0000919574-09-016585.txt : 20110516
0000919574-09-016585.hdr.sgml : 20110516
20091120145122
ACCESSION NUMBER: 0000919574-09-016585
CONFORMED SUBMISSION TYPE: 485APOS
PUBLIC DOCUMENT COUNT: 2
FILED AS OF DATE: 20091120
DATE AS OF CHANGE: 20100128
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: ALLIANCEBERNSTEIN BOND FUND INC
CENTRAL INDEX KEY: 0000003794
IRS NUMBER: 132754393
FISCAL YEAR END: 0930
FILING VALUES:
FORM TYPE: 485APOS
SEC ACT: 1933 Act
SEC FILE NUMBER: 002-48227
FILM NUMBER: 091198346
BUSINESS ADDRESS:
STREET 1: ALLIANCEBERNSTEIN LP
STREET 2: 1345 AVENUE OF THE AMERICAS
CITY: NEW YORK
STATE: NY
ZIP: 10105
BUSINESS PHONE: 2129691000
MAIL ADDRESS:
STREET 1: ALLIANCEBERNSTEIN LP
STREET 2: 1345 AVENUE OF THE AMERICAS
CITY: NEW YORK
STATE: NY
ZIP: 10105
FORMER COMPANY:
FORMER CONFORMED NAME: ALLIANCE BOND FUND INC
DATE OF NAME CHANGE: 19920703
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: ALLIANCEBERNSTEIN BOND FUND INC
CENTRAL INDEX KEY: 0000003794
IRS NUMBER: 132754393
FISCAL YEAR END: 0930
FILING VALUES:
FORM TYPE: 485APOS
SEC ACT: 1940 Act
SEC FILE NUMBER: 811-02383
FILM NUMBER: 091198347
BUSINESS ADDRESS:
STREET 1: ALLIANCEBERNSTEIN LP
STREET 2: 1345 AVENUE OF THE AMERICAS
CITY: NEW YORK
STATE: NY
ZIP: 10105
BUSINESS PHONE: 2129691000
MAIL ADDRESS:
STREET 1: ALLIANCEBERNSTEIN LP
STREET 2: 1345 AVENUE OF THE AMERICAS
CITY: NEW YORK
STATE: NY
ZIP: 10105
FORMER COMPANY:
FORMER CONFORMED NAME: ALLIANCE BOND FUND INC
DATE OF NAME CHANGE: 19920703
0000003794
S000010305
AllianceBernstein Intermediate Bond Portfolio
C000028493
Class A
ABQUX
C000028494
Class B
ABQBX
C000028495
Class C
ABQCX
C000028496
Advisor Class
ABQYX
C000028497
Class R
ABQRX
C000028498
Class K
ABQKX
C000028499
Class I
ABQIX
485APOS
1
d1045081_485-a.txt
As filed with the Securities and Exchange
Commission on November 20, 2009
File Nos. 2-48227
811-2383
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF l933
Pre-Effective Amendment No.
Post-Effective Amendment No. 91 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
Amendment No. 69 X
ALLIANCEBERNSTEIN BOND FUND, INC.
(Exact Name of Registrant as Specified in Charter)
1345 Avenue of the Americas, New York, New York 10105
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code:
(800) 221-5672
EMILIE D. WRAPP
AllianceBernstein L.P.
1345 Avenue of the Americas
New York, New York l0105
(Name and address of agent for service)
Copies of communications to:
KATHLEEN K. CLARKE
Seward & Kissel LLP
1200 G Street, NW, Suite 350
Washington, DC 20005
It is proposed that this filing will become effective (check appropriate box)
|_| immediately upon filing pursuant to paragraph (b)
|_| on (date) pursuant to paragraph (b)
|X| 60 days after filing pursuant to paragraph (a)(1)
|_| on (date) pursuant to paragraph (a)(1)
|_| 75 days after filing pursuant to paragraph (a)(2)
|_| on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
|_| This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
This Post-Effective Amendment No. 91 relates solely to the Class A, Class B,
Class C, Class R, Class K, Class I and Advisor Class shares of the
AllianceBernstein Intermediate Bond Portfolio. No information in the
Registrant's Registration Statement relating to the Class A, Class C and Advisor
Class shares, as applicable, of the AllianceBernstein Bond Inflation Strategy
and AllianceBernstein Municipal Bond Inflation Strategy is amended or
superseded.
PROSPECTUS | JANUARY 30, 2010
THE ALLIANCEBERNSTEIN BOND FUNDS
CORE
(Shares Offered-Exchange Ticker Symbol)
>AllianceBernstein Intermediate Bond Portfolio
(Class A-ABQUX; Class B-ABQBX; Class C-ABQCX; Advisor Class-ABQYX)
>AllianceBernstein Global Bond Fund
(Class A-ANAGX; Class B-ANABX; Class C-ANACX; Advisor Class-ANARX)
ABSOLUTE RETURN
(Shares Offered-Exchange Ticker Symbol)
>AllianceBernstein Diversified Yield Fund
(Class A-AGSAX; Class B-AGSBX; Class C-AGCCX; Advisor Class-AGSIX)
HIGH INCOME
(Shares Offered-Exchange Ticker Symbol)
>AllianceBernstein High Income Fund
(Class A-AGDAX; Class B-AGDBX; Class C-AGDCX; Advisor Class-AGDYX)
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation to
the contrary is a criminal offense.
[LOGO OMITTED]
Investment Products Offered
o Are Not FDIC Insured
o May Lose Value
o Are Not Bank Guaranteed
TABLE OF CONTENTS
--------------------------------------------------------------------------------
Page
SUMMARY INFORMATION......................................................... [_]
CORE........................................................................ [_]
AllianceBernstein Intermediate Bond Portfolio............................ [_]
AllianceBernstein Global Bond Fund....................................... [_]
ABSOLUTE RETURN............................................................. [_]
AllianceBernstein Diversified Yield Fund................................. [_]
HIGH INCOME................................................................. [_]
AllianceBernstein High Income Fund....................................... [_]
MORE INFORMATION ABOUT THE FUNDS' RISKS AND INVESTMENTS..................... [_]
INVESTING IN THE FUNDS...................................................... [_]
How to Buy Shares........................................................ [_]
The Different Share Class Expenses....................................... [_]
Sales Charge Reduction Programs.......................................... [_]
CDSC Waivers and Other Programs.......................................... [_]
The "Pros" and "Cons" of Different Share Classes......................... [_]
Payments to Financial Advisors and Their Firms........................... [_]
How to Exchange Shares................................................... [_]
How to Sell or Redeem Shares............................................. [_]
Frequent Purchases and Redemptions of Fund Shares........................ [_]
How the Funds Value Their Shares......................................... [_]
MANAGEMENT OF THE FUNDS..................................................... [_]
DIVIDENDS, DISTRIBUTIONS AND TAXES.......................................... [_]
GENERAL INFORMATION......................................................... [_]
GLOSSARY OF INVESTMENT TERMS................................................ [_]
FINANCIAL HIGHLIGHTS........................................................ [_]
APPENDIX A--BOND RATINGS.....................................................A-1
APPENDIX B--HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION..................B-1
SUMMARY INFORMATION
--------------------------------------------------------------------------------
AllianceBernstein Intermediate Bond Portfolio
--------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The Fund's investment objective is to generate income and price appreciation
without assuming what the Adviser considers undue risk.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund. You may qualify for sales charge reductions if you and
members of your family invest, or agree to invest in the future, at least
$100,000 in AllianceBernstein Mutual Funds. More information about these and
other discounts is available from your financial intermediary and in Investing
in the Funds - Sales Charge Reduction Programs on page [___] of this Prospectus
and in Purchase of Shares - Sales Charge Reduction Programs on page [___] of the
Funds' Statement of Additional Information ("SAI").
Shareholder Fees (fees paid directly from your investment)
Class A Shares Class B Shares Class C Shares Advisor Class
(not currently Shares
offered to new
investors)
-------------- --------------- -------------- -------------
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price) 4.25% None None None
Maximum Deferred Sales Charge
(Load) (as a percentage of
offering price or redemption
proceeds, whichever is lower) None 3.00%* 1.00%** None
Exchange Fee None None None None
Annual Fund Operating Expenses (expenses that you pay each year as a percentage
of the value of your investment)
Class A Class B Class C Advisor Class
--------- --------- --------- -------------
Management Fees .45% .45% .45% .45%
Distribution and/or
Service (12b-1) Fees .30% 1.00% 1.00% None
Other Expenses:
Transfer Agent [_______]% [_______]% [_______]% [_______]%
Other Expenses [_______]% [_______]% [_______]% [_______]%
Total Other Expenses [_______]% [_______]% [_______]% [_______]%
Total Annual Fund Operating Expenses [_______]% [_______]% [_______]% [_______]%
Waiver and/or Expense Reimbursement(a) ([_______])% ([_______])% ([_______])% ([_______])%
Net Expenses [_______]% [_______]% [_______]% [_______]%
Examples
The Examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Examples assume that you
invest $10,000 in the Fund for the time periods indicated and then redeem all of
your shares at the end of those periods. The Examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses stay
the same. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
Class A Class B Class C Advisor Class
---------- ---------- ---------- -------------
After 1 Year $[________] $[________] $[________] $[________]
After 3 Years(b) $[________] $[________] $[________] $[________]
After 5 Years(b) $[________] $[________] $[________] $[________]
After 10 Years(b) $[________] $[________] $[________] $[________]
You would pay the following expenses if you did not redeem your shares at the
end of period:
Class A Class B Class C Advisor Class
---------- ---------- ---------- -------------
After 1 Year $[________] $[________] $[________] $[________]
After 3 Years(b) $[________] $[________] $[________] $[________]
After 5 Years(b) $[________] $[________] $[________] $[________]
After 10 Years(b) $[________] $[________] $[________] $[________]
* Class B shares automatically convert to Class A shares after six years. The
CDSC decreases over time. For Class B shares, the CDSC decreases 1.00%
annually to 0% after the third year.
** For Class C shares, the CDSC is 0% after the first year.
(a) The fee waiver and/or expense reimbursements will remain in effect until
January [__], 2011.
(b) These examples assume that the Adviser's agreement to waive advisory fees
and/or bear Fund expenses is not extended beyond January [__], 2011.
Portfolio Turnover
The Fund pays transactions costs, such as commissions, when it buys or sells
securities (or "turns over" its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when shares are
held in a taxable account. These transaction costs, which are not reflected in
the Annual Fund Operating Expenses or in the Examples, affect the Fund's
performance. During the most recent fiscal year, the Fund's portfolio turnover
rate was [__]% of the average value of its portfolio.
PRINCIPAL STRATEGIES
The Fund invests, under normal circumstances, at least 80% of its net assets in
fixed-income securities. The Fund expects to invest in readily marketable
fixed-income securities with a range of maturities from short- to long-term and
relatively attractive yields that do not involve undue risk of loss of capital.
The Fund expects to invest in fixed-income securities with a dollar-weighted
average maturity of generally between three to ten years and an average duration
of three to six years. The Fund may invest up to 25% of its net assets in below
investment grade bonds. The Fund may use leverage for investment purposes.
The Fund may invest without limit in U.S. Dollar-denominated foreign
fixed-income securities and may invest up to 25% of its assets in non-U.S.
Dollar-denominated foreign fixed-income securities. These investments may
include, in each case, developed and emerging market debt securities.
The Fund may invest in mortgage-related and other asset-backed securities, loan
participations, inflation-protected securities, structured securities, variable,
floating, and inverse floating rate instruments and preferred stock, and may use
other investment techniques. The Fund intends, among other things, to enter into
transactions such as reverse repurchase agreements and dollar rolls. The Fund
may invest, without limit, in derivatives, such as options, futures, forwards,
or swap agreements.
The Fund expects to engage in active and frequent trading of portfolio
securities to achieve its principal investment strategies. A higher rate of
portfolio turnover increases transaction expenses, which may negatively affect
the Fund's performance. High portfolio turnover also may result in the
realization of substantial net short-term capital gains, which, when
distributed, are taxable to shareholders.
PRINCIPAL RISKS
o Market Risk: The value of the Fund's assets will fluctuate as the
stock or bond market fluctuates. The value of its investments may
decline, sometimes rapidly and unpredictably, simply because of
economic changes or other events that affect large portions of the
market.
o Interest Rate Risk: Changes in interest rates will affect the value of
investments in fixed-income securities. When interest rates rise, the
value of investments in fixed-income securities tend to fall and this
decrease in value may not be offset by higher income from new
investments. Interest rate risk is generally greater for fixed-income
securities with longer maturities or durations.
o Credit Risk: An issuer or guarantor of a fixed-income security, or the
counterparty to a derivatives or other contract, may be unable or
unwilling to make timely payments of interest or principal, or to
otherwise honor its obligations. The issuer or guarantor may default
causing a loss of the full principal amount of a security. The degree
of risk for a particular security may be reflected in its credit
rating. There is the possibility that the credit rating of a
fixed-income security may be downgraded after purchase, which may
adversely affect the value of the security. Investments in
fixed-income securities with lower ratings tend to have a higher
probability that an issuer will default or fail to meet its payment
obligations.
o Inflation Risk: This is the risk that the value of assets or income
from investments will be less in the future as inflation decreases the
value of money. As inflation increases, the value of the Fund's assets
can decline as can the value of the Fund's distributions. This risk is
significantly greater if the Fund invests a significant portion of its
assets in fixed-income securities with longer maturities.
o Foreign (Non-U.S.) Risk: Investment in securities of non-U.S. issuers
may involve more risk than those of U.S. issuers. These securities may
fluctuate more widely in price and may be less liquid due to adverse
market, economic, political, regulatory or other factors.
o Emerging Market Risk: Investments in emerging market countries may
have more risk because the markets are less developed and less liquid
as well as being subject to increased economic, political, regulatory
or other uncertainties.
o Currency Risk: Fluctuations in currency exchange risk may negatively
affect the value of the Fund's investments or reduce its returns.
o Prepayment Risk: The value of mortgage-related or asset-backed
securities may be particularly sensitive to changes in prevailing
interest rates. Early payments of principal on some mortgage-related
securities may occur during periods of falling mortgage interest rates
and expose a Fund to a lower rate of return upon reinvestment of
principal. Early payments associated with mortgage-related securities
cause these securities to experience significantly greater price and
yield volatility than is experienced by traditional fixed-income
securities. During periods of rising interest rates, a reduction in
prepayments may increase the effective life of mortgage-related
securities, subjecting them to greater risk of decline in market value
in response to rising interest rates. If the life of a
mortgage-related security is inaccurately predicted, a Fund may not be
able to realize the rate of return it expected.
o Derivatives Risk: Investments in derivatives may be illiquid,
difficult to price, and leveraged so that small changes may produce
disproportionate losses for the Fund, and may be subject to
counterparty risk to a greater degree than more traditional
investments.
o Management Risk: The Fund is subject to management risk because it is
an actively managed investment fund. The Adviser will apply its
investment techniques and risk analyses in making investment
decisions, but there is no guarantee that its techniques will produce
the intended results.
As with all investments, you may lose money by investing in the Fund.
BAR CHART AND PERFORMANCE INFORMATION
The bar chart and performance information provide an indication of the
historical risk of an investment in the Fund by showing:
o how the Fund's performance changed from year to year over ten years;
and
o how the Fund's average annual returns for one, five and ten years
compare to those of a broad-based securities market index.
You may obtain updated performance information on the Fund's website at
www.AllianceBernstein.com (click on "Pricing & Performance").
The Fund's past performance before and after taxes, of course, does not
necessarily indicate how it will perform in the future.
Bar Chart
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
[The following table is depicted as a bar chart in the printed material.]
11.25 7.36 7.67 3.69 3.48 1.94 3.97 5.68 -8.26 [_]
--------------------------------------------------------------------------------
00 01 02 03 04 05 06 07 08 09
Calendar Year End (%)
During the period shown in the bar chart, the Fund's:
Best Quarter was up [____]% in the [___] quarter, [____]; and Worst Quarter was
down [_____]% in the [___] quarter, [____].
Performance Table
Average Annual Total Returns
(For the periods ended December 31, 2009)
Since
1 Year 5 Years Inception*
----------------------------------------------------------------------------------------------------------------
Class A** Return Before Taxes [___]% [___]% [___]%
-------------------------------------------------------------------------------------------------
Return After Taxes on Distributions [___]% [___]% [___]%
-------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and Sale of Fund Shares [___]% [___]% [___]%
----------------------------------------------------------------------------------------------------------------
Class B Return Before Taxes [___]% [___]% [___]%
----------------------------------------------------------------------------------------------------------------
Class C Return Before Taxes [___]% [___]% [___]%
----------------------------------------------------------------------------------------------------------------
Advisor Class Return Before Taxes [___]% [___]% [___]%
----------------------------------------------------------------------------------------------------------------
Barclays Capital U.S. Aggregate Index (reflects no deduction for fees,
expenses, or taxes) [___]% [___]% [___]%
----------------------------------------------------------------------------------------------------------------
* Inception dates for Class A, Class B and Class C shares: 7/1/99, and
Advisor Class shares: 10/9/00. Performance information for periods prior to
the inception of Advisor Class shares is the performance of the Fund's
Class A shares adjusted to reflect the lower expense ratio of Advisor Class
shares.
** After-tax Returns:
- Are shown for Class A shares only and will vary for Class B, Class C and
Advisor Class shares because these Classes have different expense
ratios.
- Are an estimate, which is based on the highest historical individual
federal marginal income tax rates and do not reflect the impact of state
and local taxes; actual after-tax returns depend on an individual
investor's tax situation and are likely to differ from those shown; and
- Are not relevant to investors who hold Fund shares through tax-deferred
arrangements such as 401(k) plans or individual retirement accounts.
INVESTMENT ADVISER
AllianceBernstein L.P. is the investment adviser for the Fund.
PORTFOLIO MANAGER
The following table lists the persons responsible for day-to-day management of
the Fund's portfolio:
Employee Length of Service Title
--------------------------------------------------------------------------------
Paul J. DeNoon Since January 2009 Senior Vice President of the Adviser
Shawn E. Keegan Since October 2005 Vice President of the Adviser
Joran Laird Since October 2005 Vice President of the Adviser
Alison M. Martier Since May 2005 Senior Vice President of the Adviser
Douglas J. Peebles Since November 2007 Executive Vice President of the Adviser
Greg J. Wilensky Since October 2005 Senior Vice President of the Adviser
ADDITIONAL INFORMATION
For important information about the purchase and sale of Fund shares, tax
information and financial intermediary compensation, please turn to ADDITIONAL
INFORMATION ABOUT PURCHASE AND SALE OF FUND SHARES, TAXES AND FINANCIAL
INTERMEDIARIES, page [__] in this Prospectus.
AllianceBernstein Global Bond Fund
--------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The Fund's investment objective is to generate current income consistent with
preservation of capital.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund. You may qualify for sales charge reductions if you and
members of your family invest, or agree to invest in the future, at least
$100,000 in AllianceBernstein Mutual Funds. More information about these and
other discounts is available from your financial intermediary and in Investing
in the Funds - Sales Charge Reduction Programs on page [___] of this Prospectus
and in Purchase of Shares - Sales Charge Reduction Programs on page [___] of the
Funds' SAI.
Shareholder Fees (fees paid directly from your investment)
Class A Shares Class B Shares Class C Shares Advisor Class
(not currently Shares
offered to new
investors)
--------------- --------------- -------------- -------------
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price) 4.25% None None None
Maximum Deferred Sales Charge
(Load) (as a percentage of
offering price or redemption
proceeds, whichever is lower) None 3.00%* 1.00%** None
Exchange Fee None None None None
Annual Fund Operating Expenses (expenses that you pay each year as a percentage
of the value of your investment)
Class A Class B Class C Advisor Class
--------- -------- --------- -------------
Management Fees .50% .50% .50% .50%
Distribution and/or
Service (12b-1) Fees .30% 1.00% 1.00% None
Other Expenses:
Transfer Agent [_______]% [_______]% [_______]% [_______]%
Other Expenses [_______]% [_______]% [_______]% [_______]%
Total Other Expenses [_______]% [_______]% [_______]% [_______]%
Total Annual Fund Operating Expenses [_______]% [_______]% [_______]% [_______]%
Waiver and/or Expense Reimbursement(a) ([_______])% ([_______])% ([_______])% ([_______])%
Net Expenses(b) [_______]% [_______]% [_______]% [_______]%
Examples
The Examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Examples assume that you
invest $10,000 in the Fund for the time periods indicated and then redeem all of
your shares at the end of those periods. The Examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses stay
the same. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
Class A Class B Class C Advisor Class
---------- ---------- ---------- -------------
After 1 Year $[________] $[________] $[________] $[________]
After 3 Years(c) $[________] $[________] $[________] $[________]
After 5 Years(c) $[________] $[________] $[________] $[________]
After 10 Years(c) $[________] $[________] $[________] $[________]
You would pay the following expenses if you did not redeem your shares at the
end of period:
Class A Class B Class C Advisor Class
---------- ---------- ---------- -------------
After 1 Year $[________] $[________] $[________] $[________]
After 3 Years(c) $[________] $[________] $[________] $[________]
After 5 Years(c) $[________] $[________] $[________] $[________]
After 10 Years(c) $[________] $[________] $[________] $[________]
* Class B shares automatically convert to Class A shares after six years. The
CDSC decreases over time. For Class B shares, the CDSC decreases 1.00%
annually to 0% after the third year.
** For Class C shares, the CDSC is 0% after the first year.
(a) The fee waiver and/or expense reimbursements will remain in effect until
January [__], 2011.
(b) If interest expenses were excluded, net expenses would be as follows:
Class A Class B Class C Advisor Class
---------- ---------- ---------- -------------
.[_______]% .[_______]% .[_______]% .[_______]%
(c) These examples assume that the Adviser's agreement to waive advisory fees
and/or bear Fund expenses is not extended beyond January [__], 2011.
Portfolio Turnover
The Fund pays transactions costs, such as commissions, when it buys or sells
securities (or "turns over" its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when shares are
held in a taxable account. These transaction costs, which are not reflected in
the Annual Fund Operating Expenses or in the Examples, affect the Fund's
performance. During the most recent fiscal year, the Fund's portfolio turnover
rate was [__]% of the average value of its portfolio.
PRINCIPAL STRATEGIES
The Fund invests, under normal circumstances, at least 80% of its net assets in
fixed-income securities. Under normal market conditions, the Fund invests
significantly in securities of non-U.S. companies. In addition, the Fund
invests, under normal circumstances, in the equity securities of companies
located in at least three countries. The Fund may invest in a broad range of
fixed-income securities in both developed and emerging markets. The Fund may
invest across all fixed-income sectors, including U.S. and non-U.S. government
and corporate debt securities. The Fund's investments may be denominated in
local currency or U.S. Dollar-denominated. The Fund may invest in debt
securities with a range of maturities from short- to long-term. The Fund may use
borrowings or other leverage for investment purposes.
The Adviser will actively manage the Fund's assets in relation to market
conditions and general economic conditions and adjust the Fund's investments in
an effort to best enable the Fund to achieve its investment objective. Thus, the
percentage of the Fund's assets invested in a particular country or denominated
in a particular currency will vary in accordance with the Adviser's assessment
of the relative yield and appreciation potential of such securities and the
relationship of the country's currency to the U.S. Dollar.
Under normal circumstances, the Fund invests at least 75% of its net assets in
fixed-income securities rated investment grade at the time of investment and may
invest up to 25% of its net assets in below investment grade fixed-income
securities.
The Fund may invest in mortgage-related and other asset-backed securities, loan
participations, inflation-protected securities, structured securities, variable,
floating, and inverse floating rate instruments and preferred stock, and may use
other investment techniques. The Fund intends, among other things, to enter into
transactions such as reverse repurchase agreements and dollar rolls. The Fund
may invest, without limit, in derivatives, such as options, futures, forwards,
or swap agreements.
PRINCIPAL RISKS
o Market Risk: The value of the Fund's assets will fluctuate as the
stock or bond market fluctuates. The value of its investments may
decline, sometimes rapidly and unpredictably, simply because of
economic changes or other events that affect large portions of the
market.
o Interest Rate Risk: Changes in interest rates will affect the value of
investments in fixed-income securities. When interest rates rise, the
value of investments in fixed-income securities tend to fall and this
decrease in value may not be offset by higher income from new
investments. Interest rate risk is generally greater for fixed-income
securities with longer maturities or durations.
o Credit Risk: An issuer or guarantor of a fixed-income security, or the
counterparty to a derivatives or other contract, may be unable or
unwilling to make timely payments of interest or principal, or to
otherwise honor its obligations. The issuer or guarantor may default
causing a loss of the full principal amount of a security. The degree
of risk for a particular security may be reflected in its credit
rating. There is the possibility that the credit rating of a
fixed-income security may be downgraded after purchase, which may
adversely affect the value of the security. Investments in
fixed-income securities with lower ratings tend to have a higher
probability that an issuer will default or fail to meet its payment
obligations.
o Inflation Risk: This is the risk that the value of assets or income
from investments will be less in the future as inflation decreases the
value of money. As inflation increases, the value of the Fund's assets
can decline as can the value of the Fund's distributions. This risk is
significantly greater if the Fund invests a significant portion of its
assets in fixed-income securities with longer maturities.
o Foreign (Non-U.S.) Risk: Investment in securities of non-U.S. issuers
may involve more risk than those of U.S. issuers. These securities may
fluctuate more widely in price and may be less liquid due to adverse
market, economic, political, regulatory or other factors.
o Emerging Market Risk: Investments in emerging market countries may
have more risk because the markets are less developed and less liquid
as well as being subject to increased economic, political, regulatory
or other uncertainties.
o Currency Risk: Fluctuations in currency exchange risk may negatively
affect the value of the Fund's investments or reduce its returns.
o Leverage Risk: To the extent the Fund uses leveraging techniques, its
net asset value ("NAV") may be more volatile because leverage tends to
exaggerate the effect of changes in interest rates and any increase or
decrease in the value of the Fund's investments.
o Diversification Risk: The Fund may have more risk because it is
"non-diversified," meaning that it can invest more of its assets in a
smaller number of issuers.
o Derivatives Risk: Investments in derivatives may be illiquid,
difficult to price, and leveraged so that small changes may produce
disproportionate losses for the Fund, and may be subject to
counterparty risk to a greater degree than more traditional
investments.
o Management Risk: The Fund is subject to management risk because it is
an actively managed investment fund. The Adviser will apply its
investment techniques and risk analyses in making investment
decisions, but there is no guarantee that its techniques will produce
the intended results.
As with all investments, you may lose money by investing in the Fund.
BAR CHART AND PERFORMANCE INFORMATION
The bar chart and performance information provide an indication of the
historical risk of an investment in the Fund by showing:
o how the Fund's performance changed from year to year over ten years;
and
o how the Fund's average annual returns for one, five and ten years
compare to those of a broad-based securities market index.
You may obtain updated performance information on the Fund's website at
www.AllianceBernstein.com (click on "Pricing & Performance").
The Fund's past performance before and after taxes, of course, does not
necessarily indicate how it will perform in the future.
Bar Chart
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
[The following table is depicted as a bar chart in the printed material.]
18.47 0.31 10.69 15.13 6.87 9.72 6.57 9.90 -10.71 [_]
--------------------------------------------------------------------------------
00 01 02 03 04 05 06 07 08 09
Calendar Year End (%)
During the period shown in the bar chart, the Fund's:
Best Quarter was up [____]% in the [___] quarter, [____]; and Worst Quarter was
down [____]% in the [___] quarter, [____].
Performance Table
Average Annual Total Returns
(For the periods ended December 31, 2009)
1 Year 5 Years 10 Years
---------------------------------------------------------------------------------------------------------------
Class A* Return Before Taxes [___]% [___]% [___]%
----------------------------------------------------------------------------------------------
Return After Taxes on Distributions [___]% [___]% [___]%
----------------------------------------------------------------------------------------------
Return After Taxes on Distributions and Sale of Fund Shares [___]% [___]% [___]%
---------------------------------------------------------------------------------------------------------------
Class B Return Before Taxes [___]% [___]% [___]%
---------------------------------------------------------------------------------------------------------------
Class C Return Before Taxes [___]% [___]% [___]%
---------------------------------------------------------------------------------------------------------------
Advisor Class** Return Before Taxes [___]% [___]% [___]%
---------------------------------------------------------------------------------------------------------------
Barclays Capital Global Aggregate Index
(U.S. hedged) (reflects no deduction for fees, expenses, or taxes) [___]% [___]% [___]%
---------------------------------------------------------------------------------------------------------------
* After-tax Returns:
- Are shown for Class A shares only and will vary for Class B and Class C
shares because these Classes have higher expense ratios;
- Are an estimate, which is based on the highest historical individual
federal marginal income tax rates and do not reflect the impact of state
and local taxes; actual after-tax returns depend on an individual
investor's tax situation and are likely to differ from those shown; and
- Are not relevant to investors who hold Fund shares through tax-deferred
arrangements such as 401(k) plans or individual retirement accounts.
** Inception date of Advisor Class shares: 11/05/07. Performance information
for periods prior to the inception of Advisor Class shares is the
performance of the Fund's Class A shares adjusted to reflect the lower
expense ratio of Advisor Class shares.
INVESTMENT ADVISER
AllianceBernstein L.P. is the investment adviser for the Fund.
PORTFOLIO MANAGER
The following table lists the persons responsible for day-to-day management of
the Fund's portfolio:
Employee Length of Service Title
--------------------------------------------------------------------------------
Paul J. DeNoon Since August 2002 Senior Vice President of the Adviser
Scott DiMaggio Since August 2005 Senior Vice President of the Adviser
Fernando Grisales Since January 2007 Assistant Vice President of the Adviser
Michael L. Mon Since September 2003 Vice President of the Adviser
Douglas J. Peebles Since March 1992 Executive Vice President of the Adviser
Matthew S. Sheridan Since January 2007 Vice President of the Adviser
ADDITIONAL INFORMATION
For important information about the purchase and sale of Fund shares, tax
information and financial intermediary compensation, please turn to ADDITIONAL
INFORMATION ABOUT PURCHASE AND SALE OF FUND SHARES, TAXES AND FINANCIAL
INTERMEDIARIES, page [__] in this Prospectus.
AllianceBernstein Diversified Yield Fund
--------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The Fund's investment objective is to generate current income consistent with
preservation of capital.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund. You may qualify for sales charge reductions if you and
members of your family invest, or agree to invest in the future, at least
$100,000 in AllianceBernstein Mutual Funds. More information about these and
other discounts is available from your financial intermediary and in Investing
in the Funds - Sales Charge Reduction Programs on page [___] of this Prospectus
and in Purchase of Shares - Sales Charge Reduction Programs on page [___] of the
Funds' SAI.
Shareholder Fees (fees paid directly from your investment)
Class A Shares Class B Shares Class C Shares Advisor Class
(not currently Shares
offered to new
investors)
-------------- --------------- -------------- --------------
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price) 4.25% None None None
Maximum Deferred Sales Charge
(Load) (as a percentage of
offering price or redemption
proceeds, whichever is lower) None 4.00%* 1.00%** None
Exchange Fee None None None None
Annual Fund Operating Expenses (expenses that you pay each year as a percentage
of the value of your investment)
Class A Class B Class C Advisor Class
--------- --------- --------- -------------
Management Fees .50% .50% .50% .50%
Distribution and/or
Service (12b-1) Fees .30% 1.00% 1.00% None
Other Expenses:
Transfer Agent [_______]% [_______]% [_______]% [_______]%
Other Expenses [_______]% [_______]% [_______]% [_______]%
Total Other Expenses [_______]% [_______]% [_______]% [_______]%
Total Annual Fund Operating Expenses [_______]% [_______]% [_______]% [_______]%
Waiver and/or Expense Reimbursement(a) ([_______])% ([_______])% ([_______])% ([_______])%
Net Expenses [_______]% [_______]% [_______]% [_______]%
Examples
The Examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Examples assume that you
invest $10,000 in the Fund for the time periods indicated and then redeem all of
your shares at the end of those periods. The Examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses stay
the same. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
Class A Class B Class C Advisor Class
---------- ---------- ---------- -------------
After 1 Year $[________] $[________] $[________] $[________]
After 3 Years(b) $[________] $[________] $[________] $[________]
After 5 Years(b) $[________] $[________] $[________] $[________]
After 10 Years(b) $[________] $[________] $[________] $[________]
You would pay the following expenses if you did not redeem your shares at the
end of period:
Class A Class B Class C Advisor Class
---------- ---------- ---------- -------------
After 1 Year $[________] $[________] $[________] $[________]
After 3 Years(b) $[________] $[________] $[________] $[________]
After 5 Years(b) $[________] $[________] $[________] $[________]
After 10 Years(b) $[________] $[________] $[________] $[________]
* Class B shares automatically convert to Class A shares after eight years.
The CDSC decreases over time. For Class B shares, the CDSC decreases 1.00%
annually to 0% after the fourth year.
** For Class C shares, the CDSC is 0% after the first year.
(a) The fee waiver and/or expense reimbursements will remain in effect until
January [__], 2011.
(b) These examples assume that the Adviser's agreement to waive advisory fees
and/or bear Fund expenses is not extended beyond January [__], 2011.
Portfolio Turnover
The Fund pays transactions costs, such as commissions, when it buys or sells
securities (or "turns over" its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when shares are
held in a taxable account. These transaction costs, which are not reflected in
the Annual Fund Operating Expenses or in the Examples, affect the Fund's
performance. During the most recent fiscal year, the Fund's portfolio turnover
rate was [__]% of the average value of its portfolio.
PRINCIPAL STRATEGIES
The Fund employs a dynamic risk allocation, meaning that the Fund's risk profile
may vary significantly over time based upon market conditions. The Fund invests
in a portfolio of fixed-income securities of U.S. and non-U.S. companies and
U.S. and non-U.S. government securities and supranational entities, including
lower-rated securities. The Fund limits its investments in the securities of any
one foreign government to 25% of its total assets. The Fund may invest in debt
securities with a range of maturities from short- to long-term.
The Fund typically maintains at least 50% of its net assets in investment grade
securities. The Fund may invest up to 50% of its net assets in below investment
grade securities, such as corporate high yield fixed-income securities,
sovereign debt obligations and fixed-income securities of issuers located in
emerging markets.
The Fund may also invest in mortgage-related and other asset-backed securities,
loan participations, inflation-protected securities, structured securities,
variable, floating, and inverse floating rate instruments and preferred stock,
and may use other investment techniques. The Fund may make short sales of
securities or currencies or maintain a short position. The Fund may use
borrowings or other leverage for investment purposes. The Fund intends, among
other things, to enter into transactions such as reverse repurchase agreements
and dollar rolls. The Fund may invest, without limit, in derivatives, such as
options, futures, forwards, or swap agreements.
PRINCIPAL RISKS
o Market Risk: The value of the Fund's assets will fluctuate as the
stock or bond market fluctuates. The value of its investments may
decline, sometimes rapidly and unpredictably, simply because of
economic changes or other events that affect large portions of the
market.
o Interest Rate Risk: Changes in interest rates will affect the value of
investments in fixed-income securities. When interest rates rise, the
value of investments in fixed-income securities tend to fall and this
decrease in value may not be offset by higher income from new
investments. Interest rate risk is generally greater for fixed-income
securities with longer maturities or durations.
o Credit Risk: An issuer or guarantor of a fixed-income security, or the
counterparty to a derivatives or other contract, may be unable or
unwilling to make timely payments of interest or principal, or to
otherwise honor its obligations. The issuer or guarantor may default
causing a loss of the full principal amount of a security. The degree
of risk for a particular security may be reflected in its credit
rating. There is the possibility that the credit rating of a
fixed-income security may be downgraded after purchase, which may
adversely affect the value of the security. Investments in
fixed-income securities with lower ratings tend to have a higher
probability that an issuer will default or fail to meet its payment
obligations.
o Inflation Risk: This is the risk that the value of assets or income
from investments will be less in the future as inflation decreases the
value of money. As inflation increases, the value of the Fund's assets
can decline as can the value of the Fund's distributions. This risk is
significantly greater if the Fund invests a significant portion of its
assets in fixed-income securities with longer maturities.
o Foreign (Non-U.S.) Risk: Investment in securities of non-U.S. issuers
may involve more risk than those of U.S. issuers. These securities may
fluctuate more widely in price and may be less liquid due to adverse
market, economic, political, regulatory or other factors.
o Emerging Market Risk: Investments in emerging market countries may
have more risk because the markets are less developed and less liquid
as well as being subject to increased economic, political, regulatory
or other uncertainties.
o Currency Risk: Fluctuations in currency exchange risk may negatively
affect the value of the Fund's investments or reduce its returns.
o Leverage Risk: To the extent the Fund uses leveraging techniques, its
NAV may be more volatile because leverage tends to exaggerate the
effect of changes in interest rates and any increase or decrease in
the value of the Fund's investments.
o Prepayment Risk: The value of mortgage-related or asset-backed
securities may be particularly sensitive to changes in prevailing
interest rates. Early payments of principal on some mortgage-related
securities may occur during periods of falling mortgage interest rates
and expose a Fund to a lower rate of return upon reinvestment of
principal. Early payments associated with mortgage-related securities
cause these securities to experience significantly greater price and
yield volatility than is experienced by traditional fixed-income
securities. During periods of rising interest rates, a reduction in
prepayments may increase the effective life of mortgage-related
securities, subjecting them to greater risk of decline in market value
in response to rising interest rates. If the life of a
mortgage-related security is inaccurately predicted, a Fund may not be
able to realize the rate of return it expected.
o Derivatives Risk: Investments in derivatives may be illiquid,
difficult to price, and leveraged so that small changes may produce
disproportionate losses for the Fund, and may be subject to
counterparty risk to a greater degree than more traditional
investments.
o Management Risk: The Fund is subject to management risk because it is
an actively managed investment fund. The Adviser will apply its
investment techniques and risk analyses in making investment
decisions, but there is no guarantee that its techniques will produce
the intended results.
As with all investments, you may lose money by investing in the Fund.
BAR CHART AND PERFORMANCE INFORMATION
The bar chart and performance information provide an indication of the
historical risk of an investment in the Fund by showing:
o how the Fund's performance changed from year to year over ten years;
and
o how the Fund's average annual returns for one, five and ten years
compare to those of a broad-based securities market index.
You may obtain updated performance information on the Fund's website at
www.AllianceBernstein.com (click on "Pricing & Performance").
The Fund's past performance before and after taxes, of course, does not
necessarily indicate how it will perform in the future.
Bar Chart
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
[The following table is depicted as a bar chart in the printed material.]
4.57 -2.81 5.04 15.61 6.13 4.82 4.47 6.38 -16.52 [_]
--------------------------------------------------------------------------------
00 01 02 03 04 05 06 07 08 09
Calendar Year End (%)
During the period shown in the bar chart, the Fund's:
Best Quarter was up [____]% in the [___] quarter, [____]; and Worst Quarter was
down [____]% in the [___] quarter, [____].
Performance Table
Average Annual Total Returns
(For the periods ended December 31, 2009)
1 Year 5 Years 10 Years
-----------------------------------------------------------------------------------------------------------
Class A* Return Before Taxes [___]% [___]% [___]%
--------------------------------------------------------------------------------------------
Return After Taxes on Distributions [___]% [___]% [___]%
--------------------------------------------------------------------------------------------
Return After Taxes on Distributions and Sale of Fund Shares [___]% [___]% [___]%
-----------------------------------------------------------------------------------------------------------
Class B Return Before Taxes [___]% [___]% [___]%
-----------------------------------------------------------------------------------------------------------
Class C Return Before Taxes [___]% [___]% [___]%
-----------------------------------------------------------------------------------------------------------
Advisor Class Return Before Taxes [___]% [___]% [___]%
-----------------------------------------------------------------------------------------------------------
Barclays Capital Global Aggregate Index
(U.S. hedged) (reflects no deduction for fees, expenses, or taxes) [___]% [___]% [___]%
-----------------------------------------------------------------------------------------------------------
Merrill Lynch 3-Month T-Bill Index [___]% [___]% [___]%
-----------------------------------------------------------------------------------------------------------
* After-tax Returns:
-Are shown for Class A shares only and will vary for Class B, Class C and
Advisor Class shares because these Classes have different expense ratios.
-Are an estimate, which is based on the highest historical individual
federal marginal income tax rates and do not reflect the impact of state
and local taxes; actual after-tax returns depend on an individual
investor's tax situation and are likely to differ from those shown; and
-Are not relevant to investors who hold Fund shares through tax-deferred
arrangements such as 401(k) plans or individual retirement accounts.
INVESTMENT ADVISER
AllianceBernstein L.P. is the investment adviser for the Fund.
PORTFOLIO MANAGER
The following table lists the persons responsible for day-to-day management of
the Fund's portfolio:
Employee Length of Service Title
--------------------------------------------------------------------------------
Paul J. DeNoon Since October 2005 Senior Vice President of the Adviser
Joran Laird Since January 2009 Vice President of the Adviser
Douglas J. Peebles Since January 1996 Executive Vice President of the Adviser
Matthew S. Sheridan Since April 2006 Vice President of the Adviser
Greg J. Wilensky Since June 2008 Senior Vice President of the Adviser
ADDITIONAL INFORMATION
For important information about the purchase and sale of Fund shares, tax
information and financial intermediary compensation, please turn to ADDITIONAL
INFORMATION ABOUT PURCHASE AND SALE OF FUND SHARES, TAXES AND FINANCIAL
INTERMEDIARIES, page [__] in this Prospectus.
AllianceBernstein High Income Fund
--------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The Fund's investment objective is to seek to maximize total returns from price
appreciation and income.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund. You may qualify for sales charge reductions if you and
members of your family invest, or agree to invest in the future, at least
$100,000 in AllianceBernstein Mutual Funds. More information about these and
other discounts is available from your financial intermediary and in Investing
in the Funds - Sales Charge Reduction Programs on page [___] of this Prospectus
and in Purchase of Shares - Sales Charge Reduction Programs on page [___] of the
Funds' SAI.
Shareholder Fees (fees paid directly from your investment)
Class A Shares Class B Shares Class C Shares Advisor Class
(not currently Shares
offered to new
investors)
-------------- --------------- -------------- -------------
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price) 4.25% None None None
Maximum Deferred Sales Charge
(Load) (as a percentage of
offering price or redemption
proceeds, whichever is lower) None 3.00%* 1.00%** None
Exchange Fee None None None None
Annual Fund Operating Expenses (expenses that you pay each year as a percentage
of the value of your investment)
Class A Class B Class C Advisor Class
--------- --------- --------- -------------
Management Fees .50% .50% .50% .50%
Distribution and/or
Service (12b-1) Fees .30% 1.00% 1.00% None
Other Expenses:
Transfer Agent [_______]% [_______]% [_______]% [_______]%
Other Expenses [_______]% [_______]% [_______]% [_______]%
Total Other Expenses [_______]% [_______]% [_______]% [_______]%
Total Annual Fund Operating Expenses [_______]% [_______]% [_______]% [_______]%
Waiver and/or Expense Reimbursement(a) ([_______])% ([_______])% ([_______])% ([_______])%
Net Expenses(b) [_______]% [_______]% [_______]% [_______]%
Examples
The Examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Examples assume that you
invest $10,000 in the Fund for the time periods indicated and then redeem all of
your shares at the end of those periods. The Examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses stay
the same. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
Class A Class B Class C Advisor Class
---------- ---------- ---------- -------------
After 1 Year $[________] $[________] $[________] $[________]
After 3 Years(c) $[________] $[________] $[________] $[________]
After 5 Years(c) $[________] $[________] $[________] $[________]
After 10 Years(c) $[________] $[________] $[________] $[________]
You would pay the following expenses if you did not redeem your shares at the
end of period:
Class A Class B Class C Advisor Class
---------- ---------- ---------- -------------
After 1 Year $[________] $[________] $[________] $[________]
After 3 Years(c) $[________] $[________] $[________] $[________]
After 5 Years(c) $[________] $[________] $[________] $[________]
After 10 Years(c) $[________] $[________] $[________] $[________]
* Class B shares automatically convert to Class A shares after six years. The
CDSC decreases over time. For Class B shares, the CDSC decreases 1.00%
annually to 0% after the third year.
** For Class C shares, the CDSC is 0% after the first year.
(a) The fee waiver and/or expense reimbursements will remain in effect until
January [__], 2011.
(b) If interest expenses were excluded, net expenses would be as follows:
Class A Class B Class C Advisor Class
---------- ---------- ---------- -------------
.[_______]% .[_______]% .[_______]% .[_______]%
(c) These examples assume that the Adviser's agreement to waive advisory fees
and/or bear Fund expenses is not extended beyond January [__], 2011.
Portfolio Turnover
The Fund pays transactions costs, such as commissions, when it buys or sells
securities (or "turns over" its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when shares are
held in a taxable account. These transaction costs, which are not reflected in
the Annual Fund Operating Expenses or in the Examples, affect the Fund's
performance. During the most recent fiscal year, the Fund's portfolio turnover
rate was [__]% of the average value of its portfolio.
PRINCIPAL STRATEGIES
The Fund pursues income opportunities from government, corporate, emerging
market and high yield sources. It has the flexibility to invest in a broad range
of fixed-income securities in both developed and emerging market countries. The
Fund's investments may include U.S. and non-U.S. corporate debt securities and
sovereign debt securities. The Fund may invest, without limitation, in either
U.S. Dollar-denominated or non-U.S. Dollar-denominated fixed-income securities.
The Fund may invest in debt securities with a range of maturities from short- to
long-term. Substantially all of the Fund's assets may be invested in lower-rated
securities, which may include securities having the lowest rating for
non-subordinated debt instruments (i.e., rated C by Moody's or CCC+ or lower by
S&P and Fitch) and unrated securities of equivalent investment quality. The Fund
also may invest in investment grade securities and unrated securities.
The Fund may also make short sales of securities or maintain a short position.
The Fund is non-diversified, meaning it may invest more of its assets in a fewer
number of issuers.
The Fund may invest in mortgage-related and other asset-backed securities, loan
participations, inflation-protected securities, structured securities, variable,
floating, and inverse floating rate instruments and preferred stock, and may use
other investment techniques. The Fund may use borrowings or other leverage for
investment purposes. The Fund intends, among other things, to enter into
transactions such as reverse repurchase agreements and dollar rolls. The Fund
may invest, without limit, in derivatives, such as options, futures, forwards,
or swap agreements.
PRINCIPAL RISKS
o Market Risk: The value of the Fund's assets will fluctuate as the
stock or bond market fluctuates. The value of its investments may
decline, sometimes rapidly and unpredictably, simply because of
economic changes or other events that affect large portions of the
market.
o Interest Rate Risk: Changes in interest rates will affect the value of
investments in fixed-income securities. When interest rates rise, the
value of investments in fixed-income securities tend to fall and this
decrease in value may not be offset by higher income from new
investments. Interest rate risk is generally greater for fixed-income
securities with longer maturities or durations.
o Credit Risk: An issuer or guarantor of a fixed-income security, or the
counterparty to a derivatives or other contract, may be unable or
unwilling to make timely payments of interest or principal, or to
otherwise honor its obligations. The issuer or guarantor may default
causing a loss of the full principal amount of a security. The degree
of risk for a particular security may be reflected in its credit
rating. There is the possibility that the credit rating of a
fixed-income security may be downgraded after purchase, which may
adversely affect the value of the security. Investments in
fixed-income securities with lower ratings tend to have a higher
probability that an issuer will default or fail to meet its payment
obligations.
o Inflation Risk: This is the risk that the value of assets or income
from investments will be less in the future as inflation decreases the
value of money. As inflation increases, the value of the Fund's assets
can decline as can the value of the Fund's distributions. This risk is
significantly greater if the Fund invests a significant portion of its
assets in fixed-income securities with longer maturities.
o Foreign (Non-U.S.) Risk: Investment in securities of non-U.S. issuers
may involve more risk than those of U.S. issuers. These securities may
fluctuate more widely in price and may be less liquid due to adverse
market, economic, political, regulatory or other factors.
o Emerging Market Risk: Investments in emerging market countries may
have more risk because the markets are less developed and less liquid
as well as being subject to increased economic, political, regulatory
or other uncertainties.
o Currency Risk: Fluctuations in currency exchange risk may negatively
affect the value of the Fund's investments or reduce its returns.
o Leverage Risk: To the extent the Fund uses leveraging techniques, its
NAV may be more volatile because leverage tends to exaggerate the
effect of changes in interest rates and any increase or decrease in
the value of the Fund's investments.
o Diversification Risk: The Fund may have more risk because it is
"non-diversified," meaning that it can invest more of its assets in a
smaller number of issuers.
o Derivatives Risk: Investments in derivatives may be illiquid,
difficult to price, and leveraged so that small changes may produce
disproportionate losses for the Fund, and may be subject to
counterparty risk to a greater degree than more traditional
investments.
o Management Risk: The Fund is subject to management risk because it is
an actively managed investment fund. The Adviser will apply its
investment techniques and risk analyses in making investment
decisions, but there is no guarantee that its techniques will produce
the intended results.
As with all investments, you may lose money by investing in the Fund.
BAR CHART AND PERFORMANCE INFORMATION
The bar chart and performance information provide an indication of the
historical risk of an investment in the Fund by showing:
o how the Fund's performance changed from year to year over ten years;
and
o how the Fund's average annual returns for one, five and ten years
compare to those of a broad-based securities market index.
You may obtain updated performance information on the Fund's website at
www.AllianceBernstein.com (click on "Pricing & Performance").
The Fund's past performance before and after taxes, of course, does not
necessarily indicate how it will perform in the future.
Bar Chart
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
[The following table is depicted as a bar chart in the printed material.]
14.47 6.10 18.69 38.42 11.09 10.16 11.85 7.29 -26.52 [_]
--------------------------------------------------------------------------------
00 01 02 03 04 05 06 07 08 09
Calendar Year End (%)
During the period shown in the bar chart, the Fund's:
Best Quarter was up [____]% in the [___] quarter, [____]; and Worst Quarter was
down [____]% in the [____] quarter, [____].
Performance Table
Average Annual Total Returns
(For the periods ended December 31, 2009)
1 Year 5 Years 10 Years
------------------------------------------------------------------------------------------------------------------
Class A* Return Before Taxes [___]% [___]% [___]%
--------------------------------------------------------------------------------------------------
Return After Taxes on Distributions [___]% [___]% [___]%
--------------------------------------------------------------------------------------------------
Return After Taxes on Distributions and Sale of Fund Shares [___]% [___]% [___]%
------------------------------------------------------------------------------------------------------------------
Class B Return Before Taxes [___]% [___]% [___]%
------------------------------------------------------------------------------------------------------------------
Class C Return Before Taxes [___]% [___]% [___]%
------------------------------------------------------------------------------------------------------------------
Advisor Class** Return Before Taxes [___]% [___]% [___]%
------------------------------------------------------------------------------------------------------------------
JPMorgan Emerging Markets Bond Index Global ("EMBI Global")
(U.S. Dollar-denominated) (reflects no deduction for fees, expenses, or taxes) [___]% [___]% [___]%
------------------------------------------------------------------------------------------------------------------
JPMorgan Government Bond Index-Emerging Markets ("GBI-EM")
(local currency-denominated) (reflects no deduction for fees, expenses, or taxes) [___]% [___]% N/A
------------------------------------------------------------------------------------------------------------------
Barclays Capital High Yield Index (2% Constrained) ("BC High Yield")
(reflects no deduction for fees, expenses, or taxes) [___]% [___]% [___]%
------------------------------------------------------------------------------------------------------------------
Composite Benchmark
(equal weighted blend of EMBI Global, GBI-EM and BC High Yield) [___]% [___]% N/A
------------------------------------------------------------------------------------------------------------------
* After-tax Returns:
- Are shown for Class A shares only and will vary for Class B and Class C
shares because these Classes have higher expense ratios;
- Are an estimate, which is based on the highest historical individual
federal marginal income tax rates and do not reflect the impact of state
and local taxes; actual after-tax returns depend on an individual
investor's tax situation and are likely to differ from those shown; and
- Are not relevant to investors who hold Fund shares through tax-deferred
arrangements such as 401(k) plans or individual retirement accounts.
** Inception date for Advisor Class shares: 1/28/08. Performance information
for periods prior to the inception of Advisor Class shares is the
performance of the Fund's Class A shares adjusted to reflect the lower
expense ratio of Advisor Class shares.
INVESTMENT ADVISER
AllianceBernstein L.P. is the investment adviser for the Fund.
PORTFOLIO MANAGER
The following table lists the persons responsible for day-to-day management of
the Fund's portfolio:
Employee Length of Service Title
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Paul J. DeNoon Since August 2002 Senior Vice President of the Adviser
Gershon Distenfeld Since February 2008 Vice President of the Adviser
Douglas J. Peebles Since August 2002 Executive Vice President of the Adviser
Matthew S. Sheridan Since October 2005 Vice President of the Adviser
ADDITIONAL INFORMATION
For important information about the purchase and sale of Fund shares, tax
information and financial intermediary compensation, please turn to ADDITIONAL
INFORMATION ABOUT PURCHASE AND SALE OF FUND SHARES, TAXES AND FINANCIAL
INTERMEDIARIES, page [__] in this Prospectus.
ADDITIONAL INFORMATION ABOUT PURCHASE AND SALE OF FUND SHARES, TAXES AND
FINANCIAL INTERMEDIARIES
o PURCHASE AND SALE OF FUND SHARES
Purchase Minimums*
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Initial Subsequent
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Class A/Class C Shares, including $2,500 $50
traditional IRAs and Roth IRAs
(Class B shares are not currently
offered to new shareholders)
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Automatic Investment Program Less than $2,500 $200 monthly until
account balance
reaches $2,500
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Advisor Class Shares (only available None None
to fee-based programs or through
other limited arrangements)
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*Note: The Funds may waive investment minimums for certain types of retirement
accounts or under certain other circumstances.
You may sell (redeem) your shares each day the New York Stock Exchange is open.
You may sell your shares through your financial intermediary or by mail
(AllianceBernstein Investor Services, Inc. P.O. Box 786003, San Antonio, TX
78278-6003) or telephone (800-221-5672).
o TAX INFORMATION
Each Fund may make income dividends or capital gains distributions, which may be
subject to federal income taxes and taxable as ordinary income or capital gains,
and may also be subject to state and local taxes.
o PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of a Fund through a broker-dealer or other financial
intermediary (such as a bank), the Fund and its related companies may pay the
intermediary for the sale of Fund shares and related services. These payments
may create a conflict of interest by influencing the broker-dealer or other
financial intermediary and your salesperson to recommend the Fund over another
investment. Ask your salesperson or visit your financial intermediary's website
for more information.
ADDITIONAL INFORMATION ABOUT THE FUNDS' RISKS AND INVESTMENTS
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This section of the Prospectus provides additional information about the Funds'
investment practices and related risks. Most of these investment practices are
discretionary, which means that the Adviser may or may not decide to use them.
This Prospectus does not describe all of a Fund's investment practices and
additional information about each Fund's risks and investments can be found in
the Funds' SAI.
Derivatives
Each Fund may, but is not required to, use derivatives for risk management
purposes or as part of its investment strategies. Derivatives are financial
contracts whose value depends on, or is derived from, the value of an underlying
asset, reference rate or index. A Fund may use derivatives to earn income and
enhance returns, to hedge or adjust the risk profile of a portfolio, to replace
more traditional direct investments and to obtain exposure to otherwise
inaccessible markets.
There are four principal types of derivatives, including options, futures,
forwards and swaps, which are described below. Derivatives may be (i)
standardized, exchange-traded contracts or (ii) customized, privately negotiated
contracts. Exchange-traded derivatives tend to be more liquid and subject to
less credit risk than those that are privately negotiated.
A Fund's use of derivatives may involve risks that are different from, or
possibly greater than, the risks associated with investing directly in
securities or other more traditional instruments. These risks include the risk
that the value of a derivative instrument may not correlate perfectly, or at
all, with the value of the assets, reference rates, or indices that they are
designed to track. Other risks include: the possible absence of a liquid
secondary market for a particular instrument and possible exchange-imposed price
fluctuation limits, either of which may make it difficult or impossible to close
out a position when desired; and the risk that the counterparty will not perform
its obligations. Certain derivatives may have a leverage component and involve
leverage risk. Adverse changes in the value or level of the underlying asset,
note or index can result in a loss substantially greater than the Fund's
investment (in some cases, the potential loss is unlimited).
The Funds' investments in derivatives may include, but are not limited to, the
following:
o Forward Contracts--A forward contract is a customized, privately negotiated
agreement for one party to buy, and the other party to sell, a specific
quantity of an underlying commodity or other tangible asset for an agreed
upon price at a future date. A forward contract is either settled by
physical delivery of the commodity or tangible asset to an agreed-upon
location at a future date, rolled forward into a new forward contract or,
in the case of a non-deliverable forward, by a cash payment at maturity.
The Funds' investments in forward contracts may include the following:
- Forward Currency Exchange Contracts. A Fund may purchase or sell
forward currency exchange contracts for hedging purposes to minimize
the risk from adverse changes in the relationship between the U.S.
Dollar and other currencies or for non-hedging purposes as a means of
making direct investments in foreign currencies as described below
under "Currency Transactions". A Fund, for example, may enter into a
forward contract as a transaction hedge (to "lock in" the U.S. Dollar
price of a non-U.S. Dollar security), as a position hedge (to protect
the value of securities the Fund owns that are denominated in a
foreign currency against substantial changes in the value of the
foreign currency) or as a cross-hedge (to protect the value of
securities the Fund owns that are denominated in a foreign currency
against substantial changes in the value of that foreign currency by
entering into a forward contract for a different foreign currency that
is expected to change in the same direction as the currency in which
the securities are denominated).
o Futures Contracts and Options on Futures Contracts--A futures contract is
an agreement that obligates the buyer to buy and the seller to sell a
specified quantity of an underlying asset (or settle for cash the value of
a contract based on an underlying asset, rate or index) at a specific price
on the contract maturity date. Options on futures contracts are options
that call for the delivery of futures contracts upon exercise. A Fund may
purchase or sell futures contracts and options thereon to hedge against
changes in interest rates, securities (through index futures or options) or
currencies. A Fund may also purchase or sell futures contracts for foreign
currencies or options thereon for non-hedging purposes as a means of making
direct investments in foreign currencies, as described below under
"Currency Transactions".
o Options--An option is an agreement that, for a premium payment or fee,
gives the option holder (the buyer) the right but not the obligation to buy
(a "call option") or sell (a "put option") the underlying asset (or settle
for cash an amount based on an underlying asset, rate or index) at a
specified price (the exercise price) during a period of time or on a
specified date. Investments in options are considered speculative. A Fund
may lose the premium paid for them if the price of the underlying security
or other asset decreased or remained the same (in the case of a call
option) or increased or remained the same (in the case of a put option). If
a put or call option purchased by a Fund were permitted to expire without
being sold or exercised, its premium would represent a loss to the Fund.
The Funds' investments in options include the following:
- Options on Foreign Currencies. A Fund may invest in options on foreign
currencies that are privately negotiated or traded on U.S. or foreign
exchanges for hedging purposes to protect against declines in the U.S.
Dollar value of foreign currency denominated securities held by a Fund
and against increases in the U.S. Dollar cost of securities to be
acquired. The purchase of an option on a foreign currency may
constitute an effective hedge against fluctuations in exchange rates,
although if rates move adversely, a Fund may forfeit the entire amount
of the premium plus related transaction costs. A Fund may also invest
in options on foreign currencies for non-hedging purposes as a means
of making direct investments in foreign currencies, as described below
under "Currency Transactions."
- Options on Securities. A Fund may purchase or write a put or call
option on securities. The Fund will only exercise an option it
purchased if the price of the security was less (in the case of a put
option) or more (in the case of a call option) than the exercise
price. If the Fund does not exercise an option, the premium it paid
for the option will be lost. A Fund may write "covered" options, which
means writing an option for securities the Fund owns, and uncovered
options.
- Options on Securities Indices. An option on a securities index is
similar to an option on a security except that, rather than taking or
making delivery of a security at a specified price, an option on a
securities index gives the holder the right to receive, upon exercise
of the option, an amount of cash if the closing level of the chosen
index is greater than (in the case of a call) or less than (in the
case of a put) the exercise price of the option.
o Swap Transactions--A swap is a customized, privately negotiated agreement
that obligates two parties to exchange a series of cash flows at specified
intervals (payment dates) based upon or calculated by reference to changes
in specified prices or rates (interest rates in the case of interest rate
swaps, currency exchange rates in the case of currency swaps) for a
specified amount of an underlying asset (the "notional" principal amount).
Except for currency swaps, the notional principal amount is used solely to
calculate the payment stream, but is not exchanged. Swaps are entered into
on a net basis (i.e., the two payment streams are netted out, with a Fund
receiving or paying, as the case may be, only the net amount of the two
payments). The Funds' investments in swap transactions include the
following:
- Interest Rate Swaps, Swaptions, Caps and Floors. Interest rate swaps
involve the exchange by a Fund with another party of payments
calculated by reference to specified interest rates (e.g., an exchange
of floating rate payments for fixed rate payments). Unless there is a
counterparty default, the risk of loss to the Fund from interest rate
transactions is limited to the net amount of interest payments that
the Fund is contractually obligated to make. If the counterparty to an
interest rate transaction defaults, the Fund's risk of loss consists
of the net amount of interest payments that the Fund is contractually
is entitled to receive.
An option on a swap agreement, also called a "swaption," is an option
that gives the buyer the right, but not the obligation, to enter into
a swap on a future date in exchange for paying a market-based
"premium." A receiver swaption gives the owner the right to receive
the total return of a specified asset, reference rate, or index. A
payer swaption gives the owner the right to pay the total return of a
specified asset, reference rate, or index. Swaptions also include
options that allow an existing swap to be terminated or extended by
one of the counterparties.
The purchase of an interest rate cap entitles the purchaser, to the
extent that a specified index exceeds a predetermined interest rate,
to receive payments of interest on a contractually-based principal
amount from the party selling the interest rate cap. The purchase of
an interest rate floor entitles the purchaser, to the extent that a
specified index falls below a predetermined interest rate, to receive
payments of interest on an agreed principal amount from the party
selling the interest rate floor. Caps and floors may be less liquid
than swaps.
There is no limit on the amount of interest rate transactions that may
be entered into by a Fund. The value of these transactions will
fluctuate based on changes in interest rates.
Interest rate swap, swaptions, cap and floor transactions may be used
to preserve a return or spread on a particular investment or a portion
of a Fund's portfolio or to protect against an increase in the price
of securities a Fund anticipates purchasing at a later date.
- Inflation (CPI) Swaps. Inflation swap agreements are contracts in
which one party agrees to pay the cumulative percentage increase in a
price index (the Consumer Price Index with respect to CPI swaps) over
the term of the swap (with some lag on the inflation index), and the
other pays a compounded fixed rate. Inflation swap agreements may be
used to protect the NAV of a Fund against an unexpected change in the
rate of inflation measured by an inflation index. The values of
inflation swap agreements are expected to change in response to
changes in real interest rates. Real interest rates are tied to the
relationship between nominal interest rates and the rate of inflation.
If nominal interest rates increase at a faster rate than inflation,
real interest rates may rise, leading to a decrease in value of an
inflation swap agreement.
- Credit Default Swap Agreements. The "buyer" in a credit default swap
contract is obligated to pay the "seller" a periodic stream of
payments over the term of the contract in return for a contingent
payment upon the occurrence of a credit event with respect to an
underlying reference obligation. Generally, a credit event means
bankruptcy, failure to pay, obligation acceleration or modified
restructuring. A Fund may be either the buyer or seller in the
transaction. If a Fund is a seller, the Fund receives a fixed rate of
income throughout the term of the contract, which typically is between
one month and five years, provided that no credit event occurs. If a
credit event occurs, a Fund typically must pay the contingent payment
to the buyer, which is typically the "par value" (full notional value)
of the reference obligation. The contingent payment may be a cash
settlement or by physical delivery of the reference obligation in
return for payment of the face amount of the obligation The value of
the reference obligation received by a Fund coupled with the periodic
payments previously received may be less than the full notional value
it pays to the buyer, resulting in a loss of value to the Fund. If the
reference obligation is a defaulted security, physical delivery of the
security will cause a Fund to hold a defaulted security. If a Fund is
a buyer and no credit event occurs, the Fund will lose its periodic
stream of payments over the term of the contract. However, if a credit
event occurs, the buyer typically receives full notional value for a
reference obligation that may have little or no value.
Credit default swaps may involve greater risks than if a Fund had
invested in the reference obligation directly. Credit default swaps
are subject to general market risk, liquidity risk and credit risk.
- Currency Swaps. A Fund may invest in currency swaps for hedging
purposes to protect against adverse changes in exchange rates between
the U.S. Dollar and other currencies or for non-hedging purposes as a
means of making direct investments in foreign currencies, as described
below under "Currency Transactions." Currency swaps involve the
individually negotiated exchange by a Fund with another party of a
series of payments in specified currencies. Actual principal amounts
of currencies may be exchanged by the counterparties at the
initiation, and again upon the termination, of the transaction.
Therefore, the entire principal value of a currency swap is subject to
the risk that the swap counterparty will default on its contractual
delivery obligations. If there is a default by the counterparty to the
transaction, the Fund will have contractual remedies under the
transaction agreements.
o Other Derivatives and Strategies--
- Eurodollar Instruments. Eurodollar instruments are essentially U.S.
Dollar-denominated futures contracts or options that are linked to the
London Interbank Offered Rate (LIBOR). Eurodollar futures contracts
enable purchasers to obtain a fixed rate for the lending of funds and
sellers to obtain a fixed rate for borrowings.
- Structured Instruments. As part of its investment program and to
maintain greater flexibility, each Fund may invest in structured
instruments. Structured instruments, including indexed or structured
securities, combine the elements of futures contracts or options with
those of debt, preferred equity or a depository instrument. Generally,
a structured instrument will be a debt security, preferred stock,
depository share, trust certificate, certificate of deposit or other
evidence of indebtedness on which a portion of or all interest
payments, and/or the principal or stated amount payable at maturity,
redemption or retirement, is determined by reference to prices,
changes in prices, or differences between prices, of securities,
currencies, intangibles, goods, articles or commodities (collectively
"Underlying Assets") or by another objective index, economic factor or
other measure, such as interest rates, currency exchange rates,
commodity indices, and securities indices (collectively,
"Benchmarks"). Thus, structured instruments may take a variety of
forms, including, but not limited to, debt instruments with interest
or principal payments or redemption terms determined by reference to
the value of a currency or commodity or securities index at a future
point in time, preferred stock with dividend rates determined by
reference to the value of a currency, or convertible securities with
the conversion terms related to a particular commodity.
Structured instruments are potentially more volatile and carry greater
market risks than traditional debt instruments. Depending on the
structure of the particular structured instrument, changes in a
Benchmark may be magnified by the terms of the structured instrument
and have an even more dramatic and substantial effect upon the value
of the structured instrument. Also, the prices of the structured
instrument and the Benchmark or Underlying Asset may not move in the
same direction or at the same time.
Structured instruments can have volatile prices and limited liquidity,
and their use by a Fund may not be successful. The risk of these
investments can be substantial; possibly all of the principal is at
risk.
- Currency Transactions. A Fund may invest in non-U.S.
Dollar-denominated securities on a currency hedged or un-hedged basis.
The Adviser may actively manage a Fund's currency exposures and may
seek investment opportunities by taking long or short positions in
currencies through the use of currency-related derivatives, including
forward currency exchange contracts, futures and options on futures,
swaps and options. The Adviser may enter into transactions for
investment opportunities when it anticipates that a foreign currency
will appreciate or depreciate in value but securities denominated in
that currency are not held by a Fund and do not present attractive
investment opportunities. Such transactions may also be used when the
Adviser believes that it may be more efficient than a direct
investment in a foreign currency-denominated security. A Fund may also
conduct currency exchange contracts on a spot basis (i.e., for cash at
the spot rate prevailing in the currency exchange market for buying or
selling currencies).
Forward Commitments
Forward commitments for the purchase or sale of securities may include purchases
on a when-issued basis or purchases or sales on a delayed delivery basis. In
some cases, a forward commitment may be conditioned upon the occurrence of a
subsequent event, such as approval and consummation of a merger, corporate
reorganization or debt restructuring or approval of a proposed financing by
appropriate authorities (i.e., a "when, as and if issued" trade).
The Funds may invest significantly in TBA-mortgage-backed securities. A TBA or
"To Be Announced" trade represents a contract for the purchase or sale of
mortgage-backed securities to be delivered at a future agreed-upon date;
however, the specific mortgage pool numbers or the number of pools that will be
delivered to fulfill the trade obligation or terms of the contract are unknown
at the time of the trade. Mortgage pools (including fixed rate or variable rate
mortgages) guaranteed by the Government National Mortgage Association, or GNMA,
the Federal National Mortgage Association, or FNMA, or the Federal Home Loan
Mortgage Corporation, or FHLMC, are subsequently allocated to the TBA
transactions.
When forward commitments with respect to fixed-income securities are negotiated,
the price, which is generally expressed in yield terms, is fixed at the time the
commitment is made, but payment for and delivery of the securities take place at
a later date. Securities purchased or sold under a forward commitment are
subject to market fluctuation and no interest or dividends accrue to the
purchaser prior to the settlement date. There is the risk of loss if the value
of either a purchased security declines before the settlement date or the
security sold increases before the settlement date. The use of forward
commitments helps a Fund to protect against anticipated changes in interest
rates and prices.
Illiquid Securities
Under current Commission guidelines, the Funds limit their investments in
illiquid securities to 15% of their net assets. The term "illiquid securities"
for this purpose means securities that cannot be disposed of within seven days
in the ordinary course of business at approximately the amount a Fund has valued
the securities. A Fund that invests in illiquid securities may not be able to
sell such securities and may not be able to realize their full value upon sale.
Restricted securities (securities subject to legal or contractual restrictions
on resale) may be illiquid. Some restricted securities (such as securities
issued pursuant to Rule 144A under the Securities Act of 1933 (the "Securities
Act") or certain commercial paper) may be treated as liquid, although they may
be less liquid than registered securities traded on established secondary
markets.
Inflation-Protected Securities
Inflation-protected securities, or IPS, are fixed-income securities whose
principal value is periodically adjusted according to the rate of inflation. If
the index measuring inflation falls, the principal value of these securities
will be adjusted downward, and consequently the interest payable on these
securities (calculated with respect to a smaller principal amount) will be
reduced.
Inflation-protected securities tend to react to changes in real
interest rates. In general, the price of an inflation-protected security can
fall when real interest rates rise, and can rise when real interest rates fall.
In addition, the value of inflation-protected securities can fluctuate based on
fluctuations in expectations of inflations. Interest payments on
inflation-protected securities can be unpredictable and will vary as the
principal and/or interest is adjusted for inflation.
Investment in Other Investment Companies
The Funds may invest in other investment companies as permitted by the
Investment Company Act of 1940 (the "1940 Act") or the rules and regulations
thereunder. The Funds intend to invest uninvested cash balances in an affiliated
money market fund as permitted by Rule 12d1-1 under the 1940 Act. If a Fund
acquires shares in investment companies, shareholders would bear, indirectly,
the expenses of such investment companies (which may include management and
advisory fees), which are in addition to the Fund's expenses. A Fund may also
invest in exchange traded funds, subject to the restrictions and limitations of
the 1940 Act.
Loan Participations
The Funds may invest in corporate loans either by participating as co-lender at
the time the loan is originated or by buying an interest in the loan in the
secondary market from a financial institution or institutional investor. The
financial status of an institution interposed between a Fund and a borrower may
affect the ability of the Fund to receive principal and interest payments.
The success of a Fund may depend on the skill with which an agent bank
administers the terms of the corporate loan agreements, monitors borrower
compliance with covenants, collects principal, interest and fee payments from
borrowers and, where necessary, enforces creditor remedies against borrowers.
Agent banks typically have broad discretion in enforcing loan agreements.
Mortgage-Related and Other Asset-Backed Securities
Each Fund may invest in mortgage-related or other asset-backed securities.
Mortgage-related securities include mortgage pass-through securities,
collateralized mortgage obligations ("CMOs"), commercial mortgage-backed
securities, mortgage dollar rolls, CMO residuals, stripped mortgage-backed
securities ("SMBSs") and other securities that directly or indirectly represent
a participation in or are secured by and payable from mortgage loans on real
property. These securities may be issued or guaranteed by the U.S. Government or
one of its sponsored entities or may be issued by private organizations.
The value of mortgage-related or asset-backed securities may be particularly
sensitive to changes in prevailing interest rates. Early payments of principal
on some mortgage-related securities may occur during periods of falling mortgage
interest rates and expose a Fund to a lower rate of return upon reinvestment of
principal. Early payments associated with mortgage-related securities cause
these securities to experience significantly greater price and yield volatility
than is experienced by traditional fixed-income securities. During periods of
rising interest rates, a reduction in prepayments may increase the effective
life of mortgage-related securities, subjecting them to greater risk of decline
in market value in response to rising interest rates. If the life of a
mortgage-related security is inaccurately predicted, a Fund may not be able to
realize the rate of return it expected.
One type of SMBS has one class receiving all of the interest from the mortgage
assets (the interest-only, or "IO" class), while the other class will receive
all of the principal (the principal-only, or "PO" class). The yield to maturity
on an IO class is extremely sensitive to the rate of principal payments
(including prepayments) on the underlying mortgage assets, and a rapid rate of
principal payments may have a material adverse effect on a Fund's yield to
maturity from these securities.
Each Fund may invest in collateralized debt obligations ("CDOs"), which include
collateralized bond obligations ("CBOs"), collateralized loan obligations
("CLOs"), and other similarly structured securities. CBOs and CLOs are types of
asset-backed securities. A CBO is a trust that is backed by a diversified pool
of high-risk, below investment grade fixed-income securities. A CLO is a trust
typically collateralized by a pool of loans, which may include, among others,
domestic and foreign senior secured loans, senior unsecured loans, and
subordinate corporate loans, including loans that may be rated below investment
grade or equivalent unrated loans. The Funds may invest in other asset-backed
securities that have been offered to investors.
Other Asset-Backed Securities
The Funds may invest in other asset-backed securities. The securitization
techniques used to develop mortgage-related securities are being applied to a
broad range of financial assets. Through the use of trusts and special purpose
corporations, various types of assets, including automobile loans and leases,
credit card receivables, home equity loans, equipment leases and trade
receivables, are being securitized in structures similar to the structures used
in mortgage securitizations.
Repurchase Agreements and Buy/Sell Back Transactions
A Fund may enter into repurchase agreements in which a Fund purchases a security
from a bank or broker-dealer, which agrees to repurchase the security from the
Fund at an agreed-upon future date, normally a day or a few days later. The
purchase and repurchase obligations are transacted under one agreement. The
resale price is greater than the purchase price, reflecting an agreed-upon
interest rate for the period the buyer's money is invested in the security. Such
agreements permit a Fund to keep all of its assets at work while retaining
"overnight" flexibility in pursuit of investments of a longer-term nature. If
the bank or broker-dealer defaults on its repurchase obligation, a Fund would
suffer a loss to the extent that the proceeds from the sale of the security were
less than the repurchase price.
A Fund may enter into buy/sell back transactions, which are similar to
repurchase agreements. In this type of transaction, a Fund enters a trade to buy
securities at one price and simultaneously enters a trade to sell the same
securities at another price on a specified date. Similar to a repurchase
agreement, the repurchase price is higher than the sale price and reflects
current interest rates. Unlike a repurchase agreement, however, the buy/sell
back transaction is considered two separate transactions.
Reverse Repurchase Agreements, Dollar Rolls and Other Borrowings
A Fund may enter into reverse purchase agreements and dollar rolls, subject to
the Fund's limitations on borrowings. A reverse repurchase agreement or dollar
roll involves the sale of a security by a Fund and its agreement to repurchase
the instrument at a specified time and price, and may be considered a form of
borrowing for some purposes. Reverse repurchase agreements, dollar rolls and
other forms of borrowings may create leverage risk for a Fund. In addition,
reverse repurchase agreements and dollar rolls involve the risk that the market
value of the securities a Fund is obligated to repurchase may decline below the
purchase price.
Dollar rolls involve sales by a Fund of securities for delivery in the current
month and the Fund's simultaneously contracting to repurchase substantially
similar (same type and coupon) securities on a specified future date. During the
roll period, a Fund forgoes principal and interest paid on the securities. A
Fund is compensated by the difference between the current sales price and the
lower forward price for the future purchase (often referred to as the "drop") as
well as by the interest earned on the cash proceeds of the initial sale.
Reverse repurchase agreements and dollar rolls involve the risk that the market
value of the securities a Fund is obligated to repurchase under the agreement
may decline below the repurchase price. In the event the buyer of securities
under a reverse repurchase agreement or dollar roll files for bankruptcy or
becomes insolvent, a Fund's use of the proceeds of the agreement may be
restricted pending a determination by the other party, or its trustee or
receiver, whether to enforce the Fund's obligation to repurchase the securities.
Rights and Warrants
Rights and warrants are option securities permitting their holders to subscribe
for other securities. Rights are similar to warrants except that they have a
substantially shorter duration. Rights and warrants do not carry with them
dividend or voting rights with respect to the underlying securities, or any
rights in the assets of the issuer. As a result, an investment in rights and
warrants may be considered more speculative than certain other types of
investments. In addition, the value of a right or a warrant does not necessarily
change with the value of the underlying securities, and a right or a warrant
ceases to have value if it is not exercised prior to its expiration date.
Short Sales
The Funds may make short sales as a part of overall portfolio management or to
offset a potential decline in the value of a security. A short sale involves the
sale of a security that a Fund does not own, or if the Fund owns the security,
is not to be delivered upon consummation of the sale. When the Fund makes a
short sale of a security that it does not own, it must borrow from a
broker-dealer the security sold short and deliver the security to the
broker-dealer upon conclusion of the short sale.
If the price of the security sold short increases between the time of the short
sale and the time a Fund replaces the borrowed security, the Fund will incur a
loss; conversely, if the price declines, the Fund will realize a gain. The
potential for the price of a fixed-income security sold short to rise is a
function of both the remaining maturity of the obligation, its creditworthiness
and its yield. Unlike short sales of equities or other instruments, potential
for the price of a fixed-income security to rise may be limited due to the fact
that the security will be no more than par at maturity. However, the short sale
of other instruments or securities generally, including fixed-income securities
convertible into equities or other instruments, a fixed-income security trading
at a deep discount from par or that pays a coupon that is high in relative
and/or absolute terms, or that is denominated in a currency other than the U.S.
Dollar, involves the possibility of a theoretically unlimited loss since there
is a theoretically unlimited potential for the market price of the security sold
short to increase.
Standby Commitment Agreements
Standby commitment agreements are similar to put options that commit a Fund, for
a stated period of time, to purchase a stated amount of a security that may be
issued and sold to the Fund at the option of the issuer. The price and coupon of
the security are fixed at the time of the commitment. At the time of entering
into the agreement, the Fund is paid a commitment fee, regardless of whether the
security ultimately is issued.
There is no guarantee that a security subject to a standby commitment will be
issued. In addition, the value of the security, if issued, on the delivery date
may be more or less than its purchase price. Since the issuance of the security
is at the option of the issuer, a Fund will bear the risk of capital loss in the
event the value of the security declines and may not benefit from an
appreciation in the value of the security during the commitment period if the
issuer decides not to issue and sell the security to the Fund.
Structured Securities and Basket Securities
The Funds may invest in various types of structured securities and basket
securities. Structured securities are securities issued in structured financing
transactions, which generally involve aggregating types of debt assets in a pool
or special purpose entity and then issuing new securities. Types of structured
financings include securities described elsewhere in this Prospectus, such as
mortgage-related and other asset-backed securities. The Funds' investments
include investments in structured securities that represent interests in
entities organized and operated solely for the purpose of restructuring the
investment characteristics of particular debt obligations. This type of
restructuring involves the deposit with or purchase by an entity, such as a
corporation or trust, of specified instruments (such as commercial bank loans or
high yield bonds) and the issuance by that entity of one or more classes of
structured securities backed by, or representing interests in, the underlying
instruments. The cash flow on the underlying instruments may be apportioned
among the newly issued structured securities to create securities with different
investment characteristics such as varying maturities, payment priorities and
interest rate provisions, and the extent of the payments made with respect to
structured securities is dependent on the extent of the cash flow from the
underlying instruments. Structured securities of a given class may be either
subordinated or unsubordinated to the payment of another class. Subordinated
structured securities typically have higher yields and present greater risks
than unsubordinated structured securities.
Basket securities in which a Fund may invest may consist of entities organized
and operated for the purpose of holding a basket of other securities. Baskets
involving debt obligations may be designed to represent the characteristics of
some portion of the debt securities market or the entire debt market.
Variable, Floating and Inverse Floating Rate Instruments
Variable and floating rate securities pay interest at rates that are adjusted
periodically, according to a specified formula. A "variable" interest rate
adjusts at predetermined intervals (e.g., daily, weekly or monthly), while a
"floating" interest rate adjusts whenever a specified benchmark rate (such as
the bank prime lending rate) changes.
The Funds may also invest in inverse floating rate debt instruments ("inverse
floaters"). The interest rate on an inverse floater resets in the opposite
direction from the market rate of interest to which the inverse floater is
indexed. An inverse floater may have greater volatility in market value, in
that, during periods of rising interest rates, the market values of inverse
floaters will tend to decrease more rapidly than those of fixed rate securities.
Zero Coupon and Principal-Only Securities
Zero coupon securities and principal-only (PO) securities are debt securities
that have been issued without interest coupons or stripped of their unmatured
interest coupons, and include receipts or certificates representing interests in
such stripped debt obligations and coupons. Such a security pays no interest to
its holder during its life. Its value to an investor consists of the difference
between its face value at the time of maturity and the price for which it was
acquired, which is generally an amount significantly less than its face value.
Such securities usually trade at a deep discount from their face or par value
and are subject to greater fluctuations in market value in response to changing
interest rates than debt obligations of comparable maturities and credit quality
that make current distributions of interest. On the other hand, because there
are no periodic interest payments to be reinvested prior to maturity, these
securities eliminate reinvestment risk and "lock in" a rate of return to
maturity.
Foreign (Non-U.S.) Securities
Investing in foreign securities involves special risks and considerations not
typically associated with investing in U.S. securities. The securities markets
of many foreign countries are relatively small, with the majority of market
capitalization and trading volume concentrated in a limited number of companies
representing a small number of industries. A Fund that invests in foreign
fixed-income securities may experience greater price volatility and
significantly lower liquidity than a portfolio invested solely in securities of
U.S. companies. These markets may be subject to greater influence by adverse
events generally affecting the market, and by large investors trading
significant blocks of securities, than is usual in the United States.
Securities registration, custody, and settlement may in some instances be
subject to delays and legal and administrative uncertainties. Foreign investment
in the securities markets of certain foreign countries is restricted or
controlled to varying degrees. These restrictions or controls may at times limit
or preclude investment in certain securities and may increase the cost and
expenses of a Fund. In addition, the repatriation of investment income, capital
or the proceeds of sales of securities from certain of the countries is
controlled under regulations, including in some cases the need for certain
advance government notification or authority, and if a deterioration occurs in a
country's balance of payments, the country could impose temporary restrictions
on foreign capital remittances.
A Fund also could be adversely affected by delays in, or a refusal to grant, any
required governmental approval for repatriation, as well as by the application
to it of other restrictions on investment. Investing in local markets may
require a Fund to adopt special procedures or seek local governmental approvals
or other actions, any of which may involve additional costs to a Fund. These
factors may affect the liquidity of a Fund's investments in any country and the
Adviser will monitor the effect of any such factor or factors on a Fund's
investments. Transaction costs, including brokerage commissions for transactions
both on and off the securities exchanges, in many foreign countries are
generally higher than in the United States.
Issuers of securities in foreign jurisdictions are generally not subject to the
same degree of regulation as are U.S. issuers with respect to such matters as
insider trading rules, restrictions on market manipulation, shareholder proxy
requirements, and timely disclosure of information. The reporting, accounting,
and auditing standards of foreign countries may differ, in some cases
significantly, from U.S. standards in important respects, and less information
may be available to investors in foreign securities than to investors in U.S.
securities. Substantially less information is publicly available about certain
non-U.S. issuers than is available about most U.S. issuers.
The economies of individual foreign countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product or gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency, and balance of payments position. Nationalization,
expropriation or confiscatory taxation, currency blockage, political changes,
government regulation, political or social instability, revolutions, wars or
diplomatic developments could affect adversely the economy of a foreign country.
In the event of nationalization, expropriation, or other confiscation, a Fund
could lose its entire investment in securities in the country involved. In
addition, laws in foreign countries governing business organizations, bankruptcy
and insolvency may provide less protection to security holders such as the Fund
than that provided by U.S. laws.
Investments in securities of companies in emerging markets involve special
risks. There are approximately 100 countries identified by the World Bank as Low
Income, Lower Middle Income and Upper Middle Income countries that are generally
regarded as Emerging Markets. Emerging market countries that the Adviser
currently considers for investment are listed below. Countries may be added to
or removed from this list at any time.
Algeria Hong Kong Poland
Argentina Hungary Qatar
Belize India Romania
Brazil Indonesia Russia
Bulgaria Israel Singapore
Chile Jamaica Slovakia
China Jordan Slovenia
Colombia Kazakhstan South Africa
Costa Rica Lebanon South Korea
Cote D'Ivoire Malaysia Taiwan
Croatia Mexico Thailand
Czech Republic Morocco Trinidad & Tobago
Dominican Republic Nigeria Tunisia
Ecuador Pakistan Turkey
Egypt Panama Ukraine
El Salvador Peru Uruguay
Guatemala Philippines Venezuela
Investing in emerging market securities imposes risks different from, or greater
than, risks of investing in domestic securities or in foreign, developed
countries. These risks include: smaller market capitalization of securities
markets, which may suffer periods of relative illiquidity; significant price
volatility; restrictions on foreign investment; and possible repatriation of
investment income and capital. In addition, foreign investors may be required to
register the proceeds of sales; future economic or political crises could lead
to price controls, forced mergers, expropriation or confiscatory taxation,
seizure, nationalization, or creation of government monopolies. The currencies
of emerging market countries may experience significant declines against the
U.S. Dollar, and devaluation may occur subsequent to investments in these
currencies by a Fund. Inflation and rapid fluctuations in inflation rates have
had, and may continue to have, negative effects on the economies and securities
markets of certain emerging market countries.
Additional risks of emerging market securities may include: greater social,
economic and political uncertainty and instability; more substantial
governmental involvement in the economy; less governmental supervision and
regulation; unavailability of currency hedging techniques; companies that are
newly organized and small; differences in auditing and financial reporting
standards, which may result in unavailability of material information about
issuers; and less developed legal systems. In addition, emerging securities
markets may have different clearance and settlement procedures, which may be
unable to keep pace with the volume of securities transactions or otherwise make
it difficult to engage in such transactions. Settlement problems may cause a
Fund to miss attractive investment opportunities, hold a portion of its assets
in cash pending investment, or be delayed in disposing of a portfolio security.
Such a delay could result in possible liability to a purchaser of the security.
Foreign (Non-U.S.) Currencies
A Fund that invests some portion of its assets in securities denominated in, and
receives revenues in, foreign currencies will be adversely affected by
reductions in the value of those currencies relative to the U.S. Dollar. Foreign
currency exchange rates may fluctuate significantly. They are determined by
supply and demand in the foreign exchange markets, the relative merits of
investments in different countries, actual or perceived changes in interest
rates, and other complex factors. Currency exchange rates also can be affected
unpredictably by intervention (or the failure to intervene) by U.S. or foreign
governments or central banks or by currency controls or political developments.
In light of these risks, a Fund may engage in certain currency hedging
transactions, as described above, which involve certain special risks.
A Fund may also invest directly in foreign currencies for non-hedging purposes
directly on a spot basis (i.e., cash) or through derivative transactions, such
as forward currency exchange contracts, futures and options thereon, swaps and
options as described above. These investments will be subject to the same rates.
In addition, currency exchange risks may fluctuate significantly over short
periods of time, causing a Fund's NAV to fluctuate.
Borrowing and Leverage
The Funds may use borrowings for investment purposes subject to the limit
imposed by the 1940 Act, which is up to 33- (1)/3% of a Fund's assets.
Borrowings by a Fund result in leveraging of the Fund's shares. The Funds may
also use leverage for investment transactions by entering into transactions such
as reverse repurchase agreements, forward contracts and dollar rolls. This means
that a Fund uses cash made available during the term of these transactions to
make investments in other fixed-income securities.
Utilization of leverage, which is usually considered speculative, involves
certain risks to a Fund's shareholders. These include a higher volatility of the
NAV of a Fund's shares and the relatively greater effect on the NAV
of the shares. So long as a Fund is able to realize a net return on its
investment portfolio that is higher than the interest expense paid on borrowings
or the carrying costs of leveraged transactions, the effect of leverage will be
to cause the Fund's shareholders to realize a higher current net investment
income than if the Fund were not leveraged. If the interest expense on
borrowings or the carrying costs of leveraged transactions approaches the net
return on a Fund's investment portfolio, the benefit of leverage to the Fund's
shareholders will be reduced. If the interest expense on borrowings or the
carrying costs of leveraged transactions were to exceed the net return to
shareholders, a Fund's use of leverage would result in a lower rate of return.
