ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
SEMI-ANNUAL REPORT
DECEMBER 31, 1996
LETTER TO SHAREHOLDERS ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
February 19, 1997
Dear Shareholder:
U.S. bond market returns were subdued in 1996. Throughout most of the year,
returns were negative as the market reacted unfavorably to
stronger-than-expected job growth and uncertainty about whether the Federal
Reserve would raise rates to slow economic growth. Towards the end of 1996, the
bond market was able to move into positive territory as the fear of
accelerating inflation diminished. Across all major sectors of the bond market,
shorter-duration securities outperformed longer-duration securities for the
year while interest rates for all maturities increased. Mortgage-backed
securities were the best performing sector of the domestic investment grade
bond market as higher interest rates slowed mortgage prepayment expectations.
Outside the United States, slow worldwide economic growth and low inflation
provided a favorable investment environment for both developed market and
emerging market debt.
INVESTMENT RESULTS
The following table shows the Corporate Bond Portfolio's investment results
over the 6 and 12 month periods ended December 31, 1996. Also shown for
comparison are the total returns for the U.S. bond market, represented by the
unmanaged Lehman Brothers (LB) Aggregate Bond Index, and for the Lipper
Corporate Debt Funds BBB-Rated Average. These funds have similar investment
objectives to your Fund, though some funds included in the average may have
somewhat different investment policies.
INVESTMENT RESULTS*
Period Ended December 31, 1996
TOTAL RETURNS
6 MONTHS 12 MONTHS
---------- -----------
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
Class A 10.16% 10.04%
Class B 9.77% 9.27%
Class C 9.77% 9.27%
LEHMAN BROTHERS AGGREGATE BOND INDEX 4.90% 3.63%
LIPPER CORPORATE DEBT FUNDS BBB-RATED AVERAGE 5.54% 3.19%
* THE FUND'S INVESTMENT RESULTS ARE CUMULATIVE TOTAL RETURNS FOR THE PERIOD
AND ARE BASED ON THE NET ASSET VALUE OF EACH CLASS OF SHARES AS OF DECEMBER 31,
1996. ALL FEES AND EXPENSES RELATED TO THE OPERATION OF THE FUND HAVE BEEN
DEDUCTED, BUT NO ADJUSTMENT HAS BEEN MADE FOR SALES CHARGES THAT MAY APPLY WHEN
SHARES ARE PURCHASED OR REDEEMED. ALL RETURNS INCLUDE THE REINVESTMENT OF ANY
DISTRIBUTIONS PAID DURING THE PERIOD.
THE LEHMAN BROTHERS (LB) AGGREGATE BOND INDEX IS UNMANAGED AND DOES NOT REFLECT
FEES AND EXPENSES. THE LIPPER CORPORATE DEBT FUNDS BBB-RATED AVERAGE MEASURES
THE PERFORMANCE OF 100 MUTUAL FUNDS WITH GENERALLY SIMILAR INVESTMENT
OBJECTIVES.
ADDITIONAL INVESTMENT RESULTS CAN BE FOUND ON PAGE 3.
We are pleased to report that over the past 6 and 12 month periods, your Fund
outperformed both its benchmark and its Lipper universe of similarly managed
funds. This outpeformance is due primarily to strong performance in the
emerging market and developed non-U.S. bond markets and good country selection
within these sectors.
ECONOMIC REVIEW
The U.S. economy finished 1996 on a strong note. After moderating in the third
quarter, the economy picked up speed in the fourth quarter, led by a rebound in
consumer spending. The annualized gain in retail sales of merchandise jumped to
4.8% in the fourth quarter, up from only 0.9% in the third quarter. Exports
surged by an annualized 32.7% in October and November and unexpectedly
1
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
added to year-end growth. The production side of the economy also showed
strength. Industrial production grew at an annualized pace of 6% and payroll
growth increased to 217,000 per month, up from the third quarter's average of
171,000 per month. In all, growth in aggregate output (GDP), which dipped to
2.1% in the third quarter, accelerated to 4.7% during the final three months of
1996.
