Alliance
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Bond Fund
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U.S. Government
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Portfolio
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Semi-Annual
Report
December 31, 1999
AllianceCapital [LOGO](R)
<PAGE>
LETTER TO SHAREHOLDERS Alliance Bond Fund U.S. Government Portfolio
================================================================================
February 24, 2000
Dear Shareholder:
This shareholder report provides an update of the performance, investment
strategy and outlook for the Alliance Bond Fund U.S. Government Portfolio (the
"Fund") during the reporting period ended December 31, 1999. The Fund is
designed for investors who seek high current income, consistent with safety of
principal. The Fund invests in a diversified portfolio of U.S. government
securities backed by the full faith and credit of the United States as well as a
limited amount of investment grade fixed-income securities.
INVESTMENT RESULTS
The following table provides the investment results for the Alliance Bond Fund
U.S. Government Portfolio for the six- and twelve-month periods ended December
31, 1999. For comparison, we have included the total returns for the U.S.
Treasury market, represented by the unmanaged Lehman Brothers Government Bond
Index, as well as the average results for the Lipper universe of general U.S.
government funds.
During the six- and twelve-month periods ended December 31, 1999, your Fund
underperformed its benchmark, the Lehman Brothers Government Bond Index. While
the Fund was correctly positioned for higher interest rates throughout the year,
wider spreads in the high-grade markets in the summer caused by Y2K concerns
contributed negatively to performance. Also, part of the underperformance over
the twelve-month period was due to the Portfolio restructuring to respond to the
Fund's recently amended investment policies. Most of this underperformance was
recaptured by late in the year, and we are confident that our strategy will,
over the long run, prove beneficial to long-term performance.
INVESTMENT RESULTS*
Periods Ended December 31, 1999
Total Returns
6 Months 12 Months
------------- -------------
Alliance Bond Fund
U.S. Government
Portfolio
Class A -0.32% -3.21%
Class B -0.70% -3.82%
Class C -0.70% -3.82%
Lehman Brothers
Government Bond
Index 0.04% -2.23%
Lipper General U.S.
Government Funds
Average -0.34% -3.02%
* 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 Government Bond Index is composed of the Lehman
Brothers U.S. Treasury Bond and Agency Bond indices, the Lehman Brothers
1-3 year Government Index and the Lehman Brothers 20+ year Treasury Index.
The unmanaged Lipper General U.S. Government Funds Average (the "Lipper
Average") is based on the performance of a universe of funds that invest
at least 65% of their assets in U.S. government and agency issues. These
funds have generally similar investment objectives to your Fund, although
investment policies for the various funds may differ. For the six- and
twelve-month periods ended December 31, 1999, the Lipper Average consisted
of 186 and 178 funds, respectively. An investor cannot invest directly in
an index or an average.
Additional investment results appear on page 3.
MARKET OVERVIEW
The global economy is on the mend, and the United States deserves much of the
credit. U.S. growth was 5.8% during the fourth quarter of 1999, and 4% for the
calendar year. Two-and-a-half million new jobs were created during 1999, and
unemployment fell to 4.1%, a thirty-year low. U.S. consumers are confident and
it shows in their spending, which grew at a 5% rate during
1
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Alliance Bond Fund U.S. Government Portfolio
================================================================================
the fourth quarter. The rise in commodity prices, led by oil, has started to
flow through to U.S. inflation. The Consumer Price Index ("CPI") moved above
2.5% on a year-over-year basis during the fourth quarter versus 2% during the
first nine months of 1999. These developments, together with continuing economic
strength, have sparked inflation concerns in the United States, pushed-up bond
yields and triggered three 25 basis-point (bp) interest rate hikes by the U.S.
Federal Reserve during 1999. An additional interest rate increase was announced
on February 2, 2000, after the close of the Fund's reporting period.
1999 was a poor year for the domestic U.S. fixed-income market. The U.S. bond
market, as measured by the Lehman Brothers Aggregate Bond Index, declined 0.82%
in 1999. Strong U.S. growth, rising inflation fears and a string of interest
rate hikes by the Federal Reserve took a predictable toll on bonds. The
"structured" classes consisting of mortgage-backed securities, commercial
mortgage-backed securities, and asset-backed securities posted the best returns
during the year. Mortgage-backed securities led the group with a +1.86% return
for 1999. The prepayment risk embedded in many of these securities, as well as
their generally shorter durations, helped cushion their price declines in 1999's
rising interest rate environment. U.S. government bonds posted the worst returns
during 1999, returning -2.2% according to the Lehman Brothers U.S. Government
Bond Index. Investment-grade corporates as an asset class also posted an unusual
loss of -1.96% for the year as represented by the Lehman Brothers Corporate Bond
Index.
INVESTMENT STRATEGY
The shareholder-approved changes to the Fund's Investment Policies went into
effect in the beginning of the second quarter of 1999. These changes allowed the
portfolio to diversify some of its holdings into investment-grade fixed-income
securities. We decreased our allocation to U.S. Treasury securities as interest
rates rose. We maintained our allocation to mortgage-backed securities, which
performed well in the rising interest rate environment. The largest single asset
class outside of U.S. Treasuries was held in commercial mortgage-backed
securities ("CMBS"), which serve as a surrogate for U.S. government agency
debentures. AAA-rated CMBS earn approximately sixty basis points more in yield
than agency debentures. Going forward, the Fund will continue to utilize
investment-grade securities opportunistically to augment the performance of its
U.S. government securities portfolio.
