UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-2383
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 offices) (Zip code)
Mark R. Manley.
Alliance Capital Management, L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and address of agent for service)
Registrant's telephone number, including area code: (800) 221-5672
Date of fiscal year end: September 30, 2003
Date of reporting period: September 30, 2003
ITEM 1. REPORTS TO STOCKHOLDERS.
[LOGO] ALLIANCEBERNSTEIN(SM)
Investment Research and Management
AllianceBernstein Bond Fund
U.S. Government Portfolio
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U.S. Government
Fixed Income Annual Report--September 30, 2003
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Investment Products Offered
---------------------------
o Are Not FDIC Insured
o May Lose Value
o Are Not Bank Guaranteed
---------------------------
This shareholder report must be preceded or accompanied by the Fund's prospectus
for individuals who are not current shareholders of the Fund.
You may obtain a description of the Fund's proxy voting policies and procedures,
without charge, upon request by visiting Alliance Capital's web site at
www.investor.alliancecapital.com or on the Securities and Exchange Commission's
web site at http://www.sec.gov, or by calling Alliance Capital at (800)
227-4618.
AllianceBernstein Investment Research and Management, Inc., the principal
underwriter of the AllianceBernstein mutual funds and an affiliate of Alliance
Capital Management L.P., the manager of the funds, is a member of the NASD.
November 19, 2003
Annual Report
This report provides management's discussion of fund performance for
AllianceBernstein Bond Fund U.S. Government Portfolio (the "Portfolio") for the
annual reporting period ended September 30, 2003.
Investment Objective and Policies
This open-end fund seeks a high level of current income that is consistent with
Alliance's determination of prudent investment risk. The Portfolio invests
primarily in U.S. government securities, repurchase agreements and forward
contracts relating to U.S. government securities.
Investment Results
The following table shows the performance of the Portfolio for the six- and
12-month periods ended September 30, 2003. Also included in the table are
returns for the Portfolio's benchmark, the Lehman Brothers (LB) Government Bond
Index, which represents the U.S. government bond market, and the Lipper General
U.S. Government Funds Average (the "Lipper Average").
INVESTMENT RESULTS*
Periods Ended September 30, 2003
-----------------------------
Returns
-----------------------------
6 Months 12 Months
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AllianceBernstein
Bond Fund
U.S. Government
Portfolio
Class A 0.20% 1.16%
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Class B -0.15% 0.45%
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Class C -0.15% 0.45%
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Lehman Brothers
Government
Bond Index 1.72% 3.55%
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Lipper General
U.S. Government
Funds Average 0.79% 2.23%
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* The Portfolio's investment results are for the periods shown and are based
on the net asset value (NAV) of each class of shares as of September 30,
2003. Returns do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares. All fees
and expenses related to the operation of the Portfolio have been deducted,
but no adjustment has been made for sales charges that may apply when
shares are purchased or redeemed. Returns for Advisor Class shares will
vary due to different expenses associated with this class. Returns for the
Portfolio include the reinvestment of any distributions paid during each
period. Past performance is no guarantee of future results.
The unmanaged Lehman Brothers (LB) Government Bond Index is composed of
the LB U.S. Treasury and Agency Bond Indices, the LB 1-3 Year Government
Index and the LB 20+ Year Treasury Index. The unmanaged Lipper General
U.S. Government Funds Average is based on the performance of a universe of
funds that invests at least 65% of their assets in U.S. government and
agency issues. These funds generally have similar investment objectives to
the Portfolio, although investment policies for the various funds may
differ. In particular, many funds in the Lipper U.S. government universe
are not required to invest solely in securities backed by the full faith
and credit of the U.S. For the six- and 12-month periods ended September
30, 2003, the Lipper Average consisted of 187 and 183 funds, respectively.
An investor cannot invest directly in an index, and its results are not
indicative of any particular investment, including AllianceBernstein Bond
Fund U.S. Government Portfolio.
Additional investment results appear on page 5.
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ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 1
For the six- and 12-month periods ended September 30, 2003, the Portfolio
underperformed its benchmark, the LB Government Bond Index, and the Lipper
Average. The Portfolio was positioned to benefit from investments in
longer-dated U.S. Treasury notes and bonds, which underperformed short-dated
Treasuries as the U.S. Federal Reserve kept interest rates lower than expected.
In April, the U.S. Federal Reserve announced concerns about deflation risk and
moved to an easing bias, finally cutting interest rates by 25 basis points to
1.00% in its June meeting. Nonetheless, this position allowed the Portfolio to
maintain an attractive current yield and dividend for shareholders.
Another investment strategy that contributed positively to the earnings power of
the Portfolio was an overweight position in highly-rated asset-backed (ABS) and
commercial mortgage-backed (CMBS) securities. These securities provide
incremental yield over government securities and are limited to 20% of the
Portfolio's assets. While this strategy added to performance through June, wider
spreads when interest rates rose dramatically from July through August
subtracted from the Portfolio's performance. During the final three months of
the annual reporting period, the Portfolio was positioned to benefit from higher
interest rates. Throughout most of this period, the Portfolio was 5% to 10%
underweight versus the LB Government Bond Index. This position added to
performance in July and August as interest rates climbed, but detracted from
performance in September when interest rates fell. In addition, wider spreads
from the CMBS and ABS positions overwhelmed the earlier benefit to performance.
Market Review and Investment Strategy
Business conditions worsened in the first three months of 2003, despite record
high corporate cash flow, signs of consumer strength in rising building permits
and a new high in the mortgage refinance index. The U.S. economy contracted in
February and March, in part because of bad weather, and also because of
corporate and consumer hesitancy to make purchase and investment decisions
during the war. As the economy began to recover, the six-month period ended
September 30, 2003 proved to be one of the most volatile periods in recent
history for the U.S. fixed income markets. During the first half of this period,
interest rates fell rapidly as the economic landscape appeared bleak and the
U.S. Federal Reserve raised the possibility of quantitative easing. After a 25
basis point cut in rates on June 25, interest rates suddenly reversed course and
began a two-month bear market that saw rates rise more than 100 basis points.
The result was a period of sustained interest rate volatility, driven not only
by economic uncertainty, but also by mortgage hedging from large financial
institutions.
We maintained the Portfolio's interest rate exposure at a level slightly below
the market index during most of this period in the belief that economic growth
would inevitably lead to higher rates. While this view eventually was realized
in July, the degree by which spreads widened was excessive. In fact, spreads
have begun to recover in the fourth quarter of 2003, as interest rates
stabilized and the bond market developed a range trading posture.
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2 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
PERFORMANCE UPDATE
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
GROWTH OF A $10,000 INVESTMENT
9/30/93 TO 9/30/03
[THE FOLLOWING TABLE WAS DEPICTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL.]
Lehman Brothers Government Bond Index: $19,186
Lipper General U.S. Government Funds Average: $17,383
AllianceBernstein Bond Fund U.S. Government Portfolio Class A: $16,683
AllianceBernstein Lehman Brothers Lipper General
Bond Fund U.S. Government Bond U.S. Government
Government Portfolio Index Funds Average
- --------------------------------------------------------------------------------
9/30/93 $10,000 $10,000 $10,000
9/30/94 9,539 9,596 9,518
9/30/95 10,667 10,898 10,754
9/30/96 10,847 11,380 11,094
9/30/97 11,749 12,422 12,079
9/30/98 13,204 14,111 13,566
9/30/99 12,848 13,871 13,199
9/30/00 13,707 14,867 14,033
9/30/01 15,301 16,838 15,707
9/30/02 16,491 18,528 16,994
9/30/03 16,683 19,186 17,383
This chart illustrates the total value of an assumed $10,000 investment in
AllianceBernstein Bond Fund U.S. Government Portfolio Class A shares (from
9/30/93 to 9/30/03) as compared to the performance of an appropriate index.
Returns do not reflect the deduction of taxes that a shareholder would pay on
fund distributions or the redemption of fund shares. The chart reflects the
deduction of the maximum 4.25% sales charge from the initial $10,000 investment
in the Portfolio and assumes the reinvestment of dividends and capital gains.
Performance for Class B, Class C and Advisor Class shares will vary from the
results shown above due to differences in expenses charged to these classes.
Past performance is not indicative of future results, and is not representative
of future gain or loss in capital value or dividend income.
The unmanaged Lehman Brothers (LB) Government Bond Index is composed of the LB
U.S. Treasury and Agency Bond Indices, the LB 1-3 Year Government Index and the
LB 20+ Year Treasury Index.
The unmanaged Lipper General U.S. Government Funds Average is based on the
performance of 64 funds (based on the number of funds in the average from
9/30/93 to 9/30/03). These funds generally have similar investment objectives to
the Portfolio, although investment policies for the various funds may differ.
When comparing AllianceBernstein Bond Fund U.S. Government Portfolio to the
index and average shown above, you should note that no sales charges are
reflected in the performance of the index. An investor cannot invest directly in
an index or an average, and its results are not indicative of any specific
investment, including AllianceBernsetein Bond Fund U.S. Government Portfolio.
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ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 3
PORTFOLIO SUMMARY
September 30, 2003
INCEPTION DATES PORTFOLIO STATISTICS
Class A Shares Net Assets ($mil): $1,581.9
12/1/85
Class B Shares
9/30/91
Class C Shares
5/3/93
SECURITY TYPE
54.0% U.S. Treasury Securities
16.9% Collateralized Mortgage
Obligations/Asset
Backed Securities
12.9% Federal National
Mortgage
Association [PIE CHART OMITTED]
11.0% Federal Home Loan
Mortgage Corporation
2.8% Government National
Mortgage Association
1.4% Stripped MBS
0.8% Federal Agricultural
Mortgage Corporation
0.2% Short-Term
All data as of September 30, 2003. The Portfolio's security type breakdown is
expressed as a percentage of total investments and may vary over time.
