ALLIANCE
- --------------------------------------------------------------------------------
BOND FUND
- --------------------------------------------------------------------------------
CORPORATE BOND
- --------------------------------------------------------------------------------
PORTFOLIO
- --------------------------------------------------------------------------------
Semi-Annual
Report
December 31, 1999
Alliance Capital [LOGO]
<PAGE>
LETTER TO SHAREHOLDERS Alliance Bond Fund Corporate Bond Portfolio
================================================================================
February 24, 2000
Dear Shareholder:
This report provides the performance, investment strategy and outlook for the
Alliance Bond Fund Corporate Bond Portfolio (the "Fund") over the reporting
period ended December 31, 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 for the six- and twelve-month
periods ended December 31, 1999. For comparison, we have included the
performance for the Fund's benchmark index, as represented by the Lehman
Brothers Aggregate Bond Index, as well as the returns for the Lipper Corporate
Debt Funds BBB-Rated Average.
We are pleased to report that over the six- and twelve-month periods, your Fund
outperformed both its benchmark and the Lipper Corporate Debt Funds BBB-Rated
Average. The Fund's outperformance over both periods is a result of good
corporate security selection. Also, our emerging market and high-yield sector
exposure enhanced performance. The emerging market debt sector outperformed all
other bond market sectors during both the six- and twelve-month periods as
global economic growth improved and commodity prices firmed. Over the
twelve-month period the high-yield debt sector was the strongest performing U.S.
bond market sector. The benchmark does not hold high-yield or emerging market
debt securities.
- --------------------------------------------------------------------------------
INVESTMENT RESULTS*
Periods Ended December 31, 1999
Total Returns
6 Months 12 Months
------------------ ------------------
Alliance Bond Fund
Corporate Bond
Portfolio
Class A 3.29% 1.94%
Class B 2.89% 1.25%
Class C 2.89% 1.18%
Lehman Brothers
Aggregate Bond
Index 0.56% -0.82%
Lipper Corporate Debt
Funds BBB-Rated
Average 0.13% -1.68%
* The Fund's investment results are total returns for the periods and are
based on the net asset value of each class of shares. All fees and
expenses related to the operation of the Fund have been deducted, but no
adjustment has been made for sales charges that may apply when shares are
purchased or redeemed. Past performance is no guarantee of future results.
The Lehman Brothers Aggregate Bond Index is composed of the Lehman
Brothers Mortgage-Backed Securities Index, the Lehman Brothers
Asset-Backed Securities Index and the Lehman Brothers Government/Corporate
Bond Index. The unmanaged Lipper Corporate Debt Funds BBB-Rated Average
(the "Lipper Average") is based on the performance of a universe of funds
that invest at least 65% of their assets corporate and government debt
issues rated in the top four grades. For the six- and twelve-month periods
ended December 31, 1999, the Lipper Average consisted of 138 and 132
funds, respectively. An investor cannot invest directly in an index or an
average.
Additional investment results appear on page 3.
- --------------------------------------------------------------------------------
MARKET OVERVIEW
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 returned -0.82%
in 1999. Strong U.S. growth, rising inflation fears, and a string of interest
rate hikes by the U.S. Federal Reserve took a predictable toll on bonds. The
"structured" classes consisting of mortgage-backed securities, commercial
mortgage-backed securities and asset-backed securities
1
<PAGE>
Alliance Bond Fund Corporate Bond Portfolio
================================================================================
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, as measured by the Lehman Brothers U.S. Government Bond Index, posted the
worst returns during 1999, declining 2.2%.
Investment-grade corporates as a class posted a loss of -1.96%, as represented
by the Lehman Brothers Corporate Bond Index, for the year. Rising interest
rates, liquidity concerns related to Y2K and large corporate debt issuance in
the summer months hurt the performance of investment-grade corporate securities.
The high-yield sector returned 2.4% for the year. In addition, rising default
rates and mutual fund outflows dampened high-yield debt returns.