Similarly, the effect of leverage in a declining market could be a greater
decrease in NAV. In an extreme case, if a Fund's current investment income were
not sufficient to meet the interest expense on borrowing or the carrying costs
of leveraged transactions, it could be necessary for the Fund to liquidate
certain of its investments, thereby reducing its NAV.
Investment in Below Investment Grade Fixed-Income Securities
Investments in securities rated below investment grade may be subject to greater
risk of loss of principal and interest than higher-rated securities. These
securities are also generally considered to be subject to greater market risk
than higher-rated securities. The capacity of issuers of these securities to pay
interest and repay principal is more likely to weaken than is that of issuers of
higher-rated securities in times of deteriorating economic conditions or rising
interest rates. In addition, below investment grade securities may be more
susceptible to real or perceived adverse economic conditions than investment
grade securities.
The market for these securities may be thinner and less active than that for
higher-rated securities, which can adversely affect the prices at which these
securities can be sold. To the extent that there is no established secondary
market for these securities, a Fund may experience difficulty in valuing such
securities and, in turn, the Fund's assets.
Unrated Securities
A Fund may invest in unrated securities when the Adviser believes that the
financial condition of the issuers of such securities, or the protection
afforded by the terms of the securities themselves, limits the risk to the Fund
to a degree comparable to that of rated securities that are consistent with the
Fund's objective and policies.
Sovereign Debt Obligations
No established secondary markets may exist for many sovereign debt obligations.
Reduced secondary market liquidity may have an adverse effect on the market
price and a Fund's ability to dispose of particular instruments when necessary
to meet its liquidity requirements or in response to specific economic events
such as a deterioration in the creditworthiness of the issuer. Reduced secondary
market liquidity for certain sovereign debt obligations may also make it more
difficult for a Fund to obtain accurate market quotations for the purpose of
valuing its portfolio. Market quotations are generally available on many
sovereign debt obligations only from a limited number of dealers and may not
necessarily represent firm bids of those dealers or prices for actual sales.
By investing in sovereign debt obligations, the Funds will be exposed to the
direct or indirect consequences of political, social, and economic changes in
various countries. Political changes in a country may affect the willingness of
a foreign government to make or provide for timely payments of its obligations.
The country's economic status, as reflected in, among other things, its
inflation rate, the amount of its external debt and its gross domestic product,
will also affect the government's ability to honor its obligations.
The Funds are permitted to invest in sovereign debt obligations that are not
current in the payment of interest or principal or are in default so long as the
Adviser believes it to be consistent with the Funds' investment objectives. The
Funds may have limited legal recourse in the event of a default with respect to
certain sovereign debt obligations they hold. For example, remedies from
defaults on certain sovereign debt obligations, unlike those on private debt,
must, in some cases, be pursued in the courts of the defaulting party itself.
Legal recourse therefore may be significantly diminished. Bankruptcy,
moratorium, and other similar laws applicable to issuers of sovereign debt
obligations may be substantially different from those applicable to issuers of
private debt obligations. The political context, expressed as the willingness of
an issuer of sovereign debt obligations to meet the terms of the debt
obligation, for example, is of considerable importance. In addition, no
assurance can be given that the holders of commercial bank debt will not contest
payments to the holders of securities issued by foreign governments in the event
of default under commercial bank loan agreements.
Future Developments
A Fund may take advantage of other investment practices that are not currently
contemplated for use by the Fund, or are not available but may yet be developed,
to the extent such investment practices are consistent with the Fund's
investment objective and legally permissible for the Fund. Such investment
practices, if they arise, may involve risks that exceed those involved in the
activities described above.
Changes in Investment Objectives and Policies
A Fund's Board may change a Fund's investment objective without shareholder
approval. The Fund will provide shareholders with 60 days' prior written notice
of any change to the Fund's investment objective. Unless otherwise noted, all
other investment policies of a Fund may be changed without shareholder approval.
Temporary Defensive Position
For temporary defensive purposes in an attempt to respond to adverse market,
economic, political or other conditions, each Fund may invest in certain types
of short-term, liquid, investment grade or high quality (depending on the Fund)
debt securities. While a Fund is investing for temporary defensive purposes, it
may not meet its investment objectives.
Portfolio Holdings
A description of the Funds' policies and procedures with respect to the
disclosure of the Funds' portfolio securities is available in the Funds' SAI.
INVESTING IN THE FUNDS
--------------------------------------------------------------------------------
This section discusses how to buy, sell or redeem, or exchange different classes
of shares of a Fund that are offered in this Prospectus. AllianceBernstein
Intermediate Bond, AllianceBernstein Diversified Yield, AllianceBernstein Global
Bond and AllianceBernstein High Income offer four classes of shares through this
Prospectus. Retirement shares of AllianceBernstein Intermediate Bond,
AllianceBernstein Diversified Yield, AllianceBernstein Global Bond and
AllianceBernstein High Income are available through a separate prospectus.
Each share class represents an investment in the same portfolio of securities,
but the classes may have different sales charges and bear different ongoing
distribution expenses. For additional information on the differences between the
different classes of shares and factors to consider when choosing among them,
please see "The Different Share Class Expenses" and "The 'Pros' and 'Cons' of
Different Share Classes" below. Only Class A shares offer Quantity Discounts on
sales charges, as described under "Sales Charge Reduction Programs" below.
HOW TO BUY SHARES
The purchase of a Fund's shares is priced at the next determined NAV after your
order is received in proper form.
Class A, Class B and Class C Shares
Effective January 31, 2009, sales of Class B shares of the Funds to new
investors were suspended. Class B shares may only be purchased (i) by existing
Class B shareholders as of January 31, 2009, (ii) through exchange of Class B
shares from another AllianceBernstein Mutual Fund, and (iii) as otherwise
described below.
You may purchase a Fund's Class A, Class B, or Class C shares through financial
intermediaries, such as broker-dealers or banks. You also may purchase shares
directly from the Funds' principal underwriter, AllianceBernstein Investments,
Inc., or ABI.
Purchase Minimums and Maximums
------------------------------
Minimums:*
--Initial: $ 2,500
--Subsequent: $ 50
* These purchase minimums may not apply to some accounts established in
connection with the Automatic Investment Program and to some retirement-
related investment programs. Please see "Automatic Investment Program" and
"Tax-Deferred Accounts and Employee Benefit Plans" below. Additionally,
these investment minimums do not apply to persons participating in a
fee-based program sponsored and maintained by a registered broker-dealer or
other financial intermediary and approved by ABI.
Maximum Individual Purchase Amount:
--Class A shares None
--Class B shares $ 100,000
--Class C shares $ 1,000,000
Your broker or financial advisor must receive your purchase request by 4:00
p.m., Eastern time, and submit it to the Fund by a pre-arranged time for you to
receive the next-determined NAV, less any applicable initial sales charge.
If you are an existing Fund shareholder and you have completed the appropriate
section of the Mutual Fund Application, you may purchase additional shares by
telephone with payment by electronic funds transfer in amounts not exceeding
$500,000. AllianceBernstein Investor Services, Inc., or ABIS, must receive and
confirm telephone requests before 4:00 p.m., Eastern time, to receive that day's
public offering price. Call 800-221-5672 to arrange a transfer from your bank
account.
Advisor Class Shares
You may purchase Advisor Class shares through your financial advisor at NAV.
Advisor Class shares may be purchased and held solely:
o through accounts established under a fee-based program, sponsored and
maintained by a registered broker-dealer or other financial intermediary
and approved by ABI;
o through a defined contribution employee benefit plan (e.g., a 401(k) plan)
that has at least $10,000,000 in assets and that purchases shares directly
without the involvement of a financial intermediary; and
o by investment advisory clients of, and certain other persons associated
with, the Adviser and its affiliates or the Funds.
The Funds' SAI has more detailed information about who may purchase and hold
Advisor Class shares.
Retirement Plans, Tax-Deferred Accounts and Employee Benefit Plans
Special eligibility rules apply to these types of investments. Except as
indicated, there are no investment minimums for the plans listed below. Class A
shares are available to:
o Traditional and Roth IRAs (the minimums listed in the table above apply);
o SEPs, SAR-SEPs, SIMPLE IRAs, and individual 403(b) plans;
o AllianceBernstein-sponsored Coverdell Education Savings Accounts ($2,000
initial investment minimum, $150 automatic investment program monthly
minimum);
o AllianceBernstein Link, AllianceBernstein Individual 401(k), and
AllianceBernstein SIMPLE IRA plans; and
o certain defined contribution retirement plans that do not have plan level
or omnibus accounts on the books of the Fund.
Group retirement plans that selected Class B shares as an investment alternative
under their plan before September 2, 2003 may continue to purchase Class B
shares.
Class C shares are available to AllianceBernstein Link, AllianceBernstein
Individual 401(k), AllianceBernstein SIMPLE IRA plans with less than $250,000 in
plan assets and 100 employees, and to group retirement plans with plan assets of
less than $1,000,000.
Required Information
A Fund is required by law to obtain, verify, and record certain personal
information from you or persons on your behalf in order to establish an account.
Required information includes name, date of birth, permanent residential address
and taxpayer identification number (for most investors, your social security
number). A Fund may also ask to see other identifying documents. If you do not
provide the information, the Fund will not be able to open your account. If a
Fund is unable to verify your identity, or that of another person(s) authorized
to act on your behalf, or if the Fund believes it has identified potentially
criminal activity, the Fund reserves the right to take action it deems
appropriate or as required by law, which may include closing your account. If
you are not a U.S. citizen or resident alien, your account must be affiliated
with a Financial Industry Regulatory Authority, or FINRA, member firm.
A Fund is required to withhold 28% of taxable dividends, capital gains
distributions, and redemptions paid to any shareholder who has not provided the
Fund with his or her certified taxpayer identification number. To avoid this,
you must provide your correct tax identification number (social security number
for most investors) on your Mutual Fund Application.
General
ABI may refuse any order to purchase shares. Each Fund reserves the right to
suspend the sale of its shares to the public in response to conditions in the
securities markets or for other reasons.
THE DIFFERENT SHARE CLASS EXPENSES
This section describes the different expenses of investing in each class and
explains factors to consider when choosing a class of shares. The expenses can
include distribution and/or service (Rule 12b-1) fees, initial sales charges
and/or CDSCs. Only Class A shares offer Quantity Discounts as described below.
--------------------------------------------------------------------------------
WHAT IS A RULE 12b-1 FEE?
A Rule 12b-1 fee is a fee deducted from a Fund's assets that is used to pay
for personal service, maintenance of shareholder accounts and distribution
costs, such as advertising and compensation of financial intermediaries. The
amount of each share class's Rule 12b-1 fee, if any, is disclosed below and
in a Fund's fee table included in Summary Information section above.
--------------------------------------------------------------------------------
Asset-Based Sales Charges or Distribution and/or Service (Rule 12b-1) Fees
Each Fund has adopted plans under Securities and Exchange Commission
("Commission") Rule 12b-1 that allow the Fund to pay asset-based sales charges
or distribution and/or service (Rule 12b-1) fees for the distribution and sale
of its shares. The amount of these fees for each class of the Fund's shares is
up to:
Distribution and/or Service
(Rule 12b-1) Fee (as a
Percentage of Aggregate
Average Daily Net Assets)
--------------------------------------------------------------------------------
.30%
Class A
Class B 1.00%
Class C 1.00%
Advisor Class None
Because these fees are paid out of a Fund's assets on an ongoing basis, over
time these fees will increase the cost of your investment and may cost you more
than paying other types of sales fees. Class B and Class C shares are subject to
higher Rule 12b-1 fees than Class A shares. Class B shares are subject to these
higher fees for a period of six years, after which they convert to Class A
shares (except for AllianceBernstein Diversified Yield Class B shares, which
convert to Class A shares after eight years). Because higher fees mean a higher
expense ratio, so Class B and Class C shares pay correspondingly lower dividends
and may have a lower NAV (and returns) than Class A shares. All or some of these
fees may be paid to financial intermediaries, including your financial advisor's
firm.
Class A Shares - Initial Sales Charge Alternative
You can purchase Class A shares at their public offering price (or cost), which
is NAV plus an initial sales charge of up to 4.25% of the offering price. Any
applicable sales charge will be deducted directly from your investment. Larger
investments are subject to "breakpoints or quantity discounts" as discussed
below. Purchases of Class A shares in the amount of $1,000,000 or more or by
AllianceBernstein or non-AllianceBernstein sponsored group retirement plans are
not subject to an initial charge, but may be subject to a 1% CDSC if redeemed or
terminated within one year.
Class B Shares - Deferred Sales Charge Alternative
Effective January 31, 2009, sales of Class B shares of the Funds to new
investors were suspended. Class B shares may only be purchased (i) by existing
Class B shareholders as of January 31, 2009, (ii) through exchange of Class B
shares from another AllianceBernstein Mutual Fund, and (iii) as otherwise
described below.
You can purchase Class B shares at NAV without an initial sales charge. This
means that the full amount of your purchase is invested in the Fund. Your
investment is subject to a CDSC if you redeem shares within three years (four
years in the case of AllianceBernstein Diversified Yield) of purchase. The CDSC
varies depending on the number of years you hold the shares. The CDSC amounts
for Class B shares are:
AllianceBernstein Diversified Yield:
Year Since Purchase CDSC
--------------------------------------------------------------------------------
First 4.0%
Second 3.0%
Third 2.0%
Fourth 1.0%
Fifth and thereafter None
All Other Funds:
Year Since Purchase CDSC
--------------------------------------------------------------------------------
First 3.0%
Second 2.0%
Third 1.0%
Fourth and thereafter None
If you exchange your shares for the Class B shares of another AllianceBernstein
Mutual Fund, the CDSC also will apply to the Class B shares received. If you
redeem your shares and directly invest the proceeds in units of
CollegeBoundfund, the CDSC will apply to the units of CollegeBoundfund. The CDSC
period begins with the date of your original purchase, not the date of exchange
for the other Class B shares or purchase of CollegeBoundfund units.
Class B shares purchased for cash automatically convert to Class A shares six
years after the end of the month of your purchase (except for Class B shares of
AllianceBernstein Diversified Yield, which automatically convert to Class A
shares eight years after the end of the month of your purchase). If you purchase
shares by exchange for the Class B shares of another AllianceBernstein Mutual
Fund, the conversion period runs from the date of your original purchase.
Class C Shares - Asset-Based Sales Charge Alternative
You can purchase Class C shares at NAV without an initial sales charge. This
means that the full amount of your purchase is invested in the Fund. Your
investment is subject to a 1% CDSC if you redeem your shares within 1 year. If
you exchange your shares for the Class C shares of another AllianceBernstein
Mutual Fund, the 1% CDSC also will apply to the Class C shares received. If you
redeem your shares and directly invest the proceeds in units of
CollegeBoundfund, the CDSC will apply to the units of CollegeBoundfund. The
1-year period for the CDSC begins with the date of your original purchase, not
the date of the exchange for the other Class C shares or purchase of
CollegeBoundfund units.
Class C shares do not convert to any other class of shares of the Fund.
--------------------------------------------------------------------------------
HOW IS THE CDSC CALCULATED?
The CDSC is applied to the lesser of NAV at the time of redemption or the
original cost of shares being redeemed (or, as to Fund shares acquired
through an exchange, the cost of the AllianceBernstein Mutual Fund shares
originally purchased for cash). This means that no sales charge is assessed
on increases in NAV above the initial purchase price. Shares obtained from
dividend or distribution reinvestment are not subject to the CDSC. In
determining the CDSC, it will be assumed that the redemption is, first, of
any shares not subject to a CDSC and, second, of shares held the longest.
--------------------------------------------------------------------------------
Advisor Class Shares - Fee-Based Program Alternative
You may purchase Advisor Class shares through your financial advisor. Advisor
Class shares are not subject to any initial or contingent sales charges,
although your financial advisor may charge a fee.
SALES CHARGE REDUCTION PROGRAMS
This section includes important information about sales charge reduction
programs available to investors in Class A shares and describes information or
records you may need to provide to a Fund or your financial intermediary in
order to be eligible for sales charge reduction programs.
Information about sales charge reduction programs also is available free of
charge and in a clear and prominent format on our website at
www.AllianceBernstein.com (click on "US Investors & Financial Advisors" then
"Investment Insights--Investor Education" then "Sales Charge Reduction
Programs"). More information on Breakpoints and other sales charge waivers is
available in the Funds' SAI.
--------------------------------------------------------------------------------
You Can Reduce Sales Charges When Buying Class A Shares.
--------------------------------------------------------------------------------
Breakpoints or Quantity Discounts Offered by the Funds
The Funds offer investors the benefit of discounts on the sales charges that
apply to purchases of Class A shares in certain circumstances. These discounts,
which are also known as Breakpoints, can reduce or, in some cases, eliminate the
initial sales charges that would otherwise apply to your Class A investment.
Mutual funds are not required to offer breakpoints and different mutual fund
groups may offer different types of breakpoints.
Breakpoints or Quantity Discounts allow larger investments in Class A shares to
be charged lower sales charges. A shareholder investing more than $100,000 in
Class A shares of a Fund is eligible for a reduced sales charge. Initial sales
charges are eliminated completely for purchases of $1,000,000 or more, although
a 1%, 1-year CDSC may apply.
The sales charge schedule of Class A share Quantity Discounts is as follows:
Initial Sales Charge
---------------------------------
as % of as % of
Net Amount Offering
Amount Purchased Invested Price
--------------------------------------------------------------------------------
Up to $100,000 4.44% 4.25%
$100,000 up to $250,000 3.36 3.25
$250,000 up to $500,000 2.30 2.25
$500,000 up to $1,000,000 1.78 1.75
$1,000,000 and above 0.00 0.00
Rights of Accumulation
To determine if a new investment in Class A shares is eligible for a Quantity
Discount, a shareholder can combine the value of the new investment in a Fund
with the value of existing investments in the Fund, any other AllianceBernstein
Mutual Fund, AllianceBernstein Institutional Funds and certain CollegeBoundfund
accounts for which the shareholder, his or her spouse or domestic partner, or
child under the age of 21 is the participant. The AllianceBernstein Mutual Funds
use the current NAV of your existing investments when combining them with your
new investment.
Combined Purchase Privileges
A shareholder may qualify for a Quantity Discount by combining purchases of
shares of a Fund into a single "purchase." A "purchase" means a single purchase
or concurrent purchases of shares of a Fund or any other AllianceBernstein
Mutual Fund, including AllianceBernstein Institutional Funds, by:
o an individual, his or her spouse or domestic partner, or the individual's
children under the age of 21 purchasing shares for his, her or their own
account(s), including certain CollegeBoundfund accounts;
o a trustee or other fiduciary purchasing shares for a single trust, estate
or single fiduciary account with one or more beneficiaries involved;
o the employee benefit plans of a single employer; or
o any company that has been in existence for at least six months or has a
purpose other than the purchase of shares of the Fund.
Letter of Intent
An investor may not immediately invest a sufficient amount to reach a Quantity
Discount, but may plan to make one or more additional investments over a period
of time that, in the end, would qualify for a Quantity Discount. For these
situations, the Funds offer a Letter of Intent, which permits the investor to
express the intention, in writing, to invest at least $100,000 in Class A shares
of the Fund or any AllianceBernstein Mutual Fund within 13 months. The Fund will
then apply the Quantity Discount to each of the investor's purchases of Class A
shares that would apply to the total amount stated in the Letter of Intent. If
an investor fails to invest the total amount stated in the Letter of Intent, the
Fund will retroactively collect the sales charges otherwise applicable by
redeeming shares in the investor's account at their then current NAV. Investors
qualifying for a Combined Purchase Privilege may purchase shares under a single
Letter of Intent.
Required Shareholder Information and Records
In order for shareholders to take advantage of sales charge reductions, a
shareholder or his or her financial intermediary must notify the Fund that the
shareholder qualifies for a reduction. Without notification, the Fund is unable
to ensure that the reduction is applied to the shareholder's account. A
shareholder may have to provide information or records to his or her financial
intermediary or a Fund to verify eligibility for breakpoint privileges or other
sales charge waivers. This may include information or records, including account
statements, regarding shares of the Fund or other AllianceBernstein Mutual Funds
held in:
o all of the shareholder's accounts at the Funds or a financial intermediary;
o any account of the shareholder at another financial intermediary; and
o accounts of related parties of the shareholder, such as members of the same
family, at any financial intermediary.
Other Programs
Class A shareholders may be able to purchase additional Class A shares with a
reduced or eliminated sales charge through the following AllianceBernstein
programs: Dividend Reinvestment Program, Dividend Direction Plan and
Reinstatement Privilege as described below.
Class A Shares - Purchases Not Subject to Sales Charges
The Funds may sell their Class A shares at NAV without an initial sales charge
to some categories of investors, including:
o AllianceBernstein Link, AllianceBernstein Individual 401(k), and
AllianceBernstein SIMPLE IRA plans with at least $250,000 in plan assets or
100 employees;
o persons participating in a fee-based program, sponsored and maintained by a
registered broker-dealer or other financial intermediary and approved by
ABI, under which persons pay an asset-based fee for services in the nature
of investment advisory or administrative services;
o plan participants who roll over amounts distributed from employer
maintained retirement plans to AllianceBernstein-sponsored IRAs where the
plan is a client of or serviced by AllianceBernstein's Institutional
Investment Management or Bernstein Global Wealth Management Divisions,
including subsequent contributions to those IRAs; or
o certain other investors, such as investment management clients of the
Adviser or its affiliates, including clients and prospective clients of the
Adviser's AllianceBernstein Institutional Investment Management Division,
employees of selected dealers authorized to sell a Fund's shares, and
employees of the Adviser.
Please see the Funds' SAI for more information about purchases of Class A shares
without sales charges.
CDSC WAIVERS AND OTHER PROGRAMS
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Here Are Some Ways To Avoid Or Minimize Charges On Redemption.
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CDSC Waivers
The Funds will waive the CDSCs on redemptions of shares in the following
circumstances, among others:
o permitted exchanges of shares;
o following the death or disability of a shareholder;
o if the redemption represents a minimum required distribution from an IRA or
other retirement plan to a shareholder who has attained the age of 70 1/2;
o if the proceeds of the redemption are invested directly in a
CollegeBoundfund account; or
o if the redemption is necessary to meet a plan participant's or
beneficiary's request for a distribution or a loan from a group retirement
plan or to accommodate a plan participant's or beneficiary's direction to
reallocate his or her plan account among other investment alternatives
available under a group retirement plan.
Dividend Reinvestment Program
Shareholders may elect to have all income and capital gains distributions from
their account paid to them in the form of additional shares of the same class of
a Fund under the Fund's Dividend Reinvestment Program. There is no initial sales
charge or CDSC imposed on shares issued pursuant to the Dividend Reinvestment
Program.
Dividend Direction Plan
A shareholder who already maintains accounts in more than one AllianceBernstein
Mutual Fund may direct the automatic investment of income dividends and/or
capital gains by one Fund, in any amount, without the payment of any sales
charges, in shares of the same class of one or more other AllianceBernstein
Mutual Fund(s).
Automatic Investment Program
The Automatic Investment Program allows investors to purchase shares of a Fund
through pre-authorized transfers of funds from the investor's bank account.
Under the Automatic Investment Program, an investor may (i) make an initial
purchase of at least $2,500 and invest at least $50 monthly or (ii) make an
initial purchase of less than $2,500 and commit to a monthly investment of $200
or more until the investor's account balance is $2,500 or more. Shareholders who
committed to monthly investments of $25 or more through the Automatic Investment
Program by October 15, 2004 will be able to continue their program despite the
$50 monthly minimum discussed above. As of January 31, 2009, the Automatic
Investment Program is available for purchase of Class B shares only if a
shareholder were enrolled in the Program prior to January 31, 2009. Please see
the Funds' SAI for more details.
Reinstatement Privilege
A shareholder who has redeemed all or any portion of his or her Class A or Class
B shares may reinvest all or any portion of the proceeds from the redemption in
Class A shares of any AllianceBernstein Mutual Fund at NAV without any sales
charge, if the reinvestment is made within 120 calendar days after the
redemption date, and, for Class B shares, a CDSC has been paid and ABI has
approved, at its discretion, the reinstatement of the shares. The reinstatement
privilege for Class B shares is not available after January 31, 2009.
Systematic Withdrawal Plan
The Funds offer a systematic withdrawal plan that permits the redemption of
Class A, Class B or Class C shares without payment of a CDSC. Under this plan,
redemptions equal to 1% a month, 2% every two months or 3% a quarter of the
value of a Fund account would be free of a CDSC. Shares would be redeemed so
that Class B shares not subject to a CDSC (such as shares acquired with
reinvested dividends or distributions) would be redeemed first and Class B
shares that are held the longest would be redeemed next. For Class A and Class C
shares, shares held the longest would be redeemed first.
THE "PROS" AND "CONS" OF DIFFERENT SHARE CLASSES
The decision as to which class of shares is most beneficial to you depends on
the amount you intend to invest, how long you expect to own shares, and expenses
associated with owning a particular class of shares. If you are making a large
investment that qualifies for a reduced sales charge, you might consider
purchasing Class A shares. Class A shares, with their lower Rule 12b-1 fees, are
designed for investors with a long-term investing time frame.
Although investors in Class B shares do not pay an initial sales charge, Class B
shares may be more costly than Class A shares before they convert to Class A
shares due to their substantially higher Rule 12b-1 fees. Class B shares
redeemed within three years (four years for AllianceBernstein Diversified Yield)
of purchase are also subject to a CDSC. Class B shares are designed for
investors with an intermediate-term investing time frame.
Class C shares should not be considered as a long-term investment because they
do not convert to Class A shares and are subject to a higher distribution fee
indefinitely. Class C shares do not, however, have an initial sales charge or a
CDSC so long as the shares are held for one year or more. Class C shares are
designed for investors with a short-term investing time frame.
Your financial intermediary may receive differing compensation for selling Class
A, Class B, or Class C shares. See "Payments to Financial Advisors and their
Firms" below.
Other
A transaction, service, administrative or other similar fee may be charged by
your broker-dealer, agent, or other financial intermediary, with respect to the
purchase, sale, or exchange of Class A, Class B, Class C, or Advisor Class
shares made through your financial advisor. The financial intermediaries or your
fee-based program also may impose requirements on the purchase, sale, or
exchange of shares that are different from, or in addition to, those imposed by
the Funds, including requirements as to the minimum initial and subsequent
investment amounts.
You should consult your financial advisor for assistance in choosing a class of
Fund shares.
PAYMENTS TO FINANCIAL ADVISORS AND THEIR FIRMS
Financial intermediaries market and sell shares of the Funds. These financial
intermediaries employ financial advisors and receive compensation for selling
shares of the Funds. This compensation is paid from various sources, including
any sales charge, CDSC, and/or Rule 12b-1 fee that you or the Funds may pay.
Your individual financial advisor may receive some or all of the amounts paid to
the financial intermediary that employs him or her.
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WHAT IS A FINANCIAL INTERMEDIARY?
A financial intermediary is a firm that receives compensation for selling
shares of the Funds offered in this Prospectus and/or provides services to
the Funds' shareholders. Financial intermediaries may include, among others,
your broker, your financial planner or advisor, banks, and insurance
companies. Financial intermediaries may employ financial advisors who deal
with you and other investors on an individual basis.
--------------------------------------------------------------------------------
All or a portion of the initial sales charge that you pay may be paid by ABI to
financial intermediaries selling Class A shares. ABI may also pay these
financial intermediaries a fee of up to 1% on purchases of $1,000,000 or more or
for AllianceBernstein Link, AllianceBernstein SIMPLE IRA plans with more than
$250,000 in assets or for purchases made by certain other retirement plans.
ABI may pay, at the time of your purchase, a commission to financial
intermediaries selling Class B shares in an amount equal to 4% of your
investment for sales of Class B shares and an amount equal to 1% of your
investment for sales of Class C shares.
For Class A and Class C shares, up to 100% and, for Class B shares, up to 30% of
the Rule 12b-1 fees applicable to these Classes of shares each year may be paid
to financial intermediaries.
In the case of Advisor Class shares, your financial advisor may charge ongoing
fees or transactional fees.
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Your financial advisor's firm receives compensation from the Funds, ABI,
and/or the Adviser in several ways from various sources, which include some
or all of the following:
- upfront sales commissions;
- Rule 12b-1 fees;
- additional distribution support;
- defrayal of costs for educational seminars and training; and
- payments related to providing shareholder recordkeeping and/or transfer
agency services. Please read the Prospectus carefully for information on
this compensation.
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Other Payments for Distribution Services and Educational Support
In addition to the commissions paid to financial intermediaries at the time of
sale and Rule 12b-1 fees, some or all of which may be paid to financial
intermediaries (and, in turn, to your financial advisor), ABI, at its expense,
currently provides additional payments to firms that sell shares of the
AllianceBernstein Mutual Funds. Although the individual components may be higher
and the total amount of payments made to each qualifying firm in any given year
may vary, the total amount paid to a financial intermediary in connection with
the sale of shares of the AllianceBernstein Mutual Funds will generally not
exceed the sum of (a) 0.25% of the current year's fund sales by that firm and
(b) 0.10% of average daily net assets attributable to that firm over the year.
These sums include payments to reimburse directly or indirectly the costs
incurred by these firms and their employees in connection with educational
seminars and training efforts about the AllianceBernstein Mutual Funds for the
firms' employees and/or their clients and potential clients. The costs and
expenses associated with these efforts may include travel, lodging,
entertainment and meals. ABI may pay a portion of "ticket" or other
transactional charges.
For 2009, ABI's additional payments to these firms for distribution services and
educational support related to the AllianceBernstein Mutual Funds are expected
to be approximately 0.04% of the average monthly assets of the AllianceBernstein
Mutual Funds, or approximately $15,500,000. In 2008, ABI paid approximately
0.04% of the average monthly assets of the AllianceBernstein Mutual Funds or
approximately $19,000,000 for distribution services and educational support
related to the AllianceBernstein Mutual Funds.
A number of factors are considered in determining the additional payments,
including each firm's AllianceBernstein Mutual Fund sales, assets and redemption
rates, and the willingness and ability of the firm to give ABI access to its
financial advisors for educational and marketing purposes. In some cases, firms
will include the AllianceBernstein Mutual Funds on a "preferred list." ABI's
goal is to make the financial advisors who interact with current and prospective
investors and shareholders more knowledgeable about the AllianceBernstein Mutual
Funds so that they can provide suitable information and advice about the funds
and related investor services.
The Funds and ABI also make payments for recordkeeping and other transfer agency
services to financial intermediaries that sell AllianceBernstein Mutual Fund
shares. Please see "Management of the Funds--Transfer Agency and Retirement Plan
Services" below. These expenses paid by the Funds are included in "Other
Expenses" under "Fees and Expenses of the Funds--Annual Fund Operating Expenses"
above.
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If one mutual fund sponsor makes greater distribution assistance payments
than another your financial advisor and his or her firm may have an incentive
to recommend one fund complex over another. Similarly if your financial
advisor or his or her firm receives more distribution assistance for one
share class versus another then they may have an incentive to recommend that
class.
Please speak with your financial advisor to learn more about the total
amounts paid to your financial advisor and his or her firm by the Funds, the
Adviser, ABI, and by sponsors of other mutual funds he or she may recommend
to you. You should also consult disclosures made by your financial advisor at
the time of purchase.
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As of the date of the Prospectus, ABI anticipates that the firms that will
receive additional payments for distribution services and/or educational support
include:
Ameriprise Financial Services
AXA Advisors
Bank of America
Cadaret, Grant & Co.
CCO Investment Services Corp.
Chase Investment Services
Citigroup Global Markets
Commonwealth Financial Network
Donegal Securities
ING Advisors Network
LPL Financial Corporation
Merrill Lynch
Morgan Stanley & Co. Incorporated
Northwestern Mutual Investment Services
Raymond James
RBC Capital Markets Corporation
Robert W. Baird
SagePoint Financial, Inc.
UBS AG
UBS Financial Services
Wachovia Securities
Wells Fargo Investments
Although the Funds may use brokers and dealers that sell shares of the Funds to
effect portfolio transactions, the Funds do not consider the sale of
AllianceBernstein Mutual Fund shares as a factor when selecting brokers or
dealers to effect portfolio transactions.
HOW TO EXCHANGE SHARES
You may exchange your Fund shares for shares of the same class of other
AllianceBernstein Mutual Funds (including AllianceBernstein Exchange Reserves, a
money market fund managed by the Adviser) provided that the other fund offers
the same class of shares. Exchanges of shares are made at the next-determined
NAV, without sales or service charges. All exchanges are subject to the minimum
investment restrictions set forth in the prospectus for the AllianceBernstein
Mutual Fund whose shares are being acquired. Your exchange of shares is priced
at the next-determined NAV after your order is received in proper form. You may
request an exchange by mail or telephone. In order to receive a day's NAV, ABIS
must receive and confirm your telephone exchange request by 4:00 p.m., Eastern
time, on that day. The Funds may modify, restrict, or terminate the exchange
privilege on 60 days' written notice.
HOW TO SELL OR REDEEM SHARES
You may "redeem" your shares (i.e., sell your shares to a Fund) on any day the
New York Stock Exchange ("Exchange") is open, either directly or through your
financial intermediary. Your sale price will be the next-determined NAV, less
any applicable CDSC, after the Fund receives your redemption request in proper
form. Normally, redemption proceeds are sent to you within seven days. If you
recently purchased your shares by check or electronic funds transfer, your
redemption payment may be delayed until the Fund is reasonably satisfied that
the check or electronic funds transfer has been collected (which may take up to
15 days). For Advisor Class shares, if you are in doubt about what procedures or
documents are required by your fee-based program or employee benefit plan to
sell your shares, you should contact your financial advisor.
Selling Shares Through Your Broker or Other Financial Advisor
Your broker or financial advisor must receive your sales request by 4:00 p.m.,
Eastern time, and submit it to the Fund by a pre-arranged time for you to
receive the next-determined NAV, less any applicable CDSC. Your broker or
financial advisor is responsible for submitting all necessary documentation to
the Fund and may charge you a fee for this service.
Selling Shares Directly to the Fund By Mail:
o Send a signed letter of instruction or stock power, along with
certificates, to:
AllianceBernstein Investor Services, Inc.
P.O. Box 786003
San Antonio, TX 78278-6003
o For certified or overnight deliveries, send to:
AllianceBernstein Investor Services, Inc.
8000 IH 10 W, 4th floor
San Antonio, TX 78230
o For your protection, a bank, a member firm of a national stock exchange or
another eligible guarantor institution must guarantee signatures. Stock
power forms are available from your financial intermediary, ABIS, and many
commercial banks. Additional documentation is required for the sale of
shares by corporations, intermediaries, fiduciaries, and surviving joint
owners. If you have any questions about these procedures, contact ABIS.
By Telephone:
o You may redeem your shares for which no stock certificates have been issued
by telephone request. Call ABIS at 800-221-5672 with instructions on how
you wish to receive your sale proceeds.
o ABIS must receive and confirm a telephone redemption request by 4:00 p.m.,
Eastern time, for you to receive that day's NAV, less any applicable CDSC.
o For your protection, ABIS will request personal or other information from
you to verify your identity and will generally record the calls. Neither
the Fund nor the Adviser, ABIS, ABI or other Fund agent will be liable for
any loss, injury, damage or expense as a result of acting upon telephone
instructions purporting to be on your behalf that ABIS reasonably believes
to be genuine.
o If you have selected electronic funds transfer in your Mutual Fund
Application, the redemption proceeds will be sent directly to your bank.
Otherwise, the proceeds will be mailed to you.
o Redemption requests by electronic funds transfer or check may not exceed
$100,000 per Fund account per day.
o Telephone redemption is not available for shares held in nominee or "street
name" accounts, retirement plan accounts, or shares held by a shareholder
who has changed his or her address of record within the previous 30
calendar days.
FREQUENT PURCHASES AND REDEMPTIONS OF FUND SHARES
Each Fund's Board of Directors (the "Board") has adopted policies and procedures
designed to detect and deter frequent purchases and redemptions of Fund shares
or excessive or short-term trading that may disadvantage long-term Fund
shareholders. These policies are described below. There is no guarantee that the
Funds will be able to detect excessive or short-term trading and to identify
shareholders engaged in such practices, particularly with respect to
transactions in omnibus accounts. Shareholders should be aware that application
of these policies may have adverse consequences, as described below, and avoid
frequent trading in Fund shares through purchases, sales and exchanges of
shares. Each Fund reserves the right to restrict, reject, or cancel, without any
prior notice, any purchase or exchange order for any reason, including any
purchase or exchange order accepted by any shareholder's financial intermediary.
Risks Associated With Excessive Or Short-Term Trading Generally. While the Funds
will try to prevent market timing by utilizing the procedures described below,
these procedures may not be successful in identifying or stopping excessive or
short-term trading in all circumstances. By realizing profits through short-term
trading, shareholders that engage in rapid purchases and sales or exchanges of a
Fund's shares dilute the value of shares held by long-term shareholders.
Volatility resulting from excessive purchases and sales or exchanges of Fund
shares, especially involving large dollar amounts, may disrupt efficient
portfolio management and cause a Fund to sell shares at inopportune times to
accommodate redemptions relating to short-term trading. In particular, a Fund
may have difficulty implementing its long-term investment strategies if it is
forced to maintain a higher level of its assets in cash to accommodate
significant short-term trading activity. In addition, a Fund may incur increased
administrative and other expenses due to excessive or short-term trading,
including increased brokerage costs and realization of taxable capital gains.
Funds that may invest significantly in foreign securities may be particularly
susceptible to short-term trading strategies. This is because foreign securities
are typically traded on markets that close well before the time a Fund
calculates its NAV at 4:00 p.m., Eastern time, which gives rise to the
possibility that developments may have occurred in the interim that would affect
the value of these securities. The time zone differences among international
stock markets can allow a shareholder engaging in a short-term trading strategy
to exploit differences in Fund share prices that are based on closing prices of
foreign securities established some time before the Fund calculates its own
share price (referred to as "time zone arbitrage"). The Funds have procedures,
referred to as fair value pricing, designed to adjust closing market prices of
foreign securities to reflect what is believed to be the fair value of those
securities at the time a Fund calculates its NAV. While there is no assurance,
the Funds expect that the use of fair value pricing, in addition to the
short-term trading policies discussed below, will significantly reduce a
shareholder's ability to engage in time zone arbitrage to the detriment of other
Fund shareholders.
A shareholder engaging in a short-term trading strategy may also target a Fund
that does not invest primarily in foreign securities. Any Fund that invests in
securities that are, among other things, thinly traded, traded infrequently or
relatively illiquid has the risk that the current market price for the
securities may not accurately reflect current market values. A shareholder may
seek to engage in short-term trading to take advantage of these pricing
differences (referred to as "price arbitrage"). All Funds may be adversely
affected by price arbitrage.
Policy Regarding Short-Term Trading. Purchases and exchanges of shares of the
Funds should be made for investment purposes only. The Funds will seek to
prevent patterns of excessive purchases and sales of Fund shares to the extent
they are detected by the procedures described below. The Funds reserve the right
to modify this policy, including any surveillance or account blocking procedures
established from time to time to effectuate this policy, at any time without
notice.
o Transaction Surveillance Procedures. The Funds, through their agents, ABI
and ABIS, maintain surveillance procedures to detect excessive or
short-term trading in Fund shares. This surveillance process involves
several factors, which include scrutinizing transactions in Fund shares
that exceed certain monetary thresholds or numerical limits within a
specified period of time. Generally, more than two exchanges of Fund shares
during any 90-day period or purchases of shares followed by a sale within
90 days will be identified by these surveillance procedures. For purposes
of these transaction surveillance procedures, the Funds may consider
trading activity in multiple accounts under common ownership, control, or
influence. Trading activity identified by either, or a combination, of
these factors, or as a result of any other information available at the
time, will be evaluated to determine whether such activity might constitute
excessive or short-term trading. These surveillance procedures may be
modified from time to time, as necessary or appropriate to improve the
detection of excessive or short-term trading or to address specific
circumstances.
o Account Blocking Procedures. If the Funds determine, in their sole
discretion, that a particular transaction or pattern of transactions
identified by the transaction surveillance procedures described above is
excessive or short-term trading in nature, the relevant Fund account(s)
will be immediately "blocked" and no future purchase or exchange activity
will be permitted. However, sales of Fund shares back to a Fund or
redemptions will continue to be permitted in accordance with the terms of
the Fund's current Prospectus. As a result, unless the shareholder redeems
his or her shares, which may have consequences if the shares have declined
in value, a CDSC is applicable or adverse tax consequences may result, the
shareholder may be "locked" into an unsuitable investment. In the event an
account is blocked, certain account-related privileges, such as the ability
to place purchase, sale and exchange orders over the internet or by phone,
may also be suspended. A blocked account will generally remain blocked
unless and until the account holder or the associated broker, dealer or
other financial intermediary provides evidence or assurance acceptable to
the Fund that the account holder did not or will not in the future engage
in excessive or short-term trading.
o Applications of Surveillance Procedures and Restrictions to Omnibus
Accounts. Omnibus account arrangements are common forms of holding shares
of the Funds, particularly among certain brokers, dealers and other
financial intermediaries, including sponsors of retirement plans and
variable insurance products. The Funds apply their surveillance procedures
to these omnibus account arrangements. As required by Commission rules, the
Funds have entered into agreements with all of their financial
intermediaries that require the financial intermediaries to provide the
Funds, upon the request of the Funds or their agents, with individual
account level information about their transactions. If the Funds detect
excessive trading through their monitoring of omnibus accounts, including
trading at the individual account level, the financial intermediaries will
also execute instructions from the Funds to take actions to curtail the
activity, which may include applying blocks to accounts to prohibit future
purchases and exchanges of Fund shares. For certain retirement plan
accounts, the Funds may request that the retirement plan or other
intermediary revoke the relevant participant's privilege to effect
transactions in Fund shares via the internet or telephone, in which case
the relevant participant must submit future transaction orders via the U.S.
Postal Service (i.e., regular mail).
HOW THE FUNDS VALUE THEIR SHARES
Each Fund's NAV is calculated at the close of regular trading on the Exchange
(ordinarily, 4:00 p.m., Eastern time), only on days when the Exchange is open
for business. To calculate NAV, a Fund's assets are valued and totaled,
liabilities are subtracted, and the balance, called net assets, is divided by
the number of shares outstanding. If a Fund invests in securities that are
primarily traded on foreign exchanges that trade on weekends or other days when
the Fund does not price its shares, the NAV of the Fund's shares may change on
days when shareholders will not be able to purchase or redeem their shares in
the Fund.
The Funds value their securities at their current market value determined on the
basis of market quotations or, if market quotations are not readily available or
are unreliable, at "fair value" as determined in accordance with procedures
established by and under the general supervision of each Fund's Board. When a
Fund uses fair value pricing, it may take into account any factors it deems
appropriate. A Fund may determine fair value based upon developments related to
a specific security, current valuations of foreign stock indices (as reflected
in U.S. futures markets) and/or U.S. sector or broader stock market indices. The
prices of securities used by the Fund to calculate its NAV may differ from
quoted or published prices for the same securities. Fair value pricing involves
subjective judgments and it is possible that the fair value determined for a
security is materially different than the value that could be realized upon the
sale of that security.
Funds expect to use fair value pricing for securities primarily traded on U.S.
exchanges only under very limited circumstances, such as the early closing of
the exchange on which a security is traded or suspension of trading in the
security. Funds may use fair value pricing more frequently for securities
primarily traded in non-U.S. markets because, among other things, most foreign
markets close well before a Fund values its securities at 4:00 p.m., Eastern
time. The earlier close of these foreign markets gives rise to the possibility
that significant events, including broad market moves, may have occurred in the
interim. For example, the Funds believe that foreign security values may be
affected by events that occur after the close of foreign securities markets. To
account for this, the Funds may frequently value many of their foreign equity
securities using fair value prices based on third party vendor modeling tools to
the extent available.
Subject to the Board's oversight, each Fund's Board has delegated responsibility
for valuing a Fund's assets to the Adviser. The Adviser has established a
Valuation Committee, which operates under the policies and procedures approved
by the Board, to value the Fund's assets on behalf of the Fund. The Valuation
Committee values Fund assets as described above.
MANAGEMENT OF THE FUNDS
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INVESTMENT ADVISER
Each Fund's adviser is AllianceBernstein L.P., 1345 Avenue of the Americas, New
York, New York 10105. The Adviser is a leading international investment adviser
supervising client accounts with assets as of September 30, 2009, totaling
approximately $[________] billion (of which approximately $[___] billion
represented assets of investment companies). As of September 30, 2009, the
Adviser managed retirement assets for many of the largest public and private
employee benefit plans (including [___] of the nation's FORTUNE 100 companies),
for public employee retirement funds in [___] states, for investment companies,
and for foundations, endowments, banks and insurance companies worldwide. The 36
registered investment companies managed by the Adviser, comprising [____]
separate investment portfolios, currently have approximately [___] million
accounts.
The Adviser provides investment advisory services and order placement facilities
for each of the Funds. For these advisory services, each of the Funds paid the
Adviser during its most recent fiscal year as a percentage of average daily net
assets:
Fee as a
percentage of
average daily Fiscal Year
Fund net assets Ended
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AllianceBernstein Intermediate Bond .22%* 10/31/09
AllianceBernstein Global Bond .40%* 9/30/09
AllianceBernstein Diversified Yield .00%* 10/31/09
AllianceBernstein High Income .40%* 10/31/09
* Fee stated net of any waivers and/or reimbursements. See "Fees and Expenses
of the Funds" at the beginning of the Prospectus for more information about
fee waivers.
A discussion regarding the basis for the Board's approval of each Fund's
investment advisory agreement is available in the Fund's semi-annual report to
shareholders.
The Adviser may act as an investment adviser to other persons, firms, or
corporations, including investment companies, hedge funds, pension funds, and
other institutional investors. The Adviser may receive management fees,
including performance fees, that may be higher or lower than the advisory fees
it receives from the Funds. Certain other clients of the Adviser may have
investment objectives and policies similar to those of a Fund. The Adviser may,
from time to time, make recommendations that result in the purchase or sale of a
particular security by its other clients simultaneously with a Fund. If
transactions on behalf of more than one client during the same period increase
the demand for securities being purchased or the supply of securities being
sold, there may be an adverse effect on price or quantity. It is the policy of
the Adviser to allocate advisory recommendations and the placing of orders in a
manner that is deemed equitable by the Adviser to the accounts involved,
including a Fund. When two or more of the clients of the Adviser (including a
Fund) are purchasing or selling the same security on a given day from the same
broker-dealer, such transactions may be averaged as to price.
PORTFOLIO MANAGERS
The management of, and investment decisions for, the Funds' portfolios are made
by certain Investment Policy Teams. Each Investment Policy Team relies heavily
on the fundamental analysis and research of the Adviser's large internal
research staff. No one person is principally responsible for coordinating each
Fund's investments.
The following table lists the Investment Policy Teams, the person within each
Investment Policy Team with the most significant responsibility for day-to-day
management of the Fund's portfolio, the length of time that each person has been
jointly and primarily responsible for the Fund, and each person's principal
occupation during the past five years:
Fund and
Responsible Principal Occupation(s)
Team Employee; Year; Title During the Past Five (5) Years
------------------------------------------------------------------------------------------------------------------------------------
AllianceBernstein Intermediate Bond Paul J. DeNoon; since January 2009; Senior Senior Vice President of the Adviser, with
Portfolio Vice President of the Adviser and Director which he has been associated in a
U.S. Investment Grade Core Fixed of Emerging Market Debt substantially similar capacity to his
Income Team current position since prior to 2005.
Shawn E. Keegan; since October 2005; (see above)
(see above)
Joran Laird; since October 2005; Vice Vice President of the Adviser, with which
President of the Adviser he has been associated in a substantially
similar capacity to his current position
since prior to 2005.
Alison M. Martier; since May 2005; (see above)
(see above)
Douglas J. Peebles; since November 2007; (see above)
(see above)
Greg J. Wilensky; since October 2005; (see above)
(see above)
AllianceBernstein Global Bond Fund Paul J. DeNoon; since August 2002; (see above)
Global Fixed Income Investment Team (see above)
Scott DiMaggio; since August 2005; Senior Vice President of the Adviser, with
Senior Vice President of the which he has been associated in a
Adviser and Director of Canada Fixed substantially similar capacity to his
Income current position since prior to 2005.
Fernando Grisales; since January 2007; Assistant Vice President of the Adviser,
Assistant Vice President of the Adviser with which he has been associated in a
substantially similar capacity since prior
to 2005.
Michael L. Mon; since September 2003; Vice Vice President of the Adviser, with which
President of the Adviser he has been associated in a substantially
similar capacity to his current position
since prior to 2005.
Douglas J. Peebles; since March 1992; (see above)
(see above)
Matthew S. Sheridan; since January 2007; Vice President of the Adviser, with which
Vice President of the Adviser he has been associated in a substantially
similar capacity to his current position
since prior to 2005.
AllianceBernstein Diversified Yield Fund Paul J. DeNoon; since October 2005; (see above)
(see above)
Global Fixed Income Investment Team and Joran Laird; since January 2009; (see above)
Global Credit Investment Team (see above)
Douglas J. Peebles; since January 1996; (see above)
(see above)
Matthew S. Sheridan; since April 2006; (see above)
(see above)
Greg J. Wilensky; since June 2008; (see above)
(see above)
AllianceBernstein High Income Fund Paul J. DeNoon; since August 2002; (see above)
(see above)
Global Fixed Income Team and Global Gershon Distenfeld; since February 2008; Vice President of the Adviser, with which
Credit Investment Team Vice President of the Adviser he has been associated in a substantially
similar capacity to his current position
since prior to 2005.
Douglas J. Peebles; since August 2002; (see above)
(see above)
Matthew S. Sheridan; since October 2005; (see above)
(see above)
Additional information about the portfolio managers may be found in the Funds'
SAI.
PERFORMANCE OF A SIMILARLY MANAGED PORTFOLIO
The investment teams employed by the Adviser to manage AllianceBernstein High
Income Fund and AllianceBernstein Intermediate Bond Portfolio have substantial
experience in managing discretionary accounts of institutional clients, pooled
investment vehicles and/or other registered investment companies and portions
thereof (the "Historical Accounts") that have substantially the same investment
objectives and policies and are managed in accordance with essentially the same
investment strategies as the Funds. The Historical Accounts that are not
registered investment companies are not subject to certain limitations,
diversification requirements and other restrictions imposed under the 1940 Act
and the Internal Revenue Code (the "Code") to which the Funds, as registered
investment companies, are subject and which, if applicable to the Historical
Accounts, may have adversely affected the performance of the Historical
Accounts. With respect to AllianceBernstein High Income Fund, the Historical
Accounts performance information is representative solely of the performance of
a pooled investment vehicle that is not offered for sale in the United States.
Set forth below is performance data provided by the Adviser relating to the
Historical Accounts managed by the investment team that manages each Fund's
assets. Performance data is shown for the period during which the investment
team of the Adviser managed the Historical Accounts through December 31, 2009.
The aggregate assets for the Historical Accounts managed by the High Income
investment team and the Intermediate Bond investment team as of December 31,
2009 were approximately $[_______] billion and $[_________] billion,
respectively. The investment teams' Historical Accounts have a nearly identical
composition of representative investment holdings and related percentage
weightings. The performance data is net of all fees (including any portfolio
transaction costs) charged to the Historical Accounts, calculated on a monthly
basis. The highest fee payable for the Historical Accounts is 1.99% of assets
for AllianceBernstein High Income Fund and 0.85% of assets for AllianceBernstein
Intermediate Bond Portfolio, annually. Net-of-fee performance figures reflect
the compounding effect of such fees.
The data has not been adjusted to reflect any fees that will be payable by the
Funds, which may be higher than the fees imposed on the Historical Accounts, and
will reduce the returns of the Funds. Expenses associated with the distribution
of Class A, Class B and Class C shares of the Funds in accordance with the plans
adopted by the Boards of the Funds under Commission Rule 12b-1 are also
excluded. Except as noted, the performance data has also not been adjusted for
corporate or individual taxes, if any, payable by account owners.
The Adviser has calculated the investment performance of the Historical Accounts
on a trade-date basis. Income has been accrued daily and cash flows weighted
daily. Composite investment performance for the Funds has been determined on an
asset weighted basis. New accounts are included in the composite investment
performance computations at the beginning of the quarter following the initial
contribution. The total returns set forth below are calculated using a method
that links the monthly return amounts for the disclosed periods, resulting in a
time-weighted rate of return. Other methods of computing the investment
performance of the Historical Accounts may produce different results, and the
results for different periods may vary.
A composite benchmark, comprised of the JPMorgan Emerging Markets Bond Index
Global ("EMBI Global"), the JPMorgan Government Bond Index-Emerging Markets
("GBI-EM") and the Barclays Capital High Yield Index (2% Constrained) ("BC High
Yield") on an equal weighted basis (the "High Income Composite Benchmark") is
used by AllianceBernstein High Income Fund and its Historical Account, for
purposes of this example, as a benchmark to measure its relative performance.
EMBI Global tracks total returns for traded external debt instruments in the
emerging markets, GBI-EM tracks total returns for local currency government
bonds issued by emerging markets, and BC High Yield tracks the U.S.
Dollar-denominated, non-investment grade, fixed-rate, taxable corporate bond
market.
The Barclays Capital Aggregate Index ("BC Aggregate Index") is used by
AllianceBernstein Intermediate Bond Portfolio as a benchmark to measure its
relative performance and is composed of securities from Barclays Capital
Government/Corporate Bond Index, Mortgage-Backed Securities Index, and the
Asset-Backed Securities Index. The index's total return consists of price
appreciation/depreciation plus income as a percentage of the original
investment. Indices are rebalanced monthly by market capitalization.
To the extent the investment teams utilize investment techniques such as swaps,
futures or options, the performance of the High Income Composite Benchmark and
the BC Aggregate Index may not be substantially comparable to the performance of
the investment teams' Historical Accounts. The High Income Composite Benchmark
and the BC Aggregate Index do not reflect the deduction of any fees or expenses
associated with the active management of a mutual fund.
The performance data below is provided solely to illustrate the investment
teams' performance in managing the Historical Accounts as measured against a
broad based market index. The performance of the Funds will be affected by the
performance of the investment team managing the Funds' assets. If the investment
team were to perform relatively poorly, the performance of the Funds would
suffer. Investors should not rely on the performance data of the Historical
Accounts as an indication of future performance of the Funds.
The investment performance for the periods presented may not be indicative of
future rates of return. The performance was not calculated pursuant to the
methodology established by the Commission that will be used to calculate the
Funds' performance. The use of methodology different from that used to calculate
performance could result in different performance data.
SCHEDULE OF HISTORICAL PERFORMANCE - HISTORICAL ACCOUNTS*
High Income High Income
Historical Account Composite BC High
Total Return** Benchmark EMBI Global*** GBI-EM Yield Index***
------------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31:
2009 [___________]% [___________]% [___________]% [___________]% [___________]%
2008 [___________]% [___________]% [___________]% [___________]% [___________]%
2007 [___________]% [___________]% [___________]% [___________]% [___________]%
2006 [___________]% [___________]% [___________]% [___________]% [___________]%
2005 [___________]% [___________]% [___________]% [___________]% [___________]%
2004 [___________]% [___________]% [___________]% [___________]% [___________]%
2003 [___________]% [___________]% [___________]% [___________]% [___________]%
2002 [___________]% [___________]% [___________]% [___________]% [___________]%
2001 [___________]% N/A [___________]% N/A [___________]%
2000 [___________]% N/A [___________]% N/A [___________]%
1999 [___________]% N/A [___________]% N/A [___________]%
1998 [___________]% N/A [___________]% N/A [___________]%
Cumulative total return for the
period December 22, 1997
(inception of Historical Account)
to December 31, 2009 [___________]% N/A [___________]%*** N/A [___________]%***
* Total return is a measure of investment performance that is based upon the
change in value of an investment from the beginning to the end of a
specified period and assumes reinvestment of all dividends and other
distributions. The basis of presentation of this data is described in the
preceding discussion.
** Net of all fees.
*** Net inception cumulative index returns are from December 31, 1997.
Intermediate Bond BC U.S.
Historical Accounts Aggregate
Total Return** Index
-------------------------------------------------------------------------------
Year Ended December 31:
2009 [_________]% [_________]%
2008 (5.40)% 5.24%
2007 5.60% 6.97%
2006 5.26% 4.33%
2005 3.22% 2.43%
2004 5.48% 4.34%
2003 8.45% 4.10%
2002 7.93% 10.26%
Cumulative total return for the period
June 30, 2001 (inception of Historical Accounts)
to December 31, 2009 4.58% 5.63%
* Total return is a measure of investment performance that is based upon the
change in value of an investment from the beginning to the end of a
specified period and assumes reinvestment of all dividends and other
distributions. The basis of presentation of this data is described in the
preceding discussion.
** Net of all fees.
AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 2009
Since
1 Year 3 Years 5 Years 10 Years Inception
--------------------------------------------------------------------------------------------------
High Income Historical Account [_____]% [_____]% [_____]% [_____]% [_____]%*
High Income Composite Benchmark [_____]% [_____]% [_____]% N/A N/A
EMBI Global [_____]% [_____]% [_____]% [_____]% [_____]%**
GBI-EM [_____]% [_____]% [_____]% N/A N/A
BC High Yield [_____]% [_____]% [_____]% [_____]% [_____]%**
* Inception date of Historical Account is December 22, 1997
** Since inception average annual total returns are from December 31, 1997.
Since
1 Year 3 Years Inception
--------------------------------------------------------------------------------
Intermediate Bond Historical Accounts [_____]% [_____]% [_____]%*
BC U.S. Aggregate Index [_____]% [_____]% [_____]%*
* Inception date of Historical Accounts is June 30, 2001.
LEGAL PROCEEDINGS
On October 2, 2003, a purported class action complaint entitled Hindo et al. v.
AllianceBernstein Growth & Income Fund et al. (the "Hindo Complaint") was filed
against the Adviser; AllianceBernstein Holding L.P. ("Holding");
AllianceBernstein Corporation; AXA Financial, Inc.; the AllianceBernstein Mutual
Funds, certain officers of the Adviser ("AllianceBernstein defendants"); and
certain other unaffiliated defendants, as well as unnamed Doe defendants. The
Hindo Complaint was filed in the United States District Court for the Southern
District of New York by alleged shareholders of two of the AllianceBernstein
Mutual Funds. The Hindo Complaint alleges that certain of the AllianceBernstein
defendants failed to disclose that they improperly allowed certain hedge funds
and other unidentified parties to engage in "late trading" and "market timing"
of AllianceBernstein Mutual Fund securities, violating Sections 11 and 15 of the
Securities Act, Sections 10(b) and 20(a) of the Securities Exchange Act of 1934,
and Sections 206 and 215 of the Investment Advisers Act of 1940. Plaintiffs seek
an unspecified amount of compensatory damages and rescission of their contracts
with the Adviser, including recovery of all fees paid to the Adviser pursuant to
such contracts.
Following October 2, 2003, additional lawsuits making factual allegations
generally similar to those in the Hindo Complaint were filed in various federal
and state courts against the Adviser and certain other defendants. On September
29, 2004, plaintiffs filed consolidated amended complaints with respect to four
claim types: mutual fund shareholder claims; mutual fund derivative claims;
derivative claims brought on behalf of Holding; and claims brought under ERISA
by participants in the Profit Sharing Plan for Employees of the Adviser. All
four complaints include substantially identical factual allegations, which
appear to be based in large part on the Order of the Commission dated December
18, 2003 as amended and restated January 15, 2004 and the New York State
Attorney General Assurance of Discontinuance dated September 1, 2004.
On April 21, 2006, the Adviser and attorneys for the plaintiffs in the mutual
fund shareholder claims, mutual fund derivative claims, and ERISA claims entered
into a confidential memorandum of understanding containing their agreement to
settle these claims. The agreement will be documented by a stipulation of
settlement and will be submitted for court approval at a later date. The
settlement amount ($30 million), which the Adviser previously accrued and
disclosed, has been disbursed. The derivative claims brought on behalf of
Holding, in which plaintiffs seek an unspecified amount of damages, remain
pending.
It is possible that these matters and/or other developments resulting from these
matters could result in increased redemptions of the affected fund's shares or
other adverse consequences to those funds. This may require those funds to sell
investments to provide for sufficient liquidity and could also have an adverse
effect on the investment performance of the Funds. However, the Adviser believes
that these matters are not likely to have a material adverse effect on its
ability to perform advisory services relating to those funds or the Funds.
TRANSFER AGENCY AND RETIREMENT PLAN SERVICES
ABIS acts as the transfer agent for the Funds. ABIS, an indirect wholly-owned
subsidiary of the Adviser, registers the transfer, issuance, and redemption of
Fund shares and disburses dividends and other distributions to Fund
shareholders.
Many Fund shares are owned by financial intermediaries for the benefit of their
customers. Retirement plans also may hold Fund shares in the name of the plan,
rather than the participant. In those cases, the Fund often does not maintain an
account for you. Thus, some or all of the transfer agency functions for these
and certain other accounts are performed by the financial intermediaries and
plan recordkeepers. The Funds, ABI and/or the Adviser pay to these financial
intermediaries and recordkeepers, including those that sell shares of the
AllianceBernstein Mutual Funds, fees for sub-accounting or shareholder servicing
in amounts ranging up to $19 per customer fund account per annum and/or up to
0.25% per annum of the average daily assets held through the intermediary. To
the extent any of these payments for recordkeeping services or transfer agency
services are made by the Fund, they are included in the amount appearing
opposite the caption "Other Expenses" found in the Fund expense tables under
"Fees and Expenses of the Funds." In addition, financial intermediaries may be
affiliates of entities that receive compensation from the Adviser or ABI for
maintaining retirement plan "platforms" that facilitate trading by affiliated
and non-affiliated financial intermediaries and recordkeeping for retirement
plans.
Because financial intermediaries and plan recordkeepers may be paid varying
amounts per class for sub-accounting or shareholder servicing, the service
requirements of which may also vary by class, this may create an additional
incentive for financial intermediaries and their financial advisors to favor one
fund complex over another or one class of shares over another.
DIVIDENDS, DISTRIBUTIONS AND TAXES
--------------------------------------------------------------------------------
Each Fund's income dividends and capital gains distributions, if any, declared
by a Fund on its outstanding shares will, at the election of each shareholder,
be paid in cash or in additional shares of the same class of shares of that
Fund. If paid in additional shares, the shares will have an aggregate NAV as of
the close of business on the declaration date of the dividend or distribution
equal to the cash amount of the dividend or distribution. You may make an
election to receive dividends and distributions in cash or in shares at the time
you purchase shares. Your election can be changed at any time prior to a record
date for a dividend. There is no sales or other charge in connection with the
reinvestment of dividends or capital gains distributions. Cash dividends may be
paid by check, or at your election, electronically via the ACH network.
If you receive an income dividend or capital gains distribution in cash you may,
within 120 days following the date of its payment, reinvest the dividend or
distribution in additional shares of that Fund without charge by returning to
the Adviser, with appropriate instructions, the check representing the dividend
or distribution. Thereafter, unless you otherwise specify, you will be deemed to
have elected to reinvest all subsequent dividends and distributions in shares of
that Fund.
While it is the intention of each Fund to distribute to its shareholders
substantially all of each fiscal year's net income and net realized capital
gains, if any, the amount and timing of any dividend or distribution will depend
on the realization by the Fund of income and capital gains from investments.
There is no fixed dividend rate and there can be no assurance that a Fund will
pay any dividends or realize any capital gains. The final determination of the
amount of a Fund's return of capital distributions for the period will be made
after the end of each calendar year.
You will normally have to pay federal income tax, and any state or local income
taxes, on the distributions you receive from a Fund, whether you take the
distributions in cash or reinvest them in additional shares. Distributions of
net capital gains from the sale of investments that a Fund owned for more than
one year and that are properly designated as capital gain dividends are taxable
as long-term capital gains. For taxable years beginning on or before December
31, 2010, distributions of dividends to a Fund's non-corporate shareholders may
be treated as "qualified dividend income," which is taxed at reduced rates, if
such distributions are derived from, and designated by a Fund as, "qualified
dividend income" and provided that holding period and other requirements are met
by both the shareholder and the Fund. "Qualified dividend income" generally is
income derived from dividends from U.S. corporations and "qualified foreign
corporations." Other distributions by a Fund are generally taxable to you as
ordinary income. Dividends declared in October, November, or December and paid
in January of the following year are taxable as if they had been paid the
previous December. A Fund will notify you as to how much of the Fund's
distributions, if any, qualify for these reduced tax rates.
Investment income received by a Fund from sources within foreign countries may
be subject to foreign income taxes withheld at the source. To the extent that a
Fund is liable for foreign income taxes withheld at the source, the Fund
intends, if possible, to operate so as to meet the requirements to "pass
through" to the Fund's shareholders for foreign income taxes paid (or to permit
shareholders to claim a deduction for such foreign taxes), but there can be no
assurance that any Fund will be able to do so, and Funds that invest primarily
in U.S. securities will not do so. Furthermore, a shareholder's ability to claim
a foreign tax credit or deduction for foreign taxes paid by a Fund may be
subject to certain limitations imposed by the Internal Revenue Code, as a result
of which a shareholder may not be permitted to claim a credit or deduction for
all or a portion of the amount of such taxes.
Under certain circumstances, if a Fund realizes losses (e.g., from fluctuations
in currency exchange rates) after paying a dividend, all or a portion of the
dividend may subsequently be characterized as a return of capital. Returns of
capital are generally nontaxable, but will reduce a shareholder's basis in
shares of a Fund. If that basis is reduced to zero (which could happen if the
shareholder does not reinvest distributions and returns of capital are
significant), any further returns of capital will be taxable as a capital gain.
If you buy shares just before a Fund deducts a distribution from its NAV, you
will pay the full price for the shares and then receive a portion of the price
back as a taxable distribution.
The sale or exchange of Fund shares is a taxable transaction for federal income
tax purposes.
Each year shortly after December 31, each Fund will send its shareholders tax
information stating the amount and type of all its distributions for the year.
Consult your tax adviser about the federal, state, and local tax consequences in
your particular circumstances.
NON-U.S. SHAREHOLDERS
If you are a nonresident alien individual or a foreign corporation for federal
income tax purposes, please see the Funds' SAI for information on how you will
be taxed as a result of holding shares in a Fund.
GENERAL INFORMATION
--------------------------------------------------------------------------------
Under unusual circumstances, a Fund may suspend redemptions or postpone payment
for up to seven days or longer, as permitted by federal securities law. The
Funds reserve the right to close an account that has remained below $500 for 90
days.
During drastic economic or market developments, you might have difficulty
reaching ABIS by telephone, in which event you should issue written instructions
to ABIS. ABIS is not responsible for the authenticity of telephone requests to
purchase, sell, or exchange shares. ABIS will employ reasonable procedures to
verify that telephone requests are genuine, and could be liable for losses
resulting from unauthorized transactions if it failed to do so. Dealers and
agents may charge a commission for handling telephone requests. The telephone
service may be suspended or terminated at any time without notice.
Shareholder Services. ABIS offers a variety of shareholder services. For more
information about these services or your account, call ABIS's toll-free number,
800-221-5672. Some services are described in the Mutual Fund Application.
Householding. Many shareholders of the AllianceBernstein Mutual Funds have
family members living in the same home who also own shares of the same Funds. In
order to reduce the amount of duplicative mail that is sent to homes with more
than one Fund account and to reduce expenses of the Funds, all AllianceBernstein
Mutual Funds will, until notified otherwise, send only one copy of each
prospectus, shareholder report and proxy statement to each household address.
This process, known as "householding", does not apply to account statements,
confirmations, or personal tax information. If you do not wish to participate in
householding, or wish to discontinue householding at any time, call ABIS at
1-800-221-5672. We will resume separate mailings for your account within 30 days
of your request.
GLOSSARY OF INVESTMENT TERMS
--------------------------------------------------------------------------------
Bonds are interest-bearing or discounted government or corporate securities that
obligate the issuer to pay the bond holder a specified sum of money, usually at
specified intervals, and to repay the principal amount of the loan at maturity.
Fixed-income securities are investments, such as bonds, that pay a fixed rate of
return.
Preferred stock is a class of capital stock that pays dividends at a specified
rate and that has preference over common stock, but not debt securities of the
same issuer, in the payment of dividends and the liquidation of assets.
Sovereign debt obligations are foreign government debt securities, loan
participations between foreign governments and financial institutions, and
interests in entities organized and operated for the purpose of restructuring
the investment characteristics of foreign government securities.
Supranational entities are international organizations formed by two or more
governments. Examples of supranational entities include the International Bank
for Reconstruction and Development, the Inter-American Development Bank, the
Asian Development Bank, the African Development Bank, the International Finance
Corporation and the European Bank for Reconstruction and Development.
U.S. Government securities are securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, including obligations that are
issued by private issuers that are guaranteed as to principal or interest by the
U.S. Government, its agencies or instrumentalities, or by certain
government-sponsored entities (entities chartered by or sponsored by Act of
Congress). These securities include securities backed by the full faith and
credit of the United States, those supported by the right of the issuer to
borrow from the U.S. Treasury, and those backed only by the credit of the
issuing agency or entity itself. The first category includes U.S. Treasury
securities (which are U.S. Treasury bills, notes, and bonds) and certificates
issued by GNMA. U.S. Government securities not backed by the full faith and
credit of the United States or a right to borrow from the U.S. Treasury include
certificates issued by FNMA and FHLMC.
The Merrill Lynch 3-Month T-Bill Index is an unmanaged index that measures
returns of three-month Treasury Bills.
The Merrill Lynch 1-3 Year Treasury Index is an unmanaged index consisting of
all public U.S. Treasury obligations having maturities from 1 to 2.99 years and
reflects total return. This unmanaged index does not reflect fees and expenses
and is not available for direct investment.
The Barclays Capital U.S. Aggregate Index is a broad-based bond index comprised
of government, corporate, mortgage and asset-backed issues, rated investment
grade or higher, and having at least one year to maturity.
The Barclays Capital Global Aggregate Index is a macro index of global
government and corporate bond markets, and is composed of various indices
calculated by Lehman Brothers Inc., including the U.S. Aggregate Index, the
Pan-European Aggregate Index, the Global Treasury Index, the Asian-Pacific
Aggregate Index, the Eurodollar Index and the U.S. Investment-Grade 144A Index.
The Barclays Capital High Yield Index is an unmanaged index generally
representative of corporate bonds rated below investment grade.
The JPMorgan Emerging Markets Bond Index Global is a broad-based, unmanaged
index which tracks total return for external currency denominated debt in
emerging markets.
The JPMorgan Government Bond Index-Emerging Markets is a definitive local
emerging markets debt benchmark that tracks local currency government bonds
issued by emerging markets.
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
The financial highlights table is intended to help you understand each Fund's
financial performance for the past five years. Certain information reflects
financial results for a single share of a class of each Fund. The total returns
in the table represent the rate that an investor would have earned (or lost) on
an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by [____________], the
independent registered public accounting firm for all Funds, whose reports,
along with each Fund's financial statements, are included in each Fund's Annual
Report, which is available upon request.
Income from Investment
Operations Less: Dividends and Distributions
------------------------------------------------ ------------------------------------
Net Asset Net Realized Net Increase Dividends Distributions
Value, Net and Unrealized (Decrease) in from Net from Net
Beginning Investment Gain (Loss) Net Asset Value Investment Realized Gain
Fiscal Year or Period of Period Income (a) on Investments from Operations Income on Investments
------------------------------------------------------------------------------------------------------------------------------
Intermediate Bond
Class A
Year Ended 10/31/09 $[______] $ [_____] $ [_______] $[_______] $ [_______] $ [_______]
Year Ended 10/31/08 10.24 .50(f) (1.49) (.99)(k) (.48) 0.00
Year Ended 10/31/07 10.18 .42(f) .06 .48 (.42) 0.00
Year Ended 10/31/06 10.15 .41(f) .04 .45 (.42) 0.00
Year Ended 10/31/05 10.43 .37(f) (.28) .09 (.37) 0.00
Class B
Year Ended 10/31/09 $[______] $ [_____] $ [_______] $[_______] $ [_______] $ [_______]
Year Ended 10/31/08 10.23 .42(f) (1.47) (1.05)(k) (.41) 0.00
Year Ended 10/31/07 10.18 .35(f)(g) .05 .40 (.35) 0.00
Year Ended 10/31/06 10.15 .38(f)(g) .04 .42 (.39) 0.00
Year Ended 10/31/05 10.42 .29(f) (.25) .04 (.31) 0.00
Class C
Year Ended 10/31/09 $[______] $ [_____] $ [_______] $[_______] $ [_______] $ [_______]
Year Ended 10/31/08 10.22 .43(f) (1.49) (1.06)(k) (.41) 0.00
Year Ended 10/31/07 10.16 .35(f) .06 .41 (.35) 0.00
Year Ended 10/31/06 10.13 .34(f) .04 .38 (.35) 0.00
Year Ended 10/31/05 10.40 .29(f) (.26) .03 (.30) 0.00
Advisor Class
Year Ended 10/31/09 $[______] $ [_____] $ [_______] $[_______] $ [_______] $ [_______]
Year Ended 10/31/08 10.24 .50(f) (1.45) (.95)(k) (.51) 0.00
Year Ended 10/31/07 10.18 .45(f) .06 .51 (.45) 0.00
Year Ended 10/31/06 10.15 .44(f) .04 .48 (.45) 0.00
Year Ended 10/31/05 10.43 .39(f) (.26) .13 (.41) 0.00
Global Bond
Class A
Year Ended 9/30/09 $[______] $ [_____] $ [_______] $ [_______] $ [_______] $ [_______]
Year Ended 9/30/08 8.07 .42 (.70) (.28) (.40) 0.00
Year Ended 9/30/07 7.54 .40 .52 .92 (.39) 0.00
Year Ended 9/30/06 7.69 .44 (.15) .29 (.44) 0.00
Year Ended 9/30/05 7.35 .50 .34 .84 (.50) 0.00
Class B
Year Ended 9/30/09 $[______] $ [_____] $ [_______] $ [_______] $ [_______] $ [_______]
Year Ended 9/30/08 8.07 .36 (.70) (.34) (.34) 0.00
Year Ended 9/30/07 7.54 .34 .52 .86 (.33) 0.00
Year Ended 9/30/06 7.68 .38 (.14) .24 (.38) 0.00
Year Ended 9/30/05 7.35 .44 .33 .77 (.44) 0.00
Class C
Year Ended 9/30/09 $[______] $ [_____] $ [_______] $ [_______] $ [_______] $ [_______]
Year Ended 9/30/08 8.09 .36 (.70) (.34) (.34) 0.00
Year Ended 9/30/07 7.56 .34 .52 .86 (.33) 0.00
Year Ended 9/30/06 7.71 .38 (.15) .23 (.38) 0.00
Year Ended 9/30/05 7.38 .44 .34 .78 (.45) 0.00
Advisor Class
Year Ended 9/30/09 $[______] $ [_____] $ [_______] $ [_______] $ [_______] $ [_______]
11/5/07(i) to 9/30/08 8.14 .41 (.78) (.37) (.39) 0.00
Diversified Yield
Class A
Year Ended 10/30/09 $[______] $ [_____] $ [_______] $ [_______] $ [_______] $ [_______]
Year Ended 10/31/08 9.02 .36 (1.63) (1.27)(k) (.36) 0.00
Year Ended 10/31/07 8.62 .34 .40 .74 (.34) 0.00
Year Ended 10/31/06 8.70 .34 .14 .48 (.34) (.22)
Year Ended 10/31/05 8.63 .39 .09 .48 (.41) 0.00
Class B
Year Ended 10/30/09 $[______] $ [_____] $ [_______] $ [_______] $ [_______] $ [_______]
Year Ended 10/31/08 9.03 .30 (1.64) (1.34)(k) (.29) 0.00
Year Ended 10/31/07 8.63 .26 .41 .67 (.27) 0.00
Year Ended 10/31/06 8.70 .28 .14 .42 (.27) (.22)
Year Ended 10/31/05 8.63 .32 .10 .42 (.35) 0.00
Class C
Year Ended 10/30/09 $[______] $ [_____] $ [_______] $ [_______] $ [_______] $ [_______]
Year Ended 10/31/08 9.02 .29 (1.61) (1.32)(k) (.30) 0.00
Year Ended 10/31/07 8.63 .27 .39 .66 (.27) 0.00
Year Ended 10/31/06 8.71 .28 .14 .42 (.28) (.22)
Year Ended 10/31/05 8.64 .33 .09 .42 (.35) 0.00
Advisor Class
Year Ended 10/30/09 $[______] $ [_____] $ [_______] $ [_______] $ [_______] $ [_______]
Year Ended 10/31/08 9.02 .38 (1.63) (1.25)(k) (.38) 0.00
Year Ended 10/31/07 8.62 .37 .39 .76 (.36) 0.00
Year Ended 10/31/06 8.70 .36 .14 .50 (.36) (.22)
Year Ended 10/31/05 8.63 .47 .04 .51 (.44) 0.00
Please refer to the footnotes on pages [___] through [___].
Less Distributions Ratios/Supplemental Data
---------------------------------------------- -----------------------------------------------------------
Total Ratio of Net
Investment Net Assets, Ratio of Investment
Total Divi- Net Asset Return Based End of Period Expenses Income Portfolio
dends and Value, End on Net (000's to Average to Average Turnover
Fiscal Year or Period Distributions of Period Asset Value (b) Omitted) Net Assets Net Assets Rate
------------------------------------------------------------------------------------------------------------------------------------
Intermediate Bond
Class A
Year Ended 10/31/09 $ [______] $ [______] [_______]% $ [________] [_______]% [_______]% [______]%
Year Ended 10/31/08 (.48) 8.77 (10.15)(c) 360,606 .85(h) 4.68(f) 184
Year Ended 10/31/07 (.42) 10.24 4.79(c) 41,696 .98(h) 4.13(f) 173
Year Ended 10/31/06 (.42) 10.18 4.51 44,409 .98(d)(h) 4.08(d)(f) 446
Year Ended 10/31/05 (.37) 10.15 .90 52,430 .98(h) 3.53(f) 935
Class B
Year Ended 10/31/09 $ [______] $ [______] [_______]% $ [________] [_______]% [_______]% [______]%
Year Ended 10/31/08 (.41) 8.77 (10.69)(c) 31,207 1.55(h) 3.95(f) 184
Year Ended 10/31/07 (.35) 10.23 3.96(c) 20,157 1.66(h) 3.46(f)(g) 173
Year Ended 10/31/06 (.39) 10.18 4.20 30,154 1.33(d)(h) 3.75(d)(f)(g) 446
Year Ended 10/31/05 (.31) 10.15 .30 44,944 1.68(h) 2.82(f) 935
Class C
Year Ended 10/30/09 $ [______] $ [______] [_______]% $ [________] [_______]% [_______]% [______]%
Year Ended 10/31/08 (.41) 8.75 (10.80)(c) 51,708 1.55(h) 3.99(f) 184
Year Ended 10/31/07 (.35) 10.22 4.07(c) 9,404 1.68(h) 3.45(f) 173
Year Ended 10/31/06 (.35) 10.16 3.80 9,874 1.68(d)(h) 3.40(d)(f) 446
Year Ended 10/31/05 (.30) 10.13 .30 15,689 1.68(h) 2.84(f) 935
Advisor Class
Year Ended 10/30/09 $ [______] $ [______] [_______]% $ [________] [_______]% [_______]% [______]%
Year Ended 10/31/08 (.51) 8.78 (9.78)(c) 33,139 .55(h) 4.98(f) 184
Year Ended 10/31/07 (.45) 10.24 5.11(c) 32,375 .68(h) 4.44(f) 173
Year Ended 10/31/06 (.45) 10.18 4.83 29,966 .68(d)(h) 4.38(d)(f) 446
Year Ended 10/31/05 (.41) 10.15 1.20 29,576 .68(h) 3.72(f) 935
Global Bond
Class A
Year Ended 9/30/09 $ [______] $ [______] [_______]% $ [________] [_______]% [_______]% [______]%
Year Ended 9/30/08 (.40) 7.39 (3.75) 1,425,649 1.04(e)(h) 5.19 140
Year Ended 9/30/07 (.39) 8.07 12.47 1,071,398 1.80(e) 5.09 170
Year Ended 9/30/06 (.44) 7.54 3.90 935,901 1.04(d) 5.81(d) 104
Year Ended 9/30/05 (.50) 7.69 11.83 957,697 1.05 6.78 66
Class B
Year Ended 9/30/09 $ [______] $ [______] [_______]% $ [________] [_______]% [_______]% [______]%
Year Ended 9/30/08 (.34) 7.39 (4.44) 137,926 1.75(e)(h) 4.52 140
Year Ended 9/30/07 (.33) 8.07 11.65 171,078 2.53(e) 4.36 170
Year Ended 9/30/06 (.38) 7.54 3.28 277,450 1.76(d) 5.10(d) 104
Year Ended 9/30/05 (.44) 7.68 11.04 373,923 1.77 5.82 66
Class C
Year Ended 9/30/09 $ [______] $ [______] [_______]% $ [________] [_______]% [_______]% [______]%
Year Ended 9/30/08 (.34) 7.41 (4.42) 492,541 1.75(e)(h) 4.46 140
Year Ended 9/30/07 (.33) 8.09 11.65 307,616 2.50(e) 4.37 170
Year Ended 9/30/06 (.38) 7.56 3.15 256,047 1.74(d) 5.07(d) 104
Year Ended 9/30/05 (.45) 7.71 10.87 251,752 1.76 5.88 66
Advisor Class
Year Ended 9/30/09 $ [______] $ [______] [_______]% $ [________] [_______]% [_______]% [______]%
11/5/07(i) to 9/30/08 (.39) 7.38 (4.83) 89,152 0.74(e)(h)(j) 5.37(j) 140
Diversified Yield
Class A
Year Ended 10/30/09 $ [______] $ [______] [_______]% $ [________] [_______]% [_______]% [______]%
Year Ended 10/31/08 (.36) 7.39 (14.57)(c) 39,639 0.90(h) 4.13 81
Year Ended 10/31/07 (.34) 9.02 8.60(c) 48,542 1.47 3.81 134
Year Ended 10/31/06 (.56) 8.62 5.61 25,348 1.78(d)(e) 3.93(d) 169
Year Ended 10/31/05 (.41) 8.70 5.67 24,250 1.54 4.65 98
Class B
Year Ended 10/30/09 $ [______] $ [______] [_______]% $ [________] [_______]% [_______]% [______]%
Year Ended 10/31/08 (.29) 7.40 (15.15)(c) 13,666 1.60(h) 3.43 81
Year Ended 10/31/07 (.27) 9.03 7.77(c) 27,303 2.28 2.93 134
Year Ended 10/31/06 (.49) 8.63 4.96 40,136 2.50(d)(e) 3.24(d) 169
Year Ended 10/31/05 (.35) 8.70 4.92 59,513 2.25 3.94 98
Class C
Year Ended 10/30/09 $ [______] $ [______] [_______]% $ [________] [_______]% [_______]% [______]%
Year Ended 10/31/08 (.30) 7.40 (15.05)(c) 11,245 1.60(h) 3.44 81
Year Ended 10/31/07 (.27) 9.02 7.69(c) 15,208 2.20 3.03 134
Year Ended 10/31/06 (.50) 8.63 4.86 11,040 2.49(d)(e) 3.22(d) 169
Year Ended 10/31/05 (.35) 8.71 4.93 11,492 2.25 3.94 98
Advisor Class
Year Ended 10/30/09 $ [______] $ [______] [_______]% $ [________] [_______]% [_______]% [______]%
Year Ended 10/31/08 (.38) 7.39 (14.31)(c) 3,756 0.60(h) 4.42 81
Year Ended 10/31/07 (.36) 9.02 8.89(c) 5,529 1.14 4.00 134
Year Ended 10/31/06 (.58) 8.62 5.94 2,494 1.49(d)(e) 4.17(d) 169
Year Ended 10/31/05 (.44) 8.70 6.01 1,594 1.26 4.93 98
Income from Investment
Operations Less: Dividends and Distributions
-------------------------------------------- -----------------------------------
Net Asset Net Realized Net Increase Dividends Distributions
Value, Net and Unrealized (Decrease) in from Net from Net
Beginning Investment Gain (Loss) Net Asset Value Investment Realized Gain
Fiscal Year or Period of Period Income (a) on Investments from Operations Income on Investments
------------------------------------------------------------------------------------------------------------------------------------
High Income
Class A
Year Ended 10/30/09 $[______] $ [_____] $ [_______] $ [_______] $ [_______] $ [_______]
Year Ended 10/31/08 9.02 .61(f) (2.87) (2.26)(k) (.68) (.23)
Year Ended 10/31/07 8.97 .56 .41 .97 (.57) (.35)
Year Ended 10/31/06 8.70 .55 .43 .98 (.57) (.14)
Year Ended 10/31/05 8.38 .53 .34 .87 (.55) 0.00
Class B
Year Ended 10/30/09 $[______] $ [_____] $ [_______] $ [_______] $ [_______] $ [_______]
Year Ended 10/31/08 9.09 .55(f) (2.89) (2.34)(k) (.62) (.23)
Year Ended 10/31/07 9.05 .49 .41 .90 (.51) (.35)
Year Ended 10/31/06 8.77 .49 .44 .93 (.51) (.14)
Year Ended 10/31/05 8.45 .47 .34 .81 (.49) 0.00
Class C
Year Ended 10/30/09 $[______] $ [_____] $ [_______] $ [_______] $ [_______] $ [_______]
Year Ended 10/31/08 9.11 .55(f) (2.89) (2.34)(k) (.62) (.23)
Year Ended 10/31/07 9.07 .49 .41 .90 (.51) (.35)
Year Ended 10/31/06 8.79 .49 .44 .93 (.51) (.14)
Year Ended 10/31/05 8.47 .47 .34 .81 (.49) 0.00
Advisor Class
Year Ended 10/30/09 $[______] $ [_____] $ [_______] $ [_______] $ [_______] $ [_______]
1/28/08(i) to 10/31/08 8.52 .52(f) (2.69) (2.17)(k) (.49) 0.00
Please refer to the footnotes on pages [____] through [____].
Less Distributions Ratios/Supplemental Data
------------------------------------------- ---------------------------------------------------------------
Total Ratio of Net
Investment Net Assets, Ratio of Investment
Total Divi- Net Asset Return Based End of Period Expenses Income Portfolio
dends and Value, End on Net (000's to Average to Average Turnover
Distributions of Period Asset Value (b) Omitted) Net Assets Net Assets Rate
------------------------------------------------------------------------------------------------------------------------------------
High Income
Class A
Year Ended 10/30/09 $ [______] $ [______] [_______]% $ [________] [______]% [______]% [_____]%
Year Ended 10/31/08 (.91) 5.85 (27.49)(c) 450,517 1.03(d)(e)(h) 7.65(d)(f) 74
Year Ended 10/31/07 (.92) 9.02 11.54 281,677 1.41(d)(e) 6.24(d) 67
Year Ended 10/31/06 (.71) 8.97 11.87 235,763 1.48(e) 6.32 75
Year Ended 10/31/05 (.55) 8.70 10.70 213,652 1.20(e) 6.14 100
Class B
Year Ended 10/30/09 $ [______] $ [______] [_______]% $ [________] [______]% [______]% [_____]%
Year Ended 10/31/08 (.85) 5.90 (28.03)(c) 54,724 1.74(d)(e)(h) 6.83(d)(f) 74
Year Ended 10/31/07 (.86) 9.09 10.51 35,058 2.14(d)(e) 5.45(d) 67
Year Ended 10/31/06 (.65) 9.05 11.11 45,133 2.18(e) 5.55 75
Year Ended 10/31/05 (.49) 8.77 9.81 53,629 1.89(e) 5.39 100
Class C
Year Ended 10/30/09 $ [______] $ [______] [_______]% $ [________] [______]% [______]% [_____]%
Year Ended 10/31/08 (.85) 5.92 (27.95)(c) 112,508 1.75(d)(e)(h) 6.82(d)(f) 74
Year Ended 10/31/07 (.86) 9.11 10.50 86,525 2.11(d)(e) 5.47(d) 67
Year Ended 10/31/06 (.65) 9.07 11.10 88,046 2.17(e) 5.54 75
Year Ended 10/31/05 (.49) 8.79 9.81 91,662 1.89(e) 5.38 100
Advisor Class
Year Ended 10/30/09 $ [______] $ [______] [_______]% $ [________] [______]% [______]% [_____]%
1/28/08(i) to 10/31/08 (.49) 5.86 (26.77)(c) 6,095 .69(d)(e)(h)(j) 8.16(d)(f)(j) 74
-----------------------------------------------------------------------------------------------------------------------------------
(a) Based on average shares outstanding.
(b) Total investment return is calculated assuming an initial investment made
at the NAV at the beginning of the period, reinvestment of all dividends
and distributions at the NAV during the period, and a redemption on the
last day of the period. Initial sales charge or contingent deferred sales
charge, if applicable, is not reflected in the calculation of total
investment return. Total investment return does not reflect the deduction
of taxes that a shareholder would pay on fund distributions or the
redemption of fund shares. Total investment returns calculated for periods
of less than one year are not annualized.
(c) Includes the impact of proceeds received and credited to the Fund resulting
from the WorldCom class action settlement, which enhanced the performance
of each share class by:
For Fiscal Year Ended
--------------------------------------------------------------------------------
AllianceBernstein Intermediate Bond October 31, 2008 .21%
October 31, 2007 .61%
AllianceBernstein Diversified Yield October 31, 2008 .81%
October 31, 2007 4.31%
AllianceBernstein High Income October 31, 2008 .41%
(d) The ratio includes expenses attributable to costs of proxy solicitation.