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4 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
Investment Results
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INVESTMENT RESULTS
AVERAGE ANNUAL RETURNS AS OF SEPTEMBER 30, 2003
Class A Shares
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Without Sales Charge With Sales Charge
1 Year 1.16% -3.09%
5 Years 4.79% 3.88%
10 Years 5.25% 4.79%
SEC Yield* 4.73%
Class B Shares
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Without Sales Charge With Sales Charge
1 Year 0.45% -2.45%
5 Years 4.04% 4.04%
10 Years(a) 4.80% 4.80%
SEC Yield* 4.21%
Class C Shares
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Without Sales Charge With Sales Charge
1 Year 0.45% -0.52%
5 Years 4.07% 4.07%
10 Years 4.51% 4.51%
SEC Yield* 4.22%
The Portfolio's investment results represent average annual returns. Returns do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares. The returns reflect reinvestment
of dividends and/or capital gains distributions in additional shares without and
with the effect of the 4.25% maximum front-end sales charge for Class A or
applicable contingent deferred sales charge for Class B (3% year 1, 2% year 2,
1% year 3, 0% year 4); and for Class C shares (1% year 1). Returns for Class A
shares do not reflect the imposition of the 1 year, 1% contingent deferred sales
charge for accounts over $1,000,000. Returns for Advisor Class shares will vary
due to different expenses associated with this class.
The Portfolio normally invests all of its assets in securities that are rated at
least BBB by Standard & Poor's or, if unrated, are of comparable quality. The
Portfolio also may invest in convertible debt securities, preferred stock and
dividend-paying stocks, U.S. government obligations, and foreign fixed-income
securities. The Portfolio may invest a portion of its assets in foreign
securities, which may magnify fluctuations. Price fluctuations may also be
caused by changes in interest rates or bond credit quality ratings. These
changes have a greater effect on bonds with longer maturities than on those with
shorter maturities.
Past performance does not guarantee future results. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
* SEC yields are based on SEC guidelines and are calculated on 30 days ended
September 30, 2003.
(a) Assumes conversion of Class B shares into Class A shares after six years.
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ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 5
Portfolio of Investments
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PORTFOLIO OF INVESTMENTS
September 30, 2003
Principal
Amount
(000) U.S. $ Value
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U.S. GOVERNMENT & GOVERNMENT
SPONSORED AGENCY OBLIGATIONS-99.8%
U.S. Treasury Bonds-29.9%
6.125%, 11/15/27 ........................................... $ 15,000 $ 17,378,325
6.25%, 8/15/23-5/15/30(a) .................................. 85,000 99,569,350
6.375%, 8/15/27(a) ......................................... 40,000 47,745,320
7.125%, 2/15/23(a) ......................................... 45,000 57,642,210
7.25%, 5/15/16 ............................................. 20,000 25,578,140
7.50%, 11/15/16(a) ......................................... 95,000 124,041,880
11.25%, 2/15/15 ............................................ 20,000 32,866,420
12.50%, 8/15/14(a) ......................................... 45,150 67,922,531
--------------
472,744,176
--------------
U.S. Treasury Notes-36.3%
2.00%, 5/15/06 ............................................. 192,000 193,387,584
3.00%, 2/15/08 ............................................. 50,000 50,878,950
3.125%, 9/15/08(b) ......................................... 225,000 228,199,275
3.625%, 5/15/13 ............................................ 20,000 19,636,720
4.25%, 8/15/13 ............................................. 80,000 82,034,400
--------------
574,136,929
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Federal National Mortgage
Association-15.8%
zero coupon, 2/15/08 ....................................... 22,130 19,453,487
2.90%, 10/25/32 ............................................ 9,027 9,060,851
5.00%, TBA ................................................. 350 350,109
6.00%, 12/01/13-9/01/33 .................................... 80,668 83,661,648
7.00%, 4/01/07-1/01/21 ..................................... 97,471 103,627,351
7.50%, 12/01/09-4/01/17 .................................... 12,579 13,416,264
8.00%, 3/25/07 ............................................. 3,299 3,497,050
8.50%, 4/01/08 ............................................. 2,915 3,058,423
9.00%, 8/01/21 ............................................. 941 1,041,992
10.00%, 11/01/13-10/01/14 .................................. 10,507 11,905,154
11.00%, 7/01/16 ............................................ 898 1,037,995
--------------
250,110,324
--------------
Federal Home Loan Mortgage
Corp.-13.5%
1.52%, 2/15/33 ............................................. 15,226 15,240,646
2.75%, 10/06/06 ............................................ 30,000 30,028,200
4.05%, 6/21/05(a) .......................................... 25,000 25,527,100
4.50%, 7/15/13 ............................................. 45,000 45,531,495
6.00%, 3/15/23(a) .......................................... 13,739 14,351,645
6.75%, 3/15/31(a) .......................................... 60,000 71,467,080
7.00%, 12/01/10 ............................................ 4,042 4,257,818
8.00%, 9/01/11 ............................................. 1,983 2,093,925
12.00%, 8/01/15-7/01/20 .................................... 3,947 4,540,566
--------------
213,038,475
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6 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
Portfolio of Investments
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Principal
Amount
(000) U.S. $ Value
- ---------------------------------------------------------------------------------------------------------
Government National Mortgage
Association-3.4%
Single Family Homes
7.50%, 12/15/14-3/15/32 .................................... $ 36,844 $ 39,500,066
8.00%, 3/15/12 ............................................. 9,087 9,755,491
8.15%, 9/15/20 ............................................. 1,374 1,494,213
9.00%, 12/15/09-12/15/19 ................................... 2,991 3,281,582
--------------
54,031,352
--------------
Federal Agricultural Mortgage
Association-0.9%
6.725%, 7/25/13 ............................................ 14,034 14,776,299
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Total U.S. Government & Government Sponsored
Agency Obligations
(cost $1,543,326,269) ...................................... 1,578,837,555
--------------
COLLATERALIZED MORTGAGE
OBLIGATIONS-9.5%
Bank of America Alternative Loan Trust
Series 2003-7 Cl.A1
5.50%, 9/25/33 ............................................. 19,821 20,195,240
Citicorp Mortgage Securities, Inc.
Series 1987-3 Cl.A1
9.00%, 5/25/17 ............................................. 2,115 2,113,554
Countrywide Alternative Loan Trust
Series 2003-21 Cl.A1
5.00%, 10/30/03 ............................................ 30,000 30,097,200
MLCC Mortgage Investors, Inc.
Series 2003-F Cl.A1
1.44%, 10/25/28 ............................................ 20,000 20,000,000
Prudential Home Mortgage Securities Co.
Series 1994-1 Cl.A11
6.00%, 2/25/09 ............................................. 22,204 22,231,333
Residential Finance Limited Partnership
Series 2003-C Cl.B3
2.52%, 9/10/35(c) .......................................... 8,000 8,000,000
Structured Asset Securities Corp.
Series 2003-20 Cl.1A1
5.50%, 7/25/33 ............................................. 18,257 18,405,302
Series 2003-7H Cl.A11
6.00%, 3/25/33 ............................................. 21,656 22,123,275
Summit Mortgage Trust
Series 2003-1 Cl.1A1
6.88%, 4/28/35(c) .......................................... 6,322 6,341,606
--------------
Total Collateralized Mortgage Obligations
(cost $150,439,664) ........................................ 149,507,510
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ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 7
Portfolio of Investments
- --------------------------------------------------------------------------------
Principal
Amount
(000) U.S. $ Value
- ---------------------------------------------------------------------------------------------------------
ASSET BACKED SECURITIES-6.0%
ADJUSTABLE RATE
Ameriquest Mortgage Securities, Inc.
Series 2002-3 Cl.AV2
1.42%, 9/25/32 ............................................. $ 4,588 $ 4,590,442
GMAC Commercial Mortgage Securities, Inc.
Series 2003-FL1AC Cl.A
1.48%, 3/11/15(c) .......................................... 21,062 21,060,382
Renaissance Home Equity Loan Trust
Series 2003-2 Cl.A
1.56%, 8/25/33 ............................................. 24,648 24,648,236
Residential Asset Securities Corp.
Series 2002-KS8 Cl.A3
3.69%, 4/25/27 ............................................. 10,000 10,231,300
Specialty Underwriting & Residential Finance
Series 2003-BC3 Cl.A
1.47%, 8/25/34 ............................................. 20,000 19,990,600
Winston Funding, Ltd.
Series 2003-1 Cl.A2
2.01%, 4/23/09(c) .......................................... 15,000 15,000,000
--------------
Total Asset Backed Securities
(cost $95,283,887) ......................................... 95,520,960
--------------
COMMERCIAL MORTGAGE BACKED
SECURITIES-5.3%
Asset Securitization Corp.
Series 1997-MD7 Cl.A1B
7.41%, 1/13/30 ............................................. 16,847 18,878,748
Commercial Mortgage Acceptance Corp.
Series 1997-ML1 Cl.A2
6.53%, 12/15/30 ............................................ 13,077 13,894,312
Host Marriot Pool Trust
Series 1999-HMTA Cl.E
8.07%, 8/03/15(c) .......................................... 9,800 10,705,593
Merrill Lynch Mortgage Investors, Inc.
Series 1995-C3 Cl.D
7.851%, 12/26/25 ........................................... 20,016 21,817,440
Morgan Stanley Capital I
Series 1998-CF1 Cl.A1
6.33%, 7/15/32 ............................................. 8,935 9,336,972
Teachers Insurance & Annuity Association
Series 2001-Cl Cl.A2
6.30%, 6/19/21(c) .......................................... 8,225 9,065,582
--------------
Total Commercial Mortgage Backed Securities
(cost $79,631,353) ......................................... 83,698,647
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8 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
Portfolio of Investments
- --------------------------------------------------------------------------------
Principal
Amount
(000) U.S. $ Value
- ---------------------------------------------------------------------------------------------------------
STRIPPED MORTGAGE BACKED
SECURITIES-1.8%
Credit Suisse First Boston Mortgage
Series 2001-CK3 Cl.AX
1.272%, 6/15/34(c) ......................................... $ 38,231 $ 2,182,963
Greenwich Capital Commercial Funding Corp.
Series 2003-C1 Cl.XC
0.22%, 7/05/35(c) .......................................... 112,969 5,117,510
Morgan Stanley Capital I
Series 2003-IQ4 Cl.X1
0.20%, 5/15/40(c) .......................................... 102,672 3,506,233
Mortgage Capital Funding, Inc.
Series 1996-MC2 Cl.X
2.08%, 12/21/26 ............................................ 95,336 4,051,788
Prudential Securities Secured Financing Corp.
Series 1999-NRF1 Cl.AEC
0.89%, 11/01/31(c) ......................................... 326,691 12,303,164
SACO I, Inc.
