As filed with the Securities and Exchange
Commission on August 17, 2007
Securities Act File No.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [_]
Post-Effective Amendment No. [_]
ALLIANCEBERNSTEIN BOND FUND, INC.
(Exact Name of Registrant as Specified in Charter)
1345 Avenue of the Americas, New York, New York 10105
(Address of Principal Executive Office) (Zip Code)
Registrants Telephone Number, including Area Code:
(800) 221-5672
EMILIE D. WRAPP
AllianceBernstein L.P.
1345 Avenue of the Americas
New York, New York l0105
(Name and address of agent for service)
Copies of communications to:
KATHLEEN K. CLARKE
Seward & Kissel LLP
1200 G Street, Suite 350
Washington, DC 20005
Approximate Date of Proposed Public Offering:
- - As soon as practicable after this Registration Statement becomes
effective.
- - It is proposed that this filing become effective on September 17, 2007
pursuant to Rule 488 under the Securities Act of 1933.
---------------------------------------------
No filing fee is required because an indefinite number of shares have previously
been registered pursuant to Rule 24f-2 under the Investment Company Act of 1940,
as amended.
CONTENTS OF FORM N-14 REGISTRATION STATEMENT
This Registration Statement contains the following papers and documents:
o Cover Sheet
o Contents of Registration Statement
o Letter to Shareholders
o Part A - Prospectus
o Part B - Statement of Additional Information
o Part C - Other Information
o Signatures
o Exhibits
[LOGO]
ALLIANCEBERNSTEIN
Investments
ALLIANCEBERNSTEIN BOND FUND, INC. --
ALLIANCEBERNSTEIN U.S. GOVERNMENT PORTFOLIO
1345 Avenue of the Americas
New York, New York 10105
[________], 2007
INFORMATION ABOUT THE ACQUISITION
Dear Shareholders:
The Board of Directors (the "Directors") of AllianceBernstein Bond Fund,
Inc. ("Bond Fund") is pleased to announce to the shareholders of
AllianceBernstein U.S. Government Portfolio ("U.S. Gov't"), a series of Bond
Fund, the acquisition of the assets and liabilities of U.S. Gov't by
AllianceBernstein Intermediate Bond Portfolio ("Intermediate Bond"), a series of
Bond Fund. (Intermediate Bond and U.S. Gov't are each a "Fund" and collectively,
the "Funds.") The acquisition, which is not expected to become effective until
late in the last quarter of this year, is described in more detail in the
attached Prospectus, which includes information about risks. You should review
the Prospectus carefully.
U.S. Gov't and Intermediate Bond have identical investment objectives but
U.S. Gov't invests primarily in U.S. Government securities whereas Intermediate
Bond is a multi-sector bond fund that invests in a diversified portfolio of
fixed-income securities. We anticipate that the acquisition will result in
benefits to the shareholders of U.S. Gov't as discussed more fully in the
Prospectus. As a general matter, we believe that the acquisition will provide
the potential for improved performance with lower overall portfolio volatility
for U.S. Gov't shareholders in light of Intermediate Bond's multi-sector
investment strategy, which includes investment in corporate debt, foreign
currency denominated debt (including emerging market debt), and non-investment
grade debt (subject to a 25% maximum), as well as U.S. Government debt.
The Directors of Bond Fund have considered, among other things, the
investment objectives and investment policies of the Funds, the changes in the
fixed-income markets since U.S. Gov't commenced operations, expense ratio
reductions expected to result from the acquisition, the continuity of the
portfolio management team, the comparison of fees for the Fund and the pro forma
for the combined fund, the cost of the acquisition, and the tax-free nature of
the acquisition and have concluded that the acquisition is in the best interests
of the Funds.
Upon the acquisition of U.S. Gov't by Intermediate Bond, shareholders of
U.S. Gov't will receive shares of Intermediate Bond of the same class of shares
as the Shares they currently own, which have an aggregate net asset value
("NAV") equal to the aggregate NAV of the shareholder's shares in U.S. Gov't.
U.S. Gov't would then cease operations and dissolve. Shareholders of U.S. Gov't
will not be assessed any sales charges or other shareholder fees in connection
with the acquisition.
Sincerely,
Marc O. Mayer
President
PROSPECTUS
Acquisition of the Assets and Assumption of the Liabilities of
ALLIANCEBERNSTEIN BOND FUND, INC. - ALLIANCEBERNSTEIN
U.S. GOVERNMENT PORTFOLIO
By, and in Exchange for Shares of,
ALLIANCEBERNSTEIN BOND FUND, INC.
- ALLIANCEBERNSTEIN INTERMEDIATE BOND PORTFOLIO
[________], 2007
TABLE OF CONTENTS
Questions and Answers [_____]
Summary [_____]
Comparison of the Fees [_____]
Comparison of Investment Advisory Fees [_____]
Comparison of Investment Objectives and Policies [_____]
Principal Risks [_____]
Federal Income Tax Consequences [_____]
Comparison of Distribution and Purchase Procedures [_____]
Service Providers [_____]
Comparison of Business Structures [_____]
Information about the Transaction [_____]
Introduction [_____]
Description of the Acquisition Plan [_____]
Reasons for the Acquisition [_____]
Description of Securities to be Issued [_____]
Dividends and Other Distributions [_____]
Surrender of U.S. Gov't Stock Certificates [_____]
Federal Income Tax Consequences [_____]
Capitalization Information [_____]
Information about the Funds [_____]
Management of the Funds [_____]
Advisory Agreement and Fees [_____]
Distributor [_____]
Other Service Providers [_____]
Legal Matters [_____]
Experts [_____]
Financial Highlights [_____]
Appendix A -- Fee Table [_____]
Appendix B -- Comparison of Investment Objectives and Policies [_____]
Appendix C -- Fund Performance [_____]
Appendix D -- Description of Principal Risks of the Funds [_____]
Appendix E -- Certain Information Applicable to Class A, Class B,
Class C, Class R, Class K, Class I and Advisor Class
Shares of Intermediate Bond [_____]
Appendix F -- Other Information [_____]
Appendix G -- Form of Agreement and Plan of Acquisition and Liquidation
between AllianceBernstein U.S. Government Portfolio, a
series of AllianceBernstein Bond Fund, Inc., and
AllianceBernstein Intermediate Bond Portfolio, a series
of AllianceBernstein Bond Fund, Inc. [_____]
Appendix H -- Capitalization [_____]
Appendix I -- Legal Proceedings [_____]
Appendix J -- Share Ownership Information [_____]
Appendix K -- Financial Highlights [_____]
QUESTIONS AND ANSWERS
The following questions and answers provide an overview of key features of the
acquisition and of the information contained in this Prospectus.
1. What is this document and why did we send this document to you?
This is a Prospectus that provides you with information about the acquisition
(the "Acquisition") of the assets and liabilities of AllianceBernstein U.S.
Government Portfolio ("U.S. Gov't"), a series of AllianceBernstein Bond Fund,
Inc. (" Bond Fund"), by AllianceBernstein Intermediate Bond Fund Portfolio
("Intermediate Bond"), a series of Bond Fund. (Intermediate Bond and U.S. Gov't
are each a "Fund" and collectively, the "Funds.")
On August 2, 2007, the Board of Directors ("Directors") of Bond Fund approved
and declared advisable the Acquisition of U.S. Gov't by Intermediate Bond. The
Acquisition does not require approval by U.S. Gov't shareholders.
The Directors also approved certain changes in Intermediate Bond's
non-fundamental investment policy to enable the Fund to provide greater
diversification within its risk/return parameters over full market cycles. For a
more complete discussion of the investment policy revisions of Intermediate
Bond, see "Comparison of Investment Objectives and Policies" in the Summary.
Shareholders may contact a Fund at 1-800-221-5672 or write to a Fund at 1345
Avenue of the Americas, New York, NY 10105.
2. How will the Acquisition work?
The Agreement and Plan of Acquisition and Liquidation dated as of [__________],
2007, between U.S. Gov't and Intermediate Bond (the "Plan") provides for (i) the
transfer of all the assets of U.S. Gov't to Intermediate Bond, (ii) the
assumption by Intermediate Bond of all the liabilities of U.S. Gov't and the
subsequent redemption of shares of U.S. Gov't, (iii) the issuance to U.S. Gov't
shareholders of the equivalent class of shares of Intermediate Bond, equal in
aggregate net asset value ("NAV") to the NAV of their former U.S. Gov't shares,
and (iv) the cessation of operations and dissolution of U.S. Gov't.
As a shareholder of U.S. Gov't, you will receive shares of a class of
Intermediate Bond corresponding to the class of shares you now own. The
Intermediate Bond shares that shareholders of U.S. Gov't receive will have the
same aggregate NAV as the shares of U.S. Gov't held before the Acquisition. The
contingent deferred sales charge ("CDSC") period applicable to U.S. Gov't
shares prior to the Acquisition will continue to apply to the shares of
Intermediate Bond issued in the Acquisition. Shareholders of U.S. Gov't will not
be assessed any sales charges or other shareholder fees in connection with the
Acquisition.
3. Why is the Acquisition taking place?
After considering the recommendation of AllianceBernstein L.P. (the "Adviser"),
the Directors concluded that participation by U.S. Gov't in the Acquisition is
in the best interests of U.S. Gov't. The Directors also concluded that the
Acquisition would benefit U.S. Gov't shareholders by resulting in, among other
things, a reduction in expenses, and would not dilute shareholders' interests.
In reaching this conclusion, the Directors considered, among other things, the
investment objectives and investment policies of the Funds, the changes in
fixed-income markets since U.S. Gov't commenced operations, the expense ratio
reductions expected to result from the Acquisition, the continuity of portfolio
management teams, the comparison of fees for the Funds and the pro forma
combined Fund, the costs of the Acquisition, and the tax-free nature of the
Acquisition.
4. When will the Acquisition take place?
The Acquisition is expected to take place late in the last quarter of this year.
5. Where may I find additional information regarding the Funds?
Additional information about the Funds is available in the Statement of
Additional Information ("SAI") dated [________], 2007 that has been filed with
the Securities and Exchange Commission ("SEC") in connection with this
Prospectus. The SAI and each Fund's Annual Report to Shareholders, which contain
audited financial statements for the Funds' fiscal year, are incorporated by
reference into this Prospectus. In addition, the Funds' Semi-Annual Report and
the Prospectuses and Statements of Additional Information for each Fund dated
February 1, 2007 (the "Prospectuses") are also incorporated by reference into
this Prospectus.
Additional copies of the Annual and Semi-Annual Reports, and the Prospectus for
a Fund are available at www.AllianceBernstein.com and are also available, along
with this Prospectus and SAI, upon request, without charge, by writing to the
address or calling the telephone number listed below.
By Mail: AllianceBernstein Investor Services, Inc.
P.O. Box 786003
San Antonio, TX 78278-6003
By Phone: For Information: 1-800-221-5672
For Literature: 1-800-227-4618
All of this additional information is also available in documents filed with the
SEC. You may view or obtain these documents from the SEC:
In Person: at the SEC's Public Reference Room in Washington, DC
By Phone: 1-202-551-8090 (for information on the operations of
the Public Reference Room only)
By Mail: Public Reference Section, Securities and Exchange
Commission, Washington, DC 20549-0102 (duplicating fee
required)
By Electronic Mail: publicinfo@sec.gov (duplicating fee required)
On the Internet: www.sec.gov
Other Important Things to Note:
o You may lose money by investing in the Funds.
o The SEC has not approved or disapproved these securities or passed
upon the adequacy of this Prospectus. Any representation to the
contrary is a criminal offense.
ACQUISITION OF U.S. GOV'T BY INTERMEDIATE BOND
On August 2, 2007, the Board of Directors of Bond Fund (the "Directors")
declared advisable and voted to approve the Plan and the Acquisition. The Plan
provides for (i) the transfer of all the assets of U.S. Gov't to Intermediate
Bond, (ii) the assumption by Intermediate Bond of all the liabilities of U.S.
Gov't and the subsequent redemption of shares of U.S. Gov't, (iii) the issuance
to U.S. Gov't's shareholders of an equivalent class of shares of Intermediate
Bond, equal in aggregate NAV to the NAV of their former U.S. Gov't shares and
(iv) the cessation of operations and dissolution of U.S. Gov't.
Each U.S. Gov't shareholder will receive the number of full and fractional
shares of an equivalent class of shares of Intermediate Bond having an aggregate
NAV that, on the effective date of the Acquisition, is equal to the aggregate
NAV of the shareholder's shares of U.S. Gov't. Shareholders of U.S. Gov't will
recognize no gain or loss. The Acquisition is expected to occur late in the last
quarter of this year. The Acquisition does not require shareholder approval.
The Directors concluded that participation by U.S. Gov't in the Acquisition
is in the best interest of the Fund. The Directors also concluded that the
Acquisition would not dilute shareholders' interests. In reaching this
conclusion, the Directors considered, among other things, the investment
objectives and investment policies of the Funds, the changes in the fixed-income
markets since U.S. Gov't commenced operations, expense ratio reductions for
shareholders expected to result from the Acquisition, the continuity of the
portfolio management team, the comparison of fees for the Funds and the pro
forma combined Fund, the costs of the Acquisition, and the tax-free nature of
the Acquisition. For a more complete discussion of the factors considered by the
Directors in approving the Acquisition, see "Reasons for the Acquisition" in
"Information About the Transaction."
SUMMARY
The following summary highlights differences between Intermediate Bond and
U.S. Gov't. This summary is not complete, and, for more complete information,
please read this entire document. Note that certain information is presented as
of April 30, 2007. At the July 31 - August 2, 2007 Regular Board Meetings (the
"Board Meetings"), the Funds' Adviser, AllianceBernstein, L.P., represented to
the Directors that, if the information was updated, it would not differ in any
material respect.
U.S. Gov't is a diversified open-end fund, with assets, as of April 30,
2007, of approximately $552 million, that invests primarily in U.S. Government
securities. U.S. Gov't may invest in debt securities with a range of maturities
from short- to long-term. Intermediate Bond is a diversified open-end fund, with
assets, as of April 30, 2007, of approximately $118 million, that invests in a
broad range of fixed-income securities with an average duration between three
and six years. As discussed below, the Directors of Intermediate Bond have
recently approved revisions to the Fund's investment policies to enable the Fund
to provide greater diversification within its risk/return parameters over full
market cycles.
Intermediate Bond's performance record is somewhat better than that of U.S.
Gov't with average annual total returns for Class A shares as of December 31,
2006, of -0.43% for one year, 3.23% for five years, and 4.69% since inception
(July 1, 1999) as compared to U.S. Gov't's returns of -1.90% for one year, 2.64%
for five years, and 4.45% for ten years.
Comparison of the Fees
The expense ratio of the U.S. Gov't Class A shares is lower than the
expense ratio of the Intermediate Bond Class A shares before waiver (the
expenses of the other classes vary due to sales loads and distribution and
shareholder servicing fees, but have corresponding expense ratios). However, the
expenses of Intermediate Bond are currently subject to an expense cap of .98% so
that the expense ratio of Intermediate Bond Class A shares, after waiver, is
slightly lower than that of U.S. Gov't. The Adviser has reduced the expense cap
of Intermediate Bond's Class A shares (with corresponding changes for other
classes of shares) from .98% to .85%. Thus, the Acquisition would result in a
significant reduction in expenses for U.S. Gov't. The following table shows the
Funds' expense ratios and pro forma expense ratio of the combined Fund for Class
A shares.
Total Annual
Total Annual Expense Ratio
Expense Ratio After Waiver*
Before Waiver (as of April 30, 2007)
---------------------------------------------------------------------------
U.S. Gov't 1.05% --
Intermediate Bond 1.51% .98%
Combined Fund 1.06% .98%
Combined Fund with New Cap -- .85%
* The Adviser has agreed to reduce the expense ratio cap for
Intermediate Bond to .85% for Class A shares with corresponding caps
for the other classes of shares. The cap is effective until October
31, 2009, and will continue thereafter for one-year periods unless the
Adviser gives Intermediate Bond notice of termination at least 60 days
prior to the end of the Fund's fiscal year.
As the table indicates, the expenses per share, after waiver, of the U.S. Gov't
shares would be reduced by 0.20%. The Fee Table, attached hereto as Appendix A,
describes the fees and expense of each class of the Funds as of April 30, 2007
and includes pro forma expenses for the combined Fund.
Comparison of Investment Advisory Fees
U.S. Gov't and Intermediate Bond pay advisory fees to the Adviser at the
same rate which is .45% of the first $2.5 billion, .40% of the excess over $2.5
billion to $5.0 billion and .35% of the excess over $5.0 billion. Although the
fee rates are the same, U.S. Gov't's fee is based on quarter-end aggregate net
assets and Intermediate Bond's fee is based on monthly average net assets. The
difference could result in different effective advisory fee rates, although the
Adviser believes any differences would be immaterial.
Comparison of Investment Objectives and Policies
At the Board Meetings, the Directors approved certain changes in
Intermediate Bond's non-fundamental investment policies including:
o increasing the Fund's permissible investments in below investment
grade securities or junk bonds from 20% to 25% of the Fund's net
assets and making a corresponding change to the Fund's policy to
invest at least 80% of its net assets in "investment grade"
fixed-income securities to remove the investment grade requirement so
that the policy will require the Fund to invest at least 80% of its
net assets in fixed-income securities; and
o replacing the requirement that the currency risk of the Fund's
investment in non-U.S. Dollar-denominated fixed-income securities be
fully hedged with a policy that the Fund may use hedging strategies,
such as foreign currency exchange contracts and options on foreign
securities.
The purpose of these changes is to enable the Fund to provide greater
diversification within its risk/return parameters over full market cycles. The
Adviser does not expect significant changes to the Fund's portfolio to result
from these changes. The non-fundamental investment policy changes are expected
to become effective on or about November 1, 2007.
The investment objectives of the Funds are the same but their investment
strategies differ as shown in the following table.
Revised Intermediate Bond
Investment Policies as of
U.S. Gov't Intermediate Bond November 1, 2007
- --------------------------------------------------------------------------------------------
Investment U.S. Gov't's investment Intermediate Bond's Same.
Objective objective is to generate investment objective is
income and price to generate income and
appreciation without price appreciation
assuming undue risk. without assuming undue
risk.
Principal (i) U.S. Gov't normally (i) Under normal (i) Under normal
Investment invests at least 80% circumstances, circumstances,
Strategies of its net assets in Intermediate Bond Intermediate Bond
U.S. Government will invest at least will invest at least 80%
securities and 80% of its net assets in of its net assets in
repurchase agreements investment grade fixed-income securities.
and forward contracts fixed-income securities.
relating to U.S.
Government Securities.
(ii) U.S. Gov't may (ii) Intermediate Bond (ii) Intermediate Bond
invest the remaining may invest up to 20% may invest up to 25% of
20% of its net of its net assets in it net assets in below
assets in non-U.S. below investment grade investment grade
Government debt bonds and may invest securities and may invest
securities, such as without limit in U.S. without limit in U.S.
mortgage-related and Dollar-denominated Dollar-denominated
other asset-backed foreign fixed-income foreign fixed-income
securities, loan securities. The Fund may securities. The Fund may
participations, invest up to 25% of its use hedging strategies,
inflation-protected assets in non-U.S. Dollar such as foreign currency
securities, structured denominated foreign exchange contracts and
securities and variable, fixed-income securities, options on foreign
floating, and inverse whose currency risk will securities.
floating rate be fully hedged at be
instruments, preferred fully hedged at fully
stock, and other hedged at the time of
corporate debt investment. These
securities. U.S. Gov't investments may include,
does not invest in any in each case, developed
security rated below and emerging market debt
BBB- by S&P or Baa- by securities.
Moody's.
(iii) U.S. Gov't may (iii) Intermediate Bond (iii) Same.
invest in debt expects that the average
securities with a range duration of its
of maturities from investments will be in
short- to long-term. the intermediate range
of three to six years.
As the table above shows, U.S. Gov't invests 80% of its net assets in U.S.
Government securities and may invest 20% of its net assets in non-U.S.
Government securities. U.S. Gov't does not invest in below investment grade
fixed-income securities. In contrast, Intermediate Bond has a broader investment
strategy. It may invest at least 80% of its net assets in investment grade
fixed-income securities and may invest up to 20% of its net assets in below
investment grade securities. Intermediate Bond may also invest in U.S. and
non-U.S. Dollar-denominated foreign fixed-income securities. A more detailed
comparison of the investment strategies and policies of the Funds is provided in
Appendix B and information about the historical performance of the Funds is
provided in Appendix C. You can find additional information on the Funds in the
Prospectuses.
The Adviser expects to reposition U.S. Gov't's portfolio. Currently, there
is a 40% overlap between the holdings of the Funds because both invest
significantly in mortgage-backed securities and the Adviser expects to retain
these holdings in the combined fund. The remaining securities will be
transferred or liquidated prior to the merger.
Principal Risks
Each Fund is subject to market risk, credit risk, interest rate risk,
inflation risk, prepayment risk, derivatives risk and leverage risk. In
addition, Intermediate Bond may have more risk because it is subject to foreign
risk, emerging market risk, and currency risk due to its investments in non-U.S.
securities. However, as an intermediate duration bond fund, which invests in
fixed-income securities with an average duration of three to six years,
Intermediate Bond has less interest rate risk than funds that invest in
fixed-income securities with longer average duration or maturities. A
description of each of these risks is provided in Appendix D.
Federal Income Tax Consequences
No gain or loss will be recognized by U.S. Gov't or its shareholders as a
result of the Acquisition. The aggregate tax basis of the shares of Intermediate
Bond received by a shareholder of U.S. Gov't (including any fractional shares to
which the shareholder may be entitled) will be the same as the aggregate tax
basis of the shareholder's shares of U.S. Gov't. The holding period of the
shares of Intermediate Bond received by a shareholder of U.S. Gov't (including
any fractional share to which the shareholder may be entitled) will include the
holding period of the shares of U.S. Gov't held by the shareholder, provided
that such shares are held as capital assets by the shareholder of U.S. Gov't at
the time of the Acquisition. The holding period and tax basis of each asset of
U.S. Gov't in the hands of Intermediate Bond as a result of the Acquisition will
be the same as the holding period and tax basis of each such asset in the hands
of U.S. Gov't prior to the Acquisition. Provided that U.S. Gov't shares
surrendered constitute capital assets in the hands of the shareholder, such gain
or loss realized by the shareholder will be capital gain or loss upon
disposition of the shares. This tax information is based on the advice of Seward
& Kissel LLP, counsel to each of the Funds. It is a condition to the closing of
the Acquisition that such advice be confirmed in a written opinion of counsel.
An opinion of counsel is not binding on the Internal Revenue Service ("IRS").
U.S. Gov't has, as of April 30, 2007, no realized capital gains and
substantial capital loss carryforwards. No distribution of capital gains to U.S.
Gov't's shareholders prior to the closing of the Acquisition is anticipated.
U.S. Gov't has capital loss carryforwards of approximately $118 million or
$1.46 per share, while Intermediate Bond has tax loss carryforwards of
approximately $9.5 million or $0.83 per share. After the Acquisition, the
combined Fund's capital loss carryforwards will be approximately $128 million or
$1.96 per share. As a result, the amount of capital loss carryforwards available
to Intermediate Bond's shareholders will increase significantly and those
available to U.S. Gov't's shareholders will also increase somewhat. The
Acquisition will, however, trigger the loss limitation provision of Section 382
of the Internal Revenue Code (the "Code"), which would subject the use of
Intermediate Bond's capital loss carryforwards to an annual limitation for
taxable years after the Acquisition. In any event, the Adviser does not expect
that the capital loss carryforwards, or any limitations to their use, will have
much effect on the combined Fund's after-tax position since, because it invests
in fixed-income securities, significant capital gains are unlikely to be
realized by the combined Fund.
Additional tax considerations are discussed under the section on "Federal
Income Tax Consequences" in Information About the Transaction.
Comparison of Distribution and Purchase Procedures
The purchase procedures for the Funds are the same.
The shares of each Fund are offered to a broad range of investors. Class A
shares are sold with a front-end sales load of up to 4.25% for purchases of less
than $1,000,000. Class B shares are available at NAV without an initial sales
charge. Your investment, however, is subject to a Contingent Deferred Sales
Charge, or CDSC, if you redeem shares within three years of purchase. The CDSC
varies depending on the number of years you hold the shares. Class C shares are
also available at NAV without an initial sales charge. Your investment, however,
is subject to a 1% CDSC if you redeem your shares within one year. Advisor Class
shares may be purchased through a financial adviser at NAV.
Class A, Class R, Class K and Class I shares of each Fund are available to
certain group retirement plans at NAV, without an initial sales charge, to
401(k) plans, 457 plans, employer-sponsored 403(b) plans, profit-sharing and
money purchase pension plans, defined benefit plans, and non-qualified deferred
compensation plans where plan level or omnibus accounts are held on the books of
the Fund ("group retirement plans"), as follows: Class A shares are designed for
group retirement plans with assets in excess of $10,000,000. Class A shares are
also available at NAV to the AllianceBernstein Link, AllianceBernstein
Individual 401(k) and AllianceBernstein SIMPLE IRA plans with at least $250,000
in plan assets or 100 employees. Class R shares are designed for group
retirement plans with plan assets up to $10 million. Class K shares are designed
for group retirement plans with at least $1 million in plan assets. Class I
shares are designed for group retirement plans with at least $10 million in plan
assets and are available to certain investment advisory clients of the Adviser
who invest at least $2 million in a Fund.
The CDSC's applicable to shares of U.S. Gov't will continue to apply to
Intermediate Bond shares issued in the Acquisition. The CDSC period will be
calculated from the date of the original purchase of U.S. Gov't's Shares.
Each Fund's Class A shares have a .30% distribution (Rule 12b-1) fee. The
Class B and Class C shares of each Fund have a 1.00% distribution fee. Class R
shares of each Fund have a .50% distribution fee and Class K shares of each Fund
have a .25% distribution fee. The shares of both Funds may be exchanged for
comparable classes of shares of other AllianceBernstein mutual funds. More
information on distribution and purchase procedures of Intermediate Bond is
provided in Appendix E.
Service Providers
The Funds have the same service providers, which will continue in their
capacity after the Acquisition.
Comparison of Business Structures
Each Fund is a series of AllianceBernstein Bond Fund, Inc., which is
organized as a Maryland corporation and is governed by its Charter, Bylaws and
Maryland law. For more information on the comparison of the business structure
of the Funds, see Appendix F.
INFORMATION ABOUT THE TRANSACTION
Description of the Acquisition Plan
As provided in the Acquisition Plan, Intermediate Bond will acquire all the
assets and assume all the liabilities of U.S. Gov't at the effective time of the
Acquisition (the "Effective Time"). In return, Intermediate Bond will issue, and
U.S. Gov't will distribute to its shareholders, a number of full and fractional
shares of Intermediate Bond, determined by dividing the net value of all the
assets of U.S. Gov't by the NAV of one share of Intermediate Bond. For this
purpose, the Acquisition Plan provides the times for and methods of determining
the net value of the assets of each Fund. The Acquisition Plan provides that
shareholders of U.S. Gov't will be credited with shares of Intermediate Bond
corresponding to the aggregate NAV of U.S. Gov't's shares that the shareholder
holds of record at the Effective Time.
Following the distribution of Intermediate Bond shares in full liquidation
of U.S. Gov't, U.S. Gov't will wind up its affairs, cease operations, and
dissolve as soon as is reasonably possible after the Acquisition. In the event
the Acquisition does not occur, U.S. Gov't will continue its operations and its
Directors will consider what future action, if any, is appropriate.
The projected expenses of the Acquisition, largely those for legal,
accounting, printing and proxy solicitation expenses, are estimated to total
approximately $262,000. The projected expenses will be borne by the Funds on a
relative net asset basis in the amounts of approximately $214,178 and $47,822
for U.S. Gov't and Intermediate Bond, respectively.
The Acquisition is expected to occur late in the last quarter of this year.
Under applicable legal and regulatory requirements, none of U.S. Gov't's
shareholders will be entitled to exercise objecting shareholders' appraisal
rights, i.e., to demand the fair value of their shares in connection with the
Acquisition. Therefore, shareholders will be bound by the terms of the
Acquisition under the Acquisition Plan. However, any shareholder of U.S. Gov't
may redeem shares of common stock prior to the Acquisition.
Completion of the Acquisition is subject to certain conditions set forth in
the Acquisition Plan, some of which may be waived by a party to the Acquisition
Plan. The Acquisition Plan may be amended in any mutually agreed manner. The
parties to the Acquisition Plan may terminate the Acquisition Plan by mutual
consent and either party has the right to terminate the Acquisition Plan under
certain circumstances. Among other circumstances, either party may at any time
terminate the Acquisition Plan unilaterally upon a determination by the party's
Board of Directors that proceeding with the Acquisition Plan is not in the best
interests of the Fund or of its shareholders.
A copy of a form of the Acquisition Plan for the Acquisition is attached as
Appendix G.
Reasons for the Acquisition
At the Board Meetings, the Adviser recommended that the Directors approve
the proposed Plan and Acquisition. The Directors considered the factors
discussed below from the point of view of the interests of U.S. Gov't and its
shareholders. After careful consideration, the Directors (including all
Directors who are not "interested persons" of the Fund, the Adviser or its
affiliates) determined that the Acquisition would be in the best interests of
U.S. Gov't and that the interests of existing shareholders of the Funds would
not be diluted as a result of the Acquisition. The Directors have unanimously
approved the Acquisition Plan and Acquisition.
The Adviser presented the following reasons in favor of the Acquisition:
o U.S. Gov't is a diversified open-end fund that invests primarily
in U.S. Government Securities with net assets of, as of April 30,
2007, approximately $552 million. Intermediate Bond is a
diversified open-end fund with net assets of, as of April 30,
2007, approximately $118 million. The Adviser noted that
Intermediate Bond had outperformed U.S. Gov't for the one-,
three-, and five-year periods ended March 31, 2007.
o The Adviser discussed with the Directors that the past twenty
years have seen deterioration in the desirability of U.S.
Government bonds as an asset class. In 1985, U.S. Government
bonds represented 70% of retail, advisor-sold fixed income
assets, and the asset class was considered to be the "core" bond
strategy. With the evolution in the fixed income capital markets,
intermediate duration investment grade services have supplanted
U.S. Government services as the "core" investment of choice. The
ability to deliver solid returns in a diversified portfolio of
investments including but not limited to government and agency
securities has become important to investors, as yields on U.S.
Government securities have been in a secular decline. In light of
these developments, the Adviser noted that U.S. Gov't has been
losing assets steadily since 2002, with its assets decreasing
from almost $2 billion to approximately $552 as of April 30,
2007.
o The Adviser also discussed with the Directors that it believed
that investors seeking exposure solely to the U.S. Government
sector may be better served by investing in Exchange-Traded Funds
("ETFs"), rather than advisor-sold mutual funds, because ETFs are
generally less expensive alternatives with essentially the same
performance.
o The Adviser also discussed with the Directors that, while
historically investors also have turned to U.S. Government
securities in times of general market distress, its research
shows that retail investors are also looking to other venues
besides U.S. Government securities in times of market
dislocation. For example, in the recent bear market of the early
2000s, after the bursting of the growth bubble, retail investors
who did seek safe havens chose short duration and intermediate
duration core investments over U.S. Government securities.
Interestingly, retail investors typically choose short duration
services only during bear markets and not as a core strategy.
Unfortunately, bear markets are typically accompanied by falling
interest rates, which means intermediate duration securities
outperform short duration securities. Therefore, the Adviser
noted that it believed that Intermediate Bond provides the
appropriate service at these times for its fixed-income
shareholders.
o The Adviser discussed with the Board that it believes that the
Acquisitions would benefit U.S. Gov't and its shareholders. The
Adviser believes that the U.S. Gov't shareholders would benefit
from the multi-sector strategy of Intermediate Bond because it
invests in a broader range of debt securities, including that it
may invest without limit in U.S. Dollar-denominated foreign
fixed-income securities and up to 25% of its assets in non-U.S.
Dollar-denominated foreign fixed-income securities. The Adviser
believes that this benefit would be augmented by virtue of the
non-fundamental policy changes that it recommended to, and were
approved by, the Board, which would, among other things, permit
Intermediate Bond to invest more of its assets in below
investment grade securities.
At the Board Meetings, the Directors (with the advice and assistance of
independent counsel) also considered, among other things:
o potential shareholder benefits including the fact that total
expenses of each class of shares of the combined Fund are
expected to be significantly lower than the current expenses of
comparable classes of shares of U.S. Gov't, particularly in light
of the expense cap adopted by the Adviser for Intermediate Bond's
Class A shares of 0.85% (with corresponding expense caps for
other classes of shares), which is effective until October 31,
2009 and will run for continuing one-year periods unless the
Adviser gives Intermediate Bond notice of termination at least 60
days prior to the end of the Fund's fiscal year;
o the Adviser's plans with respect to the portfolio securities of
the U.S. Gov't and Intermediate Bond, including that (i) there is
currently a 40% overlap between the portfolio holdings of the two
Funds because both invest significantly in mortgage-backed
securities; (ii) the Adviser expects to sell up to 60% of the
remaining securities holdings of U.S. Gov't prior to its
Acquisition, for which there will be no material transaction
costs because U.S. Gov't's securities are valued at bid prices
and because the Adviser does not believe there will be any market
impact as a result of these sales; and (iii) investment by
Intermediate Bond of the cash acquired from U.S. Gov't in
accordance with Intermediate Bond's revised investment guidelines
for which the transaction costs are expected to be up to
approximately $467,000, or .07% of the combined Fund's net
assets, which will be borne by the combined Fund since both
Funds' shareholders are expected to benefit from the expected
on-going reduction of operating expenses and the opportunity for
enhanced returns;
o the current asset levels of U.S. Gov't and the combined pro forma
asset levels of Intermediate Bond;
o the historical performance results of the Funds;
o the investment objectives and principal investment strategies of
the Funds, as well as the fact that Intermediate Bond is a
multi-sector fund that may invest in a broader range of debt
securities and the proposed changes to Intermediate Bond's
non-fundamental investment policies discussed above; and
o the portfolio management teams for each of the Funds, which are
different although they are both within the Adviser's U.S.
Investment Grade Team and both are supervised by the heads of
this team, and that, following the Acquisitions, Intermediate
Bond's team will manage the combined Fund.
The Directors also considered, among other things:
o the historical and pro forma tax attributes of the Acquired
Funds, including that (i) U.S. Gov't has no realized gains and
substantial loss carryforwards, which will offset any gains
realized as a result of the portfolio repositioning described
above; (ii) Intermediate Bond has a relatively small amount
capital loss carryforwards that will not, after the Acquisition,
affect the capital loss carryforwards available to U.S. Gov't
shareholders, which will increase somewhat, while those available
to Intermediate Bond shareholders will increase significantly;
and (iii) the availability of these capital loss carry forwards
in the combined Fund will be limited by IRS Guidelines and,
because the combined Fund is a fixed-income fund that will
generate relatively insignificant capital gains, these
limitations are unlikely to have any adverse affect on the
combined Fund's after-tax position;
o the form of the Plan and the terms and conditions of the
Acquisition;
o the fact that the Funds pay the same advisory fee rates, although
the possibility for different fees exists since the U.S. Gov't's
fee is based on quarter-end aggregate net assets and Intermediate
Bond's fee is based on monthly average net assets, but, however,
the Adviser does not believe the difference is likely to have a
material effect on the fees;
o whether the Acquisition would result in the dilution of
shareholders' interests;
o the number of shareholder accounts and average account sizes of
the Funds;
o changes in service providers that would result from the
Acquisition;
o the benefits of the Acquisition to persons other than U.S. Gov't
and its shareholders, in particular, the Adviser, which will
benefit from the elimination of monitoring and administrating
U.S. Gov't;
o the fact that Intermediate Bond will assume all the liabilities
of U.S. Gov't;
o the fact that Intermediate Bond will assume the unreimbursed
distribution expenses that have not been reimbursed to the U.S.
Gov't's principal underwriter under the plan adopted by the U.S.
Gov't pursuant to Rule 12b-1 under the 1940 Act;
o the expected federal income tax consequences of the Acquisition;
o the costs of the Acquisition, which will be borne by U.S. Gov't
and Intermediate Bond; and
o the fact that the Adviser has agreed to indemnify Intermediate
Bond for a three-year period against any undisclosed or other
contingent liabilities not reflected on the balance sheet of U.S.
Gov't, to reimburse Intermediate Bond for any costs in connection
with investigating any such liability, and to continue certain
insurance coverage for a six-year period.
Also at the Board Meetings, the Directors of Bond Fund approved the Plan on
behalf of Intermediate Bond.
Description of Securities to be Issued
Under the Acquisition Plan, Intermediate Bond will issue additional shares
of common stock of its Class A, Class B, Class C, Advisor Class, Class R, Class
K and Class I for distribution to corresponding classes of shares of U.S. Gov't.
Under its Charter and Bylaws, Intermediate Bond may issue up to[ 3,000,000,000]
shares of common stock, par value $.001 per share, for each of these Classes.
When the acquisition of U.S. Gov't by Intermediate Bond is consummated,
shareholders of Class A, Class B, Class C, Advisor Class, Class R, Class K, and
Class I of U.S. Gov't will receive corresponding class shares of Intermediate
Bond having an aggregate NAV equal to the aggregate NAV of the shareholder's
shares in U.S. Gov't.
Each share of Intermediate Bond represents an equal proportionate interest
with other shares of Intermediate Bond. Each share has equal earnings, assets,
and voting privileges, and is entitled to dividends and other distributions out
of the income earned and gain realized on the assets belonging to Intermediate
Bond as authorized by the Board of Directors. Shares of Intermediate Bond
entitle their holders to one vote per full share and fractional votes for
fractional shares held. Shares of Intermediate Bond received by U.S. Gov't in
the Acquisition will be issued at NAV without a sales charge, fully paid and
non-assessable.
Dividends and Other Distributions
On or before the Closing Date, as defined in the Acquisition Plan, U.S.
Gov't will, if necessary, declare and pay as a distribution substantially all
its undistributed net investment income, net short-term capital gain, net
long-term capital gain and net gains from foreign currency transactions as
applicable to maintain its treatment as a regulated investment company.
Surrender of U.S. Gov't Stock Certificates
After the Acquisition Plan's Effective Time, each holder of a certificate
(or certificates) formerly representing shares of U.S. Gov't will not receive,
upon surrender of the certificate, a certificate representing the number of
Intermediate Bond shares distributable as a result of the Acquisition since
Intermediate Bond will not issue certificates representing Intermediate Bond
shares in connection with the Acquisition. Ownership of Intermediate Bond's
shares will be shown on the books of Intermediate Bond's transfer agent.
