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: October 31, 2005
Date of reporting period: October 31, 2005
ITEM 1. REPORTS TO STOCKHOLDERS.
[LOGO] ALLIANCEBERNSTEIN(R)
Investment Research and Management
ANNUAL REPORT
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AllianceBernstein Bond Fund
Quality Bond Portfolio
----------------------------
Annual Report
October 31, 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.
December 19, 2005
Annual Report
This report provides management's discussion of fund performance for
AllianceBernstein Bond Fund Quality Bond Portfolio (the "Portfolio") for the
annual reporting period ended October 31, 2005.
Investment Objective and Policies
This open-end Portfolio seeks high current income consistent with preservation
of capital by investing in investment-grade fixed income securities. Under
normal circumstances, at least 80% of the Portfolio's net assets will be
invested in bonds and other debt securities. The Portfolio invests in readily
marketable securities that do not involve undue risk of capital.
Investment Results
The table on page 4 shows the Portfolio's performance compared to its benchmark,
the Lehman Brothers (LB) U.S. Aggregate Index, which is a standard measure of
the performance of a basket of unmanaged debt securities, for the six- and
12-month periods ended October 31, 2005.
The Fund's Class A Shares underperformed the benchmark, the LB U.S. Aggregate
Index, for the 12-month period and outperformed for the six-month period ended
October 31, 2005. The Fund's shorter-than-benchmark duration, with an
underweight focused on the two- to five-year area of the yield curve,
contributed positively to performance for both the six- and 12-month periods;
corporate security selection detracted modestly, as did an underweight in agency
debt. U.S. interest rates, particularly in the short and intermediate area of
the yield curve, rose as the Federal Reserve tightened monetary policy at a
measured pace.
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. The U.S.
Treasury market, as measured by the Lehman Brothers Treasury Index, posted a
modest return of 0.88% for the reporting period, held back by the headwinds of
continued rate increases by the Federal Reserve. Since June 2004, the Federal
Reserve has raised the 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 1.68%, according to the Lehman Brothers 1-10 Year
TIPS Index. Non-U.S. dollar government bonds also outperformed as global bond
yields remained stable or actually declined. Hedged global bonds ex-U.S.
returned 5.63%, according to the Lehman Brothers Global ex-U.S. Treasury Index,
significantly outperforming their U.S. counterparts.
Corporate securities returned a meager 0.41% for the annual period, according to
Lehman Brothers. From March through May 2005, spreads widened dramatically as
investors re-
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ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO o 1
duced risk in response to the uncertainty surrounding the downgrade of General
Motors (GM) and Ford Motor Company to "junk". From May through September 2005,
spreads recovered half of the ground lost from the GM/Ford dislocation as
investors once again focused on the healthy fundamental background. Technicals
turned more balanced at the end of the period as investors, concerned by the
recent GM/Ford events, took a more sober view of valuations. Throughout the
12-month period ended October 31, 2005, leveraged buyout activity, both real and
rumored, threatened individual credits, causing spreads on those issues to
widen.
Asset backed securities and collateralized mortgage backed securities (CMBS)
also posted modest returns of 1.08% and 0.34%, respectively. Mortgage
pass-through securities returned a healthy 1.75%, benefiting from relatively low
volatility and strong foreign demand.
During the reporting period, the Fund remained positioned for U.S. interest
rates to rise. Accordingly, the Fund's overall duration was kept shorter than
that of its benchmark. The Fund 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 Fund was invested in hedged non-U.S. government bonds and TIPS.
The Fund's underweight positions in U.S. Treasuries and agencies were maintained
while moderate overweight positions in CMBS were held. Lastly, exposure to
investment-grade credit was reduced to a modest underweight during the period.
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2 o ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO
Historical Performance
- --------------------------------------------------------------------------------
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. During the
reporting period, the Adviser waived a portion of its advisory fee or reimbursed
the Portfolio for a portion of its expenses to the extent necessary to limit
AllianceBernstein Bond Fund Quality Bond Portfolio expenses on an annual basis
to 0.98%, 1.68%, 1.68%, 0.68%, 1.18%, 0.93% and 0.68% of the average daily net
assets of Class A, Class, B, Class C, Advisor Class, Class R, Class K and Class
I shares, respectively. These waivers extend through the Portfolio's current
fiscal year and may be extended by the Adviser for additional one-year terms.
Without the waivers, the Portfolio's expenses would have been higher and its
performance would have been lower than that shown.
Benchmark Disclosure
The unmanaged Lehman Brothers (LB) U.S. Aggregate Index does not reflect fees
and expenses associated with the active management of a mutual fund portfolio.
The Index covers the U.S. investment-grade fixed-rate bond market, including
government and credit securities, agency mortgage pass-through securities,
asset-backed securities and commercial mortgage-backed securities. An investor
cannot invest directly in an index, and its results are not indicative of the
performance for any specific investment, including the Portfolio.
A Word About Risk
The Portfolio normally invests all of its assets in securities that are rated at
least BBB by Standard & Poor's (or Baa2 by Moody's Investors Service) or, if
unrated, are of comparable quality. The Portfolio may invest in convertible debt
securities, preferred stock and dividend-paying stocks, U.S. government
obligations, and foreign fixed-income securities. The Portfolio may invest a
portion of its assets in foreign securities, which may magnify fluctuations.
Price fluctuations may also be caused by changes in interest rates or bond
credit quality ratings. These changes have a greater effect on bonds with longer
maturities than on those with shorter maturities. Please note, as interest rates
rise, existing bond prices fall and can cause the value of your investment in
the Fund to decline. While the Portfolio invests principally in bonds and other
fixed-income securities, 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 prospectus.
(Historical Performance continued on next page)
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ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO o 3
Historical Performance
- --------------------------------------------------------------------------------
HISTORICAL PERFORMANCE
(continued from previous page)
---------------------
Returns
THE PORTFOLIO VS. ITS BENCHMARK ---------------------
PERIODS ENDED OCTOBER 31, 2005 6 Months 12 Months
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AllianceBernstein Bond Fund Quality Bond Portfolio
Class A 0.20% 0.90%
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Class B -0.05% 0.30%
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Class C -0.15% 0.30%
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Advisor Class 0.35% 1.20%
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Class R 0.11% 0.81%
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Class K** 0.23% 0.82%*
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Class I** 0.34% 0.97%*
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Lehman Brothers U.S. Aggregate Index 0.15% 1.13%
- --------------------------------------------------------------------------------
* 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 institutionalt 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
7/1/99* TO 10/31/05
AllianceBernstein
Bond Fund
Quality Bond Portfolio Lehman Brothers U.S.
Class A Aggregate Index
7/1/99* $ 9,575 $ 10,000
10/31/1999 9,682 10,122
10/31/2000 10,325 10,861
10/31/2001 11,723 12,442
10/31/2002 12,136 13,175
10/31/2003 12,687 13,821
10/31/2004 13,278 14,585
10/31/2005 13,397 14,750
* Since inception of the Portfolio's Class A shares on 7/1/99.
This chart illustrates the total value of an assumed $10,000 investment in
AllianceBernstein Bond Fund Quality Bond Portfolio Class A shares (from 7/1/99*
to 10/31/05) as compared to the performance of the Fund's benchmark, the Lehman
Brothers U.S. Aggregate Index. 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)
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4 o ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO
Historical Performance
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HISTORICAL PERFORMANCE
(continued from previous page)
AVERAGE ANNUAL RETURNS AS OF OCTOBER 31, 2005
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NAV Returns SEC Returns
Class A Shares
1 Year 0.90% -3.36%
5 Years 5.35% 4.44%
Since Inception* 5.45% 4.73%
SEC Yield** 3.70%
Class B Shares
1 Year 0.30% -2.62%
5 Years 4.65% 4.65%
Since Inception* 4.75% 4.75%
SEC Yield ** 3.18%
Class C Shares
1 Year 0.30% -0.67%
5 Years 4.63% 4.63%
Since Inception* 4.70% 4.70%
SEC Yield** 3.18%
Advisor Class Shares
1 Year 1.20%
5 Years 5.66%
Since Inception* 5.69%
SEC Yield ** 4.18%
Class R Shares+
1 Year 0.81%
Since Inception* 2.71%
SEC Yield** 3.67%
Class K Shares+
Since Inception* 0.82%
SEC Yield** 3.92%
Class I Shares+
Since Inception* 0.97%
SEC Yield** 4.17%
SEC AVERAGE ANNUAL RETURNS (WITH SALES CHARGES)
AS OF THE MOST RECENT CALENDAR QUARTER-END (SEPTEMBER 30, 2005)
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Class A Shares
1 Year -1.80%
5 Years 4.72%
Since Inception* 4.94%
Class B Shares
1 Year -1.12%
5 Years 4.91%
Since Inception* 4.96%
Class C Shares
1 Year 0.96%
5 Years 4.91%
Since Inception* 4.91%
* Inception dates: 7/1/99 for Class A, Class B and Class C shares; 10/10/00
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 October 31, 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.
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ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO o 5
Fund Expenses
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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
May 1, 2005 October 31,2005 During Period*
--------------------- ----------------------- ----------------------
Actual Hypothetical Actual Hypothetical** Actual Hypothetical
------ ------------ --------- -------------- ------ -------------
Class A $1,000 $ 1,000 $1,002.00 $ 1,020.27 $ 4.95 $ 4.99
- --------------------------------------------------------------------------------
Class B $1,000 $ 1,000 $ 999.47 $ 1,016.74 $ 8.47 $ 8.54
- --------------------------------------------------------------------------------
Class C $1,000 $ 1,000 $ 998.48 $ 1,016.74 $ 8.46 $ 8.54
- --------------------------------------------------------------------------------
Advisor
Class $1,000 $ 1,000 $1,003.52 $ 1,021.78 $ 3.43 $ 3.47
- --------------------------------------------------------------------------------
Class R $1,000 $ 1,000 $1,001.07 $ 1,019.26 $ 5.95 $ 6.01
- --------------------------------------------------------------------------------
Class K $1,000 $ 1,000 $1,002.34 $ 1,020.52 $ 4.69 $ 4.74
- --------------------------------------------------------------------------------
Class I $1,000 $ 1,000 $1,003.38 $ 1,021.98 $ 3.23 $ 3.26
- --------------------------------------------------------------------------------
* Expenses are equal to the classes' annualized expense ratios of 0.98%,
1.68%, 1.68%, 0.68%, 1.18%, 0.93% and 0.64%, 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.
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6 o ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO
Portfolio Summary
- --------------------------------------------------------------------------------
PORTFOLIO SUMMARY
October 31, 2005
PORTFOLIO STATISTICS
Net Assets ($mil): $142.7
SECURITY TYPE BREAKDOWN*
[THE FOLLOWING TABLE WAS DEPICTED AS A PIE CHART IN THE PRINTED MATERIAL.]