Series 1997-2 Cl.X
1.55%, 8/25/36(c) .......................................... 28,739 723,077
--------------
Total Stripped Mortgage Backed Securities
(cost $34,417,934) ......................................... 27,884,735
--------------
SHORT-TERM INVESTMENT-0.2%
U.S. Treasury Bills-0.2%
zero coupon, 11/20/03(d)
(amortized cost $3,245,780) ................................ 3,250 3,245,780
--------------
Total Investments Before Security
Lending Collateral-122.6%
(cost $1,906,344,887) ...................................... 1,938,695,187
--------------
Investment of Cash Collateral for
Securities Loaned*-35.7%
Short Term Investments
Associated Finance
1.50%, 11/1/03 ............................................. 1,800 1,880,894
Bank of America
1.26%, 6/15/04 ............................................. 25,295 27,452,923
Concord
1.06%-1.14%, 10/2/03-10/10/03 .............................. 72,120 72,087,393
FHLB
1.30%-1.40%, 6/28/04-1/24/05 ............................... 45,000 45,000,000
FHLMC
1.11%-1.31%, 8/30/04-9/9/05 ................................ 48,500 48,500,000
FNMA
2.00%, 5/5/05 .............................................. 34,128 34,128,000
General Electric
1.27%-1.44%, 11/3/03-3/19/04 ............................... 13,245 14,024,222
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ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 9
Portfolio of Investments
- --------------------------------------------------------------------------------
Principal
Amount
(000) U.S. $ Value
- ---------------------------------------------------------------------------------------------------------
Gotham Funding
1.13%, 10/15/03 ............................................ $ 30,048 $ 30,028,194
Household Finance
1.35-1.65%, 10/15/03-5/1/04 ................................ 35,779 36,211,845
K2 (USA) LLC
1.21%, 4/26/04 ............................................. 10,000 10,040,972
LB Baden-Wuerttemberg
1.27%, 4/15/04 ............................................. 5,000 5,332,956
RBS
1.50%, 11/15/03 ............................................ 5,000 5,401,715
Sigma Finance
1.12%-1.18%, 12/15/03-6/16/04 .............................. 150,000 150,101,108
Wells Fargo
1.20%-1.30%, 11/1/03-7/15/04 ............................... 13,640 14,353,207
--------------
494,543,429
--------------
Shares
----------
UBS Private Money Market Fund, LLC
1.03%....................................................... 70,189,809 70,189,809
--------------
Total Investments of Cash Collateral for
Securities Loaned
(cost $564,733,238) ........................................ 564,733,238
--------------
Total Investments-158.3%
(cost $2,471,078,125) ...................................... 2,503,428,425
Other assets less liabilities-(58.3%) ......................... (921,545,103)
--------------
Net Assets-100% ............................................... $1,581,883,322
==============
Contracts(e)
------------
Call Option Written (see Note D)
U.S. Treasury Notes
expiring Oct. '03 @ $99.625
(premiums received $1,072,265)........... 2,250 $ (3,919,923)
--------------
FINANCIAL FUTURES CONTRACTS SOLD (see Note D)
Value at
Number of Expiration Original September 30, Unrealized
Type Contracts Month Value 2003 Depreciation
================= ========= ============= ============ ============= =============
U.S. Treasury
Note 10 Yr Future 1,375 December 2003 $152,349,708 $157,609,375 $ (5,259,667)
U.S. Treasury
Note 5 Yr Future 1,364 December 2003 149,841,504 154,771,375 (4,929,871)
-------------
$(10,189,538)
-------------
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10 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
Portfolio of Investments
- --------------------------------------------------------------------------------
REVERSE REPURCHASE AGREEMENTS (see Note D)
Broker Interest Rate Maturity Amount
============ ============= ======== ============
Goldman Sachs & Co. 1.12% 10/07/03 $ 8,268,257
UBS Warburg 1.15 10/03/03 11,701,869
UBS Warburg 1.12 10/06/03 25,776,604
UBS Warburg 1.10 10/02/03 119,939,985
UBS Warburg 1.09 10/03/03 124,848,898
UBS Warburg 1.05 10/06/03 87,080,079
------------
$377,615,692
------------
* See Note E for securities lending information.
(a) Positions, or portions thereof, with an aggregate market value of
$383,411,426 have been segregated to collateralize reverse repurchase
agreements.
(b) Securities on which option is written (par value subject to call have an
aggregate market value of $228,199,275).
(c) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At September 30,
2003, the aggregate market value of these securities amounted to
$94,006,110 or 5.9% of net assets.
(d) Position with a market value of $3,245,780 has been segregated to
collateralize margin requirements for open futures contracts.
(e) One contract relates to principal amount of $100,000.
Glossary of Terms:
FHLB - Federal Home Loan Bank
FHLMC - Federal Home Loan Mortgage Corporation
FNMA - Federal National Mortgage Association
TBA - (To Be Assigned) - Security is purchased on a forward
commitment with an appropriate principal amount (generally +/-
1.0%) and no definite maturity date. The actual principal amount
and maturity date will be determined upon settlement when the
specific mortgage pools are assigned.
See notes to financial statements.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 11
Statement of Assets & Liabilities
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS & LIABILITIES
September 30, 2003
Assets
Investments in securities, at value
(cost $2,471,078,125--including investment of cash
collateral for securities loaned of $564,733,238) ... $ 2,503,428,425(a)
Cash ................................................... 20,790,312
Due from broker(b) ..................................... 339,000
Receivable for investment securities sold .............. 326,845,746
Interest receivable .................................... 13,770,654
Receivable for capital stock sold ...................... 2,134,380
---------------
Total assets ........................................... 2,867,308,517
---------------
Liabilities
Outstanding call options written, at value
(premiums received $1,072,265) ...................... 3,919,923
Payable for collateral on securities loaned ............ 564,733,238
Payable for reverse repurchase agreements .............. 377,615,692
Payable for investment securities purchased ............ 325,806,040
Payable for capital stock redeemed ..................... 5,367,239
Payable for variation margin on futures contracts ...... 2,612,500
Advisory fee payable ................................... 2,104,890
Dividends payable ...................................... 1,794,985
Distribution fee payable ............................... 671,165
Accrued expenses ....................................... 799,523
---------------
Total liabilities ...................................... 1,285,425,195
---------------
Net Assets ............................................. $ 1,581,883,322
===============
Composition of Net Assets
Capital stock, at par .................................. $ 217,628
Additional paid-in capital ............................. 1,724,667,553
Distributions in excess of net investment income ....... (13,576,433)
Accumulated net realized loss on
investment transactions.............................. (148,736,569)
Net unrealized appreciation of investments ............. 19,311,143
---------------
$1,581,883,322
===============
- --------------------------------------------------------------------------------
12 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
Statement of Assets & Liabilities
- --------------------------------------------------------------------------------
Calculation of Maximum Offering Price
Class A Shares
Net asset value and redemption price per share
($811,376,104 / 111,658,861 shares of capital stock
issued and outstanding) ........................................... $7.27
Sales charge--4.25% of public offering price ......................... .32
-----
Maximum offering price ............................................... $7.59
=====
Class B Shares
Net asset value and offering price per share
($399,040,243 / 54,925,047 shares of capital stock
issued and outstanding) ........................................... $7.27
=====
Class C Shares
Net asset value and offering price per share
($167,358,967 / 23,004,655 shares of capital stock
issued and outstanding) ........................................... $7.28
=====
Advisor Class Shares
Net asset value, redemption and offering price per share
($204,108,008 / 28,039,607 shares of capital stock
issued and outstanding) ........................................... $7.28
=====
(a) Includes securities on loan with a value of $559,066,809 (See Note E).
(b) Cash segregated at broker to collateralize margin requirements for open
futures contracts.
See notes to financial statements.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 13
Statement of Operations
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
July 1, 2003
to Year Ended
September 30, June 30,
2003* 2003
============= =============
Investment Income
Interest .............................. $ 19,241,002 $ 86,923,790
------------ -------------
Expenses
Advisory fee .......................... 2,104,878 9,698,623
Distribution fee--Class A ............. 631,330 2,702,157
Distribution fee--Class B ............. 1,106,714 5,220,716
Distribution fee--Class C ............. 454,736 2,293,231
Transfer agency ....................... 956,653 3,546,502
Printing .............................. 118,850 496,678
Custodian ............................. 97,387 402,874
Audit and legal ....................... 57,321 114,788
Registration fees ..................... 37,141 74,141
Administrative ........................ 30,340 124,000
Directors' fees ....................... 5,000 18,000
Miscellaneous ......................... 3,701 97,318
------------ -------------
Total expenses before interest expense 5,604,051 24,789,028
Interest expense ...................... 285,376 226,944
------------ -------------
Total expenses ........................ 5,889,427 25,015,972
Less: expense offset arrangement
(see Note B) ....................... (94) (2,955)
------------ -------------
Net expenses .......................... 5,889,333 25,013,017
------------ -------------
Net investment income ................. 13,351,669 61,910,773
------------ -------------
Realized and Unrealized Gain (Loss)
on Investment Transactions
Net realized gain (loss) on:
Investment transactions ............ (19,524,008) 53,152,476
Written options .................... -0- 954,531
Futures ............................ 5,732,872 (6,605,444)
Swap contracts ..................... -0- (7,714,477)
Net change in unrealized
appreciation/depreciation of:
Investments ........................ (23,100,425) 42,249,044
Written options .................... (2,847,658) -0-
Futures ............................ (10,189,538) 1,239,412
Swap contracts ..................... -0- 2,598,092
------------ -------------
Net gain (loss) on investment
transactions ....................... (49,928,757) 85,873,634
------------ -------------
Net Increase (Decrease) in Net Assets
from Operations .................... $(36,577,088) $ 147,784,407
============ =============
* The Portfolio changed its fiscal year end from June 30 to September 30.
See notes to financial statements.
