ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
SEMI-ANNUAL REPORT
DECEMBER 31, 1998
ALLIANCE CAPITAL
LETTER TO SHAREHOLDERS ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
February 24, 1999
Dear Shareholder:
We are pleased to report to you on our investment strategy, performance and
outlook of the Alliance Bond Fund Corporate Bond Portfolio (the Fund). The
objective of the Fund is to maximize income over the long term, while providing
reasonable safety in the value of each shareholder's investment. As a secondary
objective, the Fund seeks capital appreciation. The Fund invests primarily in a
diversified portfolio of investment grade and non-investment grade corporate
bonds issued by domestic and foreign issuers that we expect to benefit from
improving credit and economic fundamentals. The Fund may also hold debt issued
by the U.S. and foreign governments.
INVESTMENT RESULTS
The following table shows how your Fund performed over the past six- and
12-month periods ended December 31, 1998. For comparison, we have included the
Lehman Brothers (LB) Aggregate Bond Index, a standard measure of the
performance of a basket of unmanaged debt securities, as well as the Lipper
Corporate Debt Funds BBB-Rated Average (Lipper Average), the average
performance of a group of similar corporate bond funds.
As shown, your Fund underperformed both the LB Aggregate Bond Index and the
Lipper Average during the six- and 12-month periods ended December 31, 1998.
Our exposure to emerging market and Yankee securities dampened performance as
these sectors underperformed.
INVESTMENT RESULTS*
Periods Ended December 31, 1998
TOTAL RETURNS
6 MONTHS 12 MONTHS
-------- ---------
ALLIANCE BOND FUND CORPORATE
BOND PORTFOLIO
Class A -2.82% -0.02%
Class B -3.24% -0.78%
Class C -3.17% -0.71%
LEHMAN BROTHERS AGGREGATE
BOND INDEX 4.58% 8.69%
LIPPER CORPORATE DEBT FUNDS
BBB-RATED AVERAGE 2.52% 6.23%
* THE FUND'S INVESTMENT RESULTS ARE TOTAL RETURNS FOR THE PERIODS AND ARE
BASED ON THE NET ASSET VALUE OF EACH CLASS OF SHARES. 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. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
THE LEHMAN BROTHERS AGGREGATE BOND INDEX IS COMPOSED OF THE
MORTGAGE-BACKED SECURITIES INDEX, THE ASSET-BACKED SECURITIES INDEX AND THE
GOVERNMENT/CORPORATE BOND INDEX. THE UNMANAGED LIPPER CORPORATE DEBT FUNDS
BBB-RATED AVERAGE (LIPPER AVERAGE) IS BASED ON THE PERFORMANCE OF A UNIVERSE OF
FUNDS THAT INVEST AT LEAST 65% OF THEIR ASSETS CORPORATE AND GOVERNMENT DEBT
ISSUES RATED IN THE TOP FOUR GRADES. FOR THE SIX AND 12-MONTH PERIODS ENDED
DECEMBER 31, 1998, THE LIPPER AVERAGE CONSISTED OF 123 AND 98 FUNDS,
RESPECTIVELY. AN INVESTOR CANNOT INVEST DIRECTLY IN AN INDEX OR AN AVERAGE.
ADDITIONAL INVESTMENT RESULTS APPEAR ON PAGE 4.
MARKET OVERVIEW
During the six-month period, the U.S. bond market continued to climb as
investors sought safety from global financial market turmoil. At the beginning
of the period, global markets suffered from multiple concerns about
1
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
recession and a liquidity crisis throughout non-government bond markets. The
devaluation in Russia, the extreme weakness in the Japanese yen, and the
well-publicized bailout of Long Term Capital Management's hedge fund all added
to investors' risk aversion. The resulting "flight to quality" spurred a rally
in the U.S. Treasury market and other "safe haven" government bond markets
outside the U.S. and negatively impacted returns in the corporate, high yield,
mortgage and emerging market bond sectors. The U.S. Federal Reserve and other
world central banks reacted by reducing official interest rates. The combined
effect of monetary policy ease with the release of stronger than expected U.S.
economic growth data reduced market aversion and investors cautiously moved
back into higher yielding securities toward the end of the period. The U.S.
