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
AllianceBernstein 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, 2006
Date of reporting period: October 31, 2006
ITEM 1. REPORTS TO STOCKHOLDERS.
- -------------------------------------------------------------------------------
ANNUAL REPORT
- -------------------------------------------------------------------------------
AllianceBernstein Bond Fund
Intermediate Bond Portfolio
Annual Report
October 31, 2006
[LOGO]
ALLIANCEBERNSTEIN
INVESTMENTS
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(R) 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 Investments, Inc. is an affiliate of AllianceBernstein L.P.,
the manager of the AllianceBernstein funds, and is a member of the NASD.
AllianceBernstein(R) and the AB Logo are registered trademarks and service
marks used by permission of the owner, AllianceBernstein L.P.
December 22, 2006
Annual Report
This report provides management's discussion of fund performance for
AllianceBernstein Bond Fund Intermediate Bond Portfolio (the "Portfolio") for
the annual reporting period ended October 31, 2006. Prior to February 1, 2006,
the Portfolio was named AllianceBernstein Bond Fund Quality Bond Portfolio.
Investment Objective and Policies
This open-end fund's investment objective is to generate income and price
appreciation without assuming what AllianceBernstein considers undue risk. The
Portfolio invests, under normal circumstances, at least 80% of its net assets
in investment-grade fixed-income securities. The Portfolio expects to invest in
readily marketable fixed-income securities with a range of maturities from
short to long term, and relatively attractive yields that do not involve undue
risk of loss of capital. The Adviser expects that the average duration of the
Portfolio's investments will be in the range of three to six years. The
Portfolio may invest up to 20% of its net assets in below-investment-grade
bonds. The Portfolio may invest without limit in U.S. dollar-denominated
foreign fixed-income securities and may invest up to 25% of its assets in
non-U.S. dollar-denominated fixed-income securities whose currency risk will be
fully hedged at the time of investment. These investments may include, in each
case, developed and emerging market debt securities.
Investment Results
The table on page 5 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, 2006.
The Portfolio underperformed its benchmark for the six- and 12-month periods
ended October 31, 2006. The Portfolio's defensive shorter duration positioning
during the latter part of the 12-month period, as U.S. interest rates fell
sharply in the third quarter and bond market returns rallied, detracted from
performance for both the six- and 12-month periods. The Portfolio's underweight
to long corporates and the Portfolio's corporate security selection also
detracted from Portfolio performance for the six- and 12-month periods.
Exposure to hedged non-U.S. government holdings was a positive contributor for
the annual period, as was the modest exposure to high yield and emerging market
debt. Additionally, the Portfolio's overweight to mortgages and commercial
mortgage-backed securities (CMBS) contributed positively to performance for
both periods under review.
The Portfolio's defensive shorter-duration positioning detracted from
performance during the latter half of the six-month period ended October 31,
2006, as both U.S. interest rates fell sharply and bond market returns rallied
in the third quarter of 2006. During the six-month period ended October 31,
2006, both the Portfolio's underweight to long corporate bonds and corporate
security selection also detracted from performance.
ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO o 1
Market Review and Investment Strategy
U.S. fixed-income returns were generally weak in the first three quarters of
the annual period ended October 31, 2006, buffeted by higher interest rates and
continued U.S. Federal Reserve (the "Fed") rate increases. The final three
months of the period, however, saw a broad-based rally in both the fixed-income
and equity markets as the economy slowed, oil prices declined and the Fed ended
its interest rate hike cycle. The Fed raised official rates 150 basis points in
quarter-point increments to 5.25% in the annual period ended October 31, 2006.
Yields across the maturity spectrum rose as the Fed raised rates, with the
10-year yield gaining five basis points, ending the period at 4.63%. The
Treasury yield curve remained flat with the yield spread between the two-year
yield and the 30-year yield at only one basis point.
By index sector, mortgages and CMBS securities led, with each posting returns
of 5.68% and 5.53% respectively, according to Lehman Brothers. Mortgages
benefited from relatively low volatility and muted prepayment risk while CMBS
securities were helped by improving delinquency trends and strong demand.
Investment-grade corporate bonds posted a return of 5.40%, as healthy corporate
fundamentals outweighed increasing event risk.
Non-U.S. government bonds matched U.S. Treasuries, with Global Treasuries
(ex-U.S. hedged into the U.S. dollar) posting an average return of 4.41%, and
U.S. Treasuries returning 4.43% for the annual period ended October 31, 2006.
Most central banks outside of the U.S. held off raising interest rates through
much of the period. Non-U.S. holdings in the Portfolio included Japan,
returning 5.20%, Sweden, returning 3.66%, Mexico, returning 10.54% and Poland,
returning 6.26%, most of which substantially outperformed U.S. Treasuries on a
hedged basis, according to Lehman Brothers.
During the annual reporting period ended October 31, 2006, the Portfolio held a
shorter-than-benchmark duration and an underweight position in U.S. government
bonds. The Portfolio was also overweighted in both mortgages and CMBS, which
had been projected as sources of high-quality incremental yield. Additionally,
the Portfolio reduced corporate exposure to a below-benchmark position due to
historically tight spreads, a flat yield curve and increased event risk. The
Portfolio also maintained an underweight in longer-maturity corporate bonds,
which are inherently more vulnerable to event risk. As U.S. interest rates
trended higher, the Portfolio employed hedged non-U.S. government bonds, which
offered an attractive yield over domestic bonds. As such, the Portfolio held
positions in several countries including Japan, Mexico, Poland, Sweden and
Norway.
2 o ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO
HISTORICAL PERFORMANCE
An Important Note About the Value of Historical Performance
The performance shown on the following pages represents past performance and
does not guarantee future results. Current performance may be lower or higher
than the performance information shown. You may obtain performance information
current to the most recent month-end by visiting www.alliancebernstein.com.
The investment return and principal value of an investment in the Portfolio
will fluctuate, so that your shares, when redeemed, may be worth more or less
than their original cost. You should consider the investment objectives, risks,
charges and expenses of the Portfolio carefully before investing. For a free
copy of the Portfolio's prospectus, which contains this and other information,
visit our website at www.alliancebernstein.com or call your financial advisor
or AllianceBernstein Investments at 800.227.4618. You should read the
prospectus carefully before you invest.
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 the
different share classes will vary due to different expenses associated with
each class. 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 Intermediate Bond
Portfolio expenses on an annual basis to 0.98%, N/A, 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.
(Historical Performance continued on next page)
ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO o 3
HISTORICAL PERFORMANCE
(continued from previous page)
A Word About Risk
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 in mortgage-related and other asset-backed
securities which are subject to prepayment risk; the risk that early payments
on principal on some mortgage-related securities may occur during periods of
falling mortgage rates and expose the Portfolio to a lower rate of return upon
reinvestment of principal. 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.
Investments in the Portfolio are not guaranteed because of fluctuation in the
net asset value of the underlying fixed-income related investments. Similar to
direct bond ownership, bond funds have the same interest rate, inflation and
credit risks that are associated with the underlying bonds owned by the
Portfolio. Portfolio purchasers should understand that, in contrast to owning
individual bonds, there are ongoing fees and expenses associated with owning
shares of bond funds. The Portfolio may invest in high yield bonds (i.e., junk
bonds) which involves a greater risk of default and price volatility than other
bonds. Investing in non-investment grade presents special risks, including
credit risk. The Portfolio is also subject to leverage risk. When a fund
borrows money or otherwise leverages its portfolio, it may be volatile because
leverage tends to exaggerate the effect of any increase or decrease in the
value of a fund's investments. A fund may create leverage through the use of
reverse repurchase agreements, forward contracts or dollar rolls or by
borrowing money. 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 Portfolio's prospectus.
(Historical Performance continued on next page)
4 o ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO
HISTORICAL PERFORMANCE
(continued from previous page)
THE PORTFOLIO VS. ITS BENCHMARK
PERIODS ENDED OCTOBER 31, 2006
Returns
--------------------------
6 Months 12 Months
- --------------------------------------------------------------------------
AllianceBernstein Bond Fund Intermediate
Bond Portfolio
Class A 4.03% 4.51%
Class B 4.12% 4.20%
Class C 3.78% 3.80%
Advisor Class* 4.18% 4.83%
Class R* 4.03% 4.31%
Class K* 4.14% 4.54%
Class I* 4.18% 4.71%
Lehman Brothers U.S. Aggregate Index 4.60% 5.19%
* Please note that these share classes are for investors purchasing shares
through institutional pension plans and investment advisory clients of, and
certain other persons associated with, the Adviser and its affiliates or the
Funds.
GROWTH OF A $10,000 INVESTMENT IN THE PORTFOLIO
7/1/99* TO 10/31/06
AllianceBernstein Bond Fund Intermediate Bond Portfolio Class A: $14,008
LB U.S. Aggregate Index: $15,515
[THE FOLLOWING DATA WAS REPRESENTED BY A MOUNTAIN CHART IN THE PRINTED MATERIAL]
AllianceBernstein
Bond Fund
Intermediate LB U.S.
Bond Portfolio Aggregate
Class A Index
- ------------------------------------------------------------
7/1/99 $ 9,575 $10,000
10/31/99 $ 9,682 $10,122
10/31/00 $10,325 $10,861
10/31/01 $11,723 $12,442
10/31/02 $12,136 $13,175
10/31/03 $12,687 $13,821
10/31/04 $13,278 $14,585
10/31/05 $13,397 $14,750
10/31/06 $14,008 $15,515
* 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 Intermediate Bond Portfolio Class A shares (from
7/1/99 to 10/31/06) as compared to the performance of its 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 Fund and assumes
the reinvestment of dividends and capital gains distributions.
See Historical Performance and Benchmark disclosures on pages 3-4.
(Historical Performance continued on next page)
ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO o 5
HISTORICAL PERFORMANCE
(continued from previous page)
AVERAGE ANNUAL RETURNS AS OF OCTOBER 31, 2006
NAV Returns SEC Returns
- -------------------------------------------------------------------------------
Class A Shares
1 Year 4.51% 0.07%
5 Years 3.62% 2.73%
Since Inception* 5.32% 4.70%
SEC Yields** 3.78%
Class B Shares
1 Year 4.20% 1.20%
5 Years 3.00% 3.00%
Since Inception* 4.72% 4.72%
SEC Yields** 4.64%
Class C Shares
1 Year 3.80% 2.80%
5 Years 2.93% 2.93%
Since Inception* 4.57% 4.57%
SEC Yields** 3.23%
Advisor Class Shares+
1 Year 4.83% 4.83%
5 Years 3.95% 3.95%
Since Inception* 5.55% 5.55%
SEC Yields** 4.25%
Class R Shares+
1 Year 4.31% 4.31%
Since Inception* 3.24% 3.24%
SEC Yields** 3.74%
Class K Shares+
1 Year 4.54% 4.54%
Since Inception* 3.20% 3.20%
SEC Yields** 3.99%
Class I Shares+
1 Year 4.71% 4.71%
Since Inception* 3.40% 3.40%
SEC Yields** 4.24%
* 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, 2006.
+ These share classes are offered at net asset value (NAV) to eligible
investors and their SEC returns are the same as the NAV returns. Please note
that these share classes are for investors purchasing shares through
institutional pension plans and investment advisory clients of, and certain
other persons associated with, the Adviser and its affiliates or the Funds. The
inception dates for these share classes are listed above.
See Historical Performance disclosures on page 3-4.
(Historical Performance continued on next page)
6 o ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO
HISTORICAL PERFORMANCE
(continued from previous page)
SEC AVERAGE ANNUAL RETURNS (WITH ANY APPLICABLE SALES CHARGES)
AS OF THE MOST RECENT CALENDAR QUARTER-END (SEPTEMBER 30, 2006)
SEC Returns
- -------------------------------------------------------------------------------
Class A Shares
1 Year -1.44%
5 Years 2.97%
Since Inception* 4.67%
Class B Shares
1 Year -0.41%
5 Years 3.21%
Since Inception* 4.68%
Class C Shares
1 Year 1.29%
5 Years 3.18%
Since Inception* 4.55%
Advisor Class Shares+
1 Year 3.29%
5 Years 4.21%
Since Inception* 5.51%
Class R Shares+
1 Year 2.77%
Since Inception* 3.12%
Class K Shares+
1 Year 3.01%
Since Inception* 2.96%
Class I Shares+
1 Year 3.18%
Since Inception* 3.16%
* 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.
+ Please note that these share classes are for investors purchasing shares
through institutional pension plans and investment advisory clients of, and
certain other persons associated with, the Adviser and its affiliates or the
Funds. The inception dates for these share classes are listed above.
See Historical Performance disclosures on page 3-4.
ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO o 7
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, 2006 October 31, 2006 During Period*
----------------------- --------------------------- ----------------------
Actual Hypothetical Actual Hypothetical** Actual Hypothetical
------ ------------ --------- -------------- ------ ------------
Class A $1,000 $1,000 $1,040.26 $1,020.27 $ 5.04 $ 4.99
Class B $1,000 $1,000 $1,041.22 $1,020.01 $ 5.30 $ 5.24
Class C $1,000 $1,000 $1,037.79 $1,016.74 $ 8.63 $ 8.54
Advisor
Class $1,000 $1,000 $1,041.82 $1,021.78 $ 3.50 $ 3.47
Class R $1,000 $1,000 $1,040.28 $1,019.26 $ 6.07 $ 6.01
Class K $1,000 $1,000 $1,041.38 $1,020.52 $ 4.79 $ 4.74
Class I $1,000 $1,000 $1,041.81 $1,021.78 $ 3.50 $ 3.47
* Expenses are equal to the classes' annualized expense ratios of 0.98%,
1.03%, 1.68%, 0.68%, 1.18%, 0.93% and 0.68%, respectively, multiplied by the
average account value over the period, multiplied by 184/365 (to reflect the
one-half year period).