- --------------------------------------------------------------------------------
14 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
July 1, 2003
to Year Ended Year Ended
September 30, June 30, June 30,
2003* 2003 2002
=============== =============== ===============
Increase (Decrease)
in Net Assets from
Operations
Net investment
income ................ $ 13,351,669 $ 61,910,773 $ 76,503,030
Net realized gain (loss)
on investment
transactions .......... (13,791,136) 39,787,086 (2,033)
Net change in
unrealized
appreciation/
depreciation of
investments ........... (36,137,621) 46,086,548 20,025,936
--------------- --------------- ---------------
Net increase
(decrease) in
net assets from
operations ............ (36,577,088) 147,784,407 96,526,933
Dividends and
Distributions to
Shareholders from
Net investment income
Class A ............... (9,719,429) (41,821,063) (45,917,533)
Class B ............... (4,297,353) (20,589,855) (16,272,061)
Class C ............... (1,766,382) (9,059,572) (8,987,433)
Advisor Class ......... (2,444,044) (8,628,587) (5,326,003)
Distributions in excess of
net investment income
Class A ............... -0- -0- (3,697,433)
Class B ............... -0- -0- (1,310,281)
Class C ............... -0- -0- (722,436)
Advisor Class ......... -0- -0- (428,868)
Tax return of capital
Class A ............... -0- -0- (3,106,367)
Class B ............... -0- -0- (1,100,822)
Class C ............... -0- -0- (606,948)
Advisor Class ......... -0- -0- (360,309)
Capital Stock
Transactions
Net increase
(decrease) ............ (149,688,274) 72,866,684 279,883,858
--------------- --------------- ---------------
Total increase
(decrease) ............ (204,492,570) 140,552,014 288,574,297
Net Assets
Beginning of period ...... 1,786,375,892 1,645,823,878 1,357,249,581
--------------- --------------- ---------------
End of period ............ $ 1,581,883,322 $ 1,786,375,892 $ 1,645,823,878
=============== =============== ===============
* The Portfolio changed its fiscal year end from June 30 to September 30.
See notes to financial statements.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 15
Notes to Financial Statements
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
September 30, 2003
NOTE A
Significant Accounting Policies
AllianceBernstein Bond Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company. The Fund, which is a Maryland corporation, operates as a series company
currently comprised of three portfolios: the Corporate Bond Portfolio, the
Quality Bond Portfolio and the U.S. Government Portfolio. Each series is
considered to be a separate entity for financial reporting and tax purposes.
This report relates only to the U.S. Government Portfolio. The U.S. Government
Portfolio (the "Portfolio") offers Class A, Class B, Class C and Advisor Class
shares. Class A shares are sold with a front-end sales charge of up to 4.25% for
purchases not exceeding $1,000,000. With respect to purchases of $1,000,000 or
more, Class A shares redeemed within one year of purchase may be subject to a
contingent deferred sales charge of 1%. Class B shares are currently sold with a
contingent deferred sales charge which declines from 3% to zero depending on the
period of time the shares are held. Class B shares will automatically convert to
Class A shares six years after the end of the calendar month of purchase. Class
C shares are subject to a contingent deferred sales charge of 1% on redemptions
made within the first year after purchase. Advisor Class shares are sold without
any initial or contingent deferred sales charge and are not subject to ongoing
distribution expenses. Advisor Class shares are offered to investors
participating in fee-based programs and to certain retirement plan accounts. All
four classes of shares have identical voting, dividend, liquidation and other
rights, except that each class bears different distribution expenses and has
exclusive voting rights with respect to its distribution plan. The financial
statements have been prepared in conformity with accounting principles generally
accepted in the United States which require management to make certain estimates
and assumptions that affect the reported amounts of assets and liabilities in
the financial statements and amounts of income and expenses during the reporting
period. Actual results could differ from those estimates. Additional information
about some of the items discussed in these Notes to Financial Statements is
contained in the Fund's Statement of Additional Information, which is available
upon request. The following is a summary of significant accounting policies
followed by the Portfolio.
1. Security Valuation
In accordance with Pricing Policies adopted by the Board of Directors of the
Fund (the "Pricing Policies") and applicable law, portfolio securities are
valued at current market value or at fair value. The Board of Directors has
delegated to the Adviser, subject to the Board's continuing oversight, certain
responsibilities with respect to the implementation of the Pricing Policies.
Pursuant to the Pricing Policies, securities for which market quotations are
readily available are valued at their current market value. In general, the
market value of these securities is determined as follows:
- --------------------------------------------------------------------------------
16 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
Notes to Financial Statements
- --------------------------------------------------------------------------------
Securities listed on a national securities exchange 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. If no bid or asked prices are quoted on such day, then the security is
valued in good faith at fair value in accordance with the Pricing Policies.
Securities listed on more than one exchange are valued by reference to the
principal exchange on which the securities are traded; securities not listed on
an exchange but traded on The Nasdaq Stock Market, Inc. ("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 valuations, the last available closing
settlement price is used; securities traded in the over-the-counter market, (but
excluding securities traded on NASDAQ) 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, the Pricing Policies provide that 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 are valued at fair value in
accordance with the Pricing Policies.
2. Taxes
It is the Portfolio'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.
3. Investment Income and Investment Transactions
Interest income is accrued daily. Investment transactions are accounted for on
the date securities are purchased or sold. Investment gains and losses are
determined on the identified cost basis. The Portfolio accretes discounts as
adjustments to interest income. Additionally, the Portfolio amortizes premiums
on debt securities for financial statement reporting purposes.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 17
Notes to Financial Statements
- --------------------------------------------------------------------------------
4. Income and Expenses
All income earned and expenses incurred by the Portfolio are borne on a pro rata
basis by each settled class of shares, based on the proportionate interest in
the Portfolio represented by the net assets of such class, except that the
Portfolio's Class B and Class C shares bear higher distribution and transfer
agent fees than Class A and Advisor Class shares. Advisor Class shares have no
distribution fees.
5. Dividends and Distributions
Dividends and distributions to shareholders 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 accounting principles generally accepted in the United States.
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.
6. Repurchase Agreements
It is the Portfolio's policy that its custodian or designated subcustodian take
control of securities as collateral under repurchase agreements and to determine
on a daily basis that the value of such securities are sufficient to cover the
value of the repurchase agreements. If the seller defaults and the value of the
collateral declines or if bankruptcy proceedings are commenced with respect to
the seller of the security, realization of collateral by the Portfolio may be
delayed or limited.
7. Change of Fiscal Year End
The Fund changed its fiscal year end from June 30 to September 30. Accordingly,
the statement of operations, the statement of changes in net assets and
financial highlights reflect the period from July 1, 2003 to September 30, 2003.
NOTE B
Advisory Fee and Other Transactions with Affiliates
Under the terms of an investment advisory agreement, the Portfolio pays Alliance
Capital Management L.P. (the "Adviser") an advisory fee at a quarterly rate of
..15 of 1% (approximately .60 of 1% on an annual basis) of the first $500 million
of the Portfolio's net assets and .125 of 1% (approximately .50 of 1% on an
annual basis) of its net assets over $500 million, valued on the last business
day of the previous quarter.
Pursuant to the advisory agreement, the Portfolio paid $30,340 and $124,000,
respectively, to the Adviser representing the cost of certain legal and
accounting services provided to the Portfolio by the Adviser for the period
ended September 30, 2003 and the year ended June 30, 2003.
- --------------------------------------------------------------------------------
18 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
Notes to Financial Statements
- --------------------------------------------------------------------------------
The Portfolio compensates Alliance Global Investor Services, Inc. (AGIS), a
wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for
providing personnel and facilities to perform transfer agency services for the
Portfolio. Such compensation amounted to $584,436 and $2,495,897, respectively,
for the period ended September 30, 2003 and the year ended June 30, 2003.
For the period ended September 30, 2003 and the year ended June 30, 2003, the
Portfolio's expenses were reduced by $94 and $2,955, respectively, under an
expense offset arrangement with AGIS.
AllianceBernstein Investment Research and Management, Inc. (the "Distributor"),
a wholly-owned subsidiary of the Adviser, serves as the distributor of the
Portfolio's shares. The Distributor has advised the Portfolio that it has
retained front-end sales charges of $3,507 and $48,272 from the sales of Class A
shares and received $3,972 and $108,249; $329,394 and $1,116,604; and $9,534 and
$64,753, respectively, in contingent deferred sales charges imposed upon
redemptions by shareholders of Class A, Class B and Class C shares,
respectively, for the period ended September 30, 2003 and the year ended June
30, 2003.
NOTE C
Distribution Services Agreement
The Portfolio has adopted a Distribution Services Agreement (the "Agreement")
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the
Agreement, the Portfolio pays distribution and servicing fees to the Distributor
at an annual rate of up to .30 of 1% of the Portfolio's average daily net assets
attributable to Class A shares and 1% of the average daily net assets
attributable to both Class B and Class C shares. There are no distribution and
servicing fees on the Advisor Class shares. The fees are accrued daily and paid
monthly. The Agreement provides that the Distributor will use such payments in
their entirety for distribution assistance and promotional activities. The
Distributor has advised the Portfolio that it has incurred expenses in excess of
the distribution costs reimbursed by the Portfolio in the amount of $6,164,859,
and $5,929,811 for Class B and Class C shares, respectively; such costs may be
recovered from the Portfolio in future periods as long as the Agreement is in
effect. In accordance with the Agreement, there is no provision for recovery of
unreimbursed distribution costs incurred by the Distributor beyond the current
fiscal year for Class A shares. The Agreement also provides that the Adviser may
use its own resources to finance the distribution of the Portfolio's shares.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 19
Notes to Financial Statements
- --------------------------------------------------------------------------------
NOTE D
Investment Transactions
Purchases and sales of investment securities (excluding short-term investments)
for the period ended September 30, 2003, were as follows:
Purchases Sales
============== ==============
Investment securities (excluding
U.S. government securities) ...... $ 88,727,945 $ 58,133,915
U.S. government securities ......... 4,552,554,045 4,198,939,429
The cost of investments for federal income tax purposes, gross unrealized
appreciation and unrealized depreciation (excluding the written option and
futures) are as follows:
Cost ..................................................... $ 2,483,734,387
===============
Gross unrealized appreciation ............................ $ 35,215,614
Gross unrealized depreciation ............................ (15,521,576)
---------------
Net unrealized appreciation .............................. $ 19,694,038
===============
1. Financial Futures Contracts
The Portfolio may buy or sell financial futures contracts for the purpose of
hedging its portfolio against adverse effects of anticipated movements in the
market. The Portfolio bears the market risk that arises from changes in the
value of these financial instruments and the imperfect correlation between
movements in the price of the futures contracts and movements in the price of
the securities hedged or used for cover.
At the time the Portfolio enters into a futures contract, the Portfolio deposits
and maintains as collateral an initial margin as required by the exchange on
which the transaction is affected. Pursuant to the contract, the Portfolio
agrees to receive from or pay to the broker an amount of cash equal to the daily
fluctuation in the value of the contract. Such receipts or payments are known as
variation margin and are recorded by the Portfolio as unrealized gains or
losses. Risks may arise from the potential inability of a counterparty to meet
the terms of the contract. When the contract is closed, the Portfolio records a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the time it was closed.
