ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
SEMI-ANNUAL REPORT
DECEMBER 31, 1997
ALLIANCE CAPITAL
LETTER TO SHAREHOLDERS
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
February 10, 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 posted solid returns in the second half of 1997. Early in
the period, interest rates were relatively stable and investor demand for yield
oriented securities, i.e., corporates and mortgage-backed securities (MBS), was
high. In spite of strong U.S. economic growth, inflation remained almost
non-existent, further increasing demand in the bond market. Toward year's end,
the financial turmoil which began in Southeast Asia, spilled over into other
global bond markets, including the U.S. The resulting "flight to quality"
spurred a year-end rally in U.S. Treasury securities while negatively impacting
returns in the corporate, mortgage and non-U.S. bond sectors.
Interest rates on most maturities fell dramatically over the past six months.
The decreasing likelihood that the Federal Reserve would have to raise rates to
slow economic growth, coupled with the year-end rally in the Treasury market,
helped push interest rates to new lows. Overall, the 30-year Treasury bond,
which was yielding 6.78% at the beginning of the period, fell to 5.92% at year
end; 5-year note yields fell to 5.71% from 6.37%.
INVESTMENT RESULTS
The following table shows Alliance Bond Fund Corporate Bond Portfolio's
investment results over the six and 12 month periods ended December 31, 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 bond funds. These
funds have similar investment objectives to your Fund, although some funds
included in the average may have somewhat different investment policies.
Over the six month period ended December 31, 1997, the return for your Fund's
Class A shares trailed those of its benchmark and the Lipper universe. This
underperformance can be traced to sluggish performance in the corporate and
emerging market bond sectors. As events unfolded in Southeast Asia, many
investors reduced their
appetite for all types of credit risk. This risk aversion pushed down prices
and produced wider yield spreads in the credit oriented markets. Your Fund's
long term performance, however, remains ahead of its benchmark.
INVESTMENT RESULTS*
Period Ended December 31, 1997
TOTAL RETURNS
6 MONTHS 12 MONTHS
--------- ---------
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
Class A 5.62% 11.78%
Class B 5.28% 11.05%
Class C 5.28% 11.05%
LEHMAN BROTHERS AGGREGATE BOND INDEX 6.36% 9.65%
LIPPER CORPORATE DEBT FUNDS BBB-RATED AVERAGE 6.50% 10.08%
* 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. ALL RETURNS INCLUDE THE REINVESTMENT OF ANY
DISTRIBUTIONS PAID DURING THE PERIOD. PAST PERFORMANCE IS NO GUARANTEE OF
FUTURE RESULTS.
THE LEHMAN BROTHERS (LB) AGGREGATE BOND INDEX IS UNMANAGED AND DOES NOT
REFLECT FEES AND EXPENSES. THE LIPPER CORPORATE DEBT FUNDS BBB-RATED AVERAGE
FOR THE SIX AND 12 MONTH PERIODS ENDED DECEMBER 31, 1997 REFLECTS THE
PERFORMANCE OF 111 AND 102 MUTUAL FUNDS, RESPECTIVELY. THESE FUNDS HAVE
GENERALLY SIMILAR INVESTMENT OBJECTIVES TO YOUR FUND, ALTHOUGH INVESTMENT
POLICIES FOR THE VARIOUS FUNDS MAY DIFFER. AN INVESTOR CANNOT INVEST DIRECTLY
IN THE INDEX OR AVERAGE.
ADDITIONAL INVESTMENT RESULTS CAN BE FOUND ON PAGE 3.
ECONOMIC REVIEW
The U.S. economy continued to be fundamentally strong and grew at a solid pace
in the second half of 1997. Total growth, as measured by the Gross Domestic
Product (GDP), was likely in the 3% range in the fourth quarter,
1
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
following third quarter's 3.1% pace. As it has all year, the labor market
remained tight and fueled economic growth. The unemployment rate dropped to
4.7% in December and hovered near 20-year lows throughout most of the period.
For the year, the U.S. economy created 3.2 million new jobs with over one
million jobs added in the fourth quarter alone. Inflation remained remarkably
absent for this late in an expansion. Through December, producer prices were
down 1.2% from year earlier levels while consumer prices posted a modest 1.7%
gain for the same period.
