-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BU2QW+t+qGtufkJAt1mhe9RnaZR0luksIc3Bi/1CysF0n11WcYsKzE1OKVC3thEk u8WbWMt+pm4lbuKIR0Jb+g== 0000936772-03-000467.txt : 20031210 0000936772-03-000467.hdr.sgml : 20031210 20031210143836 ACCESSION NUMBER: 0000936772-03-000467 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20030930 FILED AS OF DATE: 20031210 EFFECTIVENESS DATE: 20031210 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLIANCEBERNSTEIN BOND FUND INC CENTRAL INDEX KEY: 0000003794 IRS NUMBER: 132754393 FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-02383 FILM NUMBER: 031047025 BUSINESS ADDRESS: STREET 1: 500 PLAZA DRIVE STREET 2: 1345 AVENUE OF THE AMERICAS CITY: SECAUCUS STATE: NJ ZIP: 07094 BUSINESS PHONE: 2013194105 MAIL ADDRESS: STREET 1: 500 PLAZA DRIVE STREET 2: 1345 AVENUE OF THE AMERICAS CITY: SECAUCUS STATE: NJ ZIP: 07094 FORMER COMPANY: FORMER CONFORMED NAME: ALLIANCE BOND FUND INC DATE OF NAME CHANGE: 19920703 N-CSR 1 edg9542_ar.txt 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: 811-2383 AllianceBernstein Bond Fund, Inc. (Exact name of registrant as specified in charter) 1345 Avenue of the Americas, New York, New York 10105 (Address of principal executive offices) (Zip code) Mark R. Manley. Alliance Capital Management, 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, 2003 Date of reporting period: September 30, 2003 ITEM 1. REPORTS TO STOCKHOLDERS. [LOGO] ALLIANCEBERNSTEIN(SM) Investment Research and Management AllianceBernstein Bond Fund U.S. Government Portfolio - -------------------------------------------------------------------------------- U.S. Government Fixed Income Annual Report--September 30, 2003 - -------------------------------------------------------------------------------- Investment Products Offered --------------------------- o Are Not FDIC Insured o May Lose Value o Are Not Bank Guaranteed --------------------------- 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, without charge, upon request by visiting Alliance Capital's web site at www.investor.alliancecapital.com or on the Securities and Exchange Commission's web site at http://www.sec.gov, or by calling Alliance Capital at (800) 227-4618. AllianceBernstein Investment Research and Management, Inc., the principal underwriter of the AllianceBernstein mutual funds and an affiliate of Alliance Capital Management L.P., the manager of the funds, is a member of the NASD. November 19, 2003 Annual Report This report provides management's discussion of fund performance for AllianceBernstein Bond Fund U.S. Government Portfolio (the "Portfolio") for the annual reporting period ended September 30, 2003. Investment Objective and Policies This open-end fund seeks a high level of current income that is consistent with Alliance's determination of prudent investment risk. The Portfolio invests primarily in U.S. government securities, repurchase agreements and forward contracts relating to U.S. government securities. Investment Results The following table shows the performance of the Portfolio for the six- and 12-month periods ended September 30, 2003. Also included in the table are returns for the Portfolio's benchmark, the Lehman Brothers (LB) Government Bond Index, which represents the U.S. government bond market, and the Lipper General U.S. Government Funds Average (the "Lipper Average"). INVESTMENT RESULTS* Periods Ended September 30, 2003 ----------------------------- Returns ----------------------------- 6 Months 12 Months - --------------------------------------------------------------------------- AllianceBernstein Bond Fund U.S. Government Portfolio Class A 0.20% 1.16% - --------------------------------------------------------------------------- Class B -0.15% 0.45% - --------------------------------------------------------------------------- Class C -0.15% 0.45% - --------------------------------------------------------------------------- Lehman Brothers Government Bond Index 1.72% 3.55% - --------------------------------------------------------------------------- Lipper General U.S. Government Funds Average 0.79% 2.23% - --------------------------------------------------------------------------- * The Portfolio's investment results are for the periods shown and are based on the net asset value (NAV) of each class of shares as of September 30, 2003. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. All fees and expenses related to the operation of the Portfolio have been deducted, but no adjustment has been made for sales charges that may apply when shares are purchased or redeemed. Returns for Advisor Class shares will vary due to different expenses associated with this class. Returns for the Portfolio include the reinvestment of any distributions paid during each period. Past performance is no guarantee of future results. The unmanaged Lehman Brothers (LB) Government Bond Index is composed of the LB U.S. Treasury and Agency Bond Indices, the LB 1-3 Year Government Index and the LB 20+ Year Treasury Index. The unmanaged Lipper General U.S. Government Funds Average is based on the performance of a universe of funds that invests at least 65% of their assets in U.S. government and agency issues. These funds generally have similar investment objectives to the Portfolio, although investment policies for the various funds may differ. In particular, many funds in the Lipper U.S. government universe are not required to invest solely in securities backed by the full faith and credit of the U.S. For the six- and 12-month periods ended September 30, 2003, the Lipper Average consisted of 187 and 183 funds, respectively. An investor cannot invest directly in an index, and its results are not indicative of