<DOCUMENT>
<TYPE>N-CSRS
<SEQUENCE>1
<FILENAME>edg150726_sr.txt
<TEXT>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-09160
ALLIANCEBERNSTEIN HIGH YIELD FUND, INC.
(Exact name of registrant as specified in charter)
1345 Avenue of the Americas, New York, New York 10105
(Address of principal executive offices) (Zip code)
Mark R. Manley
AllianceBernstein L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and address of agent for service)
Registrant's telephone number, including area code: (800) 221-5672
Date of fiscal year end: September 30, 2007
Date of reporting period: March 31, 2007
ITEM 1. REPORTS TO STOCKHOLDERS.
AllianceBernstein High Yield Fund
Semi-Annual Report
March 31, 2007
[LOGO]
ALLIANCEBERNSTEIN
INVESTMENTS
Investment Products Offered
o Are Not FDIC Insured
o May Lose Value
o Are Not Bank Guaranteed
The investment return and principal value of an investment in the Fund will
fluctuate as the prices of the individual securities in which it invests
fluctuate, so that your shares, when redeemed, may be worth more or less than
their original cost. You should consider the investment objectives, risks,
charges and expenses of the Fund carefully before investing. For a free copy of
the Fund's prospectus, which contains this and other information, visit our web
site at www.alliancebernstein.com or call your financial advisor or
AllianceBernstein(R) at (800) 227-4618. Please read the prospectus carefully
before you invest.
You may obtain performance information current to the most recent month-end by
visiting www.alliancebernstein.com.
This shareholder report must be preceded or accompanied by the Fund's
prospectus for individuals who are not current shareholders of the Fund.
You may obtain a description of the Fund's proxy voting policies and
procedures, and information regarding how the Fund voted proxies relating to
portfolio securities during the most recent 12-month period ended June 30,
without charge. Simply visit AllianceBernstein's web site at
www.alliancebernstein.com, or go to the Securities and Exchange Commission's
(the "Commission") web site at www.sec.gov, or call AllianceBernstein at (800)
227-4618.
The Fund files its complete schedule of portfolio holdings with the Commission
for the first and third quarters of each fiscal year on Form N-Q. The Fund's
Forms N-Q are available on the Commission's web site at www.sec.gov. The Fund's
Forms N-Q may also be reviewed and copied at the Commission's Public Reference
Room in Washington, DC; information on the operation of the Public Reference
Room may be obtained by calling (800) SEC-0330.
AllianceBernstein Investments, Inc. is an affiliate of AllianceBernstein L.P.,
the manager of the AllianceBernstein funds, and is a member of the NASD.
AllianceBernstein(R) and the AB Logo are registered trademarks and service
marks used by permission of the owner, AllianceBernstein L.P.
May 24, 2007
Semi-Annual Report
This report provides management's discussion of fund performance for
AllianceBernstein High Yield Fund (the "Fund") for the semi-annual reporting
period ended March 31, 2007.
Investment Objective and Policies
This open-end fund's objective is to maximize total returns from price
appreciation and income. The Fund invests, under normal circumstances, at least
80% of its net assets in high yield debt securities. The Fund invests in a
diversified mix of high-yield, below-investment-grade debt securities, known as
"junk bonds". These securities involve greater volatility of price and risk of
principal and income than higher quality debt securities. The Fund is managed
to maximize total return by taking advantage of market developments, yield
disparities and variations in the creditworthiness of issuers. The Fund may
invest in debt securities with a range of maturities from short to long term.
The Fund may invest in U.S. dollar-denominated and non-U.S. dollar-denominated
foreign fixed-income securities. The Fund may buy and sell foreign currencies
principally for the purpose of preserving the value of foreign securities or in
anticipation of purchasing foreign 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 may use 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. For hedging
purposes, the Fund may enter into forward currency exchange contracts and
options on foreign currencies.
Investment Results
The table on page 4 shows the Fund's performance compared to its new benchmark,
the Lehman Brothers (LB) High Yield 2% Issuer Cap Index, and its old benchmark,
the Credit Suisse First Boston High Yield (CSFBHY) Index, for the six- and
12-month periods ended March 31, 2007. Performance for the Lipper High Current
Yield Funds Average (the "Lipper Average") has also been included. Funds in the
Lipper Average have generally similar investment objectives to the Fund,
although some may have different investment policies and sales and management
fees.
The Fund delivered close-to-benchmark returns for the six-month period and
underperformed for the 12-month period ended March 31, 2007. The Fund
outperformed the Lipper Average, an average of similarly managed funds, for
both periods under review. Detracting from performance for the six-month period
was an overweight in the financial sector, a slightly larger than usual cash
position, and security selection within the paper/packaging, utilities and
wireless communication industries. Positive contributors to relative
performance for the six-month period included security selection within the
cable, financial and
ALLIANCEBERNSTEIN HIGH YIELD FUND o 1
housing industries, as well as the Fund's overweight in metal/mining and
wireless communications.
The Fund's underweight in the automotive sector, which outperformed, and
security selection in the paper/packaging and wireless industries detracted for
the 12-month period ended March 31, 2007. The Fund's underweight position in
lower-quality holdings also detracted from performance for both periods. In
January 2007, the Fund received proceeds resulting from the WorldCom class
action settlement. The addition of these proceeds positively impacted relative
performance for both the six- and 12-month periods.
Market Review and Investment Strategy
The high yield market, as represented by the LB High Yield 2% Issuer Cap Index,
posted a solid return of 7.02% for the six-month period ended March 31, 2007,
significantly outperforming investment-grade sectors which posted returns in a
range of only 2-3%. High yield continued to be supported by a low default risk
environment, strong investor demand for yield and a decline in new issuance.
Market volatility remained relatively subdued despite the limited spike in late
February and early March due to concerns over sub-prime mortgage delinquencies.
The bout of volatility roiled the lowest sub-prime mortgage sector but was
limited without contagion.
By quality tier, lower-rated high yield debt outperformed higher-quality debt
with CCC-rated returning 10.84%, B-rated returning 6.80% and BB-rated returning
5.42%. All industries were in positive territory with top performers including
media-cable returning 10.98%, retailers returning 10.10% and services returning
9.08%. Underperforming industries included banking returning 3.47%, home
construction returning 3.97% and energy returning 5.51%. Spreads in high yield
continued to compress during the six-month reporting period, tightening an
additional 53 basis points to end the period at 273 basis points over U.S.
Treasuries.
During the six-month reporting period, the Fund's Global Credit Investment Team
(the "Team") maintained a cautious posture, given what the Team perceived as
insufficient compensation for assuming risk and a lack of specific credit
opportunities. The Fund's quantitative analysts indicated to the Team that the
reward for assuming incremental risk is greatly diminished in times of a flat
or inverted yield curve and narrow spreads. Specific credit opportunities
remained scarce. At the same time, strong corporate profits, a low default rate
and investor demand for yield allowed high yield spreads to remain well below
their long-term average even as market and leveraged buy out risks increased.
In this environment, the Team modestly underweighted more volatile holdings and
provided thorough diversification to minimize risk.
2 o ALLIANCEBERNSTEIN HIGH YIELD FUND
Historical Performance
An Important Note About the Value of Historical Performance
The performance shown on the following pages represents past performance and
does not guarantee future results. Current performance may be lower or higher
than the performance information shown. You may obtain performance information
current to the most recent month-end by visiting www.alliancebernstein.com.
The investment return and principal value of an investment in the Fund will
fluctuate, so that your shares, when redeemed, may be worth more or less than
their original cost. You should consider the investment objectives, risks,
charges and expenses of the Fund carefully before investing. For a free copy of
the Fund's prospectus, which contains this and other information, visit our
website at www.alliancebernstein.com or call your financial advisor or
AllianceBernstein Investments at 800.227.4618. You should read the prospectus
carefully before you invest.
All fees and expenses related to the operation of the Fund have been deducted.
NAV returns do not reflect sales charges; if sales charges were reflected, the
Fund's quoted performance would be lower. SEC returns reflect the applicable
sales charges for each share class: a 4.25% maximum front-end sales charge for
Class A shares; the applicable contingent deferred sales charge for Class B
shares (4% year 1, 3% year 2, 2% year 3, 1% year 4); a 1% 1 year contingent
deferred sales charge for Class C shares. Returns for the different share
classes will vary due to different expenses associated with each class.
Performance assumes reinvestment of distributions and does not account for
taxes.
Benchmark Disclosure
Neither the unmanaged Lehman Brothers (LB) High Yield 2% Issuer Cap Index nor
the unmanaged Credit Suisse First Boston High Yield Index (CSFBHY) reflect fees
and expenses associated with the active management of a mutual fund portfolio.
The unmanaged LB High Yield 2% Issuer Cap Index covers the universe of
fixed-rate, below-investment-grade debt. Pay-in-kind (PIK) bonds, eurobonds and
debt issues from countries designated as emerging markets (e.g., Argentina,
Brazil, Venezuela, etc.) are excluded, but Canadian and global bonds (SEC
registered) of issuers in non-emerging market countries are included. Original
issue zeroes, step-up coupon structures and 144-As are also included in this
Index. The CSFBHY Index is a measure of lower-rated, fixed-income,
non-convertible U.S. dollar-denominated securities meeting certain criteria
developed by Credit Suisse, designed to enable the Index to reflect the high
yield market. For the six- and 12-month periods ended March 31, 2007, the
Lipper High Current Yield Funds Average consisted of 452 and 439 funds,
respectively. These funds have generally similar investment objectives to the
Fund, although some may have different investment policies and sales and
management fees. An investor cannot invest directly in an index or an average,
and their results are not indicative of the performance for any specific
investment, including the Fund.
A Word About Risk
The Fund can invest in foreign securities, including emerging markets, which
may magnify fluctuations due to changes in foreign exchange rates and the
possibility of substantial volatility due to political and economic
uncertainties in foreign countries. Price fluctuation in the Fund's portfolio
securities may be caused by changes in the general level of interest rates or
changes in bond credit quality ratings. Please note, as interest rates rise,
existing bond prices fall and can cause the value of an investment in the Fund
to decline. Changes in interest rates have a greater effect on bonds with
longer maturities than on those with shorter maturities. High yield bonds,
otherwise known as "junk bonds," involve a greater risk of default and price
volatility than other bonds. Investing in below-investment grade securities
presents special risks, including credit risk. Investments in the Fund are not
guaranteed because of fluctuation in the net asset value of the underlying
fixed-income related investments. Similar to direct bond ownership, bond funds
have the same interest rate, inflation and credit risks that are associated
with the underlying bonds owned by the Fund. Fund purchasers should understand
that, in contrast to owning individual bonds, there are ongoing fees and
expenses associated with owning shares of bond funds. While the Fund invests
principally in bonds and other fixed-income securities, in order to achieve its
investment objectives, the Fund may at times use certain types of investment
derivatives, such as options, futures, forwards and swaps. These instruments
involve risks different from, and in certain cases, greater than, the risks
presented by more traditional investments. These risks are fully discussed in
the Fund's prospectus.
(Historical Performance continued on next page)
ALLIANCEBERNSTEIN HIGH YIELD FUND o 3
HISTORICAL PERFORMANCE
(continued from previous page)
THE FUND VS. ITS BENCHMARK Returns
PERIODS ENDED MARCH 31, 2007 6 Months 12 Months
-------------------------------------------------------------------------------
AllianceBernstein High Yield Fund
Class A 6.96% 10.41%
Class B 6.39% 9.63%
Class C 6.59% 9.65%
Advisor Class* 6.92% 10.73%
Class R* 6.73% 10.11%
Class K* 6.80% 10.55%
Class I* 7.01% 10.77%
New benchmark: Lehman Brothers
High Yield 2% Issuer Cap Index 7.02% 10.97%
Old benchmark: Credit Suisse First Boston
High Yield Index 7.59% 11.83%
Lipper High Current Yield Funds Average 6.72% 10.07%
* Please note that these share classes are for investors purchasing shares
through accounts established under certain fee-based programs sponsored and
maintained by certain broker-dealers and financial intermediaries,
institutional pension plans and/or investment advisory clients of, and certain
other persons associated with, the Adviser and its affiliates or the Funds.
See Historical Performance and Benchmark Disclosures on previous page.
(Historical Performance continued on next page)
4 o ALLIANCEBERNSTEIN HIGH YIELD FUND
HISTORICAL PERFORMANCE
(continued from previous page)
AVERAGE ANNUAL RETURNS AS OF MARCH 31, 2007
-------------------------------------------------------------------------------
NAV Returns SEC Returns SEC Yields**
Class A Shares
1 Year 10.41% 5.70% 4.61%
5 Years 8.12% 7.18%
Since Inception* 4.59% 4.14%
Class B Shares
1 Year 9.63% 5.63% 4.09%
5 Years 7.35% 7.35%
Since Inception* 4.15% 4.15%
Class C Shares
1 Year 9.65% 8.65% 4.11%
5 Years 7.38% 7.38%
Since Inception* 3.88% 3.88%
Advisor Class Shares+
1 Year 10.73% 10.73% 5.12%
5 Years 8.43% 8.43%
Since Inception* 4.92% 4.92%
Class R Shares+
1 Year 10.11% 10.11% 4.73%
Since Inception* 5.51% 5.51%
Class K Shares+
1 Year 10.55% 10.55% 4.82%
Since Inception* 5.87% 5.87%
Class I Shares+
1 Year 10.77% 10.77% 5.28%
Since Inception* 6.13% 6.13%
* Inception dates: 4/22/97 for Class A, Class B, Class C and Advisor Class
shares; 3/1/05 for Class R, Class K and Class I shares.
** SEC yields are calculated based on SEC guidelines for the 30-day period
ended March 31, 2007.
+ These share classes are offered at net asset value (NAV) to eligible
investors and their SEC returns are the same as the NAV returns. Please
note that these share classes are for investors purchasing shares
through accounts established under certain fee-based programs sponsored
and maintained by certain broker-dealers and financial intermediaries,
institutional pension plans and/or investment advisory clients of, and
certain other persons associated with, the Adviser and its affiliates
or the Funds. The inception dates for these share classes are listed
above.
See Historical Performance disclosures on page 3.
(Historical Performance continued on next page)
ALLIANCEBERNSTEIN HIGH YIELD FUND o 5
HISTORICAL PERFORMANCE
(continued from previous page)
SEC AVERAGE ANNUAL RETURNS (WITH ANY APPLICABLE SALES CHARGES) AS OF THE MOST
RECENT CALENDAR QUARTER-END (MARCH 31, 2007)
-------------------------------------------------------------------------------
SEC Returns
Class A Shares
1 Year 5.70%
5 Years 7.18%
Since Inception* 4.14%
Class B Shares
1 Year 5.63%
5 Years 7.35%
Since Inception* 4.15%
Class C Shares
1 Year 8.65%
5 Years 7.38%
Since Inception* 3.88%
Advisor Class Shares+
1 Year 10.73%
5 Years 8.43%
Since Inception* 4.92%
Class R Shares+
1 Year 10.11%
Since Inception* 5.51%
Class K Shares+
1 Year 10.55%
Since Inception* 5.87%
Class I Shares+
1 Year 10.77%
Since Inception* 6.13%
* Inception dates: 4/22/97 for Class A, Class B, Class C and Advisor Class
shares; 3/1/05 for Class R, Class K and Class I shares.
+ Please note that these share classes are for investors purchasing shares
through accounts established under certain fee-based programs sponsored
and maintained by certain broker-dealers and financial intermediaries,
institutional pension plans and/or investment advisory clients of, and
certain other persons associated with, the Adviser and its affiliates or
the Funds. The inception dates for these share classes are listed above.
See Historical Performance disclosures on page 3.
6 o ALLIANCEBERNSTEIN HIGH YIELD FUND
FUND EXPENSES
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments, contingent
deferred sales charges on redemptions and (2) ongoing costs, including
management fees; distribution (12b-1) fees; and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period as indicated below.
Actual Expenses
The table below provides information about actual account values and actual
expenses. You may use the information, together with the amount you invested,
to estimate the expenses that you paid over the period. Simply divide your
account value by $1,000 (for example, an $8,600 account value divided by $1,000
= 8.6), then multiply the result by the number under the heading entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
Hypothetical Example for Comparison Purposes
The table below also provides information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an assumed
annual rate of return of 5% before expenses, which is not the Fund's actual
return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds by comparing this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), or contingent deferred sales charges on redemptions.
Therefore, the hypothetical example is useful in comparing ongoing costs only,
and will not help you determine the relative total costs of owning different
funds. In addition, if these transactional costs were included, your costs
would have been higher.
