ALLIANCE BOND FUND U.S. GOVERNMENT PORTFOLIO
SEMI-ANNUAL REPORT
DECEMBER 31, 1997
ALLIANCE CAPITAL
LETTER TO SHAREHOLDERS
ALLIANCE BOND FUND U.S. GOVERNMENT PORTFOLIO
_______________________________________________________________________________
February 2, 1998
Dear Shareholder:
This semi-annual report contains investment results and market activity for the
period ended December 31, 1997.
BOND MARKET REVIEW
The U.S. bond market rallied during the period under review, posting solid
returns. Data indicating a slowing U.S. economy, together with a favorable U.S.
budget deficit, fueled a rally in the U.S. Treasury market. In October,
financial market turmoil which started in Southeast Asia, created a ripple
effect that spread to other global markets and caused an increase in
volatility. Increased investor demand for "safe," liquid securities provided
additional fuel for the rally. U.S. bond yields reached their lowest levels
since 1996 during the fourth quarter as the financial crisis in Southeast Asia
spread around the world.
Among the investment grade sectors, corporates and governments were the best
performing on an absolute basis. However, mortgage securities posted strong
relative returns, adjusting for the shorter duration exposure of the sector.
INVESTMENT RESULTS
The following table provides the investment returns for the U.S. Government
Portfolio for the six and 12 month periods ended December 31, 1997. Also shown
for comparison are the total returns for the U.S. Treasury market, represented
by the unmanaged Lehman Brothers Government Bond Index, and the average results
of the Lipper universe of general U.S. Government Funds. These funds have
similar investment objectives to your Fund, although some funds included in the
average may have somewhat different investment policies. During the six months
ended December 31, 1997, the Fund modestly underperformed its benchmark, the
Lehman Brothers Government Bond Index, due to its conservative positioning in
anticipation of increased levels of market volatility and mortgage prepayments.
INVESTMENT RESULTS*
Period Ended December 31, 1997
TOTAL RETURNS
6 MONTHS 12 MONTHS
---------- -----------
ALLIANCE BOND FUND U.S.
GOVERNMENT PORTFOLIO
Class A 6.24% 8.56%
Class B 5.85% 7.75%
Class C 5.85% 7.74%
LEHMAN BROTHERS GOVERNMENT
BOND INDEX 6.78% 9.59%
LIPPER U.S. GOVERNMENT
FUNDS AVERAGE 6.30% 8.84%
* 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,
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. RETURNS FOR THE FUND AND ITS COMPARATIVE
BENCHMARKS INCLUDE THE REINVESTMENT OF ANY DISTRIBUTIONS PAID DURING THE
PERIOD. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
THE LEHMAN BROTHERS (LB) GOVERNMENT BOND INDEX IS UNMANAGED AND REFLECTS
NO FEES OR EXPENSES. IT IS MADE UP OF THE U.S. TREASURY BOND AND AGENCY BOND
INDICES. THE LIPPER GENERAL U.S. GOVERNMENT FUNDS AVERAGE FOR THE SIX AND 12
MONTH PERIODS ENDED DECEMBER 31, 1997 REFLECTS THE PERFORMANCE OF 186 AND 180
MUTUAL FUNDS, RESPECTIVELY. THESE FUNDS HAVE GENERALLY SIMILAR INVESTMENT
OBJECTIVES TO YOUR FUND, ALTHOUGH INVESTMENT POLICIES FOR THE VARIOUS FUNDS MAY
DIFFER. THE AVERAGE INCLUDES FEES AND EXPENSES, BUT NO SALES CHARGES. AN
INVESTOR CANNOT INVEST DIRECTLY IN THE INDEX OR AVERAGE.