Treasury sector outperformed all other bond market sectors over the six-month
period while the emerging market bond sector underperformed all other bond
market sectors.
Within the corporate bond sector, credit spreads (the difference between the
yield on comparable quality corporate securities and Treasury securities)
widened dramatically at the beginning of the period as financial market turmoil
spread throughout the world. Particularly affected were lower quality, foreign
(Yankee bonds) and cyclical issuers. As financial markets stabilized in the
fourth quarter, credit spreads tightened. Yankee bonds and banks recovered much
of the losses they suffered in the third quarter. However, smaller issuers and
out of favor industries continued to lag as investors generally avoided any
areas of questionable liquidity. The most stable industrial sectors were media
& entertainment and telecommunications. These industries, dominated by names
such as TCI, Time Warner, Sprint Corp., MCI Worldcom, Inc. and Viacom Inc.,
maintained investor demand throughout the period. The electric utility sector
also enjoyed better stability than most sectors.
INVESTMENT STRATEGY
Over the six-month period ended December 31, 1998, as turmoil spread through
financial markets, we increased our treasury holdings and trimmed our exposure
to Yankee and emerging market issuers. We continued to emphasize the media &
entertainment, telecommunications and electric utility sectors as these sectors
continued to perform well amidst financial market turmoil.
OUTLOOK
We believe the risk of global recession has diminished after the recent wave of
official interest rate cuts around the world. However, global growth will
continue to slow and inflation will remain subdued as the consequences of
excess productive capacity are felt around the world. U.S. economic activity is
expected to moderate from the robust rate of the fourth quarter with growth
estimates centered around 3.0% for 1999. Further interest rate reductions are
unlikely as economic data continues to show healthy growth. U.S. interest
rates, as well as inflation, will remain low.
In the U.S. fixed income markets, corporate securities will provide
opportunities despite the spread widening caused by the Brazilian real
devaluation on January 13, 1999. Our cautious optimism reflects important
distinctions between the recent Brazilian devaluation and 1998's Russian
crisis; interest rates are lower, liquidity is much higher, leverage much
lower, and the U.S. economy stronger. We expect the safe-haven premium on
Treasuries to diminish somewhat, but Treasuries will continue to perform well
given their attractiveness to foreign investors, a low inflationary environment
and investor sentiment to constrain risk.
Our outlook for emerging market debt has improved as the U.S. Federal Reserve,
along with other G7 countries, has begun easing monetary policy in an effort to
lower the risk of slower economic growth. Also, the Japanese yen has
strengthened sharply against the U.S. dollar, relieving pressure on exchange
rates and interest rates elsewhere in Asia. In addition, signs of economic
growth are beginning to surface from emerging markets in Asia. However,
increased uncertainty has been generated by the change in Brazil's exchange
rate policy. Spreads on emerging market debt have widened considerably as a
result, weakening growth prospects for Latin America. Furthermore, we remain
concerned about the effects that slower global growth and low commodity prices
will have on emerging markets. In this environment, we expect emerging market
debt prices to remain volatile with periods of improved sentiment, triggered by
stimu-
2
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
lative policies in developed countries, interspersed with episodes of weakness,
as investors lose confidence in the pace of reforms in emerging countries and
Japan.
Thank you for your continued interest and investment in the Alliance Bond Fund
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
NAV AND SEC AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1998
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year -0.02% -4.29%
5 Years 6.55% 5.63%
10 Years 11.13% 10.65%
SEC Yield** 7.34%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year -0.78% -3.54%
5 Years 5.82% 5.82%
Since Inception* 9.57% 9.57%
SEC Yield** 6.93%
CLASS C SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year -0.71% -1.63%
5 Years 5.84% 5.84%
Since Inception* 7.96% 7.96%
SEC Yield** 6.95%
The Fund's investment results represent Average Annual Total Returns. The NAV
and SEC returns reflect reinvestment of dividends and/or capital gains
distributions in additional shares without (NAV) and with (SEC) the effect of
the 4.25% maximum front-end sales charge for Class A or applicable contingent
deferred sales charge for Class B (3% year 1, 2% year 2, 1% year 3, 0% year 4);
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, 1998.
