ALLIANCE
BOND FUND
U.S. GOVERNMENT
PORTFOLIO
ANNUAL REPORT
JUNE 30, 1995
LETTER TO SHAREHOLDERS ALLIANCE BOND FUND U.S. GOVERNMENT PORTFOLIO
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August 7, 1995
Dear Shareholder:
The U.S. bond market rebounded sharply over the past six months, staging an
impressive rally across nearly all fixed income sectors. The rally was sparked,
in large part, by evidence of a slowing U.S. economy, moderating inflationary
pressures and a shift in Federal Reserve monetary policy. Treasury securities
outperformed mortgage securities during this period, though both sectors of the
market gained.
INVESTMENT RESULTS
Listed below is Alliance Bond Fund U.S. Government Portfolio's performance
through its annual reporting period ended June 30, 1995. The table shows your
Portfolio's total returns over the six- and twelve-month periods compared with
the U.S. Treasury market, represented by the unmanaged Lehman Brothers (LB)
Government Bond Index, and versus the average of its Lipper universe of 156
general U.S. Government funds. (Complete descriptions of these benchmarks
appear on page 4.)
Total Returns Through June 30, 1995
Six Months Twelve Months
---------- -------------
ALLIANCE U.S. GOVERNMENT PORTFOLIO
Class A +10.30% +10.37%
Class B +9.73% +9.52%
Class C +9.88% +9.67%
LB GOVERNMENT BOND INDEX +11.20% +12.06%
LIPPER U.S. GOV'T FUNDS AVG. +10.49% +10.85%
The Portfolio's total returns are based on the net asset values of each class
of shares as of June 30; additional investment results appear on page 3.
On June 1, 1995, we reduced the Portfolio's monthly dividend rates by $0.0059
per share (Class A) and $0.0056 per share (Class B and Class C), representing
the first dividend adjustment in approximately two years. We believe the new
rates more accurately reflect the Portfolio's income-earning capabilities in
the current yield environment, consistent with its objective of providing as
high a level of current income as is consistent with safety of principal. A
notice of this change appeared on your June account statements and dividend
checks.
A SOFT LANDING FOR THE U.S. ECONOMY?
The pronounced economic slowdown in the first six months of the year challenged
the notion of a "soft landing" for the U.S. economy. In the second quarter,
gross domestic product growth fell to 0.5%, reflecting declines in industrial
production and lower final sales growth. Economic growth will likely slow
further without a resurgence in consumer spending, which represents two-thirds
of the nation's economic activity. In the first four months of the year,
consumer expenditures remained weak. However, more recent personal income and
consumer confidence data suggest that higher consumer spending may lead to
stronger economic growth in the second half of the year. Concerns regarding
inflation have largely subsided with the decline in economic growth. Broad
price indices such as the Consumer Price Index and Producer Price Index have
shown only moderate acceleration and labor costs remain under control.
MORTGAGE MARKET REVIEW
Largely in anticipation of a shift in Federal Reserve monetary policy, interest
and mortgage rates declined. Thirty-year mortgage rates fell to 7.50% in July,
from 9.25% in late November. The decline in mortgage rates prompted concern
over an acceleration of prepayment activity and placed pressure on
mortgage-backed security prices. Volatility also increased with uncertainty
over the direction of interest rates. Throughout the period, however, the lack
of supply of new loans in the market favorably influenced mortgage prices.
Within the mortgage market, relative performance was driven largely by duration
(price sensitivity to changes in interest rates), with discount coupons
outperforming current and premium coupon mortgage-backed securities.
INVESTMENT OUTLOOK
After a tremendous rally in the first two quarters of the year, the outlook for
U.S. bond markets continues to be favorable. It is our view that the U.S.
economic expansion should moderate to an annual growth rate of 2.0% in the
second half of the year. Slower economic growth
1
ALLIANCE BOND FUND U.S. GOVERNMENT PORTFOLIO
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would be positive for inflation and may allow for further cuts in interest
rates. We believe that inflationary pressures have crested and project that CPI
inflation will peak near 3.5% in 1995. In tacit acknowledgment of the weakening
U.S. economy, the Federal Reserve cut interest rates 0.25% in early July.