Broad inflation measures were slightly higher at the end of 1996 as consumer
prices increased 3.3% year-over-year and producer prices were up 2.8%. However,
excluding the volatile food and energy sectors, inflation remained very
well-behaved with year-over-year consumer and producer prices up only 2.6% and
0.6%, respectively.
INVESTMENT OUTLOOK
Our outlook for the U.S. economy assumes that while economic growth accelerated
at the end of 1996, it will moderate again during the first half of 1997. As
this occurs, current upward pressures on inflation should dissipate. Until
clear signs of a slowing economy emerge, concerns about inflation will keep
U.S. interest rates within their recent ranges. The Fed remains on hold with
its neutral-to-slightly-restrictive policy. Given justified concerns about the
economic outlook, further near-term weakness in bond prices and higher bond
yields cannot be ruled out. However, such developments would only facilitate
the economic slowing we predict later in 1997.
Although domestic corporate bond yields remain at historically narrow levels,
we expect to continue to find opportunities in corporate debt on a case-by-case
basis. Balance sheet improvements and increased investor demand for
yield-oriented securities should support higher prices for these securities
into 1997.
Outside the United States, we continue to have a favorable outlook for emerging
market debt. Ongoing economic reforms in a worldwide environment of moderate
growth and generally low inflation should support further gains in this sector.
However, as risk premiums for this asset class have narrowed from their highs
at the end of 1994, we expect the pace of price appreciation of these
securities to slow.
Thank you for your continued interest and investment in Alliance Corporate Bond
Portfolio. We look forward to reporting the Portfolio's progress to you in the
coming months.
Sincerely,
John D. Carifa
Chairman and President
Wayne D. Lyski
Senior Vice President
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, GUARANTEED OR ENDORSED
BY, ANY BANK; FURTHER, SUCH SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
2
INVESTMENT OBJECTIVE AND POLICIES ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
Alliance Bond Fund Corporate Bond Portfolio seeks primarily to maximize income
over the long-term consistent with providing reasonable safety in the value of
each shareholder's investment; secondarily, the Fund will seek capital
appreciation. It invests primarily in a diversified portfolio of corporate
bonds issued by domestic and foreign issuers that give promise of relatively
attractive yields.
INVESTMENT RESULTS
_______________________________________________________________________________
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1996
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 10.04% 5.34%
Five Years 12.78% 11.80%
Ten Years 11.15% 10.67%
SEC Yield** 7.12%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 9.27% 6.27%
Since Inception* 11.95% 11.95%
SEC Yield** 6.72%
CLASS C SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 9.27% 8.27%
Since Inception* 9.57% 9.57%
SEC Yield** 6.73%
Average annual total returns reflect reinvestment of dividends and/or capital
gain 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 A (1%-year 1 for purchases exceeding
$1,000,000); for Class B (3%-year 1; 2%-year 2; 1%-year 3; 0%-year 4); Class C
(1%-year 1).
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.
* Inception: 1/8/93, Class B; 5/3/93, Class C.
** SEC Yields are based on SEC guidelines and are calculated on 30 days ended
December 31, 1996.
3
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996 (UNAUDITED) ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
STANDARD PRINCIPAL
& POOR'S AMOUNT
RATINGS(a) (000) VALUE
- ------------------------------------------------------------------------
CORPORATE DEBT OBLIGATIONS-54.3%
FINANCIAL-24.2%
BBB Arkwright CSN Trust
9.625%, 8/15/26 (b) $30,000 $ 32,754,900
BBB+ FBS Capital I
8.09%, 11/15/26 (b) 26,300 26,150,090
A1 First Union Capital
8.04%, 12/01/26 (b) (c) 38,000 38,268,660
BB- First USA Capital Trust I
9.33%, 1/15/27 (b) 36,000 36,067,500
A2 Fleet Capital II
7.92%, 12/11/26 (c) 29,875 29,435,180
B- Home Holdings, Inc.