<TABLE>
<CAPTION>
Beginning Ending
Account Value Account Value Expenses Paid
October 1, 2006 March 31, 2007 During Period*
------------------------ ----------------------- -----------------------
Actual Hypothetical Actual Hypothetical** Actual Hypothetical
--------- ------------ --------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Class A $1,000 $1,000 $1,069.61 $1,018.95 $6.19 $6.04
Class B $1,000 $1,000 $1,063.93 $1,015.31 $9.93 $9.70
Class C $1,000 $1,000 $1,065.86 $1,015.41 $9.84 $9.60
Advisor
Class $1,000 $1,000 $1,069.19 $1,020.44 $4.64 $4.53
Class R $1,000 $1,000 $1,067.27 $1,018.40 $6.75 $6.59
Class K $1,000 $1,000 $1,067.96 $1,018.90 $6.24 $6.09
Class I $1,000 $1,000 $1,070.13 $1,021.04 $4.03 $3.93
</TABLE>
* Expenses are equal to the classes' annualized expense ratios of 1.20%,
1.93%, 1.91%, 0.90%, 1.31%, 1.21% and 0.78%, respectively, multiplied by
the average account value over the period, multiplied by 182/365 (to
reflect the one-half year period).
** Assumes 5% return before expenses.
ALLIANCEBERNSTEIN HIGH YIELD FUND o 7
PORTFOLIO SUMMARY
March 31, 2007 (unaudited)
PORTFOLIO STATISTICS
Net Assets ($mil): $203.2
[PIE CHART OMITTED]
INDUSTRY BREAKDOWN*
o 13.0% Communications-
Telecommunications
o 12.0% Communications-Media
o 10.1% Basic Industry
o 9.0% Consumer Non-Cyclical
o 8.4% Consumer Cyclical-Other
o 8.2% Electric
o 7.5% Consumer Cyclical-Automotive
o 7.0% Capital Goods
o 5.2% Technology
o 3.5% Natural Gas
o 2.2% Energy
o 2.0% Consumer Cyclical-Retail
o 5.3% Structure Note
o 6.0% Other
o 0.6% Short-Term
* All data are as of March 31, 2007. The Fund's industry breakdown is
expressed as a percentage of total investments and may vary over time.
"Other" represents less than 2.0% weightings in the following industries:
brokerage, consumer cyclical-restaurants, insurance, other industrial,
real estate investment trusts, services, transportation-airlines,
transportation-services and warrants.
Please note: The industry classifications presented herein are based on
the industry categorization methodology of the Adviser.
8 o ALLIANCEBERNSTEIN HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS
March 31, 2007 (unaudited)
Principal
Amount
Company (000) U.S. $ Value
-------------------------------------------------------------------------------
CORPORATES-NON-INVESTMENT GRADES-90.9%
Industrial-72.9%
Basic-8.7%
AK Steel Corp.
7.875%, 2/15/09(a) $ 428 $ 428,000
Arch Western Finance LLC
6.75%, 7/01/13(a) 450 442,687
Citigroup (JSC Severstal)
Series REGS
9.25%, 4/19/14(a)(b) 1,254 1,357,480
Equistar Chemicals Funding LP
10.125%, 9/01/08(a) 758 797,795
10.625%, 5/01/11(a) 649 684,695
Evraz Group, SA
8.25%, 11/10/15(a)(b) 860 880,425
Freeport-McMoRan Copper & Gold, Inc.
8.375%, 4/01/17(a) 1,590 1,719,188
10.125%, 2/01/10(a) 704 740,960
Georgia-Pacific Corp.
7.00%, 1/15/15(a)(b) 440 442,200
7.125%, 1/15/17(a)(b) 525 526,313
Hexion US Finance Corp./Hexion Nova
Scotia Finance ULC
9.75%, 11/15/14(a)(b) 320 335,600
9.86%, 11/15/14(a)(b)(c) 320 328,000
Huntsman International LLC
7.875%, 11/15/14(a)(b) 535 553,056
Ineos Group Holdings PLC
8.50%, 2/15/16(a)(b) 855 818,663
Lyondell Chemical Company
8.00%, 9/15/14(a) 430 450,425
8.25%, 9/15/16(a) 1,430 1,530,100
The Mosaic Co.
7.625%, 12/01/16(a)(b) 1,455 1,535,025
Nell AF S.a.r.l.
8.375%, 8/15/15(a)(b) 774 806,895
NewMarket Corp.
7.125%, 12/15/16(a)(b) 445 442,775
NewPage Corp.
10.00%, 5/01/12(a) 533 582,969
Peabody Energy Corp.
Series B
6.875%, 3/15/13(a) 1,550 1,577,125
Rhodia SA
8.875%, 6/01/11(a) 669 697,432
------------
17,677,808
ALLIANCEBERNSTEIN HIGH YIELD FUND o 9
Principal
Amount
Company (000) U.S. $ Value
-------------------------------------------------------------------------------
Capital Goods-6.9%
Alion Science and Technology Corp.
10.25%, 2/01/15(a)(b) $ 115 $ 118,450
Allied Waste North America, Inc.
6.375%, 4/15/11(a) 977 974,557
6.875%, 6/01/17(a) 225 225,563
Series B
7.125%, 5/15/16(a) 1,214 1,235,245
7.375%, 4/15/14(a) 345 350,175
Associated Materials, Inc.
11.25%, 3/01/14(a)(d) 1,195 839,487
Berry Plastics Holding Corp.
8.875%, 9/15/14(a) 755 771,988
Bombardier, Inc.
8.00%, 11/15/14(a)(b) 1,060 1,091,800
Case New Holland, Inc.
7.125%, 3/01/14(a) 1,010 1,050,400
9.25%, 8/01/11(a) 632 663,600
Covalence Specialty Materials Corp.
10.25%, 3/01/16(a)(b) 370 370,000
Crown Americas
7.625%, 11/15/13(a) 805 828,144
Goodman Global Holdings, Inc.
7.875%, 12/15/12(a) 578 580,890
L-3 Communications Corp.
5.875%, 1/15/15(a) 667 647,824
Owens Brockway Glass Container, Inc.
8.875%, 2/15/09(a) 1,518 1,548,360
Russell-Stanley Holdings, Inc.
9.00%, 11/30/08 (e)(f)(g) 633 79,305
Trinity Industries, Inc.
6.50%, 3/15/14(a) 1,240 1,227,600
United Rentals North America, Inc.
7.00%, 2/15/14(a) 225 224,437
7.75%, 11/15/13(a) 1,205 1,238,137
------------
14,065,962
Communications - Media-11.3%
Allbritton Communications Co.
7.75%, 12/15/12(a) 742 760,550
Cablevision Systems Corp.
Series B
8.00%, 4/15/12(a) 1,193 1,210,895
CCH I Holdings LLC
11.75%, 5/15/14(a) 3,286 3,146,345
Clear Channel Communications, Inc.
5.50%, 9/15/14(a) 1,224 1,083,616
5.75%, 1/15/13(a) 801 751,074
CSC Holdings, Inc.
6.75%, 4/15/12(a)(b) 1,506 1,494,705
Dex Media East LLC
12.125%, 11/15/12(a) 570 623,438
10 o ALLIANCEBERNSTEIN HIGH YIELD FUND
Principal
Amount
Company (000) U.S. $ Value
-------------------------------------------------------------------------------
Dex Media West LLC
Series B
8.50%, 8/15/10(a) $ 331 $ 346,309
DIRECTV Holdings LLC
6.375%, 6/15/15(a) 1,562 1,483,900
EchoStar DBS Corp.
6.375%, 10/01/11(a) 690 694,313
7.125%, 2/01/16(a) 390 402,675
Insight Communications Co., Inc.
12.25%, 2/15/11(a) 580 606,100
Insight Midwest LP
9.75%, 10/01/09(a) 425 431,906
Intelsat Bermuda, Ltd.
8.625%, 1/15/15(a) 672 719,040
11.25%, 6/15/16(b) 1,514 1,718,390
Lamar Media Corp.
6.625%, 8/15/15(a) 265 258,375
Liberty Media Corp.
5.70%, 5/15/13(a) 300 287,631
7.875%, 7/15/09(a) 237 248,637
8.25%, 2/01/30(a) 315 314,908
Quebecor Media, Inc.
7.75%, 3/15/16(a) 1,460 1,500,150
Rainbow National Services LLC
8.75%, 9/01/12(a)(b) 441 469,114
10.375%, 9/01/14(a)(b) 411 459,806
RH Donnelley Corp.
Series A-2
6.875%, 1/15/13(a) 681 662,272
Sirius Satellite Radio, Inc.
9.625%, 8/01/13(a) 380 381,425
Univision Communications, Inc.
7.85%, 7/15/11(a) 540 564,300
WDAC Subsidiary Corp.
8.375%, 12/01/14(a)(b) 583 601,947
WMG Holdings Corp.
9.50%, 12/15/14(a)(d) 1,695 1,296,675
XM Satellite Radio, Inc.
9.75%, 5/01/14(a) 465 469,069
------------
22,987,565
Communications - Telecommunications-9.7%
American Tower Corp.
7.125%, 10/15/12(a) 1,483 1,527,490
Citizens Communications Co.
6.25%, 1/15/13(a) 1,038 1,030,215
Cricket Communications, Inc.
9.375%, 11/01/14(a)(b) 1,110 1,176,600
Digicel Ltd.
9.25%, 9/01/12(a)(b) 997 1,051,835
ALLIANCEBERNSTEIN HIGH YIELD FUND o 11
Principal
Amount
Company (000) U.S. $ Value
-------------------------------------------------------------------------------
Dobson Cellular Systems, Inc.
Series B
8.375%, 11/01/11(a) $ 396 $ 420,255
Dobson Communications Corp.
8.875%, 10/01/13(a) 385 396,550
Idearc, Inc.
8.00%, 11/15/16(a)(b) 950 977,313
Inmarsat Finance PLC
7.625%, 6/30/12(a) 1,029 1,072,733
10.375%, 11/15/12(a)(d) 676 638,820
Level 3 Financing, Inc.
9.25%, 11/01/14(a)(b) 1,425 1,464,187
12.25%, 3/15/13(a) 1,350 1,579,500
Mobile Telesystems Finance SA
8.00%, 1/28/12(a)(b) 1,318 1,393,785
PanAmSat Corp.
9.00%, 8/15/14(a) 678 733,935
Qwest Capital Funding, Inc.
7.25%, 2/15/11(a) 2,926 2,995,492
Qwest Corp.
6.875%, 9/15/33(a) 1,045 1,008,425
Rural Cellular Corp.
9.75%, 1/15/10(a) 761 783,830
Time Warner Telecom Holdings, Inc.
9.25%, 2/15/14(a) 540 577,800
Windstream Corp.
8.125%, 8/01/13(a) 466 504,445
8.625%, 8/01/16(a) 398 435,312
------------
19,768,522
Consumer Cyclical - Automotive-7.4%
Ford Motor Co.
7.45%, 7/16/31(a) 2,043 1,580,771
Ford Motor Credit Co.
4.95%, 1/15/08(a) 892 881,319
7.00%, 10/01/13(a) 1,265 1,175,928
8.11%, 1/13/12(a)(c) 1,505 1,471,172
General Motors Acceptance Corp.
6.875%, 9/15/11(a) 1,872 1,873,814
General Motors Corp.
8.25%, 7/15/23(a) 2,025 1,822,500
8.375%, 7/15/33(a) 1,890 1,696,275
The Goodyear Tire & Rubber Co.
8.625%, 12/01/11(a)(b) 265 284,875
9.00%, 7/01/15(a) 990 1,086,525
Keystone Automotive Operations, Inc.
9.75%, 11/01/13(a) 494 480,415
Lear Corp.
Series B
8.50%, 12/01/13(a) 225 217,406
8.75%, 12/01/16(a) 1,470 1,403,850
12 o ALLIANCEBERNSTEIN HIGH YIELD FUND
Principal
Amount
Company (000) U.S. $ Value
-------------------------------------------------------------------------------
Tenneco, Inc.
8.625%, 11/15/14(a) $ 355 $ 370,088
Visteon Corp.
7.00%, 3/10/14(a) 850 743,750
------------
15,088,688
Consumer Cyclical - Other-8.0%
Broder Brothers Co.
Series B
11.25%, 10/15/10(a) 405 413,100
Greektown Holdings LLC
10.75%, 12/01/13(a)(b) 395 422,650
Harrah's Operating Co. Inc.
5.625%, 6/01/15(a) 1,930 1,664,625
Host Hotels & Resorts LP
6.875%, 11/01/14(a) 235 238,525
Host Marriott LP
Series Q
6.75%, 6/01/16(a) 1,530 1,541,475
Levi Strauss & Co.
10.11%, 4/01/12(a)(c) 502 512,040
MGM Mirage
6.625%, 7/15/15(a) 1,812 1,739,520
7.625%, 1/15/17(a) 320 324,000
8.375%, 2/01/11(a) 1,261 1,327,203
Mohegan Tribal Gaming Authority
7.125%, 8/15/14(a) 680 690,200
NCL Corp.
10.625%, 7/15/14(a) 688 681,120
Penn National Gaming, Inc.
6.875%, 12/01/11(a) 829 829,000
Riviera Holdings Corp.
11.00%, 6/15/10(a) 1,202 1,253,085
Six Flags, Inc.
9.625%, 6/01/14(a) 785 737,900
Turning Stone Resort Casino Enterprise
9.125%, 12/15/10(a)(b) 848 860,720
Universal City Development Partners
11.75%, 4/01/10(a) 727 769,711
William Lyon Homes, Inc.
10.75%, 4/01/13(a) 564 544,260
Wynn Las Vegas LLC/Corp.
6.625%, 12/01/14(a) 1,590 1,574,100
------------
16,123,234
Consumer Cyclical - Restaurants-0.1%
Sbarro, Inc.
10.375%, 2/01/15(a)(b) 180 187,200
Consumer Cyclical - Retailers-2.0%
The Bon-Ton Dept Stores, Inc.
10.25%, 3/15/14(a) 645 692,569
ALLIANCEBERNSTEIN HIGH YIELD FUND o 13
Principal
Amount
Company (000) U.S. $ Value
-------------------------------------------------------------------------------
Burlington Coat Factory Warehouse Corp.
11.125%, 4/15/14(a) $ 280 $ 285,600
Couche-Tard Inc.
7.50%, 12/15/13(a) 729 749,047
GSC Holdings Corp.
8.00%, 10/01/12(a) 1,185 1,256,100
Rite Aid Corp.
6.875%, 8/15/13(a) 630 554,400
9.25%, 6/01/13(a) 450 447,750
------------
3,985,466
Consumer Non-Cyclical-8.1%
Aramark Corp.
8.50%, 2/01/15(a)(b) 1,055 1,097,200
Concentra Operating Corp.
9.125%, 6/01/12(a) 566 604,205
DaVita, Inc.
7.25%, 3/15/15(a) 731 739,224
Elan Finance PLC/Elan Finance Corp.
7.75%, 11/15/11(a) 1,610 1,581,825
Hanger Orthopedic Group, Inc.
10.25%, 6/01/14(a) 420 446,250
HCA, Inc.
6.375%, 1/15/15(a) 1,007 859,726
6.50%, 2/15/16(a) 795 676,744
6.75%, 7/15/13(a) 880 811,800
10.375%, 11/15/16(a)(b)(h) 1,275 1,377,000
Healthsouth Corp.
10.75%, 6/15/16(a)(b) 655 712,313
IASIS Healthcare Corp.
8.75%, 6/15/14(a) 751 777,285
Jostens IH Corp.
7.625%, 10/01/12(a) 577 587,097
Reynolds American, Inc.
7.25%, 6/01/12-6/01/13(a) 2,035 2,132,460
7.625%, 6/01/16(a) 820 872,341
Select Medical Corp.
7.625%, 2/01/15(a) 643 578,700
Stater Brothers Holdings
8.125%, 6/15/12(a) 336 346,080
Tenet Healthcare Corp.
7.375%, 2/01/13(a) 725 673,344
9.875%, 7/01/14(a) 415 419,150
Universal Hospital Services, Inc.
10.125%, 11/01/11(a) 661 702,312
Ventas Realty LP/CAP CRP
6.75%, 4/01/17(a) 429 444,015
------------
16,439,071
Energy-2.2%
Chesapeake Energy Corp.
7.50%, 9/15/13(a) 410 428,450
7.75%, 1/15/15(a) 1,251 1,304,168
14 o ALLIANCEBERNSTEIN HIGH YIELD FUND
Principal
Amount
Company (000) U.S. $ Value
-------------------------------------------------------------------------------
Compagnie Generale de
Geophysique-Veritas
7.50%, 5/15/15(a) $ 25 $ 25,750
7.75%, 5/15/17(a) 70 72,975
Complete Production Services, Inc.