Emerging market debt was the standout best performer among the fixed-income
sectors during 1999 as global economic growth improved and commodity prices
firmed. With a total return for the year of +25.97% (+19.70% excluding Russia),
and a fourth-quarter gain of +12.58% (+9.60% excluding Russia), emerging market
debt far outdistanced its fixed-income competition and rivaled U.S. equity
benchmarks. The annual results for the calendar year 1999 were in part generated
by the low end-1998 starting point; the JP Morgan Emerging Markets Bond
Index-Plus did not regain its high of May 1998 until the middle of December
1999. Among the individual markets, Russia posted the best return. Rising oil
prices along with progress in restructuring Soviet-era debt helped the
performance of Russian debt. Also, the big three Latin markets of Argentina,
Brazil, and Mexico scored impressive results of +12.97%, +40.68% and +15.30% for
the year as their economies strengthened.
INVESTMENT STRATEGY
We have continued to emphasize the cable and communication industries and we
expect these sectors to benefit from ongoing deregulation and restructuring.
Also, we have maintained exposure to the utility, electric and gas sectors as
well as the finance sector. In the emerging markets, we have securities in
Russia and Brazil. We also purchased Republic of Turkey securities. Fiscal
reforms, an International Monetary Fund support package, and the growing
probability of membership in the European Union have caused Turkish bonds to
perform well.
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. As we have stated
previously, corporate security selection will become increasingly important.
We believe that ongoing reforms and a favorable global economic backdrop will
make the emerging market debt sector the best performing sector of fixed-income
securities for many months to come. Stronger global growth coupled with the
recent firming in commodity prices will continue to provide the environment
necessary for emerging countries to gradually improve their credit profiles.
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,
/s/ John D. Carifa
John D. Carifa
Chairman and President
/s/ Wayne D. Lyski
Wayne D. Lyski
Senior Vice President
2
<PAGE>
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
share-holder'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 December 31, 1999
- --------------------------------------------------------------------------------
Class A Shares
- --------------------------------------------------------------------------------
Without With
Sales Charge Sales Charge
----------------------------------
One Year 1.94% -2.42%
Five Years 9.92% 8.96%
10 Years 9.99% 9.51%
SEC Yield** 7.66%
- --------------------------------------------------------------------------------
Class B Shares
- --------------------------------------------------------------------------------
Without With
Sales Charge Sales Charge
----------------------------------
One Year 1.25% -1.56%
Five Years 9.17% 9.17%
Since Inception*(a) 8.44% 8.44%
SEC Yield** 7.28%
- --------------------------------------------------------------------------------
Class C Shares
- --------------------------------------------------------------------------------
Without With
Sales Charge Sales Charge
----------------------------------
One Year 1.18% 0.24%
Five Years 9.17% 9.17%
Since Inception* 6.91% 6.91%
SEC Yield** 7.28%
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: 1/8/93 Class B; 5/3/93 Class C.
** SEC Yields are based on SEC guidelines and are calculated on 30 days ended
December 31, 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
<PAGE>
PORTFOLIO OF INVESTMENTS
December 31, 1999 (unaudited) Alliance Bond Fund Corporate Bond Portfolio
================================================================================
Standard & Principal
Poor's Amount
Ratings (000) Value
- --------------------------------------------------------------------------------
CORPORATE DEBT
OBLIGATIONS-59.5%
AIR TRANSPORTATION-3.6%
BBB United Airlines
9.56%, 10/19/18............. $ 41,716 $ 45,312,128
--------------
AUTOMOTIVE-4.6%
BBB- Federal Mogul Corp.
7.50%, 1/15/09 (a).......... 17,000 15,166,703
7.875%, 7/01/10 (a)......... 47,800 42,582,391
--------------
57,749,094
--------------
BROADCASTING/
MEDIA-7.3%
BBB- CBS Corp.
8.625%, 8/01/12............. 26,919 28,430,017
BBB- News America, Inc.
7.30%, 4/30/28.............. 69,000 61,892,724
--------------
90,322,741
--------------
CABLE-8.4%
BB+ CSC Holdings, Inc.
7.25%, 7/15/08.............. 20,000 19,050,000
7.625%, 7/15/18............. 37,400 34,969,000
7.875%, 2/15/18............. 11,310 10,829,325
B- United Pan-Europe
Communications N.V.