If our forecast for modest inflation and lower interest rates proves correct,
the result should be an increase in bond prices. In this environment, we would
expect to shift a greater percentage of the Portfolio's assets to Treasury
securities from mortgages. Treasury securities typically outperform mortgage
securities in a declining interest rate environment due to the existence of
prepayment risk in the mortgage market. (Prepayment risk is the risk that
homeowners will refinance their mortgages, forcing mortgage investors to
reinvest the proceeds at lower interest rates.)
In the mortgage market, volatility levels will also affect performance.
Volatility is central to the relative performance of mortgage-backed securities
versus comparable duration Treasury securities. It also affects relative
performance among fixed rate MBS coupons on a duration adjusted basis and
versus comparable duration adjustable-rate mortgages. If volatility declines,
MBS will perform well relative to comparable duration Treasury securities and
ARMs should outperform premium fixed rate MBS coupons.
Thank you for your continued interest and investment in Alliance Bond Fund U.S.
Government Portfolio. We look forward to reporting its progress to you at year
end.
Sincerely,
John D. Carifa
Chairman and President
Paul J. DeNoon
Vice President
2
INVESTMENT RESULTS ALLIANCE BOND FUND U.S. GOVERNMENT PORTFOLIO
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AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 1995
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
---------------------------
. One Year +10.37% +5.65%
. Five Years +8.47 +7.54
. Since Inception* +8.05 +7.56
SEC Yield 6.74%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
---------------------------
. One Year +9.52% +6.52%
. Since Inception* +6.67 +6.67
SEC Yield 6.32%
CLASS C SHARES
. One Year +9.67%
. Since Inception* +4.02
SEC Yield 6.33%
The average annual total returns reflect investment of dividends and/or capital
gains distributions in additional shares-with and without the effect of the
4.25% maximum front-end sales charge for Class A or applicable contingent
deferred sales charge for Class B (3% year 1, 2% year 2, 1% year 3, 0% year 4);
Class C shares are not subject to front-end or contingent deferred sales
charges. Past performance does not guarantee future results. Investment return
and principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost. Yields are for the 30 days
ended June 30, 1995.
* Inception: 12/2/85, Class A; 9/30/91, Class B; 5/3/93, Class C.
3
ALLIANCE BOND FUND U.S. GOVERNMENT PORTFOLIO
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ALLIANCE BOND FUND U.S. GOVERNMENT PORTFOLIO
GROWTH OF A $10,000 INVESTMENT:
11/30/85 TO 6/30/95
This chart illustrates the total value of an assumed investment in Alliance
Bond Fund U.S. Government Portfolio Class A shares (since inception) after
deducting the maximum 4.25% sales charge, and with dividends and capital gains
reinvested. Performance for Class B and Class C shares will vary from the
results shown above due to differences in expenses charged to those classes.
Past performance is not indicative of future results, and is not representative
of future gain or loss in capital value or dividend income.
The Lehman Brothers Government Index is composed of the Treasury Bond and
Agency Bond Indices.
The Lipper General U.S. Government Funds Average reflects performance of 196
funds, 23 of which have been in existence for the full time period represented.
These funds have generally similar investment objectives to Alliance U.S.
Government Portfolio, although some funds included in the average may have
somewhat different investment policies.
When comparing Alliance Bond Fund U.S. Government Portfolio to the index and
the average shown above, you should note that the Portfolio's performance
reflects the maximum sales charge of 4.25% while no such charges are reflected
in the performance of the index or average.