ADDITIONAL INVESTMENT RESULTS CAN BE FOUND ON PAGE 3
ECONOMIC REVIEW
U.S. economic activity remained healthy during the second half of the year
buoyed by continued strength in the labor market and a strong rebound in
consumer spending. Gross Domestic Product (GDP) growth accelerated in the
fourth quarter to 4.3%, up from 3.1% for the third quarter. Overall, 1997 GDP
growth was 3.8%. The labor market remained strong as non-farm payrolls grew by
358,000 a month during the fourth quarter, the highest three month average
since March-May 1994. The
1
ALLIANCE BOND FUND U.S. GOVERNMENT PORTFOLIO
_______________________________________________________________________________
unemployment rate dropped to 4.7% in December and hovered near 20-year lows
throughout most of the period. Despite these record employment levels,
inflation continued to abate with consumer prices advancing 1.7% and producer
prices declining 1.2% year over year through December. This yearly decline in
producer prices was the largest since 1986.
Despite U.S. economic growth above trend levels, the Federal Reserve left
interest rates unchanged. Improving inflation fundamentals and a strong dollar,
coupled with turmoil in Asia's financial markets, argued against any Federal
Reserve action.
PORTFOLIO ACTIVITY
The Fund was positioned predominantly in Treasury securities and underweighted
in mortgage securities based on our outlook for rising prepayments and
volatility. As market prepayment expectations reach our level, we will add
Government National Mortgage Association (GNMA) mortgage securities to enhance
portfolio yield.
INVESTMENT OUTLOOK
In 1998, we expect growth will be slower and inflation pressures will remain
contained as a result of the crisis in Southeast Asia. 1998 U.S. GDP growth is
expected to slow to 2.0%-2.5%. Economic growth will be tempered by excess
global manufacturing capacity, while lower commodity and import prices will
restrain inflation pressures. Recent declines in interest rates will provide an
offsetting stimulus.
Although the direction of Asia's impact is clear, the full extent of the crisis
has yet to be determined. However, liquidity will remain low, volatility will
remain high, and the U.S. Treasury market will continue to be perceived as a
"safe haven" for investors until clear policy responses are outlined and there
is a commitment to implementing them. The Federal Reserve is unlikely to raise
interest rates in the short term.
Thank you for your continued interest and investment in Alliance Bond Fund U.S.
Government Portfolio. We look forward to reporting the Fund'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 U.S. GOVERNMENT PORTFOLIO
_______________________________________________________________________________
Alliance Bond Fund U.S. Government Portfolio seeks as high a level of current
income as is consistent with safety of principal. The Fund is a diversified,
open-end investment company that invests solely in U.S. Government securities
that are backed by the full faith and credit of the U.S. Government.
INVESTMENT RESULTS
_______________________________________________________________________________
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1997
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 8.56% 4.01%
Five Years 5.90% 4.99%
Ten Years 7.77% 7.30%
SEC Yield** 5.90%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 7.75% 4.75%
Five Years 5.13% 5.13%
Since Inception*(a) 6.03% 6.03%
SEC Yield** 5.46%
CLASS C SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 7.74% 6.74%
Since Inception* 4.55% 4.55%
SEC Yield** 5.46%
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: 9/30/91, Class B; 5/3/93, Class C.
** SEC Yields are based on SEC guidelines and are calculated on 30 days ended
December 31, 1997.
(a) Assumes conversion of Class B shares into Class A shares after six years.