Promptly after the Acquisition Plan's Effective Time, AllianceBernstein Investor
Services, Inc. ("ABIS") will mail to U.S. Gov't's certificate holders,
instructions and a letter of transmittal for use in surrendering the
certificate. Please do not send share certificates at this time. Although the
certificates will be deemed for all purposes to evidence ownership of the
equivalent number of Intermediate Bond shares, no dividends will be paid to
holders of certificates of U.S. Gov't until the holder surrenders the
certificates in accordance with the instructions and letter of transmittal. Any
dividends on Intermediate Bond shares payable after the Effective Time will be
paid to the certificate holder, without interest, when that holder surrenders
his or her U.S. Gov't share certificate for exchange.
Federal Income Tax Consequences
Subject to certain stated assumptions contained therein, U.S. Gov't will
receive an opinion of Seward & Kissel LLP, its counsel, substantially to the
following effect: (i) the Acquisition will constitute a "reorganization" within
the meaning of section 368(a) of the Code and that U.S. Gov't and Intermediate
Bond will each be "a party to a reorganization" within the meaning of section
368(b) of the Code; (ii) a shareholder of U.S. Gov't will recognize no gain or
loss on the exchange of the shareholder's shares of U.S. Gov't solely for shares
of Intermediate Bond; (iii) neither U.S. Gov't nor Intermediate Bond will
recognize any gain or loss upon the transfer of all of the assets of U.S. Gov't
to Intermediate Bond in exchange for shares of Intermediate Bond and the
assumption by Intermediate Bond of the liabilities of U.S. Gov't pursuant to the
Acquisition Plan or upon the distribution of shares of Intermediate Bond to
shareholders of U.S. Gov't in exchange for their respective shares of U.S.
Gov't; (iv) the holding period and tax basis of the assets of U.S. Gov't
acquired by Intermediate Bond will be the same as the holding period and tax
basis that U.S. Gov't had in such assets immediately prior to the Acquisition;
(v) the aggregate tax basis of shares of Intermediate Bond received in
connection with the Acquisition by each shareholder of U. S. Gov't (including
any fractional share to which the shareholder may be entitled) will be the same
as the aggregate tax basis of the shares of U.S. Gov't surrendered in exchange
therefore; (vi) the holding period of shares of Intermediate Bond received in
connection with the Acquisition by each shareholder of U.S. Gov't (including any
fractional share to which the shareholder may be entitled) will include the
holding period of the shares of U.S. Gov't surrendered in exchange therefore,
provided that such U.S. Gov't shares constitute capital assets in the hands of
the shareholder as of the Closing Date; and (vii) Intermediate Bond will succeed
to the capital loss carryovers of U.S. Gov't but the use of Intermediate Bond's
existing capital loss carryovers (as well as the carryovers of U.S. Gov't) may
be subject to limitation under section 383 of the Code after the Acquisition.
This opinion of counsel will not be binding on the Internal Revenue Service or a
court and there is no assurance that the Internal Revenue Service or a court
will not take a view contrary to those expressed in the opinion.
Shareholders of U.S. Gov't are encouraged to consult their tax advisers
regarding the effect, if any, of the Acquisition in light of their individual
circumstances. Because the foregoing discussion only relates to the federal
income tax consequences of the Acquisition, those shareholders also should
consult their tax advisers as to state and local tax consequences, if any, of
the Acquisition.
Capitalization Information
For information on the existing and pro forma capitalization of the Funds,
see Appendix H.
INFORMATION ABOUT THE FUNDS
U.S. Gov't and Intermediate Bond are each a series of AllianceBernstein
Bond Fund, Inc., an open-end management investment company registered under the
1940 Act and organized as a Maryland corporation in 1973 under the name Alliance
Bond Fund, Inc. The company's name became AllianceBernstein Bond Fund, Inc. on
March 31, 2003.
Management of the Funds
The Board of Directors of Bond Fund directs the management of the business
and affairs of the Funds. The Board of Directors approves all significant
agreements between the respective Fund and persons or companies furnishing
services to it, including a Fund's agreements with the Adviser and the Fund's
administrator, custodian, and transfer and dividend disbursing agent. The
day-to-day operations of a Fund are delegated to its officers and the Fund's
Adviser, subject to the Fund's investment objective and policies and to general
supervision by the Fund's Board of Directors. Subsequent to the consummation of
the Acquisition, the directors and officers of Intermediate Bond will continue
to serve as the directors and officers of the combined Fund. Ms. Alison M.
Martier and Messrs. Greg J. Wilensky, Shawn E. Keegan, Joran Laird, and Jeffrey
S. Phlegar, the senior members of the U.S. Investment Grade: Core Fixed-Income
Investment Team, are primarily responsible for day-to-day management of
Intermediate Bond's portfolios. Ms. Martier is a Senior Vice President of the
Adviser, with which she has been associated in a substantially similar capacity
to her current position since prior to 2002, and Director of U.S. Core
Fixed-Income. Mr. Phlegar is an Executive President of the Adviser, with which
he has been associated in a substantially similar capacity to his current
position since prior to 2002, and the Chief Investment Officer and Co-Head of
Fixed-Income. Messrs. Wilensky, Keegan, and Laird are Vice Presidents of the
Adviser, with which they have been associated in a substantially similar
capacity to their current positions since prior to 2002. Mr. Wilensky is also
Director of Stable Value Investments.
Messrs. Kewjin Yuoh, S. Sean Kelleher, and Lipkee Lu, the senior members of
the U.S. Investment Grade: Structured Asset Investment Team, are primarily
responsible for day-to-day management of U.S. Gov'ts portfolios. Mr. Kelleher is
a Senior Vice President of the Adviser, with which he has been associated in a
substantially similar capacity to his current position since prior to 2002, and
Director of Liquid Markets. Messrs. Yuoh and Lu are Vice Presidents of the
Adviser, with which they have been associated in a substantially similar
capacity to their current positions since March 2003 and June 2005,
respectively. Prior thereto, Mr. Yuoh was a Vice President of Credit Suisse
Asset Management since prior to 2002 and Mr. Lu was Senior Vice President and
Structured Product portfolio manager within the corporate bond trading team at
Deerfield Capital Management since prior to 2002.
Subsequent to the consummation of the Acquisition, Ms. Martier and Messrs.
Wilensky, Keegan, Laird, and Phlegar will continue to be primarily responsible
for day-to-day management of the combined Fund. The Prospectuses provide
additional information about the portfolio managers' compensation, other
accounts managed by the portfolio managers, and the portfolio managers'
ownership of securities of the Funds.
Advisory Agreement and Fees
Each Fund's investment adviser is AllianceBernstein L.P., 1345 Avenue of
the Americas, New York, New York 10105. The Adviser is a leading international
investment adviser managing client accounts with assets as of June 30, 2007
totaling more than $792.9 billion (of which more than $99.6 billion represented
the assets of investment companies). As of June 30, 2007, the Adviser managed
retirement assets for many of the largest public and private employee benefit
plans (including 50 of the nation's FORTUNE 100 companies), for public employee
retirement funds in 37 states, for investment companies, and for foundations,
endowments, banks and insurance companies worldwide. The 41 registered
investment companies managed by the Adviser, comprising 123 separate investment
portfolios, currently have approximately 4.3 million shareholder accounts. The
Adviser also serves as administrator for each Fund.
Under each Fund's advisory agreement with the Adviser (the "Advisory
Agreement"), the Adviser provides investment advisory services and order
placement facilities for the Fund and pays all compensation of directors and
officers of the Fund who are affiliated persons of the Adviser. Under the
Advisory Agreements of U.S. Gov't and Intermediate Bond, each Fund pays the
Adviser an advisory fee at an annual rate of .45% of the first $2.5 billion,
..40% of the excess of over $2.5 billion to $5.0 billion and .35% of the excess
over $5.0 billion, of its average daily net assets. U.S. Gov't's fee is based on
quarter-end aggregate net assets and Intermediate Bond's fee is based on monthly
average net assets.
The Advisory Agreements, by their terms, continue in effect from year to
year if such continuance is specifically approved, at least annually, by a
majority vote of the directors of a Fund who neither are interested persons of
the Fund nor have any direct or indirect financial interest in the Advisory
Agreement, cast in person at a meeting called for the purpose of voting on such
approval. A discussion regarding the basis for the Board of Directors approving
the investment advisory contracts of U.S. Gov't and Intermediate Bond is
available in each Fund's Annual Report to Shareholders for fiscal years ended
September 30, 2006 and October 31, 2006, respectively.
The Adviser is the subject of certain legal proceedings and a discussion of
those proceedings is presented in Appendix I.
Distributor
AllianceBernstein Investments, Inc. ("ABI" or the "Distributor"), a
wholly-owned subsidiary of the Adviser, serves as the distributor of U.S.
Gov't's and Intermediate Bond's shares. Under a Distribution Services Agreement,
U.S. Gov't and Intermediate Bond pay distribution and service fees to the
Distributor at an annual rate of up to .30% of each Fund's average daily net
assets attributable to their Class A shares, 1.00% of each Fund's average daily
net assets attributable to its Class B and Class C shares, .50% of each Fund's
average daily net assets attributable to their Class R shares, and .25% of each
Fund's average daily net assets attributable to their Class K shares. The
Distribution Agreement provides that the Distributor will use such payments in
their entirety for distribution assistance and promotional activities.
Other Service Providers
The Funds will have the same service providers after the Acquisition. ABIS,
an affiliate of the Adviser, provides shareholder services for the Funds. The
Funds compensate ABIS for these services. State Street Bank & Trust Company, One
Lincoln Street, Boston, MA 02111, serves as custodian for the Funds. ABIS, P.O.
Box 786003, San Antonio, TX 78278-6003, serves as transfer agent for the Funds.
After the Acquisition, State Street Bank & Trust Company and ABIS will serve,
respectively, as custodian and transfer agent for the combined Fund. Ernst &
Young LLP serves as the independent registered public accounting firm for the
Funds and will continue to serve in that capacity for the combined Fund after
the Acquisition.
LEGAL MATTERS
The validity of the shares offered hereby will be passed upon for U.S.
Gov't by Seward & Kissel LLP.
EXPERTS
The audited financial statements and financial highlights in the Prospectus
and the SAI have been included in reliance on the report of Ernst & Young LLP, 5
Times Square, New York, New York, 10036, the independent registered public
accounting firm for U.S. Gov't, given on their authority as experts in auditing
and accounting.
FINANCIAL HIGHLIGHTS
Financial highlights information for the Funds is available at Appendix K.
APPENDIX A
FEE TABLE
The purpose of the tables below is to assist an investor in understanding
the various costs and expenses that a shareholder bears directly and indirectly
from an investment in the Funds. The tables allow you to compare the sales
charges, expenses of each Fund and estimates for the pro forma combined Fund in
its first year following the Acquisition.
Shareholder Fees (These fees are the same for both Funds and will remain the
same after the Acquisition.) (fees paid directly from your investment)
U.S. Gov't Class A U.S. Gov't Class B U.S. Gov't Class C
Intermediate Bond Intermediate Bond Intermediate Bond
Class A Intermediate Class B Intermediate Class C Intermediate
Bond (pro forma Bond (pro forma Bond (pro forma
Class A) Class B) Class C)
Maximum Sales
Charge (Load)
Imposed on
Purchases (as a
percentage of
offering price) 4.25%(a) None None
Maximum Deferred
Sales Charge
(Load) (as a
percentage of
original purchase
price or
redemption price,
whichever is lower) None(a) 3.00%(a)(b) 1.00%(a)(c)
Exchange Fee None None None
U.S. Gov't Advisor
Class Intermediate
Bond Advisor Class
Intermediate Bond
(pro forma Advisor
Class)
Maximum Sales
Charge (Load)
Imposed on
Purchases (as a
percentage of
offering price) None
Maximum Deferred
Sales Charge
(Load) (as a
percentage of
original purchase
price or
redemption price,
whichever is lower) None
Exchange Fee None
U.S. Gov't Class R U.S. Gov't Class K U.S. Gov't Class I
Intermediate Bond Intermediate Bond Intermediate Bond
Class R Intermediate Class K Intermediate Class I Intermediate
Bond (pro forma Bond (pro forma Bond (pro forma
Class R) Class K) Class I)
Maximum Sales
Charge (Load)
Imposed on
Purchases (as a
percentage of
offering price) None None None
Maximum Deferred
Sales Charge
(Load) (as a
percentage of
original purchase
price or
redemption price,
whichever is lower) None None None
Exchange Fee None None None
- ----------
(a) Class A sales charges may be reduced or eliminated in certain
circumstances, typically for large purchases. In some cases, however, a 1%,
1-year contingent deferred sales charge ("CDSC") may apply. CDSCs for Class
A , Class B, and Class C shares may also be subject to waiver in certain
circumstances.
(b) Class B shares automatically convert to Class A shares after 6 years. The
CDSC decreases over time. For Class B shares the CDSC decreases 1.00%
annually to 0% after the third year.
(c) For Class C shares, the CDSC is 0% after the first year.
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)
Intermediate
U.S. Gov't Intermediate Bond (pro
Class A Bond Class A forma) Class A
---------- ------------ --------------
Management Fees .44% .45% .45%
Distribution and/or Service
(12b-1) Fees .30% .30% .30%
Interest Expense .04% n/a n/a
Other Expenses
Transfer Agent .13% .20% .19%
Other Expenses .12% .40% .12%
---- ---- ----
Total Other Expenses .25% .60% .31%
---- ---- ----
Total Fund Operating
Expenses(a) 1.03% 1.35% 1.06%
==== ==== ====
Waiver and/or Expense
Reimbursement n/a (.37)%(b) (.21)%(c)
---- ----
Net Expenses n/a .98% .85%
====
- ----------
(a) Does not reflect expenses attributable to costs of proxy solicitation that
occurred in 2006.
(b) Reflects the Adviser's contractual waiver of a portion of its advisory fee
and/or reimbursement of a portion of the Fund's operating expenses. This
waiver extends through the end of the Fund's current fiscal year and may be
extended by the Adviser for additional one-year terms.
(c) Reflects the Adviser's contractual waiver of a portion of its advisory fee
and/or reimbursement of a portion of the Fund's operating expenses. This
waiver extends through October 31, 2009 and then may be extended by the
Adviser for additional one-year terms.
Intermediate
U.S. Gov't Intermediate Bond (pro
Class B Bond Class B forma) Class B
---------- ------------ --------------
Management Fees .44% .45% .45%
Distribution and/or Service
(12b-1) Fees 1.00% 1.00%(a) 1.00%(a)
Interest Expense .04% n/a n/a
Other Expenses
Transfer Agent .18% .25% .19%
Other Expenses .11% .41% .12%
---- ---- ----
Total Other Expenses .29% .66% .31%
---- ---- ----
Total Fund Operating
Expenses (b) 1.77% 2.11% 1.76%
==== ==== ====
Waiver and/or Expense
Reimbursement n/a (.43)%(c) (.21)%(d)
---- ----
Net Expenses n/a 1.68% 1.55%
==== ====
- ----------
(a) Total Fund Operating Expenses for the fiscal year ended October 31, 2006 do
not reflect the voluntary waiver of certain distribution expenses by the
Fund's principal underwriter, ABI. If the waiver were reflected, the net
expense of the Class B shares would have been 1.33%.
(b) Does not reflect expenses attributable to costs of proxy solicitation that
occurred in 2006.
(c) Reflects the Adviser's contractual waiver of a portion of its advisory fee
and/or reimbursement of a portion of the Fund's operating expenses. This
waiver extends through the end of the Fund's current fiscal year and may be
extended by the Adviser for additional one-year terms.
(d) Reflects the Adviser's contractual waiver of a portion of its advisory fee
and/or reimbursement of a portion of the Fund's operating expenses. This
waiver extends through October 31, 2009 and then may be extended by the
Adviser for additional one-year terms.
Intermediate
U.S. Gov't Intermediate Bond (pro
Class C Bond Class C forma) Class C
---------- ------------ --------------
Management Fees .44% .45% .45%
Distribution and/or Service
(12b-1) Fees 1.00% 1.00% 1.00%
Interest Expense .04% n/a n/a
Other Expenses
Transfer Agent .15% .22% .19%
Other Expenses .12% .41% .12%
---- ---- ----
Total Other Expenses .27% .63% .31%
---- ---- ----
Total Fund Operating
Expenses (a) 1.75% 2.08% 1.76%
==== ==== ====
Waiver and/or Expense
Reimbursement n/a (.40)%(b) (.21)%(c)
---- ----
Net Expenses n/a 1.8% 1.55%
==== ====
- ----------
(a) Does not reflect expenses attributable to costs of proxy solicitation that
occurred in 2006.
(b) Reflects the Adviser's contractual waiver of a portion of its advisory fee
and/or reimbursement of a portion of the Fund's operating expenses. This
waiver extends through the end of the Fund's current fiscal year and may be
extended by the Adviser for additional one-year terms.
(c) Reflects the Adviser's contractual waiver of a portion of its advisory fee
and/or reimbursement of a portion of the Fund's operating expenses. This
waiver extends through October 31, 2009 and then may be extended by the
Adviser for additional one-year terms.
U.S. Gov't Intermediate
Advisor Intermediate Bond (pro forma)
Class Advisor Class Advisor Class
---------- ------------- ---------------
Management Fees .44% .45% .45%
Distribution and/or Service
(12b-1) Fees None None None
Interest Expense .04% n/a n/a
Other Expenses
Transfer Agent .14% .18% .19%
Other Expenses .11% .40% .12%
---- ---- ----
Total Other Expenses .25% .58% .31%
---- ---- ----
Total Fund Operating
Expenses (a) .73% 1.03% .76%
==== ==== ====
Waiver and/or Expense
Reimbursement n/a (.35)%(b) (.21)%(c)
---- ----
Net Expenses n/a .68% .55%
==== ====
- ----------
(a) Does not reflect expenses attributable to costs of proxy solicitation that
occurred in 2006.
(b) Reflects the Adviser's contractual waiver of a portion of its advisory fee
and/or reimbursement of a portion of the Fund's operating expenses. This
waiver extends through the end of the Fund's current fiscal year and may be
extended by the Adviser for additional one-year terms.
(c) Reflects the Adviser's contractual waiver of a portion of its advisory fee
and/or reimbursement of a portion of the Fund's operating expenses. This
waiver extends through October 31, 2009 and then may be extended by the
Adviser for additional one-year terms.
Intermediate
U.S. Gov't Intermediate Bond (pro
Class R Bond Class R forma) Class R
---------- ------------ --------------
Management Fees .44% .45% .45%
Distribution and/or Service
(12b-1) Fees .50% .50% .50%
Interest Expense .03% n/a n/a
Other Expenses
Transfer Agent .24% .21% .26%
Other Expenses .12% .42% .12%
---- ---- ----
Total Other Expenses .36% .63% .38%
---- ---- ----
Total Fund Operating
Expenses (a) 1.33% 1.58% 1.33%
==== ==== ====
Waiver and/or Expense
Reimbursement n/a (.40)%(b) (.28)%(c)
---- ----
Net Expenses n/a 1.18% 1.05%
==== ====
- ----------
(a) Does not reflect expenses attributable to costs of proxy solicitation that
occurred in 2006.
(b) Reflects the Adviser's contractual waiver of a portion of its advisory fee
and/or reimbursement of a portion of the Fund's operating expenses. This
waiver extends through the end of the Fund's current fiscal year and may be
extended by the Adviser for additional one-year terms.
(c) Reflects the Adviser's contractual waiver of a portion of its advisory fee
and/or reimbursement of a portion of the Fund's operating expenses. This
waiver extends through October 31, 2009 and then may be extended by the
Adviser for additional one-year terms.
Intermediate
U.S. Gov't Intermediate Bond (pro
Class K Bond Class K forma) Class K
---------- ------------ --------------
Management Fees .44% .45% .45%
Distribution and/or Service
(12b-1) Fees .25% .25% .25%
Interest Expense .04% n/a n/a
Other Expenses
Transfer Agent .19% .19% .20%
Other Expenses .09% .40% .12%
---- ---- ----
Total Other Expenses .28% .59% .32%
---- ---- ----
Total Fund Operating
Expenses (a) 1.01% 1.29% 1.02%
==== ==== ====
Waiver and/or Expense
Reimbursement n/a (.36)%(b) (.22)%(c)
---- ----
Net Expenses n/a .93% .80%
==== ====
- ----------
(a) Does not reflect expenses attributable to costs of proxy solicitation that
occurred in 2006.
(b) Reflects the Adviser's contractual waiver of a portion of its advisory fee
and/or reimbursement of a portion of the Fund's operating expenses. This
waiver extends through the end of the Fund's current fiscal year and may be
extended by the Adviser for additional one-year terms.
(c) Reflects the Adviser's contractual waiver of a portion of its advisory fee
and/or reimbursement of a portion of the Fund's operating expenses. This
waiver extends through October 31, 2009 and then may be extended by the
Adviser for additional one-year terms.
Intermediate
U.S. Gov't Intermediate Bond (pro
Class I Bond Class I forma) Class I
---------- ------------ --------------
Management Fees .44% .45% .45%
Distribution and/or Service
(12b-1) Fees None None None
Interest Expense .04% n/a n/a
Other Expenses
Transfer Agent .12% .12% .12%
Other Expenses .14% .33% .12%
--- --- ---
Total Other Expenses .26% .45% .24%
--- --- ---
Total Fund Operating
Expenses (a) .74% .90% .69%
=== === ===
Waiver and/or Expense
Reimbursement n/a (.22)%(b) (.14)%(c)
--- ---
Net Expenses n/a .68% .55%
=== ===
- ----------
(a) Does not reflect expenses attributable to costs of proxy solicitation that
occurred in 2006.
(b) Reflects the Adviser's contractual waiver of a portion of its advisory fee
and/or reimbursement of a portion of the Fund's operating expenses. This
waiver extends through the end of the Fund's current fiscal year and may be
extended by the Adviser for additional one-year terms.
(c) Reflects the Adviser's contractual waiver of a portion of its advisory fee
and/or reimbursement of a portion of the Fund's operating expenses. This
waiver extends through October 31, 2009 and then may be extended by the
Adviser for additional one-year terms.
EXAMPLES
The Examples are to help you compare the cost of investing in each Fund
with the cost of investing in the combined Fund on a pro forma combined basis.
They assume that you invest $10,000 in a Fund for the time periods indicated and
then redeem all of your shares at the end of those periods. They also assume
that your investment has a 5% return each year, that a Fund's operating expenses
stay the same and that all dividends and distributions are reinvested.
Intermediate
Bond
U.S. Gov't Intermediate (pro forma)
Class A Bond Class A Class A
------ ------ ------
After 1 Year $ 526 $ 521 $ 508
After 3 Years+++ $ 739 $ 800 $ 707
After 5 Years+++ $ 969 $1,099 $ 945
After 10 Years+++ $1,631 $1,949 $1,627
Intermediate Intermediate
Bond Bond
U.S. Gov't Intermediate (pro forma) U.S. Gov't Intermediate (pro forma)
Class B+ Bond Class B+ Class B+ Class B++ Bond Class B++ Class B++
---------- ------------- ------------ ---------- -------------- ------------
After 1 Year $ 480 $ 471 $ 558 $ 180 $ 171 $ 158
After 3 Years+++ $ 657 $ 719 $ 712 $ 557 $ 619 $ 512
After 5 Years+++ $ 959 $1,095 $ 914 $ 959 $1,095 $ 914
After 10 Years+++ $1,710 $2,034 $1,852 $1,710 $2,034 $1,852
Intermediate Intermediate
Bond Bond
U.S. Gov't Intermediate (pro forma) U.S. Gov't Intermediate (pro forma)
Class C+ Bond Class C+ Class C+ Class C++ Bond Class C++ Class C++
---------- ------------- ------------ ---------- -------------- ------------
After 1 Year $ 278 $ 271 $ 258 $ 178 $ 171 $ 158
After 3 Years+++ $ 551 $ 613 $ 511 $ 551 $ 613 $ 511
After 5 Years+++ $ 949 $1,082 $ 912 $ 949 $1,082 $ 912
After 10 Years+++ $2,062 $2,379 $2,033 $2,062 $2,379 $2,033
Intermediate Intermediate
U.S. Gov't Intermediate Bond Bond
Advisor Bond (pro forma) U.S. Gov't Intermediate (pro forma)
Class Advisor Class Advisor Class Class R Bond Class R Class R
---------- ------------- ------------- ---------- -------------- ------------
After 1 Year $ 75 $ 69 $ 56 $ 135 $ 120 $ 107
After 3 Years+++ $ 233 $ 293 $ 200 $ 421 $ 460 $ 365
After 5 Years+++ $ 406 $ 535 $ 380 $ 729 $ 823 $ 674
After 10 Years+++ $ 906 $1,238 $ 902 $1,601 $1,844 $1,551
Intermediate Intermediate
Bond Bond
U.S. Gov't Intermediate (pro forma) U.S. Gov't Intermediate (pro forma)
Class K Bond Class K Class K Class I Bond Class I Class I
---------- ------------- ------------ ---------- -------------- ------------
After 1 Year $ 103 $ 95 $ 82 $ 76 $ 69 $ 56
After 3 Years+++ $ 322 $ 373 $ 280 $ 237 $ 265 $ 192
After 5 Years+++ $ 558 $ 673 $ 519 $ 411 $ 477 $ 356
After 10 Years+++ $1,236 $1,525 $1,207 $ 918 $1,088 $ 831
The projected post-Acquisition pro forma Annual Fund Operating Expenses and
Examples presented above are based upon numerous material assumptions. Although
these projections represent good faith estimates, there can be no assurance that
any particular level of expenses or expense savings will be achieved, because
expenses depend on a variety of factors, including the future level of fund
assets, many of which are beyond the control of Intermediate Bond and the
Adviser.
+ Assumes redemption at end of period and, with respect to shares held 10
years, conversion of Class B shares to Class A shares after six years.
++ Assumes no redemption at end of period and, with respect to shares held 10
years, conversion of Class B shares to Class A shares after six years.
+++ These examples assume that the Adviser's agreement to waive management fees
and/or bear Fund expenses is not extended beyond its initial term.
APPENDIX B
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
- --------------------------------------------------------------------------------------------------------------------------------
Merged Fund -
Policy Changes from
Intermediate Bond
U.S. Government Portfolio Intermediate Bond Portfolio Portfolio
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
Investment The Fund's investment objective is to Same.
Objective generate income and price appreciation
without assuming what the Adviser
considers undue risk.
- --------------------------------------------------------------------------------------------------------------------------------
Investment Policies(1)
- --------------------------------------------------------------------------------------------------------------------------------
Status The Fund is a series of an open-end Same. None.
management investment company that is
diversified.
- --------------------------------------------------------------------------------------------------------------------------------
Rule 35d-1 - The Fund invests, under normal The Fund invests, under normal To accommodate the proposed
80% Policy circumstances, at least 80% of its circumstances, at least 80% of its increase in investments in
net assets in U.S. Government net assets in investment grade below investment grade
securities and repurchase agreements fixed-income securities. securities (see below), the
and forward contracts relating to Fund's policy to invest 80% of
U.S. Government securities. its assets in "investment
grade" fixed-income securities
U.S. Government securities in which will be modified to eliminate
the Fund invests may include a the "investment grade"
significant amount of mortgage-backed restriction, which is not
securities issued by government- necessary for the purposes of
sponsored entities, such as FNMA or Rule 35d-1.
FHLMC, that are neither issued nor
guaranteed by the U.S. Treasury.
- --------------------------------------------------------------------------------------------------------------------------------
Other Securities The Fund may invest 20% of its net The Fund may invest up to 20% of Increase permissible
assets in non-U.S. Government its net assets in below investment investments in below
securities. grade bonds. investment grade bonds
from 20% to 25% of the
Fund's net assets.
- --------------------------------------------------------------------------------------------------------------------------------
Foreign The Fund may invest without limit Remove requirement to fully
Securities in U.S. Dollar-denominated foreign hedge currency risk but
fixed-income securities and may maintain flexibility to use
invest up to 25% of its assets in hedging strategies.
non-U.S. Dollar denominated foreign
fixed-income securities, whose
currency risk will be fully hedged
at the time of investment.
- --------------------------------------------------------------------------------------------------------------------------------
Maturity The Fund may invest in debt The Fund expects that the average None.
securities with a range of duration of the Fund's investments
maturities from short- to will be in the intermediate range
long-term. of three to six years.
- --------------------------------------------------------------------------------------------------------------------------------
Mortgage- The mortgage-related securities in Same. None.
Related and which the Fund may invest typically
Other Asset- are securities representing interests
Backed in pools of mortgage loans made by
Securities lenders such as savings and loan
associations, mortgage bankers and
commercial banks, and are assembled
for investors by governmental,
government-related or private
organizations. These securities may
include pass-through mortgage-related
securities, collateralized mortgage
obligations ("CMOs"), CMO residuals,
adjustable-rate mortgage securities,
stripped mortgage-backed securities,
commercial mortgage-backed
securities, "to be announced"
mortgage-backed securities, mortgage
dollar rolls, collateralized
obligations and other securities that
directly or indirectly represent a
participation in or are secured by
and payable from mortgage loans on
real property and other assets.
Other asset-backed securities in
which the Fund may invest include
collateralized debt obligations
("CDOs"), which include
collateralized bond obligations
("CBOs"), collateralized loan
obligations ("CLOs") and other
similarly structured securities.
- --------------------------------------------------------------------------------------------------------------------------------
Structured The Fund may invest in securities Same. None.
Securities issued in structured financing
transactions, which generally involve
aggregating types of debt assets in a
pool or special purpose entity and
then issuing new securities.
- --------------------------------------------------------------------------------------------------------------------------------
Inflation- The Fund may invest in Same. None.
Protected inflation-protected securities.
Securities
- --------------------------------------------------------------------------------------------------------------------------------
Derivatives - The Fund may invest, without limit, Same. None.
General in derivatives, such as options,
futures, forwards or swap agreements.
- --------------------------------------------------------------------------------------------------------------------------------
Futures Contracts The Fund will not purchase or sell Same. None.
and Options commodities regulated by the
on Futures Commodity Futures Trading Commission
Contracts under the Commodity Exchange Act or
commodities contracts except for
General futures contracts and options on
futures contracts. (F)
- --------------------------------------------------------------------------------------------------------------------------------
Futures Futures contracts that the Fund may Same. Also, the Fund may engage in None.
Contracts and buy and sell may include futures currency "cross hedging."
Options on contracts on fixed-income or other
Futures securities, and contracts based on
Contracts interest rates or financial indices,
including any index of U.S.
Specific Government securities.
Options on futures contracts written
or purchased by the Fund will be
traded on U.S. exchanges and will be
used only for hedging purposes.
- --------------------------------------------------------------------------------------------------------------------------------
Foreign The Fund may purchase and sell None.
Currency foreign currency futures
Futures contracts.
Contracts
- --------------------------------------------------------------------------------------------------------------------------------
Options The Fund may write and purchase call Same. None.
and put options on securities. The
Fund may also write combinations of
put and call options on the same
security, known as "straddles," with
the same exercise and expiration
date. The Fund may purchase or write
options on securities of the types in
which it is permitted to invest in
privately negotiated transactions.
The Fund may write call and put
options and purchase call and put
options on securities indices.
The Fund may invest in options on
foreign currencies that are privately
negotiated or traded on U.S. or
foreign exchanges for hedging
purposes or to increase income.
- --------------------------------------------------------------------------------------------------------------------------------
Forward The Fund may invest in forward Same. None.
Contracts contracts, including the purchase or
sale of forward currency exchange
contracts.
- --------------------------------------------------------------------------------------------------------------------------------
Swap The Fund may enter into interest rate Same. None.
Transactions swap, cap or floor transactions,
which may include preserving a return
or spread on a particular investment
or portion of its portfolio or
protecting against an increase in the
price of securities the Fund
anticipates purchasing at a later
date. The Fund also may invest in
credit default swap agreements,
currency swaps and interest rate
transaction futures.
- --------------------------------------------------------------------------------------------------------------------------------
Preferred Stock The Fund may invest in preferred stock. Same. None.
- --------------------------------------------------------------------------------------------------------------------------------
Repurchase The Fund may enter into repurchase Same. None.
Agreements agreements pertaining to the types of
securities in which it invests with
member banks of the Federal Reserve
System or "primary dealers" in such
securities. There is no percentage
restriction on the Fund's ability to
enter into repurchase agreements.
- --------------------------------------------------------------------------------------------------------------------------------
Variable and The Fund may invest in variable, Same. None.
Floating Rate floating and inverse floating rate
Instruments instruments.
- --------------------------------------------------------------------------------------------------------------------------------
Forward The Fund may enter into forward Same. None.
Commitment commitments for the purchase or sale
Transactions of securities. Such transactions may
and When- include purchases on a "when-issued"
Issued, basis or purchases or sales on a
Delayed "delayed delivery" basis.
Delivery
Securities
- --------------------------------------------------------------------------------------------------------------------------------
Zero Coupon The Fund may invest in zero coupon Same. None.
Securities Treasury securities. The Fund may
also invest in zero coupon securities
issued by U.S. Government agencies or
instrumentalities that are supported
by the full faith and credit of the
United States.
- --------------------------------------------------------------------------------------------------------------------------------
Reverse The Fund may enter into reverse Same. None.
Repurchase repurchase agreements and dollar
Agreements and rolls, subject to the Fund's
Dollar Rolls limitations on borrowings.
- --------------------------------------------------------------------------------------------------------------------------------
Loan The Fund may invest in corporate Same. None.
Participations loans either by participating as
co-lender at the time the loan is
originated or by buying an interest
in the loan in the secondary market
from a financial institution or
institutional investor.
- --------------------------------------------------------------------------------------------------------------------------------
Standby The Fund will enter into standby Same. None.
Commitment commitment agreements only for the
Agreements purpose of investing in the security
underlying the commitment at a yield
and price considered advantageous to
the Fund and unavailable on a firm
commitment basis.
- --------------------------------------------------------------------------------------------------------------------------------
Other The Fund may invest in securities of Same. None.
Investment other investment companies, including
Companies exchange-traded funds, to the extent
permitted under the 1940 Act or the
rules and regulations thereunder (as
such statute, rules or regulations
may be amended from time to time) or
by guidance regarding,
interpretations of, or exemptive
orders under, the 1940 Act or the
rules or regulations thereunder
published by appropriate regulatory
authorities. The Fund intends to
invest uninvested cash balances in an
affiliated money market fund as
permitted by Rule 12d1-1 under the
1940 Act.
- --------------------------------------------------------------------------------------------------------------------------------
Illiquid The Fund will limit its investments Same. None.
Securities in illiquid securities to no more
than 15% of its net assets or such
other amount permitted by guidance
regarding the 1940 Act.
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio The Fund expects to engage in active Same. None.
Turnover and frequent portfolio turnover to
achieve its investment objectives.
- --------------------------------------------------------------------------------------------------------------------------------
Margin The Fund may not purchase securities Same. None.
on margin, except (i) as otherwise
provided under rules adopted by the
Commission under the 1940 Act or by
guidance regarding the 1940 Act, or
interpretations thereof, and (ii)
that the Portfolio may obtain such
short-term credits as are necessary
for the clearance of portfolio
transactions, and the Portfolio may
make margin payments in connection
with futures contracts, options,
forward contracts, swaps, caps,
floors, collars and other financial
instruments. (Operating Policy.)
- --------------------------------------------------------------------------------------------------------------------------------
Future The Fund may take advantage of other Same. None.
Developments investment practices that are not
presently contemplated for use by the
Fund or which are not currently
available but that may be developed,
to the extent that such investment
practices are consistent with the
Fund's investment objective and
legally permissible for the Fund.
- --------------------------------------------------------------------------------------------------------------------------------
Short Sales The Fund may make short sales a part Same. None.
of overall portfolio management or to
offset a potential decline in the
value of a security.
- --------------------------------------------------------------------------------------------------------------------------------
Securities For the purposes of achieving income, Same. None.
Lending the Fund may make secured loans of
portfolio securities to brokers,
dealers and financial institutions,
provided a number of conditions are
satisfied, including that the loan is
fully collateralized. The Fund may
pay reasonable finders',
administrative, and custodial fees in
connection with a loan.
- --------------------------------------------------------------------------------------------------------------------------------
Borrowing The Fund may borrow for temporary Same. None.
purposes to repurchase its shares to
meet redemption requests in an amount
not exceeding 5% of the value of the
total assets of the Fund.
The Fund may use borrowings for
investment purposes subject to the
limit imposed by the 1940 Act, which
is up to 33-1/3% of the Fund's assets.
The Fund may not issue any senior
security (as that term is defined in
the 1940 Act) or borrow money, except
to the extent permitted by the 1940
Act or the rules and regulations
thereunder (as such statute, rules or
regulations may be amended from time
to time) or by guidance regarding, or
interpretations of, or exemptive
orders under, the 1940 Act or the
rules or regulations thereunder
published by appropriate regulatory
authorities. For the purposes of this
restriction, margin and collateral
arrangements, including, for example,
with respect to permitted borrowings,
options, futures contracts, options on
futures contracts and other
derivatives such as swaps, are not
deemed to be the issuance of a senior
security. (F)
- --------------------------------------------------------------------------------------------------------------------------------
Issuer As a fundamental policy, the Fund is Same. None.
Concentration diversified. This means that at least
75% of the Fund's assets consist of
cash or cash items; government
securities; securities of other
investment companies; and securities
of any one issuer that represent not
more than 10% of the outstanding
voting securities of the issuer of
the securities and not more than 5%
of the total assets of the Fund. (F)
- --------------------------------------------------------------------------------------------------------------------------------
Lending The Fund may not make loans except Same. None.
through (i) the purchase of debt
obligations in accordance with its
investment objectives and policies;
(ii) the lending of portfolio
securities; (iii) the use of
repurchase agreements; or (iv) the
making of loans to affiliated funds
as permitted under the 1940 Act, the
rules and regulations thereunder (as
such statutes, rule or regulations
may be amended from time to time), or
by guidance regarding, and
interpretations of, or exemptive
orders under, the 1940 Act. (F)
- --------------------------------------------------------------------------------------------------------------------------------
Underwriting The Fund may not act as an Same. None.
underwriter of securities, except
that the Portfolio may acquire
restricted securities under
circumstances in which, if such
securities were sold, the Portfolio
might be deemed to be an underwriter
for purposes of the Securities Act of
1933, as amended. (F)
- --------------------------------------------------------------------------------------------------------------------------------
Industry The Fund may not concentrate Same. None.