(e) Includes interest expense. If the following Funds had borne all expenses,
excluding interest expense, the ratio of expenses to average net assets
would have been as follows:
2009 2008 2007 2006 2005 2004
----------------------------------------------------------------------------------------------------------
AllianceBernstein Diversified Yield
Class A 1.72%*
Class B 2.45%*
Class C 2.44%*
Advisor Class 1.44%*
AllianceBernstein Global Bond
Class A [____]% 1.01% 1.05% 1.04%* 1.05% 1.27%
Class B [____]% 1.73% 1.77% 1.76%* 1.77% 1.99%
Class C [____]% 1.71% 1.75% 1.74%* 1.76% 1.97%
Advisor Class [____]% .74%
AllianceBernstein High Income
Class A [____]% 1.07%* 1.14%* 1.14% 1.19% 1.21%
Class B [____]% 1.80%* 1.87%* 1.85% 1.89% 1.92%
Class C [____]% 1.77%* 1.85%* 1.84% 1.88% 1.90%
Advisor Class [____]% .76%*
------------------
* The ratio includes expenses attributable to costs of proxy solicitation.
(f) Net of fees waived and expenses reimbursed by the Adviser.
(g) Net of fees and expenses waived by the distributor.
(h) Net of fees waived by the Adviser. If the following Funds had borne all
expenses for the respective year ends, the expense ratios would have been
as follows:
2009 2008 2007 2006 2005
------------------------------------------------------------------------------------------------
AllianceBernstein Intermediate Bond
Class A [____]% 1.09% 1.54% 1.34%* 1.31%
Class B [____]% 1.83% 2.29% 2.10%* 2.02%
Class C [____]% 1.80% 2.27% 2.07%* 2.03%
Advisor Class [____]% .80% 1.25% 1.02%* .84%
AllianceBernstein Diversified Yield
Class A [____]% 1.65%
Class B [____]% 2.41%
Class C [____]% 2.36%
Advisor Class [____]% 1.33%
AllianceBernstein Global Bond
Class A [____]% 1.15%
Class B [____]% 1.88%
Class C [____]% 1.86%
Advisor Class [____]% .88%
AllianceBernstein High Income
Class A [____]% 1.13%
Class B [____]% 1.86%
Class C [____]% 1.84%
Advisor Class [____]% .80%
------------------
* The ratio includes expenses attributable to costs of proxy solicitation.
(i) Commencement of distribution.
(j) Annualized.
(k) Amount includes contribution from Advisor of less than $ .01.
APPENDIX A
--------------------------------------------------------------------------------
BOND RATINGS
Moody's Investors Service, Inc.
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than the Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment some time in the future.
Baa--Bonds which are rated Baa are considered as medium-grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba--Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa--Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca--Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C--Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Absence of Rating--When no rating has been assigned or where a rating has been
suspended or withdrawn, it may be for reasons unrelated to the quality of the
issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or companies that are
unrated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not published
in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgment to be formed; if a bond is
called for redemption; or for other reasons.
Note--Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through Caa in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
Standard & Poor's Ratings Services
AAA--Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Debt rated BBB normally exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories.
BB, B, CCC, CC, C--Debt rated BB, B, CCC, CC or C is regarded as having
significant speculative characteristics. BB indicates the lowest degree of
speculation and C the highest. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
exposures to adverse conditions.
BB--Debt rated BB is less vulnerable to nonpayment than other speculative debt.
However, it faces major ongoing uncertainties or exposure to adverse business,
financial or economic conditions which could lead to an inadequate capacity to
pay interest and repay principal.
B--Debt rated B is more vulnerable to nonpayment than debt rated BB, but there
is capacity to pay interest and repay principal. Adverse business, financial or
economic conditions will likely impair the capacity or willingness to pay
principal or repay interest.
CCC--Debt rated CCC is currently vulnerable to nonpayment, and is dependent upon
favorable business, financial and economic conditions to pay interest and repay
principal. In the event of adverse business, financial or economic conditions,
there is not likely to be capacity to pay interest or repay principal.
CC--Debt rated CC is currently highly vulnerable to nonpayment.
C--The C rating may be used to cover a situation where a bankruptcy petition has
been filed or similar action has been taken, but payments are being continued.
D--The D rating, unlike other ratings, is not prospective; rather, it is used
only where a default has actually occurred.
Plus (+) or Minus (-)--The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
NR--Not rated.
Fitch Ratings
AAA--Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA--Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated F1+.
A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB--Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
BB--Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.
B--Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC--Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC--Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C--Bonds are in imminent default in payment of interest or principal.
DDD, DD, D--Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. DDD
represents the highest potential for recovery on these bonds, and D represents
the lowest potential for recovery.
Plus (+) Minus (-)--Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the AAA category or in categories below
CCC.
NR--Indicates that Fitch does not rate the specific issue.
Dominion Bond Rating Service Limited
Each rating category is denoted by the subcategories "high" and "low". The
absence of either a "high" or "low" designation indicates the rating is in the
"middle" of the category. The AAA and D categories do not utilize "high",
"middle", and "low" as differential grades.
AAA--Long-term debt rated AAA is of the highest credit quality, with
exceptionally strong protection for the timely repayment of principal and
interest. Earnings are considered stable, the structure of the industry in which
the entity operates is strong, and the outlook for future profitability is
favorable. There are few qualifying factors present that would detract from the
performance of the entity. The strength of liquidity and coverage ratios is
unquestioned and the entity has established a credible track record of superior
performance. Given the extremely high standard that Dominion has set for this
category, few entities are able to achieve a AAA rating.
AA--Long-term debt rated AA is of superior credit quality, and protection of
interest and principal is considered high. In many cases they differ from
long-term debt rated AAA only to a small degree. Given the extremely restrictive
definition Dominion has for the AAA category, entities rated AA are also
considered to be strong credits, typically exemplifying above-average strength
in key areas of consideration and unlikely to be significantly affected by
reasonably foreseeable events.
A--Long-term debt rated A is of satisfactory credit quality. Protection of
interest and principal is still substantial, but the degree of strength is less
than that of AA rated entities. While A is a respectable rating, entities in
this category are considered to be more susceptible to adverse economic
conditions and have greater cyclical tendencies than higher-rated securities.
BBB--Long-term debt rated BBB is of adequate credit quality. Protection of
interest and principal is considered acceptable, but the entity is fairly
susceptible to adverse changes in financial and economic conditions, or there
may be other adverse conditions present which reduce the strength of the entity
and its rated securities.
BB--Long-term debt rated BB is defined to be speculative and non-investment
grade, where the degree of protection afforded interest and principal is
uncertain, particularly during periods of economic recession. Entities in the BB
range typically have limited access to capital markets and additional liquidity
support. In many cases, deficiencies in critical mass, diversification, and
competitive strength are additional negative considerations.
B--Long-term debt rated B is considered highly speculative and there is a
reasonably high level of uncertainty as to the ability of the entity to pay
interest and principal on a continuing basis in the future, especially in
periods of economic recession or industry adversity.
CCC, CC and C--Long-term debt rated in any of these categories is very highly
speculative and is in danger of default of interest and principal. The degree of
adverse elements present is more severe than long-term debt rated B. Long-term
debt rated below B often have features which, if not remedied, may lead to
default. In practice, there is little difference between these three categories,
with CC and C normally used for lower ranking debt of companies for which the
senior debt is rated in the CCC to B range.
D--A security rated D implies the issuer has either not met a scheduled payment
of interest or principal or that the issuer has made it clear that it will miss
such a payment in the near future. In some cases, Dominion may not assign a D
rating under a bankruptcy announcement scenario, as allowances for grace periods
may exist in the underlying legal documentation. Once assigned, the D rating
will continue as long as the missed payment continues to be in arrears, and
until such time as the rating is suspended, discontinued, or reinstated by
Dominion.
APPENDIX B
--------------------------------------------------------------------------------
HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION
The settlement agreement between the Adviser and the New York State Attorney
General requires the Funds to include the following supplemental hypothetical
investment information, which provides additional information calculated and
presented in a manner different from expense information found under "Fees and
Expenses of the Funds" in this Prospectus about the effect of a Fund's expenses,
including investment advisory fees and other Fund costs, on each Fund's returns
over a 10-year period. The chart shows the estimated expenses that would be
charged on a hypothetical investment of $10,000 in Class A shares of each Fund
assuming a 5% return each year, including an initial sales charge of 4.25%.
Except as otherwise indicated, the chart also assumes that the current annual
expense ratio stays the same throughout the 10-year period. The current annual
expense ratio for each Fund is the same as stated under "Financial Highlights."
If you wish to obtain hypothetical investment information for other classes of
shares of each Fund, please refer to the "Mutual Fund Fees & Expenses
Calculators" on www.AllianceBernstein.com. Your actual expenses may be higher or
lower.
AllianceBernstein Intermediate Bond Portfolio
---------------------------------------------------------------------------------------------------------------------------
Hypothetical Investment Annual Hypothetical
Hypothetical Performance After Expense Hypothetical Ending
Year Investment Earnings Returns Ratio Expenses* Investment
---------------------------------------------------------------------------------------------------------------------------
1 $10,000.00 $[___________] $[___________] $[___________] $[___________] $[___________]
2 [___________] [___________] [___________] [___________] [___________] [___________]
3 [___________] [___________] [___________] [___________] [___________] [___________]
4 [___________] [___________] [___________] [___________] [___________] [___________]
5 [___________] [___________] [___________] [___________] [___________] [___________]
6 [___________] [___________] [___________] [___________] [___________] [___________]
7 [___________] [___________] [___________] [___________] [___________] [___________]
8 [___________] [___________] [___________] [___________] [___________] [___________]
9 [___________] [___________] [___________] [___________] [___________] [___________]
10 [___________] [___________] [___________] [___________] [___________] [___________]
---------------------------------------------------------------------------------------------------------------------------
Total $[___________] $[___________]
AllianceBernstein Global Bond Fund
---------------------------------------------------------------------------------------------------------------------------
Hypothetical Annual Hypothetical
Hypothetical Performance Investment Expense Hypothetical Ending
Year Investment Earnings After Returns Ratio Expenses* Investment
---------------------------------------------------------------------------------------------------------------------------
1 $10,000.00 $[___________] $[___________] $[___________] $[___________] $[___________]
2 [___________] [___________] [___________] [___________] [___________] [___________]
3 [___________] [___________] [___________] [___________] [___________] [___________]
4 [___________] [___________] [___________] [___________] [___________] [___________]
5 [___________] [___________] [___________] [___________] [___________] [___________]
6 [___________] [___________] [___________] [___________] [___________] [___________]
7 [___________] [___________] [___________] [___________] [___________] [___________]
8 [___________] [___________] [___________] [___________] [___________] [___________]
9 [___________] [___________] [___________] [___________] [___________] [___________]
10 [___________] [___________] [___________] [___________] [___________] [___________]
---------------------------------------------------------------------------------------------------------------------------
Total $[___________] $[___________]
AllianceBernstein Diversified Yield Fund
---------------------------------------------------------------------------------------------------------------------------
Hypothetical Annual Hypothetical
Hypothetical Performance Investment Expense Hypothetical Ending
Year Investment Earnings After Returns Ratio Expenses* Investment
---------------------------------------------------------------------------------------------------------------------------
1 $10,000.00 $[___________] $[___________] $[___________] $[___________] $[___________]
2 [___________] [___________] [___________] [___________] [___________] [___________]
3 [___________] [___________] [___________] [___________] [___________] [___________]
4 [___________] [___________] [___________] [___________] [___________] [___________]
5 [___________] [___________] [___________] [___________] [___________] [___________]
6 [___________] [___________] [___________] [___________] [___________] [___________]
7 [___________] [___________] [___________] [___________] [___________] [___________]
8 [___________] [___________] [___________] [___________] [___________] [___________]
9 [___________] [___________] [___________] [___________] [___________] [___________]
10 [___________] [___________] [___________] [___________] [___________] [___________]
---------------------------------------------------------------------------------------------------------------------------
Total $[___________] $[___________]
AllianceBernstein High Income Fund
---------------------------------------------------------------------------------------------------------------------------
Hypothetical Annual Hypothetical
Hypothetical Performance Investment Expense Hypothetical Ending
Year Investment Earnings After Returns Ratio Expenses* Investment
---------------------------------------------------------------------------------------------------------------------------
1 $10,000.00 $[___________] $[___________] $[___________] $[___________] $[___________]
2 [___________] [___________] [___________] [___________] [___________] [___________]
3 [___________] [___________] [___________] [___________] [___________] [___________]
4 [___________] [___________] [___________] [___________] [___________] [___________]
5 [___________] [___________] [___________] [___________] [___________] [___________]
6 [___________] [___________] [___________] [___________] [___________] [___________]
7 [___________] [___________] [___________] [___________] [___________] [___________]
8 [___________] [___________] [___________] [___________] [___________] [___________]
9 [___________] [___________] [___________] [___________] [___________] [___________]
10 [___________] [___________] [___________] [___________] [___________] [___________]
---------------------------------------------------------------------------------------------------------------------------
Total $[___________] $[___________]
* Expenses are net of any fee waiver or expense waiver for the first year.
Thereafter, the expense ratio reflects the Fund's operating expenses as
reflected under "Fees and Expenses of the Funds" before waiver.
For more information about the Funds, the following documents are available upon
request:
o Annual/Semi-Annual Reports to Shareholders The Funds' annual and semi-annual
reports to shareholders contain additional information on the Funds'
investments. In the annual report, you will find a discussion of the market
conditions and investment strategies that significantly affected a Fund's
performance during its last fiscal year.
o Statement of Additional Information (SAI) The Funds have an SAI, which
contains more detailed information about the Funds, including their operations
and investment policies. The Funds' SAI and the independent registered public
accounting firms' reports and financial statements in each Fund's most recent
annual report to shareholders are incorporated by reference into (and are
legally part of) this Prospectus.
You may request a free copy of the current annual/semi-annual report or the SAI,
or make inquiries concerning the Funds, by contacting your broker or other
financial intermediary, or by contacting the Adviser:
By Mail/Phone: AllianceBernstein Investor Services, Inc. For Information: (800) 221-5672
P.O. Box 786003 For Literature: (800) 227-4618
San Antonio, TX 78278-6003
Or you may view or obtain these documents from the Commission:
o Call the Commission at 1-202-551-8090 for information on the operation of the
Public Reference Room.
o Reports and other information about a Fund are available on the EDGAR Database
on the Commission's Internet site at http://www.sec.gov.
o Copies of the information may be obtained, after paying a duplicating fee, by
electronic request at publicinfo@sec.gov, or by writing the Commission's Public
Reference Section, Washington, DC 20549-1520.
You also may find these documents and more information about the Adviser and the
Funds on the Internet at: www.AllianceBernstein.com.
AllianceBernstein and the AB Logo are registered trademarks and service marks
used by permission of the owner, AllianceBernstein L.P.
Fund SEC File No.
--------------------------------------------------------------------------------
Intermediate Bond 811-02383
Global Bond 811-06554
Diversified Yield 811-07391
High Income 811-08188
ALLIANCEBERNSTEIN BOND FUNDS
1345 Avenue of the Americas
New York, NY 10105
PRO-0115-0109
[LOGO OMITTED]
BOND FUNDS - RETIREMENT SHARES - (CLASS A, R, K AND I SHARES)
PROSPECTUS | JANUARY 30, 2010
The AllianceBernstein Bond Funds
Core
(Shares Offered-Exchange Ticker Symbol)
>AllianceBernstein Intermediate Bond Portfolio
(Class A-ABQUX; Class R-ABQRX; Class K-ABQKX; Class
I-ABQIX)
> AllianceBernstein Global Bond Fund
(Class A-ANAGX; Class R-ANARX; Class K-ANAKX; Class I-ANAIX)
Absolute Return
(Shares Offered-Exchange Ticker Symbol)
> AllianceBernstein Diversified Yield Fund
(Class A-AGSAX; Class R-AGSRX; Class K-AGSKX; Class I-AGLIX)
High Income
(Shares Offered-Exchange Ticker Symbol)
>AllianceBernstein High Income Fund
(Class A-AGDAX; Class R-AGDRX; Class K-AGDKX; Class I-AGDIX)
The Securities and Exchange Commission has not approved or
disapproved these securities or passed upon the adequacy of
this Prospectus. Any representation to the contrary is a
criminal offense.
[AllianceBernstein LOGO]
Investment Products Offered
---------------------------
o Are Not FDIC Insured
o May Lose Value
o Are Not Bank Guaranteed
---------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
Page
SUMMARY INFORMATION..........................................................[_]
CORE.........................................................................[_]
AllianceBernstein Intermediate Bond Portfolio.............................[_]
AllianceBernstein Global Bond Fund........................................[_]
ABSOLUTE RETURN..............................................................[_]
AllianceBernstein Diversified Yield Fund..................................[_]
HIGH INCOME..................................................................[_]
AllianceBernstein High Income Fund........................................[_]
ADDITIONAL INFORMATION ABOUT THE FUNDS' RISKS AND INVESTMENTS................[_]
INVESTING IN THE FUNDS.......................................................[_]
How to Buy Shares.........................................................[_]
The Different Share Class Expenses........................................[_]
Distribution Arrangements for Group Retirement Plans......................[_]
Payments to Financial Intermediaries......................................[_]
How to Exchange Shares....................................................[_]
How to Sell or Redeem Shares..............................................[_]
Frequent Purchases and Redemptions of Fund Shares.........................[_]
How the Funds Value Their Shares..........................................[_]
MANAGEMENT OF THE FUNDS......................................................[_]
DIVIDENDS, DISTRIBUTIONS AND TAXES...........................................[_]
GENERAL INFORMATION..........................................................[_]
GLOSSARY OF INVESTMENT TERMS.................................................[_]
FINANCIAL HIGHLIGHTS.........................................................[_]
APPENDIX A--BOND RATINGS.....................................................A-1
APPENDIX B--HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION..................B-1
SUMMARY INFORMATION
--------------------------------------------------------------------------------
AllianceBernstein Intermediate Bond Portfolio
--------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The Fund's investment objective is to generate income and price appreciation
without assuming what the Adviser considers undue risk.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund. You may qualify for sales charge reductions if you and
members of your family invest, or agree to invest in the future, at least
$100,000 in AllianceBernstein Mutual Funds. More information about these and
other discounts is available from your financial intermediary and in Investing
in the Funds - Sales Charge Reduction Programs on page [___] of this Prospectus
and in Purchase of Shares - Sales Charge Reduction Programs on page [___] of the
Funds' Statement of Additional Information ("SAI").
Shareholder Fees (fees paid directly from your investment)
Class A Class R Class K Class I
Shares Shares Shares Shares
------ ------ ------ ------
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price) None None None None
Maximum Deferred Sales Charge
(Load) (as a percentage of
offering price or redemption
proceeds, whichever is lower) None* None None None
Exchange Fee None None None None
Annual Fund Operating Expenses (expenses that you pay each year as a percentage
of the value of your investment)
Class A Class R Class K Class I
------- ------- ------- -------
Management Fees .45% .45% .45% .45%
Distribution and/or
Service (12b-1) Fees .30% .50% .25% None
Other Expenses:
Transfer Agent [_______]% [_______]% [_______]% [_______]%
Other Expenses [_______]% [_______]% [_______]% [_______]%
Total Other Expenses [_______]% [_______]% [_______]% [_______]%
Total Annual Fund
Operating Expenses [_______]% [_______]% [_______]% [_______]%
Waiver and/or Expense
Reimbursement(a) ([_______])% ([_______])% ([_______])% ([_______])%
Net Expenses [_______]% [_______]% [_______]% [_______]%
Examples
The Examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Examples assume that you
invest $10,000 in the Fund for the time periods indicated and then redeem all of
your shares at the end of those periods. The Examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses stay
the same. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
Class A Class R Class K Class I
After 1 Year $[________] $[________] $[________] $[________]
After 3 Years(b) $[________] $[________] $[________] $[________]
After 5 Years(b) $[________] $[________] $[________] $[________]
After 10 Years(b) $[________] $[________] $[________] $[________]
----------
* In some cases, a 1%, 1-year contingent deferred sales charge or CDSC may
apply for Class A shares. CDSCs for Class A shares may also be subject to
waiver in certain circumstances. See "Purchase of Shares" in the SAI.
(a) The fee waiver and/or expense reimbursements will remain in effect until
January [__], 2011.
(b) These examples assume that the Adviser's agreement to waive advisory fees
and/or bear Fund expenses is not extended beyond January [__], 2011.
Portfolio Turnover
The Fund pays transactions costs, such as commissions, when it buys or sells
securities (or "turns over" its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when shares are
held in a taxable account. These transaction costs, which are not reflected in
the Annual Fund Operating Expenses or in the Examples, affect the Fund's
performance. During the most recent fiscal year, the Fund's portfolio turnover
rate was [___]% of the average value of its portfolio.
PRINCIPAL STRATEGIES
The Fund invests, under normal circumstances, at least 80% of its net assets in
fixed-income securities. The Fund expects to invest in readily marketable
fixed-income securities with a range of maturities from short- to long-term and
relatively attractive yields that do not involve undue risk of loss of capital.
The Fund expects to invest in fixed-income securities with a dollar-weighted
average maturity of generally between three to ten years and an average duration
of three to six years. The Fund may invest up to 25% of its net assets in below
investment grade bonds. The Fund may use leverage for investment purposes.
The Fund may invest without limit in U.S. Dollar-denominated foreign
fixed-income securities and may invest up to 25% of its assets in non-U.S.
Dollar-denominated foreign fixed-income securities. These investments may
include, in each case, developed and emerging market debt securities.
The Fund may invest in mortgage-related and other asset-backed securities, loan
participations, inflation-protected securities, structured securities, variable,
floating, and inverse floating rate instruments and preferred stock, and may use
other investment techniques. The Fund intends, among other things, to enter into
transactions such as reverse repurchase agreements and dollar rolls. The Fund
may invest, without limit, in derivatives, such as options, futures, forwards,
or swap agreements.
The Fund expects to engage in active and frequent trading of portfolio
securities to achieve its principal investment strategies. A higher rate of
portfolio turnover increases transaction expenses, which may negatively affect
the Fund's performance. High portfolio turnover also may result in the
realization of substantial net short-term capital gains, which, when
distributed, are taxable to shareholders.
PRINCIPAL RISKS
o Market Risk: The value of the Fund's assets will fluctuate as the
stock or bond market fluctuates. The value of its investments may
decline, sometimes rapidly and unpredictably, simply because of
economic changes or other events that affect large portions of the
market.
o Interest Rate Risk: Changes in interest rates will affect the value of
investments in fixed-income securities. When interest rates rise, the
value of investments in fixed-income securities tend to fall and this
decrease in value may not be offset by higher income from new
investments. Interest rate risk is generally greater for fixed-income
securities with longer maturities or durations.
o Credit Risk: An issuer or guarantor of a fixed-income security, or the
counterparty to a derivatives or other contract, may be unable or
unwilling to make timely payments of interest or principal, or to
otherwise honor its obligations. The issuer or guarantor may default
causing a loss of the full principal amount of a security. The degree
of risk for a particular security may be reflected in its credit
rating. There is the possibility that the credit rating of a
fixed-income security may be downgraded after purchase, which may
adversely affect the value of the security. Investments in
fixed-income securities with lower ratings tend to have a higher
probability that an issuer will default or fail to meet its payment
obligations.
o Inflation Risk: This is the risk that the value of assets or income
from investments will be less in the future as inflation decreases the
value of money. As inflation increases, the value of the Fund's assets
can decline as can the value of the Fund's distributions. This risk is
significantly greater if the Fund invests a significant portion of its
assets in fixed-income securities with longer maturities.
o Foreign (Non-U.S.) Risk: Investment in securities of non-U.S. issuers
may involve more risk than those of U.S. issuers. These securities may
fluctuate more widely in price and may be less liquid due to adverse
market, economic, political, regulatory or other factors.
o Emerging Market Risk: Investments in emerging market countries may
have more risk because the markets are less developed and less liquid
as well as being subject to increased economic, political, regulatory
or other uncertainties.
o Currency Risk: Fluctuations in currency exchange risk may negatively
affect the value of the Fund's investments or reduce its returns.
o Prepayment Risk: The value of mortgage-related or asset-backed
securities may be particularly sensitive to changes in prevailing
interest rates. Early payments of principal on some mortgage-related
securities may occur during periods of falling mortgage interest rates
and expose a Fund to a lower rate of return upon reinvestment of
principal. Early payments associated with mortgage-related securities
cause these securities to experience significantly greater price and
yield volatility than is experienced by traditional fixed-income
securities. During periods of rising interest rates, a reduction in
prepayments may increase the effective life of mortgage-related
securities, subjecting them to greater risk of decline in market value
in response to rising interest rates. If the life of a
mortgage-related security is inaccurately predicted, a Fund may not be
able to realize the rate of return it expected.
o Derivatives Risk: Investments in derivatives may be illiquid,
difficult to price, and leveraged so that small changes may produce
disproportionate losses for the Fund, and may be subject to
counterparty risk to a greater degree than more traditional
investments.
o Management Risk: The Fund is subject to management risk because it is
an actively managed investment fund. The Adviser will apply its
investment techniques and risk analyses in making investment
decisions, but there is no guarantee that its techniques will produce
the intended results.
As with all investments, you may lose money by investing in the Fund.
BAR CHART AND PERFORMANCE INFORMATION
The bar chart and performance information provide an indication of the
historical risk of an investment in the Fund by showing:
o how the Fund's performance changed from year to year over ten
years; and
o how the Fund's average annual returns for one, five and ten years
compare to those of a broad-based securities market index.
You may obtain updated performance information on the Fund's website at
www.AllianceBernstein.com (click on "Pricing & Performance").
The Fund's past performance before and after taxes, of course, does not
necessarily indicate how it will perform in the future.
Bar Chart
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
[The following table was depicted as a bar chart in the printed material.]
11.25 7.36 7.67 3.69 3.48 1.94 3.97 5.68 -8.26 [__]
--------------------------------------------------------------------------------
00 01 02 03 04 05 06 07 08 09
Calendar Year End (%)
During the period shown in the bar chart, the Fund's:
Best Quarter was up [____]% in the [___] quarter, [____]; and Worst Quarter was
down [____]% in the [___] quarter, [____].
Performance Table
Average Annual Total Returns
(For the periods ended December 31, 2009)
Since
1 Year 5 Years* Inception*
Class A [___]% [___]% [___]%
--------------------------------------------------------------------------------
Class R [___]% [___]% [___]%
--------------------------------------------------------------------------------
Class K [___]% [___]% [___]%
--------------------------------------------------------------------------------
Class I [___]% [___]% [___]%
--------------------------------------------------------------------------------
Barclays Capital U.S.
Aggregate Index
(reflects no deduction for
fees, expenses, or taxes) [___]% [___]% [___]%
--------------------------------------------------------------------------------
----------
* Inception Dates for Class A shares: 7/1/99, Class R shares: 11/03/03, and
Class K and Class I shares: 3/1/05. Performance information for periods
prior to the inception of Class R, Class K and Class I shares is the
performance of the Fund's Class A shares adjusted to reflect the higher
expense ratio of Class R shares and the lower expense ratio of Class K and
Class I shares, respectively.
INVESTMENT ADVISER
AllianceBernstein L.P. is the investment adviser for the Fund.
PORTFOLIO MANAGER
The following table lists the persons responsible for day-to-day management of
the Fund's portfolio:
Employee Length of Service Title
-------------------------------------------------------------------------------
Paul J. DeNoon Since January 2009 Senior Vice President of the Adviser
Shawn E. Keegan Since October 2005 Vice President of the Adviser
Joran Laird Since October 2005 Vice President of the Adviser
Alison M. Martier Since May 2005 Senior Vice President of the Adviser
Douglas J. Peebles Since November 2007 Executive Vice President of the Adviser
Greg J. Wilensky Since October 2005 Senior Vice President of the Adviser
ADDITIONAL INFORMATION
For important information about the purchase and sale of Fund shares, tax
information and financial intermediary compensation, please turn to ADDITIONAL
INFORMATION ABOUT PURCHASE AND SALE OF FUND SHARES, TAXES AND FINANCIAL
INTERMEDIARIES, page [__] in this Prospectus.
AllianceBernstein Global Bond Fund
--------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The Fund's investment objective is to generate current income consistent with
preservation of capital.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund. You may qualify for sales charge reductions if you and
members of your family invest, or agree to invest in the future, at least
$100,000 in AllianceBernstein Mutual Funds. More information about these and
other discounts is available from your financial intermediary and in Investing
in the Funds - Sales Charge Reduction Programs on page [___] of this Prospectus
and in Purchase of Shares - Sales Charge Reduction Programs on page [___] of the
Funds' SAI.
Shareholder Fees (fees paid directly from your investment)
Class A Class R Class K Class I
Shares Shares Shares Shares
------ ------ ------ ------
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price) None None None None
Maximum Deferred Sales Charge
(Load) (as a percentage of
offering price or redemption
proceeds, whichever is lower) None* None None None
Exchange Fee None None None None
Annual Fund Operating Expenses (expenses that you pay each year as a percentage
of the value of your investment)
Class A Class R Class K Class I
------- ------- ------- -------
Management Fees .50% .50% .50% .50%
Distribution and/or
Service (12b-1) Fees .30% .50% .25% None
Other Expenses:
Transfer Agent [_______]% [_______]% [_______]% [_______]%
Other Expenses [_______]% [_______]% [_______]% [_______]%
Total Other Expenses [_______]% [_______]% [_______]% [_______]%
Total Annual Fund
Operating Expenses [_______]% [_______]% [_______]% [_______]%
Waiver and/or Expense
Reimbursement(a) ([_______])% ([_______])% ([_______])% ([_______])%
Net Expenses(b) [_______]% [_______]% [_______]% [_______]%
Examples
The Examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Examples assume that you
invest $10,000 in the Fund for the time periods indicated and then redeem all of
your shares at the end of those periods. The Examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses stay
the same. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
Class A Class R Class K Class I
After 1 Year $[________] $[________] $[________] $[________]
After 3 Years(c) $[________] $[________] $[________] $[________]
After 5 Years(c) $[________] $[________] $[________] $[________]
After 10 Years(c) $[________] $[________] $[________] $[________]
* In some cases, a 1%, 1-year contingent deferred sales charge or CDSC may
apply for Class A shares. CDSCs for Class A shares may also be subject to
waiver in certain circumstances. See "Purchase of Shares" in the SAI.
(a) The fee waiver and/or expense reimbursements will remain in effect until
January [__], 2011.
(b) If interest expenses were excluded, net expenses would be as follows:
Class A Class R Class K Class I
---------------------------------------------------------------------
[_______]% [_______]% [_______]% [_______]%
(c) These examples assume that the Adviser's agreement to waive advisory fees
and/or bear Fund expenses is not extended beyond January [__], 2011.
Portfolio Turnover
The Fund pays transactions costs, such as commissions, when it buys or sells
securities (or "turns over" its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when shares are
held in a taxable account. These transaction costs, which are not reflected in
the Annual Fund Operating Expenses or in the Examples, affect the Fund's
performance. During the most recent fiscal year, the Fund's portfolio turnover
rate was [___]% of the average value of its portfolio.
PRINCIPAL STRATEGIES
The Fund invests, under normal circumstances, at least 80% of its net assets in
fixed-income securities. Under normal market conditions, the Fund invests
significantly in securities of non-U.S. companies. In addition, the Fund
invests, under normal circumstances, in the equity securities of companies
located in at least three countries. The Fund may invest in a broad range of
fixed-income securities in both developed and emerging markets. The Fund may
invest across all fixed-income sectors, including U.S. and non-U.S. government
and corporate debt securities. The Fund's investments may be denominated in
local currency or U.S. Dollar-denominated. The Fund may invest in debt
securities with a range of maturities from short- to long-term. The Fund may use
borrowings or other leverage for investment purposes.
The Adviser will actively manage the Fund's assets in relation to market
conditions and general economic conditions and adjust the Fund's investments in
an effort to best enable the Fund to achieve its investment objective. Thus, the
percentage of the Fund's assets invested in a particular country or denominated
in a particular currency will vary in accordance with the Adviser's assessment
of the relative yield and appreciation potential of such securities and the
relationship of the country's currency to the U.S. Dollar.
Under normal circumstances, the Fund invests at least 75% of its net assets in
fixed-income securities rated investment grade at the time of investment and may
invest up to 25% of its net assets in below investment grade fixed-income
securities.
The Fund may invest in mortgage-related and other asset-backed securities, loan
participations, inflation-protected securities, structured securities, variable,
floating, and inverse floating rate instruments and preferred stock, and may use
other investment techniques. The Fund intends, among other things, to enter into
transactions such as reverse repurchase agreements and dollar rolls. The Fund
may invest, without limit, in derivatives, such as options, futures, forwards,
or swap agreements.
PRINCIPAL RISKS
o Market Risk: The value of the Fund's assets will fluctuate as the
stock or bond market fluctuates. The value of its investments may
decline, sometimes rapidly and unpredictably, simply because of
economic changes or other events that affect large portions of the
market.
o Interest Rate Risk: Changes in interest rates will affect the value of
investments in fixed-income securities. When interest rates rise, the
value of investments in fixed-income securities tend to fall and this
decrease in value may not be offset by higher income from new
investments. Interest rate risk is generally greater for fixed-income
securities with longer maturities or durations.
o Credit Risk: An issuer or guarantor of a fixed-income security, or the
counterparty to a derivatives or other contract, may be unable or
unwilling to make timely payments of interest or principal, or to
otherwise honor its obligations. The issuer or guarantor may default
causing a loss of the full principal amount of a security. The degree
of risk for a particular security may be reflected in its credit
rating. There is the possibility that the credit rating of a
fixed-income security may be downgraded after purchase, which may
adversely affect the value of the security. Investments in
fixed-income securities with lower ratings tend to have a higher
probability that an issuer will default or fail to meet its payment
obligations.
o Inflation Risk: This is the risk that the value of assets or income
from investments will be less in the future as inflation decreases the
value of money. As inflation increases, the value of the Fund's assets
can decline as can the value of the Fund's distributions. This risk is
significantly greater if the Fund invests a significant portion of its
assets in fixed-income securities with longer maturities.
o Foreign (Non-U.S.) Risk: Investment in securities of non-U.S. issuers
may involve more risk than those of U.S. issuers. These securities may
fluctuate more widely in price and may be less liquid due to adverse
market, economic, political, regulatory or other factors.
o Emerging Market Risk: Investments in emerging market countries may
have more risk because the markets are less developed and less liquid
as well as being subject to increased economic, political, regulatory
or other uncertainties.
o Currency Risk: Fluctuations in currency exchange risk may negatively
affect the value of the Fund's investments or reduce its returns.
o Leverage Risk: To the extent the Fund uses leveraging techniques, its
NAV may be more volatile because leverage tends to exaggerate the
effect of changes in interest rates and any increase or decrease in
the value of the Fund's investments.
o Diversification Risk: The Fund may have more risk because it is
"non-diversified," meaning that it can invest more of its assets in a
smaller number of issuers.
o Derivatives Risk: Investments in derivatives may be illiquid,
difficult to price, and leveraged so that small changes may produce
disproportionate losses for the Fund, and may be subject to
counterparty risk to a greater degree than more traditional
investments.
o Management Risk: The Fund is subject to management risk because it is
an actively managed investment fund. The Adviser will apply its
investment techniques and risk analyses in making investment
decisions, but there is no guarantee that its techniques will produce
the intended results.
As with all investments, you may lose money by investing in the Fund.
BAR CHART AND PERFORMANCE INFORMATION
The bar chart and performance information provide an indication of the
historical risk of an investment in the Fund by showing:
o how the Fund's performance changed from year to year over ten years;
and
o how the Fund's average annual returns for one, five and ten years
compare to those of a broad-based securities market index.
You may obtain updated performance information on the Fund's website at
www.AllianceBernstein.com (click on "Pricing & Performance").
The Fund's past performance before and after taxes, of course, does not
necessarily indicate how it will perform in the future.
Bar Chart
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
[The following table was depicted as a bar chart in the printed material.]
18.47 0.31 10.69 15.13 6.87 9.72 6.57 9.90 -10.71 [__]
--------------------------------------------------------------------------------
00 01 02 03 04 05 06 07 08 09
Calendar Year End (%)
During the period shown in the bar chart, the Fund's:
Best Quarter was up [____]% in the [___] quarter, [____]; and Worst Quarter was
down [____]% in the [___] quarter, [____].
Performance Table
Average Annual Total Returns
(For the periods ended December 31, 2009)
1 Year 5 Years* 10 Years*
Class A [___]% [___]% [___]%
--------------------------------------------------------------------------------
Class R [___]% [___]% [___]%
--------------------------------------------------------------------------------
Class K [___]% [___]% [___]%
--------------------------------------------------------------------------------
Class I [___]% [___]% [___]%
--------------------------------------------------------------------------------
Barclays Capital Global
Aggregate Index (U.S. hedged)
(reflects no deduction for
Fees, expenses, or taxes) [___]% [___]% [___]%
--------------------------------------------------------------------------------
* Inception dates for Class R, Class K and Class I shares: 11/5/07.
Performance information for periods prior to the inception of Class R,
Class K and Class I shares is the performance of the Fund's Class A shares
adjusted to reflect the higher expense ratio of Class R shares and the
lower expense ratio of Class K and Class I shares, respectively.
INVESTMENT ADVISER
AllianceBernstein L.P. is the investment adviser for the Fund.
PORTFOLIO MANAGER
The following table lists the persons responsible for day-to-day management of
the Fund's portfolio:
Employee Length of Service Title
------------------------------------------------------------------------------------
Paul J. DeNoon Since August 2002 Senior Vice President of the Adviser
Scott DiMaggio Since August 2005 Senior Vice President of the Adviser
Fernando Grisales Since January 2007 Assistant Vice President of the Adviser
Michael L. Mon Since September 2003 Vice President of the Adviser
Douglas J. Peebles Since March 1992 Executive Vice President of the Adviser
Matthew S. Sheridan Since January 2007 Vice President of the Adviser
ADDITIONAL INFORMATION
For important information about the purchase and sale of Fund shares, tax
information and financial intermediary compensation, please turn to ADDITIONAL
INFORMATION ABOUT PURCHASE AND SALE OF FUND SHARES, TAXES AND FINANCIAL
INTERMEDIARIES, page [__] in this Prospectus.
AllianceBernstein Diversified Yield Fund
--------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The Fund's investment objective is to generate current income consistent with
preservation of capital.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund. You may qualify for sales charge reductions if you and
members of your family invest, or agree to invest in the future, at least
$100,000 in AllianceBernstein Mutual Funds. More information about these and
other discounts is available from your financial intermediary and in Investing
in the Funds - Sales Charge Reduction Programs on page [___] of this Prospectus
and in Purchase of Shares - Sales Charge Reduction Programs on page [___] of the
Funds' SAI.
Shareholder Fees (fees paid directly from your investment)
Class A Class R Class K Class I
Shares Shares Shares Shares
------ ------ ------ ------
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price) None None None None
Maximum Deferred Sales Charge
(Load) (as a percentage of
offering price or redemption
proceeds, whichever is lower) None* None None None
Exchange Fee None None None None
Annual Fund Operating Expenses (expenses that you pay each year as a percentage
of the value of your investment)
Class A Class R Class K Class I
------- ------- ------- -------
Management Fees .45% .45% .45% .45%
Distribution and/or
Service (12b-1) Fees .30% .50% .25% None
Other Expenses:
Transfer Agent [_______]% [_______]% [_______]% [_______]%
Other Expenses [_______]% [_______]% [_______]% [_______]%
Total Other Expenses [_______]% [_______]% [_______]% [_______]%
Total Annual Fund
Operating Expenses [_______]% [_______]% [_______]% [_______]%
Waiver and/or Expense
Reimbursement(a) ([_______])% ([_______])% ([_______])% ([_______])%
Net Expenses [_______]% [_______]% [_______]% [_______]%
Examples
The Examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Examples assume that you
invest $10,000 in the Fund for the time periods indicated and then redeem all of
your shares at the end of those periods. The Examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses stay
the same. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
Class A Class R Class K Class I
After 1 Year $[________] $[________] $[________] $[________]
After 3 Years(b) $[________] $[________] $[________] $[________]
After 5 Years(b) $[________] $[________] $[________] $[________]
After 10 Years(b) $[________] $[________] $[________] $[________]
----------
* In some cases, a 1%, 1-year contingent deferred sales charge or CDSC may
apply for Class A shares. CDSCs for Class A shares may also be subject to
waiver in certain circumstances. See "Purchase of Shares" in the SAI.
(a) The fee waiver and/or expense reimbursements will remain in effect until
January [__], 2011.
(b) These examples assume that the Adviser's agreement to waive advisory fees
and/or bear Fund expenses is not extended beyond January [__], 2011.
Portfolio Turnover
The Fund pays transactions costs, such as commissions, when it buys or sells
securities (or "turns over" its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when shares are
held in a taxable account. These transaction costs, which are not reflected in
the Annual Fund Operating Expenses or in the Examples, affect the Fund's
performance. During the most recent fiscal year, the Fund's portfolio turnover
rate was [___]% of the average value of its portfolio.
PRINCIPAL STRATEGIES
The Fund employs a dynamic risk allocation, meaning that the Fund's risk profile
may vary significantly over time based upon market conditions. The Fund invests
in a portfolio of fixed-income securities of U.S. and non-U.S. companies and
U.S. and non-U.S. government securities and supranational entities, including
lower-rated securities. The Fund limits its investments in the securities of any
one foreign government to 25% of its total assets. The Fund may invest in debt
securities with a range of maturities from short- to long-term.
The Fund typically maintains at least 50% of its net assets in investment grade
securities. The Fund may invest up to 50% of its net assets in below investment
grade securities, such as corporate high yield fixed-income securities,
sovereign debt obligations and fixed-income securities of issuers located in
emerging markets.
The Fund may also invest in mortgage-related and other asset-backed securities,
loan participations, inflation-protected securities, structured securities,
variable, floating, and inverse floating rate instruments and preferred stock,
and may use other investment techniques. The Fund may make short sales of
securities or currencies or maintain a short position. The Fund may use
borrowings or other leverage for investment purposes. The Fund intends, among
other things, to enter into transactions such as reverse repurchase agreements
and dollar rolls. The Fund may invest, without limit, in derivatives, such as
options, futures, forwards, or swap agreements.
PRINCIPAL RISKS
o Market Risk: The value of the Fund's assets will fluctuate as the
stock or bond market fluctuates. The value of its investments may
decline, sometimes rapidly and unpredictably, simply because of
economic changes or other events that affect large portions of the
market.
o Interest Rate Risk: Changes in interest rates will affect the value of
investments in fixed-income securities. When interest rates rise, the
value of investments in fixed-income securities tend to fall and this
decrease in value may not be offset by higher income from new
investments. Interest rate risk is generally greater for fixed-income
securities with longer maturities or durations.
o Credit Risk: An issuer or guarantor of a fixed-income security, or the
counterparty to a derivatives or other contract, may be unable or
unwilling to make timely payments of interest or principal, or to
otherwise honor its obligations. The issuer or guarantor may default
causing a loss of the full principal amount of a security. The degree
of risk for a particular security may be reflected in its credit
rating. There is the possibility that the credit rating of a
fixed-income security may be downgraded after purchase, which may
adversely affect the value of the security. Investments in
fixed-income securities with lower ratings tend to have a higher
probability that an issuer will default or fail to meet its payment
obligations.
o Inflation Risk: This is the risk that the value of assets or income
from investments will be less in the future as inflation decreases the
value of money. As inflation increases, the value of the Fund's assets
can decline as can the value of the Fund's distributions. This risk is
significantly greater if the Fund invests a significant portion of its
assets in fixed-income securities with longer maturities.
o Foreign (Non-U.S.) Risk: Investment in securities of non-U.S. issuers
may involve more risk than those of U.S. issuers. These securities may
fluctuate more widely in price and may be less liquid due to adverse
market, economic, political, regulatory or other factors.
o Emerging Market Risk: Investments in emerging market countries may
have more risk because the markets are less developed and less liquid
as well as being subject to increased economic, political, regulatory
or other uncertainties.
o Currency Risk: Fluctuations in currency exchange risk may negatively
affect the value of the Fund's investments or reduce its returns.
o Leverage Risk: To the extent the Fund uses leveraging techniques, its
NAV may be more volatile because leverage tends to exaggerate the
effect of changes in interest rates and any increase or decrease in
the value of the Fund's investments.
o Prepayment Risk: The value of mortgage-related or asset-backed
securities may be particularly sensitive to changes in prevailing
interest rates. Early payments of principal on some mortgage-related
securities may occur during periods of falling mortgage interest rates
and expose a Fund to a lower rate of return upon reinvestment of
principal. Early payments associated with mortgage-related securities
cause these securities to experience significantly greater price and
yield volatility than is experienced by traditional fixed-income
securities. During periods of rising interest rates, a reduction in
prepayments may increase the effective life of mortgage-related
securities, subjecting them to greater risk of decline in market value
in response to rising interest rates. If the life of a
mortgage-related security is inaccurately predicted, a Fund may not be
able to realize the rate of return it expected.
o Derivatives Risk: Investments in derivatives may be illiquid,
difficult to price, and leveraged so that small changes may produce
disproportionate losses for the Fund, and may be subject to
counterparty risk to a greater degree than more traditional
investments.
o Management Risk: The Fund is subject to management risk because it is
an actively managed investment fund. The Adviser will apply its
investment techniques and risk analyses in making investment
decisions, but there is no guarantee that its techniques will produce
the intended results.
As with all investments, you may lose money by investing in the Fund.
BAR CHART AND PERFORMANCE INFORMATION
The bar chart and performance information provide an indication of the
historical risk of an investment in the Fund by showing:
o how the Fund's performance changed from year to year over ten years;
and
o how the Fund's average annual returns for one, five and ten years
compare to those of a broad-based securities market index.
You may obtain updated performance information on the Fund's website at
www.AllianceBernstein.com (click on "Pricing & Performance").
The Fund's past performance before and after taxes, of course, does not
necessarily indicate how it will perform in the future.
Bar Chart
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
[The following table was depicted as a bar chart in the printed material.]
4.57 -2.81 5.04 15.61 6.13 4.82 4.47 6.38 -16.52 [__]
--------------------------------------------------------------------------------
00 01 02 03 04 05 06 07 08 09
Calendar Year End (%)
During the period shown in the bar chart, the Fund's:
Best Quarter was up [____]% in the [___] quarter, [____]; and Worst Quarter was
down [____]% in the [___] quarter, [____].
Performance Table
Average Annual Total Returns
(For the periods ended December 31, 2009)
1 Year 5 Years* 10 Years*
Class A [___]% [___]% [___]%
--------------------------------------------------------------------------------
Class R [___]% [___]% [___]%
--------------------------------------------------------------------------------
Class K [___]% [___]% [___]%
--------------------------------------------------------------------------------
Class I [___]% [___]% [___]%
--------------------------------------------------------------------------------
Barclays Capital Global
Aggregate Index (U.S. hedged)
(reflects no deduction
for fees, expenses, or taxes) [___]% [___]% [___]%
--------------------------------------------------------------------------------
Merrill Lynch 3-Month T-Bill Index [___]% [___]% [___]%
--------------------------------------------------------------------------------
* Inception Dates for Class R, Class K and Class I shares: 3/1/05.
Performance information for periods prior to the inception of Class R,
Class K and Class I shares is the performance of the Fund's Class A shares
adjusted to reflect the higher expense ratio of Class R shares and the
lower expense ratio of Class K and Class I shares, respectively.
INVESTMENT ADVISER
AllianceBernstein L.P. is the investment adviser for the Fund.
PORTFOLIO MANAGER
The following table lists the persons responsible for day-to-day management of
the Fund's portfolio:
Employee Length of Service Title
--------------------------------------------------------------------------------
Paul J. DeNoon Since October 2005 Senior Vice President of the Adviser
Joran Laird Since January 2009 Vice President of the Adviser
Douglas J. Peebles Since January 1996 Executive Vice President of the Adviser
Matthew S. Sheridan Since April 2006 Vice President of the Adviser
Greg J. Wilensky Since June 2008 Senior Vice President of the Adviser
ADDITIONAL INFORMATION
For important information about the purchase and sale of Fund shares, tax
information and financial intermediary compensation, please turn to ADDITIONAL
INFORMATION ABOUT PURCHASE AND SALE OF FUND SHARES, TAXES AND FINANCIAL
INTERMEDIARIES, page [__] in this Prospectus.
AllianceBernstein High Income Fund
--------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The Fund's investment objective is to seek to maximize total returns from price
appreciation and income.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund. You may qualify for sales charge reductions if you and
members of your family invest, or agree to invest in the future, at least
$100,000 in AllianceBernstein Mutual Funds. More information about these and
other discounts is available from your financial intermediary and in Investing
in the Funds - Sales Charge Reduction Programs on page [___] of this Prospectus
and in Purchase of Shares - Sales Charge Reduction Programs on page [___] of the
Funds' SAI.
Shareholder Fees (fees paid directly from your investment)
Class A Class R Class K Class I
Shares Shares Shares Shares
------ ------ ------ ------
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price) None None None None
Maximum Deferred Sales Charge
(Load) (as a percentage of
offering price or redemption
proceeds, whichever is lower) None* None None None
Exchange Fee None None None None
Annual Fund Operating Expenses (expenses that you pay each year as a percentage
of the value of your investment)
Class A Class R Class K Class I
------- ------- ------- -------
Management Fees .50% .50% .50% .50%
Distribution and/or
Service (12b-1) Fees .30% .50% .25% None
Other Expenses:
Transfer Agent [_______]% [_______]% [_______]% [_______]%
Other Expenses [_______]% [_______]% [_______]% [_______]%
Total Other Expenses [_______]% [_______]% [_______]% [_______]%
Total Annual Fund
Operating Expenses [_______]% [_______]% [_______]% [_______]%
Waiver and/or Expense
Reimbursement(a) ([_______])% ([_______])% ([_______])% ([_______])%
Net Expenses(b) [_______]% [_______]% [_______]% [_______]%
Examples
The Examples are intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Examples assume that you
invest $10,000 in the Fund for the time periods indicated and then redeem all of
your shares at the end of those periods. The Examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses stay
the same. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
Class A Class R Class K Class I
After 1 Year $[________] $[________] $[________] $[________]
After 3 Years(c) $[________] $[________] $[________] $[________]
After 5 Years(c) $[________] $[________] $[________] $[________]
After 10 Years(c) $[________] $[________] $[________] $[________]
* In some cases, a 1%, 1-year contingent deferred sales charge or CDSC may
apply for Class A shares. CDSCs for Class A shares may also be subject to
waiver in certain circumstances. See "Purchase of Shares" in the SAI.
(a) The fee waiver and/or expense reimbursements will remain in effect until
January [__], 2011.
(b) If interest expenses were excluded, net expenses would be as follows:
Class A Class R Class K Class I
---------------------------------------------------------------------
[_______]% [_______]% [_______]% [_______]%
(c) These examples assume that the Adviser's agreement to waive advisory fees
and/or bear Fund expenses is not extended beyond January [__], 2011.
Portfolio Turnover
The Fund pays transactions costs, such as commissions, when it buys or sells
securities (or "turns over" its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when shares are
held in a taxable account. These transaction costs, which are not reflected in
the Annual Fund Operating Expenses or in the Examples, affect the Fund's
performance. During the most recent fiscal year, the Fund's portfolio turnover
rate was [___]% of the average value of its portfolio.
PRINCIPAL STRATEGIES
The Fund pursues income opportunities from government, corporate, emerging
market and high yield sources. It has the flexibility to invest in a broad range
of fixed-income securities in both developed and emerging market countries. The
Fund's investments may include U.S. and non-U.S. corporate debt securities and
sovereign debt securities. The Fund may invest, without limitation, in either
U.S. Dollar-denominated or non-U.S. Dollar-denominated fixed-income securities.
The Fund may invest in debt securities with a range of maturities from short- to
long-term. Substantially all of the Fund's assets may be invested in lower-rated
securities, which may include securities having the lowest rating for
non-subordinated debt instruments (i.e., rated C by Moody's or CCC+ or lower by
S&P and Fitch) and unrated securities of equivalent investment quality. The Fund
also may invest in investment grade securities and unrated securities.
The Fund may also make short sales of securities or maintain a short position.
The Fund is non-diversified, meaning it may invest more of its assets in a fewer
number of issuers.
The Fund may invest in mortgage-related and other asset-backed securities, loan
participations, inflation-protected securities, structured securities, variable,
floating, and inverse floating rate instruments and preferred stock, and may use
other investment techniques. The Fund may use borrowings or other leverage for
investment purposes. The Fund intends, among other things, to enter into
transactions such as reverse repurchase agreements and dollar rolls. The Fund
may invest, without limit, in derivatives, such as options, futures, forwards,
or swap agreements.
PRINCIPAL RISKS
o Market Risk: The value of the Fund's assets will fluctuate as the
stock or bond market fluctuates. The value of its investments may
decline, sometimes rapidly and unpredictably, simply because of
economic changes or other events that affect large portions of the
market.
o Interest Rate Risk: Changes in interest rates will affect the value of
investments in fixed-income securities. When interest rates rise, the
value of investments in fixed-income securities tend to fall and this
decrease in value may not be offset by higher income from new
investments. Interest rate risk is generally greater for fixed-income
securities with longer maturities or durations.
o Credit Risk: An issuer or guarantor of a fixed-income security, or the
counterparty to a derivatives or other contract, may be unable or
unwilling to make timely payments of interest or principal, or to
otherwise honor its obligations. The issuer or guarantor may default
causing a loss of the full principal amount of a security. The degree
of risk for a particular security may be reflected in its credit
rating. There is the possibility that the credit rating of a
fixed-income security may be downgraded after purchase, which may
adversely affect the value of the security. Investments in
fixed-income securities with lower ratings tend to have a higher
probability that an issuer will default or fail to meet its payment
obligations.
o Inflation Risk: This is the risk that the value of assets or income
from investments will be less in the future as inflation decreases the
value of money. As inflation increases, the value of the Fund's assets
can decline as can the value of the Fund's distributions. This risk is
significantly greater if the Fund invests a significant portion of its
assets in fixed-income securities with longer maturities.
o Foreign (Non-U.S.) Risk: Investment in securities of non-U.S. issuers
may involve more risk than those of U.S. issuers. These securities may
fluctuate more widely in price and may be less liquid due to adverse
market, economic, political, regulatory or other factors.
o Emerging Market Risk: Investments in emerging market countries may
have more risk because the markets are less developed and less liquid
as well as being subject to increased economic, political, regulatory
or other uncertainties.
o Currency Risk: Fluctuations in currency exchange risk may negatively
affect the value of the Fund's investments or reduce its returns.
o Leverage Risk: To the extent the Fund uses leveraging techniques, its
NAV may be more volatile because leverage tends to exaggerate the
effect of changes in interest rates and any increase or decrease in
the value of the Fund's investments.
o Diversification Risk: The Fund may have more risk because it is
"non-diversified," meaning that it can invest more of its assets in a
smaller number of issuers.
o Derivatives Risk: Investments in derivatives may be illiquid,
difficult to price, and leveraged so that small changes may produce
disproportionate losses for the Fund, and may be subject to
counterparty risk to a greater degree than more traditional
investments.
o Management Risk: The Fund is subject to management risk because it is
an actively managed investment fund. The Adviser will apply its
investment techniques and risk analyses in making investment
decisions, but there is no guarantee that its techniques will produce
the intended results.
As with all investments, you may lose money by investing in the Fund.
BAR CHART AND PERFORMANCE INFORMATION
The bar chart and performance information provide an indication of the
historical risk of an investment in the Fund by showing:
o how the Fund's performance changed from year to year over ten years;
and
o how the Fund's average annual returns for one, five and ten years
compare to those of a broad-based securities market index.
You may obtain updated performance information on the Fund's website at
www.AllianceBernstein.com (click on "Pricing & Performance").
The Fund's past performance before and after taxes, of course, does not
necessarily indicate how it will perform in the future.
Bar Chart
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
[The following table was depicted as a bar chart in the printed material.]
14.47 6.10 18.69 38.42 11.09 10.16 11.85 7.29 -26.52 [__]
--------------------------------------------------------------------------------
00 01 02 03 04 05 06 07 08 09
Calendar Year End (%)
During the period shown in the bar chart, the Fund's:
Best Quarter was up [____]% in the [___] quarter, [____]; and Worst Quarter was
down [____]% in the [____] quarter, [____].
Performance Table
Average Annual Total Returns
(For the periods ended December 31, 2009)
1 Year** 5 Years** 10 Years**
Class A [___]% [___]% [___]%
--------------------------------------------------------------------------------
Class R [___]% [___]% [___]%
--------------------------------------------------------------------------------
Class K [___]% [___]% [___]%
--------------------------------------------------------------------------------
Class I [___]% [___]% [___]%
--------------------------------------------------------------------------------
JPMorgan Emerging Markets
Bond Index Global
("EMBI Global")
(U.S. Dollar-denominated)+ [___]% [___]% [___]%
--------------------------------------------------------------------------------
JPMorgan Government Bond Index
Emerging Markets
("GBI-EM")
(local currency-denominated)
(reflects no deduction for fees,
expenses, or taxes) [___]% [___]% [N/A]
--------------------------------------------------------------------------------
Barclays Capital High Yield Index
(2% Constrained) ("BC High Yield")
(reflects no deduction for fees,
expenses, or taxes) [___]% [___]% [___]%
--------------------------------------------------------------------------------
Composite Benchmark
(equal weighted blend of EMBI Global,
GBI-EM and BC High Yield) [___]% [___]% [N/A]
--------------------------------------------------------------------------------
** Inception date for Class R, Class K and Class I shares: 1/28/08.
Performance information for periods prior to the inception of Class R Class
K and Class I shares is the performance of the Class A shares adjusted to
reflect the higher expense ratio of Class R shares and the lower expense
ratio of Class K and Class I shares, respectively.
INVESTMENT ADVISER
AllianceBernstein L.P. is the investment adviser for the Fund.
PORTFOLIO MANAGER
The following table lists the persons responsible for day-to-day management of
the Fund's portfolio:
Employee Length of Service Title
--------------------------------------------------------------------------------
Paul J. DeNoon Since August 2002 Senior Vice President of the Adviser
Gershon Distenfeld Since February 2008 Vice President of the Adviser
Douglas J. Peebles Since August 2002 Executive Vice President of the Adviser
Matthew S. Sheridan Since October 2005 Vice President of the Adviser
ADDITIONAL INFORMATION
For important information about the purchase and sale of Fund shares, tax
information and financial intermediary compensation, please turn to ADDITIONAL
INFORMATION ABOUT PURCHASE AND SALE OF FUND SHARES, TAXES AND FINANCIAL
INTERMEDIARIES, page [__] in this Prospectus.
ADDITIONAL INFORMATION ABOUT PURCHASE AND SALE OF FUND SHARES, TAXES AND
FINANCIAL INTERMEDIARIES
o PURCHASE AND SALE OF FUND SHARES
Purchase Minimums*
Class A, Class R, Class K and Class I shares are available at NAV, without an
initial sales charge, to 401(k) plans, 457 plans, employer-sponsored 403(b)
plans, profit-sharing and money purchase pension plans, defined benefit plans,
and non-qualified deferred compensation plans where plan level or omnibus
accounts are held on the books of a Fund.
You may sell (redeem) your shares each day the New York Stock Exchange is open.
You may sell your shares through your financial intermediary.
o TAX INFORMATION
Each Fund may make income dividends or capital gains distributions, which may be
subject to federal income taxes and taxable as ordinary income or capital gains,
and may also be subject to state and local taxes.
o PAYMENTS TO FINANCIAL INTERMEDIARIES
Financial intermediaries (such as a bank) market and sell shares of the Funds. A
Fund and its related companies may pay the intermediary for the sale of Fund
shares and related services. These payments may create a conflict of interest by
influencing the financial intermediary to recommend the Fund over another
investment.
ADDITIONAL INFORMATION ABOUT THE FUNDS' RISKS AND INVESTMENTS
--------------------------------------------------------------------------------
This section of the Prospectus provides additional information about the Funds'
investment practices and related risks. Most of these investment practices are
discretionary, which means that the Adviser may or may not decide to use them.
This Prospectus does not describe all of a Fund's investment practices and
additional information about each Fund's risks and investments can be found in
the Funds' SAI.
Derivatives
Each Fund may, but is not required to, use derivatives for risk management
purposes or as part of its investment strategies. Derivatives are financial
contracts whose value depends on, or is derived from, the value of an underlying
asset, reference rate or index. A Fund may use derivatives to earn income and
enhance returns, to hedge or adjust the risk profile of a portfolio, to replace
more traditional direct investments and to obtain exposure to otherwise
inaccessible markets.
There are four principal types of derivatives, including options, futures,
forwards and swaps, which are described below. Derivatives may be (i)
standardized, exchange-traded contracts or (ii) customized, privately negotiated
contracts. Exchange-traded derivatives tend to be more liquid and subject to
less credit risk than those that are privately negotiated.
A Fund's use of derivatives may involve risks that are different from, or
possibly greater than, the risks associated with investing directly in
securities or other more traditional instruments. These risks include the risk
that the value of a derivative instrument may not correlate perfectly, or at
all, with the value of the assets, reference rates, or indices that they are
designed to track. Other risks include: the possible absence of a liquid
secondary market for a particular instrument and possible exchange-imposed price
fluctuation limits, either of which may make it difficult or impossible to close
out a position when desired; and the risk that the counterparty will not perform
its obligations. Certain derivatives may have a leverage component and involve
leverage risk. Adverse changes in the value or level of the underlying asset,
note or index can result in a loss substantially greater than the Fund's
investment (in some cases, the potential loss is unlimited).
The Funds' investments in derivatives may include, but are not limited to, the
following:
o Forward Contracts--A forward contract is a customized, privately negotiated
agreement for one party to buy, and the other party to sell, a specific
quantity of an underlying commodity or other tangible asset for an agreed
upon price at a future date. A forward contract is either settled by
physical delivery of the commodity or tangible asset to an agreed-upon
location at a future date, rolled forward into a new forward contract or,
in the case of a non-deliverable forward, by a cash payment at maturity.
The Funds' investments in forward contracts may include the following:
- Forward Currency Exchange Contracts. A Fund may purchase or sell
forward currency exchange contracts for hedging purposes to minimize
the risk from adverse changes in the relationship between the U.S.
Dollar and other currencies or for non-hedging purposes as a means of
making direct investments in foreign currencies as described below
under "Currency Transactions". A Fund, for example, may enter into a
forward contract as a transaction hedge (to "lock in" the U.S. Dollar
price of a non-U.S. Dollar security), as a position hedge (to protect
the value of securities the Fund owns that are denominated in a
foreign currency against substantial changes in the value of the
foreign currency) or as a cross-hedge (to protect the value of
securities the Fund owns that are denominated in a foreign currency
against substantial changes in the value of that foreign currency by
entering into a forward contract for a different foreign currency that
is expected to change in the same direction as the currency in which
the securities are denominated).
o Futures Contracts and Options on Futures Contracts--A futures contract is
an agreement that obligates the buyer to buy and the seller to sell a
specified quantity of an underlying asset (or settle for cash the value of
a contract based on an underlying asset, rate or index) at a specific price
on the contract maturity date. Options on futures contracts are options
that call for the delivery of futures contracts upon exercise. A Fund may
purchase or sell futures contracts and options thereon to hedge against
changes in interest rates, securities (through index futures or options) or
currencies. A Fund may also purchase or sell futures contracts for foreign
currencies or options thereon for non-hedging purposes as a means of making
direct investments in foreign currencies, as described below under
"Currency Transactions".
o Options--An option is an agreement that, for a premium payment or fee,
gives the option holder (the buyer) the right but not the obligation to buy
(a "call option") or sell (a "put option") the underlying asset (or settle
for cash an amount based on an underlying asset, rate or index) at a
specified price (the exercise price) during a period of time or on a
specified date. Investments in options are considered speculative. A Fund
may lose the premium paid for them if the price of the underlying security
or other asset decreased or remained the same (in the case of a call
option) or increased or remained the same (in the case of a put option). If
a put or call option purchased by a Fund were permitted to expire without
being sold or exercised, its premium would represent a loss to the Fund.
The Funds' investments in options include the following:
- Options on Foreign Currencies. A Fund may invest in options on foreign
currencies that are privately negotiated or traded on U.S. or foreign
exchanges for hedging purposes to protect against declines in the U.S.
Dollar value of foreign currency denominated securities held by a Fund
and against increases in the U.S. Dollar cost of securities to be
acquired. The purchase of an option on a foreign currency may
constitute an effective hedge against fluctuations in exchange rates,
although if rates move adversely, a Fund may forfeit the entire amount
of the premium plus related transaction costs. A Fund may also invest
in options on foreign currencies for non-hedging purposes as a means
of making direct investments in foreign currencies, as described below
under "Currency Transactions."
- Options on Securities. A Fund may purchase or write a put or call
option on securities. The Fund will only exercise an option it
purchased if the price of the security was less (in the case of a put
option) or more (in the case of a call option) than the exercise
price. If the Fund does not exercise an option, the premium it paid
for the option will be lost. A Fund may write "covered" options, which
means writing an option for securities the Fund owns, and uncovered
options.
- Options on Securities Indices. An option on a securities index is
similar to an option on a security except that, rather than taking or
making delivery of a security at a specified price, an option on a
securities index gives the holder the right to receive, upon exercise
of the option, an amount of cash if the closing level of the chosen
index is greater than (in the case of a call) or less than (in the
case of a put) the exercise price of the option.
o Swap Transactions--A swap is a customized, privately negotiated agreement
that obligates two parties to exchange a series of cash flows at specified
intervals (payment dates) based upon or calculated by reference to changes
in specified prices or rates (interest rates in the case of interest rate
swaps, currency exchange rates in the case of currency swaps) for a
specified amount of an underlying asset (the "notional" principal amount).
Except for currency swaps, the notional principal amount is used solely to
calculate the payment stream, but is not exchanged. Swaps are entered into
on a net basis (i.e., the two payment streams are netted out, with a Fund
receiving or paying, as the case may be, only the net amount of the two
payments). Payments received by a Fund from swap agreements will result in
taxable income, either as ordinary income or capital gains, rather than
tax-exempt income, which will increase the amount of taxable distributions
received by shareholders. The Funds' investments in swap transactions
include the following:
- Interest Rate Swaps, Swaptions, Caps and Floors. Interest rate swaps
involve the exchange by a Fund with another party of payments
calculated by reference to specified interest rates (e.g., an exchange
of floating rate payments for fixed rate payments). Unless there is a
counterparty default, the risk of loss to the Fund from interest rate
transactions is limited to the net amount of interest payments that
the Fund is contractually obligated to make. If the counterparty to an
interest rate transaction defaults, the Fund's risk of loss consists
of the net amount of interest payments that the Fund is contractually
is entitled to receive.
An option on a swap agreement, also called a "swaption," is an option
that gives the buyer the right, but not the obligation, to enter into
a swap on a future date in exchange for paying a market-based
"premium." A receiver swaption gives the owner the right to receive
the total return of a specified asset, reference rate, or index. A
payer swaption gives the owner the right to pay the total return of a
specified asset, reference rate, or index. Swaptions also include
options that allow an existing swap to be terminated or extended by
one of the counterparties.
The purchase of an interest rate cap entitles the purchaser, to the
extent that a specified index exceeds a predetermined interest rate,
to receive payments of interest on a contractually-based principal
amount from the party selling the interest rate cap. The purchase of
an interest rate floor entitles the purchaser, to the extent that a
specified index falls below a predetermined interest rate, to receive
payments of interest on an agreed principal amount from the party
selling the interest rate floor. Caps and floors may be less liquid
than swaps.
There is no limit on the amount of interest rate transactions that may
be entered into by a Fund. The value of these transactions will
fluctuate based on changes in interest rates.
Interest rate swap, swaptions, cap and floor transactions may be used
to preserve a return or spread on a particular investment or a portion
of a Fund's portfolio or to protect against an increase in the price
of securities a Fund anticipates purchasing at a later date.
- Inflation (CPI) Swaps. Inflation swap agreements are contracts in
which one party agrees to pay the cumulative percentage increase in a
price index (the Consumer Price Index with respect to CPI swaps) over
the term of the swap (with some lag on the inflation index), and the
other pays a compounded fixed rate. Inflation swap agreements may be
used to protect the NAV of a Fund against an unexpected change in the
rate of inflation measured by an inflation index. The values of
inflation swap agreements are expected to change in response to
changes in real interest rates. Real interest rates are tied to the
relationship between nominal interest rates and the rate of inflation.
If nominal interest rates increase at a faster rate than inflation,
real interest rates may rise, leading to a decrease in value of an
inflation swap agreement.
- Credit Default Swap Agreements. The "buyer" in a credit default swap
contract is obligated to pay the "seller" a periodic stream of
payments over the term of the contract in return for a contingent
payment upon the occurrence of a credit event with respect to an
underlying reference obligation. Generally, a credit event means
bankruptcy, failure to pay, obligation acceleration or modified
restructuring. A Fund may be either the buyer or seller in the
transaction. If a Fund is a seller, the Fund receives a fixed rate of
income throughout the term of the contract, which typically is between
one month and five years, provided that no credit event occurs. If a
credit event occurs, a Fund typically must pay the contingent payment
to the buyer, which is typically the "par value" (full notional value)
of the reference obligation. The contingent payment may be a cash
settlement or by physical delivery of the reference obligation in
return for payment of the face amount of the obligation The value of
the reference obligation received by a Fund coupled with the periodic
payments previously received may be less than the full notional value
it pays to the buyer, resulting in a loss of value to the Fund. If the
reference obligation is a defaulted security, physical delivery of the
security will cause a Fund to hold a defaulted security. If a Fund is
a buyer and no credit event occurs, the Fund will lose its periodic
stream of payments over the term of the contract. However, if a credit
event occurs, the buyer typically receives full notional value for a
reference obligation that may have little or no value.
Credit default swaps may involve greater risks than if a Fund had
invested in the reference obligation directly. Credit default swaps
are subject to general market risk, liquidity risk and credit risk.
- Currency Swaps. A Fund may invest in currency swaps for hedging
purposes to protect against adverse changes in exchange rates between
the U.S. Dollar and other currencies or for non-hedging purposes as a
means of making direct investments in foreign currencies, as described
below under "Currency Transactions." Currency swaps involve the
individually negotiated exchange by a Fund with another party of a
series of payments in specified currencies. Actual principal amounts
of currencies may be exchanged by the counterparties at the
initiation, and again upon the termination, of the transaction.
Therefore, the entire principal value of a currency swap is subject to
the risk that the swap counterparty will default on its contractual
delivery obligations. If there is a default by the counterparty to the
transaction, the Fund will have contractual remedies under the
transaction agreements.
o Other Derivatives and Strategies--
- Eurodollar Instruments. Eurodollar instruments are essentially U.S.
Dollar-denominated futures contracts or options that are linked to the
London Interbank Offered Rate (LIBOR). Eurodollar futures contracts
enable purchasers to obtain a fixed rate for the lending of funds and
sellers to obtain a fixed rate for borrowings.
- Structured Instruments. As part of its investment program and to
maintain greater flexibility, each Fund may invest in structured
instruments. Structured instruments, including indexed or structured
securities, combine the elements of futures contracts or options with
those of debt, preferred equity or a depository instrument. Generally,
a structured instrument will be a debt security, preferred stock,
depository share, trust certificate, certificate of deposit or other
evidence of indebtedness on which a portion of or all interest
payments, and/or the principal or stated amount payable at maturity,
redemption or retirement, is determined by reference to prices,
changes in prices, or differences between prices, of securities,
currencies, intangibles, goods, articles or commodities (collectively
"Underlying Assets") or by another objective index, economic factor or
other measure, such as interest rates, currency exchange rates,
commodity indices, and securities indices (collectively,
"Benchmarks"). Thus, structured instruments may take a variety of
forms, including, but not limited to, debt instruments with interest
or principal payments or redemption terms determined by reference to
the value of a currency or commodity or securities index at a future
point in time, preferred stock with dividend rates determined by
reference to the value of a currency, or convertible securities with
the conversion terms related to a particular commodity.
Structured instruments are potentially more volatile and carry greater
market risks than traditional debt instruments. Depending on the
structure of the particular structured instrument, changes in a
Benchmark may be magnified by the terms of the structured instrument
and have an even more dramatic and substantial effect upon the value
of the structured instrument. Also, the prices of the structured
instrument and the Benchmark or Underlying Asset may not move in the
same direction or at the same time.
Structured instruments can have volatile prices and limited liquidity,
and their use by a Fund may not be successful. The risk of these
investments can be substantial; possibly all of the principal is at
risk. No Fund will invest more than 20% of its total assets in these
investments.
- Currency Transactions. A Fund may invest in non-U.S. Dollar-
denominated securities on a currency hedged or un-hedged basis. The
Adviser may actively manage a Fund's currency exposures and may seek
investment opportunities by taking long or short positions in
currencies through the use of currency-related derivatives, including
forward currency exchange contracts, futures and options on futures,
swaps and options. The Adviser may enter into transactions for
investment opportunities when it anticipates that a foreign currency
will appreciate or depreciate in value but securities denominated in
that currency are not held by a Fund and do not present attractive
investment opportunities. Such transactions may also be used when the
Adviser believes that it may be more efficient than a direct
investment in a foreign currency-denominated security. A Fund may also
conduct currency exchange contracts on a spot basis (i.e., for cash at
the spot rate prevailing in the currency exchange market for buying or
selling currencies).
Forward Commitments
Forward commitments for the purchase or sale of securities may include purchases
on a when-issued basis or purchases or sales on a delayed delivery basis. In
some cases, a forward commitment may be conditioned upon the occurrence of a
subsequent event, such as approval and consummation of a merger, corporate
reorganization or debt restructuring or approval of a proposed financing by
appropriate authorities (i.e., a "when, as and if issued" trade).
The Funds may invest significantly in TBA-mortgage-backed securities. A TBA or
"To Be Announced" trade represents a contract for the purchase or sale of
mortgage-backed securities to be delivered at a future agreed-upon date;
however, the specific mortgage pool numbers or the number of pools that will be
delivered to fulfill the trade obligation or terms of the contract are unknown
at the time of the trade. Mortgage pools (including fixed rate or variable rate
mortgages) guaranteed by the Government National Mortgage Association, or GNMA,
the Federal National Mortgage Association, or FNMA, or the Federal Home Loan
Mortgage Corporation, or FHLMC, are subsequently allocated to the TBA
transactions.
When forward commitments with respect to fixed-income securities are negotiated,
the price, which is generally expressed in yield terms, is fixed at the time the
commitment is made, but payment for and delivery of the securities take place at
a later date. Securities purchased or sold under a forward commitment are
subject to market fluctuation and no interest or dividends accrue to the
purchaser prior to the settlement date. There is the risk of loss if the value
of either a purchased security declines before the settlement date or the
security sold increases before the settlement date. The use of forward
commitments helps a Fund to protect against anticipated changes in interest
rates and prices.
Illiquid Securities
Under current Commission guidelines, the Funds limit their investments in
illiquid securities to 15% of their net assets. The term "illiquid securities"
for this purpose means securities that cannot be disposed of within seven days
in the ordinary course of business at approximately the amount a Fund has valued
the securities. A Fund that invests in illiquid securities may not be able to
sell such securities and may not be able to realize their full value upon sale.
Restricted securities (securities subject to legal or contractual restrictions
on resale) may be illiquid. Some restricted securities (such as securities
issued pursuant to Rule 144A under the Securities Act of 1933 (the "Securities
Act") or certain commercial paper) may be treated as liquid, although they may
be less liquid than registered securities traded on established secondary
markets.
Indexed Commercial Paper
Indexed commercial paper may have its principal linked to changes in foreign
currency exchange rates whereby its principal amount is adjusted upwards or
downwards (but not below zero) at maturity to reflect changes in the referenced
exchange rate. A Fund will receive interest and principal payments on such
commercial paper in the currency in which such commercial paper is denominated,
but the amount of principal payable by the issuer at maturity will change in
proportion to the change (if any) in the exchange rate between the two specified
currencies between the date the instrument is issued and the date the instrument
matures. While such commercial paper entails the risk of loss of principal, the
potential for realizing gains as a result of changes in foreign currency
exchange rates enables a Fund to hedge (or cross-hedge) against a decline in the
U.S. Dollar value of investments denominated in foreign currencies while
providing an attractive money market rate of return. A Fund will purchase such
commercial paper for hedging purposes only, not for speculation.
Inflation-Protected Securities
Inflation-protected securities, or IPS, are fixed-income securities whose
principal value is periodically adjusted according to the rate of inflation. If
the index measuring inflation falls, the principal value of these securities
will be adjusted downward, and consequently the interest payable on these
securities (calculated with respect to a smaller principal amount) will be
reduced. Inflation-protected securities tend to react to changes in real
interest rates. In general, the price of an inflation-protected security can
fall when real interest rates rise, and can rise when real interest rates fall.
In addition, the value of inflation-protected securities can fluctuate based on
fluctuations in expectations of inflations. Interest payments on inflation-
protected securities can be unpredictable and will vary as the principal and/or
interest is adjusted for inflation.
Investment in Other Investment Companies
The Funds may invest in other investment companies as permitted by the
Investment Company Act of 1940 (the "1940 Act") or the rules and regulations
thereunder. The Funds intend to invest uninvested cash balances in an affiliated
money market fund as permitted by Rule 12d1-1 under the 1940 Act. If a Fund
acquires shares in investment companies, shareholders would bear, indirectly,
the expenses of such investment companies (which may include management and
advisory fees), which are in addition to the Fund's expenses. A Fund may also
invest in exchange traded funds, subject to the restrictions and limitations of
the 1940 Act.
Loan Participations
The Funds may invest in corporate loans either by participating as co-lender at
the time the loan is originated or by buying an interest in the loan in the
secondary market from a financial institution or institutional investor. The
financial status of an institution interposed between a Fund and a borrower may
affect the ability of the Fund to receive principal and interest payments. The
success of a Fund may depend on the skill with which an agent bank administers
the terms of the corporate loan agreements, monitors borrower compliance with
covenants, collects principal, interest and fee payments from borrowers and,
where necessary, enforces creditor remedies against borrowers. Agent banks
typically have broad discretion in enforcing loan agreements.
Mortgage-Related and Other Asset-Backed Securities
Each Fund may invest in mortgage-related or other asset-backed securities.
Mortgage-related securities include mortgage pass-through securities,
collateralized mortgage obligations ("CMOs"), commercial mortgage-backed
securities, mortgage dollar rolls, CMO residuals, stripped mortgage-backed
securities ("SMBSs") and other securities that directly or indirectly represent
a participation in or are secured by and payable from mortgage loans on real
property. These securities may be issued or guaranteed by the U.S. Government or
one of its sponsored entities or may be issued by private organizations.
The value of mortgage-related or asset-backed securities may be particularly
sensitive to changes in prevailing interest rates. Early payments of principal
on some mortgage-related securities may occur during periods of falling mortgage
interest rates and expose a Fund to a lower rate of return upon reinvestment of
principal. Early payments associated with mortgage-related securities cause
these securities to experience significantly greater price and yield volatility
than is experienced by traditional fixed-income securities. During periods of
rising interest rates, a reduction in prepayments may increase the effective
life of mortgage-related securities, subjecting them to greater risk of decline
in market value in response to rising interest rates. If the life of a
mortgage-related security is inaccurately predicted, a Fund may not be able to
realize the rate of return it expected.
One type of SMBS has one class receiving all of the interest from the mortgage
assets (the interest-only, or "IO" class), while the other class will receive
all of the principal (the principal-only, or "PO" class). The yield to maturity
on an IO class is extremely sensitive to the rate of principal payments
(including prepayments) on the underlying mortgage assets, and a rapid rate of
principal payments may have a material adverse effect on a Fund's yield to
maturity from these securities.
Each Fund may invest in collateralized debt obligations ("CDOs"), which include
collateralized bond obligations ("CBOs"), collateralized loan obligations
("CLOs"), and other similarly structured securities. CBOs and CLOs are types of
asset-backed securities. A CBO is a trust that is backed by a diversified pool
of high-risk, below investment grade fixed-income securities. A CLO is a trust
typically collateralized by a pool of loans, which may include, among others,
domestic and foreign senior secured loans, senior unsecured loans, and
subordinate corporate loans, including loans that may be rated below investment
grade or equivalent unrated loans. The Funds may invest in other asset-backed
securities that have been offered to investors.
Other Asset-Backed Securities
The Funds may invest in other asset-backed securities. The securitization
techniques used to develop mortgage-related securities are being applied to a
broad range of financial assets. Through the use of trusts and special purpose
corporations, various types of assets, including automobile loans and leases,
credit card receivables, home equity loans, equipment leases and trade
receivables, are being securitized in structures similar to the structures used
in mortgage securitizations.
Repurchase Agreements and Buy/Sell Back Transactions
A Fund may enter into repurchase agreements in which a Fund purchases a security
from a bank or broker-dealer, which agrees to repurchase the security from the
Fund at an agreed-upon future date, normally a day or a few days later. The
purchase and repurchase obligations are transacted under one agreement. The
resale price is greater than the purchase price, reflecting an agreed-upon
interest rate for the period the buyer's money is invested in the security. Such
agreements permit a Fund to keep all of its assets at work while retaining
"overnight" flexibility in pursuit of investments of a longer-term nature. If
the bank or broker-dealer defaults on its repurchase obligation, a Fund would
suffer a loss to the extent that the proceeds from the sale of the security were
less than the repurchase price.
A Fund may enter into buy/sell back transactions, which are similar to
repurchase agreements. In this type of transaction, a Fund enters a trade to buy
securities at one price and simultaneously enters a trade to sell the same
securities at another price on a specified date. Similar to a repurchase
agreement, the repurchase price is higher than the sale price and reflects
current interest rates. Unlike a repurchase agreement, however, the buy/sell
back transaction is considered two separate transactions.
Reverse Repurchase Agreements, Dollar Rolls and Other Borrowings
A Fund may enter into reverse purchase agreements and dollar rolls, subject to
the Fund's limitations on borrowings. A reverse repurchase agreement or dollar
roll involves the sale of a security by a Fund and its agreement to repurchase
the instrument at a specified time and price, and may be considered a form of
borrowing for some purposes. Reverse repurchase agreements, dollar rolls and
other forms of borrowings may create leverage risk for a Fund. In addition,
reverse repurchase agreements and dollar rolls involve the risk that the market
value of the securities a Fund is obligated to repurchase may decline below the
purchase price.
Dollar rolls involve sales by a Fund of securities for delivery in the current
month and the Fund's simultaneously contracting to repurchase substantially
similar (same type and coupon) securities on a specified future date. During the
roll period, a Fund forgoes principal and interest paid on the securities. A
Fund is compensated by the difference between the current sales price and the
lower forward price for the future purchase (often referred to as the "drop") as
well as by the interest earned on the cash proceeds of the initial sale.
Reverse repurchase agreements and dollar rolls involve the risk that the market
value of the securities a Fund is obligated to repurchase under the agreement
may decline below the repurchase price. In the event the buyer of securities
under a reverse repurchase agreement or dollar roll files for bankruptcy or
becomes insolvent, a Fund's use of the proceeds of the agreement may be
restricted pending a determination by the other party, or its trustee or
receiver, whether to enforce the Fund's obligation to repurchase the securities.
Rights and Warrants
Rights and warrants are option securities permitting their holders to subscribe
for other securities. Rights are similar to warrants except that they have a
substantially shorter duration. Rights and warrants do not carry with them
dividend or voting rights with respect to the underlying securities, or any
rights in the assets of the issuer. As a result, an investment in rights and
warrants may be considered more speculative than certain other types of
investments. In addition, the value of a right or a warrant does not necessarily
change with the value of the underlying securities, and a right or a warrant
ceases to have value if it is not exercised prior to its expiration date.
Short Sales
The Funds may make short sales as a part of overall portfolio management or to
offset a potential decline in the value of a security. A short sale involves the
sale of a security that a Fund does not own, or if the Fund owns the security,
is not to be delivered upon consummation of the sale. When the Fund makes a
short sale of a security that it does not own, it must borrow from a
broker-dealer the security sold short and deliver the security to the
broker-dealer upon conclusion of the short sale.
If the price of the security sold short increases between the time of the short
sale and the time a Fund replaces the borrowed security, the Fund will incur a
loss; conversely, if the price declines, the Fund will realize a gain. The
potential for the price of a fixed-income security sold short to rise is a
function of both the remaining maturity of the obligation, its creditworthiness
and its yield. Unlike short sales of equities or other instruments, potential
for the price of a fixed-income security to rise may be limited due to the fact
that the security will be no more than par at maturity. However, the short sale
of other instruments or securities generally, including fixed-income securities
convertible into equities or other instruments, a fixed-income security trading
at a deep discount from par or that pays a coupon that is high in relative
and/or absolute terms, or that is denominated in a currency other than the U.S.
Dollar, involves the possibility of a theoretically unlimited loss since there
is a theoretically unlimited potential for the market price of the security sold
short to increase.
Standby Commitment Agreements
Standby commitment agreements are similar to put options that commit a Fund, for
a stated period of time, to purchase a stated amount of a security that may be
issued and sold to the Fund at the option of the issuer. The price and coupon of
the security are fixed at the time of the commitment. At the time of entering
into the agreement, the Fund is paid a commitment fee, regardless of whether the
security ultimately is issued. The Funds will enter into such agreements only
for the purpose of investing in the security underlying the commitment at a
yield and price considered advantageous to the Fund and unavailable on a firm
commitment basis.
There is no guarantee that a security subject to a standby commitment will be
issued. In addition, the value of the security, if issued, on the delivery date
may be more or less than its purchase price. Since the issuance of the security
is at the option of the issuer, a Fund will bear the risk of capital loss in the
event the value of the security declines and may not benefit from an
appreciation in the value of the security during the commitment period if the
issuer decides not to issue and sell the security to the Fund.
Structured Securities and Basket Securities
The Funds may invest in various types of structured securities and basket
securities. Structured securities are securities issued in structured financing
transactions, which generally involve aggregating types of debt assets in a pool
or special purpose entity and then issuing new securities. Types of structured
financings include securities described elsewhere in this Prospectus, such as
mortgage-related and other asset-backed securities. The Funds' investments
include investments in structured securities that represent interests in
entities organized and operated solely for the purpose of restructuring the
investment characteristics of particular debt obligations. This type of
restructuring involves the deposit with or purchase by an entity, such as a
corporation or trust, of specified instruments (such as commercial bank loans or
high yield bonds) and the issuance by that entity of one or more classes of
structured securities backed by, or representing interests in, the underlying
instruments. The cash flow on the underlying instruments may be apportioned
among the newly issued structured securities to create securities with different
investment characteristics such as varying maturities, payment priorities and
interest rate provisions, and the extent of the payments made with respect to
structured securities is dependent on the extent of the cash flow from the
underlying instruments. Structured securities of a given class may be either
subordinated or unsubordinated to the payment of another class. Subordinated
structured securities typically have higher yields and present greater risks
than unsubordinated structured securities.
Basket securities in which a Fund may invest may consist of entities organized
and operated for the purpose of holding a basket of other securities. Baskets
involving debt obligations may be designed to represent the characteristics of
some portion of the debt securities market or the entire debt market.
Variable, Floating and Inverse Floating Rate Instruments
Variable and floating rate securities pay interest at rates that are adjusted
periodically, according to a specified formula. A "variable" interest rate
adjusts at predetermined intervals (e.g., daily, weekly or monthly), while a
"floating" interest rate adjusts whenever a specified benchmark rate (such as
the bank prime lending rate) changes.
The Funds may also invest in inverse floating rate debt instruments ("inverse
floaters"). The interest rate on an inverse floater resets in the opposite
direction from the market rate of interest to which the inverse floater is
indexed. An inverse floater may have greater volatility in market value, in
that, during periods of rising interest rates, the market values of inverse
floaters will tend to decrease more rapidly than those of fixed rate securities.
Zero Coupon and Principal-Only Securities
Zero coupon securities and principal-only (PO) securities are debt securities
that have been issued without interest coupons or stripped of their unmatured
interest coupons, and include receipts or certificates representing interests in
such stripped debt obligations and coupons. Such a security pays no interest to
its holder during its life. Its value to an investor consists of the difference
between its face value at the time of maturity and the price for which it was
acquired, which is generally an amount significantly less than its face value.
Such securities usually trade at a deep discount from their face or par value
and are subject to greater fluctuations in market value in response to changing
interest rates than debt obligations of comparable maturities and credit quality
that make current distributions of interest. On the other hand, because there
are no periodic interest payments to be reinvested prior to maturity, these
securities eliminate reinvestment risk and "lock in" a rate of return to
maturity.
Foreign (Non-U.S.) Securities
Investing in foreign securities involves special risks and considerations not
typically associated with investing in U.S. securities. The securities markets
of many foreign countries are relatively small, with the majority of market
capitalization and trading volume concentrated in a limited number of companies
representing a small number of industries. A Fund that invests in foreign
fixed-income securities may experience greater price volatility and
significantly lower liquidity than a portfolio invested solely in securities of
U.S. companies. These markets may be subject to greater influence by adverse
events generally affecting the market, and by large investors trading
significant blocks of securities, than is usual in the United States.