OUTLOOK
With economic growth strong and temporary upward pressure on inflation, we
expect tighter monetary policy in the U.S. during the first half of the year.
Long-term interest rates will trend up modestly from current levels in this
environment. After widening dramatically during the third quarter of 1999, yield
premiums in non-Treasury sectors have narrowed, although not to the levels seen
in mid-1997. We expect these premiums to narrow somewhat from current levels,
but not to return to the previous tight levels of 1997.
We expect mortgage securities to perform well as demand from banks, insurance
companies and government agencies meets a diminished supply of mortgage-backed
securities. The combination of strong growth, low inflation and improved
liquidity after the passing of Y2K suggests mortgage-backed securities will
outperform other fixed-income investments in 2000.
Thank you for your continued interest and investment in the Alliance Bond Fund
U.S. Government Portfolio. We look forward to reporting to you again in the
coming months.
Sincerely,
/s/ John D. Carifa
John D. Carifa
Chairman and President
/s/ Jeffrey S. Phlegar
Jeffrey S. Phlegar
Vice President
2
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INVESTMENT OBJECTIVE AND POLICIES Alliance Bond Fund U.S. Government Portfolio
================================================================================
Alliance Bond Fund U.S. Government Portfolio seeks as high a level of current
income as is consistent with prudent investment risk through investment
primarily in U.S. government securities.
INVESTMENT RESULTS
================================================================================
NAV and SEC Average Annual Total Returns as of December 31, 1999
-----------------------------
Class A Shares
-----------------------------
Without With
Sales Charge Sales Charge
--------------------------------
One Year -3.21% -7.32%
Five Years 5.94% 5.03%
Ten Years 6.37% 5.91%
SEC Yield** 7.02%
-----------------------------
Class B Shares
-----------------------------
Without With
Sales Charge Sales Charge
--------------------------------
One Year -3.82% -6.53%
Five Years 5.15% 5.15%
Since Inception*(a) 5.17% 5.17%
SEC Yield** 6.60%
-----------------------------
Class C Shares
-----------------------------
Without With
Sales Charge Sales Charge
--------------------------------
One Year -3.82% -4.72%
Five Years 5.18% 5.18%
Since Inception* 3.73% 3.73%
SEC Yield** 6.62%
Investment Results
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.
* Since Inception: 9/30/91 Class B, 5/3/93 Class C.
** SEC Yields are based on SEC guidelines and are calculated on 30 days ended
December 31, 1999.
(a) Assumes conversion of Class B shares into Class A shares after six years.
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
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PORTFOLIO OF INVESTMENTS
December 31, 1999 (unaudited) Alliance Bond Fund U.S. Government Portfolio
===============================================================================
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
U.S. GOVERNMENT & AGENCY
OBLIGATIONS-92.1%
U.S. TREASURY
SECURITIES-67.1%
U.S. TREASURY
BONDS-54.1%
5.25%, 11/15/28 .......................... $ 16,000 $ 13,180,000
6.125%, 8/15/29 (a) ...................... 10,000 9,532,800
6.875%, 8/15/25 .......................... 20,000 20,371,800
8.125%, 5/15/21 .......................... 29,100 33,355,875
8.875%, 8/15/17 .......................... 24,000 29,006,160
10.75%, 2/15/03 (a) ...................... 80,000 89,549,600
12.50%, 8/15/14 .......................... 65,150 91,006,080
14.00%, 11/15/11 (a) ..................... 110,900 154,705,500
--------------
440,707,815
--------------
U.S. TREASURY
NOTES-13.0%
5.50%, 8/31/01 ........................... 25,000 24,714,750
5.875%, 11/15/04 (a) ..................... 25,000 24,511,750
6.00%, 8/15/04-8/15/09 (a) ............... 57,780 56,560,594
--------------
105,787,094
--------------
546,494,909
--------------
FEDERAL NATIONAL
MORTGAGE
ASSOCIATION-10.4%
zero coupon, 2/15/08 ..................... 22,130 12,589,646
6.625%, 9/15/09 .......................... 35,000 33,993,750
10.00%, 10/01/14 ......................... 36,700 38,458,326
--------------
85,041,722
--------------
COLLATERALIZED
MORTGAGE
OBLIGATIONS-9.7%
Federal Home Loan
Mortgage Corp. ...........................
Series 1955 Cl.K
7.50%, 2/20/24 ........................... 5,000 5,018,750
Series 1748 Cl.B
8.00%, 6/15/23 ........................... 13,400 13,567,500
Federal National Mortgage
Association
Series 1993-204 Cl.PJ
6.05%, 5/25/23 ........................... 25,000 23,468,750
Series 1997-44 Cl.PE
7.00%, 6/18/21 ........................... 23,884 23,854,145
Government National
Mortgage Association
Series 1997-8 Cl.PI
7.00%, 9/16/21 ........................... 13,307 13,315,178
--------------
79,224,323
--------------
GOVERNMENT NATIONAL
MORTGAGE
ASSOCIATION-4.9%
SINGLE FAMILY HOMES
8.00%, 3/15/12 ........................... 31,132 31,666,501
8.15%, 9/15/20 ........................... 5,558 5,677,390
9.00%, 7/20/24-9/20/24 ................... 2,421 2,528,249
--------------
39,872,140
--------------
Total U.S. Government &
Agency Obligations
(cost $792,317,394) ...................... 750,633,094
--------------
COMMERCIAL
MORTGAGE BACKED
SECURITIES-16.8%
Allied Capital Commercial
Mortgage Trust
Series 1998-1-A Cl.A
6.31%, 9/25/03 (b) ....................... 6,974 6,879,547
BTC Mortgage Investors
Trust
Series 1997-S1 Cl.D
6.95%, 12/31/09 (b) ...................... 6,846 6,797,873
BTR 2 Trust
Series 1999-S1A Cl.C
5.9343%, 2/28/04 (b) ..................... 5,000 4,981,250
4
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Alliance Bond Fund U.S. Government Portfolio
================================================================================
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
Credit Suisse First Boston
Mortgage
Series 1997-C1 Cl.B
7.28%, 6/20/07 (b) .................... $ 15,000 $ 14,564,100
Series 1998-Fl2 Cl.1AC
6.55875%, 8/15/01 ..................... 1,600 1,597,504
First Chicago/Lennar Trust
Series 1997-CHL1 Cl.A
8.06%, 4/29/05 ........................ 15,598 15,222,756
First Union National Bank
1999-C4 Cl.A2
7.39%, 11/15/09 ....................... 16,000 15,864,960
Forum Finance Corp. ......................