any particular investment, including AllianceBernstein Bond Fund U.S. Government Portfolio. Additional investment results appear on page 5. - -------------------------------------------------------------------------------- ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 1 For the six- and 12-month periods ended September 30, 2003, the Portfolio underperformed its benchmark, the LB Government Bond Index, and the Lipper Average. The Portfolio was positioned to benefit from investments in longer-dated U.S. Treasury notes and bonds, which underperformed short-dated Treasuries as the U.S. Federal Reserve kept interest rates lower than expected. In April, the U.S. Federal Reserve announced concerns about deflation risk and moved to an easing bias, finally cutting interest rates by 25 basis points to 1.00% in its June meeting. Nonetheless, this position allowed the Portfolio to maintain an attractive current yield and dividend for shareholders. Another investment strategy that contributed positively to the earnings power of the Portfolio was an overweight position in highly-rated asset-backed (ABS) and commercial mortgage-backed (CMBS) securities. These securities provide incremental yield over government securities and are limited to 20% of the Portfolio's assets. While this strategy added to performance through June, wider spreads when interest rates rose dramatically from July through August subtracted from the Portfolio's performance. During the final three months of the annual reporting period, the Portfolio was positioned to benefit from higher interest rates. Throughout most of this period, the Portfolio was 5% to 10% underweight versus the LB Government Bond Index. This position added to performance in July and August as interest rates climbed, but detracted from performance in September when interest rates fell. In addition, wider spreads from the CMBS and ABS positions overwhelmed the earlier benefit to performance. Market Review and Investment Strategy Business conditions worsened in the first three months of 2003, despite record high corporate cash flow, signs of consumer strength in rising building permits and a new high in the mortgage refinance index. The U.S. economy contracted in February and March, in part because of bad weather, and also because of corporate and consumer hesitancy to make purchase and investment decisions during the war. As the economy began to recover, the six-month period ended September 30, 2003 proved to be one of the most volatile periods in recent history for the U.S. fixed income markets. During the first half of this period, interest rates fell rapidly as the economic landscape appeared bleak and the U.S. Federal Reserve raised the possibility of quantitative easing. After a 25 basis point cut in rates on June 25, interest rates suddenly reversed course and began a two-month bear market that saw rates rise more than 100 basis points. The result was a period of sustained interest rate volatility, driven not only by economic uncertainty, but also by mortgage hedging from large financial institutions. We maintained the Portfolio's interest rate exposure at a level slightly below the market index during most of this period in the belief that economic growth would inevitably lead to higher rates. While this view eventually was realized in July, the degree by which spreads widened was excessive. In fact, spreads have begun to recover in the fourth quarter of 2003, as interest rates stabilized and the bond market developed a range trading posture. - -------------------------------------------------------------------------------- 2 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO PERFORMANCE UPDATE ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO GROWTH OF A $10,000 INVESTMENT 9/30/93 TO 9/30/03 [THE FOLLOWING TABLE WAS DEPICTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL.] Lehman Brothers Government Bond Index: $19,186 Lipper General U.S. Government Funds Average: $17,383 AllianceBernstein Bond Fund U.S. Government Portfolio Class A: $16,683 AllianceBernstein Lehman Brothers Lipper General Bond Fund U.S. Government Bond U.S. Government Government Portfolio Index Funds Average - -------------------------------------------------------------------------------- 9/30/93 $10,000 $10,000 $10,000 9/30/94 9,539 9,596 9,518 9/30/95 10,667 10,898 10,754 9/30/96 10,847 11,380 11,094 9/30/97 11,749 12,422 12,079 9/30/98 13,204 14,111 13,566 9/30/99 12,848 13,871 13,199 9/30/00 13,707 14,867 14,033 9/30/01 15,301 16,838 15,707 9/30/02 16,491 18,528 16,994 9/30/03 16,683 19,186 17,383 This chart illustrates the total value of an assumed $10,000 investment in AllianceBernstein Bond Fund U.S. Government Portfolio Class A shares (from 9/30/93 to 9/30/03) as compared to the performance of an appropriate index. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The chart reflects the deduction of the maximum 4.25% sales charge from the initial $10,000 investment in the Portfolio and assumes the reinvestment of dividends and capital gains. Performance for Class B, Class C and Advisor Class shares will vary from the results shown above due to differences in expenses charged to these classes. Past performance is not indicative of future results, and is not representative of future gain or loss in capital value or dividend income. The unmanaged Lehman Brothers (LB) Government Bond Index is composed of the LB U.S. Treasury and Agency Bond Indices, the LB 1-3 Year Government Index and the LB 20+ Year Treasury Index. The unmanaged Lipper General U.S. Government Funds Average is based on the performance of 64 funds (based on the number of funds in the average from 9/30/93 to 9/30/03). These