ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
ANNUAL REPORT
JUNE 30, 1997
ALLIANCE CAPITAL
LETTER TO SHAREHOLDERS ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
August 5, 1997
Dear Shareholder:
The U.S. bond market posted modest gains through the first half of 1997. After
trading lower during the first quarter on fears that too-strong growth would
ignite inflation, the market rebounded in the second quarter. Data released
during the quarter indicating that the economy had slowed from its
unsustainable first quarter pace and inflation remained dormant helped ease
investor concerns and pushed the market higher. Interest rates, which peaked in
late spring following the Federal Reserve's decision to raise the Fed Funds
rate, ended the period lower on all maturities.
Among the investment grade sectors, mortgage-backed securities were the best
performing sector, followed by corporates, asset-backed and government
securities. Outside the U.S., continued low worldwide inflation helped emerging
markets to continue their strong performance. In many developed markets,
however, low inflation was offset by improving growth prospects.
INVESTMENT RESULTS
The following table shows the Corporate Bond Portfolio's investment results
over the six and twelve month periods ended June 30, 1997. 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 average of the
Lipper universe of BBB-Rated Corporate Debt Funds. 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 June 30, 1997
TOTAL RETURNS
6 MONTHS 12 MONTHS
---------- -----------
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
Class A 5.84% 16.59%
Class B 5.49% 15.80%
Class C 5.49% 15.80%
LEHMAN BROTHERS AGGREGATE BOND INDEX 3.09% 8.15%
LIPPER CORPORATE DEBT FUNDS BBB-RATED AVERAGE 3.16% 8.85%
* 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 JUNE 30,
1997. 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 4.
We are pleased to report that over the past six and twelve month periods, your
Fund outperformed both its benchmark and its Lipper universe of similarly
managed funds. The Fund's strong performance over the most recent period can be
traced to solid returns in the corporate bond sector. Corporate bond yield
spreads narrowed significantly over the past six months as investor demand for
these securities increased, driving bond prices higher. Performance was
particularly strong for longer duration securities, such as those held in your
Fund, where the benefits of falling interest rates during the period were
magnified. Continued strong performance in the emerging market bond sector,
which constitutes 44.30% of your Fund's portfolio as of June 30, 1997, also
contributed positively to portfolio performance.
1
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
As you can see from the chart below, Alliance Bond Fund, Corporate Bond
Portfolio has performed extrememly well in the Lipper universe over the past 10
years, with number one rankings in the 1 year and 10 year categories for the
period ended June 30, 1997. Lipper rankings are based on total returns at net
asset value, without the imposition of the maximum 4.25% sales charge, which
would reduce total return figures.
LIPPER RANKINGS
Period Ended June 30, 1997
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------- -------- -------- --------
#1 of 112 #3 of 68 #2 of 34 #1 of 20
funds funds funds funds
ECONOMIC REVIEW
The U.S. economy continued its strong performance in early 1997, led by
continued strength in the labor market. The unemployment rate dropped to 20
year lows and wages continued to climb. In response to the continued economic
strength and what were viewed as mounting inflationary pressures, the Federal
Reserve Bank raised short-term interest rates in March. Overall, economic
growth, as measured by Gross Domestic Product (GDP), which had risen to an
annual rate of 3.8% at the end of 1996, further accelerated to 4.9% during the
first quarter of 1997.
More recent data confirms that the economy slowed sharply during the second
quarter, led by a decline in consumer spending. Retail sales of merchandise
declined 3.8% in the second quarter while real construction spending fell 2.0%
in April-May. The production side of the economy experienced a more muted
slowdown: manufacturing output growth slowed to 4.4% (from 5.3% in the first
quarter) and total hours worked increased by only 1.9% (versus 4.1% in the
first quarter). However, labor market strength continued unabated in the second
quarter as non-farm payroll growth rose to 237,000 new jobs per month from
first quarter's average of 228,000 per month. Overall, GDP growth slowed to
2.2% for the quarter.
