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: 811-02383
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, 2005
Date of reporting period: September 30, 2005
ITEM 1. REPORTS TO STOCKHOLDERS.
[LOGO] ALLIANCEBERNSTEIN (R)
Investment Research and Management
AllianceBernstein Bond Fund
Corporate Bond Portfolio
Annual Report
September 30, 2005
- ---------------------------
Investment Products Offered
o Are Not FDIC Insured
o May Lose Value
o Are Not Bank Guaranteed
- ---------------------------
The investment return and principal value of an investment in the Fund will
fluctuate as the prices of the individual securities in which it invests
fluctuate, so that your shares, when redeemed, may be worth more or less than
their original cost. You should consider the investment objectives, risks,
charges and expenses of the Fund carefully before investing. For a free copy of
the Fund's prospectus, which contains this and other information, visit our web
site at www.alliancebernstein.com or call your financial advisor or
AllianceBernstein at (800) 227-4618. Please read the prospectus carefully
before you invest.
You may obtain performance information current to the most recent month-end by
visiting www.alliancebernstein.com.
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, and information regarding how the Fund voted proxies relating to
portfolio securities during the most recent 12-month period ended June 30,
without charge. Simply visit AllianceBernstein's web site at
www.alliancebernstein.com, or go to the Securities and Exchange Commission's
(the "Commission") web site at www.sec.gov, or call AllianceBernstein at (800)
227-4618.
The Fund files its complete schedule of portfolio holdings with the Commission
for the first and third quarters of each fiscal year on Form N-Q. The Fund's
Forms N-Q are available on the Commission's web site at www.sec.gov. The Fund's
Forms N-Q may also be reviewed and copied at the Commission's Public Reference
Room in Washington, DC; information on the operation of the Public Reference
Room may be obtained by calling (800) SEC-0330.
AllianceBernstein Investment Research and Management, Inc. is an affiliate of
Alliance Capital Management L.P., the manager of the funds, and is a member of
the NASD.
November 22, 2005
Annual Report
This report provides management's discussion of fund performance for
AllianceBernstein Bond Fund Corporate Bond Portfolio (the "Portfolio") for the
annual reporting period ended September 30, 2005.
Investment Objective and Policies
The primary objective of this open-end Portfolio is to maximize income over the
long-term, to the extent consistent with providing reasonable safety in the
value of each shareholder's investment. As a secondary objective, the Portfolio
seeks capital appreciation. To achieve its objectives, the Portfolio invests
primarily in corporate bonds. The Portfolio may also hold debt securities
issued by the U.S. and foreign governments. While the Portfolio invests
primarily in investment-grade debt securities (currently 65%), it may also
invest a significant amount of its assets in lower-rated debt securities.
Investment Results
The table on page 4 shows the Portfolio's performance compared to its
benchmark, the Lehman Brothers (LB) Long Baa U.S. Credit Index, for the six-
and 12-month periods ended September 30, 2005. We have also included
performance for the Lipper Corporate Debt Funds BBB-Rated Funds Average. Funds
in the Lipper Average have generally similar investment objectives to the
Portfolio, although some may have different investment policies and sales and
management fees.
For the 12-month period ended September 30, 2005, the Portfolio underperformed
its benchmark, the Lehman Brothers Long Baa U.S. Credit Index, and outperformed
the Lipper Corporate Debt BBB-rated Funds Average, a peer group average of
similarly managed funds. The Portfolio's shorter-than-benchmark duration
detracted from its performance versus its benchmark as longer maturity
corporates outperformed for the annual reporting period. The benchmark carried
a duration of 11.1 years as compared to the Fund's credit duration of 6.7
years. The Fund's duration, however, exceeded the duration of the Lipper
Average by approximately 1.5 to 2 years. This duration helped the Portfolio to
outperform its peer universe for the year.
Contributing positively to the Portfolio's relative performance was its
allocation to high yield which outperformed investment-grade corporates for the
annual reporting period. Also contributing positively was the Fund's
underweight position in the automotive industry which performed poorly during
the year. The Portfolio's overweight position in the financial industry,
specifically in banking and property and casualty, also helped performance.
Market Review and Investment Strategy
Investment-grade fixed-income returns were moderate during the annual reporting
period, reflecting generally higher interest rates, a significant flattening of
the yield curve and modest spread movement. As measured by the Lehman Brothers
Long Baa U.S. Credit Index, the corporate market posted a return of 5.13% for
the reporting period despite the headwinds of continued rate increases by the
Federal Reserve. Beginning in June 2004, the Federal Reserve hiked the
ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 1
Fed Funds benchmark rate 12 times for a total of 300 basis points, bringing the
Fed Funds target from its all-time low of 1% to 4%.
Corporate securities continued to benefit from favorable liquidity, investor
demand and strong corporate earnings. Most industries posted positive returns
with airlines, aerospace/defense and media/cable outperforming, while the
automotive industry underperformed. The auto industry took another tumble in
the third quarter after Moody's Investors Service cut the credit ratings of
General Motors and Ford Motor Company to non-investment grade, reflecting
financial losses and declining U.S. market share. The sector has also been hurt
by higher energy prices, which are causing consumers to defer purchases or
shift from large sport utility vehicles to smaller utility vehicles and sedans,
which are generally less profitable.
During the annual reporting period, high yield debt outperformed the
investment-grade sectors which are more sensitive to rising interest rates.
High yield securities returned 6.71%, as represented by the Lehman Brothers
High Yield Index. A similar combination of factors also supported the high
yield market throughout the year including a strong investor demand for yield,
limited supply and strong corporate earnings. Liquidity in the high yield
market also remained ample with default rates near all-time lows. In September,
however, returns were dampened somewhat as the sector posted its first negative
monthly return since April. Investor sentiment turned more cautious as the
post-Hurricane Katrina energy price shock weighed on consumers and equity
investors. High yield spreads, according to Credit Suisse First Boston, were
377 basis points over Treasuries at the end of the reporting period,
representing a tightening of 53 basis points during the annual period. Most of
the tightening occurred early in the reporting period.
During the period under review, the Portfolio was positioned for interest rates
to rise. Accordingly, the overall duration of the Portfolio was shorter than
that of the benchmark to help protect against the negative effect of rising
interest rates. Additionally, as credit spreads reached historic lows and the
Federal Reserve signaled it would continue to raise interest rates, the
Portfolio's U.S. Investment Grade Corporate Bond and U.S. High Yield Investment
Team moved to reduce the overall risk of the Portfolio to downward moves in the
market. Consequently, the Team significantly reduced the Portfolio's credit
risk by upgrading the Fund's overall credit quality profile. The Portfolio's
high yield component was also significantly reduced. The Portfolio's reduced
exposure to the high yield market reflected the lack of attractive yield
compensation relative to credit risk.
With fairly negligible spread differentials between industries, security
selection was emphasized over industry selection. The Portfolio was overweight
in some industries such as insurance (property and casualty), banking and
communications, and underweight in airlines, aerospace/defense and energy.
2 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO
HISTORICAL PERFORMANCE
An Important Note About the Value of Historical Performance
The performance shown on the following pages represents past performance and
does not guarantee future results. Current performance may be lower or higher
than the performance information shown. You may obtain performance information
current to the most recent month-end by visiting www.alliancebernstein.com.
The investment return and principal value of an investment in the Portfolio
will fluctuate, so that your shares, when redeemed, may be worth more or less
than their original cost. You should consider the investment objectives, risks,
charges and expenses of the Portfolio carefully before investing. For a free
copy of the Portfolio's prospectus, which contains this and other information,
visit our web site at www.alliancebernstein.com or call your financial advisor
or AllianceBernstein at (800) 227-4618. You should read the prospectus
carefully before you invest.
Returns are annualized for periods longer than one year. All fees and expenses
related to the operation of the Portfolio have been deducted. NAV returns do
not reflect sales charges; if sales charges were reflected, the Portfolio's
quoted performance would be lower. SEC returns reflect the applicable sales
charges for each share class: a 4.25% maximum front-end sales charge for Class
A shares; the applicable contingent deferred sales charge for Class B shares
(3% year 1, 2% year 2, 1% year 3, 0% year 4); a 1% 1 year contingent deferred
sales charge for Class C shares. Returns for Advisor Class, Class R, Class K
and Class I shares will vary due to different expenses associated with these
classes. Performance assumes reinvestment of distributions and does not account
for taxes.
Benchmark Disclosure
The unmanaged Lehman Brothers (LB) Long Baa U.S. Credit Index does not reflect
fees and expenses associated with the active management of a mutual fund
portfolio. The Index is a measure of corporate and non-corporate fixed income
securities that are rated investment grade (Baa by Moody's Investors Service or
BBB by Standard & Poor's) and have at least 10 years to final maturity. The
unmanaged Lipper Corporate Debt BBB-Rated Funds Average (the "Lipper Average")
is based on the performance of a universe of funds that invest at least 65% of
their assets in corporate or government debt issues rated in the top four
grades. For the six- and 12-month periods ended September 30, 2005, the Lipper
Average consisted of 160 and 155 funds, respectively. Investors cannot invest
directly in an index or an average, and their results are not indicative of the
performance for any specific investment, including the Portfolio.
A Word About Risk
The Portfolio can invest in foreign securities, including emerging markets,
which may magnify fluctuations due to changes in foreign exchange rates and the
possibility of substantial volatility due to political and economic
uncertainties in foreign countries. Price fluctuation in the Portfolio's
securities may be caused by changes in the general level of interest rates or
changes in bond credit quality ratings. Please note, as interest rates rise,
existing bond prices fall and can cause the value of an investment in the
Portfolio to decline. Changes in interest rates have a greater effect on bonds
with longer maturities than on those with shorter maturities. High yield bonds
involve a greater risk of default and price volatility than other bonds.
Investing in non-investment grade securities presents special risks, including
credit risk. Investments in the Portfolio are not guaranteed because of
fluctuation in the net asset value of the underlying fixed-income related
investments. Similar to direct bond ownership, bond funds have the same
interest rate, inflation and credit risks that are associated with the
underlying bonds owned by the Portfolio. Portfolio purchasers should understand
that, in contrast to owning individual bonds, there are ongoing fees and
expenses associated with owning shares of bond funds. While the Portfolio
invests principally in bonds and other fixed-income securities, in order to
achieve its investment objectives, the Portfolio may at times use certain types
of investment derivatives, such as options, futures, forwards and swaps. These
instruments involve risks different from, and in certain cases, greater than,
the risks presented by more traditional investments. These risks are fully
discussed in the Portfolio's prospectus.
(Historical Performance continued on next page)
ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 3
HISTORICAL PERFORMANCE
(continued from previous page)
Returns
THE PORTFOLIO VS. ITS BENCHMARK -----------------------------
PERIODS ENDED SEPTEMBER 30, 2005 6 Months 12 Months
- -------------------------------------------------------------------------------
AllianceBernstein Bond Fund
Corporate Bond Portfolio
Class A 1.09% 3.86%
Class B 0.82% 3.13%
Class C 0.82% 3.14%
Advisor Class 1.33% 4.10%
Class R** 1.04% 3.71%
Class K** 1.11% -0.89%*
Class I** 1.28% -0.70%*
Lehman Brothers Long Baa U.S. Credit Index 3.22% 5.13%
Lipper Corporate Debt BBB-Rated Funds Average 2.29% 3.19%
* Since Inception. The Class K and Class I share inception date is 3/1/05.
** Please note that this is a new share class offering for investors
purchasing shares through institutional pension plans. The inception date for
Class R shares is 11/3/03. The inception date for Class K and Class I shares is
listed above.
GROWTH OF A $10,000 INVESTMENT IN THE PORTFOLIO
9/30/95 TO 9/30/05
[THE FOLLOWING DATA WAS REPRESENTED BY A MOUNTAIN CHART IN THE PRINTED MATERIAL]
AllianceBernstein Lehman Brothers
Bond Fund Corporate Bond Long Baa U.S. Credit
Portfolio Class A Index
- -------------------------------------------------------------------------------
9/30/95 $ 9,575 $10,000
9/30/96 $10,624 $10,403
9/30/97 $12,556 $11,896
9/30/98 $12,031 $13,197
9/30/99 $12,411 $12,767
9/30/00 $13,407 $13,361
9/30/01 $14,427 $14,924
9/30/02 $13,782 $15,821
9/30/03 $16,696 $19,124
9/30/04 $18,033 $20,662
9/30/05 $18,726 $21,722
AllianceBernstein Bond Fund Corporate Bond Portfolio Class A: $18,726
Lehman Brothers Long Baa U.S. Credit Index: $21,722
This chart illustrates the total value of an assumed $10,000 investment in
AllianceBernstein Bond Fund Corporate Bond Portfolio Class A shares (from
9/30/95 to 9/30/05) as compared to the performance of its benchmark. 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.
See Historical Performance and Benchmark disclosures on previous page.
(Historical Performance continued on next page)
4 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO
HISTORICAL PERFORMANCE
(continued from previous page)
AVERAGE ANNUAL RETURNS AS OF SEPTEMBER 30, 2005
- -------------------------------------------------------------------------------
NAV Returns SEC Returns
Class A Shares
1 Year 3.86% -0.55%
5 Years 6.92% 5.99%
10 Years 6.94% 6.48%
SEC Yield** 4.23%
Class B Shares
1 Year 3.13% 0.17%
5 Years 6.15% 6.15%
10 Years(a) 6.49% 6.49%
SEC Yield ** 3.70%
Class C Shares
1 Year 3.14% 2.16%
5 Years 6.19% 6.19%
10 Years 6.19% 6.19%
SEC Yield** 3.70%
Advisor Class Shares
1 Year 4.10%
Since Inception* 12.17%
SEC Yield ** 4.72%
Class R Shares+
1 Year 3.71%
Since Inception* 6.14%
SEC Yield** 4.19%
Class K Shares+
Since Inception* -0.89%
SEC Yield ** 4.55%
Class I Shares+
Since Inception* -0.70%
SEC Yield ** 4.84%
SEC AVERAGE ANNUAL RETURNS (WITH SALES CHARGES)
AS OF THE MOST RECENT CALENDAR QUARTER-END (SEPTEMBER 30, 2005)
- -------------------------------------------------------------------------------
Class A Shares
1 Year -0.55%
5 Years 5.99%
10 Years 6.48%
Class B Shares
1 Year 0.17%
5 Years 6.15%
10 Years(a) 6.49%
Class C Shares
1 Year 2.16%
5 Years 6.19%
10 Years 6.19%
(a) Assumes conversion of Class B shares into Class A shares after six years.
* Inception Date: 8/8/02 for Advisor Class shares; 11/3/03 for Class R
shares; 3/1/05 for Class K and Class I shares.
** SEC yields are calculated based on SEC guidelines for the 30-day period
ended September 30, 2005.
+ Please note that this is a new share class offering for investors
purchasing shares through institutional pension plans. The inception date for
these share classes is listed above.
See Historical Performance disclosures on page 3.
ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 5
FUND EXPENSES
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments, contingent
deferred sales charges on redemptions and (2) ongoing costs, including
management fees; distribution (12b-1) fees; and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period as indicated below.
Actual Expenses
The table below provides information about actual account values and actual
expenses. You may use the information, together with the amount you invested,
to estimate the expenses that you paid over the period. Simply divide your
account value by $1,000 (for example, an $8,600 account value divided by $1,000
= 8.6), then multiply the result by the number under the heading entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
Hypothetical Example for Comparison Purposes
The table below also provides information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an assumed
annual rate of return of 5% before expenses, which is not the Fund's actual
return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds by comparing this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), or contingent deferred sales charges on redemptions.
Therefore, the hypothetical example is useful in comparing ongoing costs only,
and will not help you determine the relative total costs of owning different
funds. In addition, if these transactional costs were included, your costs
would have been higher.
Beginning Ending
Account Value Account Value Expenses Paid
April 1, 2005 September 30, 2005 During Period*
---------------------------------------------------------------------------------------
Actual Hypothetical Actual Hypothetical** Actual Hypothetical
---------------------------------------------------------------------------------------
<s> <c> <c> <c> <c> <c> <c>
Class A $1,000 $1,000 $1,010.93 $1,019.35 $5.75 $5.77
Class B $1,000 $1,000 $1,008.18 $1,015.74 $9.36 $9.40
Class C $1,000 $1,000 $1,008.21 $1,015.79 $9.31 $9.35
Advisor
Class $1,000 $1,000 $1,013.31 $1,020.81 $4.29 $4.31
Class R $1,000 $1,000 $1,010.43 $1,017.85 $7.26 $7.28
Class K $1,000 $1,000 $1,011.07 $1,019.45 $5.65 $5.67
Class I $1,000 $1,000 $1,012.83 $1,021.06 $4.04 $4.05
* Expenses are equal to the classes' annualized expense ratios of 1.14%,
1.86%, 1.85%, 0.85%, 1.44%, 1.12% and 0.80%, respectively, multiplied by the
average account value over the period, multiply by the number of days in the
period/365.
** Assumes 5% return before expenses.
6 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO
PORTFOLIO SUMMARY
September 30, 2005
PORTFOLIO STATISTICS
Net Assets ($mil): $761.8
[PIE CHART OMITTED]
SECURITY TYPE BREAKDOWN*
[ ] 6.9% Preferred Stock
[ ] 6.1% U.S. Government & Government Sponsored Agency Obligations
[ ] 1.3% Asset Backed Securities
[PIE CHART OMITTED]
CORPORATE DEBT OBLIGATIONS*
[ ] 13.9% Public Utilities--
Electric & Gas
[ ] 10.3% Banking
[ ] 8.9% Insurance
[ ] 7.4% Communications
[ ] 5.3% Broadcasting/Media
[ ] 4.9% Financial
[ ] 4.6% Cable
[ ] 4.0% Petroleum Products
[ ] 3.6% Paper/Packaging
[ ] 3.3% Building/Real Estate
[ ] 2.6% Non-Air Transportation
[ ] 2.5% Metals/Mining
[ ] 2.5% Communications--Mobile
[ ] 2.4% Health Care
[ ] 9.3% Other
[ ] 0.2% Short-Term
* All data are as of September 30, 2005. The Portfolio's security type
breakdown is expressed as a percentage of total investments (excluding security
lending collateral) and may vary over time. "Other" represents less than 2.4%
weightings in automotive, chemicals, energy, food & beverages, industrial,
public utilities-telephone, retail and supermarket/drug.
ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 7
PORTFOLIO OF INVESTMENTS
September 30, 2005
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
CORPORATE DEBT OBLIGATIONS-85.3%
Automotive-2.0%
DaimlerChrysler North America
4.875%, 6/15/10* $ 3,150 $ 3,087,060
Ford Motor Credit Co.
7.875%, 6/15/10 10,000 9,731,100
General Motors Corp.
7.75%, 3/15/36(a) 10,000 2,550,000
------------
15,368,160
------------
Banking-10.3%
CA Preferred Funding Trust
7.00%, 1/30/49 9,000 9,337,500
Dime Capital Trust I
Series A
9.33%, 5/06/27 9,028 9,993,138
Dresdner Funding Trust I
8.151%, 6/30/31(b) 10,000 12,209,700
Great Western Financial Trust II
8.206%, 2/01/27 14,456 15,567,580
Lloyds Bank Plc (United Kingdom)
6.90%, 11/22/07 5,000 5,156,500
Mizuho Finance Group (Cayman Islands)
8.375%, 4/27/09 14,000 15,155,000
RBS Capital Trust I
4.709%, 7/01/13 10,000 9,647,720
Russian Standard Finance (Luxembourg)
7.50%, 10/07/10(b) 1,314 1,319,913
------------
78,387,051
------------
Broadcasting/Media-5.3%
News America, Inc.
5.30%, 12/15/14* 12,000 11,974,260
Time Warner, Inc.
6.875%, 5/01/12 15,000 16,393,290
7.70%, 5/01/32* 10,000 11,839,240
------------
40,206,790
------------
Building/Real Estate-3.4%
D.R. Horton, Inc.
6.875%, 5/01/13 7,000 7,334,152
EOP Operating L.P.
4.75%, 3/15/14 5,000 4,815,475
ERP Operating L.P.
5.125%, 3/15/16 8,800 8,668,378
KB HOME
5.875%, 1/15/15* 5,000 4,731,640
------------
25,549,645
------------
8 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
Cable-4.5%
AT&T Broadband Corp.
9.455%, 11/15/22 $20,420 $27,501,411
DirecTV Holdings LLC
6.375%, 6/15/15(b) 5,155 5,116,337
Insight Midwest LP
9.75%, 10/01/09 2,000 2,045,000
------------
34,662,748
------------
Chemicals-0.7%
Union Carbide Corp.
7.75%, 10/01/96* 5,000 5,258,085
------------
Communications-7.3%
America Movil SA de C.V. (Mexico)
5.75%, 1/15/15 5,000 5,017,325
AT&T Corp.
9.05%, 11/15/11 10,000 11,262,500
British Telecommunications Plc (United Kingdom)
8.375%, 12/15/10* 15,000 17,367,810
Deutsche Telekom International Finance BV
8.00%, 6/15/10 5,000 5,668,625
Sprint Capital Corp.
7.625%, 1/30/11* 10,000 11,190,050
TCI Communications Financing III
9.65%, 3/31/27 5,000 5,475,605
------------
55,981,915
------------
Communications-Mobile-2.5%
AT&T Wireless Services, Inc.
8.125%, 5/01/12 11,500 13,485,763
Nextel Communications, Inc.
Series E
6.875%, 10/31/13* 5,000 5,307,265
------------
18,793,028
------------
Energy-0.8%
Ras Laffan LNG III
Series B (Qatar)
5.838%, 9/30/27(b) 6,200 6,213,206
------------
Financial-4.9%
AFC Capital Trust I
Series B
8.207%, 2/03/27 10,000 10,835,840
Farmers Insurance Exchange
8.625%, 5/01/24(b) 8,000 9,555,720
iStar Financial, Inc.
6.00%, 12/15/10 4,505 4,624,364
ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 9
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
National Capital Trust II
5.486%, 12/29/49(b) $10,000 $10,042,040
Resona Global Securities (Cayman Islands)
7.191%, 12/29/49(b) 2,300 2,381,103
------------
37,439,067
------------
Food & Beverage-1.1%
ConAgra Foods, Inc.
6.75%, 9/15/11 1,740 1,870,968
7.875%, 9/15/10 5,560 6,221,429
------------
8,092,397
------------
Healthcare-2.4%
AmerisourceBergen Corp.
5.625%, 9/15/12(b) 5,000 4,925,000
Coventry Health Care, Inc.
5.875%, 1/15/12 1,660 1,684,900
6.125%, 1/15/15 2,815 2,885,375
Wyeth
6.50%, 2/01/34 7,500 8,429,220
------------
17,924,495
------------
Industrial-0.4%
Inco, Ltd. (Canada)
5.70%, 10/15/15 2,905 2,976,265
------------
Insurance-8.9%
Liberty Mutual Group
5.75%, 3/15/14(b) 10,000 9,771,240
Mangrove Bay PassThru Trust
6.102%, 7/15/33(b) 20,000 20,000,200
Markel Capital Trust I
Series B
8.71%, 1/01/46 2,400 2,552,081
North Front Pass Through Trust
5.81%, 12/15/24(b) 5,000 5,028,505
Ohio Casualty Corp.
7.30%, 6/15/14* 6,650 7,167,523
Willis Group
5.125%, 7/15/10 2,500 2,498,160
W.R. Berkley Corp.
5.60%, 5/15/15 7,500 7,493,940
Zurich Capital Trust I
8.376%, 6/01/37(b) 12,500 13,356,025
------------
67,867,674
------------
Metals/Mining-2.5%
International Steel Group, Inc.
6.50%, 4/15/14 2,565 2,539,350
Ispat Inland ULC (Canada)
9.75%, 4/01/14 6,000 6,960,000
Teck Cominco, Ltd. (Canada)
6.125%, 10/01/35 10,000 9,806,270
------------
19,305,620
------------
10 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
Non-Air Transportation-2.6%
CSX Corp.
6.75%, 3/15/11 $ 5,622 $6,091,757
CSX Transportation, Inc.
9.75%, 6/15/20 5,200 7,270,323
Union Pacific Corp.
5.375%, 5/01/14 6,000 6,122,214
------------
19,484,294
------------
Paper/Packaging-3.6%
Georgia-Pacific Corp.
9.375%, 2/01/13 2,500 2,787,500
Packaging Corp. of America
5.75%, 8/01/13 8,850 8,561,729
Weyerhaeuser Co.
6.75%, 3/15/12* 15,000 16,208,295
------------
27,557,524
------------
Petroleum Products-4.0%
Amerada Hess Corp.
6.65%, 8/15/11 6,000 6,482,940
Enterprise Products Operating L.P.
5.00%, 3/01/15(b)* 10,000 9,488,260
6.65%, 10/15/34 8,000 8,208,552
Tengizchevroil LLP (Kazakhstan)
6.124%, 11/15/14(b) 6,215 6,354,838
------------
30,534,590
------------
Public Utilities-Electric & Gas-13.8%
Aquila, Inc.
14.875%, 7/01/12* 4,435 6,053,775
Calenergy Co., Inc.
8.48%, 9/15/28 6,000 7,733,982
Dominion Resources Capital Trust III
8.40%, 1/15/31 7,000 8,619,541
Duke Capital LLC
6.75%, 2/15/32 6,000 6,546,198
8.00%, 10/01/19 9,000 10,927,962
FirstEnergy Corp. Series B
6.45%, 11/15/11 7,250 7,719,546
7.375%, 11/15/31 12,230 14,344,176
Indiantown Cogeneration L.P.
Series A-9
9.26%, 12/15/10 7,535 8,197,140
Kansas Gas & Electric Co.
5.647%, 3/29/21(b) 5,000 4,948,200
Pacific Gas & Electric Co.
4.80%, 3/01/14 10,000 9,777,830
Potomac Edison Co.
5.35%, 11/15/14 3,500 3,538,014
Progress Energy, Inc.
7.10%, 3/01/11* 6,000 6,522,594
ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 11
Shares or
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
TECO Energy, Inc.
7.00%, 5/01/12 $ 5,000 $ 5,275,000
7.20%, 5/01/11 5,000 5,300,000
------------
105,503,958
------------
Public Utilities-Telephone-1.9%
Telecom Italia Capital (Luxembourg)
4.00%, 1/15/10 5,000 4,801,075
5.25%, 10/01/15 5,000 4,913,150
6.00%, 9/30/34 5,000 4,899,720
------------
14,613,945
------------
Retail-0.7%
GSC Holdings Corp.
8.00%, 10/01/12(b)* 5,000 5,000,000
Supermarket/Drug-1.7%
Delhaize America, Inc.
9.00%, 4/15/31 7,000 8,080,387
The Kroger Co.