11.25%, 11/01/09 (b)........ 39,000 40,218,750
--------------
105,067,075
--------------
CHEMICALS-4.3%
BBB- Equistar Chemicals LP
8.75%, 2/15/09.............. 54,400 53,690,189
--------------
COMMUNICATIONS-5.6%
B Nextel Communications,
Inc.
9.375%, 11/15/09 (b)........ 30,000 29,550,000
B- RSL Communications PLC
9.875%, 11/15/09 (b)........ 10,000 8,900,000
BB- Williams Communications
Group, Inc.
10.875%, 10/01/09........... 29,500 30,975,000
--------------
69,425,000
--------------
FINANCIAL-8.8%
A+ Auburn Hills Trust
12.00%, 5/01/20............. 38,720 56,170,097
A+ Goldman Sachs Group, Inc.
7.35%, 10/01/09............. 33,000 32,289,906
BBB- Westinghouse Credit Corp.
8.875%, 6/14/14............. 20,000 20,990,040
--------------
109,450,043
--------------
INSURANCE - 5.2%
BBB+ Arkwright CSN Trust
9.625%, 8/15/26 (b)......... 38,500 38,799,376
BBB- Delphi Funding LLC
Series A
9.31%, 3/25/27 (c).......... 29,450 25,401,980
--------------
64,201,356
--------------
PUBLIC UTILITIES -
TELEPHONE-2.4%
BB AES Corp.
9.50%, 6/01/09.............. 29,000 29,398,750
--------------
PUBLIC UTILITIES-9.3%
BB CMS Energy Corp.
7.50%, 1/15/09.............. 23,500 21,247,572
BBB- Niagara Mohawk Power
Corp.
8.50%, 7/01/10 (d).......... 78,866 59,630,977
BBB- Selkirk Cogen Funding
Corp.
8.98%, 6/26/12.............. 35,000 35,170,660
--------------
116,049,209
--------------
Total Corporate Debt
Obligations
(cost $781,016,418)......... 740,665,585
--------------
YANKEES-18.8%
COMMUNICATIONS-1.0%
BBB Metronet Communications
Corp.
9.95%, 6/15/08 (d).......... 15,500 12,245,000
--------------
FINANCIAL-11.3%
A+ Dresdner Funding Trust I
8.151%, 6/30/31 (b)......... 58,715 55,429,720
A- KBC Bank Funding
Trust III
9.86%, 11/29/49............. 57,000 59,094,579
BBB- MC Cuernavaca Trust
9.25%, 7/25/01 (b).......... 18,818 16,089,181
BBB- Petrozuata Finance, Inc
8.22%, 4/01/17 (b)(c)....... 14,500 10,113,750
--------------
140,727,230
--------------
INDUSTRIAL-0.7%
C Grupo Mexicano de
Desarrollo, SA
8.25%, 2/17/01 (e)(f)....... 29,200 8,760,000
--------------
4
<PAGE>
Alliance Bond Fund Corporate Bond Portfolio
================================================================================
Shares or
Standard & Principal
Poor's Amount
Ratings (000) Value
================================================================================
TELEPHONE
UTILITY-4.7%
BBB TPSA Finance BV
7.75%, 12/10/08 (b)......... $ 63,000 $ 58,747,500
--------------
UTILITY-1.1%
BB- Empresa Electrica Del
Norte, SA
7.75%, 3/15/06 (b).......... 35,240 13,417,101
--------------
Total Yankees
(cost $277,151,508)......... 233,896,831
--------------
SOVEREIGN DEBT
OBLIGATIONS-10.9%
RUSSIA-4.8%
CCC+ Russia Ministry of
Finance
12.75%, 6/24/28 (b)......... 86,000 60,200,000
--------------
BRAZIL-3.9%
B+ Republic of Brazil
10.125%, 5/15/27............ 50,000 43,500,000
14.50%, 10/15/09............ 5,000 5,550,000
--------------
49,050,000
--------------
TURKEY-2.2%
B Republic of Turkey
12.375%, 6/15/09............ 25,000 26,875,000
--------------
Total Sovereign Debt
Obligations
(cost $120,828,900)......... 136,125,000
--------------
U.S. GOVERNMENT
OBLIGATIONS-9.4%
AAA U.S. Treasury Bonds
Zero coupon, 5/15/17........ 225,000 69,391,575
5.25%, 2/15/29.............. 35,000 28,962,500
6.125%, 8/15/29............. 20,000 19,075,000
--------------
Total U.S. Government
Obligations
(cost $119,671,378)......... 117,429,075
--------------
PREFERRED STOCK-4.3%
FINANCIAL-4.3%
BBB+ Centaur Funding Corp.
