ALLIANCE
----------------------------
BOND FUND
----------------------------
QUALITY BOND
----------------------------
PORTFOLIO
----------------------------
Semi-Annual
Report
December 31, 1999
Alliance Capital [LOGO](R)
<PAGE>
LETTER TO SHAREHOLDERS Alliance Bond Fund Quality Bond Portfolio
================================================================================
February 10, 2000
Dear Shareholder:
We are pleased to provide the first report to shareholders for the Alliance Bond
Fund Quality Bond Portfolio ("the Fund"). This report contains investment
results and market activity for the Fund, for the period from the Fund's
inception on July 1, 1999 through December 31, 1999. Also included are
discussions of the Fund's investment strategy and outlook.
INVESTMENT RESULTS
The following table shows how your Fund performed since its inception through
December 31, 1999. For comparison, we have included performance for the fund's
benchmark index the Lehman Brothers Aggregate Bond Index, a standard measure of
the performance of a basket of unmanaged debt securities.
- --------------------------------------------------------------------------------
INVESTMENT RESULTS*
Period Ended December 31, 1999
Total Returns
Since Inception**
-----------------
Alliance Bond Fund
Quality Bond Portfolio
Class A 0.67%
Class B 0.32%
Class C 0.12%
Lehman Brothers
Aggregate Bond Index 0.56%
* The Fund's investment results represent total returns and are based on the
net asset value as of December 31, 1999. 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. Returns for the Fund include the reinvestment of any
distributions paid during the period. The Lehman Brothers Aggregate Bond
Index is a standard measure of the performance of a basket of unmanaged
debt securities. An investor cannot invest directly in an index. Past
performance is no guarantee of future results.
** Performance for the Fund is from the Fund's inception date on July 1,
1999. Performance for the Lehman Brothers Aggregate Bond Index is over the
past six months ended December 31, 1999, which is the closest month-end to
the Fund's inception date.
Additional investment results appear on page 3.
- --------------------------------------------------------------------------------
During the since-inception period ended December 31, 1999, your Fund slightly
outperformed its benchmark as a result of our overweighting the mortgage sector.
Mortgage-backed securities were the best performing securities in the domestic
U.S. bond market over this time period.
MARKET REVIEW
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 30-year low. U.S. consumers are confident and it
shows in their spending, which grew at a 5% rate during the fourth quarter.
Private demand is increasing in Europe, a development that will support
export-led recoveries in East Asia (including Japan) and Latin America. The rise
in commodity prices, led by oil, has started to flow through to U.S. inflation:
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.
The weakness in U.S. bond prices spread throughout much of the industrialized
world this year, although not always with the same inflationary justification.
1999 was a poor year for the domestic U.S. fixed-income market. As measured by
the Lehman Brothers Aggregate Bond Index, the U.S. bond market returned -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
1
<PAGE>
Alliance Bond Fund Quality Bond Portfolio
================================================================================
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% as represented by the Lehman Brothers Corporate Bond Index for the year.
INVESTMENT STRATEGY
From a fundamental perspective, we prefer mortgage-backed securities to
investment-grade corporates and will maintain the current yield oriented posture
by remaining overweighted in both dollar and duration terms in liquid
mortgage-backed securities where prepayment risk is currently minimal. We will
continue to trim our exposure to investment-grade corporates, diversifying our
holdings among the different corporate subsectors. The relatively flat credit
curve will provide an opportunity to diversify along the corporate maturity
spectrum.
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.
Thank you for your continued interest and investment in the Alliance Bond Fund
Quality Bond Portfolio. We look forward to reporting to you in the coming
months.
Sincerely,
/s/ John D. Carifa
John D. Carifa
Chairman and President
/s/ Matthew Bloom
Matthew Bloom
Portfolio Manager
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
2
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES Alliance Bond Fund Quality Bond Portfolio
================================================================================
The Alliance Bond Fund Quality Bond Portfolio seeks high current income
consistent with preservation of capital by investing in investment grade
fixed-income securities. The Portfolio invests in readily marketable securities
that do not involve undue risk of capital.
INVESTMENT RESULTS
================================================================================
NAV and SEC Average Annual Total Returns as of December 31, 1999
---------------------------------
CLASS A SHARES
---------------------------------
Without With
Sales Charge Sales Charge
=================================
Since Inception* 0.67% -3.57%
SEC Yield** 5.56%
---------------------------------
CLASS B SHARES
---------------------------------
Without With
Sales Charge Sales Charge
=================================
Since Inception* 0.32% -2.61%
SEC Yield** 5.04%
---------------------------------
CLASS C SHARES
---------------------------------
Without With
Sales Charge Sales Charge
=================================
Since Inception* 0.12% -0.85%
SEC Yield** 5.04%
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.