4.95%, 1/15/15* 5,250 5,008,883
------------
13,089,270
------------
Total Corporate Debt Obligations
(cost $637,271,694) 649,809,727
------------
PREFERRED STOCKS-6.9%
Banking-2.0%
CoBank
Series B(b) 100 5,139,500
Royal Bank of Scotland Group PLC
(United Kingdom)
Series N 400 10,164,000
------------
15,303,500
------------
Building/Real Estate-0.7%
Equity Residential
Series N* 200 4,978,000
------------
Communications-3.5%
Centaur Funding Corp. (Cayman Islands)
Series B(b) 20 26,452,725
------------
Insurance-0.7%
AmerUs Group Co. 225 5,582,790
------------
Total Preferred Stocks
(cost $45,896,250) 52,317,015
------------
12 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO
Shares or
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
U.S. GOVERNMENT & GOVERNMENT SPONSORED
AGENCY OBLIGATIONS-6.1%
Federal Home Loan Mortgage Corporation-3.9%
4.50%, 8/01/35 $30,932 $ 29,431,752
------------
U.S. Treasury Bond-0.5%
5.375%, 2/15/31 3,475 3,893,084
------------
U.S. Treasury Note-1.7%
2.50%, 10/31/06(c) 13,000 12,778,090
------------
Total U.S. Government & Government
Sponsored Agency Obligations
(cost $46,558,667) 46,102,926
------------
ASSET BACKED SECURITIES-1.3%
Chase Issuance Trust
Series 2005-A7, Cl.A7
4.55%, 3/15/13
(cost $10,047,516) 10,000 9,971,875
------------
SHORT-TERM INVESTMENT-0.2%
Time Deposit-0.2%
State Street Euro Dollar
3.10%, 10/03/05
(cost $1,857,000) 1,857 1,857,000
------------
Total Investments Before Security Lending
Collateral-99.8%
(cost $741,631,127) 760,058,543
------------
INVESTMENT OF CASH COLLATERAL
FOR SECURITIES LOANED-10.3%
Short-Term Investments
Deutsche Bank
3.88%, 2/26/06 10,000 10,062,333
Gotham Funding
3.80%, 10/19/05 30,000 29,927,359
Morgan Stanley
3.89%, 1/20/06 10,000 10,000,000
------------
49,989,692
------------
UBS Private Money Market Fund, LLC
3.65% 28,746,236 28,746,236
------------
Total Investment of Cash
Collateral for Securities Loaned
(cost $78,735,928) 78,735,928
------------
ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 13
U.S. $ Value
- -------------------------------------------------------------------------------
Total Investments-110.1%
(cost $820,367,055) $838,794,471
Other assets less liabilities-(10.1%) (76,948,542)
------------
Net Assets-100% $761,845,929
------------
CREDIT DEFAULT SWAP CONTRACTS (see Note D)
Notional
Swap Counterparty & Amount Interest Termination Unrealized
Referenced Obligation(s) (000) Rate Date Appreciation
- -------------------------------------------------------------------------------
Sell:
Lehman Brothers 10,000 1.58% 9/20/07 $4,775
AvalonBay Communities, Inc.,
Series H, Preferred Stock
CIT Group, Inc.,
Series A, Preferred Stock
Duke Energy Corp.,
Series C, Preferred Stock
Merrill Lynch & Co., Inc.,
Series 1, Preferred Stock
MetLife, Inc.,
Series B, Preferred Stock
Royal Bank of
Scotland Group plc,
Series M, Preferred Stock
Washington Mutual, Inc.,
Series A
Lehman Brothers 10,000 0.77% 12/20/10 12,001
Simon Property Group, Inc.
Series F, Preferred Stock
INTEREST RATE SWAP CONTRACT (see Note D)
Rate Type
---------------------------
Notional Payments Payments
Swap Amount Termination made by the received by Unrealized
Counterparty (000) Date Portfolio the Portfolio Depreciation
- ---------------------------------------------------------------------------------------
<s> <c> <c> <c> <c> <c>
J. P. Morgan+ 200,000 3/15/15 5.218% 3 Month LIBOR++ $(5,857,310)
+ Represents a forward interest rate swap whose effective date for the
exchange of cash flows is March 15, 2006.
++ LIBOR (London Interbank Offered Rate)
* Represents entire or partial securities out on loan. See Note E for
securities lending information.
(a) Indicates security that has a zero coupon that remains in effect until a
predetermined date at which time the stated coupon rate becomes effective.
(b) Security is exempt from registration under Rule 144A of the Securities
Act of 1933. These securities are considered liquid and may be resold in
transactions exempt from registration, normally to qualified institutional
buyers. At September 30, 2005, the aggregate market value of these securities
amounted to $157,302,512 or 20.6% of net assets.
(c) Represents entire or partial position segregated as collateral for
interest rate swaps.
See notes to financial statements.
14 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO
STATEMENT OF ASSETS & LIABILITIES
September 30, 2005
Assets
Investments in securities, at value
(cost $820,367,055--including investment of cash
collateral for securities loaned of $78,735,928) $838,794,471(a)
Cash 864
Interest and dividends receivable 11,577,119
Receivable for capital stock sold 2,645,634
Unrealized appreciation of swap contracts 16,776
------------
Total assets 853,034,864
------------
Liabilities
Payable for collateral on securities loaned 78,735,928
Unrealized depreciation of swap contracts 5,857,310
Payable for capital stock redeemed 3,375,999
Payable for investment securities purchased 1,314,000
Dividends payable 852,326
Distribution fee payable 350,967
Advisory fee payable 318,006
Transfer agent fee payable 102,174
Accrued expenses 282,225
------------
Total liabilities 91,188,935
------------
Net Assets $761,845,929
------------
Composition of Net Assets
Capital stock, at par $63,435
Additional paid-in capital 1,033,508,723
Undistributed net investment income 520,578
Accumulated net realized loss on investment
transactions (284,833,689)
Net unrealized appreciation of investments 12,586,882
------------
$761,845,929
------------
Calculation of Maximum Offering Price Per Share
Net Asset Value and:
-------------------- Maximum
Shares Offering Redemption Offering
Class Net Assets Outstanding Price Price Price*
- -------------------------------------------------------------------------------
A $483,168,629 40,217,146 -- $12.01 $12.54
- -------------------------------------------------------------------------------
B $162,973,115 13,582,565 $12.00 -- --
- -------------------------------------------------------------------------------
C $110,680,312 9,217,333 $12.01 -- --
- -------------------------------------------------------------------------------
Advisor $ 4,971,345 413,994 $12.01 $12.01 --
- -------------------------------------------------------------------------------
R $ 32,903 2,738 $12.02 $12.02 --
- -------------------------------------------------------------------------------
K $ 9,806 816.2 $12.01 $12.01 --
- -------------------------------------------------------------------------------
I $ 9,819 817.3 $12.01 $12.01 --
- -------------------------------------------------------------------------------
* The maximum offering price per share for Class A shares includes a sales
charge of 4.25%.
(a) Includes securities on loan with a value of $75,327,864 (see Note E).
See notes to financial statements.
ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 15
STATEMENT OF OPERATIONS
Year Ended September 30, 2005
Investment Income
Interest $ 50,299,937
Dividends (net of foreign taxes
withheld of $22,124) 3,829,344 $ 54,129,281
Expenses
Advisory fee 4,195,799
Distribution fee--Class A 1,518,380
Distribution fee--Class B 2,092,750
Distribution fee--Class C 1,202,567
Distribution fee--Class R 113
Distribution fee--Class K 15
Transfer agency 1,371,717
Printing 350,774
Custodian 255,798
Registration fees 96,300
Administrative 92,000
Audit 69,929
Legal 52,128
Directors' fees 25,351
Miscellaneous 45,111
Total expenses before interest expense 11,368,732
Interest expense 51,728
Total expenses 11,420,460
Less: expense offset arrangement
(see Note B) (8,679)
Net expenses 11,411,781
Net investment income 42,717,500
Realized and Unrealized Gain (Loss)
on Investment Transactions
Net realized gain (loss) on:
Investment transactions 37,594,639
Written options (239,000)
Swap contracts 393,720
Net change in unrealized
appreciation/depreciation of:
Investments (43,608,232)
Written options 5,000
Swap contracts (5,538,825)
Net loss on investment transactions (11,392,698)
Net Increase in Net Assets
from Operations $ 31,324,802
See notes to financial statements.
16 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
September 30, September 30,
2005 2004
--------------- --------------
Increase (Decrease) in Net Assets
from Operations
Net investment income $ 42,717,500 $ 57,826,732
Net realized gain on investment
transactions 37,749,359 32,602,855
Net change in unrealized
appreciation/depreciation
of investments (49,142,057) (19,242,237)
Net increase in net assets
from operations 31,324,802 71,187,350
Dividends to Shareholders from
Net investment income
Class A (26,331,894) (30,964,784)
Class B (9,462,753) (16,743,588)
Class C (5,421,178) (7,389,724)
Advisor Class (186,170) (203,931)
Class R (1,090) (534)
Class K (292) -0-
Class I (312) -0-
Capital Stock Transactions
Net decrease (118,487,269) (205,155,519)
Total decrease (128,566,156) (189,270,730)
Net Assets
Beginning of period 890,412,085 1,079,682,815
End of period (including undistributed
net investment income of $520,578
and $359,434, respectively) $ 761,845,929 $ 890,412,085
See notes to financial statements.
ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 17
NOTES TO FINANCIAL STATEMENTS
September 30, 2005
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 Corporate Bond Portfolio. The Corporate Bond
Portfolio (the "Portfolio") offers Class A, Class B, Class C, Advisor Class,
Class R, Class K and Class I 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. Class R and Class K shares are sold without an initial or
contingent deferred sales charge. Advisor Class and Class I shares are sold
without an initial or contingent deferred sales charge and are not subject to
ongoing distribution expenses. All seven 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 U.S. generally accepted accounting principles which require
management to make certain estimates and assumptions that affect the reported
amounts of assets and liabilities in the financial statements and amounts of
income and expenses during the reporting period. Actual results could differ
from those estimates. 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
Portfolio securities are valued at their current market value determined on the
basis of market quotations or, if market quotations are not readily available
or are deemed unreliable, at "fair value" as determined in accordance with
procedures established by and under the general supervision of the Fund's Board
of Directors.
In general, the market value of securities which are readily available and
deemed reliable are determined as follows. Securities listed on a national
securities exchange or on a foreign securities exchange are valued at the last
sale price at the
18 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO
close of the exchange or foreign securities exchange. If there has been no sale
on such day, the securities are valued at the mean of the closing bid and asked
prices on such day. Securities listed on more than one exchange are valued by
reference to the principal exchange on which the securities are traded;
securities 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
valuation, the last available closing settlement price is used; securities
traded in the over-the-counter market, ("OTC") (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, Alliance Capital Management, L.P. (the
"Adviser") may establish procedures whereby changes in market yields or spreads
are used to adjust, on a daily basis, a recently obtained quoted price on a
security; and OTC and other derivatives are valued on the basis of a quoted bid
price or spread from a major broker/dealer in such security.
Securities for which market quotations are not readily available (including
restricted securities) or are deemed unreliable are valued at fair value.
Factors considered in making this determination may include, but are not
limited to, information obtained by contacting the issuer, analysts, analysis
of the issuer's financial statements or other available documents. In addition,
the Portfolio may use fair value pricing for securities primarily traded in
non-U.S. markets because most foreign markets close well before the Portfolio
values its securities at 4:00 p.m., Eastern Time. The earlier close of these
foreign markets gives rise to the possibility that significant events,
including broad market moves, may have occurred in the interim and may
materially affect the value of those securities.
2. Taxes
It is the policy of the Portfolio to meet the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required. The Portfolio may be subject to taxes imposed by countries in which
it invests. Such taxes are generally based on income and/or capital gains
earned or repatri-
ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 19
ated. Taxes are accrued and applied to net investment income, net realized
gains and net unrealized appreciation/depreciation as such income and/or gains
are earned.
3. Investment Income and Investment Transactions
Dividend income is recorded on the ex-dividend date or as soon as the Portfolio
is informed of the dividend. 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 and amortizes premiums as adjustments to interest
income.
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 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, Advisor Class, Class R, Class K and Class I shares.
Advisor Class and Class I 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 U.S. generally accepted accounting principles. To the extent
these differences are permanent, such amounts are reclassified within the
capital accounts based on their federal tax basis treatment; temporary
differences do not require such reclassification.
NOTE B
Advisory Fee and Other Transactions with Affiliates
Under the terms of the investment advisory agreement, the Portfolio pays the
Adviser an advisory fee at an annual rate of .50% of the first $2.5 billion,
..45% of the next $2.5 billion and .40% in excess of $5 billion, of the
Portfolio's average daily net assets. Prior to September 7, 2004, the Portfolio
paid the Adviser an advisory fee at an annual rate of .625% of the first $500
million and .50% in excess of $500 million of the Portfolio's average daily net
assets. The fee is accrued daily and paid monthly.
Effective January 1, 2004 through September 6, 2004, in contemplation of the
final agreement with the Office of New York Attorney General ("NYAG"), the
Adviser began waiving a portion of its advisory fee so as to charge the
Portfolio at the reduced annual rate discussed above. For a more complete
discussion of the Adviser's settlement with the NYAG, please see "Legal
Proceedings" below.
20 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO
Pursuant to the advisory agreement, the Portfolio paid $92,000 to the Adviser
representing the cost of certain legal and accounting services provided to the
Portfolio by the Adviser for the year ended September 30, 2005.
The Fund compensates Alliance Global Investor Services, Inc. (AGIS), a wholly
owned subsidiary of the Advisor, under a Transfer Agency Agreement for
providing personnel and facilities to perform transfer agency services for the
Fund. AGIS may make payments to intermediaries that provide omnibus account
services, sub-accounting services and/or networking services. Such compensation
retained by AGIS amounted to $651,716 for the year ended June 30, 2005.
For the year ended September 30, 2005, the Portfolio's expenses were reduced by
$8,679 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 $21,699 from the sales of Class A shares
and received $9,210, $151,258 and $13,877, respectively, in contingent deferred
sales charges imposed upon redemptions by shareholders of Class A, Class B and
Class C shares, respectively, for the year ended September 30, 2005.
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 the Portfolio's average daily
net assets attributable to Class A shares, 1% of the Portfolio's average daily
net assets attributable to both Class B and Class C shares, .50% of the
Portfolio's average daily net assets attributable to Class R shares and .25% of
the Portfolio's average daily net assets attributable to Class K shares. There
are no distribution and servicing fees on the Advisor Class and Class I shares.
The 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 incurred expenses in
excess of the distribution costs reimbursed by the Portfolio in the amounts of
$10,981,689, $5,575,481, $1,744 and $0 for Class B, Class C, Class R and Class
K shares, respectively. Such costs may be recovered from the Portfolio in
future periods so 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 CORPORATE BOND PORTFOLIO o 21
NOTE D
Investment Transactions
Purchases and sales of investment securities (excluding short-term investments)
for the year ended September 30, 2005, were as follows:
Purchases Sales
------------- ---------------
Investment securities (excluding
U.S. government securities) $ 884,414,688 $ 1,044,712,203
U.S. government securities 162,604,506 115,852,449
The cost of investments for federal income tax purposes, gross unrealized
appreciation and unrealized depreciation (excluding swaps) are as follows:
Cost $ 820,749,218
Gross unrealized appreciation $ 23,806,601
Gross unrealized depreciation (5,761,348)
Net unrealized appreciation $ 18,045,253
1. Option Transactions
For hedging and investment purposes, the Portfolio may purchase and write
(sell) put and call options on debt securities that are traded on U.S. and
foreign securities exchanges and over-the-counter markets and swap agreements
(commonly referred to as swaptions).
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 Portfolio bears the
market risk of an unfavorable change in the price of the security
22 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO
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 swaptions for the year ended September 30, 2005 were as follows:
Number of Premiums
Contracts Received
----------- -----------
Swaptions outstanding at
September 30, 2004 35 $ 119,500
Swaptions terminated in closing
purchase transactions (35) (119,500)
Swaptions outstanding at
September 30, 2005 -0- $ -0-
2. Swap Agreements
The Portfolio may enter into swaps to hedge its exposure to interest rates and
credit risk or for investment purposes. 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.
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 interim 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.
As of October 1, 2003, the Portfolio has adopted the method of accounting for
interim payments on swap contracts in accordance with Financial Accounting
Standards Board Statement No. 133. The Portfolio accrues for the interim
payments on swap contracts on a daily basis, with the net amount recorded
within unrealized appreciation/depreciation of swap contracts on the statement
of assets and liabilities. Once the interim payments are settled in cash, the
net amount is recorded as realized gain/loss on swaps, in addition to realized
gain/loss recorded upon termination of swap contracts on the statement of
operations. Prior to October 1, 2003, these interim payments were reflected
within interest income/expense in the statement of operations. Fluctuations in
the value of swap contracts are recorded as a component of net change in
unrealized appreciation/depreciation of investments.
ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 23
The Portfolio may enter into credit default swaps. The Portfolio may purchase
credit protection on the referenced obligation of the credit default swap ("Buy
Contract") or provide credit protection on the referenced obligation of the
credit default swap ("Sale Contract"). A sale/(buy) in a credit default swap
provides upon the occurrence of a credit event, as defined in the swap
agreement, for the Portfolio to buy/(sell) from/(to) the counterparty at the
notional amount (the "Notional Amount") and receive/(deliver) the principal
amount of the referenced obligation. If a credit event occurs, the maximum
payout amount for a Sale Contract is limited to the Notional Amount of the swap
contract ("Maximum Payout Amount"). During the term of the swap agreement, the
Portfolio receives/(pays) semi-annual fixed payments from/(to) the respective
counterparty, calculated at the agreed upon interest rate applied to the
Notional Amount. These interim payments are recorded within unrealized
appreciation/depreciation of swap contracts on the statement of assets and
liabilities.
Credit default swaps may involve greater risks than if a Portfolio had invested
in the referenced obligation directly. Credit default swaps are subject to
general market risk, liquidity risk, counterparty risk and credit risk. If the
Portfolio is a buyer and no credit event occurs, it will lose its investment.
In addition, if the Portfolio is a seller and a credit event occurs, the value
of the referenced obligation received by the Portfolio coupled with the
periodic payments previously received, may be less than the Maximum Payout
Amount it pays to the buyer, resulting in a loss to the Portfolio.
At September 30, 2005, the Portfolio had Sale Contracts outstanding with
Maximum Payout Amounts aggregating $20,000,000, with net unrealized
appreciation of $16,776, and terms ranging from 2 years to 5 years, as
reflected in the portfolio of investments.
In certain circumstances, the Portfolio may hold Sale Contracts on the same
referenced obligation and with the same counterparty it has purchased credit
protection, which may reduce its obligation to make payments on Sale Contracts,
if a credit event occurs.
3. 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 year ended September 30, 2005, the average amount of reverse repurchase
agreements outstanding was $2,039,096 and the daily weighted average annualized
interest rate was 2.46%.
24 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO
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, 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, 2005, the Portfolio had loaned securities with a value of $75,327,864 and
received cash collateral which was invested in short-term securities valued at
$78,735,928 as included in the accompanying portfolio of investments. For the
year ended September 30, 2005, the Portfolio earned fee income of $45,526 which
is included in interest income in the accompanying statement of operations.
NOTE F
Capital Stock
There are 21,000,000,000 shares of $.001 par value capital stock authorized,
divided into seven classes, designated Class A, Class B, Class C, Advisor
Class, Class R, Class K and Class I shares. Each class consists of
3,000,000,000 authorized shares. Transactions in capital stock were as follows:
Shares Amount
--------------------------- ------------------------------
Year Ended Year Ended Year Ended Year Ended
September 30, September 30, September 30, September 30,
2005 2004 2005 2004
------------ ------------ -------------- --------------
Class A
Shares sold 4,610,455 4,461,502 $ 56,557,019 $ 53,778,453
Shares issued in
reinvestment of
dividends 1,569,512 1,701,230 19,213,947 20,476,419
Shares converted
from Class B 3,336,050 5,004,729 40,930,028 60,239,503
Shares redeemed (11,359,866) (13,829,610) (139,267,023) (166,068,888)
Net decrease (1,843,849) (2,662,149) $(22,566,029) $(31,574,513)
ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 25
Shares Amount
--------------------------- ------------------------------
Year Ended Year Ended Year Ended Year Ended
September 30, September 30, September 30, September 30,
2005 2004 2005 2004
------------ ------------ -------------- --------------
Class B
Shares sold 1,237,626 2,154,985 $ 15,172,576 $ 25,956,985
Shares issued in
reinvestment of
dividends 534,444 832,039 6,538,548 10,006,532
Shares converted
to Class A (3,340,339) (5,000,439) (40,930,028) (60,239,503)
Shares redeemed (5,490,400) (9,436,877) (67,252,868) (113,115,838)
Net decrease (7,058,669) (11,450,292) $ (86,471,772) $(137,391,824)
Class C
Shares sold 947,050 1,532,581 $ 11,613,928 $ 18,454,991
Shares issued in
reinvestment of
dividends 272,247 316,396 3,331,569 3,805,919
Shares redeemed (2,404,933) (4,628,642) (29,473,603) (55,668,836)
Net decrease (1,185,636) (2,779,665) $ (14,528,106) $ (33,407,926)
Advisor Class
Shares sold 438,090 101,095 $ 5,414,629 $ 1,220,358
Shares issued in
reinvestment of
dividends 14,875 17,041 181,546 204,868
Shares redeemed (46,049) (351,762) (561,245) (4,216,532)
Net increase
(decrease) 406,916 (233,626) $ 5,034,930 $ (2,791,306)
November 3, November 3,
Year Ended 2003(a) to Year Ended 2003(a) to
September 30, September 30, September 30, September 30,
2005 2004 2005 2004
------------ ------------ -------------- --------------
Class R
Shares sold 2,982 846 $ 36,622 $ 10,050
Shares issued in
reinvestment of
dividends 46 -0- 559 -0-
Shares redeemed (1,136) -0- (13,859) -0-
Net increase 1,892 846 $ 23,322 $ 10,050
26 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO
Shares Amount
--------------------------- ------------------------------
March 1, March 1,
2005(a) to 2005(a) to
September 30, September 30,
2005 2005
------------- -------------
Class K
Shares sold 816 $ 10,186
Net increase 816 $ 10,186
Class I
Shares sold 817 $ 10,200
Net increase 817 $ 10,200
(a) Commencement of distribution.
NOTE G
Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the
Portfolio, participate in a $250 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 year ended September 30, 2005.
NOTE H
Risks Involved in Investing in the Portfolio
Interest Rate Risk and Credit Risk--Interest rate risk is the risk that changes
in interest rates will affect the value of the Portfolio's investments in
fixed-income debt securities such as bonds or notes. Increases in interest
rates may cause the value of the Portfolio's investments to decline. Credit
risk is the risk that the issuer or guarantor of a debt security, or the
counterparty to a derivative contract, will be unable or unwilling to make
timely principal and/or interest payments, or to otherwise honor its
obligations. The degree of risk for a particular security may be reflected in
its credit risk rating. Credit risk is greater for medium quality and
lower-rated securities. Lower-rated debt securities and similar unrated
securities (commonly known as "junk bonds") have speculative elements or are
predominantly speculative risks.
Foreign Securities Risk--Investing in securities of foreign companies or
foreign governments involves special risks which include changes in foreign
exchange rates and the possibility of future political and economic
developments which could adversely affect the value of such securities.
Moreover, securities of many foreign companies or foreign governments and their
markets may be less liquid and their prices more volatile than those of
comparable United States companies or of the United States government.
ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 27
Indemnification Risk--In the ordinary course of business, the Portfolio enters
into contracts that contain a variety of indemnifications. The Portfolio's
maximum exposure under these arrangements is unknown. However, the Portfolio
has not had prior claims or losses pursuant to these indemnification provisions
and expects the risk of loss thereunder to be remote.
NOTE I
Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended September
30, 2005 and September 30, 2004 were as follows:
September 30, September 30,
2005 2004
------------- -------------
Distributions paid from:
Ordinary income $ 41,403,689 $ 55,302,561
Total taxable distributions 41,403,689 55,302,561
Total distributions paid $ 41,403,689 $ 55,302,561
As of September 30, 2005, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Undistributed ordinary income $ 1,751,193
Accumulated capital and other losses (284,813,037)(a)
Unrealized appreciation/(depreciation) 12,187,943(b)
Total accumulated earnings/(deficit) $ (270,873,901)(c)
(a) On September 30, 2005, the Portfolio had a net capital loss carryforward
for federal income tax purposes of $284,813,037 of which $43,560,309 expires in
the year 2007, $54,554,000 expires in the year 2008, $52,066,319 expires in the
year 2009 and $134,632,409 expires in the year 2010. To the extent future
capital gains are offset by capital loss carryforwards, such gains will not be
distributed. During the fiscal year, the Portfolio utilized capital loss
carryforwards of $38,843,019.
(b) The differences between book-basis and tax-basis unrealized
appreciation/(depreciation) are attributable primarily to the tax deferral of
losses on wash sales, the difference between book and tax treatment of swap
income and the difference between book and tax amortization methods for premium.
(c) The difference between book-basis and tax-basis components of accumulated
earnings/(deficit) is attributable to dividends payable.
During the current fiscal year, permanent differences primarily due to the tax
treatment of bond premium and the tax treatment of swap income, resulted in a
net decrease in undistributed net investment income and a net decrease in
accumulated net realized loss on investment transactions. This reclassification
had no effect on net assets.
28 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO
NOTE J
Legal Proceedings
As has been previously reported, the staff of the U.S. Securities and Exchange
Commission ("SEC") and the NYAG have been investigating practices in the mutual
fund industry identified as "market timing" and "late trading" of mutual fund
shares. Certain other regulatory authorities have also been conducting
investigations into these practices within the industry and have requested that
the Adviser provide information to them. The Adviser has been cooperating and
will continue to cooperate with all of these authorities.
On December 18, 2003, the Adviser confirmed that it had reached terms with the
SEC and the NYAG for the resolution of regulatory claims relating to the
practice of "market timing" mutual fund shares in some of the AllianceBernstein
Mutual Funds. The agreement with the SEC is reflected in an Order of the
Commission ("SEC Order"). The agreement with the NYAG is memorialized in an
Assurance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the
key provisions of these agreements are the following:
(i) The Adviser agreed to establish a $250 million fund (the
"Reimbursement Fund") to compensate mutual fund shareholders for the adverse
effects of market timing attributable to market timing relationships described
in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be
paid, in order of priority, to fund investors based on (i) their aliquot share
of losses suffered by the fund due to market timing, and (ii) a proportionate
share of advisory fees paid by such fund during the period of such market
timing;
(ii) The Adviser agreed to reduce the advisory fees it receives from
some of the AllianceBernstein long-term, open-end retail funds until December
31, 2008; and
(iii) The Adviser agreed to implement changes to its governance and
compliance procedures. Additionally, the SEC Order and the NYAG Order
contemplate that the Adviser's registered investment company clients, including
the Fund, will introduce governance and compliance changes.
In anticipation of final, definitive documentation of the NYAG Order and
effective January 1, 2004, the Adviser began waiving a portion of its advisory
fee. On September 7, 2004, the Fund's investment advisory agreement was amended
to reflect the reduced advisory fee. For more information on this waiver and
amendment to the Fund's investment advisory agreement, please see "Advisory Fee
and Other Transactions with Affiliates" above.
A special committee of the Adviser's Board of Directors, comprised of the
members of the Adviser's Audit Committee and the other independent member of
the Adviser's Board, is continuing to direct and oversee an internal
investigation and
ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 29
a comprehensive review of the facts and circumstances relevant to the SEC's and
the NYAG's investigations.
In addition, the Independent Directors of the Fund ("the Independent
Directors") have initiated an investigation of the above-mentioned matters with
the advice of an independent economic consultant and independent counsel. The
Independent Directors have formed a special committee to supervise the
investigation.
On October 2, 2003, a purported class action complaint entitled Hindo, et al.
v. AllianceBernstein Growth & Income Fund, et al. ("Hindo Complaint") was filed
against the Adviser, Alliance Capital Management Holding L.P. ("Alliance
Holding"), Alliance Capital Management Corporation, AXA Financial, Inc., the
AllianceBernstein Funds, certain officers of the Adviser ("Alliance
defendants"), and certain other defendants not affiliated with the Adviser, as
well as unnamed Doe defendants. The Hindo Complaint was filed in the United
States District Court for the Southern District of New York by alleged
shareholders of two of the AllianceBernstein Funds. The Hindo Complaint alleges
that certain of the Alliance 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 the Adviser, including recovery of all fees paid to the Adviser pursuant
to such contracts.