Securities registration, custody, and settlement may in some instances be
subject to delays and legal and administrative uncertainties. Foreign investment
in the securities markets of certain foreign countries is restricted or
controlled to varying degrees. These restrictions or controls may at times limit
or preclude investment in certain securities and may increase the cost and
expenses of a Fund. In addition, the repatriation of investment income, capital
or the proceeds of sales of securities from certain of the countries is
controlled under regulations, including in some cases the need for certain
advance government notification or authority, and if a deterioration occurs in a
country's balance of payments, the country could impose temporary restrictions
on foreign capital remittances.
A Fund also could be adversely affected by delays in, or a refusal to grant, any
required governmental approval for repatriation, as well as by the application
to it of other restrictions on investment. Investing in local markets may
require a Fund to adopt special procedures or seek local governmental approvals
or other actions, any of which may involve additional costs to a Fund. These
factors may affect the liquidity of a Fund's investments in any country and the
Adviser will monitor the effect of any such factor or factors on a Fund's
investments. Transaction costs, including brokerage commissions for transactions
both on and off the securities exchanges, in many foreign countries are
generally higher than in the United States.
Issuers of securities in foreign jurisdictions are generally not subject to the
same degree of regulation as are U.S. issuers with respect to such matters as
insider trading rules, restrictions on market manipulation, shareholder proxy
requirements, and timely disclosure of information. The reporting, accounting,
and auditing standards of foreign countries may differ, in some cases
significantly, from U.S. standards in important respects, and less information
may be available to investors in foreign securities than to investors in U.S.
securities. Substantially less information is publicly available about certain
non-U.S. issuers than is available about most U.S. issuers.
The economies of individual foreign countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product or gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency, and balance of payments position. Nationalization,
expropriation or confiscatory taxation, currency blockage, political changes,
government regulation, political or social instability, revolutions, wars or
diplomatic developments could affect adversely the economy of a foreign country.
In the event of nationalization, expropriation, or other confiscation, a Fund
could lose its entire investment in securities in the country involved. In
addition, laws in foreign countries governing business organizations, bankruptcy
and insolvency may provide less protection to security holders such as the Fund
than that provided by U.S. laws.
Investments in securities of companies in emerging markets involve special
risks. There are approximately 100 countries identified by the World Bank as Low
Income, Lower Middle Income and Upper Middle Income countries that are generally
regarded as Emerging Markets. Emerging market countries that the Adviser
currently considers for investment are listed below. Countries may be added to
or removed from this list at any time.
Algeria Hong Kong Poland
Argentina Hungary Qatar
Belize India Romania
Brazil Indonesia Russia
Bulgaria Israel Singapore
Chile Jamaica Slovakia
China Jordan Slovenia
Colombia Kazakhstan South Africa
Costa Rica Lebanon South Korea
Cote D'Ivoire Malaysia Taiwan
Croatia Mexico Thailand
Czech Republic Morocco Trinidad & Tobago
Dominican Republic Nigeria Tunisia
Ecuador Pakistan Turkey
Egypt Panama Ukraine
El Salvador Peru Uruguay
Guatemala Philippines Venezuela
Investing in emerging market securities imposes risks different from, or greater
than, risks of investing in domestic securities or in foreign, developed
countries. These risks include: smaller market capitalization of securities
markets, which may suffer periods of relative illiquidity; significant price
volatility; restrictions on foreign investment; and possible repatriation of
investment income and capital. In addition, foreign investors may be required to
register the proceeds of sales; future economic or political crises could lead
to price controls, forced mergers, expropriation or confiscatory taxation,
seizure, nationalization, or creation of government monopolies. The currencies
of emerging market countries may experience significant declines against the
U.S. Dollar, and devaluation may occur subsequent to investments in these
currencies by a Fund. Inflation and rapid fluctuations in inflation rates have
had, and may continue to have, negative effects on the economies and securities
markets of certain emerging market countries.
Additional risks of emerging market securities may include: greater social,
economic and political uncertainty and instability; more substantial
governmental involvement in the economy; less governmental supervision and
regulation; unavailability of currency hedging techniques; companies that are
newly organized and small; differences in auditing and financial reporting
standards, which may result in unavailability of material information about
issuers; and less developed legal systems. In addition, emerging securities
markets may have different clearance and settlement procedures, which may be
unable to keep pace with the volume of securities transactions or otherwise make
it difficult to engage in such transactions. Settlement problems may cause a
Fund to miss attractive investment opportunities, hold a portion of its assets
in cash pending investment, or be delayed in disposing of a portfolio security.
Such a delay could result in possible liability to a purchaser of the security.
Foreign (Non-U.S.) Currencies
A Fund that invests some portion of its assets in securities denominated in, and
receives revenues in, foreign currencies will be adversely affected by
reductions in the value of those currencies relative to the U.S. Dollar. Foreign
currency exchange rates may fluctuate significantly. They are determined by
supply and demand in the foreign exchange markets, the relative merits of
investments in different countries, actual or perceived changes in interest
rates, and other complex factors. Currency exchange rates also can be affected
unpredictably by intervention (or the failure to intervene) by U.S. or foreign
governments or central banks or by currency controls or political developments.
In light of these risks, a Fund may engage in certain currency hedging
transactions, as described above, which involve certain special risks.
A Fund may also invest directly in foreign currencies for non-hedging purposes
directly on a spot basis (i.e., cash) or through derivative transactions, such
as forward currency exchange contracts, futures and options thereon, swaps and
options as described above. These investments will be subject to the same rates.
In addition, currency exchange risks may fluctuate significantly over short
periods of time, causing a Fund's NAV to fluctuate.
Borrowing and Leverage
The Funds may use borrowings for investment purposes subject to the limit
imposed by the 1940 Act, which is up to 33- (1)/3% of a Fund's assets.
Borrowings by a Fund result in leveraging of the Fund's shares. The Funds may
also use leverage for investment transactions by entering into transactions such
as reverse repurchase agreements, forward contracts and dollar rolls. This means
that a Fund uses cash made available during the term of these transactions to
make investments in other fixed-income securities.
Utilization of leverage, which is usually considered speculative, involves
certain risks to a Fund's shareholders. These include a higher volatility of the
NAV of a Fund's shares and the relatively greater effect on the NAV
of the shares. So long as a Fund is able to realize a net return on its
investment portfolio that is higher than the interest expense paid on borrowings
or the carrying costs of leveraged transactions, the effect of leverage will be
to cause the Fund's shareholders to realize a higher current net investment
income than if the Fund were not leveraged. If the interest expense on
borrowings or the carrying costs of leveraged transactions approaches the net
return on a Fund's investment portfolio, the benefit of leverage to the Fund's
shareholders will be reduced. If the interest expense on borrowings or the
carrying costs of leveraged transactions were to exceed the net return to
shareholders, a Fund's use of leverage would result in a lower rate of return.
Similarly, the effect of leverage in a declining market could be a greater
decrease in NAV. In an extreme case, if a Fund's current investment income were
not sufficient to meet the interest expense on borrowing or the carrying costs
of leveraged transactions, it could be necessary for the Fund to liquidate
certain of its investments, thereby reducing its NAV.
Investment in Below Investment Grade Fixed-Income Securities
Investments in securities rated below investment grade may be subject to greater
risk of loss of principal and interest than higher-rated securities. These
securities are also generally considered to be subject to greater market risk
than higher-rated securities. The capacity of issuers of these securities to pay
interest and repay principal is more likely to weaken than is that of issuers of
higher-rated securities in times of deteriorating economic conditions or rising
interest rates. In addition, below investment grade securities may be more
susceptible to real or perceived adverse economic conditions than investment
grade securities.
The market for these securities may be thinner and less active than that for
higher-rated securities, which can adversely affect the prices at which these
securities can be sold. To the extent that there is no established secondary
market for these securities, a Fund may experience difficulty in valuing such
securities and, in turn, the Fund's assets.
Unrated Securities
A Fund may invest in unrated securities when the Adviser believes that the
financial condition of the issuers of such securities, or the protection
afforded by the terms of the securities themselves, limits the risk to the Fund
to a degree comparable to that of rated securities that are consistent with the
Fund's objective and policies.
Sovereign Debt Obligations
No established secondary markets may exist for many sovereign debt obligations.
Reduced secondary market liquidity may have an adverse effect on the market
price and a Fund's ability to dispose of particular instruments when necessary
to meet its liquidity requirements or in response to specific economic events
such as a deterioration in the creditworthiness of the issuer. Reduced secondary
market liquidity for certain sovereign debt obligations may also make it more
difficult for a Fund to obtain accurate market quotations for the purpose of
valuing its portfolio. Market quotations are generally available on many
sovereign debt obligations only from a limited number of dealers and may not
necessarily represent firm bids of those dealers or prices for actual sales.
By investing in sovereign debt obligations, the Funds will be exposed to the
direct or indirect consequences of political, social, and economic changes in
various countries. Political changes in a country may affect the willingness of
a foreign government to make or provide for timely payments of its obligations.
The country's economic status, as reflected in, among other things, its
inflation rate, the amount of its external debt and its gross domestic product,
will also affect the government's ability to honor its obligations.
The Funds are permitted to invest in sovereign debt obligations that are not
current in the payment of interest or principal or are in default so long as the
Adviser believes it to be consistent with the Funds' investment objectives. The
Funds may have limited legal recourse in the event of a default with respect to
certain sovereign debt obligations they hold. For example, remedies from
defaults on certain sovereign debt obligations, unlike those on private debt,
must, in some cases, be pursued in the courts of the defaulting party itself.
Legal recourse therefore may be significantly diminished. Bankruptcy,
moratorium, and other similar laws applicable to issuers of sovereign debt
obligations may be substantially different from those applicable to issuers of
private debt obligations. The political context, expressed as the willingness of
an issuer of sovereign debt obligations to meet the terms of the debt
obligation, for example, is of considerable importance. In addition, no
assurance can be given that the holders of commercial bank debt will not contest
payments to the holders of securities issued by foreign governments in the event
of default under commercial bank loan agreements.
Future Developments
A Fund may take advantage of other investment practices that are not currently
contemplated for use by the Fund, or are not available but may yet be developed,
to the extent such investment practices are consistent with the Fund's
investment objective and legally permissible for the Fund. Such investment
practices, if they arise, may involve risks that exceed those involved in the
activities described above.
Changes in Investment Objectives and Policies
A Fund's Board may change a Fund's investment objective without shareholder
approval. The Fund will provide shareholders with 60 days' prior written notice
of any change to the Fund's investment objective. Unless otherwise noted, all
other investment policies of a Fund may be changed without shareholder approval.
Temporary Defensive Position
For temporary defensive purposes in an attempt to respond to adverse market,
economic, political or other conditions, each Fund may invest in certain types
of short-term, liquid, investment grade or high quality (depending on the Fund)
debt securities. While a Fund is investing for temporary defensive purposes, it
may not meet its investment objectives.
Portfolio Holdings
A description of the Funds' policies and procedures with respect to the
disclosure of the Funds' portfolio securities is available in the Funds' SAI.
INVESTING IN THE FUNDS
--------------------------------------------------------------------------------
This section discusses how to buy, sell or redeem, or exchange different classes
of shares of a Fund that are offered in this Prospectus. The Funds offer four
classes of shares through this Prospectus.
Each share class represents an investment in the same portfolio of securities,
but the classes may have different sales charges and bear different ongoing
distribution expenses. For additional information on the differences between the
different classes of shares and factors to consider when choosing among them,
please see "The Different Share Class Expenses" below.
HOW TO BUY SHARES
The purchase of a Fund's shares is priced at the next determined NAV after your
order is received in proper form.
Class A, Class R, Class K and Class I shares are available at NAV, without an
initial sales charge, to 401(k) plans, 457 plans, employer-sponsored 403(b)
plans, profit-sharing and money purchase pension plans, defined benefit plans,
and non-qualified deferred compensation plans where plan level or omnibus
accounts are held on the books of a Fund ("group retirement plans"), as follows:
Class A shares offered through this Prospectus are designed for group retirement
plans with assets in excess of $10,000,000. Class A shares are also available at
NAV to the AllianceBernstein Link, AllianceBernstein Individual 401(k) and
AllianceBernstein SIMPLE IRA plans with at least $250,000 in plan assets or 100
employees.
Class R shares are designed for group retirement plans with plan assets up to
$10,000,000.
Class K shares are designed for group retirement plans with at least $1,000,000
in plan assets.
Class I shares are designed for group retirement plans with at least $10,000,000
in plan assets and also are available to certain institutional clients of the
Adviser who invest at least $2 million in a Fund.
Class A, Class R, Class K and Class I shares are also available to certain
AllianceBernstein-sponsored group retirement plans. Class R, Class K and Class I
shares generally are not available to retail non-retirement accounts,
traditional and Roth IRAs, Coverdell Education Savings Accounts, SEPs, SAR-SEPs,
SIMPLE IRAs, and individual 403(b) plans. Effective October 19, 2005, Class I
shares were no longer available to AllianceBernstein-sponsored group retirement
plan programs known as the "Informed Choice" programs.
Required Information
A Fund is required by law to obtain, verify, and record certain personal
information from you or persons on your behalf in order to establish an account.
Required information includes name, date of birth, permanent residential address
and taxpayer identification number (for most investors, your social security
number). A Fund may also ask to see other identifying documents. If you do not
provide the information, the Fund will not be able to open your account. If a
Fund is unable to verify your identity, or that of another person(s) authorized
to act on your behalf, or if the Fund believes it has identified potentially
criminal activity, the Fund reserves the right to take action it deems
appropriate or as required by law, which may include closing your account. If
you are not a U.S. citizen or Resident Alien, your account must be affiliated
with a Financial Industry Regulatory Authority, or FINRA, member firm.
General
AllianceBernstein Investments, Inc., or ABI, may refuse any order to
purchase shares. Each Fund reserves the right to suspend the sale of
its shares to the public in response to conditions in the securities
markets or for other reasons.
THE DIFFERENT SHARE CLASS EXPENSES
This section describes the different expenses of investing in each class and
explains factors to consider when choosing a class of shares. The expenses can
include distribution and/or service (Rule 12b-1) fees or CDSCs.
WHAT IS A RULE 12b-1 FEE?
A Rule 12b-1 fee is a fee deducted from a Fund's assets that is used to pay
for personal service, maintenance of shareholder accounts and distribution
costs, such as advertising and compensation of financial intermediaries. The
amount of each share class's Rule 12b-1 fee, if any, is disclosed below and
in a Fund's fee table included in Summary Information section above.
Asset-Based Sales Charges or Distribution and/or Service (Rule 12b-1)
Fees
Each Fund has adopted plans under Securities and Exchange Commission
("Commission") Rule 12b-1 that allow the Fund to pay asset-based sales charges
or distribution and/or service (Rule 12b-1) fees for the distribution and sale
of its shares. The amount of these fees for each class of the Fund's shares is:
Distribution and/or Service
(Rule 12b-1) Fee (as a
Percentage of Aggregate
Average Daily Net Assets)
--------------------------------------------------------------------------------
Class A .30%
Class R .50%
Class K .25%
Class I None
Because these fees are paid out of a Fund's assets on an ongoing basis, over
time these fees will increase the cost of your investment and may cost you more
than paying other types of sales fees. Class R shares are subject to higher Rule
12b-1 fees than Class A shares. Because higher fees mean a higher expense ratio,
Class R shares pay correspondingly lower dividends and may have a lower NAV (and
returns) than Class A shares. Conversely, Class K and Class I shares have a
lower or no Rule 12b-1 fee. Therefore, Class K and Class I shares have a lower
expense ratio and may have a higher NAV (and returns) than Class A or Class R
shares. All or some of these fees may be paid to financial intermediaries,
including your financial intermediary.
Class A Shares
Class A shares offered through this Prospectus do not have an initial sales
charge. Class A shares may be subject to a CDSC of up to 1%. Purchases of Class
A shares by AllianceBernstein or non-AllianceBernstein-sponsored group
retirement plans may be subject to a 1% CDSC if terminated within one year. The
CDSC is applied to the lesser of NAV at the time of redemption of shares or the
original cost of shares being redeemed.
Class R, Class K and Class I Shares
Class R, Class K and Class I shares do not have an initial sales charge or CDSC.
DISTRIBUTION ARRANGEMENTS FOR GROUP RETIREMENT PLANS
Each Fund offers distribution arrangements for group retirement plans. Plan
sponsors, plan fiduciaries and other financial intermediaries may establish
requirements for group retirement plans as to the purchase, sale or exchange of
shares of a Fund, including maximum and minimum initial investment requirements,
that are different from those described in this Prospectus and the Funds' SAI.
Group retirement plans also may not offer all classes of shares of a Fund. A
Fund is not responsible for, and has no control over, the decision of any plan
sponsor or fiduciary to impose such differing requirements.
PAYMENTS TO FINANCIAL INTERMEDIARIES
Financial intermediaries market and sell shares of the Funds. These financial
intermediaries may receive compensation for selling shares of the Funds. This
compensation is paid from various sources, including any CDSC, and/or Rule 12b-1
fee that you or the Funds may pay.
WHAT IS A FINANCIAL INTERMEDIARY?
A financial intermediary is a firm that receives compensation for selling
shares of the Funds offered in this Prospectus and/or provides services to
the Funds' shareholders. Financial intermediaries may include, among others,
brokers, financial planners or advisors, banks and insurance companies.
Financial intermediaries may employ financial advisors who deal with you and
other investors on an individual basis.
ABI may pay financial intermediaries selling Class A shares a fee of up to 1%.
Up to 100% of the Rule 12b-1 fees applicable to Class A shares each year may be
paid to financial intermediaries, including your financial intermediary, that
sell Class A shares.
For Class R and Class K shares, up to 100% of the Rule 12b-1 fee applicable to
these classes of shares each year may be paid to financial intermediaries,
including your financial intermediary, that sell Class R and Class K shares.
Your financial advisor's firm receives compensation from the Funds, ABI,
and/or the Adviser in several ways from various sources, which include some
or all of the following:
- Rule 12b-1 fees;
- additional distribution support;
- defrayal of costs for educational seminars and training; and
- payments related to providing shareholder recordkeeping and/or transfer
agency services.
Please read the Prospectus carefully for information on this compensation.
Other Payments for Distribution Services and Educational Support
In addition to the Rule 12b-1 fees described above, some or all of which may be
paid to financial intermediaries, ABI, at its expense, currently provides
additional payments to firms that sell shares of the AllianceBernstein Mutual
Funds. Although the individual components may be higher and the total amount of
payments made to each qualifying firm in any given year may vary, the total
amount paid to a financial intermediary in connection with the sale of shares of
the AllianceBernstein Mutual Funds will generally not exceed the sum of (a)
0.25% of the current year's fund sales by that firm and (b) 0.10% of average
daily net assets attributable to that firm over the year. These sums include
payments to reimburse directly or indirectly the costs incurred by these firms
and their employees in connection with educational seminars and training efforts
about the AllianceBernstein Mutual Funds for the firms' employees and/or their
clients and potential clients. The costs and expenses associated with these
efforts may include travel, lodging, entertainment, and meals. ABI may pay a
portion of "ticket" or other transactional charges.
For 2010, ABI's additional payments to these firms for distribution services and
educational support related to the AllianceBernstein Mutual Funds are expected
to be approximately [_______]% of the average monthly assets of the
AllianceBernstein Mutual Funds, or approximately $[_____________]. In 2009, ABI
paid approximately 0.04% of the average monthly assets of the AllianceBernstein
Mutual Funds or approximately $15,500,000 for distribution services and
educational support related to the AllianceBernstein Mutual Funds.
A number of factors are considered in determining the additional payments,
including each firm's AllianceBernstein Mutual Fund sales, assets and redemption
rates, and the willingness and ability of the firm to give ABI access to its
financial advisors for educational and marketing purposes. In some cases, firms
will include the AllianceBernstein Mutual Funds on a "preferred list." ABI's
goal is to make the financial intermediaries who interact with current and
prospective investors and shareholders more knowledgeable about the
AllianceBernstein Mutual Funds so that they can provide suitable information and
advice about the funds and related investor services.
The Funds and ABI also make payments for recordkeeping and other transfer agency
services to financial intermediaries that sell AllianceBernstein Mutual Fund
shares. Please see "Management of the Funds--Transfer Agency and Retirement Plan
Services" below. These expenses paid by the Funds are included in "Other
Expenses" under "Fees and Expenses of the Funds--Annual Fund Operating Expenses"
above.
If one mutual fund sponsor makes greater distribution assistance payments
than another, your financial intermediary may have an incentive to recommend
one fund complex over another. Similarly, if your financial advisor and his
or her firm receives more distribution assistance for one share class versus
another, the financial intermediary may have an incentive to recommend that
class.
As of the date of the Prospectus, ABI anticipates that the firms that will
receive additional payments for distribution services and/or educational support
include:
Ameriprise Financial Services
AXA Advisors
Bank of America
Cadaret, Grant & Co.
CCO Investment Services Corp.
Chase Investment Services
Citigroup Global Markets
Commonwealth Financial Network
Donegal Securities
ING Advisors Network
LPL Financial Corporation
Merrill Lynch
Morgan Stanley & Co. Incorporated
Northwestern Mutual Investment Services
Raymond James
RBC Capital Markets Corporation
Robert W. Baird
SagePoint Financial, Inc.
UBS AG
UBS Financial Services
Wachovia Securities
Wells Fargo Investments
Although the Funds may use brokers and dealers that sell shares of the Funds to
effect portfolio transactions, the Funds do not consider the sale of
AllianceBernstein Mutual Fund shares as a factor when selecting brokers or
dealers to effect portfolio transactions.
HOW TO EXCHANGE SHARES
You may exchange your Fund shares for shares of the same class of other
AllianceBernstein Mutual Funds (including AllianceBernstein Exchange Reserves, a
money market fund managed by the Adviser) provided that the other fund offers
the same class of shares. Exchanges of shares are made at the next-determined
NAV, without sales or service charges. All exchanges are subject to the minimum
investment restrictions set forth in the prospectus for the AllianceBernstein
Mutual Fund whose shares are being acquired. Your exchange of shares is priced
at the next-determined NAV after your order is received in proper form. You may
request an exchange by mail or telephone. In order to receive a day's NAV,
AllianceBernstein Investor Services, Inc., or ABIS, must receive and confirm
your telephone exchange request by 4:00 p.m., Eastern time, on that day. The
Funds may modify, restrict, or terminate the exchange privilege on 60 days'
written notice.
HOW TO SELL OR REDEEM SHARES
You may "redeem" your shares (i.e., sell your shares to a Fund) on any day the
New York Stock Exchange (the "Exchange") is open. Your sale price will be the
next-determined NAV, less any applicable CDSC, after the Fund receives your
redemption request in proper form. Normally, redemption proceeds are sent to you
within seven days. If you recently purchased your shares by check or electronic
funds transfer, your redemption payment may be delayed until the Fund is
reasonably satisfied that the check or electronic funds transfer has been
collected (which may take up to 15 days).
Your financial intermediary must receive your sales request by 4:00 p.m.,
Eastern time, and submit it to the Fund by a pre-arranged time for you to
receive the next-determined NAV, less any applicable CDSC. Your financial
intermediary is responsible for submitting all necessary documentation to the
Fund and may charge you a fee for this service.
FREQUENT PURCHASES AND REDEMPTIONS OF FUND SHARES
Each Fund's Board of Directors (the "Board") has adopted policies and procedures
designed to detect and deter frequent purchases and redemptions of Fund shares
or excessive or short-term trading that may disadvantage long-term Fund
shareholders. These policies are described below. There is no guarantee that the
Funds will be able to detect excessive or short-term trading and to identify
shareholders engaged in such practices, particularly with respect to
transactions in omnibus accounts. Shareholders should be aware that application
of these policies may have adverse consequences, as described below, and avoid
frequent trading in Fund shares through purchases, sales and exchanges of
shares. Each Fund reserves the right to restrict, reject, or cancel, without any
prior notice, any purchase or exchange order for any reason, including any
purchase or exchange order accepted by any shareholder's financial intermediary.
Risks Associated With Excessive Or Short-Term Trading Generally. While the Funds
will try to prevent market timing by utilizing the procedures described below,
these procedures may not be successful in identifying or stopping excessive or
short-term trading in all circumstances. By realizing profits through short-term
trading, shareholders that engage in rapid purchases and sales or exchanges of a
Fund's shares dilute the value of shares held by long-term shareholders.
Volatility resulting from excessive purchases and sales or exchanges of Fund
shares, especially involving large dollar amounts, may disrupt efficient
portfolio management and cause a Fund to sell shares at inopportune times to
accommodate redemptions relating to short-term trading. In particular, a Fund
may have difficulty implementing its long-term investment strategies if it is
forced to maintain a higher level of its assets in cash to accommodate
significant short-term trading activity. In addition, a Fund may incur increased
administrative and other expenses due to excessive or short-term trading,
including increased brokerage costs and realization of taxable capital gains.
Funds that may invest significantly in foreign securities may be particularly
susceptible to short-term trading strategies. This is because foreign securities
are typically traded on markets that close well before the time a Fund
calculates its NAV at 4:00 p.m., Eastern time, which gives rise to the
possibility that developments may have occurred in the interim that would affect
the value of these securities. The time zone differences among international
stock markets can allow a shareholder engaging in a short-term trading strategy
to exploit differences in Fund share prices that are based on closing prices of
foreign securities established some time before the Fund calculates its own
share price (referred to as "time zone arbitrage"). The Funds have procedures,
referred to as fair value pricing, designed to adjust closing market prices of
foreign securities to reflect what is believed to be the fair value of those
securities at the time a Fund calculates its NAV. While there is no assurance,
the Funds expect that the use of fair value pricing, in addition to the
short-term trading policies discussed below, will significantly reduce a
shareholder's ability to engage in time zone arbitrage to the detriment of other
Fund shareholders.
A shareholder engaging in a short-term trading strategy may also target a Fund
that does not invest primarily in foreign securities. Any Fund that invests in
securities that are, among other things, thinly traded, traded infrequently or
relatively illiquid, has the risk that the current market price for the
securities may not accurately reflect current market values. A shareholder may
seek to engage in short-term trading to take advantage of these pricing
differences (referred to as "price arbitrage"). All Funds may be adversely
affected by price arbitrage.
Policy Regarding Short-Term Trading. Purchases and exchanges of shares of the
Funds should be made for investment purposes only. The Funds will seek to
prevent patterns of excessive purchases and sales of Fund shares to the extent
they are detected by the procedures described below. The Funds reserve the right
to modify this policy, including any surveillance or account blocking procedures
established from time to time to effectuate this policy, at any time without
notice.
o Transaction Surveillance Procedures. The Funds, through their agents, ABI and
ABIS, maintain surveillance procedures to detect excessive or short-term
trading in Fund shares. This surveillance process involves several factors,
which include scrutinizing transactions in Fund shares that exceed certain
monetary thresholds or numerical limits within a specified period of time.
Generally, more than two exchanges of Fund shares during any 90-day period or
purchases of shares followed by a sale within 90 days will be identified by
these surveillance procedures. For purposes of these transaction surveillance
procedures, the Funds may consider trading activity in multiple accounts
under common ownership, control, or influence. Trading activity identified by
either, or a combination, of these factors, or as a result of any other
information available at the time, will be evaluated to determine whether
such activity might constitute excessive or short-term trading. These
surveillance procedures may be modified from time to time, as necessary or
appropriate to improve the detection of excessive or short-term trading or to
address specific circumstances.
o Account Blocking Procedures. If the Funds determine, in their sole
discretion, that a particular transaction or pattern of transactions
identified by the transaction surveillance procedures described above is
excessive or short-term trading in nature, the relevant Fund account(s) will
be immediately "blocked" and no future purchase or exchange activity will be
permitted. However, sales of Fund shares back to a Fund or redemptions will
continue to be permitted in accordance with the terms of the Fund's current
Prospectus. As a result, unless the shareholder redeems his or her shares,
which may have consequences if the shares have declined in value, a CDSC is
applicable or adverse tax consequences may result, the shareholder may be
"locked" into an unsuitable investment. In the event an account is blocked,
certain account-related privileges, such as the ability to place purchase,
sale and exchange orders over the internet or by phone, may also be
suspended. A blocked account will generally remain blocked unless and until
the account holder or the associated broker, dealer or other financial
intermediary provides evidence or assurance acceptable to the Fund that the
account holder did not or will not in the future engage in excessive or
short-term trading.
o Applications of Surveillance Procedures and Restrictions to Omnibus Accounts.
Omnibus account arrangements are common forms of holding shares of the Funds,
particularly among certain brokers, dealers and other financial
intermediaries, including sponsors of retirement plans and variable insurance
products. The Funds apply their surveillance procedures to these omnibus
account arrangements. As required by Commission rules, the Funds have entered
into agreements with all of their financial intermediaries that require the
financial intermediaries to provide the Funds, upon the request of the Funds
or their agents, with individual account level information about their
transactions. If the Funds detect excessive trading through their monitoring
of omnibus accounts, including trading at the individual account level, the
financial intermediaries will also execute instructions from the Funds to
take actions to curtail the activity, which may include applying blocks to
accounts to prohibit future purchases and exchanges of Fund shares. For
certain retirement plan accounts, the Funds may request that the retirement
plan or other intermediary revoke the relevant participant's privilege to
effect transactions in Fund shares via the internet or telephone, in which
case the relevant participant must submit future transaction orders via the
U.S. Postal Service (i.e., regular mail).
HOW THE FUNDS VALUE THEIR SHARES
Each Fund's NAV is calculated at the close of regular trading on the Exchange
(ordinarily, 4:00 p.m., Eastern time), only on days when the Exchange is open
for business. To calculate NAV, a Fund's assets are valued and totaled,
liabilities are subtracted, and the balance, called net assets, is divided by
the number of shares outstanding. If a Fund invests in securities that are
primarily traded on foreign exchanges that trade on weekends or other days when
the Fund does not price its shares, the NAV of the Fund's shares may change on
days when shareholders will not be able to purchase or redeem their shares in
the Fund.
The Funds value their securities at their current market value determined on the
basis of market quotations or, if market quotations are not readily available or
are unreliable, at "fair value" as determined in accordance with procedures
established by and under the general supervision of each Fund's Board. When a
Fund uses fair value pricing, it may take into account any factors it deems
appropriate. A Fund may determine fair value based upon developments related to
a specific security, current valuations of foreign stock indices (as reflected
in U.S. futures markets) and/or U.S. sector or broader stock market indices. The
prices of securities used by the Fund to calculate its NAV may differ from
quoted or published prices for the same securities. Fair value pricing involves
subjective judgments and it is possible that the fair value determined for a
security is materially different than the value that could be realized upon the
sale of that security.
Funds expect to use fair value pricing for securities primarily traded on U.S.
exchanges only under very limited circumstances, such as the early closing of
the exchange on which a security is traded or suspension of trading in the
security. Funds may use fair value pricing more frequently for securities
primarily traded in non-U.S. markets because, among other things, most foreign
markets close well before a Fund values its securities at 4:00 p.m., Eastern
time. The earlier close of these foreign markets gives rise to the possibility
that significant events, including broad market moves, may have occurred in the
interim. For example, the Funds believe that foreign security values may be
affected by events that occur after the close of foreign securities markets. To
account for this, the Funds may frequently value many of their foreign equity
securities using fair value prices based on third party vendor modeling tools to
the extent available.
Subject to the Board's oversight, each Fund's Board has delegated responsibility
for valuing a Fund's assets to the Adviser. The Adviser has established a
Valuation Committee, which operates under the policies and procedures approved
by the Board, to value the Fund's assets on behalf of the Fund. The Valuation
Committee values Fund assets as described above.
MANAGEMENT OF THE FUNDS
--------------------------------------------------------------------------------
INVESTMENT ADVISER
Each Fund's adviser is AllianceBernstein L.P., 1345 Avenue of the Americas, New
York, New York 10105. The Adviser is a leading international investment adviser
supervising client accounts with assets as of September 30, 2009, totaling
approximately $[____] billion (of which more than $[___] billion represented
assets of investment companies). As of September 30, 2009, the Adviser managed
retirement assets for many of the largest public and private employee benefit
plans (including [__] of the nation's FORTUNE 100 companies), for public
employee retirement funds in [__] states, for investment companies, and for
foundations, endowments, banks and insurance companies worldwide. The [__]
registered investment companies managed by the Adviser, comprising [___]
separate investment portfolios, currently have approximately [___] million
retail accounts.
The Adviser provides investment advisory services and order placement facilities
for each of the Funds. For these advisory services, each of the Funds paid the
Adviser during its most recent fiscal year as a percentage of average daily net
assets:
Fee as a
Percentage of
Average Daily Fiscal Year
Fund Net Assets Ended
--------------------------------------------------------------------------------
AllianceBernstein Intermediate Bond .22%* 10/31/09
AllianceBernstein Global Bond .40% 9/30/09
AllianceBernstein Diversified Yield .00%* 10/31/09
AllianceBernstein High Income .40% 10/31/09
* Fee stated net of any waivers and/or reimbursements. See "Fees and Expenses
of the Funds" at the beginning of the Prospectus for more information about
fee waivers.
A discussion regarding the basis for the Board's approval of each Fund's
investment advisory agreement is available in the Fund's semi-annual report to
shareholders.
The Adviser may act as an investment adviser to other persons, firms, or
corporations, including investment companies, hedge funds, pension funds, and
other institutional investors. The Adviser may receive management fees,
including performance fees, that may be higher or lower than the advisory fees
it receives from the Funds. Certain other clients of the Adviser may have
investment objectives and policies similar to those of a Fund. The Adviser may,
from time to time, make recommendations that result in the purchase or sale of a
particular security by its other clients simultaneously with a Fund. If
transactions on behalf of more than one client during the same period increase
the demand for securities being purchased or the supply of securities being
sold, there may be an adverse effect on price or quantity. It is the policy of
the Adviser to allocate advisory recommendations and the placing of orders in a
manner that is deemed equitable by the Adviser to the accounts involved,
including a Fund. When two or more of the clients of the Adviser (including a
Fund) are purchasing or selling the same security on a given day from the same
broker-dealer, such transactions may be averaged as to price.
PORTFOLIO MANAGERS
The management of, and investment decisions for, the Funds' portfolios are made
by certain Investment Policy Teams. Each Investment Policy Team relies heavily
on the fundamental analysis and research of the Adviser's large internal
research staff. No one person is principally responsible for coordinating each
Fund's investments.
The following table lists the Investment Policy Teams, the person within each
Investment Policy Team with the most significant responsibility for day-to-day
management of the Fund's portfolio, the length of time that each person has been
jointly and primarily responsible for the Fund, and each person's principal
occupation during the past five years:
Fund and
Responsible Principal Occupation(s)
Team Employee; Year; Title During the Past Five (5) Years
----------------------------------- --------------------------------- ----------------------------------
AllianceBernstein Intermediate Bond Alison M. Martier; since May Senior Vice President of the Adviser,
Portfolio 2005; Senior Vice President of with which she has been associated in
the Adviser and Director of the a substantially similar capacity to
U.S. Investment Grade Core Fixed Fixed-Income Senior Portfolio her current position since prior to
Income Team Management Team 2005.
Greg J. Wilensky; since October Senior Vice President of the Adviser,
2005; Senior Vice President of with which he has been associated in a
the Adviser and Director of substantially similar capacity to his
Stable Value Investments current position since prior to 2005.
Shawn E. Keegan; since October Vice President of the Adviser, with
2005; Vice President of the which he has been associated in a
Adviser substantially similar capacity to his
current position since prior to 2005.
Joran Laird; since October 2005; Vice President of the Adviser, with
Vice President of the Adviser which he has been associated in a
substantially similar capacity to his
current position since prior to 2005.
Douglas J. Peebles; since Executive Vice President of the
November 2007; Executive Vice Adviser, with which he has been
President of the Adviser; and associated in a substantially similar
Chief Investment Officer and Head capacity to his current position since
of Fixed-Income prior to 2005.
Paul J. DeNoon; since January Senior Vice President of the Adviser,
2009; Senior Vice President of with which he has been associated in a
the Adviser and Director of substantially similar capacity to his
Emerging Market Debt current position since prior to 2005.
AllianceBernstein Global Bond Fund Paul J. DeNoon; since August (see above)
2002; (see above)
Global Fixed Income Investment Team
Douglas J. Peebles; since March (see above)
1992; (see above)
Scott DiMaggio; since August Senior Vice President of the Adviser,
2005; Senior Vice President of with which he has been associated in a
the Adviser and Director of substantially similar capacity to his
Canada Fixed Income current position since prior to 2005.
Matthew S. Sheridan; since Vice President of the Adviser, with
January 2007; Vice President of which he has been associated in a
the Adviser substantially similar capacity to his
current position since prior to 2005.
Fernando Grisales; since January Assistant Vice President of the
2007; Assistant Vice President of Adviser, with which he has been
the Adviser associated in a substantially similar
capacity to his current position since
prior to 2005.
Michael L. Mon; since September Vice President of the Adviser, with
2003; Vice President of the which he has been associated in a
Adviser substantially similar capacity to his
current position since prior to 2005.
AllianceBernstein Diversified Douglas J. Peebles; since January (see above)
Yield Fund 1996; (see above)
Global Fixed Income Investment Team Paul J. DeNoon; since October (see above)
and Global Credit Investment Team 2005; (see above)
Greg J. Wilensky; since June (see above)
2008; (see above)
Joran Laird; since January 2009; (see above)
(see above)
Matthew S. Sheridan; since April (see above)
2006; (see above)
Paul J. DeNoon; since August (see above)
2002; (see above)
AllianceBernstein High Income Fund Gershon Distenfeld; since Vice President of the Adviser, with
February 2008; Vice President of which he has been associated in a
Global Fixed Income Team and Global the Adviser substantially similar capacity to his
Credit Investment Team current position since prior to 2005.
Douglas J. Peebles; since August (see above)
2002; (see above)
Matthew S. Sheridan; since (see above)
October 2005; (see above)
Additional information about the portfolio managers may be found in the Funds'
SAI.
PERFORMANCE OF A SIMILARLY MANAGED PORTFOLIO
The investment teams employed by the Adviser to manage AllianceBernstein High
Income Fund and AllianceBernstein Intermediate Bond Portfolio have substantial
experience in managing discretionary accounts of institutional clients, pooled
investment vehicles and/or other registered investment companies and portions
thereof (the "Historical Accounts") that have substantially the same investment
objectives and policies and are managed in accordance with essentially the same
investment strategies as the Funds. The Historical Accounts that are not
registered investment companies are not subject to certain limitations,
diversification requirements and other restrictions imposed under the 1940 Act
and the Internal Revenue Code (the "Code") to which the Funds, as registered
investment companies, are subject and which, if applicable to the Historical
Accounts, may have adversely affected the performance of the Historical
Accounts. With respect to AllianceBernstein High Income Fund, the Historical
Accounts performance information is representative solely of the performance of
a pooled investment vehicle that is not offered for sale in the United States.
Set forth below is performance data provided by the Adviser relating to the
Historical Accounts managed by the investment team that manages each Fund's
assets. Performance data is shown for the period during which the investment
teams of the Adviser managed the Historical Accounts through December 31, 2009.
The aggregate assets for the Historical Accounts managed by the High Income
investment team and the Intermediate Bond investment team as of December 31,
2009 were approximately $[___] billion and $[____] billion, respectively. The
investment teams' Historical Accounts have a nearly identical composition of
representative investment holdings and related percentage weightings.
The performance data is net of all fees (including any portfolio transaction
costs) charged to the Historical Accounts, calculated on a monthly basis. The
highest fee payable for the Historical Accounts is 1.99% of assets for
AllianceBernstein High Income Fund and 0.85% of assets for AllianceBernstein
Intermediate Bond Portfolio, annually. Net-of-fee performance figures reflect
the compounding effect of such fees.
The data has not been adjusted to reflect any fees that will be payable by the
Funds, which may be higher than the fees imposed on the Historical Accounts, and
will reduce the returns of the Funds. Expenses associated with the distribution
of Class A, Class R and Class K shares of the Funds in accordance with the plans
adopted by the Boards of the Funds under Commission Rule 12b-1 are also
excluded. Except as noted, the performance data has also not been adjusted for
corporate or individual taxes, if any, payable by account owners.
The Adviser has calculated the investment performance of the Historical Accounts
on a trade-date basis. Income has been accrued daily and cash flows weighted
daily. Composite investment performance for the Funds has been determined on an
asset weighted basis. New accounts are included in the composite investment
performance computations at the beginning of the quarter following the initial
contribution. The total returns set forth below are calculated using a method
that links the monthly return amounts for the disclosed periods, resulting in a
time-weighted rate of return. Other methods of computing the investment
performance of the Historical Accounts may produce different results, and the
results for different periods may vary.
A composite benchmark, comprised of the JPMorgan Emerging Markets Bond Index
Global ("EMBI Global"), the JPMorgan Government Bond Index-Emerging Markets
("GBI-EM") and the Barclays Capital High Yield Index (2% Constrained) ("BC High
Yield") on an equal weighted basis (the "High Income Composite Benchmark") is
used by High Income and its Historical Account, for purposes of this example, as
a benchmark to measure its relative performance. EMBI Global tracks total
returns for traded external debt instruments in the emerging markets, GBI-EM
tracks total returns for local currency government bonds issued by emerging
markets, and BC High Yield tracks the U.S. Dollar-denominated, non-investment
grade, fixed-rate, taxable corporate bond market.
The Barclays Capital Aggregate Index ("BC Aggregate Index") is used by
Intermediate Bond as a benchmark to measure its relative performance and is
composed of securities from Barclays Capital Government/Corporate Bond Index,
Mortgage-Backed Securities Index, and the Asset-Backed Securities Index. The
index's total return consists of price appreciation/depreciation plus income as
a percentage of the original investment. Indices are rebalanced monthly by
market capitalization.
To the extent the investment teams utilize investment techniques such as swaps,
futures or options, the performance of the High Income Composite Benchmark and
the BC Aggregate Index may not be substantially comparable to the performance of
the investment teams' Historical Accounts. The High Income Composite Benchmark
and the BC Aggregate Index do not reflect the deduction of any fees or expenses
associated with the active management of a mutual fund.
The performance data below is provided solely to illustrate the investment
teams' performance in managing the Historical Accounts as measured against a
broad based market index. The performance of the Funds will be affected by the
performance of the investment teams managing the Funds' assets. If the
investment teams were to perform relatively poorly, the performance of the Funds
would suffer. Investors should not rely on the performance data of the
Historical Accounts as an indication of future performance of the Funds.
The investment performance for the periods presented may not be indicative of
future rates of return. The performance was not calculated pursuant to the
methodology established by the Commission that will be used to calculate the
Funds' performance. The use of methodology different from that used to calculate
performance could result in different performance data.
SCHEDULE OF HISTORICAL PERFORMANCE - HISTORICAL ACCOUNTS*
High Income High Income
Historical Account Composite BC High
Total Return** Benchmark EMBI Global*** GBI-EM Yield Index***
-------------------------------------------------------------------------------------------------------------------
Year Ended December 31:
2009 [___________]% [___________]% [___________]% [___________] [___________]%
2008 [___________]% [___________]% [___________]% [___________] [___________]%
2007 [___________]% [___________]% [___________]% [___________] [___________]%
2006 [___________]% [___________]% [___________]% [___________] [___________]%
2005 [___________]% [___________]% [___________]% [___________] [___________]%
2004 [___________]% [___________]% [___________]% [___________] [___________]%
2003 [___________]% [___________]% [___________]% [___________] [___________]%
2002 [___________]% [___________]% [___________]% [___________] [___________]%
2001 [___________]% N/A [___________]% N/A [___________]%
2000 [___________]% N/A [___________]% N/A [___________]%
1999 [___________]% N/A [___________]% N/A [___________]%
1998 [___________]% N/A [___________]% N/A [___________]%
Cumulative total return for the
period December 22, 1997
(inception of Historical
Account) to December 31, 2009 [___________]% N/A [_________]%*** N/A [____________]%***
* Total return is a measure of investment performance that is based upon the
change in value of an investment from the beginning to the end of a
specified period and assumes reinvestment of all dividends and other
distributions. The basis of presentation of this data is described in the
preceding discussion.
** Net of all fees.
*** Net inception cumulative index returns are from December 31, 1997.
Intermediate Bond BC U.S.
Historical Account Aggregate
Total Return** Index
--------------------------------------------------------------------------------
Year Ended December 31:
2009 [___________]% [___________]%
2008 (5.40)% 5.24%
2007 5.60% 6.97%
2006 5.26% 4.33%
2005 3.22% 2.43%
2004 5.48% 4.34%
2003 8.45% 4.10%
2002 7.93% 10.26%
Cumulative total return for
the period June 30, 2001
(inception of Historical
Accounts) to December 31, 2009 4.58% 5.63%
* Total return is a measure of investment performance that is based upon the
change in value of an investment from the beginning to the end of a
specified period and assumes reinvestment of all dividends and other
distributions. The basis of presentation of this data is described in the
preceding discussion.
** Net of all fees.
AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 2009
Since
1 Year 3 Years 5 Years 10 Years Inception
---------------------------------------------------------------------------------------
High Income Historical Account [_____]% [_____]% [_____]% [_____]% [____]%*
High Income Composite Benchmark [_____]% [_____]% [_____]% N/A N/A
EMBI Global [_____]% [_____]% [_____]% [_____]% [____]%**
GBI-EM [_____]% [_____]% [_____]% N/A N/A
BC High Yield [_____]% [_____]% [_____]% [_____]% [____]%**
* Inception date of Historical Account is December 22, 1997.
** Since inception average annual total returns are from December 31, 1997.
Since
1 Year 3 Years Inception
--------------------------------------------------------------------------------
Intermediate Bond Historical Accounts [_____]% [_____]% [_____]%*
BC U.S. Aggregate Index [_____]% [_____]% [_____]%*
* Inception date of Historical Accounts is June 30, 2001.
LEGAL PROCEEDINGS
On October 2, 2003, a purported class action complaint entitled Hindo et al. v.
AllianceBernstein Growth & Income Fund et al. (the "Hindo Complaint") was filed
against the Adviser; AllianceBernstein Holding L.P. ("Holding");
AllianceBernstein Corporation; AXA Financial, Inc.; the AllianceBernstein Mutual
Funds, certain officers of the Adviser ("AllianceBernstein defendants"); and
certain other unaffiliated defendants, as well as unnamed Doe defendants. The
Hindo Complaint was filed in the United States District Court for the Southern
District of New York by alleged shareholders of two of the AllianceBernstein
Mutual Funds. The Hindo Complaint alleges that certain of the AllianceBernstein
defendants failed to disclose that they improperly allowed certain hedge funds
and other unidentified parties to engage in "late trading" and "market timing"
of AllianceBernstein Mutual Fund securities, violating Sections 11 and 15 of the
Securities Act, Sections 10(b) and 20(a) of the Securities Exchange Act of 1934,
and Sections 206 and 215 of the Investment Advisers Act of 1940. Plaintiffs seek
an unspecified amount of compensatory damages and rescission of their contracts
with the Adviser, including recovery of all fees paid to the Adviser pursuant to
such contracts.
Following October 2, 2003, additional lawsuits making factual allegations
generally similar to those in the Hindo Complaint were filed in various federal
and state courts against the Adviser and certain other defendants. On September
29, 2004, plaintiffs filed consolidated amended complaints with respect to four
claim types: mutual fund shareholder claims; mutual fund derivative claims;
derivative claims brought on behalf of Holding; and claims brought under ERISA
by participants in the Profit Sharing Plan for Employees of the Adviser. All
four complaints include substantially identical factual allegations, which
appear to be based in large part on the Order of the Commission dated December
18, 2003 as amended and restated January 15, 2004 and the New York State
Attorney General Assurance of Discontinuance dated September 1, 2004.
On April 21, 2006, the Adviser and attorneys for the plaintiffs in the mutual
fund shareholder claims, mutual fund derivative claims, and ERISA claims entered
into a confidential memorandum of understanding containing their agreement to
settle these claims. The agreement will be documented by a stipulation of
settlement and will be submitted for court approval at a later date. The
settlement amount ($30 million), which the Adviser previously accrued and
disclosed, has been disbursed. The derivative claims brought on behalf of
Holding, in which plaintiffs seek an unspecified amount of damages, remain
pending.
It is possible that these matters and/or other developments resulting from these
matters could result in increased redemptions of the affected fund's shares or
other adverse consequences to those funds. This may require those funds to sell
investments to provide for sufficient liquidity and could also have an adverse
effect on the investment performance of the Funds. However, the Adviser believes
that these matters are not likely to have a material adverse effect on its
ability to perform advisory services relating to those funds or the Funds.
TRANSFER AGENCY AND RETIREMENT PLAN SERVICES
ABIS acts as the transfer agent for the Funds. ABIS, an indirect wholly-owned
subsidiary of the Adviser, registers the transfer, issuance, and redemption of
Fund shares and disburses dividends and other distributions to Fund
shareholders.
Retirement plans may hold Fund shares in the name of the plan, rather than the
participant. Plan recordkeepers, who may have affiliated financial
intermediaries who sell shares of the Funds, may be paid for each participant
fund account in amounts up to $19 per customer fund account per annum and/or up
to 0.25% per annum of the average daily assets held in the plan. To the extent
any of these payments for recordkeeping services, transfer agency services or
retirement plan services are made by the Funds, they are included in the amount
appearing opposite the caption "Other Expenses" found in the Fund expense tables
under "Fees and Expenses of the Funds." In addition, financial intermediaries
may be affiliates of entities that receive compensation from the Adviser or ABI
for maintaining retirement plan "platforms" that facilitate trading by
affiliated and non-affiliated financial intermediaries and recordkeeping for
retirement plans.
Because financial intermediaries and plan recordkeepers may be paid varying
amounts per class for sub-accounting or shareholder servicing, the service
requirements of which may also vary by class, this may create an additional
incentive for financial intermediaries and their financial advisors to favor one
fund complex over another or one class of shares over another.
DIVIDENDS, DISTRIBUTIONS AND TAXES
--------------------------------------------------------------------------------
Each Fund's income dividends and capital gains distributions, if any, declared
by a Fund on its outstanding shares will, at the election of each shareholder,
be paid in cash or in additional shares of the same class of shares of that
Fund. If paid in additional shares, the shares will have an aggregate NAV as of
the close of business on the declaration date of the dividend or distribution
equal to the cash amount of the dividend or distribution. You may make an
election to receive dividends and distributions in cash or in shares at the time
you purchase shares. Your election can be changed at any time prior to a record
date for a dividend. There is no sales or other charge in connection with the
reinvestment of dividends or capital gains distributions. Cash dividends may be
paid by check, or at your election, electronically via the ACH network.
If you receive an income dividend or capital gains distribution in cash you may,
within 120 days following the date of its payment, reinvest the dividend or
distribution in additional shares of that Fund without charge by returning to
the Adviser, with appropriate instructions, the check representing the dividend
or distribution. Thereafter, unless you otherwise specify, you will be deemed to
have elected to reinvest all subsequent dividends and distributions in shares of
that Fund.
While it is the intention of each Fund to distribute to its shareholders
substantially all of each fiscal year's net income and net realized capital
gains, if any, the amount and timing of any dividend or distribution will depend
on the realization by the Fund of income and capital gains from investments.
There is no fixed dividend rate and there can be no assurance that a Fund will
pay any dividends or realize any capital gains. The final determination of the
amount of a Fund's return of capital distributions for the period will be made
after the end of each calendar year.
You will normally have to pay federal income tax, and any state or local income
taxes, on the distributions you receive from a Fund, whether you take the
distributions in cash or reinvest them in additional shares. Distributions of
net capital gains from the sale of investments that a Fund owned for more than
one year and that are properly designated as capital gain dividends are taxable
as long-term capital gains. For taxable years beginning on or before December
31, 2010, distributions of dividends to a Fund's non-corporate shareholders may
be treated as "qualified dividend income," which is taxed at reduced rates, if
such distributions are derived from, and designated by a Fund as, "qualified
dividend income" and provided that holding period and other requirements are met
by both the shareholder and the Fund. "Qualified dividend income" generally is
income derived from dividends from U.S. corporations and "qualified foreign
corporations." Other distributions by a Fund are generally taxable to you as
ordinary income. Dividends declared in October, November, or December and paid
in January of the following year are taxable as if they had been paid the
previous December. A Fund will notify you as to how much of the Fund's
distributions, if any, qualify for these reduced tax rates.
Investment income received by a Fund from sources within foreign countries may
be subject to foreign income taxes withheld at the source. To the extent that a
Fund is liable for foreign income taxes withheld at the source, the Fund
intends, if possible, to operate so as to meet the requirements to "pass
through" to the Fund's shareholders for foreign income taxes paid (or to permit
shareholders to claim a deduction for such foreign taxes), but there can be no
assurance that any Fund will be able to do so, and Funds that invest primarily
in U.S. securities will not do so. Furthermore, a shareholder's ability to claim
a foreign tax credit or deduction for foreign taxes paid by a Fund may be
subject to certain limitations imposed by the Internal Revenue Code, as a result
of which a shareholder may not be permitted to claim a credit or deduction for
all or a portion of the amount of such taxes.
Under certain circumstances, if a Fund realizes losses (e.g., from fluctuations
in currency exchange rates) after paying a dividend, all or a portion of the
dividend may subsequently be characterized as a return of capital. Returns of
capital are generally nontaxable, but will reduce a shareholder's basis in
shares of a Fund. If that basis is reduced to zero (which could happen if the
shareholder does not reinvest distributions and returns of capital are
significant), any further returns of capital will be taxable as a capital gain.
If you buy shares just before a Fund deducts a distribution from its NAV, you
will pay the full price for the shares and then receive a portion of the price
back as a taxable distribution.
The sale or exchange of Fund shares is a taxable transaction for federal income
tax purposes.
Each year shortly after December 31, each Fund will send its shareholders tax
information stating the amount and type of all its distributions for the year.
Consult your tax adviser about the federal, state, and local tax consequences in
your particular circumstances.
NON-U.S. SHAREHOLDERS
If you are a nonresident alien individual or a foreign corporation for federal
income tax purposes, please see the Funds' SAI for information on how you will
be taxed as a result of holding shares in a Fund.
GENERAL INFORMATION
--------------------------------------------------------------------------------
Under unusual circumstances, a Fund may suspend redemptions or postpone payment
for up to seven days or longer, as permitted by federal securities law. The
Funds reserve the right to close an account that has remained below $500 for 90
days.
During drastic economic or market developments, you might have difficulty
reaching ABIS by telephone, in which event you should issue written instructions
to ABIS. ABIS is not responsible for the authenticity of telephone requests to
purchase, sell, or exchange shares. ABIS will employ reasonable procedures to
verify that telephone requests are genuine, and could be liable for losses
resulting from unauthorized transactions if it failed to do so. Dealers and
agents may charge a commission for handling telephone requests. The telephone
service may be suspended or terminated at any time without notice.
Shareholder Services. ABIS offers a variety of shareholder services. For more
information about these services or your account, call ABIS's toll-free number,
800-221-5672. Some services are described in the Mutual Fund Application.
Householding. Many shareholders of the AllianceBernstein Mutual Funds have
family members living in the same home who also own shares of the same Funds. In
order to reduce the amount of duplicative mail that is sent to homes with more
than one Fund account and to reduce expenses of the Funds, all AllianceBernstein
Mutual Funds will, until notified otherwise, send only one copy of each
prospectus, shareholder report and proxy statement to each household address.
This process, known as "householding", does not apply to account statements,
confirmations, or personal tax information. If you do not wish to participate in
householding, or wish to discontinue householding at any time, call ABIS at
1-800-221-5672. We will resume separate mailings for your account within 30 days
of your request.
GLOSSARY OF INVESTMENT TERMS
--------------------------------------------------------------------------------
Bonds are interest-bearing or discounted government or corporate securities that
obligate the issuer to pay the bond holder a specified sum of money, usually at
specified intervals, and to repay the principal amount of the loan at maturity.
Fixed-income securities are investments, such as bonds, that pay a fixed rate of
return.
Preferred stock is a class of capital stock that pays dividends at a specified
rate and that has preference over common stock, but not debt securities of the
same issuer, in the payment of dividends and the liquidation of assets.
Sovereign debt obligations are foreign government debt securities, loan
participations between foreign governments and financial institutions, and
interests in entities organized and operated for the purpose of restructuring
the investment characteristics of foreign government securities.
Supranational entities are international organizations formed by two or more
governments. Examples of supranational entities include the International Bank
for Reconstruction and Development, the Inter-American Development Bank, the
Asian Development Bank, the African Development Bank, the International Finance
Corporation and the European Bank for Reconstruction and Development.
U.S. Government securities are securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, including obligations that are
issued by private issuers that are guaranteed as to principal or interest by the
U.S. Government, its agencies or instrumentalities, or by certain
government-sponsored entities (entities chartered by or sponsored by Act of
Congress). These securities include securities backed by the full faith and
credit of the United States, those supported by the right of the issuer to
borrow from the U.S. Treasury, and those backed only by the credit of the
issuing agency or entity itself. The first category includes U.S. Treasury
securities (which are U.S. Treasury bills, notes, and bonds) and certificates
issued by GNMA. U.S. Government securities not backed by the full faith and
credit of the United States or a right to borrow from the U.S. Treasury include
certificates issued by FNMA and FHLMC.
The Merrill Lynch 3-Month T-Bill Index is an unmanaged index that measures
returns of three-month Treasury Bills.
The Barclays Capital U.S. Aggregate Index is a broad-based bond index comprised
of government, corporate, mortgage and asset-backed issues, rated investment
grade or higher, and having at least one year to maturity.
The Barclays Capital Global Aggregate Index is a macro index of global
government and corporate bond markets, and is composed of various indices
calculated by Lehman Brothers Inc., including the U.S. Aggregate Index, the
Pan-European Aggregate Index, the Global Treasury Index, the Asian-Pacific
Aggregate Index, the Eurodollar Index and the U.S. Investment-Grade 144A Index.
The Barclays Capital High Yield Index is an unmanaged index generally
representative of corporate bonds rated below investment grade.
The JPMorgan Emerging Markets Bond Index Global is a broad-based, unmanaged
index which tracks total return for external currency denominated debt in
emerging markets.
The JPMorgan Government Bond Index-Emerging Markets is a definitive local
emerging markets debt benchmark that tracks local currency government bonds
issued by emerging markets.
(This page intentionally left blank.)
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
The financial highlights table is intended to help you understand each Fund's
financial performance for the past five years (or, if shorter, the period of the
Fund's operations). Certain information reflects financial results for a single
share of a class of each Fund. The total returns in the table represent the rate
that an investor would have earned (or lost) on an investment in the Fund
(assuming reinvestment of all dividends and distributions). This information has
been audited by [____________], the independent registered public accounting
firm for all Funds, whose reports, along with each Fund's financial statements,
are included in each Fund's Annual Report, which is available upon request.
Less: Dividends and
Income from Investment Operations Distributions
------------------------------------------ ----------------------------
Net Increase
Net Asset Net Realized (Decrease) Dividends Distributions
Value, Net and Unrealized in Net Asset from Net from Net
Beginning Investment Gain (Loss) on Value from Investment Realized Gain
Fiscal Year or Period of Period Income (a) Investments Operations Income on Investments
-------------------------------------------------------------------------------------------------------------
Intermediate Bond
Class A
Year Ended 10/31/09 $[_____] $[_____] $[______] $[_____] $[_____] $0.00
Year Ended 10/31/08 10.24 .50(c) (1.49) (.99)(j) (.48) 0.00
Year Ended 10/31/07 10.18 .42(c) .06 .48 (.42) 0.00
Year Ended 10/31/06 10.15 .41(c) .04 .45 (.42) 0.00
Year Ended 10/31/05 10.43 .37(c) (.28) .09 (.37) 0.00
Class R
Year Ended 10/31/09 $[_____] $[_____] $[______] $[_____] $[_____] $0.00
Year Ended 10/31/08 10.24 .46(c) (1.47) (1.01)(j) (.46) 0.00
Year Ended 10/31/07 10.18 .44(c) .02 .46 (.40) 0.00
Year Ended 10/31/06 10.15 .39(c) .04 .43 (.40) 0.00
Year Ended 10/31/05 10.42 .34(c) (.26) .08 (.35) 0.00
Class K
Year Ended 10/31/09 $[_____] $[_____] $[______] $[_____] $[_____] $0.00
Year Ended 10/31/08 10.25 .48(c) (1.47) (.99)(j) (.48) 0.00
Year Ended 10/31/07 10.19 .42(c) .06 .48 (.42) 0.00
Year Ended 10/31/06 10.16 .42(c) .03 .45 (.42) 0.00
3/1/05(g) to 10/31/05 10.34 .26(c) (.17) .09 (.27) 0.00
Class I
Year Ended 10/31/09 $[_____] $[_____] $[______] $[_____] $[_____] $0.00
Year Ended 10/31/08 10.24 .50(c) (1.45) (.95)(j) (.51) 0.00
Year Ended 10/31/07 10.18 .45(c) .06 .51 (.45) 0.00
Year Ended 10/31/06 10.16 .44(c) .03 .47 (.45) 0.00
3/1/05(g) to 10/31/05 10.34 .27(c) (.17) .10 (.28) 0.00
Diversified Yield
Class A
Year Ended 10/31/09 $[_____] $[_____] $[______] $[_____] $[_____] $0.00
Year Ended 10/31/08 9.02 .36 (1.63) (1.27)(j) (.36) 0.00
Year Ended 10/31/07 8.62 .34 .40 .74 (.34) 0.00
Year Ended 10/31/06 8.70 .34 .14 .48 (.34) (.22)
Year Ended 10/31/05 8.63 .39 .09 .48 (.41) 0.00
Class R
Year Ended 10/31/09 $[_____] $[_____] $[______] $[_____] $[_____] $0.00
Year Ended 10/31/08 8.99 .34 (1.62) (1.28)(j) (.34) 0.00
Year Ended 10/31/07 8.61 .35 .34 .69 (.31) 0.00
Year Ended 10/31/06 8.69 .31 .14 .45 (.31) (.22)
3/1/05(g) to 10/31/05 8.85 .25 (.15) .10 (.26) 0.00
Class K
Year Ended 10/31/09 $[_____] $[_____] $[______] $[_____] $[_____] $0.00
Year Ended 10/31/08 9.00 .38 (1.63) (1.25)(j) (.36) 0.00
Year Ended 10/31/07 8.61 .32 .40 .72 (.33) 0.00
Year Ended 10/31/06 8.69 .29 .19 .48 (.34) (.22)
3/1/05(g) to 10/31/05 8.85 .27 (.15) .12 (.28) 0.00
Class I
Year Ended 10/31/09 $[_____] $[_____] $[______] $[_____] $[_____] $0.00
Year Ended 10/31/08 9.00 .38 (1.62) (1.24)(j) (.38) 0.00
Year Ended 10/31/07 8.61 .36 .40 .76 (.37) 0.00
Year Ended 10/31/06 8.69 .37 .14 .51 (.37) (.22)
3/1/05(g) to 10/31/05 8.85 .29 (.15) .14 (.30) 0.00
Global Bond
Class A
Year Ended 10/31/09 $[_____] $[_____] $[______] $[_____] $[_____] $0.00
Year Ended 9/30/08 8.07 .42 (.70) (.28) (.40) 0.00
Year Ended 9/30/07 7.54 .40 .52 .92 (.39) 0.00
Year Ended 9/30/06 7.69 .44 (.15) .29 (.44) 0.00
Year Ended 9/30/05 7.35 .50 .34 .84 (.50) 0.00
Class R
Year Ended 10/31/09 $[_____] $[_____] $[______] $[_____] $[_____] $0.00
11/5/07(g) to 9/30/08 8.14 .35 (.75) (.40) (.35) 0.00
Class K
Year Ended 10/31/09 $[_____] $[_____] $[______] $[_____] $[_____] $0.00
11/5/07(g) to 9/30/08 8.14 .36 (.75) (.39) (.37) 0.00
Class I
Year Ended 10/31/09 $[_____] $[_____] $[______] $[_____] $[_____] $0.00
11/5/07(g) to 9/30/08 8.14 .47 (.83) (.36) (.39) 0.00
Please refer to the footnotes on pages [___] through [___].
Less Distributions Ratios/Supplemental Data
------------------------------------------- --------------------------------------------------------------
Total Ratio of Net
Investment Net Assets, Ratio of Investment
Total Net Asset Return Based End of Period Expenses Income Portfolio
Dividends and Value, End on Net Asset (000's to Average to Average Turnover
Fiscal Year or Period Distributions of Period Value (b) omitted) Net Assets Net Assets Rate
------------------------------------------------------------------------------------------------------------------------------------
Intermediate Bond
Class A
Year Ended 10/31/09 $[______] $[______] [______]% $[__________] [______]% [______]% [______]%
Year Ended 10/31/08 (.48) 8.77 (10.15)(d) 360,606 .85(e) 4.68(c) 184
Year Ended 10/31/07 (.42) 10.24 4.79(d) 41,696 .98(e) 4.13(c) 173
Year Ended 10/31/06 (.42) 10.18 4.51 44,409 .98(e)(f) 4.08(c)(f) 446
Year Ended 10/31/05 (.37) 10.15 .90 52,430 .98(e) 3.53(c) 935
Class R
Year Ended 10/31/09 $[______] $[______] [______]% $[__________] [______]% [______]% [______]%
Year Ended 10/31/08 (.46) 8.77 (10.33)(d) 73 1.05(e) 4.45(c) 184
Year Ended 10/31/07 (.40) 10.24 4.57(d) 577 1.18(e) 3.97(c) 173
Year Ended 10/31/06 (.40) 10.18 4.31 13 1.18(e)(f) 3.89(c)(f) 446
Year Ended 10/31/05 (.35) 10.15 .81 13 1.18(e) 3.31(c) 935
Class K
Year Ended 10/31/09 $[______] $[______] [______]% $[__________] [______]% [______]% [______]%
Year Ended 10/31/08 (.48) 8.78 (10.09)(d) 3,784 .80(e) 4.69(c) 184
Year Ended 10/31/07 (.42) 10.25 4.84(d) 7,222 .93(e) 4.39(c) 173
Year Ended 10/31/06 (.42) 10.19 4.54 10 .93(e)(f) 4.13(c)(f) 446
3/1/05(g) to 10/31/05 (.27) 10.16 .82 10 .93(e)(h) 3.76(c)(h) 935
Class I
Year Ended 10/31/09 $[______] $[______] [______]% $[__________] [______]% [______]% [______]%
Year Ended 10/31/08 (.51) 8.78 (9.78)(d) 5,115 .55(e) 4.98(c) 184
Year Ended 10/31/07 (.45) 10.24 5.10(d) 5,368 .68(e) 4.44(c) 173
Year Ended 10/31/06 (.45) 10.18 4.71 5,913 .68(e)(f) 4.37(c)(f) 446
3/1/05(g) to 10/31/05 (.28) 10.16 .97 10 .68(e)(h) 3.98(c)(h) 935
Diversified Yield
Class A
Year Ended 10/31/09 $[______] $[______] [______]% $[__________] [______]% [______]% [______]%
Year Ended 10/31/08 (.36) 7.39 (14.57)(d) 39,639 .90(e) 4.13 81
Year Ended 10/31/07 (.34) 9.02 8.60(d) 48,542 1.47 3.81 134
Year Ended 10/31/06 (.56) 8.62 5.61 25,348 1.78(f)(i) 3.93(f) 169
Year Ended 10/31/05 (.41) 8.70 5.67 24,250 1.54 4.65 98
Class R
Year Ended 10/31/09 $[______] $[______] [______]% $[__________] [______]% [______]% [______]%
Year Ended 10/31/08 (.34) 7.37 (14.65)(d) 252 1.10(e) 3.98 81
Year Ended 10/31/07 (.31) 8.99 8.15(d) 187 1.58 4.08 134
Year Ended 10/31/06 (.53) 8.61 5.32 20 2.03(f) 3.64(f) 169
3/1/05(g) to 10/31/05 (.26) 8.69 1.17 10 1.94(h) 4.25(h) 98
Class K
Year Ended 10/31/09 $[______] $[______] [______]% $[__________] [______]% [______]% [______]%
Year Ended 10/31/08 (.36) 7.39 (14.28)(d) 21 .85(e) 4.02 81
Year Ended 10/31/07 (.33) 9.00 8.46(d) 57 1.59 3.47 134
Year Ended 10/31/06 (.56) 8.61 5.61 141 1.80(f) 3.63(f) 169
3/1/05(g) to 10/31/05 (.28) 8.69 1.36 10 1.63(h) 4.55(h) 98
Class I
Year Ended 10/31/09 $[______] $[______] [______]% $[__________] [______]% [______]% [______]%
Year Ended 10/31/08 (.38) 7.38 (14.21)(d) 8 .60(e) 4.45 81
Year Ended 10/31/07 (.37) 9.00 8.92(d) 10 1.14 4.06 134
Year Ended 10/31/06 (.59) 8.61 5.95 10 1.46(f) 4.25(f) 169
3/1/05(g) to 10/31/05 (.30) 8.69 1.58 10 1.30(h) 4.88(h) 98
Global Bond
Class A
Year Ended 10/31/09 $[______] $[______] [______]% $[__________] [______]% [______]% [______]%
Year Ended 9/30/08 (.40) 7.39 (3.75) 1,425,649 1.04(e)(i) 5.19 140
Year Ended 9/30/07 (.39) 8.07 12.47 1,071,398 1.80(i) 5.09 170
Year Ended 9/30/06 (.44) 7.54 3.90 935,901 1.04(f)(i) 5.81(f) 104
Year Ended 9/30/05 (.50) 7.69 11.83 957,697 1.05(i) 6.78 66
Classs R
Year Ended 10/31/09 $[______] $[______] [______]% $[__________] [______]% [______]% [______]%
11/5/07(g) to 9/30/08 (.35) 7.39 (5.15) 122 1.24(e)(h)(i) 4.92 140
Class K
Year Ended 10/31/09 $[______] $[______] [______]% $[__________] [______]% [______]% [______]%
11/5/07(g) to 9/30/08 (.37) 7.38 (5.07) 59 .99(e)(h)(i) 5.06 140
Class I
Year Ended 10/31/09 $[______] $[______] [______]% $[__________] [______]% [______]% [______]%
11/5/07(g) to 9/30/08 (.39) 7.39 (4.72) 67 .74(e)(h)(i) 5.45 140
Please refer to the footnotes on pages [___] through [___].
Income from Investment Operations Less: Dividends and Distributions
--------------------------------- ---------------------------------
Net Increase
Net Asset Net Realized (Decrease) Dividends Distributions
Value, Net and Unrealized in Net Asset from Net from Net
Beginning Investment Gain (Loss) Value from Investment Realized Gain
Fiscal Year or Period of Period Income (a) on Investments Operations Income on Investments
------------------------------------------------------------------------------------------------------------------------------------
High Income
Class A
Year Ended 10/31/09 $ [_____] $ [______] $ [______] $ [_____] $ [_____] $ 0.00
Year Ended 10/31/08 9.02 .61(c) (2.87) (2.26)(j) (.68) (.23)
Year Ended 10/31/07 8.97 .56 .41 .97 (.57) (.35)
Year Ended 10/31/06 8.70 .55 .43 .98 (.57) (.14)
Year Ended 10/31/05 8.38 .53 .34 .87 (.55) 0.00
Class R
Year Ended 10/31/09 $ [_____] $ [______] $ [_____] $ [_____] $ [_____] $ 0.00
1/28/08(g) to 10/31/08 8.52 .46 (2.66) (2.20)(j) (.47) 0.00
Class K
Year Ended 10/31/09 $ [_____] $ [______] $ [_____] $ [_____] $ [_____] $ 0.00
1/28/08(g) to 10/31/08 8.52 .47 (2.66) (2.19)(j) (.48) 0.00
Class I
Year Ended 10/31/09 $ [_____] $ [______] $ [_____] $ [_____] $ [_____] $ 0.00
1/28/08(g) to 10/31/08 8.52 .49 (2.67) (2.18)(j) (.49) 0.00
Less Distributions Ratios/Supplemental Data
------------------ ------------------------
Total Ratio of Net
Investment Net Assets, Ratio of Investment
Total Net Asset Return Based End of Period Expenses Income Portfolio
Dividends and Value, End on Net Asset (000's to Average to Average Turnover
Distributions of Period Value (b) omitted) Net Assets Net Assets Rate
------------------------------------------------------------------------------------------------------------------------------------
$ [______] $ [______] [______]% $ [__________] [______]% [______]% [______]%
(.91) 5.85 (27.49)(d) 450,517 1.03(e)(f)(i) 7.65(f) 74
(.92) 9.02 11.54 281,677 1.41(f)(i) 6.24(f) 67
(.71) 8.97 11.87 235,763 1.48(i) 6.32 75
(.55) 8.70 10.70 213,652 1.20(i) 6.14 100
(.61) 8.38 12.82 156,469 1.23(i) 6.04(c) 173
$ [______] $ [______] [______]% $ [__________] [______]% [______]% [______]%
(.47) 5.85 (27.09)(d) 1,443 1.18(e)(f)(h)(i) 7.62(c)(f)(h) 74
$ [______] $ [______] [______]% $ [__________] [______]% [______]% [______]%
(.48) 5.85 (26.94)(d) 753 .93(e)(f)(h)(i) 8.01(c)(f)(h) 74
$ [______] $ [______] [______]% $ [__________] [______]% [______]% [______]%
------------------------------------------------------------------------------------------------------------------------------------
(.49) 5.85 (26.84)(d) 165 .69(e)(f)(h)(i) 8.09(c)(f)(h) 74
------------------------------------------------------------------------------------------------------------------------------------
----------
(a) Based on average shares outstanding.
(b) Total investment return is calculated assuming an initial investment is
made at the NAV at the beginning of the period, reinvestment of all
dividends and distributions at the NAV during the period, and a redemption
on the last day of the period. Initial sales charges or contingent deferred
sales charges, if applicable, are not reflected in the calculation of total
investment return. Total investment return does not reflect the deduction
of taxes that a shareholder would pay on fund distributions or the
redemption of fund shares. Total investment returns calculated for periods
of less than one year are not annualized.
(c) Net of fees waived and expenses reimbursed by the Adviser.
(d) Includes the impact of proceeds received and credited to the Fund resulting
from the WorldCom class action settlement, which enhanced the performance
of each share class by:
For Fiscal Year Ended
--------------------------------------------------------------------------------
AllianceBernstein Intermediate Bond October 31, 2008 0.21%
October 31, 2007 0.61%
AllianceBernstein Diversified Yield October 31, 2008 0.81%
October 31, 2007 4.31%
S
AllianceBernstein High Income October 31, 2008 0.41%
(e) Net of expenses assumed and/or waived/reimbursed. If the following Funds
had borne all expenses for the respective years ended, the expense ratios
would have been as follows:
2009 2008 2007 2006 2005
-------------------------------------------------------------------------------
AllianceBernstein Intermediate Bond
Class A [______]% 1.09% 1.54% 1.34%* 1.31%
Class R [______]% 1.25% 1.74% 1.57%* 1.40%
Class K [______]% 1.02% 1.53% 1.27%* 1.15%*
Class I [______]% .64% 1.09% .88%* 0.89%*
AllianceBernstein Diversified Yield
Class A [______]% 1.65%
Class R [______]% 1.88%
Class K [______]% 1.53%
Class I [______]% 1.28%
AllianceBernstein Global Bond
Class A [______]% 1.15%
Class R [______]% 1.48%
Class K [______]% 1.09%
Class I [______]% .77%
AllianceBernstein High Income
Class A [______]% 1.13%
Class R [______]% 1.43%
Class K [______]% 1.12%
Class I [______]% .79%
----------
* The ratio includes expenses attributable to costs of proxy solicitation.
(f) The ratio includes expenses attributable to costs of proxy solicitation.
(g) Commencement of distribution.
(h) Annualized.
(i) Includes interest expense. If the following Funds had borne all expenses,
excluding interest expense, the ratio of expenses to average net assets
would have been as follows:
2009 2008 2007 2006 2005
--------------------------------------------------------------------------------
AllianceBernstein Diversified Yield
Class A 1.72%
AllianceBernstein Global Bond
Class A [____]% 1.01% 1.05% 1.04% 1.05%
Class R [____]% 1.34%
Class K [____]% .95%
Class I [____]% .63%
AllianceBernstein High Income
Class A [____]% 1.07%* 1.14%* 1.14% 1.19%
Class R [____]% 1.40%*
Class K [____]% 1.09%*
Class I [____]% .75%*
----------
* The ratio includes expenses attributable to costs of proxy solicitation.
(j) Amount includes contribution from the Adviser of less than $.01.
APPENDIX A
--------------------------------------------------------------------------------
BOND RATINGS
Moody's Investors Service, Inc.
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than the Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment some time in the future.
Baa--Bonds which are rated Baa are considered as medium-grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba--Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa--Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca--Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C--Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Absence of Rating--When no rating has been assigned or where a rating has been
suspended or withdrawn, it may be for reasons unrelated to the quality of the
issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or companies that are
unrated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not published
in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgment to be formed; if a bond is
called for redemption; or for other reasons.
Note--Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through Caa in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
Standard & Poor's Ratings Services
AAA--Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Debt rated BBB normally exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories.
BB, B, CCC, CC, C--Debt rated BB, B, CCC, CC or C is regarded as having
significant speculative characteristics. BB indicates the lowest degree of
speculation and C the highest. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
exposures to adverse conditions.
BB--Debt rated BB is less vulnerable to nonpayment than other speculative debt.
However, it faces major ongoing uncertainties or exposure to adverse business,
financial or economic conditions which could lead to an inadequate capacity to
pay interest and repay principal.
B--Debt rated B is more vulnerable to nonpayment than debt rated BB, but there
is capacity to pay interest and repay principal. Adverse business, financial or
economic conditions will likely impair the capacity or willingness to pay
principal or repay interest.
CCC--Debt rated CCC is currently vulnerable to nonpayment, and is dependent upon
favorable business, financial and economic conditions to pay interest and repay
principal. In the event of adverse business, financial or economic conditions,
there is not likely to be capacity to pay interest or repay principal.
CC--Debt rated CC is currently highly vulnerable to nonpayment.
C--The C rating may be used to cover a situation where a bankruptcy petition has
been filed or similar action has been taken, but payments are being continued.
D--The D rating, unlike other ratings, is not prospective; rather, it is used
only where a default has actually occurred.
Plus (+) or Minus (-)--The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
NR--Not rated.
Fitch Ratings
AAA--Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA--Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated F1+.
A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB--Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
BB--Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.
B--Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC--Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC--Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C--Bonds are in imminent default in payment of interest or principal.
DDD, DD, D--Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. DDD
represents the highest potential for recovery on these bonds, and D represents
the lowest potential for recovery.
Plus (+) Minus (-)--Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the AAA category or in categories below
CCC.
NR--Indicates that Fitch does not rate the specific issue.
Dominion Bond Rating Service Limited
Each rating category is denoted by the subcategories "high" and "low". The
absence of either a "high" or "low" designation indicates the rating is in the
"middle" of the category. The AAA and D categories do not utilize "high",
"middle", and "low" as differential grades.
AAA--Long-term debt rated AAA is of the highest credit quality, with
exceptionally strong protection for the timely repayment of principal and
interest. Earnings are considered stable, the structure of the industry in which
the entity operates is strong, and the outlook for future profitability is
favorable. There are few qualifying factors present that would detract from the
performance of the entity. The strength of liquidity and coverage ratios is
unquestioned and the entity has established a credible track record of superior
performance. Given the extremely high standard that Dominion has set for this
category, few entities are able to achieve a AAA rating.
AA--Long-term debt rated AA is of superior credit quality, and protection of
interest and principal is considered high. In many cases they differ from
long-term debt rated AAA only to a small degree. Given the extremely restrictive
definition Dominion has for the AAA category, entities rated AA are also
considered to be strong credits, typically exemplifying above-average strength
in key areas of consideration and unlikely to be significantly affected by
reasonably foreseeable events.
A--Long-term debt rated A is of satisfactory credit quality. Protection of
interest and principal is still substantial, but the degree of strength is less
than that of AA rated entities. While A is a respectable rating, entities in
this category are considered to be more susceptible to adverse economic
conditions and have greater cyclical tendencies than higher-rated securities.
BBB--Long-term debt rated BBB is of adequate credit quality. Protection of
interest and principal is considered acceptable, but the entity is fairly
susceptible to adverse changes in financial and economic conditions, or there
may be other adverse conditions present which reduce the strength of the entity
and its rated securities.
BB--Long-term debt rated BB is defined to be speculative and non-investment
grade, where the degree of protection afforded interest and principal is
uncertain, particularly during periods of economic recession. Entities in the BB
range typically have limited access to capital markets and additional liquidity
support. In many cases, deficiencies in critical mass, diversification, and
competitive strength are additional negative considerations.
B--Long-term debt rated B is considered highly speculative and there is a
reasonably high level of uncertainty as to the ability of the entity to pay
interest and principal on a continuing basis in the future, especially in
periods of economic recession or industry adversity.
CCC, CC and C--Long-term debt rated in any of these categories is very highly
speculative and is in danger of default of interest and principal. The degree of
adverse elements present is more severe than long-term debt rated B. Long-term
debt rated below B often have features which, if not remedied, may lead to
default. In practice, there is little difference between these three categories,
with CC and C normally used for lower ranking debt of companies for which the
senior debt is rated in the CCC to B range.
D--A security rated D implies the issuer has either not met a scheduled payment
of interest or principal or that the issuer has made it clear that it will miss
such a payment in the near future. In some cases, Dominion may not assign a D
rating under a bankruptcy announcement scenario, as allowances for grace periods
may exist in the underlying legal documentation. Once assigned, the D rating
will continue as long as the missed payment continues to be in arrears, and
until such time as the rating is suspended, discontinued, or reinstated by
Dominion.
APPENDIX B
--------------------------------------------------------------------------------
HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION
The settlement agreement between the Adviser and the New York State Attorney
General requires the Funds to include the following supplemental hypothetical
investment information, which provides additional information calculated and
presented in a manner different from expense information found under "Fees and
Expenses of the Funds" in this Prospectus about the effect of a Fund's expenses,
including investment advisory fees and other Fund costs, on each Fund's returns
over a 10-year period. The chart shows the estimated expenses that would be
charged on a hypothetical investment of $10,000 in Class A shares of each Fund
assuming a 5% return each year. Except as otherwise indicated, the chart also
assumes that the current annual expense ratio stays the same throughout the
10-year period. The current annual expense ratio for each Fund is the same as
stated under "Financial Highlights." If you wish to obtain hypothetical
investment information for other classes of shares of each Fund, please refer to
the "Mutual Fund Fees & Expenses Calculators" on www.AllianceBernstein.com. Your
actual expenses may be higher or lower.
AllianceBernstein Intermediate Bond Portfolio
---------------------------------------------------------------------------------------------------------------------------
Hypothetical Investment Annual Hypothetical
Hypothetical Performance After Expense Hypothetical Ending
Year Investment Earnings Returns Ratio Expenses* Investment
---------------------------------------------------------------------------------------------------------------------------
1 $10,000.00 $[___________] $[___________] $[___________] $[___________] $[___________]
2 [___________] [___________] [___________] [___________] [___________] [___________]
3 [___________] [___________] [___________] [___________] [___________] [___________]
4 [___________] [___________] [___________] [___________] [___________] [___________]
5 [___________] [___________] [___________] [___________] [___________] [___________]
6 [___________] [___________] [___________] [___________] [___________] [___________]
7 [___________] [___________] [___________] [___________] [___________] [___________]
8 [___________] [___________] [___________] [___________] [___________] [___________]
9 [___________] [___________] [___________] [___________] [___________] [___________]
10 [___________] [___________] [___________] [___________] [___________] [___________]
---------------------------------------------------------------------------------------------------------------------------
Total $[___________] $[___________]
AllianceBernstein Global Bond Fund
---------------------------------------------------------------------------------------------------------------------------
Hypothetical Annual Hypothetical
Hypothetical Performance Investment Expense Hypothetical Ending
Year Investment Earnings After Returns Ratio Expenses* Investment
---------------------------------------------------------------------------------------------------------------------------
1 $10,000.00 $[___________] $[___________] $[___________] $[___________] $[___________]
2 [___________] [___________] [___________] [___________] [___________] [___________]
3 [___________] [___________] [___________] [___________] [___________] [___________]
4 [___________] [___________] [___________] [___________] [___________] [___________]
5 [___________] [___________] [___________] [___________] [___________] [___________]
6 [___________] [___________] [___________] [___________] [___________] [___________]
7 [___________] [___________] [___________] [___________] [___________] [___________]
8 [___________] [___________] [___________] [___________] [___________] [___________]
9 [___________] [___________] [___________] [___________] [___________] [___________]
10 [___________] [___________] [___________] [___________] [___________] [___________]
---------------------------------------------------------------------------------------------------------------------------
Total $[___________] $[___________]
AllianceBernstein Diversified Yield Fund
---------------------------------------------------------------------------------------------------------------------------
Hypothetical Annual Hypothetical
Hypothetical Performance Investment Expense Hypothetical Ending
Year Investment Earnings After Returns Ratio Expenses* Investment
---------------------------------------------------------------------------------------------------------------------------
1 $10,000.00 $[___________] $[___________] $[___________] $[___________] $[___________]
2 [___________] [___________] [___________] [___________] [___________] [___________]
3 [___________] [___________] [___________] [___________] [___________] [___________]
4 [___________] [___________] [___________] [___________] [___________] [___________]
5 [___________] [___________] [___________] [___________] [___________] [___________]
6 [___________] [___________] [___________] [___________] [___________] [___________]
7 [___________] [___________] [___________] [___________] [___________] [___________]
8 [___________] [___________] [___________] [___________] [___________] [___________]
9 [___________] [___________] [___________] [___________] [___________] [___________]
10 [___________] [___________] [___________] [___________] [___________] [___________]
---------------------------------------------------------------------------------------------------------------------------
Total $[___________] $[___________]
AllianceBernstein High Income Fund
---------------------------------------------------------------------------------------------------------------------------
Hypothetical Annual Hypothetical
Hypothetical Performance Investment Expense Hypothetical Ending
Year Investment Earnings After Returns Ratio Expenses* Investment
---------------------------------------------------------------------------------------------------------------------------
1 $10,000.00 $[___________] $[___________] $[___________] $[___________] $[___________]
2 [___________] [___________] [___________] [___________] [___________] [___________]
3 [___________] [___________] [___________] [___________] [___________] [___________]
4 [___________] [___________] [___________] [___________] [___________] [___________]
5 [___________] [___________] [___________] [___________] [___________] [___________]
6 [___________] [___________] [___________] [___________] [___________] [___________]
7 [___________] [___________] [___________] [___________] [___________] [___________]
8 [___________] [___________] [___________] [___________] [___________] [___________]
9 [___________] [___________] [___________] [___________] [___________] [___________]
10 [___________] [___________] [___________] [___________] [___________] [___________]
---------------------------------------------------------------------------------------------------------------------------
Total $[___________] $[___________]
* Expenses are net of any fee waiver or expense waiver for the first year.
Thereafter, the expense ratio reflects the Fund's operating expenses as
reflected under "Fees and Expenses of the Funds" before waiver.
For more information about the Funds, the following documents are available upon
request:
o Annual/Semi-Annual Reports to Shareholders
The Funds' annual and semi-annual reports to shareholders contain additional
information on the Funds' investments. In the annual report, you will find a
discussion of the market conditions and investment strategies that significantly
affected a Fund's performance during its last fiscal year.
o Statement of Additional Information (SAI)
The Funds have an SAI, which contains more detailed information about the Funds
including their operations and investment policies. The Funds' SAI and
independent registered public accounting firms' reports and financial statements
in each Fund's most recent annual report to shareholders are incorporated by
reference into (and are legally part of) this Prospectus.
You may request a free copy of the current annual/semi-annual report or the SAI,
or make inquiries concerning the Funds, by contacting your broker or other
financial intermediary, or by contacting the Adviser:
By Mail/Phone AllianceBernstein Investor Services, Inc.
P.O. Box 786003
San Antonio, TX 78278-6003
For Information: (800) 221-5672
For Literature: (800) 227-4618
Or you may view or obtain these documents from the Commission:
o Call the Commission at 1-202-551-8090 for information on the operation of
the Public Reference Room.
o Reports and other information about a Fund are available on the EDGAR
Database on the Commission's Internet site at http://www.sec.gov.
o Copies of the information may be obtained, after paying a duplicating fee,
by electronic request at publicinfo@sec.gov, or by writing the Commission's
Public Reference Section, Wash. DC 20549-1520.
You also may find these documents and more information about the Adviser and the
Funds on the Internet at: www.AllianceBernstein.com.
AllianceBernstein and the AB logo are registered trademarks and service marks
used by permission of the owner, AllianceBernstein L.P.
Fund SEC File No.
--------------------------------------------------------------------
Intermediate Bond 811-02383
Diversified Yield 811-07391
Global Bond 811-06554
High Income 811-08188
ALLIANCEBERNSTEIN BOND FUNDS
1345 Avenue of the Americas
New York, NY 10105
SK 00250 0157 1034751 v2
[LOGO] ALLIANCEBERNSTEIN BOND FUND, INC.
-ALLIANCEBERNSTEIN INTERMEDIATE BOND PORTFOLIO
ALLIANCEBERNSTEIN DIVERSIFIED YIELD FUND, INC.
ALLIANCEBERNSTEIN HIGH INCOME FUND, INC.
ALLIANCEBERNSTEIN GLOBAL BOND FUND, INC.