** Assumes 5% return before expenses.
8 o ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO
PORTFOLIO SUMMARY
October 31, 2006
PORTFOLIO STATISTICS
Net Assets ($mil): $120.3
SECURITY TYPE BREAKDOWN*
[ ] 38.3% U.S. Government & Government [PIE CHART OMITTED]
Sponsored Agency Obligations
[ ] 14.4% Non U.S. Dollar Sovereign Debt
[ ] 13.6% Corporate Debt Obligations
[ ] 8.9% Commercial Mortgage Backed Securities
[ ] 4.1% U.S. Dollar Sovereign Debt
[ ] 3.4% Asset Backed Securities
[ ] 3.4% Collateralized Mortgage Obligations
[ ] 13.9% Short-Term
* All data are as of October 31, 2006. The Portfolio's security type breakdown
is expressed as a percentage of total investments (excluding security lending
collateral) and may vary over time.
ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO o 9
PORTFOLIO OF INVESTMENTS
October 31, 2006
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
U.S. GOVERNMENT & GOVERNMENT
SPONSORED AGENCY
OBLIGATIONS-44.3%
Mortgage Pass Thru's-41.3%
Federal Home Loan Mortgage Corp.
3.869%, 10/01/34(a)(b) $ 389 $ 385,096
4.50%, 8/01/35-11/01/35(a) 2,411 2,263,673
5.00%, 4/01/21(a) 953 938,696
Federal National Mortgage Association
4.116%, 12/01/34(a)(b) 438 437,700
4.125%, 11/01/34(a)(b) 590 590,252
4.50%, 4/01/20-1/01/21(a) 3,790 3,665,918
4.646%, 7/01/35(a)(b) 536 532,815
5.00%, 4/01/19-2/01/36(a) 5,999 5,850,121
5.49%, 5/01/36(a)(b) 184 184,469
5.50%, 4/01/33-2/01/35(a) 9,047 8,964,456
5.50%, TBA 10,205 10,083,816
5.808%, 3/01/36(a)(b) 658 665,113
5.941%, 6/01/36(a)(b) 472 475,212
6.00%, TBA 4,885 4,914,007
6.50%, 1/01/36(a) 480 490,201
6.50%, TBA 3,670 3,739,958
Government National Mortgage Association
6.00%, 3/15/36(a) 2,317 2,349,330
6.00%, TBA 3,115 3,152,612
------------
49,683,445
U.S. Treasury Bonds-2.0%
United States Treasury Bonds
4.50%, 2/15/36(a)* 2,480 2,393,587
Federal Agency - Collateralized Mortgage
Obligations-1.0%
Fannie Mae Grantor Trust
Series 2004-T5 Class AB4
5.60%, 5/28/35(a)(b) 210 209,935
Federal Home Loan Mortgage Corp.
Series R007 Class AC
5.875%, 5/15/16(a) 1,021 1,027,517
------------
1,237,452
Total U.S. Government & Government
Sponsored Agency Obligations
(cost $53,175,262) 53,314,484
NON U.S. DOLLAR SOVEREIGN DEBT-16.7%
Japan (Government of)
0.70%, 6/20/10(a) JPY 857,050 7,252,107
0.80%, 9/10/15(a) 302,806 2,527,979
10 o ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
Norway (Kingdom of)
6.00%, 5/16/11(a) NOK 6,050 $ 996,217
Poland (Government of)
6.00%, 11/24/10(a) PLN 1,865 635,745
6.25%, 10/24/15(a) 3,890 1,371,733
Sweden (Kingdom of)
5.00%, 1/28/09(a) SEK 8,505 1,215,269
5.25%, 3/15/11(a) 19,170 2,827,299
United Mexican States
8.00%, 12/24/08-12/19/13(a) MXN 27,920 2,615,360
9.00%, 12/20/12(a) 6,445 630,723
Total Non U.S. Dollar Sovereign Debt
(cost $19,834,216) 20,072,432
CORPORATE DEBT OBLIGATIONS-15.8%
Financial Institutions-3.8%
Banking-2.7%
Barclays Bank PLC
8.55%, 6/15/49(a)(c) $ 339 382,008
BOI Capital Funding Number 2
5.571%, 2/01/49(a)(c) 115 112,264
Mitsubishi UFG Capital Finance 1, Ltd.
6.346%, 7/29/49(a)(b) 115 116,138
RBS Capital Trust III
5.512%, 9/29/49(a)(b) 358 352,224
Resona Preferred Global Securities
7.191%, 12/29/49(a)(c) 176 184,539
Sanwa Bank, Ltd.
7.40%, 6/15/11(a) 100 108,042
Sumitomo Mitsui Banking Corp.
5.625%, 7/29/49(a)(c) 107 104,697
The Huntington National Bank
4.375%, 1/15/10(a) 183 178,078
UBS Preferred Funding Trust I
8.622%, 10/29/49(a)(b) 230 255,728
UFJ Finance Aruba AEC
6.75%, 7/15/13(a) 172 184,281
Wachovia Capital Trust III
5.80%, 8/29/49(a)(b) 235 237,070
Washington Mutual, Inc.
4.00%, 1/15/09(a)* 400 390,436
Wells Fargo & Co.
4.20%, 1/15/10(a) 457 444,466
Zions Bancorporation
5.50%, 11/16/15(a) 170 168,293
------------
3,218,264
ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO o 11
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
Finance Companies-0.6%
American General Finance Corp.
4.625%, 5/15/09(a) $ 530 $ 521,308
General Electric Capital Corp.
6.75%, 3/15/32(a) 76 87,755
iStar Financial, Inc.
5.15%, 3/01/12(a) 146 142,648
------------
751,711
Insurance-0.5%
Assurant, Inc.
5.625%, 2/15/14(a) 172 172,550
Humana, Inc.
6.30%, 8/01/18(a) 166 168,041
Liberty Mutual Group
5.75%, 3/15/14(a)(c) 167 168,571
WellPoint, Inc.
3.75%, 12/14/07(a) 73 71,717
------------
580,879
------------
4,550,854
Industrial-9.3%
Basic Industry-0.9%
International Paper Co.
5.30%, 4/01/15(a) 235 227,404
Ispat Inland ULC
9.75%, 4/01/14(a) 118 132,160
Lubrizol Corp.
4.625%, 10/01/09(a) 150 147,256
Packaging Corp. of America
5.75%, 8/01/13(a) 196 192,523
Rhodia, SA
10.25%, 6/01/10(a) 85 96,263
Westvaco Corp.
8.20%, 1/15/30(a) 85 95,313
Weyerhaeuser Co.
5.95%, 11/01/08(a) 202 203,920
------------
1,094,839
Capital Goods-0.7%
Hutchison Whampoa International, Ltd.
7.45%, 11/24/33(a)(c) 216 248,366
Textron Financial Corp.
4.125%, 3/03/08(a) 160 157,442
Tyco International Group, SA
6.00%, 11/15/13(a) 195 202,445
Waste Management, Inc.
6.875%, 5/15/09(a) 250 259,541
------------
867,794
Communications-5.4%
AT&T Broadband Corp.
9.455%, 11/15/22(a) 174 227,218
12 o ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
AT&T Corp.
8.00%, 11/15/31(a) $ 80 $ 100,226
AT&T Wireless Services, Inc.
8.75%, 3/01/31(a) 181 237,173
British Sky Broadcasting Group PLC
6.875%, 2/23/09(a) 86 88,778
British Telecommunications PLC
8.375%, 12/15/10(a) 524 588,522
BSKYB Finance United Kingdom PLC
5.625%, 10/15/15(a)(c) 270 266,210
CenturyTel, Inc.
Series G
6.875%, 1/15/28(a) 195 188,751
Cingular Wireless LLC
5.625%, 12/15/06(a) 316 316,003
Clear Channel Communications, Inc.
5.50%, 9/15/14(a) 275 232,996
Comcast Cable Communication, Inc.
6.875%, 6/15/09(a) 287 298,370
Comcast Corp.
5.50%, 3/15/11(a) 313 315,051
Embarq Corp.
6.738%, 6/01/13(a) 25 25,695
New Cingular Wireless Services, Inc.
7.875%, 3/01/11(a) 575 630,413
News America, Inc.
6.55%, 3/15/33(a) 142 143,414
R.R. Donnelley & Sons Co.
4.95%, 4/01/14(a) 85 76,543
Sprint Capital Corp.
8.375%, 3/15/12(a) 626 704,021
Telecom Italia Capital
4.00%, 11/15/08-1/15/10(a) 745 713,055
6.375%, 11/15/33(a) 110 104,639
Time Warner Entertainment Co.
8.375%, 3/15/23(a) 325 383,612
Verizon Global Funding Corp.
4.90%, 9/15/15(a) 180 171,788
Verizon New Jersey, Inc.
5.875%, 1/17/12(a) 220 223,690
Vodafone Group PLC
5.50%, 6/15/11(a) 295 297,033
WPP Finance Corp.
5.875%, 6/15/14(a) 149 149,659
------------
6,482,860
Consumer Cyclical-0.8%
Centex Corp.
5.45%, 8/15/12(a) 179 176,164
DaimlerChrysler North America Corp.
4.875%, 6/15/10(a) 137 133,758
ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO o 13
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
Starwood Hotels & Resorts Worldwide, Inc.
7.375%, 11/15/15(a) $ 206 $ 208,060
7.875%, 5/01/12(a) 235 246,456
Toll Brothers Finance Corp.
6.875%, 11/15/12(a) 120 122,804
------------
887,242
Consumer Non Cyclical-0.9%
Altria Group, Inc.
7.75%, 1/15/27(a) 220 269,904
ConAgra Foods, Inc.
6.75%, 9/15/11(a) 56 59,218
7.875%, 9/15/10(a) 120 130,555
Safeway, Inc.
4.125%, 11/01/08(a) 96 93,625
6.50%, 3/01/11(a) 82 84,889
Tyson Foods, Inc.
8.25%, 10/01/11(a) 225 241,329
Wyeth
5.50%, 2/01/14(a) 233 234,393
------------
1,113,913
Energy-0.2%
Amerada Hess Corp.
7.875%, 10/01/29(a) 222 263,776
Technology-0.4%
Cisco Systems, Inc.
5.25%, 2/22/11(a) 120 120,724
International Business Machines Corp.
4.375%, 6/01/09(a) 75 73,812
Motorola, Inc.
7.625%, 11/15/10(a) 28 30,380
Oracle Corp.
5.25%, 1/15/16(a) 280 276,165
------------
501,081
------------
11,211,505
Utilities-2.7%
Electric-2.3%
Carolina Power & Light Co.
6.50%, 7/15/12(a) 345 365,313
Consumers Energy Co.
4.25%, 4/15/08(a) 116 114,102
Duke Capital LLC
Senior Note
8.00%, 10/01/19(a) 311 365,289
Exelon Corp.
6.75%, 5/01/11(a) 280 293,679
FirstEnergy Corp.
7.375%, 11/15/31(a) 279 326,351
MidAmerican Energy Holdings Co.
5.875%, 10/01/12(a) 162 165,775
14 o ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
NiSource Finance Corp.
7.875%, 11/15/10(a) $ 154 $ 166,490
Progress Energy, Inc.
7.10%, 3/01/11(a) 233 249,490
Public Service Co. of Colorado
7.875%, 10/01/12(a) 176 198,749
SPI Electricity & Gas Australia Holdings
Pty Ltd.
6.15%, 11/15/13(a)(c) 283 294,305
Xcel Energy, Inc.
7.00%, 12/01/10(a) 170 180,349
------------
2,719,892
Natural Gas-0.4%
Duke Energy Field Services Corp.
7.875%, 8/16/10(a) 94 101,799
Enterprise Products Operating LP
Series B
5.60%, 10/15/14(a) 157 154,933
Kinder Morgan Finance Corp.
5.35%, 1/05/11(a) 221 215,842
------------
472,574
------------
3,192,466
Total Corporate Debt Obligations
(cost $19,189,486) 18,954,825
COMMERCIAL MORTGAGE BACKED
SECURITIES-10.3%
Banc America Commercial Mortgage, Inc.
Series 2001-PB1 Class A2
5.787%, 5/11/35(a) 309 315,966
Series 2004-4 Class A3
4.128%, 7/10/42(a) 365 355,326
Series 2004-6 Class A2
4.161%, 12/10/42(a) 480 466,817
Bear Stearns Commercial Mortgage
Securities, Inc.
Series 2005-T18 Class A4
4.933%, 2/13/42(a)(b) 610 595,516
Citigroup Commercial Mortgage Trust
Series 2004-C1 Class A4
5.356%, 4/15/40(a)(b) 560 566,602
Credit Suisse Mortgage Capital Certificates
Series 2006-C3 Class A3
5.828%, 6/15/38(a)(b) 555 578,404
CS First Boston Mortgage Securities Corp.