funds generally have similar investment objectives to the Portfolio, although investment policies for the various funds may differ. When comparing AllianceBernstein Bond Fund U.S. Government Portfolio to the index and average shown above, you should note that no sales charges are reflected in the performance of the index. An investor cannot invest directly in an index or an average, and its results are not indicative of any specific investment, including AllianceBernsetein Bond Fund U.S. Government Portfolio. - -------------------------------------------------------------------------------- ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 3 PORTFOLIO SUMMARY September 30, 2003 INCEPTION DATES PORTFOLIO STATISTICS Class A Shares Net Assets ($mil): $1,581.9 12/1/85 Class B Shares 9/30/91 Class C Shares 5/3/93 SECURITY TYPE 54.0% U.S. Treasury Securities 16.9% Collateralized Mortgage Obligations/Asset Backed Securities 12.9% Federal National Mortgage Association [PIE CHART OMITTED] 11.0% Federal Home Loan Mortgage Corporation 2.8% Government National Mortgage Association 1.4% Stripped MBS 0.8% Federal Agricultural Mortgage Corporation 0.2% Short-Term All data as of September 30, 2003. The Portfolio's security type breakdown is expressed as a percentage of total investments and may vary over time. - -------------------------------------------------------------------------------- 4 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO Investment Results - -------------------------------------------------------------------------------- INVESTMENT RESULTS AVERAGE ANNUAL RETURNS AS OF SEPTEMBER 30, 2003 Class A Shares - -------------------------------------------------------------------------------- Without Sales Charge With Sales Charge 1 Year 1.16% -3.09% 5 Years 4.79% 3.88% 10 Years 5.25% 4.79% SEC Yield* 4.73% Class B Shares - -------------------------------------------------------------------------------- Without Sales Charge With Sales Charge 1 Year 0.45% -2.45% 5 Years 4.04% 4.04% 10 Years(a) 4.80% 4.80% SEC Yield* 4.21% Class C Shares - -------------------------------------------------------------------------------- Without Sales Charge With Sales Charge 1 Year 0.45% -0.52% 5 Years 4.07% 4.07% 10 Years 4.51% 4.51% SEC Yield* 4.22% The Portfolio's investment results represent average annual returns. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The returns reflect reinvestment of dividends and/or capital gains distributions in additional shares without and with the effect of the 4.25% maximum front-end sales charge for Class A or applicable contingent deferred sales charge for Class B (3% year 1, 2% year 2, 1% year 3, 0% year 4); and for Class C shares (1% year 1). Returns for Class A shares do not reflect the imposition of the 1 year, 1% contingent deferred sales charge for accounts over $1,000,000. Returns for Advisor Class shares will vary due to different expenses associated with this class. The Portfolio normally invests all of its assets in securities that are rated at least BBB by Standard & Poor's or, if unrated, are of comparable quality. The Portfolio also may invest in convertible debt securities, preferred stock and dividend-paying stocks, U.S. government obligations, and foreign fixed-income securities. The Portfolio may invest a portion of its assets in foreign securities, which may magnify fluctuations. Price fluctuations may also be caused by changes in interest rates or bond credit quality ratings. These changes have a greater effect on bonds with longer maturities than on those with shorter maturities. Past performance does not guarantee future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. * SEC yields are based on SEC guidelines and are calculated on 30 days ended September 30, 2003. (a) Assumes conversion of Class B shares into Class A shares after six years. - -------------------------------------------------------------------------------- ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 5 Portfolio of Investments - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS September 30, 2003
Principal Amount (000) U.S. $ Value - --------------------------------------------------------------------------------------------------------- U.S. GOVERNMENT & GOVERNMENT SPONSORED AGENCY OBLIGATIONS-99.8% U.S. Treasury Bonds-29.9% 6.125%, 11/15/27 ........................................... $ 15,000 $ 17,378,325 6.25%, 8/15/23-5/15/30(a) .................................. 85,000 99,569,350 6.375%, 8/15/27(a) ......................................... 40,000 47,745,320 7.125%, 2/15/23(a) ......................................... 45,000 57,642,210 7.25%, 5/15/16 ............................................. 20,000 25,578,140 7.50%, 11/15/16(a) ......................................... 95,000 124,041,880 11.25%, 2/15/15 ............................................ 20,000 32,866,420 12.50%, 8/15/14(a) ......................................... 45,150 67,922,531 -------------- 472,744,176 -------------- U.S. Treasury Notes-36.3% 2.00%, 5/15/06 ............................................. 192,000 193,387,584 3.00%, 2/15/08 ............................................. 50,000 50,878,950 3.125%, 9/15/08(b) ......................................... 225,000 228,199,275 3.625%, 5/15/13 ............................................ 20,000 19,636,720 4.25%, 8/15/13 ............................................. 80,000 82,034,400 -------------- 574,136,929 -------------- Federal National Mortgage Association-15.8% zero coupon, 2/15/08 ....................................... 22,130 19,453,487 2.90%, 10/25/32 ............................................ 9,027 9,060,851 5.00%, TBA ................................................. 