8.00%, 12/15/16(a)(b) 390 399,750
Hilcorp Energy I LP/Hilcorp Finance Co.
7.75%, 11/01/15(a)(b) 280 275,100
PetroHawk Energy Corp.
Series WI
9.125%, 7/15/13(a) 550 585,750
Range Resources Corp.
7.50%, 5/15/16(a) 595 612,850
Tesoro Corp.
6.25%, 11/01/12(a) 730 740,037
------------
4,444,830
Other Industrial-1.3%
FastenTech, Inc.
11.50%, 5/01/11(a) 460 488,175
Mueller Group, Inc.
10.00%, 5/01/12(a) 505 545,400
RBS Global, Inc. and Rexnord Corp.
9.50%, 8/01/14(a) 600 624,000
11.75%, 8/01/16(a) 330 354,338
Sensus Metering Systems, Inc.
8.625%, 12/15/13(a) 580 587,250
------------
2,599,163
Services-0.7%
Avis Budget Car Rental
7.75%, 5/15/16(a)(b) 720 734,400
Horizon Lines LLC
9.00%, 11/01/12(a) 491 515,550
West Corp.
9.50%, 10/15/14(a)(b) 215 222,525
------------
1,472,475
Technology-5.1%
Amkor Technology, Inc.
9.25%, 6/01/16(a) 925 964,313
Avago Technologies Finance
10.375%, 12/01/13(a) 470 508,775
CA, Inc.
4.75%, 12/01/09(a)(b) 560 549,988
Flextronics International Ltd.
6.50%, 5/15/13(a) 736 728,640
Freescale Semiconductor, Inc.
8.875%, 12/15/14(a)(b) 1,500 1,501,875
10.125%, 12/15/16(a)(b) 400 401,000
Iron Mountain, Inc.
6.625%, 1/01/16(a) 775 747,875
Nortel Networks Ltd.
10.125%, 7/15/13(a)(b) 645 707,887
ALLIANCEBERNSTEIN HIGH YIELD FUND o 15
Principal
Amount
Company (000) U.S. $ Value
-------------------------------------------------------------------------------
NXP BV/NXP Funding LLC
8.11%, 10/15/13(a)(b)(c) $ 470 $ 483,512
9.50%, 10/15/15(a)(b) 215 221,987
Seagate Technology HDD Holdings
6.375%, 10/01/11(a) 1,205 1,205,000
6.80%, 10/01/16(a) 502 504,510
Serena Software, Inc.
Series WI
10.375%, 3/15/16(a) 425 459,000
Sungard Data Systems, Inc.
9.125%, 8/15/13(a) 1,311 1,406,048
------------
10,390,410
Transportation - Airlines-0.8%
AMR Corp.
9.00%, 8/01/12(a) 664 697,200
Continental Airlines, Inc.
8.75%, 12/01/11 715 700,700
Series RJO3
7.875%, 7/02/18(a) 229 238,386
------------
1,636,286
Transportation - Services-0.6%
Hertz Corp.
8.875%, 1/01/14(a) 555 598,013
10.50%, 1/01/16(a) 545 621,300
------------
1,219,313
------------
148,085,993
Utility-11.1%
Electric-8.1%
The AES Corp.
7.75%, 3/01/14(a) 1,520 1,596,000
9.00%, 5/15/15(a)(b) 399 426,431
Allegheny Energy Supply
7.80%, 3/15/11(a) 735 780,937
8.25%, 4/15/12(a)(b) 1,040 1,138,800
Aquila, Inc.
14.875%, 7/01/12(a) 629 819,272
CMS Energy Corp.
8.50%, 4/15/11(a) 485 527,438
Dynegy Holdings, Inc.
8.375%, 5/01/16(a) 875 910,000
Dynegy-Roseton Danskammer
Series B
7.67%, 11/08/16(a) 1,129 1,196,740
Edison Mission Energy
7.50%, 6/15/13(a) 1,080 1,115,100
7.75%, 6/15/16(a) 455 474,338
Mirant Americas Generation LLC
8.50%, 10/01/21(a) 700 710,500
16 o ALLIANCEBERNSTEIN HIGH YIELD FUND
Principal
Amount
Company (000) U.S. $ Value
-------------------------------------------------------------------------------
NRG Energy, Inc.
7.25%, 2/01/14(a) $ 250 $ 256,250
7.375%, 2/01/16-1/15/17(a) 2,570 2,638,800
Reliant Energy, Inc.
6.75%, 12/15/14(a) 437 461,581
9.50%, 7/15/13(a) 851 926,526
Sierra Pacific Resources
8.625%, 3/15/14(a) 535 578,726
TXU Corp.
Series P
5.55%, 11/15/14(a) 1,141 1,010,559
Series Q
6.50%, 11/15/24(a) 1,023 862,208
------------
16,430,206
Natural Gas-3.0%
El Paso Corp.
7.375%, 12/15/12(a) 735 786,450
El Paso Production Holding Co.
7.75%, 6/01/13(a) 940 982,300
Northwest Pipeline Corp.
8.125%, 3/01/10(a) 691 719,075
Regency Energy Partners
8.375%, 12/15/13(a)(b) 835 851,700
Williams Cos, Inc.
7.625%, 7/15/19(a) 1,775 1,930,313
7.875%, 9/01/21(a) 837 920,700
------------
6,190,538
------------
22,620,744
Non Corporate Sectors-5.2%
Structured Notes-5.2%
Racers SER 06-6
5.30%, 5/01/07(a)(b)(c) 9,935 10,519,724
Financial Institutions-1.7%
Brokerage-1.3%
E*Trade Financial Corp.
7.375%, 9/15/13(a) 525 548,625
7.875%, 12/01/15(a) 1,417 1,528,589
8.00%, 6/15/11(a) 465 489,412
------------
2,566,626
Insurance-0.4%
Crum & Forster Holdings Corp.
10.375%, 6/15/13(a) 465 502,200
Liberty Mutual Group, Inc.
7.80%, 3/15/37(a)(b) 405 394,863
------------
897,063
------------
3,463,689
Total Corporates - Non-Investment Grades
(cost $188,039,304) 184,690,150
ALLIANCEBERNSTEIN HIGH YIELD FUND o 17
Principal
Amount
Company (000) U.S. $ Value
-------------------------------------------------------------------------------
CORPORATES - INVESTMENT GRADES-5.1%
Industrial-4.4%
Basic-1.3%
International Steel Group, Inc.
6.50%, 4/15/14(a) $ 1,580 $ 1,645,175
Ispat Inland ULC
9.75%, 4/01/14(a) 789 870,758
------------
2,515,933
Communications - Media-0.5%
Rogers Cable, Inc.
6.75%, 3/15/15(a) 1,028 1,063,980
Communications - Telecommunications-2.2%
Mobifon Holdings BV
12.50%, 7/31/10(a) 2,105 2,278,662
Rogers Wireless, Inc.
7.25%, 12/15/12(a) 739 789,806
7.50%, 3/15/15(a) 1,248 1,352,520
------------
4,420,988
Consumer Non-Cyclical-0.4%
Cadbury Schweppes US Finance LLC
5.125%, 10/01/13(a)(b) 395 382,184
Coventry Health Care, Inc.
5.875%, 1/15/12(a) 452 459,205
------------
841,389
------------
8,842,290
Financial Institutions-0.3%
Insurance-0.3%
Liberty Mutual Group, Inc.
5.75%, 3/15/14(a)(b) 660 658,199
Utility-0.4%
Natural Gas-0.4%
Tennessee Gas Pipeline Co.
7.00%, 10/15/28(a) 800 856,533
Total Corporates - Investment Grades
(cost $9,961,084) 10,357,022
EMERGING MARKETS - NON-INVESTMENT
GRADES-1.6%
Industrial-1.6%
Communications - Telecommunications-0.9%
Kyivstar
10.375%, 8/17/09(a)(b) 1,663 1,793,961
Consumer Cyclical - Other-0.4%
Royal Caribbean Cruises Ltd.
8.75%, 2/02/11(a) 739 809,200
18 o ALLIANCEBERNSTEIN HIGH YIELD FUND
Shares or
Principal
Amount
Company (000) U.S. $ Value
-------------------------------------------------------------------------------
Consumer Non-Cyclical-0.3%
Foodcorp Ltd.
8.875%, 6/15/12(a)(b) EUR 463 $ 658,699
Total Emerging Markets - Non-Investment
Grades (cost $3,021,318) 3,261,860
NON-CONVERTIBLE
PREFERRED STOCKS-0.4%
Financial Institutions-0.4%
Sovereign REIT
12.00%(a)(b) 501 779,525
Industrial-0.0%
ION Media Networks, Inc. 0 3,198
Total Non-Convertible Preferred Stocks
(cost $475,184) 782,723
COMMON STOCKS-0.0%
Consumer Services-0.0%
Miscellaneous-0.0%
Phase Metrics (e)(i)
(cost $1,258,040) 126,418 1,264
WARRANTS-0.0%
PLIANT Corp., expiring 6/01/10 (e)(f)(i)
(cost $7,317) 200 2
SHORT-TERM INVESTMENTS-0.6%
Time Deposit-0.6%
The Bank of New York
4.25%, 4/02/07
(cost $1,298,000) $ 1,298 $ 1,298,000
Total Investments-98.6%
(cost $204,060,247) 200,391,021
Other assets less liabilities-1.4% 2,819,695
Net Assets-100.0% $203,210,716
FORWARD EXCHANGE CURRENCY CONTRACT (see Note D)
U.S. $
Contract Value on U.S. $ Value
Amount Origination at March 31, Unrealized
(000) Date 2007 Depreciation
-----------------------------------------------------------------------------
Sale Contracts:
Euro settling 5/29/07 475 $ 635,511 $ 636,036 $ (525)
ALLIANCEBERNSTEIN HIGH YIELD FUND o 19
(a) Position, or a portion thereof, has been segregated to collateralize
forward currency exchange contracts. The aggregate market value of these
securities amounted to $197,294,060.
(b) Security is exempt from registration under Rule 144A of the Securities
Act of 1933. These securities are considered liquid and may be resold in
transactions exempt from registration, normally to qualified institutional
buyers. At March 31, 2007, the aggregate market value of these securities
amounted to $48,458,431 or 23.8% of net assets.
(c) Floating Rate Security. Stated interest rate was in effect at March 31,
2007.
(d) Indicates a security that has a zero coupon that remains in effect until a
predetermined date at which time the stated coupon rate becomes effective
until final maturity.
(e) Illiquid security, valued at fair value. (see note A)
(f) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. These securities, which represent 0.04% of net assets as of March
31, 2007, are considered illiquid and restricted (see notes A & E).
Acquisition Acquisition Market Percentage of
Restricted Securities Date Cost Value Net Assets
-------------------------------------------------------------------------------
Russell-Stanley 2/10/99-5/31/05 $7,530,199 $79,305 0.04%
Holdings, Inc.
9.00%, 11/30/08
Pliant Corp.-warrants 10/04/04 7,317 2 0.00
Expiring 6/01/10
(g) Security is in default and is non-income producing.
(h) Pay-In-Kind Payments (PIK).
(i) Non-income producing security.
Currency Abbreviations:
EUR - Euro Dollar
See notes to financial statements.
20 o ALLIANCEBERNSTEIN HIGH YIELD FUND
STATEMENT OF ASSETS & LIABILITIES
March 31, 2007 (unaudited)
Assets
Investments in securities, at value (cost $204,060,247) $200,391,021
Interest receivable 4,093,592
Receivable for capital stock sold 3,121,472
Total assets 207,606,085
Liabilities
Due to custodian 2,472
Unrealized depreciation of forward currency exchange
contracts 525
Payable for capital stock redeemed 3,257,651
Dividends payable 326,655
Distribution fee payable 120,480
Advisory fee payable 89,779
Payable for investment securities purchased 43,598
Transfer Agent fee payable 24,535
Accrued expenses 529,674
Total liabilities 4,395,369
Net Assets $203,210,716
Composition of Net Assets
Capital stock, at par $ 33,784
Additional paid-in capital 554,734,896
Distributions in excess of net investment income (444,165)
Accumulated net realized loss on investment and foreign
currency transactions (347,444,344)
Net unrealized depreciation of investments and foreign
currency denominated assets and liabilities (3,669,455)
$203,210,716
Net Asset Value Per Share--21 billion shares of capital stock authorized,
$.001 par value
Shares Net Asset
Class Net Assets Outstanding Value
-----------------------------------------------------------
A $92,072,245 15,305,908 $6.02*
B $71,924,507 11,962,117 $6.01
C $34,446,102 5,725,401 $6.02
Advisor $ 4,703,045 779,843 $6.03
R $ 9,800 1,630 $6.01
K $ 45,321 7,531 $6.02
I $ 9,696 1,613 $6.01
* The maximum offering price per share for Class A shares was $6.29 which
reflects a sales charge of 4.25%.
See notes to financial statements.
ALLIANCEBERNSTEIN HIGH YIELD FUND o 21
STATEMENT OF OPERATIONS
Six Months Ended March 31, 2007 (unaudited)
Investment Income
Interest $7,999,203
Dividends 101,700 $8,100,903
Expenses
Advisory fee 531,901
Distribution fee--Class A 130,680
Distribution fee--Class B 426,699
Distribution fee--Class C 178,947
Distribution fee--Class R 24
Distribution fee--Class K 231
Transfer agency--Class A 60,987
Transfer agency--Class B 71,262
Transfer agency--Class C 26,921
Transfer agency--Advisor Class 3,017
Transfer agency--Class R 4
Transfer agency--Class K 180
Transfer agency--Class I 1
Custodian 71,474
Administrative 48,784
Legal 45,210
Audit 42,166
Registration 40,904
Directors' fees 19,253
Printing 17,175
Miscellaneous 2,383
Total expenses 1,718,203
Less: expense offset arrangement
(see Note B) (8,457)
Net expenses 1,709,746
Net investment income 6,391,157
Realized and Unrealized Gain (Loss)
on Investment and Foreign Currency
Transactions
Net realized gain (loss) on:
Investment transactions 2,625,972
Foreign currency transactions (27,724)
Net change in unrealized
appreciation/depreciation of:
Investments 4,677,355
Foreign currency denominated
assets and liabilities (740)
Net gain on investment and foreign
currency transactions 7,274,863
Net Increase in Net Assets from
Operations $13,666,020
See notes to financial statements.
22 o ALLIANCEBERNSTEIN HIGH YIELD FUND
STATEMENT OF CHANGES IN NET ASSETS
Six Months
Ended
March 31, Year Ended
2007 September 30,
(unaudited) 2006
-------------------------------------------------------------------------------
Increase (Decrease) in Net Assets
from Operations
Net investment income $ 6,391,157 $16,685,295
Net realized gain (loss) on investment and
foreign currency transactions 2,598,248 (3,511,186)
Net change in unrealized
appreciation/depreciation of
investments and foreign currency
denominated assets and liabilities 4,676,615 (2,092,658)
Net increase in net assets from
operations 13,666,020 11,081,451
Dividends to Shareholders from
Net investment income
Class A (2,788,774) (5,751,992)
Class B (2,431,299) (7,746,352)
Class C (1,021,303) (2,615,992)
Advisor Class (143,836) (420,165)
Class R (306) (658)
Class K (6,075) (1,859)
Class I (329) (710)
Capital Stock Transactions
Net decrease (16,776,034) (74,808,926)
Total decrease (9,501,936) (80,265,203)
Net Assets
Beginning of period 212,712,652 292,977,855
End of period (including distributions in
excess of net investment income of
($444,165) and ($443,400),
respectively) $203,210,716 $212,712,652
See notes to financial statements.
ALLIANCEBERNSTEIN HIGH YIELD FUND o 23
NOTES TO FINANCIAL STATEMENTS
March 31, 2007 (unaudited)
NOTE A
Significant Accounting Policies
AllianceBernstein High Yield Fund, Inc. (the "Fund") was incorporated in the
state of Maryland on December 19, 1996 as a diversified, open-end management
investment company. The Fund offers Class A, Class B, Class C, Advisor Class,
Class R, Class K and Class I shares. Class A shares are sold with a front-end
sales charge of up to 4.25% for purchases not exceeding $1,000,000. With
respect to purchases of $1,000,000 or more, Class A shares redeemed within one
year of purchase may be subject to a contingent deferred sales charge of 1%.
Class B shares are currently sold with a contingent deferred sales charge which
declines from 4% to zero depending on the period of time the shares are held.
