ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
ANNUAL REPORT
JUNE 30, 1999
ALLIANCE CAPITAL
LETTER TO SHAREHOLDERS ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
August 16, 1999
Dear Shareholder:
This report provides the performance, investment strategy and outlook for the
Alliance Bond Fund Corporate Bond Portfolio (the "Fund") over the twelve-month
period ended June 30, 1999. 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. Secondarily, 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 six- and
twelve-month periods ended June 30, 1999. For comparison, we have included the
performance for the Fund's benchmark index, as represented by the Lehman
Brothers ("LB") Aggregate Bond Index, as well as the returns for the Lipper
Corporate Debt Funds BBB-Rated Average (the "Lipper Average").
Over the six-month period ended June 30, 1999, your Fund marginally
outperformed its benchmark index and outperformed the Lipper Average due to our
holdings in the high-yield and emerging market sectors. These fixed-income
sectors outperformed the traditional fixed-income sectors, which include the
U.S. Treasury, mortgage-backed, asset-backed and investment-grade corporate
securities sectors, as the domestic and global economic outlook improved over
the period.
Conversely, during the longer, twelve-month period, your Fund underperformed
its benchmark index and the Lipper Average as a result of its exposure to
high-yield and emerging market debt, which suffered in the third quarter of
1998 when market turmoil spread from Asia to Russia and Latin America.
INVESTMENT RESULTS*
Periods Ended June 30, 1999
TOTAL RETURNS
6 MONTHS 12 MONTHS
-------- ---------
ALLIANCE BOND FUND CORPORATE BOND
PORTFOLIO
Class A -1.30% -4.08%
Class B -1.59% -4.77%
Class C -1.66% -4.77%
LEHMAN BROTHERS AGGREGATE BOND
INDEX -1.37% 3.15%
LIPPER CORPORATE DEBT FUNDS BBB-RATED
AVERAGE -1.73% 0.85%
* 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 UNMANAGED LEHMAN BROTHERS ("LB") AGGREGATE BOND INDEX IS COMPOSED OF
THE LB MORTGAGE-BACKED SECURITIES INDEX, THE LB ASSET-BACKED SECURITIES INDEX
AND THE LB 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 IN CORPORATE AND
GOVERNMENT DEBT ISSUES RATED IN THE TOP FOUR GRADES. FOR THE SIX- AND
TWELVE-MONTH PERIODS ENDED JUNE 30, 1999, THE LIPPER AVERAGE CONSISTED OF 136
AND 114 FUNDS, RESPECTIVELY. AN INVESTOR CANNOT INVEST DIRECTLY IN AN INDEX OR
AN AVERAGE.
ADDITIONAL INVESTMENT RESULTS APPEAR ON PAGE 4.
MARKET OVERVIEW
The outlook for the global economy continued to brighten during the first six
months of 1999. Signs of a strong recovery in East Asia, better-than-expected
growth in Japan, and a quick drop in Brazilian interest rates bolstered
investor confidence. In the United States, private demand growth has
downshifted but remains exceptionally strong, while inflation and unemployment
have remained low. With economic activity remaining strong and global liquidity
concerns abating, the U.S. Federal
1
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
Reserve adopted a monetary policy tightening bias in May and increased the
Federal Funds rate by 25 basis points, to 5.00%, in June. For the six months
ended June 30, 1999, the U.S. yield curve flattened as short- and
intermediate-term rates rose more than long-term rates. Two-year U.S. Treasury
yields rose from 4.53%, to 5.52%, while thirty-year U.S. Treasury yields rose
from 5.09%, to 5.97%.
During the six-month period ended June 30, 1999, the U.S. bond market, as
represented by the LB Aggregate Bond Index, declined by 1.4% as economic growth
strengthened and the U.S. Federal Reserve raised interest rates. Among the
traditional sectors of the U.S. bond market, the mortgage sector recorded the
strongest performance while the U.S. Treasury sector, followed closely by the
corporate sector, recorded the weakest performance. As credit markets continued
to stabilize from the turmoil in 1998, and the threat of higher interest rates
surfaced, investors moved out of U.S. Treasuries and back into higher-yielding
sectors in search of higher returns. While the corporate sector suffered from
rising rates and liquidity concerns, the mortgage sector was the main
beneficiary of the change in interest rate expectations. When interest rates
rose, mortgage refinancing slowed and mortgage prepayments fell, making
mortgage-backed securities more attractive.