45.4% U.S. Government & Government Sponsored Agency Obligations
22.0% Corporate Debt Obligations
7.0% Commercial Mortgage Backed Securities
3.7% Asset Backed Securities
1.3% Sovereign Debt Obligations
0.8% Collateralized Mortgage Obligations
19.8% Short-Term
o All data are as of October 31, 2005. The Portfolio's security type
breakdown is expressed as a percentage of total investments (excluding
security lending collateral) and may vary over time.
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ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO o 7
Portfolio of Investments
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PORTFOLIO OF INVESTMENTS
October 31, 2005
Principal
Amount
(000) U.S. $ Value
- -----------------------------------------------------------------------------
U.S. GOVERNMENT & GOVERNMENT
SPONSORED AGENCY
OBLIGATIONS - 53.7%
Federal National Mortgage
Association - 33.2%
3.875%, 11/17/08(a)...................... $ 1,367 $ 1,333,645
4.50%, TBA............................... 4,475 4,326,766
5.00%, TBA............................... 4,525 4,462,781
5.50%, 12/01/16-2/01/35(a)............... 15,710 15,618,682
5.50%, TBA............................... 8,720 8,600,100
6.00%, 2/01/17-9/01/35(a)................ 7,382 7,463,427
6.50%, TBA............................... 5,490 5,634,113
--------------
47,439,514
--------------
U.S. Treasury Notes - 13.3%
1.625%, 1/15/15(a)....................... 2,124 2,060,019
2.00%, 7/15/14(a)*....................... 3,332 3,340,267
3.875%, 7/31/07-9/15/10(a)............... 3,605 3,571,698
4.25%, 10/31/07-8/15/15(a)............... 10,100 9,999,950
--------------
18,971,934
--------------
U.S. Treasury Bond - 3.9%
5.375%, 2/15/31(a)*...................... 5,064 5,522,925
--------------
Federal Home Loan Mortgage Corp. - 3.3%
4.50%, 9/01/35(a)........................ 816 761,360
4.50%, TBA............................... 2,260 2,108,862
6.00%, 6/01/20-3/01/35(a)................ 1,854 1,874,921
--------------
4,745,143
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Total U.S. Government & Government
Sponsored Agency Obligations
(cost $77,683,063)....................... 76,679,516
--------------
CORPORATE DEBT OBLIGATIONS - 26.0%
Aerospace & Defense - 0.3%
Raytheon Co.
6.75%, 8/15/07(a)........................ 211 217,114
Textron, Inc.
6.375%, 11/15/08(a)...................... 160 166,455
--------------
383,569
--------------
Automotive - 0.4%
Daimlerchrysler North America Holdings Corp.
4.875%, 6/15/10(a)....................... 137 132,837
Ford Motor Credit Co.
7.375%, 2/01/11(a)....................... 416 390,706
--------------
523,543
--------------
Banking - 2.9%
Bank of America Corp.
4.50%, 8/01/10(a)........................ 649 634,924
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8 o ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO
Portfolio of Investments
- --------------------------------------------------------------------------------
Principal
Amount
(000) U.S. $ Value
- -----------------------------------------------------------------------------
Barclays Bank Plc pfd. (United Kingdom)
8.55%, 9/29/49(a)(b)..................... $ 339 $ 391,939
J.P. Morgan Chase & Co.
6.75%, 2/01/11(a)........................ 465 497,222
Mizuho Financial Group (Cayman Islands)
8.375%, 12/29/49(a)...................... 376 402,320
RBS Capital Trust III pfd.
5.512%, 9/29/49(a)....................... 358 351,884
Sumitomo Mitsui Banking Corp. (Japan)
5.625%, 7/29/49(a)(b).................... 107 104,656
Suntrust Bank
3.99%, 6/02/09(a)........................ 209 209,308
The Huntington National Bank
4.375%, 1/15/10(a)....................... 183 178,366
UFJ Bank, Ltd.
7.40%, 6/15/11(a)........................ 100 109,529
UFJ Finance Aruba AEC (Aruba)
6.75%, 7/15/13(a)........................ 372 402,572
Washington Mutual, Inc.
4.00%, 1/15/09(a)........................ 400 386,706
Wells Fargo & Co.
4.20%, 1/15/10(a)........................ 457 444,314
--------------
4,113,740
--------------
Broadcasting/Media - 1.1%
British Sky Broadcasting Finance plc
(United Kingdom)
5.625%, 10/15/15(a)(b)................... 270 265,876
British Sky Broadcasting Group plc
(United Kingdom)
6.875%, 2/23/09(a)....................... 86 90,322
News America, Inc.
6.55%, 3/15/33(a)........................ 337 337,550
Time Warner Entertainment Co. LP
8.375%, 3/15/23(a)....................... 405 476,040
Time Warner, Inc.
6.875%, 5/01/12(a)....................... 200 214,072
WPP Finance Corp. (United Kingdom)
5.875%, 6/15/14(a)....................... 149 152,168
--------------
1,536,028
--------------
Building/Real Estate - 0.3%
EOP Operating L.P.
6.763%, 6/15/07(a)....................... 124 127,132
iStar Financial, Inc.
5.15%, 3/01/12(a)........................ 146 139,951
Simon Property Group L.P.
6.375%, 11/15/07(a)...................... 185 189,603
--------------
456,686
--------------
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ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO o 9
Portfolio of Investments
- --------------------------------------------------------------------------------
Principal
Amount
(000) U.S. $ Value
- -----------------------------------------------------------------------------
Cable - 0.9%
AT&T Broadband Corp.
9.455%, 11/15/22(a)...................... $ 229 $ 297,373
Comcast Cable Communication, Inc.
6.875%, 6/15/09(a)....................... 287 301,996
Comcast Corp.
5.30%, 1/15/14(a)........................ 242 235,260
5.50%, 3/15/11(a)........................ 313 313,309
Cox Communications, Inc.
4.625%, 6/01/13(a)....................... 153 142,065
--------------
1,290,003
--------------
Chemicals - 0.2%
ProLogis
7.05%, 7/15/06(a)........................ 130 131,563
The Lubrizol Corp.
4.625%, 10/01/09(a)...................... 150 146,201
--------------
277,764
--------------
Communications - 1.5%
British Telecommunications Plc
(United Kingdom)
8.375%, 12/15/10(a)...................... 524 597,428
Deutsche Telekom International Finance BV
(Netherlands)
8.50%, 6/15/10(a)........................ 190 212,027
Sprint Capital Corp.
8.375%, 3/15/12(a)....................... 626 722,273
Telecom Italia Capital (Italy)
4.00%, 1/15/10(a)........................ 575 546,585
--------------
2,078,313
--------------
Communications - Mobile - 1.3%
AT&T Wireless Services, Inc.
8.75%, 3/01/31(a)........................ 271 353,398
Cingular Wireless LLC
5.625%, 12/15/06(a)...................... 316 318,831
New Cingular Wireless Services, Inc.
7.35%, 3/01/06(a)........................ 190 191,648
7.875%, 3/01/11(a)....................... 575 643,815
Telus Corp. (Canada)
7.50%, 6/01/07(a)........................ 316 328,136
--------------
1,835,828
--------------
Conglomerate/Miscellaneous - 0.2%
Hutchison Whampoa International, Ltd.
(Cayman Islands)
7.45%, 11/24/33(a)(b).................... 316 350,750
--------------
Consumer Manufacturing - 0.2%
Fortune Brands, Inc.
2.875%, 12/01/06(a)...................... 133 129,971
Textron Financial Corp.
4.125%, 3/03/08(a)....................... 240 235,896
--------------
365,867
--------------
- --------------------------------------------------------------------------------
10 o ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO
Portfolio of Investments
- --------------------------------------------------------------------------------
Principal
Amount
(000) U.S. $ Value
- -----------------------------------------------------------------------------
Energy - 1.1%
Amerada Hess Corp.
6.65%, 8/15/11(a)........................ $ 365 $ 388,456
7.875%, 10/01/29(a)...................... 222 263,955
Conoco, Inc.
6.95%, 4/15/29(a)........................ 223 264,318
Duke Energy Field Services Corp.
7.875%, 8/16/10(a)....................... 94 103,907
Enterprise Products Operating L.P.
5.60%, 10/15/14(a)....................... 157 154,076
Valero Energy Corp.
6.875%, 4/15/12(a)....................... 292 316,595
7.50%, 4/15/32(a)........................ 115 135,661
--------------
1,626,968
--------------
Financial - 7.3%
American General Finance Corp.
4.625%, 5/15/09(a)....................... 530 521,989
Berkshire Hathaway Finance Corp.
4.20%, 12/15/10(a)....................... 294 283,903
Boeing Capital Corp.
4.75%, 8/25/08(a)........................ 95 94,666
CIT Group, Inc.
4.022%, 5/18/07(a)....................... 164 164,454
7.75%, 4/02/12(a)........................ 587 663,998
Citigroup, Inc.
3.938%, 6/09/09(a)....................... 149 149,242
4.625%, 8/03/10(a)....................... 443 435,540
5.00%, 9/15/14(a)........................ 229 224,257
Core Investment Grade Trust
4.659%, 11/30/07(a)...................... 730 721,335
Countrywide Home Loans, Inc.
4.00%, 3/22/11(a)........................ 348 326,571
4.25%, 12/19/07(a)....................... 340 335,111
Credit Suisse First Boston
5.50%, 8/15/13(a)........................ 203 205,768
General Electric Capital Corp.
3.984%, 6/22/07(a)....................... 1,212 1,212,996
4.00%, 2/17/09(a)........................ 740 719,516
4.375%, 11/21/11(a)...................... 212 204,900
6.75%, 3/15/32(a)........................ 856 979,061
Household Finance Corp.
6.50%, 11/15/08(a)....................... 479 499,071
7.00%, 5/15/12(a)........................ 155 169,202
MBNA Corp.
4.625%, 9/15/08(a)....................... 238 236,053
Merrill Lynch & Co., Inc.
4.79%, 8/04/10(a)........................ 768 756,144
Resona Preferred Global Securities
(Cayman Islands)
7.191%, 12/29/49(a)(b)................... 176 179,311
SLM Corp.
4.50%, 7/26/10(a)........................ 401 391,273
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO o 11
Portfolio of Investments
- --------------------------------------------------------------------------------
Principal
Amount
(000) U.S. $ Value
- -----------------------------------------------------------------------------
The Goldman Sachs Group, Inc.
4.75%, 7/15/13(a)........................ $ 179 $ 171,683
5.125%, 1/15/15(a)....................... 147 143,374
Washington Mutual Finance Corp.