Series 2003-CK2 Class A2
3.861%, 3/15/36(a) 316 308,688
Series 2004-C1 Class A4
4.75%, 1/15/37(a) 180 174,477
Series 2005-C1 Class A4
5.014%, 2/15/38(a)(b) 534 524,096
ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO o 15
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
GE Capital Commercial Mortgage Corp.
Series 2005-C3 Class A3FX
4.863%, 7/10/45(a) $ 585 $ 579,688
Greenwich Capital Commercial Funding Corp.
Series 2003-C1 Class A4
4.111%, 7/05/35(a) 388 364,673
Series 2005-GG3 Class A2
4.305%, 8/10/42(a) 642 626,607
GS Mortgage Securities Corp. II
Series 2004-GG2 Class A6
5.396%, 8/10/38(a)(b) 375 377,468
JPMorgan Chase Commercial Mortgage
Securities
Series 2005-LDP1 Class A4
5.038%, 3/15/46(a)(b) 649 637,402
Series 2005-LDP3 Class A2
4.851%, 8/15/42(a) 515 509,203
Series 2005-LDP4 Class A2
4.79%, 10/15/42(a) 365 360,159
Series 2006-CB14 Class A4
5.481%, 12/12/44(a)(b) 250 253,229
Series 2006-CB15 Class A4
5.814%, 6/12/43(a)(b) 375 388,564
LB-UBS Commercial Mortgage Trust
Series 2003-C3 Class A4
4.166%, 5/15/32(a) 555 522,249
Series 2004-C4 Class A4
5.134%, 6/15/29(a)(b) 195 197,307
Series 2004-C8 Class A2
4.201%, 12/15/29(a) 381 370,948
Series 2005-C1 Class A4
4.742%, 2/15/30(a) 426 411,493
Series 2005-C7 Class A4
5.197%, 11/15/30(a)(b) 435 432,347
Merrill Lynch Mortgage Trust
Series 2005-CKI1 Class A6
5.244%, 11/12/37(a)(b) 360 360,557
Series 2005-MKB2 Class A2
4.806%, 9/12/42(a) 785 776,686
Merrill Lynch/Countrywide Commercial
Mortgage Trust
Series 2006-2 Class A4
5.91%, 6/12/46(a)(b) 370 388,219
Morgan Stanley Capital I
Series 2005-HQ5 Class A4
5.168%, 1/14/42(a) 944 936,363
Total Commercial Mortgage Backed Securities
(cost $12,442,111) 12,379,054
16 o ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
U.S. DOLLAR SOVEREIGN DEBT-4.7%
Brazil (Republic of)
8.25%, 1/20/34(a) $ 1,225 $ 1,430,187
Peru (Republic of)
7.35%, 7/21/25(a) 665 726,513
Russian Federation
5.00%, 3/31/30(a)(b) 2,264 2,535,680
United Mexican States
5.625%, 1/15/17(a) 1,016 1,008,380
Total U.S. Dollar Sovereign Debt
(cost $5,457,218) 5,700,760
ASSET-BACKED SECURITIES-4.0%
Asset Backed Funding Certificates
Series 2003-WF1 Class A2
6.08%, 12/25/32(a)(b) 169 169,701
Bear Stearns Asset Backed Securities, Inc.
Series 2005-SD1 Class 1A1
5.47%, 4/25/22(a)(b) 110 110,373
Capital Auto Receivables Asset Trust
Series 2005-SN1A Class A3A
4.10%, 6/15/08(a) 549 547,093
Capital One Prime Auto Receivables Trust
Series 2005-1 Class A3
4.32%, 8/15/09(a) 640 635,413
Citifinancial Mortgage Securities, Inc.
Series 2003-1 Class AFPT
3.36%, 1/25/33(a)(b) 150 135,516
Credit-Based Asset Servicing &
Securities Trust
Series 2005-CB7 Class AF2
5.147%, 11/25/35(a)(b) 330 327,483
Credit-Based Asset Servicing &
Securities, Inc.
Series 2003-CB1 Class AF
3.45%, 1/25/33(a)(b) 316 301,035
DB Master Finance, LLC
Series 2006-1 Class A2
5.779%, 6/20/31(a)(c) 100 101,580
GE-WMC Mortgage Securities LLC
Series 2005-2 Class A2B
5.49%, 12/25/35(a)(b) 365 365,153
Home Equity Mortgage Trust
Series 2005-2 Class A1
5.50%, 7/25/35(a)(b) 58 58,034
Series 2006-1 Class A2
5.30%, 5/25/36(a)(b) 160 159,698
Household Home Equity Loan Trust
Series 2005-3 Class A1
5.58%, 1/20/35(a)(b) 314 314,922
HSI Asset Securitization Corp. Trust
Series 2006-OPT2 Class 2A1
5.40%, 1/25/36(a)(b) 222 221,653
ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO o 17
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
RAAC Series
Series 2006-SP3 Class A1
5.41%, 8/25/36(a)(b) $ 284 $ 283,686
Residential Asset Mortgage Products, Inc.
Series 2005-RS3 Class AIA2
5.49%, 3/25/35(a)(b) 368 368,761
Residential Asset Securities Corp.
Series 2002-KS7 Class A2
5.69%, 11/25/32(a)(b) 55 55,277
Residential Funding Mortgage Securities II
Series 2005-HI2 Class A3
4.46%, 5/25/35(a) 285 280,956
Saxon Asset Securities Trust
Series 2005-4 Class A2B
5.50%, 11/25/37(a)(b) 375 375,352
Total Asset-Backed Securities
(cost $4,836,888) 4,811,686
COLLATERALIZED MORTGAGE
OBLIGATIONS-3.9%
Bear Stearns Alt-A Trust
Series 2005-10 Class 24A1
5.954%, 1/25/36(a)(b) 490 494,399
Citigroup Mortgage Loan Trust, Inc.
Series 2005-2 Class 1A4
5.114%, 5/25/35(a)(b) 679 672,239
Series 2006-AR1, Class 3A1
5.50%, 3/25/36(a)(b) 851 846,127
Countrywide Alternative Loan Trust
Series 2005-62 Class 2A1
5.563%, 12/25/35(a)(b) 385 385,734
IndyMac Index Mortgage Loan Trust
Series 2006-AR7 Class 4A1
6.261%, 5/25/36(a)(b) 364 369,059
Merrill Lynch Mortgage Investors, Inc.
Series 2006-A1 Class 2A1
6.203%, 3/25/36(a)(b) 561 566,953
Morgan Stanley Mortgage Loan Trust
Series 2006-11 Class 1A2
6.354%, 8/25/36(a)(b) 375 379,298
Residential Funding Mortgage Securities I, Inc.
Series 2005-SA3 Class 3A
5.241%, 8/25/35(a)(b) 440 436,002
Structured Adjustable Rate Mortgage Loan Trust
Series 2006-3 Class 2A1
6.007%, 4/25/36(a)(b) 439 441,929
Washington Mutual, Inc.
Series 2005-AR2 Class 2A22
5.54%, 1/25/45(a)(b) 158 157,984
Total Collateralized Mortgage Obligations
(cost $4,737,624) 4,749,724
18 o ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO
Shares or
Principal
Amount
(000) U.S. $ Value
- -------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS-16.1%
U.S. Government & Government Sponsored
Agency Obligations-11.5%
Federal Home Loan Bank
Zero coupon, 11/13/06 $ 5,915 $ 5,905,036
Federal Home Loan Mortgage Corp.
Zero coupon, 12/11/06 3,765 3,743,874
Federal National Mortgage Association
Zero coupon, 11/07/06 4,220 4,216,385
------------
13,865,295
Time Deposit-4.6%
State Street Euro Dollar
4.60%, 11/01/06 5,471 5,471,000
Total Short-Term Investments
(cost $19,336,295) 19,336,295
Total Investments Before Security Lending
Collateral-115.8%
(cost $139,009,100) 139,319,260
INVESTMENT OF CASH COLLATERAL FOR
SECURITIES LOANED-2.0%
Short-Term Investment
UBS Private Money Market Fund, LLC
(cost $2,458,577) 2,458,577 2,458,577
Total Investments-117.8%
(cost $141,467,677) 141,777,837
Other assets less liabilities-(17.8)% (21,438,939)
Net Assets-100% $120,338,898
INTEREST RATE SWAP TRANSACTIONS (see Note D)
Rate Type
---------------------------
Payments Payments
Notional Made Received
Swap Amount Termination by the by the Unrealized
Counterparty (000) Date Portfolio Portfolio Appreciation
- ----------------------------------------------------------------------------------------------
Lehman Brothers $4,000 1/23/08 3 Month LIBOR+ 4.778% $ 15,256
+ LIBOR (London Interbank Offered Rate)
ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO o 19
FINANCIAL FUTURES CONTRACTS (see Note D)
Value at
Number of Expiration Original October 31, Unrealized
Type Contracts Month Value 2006 Appreciation
- --------------------------------------------------------------------------------------------------------
Purchased
U.S. T-Bond Future 19 December 2006 $2,111,540 $2,140,469 $ 28,929
U.S. T-Note 10 Yr Future 20 December 2006 2,141,683 2,164,375 22,692
Sold
Japan Government Bonds
10 Yr Future 3 December 2006 3,453,224 3,449,532 3,692
--------
$ 55,313
FORWARD CURRENCY EXCHANGE CONTRACTS (see Note D)
U.S. $
Contract Value on U.S. $ Unrealized
Amount Origination Current Appreciation/
(000) Date Value (Depreciation)
- ------------------------------------------------------------------------------------
Sale Contracts:
Japanese Yen
Settling 11/20/06 1,143,811 $9,635,823 $9,808,564 $(172,741)
Mexican Peso
Settling 11/06/06 21,680 1,959,551 2,015,268 (55,717)
Mexican Peso
Settling 11/21/06 779 72,245 72,356 (111)
Settling 11/21/06 13,454 1,240,042 1,249,702 (9,660)
Norwegian Krone
Settling 11/08/06 6,626 1,024,648 1,014,066 10,582
Polish Zloty
Settling 11/16/06 6,326 2,039,457 2,088,568 (49,111)
Swedish Krona
Settling 11/15/06 29,831 4,099,696 4,134,977 (35,281)
* 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
$98,092,572 have been segregated to collateralize open forward exchange
currency contracts.
(b) Variable rate coupon, rate shown as of October 31, 2006.
(c) 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, 2006, the aggregate market value of these securities
amounted to $4,398,220 or 3.7% of net assets.
Currency Abbreviations
JPY - Japanese Yen
MXN - Mexican Peso
NOK - Norwegian Krone
PLN - Polish Zloty
SEK - Swedish Krona
Glossary:
TBA-To Be Announced
See notes to financial statements.
20 o ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO
STATEMENT OF ASSETS & LIABILITIES
October 31, 2006
Assets
Investments in securities, at value (cost $141,467,677-
including investment of cash collateral for securities
loaned of $2,458,577) $141,777,837(a)
Foreign cash, at value (cost $62,922) 64,178
Cash 53,350(b)
Receivable for investment securities sold 4,253,306
Interest receivable 1,008,201
Receivable for capital stock sold 401,329
Receivable for variation margin on futures contracts 19,295
Unrealized appreciation of swap agreements 15,256
Unrealized appreciation of forward currency exchange
contracts 10,582
Total assets 147,603,334
Liabilities
Payable for investment securities purchased and foreign
currency transactions 22,975,832
Payable for collateral received on securities loaned 2,458,577
Payable for capital stock redeemed 1,144,329
Unrealized depreciation of forward currency exchange
contracts 322,621
Dividends payable 137,111
Advisory fee payable 97,563
Distribution fee payable 29,258
Transfer Agent fee payable 15,686
Accrued expenses 83,459
Total liabilities 27,264,436
Net Assets $120,338,898
Composition of Net Assets
Capital stock, at par $ 11,822
Additional paid-in capital 129,616,594
Undistributed net investment income 185,856
Accumulated net realized loss on investments and
foreign currency transactions (9,550,436)
Net unrealized appreciation of investments and foreign
currency denominated assets and liabilities 75,062
-------------
$120,338,898
(a) Includes securities on loan with a value of $2,388,722 (See Note E).
(b) An amount of $52,900 has been segregated as collateral for the financial
futures contracts outstanding at October 31, 2006.
See notes to financial statements.
ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO o 21
Net Asset Value Per Share--21 billion shares of capital stock authorized, $.001
par value
Shares Net Asset
Class Net Assets Outstanding Value
- -------------------------------------------------------------------
A $ 44,408,858 4,361,104 $ 10.18*
B $ 30,154,123 2,963,461 $ 10.18
C $ 9,873,952 971,986 $ 10.16
Advisor $ 29,966,205 2,943,037 $ 10.18
R $ 12,989 1,276 $ 10.18
K $ 9,954 977 $ 10.19
I $ 5,912,817 580,578 $ 10.18
* The maximum offering price per share for Class A shares was $10.63 which
reflects a sales charge of 4.25%.
See notes to financial statements.