Class B shares will automatically convert to Class A shares eight years after
the end of the calendar month of purchase. Class C shares are subject to a
contingent deferred sales charge of 1% on redemptions made within the first
year after purchase. Class R and Class K shares are sold without an initial or
contingent deferred sales charge. Advisor Class and Class I shares are sold
without an initial or contingent deferred sales charge and are not subject to
ongoing distribution expenses. All seven classes of shares have identical
voting, dividend, liquidation and other rights, except that the classes bear
different distribution and transfer agency expenses. Each class has exclusive
voting rights with respect to its distribution plan, if any. The financial
statements have been prepared in conformity with U.S. generally accepted
accounting principles, which require management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities in the
financial statements and amounts of income and expenses during the reporting
period. Actual results could differ from those estimates. The following is a
summary of significant accounting policies followed by the Fund.
1. Security Valuation
Portfolio securities are valued at their current market value determined on the
basis of market quotations or, if market quotations are not readily available
or are deemed unreliable, at "fair value" as determined in accordance with
procedures established by and under the general supervision of the Fund's Board
of Directors.
In general, the market value of securities which are readily available and
deemed reliable are determined as follows. Securities listed on a national
securities exchange (other than securities listed on The NASDAQ Stock Market,
Inc. ("NASDAQ")) or on a foreign securities exchange are valued at the last
sale price at the close of the exchange or foreign securities exchange. 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. Securities listed on more than
one exchange are valued by reference to the principal exchange on which the
securities are traded; securities listed only on NASDAQ are valued in
accordance with the NASDAQ Official Closing Price; listed put or call options
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
24 o ALLIANCEBERNSTEIN HIGH YIELD FUND
prices on that day; open futures contracts and options thereon are 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
valuation, the last available closing settlement price is used; securities
traded in the over-the-counter market, ("OTC") are valued at the mean of the
current bid and asked prices as reported by the National Quotation Bureau or
other comparable sources; 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; fixed-income securities, including mortgage backed and asset
backed securities, may be valued on the basis of prices provided by a pricing
service or at a price obtained from one or more of the major broker/dealers. In
cases where broker/dealer quotes are obtained, AllianceBernstein L.P. (the
"Adviser") may establish procedures whereby changes in market yields or spreads
are used to adjust, on a daily basis, a recently obtained quoted price on a
security; and OTC and other derivatives are valued on the basis of a quoted bid
price or spread from a major broker/dealer in such security.
Securities for which market quotations are not readily available (including
restricted securities) or are deemed unreliable are valued at fair value.
Factors considered in making this determination may include, but are not
limited to, information obtained by contacting the issuer, analysts, analysis
of the issuer's financial statements or other available documents. In addition,
the Fund may use fair value pricing for securities primarily traded in non-U.S.
markets because, 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 those securities.
2. Currency Translation
Assets and liabilities denominated in foreign currencies and commitments under
forward currency exchange contracts are translated into U.S. dollars at the
mean of the quoted bid and asked prices of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated into U.S.
dollars at the rates of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated into U.S. dollars at the rates of
exchange prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents foreign
exchange gains and losses from sales and maturities of foreign fixed income
investments, foreign currency exchange contracts, holding of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on foreign investment transactions, and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on the
Fund's books
ALLIANCEBERNSTEIN HIGH YIELD FUND o 25
and the U.S. dollar equivalent amounts actually received or paid. Net
unrealized currency gains and losses from valuing foreign currency denominated
assets and liabilities at period end exchange rates are reflected as a
component of net unrealized appreciation and depreciation of investments and
foreign currency denominated assets and liabilities.
3. Taxes
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required. The Fund may be subject to taxes imposed by countries in which it
invests. Such taxes are generally based on income and/or capital gains earned
or repatriated. Taxes are accrued and applied to net investment income, net
realized gains and net unrealized appreciation/depreciation as such income
and/or gains are earned.
4. Investment Income and Investment Transactions
Interest income is accrued daily. Dividend income is recorded on the
ex-dividend date or as soon as the Fund is informed of the dividend. Investment
transactions are accounted for on the date the securities are purchased or
sold. Investment gains and losses are determined on the identified cost basis.
The Fund amortizes premiums and accretes discounts as adjustments to interest
income.
5. Class Allocations
All income earned and expenses incurred by the Fund are borne on a pro-rata
basis by each settled class of shares, based on the proportionate interest in
the Fund represented by the shares of such class, except for class specific
expenses which are allocated to the respective class. Realized and unrealized
gains and losses are allocated among the various share classes based on their
respective net assets.
6. Dividends and Distributions
Dividends and distributions to shareholders are recorded on the ex-dividend
date. Income and capital gains distributions are determined in accordance with
federal tax regulations and may differ from those determined in accordance with
U.S. generally accepted accounting principles. To the extent these differences
are permanent, such amounts are reclassified within the capital accounts based
on their federal tax basis treatment; temporary differences do not require such
reclassification.
NOTE B
Advisory Fee and Other Transactions with Affiliates
Under the terms of the investment advisory agreement, the Fund pays the Adviser
an advisory fee at an annual rate of .50% of the first $2.5 billion, .45% of
the next $2.5 billion and .40% in excess of $5 billion, of the average daily
net
26 o ALLIANCEBERNSTEIN HIGH YIELD FUND
assets of the Fund. Prior to September 6, 2004, under the terms of an
investment advisory agreement, the Fund paid the Adviser an advisory fee at an
annual rate of .75% of the average daily net assets of the Fund. Such fee is
accrued daily and paid monthly. The Adviser has agreed to waive its fees and
bear certain expenses to the extent necessary to limit total operating expenses
on an annual basis 1.70%, 2.40%, 2.40%, 1.40%, 1.90%, 1.65%, and 1.40% of the
daily average net assets for the Class A, Class B, Class C, Advisor Class,
Class R, Class K and Class I shares, respectively. For the six months ended
March 31, 2007, there were no expenses waived by the Adviser.
Pursuant to the advisory agreement, the Adviser provides certain legal and
accounting services to the Fund. For the six months ended March 31, 2007 such
fees amounted to $48,784.
The Fund compensates AllianceBernstein Investor Services, Inc. ("ABIS"), a
wholly owned subsidiary of the Adviser, under a Transfer Agency Agreement for
providing personnel and facilities to perform transfer agency services for the
Fund. ABIS may make payments to intermediaries that provide omnibus account
services, sub-accounting services and/or networking services. Such compensation
retained by ABIS amounted to $84,048 for the six months ended March 31, 2007.
For the six months ended March 31, 2007, the Fund's expenses were reduced by
$8,457 under an expense offset arrangement with ABIS.
AllianceBernstein Investments, Inc. (the "Distributor"), a wholly-owned
subsidiary of the Adviser, serves as the distributor of the Fund's shares. The
Distributor has advised the Fund that it has retained front-end sales charges
of $3,045 from the sale of Class A shares and received $412, $30,994 and $139
in contingent deferred sales charges imposed upon redemptions by shareholders
of Class A, Class B and Class C shares, respectively, for the six months ended
March 31, 2007.
NOTE C
Distribution Services Agreement
The Fund has adopted a Distribution Services Agreement (the "Agreement")
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the
Agreement, the Fund pays distribution and servicing fees to the Distributor at
an annual rate of up to .30% of the Fund's average daily net assets
attributable to Class A shares, 1% of the Fund's average daily net assets
attributable to Class B and Class C shares, .50% of the Fund's average daily
net assets attributable to Class R shares and .25% of the Fund's average daily
net assets attributable to Class K shares. There are no distribution and
servicing fees on the Advisor Class and Class I shares. The fees are accrued
daily and paid monthly. The Agreement provides that the Distributor will use
such payments in their entirety for distrib-
ALLIANCEBERNSTEIN HIGH YIELD FUND o 27
ution assistance and promotional activities. The Distributor has incurred
expenses in excess of the distribution costs reimbursed by the Fund in the
amounts of $20,863,320, $1,861,257, $0 and $2,444 for Class B, Class C, Class R
and Class K shares, respectively; such costs may be recovered from the Fund in
future periods so long as the Agreement is in effect. In accordance with the
Agreement, there is no provision for recovery of unreimbursed distribution
costs, incurred by the Distributor, beyond the current fiscal year for Class A
shares. The Agreement also provides that the Adviser may use its own resources
to finance the distribution of the Fund's shares.
NOTE D
Investment Transactions
Purchases and sales of investment securities (excluding short-term investments)
for the six months ended March 31, 2007, were as follows:
Purchases Sales
----------------------------------------------------------------------------
Investment securities (excluding
U.S. government securities) $68,844,389 $83,256,001
U.S. government securities -0- -0-
The cost of investments for federal income tax purposes was substantially the
same as the cost for financial reporting purposes. Accordingly, gross
unrealized appreciation and unrealized depreciation (excluding foreign currency
transactions) are as follows:
Gross unrealized appreciation $ 6,544,411
Gross unrealized depreciation (10,213,637)
Net unrealized depreciation $(3,669,226)
1. Forward Currency Exchange Contracts
The Fund may enter into forward currency exchange contracts in order to hedge
its exposure to changes in foreign currency exchange rates on its foreign
portfolio holdings, to hedge certain firm purchase and sale commitments
denominated in foreign currencies and for investment purposes. A forward
currency exchange contract is a commitment to purchase or sell a foreign
currency on a future date at a negotiated forward rate. The gain or loss
arising from the difference between the original contract and the closing of
such contract would be included in net realized gain or loss on foreign
currency transactions.
Fluctuations in the value of open forward currency exchange contracts are
recorded for financial reporting purposes as unrealized appreciation and
depreciation by the Fund.
The Fund's custodian will place and maintain cash not available for investment
or other liquid assets in a separate account of the Fund having a value at
least equal
28 o ALLIANCEBERNSTEIN HIGH YIELD FUND
to the aggregate amount of the Fund's commitments under forward currency
exchange contracts entered into with respect to position hedges.
Risks may arise from the potential inability of the counterparty to meet the
terms of a contract and from unanticipated movements in the value of a foreign
currencies relative to the U.S. dollar. The face or contract amount, in U.S.
dollars reflects the total exposure the Fund has in that particular currency
contract.
NOTE E
Capital Stock
Each class consists of 3,000,000,000 authorized shares. Transactions in capital
shares for each class were as follows:
Shares Amount
--------------------------- ------------------------------
Six Months Ended Year Ended Six Months Ended Year Ended
March 31, 2007 September 30, March 31, 2007 September 30,
(unaudited) 2006 (unaudited) 2006
------------ ------------ -------------- --------------
Class A
Shares sold 2,032,298 2,657,749 $ 12,099,362 $ 15,475,719
Shares issued in
reinvestment of
dividends 246,806 481,218 1,468,690 2,788,812
Shares converted
from Class B 2,322,898 2,533,980 13,860,096 14,669,647
Shares redeemed (2,939,624) (7,703,447) (17,561,501) (44,748,960)
Net increase
(decrease) 1,662,378 (2,030,500) $ 9,866,647 $(11,814,782)
Class B
Shares sold 413,154 757,111 $ 2,485,157 $ 4,390,118
Shares issued in
reinvestment of
dividends 255,100 832,496 1,515,385 4,826,587
Shares converted
to Class A (2,323,661) (2,535,596) (13,860,096) (14,669,647)
Shares redeemed (2,389,446) (7,847,318) (14,194,820) (45,535,415)
Net decrease (4,044,853) (8,793,307) $(24,054,374) $(50,988,357)
Class C
Shares sold 217,396 1,016,695 $ 1,306,410 $ 5,883,546
Shares issued in
reinvestment of
dividends 104,476 276,188 621,210 1,601,706
Shares redeemed (834,815) (2,913,701) (4,967,277) (16,891,624)
Net decrease (512,943) (1,620,818) $ (3,039,657) $ (9,406,372)
ALLIANCEBERNSTEIN HIGH YIELD FUND o 29
Shares Amount
--------------------------- ------------------------------
Six Months Ended Year Ended Six Months Ended Year Ended
March 31, 2007 September 30, March 31, 2007 September 30,
(unaudited) 2006 (unaudited) 2006
------------ ------------ -------------- --------------
Advisor Class
Shares sold 279,213 500,249 $ 1,675,237 $ 2,928,470
Shares issued in
reinvestment of
dividends 21,863 68,251 130,418 396,772
Shares redeemed (188,931) (1,068,016) (1,131,674) (6,174,049)
Net increase
(decrease) 112,145 (499,516) $ 673,981 $ (2,848,807)
Class R
Shares sold -0- 1 $ 4 $ 3
Shares issued in
reinvestment of
dividends -0- -0- 2 -0-
Shares redeemed -0- -0- -0- -0-
Net increase -0- 1 $ 6 $ 3
Class K
Shares sold 3,480 42,892 $ 20,617 $ 248,796
Shares issued in
reinvestment of
dividends 1,036 121 6,133 699
Shares redeemed (41,593) (18) (249,391) (106)
Net increase
(decrease) (37,077) 42,995 $ (222,641) $ 249,389
Class I
Shares sold -0- -0- $ 4 $ -0-
Shares issued in
reinvestment of
dividends -0- -0- -0- -0-
Shares redeemed -0- -0- -0- -0-
Net increase -0- -0- $ 4 $ -0-
NOTE F
Risks Involved in Investing in the Fund
Interest Rate Risk and Credit Risk--Interest rate risk is the risk that
changes in interest rates will affect the value of the Fund's investments in
fixed-income debt securities such as bonds or notes. Increases in interest
rates may cause the value of the Fund's investments to decline. Credit risk is
the risk that the issuer or guarantor of a debt security, or the counterparty
to a derivative contract, will be unable or unwilling to make timely principal
and/or interest payments, or to otherwise honor its obligations. The degree of
risk for a particular security may
30 o ALLIANCEBERNSTEIN HIGH YIELD FUND
be reflected in its credit risk rating. Credit risk is greater for medium
quality and lower-rated securities. Lower-rated debt securities and similar
unrated securities (commonly known as "junk bonds") have speculative elements
or are predominantly speculative risks.
Foreign Securities Risk--Investing in securities of foreign companies or
foreign governments involves special risks which include changes in foreign
currency exchange rates and the possibility of future political and economic
developments which could adversely affect the value of such securities.
Moreover, securities of many foreign companies or foreign governments and
their markets may be less liquid and their prices more volatile than those
of comparable U.S. companies or of the U.S. government.
Indemnification Risk--In the ordinary course of business, the Fund enters into
contracts that contain a variety of indemnifications. The Fund's maximum
exposure under these arrangements is unknown. However, theFund has not had
prior claims or losses pursuant to these indemnification provisions and expects
the risk of loss thereunder to be remote.
NOTE G
Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the Fund,
participate in a $250 million revolving credit facility (the "Facility")
intended to provide short-term financing if necessary, subject to certain
restrictions in connection with abnormal redemption activity. Commitment fees
related to the Facility are paid by the participating funds and are included in
miscellaneous expenses in the statement of operations. The Fund did not utilize
the Facility during the six months ended March 31, 2007.
NOTE H
Distributions To Shareholders
The tax character of distributions to be paid for the year ending September 30,
2007 will be determined at the end of the current fiscal year. The tax
character of distributions paid during the fiscal years ended September 30,
2006 and September 30, 2005 were as follows:
2006 2005
Distributions paid from:
Ordinary income $16,537,728 $37,527,202
Total taxable distributions 16,537,728 37,527,202
Tax return of capital -0- 1,389,134
Total distributions paid $16,537,728 $38,916,336
ALLIANCEBERNSTEIN HIGH YIELD FUND o 31
As of September 30, 2006, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Accumulated capital and other losses $(349,945,471)(a)
Unrealized appreciation/(depreciation) (8,520,286)(b)
Total accumulated earnings/(deficit) $(358,465,757)(c)
(a) On September 30, 2006, the Fund had a net capital loss carryforward for
federal income tax purposes of $347,748,786 of which $42,171,352 expires
in the year 2007, $69,495,145 expires in the year 2008, $138,621,046
expires in the year 2009, $80,368,329 expires in the year 2010, $4,663,406
expires in the year 2011, $2,851,070 expires in the year 2013 and
$9,578,438 expires in 2014. To the extent future capital gains are offset
by capital loss carryforwards, such gains will not be distributed. Net
capital losses incurred after October 31, and within the taxable year are
deemed to arise on the first business day of the Fund's next taxable year.
For the fiscal year ended September 30, 2006, the Fund deferred to October
1, 2006 post-October capital losses of $2,194,588. In addition, the Fund
deferred to October 1, 2006 post-October foreign currency losses of $2,097.
(b) The difference between book-basis and tax-basis unrealized
appreciation/(depreciation) are attributable primarily to the tax
deferral of losses on wash sales and the difference between book and tax
amortization methods for premium.