6.875%, 5/15/11(a)....................... 593 642,753
--------------
10,432,171
--------------
Food/Beverages - 1.5%
ConAgra Foods, Inc.
6.75%, 9/15/11(a)........................ 56 59,566
7.875%, 9/15/10(a)....................... 180 199,069
General Mills, Inc.
5.125%, 2/15/07(a)....................... 610 610,811
Kraft Foods, Inc.
4.125%, 11/12/09(a)...................... 630 608,560
5.25%, 10/01/13(a)....................... 332 330,356
The Kroger Co.
7.80%, 8/15/07(a)........................ 285 297,693
--------------
2,106,055
--------------
Health Care - 1.2%
Aetna, Inc.
7.375%, 3/01/06(a)....................... 346 349,060
Humana, Inc.
6.30%, 8/01/18(a)........................ 166 172,475
WellPoint, Inc.
3.50%, 9/01/07(a)........................ 400 389,670
3.75%, 12/14/07(a)....................... 73 71,278
4.25%, 12/15/09(a)....................... 495 480,065
Wyeth
5.50%, 2/01/14(a)........................ 233 234,667
--------------
1,697,215
--------------
Industrial - 0.4%
Tyco International Group SA
6.375%, 10/15/11(a)...................... 508 533,739
--------------
Insurance - 1.2%
Assurant, Inc.
5.625%, 2/15/14(a)....................... 172 171,987
Liberty Mutual Group
5.75%, 3/15/14(a)(b)..................... 167 160,768
Mangrove Bay Pass-Through Trust pfd.
6.102%, 7/15/33(a)(b).................... 544 534,850
MetLife, Inc.
5.00%, 11/24/13(a)....................... 193 189,096
Royal & Sun Alliance Insurance Group plc
(United Kingdom)
8.95%, 10/15/29(a)....................... 167 206,602
Zurich Capital Trust I
8.376%, 6/01/37(a)(b).................... 459 496,465
--------------
1,759,768
--------------
- --------------------------------------------------------------------------------
12 o ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO
Portfolio of Investments
- --------------------------------------------------------------------------------
Principal
Amount
(000) U.S. $ Value
- -----------------------------------------------------------------------------
Metals/Mining - 0.1%
Ispat Inland Ulc (Canada)
9.75%, 4/01/14(a)........................ $ 118 $ 133,340
Teck Cominco, Ltd.
Class B
6.125%, 10/01/35(a)...................... 95 89,171
--------------
222,511
--------------
Paper/Packaging - 0.5%
International Paper Co.
5.30%, 4/01/15(a)........................ 235 222,318
Packaging Corp. of America
5.75%, 8/01/13(a)........................ 311 294,053
Weyerhaeuser Co.
5.95%, 11/01/08(a)....................... 202 206,746
--------------
723,117
--------------
Public Utilities - Electric & Gas - 2.4%
Carolina Power & Light Co.
6.50%, 7/15/12(a)........................ 345 367,879
Consumers Energy Co.
4.25%, 4/15/08(a)........................ 116 113,729
Duke Capital LLC
8.00%, 10/01/19(a)....................... 311 367,143
FirstEnergy Corp.
6.45%, 11/15/11(a)....................... 360 378,687
7.375%, 11/15/31(a)...................... 339 386,040
MidAmerican Energy Holdings Co.
5.875%, 10/01/12(a)...................... 162 166,015
Nisource Finance Corp.
7.875%, 11/15/10(a)...................... 154 171,194
Pacific Gas & Electric Co.
4.80%, 3/01/14(a)........................ 305 293,645
6.05%, 3/01/34(a)........................ 206 206,954
Progress Energy, Inc.
7.10%, 3/01/11(a)........................ 233 249,337
Public Service Company of Colorado
7.875%, 10/01/12(a)...................... 176 203,482
TXU Australia Holdings Pty, Ltd. (Australia)
6.15%, 11/15/13(a)(b).................... 283 300,293
Xcel Energy, Inc.
7.00%, 12/01/10(a)....................... 170 182,967
--------------
3,387,365
--------------
Public Utilities - Telephone - 0.3%
Telecom Italia Capital (Italy)
6.375%, 11/15/33(a)...................... 380 377,533
--------------
Services - 0.5%
Pershing Road Development Co. LLC
4.26%, 9/01/26(a)(b)..................... 402 402,000
Waste Management, Inc.
6.875%, 5/15/09(a)....................... 250 263,764
--------------
665,764
--------------
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO o 13
Portfolio of Investments
- --------------------------------------------------------------------------------
Principal
Amount
(000) U.S. $ Value
- -----------------------------------------------------------------------------
Supermarket/Drug - 0.1%
Safeway, Inc.
4.80%, 7/16/07(a)........................ $ 110 $ 109,401
6.50%, 3/01/11(a)........................ 82 84,238
--------------
193,639
--------------
Technology - 0.1%
IBM Corp.
4.375%, 6/01/09(a)....................... 75 73,921
Motorola, Inc.
7.625%, 11/15/10(a)...................... 28 31,238
--------------
105,159
--------------
Total Corporate Debt Obligations
(cost $37,815,668)....................... 37,043,095
--------------
COMMERCIAL MORTGAGE BACKED
SECURITIES - 8.3%
Banc America Commercial Mortgage, Inc.
Series 2004-4, Class A3
4.128%, 7/10/42(a)....................... 365 352,864
Series 2004-6, Class A2
4.161%, 12/10/42(a)...................... 480 463,440
Series 2005-1, Class A3
4.877%, 11/10/42(a)...................... 649 642,614
Series 2004-3, Class A5
5.305%, 6/10/39(a)....................... 575 580,508
Bear Stearns Commercial Mortgage
Securities, Inc.
Series 2005-T18, Class A4
4.933%, 2/13/42(a)....................... 610 594,280
CS First Boston Mortgage Securities Corp.
Series 2003-CK2, Class A2
3.861%, 3/15/36(a)....................... 316 306,229
Series 2004-C5, Class A2
4.183%, 11/15/37(a)...................... 406 391,932
Series 2005-C1, Class A4
5.014%, 2/15/38(a)....................... 534 522,621
GE Capital Commercial Mortgage Corp.
Series 2005-C3, Class A3FX
4.863%, 7/10/45(a)....................... 585 578,103
Series 2004-C3, Class A4
5.189%, 7/10/39(a)....................... 402 398,466
Greenwich Capital Commercial Funding Corp.
Series 2003-C1, Class A4
4.111%, 7/05/35(a)....................... 388 361,717
Series 2005-GG3, Class A2
4.305%, 8/10/42(a)....................... 642 622,990
JP Morgan Chase Commercial Mortgage
Securities Corp.
Series 2005-LDP1, Class A2
4.625%, 3/15/46(a)....................... 652 639,501
- --------------------------------------------------------------------------------
14 o ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO
Portfolio of Investments
- --------------------------------------------------------------------------------
Principal
Amount
(000) U.S. $ Value
- -----------------------------------------------------------------------------
Series 2005-LDP4, Class A2
4.79%, 10/15/42(a)....................... $ 365 $ 359,145
Series 2005-LDP3, Class A2
4.851%, 8/15/42(a)....................... 515 508,243
Series 2005-LDP1, Class A4
5.038%, 3/15/46(a)....................... 649 636,371
LB-UBS Commercial Mortgage Trust
Series 2004-C7, Class A2
3.992%, 10/15/29(a)...................... 345 331,431
Series 2004-C8, Class A2
4.201%, 12/15/29(a)...................... 381 368,599
Series 2005-C1, Class A4
4.742%, 2/15/30(a)....................... 426 409,897
Series 2005-C7, Class A4
5.197%, 11/15/30(a)...................... 435 432,625
Merrill Lynch Mortgage Trust
Series 2004-KEY2, Class A2
4.166%, 8/12/39(a)....................... 303 291,910
Series 2005-MKB2, Class A2
4.806%, 9/12/42(a)....................... 785 775,502
Morgan Stanley Capital I Inc.
Series 2004-T13, Class A2
3.94%, 9/13/45(a)........................ 365 348,528
Series 2005-HQ5, Class A4
5.168%, 1/14/42(a)....................... 944 935,202
--------------
Total Commercial Mortgage Backed Securities
(cost $12,126,632)....................... 11,852,718
--------------
ASSET BACKED SECURITIES - 4.4%
Aegis Asset Backed Securities Trust
Series 2004-3, Class A2A
4.238%, 9/25/34(a)....................... 316 316,001
American Express Credit Account Master Trust
Series 2005-1, Class A
4.00%, 10/15/12(a)....................... 457 457,000
Asset Backed Funding Certificates
Series 2003-WF1 Class A2
4.58%, 12/25/32(a)....................... 338 340,074
Bank One Issuance Trust
Series 2004-A4, Class A4
4.01%, 2/16/10(a)........................ 472 472,146
Bear Stearns Asset Backed Securities, Inc.
Series 2005-SD1, Class 1A1
4.188%, 4/25/22(a)....................... 241 241,025
Capital Auto Receivables Asset Trust
Series 2005-SN1A, Class A3A
4.10%, 6/15/08(a)........................ 570 564,534
Citifinancial Mortgage Securities, Inc.
Series 2003-1, Class AFPT
3.36%, 1/25/33(a)........................ 202 196,529
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO o 15
Portfolio of Investments
- --------------------------------------------------------------------------------
Principal
Amount
(000) U.S. $ Value
- -----------------------------------------------------------------------------
Credit-Based Asset Servicing and Securities, Inc.
Series 2005-CB7, Class AF2
5.147%, 11/25/36(a)...................... $ 330 $ 329,597
Discover Card Master Trust I
Series 2004-1, Class A
4.00%, 4/16/10(a)........................ 548 547,830
Equity One ABS, Inc.
Series 2004-3, Class AF1
4.198%, 7/25/34(a)....................... 37 36,756
MBNA Credit Card Master Note Trust
Series 2001-A5, Class A5
4.18%, 3/15/11(a)........................ 1,414 1,418,864
Merrill Lynch Mortgage Investors, Inc.
Series 2004-SL1, Class A
4.298%, 4/25/35(a)....................... 18 18,347
Morgan Stanley ABS Capital I
Series 2005-WMC1, Class A2A
4.138%, 1/25/35(a)....................... 126 125,575
Series 2004-HE4, Class A3
4.238%, 5/25/34(a)....................... 113 113,134
Novastar Home Equity Loan
Series 2001-1, Class A1
4.318%, 7/25/31(a)....................... 194 193,938
Residential Asset Mortgage Products, Inc.
Series 2004-RS6, Class AI1
4.188%, 8/25/22(a)....................... 2 2,003
Series 2004-SP1, Class AI1
4.218%, 6/25/13(a)....................... 28 27,707
Residential Asset Securities Corp.