Concentration investments in an industry, as
concentration may be defined under
the 1940 Act or the rules and
regulations thereunder (as such
statute, rules or regulations may be
amended from time to time) or by
guidance regarding, interpretations
of, or exemptive orders under, the
1940 Act or the rules or regulations
thereunder published by appropriate
regulatory authorities. (F)
- --------------------------------------------------------------------------------------------------------------------------------
Real Estate The Fund may not purchase or sell Same. None.
real estate except that it may
dispose of real estate acquired as a
result of the ownership of securities
or other instruments. This
restriction does not prohibit the
Portfolio from investing in
securities or other instruments
backed by real estate or in
securities of companies engaged in
the real estate business. (F)
- --------------------------------------------------------------------------------------------------------------------------------
APPENDIX C
FUND PERFORMANCE
The charts below show the percentage gain or loss in each calendar year for
the ten-year period ended December 31, 2006, for Class A shares of U.S. Gov't
and Class A shares of Intermediate Bond.
They should give you a general idea of how each Fund's return has varied
from year to year. The charts include the effects of Fund expenses, but not
applicable sales charges. Returns would be lower if any applicable sales charges
were included. The calculations of annual total return assume the reinvestment
of all dividends and capital gain distributions on the reinvestment date.
Performance results included the effect of expense reduction arrangements, if
any. If these arrangements had not been in place, the performance results would
have been lower. As with all mutual funds, past performance is not an indication
of future results. No assurance can be given that Intermediate Bond will achieve
any particular level of performance after the Acquisition. Additional discussion
of the manner of calculation of total return is contained in the Prospectuses of
each Fund.
Calendar Year Total Returns
U.S. GOV'T
----------
BAR CHART
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
[The following table was depicted as a bar chart in the printed material.]
8.55 8.60 -3.21 12.42 5.72 9.21 0.72 3.35 2.16 2.48
- --------------------------------------------------------------------------------
97 98 99 00 01 02 03 04 05 06
Calendar Year End
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best quarter was up 5.62% in the 3rd quarter, 2002; and Worst quarter was down
3.11% in the 2nd quarter, 2004.
INTERMEDIATE BOND
-----------------
BAR CHART
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
[The following table was depicted as a bar chart in the printed material.]
n/a n/a n/a 11.25 7.36 7.67 3.69 3.48 1.94 3.97
- --------------------------------------------------------------------------------
97 98 99 00 01 02 03 04 05 06
Calendar Year End
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best quarter was up 4.56% in the 3rd quarter, 2001; and Worst quarter was down
- -2.50% in the 2nd quarter, 2004.
The following tables list U.S. Gov't's and Intermediate Bond's average annual
total return before taxes for each class of shares that will be involved in the
Acquisition for the one-year, five-year and since inception periods ending
December 31, 2006 for each Fund (including applicable sales charges). These
tables are intended to provide you with some indication of the risks of
investing in the Funds. At the bottom of each table, you can compare the Funds'
performance with the performance of a broad-based market index.
Average Annual Total Returns
U.S. Gov't
PERFORMANCE TABLE
Average Annual Total Returns*
(For the periods ended December 31, 2006)
1 year 5 years** 10 years**
- ------------------------------------------------------------------------------------------
Class A*** Return Before Taxes (1.90)% 2.64% 4.45%
-----------------------------------------------------------------------
Return After Taxes on Distributions (3.48)% 0.98% 2.18%
-----------------------------------------------------------------------
Return After Taxes on Distributions
and Sale of Fund Shares (1.26)% 1.27% 2.37%
- ------------------------------------------------------------------------------------------
Class B Return Before Taxes (1.20)% 2.80% 4.45%
- ------------------------------------------------------------------------------------------
Class C Return Before Taxes 0.77% 2.80% 4.16%
- ------------------------------------------------------------------------------------------
Advisor Class Return Before Taxes 2.78% 3.88% 4.82%
- ------------------------------------------------------------------------------------------
Lehman Brothers (reflects no deduction for fees,
Government Bond expenses, or taxes)
Index 3.48% 4.64% 6.01%
- ------------------------------------------------------------------------------------------
* Average annual total returns reflect imposition of the maximum front-end or
contingent deferred sales charges as well as conversion of Class B shares
to Class A shares after the applicable period.
** Inception Dates for Advisor Class shares: 10/6/00. Performance information
for periods prior to the inception of Advisor Class shares is the
performance of the Fund's Class A shares adjusted to reflect the lower
expense ratio of Advisor Class shares.
*** After-tax Returns:
-- Are shown for Class A shares only and will vary for Class B, Class C
and Advisor Class shares because these Classes have different expense
ratios.
-- Are an estimate, which is based on the highest historical individual
federal marginal income tax rates and do not reflect the impact of
state and local taxes; actual after-tax returns depend on an
individual investor's tax situation and are likely to differ from
those shown; and
-- Are not relevant to investors who hold Fund shares through
tax-deferred arrangements such as 401(k) plans or individual
retirement accounts.
Intermediate Bond -
PERFORMANCE TABLE
Average Annual Total Returns*
(For the periods ended December 31, 2006)
Since
1 year 5 years** Inception**
- ---------------------------------------------------------------------------------------------------------
Class A*** Return Before Taxes (0.43)% 3.23% 4.69%
----------------------------------------------------------------------------------------
Return After Taxes on Distributions (1.84)% 1.65% 2.81%
----------------------------------------------------------------------------------------
Return After Taxes on Distributions
and Sale of Fund Shares (0.30)% 1.82% 2.85%
- ---------------------------------------------------------------------------------------------------------
Class B Return Before Taxes 0.80% 3.52% 4.70%
- ---------------------------------------------------------------------------------------------------------
Class C Return Before Taxes 2.26% 3.44% 4.55%
- ---------------------------------------------------------------------------------------------------------
Advisor Class Return Before Taxes 4.28% 4.45% 5.52%
- ---------------------------------------------------------------------------------------------------------
Lehman Brothers (reflects no deduction for fees, expenses, or taxes,
Aggregate Index 4.33% 5.06% 6.22%
- ---------------------------------------------------------------------------------------------------------
* Average annual total returns reflect imposition of the maximum front-end or
contingent deferred sales charges as well as conversion of Class B shares
to Class A shares after the applicable period.
** Inception Dates for Class A, B and C shares: 7/1/99, and Advisor Class
shares: 10/9/00. Performance information for periods prior to the inception
of Advisor Class shares is the performance of the Fund's Class A shares
adjusted to reflect the lower expense ratio of Advisor Class shares,
respectively.
*** After-tax Returns:
-- Are shown for Class A shares only and will vary for Class B, Class C
and Advisor Class shares because these Classes have different expense
ratios.
-- Are an estimate, which is based on the highest historical individual
federal marginal income tax rates and do not reflect the impact of
state and local taxes; actual after-tax returns depend on an
individual investor's tax situation and are likely to differ from
those shown; and
-- Are not relevant to investors who hold Fund shares through
tax-deferred arrangements such as 401(k) plans or individual
retirement accounts.
APPENDIX D
DESCRIPTION OF PRINCIPAL RISKS OF THE FUNDS
Among the principal risks of investing in a Fund are market risk, interest
rate risk, credit risk, inflation risk, foreign (non-U.S.) risk, emerging
markets risk, currency risk, prepayment risk, derivatives risk, leverage risk,
and management risk. Each of these risks is more fully described below. Each
Fund could become subject to additional risks because the types of investments
made by each Fund can change over time.
Market Risk This is the risk that the value of a Fund's investments will
fluctuate as the stock or bond markets fluctuate and that
prices overall will decline over shorter- or longer-term
periods.
Interest Rate Changes in interest rates will affect the value of a Fund's
Risk investments in fixed-income securities. When interest rates
rise, the value of a Fund's investments tends to fall and
this decrease in value may not be offset by higher interest
income from new investments. Interest rate risk is generally
greater for Funds that invest in fixed-income securities
with longer maturities or durations.
Credit Risk This is the risk that the issuer or the guarantor of a
fixed-income security, or the counterparty to a derivatives
or other contract, will be unable or unwilling to make
timely payments of interest or principal, or to otherwise
honor its obligations. The issuer or guarantor may default
causing a loss of the full principal amount of a security
and any accrued interest. The degree of risk for a
particular security may be reflected in its credit rating.
Investments in fixed-income securities with lower ratings
tend to have a higher probability that an issuer will
default or fail to meet its payment obligations.
Inflation Risk This is the risk that the value of assets or income from
investments will be less in the future as inflation
decreases the value of money. As inflation increases, the
value of each Fund's assets can decline as can the value of
the Fund's distributions. This risk is significantly greater
for those Funds that invest a significant portion of their
assets in fixed-income securities with longer maturities.
Foreign A Fund's investments in foreign (non-U.S.) securities may
(Non-U.S.) Risk experience more rapid and extreme changes in value than
investments in securities of U.S. companies. The securities
markets of many foreign countries are relatively small, with
a limited number of companies representing a small number of
securities. Foreign companies usually are not subject to the
same degree of regulation as U.S. issuers. Reporting,
accounting, and auditing standards of foreign countries
differ, in some cases significantly, from U.S. standards.
Nationalization, expropriation or confiscatory taxation,
currency blockage, political changes, or diplomatic
development could adversely affect a Fund's investments in a
foreign country. These risks are heightened for emerging
market countries because there may be more economic,
political and social instability, and investments in
companies in emerging markets may have more risk because
these securities may be more volatile and less liquid. To
the extent a Fund invests in a particular country or
geographic region, the Fund may have more significant risk
due to market changes or other factors affecting that
country or region, including political instability and
unpredictable economic conditions.
Emerging Foreign investment risk may be particularly high to the
Market Risk extent a Fund invests in emerging market securities of
issuers based in countries with developing economies. These
securities may present market, credit, currency, liquidity,
legal, political and other risks different from, or greater
than, the risk of investing in developed foreign (non-U.S.)
countries.
Currency Risk This is the risk that fluctuations in the exchange rates
between the U.S. Dollar and foreign (non-U.S.) currencies
may negatively affect the value of a Fund's investments or
reduce the returns of a Fund.
Derivatives The Funds may use derivatives. These investment strategies
Risk may be riskier than other investment strategies and may
result in greater volatility for a Fund, particularly during
periods of market declines.
Leverage Risk When a Fund borrows money or otherwise leverages its
portfolio, it may be volatile because leverage tends to
exaggerate the effect of any increase or decrease in the
value of a Fund's investments. A Fund may create leverage
through the use of reverse repurchase arrangements, forward
currency exchange contracts, forward commitments, dollar
rolls or futures contracts or by borrowing money.
Prepayment The value of mortgage-related or asset-backed securities may
Risk be particularly sensitive to changes in prevailing interest
rates. Early prepayments of principal on some
mortgage-related securities may occur during periods of
falling mortgage interest rates and expose a Fund to a lower
rate of return upon reinvestment of principal. Early
payments associated with mortgage-related securities cause
these securities to experience significantly greater price
and yield volatility than is experienced by traditional
fixed-income securities. During periods of rising interest
rates, a reduction in prepayments may increase the effective
life of mortgage-related securities, subjecting them to
greater risk of decline in market value in response to
rising interest rates. If the life of a mortgage-related
security is inaccurately predicted, a Fund may not be able
to realize the rate of return it expected.
Management Each Fund is subject to management risk because it is an
Risk actively managed investment portfolio. The Adviser will
apply its investment techniques and risk analyses in making
investment decisions for each Fund, but there can be no
guarantee that its decisions will produce the desired
results.
APPENDIX E
CERTAIN INFORMATION APPLICABLE TO CLASS A, CLASS B, CLASS C, CLASS R, CLASS K,
CLASS I AND ADVISOR CLASS SHARES OF INTERMEDIATE BOND
How to Buy Shares
Class A Shares
- --------------
Class A shares are sold with a front-end sales charge of up to 4.25% for
purchases of less than $1,000,000.
Class B and Class C Shares
- --------------------------
Class B and Class C shares may be purchased through financial
intermediaries, such as broker-dealers or banks. You may also purchase shares
directly from the Fund's principal underwriter, AllianceBernstein Investments,
Inc., or ABI.
Advisor Class Shares
- --------------------
You may purchase Advisor Class shares through your financial advisor at
NAV. Advisor Class shares may be purchased and held solely:
o through accounts established under a fee-based program, sponsored and
maintained by a registered broker-dealer or other financial
intermediary and approved by the Fund's principal underwriter;
o through a defined contribution employee benefit plan (e.g., a 401(k)
plan) that has at least $10,000,000 in assets and that purchases
shares directly without the involvement of a financial intermediary;
and
o by investment advisory clients of, and certain other persons
associated with, the Adviser and its affiliates or the Fund.
The Fund's Prospectuses have more detailed information about who may
purchase and hold Advisor Class shares.
Class A, Class R, Class K and Class I Shares
- --------------------------------------------
Class A, Class R, Class K and Class I shares are available at net asset
value, or NAV, to 401(k) plans, 457 plans, employer-sponsored 403(b) plans,
profit-sharing and money purchase pension plans, defined benefit plans, and
non-qualified deferred compensation plans where plan level or omnibus accounts
are held on the books of the Fund ("group retirement plans"), as follows: Class
A shares are designed for group retirement plans with assets in excess of
$10,000,000. Class A shares are also available at NAV to the AllianceBernstein
Link, AllianceBernstein Individual 401(k) and AllianceBernstein SIMPLE IRA plans
with at least $250,000 in plan assets or 100 employees. Class R shares are
designed for group retirement plans with plan assets up to $10,000,000. Class K
shares are designed for group retirement plans with at least $1,000,000 in plan
assets. Class K and Class I shares are sold without an initial sales charge.
Class I shares are designed for group retirement plans with at least
$10,000,000 in plan assets and are available to certain investment advisory
clients of the Adviser who invest at least $2 million in a Fund and its
affiliates.
Class A, Class K and Class I shares are also available to
AllianceBernstein-sponsored group retirement plans. Class K and Class I shares
generally are not available to retail non-retirement accounts, traditional and
ROTH IRAs, Coverdell Education Savings Accounts, SEPs, SAR-SEPs, SIMPLE IRAs,
and individual 403(b) plans.
Required Information
- --------------------
The Fund is required by law to obtain, verify and record certain personal
information from you or persons on your behalf in order to establish an account.
Required information includes name, date of birth, permanent residential address
and taxpayer identification number (for most investors, your social security
number). The Fund may also ask to see other identifying documents. If you do not
provide the information, the Fund will not be able to open your account. If the
Fund is unable to verify your identity, or that of another person(s) authorized
to act on your behalf, or if the Fund believes it has identified potentially
criminal activity, the Fund reserves the right to take action it deems
appropriate or as required by law, which may include closing your account. If
you are not a U.S. citizen or Resident Alien, your account must be affiliated
with a NASD member firm.
General
- -------
The Fund may refuse any order to purchase shares. The Fund reserves the
right to suspend the sale of its shares to the public in response to conditions
in the securities markets or for other reasons.
The Different Share Class Expenses
This section describes the different expenses of investing in each class
and explains factors to consider when choosing a class of shares. The expenses
can include distribution and/or service fees (12b-1 fees) or contingent deferred
sales charges ("CDSCs"). Please see below for a discussion of how CDSCs are
calculated.
---------------------------------------------------------------------
What is a Rule 12b-1 Fee?
A Rule 12b-1 fee is a fee deducted from the Fund's assets that is used
to pay for personal service, maintenance of shareholder accounts and
distribution costs, such as advertising and compensation of financial
intermediaries. The amount of each share class's 12b-1 fee, if any, is
disclosed below and in the Fund's fee table near the front of its
Prospectus.
---------------------------------------------------------------------
Asset-Based Sales Charges or Distribution and/or Service (Rule 12b-1) Fees
- --------------------------------------------------------------------------
The Fund has adopted plans under Commission Rule 12b-1 that allow the Fund
to pay asset-based sales charges or distribution and/or service fees for the
distribution and sale of its shares. The amount of these fees for each class of
the Fund's shares involved in the Acquisition is:
Distribution and/or Service
(Rule 12b-1) Fee (as a
Percentage of Aggregate
Average Daily Net Assets)
----------------------------
Class A .30%
Class B 1.00%
Class C 1.00%
Class R .50%
Class K .25%
Class I None
Advisor Class None
Because these fees are paid out of the Fund's assets on an on-going basis,
over time these fees will increase the cost of your investment and may cost you
more than paying other types of sales fees. Class B, Class C, and Class R shares
are subject to higher Rule 12b-1 fees than Class A shares. The higher fees mean
a higher expense ratio, so Class B, Class C, and Class R shares pay
correspondingly lower dividends and may have a lower NAV (and returns) than
Class A shares. Class K and Class I shares have a lower or no Rule 12b-1 fee.
Therefore, Class K and Class I shares have a lower expense ratio and may have a
higher NAV (and returns) than Class A shares. All or some of these fees may be
paid to financial intermediaries, including your financial advisor's firm.
Class A Shares
- --------------
Class A shares do not have an initial sales charge. Class A shares may be
subject to a CDSC of up to 1%. When a non-AllianceBernstein-sponsored group
retirement plan terminates a Fund as an investment option, all investments in
Class A shares of that Fund through the plan are subject to a 1%, 1-year CDSC
upon redemption. In addition, when a group retirement plan ceases to participate
in an AllianceBernstein-sponsored group retirement plan program, investments in
the Fund's Class A shares through the plan are subject to a 1%, 1-year CDSC upon
redemption. The CDSC is applied to the lesser of NAV at the time of redemption
of shares or the original cost of shares being redeemed.
Class B Shares - Deferred Sales Charge Alternative
- --------------------------------------------------
Class B shares do not have an initial sales charge. Your investment,
however, is subject to a CDSC if you redeem within three years of purchase. The
CDSC varies depending on the number of years you hold the shares. The CDSC
amounts for Class B shares are:
Year Since Purchase CDSC
-------------------- ----
First 4.00%
Second 3.00%
Third 2.00%
Fourth 1.00%
Fifth and thereafter None
If you exchange your shares for the Class B shares of another
AllianceBernstein Mutual Fund, the CDSC also will apply to the Class B shares
received. If you redeem your shares and directly invest the proceeds in units of
CollegeBoundfund, the CDSC will apply to the units of the CollegeBoundfund. The
CDSC period begins with the date of your original purchase, not the date of
exchange for the other Class B shares or purchase of CollegeBoundfund units.
Class B shares purchased for cash automatically convert to Class A shares
six years after the end of the month of your purchase. If you purchase shares by
exchange for the Class B shares of another AllianceBernstein Mutual Fund, the
conversion period runs from the date of your original purchase.
Class C Shares - Asset-Based Sales Charge Alternative
- -----------------------------------------------------
Class C shares may be purchased at NAV without an initial sales charge.
Your investment, however, is subject to a 1% CDSC if you redeem your shares
within one year. If you exchange your shares for the Class C shares of another
AllianceBernstein Mutual Fund, the 1% CDSC also will apply to the Class C shares
received. The one-year period for the CDSC begins with the date of your original
purchase, not the date of the exchange for the other Class C shares. Class C
shares do not convert to any other class of shares of the Fund.
Class R, Class K and Class I Shares
- -----------------------------------
Class R, Class K and Class I shares do not have an initial sales charge or
CDSC.
Advisor Class Shares - Fee-Based Program Alternative
- ----------------------------------------------------
You may purchase Advisor Class shares through your financial advisor.
Advisor Class shares are not subject to any initial or contingent sales charges.
However, when you purchase Advisor Class shares through your financial advisor,
your financial advisor may charge a fee. Advisor Class shares are not available
to everyone. See "How to Buy Shares" above.
Distribution Arrangements for Group Retirement Plans
The Fund offers distribution arrangements for group retirement plans.
However, plan sponsors, plan fiduciaries and other financial intermediaries may
establish requirements for group retirement plans as to the purchase, sale or
exchange of shares of the Fund, including maximum and minimum initial investment
requirements that are different from those described in the Fund's Prospectus
and SAI. Therefore, plan sponsors or fiduciaries may not impose the same share
class parameters as set forth in the Fund's Prospectus and SAI. Group retirement
plans also may not offer all classes of shares of the Fund. The Fund is not
responsible for, and has no control over, the decision of any plan sponsor or
fiduciary to impose such differing requirements.
Payments to Financial Intermediaries
Financial intermediaries market and sell shares of the Fund. These
financial intermediaries may receive compensation for selling shares of the
Fund. This compensation is paid from various sources, including any CDSC and/or
Rule 12b-1 fee that you may pay.
---------------------------------------------------------------------
What is a Financial Intermediary?
A financial intermediary is a firm that receives compensation for
selling shares of the Fund offered in this Prospectus and/or provides
services to the Fund's shareholders. Financial intermediaries may
include, among others, brokers, financial planners or advisors, banks,
pension plan consultants and insurance companies. Financial
intermediaries employ financial advisors who deal with you and other
investors on an individual basis.
---------------------------------------------------------------------
In the case of Class A shares, the Fund's principal underwriter,
AllianceBernstein Investments, Inc. or ABI, may pay financial intermediaries a
fee of up to 1%. Additionally, up to 100% of the Rule 12b-1 fees applicable to
Class A shares each year may be paid to financial intermediaries, including your
financial intermediary, that sell Class A shares.
In the case of Class B shares, ABI must pay, at the time of your purchase,
a commission to financial intermediaries selling Class B shares in an amount
equal to 4% of your investment. Additionally, up to 30% of the Rule 12b-1 fees
applicable to Class B shares each year may be paid to financial intermediaries,
including your financial intermediary, that sell Class B shares.
In the case of Class C shares, ABI must pay, at the time of your purchase,
a commission to firms selling Class C shares in an amount equal to 1% of your
investment. Additionally, up to 100% of the Rule 12b-1 fees applicable to Class
C shares each year may be paid to financial intermediaries, including your
financial intermediary, that sell Class C shares.
In the case of Advisor Class shares, your financial advisor may charge
ongoing fees or transactional fees.
In the case of Class R and Class K shares, up to 100% of the Rule 12b-1 fee
applicable to Class R and Class K shares each year may be paid to financial
intermediaries, including your financial intermediary, that sell Class R and
Class K shares.
Your financial advisor's firm receives compensation from the Fund, ABI
and/or the Adviser in several ways from various sources, which include some or
all of the following:
o upfront sales commissions;
o Rule 12b-1 fees;
o additional distribution support;
o defrayal of costs for educational seminars and training; and
o payments related to providing shareholder recordkeeping and/or
transfer agency services.
Other Payments for Distribution Services and Educational Support
In addition to the Rule 12b-1 fees described above, ABI, at its expense,
currently provides additional payments to firms that sell shares of the
AllianceBernstein Mutual Funds. Although the individual components may be higher
and the total amount of payments made to each qualifying firm in any given year
may vary, the total amount paid to a financial intermediary in connection with
the sale of shares of the AllianceBernstein Mutual Funds will generally not
exceed the sum of (a) 0.25% of the current year's fund sales by that firm and
(b) 0.10% of average daily net assets attributable to that firm over the year.
These sums include payments to reimburse directly or indirectly the costs
incurred by these firms and their employers in connection with educational
seminars and training efforts about the AllianceBernstein Mutual Funds for the
firm's employees and/or their clients and potential clients. The costs and
expenses associated with these efforts may include travel, lodging,
entertainment, and meals.
For 2007, ABI's additional payments to these firms for distribution
services and educational support related to the AllianceBernstein Mutual Funds
is expected to be approximately 0.04% of the average monthly assets of the
AllianceBernstein Mutual Funds, or approximately $22,000,000. In 2006, ABI paid
approximately 0.04% of the average monthly assets of the AllianceBernstein
Mutual Funds or approximately $20,000,000, for distribution services and
educational support related to the AllianceBernstein Mutual Funds.
A number of factors are considered in determining the additional payments,
including each firm's AllianceBernstein Mutual Fund sales, assets and redemption
rates, and the willingness and ability of the firm to allow ABI to provide
information for educational and marketing purposes. In some cases, firms will
include the AllianceBernstein Mutual Funds on a "preferred" list. ABI's goal is
to make the financial intermediaries who interact with current and prospective
investors and shareholders more knowledgeable about the AllianceBernstein Mutual
Funds so that they can provide suitable information and advice about the funds
and related investor services.
The Fund and ABI also make payments for recordkeeping and other transfer
agency services to financial intermediaries that sell AllianceBernstein Mutual
Fund shares. These expenses paid by the Fund are included in "Other Expenses"
under "Fees and Expenses of the Funds--Annual Fund Operating Expenses" in the
Fund's Prospectus.
If one mutual fund sponsor makes greater distribution assistance payments
than another, a financial advisor and his or her firm may have an incentive to
recommend one fund complex over another. Similarly, if a financial intermediary
receives more distribution assistance for one share class versus another, the
financial intermediary may have an incentive to recommend that class.
Please speak with your financial advisor to learn more about the total
amounts paid to your financial advisor and his or her firm by the Funds, the
Adviser, ABI, and by sponsors of other mutual funds he or she may recommend to
you. You should also consult disclosures made by your financial advisor at the
time of purchase.
As of the date of the Fund's most recent Prospectus, ABI anticipates that
the firms that will receive additional payments for distribution services and/or
educational support include:
A.G. Edwards
AIG Advisor Group
Ameriprise Financial Services
AXA Advisors
Banc of America
Cadaret Grant & Co.
CCO Investment Services Corp.
Charles Schwab
Chase Investment Services
Citicorp Investment Services
Citigroup Global Markets
Commonwealth Financial Network
Donegal Securities
Independent Financial Marketing Group
ING Advisors Network
Linsco/Private Ledger
McDonal Investments
Merrill Lynch
MetLife Securities
Morgan Stanley
Mutual Service Corporation
National Financial
PFS Investments
Raymond James
RBC Dain Rauscher
Robert W. Baird
Securities America
Signator Investors
UBS AG
UBS Financial Service
Wachovia Securities
Wells Fargo Investments
Although the Fund may use brokers or other financial intermediaries who
sell shares of the Fund to effect portfolio transactions, the Fund does not
consider the sale of AllianceBernstein Mutual Fund shares as a factor when
selecting brokers or dealers to effect portfolio transactions.
How to Exchange Shares
You may exchange your Fund shares for shares of the same class of other
AllianceBernstein Mutual Funds (including AllianceBernstein Exchange Reserves, a
money market fund managed by the Adviser). Exchanges of shares are made at the
next-determined NAV, without sales or service charges. You may request an
exchange by mail or telephone or through your financial intermediary. In order
to receive a day's NAV, ABIS or your financial intermediary must receive and
confirm your telephone exchange request by 4:00 p.m., Eastern Time, on that day.
The Fund may modify, restrict, or terminate the exchange privilege on 60 days'
written notice.
How to Sell or Redeem Shares
You may "redeem" your shares (i.e., sell your shares to the Fund) on any
day the New York Stock Exchange (the "Exchange") is open. Your sale price will
be the next-determined NAV, less any applicable CDSC, after the Fund receives
your redemption request in proper form. Normally, redemption proceeds are sent
to you within 7 days. If you recently purchased your shares by check or
electronic funds transfer, your redemption payment may be delayed until the Fund
is reasonably satisfied that the check or electronic funds transfer has been
collected (which may take up to 15 days). For Advisor Class shares, if you are
in doubt about what procedures or documents are required by your fee-based
program or employee benefit plan to sell your shares, you should contact your
financial advisor. Your financial intermediary must receive your sales request
by 4:00 p.m., Eastern Time, and submit it to the Fund by a pre-arranged time for
you to receive the next-determined NAV, less any applicable CDSC. Your financial
intermediary is responsible for submitting all necessary documentation to the
Fund and may charge you a fee for this service.
Frequent Purchases and Redemptions of Fund Shares
The Fund's Board of Directors has adopted policies and procedures designed
to detect and deter frequent purchases and redemptions of Fund shares or
excessive or short-term trading that may disadvantage long-term Fund
shareholders. These policies are described below. The Fund reserves the right to
restrict, reject or cancel, without any prior notice, any purchase or exchange
order for any reason, including any purchase or exchange order accepted by any
shareholder's financial intermediary.
Risks Associated With Excessive Or Short-term Trading Generally
- ----------------------------------------------------------------
While the Fund will try to prevent market timing by utilizing the
procedures described below, these procedures may not be successful in
identifying or stopping excessive or short-term trading in all circumstances. By
realizing profits through short-term trading, shareholders that engage in rapid
purchases and sales or exchanges of the Fund's shares dilute the value of shares
held by long-term shareholders. Volatility resulting from excessive purchases
and sales or exchanges of Fund shares, especially involving large dollar
amounts, may disrupt efficient portfolio management. In particular, the Fund may
have difficulty implementing its long-term investment strategies if it is forced
to maintain a higher level of its assets in cash to accommodate significant
short-term trading activity. Excessive purchases and sales or exchanges of the
Fund's shares may force the Fund to sell portfolio securities at inopportune
times to raise cash to accommodate short-term trading activity. In addition, the
Fund may incur increased expenses if one or more shareholders engage in
excessive or short-term trading. For example, a Fund may be forced to liquidate
investments as a result of short-term trading and incur increased brokerage
costs and realization of taxable capital gains without attaining any investment
advantage. Similarly, the Fund may bear increased administrative costs due to
asset level and investment volatility that accompanies patterns of short-term
trading activity. All of these factors may adversely affect Fund performance.
A Fund that invests significantly in foreign securities may be particularly
susceptible to short-term trading strategies. This is because foreign securities
are typically traded on markets that close well before the time a Fund
calculates its NAV at 4:00 p.m., Eastern Time, which gives rise to the
possibility that developments may have occurred in the interim that would affect
the value of these securities. The time zone differences among international
stock markets can allow a shareholder engaging in a short-term trading strategy
to exploit differences in Fund share prices that are based on closing prices of
foreign securities established some time before the Fund calculates its own
share price (referred to as "time zone arbitrage"). The Fund has procedures,
referred to as fair value pricing, designed to adjust closing market prices of
foreign securities to reflect what is believed to be the fair value of those
securities at the time the Fund calculates its NAV. While there is no assurance,
the Fund expects that the use of fair value pricing, in addition to the
short-term trading policies discussed below, will significantly reduce a
shareholder's ability to engage in time zone arbitrage to the detriment of other
Fund shareholders. This risk is generally not applicable to the Fund because it
does not invest in foreign equity securities.
A shareholder engaging in a short-term trading strategy may also target a
Fund that does not invest primarily in foreign securities. Any Fund that invests
in securities that are, among other things, thinly traded, traded infrequently,
or relatively illiquid has the risk that the current market price for the
securities may not accurately reflect current market values. A shareholder may
seek to engage in short-term trading to take advantage of these pricing
differences (referred to as "price arbitrage"). Funds that may be adversely
affected by price arbitrage include, in particular, those Funds that
significantly invest in fixed-income securities, such as high yield bonds,
asset-backed securities, or foreign fixed-income securities, that may be timely
traded or traded infrequently.
Policy Regarding Short-term Trading
- ------------------------------------
Purchases and exchanges of shares of the Fund should be made for investment
purposes only. The Fund seeks to prevent patterns of excessive purchases and
sales or exchanges of Fund shares. The Fund will seek to prevent such practices
to the extent they are detected by the procedures described below. The Fund
reserves the right to modify this policy, including any surveillance or account
blocking procedures established from time to time to effectuate this policy, at
any time without notice.
Transaction Surveillance Procedures. The Fund, through its agents, ABI and
ABIS, maintains surveillance procedures to detect excessive or short-term
trading in Fund shares. This surveillance process involves several factors,
which include scrutinizing transactions in Fund shares that exceed certain
monetary thresholds or numerical limits within a specified period of time.
Generally, more than two exchanges of Fund shares during any 90-day period or
purchases of shares followed by a sale within 90 days will be identified by
these surveillance procedures. For purposes of these transaction surveillance
procedures, the Fund may consider trading activity in multiple accounts under
common ownership, control, or influence. Trading activity identified by either,
or a combination, of these factors, or as a result of any other information
available at the time, will be evaluated to determine whether such activity
might constitute excessive or short-term trading. These surveillance procedures
may be modified from time to time, as necessary or appropriate to improve the
detection of excessive or short-term trading or to address specific
circumstances, such as for certain retirement plans, to conform to plan exchange
limits or U.S. Department of Labor regulations, or for certain automated or
pre-established exchange, asset allocation or dollar cost averaging programs, or
omnibus account arrangements.
Account Blocking Procedures. If the Fund determines, in its sole
discretion, that a particular transaction or pattern of transactions identified
by the transaction surveillance procedures described above is excessive or
short-term trading in nature, the relevant Fund account(s) will be immediately
"blocked" and no future purchase or exchange activity will be permitted.
However, sales of Fund shares back to the Fund or redemptions will continue to
be permitted in accordance with the terms of the Fund's current Prospectus. In
the event an account is blocked, certain account-related privileges, such as the
ability to place purchase, sale and exchange orders over the internet or by
phone, may also be suspended. A blocked account will generally remain blocked
unless and until the account holder or the associated broker, dealer or other
financial intermediary provides evidence or assurance acceptable to the Fund
that the account holder did not or will not in the future engage in excessive or
short-term trading.
Applications of Surveillance Procedures and Restrictions to Omnibus
Accounts. Omnibus account arrangements are common forms of holding shares of the
Fund, particularly among certain brokers, dealers, and other financial
intermediaries, including sponsors of retirement plans and variable insurance
products. The Fund seeks to apply its surveillance procedures to these omnibus
account arrangements. If an intermediary does not have the capabilities, or
declines, to provide individual account level detail to the Fund, the Fund will
monitor turnover of assets to purchases and redemptions of the omnibus account.
If excessive turnover, defined as annualized purchases and redemptions exceeding
50% of assets, is detected, the Fund will notify the intermediary and request
that the intermediary review individual account transactions for excessive or
short-term trading activity and confirm to the Fund that appropriate action has
been taken to curtail the activity, which may include applying blocks to
accounts to prohibit future purchases and exchanges of Fund shares. For certain
retirement plan accounts, the Fund may request that the retirement plan or other
intermediary revoke the relevant participant's privilege to effect transactions
in Fund shares via the internet or telephone, in which case the relevant
participant must submit future transaction orders via the U.S. Postal Service
(i.e., regular mail). The Fund will continue to monitor the turnover
attributable to an intermediary's omnibus account arrangement and may consider
whether to terminate the relationship if the intermediary does not demonstrate
that appropriate action has been taken.
Risks to Shareholders Resulting From Imposition of Account Blocks in Response to
Excessive Short-term Trading Activity
- --------------------------------------------------------------------------------
A shareholder identified as having engaged in excessive or short-term
trading activity whose account is "blocked" and who may not otherwise wish to
redeem his or her shares effectively may be "locked" into an investment in the
Fund that the shareholder did not intend to hold on a long-term basis or that
may not be appropriate for the shareholder's risk profile. To rectify this
situation, a shareholder with a "blocked" account may be forced to redeem Fund
shares, which could be costly if, for example, these shares have declined in
value, the shares are subject to a CDSC, or the sale results in adverse tax
consequences to the shareholder. To avoid this risk, a shareholder should
carefully monitor the purchases, sales, and exchanges of Fund shares and avoid
frequent trading in Fund shares.
Limitations on Ability to Detect and Curtail Excessive Trading Practices
- -------------------------------------------------------------------------
Shareholders seeking to engage in excessive short-term trading activities
may deploy a variety of strategies to avoid detection and, despite the efforts
of the Fund and its agents to detect excessive or short duration trading in Fund
shares, there is no guarantee that the Fund will be able to identify these
shareholders or curtail their trading practices. In particular, the Fund may not
be able to detect excessive or short-term trading in Fund shares attributable to
a particular investor who effects purchase and/or exchange activity in Fund
shares through omnibus accounts. Also, multiple tiers of these entities may
exist, each utilizing an omnibus account arrangement, which may further compound
the difficulty of detecting excessive or short duration trading activity in Fund
shares.
How the Fund Values Its Shares
The Fund's NAV is calculated at the close of regular trading on the
Exchange (ordinarily, 4:00 p.m., Eastern Time), only on days when the Exchange
is open for business. To calculate NAV, a Fund's assets are valued and totaled,
liabilities are subtracted, and the balance, called net assets, is divided by
the number of shares outstanding. If the Fund invests in securities that are
primarily traded on foreign exchanges that trade on weekends or other days when
the Fund does not price its shares, the NAV of the Fund's shares may change on
days when shareholders will not be able to purchase or redeem their shares in
the Fund.
The Fund values its securities at their current market value determined on
the basis of market quotations or, if market quotations are not readily
available or are unreliable, at "fair value" as determined in accordance with
procedures established by and under the general supervision of the Fund's Board
of Directors. When a Fund uses fair value pricing, it may take into account any
factors it deems appropriate. The Fund may determine fair value based upon
developments related to a specific security and/or U.S. sector or broader stock
market indices. The prices of securities used by the Fund to calculate its NAV
may differ from quoted or published prices for the same securities. Fair value
pricing involves subjective judgments and it is possible that the fair value
determined for a security is materially different than the value that could be
realized upon the sale of that security.
Securities for which market quotations are not readily available or deemed
unreliable (including restricted securities) are valued at fair market value.
Factors considered in making this determination may include, but are not limited
to, information obtained by contacting the issuer or analysts, or by analysis of
the issuer's financial statements. The Fund may use fair value pricing more
frequently for securities primarily traded in non-U.S. markets because, among
other things, most foreign markets close well before the Fund values its
securities at 4:00 p.m., Eastern Time. The earlier close of these foreign
markets gives rise to the possibility that significant events, including broad
market moves, may have occurred in the interim. For example, the Fund believes
that foreign security values may be affected by events that occur after the
close of foreign securities markets. The Fund may value securities using fair
value prices based on independent pricing services or third party vendor
modeling tools to the extent available.
Subject to the Board's oversight, the Fund's Board has delegated
responsibility for valuing the Fund's assets to the Adviser. The Adviser has
established a Valuation Committee, which operates under the policies and
procedures approved by the Board, to value the Fund's assets on behalf of the
Fund. The Valuation Committee values Fund assets as described above.
Your order for purchase, sale, or exchange of shares is priced at the
next-determined NAV after your order is received in proper form by the Fund.
APPENDIX F
OTHER INFORMATION
The following information provides only a summary of the key features of
the organizational structure and governing documents of the Funds. Each Fund is
organized as a series of the same Maryland corporation. The Bylaw provisions
that govern Bond Fund apply to U.S. Gov't and Intermediate Bond. Accordingly,
there are no significant differences between U.S. Gov't and Intermediate Bond in
terms of their corporate organizational structures.
General
Each Fund has procedures available to its respective shareholders for
calling shareholders' meetings and for the removal of directors. Under the
Fund's Charter, a director may be removed, either with or without cause, at a
meeting duly called and at which a quorum is present by the affirmative vote of
the holders of a majority of the votes entitled to be cast for the election of
directors. In addition, shareholder-requested special meetings of shareholders
for any other purpose shall be called by a Fund's Secretary only upon the
written request of shareholders entitled to cast not less than a majority of all
the votes entitled to be cast at the meeting.