4
PORTFOLIO OF INVESTMENTS
JUNE 30, 1995 ALLIANCE BOND FUND U.S. GOVERNMENT PORTFOLIO
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PRINCIPAL
AMOUNT
(000) VALUE
- ------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS-99.3%
U.S. TREASURY SECURITIES-46.8%
U.S. TREASURY BONDS-33.7%
7.125%, 2/15/23 $ 32,300 $34,030,957
7.625%, 2/15/25 24,000 27,104,880
11.25%, 2/15/15 20,000 30,006,200
13.375%, 8/15/01 10,000 13,709,400
14.00%, 11/15/11 233,100 374,197,761
479,049,198
U.S. TREASURY NOTES-9.1%
5.875%, 2/15/04 13,000 12,681,110
9.25%, 1/15/96 44,000 44,783,640
9.375%, 4/15/96 69,600 71,525,136
128,989,886
U.S. TREASURY STRIP-4.0%
Zero coupon, 5/15/14 204,000 56,367,240
Total U.S. Treasury Securities
(cost $649,652,948) 664,406,324
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION-39.1%
Construction Loan
7.50%, 8/15/95 6,300 6,205,500
Mobile Homes
8.00%, 10/15/12 384 394,304
8.25%, 6/15/05-9/15/12 1,961 2,021,088
8.50%, 5/15/08-1/15/12 1,381 1,441,135
8.75%, 11/15/00-1/15/12 6,098 6,390,363
9.00%, 10/15/11-1/15/12 1,724 1,822,267
9.25%, 3/15/05-2/15/10 475 503,258
9.50%, 2/15/05 296 315,045
9.75%, 5/15/99-1/15/13 9,845 10,489,969
10.00%, 8/15/02-6/15/05 855 914,486
10.25%, 4/15/98-6/15/13 8,684 9,350,136
11.25%, 3/15/98-5/15/98 57 61,358
33,703,409
Project Loans
7.00%, 1/15/96-3/15/35 $ 23,732 $22,879,280
7.05%, 9/15/25 7,111 6,855,816
7.50%, 2/15/23-2/15/29 3,231 3,182,954
7.55%, 3/15/28 4,493 4,425,808
7.625%, 9/15/28 3,349 3,298,651
7.75%, 4/15/28-6/15/28 22,605 22,675,522
7.80%, 11/15/34 15,143 15,459,922
8.00%, 4/15/23-2/15/34 23,806 24,133,054
8.125%, 10/15/29 27,448 27,825,894
8.375%, 1/15/30-7/15/32 15,605 15,932,184
8.43%, 7/15/27 4,949 5,099,307
8.50%, 11/15/12-7/15/32 50,440 51,984,456
8.75%, 1/15/33 2,518 2,609,974
9.00%, 4/15/29-5/15/35 8,163 8,473,431
9.25%, 4/15/32 6,991 7,291,802
9.50%, 8/15/31 10,330 10,871,147
10.50%, 8/15/29 5,804 6,477,207
10.75%, 5/15/28 5,007 5,610,262
245,086,671
Single Family Homes
7.50%, 7/16/24 23,500 23,118,125
8.00%, 8/15/22-1/15/24 55,467 56,784,199
8.50%, 1/15/17-9/15/24 15,380 15,965,845
9.00%, 7/15/20-4/15/25 149,565 156,891,586
10.00%, 1/15/25 15,813 17,210,934
11.00%, 8/15/15-9/15/19 371 411,819
270,382,508
Total Government National Mortgage
Association (cost $552,195,863) 555,378,088
5
PORTFOLIO OF INVESTMENTS (CONT.) ALLIANCE BOND FUND U.S. GOVERNMENT PORTFOLIO
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PRINCIPAL
AMOUNT
(000) VALUE
- ------------------------------------------------------------
FEDERAL AGENCY SECURITIES-8.6%
Federal Housing Authority
11.93%, 1/01/29 $ 7,939 $8,137,109
Financial Assistance Corp.