Series 2004-KS7, Class AI1
4.188%, 10/25/21(a)...................... 57 56,865
Series 2002-KS7, Class A2
4.408%, 11/25/32(a)...................... 126 126,197
Residential Funding Mortgage Securities, Inc.
Series 2004-HS2, Class AI1
4.188%, 12/25/18(a)...................... 29 28,559
SLM Student Loan Trust
Series 2003-C, Class A1
3.97%, 9/15/16(a)........................ 462 462,104
Structured Asset Investment Loan Trust
Series 2004-5, Class A2
4.218%, 5/25/34(a)....................... 166 166,260
--------------
Total Asset Backed Securities
(cost $6,252,139)........................ 6,241,045
--------------
COLLATERALIZED MORTGAGE
OBLIGATIONS - 0.9%
Countrywide Home Loans
Series 2003-49, Class A1
1.642%, 12/19/33(a)...................... 9 8,963
- --------------------------------------------------------------------------------
16 o ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO
Portfolio of Investments
- --------------------------------------------------------------------------------
Principal
Amount
(000) U.S. $ Value
- -----------------------------------------------------------------------------
Credit-Based Asset Servicing and Securities,
Inc.Series 2003-CB1, Class AF
3.45%, 1/25/33(a)........................ $ 601 $ 581,104
Residential Funding Mortgage Securities II
Series 2005-HI2, Class A3
4.46%, 5/25/35(a)........................ 285 279,254
Washington Mutual
Series 2005-AR2, Class 2A22
4.258%, 1/25/45(a)....................... 437 436,540
--------------
Total Collateralized Mortgage Obligations
(cost $1,321,848)........................ 1,305,861
--------------
SOVEREIGN DEBT OBLIGATIONS- 1.5%
Mexico - 0.7%
United Mexican States
4.625%, 10/08/08(a)...................... 2 1,978
United Mexican States
10.00%, 12/05/24(a)...................... MXP 10,475 1,044,538
--------------
1,046,516
--------------
Russia - 0.6%
Russian Federation
5.00%, 3/31/30(a)........................ 779 864,690
--------------
South Korea - 0.2%
Korea Development Bank
4.625%, 9/16/10(a)....................... 250 243,903
--------------
Total Sovereign Debt Obligations
(cost $2,103,346)........................ 2,155,109
--------------
SHORT-TERM INVESTMENTS - 23.5%
U.S. Government & Government Sponsored
Agency Obligations - 16.0%
Federal Home Loan Bank
Zero coupon, 11/14/05.................... 6,020 6,012,000
Federal Home Loan Mortgage Corporation
Zero coupon, 12/22/05(c)................. 8,475 8,429,376
Federal National Mortgage Association
Zero coupon, 12/02/05.................... 8,385 8,358,646
--------------
22,800,022
--------------
Time Deposit - 7.5%
State Street Euro Dollar
3.10%, 11/01/05.......................... 10,678 10,678,000
--------------
Total Short-Term Investments
(amortized cost $33,478,022)............. 33,478,022
--------------
Total Investments Before Security Lending
Collateral - 118.3%
(cost $170,780,718)...................... 168,755,366
--------------
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO o 17
Portfolio of Investments
- --------------------------------------------------------------------------------
Principal
Amount
(000) U.S. $ Value
- -----------------------------------------------------------------------------
INVESTMENT OF CASH COLLATERAL
FOR SECURITIES LOANED - 4.8%
Short-Term Investments
BP Amoco Capital plc
4.04%, 11/01/05.......................... $ 5,690 $ 5,689,361
Shares
---------
UBS Private Money Market Fund, LLC,
3.87%.................................... 1,229,191 1,229,191
--------------
Total Investment of Cash Collateral For
Securities Loaned
(cost $6,918,552)........................ 6,918,552
--------------
Total Investments - 123.1%
(cost $177,699,270)...................... 175,673,918
Other assets less liabilities - (23.1%)..... (33,001,648)
--------------
Net Assets - 100%........................... $ 142,672,270
==============
CREDIT DEFAULT SWAP CONTRACTS (See Note D)
Notional
Swap Counterparty & Amount Interest Termination Unrealized
Referenced Obligation (000) Rate Date Appreciation
- -----------------------------------------------------------------------------
Buy Contracts:.
JP Morgan Chase
Dow Jones High Volume
4.00%, 06/20/10 $6,000 0.90% 6/20/10 $40,705
FINANCIAL FUTURES CONTRACTS PURCHASED (See Note D)
Value at
Number of Expiration Original October 31, Unrealized
Type Contracts Month Value 2005 Depreciation
- ---------------------------------------------------------------------------------------
Japan Government Bonds
10 Yr Future 1 December 2005 $1,198,718 $1,177,734 $(20,984)
FORWARD EXCHANGE CURRENCY CONTRACTS (See Note D)
U.S. $
Contract Value on U.S. $
Amount Original Current Unrealized
(000) Date Value Depreciation
- -----------------------------------------------------------------------------
Sale Contracts:
Mexican Peso
Settling 12/19/05 11,465 $ 1,037,331 $ 1,055,585 $(18,254)
- --------------------------------------------------------------------------------
18 o ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO
Portfolio of Investments
- --------------------------------------------------------------------------------
* Represents entire or partial securities out on loan. See Note E for
securities lending information.
(a) Positions, or portion thereof, with an aggregate market value of
$110,144,722 have been segregated to collateralize open forward exchange
currency contracts.
(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 October 31, 2005, the aggregate market value of these
securities amounted to $3,186,908 or 2.2% of net assets.
(c) Position, or portion thereof, with a market value of $149,210 has been
segregated to collateralize margin requirements for open futures
contracts.
Glossary:
TBA - (To Be Assigned) - Securities are purchased on a forward commitment
with an appropriate principal amount (generally +/-1.0%) and no definite
maturity date. The actual principal amount and maturity date will be
determined upon settlement when the specific mortgage pools are assigned.
See notes to financial statements.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO o 19
Statement of Assets & Liabilities
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS & LIABILITIES
October 31, 2005
Assets
Investments in securities, at value
(cost $177,699,270--including investment of cash
collateral for securities loaned of $6,918,552)...... $ 175,673,918(a)
Cash.................................................... 687
Interest receivable..................................... 989,953
Receivable for capital stock sold....................... 223,782
Receivable for investment securities sold............... 140,389
Receivable due from Adviser............................. 79,192
-------------
Total assets............................................ 177,107,921
-------------
Liabilities
Swap contracts, at value (amortized discount $113,684).. 72,979
Payable for investment securities purchased............. 26,302,879
Payable for collateral on securities loaned............. 6,918,552
Payable for capital stock redeemed...................... 551,022
Dividends payable....................................... 162,538
Distribution fee payable................................ 66,051
Transfer Agent fee payable.............................. 63,049
Unrealized depreciation of forward exchange currency
contracts............................................ 18,254
Payable for variation margin on futures contracts....... 2,719
Accrued expenses........................................ 277,608
-------------
Total liabilities....................................... 34,435,651
-------------
Net Assets.............................................. $ 142,672,270
=============
Composition of Net Assets
Capital stock, at par................................... $ 14,059
Additional paid-in capital.............................. 152,139,291
Distributions in excess of net investment income........ (22,888)
Accumulated net realized loss on investments
and foreign currency transactions.................... (7,434,763)
Net unrealized depreciation of investments and foreign
currency denominated assets and liabilities.......... (2,023,429)
-------------
$ 142,672,270
=============
Calculation of Maximum Offering Price Per Share
Net Asset Value and:
---------------------- Maximum
Shares Offering Redemption Offering
Class Net Assets Outstanding Price Price Price*
- ---------------------------------------------------------------------------
A $ 52,430,348 5,163,960 -- $ 10.15 $ 10.60
- ---------------------------------------------------------------------------
B $ 44,943,748 4,429,846 $ 10.15 -- --
- ---------------------------------------------------------------------------
C $ 15,689,345 1,549,047 $ 10.13 -- --
- ---------------------------------------------------------------------------
Advisor $ 29,576,259 2,913,267 $ 10.15 $ 10.15 --
- ---------------------------------------------------------------------------
R $ 12,824 1,264 $ 10.15 $ 10.15 --
- ---------------------------------------------------------------------------
K $ 9,922 977 $ 10.16 $ 10.16 --
- ---------------------------------------------------------------------------
I $ 9,824 967 $ 10.16 $ 10.16 --
- ---------------------------------------------------------------------------
* 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 $6,476,797 (see Note E).
See notes to financial statements.
- --------------------------------------------------------------------------------
20 o ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO
Statement of Operations
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
Year Ended October 31, 2005
Investment Income
Interest................................ $ 16,938,742
Income from dollar rolls................ 3,195,831 $ 20,134,573
-------------
Expenses
Advisory fee............................ 2,045,411
Distribution fee--Class A............... 169,888
Distribution fee--Class B............... 557,049
Distribution fee--Class C............... 176,232
Distribution fee--Class R............... 72
Distribution fee--Class K............... 17
Transfer agency......................... 1,345,010
Custodian............................... 225,127
Printing................................ 97,380
Registration fees....................... 89,413
Administrative.......................... 89,000
Audit................................... 59,415
Legal................................... 39,547
Directors' fees and expenses............ 24,493
Miscellaneous........................... 33,588
-------------
Total expenses.......................... 4,951,642
Less: expense waived and reimbursed
by the Adviser (see Note B).......... (953,770)
Less: expense offset arrangement
(see Note B)......................... (3,770)
-------------
Net expenses............................ 3,994,102
-------------
Net investment income................... 16,140,471
-------------
Realized and Unrealized Gain (Loss)
on Investment Transactions
Net realized gain (loss) on:
Investment transactions.............. (1,302,276)(a)
Futures contracts.................... 96,399
Swap contracts....................... (133,351)
Foreign currency transactions........ 181,459(a)
Net change in unrealized
appreciation/depreciation of:
Investments.......................... (8,462,563)
Futures contracts.................... (20,984)
Swap contracts....................... 40,705
Foreign currency denominated assets
and liabilities.................... (17,798)
-------------
Net loss on investment transactions..... (9,618,409)
-------------
Net Increase in Net Assets
from Operations...................... $ 6,522,062
=============
(a) On August 5, 2005, the Fund had a redemption-in-kind with total proceeds
in the amount of $575,983,759. The net realized gains on investments and
foreign currency transactions of $1,029,251 and $229,769, respectively,
will not be realized for tax purposes.