- --------------------------------------------------------------------------------
* Performance since the Fund's inception date of July 1, 1999.
** SEC Yields are based on SEC guidelines and are calculated on 30 days ended
December 31, 1999.
3
<PAGE>
PORTFOLIO OF INVESTMENTS
December 31, 1999 (unaudited) Alliance Bond Fund Quality Bond Portfolio
================================================================================
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS-81.1%
U.S. TREASURY SECURITIES-48.0%
U.S. TREASURY BONDS-15.1%
6.125%, 8/15/29 .............................. $ 40 $ 38,131
8.125%, 8/15/19 .............................. 335 381,743
11.25%, 2/15/15 .............................. 100 141,359
----------
561,233
----------
U.S. TREASURY NOTES-32.9%
6.25%, 4/30/01 ............................... 185 185,144
6.50%, 5/31/02 ............................... 525 527,541
6.75%, 4/30/00 ............................... 150 150,468
6.875%, 5/15/06 .............................. 350 356,181
----------
1,219,334
----------
1,780,567
----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION-19.1%
6.00%, 3/01/29-7/01/29........................ 144 131,540
6.50%, 11/01/14-7/01/29....................... 119 112,667
7.00%, 3/01/12-12/01/29....................... 182 178,175
7.50%, 9/01/26-12/01/29....................... 241 238,480
8.00%, 10/01/27 .............................. 50 50,211
----------
711,073
----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION-14.0%
6.50%, 3/15/28-7/15/29 ....................... 258 242,160
7.00%, 5/15/29-11/15/29 ...................... 287 277,212
----------
519,372
----------
Total U.S. Government & Agency Obligations
(cost $3,045,858)............................. 3,011,012
----------
CORPORATE OBLIGATIONS-12.9%
AUTOMOTIVE-1.6%
Ford Motor Company 6.375%, 2/01/29 ............. 70 59,058
----------
BROADCASTING/MEDIA-3.3%
Clear Channel Communication, Inc.
7.25%, 10/15/27 .............................. 70 63,140
Time Warner, Inc. 6.625%, 5/15/29 .............. 70 59,750
----------
122,890
----------
CABLE-1.7%
Comcast Cable Communications, Inc.
6.20%, 11/15/08 .............................. 70 63,557
----------
FINANCIAL-4.4%
Household Netherlands BV 6.20%, 12/01/03 ....... 100 96,554
Morgan Stanley Dean Witter & Co.
5.625%, 1/20/04 .............................. 70 66,144
----------
162,698
----------
INSURANCE-1.9%
Prudential Insurance Co.
8.30%, 7/01/25 (a) ........................... 70 71,407
----------
Total Corporate Obligations
(cost $492,735)............................... 479,610
----------
ASSET BACKED SECURITY-1.9%
Capital Auto Receivables Asset Trust
5.58%, 6/15/02 (cost $69,553)................. 70 69,015
----------
4
<PAGE>
PORTFOLIO OF INVESTMENTS (continued) Alliance Bond Fund Quality Bond Portfolio
================================================================================
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
YANKEE BOND-1.9%
Quebec Province of Canada
7.50%, 9/15/29 (cost $74,661)................ $ 75 $ 72,703
----------
TIME DEPOSIT-3.9%
State Street Euro Dollar
3.00%, 1/03/00 (cost $144,000)................ 144 144,000
----------
TOTAL INVESTMENTS-101.7%
(cost $3,826,807)............................ $3,776,340
Other assets less liabilities-(1.7%)............ (63,246)
----------
NET ASSETS-100%................................. $3,713,094
==========
- --------------------------------------------------------------------------------
(a) Security exempt from Registration under Rule 144A of the Securities Act of
1933. This security may be resold in transactions exempt from
registration, normally to qualified buyers. At December 31, 1999, this
security amounted to $71,407 or 1.9% of net assets.
See notes to financial statements.