For each Fund, the presence in person or by proxy of the holders of
one-third of the shares entitled to be cast constitutes a quorum at any meeting
of shareholders of the Fund. When a quorum is present at any meeting, the
affirmative vote of a majority of the votes (or with respect to the election of
directors, a plurality of votes) cast shall decide any question brought before
such meeting, except as otherwise required by law.
Shares of Common Stock of the Funds
The Funds' shares have no preemptive rights. Each share has equal voting,
dividend, distribution and liquidation rights. Shareholders are entitled to one
vote per share. All voting rights for the election of directors are
non-cumulative, which means that the holders of more than 50% of the shares of
common stock of a Fund can elect 100% of the directors then nominated for
election if they choose to do so and, in such event, the holders of the
remaining shares of common stock will not be able to elect any directors. The
Funds are organized as series of the same Maryland corporation and thus their
shareholders have the same rights due to them under state law. The Funds are not
required to, and do not, hold annual meetings of shareholders and have no
current intention to hold such meetings, except as required by the 1940 Act.
Under the 1940 Act, U.S. Gov't and Intermediate Bond are required to hold a
shareholder meeting if, among other reasons, the number of Directors elected by
shareholders is less than a majority of the total number of Directors, or if a
Fund seeks to change its fundamental investment policies.
Dividends and Distributions
U.S. Gov't and Intermediate Bond have the same dividends and distributions
policies. While each of U.S. Gov't and Intermediate Bond intends to distribute
to its shareholders substantially all of each fiscal year's net income and net
realized capital gains, if any, the amount and time of any dividend or
distribution will depend on the realization by the Fund of income and capital
gains from investments. There is no fixed dividend rate and there can be no
assurance that the Fund will pay any dividends or realize any capital gains. The
final determination of the amount of the Fund's return of capital distributions
for the period will be made after the end of each calendar year.
Each of U.S. Gov't's and Intermediate Bond's income dividends and capital
gains distributions, if any, declared by the Fund on its outstanding shares
will, at the election of each shareholder, be paid in cash or in additional
shares. If paid in additional shares, the shares will have an aggregate net
asset value as of the close of business on the declaration date of the dividend
or distribution equal to the cash amount of the dividend or distribution. A
shareholder may make an election to receive dividends and distributions in cash
or in shares at the time of purchase of shares. The shareholder's election can
be changed at any time prior to a record date for a dividend. There is no sales
or other charge in connection with the reinvestment of dividends or capital
gains distributions.
Indemnification and Liability of Directors and Officers
The charter of Bond Fund generally provides for the indemnification of
officers and directors, as applicable, to the full extent permitted by law. This
indemnification does not protect any such person against any liability to a Fund
or any shareholder thereof to which such person would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the satisfaction of such person's office.
Maryland law permits a Maryland corporation to include in its charter a
provision limiting the liability of its directors and officers to the
corporation and its shareholders for money damages except for liability
resulting from (a) actual receipt of an improper benefit or profit in money,
property or services or (b) active and deliberate dishonesty established by a
final judgment as being material to the cause of action. Bond Fund's charter
contains such a provision that eliminates directors' and officers' liability to
the maximum extent permitted by Maryland law. This indemnification does not
protect any such person against any liability to a Fund or any shareholder
thereof to which such person would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the satisfaction of such person's office.
APPENDIX G
FORM OF AGREEMENT AND PLAN OF ACQUISITION AND LIQUIDATION BETWEEN
ALLIANCEBERNSTEIN U.S. GOVERNMENT PORTFOLIO, A SERIES OF ALLIANCEBERNSTEIN
BOND FUND, INC., AND ALLIANCEBERNSTEIN INTERMEDIATE BOND PORTFOLIO, A SERIES
OF ALLIANCEBERNSTEIN BOND FUND, INC.
AGREEMENT AND PLAN OF ACQUISITION AND LIQUIDATION
RELATING TO THE ACQUISITION OF THE ASSETS AND LIABILITIES OF
ALLIANCEBERNSTEIN U.S. GOVERNMENT PORTFOLIO,
A SERIES OF ALLIANCEBERNSTEIN BOND FUND, INC.
As of
[___________________], 2007
This Agreement and Plan of Acquisition and Liquidation (the "Acquisition
Plan") is made as of this [___]th day of [_______________], 2007, by and between
AllianceBernstein Intermediate Bond Portfolio ("Intermediate Bond"), a series of
AllianceBernstein Bond Fund, Inc., a Maryland corporation, and AllianceBernstein
U.S. Government Portfolio (the "Acquired Fund"), a series of AllianceBernstein
Bond Fund, Inc., a Maryland corporation.
WHEREAS, Intermediate Bond and the Acquired Fund are open-end management
investment companies registered with the Securities and Exchange Commission (the
"SEC") under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the parties desire that the Acquired Fund transfer all of the
assets attributable to its Class A shares held by shareholders ("Shareholders")
in exchange for Class A shares of equal net asset value of Intermediate Bond
("Class A Acquisition Shares"), transfer all of the assets attributable to its
Class B shares held by Shareholders in exchange for Class B shares of equal net
asset value of Intermediate Bond ("Class B Acquisition Shares"), transfer all of
the assets attributable to its Class C shares held by Shareholders in exchange
for Class C shares of equal net asset value of Intermediate Bond ("Class C
Acquisition Shares"), transfer all of the assets attributable to its Advisor
Class shares held by Shareholders in exchange for Advisor Class shares of equal
net asset value of Intermediate Bond ("Advisor Class Acquisition Shares"),
transfer all of the assets attributable to its Class R shares held by
Shareholders in exchange for Class R shares of equal net asset value of
Intermediate Bond ("Class R Acquisition Shares"), transfer all of the assets
attributable to its Class K shares held by Shareholders in exchange for Class K
shares of equal net asset value of Intermediate Bond ("Class K Acquisition
Shares"), transfer all of the assets attributable to its Class I shares held by
Shareholders in exchange for Class I shares of equal net asset value of
Intermediate Bond ("Class I Acquisition Shares" and together with the Class A
Acquisition Shares, Class B Acquisition Shares, Class C Acquisition Shares,
Advisor Class Acquisition Shares, Class R Acquisition Shares, and Class K
Acquisition Shares, the "Acquisition Shares") and distribute the Class A
Acquisition Shares, Class B Acquisition Shares, Class C Acquisition Shares,
Advisor Class Acquisition Shares, Class R Acquisition Shares, Class K
Acquisition Shares, and Class I Acquisition Shares to Shareholders of Class A,
Class B, Class C, Advisor Class, Class R, Class K, and Class I, respectively, of
the Acquired Fund (the "Acquisition"); and
WHEREAS, the parties intend that the Acquisition qualify as a
"reorganization" within the meaning of Section 368(a) of the United States
Internal Revenue Code of 1986, as amended (the "Code"), and any successor
provisions, and that with respect to the Acquisition, Intermediate Bond and the
Acquired Fund will each be a "party to a reorganization" within the meaning of
Section 368(b) of the Code;
Now, therefore, Intermediate Bond and the Acquired Fund agree as follows:
1. Definitions
In addition to the terms elsewhere defined herein, each of the following
terms shall have the meaning indicated for that term as follows:
1934 Act Securities Exchange Act of 1934, as amended.
1933 Act Securities Act of 1933, as amended.
Assets All assets of any kind and all interests, rights, privileges
and powers of or attributable to the Acquired Fund or its
shares, as appropriate, whether or not determinable at the
appropriate Effective Time and wherever located, including,
without limitation, all cash, cash equivalents, securities,
claims (whether absolute or contingent, known or unknown,
accrued or unaccrued or conditional or unmatured), contract
rights and receivables (including dividend and interest
receivables) owned by the Acquired Fund or attributable to
its shares and any deferred or prepaid expense, other than
unamortized organizational expenses, shown as an asset on
the Acquired Fund's books.
Closing Date Shall be on such date as the parties may agree.
Effective Time 5:00 p.m. Eastern time on the Closing Date, or such other
time as the parties may agree to in writing.
Financial The audited financial statements of the relevant Fund for
Statements its most recently completed fiscal year and, if applicable,
the unaudited financial statements of that Fund for its most
recently completed semi-annual period.
Fund Intermediate Bond and/or the Acquired Fund, as the case may
be.
Liabilities All liabilities, expenses and obligations of any kind
whatsoever of the Acquired Fund, whether known or unknown,
accrued or unaccrued, absolute or contingent or conditional
or unmatured.
N-14 The Registration Statement of Intermediate Bond on Form N-14
Registration under the 1940 Act that will register the Acquisition Shares
Statement to be issued in the Acquisition.
Valuation Time The close of regular session trading on the New York Stock
Exchange ("NYSE") on the Closing Date, when for purposes of
the Acquisition Plan, Intermediate Bond determines its net
asset value per Acquisition Share and the Acquired Fund
determines the net value of the Assets.
NAV A Fund's net asset value is calculated by valuing and
totaling assets and then subtracting liabilities and then
dividing the balance by the number of shares that are
outstanding.
2. Regulatory Filings
Intermediate Bond shall promptly prepare and file the N-14 Registration
Statement with the SEC, and Intermediate Bond and the Acquired Fund also shall
make any other required or appropriate filings with respect to the actions
contemplated hereby.
3. Transfer of the Acquired Fund's Assets
Intermediate Bond and the Acquired Fund shall take the following steps with
respect to the Acquisition, as applicable:
(a) On or prior to the Closing Date, the Acquired Fund shall pay or
provide for the payment of all of the Liabilities, expenses, costs and
charges of or attributable to the Acquired Fund that are known to the
Acquired Fund and that are due and payable prior to or as of the
Closing Date.
(b) Prior to the Effective Time, except to the extent prohibited by Rule
19b-1 under the 1940 Act, the Acquired Fund will declare to Acquired
Fund Shareholders of record a dividend or dividends which, together
with all previous such dividends, shall have the effect of
distributing (a) all the excess of (i) Acquired Fund's investment
income excludable from gross income under Section 103(a) of the Code
over (ii) Acquired Fund's deductions disallowed under Sections 265 and
171(a)(2) of the Code, (b) all of Acquired Fund's investment company
taxable income (as defined in Code Section 852), (computed in each
case without regard to any deduction for dividends paid), and (c) all
of Acquired Fund's net realized capital gain (as defined in Code
Section 1222), if any (after reduction for any capital loss
carryover), in the case of the Acquired Fund for the taxable year
ending on September 30, 2007 and for the short taxable year beginning
on October 1, 2007, and ending on the Closing Date. Such dividends
will be declared and paid to ensure continued qualification of the
Acquired Fund as a "regulated investment company" for tax purposes and
to eliminate fund-level tax.
(c) At the Effective Time, the Acquired Fund shall assign, transfer,
deliver and convey the Assets to Intermediate Bond, subject to the
Liabilities. Intermediate Bond shall then accept the Assets and assume
the Liabilities such that at and after the Effective Time (i) the
Assets at or after the Effective Time shall become and be assets of
Intermediate Bond, and (ii) the Liabilities at the Effective Time
shall attach to Intermediate Bond, and shall be enforceable against
Intermediate Bond to the same extent as if initially incurred by
Intermediate Bond.
(d) Within a reasonable time prior to the Closing Date, the Acquired Fund
shall provide, if requested, a list of the Assets to Intermediate
Bond. The Acquired Fund may sell any asset on such list prior to the
Effective Time. After the Acquired Fund provides such list, the
Acquired Fund will not acquire any additional securities or permit to
exist any encumbrances, rights, restrictions or claims not reflected
on such list, without the approval of Intermediate Bond. Within a
reasonable time after receipt of the list and prior to the Closing
Date, Intermediate Bond will advise the Acquired Fund in writing of
any investments shown on the list that Intermediate Bond has
determined to be inconsistent with its investment objective, policies
and restrictions. The Acquired Fund will dispose of any such
securities prior to the Closing Date to the extent practicable and
consistent with applicable legal requirements, including the Acquired
Fund's investment objectives, policies and restrictions. In addition,
if Intermediate Bond determines that, as a result of the Acquisition,
Intermediate Bond would own an aggregate amount of an investment that
would exceed a percentage limitation applicable to Intermediate Bond,
Intermediate Bond will advise the Acquired Fund in writing of any such
limitation and the Acquired Fund shall dispose of a sufficient amount
of such investment as may be necessary to avoid the limitation as of
the Effective Time, to the extent practicable and consistent with
applicable legal requirements, including the Acquired Fund's
investment objectives, policies and restrictions.
(e) The Acquired Fund shall assign, transfer, deliver and convey the
Assets to Intermediate Bond at the Effective Time on the following
basis:
(1) The value of the Assets less the Liabilities of the Acquired Fund
attributable to shares of Class A held by Shareholders, shares of
Class B held by Shareholders, shares of Class C held by
Shareholders, shares of Advisor Class held by Shareholders,
shares of Class R held by Shareholders, shares of Class K held by
Shareholders, and shares of Class I held by Shareholders,
determined as of the Valuation Time, shall be divided by the then
NAV of one Class A, Class B, Class C, Advisor Class, Class R,
Class K or Class I Acquisition Share, as applicable, and, in
exchange for the transfer of the Assets, Intermediate Bond shall
simultaneously issue and deliver to the Acquired Fund the number
of Class A, Class B, Class C, Advisor Class, Class R, Class K,
and Class I Acquisition Shares so determined, rounded to the
second decimal place or such other decimal place as the parties
may agree to in writing;
(2) The NAV of Class A, Class B, Class C, Advisor Class, Class R,
Class K, and Class I Acquisition Shares to be delivered to the
Acquired Fund shall be determined as of the Valuation Time in
accordance with Intermediate Bond's then applicable valuation
procedures, and the net value of the Assets to be conveyed to
Intermediate Bond shall be determined as of the Valuation Time in
accordance with the then applicable valuation procedures of the
Acquired Fund; and
(3) The portfolio securities of the Acquired Fund shall be made
available by the Acquired Fund to State Street Bank & Trust
Company, as custodian for Intermediate Bond (the "Custodian"),
for examination no later than five business days preceding the
Valuation Time. On the Closing Date, such portfolio securities
and all the Acquired Fund's cash shall be delivered by the
Acquired Fund to the Custodian for the account of Intermediate
Bond, such portfolio securities to be duly endorsed in proper
form for transfer in such manner and condition as to constitute
good delivery thereof in accordance with the custom of brokers
or, in the case of portfolio securities held in the U.S. Treasury
Department's book-entry system or by The Depository Trust
Company, Participants Trust Company or other third party
depositories, by transfer to the account of the Custodian in
accordance with Rule 17f-4, Rule 17f-5 or Rule 17f-7, as the case
may be, under the 1940 Act and accompanied by all necessary
federal and state stock transfer stamps or a check for the
appropriate purchase price thereof. The cash delivered shall be
in the form of currency or certified or official bank checks,
payable to the order of the Custodian, or shall be wired to an
account pursuant to instructions provided by Intermediate Bond.
(f) Promptly after the Closing Date, the Acquired Fund will deliver to
Intermediate Bond a Statement of Assets and Liabilities of the
Acquired Fund as of the Closing Date.
4. Termination of the Acquired Fund, Registration of Acquisition Shares and
Access to Records
The Acquired Fund and Intermediate Bond also shall take the following
steps, as applicable:
(a) At or as soon as reasonably practical after the Effective Time, the
Acquired Fund shall terminate by transferring pro rata to its
Shareholders of Class A of record Class A Acquisition Shares received
by the Acquired Fund pursuant to Section 4(e)(1) of this Acquisition
Plan; to its Shareholders of Class B of record Class B Acquisition
Shares received by the Acquired Fund pursuant to Section 4(e)(1) of
this Acquisition Plan; to its Shareholders of Class C of record Class
C Acquisition Shares received by the Acquired Fund pursuant to Section
4(e)(1) of this Acquisition Plan; to its Shareholders of Advisor Class
of record Advisor Class Acquisition Shares received by the Acquired
Fund pursuant to Section 4(e)(1) of this Acquisition Plan; to its
Shareholders of Class R of record Class R Acquisition Shares received
by the Acquired Fund pursuant to Section 4(e)(1) of this Acquisition
Plan; to its Shareholders of Class K of record Class K Acquisition
Shares received by the Acquired Fund pursuant to Section 4(e)(1) of
this Acquisition Plan; and to its Shareholders of Class I of record
Class I Acquisition Shares received by the Acquired Fund pursuant to
Section 4(e)(1) of this Acquisition Plan. Intermediate Bond shall
establish accounts on its share records and note on such accounts the
names of the former Acquired Fund Shareholders and the types and
amounts of Intermediate Bond shares that former Acquired Fund
Shareholders are due based on their respective holdings of shares of
the Acquired Fund as of the close of business on the Closing Date.
Fractional Intermediate Bond shares shall be carried to the second
decimal place. Intermediate Bond shall not issue certificates
representing Intermediate Bond shares in connection with such
exchange. All issued and outstanding shares in connection with such
exchange will be simultaneously cancelled on the books of the Acquired
Fund. Ownership of Intermediate Bond's shares will be shown on the
books of Intermediate Bond's transfer agent.
Following distribution by the Acquired Fund to its Shareholders of all
Acquisition Shares delivered to the Acquired Fund, the Acquired Fund
shall wind up its affairs and shall take all steps as are necessary
and proper to terminate as soon as is reasonably possible after the
Effective Time.
(b) At and after the Closing Date, the Acquired Fund shall provide
Intermediate Bond and its transfer agent with immediate access to: (i)
all records containing the names, addresses and taxpayer
identification numbers of all of the Acquired Fund's Shareholders and
the number and percentage ownership of the outstanding shares of the
Acquired Fund owned by Shareholders as of the Effective Time, and (ii)
all original documentation (including all applicable Internal Revenue
Service forms, certificates, certifications and correspondence)
relating to the Acquired Fund Shareholders' taxpayer identification
numbers and their liability for or exemption from back-up withholding.
The Acquired Fund shall preserve and maintain, or shall direct its
service providers to preserve and maintain, records with respect to
the Acquired Fund as required by Section 31 of, and Rules 31a-1 and
31a-2 under, the 1940 Act.
5. Certain Representations and Warranties of the Acquired Fund
The Acquired Fund represents and warrants to Intermediate Bond as follows:
(a) The Acquired Fund is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Maryland. The
Acquired Fund is registered with the SEC as an open-end management
investment company under the 1940 Act and is duly registered with the
SEC under the 1940 Act, and such registrations will be in full force
and effect as of the Effective Time.
(b) The Acquired Fund has the power and all necessary federal, state and
local qualifications and authorizations to own all of the Assets, to
carry on its business, to enter into this Acquisition Plan and to
consummate the transactions contemplated herein.
(c) The Board of Directors of the Acquired Fund has duly authorized the
execution and delivery of this Acquisition Plan and the transactions
contemplated herein. Duly authorized officers of the Acquired Fund
have executed and delivered the Acquisition Plan. The Acquisition Plan
represents a valid and binding contract, enforceable in accordance
with its terms, subject as to enforcement to bankruptcy, insolvency,
reorganization, arrangement, moratorium, and other similar laws of
general applicability relating to or affecting creditors' rights and
to general equity principles. The execution and delivery of this
Acquisition Plan does not, and will not, violate the Acquired Fund's
Charter, its Bylaws or any material agreement to which the Acquired
Fund is subject. The Acquired Fund does not need to take any other
action to authorize its officers to effectuate this Acquisition Plan
and the transactions contemplated herein.
(d) The Acquired Fund has qualified as a regulated investment company
under Part I of Subchapter M of Subtitle A, Chapter 1, of the Code, in
respect of each taxable year since the commencement of its operations
and intends to continue to qualify as a regulated investment company
for its taxable year ending upon its liquidation.
(e) The information pertaining to the Acquired Fund included within the
N-14 Registration Statement when filed with the SEC, when Part A of
the N-14 Registration Statement is distributed to Shareholders, at the
Effective Time, insofar as it relates to the Acquired Fund, shall (i)
comply in all material respects with the applicable provisions of the
1933 Act and the 1940 Act, and the rules and regulations thereunder
and applicable state securities laws, and (ii) not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements made therein
not misleading.
(f) The Acquired Fund has duly authorized and validly issued all of its
issued and outstanding shares of common stock, and all such shares are
fully paid and non-assessable and were offered for sale and sold in
conformity with the registration requirements of all applicable
federal and state securities laws. There are no outstanding options,
warrants or other rights to subscribe for or purchase any of the
shares of the Acquired Fund, nor are there any securities convertible
into shares of the Acquired Fund.
(g) The Acquired Fund shall operate its business in the ordinary course
between the date hereof and the Effective Time. Such ordinary course
of business will include the declaration and payment of customary
dividends and distributions and any other dividends and distributions
referred to in Section 4(b) hereof.
(h) At the Effective Time, the Acquired Fund will have good and marketable
title to the Assets and full right, power and authority to assign,
transfer, deliver and convey the Assets.
(i) The Financial Statements of the Acquired Fund, a copy of which has
been previously delivered to Intermediate Bond, fairly present the
financial position of the Acquired Fund as of the Acquired Fund's most
recent fiscal year-end and the results of the Acquired Fund's
operations and changes in the Acquired Fund's net assets for the
periods indicated.
(j) To the knowledge of the Acquired Fund, the Acquired Fund has no
liabilities, whether or not determined or determinable, other than the
Liabilities disclosed or provided for in its Financial Statements or
Liabilities incurred in the ordinary course of business subsequent to
the date of the most recent Financial Statement referencing
Liabilities.
(k) To the knowledge of the Acquired Fund, except as has been disclosed in
writing to Intermediate Bond, no claims, actions, suits,
investigations or proceedings of any type are pending or threatened
against the Acquired Fund or any of its properties or assets or any
person whom the Acquired Fund may be obligated to indemnify in
connection with such litigation, proceeding or investigation. Subject
to the foregoing, there are no facts that the Acquired Fund has reason
to believe are likely to form the basis for the institution of any
such claim, action, suit, investigation or proceeding against the
Acquired Fund. The Acquired Fund is not a party to nor subject to the
provisions of any order, decree or judgment of any court or
governmental body that adversely affects, or is reasonably likely to
adversely affect, its financial condition, results of operations, or
the Assets or its ability to consummate the transactions contemplated
by the Acquisition Plan.
(l) Except for agreements entered into or granted in the ordinary course
of its business, in each case under which no material default exists,
and this Acquisition Plan, the Acquired Fund is not a party to or
subject to any material contract or other commitments, which if
terminated, may result in material liability to the Acquired Fund or
under which (whether or not terminated) any material payment for
periods subsequent to the Closing Date will be due from the Acquired
Fund.
(m) The Acquired Fund has filed its federal income tax returns, copies of
which have been previously made available to Intermediate Bond, for
all taxable years for which such returns are due and has paid all
taxes payable pursuant to such returns. All of the Acquired Fund's tax
liabilities will have been adequately provided for on its books. No
such return is currently under audit and no unpaid assessment has been
asserted with respect to such returns. To the best of the Acquired
Fund's knowledge, it will not have any tax deficiency or liability
asserted against it or question with respect thereto raised, and it
will not be under audit by the Internal Revenue Service or by any
state or local tax authority for taxes in excess of those already
paid. The Acquired Fund will timely file its federal income tax return
for each subsequent taxable year including its current taxable year.
(n) For federal income tax purposes, the Acquired Fund qualifies as a
"regulated investment company," and the provisions of Sections 851
through 855 of the Code apply to the Acquired Fund for the remainder
of its current taxable year beginning November 1, 2007, and will
continue to apply through the Closing Date.
(o) Since the date of the Financial Statements of the Acquired Fund, there
has been no material adverse change in its financial condition,
results of operations, business, or Assets. For this purpose, negative
investment performance shall not be considered a material adverse
change.
(p) The Acquired Fund's investment operations from inception to the date
hereof have been in compliance in all material respects with the
investment policies and investment restrictions set forth in its
prospectus or prospectuses and statement or statements of additional
information as in effect from time to time, except as previously
disclosed in writing to Intermediate Bond.
(q) The Acquisition Shares to be issued to the Acquired Fund pursuant to
paragraph 4(e)(1) will not be acquired for the purpose of making any
distribution thereof other than to the Acquired Fund Shareholders as
provided in paragraph 4(e)(1).
(r) The Acquired Fund, or its agents, (i) holds a valid Form W-8Ben,
Certificate of Foreign Status of Beneficial Owner for United States
Withholding (or other appropriate series of Form W-8, as the case may
be) or Form W-9, Request for Taxpayer Identification Number and
Certification, for each Acquired Fund shareholder of record, which
Form W-8 or Form W-9 can be associated with reportable payments made
by the Acquired Fund to such Shareholder, and/or (ii) has otherwise
timely instituted the appropriate backup withholding procedures with
respect to such Shareholder as provided by Section 3406 of the Code
and the regulations thereunder.
6. Certain Representations and Warranties of Intermediate Bond
Intermediate Bond represents and warrants to the Acquired Fund as follows:
(a) Intermediate Bond is a series of a corporation duly incorporated,
validly existing and in good standing under the laws of the State of
Maryland. Intermediate Bond is registered with the SEC as a series of
an open-end management investment company under the 1940 Act and is
duly registered with the SEC under the 1940 Act, and such
registrations will be in full force and effect as of the Effective
Time.
(b) Intermediate Bond shall operate its business in the ordinary course
between the date hereof and the Effective Time. Such ordinary course
of business will include the declaration and payment of customary
dividends and distributions.
(c) Intermediate Bond has the power and all necessary federal, state and
local qualifications and authorizations to own all of its assets, to
carry on its business, to enter into this Acquisition Plan and to
consummate the transactions contemplated herein.
(d) The Board of Directors of Intermediate Bond has duly authorized
execution and delivery of this Acquisition Plan and the transactions
contemplated herein. Duly authorized officers of Intermediate Bond
have executed and delivered the Acquisition Plan. The Acquisition Plan
represents a valid and binding contract, enforceable in accordance
with its terms, subject as to enforcement to bankruptcy, insolvency,
reorganization, arrangement, moratorium and other similar laws of
general applicability relating to or affecting creditors' rights and
to general equity principles. The execution and delivery of this
Acquisition Plan does not, and the consummation of the transactions
contemplated by this Acquisition Plan will not violate the Charter of
Intermediate Bond, its Bylaws or any material agreement to which
Intermediate Bond is subject. Except for the approval of its Board,
Intermediate Bond does not need to take any other action to authorize
its officers to effectuate the Acquisition Plan and the transactions
contemplated herein.
(e) Intermediate Bond has qualified as a regulated investment company
under Part I of Subchapter M of Subtitle A, Chapter 1, of the Code, in
respect of each taxable year since the commencement of its operations
and qualifies and intends to continue to qualify as a regulated
investment company for its current taxable year.
(f) The N-14 Registration Statement, when filed with the SEC, when Part A
of the N-14 Registration Statement is distributed to Shareholders, at
the Effective Time, insofar as it relates to Intermediate Bond, shall
(i) comply in all material respects with the applicable provisions of
the 1933 Act and the 1940 Act, and the rules and regulations
thereunder and applicable state securities laws and (ii) not contain
any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they were
made, not misleading.
(g) Intermediate Bond has duly authorized and validly issued all issued
and outstanding shares of common stock of Intermediate Bond, and all
such shares are fully paid and non-assessable and were offered for
sale and sold in conformity with the registration requirements of all
applicable federal and state securities laws. Intermediate Bond has
duly authorized the Class A, Class B, Class C, Advisor Class, Class R,
Class K and Class I shares of Intermediate Bond referred to in Section
4(e) hereof to be issued and delivered to the Acquired Fund as of the
Effective Time. When issued and delivered, such Class A, Class B,
Class C, Advisor Class, Class R, Class K, and Class I shares of
Intermediate Bond shall be validly issued, fully paid and
non-assessable, and no Shareholder of Intermediate Bond shall have any
preemptive right of subscription or purchase in respect of any such
share. There are no outstanding options, warrants or other rights to
subscribe for or purchase any Acquisition Shares, nor are there any
securities convertible into Acquisition Shares.
(h) To the knowledge of Intermediate Bond, except as has been disclosed in
writing to the Acquired Fund, no claims, actions, suits,
investigations or proceedings of any type are pending or threatened
against Intermediate Bond or any of its properties or assets or any
person whom Intermediate Bond may be obligated to indemnify in
connection with such litigation, proceeding or investigation. Subject
to the foregoing, there are no facts that Intermediate Bond currently
has reason to believe are likely to form the basis for the institution
of any such claim, action, suit, investigation or proceeding against
Intermediate Bond. Intermediate Bond is not a party to or subject to
the provisions of any order, decree or judgment of any court or
governmental body that adversely affects, or is reasonably likely to
adversely affect its financial condition, results of operations, its
assets or its ability to consummate the transactions contemplated by
this Acquisition Plan.
(i) Except for agreements entered into or granted in the ordinary course
of its business, in each case under which no material default exists,
Intermediate Bond is not a party to or subject to any material
contract, debt instrument, employee benefit plan, lease, franchise,
license or permit of any kind or nature whatsoever.
(j) Intermediate Bond has filed its federal income tax returns, copies of
which have been previously made available to the Acquired Fund, for
all taxable years for which such returns are due and has paid all
taxes payable pursuant to such returns. All of Intermediate Bond's tax
liabilities will have been adequately provided for on its books. No
such return is currently under audit and no unpaid assessment has been
asserted with respect to such returns. To the best of Intermediate
Bond's knowledge, it will not have any tax deficiency or liability
asserted against it or question with respect thereto raised, and it
will not be under audit by the Internal Revenue Service or by any
state or local tax authority for taxes in excess of those already
paid. Intermediate Bond will timely file its federal income tax return
for each subsequent taxable year including its current taxable year.
(k) For federal income tax purposes, Intermediate Bond qualifies as a
"regulated investment company," and the provisions of Sections 851
through 855 of the Code apply to Intermediate Bond for the remainder
of its current taxable year beginning November 1, 2007, and will
continue to apply through the Closing Date.
(l) The Financial Statements of Intermediate Bond, a copy of which has
been previously delivered to the Acquired Fund, fairly present the
financial position of Intermediate Bond's most recent fiscal year-end
and the results of Intermediate Bond's operations and changes in
Intermediate Bond's net assets for the period indicated.
(m) Since the date of the Financial Statements of Intermediate Bond, there
has been no material adverse change in its financial condition,
results of operations, business or assets. Negative investment
performance shall not be considered a material adverse change.
(n) Intermediate Bond's investment operations from inception to the date
hereof have been in compliance in all material respects with the
investment policies and investment restrictions set forth in its
prospectus or prospectuses and statement or statements of additional
information as in effect from time to time, except as previously
disclosed in writing to the Acquired Fund.
(o) Intermediate Bond will use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act
and such other state securities laws as it may deem appropriate in
order to continue its operations after the Closing Date.
7. Conditions to the Obligations of Intermediate Bond and the Acquired Fund
The obligations of Intermediate Bond and the Acquired Fund with respect to
the Acquisition shall be subject to the following conditions precedent:
(a) Intermediate Bond and the Acquired Fund shall have delivered to the
other party a certificate dated as of the Closing Date and executed in
its name by its Secretary or an Assistant Secretary, in a form
reasonably satisfactory to the receiving party, stating that the
representations and warranties of Intermediate Bond or the Acquired
Fund, as applicable, in this Acquisition Plan that apply to the
Acquisition are true and correct in all material respects at and as of
the Valuation Time.
(b) Intermediate Bond and the Acquired Fund shall have performed and
complied in all material respects with each of its representations and
warranties required by this Acquisition Plan to be performed or
complied with by it prior to or at the Valuation Time and the
Effective Time.
(c) There has been no material adverse change in the financial condition,
results of operations, business, properties or assets of Intermediate
Bond or the Acquired Fund since the date of the most recent Financial
Statements. Negative investment performance shall not be considered a
material adverse change.
(d) Intermediate Bond and the Acquired Fund shall have received an opinion
of Seward & Kissel LLP reasonably satisfactory to each of them,
substantially to the effect that for federal income tax purposes:
(1) the Acquisition will constitute a "reorganization" within the
meaning of Section 368(a) of the Code and that Intermediate Bond
and the Acquired Fund will each be "a party to a reorganization"
within the meaning of Section 368(b) of the Code;
(2) a Shareholder of the Acquired Fund will recognize no gain or loss
on the exchange of the Shareholder's shares of the Acquired Fund
solely for Acquisition Shares;
(3) neither the Acquired Fund nor Intermediate Bond will recognize
any gain or loss upon the transfer of all of the Assets to
Intermediate Bond in exchange for Acquisition Shares and the
assumption by Intermediate Bond of the Liabilities pursuant to
this Acquisition Plan or upon the distribution of Acquisition
Shares to Shareholders of the Acquired Fund in exchange for their
respective shares of the Acquired Fund;
(4) the holding period and tax basis of the Assets acquired by
Intermediate Bond will be the same as the holding period and tax
basis that the Acquired Fund had in such Assets immediately prior
to the Acquisition;
(5) the aggregate tax basis of Acquisition Shares received in
connection with the Acquisition by each Shareholder of the
Acquired Fund (including any fractional share to which the
Shareholder may be entitled) will be the same as the aggregate
tax basis of the shares of the Acquired Fund surrendered in
exchange therefore, and increased by any gain recognized on the
exchange;
(6) the holding period of Acquisition Shares received in connection
with the Acquisition by each Shareholder of the Acquired Fund
(including any fractional share to which the shareholder may be
entitled) will include the holding period of the shares of the
Acquired Fund surrendered in exchange therefor, provided that
such Acquired Fund shares constitute capital assets in the hands
of the Shareholder as of the Closing Date; and
(7) Intermediate Bond will succeed to the capital loss carryovers of
U.S. Gov't but the use of Intermediate Bond's existing capital
loss carryovers (as well as the carryovers of U.S. Gov't) may be
subject to limitation under Section 383 of the Code after the
Acquisition.
The opinion will be based on certain factual certifications made by
officers of the Funds and will also be based on customary assumptions
and subject to certain qualifications. The opinion is not a guarantee
that the tax consequences of the Acquisition will be as described
above.
Notwithstanding this subparagraph (e), Seward & Kissel LLP will
express no view with respect to the effect of the Acquisition on any
transferred asset as to which any unrealized gain or loss is required
to be recognized at the end of a taxable year (or on the termination
or transfer thereof) under federal income tax principles. Each Fund
shall agree to make and provide additional factual representations to
Seward & Kissel LLP with respect to the Funds that are reasonably
necessary to enable Seward & Kissel LLP to deliver the tax opinion.
Notwithstanding anything in this Acquisition Plan to the contrary,
neither Fund may waive in any material respect the conditions set
forth under this subparagraph (e).
(e) The N-14 Registration Statement shall have become effective under the
1933 Act as to the Acquisition Shares, and the SEC shall not have
instituted and, to the knowledge of Intermediate Bond, is not
contemplating instituting any stop order suspending the effectiveness
of the N-14 Registration Statement.
(f) No action, suit or other proceeding shall be threatened or pending
before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection
with the Acquisition.
(g) The SEC shall not have issued any unfavorable advisory report under
Section 25(b) of the 1940 Act nor instituted any proceeding seeking to
enjoin consummation of the Acquisition under Section 25(c) of the 1940
Act.
(h) Neither party shall have terminated this Acquisition Plan with respect
to the Acquisition pursuant to Section 13 of this Acquisition Plan.
8. Conditions to the Obligations of the Acquired Fund
The obligations of the Acquired Fund with respect to the Acquisition shall
be subject to the following conditions precedent:
(a) The Acquired Fund shall have received an opinion of Seward & Kissel
LLP, counsel to Intermediate Bond, in form and substance reasonably
satisfactory to the Acquired Fund and dated as of the Closing Date,
substantially to the effect that:
(1) Intermediate Bond is a series of a corporation duly incorporated,
validly existing and in good standing under the laws of the State
of Maryland and is a series of an open-end, management investment
company registered under the 1940 Act;
(2) This Acquisition Plan has been duly authorized, executed and
delivered by Intermediate Bond and, assuming the N-14
Registration Statement referred to in Section 2 of this
Acquisition Plan does not contain any material misstatements or
omissions, and assuming due authorization, execution and delivery
of this Acquisition Plan by the Acquired Fund, represents a
legal, valid and binding contract, enforceable in accordance with
its terms, subject to the effect of bankruptcy, insolvency,
moratorium, fraudulent conveyance and transfer and similar laws
relating to or affecting creditors' rights generally and court
decisions with respect thereto, and further subject to the
application of equitable principles in any proceeding, whether at
law or in equity or with respect to the enforcement of provisions
of the Acquisition Plan and the effect of judicial decisions
which have held that certain provisions are unenforceable when
their enforcement would violate an implied covenant of good faith
and fair dealing or would be commercially unreasonable or when
default under the Acquisition Plan is not material;
(3) The Class A, Class B, Class C, Advisor Class, Class R, Class K
and Class I Acquisition Shares to be delivered as provided for by
this Acquisition Plan are duly authorized and upon delivery will
be validly issued, fully paid and non-assessable by Intermediate
Bond;
(4) The execution and delivery of this Acquisition Plan did not, and
the consummation of the Acquisition will not, violate the Charter
of Intermediate Bond, its Bylaws or any agreement of Intermediate
Bond known to such counsel, after reasonable inquiry; and
(5) To the knowledge of such counsel, no consent, approval,
authorization or order of any federal or state court or
administrative or regulatory agency, other than the acceptance of
record of Articles of Transfer by the SDAT, is required for
Intermediate Bond to enter into this Acquisition Plan or carry
out its terms, except those that have been obtained under the
1933 Act, the 1940 Act and the rules and regulations under those
Acts or that may be required under state securities laws or
subsequent to the Effective Time or when the failure to obtain
the consent, approval, authorization or order would not have a
material adverse effect on the operation of Intermediate Bond.
In rendering such opinion, Seward & Kissel LLP may (i) rely on the
opinion of Venable LLP as to matters of Maryland law to the extent set
forth in such opinion, (ii) make assumptions regarding the
authenticity, genuineness and/or conformity of documents and copies
thereof without independent verification thereof, (iii) limit such
opinion to applicable federal and state law, (iv) define the word
"knowledge" and related terms to mean the knowledge of attorneys then
with such firm who have devoted substantive attention to matters
directly related to this Acquisition Plan and (v) rely on certificates
of officers or directors of Intermediate Bond as to factual matters.
(b) Intermediate Bond shall have received a letter from AllianceBernstein
L.P. (the "Adviser") with respect to insurance matters in form and
substance satisfactory to the Acquired Fund.