In spite of an increase in wage pressures, inflation remained very well-behaved
during the first half of 1997. Consumer prices increased at a 1.4% annual rate
in the first six months of the year and are up 2.3% from the same period last
year. Meanwhile, producer prices dropped for six months in a row through June
and are down 0.1% on a year-over-year basis.
The emerging market economies, benefiting from generally stable or falling
worldwide interest rates, moved into their second year of healthy growth and
low inflation. With sustained strength in export markets, the benefits of
reform have begun to penetrate deeper into the emerging market economies.
Declining unemployment has relieved some political pressures and strengthened
commitment to the ongoing process of reform and revitalization.
INVESTMENT OUTLOOK
We expect U.S. economic activity to accelerate somewhat in the third quarter.
Consumer confidence has reached new highs, real income is growing solidly and
the labor market remains strong, with unemployment at 5.0%. We expect this
reacceleration to be moderate, with economic growth averaging 3.0% to 3.5% for
1997. With multi-quarter growth trending above the level historically
considered to be non-inflationary, Federal Reserve policy makers will continue
to closely monitor inflationary pressures with a bias towards increasing rates
at the first sign of economic overheating.
Although domestic corporate bond yields remain at historically narrow levels,
we expect to continue to find opportunities in the corporate debt sector.
Stabilizing interest rates and moderating economic growth will produce an
attractive environment for yield-oriented securities and should support higher
prices for these securities over the near-term.
Given our expectations for relatively stable growth, inflation and monetary
policy worldwide, the emerging markets should provide investment opportunities
as the process of reform and integration continues. However, the generic risk
premiums for these countries are more rationally aligned with economic
fundamentals than they have been for some time and caution is warranted. We
believe that country selection will be more critical than in the last several
quarters.
2
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
Thank you for your continued interest and investment in Alliance Corporate Bond
Portfolio. We look forward to reporting its 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.
3
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 RETURNS AS OF JUNE 30, 1997
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 16.59% 11.63%
Five Years 13.34% 12.36%
Ten Years 11.57% 11.09%
SEC Yield** 7.26%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 15.80% 12.80%
Since Inception* 11.88% 11.88%
SEC Yield** 6.87%
CLASS C SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 15.80% 14.80%
Since Inception* 9.78% 9.78%
SEC Yield** 6.87%
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 shares or applicable
contingent deferred sales charge for Class B shares (3% year 1, 2% year 2, 1%
year 3, 0% year 4); and for Class C shares (1% year 1). Returns for Class A
shares do not reflect the imposition of the 1 year 1% contingent deferred sales
charge for accounts over $1,000,000.
Past performance does not guarantee future results. Investment returns 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
June 30, 1997.
4
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
GROWTH OF A $10,000 INVESTMENT
6/30/87 TO 6/30/97
CORPORATE BOND PORTFOLIO
CLASS A: $28,614
$30,000
$27,000
$24,000
$21,000
$18,000
$15,000
$12,000
$9,000
LIPPER CORP. DEBT FUNDS BBB-RATED AVERAGE: $23,413
LBAGGREGATE INDEX: $23,283
$10,000
6/30/87 6/30/88 6/30/89 6/30/90 6/30/91
6/30/92 6/30/93 6/30/94 6/30/95 6/30/96 6/30/97
This chart illustrates the total value of an assumed $10,000 investment in
Alliance Bond Fund Corporate Bond Portfolio Class A shares (from 6/30/87 to
6/30/97) as compared to the performance of an appropriate broad-based 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. 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 unmanaged Lehman Brothers Aggregate Index is composed of the
Mortgage-Backed Securities Index, the Asset-Backed Securities Index, and the
combination Government/Corporate Bond Index.
The unmanaged Lipper Corporate Debt Funds BBB-Rated Average reflects
performance of 129 mutual funds, only 20 of which have existed for the full
10-year period. These funds have generally similar investment objectives to
Alliance Bond Fund Corporate Bond Portfolio, although the investment policies
of some funds included in the average may vary.