4
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998 (UNAUDITED) ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
STANDARD & PRINCIPAL
POOR'S AMOUNT
RATINGS (000) VALUE
- -------------------------------------------------------------------------------
CORPORATE DEBT OBLIGATIONS-68.9%
AUTOMOTIVE-2.5%
BB+ Federal Mogul Corp.
7.875%, 7/01/10 $ 35,000 $ 35,903,105
BANKING-0.9%
BBB- FBOP Capital Trust I
10.20%, 2/06/27 (a) (b) 12,000 13,172,100
BROADCASTING/MEDIA-9.6%
BBB- News America, Inc.
7.30%, 4/30/28 69,000 71,162,805
BBB Time Warner Entertainment Company LP
8.375%, 7/15/33 10,000 12,400,040
BBB Time Warner, Inc.
6.95%, 1/15/28 50,000 53,130,200
--------------
136,693,045
CABLE-2.6%
BB+ CSC Holdings, Inc.
7.25%, 7/15/08 20,000 20,086,000
7.625%, 7/15/18 17,000 16,755,200
36,841,200
COMMUNICATIONS-7.7%
BBB- Comcast Cable Communications
8.875%, 5/01/17 40,525 50,689,683
A- U.S. West Capital Funding, Inc.
6.875%, 7/15/28 30,000 32,148,120
CCC Winstar Communications, Inc.
10.00%, 3/15/08 22,000 18,150,000
11.00%, 3/15/08 535 534,722
11.00%, 3/15/08 10,000 8,273,100
--------------
109,795,625
FINANCIAL-15.6%
BB- Advanta Capital Trust I
8.99%, 12/17/26 (b) 12,000 4,876,704
AA- Associates Corp., NA
6.95%, 11/01/18 25,000 26,610,225
BBB- GS Escrow Corp.
7.00%, 8/01/03 (a) (b) 25,000 24,522,575
7.125%, 8/01/05 (a) (b) 20,000 19,750,340
AA- Merrill Lynch & Co., Inc.
6.375%, 4/03/08 10,000 9,640,080
6.75%, 6/01/28 22,000 21,983,588
6.875%, 11/15/18 40,000 41,748,960
BBB Renaissance Capital Trust
8.54%, 3/01/27 19,470 19,445,682
BBB- Selkirk Cogen Funding Corp.
8.65%, 12/26/07 10,115 11,298,828
8.98%, 6/26/12 35,000 41,574,645
--------------
221,451,627
HEALTHCARE-1.6%
BBB Healthsouth Corp.
7.00%, 6/15/08 22,500 22,352,265
INSURANCE-5.1%
A- Arkwright CSN Trust
9.625%, 8/15/26 (a) (b) 38,500 44,693,611
BBB- Delphi Funding LLC
Series A
9.31%, 3/25/27 25,000 28,058,100
--------------
72,751,711
PUBLIC UTILITIES-16.8%
BB+ CalEnergy Co., Inc.
8.48%, 9/15/28 50,000 56,440,800
BB+ Cogentrix Energy, Inc.
8.75%, 10/15/08 (a) 26,000 27,950,000
A+ Consolidated Edison
7.125%, 2/15/29 22,000 22,956,406
BB+ El Paso Electric Co.
8.90%, 2/01/06 19,000 21,707,500
BB+ Niagara Mohawk Power Corp.
8.50%, 7/01/10 (c) 66,750 52,024,149
BBB- Public Service Co.
7.10%, 8/01/05 (b) 20,000 20,169,380
7.50%, 8/01/18 (b) 38,750 38,055,445
--------------
239,303,680
5
PORTFOLIO OF INVESTMENTS (CONTINUED)
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
STANDARD & PRINCIPAL
POOR'S AMOUNT
RATINGS (000) VALUE
- -------------------------------------------------------------------------------
TELEPHONE UTILITIES-3.3%
A- Sprint Capital Corp.