(c) The difference between book-basis and tax-basis components of accumulated
earnings/(deficit) is attributable to dividends payable.
NOTE I
Legal Proceedings
As has been previously reported, the staff of the U.S. Securities and Exchange
Commission ("SEC") and the Office of New York Attorney General ("NYAG") have
been investigating practices in the mutual fund industry identified as "market
timing" and "late trading" of mutual fund shares. Certain other regulatory
authorities have also been conducting investigations into these practices
within the industry and have requested that the Adviser provide information to
them. The Adviser has been cooperating and will continue to cooperate with all
of these authorities.
On December 18, 2003, the Adviser confirmed that it had reached terms with the
SEC and the NYAG for the resolution of regulatory claims relating to the
practice of "market timing" mutual fund shares in some of the AllianceBernstein
Mutual Funds. The agreement with the SEC is reflected in an Order of the
Commission ("SEC Order"). The agreement with the NYAG is memorialized in an
Assurance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the
key provisions of these agreements are the following:
(i) The Adviser agreed to establish a $250 million fund (the
"Reimbursement Fund") to compensate mutual fund shareholders for
the adverse effects of market timing attributable to market timing
relationships described in the SEC Order. According to the SEC Order,
the Reimbursement Fund is to be paid, in order of priority, to fund
investors based
32 o ALLIANCEBERNSTEIN HIGH YIELD FUND
on (i) their aliquot share of losses suffered by the fund due to
market timing, and (ii) a proportionate share of advisory fees paid
by such fund during the period of such market timing;
(ii) The Adviser agreed to reduce the advisory fees it receives from some
of the AllianceBernstein long-term, open-end retail funds until
December 31, 2008; and
(iii) The Adviser agreed to implement changes to its governance and
compliance procedures. Additionally, the SEC Order and the NYAG Order
contemplate that the Adviser's registered investment company clients,
including the Fund, will introduce governance and compliance changes.
In anticipation of final, definitive documentation of the NYAG Order and
effective January 1, 2004, the Adviser began waiving a portion of its advisory
fee. On September 7, 2004, the Fund's investment advisory agreement was amended
to reflect the reduced advisory fee. For more information on this waiver and
amendment to the Fund's investment advisory agreement, please see "Advisory Fee
and Other Transactions with Affiliates" above.
A special committee of the Adviser's Board of Directors, comprised of the
members of the Adviser's Audit Committee and the other independent member of
the Adviser's Board, directed and oversaw an internal investigation and a
comprehensive review of the facts and circumstances relevant to the SEC's and
the NYAG's investigations.
In addition, the Independent Directors of the Fund ("the Independent
Directors") have conducted an investigation of the above-mentioned matters with
the advice of an independent economic consultant and independent counsel.
On October 2, 2003, a purported class action complaint entitled Hindo, et al.
v. AllianceBernstein Growth & Income Fund, et al. ("Hindo Complaint") was filed
against the Adviser, Alliance Capital Management Holding L.P. ("Alliance
Holding"), Alliance Capital Management Corporation, AXA Financial, Inc.,
the AllianceBernstein Funds, certain officers of the Adviser ("Alliance
defendants"), and certain other defendants not affiliated with the Adviser, 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 Funds. The Hindo Complaint alleges
that certain of the Alliance 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 Fund securities, violating
Sections 11 and 15 of the Securities Act, Sections 10(b) and 20(a) of the
Exchange Act and Sections 206 and 215 of the Advisers Act. Plaintiffs seek an
unspecified amount of compen-
ALLIANCEBERNSTEIN HIGH YIELD FUND o 33
satory damages and rescission of their contracts with the Adviser, including
recovery of all fees paid to the Adviser pursuant to such contracts.
Since October 2, 2003, 43 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. The
plaintiffs in such lawsuits have asserted a variety of theories for recovery
including, but not limited to, violations of the Securities Act, the Exchange
Act, the Advisers Act, the Investment Company Act, the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), certain state securities
laws and common law. All state court actions against the Adviser either were
voluntarily dismissed or removed to federal court. On February 20, 2004, the
Judicial Panel on Multidistrict Litigation transferred all actions to the
United States District Court for the District of Maryland (the "Mutual Fund
MDL").
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 Alliance 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 SEC Order
and the NYAG Order.
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 ("MOU") 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 derivative claims brought on behalf of Alliance Holding remain
pending.
On February 10, 2004, the Adviser received (i) a subpoena duces tecum from the
Office of the Attorney General of the State of West Virginia and (ii) a request
for information from West Virginia's Office of the State Auditor, Securities
Commission (the "West Virginia Securities Commissioner") (together, the
"Information Requests"). Both Information Requests require the Adviser to
produce documents concerning, among other things, any market timing or late
trading in the Adviser's sponsored mutual funds. The Adviser responded to the
Information Requests and has been cooperating fully with the investigation.
On April 11, 2005, a complaint entitled The Attorney General of the State of
West Virginia v. AIM Advisors, Inc., et al. ("WVAG Complaint") was filed
against the Adviser, Alliance Holding, and various other defendants not
affiliated with the Adviser. The WVAG Complaint was filed in the Circuit Court
of Marshall County, West Virginia by the Attorney General of the State of West
Virginia. The
34 o ALLIANCEBERNSTEIN HIGH YIELD FUND
WVAG Complaint makes factual allegations generally similar to those in the
Hindo Complaint. On October 19, 2005, the WVAG Complaint was transferred to the
Mutual Fund MDL.
On August 30, 2005, the West Virginia Securities Commissioner signed a Summary
Order to Cease and Desist, and Notice of Right to Hearing addressed to the
Adviser and Alliance Holding. The Summary Order claims that the Adviser and
Alliance Holding violated the West Virginia Uniform Securities Act, and makes
factual allegations generally similar to those in the Commission Order and the
NYAG Order. On January 26, 2006, the Adviser, Alliance Holding, and various
unaffiliated defendants filed a Petition for Writ of Prohibition and Order
Suspending Proceedings in West Virginia state court seeking to vacate the
Summary Order and for other relief. The court denied the writ and in September
2006 the Supreme Court of Appeals declined the defendants' petition for appeal.
On September 22, 2006, Alliance and Alliance Holding filed an answer and motion
to dismiss the Summary Order with the Securities Commissioner.
On June 22, 2004, a purported class action complaint entitled Aucoin, et al. v.
Alliance Capital Management L.P., et al. ("Aucoin Complaint") was filed against
the Adviser, Alliance Holding, Alliance Capital Management Corporation, AXA
Financial, Inc., AllianceBernstein Investment Research & Management, Inc.,
certain current and former directors of the AllianceBernstein Mutual Funds,
and unnamed Doe defendants. The Aucoin Complaint names certain of the
AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was
filed in the United States District Court for the Southern District of New York
by alleged shareholders of an AllianceBernstein mutual fund. The Aucoin
Complaint alleges, among other things, (i) that certain of the defendants
improperly authorized the payment of excessive commissions and other fees from
fund assets to broker-dealers in exchange for preferential marketing services,
(ii) that certain of the defendants misrepresented and omitted from
registration statements and other reports material facts concerning such
payments, and (iii) that certain defendants caused such conduct as control
persons of other defendants. The Aucoin Complaint asserts claims for violation
of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206
and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding
and abetting breaches of common law fiduciary duties. Plaintiffs seek an
unspecified amount of compensatory damages and punitive damages, rescission of
their contracts with the Adviser, including recovery of all fees paid to the
Adviser pursuant to such contracts, an accounting of all fund-related fees,
commissions and soft dollar payments, and restitution of all unlawfully or
discriminatorily obtained fees and expenses.
Since June 22, 2004, nine additional lawsuits making factual allegations
substantially similar to those in the Aucoin Complaint were filed against the
Adviser and
ALLIANCEBERNSTEIN HIGH YIELD FUND o 35
certain other defendants. All nine of the lawsuits (i) were brought as class
actions filed in the United States District Court for the Southern District of
New York, (ii) assert claims substantially identical to the Aucoin Complaint,
and (iii) are brought on behalf of shareholders of the Funds.
On February 2, 2005, plaintiffs filed a consolidated amended class action
complaint ("Aucoin Consolidated Amended Complaint") that asserts claims
substantially similar to the Aucoin Complaint and the nine additional lawsuits
referenced above. On October 19, 2005, the District Court dismissed each of the
claims set forth in the Aucoin Consolidated Amended Complaint, except for
plaintiffs' claim under Section 36(b) of the Investment Company Act. On January
11, 2006, the District Court granted defendants' motion for reconsideration and
dismissed the remaining Section 36(b) claim. On May 31, 2006 the District Court
denied plaintiffs' motion for leave to file an amended complaint. On July 5,
2006, plaintiffs filed a notice of appeal. On October 4, 2006 the appeal was
withdrawn by stipulation, with plaintiffs reserving the right to reinstate it
at a later date.
It is possible that these matters and/or other developments resulting from
these matters could result in increased redemptions of the AllianceBernstein
Mutual Funds' shares or other adverse consequences to the AllianceBernstein
Mutual Funds. This may require the AllianceBernstein Mutual Funds to sell
investments held by those funds to provide for sufficient liquidity and could
also have an adverse effect on the investment performance of the
AllianceBernstein Mutual 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 the AllianceBernstein Mutual Funds.
NOTE J
Recent Accounting Pronouncements
On July 13, 2006, the Financial Accounting Standards Board ("FASB") released
FASB Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" ("FIN
48"). FIN 48 provides guidance for how uncertain tax positions should be
recognized, measured, presented and disclosed in the financial statements. FIN
48 requires the evaluation of tax positions taken or expected to be taken in
the course of preparing a fund's tax returns to determine whether the tax
positions are "more-likely-than-not" of being sustained by the applicable tax
authority. Tax positions not deemed to meet the more-likely-than-not threshold
would be recorded in the current period. Adoption of FIN 48 is required for
fiscal years beginning after December 15, 2006 and is to be applied to all open
tax years as of the effective date. On December 22, 2006, the Securities and
Exchange Commission notified the industry that the implementation of FIN 48 by
registered investment companies could be delayed until the last business day of
the first required financial statement reporting period for fiscal years
beginning after
36 o ALLIANCEBERNSTEIN HIGH YIELD FUND
December 15, 2006. At this time, management is evaluating the implications of
FIN 48 and its impact on the financial statements has not yet been determined.
On September 20, 2006, the FASB released Statement of Financial Accounting
Standards No. 157 "Fair Value Measurements" ("FAS 157"). FAS 157 establishes
an authoritative definition of fair value, sets out a framework for measuring
fair value, and requires additional disclosures about fair-value measurements.
The application of FAS 157 is required for fiscal years beginning after
November 15, 2007 and interim periods within those fiscal years. At this
time, management is evaluating the implications of FAS 157 and its impact on
the financial statements has not yet been determined.
ALLIANCEBERNSTEIN HIGH YIELD FUND o 37
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Class A
-----------------------------------------------------------------------------------------
Six Months
Ended September
March 31, Year Ended September 30, 1, 2003 to Year Ended August 31,
2007 ---------------------------------- September --------------------
(unaudited) 2006 2005 2004 30, 2003(a) 2003 2002(b)
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $5.81 $5.92 $6.02 $5.98 $5.90 $5.33 $6.49
Income from Investment
Operations
Net investment income(c) .19 .42 .45 .43(d) .04 .48 .60
Net realized and unrealized
gain (loss) on investment
and foreign currency
transactions .21 (.11) (.10) .11 .08 .61 (1.16)
Net increase (decrease) in
net asset value from
operations .40 .31 .35 .54 .12 1.09 (.56)
Less: Dividends and
Distributions
Dividends from net
investment income (.19) (.42) (.43) (.50) (.04) (.49) (.58)
Tax return of capital -0- -0- (.02) -0- -0- (.03) (.02)
Total dividends and
distributions (.19) (.42) (.45) (.50) (.04) (.52) (.60)
Net asset value,
end of period $6.02 $5.81 $5.92 $6.02 $5.98 $5.90 $5.33
Total Return
Total investment return
based on net asset
value(e) 6.96% 5.54% 5.84% 9.23% 2.03% 21.38% (9.14)%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $92,072 $79,298 $92,770 $117,602 $90,466 $134,674 $72,455
Ratio to average
net assets of:
Expenses,
net of waivers/
reimbursements 1.20%(f) 1.28%(g) 1.16% 1.15% 1.63%(f) 1.38% 1.43%
Expenses,
before waivers/
reimbursements 1.20%(f) 1.28%(g) 1.16% 1.32% 1.63%(f) 1.38% 1.43%
Net investment
income 6.40%(f) 7.32%(d)(g) 7.31%(d) 7.09%(d) 7.60%(f) 8.33% 10.06%
Portfolio turnover rate 33% 57% 68% 83% 10% 123% 57%
</TABLE>
See footnote summary on page 44.
38 o ALLIANCEBERNSTEIN HIGH YIELD FUND
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Class B
-----------------------------------------------------------------------------------------
Six Months
Ended September
March 31, Year Ended September 30, 1, 2003 to Year Ended August 31,
2007 ---------------------------------- September --------------------
(unaudited) 2006 2005 2004 30, 2003(a) 2003 2002(b)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $5.81 $5.92 $6.02 $5.99 $5.90 $5.33 $6.50
Income from Investment
Operations
Net investment income(c) .17 .38 .40 .50(d) .03 .43 .56
Net realized and unrealized
gain (loss) on investment
and foreign currency
transactions .20 (.11) (.10) (.01) .10 .62 (1.17)
Net increase (decrease) in
net asset value from
operations .37 .27 .30 .49 .13 1.05 (.61)
Less: Dividends and
Distributions
Dividends from net
investment income (.17) (.38) (.39) (.46) (.04) (.45) (.54)
Tax return of capital -0- -0- (.01) -0- -0- (.03) (.02)
Total dividends and
distributions (.17) (.38) (.40) (.46) (.04) (.48) (.56)
Net asset value,
end of period $6.01 $5.81 $5.92 $6.02 $5.99 $5.90 $5.33
Total Return
Total investment return
based on net asset
value(e) 6.39% 4.80% 5.11% 8.38% 2.15% 20.55% (9.94)%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $71,925 $92,986 $146,729 $217,320 $279,666 $277,190 $256,533
Ratio to average
net assets of:
Expenses,
net of waivers/
reimbursements 1.93%(f) 2.02%(g) 1.87% 1.88% 2.40%(f) 2.11% 2.15%
Expenses,
before waivers/
reimbursements 1.93%(f) 2.02%(g) 1.87% 2.05% 2.42%(f) 2.11% 2.15%
Net investment
income 5.70%(f) 6.64%(d)(g) 6.63%(d) 8.18%(d) 7.11%(f) 7.79% 9.34%
Portfolio turnover rate 33% 57% 68% 83% 10% 123% 57%
</TABLE>
See footnote summary on page 44.
ALLIANCEBERNSTEIN HIGH YIELD FUND o 39
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Class C
------------------------------------------------------------------------------------------
Six Months
Ended September
March 31, Year Ended September 30, 1, 2003 to Year Ended August 31,
2007 ---------------------------------- September --------------------
(unaudited) 2006 2005 2004 30, 2003(a) 2003 2002(b)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $5.81 $5.92 $6.03 $5.99 $5.90 $5.33 $6.50
Income from Investment
Operations
Net investment income(c) .17 .38 .40 .45(d) .03 .43 .56
Net realized and unrealized
gain (loss) on investment
and foreign currency
transactions .21 (.11) (.11) .05 .10 .62 (1.17)
Net increase (decrease) in
net asset value from
operations .38 .27 .29 .50 .13 1.05 (.61)
Less: Dividends and
Distributions
Dividends from net
investment income (.17) (.38) (.39) (.46) (.04) (.45) (.54)
Tax return of capital -0- -0- (.01) -0- -0- (.03) (.02)
Total dividends and
distributions (.17) (.38) (.40) (.46) (.04) (.48) (.56)
Net asset value,
end of period $6.02 $5.81 $5.92 $6.03 $5.99 $5.90 $5.33
Total Return
Total investment return
based on net asset
value(e) 6.59% 4.80% 4.94% 8.56% 2.15% 20.54% (9.94)%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $34,446 $36,261 $46,526 $66,336 $68,068 $66,427 $48,448
Ratio to average
net assets of:
Expenses,
net of waivers/
reimbursements 1.91%(f) 2.00%(g) 1.86% 1.87% 2.40%(f) 2.10% 2.14%
Expenses,
before waivers/
reimbursements 1.91%(f) 2.00%(g) 1.86% 2.04% 2.41%(f) 2.10% 2.14%
Net investment
income 5.71%(f) 6.62%(d)(g) 6.62%(d) 7.40%(d) 7.11%(f) 7.72% 9.35%
Portfolio turnover rate 33% 57% 68% 83% 10% 123% 57%
</TABLE>
See footnote summary on page 44.