Developments in Southeast Asia roiled the world's financial markets. Economic
problems which began in Thailand quickly spread to Malaysia, Indonesia, the
Philippines and South Korea. In all these countries, fast growth, fueled by
strong capital inflows, and overvalued currencies had combined to produce large
external trade deficits, property and stock market bubbles and overextended
banking systems. Immediate policy responses in the affected countries were
often inadequate and/or poorly articulated. This resulted in additional
volatility which spread to other markets in the region and created a ripple
effect felt from Japan to the U.S. and Europe. In many cases, fundamental
analysis temporarily took a back seat to market psychology.
In the U.S. bond market, corporate bonds, which had benefited from the stable
interest rate environment and strong investor demand for most of the year, were
negatively affected. Investors began selling emerging market debt, but the
selling quickly spread to all forms of credit oriented debt as uncertainty over
the magnitude of the fallout from Southeast Asia grew. The resulting widening
of spreads in both domestic corporate bonds and emerging market bonds eroded
returns in those sectors while pushing up returns in the U.S. Government bond
sector as investors sought safety and liquidity. However, as appropriate policy
responses are implemented in the affected countries, we are confident that
economic fundamentals will eventually reassert themselves.
INVESTMENT OUTLOOK
Our outlook for the U.S. remains optimistic. We expect domestic growth to slow
from its 1997 pace to a more sustainable 2.5% rate in 1998. The economic
slowing in Southeast Asia will further temper U.S. growth in the upcoming year
as exports to that region curtail. Meanwhile, the recent decline in interest
rates should moderate the anticipated slowing and provide stimulus to the
economy to ensure continued growth. The Federal Reserve is unlikely to raise
interest rates in the short term in light of the likelihood of slowing growth
and the desire to keep global liquidity at high levels. Until the repercussions
of events in Southeast Asia are fully understood, we expect interest rate
volatility to remain accentuated. In this environment, we expect returns in the
domestic corporate bond sector to continue to be choppy. We will maintain
emphasis in the portfolio on higher quality issues which are less susceptible
to economic developments in Southeast Asia.
Outside of the U.S., global growth will be slower and inflation pressures will
be reduced as Asia exports cheaper goods to the world and imports less from
abroad. In the emerging markets, we expect volatility to remain heightened and
liquidity to remain low. Although the direction of Asia's impact is clear, the
full extent of the crisis has yet to be determined. At this juncture,
stabilizing Korea is key and multinational efforts are clearly focused on this
goal. We expect 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. As adjustments are made, we believe
markets will stabilize and significant investment opportunities will be found
in many bond markets around the world.
Thank you for your continued interest and investment in Alliance Bond Fund
Corporate Bond 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
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, 1997
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 11.78% 7.04%
Five Years 12.48% 11.51%
Ten Years 12.01% 11.53%
SEC Yield** 6.83%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 11.05% 8.05%
Since Inception* 11.77% 11.77%
SEC Yield** 6.43%
CLASS C SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 11.05% 10.05%
Since Inception* 9.89% 9.89%
SEC Yield** 6.44%
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 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, 1997.
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
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997 (UNAUDITED)
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
STANDARD PRINCIPAL
& POOR'S AMOUNT
RATINGS (000) VALUE
- -------------------------------------------------------------------------
CORPORATE DEBT OBLIGATIONS-68.9%
BANKING-9.5%
BB Dime Capital Trust I
Series A
9.33%, 5/06/27 $36,075 $ 40,868,285
BBB- FBOP Capital Trust I
10.20%, 2/06/27 (a)(b) 23,000 24,794,023
Baa3 Riggs Capital II
8.875%, 3/15/27 (a)(c) 45,500 49,526,750
-------------
115,189,058
COMMUNICATIONS-3.8%
BBB- TCI Communications, Inc.