350 350,109 6.00%, 12/01/13-9/01/33 .................................... 80,668 83,661,648 7.00%, 4/01/07-1/01/21 ..................................... 97,471 103,627,351 7.50%, 12/01/09-4/01/17 .................................... 12,579 13,416,264 8.00%, 3/25/07 ............................................. 3,299 3,497,050 8.50%, 4/01/08 ............................................. 2,915 3,058,423 9.00%, 8/01/21 ............................................. 941 1,041,992 10.00%, 11/01/13-10/01/14 .................................. 10,507 11,905,154 11.00%, 7/01/16 ............................................ 898 1,037,995 -------------- 250,110,324 -------------- Federal Home Loan Mortgage Corp.-13.5% 1.52%, 2/15/33 ............................................. 15,226 15,240,646 2.75%, 10/06/06 ............................................ 30,000 30,028,200 4.05%, 6/21/05(a) .......................................... 25,000 25,527,100 4.50%, 7/15/13 ............................................. 45,000 45,531,495 6.00%, 3/15/23(a) .......................................... 13,739 14,351,645 6.75%, 3/15/31(a) .......................................... 60,000 71,467,080 7.00%, 12/01/10 ............................................ 4,042 4,257,818 8.00%, 9/01/11 ............................................. 1,983 2,093,925 12.00%, 8/01/15-7/01/20 .................................... 3,947 4,540,566 -------------- 213,038,475 --------------
- -------------------------------------------------------------------------------- 6 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO Portfolio of Investments - --------------------------------------------------------------------------------
Principal Amount (000) U.S. $ Value - --------------------------------------------------------------------------------------------------------- Government National Mortgage Association-3.4% Single Family Homes 7.50%, 12/15/14-3/15/32 .................................... $ 36,844 $ 39,500,066 8.00%, 3/15/12 ............................................. 9,087 9,755,491 8.15%, 9/15/20 ............................................. 1,374 1,494,213 9.00%, 12/15/09-12/15/19 ................................... 2,991 3,281,582 -------------- 54,031,352 -------------- Federal Agricultural Mortgage Association-0.9% 6.725%, 7/25/13 ............................................ 14,034 14,776,299 -------------- Total U.S. Government & Government Sponsored Agency Obligations (cost $1,543,326,269) ...................................... 1,578,837,555 -------------- COLLATERALIZED MORTGAGE OBLIGATIONS-9.5% Bank of America Alternative Loan Trust Series 2003-7 Cl.A1 5.50%, 9/25/33 ............................................. 19,821 20,195,240 Citicorp Mortgage Securities, Inc. Series 1987-3 Cl.A1 9.00%, 5/25/17 ............................................. 2,115 2,113,554 Countrywide Alternative Loan Trust Series 2003-21 Cl.A1 5.00%, 10/30/03 ............................................ 30,000 30,097,200 MLCC Mortgage Investors, Inc. Series 2003-F Cl.A1 1.44%, 10/25/28 ............................................ 20,000 20,000,000 Prudential Home Mortgage Securities Co. Series 1994-1 Cl.A11 6.00%, 2/25/09 ............................................. 22,204 22,231,333 Residential Finance Limited Partnership Series 2003-C Cl.B3 2.52%, 9/10/35(c) .......................................... 8,000 8,000,000 Structured Asset Securities Corp. Series 2003-20 Cl.1A1 5.50%, 7/25/33 ............................................. 18,257 18,405,302 Series 2003-7H Cl.A11 6.00%, 3/25/33 ............................................. 21,656 22,123,275 Summit Mortgage Trust Series 2003-1 Cl.1A1 6.88%, 4/28/35(c) .......................................... 6,322 6,341,606 -------------- Total Collateralized Mortgage Obligations (cost $150,439,664) ........................................ 149,507,510 --------------
- -------------------------------------------------------------------------------- ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 7 Portfolio of Investments - --------------------------------------------------------------------------------
Principal Amount (000) U.S. $ Value - --------------------------------------------------------------------------------------------------------- ASSET BACKED SECURITIES-6.0% ADJUSTABLE RATE Ameriquest Mortgage Securities, Inc. Series 2002-3 Cl.AV2 1.42%, 9/25/32 ............................................. $ 4,588 $ 4,590,442 GMAC Commercial Mortgage Securities, Inc. Series 2003-FL1AC Cl.A 1.48%, 3/11/15(c) .......................................... 21,062 21,060,382 Renaissance Home Equity Loan Trust Series 2003-2 Cl.A 1.56%, 8/25/33 ............................................. 24,648 24,648,236 Residential Asset Securities Corp. Series 2002-KS8 Cl.A3 3.69%, 4/25/27 ............................................. 10,000 10,231,300 Specialty Underwriting & Residential Finance Series 2003-BC3 Cl.A 1.47%, 8/25/34 ............................................. 20,000 19,990,600 Winston Funding, Ltd. Series 2003-1 Cl.A2 2.01%, 4/23/09(c) .......................................... 15,000 15,000,000 -------------- Total Asset Backed Securities (cost $95,283,887) ......................................... 95,520,960 -------------- COMMERCIAL MORTGAGE BACKED SECURITIES-5.3% Asset Securitization Corp. Series 1997-MD7 Cl.A1B 7.41%, 1/13/30 ............................................. 16,847 18,878,748 Commercial Mortgage Acceptance Corp. Series 1997-ML1 Cl.A2 6.53%, 12/15/30 ............................................ 13,077 13,894,312 Host Marriot Pool Trust Series 1999-HMTA Cl.E 8.07%, 8/03/15(c) .......................................... 9,800 10,705,593 Merrill Lynch Mortgage Investors, Inc. Series 1995-C3 Cl.D 7.851%, 12/26/25 ........................................... 20,016 21,817,440 Morgan Stanley Capital I Series 1998-CF1 Cl.A1 6.33%, 7/15/32 ............................................. 8,935 9,336,972 Teachers Insurance & Annuity Association Series 2001-Cl Cl.A2 6.30%, 6/19/21(c) .......................................... 8,225 9,065,582 -------------- Total Commercial Mortgage Backed Securities (cost $79,631,353) ......................................... 83,698,647 --------------