5
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999 (unaudited) Alliance Bond Fund Quality Bond Portfolio
================================================================================
ASSETS
Investments in securities, at value (cost $3,826,807) ....... $ 3,776,340
Cash ........................................................ 116
Prepaid expenses ............................................ 60,334
Interest receivable ......................................... 43,729
Receivable due from Adviser ................................. 36,615
Receivable for capital stock sold ........................... 5,994
-----------
Total assets ................................................ 3,923,128
-----------
LIABILITIES
Dividends payable ........................................... 6,338
Distribution fee payable .................................... 1,205
Accrued expenses ............................................ 202,491
-----------
Total liabilities ........................................... 210,034
-----------
NET ASSETS ..................................................... $ 3,713,094
===========
COMPOSITION OF NET ASSETS
Capital stock, at par ....................................... $ 380
Additional paid-in capital .................................. 3,776,543
Distributions in excess of net investment income ............ (1,439)
Net realized loss on investment transactions ................ (11,923)
Net unrealized depreciation of investments .................. (50,467)
-----------
$ 3,713,094
===========
CALCULATION OF MAXIMUM OFFERING PRICE
Class A Shares
Net asset value and redemption price per share
($2,907,001 / 297,231 shares of capital stock
issued and outstanding) ................................... $ 9.78
Sales charge--4.25% of public offering price ................ .43
------
Maximum offering price ...................................... $10.21
======
Class B Shares
Net asset value and offering price per share
($441,416 / 45,156 shares of capital stock
issued and outstanding) ................................... $ 9.78
======
Class C Shares
Net asset value and offering price per share
($364,677 / 37,379 shares of capital stock
issued and outstanding) ................................... $ 9.76
======
- --------------------------------------------------------------------------------
See notes To Financial Statements
6
<PAGE>
STATEMENT OF OPERATIONS
July 1, 1999(a) to December 31,
1999 (unaudited) Alliance Bond Fund Quality Bond Portfolio
================================================================================
INVESTMENT INCOME
Interest .......................................... $ 81,873
EXPENSES
Advisory fee ...................................... $ 6,751
Distribution fee - Class A ........................ 3,211
Distribution fee - Class B ........................ 916
Distribution fee - Class C ........................ 657
Taxes ............................................. 60,666
Administrative .................................... 58,000
Audit and legal ................................... 45,326
Custodian ......................................... 41,175
Registration ...................................... 31,633
Printing .......................................... 22,509
Transfer agency ................................... 10,650
Directors' fees ................................... 7,503
Amortization of organization expenses ............. 3,000
Miscellaneous ..................................... 7,941
---------
Total expenses .................................... 299,938
Less: expenses waived and assumed by Adviser
(See Note B) .................................... (286,808)
---------
Net expenses ................................... 13,130
---------
Net investment income ............................. 68,743
---------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss on investment transactions ...... (11,923)
Net unrealized depreciation of investments ........ (50,467)
---------
Net loss on investment transactions ............... (62,390)
---------
NET INCREASE IN NET ASSETS FROM OPERATIONS ........... $ 6,353
=========
- --------------------------------------------------------------------------------
(a) Commencement of operations.
See notes to financial statements.
7
<PAGE>
STATEMENT OF CHANGES
IN NET ASSETS Alliance Bond Fund Quality Bond Portfolio
================================================================================
July 1, 1999 (a)
to December 31, 1999
(unaudited)
--------------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income .................................. $ 68,743
Net realized loss on investment transactions ........... (11,923)
Net unrealized depreciation of investments ............. (50,467)
-----------
Net increase in net assets from operations ............. 6,353
DIVIDENDS TO SHAREHOLDERS FROM
Net investment income
Class A .............................................. (61,943)
Class B .............................................. (4,944)
Class C .............................................. (3,295)
CAPITAL STOCK TRANSACTIONS
Net increase ........................................... 3,776,923
-----------
Total increase ......................................... 3,713,094
NET ASSETS
Beginning of period .................................... -0-
-----------
End of period .......................................... $ 3,713,094
===========
- --------------------------------------------------------------------------------
(a) Commencement of operations.
See notes to financial statements.
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 (unaudited) Alliance Bond Fund Quality 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 Quality 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 such securities.
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.
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 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
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.
9
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Alliance Bond Fund Quality Bond Portfolio
================================================================================
4. Income and Expenses
All income earned and expenses incurred by the Portfolio are borne on a pro-rata
basis by each settled class of shares, based on proportionate interest in the
Portfolio represented by the net assets of such class, except that the
Portfolio's Class B and Class C shares bear higher distribution and transfer
agent fees than Class A shares.
5. Dividends and Distributions
Dividends and distributions to shareholders are recorded on the ex-dividend
date.
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
.55 of the Portfolio's average daily net assets. The fee is accrued daily and
paid monthly. The adviser has agreed to waive its fees and bear certain expenses
to the extent necessary to limit total operating expenses on an annual basis to
.98%, 1.68% and 1.68% of the daily average net assets for Class A, Class B and
Class C shares, respectively. For the period ended December 31, 1999, such
reimbursement amounted to $228,808.
Pursuant to the advisory agreement, the Portfolio may reimburse the Adviser for
certain legal and accounting services provided to the Portfolio by the Adviser.
For the six months ended December 31, 1999 the Adviser agreed to waive fees for
certain legal and accounting services in the amount of $58,000.
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.
For the six months ended December 31, 1999 Alliance Fund Services, Inc. agreed
to waive service fees in the amount of $9,000.
