 Retirement Strategy |
2050 Retirement Strategy | ||
2015 Retirement Strategy |
2035 Retirement Strategy |
2055 Retirement Strategy |
We also offer Exchange Reserves,** which serves as the money market fund exchange vehicle for the AllianceBernstein mutual funds.
Investors should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. For copies of our prospectus or summary prospectus, which contain this and other information, visit us online at www.alliancebernstein.com or contact your AllianceBernstein investments representative. Please read the prospectus and/or summary prospectus carefully before investing.
** | 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. |
44 | ALLIANCEBERNSTEIN EXCHANGE RESERVES |
AllianceBernstein Family of Funds
EXC-0152-0312 |
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. | SCHEDULE OF INVESTMENTS. |
Please see Schedule of Investments contained in the Report to Shareholders included under Item 1 of this Form N-CSR.
ITEM 7. | DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable to the registrant.
ITEM 8. | PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable to the registrant.
ITEM 9. | PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. |
Not applicable to the registrant.
ITEM 10. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. |
There have been no material changes to the procedures by which shareholders may recommend nominees to the Funds Board of Directors since the Fund last provided disclosure in response to this item.
ITEM 11. | CONTROLS AND PROCEDURES. |
(a) The registrants principal executive officer and principal financial officer have concluded that the registrants 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 changes in the registrants internal controls over financial reporting that occurred during the second fiscal quarter of the period that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting.
ITEM 12. | EXHIBITS. |
The following exhibits are attached to this Form N-CSR:
EXHIBIT NO. |
DESCRIPTION OF EXHIBIT | |
12 (b) (1) | Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
12 (b) (2) | Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
12 (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/ Robert M. Keith | |
Robert M. Keith | ||
President | ||
Date: |
May 23, 2012 |
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/ Robert M. Keith | |
Robert M. Keith | ||
President | ||
Date: |
May 23, 2012 |
By: |
/s/ Joseph J. Mantineo | |
Joseph J. Mantineo | ||
Treasurer and Chief Financial Officer | ||
Date: |
May 23, 2012 |
Exhibit 12(b)(1)
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
I, Robert M. Keith, President of AllianceBernstein Exchange Reserves, certify that:
1. I have reviewed this report on Form N-CSR of AllianceBernstein Exchange Reserves;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:
a) | designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | designed such internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and |
d) | disclosed in this report any change in the registrants internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. The registrants other certifying officers and I have disclosed to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize, and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: May 23, 2012
/s/ Robert M. Keith |
||||
Robert M. Keith | ||||
President |
Exhibit 12(b)(2)
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
I, Joseph J. Mantineo, Treasurer and Chief Financial Officer of AllianceBernstein Exchange Reserves, certify that:
1. I have reviewed this report on Form N-CSR of AllianceBernstein Exchange Reserves;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:
a) | designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | designed such internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | evaluated the effectiveness of the registrants disclosure controls and procedures presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and |
d) | disclosed in this report any change in the registrants internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. The registrants other certifying officers and I have disclosed to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize, and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: May 23, 2012
/s/ Joseph J. Mantineo |
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Joseph J. Mantineo | ||||
Treasurer and Chief Financial Officer |
EXHIBIT 12(c)
CERTIFICATION PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT
Pursuant to 18 U.S.C. 1350, each of the undersigned, being the Principal Executive Officer and Principal Financial Officer of AllianceBernstein Exchange Reserves (the Registrant), hereby certifies that the Registrants report on Form N-CSR for the period ended March 31, 2011 (the Report) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
Date: May 23, 2012
By: | /s/ Robert M. Keith | |
Robert M. Keith | ||
President | ||
By: | /s/ Joseph J. Mantineo | |
Joseph J. Mantineo | ||
Treasurer and Chief Financial Officer |
This certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and is not being filed as part of the Report or as a separate disclosure document.
A signed original of this written statement required by Section 906 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request.