- -------------------------------------------------------------------------------- 8 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO Portfolio of Investments - --------------------------------------------------------------------------------
Principal Amount (000) U.S. $ Value - --------------------------------------------------------------------------------------------------------- STRIPPED MORTGAGE BACKED SECURITIES-1.8% Credit Suisse First Boston Mortgage Series 2001-CK3 Cl.AX 1.272%, 6/15/34(c) ......................................... $ 38,231 $ 2,182,963 Greenwich Capital Commercial Funding Corp. Series 2003-C1 Cl.XC 0.22%, 7/05/35(c) .......................................... 112,969 5,117,510 Morgan Stanley Capital I Series 2003-IQ4 Cl.X1 0.20%, 5/15/40(c) .......................................... 102,672 3,506,233 Mortgage Capital Funding, Inc. Series 1996-MC2 Cl.X 2.08%, 12/21/26 ............................................ 95,336 4,051,788 Prudential Securities Secured Financing Corp. Series 1999-NRF1 Cl.AEC 0.89%, 11/01/31(c) ......................................... 326,691 12,303,164 SACO I, Inc. Series 1997-2 Cl.X 1.55%, 8/25/36(c) .......................................... 28,739 723,077 -------------- Total Stripped Mortgage Backed Securities (cost $34,417,934) ......................................... 27,884,735 -------------- SHORT-TERM INVESTMENT-0.2% U.S. Treasury Bills-0.2% zero coupon, 11/20/03(d) (amortized cost $3,245,780) ................................ 3,250 3,245,780 -------------- Total Investments Before Security Lending Collateral-122.6% (cost $1,906,344,887) ...................................... 1,938,695,187 -------------- Investment of Cash Collateral for Securities Loaned*-35.7% Short Term Investments Associated Finance 1.50%, 11/1/03 ............................................. 1,800 1,880,894 Bank of America 1.26%, 6/15/04 ............................................. 25,295 27,452,923 Concord 1.06%-1.14%, 10/2/03-10/10/03 .............................. 72,120 72,087,393 FHLB 1.30%-1.40%, 6/28/04-1/24/05 ............................... 45,000 45,000,000 FHLMC 1.11%-1.31%, 8/30/04-9/9/05 ................................ 48,500 48,500,000 FNMA 2.00%, 5/5/05 .............................................. 34,128 34,128,000 General Electric 1.27%-1.44%, 11/3/03-3/19/04 ............................... 13,245 14,024,222
- -------------------------------------------------------------------------------- ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 9 Portfolio of Investments - --------------------------------------------------------------------------------
Principal Amount (000) U.S. $ Value - --------------------------------------------------------------------------------------------------------- Gotham Funding 1.13%, 10/15/03 ............................................ $ 30,048 $ 30,028,194 Household Finance 1.35-1.65%, 10/15/03-5/1/04 ................................ 35,779 36,211,845 K2 (USA) LLC 1.21%, 4/26/04 ............................................. 10,000 10,040,972 LB Baden-Wuerttemberg 1.27%, 4/15/04 ............................................. 5,000 5,332,956 RBS 1.50%, 11/15/03 ............................................ 5,000 5,401,715 Sigma Finance 1.12%-1.18%, 12/15/03-6/16/04 .............................. 150,000 150,101,108 Wells Fargo 1.20%-1.30%, 11/1/03-7/15/04 ............................... 13,640 14,353,207 -------------- 494,543,429 -------------- Shares ---------- UBS Private Money Market Fund, LLC 1.03%....................................................... 70,189,809 70,189,809 -------------- Total Investments of Cash Collateral for Securities Loaned (cost $564,733,238) ........................................ 564,733,238 -------------- Total Investments-158.3% (cost $2,471,078,125) ...................................... 2,503,428,425 Other assets less liabilities-(58.3%) ......................... (921,545,103) -------------- Net Assets-100% ............................................... $1,581,883,322 ============== Contracts(e) ------------ Call Option Written (see Note D) U.S. Treasury Notes expiring Oct. '03 @ $99.625 (premiums received $1,072,265)........... 2,250 $ (3,919,923) --------------
FINANCIAL FUTURES CONTRACTS SOLD (see Note D)
Value at Number of Expiration Original September 30, Unrealized Type Contracts Month Value 2003 Depreciation ================= ========= ============= ============ ============= ============= U.S. Treasury Note 10 Yr Future 1,375 December 2003 $152,349,708 $157,609,375 $ (5,259,667) U.S. Treasury Note 5 Yr Future 1,364 December 2003 149,841,504 154,771,375 (4,929,871) ------------- $(10,189,538) -------------