Since October 2, 2003, numerous additional lawsuits making factual allegations
generally similar to those in the Hindo Complaint were filed in various federal
and state courts against the Adviser and certain other defendants, and others
may be filed. The plaintiffs in such lawsuits have asserted a variety of
theories for recovery including, but not limited to, violations of the
Securities Act, the Exchange Act, the Advisers Act, the Investment Company Act,
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
certain state securities laws, and common law. On February 20, 2004, the
Judicial Panel on Multidistrict Litigation transferred all federal actions, and
removed all state court actions, to the United States District Court for the
District of Maryland (the "Mutual Fund MDL"). The plaintiffs in the removed
actions have since moved for remand, and that motion is pending.
On September 29, 2004, plaintiffs filed consolidated amended complaints with
respect to four claim types: mutual fund shareholder claims; mutual fund
derivative claims; derivative claims brought on behalf of Alliance Holding; and
claims brought under ERISA by participants in the Profit Sharing Plan for
Employees of the Adviser. All four complaints include substantially identical
factual allegations, which appear to be based in large part on the SEC Order
and the
30 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO
NYAG Order. The claims in the mutual fund derivative consolidated amended
complaint are generally based on the theory that all fund advisory agreements,
distribution agreements and 12b-1 plans between the Adviser and the
AllianceBernstein Funds should be invalidated, regardless of whether market
timing occurred in each individual fund, because each was approved by fund
trustees on the basis of materially misleading information with respect to the
level of market timing permitted in funds managed by the Adviser. The claims
asserted in the other three consolidated amended complaints are similar to
those that the respective plaintiffs asserted in their previous federal
lawsuits. All of these lawsuits seek an unspecified amount of damages. The
Alliance defendants have moved to dismiss the complaints, and those motions are
pending.
On February 10, 2004, the Adviser received (i) a subpoena duces tecum from the
Office of the Attorney General of the State of West Virginia and (ii) a request
for information from West Virginia's Office of the State Auditor, Securities
Commission (the "West Virginia Securities Commission") (together, the
"Information Requests"). Both Information Requests require the Adviser to
produce documents concerning, among other things, any market timing or late
trading in the Adviser's sponsored mutual funds. The Adviser responded to the
Information Requests and has been cooperating fully with the investigation.
On April 11, 2005, a complaint entitled The Attorney General of the State of
West Virginia v. AIM Advisors, Inc., et al. ("WVAG Complaint") was filed
against the Adviser, Alliance Holding, and various other defendants not
affiliated with the Adviser. The WVAG Complaint was filed in the Circuit Court
of Marshall County, West Virginia by the Attorney General of the State of West
Virginia. The WVAG Complaint makes factual allegations generally similar to
those in the Hindo Complaint. On May 31, 2005, defendants removed the WVAG
Complaint to the United States District Court for the Northern District of West
Virginia. On July 12, 2005, plaintiff moved to remand. On October 19, 2005, the
WVAG Complaint was transferred to the Mutual Fund MDL.
On August 30, 2005, the deputy commissioner of securities of the West Virginia
Securities Commission signed a "Summary Order to Cease and Desist, and Notice
of Right to Hearing" addressed to the Adviser and Alliance Holding. The Summary
Order claims that the Adviser and Alliance Holding violated the West Virginia
Uniform Securities Act, and makes factual allegations generally similar to
those in the Commission Order and the NYAG Order. The Adviser intends to
vigorously defend against the allegations in the WVAG Complaint.
As a result of the matters discussed above, 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.
ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 31
On June 22, 2004, a purported class action complaint entitled Aucoin, et al. v.
Alliance Capital Management L.P., et al. ("Aucoin Complaint") was filed against
the Adviser, Alliance Capital Management Holding L.P., Alliance Capital
Management Corporation, AXA Financial, Inc., AllianceBernstein Investment
Research & Management, Inc., certain current and former directors of the
AllianceBernstein Mutual Funds, and unnamed Doe defendants. The Aucoin
Complaint names certain of the AllianceBernstein mutual funds as nominal
defendants. The Aucoin Complaint was filed in the United States District Court
for the Southern District of New York by an alleged shareholder of an
AllianceBernstein mutual fund. The Aucoin Complaint alleges, among other
things, (i) that certain of the defendants improperly authorized the payment of
excessive commissions and other fees from fund assets to broker-dealers in
exchange for preferential marketing services, (ii) that certain of the
defendants misrepresented and omitted from registration statements and other
reports material facts concerning such payments, and (iii) that certain
defendants caused such conduct as control persons of other defendants. The
Aucoin Complaint asserts claims for violation of Sections 34(b), 36(b) and
48(a) of the Investment Company Act, Sections 206 and 215 of the Advisers Act,
breach of common law fiduciary duties, and aiding and abetting breaches of
common law fiduciary duties. Plaintiffs seek an unspecified amount of
compensatory damages and punitive damages, rescission of their contracts with
the Adviser, including recovery of all fees paid to the Adviser pursuant to
such contracts, an accounting of all fund-related fees, commissions and soft
dollar payments, and restitution of all unlawfully or discriminatorily obtained
fees and expenses.
Since June 22, 2004, numerous additional lawsuits making factual allegations
substantially similar to those in the Aucoin Complaint were filed against the
Adviser and certain other defendants, and others may be filed. On October 19,
2005, the District Court granted in part, and denied in part, defendants'
motion to dismiss the Aucoin Complaint and as a result the only claim remaining
is plaintiffs' Section 36(b) claim.
It is possible that these matters and/or other developments resulting from
these matters could result in increased redemptions of the AllianceBernstein
Mutual Funds' shares or other adverse consequences to the AllianceBernstein
Mutual Funds. However, the Adviser believes that these matters are not likely
to have a material adverse effect on its ability to perform advisory services
relating to the AllianceBernstein Mutual Funds.
32 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class A
------------------------------------------------------------------------------
Year Ended July 1,
September 30, 2003 to Year Ended June 30,
------------------------ Sept. 30, ------------------------------------
2005 2004(a) 2003(b) 2003 2002(c) 2001
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period $12.18 $11.97 $12.03 $10.70 $12.29 $11.91
Income From Investment Operations
Net investment income(d) .66 .75(e) .18 .77 .94 .97
Net realized and unrealized gain
(loss) on investment
transactions (.19) .18 (.06) 1.35 (1.55) .42
Net increase (decrease) in net
asset value from operations .47 .93 .12 2.12 (.61) 1.39
Less: Dividends and Distributions
Dividends from net investment income (.64) (.72) (.18) (.76) (.94) (.97)
Distributions in excess of net
investment income -0- -0- -0- -0- -0- (.01)
Tax return of capital -0- -0- -0- (.03) (.04) (.03)
Total dividends and distributions (.64) (.72) (.18) (.79) (.98) (1.01)
Net asset value, end of period $12.01 $12.18 $11.97 $12.03 $10.70 $12.29
Total Return
Total investment return based on
net asset value(f) 3.86% 8.01% 1.06% 20.75% (5.51)% 12.03%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $483,169 $512,458 $535,318 $555,979 $520,984 $530,446
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements 1.08% 1.16% 1.20%(g) 1.16% 1.12% 1.31%
Expenses, before waivers/
reimbursements 1.08% 1.20% 1.20%(g) 1.16% 1.12% 1.31%
Expenses, before waivers/
reimbursements, excluding
interest expense 1.08% 1.12% 1.15%(g) 1.13% 1.09% 1.09%
Net investment income 5.38% 6.25%(e) 6.18%(g) 6.96% 7.79% 7.95%
Portfolio turnover rate 127% 230% 65% 171% 276% 340%
See footnote summary on page 40.
ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 33
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class B
------------------------------------------------------------------------------
Year Ended July 1,
September 30, 2003 to Year Ended June 30,
------------------------ Sept. 30, -------------------------------------
2005 2004(a) 2003(b) 2003 2002(c) 2001
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period $12.17 $11.96 $12.02 $10.70 $12.30 $11.92
Income From Investment Operations
Net investment income(d) .57 .66(e) .16 .69 .85 .88
Net realized and unrealized gain
(loss) on investment
transactions (.19) .19 (.06) 1.35 (1.55) .42
Net increase (decrease) in net
asset value from operations .38 .85 .10 2.04 (.70) 1.30
Less: Dividends and Distributions
Dividends from net investment income (.55) (.64) (.16) (.70) (.85) (.88)
Distributions in excess of net
investment income -0- -0- -0- -0- (.01) (.01)
Tax return of capital -0- -0- -0- (.02) (.04) (.03)
Total dividends and distributions (.55) (.64) (.16) (.72) (.90) (.92)
Net asset value, end of period $12.00 $12.17 $11.96 $12.02 $10.70 $12.30
Total Return
Total investment return based on
net asset value(f) 3.13% 7.26% .88% 19.85% (6.23)% 11.24%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $162,973 $251,173 $383,763 $418,095 $458,394 $509,953
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements 1.80% 1.89% 1.92%(g) 1.88% 1.83% 2.03%
Expenses, before waivers/
reimbursements 1.80% 1.93% 1.92%(g) 1.88% 1.83% 2.03%
Expenses, before waivers/
reimbursements, excluding
interest expense 1.79% 1.84% 1.87%(g) 1.85% 1.80% 1.81%
Net investment income 4.65% 5.55%(e) 5.48%(g) 6.27% 7.05% 7.18%
Portfolio turnover rate 127% 230% 65% 171% 276% 340%
See footnote summary on page 40.
34 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class C
------------------------------------------------------------------------------
Year Ended July 1,
September 30, 2003 to Year Ended June 30,
------------------------ Sept. 30, -------------------------------------
2005 2004(a) 2003(b) 2003 2002(c) 2001
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period $12.18 $11.96 $12.02 $10.70 $12.30 $11.91
Income From Investment Operations
Net investment income(d) .57 .67(e) .16 .69 .85 .89
Net realized and unrealized gain
(loss) on investment
transactions (.19) .19 (.06) 1.35 (1.55) .42
Net increase (decrease) in net
asset value from operations .38 .86 .10 2.04 (.70) 1.31
Less: Dividends and Distributions
Dividends from net investment income (.55) (.64) (.16) (.70) (.85) (.89)
Distributions in excess of net
investment income -0- -0- -0- -0- (.01) -0-
Tax return of capital -0- -0- -0- (.02) (.04) (.03)
Total dividends and distributions (.55) (.64) (.16) (.72) (.90) (.92)
Net asset value, end of period $12.01 $12.18 $11.96 $12.02 $10.70 $12.30
Total Return
Total investment return based on
net asset value(f) 3.14% 7.35% .88% 19.85% (6.23)% 11.33%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $110,680 $126,685 $157,719 $168,123 $179,418 $185,022
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements 1.79% 1.87% 1.91%(g) 1.87% 1.82% 2.03%
Expenses, before waivers/
reimbursements 1.79% 1.92% 1.91%(g) 1.87% 1.82% 2.03%
Expenses, before waivers/
reimbursements, excluding
interest expense 1.78% 1.84% 1.86%(g) 1.84% 1.79% 1.81%
Net investment income 4.65% 5.55%(e) 5.49%(g) 6.28% 7.07% 7.22%
Portfolio turnover rate 127% 230% 65% 171% 276% 340%
See footnote summary on page 40.
ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 35
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Advisor Class
-------------------------------------------------
Year Ended July 1, August 8,
September 30, 2003 to, 2002(h) to
------------------------ Sept. 30, June 30,
2005 2004(a) 2003(b) 2003
----------- ----------- ----------- ----------
Net asset value, beginning of period $12.19 $11.98 $12.03 $10.21
Income From Investment Operations
Net investment income(d) .68 .84(e) .19 .69
Net realized and unrealized
gain (loss) on
investment transactions (.18) .13 (.05) 1.85
Net increase in net
asset value from
operations .50 .97 .14 2.54
Less: Dividends and Distributions
Dividends from net investment income (.68) (.76) (.19) (.70)
Tax return of capital -0- -0- -0- (.02)
Total dividends and distributions (.68) (.76) (.19) (.72)
Net asset value, end of period $12.01 $12.19 $11.98 $12.03
Total Return
Total investment return based on
net asset value(f) 4.10% 8.34% 1.22% 25.70%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $4,971 $86 $2,883 $2,298
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements .83% .88% .91%(g) .88%(g)
Expenses, before waivers/
reimbursements .83% .92% .91%(g) .88%(g)
Expenses, before waivers/
reimbursements, excluding
interest expense .82% .83% .86%(g) .85%(g)
Net investment income 5.62% 6.52%(e) 6.51%(g) 6.90%(g)
Portfolio turnover rate 127% 230% 65% 171%
See footnote summary on page 40.
36 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class R
---------------------------
November 3,
Year Ended 2003(h) to
September 30, September 30,
2005 2004(a)
----------- -------------
Net asset value, beginning of period $12.18 $11.88
Income From Investment Operations
Net investment income(d) .60 .66(e)
Net realized and unrealized gain (loss) on
investment transactions (.15) .27
Net increase in net asset value
from operations .45 .93
Less: Dividends
Dividends from net investment income (.61) (.63)
Net asset value, end of period $12.02 $12.18
Total Return
Total investment return based on
net asset value(f) 3.71% 8.04%
Ratios/Supplemental Data
Net assets, end of period (000's omitted) $33 $10
Ratio to average net assets of:
Expenses, net of waivers/reimbursements 1.39% 1.34%(g)
Expenses, before waivers/reimbursements 1.39% 1.39%(g)
Expenses, before waivers/reimbursements,
excluding interest expense 1.38% 1.31%(g)
Net investment income 5.02% 6.04%(e)(g)
Portfolio turnover rate 127% 230%
See footnote summary on page 40.
ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 37
Selected Data For A Share Of Capital Stock Outstanding Throughout The Period
Class K
------------
March 1,
2005(h) to
September 30,
2005
------------
Net asset value, beginning of period $12.48
Income From Investment Operations
Net investment income(d) .37
Net realized and unrealized loss on
investment transactions (.48)
Net decrease in net asset value
from operations (.11)
Less: Dividends
Dividends from net investment income. (.36)
Net asset value, end of period $12.01
Total Return
Total investment return based on
net asset value(f) (.89)%
Ratios/Supplemental Data
Net assets, end of period (000's omitted) $10
Ratio to average net assets of:
Expenses(g) 1.10%
Expenses, excluding interest expense(g) 1.10%
Net investment income(g) 5.25%
Portfolio turnover rate 127%
See footnote summary on page 40.
38 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO
Selected Data For A Share Of Capital Stock Outstanding Throughout The Period
Class I
------------
March 1,
2005(h) to
September 30,
2005
------------
Net asset value, beginning of period $12.48
Income From Investment Operations
Net investment income(d) .40
Net realized and unrealized loss
on investment transactions (.49)
Net decrease in net asset value
from operations (.09)
Less: Dividends
Dividends from net investment income (.38)
Net asset value, end of period $12.01
Total Return
Total investment return based on
net asset value(f) (.70)%
Ratios/Supplemental Data
Net assets, end of period (000's omitted) $10
Ratio to average net assets of:
Expenses(g) .79%
Expenses, excluding interest expense(g) .79%
Net investment income(g) 5.59%
Portfolio turnover rate 127%
See footnote summary on page 40.
ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 39
(a) As of October 1, 2003, the Portfolio has adopted the method of accounting
for interim payments on swap contracts in accordance with Financial Accounting
Standards Board Statement No. 133. These interim payments are reflected within
net realized and unrealized gain (loss) on swap contracts, however, prior to
October 1, 2003, these interim payments were reflected within interest
income/expense on the statement of operations. The effect of this change for
the year ended September 30, 2004, was to increase net investment income per
share by $.02 for Class A, B, C, Advisor Class and Class R and decrease net
realized and unrealized gain on investment transactions per share by $.02 for
Classs A, B, C, Advisor Class and Class R. Consequently, the ratios of net
investment income to average net assets increased by 0.18%, 0.16%, 0.16%, 0.18%
and 0.17% for Class A, B, C, Advisor Class and Class R, respectively.
(b) The Portfolio changed its fiscal year end from June 30 to September 30.
(c) 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 and net realized
and unrealized loss on investments per share by less than $.01 for Class A,
Class B and Class C, respectively, and decrease the ratio of net investment
income to average net assets from 7.82% to 7.79% for Class A, from 7.08% to
7.05% for Class B and from 7.10% to 7.07% for Class C. Per share, ratios and
supplemental data for periods prior to July 1, 2001 have not been restated to
reflect this change in presentation.
(d) Based on average shares outstanding.
(e) Net of expenses waived and reimbursed by the Adviser.
(f) Total investment return is calculated assuming an initial investment is
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 Portfolio distributions or the redemption of Portfolio
shares. Total investment return calculated for a period of less than one year
is not annualized.
(g) Annualized.
(h) Commencement of distribution.
40 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
AllianceBernstein Bond Fund, Inc. Corporate Bond Portfolio
We have audited the accompanying statement of assets and liabilities of
Corporate Bond Portfolio (the "Portfolio") one of the Portfolios constituting
the AllianceBernstein Bond Fund, Inc., including the portfolio of investments,
as of September 30, 2005, and the related statement of operations for the year
then ended, the statement of changes in net assets applicable to common
shareholders for each of the two years in the period then ended, and the
financial highlights for each of the five years in the period then ended. 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 the standards of the Public Company
Accounting Oversight Board (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. We were not engaged to perform an audit of the Fund's internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Fund's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. Our procedures included
confirmation of securities owned as of September 30, 2005 by correspondence
with the custodian and others or by other appropriate auditing procedures where
replies from others were not received. 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
Corporate Bond Portfolio at September 30, 2005, the results of its operations
for the year then ended, the changes in its net assets applicable to common
shareholders for each of the two years in the period then ended, and the
financial highlights for each of the five years in the period then ended, in
conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young
- ------------------
New York, New York
November 16, 2005
ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 41
BOARD OF DIRECTORS
William H. Foulk, Jr.(1), Chairman
Marc O. Mayer, President
Ruth Block(1)
David H. Dievler(1)
John H. Dobkin(1)
Michael J. Downey(1)
D. James Guzy
Marshall C. Turner, Jr.
OFFICERS
Philip L. Kirstein, Senior Vice President and Independent Compliance Officer
Jeffrey S. Phlegar, Vice President
Lawrence J. Shaw(2), Vice President
Michael A. Snyder(2), Vice President
Emilie D. Wrapp, Secretary
Mark D. Gersten, Treasurer and 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, TX 78278-6003
Toll-Free (800) 221-5672
Independent Registered Public Accounting Firm
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, Governance and Nominating Committee and
Independent Directors Committee.
(2) The day-to-day management of and investment decisions for the Portfolio
are made by the U.S. Investment Grade: Corporate Bond and U.S. High Yield
Investment Team. Messrs. Shaw and Snyder are the investment professionals with
the most significant responsibility for the day-to-day management of the
Portfolio.
42 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO
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, PRINCIPAL COMPLEX DIRECTORSHIPS
ADDRESS, DATE OF BIRTH OCCUPATION(S) OVERSEEN BY HELD BY
(FIRST YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR
- -----------------------------------------------------------------------------------------------------------------------
DISINTERESTED DIRECTORS
William H. Foulk, Jr. #, + Investment Adviser and an 108 None
2 Sound View Drive independent consultant. He was
Suite 100 formerly Senior Manager of Barrett
Greenwich, CT 06830 Associates, Inc., a registered
9/7/32 investment adviser, with which
(1998) he had been associated since
Chairman of the Board prior to 2000. 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 #, ** Formerly Executive Vice President 106 None
500 SE Mizner Blvd. and Chief Insurance Officer of The
Boca Raton, FL 33432 Equitable Life Assurance Society
11/7/30 of the United States; Chairman and
(1987) Chief Executive Officer of Evlico
(insurance); Director of Avon, BP
(oil and gas), Ecolab Incorporated
(specialty chemicals), Tandem Financial
Group and Donaldson, Lufkin &
Jenrette Securities Corporation;
Governor at Large, National Association
of Securities Dealers, Inc.
David H. Dievler # Independent consultant. Until 107 None
P.O. Box 167 December 1994, he was Senior
Spring Lake, NJ 07762 Vice President of Alliance Capital
10/23/29 Management Corporation ("ACMC")
(1987) 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 American Institute of Certified
Public Accountants since 1953.
John Dobkin # Consultant. Formerly President 106 None
P.O. Box 12 of Save Venice, Inc. (preservation
Annandale, NY 12504 organization) from 2001 - 2002, Senior
2/19/42 Advisor from June 1999 - June 2000
(1998) and President of Historic Hudson Valley
(historic preservation) from December
1989 - May 1999. Previously, Director
of the National Academy of Design and
during 1988-1992, Director and
Chairman of the Audit Committee
of ACMC.
ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 43
PORTFOLIOS
IN FUND OTHER
NAME, PRINCIPAL COMPLEX DIRECTORSHIPS
ADDRESS, DATE OF BIRTH OCCUPATION(S) OVERSEEN BY HELD BY
(FIRST YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR
- -----------------------------------------------------------------------------------------------------------------------
DISINTERESTED DIRECTORS
(continued)
Michael J. Downey # Consultant since January 81 Asia Pacific
c/o Alliance Capital 2004. Formerly managing Fund, Inc.;
Management L.P. partner of Lexington Capital, and The
1345 Avenue of the Americas LLC (investment advisory firm) Merger Fund.
New York, NY 10105 from December 1997 until
Attention: Phil Kirstein December 2003. Prior thereto,
1/26/44 Chairman and CEO of Prudential
(2005) Mutual Fund Management
from 1987 to 1993.
D. James Guzy Chairman of the Board of PLX 58 Intel Corporation,
P.O. Box 128 Technology (semi-conductors) Cirrus Logic
Glenbrook, NV 89413 and of SRC Computers Inc., Corporation,
3/7/36 with which he has been associated Novellus
(2005) since prior to 2000. He is also Corporation,
President of the Arbor Company Micro Component
(private family investments). Technology, the
Davis Selected
Advisers Group of
Mutual Funds
and LogicVision.
Marshall C. Turner, Jr. Principal of Turner Venture 58 Toppan
220 Montgomery Street Associates (venture capital and Photomasks, Inc.,
Penthouse 10 consulting) since prior to 2000. the George Lucas
San Francisco, Chairman and CEO, DuPont Educational
CA 94104 Photomasks, Inc., Austin, Texas, Foundation,
10/10/41 2003-2005, and President and Chairman of the
(2005) CEO since company acquired, Board of the
and name changed to Toppan Smithsonian's
Photomasks, Inc. in 2005 National Museum
(semiconductor manufacturing of Natural History.
services).
INTERESTED DIRECTOR
Marc O. Mayer++ Executive Vice President of 81 SCB Partners,
1345 Avenue of the Americas ACMC since 2001; prior thereto, Inc.; and
New York, NY 10105 Chief Executive Officer of SCB Inc.
10/2/57 Sanford C. Bernstein &Co.,
(2003) LLC (institutional research and
brokerage arm of Bernstein &
Co., LLC) ("SCB & Co.") and its
predecessor since prior to 2000.
See footnote summary on page 45.
44 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO
* There is no stated term of office for the Fund's directors.
** Ms.Block was an "interested person", as defined in the 1940 Act, from July
22, 1992 until October 21, 2004 by reason of her ownership of securities of a
control person of the Adviser. Ms. Block received shares of The Equitable
Companies Incorporated ('Equitable") as part of the demutualization of The
Equitable Life Assurance Society of the United States in 1992. Ms. Block's
Equitable shares were subsequently converted through a corporate action into
American Depositary Shares of AXA, which were sold for approximately $2,400 on
October 21, 2004. Equitable and AXA are control persons of the Adviser.
# Member of the Audit Committee, Governance and Nominating Committee and
Independent Directors Committee.
+ Member of the Fair Value Pricing Commitee.
++ Mr.Mayer is an "interested director", as defined in the 1940 Act, due to
his position as an Executive Vice President of ACMC.
ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 45
Officer Information
Certain information concerning the Fund's Officers is set forth below.
PRINCIPAL
NAME, ADDRESS*, POSITION(S) PRINCIPAL OCCUPATION
AND DATE OF BIRTH HELD WITH FUND DURING PAST 5 YEARS
- -------------------------------------------------------------------------------------------------
Marc O. Mayer President and Chief See biography above.
10/2/1957 Executive Officer
Philip L. Kirstein Senior Vice President Senior Vice President and Independent
5/29/1945 & Independent Compliance Officer of the
Compliance Officer AllianceBernstein Funds, with which he
has been associated since October
2004. Prior thereto, he was Of Counsel
to Kirkpatrick & Lockhart, LLP from
October 2003 to October 2004, and
General Counsel of Merrill Lynch
Investment Managers L.P. since prior
to 2000 until March 2003.
Jeffrey S. Phlegar Vice President Executive Vice President of ACMC**,
6/28/1966 with which he has been associated
since prior to 2000.
Lawrence J. Shaw Vice President Senior Vice President of ACMC**, with
2/9/1951 which he has been associated
since prior to 2000.
Michael A. Snyder Vice President Senior Vice President of ACMC** since
4/18/1962 May 2001. Prior thereto, he was a
Managing Director in the high yield
asset group at Donaldson, Lufkin &
Jenrette Corporation since prior to
2000.
Emilie D. Wrapp Secretary Senior Vice President, Assistant
11/13/55 General Counsel and Assistant
Secretary of AllianceBernstein
Investment Research and
Management, Inc. ("ABIRM")**, with
which she has been associated since
prior to 2000.
46 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO
PRINCIPAL
NAME, ADDRESS*, POSITION(S) PRINCIPAL OCCUPATION
AND DATE OF BIRTH HELD WITH FUND DURING PAST 5 YEARS
- -------------------------------------------------------------------------------------------------
Mark D. Gersten Treasurer and Chief Senior Vice President of Alliance Global
10/4/1950 Financial Officer Investor Services,Inc. ("AGIS")** and
Vice President of ABIRM**, with
which he has been associated since
prior to 2000.
Vincent S. Noto Controller Vice President of AGIS**, with which
12/14/1964 he has been associated since prior to
2000.
* The address for each of the Fund's Officers is 1345 Avenue of the
Americas, New York, NY 10105.
** ACMC, ABIRM, AGIS and SCB & Co. 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 1-800-227-4618 for a free prospectus or SAI.
ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 47
Information Regarding the Review and Approval of the Fund's Investment Advisory
Contract
In this disclosure, the term "Fund" refers to AllianceBernstein Bond Fund,
Inc., and the term "Portfolio" refers to Corporate Bond Portfolio.
The Fund's disinterested directors (the "directors") unanimously approved the
continuance of the Investment Advisory Contract (the "Advisory Agreement")
between the Fund and the Adviser in respect of the Portfolio at a meeting held
on June 15, 2005.