40 o ALLIANCEBERNSTEIN HIGH YIELD FUND
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Advisor Class
----------------------------------------------------------------------------------------
Six Months
Ended September
March 31, Year Ended September 30, 1, 2003 to Year Ended August 31,
2007 ---------------------------------- September --------------------
(unaudited) 2006 2005 2004 30, 2003(a) 2003 2002(b)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $5.83 $5.93 $6.03 $5.99 $5.91 $5.34 $6.50
Income from Investment
Operations
Net investment income(c) .20 .45 .48 .44(d) .04 .49 .62
Net realized and unrealized
gain (loss) on investment
and foreign currency
transactions .20 (.11) (.12) .11 .08 .61 (1.16)
Net increase (decrease) in
net asset value from
operations .40 .34 .36 .55 .12 1.10 (.54)
Less: Dividends and
Distributions
Dividends from net
investment income (.20) (.44) (.44) (.51) (.04) (.50) (.61)
Tax return of capital -0- -0- (.02) -0- -0- (.03) (.01)
Total dividends and
distributions (.20) (.44) (.46) (.51) (.04) (.53) (.62)
Net asset value,
end of period $6.03 $5.83 $5.93 $6.03 $5.99 $5.91 $5.34
Total Return
Total investment return
based on net asset
value(e) 6.92% 6.03% 6.14% 9.51% 2.05% 21.73% (8.82)%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $4,703 $3,890 $6,924 $179,418 $148,041 $145,549 $95,895
Ratio to average
net assets of:
Expenses,
net of waivers/
reimbursements .90%(f) .98%(g) .80% .85% 1.40%(f) 1.09% 1.16%
Expenses,
before waivers/
reimbursements .90%(f) .98%(g) .80% 1.02% 1.40%(f) 1.09% 1.16%
Net investment
income 6.68%(f) 7.64%(d)(g) 7.73%(d) 7.26%(d) 8.12%(f) 8.72% 10.43%
Portfolio turnover rate 33% 57% 68% 83% 10% 123% 57%
</TABLE>
See footnote summary on page 44.
ALLIANCEBERNSTEIN HIGH YIELD FUND o 41
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Class R
------------------------------------
Six Months
Ended Year March 1,
March 31, Ended 2005(h) to
2007 September September
(unaudited) 30, 2006 30, 2005
----------- ----------- ----------
<S> <C> <C> <C>
Net asset value, beginning of period $5.81 $5.92 $6.20
Income from Investment Operations
Net investment income(c) .19 .41 .25
Net realized and unrealized gain (loss) on investment
and foreign currency transactions .20 (.12) (.28)
Net increase (decrease) in net asset value from operations .39 .29 (.03)
Less: Dividends and Distributions
Dividends from net investment income (.19) (.40) (.24)
Tax return of capital -0- -0- (.01)
Total dividends and distributions (.19) (.40) (.25)
Net asset value, end of period $6.01 $5.81 $5.92
Total Return
Total investment return based on net asset value(e) 6.73% 5.22% (.44)%
Ratios/Supplemental Data
Net assets, end of period (000's omitted) $10 $9 $10
Ratio to average net assets of:
Expenses 1.31%(f) 1.58%(g) 1.45%(f)
Net investment income(d) 6.30%(f) 7.01%(g) 7.17%(f)
Portfolio turnover rate 33% 57% 68%
</TABLE>
See footnote summary on page 44.
42 o ALLIANCEBERNSTEIN HIGH YIELD FUND
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Class K
------------------------------------
Six Months
Ended Year March 1,
March 31, Ended 2005(h) to
2007 September September
(unaudited) 30, 2006 30, 2005
----------- ----------- -----------
<S> <C> <C> <C>
Net asset value, beginning of period $5.82 $5.92 $6.20
Income from Investment Operations
Net investment income(c) .21 .29 .26
Net realized and unrealized gain (loss) on investment
and foreign currency transactions .18 .03 (.28)
Net increase (decrease) in net asset value from operations .39 .32 (.02)
Less: Dividends and Distributions
Dividends from net investment income (.19) (.42) (.25)
Tax return of capital -0- -0- (.01)
Total dividends and distributions (.19) (.42) (.26)
Net asset value, end of period $6.02 $5.82 $5.92
Total Return
Total investment return based on net asset value(e) 6.80% 5.73% (.28)%
Ratios/Supplemental Data
Net assets, end of period (000's omitted) $45 $259 $10
Ratio to average net assets of:
Expenses 1.21%(f) 1.34%(g) 1.16%(f)
Net investment income(d) 6.57%(f) 7.19%(g) 7.47%(f)
Portfolio turnover rate 33% 57% 68%
</TABLE>
See footnote summary on page 44.
ALLIANCEBERNSTEIN HIGH YIELD FUND o 43
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Class I
------------------------------------
Six Months
Ended Year March 1,
March 31, Ended 2005(h) to
2007 September September
(unaudited) 30, 2006 30, 2005
----------- ----------- -----------
<S> <C> <C> <C>
Net asset value, beginning of period $5.81 $5.92 $6.20
Income from Investment Operations
Net investment income(c) .20 .44 .27
Net realized and unrealized gain (loss) on investment
and foreign currency transactions .20 (.11) (.28)
Net increase (decrease) in net asset value from operations .40 .33 (.01)
Less: Dividends and Distributions
Dividends from net investment income (.20) (.44) (.26)
Tax return of capital -0- -0- (.01)
Total dividends and distributions (.20) (.44) (.27)
Net asset value, end of period $6.01 $5.81 $5.92
Total Return
Total investment return based on net asset value(e) 7.01% 5.89% (.11)%
Ratios/Supplemental Data
Net assets, end of period (000's omitted) $10 $9 $10
Ratio to average net assets of:
Expenses .78%(f) .95%(g) .88%(f)
Net investment income(d) 6.84%(f) 7.64%(g) 7.75%(f)
Portfolio turnover rate 33% 57% 68%
</TABLE>
(a) The Fund changed its fiscal year end from August 31 to September 30.
(b) As required, effective September 1, 2001, the Fund has adopted the
provisions of the AICPA Audit and Accounting Guide, Audits of Investment
Companies, and began amortizing premium on debt securities for financial
statement reporting purposes only. For the year ended August 31, 2002, the
effect of this change to Class A, B, C and Advisor Class was to decrease
net investment income per share by $.01 and decrease net realized and
unrealized loss on investment transactions per share by $.01. Consequently,
the ratio of net investment income to average net assets decreased from
10.19% to 10.06% for Class A, from 9.47% to 9.34% for Class B, from 9.47%
to 9.35% for Class C and from 10.56% to 10.43% for Advisor Class. Per
share, ratios and supplemental data for periods prior to September 1, 2001
have not been restated to reflect this change in presentation.
(c) Based on average shares outstanding.
(d) Net of waivers/reimbursement by the Adviser.
(e) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of
all dividends and distributions at net asset value during the period,
and redemption on the last day of the period. Initial sales charge or
contingent deferred sales charge is not reflected in the calculation of
total investment return. Total return does not reflect the deduction
of taxes that a shareholder would pay on Fund distributions or the
redemption of Fund shares. Total investment return calculated for a
period of less than one year is not annualized.
(f) Annualized.
(g) The ratio includes expenses attributable to costs of proxy solicitation.
(h) Commencement of distribution.
44 o ALLIANCEBERNSTEIN HIGH YIELD FUND
Information Regarding the Review and Approval of the Fund's Advisory Agreement
The Fund's disinterested directors (the "directors") unanimously approved the
continuance of the Advisory Agreement between the Fund and the Adviser at a
meeting held on October 31-November 2, 2006.
In preparation for the meeting, the directors had requested from the Adviser
and received and evaluated extensive materials, including performance and
expense information for other investment companies with similar investment
objectives as the Fund derived from data compiled by Lipper Inc. ("Lipper"),
which is not affiliated with the Adviser. The directors also reviewed an
independent evaluation from the Fund's Senior Officer (who is also the Fund's
Independent Compliance Officer) of the reasonableness of the advisory fees in
the Fund's Advisory Agreement (as contemplated by the September 2004 Assurance
of Discontinuance between the Adviser and the New York Attorney General)
wherein the Senior Officer concluded that such fees were reasonable. In
addition, the directors received a presentation from the Adviser and had an
opportunity to ask representatives of the Adviser various questions relevant to
the proposed approval. The directors noted that the Senior Officer's evaluation
considered the following factors: management fees charged to institutional and
other clients of the Adviser for like services; management fees charged by
other mutual fund companies for like services; cost to the Adviser and its
affiliates of supplying services to the Fund pursuant to the Advisory
Agreement, excluding any intra-corporate profit; profit margins of the Adviser
and its affiliates from supplying such services; possible economies of scale as
the Fund grows larger; and nature and quality of the Adviser's services
including the performance of the Fund.
Prior to voting, the directors reviewed the proposed continuance of the
Advisory Agreement with management and with experienced counsel who are
independent of the Adviser and received a memorandum from such counsel
discussing the legal standards for their consideration of the proposed
continuance. The directors also discussed the proposed continuance in three
private sessions at which only the directors, their independent counsel and the
Fund's Independent Compliance Officer were present. In reaching their
determinations relating to continuance of the Advisory Agreement, the directors
considered all factors they believed relevant, including the following:
1. information comparing the performance of the Fund to other investment
companies with similar investment objectives and to an index;
2. the nature, extent and quality of investment, compliance, administrative
and other services rendered by the Adviser;
3. payments received by the Adviser from all sources in respect of the Fund
and all investment companies in the AllianceBernstein Funds complex;
ALLIANCEBERNSTEIN HIGH YIELD FUND o 45
4. the costs borne by, and profitability of, the Adviser and its affiliates
in providing services to the Fund and to all investment companies in the
AllianceBernstein Funds complex;
5. comparative fee and expense data for the Fund and other investment
companies with similar investment objectives;
6. the extent to which economies of scale would be realized to the extent
the Fund grows and whether fee levels reflect any economies of scale
for the benefit of investors;
7. the Adviser's policies and practices regarding allocation of portfolio
transactions of the Fund;
8. information about "revenue sharing" arrangements that the Adviser has
entered into in respect of the Fund;
9. portfolio turnover rates for the Fund compared to other investment
companies with similar investment objectives;
10. fall-out benefits that the Adviser and its affiliates receive from
their relationships with the Fund;
11. information about fees charged by the Adviser to other clients with a
substantially similar investment style as the Fund;
12. the Senior Officer's evaluation of the reasonableness of the fee
payable to the Adviser in the Advisory Agreement;
13. the professional experience and qualifications of the Fund's portfolio
management team and other senior personnel of the Adviser; and
14. the terms of the Advisory Agreement.
The directors also considered their knowledge of the nature and quality of the
services provided by the Adviser to the Fund gained from their experience as
directors or trustees of most of the registered investment companies advised by
the Adviser, their overall confidence in the Adviser's integrity and competence
they have gained from that experience and the Adviser's responsiveness to
concerns raised by them in the past, including the Adviser's willingness to
consider and implement organizational and operational changes designed to
improve investment results and the services provided to the AllianceBernstein
Funds.
46 o ALLIANCEBERNSTEIN HIGH YIELD FUND
In their deliberations, the directors did not identify any particular
information that was all-important or controlling, and different directors may
have attributed different weights to the various factors. The directors
determined that the overall arrangements between the Fund and the Adviser, as
provided in the Advisory Agreement, were fair and reasonable in light of the
services performed, expenses incurred and such other matters as the directors
considered relevant in the exercise of their business judgment.
The material factors and conclusions that formed the basis for the directors
reaching their determinations to approve the continuance of the Advisory
Agreement (including their determinations that the Adviser should continue to
be the investment adviser for the Fund, and that the fees payable to the
Adviser pursuant to the Advisory Agreement are appropriate) were separately
discussed by the directors.
Nature, Extent and Quality of Services Provided by the Adviser
The directors noted that, under the Advisory Agreement, the Adviser, subject to
the oversight of the directors, administers the Fund's business and other
affairs. The Adviser manages the investment of the assets of the Fund,
including making purchases and sales of portfolio securities consistent with
the Fund's investment objective and policies. Under the Advisory Agreement, the
Adviser also provides the Fund with such office space, administrative and other
services (exclusive of, and in addition to, any such services provided by any
others retained by the Fund) and executive and other personnel as are necessary
for the Fund's operations. The Adviser pays all of the compensation of
directors of the Fund who are affiliated persons of the Adviser and of the
officers of the Fund.
The directors also considered that the Advisory Agreement provides that the
Fund will reimburse the Adviser for the cost of certain clerical, accounting,
administrative and other services provided at the Fund's request by employees
of the Adviser or its affiliates. Requests for these "at no more than cost"
reimbursements are approved by the directors on a quarterly basis and (to the
extent requested and paid) result in a higher rate of total compensation from
the Fund to the Adviser than the fee rates stated in the Fund's Advisory
Agreement.
The directors considered the scope and quality of services provided by the
Adviser under the Advisory Agreement and noted that the scope of services
provided by advisers of funds had expanded over time as a result of regulatory
and other developments. The directors noted, for example, that the Adviser is
responsible for maintaining and monitoring its own and, to varying degrees, the
Fund's compliance programs, and that these compliance programs have recently
been refined and enhanced in light of current regulatory requirements. The
directors considered the quality of the in-house investment research
capabilities of the Adviser and the other resources it has dedicated to
performing services for the Fund. The quality of administrative and other
services, including the
ALLIANCEBERNSTEIN HIGH YIELD FUND o 47
Adviser's role in coordinating the activities of the Fund's other service
providers, also were considered. The directors also considered the Adviser's
response to recent regulatory compliance issues affecting a number of the
investment companies in the AllianceBernstein Funds complex. The directors
concluded that, overall, they were satisfied with the nature, extent and
quality of services provided to the Fund under the Advisory Agreement.
Costs of Services Provided and Profitability to the Adviser
The directors reviewed a schedule of the revenues, expenses and related notes
indicating the profitability of the Fund to the Adviser for calendar years 2004
and 2005 that had been prepared with an updated expense allocation methodology
arrived at in consultation with an independent consultant. The directors noted
that the updated expense allocation methodology differed in various respects
from the methodology used in prior years. The directors reviewed the
assumptions and methods of allocation used by the Adviser in preparing
fund-specific profitability data, and noted the Adviser's representation to
them that it believed that the methods of allocation used in preparing the
profitability information were reasonable and appropriate and that the Adviser
had previously discussed with the directors that there is no generally accepted
allocation methodology for information of this type.
The directors recognized that it is difficult to make comparisons of
profitability from fund advisory contracts because comparative information is
not generally publicly available and is affected by numerous factors, including
the structure of the particular adviser, the types of funds it manages, its
business mix, numerous assumptions regarding allocations and the adviser's
capital structure and cost of capital. In considering profitability
information, the directors considered the effect of fall-out benefits on the
Adviser's expenses, as well as the "revenue sharing" arrangements the Adviser
has entered into with certain entities that distribute shares of the Fund. The
directors focused on the profitability of the Adviser's relationship with the
Fund before taxes and distribution expenses. The directors recognized that the
Adviser should generally be entitled to earn a reasonable level of profits for
the services it provides to the Fund and, based on their review, concluded that
they were satisfied that the Adviser's level of profitability from its
relationship with the Fund was not excessive.
Fall-Out Benefits
The directors considered that the Adviser benefits from soft dollar
arrangements whereby it receives brokerage and research services from many of
the brokers and dealers that execute purchases and sales of securities on
behalf of its clients on an agency basis. The directors noted that since the
Fund does not engage in brokerage transactions, the Adviser does not receive
soft dollar benefits in respect of portfolio transactions of the Fund.
48 o ALLIANCEBERNSTEIN HIGH YIELD FUND
The directors also considered that the Distributor, which is a wholly-owned
subsidiary of the Adviser, receives 12b-1 fees from the Fund in respect of
classes of shares of the Fund that are subject to the Fund's 12b-1 plan and
retains a portion of such 12b-1 fees, and receives all or a portion of the
sales charges on sales or redemptions of certain classes of shares. The
directors also noted that certain affiliates of the Adviser distribute shares
of the Fund and receive compensation in that connection, and that a subsidiary
of the Adviser provides transfer agency services to the Fund and receives
compensation from the Fund for such services.
The directors recognized that the Adviser's profitability would be somewhat
lower if the Adviser's affiliates did not receive the benefits described above.
The directors understood that the Adviser also might derive reputational and
other benefits from its association with the Fund.