22 o ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO
STATEMENT OF OPERATIONS
Year Ended October 31, 2006
Investment Income
Interest $ 6,649,770
Expenses
Advisory fee $ 590,341
Distribution fee-Class A 142,224
Distribution fee-Class B 371,035
Distribution fee-Class C 147,277
Distribution fee-Class R 64
Distribution fee-Class K 24
Transfer agency-Class A 98,814
Transfer agency-Class B 94,645
Transfer agency-Class C 34,021
Transfer agency-Advisor Class 55,391
Transfer agency-Class R 28
Transfer agency-Class K 19
Transfer agency-Class I 3,823
Custodian 167,111
Administrative 96,000
Registration fees 82,646
Audit 58,373
Legal 45,494
Directors' fees and expenses 31,883
Printing 22,272
Miscellaneous 10,300
Total expenses 2,051,785
Less: expenses waived and reimbursed
by the Adviser and Distributor
(see Notes B and C) (621,359)
Less: expense offset arrangement
(see Note B) (8,817)
Net expenses 1,421,609
Net investment income 5,228,161
Realized and Unrealized Gain (Loss)
on Investment Transactions
Net realized gain (loss) on:
Investment transactions (2,268,139)
Futures contracts (26,643)
Swap contracts 35,124
Foreign currency transactions 407,626
Net change in unrealized
appreciation/depreciation of:
Investments 2,335,512
Futures contracts 76,297
Swap contracts (25,449)
Foreign currency denominated assets
and liabilities (287,869)
Net gain on investment transactions 246,459
Net Increase in Net Assets
from Operations $ 5,474,620
See notes to financial statements.
ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO o 23
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
October 31, October 31,
2006 2005
-------------- --------------
Increase (Decrease) in Net Assets
from Operations
Net investment income $ 5,228,161 $ 16,140,471
Net realized loss on investment and
foreign currency transactions (1,852,032) (1,157,769)
Net change in unrealized
appreciation/depreciation of
investments and foreign currency
denominated assets and liabilities 2,098,491 (8,460,640)
Net increase in net assets from
operations 5,474,620 6,522,062
Dividends to Shareholders from
Net investment income
Class A (1,956,143) (2,047,448)
Class B (1,406,469) (1,615,912)
Class C (506,478) (514,975)
Advisor Class (1,279,752) (12,338,990)
Class R (503) (491)
Class K (411) (260)
Class I (133,302) (272)
Capital Stock Transactions
Net decrease (22,524,934) (299,458,053)
Total decrease (22,333,372) (309,454,339)
Net Assets
Beginning of period 142,672,270 452,126,609
End of period (including undistributed
net investment income of $185,856
and distributions in excess of net
investment income of ($22,888),
respectively) $120,338,898 $142,672,270
See notes to financial statements.
24 o ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
October 31, 2006
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 Intermediate Bond Portfolio, (formerly 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
Intermediate Bond Portfolio. The Intermediate 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 the classes bear different
distribution and transfer agency expenses. Each class 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. 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 (other than securities listed on the
NASDAQ Stock Market, Inc. ("NASDAQ")) or foreign securities exchange. If there
has been no
ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO o 25
sale on such day, the securities are valued at the mean of the closing bid and
asked prices on such day. Securities listed on more than one exchange are
valued by reference to the principal exchange on which the securities are
traded; securities listed only on NASDAQ are valued in accordance with the
NASDAQ Official Closing Price; listed put or call options are valued at the
last sale price. If there has been no sale on that day, such securities will be
valued at the closing bid prices on that day; open futures contracts and
options thereon are valued using the closing settlement price or, in the
absence of such a price, the most recent quoted bid price. If there are no
quotations available for the day of valuation, the last available closing
settlement price is used; securities traded in the over-the-counter market,
("OTC") are valued at the mean of the current bid and asked prices as reported
by the National Quotation Bureau or other comparable sources; U.S. government
securities and other debt instruments having 60 days or less remaining until
maturity are valued at amortized cost if their original maturity was 60 days or
less; or by amortizing their fair value as of the 61st day prior to maturity if
their original term to maturity exceeded 60 days; fixed-income securities,
including mortgage backed and asset backed securities, may be valued on the
basis of prices provided by a pricing service or at a price obtained from one
or more of the major broker/dealers. In cases where broker/dealer quotes are
obtained, AllianceBernstein L.P. (prior to February 24, 2006 known as Alliance
Capital Management L.P.) (the "Adviser") may establish procedures whereby
changes in market yields or spreads are used to adjust, on a daily basis, a
recently obtained quoted price on a security; and OTC and other derivatives are
valued on the basis of a quoted bid price or spread from a major broker/dealer
in such security.
Securities for which market quotations are not readily available (including
restricted securities) or are deemed unreliable are valued at fair value.
Factors considered in making this determination may include, but are not
limited to, information obtained by contacting the issuer, analysts, analysis
of the issuer's financial statements or other available documents. In addition,
the Portfolio may use fair value pricing for securities primarily traded in
non-U.S. markets because most foreign markets close well before the Fund values
its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign
markets gives rise to the possibility that significant events, including broad
market moves, may have occurred in the interim and may materially affect the
value of those securities.
2. Currency Translation
Assets and liabilities denominated in foreign currencies and commitments under
forward currency exchange contracts are translated into U.S. dollars at the
mean of the quoted bid and asked prices of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated into U.S.
dollars at the rates of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated into U.S. dollars at the rates of
exchange prevailing when accrued.
26 o ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO
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 Portfolio may be subject to taxes imposed by countries in which
it invests. Such taxes are generally based on income and/or capital gains
earned or repatriated. Taxes are accrued and applied to net investment income,
net realized gains and net unrealized appreciation/depreciation as such income
and/or gains are earned.
4. Investment Income and Investment Transactions
Interest income is accrued daily. Investment transactions are accounted for on
the trade date securities are purchased or sold. Investment gains and losses
are determined on the identified cost basis. The Portfolio amortizes premiums
and accretes discounts as adjustments to interest income.
5. Class Allocations
All income earned and expenses incurred by the 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 for class
specific expenses which are allocated to the respective class. Expenses of the
Fund are charged to each Portfolio in proportion to net assets. Realized and
unrealized gains and losses are allocated among the various share classes based
on respective net assets.
6. Dividends and Distributions
Dividends and distributions to shareholders, if any, are recorded on the
ex-dividend date. Income dividends and capital gains distributions are
determined in accordance with federal tax regulations and may differ from those
determined in accordance with U.S. generally accepted accounting principles. To
the extent these differences are permanent, such amounts are reclassified
within the capital accounts based on their federal tax basis treatment;
temporary differences do not require such reclassification.
ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO o 27
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, 2006, such waiver amounted to
$265,636.
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, 2006, the Adviser voluntarily agreed to waive
its fees for services. Such waiver amounted to $96,000.
The Portfolio compensates AllianceBernstein Investor Services, Inc. (prior to
February 24, 2006 known as Alliance Global Investor Services, Inc.) ("ABIS"), a
wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for
providing personnel and facilities to perform transfer agency services for the
Portfolio. ABIS may make payments to intermediaries that provide omnibus
account services, sub-accounting services and/or networking services. Such
compensation retained by ABIS amounted to $190,459 for the year ended October
31, 2006.
For the year ended October 31, 2006, the Portfolio's expenses were reduced by
$8,817 under an expense offset arrangement with ABIS.
AllianceBernstein Investments, Inc. (prior to February 24, 2006 known as
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 $3,334 from the sale
of Class A shares and received $1,943, $18,006 and $1,356, 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, 2006.
NOTE C
Distribution Services Agreement
The Portfolio has adopted a Distribution Services Agreement (the "Agreement")
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the
Agreement, the Portfolio pays distribution and servicing fees to the
Distributor
28 o ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO
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 voluntarily
being limited to .30% of the average daily net assets attributable to Class B
shares. The fees are accrued daily and paid monthly. For the year ended October
31, 2006, such waiver amounted to $259,723. 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
$192,050, $438,602, $286 and $29 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, 2006, were as follows:
Purchases Sales
------------- -------------
Investment securities (excluding U.S.
government securities) $ 70,898,677 $ 59,936,522
U.S. government securities 391,332,382 409,142,304
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 $ 141,486,659
Gross unrealized appreciation $ 1,203,273
Gross unrealized depreciation (912,095)
Net unrealized appreciation $ 291,178
1. Forward Currency Exchange Contracts
The Portfolio may enter into forward currency exchange 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
currency exchange contract is a commitment to purchase or sell a foreign
currency
ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO o 29
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 currency exchange 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 currency exchange 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. For the year ended October 31, 2006, the Portfolio
earned drop income of $240,886 which is included in interest income in the
accompanying statement of operations.
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.
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.
30 o ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO
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.
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
ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO o 31
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 with the broker, 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, 2006, the Portfolio had loaned securities with a value of $2,388,722 and
received cash collateral which was invested in short-term securities valued at
$2,458,577 as included in the accompanying portfolio of investments. For the
year ended October 31, 2006, the Portfolio earned fee income of $30,914 which
is included in the accompanying statement of operations.
32 o ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO
NOTE F
Capital Stock
Each class consists of 3,000,000,000 authorized shares. Transactions in capital
shares for each class were as follows:
Shares Amount
--------------------------- ------------------------------
Year Ended Year Ended Year Ended Year Ended
October 31, October 31, October 31, October 31,
2006 2005 2006 2005
------------ ------------ -------------- --------------
Class A
Shares sold 1,129,468 1,297,569 $ 11,391,299 $ 13,541,985
Shares issued in
reinvestment of
dividends 173,344 177,782 1,748,384 1,837,212
Shares converted
from Class B 330,816 370,102 3,337,159 3,697,915
Shares redeemed (2,436,484) (2,126,010) (24,510,901) (21,966,635)
Net decrease (802,856) (280,557) $ (8,034,059) $ (2,889,523)
Class B
Shares sold 246,163 509,815 $ 2,477,033 $ 5,271,866
Shares issued in
reinvestment of
dividends 114,155 120,884 1,150,003 1,248,546
Shares converted
to Class A (330,844) (370,414) (3,337,159) (3,697,915)
Shares redeemed (1,495,859) (2,225,329) (15,047,953) (23,115,708)
Net decrease (1,466,385) (1,965,044) $(14,758,076) $ (20,293,211)
Class C
Shares sold 274,371 168,252 $ 2,749,577 $ 1,735,347
Shares issued in
reinvestment of
dividends 22,799 22,443 229,319 231,389
Shares redeemed (874,231) (468,748) (8,794,276) (4,830,131)
Net decrease (577,061) (278,053) $ (5,815,380) $ (2,863,395)
Advisor Class
Shares sold 314,494 14,738,340 $ 3,167,310 $ 152,659,635
Shares issued in
reinvestment of
dividends 127,711 1,155,430 1,287,059 11,958,110
Shares redeemed (412,435) (42,685,120) (4,157,384) (438,046,997)
Net increase
(decrease) 29,770 (26,791,350) $ 296,985 $(273,429,252)
ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO o 33
Shares Amount
--------------------------- ------------------------------
Year Ended Year Ended Year Ended Year Ended
October 31, October 31, October 31, October 31,
2006 2005 2006 2005
------------ ------------ -------------- --------------
Class R
Shares sold 7 26 $ 75 $ 267
Shares issued in
reinvestment of
dividends 12 15 127 152
Shares redeemed (7) (309) (75) (3,191)
Net increase
(decrease) 12 (268) $ 127 $ (2,772)
March 1, March 1,
Year Ended 2005(a) to Year Ended 2005(a) to
October 31, October 31, October 31, October 31,
2006 2005 2006 2005
------------ ------------ -------------- --------------
Class K
Shares sold -0- 977 $ -0- $ 10,100
Shares issued in
reinvestment of
dividends -0-(b) -0- 3 -0-
Net increase -0-(b) 977 $ 3 $ 10,100
Class I
Shares sold 577,257 967 $ 5,761,626 $ 10,000
Shares issued in
reinvestment of
dividends 12,658 -0- 126,933 -0-
Shares redeemed (10,304) -0- (103,093) -0-
Net increase 579,611 967 $ 5,785,466 $ 10,000
(a) Commencement of distributions.
(b) Share amount is less than one full share.
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 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
34 o ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO
(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 U.S. companies or of the U.S. 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, 2006.
NOTE I
Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended October
31, 2006 and October 31, 2005 were as follows:
2006 2005
-------------- --------------
Distributions paid from:
Ordinary income $ 5,283,058 $ 16,518,348
Net long-term capital gains -0- -0-
Total taxable distributions 5,283,058 16,518,348
Total distributions paid $ 5,283,058 $ 16,518,348
ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO o 35
As of October 31, 2006, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Undistributed Ordinary Income $ 105,121
Accumulated capital and other losses (9,663,944)(a)
Unrealized appreciation/(depreciation) 269,306(b)
Total accumulated earnings/(deficit) $ (9,289,517)
(a) On October 31, 2006, the Fund had a net capital loss carryforward for
federal income tax purposes of $9,495,811 of which $2,545,113 expires in the
year 2011, $4,798,199 expires in the year 2013 and $2,152,499 expires in the
year 2014. To the extent future capital gains are offset by capital loss
carryforwards, such gains will not be distributed. For the year ended October
31, 2006, the Portfolio deferred losses on straddles of $168,133.