2. Swap Agreements
The Portfolio may enter into interest rate swaps to protect itself from interest
rate fluctuations on the underlying debt instruments. A swap is an agreement
that obligates two parties to exchange a series of cash flows at specified
intervals based upon or calculated by reference to changes in specified prices
or rates for a specified amount of an underlying asset. The payment flows are
usually netted against each other, with the difference being paid by one party
to the other.
- --------------------------------------------------------------------------------
20 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
Notes to Financial Statements
- --------------------------------------------------------------------------------
Risks may arise as a result of the failure of the counterparty to the swap
contract to comply with the terms of the swap contract. The loss incurred by the
failure of a counterparty is generally limited to the net interest payment to be
received by the Portfolio, and/or the termination value at the end of the
contract. Therefore, the Portfolio considers the creditworthiness of each
counterparty to a swap contract in evaluating potential credit risk.
Additionally, risks may arise from unanticipated movements in interest rates or
in the value of the underlying securities.
The Portfolio records a net receivable or payable on a daily basis for the net
interest income or expense expected to be received or paid in the interest
period. Net interest received or paid on these contracts is recorded as interest
income (or as an offset to interest income). Fluctuations in the value of swap
contracts are recorded for financial statement purposes as a component of net
change in unrealized appreciation/depreciation of investments. Realized gains
and losses from terminated swaps are included in net realized gains or losses on
investment transactions.
3. Option Transactions
For hedging and investment purposes, the Portfolio may purchase and write (sell)
put and call options on U.S. and foreign government securities and foreign
currencies that are traded on U.S. and foreign securities exchanges and
over-the-counter markets.
The risk associated with purchasing an option is that the Portfolio pays a
premium whether or not the option is exercised. Additionally, the Portfolio
bears the risk of loss of premium and change in market value should the
counterparty not perform under the contract. Put and call options purchased are
accounted for in the same manner as portfolio securities. The cost of securities
acquired through the exercise of call options is increased by premiums paid. The
proceeds from securities sold through the exercise of put options are decreased
by the premiums paid.
When the Portfolio writes an option, the premium received by the Portfolio is
recorded as a liability and is subsequently adjusted to the current market value
of the option written. Premiums received from written options which expire
unexercised are recorded by the Portfolio on the expiration date as realized
gains from options written. The difference between the premium received and the
amount paid on effecting a closing purchase transaction, including brokerage
commissions, is also treated as a realized gain, or if the premium received is
less than the amount paid for the closing purchase transaction, as a realized
loss. If a call option is exercised, the premium received is added to the
proceeds from the sale of the underlying security in determining whether the
Portfolio has realized a gain or loss. If a put option is exercised, the premium
received reduces the cost basis of the security purchased by the Portfolio. In
writing an option, the
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 21
Notes to Financial Statements
- --------------------------------------------------------------------------------
Portfolio bears the market risk of an unfavorable change in the price of the
security underlying the written option. Exercise of an option written by the
Portfolio could result in the Portfolio selling or buying a security at a price
different from the current market value.
Transactions in options written for the period ended September 30, 2003 were as
follows:
Number of Premiums
Contracts Received
=========== =============
Options outstanding at beginning of
the period ........................ -0- $ -0-
Options written ...................... 2,250 1,072,265
Options terminated in closing purchase
transactions ...................... -0- -0-
Options exercised .................... -0- -0-
----------- -------------
Options outstanding at
September 30, 2003 ................ 2,250 $ 1,072,265
=========== =============
4. Reverse Repurchase Agreements
Under a reverse repurchase agreement, the Portfolio sells securities and agrees
to repurchase them at a mutually agreed upon date and price. At the time the
Portfolio enters into a reverse repurchase agreement, it will establish a
segregated account with the custodian containing liquid assets having a value at
least equal to the repurchase price.
For the period from July 1, 2003 to September 30, 2003, the average amount of
reverse repurchase agreements outstanding was $126,781,942 and the daily
weighted average annualized interest rate was 1.05%.
NOTE E
Securities Lending
The Portfolio has entered into a securities lending agreement with AG Edwards &
Sons, Inc. (the "Lending Agent"). Under the terms of the agreement, the Lending
Agent, on behalf of the Portfolio, administers the lending of portfolio
securities to certain broker-dealers. In return, the Portfolio receives fee
income from the lending transactions or it retains a portion of interest on the
investment of any cash received as collateral. The Portfolio also continues to
receive dividends or interest on the securities loaned. Unrealized gain or loss
on the value of the securities loaned that may occur during the term of the loan
will be reflected in the accounts of the Portfolio. All loans are continuously
secured by collateral exceeding the value of the securities loaned. All
collateral consists of either cash or U.S. government securities. The Lending
Agent may invest the cash collateral received in accordance with the investment
restrictions of the Portfolio in one or more of the following investments: U.S.
government or U.S. government agency obligations, bank obligations, corporate
debt obligations, asset-backed securities,
- --------------------------------------------------------------------------------
22 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
Notes to Financial Statements
- --------------------------------------------------------------------------------
investment funds, structured products, repurchase agreements and an eligible
money market fund. The Lending Agent will indemnify the Portfolio for any loss
resulting from a borrower's failure to return a loaned security when due. As of
September 30, 2003, the Portfolio had loaned securities with a value of
$559,066,809 and received cash collateral which was invested in short-term
securities valued at $564,733,238 as included in the accompanying portfolio of
investments. For the period ended September 30, 2003 and the year ended June 30,
2003, the Portfolio earned fee income of $595,892 and $1,412,548, respectively,
which is included in interest income in the accompanying statement of
operations.
NOTE F
Capital Stock
There are 12,000,000,000 shares of $.001 par value capital stock authorized,
divided into four classes, designated Class A, Class B, Class C and Advisor
Class shares. Each class consists of 3,000,000,000 authorized shares.
Transactions in capital stock were as follows:
---------------------------------------------------------
Shares
---------------------------------------------------------
July 1, 2003 to Year Ended Year Ended
September 30, June 30, June 30,
2003(a) 2003 2002
---------------------------------------------------------
Class A
Shares sold 7,081,876 99,871,241 147,432,112
- ------------------------------------------------------------------------------------------
Shares issued in reinvestment
of dividends 842,226 3,397,687 4,167,873
- ------------------------------------------------------------------------------------------
Shares converted from Class B 623,756 2,638,670 3,136,090
- ------------------------------------------------------------------------------------------
Shares redeemed (15,589,912) (107,352,732) (158,502,944)
- ------------------------------------------------------------------------------------------
Net decrease (7,042,054) (1,445,134) (3,766,869)
==========================================================================================
Class B
Shares sold 1,785,384 41,363,192 39,137,935
- ------------------------------------------------------------------------------------------
Shares issued in reinvestment
of dividends 384,985 1,747,439 1,616,781
- ------------------------------------------------------------------------------------------
Shares converted to Class A (623,756) (2,666,482) (3,546,194)
- ------------------------------------------------------------------------------------------
Shares redeemed (12,799,293) (29,791,395) (20,377,516)
- ------------------------------------------------------------------------------------------
Net increase (decrease) (11,252,680) 10,652,754 16,831,006
==========================================================================================
Class C
Shares sold 743,732 17,523,866 19,154,718
- ------------------------------------------------------------------------------------------
Shares issued in reinvestment
of dividends 147,804 741,897 910,419
- ------------------------------------------------------------------------------------------
Shares redeemed (5,091,572) (19,058,320) (15,734,751)
- ------------------------------------------------------------------------------------------
Net increase (decrease) (4,200,036) (792,557) 4,330,386
==========================================================================================
(a) The Portfolio changed its fiscal year end from June 30 to September 30.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 23
Notes to Financial Statements
- --------------------------------------------------------------------------------
-------------------------------------------------------------
Shares
-------------------------------------------------------------
July 1, 2003 to Year Ended Year Ended
September 30, June 30, June 30,
2003(a) 2003 2002
-------------------------------------------------------------
Advisor Class
Shares sold 1,553,934 5,728,180 20,316,829
- ------------------------------------------------------------------------------------------------
Shares issued in reinvestment
of dividends 332,740 1,166,739 818,898
- ------------------------------------------------------------------------------------------------
Shares redeemed (186,666) (5,229,251) (264,735)
- ------------------------------------------------------------------------------------------------
Net increase 1,700,008 1,665,668 20,870,992
================================================================================================
(a) The Portfolio changed its fiscal year end from June 30 to September 30.
-------------------------------------------------------------
Amount
-------------------------------------------------------------
July 1, 2003 to Year Ended Year Ended
September 30, June 30, June 30,
2003(a) 2003 2002
-------------------------------------------------------------
Class A
Shares sold $ 51,268,823 $ 738,562,949 $ 1,062,360,414
- ------------------------------------------------------------------------------------------------
Shares issued in reinvestment
of dividends 6,086,303 25,217,655 30,124,250
- ------------------------------------------------------------------------------------------------
Shares converted from Class B 4,387,602 19,834,712 24,883,707
- ------------------------------------------------------------------------------------------------
Shares redeemed (112,373,614) (794,926,312) (1,143,883,509)
- ------------------------------------------------------------------------------------------------
Net decrease $ (50,630,886) $ (11,310,996) $ (26,515,138)
================================================================================================
Class B
Shares sold $ 12,927,847 $ 305,612,817 $ 285,085,120
- ------------------------------------------------------------------------------------------------
Shares issued in reinvestment
of dividends 2,781,869 12,971,394 11,691,662
- ------------------------------------------------------------------------------------------------
Shares converted to Class A (4,387,602) (19,834,712) (24,883,707)
- ------------------------------------------------------------------------------------------------
Shares redeemed (92,309,168) (221,190,959) (148,144,475)
- ------------------------------------------------------------------------------------------------
Net increase (decrease) $ (80,987,054) $ 77,558,540 $ 123,748,600
================================================================================================
Class C
Shares sold $ 5,399,978 $ 129,704,727 $ 139,438,986
- ------------------------------------------------------------------------------------------------
Shares issued in reinvestment
of dividends 1,069,553 5,512,251 6,592,467
- ------------------------------------------------------------------------------------------------
Shares redeemed (36,840,779) (141,500,884) (113,989,182)
- ------------------------------------------------------------------------------------------------
Net increase (decrease) $ (30,371,248) $ (6,283,906) $ 32,042,271
================================================================================================
Advisor Class
Shares sold $ 11,241,378 $ 42,725,185 $ 146,617,899
- ------------------------------------------------------------------------------------------------
Shares issued in reinvestment
of dividends 2,407,372 8,673,997 5,898,085
- ------------------------------------------------------------------------------------------------
Shares redeemed (1,347,836) (38,496,136) (1,907,859)
- ------------------------------------------------------------------------------------------------
Net increase $ 12,300,914 $ 12,903,046 $ 150,608,125
================================================================================================
(a) The Portfolio changed its fiscal year end from June 30 to September 30.