Investment Results
In addition to the information reviewed by the directors in connection with the
meeting, the directors receive detailed comparative performance information for
the Fund at each regular Board meeting during the year. At the meeting, the
directors reviewed information from a report prepared by Lipper showing
performance of the Class A Shares of the Fund as compared to a group of 16 to
12 funds (depending on the year) in its Lipper category selected by Lipper (the
"Performance Group") and as compared to a universe of 91 to 70 funds (depending
on the year) in its Lipper category selected by Lipper (the "Performance
Universe") for periods ended June 30, 2006 over the 1-, 3- and 5-year periods,
and information prepared by the Adviser showing performance of such shares as
compared to the Lehman Brothers U.S. High Yield-2% Issuer Cap Index (the
"Index") for periods ended June 30, 2006 over the year to date, 1-, 3- and
5-year and since inception periods (April 1997 inception). The directors noted
that in the Performance Group and Performance Universe comparisons the Fund was
in the 5th quintile in each period reviewed except in the 5-year period when it
was in the 4th quintile in the Performance Group comparison. The comparative
information showed that the Fund underperformed the Index in all periods
reviewed. Based on their review and their discussion of the reasons for the
Fund's performance over time with the Adviser, and steps that had been taken by
the Adviser in an effort to address such underperformance, the directors
retained confidence in the Adviser's ability to continue to advise the Fund and
concluded that the Fund's investment performance was understandable. The
directors informed the Adviser that they planned to closely monitor the Fund's
performance.
Advisory Fees and Other Expenses
The directors considered the advisory fee rate paid by the Fund to the Adviser
and information prepared by Lipper concerning fee rates paid by other funds in
the same Lipper category as the Fund at a common asset level. The directors
recognized that it is difficult to make comparisons of advisory fees because
there are variations in the services that are included in the fees paid by
other funds.
ALLIANCEBERNSTEIN HIGH YIELD FUND o 49
The directors also considered the fees the Adviser charges other clients with
investment objectives similar to those of the Fund. For this purpose, they
reviewed information in the Adviser's Form ADV and a chart prepared by the
Adviser disclosing the institutional fee schedule for institutional products
managed by it that have a substantially similar investment style as the Fund.
The directors noted that the institutional fee schedule for clients with a
substantially similar investment style as the Fund had breakpoints at much
lower asset levels than those in the fee schedule applicable to the Fund and
that the application of such fee schedule to the level of assets of the Fund
would result in a fee rate that would be significantly lower than that in the
Fund's Advisory Agreement. The directors noted that the Adviser may, in some
cases, negotiate fee rates with large institutional clients that are lower than
those reviewed by the directors and that they had previously discussed with the
Adviser its policies in respect of such negotiated arrangements. The directors
also noted that the Adviser advises a portfolio of another AllianceBernstein
fund with a similar investment objective and strategies as the Fund for the
same fee schedule as the Fund.
The Adviser reviewed with the directors the significant differences in the
scope of services it provides to institutional clients and to the Fund. For
example, the Advisory Agreement requires the Adviser to provide, in addition to
investment advice, office facilities and officers (including officers to
provide required certifications). The Adviser also coordinates the provision of
services to the Fund by non-affiliated service providers and is responsible for
the compensation of the Fund's Independent Compliance Officer and certain
related expenses. The provision of these non-advisory services involves costs
and exposure to liability. The Adviser explained that many of these services
normally are not provided to non-investment company clients and that fees
charged to the Fund reflect the costs and risks of the additional obligations.
The Adviser also noted that since the Fund is constantly issuing and redeeming
its shares, it is more difficult to manage than an institutional account, where
the assets are relatively stable. In light of these facts, the directors did
not place significant weight on these fee comparisons.
The directors also considered the total expense ratio of the Class A shares of
the Fund in comparison to the fees and expenses of funds within two comparison
groups created by Lipper: an Expense Group and an Expense Universe. Lipper
described an Expense Group as a representative sample of comparable funds and
an Expense Universe as a broader group, consisting of all funds in the Fund's
investment classification/objective with a similar load type as the Fund. The
Class A expense ratio of the Fund was based on the Fund's latest fiscal year
expense ratio. The directors recognized that the expense ratio information for
the Fund potentially reflected on the Adviser's provision of services, as the
Adviser is responsible for coordinating services provided to the Fund by
others. The directors noted that it was likely that the expense ratios of some
funds in the Fund's Lipper category also were lowered by waivers or
reimbursements by those
50 o ALLIANCEBERNSTEIN HIGH YIELD FUND
funds' investment advisers, which in some cases were voluntary and perhaps
temporary.
The directors noted that the Fund's at approximate current size contractual
effective fee rate of 50 basis points was significantly lower than the Expense
Group median. The directors noted that the latest fiscal year administrative
expense reimbursement by the Fund pursuant to the Advisory Agreement was 2
basis points, and that the total compensation of 52 basis points received by
the Adviser from the Fund pursuant to the Advisory Agreement was materially
lower than the Expense Group median. The directors further noted that the
Fund's total expense ratio, which had been capped by the Adviser (although the
expense ratio was currently significantly lower than the cap), was slightly
higher than the Expense Group median and somewhat higher than the Expense
Universe median. The directors concluded that the Fund's expense ratio was
satisfactory.
Economies of Scale
The directors noted that the advisory fee schedule for the Fund contains
breakpoints so that, if assets were to increase over the breakpoint levels, the
fee rates would be reduced on the incremental assets. The directors also
considered a presentation by an independent consultant discussing economies of
scale issues in the mutual fund industry. The directors believe that economies
of scale are realized (if at all) by the Adviser across a variety of products
and services, and not only in respect of a single fund. The directors noted
that there is no uniform methodology for establishing breakpoints that give
effect to fund-specific services provided by the Adviser and to the economies
of scale that the Adviser may realize in its overall mutual fund business or
those components of it which directly or indirectly affect the Fund's
operations. The directors observed that in the mutual fund industry as a whole,
as well as among funds similar to the Fund, there is no uniformity or pattern
in the fees and asset levels at which breakpoints (if any) apply. Depending on
the age and size of a particular fund and its adviser's cost structure,
different conclusions can be drawn as to whether there are economies of scale
to be realized at any particular level of assets, notwithstanding the intuitive
conclusion that such economies exist, or will be realized at some level of
total assets. Moreover, because different advisers have different cost
structures and service models, it is difficult to draw meaningful conclusions
from the comparison of a fund's advisory fee breakpoints with those of
comparable funds. The directors also noted that the advisory agreements for
many funds do not have breakpoints at all. Having taken these factors into
account, the directors concluded that the Fund's breakpoint arrangements would
result in a sharing of economies of scale in the event of a very significant
increase in the Fund's net assets.
ALLIANCEBERNSTEIN HIGH YIELD FUND o 51
BOARD OF DIRECTORS
William H. Foulk, Jr.(1), Chairman
Marc O. Mayer, President and Chief Executive Officer
David H. Dievler(1)
John H. Dobkin(1)
Michael J. Downey(1)
D. James Guzy(1)
Nancy P. Jacklin(1)
Marshall C. Turner, Jr.(1)
Earl D. Weiner(1)
OFFICERS(2)
Philip L. Kirstein, Senior Vice President and Independent Compliance Officer
Andrew M. Aran, Vice President
Gershon Distenfeld, Vice President
Joel J. McKoan, Vice President
Douglas J. Peebles, Vice President
Lawrence J. Shaw, Vice President
Emilie D. Wrapp, Secretary
Joseph J. Mantineo, Treasurer and Chief Financial Officer
Vincent S. Noto, Controller
Principal Underwriter
AllianceBernstein Investments, Inc.
1345 Avenue of the Americas
New York, NY 10105
Custodian
The Bank of New York
One Wall Street
New York, NY 10286
Legal Counsel
Seward & Kissel LLP
One Battery Park Plaza
New York, NY 10004
Transfer Agent
AllianceBernstein Investor
Services, Inc.
P.O. Box 786003
San Antonio, TX 78278-6003
Toll-Free (800) 221-5672
Independent Registered Public
Accounting Firm
Ernst & Young LLP
5 Times Square
New York, NY 10036
(1) Member of the Audit Committee, the Governance and Nominating Committee and
the Independent Directors Committee.
(2) The day-to-day management of, and investment decisions for, the Fund's
portfolio are made by the Global Credit Investment Team. While all members
of the team work jointly to determine the majority of the investment
strategy including security selection for the Fund, Messrs. Douglas J.
Peebles, Andrew M. Aran, Joel J. McKoan and Gershon Distenfeld, members
of the Global Credit Investment Team, are primarily responsible for the
day-to-day management of the Fund's portfolio.
52 o ALLIANCEBERNSTEIN HIGH YIELD FUND
THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
SUMMARY OF SENIOR OFFICER'S EVALUATION OF
INVESTMENT ADVISORY AGREEMENT(1)
The following is a summary of the evaluation of the Investment Advisory
Agreement between AllianceBernstein L.P. (the "Adviser") and the
AllianceBernstein High Yield Fund, Inc. (the "Fund"),(2) prepared by Philip L.
Kirstein, the Senior Officer of the Fund, for the Directors of the Fund, as
required by an August 2004 agreement between the Adviser and the New York State
Attorney General (the "NYAG"). The Senior Officer's evaluation of the
Investment Advisory Agreement is not meant to diminish the responsibility or
authority of the Board of Directors of the Fund to perform its duties pursuant
to Section 15 of the Investment Company Act of 1940 (the "40 Act") and
applicable state law. The purpose of the summary is to provide shareholders
with a synopsis of the independent evaluation of the reasonableness of the
advisory fees proposed to be paid by the Fund which was provided to the
Directors in connection with their review of the proposed approval of the
continuance of the Investment Advisory Agreement. The Senior Officer's
evaluation considered the following factors:
1. Advisory fees charged to institutional and other clients of the
Adviser for like services;
2. Advisory fees charged by other mutual fund companies for like services;
3. Costs to the Adviser and its affiliates of supplying services pursuant
to the advisory agreement, excluding any intra-corporate profit;
4. Profit margins of the Adviser and its affiliates from supplying such
services;
5. Possible economies of scale as the Fund grows larger; and
6. Nature and quality of the Adviser's services including the performance
of the Fund.
FUND ADVISORY FEES, EXPENSE CAPS, REIMBURSEMENTS & RATIOS
The Adviser proposed that the Fund pay the advisory fee set forth in the table
below for receiving the services to be provided pursuant to the Investment
Advisory Agreement. The fee schedule below, implemented in January 2004 in
1 It should be noted that the information in the fee summary was completed
on October 23, 2006 and presented to the Board of Directors on October
31-November 2, 2006.
2 Future references to the Fund do not include "AllianceBernstein."
References in the fee summary pertaining to performance and expense ratios
refer to the Class A shares of the Fund.
ALLIANCEBERNSTEIN HIGH YIELD FUND o 53
consideration of the Adviser's settlement with the NYAG in December 2003 is
based on a master schedule that contemplates eight categories of funds with
almost all funds in each category having the same advisory schedule.(3)
Advisory Fee Based Net Assets
on % of Average 09/30/06
Category Daily Net Assets ($MIL) Fund
-------------------------------------------------------------------------------
High Income 50 bp on 1st $2.5 billion $212.9 High Yield Fund, Inc.
45 bp on next $2.5 billion
40 bp on the balance
The Adviser is reimbursed as specified in the Investment Advisory Agreement for
certain clerical, legal, accounting, administrative and other services provided
to the Fund. During the Fund's most recently completed fiscal year, the Adviser
received $93,000 (0.02% of the Fund's average daily net assets) for such
services.
The Adviser agreed to waive that portion of its advisory fees and/or reimburse
the Fund for that portion of the Fund's total operating expenses to the degree
necessary to limit the Fund's expense ratios to the amounts set forth below
for the Fund's current fiscal year, although it should be noted that the Fund
was operating under its expense cap for the most recent semi-annual period.
Accordingly, the expense limitation undertaking was of no effect during that
period. The waiver is terminable by the Adviser at the end of the Fund's fiscal
year upon at least 60 days written notice. In addition, set forth below are the
Fund's gross expense ratios as of the Fund's most recent semi-annual period:
Expense Cap Pursuant to Gross Fiscal
Expense Limitation Expense Year
Fund Undertaking Ratio(4) End
-----------------------------------------------------------------------------
High Yield Fund, Inc. Advisor 1.40% 1.05% September 30
Class A 1.70% 1.37%
Class B 2.40% 2.09%
Class C 2.40% 2.08%
Class R 1.90% 1.54%
Class K 1.65% 1.25%
Class I 1.40% 0.92%
I. ADVISORY FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS
The advisory fees charged to investment companies which the Adviser manages and
sponsors are normally higher than those charged to similar sized institutional
accounts, including pension plans and sub-advised investment companies. The fee
differential reflects, among other things, different services provided to such
clients, and different liabilities assumed. Services provided by the Adviser to
the Fund that are not provided to non-investment company clients include
providing
3 Most of the AllianceBernstein Mutual Funds, which the Adviser manages, were
affected by the Adviser's settlement with the NYAG.
4 Annualized.
54 o ALLIANCEBERNSTEIN HIGH YIELD FUND
office space and personnel to serve as Fund Officers, who among other
responsibilities make the certifications required under the Sarbanes-Oxley Act
of 2002, and coordinating with and monitoring the Fund's third party service
providers such as Fund counsel, auditors, custodians, transfer agents and
pricing services. The accounting, administrative, legal and compliance
requirements for the Fund are more costly than those for institutional assets
due to the greater complexities and time required for investment companies,
although as previously noted, a portion of these expenses are reimbursed by the
Fund to the Adviser. Also, retail mutual funds managed by the Adviser are
widely held. Servicing the Fund's investors is more time consuming and labor
intensive compared to institutional clients since the Adviser needs to
communicate with a more extensive network of financial intermediaries and
shareholders. In addition, managing the cash flow of an investment company may
be more difficult than that of a stable pool of assets, such as an
institutional account with little cash movement in either direction,
particularly, if a fund is in net redemption and the Adviser is frequently
forced to sell securities to raise cash for redemptions. However, managing a
fund with positive cash flow may be easier at times than managing a stable pool
of assets. Finally, in recent years, investment advisers have been sued by
institutional clients and have suffered reputational damage both by the
attendant publicity and outcomes other than complete victories. Accordingly,
the legal and reputational risks associated with institutional accounts are
greater than previously thought, although still not equal to those related to
the mutual fund industry.
Notwithstanding the Adviser's view that managing an investment company is not
comparable to managing other institutional accounts because the services
provided are different, it is worth considering information regarding the
advisory fees charged to institutional accounts with a substantially similar
investment style as the Fund.(5) In addition to the AllianceBernstein
Institutional fee schedule, set forth below is what would have been the
effective advisory fee of the Fund had the AllianceBernstein Institutional fee
schedule been applicable to the Fund versus the Fund's advisory fees based on
September 30, 2006 net assets.
Net Assets AllianceBernstein ("AB") Effective Fund
09/30/06 Institutional ("Inst.") AB Inst. Advisory
Fund ($MIL) Fee Schedule Adv. Fee Fee
-------------------------------------------------------------------------------
High Yield Fund, Inc. $212.9 High Yield Schedule 0.397% 0.500%
65 bp on 1st $20 million
50 bp on next $20 million
40 bp on next $20 million
35 bp on the balance
Minimum Account Size: $20 m
5 The Adviser has indicated that with respect to institutional accounts with
assets greater than $300 million, it will negotiate a fee schedule, although
it should be noted that there were no such institutional accounts that are
similar in investment style as the Fund, which opened in the last three
years. Discounts that are negotiated vary based upon each client
relationship.
ALLIANCEBERNSTEIN HIGH YIELD FUND o 55
The adviser also manages the AllianceBernstein Variable Products Series Fund,
Inc. ("AVPS"), which is available through variable annuity and variable life
contracts offered by other financial institutions and offers policyholders the
option to utilize certain AVPS portfolios as the investment option underlying
their insurance contracts. Set forth below is the fee schedule of the AVPS
portfolio that has a substantially similar investment style as the Fund(6):
<TABLE>
<CAPTION>
Fund AVPS Portfolio Fee Schedule
--------------------------------------------------------------------------------------
<S> <C> <C>
High Yield Fund, Inc.(7) High Yield Portfolio 0.50% on first $2.5 billion
0.45% on next $2.5 billion
0.40% on the balance
</TABLE>
The Adviser also manages and sponsors retail mutual funds, which are organized
in jurisdictions outside the United States, generally Luxembourg and Japan, and
sold to non-United States resident investors. The Adviser charges the following
fees for Global High Yield and U.S. High Yield, which are Luxembourg funds that
have a somewhat similar investment style as the Fund:
Fund Fee(8)
-------------------------------------------
Global High Yield
Class A 1.70%
Class I (Institutional) 1.15%
U.S. High Yield
Class A 1.55%
Class I (Institutional) 0.75%
The Alliance Capital Investment Trust Management mutual funds ("ACITM"), which
are offered to investors in Japan, have an "all-in" fee to compensate the
Adviser for investment advisory as well as fund accounting and administrative
related services. The fee schedule of the ACITM mutual fund that has a somewhat
similar investment style as the Fund is as follows:
Fund ACITM Mutual Fund Fee
-------------------------------------------------------
High Yield Fund, Inc. High Yield Open Fund 1.00%
The Adviser represented that it does not sub-advise any registered investment
company that has a similar investment strategy as the Fund.