Series B
9.08%, (b)
(cost $54,758,500).......... 53 53,540,865
--------------
SHORT-TERM
INVESTMENT-1.1%
State Street Euro Dollar
3.00%, 1/03/00
(cost $14,227,000).......... 14,227 14,227,000
--------------
TOTAL
INVESTMENTS-104.0%
(cost $1,367,653,705)....... 1,295,884,356
Other assets less
liabilities-(4.0%).......... (49,905,369)
--------------
NET ASSETS-100%................ $ 1,245,978,987
==============
- --------------------------------------------------------------------------------
(a) Fitch's Rating
(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 $385,006,243 or 30.9% of net assets.
(c) Duff & Phelp's Rating
(d) 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
until final maturity.
(e) Moody's Rating
(f) Security is in default and is non-income producing.
See notes to financial statements.
5
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999 (unaudited) Alliance Bond Fund Corporate Bond Portfolio
================================================================================
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments in securities, at value (cost $1,367,653,705) ........................................... $1,295,884,356
Cash ................................................................................................ 902
Interest receivable ................................................................................. 24,790,779
Receivable for capital stock sold ................................................................... 1,404,026
--------------
Total assets ........................................................................................ 1,322,080,063
--------------
LIABILITIES
Payable for investment securities purchased ......................................................... 69,772,500
Dividends payable ................................................................................... 3,014,128
Payable for capital stock redeemed ............................................................... 1,560,932
Distribution fee payable ............................................................................ 783,155
Advisory fee payable ................................................................................ 586,297
Accrued expenses .................................................................................... 384,064
--------------
Total liabilities ................................................................................... 76,101,076
--------------
NET ASSETS .............................................................................................. $1,245,978,987
==============
COMPOSITION OF NET ASSETS
Capital stock, at par ............................................................................... $ 100,880
Additional paid-in capital .......................................................................... 1,472,656,083
Distributions in excess of net investment income .................................................... (1,879,866)
Accumulated net realized loss on investment transactions ............................................ (153,128,761)
Net unrealized depreciation of investments .......................................................... (71,769,349)
--------------
$1,245,978,987
==============
CALCULATION OF MAXIMUM OFFERING PRICE
Class A Shares
Net asset value and redemption price per share
($475,150,264 / 38,473,628 shares of capital stock issued and outstanding) ....................... $12.35
Sales charge-4.25% of public offering price ......................................................... .55
------
Maximum offering price .............................................................................. $12.90
======
Class B Shares
Net asset value and offering price per share
($564,375,711 / 45,691,081 shares of capital stock issued and outstanding) ....................... $12.35
------
Class C Shares
Net asset value and offering price per share
($206,453,012 / 16,714,903 shares of capital stock issued and outstanding) ....................... $12.35
======
</TABLE>
- --------------------------------------------------------------------------------
See notes to financial statements.
6
<PAGE>
STATEMENT OF OPERATIONS
Six Months Ended December 31, 1999 (unaudited)
Alliance Bond Fund Corporate Bond Portfolio
================================================================================
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME
Interest ............................................................................ $ 57,473,003
Dividends ........................................................................... 3,675,383 $61,148,386
-----------
EXPENSES
Advisory fee ........................................................................ 3,512,316
Distribution fee - Class A .......................................................... 710,143
Distribution fee - Class B .......................................................... 2,999,904
Distribution fee - Class C .......................................................... 1,029,167
Transfer agency ..................................................................... 1,133,992
Audit and legal ..................................................................... 249,872
Printing ............................................................................ 167,468
Registration ........................................................................ 132,112
Custodian ........................................................................... 131,908
Administrative ................................................................... 59,932
Directors' fees ..................................................................... 7,168
Miscellaneous ....................................................................... 69,931
-----------
Total expenses ...................................................................... 10,203,913
------------
Net investment income ............................................................... 50,944,473
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investment transactions ........................................ (39,197,665)
Net change in unrealized appreciation/depreciation of investments ................... 25,390,455
------------
Net loss on investments ............................................................. (13,807,210)
------------
NET INCREASE IN NET ASSETS FROM OPERATIONS .............................................. $ 37,137,263
============
</TABLE>
- --------------------------------------------------------------------------------
See notes to financial statements.