- --------------------------------------------------------------------------------
24 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
Notes to Financial Statements
- --------------------------------------------------------------------------------
NOTE G
Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the
Portfolio, participate in a $500 million revolving credit facility (the
"Facility") to provide short-term financing if necessary, in connection with
abnormal redemption activity. Commitment fees related to the Facility are paid
by the participating funds and are included in the miscellaneous expenses in the
statement of operations. The Portfolio did not utilize the Facility during the
period ended September 30, 2003.
NOTE H
Distributions to Shareholders
The tax character of distributions paid during the period ended September 30,
2003, and the fiscal years ended June 30, 2003 and June 30, 2002 were as
follows:
July 1, 2003 to Year Ended Year Ended
September 30, June 30, June 30,
2003* 2003 2002
=============== =========== ===========
Distributions paid
from:
Ordinary income ..... $18,227,208 $80,099,077 $82,835,463
----------- ----------- -----------
Total taxable
distributions ....... 18,227,208 80,099,077 82,835,463
Tax return of
capital ........... -0- -0- 5,174,446
----------- ----------- -----------
Total distributions
paid ................ $18,227,208 $80,099,077 $88,009,909(a)
=========== =========== ===========
As of September 30, 2003, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Accumulated capital and other losses .............. $(158,051,293)(b)
Unrealized appreciation/(depreciation) ............ 16,844,419(c)
-------------
Total accumulated earnings/(deficit) .............. $(141,206,874)
=============
* The Portfolio changed its fiscal year end from June 30 to September 30.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 25
Notes to Financial Statements
- --------------------------------------------------------------------------------
(a) Total distributions paid differ from the Statement of Changes in Net
Assets because for tax purposes dividends are recognized when actually
paid.
(b) On September 30, 2003, the Fund had a net capital loss carryforward for
federal income tax purposes of $153,542,290 (of which $5,207,458 and
$21,956,032 were attributable to the purchase of net assets of Alliance
Limited Maturity Government Income Fund, Inc. and Alliance Mortgage
Securities Income Fund, Inc., respectively, by the Fund in December of
2000), of which $51,829,521 expires in the year 2004, $6,928,773 expires
in the year 2005, $16,083,708 expires in the year 2006, $48,732,137
expires in the year 2007, $6,470,420 expires in the year 2008 and
$23,497,731 expires in the year 2011. To the extent future capital gains
are offset by capital loss carryforwards, such gains will not be
distributed. During the fiscal year ended September 30, 2003, $64,973,014
of capital loss carryforward expired. Based on certain provision in the
Internal Revenue Code, various limitations regarding the future
utilization of these carryforwards, brought forward as a result of the
Portfolio's merger with Alliance Limited Maturity Government, Inc. may
apply. For the year ended September 30, 2003 the Fund deferred losses on
straddles of $4,509,003.
(c) The difference between book-basis and tax-basis unrealized
appreciation/(depreciation) are attributable primarily to the tax deferral
of losses on wash sales and the difference between book and tax
amortization methods for premium.
During the current fiscal period, permanent differences, primarily due to a tax
distribution in excess of earnings, tax character of paydown losses, expiration
of capital loss carryforwards and the tax treatment of bond premium, resulted in
a net decrease in distributions in excess of net investment income, a net
decrease in accumulated net realized loss on investments and a decrease in
additional paid-in capital. This reclassification had no effect on net assets.
NOTE I
Legal Proceedings
Alliance Capital Management L.P. ("Alliance Capital"), the Fund's Adviser, is
currently under investigation by the Office of the New York State Attorney
General ("NYAG") and the United States Securities and Exchange Commission
("SEC") in connection with their investigation of practices in the mutual fund
industry identified as "market timing" and "late trading" of mutual fund shares.
Certain other regulatory authorities are also conducting investigations into
these practices within the industry and have requested that Alliance Capital
provide information to them. Alliance Capital has been cooperating with all of
these authorities and has been conducting its own internal investigation into
these matters. In addition, Alliance Capital's Board of Directors authorized a
special committee, comprised of the members of Alliance Capital's Audit
Committee and the other independent member of the Board, to direct and oversee a
comprehensive review of the facts and circumstances relevant to the SEC's and
the NYAG's investigations.
On October 2, 2003, a putative class action complaint entitled Hindo et al. v.
AllianceBernstein Growth & Income Fund et al. (the "Hindo Complaint") was filed
against Alliance Capital; Alliance Capital Management Holding L.P.; Alliance
Capital Management Corporation; AXA Financial, Inc.; certain of the
AllianceBernstein Mutual Funds, including the Fund; Gerald Malone; Charles
Schaffran (collectively, the "Alliance Capital defendants"); and certain other
- --------------------------------------------------------------------------------
26 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
Notes to Financial Statements
- --------------------------------------------------------------------------------
defendants not affiliated with Alliance Capital. The Hindo Complaint was filed
in the United States District Court for the Southern District of New York by
alleged shareholders of two of the AllianceBernstein Mutual Funds. The Hindo
Complaint alleges that certain of the Alliance Capital defendants failed to
disclose that they improperly allowed certain hedge funds and other unidentified
parties to engage in late trading and market timing of AllianceBernstein Fund
securities, violating Sections 11 and 15 of the Securities Act, Sections 10(b)
and 20(a) of the Exchange Act, and Sections 206 and 215 of the Advisers Act.
Plaintiffs seek an unspecified amount of compensatory damages and rescission of
their contracts with Alliance Capital, including recovery of all fees paid to
Alliance Capital pursuant to such contracts.
Between October 3 and November 13, 2003, twenty-one additional lawsuits making
factual allegations similar to those in the Hindo Complaint were filed against
Alliance Capital and certain other defendants. All of these lawsuits seek an
unspecified amount of damages.
Through November 14, 2003, Alliance Capital's internal investigation has
revealed that Alliance Capital maintained relationships with certain investors
who were permitted to engage in market timing trades in certain
AllianceBernstein Mutual Funds in return for or in connection with making
investments (which were not actively traded) in other Alliance Capital products,
including hedge funds and mutual funds, for which Alliance Capital receives
advisory fees ("Market Timing Relationships"). Alliance Capital believes that
these Market Timing Relationships created conflicts of interest and that certain
of the trades made pursuant to these relationships had an adverse effect on some
shareholders of the AllianceBernstein Mutual Funds. These matters are the
subject of the ongoing internal investigation by Alliance Capital.
As a result of Alliance Capital's involvement in market timing or for other
reasons, investors in the AllianceBernstein Mutual Funds may choose to redeem
their investments. This may require the AllianceBernstein Mutual Funds to sell
investments held by those funds to provide for sufficient liquidity and could
also have an adverse effect on the investment performance of the
AllianceBernstein Mutual Funds.
Any resolution of Alliance Capital's involvement in market timing and the
related SEC and NYAG investigations and private lawsuits is likely to include,
but not be limited to, sanctions, penalties, appropriate restitution to mutual
fund shareholders and structural changes in the governance of Alliance Capital's
mutual fund business. Alliance Capital is committed to full restitution of the
adverse effects that inappropriate market timing transactions allowed by
Alliance Capital had on the shareholders of the AllianceBernstein Mutual Funds.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 27
Financial Highlights
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
=============================================================================================
Class A
=============================================================================================
July 1, 2003
to Year Ended June 30,
September 30, ----------------------------------------------------------------------
2003(a) 2003 2002(b) 2001 2000 1999
---------------------------------------------------------------------------------------------
Net asset value,
beginning of period .............. $ 7.49 $ 7.21 $ 7.14 $ 6.99 $ 7.19 $ 7.57
---------------------------------------------------------------------------------------------
Income From Investment
Operations
Net investment income(c) ........... .06 .27 .37 .47 .50 .52
Net realized and unrealized
gain (loss) on investment
transactions ..................... (.20) .35 .13 .17 (.20) (.37)
---------------------------------------------------------------------------------------------
Net increase (decrease) in net
asset value from operations ...... (.14) .62 .50 .64 .30 .15
---------------------------------------------------------------------------------------------
Less: Dividends and
Distributions
Dividends from net investment
income ........................... (.08) (.34) (.37) (.47) (.49) (.52)
Distributions in excess of
net investment income ............ -0- -0- (.03) (.01) -0- (.01)
Tax return of capital .............. -0- -0- (.03) (.01) (.01) -0-
---------------------------------------------------------------------------------------------
Total dividends and distributions .. (.08) (.34) (.43) (.49) (.50) (.53)
---------------------------------------------------------------------------------------------
Net asset value, end of period ..... $ 7.27 $ 7.49 $ 7.21 $ 7.14 $ 6.99 $ 7.19
=============================================================================================
Total Return
Total investment return based
on net asset value(d) ............ (1.80)% 8.82% 7.11% 9.30% 4.41% 1.83%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) .................. $ 811,376 $ 889,115 $ 865,739 $ 884,574 $ 430,895 $ 426,167
Ratio to average net assets of:
Expenses ......................... 1.18%(e) 1.10% 1.23% 2.11% 2.14% 1.17%
Expenses, excluding interest
expense ........................ 1.11%(e) 1.09% 1.09% 1.13% 1.12% 1.08%
Net investment income ............ 3.43%(e) 3.64% 5.15% 6.57% 7.13% 6.86%
Portfolio turnover rate ............ 241% 976% 1,009% 712% 398% 320%
See footnote summary on page 31.