See notes to financial statements.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO o 21
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
October 31, October 31,
2005 2004
------------- -------------
Increase (Decrease) in Net Assets
from Operations
Net investment income................... $ 16,140,471 $ 14,402,597
Net realized gain (loss) on investment
and foreign currency transactions.... (1,157,769) 3,225,907
Net change in unrealized
appreciation/depreciation of
investments and foreign currency
denominated assets and liabilities... (8,460,640) 2,816,634
------------- -------------
Net increase in net assets
from operations..................... 6,522,062 20,445,138
Dividends and Distributions to
Shareholders from
Net investment income
Class A.............................. (2,047,448) (2,175,102)
Class B.............................. (1,615,912) (2,309,764)
Class C.............................. (514,975) (633,482)
Advisor Class........................ (12,338,990) (11,331,550)
Class R.............................. (491) (450)
Class K.............................. (260) -0-
Class I.............................. (272) -0-
Net realized gain on investment transactions
Class A.............................. -0- (1,348,611)
Class B.............................. -0- (1,909,068)
Class C.............................. -0- (511,130)
Advisor Class........................ -0- (5,670,270)
Class R.............................. -0- (214)
Capital Stock Transactions
Net increase (decrease)................. (299,458,053) 8,556,559
------------- -------------
Total increase (decrease)............... (309,454,339) 3,112,056
Net Assets
Beginning of period..................... 452,126,609 449,014,553
------------- -------------
End of period (including distributions
in excess of net investment income
of ($22,888) and ($2,348,644),
respectively)....................... $ 142,672,270 $ 452,126,609
============= =============
See notes to financial statements.
- --------------------------------------------------------------------------------
22 o ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO
Notes to Financial Statements
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
October 31, 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 Quality Bond Portfolio. The Quality 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 close of the exchange or foreign securities exchange. If there
has been no sale on
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO o 23
Notes to Financial Statements
- --------------------------------------------------------------------------------
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
Fund may use fair value pricing for securities primarily traded in non-U.S.
markets because, most foreign markets close well before the Fund values its
securities at 4:00 p.m., Eastern Time. The earlier close of these foreign
markets gives rise to the possibility that significant events, including broad
market moves, may have occurred in the interim and may materially affect the
value of those securities.
2. Currency Translation
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the mean
of the quoted bid and asked prices of such currencies against the U.S. dollar.
Purchases and sales of portfolio securities are translated into U.S. dollars at
the rates of exchange prevailing when such securities were acquired or sold.
Income and expenses are translated into U.S. dollars at the rates of exchange
prevailing when accrued.
- --------------------------------------------------------------------------------
24 o ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO
Notes to Financial Statements
- --------------------------------------------------------------------------------
Net realized gain or loss on foreign currency transactions represents foreign
exchange gains and losses from sales and maturities of foreign fixed income
investments, foreign currency exchange contracts, holding of foreign currencies,
currency gains or losses realized between the trade and settlement dates on
foreign investment transactions, and the difference between the amounts of
dividends, interest and foreign withholding taxes recorded on the Fund's books
and the U.S. dollar equivalent amounts actually received or paid. Net unrealized
currency gains and losses from valuing foreign currency denominated assets and
liabilities at period end exchange rates are reflected as a component of net
unrealized appreciation or depreciation of investments and foreign currency
denominated assets and liabilities.
3. Taxes
It is the 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 Fund may be subject to taxes imposed by countries in which it
invests. Such taxes are generally based on income and/or capital gains earned or
repatriated. Taxes are accrued and applied to net investment income, net
realized gains and net unrealized appreciation/depreciation as such income
and/or gains are earned.
4. Investment Income and Investment Transactions
Interest income is accrued daily. Investment transactions are accounted for on
the trade date securities are purchased or sold. Investment gains and losses are
determined on the identified cost basis. The Portfolio amortizes premiums and
accretes discounts as adjustments to interest income.
5. 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.
6. Dividends and Distributions
Dividends and distributions to shareholders, if any, are recorded on the
ex-dividend date. Income dividends and capital gains distributions are
determined in accordance with federal tax regulations and may differ from those
determined in accordance with U.S. generally accepted accounting principles. To
the extent these differences are permanent, such amounts are reclassified within
the capital accounts based on their federal tax basis treatment; temporary
differences do not require such reclassification.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO o 25
Notes to Financial Statements
- --------------------------------------------------------------------------------
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 average daily net assets. Prior to September 7, 2004, the Portfolio
paid the Adviser an advisory fee at an annual rate of .55% of the Portfolio's
average daily net assets. The fee is accrued daily and paid monthly. The Adviser
has agreed to waive its fees and bear certain expenses to the extent necessary
to limit total operating expenses on an annual basis .98%, 1.68%, 1.68%, .68%,
1.18%, .93% and .68% of the daily average net assets for the Class A, Class B,
Class C, Advisor Class, Class R, Class K and Class I shares, respectively. For
the year ended October 31, 2005, such waiver amounted to $864,770.
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 may reimburse the Adviser for
certain legal and accounting services provided to the Portfolio by the Adviser.
For the year ended October 31, 2005, the Adviser voluntarily agreed to waive its
fees for services. Such waiver amounted to $89,000.
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 $908,572 for the year ended October 31, 2005.
For the year ended October 31, 2005, the Portfolio's expenses were reduced by
$3,770 under an expense offset arrangement with AGIS.
AllianceBernstein Investment Research and Management, Inc. (the "Distributor"),
a wholly-owned subsidiary of the Adviser, serves as the Distributor of the
Portfolio's shares. The Distributor has advised the Portfolio that it has
retained front-end sales charges of $3,906 from the sale of Class A shares and
received $1,370, $67,205 and $2,002, in contingent deferred sales charges
imposed upon redemptions by shareholders of Class A, Class B and Class C shares,
respectively, for the year ended October 31, 2005.
- --------------------------------------------------------------------------------
26 o ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO
Notes to Financial Statements
- --------------------------------------------------------------------------------
NOTE C
Distribution Services Agreement
The Fund has adopted a Distribution Services Agreement (the "Agreement")
pursuant to Rule 12b-1 under the Investment Company Act of 1940. 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. As of November 1, 2005,
with respect to Class B shares, payments to the Distributor are being limited to
..30% of the average daily net assets attributable to Class B 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 amount of $105,435,
$396,868, $328 and $12 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.
NOTE D
Investment Transactions
Purchases and sales of investment securities (excluding short-term investments)
for the year ended October 31, 2005, were as follows:
Purchases Sales
--------------- ---------------
Investment securities (excluding U.S.
government securities).............. $ 260,365,443 $ 139,941,581
U.S. government securities............. 2,433,260,063 2,413,366,042
The cost of investments for federal income tax purposes, gross unrealized
appreciation and unrealized depreciation (excluding swaps, futures and foreign
currency transactions) are as follows:
Cost.................................................... $ 177,819,160
---------------
Gross unrealized appreciation........................... $ 159,115
Gross unrealized depreciation........................... (2,304,357)
---------------
Net unrealized depreciation............................. $ (2,145,242)
===============
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO o 27
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. Forward Exchange Currency Contracts
The Portfolio may enter into forward exchange currency contracts in order to
hedge its exposure to changes in foreign currency exchange rates on its foreign
portfolio holdings, to hedge certain firm purchase and sale commitments
denominated in foreign currencies and for investment purposes. A forward
exchange currency contract is a commitment to purchase or sell a foreign
currency on a future date at a negotiated forward rate. The gain or loss arising
from the difference between the original contract and the closing of such
contract would be included in net realized gain or loss on foreign currency
transactions.
Fluctuations in the value of open forward exchange currency contracts are
recorded for financial reporting purposes as net unrealized appreciation and
depreciation by the Portfolio.
The Portfolio's custodian will place and maintain cash not available for
investment or other liquid assets in a separate account of the Portfolio having
a value at least equal to the aggregate amount of the Portfolio's commitments
under forward exchange currency contracts entered into with respect to position
hedges. Risks may arise from the potential inability of a counterparty to meet
the terms of a contract and from unanticipated movements in the value of a
foreign currency relative to the U.S. dollar. The face or contract amount, in
U.S. dollars, reflects the total exposure the Portfolio has in that particular
currency contract.
2. 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.
3. 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.
- --------------------------------------------------------------------------------
28 o ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO
Notes to Financial Statements
- --------------------------------------------------------------------------------
Risks may arise as a result of the failure of the counterparty to the swap
contract to comply with the terms of the swap contract. The loss incurred by the
failure of a counterparty is generally limited to the net 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.
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 the termination of
swap contracts on 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.
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.
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.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO o 29
Notes to Financial Statements
- --------------------------------------------------------------------------------
4. 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 effected. 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.
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 October 31, 2005, the
Portfolio had loaned securities with a value of $6,476,797 and received cash
collateral which was invested in short-term securities valued at $6,918,552 as
included in the accompanying portfolio of investments. For the year ended
October 31, 2005, the Portfolio earned fee income of $150,988 which is included
in the accompanying statement of operations.