9. Conditions to the Obligations of Intermediate Bond
The obligations of Intermediate Bond with respect to the Acquisition shall
be subject to the following conditions precedent:
(a) Intermediate Bond shall have received an opinion of Seward & Kissel
LLP, counsel to the Acquired Fund, in form and substance reasonably
satisfactory to Intermediate Bond and dated as of the Closing Date,
substantially to the effect that:
(1) The Acquired Fund is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Maryland and is an open-end management investment company
registered under the 1940 Act;
(2) This Acquisition Plan has been duly authorized, executed and
delivered by the Acquired Fund and, assuming the N-14
Registration Statement referred to in Section 2 of this
Acquisition Plan does not contain any material misstatements or
omissions, and assuming due authorization, execution and delivery
of this Acquisition Plan by Intermediate Bond, represents a
legal, valid and binding contract, enforceable in accordance with
its terms, subject to the effect of bankruptcy, insolvency,
moratorium, fraudulent conveyance and transfer and similar laws
relating to or affecting creditors' rights generally and court
decisions with respect thereto, and further subject to the
application of equitable principles in any proceeding, whether at
law or in equity or with respect to the enforcement of provisions
of the Acquisition Plan and the effect of judicial decisions
which have held that certain provisions are unenforceable when
their enforcement would violate an implied covenant of good faith
and fair dealing or would be commercially unreasonable or when
default under the Acquisition Plan is not material;
(3) The execution and delivery of this Acquisition Plan did not, and
the consummation of the Acquisition will not, violate the Charter
of the Acquired Fund, its Bylaws or any agreement of the Acquired
Fund known to such counsel, after reasonable inquiry, and no
approval of the Acquisition Plan by the shareholders of
Intermediate Bond is required under its Charter, Bylaws or
applicable law; and
(4) To the knowledge of such counsel, no consent, approval,
authorization or order of any federal or state court or
administrative or regulatory agency, other than the acceptance of
record of Articles of Transfer by the SDAT, is required for the
Acquired Fund to enter into the Acquisition Plan or carry out its
terms, except those that have been obtained under the 1933 Act,
the 1940 Act and the rules and regulations under those Acts or
that may be required under state securities laws or subsequent to
the Effective Time or when the failure to obtain the consent,
approval, authorization or order would not have a material
adverse effect on the operation of the Acquired Fund.
In rendering such opinion, Seward & Kissel LLP may (i) rely on the opinion
of Venable LLP as to matters of Maryland law, (ii) make assumptions regarding
the authenticity, genuineness and/or conformity of documents and copies thereof
without independent verification thereof, (iii) limit such opinion to applicable
federal and state law, (iv) define the word "knowledge" and related terms to
mean the knowledge of attorneys then with such firm who have devoted substantive
attention to matters directly related to this Acquisition Plan and (v) rely on
certificates of officers or directors of the Acquired Fund as to factual
matters.
(b) Intermediate Bond shall have received a letter from the Adviser
agreeing to indemnify Intermediate Bond in respect of certain
liabilities of the Acquired Fund in form and substance satisfactory to
Intermediate Bond.
10. Closing
(a) The Closing shall be held at the offices of the Funds, 1345 Avenue of
the Americas, New York, New York 10105, or at such other time or place
as the parties may agree.
(b) In the event that at the Valuation Time (a) the NYSE shall be closed
to trading or trading thereon shall be restricted, or (b) trading or
the reporting of trading on said Exchange or elsewhere shall be
disrupted so that accurate appraisal of the value of the net assets of
the Acquired Fund or Intermediate Bond is impracticable, the Closing
Date shall be postponed until the first business day after the day
when trading shall have been fully resumed and reporting shall have
been restored; provided that if trading shall not be fully resumed and
reporting restored within three business days of the Valuation Time,
this Acquisition Plan may be terminated by either the Acquired Fund or
Intermediate Bond upon the giving of written notice to the other
party.
(c) Intermediate Bond will provide to the Acquired Fund evidence
satisfactory to the Acquired Fund that Acquisition Shares issuable
pursuant to the Acquisition have been credited to the Acquired Fund's
account on the books of Intermediate Bond. After the Closing Date,
Intermediate Bond will provide to the Acquired Fund evidence
satisfactory to the Acquired Fund that such Shares have been credited
pro rata to open accounts in the names of the Acquired Fund
Shareholders.
(d) At the Closing, each party shall deliver to the other such bills of
sale, instruments of assumption of liabilities, checks, assignments,
stock certificates, receipts or other documents as such other party or
its counsel may reasonably request in connection with the transfer of
assets, assumption of liabilities and liquidation contemplated by the
Acquisition Plan.
11. Survival of Representations and Warranties
No representations, warranties or covenants in or pursuant to this
Acquisition Plan (including certificates of officers) hereto shall survive the
completion of the transactions contemplated herein.
12. Termination of Acquisition Plan
A majority of either Fund's Board of Directors may terminate this
Acquisition Plan with respect to that Fund at any time before the applicable
Effective Time if: (i) the Fund's conditions precedent set forth in Sections 8,
9 or 10 as appropriate, are not satisfied; or (ii) the Board of Directors
determines that the consummation of the Acquisition is not in the best interests
of the Fund or its Shareholders and gives notice of such termination to the
other party.
13. Governing Law
This Acquisition Plan and the transactions contemplated hereby shall be
governed, construed and enforced in accordance with the laws of the State of New
York, except to the extent preempted by federal law, without regard to conflicts
of law principles.
14. Brokerage Fees
Each party represents and warrants that there are no brokers or finders
entitled to receive any payments in connection with the transactions provided
for in the Acquisition Plan.
15. Amendments
The parties may, by agreement in writing authorized by their respective
Board of Directors, amend this Acquisition Plan at any time. This Section shall
not preclude the parties from changing the Closing Date or the Effective Time by
mutual agreement.
16. Waivers
At any time prior to the Closing Date, either party may by written
instrument signed by it (i) waive the effect of any inaccuracies in the
representations and warranties made to it contained herein and (ii) waive
compliance with any of the agreements, covenants or conditions made for its
benefit contained herein. Any waiver shall apply only to the particular
inaccuracy or requirement for compliance waived, and not any other or future
inaccuracy or lack of compliance.
17. Indemnification of Directors
Intermediate Bond agrees that all rights to indemnification and all
limitations of liability existing in favor of the Acquired Fund's current and
former Directors and officers, acting in their capacities as such, under the
Acquired Fund's Articles of Incorporation and Bylaws as in effect as of the date
of this Acquisition Plan shall survive the Acquisition as obligations of
Intermediate Bond and shall continue in full force and effect, without any
amendment thereto, and shall constitute rights which may be asserted against
Intermediate Bond, its successors or assigns.
18. Cooperation and Further Assurances
Each party will cooperate with the other in fulfilling its obligations
under this Acquisition Plan and will provide such information and documentation
as is reasonably requested by the other in carrying out the Acquisition Plan's
terms. Each party will provide such further assurances concerning the
performance of its obligations hereunder and execute all documents for or in
connection with the consummation of the Acquisition as, with respect to such
assurances or documents, the other shall deem necessary or appropriate.
19. Updating of N-14 Registration Statement
If at any time prior to the Effective Time, a party becomes aware of any
untrue statement of a material fact or omission to state a material fact
required to be stated therein or necessary to make the statements made not
misleading in the N-14 Registration Statement, the party discovering the item
shall notify the other party and the parties shall cooperate in promptly
preparing, filing and clearing with the SEC and, if appropriate, distributing to
shareholders appropriate disclosure with respect to the item.
20. Limitation on Liabilities
The obligations of the Acquired Fund and Intermediate Bond shall not bind
any of the directors, Shareholders, nominees, officers, agents, employees or
agents of the Acquired Fund or Intermediate Bond personally, but shall bind only
the Acquired Fund or Intermediate Bond, as appropriate. The execution and
delivery of this Acquisition Plan by an officer of either party shall not be
deemed to have been made by the officer individually or to impose any liability
on the officer personally, but shall bind only the Acquired Fund or Intermediate
Bond, as appropriate.
21. Termination of the Acquired Fund
If the parties complete the Acquisition, the Acquired Fund shall terminate
its registration under the 1940 Act and the 1933 Act and will terminate.
22. Notices
Any notice, report, statement, certificate or demand required or permitted
by any provision of the Acquisition Plan shall be in writing and shall be given
in person or by telecopy, certified mail or overnight express courier to:
For the Acquired Fund:
AllianceBernstein Bond Fund, Inc - AllianceBernstein U.S.
Government Portfolio
1345 Avenue of the Americas
New York, New York 10105
Attention: Secretary
For Intermediate Bond:
AllianceBernstein Bond Fund, Inc. - AllianceBernstein
Intermediate Bond Portfolio
1345 Avenue of the Americas
New York, New York 10105
Attention: Secretary
23. Expenses
The Acquisition expenses shall be paid by [____________________________].
24. General
This Acquisition Plan supersedes all prior agreements between the parties
with respect to the subject matter hereof and may be amended only in writing
signed by both parties. The headings contained in this Acquisition Plan are for
reference only and shall not affect in any way the meaning or interpretation of
this Acquisition Plan. Whenever the context so requires, the use in the
Acquisition Plan of the singular will be deemed to include the plural and vice
versa. Nothing in this Acquisition Plan, expressed or implied, confers upon any
other person any rights or remedies under or by reason of this Acquisition Plan.
Neither party may assign or transfer any right or obligation under this
Acquisition Plan without the written consent of the other party.
In Witness Whereof, the parties hereto have executed this Acquisition Plan
as of the day and year first above written.
AllianceBernstein Bond Fund, Inc - AllianceBernstein U.S. Government Portfolio
Attest:
By:
- ------------------------------------- -------------------------------------
Name: Name:
------------------------------- ----------------------------------
Title: Title:
------------------------------- ----------------------------------
AllianceBernstein Bond Fund, Inc - AllianceBernstein Intermediate Bond Portfolio
Attest:
By:
- ------------------------------------- -------------------------------------
Name: Name:
------------------------------- ----------------------------------
Title: Title:
------------------------------- ----------------------------------
APPENDIX H
CAPITALIZATION
The following table shows on an unaudited basis the capitalization of each
of U.S. Gov't and Intermediate Bond as of April 30, 2007 and on a pro forma
combined basis, giving effect to the acquisition of the assets and liabilities
of U.S. Gov't by Intermediate Bond at net asset value as of April 30, 2007.
Intermediate
Intermediate Pro Forma Bond
U.S. Gov't Bond Adjustments (pro forma)(a)
------------ ------------ ------------ ------------
Class A Class A Class A
------------ ------------ ------------
Net Asset Value $420,581,903 $ 44,573,939 $465,155,642
Shares outstanding 61,755,437 4,326,175 (20,924,901) 45,156,711
Net asset value per share $ 6.81 $ 10.30 $ 10.30
Class B Class B Class B
------------ ------------ ------------
Net Asset Value $ 63,640,497 $ 25,734,681 $ 89,375,178
Shares outstanding 9,345,340 2,499,498 (3,166,528) 8,678,310
Net asset value per share $ 6.81 $ 10.30 $ 10.30
Class C Class C Class C
------------ ------------ ------------
Net Asset Value $ 61,993,678 $ 9,411,692 $ 71,405,370
Shares outstanding 9,089,724 915,601 (3,059,382) 6,945,943
Net asset value per share $ 6.82 $ 10.28 $ 10.28
Advisor Class Advisor Class Advisor Class
------------- ------------- -------------
Net Asset Value $ 5,558,827 $ 32,444,171 $ 38,002,998
Shares outstanding 814,956 3,149,078 (275,344) 3,688,690
Net asset value per share $ 6.82 $ 10.30 $ 10.30
Class R Class R Class R
------------ ------------ ------------
Net Asset Value $ 102,412 $ 636,340 $ 738,752
Shares outstanding 15,032 61,786 (5,094) 71,725
Net asset value per share $ 6.81 $ 10.30 $ 10.30
Class K Class K Class K
------------ ------------ ------------
Net Asset Value $ 9,804 $ 10,074 $ 19,878
Shares outstanding 1,440 977 (489) 1,928
Net asset value per share $ 6.81 $ 10.31 $ 10.31
Class I Class I Class I
------------ ------------ ------------
Net Asset Value $ 9,700 $ 5,343,617 $ 5,353,317
Shares outstanding 1,425 518,587 (483) 519,529
Net asset value per share $ 6.81 $ 10.30 $ 10.30
- ----------
(a) Assumes the Acquisition was consummated on April 30, 2007 and is for
information purposes only. No assurance can be given as to how many shares
of Intermediate Bond will be received by the shareholders of U.S. Gov't on
the date the Acquisition takes place, and the foregoing should not be
relied upon to reflect the number of shares of Intermediate Bond that
actually will be received on or after such date.
APPENDIX I
LEGAL PROCEEDINGS
On October 2, 2003, a purported class action complaint entitled Hindo, et
al. v. AllianceBernstein Growth & Income Fund, et al. ("Hindo Complaint") was
filed against the Adviser, AllianceBernstein Holding L.P. ("Holding"),
AllianceBernstein Corporation, AXA Financial, Inc., the AllianceBernstein Funds,
certain officers of the Adviser ("AllianceBernstein defendants"), and certain
other unaffiliated defendants, as well as unnamed Doe defendants. The Hindo
Complaint was filed in the United States District Court for the Southern
District of New York by alleged shareholders of two of the AllianceBernstein
Mutual Funds. The Hindo Complaint alleges that certain of the AllianceBernstein
defendants failed to disclose that they improperly allowed certain hedge funds
and other unidentified parties to engage in "late trading" and "market timing"
of AllianceBernstein Mutual Fund securities, violating Sections 11 and 15 of the
Securities Act, Sections 10(b) and 20(a) of the Exchange Act and Sections 206
and 215 of the Advisers Act. Plaintiffs seek an unspecified amount of
compensatory damages and rescission of their contracts with the Adviser,
including recovery of all fees paid to the Adviser pursuant to such contracts.
Following October 2, 2003, additional lawsuits making factual allegations
generally similar to those in the Hindo Complaint were filed in various federal
and state courts against the Adviser and certain other defendants. All state
court actions against the Adviser either were voluntarily dismissed or removed
to federal court. On February 20, 2004, the Judicial Panel on Multidistrict
Litigation transferred all actions to the United States District Court for the
District of Maryland (the "Mutual Fund MDL"). On September 29, 2004, plaintiffs
filed consolidated amended complaints with respect to four claim types: mutual
fund shareholder claims; mutual fund derivative claims; derivative claims
brought on behalf of Holding; and claims brought under ERISA by participants in
the Profit Sharing Plan for Employees of the Adviser. All four complaints
include substantially identical factual allegations, which appear to be based in
large part on the SEC Order and the NYAG Order.
On April 21, 2006, the Adviser and attorneys for the plaintiffs in the
mutual fund shareholder claims, mutual fund derivative claims, and ERISA claims
entered into a confidential memorandum of understanding ("MOU") containing their
agreement to settle these claims. The agreement will be documented by a
stipulation of settlement and will be submitted for court approval at a later
date. The settlement amount ($30 million), which we previously accrued and
disclosed, has been disbursed. The derivative claims brought on behalf of
Holding, in which plaintiffs seek an unspecified amount of damages, remain
pending.
On April 11, 2005, a complaint entitled The Attorney General of the State
of West Virginia v. AIM Advisors, Inc., et al. ("WVAG Complaint") was filed
against the Adviser, Holding, and various unaffiliated defendants. The WVAG
Complaint was filed in the Circuit Court of Marshall County, West Virginia by
the Attorney General of the State of West Virginia. The WVAG Complaint makes
factual allegations generally similar to those in the Hindo Complaint. On
October 19, 2005, the WVAG Complaint was transferred to the Mutual Fund MDL. On
August 30, 2005, the WV Securities Commissioner signed a Summary Order to Cease
and Desist, and Notice of Right to Hearing addressed to the Adviser and Holding.
The Summary Order claims that the Adviser and Holding violated the West Virginia
Uniform Securities Act, and makes factual allegations generally similar to those
in the SEC Order and the NYAG Order. On January 25, 2006, the Adviser and
Holding moved to vacate the Summary Order. In early September 2006, the court
denied this motion, and the Supreme Court of Appeals in West Virginia denied the
defendants' petition for appeal. On September 22, 2006, the Adviser and Holding
filed an answer and moved to dismiss the Summary Order with the WV Securities
Commissioner.
It is possible that these matters and/or other developments resulting from
these matters could result in increased redemptions of the AllianceBernstein
Mutual Funds' shares or other adverse consequences to the AllianceBernstein
Mutual Funds. This may require the AllianceBernstein Mutual Funds to sell
investments held by those funds to provide for sufficient liquidity and could
also have an adverse effect on the investment performance of the
AllianceBernstein Mutual Funds. However, the Adviser believes that these matters
are not likely to have a material adverse effect on its ability to perform
advisory services relating to the AllianceBernstein Mutual Funds.
APPENDIX J
SHARE OWNERSHIP INFORMATION
Shares Outstanding
As of August 3, 2007 each Fund had the following number of shares of common
stock outstanding.
Number of Outstanding
Shares of
Fund Class Common Stock
- ----------------------------- ------- --------------------------------------
U.S. Gov't A 60,375,253
B 7,796,768
C 8,692,171
Advisor 810,661
R 6,117
K 47,661
I 1,425
Intermediate Bond A 3,913,574
B 2,231,101
C 940,238
Advisor 3,207,303
R 66,199
K 640,705
I 525,673
Ownership of Shares
As of August 3, 2007, the Directors and officers of each Fund as a group
beneficially owned less than 1% of the outstanding shares of common stock of
that Fund. To the knowledge of each Fund, the following table shows the persons
owning, as of August 3, 2007, either of record or beneficially, 5% or more of
the outstanding shares of the Fund and the percentage of the combined fund's
shares to be owned by the persons if the Acquisition had been consummated as of
that date.
Percentage of
Outstanding
Number of Percentage of Shares of
Outstanding Outstanding Combined
Fund and Shares of Shares of Fund Class
Class Name and Address of Shareholder Class Owned Class Owned Owned
- ------------ -------------------------------- ----------- ------------- -------------
U.S. Gov't
Class A MLPF&S For the Sole Benefit 4,630,834 7.67% 8.60%
of its Customers
Attn: Fund Administration
4800 Deer Lake Drive East 2nd
Floor
Jacksonville, FL 32246-6484
Class B First Clearing LLC 422,577 5.42% 5.53%
Special Custody Account
FEBO Customer
10750 Wheat First Drive
Glen Allen, VA 23060-9245
Pershing LLC 795,079 10.21% 11.13%
P.O. Box 2052
Jersey City, NJ 07303-2052
MLPF&S For the Sole Benefit 504,600 6.48% 6.15%
of its Customers
Attn: Fund Administration
4800 Deer Lake Drive East 2nd
Floor
Jacksonville, FL 32246-6484
Class C MLPF&S For the Sole Benefit 1,993,535 22.94% 24.00%
of its Customers
Attn: Fund Administration
4800 Deer Lake Drive East 2nd
Floor
Jacksonville, FL 32246-6484
HO Chunk Nation 1,338,368 15.40% 13.24%
Attn: Sharon Taylor
P.O. Box 640
Black River Falls, WI 54615-0640
Advisor
Class Frontier Trust Co. FBO 154,704 19.08% 2.74%
Maurice S. Mandel Rollover
IRA
14 Hillside Avenue
Port Washington, NY 11050-
2747
Trust For PSP For Employees 622,622 76.80% 11.05%
of Alliance Capital
Management L.P.
Attn: Diana Marotta, Floor 31
1345 Avenue of the Americas
New York, NY 10105
Class R Alliance Capital Management 1,401 22.89% 2.68%
L.P.
Attn: Raymond Cardosi Seed
Account
1 N. Lexington Avenue
White Plains, NY 10601-1712
Reliance Trust Co. Cust. FBO 2,100 34.32% 1.99%
Chemic Laboratories Inc.
401(k)
P.O. Box 48529
Atlanta, GA 30362-1529
MG Trust Trustee 1,559 25.48% 1.47%
Shumate Tri-City LLC
700 17th Street, Suite 300
Denver, CO 80202-3531
MG Trust Co. Cust. FBO 628 10.26% 0.59%
Carolinas Net Care LLC
700 17th Street, Suite 300
Denver, CO 80202-3531
Class K Union Bank of CA Trust 8,012 16.81% 0.79%
Nominee
Great Place to Work Institute
Inc. 401(k)
P.O. Box 85484
San Diego, CA 92186-5484
Union Bank of CA Trust 19,679 41.29% 1.95%
Nominee
Intergro Inc. 401(k) Savings
Retirement Plan
P.O. Box 85484
San Diego, CA 92186-5484
Union Bank of CA Trust 12,649 26.54% 8.88%
Nominee
Minnesota Surgical Associates
PA 401(k) PSP
P.O. Box 85484
San Diego, CA 92186-5484
Union Bank of CA Trust 3,352 7.03% 0.33%
Nominee
Carlyle Group Ltd. 401(k) Plan
P.O. Box 85484
San Diego, CA 92186-5484
Class I Alliance Capital Management L.P. 1,425 100.00% 0.18%
Attn: Raymond Cardosi Seed
Account
1 N. Lexington Avenue
White Plains, NY 10601-1712
Intermediate
Bond
Class A MLPF&S For the Sole Benefit 711,244 18.18% 8.60%
of its Customers
Attn: Fund Administration
4800 Deer Lake Drive East 2nd
Floor
Jacksonville, FL 32246-6484
Pershing LLC 289,094 7.39% 1.10%
P.O. Box 2052
Jersey City, NJ 07303-2052
Class B First Clearing LLC 128,895 5.78% 5.53%
Special Custody Account
FEBO Customer
10750 Wheat First Drive
Glen Allen, VA 23060-9245
MLPF&S For the Sole Benefit 120,370 5.40% 6.15%
of its Customers
Attn: Fund Administration
4800 Deer Lake Drive East 2nd
Floor
Jacksonville, FL 32246-6484
Pershing LLC 296,376 13.30% 11.13%
P.O. Box 2052
Jersey City, NJ 07303-2052
Class C MLPF&S For the Sole Benefit 287,343 30.64% 24.00%
of its Customers
Attn: Fund Administration
4800 Deer Lake Drive East 2nd
Floor
Jacksonville, FL 32246-6484
Pershing LLC 108,070 11.52% 4.56%
P.O. Box 2052
Jersey City, NJ 07303-2052
Advisor CollegeBound Fund CBF- 3,176,834 99.18% 84.80%
Class Quality Bond Fund
Customized Allocation 529
Plan
1345 Avenue of the Americas
New York, NY 10105-0302
Class R Counsel Trust DBA Mid 3,315 5.01% 4.72%
Atlantic Trust Co. FBO Ohio
Agribusiness Association
401(k) PSP & Trust
1251 Waterfront Place, Suite
525
Pittsburgh, PA 15222-4228
Merrill Lynch 60,918 92.02% 86.70%
Attn: Fund Administration
4800 Deer Lake Drive East 2nd
Floor
Jacksonville, FL 32246-6484
Class K Union Bank of CA Trust 51,330 8.01% 8.88%
Nominee
Minnesota Surgical Associates
PA 401(k) PSP
P.O. Box 85484
San Diego, CA 92186-5484
Union Bank of CA Trust 312,042 48.72% 46.41%
Nominee
Englewood Surgical Associates
PA PSP
P.O. Box 85484
San Diego, CA 92186-5484
Union Bank of CA Trust 130,357 20.35% 19.39%
Nominee
Muncie Surgical Associates
Inc. PSP
P.O. Box 85484
San Diego, CA 92186-5484
Union Bank of CA Trust 33,047 5.16% 4.91%
Nominee
Highland Park Medical
Associates PC 401(k) PSP
P.O. Box 85484
San Diego, CA 92186-5484
Class I Union Bank of CA Trust 373,371 73.38% 70.90%
Nominee
Associated Radiologist PA
401(k) PSP
P.O. Box 85484
San Diego, CA 92186-5484
Union Bank of CA Trust 129,200 25.39% 24.53%
Nominee
Minnesota Surgical Associates
PA 401(k) PSP
P.O. Box 85484
San Diego, CA 92186-5484
APPENDIX K
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand each
Fund's financial performance for the past 5 years (or, if shorter, the period of
the Fund's operations). Certain information reflects financial results for a
single share of each Fund. The total returns in the table represent the rate
that an investor would have earned (or lost) on an investment in the Fund
(assuming reinvestment of all dividends and distributions). Except as otherwise
indicated, this information has been audited by Ernst & Young LLP, the
independent registered public accounting firm for both Intermediate Bond and
U.S. Gov't as of the end of the Funds' last fiscal year, whose reports, along
with each Fund's financial statements, are included in the Funds' annual report
and available upon request.
U.S. Gov't
----------
Income from Investment Operations Less: Dividends and Distributions
------------------------------------------ -----------------------------------------------
Net Increase
Net Asset Net Realized (Decrease) Dividends Distributions Distributions
Value, Net and Unrealized in Net Asset from Net in Excess of from Net
Beginning Investment Gain (Loss) on Value from Investment Net Investment Realized Gain
Fiscal Year or Period of Period Income(a) Investments Operations Income Income on Investments
- --------------------------------------------------------------------------------------------------------------------------------
U.S. Government
Class A
Six months Ended
3/31/07 (unaudited) $6.84 $.14 $(.03) $11 $(.15) $0.00 $0.00
Year Ended 9/30/06 6.98 .30 (.13) 17 (.31) 0.00 0.00
Year Ended 9/30/05 7.11 .28 (.12) .16 (.29) 0.00 0.00
Year Ended 9/30/04 7.27 .30(d) (.13) .17 (.33) 0.00 0.00
7/1/03 to 9/30/03(k) 7.49 .06 (.20) (.14) (.08) 0.00 0.00
Year Ended 6/30/03 7.21 .27 .35 .62 (.34) 0.00 0.00
Year Ended 6/30/02(c) 7.14 .37 .13 .50 (.37) (.03) 0.00
Class B
Six months Ended
3/31/07 (unaudited) $6.84 $.12 $(.04) $.08 $(.12) $0.00 $0.00
Year Ended 9/30/06 6.98 .24 (.12) .12 (.26) 0.00 0.00
Year Ended 9/30/05 7.11 .23 (.12) .11 (.24) 0.00 0.00
Year Ended 9/30/04 7.27 .25(d) (.13) .12 (.28) 0.00 0.00
7/1/03 to 9/30/03(k) 7.49 .05 (.20) (.15) (.07) 0.00 0.00
Year Ended 6/30/03 7.21 .22 .35 .57 (.29) 0.00 0.00
Year Ended 6/30/02(c) 7.14 .32 .13 .45 (.32) (.03) 0.00
Class C
Six months Ended
3/31/07 (unaudited) $6.85 $.12 $(.03) $.09 $(.13) $0.00 $0.00
Year Ended 9/30/06 6.99 .25 (.12) .13 (.27) 0.00 0.00
Year Ended 9/30/05 7.12 .23 (.12) .11 (.24) 0.00 0.00
Year Ended 9/30/04 7.28 .25(d) (.13) .12 (.28) 0.00 0.00
7/1/03 to 9/30/03(k) 7.50 .05 (.20) (.15) (.07) 0.00 0.00
Year Ended 6/30/03 7.22 .22 .35 .57 (.29) 0.00 0.00
Year Ended 6/30/02(c) 7.15 .32 .13 .45 (.32) (.03) 0.00
Advisor Class
Six months Ended
3/31/07 (unaudited) $6.85 $.15 $(.03) $.12 $(.16) $0.00 $0.00
Year Ended 9/30/06 7.00 .31 (.12) .19 (.34) 0.00 0.00
Year Ended 9/30/05 7.12 .30 (.11) .19 (.31) 0.00 0.00
Year Ended 9/30/04 7.28 .32(d) (.12) .20 (.36) 0.00 0.00
7/1/03 to 9/30/03(k) 7.50 .07 (.20) (.13) (.09) 0.00 0.00
Year Ended 6/30/03 7.21 .29 .37 .66 (.37) 0.00 0.00
Year Ended 6/30/02(c) 7.14 .39 .13 .52 (.39) (.03) 0.00
Less: Distributions
---------------------------------------
Total
Tax Total Net Asset Investment
Return Dividends Value, Return Based Net Assets,
of and End of on Net Asset End of Period
Fiscal Year or Period Capital Distributions Period Value(b) (000's Omitted)
- ---------------------------------------------------------------------------------------------
U.S. Government
Class A
Six months Ended
3/31/07 (unaudited) $0.00 $(.15) $6.80 1.62% $425,889
Year Ended 9/30/06 0.00 (.31) 6.84 2.60 457,168
Year Ended 9/30/05 0.00 (.29) 6.98 2.31 543,547
Year Ended 9/30/04 0.00 (.33) 7.11 2.49 626,183
7/1/03 to 9/30/03(k) 0.00 (.08) 7.27 (1.80) 811,376
Year Ended 6/30/03 0.00 (.34) 7.49 8.82 889,115
Year Ended 6/30/02(c) (.03) (.43) 7.21 7.11 865,739
Class B
Six months Ended
3/31/07 (unaudited) $0.00 $(.12) $6.80 1.25% $64,748
Year Ended 9/30/06 0.00 (.26) 6.84 1.86 81,834
Year Ended 9/30/05 0.00 (.24) 6.98 1.57 138,856
Year Ended 9/30/04 0.00 (.28) 7.11 1.74 229,823
7/1/03 to 9/30/03(k) 0.00 (.07) 7.27 (1.98) 399,040
Year Ended 6/30/03 0.00 (.29) 7.49 8.07 495,606
Year Ended 6/30/02(c) (.03) (.38) 7.21 6.36 400,221
Class C
Six months Ended
3/31/07 (unaudited) $0.00 $(.13) $6.81 1.25% $62,150
Year Ended 9/30/06 0.00 (.27) 6.85 1.87 66,796
Year Ended 9/30/05 0.00 (.24) 6.99 1.58 84,303
Year Ended 9/30/04 0.00 (.28) 7.12 1.73 107,003
7/1/03 to 9/30/03(k) 0.00 (.07) 7.28 (1.98) 167,359
Year Ended 6/30/03 0.00 (.29) 7.50 8.06 204,006
Year Ended 6/30/02(c) (.03) (.38) 7.22 6.35 202,030
Advisor Class
Six months Ended
3/31/07 (unaudited) $0.00 $(.16) $6.81 1.77% $5,517
Year Ended 9/30/06 0.00 (.34) 6.85 2.75 5,259
Year Ended 9/30/05 0.00 (.31) 7.00 2.76 5,981
Year Ended 9/30/04 0.00 (.36) 7.12 2.82 247,020
7/1/03 to 9/30/03(k) 0.00 (.09) 7.28 (1.72) 204,108
Year Ended 6/30/03 0.00 (.37) 7.50 9.29 197,649
Year Ended 6/30/02(c) (.03) (.45) 7.21 7.41 177,834
Ratios/Supplemental Data
Ratio of Net
Ratio of Investment
Expenses Income
to Average to Average Portfolio
Fiscal Year or Period Net Assets Net Assets Turnover Rate
- ------------------------------------------------------------------------
U.S. Government
Class A
Six months Ended
3/31/07 (unaudited) 1.20%(e)(f)(j) 4.22%(j) 130%
Year Ended 9/30/06 1.04(m) 4.33(m) 159
Year Ended 9/30/05 1.30(e) 3.90 166
Year Ended 9/30/04 1.34(e)(l) 4.23(d) 150
7/1/03 to 9/30/03(k) 1.18(e)(j) 3.43(j) 241
Year Ended 6/30/03 1.10(e) 3.64 976
Year Ended 6/30/02(c) 1.23(e) 5.15 1,009
Class B
Six months Ended
3/31/07 (unaudited) 1.95%(e)(f)(j) 3.47%(j) 130%
Year Ended 9/30/06 1.79(m) 3.59(m) 159
Year Ended 9/30/05 2.02(e) 3.20 166
Year Ended 9/30/04 2.07(e)(l) 3.55(d) 150
7/1/03 to 9/30/03(k) 1.90(e)(j) 2.75(j) 241
Year Ended 6/30/03 1.82(e) 2.95 976
Year Ended 6/30/02(c) 1.93(e) 4.41 1,009
Class C
Six months Ended
3/31/07 (unaudited) 1.93%(e)(f)(j) 3.49%(j) 130%
Year Ended 9/30/06 1.76(m) 3.60(m) 159
Year Ended 9/30/05 2.02(e) 3.19 166
Year Ended 9/30/04 2.06(e)(l) 3.56(d) 150
7/1/03 to 9/30/03(k) 1.89(e)(j) 2.76(j) 241
Year Ended 6/30/03 1.81(e) 2.96 976
Year Ended 6/30/02(c) 1.93(e) 4.42 1,009
Advisor Class
Six months Ended
3/31/07 (unaudited) .90%(e)(f)(j) 4.52%(j) 130%
Year Ended 9/30/06 .74(m) 4.61(m) 159
Year Ended 9/30/05 .94(e) 4.11 166
Year Ended 9/30/04 1.02(e)(l) 4.52(d) 150
7/1/03 to 9/30/03(k) .89(e)(j) 3.72(j) 241
Year Ended 6/30/03 .81(e) 3.96 976
Year Ended 6/30/02(c) .89(e) 5.41 1,009
- ----------
See footnotes on pages 82 and 83.
U.S. Gov't
----------
Income from Investment Operations Less: Dividends and Distributions
------------------------------------------ ----------------------------------------------
Net Increase
Net Asset Net Realized (Decrease) Dividends Distributions Distributions
Value, Net and Unrealized in Net Asset from Net in Excess of from Net
Beginning Investment Gain (Loss) on Value from Investment Net Investment Realized Gain
Fiscal Year or Period of Period Income(a) Investments Operations Income Income on Investment
- -------------------------------------------------------------------------------------------------------------------------------
U.S. Government
Class R
Six months Ended
3/31/07 (unaudited) $6.84 $.14 $(.03) $.11 $(.14) $0.00 $0.00
Year Ended 9/30/06 6.98 .27 (.12) .15 (.29) 0.00 0.00
Year Ended 9/30/05 7.11 .26 (.11) .15 (.28) 0.00 0.00
11/03/03 to 9/30/04(i) 7.14 .26 0.00 .26 (.29) 0.00 0.00
Class K
Six months Ended
3/31/07 (unaudited) $6.84 $.15 $(.03) $.12 $(.16) $0.00 $0.00
Year Ended 9/30/06 6.98 .30 (.13) .17 (.31) 0.00 0.00
03/01/05 to 9/30/05(i) 7.02 .16 (.03) .13 (.17) 0.00 0.00
Class I
Six months Ended
3/31/07 (unaudited) $6.84 $.16 $(.03) $.13 $(.17) $0.00 $0.00
Year Ended 9/30/06 6.98 .32 (.13) .19 (.33) 0.00 0.00
03/01/05 to 9/30/05(i) 7.02 .17 (.03) .14 (.18) 0.00 0.00
Less: Distributions
---------------------------------------
Total
Tax Total Net Asset Investment
Return Dividends Value, Return Based Net Assets,
of and End of on Net Asset End of Period
Fiscal Year or Period Capital Distributions Period Value(b) (000's Omitted)
- ---------------------------------------------------------------------------------------------
U.S. Government
Class R
Six months Ended
3/31/07 (unaudited) $0.00 $(.14) $6.81 1.65% $104
Year Ended 9/30/06 0.00 (.29) 6.84 2.26 35
Year Ended 9/30/05 0.00 (.28) 6.98 2.14 25
Year Ended 9/30/04 0.00 (.29) 7.11 3.72 16
Class K
Six months Ended
3/31/07 (unaudited) $0.00 $(.16) $6.80 1.72% $10
Year Ended 9/30/06 0.00 (.31) 6.84 2.57 10
Year Ended 9/30/05 0.00 (.17) 6.98 1.79 10
Class I
Six months Ended
3/31/07 (unaudited) $0.00 $(.17) $6.80 1.86% $10
Year Ended 9/30/06 0.00 (.33) 6.84 2.89 10
Year Ended 9/30/05 0.00 (.18) 6.98 1.97 10
Ratios/Supplemental Data
------------------------
Ratio of Net
Ratio of Investment
Expenses Income
to Average to Average Portfolio
Fiscal Year or Period Net Assets Net Assets Turnover Rate
- ------------------------------------------------------------------------
U.S. Government
Class R
Six months Ended
3/31/07 (unaudited) 1.38%(e)(f)(j) 4.07%(j) 130%
Year Ended 9/30/06 1.34(m) 4.03(m) 159
Year Ended 9/30/05 1.49(e) 3.68 166
11/03/03 to 9/30/04(i) 1.48(e)(j) 4.08(d)(j) 150
Class K
Six months Ended
3/31/07 (unaudited) .98%(e)(j) 4.42%(j) 130%
Year Ended 9/30/06 1.02 4.34(m) 159
03/01/05 to 9/30/05(i) 1.17(e)(j) 3.79(j) 166
Class I
Six months Ended
3/31/07 (unaudited) .76%(e)(j) 4.67%(j) 130%
Year Ended 9/30/06 .75 4.62(m) 159
03/01/05 to 9/30/05(i) .89(e)(j) 4.10(j) 166
- ----------
See footnotes on pages 82 and 83.