Over the six-month period ended June 30, 1999, the U.S. high-yield sector, as
represented by the Merrill Lynch High Yield Master Index, gained 1.8%,
outperforming the traditional domestic bond market sectors. The U.S. high-yield
sector started the year off with healthy returns. As the global economic
environment improved, investors grew more comfortable taking on risk and moved
into higher-yielding assets. However, towards the end of the six-month period,
the threat of interest-rate tightening combined with a weaker stock market and
concerns about volatility in the emerging markets dampened the six-month
returns for the sector.
During the six months under review, most developed countries outside the U.S.
showed signs of improving economic growth while inflation remained low.
Divergent interest-rate policies (the European Central Bank and Bank of Japan
eased, while the U.S. Federal Reserve indicated a tightening bias) caused the
U.S. bond market to underperform all other developed bond markets, in local
currency terms and on a hedged basis. The Japanese bond market, boosted by
domestic investment and, until late in the quarter, a poor economic
environment, posted the strongest performance among bond markets of developed
countries. In aggregate, the developed global bond markets, excluding the U.S.,
as represented by the J.P. Morgan ("JPM") non-U.S. Government Bond Index
(Hedged), gained 1.0% during the six months ended June 30, 1999.
In the emerging markets, favorable growth surprises surfaced. Economic weakness
in Latin America proved less severe than anticipated, and the Asian economies
appeared to be improving. However, concerns about tighter U.S. monetary policy
dampened the investor enthusiasm exhibited earlier this year. In aggregate, the
emerging market debt sector, as represented by the JPM Emerging Markets Bond
Index Plus, gained 10.5%, outperforming the traditional bond market sectors
during the six-month period. Individual emerging market returns were mixed
during the period, with Russia posting the largest gains and non-Latin
countries outperforming Latin countries.
INVESTMENT STRATEGY
During the six-month period ended June 30, 1999, as the global economy
continued to improve, we increased our holdings of high-yield and emerging
market securities and decreased our U.S. Treasury holdings. We maintained a
longer interest-rate duration than the market. With respect to corporate
industry concentration, we continued to emphasize the utility industry, as we
expect this sector to benefit from ongoing deregulation and restructuring. In
addition, we employed securities issued in foreign countries to enhance
portfolio yield. For example, the Fund held the government debt of Mexico,
Russia and Panama. We initiated a position in Mexican government bonds based on
our conviction that this is an improving credit, moving toward investment-grade
status after the presidential election in 2000.
OUTLOOK
Globally, growth prospects are improving and inflation pressures remain
subdued. While the U.S. economy appears to be moderating somewhat from the
robust level of the first quarter, we still estimate that growth for calendar
1999 will be close to the 3.9% pace of 1998. We believe the risks remain toward
somewhat tighter
2
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
monetary policy and higher interest rates. While the non-Treasury sectors of
the market appear to be cheap by historical standards, the upward pressure on
rates, and liquidity concerns related to this year-end are likely to keep yield
premiums wide in the near term. In this environment, security selection will
remain focused on longer-term fundamentals, recognizing that near-term
liquidity will be limited.
In Europe, although there are signs that a mild recovery is underway, we
continue to expect growth to be 1.9% in 1999, down from the 2.6% pace of 1998.
Increasing global demand, low interest rates and a weak Euro should help
improve growth prospects going forward. We believe the European Central Bank
will maintain a neutral monetary policy. Japan is also showing signs of
stronger economic activity and we expect 1999 gross domestic product growth to
be 0.3%, an improvement over the 2.9% decline of 1998. The extent to which the
Japanese economy rebounds remains a key issue going forward in terms of global
growth and interest-rate patterns.
Improving global growth and subdued inflation should provide the environment
necessary for emerging countries to gradually improve their credit profiles.
However, in the period ahead we see performance divergences developing between
those countries with constructive reform-oriented policies (expected to
outperform), and those countries with less commitment to the reform process
(expected to underperform). Therefore, country selection will remain critical.
While there may well be short-term market volatility as investor sentiment
shifts with events, we expect the strongest performance from Mexico, Panama,
Brazil and the Philippines.
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 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.