- --------------------------------------------------------------------------------
28 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
=============================================================================================
Class B
=============================================================================================
July 1, 2003
to Year Ended June 30,
September 30, ----------------------------------------------------------------------
2003(a) 2003 2002(b) 2001 2000 1999
---------------------------------------------------------------------------------------------
Net asset value,
beginning of period .............. $ 7.49 $ 7.21 $ 7.14 $ 7.00 $ 7.20 $ 7.57
---------------------------------------------------------------------------------------------
Income From Investment
Operations
Net investment income(c) ........... .05 .22 .32 .42 .44 .46
Net realized and unrealized
gain (loss) on investment
transactions ..................... (.20) .35 .13 .16 (.19) (.36)
---------------------------------------------------------------------------------------------
Net increase (decrease) in net
asset value from operations ...... (.15) .57 .45 .58 .25 .10
---------------------------------------------------------------------------------------------
Less: Dividends and
Distributions
Dividends from net investment
income ........................... (.07) (.29) (.32) (.42) (.44) (.46)
Distributions in excess of
net investment income ............ -0- -0- (.03) (.01) -0- (.01)
Tax return of capital .............. -0- -0- (.03) (.01) (.01) -0-
---------------------------------------------------------------------------------------------
Total dividends and distributions .. (.07) (.29) (.38) (.44) (.45) (.47)
---------------------------------------------------------------------------------------------
Net asset value, end of period ..... $ 7.27 $ 7.49 $ 7.21 $ 7.14 $ 7.00 $ 7.20
=============================================================================================
Total Return
Total investment return based
on net asset value(d) ............ (1.98)% 8.07% 6.36% 8.39% 3.64% 1.22%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) .................. $ 399,040 $ 495,606 $ 400,221 $ 276,308 $200,283 $ 338,310
Ratio to average net assets of:
Expenses ......................... 1.90%(e) 1.82% 1.93% 2.90% 2.80% 1.87%
Expenses, excluding interest
expense ........................ 1.83%(e) 1.81% 1.80% 1.83% 1.83% 1.79%
Net investment income ............ 2.75%(e) 2.95% 4.41% 5.95% 6.28% 6.13%
Portfolio turnover rate ............ 241% 976% 1,009% 712% 398% 320%
See footnote summary on page 31.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 29
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
=============================================================================================
Class C
=============================================================================================
July 1, 2003
to Year Ended June 30,
September 30, ----------------------------------------------------------------------
2003(a) 2003 2002(b) 2001 2000 1999
---------------------------------------------------------------------------------------------
Net asset value,
beginning of period ............... $ 7.50 $ 7.22 $ 7.15 $ 7.00 $ 7.20 $ 7.57
---------------------------------------------------------------------------------------------
Income From Investment
Operations
Net investment income(c) ............ .05 .22 .32 .43 .45 .46
Net realized and unrealized
gain (loss) on investment
transactions ...................... (.20) .35 .13 .16 (.20) (.36)
---------------------------------------------------------------------------------------------
Net increase (decrease) in net
asset value from operations ....... (.15) .57 .45 .59 .25 .10
---------------------------------------------------------------------------------------------
Less: Dividends and
Distributions
Dividends from net investment
income ............................ (.07) (.29) (.32) (.43) (.44) (.46)
Distributions in excess of
net investment income ............. -0- -0- (.03) (.01) -0- (.01)
Tax return of capital ............... -0- -0- (.03) -0- (.01) -0-
---------------------------------------------------------------------------------------------
Total dividends and distributions ... (.07) (.29) (.38) (.44) (.45) (.47)
---------------------------------------------------------------------------------------------
Net asset value, end of period ...... $ 7.28 $ 7.50 $ 7.22 $ 7.15 $ 7.00 $ 7.20
=============================================================================================
Total Return
Total investment return based
on net asset value(d) ............. (1.98)% 8.06% 6.35% 8.54% 3.64% 1.22%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) ................... $ 167,359 $ 204,006 $ 202,030 $ 169,213 $112,808 $ 144,145
Ratio to average net assets of:
Expenses .......................... 1.89%(e) 1.81% 1.93% 2.89% 2.82% 1.87%
Expenses, excluding interest
expense ......................... 1.83%(e) 1.80% 1.79% 1.83% 1.83% 1.78%
Net investment income ............. 2.76%(e) 2.96% 4.42% 5.94% 6.35% 6.13%
Portfolio turnover rate ............. 241% 976% 1,009% 712% 398% 320%
See footnote summary on page 31.
- --------------------------------------------------------------------------------
30 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
=================================================================
Advisor Class
=================================================================
July 1, 2003 October 6
to Year Ended June 30, 2000(f) to
September 30, ------------------------------ June 30,
2003(a) 2003 2002(b) 2001
-----------------------------------------------------------------
Net asset value,
beginning of period ............... $ 7.50 $ 7.21 $ 7.14 $ 7.05
-----------------------------------------------------------------
Income From Investment
Operations
Net investment income(c) ............ .07 .29 .39 .34
Net realized and unrealized
gain (loss) on
investment transactions ........... (.20) .37 .13 .12
-----------------------------------------------------------------
Net increase (decrease) in net
asset value
from operations ................... (.13) .66 .52 .46
-----------------------------------------------------------------
Less: Dividends and
Distributions
Dividends from net investment
income ............... ............ (.09) (.37) (.39) (.34)
Distributions in excess of
net investment income ... ......... -0- -0- (.03) (.02)
Tax return of capital ............... -0- -0- (.03) (.01)
-----------------------------------------------------------------
Total dividends and
distributions ..................... (.09) (.37) (.45) (.37)
-----------------------------------------------------------------
Net asset value, end of
period ............................ $ 7.28 $ 7.50 $ 7.21 $ 7.14
=================================================================
Total Return
Total investment return based on
net asset value(d) ................ (1.72)% 9.29% 7.41% 6.65%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) ................... $ 204,108 $ 197,649 $ 177,834 $ 27,154
Ratio to average net assets of:
Expenses .......................... .89%(e) .81% .89% 1.38%(e)
Expenses, excluding
interest expense ................ .81%(e) .80% .81% .81%(e)
Net investment income ............. 3.72%(e) 3.96% 5.41% 6.74%(e)
Portfolio turnover rate ............. 241% 976% 1,009% 712%
(a) The Portfolio changed its fiscal year end from June 30 to September 30.
(b) As required, effective July 1, 2001, the Portfolio has 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. The effect of this change for the year
ended June 30, 2002 was to decrease net investment income per share by
$.03, increase net realized and unrealized gain on investment transactions
per share by $.03, and decrease the ratio of net investment income to
average net assets from 5.56% to 5.15% for Class A, from 4.82% to 4.41%
for Class B, from 4.83% to 4.42% for Class C and from 5.81% to 5.41% for
Advisor Class. Per share, ratios and supplemental data for periods prior
to July 1, 2001 have not been restated to reflect this change in
presentation.
(c) Based on average shares outstanding.
(d) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales charges or
contingent deferred sales charges are 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 return calculated for a
period of less than one year is not annualized.
(e) Annualized.
(f) Commencement of distribution.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 31
Report of Ernst & Young LLP, Independent Auditors
- --------------------------------------------------------------------------------
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
To the Shareholders and Board of Directors
of AllianceBernstein Bond Fund, Inc.
U.S. Government Portfolio
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the U.S. Government Portfolio (the
"Portfolio"), one of the portfolios constituting the AllianceBernstein Bond
Fund, Inc., as of September 30, 2003, and the related statement of operations
for the period from July 1, 2003 to September 30, 2003 and for the year ended
June 30, 2003, the statement of changes in net assets for the period from July
1, 2003 to September 30, 2003 and for each of the two years in the period ended
June 30, 2003, and the financial highlights for the period from July 1, 2003 to
September 30, 2003 and for each of the five years in the period ended June 30,
2003. These financial statements and financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of September 30, 2003, by correspondence with the custodian and others.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
U.S. Government Portfolio of the AllianceBernstein Bond Fund, Inc. at September
30, 2003, the results of its operations for the period from July 1, 2003 to
September 30, 2003 and for the year ended June 30, 2003, the changes in its net
assets for the period from July 1, 2003 to September 30, 2003 and for each of
the two years in the period ended June 30, 2003, and the financial highlights
for the period from July 1, 2003 to September 30, 2003 and for each of the five
years in the period ended June 30, 2003, in conformity with accounting
principles generally accepted in the United States.
/s/ Ernst & Young LLP
New York, New York
November 14, 2003
- --------------------------------------------------------------------------------
32 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
BOARD OF DIRECTORS
William H. Foulk, Jr.(1), Chairman
Marc O. Mayer, President
Ruth Block(1)
David H. Dievler(1)
John H. Dobkin(1)
Clifford L. Michel(1)
Donald J. Robinson(1)
OFFICERS
Kathleen A. Corbet, Senior Vice President
Matthew D.W. Bloom, Vice President
Paul J. DeNoon, Vice President
S. Sean Kelleher(2), Vice President
Jeffrey S. Phlegar, Vice President
Kewjin Yuoh, Vice President
Mark D. Gersten, Treasurer & Chief Financial Officer
Vincent S. Noto, Controller
Custodian
State Street Bank & Trust Company
225 Franklin Street
Boston, MA 02110
Principal Underwriter
AllianceBernstein Investment
Research and Management, Inc.
1345 Avenue of the Americas
New York, NY 10105
Transfer Agent
Alliance Global Investor Services, Inc.
P.O. Box 786003
San Antonio, Texas 78278-6003
Toll-Free (800) 221-5672
Independent Auditors
Ernst & Young LLP
5 Times Square
New York, NY 10036
Legal Counsel
Seward & Kissel LLP
One Battery Park Plaza
New York, NY 10004
(1) Member of the Audit Committee.
(2) Mr. Kelleher is the person primarily responsible for the day-to-day
management of the Portfolio's investment portfolio.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 33
MANAGEMENT OF THE FUND
Board of Directors Information
The business and affairs of the Fund are managed under the direction of the
Board of Directors. Certain information concerning the Fund's Directors is set
forth below.
PORTFOLIOS
IN FUND OTHER
NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIPS
ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY
(YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR
- ---------------------------------------------------------------------------------------------------
DISINTERESTED DIRECTORS
William H. Foulk, Jr., #+, 71 Investment Adviser and an 113 None
2 Sound View Drive independent consultant. He was
Suite 100 formerly Senior Manager of Barrett
Greenwich, CT 06830 Associates, Inc., a registered
(5) investment adviser, with which
Chairman of the Board he had been associated since prior
to 1998. He was formerly Deputy Comptroller and
Chief Investment Officer of the State of New
York and, prior thereto, Chief Investment
Officer of the New York Bank for Savings.