Intermediate Bond
-----------------
Income from Investment Operations Less: Dividends and Distributions
------------------------------------------ ----------------------------------------------
Net Increase
Net Asset Net Realized (Decrease) Dividends Distributions Distributions
Value, Net and Unrealized in Net Asset from Net in Excess of from Net
Beginning Investment Gain (Loss) on Value from Investment Net Investment Realized Gain
Fiscal Year or Period of Period Income(a) Investments Operations Income Income on Investments
- --------------------------------------------------------------------------------------------------------------------------------
Intermediate Bond
Class A
Six months Ended
4/30/07 (unaudited) $10.18 $.21(d)(m) $.12 $.33 $(.21) $0.00 $0.00
Year Ended 10/31/06 10.15 .41(d)(m) .04 .45 (.42) 0.00 0.00
Year Ended 10/31/05 10.43 .37(d) (.28) .09 (.37) 0.00 0.00
Year Ended 10/31/04 10.56 .33(d) .15 .48 (.38) 0.00 (.23)
7/1/03 to 10/31/03(k) 10.82 .12(d) (.25) (.13) (.13) 0.00 0.00
Year Ended 6/30/03 10.25 .33(d) .66 .99 (.42) 0.00 0.00
Year Ended 6/30/02(c) 10.22 .46(d) .17 .63 (.46) (.10) (.01)
Class B
Six months Ended
4/30/07 (unaudited) $10.18 $.18(m) $.12 $.30 $(.18) $0.00 $0.00
Year Ended 10/31/06 10.15 .38(m) .04 .42 (.39) 0.00 0.00
Year Ended 10/31/05 10.42 .29(d) (.25) .04 (.31) 0.00 0.00
Year Ended 10/31/04 10.55 .27(d) .14 .41 (.31) 0.00 (.23)
7/1/03 to 10/31/03(k) 10.81 .09(d) (.25) (.16) (.10) 0.00 0.00
Year Ended 6/30/03 10.24 .26(d) .66 .92 (.35) 0.00 0.00
Year Ended 6/30/02(c) 10.21 .38(d) .16 .54 (.38) (.09) (.01)
Class C
Six months Ended
4/30/07 (unaudited) $10.16 $.17 $.12 $.29 $(.17) $0.00 $0.00
Year Ended 10/31/06 10.13 .34(d) .04 .38 (.35) 0.00 0.00
Year Ended 10/31/05 10.40 .29(d) (.26) .03 (.30) 0.00 0.00
Year Ended 10/31/04 10.53 .27(d) .14 .41 (.31) 0.00 (.23)
7/1/03 to 10/31/03(k) 10.79 .09(d) (.25) (.16) (.10) 0.00 0.00
Year Ended 6/30/03 10.23 .26(d) .65 .91 (.35) 0.00 0.00
Year Ended 6/30/02(c) 10.19 .38(d) .17 .55 (.38) (.09) (.01)
Advisor Class
Six months Ended
4/30/07 (unaudited) $10.18 $.22 $.12 $.34 $(.22) $0.00 $0.00
Year Ended 10/31/06 10.15 .44(d) .04 .48 (.45) 0.00 0.00
Year Ended 10/31/05 10.43 .39(d) (.26) .13 (.41) 0.00 0.00
Year Ended 10/31/04 10.55 .36(d) .16 .52 (.41) 0.00 (.23)
7/1/03 to 10/31/03(k) 10.82 .13(d) (.26) (.13) (.14) 0.00 0.00
Year Ended 6/30/03 10.25 .36(d) .66 1.02 (.45) 0.00 0.00
Year Ended 6/30/02(c) 10.22 .48(d) .18 .66 (.48) (.11) (.01)
Less: Distributions
---------------------------------------
Distributions Total
in Excess of Tax Total Net Asset Investment
Net Realized Return Dividends Value, Return Based Net Assets,
Gain on of and End of on Net Asset End of Period
Fiscal Year or Period Investments Capital Distributions Period Value(b) (000's Omitted)
- ------------------------------------------------------------------------------------------------------------
Intermediate Bond
Class A
Six months Ended
4/30/07 (unaudited) $0.00 $0.00 $(.21) $10.30 3.22% $44,574
Year Ended 10/31/06 0.00 0.00 (.42) 10.18 4.51 44,409
Year Ended 10/31/05 0.00 0.00 (.37) 10.15 .90 52,430
Year Ended 10/31/04 0.00 0.00 (.61) 10.43 4.66 56,778
7/1/03 to 10/31/03(k) 0.00 0.00 (.13) 10.56 (1.20) 68,213
Year Ended 6/30/03 0.00 0.00 (.42) 10.82 9.87 76,565
Year Ended 6/30/02(c) (.03) 0.00 (.60) 10.25 6.23 44,852
Class B
Six months Ended
4/30/07 (unaudited) $0.00 $0.00 $(.18) $10.30 2.97% $25,735
Year Ended 10/31/06 0.00 0.00 (.39) 10.18 4.20 30,154
Year Ended 10/31/05 0.00 0.00 (.31) 10.15 .30 44,944
Year Ended 10/31/04 0.00 0.00 (.54) 10.42 3.93 66,635
7/1/03 to 10/31/03(k) 0.00 0.00 (.10) 10.55 (1.44) 96,033
Year Ended 6/30/03 0.00 0.00 (.35) 10.81 9.12 113,233
Year Ended 6/30/02(c) (.03) 0.00 (.51) 10.24 5.52 50,354
Class C
Six months Ended
4/30/07 (unaudited) $0.00 $0.00 $(.17) $10.28 2.87% $9,412
Year Ended 10/31/06 0.00 0.00 (.35) 10.16 3.80 9,874
Year Ended 10/31/05 0.00 0.00 (.30) 10.13 .30 15,689
Year Ended 10/31/04 0.00 0.00 (.54) 10.40 3.93 19,008
7/1/03 to 10/31/03(k) 0.00 0.00 (.10) 10.53 (1.44) 26,021
Year Ended 6/30/03 0.00 0.00 (.35) 10.79 9.03 26,445
Year Ended 6/30/02(c) (.03) 0.00 (.51) 10.23 5.63 16,131
Advisor Class
Six months Ended
4/30/07 (unaudited) $0.00 $0.00 $(.22) $10.30 3.38% $32,444
Year Ended 10/31/06 0.00 0.00 (.45) 10.18 4.83 29,966
Year Ended 10/31/05 0.00 0.00 (.41) 10.15 1.20 29,576
Year Ended 10/31/04 0.00 0.00 (.64) 10.43 5.08 309,690
7/1/03 to 10/31/03(k) 0.00 0.00 (.14) 10.55 (1.19) 258,747
Year Ended 6/30/03 0.00 0.00 (.45) 10.82 10.20 246,127
Year Ended 6/30/02(c) (.03) 0.00 (.63) 10.25 6.57 185,071
Ratios/Supplemental Data
------------------------
Ratio of Net
Ratio of Investment
Expenses Income
to Average to Average Portfolio
Fiscal Year or Period Net Assets Net Assets Turnover Rate
- ------------------------------------------------------------------------
Intermediate Bond
Class A
Six months Ended
4/30/07 (unaudited) .99%(g)(j) 4.07%(j) 98%
Year Ended 10/31/06 .98(g) 4.08(d) 446
Year Ended 10/31/05 .98(g) 3.53(d) 935
Year Ended 10/31/04 .98(g) 3.21(d) 658
7/1/03 to 10/31/03(k) .98(g)(j) 2.60(d)(j) 199
Year Ended 6/30/03 .98(g) 3.08(d) 867
Year Ended 6/30/02(c) .98(g) 4.39(d) 573
Class B
Six months Ended
4/30/07 (unaudited) 1.49%(g)(j) 3.58%(j) 98%
Year Ended 10/31/06 1.33(g) 3.75(d) 446
Year Ended 10/31/05 1.68(g) 2.82(d) 935
Year Ended 10/31/04 1.68(g) 2.59(d) 658
7/1/03 to 10/31/03(k) 1.68(g)(j) 2.01(d)(j) 199
Year Ended 6/30/03 1.68(g) 2.41(d) 867
Year Ended 6/30/02(c) 1.68(g) 3.70(d) 573
Class C
Six months Ended
4/30/07 (unaudited) 1.69%(g)(j) 3.39%(j) 98%
Year Ended 10/31/06 1.68(g) 3.40(d) 446
Year Ended 10/31/05 1.68(g) 2.84(d) 935
Year Ended 10/31/04 1.68(g) 2.60(d) 658
7/1/03 to 10/31/03(k) 1.68(g)(j) 2.03(d)(j) 199
Year Ended 6/30/03 1.68(g) 2.41(d) 867
Year Ended 6/30/02(c) 1.68(g) 3.71(d) 573
Advisor Class
Six months Ended
4/30/07 (unaudited) .69%(g)(j) 4.37%(j) 98%
Year Ended 10/31/06 .68(g) 4.38(d) 446
Year Ended 10/31/05 .68(g) 3.72(d) 935
Year Ended 10/31/04 .68(g) 3.47(d) 658
7/1/03 to 10/31/03(k) .68(g)(j) 2.87(d)(j) 199
Year Ended 6/30/03 .68(g) 3.39(d) 867
Year Ended 6/30/02(c) .68(g) 4.69(d) 573
- ----------
See footnotes on pages 82 and 83.
Intermediate Bond
-----------------
Income from Investment Operations Less: Dividends and Distributions
------------------------------------ ------------------------------------------------------
Net Asset Net Realized Net Increase Dividends Distributions Distributions
Value, Net and Unrealized (Decrease) in from Net In Excess of from Net
Beginning Investment Gain (Loss) on Net Asset Value Investment Net Investment Realized Gain
Fiscal Year or Period of Period Income(a) Investments from Operations Income Income on Investment
- ----------------------------------------------------------------------------------------------------------------------------------
Intermediate Bond
Class R
Six months Ended
4/30/07 (unaudited) $10.18 $.21 $.10 $.31 $(.19) $0.00 $0.00
Year Ended 10/31/06 10.15 .39 .04 .43 (.40) 0.00 0.00
Year Ended 10/31/05 10.42 .34(d) (.26) .08 (.35) 0.00 0.00
11/03/03 to 10/31/04(i) 10.53 .33(d) .15 .48 (.36) 0.00 (.23)
Class K
Six months Ended
4/30/07 (unaudited) $10.19 $.21 $.12 $.33 $(.21) $0.00 $0.00
Year Ended 10/31/06 10.16 .42 .03 .45 (.42) 0.00 0.00
03/01/05 to 10/31/05(i) 10.34 .26(d) (.17) .09 (.27) 0.00 0.00
Class I
Six months Ended
4/30/07 (unaudited) $10.18 $.22 $.12 $.34 $(.22) $0.00 $0.00
Year Ended 10/31/06 10.16 .44 .03 .47 (.45) 0.00 0.00
03/01/05 to 10/31/05(i) 10.34 .27(d) (.17) .10 (.28) 0.00 0.00
Less: Distributions
------------------------------------------------
Distributions Distributions Total
from In Excess of Tax Total Net Asset Investment
Net Realized Net Realized Return Dividends Value, Return Based
Gain on Gain on of and End of on Net Asset
Fiscal Year or Period Investments Investments Capital Distributions Period Value(b)
- ----------------------------------------------------------------------------------------------------------------------
Intermediate Bond
Class R
Six months Ended
4/30/07 (unaudited) $0.00 $0.00 $0.00 $(.19) $10.30 3.11%
Year Ended 10/31/06 0.00 0.00 0.00 (.40) 10.18 4.31
Year Ended 10/31/05 0.00 0.00 0.00 (.35) 10.15 .81
Year Ended 10/31/04 0.00 0.00 0.00 (.59) 10.42 4.63
Class K
Six months Ended
4/30/07 (unaudited) $0.00 $0.00 $0.00 $(.21) $10.31 3.23%
Year Ended 10/31/06 0.00 0.00 0.00 (.42) 10.19 4.54
Year Ended 10/31/05 0.00 0.00 0.00 (.27) 10.16 .82
Class I
Six months Ended
4/30/07 (unaudited) $0.00 $0.00 $0.00 $(.22) $10.30 3.38%
Year Ended 10/31/06 0.00 0.00 0.00 (.45) 10.18 4.71
Year Ended 10/31/05 0.00 0.00 0.00 (.28) 10.16 .97
Ratios/Supplemental Data
------------------------------------------------------------------
Ratio of Net
Ratio of Investment
Net Assets, Expenses Income
End of Period to Average to Average Portfolio
Fiscal Year or Period (000's Omitted) Net Assets Net Assets Turnover Rate
- ---------------------------------------------------------------------------------------------
Intermediate Bond
Class R
Six months Ended
4/30/07 (unaudited) $636 1.19%(m)(j) 3.85%(j) 98%
Year Ended 10/31/06 13 1.18(m)(g) 3.89(d)(m) 446
Year Ended 10/31/05 13 1.18(m) 3.31(m) 935
Year Ended 10/31/04 16 1.18(j)(m) 2.98(d)(j) 658
Class K
Six months Ended
4/30/07 (unaudited) $10 .94%(m)(g) 4.11%(j) 98%
Year Ended 10/31/06 10 .93(m) 4.13(j) 446
Year Ended 10/31/05 10 .93(m)(j) 3.76(d)(m) 935
Class I
Six months Ended
4/30/07 (unaudited) $5,344 .69%(m)(g) 4.37%(j) 98%
Year Ended 10/31/06 5,913 .68(m) 4.37(m) 446
Year Ended 10/31/05 10 .68(h)(j) 3.98(d)(j) 935
- ----------
See footnotes on pages 82 and 83.
(a) Based on average shares outstanding.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at the net asset value during the period, and a
redemption on the last day of the period. Initial sales charge or
contingent deferred sales charge, if applicable, is not reflected in the
calculation of total investment return. Total investment return does not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares. Total investment returns
calculated for periods of less than one year are not annualized.
(c) As required, the Funds have adopted the provisions of the AICPA Audit and
Accounting Guide, Audits of Investment Companies, and began amortizing
premium on debt securities for financial statement reporting purposes only.
For each Fund, the effective date and impact of this change to each class
of shares is as follows:
Increase Decrease in Ratio of
(Decrease) in Net Investment Income
Net Realized to Average Net
Decrease in and Unrealized Assets:
Net Investment Gain (Loss) on ----------------------
Effective Income per Investments
Date Share per Share From: To:
------- ------ ----- ---- ----
AllianceBernstein U.S. Government 7/1/01
Class A $(0.03) $0.03 5.56% 5.15%
Class B (0.03) 0.03 4.82% 4.41%
Class C (0.03) 0.03 4.83% 4.42%
Advisor Class (0.03) 0.03 5.81% 5.41%
AllianceBernstein Intermediate Bond 7/1/01
Class A (0.05) 0.05 4.93% 4.39%
Class B (0.05) 0.05 4.24% 3.70%
Class C (0.05) 0.05 4.25% 3.71%
Advisor Class (0.06) 0.06 5.24% 4.69%
Per share, ratios and supplemental data for periods prior to the effective date
have not been restated to reflect these changes in presentation.
(d) Net of fees waived and expenses reimbursed by the Adviser.
(e) Includes interest expense. If the following Funds had borne all expenses
excluding interest expense, the ratio of expenses to average net assets
would have been as follows:
Six months
Ended 3/31/07 September
(unaudited) 2006 2005 2004 2003 2003 2002
------------- ---- ---- ---- ---- ---- ----
AllianceBernstein U.S. Government
Class A 1.05% 1.00% 1.06% 1.10% 1.11%(k) 1.09% 1.09%
Class B 1.80% 1.75% 1.78% 1.83% 1.83%(k) 1.81% 1.80%
Class C 1.77% 1.72% 1.77% 1.82% 1.83%(k) 1.80% 1.79%
Advisor Class 0.74% 0.70% 0.72% 0.79% 0.81%(k) 0.80% 0.81%
(f) Net of waivers/reimbursements. Before waivers/reimbursements, but including
interest expense, the ratio of expenses to average net assets would have
been as follows:
Six months
Ended 3/31/07 September
(unaudited) 2006 2005 2004 2003 2003 2002
------------- ---- ---- ---- ---- ---- ----
AllianceBernstein U.S. Government
Class A 1.20%(j) 1.04% 1.30% 1.39% 1.18%(k) 1.10% 1.23%
Class B 1.95%(j) 1.79% 2.02% 2.13% 1.90%(k) 1.82% 1.93%
Class C 1.93%(j) 1.76% 2.02% 2.11% 1.89%(k) 1.81% 1.93%
Advisor Class 0.90%(j) 0.74% 0.94% 1.08% 0.89%(k) 0.81% 0.89%
Class R 1.38%(j) 1.34%(m) 1.49% 1.54% n/a n/a n/a
(g) Net of expenses assumed and/or waived/reimbursed. If the following Funds
had borne all expenses for the respective years ended, the expense ratios
would have been as follows:
Six months
Ended 4/30/07 September
(unaudited) 2006 2005 2004 2003 2003 2002
------------- ---- ---- ---- ---- ---- ----
AllianceBernstein Intermediate Bond
Class A 1.52%(j) 1.34% 1.31% 1.26% 1.33%(j) 1.32% 1.48%
Class B 2.27%(j) 2.10% 2.02% 2.00% 2.06%(j) 2.05% 2.19%
Class C 2.24%(j) 2.07% 2.03% 1.99% 2.06%(j) 2.03% 2.19%
Advisor Class 1.22%(j) 1.02% .84% .96% 1.03%(j) 1.20% 1.20%
Class R 1.66%(j) 1.57% 1.40% 1.45%(j)
Class K 1.22%(j) 1.27% 1.15%(j)
Class I 1.07%(j) .88% .89%(j)
(h) The Funds have adopted the method of accounting for interim payments on
swap contracts in accordance with Financial Accounting Standards Board
Statement No. 133. These interim payments are reflected within net realized
and unrealized gain (loss) on swap contracts, however prior to the
effective date noted below, these interim payments were reflected within
interest income/expense on the statement of operations. For each Fund, the
effective date and impact of this change to each class of shares is as
follows:
(i) Commencement of distribution.
(j) Annualized.
(k) Change in fiscal year end.
(l) Net of fees waived by the Adviser. If the following Funds had borne all
expenses for the respective year ends, the expense ratios would have been
as follows:
2004
------------
AllianceBernstein U.S. Government
Class A 1.39%
Class B 2.13%
Class C 2.11%
Advisor Class 1.08%
Class R 1.54%(k)
(m) The ratio includes expenses attributable to costs of proxy solicitation.
SK 00250 0455 785935 v5
ALLIANCEBERNSTEIN BOND FUND, INC.
- ALLIANCEBERNSTEIN INTERMEDIATE BOND PORTFOLIO
1345 Avenue of the Americas
New York, New York
Toll Free (800) 221-5672
STATEMENT OF ADDITIONAL INFORMATION
[_____________], 2007
This Statement of Additional Information (the "SAI") relates to the
acquisition (the "Acquisition") of all of the assets and liabilities of
AllianceBernstein U.S. Government Portfolio ("U.S. Gov't"), a series of
AllianceBernstein Bond Fund, Inc., by AllianceBernstein Intermediate Bond
Portfolio ("Intermediate Bond").
This SAI contains information which may be of interest to shareholders but
which is not included in the Prospectus dated [________], 2007 (the
"Prospectus") of Intermediate Bond which relates to the Acquisition. As
described in the Prospectus, the Acquisition would involve the transfer of all
the assets of U.S. Gov't in exchange for shares of Intermediate Bond and the
assumption by Intermediate Bond of all the liabilities of U.S. Gov't. U.S. Gov't
would distribute the Intermediate Bond shares it receives to its shareholders in
complete liquidation of U.S. Gov't. Intermediate Bond will be the survivor for
accounting purposes.
This SAI is not a prospectus and should be read in conjunction with the
Prospectus. The Prospectus has been filed with the Securities and Exchange
Commission and is available upon request and without charge by writing to U.S.
Gov't at 1345 Avenue of the Americas, New York, New York 10105, or by calling
1-800-221-5672.
- ------------------------------------------------------------- ------------------
TABLE OF CONTENTS
Page
ADDITIONAL INFORMATION ABOUT INTERMEDIATE BOND AND U.S. GOV'T
FINANCIAL STATEMENTS
Additional Information About Intermediate Bond and U.S. Gov't
Further information about Intermediate Bond and U.S. Gov't is contained in
their Statements of Additional Information each dated February 1, 2007, which
are available upon request and without charge by writing to U.S. Gov't at 1345
Avenue of the Americas, New York, New York 10105, or by calling 1-800-221-5672.
Financial Statements
The financial statements and Report of Independent Registered Public
Accounting Firm contained in the Annual Report for the twelve months ended
October 31, 2006, of Intermediate Bond, which report contains historical
financial information regarding Intermediate Bond, has been filed with the
Securities and Exchange Commission and is incorporated herein by reference.
The financial statements and Report of Independent Registered Public
Accounting Firm contained in the Annual Report for the twelve months ended
September 30, 2006, of U.S. Gov't, which report contains historical financial
information regarding U.S. Gov't, has been filed with the Securities and
Exchange Commission and is incorporated herein by reference.
Pro Forma Financial Information:
The following represents the pro forma financial information:
PRO FORMA ALLIANCEBERNSTEIN
BOND FUND,
FINANCIAL STATEMENTS
ALLIANCEBERNSTEIN INTERMEDIATE BOND PORTFOLIO
ALLIANCEBERNSTEIN U.S. GOVERNMENT PORTFOLIO
[_____________], 2007
(unaudited)
PORTFOLIO OF INVESTMENTS
PRO FORMA ALLIANCEBERNSTEIN BOND FUND
INTERMEDIATE BOND PORTFOLIO AllianceBernstein Bond Fund U.S. Government Portfolio
April 30, 2007 (unaudited) AllianceBernstein Bond Fund Intermediate Bond Portfolio
- ----------------------------------------------------------------------------------------------------------------------------------
Pro Forma
AllianceBernstein Pro Forma
Bond Fund AllianceBernstein AllianceBernstein AllianceBernstein
Intermediate Bond Fund Bond Fund Bond Fund
Bond Portfolio Intermediate Bond U.S. Government Intermediate
Principal Amount Portfolio Bond Portfolio Portfolio
(000) (U.S. $ Value) (U.S. $ Value) (U.S. $ Value)
- ----------------------------------------------------------------------------------------------------------------------------------
MORTGAGE PASS-THRU'S - 50.9%
Fixed Rate 30-Year - 34.1%
Federal Gold Loan Mortgage Corp.
Series 2005
4.50%, 8/01/35 - 9/01/35 (a) $ 858 $ 807,794 $ -0- $ 807,794
Federal Home Loan Mortgage Corp.
Series 2005
4.50%, 10/01/35 - 11/01/35 (a) 1,484 1,396,687 -0- 1,396,687
Series 2007
7.00%, 2/01/37 (a) 11,986 1,675,031 10,692,204 12,367,235
Federal National Mortgage Association
5.00%, TBA 5,941 -0- 5,736,778 5,736,778
6.50%, TBA 20,755 5,804,033 15,385,536 21,189,569
Series 2003
5.50%, 4/01/33 - 7/01/33 (a) 4,581 4,541,837 -0- 4,541,837
Series 2004
5.50%, 4/01/34 - 11/01/34 (a) 2,215 2,195,086 -0- 2,195,086
Series 2003
5.50%, 2/01/35 - 7/01/35 (a) 3,500 3,468,774 -0- 3,468,774
Series 2006
5.00%, 2/01/36 (a) 3,258 3,150,711 -0- 3,150,711
5.50%, 1/01/36 - 5/01/36 (a) 19,056 7,679,464 11,189,213 18,868,677
6.50%, 9/01/36 (a) 29,234 3,523,918 26,326,630 29,850,548
Series 2007
5.50%, 2/01/37 (a) 71,564 1,306,863 69,554,154 70,861,017
Government National Mortgage Association
5.50%, TBA 3,910 3,885,563 -0- 3,885,563
Series 1990
9.00%, 12/15/19 -0-* -0- 246 246
Series 1999
8.15%, 12/15/29 361 -0- 384,268 384,268
Series 2000
9.00%, 12/15/09 448 -0- 456,813 456,813
Series 2003
5.50%, 7/15/33 10,252 -0- 10,210,950 10,210,950
Series 2006
5.50%, 1/15/36 - 12/15/36 39,366 -0- 39,113,677 39,113,677
----------------- ----------------- -----------------
39,435,761 189,050,469 228,486,230
----------------- ----------------- -----------------
Agency ARMS - 8.5%
Federal Home Loan Mortgage Corp.
6.085%, 12/01/36 (a) 588 593,627 -0- 593,627
Series 2006
5.98%, 1/01/37 (a)(b) 596 605,493 -0- 605,493
Series 2007
5.972%, 12/01/36 (a)(b) 425 429,675 -0- 429,675
6.278%, 4/01/37 (b) 4,183 -0- 4,238,382 4,238,382
Series 2005
4.565%, 4/01/35 (b) 602 -0- 600,401 600,401
Series 2006
4.22%, 4/01/35 (b) 3,138 -0- 3,121,808 3,121,808
5.749%, 5/01/36 (b) 681 -0- 686,584 686,584
5.78%, 12/01/36 (b) 4,011 -0- 4,044,561 4,044,561
Series 2007
5.805%, 2/01/37 (b) 3,584 -0- 3,608,924 3,608,924
5.903%, 3/01/37 (b) 5,608 -0- 5,652,165 5,652,165
5.976%, 1/01/37 (b) 6,883 -0- 6,940,127 6,940,127
Federal National Mortgage Association
Series 2006
4.16%, 11/01/34 (a)(b) 476 478,411 -0- 478,411
5.487%, 5/01/36 (a)(b) 173 174,454 -0- 174,454
5.801%, 3/01/36 (a)(b) 624 630,683 -0- 630,683
5.93%, 6/01/36 (a)(b) 439 442,865 -0- 442,865
Series 2007
5.779%, 1/01/37 (a)(b) 835 842,188 -0- 842,188
5.896%, 4/01/37 (b) 2,780 -0- 2,851,365 2,851,365
Series 2005
4.182%, 9/01/35 (b) 442 -0- 441,854 441,854
4.688%, 5/01/35 (b) 830 -0- 828,895 828,895
4.78%, 7/01/35 (b) 1,403 -0- 1,403,918 1,403,918
4.83%, 7/01/35 (b) 717 -0- 715,869 715,869
6.03%, 1/01/36 (b) 1,143 -0- 1,168,278 1,168,278
Series 2006
4.16%, 11/01/34 (b) 792 -0- 796,162 796,162
4.41%, 8/01/34 (b) 749 -0- 753,186 753,186
4.47%, 1/01/36 (b) 694 -0- 696,700 696,700
5.598%, 4/01/36 (b) 994 -0- 999,677 999,677
5.702%, 12/01/36 (b) 7,040 -0- 7,103,569 7,103,569
5.801%, 3/01/36 (b) 2,370 -0- 2,396,596 2,396,596
5.93%, 6/01/36 (b) 355 -0- 357,871 357,871
5.95%, 6/01/36 (b) 1,582 -0- 1,601,160 1,601,160
6.05%, 5/01/36 (b) 903 -0- 913,288 913,288
----------------- ----------------- -----------------
4,197,396 51,921,340 56,118,736
----------------- ----------------- -----------------
Non-Agency ARMS - 6.2%
Adjustable Rate Mortgage Trust
Series 2005-4, Class 3A1
5.003%, 8/25/35 (c) 2,754 -0- 2,714,899 2,714,899
BAFC 2007-c 1a3
5.763%, 5/20/47 (a) 4,515 565,214 3,951,501 4,516,715
Bear Stearns Alt-A Trust
Series 2006-3, Class 22A1
6.223%, 5/25/36 (c) 2,445 -0- 2,466,110 2,466,110
Series 2007-1, Class 21A1
5.75%, 1/25/47 (c) 2,767 -0- 2,784,543 2,784,543
Citigroup Mortgage Loan Trust, Inc.
Series 2005-2, Class 1A4
5.11%, 5/25/35 (a)(c) 3,484 639,291 2,803,350 3,442,641
Series 2006-AR1, Class 3A1
5.50%, 3/25/36 (a)(b) 791 794,068 -0- 794,068
Countrywide Home Loan Mortgage Pass
Series 2006-HYB4, Class 2A1
5.86%, 6/20/36 (c) 3,480 -0- 3,498,259 3,498,259
Indymac INDA Mortgage Loan Trust
Series 2006-AR2, Class 1A1
6.019%, 9/25/36 (c) 3,724 -0- 3,748,275 3,748,275
Indymac Index Mortgage Loan Trust
Series 2006-AR7, Class 4A1
6.253%, 5/25/36 (a)(c) 2,182 341,214 1,865,879 2,207,093
JP Morgan Alternative Loan Trust
Series 2006-A2, Class 4A1
6.399%, 5/25/36 (c) 2,662 -0- 2,694,069 2,694,069
Series 2006-A3, Class 2A1
6.072%, 7/25/36 (c) 2,536 -0- 2,555,951 2,555,951
Series 2006-A4, Class A1
5.95%, 9/25/36 (c) 2,715 -0- 2,747,398 2,747,398
JP Morgan Mortgage Trust
Series 2006-A4, Class 1A1
5.862%, 6/25/36 (c) 2,641 -0- 2,657,669 2,657,669
Residential Funding Mortgage Securities, Inc.
Series 2005-SA3, Class 3A
5.236%, 8/25/35 (a)(c) 3,250 422,442 2,813,300 3,235,742
Structured Asset Securities Corp.
Series 2003-6A, Class B3
5.425%, 3/25/33 (c) 1,849 -0- 1,809,165 1,809,165
----------------- ----------------- -----------------
2,762,229 39,110,368 41,872,597
----------------- ----------------- -----------------
Fixed Rate 15-Year - 2.1%
Federal Home Loan Mortgage Corp.
Series 2006
5.00%, 4/01/21 (a) 888 876,296 -0- 876,296
Federal National Mortgage Association
Series 2005
4.50%, 4/01/20 - 12/01/20 (a) 2,890 2,798,851 -0- 2,798,851
5.00%, 4/01/19 - 9/01/20 (a) 2,366 2,339,395 -0- 2,339,395
Series 2006
4.50%, 1/01/21 (a) 702 679,617 -0- 679,617
Government National Mortgage Association
Series 1997
8.00%, 3/15/12 2,144 -0- 2,198,691 2,198,691
Series 2001
7.50%, 12/15/14 5,240 -0- 5,406,383 5,406,383
----------------- ----------------- -----------------
6,694,159 7,605,074 14,299,233
----------------- ----------------- -----------------
Total Mortgage Pass-Thru's
(cost $340,231,799) 53,089,545 287,687,251 340,776,796
----------------- ----------------- -----------------
U.S. TREASURIES - 27.9%
U.S. Treasury Bonds
4.50%, 2/15/36 (a) 1,475 1,398,714 -0- 1,398,714
6.25%, 8/15/23 (d) 18,000 -0- 20,754,846 20,754,846
6.625%, 2/15/27 (d) 23,400 -0- 28,494,976 28,494,976
7.125%, 2/15/23 (d) 20,000 -0- 24,923,440 24,923,440
7.50%, 11/15/16 (d) 19,500 -0- 23,728,302 23,728,302
8.75%, 5/15/17 5,340 -0- 7,067,576 7,067,576
11.25%, 2/15/15 (d) 20,000 -0- 28,600,000 28,600,000
U.S. Treasury Notes
4.00%, 3/15/10 5,000 -0- 4,929,885 4,929,885
4.50%, 11/15/15 (d) 18,560 -0- 18,412,095 18,412,095
4.625%, 11/15/16 (d) 7,238 -0- 7,233,476 7,233,476
4.875%, 5/31/11 (a) 400 405,391 -0- 405,391
5.125%, 6/30/11 - 5/15/16 (d) 20,665 -0- 21,195,508 21,195,508
----------------- ----------------- -----------------
Total U.S. Treasuries
(cost $181,800,266) 1,804,105 185,340,104 187,144,209
----------------- ----------------- -----------------
MORTGAGE CMO'S - 7.4%
Non-Agency Fixed Rate - 4.1%
Countrywide Alternative Loan Trust
Series 2005-59, Class 2X
1.879%, 11/20/35 (e) 12,514 -0- 439,622 439,622
Series 2006-J8, Class A2
6.00%, 2/25/37 (a) 3,355 569,606 2,804,951 3,374,557
Greenpoint Mortgage Funding Trust
Series 2005-AR5, Class 4X1
1.028%, 11/25/45 (e) 13,621 -0- 238,361 238,361
Series 2005-AR5, Class 4X2
1.00%, 11/25/45 (e) 7,831 -0- 101,566 101,566
Merrill Lynch Mortgage Investors, Inc.
Series 2005-A9, Class 2A1A
5.159%, 12/25/35 (c) 2,660 -0- 2,637,501 2,637,501
Morgan Stanley Mortgage Loan Trust
Series 2006-11, Class 1A2
6.354%, 8/25/36 (a)(c) 375 376,384 -0- 376,384
Residential Accredit Loans, Inc.
Series 2007-QS1, Class 1A1
6.00%, 1/25/37 (a) 3,300 424,870 2,896,839 3,321,709
Residential Asset Mortgage Products, Inc.
Series 2004-SL2, Class A2
6.50%, 10/25/31 3,887 -0- 3,925,335 3,925,335
Series 2004-SL4, Class A4
7.00%, 7/25/32 1,343 -0- 1,373,443 1,373,443
Residential Asset Securitization Trust
Series 2003-A15, Class B2
5.582%, 2/25/34 (c) 1,699 -0- 1,617,847 1,617,847
Structured Asset Mortgage Investments, Inc.
Series 2005-AR7, Class 5X1
1.42%, 3/25/46 (e) 4,181 -0- 112,372 112,372
Structured Asset Securities Corp.
Series 2002-3, Class B3
6.50%, 3/25/32 3,324 -0- 3,288,976 3,288,976
Series 2006-RM1, Class AIO
5.00%, 8/25/46 (e)(f) 4,588 -0- 994,974 994,974
Washington Mutual Mortgage Pass Through
5.746%, 4/25/37 2,633 -0- 2,632,984 2,632,984
Wells Fargo Mortgage Backed Securities Trust
Series 2006-AR11, Class A4
5.526%, 8/25/36 (c) 2,330 -0- 2,322,813 2,322,813
----------------- ----------------- -----------------
1,370,860 25,387,584 26,758,444
----------------- ----------------- -----------------
Agency Fixed Rate - 1.8%
Federal National Mortgage Association
Series 2003-334, Class 22
5.00%, 2/01/18 (e) 1,805 -0- 268,544 268,544
Series 2003-337, Class 2
5.00%, 7/01/33 (e) 8,520 -0- 1,970,212 1,970,212
Series 2003-339, Class 24
5.00%, 7/01/18 (e) 5,998 -0- 890,574 890,574
Series 2003-339, Class 25
5.00%, 7/01/18 (e) 2,813 -0- 421,212 421,212
Series 2003-339, Class 26
5.00%, 7/01/18 (e) 2,310 -0- 349,506 349,506
Series 2004-351, Class 27
5.00%, 4/01/19 (e) 1,004 -0- 156,983 156,983
Series 2004-353, Class 2
5.00%, 8/01/34 (e) 5,090 -0- 1,196,364 1,196,364
Series 2005-357, Class 2
5.00%, 3/01/35 (e) 12,030 -0- 2,864,681 2,864,681
Series 2006-370, Class 2
6.00%, 5/25/36 (e) 2,071 -0- 442,030 442,030
Federal Home Loan Mortgage Corp.
Series 2004-227, Class IO
5.00%, 12/01/34 (e) 4,261 -0- 1,022,604 1,022,604
Series 2005-232, Class IO
5.00%, 8/01/35 (e) 11,672 -0- 2,727,615 2,727,615
----------------- -----------------
12,310,325 12,310,325
----------------- -----------------
Non-Agency Adjustable Rate - 1.5%
Countrywide Alternative Loan Trust
Series 2005-62, Class 2A1
6.014%, 12/25/35 (a)(b) 265 264,371 -0- 264,371
Series 2007-OA3, Class M1
5.63%, 4/25/47 (a)(b) 180 178,285 -0- 178,285
Series 2006-OA14, Class 3A1
5.833%, 11/25/46 (b) 2,929 -0- 2,927,459 2,927,459
Greenpoint Mortgage Funding Trust
Series 2005-AR5, Class M2
5.97%, 11/25/45 (b) 999 -0- 1,005,949 1,005,949
Series 2006-AR2, Class 4A1
6.959%, 3/25/36 (b) 2,992 -0- 3,065,391 3,065,391
Washington Mutual, Inc.
Series 2005-AR2, Class 2A22
5.54%, 1/25/45 (a)(b) 56 55,859 -0- 55,859
Series 2007-OA1, Class A1A
5.683%, 2/25/47 (b) 2,753 -0- 2,752,769 2,752,769
----------------- ----------------- -----------------
498,515 9,751,568 10,250,083
----------------- ----------------- -----------------
Agency Adjustable Rate - 0.0%
Fannie Mae Grantor Trust
Series 2004-T5, Class AB4
5.59%, 5/28/35 (a)(b) 65 65,371 -0- 65,371
----------------- ----------------- -----------------
Total Mortgage CMO's
(cost $49,641,964) 1,934,746 47,449,477 49,384,223
----------------- ----------------- -----------------
COMMERCIAL MORTGAGE-BACKED SECURITIES - 4.2%
Non-Agency Fixed Rate CMBS - 4.2%
Banc of America Commercial Mortgage, Inc.
Series 2001-PB1, Class A2
5.787%, 5/11/35 (a) 305 310,953 -0- 310,953
Series 2004-4, Class A3
4.128%, 7/10/42 (a) 365 356,664 -0- 356,664
Series 2004-6, Class A2
4.161%, 12/10/42 (a) 480 468,624 -0- 468,624
Bear Stearns Commercial Mortgage
Securities, Inc.
Series 2005-T18, Class A4
4.933%, 2/13/42 (a)(c) 610 594,487 -0- 594,487
Citigroup Commercial Mortgage Trust
Series 2004-C1, Class A4
5.529%, 4/15/40 (a)(c) 2,600 567,271 2,066,486 2,633,757
Credit Suisse Mortgage Capital Certificates
Series 2006-C3, Class A3
6.022%, 6/15/38 (a)(c) 555 574,990 -0- 574,990
Credit Suisse First Boston Mortgage
Securities Corp.
Series 2003-CK2, Class A2
3.861%, 3/15/36 (a) 316 310,638 -0- 310,638
Series 2004-C1, Class A4
4.75%, 1/15/37 (a) 895 174,762 694,194 868,956
Series 2005-C1, Class A4
5.014%, 2/15/38 (a)(c) 534 521,969 -0- 521,969
GE Capital Commercial Mortgage Corp.
Series 2005-C3, Class A3FX
4.863%, 7/10/45 (a) 585 579,513 -0- 579,513
Greenwich Capital Commercial Funding
Corp.
Series 2003-C1, Class A4
4.111%, 7/05/35 (a) 388 366,208 -0- 366,208
Series 2005-GG3, Class A2
4.305%, 8/10/42 (a) 642 628,290 -0- 628,290
GS Mortgage Securities Corp. II
Series 2004-GG2, Class A6
5.396%, 8/10/38 (a)(c) 375 377,152 -0- 377,152
JP Morgan Chase Commercial Mortgage
Securities Corp.
Series 2005-LDP1, Class A4
5.038%, 3/15/46 (a)(c) 649 637,240 -0- 637,240
Series 2005-LDP3, Class A2
4.851%, 8/15/42 (a) 515 509,450 -0- 509,450
Series 2005-LDP4, Class A2
4.79%, 10/15/42 (a) 365 360,429 -0- 360,429
Series 2006-CB14, Class A4
5.481%, 12/12/44 (a)(c) 250 252,226 -0- 252,226
Series 2006-CB15, Class A4
5.814%, 6/12/43 (a)(c) 375 386,104 -0- 386,104
LB-UBS Commercial Mortgage Trust
Series 2003-C3, Class A4
4.166%, 5/15/32 (a) 555 525,026 -0- 525,026
Series 2004-C4, Class A4
5.303%, 6/15/29 (a)(c) 195 197,146 -0- 197,146
Series 2004-C8, Class A2
4.201%, 12/15/29 (a) 381 372,158 -0- 372,158
Series 2005-C1, Class A4
4.742%, 2/15/30 (a) 426 411,209 -0- 411,209
Series 2005-C7, Class A4
5.197%, 11/15/30 (a)(c) 435 430,711 -0- 430,711
Series 2004-C2, Class A4
4.367%, 3/15/36 1,700 -0- 1,613,017 1,613,017
Series 2005-C7, Class XCL
0.096%, 11/15/40 (c)(e)(f) 122,043 -0- 1,134,999 1,134,999
Series 2006-C6, Class XCL
0.078%, 9/15/39 (c)(e)(f) 77,285 -0- 1,493,914 1,493,914
Merrill Lynch Mortgage Trust
Series 2005-CKI1, Class A6
5.417%, 11/12/37 (a)(c) 360 358,842 -0- 358,842
Series 2005-MKB2, Class A2
4.806%, 9/12/42 (a) 785 777,061 -0- 777,061
Series 2004-BPC1, Class A5
4.855%, 10/12/41 (c) 1,890 -0- 1,837,328 1,837,328
Series 2004-KEY2, Class A4
4.864%, 8/12/39 (c) 2,420 -0- 2,355,773 2,355,773
Merrill Lynch/Countrywide Commercial
Mortgage Trust
Series 2006-2, Class A4
6.105%, 6/12/46 (a)(c) 370 385,505 -0- 385,505
Morgan Stanley Capital I
Series 2005-HQ5, Class A4
5.168%, 1/14/42 (a) 944 934,849 -0- 934,849
Series 2005-T17, Class A5
4.78%, 12/13/41 (a) 405 391,589 -0- 391,589
Mortgage Capital Funding, Inc.