Series 1 Cl.A1
7.125%, 5/15/04 (b) ................... 11,875 11,901,125
Series 1 Cl.A2
5.7525%, 5/04/04 (b) ............... 5,000 4,926,950
Government Lease Trust
Series 1999-C1 Cl.B1
4.00%, 5/18/11 (b) .................... 8,725 6,189,341
Meristar Commercial
Mortgage Trust
Series 1999-C1 Cl.A2
7.61%, 9/03/09 (b) .................... 10,000 9,781,300
Merrill Lynch Mortgage
Investors, Inc. .......................
Series 1998-ASP1 Cl.B
6.257%, 10/01/03 (b) .................. 5,000 5,003,150
Nationslink Funding Corp. ................
Series 1999-SL Cl.A1
5.805%, 2/10/01 ....................... 7,979 7,927,131
Sasco Floating Rate
Commercial Mortgage
Series 1999-C3 Cl.B
6.0088%, 10/21/13 (b) ................. 24,993 25,000,721
--------------
Total Commercial Mortgage
Backed Securities
(cost $138,357,355) ................... 136,637,708
--------------
ASSET BACKED
SECURITIES-6.2%
ACE Securities Corp. .....................
Series 1999-LB2 Cl.A1
5.53%, 8/25/30 ........................ 9,434 9,429,564
ARG Funding Corp. ........................
Series 1999-3A Cl.A
5.168%, 8/22/05 (b) ................... 8,500 8,470,760
Blue Stripe, Ltd. ........................
Series 1999-1 Cl.A1
5.426%, 3/15/05 (b) ................... 7,200 7,194,384
Green Tree Home
Improvement Loan Trust
Series 1997-A Cl.HEA5
7.21%, 3/15/28 ........................ 5,093 5,102,133
Option One Mortgage
Securities Corp. ......................
Series 1999-B Cl.CTFS
9.66%, 6/25/29 (b) .................... 1,893 1,847,588
Peco Energy Transition Trust
Series 1999-A Cl.A5
5.19688%, 3/01/09 ..................... 10,000 9,975,000
Structured Asset Securities
Corp ..................................
Series 1999-SP1 Cl.M1
5.4825%, 5/25/29 ...................... 8,100 8,089,875
--------------
Total Asset Backed
Securities
(cost $50,227,385) .................... 50,109,304
--------------
STRIPPED MORTGAGE
BACKED SECURITIES-4.8%
LB Commercial Conduit
Mortgage Trust
Series 1999-C1 Cl.X
8.84%, 7/15/23 ........................ 258,411 10,739,557
Series 1999-C2 Cl.X
9.907%, 10/15/32 ...................... 57,733 2,417,839
5
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PORTFOLIO OF INVESTMENTS
(continued) Alliance Bond Fund U.S. Government Portfolio
===============================================================================
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
Prudential Securities
Secured Financing Corp.
Series 1999-NRF1
Cl.AEC
9.968%, 10/15/18 .................... $ 373,017 $ 18,535,207
Salomon Brothers Mortgage
Securities, Inc. ....................
Series 1999-5
10.34%, 6/25/29 ..................... 127,531 7,333,009
--------------
Total Stripped Mortgage
Backed Securities
(cost $39,068,146) .................. 39,025,612
--------------
COLLATERALIZED
MORTGAGE
OBLIGATIONS-3.8%
BA Mortgage Securities, Inc.
Series 1997-1 Cl.A8
7.10%, 7/25/26 ...................... 4,718 4,706,244
Chase Mortgage Finance
Corp.
Series 1993-3 Cl.B8
7.40%, 10/30/24 ..................... 3,285 3,190,279
Series 1993-3 Cl.B9
7.40%, 10/30/24 ..................... 3,122 3,014,737
Series 1993-3 Cl.B10
7.40%, 10/30/24 ..................... 2,797 2,732,037
Prudential Home Mortgage
Securities Co.
Series 1992-33 Cl.B1
7.50%, 11/25/22 ..................... 12,719 12,544,574
Securitized Asset Sales, Inc.
Series 1993-J Cl.1B 1
6.8076%, 11/28/23 ................... 5,392 5,094,272
--------------
Total Collateralized
Mortgage Obligations
(cost $32,265,633) .................. 31,282,143
--------------
COMMERCIAL
PAPER-2.4%
Variable Funding Capital
Corp.
6.53%, 1/18/00
(cost $19,938,328) .................. 20,000 19,938,328
--------------
REPURCHASE
AGREEMENTS-2.3%
Lehman Brothers, Inc.