INVESTMENT RESULTS
NAV AND SEC AVERAGE ANNUAL TOTAL RETURNS AS OF JUNE 30, 1999
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year -4.08% -8.16%
Five years 9.07% 8.12%
10 Years 10.00% 9.52%
SEC Yield** 7.49%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year -4.77% -7.41%
Five years 8.34% 8.34%
Since Inception* (a) 8.57% 8.57%
SEC Yield** 7.10%
CLASS C SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year -4.77% -5.65%
Five years 8.34% 8.34%
Since Inception* 7.00% 7.00%
SEC Yield** 7.11%
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
June 30, 1999.
(a) assumes conversion of Class B shares into Class A shares after six years.
4
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
GROWTH OF A $10,000 INVESTMENT 6/30/89 TO 6/30/99
$28,000
$24,000
$20,000
$16,000
$12,000
$10,000
$8,000
CORPORATE BOND PORTFOLIO CLASS A: $24,830
LEHMAN BROTHERS AGGREGATE BOND INDEX: $21,894
LIPPER CORP. DEBT FUNDS BBB-RATED AVERAGE: $21,646
6/30/89 6/30/90 6/30/91 6/30/92 6/30/93 6/30/94 6/30/95 6/30/96 6/30/97
6/30/98 6/30/99
This chart illustrates the total value of an assumed $10,000 investment in
Alliance Bond Fund Corporate Bond Portfolio Class A shares (from 6/30/89 to
6/30/99) as compared to the performance of an appropriate broad-based index, as
well as a comparative Lipper Average. The chart reflects the deduction of the
maximum 4.25% sales charge from the initial $10,000 investment in the Fund and
assumes the reinvestment of dividends and capital gains. Performance for Class
B and Class C shares will vary from the results shown above due to differences
in expenses charged to those classes. Past performance is not indicative of
future results, and is not representative of future gain or loss in capital
value or dividend income.
The unmanaged Lehman Brothers ("LB") Aggregate Bond Index is composed of the LB
Mortgage-Backed Securities Index, the LB Asset-Backed Securities Index, and the
LB Government/Corporate Bond Index.
The Lipper Corporate Debt Funds BBB-Rated Average reflects performance of 18
funds (based on the number of funds in the average from 6/30/89 to 6/30/99).
These funds have similar investment objectives to Alliance Bond Fund Corporate
Bond Portfolio, although the investment policies of some funds included in the
average may vary.
When comparing Alliance Bond Fund Corporate Bond Portfolio to the index shown
above, you should note that no charges or expenses are reflected in the
performance of the index. Lipper results include fees and expenses.
Alliance Bond Fund Corporate Bond Portfolio
Lehman Brothers Aggregate Bond Index
Lipper Corporate Debt Funds BBB-Rated Average
5
PORTFOLIO OF INVESTMENTS
JUNE 30, 1999 ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
STANDARD & PRINCIPAL
POOR'S AMOUNT
RATINGS (A) (000) VALUE
- -------------------------------------------------------------------------------
CORPORATE DEBT OBLIGATIONS-66.9%
AIR TRANSPORTATION-7.4%
BB Northwest Airlines, Inc.
8.52%, 4/07/04 $ 23,500 $ 22,707,627
BBB United Airlines
9.56%, 10/19/18 41,716 48,083,739
BBB- US Airways, Inc.
6.82%, 7/30/14 (b) 30,000 25,562,100
-----------
96,353,466
AUTOMOTIVE-4.8%
BB+ Federal Mogul Corp.
7.50%, 1/15/09 (b) 10,000 9,231,400
7.875%, 7/01/10 37,800 35,423,249
A Ford Motor Co.
6.375%, 2/01/29 21,500 18,737,100
-----------
63,391,749
BROADCASTING/MEDIA-11.4%
BBB- CBS Corp.
8.625%, 8/01/12 26,919 28,730,299
BBB- News America, Inc.
7.30%, 4/30/28 69,000 63,780,771
BBB Time Warner Entertainment Company LP
8.375%, 7/15/33 10,000 10,837,480
BBB Time Warner, Inc.
6.95%, 1/15/28 50,000 46,362,350
-----------
149,710,900
CABLE-7.5%
BBB- Comcast Cable Communications
8.875%, 5/01/17 40,525 45,585,114
BB+ CSC Holdings, Inc.
7.25%, 7/15/08 20,000 19,100,000
7.625%, 7/15/18 30,450 28,356,562
7.875%, 2/15/18 5,000 4,762,500
-----------
97,804,176
CHEMICALS-4.2%
BBB- Equistar Chemicals LP
8.75%, 2/15/09 (b) 54,400 55,070,969
COMMUNICATIONS-0.7%
B- RSL Communications PLC
9.875%, 11/15/09 (b) 10,000 9,687,500
ENERGY-1.8%
A- Conoco, Inc.