7
<PAGE>
STATEMENT OF CHANGES
IN NET ASSETS Alliance Bond Fund Corporate Bond 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 .......................................................... $ 50,944,473 $ 105,021,981
Net realized loss on investments and options transactions ...................... (39,197,665) (94,827,759)
Net change in unrealized appreciation/depreciation of investments .............. 25,390,455 (72,905,227)
--------------- ---------------
Net increase (decrease) in net assets from operations .......................... 37,137,263 (62,711,005)
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A ..................................................................... (20,562,606) (40,134,019)
Class B ..................................................................... (23,713,980) (49,607,825)
Class C ..................................................................... (8,176,101) (16,944,532)
Distributions in excess of net investment income
Class A ..................................................................... -0- (139,815)
Class B ..................................................................... -0- (172,818)
Class C ..................................................................... -0- (59,019)
Tax return of capital
Class A ..................................................................... -0- (1,516,771)
Class B ..................................................................... -0- (1,874,797)
Class C ..................................................................... -0- (640,254)
CAPITAL STOCK TRANSACTIONS
Net increase (decrease) ........................................................ (49,748,448) 47,542,470
--------------- ---------------
Total decrease ................................................................. (65,063,872) (126,258,385)
NET ASSETS
Beginning of year .............................................................. 1,311,042,859 1,437,301,244
--------------- ---------------
End of period .................................................................. $ 1,245,978,987 $ 1,311,042,859
=============== ===============
</TABLE>
- --------------------------------------------------------------------------------
See notes to financial statements.
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 (unaudited) Alliance Bond Fund Corporate Bond Portfolio
================================================================================
NOTE A: Significant Accounting Policies
Alliance Bond Fund, Inc. (the "Fund") is registered under the Investment Company
Act of 1940 as a diversified, open-end management investment company. The Fund,
which is a Maryland corporation, operates as a series company currently
comprised of 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 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.
9
<PAGE>
Alliance Bond Fund
NOTES TO FINANCIAL STATEMENTS (cont.) 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.
- --------------------------------------------------------------------------------
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 $59,932 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 $798,086 for the six months ended December 31,
1999.
For the six months ended December 31, 1999, the Fund's expenses were reduced by
$43,864 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 front-end sales charges of
$48,712 from the sales of Class A shares and $2,435, $513,231 and $30,223 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 $15,195,621 and
$3,524,962 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 $967,890,637 and $1,143,142,865,
respectively, for the six months ended December 31, 1999. There were purchases
of $1,123,744,872 and sales of $1,003,063,239 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,
10
<PAGE>
Alliance Bond Fund Corporate Bond Portfolio
================================================================================
gross unrealized appreciation of investments was $20,404,840 and gross
unrealized depreciation of investments was $92,174,189 resulting in net
unrealized depreciation of $71,769,349.
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.
For the period ended December 31, 1999, the Fund did not engage in written
options transactions.