3.70%, dated 12/30/99,
due 1/03/00 in the
amount of $15,820,501
(cost $15,814,000;
collateralized by
$24,739,920
FHLMC 2108,
6.50%, 12/15/13,
value $17,170,474) .................. 15,814 15,814,000
Lehman Brothers, Inc.
4.00%, dated 12/31/99,
due 1/03/00 in the
amount of $3,091,030
(cost $3,090,000;
collateralized by
$ 6,438,520
FHLMC 1959,
7.00%, 12/15/26,
value $3,159,699) ................... 3,090 3,090,000
--------------
Total Repurchase
Agreements
(cost $18,904,000) .................. 18,904,000
--------------
TOTAL INVESTMENTS-128.4%
(cost $1,091,078,241) ............... 1,046,530,189
Other assets less
liabilities-(28.4%) ................. (231,520,431)
--------------
NET ASSETS-100% ........................ $ 815,009,758
==============
6
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Alliance Bond Fund U.S. Government Portfolio
===============================================================================
(a) Securities, or portions thereof, with an aggregate market value of
$259,643,003 have been segregated to collateralize reverse repurchase
agreements.
(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 December 31, 1999, these
securities amounted to 113,538,089 or 13.9% of net assets.
Glossary:
FHLMC - Federal Home Loan Mortgage Corp.
See notes to financial statements.
7
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES Alliance Bond Fund
December 31, 1999 (unaudited) U.S. Government Portfolio
===============================================================================
ASSETS
Investments in securities, at value (cost $1,091,078,241) . $ 1,046,530,189
Cash ...................................................... 366,646
Receivable for investments sold ........................... 102,207,465
Interest receivable ....................................... 16,117,689
Receivable for capital stock sold ......................... 582,818
Net unrealized appreciation of swap contracts ............. 486,720
---------------
Total assets .............................................. 1,166,291,527
---------------
LIABILITIES
Reverse repurchase agreements ............................. 259,605,225
Payable for investment securities purchased ............... 86,613,544
Dividends payable ......................................... 1,612,495
Advisory fee payable ...................................... 1,151,435
Payable for capital stock redeemed ........................ 835,037
Distribution fee payable .................................. 450,079
Interest payable on reverse repurchase agreements ......... 175,576
Accrued expenses .......................................... 838,378
---------------
Total liabilities ......................................... 351,281,769
---------------
NET ASSETS ................................................... $ 815,009,758
===============
COMPOSITION OF NET ASSETS
Capital stock, at par ..................................... $ 117,858
Additional paid-in capital ................................ 1,106,741,476
Distributions in excess of net investment income .......... (4,517,239)
Accumulated net realized loss on investments, options,
and futures transactions ................................ (243,265,812)
Net unrealized depreciation of investments and other assets (44,066,525)
---------------
$ 815,009,758
===============
CALCULATION OF MAXIMUM OFFERING PRICE
Class A Shares
Net asset value and redemption price per share
($422,029,869 / 61,058,176 shares of
capital stock issued and outstanding) ................... $6.91
Sales charge--4.25% of public offering price .............. .31
-----
Maximum offering price .................................... $7.22
=====
Class B Shares
Net asset value and offering price per share
($264,362,378 / 38,210,893 shares of
capital stock issued and outstanding) ................... $6.92
=====
Class C Shares
Net asset value and offering price per share
($128,617,511 / 18,588,554 shares of
capital stock issued and outstanding) ................... $6.92
=====
- -------------------------------------------------------------------------------
See notes to financial statements.
8
<PAGE>
STATEMENT OF OPERATIONS Alliance Bond Fund
Six Months Ended December 31, 1999 (unaudited) U.S. Government Portfolio
===============================================================================
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest............................................................. $ 37,176,198
EXPENSES
Advisory fee......................................................... $ 2,373,396
Distribution fee - Class A........................................... 645,956
Distribution fee - Class B........................................... 1,526,796
Distribution fee - Class C........................................... 698,451
Transfer agency...................................................... 663,272
Printing............................................................. 168,776
Custodian............................................................ 115,024
Audit and legal...................................................... 88,912
Registration......................................................... 75,051
Administrative....................................................... 58,000
Directors' fees...................................................... 7,384
Miscellaneous........................................................ 45,368
--------------
Total expenses before interest....................................... 6,466,386
Interest expense..................................................... 3,452,067
--------------
Net expenses......................................................... 9,918,453
--------------
Net investment income................................................ 27,257,745
--------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investment transactions......................... (13,314,781)
Net realized loss on options transactions............................ (28,275)
Net realized gain on futures transactions............................ 228,650
Net change in unrealized appreciation/depreciation of investments
and other assets................................................... (18,349,150)
--------------
Net loss on investment transactions.................................. (31,463,556)
--------------
NET DECREASE IN NET ASSETS FROM OPERATIONS.............................. $ (4,205,811)
==============
</TABLE>
- -------------------------------------------------------------------------------
See notes to financial statements.