Series 1996-MC2, Class X
2.31%, 12/21/26 (c)(e) 312 -0- 13 13
Prudential Securities Secured Financing
Corp.
Series 1999-NRF1, Class AEC
0.954%, 10/15/18 (c)(e)(f) 233,790 -0- 4,201,211 4,201,211
----------------- ----------------- -----------------
Total Commercial Mortgage-Backed
Securities
(cost $29,347,936) 12,761,066 15,396,935 28,158,001
----------------- ----------------- -----------------
ASSET-BACKED SECURITIES - 2.7%
Home Equity Loans - Floating Rate - 1.4%
Asset Backed Funding Certificates
Series 2003-WF1, Class A2
6.07%, 12/25/32 (a)(b) 169 169,524 -0- 169,524
Bear Stearns Asset Backed Securities, Inc.
Series 2005-SD1, Class 1A1
5.47%, 4/25/22 (a)(b) 65 64,741 -0- 64,741
BNC Mortgage Loan Trust
Series 2007-1, Class M1
5.56%, 3/25/37 (a)(b) 300 298,428 -0- 298,428
GE-WMC Mortgage Securities LLC
Series 2005-2, Class A2B
5.49%, 12/25/35 (a)(b) 365 365,057 -0- 365,057
HFC Home Equity Loan Asset Backed
Certificates
Series 2005-3, Class A1
5.58%, 1/20/35 (a)(b) 256 256,056 -0- 256,056
HSI Asset Securitization Corp. Trust
Series 2006-OPT2, Class 2A1
5.40%, 1/25/36 (a)(b) 153 152,995 -0- 152,995
Series 2006-OPT2, Class M2
5.71%, 1/25/36 (a)(b) 205 204,233 -0- 204,233
Household Home Equity Loan
5.70%, 3/20/36 1,250 -0- 1,250,000 1,250,000
6.87%, 8/25/37 500 -0- 500,000 500,000
Series 2007-2, Class M1
5.68%, 5/25/37 1,000 -0- 1,000,060 1,000,060
Lehman XS Trust
Series 2005-5N, Class M2
5.98%, 11/25/35 (b) 1,000 -0- 1,003,910 1,003,910
Series 2006-18N, Class M2
5.73%, 12/25/36 (b) 3,000 -0- 2,979,930 2,979,930
RAAC Series
Series 2006-SP3, Class A1
5.40%, 8/25/36 (a)(b) 204 203,708 -0- 203,708
Residential Asset Mortgage Products, Inc.
Series 2005-RS3, Class AIA2
5.49%, 3/25/35 (a)(b) 213 213,455 -0- 213,455
Saxon Asset Securities Trust
Series 2005-4, Class A2B
5.50%, 11/25/37 (a)(b) 369 368,602 -0- 368,602
----------------- ----------------- -----------------
2,296,799 6,733,900 9,030,699
----------------- ----------------- -----------------
Home Equity Loans - Fixed Rate - 0.4%
Citifinancial Mortgage Securities, Inc.
Series 2003-1, Class AFPT
3.36%, 1/25/33 (a)(g) 150 142,898 -0- 142,898
Countrywide Asset-Backed Certificates
Series 2004-2, Class N1
5.00%, 2/25/35 (f) 66 -0- 65,288 65,288
Series 2007-S1, Class A3
5.81%, 2/25/37 (a) 600 601,110 -0- 601,110
Credit-Based Asset Servicing and
Securities, Inc.
Series 2003-CB1, Class AF
3.45%, 1/25/33 (a)(g) 316 307,158 -0- 307,158
Series 2005-CB7, Class AF2
5.147%, 11/25/35 (a)(e) 330 327,834 -0- 327,834
Home Equity Mortgage Trust
Series 2006-1, Class A2
5.30%, 5/25/36 (a)(g) 160 159,550 -0- 159,550
Nationstar Nim Ltd.
Series 2007, Class A
9.97%, 3/25/37 (f) 400 -0- 400,000 400,000
Residential Funding Mortgage Securities II,
Inc.
Series 2005-HI2, Class A3
4.46%, 5/25/35 (a) 285 281,616 -0- 281,616
----------------- ----------------- -----------------
-- 1,820,166 465,288 2,285,454
----------------- ----------------- -----------------
Other - Fixed Rate - 0.5%
DB Master Finance, LLC
Series 2006-1, Class A2
5.779%, 6/20/31 (a)(f) 1,495 101,715 1,418,924 1,520,639
Government National Mortgage Association
Series 2006-32, Class XM
0.615%, 11/16/45 (c) 5,781 -0- 310,289 310,289
Residential Asset Mortgage Products, Inc.
Series 2004-SL3, Class A3
7.50%, 12/25/31 1,165 -0- 1,175,979 1,175,979
----------------- ----------------- -----------------
101,715 2,905,192 3,006,907
----------------- ----------------- -----------------
Other - Floating Rate - 0.4%
Government National Mortgage Association
Series 2006-39, Class IO
1.114%, 7/16/46 (c)(e) 24,086 -0- 1,226,221 1,226,221
Libertas Preferred Funding Ltd.
Series 2007-3A, Class 2
6.005%, 4/09/47 (a)(b)(f) 1,770 412,654 1,326,388 1,739,042
----------------- ----------------- -----------------
412,654 2,552,609 2,965,263
----------------- ----------------- -----------------
Autos - Fixed Rate - 0.0%
Capital Auto Receivables Asset Trust
Series 2005-SN1A, Class A3A
4.10%, 6/15/08 (a) 200 199,192 -0- 199,192
Capital One Prime Auto Receivables Trust
Series 2005-1, Class A3
4.32%, 8/15/09 (a) 406 404,390 -0- 404,390
----------------- ----------------- -----------------
603,582 -0- 603,582
Total Asset-Backed Securities
----------------- ----------------- -----------------
(cost $18,007,909) 5,234,916 12,656,989 17,891,905
----------------- ----------------- -----------------
CORPORATES - INVESTMENT GRADES - 2.6%
Industrial - 1.6%
Basic - 0.1%
The Dow Chemical Co.
7.375%, 11/01/29 (a) 20 22,283 -0- 22,283
International Paper Co.
5.30%, 4/01/15 (a) 235 226,243 -0- 226,243
International Steel Group, Inc.
6.50%, 4/15/14 (a) 150 156,819 -0- 156,819
Ispat Inland ULC
9.75%, 4/01/14 (a) 118 131,410 -0- 131,410
Lubrizol Corp.
4.625%, 10/01/09 (a) 150 147,909 -0- 147,909
Westvaco Corp.
8.20%, 1/15/30 (a) 85 93,034 -0- 93,034
Weyerhaeuser Co.
5.95%, 11/01/08 (a) 202 203,755 -0- 203,755
----------------- ----------------- -----------------
981,453 -0- 981,453
----------------- ----------------- -----------------
Capital Goods - 0.1%
Hutchison Whampoa International, Ltd.
7.45%, 11/24/33 (a)(f) 216 251,120 -0- 251,120
Textron Financial Corp.
4.125%, 3/03/08 (a) 160 158,471 -0- 158,471
Tyco International Group, SA
6.00%, 11/15/13 (a) 195 204,894 -0- 204,894
Waste Management, Inc.
6.875%, 5/15/09 (a) 250 257,894 -0- 257,894
----------------- ----------------- -----------------
872,379 -0- 872,379
----------------- ----------------- -----------------
Communications - Media - 0.3%
British Sky Broadcasting Group PLC
6.875%, 2/23/09 (a) 86 88,355 -0- 88,355
BSKYB Finance UK PLC
5.625%, 10/15/15 (a)(f) 270 268,112 -0- 268,112
Comcast Cable Communications Holdings, Inc.
9.455%, 11/15/22 (a) 174 229,458 -0- 229,458
Comcast Cable Communications, Inc.
6.875%, 6/15/09 (a) 287 296,792 -0- 296,792
Comcast Corp.
5.50%, 3/15/11 (a) 313 317,038 -0- 317,038
News America, Inc.
6.55%, 3/15/33 (a) 142 143,202 -0- 143,202
RR Donnelley & Sons Co.
4.95%, 4/01/14 (a) 85 78,663 -0- 78,663
Time Warner Entertainment Co.
8.375%, 3/15/23 (a) 325 387,107 -0- 387,107
WPP Finance Corp.
5.875%, 6/15/14 (a) 149 151,105 -0- 151,105
----------------- ----------------- -----------------
1,959,832 -0- 1,959,832
----------------- ----------------- -----------------
Communications - Telecommunications - 0.6%
AT&T Corp.
8.00%, 11/15/31 (a) 80 100,241 -0- 100,241
British Telecommunications PLC
8.625%, 12/15/10 (a) 524 584,513 -0- 584,513
CenturyTel, Inc.
5.00%, 2/15/15 (a) 236 221,752 -0- 221,752
Series G
6.875%, 1/15/28 (a) 195 193,718 -0- 193,718
Embarq Corp.
6.738%, 6/01/13 (a) 25 25,983 -0- 25,983
7.082%, 6/01/16 (a) 355 366,764 -0- 366,764
New Cingular Wireless Services, Inc.
7.875%, 3/01/11 (a) 225 246,472 -0- 246,472
8.75%, 3/01/31 (a) 126 164,866 -0- 164,866
Sprint Capital Corp.
8.375%, 3/15/12 (a) 626 697,186 -0- 697,186
Telecom Italia Capital
4.00%, 11/15/08 (a) 170 166,908 -0- 166,908
6.375%, 11/15/33 (a) 110 106,996 -0- 106,996
Telecom Italia Capital, SA
4.00%, 1/15/10 (a) 575 557,594 -0- 557,594
Verizon Global Funding Corp.
4.90%, 9/15/15 (a) 180 172,943 -0- 172,943
Verizon New Jersey, Inc.
Series A
5.875%, 1/17/12 (a) 220 224,582 -0- 224,582
Vodafone Group PLC
5.50%, 6/15/11 (a) 295 298,376 -0- 298,376
----------------- ----------------- -----------------
4,128,894 -0- 4,128,894
----------------- ----------------- -----------------
Consumer Cyclical - Automotive - 0.0%
DaimlerChrysler North America
4.875%, 6/15/10 (a) 137 135,717 -0- 135,717
----------------- ----------------- -----------------
Consumer Cyclical - Other - 0.1%
Centex Corp.
5.45%, 8/15/12 (a) 79 76,116 -0- 76,116
Starwood Hotels & Resorts Worldwide, Inc.
7.375%, 11/15/15 (a) 224 231,205 -0- 231,205
7.875%, 5/01/12 (a) 235 252,039 -0- 252,039
Toll Brothers Finance Corp.
6.875%, 11/15/12 (a) 120 123,178 -0- 123,178
----------------- ----------------- -----------------
682,538 -0- 682,538
----------------- ----------------- -----------------
Consumer Non-Cyclical - 0.2%
Altria Group, Inc.
7.75%, 1/15/27 (a) 220 263,213 -0- 263,213
Cadbury Schweppes US Finance LLC
5.125%, 10/01/13 (a)(f) 310 302,125 -0- 302,125
ConAgra Foods, Inc.
7.875%, 9/15/10 (a) 120 129,834 -0- 129,834
Safeway, Inc.
4.125%, 11/01/08 (a) 96 94,471 -0- 94,471
6.50%, 3/01/11 (a) 82 85,215 -0- 85,215
Wyeth
5.50%, 2/01/14 (a) 233 235,619 -0- 235,619
----------------- ----------------- -----------------
1,110,477 -0- 1,110,477
----------------- ----------------- -----------------
Energy - 0.0%
Amerada Hess Corp.
7.875%, 10/01/29 (a) 98 115,073 -0- 115,073
----------------- ----------------- -----------------
Technology - 0.2%
Cisco Systems, Inc.
5.25%, 2/22/11 (a) 120 120,857 -0- 120,857
Electronic Data Systems Corp.
Series B
6.50%, 8/01/13 (a) 357 364,229 -0- 364,229
IBM Corp.
4.375%, 6/01/09 (a) 75 74,141 -0- 74,141
Motorola, Inc.
6.50%, 9/01/25 (a) 165 162,999 -0- 162,999
7.50%, 5/15/25 (a) 30 32,875 -0- 32,875
7.625%, 11/15/10 (a) 28 29,964 -0- 29,964
Oracle Corp.
5.25%, 1/15/16 (a) 280 276,137 -0- 276,137
----------------- ----------------- -----------------
1,061,202 -0- 1,061,202
----------------- ----------------- -----------------
11,047,565 -0- 11,047,565
----------------- ----------------- -----------------
Financial Institutions - 0.6%
Banking - 0.5%
Bank of Tokyo - Mitsubishi UFJ
7.40%, 6/15/11 (a) 100 108,392 -0- 108,392
Barclays Bank PLC
8.55%, 6/15/11 (a)(c)(f) 339 380,126 -0- 380,126
BOI Capital Funding Number 2
5.571%, 2/01/16 (a)(c)(f) 115 113,208 -0- 113,208
Huntington National Bank
4.375%, 1/15/10 (a) 183 178,876 -0- 178,876
MUFG Capital Finance 1 Ltd.
6.346%, 7/25/16 (a)(c) 115 117,454 -0- 117,454
RBS Capital Trust III
5.512%, 9/29/49 (a)(c) 358 352,686 -0- 352,686
Resona Preferred Global Securities
7.191%, 7/30/15 (a)(c)(f) 176 186,046 -0- 186,046
Sumitomo Mitsui Banking Corp.
5.625%, 10/15/15 (a)(c)(f) 107 105,550 -0- 105,550
UBS Preferred Funding Trust I
8.622%, 10/01/10 (a)(c) 230 253,872 -0- 253,872
UFJ Finance Aruba AEC
6.75%, 7/15/13 (a) 172 185,387 -0- 185,387
Wachovia Capital Trust III
5.80%, 3/15/11 (a)(c) 235 238,502 -0- 238,502
Washington Mutual, Inc.
4.00%, 1/15/09 (a) 400 391,898 -0- 391,898
Wells Fargo & Co.
4.20%, 1/15/10 (a) 457 448,426 -0- 448,426
Zions Bancorporation
5.50%, 11/16/15 (a) 170 168,544 -0- 168,544
----------------- ----------------- -----------------
3,228,967 -0- 3,228,967
----------------- ----------------- -----------------
Finance - 0.1%
American General Finance Corp.
4.625%, 5/15/09 (a) 530 524,584 -0- 524,584
iStar Financial, Inc.
5.15%, 3/01/12 (a) 146 143,031 -0- 143,031
----------------- ----------------- -----------------
667,615 -0- 667,615
----------------- ----------------- -----------------
Insurance - 0.0%
Assurant, Inc.
5.625%, 2/15/14 (a) 92 92,275 -0- 92,275
Humana, Inc.
6.30%, 8/01/18 (a) 166 169,330 -0- 169,330
Liberty Mutual Group, Inc.
5.75%, 3/15/14 (a)(f) 167 166,858 -0- 166,858
WellPoint, Inc.
3.75%, 12/14/07 (a) 73 72,249 -0- 72,249
----------------- ----------------- -----------------
500,712 -0- 500,712
----------------- ----------------- -----------------
4,397,294 -0- 4,397,294
----------------- ----------------- -----------------
Utility - 0.4%
Electric - 0.4%
Carolina Power & Light Co.
6.50%, 7/15/12 (a) 345 365,720 -0- 365,720
Consumers Energy Co.
Series C
4.25%, 4/15/08 (a) 116 114,779 -0- 114,779
Exelon Corp.
6.75%, 5/01/11 (a) 280 292,847 -0- 292,847
FirstEnergy Corp.
Series C
7.375%, 11/15/31 (a) 279 320,276 -0- 320,276
MidAmerican Energy Holdings Co.
5.875%, 10/01/12 (a) 162 167,276 -0- 167,276
Nisource Finance Corp.
7.875%, 11/15/10 (a) 154 167,099 -0- 167,099
Progress Energy, Inc.
7.10%, 3/01/11 (a) 109 116,421 -0- 116,421
Public Service Company of Colorado
7.875%, 10/01/12 (a) 176 198,069 -0- 198,069
SPI Electricity & Gas Australia Holdings
Pty Ltd.
6.15%, 11/15/13 (a)(f) 283 292,505 -0- 292,505
----------------- ----------------- -----------------
2,034,992 -0- 2,034,992
----------------- ----------------- -----------------
Natural Gas - 0.0%
Duke Energy Field Services Corp.
7.875%, 8/16/10 (a) 94 101,300 -0- 101,300
Enterprise Products Operating L.P.
Series B
5.60%, 10/15/14 (a) 157 157,491 -0- 157,491
----------------- ----------------- -----------------
258,791 -0- 258,791
----------------- ----------------- -----------------
2,293,783 -0- 2,293,783
Total Corporates - Investment Grades
----------------- ----------------- -----------------
(cost $17,843,695) 17,738,642 -0- 17,738,642
----------------- ----------------- -----------------
GOVERNMENT-RELATED - SOVEREIGNS - 2.1%
Japan Government Two Year Bond
Series 253
0.80%, 2/15/09 (a) JPY 421,000 3,521,542 -0- 3,521,542
Series 283
1.80%, 9/20/16 (a) 140,000 1,196,270 -0- 1,196,270
Series 48
0.70%, 6/20/10 (a) 494,900 4,098,208 -0- 4,098,208
Mexican Bonos
Series M7
8.00%, 12/24/08 MXN 14,695 1,351,169 -0- 1,351,169
Series MI10
8.00%, 12/19/13 (a) 19,945 1,851,194 -0- 1,851,194
9.00%, 12/20/12 6,445 624,085 -0- 624,085
Government of Sweden
Series 1043
5.00%, 1/28/09 (a) SEK 8,505 1,290,846 -0- 1,290,846
----------------- ----------------- -----------------
Total Government-Related - Sovereigns
(cost $13,703,938) 13,933,314 -0- 13,933,314
----------------- ----------------- -----------------
GOVERNMENT-RELATED - U.S. AGENCIES - 1.2%
Agency Debentures - 1.2%
Federal Home Loan Mortgage Corp.
4.75%, 11/03/09 (g)
(cost $7,888,198) 7,860 -0- 7,847,235 7,847,235
----------------- ----------------- -----------------
GOVERNMENT-RELATED - NON-U.S.
ISSUERS - 0.5%
Sovereigns - 0.5%
United Mexican States
5.625%, 1/15/17 (a) 1,016 1,030,224 -0- 1,030,224
Russian Federation
Series REGS
7.50%, 3/31/30 (e)(f) 2,253 2,556,792 -0- 2,556,792
----------------- ----------------- -----------------
Total Government-Related -
Non-U.S. Issuers
(cost $3,464,471) 3,587,016 -0- 3,587,016
----------------- ----------------- -----------------
EMERGING MARKETS - NON-INVESTMENT
GRADES - 0.5%
Non Corporate Sectors - 0.5%
Sovereign - 0.5%
Republic of Brazil
8.25%, 1/20/34 (a) BRL 1,505 1,933,925 -0- 1,933,925
Republic of Panama
8.875%, 9/30/27 (a) 225 289,687 -0- 289,687
9.375%, 4/01/29 (a) 225 306,562 -0- 306,562
Republic of Peru
7.35%, 7/21/25 (a) 665 773,063 -0- 773,063
----------------- ----------------- -----------------
Total Emerging Markets -
Non-Investment Grades
(cost $2,901,882) 3,303,237 -0- 3,303,237
----------------- ----------------- -----------------
INFLATION-LINKED SECURITIES - 0.4%
Government of Japan CPI Linked Bond
Series 5
0.80%, 9/10/15
(cost $2,539,847) JPY 300,699 2,470,320 -0- 2,470,320
----------------- ----------------- -----------------
CORPORATES - NON-INVESTMENT GRADES - 0.2%
Industrial - 0.2%
Basic - 0.0%
Ineos Group Holdings PLC
8.50%, 2/15/16 (a)(f) 110 106,425 -0- 106,425
Packaging Corp. of America
5.75%, 8/01/13 (a) 196 194,233 -0- 194,233
----------------- ----------------- -----------------
300,658 -0- 300,658
----------------- ----------------- -----------------
Communications - Media - 0.0%
Cablevision Systems Corp.
Series B
8.00%, 4/15/12 (a) 105 107,625 -0- 107,625
Clear Channel Communications, Inc.
5.50%, 9/15/14 (a) 275 243,844 -0- 243,844
DIRECTV Holdings LLC
6.375%, 6/15/15 (a) 100 96,250 -0- 96,250
----------------- ----------------- -----------------
447,719 -0- 447,719
----------------- ----------------- -----------------
Communications - Telecommunications - 0.0%
Qwest Communications International, Inc.
7.50%, 2/15/14 (a) 60 61,950 -0- 61,950
Series B
7.50%, 2/15/14 (a) 35 36,137 -0- 36,137
Qwest Corp.
8.875%, 3/15/12 (a) 30 33,150 -0- 33,150
----------------- ----------------- -----------------
131,237 -0- 131,237
----------------- ----------------- -----------------
Consumer Cyclical - Other - 0.0%
MGM Mirage
8.375%, 2/01/11 (a) 95 100,819 -0- 100,819
----------------- ----------------- -----------------
Transportation - Services - 0.2%
Hertz Corp.
8.875%, 1/01/14 (a) 90 96,975 -0- 96,975
----------------- ----------------- -----------------
1,077,408 -0- 1,077,408
----------------- ----------------- -----------------
Utility - 0.0%
Electric - 0.0%
NRG Energy, Inc.
7.25%, 2/01/14 (a) 15 15,525 -0- 15,525
7.375%, 2/01/16 (a) 90 93,487 -0- 93,487
----------------- ----------------- -----------------
109,012 -0- 109,012
----------------- ----------------- -----------------
Natural Gas - 0.0%
Williams Cos, Inc.
7.875%, 9/01/21 (a) 95 105,213 -0- 105,213
----------------- ----------------- -----------------
214,225 -0- 214,225
----------------- ----------------- -----------------
Financial Institutions - 0.0%
Insurance - 0.0%
Liberty Mutual Group, Inc.
7.80%, 3/15/37 (a)(f) 165 166,010 -0- 166,010
----------------- ----------------- -----------------
Total Corporates - Non-Investment Grades
(cost $1,459,241) 1,457,643 -0- 1,457,643
----------------- ----------------- -----------------
SHORT-TERM INVESTMENTS - 3.1%
Investment Companies - 3.1%
AllianceBernstein Fixed-Income Shares, 20,767,225 10,227,898 10,539,327 20,767,225
Inc. - Prime STIF Portfolio (h)
Cash Equivalent - U.S. Government
Obligations - 0.0%
U.S. Treasury Bills
Zero Coupon, 5/03/07 (i) 250 -0- 249,931 249,931
Total Short-Term Investments
----------------- ----------------- -----------------
(cost $21,017,156) 10,227,898 10,789,258 21,017,156
----------------- ----------------- -----------------
Total Investments Before Security Lending
Collateral- 100.0%
(cost $689,848,302) 127,542,448 567,167,249 694,709,697
----------------- ----------------- -----------------
INVESTMENT OF CASH COLLATERAL FOR
SECURITIES LOANED - 25.8%
Short Terms - 25.8%
UBS Private Money Market Fund, LLC
(cost $173,187,175) 173,187,175 -0- 173,187,175 173,187,175
----------------- ----------------- -----------------
Total Investments - 129.5%
(cost $863,035,477) 127,542,448 740,354,424 867,896,872
Other assets less liabilities - (29.5)% (9,387,934) (188,457,603) (197,845,537)
----------------- ----------------- -----------------
Net Assets - 100.0% $ 118,154,514 $ 551,896,821 $ 670,051,335
----------------- ----------------- -----------------
FORWARD CURRENCY EXCHANGE CONTRACTS
Pro-Forma U.S.$ Pro-Forma
Contract Value on U.S.$ Value at Unrealized
Amount Origination April 30, Appreciation/
(000) Date 2007 (Depreciation)
- --------------------------------------------------------------------------------
Buy Contracts:
Mexican Peso
settling 5/02/07 42,709 $3,909,787 $3,899,206 $(10,581)
Sale Contracts:
Japanese Yen
settling 6/04/07 1,346,513 11,418,580 11,322,949 95,631
Mexican Peso
settling 5/02/07 42,709 3,859,614 3,899,206 (39,592)
Mexican Peso
settling 6/06/07 42,709 3,902,285 3,891,547 10,738
Swedish Krona
settling 5/30/07 9,473 1,406,434 1,416,215 (9,781)
FINANCIAL FUTURES CONTRACTS
Pro-Forma
Pro-Forma Value at Unrealized
Number of Expiration Original April 30, Appreciation/
Type Contracts Month Value 2007 (Depreciation)
- -------------------------------------------------------------------------------------------------------
Purchased Contracts
U.S. T-Bond Future 43 June 2007 $4,780,062 $4,805,250 $25,188
U.S. T-Note 10 Yr Future 20 June 2007 2,153,175 2,166,563 13,388
U.S. T-Note 2 Yr Future 386 June 2007 79,016,635 79,021,438 4,803
U.S. T-Note 5 Yr Future 145 June 2007 15,365,889 15,345,078 (20,811)
Sold Contracts
Japan Government Bonds 10 Yr Future 2 June 2007 2,250,714 2,248,985 $1,729
U.S. T-Note 5 Yr Future 15 June 2007 1,589,253 1,587,422 1,831
-----------
$26,128
INTEREST RATE SWAP TRANSACTIONS
Rate Type
Pro-Forma ----------------------------- Pro-Forma
Notional Payments Payments Unrealized
Swap Amount Termination made by received by Appreciation/
Counterparty (000) Date the Portfolio the Portfolio (Depreciation)
- -----------------------------------------------------------------------------------------
Lehman
Brothers $4,000 1/23/08 3 Month LIBOR 4.777% $28,683
Lehman
Brothers 2,000 12/04/11 3 Month LIBOR 4.850% 28,469
- ----------
* Principal amount of $241
(a) Position, or a portion thereof, has been segregated to collateralize
forward currency exchange contracts. The aggregate market value of these
securities amounted to $107,624,955.
(b) Floating Rate Security. Stated interest rate was in effect at April 30,
2007.
(c) Variable rate coupon, rate shown as of April 30, 2007.
(d) Represents entire or partial securities out on loan.
(e) IO - Interest Only
(f) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. These securities are considered liquid and may be resold in the
transactions exempt from registration, normally to qualified institutional
buyers. At April 30, 2007, the aggregate market value of these securities
amounted to $16,444,945 or 2.5% of net assets.
(g) Coupon rate adjusts periodically based upon a predetermined schedule.
Stated interest rate in effect at April 30, 2007.
(h) Investment in affiliated money market mutual fund.
(i) Position, or of a portion thereof, has been segregated to collateralize
margin requirements for open futures contracts. The aggregate market value
of these securities amounted to $249,931.
Currency Abbreviations:
BRL Brazilian Real
JPY Japanese Yen
MXN Mexican Peso
SEK Swedish Krona
Glossary:
LIBOR London Interbank Offered Rates
TBA To Be Announced
See notes to financial statements.
STATEMENT OF ASSETS AND LIABILITIES
PRO FORMA
ALLIANCEBERNSTEIN BOND FUND
INTERMEDIATE BOND PORTFOLIO AllianceBernstein Bond Fund Intermediate Bond Portfolio
April 30, 2007 (unaudited) AllianceBernstein Bond Fund U.S Government Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Pro-Forma
AllianceBernstein AllianceBernstein AllianceBernstein
Bond Fund Bond Fund Bond Fund
Intermediate U.S Government Intermediate
Bond Portfolio Portfolio* Adjustments Bond Portfolio
----------------- ----------------- ------------ -----------------
ASSETS
Investments in securities, at value
Unaffiliated issuers (cost $116,806,243 and
$725,462,009, respectively -- including
investments of cash collateral of securities
loaned of $173,187,175 and $0, respectively) $ 117,314,550 $ 729,815,097 $ -0- $ 847,129,647
Affiliated issuers (cost 10,227,898 and
$10,539,327, respectively) 10,227,898 10,539,327 -0- 20,767,225
Cash 56,347(a) 2,714,832(a) -0- 2,771,179
Interest receivable 900,522 5,460,013 -0- 6,360,535
Receivable for investments securities sold -0- 5,759,108 -0- 5,759,108
Receivable for capital stock sold 680,265 25,212 -0- 705,477
Unrealized appreciation of forward currency
exchange contracts 106,369 -0- -0- 106,369
Unrealized appreciation of swap contracts 57,152 -0- -0- 57,152
Receivable for variation margin on future
contracts 35,204 129,531 -0- 164,735
----------------- ----------------- ------------- -----------------
Total assets 129,378,307 754,443,120 -0- 883,821,427
----------------- ----------------- ------------- -----------------
LIABILITIES
Payable for collateral received on
securities loaned -0- 173,187,175 -0- 173,187,175
Payable for investment securities purchased 9,693,010 27,404,920 -0- 37,097,930
Payable for capital stock redeemed 1,213,115 494,291 -0- 1,707,406
Dividends payable 97,676 575,746 -0- 673,422
Unrealized depreciation of forward currency
exchange contracts 59,954 -0- -0- 59,954
Distribution fee payable 25,654 207,954 -0- 233,608
Advisory fee payable 10,905 204,915 -0- 215,820
Transfer Agent fee payable 10,476 206,654 -0- 217,130
Administrative fee payable -0- 32,086 -0- 32,086
Accrued expenses 113,003 232,558 -0- 345,561
----------------- ----------------- ------------- -----------------
Total liabilities 11,223,793 202,546,299 -0- 213,770,092
----------------- ----------------- ------------- -----------------
NET ASSETS $ 118,154,514 $ 551,896,821 $ -0- 670,051,335
================= ================= ============= =================
NET ASSET VALUE PER SHARE
Class A Shares
Net assets $ 44,573,939 $ 420,581,903 $ 465,155,842
----------------- ----------------- -----------------
Shares of capital stock outstanding 4,326,175 61,755,437 (20,924,901) 45,156,711
----------------- ----------------- ------------- -----------------
Net asset value and redemption price per share $ 10.30 $ 6.81 $ 10.30
----------------- ----------------- -----------------
Sales charge-4.25% of public offering price 0.46 0.30 0.46
Maximum offering price $ 10.76 $ 7.11 $ 10.76
----------------- ----------------- -----------------
Class B Shares
Net assets $ 25,734,681 $ 63,640,497 $ 89,375,178
----------------- ----------------- -----------------
Shares of capital stock outstanding 2,499,498 9,345,340 (3,166,528) 8,678,310
----------------- ----------------- ------------- -----------------
Net asset value and offering price per share $ 10.30 $ 6.81 $ 10.30
----------------- ----------------- -----------------
Class C Shares
Net assets $ 9,411,692 $ 61,993,678 $ 71,405,370
----------------- ----------------- -----------------
Shares of capital stock outstanding 915,601 9,089,724 (3,059,382) 6,945,943
----------------- ----------------- ------------- -----------------
Net asset value and offering price per share $ 10.28 $ 6.82 $ 10.28
----------------- ----------------- -----------------
Advisor Shares
Net assets $ 32,444,171 $ 5,558,827 $ 38,002,998
----------------- ----------------- -----------------
Shares of capital stock outstanding 3,149,078 814,956 (275,344) 3,688,690
----------------- ----------------- ------------- -----------------
Net asset value and offering price per share $ 10.30 $ 6.82 $ 10.30
----------------- ----------------- -----------------
Class R Shares
Net assets $ 636,340 $ 102,412 $ 738,752
----------------- ----------------- -----------------
Shares of capital stock outstanding 61,786 15,032 (5,094) 71,724
----------------- ----------------- ------------- -----------------
Net asset value and offering price per share $ 10.30 $ 6.81 $ 10.30
----------------- ----------------- -----------------
Class K Shares
Net assets $ 10,074 $ 9,804 $ 19,878
----------------- ----------------- -----------------
Shares of capital stock outstanding 977 1,440 (489) 1,928
----------------- ----------------- ------------- -----------------
Net asset value and offering price per share $ 10.31 $ 6.81 $ 10.31
----------------- ----------------- -----------------
Class I Shares
Net assets $ 5,343,617 $ 9,700 $ 5,353,317
----------------- ----------------- -----------------
Shares of capital stock outstanding 518,587 1,425 (483) 519,529
----------------- ----------------- ------------- -----------------
Net asset value and offering price per share $ 10.30 $ 6.81 $ 10.30
----------------- ----------------- -----------------
(a) An amount of $56,336 and $1,000, respectively has been segregated as
collateral for financial futures contracts outstanding at April 30, 2007.
* Does not include the cost of $467,000 for the repositioning of assets on
U.S. Government Portfolio.
- --------------------------------------------------------------------------------
See notes to Pro Forma AllianceBernstein Bond Fund Intermediate Bond Portfolio
financial statements.
STATEMENT OF OPERATIONS
PRO FORMA
ALLIANCEBERNSTEIN BOND FUND
INTERMEDIATE BOND PORTFOLIO AllianceBernstein Bond Fund Intermediate Bond Portfolio
Twelve Months Ended April 30, 2007 (unaudited) AllianceBernstein Bond Fund U.S Government Portfolio
- --------------------------------------------------------------------------------------------------------------------------------
Pro-Forma
AllianceBernstein AllianceBernstein AllianceBernstein
Bond Fund Bond Fund Bond Fund
Intermediate U.S Government Intermediate
Bond Portfolio Portfolio* Adjustments Bond Portfolio
------------------ ------------------ ------------------ ------------------
INVESTMENT INCOME
Interest
Unaffiliated issuers $ 6,029,383 $ 32,045,070 $ -0- $ 38,074,453
Affiliated issuers 184,690 515,511 -0- 700,201
------------------ ------------------ ------------------ ------------------
6,214,073 32,560,581 -0- 38,774,654
------------------ ------------------ ------------------ ------------------
EXPENSES
Advisory fee 550,939 2,638,033 (40,132) 3,148,840(a)
Distribution fee - Class A 132,971 1,346,548 (29,430) 1,450,089(b)
Distribution fee - Class B 306,445 800,732 -0- 1,107,177(c)
Distribution fee - Class C 119,575 655,388 -0- 774,963(c)
Distribution fee - Class R 340 258 -0- 598(d)
Distribution fee - Class K 24 25 -0- 49(e)
Transfer agency 178,442 811,770 346,296 1,336,508(f)
Custodian 156,797 154,675 (44,282) 267,190(f)
Audit and legal 103,258 134,851 (121,109) 117,000(f)
Administrative 96,000 97,892 (97,892) 96,000(f)
Registration fees 77,722 78,023 (63,965) 91,780(f)
Directors' fees 34,282 37,740 (37,817) 34,205(f)
Printing 11,905 88,070 78,025 178,000(f)
Miscellaneous 3,325 19,688 11,987 35,000(f)
------------------ ------------------ ------------------ ------------------
Total expenses before interest expense 1,772,025 6,863,693 1,681 8,637,399
Interest expense -0- 507,791 (507,791) 0
------------------ ------------------ ------------------ ------------------
Total expenses 1,772,025 7,371,484 (506,110) 8,637,399
Less: expenses offset agreement (see Note C) (13,247) (42,000) -0- (55,247)
Less: expenses waived and reimbursed by the
Adviser (see Note C) (506,098) -0- (949,842) (1,455,940)
------------------ ------------------ ------------------ ------------------
Net expenses 1,252,680 7,329,484 (1,455,952) 7,126,212
------------------ ------------------ ------------------ ------------------
Net investment income 4,961,393 25,231,097 1,455,952 31,648,442
------------------ ------------------ ------------------ ------------------
Realized And Unrealized Gain (Loss)
On Investments Transactions
Net realized gain (loss) on:
Investment transactions 336,273 (13,990,489) -0- (13,654,216)
Swap contracts (51,764) -0- -0- (51,764)
Futures contracts (66,165) 148,305 -0- 82,140
Written options -0- -0- -0- 0
Foreign currency transactions 649,256 -0- -0- 649,256
Net change in unrealized appreciation/
depreciation of:
Investments 2,305,906 23,568,212 -0- 25,874,118
Swap contracts 2,940 -0- -0- 2,940
Future contracts 81,477 (829,813) -0- (748,336)
Foreign currency denominated assets and
liabilities 494,812 -0- -0- 494,812
------------------ ------------------ ------------------ ------------------
Net gain on investment transactions 3,752,735 8,896,215 -0- 12,648,950
------------------ ------------------ ------------------ ------------------
Net Increase In Net Assets
From Operations $ 8,714,128 $ 34,127,312 $ 1,455,952 $ 44,297,392
================== ================== ================== ==================
- ----------
(a) Advisory fee based on an annualized rate of .45% of the first $2.5 billion
.40% of the next $2.5 billion and .35% in excess of $5 billion, of the
Portfolio's average daily net assets.
(b) Distribution fee based on annual rate of .30% of the total combined average
daily net assets.
(c) Distribution fee based on annual rate of 1.00% of the total combined
average daily net assets.
(d) Distribution fee based on annual rate of .50% of the total combined average
daily net assets.
(e) Distribution fee based on annual rate of .25% of the total combined average
daily net assets.
(f) Expenses are based on one Fund.
See notes to Pro Forma AllianceBernstein Bond Fund Intermediate Bond Portfolio
financial statements.