6.875%, 11/15/28 $ 45,000 $ 46,878,300
TRANSPORTATION-3.2%
BBB United Airlines
9.56%, 10/19/18 37,716 45,828,900
Total Corporate Debt Obligations
(cost $955,154,289) 980,971,558
YANKEES-18.1%
BANKING-3.2%
BBB Dao Heng Bank, Ltd.
7.75%, 1/24/07 (a) 23,500 19,508,690
Ba1 Fuji LLC
9.87%, 12/31/49 (a) (d) 35,000 25,591,265
--------------
45,099,955
COMMUNICATIONS-2.7%
BBB- Telefonica de Argentina, SA
9.125%, 5/07/08 (a) 24,000 22,140,000
11.875%, 11/01/04 15,220 16,209,300
--------------
38,349,300
ENERGY-1.1%
BBB- Transgas de Occidental, SA
9.79%, 11/01/10 (a) 22,466 15,726,285
FINANCIAL-3.1%
BBB- MC Cuernavaca Trust
9.25%, 7/25/01 (a) 29,028 21,045,594
Baa3 Tokai Capital, LLC
9.98%, 12/29/49 (a) (d) 26,300 22,412,202
--------------
43,457,796
INDUSTRIAL-3.5%
BB- CSN Iron Brazil, SA
9.125%, 6/01/07 (a) (b) 42,500 26,350,000
C Grupo Mexicano de Desarrollo, SA
8.25%, 2/17/01 (d) (e) 29,200 7,154,000
BB Reliance Industries, Ltd.
9.375%, 6/24/26 (a) 21,000 16,917,600
--------------
50,421,600
REAL ESTATE-0.4%
BB Guangzhou Shenzhen
10.25%, 8/15/07 10,000 4,950,000
TELEPHONE UTILITIES-2.4%
BBB- TPSA Finance BV
7.75%, 12/10/08 (a) 35,000 34,518,750
UTILITY-1.7%
BB+ Empresa Electrica Del Norte, SA
7.75%, 3/15/06 (a) 40,240 24,144,000
Total Yankees
(cost $331,877,686) 256,667,686
U.S. GOVERNMENT OBLIGATIONS-17.3%
AAA U.S. Treasury Bond
5.50%, 8/15/28 30,000 31,453,140
AAA U.S. Treasury Strip
Zero coupon, 5/15/10 100,000 55,806,700
Zero coupon, 5/15/12 230,000 113,295,700
Zero coupon, 5/15/13 98,000 45,336,368
Total U.S. Government Obligations
(cost $236,540,248) 245,891,908
PREFERRED STOCK-6.0%
FINANCIAL-6.0%
BBB Centaur Funding Corp.Series B
9.08%, (a) 65 67,149,550
A2 NB Capital Corp.
8.35%, (d) 720 18,765,000
--------------
(cost $83,148,500) 85,914,550
SOVEREIGN DEBT OBLIGATIONS-2.0%
PANAMA-1.3%
BB+ Republic of Panama
4.00%, 7/17/14 25,000 18,625,000
6
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
STANDARD & PRINCIPAL
POOR'S AMOUNT
RATINGS (000) VALUE
- -------------------------------------------------------------------------------
RUSSIA-0.7%
B3 Russia Ministry of Finance
12.75%, 6/24/28 (a) (d) $ 20,000 $ 6,000,000
Ca Russian IAN
5.9688%, 12/15/15 (d) 2,656 278,858
NR Russian Principal
Loans FRN
5.9688%, 12/15/20 (f) 90,000 4,162,500
--------------
10,441,358
Total Sovereign Debt Obligations
(cost $96,685,851) 29,066,358
COMMERCIAL PAPER-0.4%
General Electric Capital Corp.