9
<PAGE>
STATEMENT OF CHANGES
IN NET ASSETS Alliance Bond Fund U.S. Government Portfolio
===============================================================================
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1999 Year Ended
(unaudited) June 30, 1999
---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income................................................ $ 27,257,745 $ 60,038,948
Net realized loss on investments, options and futures transactions... (13,114,406) (20,418,077)
Net change in unrealized appreciation/depreciation of investments
and other assets..................................................... (18,349,150) (28,567,511)
-------------- --------------
Net increase (decrease) in net assets from operations................ (4,205,811) 11,053,360
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A............................................................ (15,638,020) (26,892,164)
Class B......................................................... (9,876,172) (24,633,071)
Class C............................................................ (4,531,670) (8,513,713)
Distributions in excess of net investment income
Class A............................................................ -0- (505,653)
Class B............................................................ -0- (277,687)
Class C............................................................ -0- (116,468)
CAPITAL STOCK TRANSACTIONS
Net increase (decrease).............................................. (59,359,982) 101,112,314
-------------- --------------
Total increase (decrease)............................................ (93,611,655) 51,226,918
NET ASSETS
Beginning of year.................................................... 908,621,413 857,394,495
-------------- --------------
End of period........................................................ $ 815,009,758 $ 908,621,413
============== ==============
</TABLE>
- -------------------------------------------------------------------------------
See notes to financial statements.
10
<PAGE>
STATEMENT OF CASH FLOWS Alliance Bond Fund
Six Months Ended December 31, 1999 (unaudited) U.S. Government Portfolio
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INCREASE (DECREASE) IN CASH FROM:
OPERATING ACTIVITIES:
Interest received.................................................. $ 30,975,874
Interest expense paid.............................................. (3,452,067)
Operating expenses paid............................................ (6,222,102)
--------------
Net increase in cash from operating activities..................... $ 21,301,705
INVESTING ACTIVITIES:
Proceeds from disposition of long-term portfolio investments....... 1,745,606,246
Purchase of long-term portfolio investments........................ (1,833,220,795)
Purchase of short-term portfolio investments, net.................. (37,770,603)
Gain on closed futures contracts................................... 228,650
--------------
Net decrease in cash from investing activities..................... (125,156,502)
FINANCING ACTIVITIES*:
Increase in reverse repurchase agreements.......................... 193,475,206
Redemptions of capital stock, net.................................. (76,996,586)
Cash dividends paid................................................ (12,459,259)
--------------
Net increase in cash from financing activities..................... 104,019,361
--------------
Net increase in cash............................................... 164,564
Cash at beginning of year.......................................... 202,082
--------------
Cash at end of period.............................................. $ 366,646
==============
- ---------------------------------------------------------------------------------------------------------------
RECONCILIATION OF NET INCREASE IN NET ASSETS
FROM OPERATIONS TO NET INCREASE IN CASH
FROM OPERATING ACTIVITIES:
Net decrease in net assets resulting from operations............... $ (4,205,811)
ADJUSTMENTS:
Increase in interest receivable.................................... $ (5,830,746)
Net realized loss on investment transactions....................... 13,114,406
Net change in unrealized depreciation.............................. 18,349,150
Accretion of bond discount......................................... (880,583)
Increase in accrued expenses....................................... 755,289
--------------
Total adjustments.................................................. 25,507,516
--------------
Net increase in cash from operating activities..................... $ 21,301,705
==============
</TABLE>
- -------------------------------------------------------------------------------
* Non-cash financing activities not included herein consist of reinvestment
of dividends.
See notes to financial statements.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 (unaudited) Alliance Bond Fund U.S. Government Portfolio
===============================================================================
NOTE A: Significant Accounting Policies
Alliance Bond Fund, Inc. (the "Fund") is registered under the Investment Company
Act of 1940 as a diversified, open-end management investment company. The Fund,
which is a Maryland corporation, operates as a series company currently
comprised of three portfolios: the Corporate Bond Portfolio, the Quality Bond
Portfolio and the U.S. Government Portfolio. The Quality Bond Portfolio
commenced 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 U.S. Government Portfolio
(the "Portfolio") only. The Portfolio offers 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 are valued at the
last reported sale price on such exchange on the day of valuation or, if there
was no sale on such day, the last bid price quoted on such day. If no bid prices
are quoted, then the security is valued at the mean of the bid and asked prices
as obtained on that day from one or more dealers regularly making a market in
that security. Securities traded on the over-the-counter market are valued at
the mean of the closing bid and asked prices provided by two or more dealers
regularly making a market in such securities. U.S. government securities and
other debt securities which mature in 60 days or less are valued at amortized
cost unless this method does not represent fair value. Securities for which
market quotations are not readily available are valued at fair value as
determined in good faith by, or in accordance with procedures approved by, the
Board of Directors. Fixed income securities may be valued on the basis of prices
provided by a pricing service when such prices are believed to reflect the fair
market value of such securities. Mortgage backed and asset backed securities may
be valued at prices obtained from a bond pricing service or at a price obtained
from one or more of the major broker/dealers in such securities. In cases where
broker/dealer quotes are obtained, the Adviser may establish procedures whereby
changes in market yields or spreads are used to adjust, on a daily basis, a
recently obtained quoted bid price on a security.
2. Taxes
It is the Portfolio's policy to meet the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
3. Investment Income and Investment Transactions
Interest income is accrued daily. Investment transactions are accounted for on
the date securities are purchased or sold. The Portfolio amortizes premiums and
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 the 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.
12
<PAGE>
Alliance Bond Fund U.S. Government 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
- -------------------------------------------------------------------------------
NOTE B: Advisory Fee and Other Transactions with Affiliates
Under the terms of an investment advisory agreement, the Portfolio pays Alliance
Capital Management L.P. (the "Adviser") an advisory fee at a quarterly rate of
.15 of 1% (approximately .60 of 1% on an annual basis) of the first $500 million
of the Portfolio's net assets and .125 of 1% (approximately .50 of 1% on an
annual basis) of its net assets over $500 million, valued on the last business
day of the previous quarter.