Ruth Block, #+, 73 Formerly Executive Vice 96 None
500 SE Mizner Blvd. President and Chief Insurance
Boca Raton, FL 33432 Officer of The Equitable Life
(15) Assurance Society of the United
States; Chairman and Chief Executive Officer of
Evlico; Director of Avon, BP (oil and gas),
Ecolab Incorporated (specialty chemicals),
Tandem Financial Group, and Donaldson, Lufkin &
Jenrette Securities Corporation; former
Governor at Large National Association of
Securities Dealers, Inc.
David H. Dievler, #+, 74 Independent consultant. Until 100 None
P.O. Box 167 December 1994, he was Senior
Spring Lake, NJ 07762 Vice President of Alliance Capital
(15) Management Corporation ("ACMC")
responsible for mutual fund
administration. Prior to joining ACMC
in 1984, he was Chief Financial
Officer of Eberstadt Asset Management
since 1968. Prior to that, he was
Senior Manager at Price Waterhouse
& Co. Member of the American Institute
of Certified Public Accountants
since 1953.
- --------------------------------------------------------------------------------
34 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
Management of the Fund
- --------------------------------------------------------------------------------
PORTFOLIOS
IN FUND OTHER
NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIPS
ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY
(YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR
- -------------------------------------------------------------------------------------------------------
DISINTERESTED DIRECTORS
(continued)
John H. Dobkin, #+, 61 Consultant. Formerly President of 98 None
P.O. Box 12, Save Venice, Inc. from 2001-2002,
Annandale, NY 12504 Senior Advisor from June 1999 -
(5) June 2000 and President of Historic
Hudson Valley (historic preservation) from
December 1989-May 1999. Previously, Director of
the National Academy of Design. During 1988-92,
he was Director and Chairman of the Audit
Committee of ACMC.
Clifford L. Michel, #+, 64 Senior Counsel of the law firm of 97 Placer Dome, Inc.
15 St. Bernard's Road Cahill Gordon & Reindel since
Gladstone, NJ 07934 February 2001 and a partner of
(15) that firm for more than twenty-five
years prior thereto. He is President
and Chief Executive Officer of
Wenonah Development Company
(investments) and a Director of the Placer
Dome, Inc. (mining).
Donald J. Robinson, #+, 69 Senior Counsel to the law firm of 96 None
98 Hell's Peak Road Orrick, Herrington & Sutcliffe LLP
Weston, VT 05161 since prior to 1998. Formerly a
(6) senior partner and a member of
the Executive Committee of that firm. He was
also a member and Chairman of the Municipal
Securities Rulemaking Board and a Trustee of
the Museum of the City of New York.
INTERESTED DIRECTOR
Marc O. Mayer, ++, 46 Executive Vice President of ACMC 68 None
1345 Avenue of the since 2001; prior thereto, Chief
Americas Executive Officer of Sanford C.
New York, NY 10105 Bernstein & Co., LLC and its
(1 month) predecessor since prior to 1998.
* There is no stated term of office for the Fund's Directors.
# Member of the Audit Committee.
+ Member of the Nominating Committee.
++ Mr. Mayer is an "interested director", as defined in the 1940 Act, due to
his position as Executive Vice President of ACMC.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 35
Management of the Fund
- --------------------------------------------------------------------------------
Officer Information
Certain information concerning the Fund's Officers is set forth below.
NAME, POSITION(S) PRINCIPAL OCCUPATION
ADDRESS* AND AGE HELD WITH FUND DURING PAST 5 YEARS**
- ---------------------------------------------------------------------------------------------------------
Marc O. Mayer, (46) President See biography above.
Kathleen A. Corbet, (43) Senior Vice President Executive Vice President of Alliance
Capital Management Corporation
(ACMC),** with which she has been
associated since prior to 1998.
Matthew D.W. Bloom, (47) Vice President Senior Vice President of ACMC,** with
which he has been associated since
prior to 1998.
Paul J. DeNoon, (41) Vice President Senior Vice President of ACMC,** with
which he has been associated since
prior to 1998.
S. Sean Kelleher, (42) Vice President Senior Vice President of ACMC** since
1999; prior thereto worked in fixed
income research at Merrill Lynch since
prior to 1998.
Jeffrey S. Phlegar, (37) Vice President Vice President of ACMC,** with which
he has been associated since prior to
1998.
Kewjin Yuoh, (32) Vice President Vice President of ACMC** since March
2003. Previously, he was a Vice President
of Credit Suisse Asset Management from
2000 to 2002 and a Vice President of
Brundage, Story & Rose from 1998 to
2000. Prior thereto, he was a Portfolio
Manager of Sanford C. Bernstein & Co.
since prior to 1998.
Mark D. Gersten, (53) Treasurer and Chief Senior Vice President of Alliance Global
Financial Officer Investor Services, Inc. ("AGIS")** and
Vice President
of
AllianceBernstein
Investment
Research and
Management, Inc.
("ABIRM")**,
with which he
has been
associated since
prior to 1998.
Vincent S. Noto (39) Controller Vice President of AGIS,** with which
he has been associated since prior to
1998.
* The address for each of the Fund's Officers is 1345 Avenue of the
Americas, New York, NY 10105.
** ACMC, ABIRM, and AGIS are affiliates of the Fund.
The Fund's Statement of Additional Information ("SAI") has additional
information about the Fund's Directors and officers and is available
without charge upon request. Contact your financial representative or
Alliance Capital at 800-227-4618 for a free prospectus or SAI.
- --------------------------------------------------------------------------------
36 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
AllianceBernstein Family of Funds
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN FAMILY OF FUNDS
Wealth Strategies Funds
Balanced Wealth Strategy
Wealth Appreciation Strategy
Wealth Preservation Strategy
Tax-Managed Balanced Wealth Strategy*
Tax-Managed Wealth Appreciation Strategy
Tax-Managed Wealth Preservation Strategy**
Blended Style Series
U.S. Large Cap Portfolio
Growth Funds
Domestic
Growth Fund
Health Care Fund
Mid-Cap Growth Fund
Premier Growth Fund
Small Cap Growth Fund+
Technology Fund
Global & International
All-Asia Investment Fund
Global Small Cap Fund
Greater China '97 Fund
International Premier Growth Fund
New Europe Fund
Worldwide Privatization Fund
Select Investor Series
Biotechnology Portfolio
Premier Portfolio
Technology Portfolio
Value Funds
Domestic
Balanced Shares
Disciplined Value Fund
Growth & Income Fund
Real Estate Investment Fund
Small Cap Value Fund
Utility Income Fund
Value Fund
Global & International
Global Value Fund
International Value Fund
Taxable Bond Funds
Americas Government Income Trust
Corporate Bond Portfolio
Emerging Market Debt Fund
Global Strategic Income Trust
High Yield Fund
Multi-Market Strategy Trust
Quality Bond Portfolio
Short Duration Portfolio
U.S. Government Portfolio
Municipal Bond Funds
National
Insured National
Arizona
California
Insured California
Florida
Massachusetts
Michigan
Minnesota
New Jersey
New York
Ohio
Pennsylvania
Virginia
Intermediate Municipal Bond Funds
Intermediate California
Intermediate Diversified
Intermediate New York
Closed-End Funds
All-Market Advantage Fund
ACM Income Fund
ACM Government Opportunity Fund
ACM Managed Dollar Income Fund
ACM Managed Income Fund
ACM Municipal Securities Income Fund
California Municipal Income Fund
National Municipal Income Fund
New York Municipal Income Fund
The Spain Fund
World Dollar Government Fund
World Dollar Government Fund II
We also offer Exchange Reserves,++ which serves as the money market fund
exchange vehicle for the AllianceBernstein mutual funds.
For more complete information on any AllianceBernstein mutual fund, including
investment objectives and policies, sales charges, expenses, risks and other
matters of importance to prospective investors, visit our web site at
www.alliancebernstein.com or call us at (800) 227-4618 for a current prospectus.
Please read the prospectus carefully before you invest or send money.
* Formerly Growth Investors Fund.
** Formerly Conservative Investors Fund.
+ Quasar Fund changed its name to Small Cap Growth Fund on 11/3/03.
++ An investment in the Fund is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although the Fund seeks to preserve the value of your
investment at $1.00 per share, it is possible to lose money by investing
in the Fund.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 37
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
[LOGO] ALLIANCEBERNSTEIN(SM) Investment Research and Management
(SM) This service mark used under license from the owner, Alliance Capital
Management L.P.
USGAR0903
ITEM 2. CODE OF ETHICS.
(a) The registrant has adopted a code of ethics that applies to its principal
executive officer, principal financial officer and principal accounting officer.
A copy of the registrant's code of ethics is filed herewith as Exhibit 10(a)(1).
(b) During the period covered by this report, no amendments were made to the
provisions of the code of ethics adopted in 2(a) above.
(c) During the period covered by this report, no implicit or explicit waivers to
the provisions of the code of ethics adopted in 2(a) above were granted.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Directors has determined that independent directors
David H. Dievler and William H. Foulk, Jr. qualify as audit committee financial
experts.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Form N-CSR disclosure requirement not yet effective with respect to the
registrant.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to the registrant.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the registrant.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial officer
have concluded that the registrant's disclosure controls and procedures (as
defined in Rule 30a-2(c) under the Investment Company Act of 1940, as amended)
are effective at the reasonable assurance level based on their evaluation of
these controls and procedures as of a date within 90 days of the filing date of
this document.
(b) There were no significant changes in the registrant's internal controls that
could significantly affect these controls subsequent to the date of their
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
ITEM 10. EXHIBITS.
The following exhibits are attached to this Form N-CSR:
Exhibit No. DESCRIPTION OF EXHIBIT
10 (a) (1) Code of ethics that is subject to the disclosure of Item 2 hereof
10 (b) (1) Certification of Principal Executive Officer Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
10 (b) (2) Certification of Principal Financial Officer Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
10 (c) Certification of Principal Executive Officer and Principal Financial
Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant): AllianceBernstein Bond Fund, Inc.
By: /s/Marc O. Mayer
-----------------------------------
Marc O. Mayer
President
Date: November 25, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/Marc O. Mayer
-------------------------------
Marc O. Mayer
President
Date: November 25, 2003
By: /s/Mark D. Gersten
------------------------------
Mark D. Gersten
Treasurer and Chief Financial Officer
Date: November 25, 2003