8.625%, 12/15/03 46,165 10,848,775
A Travelers Capital III
7.625%, 12/01/36 35,000 34,586,300
------------
208,111,405
INSURANCE-11.5%
A2 Farmers Insurance Exchange
8.625%, 5/01/24 (b) (c) 38,725 39,686,852
A Mutual Life Insurance Co. of New York
11.24%, 8/15/24 (b) (d) 25,000 25,325,000
A2 Prudential Insurance Co.
8.30%, 7/01/25 (b) (c) 33,000 33,915,882
------------
98,927,734
INDUSTRIAL-15.0%
A- Enersis, S.A.
7.40%, 12/01/16 30,655 29,722,781
A International Business Machines
7.125%, 12/01/96 35,000 33,336,380
A3 Ras Laffan Liquefied Natural Gas
8.294%, 3/15/14 (b) (c) 34,000 34,170,000
BB+ USX Marathon Group
8.50%, 3/01/23 29,400 31,810,006
------------
129,039,167
COMMUNICATIONS-3.6%
BBB- TCI Communications, Inc.
7.875%, 2/15/26 15,600 13,528,679
8.75%, 8/01/15 17,500 17,246,268
------------
30,774,947
Total Corporate Debt Obligations
(cost $484,554,850) 466,853,253
YANKEES-15.7%
B3 Grupo Mexicano de Desarrollo, S.A.
8.25%, 2/17/01 (c) 27,200 16,558,000
BBB MC Cuernavaca Trust
9.25%, 7/25/01 (b) 43,664 38,643,050
B- Millicom International Cellular, S.A.
13.50%, 6/01/06 (b) (d) 20,000 12,500,000
BB+ Reliance Industries Ltd.
9.375%, 6/24/26 (b) 35,000 37,395,225
BBB- Total Access Communication
8.375%, 11/04/06 (b) 30,000 30,217,500
Total Yankees (cost $138,819,475) 135,313,775
SOVEREIGN DEBT OBLIGATIONS-15.5%
ARGENTINA-2.5%
NR Repackaged Argentina
Domestic Security Trust
14.75%, 9/01/02 (b) 18,000 21,600,000
COLOMBIA-3.2%
BBB- Republic of Colombia
8.70%, 2/15/16 27,500 27,419,590
MEXICO-3.1%
BB United Mexican States
11.50%, 5/15/26 25,000 26,406,250
PERU-2.3%
NR Republic of Peru FLIRB WI
3.25%, 3/15/16 (b)(e) 30,000 16,500,000
NR Republic of Peru PDI WI
4.00%, 12/01/17 (b)(e) 5,000 2,956,250
------------
19,456,250
POLAND-4.4%
Baa3 Republic of Poland PDI
4.00%, 10/27/14 (c) (e) 45,000 38,193,750
Total Sovereign Debt Obligations
(cost $128,066,043) 133,075,840
4
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
SHARES OR
STANDARD PRINCIPAL
& POOR'S AMOUNT
RATINGS(a) (000) VALUE
- ------------------------------------------------------------------------
PREFERRED STOCK-9.9%
BB- Digital Equipment Corp. Series A
8.88% $ 325 $ 8,206,250
BB+ Time Warner, Inc.
10.25% (b) 373 40,584,412
BBB+ Transcanada Pipelines
8.75% 1,350 36,028,125
Total Preferred Stock
(cost $79,764,820) 84,818,787
SOVEREIGN DEBT RELATED-4.9%
BB- Morgan Guaranty Trust Co.
Indexed Note
Linked Russian US$
Vneshekonombank
Loan Assignment
14.00%, 2/28/97 (f)
(cost $42,556,250) 42,556 42,526,461
STANDARD PRINCIPAL
& POOR'S AMOUNT
RATINGS(a) (000) VALUE
- ------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATION-2.8%
AAA U.S. Treasury Strip
Zero coupon, 2/15/11
(cost $24,721,111) $62,300 $ 24,367,399
COMMERCIAL PAPER-0.8%
A1+ General Electric Credit Corp.