Pursuant to the advisory agreement, the Portfolio paid $58,000 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, 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 $506,752 for the six months ended December 31,
1999.
For the six months ended December 31, 1999, the Portfolio's expenses were
reduced by $24,995 under an expense offset arrangement with Alliance Fund
Services, Inc.
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 $3,929, $232,097 and
$25,080 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, 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 distribution and servicing fees 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 $7,844,924, and
$4,960,550 for Class B and Class C shares, respectively; such costs may be
recovered from the Portfolio in future periods as 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 $193,905,790 and $207,327,297,
respectively, for the six months ended December 31, 1999. There were purchases
of $1,621,589,136 and sales of $1,519,660,439 of U.S. government and government
agency obligations for the six months ended December 31, 1999.
At December 31, 1999, the cost of investments for federal income tax purposes
was substantially the same as the cost for financial reporting purposes.
Accordingly,
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(continued) Alliance Bond Fund U.S. Government Portfolio
===============================================================================
gross unrealized appreciation of investments was $1,103,323 and gross unrealized
depreciation of investments was $45,651,375, resulting in net unrealized
depreciation of $44,548,052.
At June 30, 1999, the Portfolio had a capital loss carry-forward for federal
income tax purposes of $200,126,928, of which $83,016,947 expires in the year
2003; $61,544,081 expires in the year 2004; $51,829,521 expires in the year 2005
and $3,736,379 expires in the year 2006. During the tax year ended June 30,
1999, $114,601 of the capital loss carryforward expired unutilized.
1. Financial Futures Contracts
The Portfolio may buy or sell financial futures contracts for the purpose of
hedging its portfolio against adverse affects of anticipated movements in the
market. The Portfolio bears the market risk that arises from changes in the
value of these financial instruments.
At the time the Portfolio enters into a futures contract, the Portfolio deposits
and maintains as collateral an initial margin as required by the exchange on
which the transaction is effected. Pursuant to the contract, the Portfolio
agrees to receive from or pay to the broker an amount of cash equal to the daily
fluctuation in the value of the contract. Such receipts or payments are known as
variation margin and are recorded by the Portfolio as unrealized gains or
losses. When the contract is closed, the Portfolio records a realized gain or
loss equal to the difference between the value of the contract at the time it
was opened and the time it was closed. At December 31, 1999, the Portfolio had
no outstanding futures contracts.
2. Interest Rate Swap Agreements
The Fund enters into interest rate swaps to protect itself from interest rate
fluctuations on the underlying debt instruments. A swap is an agreement that
obligates two parties to exchange a series of cash flows at specified intervals
based upon or calculated by reference to changes in specified prices or rates
for a specified amount of an underlying asset. The payment flows are usually
netted against each other, with the difference being paid by one party to the
other.
Risks may arise as a result of the failure of the counterparty to the swap
contract to comply with the terms of the swap contract. The loss incurred by the
failure of a counterparty is generally limited to the net interest payment to be
received by the Fund, and/or the termination value at the end of the contract.
Therefore, the Fund considers the creditworthiness of each counterparty to a
swap contract in evaluating potential credit risk. Additionally, risks may arise
from unanticipated movements in interest rates or in the value of the underlying
securities.
The Fund records a net receivable or payable on a daily basis for the net
interest income or expense expected to be received or paid in the interest
period. Net interest received or paid on these contracts is recorded as interest
income (or as an offset to interest income). Fluctuations in the value of
investments are recorded for financial statement purposes as unrealized
appreciation or depreciation of investments. Realized gains and losses from
terminated swaps are included in net realized gains on investment transactions.
At December 31, 1999, the Fund had outstanding interest rate swap contracts with
the following terms:
<TABLE>
<CAPTION>
Rate Type
---------------------------------------------
Swap Notional Amount Termination Payments made Payments received
Counterparty (000) Date by the Fund by the Fund
- --------------- -------------------- -------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Goldman Sachs
Capital Markets, L.P. $28,800 10/01/09 6.94% 6.08%
</TABLE>
3. 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
14
<PAGE>
Alliance Bond Fund U.S. Government Portfolio
===============================================================================
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.
There were no written options for the six months ended December 31, 1999.
- -------------------------------------------------------------------------------
NOTE E: Capital Stock
There are 600,000,000 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 200,000,000 authorized shares. Transactions in capital stock
were as follows:
<TABLE>
<CAPTION>
----------------------------------- -----------------------------------
Shares Amount
----------------------------------- -----------------------------------
Six Months Ended Year Ended Six Months Ended Year Ended
December 31, 1999 June 30, December 31, 1999 June 30,
(unaudited) 1999 (unaudited) 1999
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Class A
Shares sold....................... 6,898,559 19,224,210 $ 48,607,806 $ 145,163,835
Shares issued in reinvestment of
dividends and distributions.... 1,035,928 1,728,659 7,646,344 13,009,221
Shares converted from Class B..... 7,066,593 11,651,921 49,750,603 86,786,935
Shares redeemed................... (13,191,271) (19,949,212) (93,184,911) (149,785,083)
-------------- -------------- -------------- --------------
Net increase...................... 1,809,809 12,655,578 $ 12,819,842 $ 95,174,908
============== ============== ============== ==============
Class B
Shares sold....................... 5,734,711 24,468,480 $ 39,571,021 $ 185,888,333
Shares issued in reinvestment of
dividends and distributions.... 622,595 1,662,969 5,495,090 12,540,058
Shares converted to Class A....... (7,061,423) (11,639,868) (49,750,603) (86,786,935)
Shares redeemed................... (8,084,315) (19,011,200) (57,392,044) (143,440,490)
-------------- -------------- -------------- --------------
Net decrease...................... (8,788,432) (4,519,619) $ (62,076,536) $ (31,799,034)
============== ============== ============== ==============
Class C
Shares sold....................... 2,180,604 13,380,912 $ 14,791,821 $ 101,866,687
Shares issued in reinvestment of
dividends and distributions.... 307,786 711,129 2,832,674 5,357,332
Shares redeemed................... (3,922,978) (9,170,674) (27,727,783) (69,487,579)
-------------- -------------- -------------- --------------
Net increase (decrease)........... (1,434,588) 4,921,367 $ (10,103,288) $ 37,736,440
============== ============== ============== ==============
</TABLE>
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(continued) Alliance Bond Fund U.S. Government Portfolio
===============================================================================
NOTE F: Reverse Repurchase Agreements
Under a reverse repurchase agreement, the Portfolio sells securities and agrees
to repurchase them at a mutually agreed upon date and price. At the time the
Portfolio enters into a reverse repurchase agreement, it will establish a
segregated account with the custodian containing liquid assets having a value at
least equal to the repurchase price.