(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 swap income, paydown reclassification, foreign currency
reclassification, and the tax treatment of premium amortization resulted in a
net decrease in distributions in excess of net investment income, and a net
increase in accumulated net realized loss on investment transactions and
foreign currency transactions. 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 Office of New York Attorney General ("NYAG") have
been investigating practices in the mutual fund industry identified as "market
timing" and "late trading" of mutual fund shares. Certain other regulatory
authorities have also been conducting investigations into these practices
within the industry and have requested that the Adviser provide information to
them. The Adviser has been cooperating and will continue to cooperate with all
of these authorities.
On December 18, 2003, the Adviser confirmed that it had reached terms with the
SEC and the NYAG for the resolution of regulatory claims relating to the
practice of "market timing" mutual fund shares in some of the AllianceBernstein
Mutual Funds. The agreement with the SEC is reflected in an Order of the
Commission ("SEC Order"). The agreement with the NYAG is memorialized in an
Assurance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the
key provisions of these agreements are the following:
(i) The Adviser agreed to establish a $250 million fund (the
"Reimbursement Fund") to compensate mutual fund shareholders for the adverse
effects of market timing attributable to market timing relationships described
in the SEC Order. According to the SEC Order, the Reim-
36 o ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO
bursement 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, directed and oversaw 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 conducted an investigation of the above-mentioned matters with
the advice of an independent economic consultant and independent counsel.
On October 2, 2003, a purported class action complaint entitled Hindo, et al.
v. AllianceBernstein Growth & Income Fund, et al. ("Hindo Complaint") was filed
against the Adviser, Alliance Capital Management Holding L.P. ("Alliance
Holding"), Alliance Capital Management Corporation, AXA Financial, Inc., the
AllianceBernstein Funds, certain officers of the Adviser ("Alliance
defendants"), and certain other defendants not affiliated with the Adviser, as
well as unnamed Doe defendants. The Hindo Complaint was filed in the United
States District Court for the Southern District of New York by alleged
shareholders of two of the AllianceBernstein Funds. The Hindo Complaint alleges
that certain of the Alliance defendants failed to disclose that they improperly
allowed certain hedge funds and other unidentified parties to engage in "late
trading" and "market timing" of AllianceBernstein Fund securities, violating
Sections 11 and 15 of the Securities Act, Sections 10(b) and 20(a) of the
Exchange Act and Sections 206 and 215 of the Advisers Act. Plaintiffs seek an
unspecified amount of compen-
ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO o 37
satory 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, 43 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. 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. All state court actions against the Adviser either were
voluntarily dismissed or removed to federal court. On February 20, 2004, the
Judicial Panel on Multidistrict Litigation transferred all actions to the
United States District Court for the District of Maryland (the "Mutual Fund
MDL").
On September 29, 2004, plaintiffs filed consolidated amended complaints with
respect to four claim types: mutual fund shareholder claims; mutual fund
derivative claims; derivative claims brought on behalf of 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.
On April 21, 2006, the Adviser and attorneys for the plaintiffs in the mutual
fund shareholder claims, mutual fund derivative claims, and ERISA claims
entered into a confidential memorandum of understanding ("MOU") containing
their agreement to settle these claims. The agreement will be documented by a
stipulation of settlement and will be submitted for court approval at a later
date. The derivative claims brought on behalf of Alliance Holding remain
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 Commissioner") (together, the
"Information Requests"). Both Information Requests require the Adviser to
produce documents concerning, among other things, any market timing or late
trading in the Adviser's sponsored mutual funds. The Adviser responded to the
Information Requests and has been cooperating fully with the investigation.
On April 11, 2005, a complaint entitled The Attorney General of the State of
West Virginia v. AIM Advisors, Inc., et al. ("WVAG Complaint") was filed
against the Adviser, Alliance Holding, and various other defendants not
affiliated with the Adviser. The WVAG Complaint was filed in the Circuit Court
of Marshall County, West Virginia by the Attorney General of the State of West
Virginia. The
38 o ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO
WVAG Complaint makes factual allegations generally similar to those in the
Hindo Complaint. On October 19, 2005, the WVAG Complaint was transferred to the
Mutual Fund MDL.
On August 30, 2005, the West Virginia Securities Commissioner 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
NYAGOrder. On January 26, 2006, the Adviser, Alliance Holding, and various
unaffiliated defendants filed a Petition for Writ of Prohibition and Order
Suspending Proceedings in West Virginia state court seeking to vacate the
Summary Order and for other relief. The court denied the writ and in September
2006 the Supreme Court of Appeals declined the defendants' petition for appeal.
On September 22, 2006, Alliance and Alliance Holding filed an answer and motion
to dismiss the Summary Order with the Securities Commissioner.
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 Holding, 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 alleged shareholders of an AllianceBernstein mutual fund. The Aucoin
Complaint alleges, among other things, (i) that certain of the defendants
improperly authorized the payment of excessive commissions and other fees from
fund assets to broker-dealers in exchange for preferential marketing services,
(ii) that certain of the defendants misrepresented and omitted from
registration statements and other reports material facts concerning such
payments, and (iii) that certain defendants caused such conduct as control
persons of other defendants. The Aucoin Complaint asserts claims for violation
of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206
and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding
and abetting breaches of common law fiduciary duties. Plaintiffs seek an
unspecified amount of compensatory damages and punitive damages, rescission of
their contracts with the Adviser, including recovery of all fees paid to the
Adviser pursuant to such contracts, an accounting of all fund-related fees,
commissions and soft dollar payments, and restitution of all unlawfully or
discriminatorily obtained fees and expenses.
ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO o 39
Since June 22, 2004, nine additional lawsuits making factual allegations
substantially similar to those in the Aucoin Complaint were filed against the
Adviser and certain other defendants. All nine of the lawsuits (i) were brought
as class actions filed in the United States District Court for the Southern
District of New York, (ii) assert claims substantially identical to the Aucoin
Complaint, and (iii) are brought on behalf of shareholders of the Funds.
On February 2, 2005, plaintiffs filed a consolidated amended class action
complaint ("Aucoin Consolidated Amended Complaint") that asserts claims
substantially similar to the Aucoin Complaint and the nine additional lawsuits
referenced above. On October 19, 2005, the District Court dismissed each of the
claims set forth in the Aucoin Consolidated Amended Complaint, except for
plaintiffs' claim under Section 36(b) of the Investment Company Act. On January
11, 2006, the District Court granted defendants' motion for reconsideration and
dismissed the remaining Section 36(b) claim. On May 31, 2006 the District Court
denied plaintiffs' motion for leave to file an amended complaint. On July 5,
2006, plaintiffs filed a notice of appeal. On October 4, 2006 the appeal was
withdrawn by stipulation, with plaintiffs reserving the right to reinstate it
at a later date.
It is possible that these matters and/or other developments resulting from
these matters could result in increased redemptions of the AllianceBernstein
Mutual Funds' shares or other adverse consequences to the AllianceBernstein
Mutual Funds. This may require the AllianceBernstein Mutual Funds to sell
investments held by those funds to provide for sufficient liquidity and could
also have an adverse effect on the investment performance of the
AllianceBernstein Mutual Funds. However, the Adviser believes that these
matters are not likely to have a material adverse effect on its ability to
perform advisory services relating to the AllianceBernstein Mutual Funds.
NOTE K
Recent Accounting Pronouncements
On July 13, 2006, the Financial Accounting Standards Board ("FASB") released
FASB Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" ("FIN
48"). FIN 48 provides guidance for how uncertain tax positions should be
recognized, measured, presented and disclosed in the financial statements. FIN
48 requires the evaluation of tax positions taken or expected to be taken in
the course of preparing the Portfolio's tax returns to determine whether the
tax positions are "more-likely-than-not" of being sustained by the applicable
tax authority. Tax positions not deemed to meet the more-likely-than-not
threshold would be recorded in the current period. Adoption of FIN 48 is
required for fiscal years beginning after December 15, 2006 and is to be
applied to all open tax years as of the effective date. At this time,
management is evaluating the implications of FIN 48 and its impact on the
financial statements has not yet been determined.
40 o ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO
On September 20, 2006, the FASB released Statement of Financial Accounting
Standards No. 157 "Fair Value Measurements" ("FAS 157"). FAS 157 establishes an
authoritative definition of fair value, sets out a framework for measuring fair
value, and requires additional disclosures about fair-value measurements. The
application of FAS 157 is required for fiscal years beginning after November
15, 2007 and interim periods within those fiscal years. At this time,
management is evaluating the implications of FAS 157 and its impact on the
financial statements has not yet been determined.
ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO o 41
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class A
----------------------------------------------------------------------------
July 1,
Year Ended October 31, 2003 to Year Ended June 30,
------------------------------------- October 31, ------------------------
2006 2005 2004 2003(a) 2003 2002(b)
----------- ----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $10.15 $10.43 $10.56 $10.82 $10.25 $10.22
Income From Investment
Operations
Net investment income(c)(d) .41 .37 .33 .12 .33 .46
Net realized and unrealized
gain (loss) on investment
and foreign currency
transactions .04 (.28) .15 (.25) .66 .17
Net increase (decrease) in net
asset value from operations .45 .09 .48 (.13) .99 .63
Less: Dividends and
Distributions
Dividends from net
investment income (.42) (.37) (.38) (.13) (.42) (.46)
Distributions in excess of net
investment income -0- -0- -0- -0- -0- (.10)
Distributions from net realized
gain on investment
transactions -0- -0- (.23) -0- -0- (.01)
Distributions in excess of net
realized gain on investment
transactions -0- -0- -0- -0- -0- (.03)
Total dividends and distributions (.42) (.37) (.61) (.13) (.42) (.60)
Net asset value, end of period $10.18 $10.15 $10.43 $10.56 $10.82 $10.25
Total Return
Total investment return based on
net asset value(e) 4.51% .90% 4.66% (1.20)% 9.87% 6.23%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $44,409 $52,430 $56,778 $68,213 $76,565 $44,852
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements .98%(f) .98% .98% .98%(g) .98% .98%
Expenses, before waivers/
reimbursements 1.34%(f) 1.31% 1.26% 1.33%(g) 1.32% 1.48%
Net investment income(d) 4.08%(f) 3.53% 3.21% 2.60%(g) 3.08% 4.39%
Portfolio turnover rate 446% 935% 658% 199% 867% 573%
See footnote summary on page 48.
42 o ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class B
----------------------------------------------------------------------------
July 1,
Year Ended October 31, 2003 to Year Ended June 30,
---------------------------------------- October 31, ------------------------
2006 2005 2004 2003(a) 2003 2002(b)
----------- ----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $10.15 $10.42 $10.55 $10.81 $10.24 $10.21
Income From Investment
Operations
Net investment income(c)(d) .38(h) .29 .27 .09 .26 .38
Net realized and unrealized
gain (loss) on investment
and foreign currency
transactions .04 (.25) .14 (.25) .66 .16
Net increase (decrease) in net
asset value from operations .42 .04 .41 (.16) .92 .54
Less: Dividends and
Distributions
Dividends from net
investment income (.39) (.31) (.31) (.10) (.35) (.38)
Distributions in excess of net
investment income -0- -0- -0- -0- -0- (.09)
Distributions from net realized
gain on investment
transactions -0- -0- (.23) -0- -0- (.01)
Distributions in excess of net
realized gain on investment
transactions -0- -0- -0- -0- -0- (.03)
Total dividends and distributions (.39) (.31) (.54) (.10) (.35) (.51)
Net asset value, end of period $10.18 $10.15 $10.42 $10.55 $10.81 $10.24
Total Return
Total investment return based on
net asset value(e) 4.20% .30% 3.93% (1.44)% 9.12% 5.52%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $30,154 $44,944 $66,635 $96,033 $113,233 $50,354
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements 1.33%(f) 1.68% 1.68% 1.68%(g) 1.68% 1.68%
Expenses, before waivers/
reimbursements 2.10%(f) 2.02% 2.00% 2.06%(g) 2.05% 2.19%
Net investment income(d) 3.75%(f)(h) 2.82% 2.59% 2.01%(g) 2.41% 3.70%
Portfolio turnover rate 446% 935% 658% 199% 867% 573%
See footnote summary on page 48.
ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO o 43
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class C
----------------------------------------------------------------------------
July 1,
Year Ended October 31, 2003 to Year Ended June 30,
------------------------------------- October 31, ------------------------
2006 2005 2004 2003(a) 2003 2002(b)
----------- ----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $10.13 $10.40 $10.53 $10.79 $10.23 $10.19
Income From Investment
Operations
Net investment income(c)(d) .34 .29 .27 .09 .26 .38
Net realized and unrealized
gain (loss) on investment
and foreign currency
transactions .04 (.26) .14 (.25) .65 .17
Net increase (decrease) in net
asset value from operations .38 .03 .41 (.16) .91 .55
Less: Dividends and
Distributions
Dividends from net
investment income (.35) (.30) (.31) (.10) (.35) (.38)
Distributions in excess of net
investment income -0- -0- -0- -0- -0- (.09)
Distributions from net realized
gain on investment
transactions -0- -0- (.23) -0- -0- (.01)
Distributions in excess of net
realized gain on investment
transactions -0- -0- -0- -0- -0- (.03)
Total dividends and distributions (.35) (.30) (.54) (.10) (.35) (.51)
Net asset value, end of period $10.16 $10.13 $10.40 $10.53 $10.79 $10.23
Total Return
Total investment return based on
net asset value(e) 3.80% .30% 3.93% (1.44)% 9.03% 5.63%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $9,874 $15,689 $19,008 $26,021 $26,445 $16,131
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements 1.68%(f) 1.68% 1.68% 1.68%(g) 1.68% 1.68%
Expenses, before waivers/
reimbursements 2.07%(f) 2.03% 1.99% 2.06%(g) 2.03% 2.19%
Net investment income(d) 3.40%(f) 2.84% 2.60% 2.03%(g) 2.41% 3.71%
Portfolio turnover rate 446% 935% 658% 199% 867% 573%
See footnote summary on page 48.