5.50%, 1/02/97 (c)
(cost $6,566,996) 6,568 6,566,996
TOTAL INVESTMENTS-103.9%
(cost $905,049,545) 893,522,511
Other assets less liabilities-(3.9%) (33,186,511)
NET ASSETS-100% $860,336,000
(a) Unaudited.
(b) Securities exempt from Registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified buyers. At December 31, 1996, this security
amounted to $466,735,321 or 54.3% of net assets.
(c) Moody's rating.
(d) Indicates a security that has a zero coupon that remains in effect until a
predetermined date at which time the stated coupon rate becomes effective.
(e) Coupon increases periodically based upon a predetermined schedule. Stated
interest rate in effect at December 31, 1996.
(f) Principal amount represents par value at purchase date. The redemption
value of this security is linked to the change in the bid price of the
referenced emerging market debt.
Glossary of Terms:
NR - Not rated.
PDI - Past due interest.
WI - When issued.
FLIRB - Front loaded interest reduction bond.
See notes to financial statements.
5
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996 (UNAUDITED)
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $905,049,545) $893,522,511
Cash 124
Interest receivable 12,431,448
Receivable for capital stock sold 1,767,129
Dividends receivable 180,375
Total assets 907,901,587
LIABILITIES
Payable for investment securities purchased 43,695,211
Dividends payable 2,107,462
Distribution fee payable 529,603
Payable for capital stock redeemed 447,490
Advisory fee payable 413,985
Accrued expenses 371,836
Total liabilities 47,565,587
NET ASSETS $860,336,000
COMPOSITION OF NET ASSETS
Capital stock, at par $ 61,470
Additional paid-in capital 966,404,592
Undistributed net investment income 3,870,792
Accumulated net realized loss on investments (98,473,820)
Net unrealized depreciation of investments (11,527,034)
$860,336,000
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($326,546,493/
23,330,608 shares of capital stock issued and outstanding) $14.00
Sales charge--4.25% of public offering price .62
Maximum offering price $14.62
CLASS B SHARES
Net asset value and offering price per share ($419,234,095/
29,954,901 shares of capital stock issued and outstanding) $14.00
CLASS C SHARES
Net asset value and offering price per share ($114,555,412/
8,184,803 shares of capital stock issued and outstanding) $14.00
See notes to financial statements.
6
STATEMENT OF OPERATIONS
SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED)
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
INVESTMENT INCOME
Interest $34,145,825
Dividends 3,358,090
$37,503,915
EXPENSES
Advisory fee 2,269,690
Distribution fee - Class A 455,936
Distribution fee - Class B 1,900,800
Distribution fee - Class C 488,656
Transfer agency 570,710
Custodian 144,554
Administrative 66,976
Printing 54,713
Audit and legal 39,821
Registration 37,578
Taxes 7,382
Directors' fees 5,325
Miscellaneous 8,958
Total expenses 6,051,099
Net investment income 31,452,816
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investment transactions 31,324,511
Net change in unrealized depreciation of investments 10,876,621
Net gain on investments 42,201,132
NET INCREASE IN NET ASSETS FROM OPERATIONS $73,653,948
See notes to financial statements.
7
STATEMENT OF CHANGES
IN NET ASSETS ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
SIX MONTHS ENDED
DEC. 31, 1996 YEAR ENDED
(UNAUDITED) JUNE 30, 1996
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 31,452,816 $ 55,214,973
Net realized gain on investments 31,324,511 9,409,977
Net change in unrealized depreciation
of investments 10,876,621 (1,446,864)
Net increase in net assets from operations 73,653,948 63,178,086
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income
Class A (13,586,041) (22,018,218)
Class B (15,654,935) (23,308,105)
Class C (4,021,639) (5,153,555)
CAPITAL STOCK TRANSACTIONS
Net increase 121,328,882 162,746,223
Total increase 161,720,215 175,444,431
NET ASSETS
Beginning of year 698,615,785 523,171,354
End of period (including undistributed
net investment income of $3,870,792
and $5,680,591, respectively) $860,336,000 $698,615,785
See notes to financial statements.