When comparing Alliance Bond Fund Corporate Bond Portfolio to the index and
average shown above, you should note that no charges or expenses are reflected
in the performance of the index. Lipper results include fees and expenses.
Corporate Bond Portfolio
LBIndex Aggregate Index
Lipper Corp. Debt Funds BBB-Rated Avg.
5
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
STANDARD PRINCIPAL
& POOR'S AMOUNT
RATINGS(A) (000) VALUE
- -------------------------------------------------------------------------
CORPORATE DEBT OBLIGATIONS-46.8%
BANKING-7.7%
BBB- FBOP Capital Trust I
10.20%, 2/06/27 (b)(c) $23,000 $23,081,328
Baa3 Riggs Capital Trust II
8.875%, 3/15/27 (b)(d) 40,500 40,711,815
A3 Zions Institutional Capital Trust A
8.536%, 12/15/26 (b)(d) 15,000 15,504,675
------------
79,297,818
COMMUNICATIONS-3.1%
BB+ TCI Communications Financing III
9.65%, 3/31/27 30,000 31,389,720
FINANCIAL-14.0%
BBB- Advanta Capital Trust I
8.99%, 12/17/26 (b)(c) 12,000 11,315,280
BBB- Conesco Finance Trust II
8.70%, 11/15/26 21,600 22,179,010
Conesco Finance Trust III
8.796%, 4/01/27 20,000 20,650,000
BB- Dime Capital Trust I
Series A
9.33%, 5/06/27 20,000 20,903,000
BBB Renaissance Capital Trust
8.54%, 3/01/27 (b) 34,470 34,486,201
Aa3 Travelers Capital III
7.625%, 12/01/36 (d) 35,000 34,375,495
------------
143,908,986
INDUSTRIAL-2.1%
BB- CSN Iron Brazil, S.A.
9.125%, 6/01/07 (b)(c) 20,000 19,460,000
NR Taiwan Semiconductor
Zero coupon, 7/03/02 (b)(c) 2,500 2,581,250
------------
22,041,250
INSURANCE-10.3%
BBB+ Arkwright CSN Trust
9.625%, 8/15/26 (b) 38,500 42,552,587
BBB- Delphi Funding LLC
Series A
9.31%, 3/25/27 25,000 25,765,425
Ca Home Holdings, Inc.
8.625%, 12/15/03 (d)(e) 45,765 9,610,650
BBB Mutual Life Insurance Co.
of New York
11.25%, 8/15/24 (b)(f) 25,000 27,135,000
------------
105,063,662
MEDIA-2.2%
NR McCaw International, Ltd.
13.00%, 4/15/07 (b)(f) 46,750 22,673,750
UTILITIES-7.4%
B+ Beaver Valley Funding Corp.
9.00%, 6/01/17 35,000 36,501,500
BB+ Beaver Valley Power Station
8.33%, 12/01/07 9,923 10,158,175
BBB- Commonwealth Edison Co.
6.40%, 10/15/05 10,000 9,356,390
7.625%, 1/15/07 20,000 20,119,360
------------
76,135,425
Total Corporate Debt Obligations
(cost $496,584,387) 480,510,611
YANKEES-26.5%
BBB- Total Access Communication
8.375%, 11/04/06 (b) 30,000 29,100,000
BBB MC Cuernavaca Trust
9.25%, 7/25/01 (b) 40,739 36,869,229
Caa Grupo Mexicano de
Desarrollo, S.A.
8.25%, 2/17/01 (d) 29,200 20,075,000
Baa3 Reliance Industries, Ltd.
9.375%, 6/24/26 (b)(d) 35,000 38,293,500
B2 Innova S de R.L.
12.875%, 4/01/07 (b)(d) 18,000 18,922,500
BBB- Telefonica de Argentina, S.A.
11.875%, 11/01/04 35,000 41,693,750
Baa3 Empresa Electrica
Delaware Norte, S.A.
7.75%, 3/15/06 (b)(d) 22,000 21,516,000
A- Empresa Nacional de Electricidad, S.A.