In preparation for the meeting, the directors had requested from the Adviser
and evaluated extensive materials, including performance and expense
information for other investment companies with similar investment objectives
derived from data compiled by Lipper Inc. ("Lipper"), which is not affiliated
with the Adviser. The directors also reviewed an independent evaluation from
the Fund's Senior Officer (who is also the Fund's Independent Compliance
Officer) of the reasonableness of the advisory fees in the Advisory Agreement
in respect of the Portfolio (as contemplated by the Assurance of Discontinuance
between the Adviser and the New York Attorney General) wherein the Senior
Officer concluded that such fees were reasonable. In addition, the directors
received a presentation from the Adviser and had an opportunity to ask
representatives of the Adviser various questions relevant to the proposed
approval. The directors noted that the Senior Officer's evaluation considered
the following factors: management fees charged to institutional and other
clients of the Adviser for like services; management fees charged by other
mutual fund companies for like services; cost to the Adviser and its affiliates
of supplying services pursuant to the Advisory Agreement, excluding any
intra-corporate profit; profit margins of the Adviser and its affiliates from
supplying such services; possible economies of scale as the Portfolio grows
larger; and nature and quality of the Adviser's services including the
performance of the Portfolio.
Prior to voting, the directors reviewed the proposed continuance of the
Advisory Agreement in respect of the Portfolio with management and with
experienced counsel who are independent of the Adviser and received a
memorandum from such counsel discussing the legal standards for their
consideration of the proposed continuance. The directors also discussed the
proposed continuance in three private sessions at which only the directors,
their independent counsel and the Fund's Independent Compliance Officer were
present. In reaching their determinations relating to continuance of the
Advisory Agreement in respect of the Portfolio, the directors considered all
factors they believed relevant, including the following:
1. information comparing the performance of the Portfolio to other
investment companies with similar investment objectives and to an index;
48 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO
2. the nature, extent and quality of investment, compliance,
administrative and other services rendered by the Adviser;
3. payments received by the Adviser from all sources in respect of the
Portfolio and all investment companies in the AllianceBernstein Funds complex;
4. the costs borne by, and profitability of, the Adviser and its
affiliates in providing services to the Portfolio and to all investment
companies in the AllianceBernstein Funds complex;
5. comparative fee and expense data for the Portfolio and other
investment companies with similar investment objectives;
6. the extent to which economies of scale would be realized to the extent
the Portfolio grows and whether fee levels reflect any economies of scale for
the benefit of investors;
7. the Adviser's policies and practices regarding allocation of portfolio
transactions of the Portfolio;
8. information about "revenue sharing" arrangements that the Adviser has
entered into in respect of the Portfolio;
9. portfolio turnover rates for the Portfolio compared to other
investment companies with similar investment objectives;
10. fall-out benefits which the Adviser and its affiliates receive from
their relationships with the Portfolio;
11. the Adviser's representation that it does not advise other clients with
substantially similar investment objectives and strategies as the Portfolio;
12. the Senior Officer's evaluation of the reasonableness of the fee
payable to the Adviser in the Advisory Agreement;
13. the professional experience and qualifications of the Portfolio's
portfolio management team and other senior personnel of the Adviser; and
14. the terms of the Advisory Agreement.
The directors also considered their knowledge of the nature and quality of the
services provided by the Adviser to the Portfolio gained from their experience
as directors or trustees of most of the funds advised by the Adviser, their
overall
ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 49
confidence in the Adviser's integrity and competence they have gained from that
experience and the Adviser's responsiveness to concerns raised by them in the
past, including the Adviser's willingness to consider and implement
organizational and operational changes designed to improve investment results
and the services provided to the AllianceBernstein Funds.
In their deliberations, the directors did not identify any particular
information that was all-important or controlling, and each director attributed
different weights to the various factors.
The directors determined that the overall arrangements between the Portfolio
and the Adviser, as provided in the Advisory Agreement, were fair and
reasonable in light of the services performed, expenses incurred and such other
matters as the directors considered relevant in the exercise of their business
judgment.
The material factors and conclusions that formed the basis for the directors
reaching their determinations to approve the continuance of the Advisory
Agreement in respect of the Portfolio (including their determinations that the
Adviser should continue to be the investment adviser for the Portfolio, and
that the fees payable to the Adviser pursuant to the Advisory Agreement are
appropriate) were separately discussed by the directors.
Nature, extent and quality of services provided by the Adviser
The directors noted that, under the Advisory Agreement, the Adviser, subject to
the control of the directors, administers the Portfolio's business and other
affairs. The Adviser manages the investment of the assets of the Portfolio,
including making purchases and sales of portfolio securities consistent with
the Portfolio's investment objective and policies. Under the Advisory
Agreement, the Adviser also provides the Portfolio with such office space,
administrative and other services (exclusive of, and in addition to, any such
services provided by any others retained by the Portfolio) and executive and
other personnel as are necessary for the Portfolio's operations. The Adviser
pays all of the compensation of directors of the Fund who are affiliated
persons of the Adviser and of the officers of the Portfolio.
The directors also considered that the Advisory Agreement provides that the
Portfolio will reimburse the Adviser for the cost of certain clerical,
accounting, administrative and other services provided at the Portfolio's
request by employees of the Adviser or its affiliates. Requests for these "at
no more than cost" reimbursements are approved by the directors on a quarterly
basis and (to the extent requested and paid) result in a higher rate of total
compensation from the Portfolio to the Adviser than the stated fee rates in the
Portfolio's Advisory Agreement.
50 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO
The directors considered the scope and quality of services provided by the
Adviser under the Advisory Agreement and noted that the scope of services
provided by advisers of funds had expanded over time as a result of regulatory
and other developments. The directors noted, for example, that the Adviser is
responsible for maintaining and monitoring its own and, to varying degrees, the
Portfolio's compliance programs, and that these compliance programs have
recently been refined and enhanced in light of new regulatory requirements. The
directors considered the quality of the in-house investment research
capabilities of the Adviser and the other resources it has dedicated to
performing services for the Portfolio. The quality of administrative and other
services, including the Adviser's role in coordinating the activities of the
Portfolio's other service providers, also were considered. The directors also
considered the Adviser's response to recent regulatory compliance issues
affecting a number of the investment companies in the AllianceBernstein Funds
complex. The directors concluded that, overall, they were satisfied with the
nature, extent and quality of services provided to the Portfolio under the
Advisory Agreement.
Costs of Services Provided and Profitability to the Adviser
The directors reviewed a schedule of the revenues, expenses and related notes
indicating the profitability of the Portfolio to the Adviser for calendar years
2003 and 2004. The directors reviewed the assumptions and methods of allocation
used by the Adviser in preparing fund-specific profitability data, and noted
the Adviser's representation to them that it believed that the methods of
allocation used in preparing the profitability information were reasonable and
appropriate and that the Adviser had previously discussed with the directors
that there is no generally accepted allocation methodology for information of
this type. The directors also noted that the methodology for preparing
fund-by-fund profitability information was being reviewed and that it was
expected that an updated methodology would be implemented later in the year,
and that it would differ in various respects from the methodology used
previously.
The directors recognized that it is difficult to make comparisons of
profitability from fund advisory contracts because comparative information is
not generally publicly available and is affected by numerous factors, including
the structure of the particular adviser, the types of funds it manages, its
business mix, numerous assumptions regarding allocations and the adviser's
capital structure and cost of capital. In considering profitability
information, the directors considered the effect of fall-out benefits on the
Adviser's expenses, as well as the "revenue sharing" arrangements the Adviser
has entered into with certain entities that distribute shares of the Portfolio.
The directors focused on the profitability of the Adviser's relationship with
the Portfolio before taxes and distribution expenses. The directors recognized
that the Adviser should generally be entitled to earn a reasonable level of
profits for the services it provides to the Portfolio and, based on their
review, concluded that they were satisfied that the Adviser's level of
profitability from its relationship with the Portfolio was not excessive.
ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 51
Fall-Out Benefits
The directors considered that the Adviser benefits from soft dollar
arrangements whereby it receives brokerage and research services from many of
the brokers and dealers that execute purchases and sales of securities on
behalf of its clients on an agency basis. Since the Portfolio does not normally
engage in brokerage transactions, the Adviser does not receive soft dollar
benefits in respect of portfolio transactions of the Portfolio.
The directors also considered that the Distributor, which is a wholly-owned
subsidiary of the Adviser: receives 12b-1 fees from the Portfolio in respect of
classes of shares of the Portfolio that are subject to the Fund's 12b-1 plan;
retains a portion of the 12b-1 fees from the Portfolio; and receives all or a
portion of the sales charges on sales or redemptions of certain classes of
shares. The directors also noted that certain affiliates of the Adviser
distribute shares of the Portfolio and receive compensation in that connection
and that a subsidiary of the Adviser provides transfer agency services to the
Portfolio and receives compensation from the Portfolio for such services.
The directors recognized that the Adviser's profitability would be somewhat
lower if the Adviser's affiliates did not receive the benefits described above.
The directors also believe that the Adviser derives reputational and other
benefits from its association with the Portfolio.
Investment Results
In addition to the information reviewed by the directors in connection with the
meeting, the directors receive detailed comparative performance information for
the Portfolio at each regular Board meeting during the year. At the meeting,
the directors reviewed information prepared by the Adviser based on information
obtained from Lipper showing performance for Class A shares of the Portfolio as
compared to other funds in the Lipper Corporate Debt BBB-Rated Funds Average
for periods ending March 31, 2005 over the year to date, 1-, 3-, 5- and 10-year
and since inception periods (inception March 1974) and for each of the last ten
calendar years and compared to the Lehman Brothers Long BAA U.S. Credit Index.
The directors also reviewed information from a report prepared by Lipper
showing performance for Class A shares of the Portfolio as compared to a group
of 9 to 7 funds (depending on the year) in its Lipper category selected by
Lipper (the "Performance Group") and as compared to a universe of 35 to 10
funds (depending on the year) in its Lipper category selected by Lipper (the
"Performance Universe") for periods ended March 31, 2005 over the 1-, 3-, 5-
and 10-year periods. The directors noted that the Lipper category data showed
the Portfolio's performance for the periods ending March 31, 2005 was somewhat
above the Lipper median for the 5-year period and significantly above the
Lipper medians for all other periods reviewed, and that the Fund's performance
for calendar years 2002, 1998 and 1994 was significantly below the Lipper
medians, close to the Lipper median for calendar year 2000 and significantly
52 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO
above the Lipper medians for all other calendar year periods reviewed. The
directors further noted that in the Performance Universe comparison, the
Portfolio was in the third quintile in the 5-year period but in the first or
second quintile in the Performance Group and Performance Universe comparisons
for all other periods reviewed. Based on their review, the directors concluded
that the Portfolio's relative performance over time was satisfactory.
Advisory Fees and Other Expenses
The directors considered the advisory fee rate paid by the Portfolio to the
Adviser and information prepared by Lipper concerning fee rates paid by other
funds in the same Lipper category as the Portfolio at a common asset level. The
directors recognized that it is difficult to make comparisons of advisory fees
because there are variations in the services that are included in the fees paid
by other funds.
The directors also considered the total expense ratio of the Class A shares of
the Portfolio in comparison to the fees and expenses of funds within two
comparison groups created by Lipper: an Expense Group and an Expense Universe.
Lipper described an Expense Group as a representative sample of comparable
funds and an Expense Universe as a broader group, consisting of all funds in
the investment classification/objective with a similar load type as the subject
Portfolio. The Class A expense ratio of the Portfolio was based on the
Portfolio's latest fiscal year expense ratio. The directors recognized that the
expense ratio information for the Portfolio potentially reflected on the
Adviser's provision of services, as the Adviser is responsible for coordinating
services provided to the Portfolio by others. The directors noted that it was
likely that the expense ratios of some funds in the Portfolio's Lipper category
also were lowered by waivers or reimbursements by those funds' investment
advisers, which in some cases were voluntary and perhaps temporary.
The directors noted that the Portfolio's at approximate current size
contractual effective fee rate of 50 basis points was slightly higher than the
median for the Expense Group. The directors noted that the latest fiscal year
administrative expense reimbursement by the Portfolio pursuant to the Advisory
Agreement was one basis point. As a result, the Adviser's total compensation
pursuant to the Fund's Advisory Agreement was at a rate that slightly exceeded
the median for the Expense Group. The directors also noted that the Portfolio's
total expense ratio was somewhat above the median for the Expense Group and the
median for the Expense Universe. The directors concluded that the Fund's
expense ratio was acceptable.
Economies of Scale
The directors noted that the advisory fee schedule for the Portfolio contains
breakpoints so that, if assets were to increase over the breakpoint levels, the
fee rates would be reduced on the incremental assets. The directors also
considered
ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 53
a presentation by an independent consultant discussing economies of scale
issues in the mutual fund industry. The directors believe that economies of
scale are realized (if at all) by the Adviser across a variety of products and
services, and not only in respect of a single fund. The directors noted that
there is no uniform methodology for establishing breakpoints that give effect
to fund-specific services provided by the Adviser and to the economies of scale
that the Adviser may realize in its overall mutual fund business or those
components of it which directly or indirectly affect the Portfolio's
operations. The directors observed that in the mutual fund industry as a whole,
as well as among funds similar to the Portfolio, there is no uniformity or
pattern in the fees and asset levels at which breakpoints (if any) apply.
Depending on the age and size of a particular fund and its adviser's cost
structure, different conclusions can be drawn as to whether there are economies
of scale to be realized at any particular level of assets, notwithstanding the
intuitive conclusion that such economies exist, or will be realized at some
level of total assets. Moreover, because different advisers have different cost
structures and service models, it is difficult to draw meaningful conclusions
from the comparison of a fund's advisory fee breakpoints with those of
comparable funds. The directors also noted that the advisory agreements for
many funds do not have breakpoints at all. Having taken these factors into
account, the directors concluded that the Portfolio's breakpoint arrangements
would result in a sharing of economies of scale in the event of a very
significant increase in the Portfolio's net assets.
54 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO
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 Funds
- -------------------------------------------
U.S. Large Cap Portfolio
International Portfolio
Tax-Managed International Portfolio
- -------------------------------------------
Growth Funds
- -------------------------------------------
Domestic
Growth Fund
Mid-Cap Growth Fund
Large Cap Growth Fund*
Small Cap Growth Portfolio
Global & International
Global Health Care Fund*
Global Research Growth Fund
Global Technology Fund*
Greater China '97 Fund
International Growth Fund*
International Research Growth Fund*
- -------------------------------------------
Value Funds
- -------------------------------------------
Domestic
Balanced Shares
Focused Growth & Income Fund*
Growth & Income Fund
Real Estate Investment Fund
Small/Mid-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. You should read the prospectus carefully before you invest.
* Prior to December 15, 2004, these Funds were named as follows: Global
Health Care Fund was Health Care Fund; Large Cap Growth Fund was Premier Growth
Fund; Global Technology Fund was Technology Fund; and Focused Growth & Income
Fund was Disciplined Value Fund. Prior to February 1, 2005, Small/Mid-Cap Value
Fund was named Small Cap Value Fund. Prior to May 16, 2005, International
Growth Fund was named Worldwide Privatization Fund and International Research
Growth Fund was named International Premier Growth Fund. On June 24, 2005,
All-Asia Investment Fund merged into International Research GrowthFund. On July
8, 2005, New Europe Fund merged into International Research Growth Fund.
** 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 CORPORATE BOND PORTFOLIO o 55
THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
SUMMARY OF SENIOR OFFICER'S EVALUATION OF INVESTMENT ADVISORY AGREEMENT*
The following is a summary of the evaluation of the investment advisory
agreement between Alliance Capital Management L.P., (the "Adviser") and the
AllianceBernstein Corporate Bond Portfolio, the AllianceBernstein Quality Bond
Portfolio and the AllianceBernstein U.S. Government Portfolio of
AllianceBernstein Bond Fund, Inc. (the "Funds"), prepared by Philip L.
Kirstein, the Senior Officer, for the independent directors of the Funds, as
required by the Assurance of Discontinuance between the New York State Attorney
General and the Adviser. The Senior Officer's evaluation of the investment
advisory agreement is not meant to diminish the responsibility or authority of
the Boards of Directors to perform their duties pursuant to Section 15 of the
Investment Company Act of 1940 (the "40 Act") and applicable state law. The
purpose of the summary is to provide shareholders with a synopsis of the
independent evaluation of the reasonableness of the advisory fees which was
provided to the independent directors in connection with their review of the
proposed continuance of the investment advisory agreement. The Senior Officer's
evaluation considered the following factors:
1. Management fees charged to institutional and other clients of the
Adviser for like services.
2. Management fees charged by other mutual fund companies for like
services.
3. Costs to the Adviser and its affiliates of supplying services pursuant
to the advisory agreement, excluding any intra-corporate profit.
4. Profit margins of the Adviser and its affiliates from providing such
services.
5. Possible economies of scale as the Funds grow larger.
6. Nature and quality of the Adviser's services, including the
performance of the Funds.
* It should be noted that the information in the fee summary was completed
on June 8, 2005 and presented to the Board of Directors and Trustees on June
15, 2005 in accordance with the Assurance of Discontinuance with the New York
State Attorney General. It also should be noted that references in the fee
summary pertaining to performance and expense ratios refer to Class A shares of
the Fund.
56 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO
FUND ADVISORY FEES, EXPENSE REIMBURSEMENTS, CAPS & RATIOS
The table below describes the Funds' advisory fees pursuant to the Investment
Advisory Agreement. This is the fee schedule the Adviser implemented in January
2004 as a result of the settlement with the New York State Attorney General.
Advisory Fee Based on % of
Fund Average Daily Net Assets
- -------------------------------------------------------------------------------
AllianceBernstein
Corporate Bond Portfolio Monthly fee of
First $2.5 billion 1/12 of .50%
Next $2.5 billion 1/12 of .45%
Excess of $5 billion 1/12 of .40%
AllianceBernstein
Quality Bond Portfolio Monthly fee of
First $2.5 billion 1/12 of .45%
Next $2.5 billion 1/12 of .40%
Excess of $5 billion 1/12 of .35%
AllianceBernstein
U.S. Government Portfolio Quarterly fee of
First $2.5 billion .1125%
Next $2.5 billion .10%
Excess over $5 billion .0875%
The Adviser is reimbursed as specified in the Investment Advisory Agreement for
certain clerical, legal, accounting, administrative and other services provided
to the Funds as indicated below:
Latest
Fiscal Year As % of Average
Fund Amount Daily Net Assets
- -------------------------------------------------------------------------------
AllianceBernstein
Corporate Bond Portfolio $ 98,000.00 .01
AllianceBernstein
Quality Bond Portfolio* 0 .0
AllianceBernstein
U.S. Government Portfolio $ 97,728.00 .01
The Adviser has agreed to waive that portion of its management fees and/or
reimburse the Quality Bond Portfolio for that portion of its total operating
expenses to the degree necessary to limit the Fund's expense ratios to the
levels set forth below for that Fund's current fiscal year. That waiver
agreement is terminable by the Adviser at the end of the Fund's fiscal year
upon at least 60 days written notice. Pro-forma expense ratio information for
each Fund is also set forth below.
* For the most recently completed fiscal year, with respect to the Quality
Bond Portfolio, the Adviser waived $89,000 (or .02% of average daily net
assets).
ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 57
Expense Cap
pursuant to
Expense
Limitation Pro-Forma Fiscal
Fund Undertaking Expense Ratio* Year End
- -------------------------------------------------------------------------------
AllianceBernstein Advisor-0.68% .79% October 31,
Quality Bond Portfolio Class A-0.98% 1.10% 2004
Class B-1.68% 1.83%
Class C-1.68% 1.82%
Class R-1.18% 1.30%
Pro-Forma Fiscal
Fund Expense Ratio* Year End
- -------------------------------------------------------------------------------
AllianceBernstein
Corporate Bond Portfolio Advisor-0.73% September
Class A-1.00% 30, 2004
Class B-1.72%
Class C-1.71%
Class R-1.21%
AllianceBernstein
U.S. Government Portfolio Advisor-0.71% September
Class A-1.01% 30, 2004
Class B-1.74%
Class C-1.73%
Class R-1.27%
I. MANAGEMENT FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS OF THE ADVISER
The management fees charged to investment companies which the Adviser manages
and sponsors may be higher than those charged to institutional accounts,
including pension plans and sub-advised investment companies. The fee
differential reflects, among other things, different services provided to such
clients, and different liabilities assumed. Services provided by the Adviser to
the Funds that are not provided to non-investment company clients include
providing office space and personnel to serve as Fund Officers and coordinating
with and monitoring the Funds' third party service providers such as Fund
counsel, auditors, custodians, transfer agents and pricing services. The
accounting, administrative and legal/compliance requirements for the Funds are
more costly than those for institutional assets due to the greater complexities
and time required for investment companies. A portion of the expenses related
to these services are reimbursed by the Funds to the Adviser. Managing the cash
flow of an investment company may be more difficult than for other accounts,
particularly if a Fund is in net redemptions, as the Adviser is forced to sell
securities to meet redemptions.
Notwithstanding the Adviser's view that managing an investment company is not
comparable to managing other institutional accounts because the services
provided are different, the Senior Officer believes it is worth noting the
information
* This pro-forma expense ratio information shows what would have been each
Fund's expense ratio in the indicated fiscal year had the current fee been in
effect throughout the fiscal year.
58 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO
from the Adviser's ADV regarding the advisory fees charged to institutional
accounts in the same asset class as the Quality Bond Portfolio. The Adviser
represented that there is no category set forth in its Form ADV for
institutional products which have a substantially similar investment style as
the Corporate Bond Portfolio or the U.S. Government Portfolio.
Total Net Assets
03/31/05 Alliance Institutional
Fund ($MIL) Fee Schedule
- -------------------------------------------------------------------------------
AllianceBernstein
Quality Bond Portfolio 571 U.S. Core High-Grade
Fixed Income
40 bp on 1st $20 m
25 bp on next $80 m
20 bp on next $100 m
15 bp on the balance
Minimum account size $20 m
The Adviser also manages and sponsors retail fixed income mutual funds
which are organized in jurisdictions outside the United States, generally
Luxembourg, and sold to non-United States investors. The Adviser charges the
following fee for offshore mutual funds with similar investment styles as the
Funds:
Asset Class Fee
- ---------------------------------------------------------------
Fixed Income .65%
The Adviser represented that it does not sub-advise any registered investment
companies with similar investment styles as the Funds.
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES.
Lipper, Inc., an analytical service that is not affiliated with the Adviser,
compared the fees charged to the Funds with fees charged to other investment
companies for similar services by other investment advisers. Lipper's analysis
included the Funds' ranking with respect to the proposed advisory fees relative
to the Lipper group median at the approximate current asset levels for the
Funds.*
Lipper Group
Fund Fee Median Rank
- -------------------------------------------------------------------------------
AllianceBernstein Corporate
Bond Portfolio 0.500 0.488 6/9
AllianceBernstein Quality
Bond Portfolio 0.450 0.616 1/12
AllianceBernstein U.S.
Government Portfolio 0.450 0.544 2/10
* A ranking of "1" means that the AllianceBernstein Fund has the lowest
effective fee rate in the Lipper peer group.
ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 59
Lipper also analyzed the expense ratios of each Fund in comparison to its
Lipper Expense Group* and Lipper Expense Universe**. Lipper describes a Lipper
Expense Group as a representative sample of comparable funds and a Lipper
Universe as a broader group, consisting of all funds in the investment
classification/objective with a similar load type as the subject Fund. The
results of that analysis are set forth below:
Lipper Lipper Lipper
Expense Universe Universe Lipper Group
Fund Ratio Median Rank Group Rank Median
- ------------------------------------------------------------------------------------------
AllianceBernstein
Corporate
Bond Portfolio 1.078 1.026 14/25 6/9 .984
AllianceBernstein
Quality
Bond Portfolio 0.979 0.955 39/67 2/12 1.066
AllianceBernstein
U.S. Government
Portfolio 1.046 0.985 24/38 8/10 .996
Based on this analysis, the Funds have a more favorable ranking on an advisory
fee basis than they do on a total expense ratio basis. This has resulted in a
variety of efforts by the Adviser to lower non-management expenses.
III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO
THE ADVISORY AGREEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.
The profitability information for the Funds prepared by the Adviser for the
Board of the Directors was reviewed by the Senior Officer. An independent
consultant is working with the Adviser's personnel on a new system to produce
profitability information at the Fund level which will reflect the Adviser's
management reporting approach. It is possible that future Fund profitability
information may differ from previously reviewed information due to changes in
methodologies and allocations.
See Section IV for additional discussion.
IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH
SERVICES.
With the exception of the Quality Bond Portfolio, the pre-tax profitability
margin of the Adviser decreased during calendar year 2004 relative to 2003
primarily as a result of the reduction in the advisory fee schedule implemented
early
* Lipper uses the following criteria in screening funds to be included in
each Fund's expense group: fund type, investment classification/objective, load
type and similar 12b-1/non-12b-1 service fees, asset (size) comparability, and
expense components and attributes. An expense group will typically consist of
seven to twenty funds.
** Except for asset (size) comparability, Lipper uses the same criteria for
selecting an expense group when selecting an expense universe. Unlike an
expense group, an expense universe allows for the same advisor to be
represented by more than just one fund.
60 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO
in 2004. For the Quality Bond Portfolio, it appears that the Adviser's profit
margin increased in 2004, as a result of the reduction in fee waivers and
expense reimbursements.
In addition to the Adviser's direct profits from managing the Funds pursuant to
the investment advisory agreement, certain of the Adviser's affiliates have
business relationships with the Funds and may earn a profit from providing
other services to the Funds. These affiliates provide transfer agency and
distribution related services and receive transfer agent fees, Rule 12b-1
payments, front-end sales loads, contingent deferred sales charges ("CDSC") and
commissions for providing brokerage services. In addition, the Adviser benefits
from soft dollar arrangements which offset expenses the Adviser would otherwise
incur. Additional information regarding distribution related fees can be found
in the prospectus of the Funds.
Different classes of shares are charged different types of distribution fees.
The Adviser's affiliate, AllianceBernstein Investment Research and Management
Inc. ("ABIRM"), is the Funds' principal underwriter. ABIRM and the Adviser may
make payments* from their own resources, in addition to sales loads and Rule
12b-1 fees, to firms that sell shares of the Funds. In 2004, ABIRM paid from
its own resources approximately .04% of the average monthly assets of the Funds
for distribution services and educational support. For 2005, it is anticipated
that ABIRM will pay approximately .04% of average monthly assets of each Fund
for such purposes.
After payments to third party intermediaries, ABIRM retained the following
amounts in Class A front-end load sales charges from sales of each Fund's
shares in the Funds' most recent fiscal year:
Fund Amount Received
- -------------------------------------------------------------------------------
AllianceBernstein Corporate Bond Portfolio $21,917
AllianceBernstein Quality Bond Portfolio $ 4,297
AllianceBernstein U.S. Government Portfolio $11,758
* The total amount paid to the financial intermediary in connection with the
sale of shares will generally not exceed the sum of (a) .25% of the current
year's Fund sales by that firm and (b) .10% of the average daily net assets
attributable to that firm over the year.
ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 61
ABIRM received the amounts set forth below in Rule 12b-1 fees and CDSC for each
Fund during the Funds' most recent fiscal year. A significant percentage of
such amounts were paid out to third party intermediaries by ABIRM.
12b-1 Fee
Fund Received* CDSC Received
- -------------------------------------------------------------------------------
AllianceBernstein
Corporate Bond Portfolio $ 6,124,397 $ 54,108
AllianceBernstein
Quality Bond Portfolio $ 1,177,056 $ 178,196
AllianceBernstein
U.S. Government Portfolio $ 6,317,922 $ 685,181
Fees and reimbursements for out of pocket expenses charged by Alliance Global
Investor Services, Inc. ("AGIS"), the affiliated transfer agent, are based on
the level of the network account and the class of share held by the account.
AGIS also receives a fee per shareholder sub-account for each account
maintained by an intermediary on an omnibus basis. AGIS' after-tax
profitability decreased in 2004 in comparison to 2003.