As of December 31, 1999, the Portfolio had entered into the following reverse
repurchase agreements:
Amount Broker Interest Rate Maturity
- --------------- --------------- -------------- ---------------
$37,811,475 Lehman Brothers 5.00% January 3, 2000
$74,862,500 Lehman Brothers 5.63% January 3, 2000
$92,800,000 Lehman Brothers 5.63% January 3, 2000
$ 9,775,000 Lehman Brothers 4.35% January 4, 2000
$ 6,699,375 Lehman Brothers 2.75% January 5, 2000
$13,432,500 Lehman Brothers 4.38% January 6, 2000
$24,224,375 Salomon Brothers, Inc. 5.05% January 6, 2000
For the six months ended December 31, 1999, the maximum amount of reverse
repurchase agreements outstanding was $291,359,788, the average amount
outstanding was approximately $155,532,739, and the daily weighted average
interest rate was 4.35%.
- -------------------------------------------------------------------------------
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
six months ended December 31, 1999.
16
<PAGE>
FINANCIAL HIGHLIGHTS Alliance Bond Fund U.S. Government Portfolio
===============================================================================
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
Class A
-------------------------------------------------------------------------------------
Six Months
Ended
December 31, Year Ended June 30,
1999 --------------------------------------------------------------------
(unaudited) 1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year ....... $ 7.19 $ 7.57 $ 7.41 $ 7.52 $ 7.96 $ 7.84
--------- --------- --------- --------- --------- ---------
Income From Investment Operations
Net investment income .................... .24(a) .52(a) .54(a) .57(a) .58 .64
Net realized and unrealized gain (loss)
on investment transactions ............ (.25) (.37) .18 (.10) (.44) .13
--------- --------- --------- --------- --------- ---------
Net increase (decrease) in net asset value
from operations ....................... (.01) .15 .72 .47 .14 .77
--------- --------- --------- --------- --------- ---------
Less: Dividends and Distributions
Dividends from net investment income ..... (.27) (.52) (.54) (.57) (.58) (.65)
Distribution in excess of net investment
income ................................ -0- (.01) -0- -0- -0 - -0-
Tax return of capital .................... -0- -0- (.02) (.01) -0 - -0-
--------- --------- --------- --------- --------- ---------
Total dividends and distributions ........ (.27) (.53) (.56) (.58) (.58) (.65)
--------- --------- --------- --------- --------- ---------
Net asset value, end of period ........... $ 6.91 $ 7.19 $ 7.57 $ 7.41 $ 7.52 $ 7.96
========= ========= ========= ========= ========= =========
Total Return
Total investment return based on net
asset value (b) ....................... (.32)% 1.83% 10.02% 6.49% 1.74 % 10.37%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) ....................... $ 422,030 $ 426,167 $ 352,749 $ 354,782 $ 397,894 $ 463,660
Ratio of expenses to average net assets .. 2.04%(c) 1.17% 1.06% 1.02 % 1.01% 1.01%
Ratio of expenses to average net assets,
excluding interest expense ............ 1.24%(c) 1.08% -0- -0- -0 - -0-
Ratio of net investment income to
average net assets .................... 6.61%(c) 6.86% 7.08% 7.66% 7.38 % 8.27%
Portfolio turnover rate .................. 174% 320% 153% 330% 334 % 190%
</TABLE>
- -------------------------------------------------------------------------------
See footnote summary on page 19.