8
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 (UNAUDITED) ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
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: the Corporate Bond Portfolio and the
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 Corporate Bond Portfolio (the "Portfolio") only.
The Portfolio offers three classes of shares: Class A, Class B and Class C
shares. Class A shares are currently 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 will be
subject to a contingent deferred sales charge of 1%. Class B shares are 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 purchased on or after July 1, 1996, are
subject to a contingent deferred sales charge of 1% on redemptions made within
the first year after purchase. 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 which mature in 60 days or less are
valued at amortized cost, which approximates market value unless this method
does not represent fair value. Securities for which market quotations are not
readily available and restricted securities 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.
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 or net realized gains, if applicable, to its
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
3. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Interest income is accrued daily. Dividend income is recorded on ex-dividend
date. Investment transactions are accounted for on the date the securities are
purchased or sold. Investment gains and losses are determined on the identified
cost basis. The Portfolio accretes discount as an adjustment to interest income.
4. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date and are determined in accordance with income tax regulations.
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of an Investment Advisory Agreement, the Portfolio pays
Alliance Capital Management L.P., (the "Adviser"), an advisory fee at a annual
rate of .625 of 1% of the first $500 million and .50 of 1% in excess of $500
million of the Portfolio's average daily net assets. Such fee is accrued daily
and paid monthly.
Pursuant to the advisory agreement, the Portfolio paid $66,976 to the Adviser
representing the cost of certain legal and accounting services provided to the
Portfolio by the Adviser for the six months ended December 31, 1996.
9
NOTES TO FINANCIAL STATEMENTS (CONT.)
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
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 $406,512 for the six months ended December 31,
1996. 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 $59,108 from the sale of Class A shares,
$200,739, $3,884 in contingent deferred sales charges imposed upon redemption
by shareholders of Class B and Class C respectively, for the six months ended
December 31, 1996.
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 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 $8,023,556 and $1,329,773,
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
and U.S. government obligations) aggregated $1,047,812,799 and $902,653,548,
respectively, for the six months ended December 31, 1996. There were purchases
of $320,748,339 and sales of $311,529,380 of U.S. government and government
agency obligations for the six months ended December 31, 1996. At December 31,
1996, the cost of securities for federal income tax purposes was $905,049,545.
Accordingly, gross unrealized appreciation of investments was $25,011,924 and
gross unrealized depreciation of investments was $36,538,958, resulting in net
unrealized depreciation of $11,527,034. At June 30, 1996, the Portfolio had a
capital loss carryforward for federal income tax purposes of approximately
$126,287,458 of which $93,188,575 expires in the year 1997; $14,295,126 in the
year 1998; $258,361 in the year 2000; $15,028,057 in the year 2003 and
$3,517,339 in the year 2004.
OPTIONS TRANSACTIONS
For hedging purposes, the Fund purchases and writes (sells) put and call
options on debt securities that are traded on U.S. and foreign securities
exchanges and over-the-counter markets.
The risk associated with purchasing an option is that the Fund pays a premium
whether or not the option is exercised. Additionally, the Fund bears the risk
of loss of premium and change in market value should the counterparty not
perform under the contract. Put and call options purchased are accounted for in
the same manner as portfolio securities. The cost of securities acquired
through the exercise of call options is increased by premiums paid. The
proceeds from securities sold through the exercise of put options are decreased
by the premiums paid.