6 It should be noted that AVPS was affected by the settlement between the
Adviser and the NYAG.
7 The AVPS portfolio is a clone of the Fund.
8 Class A shares of the funds are charged an "all-in" fee, which covers
investment advisory services and distribution related services.
56 o ALLIANCEBERNSTEIN HIGH YIELD FUND
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES.
Lipper, Inc. ("Lipper"), an analytical service that is not affiliated with the
Adviser, compared the fees charged to the Fund with fees charged to other
investment companies for similar services by other investment advisers.
Lipper's analysis included the Fund's ranking with respect to the proposed
advisory fee relative to the median of the Fund's Lipper Expense Group
("EG")(9) at the approximate current asset level of the Fund.(10)
Lipper describes an EG as a representative sample of comparable funds. Lipper's
standard methodology for screening funds to be included in an EG entails the
consideration of several fund criteria, including fund type, investment
classification/objective, load type and similar 12b-1/non-12b-1 service fees,
asset (size) comparability, and expense components and attributes. An EG will
typically consist of seven to twenty funds.
Contractual Lipper
Management Expense Group
Fund Fee(11) Median Rank
----------------------------------------------------------------------
High Yield Fund, Inc. 0.500 0.638 2/16
Lipper also analyzed the Fund's most recently completed fiscal year total
expense ratio in comparison to the Fund's EG and Lipper Expense Universe
("EU"). The
9 It should be noted that Lipper does not consider average account size when
constructing EGs. Funds with relatively small average account sizes tend
to have higher transfer agent expense ratio than comparable sized funds that
have relatively large average account sizes. Note that there are limitations
on Lipper expense category data because different funds categorize expenses
differently.
10 The contractual management fee is calculated by Lipper using the Fund's'
contractual management fee rate at a hypothetical asset level. The
hypothetical asset level is based on the combined net assets of all classes
of the Fund, rounded up to the next $25 million. Lipper's total expense
ratio information is based on the most recent annual report except as
otherwise noted. A ranking of "1" means that the Fund has the lowest
effective fee rate in the Lipper peer group.
11 The contractual management fee does not reflect any expense reimbursements
made by the Fund to the Adviser for certain clerical, legal, accounting,
administrative, and other services. In addition, the contractual management
fee does not reflect any management fee waivers for expense caps that would
effectively reduce the actual contractual management fee.
ALLIANCEBERNSTEIN HIGH YIELD FUND o 57
EU(12) is a broader group compared to the EG, consisting of all funds that have
the same investment classification/objective and load type as the subject Fund.
Expense Lipper Exp. Lipper Exp.
Ratio Group Universe
Fund (%)(13) Median (%) Rank Median (%) Rank
-------------------------------------------------------------------------------
High Yield Fund, Inc. 1.160 1.130 13/16 1.063 55/73
Based on this analysis, the Fund has a more favorable ranking on a management
fee basis than it does on a total expense ratio basis.
III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO
THE ADVISORY FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.
A consultant was retained by the Senior Officer to work with the Adviser's
personnel to align the Adviser's two profitability reporting systems. The
alignment, which now has been completed, allows the Adviser's management and
the Directors to receive consistent presentations of the financial results and
profitability although the two profitability reporting systems operate
independently. See Section IV for additional discussion.
IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH
SERVICES.
The profitability information for the Fund prepared by the Adviser for the
Board of Directors was reviewed by the Senior Officer and the consultant. The
Adviser's profitability from providing investment advisory services to the Fund
decreased during calendar year 2005, relative to 2004.
In addition to the Adviser's direct profits from managing the Fund, certain of
the Adviser's affiliates have business relationships with the Fund and may earn
a profit from providing other services to the Fund. The courts have referred to
this type of business opportunity as "fall-out benefits" to the Adviser and
indicated that such benefits should be factored into the evaluation of the
total relationship between the Fund and the Adviser. Neither case law nor
common business practice precludes the Adviser's affiliates from earning a
reasonable profit on this type of relationship provided the affiliates' charges
and services are competitive. These affiliates provide transfer agent and
distribution related services to the Fund and receive transfer agent fees, Rule
12b-1 payments, front-end sales loads and contingent deferred sales charges
("CDSC").
12 Except for asset (size) comparability, Lipper uses the same criteria for
selecting a Lipper Expense Group when selecting a Lipper Expense Universe.
Unlike the Lipper Expense Group, the Lipper Expense Universe allows for
the same adviser to be represented by more than just one fund.
13 Most recently completed fiscal year Class A share total expense ratio.
58 o ALLIANCEBERNSTEIN HIGH YIELD FUND
AllianceBernstein Investments, Inc. ("ABI"), an affiliate of the Adviser, is
the Fund's principal underwriter. ABI and the Adviser have disclosed in the
Fund's prospectus that they may make revenue sharing payments from their own
resources, in addition to resources derived from sales loads and Rule 12b-1
fees, to firms that sell shares of the Fund. In 2005, ABI paid approximately
0.042% of the average monthly assets of the AllianceBernstein Mutual Funds or
approximately $18.0 million for distribution services and educational support
(revenue sharing payments). For 2006, it is anticipated, ABI will pay
approximately 0.04% of the average monthly assets of the AllianceBernstein
Mutual Funds or approximately $17.5 million.(14) During the Fund's most
recently completed fiscal year, ABI received from the Fund $9,851, $2,784,048
and $238,286 in front-end sales charges, Rule 12b-1 and CDSC fees, respectively.
Fees and reimbursements for out of pocket expenses charged by AllianceBernstein
Investor Services, Inc. ("ABIS"), the affiliated transfer agent for the Fund,
are charged on a per account basis, based on the level of service provided
and the class of share held by the account. ABIS also receives a fee per
shareholder sub-account for each account maintained by an intermediary on an
omnibus basis. ABIS' after-tax profitability increased in 2005 in comparison to
2004. During the Fund's most recently completed fiscal year, ABIS received
$625,973 in fees from the Fund.(15)
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that the breakpoints in the fee schedules being
proposed reflect a sharing of economies of scale to the extent they exist.
Based on some of the professional literature that has considered economies of
scale in the mutual fund industry, it is thought that to the extent economies
of scale exist, they may more often exist across a fund family as opposed to a
specific fund. This is because the costs incurred by the Adviser, such as
investment research or technology for trading or compliance systems can be
spread across a greater asset base as the fund family increases in size. It is
also possible that as the level of services required to operate a successful
investment company has increased over time, and advisory firms have made such
investments in their business to provide improved services, there may be a
sharing of economies of scale without a reduction in advisory fees.
14 ABI currently inserts the "Advance" in quarterly account statements and
pays the incremental costs associated with the mailing. The incremental
cost is less than what an "independent mailing" would cost.
15 The fees disclosed are net of any expense offsets with ABIS. An expense
offset is created by the interest earned on the positive cash balance that
occur within the transfer agent account as there is a one day lag with
regards to money movement from the shareholder's account to the transfer
agent's account and then the transfer agent's account to the Fund's
account. During the Fund's most recently completed fiscal year, the fees
paid by the Fund to ABIS were reduced by $5,807 under the offset agreement
between the Portfolio and ABIS.
ALLIANCEBERNSTEIN HIGH YIELD FUND o 59
An independent consultant, retained by the Senior Officer, made a presentation
to the Board of Directors regarding possible economies of scale or scope in
the mutual fund industry. Based on the presentation, it was evident that fund
management companies benefit from economies of scale. However, due to the lack
of cost data, researchers had to infer facts about the costs from the behavior
of fund expenses; there was a lack of consensus among researchers as to whether
economies of scale were being passed on to the shareholders. In the meantime,
it is clear that to the extent a fund's assets were to exceed the initial
breakpoint its shareholders would benefit from a lower fee rate.
VI. NATURE AND QUALITY OF THE ADVISER'S SERVICES, INCLUDING THE PERFORMANCE OF
THE FUND
With assets under management of approximately $659 billion as of September 30,
2006, the Adviser has the investment experience to manage and provide
non-investment services (described in Section I) to the Fund.
The information below shows the 1, 3, and 5 year performance returns and
rankings of the Fund(16) relative to the Fund's Lipper Performance Group ("PG")
and Lipper Performance Universe ("PU")(17) for the periods ended June 30,
2006.(18)
Fund PG PU PG PU
Return Median Median Rank Rank
-------------------------------------------------------
1 year 2.24 4.41 4.71 16/16 87/91
3 year 6.38 7.48 7.92 14/16 69/82
5 year 6.05 6.70 7.72 8/12 61/70
16 The performance returns and rankings are for the Class A shares of the
Fund. It should be noted that the performance returns of the Fund that is
shown was provided by the Adviser. Lipper maintains its own database that
includes the Fund's performance returns. However, differences in
distribution price (ex-date versus payable date) and rounding differences
may cause the Adviser's own performance returns of the Fund to be one or
two basis points different from Lipper. To maintain consistency in this
evaluation, the performance returns of the Fund, as reported by the
Adviser, are provided instead of Lipper.
17 The Fund's PG is identical to the Fund's EG. The Fund's PU is not identical
to the Fund's EU. In addition to outliers, funds with negative management
fees are excluded from EUs but not necessarily from PUs.
18 Note that the current Lipper investment classification/objective dictates
the PG and PU throughout the life of the Fund even if a Fund may have had a
different investment classification/objective at different points in time.
60 o ALLIANCEBERNSTEIN HIGH YIELD FUND
Set forth below are the 1, 3, and 5 year and since inception performance
returns of the Fund (in bold) versus its benchmark:(19)
Periods Ending June 30, 2006
Annualized Performance
1 3 5 Since
Funds Year Year Year Inception
-------------------------------------------------------------------------------
High Yield Fund, Inc. 2.24 6.38 6.05 3.79
Lehman Brothers U.S. High Yield-2%
Issuer Cap Index 4.37 8.41 8.79 6.10
CONCLUSION:
Based on the factors discussed above the Senior Officer's conclusion is that
the proposed advisory fee for the Fund is reasonable and within the range of
what would have been negotiated at arms-length in light of all the surrounding
circumstances. This conclusion in respect of the Fund is based on an evaluation
of all of these factors and no single factor was dispositive.
Dated: November 15, 2006
19 The Adviser provided fund and benchmark performance return information for
periods through June 30, 2006.
ALLIANCEBERNSTEIN HIGH YIELD FUND o 61
THIS PAGE IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
ALLIANCEBERNSTEIN FAMILY OF FUNDS
Wealth Strategies Funds
---------------------------------------------
Balanced Wealth Strategy
Wealth Appreciation Strategy
Wealth Preservation Strategy
Tax-Managed Balanced Wealth Strategy
Tax-Managed Wealth Appreciation Strategy
Tax-Managed Wealth Preservation Strategy
---------------------------------------------
Blended Style Funds
---------------------------------------------
U.S. Large Cap Portfolio
International Portfolio
Tax-Managed International Portfolio
---------------------------------------------
Growth Funds
---------------------------------------------
Domestic
Growth Fund
Mid-Cap Growth Fund
Large Cap Growth Fund
Small Cap Growth Portfolio
Global & International
Global Health Care Fund
Global Research Growth Fund
Global Technology Fund
Greater China '97 Fund
International Growth Fund
International Research Growth Fund
---------------------------------------------
Value Funds
---------------------------------------------
Domestic
Balanced Shares
Focused Growth & Income Fund
Growth & Income Fund
Small/Mid Cap Value Fund
Utility Income Fund
Value Fund
Global & International
Global Real Estate Investment Fund*
Global Value Fund
International Value Fund
---------------------------------------------
Taxable Bond Funds
---------------------------------------------
Global Government Income Trust
Corporate Bond Portfolio
Emerging Market Debt Fund
Global Strategic Income Trust
High Yield Fund
Intermediate Bond Portfolio
Short Duration Portfolio
U.S. Government Portfolio
---------------------------------------------
Municipal Bond Funds
---------------------------------------------
National Michigan
Insured National Minnesota
Arizona New Jersey
California New York
Insured California Ohio
Florida Pennsylvania
Massachusetts Virginia
---------------------------------------------
Intermediate Municipal Bond Funds
---------------------------------------------
Intermediate California
Intermediate Diversified
Intermediate New York
---------------------------------------------
Closed-End Funds
---------------------------------------------
All-Market Advantage Fund
AllianceBernstein Global High Income Fund*
AllianceBernstein Income Fund*
ACM Managed Dollar Income Fund
ACM Managed Income Fund
California Municipal Income Fund
AllianceBernstein National Municipal Income Fund*
New York Municipal Income Fund
The Spain Fund
---------------------------------------------
Retirement Strategies Funds
---------------------------------------------
2000 Retirement Strategy
2005 Retirement Strategy
2010 Retirement Strategy
2015 Retirement Strategy
2020 Retirement Strategy
2025 Retirement Strategy
2030 Retirement Strategy
2035 Retirement Strategy
2040 Retirement Strategy
2045 Retirement Strategy
We also offer Exchange Reserves,** which serves as the money market fund
exchange vehicle for the AllianceBernstein mutual funds.
You should consider the investment objectives, risks, charges and expenses of
any AllianceBernstein fund/portfolio carefully before investing. For free
copies of our prospectuses, which contain this and other information, visit us
online at www.alliancebernstein.com or contact your financial advisor. Please
read the prospectus carefully before investing.
* Prior to January 26, 2007, AllianceBernstein Global High Income Fund was
named Alliance World Dollar Government Fund II and AllianceBernstein
Income Fund was named ACM Income Fund. Prior to March 1, 2007, Global Real
Estate Investment Fund was named Real Estate Investment Fund. Prior to May
18, 2007, AllianceBernstein National Municipal Income Fund was named
National Municipal Income Fund.
** An investment in the Fund is not a deposit in a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although the Fund seeks to preserve the value of your
investment at $1.00 per share, it is possible to lose money by investing
in the Fund.
62 o ALLIANCEBERNSTEIN HIGH YIELD FUND
NOTES
ALLIANCEBERNSTEIN HIGH YIELD FUND o 63
NOTES
64 o ALLIANCEBERNSTEIN HIGH YIELD FUND
ALLIANCEBERNSTEIN HIGH YIELD FUND
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
[LOGO]
ALLIANCEBERNSTEIN
INVESTMENTS
HY-0152-0307
ITEM 2. CODE OF ETHICS.
Not applicable when filing a semi-annual report to shareholders.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable when filing a semi-annual report to shareholders.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable when filing a semi-annual report to shareholders.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to the registrant.
ITEM 6. SCHEDULE OF INVESTMENTS.
Please see Schedule of Investments contained in the Report to Shareholders
included under Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the registrant.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the registrant.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable to the registrant.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the Fund's Board of Directors since the Fund last
provided disclosure in response to this item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial
officer have concluded that the registrant's disclosure controls and procedures
(as defined in Rule 30a-2(c) under the Investment Company Act of 1940, as
amended) are effective at the reasonable assurance level based on their
evaluation of these controls and procedures as of a date within 90 days of the
filing date of this document.
(b) There were no changes in the registrant's internal controls over financial
reporting that occurred during the second fiscal quarter of the period that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 12. EXHIBITS
The following exhibits are attached to this Form N-CSR:
EXHIBIT NO. DESCRIPTION OF EXHIBIT
12 (b) (1) Certification of Principal Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
12 (b) (2) Certification of Principal Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
12 (c) Certification of Principal Executive Officer and Principal
Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant): AllianceBernstein High Yield Fund, Inc.
By: /s/ Marc O. Mayer
-----------------
Marc O. Mayer
President
Date: May 30, 2007
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Marc O. Mayer
-----------------
Marc O. Mayer
President
Date: May 30, 2007
By: /s/ Joseph J. Mantineo
----------------------
Joseph J. Mantineo
Treasurer and Chief Financial Officer
Date: May 30, 2007
??
??
??
??
</TEXT>
</DOCUMENT>