6.875%, 2/15/06 32,000 32,122,336
7.875%, 2/15/26 12,720 13,690,625
-------------
45,812,961
FINANCIAL-12.5%
BBB- Advanta Capital Trust I
8.99%, 12/17/26 (a)(b) 12,000 12,300,468
BBB- Conseco Finance Trust II
8.70%, 11/15/26 21,600 24,084,626
BBB- Conseco Finance Trust III
8.796%, 4/01/27 20,000 22,700,000
Baa3 Northfork Capital Trust I
8.70%, 12/15/26 (c) 16,230 17,599,358
Baa3 Northfork Capital Trust II
8.00%, 12/15/27 (c) 20,000 20,450,000
BBB Renaissance Capital Trust
8.54%, 3/01/27 (a) 19,470 20,722,505
BBB- Selkirk Cogen Funding Corp. Series A
8.98%, 6/26/12 30,000 33,093,000
-------------
150,949,957
INDUSTRIAL-12.7%
BB- CSN Iron Brazil, SA
9.125%, 6/01/07 (a)(b) 42,500 36,729,775
A Ford Motor Credit Co.
7.50%, 8/01/26 35,000 38,101,700
BBB Raytheon Co.
7.20%, 8/15/27 30,000 31,104,150
BBB- Time Warner, Inc.
7.75%, 6/15/05 45,000 47,820,330
-------------
153,755,955
INSURANCE-13.7%
BBB+ Arkwright CSN Trust
9.625%, 8/15/26 (a) $38,500 45,633,858
BBB- Delphi Funding LLC
Series A
9.31%, 3/25/27 25,000 26,995,225
Ca Home Holdings, Inc.
8.625%, 12/15/03 (b)(d) 45,765 14,644,800
A+ Liberty Mutual Insurance
7.697%, 10/15/97 (a) 45,000 47,308,140
BBB Mutual Life Insurance Co. of New York
11.25%, 8/15/24 (a)(e) 25,000 31,549,875
-------------
166,131,898
PUBLIC UTILITIES-11.8%
BB+ CalEnergy Co., Inc.
7.63%, 10/15/07 40,000 40,714,440
BB+ Connecticut Light & Power Co. Series C
7.75%, 6/01/02 15,000 15,101,700
A+ Consolidated Edison
Series 94-A
7.125%, 2/15/29 44,000 44,756,184
BB+ Niagara Mohawk Power Corp.
7.75%, 5/15/06 30,000 31,025,700
8.00%, 6/01/04 10,000 10,480,900
-------------
142,078,924
TRANSPORTATION-4.9%
AA+ Continental Airlines
Series 1997-1
7.461%, 4/01/15 33,000 34,830,510
BBB- United Airlines
9.56%, 10/19/18 19,591 24,574,950
-------------
59,405,460
Total Corporate Debt Obligations
(cost $822,773,600) 833,324,213
YANKEES-12.8%
Baa3 Empresa Electrica Del Norte, SA
7.75%, 3/15/06 (a)(c) 22,000 19,778,000
Caa2 Grupo Mexicano de Desarrollo, SA
8.25%, 2/17/01 (a)(c) 29,200 8,176,000
4
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
STANDARD PRINCIPAL
& POOR'S AMOUNT
RATINGS (000) VALUE
- -------------------------------------------------------------------------
BBB- MC Cuernavaca Trust
9.25%, 7/25/01 (a) $37,118 $ 35,632,582
Baa3 Reliance Industries, Ltd.
9.375%, 6/24/26 (a)(c) 35,000 34,444,200
BBB- Telefonica de Argentina, SA
11.875%, 11/01/04 35,000 40,810,000
BB Total Access Communication
8.375%, 11/04/06 (a) 33,500 15,242,500
Total Yankees (cost $189,927,362) 154,083,282
U.S. GOVERNMENT OBLIGATIONS-8.3%
AAA U.S. Treasury Bond
6.125%, 11/15/27 20,000 20,553,200
AAA U.S. Treasury Note
6.125%, 8/15/07 35,000 35,984,410
AAA U.S. Treasury Strip
Zero coupon, 5/15/09 85,000 43,648,350
Total U.S. Government Obligations
(cost $99,862,392) 100,185,960
SOVEREIGN DEBT OBLIGATIONS-8.0%
BRAZIL-4.0%
BB- Republic of Brazil
10.125%, 5/15/27 52,000 48,789,000
PRINCIPAL
STANDARD AMOUNT
& POOR'S (000)
RATINGS OR SHARES VALUE
- -------------------------------------------------------------------------
RUSSIA-4.0%
Ba2 Russian IAN
6.718%, 12/02/15 (a)(b) $20,000 $ 14,200,000
Ba2 Russian Principal Loans
6.718%, 12/15/20 (a)(b) 55,000 34,168,750
---------------
48,368,750
Total Sovereign Debt Obligations
(cost $100,665,623) 97,157,750
PREFERRED STOCK-5.2%
B1 Chevy Chase Capital Corp.