7.875%, 2/01/27 30,655 31,022,737
A3 Ras Laffan Liquefied Natural Gas
8.294%, 3/15/14 (b)(d) 33,000 34,596,078
Total Yankees (cost $270,981,669) 272,088,794
6
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
STANDARD PRINCIPAL
& POOR'S AMOUNT
RATINGS(A) (000) VALUE
- -------------------------------------------------------------------------
SOVEREIGN DEBT OBLIGATIONS-9.2%
PANAMA-3.8%
BB+ Republic of Panama
3.50%, 7/17/14 $50,000 $38,625,000
PERU-4.1%
NR Republic of Peru FLIRB
3.25%, 3/07/17 (d) 70,000 41,825,000
VENEZUELA-1.3%
Ba2 Republic of Venezuela
6.75%, 3/31/07 (d) 14,286 13,290,166
Total Sovereign Debt Obligations
(cost $90,342,742) 93,740,166
U.S. GOVERNMENT OBLIGATIONS-5.7%
AAA U.S. Treasury Bond
6.50%, 11/15/26 35,500 34,046,630
AAA U.S. Treasury Strip
Zero coupon, 2/15/11 62,300 24,788,547
Total U.S. Government Obligations
(cost $58,503,388) 58,835,177
PRINCIPAL
STANDARD AMOUNT
& POOR'S (000)
RATINGS(A) OR SHARES VALUE
- -------------------------------------------------------------------------
SOVEREIGN DEBT RELATED-4.9%
AA Morgan Guaranty Trust Co.
Indexed Note Linked Russian US$
Vneshekonombank Loan Assignment
14.00%, 8/15/97(g)
(cost $49,087,500) $49,088 $49,617,645
PREFERRED STOCK-2.3%
B1 Chevy Chase Capital Corp.
Series A pfd.
10.375% (d)
(cost $22,451,934) 438,600 23,245,800
COMMERCIAL PAPER-0.9%
A1+ GE Capital Corp.
5.50%, 7/01/97 (d)
(amortized cost $9,489,000) $9,489 9,489,000
TOTAL INVESTMENTS-96.3%
(cost $997,440,620) 987,527,193
Other assets less liabilities-3.7% 38,406,735
NET ASSETS-100% $1,025,933,928
(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 June 30, 1997, these securities
amounted to $418,799,193 or 40.8% of net assets.
(c) Duff & Phelps rating.
(d) Moody's rating.
(e) Illiquid security, valued at fair value (see Note A).
(f) 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.
(g) 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:
FLIRB - Front loaded interest reduction bond
NR - Not rated
See notes to financial statements.
7
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $997,440,620) $ 987,527,193
Cash 4,978,095
Receivable for investment securities sold 50,103,502
Interest receivable 15,284,905
Receivable for capital stock sold 6,290,848
Dividends receivable 568,807
Total assets 1,064,753,350
LIABILITIES
Payable for investment securities purchased 32,224,486
Payable for capital stock redeemed 2,707,406
Dividends payable 2,324,337
Distribution fee payable 620,459
Advisory fee payable 467,179
Accrued expenses 475,555
Total liabilities 38,819,422
NET ASSETS $1,025,933,928
COMPOSITION OF NET ASSETS
Capital stock, at par $ 72,297
Additional paid-in capital 1,070,586,984
Undistributed net investment income 1,077,850
Accumulated net realized loss on investment transactions (35,889,776)
Net unrealized depreciation of investments (9,913,427)
$1,025,933,928
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($370,845,221/
26,133,431 shares of capital stock issued and outstanding) $14.19
Sales charge-4.25% of public offering price .63
Maximum offering price $14.82
CLASS B SHARES
Net asset value and offering price per share ($480,326,301/
33,848,573 shares of capital stock issued and outstanding) $14.19
CLASS C SHARES
Net asset value and offering price per share ($174,762,406/
12,315,459 shares of capital stock issued and outstanding) $14.19
See notes to financial statements.