3
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997 (UNAUDITED)
ALLIANCE BOND FUND U.S. GOVERNMENT PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) VALUE
- -------------------------------------------------------------------------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS-97.6%
U.S. TREASURY SECURITIES-69.4%
U.S. TREASURY BONDS-51.9%
8.125%, 5/15/21 $ 48,300 $ 60,865,728
11.625%, 11/15/02 11,500 14,330,035
12.00%, 8/15/13 74,585 109,896,522
12.50%, 8/15/14 72,250 111,682,605
14.00%, 11/15/11 110,900 172,328,619
--------------
469,103,509
U.S. TREASURY NOTES-16.2%
5.625%, 12/31/99 26,000 25,987,780
8.50%, 2/15/00 79,000 83,393,980
8.75%, 8/15/00 34,200 36,700,704
--------------
146,082,464
U.S. TREASURY STRIP-1.3%
7.875%, 2/15/21 48,000 11,938,080
Total U.S. Treasury Securities
(cost $612,513,952) 627,124,053
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION-16.6%
Collateralized Mortgage Obligations
Series 1996-7 Cl.A
7.50%, 8/16/18 16,726 16,954,691
Series 1997-10 Cl.C
9.50%, 4/16/25 26,250 29,547,787
Series 1997-11 Cl.C
9.50%, 10/20/25 28,052 31,576,173
--------------
78,078,651
Mobile Homes
8.00%, 8/15/16 622 644,979
8.25%, 6/15/05-3/15/16 4,701 4,892,715
8.50%, 5/15/08-1/15/12 1,001 1,044,732
8.75%, 11/15/00-1/15/12 3,411 3,575,749
9.00%, 10/15/11-1/15/12 1,184 1,244,554
9.75%, 5/15/99-1/15/13 5,718 6,150,305
10.25%, 4/15/98-6/15/13 4,958 5,325,289
11.25%, 3/15/98-5/15/98 3 3,530
--------------
22,881,853
Project Loans
7.50%, 1/15/35 6,912 7,052,601
8.00%, 2/15/28-1/15/29 5,193 5,358,567
8.50%, 11/15/12-11/15/31 14,545 15,204,205
8.75%, 1/15/33 2,494 2,656,972
9.00%, 4/15/29 3,656 3,880,296
10.50%, 8/15/29 5,757 6,440,720
--------------
40,593,361
Single Family Homes
9.00%, 7/20/24-9/20/24 7,829 8,361,669
Total Government National Mortgage
Association
(cost $149,791,934) 149,915,534
FEDERAL AGENCY SECURITIES-11.6%
Federal Housing Authority
11.93%, 1/01/29 7,886 8,460,508
Financial Assistance Corp.
9.45%, 11/21/03 26,000 26,827,580
9.50%, 4/16/04 31,506 32,918,729
Private Export Funding Corp.
9.50%, 3/31/99 20,227 21,121,438
United States Agency for International
Development
7.11%, 2/01/12 14,000 15,052,660
Total Federal Agency Securities
(cost $111,065,350) 104,380,915
TOTAL INVESTMENTS-97.6%
(cost $873,371,236) 881,420,502
Other assets less liabilities-2.4% 21,803,230
NET ASSETS-100% $ 903,223,732
See notes to financial statements.
4
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997 (UNAUDITED)
ALLIANCE BOND FUND U.S. GOVERNMENT PORTFOLIO
_______________________________________________________________________________
ASSETS
Investments in securities, at value
(cost $873,371,236) $ 881,420,502
Cash 1,040,798
Receivable for investments sold 47,380,624
Interest receivable 16,195,735
Receivable for capital stock sold 323,267
Prepaid expenses 35,901
Total assets 946,396,827
LIABILITIES
Payable for investment securities purchased 38,142,041
Dividends payable 1,863,173
Payable for capital stock redeemed 1,329,343
Advisory fee payable 1,252,336
Distribution fee payable 161,361
Accrued expenses 424,841
Total liabilities 43,173,095
NET ASSETS $ 903,223,732
COMPOSITION OF NET ASSETS
Capital stock, at par $ 119,150
Additional paid-in capital 1,133,689,779
Distributions in excess of net
investment income (3,854,117)
Accumulated net realized loss on
investment transactions (234,775,736)
Net unrealized appreciation of investments
and other assets 8,044,656
$ 903,223,732
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share
($358,003,573/47,235,023 shares of capital stock
issued and outstanding) $7.58
Sales charge--4.25% of public offering price .34
Maximum offering price $7.92
CLASS B SHARES
Net asset value and offering price per share
($432,465,602/57,042,452 shares of capital stock
issued and outstanding) $7.58
CLASS C SHARES
Net asset value and offering price per share
($112,754,557/14,872,287 shares of capital stock
issued and outstanding) $7.58
See notes to financial statements.
5
STATEMENT OF OPERATIONS
SIX MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED)
ALLIANCE BOND FUND U.S. GOVERNMENT PORTFOLIO
_______________________________________________________________________________
INVESTMENT INCOME
Interest $ 37,648,684
EXPENSES
Advisory fee $ 2,521,647
Distribution fee - Class A 534,492
Distribution fee - Class B 2,275,161
Distribution fee - Class C 573,090
Transfer agency 564,170
Custodian 83,156
Printing 71,301
Administrative 56,907
Taxes 38,133
Registration 37,881
Audit and legal 36,934
Directors' fees 6,280
Miscellaneous 10,475
Total expenses 6,809,627
Net investment income 30,839,057
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized loss on investment transactions (535,143)
Net change in unrealized appreciation (depreciation)
of investments and other assets 22,870,587
Net gain on investment transactions 22,335,444
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 53,174,501
See notes to financial statements.