AGIS received the following fees from the Funds in the most recent fiscal year:
Fund AGIS Fee
- -------------------------------------------------------------------------------
AllianceBernstein Corporate Bond Portfolio $ 1,082,000
AllianceBernstein Quality Bond Portfolio $ 1,083,000
AllianceBernstein U.S. Government Portfolio $ 2,010,000
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that the breakpoints in the fee schedules for the
Funds reflect a sharing of economies of scale to the extent they exist. Based
on some of the professional literature that has considered economies of scale
in the mutual fund industry it is thought that to the extent economies of scale
exist, they may more often exist across a fund family as opposed to a specific
fund. This is because the costs incurred by the Adviser, such as investment
research or technology for trading or compliance systems can be spread across a
greater asset base as the fund family increases in size. It is also possible
that as the level of services required to operate a successful investment
company has increased over time, and advisory firms have made such investments
in their business to provide improved services, there may be a sharing of
economies of scale without a reduction in advisory fees.
An independent consultant made a presentation to the Board of Directors and the
Senior Officer regarding possible economies of scale or scope in the mutual
fund industry. Based on the presentation, it was evident that fund management
companies benefit from economies of scale. However, due to the lack of cost
data
* 12b-1 amounts are gross amounts paid to ABIRM.
62 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO
which forced the researchers to infer facts about the costs from the behavior
of fund expenses, there was a lack of consensus among researchers as to whether
economies of scale were being passed on to the shareholders. It is contemplated
that additional work will be performed to determine if the benefits of
economies of scale or scope are being passed to shareholders by the Adviser. In
the meantime, it is clear that to the extent a Fund's assets exceed the initial
breakpoint its shareholders benefit from a lower fee rate.
VI. NATURE AND QUALITY OF THE ADVISER'S SERVICES INCLUDING PERFORMANCE OF THE
FUND.
With assets under management of $534.4 billion as of March 31, 2005, the
Adviser has the investment experience and resources necessary to effectively
manage the Funds and provide non-investment services (described in Section II)
to the Funds.
The information prepared by Lipper showed the 1, 3, 5 and 10 year performance
ranking of the Funds relative to its Lipper universe:
Performance Year
Rank in Performance Universe for Periods
Ended March 31, 2005
- -------------------------------------------------------------------------------
Fund 1 3 5 10
- -------------------------------------------------------------------------------
AllianceBernstein
Corporate Bond
Portfolio 3/35 6/27 10/21 1/10
AllianceBernstein
Quality Bond
Portfolio 58/80 48/66 30/47 N/A
AllianceBernstein
U.S. Government
Portfolio 32/44 35/41 32/38 31/32
CONCLUSION:
Based on the factors discussed above the Senior Officer's conclusion is that
the proposed fee for each of the Funds is reasonable and within the range of
what would have been negotiated at arms-length in light of all the surrounding
circumstances. This conclusion in respect of each Fund is based on an
evaluation of all of these factors and no single factor was dispositive.
Dated: July 22, 2005
ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 63
ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
CBPAR0905
[LOGO] ALLIANCEBERNSTEIN (R)
Investment Research and Management
AllianceBernstein Bond Fund
U.S. Government Portfolio
ANNUAL REPORT
September 30, 2005
Investment Products Offered
o Are Not FDIC Insured
o May Lose Value
o Are Not Bank Guaranteed
The investment return and principal value of an investment in the Fund will
fluctuate as the prices of the individual securities in which it invests
fluctuate, so that your shares, when redeemed, may be worth more or less than
their original cost. You should consider the investment objectives, risks,
charges and expenses of the Fund carefully before investing. For a free copy of
the Fund's prospectus, which contains this and other information, visit our web
site at www.alliancebernstein.com or call your financial advisor or
AllianceBernstein at (800) 227-4618. Please read the prospectus carefully
before you invest.
You may obtain performance information current to the most recent month-end by
visiting www.alliancebernstein.com.
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, and information regarding how the Fund voted proxies relating to
portfolio securities during the most recent 12-month period ended June 30,
without charge. Simply visit AllianceBernstein's web site at
www.alliancebernstein.com, or go to the Securities and Exchange Commission's
(the "Commission") web site at www.sec.gov, or call AllianceBernstein at (800)
227-4618.
The Fund files its complete schedule of portfolio holdings with the Commission
for the first and third quarters of each fiscal year on Form N-Q. The Fund's
Forms N-Q are available on the Commission's web site at www.sec.gov. The Fund's
Forms N-Q may also be reviewed and copied at the Commission's Public Reference
Room in Washington, DC; information on the operation of the Public Reference
Room may be obtained by calling (800) SEC-0330.
AllianceBernstein Investment Research and Management, Inc. is an affiliate of
Alliance Capital Management L.P., the manager of the funds, and is a member of
the NASD.
November 17, 2005
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, 2005.
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 in
U.S. government securities, repurchase agreements and forward contracts
relating to U.S. government securities.
Investment Results
The table on page 4 shows the Portfolio's performance compared to its
benchmark, the Lehman Brothers (LB) Government Index, which represents the U.S.
government bond market, for the six- and 12-month periods ended September 30,
2005. We have also included performance for the Lipper General U.S. Government
Funds Average (the "Lipper Average"). Funds in the Lipper Average have
generally similar investment objectives to the Portfolio, although some may
have different investment policies and sales and management fees.
The Portfolio modestly underperformed its benchmark, the LB Government Index,
and matched the Lipper Average, for the 12-month period ended September 30,
2005. Contributing positively to the Portfolio's relative performance was its
shorter-than-benchmark duration as well as its yield curve positioning during a
period of rising interest rates. During the annual period under review, the
yield curve flattened by 189 basis points as yields on short and intermediate
maturity Treasuries rose, while longer maturities remained stable, or actually
declined. Specifically, two-year and five-year yields rose by 156 basis points
and 82 basis points, respectively. Ten-year yields rose more modestly by 20
basis points while longer 30-year maturity Treasuries actually declined by 32
basis points. Additionally, the Portfolio's non-government holdings also
contributed positively to relative performance.
Detracting from the Portfolio's performance for the 12-month period was its
long mortgage position versus a short agency position. During the year,
mortgage securities underperformed agency securities on a duration-adjusted
basis. Mortgage issue selection, however, was positive as the Portfolio's
allocation to 15-year pass-through securities outperformed 30-year pass through
securities.
Market Review and Investment Strategy
Investment-grade fixed-income returns were moderate during the annual reporting
period reflecting generally higher interest rates, a significant flattening of
the yield curve, and modest spread movement in the non-Treasury sectors of the
market. The U.S. Treasury market, as measured by the Lehman Brothers Treasury
Index, posted a return of 2.48% for the reporting period, despite the headwinds
of continued rate increases by the Federal Reserve. Beginning in June 2004, the
Federal Reserve hiked the
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 1
Fed Funds benchmark rate 12 times for a total of 300 basis points, bringing the
Fed Funds target from its all-time low of 1% to 4%. With rates rising, Treasury
Inflation-Protected Securities (TIPS) outperformed conventional Treasuries at
3.84%, according to the Lehman Brothers 1-10 Year TIPS Index.
Agency securities, as represented by Lehman Brothers, posted a return of 2.41%.
Agency spreads tightened during the year, reflecting the scarcity of new
issuance and strong foreign demand. Asset-backed securities (ABS) and
commercial mortgage-backed securities (CMBS) also posted modest returns of
1.88% and 1.94% and outperformed other benchmark sectors on a duration-adjusted
basis. Investors readily absorbed heavy new issuance in the CMBS market. Within
the ABS market, manufactured housing outpaced the other sectors, posting a
return of 3.34%, followed by home equity loans at 2.78%, utilities at 1.80%,
credit cards at 1.54% and autos at 1.49%. ABS securities were helped by limited
new supply and a general flight toward floating-rate assets as interest rates
continued to climb.
Mortgage pass-through securities returned 3.29%, however they underperformed
other sectors on a duration-adjusted basis. Heavy supply and the lack of a
significant investor base outside of foreign investors negatively impacted the
sector. Fifteen-year mortgage pass-through securities outperformed 30-year pass
through securities based on limited supply given investor preference for
30-year adjustable rate mortgages over 30-year conventionals.
During the reporting period, the Portfolio remained positioned for U.S.
interest rates to rise. Accordingly, the Portfolio's U.S. Investment Grade
Structured Asset Investment Team kept the Portfolio's overall duration shorter
than that of its benchmark. Additionally, the Portfolio was underweight in
short and intermediate maturities to help protect against the negative effect
of rising short-term interest rates. As a further buffer against rising U.S.
interest rates, a portion of the Portfolio was invested in inflation-protected
Treasuries and hybrid adjustable-rate mortgage securities. Structured CMO's
(Collateralized Mortgage Obligations) were also favored due to their yield
advantage and stability in periods of volatility. Additionally, within the
Portfolio's mortgage pass-through selection, 15-year mortgages were utilized
due to favorable supply technicals and the fact that they are less sensitive to
volatility.
2 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
HISTORICAL PERFORMANCE
An Important Note About the Value of Historical Performance
The performance shown on the following pages represents past performance and
does not guarantee future results. Current performance may be lower or higher
than the performance information shown. You may obtain performance information
current to the most recent month-end by visiting www.alliancebernstein.com.
The investment return and principal value of an investment in the Portfolio
will fluctuate, so that your shares, when redeemed, may be worth more or less
than their original cost. You should consider the investment objectives, risks,
charges and expenses of the Portfolio carefully before investing. For a free
copy of the Portfolio's prospectus, which contains this and other information,
visit our web site at www.alliancebernstein.com or call your financial advisor
or AllianceBernstein at (800) 227-4618. You should read the prospectus
carefully before you invest.
Returns are annualized for periods longer than one year. All fees and expenses
related to the operation of the Portfolio have been deducted. NAV returns do
not reflect sales charges; if sales charges were reflected, the Portfolio's
quoted performance would be lower. SEC returns reflect the applicable sales
charges for each share class: a 4.25% maximum front-end sales charge for Class
A shares; the applicable contingent deferred sales charge for Class B shares
(3% year 1, 2% year 2, 1% year 3, 0% year 4); a 1% 1 year contingent deferred
sales charge for Class C shares. Returns for Advisor Class, Class R, Class K
and Class I shares will vary due to different expenses associated with these
classes. Performance assumes reinvestment of distributions and does not account
for taxes.
Benchmark Disclosure
The unmanaged Lehman Brothers (LB) Government Index does not reflect fees and
expenses associated with the active management of a mutual fund portfolio. The
Index is composed of the LB Treasury Index and the LB Agency Index. For the
six- and 12-month periods ended September 30, 2005, the Lipper General U.S.
Government Funds Average consisted of 170 and 164 funds, respectively. These
funds have generally similar investment objectives to the Portfolio, although
some may have different investment policies and sales and management fees. An
investor cannot invest directly in an index or average, and their results are
not indicative of the performance for any specific investment, including the
Portfolio.
A Word About Risk
Price fluctuations in the Portfolio's securities may be caused by changes in
the general level of interest rates or changes in bond credit quality ratings.
Please note, as interest rates rise, existing bond prices fall and can cause
the value of an investment in the Portfolio to decline. Changes in interest
rates have a greater effect on bonds with longer maturities than on those with
shorter maturities. Investments in the Portfolio are not guaranteed because of
fluctuation in the net asset value of the underlying fixed-income related
investments. Similar to direct bond ownership, bond funds have the same
interest rate, inflation and credit risks that are associated with the
underlying bonds owned by the Portfolio. Portfolio purchasers should understand
that, in contrast to owning individual bonds, there are ongoing fees and
expenses associated with owning shares of bond funds. While the Portfolio
invests principally in bonds and other fixed-income securities, in order to
achieve its investment objectives, the Portfolio may at times use certain types
of investment derivatives, such as options, futures, forwards and swaps. These
instruments involve risks different from, and in certain cases, greater than,
the risks presented by more traditional investments. These risks are fully
discussed in the Portfolio's prospectus.
(Historical Performance continued on next page)
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 3
HISTORICAL PERFORMANCE
(continued from previous page)
THE PORTFOLIO VS. ITS BENCHMARK Returns
-----------------------
PERIODS ENDED SEPTEMBER 30, 2005 6 Months 12 Months
AllianceBernstein Bond Fund
U.S. Government Portfolio
Class A 1.97% 2.31%
Class B 1.60% 1.57%
Class C 1.61% 1.58%
Advisor Class 2.27% 2.76%
Class R** 1.89% 2.14%
Class K** 2.04% 1.79%*
Class I** 2.20% 1.97%*
Lehman Brothers Government Index 2.39% 2.47%
Lipper General U.S. Government Funds Average 1.95% 2.31%
* Since Inception: see inception dates below.
** Please note that this is a new share class offering for investors purchasing
shares through institutional pension plans. The inception date for Class R
shares is 11/3/03; the inception date for Class K and Class I shares is 3/1/05.
GROWTH OF A $10,000 INVESTMENT IN THE PORTFOLIO
9/30/95 TO 9/30/05
o AllianceBernstein Bond Fund U.S. Government Portfolio Class A
o Lehman Brothers Government Index
AllianceBernstein Bond Fund U.S. Government Portfolio Class A: $15,705
Lehman Brothers Government Index: $18,494
[THE FOLLOWING DATA WAS REPRESENTED BY A MOUNTAIN CHART IN THE PRINTED MATERIAL]
9/30/95 $ 9,575 $10,000
9/30/96 $ 9,739 $10,442
9/30/97 $10,549 $11,398
9/30/98 $11,855 $12,948
9/30/99 $11,536 $12,727
9/30/00 $12,311 $13,641
9/30/01 $13,743 $15,450
9/30/02 $14,808 $17,001
9/30/03 $14,961 $17,605
9/30/04 $15,354 $18,048
9/30/05 $15,705 $18,494
This chart illustrates the total value of an assumed $10,000 investment in
AllianceBernstein Bond Fund U.S. Government Portfolio Class A shares (from
9/30/95 to 9/30/05) as compared to the performance of its benchmark. The chart
reflects the deduction of the maximum 4.25% sales charge from the initial
$10,000 investment in the Fund and assumes the reinvestment of dividends and
capital gains.
See Historical Performance and Benchmark disclosures on previous page.
(Historical Performance continued on next page)
4 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
HISTORICAL PERFORMANCE
(continued from previous page)
AVERAGE ANNUAL RETURNS AS OF SEPTEMBER 30, 2005
NAV Returns SEC Returns
Class A Shares
1 Year 2.31% -2.10%
5 Years 5.00% 4.10%
10 Years 5.07% 4.62%
SEC Yield** 3.69%
Class B Shares
1 Year 1.57% -1.38%
5 Years 4.26% 4.26%
10 Years(a) 4.61% 4.61%
SEC Yield ** 3.12%
Class C Shares
1 Year 1.58% 0.60%
5 Years 4.25% 4.25%
10 Years 4.33% 4.33%
SEC Yield** 3.12%
Advisor Class Shares
1 Year 2.76%
Since Inception* 5.40%
SEC Yield ** 4.14%
Class R Shares+
1 Year 2.14%
Since Inception* 3.06%
SEC Yield** 3.83%
Class K Shares+
Since Inception* 1.79%
SEC Yield ** 4.18%
Class I Shares+
Since Inception* 1.97%
SEC Yield ** 4.49%
SEC AVERAGE ANNUAL RETURNS (WITH SALES CHARGES)
AS OF THE MOST RECENT CALENDAR QUARTER-END (SEPTEMBER 30, 2005)
Class A Shares
1 Year -2.10%
5 Years 4.10%
10 Years 4.62%
Class B Shares
1 Year -1.38%
5 Years 4.26%
10 Years(a) 4.61%
Class C Shares
1 Year 0.60%
5 Years 4.25%
10 Years 4.33%
(a) Assumes conversion of Class B shares into Class A shares after six years.
* Inception Date: 10/6/00 for Advisor Class shares; 11/3/03 for Class R
shares; 3/1/05 for Class K and Class I shares.
** SEC yields are calculated based on SEC guidelines for the 30-day period
ended September 30, 2005.
+ Please note that this is a new share class offering for investors
purchasing shares through institutional pension plans. The inception date for
these share classes is listed above.
See Historical Performance disclosures on page 3.
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 5
FUND EXPENSES
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments, contingent
deferred sales charges on redemptions and (2) ongoing costs, including
management fees; distribution (12b-1) fees; and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period as indicated below.
Actual Expenses
The table below provides information about actual account values and actual
expenses. You may use the information, together with the amount you invested,
to estimate the expenses that you paid over the period. Simply divide your
account value by $1,000 (for example, an $8,600 account value divided by $1,000
= 8.6), then multiply the result by the number under the heading entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
Hypothetical Example for Comparison Purposes
The table below also provides information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an assumed
annual rate of return of 5% before expenses, which is not the Fund's actual
return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds by comparing this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), or contingent deferred sales charges on redemptions.
Therefore, the hypothetical example is useful in comparing ongoing costs only,
and will not help you determine the relative total costs of owning different
funds. In addition, if these transactional costs were included, your costs
would have been higher.
Beginning Ending
Account Value Account Value Expenses Paid
April 1, 2005 September 30, 2005 During Period*
------------------------- --------------------------- ------------------------
Actual Hypothetical Actual Hypothetical** Actual Hypothetical
--------------------------------------------------------------------------------
Class A $1,000 $1,000 $1,019.74 $1,018.40 $6.73 $6.73
Class B $1,000 $1,000 $1,016.04 $1,014.84 $10.31 $10.30
Class C $1,000 $1,000 $1,016.07 $1,014.84 $10.31 $10.30
Advisor
Class $1,000 $1,000 $1,022.69 $1,020.51 $4.61 $4.61
Class R $1,000 $1,000 $1,018.92 $1,017.45 $7.69 $7.69
Class K $1,000 $1,000 $1,020.40 $1,019.10 $6.03 $6.02
Class I $1,000 $1,000 $1,022.00 $1,020.56 $4.56 $4.56
* Expenses are equal to the classes' annualized expense ratios of 1.33%,
2.04%, 2.04%, 0.91%, 1.52%, 1.19% and 0.90%, respectively, multiplied by the
average account value over the period, multiply by the number of days in the
period/365.
** Assumes 5% return before expenses.
6 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
PORTFOLIO SUMMARY
September 30, 2005
PORTFOLIO STATISTICS
Net Assets ($mil): $772.7
SECURITY TYPE BREAKDOWN*
[ ] 59.2% U.S. Treasury Securities
[ ] 13.0% Federal National Mortgage
Association
[ ] 10.8% Collateralized Mortgage
Obligations
[ ] 8.8% Federal Home Loan
Mortgage Corp.
[ ] 2.9% Government National [PIE CHART OMITTED]
Mortgage Association
[ ] 1.7% Asset Backed Securities
[ ] 1.5% Stripped Mortgage Backed
Securities
[ ] 0.6% Collateralized Mortgage
Backed Securities
[ ] 1.5% Short-Term
* All data are as of September 30, 2005. The Portfolio's security type
breakdown is expressed as a percentage of total investments (excluding security
lending collateral) and may vary over time.
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 7
PORTFOLIO OF INVESTMENTS
September 30, 2005
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
U.S. GOVERNMENT & GOVERNMENT
SPONSORED AGENCY OBLIGATIONS-87.0%
U.S. Treasury Bonds-32.3%
6.25%, 8/15/23-5/15/30* $ 66,300 $80,793,648
7.125%, 2/15/23 20,000 25,950,000
7.25%, 5/15/16 20,000 24,741,400
7.50%, 11/15/16 23,000 29,111,169
11.25%, 2/15/15 20,000 30,494,540
12.50%, 8/15/14(a)* 45,150 58,384,594
------------
249,475,351
U.S. Treasury Notes-29.1%
2.00%, 7/15/14* 18,338 18,732,777
3.00%, 2/15/09* 25,600 24,636,006
3.25%, 1/15/09* 28,600 27,774,404
3.375%, 11/15/08* 21,750 21,230,893
3.625%, 1/15/10* 7,010 6,848,167
3.875%, 5/15/09 22,545 22,298,403
4.00%, 6/15/09-2/15/14* 81,235 80,295,365
4.75%, 5/15/14* 22,610 23,293,591
------------
225,109,606
Federal National Mortgage Association-13.5%
4.58%, 4/01/35 14,644 14,525,378
4.75%, 7/01/35 7,773 7,724,672
4.898%, 9/01/35 2,988 2,984,562
5.00%, 12/01/17-10/25/33 37,614 29,317,460
5.50%, 9/25/17-3/25/33 13,762 13,791,265
6.00%, 12/01/13-2/01/14 9,949 10,235,576
6.50%, 4/25/32-1/25/44 13,420 13,838,861
7.00%, 1/01/21 1,639 1,724,543
7.50%, 12/01/09-4/01/17 4,559 4,781,114
8.50%, 4/01/08 460 463,178
9.00%, 8/01/21 343 371,173
10.00%, 11/01/13-10/01/14 3,581 3,840,123
11.00%, 7/01/16 543 592,479
------------
104,190,384
Federal Home Loan Mortgage Corp.-9.1%
5.00%, 4/15/15-6/15/31 54,212 44,033,594
5.50%, 7/15/17 10,795 11,022,019
6.00%, 6/01/20-5/15/35 13,396 13,655,671
7.00%, 12/01/10 1,055 1,080,020
8.00%, 9/01/11 572 579,647
------------
70,370,951
8 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
Government National Mortgage
Association-3.0%
Single Family Homes
6.00%, 7/20/32 $ 2,910 $2,968,200
7.00%, 12/15/26 3,786 4,002,432
7.50%, 12/15/14 9,155 9,667,402
8.00%, 3/15/12 4,246 4,474,587
8.15%, 9/15/20 553 583,034
9.00%, 12/15/09-12/15/19 1,247 1,301,069
------------
22,996,724
Total U.S. Government & Government
Sponsored Agency Obligations
(cost $668,310,934) 672,143,016
COLLATERALIZED MORTGAGE
OBLIGATIONS-11.2%
ABN Amro Mortgage Corp.
Series 2003-5 Cl.A11
4.75%, 4/25/33 6,975 6,901,902
Citicorp Mortgage Securities, Inc.
Series 2004-7 Cl.1A1
5.25%, 9/25/34 6,865 6,842,436
Series 2003-8 Cl.A1
5.50%, 8/25/33 7,285 7,334,859
Countrywide Home Loans
Series 2004-J9 Cl.2A1
5.25%, 1/25/35 6,630 6,601,849
Series 2005-12 Cl.1A5
5.25%, 5/25/35 8,602 8,558,606
Credit Suisse First Boston Mortgage
Securities Corp.
Series 2004-R2 Cl.A1
5.05%, 12/28/33(b) 3,934 3,696,209
Series 2004-8 Cl.1A2
5.25%, 12/25/34 6,220 6,193,345
Master Adjustable Rate Mortgages Trust
Series 2004-8 Cl.5A1
4.72%, 8/25/34 4,400 4,368,025
Master Asset Securitization Trust
Series 2004-9 Cl.3A1
5.25%, 7/25/34 6,863 6,837,511
Merrill Lynch Mortgage Investors, Inc.
Series 2005-A5 Cl.A3
4.442%, 6/25/35 8,355 8,267,523
Residential Asset Mortgage Products, Inc.
Series 2004-SL2 Cl.A2
6.50%, 10/25/31 6,025 6,096,003
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 9
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
Residential Asset Securitization Trust
Series 2003-A15 Cl.B2
5.58%, 2/25/34 $ 1,747 $1,691,775
SASCO Net Interest Margin Trust
Series 2004-9XS Cl.A
5.25%, 5/28/34(b) 1,589 1,579,373
Structured Asset Securities Corp.
Series 2003-6A Cl.B3
5.45%, 3/25/33 2,743 2,717,845
Series 2002-3 Cl.B3
6.50%, 3/25/32 3,409 3,406,715
Wells Fargo Mortgage Backed
Securities Trust
Series 2005-AR2 Cl.2A1
4.56%, 3/25/35 5,604 5,542,748
------------
Total Collateralized Mortgage Obligations
(cost $87,524,424) 86,636,724
ASSET BACKED SECURITIES-1.8%
Fixed Rate-0.2%
Countrywide Asset-Backed Certificates
Series 2004-2N Cl.N1
5.00%, 2/25/35(b) 1,123 1,122,517
Adjustable Rate-1.6%
Long Beach Mortgage Loan Trust
Series 2003-1 Cl.M2
5.88%, 3/25/33 6,465 6,538,765
Morgan Stanley ABS Capital I
Series 2004-NC3 Cl.M2
4.93%, 3/25/34 6,000 6,050,640
------------
12,589,405
------------
Total Asset Backed Securities
(cost $13,777,115) 13,711,922
STRIPPED MORTGAGE BACKED
SECURITIES-1.6%
Morgan Stanley Capital I
Series 2003-IQ4 Cl.X1
0.21%, 5/15/40(b) 98,506 3,830,894
Mortgage Capital Funding, Inc.
Series 1996-MC2 Cl.X
2.12%, 12/21/26 32,338 437,208
Prudential Securities Secured Financing Corp.
Series 1999-NRF1 Cl.AEC
0.80%, 11/01/31(b) 290,861 7,888,163
------------
Total Stripped Mortgage Backed Securities
(cost $12,729,417) 12,156,265
10 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
COMMERCIAL MORTGAGE BACKED
SECURITIES-0.6%
Commercial Mortgage Acceptance Corp.
Series 1997-ML1 Cl.A2
6.53%, 12/15/30 $ 2,978 $3,020,333
Credit Suisse First Boston Mortgage
Series 2001-CK3 Cl.AX
0.98%, 6/15/34(b) 36,588 1,589,037
------------
Total Commercial Mortgage Backed Securities
(cost $4,360,981) 4,609,370
SHORT-TERM INVESTMENTS-1.5%
Commercial Paper-1.3%
Rabobank USA Financial Corp.
3.88%, 10/03/05 10,400 10,397,758
U.S. Treasury Bill-0.2%
Zero coupon, 11/25/05(c) 1,500 1,492,151
------------
Total Short-Term Investments
(amortized cost $11,889,909) 11,889,909
------------
Total Investments Before Security Lending
Collateral
(cost $798,592,780) 801,147,206
INVESTMENT OF CASH COLLATERAL
FOR SECURITIES LOANED-31.4%
Short-Term Investments
Deutsche Bank
3.86%, 2/26/06 18,500 18,513,949
Gemini
3.881%, 10/03/05 20,000 19,993,534
Goldman Sachs
3.93%, 12/02/05 25,000 25,000,000
Gotham Funding
3.792%, 10/26/05 29,001 28,909,647
Lexpar
3.901%, 10/03/05 25,000 24,991,875
Morgan Stanley
3.88%-3.89%, 12/13/05-1/20/06 61,000 61,000,000
Sigma Funding
3.73%-4.02%, 3/06/06-7/25/06 38,000 38,244,350
Three Rivers
3.64%, 10/03/05 25,000 24,934,458
------------
241,587,813
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 11
Shares U.S. $ Value
- -------------------------------------------------------------------------------
UBS Private Money Market Fund, LLC
3.65% 1,023,935 $1,023,935
------------
Total Investment of Cash Collateral for
Securities Loaned
(cost $242,611,748) 242,611,748
------------
Total Investments-135.1%
(cost $1,041,204,528) 1,043,758,954
Other assets less liabilities-(35.1%) (271,027,393)
Net Assets-100% $772,731,561
FINANCIAL FUTURES CONTRACTS SOLD (see Note D)
Value at
Number of Expiration Original September 30, Unrealized
Type Contracts Month Value 2005 Appreciation
U.S. Treasury
Note 10 Yr Future 350 December 2005 $38,871,876 $38,472,656 $399,220
REVERSE REPURCHASE AGREEMENT (see Note D)
Broker Interest Rate Maturity Amount
Citigroup Global Markets, Inc. 3.70% 10/04/05 $27,101,137
* Represents entire or partial securities out on loan. See Note E for
securities lending information.