8
STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1997
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
INVESTMENT INCOME
Interest $75,038,194
Dividends 5,493,573
$ 80,531,767
EXPENSES
Advisory fee 4,886,295
Distribution fee--Class A 969,622
Distribution fee--Class B 4,109,485
Distribution fee--Class C 1,181,034
Transfer agency 1,273,919
Custodian 246,880
Registration 159,538
Printing 132,624
Administrative 124,584
Audit and legal 107,113
Taxes 42,919
Directors' fees 10,569
Miscellaneous 19,347
Total expenses 13,263,929
Net investment income 67,267,838
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investment transactions 45,535,746
Net change in unrealized depreciation of investments 12,490,228
Net gain on investments 58,025,974
NET INCREASE IN NET ASSETS FROM OPERATIONS $125,293,812
See notes to financial statements.
9
STATEMENT OF CHANGES
IN NET ASSETS
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
JUNE 30, 1997 JUNE 30, 1996
--------------- --------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 67,267,838 $ 55,214,973
Net realized gain on investment transactions 45,535,746 9,409,977
Net change in unrealized depreciation of
investments 12,490,228 (1,446,864)
Net increase in net assets from operations 125,293,812 63,178,086
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income
Class A (28,663,265) (22,018,218)
Class B (33,588,524) (23,308,105)
Class C (9,618,790) (5,153,555)
CAPITAL STOCK TRANSACTIONS
Net increase 273,894,910 162,746,223
Total increase 327,318,143 175,444,431
NET ASSETS
Beginning of year 698,615,785 523,171,354
End of year (including undistributed net
investment income of $1,077,850 and
$5,680,591, respectively) $1,025,933,928 $698,615,785
See notes to financial statements.
10
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
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 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 and 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.
Income and capital gains distributions are determined in accordance with
federal tax regulations and may differ from those determined in accordance with
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. During the current fiscal year, permanent differences,
primarily due to expiration of capital loss carryforwards, resulted in a net
decrease in accumulated net realized loss on investment transactions and a
corresponding decrease in additional paid-in capital. This reclassification had
no affect on net assets.
5. USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at June 30, 1997 and
the reported amounts of revenues and expenses during the period. Actual results
could differ from those estimates.
11
NOTES TO FINANCIAL STATEMENTS (CONT.)
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
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 $124,584 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, 1997.
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 $881,035 for the year ended June 30, 1997.
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 $112,211 from the sale of Class A shares, and $668,
$463,689 and $49,841 in contingent deferred sales charges imposed upon
redemptions by shareholders of Class A, Class B and Class C, respectively, for
the year ended June 30, 1997.
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 $9,163,392 and $2,093,526,
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 $2,303,306,860 and $2,122,929,391,
respectively, for the year ended June 30, 1997. There were purchases of
$559,014,607 and sales of $514,087,326 of U.S. government and government agency
obligations for the year ended June 30, 1997. At June 30, 1997, the cost of
securities for federal income tax purposes was $1,000,231,513. Accordingly,
gross unrealized appreciation of investments was $25,451,666 and gross
unrealized depreciation of investments was $38,155,986, resulting in net
unrealized depreciation of $12,704,320. At June 30, 1997, the Portfolio had a
capital loss carryforward for federal income tax purposes of $33,098,883 of
which $14,295,126 expires in the year 1998; $258,361 expires in the year 2000;
$15,028,057 expires in the year 2003 and $3,517,339 expires 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.