- --------------------------------------------------------------------------------
30 o ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO
Notes to Financial Statements
- --------------------------------------------------------------------------------
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
October 31, October 31, October 31, October 31,
2005 2004 2005 2004
---------------------------------------------------------
Class A
Shares sold 1,297,569 1,375,400 $ 13,541,985 $ 14,301,333
- ------------------------------------------------------------------------------
Shares issued in
reinvestment of
dividends and
distributions 177,782 296,232 1,837,212 3,081,949
- ------------------------------------------------------------------------------
Shares converted
from Class B 370,102 253,309 3,697,915 2,633,099
- ------------------------------------------------------------------------------
Shares redeemed (2,126,010) (2,942,203) (21,966,635) (30,605,160)
- ------------------------------------------------------------------------------
Net decrease (280,557) (1,017,262) $ (2,889,523) $ (10,588,779)
==============================================================================
Class B
Shares sold 509,815 1,030,452 $ 5,271,866 $ 10,726,082
- ------------------------------------------------------------------------------
Shares issued in
reinvestment of
dividends and
distributions 120,884 294,602 1,248,546 3,062,146
- ------------------------------------------------------------------------------
Shares converted
to Class A (370,414) (253,544) (3,697,915) (2,633,099)
- ------------------------------------------------------------------------------
Shares redeemed (2,225,329) (3,782,457) (23,115,708) (39,315,080)
- ------------------------------------------------------------------------------
Net decrease (1,965,044) (2,710,947) $ (20,293,211) $ (28,159,951)
==============================================================================
Class C
Shares sold 168,252 274,647 $ 1,735,347 $ 2,862,489
- ------------------------------------------------------------------------------
Shares issued in
reinvestment of
dividends and
distributions 22,443 51,557 231,389 534,916
- ------------------------------------------------------------------------------
Shares redeemed (468,748) (970,702) (4,830,131) (10,085,462)
- ------------------------------------------------------------------------------
Net decrease (278,053) (644,498) $ (2,863,395) $ (6,688,057)
==============================================================================
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO o 31
Notes to Financial Statements
- --------------------------------------------------------------------------------
------------------------ -----------------------------
Shares Amount
------------------------ -----------------------------
Year Ended Year Ended Year Ended Year Ended
October 31, October 31, October 31, October 31,
2005 2004 2005 2004
---------------------------------------------------------
Advisor Class
Shares sold 14,738,340 4,711,221 $ 152,659,635 $ 49,011,188
- ------------------------------------------------------------------------------
Shares issued in
reinvestment of
dividends and
distributions 1,155,430 1,632,750 11,958,110 16,972,727
- ------------------------------------------------------------------------------
Shares redeemed (42,685,120) (1,157,388) (438,046,997) (12,006,589)
- ------------------------------------------------------------------------------
Net increase
(decrease) (26,791,350) 5,186,583 $(273,429,252) $ 53,977,326
==============================================================================
November 3, November 3,
Year Ended 2003(a) to Year Ended 2003(a) to
October 31, October 31, October 31, October 31,
2005 2004 2005 2004
---------------------------------------------------------
Class R
Shares sold 26 1,522 $ 267 $ 15,915
- ------------------------------------------------------------------------------
Shares issued in
reinvestment of
dividends and
distributions 15 10 152 105
- ------------------------------------------------------------------------------
Shares redeemed (309) -0- (3,191) -0-
- ------------------------------------------------------------------------------
Net increase
(decrease) (268) 1,532 $ (2,772) $ 16,020
==============================================================================
March 1, March 1,
2005(a) to 2005(a) to
October 31, October 31,
2005 2005
-------------------------------------------------------
Class K
Shares sold 977 $ 10,100
- ----------------------------------------------------------------------------
Net increase 977 $ 10,100
============================================================================
Class I
Shares sold 967 $ 10,000
- ----------------------------------------------------------------------------
Net increase 967 $ 10,000
============================================================================
(a) Commencement of distributions.
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 Fund'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
- --------------------------------------------------------------------------------
32 o ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO
Notes to Financial Statements
- --------------------------------------------------------------------------------
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 the 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.
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") intended to provide short-term financing if necessary, subject to
certain restrictions, in connection with abnormal redemption activity.
Commitment fees related to the Facility are paid by the participating funds and
are included in miscellaneous expenses in the statement of operations. The
Portfolio did not utilize the Facility during the year ended October 31, 2005.
NOTE I
Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended October
31, 2005 and October 31, 2004 were as follows:
2005 2004
============ ============
Distributions paid from:
Ordinary income ............................. $ 16,518,348 $ 23,211,211
Net long-term capital gains ................. -0- 2,678,430
------------ ------------
Total taxable distributions .................... 16,518,348 25,889,641
------------ ------------
Total distributions paid ....................... $ 16,518,348 $ 25,889,641
============ ============
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO o 33
Notes to Financial Statements
- --------------------------------------------------------------------------------
As of October 31, 2005, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Undistributed Ordinary Income ............................... $ 46,256
Accumulated capital and other losses ........................ (7,343,312)(a)
Unrealized appreciation/(depreciation) ...................... (2,184,024)(b)
-----------
Total accumulated earnings/(deficit) ........................ $(9,481,080)
===========
(a) On October 31, 2005, the Fund had a net capital loss carryforward for
federal income tax purposes of $7,343,312 of which $2,545,113 expires in
the year 2011 and $4,798,199 expires in the year 2013. To the extent
future capital gains are offset by capital loss carryforwards, such gains
will not be distributed.
(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 tax treatment of swap income, the difference
between book and tax amortization methods for premium, and the realization
for tax purposes of gains/losses on certain derivative instruments.
During the current fiscal year permanent differences, primarily due to the tax
treatment of foreign currency gains and losses, tax treatment of swap income,
the timing of distributions for tax purposes, the tax character of paydown
gains, the tax treatment of bond premium and the tax treatment of redemptions in
kind, resulted in a net decrease in distributions in excess of net investment
income, an increase in accumulated net realized loss on investment and foreign
currency transactions and a net increase to additional paid-in capital. This
reclassification had no effect on net assets.
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
- --------------------------------------------------------------------------------
34 o ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO
Notes to Financial Statements
- --------------------------------------------------------------------------------
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 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
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO o 35
Notes to Financial Statements
- --------------------------------------------------------------------------------
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 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.
- --------------------------------------------------------------------------------
36 o ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO
Notes to Financial Statements
- --------------------------------------------------------------------------------
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.
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 puni-
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO o 37
Notes to Financial Statements
- --------------------------------------------------------------------------------
tive 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.
- --------------------------------------------------------------------------------
38 o ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO
Financial Highlights
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
------------------------------------------------------------------------------------------
Class A
------------------------------------------------------------------------------------------
Year Ended July 1,
October 31, 2003 to Year Ended June 30,
--------------------------- October 31, -----------------------------------------
2005 2004 2003(a) 2003 2002(b) 2001
------------------------------------------------------------------------------------------
Net asset value,
beginning of period ......... $ 10.43 $ 10.56 $ 10.82 $ 10.25 $ 10.22 $ 9.85
------------------------------------------------------------------------------------------
Income From Investment
Operations
Net investment income(c)(d) ... .37 .33 .12 .33 .46 .55
Net realized and unrealized
gain (loss) on investment
and foreign currency
transactions ................ (.28) .15 (.25) .66 .17 .42
------------------------------------------------------------------------------------------
Net increase (decrease) in
net asset value from
operations .................. .09 .48 (.13) .99 .63 .97
------------------------------------------------------------------------------------------
Less: Dividends and
Distributions
Dividends from net
investment income ........... (.37) (.38) (.13) (.42) (.46) (.55)
Distributions in excess of
net investment income ....... -0- -0- -0- -0- (.10) (.04)
Distributions from net
realized gain on
investment transactions ..... -0- (.23) -0- -0- (.01) (.01)
Distributions in excess of
net realized gain on
investment
transactions ................ -0- -0- -0- -0- (.03) -0-
------------------------------------------------------------------------------------------
Total dividends and
distributions ............... (.37) (.61) (.13) (.42) (.60) (.60)
------------------------------------------------------------------------------------------
Net asset value, end of
period ...................... $ 10.15 $ 10.43 $ 10.56 $ 10.82 $ 10.25 $ 10.22
==========================================================================================
Total Return
Total investment return
based on net asset
value(e) .................... .90% 4.66% (1.20)% 9.87% 6.23% 10.09%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) ............. $ 52,430 $ 56,778 $ 68,213 $ 76,565 $ 44,852 $ 20,068
Ratio to average net assets of:
Expenses, net of
waivers/
reimbursements ............ .98% .98% .98%(f) .98% .98% .98%
Expenses, before
waivers/
reimbursements ............ 1.31% 1.26% 1.33%(f) 1.32% 1.48% 2.85%
Net investment income(d) ...... 3.53% 3.21% 2.60%(f) 3.08% 4.39% 5.49%
Portfolio turnover rate ....... 935% 658% 199% 867% 573% 385%
See footnote summary on page 45.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO o 39
Financial Highlights
- --------------------------------------------------------------------------------
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
------------------------------------------------------------------------------------------
Class B
------------------------------------------------------------------------------------------
Year Ended July 1,
October 31, 2003 to Year Ended June 30,
--------------------------- October 31, -----------------------------------------
2005 2004 2003(a) 2003 2002(b) 2001
------------------------------------------------------------------------------------------
Net asset value,
beginning of period ......... $ 10.42 $ 10.55 $ 10.81 $ 10.24 $ 10.21 $ 9.84
------------------------------------------------------------------------------------------
Income From Investment
Operations
Net investment
income(c)(d) ................ .29 .27 .09 .26 .38 .47
Net realized and unrealized
gain (loss) on investment
and foreign currency
transactions ................ (.25) .14 (.25) .66 .16 .43
------------------------------------------------------------------------------------------
Net increase (decrease)
in net asset value from
operations .................. .04 .41 (.16) .92 .54 .90
------------------------------------------------------------------------------------------
Less: Dividends and
Distributions
Dividends from net
investment income ........... (.31) (.31) (.10) (.35) (.38) (.47)
Distributions in excess of
net investment income ....... -0- -0- -0- -0- (.09) (.05)
Distributions from net
realized gain on investment
transactions ................ -0- (.23) -0- -0- (.01) (.01)
Distributions in excess of
net realized gain on
investment
transactions ................ -0- -0- -0- -0- (.03) -0-
------------------------------------------------------------------------------------------
Total dividends and
distributions ............... (.31) (.54) (.10) (.35) (.51) (.53)
------------------------------------------------------------------------------------------
Net asset value, end of
period ...................... $ 10.15 $ 10.42 $ 10.55 $ 10.81 $ 10.24 $ 10.21
==========================================================================================
Total Return
Total investment return
based on net asset
value(e) .................... .30% 3.93% (1.44)% 9.12% 5.52% 9.34%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) ............. $ 44,944 $ 66,635 $ 96,033 $ 113,233 $ 50,354 $ 13,960
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements ............ 1.68% 1.68% 1.68%(f) 1.68% 1.68% 1.68%
Expenses, before waivers/
reimbursements ............ 2.02% 2.00% 2.06%(f) 2.05% 2.19% 3.36%
Net investment income(d) ...... 2.82% 2.59% 2.01%(f) 2.41% 3.70% 4.82%
Portfolio turnover rate ....... 935% 658% 199% 867% 573% 385%
See footnote summary on page 45.