- --------------------------------------------------------------------------------
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:
<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 .................................... 3,219,525 9,281,074 $ 39,136,079 $ 121,721,663
Shares issued in reinvestment of
dividends and distributions ................ 894,223 1,871,312 11,544,722 24,412,990
Shares converted from Class B .................. 2,355,660 2,549,408 28,873,689 33,041,496
Shares redeemed ................................ (6,107,993) (11,561,679) (75,306,515) (150,909,101)
------------- ------------- ------------- -------------
Net increase ................................... 361,415 2,140,115 $ 4,247,975 $ 28,267,048
============= ============= ============= =============
</TABLE>
11
<PAGE>
Alliance Bond Fund
NOTES TO FINANCIAL STATEMENTS (cont.) Corporate Bond Portfolio
================================================================================
<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 B
Shares sold .................................... 4,361,113 16,818,038 $ 51,951,521 $ 220,446,343
Shares issued in reinvestment of
dividends and distributions ................ 865,607 2,365,693 12,511,513 30,713,980
Shares converted to Class A .................... (2,355,098) (2,550,208) (28,873,689) (33,041,496)
Shares redeemed ............................. (7,666,653) (13,547,224) (94,480,166) (176,394,184)
------------- ------------- ------------- -------------
Net increase (decrease) ........................ (4,795,031) 3,086,299 $ (58,890,821) $ 41,724,643
============= ============= ============= =============
Class C
Shares sold .................................... 5,687,912 12,477,675 $ 68,885,523 $ 163,058,138
Shares issued in reinvestment of
dividends and distributions ................ 282,667 834,414 4,769,605 10,892,319
Shares redeemed ................................ (5,606,163) (14,901,641) (68,760,730) (196,399,678)
------------- ------------- ------------- -------------
Net increase (decrease) ........................ 364,416 (1,589,552) $ 4,894,398 $ (22,449,221)
============= ============= ============= =============
</TABLE>
- --------------------------------------------------------------------------------
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
six months ended December 31, 1999.
12
<PAGE>
FINANCIAL HIGHLIGHTS Alliance Bond Fund Corporate Bond Portfolio
================================================================================
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
CLASS A
----------------------------------------------------------------------------------------
Six Months
Ended
December 31, Year Ended June 30,
1999 ---------------------------------------------------------------------
(unaudited) 1999 1998 1997 1996 1995
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year ...... $ 12.49 $ 14.19 $ 14.19 $ 13.29 $ 12.92 $ 12.51
-------- -------- -------- -------- -------- --------
Income From Investment Operations
Net investment income ................... .52(a) 1.06(a) 1.08(a) 1.15(a) 1.26 1.19
Net realized and unrealized gain (loss)
on investment transactions .......... (.09) (1.64) .12 .97 .27 .36
-------- -------- -------- -------- -------- --------
Net increase (decrease) in net asset
value from operations ............... .43 (.58) 1.20 2.12 1.53 1.55
-------- -------- -------- -------- -------- --------
Less: Dividends and Distributions
Dividends from net investment income .... (.57) (1.07) (1.08) (1.22) (1.16) (1.14)
Distributions in excess of net investment
income .............................. -0- (.01) (.12) -0- -0- -0-
Tax return of capital ................... -0- (.04) -0- -0- -0- -0-
-------- -------- -------- -------- -------- --------
Total dividends and distributions ....... (.57) (1.12) (1.20) (1.22) (1.16) (1.14)
-------- -------- -------- -------- -------- --------
Net asset value, end of period .......... $ 12.35 $ 12.49 $ 14.19 $ 14.19 $ 13.29 $ 12.92
======== ======== ======== ======== ======== ========
Total Return
Total investment return based on net
asset value (b) ..................... 3.29% (4.08)% 8.66% 16.59% 12.14% 13.26%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) ..................... $475,150 $476,141 $510,397 $370,845 $277,369 $230,750
Ratio of expenses to average net assets . 1.15%(c) 1.11% 1.05% 1.12% 1.20% 1.24%
Ratio of net investment income to
average net assets .................. 8.42%(c) 8.13% 7.52% 8.34% 9.46% 9.70%
Portfolio turnover rate ................. 163% 281% 244% 307% 389% 387%
</TABLE>
- --------------------------------------------------------------------------------
See footnote summary on page 15.