12
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
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. 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 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 year ended June 30, 1997, 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 are designated each for Class B and Class C shares. 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,
1997 1996 1997 1996
------------ ------------ -------------- --------------
CLASS A
Shares sold 7,284,369 5,346,878 $100,560,914 $ 71,873,295
Shares issued in
reinvestment of
dividends 1,088,659 863,496 15,092,550 11,552,038
Shares converted
from Class B 882,859 290,778 12,218,491 3,878,519
Shares redeemed (3,997,163) (3,486,540) (55,154,472) (46,736,968)
Net increase 5,258,724 3,014,612 $ 72,717,483 $ 40,566,884
CLASS B
Shares sold 13,809,148 10,495,172 $190,717,837 $141,176,345
Shares issued in
reinvestment of
dividends 1,108,727 729,705 15,370,487 9,764,021
Shares converted
to Class A (882,859) (290,799) (12,218,491) (3,878,519)
Shares redeemed (5,635,584) (4,169,007) (77,903,904) (56,009,933)
Net increase 8,399,432 6,765,071 $115,965,929 $ 91,051,914
CLASS C
Shares sold 9,879,749 3,778,824 $137,855,734 $ 50,939,949
Shares issued in
reinvestment of
dividends 356,660 151,683 4,970,992 2,030,186
Shares redeemed (4,174,633) (1,624,777) (57,615,228) (21,842,710)
Net increase 6,061,776 2,305,730 $ 85,211,498 $ 31,127,425
13
FINANCIAL HIGHLIGHTS
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------------
YEAR ENDED JUNE 30,
---------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $13.29 $12.92 $12.51 $14.15 $12.01
INCOME FROM INVESTMENT OPERATIONS
Net investment income 1.15(a) 1.26 1.19 1.11 1.25
Net realized and unrealized gain (loss)
on investments .97 .27 .36 (1.36) 2.13
Net increase (decrease) in net asset
value from operations 2.12 1.53 1.55 (.25) 3.38
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (1.22) (1.16) (1.14) (1.11) (1.24)
Dividends in excess of net investment income -0- -0- -0- (.03) -0-
Distributions from net realized gains -0- -0- -0- (.25) -0-
Total dividends and distributions (1.22) (1.16) (1.14) (1.39) (1.24)
Net asset value, end of year $14.19 $13.29 $12.92 $12.51 $14.15
TOTAL RETURN
Total investment return based on net
asset value (b) 16.59% 12.14% 13.26% (2.58)% 29.62%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $370,845 $277,369 $230,750 $219,182 $216,171
Ratio of expenses to average net assets 1.12% 1.20% 1.24% 1.30% 1.39%
Ratio of net investment income to
average net assets 8.34% 9.46% 9.70% 7.76% 9.29%
Portfolio turnover rate 307% 389% 387% 372% 579%
</TABLE>
See footnote summary on page 16.
14
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------------------
JANUARY 8,
1993(C)
YEAR ENDED JUNE 30, TO
-------------------------------------------------- JUNE 30,
1997 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 1.05(a) 1.15 1.11 1.02 .49
Net realized and unrealized gain (loss)
on investments .98 .29 .36 (1.37) 1.69
Net increase (decrease) in net asset
value from operations 2.03 1.44 1.47 (.35) 2.18
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (1.13) (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 (1.13) (1.07) (1.05) (1.30) (.50)
Net asset value, end of period $14.19 $13.29 $12.92 $12.50 $14.15
TOTAL RETURN
Total investment return based on net
asset value (b) 15.80% 11.38% 12.54% (3.27)% 17.75%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $480,326 $338,152 $241,393 $184,129 $55,508
Ratio of expenses to average net assets 1.82% 1.90% 1.99% 2.00% 2.10%(d)
Ratio of net investment income to
average net assets 7.62% 8.75% 9.07% 7.03% 7.18%(d)
Portfolio turnover rate 307% 389% 387% 372% 579%
</TABLE>
See footnote summary on page 16.
15
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
----------------------------------------------------------------
MAY 3,
1993(C)
YEAR ENDED JUNE 30, TO
-------------------------------------------------- JUNE 30,
1997 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 1.04(a) 1.14 1.10 1.02 .16
Net realized and unrealized gain (loss)
on investments .99 .29 .38 (1.37) .53
Net increase (decrease) in net asset
value from operations 2.03 1.43 1.48 (.35) .69
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (1.13) (1.07) (1.05) (1.05) (.17)
Distribution from net realized gains -0- -0- -0- (.25) -0-
Total dividends and distributions (1.13) (1.07) (1.05) (1.30) (.17)
Net asset value, end of period $14.19 $13.29 $12.93 $12.50 $14.15
TOTAL RETURN
Total investment return based on net
asset value (b) 15.80% 11.30% 12.62% (3.27)% 5.08%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $174,762 $83,095 $51,028 50,860 $5,115
Ratio of expenses to average net assets 1.82% 1.90% 1.84% 1.99% 2.05%(d)
Ratio of net investment income to
average net assets 7.61% 8.74% 8.95% 6.98% 5.51%(d)
Portfolio turnover rate 307% 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) Commencement of distribution.