Series A
10.375%, (c) 339 17,607,200
A2 NB Capital Corp.
8.35%, (a)(c) 43 45,083,350
Total Preferred Stock
(cost $60,332,934) 62,690,550
COMMERCIAL PAPER-1.5%
A1+ GE Capital Corp.
5.65%, 1/02/98 (c)
(cost $18,597,081) $18,600 18,597,081
TOTAL INVESTMENTS-104.7%
(cost $1,292,158,992) 1,266,038,836
Other assets less liabilities-(4.7%) (57,261,643)
NET ASSETS-100% $1,208,777,193
(a) 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, 1997, these
securities amounted to $475,290,776 or 39.3% of net assets.
(b) Duff & Phelps rating.
(c) Moody's rating.
(d) Illiquid security, valued at fair value (see Note A).
(e) 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.
Glossary:
IAN - Interest Arrears Note
See notes to financial statements.
5
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997 (UNAUDITED)
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $1,292,158,992) $1,266,038,836
Cash 825,148
Receivable for investment securities sold 28,424,375
Interest receivable 18,242,637
Receivable for capital stock sold 3,275,644
Dividends receivable 439,120
Prepaid expenses 68,573
Total assets 1,317,314,333
LIABILITIES
Payable for investment securities purchased 103,008,094
Dividends payable 2,875,287
Payable for capital stock redeemed 808,062
Distribution fee payable 748,097
Advisory fee payable 554,941
Accrued expenses 542,659
Total liabilities 108,537,140
NET ASSETS $1,208,777,193
COMPOSITION OF NET ASSETS
Capital stock, at par $ 84,106
Additional paid-in capital 1,241,957,247
Distributions in excess of net investment income (4,613,706)
Accumulated net realized loss on investment transactions (2,530,298)
Net unrealized depreciation of investments (26,120,156)
$1,208,777,193
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($437,558,575/
30,445,406 shares of capital stock issued and outstanding) $14.37
Sales charge--4.25% of public offering price .64
Maximum offering price $15.01
CLASS B SHARES
Net asset value and offering price per share ($573,675,483/
39,917,314 shares of capital stock issued and outstanding) $14.37
CLASS C SHARES
Net asset value and offering price per share ($197,543,135/
13,743,264 shares of capital stock issued and outstanding) $14.37
See notes to financial statements.
6
STATEMENT OF OPERATIONS
SIX MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED)
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
INVESTMENT INCOME
Interest $47,054,817
Dividends 1,007,932
$ 48,062,749
EXPENSES
Advisory fee 3,140,223
Distribution fee - Class A 613,400
Distribution fee - Class B 2,669,378
Distribution fee - Class C 936,264
Transfer agency 724,047
Custodian 121,866
Printing 103,973
Administrative 65,397
Registration 51,698
Audit and legal 43,351
Taxes 18,357
Directors' fees 8,213
Miscellaneous 16,631
Total expenses 8,512,798
Net investment income 39,549,951
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investment transactions 33,359,478
Net change in unrealized depreciation of investments (16,206,729)
Net gain on investments 17,152,749
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 56,702,700
See notes to financial statements.