6
STATEMENT OF CHANGES IN NET ASSETS
ALLIANCE BOND FUND U.S. GOVERNMENT PORTFOLIO
_______________________________________________________________________________
SIX MONTHS ENDED
DEC. 31, 1997 YEAR ENDED
(UNAUDITED) JUNE 30, 1997
---------------- ---------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income $ 30,839,057 $ 76,613,835
Net realized loss on investment transactions (535,143) (17,906,339)
Net change in unrealized depreciation of
investments and other assets 22,870,587 4,101,240
Net increase in net assets from operations 53,174,501 62,808,736
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Class A (13,440,562) (28,676,683)
Class B (15,431,873) (38,040,411)
Class C (3,889,786) (9,425,145)
Tax return of capital
Class A -0- (537,368)
Class B -0- (712,834)
Class C -0- (176,616)
CAPITAL STOCK TRANSACTIONS
Net decrease (59,466,756) (235,558,940)
Total decrease (39,054,476) (250,319,261)
NET ASSETS
Beginning of year 942,278,208 1,192,597,469
End of period $ 903,223,732 $ 942,278,208
See notes to financial statements.
7
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 (UNAUDITED)
ALLIANCE BOND FUND U.S. GOVERNMENT 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: 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 "Portfolio") 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%
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 currently 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 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 financial
statements have been prepared in conformity with generally accepted accounting
principles which require management to make certain estimates and assumptions
that affect the reported amounts of assets and liabilities in the financial
statements and amounts of income and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary of
the significant accounting policies followed by the Portfolio.
1. SECURITY VALUATION
Portfolio securities traded on a national securities exchange are generally
valued at the last reported sale price or if there was no sale on such day, the
last bid price quoted on such day. If no bid prices are quoted, then the
security is valued at the mean of the bid and asked prices as obtained on that
day from one or more dealers regularly making a market in that security.
Securities traded on the over-the-counter market are valued at the mean of the
closing bid and asked prices provided by two or more dealers regularly making a
market in such securities. U.S. government securities, and other debt
securities which mature in 60 days or less are valued at amortized cost unless
this method does not represent fair value. Securities for which market
quotations are not readily available are valued at fair value as determined in
good faith by, or in accordance with procedures approved by the Board of
Directors. Fixed income securities may be valued on the basis of prices
provided by a pricing service when such prices are believed to reflect the fair
value of such securities.
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 INVESTMENT TRANSACTIONS
Interest income is accrued daily. 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 amortizes premiums and
accretes discount as adjustments to interest income.
4. INCOME AND EXPENSES
All income earned and expenses incurred by the Fund are borne on a pro-rata
basis by each settled class of shares, based on the proportionate interest in
the Fund represented by the net assets of such class, except that the Fund's
Class B and Class C shares bear higher distribution and transfer agent fees
than Class A shares.
5. 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
8
ALLIANCE BOND FUND U.S. GOVERNMENT PORTFOLIO
_______________________________________________________________________________
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.
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of an Investment Advisory Agreement, the Fund pays Alliance
Capital Management L.P. (the "Adviser"), an advisory fee at a quarterly rate
equal to .15 of 1% (approximately .60 of 1% on an annual basis) of the first
$500 million of the Fund's net assets and .125 of 1% (approximately .50 of 1%
on an annual basis) of its net assets over $500 million, valued on the last
business day of the previous quarter. Pursuant to the advisory agreement the
Portfolio paid $56,907 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, 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 $385,177 for the six months ended December 31,
1997.