- --------------------------------------------------------------------------------
40 o ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO
Financial Highlights
- --------------------------------------------------------------------------------
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
------------------------------------------------------------------------------------------
Class C
------------------------------------------------------------------------------------------
Year Ended July 1,
October 31, 2003 to Year Ended June 30,
-------------------------- October 31, -----------------------------------------
2005 2004 2003(a) 2003 2002(b) 2001
------------------------------------------------------------------------------------------
Net asset value,
beginning of period ......... $ 10.40 $ 10.53 $ 10.79 $ 10.23 $ 10.19 $ 9.83
------------------------------------------------------------------------------------------
Income From Investment
Operations
Net investment
income(c)(d) ................ .29 .27 .09 .26 .38 .48
Net realized and unrealized
gain (loss) on investment
and foreign currency
transactions ................ (.26) .14 (.25) .65 .17 .41
------------------------------------------------------------------------------------------
Net increase (decrease) in
net asset value from
operations .................. .03 .41 (.16) .91 .55 .89
------------------------------------------------------------------------------------------
Less: Dividends and
Distributions
Dividends from net
investment income ........... (.30) (.31) (.10) (.35) (.38) (.48)
Distributions in excess of
net investment income ....... -0- -0- -0- -0- (.09) (.04)
Distributions from net
realized gain on
investment
transactions ................ -0- (.23) -0- -0- (.01) (.01)
Distributions in excess of
net realized gain on
investment
transactions ................ -0- -0- -0- -0- (.03) -0-
------------------------------------------------------------------------------------------
Total dividends and
distributions ............... (.30) (.54) (.10) (.35) (.51) (.53)
------------------------------------------------------------------------------------------
Net asset value, end of
period ...................... $ 10.13 $ 10.40 $ 10.53 $ 10.79 $ 10.23 $ 10.19
==========================================================================================
Total Return
Total investment return
based on net asset
value(e) .................... .30% 3.93% (1.44)% 9.03% 5.63% 9.25%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) ............. $ 15,689 $ 19,008 $ 26,021 $ 26,445 $ 16,131 $ 4,315
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements ............ 1.68% 1.68% 1.68%(f) 1.68% 1.68% 1.68%
Expenses, before waivers/
reimbursements ............ 2.03% 1.99% 2.06%(f) 2.03% 2.19% 3.42%
Net investment income(d) ...... 2.84% 2.60% 2.03%(f) 2.41% 3.71% 4.88%
Portfolio turnover rate ....... 935% 658% 199% 867% 573% 385%
See footnote summary on page 45.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO o 41
Financial Highlights
- --------------------------------------------------------------------------------
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
------------------------------------------------------------------------------------------
Advisor Class
------------------------------------------------------------------------------------------
Year Ended July 1, October 9,
October 31, 2003 to Year Ended June 30, 2000(g) to
--------------------------- October 31, --------------------------- June 30,
2005 2004 2003(a) 2003 2002(b) 2001
------------------------------------------------------------------------------------------
Net asset value,
beginning of period ........... $ 10.43 $ 10.55 $ 10.82 $ 10.25 $ 10.22 $ 9.97
------------------------------------------------------------------------------------------
Income From Investment
Operations
Net investment income(c)(d) ..... .39 .36 .13 .36 .48 .42
Net realized and unrealized
gain (loss) on investment and
foreign currency transactions . (.26) .16 (.26) .66 .18 .30
------------------------------------------------------------------------------------------
Net increase (decrease) in net
asset value from operations ... .13 .52 (.13) 1.02 .66 .72
------------------------------------------------------------------------------------------
Less: Dividends and
Distributions
Dividends from net investment
income ........................ (.41) (.41) (.14) (.45) (.48) (.42)
Distributions in excess of net
investment income ............. -0- -0- -0- -0- (.11) (.04)
Distributions from net realized
gain on investment
transactions ................. -0- (.23) -0- -0- (.01) (.01)
Distributions in excess of
net realized gain on
investment transactions ....... -0- -0- -0- -0- (.03) -0-
------------------------------------------------------------------------------------------
Total dividends and
distributions ................. (.41) (.64) (.14) (.45) (.63) (.47)
------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.15 $ 10.43 $ 10.55 $ 10.82 $ 10.25 $ 10.22
==========================================================================================
Total Return
Total investment return based
on net asset value(e) ......... 1.20% 5.08% (1.19)% 10.20% 6.57% 7.28%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) ............... $ 29,576 $ 309,690 $ 258,747 $ 246,127 $ 185,071 $ 27,420
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements .............. .68% .68% .68%(f) .68% .68% .68%(f)
Expenses, before waivers/
reimbursements .............. .84% .96% 1.03%(f) 1.20% 1.20% 2.29%(f)
Net investment income(d) ........ 3.72% 3.47% 2.87%(f) 3.39% 4.69% 5.89%(f)
Portfolio turnover rate ......... 935% 658% 199% 867% 573% 385%
See footnote summary on page 45.
- --------------------------------------------------------------------------------
42 o ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO
Financial Highlights
- --------------------------------------------------------------------------------
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
-------------------------
Class R
-------------------------
Year November 3,
Ended 2003(g) to
October 31, October 31,
2005 2004
-------------------------
Net asset value, beginning of period ............................. $ 10.42 $ 10.53
-------------------------
Income From Investment Operations
Net investment income(c)(d) ...................................... .34 .33
Net realized and unrealized gain (loss) on investment transactions (0.26) .15
-------------------------
Net increase in net asset value from operations .................. .08 .48
-------------------------
Less: Dividends and Distributions
Dividends from net investment income ............................. (.35) (.36)
Distributions from net realized gain on investment transactions .. -0- (.23)
-------------------------
Total dividends and distributions ................................ (.35) (.59)
-------------------------
Net asset value, end of period ................................... $ 10.15 $ 10.42
=========================
Total Return
Total investment return based on net asset value(e) .............. .81% 4.63%
Ratios/Supplemental Data
Net assets, end of period (000's omitted) ........................ $ 13 $ 16
Ratio to average net assets of:
Expenses, net of waivers/reimbursements ........................ 1.18% 1.18%(f)
Expenses, before waivers/reimbursements ........................ 1.40% 1.45%(f)
Net investment income(d) ....................................... 3.31% 2.98%(f)
Portfolio turnover rate .......................................... 935% 658%
See footnote summary on page 45.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO o 43
Financial Highlights
- --------------------------------------------------------------------------------
Selected Data For A Share Of Capital Stock Outstanding Throughout The Period
-----------
Class K
-----------
March 1,
2005(g) to
October 31,
2005
-----------
Net asset value, beginning of period........................ $ 10.34
-----------
Income From Investment Operations
Net investment income(c)(d)................................. .26
Net realized and unrealized loss on investment transactions. (.17)
-----------
Net increase in net asset value from operations............. .09
-----------
Less: Dividends
Dividends from net investment income........................ (.27)
-----------
Net asset value, end of period.............................. $ 10.16
===========
Total Return
Total investment return based on net asset value(e)......... .82%
Ratios/Supplemental Data
Net assets, end of period (000's omitted)................... $10
Ratio to average net assets of:
Expenses, net of waivers/reimbursements(f)................ .93%
Expenses, before waivers/reimbursements(f)................ 1.15%
Net investment income(d)(f)............................... 3.76%
Portfolio turnover rate..................................... 935%
See footnote summary on page 45.
- --------------------------------------------------------------------------------
44 o ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO
Financial Highlights
- --------------------------------------------------------------------------------
Selected Data For A Share Of Capital Stock Outstanding Throughout The Period
-----------
Class I
-----------
March 1,
2005(g) to
October 31,
2005
-----------
Net asset value, beginning of period........................ $ 10.34
-----------
Income From Investment Operations
Net investment income(c)(d)................................. .27
Net realized and unrealized loss on investment transactions. (.17)
-----------
Net increase in net asset value from operations............. .10
-----------
Less: Dividends
Dividends from net investment income........................ (.28)
-----------
Net asset value, end of period.............................. $ 10.16
===========
Total Return
Total investment return based on net asset value(e)......... .97%
Ratios/Supplemental Data
Net assets, end of period (000's omitted)................... $10
Ratio to average net assets of:
Expenses, net of waivers/reimbursements(f)................ .68%
Expenses, before waivers/reimbursements(f)................ .89%
Net investment income(d)(f)............................... 3.98%
Portfolio turnover rate..................................... 935%
(a) The Portfolio changed its fiscal year end from June 30 to October 31.
(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
$.05, increase net realized and unrealized gain on investments per share
by $.05 for Class A, B and C, respectively, and by $.06 for the Advisor
Class, and decrease the ratio of net investment income to average net
assets from 4.93% to 4.39% for Class A, from 4.24% to 3.70% for Class B,
from 4.25% to 3.71% for Class C and from 5.24% to 4.69% 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 fees waived and expenses 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 Portfolio distributions
or the redemption of Portfolio shares. Total investment return calculated
for a period of less than one year is not annualized.
(f) Annualized.
(g) Commencement of distribution.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO o 45
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of
Directors of AllianceBernstein Bond Fund, Inc. Quality Bond Portfolio
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the Quality Bond Portfolio (the "Portfolio")
one of the portfolios constituting the AllianceBernstein Bond Fund, Inc., as of
October 31, 2005, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended and the financial highlights for each of the periods indicated
therein. These financial statements and financial highlights are the
responsibility of the Portfolio'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 October 31, 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
Quality Bond Portfolio of the AllianceBernstein Bond Fund, Inc. at October 31,
2005, the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended and the financial
highlights for each of the periods indicated therein in conformity with U.S.
generally accepted accounting principles.
/s/ Ernst & Young LLP
New York, New York
December 16, 2005
- --------------------------------------------------------------------------------
46 o ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO
Board of Directors
- --------------------------------------------------------------------------------
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(1)
Marshall C. Turner(1)
OFFICERS(2)
Philip L. Kirstein, Senior Vice President and Independent Compliance Officer
Alison Martier, Vice President
Jeffrey S. Phlegar, Vice President
Greg Wilensky, 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, the Governance and Nominating Committee,
and the Independent Directors Committee.
(2) The day-to-day management of and investment decisions for the Fund's
portfolio are made by the U.S. Investment Grade: Core Fixed Income
Investment Team. Mr. Greg Wilensky and Ms. Alison Martier are the
investment professionals with the most significant responsibility for the
day-to-day mangement of the Fund's portfolio.
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ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO o 47
Management of the Fund
- --------------------------------------------------------------------------------
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
(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
Suite 100 was formerly Senior Manager
Greenwich, CT 06830 of Barrett Associates, Inc., a
9/7/32 registered investment adviser,
(1998) with which he had been associ-
ated since 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 an 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, (insu-
rance) Director of Avon, BP (oil
and gas), Ecolab Incorporated
(specialty chemicals), Tandem
Financial Group, and Donaldson,
Lufkin & Jenrette Securities
Corporation, former Governor
at Large, National Association of
Securities Dealers, Inc.
David H. Dievler, # 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
(1987) ("ACMC") responsible for mutual
fund administration. Prior to
joining ACMC in 1984, he was
Chief Financial Officer of
Eberstadt Asset Management
since 1968. Prior to that, he was
Senior Manager at Price
Waterhouse & Co. Member of
American Institute of Certified
Public Accountants since 1953.
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48 o ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO
Management of the Fund
- --------------------------------------------------------------------------------
PORTFOLIOS
IN FUND OTHER
NAME, ADDRESS, PRINCIPAL COMPLEX DIRECTORSHIPS
DATE OF BIRTH OCCUPATION(S) OVERSEEN BY HELD BY
(YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR
- -----------------------------------------------------------------------------------------------
DISINTERESTED DIRECTORS
(continued)
John H. Dobkin, # Consultant. Formerly President 106 None
P.O. Box 12 of 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 2004. Formerly 106 Asia Pacific
c/o Alliance Capital managing partner of Lexington Fund, Inc.