7
STATEMENT OF CHANGES IN NET ASSETS
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
SIX MONTHS ENDED
DEC. 31, 1997 YEAR ENDED
(UNAUDITED) JUNE 30, 1997
--------------- ---------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income $ 39,549,951 $ 67,267,838
Net realized gain on investment transactions 33,359,478 45,535,746
Net change in unrealized depreciation
of investments (16,206,729) 12,490,228
Net increase in net assets from operations 56,702,700 125,293,812
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income
Class A (17,241,139) (28,663,265)
Class B (20,726,710) (33,588,524)
Class C (7,273,658) (9,618,790)
CAPITAL STOCK TRANSACTIONS
Net increase 171,382,072 273,894,910
Total increase 182,843,265 327,318,143
NET ASSETS
Beginning of year 1,025,933,928 698,615,785
End of period (including undistributed net
investment income of $1,077,850 for the
year ended June 30, 1997) $1,208,777,193 $1,025,933,928
See notes to financial statements.
8
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 (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 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 or on a foreign
securities exchange (other than foreign securities exchanges whose operations
are similar to those of the United States over-the-counter market) 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, securities listed
on a foreign securities market whose operations are similar to the United
States over-the-counter market and securities listed on a national securities
exchange whose primary market is believed to be over-the-counter are valued at
the mean of the closing bid and asked price 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 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 services 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 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. 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.
9
NOTES TO FINANCIAL STATEMENTS (CONT.)
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
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 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 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 $65,397 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 $340,389 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 $94,866 from the sale of
Class A shares, and $6,626, $232,109 and $42,017 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 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 $10,989,097 and $2,419,628,
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 $1,329,875,990 and $1,110,097,012,
respectively, for the six months ended December 31, 1997. There were purchases
of $393,829,173 and sales of $361,228,878 of U.S. government and government
agency obligations for the six months ended December 31, 1997. At December 31,
1997, the cost of securities for federal income tax purposes was
$1,293,180,255. Accordingly, gross unrealized appreciation of investments was
$46,476,131 and gross unrealized depreciation of investments was $73,617,550,
resulting in net unrealized depreciation of $27,141,419. 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.
10
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
1. 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 a 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 received and the amount paid
on effecting a closing purchase transaction, including brokerage commissions,
is also treated as a realized gain, or if the premium received is less than the
amount paid for the closing purchase transaction, as a realized loss. If a call
option is exercised, the premium received 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 received reduces the
cost basis of the security purchased by the Fund. The risk involved in writing
an option is that, if the option were exercised, the underlying security would
then be purchased or sold by the Fund at a disadvantageous price.
For the six months ended December 31, 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
--------------------------- ------------------------------
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 5,562,120 7,284,369 $ 80,297,795 $100,560,914
Shares issued in
reinvestment of
dividends 655,726 1,088,659 9,497,312 15,092,550
Shares converted
from Class B 723,048 882,859 10,444,289 12,218,491
Shares redeemed (2,628,919) (3,997,163) (37,984,184) (55,154,472)
Net increase 4,311,975 5,258,724 $ 62,255,212 $ 72,717,483
CLASS B
Shares sold 8,745,218 13,809,148 $126,316,082 $190,717,837
Shares issued in
reinvestment of
dividends 734,822 1,108,727 10,642,102 15,370,487
Shares converted
to Class A (723,048) (882,859) (10,444,289) (12,218,491)
Shares redeemed (2,688,251) (5,635,584) (38,897,407) (77,903,904)
Net increase 6,068,741 8,399,432 $ 87,616,488 $115,965,929
11
NOTES TO FINANCIAL STATEMENTS (CONT.)