--------------------------------------------------------------------------------
c/o AllianceBernstein Investor Services, Inc.
P. O. Box 786003, San Antonio, Texas 78278-6003
Toll Free: (800) 221-5672
For Literature: Toll Free (800) 227-4618
--------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
January [___], 2010
--------------------------------------------------------------------------------
This Statement of Additional Information ("SAI") is not a prospectus
but supplements and should be read in conjunction with the current prospectus,
dated January [__], 2010, for the AllianceBernstein Intermediate Bond Portfolio
("Intermediate Bond") of AllianceBernstein Bond Fund, Inc., AllianceBernstein
Diversified Yield Fund, Inc. ("Diversified Yield"), AllianceBernstein Global
Bond Fund, Inc. ("Global Bond") and AllianceBernstein High Income Fund, Inc.
("High Income") (each a "Fund" and collectively, the "Funds") that offers Class
A, Class B, Class C and Advisor Class shares of the Funds and the prospectus,
dated January [__], 2010, of the Funds that offers Class A, Class R, Class K and
Class I shares of the Funds (each a "Prospectus" and together, the
"Prospectuses"). Financial statements for Intermediate Bond, Diversified Yield
and High Income for the year ended October 31, 2009, and financial statements
for Global Bond for the year ended September 30, 2009, are included in each
Fund's annual report to shareholders and are incorporated into the SAI by
reference. Copies of the Prospectuses and each Fund's annual report may be
obtained by contacting AllianceBernstein Investor Services, Inc., ("ABIS") at
the address or the "For Literature" telephone number shown above.
TABLE OF CONTENTS
-----------------
Page
----
Information About the Funds and Their Investments.........................
Management of the Funds...................................................
Expenses of the Funds.....................................................
Purchase of Shares........................................................
Redemption and Repurchase of Shares.......................................
Shareholder Services......................................................
Net Asset Value...........................................................
Fund Transactions.........................................................
Dividends, Distributions and Taxes
General Information.......................................................
Financial Statements and Report of Independent Registered Public
Accounting Firm...........................................................
----------
AllianceBernstein(R) and the AB Logo are registered trademarks and service marks
used by permission of the owner, AllianceBernstein L.P.
--------------------------------------------------------------------------------
INFORMATION ABOUT THE FUNDS AND THEIR INVESTMENTS
--------------------------------------------------------------------------------
Introduction to the Funds
-------------------------
AllianceBernstein Bond Fund, Inc.'s shares are offered in separate
series referred to as portfolios. Intermediate Bond is a separate pool of assets
constituting, in effect, a separate open-end management investment company with
its own investment objective and policies. Each shareholder of Intermediate Bond
will be entitled to his or her pro-rata share of all dividends and distributions
arising from Intermediate Bond's assets and, upon redeeming shares of
Intermediate Bond, the shareholder will receive the then current net asset value
("NAV") of Intermediate Bond represented by the redeemed shares.
Except as otherwise noted, the Funds' investment objectives and
policies described below are not "fundamental policies" within the meaning of
the Investment Company Act of 1940, as amended (the "1940 Act") and may,
therefore, be changed by the Board of Directors without shareholder approval.
However, no Fund will change its investment objective without at least 60 days'
prior written notice to shareholders. There is no guarantee that a Fund will
achieve its investment objective. Whenever any investment policy or restriction
states a percentage of a Fund's assets that may be invested in any security or
other asset, it is intended that such percentage limitation be determined
immediately after and as a result of a Fund's acquisition of such securities or
other assets. Accordingly, any later increases or decreases in percentage beyond
the specified limitation resulting from a change in values or net assets will
not be considered a violation of this percentage limitation.
The term "net assets," as used in this SAI, means net assets plus any
borrowings.
Additional Investment Policies and Practices
--------------------------------------------
The following information about the Funds' investment policies and
practices supplements the information set forth in the Prospectuses.
Derivatives
-----------
A Fund may, but is not required to, use derivatives for risk
management purposes or as part of its investment practices. Derivatives are
financial contracts whose value depend on, or are derived from, the value of an
underlying asset, reference rate or index. These assets, rates, and indices may
include bonds, stocks, mortgages, commodities, interest rates, currency exchange
rates, bond indices and stock indices. A Fund may use derivatives to earn income
and enhance returns, to hedge or adjust the risk profile of a portfolio, to
replace more traditional direct investments and to obtain exposure to otherwise
inaccessible markets.
There are four principal types of derivatives, including options,
futures, forwards and swaps, which are described below. Derivatives may be (i)
standardized, exchange-traded contracts or (ii) customized, privately-negotiated
contracts. Exchange-traded derivatives tend to be more liquid and subject to
less credit risk than those that are privately negotiated.
Forward Contracts. A forward contract is a customized, privately
negotiated agreement for one party to buy, and the other party to sell, a
specific quantity of an underlying commodity or other tangible asset for an
agreed-upon price at a future date. A forward contract generally is settled by
physical delivery of the commodity or other tangible asset underlying the
forward contract to an agreed upon location at a future date (rather than
settled by cash) or will be rolled forward into a new forward contract.
Non-deliverable forward ("NDFs") specify a cash payment upon maturity. NDFs are
normally used when the market for physical settlement of the currency is
underdeveloped, heavily regulated or highly taxed.
Futures Contracts and Options on Futures Contracts. A futures contract
is an agreement that obligates the buyer to buy and the seller to sell a
specified quantity of an underlying asset (or settle for cash the value of a
contract based on an underlying asset, rate or index) at a specific price on the
contract maturity date. Options on futures contracts are options that call for
the delivery of futures contracts upon exercise. Futures contracts are
standardized, exchange-traded instruments and are fungible (i.e., considered to
be perfect substitutes for each other). This fungibility allows futures
contracts to be readily offset or cancelled through the acquisition of equal but
opposite positions, which is the primary method in which futures contracts are
liquidated. A cash-settled futures contract does not require physical delivery
of the underlying asset but instead is settled for cash equal to the difference
between the values of the contract on the date it is entered into and its
maturity date.
Options. An option, which may be standardized and exchange-traded, or
customized and privately negotiated, is an agreement that, for a premium payment
or fee, gives the option holder (the buyer) the right but not the obligation to
buy (a "call") or sell (a "put") the underlying asset (or settle for cash an
amount based on an underlying asset, rate or index) at a specified price (the
exercise price) during a period of time or on a specified date. Likewise, when
an option is exercised the writer of the option is obligated to sell (in the
case of a call option) or to purchase (in the case of a put option) the
underlying asset (or settle for cash an amount based on an underlying asset,
rate or index). Investments in options are considered speculative. A Fund may
lose the premium paid for them if the price of the underlying security or other
asset decreased or remained the same (in the case of a call option) or increased
or remained the same (in the case of a put option). If a put or call option
purchased by the Fund were permitted to expire without being sold or exercised,
its premium would represent a loss to the Fund.
Swaps. A swap is a customized, privately negotiated agreement that
obligates two parties to exchange a series of cash flows at specified intervals
(payment dates) based upon or calculated by reference to changes in specified
prices or rates (interest rates in the case of interest rate swaps, currency
exchange rates in the case of currency swaps) for a specified amount of an
underlying asset (the "notional" principal amount). Swaps are entered into on a
net basis (i.e., the two payment streams are netted out, with a Fund receiving
or paying, as the case may be, only the net amount of the two payments). Except
for currency swaps, the notional principal amount is used solely to calculate
the payment streams but is not exchanged. With respect to currency swaps, actual
principal amounts of currencies may be exchanged by the counterparties at the
initiation, and again upon the termination, of the transaction. The swap market
has grown substantially in recent years, with a large number of banks and
investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become well
established and relatively liquid.
Risks of Derivatives. Investment techniques employing such derivatives
involve risks different from, and, in certain cases, greater than, the risks
presented by more traditional investments. Following is a general discussion of
important risk factors and issues concerning the use of derivatives.
-- Market Risk. This is the general risk attendant to all
investments that the value of a particular investment will change
in a way detrimental to a Fund's interest.
-- Management Risk. Derivative products are highly specialized
instruments that require investment techniques and risk analyses
different from those associated with stocks and bonds. The use of
a derivative requires an understanding not only of the underlying
instrument but also of the derivative itself, without the benefit
of observing the performance of the derivative under all possible
market conditions. In particular, the use and complexity of
derivatives require the maintenance of adequate controls to
monitor the transactions entered into, the ability to assess the
risk that a derivative adds to a Fund's investment portfolio, and
the ability to forecast price, interest rate or currency exchange
rate movements correctly.
-- Credit Risk. This is the risk that a loss may be sustained by
a Fund as a result of the failure of another party to a
derivative (usually referred to as a "counterparty") to comply
with the terms of the derivative contract. The credit risk for
exchange-traded derivatives is generally less than for privately
negotiated derivatives, since the clearinghouse, which is the
issuer or counterparty to each exchange-traded derivative,
provides a guarantee of performance. This guarantee is supported
by a daily payment system (i.e., margin requirements) operated by
the clearinghouse in order to reduce overall credit risk. For
privately negotiated derivatives, there is no similar clearing
agency guarantee. Therefore, a Fund considers the
creditworthiness of each counterparty to a privately negotiated
derivative in evaluating potential credit risk.
-- Liquidity Risk. Liquidity risk exists when a particular
instrument is difficult to purchase or sell. If a derivative
transaction is particularly large or if the relevant market is
illiquid (as is the case with many privately negotiated
derivatives), it may not be possible to initiate a transaction or
liquidate a position at an advantageous price.
-- Leverage Risk. Since many derivatives have a leverage
component, adverse changes in the value or level of the
underlying asset, rate or index can result in a loss
substantially greater than the amount invested in the derivative
itself. In the case of swaps, the risk of loss generally is
related to a notional principal amount, even if the parties have
not made any initial investment. Certain derivatives have the
potential for unlimited loss, regardless of the size of the
initial investment.
-- Risk of Potential Governmental Regulation of Derivatives. It
is possible that government regulation of various types of
derivative instruments, including futures and swap agreements,
may limit or prevent a Fund from using such instruments as a part
of its investment strategy. The U.S. Congress has held hearings
and various legislation has been introduced related to the
futures markets and swap market participants. In addition, the
CFTC and the SEC are considering various regulatory initiatives.
It is possible that this legislative and regulatory activity
could potentially limit or completely restrict the ability of a
Fund to use certain derivative instruments. Limits or
restrictions applicable to counterparties with a Fund engages in
derivative transactions could also prevent a Fund from engaging
in these transactions.
-- Other Risks. Other risks in using derivatives include the risk
of mispricing or improper valuation of derivatives and the
inability of derivatives to correlate perfectly with underlying
assets, rates and indices. Many derivatives, in particular
privately negotiated derivatives, are complex and often valued
subjectively. Improper valuations can result in increased cash
payment requirements to counterparties or a loss of value to a
Fund. Derivatives do not always perfectly or even highly
correlate or track the value of the assets, rates or indices they
are designed to closely track. Consequently, a Fund's use of
derivatives may not always be an effective means of, and
sometimes could be counterproductive to, furthering the Fund's
investment objective.
Use of Options, Futures, Forwards and Swaps by a Fund.
-----------------------------------------------------
- Forward Currency Exchange Contracts. A forward currency exchange
contract is an obligation by one party to buy, and the other party to sell, a
specific amount of a currency for an agreed upon price at a future date. Forward
currency exchange contracts are customized, privately negotiated agreements
designed to satisfy the objectives of each party. A forward currency exchange
contract usually results in the delivery of the underlying asset upon maturity
of the contract in return for the agreed upon payment. NDFs specify a cash
payment upon maturity. NDFs are normally used when the market for physical
settlement of the currency is underdeveloped, heavily regulated or highly taxed.
A Fund may, for example, enter into forward currency exchange
contracts to attempt to minimize the risk to the Fund from adverse changes in
the relationship between the U.S. Dollar and other currencies. A Fund may
purchase or sell forward currency exchange contracts for hedging purposes
similar to those described below in connection with its transactions in foreign
currency futures contracts. A Fund may also purchase or sell forward currency
exchange contracts for non-hedging purposes as a means of making direct
investments in foreign currencies, as described below under "Currency
Transactions".
If a hedging transaction in forward currency exchange contracts is
successful, the decline in the value of portfolio securities or the increase in
the cost of securities to be acquired may be offset, at least in part, by
profits on the forward currency exchange contract. Nevertheless, by entering
into such forward currency exchange contracts, a Fund may be required to forego
all or a portion of the benefits which otherwise could have been obtained from
favorable movements in exchange rates.
A Fund may also use forward currency exchange contracts to seek to
increase total return when AllianceBernstein L.P. (the "Adviser") anticipates
that a foreign currency will appreciate or depreciate in value but securities
denominated in that currency are not held by the Fund and do not present
attractive investment opportunities. For example, a Fund may enter into a
foreign currency exchange contract to purchase a currency if the Adviser expects
the currency to increase in value. The Fund would recognize a gain if the market
value of the currency is more than the contract value of the currency at the
time of settlement of the contract. Similarly, a Fund may enter into a foreign
currency exchange contract to sell a currency if the Adviser expects the
currency to decrease in value. The Fund would recognize a gain if the market
value of the currency is less than the contract value of the currency at the
time of settlement of the contract.
The cost of engaging in forward currency exchange contracts varies
with such factors as the currencies involved, the length of the contract period
and the market conditions then prevailing. Since transactions in foreign
currencies are usually conducted on a principal basis, no fees or commissions
are involved. A Fund will segregate and mark to market liquid assets in an
amount at least equal to the Fund's obligations under any forward currency
exchange contracts.
- Options on Securities. A Fund may write and purchase call and put
options on securities. In purchasing an option on securities, a Fund would be in
a position to realize a gain if, during the option period, the price of the
underlying securities increased (in the case of a call) or decreased (in the
case of a put) by an amount in excess of the premium paid; otherwise the Fund
would experience a loss not greater than the premium paid for the option. Thus,
a Fund would realize a loss if the price of the underlying security declined or
remained the same (in the case of a call) or increased or remained the same (in
the case of a put) or otherwise did not increase (in the case of a put) or
decrease (in the case of a call) by more than the amount of the premium. If a
put or call option purchased by a Fund were permitted to expire without being
sold or exercised, its premium would represent a loss to the Fund.
A Fund may write a put or call option in return for a premium, which
is retained by the Fund whether or not the option is exercised. A Fund may write
covered options or uncovered options. A call option written by a Fund is
"covered" if the Fund owns the underlying security, has an absolute and
immediate right to acquire that security upon conversion or exchange of another
security it holds, or holds a call option on the underlying security with an
exercise price equal to or less than of the call option it has written. A put
option written by a Fund is covered if the Fund holds a put option on the
underlying securities with an exercise price equal to or greater than of the put
option it has written. Uncovered options or "naked options" are riskier than
covered options. For example, if a Fund wrote a naked call option and the price
of the underlying security increased, the Fund would have to purchase the
underlying security for delivery to the call buyer and sustain a loss equal to
the difference between the option price and the market price of the security.
A Fund may also, as an example, write combinations of put and call
options on the same security, known as "straddles," with the same exercise and
expiration date. By writing a straddle, the Fund undertakes a simultaneous
obligation to sell and purchase the same security in the event that one of the
options is exercised. If the price of the security subsequently rises above the
exercise price, the call will likely be exercised and the Fund will be required
to sell the underlying security at or below market price. This loss may be
offset, however, in whole or part, by the premiums received on the writing of
the two options. Conversely, if the price of the security declines by a
sufficient amount, the put will likely be exercised. The writing of straddles
will likely be effective, therefore, only where the price of the security
remains stable and neither the call nor the put is exercised. In those instances
where one of the options is exercised, the loss on the purchase or sale of the
underlying security may exceed the amount of the premiums received.
By writing a call option, a Fund limits its opportunity to profit from
any increase in the market value of the underlying security above the exercise
price of the option. By writing a put option, a Fund assumes the risk that it
may be required to purchase the underlying security for an exercise price above
its then current market value, resulting in a capital loss unless the security
subsequently appreciates in value. Where options are written for hedging
purposes, such transactions constitute only a partial hedge against declines in
the value of portfolio securities or against increases in the value of
securities to be acquired, up to the amount of the premium. A Fund may purchase
put options to hedge against a decline in the value of portfolio securities. If
such decline occurs, the put options will permit the Fund to sell the securities
at the exercise price or to close out the options at a profit. By using put
options in this way, the Fund will reduce any profit it might otherwise have
realized on the underlying security by the amount of the premium paid for the
put option and by transaction costs.
A Fund may purchase call options to hedge against an increase in the
price of securities that the Fund anticipates purchasing in the future. If such
increase occurs, the call option will permit the Fund to purchase the securities
at the exercise price, or to close out the options at a profit. The premium paid
for the call option plus any transaction costs will reduce the benefit, if any,
realized by the Fund upon exercise of the option, and, unless the price of the
underlying security rises sufficiently, the option may expire worthless to the
Fund and the Fund will suffer a loss on the transaction to the extent of the
premium paid.
A Fund may purchase or write options on securities of the types in
which it is permitted to invest in privately negotiated (i.e., over-the-counter)
transactions. A Fund will effect such transactions only with investment dealers
and other financial institutions (such as commercial banks or savings and loan
institutions) deemed creditworthy by the Adviser, and the Adviser has adopted
procedures for monitoring the creditworthiness of such entities.
--Options on Securities Indices. An option on a securities index is
similar to an option on a security except that, rather than taking or making
delivery of a security at a specified price, an option on a securities index
gives the holder the right to receive, upon exercise of the option, an amount of
cash if the closing level of the chosen index is greater than (in the case of a
call) or less than (in the case of a put) the exercise price of the option.
A Fund may write (sell) call and put options and purchase call and put
options on securities indices. If a Fund purchases put options on securities
indices to hedge its investments against a decline in the value of portfolio
securities, it will seek to offset a decline in the value of securities it owns
through appreciation of the put option. If the value of the Fund's investments
does not decline as anticipated, or if the value of the option does not
increase, the Fund's loss will be limited to the premium paid for the option.
The success of this strategy will largely depend on the accuracy of the
correlation between the changes in value of the index and the changes in value
of the Fund's security holdings.
The purchase of call options on securities indices may be used by a
Fund to attempt to reduce the risk of missing a broad market advance, or an
advance in an industry or market segment, at a time when the Fund holds
uninvested cash or short-term debt securities awaiting investment. When
purchasing call options for this purpose, the Fund will also bear the risk of
losing all or a portion of the premium paid if the value of the index does not
rise. The purchase of call options on stock indices when a Fund is substantially
fully invested is a form of leverage, up to the amount of the premium and
related transaction costs, and involves risks of loss and of increased
volatility similar to those involved in purchasing call options on securities
the Fund owns.
--Options on Foreign Currencies. A Fund may purchase and write options
on foreign currencies for hedging purposes. For example, a decline in the dollar
value of a foreign currency in which portfolio securities are denominated will
reduce the dollar value of such securities, even if their value in the foreign
currency remains constant. In order to protect against such diminutions in the
value of portfolio securities, the Fund may purchase put options on the foreign
currency. If the value of the currency does decline, the Fund will have the
right to sell such currency for a fixed amount in dollars and could thereby
offset, in whole or in part, the adverse effect on its portfolio which otherwise
would have resulted.
Conversely, where a rise in the dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing the
cost of such securities, a Fund may purchase call options thereon. The purchase
of such options could offset, at least partially, the effects of the adverse
movements in exchange rates. As in the case of other types of options, however,
the benefit to the Fund from purchases of foreign currency options will be
reduced by the amount of the premium and related transaction costs. In addition,
where currency exchange rates do not move in the direction or to the extent
anticipated, the Fund could sustain losses on transactions in foreign currency
options which would require it to forego a portion or all of the benefits of
advantageous changes in such rates.
A Fund may write options on foreign currencies for hedging purposes or
to increase return. For example, where a Fund anticipates a decline in the
dollar value of foreign-denominated securities due to adverse fluctuations in
exchange rates it could, instead of purchasing a put option, write a call option
on the relevant currency. If the expected decline occurs, the option will most
likely not be exercised, and the diminution in value of portfolio securities
could be offset by the amount of the premium received.
Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the dollar cost of securities to be acquired, a Fund
could write a put option on the relevant currency, which, if rates move in the
manner projected, will expire unexercised and allow the Fund to hedge such
increased cost up to the amount of the premium. As in the case of other types of
options, however, the writing of a foreign currency option will constitute only
a partial hedge up to the amount of the premium, and only if rates move in the
expected direction. If this does not occur, the option may be exercised and the
Fund will be required to purchase or sell the underlying currency at a loss
which may not be offset by the amount of the premium. Through the writing of
options on foreign currencies, the Fund also may be required to forego all or a
portion of the benefits that might otherwise have been obtained from favorable
movements in exchange rates.
In addition to using options for the hedging purposes described above,
a Fund may also invest in options on foreign currencies for non-hedging purposes
as a means of making direct investments in foreign currencies. A Fund may use
options on currency to seek to increase total return when the Adviser
anticipates that a foreign currency will appreciate or depreciate in value but
securities denominated in that security are not held by the Fund and do not
present attractive investment opportunities. For example, the Fund may purchase
call options in anticipation of an increase in the market value of a currency. A
Fund would ordinarily realize a gain if, during the option period, the value of
such currency exceeded the sum of the exercise price, the premium paid and
transactions costs. Otherwise, the Fund would realize no gain or a loss on the
purchase of the call option. Put options may be purchased by a Fund for the
purpose of benefiting from a decline in the value of a currency that the Fund
does not own. A Fund would normally realize a gain if, during the option period,
the value of the underlying currency decreased below the exercise price
sufficiently to more than cover the premium and transaction costs. Otherwise,
the Fund would realize no gain or loss on the purchase of the put option. For
additional information on the use of options on foreign currencies for
non-hedging purposes, see "Currency Transactions" below.
Special Risks Associated with Options on Currency. An exchange traded
options position may be closed out only on an options exchange that provides a
secondary marker for an option of the same series. Although a Fund will
generally purchase or sell options for which there appears to be an active
secondary market, there is no assurance that a liquid secondary market on an
exchange will exist for any particular option, or at any particular time. For
some options, no secondary market on an exchange may exist. In such event, it
might not be possible to effect closing transactions in particular options, with
the result that the Fund would have to exercise its options in order to realize
any profit and would incur transaction costs un the sale of the underlying
currency.
--Futures Contracts and Options on Futures Contracts. Futures
contracts that a Fund may buy and sell may include futures contracts on
fixed-income or other securities, and contracts based on interest rates, foreign
currencies or financial indices, including any index of U.S. Government
securities. A Fund may, for example, purchase or sell futures contracts and
options thereon to hedge against changes in interest rates, securities (through
index futures or options) or currencies.
Interest rate futures contracts are purchased or sold for hedging
purposes to attempt to protect against the effects of interest rate changes on a
Fund's current or intended investments in fixed-income securities. For example,
if a Fund owned long-term bonds and interest rates were expected to increase,
that Fund might sell interest rate futures contracts. Such a sale would have
much the same effect as selling some of the long-term bonds in that Fund's
portfolio. However, since the futures market is more liquid than the cash
market, the use of interest rate futures contracts as a hedging technique allows
a Fund to hedge its interest rate risk without having to sell its portfolio
securities. If interest rates were to increase, the value of the debt securities
in the portfolio would decline, but the value of that Fund's interest rate
futures contracts would be expected to increase at approximately the same rate,
thereby keeping the net asset value of that Fund from declining as much as it
otherwise would have. On the other hand, if interest rates were expected to
decline, interest rate futures contracts could be purchased to hedge in
anticipation of subsequent purchases of long-term bonds at higher prices.
Because the fluctuations in the value of the interest rate futures contracts
should be similar to those of long-term bonds, a Fund could protect itself
against the effects of the anticipated rise in the value of long-term bonds
without actually buying them until the necessary cash becomes available or the
market has stabilized. At that time, the interest rate futures contracts could
be liquidated and that Fund's cash reserves could then be used to buy long-term
bonds on the cash market.
A Fund may purchase and sell foreign currency futures contracts for
hedging purposes in order to protect against fluctuations in currency exchange
rates. Such fluctuations could reduce the dollar value of portfolio securities
denominated in foreign currencies, or increase the cost of foreign-denominated
securities to be acquired, even if the value of such securities in the
currencies in which they are denominated remains constant. A Fund may sell
futures contracts on a foreign currency, for example, when it holds securities
denominated in such currency and it anticipates a decline in the value of such
currency relative to the dollar. If such a decline were to occur, the resulting
adverse effect on the value of foreign-denominated securities may be offset, in
whole or in part, by gains on the futures contracts. However, if the value of
the foreign currency increases relative to the dollar, a Fund's loss on the
foreign currency futures contract may or may not be offset by an increase in the
value of the securities because a decline in the price of the security stated in
terms of the foreign currency may be greater than the increase in value as a
result of the change in exchange rates.
Conversely, a Fund could protect against a rise in the dollar cost of
foreign-denominated securities to be acquired by purchasing futures contracts on
the relevant currency, which could offset, in whole or in part, the increased
cost of such securities resulting from a rise in the dollar value of the
underlying currencies. When a Fund purchases futures contracts under such
circumstances, however, and the price in dollars of securities to be acquired
instead declines as a result of appreciation of the dollar, the Fund will
sustain losses on its futures position which could reduce or eliminate the
benefits of the reduced cost of portfolio securities to be acquired.
A Fund may also engage in currency "cross hedging" when, in the
opinion of the Adviser, the historical relationship among foreign currencies
suggests that a Fund may achieve protection against fluctuations in currency
exchange rates similar to that described above at a reduced cost through the use
of a futures contract relating to a currency other than the U.S. Dollar or the
currency in which the foreign security is denominated. Such "cross hedging" is
subject to the same risks as those described above with respect to an
unanticipated increase or decline in the value of the subject currency relative
to the U.S. Dollar.
A Fund may also use foreign currency futures contracts and options on
such contracts for non-hedging purposes. Similar to options on currencies
described above, a Fund may use foreign currency futures contracts and options
on such contracts to seek to increase total return when the Adviser anticipates
that a foreign currency will appreciate or depreciate in value but securities
denominated in that security are not held by the Fund and do not present
attractive investment opportunities. The risks associated with foreign currency
futures contracts and options on futures are similar to those associated with
options on foreign currencies, as described above. For additional information on
the use of options on foreign currencies for non-hedging purposes, see "Currency
Transactions" below.
Purchases or sales of stock or bond index futures contracts are used
for hedging purposes to attempt to protect a Fund's current or intended
investments from broad fluctuations in stock or bond prices. For example, a Fund
may sell stock or bond index futures contracts in anticipation of or during a
market decline to attempt to offset the decrease in market value of the Fund's
portfolio securities that might otherwise result. If such decline occurs, the
loss in value of portfolio securities may be offset, in whole or part, by gains
on the futures position. When a Fund is not fully invested in the securities
market and anticipates a significant market advance, it may purchase stock or
bond index futures contracts in order to gain rapid market exposure that may, in
whole or in part, offset increases in the cost of securities that the Fund
intends to purchase. As such purchases are made, the corresponding positions in
stock or bond index futures contracts will be closed out.
Each Fund has claimed an exclusion from the definition of the term
"commodity pool operator" under the Commodity Exchange Act and therefore is not
subject to registration or regulation as a pool operator under that Act.
Options on futures contracts are options that call for the delivery of
futures contracts upon exercise. Options on futures contracts written or
purchased by a Fund will be traded on U.S. exchanges.
The writing of a call option on a futures contract constitutes a
partial hedge against declining prices of the securities in a Fund's portfolio.
If the futures price at expiration of the option is below the exercise price,
the Fund will retain the full amount of the option premium, which provides a
partial hedge against any decline that may have occurred in the Fund's portfolio
holdings. The writing of a put option on a futures contract constitutes a
partial hedge against increasing prices of the securities or other instruments
required to be delivered under the terms of the futures contract. If the futures
price at expiration of the put option is higher than the exercise price, the
Fund will retain the full amount of the option premium, which provides a partial
hedge against any increase in the price of securities which the Fund intends to
purchase. If a put or call option a Fund has written is exercised, the Fund will
incur a loss which will be reduced by the amount of the premium it receives.
Depending on the degree of correlation between changes in the value of its
portfolio securities and changes in the value of its options on futures
positions, a Fund's losses from exercised options on futures may to some extent
be reduced or increased by changes in the value of portfolio securities.
A Fund may purchase options on futures contracts for hedging purposes
instead of purchasing or selling the underlying futures contracts. For example,
where a decrease in the value of portfolio securities is anticipated as a result
of a projected market-wide decline or changes in interest or exchange rates, a
Fund could, in lieu of selling futures contracts, purchase put options thereon.
In the event that such decrease were to occur, it may be offset, in whole or
part, by a profit on the option. If the anticipated market decline were not to
occur, the Fund will suffer a loss equal to the price of the put. Where it is
projected that the value of securities to be acquired by a Fund will increase
prior to acquisition due to a market advance or changes in interest or exchange
rates, a Fund could purchase call options on futures contracts, rather than
purchasing the underlying futures contracts. If the market advances, the
increased cost of securities to be purchased may be offset by a profit on the
call. However, if the market declines, the Fund will suffer a loss equal to the
price of the call, but the securities that the Fund intends to purchase may be
less expensive.
- Credit Default Swap Agreements. The "buyer" in a credit default swap
contract is obligated to pay the "seller" a periodic stream of payments over the
term of the contract in return for a contingent payment upon the occurrence of a
credit event with respect to an underlying reference obligation. Generally, a
credit event means bankruptcy, failure to pay, obligation acceleration or
modified restructuring. A Fund may be either the buyer or seller in the
transaction. As a seller, the Fund receives a fixed rate of income throughout
the term of the contract, which typically is between one month and five years,
provided that no credit event occurs. If a credit event occurs, the Fund
typically must pay the contingent payment to the buyer, which is typically the
"par value" (full notional value) of the reference obligation. The contingent
payment may be a cash settlement or by physical delivery of the reference
obligation in return for payment of the face amount of the obligation. The value
of the reference obligation received by the Fund as a seller if a credit event
occurs, coupled with the periodic payments previously received, may be less than
the full notional value it pays to the buyer, resulting in a loss of value to
the Fund. If the reference obligation is a defaulted security, physical delivery
of the security will cause the Funds to hold a defaulted security. If the Fund
is a buyer and no credit event occurs, the Fund will lose its periodic stream of
payments over the term of the contract. However, if a credit event occurs, the
buyer typically receives full notional value for a reference obligation that may
have little or no value.
Credit default swaps may involve greater risks than if a Fund had
invested in the reference obligation directly. Credit default swaps are subject
to general market risk, liquidity risk and credit risk.
- Currency Swaps. A Fund may enter into currency swaps for hedging
purposes to protect against adverse changes in exchange rates between the U.S.
Dollar and other currencies for non-hedging purposes as a means of making direct
investments in foreign currencies, as described below under "Currency
Transactions". Currency swaps involve the exchange by the Fund with another
party of a series of payments in specified currencies. Actual principal amounts
of currencies may be exchanged by the counterparties at the initiation, and
again upon the termination of the transaction. Since currency swaps are
individually negotiated, the Fund expects to achieve an acceptable degree of
correlation between its portfolio investments and its currency swaps positions.
Therefore the entire principal value of a currency swap is subject to the risk
that the other party to the swap will default on its contractual delivery
obligations. The net amount of the excess, if any, of the Fund's obligations
over its entitlements with respect to each currency swap will be accrued on a
daily basis and an amount of liquid assets having an aggregate net asset value
("NAV") at least equal to the accrued excess will be maintained in a segregated
account by the Fund's custodian. With respect to Intermediate Bond, the Fund
will not enter into any currency swap unless the credit quality of the unsecured
senior debt or the claims-paying ability of the other party thereto is rated in
the highest rating category of at least one nationally recognized rating
organization at the time of entering into the transaction. If there is a default
by the other party to such a transaction, the Fund will have contractual
remedies pursuant to the agreements related to the transactions.
--Swaps: Interest Rate Transactions. A Fund may enter into interest
rate swaps, swaptions and cap or floor transactions, which may include
preserving a return or spread on a particular investment or portion of its
portfolio or protecting against an increase in the price of securities the Fund
anticipates purchasing at a later date. Unless there is a counterparty default,
the risk of loss to a Fund from interest rate transactions is limited to the net
amount of interest payments that the Fund is contractually obligated to make. If
the counterparty to an interest rate transaction defaults, the Fund's risk of
loss consists of the net amount of interest payments that the Fund is
contractually obligated to receive.
Interest rate swaps involve the exchange by a Fund with another party
of payments calculated by reference to specified interest rates (e.g., an
exchange of floating rate payments for fixed rate payments) computed based on a
contractually-based principal (or "notional") amount.
An option on a swap agreement, also called a "swaption," is an option
that gives the buyer the right, but not the obligation, to enter into a swap on
a future date in exchange for paying a market-based "premium." A receiver
swaption gives the owner the right to receive the total return of a specified
asset, reference rate, or index. A payer swaption gives the owner the right to
pay the total return of a specified asset, reference rate, or index. Swaptions
also include options that allow an existing swap to be terminated or extended by
one of the counterparties.
Interest rate caps and floors are similar to options in that the
purchase of an interest rate cap or floor entitles the purchaser, to the extent
that a specified index exceeds (in the case of a cap) or falls below (in the
case of a floor) a predetermined interest rate, to receive payments of interest
on a notional amount from the party selling the interest rate cap or floor.
Caps and floors are less liquid than swaps. These transactions do not
involve the delivery of securities or other underlying assets or principal. A
Fund will enter into interest rate swap, swaptions, cap or floor transactions
only with counterparties who have credit ratings of at least A- (or the
equivalent) from any one NRSRO or counterparties with guarantors with debt
securities having such a rating.
- Eurodollar Instruments. Eurodollar instruments are essentially U.S.
Dollar-denominated futures contracts or options thereon that are linked to the
London Interbank Offered Rate and are subject to the same limitations and risks
as other futures contracts and options.
- Currency Transactions. A Fund may invest in non-U.S.
Dollar-denominated securities on a currency hedged or un-hedged basis. The
Adviser will actively manage the Fund's currency exposures and may seek
investment opportunities by taking long or short positions in currencies through
the use of currency-related derivatives, including forward currency exchange
contracts, futures and options on futures, swaps and options. The Adviser may
enter into transactions for investment opportunities when it anticipates that a
foreign currency will appreciate or depreciate in value but securities
denominated in that currency are not held by the Fund and do not present
attractive investment opportunities. Such transactions may also be used when the
Adviser believes that it may be more efficient than a direct investment in a
foreign currency-denominated security. A Fund may also conduct currency exchange
contracts on a spot basis (i.e., for cash at the spot rate prevailing in the
currency exchange market for buying or selling currencies).
Forward Commitments and When-Issued and Delayed Delivery Securities
-------------------------------------------------------------------
Forward commitments for the purchase or sale of securities may include
purchases on a "when-issued" basis or purchases or sales on a "delayed delivery"
basis. In some cases, a forward commitment may be conditioned upon the
occurrence of a subsequent event, such as approval and consummation of a merger,
corporate reorganization or debt restructuring (i.e., a "when, as and if issued"
trade). When forward commitment transactions are negotiated, the price is fixed
at the time the commitment is made and the Fund assumes the rights and risks of
ownership of the security but a Fund does not pay for the securities until they
are received. If a Fund is fully or almost fully invested when forward
commitment purchases are outstanding, such purchases may result in a form of
leverage. Leveraging the portfolio in this manner may increase the Fund's
volatility of returns. The Fund will segregate permissible liquid assets in an
amount equal to or greater than, on a daily basis, the amount of the Fund's
forward commitments and "when-issued" or "delayed delivery" commitments.
Forward commitments include "To be announced" ("TBA") mortgage-backed
securities, which are contracts for the purchase or sale of mortgage-backed
securities to be delivered at a future agreed-upon date, whereby the specific
mortgage pool numbers or the number of pools that will be delivered to fulfill
the trade obligation or terms of the contract are unknown at the time of the
trade. Subsequent to the time of the trade, a mortgage pool or pools guaranteed
by the Government National Mortgage Association, or GNMA, the Federal National
Mortgage Association, or FNMA, or the Federal Home Loan Mortgage Corporation, or
FHLMC (including fixed rate or variable rate mortgages) are allocated to the TBA
mortgage-backed securities transactions.
When-issued securities and forward commitments may be sold prior to
the settlement date. If the Fund chooses to dispose of the right to acquire a
when-issued security prior to its acquisition or dispose of its right to deliver
or receive against a forward commitment, it may incur a gain or loss. Any
significant commitment of Fund assets to the purchase of securities on a "when,
as and if issued" basis may increase the volatility of the Fund's net asset
value.
At the time the Fund intends to enter into a forward commitment, it
will record the transaction and thereafter reflect the value of the security
purchased or, if a sale, the proceeds to be received, in determining its net
asset value. Any unrealized appreciation or depreciation reflected in such
valuation of a "when, as and if issued" security would be canceled in the event
that the required conditions did not occur and the trade was canceled.
Although the Funds do not intend to enter into forward commitments for
speculative purposes and the Funds intend to adhere to the provisions of the
Securities and Exchange Commission (the "Commission") policies, purchases of
securities on such bases may involve more risk than other types of purchases.
For example, by committing to purchase securities in the future, a Fund subjects
itself to a risk of loss on such commitments as well as on its portfolio
securities. Also, a Fund may have to sell assets which have been set aside in
order to meet redemptions. In addition, if a Fund determines it is advisable as
a matter of investment strategy to sell the forward commitment or "when-issued"
or "delayed delivery" securities before delivery, that Fund may incur a gain or
loss because of market fluctuations since the time the commitment to purchase
such securities was made. Any such gain or loss would be treated as a capital
gain or loss for tax purposes. When the time comes to pay for the securities to
be purchased under a forward commitment or on a "when-issued" or "delayed
delivery" basis, the Fund will meet its obligations from the then available cash
flow or the sale of securities, or, although it would not normally expect to do
so, from the sale of the forward commitment or "when-issued" or "delayed
delivery" securities themselves (which may have a value greater or less than the
Fund's payment obligation). In addition, no interest or dividends accrue to the
purchaser prior to the settlement date for securities purchased or sold under a
forward commitment.
Governmental Obligations
------------------------
The ability of governments to make timely payments on their
obligations is likely to be influenced strongly by the issuer's balance of
payments, including export performance, and its access to international credits
and investments. To the extent that a country receives payment for its exports
in currencies other than U.S. Dollars, its ability to make debt payments
denominated in U.S. Dollars could be adversely affected. To the extent that a
country develops a trade deficit, it will need to depend on continuing loans
from foreign governments, multi-lateral organizations or private commercial
banks, aid payments from foreign governments and on inflows of foreign
investment. The access of a country to these forms of external funding may not
be certain, and a withdrawal of external funding could adversely affect the
capacity of a government to make payments on its obligations. In addition, the
cost of servicing debt obligations can be affected by a change in international
interest rates since the majority of these obligations carry interest rates that
are adjusted periodically based upon international rates.
Illiquid Securities
-------------------
Each Fund will limit its investments in illiquid securities to no more
than 15% of its net assets or such other amount permitted by guidance regarding
the Investment Company Act of 1940, as amended (the "1940 Act"). For this
purpose, illiquid securities include, among others, (a) direct placements or
other securities which are subject to legal or contractual restrictions on
resale or for which there is no readily available market (e.g., trading in the
security is suspended or, in the case of unlisted securities, market makers do
not exist or will not entertain bids or offers), (b) options purchased by the
Fund over-the-counter and the cover for options written by the Fund
over-the-counter, and (c) repurchase agreements not terminable within seven
days. Securities that have legal or contractual restrictions on resale but have
a readily available market are not deemed illiquid for purposes of this
limitation.
Mutual funds do not typically hold a significant amount of restricted
securities (securities that are subject to restrictions on resale to the general
public) or other illiquid securities because of the potential for delays on
resale and uncertainty in valuation. Limitations on resale may have an adverse
effect on the marketability of portfolio securities and a mutual fund might be
unable to dispose of restricted or other illiquid securities promptly or at
reasonable prices and might thereby experience difficulty satisfying redemptions
within seven days. A mutual fund may also have to take certain steps or wait a
certain amount of time in order to remove the transfer restrictions for such
restricted securities in order to dispose of them, resulting in additional
expense and delay.
Rule 144A under the Securities Act allows a broader institutional
trading market for securities otherwise subject to restriction on resale to the
general public. Rule 144A establishes a "safe harbor" from the registration
requirements of the Securities Act for resales of certain securities to
qualified institutional buyers. An insufficient number of qualified
institutional buyers interested in purchasing certain restricted securities held
by a Fund, however, could affect adversely the marketability of such portfolio
securities and the Fund might be unable to dispose of such securities promptly
or at reasonable prices.
The Adviser, acting under the supervision of the Board of Directors,
will monitor the liquidity of restricted securities in a Fund that are eligible
for resale pursuant to Rule 144A. In reaching liquidity decisions, the Adviser
will consider, among others, the following factors: (1) the frequency of trades
and quotes for the security; (2) the number of dealers issuing quotations to
purchase or sell the security; (3) the number of other potential purchasers of
the security; (4) the number of dealers undertaking to make a market in the
security; (5) the nature of the security (including its unregistered nature) and
the nature of the marketplace for the security (e.g., the time needed to dispose
of the security, the method of soliciting offers and the mechanics of the
transfer); and (6) any applicable Commission interpretation or position with
respect to such type of securities.
Investments in Other Investment Companies
-----------------------------------------
A Fund may invest in securities of other investment companies,
including exchange-traded funds, to the extent permitted under the 1940 Act or
the rules and regulations thereunder (as such statute, rules or regulations may
be amended from time to time) or by guidance regarding, interpretations of, or
exemptive orders under, the 1940 Act or the rules or regulations thereunder
published by appropriate regulatory authorities. The Funds intend to invest
uninvested cash balances in an affiliated money market fund as permitted by Rule
12d1-1 under the 1940 Act.
Lending of Fund Securities
--------------------------
A Fund may seek to increase income by lending portfolio securities. A
principal risk in lending portfolio securities, as with other extensions of
credit, consists of the possible loss of rights in the collateral should the
borrower fail financially. In addition, the Fund may be exposed to the risk that
the sale of any collateral realized upon the borrower's default will not yield
proceeds sufficient to replace the loaned securities. In determining whether to
lend securities to a particular borrower, the Adviser will consider all relevant
facts and circumstances, including the creditworthiness of the borrower. The
loans would be made only to firms deemed by the Adviser to be of good standing,
and when, in the judgment of the Adviser, the consideration that can be earned
currently from securities loans of this type justifies the attendant risk. A
Fund may lend portfolio securities to the extent permitted under the 1940 Act or
the rules and regulations thereunder (as such statute, rules or regulations may
be amended from time to time) or by guidance regarding, interpretations of, or
exemptive orders under, the 1940 Act.
Under present regulatory policies, including those of the Board of
Governors of the Federal Reserve System and the Commission, such loans may be
made only to member firms of the New York Stock Exchange (the "Exchange") and
will be required to be secured continuously by collateral in cash, cash
equivalents, or U.S. Treasury Bills maintained on a current basis at an amount
at least equal to the market value of the securities loaned. A Fund will have
the right to call a loan and obtain the securities loaned at any time on five
days' notice. While securities are on loan, the borrower will pay the Fund any
income from the securities. A Fund may invest any cash collateral in portfolio
securities and earn additional income or receive an agreed-upon amount of income
from a borrower who has delivered equivalent collateral. Any such investment of
cash collateral will be subject to the Fund's investment risks.
A Fund will not, however, have the right to vote any securities having
voting rights during the existence of the loan. A Fund will have the right to
regain record ownership of loaned securities or equivalent securities in order
to exercise ownership rights such as voting rights, subscription rights and
rights to dividends, interest, or distributions.
A Fund may pay reasonable finders', administrative, and custodial fees
in connection with a loan.
Loan Participations and Assignments
-----------------------------------
A Fund may invest in fixed or floating rate corporate loans ("Loans"
and each, a "Loan") either by participating as co-lender at the time the loan is
originated ("Participations") or by buying an interest in the loan in the
secondary market from a financial institution or institutional investor
("Assignments"). The financial status of an institution interposed between a
Fund and a borrower may affect the ability of the Fund to receive principal and
interest payments.
The success of a Fund may depend on the skill with which an agent bank
administers the terms of the corporate loan agreements, monitors borrower
compliance with covenants, collects principal, interest and fee payments from
borrowers and, where necessary, enforces creditor remedies against borrowers.
Agent banks typically have broad discretion in enforcing loan agreements.
A Fund's investment in Participations typically will result in the
Fund having a contractual relationship only with the financial institution
arranging the Loan with the borrower (the "Lender") and not with the borrower
directly. A Fund will have the right to receive payments of principal, interest
and any fees to which it is entitled only from the Lender selling the
Participation and only upon receipt by the Lender of the payments from the
borrower. In connection with purchasing Participations, the Fund generally will
have no right to enforce compliance by the borrower with the terms of the loan
agreement relating to the Loan, nor any rights of set-off against the borrower,
and the Fund may not directly benefit from any collateral supporting the Loan in
which it has purchased the Participation. As a result, the Fund may be subject
to the credit risk of both the borrower and the Lender that is selling the
Participation. In the event of the insolvency of the Lender selling a
Participation, the Fund may be treated as a general creditor of the Lender and
may not benefit from any set-off between the Lender and the borrower. Certain
Participations may be structured in a manner designed to avoid purchasers of
Participations being subject to the credit risk of the Lender with respect to
the Participation; but even under such a structure, in the event of the Lender's
insolvency, the Lender's servicing of the Participation may be delayed and the
assignability of the Participation impaired. A Fund will acquire Participations
only if the Lender interpositioned between the Fund and the borrower is a Lender
having total assets of more than $25 billion and whose senior unsecured debt is
rated investment grade (i.e., Baa3 or higher by Moody's or BBB- or higher by
S&P) or higher.
When a Fund purchases Assignments from Lenders it will acquire direct
rights against the borrower on the Loan. Because Assignments are arranged
through private negotiations between potential assignees and potential
assignors, however, the rights and obligations acquired by the Fund as the
purchaser of an assignment may differ from, and be more limited than, those held
by the assigning Lender. The assignability of certain obligations is restricted
by the governing documentation as to the nature of the assignee such that the
only way in which the Fund may acquire an interest in a Loan is through a
Participation and not an Assignment. A Fund may have difficulty disposing of
Assignments and Participations because to do so it will have to assign such
securities to a third party. Because there is no liquid market for such
securities, the Fund anticipates that such securities could be sold only to a
limited number of institutional investors. The lack of a liquid secondary market
may have an adverse impact on the value of such securities and the Fund's
ability to dispose of particular Assignments or Participations when necessary to
meet the Fund's liquidity needs in response to a specific economic event such as
a deterioration in the creditworthiness of the borrower. The lack of a liquid
secondary market for Assignments and Participations also may make it more
difficult for the Fund to assign a value to these securities for purposes of
valuing the Fund's portfolio and calculating its asset value.
Mortgage-Related Securities and Other Asset-Backed Securities
-------------------------------------------------------------
The mortgage-related securities in which a Fund may invest typically
are securities representing interests in pools of mortgage loans made by lenders
such as savings and loan associations, mortgage bankers and commercial banks and
are assembled for sale to investors (such as the Funds) by governmental,
government-related or private organizations. Private organizations include
commercial banks, savings associations, mortgage companies, investment banking
firms, finance companies, special purpose finance entities (called special
purpose vehicles or SPVs) and other entities that acquire and package loans for
resales as mortgage-related securities. Specifically, these securities may
include pass-through mortgage-related securities, collateralized mortgage
obligations ("CMOs"), CMO residuals, adjustable-rate mortgage securities
("ARMS"), stripped mortgage-backed securities ("SMBSs"), commercial
mortgage-backed securities, "to be announced" ("TBA") mortgage-backed
securities, mortgage dollar rolls, collateralized obligations and other
securities that directly or indirectly represent a participation in or are
secured by and payable from mortgage loans on real property and other assets.
Pass-Through Mortgage-Related Securities. Interests in pools of
mortgage-related securities differ from other forms of debt securities, which
normally provide for periodic payment of interest in fixed amounts with
principal payments at maturity or specified call dates. Instead, these
securities provide a monthly payment consisting of both interest and principal
payments. In effect, these payments are a "pass-through" of the monthly payments
made by the individual borrowers on their residential mortgage loans, net of any
fees paid to the issuer or guarantor of such securities. Additional payments are
caused by repayments of principal resulting from the sale of the underlying
residential property, refinancing or foreclosure, net of fees or costs that may
be incurred. Some mortgage-related securities, such as securities issued by
GNMA, are described as "modified pass-through." These securities entitle the
holder to receive all interest and principal payments owed on the mortgage pool,
net of certain fees, regardless of whether or not the mortgagor actually makes
the payment.
The average life of pass-through pools varies with the maturities of
the underlying mortgage instruments. In addition, a pool's term may be shortened
by unscheduled or early payments of principal and interest on the underlying
mortgages. The occurrence of mortgage prepayments is affected by factors
including the level of interest rates, general economic conditions, the location
and age of the mortgage and other social and demographic conditions. As
prepayment rates of individual pools vary widely, it is not possible to
accurately predict the average life of a particular pool. For pools of
fixed-rate 30-year mortgages, common industry practice is to assume that
prepayments will result in a 12-year average life. Pools of mortgages with other
maturities or different characteristics will have varying average life
assumptions. The assumed average life of pools of mortgages having terms of less
than 30 years, is less than 12 years, but typically not less than 5 years.
Yields on pass-through securities are typically quoted by investment
dealers and vendors based on the maturity of the underlying instruments and the
associated average life assumption. In periods of falling interest rates, the
rate of prepayment tends to increase, thereby shortening the actual average life
of a pool of mortgage-related securities. Conversely, in periods of rising
interest rates the rate of prepayment tends to decrease, thereby lengthening the
actual average life of the pool. Historically, actual average life has been
consistent with the 12-year assumption referred to above. Actual prepayment
experience may cause the yield to differ from the assumed average life yield.
Reinvestment of prepayments may occur at higher or lower interest rates than the
original investment, thus affecting the yield of the Fund. The compounding
effect from reinvestment of monthly payments received by the Fund will increase
the yield to shareholders compared with bonds that pay interest semi-annually.
The principal governmental (i.e., backed by the full faith and credit
of the United States Government) guarantor of mortgage-related securities is
GNMA. GNMA is a wholly-owned United States Government corporation within the
Department of Housing and Urban Development. GNMA is authorized to guarantee,
with the full faith and credit of the United States Government, the timely
payment of principal and interest on securities issued by institutions approved
by GNMA (such as savings and loan institutions, commercial banks and mortgage
bankers) and backed by pools of FHA-insured or VA-guaranteed mortgages.
Government-related (i.e., not backed by the full faith and credit of
the United States Government) guarantors include FNMA and FHLMC. FNMA is a
government-sponsored corporation owned entirely by private stockholders. It is
subject to general regulation and oversight by the Office of Federal Housing
Enterprise Oversight ("OFHEO"). FNMA purchases residential mortgages from a list
of approved seller/servicers which include state and federally-chartered savings
and loan associations, mutual savings banks, commercial banks and credit unions
and mortgage bankers. Pass-through securities issued by FNMA are guaranteed as
to timely payment of principal and interest by FNMA but are not backed by the
full faith and credit of the United States Government. FHLMC is a corporate
instrumentality of the United States Government whose stock is owned by private
stockholders. Participation certificates issued by FHLMC, which represent
interests in mortgages from FHLMC's national portfolio, are guaranteed by FHLMC
as to the timely payment of interest and ultimate collection of principal but
are not backed by the full faith and credit of the United States Government.
Commercial banks, savings and loan associations, private mortgage
insurance companies, mortgage bankers and other secondary market issuers create
pass-through pools of conventional residential mortgage loans. Securities
representing interests in pools created by non-governmental private issuers
generally offer a higher rate of interest than securities representing interests
in pools created by governmental issuers because there are no direct or indirect
governmental guarantees of the underlying mortgage payments. However, private
issuers sometimes obtain committed loan facilities, lines of credit, letters of
credit, surety bonds or other forms of liquidity and credit enhancement to
support the timely payment of interest and principal with respect to their
securities if the borrowers on the underlying mortgages fail to make their
mortgage payments. The ratings of such non-governmental securities are generally
dependent upon the ratings of the providers of such liquidity and credit support
and would be adversely affected if the rating of such an enhancer were
downgraded.
The structuring of the pass-through pool may also provide credit
enhancement. Examples of such credit support arising out of the structure of the
transaction include the issue of senior and subordinated securities (e.g., the
issuance of securities by a SPV in multiple classes or "tranches", with one or
more classes being senior to other subordinated classes as to payment of
principal and interest, with the result that defaults on the underlying mortgage
loans are borne first by the holders of the subordinated class); creation of
"reserve funds" ( in which case cash or investments sometimes funded from a
portion of the payments on the underlying mortgage loans, are held in reserve
against future losses); and "overcollateralization" (in which case the scheduled
payments on, or the principal amount of, the underlying mortgage loans exceeds
that required to make payment of the securities and pay any servicing or other
fees). There can be no guarantee the credit enhancements, if any will be
sufficient to prevent losses in the event of defaults on the underlying mortgage
loans.
In addition, mortgage-related securities that are issued by private
issuers are not subject to the underwriting requirements for the underlying
mortgages that are applicable to those mortgage-related securities that have a
government or government-sponsored entity guaranteed. As a result, the mortgage
loans underlying private mortgage-related securities may, and frequently do,
have less favorable collateral, credit risk or other underwriting
characteristics than government or government-sponsored mortgage-related
securities and have wider variances in a number of terms, including interest
rate, term, size, purposes and borrower characteristics. Privately issued pools
more frequently include second mortgages, high loan-to-value mortgages and
manufactured housing loans. The coupon rates and maturities of the underlying
mortgage loans in a private-label mortgage-related pool may vary to a greater
extent than those included in a government guaranteed pool, and the pool may
include subprime mortgage loans. Subprime loans refer to loans made to borrowers
with weakened credit histories or with a lower capacity to make timely payments
on their loans. For these reasons, the loans underlying these securities have
had in many cases higher default rates than those loans that meet government
underwriting requirements.
Collateralized Mortgage Obligations. Another form of mortgage-related
security is a "pay-through" security, which is a debt obligation of the issuer
secured by a pool of mortgage loans pledged as collateral that is legally
required to be paid by the issuer, regardless of whether payments are actually
made on the underlying mortgages. CMOs are the predominant type of "pay-through"
mortgage-related security. In a CMO, a series of bonds or certificates is issued
in multiple classes. Each class of a CMO, often referred to as a "tranche," is
issued at a specific coupon rate and has a stated maturity or final distribution
date. Principal prepayments on collateral underlying a CMO may cause one or more
tranches of the CMO to be retired substantially earlier than the stated
maturities or final distribution dates of the collateral. Although payment of
the principal of, and interest on, the underlying collateral securing privately
issued CMOs may be guaranteed by GNMA, FNMA or FHLMC, these CMOs represent
obligations solely of the private issuer and are not insured or guaranteed by
GNMA, FNMA, FHLMC, any other governmental agency or any other person or entity.
Adjustable-Rate Mortgage Securities. Another type of mortgage-related
security, known as adjustable-rate mortgage securities ("ARMS"), bears interest
at a rate determined by reference to a predetermined interest rate or index.
ARMS may be secured by fixed-rate mortgages or adjustable-rate mortgages. ARMS
secured by fixed-rate mortgages generally have lifetime caps on the coupon rates
of the securities. To the extent that general interest rates increase faster
than the interest rates on the ARMS, these ARMS will decline in value. The
adjustable-rate mortgages that secure ARMS will frequently have caps that limit
the maximum amount by which the interest rate or the monthly principal and
interest payments on the mortgages may increase. These payment caps can result
in negative amortization (i.e., an increase in the balance of the mortgage
loan). Furthermore, since many adjustable-rate mortgages only reset on an annual
basis, the values of ARMS tend to fluctuate to the extent that changes in
prevailing interest rates are not immediately reflected in the interest rates
payable on the underlying adjustable-rate mortgages.
Stripped Mortgage-Related Securities. Stripped mortgage-related
securities (SMRS) are mortgage related securities that are usually structured
with separate classes of securities collateralized by a pool of mortgages or a
pool of mortgage backed bonds or pass-through securities, with each class
receiving different proportions of the principal and interest payments from the
underlying assets. A common type of SMRS has one class of interest-only
securities (IOs) receiving all of the interest payments from the underlying
assets and one class of principal-only securities (POs) receiving all of the
principal payments from the underlying assets. IOs and POs are extremely
sensitive to interest rate changes and are more volatile than mortgage-related
securities that are not stripped. IOs tend to decrease in value as interest
rates decrease and are extremely sensitive to the rate of principal payments
(including prepayments) on the related underlying mortgage assets, and a rapid
rate of principal prepayments may have a material adverse effect on the yield to
maturity of the IO class. POs generally increase in value as interest rates
decrease. If prepayments of the underlying mortgages are greater than
anticipated, the amount of interest earned on the overall pool will decrease due
to the decreasing principal balance of the assets. Due to their structure and
underlying cash flows, SMRS may be more volatile than mortgage-related
securities that are not stripped. Changes in the values of IOs and POs can be
substantial and occur quickly, such as occurred in the first half of 1994 when
the value of many POs dropped precipitously due to increases in interest rates.
A Fund will only invest in SMRS that are issued by the U.S.
Government, its agencies or instrumentalities and supported by the full faith
and credit of the United States. Although SMRS are purchased and sold by
institutional investors through several investment banking firms acting as
brokers or dealers, the complexity of these instruments and the smaller number
of investors in the sector can lend to illiquid markets in the sector.
Commercial Mortgage-Backed Securities. Commercial mortgage-backed
securities are securities that represent an interest in, or are secured by,
mortgage loans secured by multifamily or commercial properties, such as
industrial and warehouse properties, office buildings, retail space and shopping
malls, and cooperative apartments, hotels and motels, nursing homes, hospitals
and senior living centers. Commercial mortgage-backed securities have been
issued in public and private transactions by a variety of public and private
issuers using a variety of structures, some of which were developed in the
residential mortgage context, including multi-class structures featuring senior
and subordinated classes. Commercial mortgage-backed securities may pay fixed or
floating-rates of interest. The commercial mortgage loans that underlie
commercial mortgage-related securities have certain distinct risk
characteristics. Commercial mortgage loans generally lack standardized terms,
which may complicate their structure, tend to have shorter maturities than
residential mortgage loans and may not be fully amortizing. Commercial
properties themselves tend to be unique and are more difficult to value than
single-family residential properties. In addition, commercial properties,
particularly industrial and warehouse properties, are subject to environmental
risks and the burdens and costs of compliance with environmental laws and
regulations.
"To Be Announced" Mortgaged-Backed Securities. TBA mortgage-backed
securities are described in "Derivatives--Forward Commitments and When-Issued
and Delayed Delivery Securities" above.
Certain Risks. The value of mortgage-related securities is affected by
a number of factors. Unlike traditional debt securities, which have fixed
maturity dates, mortgage-related securities may be paid earlier than expected as
a result of prepayments of underlying mortgages. Such prepayments generally
occur during periods of falling mortgage interest rates. If property owners make
unscheduled prepayments of their mortgage loans, these prepayments will result
in the early payment of the applicable mortgage-related securities. In that
event, the Fund may be unable to invest the proceeds from the early payment of
the mortgage-related securities in investments that provide as high a yield as
the mortgage-related securities. Early payments associated with mortgage-related
securities cause these securities to experience significantly greater price and
yield volatility than is experienced by traditional fixed-income securities. The
level of general interest rates, general economic conditions and other social
and demographic factors affect the occurrence of mortgage prepayments. During
periods of falling interest rates, the rate of mortgage prepayments tends to
increase, thereby tending to decrease the life of mortgage-related securities.
Conversely, during periods of rising interest rates, a reduction in prepayments
may increase the effective life of mortgage-related securities, subjecting them
to greater risk of decline in market value in response to rising interest rates.
If the life of a mortgage-related security is inaccurately predicted, the Fund
may not be able to realize the rate of return it expected.
As with other fixed-income securities, there is also the risk of
nonpayment of mortgage-related securities, particularly for those securities
that are backed by mortgage pools that contain subprime loans. Market factors
adversely affecting mortgage loan repayments include a general economic
downturn, high unemployment, a general slowdown in the real estate market, a
drop in the market prices of real estate, or higher mortgage payments required
to be made by holders of adjustable rate mortgages due to scheduled increases or
increases due to higher interest rates.
Subordinated mortgage-related securities may have additional risks.
The subordinated mortgage-related security may serve as credit support for the
senior securities purchased by other investors. In addition, the payments of
principal and interest on these subordinated securities generally will be made
only after payments are made to the holders of securities senior to the
subordinated securities. Therefore, if there are defaults on the underlying
mortgage loans, the holders of subordinated mortgage-related securities will be
less likely to receive payments of principal and interest and will be more
likely to suffer a loss.
Commercial mortgage-related securities, like all fixed-income
securities, generally decline in value as interest rates rise. Moreover,
although generally the value of fixed-income securities increases during periods
of falling interest rates, this inverse relationship is not as marked in the
case of single-family residential mortgage-related securities, due to the
increased likelihood of prepayments during periods of falling interest rates,
and may not be as marked in the case of commercial mortgage-related securities.
The process used to rate commercial mortgage-related securities may focus on,
among other factors, the structure of the security, the quality and adequacy of
collateral and insurance, and the creditworthiness of the originators, servicing
companies and providers of credit support.
Although the market for mortgage-related securities is becoming
increasingly liquid, those issued by certain private organizations may not be
readily marketable there may be a limited market for these securities,
especially when there is a perceived weakness in the mortgage and real estate
market sectors. In particular, the secondary markets for CMOs, IOs and POs may
be more volatile and less liquid than those for other mortgage-related
securities, thereby potentially limiting a Fund's ability to buy or sell those
securities at any particular time. Without an active trading market,
mortgage-related securities held in a Fund's portfolio may be particularly
difficult to value because of the complexities involved in the value of the
underlying mortgages. In addition, the rating agencies may have difficulties in
rating commercial mortgage-related securities through different economic cycles
and in monitoring such ratings on a longer-term basis.
As with fixed-income securities generally, the value of
mortgage-related securities can also be adversely affected by increases in
general interest rates relative to the yield provided by such securities. Such
an adverse effect is especially possible with fixed-rate mortgage securities. If
the yield available on other investments rises above the yield of the fixed-rate
mortgage securities as a result of general increases in interest rate levels,
the value of the mortgage-related securities will decline.
Other Asset-Backed Securities. A Fund may invest in other asset-backed
securities. The securitization techniques used to develop mortgage-related
securities are being applied to a broad range of financial assets. Through the
use of trusts and special purpose corporations, various types of assets,
including automobile loans and leases, credit card receivables, home equity
loans, equipment leases and trade receivables, are being securitized in
structures similar to the structures used in mortgage securitizations. For
example, the Fund may invest in collateralized debt obligations ("CDOs"), which
include collateralized bond obligations ("CBOs"), collateralized loan
obligations ("CLOs"), and other similarly structured securities. CBOs and CLOs
are types of asset-backed securities. A CBO is a trust, which is backed by a
diversified pool of high-risk, below investment grade fixed-income securities. A
CLO is a trust typically collateralized by a pool of loans, which may include,
among others, domestic and foreign senior secured loans, senior unsecured loans,
and subordinate corporate loans, including loans that may be rated below
investment grade or equivalent unrated loans. These asset-backed securities are
subject to risks associated with changes in interest rates, prepayment of
underlying obligations and defaults similar to the risks of investment in
mortgage-related securities discussed above.
Each type of asset-backed security also entails unique risks depending
on the type of assets involved and the legal structure used. For example, credit
card receivables are generally unsecured obligations of the credit card holder
and the debtors are entitled to the protection of a number of state and federal
consumer credit laws, many of which give such debtors the right to set off
certain amounts owed on the credit cards, thereby reducing the balance due.
There have also been proposals to cap the interest rate that a credit card
issuer may charge. In some transactions, the value of the asset-backed security
is dependent on the performance of a third party acting as credit enhancer or
servicer. Furthermore, in some transactions (such as those involving the
securitization of vehicle loans or leases) it may be administratively burdensome
to perfect the interest of the security issuer in the underlying collateral and
the underlying collateral may become damaged or stolen.
Participation in the TALF Program.
----------------------------------
A Fund may invest a portion of its assets through participation in the
Term Asset-Backed Securities Loan Facility program ("TALF Program"), a program
created by the Board of Governors of the Federal Reserve System (the "Federal
Reserve") and the U.S. Department of the Treasury to assist the securitization
markets by supporting the issuance of certain eligible collateral, which are
investment-grade rated, asset-backed securities such as automobile loans,
student loans, and credit card loans, as well as receivables related to
residential mortgage servicing advances or certain commercial mortgage-backed
securities. The types of eligible collateral may be expanded by the Federal
Reserve in the future, and among other requirements must at issuance be rated in
the highest investment-grade rating category by at least two ratings agencies
(without he benefit of a third-party guarantee), and must not be placed on a
watch list or downgraded by any such rating agency. The TALF Program is operated
by the Federal Reserve Bank of New York (the "New York Fed"). Under the TALF
Program, the New York Fed provides non-recourse loans to a Fund in a minimum
size of $10 million.
In order to obtain a loan under the TALF Program, a Fund is required
to put up a certain percentage of the purchase price or value of the eligible
collateral (called the "haircut"). In addition, it is required to pay an
administrative fee to the New York Fed on the settlement date of each TALF
Program loan received by the Fund. The interest rate under the loan will vary
and will be determined under the terms of the TALF Program. The term of a loan
under the TALF Program depends on the nature of the eligible collateral and are
currently three years or five years.
In connection with a TALF Program loan, a Fund will pledge eligible
collateral, which will consist of either certain eligible asset-backed
securities that the Fund currently owns or other asset-backed securities that
the Fund purchases with the loan proceeds. Except in limited circumstances, TALF
loans by the New York Fed to the Fund are non-recourse, and if the Fund does not
repay the loan, the New York Fed may enforce its rights only against the
eligible collateral pledged by the Fund and not against any other assets of the
Fund. TALF loans are prepayable at the option of the Fund without penalty, and
the Fund may satisfy its loan obligation in full at any time by surrendering the
eligible collateral to the New York Fed. If the securities constituting eligible
collateral default and lose all their value, under the current terms of the TALF
Program the New York Fed cannot look to the Fund to cover the principal on the
loan. Generally, under the terms of the TALF Program payment of principal on
eligible collateral must be used immediately to reduce the principal amount of
the TALF loan in proportion to the haircut (for example, if the original haircut
was 10%, 90% of any principal repaid must be immediately paid to the New York
Fed).
The risk of leverage to the Fund under the TALF Program is the same
risk of leverage that applies to other types of borrowings the Fund may engage
in (see "Effects of Borrowing and Use of Leverage" below for more details).
Loans under the TALF Program would not be subject to the Funds' limitations on
borrowings (which are generally limited to 33 1/3% of the Fund's total assets).
However, the Fund will borrow under the TALF Program only if it maintains
segregated liquid assets (in addition to any assets pledged as eligible
collateral), marked-to-market daily, in an amount equal to the Fund's
outstanding principal and interest under the TALF loan, treating the loans under
the TALF Program similar to other financial instruments (such as reverse
repurchase agreements) that obligate a fund to "cover:" its obligation to
purchase or deliver cash or securities at a future time.
Participations in the TALF Program and other loan programs sponsored
by the United States of America (and any of its subdivisions, agencies,
departments, commissions, boards, authorities, instrumentalities or bureaus)
will not be considered purchasing securities on margin for purposes of the
Fund's limits on margin.
The New York Fed reserves the right to reject any request for a loan,
in whole or in part, in its sole discretion, even if a Fund meets all
requirements of the TALF Program. The Federal Reserve may also change the terms
of the TALF Program at its discretion. While the current terms of the TALF
Program state that amendments will only apply to future participations, there is
no guarantee that retroactive changes to the TALF Program will not occur. The
Fund cannot predict the form any such changes or modifications might take and,
if the Fund participates in the TALF Program, such changes may adversely affect
the value of the Fund's assets and the ability of the Fund to achieve its
investment objectives. Any changes to the TALF Program may, among other things,
further limit or expand the types of securities that may be purchased with the
proceeds of a TALF Program loan.
Participation in the TALF Program requires the Fund to contract with a
primary dealer that will be authorized to act as agent for the Fund. A primary
dealer may receive direct or indirect fees for its services. Any such fees
incurred will be borne by the Fund. Under the terms of the TALF Program, any
interest and principal payments from TALF eligible collateral will be directed
first to a custodial account in the name of the primary dealer prior to
remittance to the Fund. As a result, the Fund will be subject to the
counterparty risk of the primary dealer. Any voting rights held in respect of
TALF eligible collateral under a TALF Program loan currently are subject to the
consent of the New York Fed, whose consent must be obtained via the primary
dealer, which may delay the Fund's voting ability.
Under certain circumstances, loans under the TALF Program may become
recourse to the Fund, which may adversely affect the Fund's ability to achieve
its investment objective. In connection with any borrowing by the Fund under the
TALF Program, a Fund is required to represent, among other things, that at the
time of borrowing the Fund is an eligible borrower and that the collateral is
eligible collateral. A determination that the Fund is, at any time, not an
eligible borrower (based on the criteria that is applicable at the time of
borrowing), or a determination that certain representations made by the Fund
under the TALF Program were untrue when made , will cause the loan to become
full recourse to the Fund, and the Fund must then repay the loan or surrender
the eligible collateral at a time when it may not be advantageous to do so,
which may result in losses to the Fund. Additionally, the loan may become
recourse to the Fund if certain persons acquire more than 25% of the Fund's
outstanding securities or if the Fund fails to make certain timely filings under
the TALF Program. If loans under the TALF Program become recourse against the
Fund and the value of the eligible collateral pledged to the New York Fed does
not at least equal the amount of principal and interest the Fund owes to the New
York Fed under the loan, then the Fund will be required to pay the difference to
the New York Fed. In order to make this payment, the Fund may be required to
sell portfolio securities during adverse market conditions or at other times it
would not otherwise choose to sell such securities. Finally, if the Fund were to
surrender its eligible collateral under the terms of the TALF Program, it would
lose the amount of the haircut.
Under the terms of its agreement with the Fund, the primary dealer
generally disclaims all liability for losses that may occur in connection with
the TALF Program, the risk of which is borne by the Fund. Further, the Fund
indemnifies for any losses that the primary dealer may incur under the terms of
the TALF Program. The primary dealer may terminate its agreement with the Fund
at any time. If the Fund is not able to find a replacement primary dealer within
the requisite period of time, it may be required to either repay the loan, sell
the eligible collateral, or surrender the eligible collateral at a time when it
may not be advantageous to do so, which may result in losses to the Fund.
Agreements with the primary dealer are subject to amendment by the primary
dealer without the Fund's consent, in order to conform to any future amendments
of the TALF Program by the Federal Reserve.
Participation in TALF will not subject the Fund or the Manager to
restrictions on executive compensation under the Treasury Department's Troubled
Assets Relief Program.
Preferred Stock
---------------
A Fund may invest in preferred stock. Preferred stock is an equity
security that has features of debt because it generally entitles the holder to
periodic payments at a fixed rate of return. Preferred stock is subordinated to
any debt the issuer has outstanding but has liquidation preference over common
stock. Accordingly, preferred stock dividends are not paid until all debt
obligations are first met. Preferred stock may be subject to more fluctuations
in market value, due to changes in market participants' perceptions of the
issuer's ability to continue to pay dividends, than debt of the same issuer.
Repurchase Agreements and Buy/Sell Back Transactions
----------------------------------------------------
A repurchase agreement is an agreement by which a Fund purchases a
security and obtains a simultaneous commitment from the seller to repurchase the
security at an agreed upon price and date, normally one day or a few days later.
The purchase and repurchase obligations are transacted under one document. The
resale price is greater than the purchase price, reflecting an agreed-upon
"interest rate" that is effective for the period of time the buyer's money is
invested in the security, and which is related to the current market rate of the
purchased security rather than its coupon rate. During the term of the
repurchase agreement, the Fund monitors on a daily basis the market value of the
securities subject to the agreement and, if the market value of the securities
falls below the resale amount provided under the repurchase agreement, the
seller under the repurchase agreement is required to provide additional
securities or cash equal to the amount by which the market value of the
securities falls below the resale amount. Because a repurchase agreement permits
a Fund to invest temporarily available cash on a fully-collateralized basis,
repurchase agreements permit the Fund to earn a return on temporarily available
cash while retaining "overnight" flexibility in pursuit of investments of a
longer-term nature. Repurchase agreements may exhibit the characteristics of
loans by the Fund.
The obligation of the seller under the repurchase agreement is not
guaranteed, and there is a risk that the seller may fail to repurchase the
underlying security, whether because of the seller's bankruptcy or otherwise. In
such event, the Fund would attempt to exercise its rights with respect to the
underlying security, including possible sale of the securities. A Fund may incur
various expenses in the connection with the exercise of its rights and may be
subject to various delays and risks of loss, including (a) possible declines in
the value of the underlying securities, (b) possible reduction in levels of
income and (c) lack of access to the securities (if they are held through a
third-party custodian) and possible inability to enforce the Fund's rights. A
Fund's Board of Directors has established procedures, which are periodically
reviewed by the Board, pursuant to which the Adviser monitors the
creditworthiness of the dealers with which the Fund enters into repurchase
agreement transactions.
A Fund may enter into repurchase agreements pertaining to the types of
securities in which it invests with member banks of the Federal Reserve System
or "primary dealers" (as designated by the Federal Reserve Bank of New York) in
such securities. There is no percentage restriction on the Fund's ability to
enter into repurchase agreements. Currently, the Fund intends to enter into
repurchase agreements only with its custodian and such primary dealers.
A Fund may enter into buy/sell back transactions, which are similar to
repurchase agreements. In this type of transaction, the Fund enters a trade to
buy securities at one price and simultaneously enters a trade to sell the same
securities at another price on a specified date. Similar to a repurchase
agreement, the repurchase price is higher than the sale price and reflects
current interest rates. Unlike a repurchase agreement, however, the buy/sell
transaction, though done simultaneously, is two separate legal agreements. A
buy/sell transaction also differs from a repurchase agreement in that the seller
is not required to provide margin payments if the value of the securities falls
below the repurchase price because the transaction is two separate transactions.
A Fund has the risk of changes in the value of the purchased security during the
terms of the buy/sell agreement although these agreements typically provide for
the repricing of the original transaction at a new market price if the value of
the security changes by a specific amount.
Reverse Repurchase Agreements and Dollar Rolls
----------------------------------------------
Reverse repurchase agreements involve sales by a Fund of portfolio
assets concurrently with an agreement by the Fund to repurchase the same assets
at a later date at a fixed price. During the reverse repurchase agreement
period, a Fund continues to receive principal and interest payments on these
securities. Generally, the effect of such a transaction is that the Fund can
recover all or most of the cash invested in the portfolio securities involved
during the term of the reverse repurchase agreement, while it will be able to
keep the interest income associated with those portfolio securities. Such
transactions are advantageous only if the interest cost to the Fund of the
reverse repurchase transaction is less than the cost of otherwise obtaining the
cash.
Reverse repurchase agreements are considered to be a loan to a Fund by
the counterparty, collateralized by the assets subject to repurchase because the
incidents of ownership are retained by the Fund. By entering into reverse
repurchase agreements, a Fund obtains additional cash to invest on other
securities. A Fund may use reverse repurchase agreements for borrowing purposes
if it believes that the cost of this form of borrowing will be lower than the
cost of bank borrowing. Reverse repurchase agreements create leverage and are
speculative transactions because they allow a Fund to achieve a return on a
larger capital base relative to its NAV. The use of leverage creates the
opportunity for increased income for a Fund's shareholders when the Fund
achieves a higher rate of return on the investment of the reverse repurchase
agreement proceeds than it pays in interest on the reverse repurchase
transactions. However, there is the risk that returns could be reduced if the
rates of interest on the investment proceeds do not exceed the interest paid by
a Fund on the reverse repurchase transactions. Borrowings through reverse
repurchase agreements are not subject to the requirement applicable to bank
borrowings under Section 18(f)(1) of the 1940 Act to maintain an asset coverage
of at least 300% but are subject to an equivalent requirement to maintain asset
coverage by segregating assets in a segregated account equal in value to
proceeds received in the reverse repurchase agreement.
Dollar rolls involve sales by a Fund of securities for delivery in the
current month and the Fund's simultaneously contracting to repurchase
substantially similar (same type and coupon) securities on a specified future
date. During the roll period, the Fund forgoes principal and interest paid on
the securities. A Fund is compensated by the difference between the current
sales price and the lower forward price for the future purchase (often referred
to as the "drop") as well as by the interest earned on the cash proceeds of the
initial sale.
Reverse repurchase agreements and dollar rolls involve the risk that
the market value of the securities the Fund is obligated to repurchase under the
agreement may decline below the repurchase price. In the event the buyer of
securities under a reverse repurchase agreement or dollar roll files for
bankruptcy or becomes insolvent, the Fund's use of the proceeds of the agreement
may be restricted pending a determination by the other party, or its trustee or
receiver, whether to enforce the Fund's obligation to repurchase the securities.
In addition, the use of these investments results in leveraging the Fund's
common stocks because the Fund uses the proceeds to make investments in other
fixed-income securities. Use of leverage is considered speculative and has,
among other things, the risk that the Fund's NAV may be more volatile.
Securities Ratings
------------------
The ratings of fixed-income securities by Moody's, S&P, and Fitch
Ratings ("Fitch"), Dominion Bond Rating Service Ltd. and A.M. Best Company are a
generally accepted barometer of credit risk. They are, however, subject to
certain limitations from an investor's standpoint. The rating of an issuer is
heavily weighted by past developments and does not necessarily reflect probable
future conditions. There is frequently a lag between the time a rating is
assigned and the time it is updated. In addition, there may be varying degrees
of difference in credit risk of securities within each rating category.
Securities rated Baa, BBB+, BBB, or BBB- by S&P or Baa1, Baa2 or Baa3
by Moody's are considered by Moody's to have speculative characteristics.
Sustained periods of deteriorating economic conditions or rising interest rates
are more likely to lead to a weakening in the issuer's capacity to pay interest
and repay principal than in the case of higher-rated securities.
Non-rated securities will also be considered for investment by a Fund
when the Adviser believes that the financial condition of the issuers of such
securities, or the protection afforded by the terms of the securities
themselves, limits the risk to the Fund to a degree comparable to that of rated
securities which are consistent with the Fund's objectives and policies.
The Adviser generally uses ratings issued by S&P, Moody's, Fitch and
Dominion Bond Rating Service Ltd. Some securities are rated by more than one of
these ratings agencies, and the ratings assigned to the security by the rating
agencies may differ. In such an event and for purposes of determining compliance
with restrictions on investments for the Fund, if a security is rated by two or
more rating agencies, the Adviser will deem the security to be rated at the
highest rating. For example, if a security is rated by Moody's and S&P only,
with Moody's rating the security as Ba and S&P as BBB, the Adviser will deem the
security to be rated as the equivalent of BBB (i.e., Baa by Moody's and BBB by
S&P). Or, if a security is rated by Moody's, S&P and Fitch, with Moody's rating
the security as Ba, S&P as BBB and Fitch as BB, the Adviser will deem the
security to be rated as the equivalent of BBB (i.e., Ba1 by Moody's, BBB by S&P
and BBB by Fitch).
The Adviser will try to reduce the risk inherent in the Fund's
investment approach through credit analysis, diversification and attention to
current developments and trends in interest rates and economic conditions.
However, there can be no assurance that losses will not occur. In considering
investments for Funds that invest in high-yielding securities, the Adviser will
attempt to identify those high-yielding securities whose financial condition is
adequate to meet future obligations, has improved, or is expected to improve in
the future. The Adviser's analysis focuses on relative values based on such
factors as interest or dividend coverage, asset coverage, earnings prospects,
and the experience and managerial strength of the issuer.
In the event that the credit rating of a security held by the Fund is
downgraded, the credit quality deteriorates after purchase, or the security
defaults, the Fund will not be obligated to dispose of that security and may
continue to hold the security if, in the opinion of the Adviser, such investment
is appropriate in the circumstances.
Unless otherwise indicated, references to securities ratings by one
rating agency in this SAI shall include the equivalent rating by another rating
agency.
Short Sales
-----------
A Fund may make short sales of securities or maintain a short position
only for the purpose of deferring realization of gain or loss for U.S. federal
income tax purposes, provided that at all times when a short position is open
the Fund owns an equal amount of such securities of the same issue as, and equal
in amount to, the securities sold short. In addition, the Fund may not make a
short sale if more than 10% of the Fund's net assets (taken at market value) is
held as collateral for short sales at any one time. A short sale of a security
involves the risk that, instead of declining, the price of the security sold
short will rise. If the price of the securities sold short increases between the
time of a short sale and the time a Fund replaces the borrowed security, the
Fund will incur a loss; conversely, if the price declines, the Fund will realize
a gain. The potential for the price of a fixed-income security sold short to
rise is a function of both the remaining maturity of the obligation, its
creditworthiness and its yield. Unlike short sales of equities or other
instruments, potential for the price of a fixed-income security to rise may be
limited due to the fact that the security will be no more than par at maturity.
However, the short sale of other instruments or securities generally, including
fixed-income securities convertible into equities or other instruments, a
fixed-income security trading at a deep discount from par or which pays a coupon
that is high in relative or absolute terms, or which is denominated in a
currency other than the U.S. Dollar, involves the possibility of a theoretically
unlimited loss since there is a theoretically unlimited potential for the market
price of the security sold short to increase. See "Dividends, Distributions and
Taxes-Tax Straddles" for a discussion of certain special federal income tax
considerations that may apply to short sales which are entered into by the Fund.
Structured Securities
---------------------
A Fund may invest securities issued in structured financing
transactions, which generally involve aggregating types of debt assets in a pool
or special purpose entity and then issuing new securities. Types of structured
financings include, for example, mortgage-related and other asset-backed
securities. A Fund's investments include investments in structured securities
that represent interests in entities organized and operated solely for the
purpose of restructuring the investment characteristics of debt obligations.
This type of restructuring involves the deposit with or purchase by an entity,
such as a corporation or trust, of specified instruments (such as commercial
bank loans) and the issuance by that entity of one or more classes of securities
("Structured Securities") backed by, or representing interests in, the
underlying instruments. The cash flow on the underlying instruments may be
apportioned among the newly issued Structured Securities to create securities
with different investment characteristics such as varying maturities, payment
priorities and interest rate provisions, and the extent of the payments made
with respect to Structured Securities is dependent on the extent of the cash
flow on the underlying instruments. Because Structured Securities of the type in
which the Fund anticipates it will invest typically involve no credit
enhancement, their credit risk generally will be equivalent to that of the
underlying instruments.
A Fund is permitted to invest in a class of Structured Securities that
is either subordinated or unsubordinated to the right of payment of another
class. Subordinated Structured Securities typically have higher yields and
present greater risks than unsubordinated Structured Securities.
Under the terms of subordinated securities, payments that would be
made to their holders may be required to be made to the holders of more senior
securities and/or the subordinated or junior securities may have junior liens,
if they have any rights at all, in any collateral (meaning proceeds of the
collateral are required to be paid first to holders of more senior securities).
As a result, subordinated or junior securities will be disproportionately
affected by a default or even a perceived decline in the creditworthiness of the
issuer.
U.S. Government Securities
--------------------------
U.S. Government securities may be backed by the full faith and credit
of the United States, supported only by the right of the issuer to borrow from
the U.S. Treasury or backed only by the credit of the issuing agency itself.
These securities include: (i) the following U.S. Treasury securities, which are
backed by the full faith and credit of the United States and differ only in
their interest rates, maturities and times of issuance: U.S. Treasury bills
(maturities of one year or less with no interest paid and hence issued at a
discount and repaid at full face value upon maturity), U.S. Treasury notes
(maturities of one to ten years with interest payable every six months) and U.S.
Treasury bonds (generally maturities of greater than ten years with interest
payable every six months); (ii) obligations issued or guaranteed by U.S.
Government agencies and instrumentalities that are supported by the full faith
and credit of the U.S. Government, such as securities issued by GNMA, the
Farmers Home Administration, the Department of Housing and Urban Development,
the Export-Import Bank, the General Services Administration and the Small
Business Administration and including obligations that are issued by private
issuers that are guaranteed as to principal or interest by the U.S. Government,
its agencies or institutions; and (iii) obligations issued or guaranteed by U.S.
government agencies and instrumentalities that are not supported by the full
faith and credit of the U.S. Government or a right to borrow from the U.S.
Treasury, such as securities issued by the FNMA and FHLMC, and governmental
collateralized mortgage obligations ("CMOs"). The maturities of the U.S.
Government securities listed in paragraphs (i) and (ii) above usually range from
three months to 30 years. Such securities, except GNMA certificates, normally
provide for periodic payments of interest in fixed amount with principal
payments at maturity or specified call dates.
U.S. Government securities also include zero coupon securities and
principal-only securities and certain stripped mortgage-related securities. Zero
coupon securities are described in more detail in "Zero Coupon Securities"
below, and stripped mortgage-related securities and principal-only securities
are described in more detail in "Mortgage-Related Securities and Other
Asset-Backed Securities -Stripped Mortgage-Related Securities" above. In
addition, other U.S. Government agencies and instrumentalities have issued
stripped securities that are similar to SMRS.
Inflation-protected securities, or IPS, such as Treasury
Inflation-Protected Securities, or TIPS, are fixed income securities whose
principal value is periodically adjusted according to the rate of inflation. If
the index measuring inflation falls, the principal value of these securities
will be adjusted downward, and consequently the interest payable on these
securities (calculated with respect to a smaller principal amount) will be
reduced. Repayment of the original bond principal upon maturity (as adjusted for
inflation) is guaranteed in the case of U.S. Treasury inflation-protected
securities. For bonds that do not provide a similar guarantee, the adjusted
principal value of the bond repaid at maturity may be less than the original
principal.
Inflation-protected securities tend to react to changes in real
interest rates. In general, the price of an inflation-protected debt security
can fall when real interest rates rise, and can rise when real interest rates
fall. In addition, the value of inflation-protected securities may fluctuate
based on fluctuations in expectations of inflation. Interest payments on
inflation-protected debt securities can be unpredictable and will vary as the
principal and/or interest is adjusted for inflation.
TIPS, which are issued by the U.S Treasury, use the Consumer Price
Index for Urban Consumers, or the CPI, as the inflation measure. The principal
of a TIPS increases with inflation and decreases with deflation, as measured by
the CPI. When a TIPS matures, the holder is paid the adjusted principal or
original principal, whichever is greater. TIPS pay interest twice a year, at a
fixed rate, which is determined by auction at the time the TIPS are issued. The
rate is applied to the adjusted principal; so, like the principal, interest
payments rise with inflation and fall with deflation. TIPS are issued in terms
of 5, 10, and 20 years.
Guarantees of securities by the U.S. Government or its agencies or
instrumentalities guarantee only the payment of principal and interest on the
securities, and do not guarantee the securities' yield or value or the yield or
value of the shares of the Fund that holds the securities.
U.S. Government securities are considered among the safest of
fixed-income investments. As a result, however, their yields are generally lower
than the yields available from other fixed-income securities.
Variable, Floating and Inverse Floating Rate Securities
-------------------------------------------------------
These securities have interest rates that are reset at periodic
intervals, usually by reference to some interest rate index or market interest
rate. Some of these securities are backed by pools of mortgage loans. Although
the rate adjustment feature may act as a buffer to reduce sharp changes in the
value of these securities, they are still subject to changes in value based on
changes in market interest rates or changes in the issuer's creditworthiness.
Because the interest rate is reset only periodically, changes in the interest
rate on these securities may lag behind changes in prevailing market interest
rates. Also, some of these securities (or the underlying mortgages) are subject
to caps or floors that limit the maximum change in the interest rate during a
specified period or over the life of the security.
Zero Coupon Securities
----------------------
A zero coupon security pays no interest to its holder during its life.
An investor acquires a zero coupon security at a discounted price from the face
value of the security, which is generally based upon its present value, and
which, depending upon the time remaining until maturity, may be significantly
less than its face value (sometimes referred to as a "deep discount" price).
Upon maturity of the zero coupon security, the investor receives the face value
of the security.
A Fund may invest in zero coupon Treasury securities, which consist of
Treasury bills or the principal components of U.S. Treasury bonds or notes. A
Fund may also invest in zero coupon securities issued by U.S. Government
agencies or instrumentalities that are supported by the full faith and credit of
the United States, which consist of the principal components of securities of
U.S. Government agencies or instrumentalities.
Currently, the only U.S. Treasury security issued without coupons is
the Treasury bill. The zero coupon securities purchased by the Fund may consist
of principal components held in STRIPS form issued through the U.S. Treasury's
STRIPS program, which permits the beneficial ownership of the component to be
recorded directly in the Treasury book-entry system. In addition, in the last
few years a number of banks and brokerage firms have separated ("stripped") the
principal portions ("corpus") from the coupon portions of the U.S. Treasury
bonds and notes and sold them separately in the form of receipts or certificates
representing undivided interests in these instruments (which instruments are
generally held by a bank in a custodial or trust account).
Because zero coupon securities trade at a discount from their face or
par value but pay no periodic interest, they are subject to greater fluctuations
of market value in response to changing interest rates than debt obligations of
comparable maturities which make periodic distributions of interest.