9.45%, 11/21/03 26,000 28,475,200
9.50%, 4/16/04 31,506 34,842,485
Small Business Administration
BS92-1E (I/O) FRN
9.75%, 4/15/17 (a)(b) 21,390 22,433,465
BS93-2A (I/O) FRN
8.40%, 3/15/18 (a)(b) 15,398 16,766,560
BS93-5A (I/O) FRN
7.00%, 6/15/18 (a)(b) 12,481 11,903,629
Total Federal Agency Securities
(cost $125,336,965) 122,558,448
COLLATERALIZED MORTGAGE OBLIGATIONS-4.8%
Vendee Mortgage Trust
1992-2 FRN
10.00%, 9/15/22 (I/O)(a) 10,953 8,706,702
1992-2E FRN
7.00%, 2/15/17 $23,374 $23,147,506
1993-1 FRN
10.00%, 2/15/23 (I/O)(a) 11,126 9,742,345
1993-2 FRN
9.50%, 6/15/23 (I/O)(a) 8,303 6,561,016
1993-3 FRN
10.29%, 10/15/23 (I/O)(a) 12,985 10,964,109
1994-1 FRN
9.00%, 2/15/24 (I/O)(a) 5,101 4,919,388
1995-1C FRN
13.16%, 2/15/25 (I/O)(a) 5,062 4,078,151
Total Collateralized Mortgage
Obligations (cost $76,069,330) 68,119,217
TOTAL INVESTMENTS-99.3%
(cost $1,403,255,106) $1,410,462,077
Other assets less liabilities-0.7% 9,243,594
NET ASSETS-100% $1,419,705,671
(a) Interest rate represents yield to maturity, and principal amount
represents amortized cost.
(b) Illiquid security (see Notes A & F).
Glossary of Terms:
FRN - Floting rate note.
I/O - Interest only.
See notes to financial statements.
6
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1995 ALLIANCE BOND FUND U.S. GOVERNMENT PORTFOLIO
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ASSETS
Investments in securities, at value (cost $1,403,255,106) $1,410,462,077
Cash 2,765,615
Receivable for investment securities sold 28,606,529
Interest receivable 16,497,867
Receivable for capital stock sold 1,689,500
Prepaid expenses and other assets 75,671
Total assets 1,460,097,259
LIABILITIES
Payable for investment securities purchased 30,313,324
Dividends payable 5,322,084
Payable for capital stock redeemed 2,322,618
Advisory fee payable 1,899,631
Distribution fee payable 120,554
Accrued expenses 413,377
Total liabilities 40,391,588
NET ASSETS $1,419,705,671
COMPOSITION OF NET ASSETS
Capital stock, at par $ 178,353
Additional paid-in capital 1,582,625,600
Distributions in excess of net investment income (1,087,945)
Accumulated net realized loss (169,217,308)
Net unrealized appreciation of investments 7,206,971
$1,419,705,671
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($463,659,926 /
58,247,102 shares of capital stock issued and outstanding) $ 7.96
Sales charge-4.25% of public offering price .35
Maximum offering price $ 8.31
CLASS B SHARES
Net asset value and offering price per share ($774,097,691 /
97,250,041 shares of capital stock issued and outstanding) $ 7.96
CLASS C SHARES
Net asset value, redemption and offering price per share
($181,948,054 / 22,855,890 shares of capital stock issued
and outstanding) $ 7.96
See notes to financial statements.
7
STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1995 ALLIANCE BOND FUND U.S. GOVERNMENT PORTFOLIO
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INVESTMENT INCOME
Interest $129,279,543
EXPENSES
Advisory fee $7,422,436
Distribution fee - Class A 1,367,963
Distribution fee - Class B 7,380,145
Distribution fee - Class C 1,985,768
Transfer agency 1,701,719
Registration 187,060
Administrative 146,519
Custodian 141,989
Printing 115,603
Audit and legal 78,273
Taxes 48,294
Directors' fees 15,123
Miscellaneous 56,527
Total expenses 20,647,419
Net investment income 108,632,124
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investments (64,741,614)
Net change in unrealized depreciation of investments 87,484,438
Net gain on investments 22,742,824
NET INCREASE IN NET ASSETS FROM OPERATIONS $131,374,948
See notes to financial statements.