44 o ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Advisor Class
----------------------------------------------------------------------------
July 1,
Year Ended October 31, 2003 to Year Ended June 30,
------------------------------------- October 31, ------------------------
2006 2005 2004 2003(a) 2003 2002(b)
----------- ----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $10.15 $10.43 $10.55 $10.82 $10.25 $10.22
Income From Investment
Operations
Net investment income(c)(d) .44 .39 .36 .13 .36 .48
Net realized and unrealized
gain (loss) on investment
and foreign currency
transactions .04 (.26) .16 (.26) .66 .18
Net increase (decrease) in net
asset value from operations .48 .13 .52 (.13) 1.02 .66
Less: Dividends and
Distributions
Dividends from net
investment income (.45) (.41) (.41) (.14) (.45) (.48)
Distributions in excess of net
investment income -0- -0- -0- -0- -0- (.11)
Distributions from net realized
gain on investment
transactions -0- -0- (.23) -0- -0- (.01)
Distributions in excess of net
realized gain on investment
transactions -0- -0- -0- -0- -0- (.03)
Total dividends and distributions (.45) (.41) (.64) (.14) (.45) (.63)
Net asset value, end of period $10.18 $10.15 $10.43 $10.55 $10.82 $10.25
Total Return
Total investment return based on
net asset value(e) 4.83% 1.20% 5.08% (1.19)% 10.20% 6.57%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $29,966 $29,576 $309,690 $258,747 $246,127 $185,071
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements .68%(f) .68% .68% .68%(g) .68% .68%
Expenses, before waivers/
reimbursements 1.02%(f) .84% .96% 1.03%(g) 1.20% 1.20%
Net investment income(d) 4.38%(f) 3.72% 3.47% 2.87%(g) 3.39% 4.69%
Portfolio turnover rate 446% 935% 658% 199% 867% 573%
See footnote summary on page 48.
ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO o 45
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class R
-------------------------------------
November 3,
Year Ended 2003(i)
October 31, to
------------------------ October 31,
2006 2005 2004
----------- ----------- -----------
Net asset value, beginning of period $10.15 $10.42 $10.53
Income From Investment Operations
Net investment income(c)(d) .39 .34 .33
Net realized and unrealized gain (loss)
on investment transactions .04 (.26) .15
Net increase in net asset value from
operations .43 .08 .48
Less: Dividends and Distributions
Dividends from net investment income (.40) (.35) (.36)
Distributions from net realized gain on
investment transactions -0- -0- (.23)
Total dividends and distributions (.40) (.35) (.59)
Net asset value, end of period $10.18 $10.15 $10.42
Total Return
Total investment return based on net
asset value(e) 4.31% .81% 4.63%
Ratios/Supplemental Data
Net assets, end of period (000's omitted) $13 $13 $16
Ratio to average net assets of:
Expenses, net of waivers/reimbursements 1.18%(f) 1.18% 1.18%(g)
Expenses, before waivers/reimbursements 1.57%(f) 1.40% 1.45%(g)
Net investment income(d) 3.89%(f) 3.31% 2.98%(g)
Portfolio turnover rate 446% 935% 658%
See footnote summary on page 48.
46 o ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class K
---------------------------
March 1,
Year Ended 2005(i) to
October 31 October 31,
2006 2005
------------ ------------
Net asset value, beginning of period $10.16 $10.34
Income From Investment Operations
Net investment income(c)(d) .42 .26
Net realized and unrealized gain (loss)
on investment transactions .03 (.17)
Net increase in net asset value from
operations .45 .09
Less: Dividends
Dividends from net investment income (.42) (.27)
Net asset value, end of period $10.19 $10.16
Total Return
Total investment return based on net
asset value(e) 4.54% .82%
Ratios/Supplemental Data
Net assets, end of period (000's omitted) $10 $10
Ratio to average net assets of:
Expenses, net of waivers/reimbursements .93%(f) .93%(g)
Expenses, before waivers/reimbursements 1.27%(f) 1.15%(g)
Net investment income(d) 4.13%(f) 3.76%(g)
Portfolio turnover rate 446% 935%
See footnote summary on page 48.
ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO o 47
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class I
---------------------------
March 1,
Year Ended 2005(i) to
October 31 October 31,
2006 2005
------------ ------------
Net asset value, beginning of period $10.16 $10.34
Income From Investment Operations
Net investment income(c)(d) .44 .27
Net realized and unrealized loss on
investment transactions .03 (.17)
Net increase in net asset value from
operations .47 .10
Less: Dividends
Dividends from net investment income (.45) (.28)
Net asset value, end of period $10.18 $10.16
Total Return
Total investment return based on net
asset value(e) 4.71% .97%
Ratios/Supplemental Data
Net assets, end of period (000's omitted) $5,913 $10
Ratio to average net assets of:
Expenses, net of waivers/reimbursements .68%(f) .68%(g)
Expenses, before waivers/reimbursements .88%(f) .89%(g)
Net investment income(d) 4.37%(f) 3.98%(g)
Portfolio turnover rate 446% 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.
(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) The ratio includes expenses attributable to costs of proxy solicitation.
(g) Annualized.
(h) Net of fees and expenses waived by the Distributor.
(i) Commencement of distribution.
48 o ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of
Directors of AllianceBernstein Bond Fund, Inc. Intermediate Bond Portfolio
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the Intermediate Bond Portfolio, formerly the
Quality Bond Portfolio (the "Portfolio") one of the portfolios constituting the
AllianceBernstein Bond Fund, Inc., as of October 31, 2006, 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, 2006 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
Intermediate Bond Portfolio of the AllianceBernstein Bond Fund, Inc. at October
31, 2006, 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 19, 2006
ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO o 49
TAX INFORMATION
(unaudited)
For foreign shareholders, the Portfolio designates 82.6% of its ordinary
dividends as qualified interest income.
50 o ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO
BOARD OF DIRECTORS
William H. Foulk, Jr.(1), Chairman
Marc O. Mayer, President
Ruth Block(1)
David H. Dievler(1)
John H. Dobkin(1)
Michael J. Downey(1)
D. James Guzy(1)
Nancy P. Jacklin(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
Shawn Keegan, Vice President
Joran Laird, Vice President
Greg Wilensky, Vice President
Emilie D. Wrapp, Secretary
Joseph J. Mantineo, Treasurer and Chief Financial Officer
Vincent S. Noto, Controller
Custodian
State Street Bank & Trust Company
One Lincoln Street
Boston, MA 02111
Principal Underwriter
AllianceBernstein Investments, Inc.
1345 Avenue of the Americas
New York, NY 10105
Transfer Agent
AllianceBernstein 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, Mr. Shawn Keegan, Mr. Joran Laird, Mr. Jeffrey S.
Phlegar and Ms. Alison Martier are the investment professionals with the most
significant responsibility for the day-to-day mangement of the Fund's portfolio.
ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO o 51
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
AGE OCCUPATION(S) OVERSEEN BY HELD BY
(YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR
- ----------------------------------------------------------------------------------------------------------------------------
DISINTERESTED DIRECTORS
William H. Foulk, Jr., # Investment adviser and an 113 None
P.O. Box 5060 independent consultant. He
Greenwich, CT 06831 was formerly Senior Manager
Chairman of the Board of Barrett Associates, Inc., a
74 registered investment adviser,
(1998) with which he had been associ-
ated since prior to 2001. 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 100 None
500 SE Mizner Blvd. President and Chief Insurance
Boca Raton, FL 33432 Officer of The Equitable Life
76 Assurance Society of the United
(1987) States; Chairman and Chief
Executive Officer of Evlico,
(insurance) Director of Avon, BP
(oil and gas), Ecolab Incorporated
(specialty 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 112 None
P.O. Box 167 December 1994 he was Senior
Spring Lake, NJ 07762 Vice President of AllianceBernstein
77 Corporation ("AB Corp") (formerly
(1987) Alliance Capital Management
Corporation) responsible for
mutual fund administration. Prior
to joining AB Corp 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.
52 o ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO
PORTFOLIOS
IN FUND OTHER
NAME, ADDRESS, PRINCIPAL COMPLEX DIRECTORSHIPS
AGE OCCUPATION(S) OVERSEEN BY HELD BY
(YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR
- ----------------------------------------------------------------------------------------------------------------------------
DISINTERESTED DIRECTORS
(continued)
John H. Dobkin, # Consultant. Formerly President 111 None
P.O. Box 12 of Save Venice, Inc. (preservation
Annandale, NY 12504 organization) from 2001-2002,
64 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 AB Corp.
(formerly Alliance Capital
Management Corporation).
Michael J. Downey, # Consultant since 2004. Formerly 111 Asia Pacific
c/o AllianceBernstein L.P. managing partner of Lexington Fund, Inc.
1345 Avenue of the Capital, LLC (investment advisory and The
Americas firm) from December 1997 until Merger Fund
New York, NY 10105 December 2003. Prior thereto,
Attn: Phillip L. Kirstein Chairman and CEO of Prudential
62 Mutual Fund Management
(2005) from 1987 to 1993.
D. James Guzy, # Chairman of the Board of PLX 111 Intel Corporation
P.O. Box 128 Technology (semi-conductors) (semi-conductors),
Glenbrook, NV 89413 and of SRC Computers, Inc., Cirrus Logic
70 with which he has been associated Corporation
(2005) since prior to 2001. He is also (semi-conductors),
President of the Arbor Company and the
(private family investments). Davis Selected
Advisers Group
of Mutual Funds.
Nancy P. Jacklin, # Formerly U.S. Executive Director 111 None
4046 Chancery Court, of the International Monetary Fund
NW (December 2002-May 2006); partner,
Washington, DC 20007 Clifford Chance (1992-2002); Senior
58 Counsel, International Banking and
(2006) Finance, and Associate General
Counsel, Citicorp (1985-1992);
Assistant General Counsel
(International), Federal Reserve
Board of Governors (1982-1985);
and Attorney Advisor, U.S.
Department of the Treasury
(1973-1982). Member of the Bar
of the District of Columbia and of
New York; member of the Council
on Foreign Relations.
ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO o 53
PORTFOLIOS
IN FUND OTHER
NAME, ADDRESS, PRINCIPAL COMPLEX DIRECTORSHIPS
AGE OCCUPATION(S) OVERSEEN BY HELD BY
(YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR
- ----------------------------------------------------------------------------------------------------------------------------
DISINTERESTED DIRECTORS
(continued)
Marshall C. Turner, # Principal of Turner Venture 111 The George
220 Montgomery Street Associates (venture capital and Lucas
Penthouse 10 consulting) since prior to 2001. Educational
San Francisco, From 2003 until May 31, 2006, and National
CA 94104 he was CEO of Toppan Photomasks, Datacast, Inc.
65 Inc. (semi-conductor manufacturing
(2005) services) Austin, Texas.
INTERESTED DIRECTOR
Marc O. Mayer, + Executive Vice President of the 111 SCB Partners,
1345 Avenue of the Adviser since 2001, and Executive Inc. and
Americas Managing Director of AllianceBernstein SCB, Inc.
New York, NY 10105 Investments, Inc. ("ABI") since 2003;
49 prior thereto, he was head of
(2003) AllianceBernstein Institutional
Investments, a unit of the
Adviser from 2001-2003. Prior
thereto, Chief Executive Officer
of Sanford C. Bernstein & Co.,
LLC (institutional research and
brokerage arm of Bernstein &
Co. LLC) ("SCB & Co.") and its
predecessor since prior to 2001.
* There is no stated term of office for the Fund's Directors.
** Ms. Block was an "interested person", as defined in the 1940 Act, from
July 22, 1992 until October 21, 2004 by reason of her ownership of securities
of a control person of the Adviser. Ms. Block received shares of The Equitable
Companies Incorporated ("Equitable") as part of the demutualization of The
Equitable Life Assurance Society of the United States in 1992. Ms. Block's
Equitable shares were subsequently converted through a corporate action into
American Depositary Shares of AXA, which were sold for approximately $2,400 on
October 21, 2004. Equitable and AXA are control persons of the Adviser.
# Member of the Audit Committee, Governance and Nominating Committee, and
the Independent Directors Committee.
+ Mr. Mayer is an "interested person", as defined in the 1940 Act, due to
his position as Executive Vice President of the Adviser.
54 o ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO
Officer Information
Certain information concerning the Fund's Officers is set forth below.
NAME, ADDRESS* PRINCIPAL POSITION(S) PRINCIPAL OCCUPATION
AND AGE HELD WITH FUND DURING PAST 5 YEARS
- ------------------------------------------------------------------------------------------------------
Marc O. Mayer President and Chief See biography above.
49 Executive Officer
Philip L. Kirstein Senior Vice President Senior Vice President and
61 and Independent 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 2001 until March 2003.