Current federal tax law requires that a holder (such as the Fund) of a
zero coupon security accrue a portion of the discount at which the security was
purchased as income each year even though the holder receives no interest
payment in cash on the security during the year (generally referred to as
"original issue discount" or "OID"). As a result, in order to make the
distributions necessary for the Fund not to be subject to federal income or
excise taxes, the Fund may be required to pay out as an income distribution each
year an amount, obtained by liquidation of portfolio securities or borrowings if
necessary, greater than the total amount of cash that the Fund has actually
received as interest during the year. A Fund believes, however, that it is
highly unlikely that it would be necessary to liquidate portfolio securities or
borrow money in order to make such required distributions or to meet its
investment objective.
Certain Risk Considerations
---------------------------
The value of the Funds' shares will be influenced by the factors that
generally affect securities, such as the economic and political outlook,
earnings, dividends and the supply and demand for various classes of securities.
There can be, of course, no assurance that a Fund's investment objective will be
achieved.
Investments in Lower-Rated and Unrated Instruments. Certain Funds may
invest in lower-rated securities (Global Bond), some substantially (High
Income), which may include securities having the lowest rating for
non-subordinated debt securities (i.e., rated C by Moody's or CCC or lower by
S&P & Fitch) and unrated securities of equivalent investment quality. Debt
securities with such a rating are considered by the rating organizations to be
subject to greater risk of loss of principal and interest than higher-rated
securities and are considered to be predominantly speculative with respect to
the issuer's capacity to pay interest and repay principal, which may in any case
decline during sustained periods of deteriorating economic conditions or rising
interest rates. These securities are considered to have extremely poor prospects
of ever attaining any real investment standing, to have a current identifiable
vulnerability to default, to be unlikely to have the capacity to pay interest
and repay principal when due in the event of adverse business, financial or
economic conditions, and/or to be in default or not current in the payment of
interest or principal.
Lower-rated securities generally are considered to be subject to
greater market risk than higher-rated securities in times of deteriorating
economic conditions. In addition, lower-rated securities may be more susceptible
to real or perceived adverse economic and competitive industry conditions than
investment grade securities, although the market values of securities rated
below investment grade and comparable unrated securities tend to react less to
fluctuations in interest rate levels than do those of higher-rated securities.
The market for lower-rated securities may be thinner and less active than that
for higher-quality securities, which can adversely affect the prices at which
these securities can be sold. To the extent that there is no established
secondary market for lower-rated securities, the Adviser may experience
difficulty in valuing such securities and, in turn, a Fund's assets. In
addition, adverse publicity and investor perceptions about lower-rated
securities, whether or not based on fundamental analysis, may tend to decrease
the market value and liquidity of such lower-rated securities. Transaction costs
with respect to lower-rated securities may be higher, and in some cases
information may be less available, than is the case with investment grade
securities.
Many fixed-income securities, including certain U.S. corporate
fixed-income securities in which a Fund may invest, contain call or buy-back
features that permit the issuer of the security to call or repurchase it. Such
securities may present risks based on payment expectations. If an issuer
exercises such a "call option" and redeems the security, the Fund may have to
replace the called security with a lower yielding security, resulting in a
decreased rate of return for the Fund.
In seeking to achieve a Fund's investment objectives, there will be
times, such as during periods of rising interest rates, when depreciation and
realization of capital losses on securities in the Fund's portfolio will be
unavoidable. Moreover, medium and lower rated securities and non-rated
securities of comparable quality may be subject to wider fluctuations in yield
and market values than higher-rated securities under certain market conditions.
Such fluctuations after a security is acquired do not affect the cash income
received from that security but are reflected in the NAV of the Fund.
U.S. Corporate Fixed-Income Securities. The U.S. corporate
fixed-income securities in which High Income will invest may include securities
issued in connection with corporate restructurings such as takeovers or
leveraged buyouts, which may pose particular risks. Securities issued to finance
corporate restructurings may have special credit risks due to the highly
leveraged conditions of the issuer. In addition, such issuers may lose
experienced management as a result of the restructuring. Finally, the market
price of such securities may be more volatile to the extent that expected
benefits from the restructuring do not materialize. A Fund may also invest in
U.S. corporate fixed-income securities that are not current in the payment of
interest or principal or are in default, so long as the Adviser believes such
investment is consistent with the Fund's investment objectives. A Fund's rights
with respect to defaults on such securities will be subject to applicable U.S.
bankruptcy, moratorium and other similar laws.
Risks of Investments in Foreign Securities. Foreign issuers are
subject to accounting and financial standards and requirements that differ, in
some cases significantly, from those applicable to U.S. issuers. In particular,
the assets and profits appearing on the financial statements of a foreign issuer
may not reflect its financial position or results of operations in the way they
would be reflected had the financial statement been prepared in accordance with
U.S. generally accepted accounting principles. In addition, for an issuer that
keeps accounting records in local currency, inflation accounting rules in some
of the countries in which the Fund may invest require, for both tax and
accounting purposes, that certain assets and liabilities be restated on the
issuer's balance sheet in order to express items in terms of currency of
constant purchasing power. Inflation accounting may indirectly generate losses
or profits. Consequently, financial data may be materially affected by
restatements for inflation and may not accurately reflect the real condition of
those issuers and securities markets. Substantially less information is publicly
available about certain non-U.S. issuers than is available about U.S. issuers.
Expropriation, confiscatory taxation, nationalization, political,
economic or social instability or other similar developments, such as military
coups, have occurred in the past in countries in which the Fund may invest and
could adversely affect the Fund's assets should these conditions or events
recur.
Foreign investment in certain foreign securities is restricted or
controlled to varying degrees. These restrictions or controls may at times limit
or preclude foreign investment in certain foreign securities and increase the
costs and expenses of the Fund. Certain countries in which the Fund may invest
require governmental approval prior to investments by foreign persons, limit the
amount of investment by foreign persons in a particular issuer, limit the
investment by foreign persons only to a specific class of securities of an
issuer that may have less advantageous rights than the classes available for
purchase by domiciliaries of the countries and/or impose additional taxes on
foreign investors.
Certain countries other than those on which the Fund may focus its
investments may require governmental approval for the repatriation of investment
income, capital or the proceeds of sales of securities by foreign investors. In
addition, if a deterioration occurs in a country's balance of payments, the
country could impose temporary restrictions on foreign capital remittances.
Income from certain investments held by the Fund could be reduced by
foreign income taxes, including withholding taxes. It is impossible to determine
the effective rate of foreign tax in advance. A Fund's NAV may also be affected
by changes in the rates or methods of taxation applicable to the Fund or to
entities in which the Fund has invested. The Adviser generally will consider the
cost of any taxes in determining whether to acquire any particular investments,
but can provide no assurance that the tax treatment of investments held by the
Fund will not be subject to change.
Foreign Currency Transactions. A Fund may invest, sometimes
substantially, in securities denominated in foreign currencies and a
corresponding portion of the Fund's revenues will be received in such
currencies. In addition, a Fund may conduct foreign currency transactions for
hedging and non-hedging purposes on a spot (i.e., cash) basis or through the use
of derivatives transactions, such as forward currency exchange contracts,
currency futures and options thereon, and options on currencies as described
above. The dollar equivalent of the Fund's net assets and distributions will be
adversely affected by reductions in the value of certain foreign currencies
relative to the U.S. Dollar. Such changes will also affect the Fund's income. A
Fund will, however, have the ability to attempt to protect itself against
adverse changes in the values of foreign currencies by engaging in certain of
the investment practices listed above. While the Fund has this ability, there is
no certainty as to whether, and to what extent, the Fund will engage in these
practices.
Currency exchange rates may fluctuate significantly over short periods
of time causing, along with other factors, the Fund's NAV to fluctuate. Currency
exchange rates generally are determined by the forces of supply and demand in
the foreign exchange markets and the relative merits of investments in different
countries, actual or anticipated changes in interest rates and other complex
factors, as seen from an international perspective. Currency exchange rates also
can be affected unpredictably by the intervention of U.S. or foreign governments
or central banks, or the failure to intervene, or by currency controls or
political developments in the United States or abroad. To the extent the Fund's
total assets adjusted to reflect the Fund's net position after giving effect to
currency transactions is denominated or quoted in the currencies of foreign
countries, the Fund will be more susceptible to the risk of adverse economic and
political developments within those countries.
A Fund will incur costs in connection with conversions between various
currencies. A Fund may hold foreign currency received in connection with
investments when, in the judgment of the Adviser, it would be beneficial to
convert such currency into U.S. Dollars at a later date, based on anticipated
changes in the relevant exchange rate. If the value of the foreign currencies in
which the Fund receives its income falls relative to the U.S. Dollar between
receipt of the income and the making of Fund distributions, the Fund may be
required to liquidate securities in order to make distributions if the Fund has
insufficient cash in U.S. Dollars to meet distribution requirements. Similarly,
if an exchange rate declines between the time the Fund incurs expenses in U.S.
Dollars and the time cash expenses are paid, the amount of the currency required
to be converted into U.S. Dollars in order to pay expenses in U.S. Dollars could
be greater than the equivalent amount of such expenses in the currency at the
time they were incurred.
If the value of the foreign currencies in which the Fund receives
income falls relative to the U.S. Dollar between receipt of the income and the
making of Fund distributions, the Fund may be required to liquidate securities
in order to make distributions if the Fund has insufficient cash in U.S. Dollars
to meet the distribution requirements that the Fund must satisfy to qualify as a
regulated investment company for federal income tax purposes. Similarly, if the
value of a particular foreign currency declines between the time the Fund incurs
expenses in U.S. Dollars and the time cash expenses are paid, the amount of the
currency required to be converted into U.S. Dollars in order to pay expenses in
U.S. Dollars could be greater than the equivalent amount of such expenses in the
currency at the time they were incurred. In light of these risks, the Fund may
engage in certain currency hedging transactions, which themselves, involve
certain special risks. See "Additional Investment Policies and Practices,"
above.
Additional Risks of Options on Forward Currency Exchange Contracts and Options
on Foreign Currencies
------------------------------------------------------------------------------
Unlike transactions entered into by a Fund in futures contracts,
options on foreign currencies and forward currency exchange contracts are not
traded on contract markets regulated by the CFTC or (with the exception of
certain foreign currency options) by the Commission. To the contrary, such
instruments are traded through financial institutions acting as market-makers,
although foreign currency options are also traded on certain national securities
exchanges, such as the Philadelphia Stock Exchange and the Chicago Board Options
Exchange, subject to Commission regulation. Similarly, options on currencies may
be traded over-the-counter. In an over-the-counter trading environment, many of
the protections afforded to exchange participants will not be available. For
example, there are no daily price fluctuation limits, and adverse market
movements could therefore continue to an unlimited extent over a period of time.
Although the purchaser of an option cannot lose more than the amount of the
premium plus related transaction costs, this entire amount could be lost.
Moreover, the option writer and a trader of forward currency exchange contracts
could lose amounts substantially in excess of their initial investments, due to
the margin and collateral requirements associated with such positions.
Options on foreign currencies traded on national securities exchanges
are within the jurisdiction of the Commission, as are other securities traded on
such exchanges. As a result, many of the protections provided to traders on
organized exchanges will be available with respect to such transactions. In
particular, all foreign currency option positions entered into on a national
securities exchange are cleared and guaranteed by the Options Clearing
Corporation ("OCC"), thereby reducing the risk of counterparty default. Further,
a liquid secondary market in options traded on a national securities exchange
may be more readily available than in the over-the-counter market, potentially
permitting the Fund to liquidate open positions at a profit prior to exercise or
expiration, or to limit losses in the event of adverse market movements.
The purchase and sale of exchange-traded foreign currency options,
however, is subject to the risks of the availability of a liquid secondary
market described above, as well as the risks regarding adverse market movements,
margining of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effects of other
political and economic events. In addition, exchange-traded options on foreign
currencies involve certain risks not presented by the over-the-counter market.
For example, exercise and settlement of such options must be made exclusively
through the OCC, which has established banking relationships in applicable
foreign countries for this purpose. As a result, the OCC may, if it determines
that foreign governmental restrictions or taxes would prevent the orderly
settlement of foreign currency option exercises, or would result in undue
burdens on the OCC or its clearing member, impose special procedures on exercise
and settlement, such as technical changes in the mechanics of delivery of
currency, the fixing of dollar settlement prices or prohibitions, on exercise.
In addition, options on U.S. Government Securities, futures contracts, options
on futures contracts, forward currency exchange contracts and options on foreign
currencies may be traded on foreign exchanges. Such transactions are subject to
the risk of governmental actions affecting trading in or the prices of foreign
currencies or securities. The value of such positions also could be adversely
affected by (i) other complex foreign political and economic factors, (ii)
lesser availability than in the United States of data on which to make trading
decisions, (iii) delays in the Fund's ability to act upon economic events
occurring in foreign markets during nonbusiness hours in the United States, (iv)
the imposition of different exercise and settlement terms and procedures and
margin requirements than in the United States, and (v) lesser trading volume
period.
Sovereign Debt Obligations. No established secondary markets may exist
for many of the Sovereign Debt Obligations in which a Fund will invest. Reduced
secondary market liquidity may have an adverse effect on the market price and
the Fund's ability to dispose of particular instruments when necessary to meet
its liquidity requirements or in response to specific economic events such as a
deterioration in the creditworthiness of the issuer. Reduced secondary market
liquidity for certain Sovereign Debt Obligations may also make it more difficult
for the Fund to obtain accurate market quotations for the purpose of valuing its
portfolio. Market quotations are generally available on many Sovereign Debt
Obligations only from a limited number of dealers and may not necessarily
represent firm bids of those dealers or prices for actual sales.
By investing in Sovereign Debt Obligations, the Fund will be exposed
to the direct or indirect consequences of political, social and economic changes
in various countries. Political changes in a country may affect the willingness
of a foreign government to make or provide for timely payments of its
obligations. The country's economic status, as reflected, among other things, in
its inflation rate, the amount of its external debt and its gross domestic
product, will also affect the government's ability to honor its obligations.
Many countries providing investment opportunities for the Fund have
experienced substantial, and in some periods extremely high, rates of inflation
for many years. Inflation and rapid fluctuations in inflation rates have had and
may continue to have adverse effects on the economies and securities markets of
certain of these countries. In an attempt to control inflation, wage and price
controls have been imposed in certain countries.
Investing in Sovereign Debt Obligations involves economic and
political risks. The Sovereign Debt Obligations in which the Fund will invest in
most cases pertain to countries that are among the world's largest debtors to
commercial banks, foreign governments, international financial organizations and
other financial institutions. In recent years, the governments of some of these
countries have encountered difficulties in servicing their external debt
obligations, which led to defaults on certain obligations and the restructuring
of certain indebtedness. Restructuring arrangements have included, among other
things, obtaining new credit to finance interest payments. Certain governments
have not been able to make payments of interest on or principal of Sovereign
Debt Obligations as those payments have come due. Obligations arising from past
restructuring agreements may affect the economic performance and political and
social stability of those issuers.
Central banks and other governmental authorities which control the
servicing of Sovereign Debt Obligations may not be willing or able to permit the
payment of the principal or interest when due in accordance with the terms of
the obligations. As a result, the issuers of Sovereign Debt Obligations may
default on their obligations. Defaults on certain Sovereign Debt Obligations
have occurred in the past. Holders of certain Sovereign Debt Obligations may be
requested to participate in the restructuring and rescheduling of these
obligations and to extend further loans to the issuers. The interests of holders
of Sovereign Debt Obligations could be adversely affected in the course of
restructuring arrangements or by certain other factors referred to below.
Furthermore, some of the participants in the secondary market for Sovereign Debt
Obligations may also be directly involved in negotiating the terms of these
arrangements and may therefore have access to information not available to other
market participants.
The ability of governments to make timely payments on their
obligations is likely to be influenced strongly by the issuer's balance of
payments, including export performance, and its access to international credits
and investments. A country whose exports are concentrated in a few commodities
could be vulnerable to a decline in the international prices of one or more of
those commodities. Increased protectionism on the part of a country's trading
partners could also adversely affect the country's exports and diminish its
trade account surplus, if any.
To the extent that a country receives payment for its exports in
currencies other than dollars, its ability to make debt payments denominated in
dollars could be adversely affected. To the extent that a country develops a
trade deficit, it will need to depend on continuing loans from foreign
governments, multilateral organizations or private commercial banks, aid
payments from foreign governments and on inflows of foreign investment. The
access of a country to these forms of external funding may not be certain, and a
withdrawal of external funding could adversely affect the capacity of a
government to make payments on its obligations. In addition, the cost of
servicing debt obligations can be affected by a change in international interest
rates since the majority of these obligations carry interest rates that are
adjusted periodically based upon international rates.
Another factor bearing on the ability of a country to repay Sovereign
Debt Obligations is the level of the country's international reserves.
Fluctuations in the level of these reserves can affect the amount of foreign
exchange readily available for external debt payments and, thus, could have a
bearing on the capacity of the country to make payments in its Sovereign Debt
Obligations.
A Fund is permitted to invest in Sovereign Debt Obligations that are
not current in the payment of interest or principal or are in default, so long
as the Adviser believes it to be consistent with the Fund's investment
objectives. A Fund may have limited legal recourse in the event of a default
with respect to certain Sovereign Debt Obligations it holds. For example,
remedies from defaults on certain Sovereign Debt Obligations, unlike those on
private debt, must, in some cases, be pursued in the courts of the defaulting
party itself. Legal recourse therefore may be significantly diminished.
Bankruptcy, moratorium and other similar laws applicable to issuers of Sovereign
Debt Obligations may be substantially different from those applicable to issuers
of private debt obligations. The political context, expressed as the willingness
of an issuer of Sovereign Debt Obligations to meet the terms of the debt
obligation, for example, is of considerable importance. In addition, no
assurance can be given that the holders of commercial bank debt will not contest
payments to the holders of securities issued by foreign governments in the event
of default under commercial bank loan agreements.
Effects of Borrowing and Use of Leverage
----------------------------------------
Certain of the Funds (Diversified Yield, Global Bond and High Income)
may use borrowings for investment purposes. A Fund may maintain borrowings from
banks or as otherwise permitted under Commission rules or exemptive orders with
the Fund or the Adviser in an amount of money representing approximately
one-third of the Fund's total assets less liabilities (other than the amount
borrowed). A Fund's loan agreements provide for additional borrowings and for
repayments and reborrowings from time to time, and the Fund expects to effect
borrowings and repayments at such times and in such amounts as will maintain
investment leverage in an amount approximately equal to its borrowing target.
The loan agreements provide for a selection of interest rates that are based on
the bank's short-term funding costs in the U.S. and London markets.
Borrowings by the Fund result in leveraging of the Fund's shares of
common stock. The proceeds of such borrowings will be invested in accordance
with the Fund's investment objective and policies. The Adviser anticipates that
the difference between the interest expense paid by the Fund on borrowings and
the rates received by the Fund from its investment portfolio issuers will
provide the Fund's shareholders with a potentially higher yield.
Utilization of leverage, which is usually considered speculative,
however, involves certain risks to the Fund's shareholders. These include a
higher volatility of the NAV of the Fund's shares of common stock and the
relatively greater effect on the NAV of the shares caused by favorable or
adverse changes in currency exchange rates. So long as the Fund is able to
realize a net return on the leveraged portion of its investment portfolio that
is higher than the interest expense paid on borrowings, the effect of leverage
will be to cause the Fund's shareholders to realize higher current net
investment income than if the Fund were not leveraged. However, to the extent
that the interest expense on borrowings approaches the net return on the
leveraged portion of the Fund's investment portfolio, the benefit of leverage to
the Fund's shareholders will be reduced, and if the interest expense on
borrowings were to exceed the net return to shareholders, the Fund's use of
leverage would result in a lower rate of return than if the Fund were not
leveraged. Similarly, the effect of leverage in a declining market could be a
greater decrease in NAV per share than if the Fund were not leveraged. In an
extreme case, if the Fund's current investment income were not sufficient to
meet the interest expense on borrowings, it could be necessary for the Fund to
liquidate certain of its investments, thereby reducing the NAV of the Fund's
shares.
The Funds may also use leverage for investment purposes by entering
into transactions such as reverse repurchase agreements, forward contracts and
dollar rolls. This means that the Fund uses the cash proceeds made available
during the term of these transactions to make investments in other fixed-income
securities. The use of leverage is considered speculative and involves certain
risks to the Fund's shareholders. These include a higher volatility of the
Fund's NAV and the relatively greater effect on the NAV caused by favorable or
adverse changes in market conditions or interest rates. So long as the Fund is
able to realize a net return on its investment portfolio that is higher than the
carrying costs of these transactions, the effect of leverage will be to cause
the Fund's shareholders to realize higher current net income than if the Fund
were not leveraged. To the extent that the carrying costs of these transactions
approaches the net return on the Fund's investment portfolio, or exceed it, the
benefit to the Fund's shareholders will be reduced or result in a lower rate of
return than if the Fund were not leveraged.
Under the 1940 Act, the Fund is not permitted to borrow unless
immediately after such borrowing there is "asset coverage," as that term is
defined and used in the 1940 Act, of at least 300% for all borrowings of the
Fund. In addition, under the 1940 Act, in the event asset coverage falls below
300%, the Fund must within three days reduce the amount of its borrowing to such
an extent that the asset coverage of its borrowings is at least 300%. Assuming,
for example, outstanding borrowings representing not more than one-third of the
Fund's total assets less liabilities (other than such borrowings), the asset
coverage of the Fund's portfolio would be 300%; while outstanding borrowings
representing of the Fund's portfolio 25% of the Fund's total assets less
liabilities (other than such borrowings), the asset coverage of the Fund's
portfolio would be 400%. A Fund will maintain asset coverage of outstanding
borrowings of at least 300% and if necessary will, to the extent possible,
reduce the amounts borrowed by making repayments from time to time in order to
do so. Such repayments could require the Fund to sell portfolio securities at
times considered disadvantageous by the Adviser and such sales could cause the
Fund to incur related transaction costs and to realize taxable gains.
Fundamental Investment Policies
-------------------------------
The following investment restrictions may not be changed without
approval of the vote of a majority of a Fund's outstanding voting securities,
which means the affirmative vote of (1) 67% or more of the shares of the Fund
represented at a meeting at which more than 50% of the outstanding shares are
present in person or by proxy or (2) more than 50% of the outstanding shares of
the Fund, whichever is less.
As a matter of fundamental policy, a Fund may not:
1. concentrate investments in an industry, as concentration may be
defined under the 1940 Act or the rules and regulations
thereunder (as such statute, rules or regulations may be amended
from time to time) or by guidance regarding, interpretations of,
or exemptive orders under, the 1940 Act or the rules or
regulations thereunder published by appropriate regulatory
authorities;
2. issue any senior security (as that term is defined in the 1940
Act) or borrow money, except to the extent permitted by the 1940
Act or the rules and regulations thereunder (as such statute,
rules or regulations may be amended from time to time) or by
guidance regarding, or interpretations of, or exemptive orders
under, the 1940 Act or the rules or regulations thereunder
published by appropriate regulatory authorities. For the purposes
of this restriction, margin and collateral arrangements,
including, for example, with respect to permitted borrowings,
options, futures contracts, options on futures contracts and
other derivatives such as swaps, are not deemed to be the
issuance of a senior security;
3. make loans except through (i) the purchase of debt obligations in
accordance with its investment objective and policies; (ii) the
lending of portfolio securities; (iii) the use of repurchase
agreements; or (iv) the making of loans to affiliated funds as
permitted under the 1940 Act, the rules and regulations
thereunder (as such statutes, rule or regulations may be amended
from time to time), or by guidance regarding, and interpretations
of, or exemptive orders under, the 1940 Act;
4. purchase or sell real estate except that it may dispose of real
estate acquired as a result of the ownership of securities or
other instruments. This restriction does not prohibit the Fund
from investing in securities or other instruments backed by real
estate or in securities of companies engaged in the real estate
business;
5. purchase or sell commodities regulated by the Commodity Futures
Trading Commission under the Commodity Exchange Act or
commodities contracts except for futures contracts and options on
futures contracts; or
6. act as an underwriter of securities, except that the Fund may
acquire restricted securities under circumstances in which, if
such securities were sold, the Fund might be deemed to be an
underwriter for purposes of the Securities Act.
As a matter of fundamental policy, each of Diversified Yield and
Intermediate Bond is diversified (as that term is defined in the 1940 Act). This
means that at least 75% of the Fund's assets consist of:
o Cash or cash items;
o Government securities;
o Securities of other investment companies; and
o Securities of any one issuer that represent not more than 10% of the
outstanding voting securities of the issuer of the securities and not
more than 5% of the total assets of the Fund.
As a matter of fundamental policy, each of Global Bond and High Income
is a "non-diversified" investment company, which means the Fund is not limited
in the proportion of its assets that may be invested in the securities of a
single issuer. This policy may be changed without a shareholder vote. However,
the Fund intends to limit its investments so as to qualify to be taxed as a
"regulated investment company" for purposes of the Internal Revenue Code of
1986, as amended (the "Code"), which will relieve the Fund of any liability for
federal income tax to the extent its earnings are distributed to shareholders.
See "Dividends, Distributions and Taxes." To so qualify, among other
requirements, the Fund will limit its investment so that, at the close of each
quarter of the taxable year, (i) not more than 25% of the Fund's total assets
will be invested in the securities of a single issuer, and (ii) with respect to
50% of its total assets, not more than 5% of its total assets will be invested
in the securities of a single issuer and the Fund will not own more than 10% of
the outstanding voting securities of a single issuer. A Fund's investments in
U.S. Government securities are not subject to these limitations.
Because Global Bond and High Income are non-diversified investment
companies, they may invest in a smaller number of individual issuers than a
diversified investment company, and an investment in such Funds may, under
certain circumstances, present greater risk to an investor than an investment in
a diversified investment company. Foreign government securities are not treated
like U.S. Government securities for purposes of the diversification tests
described in the preceding paragraph, but instead are subject to these tests in
the same manner as the securities of non-governmental issuers. In this regard
sovereign debt obligations issued by different issuers located in the same
country are often treated as issued by a single issuer for purposes of these
diversification tests. Certain issuers of structured securities and loan
participations may be treated as separate issuers for the purposes of these
tests.
Non-Fundamental Investment Policy
---------------------------------
The following is a description of an operating policy that the Fund
has adopted but that is not fundamental and is subject to change without
shareholder approval.
A Fund may not purchase securities on margin, except (i) as otherwise
provided under rules adopted by the Commission under the 1940 Act or by guidance
regarding the 1940 Act, or interpretations thereof, and (ii) that the Fund may
obtain such short-term credits as are necessary for the clearance of portfolio
transactions, and the Fund may make margin payments in connection with futures
contracts, options, forward contracts, swaps, caps, floors, collars and other
financial instruments.
--------------------------------------------------------------------------------
MANAGEMENT OF THE FUNDS
--------------------------------------------------------------------------------
Board of Directors Information
------------------------------
The business and affairs of each Fund is managed under the direction
of each Fund's Board, which is composed of the same Directors. Certain
information concerning the Funds' Directors is set forth below.
PORTFOLIOS
IN FUND OTHER
NAME, ADDRESS*, COMPLEX DIRECTORSHIPS
AGE AND PRINCIPAL OCCUPATION(S) OVERSEEN HELD
(YEAR FIRST ELECTED**) DURING PAST 5 YEARS BY DIRECTOR BY DIRECTOR
--------------------------- ------------------------------------------ ----------- -----------
DISINTERESTED DIRECTORS
Chairman of the Board
William H. Foulk, Jr., +, # Investment Adviser and an Independent 86 None
77 Consultant. Previously, he was Senior
(1998 - Intermediate Bond) Manager of Barrett Associates, Inc., a
(1992 - Global Bond) registered investment adviser, with which
(1995 - High Income) he had been associated since prior to
(1995 - Diversified Yield) 2005. He was formerly Deputy Comptroller
and Chief Investment Officer of the State
of New York and, prior thereto, Chief
Investment Officer of the New York Bank
for Savings.
John H. Dobkin, # Consultant. Formerly, President of Save 84 None
67 Venice, Inc. (preservation organization)
(1998 - Intermediate Bond) from 2001 - 2002, Senior Advisor from June
(1992 - Global Bond) 1999 - June 2000 and President of Historic
(1993 - High Income) Hudson Valley (historic preservation)
(1995 - Diversified Yield) from December 1989 - May 1999.
Previously, Director of the National
Academy of Design.
Michael J. Downey, # Private Investor since January 2004. 84 Asia Pacific Fund, Inc., The
66 Formerly, managing partner of Lexington Merger Fund and Prospect
(2005 - Intermediate Bond) Capital, LLC (investment advisory firm) Acquisition Corp. (financial
(2005 - Global Bond) from December 1997 until December 2003. services)
(2005 - High Income) From 1987 until 1993, Chairman and CEO of
(2005 - Diversified Yield) Prudential Mutual Fund Management.
D. James Guzy, # Chairman of the Board of PLX Technology 84 Cirrus Logic Corporation
73 (semi-conductors) and of SRC Computers (semi-conductors)
(2005 - Intermediate Bond) Inc., with which he has been associated
(2005 - Global Bond) since prior to 2005. He was formerly a
(2005 - High Income) Director of Intel Corporation
(2005 - Diversified Yield) (semi-conductors) until May 2008.
Nancy P. Jacklin, # Professorial Lecturer at the Johns Hopkins 84 None
61 School of Advanced International Studies
(2006 - Intermediate Bond) in the 2009-2010 academic year. Formerly,
(2006 - Global Bond) U.S. Executive Director of the
(2006 - High Income) International Monetary Fund (December
(2006 - Diversified Yield) 2002-May 2006); Partner, Clifford Chance
(1992-2002); Sector Counsel,
International Banking and Finance, and
Associate General Counsel, Citicorp
(1985-1992); Assistant General Counsel
(International), Federal Reserve Board
of Governors (1982-1985); and Attorney
Advisor, U.S. Department of the
Treasury (1973-1982). Member of the
Bar of the District of Columbia and of
New York; and member of the Council on
Foreign Relations.
Garry L. Moody, # Formerly, Partner, Deloitte & Touche LLP, 83 None
57 Vice Chairman, and U.S. and Global
(2008 - Intermediate Bond) Managing Partner, Investment Management
(2008 - Global Bond) Services Group 1995 - 2008.
(2007 - High Income)
(2008 - Diversified Yield)
Marshall C. Turner, Jr., # Interim CEO of MEMC Electronic Materials, 84 Xilinx, Inc. (programmable
68 Inc. (semi-conductor and solar cell logic semi-conductors) and
(2005 - Intermediate Bond) substrates) from November 2008 until March MEMC Electronic Materials,
(2005 - Global Bond) 2, 2009. He was Chairman and CEO of Inc.
(2005 - High Income) Dupont Photomasks, Inc. (components of
(2005 - Diversified Yield) semi-conductor manufacturing), 2003-2005,
and President and CEO, 2005-2006, after
the company was renamed Toppan Photomasks,
Inc.
Earl D. Weiner, # Of Counsel, and Partner prior to January 84 None
70 2007, of the law firm Sullivan & Cromwell
(2007 - Intermediate Bond) LLP, and member of ABA Federal Regulation
(2007 - Global Bond) of Securities Committee Task Force on Fund
(2007 - High Income) Director's Guidebook.
(2007 - Diversified Yield)
----------
* The address for each of the Fund's disinterested Directors is c/o
AllianceBernstein L.P., Attention: Philip L. Kirstein, 1345 Avenue of the
Americas, New York, NY 10105.
** There is no stated term of office for the Funds' Directors.
+ Member of the Fair Value Pricing Committee.
# Member of the Audit Committee, the Governance and Nominating Committee and
the Independent Directors Committee.
Each Fund's Board of Directors has four standing committees of the
Board -- an Audit Committee, a Governance and Nominating Committee, a Fair Value
Pricing Committee and an Independent Directors Committee. The members of the
Audit and Governance, Nominating, Fair Value Pricing and Independent Directors
Committees are identified above.
The function of the Audit Committee is to assist the Board of
Directors in its oversight of the Fund's financial reporting process. The Audit
Committee of Intermediate Bond, Diversified Yield, Global Bond and High Income
met twice, twice, twice and twice, respectively, during the Fund's most recently
completed fiscal year.
The function of the Governance and Nominating Committee includes the
nomination of persons to fill any vacancies or newly created positions on the
Board of Directors. The Governance and Nominating Committee of Intermediate
Bond, Diversified Yield, Global Bond and High Income met four, four, four and
four times, respectively, during the Fund's most recently completed fiscal year.
The Governance and Nominating Committee has a charter and, pursuant to
the charter, the Governance and Nominating Committee will consider candidates
for nomination as a director submitted by a shareholder or group of shareholders
who have beneficially owned at least 5% of the Fund's common stock or shares of
beneficial interest for at least two years at the time of submission and who
timely provide specified information about the candidates and the nominating
shareholder or group. To be timely for consideration by the Governance and
Nominating Committee, the submission, including all required information, must
be submitted in writing to the attention of the Secretary at the principal
executive offices of the Fund not less than 120 days before the date of the
proxy statement for the previous year's annual meeting of shareholders. If the
Fund did not hold an annual meeting of shareholders in the previous year, the
submission must be delivered or mailed and received within a reasonable amount
of time before the Fund begins to print and mail its proxy materials. Public
notice of such upcoming annual meeting of shareholders may be given in a
shareholder report or other mailing to shareholders or by other means deemed by
the Governance and Nominating Committee or the Board to be reasonably calculated
to inform shareholders.
Shareholders submitting a candidate for consideration by the
Governance and Nominating Committee must provide the following information to
the Governance and Nominating Committee: (i) a statement in writing setting
forth (A) the name, date of birth, business address and residence address of the
candidate; (B) any position or business relationship of the candidate, currently
or within the preceding five years, with the shareholder or an associated person
of the shareholder as defined below; (C) the class or series and number of all
shares of the Fund owned of record or beneficially by the candidate; (D) any
other information regarding the candidate that is required to be disclosed about
a nominee in a proxy statement or other filing required to be made in connection
with the solicitation of proxies for election of Directors pursuant to Section
20 of the 1940 Act and the rules and regulations promulgated thereunder; (E)
whether the shareholder believes that the candidate is or will be an "interested
person" of the Fund (as defined in the 1940 Act) and, if believed not to be an
"interested person," information regarding the candidate that will be sufficient
for the Fund to make such determination; and (F) information as to the
candidate's knowledge of the investment company industry, experience as a
director or senior officer of public companies, directorships on the boards of
other registered investment companies and educational background; (ii) the
written and signed consent of the candidate to be named as a nominee and to
serve as a Director if elected; (iii) the written and signed agreement of the
candidate to complete a directors' and officers' questionnaire if elected; (iv)
the shareholder's consent to be named as such by the Fund; (v) the class or
series and number of all shares of each portfolio of the Fund owned beneficially
and of record by the shareholder and any associated person of the shareholder
and the dates on which such shares were acquired, specifying the number of
shares owned beneficially but not of record by each, and stating the names of
each as they appear on the Fund's record books and the names of any nominee
holders for each; and (vi) a description of all arrangements or understandings
between the shareholder, the candidate and/or any other person or persons
(including their names) pursuant to which the recommendation is being made by
the shareholder. "Associated Person of the shareholder" means any person who is
required to be identified under clause (vi) of this paragraph and any other
person controlling, controlled by or under common control with, directly or
indirectly, (a) the shareholder or (b) the associated person of the shareholder.
The Governance and Nominating Committee may require the shareholder to
furnish such other information as it may reasonably require or deem necessary to
verify any information furnished pursuant to the nominating procedures described
above or to determine the qualifications and eligibility of the candidate
proposed by the shareholder to serve on the Board. If the shareholder fails to
provide such other information in writing within seven days of receipt of
written request from the Governance and Nominating Committee, the recommendation
of such candidate as a nominee will be deemed not properly submitted for
consideration, and will not be considered, by the Committee.
The Governance and Nominating Committee will consider only one
candidate submitted by such a shareholder or group for nomination for election
at an annual meeting of shareholders. The Governance and Nominating Committee
will not consider self-nominated candidates. The Governance and Nominating
Committee will consider and evaluate candidates submitted by shareholders on the
basis of the same criteria as those used to consider and evaluate candidates
submitted from other sources. These criteria include the candidate's relevant
knowledge, experience, and expertise, the candidate's ability to carry out his
or her duties in the best interests of the Fund, the candidate's ability to
qualify as a disinterested Director and such other criteria as the Governance
and Nominating Committee determines to be relevant in light of the existing
composition of the Board and any anticipated vacancies or other factors.
The function of the Fair Value Pricing Committee is to consider, in
advance if possible, any fair valuation decision of the Adviser's Valuation
Committee relating to a security held by the Fund made under unique or highly
unusual circumstances not previously addressed by the Valuation Committee that
would result in a change in the Fund's NAV by more than $0.01 per share. The
Fair Value Pricing Committee did not meet during the Fund's most recently
completed fiscal year.
The function of the Independent Directors Committee is to consider and
take action on matters that the Board or Committee believes should be addressed
in executive session of the disinterested Directors, such as review and approval
of the Advisory and Distribution Services Agreements. The Independent Directors
Committee of Intermediate Bond, Diversified Yield, Global Bond and High Income
met six, six, six and six times, respectively, during the Fund's most recently
completed fiscal year.
The dollar range of each Fund's securities owned by each Director and
the aggregate dollar range of securities in all the registered investment
companies to which the Adviser provides investment advisory services
(collectively, the "AllianceBernstein Fund Complex") owned by each Director are
set forth below.
ALLIANCEBERNSTEIN INTERMEDIATE BOND PORTFOLIO
AGGREGATE DOLLAR
RANGE OF EQUITY
DOLLAR RANGE OF SECURITIES IN THE
EQUITY SECURITIES IN ALLIANCEBERNSTEIN
THE PORTFOLIO AS OF FUND COMPLEX AS
[____________], 2009 OF[____________], 2009
John H. Dobkin $[_____________] $[_____________]
Michael J. Downey $[_____________] $[_____________]
William H. Foulk, Jr. $[_____________] $[_____________]
D. James Guzy $[_____________] $[_____________]
Nancy P. Jacklin $[_____________] $[_____________]
Garry L. Moody $[_____________] $[_____________]
Marshall C. Turner, Jr. $[_____________] $[_____________]
Earl D. Weiner $[_____________] $[_____________]
ALLIANCEBERNSTEIN DIVERSIFIED YIELD FUND, INC.
AGGREGATE DOLLAR
RANGE OF EQUITY
DOLLAR RANGE OF SECURITIES IN THE
EQUITY SECURITIES IN ALLIANCEBERNSTEIN
THE FUND AS OF FUND COMPLEX AS OF
[____________], 2009 [____________], 2009
John H. Dobkin $[_____________] $[_____________]
Michael J. Downey $[_____________] $[_____________]
William H. Foulk, Jr. $[_____________] $[_____________]
D. James Guzy $[_____________] $[_____________]
Nancy P. Jacklin $[_____________] $[_____________]
Garry L. Moody $[_____________] $[_____________]
Marshall C. Turner, Jr. $[_____________] $[_____________]
Earl D. Weiner $[_____________] $[_____________]
ALLIANCEBERNSTEIN GLOBAL BOND FUND, INC.
AGGREGATE DOLLAR
RANGE OF EQUITY
DOLLAR RANGE OF SECURITIES IN THE
EQUITY SECURITIES IN ALLIANCEBERNSTEIN
THE FUND AS OF FUND COMPLEX AS OF
[____________], 2009 [____________], 2009
John H. Dobkin $[_____________] $[_____________]
Michael J. Downey $[_____________] $[_____________]
William H. Foulk, Jr. $[_____________] $[_____________]
D. James Guzy $[_____________] $[_____________]
Nancy P. Jacklin $[_____________] $[_____________]
Garry L. Moody $[_____________] $[_____________]
Marshall C. Turner, Jr. $[_____________] $[_____________]
Earl D. Weiner $[_____________] $[_____________]
ALLIANCEBERNSTEIN HIGH INCOME FUND, INC.
AGGREGATE DOLLAR
RANGE OF EQUITY
DOLLAR RANGE OF SECURITIES IN THE
EQUITY SECURITIES IN ALLIANCEBERNSTEIN
THE FUND AS OF FUND COMPLEX AS OF
[_____________], 2009 [_____________], 2009
John H. Dobkin $[_____________] $[_____________]
Michael J. Downey $[_____________] $[_____________]
William H. Foulk, Jr. $[_____________] $[_____________]
D. James Guzy $[_____________] $[_____________]
Nancy P. Jacklin $[_____________] $[_____________]
Garry L. Moody $[_____________] $[_____________]
Marshall C. Turner, Jr. $[_____________] $[_____________]
Earl D. Weiner $[_____________] $[_____________]
Officer Information
-------------------
Certain information concerning each Fund's officers is set forth below.
NAME, ADDRESS,* POSITION(S) PRINCIPAL OCCUPATION
AND AGE HELD WITH FUND DURING PAST 5 YEARS
--------------- -------------- --------------------
Robert M. Keith, President and Chief Executive Vice President of
49 Executive Officer the Adviser** since July 2008;
Director of AllianceBernstein
Investments Inc. ("ABI")***
and the head of ABI since July
2008. Prior to joining ABI in
2006, he was Executive
Managing Director of Bernstein
Global Wealth Management, and
prior thereto, Senior Managing
Director and Global Head of
Client Service and Sales of
the Adviser's institutional
investment management business
since 2004. Prior thereto, he
was a Managing Director and
Head of North American Client
Service and Sales in the
Adviser's institutional
investment management
business, with which he has
been associated since prior to
2005.
Philip L. Kirstein, Senior Vice President Senior Vice President and
64 and Independent Independent Compliance Officer
Compliance Officer of the AllianceBernstein
Funds, with which he has been
associated since October 2004.
Prior thereto, he was Of
Counsel to Kirkpatrick &
Lockhart, LLP from October
2003 to October 2004, and
General Counsel of Merrill
Lynch Investment Managers,
L.P. since prior to 2005.
Emilie D. Wrapp, Secretary Senior Vice President,
54 Assistant General Counsel and
Assistant Secretary of ABI,**
with which she has been
associated since prior to
2005.
Joseph J. Mantineo, Treasurer and Chief Senior Vice President of ABIS,
50 Financial Officer ** with which he has been
associated since prior to
2005.
Intermediate Bond
-----------------
Paul J. DeNoon, Vice President Senior Vice President of the
47 Adviser,** with which he has
been associated since prior to
2005.
Shawn E. Keegan, Vice President Vice President of the Adviser,
38 ** with which he has been
associated in a substantially
similar capacity to his
current position since prior
to 2005.
Joran Laird, Vice President Vice President of the Adviser,
34 ** with which he has been
associated in a substantially
similar capacity to his
current position since prior
to 2005.
Alison M. Martier, Vice President Senior Vice President of the
53 Adviser,** with which she has
been associated since prior to
2005.
Douglas J. Peebles, Vice President Executive Vice President of
44 the Adviser,** with which he
has been associated since
prior to 2005.
Greg J. Wilensky, Vice President Senior Vice President of the
42 Adviser,** with which he has
been associated since prior to
2005.
Stephen Woetzel, Controller Vice President of ABIS,** with
38 which he has been associated
since prior to 2005.
Diversified Yield
-----------------
Paul J. DeNoon, Vice President See above.
47
Joran Laird, Vice President See above.
34
Matthew S. Sheridan, Vice President Vice President of the Adviser,
34 ** with which he has been
associated since prior to
2005.
Douglas J. Peebles, Vice President See above.
44
Greg J. Wilensky, Vice President See above.
42
Stephen Woetzel, Controller Vice President of ABIS,** with
38 which he has been associated
since prior to 2005.
Global Bond
-----------
Paul J. DeNoon, Vice President See above.
47
Scott DiMaggio, Vice President Senior Vice President of the
38 Adviser,** with which he has
been associated since prior to
2005.
Fernando Grisales, Vice President Vice President of the Adviser,
30 ** with which he has been
associated since prior to
2005.
Michael L. Mon, Vice President Assistant Vice President of
40 the Adviser,** with which he
has been associated since
prior to 2005.
Douglas J. Peebles, Senior Vice President See above.
44
Matthew S. Sheridan, Vice President See above.
34
Stephen Woetzel, Controller Vice President of ABIS,** with
38 which he has been associated
since prior to 2005.
High Income
-----------
Paul J. DeNoon, Vice President See above.
47
Gershon M. Distenfeld, Vice President Vice President of the Adviser,
34 ** with which he has been
associated since prior to
2005.
Douglas J. Peebles, Senior Vice President See above.
44
Matthew S. Sheridan, Vice President See above.
34
Stephen Woetzel, Controller Vice President of ABIS,** with
38 which he has been associated
since prior to 2005.
----------
* The address for each of the Fund's Officers is 1345 Avenue of the Americas,
New York, NY 10105.
** The Adviser, ABI and ABIS are affiliates of each Fund.
The Funds do not pay any fees to, or reimburse expenses of, their
Directors who are considered "interested persons" of the Funds. The aggregate
compensation paid by a Fund to each of the Directors during its fiscal year, the
aggregate compensation paid to each of the Directors during calendar year 2009
by the AllianceBernstein Fund Complex, and the total number of registered
investment companies (and separate investment portfolios within the companies)
in the AllianceBernstein Fund Complex with respect to which each of the
Directors serves as a director or trustee are set forth below. Neither the Funds
nor any other fund in the AllianceBernstein Fund Complex provides compensation
in the form of pension or retirement benefits to any of its directors or
trustees. Each of the Directors is a director or trustee of one or more other
registered investment companies in the AllianceBernstein Fund Complex.
ALLIANCEBERNSTEIN INTERMEDIATE BOND PORTFOLIO
Total Number of Total Number of
Investment Investment
Total Companies in the Funds within the
Aggregate Compensation AllianceBernstein AllianceBernstein
Compensation from the Fund Complex, Fund Complex,
from the Fund AllianceBernstein Including the Including the
for the Fiscal Fund Complex, Fund, as to which Fund, as to which
Year Ended Including the Director is a the Director is a
Name of Director 10/31/09 the Fund Director or Trustee Director or Trustee
---------------- ------------- ----------------- ------------------- -------------------
John H. Dobkin $[_________] $[_____________] [____] 84
Michael J. Downey $[_________] $[_____________] [____] 84
William H. Foulk, Jr. $[_________] $[_____________] [____] 86
D. James Guzy $[_________] $[_____________] [____] 84
Nancy P. Jacklin $[_________] $[_____________] [____] 84
Garry L. Moody $[_________] $[_____________] [____] 83
Marshall C. Turner $[_________] $[_____________] [____] 84
Earl D. Weiner $[_________] $[_____________] [____] 84
As of [__________], 2010, the Directors and officers of the Fund as a
group owned less than [____]% of the shares of the Fund.
ALLIANCEBERNSTEIN DIVERSIFIED YIELD FUND, INC.
Total Number of Total Number of
Investment Investment
Total Companies in the Funds within the
Aggregate Compensation AllianceBernstein AllianceBernstein
Compensation from the Fund Complex, Fund Complex,
from the Fund AllianceBernstein Including the Including the
for the Fiscal Fund Complex, Fund, as to which Fund, as to which
Year Ended Including the Director is a the Director is a
Name of Director 10/31/09 the Fund Director or Trustee Director or Trustee
---------------- ------------- ----------------- ------------------- -------------------
John H. Dobkin $[_________] $[____________] [____] [____]
Michael J. Downey $[_________] $[____________] [____] [____]
William H. Foulk, Jr. $[_________] $[____________] [____] [____]
D. James Guzy $[_________] $[____________] [____] [____]
Nancy P. Jacklin $[_________] $[____________] [____] [____]
Garry L. Moody $[_________] $[____________] [____] [____]
Marshall C. Turner $__________] $[____________] [____] [____]
Earl D. Weiner $[_________] $[____________] [____] [____]
As of [____________], 2010, the Directors and officers of the Fund as
a group owned less than [____]% of the shares of the Fund.
ALLIANCEBERNSTEIN GLOBAL BOND FUND, INC.
Total Number of Total Number of
Investment Investment
Total Companies in the Funds within the
Aggregate Compensation AllianceBernstein AllianceBernstein
Compensation from the Fund Complex, Fund Complex,
from the Fund AllianceBernstein Including the Including the
for the Fiscal Fund Complex, Fund, as to which Fund, as to which
Year Ended Including the Director is a the Director is a
Name of Director 9/30/09 the Fund Director or Trustee Director or Trustee
---------------- ------------- ----------------- ------------------- -------------------
John H. Dobkin $[_________] $[____________] 32 84
Michael J. Downey $[_________] $[____________] 32 84
William H. Foulk, Jr. $[_________] $[____________] 34 86
D. James Guzy $[_________] $[____________] 32 84
Nancy P. Jacklin $[_________] $[____________] 32 84
Garry L. Moody $[_________] $[____________] 31 83
Marshall C. Turner $[_________] $[____________] 32 84
Earl D. Weiner $[_________] $[____________] 32 84
As of [___________], 2010, the Directors and officers of the Fund as a
group owned less than [___]% of the shares of the Fund.
ALLIANCEBERNSTEIN HIGH INCOME FUND, INC.
Total Number of Total Number of
Investment Investment
Total Companies in the Funds within the
Aggregate Compensation AllianceBernstein AllianceBernstein
Compensation from the Fund Complex, Fund Complex,
from the Fund AllianceBernstein Including the Including the
for the Fiscal Fund Complex, Fund, as to which Fund, as to which
Year Ended Including the Director is a the Director is a
Name of Director 10/31/09 the Fund Director or Trustee Director or Trustee
---------------- ------------- ----------------- ------------------- -------------------
John H. Dobkin $[_________] $[__________] [___] [___]
Michael J. Downey $[_________] $[__________] [___] [___]
William H. Foulk, Jr. $[_________] $[__________] [___] [___]
D. James Guzy $[_________] $[__________] [___] [___]
Nancy P. Jacklin $[_________] $[__________] [___] [___]
Garry L. Moody $[_________] $[__________] [___] [___]
Marshall C. Turner $[_________] $[__________] [___] [___]
Earl D. Weiner $[_________] $[__________] [___] [___]
As of [_______________], 2010, the Directors and officers of the Fund
as a group owned less than [___]% of the shares of the Fund.
Investment Adviser
------------------
The Adviser, a Delaware limited partnership with principal offices at
1345 Avenue of the Americas, New York, New York 10105, has been retained under
an investment advisory agreement (the "Advisory Agreement") to provide
investment advice and, in general, to conduct the management and investment
program of each of the Funds under the supervision of the Fund's Board of
Directors (see "Management of the Funds" in the Prospectuses). The Adviser is a
registered investment adviser under the Investment Advisers Act of 1940, as
amended.
The Adviser is a leading global investment management firm supervising
client accounts with assets as of September 30, 2009, totaling approximately
$[_______]billion. The Adviser provides management services for many of the
largest U.S. public and private employee benefit plans, endowments, foundations,
public employee retirement funds, banks, insurance companies and high net worth
individuals worldwide. The Adviser is also one of the largest mutual fund
sponsors, with a diverse family of globally distributed mutual fund portfolios.
As one of the world's leading global investment management organizations, the
Adviser is able to compete for virtually any portfolio assignment in any
developed capital market in the world.
As of September 30, 2009, AXA, a societe anonyme organized under the
laws of France and the holding company for an international group of insurance
and related financial services companies, through certain of its subsidiaries
("AXA and its subsidiaries") owned approximately 1.6% of the issued and
outstanding assignments of beneficial ownership of limited partnership interests
("Holding Units") in AllianceBernstein Holding L.P., a Delaware limited
partnership ("Holding"). Holding Units trade publicly on the New York Stock
Exchange ("Exchange") under the ticker symbol "AB."
As of September 30, 2009, the ownership structure of the Adviser,
expressed as a percentage of general and limited partnership interests, was as
follows:
AXA and its subsidiaries 63.6%
Holding 34.4
Unaffiliated holders 2.0
---------------
100.0%
===============
AllianceBernstein Corporation (an indirect wholly-owned subsidiary of
AXA) is the general partner of both Holding and the Adviser. AllianceBernstein
Corporation owns 100,000 general partnership units in Holding and a 1% general
partnership interest in the Adviser. Including both the general partnership and
limited partnership interests in Holding and the Adviser, AXA and its
subsidiaries had an approximate 64.2% economic interest in the Adviser as of
September 30, 2009.
AXA, a French company, is the holding company for an international
group of companies and a worldwide leader in financial protection and wealth
management. AXA operates primarily in Western Europe, North America and the
Asia/Pacific region and, to a lesser extent, in other regions including the
Middle East, Africa and South America. AXA has five operating business segments:
life and savings, property and casualty insurance, international insurance
(including reinsurance), asset management and other financial services. AXA
Financial is a wholly-owned subsidiary of AXA. AXA Equitable is an indirect
wholly-owned subsidiary of AXA Financial.
Under each Fund's Advisory Agreement, the Adviser provides investment
advisory services and order placement facilities for the Fund and pays all
compensation of Directors and officers of the Fund who are affiliated persons of
the Adviser. The Adviser or an affiliate also furnishes the Fund, without
charge, management supervision and assistance and office facilities and provides
persons satisfactory to the Fund's Board of Directors to serve as the Fund's
officers.
The Adviser is, under each Fund's Advisory Agreement, responsible for
certain expenses incurred by the Fund, including, for example, office facilities
and certain administrative services, and any expenses incurred in promoting the
sale of Fund shares (other than the portion of the promotional expenses borne by
the Fund in accordance with an effective plan pursuant to Rule 12b-1 under the
1940 Act, and the costs of printing Fund prospectuses and other reports to
shareholders and fees related to registration with the Commission and with state
regulatory authorities).
The Advisory Agreements are terminable without penalty by a vote of a
majority of the Fund's outstanding voting securities or by a vote of a majority
of the Directors on 60 days' written notice or by the Adviser on 60 days'
written notice, and will automatically terminate in the event of assignment. The
Advisory Agreement provides that in the absence of willful misfeasance, bad
faith or gross negligence on the part of the Adviser, or of reckless disregard
of its obligations thereunder, the Adviser shall not be liable for any action or
failure to act in accordance with its duties thereunder.
ALLIANCEBERNSTEIN INTERMEDIATE BOND PORTFOLIO
For services rendered by the Adviser under the Advisory Agreement, the
Fund paid the Adviser a fee effective September 7, 2004 of .45 of 1% of the
first $2.5 billion of the Fund's average net assets and .40 of 1% of the excess
of $2.5 billion up to 5 billion and .35 of 1% of the excess over $5 billion as a
percentage of aggregate daily net assets (for the year 2004, the Fund's
previously effective advisory fee was waived to this amount by the Adviser after
January 1, 2004). The fee is accrued daily and paid monthly. The Adviser has
contractually agreed through the Fund's fiscal year ending October 31, 2010 to
waive its fee and bear certain expenses so that total expenses do not exceed on
an annual basis [.85%], [1.55%], [1.55%], [1.05%], [.80%], [.55%] and [.55%] of
aggregate average net assets, respectively, for Class A, Class B, Class C, Class
R, Class K, Class I and Advisor Class shares. This contractual agreement
automatically extends each year unless the Adviser provides the Fund written
notice 60 days prior to the Fund's fiscal year end.
For the fiscal years ended October 31, 2007, 2008 and 2009 the Adviser
received under the Advisory Agreement the amount of $531,653, $2,586,786, and
$[_________], respectively, as advisory fees from the Fund. Under the expense
limitation undertaking, $436,894, $1,313,293, and $[_________] were waived
and/or reimbursed by the Adviser for the fiscal years ended October 31, 2007,
2008, and 2009 respectively.
The Fund has, under the Advisory Agreement, assumed the obligation for
payment of all of its other expenses. As to the obtaining of services other than
those specifically provided to the Fund by the Adviser, the Fund may employ its
own personnel. For such services it may also utilize personnel employed by the
Adviser or its affiliates and, in such event, the services will be provided to
the Fund at cost and the payments therefore must be specifically approved by the
Fund's Board of Directors. For the fiscal year ended October 31, 2009, the cost
of certain legal and accounting services amounting to $[_________] provided to
the Fund by the Adviser was waived.
The Advisory Agreement became effective with respect to the Fund on
July 1, 1999. The Advisory Agreement was approved by the unanimous vote, cast in
person, of the Fund's Directors, including the Directors who are not parties to
the Advisory Agreement or "interested persons" as defined in the 1940 Act of any
such party, at a meeting called for such purpose and held on September 11, 1991.
The Advisory Agreement continues in effect provided that such
continuance is specifically approved at least annually by a vote of a majority
of the Fund's outstanding voting securities or by the Fund's Board of Directors,
and in either case, by a majority of the Directors who are not parties to the
Advisory Agreement or interested persons of any such party. Most recently,
continuance of the Advisory Agreement for an additional annual term was approved
by vote, cast in person, by the Board of Directors, including a majority of the
Directors who are not "interested persons" as defined in the 1940 Act, at their
meetings held on November 3-5, 2009.
ALLIANCEBERNSTEIN DIVERSIFIED YIELD FUND, INC.
For the services rendered by the Adviser under the Advisory Agreement,
the Fund paid the Adviser effective September 7, 2004 a fee at the annual rate
of .50 of 1% for the first $2.5 billion, .45 of 1% of the excess of $2.5 billion
up to $5 billion and .40 of 1% of the excess over $5 billion as a percentage of
the Fund's average daily net assets (for the year 2004, the Fund's previously
effective advisory fee rate was waived to this amount after January 1, 2004).
The fee is accrued daily and paid monthly. The Adviser has contractually agreed
through the Fund's fiscal year ending October 31, 2010 to waive its fee and bear
certain expenses so that total expenses do not exceed on an annual basis [.90%],
[1.60%], [1.60%], [1.10%], [.85%], [.60%] and [.60%] of aggregate daily net
assets, respectively, for Class A, Class B, Class C, Class R, Class K, Class I
and Advisor Class shares. This contractual agreement automatically extends each
year unless the Adviser provides written notice 60 days prior to the Fund's
fiscal year end.
For the fiscal years ended October 31, 2007, 2008 and 2009, the
Adviser received from the Fund advisory fees of $418,174, $455,521, and
$[_________], respectively. Under the expense limitation undertaking,
$[_________] was waived and/or reimbursed by the Adviser for the fiscal year
ended 2009.
The Fund has, under the Advisory Agreement, assumed the obligation for
payment of all of its other expenses. As to the obtaining of services other than
those specifically provided to the Fund by the Adviser, the Fund may employ its
own personnel. For such services, it may also utilize personnel employed by the
Adviser or its affiliates and, in such event, the services will be provided to
the Fund at cost and the payments will be specifically approved by the Fund's
Board of Directors. For the fiscal year ended October 31, 2009, the Fund paid to
the Adviser a total of $[_________] with respect to such services.
The Advisory Agreement became effective on January 2, 1996. The
Advisory Agreement will continue in effect provided that such continuance is
specifically approved at least annually by a vote of a majority of the Fund's
outstanding voting securities or by the Fund's Board of Directors, including in
either case approval by a majority of the Directors who are not parties to the
Advisory Agreement or "interested persons," as defined by the 1940 Act, of any
such party. Most recently, the Advisory Agreement was approved for an additional
annual term by the Board of Directors, including majority of the Directors who
are not parties to the Advisory Agreement or interested periods of any such
party, at their meetings held on November 3-5, 2009.
ALLIANCEBERNSTEIN GLOBAL BOND FUND, INC.
For the services rendered by the Adviser under the Advisory Agreement,
the Fund paid the Adviser a fee effective September 7, 2004 at an annual rate of
..50 of 1% for the first $2.5 billion, .45 of 1% of the excess of $2.5 billion up
to $5 billion and .40 of 1% of the excess over $5 billion up to $5 billion as a
percentage of the Fund's average daily net assets (for the year 2004, the Fund's
previously effective advisory fee rate was waived to this amount after January
1, 2004). The fee is accrued daily and paid monthly. The Adviser has
contractually agreed through the Fund's fiscal year ending September 30, 2010 to
waive its fee and bear certain expenses so that total expenses do not exceed on
an annual basis [.90%], [1.60%], [1.60%], [.60%], [1.10%], [.85%], and [.60%] of
aggregate daily net assets, respectively, for Class A, Class B, Class C, Advisor
Class, Class R, Class K, and Class I shares. This contractual agreement
automatically extends each year unless the Adviser provides written notice 60
days prior to the Fund's fiscal year end. For the fiscal years of the Fund ended
September 30, 2007, 2008, and 2009, the Adviser received from the Fund advisory
fees of $7,324,605, $10,057,085, and $[_________]. Under the expense limitation
undertaking $[_________] was waived and/or reimbursed by the Adviser for the
fiscal year ended 2009.
The Fund has, under the Advisory Agreement, assumed the obligation for
payment of all of its other expenses. As to the obtaining of services other than
those specifically provided to the Fund by the Adviser, the Fund may employ its
own personnel. For such services it may also utilize personnel employed by the
Adviser or its affiliates and, in such event, the services will be provided to
the Fund at cost and the payments will be specifically approved by the Fund's
Board of Directors. During the Fund's fiscal year ended September 30, 2009, the
Fund paid to the Adviser a total of $[_________] with respect to such services.
The Advisory Agreement became effective on July 22, 1992. The Advisory
Agreement was approved by the unanimous vote, cast in person, by the Fund's
Directors (including the Directors who are not parties to the Advisory Agreement
or "interested persons", as defined in the 1940 Act, of any such party) at a
meeting called for that purpose held on February 21, 1992, and by the Fund's
sole shareholder on February 21, 1992. The Advisory Agreement continues in
effect provided that such continuance is specifically approved at least annually
by the Fund's Directors or by a majority vote of the holders of the outstanding
voting securities of the Fund, and, in either case, by a majority of the
Directors who are not parties to the Advisory Agreement or "interested persons"
as defined in the 1940 Act of any such party. Most recently the Advisory
Agreement was approved for an additional annual term by a vote, cast in person,
of the Directors, including a majority of the Directors who are not parties to
the Advisory Agreement or interested persons of any such party, at their
meetings held on November 3-5, 2009.
ALLIANCEBERNSTEIN HIGH INCOME FUND, INC.
For the services rendered by the Adviser under the Advisory Agreement,
the Fund paid the Adviser a fee effective September 7, 2004 at an annual rate of
..50 of 1% for the first $2.5 billion, .45 of 1% of the excess of $2.5 billion up
to $5 billion, and .40 of 1% of the excess over $5 billion of the Fund's average
daily net assets (for the year 2004, the Fund's previously effective advisory
fee was waived to this amount after January 1, 2004). The fee is accrued daily
and paid monthly. The Adviser has contractually agreed through the Fund's fiscal
year ending October 31, 2010 to waive its fee and bear certain expenses so that
total expenses do not exceed on an annual basis [.95%], [1.65%], [1.65%],
[.65%], [1.15%], [.90%], and [.65%] of aggregate daily net assets, respectively,
for Class A, Class B, Class C, Advisor Class, Class R, Class K, and Class I
shares. This contractual agreement automatically extends each year unless the
Adviser provides written notice 60 days prior to the Fund's fiscal year end. For
the fiscal years ended October 31, 2007, 2008 and 2009, the Adviser received
from the Fund advisory fees of $1,948,219, $4,026,514, and $[_________],
respectively. Under the expense limitation undertaking $[_________] was waived
and/or reimbursed by the Adviser for the fiscal year ended 2009.
The Fund has, under the Advisory Agreement, assumed the obligation for
payment of all of its other expenses. As to the obtaining of services other than
those specifically provided to the Fund by the Adviser, the Fund may employ its
own personnel. For such services, it may also utilize personnel employed by the
Adviser or its affiliates and, in such event, the services will be provided to
the Fund at cost and the payments will be specifically approved by the Fund's
Board of Directors. The Fund paid to the Adviser a total of $[_________] in
respect of such services during the Fund's fiscal year ended October 31, 2009.
The Advisory Agreement became effective on February 1, 1994 having
been approved by the unanimous vote, cast in person, of the Fund's Directors,
including the Directors who are not parties to the Advisory Agreement or
interested persons as defined in the 1940 Act of any such party, at a meeting
called for that purpose and held on December 7, 1993, and by the Fund's initial
shareholder on January 28, 1994.
The Advisory Agreement continues in effect provided that such
continuance is approved at least annually by a vote of a majority of the Fund's
outstanding voting securities or by the Fund's Board of Directors, including in
either case, approval by a majority of the Directors who are not parties to the
Advisory Agreement or interested persons of any such party as defined by the
Act. Most recently, continuance of the Advisory Agreement was approved for an
additional annual term by the Board of Directors, including a majority of the
Directors who are not "interested persons" as defined in the 1940 Act, at their
meetings held on November 3-5, 2009.
The Advisory Agreement is terminable without penalty on 60 days'
written notice, by a vote of a majority of the Fund's outstanding voting
securities or by a vote of a majority of the Fund's Directors or by the Adviser
on 60 days' written notice, and will automatically terminate in the event of its
assignment. The Advisory Agreement provides that in the absence of willful
misfeasance, bad faith or gross negligence on the part of the Adviser, or of
reckless disregard of its obligations thereunder, the Adviser shall not be
liable for any action or failure to act in accordance with its duties
thereunder.
The Adviser may act as an investment adviser to other persons, firms
or corporations, including investment companies, and is the investment adviser
to the following registered investment companies: AllianceBernstein Balanced
Shares, Inc., AllianceBernstein Blended Style Series, Inc., AllianceBernstein
Cap Fund, Inc., AllianceBernstein Corporate Shares, AllianceBernstein
Diversified Yield Fund, Inc., AllianceBernstein Exchange Reserves,
AllianceBernstein Fixed-Income Shares, Inc., AllianceBernstein Focused Growth &
Income Fund, Inc., AllianceBernstein Global Bond Fund, Inc., AllianceBernstein
Global Growth Fund, Inc., AllianceBernstein Global Real Estate Investment Fund,
Inc., AllianceBernstein Global Thematic Growth Fund, Inc., AllianceBernstein
Greater China '97 Fund, Inc., AllianceBernstein Growth and Income Fund, Inc.,
AllianceBernstein High Income Fund, Inc., AllianceBernstein Institutional Funds,
Inc., AllianceBernstein International Growth Fund, Inc., AllianceBernstein Large
Cap Growth Fund, Inc., AllianceBernstein Municipal Income Fund, Inc.,
AllianceBernstein Municipal Income Fund II, AllianceBernstein Small/Mid Cap
Growth Fund, Inc., AllianceBernstein Trust, AllianceBernstein Utility Income
Fund, Inc., AllianceBernstein Variable Products Series Fund, Inc., Sanford C.
Bernstein Fund, Inc., Sanford C. Bernstein Fund II, Inc., The AllianceBernstein
Pooling Portfolios and The AllianceBernstein Portfolios, all registered open-end
investment companies; and to AllianceBernstein Global High Income Fund, Inc.,
AllianceBernstein Income Fund, Inc., AllianceBernstein National Municipal Income
Fund, Inc., Alliance California Municipal Income Fund, Inc., Alliance New York
Municipal Income Fund, Inc., and The Ibero-America Fund, Inc., all registered
closed-end investment companies.
Additional Information About the Funds' Portfolio Managers
----------------------------------------------------------
ALLIANCEBERNSTEIN INTERMEDIATE BOND PORTFOLIO
The management of and investment decisions for the Fund's portfolio
are made by the U.S. Investment Grade: Core Fixed Income Investment Team. Mr.
Paul J. DeNoon, Mr. Shawn E. Keegan, Mr. Joran Laird, Ms. Alison M. Martier and
Mr. Greg J. Wilensky are the investment professionals(1) with the most
significant responsibility for the day-to-day management of the Fund's
portfolio. For additional information about the portfolio management of the
Fund, see "Management of the Fund - Fund Managers" in the Fund's prospectuses.
----------
(1) Investment professionals at the Adviser include portfolio managers and
research analysts. Investment professionals are part of investment groups
(or teams) that service individual fund portfolios. The number of
investment professionals assigned to a particular fund will vary from fund
to fund.
The dollar ranges of the Fund's equity securities owned directly or
beneficially by the Fund's portfolio manager as of [____________], 2009 are set
forth below:
DOLLAR RANGE OF EQUITY SECURITIES IN THE FUND(2)
------------------------------------------------
Mr. Paul J. DeNoon [_________________]
Mr. Shawn E. Keegan [_________________]
Mr. Joran Laird [_________________]
Ms. Alison M. Martier [_________________]
Mr. Douglas J. Peebles [_________________]
Mr. Greg J. Wilensky [_________________]
----------
(2) The ranges presented above include any vested shares awarded under the
Adviser's Partners Compensation Plan and/or the Profit Sharing/401(k) Plan
(the "Plans").
As of [_________], 2009, the Adviser's employees had approximately [ ]
invested in shares of all AllianceBernstein Mutual Funds (excluding
AllianceBernstein money market funds) through their interests in certain
deferred compensation plans, including the Partners Compensation Plan, including
both vested and unvested amounts.
The following tables provide information regarding registered
investment companies other than the Fund, other pooled investment vehicles and
other accounts over which the Fund's portfolio managers also have day-to-day
management responsibilities. The tables provide the numbers of such accounts,
the total assets in such accounts and the number of accounts and total assets
whose fees are based on performance. The information is provided as of
[_________], 2009.
--------------------------------------------------------------------------------
REGISTERED INVESTMENT COMPANIES
(excluding the Fund)
--------------------------------------------------------------------------------
Total
Number of Assets of
Total Total Registered Registered
Number of Assets of Investment Investment
Registered Registered Companies Companies
Investment Investment Managed with Managed with
Companies Companies Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
--------------------------------------------------------------------------------
Mr. Paul J. DeNoon [_________] $[____________] [___________] $[_________]
--------------------------------------------------------------------------------
Mr. Shawn E. Keegan [_________] $[____________] [___________] $[_________]
--------------------------------------------------------------------------------
Mr. Joran Laird [_________] $[____________] [___________] $[_________]
--------------------------------------------------------------------------------
Ms. Alison M. Martier [_________] $[____________] [___________] $[_________]
--------------------------------------------------------------------------------
Mr. Douglas J. Peebles [_________] $[____________] [___________] $[_________]
--------------------------------------------------------------------------------
Mr. Greg J. Wilensky [_________] $[____________] [___________] $[_________]
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
OTHER POOLED INVESTMENT VEHICLES
--------------------------------------------------------------------------------
Total
Assets of
Total Total Number of Other Pooled
Number of Assets Other Pooled Investment
Other of Other Investment Vehicles
Pooled Pooled Vehicles Managed
Investment Investment Managed with with
Vehicles Vehicles Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
--------------------------------------------------------------------------------
Mr. Paul J. DeNoon [_________] $[____________] [___________] $[_________]
--------------------------------------------------------------------------------
Mr. Shawn E. Keegan [_________] $[____________] [___________] $[_________]
--------------------------------------------------------------------------------
Mr. Joran Laird [_________] $[____________] [___________] $[_________]
--------------------------------------------------------------------------------
Ms. Alison M. Martier [_________] $[____________] [___________] $[_________]
--------------------------------------------------------------------------------
Mr. Douglas J. Peebles [_________] $[____________] [___________] $[_________]
--------------------------------------------------------------------------------
Mr. Greg J. Wilensky [_________] $[____________] [___________] $[_________]
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
OTHER ACCOUNTS
--------------------------------------------------------------------------------
Total
Number of Assets of
Total Other Other
Number of Accounts Accounts
Other Total Assets of Managed with Managed with
Accounts Other Accounts Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
--------------------------------------------------------------------------------
Mr. Paul J. DeNoon [_________] $[____________] [___________] $[_________]
--------------------------------------------------------------------------------
Mr. Shawn E. Keegan [_________] $[____________] [___________] $[_________]
--------------------------------------------------------------------------------
Mr. Joran Laird [_________] $[____________] [___________] $[_________]
--------------------------------------------------------------------------------
Ms. Alison M. Martier [_________] $[____________] [___________] $[_________]
--------------------------------------------------------------------------------
Mr. Douglas J. Peebles [_________] $[____________] [___________] $[_________]
--------------------------------------------------------------------------------
Mr. Greg J. Wilensky [_________] $[____________] [___________] $[_________]
--------------------------------------------------------------------------------
ALLIANCEBERNSTEIN DIVERSIFIED YIELD FUND, INC.
The management of and investment decisions for the Fund's portfolio
are made by the Global Fixed Income Investment Team and the Global Credit
Investment Team. Mr. Paul J. DeNoon, Mr. Joran Laird, Mr. Douglas J. Peebles,
Mr. Matthew S. Sheridan and Mr. Greg J. Wilensky are the investment
professionals(3) with the most significant responsibility for the day-to-day
management of the Fund's portfolio. For additional information about the
portfolio management of the Fund, see "Management of the Fund - Portfolio
Managers" in the Fund's prospectuses.
----------
(3) Investment professionals at the Adviser include portfolio managers and
research analysts. Investment professionals are part of investment groups
(or teams) that service individual fund portfolios. The number of
investment professionals assigned to a particular fund will vary from fund
to fund.
The dollar ranges of the Fund's equity securities owned directly or
beneficially by the Fund's portfolio managers are set forth below:
DOLLAR RANGE OF EQUITY SECURITIES IN THE FUND(4)
As of [_________], 2009
Mr. Paul J. DeNoon $[__________]
Mr. Joran Laird $[__________]
Mr. Douglas J. Peebles $[__________]
Mr. Matthew S. Sheridan $[__________]
Mr. Greg J. Wilensky $[__________]
----------
(4) The ranges presented above include any vested shares awarded under the
Adviser's Partners Compensation Plan and/or the Profit Sharing/401(k) Plan
(the "Plans").
The following tables provide information regarding registered
investment companies other than the Fund, other pooled investment vehicles and
other accounts over which the Fund's portfolio managers also have day-to-day
management responsibilities. The tables provide the numbers of such accounts,
the total assets in such accounts and the number of accounts and total assets
whose fees are based on performance. The information is provided as of
[_________], 2009.
--------------------------------------------------------------------------------
REGISTERED INVESTMENT COMPANIES
(excluding the Fund)
--------------------------------------------------------------------------------
Total
Number of Assets of
Total Total Registered Registered
Number of Assets of Investment Investment
Registered Registered Companies Companies
Investment Investment Managed with Managed with
Companies Companies Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
--------------------------------------------------------------------------------
Mr. Paul J. DeNoon [____] $[__________] [____] $[__________]
--------------------------------------------------------------------------------
Mr. Joran Laird [____] $[__________] [____] $[__________]
--------------------------------------------------------------------------------
Mr. Douglas J. Peebles [____] $[__________] [____] $[__________]
--------------------------------------------------------------------------------
Mr. Matthew S. Sheridan [____] $[__________] [____] $[__________]
--------------------------------------------------------------------------------
Mr. Greg J. Wilensky [____] $[__________] [____] $[__________]
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
OTHER POOLED INVESTMENT VEHICLES
--------------------------------------------------------------------------------
Total
Assets of
Total Total Number of Other Pooled
Number of Assets Other Pooled Investment
Other of Other Investment Vehicles
Pooled Pooled Vehicles Managed
Investment Investment Managed with with
Vehicles Vehicles Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
--------------------------------------------------------------------------------
Mr. Paul J. DeNoon [____] $[__________] [____] $[__________]
--------------------------------------------------------------------------------
Mr. Joran Laird [____] $[__________] [____] $[__________]
--------------------------------------------------------------------------------
Mr. Douglas J. Peebles [____] $[__________] [____] $[__________]
--------------------------------------------------------------------------------
Mr. Matthew S. Sheridan [____] $[__________] [____] $[__________]
--------------------------------------------------------------------------------
Mr. Greg J. Wilensky [____] $[__________] [____] $[__________]
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
OTHER ACCOUNTS
--------------------------------------------------------------------------------
Total
Number of Assets of
Total Other Other
Number of Accounts Accounts
Other Total Assets of Managed with Managed with
Accounts Other Accounts Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
--------------------------------------------------------------------------------
Mr. Paul J. DeNoon [____] $[__________] [____] $[__________]
--------------------------------------------------------------------------------
Mr. Joran Laird [____] $[__________] [____] $[__________]
--------------------------------------------------------------------------------
Mr. Douglas J. Peebles [____] $[__________] [____] $[__________]
--------------------------------------------------------------------------------
Mr. Matthew S. Sheridan [____] $[__________] [____] $[__________]
--------------------------------------------------------------------------------
Mr. Greg J. Wilensky [____] $[__________] [____] $[__________]
--------------------------------------------------------------------------------
ALLIANCEBERNSTEIN GLOBAL BOND FUND, INC.
The management of and investment decisions for the Fund's portfolio
are made by the Global Fixed Income Investment Team. Mr. Paul J. DeNoon, Mr.
Scott DiMaggio, Mr. Fernando Grisales, Mr. Michael L. Mon, Mr. Douglas J.
Peebles and Mr. Matthew S. Sheridan are the investment professionals(5) with the
most significant responsibility for the day-to-day management of the Fund's
portfolio. For additional information about the portfolio management of the
Fund, see "Management of the Fund - Portfolio Managers" in the Fund's
prospectuses.
----------
(5) Investment professionals at the Adviser include portfolio managers and
research analysts. Investment professionals are part of investment groups
(or teams) that service individual fund portfolios. The number of
investment professionals assigned to a particular fund will vary from fund
to fund.
The dollar ranges of the Fund's equity securities owned directly or
beneficially by the Fund's portfolio managers are set forth below:
DOLLAR RANGE OF EQUITY SECURITIES IN THE FUND
As of [_________], 2009
Mr. Paul J. DeNoon $[________________]
Mr. Scott DiMaggio $[________________]
Mr. Fernando Grisales $[________________]
Mr. Michael L. Mon $[________________]
Mr. Douglas J. Peebles $[________________]
Mr. Matthew S. Sheridan $[________________]
As of [_________], 2009, employees of the Adviser had approximately
$[____ ____] invested in shares of all AllianceBernstein Mutual Funds (excluding
AllianceBernstein money market funds) through their interests in certain
deferred compensation plans, including the Partners Compensation Plan, including
both vested and unvested amounts.
The following tables provide information regarding registered
investment companies other than the Fund, other pooled investment vehicles and
other accounts over which the Fund's portfolio managers also have day-to-day
management responsibilities. The tables provide the numbers of such accounts,
the total assets in such accounts and the number of accounts and total assets
whose fees are based on performance. The information is provided as of
[_________], 2009.
--------------------------------------------------------------------------------
REGISTERED INVESTMENT COMPANIES
(excluding the Fund)
--------------------------------------------------------------------------------
Total
Number of Assets of
Total Total Registered Registered
Number of Assets of Investment Investment
Registered Registered Companies Companies
Investment Investment Managed with Managed with
Companies Companies Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
--------------------------------------------------------------------------------
Mr. Paul J. DeNoon [____] $[________________] [____] $[___________]
--------------------------------------------------------------------------------
Mr. Scott DiMaggio [____] $[________________] [____] $[___________]
--------------------------------------------------------------------------------
Mr. Fernando Grisales [____] $[________________] [____] $[___________]
--------------------------------------------------------------------------------
Mr. Michael L. Mon [____] $[________________] [____] $[___________]
--------------------------------------------------------------------------------
Mr. Douglas J. Peebles [____] $[________________] [____] $[___________]
--------------------------------------------------------------------------------
Mr. Matthew S. Sheridan [____] $[________________] [____] $[___________]
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
OTHER POOLED INVESTMENT VEHICLES
--------------------------------------------------------------------------------
Total
Assets of
Total Total Number of Other Pooled
Number of Assets Other Pooled Investment
Other of Other Investment Vehicles
Pooled Pooled Vehicles Managed
Investment Investment Managed with with
Vehicles Vehicles Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
--------------------------------------------------------------------------------
Mr. Paul J. DeNoon [____] $[___________] [____] $[___________]
--------------------------------------------------------------------------------
Mr. Scott DiMaggio [____] $[___________] [____] $[___________]
--------------------------------------------------------------------------------
Mr. Fernando Grisales [____] $[___________] [____] $[___________]
--------------------------------------------------------------------------------
Mr. Michael L. Mon [____] $[___________] [____] $[___________]
--------------------------------------------------------------------------------
Mr. Douglas J. Peebles [____] $[___________] [____] $[___________]
--------------------------------------------------------------------------------
Mr. Matthew S. Sheridan [____] $[___________] [____] $[___________]
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
OTHER ACCOUNTS
--------------------------------------------------------------------------------
Total
Number of Assets of
Total Other Other
Number of Accounts Accounts
Other Total Assets of Managed with Managed with
Accounts Other Accounts Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
--------------------------------------------------------------------------------
Mr. Paul J. DeNoon [____] $[___________] [____] $[___________]
-----------------------------------------------------------------------------
Mr. Scott DiMaggio [____] $[___________] [____] $[___________]
-----------------------------------------------------------------------------
Mr. Fernando Grisales [____] $[___________] [____] $[___________]
-----------------------------------------------------------------------------
Mr. Michael L. Mon [____] $[___________] [____] $[___________]
-----------------------------------------------------------------------------
Mr. Douglas J. Peebles [____] $[___________] [____] $[___________]
-----------------------------------------------------------------------------
Mr. Matthew S. Sheridan [____] $[___________] [____] $[___________]
--------------------------------------------------------------------------------
ALLIANCEBERNSTEIN HIGH INCOME FUND, INC.
The management of and investment decisions for the Fund's portfolio
are made by the Global Fixed Income Team and Global Credit Investment Team. Mr.
Paul DeNoon, Mr. Fernando Grisales, Mr. Gershon Distenfeld, Mr. Douglas Peebles
and Mr. Matthew Sheridan are the investment professionals(6) with the most
significant responsibility for the day-to-day management of the Fund's
portfolio. For additional information about the portfolio management of the
Fund, see "Management of the Fund - Portfolio Managers" in the Fund's
prospectus.
----------
(6) Investment professionals at the Adviser include portfolio managers and
research analysts. Investment professionals are part of investment groups
(or teams) that service individual fund portfolios. The number of
investment professionals assigned to a particular fund will vary from fund
to fund.
The dollar ranges of the Fund's equity securities owned directly or
beneficially by the Fund's portfolio managers are set forth below:
DOLLAR RANGE OF EQUITY SECURITIES IN THE FUND(7)
------------------------------------------------
Mr. Paul J. DeNoon $[___________]
Mr. Gershon Distenfeld $[___________]
Mr. Douglas J. Peebles $[___________]
Mr. Matthew S. Sheridan $[___________]
----------
(7) The ranges presented above include any vested shares awarded under the
Adviser's Partners Compensation Plan (the "Plan").
The following tables provide information regarding registered
investment companies other than the Fund, other pooled investment vehicles and
other accounts over which the Fund's portfolio managers also has day-to-day
management responsibilities. The tables provide the numbers of such accounts,
the total assets in such accounts and the number of accounts and total assets
whose fees are based on performance. The information is provided as of
[_________], 2009.
--------------------------------------------------------------------------------
REGISTERED INVESTMENT COMPANIES
(excluding the Fund)
--------------------------------------------------------------------------------
Total
Number of Assets of
Total Total Registered Registered
Number of Assets of Investment Investment
Registered Registered Companies Companies
Investment Investment Managed with Managed with
Companies Companies Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
--------------------------------------------------------------------------------
Mr. Paul J. DeNoon [____] $[___________] [____] $[___________]
-------------------------------------------------------------------------------
Mr. Gershon Distenfeld [____] $[___________] [____] $[___________]
-------------------------------------------------------------------------------
Mr. Douglas J. Peebles [____] $[___________] [____] $[___________]
-------------------------------------------------------------------------------
Mr. Matthew S. Sheridan [____] $[___________] [____] $[___________]
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
OTHER POOLED INVESTMENT VEHICLES
--------------------------------------------------------------------------------
Total
Assets of
Total Total Number of Other Pooled
Number of Assets Other Pooled Investment
Other of Other Investment Vehicles
Pooled Pooled Vehicles Managed
Investment Investment Managed with with
Vehicles Vehicles Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
--------------------------------------------------------------------------------
Mr. Paul J. DeNoon [____] $[_________] [____] $[_________]
--------------------------------------------------------------------------------
Mr. Gershon Distenfeld [____] $[_________] [____] $[_________]
--------------------------------------------------------------------------------
Mr. Douglas J. Peebles [____] $[_________] [____] $[_________]
--------------------------------------------------------------------------------
Mr. Matthew S. Sheridan [____] $[_________] [____] $[_________]
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
OTHER ACCOUNTS
--------------------------------------------------------------------------------
Total
Number of Assets of
Total Other Other
Number of Accounts Accounts
Other Total Assets of Managed with Managed with
Accounts Other Accounts Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
--------------------------------------------------------------------------------
Mr. Paul J. DeNoon [____] $[_________] [____] $[_________]
--------------------------------------------------------------------------------
Mr. Gershon Distenfeld [____] $[_________] [____] $[_________]
--------------------------------------------------------------------------------
Mr. Douglas J. Peebles [____] $[_________] [____] $[_________]
--------------------------------------------------------------------------------
Mr. Matthew S. Sheridan [____] $[_________] [____] $[_________]
--------------------------------------------------------------------------------
Investment Professional Conflict of Interest Disclosure
-------------------------------------------------------
As an investment adviser and fiduciary, the Adviser owes its clients
and shareholders an undivided duty of loyalty. We recognize that conflicts of
interest are inherent in our business and accordingly have developed policies
and procedures (including oversight monitoring) reasonably designed to detect,
manage and mitigate the effects of actual or potential conflicts of interest in
the area of employee personal trading, managing multiple accounts for multiple
clients, including AllianceBernstein Mutual Funds, and allocating investment
opportunities. Investment professionals, including portfolio managers and
research analysts, are subject to the above-mentioned policies and oversight
monitoring to ensure that all clients are treated equitably. We place the
interests of our clients first and expect all of our employees to meet their
fiduciary duties.
Employee Personal Trading. The Adviser has adopted a Code of Business
Conduct and Ethics that is designed to detect and prevent conflicts of interest
when investment professionals and other personnel of the Adviser own, buy or
sell securities which may be owned by, or bought or sold for, clients. Personal
securities transactions by an employee may raise a potential conflict of
interest when an employee owns or trades in a security that is owned or
considered for purchase or sale by a client, or recommended for purchase or sale
by an employee to a client. Subject to the reporting requirements and other
limitations of its Code of Business Conduct and Ethics, the Adviser permits its
employees to engage in personal securities transactions, and also allows them to
acquire investments in the AllianceBernstein Mutual Funds through direct
purchase and/or notionally in connection with deferred incentive compensation
awards. The Adviser's Code of Ethics and Business Conduct requires disclosure of
all personal accounts and maintenance of brokerage accounts with designated
broker-dealers approved by the Adviser. The Code also requires preclearance of
all securities transactions (except transactions in open-end mutual funds) and
imposes a 90-day holding period for securities purchased by employees to
discourage short-term trading.
Managing Multiple Accounts for Multiple Clients. The Adviser has
compliance policies and oversight monitoring in place to address conflicts of
interest relating to the management of multiple accounts for multiple clients.
Conflicts of interest may arise when an investment professional has
responsibilities for the investments of more than one account because the
investment professional may be unable to devote equal time and attention to each
account. The investment professional or investment professional teams for each
client may have responsibilities for managing all or a portion of the
investments of multiple accounts with a common investment strategy, including
other registered investment companies, unregistered investment vehicles, such as
hedge funds, pension plans, separate accounts, collective trusts and charitable
foundations. Among other things, the Adviser's policies and procedures provide
for the prompt dissemination to investment professionals of initial or changed
investment recommendations by analysts so that investment professionals are
better able to develop investment strategies for all accounts they manage. In
addition, investment decisions by investment professionals are reviewed for the
purpose of maintaining uniformity among similar accounts and ensuring that
accounts are treated equitably. No investment professional that manages client
accounts carrying performance fees is compensated directly or specifically for
the performance of those accounts. Investment professional compensation reflects
a broad contribution in multiple dimensions to long-term investment success for
our clients and is not tied specifically to the performance of any particular
client's account, nor is it directly tied to the level or change in level of
assets under management.
Allocating Investment Opportunities. The Adviser has policies and
procedures intended to address conflicts of interest relating to the allocation
of investment opportunities. These policies and procedures are designed to
ensure that information relevant to investment decisions is disseminated
promptly within its portfolio management teams and investment opportunities are
allocated equitably among different clients. The investment professionals at the
Adviser routinely are required to select and allocate investment opportunities
among accounts. Fund holdings, position sizes, and industry and sector exposures
tend to be similar across similar accounts, which minimizes the potential for
conflicts of interest relating to the allocation of investment opportunities.
Nevertheless, investment opportunities may be allocated differently among
accounts due to the particular characteristics of an account, such as size of
the account, cash position, tax status, risk tolerance and investment
restrictions or for other reasons.
The Adviser's procedures are also designed to prevent potential
conflicts of interest that may arise when the Adviser has a particular financial
incentive, such as a performance-based management fee, relating to an account.
An investment professional may perceive that he or she has an incentive to
devote more time to developing and analyzing investment strategies and
opportunities or allocating securities preferentially to accounts for which the
Adviser could share in investment gains.
To address these conflicts of interest, the Adviser's policies and
procedures require, among other things, the prompt dissemination to investment
professionals of any initial or changed investment recommendations by analysts;
the aggregation of orders to facilitate best execution for all accounts; price
averaging for all aggregated orders; objective allocation for limited investment
opportunities (e.g., on a rotational basis) to ensure fair and equitable
allocation among accounts; and limitations on short sales of securities. These
procedures also require documentation and review of justifications for any
decisions to make investments only for select accounts or in a manner
disproportionate to the size of the account.