5.95%, 1/04/99
(amortized cost $5,297,924) 5,300 5,297,924
TOTAL INVESTMENTS-112.7%
(cost $1,708,704,498) 1,603,809,984
Other assets less liabilities-(12.7%) (180,894,981)
NET ASSETS-100% $ 1,422,915,003
(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, 1998, these
securities amounted to $431,592,562 or 30.3% of net assets.
(b) Duff & Phelps Rating.
(c) 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.
(d) Moody's Rating.
(e) Security is in default and is non-income producing.
(f) Coupon consists of 2.9844% cash payment and 2.9844% paid-in-kind of
Russian IAN's.
Glossary of terms:
FRN - Floating Rate Note
IAN - Interest Arrears Note
See notes to financial statements.
7
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998 (UNAUDITED) ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $1,708,704,498) $ 1,603,809,984
Cash 2,861,968
Interest receivable 28,976,455
Receivable for capital stock sold 3,134,555
Prepaid expenses 91,725
Total assets 1,638,874,687
LIABILITIES
Payable for investment securities purchased 210,705,948
Dividends payable 2,044,526
Payable for capital stock redeemed 1,344,560
Distribution fee payable 917,331
Advisory fee payable 659,250
Accrued expenses 288,069
Total liabilities 215,959,684
NET ASSETS $ 1,422,915,003
COMPOSITION OF NET ASSETS
Capital stock, at par $ 107,837
Additional paid-in capital 1,562,614,710
Distributions in excess of net investment income (1,828,677)
Accumulated net realized loss on investment transactions (33,084,353)
Net unrealized depreciation of investments (104,894,514)
$ 1,422,915,003
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share
($496,701,378 / 37,638,648 shares of capital stock
issued and outstanding) $13.20
Sales charge--4.25% of public offering price .59
Maximum offering price $13.79
CLASS B SHARES
Net asset value and offering price per share
($678,422,311 / 51,421,732 shares of capital stock
issued and outstanding) $13.19
CLASS C SHARES
Net asset value and offering price per share
($247,791,314 / 18,776,960 shares of capital stock
issued and outstanding) $13.20
See notes to financial statements.
8
STATEMENT OF OPERATIONS
SIX MONTHS ENDED DECEMBER 31, 1998 (UNAUDITED)
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
INVESTMENT INCOME
Interest $ 62,158,257
Dividends 1,064,621
$ 63,222,878
EXPENSES
Advisory fee 3,743,025
Distribution fee - Class A 734,289
Distribution fee - Class B 3,298,181
Distribution fee - Class C 1,110,100
Transfer agency 1,164,309
Custodian 145,695
Audit and legal 138,592
Registration 87,003
Printing 82,408
Administrative 62,617
Taxes 47,319
Directors' fees 5,283
Miscellaneous 19,038
Total expenses 10,637,859
Net investment income 52,585,019
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investment transactions (14,553,016)
Net realized gain on written options transactions 572,000
Net change in unrealized depreciation of investments (80,639,937)
Net loss on investments (94,620,953)
NET DECREASE IN NET ASSETS FROM OPERATIONS $ (42,035,934)
See notes to financial statements.
9
STATEMENT OF CHANGES
IN NET ASSETS ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
SIX MONTHS ENDED
DECEMBER 31, 1998 YEAR ENDED
(UNAUDITED) JUNE 30, 1998
----------------- ---------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income $ 52,585,019 $ 86,883,131
Net realized gain (loss) on
investments and options
transactions (13,981,016) 17,694,598
Net change in unrealized
depreciation of investments (80,639,937) (14,341,150)
Net increase (decrease) in
net assets from operations (42,035,934) 90,236,579
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income
Class A (21,147,307) (32,980,257)
Class B (26,135,654) (39,538,622)
Class C (8,795,130) (14,364,252)
Distributions in excess of
net investment income
Class A -0- (3,979,895)
Class B -0- (4,771,327)
Class C -0- (1,733,407)
CAPITAL STOCK TRANSACTIONS
Net increase 83,727,784 418,498,497
Total increase (decrease) (14,386,241) 411,367,316
NET ASSETS
Beginning of year 1,437,301,244 1,025,933,928
End of period (including
undistributed net investment
income of $1,664,395 for the
year ended June 30, 1998) $1,422,915,003 $1,437,301,244
See notes to financial statements.