Shawn Keegan Vice President Vice President of the Adviser**, with
35 which he has been associated since
prior to 2001.
Joran Laird Vice President Vice President of the Adviser**, with
31 which he has been associated since
prior to 2001.
Alison Martier Vice President Senior Vice President of the Adviser**,
49 with which she has been associated since
prior to 2001.
Jeffrey S. Phlegar Vice President Executive Vice President of the
40 Adviser**, with which he has been
associated since prior to 2001.
Greg Wilensky Vice President Vice President of the Adviser**, with
39 which he has been associated since
prior to 2001, and Director of Stable
Value Investments.
Emilie D. Wrapp Secretary Senior Vice President, Assistant
51 General Counsel and Assistant
Secretary of AllianceBernstein
Investments, Inc.**, with which she has
been associated since prior to 2001.
Joseph J. Mantineo Treasurer and Chief Senior Vice President of ABIS**, with
47 Financial Officer which he has been associated since
prior to 2001.
Vincent S. Noto Controller Vice President of ABIS**, with which
42 he has been associated since prior to
2001.
* The address for each of the Fund's officers is 1345 Avenue of the
Americas, New York, NY 10105.
** The Adviser, AllianceBernstein Investments, Inc., ABIS 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 AllianceBernstein
at 1-800-227-4618 for a free prospectus or SAI.
ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO o 55
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 Intermediate 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 14, 2006.
In preparation for the meeting, the directors had requested from the Adviser
and received and evaluated extensive materials, including performance and
expense information for other investment companies with similar investment
objectives as the Fund 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
September 2004 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 two 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;
56 o ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE 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 that the Adviser and its affiliates receive from
their relationships with the Portfolio;
11. information about fees charged by the Adviser to other clients with
a substantially similar style as the Fund;
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 registered investment companies advised
by the Adviser, their overall confidence in the Adviser's integrity and
competence
ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO o 57
they have gained from that experience and the Adviser's responsiveness to
concerns raised by them in the past, including the Adviser's willingness to
consider and implement organizational and operational changes designed to
improve investment results and the services provided to the AllianceBernstein
Funds.
In their deliberations, the directors did not identify any particular
information that was all-important or controlling, and different directors may
have 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 oversight 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 fee rates stated 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.
58 o ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE 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
2004 and 2005 that had been prepared with an updated expense allocation
methodology. The directors noted that the updated methodology differed in
various respects from the methodology used in prior years. 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 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 INTERMEDIATE BOND PORTFOLIO o 59
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 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
and retains a portion of such 12b-1 fees, 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 provided by the Fund's Senior Officer based
on information obtained from a Lipper database showing performance for Class A
shares of the Portfolio as compared to a group of 10 funds in its Lipper
category selected by Lipper (the "Performance Group") and as compared to a
universe of 69 to 45 funds (depending on the year) in its Lipper category
selected by Lipper (the "Performance Universe") for periods ended April 30,
2006 over the 1-, 3- and 5-year periods. The directors also reviewed
information prepared by the Adviser showing performance of the Class A Shares
of the Portfolio as compared to the Lehman Brothers Aggregate Bond Index (the
"Index") for periods ended April 30, 2006 over the 1-, 3-, 5-year and since
inception periods (July 1999 inception). The directors noted that in the
Performance Group comparison the Portfolio was in the 4th quintile in the
1-year period and 5th quintile in the 3- and 5-year periods, and in the
Performance Universe comparison the Portfolio was in the 2nd quintile in the
1-year period and 4th quintile in the 3- and 5-year periods. The comparative
information showed that the Portfolio underperformed the Index in all periods
reviewed. Based on their review and their discussion of the reasons for the
Portfolio's underperformance with the Adviser, and steps that had been taken by
the Adviser in an effort to address such underper-
60 o ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO
formance, the directors retained confidence in the Adviser's ability to
continue to advise the Portfolio and concluded that the Portfolio'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 information provided by the Fund's Senior Officer
based on information obtained from a Lipper database showing the actual
advisory fee rate paid by the Portfolio to the Adviser and the fee rates paid
by the other funds in the same Lipper category as the Portfolio. 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 a
substantially similar investment style as 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
managed by it that have a substantially similar investment style as the
Portfolio. They had previously received an oral presentation from the Adviser
that supplemented such information. The directors noted that the institutional
fee schedule for clients with a substantially similar investment style as the
Portfolio had breakpoints at much lower asset levels than those in the fee
schedule applicable to the Portfolio and that the application of such fee
schedule to the level of assets of the Portfolio would result in a fee rate
that would be significantly 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 that they had previously discussed with the Adviser its
policies in respect of such negotiated arrangements. The directors also
reviewed information that indicated that the Adviser sub-advises another
registered investment company with similar investment strategies as the
Portfolio at a lower fee rate than the Portfolio.
The Adviser reviewed with the directors the significant differences in the
scope of services it provides to institutional clients and sub-advised funds
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
Adviser explained that many of these services normally are not provided to
non-investment company clients or to investment company clients when the
Adviser acts in a pure sub-advisory capacity, 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
ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO o 61
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
Portfolio. The Class A expense ratio of the Portfolio was based on the
Portfolio's latest fiscal year expense ratio. The directors recognized that the
expense ratio information for the Portfolio potentially reflected on the
Adviser's provision of services, as the Adviser is responsible for coordinating
services provided to the Portfolio by others. The directors noted that it was
likely that the expense ratios of some funds in the Portfolio's Lipper category
also were lowered by waivers or reimbursements by those funds' investment
advisers, which in some cases were voluntary and perhaps temporary.
The directors noted that the Portfolio's actual advisory fee rate of 45 basis
points was significantly lower than the Expense Group median. The directors
noted that in the Portfolio's latest fiscal year the administrative expense
reimbursement by the Portfolio pursuant to the Advisory Agreement of two basis
points had been waived by the Adviser. The directors further noted that the
Portfolio's total expense ratio, which benefits from a cap implemented by the
Adviser, was slightly lower than the Expense Group median, and somewhat higher
than the Expense Universe median. The directors noted that the Adviser had
recently reviewed with them steps being taken that are intended to reduce
expenses of the AllianceBernstein Funds. 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 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
62 o ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO
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 INTERMEDIATE BOND PORTFOLIO o 63
THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
SUMMARY OF SENIOR OFFICER'S EVALUATION OF INVESTMENT ADVISORY AGREEMENT(1)
The following is a summary of the evaluation of the Investment Advisory
Agreement between AllianceBernstein L.P. (the "Adviser") and AllianceBernstein
Bond Fund, Inc. (the "Fund") in respect of AllianceBernstein Intermediate Bond
Portfolio (the "Portfolio").(2) The evaluation of the Investment Advisory
Agreement was prepared by Philip L. Kirstein, the Senior Officer of the Fund,
for the Directors of the Fund, as required by an August 2004 agreement between
the Adviser and the New York State Attorney General (the "NYAG"). The Senior
Officer's evaluation of the Investment Advisory Agreement is not meant to
diminish the responsibility or authority of the Board of Directors of the Fund
to perform its duties pursuant to Section 15 of the Investment Company Act of
1940 (the "40 Act") and applicable state law. The purpose of the summary is to
provide shareholders with a synopsis of the independent evaluation of the
reasonableness of the advisory fees proposed to be paid by the Portfolio which
was provided to the Directors in connection with their review of the proposed
approval of the continuance of the Investment Advisory Agreement. The Senior
Officer's evaluation considered the following factors:
1. Advisory fees charged to institutional and other clients of the
Adviser for like services;
2. Advisory fees charged by other mutual fund companies for like
services;
3. Costs to the Adviser and its affiliates of supplying services
pursuant to the advisory agreement, excluding any intra-corporate profit;
4. Profit margins of the Adviser and its affiliates from supplying
such services;
5. Possible economies of scale as the Portfolio grows larger; and
6. Nature and quality of the Adviser's services including the
performance of the Portfolio.
PORTFOLIO ADVISORY FEES, EXPENSE CAPS, REIMBURSEMENTS & RATIOS
The Adviser proposed that the Portfolio pay the advisory fee set forth in the
table below for receiving the services to be provided pursuant to the
Investment Advisory Agreement. The fee schedule below, implemented in January
2004 in
(1) It should be noted that the information in the fee summary was completed
on October 23, 2006 and presented to the Board of Directors on October
31-November 2, 2006.
(2) Future references to the Portfolio do not include "AllianceBernstein."
References in the fee summary pertaining to performance and expense ratios
refer to the Class A shares of the Portfolio.
64 o ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO
connection with the Adviser's settlement with the NYAG in December 2003, is
based on a master schedule that contemplates eight categories of funds with
almost all funds in each category having the same advisory fee schedule.(3)
Net Assets
09/30/06
Category (million) Advisory Fee Portfolio
- -------------------------------------------------------------------------------
Low Risk $126.5 45 bp on 1st $2.5 billion Intermediate Bond
Income 40 bp on next $2.5 billion Portfolio
35 bp on the balance
The Adviser is reimbursed as specified in the Investment Advisory Agreement for
certain clerical, legal, accounting, administrative and other services provided
to the Portfolio. During the Portfolio's most recently completed fiscal year,
the Adviser waived $89,000 (0.02% of the Portfolio's average daily net assets)
that it would have received for such services.
The Adviser agreed to waive that portion of its advisory fees and/or reimburse
the Portfolio for that portion of the Portfolio's total operating expenses to
the degree necessary to limit the Portfolio's expense ratios to the amounts set
forth below for the Portfolio's current fiscal year. The waiver is terminable
by the Adviser at the end of the Portfolio's fiscal year upon at least 60 days
written notice. In addition, set forth below are the Portfolio's gross expense
ratios as of the Portfolio's most recent semi-annual period:
Expense Cap Pursuant to Gross
Expense Limitation Expense Fiscal
Portfolio Undertaking Ratio(4) Year End
- ----------------------------------------------------------------------------
Intermediate Bond Advisor 0.68% 1.31% October 31
Portfolio Class A 0.98% 1.61%
Class B 1.68% 2.35%
Class C 1.68% 2.34%
Class R 1.18% 1.70%
Class K 0.93% 1.36%
Class I 0.68% 1.12%
(3) Most of the AllianceBernstein Mutual Funds, which the Adviser manages,
were affected by the Adviser's settlement with the NYAG.
(4) Annualized.
ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO o 65
I. ADVISORY FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS
The advisory fees charged to investment companies which the Adviser manages and
sponsors are normally higher than those charged to similar sized institutional
accounts, including pension plans and sub-advised investment companies. The fee
differential reflects, among other things, different services provided to such
clients, and different liabilities assumed. Services provided by the Adviser to
the Portfolio that are not provided to non-investment company clients include
providing office space and personnel to serve as Fund Officers, who among other
responsibilities make the certifications required under the Sarbanes-Oxley Act
of 2002, and coordinating with and monitoring the Portfolio's third party
service providers such as Fund counsel, auditors, custodians, transfer agents
and pricing services. The accounting, administrative, legal and compliance
requirements for the Portfolio are more costly than those for institutional
assets due to the greater complexities and time required for investment
companies.(5) Also, retail mutual funds managed by the Adviser are widely held.
Servicing the Portfolio's investors is more time consuming and labor intensive
compared to institutional clients since the Adviser needs to communicate with a
more extensive network of financial intermediaries and shareholders. In
addition, managing the cash flow of an investment company may be more difficult
than that of a stable pool of assets, such as an institutional account with
little cash movement in either direction, particularly if the Portfolio is in
net redemption and the Adviser is frequently forced to sell securities to raise
cash for redemptions. However, managing a fund with positive cash flow may be
easier at times than managing a stable pool of assets. Finally, in recent
years, investment advisers have been sued by institutional clients and have
suffered reputational damage both by the attendant publicity and outcomes other
than complete victories. Accordingly, the legal and reputational risks
associated with institutional accounts are greater than previously thought,
although still not equal to those related to the mutual fund industry.
Notwithstanding the Adviser's view that managing an investment company is not
comparable to managing other institutional accounts because the services
provided are different, it is worth considering information regarding the
advisory fees charged to institutional accounts with a substantially similar
investment style as the Portfolio.(6) In addition to the AllianceBernstein
Institutional fee schedule, set forth below is what would have been the
effective advisory fee of the Portfolio
(5) It should be noted that a portion of the Adviser's expenses for certain
accounting, administrative, legal and compliance are reimbursed by the
Portfolio to the Adviser, although during the most recently completed fiscal
year, the Adviser waived the reimbursement amount in its entirety.
(6) The Adviser has indicated that with respect to institutional accounts with
assets greater than $300 million, it will negotiate a fee schedule, although it
should be noted that there were no such institutional accounts that are similar
in investment style as the Portfolio, which opened in the last three years.
Discounts that are negotiated vary based upon each client relationship.
66 o ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO
had the AllianceBernstein Institutional fee schedule been applicable to the
Portfolio versus the Portfolio's advisory fees based on September 30, 2006 net
assets.