When the Fund writes an option, the premium received by the Fund is recorded as
a liability and is subsequently adjusted to the current market value of the
option written. Premiums received from writing options which expire unexercised
are recorded by the Fund on the expiration date as realized gains from option
transactions. The difference between the premium and the amount paid on
effecting a closing purchase transaction, including brokerage commissions, is
also treated as a realized gain, or if the premium is less than the amount paid
for the closing purchase transaction, as a realized loss. If a call option is
exercised, the premium is added to the proceeds from the sale of the underlying
security in determining whether the Fund has realized a gain or loss. If a put
option is exercised, the premium reduces the cost basis of
10
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
the security purchased by the Fund. In writing an option, the Fund bears the
market risk of an unfavorable change in the price of the security or currency
underlying the written option. Exercise of an option written by the Fund could
result in the Fund selling or buying a security at a price different from the
current market value.
For the six months ended December 31, 1996 the Fund did not engage in any
options transactions.
NOTE E: CAPITAL STOCK
There are 350,000,000 shares of $.001 par value capital stock authorized for
the Portfolio, of which 250,000,000 shares are designated as Class A and
50,000,000 each for Class B and Class C shares. Transactions in capital stock
were as follows:
SHARES AMOUNT
--------------------------- ------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
DEC. 31, 1996 JUNE 30, DEC. 31, 1996 JUNE 30,
(UNAUDITED) 1996 (UNAUDITED) 1996
------------ ------------ -------------- --------------
Shares sold 3,377,708 5,346,878 $45,895,741 $ 71,873,295
Shares issued in
reinvestment of
dividends 501,782 863,496 6,859,986 11,552,038
Shares converted
from Class B 349,163 290,778 4,774,940 3,878,519
Shares redeemed (1,772,752) (3,486,540) (24,115,934) (46,736,968)
Net increase 2,455,901 3,014,612 $33,414,733 $ 40,566,884
CLASS B
Shares sold 6,753,045 10,495,151 $92,087,779 $141,176,345
Shares issued in
reinvestment of
dividends 496,850 729,705 6,787,445 9,764,021
Shares converted
to Class A (349,163) (290,778) (4,774,940) (3,878,519)
Shares redeemed (2,394,972) (4,169,007) (32,628,591) (56,009,933)
Net increase 4,505,760 6,765,071 $61,471,693 $ 91,051,914
CLASS C
Shares sold 2,784,070 3,778,824 $38,084,957 $ 50,939,949
Shares issued in
reinvestment of
dividends 109,377 151,683 1,497,805 2,030,186
Shares redeemed (962,327) (1,624,777) (13,140,306) (21,842,710)
Net increase 1,931,120 2,305,730 $26,442,456 $ 31,127,425
11
FINANCIAL HIGHLIGHTS ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------------------------
SIX MONTHS
ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
1996 --------------------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992
------------- ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $13.29 $12.92 $12.51 $14.15 $12.01 $11.21
INCOME FROM INVESTMENT OPERATIONS
Net investment income .58(a) 1.26 1.19 1.11 1.25 1.06
Net realized and unrealized gain (loss)
on investments .74 .27 .36 (1.36) 2.13 .82
Net increase (decrease) in net asset
value from operations 1.32 1.53 1.55 (.25) 3.38 1.88
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.61) (1.16) (1.14) (1.11) (1.24) (1.08)
Dividends in excess of net investment
income -0- -0- -0- (.03) -0- -0-
Distributions from net realized gains -0- -0- -0- (.25) -0- -0-
Total dividends and distributions (.61) (1.16) (1.14) (1.39) (1.24) (1.08)
Net asset value, end of period $14.00 $13.29 $12.92 $12.51 $14.15 $12.01
TOTAL RETURN
Total investment return based on net
asset value (b) 10.16% 12.14% 13.26% (2.58)% 29.62% 17.43%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $326,547 $277,369 $230,750 $219,182 $216,171 $60,356
Ratio of expenses to average net assets 1.12%(c) 1.20% 1.24% 1.30% 1.39% 1.48%
Ratio of net investment income to
average net assets 8.48%(c) 9.46% 9.70% 7.76% 9.29% 8.98%
Portfolio turnover rate 154% 389% 387% 372% 579% 610%
</TABLE>
See footnote summary on page 14.