6.95%, 4/15/29 25,000 23,420,950
FINANCIAL-6.6%
BBB Renaissance Capital Trust
8.54%, 3/01/27 19,470 17,451,117
BBB Sumitomo Bank International Finance NV
8.50%, 6/15/09 46,000 46,378,074
BBB- Westinghouse Credit Corp.
8.875%, 6/14/14 20,000 22,093,440
----------
85,922,631
INSURANCE-5.1%
BBB+ Arkwright CSN Trust
9.625%, 8/15/26 (b) 38,500 40,656,269
BB+ Delphi Funding LLC
Series A
9.31%, 3/25/27 29,450 26,504,087
-----------
67,160,356
PUBLIC UTILITIES-17.4%
BB CMS Energy Corp.
7.50%, 1/15/09 23,500 21,912,058
BB+ Cogentrix Energy, Inc.
8.75%, 10/15/08 (b) 30,000 30,000,000
BB+ Niagara Mohawk Power Corp.
8.50%, 7/01/10 (c) 93,866 70,789,513
BB+ Public Service Co.
7.10%, 8/01/05 20,000 19,751,940
7.50%, 8/01/18 38,750 37,436,104
BBB- Selkirk Cogen Funding Corp.
8.65%, 12/26/07 9,987 10,471,909
8.98%, 6/26/12 (b) 35,000 38,042,445
-----------
228,403,969
Total Corporate Debt Obligations
(cost $919,199,949) 876,926,666
YANKEES-15.3%
BANKING-3.9%
Ba1 Fuji LLC
9.87%, 12/31/49 (b)(d) 58,425 50,915,109
COMMUNICATIONS-1.1%
BBB- Telefonica de Argentina, SA
9.125%, 5/07/08 (b) 16,000 14,120,000
6
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
STANDARD & PRINCIPAL
POOR'S AMOUNT
RATINGS (A) (000) VALUE
- -------------------------------------------------------------------------------
FINANCIAL-2.5%
BBB- MC Cuernavaca Trust
9.25%, 1/25/00 (b) $ 16,212 $ 10,051,239
9.25%, 1/25/00 8,197 5,081,991
BB+ Petrozuata Finance, Inc
8.22%, 4/01/17 (b) 23,500 18,153,750
-----------
33,286,980
INDUSTRIAL-0.4%
C Grupo Mexicano de Desarrollo, SA
8.25%, 2/17/01 (d)(e) 29,200 5,256,000
METALS & MINING-1.1%
B2 CSN Iron Brazil, SA
9.125%, 6/01/07 (b)(d) 19,800 15,147,000
TELEPHONE UTILITY-4.7%
BBB- TPSA Finance BV
7.75%, 12/10/08 (b) 63,000 61,425,000
UTILITY-1.6%
BB- Empresa Electrica Del Norte, SA
7.75%, 3/15/06 (b) 40,240 20,924,800
Total Yankees
(cost $252,468,918) 201,074,889
SOVEREIGN DEBT OBLIGATIONS-11.0%
MEXICO-3.8%
BB United Mexican States
10.375%, 2/17/09 49,200 49,999,500
PANAMA-3.5%
BB+ Republic of Panama
8.875%, 9/30/27 26,500 22,036,250
9.375%, 4/01/29 25,000 23,875,000
-----------
45,911,250
RUSSIA-3.7%
CC Russia Ministry of Finance
12.75%, 6/24/28 40,000 22,400,000
12.75%, 6/24/28 (b) 46,000 25,760,000
-----------
48,160,000
Total Sovereign Debt Obligations
(cost $149,590,411) 144,070,750
PREFERRED STOCK-4.7%
FINANCIAL-4.7%
BBB- Centaur Funding Corp.
Series B,
9.08% (b)
(cost $59,758,500) 58 61,960,704
U.S. GOVERNMENT OBLIGATIONS-4.5%
AAA U.S. Treasury Bonds
Zero coupon, 5/15/18 120,000 36,546,720
5.25%, 11/15/28 25,000 22,132,825
Total U.S. Government Obligations
(cost $58,854,580) 58,679,545
COMMERCIAL PAPER-2.4%
A-1+ General Electric Capital Corp.