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
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 C
Shares sold 6,468,264 9,879,749 $ 93,431,172 $137,855,734
Shares issued in
reinvestment of
dividends 360,316 356,660 5,226,216 4,970,992
Shares redeemed (5,400,775) (4,174,633) (77,147,016) (57,615,228)
Net increase 1,427,805 6,061,776 $ 21,510,372 $ 85,211,498
12
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,
1997 ---------------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
------------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $14.19 $13.29 $12.92 $12.51 $14.15 $12.01
INCOME FROM INVESTMENT OPERATIONS
Net investment income .54(a) 1.15(a) 1.26 1.19 1.11 1.25
Net realized and unrealized gain (loss)
on investment transactions .25 .97 .27 .36 (1.36) 2.13
Net increase (decrease) in net asset
value from operations .79 2.12 1.53 1.55 (.25) 3.38
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.61) (1.22) (1.16) (1.14) (1.11) (1.24)
Dividends in excess of net investment income -0- -0- -0- -0- (.03) -0-
Distributions from net realized gains -0- -0- -0- -0- (.25) -0-
Total dividends and distributions (.61) (1.22) (1.16) (1.14) (1.39) (1.24)
Net asset value, end of period $14.37 $14.19 $13.29 $12.92 $12.51 $14.15
TOTAL RETURN
Total investment return based on net
asset value (b) 5.62% 16.59% 12.14% 13.26% (2.58)% 29.62%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $437,559 $370,845 $277,369 $230,750 $219,182 $216,171
Ratio of expenses to average net assets 1.06%(c) 1.12% 1.20% 1.24% 1.30% 1.39%
Ratio of net investment income to
average net assets 7.45%(c) 8.34% 9.46% 9.70% 7.76% 9.29%
Portfolio turnover rate 131% 307% 389% 387% 372% 579%
</TABLE>
See footnote summary on page 15.
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 B
-------------------------------------------------------------------------------
SIX MONTHS JANUARY 8,
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 $14.19 $13.29 $12.92 $12.50 $14.15 $12.47
INCOME FROM INVESTMENT OPERATIONS
Net investment income .49(a) 1.05(a) 1.15 1.11 1.02 .49
Net realized and unrealized gain (loss)
on investment transactions .25 .98 .29 .36 (1.37) 1.69
Net increase (decrease) in net asset
value from operations .74 2.03 1.44 1.47 (.35) 2.18
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.56) (1.13) (1.07) (1.05) (1.04) (.50)
Dividends in excess of net investment income -0- -0- -0- -0- (.01) -0-
Distribution from net realized gains -0- -0- -0- -0- (.25) -0-
Total dividends and distributions (.56) (1.13) (1.07) (1.05) (1.30) (.50)
Net asset value, end of period $14.37 $14.19 $13.29 $12.92 $12.50 $14.15
TOTAL RETURN
Total investment return based on net
asset value (b) 5.28% 15.80% 11.38% 12.54% (3.27)% 17.75%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $573,675 $480,326 $338,152 $241,393 $184,129 $55,508
Ratio of expenses to average net assets 1.76%(c) 1.82% 1.90% 1.99% 2.00% 2.10%(c)
Ratio of net investment income to
average net assets 6.73%(c) 7.62% 8.75% 9.07% 7.03% 7.18%(c)
Portfolio turnover rate 131% 307% 389% 387% 372% 579%
</TABLE>
See footnote summary on page 15.
14
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
1997 -------------------------------------------------- JUNE 30,
(UNAUDITED) 1997 1996 1995 1994 1993
------------ ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $14.19 $13.29 $12.93 $12.50 $14.15 $13.63
INCOME FROM INVESTMENT OPERATIONS
Net investment income .50(a) 1.04(a) 1.14 1.10 1.02 .16
Net realized and unrealized gain (loss)
on investment transactions .24 .99 .29 .38 (1.37) .53
Net increase (decrease) in net asset
value from operations .74 2.03 1.43 1.48 (.35) .69
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.56) (1.13) (1.07) (1.05) (1.05) (.17)
Distribution from net realized gains -0- -0- -0- -0- (.25) -0-
Total dividends and distributions (.56) (1.13) (1.07) (1.05) (1.30) (.17)
Net asset value, end of period $14.37 $14.19 $13.29 $12.93 $12.50 $14.15
TOTAL RETURN
Total investment return based on net
asset value (b) 5.28% 15.80% 11.30% 12.62% (3.27)% 5.08%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $197,543 $174,762 $83,095 $51,028 $50,860 $5,115
Ratio of expenses to average net assets 1.76%(c) 1.82% 1.90% 1.84% 1.99% 2.05%(c)
Ratio of net investment income to
average net assets 6.78%(c) 7.61% 8.74% 8.95% 6.98% 5.51%(c)
Portfolio turnover rate 131% 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) Annualized.
(d) Commencement of distribution.
15
ALLIANCE BOND FUND CORPORATE BOND 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
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.
16
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
17
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.
CBPSR