10
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 (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 accompanying 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 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 may
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%
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 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 exchange 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 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 market value of such securities.
2. TAXES
It is the policy of the Portfolio 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 any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
3. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Dividend income is recorded on ex-dividend date. Interest income is accrued
daily. Investment transactions are accounted for on the trade date securities
are purchased or sold. The Portfolio accretes discounts as adjustments to
interest income. Investment gains and losses are determined on the identified
cost basis.
4. INCOME AND EXPENSES
All income earned and expenses incurred by the Portfolio are borne on a
pro-rata basis by each settled class of shares, based on proportionate interest
in the Portfolio represented by the net assets of such class, except that the
Portfolio'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.
11
NOTES TO FINANCIAL STATEMENTS (CONT.)
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
Income dividends 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 an 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. The fee is accrued daily
and paid monthly.
Pursuant to the advisory agreement, the Portfolio paid $62,617 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, 1998.
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 $857,044 for the six months ended December 31,
1998.
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 $72,928 from the sales of Class
A shares and $1,622, $445,538 and $44,793 in contingent deferred sales charges
imposed upon redemptions by shareholders of Class A, Class B and Class C
shares, respectively, for the six months ended December 31, 1998.
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 average daily net assets
attributable to both Class B and Class C shares. The fees are 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 $14,993,972 and $3,215,497
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 securities) aggregated $774,864,907 and $711,785,451,
respectively, for the six months ended December 31, 1998. There were purchases
of $1,211,063,412 and sales of $1,025,597,717 of U.S. government and government
agency obligations for the six months ended December 31, 1998.
At December 31, 1998, the cost of investments for federal income tax purposes
was $1,731,961,399. Accordingly, gross unrealized appreciation of investments
was $53,567,958 and gross unrealized depreciation of investments was
$181,719,373 resulting in net unrealized depreciation of $128,151,415.
At June 30, 1998, the Portfolio had a net capital loss carryforward for federal
income tax purposes of
12
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
$6,334,555, of which $2,817,216 expires in the year 2003 and $3,517,339 expires
in the year 2004.
1. OPTIONS TRANSACTIONS
For hedging and investment purposes, the Portfolio 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 Portfolio pays a
premium whether or not the option is exercised. Additionally, the Portfolio
bears the risk of loss of premium and change in market value should the
counterparty not perform under the contract. Put and call options purchased are
accounted for in the same manner as portfolio securities. The cost of
securities acquired through the exercise of call options is increased by
premiums paid. The proceeds from securities sold through the exercise of put
options are decreased by the premiums paid.
When the Portfolio writes an option, the premium received by the Portfolio 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 Portfolio 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 Portfolio 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 Portfolio. The risk involved in writing an option is that, if
the option was exercised the underlying security could then be purchased or
sold by the Portfolio at a disadvantageous price.
Transactions in written options for the six months ended December 31, 1998 were
as follows:
NUMBER OF
CONTRACTS PREMIUMS
--------- --------
Options oustanding at beginning of year -0- $ -0-
Options written 65,000 754,000
Options terminated in closing purchase
transactions (65,000) (754,000)
Options outstanding at December 31, 1998 -0- $ -0-
13
NOTES TO FINANCIAL STATEMENTS (CONT.)
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
NOTE E: CAPITAL STOCK
There are 750,000,000 shares of $.001 par value capital stock authorized,
divided into three classes, designated Class A, Class B and Class C shares.