Alliance Fund Distributors, Inc. (the "Distributor"), a wholly-owned subsidiary
of the Adviser, serves as the Distributor of the Portfolio's shares. The
Distributor received front-end sales charges of $6,430 from the sale of Class A
shares and $801, $118,153 and $16,381 in contingent deferred sales charges
imposed upon redemptions by shareholders of Class A, Class B and Class C,
respectively, for the six months ended December 31, 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 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 $7,687,616, and $3,767,815
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 $21,304,290 and $0, respectively,
for the six months ended December 31, 1997. Purchases and sales of U.S.
government obligations aggregated $321,873,055 and $463,940,538, respectively,
for the six months ended December 31, 1997. At December 31, 1997, the cost of
securities for federal income tax purposes was $874,920,184. Accordingly, gross
unrealized appreciation of investments was $17,874,264 and gross unrealized
depreciation of investments was $11,373,946, resulting in net unrealized
appreciation of $6,500,318.
For federal income tax purposes, the Portfolio had a capital loss carryforward
at June 30, 1997 of approximately $224,492,949 of which $19,845,081 expires in
the year 1998; $8,257,319 expires in the year 1999; $83,016,947 expires in the
year 2003; $61,544,081 expires in the year 2004; and $51,829,521 expires in the
year 2005.
9
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
--------------------------- ------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
DEC. 31, 1997 JUNE 30, DEC. 31, 1997 JUNE 30,
(UNAUDITED) 1997 (UNAUDITED) 1997
------------- ------------ -------------- --------------
CLASS A
Shares sold 7,013,326 7,330,644 $ 52,640,366 $ 54,720,782
Shares issued in
reinvestment of
dividends and
distributions 851,861 1,852,073 6,399,117 13,859,387
Shares converted
from Class B 1,538,106 2,400,559 11,618,042 17,892,778
Shares redeemed (10,017,790) (16,635,865) (75,227,298) (124,255,277)
Net decrease (614,497) (5,052,589) $ (4,569,773) $ (37,782,330)
CLASS B
Shares sold 3,089,319 5,813,050 $ 23,230,807 $ 43,483,332
Shares issued in
reinvestment of
dividends and
distributions 980,199 2,166,310 7,361,161 16,211,718
Shares converted
to Class A (1,538,106) (2,400,559) (11,618,042) (17,892,778)
Shares redeemed (9,132,308) (25,514,220) (68,489,558) (190,768,847)
Net decrease (6,600,896) (19,935,419) $ (49,515,632) $(148,966,575)
CLASS C
Shares sold 1,512,618 3,571,988 $ 11,395,115 $ 26,694,306
Shares issued in
reinvestment of
dividends and
distributions 338,626 544,818 2,542,397 4,070,889
Shares redeemed (2,570,849) (10,605,329) (19,318,863) (79,575,230)
Net decrease (719,605) (6,488,523) $ (5,381,351) $ (48,810,035)
10
FINANCIAL HIGHLIGHTS
ALLIANCE BOND FUND U.S. GOVERNMENT 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,
1997 ---------------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
------------ ------------ ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 7.41 $ 7.52 $ 7.96 $ 7.84 $ 8.64 $ 8.34
INCOME FROM INVESTMENT OPERATIONS
Net investment income .27(a) .57(a) .58 .64 .65 .69
Net realized and unrealized gain (loss)
on investment transactions .19 (.10) (.44) .13 (.80) .29
Net increase (decrease) in net asset
value from operations .46 .47 .14 .77 (.15) .98
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.29) (.57) (.58) (.65) (.65) (.68)
Tax return of capital -0- (.01) -0- -0- -0- -0-
Total dividends and distributions (.29) (.58) (.58) (.65) (.65) (.68)
Net asset value, end of period $ 7.58 $ 7.41 $ 7.52 $ 7.96 $ 7.84 $ 8.64
TOTAL RETURN
Total investment return based on
net asset value (b) 6.24% 6.49% 1.74% 10.37% (1.93)% 12.23%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $358,004 $354,782 $397,894 $463,660 $482,595 $527,968
Ratio of expenses to average net assets 1.04%(c) 1.02% 1.01% 1.01% 1.02% 1.10%
Ratio of net investment income to
average net assets 7.09%(c) 7.66% 7.38% 8.27% 7.76% 8.04%
Portfolio turnover rate 37% 330% 334% 190% 188% 386%
</TABLE>
See footnote summary on page 13.