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
$21,046 from the sales of Class A shares and $202 in contingent deferred sales
charges imposed upon redemptions by shareholders of Class C shares,
respectively, for the period 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 $13,070 and
$26,009 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.
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS (cont.) Alliance Bond Fund Quality Bond Portfolio
================================================================================
NOTE D: Investment Transactions
Purchases of investment securities (excluding short-term investments and U.S.
government securities) aggregated $636,042 for the period ended December 31,
1999. There were purchases of $4,779,859 and sales of $1,698,920 of U.S.
government and government agency obligations for the period 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, gross unrealized appreciation of investments was $0 and gross
unrealized depreciation of investments was $50,467 resulting in net unrealized
depreciation of $50,467.
- --------------------------------------------------------------------------------
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
------------------ ------------------
July 1, 1999(a) to July 1, 1999(a) to
December 31, 1999 December 31, 1999
(unaudited) (unaudited)
================== ==================
<S> <C> <C>
Class A
Shares sold.................................. 299,159 $ 2,981,931
Shares issued in reinvestment of dividends... 283 2,772
Shares redeemed.............................. (2,211) (21,848)
--------- -----------
Net increase................................. 297,231 $ 2,962,855
========= ===========
Class B
Shares sold.................................. 53,322 $ 526,814
Shares issued in reinvestment of dividends... 194 1,916
Shares redeemed.............................. (8,360) (82,711)
--------- -----------
Net increase................................. 45,156 $ 446,019
========= ===========
Class C
Shares sold.................................. 49,344 $ 485,531
Shares issued in reinvestment of dividends... 261 2,571
Shares redeemed.............................. (12,226) (120,053)
--------- -----------
Net increase................................. 37,379 $ 368,049
========= ===========
</TABLE>
- --------------------------------------------------------------------------------
NOTE F: 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") intended 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 miscellaneous expenses in
the statement of operations. The Portfolio did not utilize the Facility during
the period ended December 31, 1999.
- --------------------------------------------------------------------------------
(a) Commencement of operations.
11
<PAGE>
FINANCIAL HIGHLIGHTS Alliance Bond Fund Quality Bond Portfolio
================================================================================
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each
Period
<TABLE>
<CAPTION>
--------------- --------------- ---------------
CLASS A CLASS B CLASS C
--------------- --------------- ---------------
July 1, 1999(a) July 1, 1999(a) July 1, 1999(a)
to to to
December 31, December 31, December 31,
1999 1999 1999
(unaudited) (unaudited) (unaudited)
=============== =============== ===============
<S> <C> <C> <C>
Net asset value, beginning of period.................... $10.00 $ 10.00 $ 10.00
------ ------- -------
Income From Investment Operations
Net investment income (b)(c)......................... .31 .25 .22
Net realized and unrealized gain (loss) on investment
transactions......................................... (.24) (.22) (.21)
------ ------- -------
Net increase in net asset value from operations......... .07 .03 .01
------ ------- -------
Less: Dividends
Dividends from net investment income.................... (.29) (.25) (.25)
------ ------- -------
Net asset value, end of period.......................... $ 9.78 $ 9.78 $ 9.76
====== ======= =======
Total Return
Total investment return based on net asset value (d).... .67% .32% .12%
Ratios/Supplemental Data
Net assets, end of period (000's omitted)............... $2,907 $441 $365
Ratios to average net assets of:
Expenses, net of waivers/reimbursements.............. 98%(e) 1.68%(e) 1.68%(e)
Expenses, before waivers/reimbursements.............. 18.24%(e) 18.89%(e) 18.89%(e)
Net investment income (c)............................ 5.66%(e) 5.23%(e) 5.18%(e)
Portfolio turnover rate................................. 81% 81% 81%
</TABLE>
- --------------------------------------------------------------------------------
(a) Commencement of operations.
(b) Based on average shares outstanding.
(c) Net of fees waived and expenses reimbursed by the Adviser.
(d) 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.
(e) Annualized.
12
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Alliance Bond Fund Quality Bond Portfolio
================================================================================
BOARD OF DIRECTORS
John D. Carifa, Chairman and President
Ruth Block (1)
David H. Dievler (1)
John H. Dobkin (1)
William H. Foulk, Jr. (1)
Dr. James M. Hester (1)
Clifford L. Michel (1)
Donald J. Robinson (1)
OFFICERS
Wayne D. Lyski, Senior Vice President
Kathleen A. Corbet, Senior Vice President
Paul J. DeNoon, Senior 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
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(1) Member of the Audit Committee.
15
<PAGE>
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BULK RATE
U.S. POSTAGE
PAID
New York, NY
Permit No. 7131
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ALLIANCE BOND FUND QUALITY BOND PORTFOLIO
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
Alliance Capital [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.
QBPSR1299