Each class consists of 250,000,000 authorized shares. Transactions in capital
stock were as follows:
SHARES AMOUNT
--------------------------- ------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
DEC. 31, 1998 JUNE 30, DEC. 31, 1998 JUNE 30,
(UNAUDITED) 1998 (UNAUDITED) 1998
------------ ------------ -------------- --------------
CLASS A
Shares sold 5,110,117 13,329,444 $ 67,708,064 $191,806,767
Shares issued in
reinvestment of
dividends and
distributions 931,590 1,434,669 12,271,327 20,673,923
Shares converted
from Class B 891,448 1,245,638 11,794,428 17,903,380
Shares redeemed (5,266,605) (6,171,084) (69,622,504) (88,725,044)
Net increase 1,666,550 9,838,667 $ 22,151,315 $141,659,026
CLASS B
Shares sold 9,725,825 19,913,781 $128,808,584 $286,380,021
Shares issued in
reinvestment of
dividends and
distributions 1,042,790 1,579,489 13,723,101 22,757,300
Shares converted
to Class A (891,633) (1,245,638) (11,794,428) (17,903,380)
Shares redeemed (5,855,063) (6,696,392) (77,174,124) (96,372,328)
Net increase 4,021,919 13,551,240 $ 53,563,133 $194,861,613
CLASS C
Shares sold 7,283,280 11,907,869 $ 95,668,431 $171,701,245
Shares issued in
reinvestment of
dividends and
distributions 409,706 773,490 5,397,363 11,154,530
Shares redeemed (6,856,065) (7,056,779) (93,052,458) (100,877,917)
Net increase 836,921 5,624,580 $ 8,013,336 $ 81,977,858
NOTE F: CONCENTRATION OF RISK
Investing in securities of foreign companies and foreign governments involves
special risks which include revaluation of currency and future adverse
political and economic developments. Moreover, securities of many foreign
companies and foreign governments and their markets may be less liquid and
their prices more volatile than those of comparable U.S. companies and the
United States Government.
NOTE G: BANK BORROWING
A number of open-end mutual funds managed by the Adviser, including the Fund,
participate in a $750 million revolving credit facility (the "Facility")
intended to provide short-term financing if necessary, subject to certain
restrictions in connection with abnormal redemption activity. Commitment fees
related to the Facility are paid by the participating funds and are included in
miscellaneous expenses in the statement of operations. The Fund did not utilize
the Facility during the six months ended December 31, 1998.
14
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
DEC. 31, YEAR ENDED JUNE 30,
1998 ---------------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $14.19 $14.19 $13.29 $12.92 $12.51 $14.15
INCOME FROM INVESTMENT OPERATIONS
Net investment income .54(a) 1.08(a) 1.15(a) 1.26 1.19 1.11
Net realized and unrealized gain (loss)
on investment transactions (.92) .12 .97 .27 .36 (1.36)
Net increase (decrease) in net asset
value from operations (.38) 1.20 2.12 1.53 1.55 (.25)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.61) (1.08) (1.22) (1.16) (1.14) (1.11)
Distributions in excess of net
investment income -0- (.12) -0- -0- -0- (.03)
Distributions from net realized gains -0- -0- -0- -0- -0- (.25)
Total dividends and distributions (.61) (1.20) (1.22) (1.16) (1.14) (1.39)
Net asset value, end of period $13.20 $14.19 $14.19 $13.29 $12.92 $12.51
TOTAL RETURN
Total investment return based on
net asset value (b) (2.82)% 8.66% 16.59% 12.14% 13.26% (2.58)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $496,701 $510,397 $370,845 $277,369 $230,750 $219,182
Ratio of expenses to average net assets 1.10%(c) 1.05% 1.12% 1.20% 1.24% 1.30%
Ratio of net investment income to average
net assets 8.13%(c) 7.52% 8.34% 9.46% 9.70% 7.76%
Portfolio turnover rate 118% 244% 307% 389% 387% 372%
</TABLE>
See footnote summary on page 17.