12
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS B
------------------------------------------------------------------
SIX MONTHS JANUARY 8,
ENDED 1993(D)
DECEMBER 31, YEAR ENDED JUNE 30, TO
1996 ------------------------------------- JUNE 30,
(UNAUDITED) 1996 1995 1994 1993
------------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $13.29 $12.92 $12.50 $14.15 $12.47
INCOME FROM INVESTMENT OPERATIONS
Net investment income .53(a) 1.15 1.11 1.02 .49
Net realized and unrealized gain (loss)
on investments .75 .29 .36 (1.37) 1.69
Net increase (decrease) in net asset
value from operations 1.28 1.44 1.47 (.35) 2.18
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.57) (1.07) (1.05) (1.04) (.50)
Dividends in excess of net investment
income -0- -0- -0- (.01) -0-
Distribution from net realized gains -0- -0- -0- (.25) -0-
Total dividends and distributions (.57) (1.07) (1.05) (1.30) (.50)
Net asset value, end of period $14.00 $13.29 $12.92 $12.50 $14.15
TOTAL RETURN
Total investment return based on net
asset value (b) 9.77% 11.38% 12.54% (3.27)% 17.75%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $419,234 $338,152 $241,393 $184,129 $55,508
Ratio of expenses to average net assets 1.82%(c) 1.90% 1.99% 2.00% 2.10%(c)
Ratio of net investment income to
average net assets 7.77%(c) 8.75% 9.07% 7.03% 7.18%(c)
Portfolio turnover rate 154% 389% 387% 372% 579%
</TABLE>
See footnote summary on page 14.
13
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS C
------------------------------------------------------------------
SIX MONTHS MAY 3,
ENDED 1993(D)
DECEMBER 31, YEAR ENDED JUNE 30, TO
1996 ------------------------------------- JUNE 30,
(UNAUDITED) 1996 1995 1994 1993
------------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $13.29 $12.93 $12.50 $14.15 $13.63
INCOME FROM INVESTMENT OPERATIONS
Net investment income .54(a) 1.14 1.10 1.02 .16
Net realized and unrealized gain (loss)
on investments .74 .29 .38 (1.37) .53
Net increase (decrease) in net asset
value from operations 1.28 1.43 1.48 (.35) .69
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.57) (1.07) (1.05) (1.05) (.17)
Distribution from net realized gains -0- -0- -0- (.25) -0-
Total dividends and distributions (.57) (1.07) (1.05) (1.30) (.17)
Net asset value, end of period $14.00 $13.29 $12.93 $12.50 $14.15
TOTAL RETURN
Total investment return based on net
asset value (b) 9.77% 11.30% 12.62% (3.27)% 5.08%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $114,555 $83,095 $51,028 50,860 $5,115
Ratio of expenses to average net assets 1.82%(c) 1.90% 1.84% 1.99% 2.05%(c)
Ratio of net investment income to
average net assets 7.78%(c) 8.74% 8.95% 6.98% 5.51%(c)
Portfolio turnover rate 154% 389% 387% 372% 579%
</TABLE>
(a) Based on average shares outstanding.
(b) 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.
(c) Annualized.
(d) Commencement of distribution.
14
ALLIANCE BOND FUND CORPORATE BOND 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)
DONALD J. ROBINSON (1)
ROBERT C. WHITE (1)
OFFICERS
WAYNE D. LYSKI, SENIOR VICE PRESIDENT
KATHLEEN A. CORBET, SENIOR VICE PRESIDENT
PAUL J. DENOON, VICE PRESIDENT
EDMUND P. BERGAN, JR., SECRETARY
MARK D. GERSTEN, TREASURER & CHIEF FINANCIAL OFFICER
JUAN J. RODRIGUEZ, 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
LEGAL COUNSEL
SEWARD & KISSEL
One Battery Park Plaza
New York, NY 10004
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
(1) Member of the Audit Committee.
15
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
ALLIANCE CAPITAL
INVESTING WITHOUT THE MYSTERY
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.
CBPSR