(d) Annualized.
16
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
We have audited the accompanying statement of assets and liabilities of
Alliance Bond Fund Corporate Bond Portfolio (one of the portfolios comprising
the Alliance Bond Fund, Inc.), including the portfolio of investments, as of
June 30, 1997, 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. 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. 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, 1997, 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 Corporate Bond Portfolio at June 30, 1997, 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.
New York, New York
August 8, 1997
17
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)
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.
18
THE ALLIANCE FAMILY OF MUTUAL FUNDS
_______________________________________________________________________________
FIXED INCOME
Alliance Bond Fund
U.S. Government Portfolio
Corporate Bond Portfolio
Alliance Global Dollar Government Fund
Alliance Global Strategic Income Trust
Alliance High Yield Fund
Alliance Mortgage Securities Income Fund
Alliance Limited Maturity Government Fund
Alliance Multi-Market Strategy Trust
Alliance North American Government Income Trust
Alliance Short-Term Multi-Market Trust
Alliance Short-Term U.S. Government Fund
Alliance World Income Trust
TAX-FREE INCOME
Alliance Municipal Income Fund
California Portfolio
Insured California Portfolio
Insured National Portfolio
National Portfolio
New York Portfolio
Alliance Municipal Income Fund II
Arizona Portfolio
Florida Portfolio
Massachusetts Portfolio
Michigan Portfolio
Minnesota Portfolio
New Jersey Portfolio
Ohio Portfolio
Pennsylvania Portfolio
Virginia Portfolio
MONEY MARKET
AFD Exchange Reserves
GROWTH
The Alliance Fund
Alliance Global Small Cap Fund
Alliance Growth Fund
Alliance Premier Growth Fund
Alliance/Regent Sector Opportunity Fund
GROWTH & INCOME
Alliance Strategic Balanced Fund
Alliance Balanced Shares
Alliance Conservative Investors Fund
Alliance Growth & Income Fund
Alliance Growth Investors Fund
Alliance Income Builder Fund
Alliance Real Estate Investment Fund
Alliance Utility Income Fund
AGGRESSIVE GROWTH
Alliance Quasar Fund
Alliance Technology Fund
INTERNATIONAL
Alliance All-Asia Investment Fund
Alliance International Fund
Alliance New Europe Fund
Alliance Worldwide Privatization Fund
CLOSED-END FUNDS
Alliance All-Market Advantage Fund
Alliance Global Environment Fund
ACM Government Income Fund
ACM Government Opportunity Fund
ACM Government Securities Fund
ACM Government Spectrum Fund
ACM Managed Dollar Income Fund
ACM Managed Income Fund
ACM Municipal Securities Income Fund
Alliance World Dollar Government Fund
Alliance World Dollar Government Fund II
The Austria Fund
The Korean Investment Fund
The Spain Fund
The Southern Africa Fund
CASH MANAGEMENT SERVICES
ACM Institutional Reserves
Government Portfolio
Prime Portfolio
Tax-Free Portfolio
Trust Portfolio
Alliance Capital Reserves
Alliance Government Reserves
Alliance Insured Account
Alliance Money Reserves
Alliance Municipal Trust
California Portfolio
Connecticut Portfolio
Florida Portfolio
General Portfolio
Massachusetts Portfolio
New Jersey Portfolio
New York Portfolio
Virginia Portfolio
Alliance Treasury Reserves
Alliance Money Market Fund
Prime Portfolio
Government Portfolio
General Municipal Portfolio
19
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
ALLIANCE CAPITAL
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.
CBPAR