Net Assets AllianceBernstein ("AB") Effective Portfolio
09/30/06 Institutional ("Inst.") AB Inst. Advisory
Portfolio ($MIL) Fee Schedule Adv. Fee Fee
- -------------------------------------------------------------------------------------------
Intermediate Bond $126.5 U.S. Core Schedule 0.263% 0.450%
Portfolio 40 bp on 1st $20 million
25 bp on next $80 million
20 bp on next $100 million
15 bp on the balance
Minimum Account Size: $20 m
The Adviser manages Sanford C. Bernstein Fund, Inc. ("SCB Fund"), an open-end
management investment company. The Intermediate Duration Portfolio of SCB Fund,
has a similar investment style as the Portfolio. The following table shows the
fee schedule of the Intermediate Duration Portfolio:
Portfolio SCB Fund Portfolio Fee Schedule
- -------------------------------------------------------------------------------
Intermediate Bond Intermediate Duration Portfolio 50 bp on 1st $1 billion
Portfolio 45 bp on next $2 billion
40 bp on next $2 billion
35 bp thereafter
The Adviser provides sub-advisory investment services to certain other
investment companies managed by other fund families. The Adviser charges the
following fees for the following sub-advisory relationship:
Portfolio Sub-advised Fund Fee Schedule
- -------------------------------------------------------------------------------
Intermediate Bond Client No. 1(7) 0.30% on first $500 million
Portfolio 0.25% on first $500 million
0.20% on first $500 million
0.15% on next $1.5 billion
0.12% thereafter
It is fair to note that the services the Adviser provides pursuant to
sub-advisory agreements are generally confined to the services related to the
investment process; in other words, they are not as comprehensive as the
services provided to the Portfolio by the Adviser. In addition, to the extent
that the sub-advisory relationship are with affiliates of the Adviser, the fee
schedule may not reflect arms-length bargaining or negotiations.
(7) The client is an affiliate of the Adviser.
ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO o 67
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES.
Lipper, Inc. ("Lipper"), an analytical service that is not affiliated with the
Adviser, compared the fees charged to the Portfolio with fees charged to other
investment companies for similar services by other investment advisers.
Lipper's analysis included the Portfolio's ranking with respect to the proposed
advisory fee relative to the median of the Portfolio's Lipper Expense Group
("EG") at the approximate current asset level of the Portfolio.(8)
Lipper describes an EG as a representative sample of comparable funds. Lipper's
standard methodology for screening funds to be included in an EG entails the
consideration of several fund criteria, including fund type, investment
classification/objective, load type and similar 12b-1/non-12b-1 service fees,
asset (size) comparability, and expense components and attributes.(9) An EG
will typically consist of seven to twenty funds.
Contractual Lipper
Management Expense Group
Portfolio Fee(10) Median Rank
- -------------------------------------------------------------------------------
Intermediate Bond
Portfolio 0.450 0.625 2/13
Lipper also compared the Fund's most recently completed fiscal year total
expense ratio to the medians of the Fund's EG and Lipper Expense Universe
("EU"). The EU is as a broader group compared to the EG, consisting of all
funds that have the same investment classification/objective and load type as
the subject Fund.(11)
(8) The contractual management fee is calculated by Lipper using the
Portfolio's contractual management fee rate at a hypothetical asset level. The
hypothetical asset level is based on the combined net assets of all classes of
the Portfolio, rounded up to the next $25 million. Lipper's total expense ratio
information is based on the most recent annual report except as otherwise
noted. A ranking of "1" means that the Portfolio has the lowest effective fee
rate in the Lipper peer group.
(9) Lipper does not consider average account size when constructing EGs. Funds
with relatively small average account sizes tend to have higher transfer agent
expense ratio than comparable sized funds that have relatively large average
account sizes. Note that there are limitations on Lipper expense category data
because different funds categorize expense differently.
(10) The contractual management fee would not reflect any expense
reimbursements made by the Portfolio to the Adviser for certain clerical,
legal, accounting, administrative, and other services. As previously noted, the
Adviser waived such expense reimbursement. In addition, the contractual
management fee does not reflect any advisory fee waivers or expense
reimbursements for the expense caps that effectively reduce the actual
management fee.
(11) Except for asset (size) comparability, Lipper uses the same criteria for
selecting a Lipper Expense Group when selecting a Lipper Expense Universe.
Unlike the Lipper Expense Group, the Lipper Expense Universe allows for the
same adviser to be represented by more than just one fund.
68 o ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO
Lipper Lipper
Expense Expense Expense
Ratio Group Universe
Portfolio (%)(12) Median (%) Rank Median (%) Rank
- -------------------------------------------------------------------------------
Intermediate Bond
Portfolio 0.980 0.995 6/13 0.980 47/67
Based on this analysis, the Portfolio has a more favorable ranking on a
management fee basis than it does on a total expense ratio basis.
III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO
THE ADVISORY FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.
A consultant was retained by the Senior Officer to work with the Adviser's
personnel to align the Adviser's two profitability reporting systems. The
alignment, which now has been completed, allows the Adviser's management and
the Directors to receive consistent presentations of the financial results and
profitability although the two profitability reporting systems operate
independently. See Section IV for additional discussion.
IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH
SERVICES.
The profitability information for the Portfolio prepared by the Adviser for the
Board of Directors was reviewed by the Senior Officer and the consultant. The
Adviser's profitability from providing investment advisory services to the
Portfolio decreased during calendar year 2005 relative to 2004.
In addition to the Adviser's direct profits from managing the Portfolio,
certain of the Adviser's affiliates have business relationships with the
Portfolio and may earn a profit from providing other services to the Portfolio.
The courts have referred to this type of business opportunity as "fall-out
benefits" to the Adviser and indicated that such benefits should be factored
into the evaluation of the total relationship between the Portfolio and the
Adviser. Neither case law nor common business practice precludes the Adviser's
affiliates from earning a reasonable profit on this type of relationship
provided the affiliates' charges and services are competitive. These affiliates
provide transfer agent and distribution related services to the Portfolio and
receive transfer agent fees, Rule 12b-1 payments, front-end sales loads and
contingent deferred sales charges ("CDSC").
AllianceBernstein Investments, Inc. ("ABI"), an affiliate of the Adviser, is
the Portfolio's principal underwriter. ABI and the Adviser have disclosed in
the Portfolio's prospectus that they may make revenue sharing payments from
their own resources, in addition to resources derived from sales loads and Rule
12b-1
(12) Most recently completed fiscal year Class A share total expense ratio.
ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO o 69
fees, to firms that sell shares of the Portfolio. In 2005, ABI paid
approximately 0.042% of the average monthly assets of the AllianceBernstein
Mutual Funds or approximately $18.0 million for distribution services and
educational support (revenue sharing payments). For 2006, it is anticipated,
ABI will pay approximately 0.04% of the average monthly assets of the
AllianceBernstein Mutual Funds or approximately $17.5 million.(13) During the
Portfolio's most recently completed fiscal year, ABI received from the
Portfolio $3,906, $903,258 and $70,577 in front-end sales charges, Rule 12b-1
and CDSC fees, respectively.
Fees and reimbursements for out of pocket expenses charged by AllianceBernstein
Investor Services, Inc. ("ABIS"), the affiliated transfer agent for the
Portfolio, are charged on a per account basis, based on the level of service
provided and the class of share held by the account. ABIS also receives a fee
per shareholder sub-account for each account maintained by an intermediary on
an omnibus basis. ABIS' after-tax profitability increased in 2005 in comparison
to 2004. During the Portfolio's most recently completed fiscal year, ABIS
received $908,572 in fees from the Portfolio.(14)
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that the breakpoints in the fee schedule being
proposed 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, retained by the Senior Officer, made a presentation
to the Board of Directors 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 lack of
(13) ABI currently inserts the "Advance" in quarterly account statements and
pays the incremental costs associated with the mailing. The incremental cost is
less than what an "independent mailing" would cost.
(14) The fees disclosed are net of any expense offsets with ABIS. An expense
offset is created by the interest earned on the positive cash balance that
occur within the transfer agent account as there is a one day lag with regards
to money movement from the shareholder's account to the transfer agent's
account and then the transfer agent's account to the Portfolio's account.
During the Portfolio's most recently completed fiscal year, the fees paid by
the Portfolio to ABIS were reduced by $3,770 under the offset agreement between
the Portfolio and ABIS.
70 o ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO
cost data, economists, who have written on this subject, had to infer facts
about the costs from the behavior of fund expenses; there was a lack of
consensus among economists as to whether economies of scale were being passed
on to the shareholders. In the meantime, it is clear that to the extent a
fund's assets were to exceed the initial breakpoint its shareholders benefit
from a lower fee rate.
VI. NATURE AND QUALITY OF THE ADVISER'S SERVICES INCLUDING THE PERFORMANCE OF
THE PORTFOLIO.
With assets under management of approximately $659 billion as of September 30,
2006, the Adviser has the investment experience to manage and provide
non-investment services (described in Section I) to the Portfolio.
The information below shows the 1, 3, and 5 year performance returns and
rankings of the Portfolio(15) relative to the Portfolio's Lipper Performance
Group ("PG") and Lipper Performance Universe ("PU")(16) for the periods ended
June 30, 2006.(17)
Intermediate Portfolio
Bond Portfolio Return PG Median PU Median PG Rank PU Rank
- -------------------------------------------------------------------------------
1 year -0.98 -1.25 -0.98 5/13 43/82
3 year 1.51 1.64 1.78 8/12 46/69
5 year 4.07 4.29 4.39 7/11 34/52
Set forth below are the 1, 3, and 5 year and since inception performance
returns of the Portfolio (in bold) versus its benchmark:(18)
Periods Ending June 30, 2006
Annualized Performance
- -------------------------------------------------------------------------------
1 3 5 Since
Portfolios Year Year Year Inception
- -------------------------------------------------------------------------------
Intermediate Bond Portfolio -0.98 1.51 4.07 4.95
Lehman Brothers Aggregate Bond Index -0.81 2.05 4.97 5.92
(15) The performance returns and rankings are for the Class A shares of the
Portfolio. It should be noted that the performance returns of the Portfolio
that is shown was provided by the Adviser. Lipper maintains its own database
that includes the Portfolio's performance returns. However, differences in the
distribution price (ex-date versus payable date) and rounding differences may
cause the Adviser's own performance returns of the Portfolio to be one or two
basis points different from Lipper. To maintain consistency in this evaluation,
the performance returns of the Portfolio, as reported by the Adviser, are
provided instead of Lipper.
(16) The Portfolio's PG is identical to the Portfolio's EG. The Portfolio's PU
is not identical to the Portfolio's EU. Outliers and funds with negative
management fees are excluded from EUs, but not necessarily from PUs.
(17) Note that the current Lipper investment classification/objective dictates
the PG and PU throughout the life of the Portfolio even if a Portfolio may have
had a different investment classification/objective at different points in time.
(18) The Adviser provided Portfolio and benchmark performance return
information for periods through June 30, 2006.
ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO o 71
CONCLUSION:
Based on the factors discussed above the Senior Officer's conclusion is that
the proposed advisory fee for the Portfolio is reasonable and within the range
of what would have been negotiated at arms-length in light of all the
surrounding circumstances. This conclusion in respect of the Portfolio is based
on an evaluation of all of these factors and no single factor was dispositive.
Dated: December 1, 2006
72 o ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO
THIS PAGE IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
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
- --------------------------------------------------
Global Government Income Trust*
Corporate Bond Portfolio
Emerging Market Debt Fund
Global Strategic Income Trust
High Yield Fund
Intermediate Bond Portfolio*
Short Duration Portfolio
U.S. Government Portfolio
- --------------------------------------------------
Municipal Bond Funds
- --------------------------------------------------
National Michigan
Insured National Minnesota
Arizona New Jersey
California New York
Insured California Ohio
Florida Pennsylvania
Massachusetts 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
- --------------------------------------------------
Retirement Strategies Funds
- --------------------------------------------------
2000 Retirement Strategy
2005 Retirement Strategy
2010 Retirement Strategy
2015 Retirement Strategy
2020 Retirement Strategy
2025 Retirement Strategy
2030 Retirement Strategy
2035 Retirement Strategy
2040 Retirement Strategy
2045 Retirement Strategy
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 website 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 February 1, 2006, Global Government Income Trust was named
Americas Government Income Trust and Intermediate Bond Portfolio was named
Quality Bond Portfolio.
** An investment in the Fund is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the Fund seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the Fund.
ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO o 73
ALLIANCEBERNSTEIN BOND FUND INTERMEDIATE BOND PORTFOLIO
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
[LOGO]
ALLIANCEBERNSTEIN
INVESTMENTS
IB-0152-1006
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 2005 $45,000 $3,872 $9,139
Bond Portfolio 2006 $50,000 $5,406 $12,225
(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 2005 $892,007 [ $180,714 ]
Bond Portfolio ( $171,575 )
( $9,139 )
2006 $1,027,519 ($149,146)
($136,921)
($12,225)
(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 auditor's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to the registrant.
ITEM 6. SCHEDULE OF INVESTMENTS.
Please see Schedule of Investments contained in the Report to Shareholders
included under Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the registrant.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the registrant.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable to the registrant.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the Fund's Board of Directors since the Fund last
provided disclosure in response to this item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial
officer have concluded that the registrant's disclosure controls and procedures
(as defined in Rule 30a-3 (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, 2006
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
By: /s/ Joseph J. Mantineo
-----------------------
Joseph J. Mantineo
Treasurer and Chief Financial Officer
Date: December 29, 2006