8
STATEMENT OF CHANGES
IN NET ASSETS ALLIANCE BOND FUND U.S. GOVERNMENT PORTFOLIO
- -------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
JUNE 30, 1995 JUNE 30, 1994
-------------- ---------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $108,632,124 $108,609,389
Net realized loss on investments (64,741,614) (62,573,582)
Net change in unrealized appreciation
(depreciation) of investments 87,484,438 (92,105,470)
Net increase (decrease) in net assets
from operations 131,374,948 (46,069,663)
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income
Class A (38,253,548) (40,491,765)
Class B (56,201,323) (51,587,050)
Class C (15,168,018) (16,448,913)
CAPITAL STOCK TRANSACTIONS
Net increase (decrease) (72,782,075) 477,136,349
Total increase (decrease) (51,030,016) 322,538,958
NET ASSETS
Beginning of year 1,470,735,687 1,148,196,729
End of year $1,419,705,671 $1,470,735,687
See notes to financial statements.
9
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 ALLIANCE BOND FUND U.S. GOVERNMENT PORTFOLIO
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NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance 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 two portfolios: Corporate Bond Portfolio and U.S.
Government Portfolio. Each series is considered to be a separate entity for
financial reporting and tax purposes. The financial statements and notes
include the operations of the U.S. Government Portfolio (the 'Portfo1io') only.
The Portfolio offers three classes of shares; Class A, Class B and Class C
shares. Class A shares are sold with a front-end sales charge of up to 4.25%.
Class B shares are sold with a contingent deferred sales charge which declines
from 3.00% 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 sold without an initial or
contingent deferred sales charge. All three classes of shares have identical
voting, dividend, liquidation and other rights, except that each class bears
different distribution expenses and has exclusive voting rights with respect to
its distribution plan. The following is a summary of the significant accounting
policies followed by the Portfolio.
1. SECURITY VALUATION
Portfolio securities traded on a national securities exchange are valued at the
last reported sales price on such exchange. Listed securities not traded and
securities traded in the over-the-counter market, including listed debt
securities whose primary market is believed to be over-the-counter, are valued
at the mean of the closing bid and asked price as obtained from a recognized
pricing service and brokers. Securities for which bid and asked price
quotations are not readily available are valued in good faith at fair value
using methods determined by the Board of Directors. In determining fair value,
consideration is given to cost, operating and other financial data. Securities
which mature in 60 days or less are valued at amortized cost, which
approximates market value.
2. TAXES
It is the Portfolio's policy to meet the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if applicable, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
3. INVESTMENT INCOME AND SECURITY TRANSACTIONS
Interest income is accrued daily. Security transactions are accounted for on
the date the securities are purchased or sold. Security gains and losses are
determined on the identified cost basis. The portfolio accretes original issue
discount as adjustments to income.
4. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date. Income dividends and capital gain distributions are determined in
accordance with income tax regulations, which may differ from generally
accepted accounting principles.
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the investment advisory agreement, the Portfolio pays
Alliance Capital Management L.P., (the "Adviser"), an advisory fee equal to .60
of 1% of the first $500 million, and .50 of 1% in excess of $500 million on an
annualized basis, of its net assets at the end of each quarter. The Adviser has
agreed to reimburse the Portfolio pursuant to the securities laws of certain
states to the extent its aggregate annual expenses (exclusive of interest,
taxes, brokerage, distribution fees and extraordinary expenses) exceed 2.5% of
the first $30 million of its average daily net assets, 2% of the next $70
million of its average daily net assets and 1.5% of its average daily net
10
ALLIANCE BOND FUND U.S. GOVERNMENT PORTFOLIO
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assets in excess of $100 million. No such reimbursement was required for the
year ended June 30, 1995. Pursuant to the advisory agreement the Portfolio paid
$146,519 to the Adviser representing the cost of certain legal and accounting
services provided to the Portfolio by the Adviser for the year ended June 30,
1995.