13
<PAGE>
FINANCIAL HIGHLIGHTS (continued) Alliance Bond Fund Corporate Bond Portfolio
================================================================================
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
CLASS B
----------------------------------------------------------------------------------------
Six Months
Ended
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 ...... $ 12.49 $ 14.19 $ 14.19 $ 13.29 $ 12.92 $ 12.50
-------- -------- -------- -------- -------- --------
Income From Investment Operations
Net investment income ................... .48(a) .97(a) .98(a) 1.05(a) 1.15 1.11
Net realized and unrealized gain (loss)
on investment transactions .......... (.10) (1.64) .13 .98 .29 .36
-------- -------- -------- -------- -------- --------
Net increase (decrease) in net asset
value from operations ............... .38 (.67) 1.11 2.03 1.44 1.47
-------- -------- -------- -------- -------- --------
Less: Dividends and Distributions
Dividends from net investment income .... (.52) (.98) (.98) (1.13) (1.07) (1.05)
Distributions in excess of net investment
income .............................. -0- (.01) (.13) -0- -0- -0-
Tax return of capital ................... -0- (.04) -0- -0- -0- -0-
-------- -------- -------- -------- -------- --------
Total dividends and distributions ....... (.52) (1.03) (1.11) (1.13) (1.07) (1.05)
-------- -------- -------- -------- -------- --------
Net asset value, end of period .......... $ 12.35 $ 12.49 $ 14.19 $ 14.19 $ 13.29 $ 12.92
======== ======== ======== ======== ======== ========
Total Return
Total investment return based on net
asset value (b) ..................... 2.89% (4.77)% 7.95% 15.80% 11.38% 12.54%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) ..................... $564,376 $630,631 $672,374 $480,326 $338,152 $241,393
Ratio of expenses to average net assets . 1.86%(c) 1.82% 1.75% 1.82% 1.90% 1.99%
Ratio of net investment income to
average net assets .................. 7.70%(c) 7.41% 6.80% 7.62% 8.75% 9.07%
Portfolio turnover rate ................. 163% 281% 244% 307% 389% 387%
</TABLE>
- --------------------------------------------------------------------------------
See footnote summary on page 15.
14
<PAGE>
Alliance Bond Fund Corporate Bond Portfolio
================================================================================
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
CLASS C
----------------------------------------------------------------------------------------
Six Months
Ended
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 ...... $ 12.49 $ 14.19 $ 14.19 $ 13.29 $ 12.93 $ 12.50
-------- -------- -------- -------- -------- --------
Income From Investment Operations
Net investment income ................... .48(a) .97(a) .99(a) 1.04(a) 1.14 1.10
Net realized and unrealized gain (loss)
on investment transactions .......... (.10) (1.64) .12 .99 .29 .38
-------- -------- -------- -------- -------- --------
Net increase (decrease) in net asset
value from operations ............... .38 (.67) 1.11 2.03 1.43 1.48
-------- -------- -------- -------- -------- --------
Less: Dividends and Distributions
Dividends from net investment income .... (.52) (.98) (.99) (1.13) (1.07) (1.05)
Distributions in excess of net investment
income .............................. -0- (.01) (.12) -0- -0- -0-
Tax return of capital ................... -0- (.04) -0- -0- -0- -0-
-------- -------- -------- -------- -------- --------
Total dividends and distributions ....... (.52) (1.03) (1.11) (1.13) (1.07) (1.05)
-------- -------- -------- -------- -------- --------
Net asset value, end of period .......... $ 12.35 $ 12.49 $ 14.19 $ 14.19 $ 13.29 $ 12.93
======== ======== ======== ======== ======== ========
Total Return
Total investment return based on net
asset value (b) ..................... 2.89% (4.77)% 7.95% 15.80% 11.30% 12.62%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) ..................... $206,453 $204,271 $254,530 $174,762 $ 83,095 $ 51,028
Ratio of expenses to average net assets . 1.86%(c) 1.81% 1.75% 1.82% 1.90% 1.84%
Ratio of net investment income to
average net assets .................. 7.70%(c) 7.37% 6.83% 7.61% 8.74% 8.95%
Portfolio turnover rate ................. 163% 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. Total investment return calculated for a period
of less than one year is not annualized.
(c) Annualized.
15
<PAGE>
Alliance Bond Fund Corporate Bond Portfolio
================================================================================
BOARD OF DIRECTORS
John D. Carifa, Chairman and President William H. Foulk, Jr. (1)
Ruth Block (1) Dr. James M. Hester (1)
David H. Dievler (1) Clifford L. Michel (1)
John H. Dobkin (1) Donald J. Robinson (1)
OFFICERS
Wayne D. Lyski, Senior Vice President Edmund P. Bergan, Jr., Secretary
Kathleen A. Corbet, Senior Vice President Mark D. Gersten, Treasurer &
Paul J. DeNoon, Vice President Chief Financial Officer
Jeffrey S. Phlegar, Vice President Juan J. Rodriguez, Controller
CUSTODIAN TRANSFER AGENT
State Street Bank & Trust Company Alliance Fund Services, Inc.