Fund Manager Compensation
-------------------------
The Adviser's compensation program for investment professionals is
designed to be competitive and effective in order to attract and retain the
highest caliber employees. The compensation program for investment professionals
is designed to reflect their ability to generate long-term investment success
for our clients, including shareholders of the AllianceBernstein Mutual Funds.
Investment professionals' annual compensation is comprised of the following:
(i) Fixed base salary: This is generally the smallest portion of
compensation. The base salary is a relatively low, fixed salary within a similar
range for all investment professionals. The base salary is determined at the
outset of employment based on level of experience, does not change significantly
from year-to-year and hence, is not particularly sensitive to performance.
(ii) Discretionary incentive compensation in the form of an annual
cash bonus: The Adviser's overall profitability determines the total amount of
incentive compensation available to investment professionals. This portion of
compensation is determined subjectively based on qualitative and quantitative
factors. In evaluating this component of an investment professional's
compensation, the Adviser considers the contribution to his/her team or
discipline as it relates to that team's overall contribution to the long-term
investment success, business results and strategy of the Adviser. Quantitative
factors considered include, among other things, relative investment performance
(e.g., by comparison to competitor or peer group funds or similar styles of
investments, and appropriate, broad-based or specific market indices), and
consistency of performance. There are no specific formulas used to determine
this part of an investment professional's compensation and the compensation is
not tied to any pre-determined or specified level of performance. The Adviser
also considers qualitative factors such as the complexity and risk of investment
strategies involved in the style or type of assets managed by the investment
professional; success of marketing/business development efforts and client
servicing; seniority/length of service with the firm; management and supervisory
responsibilities; and fulfillment of the Adviser's leadership criteria.
(iii) Discretionary incentive compensation in the form of awards under
the Adviser's Partners Compensation Plan ("deferred awards"): The Adviser's
overall profitability determines the total amount of deferred awards available
to investment professionals. The deferred awards are allocated among investment
professionals based on criteria similar to those used to determine the annual
cash bonus. There is no fixed formula for determining these amounts. Deferred
awards, for which, prior to 2009, there were various investment options, vest
over a four-year period and are generally forfeited if the employee resigns or
the Adviser terminates his/her employment. Prior to 2009, investment options
under the deferred awards plan included many of the same AllianceBernstein
Mutual Funds offered to mutual fund investors. In 2009, the Adviser expects that
all deferred awards will be in the form of the Adviser's publicly traded equity
securities.(8)
----------
(8) Prior to 2002, investment professional compensation also included
discretionary long-term incentive in the form of restricted grants of the
Adviser's Master Limited Partnership Units.
(iv) Contributions under the Adviser's Profit Sharing/401(k) Plan: The
contributions are based on the Adviser's overall profitability. The amount and
allocation of the contributions are determined at the sole discretion of the
Adviser.
(v) Compensation under the Adviser's Special Option Program: Under
this program, certain investment professionals may be permitted to allocate a
portion of their deferred awards to options to buy the Adviser's publicly traded
equity securities, and to receive a two-for-one match of such allocated amount.
The determination of who may be eligible to participate in the Special Option
Program is made at the sole discretion of the Adviser.
--------------------------------------------------------------------------------
EXPENSES OF THE FUNDS
--------------------------------------------------------------------------------
Distribution Services Agreement
-------------------------------
Each Fund has entered into a Distribution Services Agreement (the
"Agreement") with ABI, the Fund's principal underwriter, to permit ABI to
distribute the Fund's shares and to permit the Fund to pay distribution services
fees to defray expenses associated with distribution of its Class A shares,
Class B shares, Class C shares, Class R shares and Class K shares in accordance
with a plan of distribution that is included in the Agreement and that has been
duly adopted and approved in accordance with Rule 12b-1 adopted by the
Commission under the 1940 Act (the "Rule 12b-1 Plan").
During the fiscal year ended October 31, 2009 for Intermediate Bond,
Diversified Yield and High Income and during the fiscal year ended September 30,
2009 for Global Bond, with respect to Class A shares, the distribution services
fees for expenditures payable to ABI amounted to $[___________], $[___________],
$[___________] and $[___________], respectively, which constituted %[___ ],
%[___ ], %[___ ], and %[___ ], annually, of the respective Fund's aggregate
average daily net assets attributable to Class A shares during the fiscal year.
The Adviser made payments from its own resources aggregating $[___________],
$[___________], $[___________], and $[___________], respectively.
For the fiscal year ended October 31, 2009 for Intermediate Bond,
Diversified Yield and High Income and during the fiscal year ended September 30,
2009 for Global Bond, expenses incurred by each Fund and costs allocated to each
Fund in connection with activities primarily intended to result in the sale of
Class A shares were as follows:
Category of Intermediate Diversified Global Bond High Income
Expense Bond Yield
Advertising $[___________] $[___________] $[___________] $[___________]
Printing and
Mailing of
Prospectuses
to Persons
Other Than
Current
Shareholders $[___________] $[___________] $[___________] $[___________]
Compensation
to
Broker-Dealers
and Other
Financial
Intermediaries
(excluding ABI) $[___________] $[___________] $[___________] $[___________]
Compensation
to ABI $[___________] $[___________] $[___________] $[___________]
Compensation
to Sales
Personnel $[___________] $[___________] $[___________] $[___________]
Other
(includes
printing of
sales
literature,
travel,
entertainment,
due diligence
and other
promotional
expenses) $[___________] $[___________] $[___________] $[___________]
Totals $[___________] $[___________] $[___________] $[___________]
During the fiscal year ended October 31, 2009 for Intermediate Bond,
Diversified Yield and High Income and during the fiscal year ended September 30,
2009 for Global Bond, with respect to Class B shares, the distribution services
fees for expenditures payable to ABI amounted to $[___________], $[___________],
$[___________], and $[___________], respectively, which constituted %[___ ],
%[___ ], %[___ ], and %[___ ], annually, of the respective Fund's aggregate
average daily net assets attributable to Class B shares during the fiscal year.
The Adviser made payments from its own resources aggregating$[___________],
$[___________], $[___________], and $[___________], respectively. For
Intermediate Bond, Diversified Yield, and Global Bond, $[___________],
$[___________], and $[___________], respectively, were used to offset the
distribution services fees paid in prior years.
For the fiscal year ended October 31, 2009 for Intermediate Bond,
Diversified Yield and High Income and during the fiscal year ended September 30,
2009 for Global Bond, expenses incurred by each Fund and costs allocated to each
Fund in connection with activities primarily intended to result in the sale of
Class B shares were as follows:
Category of Intermediate Diversified
Expense Bond Yield Global Bond High Income
Advertising $[___________] $[___________] $[___________] $[___________]
Printing and
Mailing of
Prospectuses
to Persons
Other Than
Current
Shareholders $[___________] $[___________] $[___________] $[___________]
Compensation
to
Broker-Dealers
and Other
Financial
Intermediaries
(excluding ABI) $[___________] $[___________] $[___________] $[___________]
Compensation
to ABI $[___________] $[___________] $[___________] $[___________]
Compensation
to Sales
Personnel $[___________] $[___________] $[___________] $[___________]
Interest on
Financing $[___________] $[___________] $[___________] $[___________]
Other
(includes
printing of
sales
literature,
travel,
entertainment,
due diligence
and other
promotional
expenses) $[___________] $[___________] $[___________] $[___________]
Totals $[___________] $[___________] $[___________] $[___________]
During the fiscal year ended October 31, 2009 for Intermediate Bond,
Diversified Yield and High Income and during the fiscal year ended September 30,
2009 for Global Bond, with respect to Class C shares, the distribution services
fees for expenditures payable to ABI amounted to $[___________], $[___________],
$[___________], and $[___________], respectively, which constituted %[___ ],
%[___ ], %[___ ], and %[___ ], annually, of the respective Fund's aggregate
average daily net assets attributable to Class C shares during the fiscal year.
The Adviser made payments from its own resources aggregating $[___________],
$[___________], $[___________], and $[___________], respectively.
For the fiscal year ended October 31, 2009 for Intermediate Bond,
Diversified Yield and High Income and during the fiscal year ended September 30,
2009 for Global Bond, expenses incurred by each Fund and costs allocated to each
Fund in connection with activities primarily intended to result in the sale of
Class C shares were as follows:
Category of Intermediate Diversified
Expense Bond Yield Global Bond High Income
Advertising $[___________] $[___________] $[___________] $[___________]
Printing and
Mailing of
Prospectuses
to Persons
Other Than
Current
Shareholders $[___________] $[___________] $[___________] $[___________]
Compensation
to
Broker-Dealers
and Other
Financial
Intermediaries
(excluding ABI) $[___________] $[___________] $[___________] $[___________]
Compensation
to ABI $[___________] $[___________] $[___________] $[___________]
Compensation
to Sales
Personnel $[___________] $[___________] $[___________] $[___________]
Interest on
Financing $[___________] $[___________] $[___________] $[___________]
Other
(includes
printing of
sales
literature,
travel,
entertainment,
due diligence
and other
promotional
expenses) $[___________] $[___________] $[___________] $[___________]
Totals $[___________] $[___________] $[___________] $[___________]
During the fiscal year ended October 31, 2009 for Intermediate Bond,
Diversified Yield and High Income and during the fiscal year ended September 30,
2009 for Global Bond, with respect to Class R shares, the distribution services
fees for expenditures payable to ABI amounted to $[___________], $[___________],
$[___________], and $[___________], respectively, which constituted %[___ ],
%[___ ], %[___ ], and %[___ ], annually, of the respective Fund's aggregate
average daily net assets attributable to Class R shares during the fiscal year.
The Adviser made payments from its own resources aggregating $[___________],
$[___________], $[___________], and $[___________], respectively.
For the fiscal year ended October 31, 2009 for Intermediate Bond,
Diversified Yield and High Income and during the fiscal year ended September 30,
2009 for Global Bond, expenses incurred by each Fund and costs allocated to each
Fund in connection with activities primarily intended to result in the sale of
Class R shares were as follows:
Category of Intermediate Diversified
Expense Bond Yield Global Bond High Income
Advertising $[___________] $[___________] $[___________] $[___________]
Printing and
Mailing of
Prospectuses
to Persons
Other Than
Current
Shareholders $[___________] $[___________] $[___________] $[___________]
Compensation
to
Broker-Dealers
and Other
Financial
Intermediaries
(excluding ABI) $[___________] $[___________] $[___________] $[___________]
Compensation
to ABI $[___________] $[___________] $[___________] $[___________]
Compensation
to Sales
Personnel $[___________] $[___________] $[___________] $[___________]
Interest on
Financing $[___________] $[___________] $[___________] $[___________]
Other
(includes
printing of
sales
literature,
travel,
entertainment,
due diligence
and other
promotional
expenses) $[___________] $[___________] $[___________] $[___________]
Totals $[___________] $[___________] $[___________] $[___________]
During the fiscal year ended October 31, 2009 for Intermediate Bond,
Diversified Yield and High Income and during the fiscal year ended September 30,
2009 for Global Bond, with respect to Class K shares, the distribution services
fees for expenditures payable to ABI amounted to $[___________], $[___________],
$[___________], and $[___________], respectively, which constituted %[___ ],
%[___ ], %[___ ], and %[___ ], annually, of the respective Fund's aggregate
average daily net assets attributable to Class K shares during the fiscal year.
The Adviser made payments from its own resources aggregating $[___________],
$[___________], $[___________], and $[___________], respectively.
For the fiscal year ended October 31, 2009 for Intermediate Bond,
Diversified Yield and High Income and during the fiscal year ended September 30,
2009 for Global Bond, expenses incurred by each Fund and costs allocated to each
Fund in connection with activities primarily intended to result in the sale of
Class K shares were as follows:
Category of Intermediate Diversified
Expense Bond Yield Global Bond High Income
Advertising $[___________] $[___________] $[___________] $[___________]
Printing and
Mailing of
Prospectuses
to Persons
Other Than
Current
Shareholders $[___________] $[___________] $[___________] $[___________]
Compensation
to
Broker-Dealers
and Other
Financial
Intermediaries
(excluding ABI) $[___________] $[___________] $[___________] $[___________]
Compensation
to ABI $[___________] $[___________] $[___________] $[___________]
Compensation
to Sales
Personnel $[___________] $[___________] $[___________] $[___________]
Interest on
Financing $[___________] $[___________] $[___________] $[___________]
Other
(includes
printing of
sales
literature,
travel,
entertainment,
due diligence
and other
promotional
expenses) $[___________] $[___________] $[___________] $[___________]
Totals $[___________] $[___________] $[___________] $[___________]
Distribution services fees are accrued daily and paid monthly and
charged as expenses of each Fund as accrued. The distribution services fees
attributable to the Class B, Class C, Class R and Class K shares are designed to
permit an investor to purchase such shares through broker-dealers without the
assessment of an initial sales charge and at the same time to permit ABI to
compensate broker-dealers in connection with the sale of such shares. In this
regard the purpose and function of the combined contingent deferred sales charge
("CDSC") and respective distribution services fee on the Class B shares and
Class C shares and distribution services fees on the Class R shares and the
Class K shares are the same as those of the initial sales charge and
distribution services fee with respect to the Class A shares in that in each
case the sales charge and/or distribution services fee provide for the financing
of the distribution of the relevant class of the Fund's shares.
With respect to Class A shares of each Fund, distribution expenses
accrued by ABI in one fiscal year may not be paid from distribution services
fees received from the Fund in subsequent fiscal years. ABI's compensation with
respect to Class B, Class C, Class R and Class K shares under the Rule 12b-1
Plan is directly tied to the expenses incurred by ABI. Actual distribution
expenses for Class B, Class C, Class R and Class K shares for any given year,
however, will probably exceed the distribution services fees payable under the
Rule 12b-1 Plan with respect to the class involved and, in the case of Class B
and Class C shares, payments received from CDSCs. The excess will be carried
forward by ABI and reimbursed from distribution services fees payable under the
Rule 12b-1 Plan with respect to the class involved and, in the case of Class B
and Class C shares, payments subsequently received through CDSCs, so long as the
Rule 12b-1 Plan is in effect.
For the fiscal year ended October 31, 2009 for Intermediate Bond,
Diversified Yield and High Income and during the fiscal year ended September 30,
2009 for Global Bond, unreimbursed distribution expenses incurred and carried
over of reimbursement in future years in respect of the Class B, Class C, Class
R and Class K shares of each Fund were as follows:
Intermediate Diversified
Class Bond Yield Global Bond High Income
Class B $[___________] $[___________] $[__________] $[__________]
(% of the net
assets of
Class B) %[____] %[____] %[____] %[____]
Class C $[___________] $[___________] $[__________] $[__________]
(% of the net
assets of
Class C) %[____] %[____] %[____] %[____]
Class R $[___________] $[___________] $[__________] $[__________]
(% of the net
assets of
Class R) %[____] %[____] %[____] %[____]
Class K $[___________] $[___________] $[__________] $[__________]
(% of the net
assets of
Class K) %[____] %[____] %[____] %[____]
The Rule 12b-1 Plan is in compliance with rules of the Financial
Industry Regulatory Authority ("FINRA"), which effectively limit the annual
asset-based sales charges and service fees that a mutual fund may pay on a class
of shares to .75% and .25%, respectively, of the average annual net assets
attributable to that class. The rules also limit the aggregate of all front-end,
deferred and asset-based sales charges imposed with respect to a class of shares
by a mutual fund that also charges a service fee to 6.25% of cumulative gross
sales of shares of that class, plus interest at the prime rate plus 1% per
annum.
In approving the Rule 12b-1 Plan, the Directors of each Fund
determined that there was a reasonable likelihood that the Rule 12b-1 Plan would
benefit the Funds and its shareholders. The distribution services fee of a
particular class will not be used to subsidize the provision of distribution
services with respect to any other class.
The Adviser may from time to time and from its own funds or such other
resources as may be permitted by rules of the Commission make payments for
distribution services to ABI; the latter may in turn pay part or all of such
compensation to brokers or other persons for their distribution assistance.
The Agreement will continue in effect provided that such continuance
is specifically approved at least annually by the Directors of the Funds or by
vote of the holders of a majority of the outstanding voting securities (as
defined in the 1940 Act) of that class, and in either case, by a majority of the
Directors of the Funds who are not parties to this Agreement or interested
persons, as defined in the 1940 Act, of any such party (other than as directors
of the Fund) and who have no direct or indirect financial interest in the
operation of the Rule 12b-1 Plan or any agreement related thereto. Most recently
the Directors approved the continuance of the Agreement for an additional annual
term at their meetings held on November 3-5, 2009.
All material amendments to the Agreement will become effective only
upon approval as provided in the preceding paragraph, and the 12b-1 Plan may not
be amended in order to increase materially the costs that the Fund may bear
pursuant to the Agreement without the approval of a majority of the holders of
the outstanding voting shares of the Fund or the class or classes of the Fund
affected. The Agreement may be terminated (a) by the Fund without penalty at any
time by a majority vote of the holders of the Fund's outstanding voting
securities, voting separately by class, or by a majority vote of the
disinterested Directors or (b) by ABI. To terminate the Agreement, any party
must give the other parties 60 days' written notice; to terminate the Rule 12b-1
Plan only, the Fund is not required to give prior notice to ABI. The Agreement
will terminate automatically in the event of its assignment.
In the event that the Rule 12b-1 Plan is terminated by either party or
not continued with respect to the Class A, Class B, Class C, Class R or Class K
shares, (i) no distribution services fees (other than current amounts accrued
but not yet paid) would be owed by the Fund to ABI with respect to that class
and (ii) the Fund would not be obligated to pay ABI for any amounts expended
under the Agreement not previously recovered by ABI from distribution services
fees in respect of shares of such class or through deferred sales charges.
Transfer Agency Agreement
-------------------------
ABIS, an indirect wholly-owned subsidiary of the Adviser, located
principally at 8000 IH 10 W, 4th Floor, San Antonio, Texas 78230, acts as the
Fund's registrar, transfer agent and dividend-disbursing agent for a fee based
upon the number of account holders for each of the Class A, Class B, Class C,
Class R, Class K, Class I and Advisor Class shares of the Funds plus
reimbursement for out-of-pocket expenses. The transfer agency fee with respect
to the Class B shares and Class C shares is higher than the transfer agency fee
with respect to the Class A, Class R, Class K, Class I and Advisor Class shares.
For the fiscal year ended October 31, 2009 for Intermediate Bond, Diversified
Yield and High Income and for the fiscal year ended September 30, 2009 for
Global Bond, the Fund paid ABIS $[___________], $[___________], $[___________]
and $[___________], respectively, for transfer agency services.
ABIS acts as the transfer agent for each Fund. ABIS registers the
transfer, issuance and redemption of Fund shares and disburses dividends and
other distributions to Fund shareholders.
Many Fund shares are owned by selected dealers or selected agents (as
defined below), financial intermediaries or other financial representatives
("financial intermediaries") for the benefit of their customers. In those cases,
the Funds often do not maintain an account for you. Thus, some or all of the
transfer agency functions for these accounts are performed by the financial
intermediaries. Each Fund, ABI and/or the Adviser pay to these financial
intermediaries, including those that sell shares of the AllianceBernstein Mutual
Funds, fees for sub-accounting or shareholder servicing in amounts ranging up to
$19 per customer fund account per annum. Retirement plans may also hold Fund
shares in the name of the plan, rather than the participant. Plan recordkeepers,
who may have affiliated financial intermediaries who sell shares of the Fund,
may be paid for each plan participant fund account in amounts up to $19 per
account per annum and/or up to 0.25% per annum of the average daily assets held
in the plan. To the extent any of these payments for sub-accounting or
shareholder servicing or retirement plan accounts are made by the Fund, they are
included in your Prospectus in the Fund expense tables under "Fees and Expenses
of the Funds." In addition, financial intermediaries may be affiliates of
entities that receive compensation from the Adviser or ABI for maintaining
retirement plan "platforms" that facilitate trading by affiliated and
non-affiliated financial intermediaries and recordkeeping for retirement plans.
Because financial intermediaries and plan recordkeepers may be paid
varying amounts per class for sub-accounting or shareholder servicing, the
service requirements of which may also vary by class, this may create an
additional incentive for financial intermediaries and their financial advisors
to favor one fund complex over another or one class of shares over another.
Code of Ethics and Proxy Voting and Procedures
----------------------------------------------
The Funds, the Adviser and ABI have each adopted codes of ethics
pursuant to Rule 17j-1 of the 1940 Act. These codes of ethics permit personnel
subject to the codes to invest in securities, including securities that may be
purchased or held by the Fund.
Information regarding how each Fund voted proxies related to portfolio
securities during the most recent 12-month period ended [June 30, 2009] is
available (1) without charge, upon request, by calling (800) 277-4618; or on or
through the Fund's website at www.AllianceBernstein.com; or both; and (2) on the
Commission's website at www.sec.gov.
--------------------------------------------------------------------------------
PURCHASE OF SHARES
--------------------------------------------------------------------------------
The following information supplements that set forth in your
Prospectus under "Investing in the Fund."
Effective January 31, 2009, sales of Class B shares of the Funds to
new investors were suspended. Class B shares may only be purchased (i) by
existing Class B shareholders as of January 31, 2009, (ii) through exchange of
Class B shares from another AllianceBernstein Mutual Fund, and (iii) as
otherwise described below.
General
-------
Shares of the Funds are offered on a continuous basis at a price equal
to their NAV plus an initial sales charge at the time of purchase ("Class A
shares"), with a CDSC ("Class B shares"), or without any initial sales charge
and, as long as the shares are held for one year or more, without any CDSC
("Class C shares"), to group retirement plans, as defined below, eligible to
purchase Class R shares, without any initial sales charge or CDSC ("Class R
shares"), to group retirement plans eligible to purchase Class K shares, without
any initial sales charge or CDSC ("Class K shares"), to group retirement plans
and certain investment advisory clients of, and certain other persons associated
with, the Adviser and its affiliates eligible to purchase Class I shares,
without any initial sales charge or CDSC ("Class I shares"), or to investors
eligible to purchase Advisor Class shares, without any initial sales charge or
CDSC ("Advisor Class shares"), in each case as described below. "Group
retirement plans" are defined as 401(k) plans, 457 plans, employer-sponsored
403(b) plans, profit sharing and money purchase pension plans, defined benefit
plans, and non-qualified deferred compensation plans where plan level or omnibus
accounts are held on the books of the Fund. All of the classes of shares of the
Funds, except the Class I and Advisor Class shares, are subject to Rule 12b-1
asset-based sales charges. Shares of the Funds that are offered subject to a
sales charge are offered through (i) investment dealers that are members of
FINRA and have entered into selected dealer agreements with ABI ("selected
dealers"), (ii) depository institutions and other financial intermediaries or
their affiliates, that have entered into selected agent agreements with ABI
("selected agents") and (iii) ABI.
Investors may purchase shares of the Funds either through financial
intermediaries or directly through ABI. A transaction, service, administrative
or other similar fee may be charged by your financial intermediary with respect
to the purchase, sale or exchange of shares made through the financial
intermediary. Such financial intermediary may also impose requirements with
respect to the purchase, sale or exchange of shares that are different from, or
in addition to, those imposed by the Fund, including requirements as to the
classes of shares available through that financial intermediary and the minimum
initial and subsequent investment amounts. A Fund is not responsible for, and
has no control over, the decision of any financial intermediary to impose such
differing requirements. Sales personnel of selected dealers and agents
distributing the Fund's Fund shares may receive differing compensation for
selling different classes of shares.
In order to open your account, a Fund or your financial intermediary
is required to obtain certain information from you for identification purposes.
This information may include name, date of birth, permanent residential address
and social security/taxpayer identification number. It will not be possible to
establish your account without this information. If the Fund or your financial
intermediary is unable to verify the information provided, your account may be
closed, and other appropriate action may be taken as permitted by law.
Each Fund's Board of Directors has adopted policies and procedures
designed to detect and deter frequent purchases and redemptions of Fund shares
or excessive or short-term trading that may disadvantage long-term Fund
shareholders. These policies are described below. There is no guarantee that the
Funds will be able to detect excessive or short-term trading and to identify
shareholders engaged in such practices, particularly with respect to
transactions in omnibus accounts. Shareholders should be aware that application
of these policies may have adverse consequences, as described below, and avoid
frequent trading in Fund shares through purchases, sales and exchanges of
shares. Each Fund reserves the right to restrict, reject or cancel, without any
prior notice, any purchase or exchange order for any reason, including any
purchase or exchange order accepted by any shareholder's financial intermediary.
Risks Associated With Excessive Or Short-Term Trading Generally. While
the Funds will try to prevent market timing by utilizing the procedures
described below, these procedures may not be successful in identifying or
stopping excessive or short-term trading in all circumstances. By realizing
profits through short-term trading, shareholders that engage in rapid purchases
and sales or exchanges of a Fund's shares dilute the value of shares held by
long-term shareholders. Volatility resulting from excessive purchases and sales
or exchanges of Fund shares, especially involving large dollar amounts, may
disrupt efficient portfolio management and cause a Fund to sell shares at
inopportune times to accommodate redemptions relating to short-term trading. In
particular, a Fund may have difficulty implementing its long-term investment
strategies if it is forced to maintain a higher level of its assets in cash to
accommodate significant short-term trading activity. In addition, a Fund may
incur increased administrative and other expenses due to excessive or short-term
trading, including increased brokerage costs and realization of taxable capital
gains.
Funds that may invest significantly in foreign securities may be
particularly susceptible to short-term trading strategies. This is because
foreign securities are typically traded on markets that close well before the
time a Fund calculates its NAV at 4:00 p.m., Eastern time, which gives rise to
the possibility that developments may have occurred in the interim that would
affect the value of these securities. The time zone differences among
international stock markets can allow a shareholder engaging in a short-term
trading strategy to exploit differences in Fund share prices that are based on
closing prices of foreign securities established some time before the Fund
calculates its own share price (referred to as "time zone arbitrage"). The Funds
have procedures, referred to as fair value pricing, designed to adjust closing
market prices of foreign securities to reflect what is believed to be the fair
value of those securities at the time a Fund calculates its NAV. While there is
no assurance, the Funds expect that the use of fair value pricing, in addition
to the short-term trading policies discussed below, will significantly reduce a
shareholder's ability to engage in time zone arbitrage to the detriment of other
Fund shareholders.
A shareholder engaging in a short-term trading strategy may also
target a Fund that does not invest primarily in foreign securities. Any Fund
that invests in securities that are, among other things, thinly traded, traded
infrequently or relatively illiquid has the risk that the current market price
for the securities may not accurately reflect current market values. A
shareholder may seek to engage in short-term trading to take advantage of these
pricing differences (referred to as "price arbitrage"). All Funds may be
adversely affected by price arbitrage.
Policy Regarding Short-Term Trading. Purchases and exchanges of shares
of the Fund should be made for investment purposes only. The Funds will seek to
prevent patterns of excessive purchases and sales of Fund shares to the extent
they are detected by the procedures described below. The Funds reserve the right
to modify this policy, including any surveillance or account blocking procedures
established from time to time to effectuate this policy, at any time without
notice.
o Transaction Surveillance Procedures. The Funds, through their
agents, ABI and ABIS, maintain surveillance procedures to detect
excessive or short-term trading in Fund shares. This surveillance
process involves several factors, which include scrutinizing
transactions in Fund shares that exceed certain monetary
thresholds or numerical limits within a specified period of time.
Generally, more than two exchanges of Fund shares during any
90-day period or purchases of shares followed by a sale within 90
days will be identified by these surveillance procedures. For
purposes of these transaction surveillance procedures, the Funds
may consider trading activity in multiple accounts under common
ownership, control, or influence. Trading activity identified by
either, or a combination, of these factors, or as a result of any
other information available at the time, will be evaluated to
determine whether such activity might constitute excessive or
short-term trading. These surveillance procedures may be modified
from time to time, as necessary or appropriate to improve the
detection of excessive or short-term trading or to address
specific circumstances.
o Account Blocking Procedures. If the Funds determine, in their
sole discretion, that a particular transaction or pattern of
transactions identified by the transaction surveillance
procedures described above is excessive or short-term trading in
nature, the relevant Fund account(s) will be immediately
"blocked" and no future purchase or exchange activity will be
permitted. However, sales of Fund shares back to the Fund or
redemptions will continue to be permitted in accordance with the
terms of the Fund's current Prospectus. As a result, unless the
shareholder redeems his or her shares, which may have
consequences if the shares have declined in value, a CDSC is
applicable or adverse tax consequences may result, the
shareholder may be "locked" into an unsuitable investment. In the
event an account is blocked, certain account-related privileges,
such as the ability to place purchase, sale and exchange orders
over the internet or by phone, may also be suspended. A blocked
account will generally remain blocked unless and until the
account holder or the associated broker, dealer or other
financial intermediary provides evidence or assurance acceptable
to the Fund that the account holder did not or will not in the
future engage in excessive or short-term trading.
o Applications of Surveillance Procedures and Restrictions to
Omnibus Accounts. Omnibus account arrangements are common forms
of holding shares of the Funds, particularly among certain
brokers, dealers and other financial intermediaries, including
sponsors of retirement plans and variable insurance products. The
Funds apply their surveillance procedures to these omnibus
account arrangements. As required by Commission rules, the Funds
have entered into agreements with all of its financial
intermediaries that require the financial intermediaries to
provide the Funds, upon the request of the Funds or their agents,
with individual account level information about their
transactions. If the Funds detect excessive trading through its
monitoring of omnibus accounts, including trading at the
individual account level, the financial intermediaries will also
execute instructions from the Funds to take actions to curtail
the activity, which may include applying blocks to accounts to
prohibit future purchases and exchanges of Fund shares. For
certain retirement plan accounts, the Funds may request that the
retirement plan or other intermediary revoke the relevant
participant's privilege to effect transactions in Fund shares via
the internet or telephone, in which case the relevant participant
must submit future transaction orders via the U.S. Postal Service
(i.e., regular mail).
A Fund reserves the right to suspend the sale of its shares to the
public in response to conditions in the securities markets or for other reasons.
If the Fund suspends the sale of its shares, shareholders will not be able to
acquire its shares, including through an exchange.
The public offering price of shares of a Fund is their NAV, plus, in
the case of Class A shares, a sales charge. On each Fund business day on which a
purchase or redemption order is received by the Fund and trading in the types of
securities in which the Fund invests might materially affect the value of Fund
shares, the NAV is computed as of the next close of regular trading on the
Exchange (currently 4:00 p.m., Eastern time) by dividing the value of the Fund's
total assets, less its liabilities, by the total number of its shares then
outstanding. A Fund business day is any day on which the Exchange is open for
trading.
The respective NAVs of the various classes of shares of the Fund are
expected to be substantially the same. However, the NAVs of the Class B, Class C
and Class R shares will generally be slightly lower than the NAVs of the Class
A, Class K, Class I and Advisor Class shares as a result of the differential
daily expense accruals of the higher distribution and, in some cases, transfer
agency fees applicable with respect to those classes of shares.
A Fund will accept unconditional orders for shares to be executed at
the public offering price equal to their NAV next determined (plus applicable
Class A sales charges), as described below. Orders received by ABI prior to the
close of regular trading on the Exchange on each day the Exchange is open for
trading are priced at the NAV computed as of the close of regular trading on the
Exchange on that day (plus applicable Class A sales charges). In the case of
orders for purchase of shares placed through financial intermediaries, the
applicable public offering price will be the NAV so determined, but only if the
financial intermediary receives the order prior to the close of regular trading
on the Exchange. The financial intermediary is responsible for transmitting such
orders by a prescribed time to the Fund or its transfer agent. If the financial
intermediary fails to do so, the investor will not receive that day's NAV. If
the financial intermediary receives the order after the close of regular trading
on the Exchange, the price received by the investor will be based on the NAV
determined as of the close of regular trading on the Exchange on the next day it
is open for trading.
Following the initial purchase of Fund shares, a shareholder may place
orders to purchase additional shares by telephone if the shareholder has
completed the appropriate portion of the Mutual Fund Application or an "Autobuy"
application obtained by calling the "For Literature" telephone number shown on
the cover of this SAI. Except with respect to certain omnibus accounts,
telephone purchase orders with payment by electronic funds transfer may not
exceed $500,000. Payment for shares purchased by telephone can be made only by
electronic funds transfer from a bank account maintained by the shareholder at a
bank that is a member of the National Automated Clearing House Association
("NACHA"). Telephone purchase requests must be received before 4:00 p.m.,
Eastern time, on a Fund business day to receive that day's public offering
price. Telephone purchase requests received after 4:00 p.m., Eastern time, are
automatically placed the following Fund business day, and the applicable public
offering price will be the public offering price determined as of the close of
business on such following business day.
Full and fractional shares are credited to a shareholder's account in
the amount of his or her subscription. As a convenience, and to avoid
unnecessary expense to the Fund, the Fund will not issue stock certificates
representing shares of the Fund. Ownership of the Fund's shares will be shown on
the books of the Fund's transfer agent. Lost certificates will not be replaced
with another certificate, but will be shown on the books of the Fund's transfer
agent. This facilitates later redemption and relieves the shareholder of the
responsibility for and inconvenience of lost or stolen certificates.
Each class of shares of the Funds represent an interest in the same
portfolio of investments of the Fund, have the same rights and are identical in
all respects, except that (i) Class A shares bear the expense of the initial
sales charge (or CDSC, when applicable) and Class B and Class C shares bear the
expense of the CDSC, (ii) Class B shares, Class C and Class R shares each bear
the expense of a higher distribution services fee than that borne by Class A
shares and Class K shares, and Class I shares and Advisor Class shares do not
bear such a fee, (iii) Class B and Class C shares bear higher transfer agency
costs than that borne by Class A, Class R, Class K, Class I and Advisor Class
shares, (iv) Class B and Advisor Class shares are subject to a conversion
feature and will convert to Class A shares under certain circumstances, and (v)
each of Class A, Class B, Class C, Class R and Class K shares has exclusive
voting rights with respect to provisions of the Rule 12b-1 Plan pursuant to
which its distribution services fee is paid and other matters for which separate
class voting is appropriate under applicable law, provided that, if the Fund
submits to a vote of the Class A shareholders, an amendment to the Rule 12b-1
Plan that would materially increase the amount to be paid thereunder with
respect to the Class A shares, then such amendment will also be submitted to the
Class B and Advisor Class shareholders because the Class B and Advisor Class
shares convert to Class A shares under certain circumstances, and the Class A,
the Class B and the Advisor Class shareholders will vote separately by class.
Each class has different exchange privileges and certain different shareholder
service options available.
The Directors of the Funds have determined that currently no conflict
of interest exists between or among the classes of shares of the Fund. On an
ongoing basis, the Directors of the Funds, pursuant to their fiduciary duties
under the 1940 Act and state law, will seek to ensure that no such conflict
arises.
Alternative Purchase Arrangements
---------------------------------
Classes A, B and C Shares. Class A, Class B and Class C shares have
the following alternative purchase arrangements: Class A shares are generally
offered with an initial sales charge, Class B shares are generally offered with
a CDSC and Class C shares are sold to investors choosing the asset-based sales
charge alternative. Special purchase arrangements are available for Group
Retirement Plans. See "Alternative Purchase Arrangements - Group Retirement
Plans and Tax-Deferred Accounts" below. These alternative purchase arrangements
permit an investor to choose the method of purchasing shares that is most
beneficial given the amount of the purchase, the length of time the investor
expects to hold the shares and other circumstances. Investors should consider
whether, during the anticipated life of their investment in the Fund, the
accumulated distribution services fee and CDSCs on Class B shares prior to
conversion, or the accumulated distribution services fee and CDSCs on Class C
shares, would be less than the initial sales charge and accumulated distribution
services fee on Class A shares purchased at the same time, and to what extent
such differential would be offset by the higher return of Class A shares. Class
A shares will normally be more beneficial than Class B shares to the investor
who qualifies for reduced initial sales charges on Class A shares, as described
below. In this regard, ABI will reject any order (except orders from certain
group retirement plans) for more than $100,000 for Class B shares (see
"Alternative Purchase Arrangements - Group Retirement Plans and Tax-Deferred
Accounts"). Class C shares will normally not be suitable for the investor who
qualifies to purchase Class A shares at NAV. For this reason, ABI will reject
any order for more than $1,000,000 for Class C shares.
Class A shares are subject to a lower distribution services fee and,
accordingly, pay correspondingly higher dividends per share than Class B shares
or Class C shares. However, because initial sales charges are deducted at the
time of purchase, most investors purchasing Class A shares would not have all
their funds invested initially and, therefore, would initially own fewer shares.
Investors not qualifying for reduced initial sales charges who expect to
maintain their investment for an extended period of time might consider
purchasing Class A shares because the accumulated continuing distribution
charges on Class B shares or Class C shares may exceed the initial sales charge
on Class A shares during the life of the investment. Again, however, such
investors must weigh this consideration against the fact that, because of such
initial sales charges, not all their funds will be invested initially.
Other investors might determine, however, that it would be more
advantageous to purchase Class B shares or Class C shares in order to have all
their funds invested initially, although remaining subject to higher continuing
distribution charges and being subject to a CDSC for a three-year (four-year for
Intermediate Bond) and one-year period, respectively. For example, based on
current fees and expenses, an investor subject to the 4.25% initial sales charge
would have to hold his or her investment approximately seven years for the Class
C distribution services fee to exceed the initial sales charge plus the
accumulated distribution services fee of Class A shares. In this example, an
investor intending to maintain his or her investment for a longer period might
consider purchasing Class A shares. This example does not take into account the
time value of money, which further reduces the impact of the Class C
distribution services fees on the investment, fluctuations in NAV or the effect
of different performance assumptions.
Those investors who prefer to have all of their funds invested
initially but may not wish to retain Fund shares for the three-year (four-year
for Intermediate Bond) period during which Class B shares are subject to a CDSC
may find it more advantageous to purchase Class C shares.
During the fiscal years ended October 31, 2007, 2008 and 2009, the
aggregate amount of underwriting commission payable with respect to shares of
Intermediate Bond was $93,302, $264,102, and $[___________], respectively. Of
that amount ABI received amounts of $3,334, $2,081, and $11,175, respectively,
representing that portion of the sales charges paid on shares of the Fund sold
during the year which was not re-allowed to selected dealers (and was,
accordingly, retained by ABI). During the Fund's fiscal years ended October 31,
2007, 2008, and 2009, ABI received CDSCs of $11,417, $6,007, and $[___________],
respectively, on Class A shares, $10,306, $29,523, and $[___________],
respectively, on Class B shares, and $2,996, $4,072, and $[___________],
respectively, on Class C shares.
During the fiscal years ended October 31, 2007, 2008 and 2009, the
aggregate amount of underwriting commission payable with respect to shares of
Diversified Yield was $142,676, $119,895, and $[___________], respectively. Of
that amount, ABI received the amounts of $10,095, $4,524, and $[___________],
respectively, representing that portion of the sales charges paid on shares of
the Fund sold during the year which was not re-allowed to selected dealers (and
was, accordingly, retained by ABI). During the Fund's fiscal years ended October
31, 2007, 2008 and 2009, ABI received contingent deferred sales charges of $512,
$11,438, and $[___________], respectively, on Class A shares, $18,745, $18,401,
and $[___________], respectively, on Class B shares, and $2,454, $4,380, and
$[___________], respectively, on Class C shares.
During the fiscal years ended September 30, 2007, 2008 and 2009, the
aggregate amount of underwriting commission payable with respect to shares of
Global Bond was $1,493,581, $3,619,264, and $[___________], respectively. Of
those amounts, ABI received the amounts of $84,878, $219,813, and
$[___________], respectively, representing that portion of the sales charges
paid on shares of the Fund sold during the year which was not re-allowed to
selected dealers (and was, accordingly, retained by ABI). During the Fund's
fiscal years ended September 30, 2007, 2008 and 2009, ABI received CDSCs of
$14,519, $44,147, and $[___________], respectively, on Class A shares, $119,221,
$132,810, and $[___________], respectively, on Class B shares and $43,902,
$134,516, and $[___________], respectively, on Class C shares.
During the fiscal years ended October 31, 2007, 2008 and 2009, the
aggregate amount of underwriting commission payable with respect to shares of
High Income was $476,389, $562,420, and $[___________], respectively. Of that
amount, ABI received the amounts of $26,725, $33,817, and $[___________],
respectively, representing that portion of the sales charges paid on shares of
the Fund sold during the year which was not re-allowed to selected dealers (and
was, accordingly, retained by ABI). During the Fund's fiscal years ended October
31, 2007, 2008 and 2009, ABI received CDSCs of $402,963, $8,355, and
$[___________], respectively, on Class A shares, $35,449, $50,423, and
$[___________], respectively, on Class B shares, and $13,305, $21,648, and
$[___________], respectively, on Class C shares.
Class A Shares
--------------
The public offering price of Class A shares is the NAV plus a sales
charge, as set forth below.
Sales Charge
------------
Discount or
Commission to
Dealers or
As % of Net As % of the Agents of up
Amount Public to % of
Amount of Purchase Invested Offering Price Offering Price
------------------ -------- -------------- --------------
Up to $100,000............. 4.44% 4.25% 4.00%
$100,000 up to $250,000.... 3.36 3.25 3.00
$250,000 up to $500,000.... 2.30 2.25 2.00
$500,000 up to $1,000,000*. 1.78 1.75 1.50
----------
* There is no initial sales charge on transactions of $1,000,000 or more.
All or a portion of the initial sales charge may be paid to your
financial representative. With respect to purchases of $1,000,000 or more, Class
A shares redeemed within one year of purchase may be subject to a CDSC of up to
1%. The CDSC on Class A shares will be waived on certain redemptions, as
described below under "--Contingent Deferred Sales Charge."
No initial sales charge is imposed on Class A shares issued (i)
pursuant to the automatic reinvestment of income dividends or capital gains
distributions, (ii) in exchange for Class A shares of other AllianceBernstein
Mutual Funds (as that term is defined under "Combined Purchase Privilege"
below), except that an initial sales charge will be imposed on Class A shares
issued in exchange for Class A shares of AllianceBernstein Exchange Reserves
that were purchased for cash without the payment of an initial sales charge and
without being subject to a CDSC, or (iii) upon the automatic conversion of Class
B shares as described below under "--Class B Shares--Conversion Feature". A Fund
receives the entire NAV of its Class A shares sold to investors. ABI's
commission is the sales charge shown above less any applicable discount or
commission "re-allowed" to selected dealers and agents. ABI will re-allow
discounts to selected dealers and agents in the amounts indicated in the table
above. In this regard, ABI may elect to re-allow the entire sales charge to
selected dealers and agents for all sales with respect to which orders are
placed with ABI. A selected dealer who receives re-allowance in excess of 90% of
such a sales charge may be deemed to be an "underwriter" under the Securities
Act.
In addition to the circumstances described above, certain types of
investors may be entitled to pay no initial sales charge in certain
circumstances described below.
Class A Shares - Sales at NAV. A Fund may sell its Class A shares at
NAV (i.e., without any initial sales charge) to certain categories of investors
including:
(i) investment management clients of the Adviser or its affiliates,
including clients and prospective clients of the Adviser's
AllianceBernstein Institutional Investment Management Division;
(ii) officers and present or former Directors of the Fund or other
investment companies managed by the Adviser, officers, directors
and present or retired full-time employees and former employees
(for subsequent investment in accounts established during the
course of their employment) of the Adviser, ABI, ABIS and their
affiliates; officers, directors and present and full-time
employees of selected dealers or agents; or the spouse or
domestic partner, sibling, direct ancestor or direct descendant
(collectively, "relatives") of any such person; or any trust,
individual retirement account or retirement plan account for the
benefit of any such person;
(iii) the Adviser, ABI, ABIS and their affiliates; certain employee
benefit plans for employees of the Adviser, ABI, ABIS and their
affiliates;
(iv) persons participating in a fee-based program, sponsored and
maintained by a registered broker-dealer or other financial
intermediary and approved by ABI, under which such persons pay an
asset-based fee for service in the nature of investment advisory
or administrative services; and
(v) certain retirement plan accounts as described under "Alternative
Purchase Arrangements - Group Retirement Plans and Tax-Deferred
Accounts."
Class B Shares
--------------
Effective January 31, 2009, sales of Class B shares of the Funds to
new investors were suspended. Class B shares may only be purchased (i) by
existing Class B shareholders as of January 31, 2009, (ii) through exchange of
Class B shares from another AllianceBernstein Mutual Fund, and (iii) as
otherwise described below.
Investors may purchase Class B shares at the public offering price
equal to the NAV per share of the Class B shares on the date of purchase without
the imposition of a sales charge at the time of purchase. The Class B shares are
sold without an initial sales charge so that the Fund will receive the full
amount of the investor's purchase payment.
Conversion Feature. For Intermediate Bond, Global Bond and High
Income, six years after the end of the calendar month in which the shareholder's
purchase order was accepted, Class B shares will automatically convert to Class
A shares and will no longer be subject to a higher distribution services fee.
For Diversified Yield, eight years after the end of the calendar month in which
the shareholder's purchase order was accepted, Class B shares will automatically
convert to Class A shares and will no longer be subject to a higher distribution
services fee. Such conversion will occur on the basis of the relative NAVs of
the two classes, without the imposition of any sales load, fee or other charge.
The purpose of the conversion feature is to reduce the distribution services fee
paid by holders of Class B shares that have been outstanding long enough for ABI
to have been compensated for distribution expenses incurred in the sale of the
shares.
For purposes of conversion to Class A, Class B shares purchased
through the reinvestment of dividends and distributions paid in respect of Class
B shares in a shareholder's account will be considered to be held in a separate
sub-account. Each time any Class B shares in the shareholder's account (other
than those in the sub-account) convert to Class A shares, an equal pro-rata
portion of the Class B shares in the sub-account will also convert to Class A
shares.
The conversion of Class B shares to Class A shares is subject to the
continuing availability of an opinion of counsel to the effect that the
conversion of Class B shares to Class A shares does not constitute a taxable
event under federal income tax law. The conversion of Class B shares to Class A
shares may be suspended if such an opinion is no longer available at the time
such conversion is to occur. In that event, no further conversions of Class B
shares would occur, and shares might continue to be subject to the higher
distribution services fee for an indefinite period which may extend beyond the
period ending six years after the end of the calendar month in which the
shareholder's purchase order was accepted.
Class C Shares
--------------
Investors may purchase Class C shares at the public offering price
equal to the NAV per share of the Class C shares on the date of purchase without
the imposition of a sales charge either at the time of purchase or, as long as
the shares are held for one year or more, upon redemption. Class C shares are
sold without an initial sales charge so that the Fund will receive the full
amount of the investor's purchase payment and, as long as the shares are held
for one year or more, without a CDSC so that the investor will receive as
proceeds upon redemption the entire NAV of his or her Class C shares. The Class
C distribution services fee enables the Fund to sell Class C shares without
either an initial sales charge or CDSC, as long as the shares are held for one
year or more. Class C shares do not convert to any other class of shares of the
Fund and incur higher distribution services fees and transfer agency costs than
Class A shares and Advisor Class shares, and will thus have a higher expense
ratio and pay correspondingly lower dividends than Class A shares and Advisor
Class shares.
Contingent Deferred Sales Charge. Class B shares that are redeemed
within three years of purchase will be subject to a CDSC at the rates set forth
below charged as a percentage of the dollar amount subject thereto. Class A
share purchases of $1,000,000 or more and Class C shares that are redeemed
within one year of purchase will be subject to a CDSC of 1%, as are Class A
share purchases by certain group retirement plans (see "alternative Purchase
Arrangements--Group Retirement Plans and Tax-Deferred Accounts" below). The
charge will be assessed on an amount equal to the lesser of the cost of the
shares being redeemed or their NAV at the time of redemption. Accordingly, no
sales charge will be imposed on increases in NAV above the initial purchase
price. In addition, no charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions.
To illustrate, assume that an investor purchased 100 Class B shares at
$10 per share (at a cost of $1,000) and in the second year after purchase, the
NAV per share is $12 and, during such time, the investor has acquired 10
additional Class B shares upon dividend reinvestment. If at such time the
investor makes his or her first redemption of 50 Class B shares (proceeds of
$600), 10 Class B shares will not be subject to the charge because of dividend
reinvestment. With respect to the remaining 40 Class B shares, the charge is
applied only to the original cost of $10 per share and not to the increase in
NAV of $2 per share. Therefore, $400 of the $600 redemption proceeds will be
charged at a rate of 2.0% (the applicable rate in the second year after purchase
as set forth below).
For Class B shares, the amount of the CDSC, if any, will vary
depending on the number of years from the time of payment for the purchase of
Class B shares until the time of redemption of such shares.
Contingent Deferred Sales Charge
for the Fund as a % of Dollar
Year Since Purchase Amount Subject to Charge
------------------- ------------------------
First 3.0%
Second 2.0%
Third 1.0%
Thereafter None
In determining the CDSC applicable to a redemption of Class B and
Class C shares, it will be assumed that the redemption is, first, of any shares
that are not subject to a CDSC (for example, because the shares were acquired
upon the reinvestment of dividends or distributions) and, second, of shares held
longest during the time they are subject to the sales charge. When shares
acquired in an exchange are redeemed, the applicable CDSC and conversion
schedules will be the schedules that applied at the time of the purchase of
shares of the corresponding class of the AllianceBernstein Mutual Fund
originally purchased by the shareholder. If you redeem your shares and directly
invest the proceeds in units of CollegeBoundfund, the CDSC will apply to the
units of CollegeBoundfund. The CDSC period begins with the date of your original
purchase, not the date of exchange for the other Class B shares or Class C
shares, as applicable, or purchase of CollegeBoundfund units.
Proceeds from the CDSC are paid to ABI and are used by ABI to defray
the expenses of ABI related to providing distribution-related services to the
Fund in connection with the sale of Fund shares, such as the payment of
compensation to selected dealers and agents for selling Fund shares. The
combination of the CDSC and the distribution services fee enables the Fund to
sell shares without a sales charge being deducted at the time of purchase.
The CDSC is waived on redemptions of shares (i) following the death or
disability, as defined in the United States Internal Revenue Code of 1986, as
amended (the "Code"), of a shareholder, (ii) to the extent that the redemption
represents a minimum required distribution from an individual retirement account
or other retirement plan to a shareholder that has attained the age of 70-1/2,
(iii) that had been purchased by present or former Directors of the Fund, by the
relative of any such person, by any trust, individual retirement account or
retirement plan account for the benefit of any such person or relative, or by
the estate of any such person or relative, (iv) pursuant to, and in accordance
with, a systematic withdrawal plan (see "Sales Charge Reduction
Programs--Systematic Withdrawal Plan" below), (v) to the extent that the
redemption is necessary to meet a plan participant's or beneficiary's request
for a distribution or loan from a group retirement plan or to accommodate a plan
participant's or beneficiary's direction to reallocate his or her plan account
among other investment alternatives available under a group retirement plan,
(vi) for Class C shares, sold through programs offered by financial
intermediaries and approved by ABI where such programs offer only shares that
are not subject to a CDSC, where the financial intermediary establishes a single
omnibus account for the Fund or, in the case of a group retirement plan, a
single account for each plan, and where no advance commission is paid to any
financial intermediary in connection with the purchase of such shares or (vii)
for permitted exchanges of shares.
Class R Shares
--------------
Class R shares are offered only to group retirement plans that have
plan assets of up to $10 million. Class R shares are not available to retail
non-retirement accounts, traditional or Roth IRAs, Coverdell Education Savings
Accounts, SEPs, SAR-SEPs, SIMPLE IRAs, individual 403(b) plans and to
AllianceBernstein sponsored retirement products. Class R shares incur a .50%
distribution services fee and thus have a higher expense ratio than Class A
shares, Class K shares and Class I shares and pay correspondingly lower
dividends than Class A shares, Class K shares and Class I shares.
Class K Shares
--------------
Class K shares are available at NAV to group retirement plans that
have plan assets of at least $1 million. Class K shares generally are not
available to retail non-retirement accounts, traditional and ROTH IRAs,
Coverdell Education Savings Accounts, SEPs, SAR-SEPs, SIMPLE IRAs, individual
403(b) plans and AllianceBernstein sponsored retirement products. Class K shares
do not have an initial sales charge or CDSC but incur a .25% distribution
services fee and (i) thus have a lower expense ratio than Class R shares and pay
correspondingly higher dividends than Class R shares and (ii) have a higher
expense ratio than Class I shares and pay correspondingly lower dividends than
Class I shares.
Class I Shares
--------------
Class I shares are available at NAV to all group retirement plans that
have plan assets in excess of $10 million and to certain investment advisory
clients of, and certain other persons associated with, the Adviser and its
affiliates. Class I shares generally are not available to retail non-retirement
accounts, traditional and ROTH IRAs, Coverdell Education Savings Accounts, SEPs,
SAR-SEPs, SIMPLE IRAs, individual 403(b) plans and AllianceBernstein sponsored
retirement products. Class I shares do not incur any distribution services fees
and will thus have a lower expense ratio and pay correspondingly higher
dividends than Class R and Class K shares.
Advisor Class Shares
--------------------
Advisor Class shares of the Funds may be purchased and held solely (i)
through accounts established under fee-based programs, sponsored and maintained
by registered broker-dealers or other financial intermediaries and approved by
ABI, (ii) through self-directed defined contribution employee benefit plans
(e.g., 401(k) plans) that have at least $10 million in assets and are purchased
directly by the plan without the involvement of a financial intermediary or
(iii) by the categories of investors described in clauses (i) through (iv) under
"Class A Shares -- Sales at NAV" (other than officers, directors and present and
full-time employees of selected dealers or agents, or relatives of such person,
or any trust, individual retirement account or retirement plan account for the
benefit of such relative, none of whom is eligible on the basis solely of such
status to purchase and hold Advisor Class shares). Generally, a fee-based
program must charge an asset-based or other similar fee and must invest at least
$250,000 in Advisor Class shares of the Fund in order to be approved by ABI for
investment in Advisor Class shares. A transaction fee may be charged by your
financial intermediary with respect to the purchase, sale or exchange of Advisor
Class shares made through such financial intermediary. Advisor Class shares do
not incur any distribution services fees, and will thus have a lower expense
ratio and pay correspondingly higher dividends than Class A, Class B, Class C,
Class R, or Class K shares.
Alternative Purchase Arrangements - Group Retirement Plans and Tax-Deferred
Accounts
---------------------------------------------------------------------------
A Fund offers special distribution arrangements for group retirement
plans. However, plan sponsors, plan fiduciaries and other financial
intermediaries may establish requirements as to the purchase, sale or exchange
of shares of the Fund, including maximum and minimum initial investment
requirements, that are different from those described in this SAI. Group
retirement plans also may not offer all classes of shares of the Fund. In order
to enable participants investing through group retirement plans to purchase
shares of the Fund, the maximum and minimum investment amounts may be different
for shares purchased through group retirement plans from those described herein.
In addition, the Class A, Class B and Class C CDSCs may be waived for
investments made through certain group retirement plans. Therefore, plan
sponsors or fiduciaries may not adhere to these share class eligibility
standards as set forth in the Prospectuses and this SAI. A Fund is not
responsible for, and has no control over, the decision of any plan sponsor or
fiduciary to impose such differing requirements.
Class A Shares
--------------
Class A shares are available at NAV to all AllianceBernstein sponsored
group retirement plans, regardless of size, and to the AllianceBernstein Link,
AllianceBernstein Individual 401(k) and AllianceBernstein SIMPLE IRA plans with
at least $250,000 in plan assets or 100 or more employees. Effective June 30,
2005, for purposes of determining whether a SIMPLE IRA plan has at least
$250,000 in plan assets, all of the SIMPLE IRAs of an employer's employees are
aggregated. ABI measures the asset levels and number of employees in these plans
once monthly. Therefore, if a plan that is not initially eligible for Class A
shares meets the asset level or number of employees required for Class A
eligibility, ABI may not initially fill orders with Class A shares if an order
is received prior to its monthly measurement of assets and employees. If the
plan terminates the Fund as an investment option within one year, then all plan
purchases of Class A shares will be subject to a 1%, 1-year CDSC on redemption.
Class A shares are also available at NAV to group retirement plans
with plan assets in excess of $10 million. The 1%, 1-year CDSC also generally
applies. However, the 1%, 1-year CDSC may be waived if the financial
intermediary agrees to waive all commissions or other compensation paid in
connection with the sale of such shares (typically up to a 1% advance payment
for sales of Class A sales at NAV) other than the service fee paid pursuant to
the Fund's distribution service plan.
Class B Shares
--------------
Class B shares are generally not available for purchase by group
retirement plans. However, Class B shares may continue to be purchased by group
retirement plans that have already selected Class B shares as an investment
alternative under their plan prior to September 2, 2003.
Class C Shares
--------------
Class C shares are available to AllianceBernstein Link,
AllianceBernstein Individual 401(k) and AllianceBernstein SIMPLE IRA plans with
less than $250,000 in plan assets and less than 100 employees. Class C shares
are also available to group retirement plans with plan assets of less than $1
million. If an AllianceBernstein Link, AllianceBernstein Individual 401(k) or
AllianceBernstein SIMPLE IRA plan holding Class C shares becomes eligible to
purchase Class A shares at NAV, the plan sponsor or other appropriate fiduciary
of such plan may request ABI in writing to liquidate the Class C shares and
purchase Class A shares with the liquidation proceeds. Any such liquidation and
repurchase may not occur before the expiration of the 1-year period that begins
on the date of the plan's last purchase of Class C shares.
Class R Shares
--------------
Class R shares are available to certain group retirement plans with
plan assets of up to $10 million. Class R shares are not subject to a front-end
sales charge or CDSC, but are subject to a .50% distribution fee.
Class K Shares
--------------
Class K shares are available to certain group retirement plans with
plan assets of at least $1 million. Class K shares are not subject to a
front-end sales charge or CDSC, but are subject to a .25% distribution fee.
Class I Shares
--------------
Class I shares are available to certain group retirement plans with
plan assets of at least $10 million and certain institutional clients of the
Adviser who invest at least $2 million in a Fund. Class I shares are not subject
to a front-end sales charge, CDSC or a distribution fee.
Choosing a Class of Shares for Group Retirement Plans
-----------------------------------------------------
Plan sponsors, plan fiduciaries and other financial intermediaries may
establish requirements as to the purchase, sale or exchange of shares of the
Fund, including maximum and minimum initial investment requirements, that are
different from those described in this SAI. Plan fiduciaries should consider how
these requirements differ from the Fund's share class eligibility criteria
before determining whether to invest.
It is expected that the Funds will eventually offer only Class R,
Class K and Class I shares to group retirement plans. Currently, the Funds also
make their Class A shares available at NAV to group retirement plans with plan
assets in excess of $10 million. Unless waived under the circumstances described
above, a 1%, 1-year CDSC applies to the sale of Class A shares by a plan.
Because Class K shares have no CDSC and lower 12b-1 distribution fees and Class
I shares have no CDSC and Rule 12b-1 distribution fees, plans should consider
purchasing Class K or Class I shares, if eligible, rather than Class A shares.
In selecting among the Class A, Class K and Class R shares, plans
purchasing shares through a financial intermediary that is not willing to waive
advance commission payments (and therefore are not eligible for the waiver of
the 1%, 1-year CDSC applicable to Class A shares) should weigh the following:
o the lower Rule 12b-1 distribution fees (0.30%) and the 1%, 1-year CDSC
with respect to Class A shares;
o the higher Rule 12b-1 distribution fees (0.50%) and the absence of a
CDSC with respect to Class R shares; and
o the lower Rule 12b-1 distribution fees (0.25%) and the absence of a
CDSC with respect to Class K shares.
Because Class A and Class K shares have lower Rule 12b-1 distribution
fees than Class R shares, plans should consider purchasing Class A or Class K
shares, if eligible, rather than Class R shares.
As described above, while Class B shares are generally not available
to group retirement plans, Class B shares are available for continuing
contributions from plans that have already selected Class B shares as an
investment option under their plans prior to September 2, 2003. Plans should
weigh the fact that Class B shares will convert to Class A shares after a period
of time against the fact that Class A, Class R, Class K and Class I shares have
lower expenses, and therefore higher returns, than Class B shares, before
determining which class to make available to its plan participants.
Sales Charge Reduction Programs
-------------------------------
The AllianceBernstein Mutual Funds offer shareholders various programs
through which shareholders may obtain reduced sales charges or reductions in
CDSC through participation in such programs. In order for shareholders to take
advantage of the reductions available through the combined purchase privilege,
rights of accumulation and letters of intent, the Fund must be notified by the
shareholder or his or her financial intermediary that they qualify for such a
reduction. If the Fund is not notified that a shareholder is eligible for these
reductions, the Fund will be unable to ensure that the reduction is applied to
the shareholder's account.
Combined Purchase Privilege. Shareholders may qualify for the sales
charge reductions by combining purchases of shares of a Fund into a single
"purchase." By combining such purchases, shareholders may be able to take
advantage of the quantity discounts described under "Alternative Purchase
Arrangements - Class A Shares." A "purchase" means a single purchase or
concurrent purchases of shares of a Fund or any other AllianceBernstein Mutual
Fund, including AllianceBernstein Institutional Funds, by (i) an individual, his
or her spouse or domestic partner or the individual's children under the age of
21 years purchasing shares for his, her or their own account(s), including
certain CollegeBoundfund accounts; (ii) a trustee or other fiduciary purchasing
shares for a single trust, estate or single fiduciary account with one or more
beneficiaries involved; or (iii) the employee benefit plans of a single
employer. The term "purchase" also includes purchases by any "company," as the
term is defined in the 1940 Act, but does not include purchases by any such
company that has not been in existence for at least six months or that has no
purpose other than the purchase of shares of the Fund or shares of other
registered investment companies at a discount. The term "purchase" does not
include purchases by any group of individuals whose sole organizational nexus is
that the participants therein are credit card holders of a company, policy
holders of an insurance company, customers of either a bank or broker-dealer or
clients of an investment adviser.
Currently, the AllianceBernstein Mutual Funds include:
AllianceBernstein Balanced Shares, Inc.
AllianceBernstein Blended Style Series, Inc.
-AllianceBernstein 2000 Retirement Strategy
-AllianceBernstein 2005 Retirement Strategy
-AllianceBernstein 2010 Retirement Strategy
-AllianceBernstein 2015 Retirement Strategy
-AllianceBernstein 2020 Retirement Strategy
-AllianceBernstein 2025 Retirement Strategy
-AllianceBernstein 2030 Retirement Strategy
-AllianceBernstein 2035 Retirement Strategy
-AllianceBernstein 2040 Retirement Strategy
-AllianceBernstein 2045 Retirement Strategy
-AllianceBernstein 2050 Retirement Strategy
-AllianceBernstein 2055 Retirement Strategy
-U.S. Large Cap Fund
AllianceBernstein Bond Fund, Inc.
-AllianceBernstein Intermediate Bond Fund
AllianceBernstein Cap Fund, Inc.
-AllianceBernstein Small Cap Growth Fund
AllianceBernstein Diversified Yield Fund, Inc.
AllianceBernstein Exchange Reserves
AllianceBernstein Focused Growth & Income Fund, Inc.
AllianceBernstein Global Bond Fund, Inc.
AllianceBernstein Global Growth Fund, Inc.
AllianceBernstein Global Thematic Growth Fund, Inc.
AllianceBernstein Greater China '97 Fund, Inc.
AllianceBernstein Growth and Income Fund, Inc.
AllianceBernstein High Income Fund, Inc.
AllianceBernstein International Growth Fund, Inc.
AllianceBernstein Large Cap Growth Fund, Inc.
AllianceBernstein Municipal Income Fund, Inc.
-California Portfolio
-National Portfolio
-New York Portfolio
AllianceBernstein Municipal Income Fund II
-Arizona Portfolio
-Massachusetts Portfolio
-Michigan Portfolio
-Minnesota Portfolio
-New Jersey Portfolio
-Ohio Portfolio
-Pennsylvania Portfolio
-Virginia Portfolio
AllianceBernstein Small/Mid Cap Growth Fund, Inc.
AllianceBernstein Trust
-AllianceBernstein Global Value Fund
-AllianceBernstein International Value Fund
-AllianceBernstein Small/Mid Cap Value Fund
-AllianceBernstein Value Fund
AllianceBernstein Utility Income Fund, Inc.
The AllianceBernstein Portfolios
-AllianceBernstein Balanced Wealth Strategy
-AllianceBernstein Growth Fund
-AllianceBernstein Tax-Managed Balanced Wealth Strategy
-AllianceBernstein Tax-Managed Wealth Appreciation Strategy
-AllianceBernstein Tax Managed Wealth Preservation Strategy
-AllianceBernstein Wealth Appreciation Strategy
-AllianceBernstein Wealth Preservation Strategy
Sanford C. Bernstein Fund, Inc.
-AllianceBernstein Intermediate California Municipal Fund
-AllianceBernstein Intermediate Diversified Municipal Fund
-AllianceBernstein Intermediate New York Municipal Fund
-AllianceBernstein International Fund
-AllianceBernstein Short Duration Fund
-AllianceBernstein Tax-Managed International Fund
Prospectuses for the AllianceBernstein Mutual Funds may be obtained
without charge by contacting ABIS at the address or the "For Literature"
telephone number shown on the front cover of this SAI.
Cumulative Quantity Discount (Right of Accumulation). An investor's
purchase of additional Class A shares of a Fund may be combined with the value
of the shareholder's existing accounts, thereby enabling the shareholder to take
advantage of the quantity discounts described under "Alternative Purchase
Arrangements - Class A Shares." In such cases, the applicable sales charge on
the newly purchased shares will be based on the total of:
(i) the investor's current purchase;
(ii) the NAV (at the close of business on the previous day) of
(a) all shares of the Fund held by the investor and (b) all
shares held by the investor of any other AllianceBernstein
Mutual Fund, including AllianceBerstein Institutional Funds
and certain CollegeBoundfund accounts for which the
investor, his or her spouse or domestic partner, or child
under the age of 21 is the participant; and
(iii) the NAV of all shares described in paragraph (ii) owned by
another shareholder eligible to combine his or her purchase
with that of the investor into a single "purchase" (see
above).
For example, if an investor owned shares of an AllianceBernstein
Mutual Fund worth $200,000 at their then current NAV and, subsequently,
purchased Class A shares of a Fund worth an additional $100,000, the initial
sales charge for the $100,000 purchase would be at the 2.25% rate applicable to
a single $300,000 purchase of shares of the Fund, rather than the 3.25% rate.
Letter of Intent. Class A investors may also obtain the quantity
discounts described under "Alternative Purchase Arrangements - Class A Shares"
by means of a written Letter of Intent, which expresses the investor's intention
to invest at least $100,000 in Class A shares of a Fund or any AllianceBerstein
Mutual Fund within 13 months. Each purchase of shares under a Letter of Intent
will be made at the public offering price or prices applicable at the time of
such purchase to a single transaction of the dollar amount indicated in the
Letter of Intent. At the investor's option, a Letter of Intent may include
purchases of shares of the Fund or any other AllianceBernstein Mutual Fund made
not more than 90 days prior to the date that the investor signs the Letter of
Intent, in which case the 13-month period during which the Letter of Intent is
in effect will begin on the date of that earliest purchase. However, sales
changes will not be reduced for purchases made prior to the date the Letter of
Intent is signed.
Investors qualifying for the Combined Purchase Privilege described
above may purchase shares of the AllianceBernstein Mutual Funds under a single
Letter of Intent. For example, if at the time an investor signs a Letter of
Intent to invest at least $100,000 in Class A shares of the Fund, the investor
and the investor's spouse or domestic partner each purchase shares of the Fund
worth $20,000 (for a total of $40,000), it will only be necessary to invest a
total of $60,000 during the following 13 months in shares of the Fund or any
other AllianceBernstein Mutual Fund, to qualify for the 3.25% sales charge on
the total amount being invested (the sales charge applicable to an investment of
$100,000).
The Letter of Intent is not a binding obligation upon the investor to
purchase the full amount indicated. The minimum initial investment under a
Letter of Intent is 5% of such amount. Shares purchased with the first 5% of
such amount will be held in escrow (while remaining registered in the name of
the investor) to secure payment of the higher sales charge applicable to the
shares actually purchased if the full amount indicated is not purchased, and
such escrowed shares will be involuntarily redeemed at their then NAV to pay the
additional sales charge, if necessary. Dividends on escrowed shares, whether
paid in cash or reinvested in additional Fund shares, are not subject to escrow.
When the full amount indicated has been purchased, the escrow will be released.
Investors wishing to enter into a Letter of Intent in conjunction with
their initial investment in Class A shares of a Fund can obtain a form of Letter
of Intent by contacting ABIS at the address or telephone numbers shown on the
cover of this SAI.
Reinstatement Privilege. A shareholder who has redeemed any or all of
his or her Class A or Class B shares may reinvest all or any portion of the
proceeds from that redemption in Class A shares of any AllianceBernstein Mutual
Fund at NAV without any sales charge, provided that (i) such reinvestment is
made within 120 calendar days after the redemption or repurchase date, and (ii)
for Class B shares, a CDSC has been paid and ABI has approved, at its
discretion, the reinstatement of such shares. The reinstatement privilege for
Class B shares is not available after January 31, 2009. Shares are sold to a
reinvesting shareholder at the NAV next determined as described above. A
reinstatement pursuant to this privilege will not cancel the redemption or
repurchase transaction; therefore, any gain or loss so realized will be
recognized for federal income tax purposes except that no loss will be
recognized to the extent that the proceeds are reinvested in shares of the Fund
within 30 calendar days after the redemption or repurchase transaction.
Investors may exercise the reinstatement privilege by written request sent to
the Fund at the address shown on the cover of this SAI.
Dividend Reinvestment Program. Shareholders may elect to have all
income and capital gains distributions from their account paid to them in the
form of additional shares of the same class of a Fund pursuant to the Fund's
Dividend Reinvestment Program. No initial sales charge or CDSC will be imposed
on shares issued pursuant to the Dividend Reinvestment Program. Shares issued
under this program will have an aggregate NAV as of the close of business on the
declaration date of the dividend or distribution equal to the cash amount of the
distribution. Investors wishing to participate in the Dividend Reinvestment
Program should complete the appropriate section of the Mutual Fund Application.
Current shareholders should contact ABIS to participate in the Dividend
Reinvestment Program.
In certain circumstances where a shareholder has elected to receive
dividends and/or capital gain distributions in cash but the account has been
determined to be lost due to mail being returned to us by the Postal Service as
undeliverable, such shareholder's distributions option will automatically be
placed within the Dividend Reinvestment Program for future distributions. No
interest will accrue on amounts represented by uncashed distribution checks.
Dividend Direction Plan
-----------------------
A shareholder who already maintains accounts in more than one
AllianceBernstein Mutual Fund may direct that income dividends and/or capital
gains paid by one AllianceBernstein Mutual Fund be automatically reinvested, in
any amount, without the payment of any sales or service charges, in shares of
the same class of the other AllianceBernstein Mutual Fund(s). Further
information can be obtained by contacting ABIS at the address or the "For
Literature" telephone number shown on the cover of this SAI. Investors wishing
to establish a dividend direction plan in connection with their initial
investment should complete the appropriate section of the Mutual Fund
Application. Current shareholders should contact ABIS to establish a dividend
direction plan.
Systematic Withdrawal Plan
--------------------------
General. Any shareholder who owns or purchases shares of a Fund having
a current NAV of at least $5,000 may establish a systematic withdrawal plan
under which the shareholder will periodically receive a payment in a stated
amount of not less than $50 on a selected date. The $5,000 account minimum does
not apply to a shareholder owning shares through an individual retirement
account or other retirement plan who has attained the age of 70-1/2 who wishes
to establish a systematic withdrawal plan to help satisfy a required minimum
distribution. Systematic withdrawal plan participants must elect to have their
dividends and distributions from the Fund automatically reinvested in additional
shares of the Fund.
Shares of a Fund owned by a participant in the Fund's systematic
withdrawal plan will be redeemed as necessary to meet withdrawal payments and
such payments will be subject to any taxes applicable to redemptions and, except
as discussed below with respect to Class A, Class B and Class C shares, any
applicable CDSC. Shares acquired with reinvested dividends and distributions
will be liquidated first to provide such withdrawal payments and thereafter
other shares will be liquidated to the extent necessary, and depending upon the
amount withdrawn, the investor's principal may be depleted. A systematic
withdrawal plan may be terminated at any time by the shareholder or the Fund.
Withdrawal payments will not end automatically when a shareholder's
account reaches a certain minimum level. Therefore, redemptions of shares under
the plan may reduce or even liquidate a shareholder's account and may subject
the shareholder to the Fund's involuntary redemption provisions. See "Redemption
and Repurchase of Shares -- General." Purchases of additional shares
concurrently with withdrawals are undesirable because of sales charges
applicable when purchases are made. While an occasional lump-sum investment may
be made by a holder of Class A shares who is maintaining a systematic withdrawal
plan, such investment should normally be an amount equivalent to three times the
annual withdrawal or $5,000, whichever is less.
Payments under a systematic withdrawal plan may be made by check or
electronically via the Automated Clearing House ("ACH") network. Investors
wishing to establish a systematic withdrawal plan in conjunction with their
initial investment in shares of a Fund should complete the appropriate portion
of the Mutual Fund Application, while current Fund shareholders desiring to do
so can obtain an application form by contacting ABIS at the address or the "For
Literature" telephone number shown on the cover of this SAI.
CDSC Waiver for Class A, Class B Shares and Class C Shares. Under the
systematic withdrawal plan, up to 1% monthly, 2% bi-monthly or 3% quarterly of
the value at the time of redemption of the Class A, Class B or Class C shares in
a shareholder's account may be redeemed free of any CDSC.
Class B shares that are not subject to a CDSC (such as shares acquired
with reinvested dividends or distributions) will be redeemed first and will
count toward the foregoing limitations. Remaining Class B shares that are held
the longest will be redeemed next. Redemptions of Class B shares in excess of
the foregoing limitations will be subject to any otherwise applicable CDSC.
With respect to Class A and Class C shares, shares held the longest
will be redeemed first and will count toward the foregoing limitations.
Redemptions in excess of those limitations will be subject to any otherwise
applicable CDSC.
Payments to Financial Advisors and Their Firms
----------------------------------------------
Financial intermediaries market and sell shares of the Funds. These
financial intermediaries employ financial advisors and receive compensation for
selling shares of the Fund. This compensation is paid from various sources,
including any sales charge, CDSC and/or Rule 12b-1 fee that you or the Fund may
pay. Your individual financial advisor may receive some or all of the amounts
paid to the financial intermediary that employs him or her.
In the case of Class A shares, all or a portion of the initial sales
charge that you pay may be paid by ABI to financial intermediaries selling Class
A shares. ABI may also pay these financial intermediaries a fee of up to 1% on
purchases of $1 million or more. Additionally, up to 100% of the Rule 12b-1 fees
applicable to Class A shares each year may be paid to financial intermediaries,
including your financial intermediary, that sell Class A shares.
In the case of Class B shares, ABI will pay, at the time of your
purchase, a commission to financial intermediaries selling Class B shares in an
amount equal to 4% of your investment. Additionally, up to 30% of the Rule 12b-1
fees applicable to Class B shares each year may be paid to financial
intermediaries, including your financial intermediary, that sell Class B shares.
In the case of Class C shares, ABI will pay, at the time of your
purchase, a commission to firms selling Class C shares in an amount equal to 1%
of your investment. Additionally, up to 100% of the Rule 12b-1 fee applicable to
Class C shares each year may be paid to financial intermediaries, including your
financial intermediary, that sell Class C shares.
In the case of Class R and Class K shares up to 100% of the Rule 12b-1
fee applicable to Class R and Class K shares each year may be paid to financial
intermediaries, including your financial intermediary, that sell Class R and
Class K shares.
In the case of Advisor Class shares, your financial advisor may charge
ongoing fees or transactional fees. ABI may pay a portion of "ticket" or other
transactional charges.
Your financial advisor's firm receives compensation from the Fund, ABI
and/or the Adviser in several ways from various sources, which include some or
all of the following:
o upfront sales commissions;
o Rule 12b-1 fees;
o additional distribution support;
o defrayal of costs for educational seminars and training; and
o payments related to providing sub-accounting or shareholder servicing.
Please read your Prospectus carefully for information on this
compensation.
Other Payments for Distribution Services and Educational Support
----------------------------------------------------------------
In addition to the commissions paid to financial intermediaries at the
time of sale and the fees described under "Asset-Based Sales Charges or
Distribution and/or Service (Rule 12b-1) Fees," in your Prospectus, some or all
of which may be paid to financial intermediaries (and, in turn, to your
financial advisor), ABI, at its expense, currently provides additional payments
to firms that sell shares of the AllianceBernstein Mutual Funds. Although the
individual components may be higher and the total amount of payments made to
each qualifying firm in any given year may vary, the total amount paid to a
financial intermediary in connection with the sale of shares of the
AllianceBernstein Mutual Funds will generally not exceed the sum of (a) 0.25% of
the current year's fund sales by that firm and (b) 0.10% of average daily net
assets attributable to that firm over the year. These sums include payments to
reimburse directly or indirectly the costs incurred by these firms and their
employees in connection with educational seminars and training efforts about the
AllianceBernstein Mutual Funds for the firms' employees and/or their clients and
potential clients. The costs and expenses associated with these efforts may
include travel, lodging entertainment and meals.
For 2010, ABI's additional payments to these firms for distribution
services and educational support related to the AllianceBernstein Mutual Funds
is expected to be approximately [____]% of the average monthly assets of the
AllianceBernstein Mutual Funds, or approximately $[___________]. In 2009, ABI
paid approximately 0.04% of the average monthly assets of the AllianceBernstein
Mutual Funds or approximately $150,000,000 for distribution services and
educational support related to the AllianceBernstein Mutual Funds.
A number of factors are considered in determining the additional
payments, including each firm's AllianceBernstein Mutual Fund sales, assets and
redemption rates, and the willingness and ability of the firm to give ABI access
to its financial advisors for educational and marketing purposes. In some cases,
firms will include the AllianceBernstein Mutual Funds on a "preferred list."
ABI's goal is to make the financial advisors who interact with current and
prospective investors and shareholders more knowledgeable about the
AllianceBernstein Mutual Funds so that they can provide suitable information and
advice about the funds and related investor services.
Each Fund and ABI also make payments for sub-accounting or shareholder
servicing to financial intermediaries that sell AllianceBernstein Mutual Fund
shares. Please see "Expenses of the Fund - Transfer Agency Agreement" above.
These expenses paid by the Fund are included in "Other Expenses" under "Fees and
Expenses of the Fund - Annual Fund Operating Expenses" in your Prospectus.
If one mutual fund sponsor makes greater distribution assistance
payments than another, your financial advisor and his or her firm may have an
incentive to recommend one fund complex over another. Similarly, if your
financial advisor or his or her firm receives more distribution assistance for
one share class versus another, then they may have an incentive to recommend
that class.
Please speak with your financial advisor to learn more about the total
amounts paid to your financial advisor and his or her firm by the Fund, the
Adviser, ABI and by sponsors of other mutual funds he or she may recommend to
you. You should also consult disclosures made by your financial advisor at the
time of purchase.
ABI anticipates that the firms that will receive additional payments
for distribution services and/or educational support include:
Ameriprise Financial Services
AXA Advisors
Bank of America
Cadaret, Grant & Co.
CCO Investment Services Corp.
Chase Investment Services
Citigroup Global Markets
Commonwealth Financial Network
Donegal Securities
ING Advisors Network
LPL Financial Corporation
Merrill Lynch
Morgan Stanley and Co. Incorporated
Northwestern Mutual Investment Services
Raymond James
RBC Capital Markets Corporation
Robert W. Baird
Sage Point Financial, Inc.
UBS AG
UBS Financial Services
Wachovia Securities
Wells Fargo Investments
Although a Fund may use brokers and dealers that sell shares of the
Fund to effect portfolio transactions, the Fund does not consider the sale of
AllianceBernstein Mutual Fund shares as a factor when selecting brokers or
dealers to effect portfolio transactions.
--------------------------------------------------------------------------------
REDEMPTION AND REPURCHASE OF SHARES
--------------------------------------------------------------------------------
The following information supplements that set forth in your
Prospectus under "Investing in the Funds." If you are an Advisor Class
shareholder through an account established under a fee-based program your
fee-based program may impose requirements with respect to the purchase, sale or
exchange of Advisor Class shares of the Fund that are different from those
described herein. A transaction fee may be charged by your financial
intermediary with respect to the purchase, sale or exchange of Advisor Class
shares made through such financial intermediary. The Fund has authorized one or
more brokers to receive on its behalf purchase and redemption orders. Such
brokers are authorized to designate other intermediaries to receive purchase and
redemption orders on the Fund's behalf. In such cases, orders will receive the
NAV next computed after such order is properly received by the authorized broker
or designee and accepted by the Fund.
Redemption
----------
Subject only to the limitations described below, each Fund's Charter
requires that the Fund redeem the shares of the Fund tendered to it, as
described below, at a redemption price equal to their NAV as next computed
following the receipt of shares tendered for redemption in proper form. Except
for any CDSC which may be applicable to Class A, Class B or Class C shares,
there is no redemption charge. Payment of the redemption price normally will be
made within seven days after the Fund's receipt of such tender for redemption.
If a shareholder is in doubt about what documents are required by his or her
fee-based program or employee benefit plan, the shareholder should contact his
or her financial intermediary.
The right of redemption may not be suspended or the date of payment
upon redemption postponed for more than seven days after shares are tendered for
redemption, except for any period during which the Exchange is closed (other
than customary weekend and holiday closings), or during which the Commission
determines that trading thereon is restricted, or for any period during which an
emergency (as determined by the Commission) exists as a result of which disposal
by the Fund of securities owned by it is not reasonably practicable or as a
result of which it is not reasonably practicable for the Fund fairly to
determine the value of its net assets, or for such other periods as the
Commission may by order permit for the protection of security holders of the
Fund.
Payment of the redemption price normally will be made in cash but, at
the option of the Fund, may be made in kind. No interest will accrue on uncashed
redemption checks. The value of a shareholder's shares on redemption or
repurchase may be more or less than the cost of such shares to the shareholder,
depending upon the market value of the Fund's portfolio securities at the time
of such redemption or repurchase. Redemption proceeds on Class A, Class B and
Class C shares will reflect the deduction of the CDSC, if any. Payment (either
in cash or in portfolio securities) received by a shareholder upon redemption or
repurchase of his or her shares, assuming the shares constitute capital assets
in his or her hands, will result in long-term or short-term capital gains (or
loss) depending upon the shareholder's holding period and basis in respect of
the shares redeemed.
To redeem shares of the Funds for which no stock certificates have
been issued, the registered owner or owners should forward a letter to the Fund
containing a request for redemption. A Fund may require the signature or
signatures on the letter to be Medallion Signature Guaranteed. Please contact
ABIS to confirm whether a Medallion Signature Guarantee is needed.
To redeem shares of a Fund represented by stock certificates, the
investor should forward the appropriate stock certificate or certificates,
endorsed in blank or with blank stock powers attached, to the Fund with the
request that the shares represented thereby, or a specified portion thereof, be
redeemed. The stock assignment form on the reverse side of each stock
certificate surrendered to the Fund for redemption must be signed by the
registered owner or owners exactly as the registered name appears on the face of
the certificate or, alternatively, a stock power signed in the same manner may
be attached to the stock certificate or certificates or, where tender is made by
mail, separately mailed to the Fund. The signature or signatures on the
assignment form must be guaranteed in the manner described above.
Telephone Redemption by Electronic Funds Transfer. Each Fund
shareholder is entitled to request redemption by electronic funds transfer (of
shares for which no share certificates have been issued) by telephone at (800)
221-5672 if the shareholder has completed the appropriate portion of the Mutual
Fund Application or, if an existing shareholder has not completed this portion,
by an "Autosell" application obtained from ABIS (except for certain omnibus
accounts). A telephone redemption by electronic funds transfer may not exceed
$100,000, and must be made by 4:00 p.m., Eastern time, on a Fund business day as
defined above. Proceeds of telephone redemptions will be sent by electronic
funds transfer to a shareholder's designated bank account at a bank selected by
the shareholder that is a member of the NACHA.
Telephone Redemption by Check. Each Fund shareholder is eligible to
request redemption by check of Fund shares for which no stock certificates have
been issued by telephone at (800) 221-5672 before 4:00 p.m., Eastern time, on a
Fund business day in an amount not exceeding $50,000. Proceeds of such
redemptions are remitted by check to the shareholder's address of record. A
shareholder otherwise eligible for telephone redemption by check may cancel the
privilege by written instruction to ABIS, or by checking the appropriate box on
the Mutual Fund Application.
Telephone Redemptions - General. During periods of drastic economic,
market or other developments, such as the terrorist attacks on September 11,
2001, it is possible that shareholders would have difficulty in reaching ABIS by
telephone (although no such difficulty was apparent at any time in connection
with the attacks). If a shareholder were to experience such difficulty, the
shareholder should issue written instructions to ABIS at the address shown on
the cover of this SAI. A Fund reserves the right to suspend or terminate its
telephone redemption service at any time without notice. Telephone redemption by
check is not available with respect to shares (i) for which certificates have
been issued, (ii) held in nominee or "street name" accounts, (iii) held by a
shareholder who has changed his or her address of record within the preceding 30
calendar days or (iv) held in any retirement plan account. Neither the Fund, the
Adviser, ABI nor ABIS will be responsible for the authenticity of telephone
requests for redemptions that the Fund reasonably believes to be genuine. A Fund
will employ reasonable procedures in order to verify that telephone requests for
redemptions are genuine, including, among others, recording such telephone
instructions and causing written confirmations of the resulting transactions to
be sent to shareholders. If the Fund did not employ such procedures, it could be
liable for losses arising from unauthorized or fraudulent telephone
instructions. Financial intermediaries may charge a commission for handling
telephone requests for redemptions.
Repurchase
----------
A Fund may repurchase shares through ABI or financial intermediaries.
The repurchase price will be the NAV next determined after ABI receives the
request (less the CDSC, if any, with respect to the Class A, Class B and Class C
shares), except that requests placed through financial intermediaries before the
close of regular trading on the Exchange on any day will be executed at the NAV
determined as of such close of regular trading on that day if received by ABI
prior to its close of business on that day (normally 5:00 p.m., Eastern time).
The financial intermediary is responsible for transmitting the request to ABI by
5:00 p.m., Eastern time (certain financial intermediaries may enter into
operating agreements permitting them to transmit purchase information that was
received prior to the close of business to ABI after 5:00 p.m., Eastern time,
and receive that day's NAV). If the financial intermediary fails to do so, the
shareholder's right to receive that day's closing price must be settled between
the shareholder and that financial intermediary. A shareholder may offer shares
of the Fund to ABI either directly or through a financial intermediary. Neither
the Fund nor ABI charges a fee or commission in connection with the repurchase
of shares (except for the CDSC, if any, with respect to Class A, Class B and
Class C shares). Normally, if shares of the Fund are offered through a financial
intermediary, the repurchase is settled by the shareholder as an ordinary
transaction with or through that financial intermediary, who may charge the
shareholder for this service. The repurchase of shares of the Fund as described
above with respect to financial intermediaries is a voluntary service of the
Fund, and the Fund may suspend or terminate this practice at any time.
General
-------
A Fund reserves the right to close out an account that has remained
below $500 for 90 days. No CDSC will be deducted from the proceeds of this
redemption. In the case of a redemption or repurchase of shares of the Fund
recently purchased by check, redemption proceeds will not be made available
until the Fund is reasonably assured that the check has cleared, normally up to
15 calendar days following the purchase date.
--------------------------------------------------------------------------------
SHAREHOLDER SERVICES
--------------------------------------------------------------------------------
The following information supplements that set forth in your
Prospectus under "Investing in the Funds." The shareholder services set forth
below are applicable to all classes of shares unless otherwise indicated. If you
are an Advisor Class shareholder through an account established under a
fee-based program or a shareholder in a group retirement program, your fee-based
program or retirement program may impose requirements with respect to the
purchase, sale or exchange of shares of the Fund that are different from those
described herein.
Automatic Investment Program
----------------------------
Investors may purchase shares of a Fund through an automatic
investment program utilizing electronic funds transfer drawn on the investor's
own bank account. Under such a program, pre-authorized monthly drafts for a
fixed amount are used to purchase shares through the financial intermediary
designated by the investor at the public offering price next determined after
ABI receives the proceeds from the investor's bank. The monthly drafts must be
in minimum amounts of either $50 or $200, depending on the investor's initial
purchase. If an investor makes an initial purchase of at least $2,500, the
minimum monthly amount for pre-authorized drafts is $50. If an investor makes an
initial purchase of less than $2,500, the minimum monthly amount for
pre-authorized drafts is $200 and the investor must commit to a monthly
investment of at least $200 until the investor's account balance is $2,500 or
more. In electronic form, drafts can be made on or about a date each month
selected by the shareholder. Investors wishing to establish an automatic
investment program in connection with their initial investment should complete
the appropriate portion of the Mutual Fund Application. As of January 31, 2009,
the Automatic Investment Program is available for purchase of Class B shares
only if a shareholder were enrolled in the Program prior to January 31, 2009.
Current shareholders should contact ABIS at the address or telephone number
shown on the cover of this SAI to establish an automatic investment program.
Shareholders committed to monthly investments of $25 or more through
the Automatic Investment Program by October 15, 2004 are able to continue their
program despite the $50 monthly minimum.