The Portfolio compensates Alliance Fund Services, Inc. (a wholly-owned
subsidiary of the Adviser) under a Transfer Agency Agreement for providing
personnel and facilities to perform transfer agency services for the Portfolio.
Such compensation amounted to $1,129,663 for the year ended June 30, 1995.
Alliance Fund Distributors, Inc. (a wholly-owned subsidiary of the Adviser)
serves as the Distributor of the Portfolio's shares. The Distributor received
front-end sales charges of $68,408 from the sale of Class A shares and
$2,043,087 in contingent deferred sales charges imposed upon redemptions by
shareholders of Class B shares for the year ended June 30, 1995.
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 a distribution fee to the Distributor at an
annual rate of up to .30 of 1% of the Portfolio's average daily net assets
attributable to the Class A shares and 1% of the Portfolio's average daily net
assets attributable to the Class B and Class C shares. Such fee is accrued
daily and paid monthly. The Agreement provides that the Distributor will use
such payments in their entirety for distribution assistance and promotional
activities. The Distributor has incurred expenses in excess of the distribution
costs reimbursed by the Portfolio in the amount of $13,511,108, and $2,224,264
for Class B and Class C 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), aggregated $2,720,103,592 and $2,817,030,800, respectively, for
year ended June 30, 1995. At June 30, 1995, the cost of securities for federal
income tax purposes was $1,406,072,147. Accordingly, gross unrealized
appreciation of investments was $26,593,927 and gross unrealized depreciation
of investments was $22,203,997, resulting in net unrealized appreciation of
$4,389,930. For federal income tax purposes, the Portfolio had a capital loss
carryforward at June 30, 1995 of approximately $111,119,347 of which
$19,845,081 expires in 1998, $8,257,319 in 1999, and $83,016,947 in 2003.
11
NOTES TO FINANCIAL STATEMENTS
(CONTINUED) ALLIANCE BOND FUND U.S. GOVERNMENT PORTFOLIO
- -------------------------------------------------------------------------------
NOTE E: CAPITAL STOCK
There are 600,000,000 shares of $.001 par value capital stock authorized, for
the Portfolio of which 200,000,000 shares are designated for Class A, Class B
and Class C shares, respectively. Transactions in capital stock were as follows:
SHARES AMOUNT
-------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1995 1994 1995 1994
------------ ------------ ------------- -------------
CLASS A
Shares sold 9,001,368 11,274,893 $69,178,564 $95,684,533
Shares issued in
reinvestment of
dividends 2,226,877 2,421,056 17,158,946 20,303,561
Shares issued in
connection with the
acquisition of the
Equitable Government
Securities Fund -0- 698,394 -0- 5,976,599
Shares redeemed (14,571,760) (13,901,306) (112,341,061) (117,389,120)
Net increase(decrease) (3,343,515) 493,037 $(26,003,551) $ 4,575,573
CLASS B
Shares sold 25,073,085 46,811,290 $192,424,585 $398,854,640
Shares issued in
reinvestment of
dividends 2,907,922 3,240,130 22,420,168 27,132,335
Shares issued in
connection with the
acquisition of the
Equitable Government
Securities Fund -0- 2,472,984 -0- 21,318,288
Shares redeemed (27,250,780) (19,937,249) (209,527,642) (166,259,442)
Net increase 730,227 32,587,155 $ 5,317,111 $281,045,821
CLASS C
Shares sold 6,046,572 47,418,974 $ 46,423,819 $407,386,564
Shares issued in
reinvestment of
dividends 836,828 1,327,359 6,463,373 11,125,450
Shares redeemed (13,632,303) (26,983,500) (104,982,827) (226,997,059)
Net increase(decrease) (6,748,903) 21,762,833 $(52,095,635) $191,514,955
12
ALLIANCE BOND FUND U.S. GOVERNMENT PORTFOLIO
- -------------------------------------------------------------------------------
NOTE F: ILLIQUID SECURITIES
DATE
SECURITY ACQUIRED COST
- -------- -------- -----------
Small Business Administration
BS92-IE (I/O)
9.75%, 4/15/17 FRN 5/07/92 $21,389,656
BS93-2A (I/O)
8.40%, 3/15/18 FRN 1/28/93 15,397,933
BS93-5A (I/O)
7.00%, 6/15/18 FRN 1/26/94 12,481,219
$49,268,808
The securities shown above are illiquid and have been valued at fair value in
accordance with the procedures described in Note A. The value of these
securities at June 30, 1995 aggregated $51,103,654, representing 3.6% of net
assets.