11
FINANCIAL HIGHLIGHTS (CONTINUED)
ALLIANCE BOND FUND U.S. GOVERNMENT PORTFOLIO
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS B
-----------------------------------------------------------------------------
SIX MONTHS
ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
1997 ---------------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
------------ ------------ ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 7.41 $ 7.52 $ 7.96 $ 7.84 $ 8.64 $ 8.34
INCOME FROM INVESTMENT OPERATIONS
Net investment income .24(a) .52(a) .52 .58 .59 .62
Net realized and unrealized gain (loss)
on investment transactions .19 (.10) (.44) .13 (.80) .30
Net increase (decrease) in net asset
value from operations .43 .42 .08 .71 (.21) .92
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.26) (.52) (.52) (.59) (.59) (.62)
Tax return of capital -0- (.01) -0- -0- -0- -0-
Total dividends and distributions (.26) (.53) (.52) (.59) (.59) (.62)
Net asset value, end of period $ 7.58 $ 7.41 $ 7.52 $ 7.96 $ 7.84 $ 8.64
TOTAL RETURN
Total investment return based on
net asset value (b) 5.85% 5.69% 1.01% 9.52% (2.63)% 11.45%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $432,466 $471,889 $628,628 $774,097 $756,282 $552,471
Ratio of expenses to average net assets 1.74%(c) 1.73% 1.72% 1.72% 1.72% 1.81%
Ratio of net investment income to
average net assets 6.39%(c) 6.95% 6.67% 7.57% 7.04% 7.25%
Portfolio turnover rate 37% 330% 334% 190% 188% 386%
</TABLE>
See footnote summary on page 13.
12
ALLIANCE BOND FUND U.S. GOVERNMENT 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
1997 --------------------------------------------------- JUNE 30,
(UNAUDITED) 1997 1996 1995 1994 1993
------------ ------------ ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 7.41 $ 7.52 $ 7.96 $ 7.83 $ 8.64 $ 8.56
INCOME FROM INVESTMENT OPERATIONS
Net investment income .24(a) .52(a) .52 .58 .59 .10
Net realized and unrealized gain (loss)
on investment transactions .19 (.10) (.44) .14 (.81) .08
Net increase (decrease) in net asset
value from operations .43 .42 .08 .72 (.22) .18
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.26) (.52) (.52) (.59) (.59) (.10)
Tax return of capital -0- (.01) -0- -0- -0- -0-
Total dividends and distributions (.26) (.53) (.52) (.59) (.59) (.10)
Net asset value, end of period $ 7.58 $ 7.41 $ 7.52 $ 7.96 $ 7.83 $ 8.64
TOTAL RETURN
Total investment return based on
net asset value (b) 5.85% 5.69% 1.01% 9.67% (2.75)% 2.12%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $112,755 $115,607 $166,075 $181,948 $231,859 $67,757
Ratio of expenses to average net assets 1.74%(c) 1.72% 1.71% 1.71% 1.70% 1.80%(c)
Ratio of net investment income to
average net assets 6.40%(c) 6.96% 6.68% 7.59% 6.97% 6.00%(c)
Portfolio turnover rate 37% 330% 334% 190% 188% 386%
</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.
13
ALLIANCE BOND FUND U.S. GOVERNMENT PORTFOLIO
_______________________________________________________________________________
BOARD OF DIRECTORS
JOHN D. CARIFA, CHAIRMAN AND PRESIDENT
RUTH BLOCK (1)
DAVID H. DIEVLER (1)
JOHN H. DOBKIN (1)
WILLIAM H. FOULK, JR. (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
PATRICIA J. YOUNG, SENIOR VICE PRESIDENT
JEFFREY S. PHLEGAR, 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
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.
14
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 Environment 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 Greater China '97 Fund
Alliance International Fund
Alliance New Europe Fund
Alliance Worldwide Privatization Fund
CLOSED-END FUNDS
Alliance All-Market Advantage 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
15
ALLIANCE BOND FUND U.S. GOVERNMENT 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.
USGSR