Exchange Privilege
------------------
You may exchange your investment in the Fund for shares of the same
class of other AllianceBernstein Mutual Funds (including AllianceBernstein
Exchange Reserves, a money market fund managed by the Adviser) if the other
AllianceBernstein Mutual Fund in which you wish to invest offers shares of the
same class. In addition, (i) present officers and full-time employees of the
Adviser, (ii) present Directors or Trustees of any AllianceBernstein Mutual
Fund, (iii) certain employee benefit plans for employees of the Adviser, ABI,
ABIS and their affiliates and (iv) persons participating in a fee-based program,
sponsored and maintained by a registered broker-dealer or other financial
intermediary and approved by ABI, under which such persons pay an asset-based
fee for service in the nature of investment advisory or administrative services
may, on a tax-free basis, exchange Class A shares of the Fund for Advisor Class
shares of the Fund. Exchanges of shares are made at the NAV next determined and
without sales or service charges. Exchanges may be made by telephone or written
request. In order to receive a day's NAV, ABIS must receive and confirm a
telephone exchange request by 4:00 p.m., Eastern time, on that day.
Shares will continue to age without regard to exchanges for purposes
of determining the CDSC, if any, upon redemption and, in the case of Class B
shares, for the purpose of conversion to Class A shares. After an exchange, your
Class B shares will automatically convert to Class A shares in accordance with
the conversion schedule applicable to the Class B shares of the
AllianceBernstein Mutual Fund you originally purchased for cash ("original
shares"). When redemption occurs, the CDSC applicable to the original shares is
applied.
Please read carefully the prospectus of the AllianceBernstein Mutual
Fund into which you are exchanging before submitting the request. Call ABIS at
(800) 221-5672 to exchange uncertificated shares. Except with respect to
exchanges of Class A shares of the Fund for Advisor Class shares of the Fund,
exchanges of shares as described above in this section are taxable transactions
for federal income tax purposes. The exchange service may be modified,
restricted or terminated on 60 days' written notice.
All exchanges are subject to the minimum investment requirements and
any other applicable terms set forth in the prospectus for the AllianceBernstein
Mutual Fund whose shares are being acquired. An exchange is effected through the
redemption of the shares tendered for exchange and the purchase of shares being
acquired at their respective NAVs as next determined following receipt by the
AllianceBernstein Mutual Fund whose shares are being exchanged of (i) proper
instructions and all necessary supporting documents as described in such fund's
prospectus, or (ii) a telephone request for such exchange in accordance with the
procedures set forth in the following paragraph. Exchanges involving the
redemption of shares recently purchased by check will be permitted only after
the AllianceBernstein Mutual Fund whose shares have been tendered for exchange
is reasonably assured that the check has cleared, normally up to 15 calendar
days following the purchase date. Exchanges of shares of AllianceBernstein
Mutual Funds will generally result in the realization of a capital gain or loss
for federal income tax purposes.
Each Fund shareholder and the shareholder's financial intermediary are
authorized to make telephone requests for exchanges unless ABIS receives written
instruction to the contrary from the shareholder, or the shareholder declines
the privilege by checking the appropriate box on the Mutual Fund Application.
Such telephone requests cannot be accepted with respect to shares then
represented by stock certificates. Shares acquired pursuant to a telephone
request for exchange will be held under the same account registration as the
shares redeemed through such exchange.
Eligible shareholders desiring to make an exchange should telephone
ABIS with their account number and other details of the exchange at (800)
221-5672 before 4:00 p.m., Eastern time, on a Fund business day as defined
above. Telephone requests for exchange received before 4:00 p.m., Eastern time,
on a Fund business day will be processed as of the close of business on that
day. During periods of drastic economic, market or other developments, such as
the terrorist attacks on September 11, 2001, it is possible that shareholders
would have difficulty in reaching ABIS by telephone (although no such difficulty
was apparent at any time in connection with the attacks). If a shareholder were
to experience such difficulty, the shareholder should issue written instructions
to ABIS at the address shown on the cover of this SAI.
A shareholder may elect to initiate a monthly "Auto Exchange" whereby
a specified dollar amount's worth of his or her Fund shares (minimum $25) is
automatically exchanged for shares of another AllianceBernstein Mutual Fund.
None of the AllianceBernstein Mutual Funds, the Adviser, ABI or ABIS
will be responsible for the authenticity of telephone requests for exchanges
that the Fund reasonably believes to be genuine. A Fund will employ reasonable
procedures in order to verify that telephone requests for exchanges are genuine,
including, among others, recording such telephone instructions and causing
written confirmations of the resulting transactions to be sent to shareholders.
If the Fund did not employ such procedures, it could be liable for losses
arising from unauthorized or fraudulent telephone instructions. Financial
intermediaries may charge a commission for handling telephone requests for
exchanges.
The exchange privilege is available only in states where shares of the
AllianceBernstein Mutual Fund being acquired may be legally sold. Each
AllianceBernstein Mutual Fund reserves the right, at any time on 60 days'
written notice to its shareholders, to modify, restrict or terminate the
exchange privilege.
Statements and Reports
----------------------
Each shareholder of the Fund receives semi-annual and annual reports
which include a portfolio of investments, financial statements and, in the case
of the annual report, the report of the Fund's independent registered public
accounting firm, Ernst & Young LLP, as well as a confirmation of each purchase
and redemption. By contacting his or her financial intermediary or ABIS, a
shareholder can arrange for copies of his or her account statements to be sent
to another person.
Shareholder Services Applicable to Class A and Class C Shareholders Only
------------------------------------------------------------------------
Checkwriting
------------
A new Class A or Class C investor may fill out the Signature Card to
authorize the Fund to arrange for a checkwriting service through State Street
Bank and Trust Company (the "Bank") to draw against Class A or Class C shares of
the Fund redeemed from the investor's account. Under this service, checks may be
made payable to any payee in any amount not less than $500 and not more than 90%
of the NAV of the Class A or Class C shares in the investor's account (excluding
for this purpose the current month's accumulated dividends and shares for which
certificates have been issued). A Class A or Class C shareholder wishing to
establish this checkwriting service subsequent to the opening of his or her Fund
account should contact the Fund by telephone or mail. Corporations, fiduciaries
and institutional investors are required to furnish a certified resolution or
other evidence of authorization. This checkwriting service will be subject to
the Bank's customary rules and regulations governing checking accounts, and the
Fund and the Bank each reserve the right to change or suspend the checkwriting
service. There is no charge to the shareholder for the initiation and
maintenance of this service or for the clearance of any checks.
When a check is presented to the Bank for payment, the Bank, as the
shareholder's agent, causes the Fund to redeem, at the NAV next determined, a
sufficient number of full and fractional shares of the Fund in the shareholder's
account to cover the check. Because the level of net assets in a shareholder's
account constantly changes due, among various factors, to market fluctuations, a
shareholder should not attempt to close his or her account by use of a check. In
this regard, the Bank has the right to return checks (marked "insufficient
funds") unpaid to the presenting bank if the amount of the check exceeds 90% of
the assets in the account. Canceled (paid) checks are returned to the
shareholder. The checkwriting service enables the shareholder to receive the
daily dividends declared on the shares to be redeemed until the day that the
check is presented to the Bank for payment.
--------------------------------------------------------------------------------
NET ASSET VALUE
--------------------------------------------------------------------------------
The NAV is computed at the next close of regular trading on the
Exchange (ordinarily 4:00 p.m., Eastern time) following receipt of a purchase or
redemption order by the Fund on each Fund business day on which such an order is
received and on such other days as the Board of Directors deems appropriate or
necessary in order to comply with Rule 22c-1 under the 1940 Act. A Fund's NAV is
calculated by dividing the value of the Fund's total assets, less its
liabilities, by the total number of its shares then outstanding. As noted above,
a Fund business day is any weekday on which the Exchange is open for trading.
In accordance with applicable rules under the 1940 Act and the Fund's
pricing policies and procedures adopted by the Board of Directors (the "Pricing
Policies"), portfolio securities are valued at current market value or at fair
value as determined in good faith by the Board of Directors. The Board has
delegated to the Adviser, subject to the Board's continuing oversight, certain
of its duties with respect to the Pricing Policies.
With respect to securities for which market quotations are readily
available, the market value of a security will be determined as follows:
(a) securities listed on the Exchange, other national securities
exchanges (other than securities listed on The NASDAQ Stock Market, Inc.
("NASDAQ")) or on a foreign securities exchange are valued at the last sale
price reflected on the consolidated tape at the close of the exchange or foreign
securities exchange on the business day as of which such value is being
determined. If there has been no sale on such day, the securities are valued at
the mean of the closing bid and asked prices on such day. If no bid or asked
prices are quoted on such day, then the security is valued in good faith at fair
value by, or in accordance with procedures established by, the Board of
Directors;
(b) securities traded on NASDAQ are valued in accordance with the
NASDAQ Official Closing Price;
(c) securities traded on the Exchange or on a foreign securities
exchange and on one or more other national or foreign securities exchanges, and
securities not traded on the Exchange but traded on one or more other national
or foreign securities exchanges, are valued in accordance with paragraph (a)
above by reference to the principal exchange on which the securities are traded;
(d) listed put or call options purchased by the Fund are valued at the
last sale price. If there has been no sale on that day, such securities will be
valued at the closing bid prices on that day;
(e) open futures contracts and options thereon will be valued using
the closing settlement price or, in the absence of such a price, the most recent
quoted bid price. If there are no quotations available for the day of
valuations, the last available closing settlement price will be used;
(f) securities traded in the over-the-counter market, including
securities listed on a national securities exchange whose primary market is
believed to be over-the-counter are valued at the mean of the current bid and
asked prices as reported by the National Quotation Bureau or other comparable
sources;
(g) U.S. Government securities and other debt instruments having 60
days or less remaining until maturity are valued at amortized cost if their
original maturity was 60 days or less, or by amortizing their fair value as of
the 61st day prior to maturity if their original term to maturity exceeded 60
days (unless in either case it is determined, in accordance with procedures
established by the Board of Directors, that this method does not represent fair
value);
(h) 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. The prices provided by a pricing service take
into account many factors, including institutional size, trading in similar
groups of securities and any developments related to specific securities. For
securities where the Adviser has determined that an appropriate pricing service
does not exist, such securities may be valued on the basis of a quoted bid price
or spread from a major broker-dealer in such security;
(i) 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 when such prices are
believed to reflect the fair market value of 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;
(j) OTC and other derivatives are valued on the basis of a quoted bid
price or spread from a major broker-dealer in such security;
(k) credit default swaps may be valued on the basis of a mid price. A
broker-dealer will provide a bid and offer spread, where a mean is calculated
and thereafter used to calculate a mid price; and
(l) all other securities will be valued in accordance with readily
available market quotations as determined in accordance with procedures
established by the Board.
A Fund values its securities at their current market value determined
on the basis of market quotations or, if market quotations are not readily
available or are unreliable, at "fair value" as determined in accordance with
procedures established by and under the general supervision of the Fund's Board
of Directors. When the Fund uses fair value pricing, it may take into account
any factors it deems appropriate. A Fund may determine fair value based upon
developments related to a specific security, current valuations of foreign stock
indices (as reflected in U.S. futures markets) and/or U.S. sector or broader
stock market indices. The prices of securities used by the Fund to calculate its
NAV may differ from quoted or published prices for the same securities. Fair
value pricing involves subjective judgments and it is possible that the fair
value determined for a security is materially different than the value that
could be realized upon the sale of that security.
Securities for which market quotations are not readily available or
deemed unreliable (including restricted securities) are valued at fair market
value. Factors considered in making this determination may include, but are not
limited to, information obtained by contacting the issuer or analysts, or by
analysis of the issuer's financial statements. A Fund may use fair value pricing
more frequently for foreign securities because, among other things, most foreign
markets close well before the Fund values its securities at 4:00 p.m., Eastern
time. The earlier close of these foreign markets gives rise to the possibility
that significant events, including broad market moves, may have occurred in the
interim and may materially affect the value of these foreign securities. A Fund
may value these securities using fair value prices based on independent pricing
services or third party vendor tools to the extent available.
Subject to the Board's oversight, the Fund's Board has delegated
responsibility for valuing the Fund's assets to the Adviser. The Adviser has
established a Valuation Committee, which operates under the policies and
procedures approved by the Board, to value the Fund's assets on behalf of the
Fund. The Valuation Committee values Fund assets as described above.
A Fund may suspend the determination of its NAV (and the offering and
sale of shares), subject to the rules of the Commission and other governmental
rules and regulations, at a time when: (1) the Exchange is closed, other than
customary weekend and holiday closings, (2) an emergency exists as a result of
which it is not reasonably practicable for the Fund to dispose of securities
owned by it or to determine fairly the value of its net assets, or (3) for the
protection of shareholders, the Commission by order permits a suspension of the
right of redemption or a postponement of the date of payment on redemption.
For purposes of determining the Fund's NAV per share, all assets and
liabilities initially expressed in a foreign currency will be converted into
U.S. Dollars at the mean of the current bid and asked prices of such currency
against the U.S. Dollar last quoted by a major bank that is a regular
participant in the relevant foreign exchange market or on the basis of a pricing
service that takes into account the quotes provided by a number of such major
banks. If such quotations are not available as of the close of the Exchange, the
rate of exchange will be determined in good faith by, or under the direction of,
the Board of Directors.
The assets attributable to the Class A shares, Class B shares, Class C
shares, Class R shares, Class K shares, Class I shares and Advisor Class shares
will be invested together in a single portfolio. The NAV of each class will be
determined separately by subtracting the liabilities allocated to that class
from the assets belonging to that class in conformance with the provisions of a
plan adopted by the Fund in accordance with Rule 18f-3 under the 1940 Act.
--------------------------------------------------------------------------------
PORTFOLIO TRANSACTIONS
--------------------------------------------------------------------------------
Subject to the general oversight of the Board of Directors of a Fund,
the Adviser is responsible for the investment decisions and the placing of the
orders for portfolio transactions for the Fund. The Adviser determines the
broker or dealer to be used in each specific transaction with the objective of
negotiating a combination of the most favorable commission (for transactions on
which a commission is payable) and the best price obtainable on each transaction
(generally defined as best execution). In connection with seeking best price and
execution, the Fund does not consider sales of shares of the Fund or other
investment companies managed by the Adviser as a factor in the selection of
brokers and dealers to effect portfolio transactions and has adopted a policy
and procedures reasonably designed to preclude such consideration.
When consistent with the objective of obtaining best execution,
brokerage may be directed to persons or firms supplying investment information
to the Adviser. There may be occasions where the transaction cost charged by a
broker may be greater than that which another broker may charge if it is
determined in good faith that the amount of such transaction cost is reasonable
in relation to the value of brokerage, research and statistical services
provided by the executing broker.
Neither the Fund nor the Adviser entered into agreements or
understandings with any brokers regarding the placement of securities
transactions because of research services they provide. To the extent that such
persons or firms supply investment information to the Adviser for use in
rendering investment advice to the Fund, such information may be supplied at no
cost to the Adviser and, therefore, may have the effect of reducing the expenses
of the Adviser in rendering advice to the Fund. While it is impracticable to
place an actual dollar value on such investment information, its receipt by the
Adviser probably does not reduce the overall expenses of the Adviser to any
material extent.
The investment information provided to the Adviser is of the type
described in Section 28(e)(3) of the Securities Exchange Act of 1934 and is
designed to augment the Adviser's own internal research and investment strategy
capabilities. Research services furnished by brokers through which the Fund
effects securities transactions are used by the Adviser in carrying out its
investment management responsibilities with respect to all its client accounts.
The extent to which commissions that will be charged by broker-dealers
selected by the Fund may reflect an element of value for research cannot
presently be determined. To the extent that research services of value are
provided by broker-dealers with or through whom the Fund places portfolio
transactions, the Adviser may be relieved of expenses which it might otherwise
bear. Research services furnished by broker-dealers could be useful and of value
to the Adviser in servicing its other clients as well as the Fund; but, on the
other hand, certain research services obtained by the Adviser as a result of the
placement of portfolio brokerage of other clients could be useful and of value
to it in serving the Fund.
A Fund may deal in some instances in securities that are not listed on
a national stock exchange but are traded in the over-the-counter market. A Fund
may also purchase listed securities through the third market, i.e., from a
dealer that is not a member of the Exchange on which a security is listed. Where
transactions are executed in the over-the-counter market or third market, the
Fund will seek to deal with the primary market makers; but when necessary in
order to obtain the best price and execution, it will utilize the services of
others. In all cases, the Fund will attempt to negotiate best execution.
Investment decisions for the Fund are made independently from those
for other investment companies and other advisory accounts managed by the
Adviser. It may happen, on occasion, that the same security is held in the
portfolio of the Fund and one or more of such other companies or accounts.
Simultaneous transactions are likely when several funds or accounts are managed
by the same Adviser, particularly when a security is suitable for the investment
objectives of more than one of such companies or accounts. When two or more
companies or accounts managed by the Adviser are simultaneously engaged in the
purchase or sale of the same security, the transactions are allocated to the
respective companies or accounts both as to amount and price, in accordance with
a method deemed equitable to each company or account. In some cases this system
may adversely affect the price paid or received by the Fund or the size of the
position obtainable for the Fund.
Allocations are made by the officers of the Fund or of the Adviser.
Purchases and sales of portfolio securities are determined by the Adviser and
are placed with broker-dealers by the order department of the Adviser.
A Fund's portfolio transactions occur primarily with issuers,
underwriters or major dealers acting as principals. Such transactions are
normally on a net basis which do not involve payment of brokerage commissions.
The cost of securities purchased from an underwriter usually includes a
commission paid by the issuer to the underwriter; transactions with dealers
normally reflect the spread between bid and asked prices. Premiums are paid with
respect to options purchased by the Fund, and brokerage commissions are payable
with respect to transactions in exchange-traded interest rate futures contracts.
Most transactions for the Fund, including transactions in listed
securities, are executed in the over-the-counter market by approximately fifteen
(15) principal market maker dealers with whom the Adviser maintains regular
contact. Most transactions made by the Fund will be principal transactions at
net prices and the Fund will incur little or no brokerage costs. Where possible,
securities will be purchased directly from the issuer or from an underwriter or
market maker for the securities unless the Adviser believes a better price and
execution is available elsewhere. Purchases from underwriters of newly-issued
securities for inclusion in the Fund usually will include a concession paid to
the underwriter by the issuer, and purchases from dealers serving as market
makers will include the spread between the bid and asked price.
A Fund has no obligation to enter into transactions in securities with
any broker, dealer, issuer, underwriter or other entity. Where best price and
execution may be obtained from more than one broker or dealer, the Adviser may,
in its discretion, purchase and sell securities through brokers and dealers who
provide research, statistical and other information to the Adviser. Such
services may be used by the Adviser for all of its investment advisory accounts
and, accordingly, not all such services may be used by the Adviser in connection
with a Fund. There may be occasions where the transaction cost charged by a
broker may be greater than that which another broker may charge if a Fund
determines in good faith that the amount of such transaction cost is reasonable
in relationship to the value of the brokerage and research and statistical
services provided by the executing broker. During the fiscal years ended October
31, 2007, 2008, and 2009 for Intermediate Bond, Diversified Yield and High
Income and for the fiscal years ended September 30, 2007, 2008 and 2009 for
Global Bond, the Funds incurred [___________] brokerage commissions.
A Fund may from time to time place orders for the purchase or sale of
securities (including listed call options) with SCB & Co., an affiliate of the
Adviser. In such instances, the placement of orders with such brokers would be
consistent with the Fund's objective of obtaining best execution and would not
be dependent upon the fact that SCB & Co. is an affiliate of the Adviser. With
respect to orders placed with SCB & Co. for execution on a national securities
exchange, commissions received must conform to Section 17(e)(2)(A) of the 1940
Act and Rule 17e-1 thereunder, which permit an affiliated person of a registered
investment company (such as the Fund), or any affiliated person of such person,
to receive a brokerage commission from such registered investment company
provided that such commission is reasonable and fair compared to the commissions
received by other brokers in connection with comparable transactions involving
similar securities during a comparable period of time.
Disclosure of Fund Holdings
---------------------------
A Fund believes that the ideas of the Adviser's investment staff
should benefit the Fund and its shareholders, and does not want to afford
speculators an opportunity to profit by anticipating Fund trading strategies or
using Fund information for stock picking. However, the Fund also believes that
knowledge of the Fund's portfolio holdings can assist shareholders in monitoring
their investment, making asset allocation decisions, and evaluating portfolio
management techniques.
The Adviser has adopted, on behalf of the Fund, policies and
procedures relating to disclosure of the Fund's portfolio securities. The
policies and procedures relating to disclosure of the Fund's portfolio
securities are designed to allow disclosure of portfolio holdings information
where necessary to the Fund's operation or useful to the Fund's shareholders
without compromising the integrity or performance of the Fund. Except when there
are legitimate business purposes for selective disclosure and other conditions
(designed to protect the Fund and its shareholders) are met, the Fund does not
provide or permit others to provide information about the Fund's portfolio
holdings on a selective basis.
A Fund includes portfolio holdings information as required in
regulatory filings and shareholder reports, discloses portfolio holdings
information as required by federal or state securities laws and may disclose
portfolio holdings information in response to requests by governmental
authorities. In addition, the Adviser posts portfolio holdings information on
the Adviser's website (www.AllianceBernstein.com). The Adviser posts on the
website a complete schedule of the Fund's portfolio securities, as of the last
day of each fiscal calendar month, approximately 30 days after the end of that
month. This posted information generally remains accessible on the website for
three months. For each portfolio security, the posted information includes its
name, the number of shares held by the Fund, the market value of the Fund's
holdings, and the percentage of the Fund's assets represented by the portfolio
security. In addition to the schedule of portfolio holdings, the Adviser posts
information about the number of securities the Fund holds, a summary of the
Fund's top ten holdings (including name and the percentage of the Fund's assets
invested in each holding), and a percentage breakdown of the Fund's investments
by credit risk or securities type, as applicable, approximately [_____] days
after the end of the month. The day after portfolio holdings information is
publicly available on the website, it may be mailed, e-mailed or otherwise
transmitted to any person.
The Adviser may distribute or authorize the distribution of
information about the Fund's portfolio holdings that is not publicly available,
on the website or otherwise, to the Adviser's employees and affiliates that
provide services to the Fund. In addition, the Adviser may distribute or
authorize distribution of information about the Fund's portfolio holdings that
is not publicly available, on the website or otherwise, to the Fund's service
providers who require access to the information in order to fulfill their
contractual duties relating to the Fund (including, without limitation, pricing
services and proxy voting services), and to facilitate the review of the Fund by
rating agencies, for the purpose of due diligence regarding a merger or
acquisition, or for the purpose of effecting in-kind redemption of securities to
facilitate orderly redemption of portfolio assets and minimal impact on
remaining Fund shareholders. The Adviser does not expect to disclose information
about the Fund's portfolio holdings that is not publicly available to the Fund's
individual or institutional investors or to intermediaries that distribute the
Fund's shares. Information may be disclosed with any frequency and any lag, as
appropriate.
Before any non-public disclosure of information about the Fund's
portfolio holdings is permitted, however, the Adviser's Chief Compliance Officer
(or his designee) must determine that the Fund has a legitimate business purpose
for providing the portfolio holdings information, that the disclosure is in the
best interests of the Fund's shareholders, and that the recipient agrees or has
a duty to keep the information confidential and agrees not to trade directly or
indirectly based on the information or to use the information to form a specific
recommendation about whether to invest in the Fund or any other security. Under
no circumstances may the Adviser or its affiliates receive any consideration or
compensation for disclosing the information.
The Adviser has established procedures to ensure that the Fund's
portfolio holdings information is only disclosed in accordance with these
policies. Only the Adviser's Chief Compliance Officer (or his designee) may
approve the disclosure, and then only if he or she and a designated senior
officer in the Adviser's product management group determines that the disclosure
serves a legitimate business purpose of the Fund and is in the best interest of
the Fund's shareholders. The Adviser's Chief Compliance Officer (or his
designee) approves disclosure only after considering the anticipated benefits
and costs to the Fund and its shareholders, the purpose of the disclosure, any
conflicts of interest between the interests of the Fund and its shareholders and
the interests of the Adviser or any of its affiliates, and whether the
disclosure is consistent with the policies and procedures governing disclosure.
Only someone approved by the Adviser's Chief Compliance Officer (or his
designee) may make approved disclosures of portfolio holdings information to
authorized recipients. The Adviser reserves the right to request certifications
from senior officers of authorized recipients that the recipient is using the
portfolio holdings information only in a manner consistent with the Adviser's
policy and any applicable confidentiality agreement. The Adviser's Chief
Compliance Officer (or his designee) or another member of the compliance team
reports all arrangements to disclose portfolio holdings information to the
Fund's Board of Directors on a quarterly basis. If the Board determines that
disclosure was inappropriate, the Adviser will promptly terminate the disclosure
arrangement.
In accordance with these procedures, each of the following third
parties have been approved to receive information concerning the Fund's
portfolio holdings: (i) the Fund's independent registered public accounting
firm, for use in providing audit opinions; (ii) RR Donnelley Financial, Data
Communique International and, from time to time, other financial printers, for
the purpose of preparing Fund regulatory filings; (iii) the Fund's custodian in
connection with its custody of the Fund's assets; (iv) Institutional Shareholder
Services, Inc. for proxy voting services; and (v) data aggregators, such as
Vestek. Information may be provided to these parties at any time with no time
lag. Each of these parties is contractually and ethically prohibited from
sharing the Fund's portfolio holdings information unless specifically
authorized.
--------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
--------------------------------------------------------------------------------
United States Federal Income Taxation of Dividends and Distributions
--------------------------------------------------------------------
General. Each Fund intends for each taxable year to qualify to be
taxed as a "regulated investment company" under the Code. To so qualify, a Fund
must, among other things, (i) derive at least 90% of its gross income in each
taxable year from dividends, interest, payments with respect to securities
loans, gains from the sale or other disposition of stock, securities or foreign
currency, certain other income (including, but not limited to, gains from
options, futures or forward currency exchange contracts) derived with respect to
its business of investing in stock, securities or currency or net income derived
from interests in certain qualified publicly traded partnerships; and (ii)
diversify its holdings so that, at the end of each quarter of its taxable year,
the following two conditions are met: (a) at least 50% of the value of the
Fund's assets is represented by cash, cash items, U.S. Government Securities,
securities of other regulated investment companies and other securities with
respect to which the Fund's investment is limited, in respect of any one issuer,
to an amount not greater than 5% of the value of the Fund's assets and to not
more than 10% of the outstanding voting securities of such issuer and (b) not
more than 25% of the value of the Fund's assets is invested in securities of any
one issuer (other than U.S. Government Securities or securities of other
regulated investment companies), securities (other than securities of other
regulated investment companies) of any two or more issuers which the Fund
controls and which are engaged in the same or similar trades or businesses or
related trades or businesses, or securities of one or more qualified publicly
traded partnerships.
If a Fund qualifies as a regulated investment company for any taxable
year and makes timely distributions to its shareholders of 90% or more of its
investment company taxable income for that year (calculated without regard to
its net capital gain, i.e., the excess of its net long-term capital gain over
its net short-term capital loss) it will not be subject to federal income tax on
the portion of its taxable income for the year (including any net capital gain)
that it distributes to shareholders.
It is the present policy of each Fund to distribute to shareholders
all net investment income quarterly and to distribute net realized capital
gains, if any, annually. The amount of any such distributions must necessarily
depend upon the realization by the Fund of income and capital gains from
investments.
A Fund will also avoid the 4% federal excise tax that would otherwise
apply to certain undistributed income for a given calendar year if it makes
timely distributions to shareholders equal to the sum of (i) 98% of its ordinary
income for such year, (ii) 98% of its capital gain net income and foreign
currency gains for the twelve-month period ending on October 31 of such year;
and (iii) any ordinary income or capital gain net income from the preceding
calendar year that was not distributed during such year. For this purpose,
income or gain retained by the Fund that is subject to corporate income tax will
be considered to have been distributed by the Fund during such year. For federal
income and excise tax purposes, dividends declared and payable to shareholders
of record as of a date in October, November or December but actually paid during
the following January will be treated as if paid by the Fund on December 31 of
such earlier calendar year, and will be taxable to these shareholders in the
year declared, and not in the year in which the shareholders actually receive
the dividend.
The information set forth in your Prospectus and the following
discussion relate solely to the significant United States federal income taxes
on dividends and distributions by a Fund and assumes that the Fund qualifies to
be taxed as a regulated investment company. An investor should consult his or
her own tax advisor with respect to the specific tax consequences of being a
shareholder in a Fund, including the effect and applicability of federal, state,
local and foreign tax laws to his or her own particular situation and the
possible effects of changes therein.
Dividends and Distributions. A Fund intends to make timely
distributions of the Fund's taxable income (including any net capital gain) so
that the Fund will not be subject to federal income and excise taxes. Dividends
of the Fund's net ordinary income and distributions of any net realized
short-term capital gain are taxable to shareholders as ordinary income.
Some or all of the distributions from a mutual fund may be treated as
"qualified dividend income," taxable to individuals, trusts and estates at the
reduced maximum rate of 15% if paid on or before December 31, 2010 (5% for
individuals, trusts and estates in lower tax brackets), provided that both the
fund and the shareholder satisfy certain holding period and other requirements.
Based upon the investment policies of the Funds, it is expected that only a
small portion, if any, of the Funds' distributions would be treated as
"qualified dividend income."
Distributions of net capital gain are taxable as long-term capital
gain, regardless of how long a shareholder has held shares in the Funds. Any
dividend or distribution received by a shareholder on shares of a Fund will have
the effect of reducing the NAV of such shares by the amount of such dividend or
distribution. Furthermore, a dividend or distribution made shortly after the
purchase of such shares by a shareholder, although in effect a return of capital
to that particular shareholder, would be taxable to him or her as described
above. Dividends are taxable in the manner discussed regardless of whether they
are paid to the shareholder in cash or are reinvested in additional shares of a
Fund. The investment objectives of the Funds is such that only a small portion,
if any, of the Funds' distributions is expected to qualify for the
dividends-received deduction for corporate shareholders.
After the end of the calendar year, a Fund will notify shareholders of
the federal income tax status of any distributions made by the Fund to
shareholders during such year.
Sales and Redemptions. Any gain or loss arising from a sale or
redemption of Fund shares generally will be capital gain or loss if a Fund
shares are held as a capital asset, and will be long-term capital gain or loss
if the shareholder has held such shares for more than one year at the time of
the sale or redemption; otherwise it will be short-term capital gain or loss. If
a shareholder has held shares in the Fund for six months or less and during that
period has received a distribution of net capital gain, any loss recognized by
the shareholder on the sale of those shares during the six-month period will be
treated as a long-term capital loss to the extent of the distribution. In
determining the holding period of such shares for this purpose, any period
during which a shareholder's risk of loss is offset by means of options, short
sales or similar transactions is not counted.
Any loss realized by a shareholder on a sale or exchange of shares of
a Fund will be disallowed to the extent the shares disposed of are reacquired
within a period of 61 days beginning 30 days before and ending 30 days after the
shares are sold or exchanged. For this purpose, acquisitions pursuant to the
Dividend Reinvestment Plan would constitute a reacquisition if made within the
period. If a loss is so disallowed, then such loss will be reflected in an
upward adjustment to the basis of the shares acquired.
Qualified Plans. A dividend or capital gains distribution with respect
to shares of a Fund held by a tax-deferred or qualified plan, such as an
individual retirement account, section 403(b)(7) retirement plan or corporate
pension or profit-sharing plan, generally will not be taxable to the plan.
Distributions from such plans will be taxable to individual participants under
applicable tax rules without regard to the character of the income earned by the
qualified plan.
Backup Withholding. Any distributions and redemption proceeds payable
to a shareholder may be subject to "backup withholding" tax (currently at a rate
of 28%) if such shareholder fails to provide a Fund with his or her correct
taxpayer identification number, fails to make certain required certifications or
is notified by the Internal Revenue Service (the "IRS") that he or she is
subject to backup withholding. Certain categories of shareholders, including all
corporations, are exempt from such backup withholding. Backup withholding is not
an additional tax; rather, a shareholder generally may obtain a refund of any
amounts withheld under backup withholding rules that exceed such shareholder's
income tax liability by filing a refund claim with the IRS, provided that the
required information is furnished to the IRS.
Foreign Taxes. Income received by a Fund also may be subject to
foreign income taxes, including taxes withheld at the source. The United States
has entered into tax treaties with many foreign countries which entitle a Fund
to a reduced rate of such taxes or exemption from taxes on such income. It is
impossible to determine the effective rate of foreign tax in advance since the
amount of a Fund's assets to be invested within various countries is not known.
If more than 50% of the value of the Fund's assets at the close of its taxable
year consists of stocks or securities of foreign corporations (which for this
purpose should include obligations issued by foreign governments), the Fund will
be eligible and intends to file an election with the IRS to pass through to its
shareholders the amount of foreign taxes paid by the Fund. However, there can be
no assurance that a Fund will be able to do so. If a Fund makes this election, a
shareholder will be required to (i) include in gross income (in addition to
taxable dividends actually received) his or her pro rata share of foreign taxes
paid by the Fund, (ii) treat his or her pro rata share of such foreign taxes as
having been paid by him and (iii) either deduct such pro rata share of foreign
taxes in computing his or her taxable income or treat such foreign taxes as a
credit against United States federal income taxes. Shareholders who are not
liable for federal income taxes, such as retirement plans qualified under
section 401 of the Code, will not be affected by any such pass-through of taxes
by a Fund. No deduction for foreign taxes may be claimed by an individual
shareholder who does not itemize deductions. In addition, certain shareholders
may be subject to rules which limit or reduce their ability to fully deduct, or
claim a credit for, their pro rata share of the foreign taxes paid by the Fund.
A shareholder's foreign tax credit with respect to a dividend received from a
Fund will be disallowed unless the shareholder holds shares in the Fund on the
ex-dividend date and for at least 15 other days during the 30-day period
beginning 15 days prior to the ex-dividend date. Each shareholder will be
notified within 60 days after the close of the Fund's taxable year whether the
foreign taxes paid by the Fund will pass through for that year and, if so, such
notification will designate (i) the shareholder's portion of the foreign taxes
paid to each such country and (ii) the portion of dividends that represents
income derived from sources within each such country.
The federal income tax status of each year's distributions by the Fund
will be reported to shareholders and to the IRS. The foregoing is only a general
description of the treatment of foreign taxes under the United States federal
income tax laws. Because the availability of a foreign tax credit or deduction
will depend on the particular circumstances of each shareholder, potential
investors are advised to consult their own tax advisers.
United States Federal Income Taxation of the Funds
--------------------------------------------------
The following discussion relates to certain significant United States
federal income tax consequences to a Fund with respect to the determination of
its "investment company taxable income" each year. This discussion assumes that
each Fund will be taxed as a regulated investment company for each of its
taxable years.
Zero Coupon Treasury Securities. Under current federal tax law, a Fund
will receive net investment income in the form of interest by virtue of holding
Treasury bills, notes and bonds, and will recognize interest attributable to it
under the original issue discount rules of the Code from holding zero coupon
Treasury securities. Current federal tax law requires that a holder (such as a
Fund) of a zero coupon security accrue a portion of the discount at which the
security was purchased as income each year even though the Fund receives no
interest payment in cash on the security during the year. Accordingly, a Fund
may be required to pay out as an income distribution each year an amount that is
greater than the total amount of cash interest the Fund actually received. Such
distributions will be made from the cash assets of the Fund or by liquidation of
portfolio securities, if necessary. If a distribution of cash necessitates the
liquidation of portfolio securities, the Adviser will select which securities to
sell. A Fund may realize a gain or loss from such sales. In the event a Fund
realizes net capital gains from such transactions, its shareholders may receive
a larger capital gain distribution, if any, than they would have in the absence
of such transactions.
Options, Futures Contracts, and Forward Currency Exchange Contracts.
Certain listed options, regulated futures contracts and forward currency
exchange contracts are considered "section 1256 contracts" for federal income
tax purposes. Section 1256 contracts held by a Fund at the end of each taxable
year will be "marked to market" and treated for federal income tax purposes as
though sold for fair market value on the last business day of such taxable year.
Gain or loss realized by a Fund on section 1256 contracts other than forward
currency exchange contracts will be considered 60% long-term and 40% short-term
capital gain or loss, although the Fund may elect to have the gain or loss it
realizes on certain contracts taxed as "section 988" gain or loss. Gain or loss
realized by a Fund on forward currency exchange contracts generally will be
treated as section 988 gain or loss and will therefore be characterized as
ordinary income or loss and will increase or decrease the amount of the Fund's
net investment income available to be distributed to shareholders as ordinary
income, as described above. A Fund can elect to exempt its section 1256
contracts which are part of a "mixed straddle" (as described below) from the
application of section 1256.
With respect to over-the-counter put and call options, gain or loss
realized by a Fund upon the lapse or sale of such options held by the Fund will
be either long-term or short-term capital gain or loss depending upon the Fund's
holding period with respect to such option. However, gain or loss realized upon
the lapse or closing out of such options that are written by a Fund will be
treated as short-term capital gain or loss. In general, if a Fund exercises an
option, or if an option that the Fund has written is exercised, gain or loss on
the option will not be separately recognized but the premium received or paid
will be included in the calculation of gain or loss upon disposition of the
property underlying the option.
Gain or loss realized by a Fund on the lapse or sale of put and call
options on foreign currencies which are traded over-the-counter or on certain
foreign exchanges will be treated as section 988 gain or loss and will therefore
be characterized as ordinary income or loss and will increase or decrease the
amount of the Fund's net investment income available to be distributed to
shareholders as ordinary income, as described above. The amount of such gain or
loss shall be determined by subtracting the amount paid, if any, for or with
respect to the option (including any amount paid by a Fund upon termination of
an option written by the Fund) from the amount received, if any, for or with
respect to the option (including any amount received by the Fund upon
termination of an option held by the Fund). In general, if a Fund exercises such
an option on a foreign currency, or if such an option that the Fund has written
is exercised, gain or loss on the option will be recognized in the same manner
as if the Fund had sold the option (or paid another person to assume the Fund's
obligation to make delivery under the option) on the date on which the option is
exercised, for the fair market value of the option. The foregoing rules will
also apply to other put and call options which have as their underlying property
foreign currency and which are traded over-the-counter or on certain foreign
exchanges to the extent gain or loss with respect to such options is
attributable to fluctuations in foreign currency exchange rates.
Stripped-Mortgage Related Securities. Certain classes of SMRS which
are issued at a discount, the payments of which are subject to acceleration by
reason of prepayments of the underlying Mortgage Assets securing such classes,
are subject to special rules for determining the portion of the discount at
which the class was issued which must be accrued as income each year. Under Code
section 1272(a)(6), a principal-only class or a class which receives a portion
of the interest and a portion of the principal from the underlying Mortgage
Assets is subject to rules which require accrual of interest to be calculated
and included in the income of a holder (such as a Fund) based on the increase in
the present value of the payments remaining on the class, taking into account
payments includable in the class's stated redemption price at maturity which are
received during the accrual period. For this purpose, the present value
calculation is made at the beginning of each accrual period (i) using the yield
to maturity determined for the class at the time of its issuance (determined on
the basis of compounding at the close of each accrual period and properly
adjusted for the length of the accrual period), calculated on the assumption
that certain prepayments will occur, and (ii) taking into account any
prepayments that have occurred before the close of the accrual period. Since
interest included in a Fund's income as a result of these rules will have been
accrued and not actually paid, the Fund may be required to pay out as an income
distribution each year an amount which is greater than the total amount of cash
interest it actually received, with possible results as described above.
Currency Fluctuations -- Section 988 Gains and Losses. Under the Code,
gains or losses attributable to fluctuations in exchange rates which occur
between the time a Fund accrues interest or other receivables or accrues
expenses or other liabilities denominated in a foreign currency and the time the
Fund actually collects such receivables or pays such liabilities are treated as
ordinary income or ordinary loss. Similarly, gains or losses from the
disposition of foreign currencies, from the disposition of debt securities
denominated in a foreign currency, or from the disposition of a forward currency
exchange contract denominated in a foreign currency which are attributable to
fluctuations in the value of the foreign currency between the date of
acquisition of the asset and the date of disposition also are treated as
ordinary income or loss. These gains or losses, referred to under the Code as
"section 988" gains or losses, increase or decrease the amount of a Fund's
investment company taxable income available to be distributed to its
shareholders as ordinary income, rather than increasing or decreasing the amount
of the Fund's net capital gain. Because section 988 losses reduce the amount of
ordinary dividends a Fund will be allowed to distribute for a taxable year, such
section 988 losses may result in all or a portion of prior dividend
distributions for such year being recharacterized as a non-taxable return of
capital to shareholders, rather than as an ordinary dividend, reducing each
shareholder's basis in his or her Fund shares. To the extent that such
distributions exceed such shareholder's basis, each will be treated as a gain
from the sale of shares.
Other Taxation
--------------
A Fund may be subject to other state and local taxes.
Taxation of Foreign Shareholders
--------------------------------
The foregoing discussion relates only to United States federal income
tax law as it affects shareholders who are United States citizens or residents
or United States corporations. The effects of federal income tax law on a
shareholder which is a non-resident alien individual or foreign corporation may
be substantially different. A foreign investor should therefore consult his or
her own tax adviser for further information as to the United States federal
income tax consequences of being a shareholder in a Fund.
--------------------------------------------------------------------------------
GENERAL INFORMATION
--------------------------------------------------------------------------------
Capitalization
--------------
ALLIANCEBERNSTEIN INTERMEDIATE BOND
Intermediate Bond is a series of AllianceBernstein Bond Fund, Inc., a
Maryland Corporation organized in 1973 under the name "Alliance Bond Fund, Inc."
The Fund's name became "AllianceBernstein Bond Fund, Inc." on March 31, 2003.
The authorized capital stock of AllianceBernstein Bond Fund, Inc.
consists of 63,000,000,000 shares of Common Stock having a par value of $.001
per share. All shares of each portfolio participate equally in dividends and
distributions from that portfolio, including any distributions in the event of a
liquidation and upon redeeming shares, will receive the then current NAV of the
portfolio represented by the redeemed shares less any applicable CDSC. Each
share of the portfolio is entitled to one vote for all purposes. Shares of the
portfolios vote for the election of Directors and on any other matter that
affects the portfolios in substantially the same manner as a single class,
except as otherwise required by law. As to matters affecting each portfolio
differently, such as approval of the Investment Advisory Contract and changes in
investment policy, shares of each portfolio would vote as a separate class.
There are no conversion or preemptive rights in connection with any shares of
the portfolio. All shares of Intermediate Bond when duly issued will be fully
paid and non-assessable.
The authorized capital stock of Intermediate Bond currently consists
of 3,000,000,000 shares of Class A Common Stock, 3,000,000,000 shares of Class B
Common Stock, 3,000,000,000 shares of Class C Common Stock, 3,000,000,000 shares
of Class R Common Stock, 3,000,000,000 shares of Class K Common Stock,
3,000,000,000 shares of Class I Common Stock and 3,000,000,000 shares of Advisor
Class Common Stock, each having a par value of $.001 per share.
ALLIANCEBERNSTEIN DIVERSIFIED YIELD FUND, INC.
The Fund is a Maryland corporation organized in 1995 under the name of
"Alliance Global Strategic Income Trust, Inc." The name became
"AllianceBernstein Global Strategic Income Trust, Inc. on March 31, 2003 and
became AllianceBernstein Diversified Yield Fund, Inc. on November 5, 2007.
The authorized capital stock of the Fund consists of 3,000,000,000
shares of Class A Common Stock, 3,000,000,000 shares of Class B Common Stock,
3,000,000,000 shares of Class C Common Stock, 3,000,000,000 shares of Class R
Common Stock, 3,000,000,000 shares of Class K Common Stock, 3,000,000,000 shares
of Class I Common Stock, and 3,000,000,000 shares of Advisor Class Common Stock,
each having a par value of $.001 per share. All shares of the Fund, when issued,
are fully paid and non-assessable. Any issuance of shares of another class or
series would be governed by the 1940 Act and the law of the State of Maryland.
If shares of another series were issued in connection with the creation of a
second portfolio, each share of either portfolio would normally be entitled to
one vote for all purposes. Generally, shares of both portfolios would vote as a
single series on matters, such as the election of Directors, that affect both
portfolios in substantially the same manner. As to matters affecting each
portfolio differently, such as approval of the Advisory Agreement and changes in
investment policy, shares of each portfolio would vote as separate series.
ALLIANCEBERNSTEIN GLOBAL BOND FUND, INC.
The Fund is a Maryland corporation organized in 1992 under the name of
"Alliance North American Government Income Fund, Inc." The name became "Alliance
Americas Government Income Trust, Inc." on March 1, 2002, "AllianceBernstein
Americas Government Income Trust, Inc." on March 31, 2003, "AllianceBernstein
Global Government Income Trust, Inc." on February 1, 2006, and
"AllianceBernstein Global Bond Fund, Inc." on November 5, 2007.
The authorized capital stock of the Fund consists of 3,000,000,000
shares of Class A Common Stock, $.001 par value, 3,000,000,000 shares of Class B
Common Stock, $.001 par value, 3,000,000,000 shares of Class C Common Stock,
$.001 par value, 3,000,000,000 shares of Class R Common Stock, $.001 par value,
3,000,000,000 shares of Class K Common Stock, $.001 par value, 3,000,000,000
shares of Class I Common Stock, $.001 par value, and 3,000,000,000 shares of
Advisor Class Common Stock, $.001 par value. All shares of the Fund, when
issued, are fully paid and non-assessable. Any issuance of shares of another
class or series would be governed by the 1940 Act and the law of the State of
Maryland. If shares of another series were issued in connection with the
creation of a second portfolio, each share of either portfolio would normally be
entitled to one vote for all purposes. Generally, shares of both portfolios
would vote as a single series on matters, such as the election of Directors,
that affect both portfolios in substantially the same manner. As to matters
affecting each portfolio differently, such as approval of the Advisory Agreement
and changes in investment policy, shares of each portfolio would vote as
separate series.
ALLIANCEBERNSTEIN HIGH INCOME FUND, INC.
The Fund is a Maryland corporation organized in 1993 under the name of
"Alliance Global Dollar Government Fund, Inc." The name became "Alliance
Emerging Market Debt Fund, Inc." on March 1, 2002, "AllianceBernstein Emerging
Market Debt Fund, Inc." on March 31, 2003, and "AllianceBernstein High Income
Fund, Inc." on January 28, 2008.
The authorized capital stock of the Fund consists of 3,000,000,000
shares of Class A Common Stock, $.001 par value, 3,000,000,000 shares of Class B
Common Stock, $.001 par value, 3,000,000,000 shares of Class C Common Stock,
$.001 par value 3,000,000,000 shares of Advisor Class Common Stock, $.001 par
value, 3,000,000,000 shares of Class R Common Stock, $.001 per value,
3,000,000,000 shares of Class K Common Stock, $.001 par value, and 3,000,000,000
shares of Class I Common Stock, $.001 par value. All shares of the Fund, when
issued, are fully paid and non-assessable. Any issuance of shares of another
class or series would be governed by the 1940 Act and the law of the State of
Maryland.
A shareholder will be entitled to share pro rata with other holders of
the same class of shares all dividends and distributions arising from a Fund's
assets and, upon redeeming shares, will receive the then current NAV of the Fund
represented by the redeemed shares less any applicable CDSC. A Fund is empowered
to establish, without shareholder approval, additional portfolios, which may
have different investment objectives and policies than those of the Fund, and
additional classes of shares within the Fund. If an additional portfolio or
class were established in the Fund, each share of the portfolio or class would
normally be entitled to one vote for all purposes. Generally, shares of each
portfolio and class would vote together as a single class on matters, such as
the election of Directors, that affect each portfolio and class in substantially
the same manner. Each class of shares of a Fund has the same rights and is
identical in all respects except that each class bears its own distribution and
transfer agency expenses. Each class of shares of a Fund votes separately with
respect to the Fund's Rule 12b-1 Plan and other matters for which separate class
voting is appropriate under applicable law. Shares are freely transferable, are
entitled to dividends as determined by the Directors and, in liquidation of a
Fund, are entitled to receive the net assets of the Fund. Certain additional
matters relating to a Fund's organization are discussed in this SAI.
It is anticipated that annual shareholder meetings will not be held;
shareholder meetings will be held only when required by federal or state law.
Shareholders have available certain procedures for the removal of directors.
Each class of shares of a Fund represents an interest in the same
portfolio of investments, and has the same rights and is identical in all
respects, except that expenses related to the distribution of each class are
borne solely by each class and each class of shares has exclusive voting rights
with respect to provisions of the Rule 12b-1 Plan which pertain to a particular
class and other matters for which separate class voting is appropriate under
applicable law, provided that, if the Fund submits to a vote of the Class A
shareholders an amendment to the Rule 12b-1 Plan that would materially increase
the amount to be paid thereunder with respect to the Class A shares, then such
amendment will also be submitted to the Class B and Advisor Class shareholders,
and the Class A shareholders, the Class B shareholders and the Advisor Class
shareholders will vote separately by class.
A Fund's Board of Directors may, without shareholder approval,
increase or decrease the number of authorized but unissued shares of the Fund's
Class A, Class B, Class C, Class R, Class K, Class I and Advisor Class Common
Stock.
The Board of Directors is authorized to reclassify and issue any
unissued shares to any number of additional portfolios and classes without
shareholder approval. Accordingly, the Directors in the future, for reasons such
as the desire to establish one or more additional portfolios with different
investment objectives, policies or restrictions, may create additional
portfolios of shares. Any issuance of shares of another portfolio would be
governed by the 1940 Act and the laws of the State of Maryland. If shares of
another portfolio were issued in connection with the creation of a second
portfolio, each share of either portfolio would normally be entitled to one vote
for all purposes. Generally, shares of both portfolios would vote as a single
portfolio for the election of Directors and on any other matter that affected
both portfolios in substantially the same manner. As to matters affecting each
portfolio differently, such as approval of the Investment Advisory Contract and
changes in investment policy, shares of each Fund would vote as separate
portfolios.
As of the close of business on January [___], 2010, each Fund had the
following number of shares of common stock outstanding.
Fund Class Number of Outstanding Shares
of Common Stock
Intermediate Bond Class A [____________________]
Class B [____________________]
Class C [____________________]
Advisor Class [____________________]
Class R [____________________]
Class K [____________________]
Class I [____________________]
Diversified Yield Class A [____________________]
Class B [____________________]
Class C [____________________]
Advisor Class [____________________]
Class R [____________________]
Class K [____________________]
Class I [____________________]
Global Bond Class A [____________________]
Class B [____________________]
Class C [____________________]
Advisor Class [____________________]
Class R [____________________]
Class K [____________________]
Class I [____________________]
High Income Class A [____________________]
Class B [____________________]
Class C [____________________]
Advisor Class [____________________]
Class R [____________________]
Class K [____________________]
Class I [____________________]
To the knowledge of each Fund, the following persons owned of record
or beneficially, 5% or more of the outstanding shares of the Fund as of January
[___], 2010:
Class A Shares
--------------
Fund Name and Address Number of Class A % of Class
---- ---------------- Shares A Shares
----------------- --------
Intermediate Bond [_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
Diversified Yield [_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
Global Bond [_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
High Income [_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
Class B Shares
--------------
Fund Name and Address Number of Class B % of Class
---- ---------------- Shares B Shares
------------------ ----------
Intermediate Bond [_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
Diversified Yield [_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
Global Bond [_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
High Income [_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
Class C Shares
--------------
Fund Name and Address Number of Class C % of Class
---- ---------------- Shares C Shares
------------------ ----------
Intermediate Bond [_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
Diversified Yield [_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
Global Bond [_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
High Income [_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
Advisor Class Shares
--------------------
Fund Name and Address Number of Advisor % of Advisor
---- ---------------- Class Shares Class Shares
----------------- ------------
Intermediate Bond [_________________] [_________________] [______]%
[_________________]
[_________________]
Diversified Yield [_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
Global Bond [_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
High Income [_________________] [_________________] [______]%
[_________________]
[_________________]
Class R Shares
--------------
Fund Name and Address Number of Class R % of Class
---- ---------------- Shares R Shares
----------------- ----------
Intermediate Bond [_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
Diversified Yield [_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
Global Bond [_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
High Income [_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
Class K Shares
--------------
Fund Name and Address Number of Class K % of Class
---------------- Shares K Shares
----------------- ----------
Intermediate Bond [_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
Diversified Yield [_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
Global Bond [_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
High Income [_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
Class I Shares
--------------
Fund Name and Address Number of Class I % of Class
---- ---------------- Shares I Shares
----------------- ----------
Intermediate Bond [_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
Diversified Yield [_________________] [_________________] [______]%
[_________________]
[_________________]
Global Bond [_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
[_________________] [_________________] [______]%
[_________________]
[_________________]
High Income [_________________] [_________________] [______]%
[_________________]
[_________________]
Custodians and Accounting Agents
--------------------------------
State Street Bank and Trust Company ("State Street"), 225 Franklin
Street, Boston, Massachusetts 02110, acts as the custodian for the assets of
High Income Fund and Bond Fund but plays no part in deciding on the purchase or
sale of portfolio securities. Subject to the supervision of each Fund's
Directors, State Street may enter into subcustodial agreements for the holding
of the Fund's foreign securities.
Brown Brothers Harriman & Co. ("Brown Brothers"), 40 Water Street,
Boston, Massachusetts 02109, will act as the custodian for the assets of
Diversified Yield Fund and Global Bond Fund but plays no part in deciding the
purchase or sale of portfolio securities. Subject to the supervision of the
Fund's Directors, Brown Brothers may enter into sub-custodial agreements for the
holding of the Fund's foreign securities.
Principal Underwriter
---------------------
ABI, an indirect wholly-owned subsidiary of the Adviser, located at
1345 Avenue of the Americas, New York, New York 10105, is the principal
underwriter of shares of the Funds, and as such may solicit orders from the
public to purchase shares of the Funds. Under the Distribution Services
Agreement, each Fund has agreed to indemnify ABI, in the absence of its willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations thereunder, against certain civil liabilities, including liabilities
under the Securities Act.
Counsel
-------
Legal matters in connection with the issuance of the shares of a Fund
offered hereby are passed upon by Seward & Kissel LLP, New York, New York.
Independent Registered Public Accounting Firm
---------------------------------------------
[_________________],[_________________], has been appointed as the
independent registered public accounting firm for the Funds.
Additional Information
----------------------
Shareholder inquiries may be directed to the shareholder's financial
intermediary or to ABIS at the address or telephone numbers shown on the front
cover of this SAI. This SAI does not contain all the information set forth in
the Registration Statement filed by a Fund with the Commission under the
Securities Act. Copies of the Registration Statement may be obtained at a
reasonable charge from the Securities and Exchange Commission or may be
examined, without charge, at the offices of the Commission in Washington, D.C.
--------------------------------------------------------------------------------
FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
--------------------------------------------------------------------------------
The financial statements of each of Intermediate Bond, Diversified
Yield and High Income for the fiscal year ended October 31, 2009 and the report
of [_________________], the independent registered public accounting firm, are
incorporated herein by reference to the each Fund's annual report. The annual
reports were filed on Form N-CSR with the Commission on January [____], 2010. It
is available without charge upon request by calling ABIS at (800) 227-4618.
The financial statements of Global Bond for the fiscal year ended
September 30, 2009 and the report of [_________________], independent registered
public accounting firm, are incorporated herein by reference to the Fund's
annual report. The Fund's annual report was filed on Form N-CSR with the
Commission on December [___], 2009. The annual report is available without
charge upon request by calling ABIS at (800) 227-4618.
SK 00250 0157 1041523 v2
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS:
(a) (1) Articles of Amendment and Restatement to Articles of
Incorporation dated February 1, 2006 and filed February 23, 2006
- Incorporated by reference to Exhibit (a) to Post-Effective
Amendment No. 87 of the Registrant's Registration Statement on
Form N-1A (File Nos. 2-48227 and 811-2383), filed with the
Securities and Exchange Commission on January 31, 2007.
(2) Articles of Amendment to the Articles of Incorporation of the
Registrant, dated November 2, 2007 and filed June 18, 2008 -
Incorporated by reference to Exhibit (a)(2) to Post-Effective
Amendment No. 89 of the Registrant's Registration Statement on
Form N-1A (File Nos. 2-48227 and 811-2383), filed with the
Securities and Exchange Commission on January 28, 2009.
(b) Amended and Restated By-Laws of the Registrant - Incorporated by
reference to Exhibit 99.77Q1 - Other Exhibits of the Registrant's
Semi-Annual Report on Form NSAR-A (File No. 811-2383), filed with the
Securities and Exchange Commission on May 30, 2006.
(c) Not applicable.
(d) Form of Amended Investment Advisory Contract between the Registrant
and AllianceBernstein L.P. - Incorporated by reference to Exhibit (d)
to Post-Effective Amendment No. 87 of the Registrant's Registration
Statement on Form N-1A (File Nos. 2-48227 and 811-2383), filed with
the Securities and Exchange Commission on January 31, 2007.
(e) (1) Distribution Services Agreement between the Registrant and
AllianceBernstein Investments, Inc. (formerly known as Alliance
Fund Distributors, Inc.) - Incorporated by reference to Exhibit
6(a) to Post-Effective Amendment No. 65 of the Registrant's
Registration Statement on Form N-1A (File Nos. 2-48227 and
811-2383), filed with the Securities and Exchange Commission on
October 31, 1997.
(2) Amendment to the Distribution Services Agreement between the
Registrant and AllianceBernstein Investments, Inc. (formerly
known as Alliance Fund Distributors, Inc.) - Incorporated by
reference to Exhibit 6(e) to Post-Effective Amendment No. 64 of
the Registrant's Registration Statement on Form N-1A (File Nos.
2-48227 and 811-2383), filed with the Securities and Exchange
Commission on October 31, 1996.
(3) Form of Amendment to the Distribution Services Agreement between
the Registrant and AllianceBernstein Investments, Inc. (formerly
known as Alliance Fund Distributors, Inc.) - Incorporated by
reference to Exhibit (e)(3) to Post-Effective Amendment No. 81 of
the Registrant's Registration Statement on Form N-1A (File Nos.
2-48227 and 811-2383), filed with the Securities and Exchange
Commission on October 29, 2003.
(4) Form of Amendment to the Distribution Services Agreement between
the Registrant and AllianceBernstein Investments, Inc. (formerly
known as Alliance Fund Distributors, Inc.) - Incorporated by
reference to Exhibit (e)(4) to the Post-Effective Amendment No.
84 of the Registrant's Registration Statement on Form N-1A (File
Nos. 2-48227 and 811-2383), filed with the Securities and
Exchange Commission on January 31, 2005.
(5) Form of Amendment to Distribution Services Agreement between the
Registrant and AllianceBernstein Investments, Inc. - Incorporated
by reference to Exhibit (e)(5) to Post-Effective Amendment No. 87
of the Registrant's Registration Statement on Form N-1A (File
Nos. 2-48227 and 811-2383), filed with the Securities and
Exchange Commission on January 31, 2007.
(6) Form of Selected Dealer Agreement between AllianceBernstein
Investments, Inc. and selected dealers offering shares of
Registrant - Incorporated by reference to Exhibit (e)(6) to
Post-Effective Amendment No. 39 of the Registration Statement on
Form N-1A of AllianceBernstein Large Cap Growth Fund, Inc. (File
Nos. 33-49530 and 811-6730), filed with the Securities and
Exchange Commission on October 15, 2009.
(7) Form of Selected Agent Agreement between AllianceBernstein
Investments, Inc. (formerly known as Alliance Fund Distributors,
Inc.) and selected agents making available shares of Registrant -
Incorporated by reference to Exhibit (e)(6) to the Post-Effective
Amendment No. 84 of the Registrant's Registration Statement on
Form N-1A (File Nos. 2-48227 and 811-2383), filed with the
Securities and Exchange Commission on January 31, 2005.
(8) Selected Dealer Agreement between AllianceBernstein Investments,
Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated
making available shares of the Registrant effective April 30,
2009 - Incorporated by reference to Exhibit (e)(8) to
Post-Effective Amendment No. 39 of the Registration Statement on
Form N-1A of AllianceBernstein Large Cap Growth Fund, Inc. (File
Nos. 33-49530 and 811-6730), filed with the Securities and
Exchange Commission on October 15, 2009.
(9) Load Fund Operating Agreement between AllianceBernstein
Investments, Inc. and Charles Schwab & Co., Inc. making available
shares of the Registrant, dated as of June 1, 2007 - Incorporated
by reference to Exhibit (e)(9) to Post-Effective Amendment No. 39
of the Registration Statement on Form N-1A of AllianceBernstein
Large Cap Growth Fund, Inc. (File Nos. 33-49530 and 811-6730),
filed with the Securities and Exchange Commission on October 15,
2009.
(10) Cooperation Agreement between AllianceBernstein Investments, Inc.
(formerly known as AllianceBernstein Research Management, Inc.)
and UBS AG, dated November 1, 2005 - Incorporated by reference to
Exhibit (e)(10) to Post- Effective Amendment No. 39 of the
Registration Statement on Form N-1A of AllianceBernstein Large
Cap Growth Fund, Inc. (File Nos. 33-49530 and 811- 6730), filed
with the Securities and Exchange Commission on October 15, 2009.
(f) Not applicable.
(g) (1) Custodian Contract between the Registrant and State Street Bank
and Trust Company - Incorporated by reference to Exhibit 8(a) to
Post-Effective Amendment No. 65 of the Registrant's Registration
Statement on Form N-1A (File Nos. 2-48227 and 811-2383), filed
with the Securities and Exchange Commission with the Securities
and Exchange Commission on October 31, 1997.
(2) Amendment to the Custodian Contract between the Registrant and
State Street Bank and Trust Company - Incorporated by reference
to Exhibit 8(a) to Post-Effective Amendment No. 64 of the
Registrant's Registration Statement on Form N-1A (File Nos.
2-48227 and 811-2383), filed with the Securities and Exchange
Commission on October 31, 1996.
(h) (1) Transfer Agency Agreement between Registrant and
AllianceBernstein Investor Services, Inc. - Incorporated by
reference to Exhibit 9 to Post-Effective Amendment No. 65 of the
Registrant's Registration Statement on Form N-1A (File Nos.
2-48227 and 811-2383), filed with the Securities and Exchange
Commission on October 31, 1997.
(2) Form of Amendment to Transfer Agency Agreement between Registrant
and AllianceBernstein Investor Services, Inc. - Incorporated by
reference to Exhibit (h)(2) to Post-Effective Amendment No. 87 of
the Registrant's Registration Statement on Form N-1A (File Nos.
2-48227 and 811-2383), filed with the Securities and Exchange
Commission on January 31, 2007.
(3) Form of Expense Limitation Undertaking by AllianceBernstein L.P.
with respect to Quality Bond Portfolio - Incorporated by
reference to Exhibit (h)(2) to the Post-Effective Amendment No.
84 of the Registrant's Registration Statement on Form N-1A (File
Nos. 2-48227 and 811-2383), filed with the Securities and
Exchange Commission on January 31, 2005.
(i) Opinion and Consent of Seward & Kissel LLP - To be filed by amendment.
(j) Consent of Independent Registered Public Accounting Firm -- To be
filed by amendment.
(k) Not applicable.
(l) Not applicable.
(m) Rule 12b-1 Plan - See Exhibit (e)(1) above.
(n) Form of Amended and Restated Rule 18f-3 Plan - Incorporated by
reference to Exhibit (n)(3) to the Post-Effective Amendment No. 84 of
the Registrant's Registration Statement on Form N-1A (File Nos.
2-48227 and 811-2383), filed with the Securities and Exchange
Commission on January 31, 2005.
(p) (1) Code of Ethics for the Fund - Incorporated by reference to
Exhibit (p)(1) to Post-Effective Amendment No. 74 of the
Registration Statement on Form N-1A of the Registrant (File Nos.
2-48227 and 811-2383), filed with the Securities and Exchange
Commission on October 6, 2000.
(2) Code of Ethics for AllianceBernstein L.P. and AllianceBernstein
Investments, Inc. - Incorporated by reference to Exhibit (p)(2)
to Post-Effective Amendment No. 39 of the Registration Statement
on Form N-1A of AllianceBernstein Large Cap Growth Fund, Inc.
(File Nos. 33-49530 and 811-6730), filed with the Securities and
Exchange Commission on October 15, 2009.
Other Exhibits:
Powers of Attorney for: John H. Dobkin, Michael J. Downey,
William H. Foulk, Jr., D. James Guzy, Nancy P. Jacklin, Robert M.
Keith, Garry L. Moody, Marshall C. Turner, Jr. and Earl D. Weiner
- Incorporated by reference to Other Exhibits to Post-Effective
Amendment No. 89 of the Registrant's Registration Statement on
Form N-1A (File Nos. 2-48227 and 811-2383), filed with the
Securities and Exchange Commission on January 28, 2009.
ITEM 24. Persons Controlled by or under Common Control with the Fund.
None.
ITEM 25. Indemnification.
It is the Registrant's policy to indemnify its directors and officers,
employees and other agents to the maximum extent permitted by Section
2-418 of the General Corporation Law of the State of Maryland, which
is incorporated by reference herein, and as set forth in Article
EIGHTH of Registrant's Articles of Amendment and Restatement of
Articles of Incorporation, Article IX of the Registrant's Amended and
Restated By-laws filed as Exhibit (b) and Section 10(a) of the
Distribution Services Agreement filed as Exhibit (e)(1), all as set
forth below.
The liability of the Registrant's directors and officers is dealt with
in Article EIGHTH of Registrant's Articles of Amendment and
Restatement of Articles of Incorporation, as set forth below. The
Investment Adviser's liability for any loss suffered by the Registrant
or its shareholders is set forth in Section 4 of the Investment
Advisory Contract filed as Exhibit (d) as set forth below.
ARTICLE EIGHTH OF THE REGISTRANT'S ARTICLES OF AMENDMENT AND RESTATEMENT OF
ARTICLES OF INCORPORATION READS AS FOLLOWS:
(1) To the maximum extent that Maryland law in effect from time to
time permits limitation of the liability of directors and officers of a
corporation, no present or former director or officer of the Corporation shall
be liable to the Corporation or its stockholders for money damages.
(2) The Corporation shall have the power, to the maximum extent
permitted by Maryland law in effect from time to time, to obligate itself to
indemnify, and to pay or reimburse reasonable expenses in advance of final
disposition of a proceeding to, (a) any individual who is a present or former
director or officer of the Corporation or (b) any individual who, while a
director or officer of the Corporation and at the request of the Corporation,
serves or has served as a director, officer, partner or trustee of another
corporation, real estate investment trust, partnership, joint venture, trust,
employee benefit plan or any other enterprise from and against any claim or
liability to which such person may become subject or which such person may incur
by reason of his status as a present or former director or officer of the
Corporation. The Corporation shall have the power, with the approval of the
Board of Directors, to provide such indemnification and advancement of expenses
to a person who served a predecessor of the Corporation in any of the capacities
described in (a) or (b) above and to any employee or agent of the Corporation or
a predecessor of the Corporation.
(3) The provisions of this Article EIGHTH shall be subject to the
limitations of the Investment Company Act.
(4) Neither the amendment nor repeal of this Article EIGHTH, nor the
adoption or amendment of any other provision of the Charter or Bylaws
inconsistent with this Article EIGHTH, shall apply to or affect in any respect
the applicability of the preceding sections of this Article EIGHTH with respect
to any act or failure to act which occurred prior to such amendment, repeal or
adoption.
ARTICLE IX OF THE REGISTRANT'S AMENDED AND RESTATED BYLAWS READS AS FOLLOWS:
To the maximum extent permitted by Maryland law in effect from time to
time, the Corporation shall indemnify and, without requiring a preliminary
determination of the ultimate entitlement to indemnification, shall pay or
reimburse reasonable expenses in advance of final disposition of a proceeding to
(a) any individual who is a present or former director or officer of the
Corporation and who is made or threatened to be made a party to the proceeding
by reason of his or her service in any such capacity or (b) any individual who,
while a director or officer of the Corporation and at the request of the
Corporation, serves or has served as a director, officer, partner or trustee of
another corporation, real estate investment trust, partnership, joint venture,
trust, employee benefit plan or other enterprise and who is made or threatened
to be made a party to the proceeding by reason of his or her service in any such
capacity. The Corporation may, with the approval of its Board of Directors or
any duly authorized committee thereof, provide such indemnification and advance
for expenses to a person who served a predecessor of the Corporation in any of
the capacities described in (a) or (b) above and to any employee or agent of the
Corporation or a predecessor of the Corporation. The termination of any claim,
action, suit or other proceeding involving any person, by judgment, settlement
(whether with or without court approval) or conviction or upon a plea of guilty
or nolo contendere, or its equivalent, shall not create a presumption that such
person did not meet the standards of conduct required for indemnification or
payment of expenses to be required or permitted under Maryland law, these Bylaws
or the Charter. Any indemnification or advance of expenses made pursuant to this
Article shall be subject to applicable requirements of the 1940 Act. The
indemnification and payment of expenses provided in these Bylaws shall not be
deemed exclusive of or limit in any way other rights to which any person seeking
indemnification or payment of expenses may be or may become entitled under any
bylaw, regulation, insurance, agreement or otherwise.
Neither the amendment nor repeal of this Article, nor the adoption or
amendment of any other provision of the Bylaws or Charter inconsistent with this
Article, shall apply to or affect in any respect the applicability of the
preceding paragraph with respect to any act or failure to act which occurred
prior to such amendment, repeal or adoption.
Section 10(a) of the Distribution Services Agreement reads as follows:
Section 10. Indemnification.
(a) The Fund agrees to indemnify, defend and hold the
Underwriter, and any person who controls the Underwriter within the
meaning of Section 15 of the Securities Act of 1933, as amended (the
"Securities Act"), free and harmless form and against any and all
claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which the Underwriter
or any such controlling person may incur, under the Securities Act, or
under common law or otherwise, arising out of or based upon any
alleged untrue statements of a material fact contained in the Fund's
Registration Statement or Prospectus or Statement of Additional
Information in effect from time to time under the Securities Act or
arising out of or based upon any alleged omission to state a material
fact required to be stated in either thereof or necessary to make the
statements in either thereof not misleading; provided, however, that
in no event shall anything therein contained by so construed as to
protect the Underwriter against any liability to the Fund or its
security holders to which the Underwriter would otherwise be subject
by reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of the Underwriter's reckless
disregard of its obligations and duties under this agreement. The
Fund's agreement to indemnify the Underwriter or any such controlling
person, such notification to be given by letter or by telegram
addressed to the Fund at its principal office in New York, New York,
and sent to the Fund by the person against whom such action is brought
within ten days after the summons or other first legal process shall
have been served. The failure so to notify the Fund of the
commencement of any such action shall not relieve the Fund from any
liability which it may have to the person against whom such action is
brought by reason of any such alleged untrue statement or omission
otherwise than on account of the indemnity agreement contained in this
Section 10. The Fund will be entitled to assume the defense of any
such suit brought to enforce any such claim, and to retain counsel of
good standing chosen by the Fund and approved by the Underwriter. In
the event the Fund does elect to assume the defense of any such suit
and retain counsel of good standing approved by the Underwriter, the
defendant or defendants in such suit shall bear the fees and expenses
of any additional counsel retained by any of them; but in case the
Fund does not elect to assume the defense of any such suit, or in case
the Underwriter does not approve of counsel chosen by the Fund, the
Fund will reimburse the Underwriter or the controlling person or
persons named as defendant or defendants in such suit, for the fees
and expenses of any counsel retained by the Underwriter or such
persons. The indemnification agreement contained in this Section 10
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of the Underwriter or any
controlling person and shall survive the sale of any of the Fund's
shares made pursuant to subscriptions obtained by the Underwriter.
This agreement of indemnity will inure exclusively to the benefit of
the Underwriter, to the benefit of its successors and assigns, and to
the benefit of any controlling persons and their successors and
assigns. The Fund agrees promptly to notify the Underwriter of the
commencement of any litigation or proceeding against the Fund in
connection with the issue and sale of any of its shares.
Section 4 of the Investment Advisory Contract reads as follows:
4. We shall expect of you, and you will give us the benefit of, your
best judgment and efforts in rendering these services to us, and we
agree as an inducement to your undertaking these services that you
shall not be liable hereunder for any mistake of judgment or in any
event whatsoever, except for lack of good faith, provided that nothing
herein shall be deemed to protect, or purport to protect, you against
any liability to us or to our security holders to which you would
otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of your duties hereunder, or by
reason of your reckless disregard of your obligations and duties
hereunder.
The foregoing summaries are qualified by the entire text of
Registrant's Articles of Amendment and Restatement of Articles of
Incorporation, Amended and Restated By-laws, the Investment Advisory
Contract between Registrant and AllianceBernstein L.P. and the
Distribution Services Agreement between Registrant and
AllianceBernstein Investments, Inc. ("ABI").
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that, in the opinion of the
Securities and Exchange Commission, such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer of controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification
by it is against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
In accordance with Release No. IC-11330 (September 2, 1980), the
Registrant will indemnify its directors, officers, investment manager
and principal underwriters only if (1) a final decision on the merits
was issued by the court or other body before whom the proceeding was
brought that the person to be indemnified (the "indemnitee") was not
liable by reason or willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of his
office ("disabling conduct") or (2) a reasonable determination is
made, based upon a review of the facts, that the indemnitee was not
liable by reason of disabling conduct, by (a) the vote of a majority
of a quorum of the directors who are neither "interested persons" of
the Registrant as defined in section 2(a)(19) of the Investment
Company Act of 1940 nor parties to the proceeding ("disinterested,
non-party directors"), or (b) an independent legal counsel in a
written opinion. The Registrant will advance attorneys fees or other
expenses incurred by its directors, officers, investment adviser or
principal underwriters in defending a proceeding, upon the undertaking
by or on behalf of the indemnitee to repay the advance unless it is
ultimately determined that he is entitled to indemnification and, as a
condition to the advance, (1) the indemnitee shall provide a security
for his undertaking, (2) the Registrant shall be insured against
losses arising by reason of any lawful advances, or (3) a majority of
a quorum of disinterested, non-party directors of the Registrant, or
an independent legal counsel in a written opinion, shall determine,
based on a review of readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the
indemnitee ultimately will be found entitled to indemnification.
The Registrant participates in a joint directors and officers
liability insurance policy issued by the ICI Mutual Insurance Company.
Coverage under this policy has been extended to directors, trustees
and officers of the investment companies managed by AllianceBernstein
L.P. Under this policy, outside trustees and directors would be
covered up to the limits specified for any claim against them for acts
committed in their capacities as trustee or director. A pro rata share
of the premium for this coverage is charged to each investment company
and to the Investment Adviser.
ITEM 26. Business and Other Connections of Investment Adviser.
The descriptions of AllianceBernstein L.P. under the captions
"Management of the Fund" in the Prospectuses and in the Statements of
Additional Information constituting Parts A and B, respectively, of
this Registration Statement are incorporated by reference herein.
The information as to the directors and executive officers of
AllianceBernstein Corporation, the general partner of
AllianceBernstein L.P., set forth in AllianceBernstein L.P.'s Form ADV
filed with the Securities and Exchange Commission on April 21, 1988
(File No. 801-32361) and amended through the date hereof, is
incorporated by reference.
ITEM 27. Principal Underwriters
(a) ABI is the Registrant's Principal Underwriter in connection with
the sale of shares of the Registrant. ABI also acts as Principal
Underwriter or Distributor for the following investment
companies:
AllianceBernstein Balanced Shares, Inc.
AllianceBernstein Blended Style Series, Inc.
AllianceBernstein Cap Fund, Inc.
AllianceBernstein Corporate Shares
AllianceBernstein Diversified Yield Fund, Inc.
AllianceBernstein Exchange Reserves
AllianceBernstein Fixed-Income Shares, Inc.
AllianceBernstein Focused Growth & Income Fund, Inc.
AllianceBernstein Global Bond Fund, Inc.
AllianceBernstein Global Growth Fund, Inc.
AllianceBernstein Global Real Estate Investment Fund, Inc.
AllianceBernstein Global Thematic Growth Fund, Inc.
AllianceBernstein Greater China '97 Fund, Inc.
AllianceBernstein Growth and Income Fund, Inc.
AllianceBernstein High Income Fund, Inc.
AllianceBernstein Institutional Funds, Inc.
AllianceBernstein Intermediate California Municipal Portfolio(1)
AllianceBernstein Intermediate Diversified Portfolio(1)
AllianceBernstein Intermediate New York Municipal Portfolio(1)
AllianceBernstein International Portfolio(1)
AllianceBernstein International Growth Fund, Inc.
AllianceBernstein Large Cap Growth Fund, Inc.
AllianceBernstein Municipal Income Fund, Inc.
AllianceBernstein Municipal Income Fund II
AllianceBernstein Short Duration Portfolio
AllianceBernstein Small/Mid Cap Growth Fund, Inc.
AllianceBernstein Tax-Managed International Portfolio(1)
AllianceBernstein Trust
AllianceBernstein Utility Income Fund, Inc.
AllianceBernstein Variable Products Series Fund, Inc.
Sanford C. Bernstein Fund II, Inc.
The AllianceBernstein Pooling Portfolios
The AllianceBernstein Portfolios
____________________________
(1) This is a retail Portfolio of Sanford C. Bernstein Fund, Inc.
(b) The following are the Directors and Officers of ABI, the principal
place of business of which is 1345 Avenue of the Americas, New York,
New York, 10105.
POSITIONS AND POSITIONS AND
NAME OFFICES WITH UNDERWRITER OFFICES WITH REGISTRANT
---- ------------------------ -----------------------
Directors
---------
Mark R. Manley Director
Robert M. Keith Director
Officers
--------
Robert M. Keith Executive Managing President and
Director and President Chief Executive Officer
Richard A. Davies Executive Vice President
Frank Speno Executive Vice President
Andrew L. Gangolf Senior Vice President and
Assistant General Counsel Assistant Secretary
Emilie D. Wrapp Senior Vice President, Secretary
Assistant General Counsel
and Assistant Secretary
Daniel A. Notto Senior Vice President,
Counsel and Assistant
Secretary
Christopher S. Alpaugh Senior Vice President
Audie G. Apple Senior Vice President
Steven R. Barr Senior Vice President and
Assistant Secretary
Amy I. Belew Senior Vice President
Peter G. Callahan Senior Vice President
Russell R. Corby Senior Vice President
John W. Cronin Senior Vice President
Robert J. Cruz Senior Vice President
Jennifer M. DeLong Senior Vice President
John C. Endahl Senior Vice President
Adam E. Engelhardt Senior Vice President
John Edward English Senior Vice President
Edward J. Farrell Senior Vice President
and Controller
Mark D. Gersten Senior Vice President
and Treasurer
Kenneth L. Haman Senior Vice President
Joseph P. Healy Senior Vice President
Mary V. Kralis Hoppe Senior Vice President
Scott Hutton Senior Vice President
Robert H. Joseph, Jr. Senior Vice President
and Assistant Treasurer
Eric L. Levinson Senior Vice President
Matthew P. Mintzer Senior Vice President
Thomas F. Monnerat Senior Vice President
Joanna D. Murray Senior Vice President
Jeffrey A. Nye Senior Vice President
John J. O'Connor Senior Vice President
Catherine N. Peterson Senior Vice President
Mark A. Pletts Senior Vice President
Stephen C. Scanlon Senior Vice President
John P. Schmidt Senior Vice President
Gregory K. Shannahan Senior Vice President
Peter J. Szabo Senior Vice President
Joseph T. Tocyloski Senior Vice President
Craig E. Welch Senior Vice President
Patrick E. Ryan Vice President and
Chief Financial Officer
Albert J. Angelus Vice President
Kenneth F. Barkoff Vice President
Peter J. Barron Vice President
William G. Beagle Vice President
Christopher M. Berenbroick Vice President
Chris Boeker Vice President
Brandon W. Born Vice President
Richard A. Brink Vice President
Shaun D. Bromley Vice President
Brian Buehring Vice President
Kevin T. Cannon Vice President
Daniel W. Carey Vice President
Tobin W. Chakeen Vice President
Alice L. Chan Vice President
Laura A. Channell Vice President
Flora Chuang Vice President
Peter T. Collins Vice President
Joseph D. Connell, Jr. Vice President
Michael C. Conrath Vice President
Dwight P. Cornell Vice President
Robert A. Craft Vice President
John D. Curry Vice President
Walter F. Czaicki Vice President
John M. D'Agostino Vice President
Christine M. Dehil Vice President
Darren K. DeSimone Vice President
Ronald G. Dietrich Vice President
Carmela Di Meo Vice President
Joseph T. Dominguez Vice President
Bradford P. Doninger Vice President
Bernard J. Eng Vice President
Daniel Ennis Vice President
Michael J. Eustic Vice President
Hollie G. Fagan Vice President
Matthew G. Fetchko Vice President
Michael F. Foy Vice President
Kevin T. Gang Vice President
Mark A. Gessner Vice President
Mark C. Glatley Vice President
Kimberly A. Collins Gorab Vice President
Joseph T. Haag Vice President
Brian P. Hanna Vice President
John G. Hansen Vice President
Shannon R. Harkins Vice President
Terry L. Harris Vice President
Michael S. Hart Vice President
Daniel R. Hemberger Vice President
Anthony D. Ialeggio Vice President
Eric S. Indovina Vice President
Oscar J. Isoba Vice President
Kumar Jagdeo II Vice President
Matthew L. Joki Vice President
Jung M. Kim Vice President
Joseph B. Kolman Vice President
Scott M. Krauthamer Vice President
Jeffrey J. Lamb Vice President
Christopher J. Larkin Vice President
Laurel E. Lindner Vice President
James M. Liptrot Vice President and
Assistant Controller
Colleen S. Lorence Vice President
Edward R. Lupo Vice President
Jennifer L. Magill Vice President
Silvia Manz Vice President
Osama Mari Vice President
Jay G. McAndrew Vice President
Joseph R. McLean Vice President
Craig S. McKenna Vice President
Bart D. Miller Vice President
Troy E. Mosconi Vice President
Paul S. Moyer Vice President
Juan Mujica Vice President
John F. Multhauf Vice President
Robert D. Nelms Vice President
Jamie A. Nieradka Vice President
Suzanne E. Norman Vice President
John J. Onofrio Vice President and
Assistant Treasurer
Ian J. O'Brien-Rupert Vice President
Alex E. Pady Vice President
David D. Paich Vice President
Kimchu Perrington Vice President
Leo J. Peters IV Vice President
Thomas C. Pfeifer Vice President
Joseph J. Proscia Vice President
John D. Prosperi Vice President
Carol H. Rappa Vice President
Jessie A. Reich Vice President
Heidi A. Richardson Vice President
James A. Rie Vice President
Lauryn A. Rivello Vice President
Patricia A. Roberts Vice President
Miguel A. Rozensztroch Vice President
Kristin M. Seabold Vice President
William D. Shockley Vice President
John F. Skahan Vice President
Praveen K. Singh Vice President
Karen Sirett Vice President
Elizabeth M. Smith Vice President
Laurie L. Snively Vice President
Daniel L. Stack Vice President
Ben H. Stairs Vice President
Jason P. Stevens Vice President
Kelly P. Sudafer Vice President
(aka Kelly Sudovar)
Scott M. Tatum Vice President
Jay D. Tini Vice President
Ellen Tobin Vice President
Keri-Ann S. Toritto Vice President
Laura L. Tocchet Vice President
Louis L. Tousignant Vice President
Christian G. Wilson Vice President
Stephen M. Woetzel Vice President
Joanna Wong Vice President
Tao T. Wu Vice President
Constantin L. Andreae Assistant Vice President
Steven D. Barbesh Assistant Vice President
DeAnna D. Beedy Assistant Vice President
Roy C. Bentzen Assistant Vice President
Michael A. Bosi Assistant Vice President
James M. Broderick Assistant Vice President
Scott A. Brown Assistant Vice President
Judith A. Chin Assistant Vice President
Christine M. Crowley Assistant Vice President
Jamila Dalia Assistant Vice President
Daniel A. Dean Assistant Vice President
Ralph A. DiMeglio Assistant Vice President
Kilie A. Donahue Assistant Vice President
Michael J. Ferraro Assistant Vice President
Robert A. Fiorentino Assistant Vice President
Jose R. Garcia Assistant Vice President
Michele J. Giangrande Assistant Vice President
Cecilia N. Gomes Assistant Vice President
Stefanie M. Gonzalez Assistant Vice President
Friederike Grote Assistant Vice President
Junko Hisamatsu (Cox) Assistant Vice President
Lia A. Horii Assistant Vice President
Julie E. (Gerstmayr) Kelly Assistant Vice President
Aaron S. Kravitz Assistant Vice President
Junko Kimura Assistant Vice President
Stephen J. Laffey Assistant Vice President Assistant Secretary
and Counsel
Jayson W. Leisenring Assistant Vice President
Jonathan M. Liang Assistant Vice President
Mark J. Maier Assistant Vice President
Matthew J. Malvey Assistant Vice President
Francesco Martello Assistant Vice President
Russell B. Martin Assistant Vice President
David G. Mitchell Assistant Vice President
Jennifer A. Mulhall Assistant Vice President
Brian W. Paulson Assistant Vice President
Steven Pavlovic Assistant Vice President
Jared M. Piche Assistant Vice President
Vinod B. Pittampalli Assistant Vice President
Cameron V. Polek Assistant Vice President
Damien J. Porras Assistant Vice President
Mark A. Quarno Assistant Vice President
Marc S. Reed Assistant Vice President
Jennifer R. Rolf Assistant Vice President
Matthew M. Stebner Assistant Vice President
Christopher R. Thabet Assistant Vice President
William Tohme Assistant Vice President
Damaris Torres Assistant Vice President
Laurence Vandecasteele Assistant Vice President
Kellie L. Weil Assistant Vice President
Martin J. Zayac Assistant Vice President
Mark R. Manley Secretary
Colin T. Burke Assistant Secretary
(c) Not applicable.
ITEM 28. Location of Accounts and Records.
The majority of the accounts, books and other documents required to be
maintained by Section 31(a) of the Investment Company Act of 1940 and
the Rules thereunder are maintained as follows: journals, ledgers,
securities records and other original records are maintained
principally at the offices of AllianceBernstein Investor Services,
Inc., P.O. Box 786003, San Antonio, Texas 78278-6003, and at the
offices of State Street Bank and Trust Company, the Registrants
Custodian, One Lincoln Street, Boston, Massachusetts 02111. All other
records so required to be maintained are maintained at the offices of
AllianceBernstein L.P., 1345 Avenue of the Americas, New York, New
York 10105.
ITEM 29. Management Services.
Not applicable.
ITEM 30. Undertakings.
Not applicable.
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, the Registrant has
duly caused this Post-Effective Amendment No. 91 to its Registration Statement
to be signed on its behalf by the undersigned, duly authorized, in the City and
State of New York, on the 20th day of November, 2009.
ALLIANCEBERNSTEIN BOND FUND, INC.
By: /s/ Robert M. Keith*
--------------------
Robert M. Keith
President
Pursuant to the requirements of the Securities Act of 1933, as amended
this Post-Effective Amendment No. 91 to the Registration Statement has been
signed below by the following persons in the capacities and on the dates
indicated:
Signature Title Date
--------- ----- ----
1) Principal
Executive Officer
/s/ Robert M. Keith* President and November 20, 2009
-------------------- Chief Executive
Robert M. Keith Officer
2) Principal Financial
and Accounting Officer
/s/ Joseph J. Mantineo Treasurer and November 20, 2009
---------------------- Chief Financial
Joseph J. Mantineo Officer
3) Directors:
----------
John H. Dobkin*
Michael J. Downey*
William H. Foulk, Jr.*
D. James Guzy*
Nancy P. Jacklin*
Garry L. Moody*
Marshall C. Turner, Jr.*
Earl D. Weiner*
*By: /s/ Andrew L. Gangolf November 20, 2009
---------------------
Andrew L. Gangolf
(Attorney-in-fact)
Index to Exhibits
-----------------
Exhibit No. Description of Exhibits
----------- -----------------------
SK 00250 0157 1045081
COVER
2
filename2.txt
SEWARD & KISSEL LLP
1200 G Street, N.W.
Washington, DC 20005
Telephone: (202) 737-8833
Facsimile: (202) 737-5184
www.sewkis.com
November 20, 2009
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Re: AllianceBernstein Bond Fund, Inc. -
AllianceBernstein Intermediate Bond
File Nos. 2-48227 and 811-2383
------------------------------------
Dear Sir or Madam:
Pursuant to Rule 485(a) under the Securities Act of 1933, we are
filing Post-Effective Amendment No. 91 under the Securities Act of 1933 and
Amendment No. 69 under the Investment Company Act of 1940 to the Registration
Statement on Form N-1A of AllianceBernstein Bond Fund, Inc. - AllianceBernstein
Intermediate Bond Portfolio (the "Fund"). We are making this filing to comply
with the amendments to Form N-1A adopted in Release No. IC-28584 (January 13,
2009).
Disclosure other than that described above contained in the Fund's
prospectuses and statement of additional information is substantially the same
as the disclosure previously reviewed by the staff of the Securities and
Exchange Commission. Accordingly, we ask for selective review of Post-Effective
Amendment No. 91.
Please call me at the above-referenced number if you have any
questions regarding the attached.
Sincerely,
/s/ Young Seo
-------------
Young Seo
Attachment
SK 00250 0157 1047568