NOTE G: ACQUISITION OF EQUITABLE GOVERNMENT SECURITIES FUND
On August 27, 1993, the Portfolio acquired all the net assets of The Equitable
Government Securities Fund ("Government Securities") pursuant to a plan of
reorganization approved by the Government Securities shareholders on August 20,
1993. The acquisition was accomplished by a tax-free exchange of 3,171,378
shares of the Portfolio for 2,757,070 shares of Government Securities on August
27, 1993. The aggregate net assets of the Portfolio and Government Securities
immediately before the acquisition were $1,349,787,767 and $27,718,855
(including unrealized appreciation of $423,968), respectively. Immediately
after the acquisition, the combined net assets of the Portfolio amounted to
$1,377,506,622.
13
FINANCIAL HIGHLIGHTS ALLIANCE BOND FUND U.S. GOVERNMENT PORTFOLIO
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------
YEAR ENDED JUNE 30,
-------------------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $7.84 $8.64 $8.34 $8.01 $8.14
INCOME FROM INVESTMENT OPERATIONS
Net investment income .64 .65 .69 .70 .81
Net realized and unrealized
gain (loss)on investments .13 (.80) .29 .35 (.11)
Net increase (decrease) in net asset
value from operations .77 (.15) .98 1.05 .70
LESS: DISTRIBUTIONS
Dividends from net investment income (.65) (.65) (.68) (.72) (.83)
Net asset value, end of year $7.96 $7.84 $8.64 $8.34 $8.01
TOTAL RETURN
Total investment return based on net
asset value (a) 10.37% (1.93)% 12.23% 13.52% 8.97%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year
(000's omitted) $463,660 $482,595 $527,968 $492,448 $491,910
Ratio of expenses to average net assets 1.01% 1.02% 1.10% 1.12% 1.07%
Ratio of net investment income
to average net assets 8.27% 7.76% 8.04% 8.43% 10.02%
Portfolio turnover rate 190% 188% 386% 418% 402%
</TABLE>
See footnote summary on page 16.
14
ALLIANCE BOND FUND U.S. GOVERNMENT PORTFOLIO
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS B
-------------------------------------------
YEAR ENDED JUNE 30, SEPT. 30,
------------------------------- 1991** TO
1995 1994 1993 JUNE 30,1992
--------- --------- --------- ----------
Net asset value, beginning of period $7.84 $8.64 $8.34 $8.25
INCOME FROM INVESTMENT OPERATIONS
Net investment income .58 .59 .62 .49
Net realized and unrealized
gain (loss) on investments .13 (.80) .30 .09
Net increase (decrease) in net
asset value from operations .71 (.21) .92 .58
LESS: DISTRIBUTIONS
Dividends from net investment income (.59) (.59) (.62) (.49)
Net asset value, end of period $7.96 $7.84 $8.64 $8.34
TOTAL RETURN
Total investment return based
on net asset value (a) 9.52% (2.63)% 11.45% 6.95%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $774,097 $756,282 $552,471 $32,227
Ratio of expenses to
average net assets 1.72% 1.72% 1.81% 1.80%*
Ratio of net investment income
to average net assets 7.57% 7.04% 7.25% 7.40%*
Portfolio turnover rate 190% 188% 386% 418%
See footnote summary on page 16.