5.00%, 7/01/99
(cost $31,514,000) 31,514 31,514,000
TOTAL INVESTMENTS-104.8%
(cost $1,471,386,358) 1,374,226,554
Other assets less liabilities - (4.8%) (63,183,695)
NET ASSETS - 100% $ 1,311,042,859
(a) Unaudited
(b) Securities exempt from Registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified buyers. At June 30, 1999, these securities
amounted to $486,708,285 or 37.1% of net assets.
(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.
See notes to financial statements.
7
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999 ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $1,471,386,358) $ 1,374,226,554
Cash 16,600
Interest receivable 26,225,439
Receivable for capital stock sold 7,771,197
Receivable for investment securities sold 12,817,386
Prepaid expenses 14,863
Total assets 1,421,072,039
LIABILITIES
Payable for investment securities purchased 96,491,580
Payable for capital stock redeemed 8,758,844
Dividends payable 2,956,634
Distribution fee payable 806,645
Advisory fee payable 590,620
Accrued expenses 424,857
Total liabilities 110,029,180
NET ASSETS $ 1,311,042,859
COMPOSITION OF NET ASSETS
Capital stock, at par $ 104,949
Additional paid-in capital 1,522,400,462
Distributions in excess of net investment income (371,652)
Accumulated net realized loss on investment
transactions (113,931,096)
Net unrealized depreciation of investments (97,159,804)
$ 1,311,042,859
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share
($476,140,748 / 38,112,213 shares of capital stock
issued and outstanding) $12.49
Sales charge--4.25% of public offering price .55
Maximum offering price $13.04
CLASS B SHARES
Net asset value and offering price per share
($630,631,245 / 50,486,112 shares of capital stock
issued and outstanding) $12.49
CLASS C SHARES
Net asset value and offering price per share
($204,270,866 / 16,350,487 shares of capital stock
issued and outstanding) $12.49
See notes to financial statements.
8
STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1999 ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
INVESTMENT INCOME
Interest $ 122,693,262
Dividends 3,804,955
$ 126,498,217
EXPENSES
Advisory fee 7,479,470
Distribution fee - Class A 1,461,195
Distribution fee - Class B 6,586,065
Distribution fee - Class C 2,252,222
Transfer agency 2,346,120
Audit and legal 367,021
Custodian 267,338
Printing 228,598
Registration 172,656
Taxes 124,180
Administrative 116,739
Directors' fees 12,170
Miscellaneous 62,462
Total expenses 21,476,236
Net investment income 105,021,981
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized loss on investment transactions (95,399,759)
Net realized gain on written options
transactions 572,000
Net change in unrealized depreciation of
investments (72,905,227)
Net loss on investments (167,732,986)
NET DECREASE IN NET ASSETS FROM OPERATIONS $ (62,711,005)
See notes to financial statements.
9
STATEMENT OF CHANGES
IN NET ASSETS ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
JUNE 30, 1999 JUNE 30, 1998
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment income $ 105,021,981 $ 86,883,131
Net realized gain (loss) on investments
and options transactions (94,827,759) 17,694,598
Net change in unrealized depreciation of
investments (72,905,227) (14,341,150)
Net increase (decrease) in net assets from
operations (62,711,005) 90,236,579
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income
Class A (40,134,019) (32,980,257)
Class B (49,607,825) (39,538,622)
Class C (16,944,532) (14,364,252)
Distributions in excess of net investment
income
Class A (139,815) (3,979,895)
Class B (172,818) (4,771,327)
Class C (59,019) (1,733,407)
Tax return of capital
Class A (1,516,771) -0-
Class B (1,874,797) -0-
Class C (640,254) -0-
CAPITAL STOCK TRANSACTIONS
Net increase 47,542,470 418,498,497
Total increase (decrease) (126,258,385) 411,367,316
NET ASSETS
Beginning of year 1,437,301,244 1,025,933,928
End of year (including undistributed net
investment income of $1,664,395 for the
year ended June 30, 1998) $ 1,311,042,859 1,437,301,244
See notes to financial statements.
10
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999 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 three portfolios: the Corporate Bond Portfolio, the
Quality Bond Portfolio and the U.S. Government Portfolio. The Quality Bond
Portfolio had not commenced operations as of June 30, 1999, but will be
commencing operations on July 1, 1999. 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.
11
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.
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.
During the current fiscal year, permanent differences, primarily due to tax
return of capital distribution, resulted in a net decrease in distributions in
excess of net investment income and a corresponding decrease in additional paid
in capital. This reclassification had no effect on net assets.