(a) Positions, or portions thereof, with an aggregate market value of
$27,155,625 have been segregated to collateralize reverse repurchase agreements.
(b) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. These securities are considered liquid and may be resold in
transactions exempt from registration, normally to qualified buyers. At
September 30, 2005, the aggregate market value of these securities amounted to
$19,706,193 representing 2.6% of net assets.
(c) Position, or a portion thereof, with a market value of $1,492,151 has been
segregated to collateralize margin requirements for open futures contracts.
See notes to financial statements.
12 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
STATEMENT OF ASSETS & LIABILITIES
September 30, 2005
Assets
Investments in securities, at value (cost $1,041,204,528--
including investment of cash collateral for securities
loaned of $242,611,748) $1,043,758,954(a)
Cash 227,358
Interest receivable 7,214,866
Receivable for capital stock sold 2,228,971
Receivable for variation margin on futures contracts 114,844
--------------
Total assets 1,053,544,993
Liabilities
Payable for collateral received on securities loaned 242,611,748
Payable for reverse repurchase agreement 27,101,137
Payable for capital stock redeemed 5,201,840
Payable for investment securities purchased 3,001,967
Advisory fee payable 869,323
Dividends payable 865,631
Distribution fee payable 325,778
Transfer Agent fee payable 295,098
Accrued expenses 540,910
Total liabilities 280,813,432
Net Assets $ 772,731,561
Composition of Net Assets
Capital stock, at par $110,627
Additional paid-in capital 911,591,828
Distributions in excess of net investment income (6,188,867)
Accumulated net realized loss on investment
transactions (135,734,289)
Net unrealized appreciation of investments 2,952,262
--------------
$ 772,731,561
Calculation of Maximum Offering Price
Net Asset Value and:
--------------------- Maximum
Shares Offering Redemption Offering
Class Net Assets Outstanding Price Price Price*
- -------------------------------------------------------------------------
A $ 543,546,535 77,828,068 -- $ 6.98 $ 7.29
B $ 138,855,584 19,883,802 $ 6.98 -- --
C $ 84,303,251 12,053,893 $ 6.99 -- --
Advisor $ 5,981,046 854,992 $ 7.00 $ 7.00 --
R $ 25,150 3,601 $ 6.98 $ 6.98 --
K $ 10,048 1,439 $ 6.98 $ 6.98 --
I $ 9,947 1,424.50 $ 6.98 $ 6.98 --
* The maximum offering price per share for Class A shares includes a sales
charge of 4.25%.
(a) Includes securities on loan with a value of $233,157,231 (see Note E).
See notes to financial statements.
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 13
STATEMENT OF OPERATIONS
Year Ended September 30, 2005
Investment Income
Interest $ 59,675,254
Expenses
Advisory fee $ 4,928,939
Distribution fee--Class A 1,750,717
Distribution fee--Class B 1,839,967
Distribution fee--Class C 950,875
Distribution fee--Class R 97
Distribution fee--Class K 15
Transfer agency 2,815,920
Custodian 309,036
Printing 289,104
Registration fees 95,699
Administrative 91,771
Audit 64,386
Legal 32,449
Directors' fees 26,095
Miscellaneous 69,144
Total expenses before interest expense 13,264,214
Interest expense 2,731,570
Total expenses 15,995,784
Less: expense offset arrangement
(see Note B) (15,301)
Net expenses 15,980,483
Net investment income 43,694,771
Realized and Unrealized Gain (Loss)
on Investment Transactions
Net realized loss on:
Investment transactions (4,816,387)
Futures contracts (3,086,147)
Net change in unrealized
appreciation/depreciation of:
Investments (11,171,234)
Futures contracts 951,004
Net loss on investment transactions (18,122,764)
Net Increase in Net Assets
from Operations $ 25,572,007
See notes to financial statements.
14 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
September 30, September 30,
2005 2004
Increase (Decrease) in Net Assets
from Operations
Net investment income $ 43,694,771 $ 54,518,687
Net realized loss on investment
transactions (7,902,534) (21,127,257)
Net change in unrealized
appreciation/depreciation
of investments (10,220,230) (6,138,651)
Net increase in net assets
from operations 25,572,007 27,252,779
Dividends to Shareholders from
Net investment income
Class A (24,186,748) (32,446,874)
Class B (6,345,707) (11,746,705)
Class C (3,259,002) (4,996,461)
Advisor Class (12,695,436) (11,309,550)
Class R (760) (529)
Class K (238) -0-
Class I (254) -0-
Capital Stock Transactions
Net decrease (416,393,877) (338,594,406)
Total decrease (437,310,015) (371,841,746)
Net Assets
Beginning of period 1,210,041,576 1,581,883,322
End of period (including distributions
in excess of net investment income
of ($6,188,867) and
($10,925,696), respectively) $ 772,731,561 $ 1,210,041,576
See notes to financial statements.
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 15
NOTES TO FINANCIAL STATEMENTS
September 30, 2005
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, Advisor Class,
Class R, Class K and Class I 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. Class R and Class K shares are sold without an initial or
contingent deferred sales charge. Advisor Class and Class I shares are sold
without an initial or contingent deferred sales charge and are not subject to
ongoing distribution expenses. All seven 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 U.S. generally accepted accounting principles which require
management to make certain estimates and assumptions that affect the reported
amounts of assets and liabilities in the financial statements and amounts of
income and expenses during the reporting period. Actual results could differ
from those estimates. 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
Portfolio securities are valued at their current market value determined on the
basis of market quotations or, if market quotations are not readily available
or are deemed unreliable, at "fair value" as determined in accordance with
procedures established by and under the general supervision of the Fund's Board
of Directors.
In general, the market value of securities which are readily available and
deemed reliable are determined as follows. Securities listed on a national
securities exchange 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
16 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
on such day. Securities listed on more than one exchange are valued by
reference to the principal exchange on which the securities are traded;
securities 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
valuation, the last available closing settlement price is used; securities
traded in the over-the-counter market, ("OTC") (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, Alliance Capital Management, L.P. (the
"Adviser") may establish procedures whereby changes in market yields or spreads
are used to adjust, on a daily basis, a recently obtained quoted price on a
security; and OTC and other derivatives are valued on the basis of a quoted bid
price or spread from a major broker/dealer in such security.
Securities for which market quotations are not readily available (including
restricted securities) or are deemed unreliable are valued at fair value.
Factors considered in making this determination may include, but are not
limited to, information obtained by contacting the issuer, analysts, analysis
of the issuer's financial statements or other available documents. In addition,
the Fund may use fair value pricing for securities primarily traded in non-U.S.
markets because, most foreign markets close well before the Fund values its
securities at 4:00 p.m., Eastern Time. The earlier close of these foreign
markets gives rise to the possibility that significant events, including broad
market moves, may have occurred in the interim and may materially affect the
value of those securities.
2. 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. The Portfolio may be subject to taxes imposed by countries in which
it invests. Such taxes are generally based on income and/or capital gains
earned or repatriated. Taxes are accrued and applied to net investment income,
net realized gains and net unrealized appreciation/depreciation as such income
and/or gains are earned.
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 17
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 and
amortizes premiums as adjustments to interest income.
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, Advisor Class, Class R, Class K and Class I shares.
Advisor Class and Class I shares have no distribution fees.
5. Dividends and Distributions
Dividends and distributions to shareholders, if any, are recorded on the
ex-dividend date. Income dividends and capital gains distributions are
determined in accordance with federal tax regulations and may differ from those
determined in accordance with U.S. generally accepted accounting principles. To
the extent these differences are permanent, such amounts are reclassified
within the capital accounts based on their federal tax basis treatment;
temporary differences do not require such reclassification.
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.
NOTE B
Advisory Fee and Other Transactions with Affiliates
Under the terms of the investment advisory agreement, the Portfolio pays the
Adviser an advisory fee at an annual rate of .45% of the first $2.5 billion,
..40% of the next $2.5 billion and .35% in excess of $5 billion, of the
Portfolio's net assets valued on the last business day of the previous quarter.
Prior to September 7, 2004, the Portfolio paid the Adviser an advisory fee at a
quarterly rate of .15% (approximately .60% on an annual basis) of the first
$500 million of the Portfolio's net assets and .125% (approximately .50% on an
annual basis) of it net assets over $500 million, valued on the last business
day of the previous quarter. The fee is accrued daily and paid quarterly.
18 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
Effective January 1, 2004 through September 6, 2004, in contemplation of the
final agreement with the Office of New York Attorney General ("NYAG"), the
Adviser began waiving a portion of its advisory fee so as to charge the
Portfolio at the reduced annual rate discussed above. For a more complete
discussion of the Adviser's settlement with the NYAG, please see "Legal
Proceedings" below.
Pursuant to the advisory agreement, the Portfolio paid $91,771 to the Adviser
representing the cost of certain legal and accounting services provided to the
Portfolio by the Adviser for the year ended September 30, 2005.
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. AGIS may make payments to intermediaries that provide omnibus
account services, sub-accounting services and/or networking services. Such
compensation retained by AGIS amounted to $ 1,554,400 for the year ended
September 30, 2005.
For the year ended September 30, 2005, the Portfolio's expenses were reduced by
$15,301 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 $9,606 from the sales of Class A shares and
received $7,728, $169,513 and $6,312 in contingent deferred sales charges
imposed upon redemptions by shareholders of Class A, Class B and Class C
shares, respectively, for the year ended September 30, 2005.
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 the Portfolio's average daily
net assets attributable to Class A shares, 1% of the average daily net assets
attributable to both Class B and Class C shares, .50% of the Portfolio's
average daily net assets attributable to Class R shares and .25% of the
Portfolio's average daily net assets attributable to Class K shares. There are
no distribution and servicing fees on the Advisor Class and Class I shares. The
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 incurred expenses in
excess of the distribution costs reimbursed by the Portfolio in the amounts of
$2,777,937, $6,056,243, $410 and $0 for Class B, Class C, Class R and Class K
shares, respectively; such costs may be recovered from the Portfolio in future
pe-
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 19
riods 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.
NOTE D
Investment Transactions
Purchases and sales of investment securities (excluding short-term investments)
for the year ended September 30, 2005, were as follows:
Purchases Sales
Investment securities (excluding
U.S. government securities) $ 117,511,723 $ 146,507,432
U.S. government securities 2,051,228,965 2,531,612,922
The cost of investments for federal income tax purposes, gross unrealized
appreciation and unrealized depreciation (excluding future contracts) are as
follows:
Cost $1,052,593,984
Gross unrealized appreciation $ 1,100,652
Gross unrealized depreciation (9,935,682)
Net unrealized depreciation $ (8,835,030)
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.
20 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
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.
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 interim 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.
As of October 1, 2003, the Portfolio has adopted the method of accounting for
interim payments on swap contracts in accordance with Financial Accounting
Standards Board Statement No. 133. The Portfolio accrues for the interim
payments on swap contracts on a daily basis, with the net amount recorded
within unrealized appreciation/depreciation of swap contracts on the statement
of assets and liabilities. Once the interim payments are settled in cash, the
net amount is recorded as realized gain/loss on swaps, in addition to realized
gain/loss recorded upon termination of swap contracts on the statement of
operations. Prior to October 1, 2003, these interim payments were reflected
within interest income/expense in the statement of operations. Fluctuations in
the value of swap contracts are recorded as a component of net change in
unrealized appreciation/depreciation of investments.
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 unex
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 21
ercised 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 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.
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 year ended September 30, 2005, the average amount of reverse repurchase
agreements outstanding was $112,462,350 and the daily weighted average
annualized interest rate was 2.40%.
5. Dollar Rolls
The Portfolio may enter into dollar rolls. Dollar rolls involve sales by the
Portfolio of securities for delivery in the current month and the Portfolio's
simultaneously contracting to repurchase substantially similar (same type and
coupon) securities on a specified future date. During the roll period, the
Portfolio forgoes principal and interest paid on the securities. The Portfolio
is compensated by the difference between the current sales price and the lower
forward price for the future purchase (often referred to as the "drop") as well
as by the interest earned on the cash proceeds of the initial sale. Dollar
rolls involve the risk that the market value of the securities the Portfolio is
obligated to repurchase under the agreement may decline below the repurchase
price. Dollar rolls are speculative techniques and may be considered to be
borrowings by the Portfolio. For the year ended September 30, 2005, the
Portfolio earned drop income of $1,402,743 which is included in interest income
in the accompanying statement of operations.
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
22 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
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, 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, 2005, the Portfolio had loaned securities with a value of $233,157,231 and
received cash collateral which was invested in short-term securities valued at
$242,611,748 as included in the accompanying portfolio of investments. For the
year ended September 30, 2005, the Portfolio earned fee income of $358,391
which is included in interest income in the accompanying statement of
operations.
NOTE F
Capital Stock
There are 21,000,000,000 shares of $.001 par value capital stock authorized,
divided into seven classes, designated Class A, Class B, Class C, Advisor
Class, Class R, Class K and Class I shares. Each class consists of
3,000,000,000 authorized shares. Transactions in capital stock were as follows:
Shares Amount
--------------------------- ------------------------------
Year Ended Year Ended Year Ended Year Ended
September 30, September 30, September 30, September 30,
2005 2004 2005 2004
------------ ------------ -------------- --------------
Class A
Shares sold 3,126,480 4,218,101 $22,073,490 $30,146,844
Shares issued in
reinvestment of
dividends 2,261,039 2,862,366 15,978,830 20,389,259
Shares converted
from Class B 4,124,189 2,905,427 29,086,145 20,665,943
Shares redeemed (19,738,404) (33,589,991) (139,391,330) (239,197,202)
Net decrease (10,226,696) (23,604,097) $(72,252,865) $(167,995,156)
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 23
Shares Amount
--------------------------- ------------------------------
Year Ended Year Ended Year Ended Year Ended
September 30, September 30, September 30, September 30,
2005 2004 2005 2004
------------ ------------ -------------- --------------
Class B
Shares sold 1,200,396 2,167,866 $8,484,320 $15,470,284
Shares issued in
reinvestment of
dividends 657,216 1,094,395 4,646,224 7,799,846
Shares converted
to Class A (4,124,192) (2,905,568) (29,086,145) (20,665,943)
Shares redeemed (10,168,820) (22,962,538) (71,816,023) (163,696,608)
Net decrease (12,435,400) (22,605,845) $(87,771,624) $(161,092,421)
Class C
Shares sold 941,980 1,313,208 $6,658,949 $9,368,581
Shares issued in
reinvestment of
dividends 301,582 441,096 2,134,703 3,147,594
Shares redeemed (4,215,458) (9,733,170) (29,812,297) (69,513,844)
Net decrease (2,971,896) (7,978,866) $(21,018,645) $(56,997,669)
Advisor Class
Shares sold 20,593,240 6,165,460 $145,526,826 $44,040,465
Shares issued in
reinvestment of
dividends 1,746,230 1,574,981 12,364,185 11,224,484
Shares redeemed (56,168,512) (1,096,014) (393,271,216) (7,790,298)
Net increase
(decrease) (33,829,042) 6,644,427 $(235,380,205) $47,474,651
November 3, November 3,
Year Ended 2003(a) to Year Ended 2003(a) to
September 30, September 30, September 30, September 30,
2005 2004 2005 2004
------------ ------------ -------------- --------------
Shares sold 1,334 2,258 $9,408 $16,074
Shares issued in
reinvestment of
dividends 51 16 359 115
Shares redeemed (58) -0- (405) -0-
Net increase 1,327 2,274 $9,362 $16,189
(a) Commencement of distribution.
24 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
Shares Amount
March 1, March 1,
2005(a) to 2005(a) to
September 30, September 30,
2005 2005
-------------- --------------
Class K
Shares sold 1,439 $ 10,100
Net increase 1,439 $ 10,100
Class I
Shares sold 1,425 $ 10,000
Net increase 1,425 $ 10,000
(a) Commencement of distribution.
NOTE G
Risks Involved in Investing in the Portfolio
Interest Rate Risk and Credit Risk--Interest rate risk is the risk that changes
in interest rates will affect the value of the Portfolio's investments in
fixed-income debt securities such as bonds or notes. Increases in interest
rates may cause the value of the Portfolio's investments to decline. Credit
risk is the risk that the issuer or guarantor of a debt security, or the
counterparty to a derivative contract, will be unable or unwilling to make
timely principal and/or interest payments, or to otherwise honor its
obligations. The degree of risk for a particular security may be reflected in
its credit risk rating. Credit risk is greater for medium quality and
lower-rated securities. Lower-rated debt securities and similar unrated
securities (commonly known as "junk bonds") have speculative elements or are
predominantly speculative risks.
Indemnification Risk--In the ordinary course of business, the Portfolio enters
into contracts that contain a variety of indemnifications. The Portfolio's
maximum exposure under these arrangements is unknown. However, the Portfolio
has not had prior claims or losses pursuant to these indemnification provisions
and expects the risk of loss thereunder to be remote.
NOTE H
Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the
Portfolio, participate in a $250 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 year ended September 30, 2005.
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 25
NOTE I
Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended September
30, 2005 and September 30, 2004 were as follows:
September 30, September 30,
2005 2004
--------------- ---------------
Distributions paid from:
Ordinary income $ 46,488,145 $ 60,500,119
Total taxable distributions 46,488,145 60,500,119
Tax return of capital -0- -0-
Total distributions paid $ 46,488,145 $ 60,500,119
As of September 30, 2005, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Accumulated capital and other losses $ (134,947,393)(a)
Undistributed ordinary income 5,678,544
Unrealized appreciation/(depreciation) (8,836,414)(b)
Total accumulated earnings/(deficit) $ (138,105,263)(c)
(a) On September 30, 2005, the Portfolio had a net capital loss carryforward
for federal income tax purposes of $122,518,919 (of which $2,015,062 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 Portfolio in December of 2000), of which
$16,083,708 expires in the year 2006, $48,732,137 expires in the year 2007,
$6,470,420 expires in the year 2008, $23,497,731 expires in the year 2011 and
$27,734,923 expires in the year 2013. 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, 2005, $6,928,773 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. Net capital losses incurred after October
31, and within the taxable year are deemed to arise on the first business day
of the Portfolio's next taxable year. For the fiscal year ended September 30,
2005, the Portfolio deferred to October 1, 2005 post-October capital losses of
$11,829,620. For the year ended September 30, 2005, the Portfolio deferred
losses on straddles of $598,854.
(b) The difference between book-basis and tax-basis unrealized
appreciation/(depreciation) are attributable primarily to the tax deferral of
losses on wash sales, the difference between book and tax amortization methods
for premium and the realization for tax purposes of unrealized gains(losses) on
certain derivative instruments.
(c) The difference between book-basis and tax-basis components of accumulated
earnings/(deficit) is attributable primarily to dividends payable.
During the current fiscal year, permanent differences primarily due to the tax
treatment of bond premium, tax character of paydown gains/losses and the
expiration of capital loss carryforward resulted in a net decrease in
distributions in excess of net investment income, a net increase in accumulated
net realized loss on investment transactions and a net decrease in additional
paid-in capital. This reclassification had no effect on net assets.
26 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
NOTE J
Legal Proceedings
As has been previously reported, the staff of the U.S. Securities and Exchange
Commission ("SEC") and the NYAG have been investigating practices in the mutual
fund industry identified as "market timing" and "late trading" of mutual fund
shares. Certain other regulatory authorities have also been conducting
investigations into these practices within the industry and have requested that
the Adviser provide information to them. The Adviser has been cooperating and
will continue to cooperate with all of these authorities.
On December 18, 2003, the Adviser confirmed that it had reached terms with the
SEC and the NYAG for the resolution of regulatory claims relating to the
practice of "market timing" mutual fund shares in some of the AllianceBernstein
Mutual Funds. The agreement with the SEC is reflected in an Order of the
Commission ("SEC Order"). The agreement with the NYAG is memorialized in an
Assurance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the
key provisions of these agreements are the following:
(i) The Adviser agreed to establish a $250 million fund (the "Reimbursement
Fund") to compensate mutual fund shareholders for the adverse effects of
market timing attributable to market timing relationships described in
the SEC Order. According to the SEC Order, the Reimbursement Fund is to
be paid, in order of priority, to fund investors based on (i) their
aliquot share of losses suffered by the fund due to market timing, and
(ii) a proportionate share of advisory fees paid by such fund during the
period of such market timing;
(ii) The Adviser agreed to reduce the advisory fees it receives from some of
the AllianceBernstein long-term, open-end retail funds until December
31, 2008; and
(iii) The Adviser agreed to implement changes to its governance and
compliance procedures. Additionally, the SEC Order and the NYAG Order
contemplate that the Adviser's registered investment company clients,
including the Fund, will introduce governance and compliance changes.
In anticipation of final, definitive documentation of the NYAG Order and
effective January 1, 2004, the Adviser began waiving a portion of its advisory
fee. On September 7, 2004, the Fund's investment advisory agreement was amended
to reflect the reduced advisory fee. For more information on this waiver and
amendment to the Fund's investment advisory agreement, please see "Advisory Fee
and Other Transactions with Affiliates" above.
A special committee of the Adviser's Board of Directors, comprised of the
members of the Adviser's Audit Committee and the other independent member of
the
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 27
Adviser's Board, is continuing to direct and oversee an internal investigation
and a comprehensive review of the facts and circumstances relevant to the SEC's
and the NYAG's investigations.
In addition, the Independent Directors of the Fund ("the Independent
Directors") have initiated an investigation of the above-mentioned matters with
the advice of an independent economic consultant and independent counsel. The
Independent Directors have formed a special committee to supervise the
investigation.
On October 2, 2003, a purported class action complaint entitled Hindo, et al.
v. AllianceBernstein Growth & Income Fund, et al. ("Hindo Complaint") was filed
against the Adviser, Alliance Capital Management Holding L.P. ("Alliance
Holding"), Alliance Capital Management Corporation, AXA Financial, Inc., the
AllianceBernstein Funds, certain officers of the Adviser ("Alliance
defendants"), and certain other defendants not affiliated with the Adviser, as
well as unnamed Doe defendants. The Hindo Complaint was filed in the United
States District Court for the Southern District of New York by alleged
shareholders of two of the AllianceBernstein Funds. The Hindo Complaint alleges
that certain of the Alliance 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 the Adviser, including recovery of all fees paid to the Adviser pursuant
to such contracts.
Since October 2, 2003, numerous additional lawsuits making factual allegations
generally similar to those in the Hindo Complaint were filed in various federal
and state courts against the Adviser and certain other defendants, and others
may be filed. The plaintiffs in such lawsuits have asserted a variety of
theories for recovery including, but not limited to, violations of the
Securities Act, the Exchange Act, the Advisers Act, the Investment Company Act,
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
certain state securities laws, and common law. On February 20, 2004, the
Judicial Panel on Multidistrict Litigation transferred all federal actions, and
removed all state court actions, to the United States District Court for the
District of Maryland (the "Mutual Fund MDL"). The plaintiffs in the removed
actions have since moved for remand, and that motion is pending.
On September 29, 2004, plaintiffs filed consolidated amended complaints with
respect to four claim types: mutual fund shareholder claims; mutual fund
derivative claims; derivative claims brought on behalf of Alliance Holding; and
claims brought under ERISA by participants in the Profit Sharing Plan for
Employees of the Adviser. All four complaints include substantially identical
factual allega-
28 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
tions, which appear to be based in large part on the SEC Order and the NYAG
Order. The claims in the mutual fund derivative consolidated amended complaint
are generally based on the theory that all fund advisory agreements,
distribution agreements and 12b-1 plans between the Adviser and the
AllianceBernstein Funds should be invalidated, regardless of whether market
timing occurred in each individual fund, because each was approved by fund
trustees on the basis of materially misleading information with respect to the
level of market timing permitted in funds managed by the Adviser. The claims
asserted in the other three consolidated amended complaints are similar to
those that the respective plaintiffs asserted in their previous federal
lawsuits. All of these lawsuits seek an unspecified amount of damages. The
Alliance defendants have moved to dismiss the complaints, and those motions are
pending.
On February 10, 2004, the Adviser received (i) a subpoena duces tecum from the
Office of the Attorney General of the State of West Virginia and (ii) a request
for information from West Virginia's Office of the State Auditor, Securities
Commission (the "West Virginia Securities Commission") (together, the
"Information Requests"). Both Information Requests require the Adviser to
produce documents concerning, among other things, any market timing or late
trading in the Adviser's sponsored mutual funds. The Adviser responded to the
Information Requests and has been cooperating fully with the investigation.
On April 11, 2005, a complaint entitled The Attorney General of the State of
West Virginia v. AIM Advisors, Inc., et al. ("WVAG Complaint") was filed
against the Adviser, Alliance Holding, and various other defendants not
affiliated with the Adviser. The WVAG Complaint was filed in the Circuit Court
of Marshall County, West Virginia by the Attorney General of the State of West
Virginia. The WVAG Complaint makes factual allegations generally similar to
those in the Hindo Complaint. On May 31, 2005, defendants removed the WVAG
Complaint to the United States District Court for the Northern District of West
Virginia. On July 12, 2005, plaintiff moved to remand. On October 19, 2005, the
WVAG Complaint was transferred to the Mutual Fund MDL.
On August 30, 2005, the deputy commissioner of securities of the West Virginia
Securities Commission signed a "Summary Order to Cease and Desist, and Notice
of Right to Hearing" addressed to the Adviser and Alliance Holding. The Summary
Order claims that the Adviser and Alliance Holding violated the West Virginia
Uniform Securities Act, and makes factual allegations generally similar to
those in the Commission Order and the NYAG Order. The Adviser intends to
vigorously defend against the allegations in the WVAG Complaint.
As a result of the matters discussed above, 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
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 29
provide for sufficient liquidity and could also have an adverse effect on the
investment performance of the AllianceBernstein Mutual Funds.
On June 22, 2004, a purported class action complaint entitled Aucoin, et al. v.
Alliance Capital Management L.P., et al. ("Aucoin Complaint") was filed against
the Adviser, Alliance Capital Management Holding L.P., Alliance Capital
Management Corporation, AXA Financial, Inc., AllianceBernstein Investment
Research & Management, Inc., certain current and former directors of the
AllianceBernstein Mutual Funds, and unnamed Doe defendants. The Aucoin
Complaint names certain of the AllianceBernstein mutual funds as nominal
defendants. The Aucoin Complaint was filed in the United States District Court
for the Southern District of New York by an alleged shareholder of an
AllianceBernstein mutual fund. The Aucoin Complaint alleges, among other
things, (i) that certain of the defendants improperly authorized the payment of
excessive commissions and other fees from fund assets to broker-dealers in
exchange for preferential marketing services, (ii) that certain of the
defendants misrepresented and omitted from registration statements and other
reports material facts concerning such payments, and (iii) that certain
defendants caused such conduct as control persons of other defendants. The
Aucoin Complaint asserts claims for violation of Sections 34(b), 36(b) and
48(a) of the Investment Company Act, Sections 206 and 215 of the Advisers Act,
breach of common law fiduciary duties, and aiding and abetting breaches of
common law fiduciary duties. Plaintiffs seek an unspecified amount of
compensatory damages and punitive damages, rescission of their contracts with
the Adviser, including recovery of all fees paid to the Adviser pursuant to
such contracts, an accounting of all fund-related fees, commissions and soft
dollar payments, and restitution of all unlawfully or discriminatorily obtained
fees and expenses.