Management LP Capital, LLC (investment advisory and The
1345 Avenue of the firm) from December 1997 until Merger Fund
Americas December 2003. Prior thereto,
New York, NY 10105 Chairman and CEO of Prudential
Attn: Phillip L. Kirstein Mutual Fund Management
1/25/44 from 1987 to 1993.
(2005)
D. James Guzy, # Chairman of the Board of PLX 106 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, # Principal of Turner Venture 106 Toppan
220 Montgomery Street Associates (venture capital and Photomasks, Inc.,
Penthouse 10 consulting) since prior to 2000. the George
San Francisco, Chairman and CEO, DuPont Lucas
CA 94104 Photomasks, Inc., Austin, Texas, Educational
10/10/41 2003 - 2005, and President and Foundation and
(2005) CEO since company acquired, Chairman of the
and name changed to Toppan Board of the
Photomasks, Inc. in 2005 (semi- Smithsonian's
conductor manufacturing National
services). Museum of
Natural History
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO o 49
Management of the Fund
- --------------------------------------------------------------------------------
PORTFOLIOS
IN FUND OTHER
NAME, ADDRESS, PRINCIPAL COMPLEX DIRECTORSHIPS
DATE OF BIRTH OCCUPATION(S) OVERSEEN BY HELD BY
(YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR
- -----------------------------------------------------------------------------------------------
INTERESTED DIRECTOR
Marc O. Mayer, ++ Executive Vice President of ACMC 106 SCB Partners,
1345 Avenue of the since 2001; prior thereto, Chief Inc., SCB, Inc.
Americas Executive Officer of Sanford C.
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, until
October 21, 2004 by reason of her ownership of equity securities of a
controlling person of the Adviser. Such Securities were sold for
approximately $2,400 on October 21, 2004. Ms. Block received shares of The
Equitable Companies Incorporated as part of the demutualization of The
Equitable Life Assurance Society of the United States. Her Equitable
shares were subsequently converted through a corporate action into 116
American Depositary shares of AXA.
# Member of the Audit Committee, Governance and Nominating Committee, and
the Independent Directors Committee.
++ Mr. Mayer is an "interested director", as defined in the 1940 Act, due to
his position as Executive Vice President of ACMC, investment adviser.
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50 o ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO
Management of the Fund
- --------------------------------------------------------------------------------
Officer Information
Certain information concerning the Fund's Officers is set forth below.
NAME, ADDRESS* PRINCIPAL 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.
Alison Martier Vice President Senior Vice President of ACMC**, with
1/29/57 which she has been associated since
prior to 2000.
Jeffrey S. Phlegar Vice President Executive Vice President of ACMC**,
6/28/66 with which he has been associated
since prior to 2000.
Greg Wilensky Vice President Vice President of ACMC**, with which
4/27/67 he has been associated since prior to
2000, and Director of Stable Value
Investments.
Emilie D. Wrapp Secretary Senior Vice President, Assistant
11/13/55 General Counsel and Assistant
Secretary of AllianceBernstein
Investment Research and Manage-
ment, Inc. ("ABIRM)**, with which she
has been associated since prior to
2000.
Mark D. Gersten Treasurer and Senior Vice President of Alliance Global
10/4/50 Chief 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
12/4/64 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.
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO o 51
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 Quality 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 management fee 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;
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52 o ALLIANCEBERNSTEIN BOND FUND QUALITY 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 |information about fees charged by the Adviser to other clients with
similar objectives;
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 confidence in the Adviser's integrity and competence they have gained
from that
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO o 53
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. The directors noted that the Adviser had waived
reimbursement payments in recent periods from the Portfolio in light of the
expense caps currently in effect for the Portfolio.
- --------------------------------------------------------------------------------
54 o ALLIANCEBERNSTEIN BOND FUND QUALITY 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 QUALITY BOND PORTFOLIO o 55
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. The directors noted that 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 showing performance for
Class A shares of the Fund as compared to other funds in the Lipper Intermediate
Investment Grade Debt Funds Average for periods ending March 31, 2005 over the
year to date ("YTD"), 1-, 3- and 5-year and since inception periods (inception
July 1999) and for calendar years 2000 to 2004 and as compared to the Lehman
Brothers U.S. Aggregate Index. The directors also reviewed information from a
report prepared by Lipper showing performance for Class A shares of the Fund as
compared to a group of 12 to 10 funds (depending on the year) in its Lipper
category selected by Lipper (the "Performance Group") and as compared to a
universe of 80 to 47 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- and 5-year periods. The directors noted that the Lipper category
data showed the Fund's performance for the periods ending March 31, 2005 was
slightly above the Lipper median in the YTD period, significantly below the
Lipper median in the 3-year period, and materially below the Lipper median in
the 1- and 5-year and since inception periods, and that the Fund's calendar year
performance was somewhat below the Lipper median in 2001, materially below the
Lipper median in 2004, significantly below the Lipper medians
- --------------------------------------------------------------------------------
56 o ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO
in 2002 and 2003, and significantly above the Lipper median in 2000. The
directors further noted that in the Performance Group and Performance Universe
comparisons, the Portfolio was in the fourth or fifth quintile for all periods
reviewed except that in the 5-year period Performance Group comparison, the
Portfolio was in the third quintile. Based on their review and discussion of the
reasons for the Portfolio's underperformance in many periods with the Adviser,
and steps that had been taken by the Adviser in an effort to address such
underperformance, the directors retained confidence in the Adviser's ability to
continue to advise the Fund and concluded that the Fund's investment performance
was understandable. The directors informed the Adviser that they planned to
closely monitor the Portfolio'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 fees the Adviser charges other clients with
investment objectives similar to those of the Portfolio. For this purpose, they
reviewed information in the Adviser's Form+ADV and a chart prepared by the
Adviser disclosing the institutional fee schedule for institutional products
that have a substantially similar investment style as the Portfolio. They also
received an oral presentation from the Adviser that supplemented such
information. The Adviser manages accounts for institutional clients with a
comparable investment style to the Portfolio. The directors noted that the
institutional fee schedule for these accounts had much lower breakpoints than
the fee schedule in the Advisory Agreement of the Portfolio. The directors also
noted that the application of such fee schedule to the level of assets of the
Portfolio would result in a fee rate that would be materially lower than that in
the Portfolio's Advisory Agreement. The directors noted that the Adviser may, in
some cases, negotiate fee rates with large institutional clients that are lower
than those reviewed by the directors and discussed with the Adviser the level of
such negotiated fees for strategies similar to those of the Portfolio.
The Adviser reviewed with the directors the significant differences in the scope
of services it provides to institutional clients and to the Portfolio. For
example, the Advisory Agreement requires the Adviser to provide, in addition to
investment advice, office facilities and officers (including officers to provide
required certifications). The Adviser also coordinates the provision of services
to the Portfolio by non-affiliated service providers and is responsible for the
compensation of the Fund's Independent Compliance Officer and certain related
expenses. The provision of these non-advisory services involves costs and
exposure to liability. The
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO o 57
Adviser explained that many of these services normally are not provided to
non-investment company clients, and that fees charged to the Portfolio reflect
the costs and risks of the additional obligations. The Adviser also noted that
since the Portfolio is constantly issuing and redeeming its shares, it is more
difficult to manage than an institutional account, where the assets are
relatively stable. In light of these facts, the directors did not place
significant weight on these fee comparisons.
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 Fund'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 in the Portfolio's latest fiscal
year the administrative expense reimbursement by the Fund pursuant to the
Advisory Agreement of two basis points had been waived by the Adviser. The
directors further noted that the Fund's total expense ratio, which benefits from
a cap implemented by the Adviser, was somewhat lower than the median for the
Expense Group, and slightly higher than 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 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
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58 o ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO
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 QUALITY BOND PORTFOLIO o 59
Alliancebernstein Family of Funds
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN FAMILY OF FUNDS
- -------------------------------------------
Wealth Strategies Funds
- -------------------------------------------
Balanced Wealth Strategy
Wealth Appreciation Strategy
Wealth Preservation Strategy
Tax-Managed Balanced Wealth Strategy
Tax-Managed Wealth Appreciation Strategy
Tax-Managed Wealth Preservation Strategy
- -------------------------------------------
Blended Style 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.
- --------------------------------------------------------------------------------
60 o ALLIANCEBERNSTEIN BOND FUND QUALITY BOND 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.
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
* 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 QUALITY BOND PORTFOLIO o 61
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
* 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).
- --------------------------------------------------------------------------------
62 o ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO
days written notice. Pro-forma expense ratio information for each Fund is also
set forth below.
Expense Cap pursuant
to Expense Limitation Pro-Forma Fiscal
Fund Undertaking Expense Ratio** Year End
- --------------------------------------------------------------------------------
AllianceBernstein Quality
Bond Portfolio Advisor -- 0.68% .79% October 31,
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 30,
Class A -- 1.00% 2004
Class B -- 1.72%
Class C -- 1.71%
Class R -- 1.21%
AllianceBernstein
U.S. Government Portfolio Advisor -- 0.71% September 30,
Class A -- 1.01% 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.
** 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 QUALITY BOND PORTFOLIO o 63
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 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
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.
- --------------------------------------------------------------------------------
64 o ALLIANCEBERNSTEIN BOND FUND QUALITY BOND 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
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 in 2004. For the Quality Bond Portfolio, it appears that the Adviser's
profit
** 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 QUALITY BOND PORTFOLIO o 65
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
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
* 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.
** 12b-1 amounts are gross amounts paid to ABIRM.
- --------------------------------------------------------------------------------
66 o ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO
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
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
- --------------------------------------------------------------------------------
ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO o 67
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
Fund Ended March 31, 2005
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
68 o ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO
ALLIANCEBERNSTEIN BOND FUND QUALITY BOND PORTFOLIO
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
[LOGO] ALLIANCEBERNSTEIN(R)
Investment Research and Management
QBPAR1005
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 and quarterly press release review (for those Funds which
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 Quality 2004 $42,000 $4,970 $22,871
Bond Portfolio 2005 $45,000 $3,872 $9,139
(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 registered public accounting firm. 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 preparing 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 Quality 2004 $1,129,573 [ $177,841 ]
Bond Portfolio ( $154,970 )
( $22,871 )
2005 $892,007 [ $180,714 ]
( $171,575 )
( $9,139 )
(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 registered public accounting firm to the Adviser and Service
Affiliates is compatible with maintaining the independent registered public
accounting firm'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: December 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: December 29, 2005
By: /s/ Mark D. Gersten
-------------------
Mark D. Gersten
Treasurer and Chief Financial Officer
Date: December 29, 2005