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 B
------------------------------------------------------------------------------
SIX MONTHS
ENDED
DEC. 31, YEAR ENDED JUNE 30,
1998 ---------------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $14.19 $14.19 $13.29 $12.92 $12.50 $14.15
INCOME FROM INVESTMENT OPERATIONS
Net investment income .49(a) .98(a) 1.05(a) 1.15 1.11 1.02
Net realized and unrealized gain (loss)
on investment transactions (.93) .13 .98 .29 .36 (1.37)
Net increase (decrease) in net asset
value from operations (.44) 1.11 2.03 1.44 1.47 (.35)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.56) (.98) (1.13) (1.07) (1.05) (1.04)
Distributions in excess of net
investment income -0- (.13) -0- -0- -0- (.01)
Distribution from net realized gains -0- -0- -0- -0- -0- (.25)
Total dividends and distributions (.56) (1.11) (1.13) (1.07) (1.05) (1.30)
Net asset value, end of period $13.19 $14.19 $14.19 $13.29 $12.92 $12.50
TOTAL RETURN
Total investment return based on
net asset value (b) (3.24)% 7.95% 15.80% 11.38% 12.54% (3.27)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $678,422 $672,374 $480,326 $338,152 $241,393 $184,129
Ratio of expenses to average net assets 1.80%(c) 1.75% 1.82% 1.90% 1.99% 2.00%
Ratio of net investment income to
average net assets 7.42%(c) 6.80% 7.62% 8.75% 9.07% 7.03%
Portfolio turnover rate 118% 244% 307% 389% 387% 372%
</TABLE>
See footnote summary on page 17.
16
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS C
------------------------------------------------------------------------------
SIX MONTHS
ENDED
DEC. 31, YEAR ENDED JUNE 30,
1998 ---------------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $14.19 $14.19 $13.29 $12.93 $12.50 $14.15
INCOME FROM INVESTMENT OPERATIONS
Net investment income .48(a) .99(a) 1.04(a) 1.14 1.10 1.02
Net realized and unrealized gain (loss)
on investment transactions (.91) .12 .99 .29 .38 (1.37)
Net increase (decrease) in net asset
value from operations (.43) 1.11 2.03 1.43 1.48 (.35)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.56) (.99) (1.13) (1.07) (1.05) (1.05)
Distributions in excess of net
investment income -0- (.12) -0- -0- -0- -0-
Distribution from net realized gains -0- -0- -0- -0- -0- (.25)
Total dividends and distributions (.56) (1.11) (1.13) (1.07) (1.05) (1.30)
Net asset value, end of period $13.20 $14.19 $14.19 $13.29 $12.93 $12.50
TOTAL RETURN
Total investment return based on
net asset value (b) (3.17)% 7.95% 15.80% 11.30% 12.62% (3.27)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $247,791 $254,530 $174,762 $83,095 $51,028 $50,860
Ratio of expenses to average net assets 1.80%(c) 1.75% 1.82% 1.90% 1.84% 1.99%
Ratio of net investment income
to average net assets 7.40%(c) 6.83% 7.61% 8.74% 8.95% 6.98%
Portfolio turnover rate 118% 244% 307% 389% 387% 372%
</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 charges or contingent
deferred sales charges are not reflected in the calculation of total investment
return. Total investment return calculated for a period of less than one year
is not annualized.
(c) Annualized.
17
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.
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 U.S. Government Fund
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 Growth Fund
Alliance Premier Growth Fund
Alliance/Regent Sector Opportunity Fund
Select Investors Series - Premier Portfolio
GROWTH & INCOME
Alliance Balanced Shares
Alliance Conservative Investors Fund
Alliance Growth & Income Fund
Alliance Growth Investors Fund
Alliance Real Estate Investment Fund
Alliance Utility Income Fund
AGGRESSIVE GROWTH
Alliance Global Small Cap Fund
Alliance Quasar Fund
Alliance Technology Fund
INTERNATIONAL
Alliance All-Asia Investment Fund
Alliance Greater China '97 Fund
Alliance International Fund
Alliance International Premier Growth Fund
Alliance New Europe Fund
Alliance Worldwide Privatization Fund
INSTITUTIONAL
Premier Growth
Quasar
Real Estate Investment
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
Alliance Capital Reserves
Alliance Government Reserves
Alliance Institutional Reserves
Prime Portfolio
Government Portfolio
Tax-Free Portfolio
Trust Portfolio
Treasury Portfolio
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.
CBPSR