Since June 22, 2004, numerous additional lawsuits making factual allegations
substantially similar to those in the Aucoin Complaint were filed against the
Adviser and certain other defendants, and others may be filed. On October 19,
2005, the District Court granted in part, and denied in part, defendants'
motion to dismiss the Aucoin Complaint and as a result the only claim pending
is plaintiffs' Section 36(b) claim.
It is possible that these matters and/or other developments resulting from
these matters could result in increased redemptions of the AllianceBernstein
Mutual Funds' shares or other adverse consequences to the AllianceBernstein
Mutual Funds. However, the Adviser believes that these matters are not likely
to have a material adverse effect on its ability to perform advisory services
relating to the AllianceBernstein Mutual Funds.
30 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class A
----------------------------------------------------------------------------
Year Ended July 1,
September 30, 2003 to Year Ended June 30,
------------------------ Sept. 30, -------------------------------------
2005 2004 2003(a) 2003 2002(b) 2001
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period $7.11 $7.27 $7.49 $7.21 $7.14 $6.99
Income From Investment
Operations
Net investment income(c) .28 .30(d) .06 .27 .37 .47
Net realized and unrealized
gain (loss) on investment
transactions (.12) (.13) (.20) .35 .13 .17
Net increase (decrease) in net
asset value from operations .16 .17 (.14) .62 .50 .64
Less: Dividends and
Distributions
Dividends from net investment
income (.29) (.33) (.08) (.34) (.37) (.47)
Distributions in excess of
net investment income -0- -0- -0- -0- (.03) (.01)
Tax return of capital -0- -0- -0- -0- (.03) (.01)
Total dividends and distributions (.29) (.33) (.08) (.34) (.43) (.49)
Net asset value, end of period $6.98 $7.11 $7.27 $7.49 $7.21 $7.14
Total Return
Total investment return based
on net asset value(e) 2.31% 2.49% (1.80)% 8.82% 7.11% 9.30%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $543,547 $626,183 $811,376 $889,115 $865,739 $884,574
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements 1.30% 1.34% 1.18%(f) 1.10% 1.23% 2.11%
Expenses, before waivers/
reimbursements 1.30% 1.39% 1.18%(f) 1.10% 1.23% 2.11%
Expenses, before waivers/
reimbursements, excluding
interest expense 1.06% 1.10% 1.11%(f) 1.09% 1.09% 1.13%
Net investment income 3.90% 4.23%(d) 3.43%(f) 3.64% 5.15% 6.57%
Portfolio turnover rate 166% 150% 241% 976% 1,009% 712%
See footnote summary on page 38.
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 31
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class B
----------------------------------------------------------------------------
Year Ended July 1,
September 30, 2003 to Year Ended June 30,
------------------------ Sept. 30, -------------------------------------
2005 2004 2003(a) 2003 2002(b) 2001
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period $7.11 $7.27 $7.49 $7.21 $7.14 $7.00
Income From Investment
Operations
Net investment income(c) .23 .25(d) .05 .22 .32 .42
Net realized and unrealized
gain (loss) on investment
transactions (.12) (.13) (.20) .35 .13 .16
Net increase (decrease) in net
asset value from operations .11 .12 (.15) .57 .45 .58
Less: Dividends and
Distributions
Dividends from net investment
income (.24) (.28) (.07) (.29) (.32) (.42)
Distributions in excess of
net investment income -0- -0- -0- -0- (.03) (.01)
Tax return of capital -0- -0- -0- -0- (.03) (.01)
Total dividends and distributions (.24) (.28) (.07) (.29) (.38) (.44)
Net asset value, end of period $6.98 $7.11 $7.27 $7.49 $7.21 $7.14
Total Return
Total investment return based
on net asset value(e) 1.57% 1.74% (1.98)% 8.07% 6.36% 8.39%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $138,856 $229,823 $399,040 $495,606 $400,221 $276,308
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements 2.02% 2.07% 1.90%(f) 1.82% 1.93% 2.90%
Expenses, before waivers/
reimbursements 2.02% 2.13% 1.90%(f) 1.82% 1.93% 2.90%
Expenses, before waivers/
reimbursements, excluding
interest expense 1.78% 1.83% 1.83%(f) 1.81% 1.80% 1.83%
Net investment income 3.20% 3.55%(d) 2.75%(f) 2.95% 4.41% 5.95%
Portfolio turnover rate 166% 150% 241% 976% 1,009% 712%
See footnote summary on page 38.
32 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class C
----------------------------------------------------------------------------
Year Ended July 1,
September 30, 2003 to Year Ended June 30,
------------------------ Sept. 30, -------------------------------------
2005 2004 2003(a) 2003 2002(b) 2001
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period $7.12 $7.28 $7.50 $7.22 $7.15 $7.00
Income From Investment
Operations
Net investment income(c) .23 .25(d) .05 .22 .32 .43
Net realized and unrealized
gain (loss) on investment
transactions (.12) (.13) (.20) .35 .13 .16
Net increase (decrease) in net
asset value from operations .11 .12 (.15) .57 .45 .59
Less: Dividends and
Distributions
Dividends from net investment
income (.24) (.28) (.07) (.29) (.32) (.43)
Distributions in excess of
net investment income -0- -0- -0- -0- (.03) (.01)
Tax return of capital -0- -0- -0- -0- (.03) -0-
Total dividends and distributions (.24) (.28) (.07) (.29) (.38) (.44)
Net asset value, end of period $6.99 $7.12 $7.28 $7.50 $7.22 $7.15
Total Return
Total investment return based
on net asset value(e) 1.58% 1.73% (1.98)% 8.06% 6.35% 8.54%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $84,303 $107,003 $167,359 $204,006 $202,030 $169,213
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements 2.02% 2.06% 1.89%(f) 1.81% 1.93% 2.89%
Expenses, before waivers/
reimbursements 2.02% 2.11% 1.89%(f) 1.81% 1.93% 2.89%
Expenses, before waivers/
reimbursements, excluding
interest expense 1.77% 1.82% 1.83%(f) 1.80% 1.79% 1.83%
Net investment income 3.19% 3.56%(d) 2.76%(f) 2.96% 4.42% 5.94%
Portfolio turnover rate 166% 150% 241% 976% 1,009% 712%
See footnote summary on page 38.
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 33
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Advisor Class
----------------------------------------------------------------------------
Year Ended July 1, Year Ended October 6,
September 30, 2003 to June 30, 2000(g) to
------------------------ Sept. 30, ------------------------ June 30,
2005 2004 2003(a) 2003 2002(b) 2001
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period $ 7.12 $7.28 $7.50 $7.21 $7.14 $7.05
Income From Investment
Operations
Net investment income(c) .30 .32(d) .07 .29 .39 .34
Net realized and unrealized
gain (loss) on investment
transactions (.11) (.12) (.20) .37 .13 .12
Net increase (decrease) in
net asset value
from operations .19 .20 (.13) .66 .52 .46
Less: Dividends and
Distributions
Dividends from net investment
income (.31) (.36) (.09) (.37) (.39) (.34)
Distributions in excess of
net investment income -0- -0- -0- -0- (.03) (.02)
Tax return of capital -0- -0- -0- -0- (.03) (.01)
Total dividends and distributions (.31) (.36) (.09) (.37) (.45) (.37)
Net asset value, end of period $7.00 $7.12 $7.28 $7.50 $7.21 $7.14
Total Return
Total investment return based
on net asset value(e) 2.76% 2.82% (1.72)% 9.29% 7.41% 6.65%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $5,981 $247,020 $204,108 $197,649 $177,834 $27,154
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements .94% 1.02% .89%(f) .81% .89% 1.38%(f)
Expenses, before waivers/
reimbursements .94% 1.08% .89%(f) .81% .89% 1.38%(f)
Expenses, before waivers/
reimbursements, excluding
interest expense .72% .79% .81%(f) .80% .81% .81%(f)
Net investment income 4.11% 4.52%(d) 3.72%(f) 3.96% 5.41% 6.74%(f)
Portfolio turnover rate 166% 150% 241% 976% 1,009% 712%
See footnote summary on page 38.
34 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class R
--------------------------------
November 3,
Year Ended 2003(g) to
September 30, September 30,
2005 2004
------------- -------------
Net asset value, beginning of period $7.11 $7.14
Income From Investment Operations
Net investment income(c) .26 .26(d)
Net realized and unrealized gain (loss) on investment transactions (.11) .00
Net increase in net asset value from operations .15 .26
Less: Dividends
Dividends from net investment income (.28) (.29)
Net asset value, end of period $6.98 $7.11
Total Return
Total investment return based on net asset value(e) 2.14% 3.72%
Ratios/Supplemental Data
Net assets, end of period (000's omitted) $25 $16
Ratio to average net assets of:
Expenses, net of waivers/reimbursements 1.49% 1.48%(f)
Expenses, before waivers/reimbursements 1.49% 1.54%(f)
Expenses, before waivers/reimbursements, excluding
interest expense 1.25% 1.27%(f)
Net investment income 3.68% 4.08%(d)(f)
Portfolio turnover rate 166% 150%
See footnote summary on page 38.
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 35
Selected Data For A Share Of Capital Stock Outstanding Throughout The Period
Class K
----------------
March 1, 2005(g)
to
September 30,
2005
----------------
Net asset value, beginning of period $7.02
Income From Investment Operations
Net investment income(c) .16
Net realized and unrealized loss on investment transactions (.03)
Net increase in net asset value from operations .13
Less: Dividends
Dividends from net investment income (.17)
Net asset value, end of period $6.98
Total Return
Total investment return based on net asset value(e) 1.79%
Ratios/Supplemental Data
Net assets, end of period (000's omitted) $10
Ratio to average net assets of:
Expenses(f) 1.17%
Expenses, excluding interest expense(f) .95%
Net investment income(f) 3.79%
Portfolio turnover rate 166%
See footnote summary on page 38.
36 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
Selected Data For A Share Of Capital Stock Outstanding Throughout The Period
Class I
----------------
March 1, 2005(g)
to
September 30,
2005
----------------
Net asset value, beginning of period $7.02
Income From Investment Operations
Net investment income(c) .17
Net realized and unrealized loss on investment transactions (.03)
Net increase in net asset value from operations .14
Less: Dividends
Dividends from net investment income (.18)
Net asset value, end of period $6.98
Total Return
Total investment return based on net asset value(e) 1.97%
Ratios/Supplemental Data
Net assets, end of period (000's omitted) $10
Ratio to average net assets of:
Expenses(f) .89%
Expenses excluding interest expense(f) .68%
Net investment income(f) 4.10%
Portfolio turnover rate 166%
See footnote summary on page 38.
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 37
(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) Net of expenses waived and reimbursed by the Adviser.
(e) 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.
(f) Annualized.
(g) Commencement of distribution.
38 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
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, 2005, and the related statements of operations
and cash flows for the period then ended, the statement of changes in net
assets, and the financial highlights for each of the periods indicated therein.
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 the standards of the Public Company
Accounting Oversight Board (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. We were not engaged to perform an audit of the Fund's internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Fund's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. Our procedures included
confirmation of securities owned as of September 30, 2005 by correspondence
with the custodian and others or by other appropriate auditing procedures where
replies from others were not received. 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, 2005, the results of its operations and its cash flows for the year then
ended, the changes in its net assets, and the financial highlights for each of
the indicated periods, in conformity with U.S. generally accepted accounting
principles.
/s/ Ernst & Young LLP
New York, New York
November 16, 2005
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 39
BOARD OF DIRECTORS
William H. Foulk, Jr.(1), Chairman
Marc O. Mayer, President
Ruth Block(1)
David H. Dievler(1)
John H. Dobkin(1)
Michael J. Downey(1)
D. James Guzy
Marshall C. Turner, Jr.
OFFICERS
Philip L. Kirstein, Senior Vice President and Independent Compliance Officer
Jeffrey S. Phlegar, Vice President
Kewjin Yuoh(2), Vice President
Mark D. Gersten, Treasurer & Chief Financial Officer
Vincent S. Noto, Controller
Emilie D. Wrapp, Secretary
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 Registered Public Accounting Firm
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, Governance and Nominating Committee and
Independent Directors Committee.
(2) The day-to-day management of and investment decisions for the portfolio are
made by the U.S.Investment Grade: Structured Asset Investment Team. Mr. Yuoh is
the investment professional with the most significant responsibility for the
day-to-day management of the Portfolio.
40 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
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, ADDRESS, PRINCIPAL COMPLEX DIRECTORSHIPS
DATE OF BIRTH OCCUPATION(S) OVERSEEN BY HELD BY
(FIRST YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR
- -----------------------------------------------------------------------------------------------------------------------
DISINTERESTED DIRECTORS
William H. Foulk, Jr., #, + Investment Adviser and an 108 None
2 Sound View Drive independent consultant. He was
Suite 100 formerly Senior Manager of Barrett
Greenwich, CT 06830 Associates, Inc., a registered
9/7/32 investment adviser, with which
(1998) he had been associated since prior
Chairman of the Board to 2000. 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, #, ** Formerly Executive Vice 106 None
500 SE Mizner Blvd. President and Chief Insurance
Boca Raton, FL 33432 Officer of The Equitable Life
11/7/30 Assurance Society of the United
(1987) States; Chairman and Chief
Executive Officer of Evlico
(insurance); Director of Avon,
BP (oil and gas), Ecolab
Incorporated (specialty chemi-
cals), Tandem Financial Group
and Donaldson, Lufkin &
Jenrette Securities Corporation;
Governor at Large, National
Association of Securities
Dealers, Inc.
David H. Dievler, # Independent consultant. Until 107 None
P.O. Box 167 December 1994, he was Senior
Spring Lake, NJ 07762 Vice President of Alliance Capital
10/23/29 Management Corporation ("ACMC")
(1987) 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.
41 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
PORTFOLIOS
IN FUND OTHER
NAME, ADDRESS, PRINCIPAL COMPLEX DIRECTORSHIPS
DATE OF BIRTH OCCUPATION(S) OVERSEEN BY HELD BY
(FIRST YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR
- -----------------------------------------------------------------------------------------------------------------------
DISINTERESTED DIRECTORS
(continued)
John H. Dobkin, # Consultant. Formerly President of 106 None
P.O. Box 12, Save Venice, Inc. (preservation
Annandale, NY 12504 organization) from 2001-2002,
2/19/42 Senior Advisor from June 1999 -
(1998) June 2000 and President of
Historic Hudson Valley (historic
preservation) from December
1989-May 1999. Previously,
Director of the National Academy
of Design and during 1988-
1992, Director and Chairman of
the Audit Committee of ACMC.
Michael J. Downey, # Consultant since January 2004. 81 Asia Pacific
c/o Alliance Capital Formerly managing partner of Fund, Inc.;
Management L.P. Lexington Capital, LLC (investment and The
1345 Avenue of the advisory firm) from December 1997 Merger Fund.
Americas until December 2003. Prior thereto,
New York, NY 10105 Chairman and CEO of Prudential
Attn: Phil Kirstein Mutual Fund Management from
1/26/44 1987 to 1993.
(2005)
D. James Guzy Chairman of the Board of PLX 58 Intel Corporation,
P.O. Box 128 Technology (semi-conductors) Cirrus Logic
Glenbrook, NV 89413 and of SRC Computers, Inc., Corporation,
3/7/36 with which he has been associated Novellus
(2005) since prior to 2000. He is also Corporation,
President of the Arbor Company Micro Component
(private family investments). Technology, the
Davis Selected
Advisers Group of
Mutual Funds
and LogicVision.
Marshall C. Turner, Jr. Principal of Turner Venture 58 Toppan
220 Montgomery Street Associates (venture capital and Photomasks, Inc.,
Penthouse 10 consulting) since prior to 2000. the George Lucas
San Francisco, Chairman and CEO, DuPont Educational
CA 94104 Photomasks, Inc., Austin, Texas, Foundation,
10/10/41 2003-2005, and President and Chairman of the
(2005) CEO since company acquired, Board of the
and name changed to Toppan Smithsonian's
Photomasks, Inc. in 2005 National Museum
(semiconductor manufacturing of Natural History.
services).
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 42
PORTFOLIOS
IN FUND OTHER
NAME, ADDRESS, PRINCIPAL COMPLEX DIRECTORSHIPS
DATE OF BIRTH OCCUPATION(S) OVERSEEN BY HELD BY
(FIRST YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR
- -----------------------------------------------------------------------------------------------------------------------
INTERESTED DIRECTOR
Marc O. Mayer,++ Executive Vice President of ACMC 81 SCB Partners,
1345 Avenue of the since 2001; prior thereto, Chief Inc.; and SCB
Americas Executive Officer of Sanford C. Inc.
New York, NY 10105 Bernstein & Co., LLC (institutional
10/2/57 research and brokerage arm of
(2003) Bernstein & Co., LLC) ("SCB & Co.")
and its predecessor since prior to
2000.
* There is no stated term of office for the Fund's Directors.
** Ms. Block was an "interested person", as defined in the 1940 Act, from
July 22, 1992 until October 21, 2004 by reason of her ownership of securities
of a control person of the Adviser. Ms. Block received shares of The
Equitable Companies Incorporated ("Equitable") as part of the demutualization
of The Equitable Life Assurance Society of the United States in 1992. Ms.
Block's Equitable shares were subsequently converted through a corporate
action into American Depositary Shares of AXA, which were sold for
approximately $2,400 on October 21, 2004. Equitable and AXA are control
persons of the Adviser.
# Member of the Audit Committee, Governance and Nominating Committee and
Independent Directors Committee.
+ Member of the Fair Value Pricing Committee.
++ Mr. Mayer is an "interested director", as defined in the 1940 Act, due to
his position as an Executive Vice President of ACMC.
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 43
Officer Information
Certain information concerning the Fund's Officers is set forth below.
NAME, ADDRESS* POSITION(S) PRINCIPAL OCCUPATION
AND DATE OF BIRTH HELD WITH FUND DURING PAST 5 YEARS
- -------------------------------------------------------------------------------------------------------
Marc O. Mayer President and Chief See biography above.
10/2/57 Executive Officer
Philip L. Kirstein Senior Vice President Senior Vice President and Independent
5/29/45 and Independent Compliance Officer of the
Compliance Officer AllianceBernstein Funds, with which he
has been associated since October 2004.
Prior thereto, he was Of Counsel
to Kirkpatrick & Lockhart, LLP from
October 2003 to October 2004, and
General Counsel of Merrill Lynch
Investment Managers L.P. since prior to
2000 until March 2003.
Jeffrey S. Phlegar Vice President Executive Vice President of ACMC**,
6/28/66 with which he has been associated
since prior to 2000.
Kewjin Yuoh Vice President Vice President of ACMC** since March
3/11/71 2003. Prior thereto, he was a Vice
President of Credit Suisse Asset
Management from 2000 to 2002 and a
Vice President of Brundage, Story & Rose
since prior to 2000.
Emilie D. Wrapp Secretary Senior Vice President, Assistant General
11/13/55 Counsel and Assistant Secretary of
AllianceBernstein Investment Research
and Management, Inc. ("ABIRM")**, with
which she has been associated since
prior to 2000.
Mark D. Gersten Treasurer and Chief Senior Vice President of Alliance Global
10/4/50 Financial Officer Investor Services, Inc. ("AGIS")** and
Vice President of ABIRM**, with which
he has been associated since prior to
2000.
Vincent S. Noto Controller Vice President of AGIS**, with which
12/14/64 he has been associated since prior to
2000.
* The address for each of the Fund's Officers is 1345 Avenue of the Americas,
New York, NY 10105.
** ACMC, ABIRM, AGIS and SCB & Co. 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 1-800-227-4618 for a free prospectus or SAI.
44 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
Information Regarding the Review and Approval of the Fund's Investment Advisory
Contract
In this disclosure, the term "Fund" refers to AllianceBernstein Bond Fund,
Inc., and the term "Portfolio" refers to U.S. Government Portfolio.
The Fund's disinterested directors (the "directors") unanimously approved the
continuance of the Investment Advisory Contract (the "Advisory Agreement")
between the Fund and the Adviser in respect of the Portfolio at a meeting held
on June 15, 2005.
In preparation for the meeting, the directors had requested from the Adviser
and evaluated extensive materials, including performance and expense
information for other investment companies with similar investment objectives
derived from data compiled by Lipper Inc. ("Lipper"), which is not affiliated
with the Adviser. The directors also reviewed an independent evaluation from
the Fund's Senior Officer (who is also the Fund's Independent Compliance
Officer) of the reasonableness of the advisory fees in the Advisory Agreement
in respect of the Portfolio (as contemplated by the Assurance of Discontinuance
between the Adviser and the New York Attorney General) wherein the Senior
Officer concluded that such fees were reasonable. In addition, the directors
received a presentation from the Adviser and had an opportunity to ask
representatives of the Adviser various questions relevant to the proposed
approval. The directors noted that the Senior Officer's evaluation considered
the following factors: management fees charged to institutional and other
clients of the Adviser for like services; management fees charged by other
mutual fund companies for like services; cost to the Adviser and its affiliates
of supplying services pursuant to the Advisory Agreement, excluding any
intra-corporate profit; profit margins of the Adviser and its affiliates from
supplying such services; possible economies of scale as the Portfolio grows
larger; and nature and quality of the Adviser's services including the
performance of the Portfolio.
Prior to voting, the directors reviewed the proposed continuance of the
Advisory Agreement in respect of the Portfolio with management and with
experienced counsel who are independent of the Adviser and received a
memorandum from such counsel discussing the legal standards for their
consideration of the proposed continuance. The directors also discussed the
proposed continuance in three private sessions at which only the directors,
their independent counsel and the Fund's Independent Compliance Officer were
present. In reaching their determinations relating to continuance of the
Advisory Agreement in respect of the Portfolio, the directors considered all
factors they believed relevant, including the following:
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 45
1. information comparing the performance of the Portfolio to other
investment companies with similar investment objectives and to an index;
2. the nature, extent and quality of investment, compliance, administrative
and other services rendered by the Adviser;
3. payments received by the Adviser from all sources in respect of the
Portfolio and all investment companies in the AllianceBernstein Funds complex;
4. the costs borne by, and profitability of, the Adviser and its affiliates
in providing services to the Portfolio and to all investment companies in the
AllianceBernstein Funds complex;
5. comparative fee and expense data for the Portfolio and other investment
companies with similar investment objectives;
6. the extent to which economies of scale would be realized to the extent
the Portfolio grows and whether fee levels reflect any economies of scale for
the benefit of investors;
7. the Adviser's policies and practices regarding allocation of portfolio
transactions of the Portfolio;
8. information about "revenue sharing" arrangements that the Adviser has
entered into in respect of the Portfolio;
9. portfolio turnover rates for the Portfolio compared to other investment
companies with similar investment objectives;
10. fall-out benefits which the Adviser and its affiliates receive from their
relationships with the Portfolio;
11. the Adviser's representation that it does not advise other clients with
substantially similar investment objectives and strategies as the Portfolio;
12. the Senior Officer's evaluation of the reasonableness of the fee payable
to the Adviser in the Advisory Agreement;
13. the professional experience and qualifications of the Portfolio's
portfolio management team and other senior personnel of the Adviser; and
14. the terms of the Advisory Agreement.
46 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
The directors also considered their knowledge of the nature and quality of the
services provided by the Adviser to the Portfolio gained from their experience
as directors or trustees of most of the funds advised by the Adviser, their
overall confidence in the Adviser's integrity and competence they have gained
from that experience and the Adviser's responsiveness to concerns raised by
them in the past, including the Adviser's willingness to consider and implement
organizational and operational changes designed to improve investment results
and the services provided to the AllianceBernstein Funds.
In their deliberations, the directors did not identify any particular
information that was all-important or controlling, and each director attributed
different weights to the various factors.
The directors determined that the overall arrangements between the Portfolio
and the Adviser, as provided in the Advisory Agreement, were fair and
reasonable in light of the services performed, expenses incurred and such other
matters as the directors considered relevant in the exercise of their business
judgment.
The material factors and conclusions that formed the basis for the directors
reaching their determinations to approve the continuance of the Advisory
Agreement in respect of the Portfolio (including their determinations that the
Adviser should continue to be the investment adviser for the Portfolio, and
that the fees payable to the Adviser pursuant to the Advisory Agreement are
appropriate) were separately discussed by the directors.
NATURE, EXTENT AND QUALITY OF SERVICES PROVIDED BY THE ADVISER
The directors noted that, under the Advisory Agreement, the Adviser, subject to
the control of the directors, administers the Portfolio's business and other
affairs. The Adviser manages the investment of the assets of the Portfolio,
including making purchases and sales of portfolio securities consistent with
the Portfolio's investment objective and policies. Under the Advisory
Agreement, the Adviser also provides the Portfolio with such office space,
administrative and other services (exclusive of, and in addition to, any such
services provided by any others retained by the Portfolio) and executive and
other personnel as are necessary for the Portfolio's operations. The Adviser
pays all of the compensation of directors of the Fund who are affiliated
persons of the Adviser and of the officers of the Portfolio.
The directors also considered that the Advisory Agreement provides that the
Portfolio will reimburse the Adviser for the cost of certain clerical,
accounting, administrative and other services provided at the Portfolio's
request by employees of the Adviser or its affiliates. Requests for these "at
no more than cost" reimbursements are approved by the directors on a quarterly
basis and (to the extent requested and paid) result in a higher rate of total
compensation from the Portfolio to the Adviser than the stated fee rates in the
Portfolio's Advisory Agreement.
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 47
The directors considered the scope and quality of services provided by the
Adviser under the Advisory Agreement and noted that the scope of services
provided by advisers of funds had expanded over time as a result of regulatory
and other developments. The directors noted, for example, that the Adviser is
responsible for maintaining and monitoring its own and, to varying degrees, the
Portfolio's compliance programs, and that these compliance programs have
recently been refined and enhanced in light of new regulatory requirements. The
directors considered the quality of the in-house investment research
capabilities of the Adviser and the other resources it has dedicated to
performing services for the Portfolio. The quality of administrative and other
services, including the Adviser's role in coordinating the activities of the
Portfolio's other service providers, also were considered. The directors also
considered the Adviser's response to recent regulatory compliance issues
affecting a number of the investment companies in the AllianceBernstein Funds
complex. The directors concluded that, overall, they were satisfied with the
nature, extent and quality of services provided to the Portfolio under the
Advisory Agreement.
COSTS OF SERVICES PROVIDED AND PROFITABILITY TO THE ADVISER
The directors reviewed a schedule of the revenues, expenses and related notes
indicating the profitability of the Portfolio to the Adviser for calendar years
2003 and 2004. The directors reviewed the assumptions and methods of allocation
used by the Adviser in preparing fund-specific profitability data, and noted
the Adviser's representation to them that it believed that the methods of
allocation used in preparing the profitability information were reasonable and
appropriate and that the Adviser had previously discussed with the directors
that there is no generally accepted allocation methodology for information of
this type. The directors also noted that the methodology for preparing
fund-by-fund profitability information was being reviewed and that it was
expected that an updated methodology would be implemented later in the year,
and that it would differ in various respects from the methodology used
previously.
The directors recognized that it is difficult to make comparisons of
profitability from fund advisory contracts because comparative information is
not generally publicly available and is affected by numerous factors, including
the structure of the particular adviser, the types of funds it manages, its
business mix, numerous assumptions regarding allocations and the adviser's
capital structure and cost of capital. In considering profitability
information, the directors considered the effect of fall-out benefits on the
Adviser's expenses, as well as the "revenue sharing" arrangements the Adviser
has entered into with certain entities that distribute shares of the Portfolio.