225 Franklin Street P.O. Box 1520
Boston, MA 02110 Secaucus, NJ 07096-1520
Toll-Free 1-(800) 221-5672
PRINCIPAL UNDERWRITER INDEPENDENT AUDITORS
Alliance Fund Distributors, Inc. Ernst & Young LLP
1345 Avenue of the Americas 787 Seventh Avenue
New York, NY 10105 New York, NY 10019
LEGAL COUNSEL
Seward & Kissel LLP
One Battery Park Plaza
New York, NY 10004
- --------------------------------------------------------------------------------
(1) Member of the Audit Committee.
16
<PAGE>
THE ALLIANCE FAMILY OF MUTUAL FUNDS
================================================================================
Fixed Income
Alliance Bond Fund
U.S. Government Portfolio
Corporate Bond Portfolio
Quality Bond Portfolio
Alliance Global Dollar Government Fund
Alliance Global Strategic Income Trust
Alliance High Yield Fund
Alliance Limited Maturity Government Fund
Alliance Mortgage Securities Income Fund
Alliance Multi-Market Strategy Trust
Alliance North American Government Income Trust
Alliance Short-Term U.S. Government Fund
Tax-Free Income
Alliance Municipal Income Fund
California Portfolio
Insured California Portfolio
Insured National Portfolio
National Portfolio
New York Portfolio
Alliance Municipal Income Fund II
Arizona Portfolio
Florida Portfolio
Massachusetts Portfolio
Michigan Portfolio
Minnesota Portfolio
New Jersey Portfolio
Ohio Portfolio
Pennsylvania Portfolio
Virginia Portfolio
Money Market
AFD Exchange Reserves
Growth
The Alliance Fund
Alliance Global Environment Fund
Alliance Growth Fund
Alliance Premier Growth Fund
Select Investors Series - Premier Portfolio
Growth & Income
Alliance Balanced Shares
Alliance Conservative Investors Fund
Alliance Growth & Income Fund
Alliance Growth Investors Fund
Alliance Real Estate Investment Fund
Alliance Utility Income Fund
Aggressive Growth
Alliance Global Small Cap Fund
Alliance Health Care Fund
Alliance Quasar Fund
Alliance Technology Fund
International
Alliance All-Asia Investment Fund
Alliance Greater China `97 Fund
Alliance International Fund
Alliance International Premier Growth Fund
Alliance New Europe Fund
Alliance Worldwide Privatization Fund
Institutional
Premier Growth
Quasar
Real Estate Investment
Closed-End Funds
Alliance All-Market Advantage Fund
ACM Government Income Fund
ACM Government Opportunity Fund
ACM Government Securities Fund
ACM Government Spectrum Fund
ACM Managed Dollar Income Fund
ACM Managed Income Fund
ACM Municipal Securities Income Fund
Alliance World Dollar Government Fund
Alliance World Dollar Government Fund II
The Austria Fund
The Korean Investment Fund
The Spain Fund
The Southern Africa Fund
Cash Management Services
Alliance Capital Reserves
Alliance Government Reserves
Alliance Institutional Reserves
Prime Portfolio
Government Portfolio
Tax-Free Portfolio
Treasury Portfolio
Trust Portfolio
Alliance Insured Account
Alliance Money Reserves
Alliance Municipal Trust
California Portfolio
Connecticut Portfolio
Florida Portfolio
General Portfolio
Massachusetts Portfolio
New Jersey Portfolio
New York Portfolio
Virginia Portfolio
Alliance Treasury Reserves
Alliance Money Market Fund
Prime Portfolio
General Municipal Portfolio
Government Portfolio
17
<PAGE>
(This page left intentionally blank.)
<PAGE>
(This page left intentionally blank.)
<PAGE>
ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO ---------------
1345 Avenue of the Americas BULK RATE
New York, NY 10105 U.S. POSTAGE
(800) 221-5672 PAID
New York, NY
Permit No. 7131
---------------
Alliance Capital [LOGO]
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.
CBPSR1299