NOTES TO FINANCIAL STATEMENTS
PRO FORMA
ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO
April 30, 2007 (unaudited)
NOTE A: General
The Pro Forma AllianceBernstein Bond Fund Intermediate Bond Portfolio Financial
Statements give effect to the proposed acquisition (the "Acquisition") of the
assets and liabilities of AllianceBernstein Bond Fund U.S. Government Bond
Portfolio (the "Acquired Fund") by AllianceBernstein Bond Fund Intermediate Bond
Portfolio (the "Fund" or "Acquiring Fund") pursuant to the Agreement and Plan of
Reorganization. The Acquisition would be accomplished by a tax-free exchange of
the assets and liabilities of AllianceBernstein Bond Fund U.S. Government Bond
Portfolio for shares of the Fund. After the proposed acquisition, the tax
survivor for federal income tax purposes will be AllianceBernstein Bond Fund
U.S. Government Bond Portfolio.
AllianceBernstein Bond Fund, Inc. (the "Registrant") was incorporated under the
laws of the State of Maryland on July 1, 1999. The Fund is a series of the
AllianceBernstein Bond Fund, Inc., currently comprised of three portfolios: the
Corporate Bond Portfolio, the Intermediate Bond Portfolio and the U.S.
Government Portfolio. The Fund's unaudited Pro Forma Portfolio of Investments,
Statement of Assets and Liabilities and Statement of Operations are prepared as
though the Acquisition was effective for the period May 1, 2006 - April 30,
2007. You should read them in conjunction with the Fund's historical financial
statements, which are included in the Fund's Shareholder reports. The Fund's Pro
Forma Statement of Operations reflects the assumption that certain expenses
would be lower for the combined Fund as a result of the Acquisition. Each fund
will bear the expenses of the Acquisition on a relative net assets basis,
including the cost of proxy solicitation. Each will bear its own costs
associated with the disposition or acquisition of portfolio securities in
connection with the Acquisition.
NOTE B: Significant Accounting Policies
The Fund's Pro Forma Financial Statements have been prepared in conformity with
U.S. generally accepted accounting principles, which require management to make
certain estimates and assumptions that affect the reported amounts of assets and
liabilities in the financial statements and amounts of income and expenses
during the reporting period. Actual results could differ from those estimates.
1. Security Valuation
Portfolio securities are valued at their current market value determined on the
basis of market quotations or, if market quotations are not readily available or
are deemed unreliable, at "fair value" as determined in accordance with
procedures established by and under the general supervision of the Fund's Board
of Directors.
In general, the market value of securities which are readily available and
deemed reliable are determined as follows. Securities listed on a national
securities exchange (other than securities listed on the NASDAQ Stock Market,
Inc. ("NASDAQ")) or on a foreign securities exchange are valued at the last sale
price at the close of the exchange or foreign securities exchange. If there has
been no sale on such day, the securities are valued at the mean of the closing
bid and asked prices on such day. Securities listed on more than one exchange
are valued by reference to the principal exchange on which the securities are
traded; securities listed only on NASDAQ are valued in accordance with the
NASDAQ Official Closing Price; listed put or call options are valued at the last
sale price. If there has been no sale on that day, such securities will be
valued at the closing bid prices on that day; open futures contracts and options
thereon are valued using the closing settlement price or, in the absence of such
a price, the most recent quoted bid price. If there are no quotations available
for the day of valuation, the last available closing settlement price is used;
securities traded in the over-the-counter market, ("OTC") are valued at the mean
of the current bid and asked prices as reported by the National Quotation Bureau
or other comparable sources; U.S. government securities and other debt
instruments having 60 days or less remaining until maturity are valued at
amortized cost if their original maturity was 60 days or less; or by amortizing
their fair value as of the 61st day prior to maturity if their original term to
maturity exceeded 60 days; fixed-income securities, including mortgage backed
and asset backed securities, may be valued on the basis of prices provided by a
pricing service or at a price obtained from one or more of the major
broker/dealers. In cases where broker/dealer quotes are obtained,
AllianceBernstein L.P. (the "Adviser") may establish procedures whereby changes
in market yields or spreads are used to adjust, on a daily basis, a recently
obtained quoted price on a security; and OTC and other derivatives are valued on
the basis of a quoted bid price or spread from a major broker/dealer in such
security.
Securities for which market quotations are not readily available (including
restricted securities) or are deemed unreliable are valued at fair value.
Factors considered in making this determination may include, but are not limited
to, information obtained by contacting the issuer, analysts, analysis of the
issuer's financial statements or other available documents. In addition, the
Fund may use fair value pricing for securities primarily traded in non-U.S.
markets because most foreign markets close well before the Fund values its
securities at 4:00 p.m., Eastern Time. The earlier close of these foreign
markets gives rise to the possibility that significant events, including broad
market moves, may have occurred in the interim and may materially affect the
value of those securities.
2. Currency Translation
Assets and liabilities denominated in foreign currencies and commitments under
forward currency exchange contracts are translated into U.S. dollars at the mean
of the quoted bid and asked prices of such currencies against the U.S. dollar.
Purchases and sales of portfolio securities are translated into U.S. dollars at
the rates of exchange prevailing when such securities were acquired or sold.
Income and expenses are translated into U.S. dollars at rates of exchange
prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents foreign
exchange gains and losses from sales and maturities of foreign fixed income
investments, foreign currency exchange contracts, holding of foreign currencies,
currency gains or losses realized between the trade and settlement dates on
foreign investment transactions, and the difference between the amounts of
dividends, interest and foreign withholding taxes recorded on the Fund's books
and the U.S. dollar equivalent amounts actually received or paid. Net unrealized
currency gains and losses from valuing foreign currency denominated assets and
liabilities at period end exchange rates are reflected as a component of net
unrealized appreciation or depreciation of investments and foreign currency
denominated assets and liabilities.
3. Taxes
It is the Fund's 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. The Fund may be subject to taxes imposed by countries in which it
invests. Such taxes are generally based on income and/or capital gains earned or
repatriated. Taxes are accrued and applied to net investment income, net
realized gains and net unrealized appreciation/depreciation as such income
and/or gains are earned.
4. Investment Income and Investment Transactions
Interest income is accrued daily. Investment transactions are accounted for on
the trade date securities are purchased or sold. Investment gains and losses are
determined on the identified cost basis. The portfolio amortizes premiums and
accretes discounts as adjustments to interest income.
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 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. Dividends and Distributions
Dividends and distributions to shareholders, if any, are recorded on the
ex-dividend date. Income dividends and capital gains distributions are
determined in accordance with federal tax regulations and may differ from those
determined in accordance with U.S. generally accepted accounting principles. To
the extent these differences are permanent, such amounts are reclassified within
the capital accounts based on their federal tax basis treatment; temporary
differences do not require such reclassification.
NOTE C: Advisory Fee and Other Transactions with Affiliates
Under the terms of the investment advisory agreement, the Fund pays the Adviser
an advisory fee at an annual rate of .45% of the first $2.5 billion, .40% of the
next $2.5 billion and .35% in excess of $5 billion, of the Fund's average daily
net assets. Prior to September 7, 2004, the Fund paid the Adviser an advisory
fee at an annual rate of .55% of the Fund's average daily net assets. The fee is
accrued daily and paid monthly. Effective upon consummation of the merger, the
Adviser has agreed to waive its fees and bear certain expenses to the extent
necessary to limit total operating expenses on an annual basis .85%, 1.55%,
1.55%, .55%, 1.05%, .80% and .55% of the daily average net assets for the Class
A, Class B, Class C, Advisor Class, Class R, Class K and Class I shares,
respectively. Assuming the merger had been consummated prior to May 1, 2006, for
the twelve months ended April 30, 2007, such waiver would have amounted to
approximately $1,359,940.
Pursuant to the advisory agreement, the Fund may reimburse the Adviser for
certain legal and accounting services provided to the Fund by the Adviser. For
the twelve months ended April 30, 2007, the Adviser would have voluntarily
agreed to waive its fees for services. Such waiver would have amounted to
approximately $96,000.
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.
For the twelve months ended April 30, 2007, the Fund 's expenses would have been
reduced by $55,247 under an expense offset arrangement with ABIS.
AllianceBernstein Investments, Inc. (the "Distributor"), a wholly-owned
subsidiary of the Adviser, serves as the Distributor of the Fund's shares.
The Fund may invest in the AllianceBernstein Fixed-Income Shares, Inc. - Prime
STIF Portfolio and the AllianceBernstein Fixed-Income Shares, Inc. - Government
STIF Portfolio (collectively, the "STIF Portfolios"), open-end management
investment companies managed by the Adviser. The STIF Portfolios are offered as
cash management options to mutual funds, trusts, and other accounts managed by
the Adviser, and are not available for direct purchase by members of the public.
The STIF Portfolios pay no investment management fees.
NOTE D: 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. Under the
Agreement, the Fund pays distribution and servicing fees to the Distributor at
an annual rate of up to .30% of the Fund's average daily net assets attributable
to Class A shares, 1% of the average daily net assets attributable to both Class
B and Class C shares, .50% of the Fund's average daily net assets attributable
to Class R shares, and .25% of the Fund's 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 Agreement also provides that the Adviser may use
its own resources to finance the distribution of the Fund's shares.
NOTE E: Capital Stock
The pro-forma combining net asset value per share assumes the issuance of
Acquiring Fund shares to Acquired Fund shareholders in connection with the
proposed merger. The number of shares assumed to be issued is equal to the net
asset value per share of the Acquired Fund divided by the net asset value per
share of the Acquiring Fund as of April 30, 2007. The pro-forma number of shares
outstanding for the combined entity consists of the following at April, 30 2007.
Shares of Additional Shares Total Shares
Acquiring Fund Assumed Issued Outstanding
Class of Shares Pre-Combination with Merger Post-Combination
- ---------------- ---------------- ----------------- ----------------
Class A 4,326,175 40,830,536 45,156,711
Class B 2,499,498 6,178,812 8,678,310
Class C 915,601 6,030,342 6,945,943
Advisor Class 3,149,078 539,612 3,688,690
Class R 61,786 9,938 71,724
Class K 977 951 1,928
Class I 518,587 942 519,529
SK 00250 0455 795734
PART C
OTHER INFORMATION
ITEM 15. Indemnification.
It is the Registrant's policy to indemnify its directors and officers,
employees and other agents to the maximum extent permitted by Section
2-418 of the General Corporation Law of the State of Maryland and as
set forth in Article EIGHTH of Registrant's Articles of Amendment and
Restatement of Articles of Incorporation, filed as Exhibit (1) in
response to Item 16, Article IX of the Registrant's Amended and
Restated By-laws filed as Exhibit (2) in response to Item 16, and
Section 10(a) of the Distribution Services Agreement filed as Exhibit
(7)(a) in response to Item 16, all as set forth below.
The liability of the Registrant's directors and officers is dealt with
in Article EIGHTH of Registrant's Articles of Amendment and
Restatement of Articles of Incorporation, as set forth below. The
Investment Adviser's liability for any loss suffered by the Registrant
or its shareholders is set forth in Section 4 of the Investment
Advisory Contract filed as Exhibit (e) in response to Item 16, as set
forth below.
SECTION 2-418 OF THE MARYLAND GENERAL CORPORATION LAW READS AS
FOLLOWS:
2-418 INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND
AGENTS.--(a) In this section the following words have the meaning
indicated.
(1) "Directors" means any person who is or was a director of
a corporation and any person who, while a director of a
corporation, is or was serving at the request of the corporation
as a director, officer, partner, trustee, employee, or agent of
another foreign or domestic corporation, partnership, joint
venture, trust, other enterprise, or employee benefit plan.
(2) "Corporation" includes any domestic or foreign
predecessor entity of a corporation in a merger, consolidation,
or other transaction in which the predecessors existence ceased
upon consummation of the transaction.
(3) "Expenses" include attorneys fees.
(4) "Official capacity" means the following
(i) When used with respect to a director, the office of
director in the corporation; and
(ii) When used with respect to a person other than a
director as contemplated in subsection (j), the elective or
appointive office in the corporation held by the officer, or the
employment or agency relationship undertaken by the employee or
agent in behalf of the corporation.
(iii) "Official capacity" does not include service for
any other foreign or domestic corporation or any partnership,
joint venture, trust, other enterprise, or employee benefit plan.
(5) "Party" includes a person who was, is, or is threatened
to be made a named defendant or respondent in a proceeding.
(6) "Proceeding" means any threatened, pending or completed
action, suit or proceeding, whether civil, criminal,
administrative, or investigative.
(b)(1) A corporation may indemnify any director made a party
to any proceeding by reason of service in that capacity unless it
is established that:
(i) The act or omission of the director was material to the
cause of action adjudicated in the proceeding; and
1. Was committed in bad faith; or
2. Was the result of active and deliberate dishonesty; or
(ii) The director actually received an improper personal
benefit in money, property, or services; or
(iii) In the case of any criminal proceeding, the director
had reasonable cause to believe that the act or omission was
unlawful.
(2)(i) Indemnification may be against judgments, penalties,
fines, settlements, and reasonable expenses actually incurred by
the director in connection with the proceeding.
(ii) However, if the proceeding was one by or in the right
of the corporation, indemnification may not be made in respect of
any proceeding in which the director shall have been adjudged to
be liable to the corporation.
(3)(i) The termination of any proceeding by judgment, order
or settlement does not create a presumption that the director did
not meet the requisite standard of conduct set forth in this
subsection.
(ii) The termination of any proceeding by conviction,
or a plea of nolo contendere or its equivalent, or an entry of an
order of probation prior to judgment, creates a rebuttable
presumption that the director did not meet that standard of
conduct.
(4) A corporation may not indemnify a director of advance
expenses under this section for a proceeding brought by that
director against the corporation, except:
(i) For a proceeding brought to enforce indemnification
under this section; or
(ii) If the charter or bylaws of the corporation, a
resolution of the board of directors of the corporation, or an
agreement approved by the board of directors of the corporation
to which the corporation is a party expressly provide otherwise.
(c) A director may not be indemnified under subsection (b)
of this section in respect of any proceeding charging improper
personal benefit to the director, whether or not involving action
in the directors official capacity, in which the director was
adjudged to be liable on the basis that personal benefit was
improperly received.
(d) Unless limited by the charter:
(1) A director who has been successful, on the merits or
otherwise, in the defense of any proceeding referred to in
subsection (b) of this section shall be indemnified against
reasonable expenses incurred by the director in connection with
the proceeding.
(2) A court of appropriate jurisdiction upon application of
a director and such notice as the court shall require, may order
indemnification in the following circumstances:
(i) If it determines a director is entitled to
reimbursement under paragraph (1) of this subsection, the court
shall order indemnification, in which case the director shall be
entitled to recover the expenses of securing such reimbursement;
or
(ii) If it determines that the director is fairly and
reasonably entitled to indemnification in view of all the
relevant circumstances, whether or not the director has met the
standards of conduct set forth in subsection (b) of this section
or has been adjudged liable under the circumstances described in
subsection (c) of this section, the court may order such
indemnification as the court shall deem proper. However,
indemnification with respect to any proceeding by or in the right
of the corporation or in which liability shall have been adjudged
in the circumstances described in subsection (c) shall be limited
to expenses.
(3) A court of appropriate jurisdiction may be the same
court in which the proceeding involving the directors liability
took place.
(e)(1) Indemnification under subsection (b) of this section
may not be made by the corporation unless authorized for a
specific proceeding after a determination has been made that
indemnification of the director is permissible in the
circumstances because the director has met the standard of
conduct set forth in subsection (b) of this section.
(2) Such determination shall be made:
(i) By the board of directors by a majority vote of a
quorum consisting of directors not, at the time, parties to the
proceeding, or, if such a quorum cannot be obtained, then by a
majority vote of a committee of the board consisting solely of
two or more directors not, at the time, parties to such
proceeding and who were duly designated to act in the matter by a
majority vote of the full board in which the designated directors
who are parties may participate;
(ii) By special legal counsel selected by the board or
a committee of the board by vote as set forth in subparagraph (i)
of this paragraph, or, if the requisite quorum of the full board
cannot be obtained therefor and the committee cannot be
established, by a majority vote of the full board in which
directors who are parties may participate; or
(iii) By the stockholders.
(3) Authorization of indemnification and determination as to
reasonableness of expenses shall be made in the same manner as
the determination that indemnification is permissible. However,
if the determination that indemnification is permissible is made
by special legal counsel, authorization of indemnification and
determination as to reasonableness of expenses shall be made in
the manner specified in subparagraph (ii) of paragraph (2) of
this subsection for selection of such counsel.
(4) Shares held by directors who are parties to the
proceeding may not be voted on the subject matter under this
subsection.
(f)(1) Reasonable expenses incurred by a director who is a
party to a proceeding may be paid or reimbursed by the
corporation in advance of the final disposition of the
proceeding, upon receipt by the corporation of:
(i) A written affirmation by the director of the
directors good faith belief that the standard of conduct
necessary for indemnification by the corporation as authorized in
this section has been met; and
(ii) A written undertaking by or on behalf of the
director to repay the amount if it shall ultimately be determined
that the standard of conduct has not been met.
(2) The undertaking required by subparagraph (ii) of
paragraph (1) of this subsection shall be an unlimited general
obligation of the director but need not be secured and may be
accepted without reference to financial ability to make the
repayment.
(3) Payments under this subsection shall be made as provided
by the charter, bylaws, or contract or as specified in subsection
(e) of this section.
(g) The indemnification and advancement of expenses provided
or authorized by this section may not be deemed exclusive of any
other rights, by indemnification or otherwise, to which a
director may be entitled under the charter, the bylaws, a
resolution of stockholders or directors, an agreement or
otherwise, both as to action in an official capacity and as to
action in another capacity while holding such office.
(h) This section does not limit the corporations power to
pay or reimburse expenses incurred by a director in connection
with an appearance as a witness in a proceeding at a time when
the director has not been made a named defendant or respondent in
the proceeding.
(i) For purposes of this section:
(1) The corporation shall be deemed to have requested a
director to serve an employee benefit plan where the performance
of the directors duties to the corporation also imposes duties
on, or otherwise involves services by, the director to the plan
or participants or beneficiaries of the plan:
(2) Excise taxes assessed on a director with respect to an
employee benefit plan pursuant to applicable law shall be deemed
fines; and
(3) Action taken or omitted by the director with respect to
an employee benefit plan in the performance of the directors
duties for a purpose reasonably believed by the director to be in
the interest of the participants and beneficiaries of the plan
shall be deemed to be for a purpose which is not opposed to the
best interests of the corporation.
(j) Unless limited by the charter:
(1) An officer of the corporation shall be indemnified as
and to the extent provided in subsection (d) of this section for
a director and shall be entitled, to the same extent as a
director, to seek indemnification pursuant to the provisions of
subsection (d);
(2) A corporation may indemnify and advance expenses to an
officer, employee, or agent of the corporation to the same extent
that it may indemnify directors under this section; and
(3) A corporation, in addition, may indemnify and advance
expenses to an officer, employee, or agent who is not a director
to such further extent, consistent with law, as may be provided
by its charter, bylaws, general or specific action of its board
of directors or contract.
(k)(1) A corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee,
or agent of the corporation, or who, while a director, officer,
employee, or agent of the corporation, is or was serving at the
request, of the corporation as a director, officer, partner,
trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, other enterprise,
or employee benefit plan against any liability asserted against
and incurred by such person in any such capacity or arising out
of such persons position, whether or not the corporation would
have the power to indemnify against liability under the
provisions of this section.
(2) A corporation may provide similar protection, including
a trust fund, letter of credit, or surety bond, not inconsistent
with this section.
(3) The insurance or similar protection may be provided by a
subsidiary or an affiliate of the corporation.
(l) Any indemnification of, or advance of expenses to, a
director in accordance with this section, if arising out of a
proceeding by or in the right of the corporation, shall be
reported in writing to the stockholders with the notice of the
next stockholders meeting or prior to the meeting.
ARTICLE EIGHTH OF THE REGISTRANT'S ARTICLES OF AMENDMENT AND RESTATEMENT OF
ARTICLES OF INCORPORATION READS AS FOLLOWS:
(1) To the maximum extent that Maryland law in effect from time to
time permits limitation of the liability of directors and officers of a
corporation, no present or former director or officer of the Corporation shall
be liable to the Corporation or its stockholders for money damages.
(2) The Corporation shall have the power, to the maximum extent
permitted by Maryland law in effect from time to time, to obligate itself to
indemnify, and to pay or reimburse reasonable expenses in advance of final
disposition of a proceeding to, (a) any individual who is a present or former
director or officer of the Corporation or (b) any individual who, while a
director or officer of the Corporation and at the request of the Corporation,
serves or has served as a director, officer, partner or trustee of another
corporation, real estate investment trust, partnership, joint venture, trust,
employee benefit plan or any other enterprise from and against any claim or
liability to which such person may become subject or which such person may incur
by reason of his status as a present or former director or officer of the
Corporation. The Corporation shall have the power, with the approval of the
Board of Directors, to provide such indemnification and advancement of expenses
to a person who served a predecessor of the Corporation in any of the capacities
described in (a) or (b) above and to any employee or agent of the Corporation or
a predecessor of the Corporation.
(3) The provisions of this Article EIGHTH shall be subject to the
limitations of the Investment Company Act.
(4) Neither the amendment nor repeal of this Article EIGHTH, nor the
adoption or amendment of any other provision of the Charter or Bylaws
inconsistent with this Article EIGHTH, shall apply to or affect in any respect
the applicability of the preceding sections of this Article EIGHTH with respect
to any act or failure to act which occurred prior to such amendment, repeal or
adoption.
ARTICLE IX OF THE REGISTRANT'S AMENDED AND RESTATED BYLAWS READS AS FOLLOWS:
To the maximum extent permitted by Maryland law in effect from time to
time, the Corporation shall indemnify and, without requiring a preliminary
determination of the ultimate entitlement to indemnification, shall pay or
reimburse reasonable expenses in advance of final disposition of a proceeding to
(a) any individual who is a present or former director or officer of the
Corporation and who is made or threatened to be made a party to the proceeding
by reason of his or her service in any such capacity or (b) any individual who,
while a director or officer of the Corporation and at the request of the
Corporation, serves or has served as a director, officer, partner or trustee of
another corporation, real estate investment trust, partnership, joint venture,
trust, employee benefit plan or other enterprise and who is made or threatened
to be made a party to the proceeding by reason of his or her service in any such
capacity. The Corporation may, with the approval of its Board of Directors or
any duly authorized committee thereof, provide such indemnification and advance
for expenses to a person who served a predecessor of the Corporation in any of
the capacities described in (a) or (b) above and to any employee or agent of the
Corporation or a predecessor of the Corporation. The termination of any claim,
action, suit or other proceeding involving any person, by judgment, settlement
(whether with or without court approval) or conviction or upon a plea of guilty
or nolo contendere, or its equivalent, shall not create a presumption that such
person did not meet the standards of conduct required for indemnification or
payment of expenses to be required or permitted under Maryland law, these Bylaws
or the Charter. Any indemnification or advance of expenses made pursuant to this
Article shall be subject to applicable requirements of the 1940 Act. The
indemnification and payment of expenses provided in these Bylaws shall not be
deemed exclusive of or limit in any way other rights to which any person seeking
indemnification or payment of expenses may be or may become entitled under any
bylaw, regulation, insurance, agreement or otherwise.
Neither the amendment nor repeal of this Article, nor the adoption or
amendment of any other provision of the Bylaws or Charter inconsistent with this
Article, shall apply to or affect in any respect the applicability of the
preceding paragraph with respect to any act or failure to act which occurred
prior to such amendment, repeal or adoption.
Section 10(a) of the Distribution Services Agreement reads as follows:
Section 10. Indemnification.
(a) The Fund agrees to indemnify, defend and hold the
Underwriter, and any person who controls the Underwriter within the
meaning of Section 15 of the Securities Act of 1933, as amended (the
"Securities Act"), free and harmless form and against any and all
claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which the Underwriter
or any such controlling person may incur, under the Securities Act, or
under common law or otherwise, arising out of or based upon any
alleged untrue statements of a material fact contained in the Fund's
Registration Statement or Prospectus or Statement of Additional
Information in effect from time to time under the Securities Act or
arising out of or based upon any alleged omission to state a material
fact required to be stated in either thereof or necessary to make the
statements in either thereof not misleading; provided, however, that
in no event shall anything therein contained by so construed as to
protect the Underwriter against any liability to the Fund or its
security holders to which the Underwriter would otherwise be subject
by reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of the Underwriter's reckless
disregard of its obligations and duties under this agreement. The
Fund's agreement to indemnify the Underwriter or any such controlling
person, such notification to be given by letter or by telegram
addressed to the Fund at its principal office in New York, New York,
and sent to the Fund by the person against whom such action is brought
within ten days after the summons or other first legal process shall
have been served. The failure so to notify the Fund of the
commencement of any such action shall not relieve the Fund from any
liability which it may have to the person against whom such action is
brought by reason of any such alleged untrue statement or omission
otherwise than on account of the indemnity agreement contained in this
Section 10. The Fund will be entitled to assume the defense of any
such suit brought to enforce any such claim, and to retain counsel of
good standing chosen by the Fund and approved by the Underwriter. In
the event the Fund does elect to assume the defense of any such suit
and retain counsel of good standing approved by the Underwriter, the
defendant or defendants in such suit shall bear the fees and expenses
of any additional counsel retained by any of them; but in case the
Fund does not elect to assume the defense of any such suit, or in case
the Underwriter does not approve of counsel chosen by the Fund, the
Fund will reimburse the Underwriter or the controlling person or
persons named as defendant or defendants in such suit, for the fees
and expenses of any counsel retained by the Underwriter or such
persons. The indemnification agreement contained in this Section 10
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of the Underwriter or any
controlling person and shall survive the sale of any of the Fund's
shares made pursuant to subscriptions obtained by the Underwriter.
This agreement of indemnity will inure exclusively to the benefit of
the Underwriter, to the benefit of its successors and assigns, and to
the benefit of any controlling persons and their successors and
assigns. The Fund agrees promptly to notify the Underwriter of the
commencement of any litigation or proceeding against the Fund in
connection with the issue and sale of any of its shares.
Section 4 of the Investment Advisory Contract reads as follows:
4. We shall expect of you, and you will give us the benefit of,
your best judgment and efforts in rendering these services to us, and
we agree as an inducement to your undertaking these services that you
shall not be liable hereunder for any mistake of judgment or in any
event whatsoever, except for lack of good faith, provided that nothing
herein shall be deemed to protect, or purport to protect, you against
any liability to us or to our security holders to which you would
otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of your duties hereunder, or by
reason of your reckless disregard of your obligations and duties
hereunder.
The foregoing summaries are qualified by the entire text of
Registrant's Articles of Amendment and Restatement of Articles of
Incorporation, Amended and Restated By-laws, the Investment Advisory
Contract between Registrant and AllianceBernstein L.P. and the
Distribution Services Agreement between Registrant and
AllianceBernstein Investments, Inc. ("ABI").
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that, in the opinion of the
Securities and Exchange Commission, such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer of controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification
by it is against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
In accordance with Release No. IC-11330 (September 2, 1980), the
Registrant will indemnify its directors, officers, investment manager
and principal underwriters only if (1) a final decision on the merits
was issued by the court or other body before whom the proceeding was
brought that the person to be indemnified (the "indemnitee") was not
liable by reason or willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of his
office ("disabling conduct") or (2) a reasonable determination is
made, based upon a review of the facts, that the indemnitee was not
liable by reason of disabling conduct, by (a) the vote of a majority
of a quorum of the directors who are neither "interested persons" of
the Registrant as defined in section 2(a)(19) of the Investment
Company Act of 1940 nor parties to the proceeding ("disinterested,
non-party directors"), or (b) an independent legal counsel in a
written opinion. The Registrant will advance attorneys fees or other
expenses incurred by its directors, officers, investment adviser or
principal underwriters in defending a proceeding, upon the undertaking
by or on behalf of the indemnitee to repay the advance unless it is
ultimately determined that he is entitled to indemnification and, as a
condition to the advance, (1) the indemnitee shall provide a security
for his undertaking, (2) the Registrant shall be insured against
losses arising by reason of any lawful advances, or (3) a majority of
a quorum of disinterested, non-party directors of the Registrant, or
an independent legal counsel in a written opinion, shall determine,
based on a review of readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the
indemnitee ultimately will be found entitled to indemnification.
The Registrant participates in a joint directors and officers
liability insurance policy issued by the ICI Mutual Insurance Company.
Coverage under this policy has been extended to directors, trustees
and officers of the investment companies managed by AllianceBernstein
L.P. Under this policy, outside trustees and directors would be
covered up to the limits specified for any claim against them for acts
committed in their capacities as trustee or director. A pro rata share
of the premium for this coverage is charged to each investment company
and to the Investment Adviser.
ITEM 16. EXHIBITS:
(1) Articles of Amendment and Restatement to Articles of Incorporation
dated February 1, 2006 and filed February 23, 2006 - Incorporated by
reference as Exhibit (a) to Post-Effective Amendment No. 87 of the
Registrant's Registration Statement on Form N-1A (File Nos. 2-48227
and 811-2383), filed with the Securities and Exchange Commission on
January 31, 2007.
(2) Amended and Restated By-Laws of the Registrant - Incorporated by
reference to Exhibit 99.77Q1 - Other Exhibits of the Registrant's
Semi-Annual Report on Form NSAR-A (File No. 811-2383) filed with the
Securities and Exchange Commission on May 30, 2006.
(3) Not applicable.
(4) Form of Agreement and Plan of Acquisition and Liquidation between
AllianceBernstein U.S. Government Portfolio, a series of
AllianceBernstein Bond Fund, Inc., and AllianceBernstein Intermediate
Bond Portfolio, a series of AllianceBernstein Bond Fund, Inc. -
Constitutes Appendix G to Part A hereof.
(5) Not applicable.
(6) Form of Amended Investment Advisory Contract between the Registrant
and AllianceBernstein L.P. - Incorporated by reference as Exhibit (d)
to Post- Effective Amendment No. 87 of the Registrant's Registration
Statement on Form N-1A (File Nos. 2-48227 and 811-2383), filed with
the Securities and Exchange Commission on January 31, 2007.
(7) (a) Distribution Services Agreement between the Registrant and
AllianceBernstein Investments, Inc. (formerly known as Alliance
Fund Distributors, Inc.) - Incorporated by reference as Exhibit
6(a) to Post-Effective Amendment No. 65 of the Registrant's
Registration Statement on Form N-1A (File Nos. 2-48227 and
811-2383) filed with the Securities and Exchange Commission on
October 31, 1997.
(b) Amendment to the Distribution Services Agreement between the
Registrant and AllianceBernstein Investments, Inc. (formerly
known as Alliance Fund Distributors, Inc.) - Incorporated by
reference as Exhibit 6(e) to Post-Effective Amendment No. 64 of
the Registrant's Registration Statement on Form N-1A (File Nos.
2-48227 and 811-2383), filed with the Securities and Exchange
Commission on October 31, 1996.
(c) Form of Amendment to the Distribution Services Agreement between
the Registrant and AllianceBernstein Investments, Inc. (formerly
known as Alliance Fund Distributors, Inc.) - Incorporated by
reference to Exhibit (e)(3) to Post-Effective Amendment No. 81 of
the Registrant's Registration Statement on Form N-1A (File Nos.
2-48227 and 811- 2383) filed with the Securities and Exchange
Commission on October 29, 2003.
(d) Form of Amendment to the Distribution Services Agreement between
the Registrant and AllianceBernstein Investments, Inc. (formerly
known as Alliance Fund Distributors, Inc.) - Incorporated by
reference to Exhibit (e)(4) to the Post-Effective Amendment No.
84 of the Registrant's Registration Statement on Form N-1A (File
Nos. 2-48227 and 811-2383) filed with the Securities and Exchange
Commission on January 31, 2005.
(e) Form of Amendment to Distribution Services Agreement between the
Registrant and AllianceBernstein Investments, Inc. - Incorporated
by reference as Exhibit (e) to Post-Effective Amendment No. 87 of
the Registrant's Registration Statement on Form N-1A (File Nos.
2-48227 and 811-2383), filed with the Securities and Exchange
Commission on January 31, 2007.
(f) Form of Selected Dealer Agreement between AllianceBernstein
Investments, Inc. (formerly known as Alliance Fund Distributors,
Inc.) and selected dealers offering shares of Registrant -
Incorporated by reference to Exhibit (e)(5) to the Post-Effective
Amendment No. 84 of the Registrant's Registration Statement on
Form N-1A (File Nos. 2-48227 and 811-2383) filed with the
Securities and Exchange Commission on January 31, 2005.
(g) Form of Selected Agent Agreement between AllianceBernstein
Investments, Inc. (formerly known as Alliance Fund Distributors,
Inc.) and selected agents making available shares of Registrant -
Incorporated by reference to Exhibit (e)(6) to the Post-Effective
Amendment No. 84 of the Registrant's Registration Statement on
Form N-1A (File Nos. 2-48227 and 811-2383) filed with the
Securities and Exchange Commission on January 31, 2005.
(8) Not applicable.
(9) (a) Custodian Contract between the Registrant and State Street Bank
and Trust Company - Incorporated by reference to Exhibit 8(a) to
Post-Effective Amendment No. 65 of the Registrant's Registration
Statement on Form N-1A (File Nos. 2-48227 and 811-2383) filed
with the Securities and Exchange Commission with the Securities
and Exchange Commission on October 31, 1997.
(b) Amendment to the Custodian Contract between the Registrant and
State Street Bank and Trust Company - Incorporated by reference
to Exhibit 8(a) to Post-Effective Amendment No. 64 of the
Registrant's Registration Statement on Form N-1A (File Nos.
2-48227 and 811-2383) filed with the Securities and Exchange
Commission on October 31, 1996.
(10) (a) Rule 12b-1 Plan - See Exhibit (7)(a) above.
(b) Amended and Restated Rule 18f-3 Plan - Incorporated by reference
to Exhibit 18(a) to Post-Effective Amendment No. 64 of the
Registrant's Registration Statement on Form N-1A (File Nos.
2-48227 and 811-2383) filed with the Securities and Exchange
Commission on October 31, 1996.
(c) Form of Amended and Restated Rule 18f-3 Plan - Incorporated by
reference to Exhibit (n)(2) to Post-Effective Amendment No. 81 of
the Registrant's Registration Statement on Form N-1A (File Nos.
2-48227 and 811-2383) filed with the Securities and Exchange
Commission on October 29, 2003.
(d) Form of Amended and Restated Rule 18f-3 Plan - Incorporated by
reference to Exhibit (n)(3) to the Post-Effective Amendment No.
84 of the Registrant's Registration Statement on Form N-1A (File
Nos. 2-48227 and 811-2383) filed with the Securities and Exchange
Commission on January 31, 2005.
(11) Opinion and Consent of Seward & Kissel LLP as to legality of the
securities being registered - Filed herewith.
(12) Opinion and Consent of Seward & Kissel LLP as to tax consequences - To
be filed by means of a Post-Effective Amendment.
(13) (a) Transfer Agency Agreement between Registrant and
AllianceBernstein Investor Services, Inc. - Incorporated by
reference to Exhibit 9 to Post-Effective Amendment No. 65 of the
Registrant's Registration Statement on Form N-1A (File Nos.
2-48227 and 811-2383) filed with the Securities and Exchange
Commission on October 31, 1997.
(b) Form of Amendment to Transfer Agency Agreement between Registrant
and AllianceBernstein Investor Services, Inc. - Incorporated by
reference as Exhibit (h) (2) to Post-Effective Amendment No. 87
of the Registrant's Registration Statement on Form N-1A (File
Nos. 2-48227 and 811-2383), filed with the Securities and
Exchange Commission on January 31, 2007.
(c) Form of Expense Limitation Undertaking by AllianceBernstein L.P.
with respect to Quality Bond Portfolio - Incorporated by
reference to Exhibit (h)(2) to the Post-Effective Amendment No.
84 of the Registrant's Registration Statement on Form N-1A (File
Nos. 2-48227 and 811-2383) filed with the Securities and Exchange
Commission on January 31, 2005.
(d) Code of Ethics for the Fund - Incorporated by reference to
Exhibit (p)(1) to Post-Effective Amendment No. 74 of the
Registration Statement on Form N-1A of the Registrant (File Nos.
2-48227 and 811-2383), filed with the Securities and Exchange
Commission on October 6, 2000.
(e) Code of Ethics for AllianceBernstein L.P. and AllianceBernstein
Investments, Inc. - Incorporated by reference to Exhibit (p)(2)
to Post-Effective Amendment No. 4 of the Registration Statement
on Form N-1A of The AllianceBernstein Pooling Portfolios (File
Nos. 333-120487 and 811-21673), filed with the Securities and
Exchange Commission on December 29, 2006.
(14) Consent of Independent Registered Public Accounting Firm -- Filed
herewith.
(15) Not applicable.
(16) Powers of Attorney for: John H. Dobkin, William H. Foulk, Jr., Nancy
P. Jacklin, Marshall C. Turner, Jr. and Earl D. Weiner - Filed
herewith.
(17) Not applicable.
ITEM 17. Undertakings.
(1) The undersigned registrant agrees that prior to any public reoffering
of the securities registered through the use of a prospectus which is
a part of this registration statement by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c) of the
Securities Act 17 [CFR 230.145(c)], the reoffering prospectus will
contain the information called for by the applicable registration form
for reofferings by persons who may be deemed underwriters, in addition
to the information called for by the other items of the applicable
form.
(2) The undersigned registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to
the registration statement and will not be used until the amendment is
effective, and that, in determining any liability under the 1933 Act,
each post-effective amendment shall be deemed to be a new registration
statement for the securities offered therein, and the offering of the
securities at that time shall be deemed to be the initial bona fide
offering of them.
(3) The undersigned registrant undertakes to file a post-effective
amendment to this registration statement upon the closing of the
Acquisition described in this registration statement that contains an
opinion of counsel supporting the tax matters discussed in this
registration statement.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant has duly caused this Registration Statement on Form N-14
to be signed on its behalf by the undersigned, duly authorized, in the City and
State of New York, on the 17th day of August, 2007.
ALLIANCEBERNSTEIN BOND FUND, INC.
By: /s/ Marc O. Mayer*
------------------
Marc O. Mayer
President
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated:
Signature Title Date
--------- ----- ----
1) Principal
Executive Officer
/s/ Marc O. Mayer* President and August 17, 2007
----------------- Chief Executive
Marc O. Mayer Officer
2) Principal Financial
and Accounting Officer
/s/ Joseph J. Matineo Treasurer and August 17, 2007
--------------------- Chief Financial
Joseph J. Matineo Officer
3) Majority of Directors
John H. Dobkin*
William H. Foulk, Jr.*
Nancy P. Jacklin*
Marshall C. Turner, Jr.*
Earl D. Weiner*
*By: /s/ Andrew L. Gangolf August 17, 2007
---------------------
Andrew L. Gangolf
(Attorney-in-fact)
Index to Exhibits
Exhibit No. Description of Exhibits
(11) Opinion of Counsel
(14) Consent of Independent Registered Public Accounting Firm
(16) Powers of Attorney
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