The directors focused on the profitability of the Adviser's relationship with
the Portfolio before taxes and distribution expenses. The directors recognized
that the Adviser should generally be entitled to earn a reasonable level of
profits for the services it provides to the Portfolio and, based on their
review, concluded that they were satisfied that the Adviser's level of
profitability from its relationship with the Portfolio was not excessive.
48 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
FALL-OUT BENEFITS
The directors considered that the Adviser benefits from soft dollar
arrangements whereby it receives brokerage and research services from many of
the brokers and dealers that execute purchases and sales of securities on
behalf of its clients on an agency basis. Since the Portfolio does not normally
engage in brokerage transactions, the Adviser does not receive soft dollar
benefits in respect of portfolio transactions of the Portfolio.
The directors also considered that the Distributor, which is a wholly-owned
subsidiary of the Adviser: receives 12b-1 fees from the Portfolio in respect of
classes of shares of the Portfolio that are subject to the Fund's 12b-1 plan;
retains a portion of the 12b-1 fees from the Portfolio; and receives all or a
portion of the sales charges on sales or redemptions of certain classes of
shares. The directors also noted that certain affiliates of the Adviser
distribute shares of the Portfolio and receive compensation in that connection
and that a subsidiary of the Adviser provides transfer agency services to the
Portfolio and receives compensation from the Portfolio for such services.
The directors recognized that the Adviser's profitability would be somewhat
lower if the Adviser's affiliates did not receive the benefits described above.
The directors also believe that the Adviser derives reputational and other
benefits from its association with the Portfolio.
INVESTMENT RESULTS
In addition to the information reviewed by the directors in connection with the
meeting, the directors receive detailed comparative performance information for
the Portfolio at each regular Board meeting during the year. At the meeting,
the directors reviewed information prepared by the Adviser based on information
obtained from Lipper showing performance for Class A shares of the Portfolio as
compared to other funds in the Lipper General U.S. Government Funds Average for
periods ending March 31, 2005 over the year to date ("YTD"), 1-, 3-, 5- and
10-year and since inception periods (inception December 1985) and for each of
the last ten calendar years and compared to the Lehman Brothers Government
Index. The directors also reviewed information from a report prepared by Lipper
showing performance for Class A shares of the Portfolio as compared to a group
of 10 to 9 funds (depending on the year) in its Lipper category selected by
Lipper (the "Performance Group") and as compared to a universe of 44 to 32
funds (depending on the year) in its Lipper category selected by Lipper (the
"Performance Universe") for periods ended March 31, 2005 over the 1-, 3-, 5-
and 10-year periods. The directors noted that the Lipper category data showed
the Fund's performance for the periods ending March 31, 2005 was consistently
below the Lipper medians for all periods reviewed except the YTD period when
performance was somewhat above the Lipper median, and that the Fund's calendar
year performance was somewhat above the Lipper median in 2004, significantly
above the Lipper medians in 1998 and 2000 and below the Lipper
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 49
medians for all other calendar year periods reviewed. The directors further
noted that in the Fund's Performance Group and Performance Universe
comparisons, the Fund was in the fourth or fifth quintile for all periods
reviewed. Based on their review and their discussion of the reasons for the
Portfolio's underperformance with the Adviser, the directors retained
confidence in the Adviser's ability to continue to advise the Portfolio and
concluded that the Portfolio's performance was understandable. The directors
informed the Adviser that they planned to closely monitor the Fund's
performance.
ADVISORY FEES AND OTHER EXPENSES
The directors considered the advisory fee rate paid by the Portfolio to the
Adviser and information prepared by Lipper concerning fee rates paid by other
funds in the same Lipper category as the Portfolio at a common asset level. The
directors recognized that it is difficult to make comparisons of advisory fees
because there are variations in the services that are included in the fees paid
by other funds.
The directors also considered the total expense ratio of the Class A shares of
the Portfolio in comparison to the fees and expenses of funds within two
comparison groups created by Lipper: an Expense Group and an Expense Universe.
Lipper described an Expense Group as a representative sample of comparable
funds and an Expense Universe as a broader group, consisting of all funds in
the investment classification/objective with a similar load type as the subject
Portfolio. The Class A expense ratio of the Portfolio was based on the
Portfolio's latest fiscal year expense ratio. The directors recognized that the
expense ratio information for the Portfolio potentially reflected on the
Adviser's provision of services, as the Adviser is responsible for coordinating
services provided to the Portfolio by others. The directors noted that it was
likely that the expense ratios of some funds in the Portfolio's Lipper category
also were lowered by waivers or reimbursements by those funds' investment
advisers, which in some cases were voluntary and perhaps temporary.
The directors noted that the Portfolio's at approximate current size
contractual effective fee rate of 45 basis points was significantly lower than
the median for the Expense Group. The directors noted that the latest fiscal
year administrative expense reimbursement by the Fund pursuant to the Advisory
Agreement was one basis point. The directors further noted that the Fund's
total expense ratio was slightly above the medians for both the Expense Group
and the Expense Universe. The directors concluded that the Fund's expense ratio
was acceptable.
ECONOMIES OF SCALE
The directors noted that the advisory fee schedule for the Portfolio contains
breakpoints so that, if assets were to increase over the breakpoint levels, the
fee rates would be reduced on the incremental assets. The directors also
considered a presentation by an independent consultant discussing economies of
scale issues
50 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
in the mutual fund industry. The directors believe that economies of scale are
realized (if at all) by the Adviser across a variety of products and services,
and not only in respect of a single fund. The directors noted that there is no
uniform methodology for establishing breakpoints that give effect to
fund-specific services provided by the Adviser and to the economies of scale
that the Adviser may realize in its overall mutual fund business or those
components of it which directly or indirectly affect the Portfolio's
operations. The directors observed that in the mutual fund industry as a whole,
as well as among funds similar to the Portfolio, there is no uniformity or
pattern in the fees and asset levels at which breakpoints (if any) apply.
Depending on the age and size of a particular fund and its adviser's cost
structure, different conclusions can be drawn as to whether there are economies
of scale to be realized at any particular level of assets, notwithstanding the
intuitive conclusion that such economies exist, or will be realized at some
level of total assets. Moreover, because different advisers have different cost
structures and service models, it is difficult to draw meaningful conclusions
from the comparison of a fund's advisory fee breakpoints with those of
comparable funds. The directors also noted that the advisory agreements for
many funds do not have breakpoints at all. Having taken these factors into
account, the directors concluded that the Portfolio's breakpoint arrangements
would result in a sharing of economies of scale in the event of a very
significant increase in the Portfolio's net assets.
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 51
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 Funds
- --------------------------------------------------
U.S. Large Cap Portfolio
International Portfolio
Tax-Managed International Portfolio
- --------------------------------------------------
Growth Funds
- --------------------------------------------------
Domestic
Growth Fund
Mid-Cap Growth Fund
Large Cap Growth Fund*
Small Cap Growth Portfolio
Global & International
Global Health Care Fund*
Global Research Growth Fund
Global Technology Fund*
Greater China '97 Fund
International Growth Fund*
International Research Growth Fund*
- --------------------------------------------------
Value Funds
- --------------------------------------------------
Domestic
Balanced Shares
Focused Growth & Income Fund*
Growth & Income Fund
Real Estate Investment Fund
Small/Mid-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. You should read the prospectus carefully before you invest.
* Prior to December 15, 2004, these Funds were named as follows: Global Health
Care Fund was Health Care Fund; Large Cap Growth Fund was Premier Growth Fund;
Global Technology Fund was Technology Fund; and Focused Growth & Income Fund
was Disciplined Value Fund. Prior to February 1, 2005, Small/Mid-Cap Value Fund
was named Small Cap Value Fund. Prior to May 16, 2005, International Growth
Fund was named Worldwide Privatization Fund and International Research Growth
Fund was named International Premier Growth Fund. On June 24, 2005, All-Asia
Investment Fund merged into International Research Growth Fund. On July 8,
2005, New Europe Fund merged into International Research Growth Fund.
**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.
52 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
SUMMARY OF SENIOR OFFICER'S EVALUATION OF
INVESTMENT ADVISORY AGREEMENT*
The following is a summary of the evaluation of the investment advisory
agreement between Alliance Capital Management L.P., (the "Adviser") and the
AllianceBernstein Corporate Bond Portfolio, the AllianceBernstein Quality Bond
Portfolio and the AllianceBernstein U.S. Government Portfolio of
AllianceBernstein Bond Fund, Inc. (the "Funds"), prepared by Philip L.
Kirstein, the Senior Officer, for the independent directors of the Funds, as
required by the Assurance of Discontinuance between the New York State Attorney
General and the Adviser. The Senior Officer's evaluation of the investment
advisory agreement is not meant to diminish the responsibility or authority of
the Boards of Directors to perform their duties pursuant to Section 15 of the
Investment Company Act of 1940 (the "40 Act") and applicable state law. The
purpose of the summary is to provide shareholders with a synopsis of the
independent evaluation of the reasonableness of the advisory fees which was
provided to the independent directors in connection with their review of the
proposed continuance of the investment advisory agreement. The Senior Officer's
evaluation considered the following factors:
1. Management fees charged to institutional and other clients of the Adviser
for like services.
2. Management fees charged by other mutual fund companies for like services.
3. Costs to the Adviser and its affiliates of supplying services pursuant to
the advisory agreement, excluding any intra-corporate profit.
4. Profit margins of the Adviser and its affiliates from providing such
services.
5. Possible economies of scale as the Funds grow larger.
6. Nature and quality of the Adviser's services, including the performance of
the Funds.
* It should be noted that the information in the fee summary was completed on
June 8, 2005 and presented to the Board of Directors and Trustees on June 15,
2005 in accordance with the Assurance of Discontinuance with the New York State
Attorney General. It also should be noted that references in the fee summary
pertaining to performance and expense ratios refer to Class A shares of the
Fund.
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 53
FUND ADVISORY FEES, EXPENSE REIMBURSEMENTS, CAPS & RATIOS
The table below describes the Funds' advisory fees pursuant to the Investment
Advisory Agreement. This is the fee schedule the Adviser implemented in January
2004 as a result of the settlement with the New York State Attorney General.
Advisory Fee Based on % of
Fund Average Daily Net Assets
- --------------------------------------------------------------------------------------------
AllianceBernstein Corporate Bond Portfolio Monthly fee of
First $2.5 billion 1/12 of .50%
Next $2.5 billion 1/12 of .45%
Excess of $5 billion 1/12 of .40%
AllianceBernstein Quality Bond Portfolio Monthly fee of
First $2.5 billion 1/12 of .45%
Next $2.5 billion 1/12 of .40%
Excess of $5 billion 1/12 of .35%
AllianceBernstein U.S. Government Portfolio Quarterly fee of
First $2.5 billion .1125%
Next $2.5 billion .10%
Excess over $5 billion .0875%
The Adviser is reimbursed as specified in the Investment Advisory Agreement for
certain clerical, legal, accounting, administrative and other services provided
to the Funds as indicated below:
Latest
Fiscal Year As % of Average
Fund Amount Daily Net Assets
- -------------------------------------------------------------------------------
AllianceBernstein Corporate Bond Portfolio $98,000.00 .01
AllianceBernstein Quality Bond Portfolio * 0 .0
AllianceBernstein U.S. Government Portfolio $97,728.00 .01
The Adviser has agreed to waive that portion of its management fees and/or
reimburse the Quality Bond Portfolio for that portion of its total operating
expenses to the degree necessary to limit the Fund's expense ratios to the
levels set forth below for that Fund's current fiscal year. That waiver
agreement is terminable by the Adviser at the end of the Fund's fiscal year
upon at least 60 days written notice. Pro-forma expense ratio information for
each Fund is also set forth below.
* For the most recently completed fiscal year, with respect to the Quality Bond
Portfolio, the Adviser waived $89,000 (or .02% of average daily net assets).
54 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
Expense Cap
pursuant to
Expense
Limitation Pro-Forma Fiscal
Fund Undertaking Expense Ratio* Year End
- -------------------------------------------------------------------------------
AllianceBernstein Quality Advisor-0.68% .79% October 31,
Bond Portfolio Class A-0.98% 1.10% 2004
Class B-1.68% 1.83%
Class C-1.68% 1.82%
Class R-1.18% 1.30%
Pro-Forma Fiscal
Fund Expense Ratio* Year End
- -------------------------------------------------------------------------------
AllianceBernstein Corporate Bond Portfolio Advisor-0.73% September
Class A-1.00% 30, 2004
Class B-1.72%
Class C-1.71%
Class R-1.21%
AllianceBernstein U.S. Government Portfolio Advisor-0.71% September
Class A-1.01% 30, 2004
Class B-1.74%
Class C-1.73%
Class R-1.27%
I. MANAGEMENT FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS OF THE ADVISER
The management fees charged to investment companies which the Adviser manages
and sponsors may be higher than those charged to institutional accounts,
including pension plans and sub-advised investment companies. The fee
differential reflects, among other things, different services provided to such
clients, and different liabilities assumed. Services provided by the Adviser to
the Funds that are not provided to non-investment company clients include
providing office space and personnel to serve as Fund Officers and coordinating
with and monitoring the Funds' third party service providers such as Fund
counsel, auditors, custodians, transfer agents and pricing services. The
accounting, administrative and legal/compliance requirements for the Funds are
more costly than those for institutional assets due to the greater complexities
and time required for investment companies. A portion of the expenses related
to these services are reimbursed by the Funds to the Adviser. Managing the cash
flow of an investment company may be more difficult than for other accounts,
particularly if a Fund is in net redemptions, as the Adviser is forced to sell
securities to meet redemptions.
Notwithstanding the Adviser's view that managing an investment company is not
comparable to managing other institutional accounts because the services
provided are different, the Senior Officer believes it is worth noting the
information
* This pro-forma expense ratio information shows what would have been each
Fund's expense ratio in the indicated fiscal year had the current fee been in
effect throughout the fiscal year.
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 55
from the Adviser's ADV regarding the advisory fees charged to institutional
accounts in the same asset class as the Quality Bond Portfolio. The Adviser
represented that there is no category set forth in its Form ADV for
institutional products which have a substantially similar investment style as
the Corporate Bond Portfolio or the U.S. Government Portfolio.
Total Net Assets
03/31/05 Alliance Institutional
Fund ($MIL) Fee Schedule
- ------------------------------------------------------------------------------------
AllianceBernstein Quality Bond Portfolio 571 U.S. Core High-Grade
Fixed Income
40 bp on 1st $20 m
25 bp on next $80 m
20 bp on next $100 m
15 bp on the balance
Minimum account size $20 m
The Adviser also manages and sponsors retail fixed income mutual funds which
are organized in jurisdictions outside the United States, generally Luxembourg,
and sold to non-United States investors. The Adviser charges the following fee
for offshore mutual funds with similar investment styles as the Funds:
Asset Class Fee
- -------------------------------------------------------------------------------
Fixed Income .65%
The Adviser represented that it does not sub-advise any registered investment
companies with similar investment styles as the Funds.
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES.
Lipper, Inc., an analytical service that is not affiliated with the Adviser,
compared the fees charged to the Funds with fees charged to other investment
companies for similar services by other investment advisers. Lipper's analysis
included the Funds' ranking with respect to the proposed advisory fees relative
to the Lipper group median at the approximate current asset levels for the
Funds.*
Lipper Group
Fund Fee Median Rank
- -------------------------------------------------------------------------------
AllianceBernstein Corporate
Bond Portfolio 0.500 0.488 6/9
AllianceBernstein Quality
Bond Portfolio 0.450 0.616 1/12
AllianceBernstein U.S.
Government Portfolio 0.450 0.544 2/10
* A ranking of "1" means that the AllianceBernstein Fund has the lowest
effective fee rate in the Lipper peer group.
56 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
Lipper also analyzed the expense ratios of each Fund in comparison to its
Lipper Expense Group* and Lipper Expense Universe**. Lipper describes a Lipper
Expense Group as a representative sample of comparable funds and a Lipper
Universe as a broader group, consisting of all funds in the investment
classification/objective with a similar load type as the subject Fund. The
results of that analysis are set forth below:
Lipper Lipper Lipper
Expense Universe Universe Lipper Group
Fund Ratio Median Rank Group Rank Median
- ----------------------------------------------------------------------------------------
AllianceBernstein Corporate
Bond Portfolio 1.078 1.026 14/25 6/9 .984
AllianceBernstein Quality
Bond Portfolio 0.979 0.955 39/67 2/12 1.066
AllianceBernstein U.S.
Government Portfolio 1.046 0.985 24/38 8/10 .996
Based on this analysis, the Funds have a more favorable ranking on an advisory
fee basis than they do on a total expense ratio basis. This has resulted in a
variety of efforts by the Adviser to lower non-management expenses.
III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO
THE ADVISORY AGREEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.
The profitability information for the Funds prepared by the Adviser for the
Board of the Directors was reviewed by the Senior Officer. An independent
consultant is working with the Adviser's personnel on a new system to produce
profitability information at the Fund level which will reflect the Adviser's
management reporting approach. It is possible that future Fund profitability
information may differ from previously reviewed information due to changes in
methodologies and allocations.
See Section IV for additional discussion.
IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH
SERVICES.
With the exception of the Quality Bond Portfolio, the pre-tax profitability
margin of the Adviser decreased during calendar year 2004 relative to 2003
primarily as a result of the reduction in the advisory fee schedule implemented
early
* Lipper uses the following criteria in screening funds to be included in each
Fund's expense group: fund type, investment classification/objective, load type
and similar 12b-1/non-12b-1 service fees, asset (size) comparability, and
expense components and attributes. An expense group will typically consist of
seven to twenty funds.
** Except for asset (size) comparability, Lipper uses the same criteria for
selecting an expense group when selecting an expense universe. Unlike an
expense group, an expense universe allows for the same advisor to be
represented by more than just one fund.
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 57
in 2004. For the Quality Bond Portfolio, it appears that the Adviser's profit
margin increased in 2004, as a result of the reduction in fee waivers and
expense reimbursements.
In addition to the Adviser's direct profits from managing the Funds pursuant to
the investment advisory agreement, certain of the Adviser's affiliates have
business relationships with the Funds and may earn a profit from providing
other services to the Funds. These affiliates provide transfer agency and
distribution related services and receive transfer agent fees, Rule 12b-1
payments, front-end sales loads, contingent deferred sales charges ("CDSC") and
commissions for providing brokerage services. In addition, the Adviser benefits
from soft dollar arrangements which offset expenses the Adviser would otherwise
incur. Additional information regarding distribution related fees can be found
in the prospectus of the Funds.
Different classes of shares are charged different types of distribution fees.
The Adviser's affiliate, AllianceBernstein Investment Research and Management
Inc. ("ABIRM"), is the Funds' principal underwriter. ABIRM and the Adviser may
make payments* from their own resources, in addition to sales loads and Rule
12b-1 fees, to firms that sell shares of the Funds. In 2004, ABIRM paid from
its own resources approximately .04% of the average monthly assets of the Funds
for distribution services and educational support. For 2005, it is anticipated
that ABIRM will pay approximately .04% of average monthly assets of each Fund
for such purposes.
After payments to third party intermediaries, ABIRM retained the following
amounts in Class A front-end load sales charges from sales of each Fund's
shares in the Funds' most recent fiscal year:
Fund Amount Received
- -------------------------------------------------------------------------------
AllianceBernstein Corporate Bond Portfolio $21,917
AllianceBernstein Quality Bond Portfolio $4,297
AllianceBernstein U.S. Government Portfolio $11,758
*The total amount paid to the financial intermediary in connection with the
sale of shares will generally not exceed the sum of (a) .25% of the current
year's Fund sales by that firm and (b) .10% of the average daily net assets
attributable to that firm over the year.
58 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
ABIRM received the amounts set forth below in Rule 12b-1 fees and CDSC for each
Fund during the Funds' most recent fiscal year. A significant percentage of
such amounts were paid out to third party intermediaries by ABIRM.
12b-1Fee
Fund Received* CDSC Received
- -------------------------------------------------------------------------------
AllianceBernstein Corporate Bond Portfolio $6,124,397 $54,108
AllianceBernstein Quality Bond Portfolio $1,177,056 $178,196
AllianceBernstein U.S. Government Portfolio $6,317,922 $685,181
Fees and reimbursements for out of pocket expenses charged by Alliance Global
Investor Services, Inc. ("AGIS"), the affiliated transfer agent, are based on
the level of the network account and the class of share held by the account.
AGIS also receives a fee per shareholder sub-account for each account
maintained by an intermediary on an omnibus basis. AGIS' after-tax
profitability decreased in 2004 in comparison to 2003.
AGIS received the following fees from the Funds in the most recent fiscal year:
Fund AGIS Fee
- -------------------------------------------------------------------------------
AllianceBernstein Corporate Bond Portfolio $1,082,000
AllianceBernstein Quality Bond Portfolio $1,083,000
AllianceBernstein U.S. Government Portfolio $2,010,000
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that the breakpoints in the fee schedules for the
Funds reflect a sharing of economies of scale to the extent they exist. Based
on some of the professional literature that has considered economies of scale
in the mutual fund industry it is thought that to the extent economies of scale
exist, they may more often exist across a fund family as opposed to a specific
fund. This is because the costs incurred by the Adviser, such as investment
research or technology for trading or compliance systems can be spread across a
greater asset base as the fund family increases in size. It is also possible
that as the level of services required to operate a successful investment
company has increased over time, and advisory firms have made such investments
in their business to provide improved services, there may be a sharing of
economies of scale without a reduction in advisory fees.
An independent consultant made a presentation to the Board of Directors and the
Senior Officer regarding possible economies of scale or scope in the mutual
fund industry. Based on the presentation, it was evident that fund management
* 12b-1 amounts are gross amounts paid to ABIRM.
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 59
companies benefit from economies of scale. However, due to the lack of cost
data which forced the researchers to infer facts about the costs from the
behavior of fund expenses, there was a lack of consensus among researchers as
to whether economies of scale were being passed on to the shareholders. It is
contemplated that additional work will be performed to determine if the
benefits of economies of scale or scope are being passed to shareholders by the
Adviser. In the meantime, it is clear that to the extent a Fund's assets exceed
the initial breakpoint its shareholders benefit from a lower fee rate.
VI. NATURE AND QUALITY OF THE ADVISER'S SERVICES INCLUDING PERFORMANCE OF THE
FUND.
With assets under management of $534.4 billion as of March 31, 2005, the
Adviser has the investment experience and resources necessary to effectively
manage the Funds and provide non-investment services (described in Section II)
to the Funds.
The information prepared by Lipper showed the 1, 3, 5 and 10 year performance
ranking of the Funds relative to its Lipper universe:
Performance Year
Rank in Performance Universe for Periods
Ended March 31, 2005
- -------------------------------------------------------------------------------
Fund 1 3 5 10
- -------------------------------------------------------------------------------
AllianceBernstein Corporate Bond
Portfolio 3/35 6/27 10/21 1/10
AllianceBernstein Quality Bond
Portfolio 58/80 48/66 30/47 N/A
AllianceBernstein U.S. Government
Portfolio 32/44 35/41 32/38 31/32
CONCLUSION:
Based on the factors discussed above the Senior Officer's conclusion is that
the proposed fee for each of the Funds is reasonable and within the range of
what would have been negotiated at arms-length in light of all the surrounding
circumstances. This conclusion in respect of each Fund is based on an
evaluation of all of these factors and no single factor was dispositive.
Dated: July 22, 2005
60 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
[LOGO] ALLIANCEBERNSTEIN (R)
Investment Research and Management
USGAR0905
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 12(a)(1).
(b) During the period covered by this report, no material 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.
(a) - (c) The following table sets forth the aggregate fees billed by the
independent registered public accounting firm Ernst & Young LLP, for the Fund's
last two fiscal years for professional services rendered for: (i) the audit of
the Fund's annual financial statements included in the Fund's annual report to
stockholders; (ii) assurance and related services that are reasonably related
to the performance of the audit of the Fund's financial statements and are not
reported under (i), which include advice and education related to accounting
and auditing issues, quarterly press release review (for those Funds that issue
press releases), and preferred stock maintenance testing (for those Funds that
issue preferred stock); and (iii) tax compliance, tax advice and tax return
preparation.
Audit-Related
Audit Fees Fees Tax Fees
---------- ------------- --------
AllianceBernstein U.S.
Government Portfolio 2004 $50,000 $5,250 $22,871
2005 $52,000 $4,117 $13,031
AllianceBernstein Corporate
Bond Portfolio 2004 $47,000 $5,145 $25,064
2005 $49,000 $4,012 $19,247
(d) Not applicable.
(e) (1) Beginning with audit and non-audit service contracts entered into on or
after May 6, 2003, the Fund's Audit Committee policies and procedures require
the pre-approval of all audit and non-audit services provided to the Fund by
the Fund's independent auditors. The Fund's Audit Committee policies and
procedures also require pre-approval of all audit and non-audit services
provided to the Adviser and Service Affiliates to the extent that these
services are directly related to the operations or financial reporting of the
Fund.
(e) (2) All of the amounts for Audit Fees, Audit-Related Fees and Tax Fees in
the table under Item 4 (a) - (c) are for services pre-approved by the Fund's
Audit Committee.
(f) Not applicable.
(g) The following table sets forth the aggregate non-audit services provided to
the Fund, the Fund's Adviser and entities that control, are controlled by or
under common control with the Adviser that provide ongoing services to the
Fund, which include conducting an annual internal control report pursuant to
Statement on Auditing Standards No. 70 ("Service Affiliates"):
Total Amount of
Foregoing Column
Pre-approved by the
All Fees for Audit Committee
Non-Audit Services (Portion Comprised of
Provided to the Audit Related Fees)
Portfolio, the Adviser (Portion Comprised of
and Service Affiliates Tax Fees)
---------------------- ---------------------
AllianceBernstein U.S.
Government Portfolio 2004 $1,229,853 [ $278,121 ]
( $255,250 )
( $ 22,871 )
2005 $892,044 [ $184,851 ]
( $171,820 )
( $ 13,031 )
AllianceBernstein
Corporate Bond
Portfolio 2004 $1,231,941 [ $280,209 ]
( $255,145 )
( $ 25,064 )
2005 $ 898,155 [ $190,962 ]
( $171,715 )
( $ 19,247 )
(h) The Audit Committee of the Fund has considered whether the provision of any
non-audit services not pre-approved by the Audit Committee provided by the
Fund's independent auditor to the Adviser and Service Affiliates is compatible
with maintaining the auditor's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to the registrant.
ITEM 6. SCHEDULE OF INVESTMENTS.
Please see Schedule of Investments contained in the Report to Shareholders
included under Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the registrant.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the registrant.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable to the registrant.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the Fund's Board of Directors since the Fund last
provided disclosure in response to this item.
ITEM 11. 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 changes in the registrant's internal controls over financial
reporting that occurred during the second fiscal quarter of the period that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
The following exhibits are attached to this Form N-CSR:
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
12 (a) (1) Code of Ethics that is subject to the disclosure of
Item 2 hereof
12 (b) (1) Certification of Principal Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
12 (b) (2) Certification of Principal Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
12 (c) Certification of Principal Executive Officer and Principal
Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant): AllianceBernstein Bond Fund, Inc.
By: /s/ Marc O. Mayer
-------------------
Marc O. Mayer
President
Date: November 29, 2005
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 29, 2005
By: /s/ Mark D. Gersten
-------------------
Mark D. Gersten
Treasurer and Chief Financial Officer
Date: November 29, 2005