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 $116,739 to the Adviser
representing the cost of certain legal and accounting services provided to the
Portfolio by the Adviser for the year ended June 30, 1999.
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 $1,651,467 for the year ended June 30, 1999.
For the year ended June 30, 1999, the Fund's expenses were reduced by $117,894
under an expense offset arrangement with Alliance Fund Services.
Alliance Fund Distributors, Inc. (the "Distributor"), a wholly-owned subsidiary
of the Adviser, serves as the Distributor of the Portfolio's shares. The
Distributor has advised the Fund that it has received front-end sales charges
of $253,725 from the sales of Class A shares and $8,998, $971,100 and $103,572
in contingent deferred sales charges imposed upon redemptions by shareholders
of Class A, Class B and Class C shares, respectively, for the year ended June
30, 1999.
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 advised the Fund that it has incurred expenses
in excess of the distribution costs reimbursed by the Portfolio in the amount
of $15,593,318 and $3,385,945 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 $1,925,757,113 and $2,046,760,607,
respectively, for the year ended June 30, 1999. There were purchases of
$2,193,289,530 and sales of $2,178,067,323 of U.S. government and government
agency obligations for the year ended June 30, 1999.
12
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
At June 30, 1999, the cost of investments for federal income tax purposes was
$1,473,698,821. Accordingly, gross unrealized appreciation of investments was
$10,328,631 and gross unrealized depreciation of investments was $109,800,898
resulting in net unrealized depreciation of $99,472,267.
At June 30, 1999, the Portfolio had a net capital loss carryforward for federal
income tax purposes of $15,072,336, of which $2,817,216 expires in the year
2003, $3,517,339 expires in the year 2004 and $8,737,781 expires in 2007.
During the tax year ended June 30, 1999, $258,361 of the capital loss
carryforward expired unutilized.
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 year ended June 30, 1999 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 June 30, 1999 -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
--------------------------- ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1999 1998 1999 1998
------------ ------------ -------------- --------------
CLASS A
Shares sold 9,281,074 13,329,444 $ 121,721,663 $ 191,806,767
Shares issued in
reinvestment of
dividends and
distributions 1,871,312 1,434,669 24,412,990 20,673,923
Shares converted
from Class B 2,549,408 1,245,638 33,041,496 17,903,380
Shares redeemed (11,561,679) (6,171,084) (150,909,101) (88,725,044)
Net increase 2,140,115 9,838,667 $ 28,267,048 $ 141,659,026
CLASS B
Shares sold 16,818,038 19,913,781 $ 220,446,343 $ 286,380,021
Shares issued in
reinvestment of
dividends and
distributions 2,365,693 1,579,489 30,713,980 22,757,300
Shares converted
to Class A (2,550,208) (1,245,638) (33,041,496) (17,903,380)
Shares redeemed (13,547,224) (6,696,392) (176,394,184) (96,372,328)
Net increase 3,086,299 13,551,240 $ 41,724,643 $ 194,861,613
CLASS C
Shares sold 12,477,675 11,907,869 $ 163,058,138 $ 171,701,245
Shares issued in
reinvestment of
dividends and
distributions 834,414 773,490 10,892,319 11,154,530
Shares redeemed (14,901,641) (7,056,779) (196,399,678) (100,877,917)
Net increase
(decrease) (1,589,552) 5,624,580 $ (22,449,221) $ 81,977,858
NOTE F: CONCENTRATION OF RISK
Investing in securities of foreign companies and foreign governments involves
special risks which include the possibility of future political and economic
developments which could adversely affect the value of such securities.
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
Portfolio, participate in a $750 million revolving credit facility (the
"Facility") to provide short-term financing if necessary, in connection with
abnormal redemption activity. Commitment fees related to the Facility are paid
by the participating funds and are included in the miscellaneous expenses in
the statement of operations. The Portfolio did not utilize the Facility during
the year ended June 30, 1999.