17
<PAGE>
FINANCIAL HIGHLIGHTS (continued) Alliance Bond Fund U.S. Government Portfolio
===============================================================================
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
Class B
-------------------------------------------------------------------------------------
Six Months
Ended
December 31, Year Ended June 30,
1999 --------------------------------------------------------------------
(unaudited) 1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year ....... $ 7.20 $ 7.57 $ 7.41 $ 7.52 $ 7.96 $ 7.84
--------- --------- --------- --------- --------- ---------
Income From Investment Operations
Net investment income .................... .21(a) .46(a) .48(a) .52(a) .52 .58
Net realized and unrealized gain (loss)
on investment transactions ............ (.25) (.36) .18 (.10) (.44) .13
--------- --------- --------- --------- --------- ---------
Net increase (decrease) in net asset value
from operations ....................... (.04) .10 .66 .42 .08 .71
--------- --------- --------- --------- --------- ---------
Less: Dividends and Distributions
Dividends from net investment income ..... (.24) (.46) (.48) (.52) (.52) (.59)
Distributions in excess of net investment
income ................................ -0- (.01) -0- -0- -0 - -0-
Tax return of capital .................... -0- -0- (.02) (.01) -0 - -0-
--------- --------- --------- --------- --------- ---------
Total dividends and distributions ........ (.24) (.47) (.50) (.53) (.52) (.59)
--------- --------- --------- --------- --------- ---------
Net asset value, end of period ........... $ 6.92 $ 7.20 $ 7.57 $ 7.41 $ 7.52 $ 7.96
========= ========= ========= ========= ========= =========
Total Return
Total investment return based on net
asset value (b) ....................... (.70)% 1.22% 9.20% 5.69% 1.01 % 9.52%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) ....................... $ 264,362 $ 338,310 $ 390,253 $ 471,889 $ 628,628 $ 774,097
Ratio of expenses to average net assets .. 2.71%(c) 1.87% 1.76% 1.73 % 1.72% 1.72%
Ratio of expenses to average net assets,
excluding interest expense ............ 1.94%(c) 1.79% -0- -0- -0 - -0-
Ratio of net investment income to
average net assets .................... 5.85%(c) 6.13% 6.37% 6.95% 6.67 % 7.57%
Portfolio turnover rate .................. 174% 320% 153% 330% 334 % 190%
</TABLE>
- -------------------------------------------------------------------------------
See footnote summary on page 19.
18
<PAGE>
Alliance Bond Fund U.S. Government Portfolio
===============================================================================
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
Class C
-------------------------------------------------------------------------------------
Six Months
Ended
December 31, Year Ended June 30,
1999 --------------------------------------------------------------------
(unaudited) 1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year ....... $ 7.20 $ 7.57 $ 7.41 $ 7.52 $ 7.96 $ 7.83
--------- --------- --------- --------- --------- ---------
Income From Investment Operations
Net investment income .................... .21(a) .46(a) .48(a) .52(a) .52 .58
Net realized and unrealized gain (loss)
on investment transactions ............ (.25) (.36) .18 (.10) (.44) .14
--------- --------- --------- --------- --------- ---------
Net increase (decrease) in net asset value
from operations ....................... (.04) .10 .66 .42 .08 .72
--------- --------- --------- --------- --------- ---------
Less: Dividends and Distributions
Dividends from net investment income ..... (.24) (.46) (.48) (.52) (.52) (.59)
Distribution in excess of net investment
income ................................ -0- (.01) -0- -0- -0- -0-
Tax return of capital .................... -0- -0- (.02) (.01) -0- -0-
--------- --------- --------- --------- --------- ---------
Total dividends and distributions ........ (.24) (.47) (.50) (.53) (.52) (.59)
--------- --------- --------- --------- --------- ---------
Net asset value, end of period ........... $ 6.92 $ 7.20 $ 7.57 $ 7.41 $ 7.52 $ 7.96
========= ========= ========= ========= ========= =========
Total Return
Total investment return based on net
asset value (b) ....................... (.70)% 1.22% 9.21% 5.69% 1.01% 9.67%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) ....................... $ 128,618 $ 144,145 $ 114,392 $ 115,607 $ 166,075 $ 181,948
Ratio of expenses to average net assets .. 2.72%(c) 1.87% 1.76% 1.72 % 1.71% 1.71%
Ratio of expenses to average net assets,
excluding interest expense ............ 1.94%(c) 1.78% -0- -0- -0 - -0-
Ratio of net investment income to
average net assets .................... 5.87%(c) 6.13% 6.38% 6.96% 6.68 % 7.59%
Portfolio turnover rate .................. 174% 320% 153% 330% 334 % 190%
</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.
19
<PAGE>
Alliance Bond Fund U.S. Government Portfolio
===============================================================================
BOARD OF DIRECTORS
John D. Carifa, Chairman and President
Ruth Block (1)
David H. Dievler (1)
John H. Dobkin (1)
William H. Foulk, Jr. (1)
Dr. James M. Hester (1)
Clifford L. Michel (1)
Donald J. Robinson (1)
OFFICERS
Wayne D. Lyski, Senior Vice President
Kathleen A. Corbet, Senior Vice President
Paul J. DeNoon, Vice President
Jeffrey S. Phlegar, Vice President
Edmund P. Bergan, Jr., Secretary
Mark D. Gersten, Treasurer & Chief Financial Officer
Juan J. Rodriguez, Controller
CUSTODIAN
State Street Bank & Trust Company
225 Franklin Street
Boston, MA 02110
PRINCIPAL UNDERWRITER
Alliance Fund Distributors, Inc.
1345 Avenue of the Americas
New York, NY 10105
TRANSFER AGENT
Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, NJ 07096-1520
Toll-Free 1-(800) 221-5672
INDEPENDENT AUDITORS
Ernst & Young LLP
787 Seventh Avenue
New York, NY 10019
LEGAL COUNSEL
Seward & Kissel LLP
One Battery Park Plaza
New York, NY 10004
- -------------------------------------------------------------------------------
(1) Member of the Audit Committee.
20
<PAGE>
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<PAGE>
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<PAGE>
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<PAGE>
----------------
Alliance Bond Fund U.S. Government Portfolio BULK RATE
1345 Avenue of the Americas U.S. POSTAGE
New York, NY 10105 PAID
(800) 221-5672 New York, NY
Permit No. 7131
AllianceCapital [LOGO](R) -----------------
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.
USGSR1299