15
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE BOND FUND U.S. GOVERNMENT PORTFOLIO
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS C
----------------------------------
YEAR ENDED JUNE 30, MAY 3,1993**
--------------------- TO
1995 1994 JUNE 30,1993
--------- --------- ----------
Net asset value, beginning of period $7.83 $8.64 $8.56
INCOME FROM INVESTMENT OPERATIONS
Net investment income .58 .59 .10
Net realized and unrealized
gain (loss) on investments .14 (.81) .08
Net increase (decrease) in net asset
value from operations .72 (.22) .18
LESS: DISTRIBUTIONS
Dividends from net investment income (.59) (.59) (.10)
Net asset value, end of period $7.96 $7.83 $8.64
TOTAL RETURN
Total investment return based on net
asset value (a) 9.67% (2.75)% 2.12%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $181,948 $231,859 $67,757
Ratio of expenses to average net assets 1.71% 1.70% 1.80%*
Ratio of net investment income
to average net assets 7.59% 6.97% 6.00%*
Portfolio turnover rate 190% 188% 386%
* Annualized.
** Commencement of distribution.
(a) 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 charge or contingent
deferred sales charge is not reflected in the calculation of total investment
return. Total investment return calculated for a period less than one year is
not annualized.
16
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS ALLIANCE BOND FUND U.S. GOVERNMENT PORTFOLIO
- -------------------------------------------------------------------------------
TO THE SHAREHOLDER AND BOARD OF DIRECTORS
ALLIANCE BOND FUND U.S. GOVERNMENT PORTFOLIO
We have audited the accompanying statement of assets and liabilities of
Alliance Bond Fund U.S. Government Portfolio (one of the portfolios comprising
the Alliance Bond Fund, Inc.) including the portfolio of investments, as of
June 30, 1995, 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 Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1995, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Alliance Bond Fund U.S. Government Portfolio at June 30, 1995, 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 indicated periods, in conformity with generally accepted accounting
principles.
Ernst & Young LLP
New York, New York
August 11, 1995
17
ALLIANCE BOND FUND U.S. GOVERNMENT PORTFOLIO
- -------------------------------------------------------------------------------
BOARD OF DIRECTORS
JOHN D. CARIFA, CHAIRMAN AND PRESIDENT
RUTH BLOCK (1)
DAVID H. DIEVLER (1)
JAMES R. GREENE (1)
DR. JAMES M. HESTER (1)
CLIFFORD L. MICHEL (1)
EUGENE F. O'NEIL (1)
ROBERT C. WHITE (1)
OFFICERS
KATHLEEN A. CORBET, SENIOR VICE PRESIDENT
WAYNE D. LYSKI, SENIOR VICE PRESIDENT
PAUL J. DENOON, VICE PRESIDENT
EDMUND P. BERGAN, JR., SECRETARY
MARK D. GERSTEN, TREASURER & CHIEF FINANCIAL OFFICER
PATRICK J. FARRELL, CONTROLLER
CUSTODIAN
STATE STREET BANK & TRUST COMPANY
225 Franklin Street
Boston, MA 02110
PRINCIPAL UNDERWRITER
ALLIANCE FUND DISTRIBUTORS, INC.
1345 Avenue of the Americas
New York, NY 10105
TRANSFER AGENT
ALLIANCE FUND SERVICES, INC.
P.O. Box 1520
Secaucus, NJ 07096-1520
Toll-Free 1-(800) 221-5672
INDEPENDENT AUDITORS
ERNST & YOUNG LLP
787 Seventh Avenue
New York, NY 10019
LEGAL COUNSEL
SEWARD & KISSEL
One Battery Park Plaza
New York, NY 10004
(1) Member of the Audit Committee.
18
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19
ALLIANCE BOND FUND U.S. GOVERNMENT PORTFOLIO
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
AllianceCapital
Mutual funds without the Mystery.SM
THIS REPORT IS INTENDED SOLELY FOR DISTRIBUTION TO CURRENT SHAREHOLDERS OF THE
FUND.
R THESE REGISTERED SERVICE MARKS USED UNDER LICENSE FROM THE OWNER,
ALLIANCE CAPITAL MANAGEMENT L.P.
USGAR