14
FINANCIAL HIGHLIGHTS ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------------
YEAR ENDED JUNE 30,
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 14.19 $ 14.19 $ 13.29 $ 12.92 $ 12.51
INCOME FROM INVESTMENT OPERATIONS
Net investment income 1.06(a) 1.08(a) 1.15(a) 1.26 1.19
Net realized and unrealized gain (loss) on
investment transactions (1.64) .12 .97 .27 .36
Net increase (decrease) in net asset value
from operations (.58) 1.20 2.12 1.53 1.55
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (1.07) (1.08) (1.22) (1.16) (1.14)
Distributions in excess of net investment
income (.01) (.12) -0- -0- -0-
Tax return of capital (.04) -0- -0- -0- -0-
Total dividends and distributions (1.12) (1.20) (1.22) (1.16) (1.14)
Net asset value, end of year $ 12.49 $ 14.19 $ 14.19 $ 13.29 $ 12.92
TOTAL RETURN
Total investment return based on net asset
value (b) (4.08)% 8.66% 16.59% 12.14% 13.26%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $476,141 $510,397 $370,845 $277,369 $230,750
Ratio of expenses to average net assets 1.11% 1.05% 1.12% 1.20% 1.24%
Ratio of net investment income to average
net assets 8.13% 7.52% 8.34% 9.46% 9.70%
Portfolio turnover rate 281% 244% 307% 389% 387%
</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 YEAR
<TABLE>
<CAPTION>
CLASS B
-----------------------------------------------------------------
YEAR ENDED JUNE 30,
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 14.19 $ 14.19 $ 13.29 $ 12.92 $ 12.50
INCOME FROM INVESTMENT OPERATIONS
Net investment income .97(a) .98(a) 1.05(a) 1.15 1.11
Net realized and unrealized gain (loss) on
investment transactions (1.64) .13 .98 .29 .36
Net increase (decrease) in net asset value
from operations (.67) 1.11 2.03 1.44 1.47
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.98) (.98) (1.13) (1.07) (1.05)
Distributions in excess of net investment
income (.01) (.13) -0- -0- -0-
Tax return of capital (.04) -0- -0- -0- -0-
Total dividends and distributions (1.03) (1.11) (1.13) (1.07) (1.05)
Net asset value, end of year $ 12.49 $ 14.19 $ 14.19 $ 13.29 $ 12.92
TOTAL RETURN
Total investment return based on net asset
value (b) (4.77)% 7.95% 15.80% 11.38% 12.54%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $630,631 $672,374 $480,326 $338,152 $241,393
Ratio of expenses to average net assets 1.82% 1.75% 1.82% 1.90% 1.99%
Ratio of net investment income to average
net assets 7.41% 6.80% 7.62% 8.75% 9.07%
Portfolio turnover rate 281% 244% 307% 389% 387%
</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 YEAR
<TABLE>
<CAPTION>
CLASS C
-----------------------------------------------------------------
YEAR ENDED JUNE 30,
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 14.19 $ 14.19 $ 13.29 $ 12.93 $ 12.50
INCOME FROM INVESTMENT OPERATIONS
Net investment income .97(a) .99(a) 1.04(a) 1.14 1.10
Net realized and unrealized gain (loss) on
investment transactions (1.64) .12 .99 .29 .38
Net increase (decrease) in net asset value
from operations (.67) 1.11 2.03 1.43 1.48
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.98) (.99) (1.13) (1.07) (1.05)
Distributions in excess of net investment
income (.01) (.12) -0- -0- -0-
Tax return of capital (.04) -0- -0- -0- -0-
Total dividends and distributions (1.03) (1.11) (1.13) (1.07) (1.05)
Net asset value, end of year $ 12.49 $ 14.19 $ 14.19 $ 13.29 $ 12.93
TOTAL RETURN
Total investment return based on net asset
value (b) (4.77)% 7.95% 15.80% 11.30% 12.62%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $204,271 $254,530 $174,762 $83,095 $51,028
Ratio of expenses to average net assets 1.81% 1.75% 1.82% 1.90% 1.84%
Ratio of net investment income to average
net assets 7.37% 6.83% 7.61% 8.74% 8.95%
Portfolio turnover rate 281% 244% 307% 389% 387%
</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.
17
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
_______________________________________________________________________________
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO
We have audited the accompanying statement of assets and liabilities of
Alliance Bond Fund Corporate Bond Portfolio (one of the portfolios comprising
the Alliance Bond Fund, Inc.), including the portfolio of investments, as of
June 30, 1999, and the related statement of operations for the year then ended,
the statement of changes in net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods indicated
therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of June 30, 1999, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Alliance Bond Fund Corporate Bond Portfolio at June 30, 1999, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for
each of the indicated periods, in conformity with generally accepted accounting
principles.
New York, New York
August 6, 1999
18
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 LLP
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.
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.
CBPAR699