- -------------------------------------------------------------------------------- 10 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO Portfolio of Investments - -------------------------------------------------------------------------------- REVERSE REPURCHASE AGREEMENTS (see Note D) Broker Interest Rate Maturity Amount ============ ============= ======== ============ Goldman Sachs & Co. 1.12% 10/07/03 $ 8,268,257 UBS Warburg 1.15 10/03/03 11,701,869 UBS Warburg 1.12 10/06/03 25,776,604 UBS Warburg 1.10 10/02/03 119,939,985 UBS Warburg 1.09 10/03/03 124,848,898 UBS Warburg 1.05 10/06/03 87,080,079 ------------ $377,615,692 ------------ * See Note E for securities lending information. (a) Positions, or portions thereof, with an aggregate market value of $383,411,426 have been segregated to collateralize reverse repurchase agreements. (b) Securities on which option is written (par value subject to call have an aggregate market value of $228,199,275). (c) Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At September 30, 2003, the aggregate market value of these securities amounted to $94,006,110 or 5.9% of net assets. (d) Position with a market value of $3,245,780 has been segregated to collateralize margin requirements for open futures contracts. (e) One contract relates to principal amount of $100,000. Glossary of Terms: FHLB - Federal Home Loan Bank FHLMC - Federal Home Loan Mortgage Corporation FNMA - Federal National Mortgage Association TBA - (To Be Assigned) - Security is purchased on a forward commitment with an appropriate principal amount (generally +/- 1.0%) and no definite maturity date. The actual principal amount and maturity date will be determined upon settlement when the specific mortgage pools are assigned. See notes to financial statements. - -------------------------------------------------------------------------------- ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 11 Statement of Assets & Liabilities - -------------------------------------------------------------------------------- STATEMENT OF ASSETS & LIABILITIES September 30, 2003 Assets Investments in securities, at value (cost $2,471,078,125--including investment of cash collateral for securities loaned of $564,733,238) ... $ 2,503,428,425(a) Cash ................................................... 20,790,312 Due from broker(b) ..................................... 339,000 Receivable for investment securities sold .............. 326,845,746 Interest receivable .................................... 13,770,654 Receivable for capital stock sold ...................... 2,134,380 --------------- Total assets ........................................... 2,867,308,517 --------------- Liabilities Outstanding call options written, at value (premiums received $1,072,265) ...................... 3,919,923 Payable for collateral on securities loaned ............ 564,733,238 Payable for reverse repurchase agreements .............. 377,615,692 Payable for investment securities purchased ............ 325,806,040 Payable for capital stock redeemed ..................... 5,367,239 Payable for variation margin on futures contracts ...... 2,612,500 Advisory fee payable ................................... 2,104,890 Dividends payable ...................................... 1,794,985 Distribution fee payable ............................... 671,165 Accrued expenses ....................................... 799,523 --------------- Total liabilities ...................................... 1,285,425,195 --------------- Net Assets ............................................. $ 1,581,883,322 =============== Composition of Net Assets Capital stock, at par .................................. $ 217,628 Additional paid-in capital ............................. 1,724,667,553 Distributions in excess of net investment income ....... (13,576,433) Accumulated net realized loss on investment transactions.............................. (148,736,569) Net unrealized appreciation of investments ............. 19,311,143 --------------- $1,581,883,322 ===============
- -------------------------------------------------------------------------------- 12 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO Statement of Assets & Liabilities - -------------------------------------------------------------------------------- Calculation of Maximum Offering Price Class A Shares Net asset value and redemption price per share ($811,376,104 / 111,658,861 shares of capital stock issued and outstanding) ........................................... $7.27 Sales charge--4.25% of public offering price ......................... .32 ----- Maximum offering price ............................................... $7.59 ===== Class B Shares Net asset value and offering price per share ($399,040,243 / 54,925,047 shares of capital stock issued and outstanding) ........................................... $7.27 ===== Class C Shares Net asset value and offering price per share ($167,358,967 / 23,004,655 shares of capital stock issued and outstanding) ........................................... $7.28 ===== Advisor Class Shares Net asset value, redemption and offering price per share ($204,108,008 / 28,039,607 shares of capital stock issued and outstanding) ........................................... $7.28 ===== (a) Includes securities on loan with a value of $559,066,809 (See Note E). (b) Cash segregated at broker to collateralize margin requirements for open futures contracts. See notes to financial statements. - -------------------------------------------------------------------------------- ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 13 Statement of Operations - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS
July 1, 2003 to Year Ended September 30, June 30, 2003* 2003 ============= ============= Investment Income Interest .............................. $ 19,241,002 $ 86,923,790 ------------ ------------- Expenses Advisory fee .......................... 2,104,878 9,698,623 Distribution fee--Class A ............. 631,330 2,702,157 Distribution fee--Class B ............. 1,106,714 5,220,716 Distribution fee--Class C ............. 454,736 2,293,231 Transfer agency ....................... 956,653 3,546,502 Printing .............................. 118,850 496,678 Custodian ............................. 97,387 402,874 Audit and legal ....................... 57,321 114,788 Registration fees ..................... 37,141 74,141 Administrative ........................ 30,340 124,000 Directors' fees ....................... 5,000 18,000 Miscellaneous ......................... 3,701 97,318 ------------ ------------- Total expenses before interest expense 5,604,051 24,789,028 Interest expense ...................... 285,376 226,944 ------------ ------------- Total expenses ........................ 5,889,427 25,015,972 Less: expense offset arrangement (see Note B) ....................... (94) (2,955) ------------ ------------- Net expenses .......................... 5,889,333 25,013,017 ------------ ------------- Net investment income ................. 13,351,669 61,910,773 ------------ ------------- Realized and Unrealized Gain (Loss) on Investment Transactions Net realized gain (loss) on: Investment transactions ............ (19,524,008) 53,152,476 Written options .................... -0- 954,531 Futures ............................ 5,732,872 (6,605,444) Swap contracts ..................... -0- (7,714,477) Net change in unrealized appreciation/depreciation of: Investments ........................ (23,100,425) 42,249,044 Written options .................... (2,847,658) -0- Futures ............................ (10,189,538) 1,239,412 Swap contracts ..................... -0- 2,598,092 ------------ ------------- Net gain (loss) on investment transactions ....................... (49,928,757) 85,873,634 ------------ ------------- Net Increase (Decrease) in Net Assets from Operations .................... $(36,577,088) $ 147,784,407 ============ =============
* The Portfolio changed its fiscal year end from June 30 to September 30. See notes to financial statements. - -------------------------------------------------------------------------------- 14 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO Statement of Changes in Net Assets - -------------------------------------------------------------------------------- STATEMENT OF CHANGES IN NET ASSETS
July 1, 2003 to Year Ended Year Ended September 30, June 30, June 30, 2003* 2003 2002 =============== =============== =============== Increase (Decrease) in Net Assets from Operations Net investment income ................ $ 13,351,669 $ 61,910,773 $ 76,503,030 Net realized gain (loss) on investment transactions .......... (13,791,136) 39,787,086 (2,033) Net change in unrealized appreciation/ depreciation of investments ........... (36,137,621) 46,086,548 20,025,936 --------------- --------------- --------------- Net increase (decrease) in net assets from operations ............ (36,577,088) 147,784,407 96,526,933 Dividends and Distributions to Shareholders from Net investment income Class A ............... (9,719,429) (41,821,063) (45,917,533) Class B ............... (4,297,353) (20,589,855) (16,272,061) Class C ............... (1,766,382) (9,059,572) (8,987,433) Advisor Class ......... (2,444,044) (8,628,587) (5,326,003) Distributions in excess of net investment income Class A ............... -0- -0- (3,697,433) Class B ............... -0- -0- (1,310,281) Class C ............... -0- -0- (722,436) Advisor Class ......... -0- -0- (428,868) Tax return of capital Class A ............... -0- -0- (3,106,367) Class B ............... -0- -0- (1,100,822) Class C ............... -0- -0- (606,948) Advisor Class ......... -0- -0- (360,309) Capital Stock Transactions Net increase (decrease) ............ (149,688,274) 72,866,684 279,883,858 --------------- --------------- --------------- Total increase (decrease) ............ (204,492,570) 140,552,014 288,574,297 Net Assets Beginning of period ...... 1,786,375,892 1,645,823,878 1,357,249,581 --------------- --------------- --------------- End of period ............ $ 1,581,883,322 $ 1,786,375,892 $ 1,645,823,878 =============== =============== ===============
* The Portfolio changed its fiscal year end from June 30 to September 30. See notes to financial statements. - -------------------------------------------------------------------------------- ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 15 Notes to Financial Statements - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS September 30, 2003 NOTE A Significant Accounting Policies AllianceBernstein Bond Fund, Inc. (the "Fund") is registered under the Investment Company Act of 1940 as a diversified, open-end management investment company. The Fund, which is a Maryland corporation, operates as a series company currently comprised of three portfolios: the Corporate Bond Portfolio, the Quality Bond Portfolio and the U.S. Government Portfolio. Each series is considered to be a separate entity for financial reporting and tax purposes. This report relates only to the U.S. Government Portfolio. The U.S. Government Portfolio (the "Portfolio") offers Class A, Class B, Class C and Advisor Class shares. Class A shares are sold with a front-end sales charge of up to 4.25% for purchases not exceeding $1,000,000. With respect to purchases of $1,000,000 or more, Class A shares redeemed within one year of purchase may be subject to a contingent deferred sales charge of 1%. Class B shares are currently sold with a contingent deferred sales charge which declines from 3% to zero depending on the period of time the shares are held. Class B shares will automatically convert to Class A shares six years after the end of the calendar month of purchase. Class C shares are subject to a contingent deferred sales charge of 1% on redemptions made within the first year after purchase. Advisor Class shares are sold without any initial or contingent deferred sales charge and are not subject to ongoing distribution expenses. Advisor Class shares are offered to investors participating in fee-based programs and to certain retirement plan accounts. All four classes of shares have identical voting, dividend, liquidation and other rights, except that each class bears different distribution expenses and has exclusive voting rights with respect to its distribution plan. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States 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. Additional information about some of the items discussed in these Notes to Financial Statements is contained in the Fund's Statement of Additional Information, which is available upon request. The following is a summary of significant accounting policies followed by the Portfolio. 1. Security Valuation In accordance with Pricing Policies adopted by the Board of Directors of the Fund (the "Pricing Policies") and applicable law, portfolio securities are valued at current market value or at fair value. The Board of Directors has delegated to the Adviser, subject to the Board's continuing oversight, certain responsibilities with respect to the implementation of the Pricing Policies. Pursuant to the Pricing Policies, securities for which market quotations are readily available are valued at their current market value. In general, the market value of these securities is determined as follows: - -------------------------------------------------------------------------------- 16 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO Notes to Financial Statements - -------------------------------------------------------------------------------- Securities listed on a national securities exchange 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. If no bid or asked prices are quoted on such day, then the security is valued in good faith at fair value in accordance with the Pricing Policies. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities not listed on an exchange but traded on The Nasdaq Stock Market, Inc. ("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 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 valuations, the last available closing settlement price is used; securities traded in the over-the-counter market, (but excluding securities traded on NASDAQ) 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, the Pricing Policies provide that 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 are valued at fair value in accordance with the Pricing Policies. 2. Taxes It is the Portfolio's policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for Federal income or excise taxes are required. 3. Investment Income and Investment Transactions Interest income is accrued daily. Investment transactions are accounted for on the date securities are purchased or sold. Investment gains and losses are determined on the identified cost basis. The Portfolio accretes discounts as adjustments to interest income. Additionally, the Portfolio amortizes premiums on debt securities for financial statement reporting purposes. - -------------------------------------------------------------------------------- ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 17 Notes to Financial Statements - -------------------------------------------------------------------------------- 4. Income and Expenses All income earned and expenses incurred by the Portfolio are borne on a pro rata basis by each settled class of shares, based on the proportionate interest in the Portfolio represented by the net assets of such class, except that the Portfolio's Class B and Class C shares bear higher distribution and transfer agent fees than Class A and Advisor Class shares. Advisor Class shares have no distribution fees. 5. Dividends and Distributions Dividends and distributions to shareholders are recorded on the ex-dividend date. Income dividends and capital gains distributions are determined in accordance with federal tax regulations and may differ from those determined in accordance with accounting principles generally accepted in the United States. 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. 6. Repurchase Agreements It is the Portfolio's policy that its custodian or designated subcustodian take control of securities as collateral under repurchase agreements and to determine on a daily basis that the value of such securities are sufficient to cover the value of the repurchase agreements. If the seller defaults and the value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of collateral by the Portfolio may be delayed or limited. 7. Change of Fiscal Year End The Fund changed its fiscal year end from June 30 to September 30. Accordingly, the statement of operations, the statement of changes in net assets and financial highlights reflect the period from July 1, 2003 to September 30, 2003. NOTE B Advisory Fee and Other Transactions with Affiliates Under the terms of an investment advisory agreement, the Portfolio pays Alliance Capital Management L.P. (the "Adviser") an advisory fee at a quarterly rate of ..15 of 1% (approximately .60 of 1% on an annual basis) of the first $500 million of the Portfolio's net assets and .125 of 1% (approximately .50 of 1% on an annual basis) of its net assets over $500 million, valued on the last business day of the previous quarter. Pursuant to the advisory agreement, the Portfolio paid $30,340 and $124,000, respectively, to the Adviser representing the cost of certain legal and accounting services provided to the Portfolio by the Adviser for the period ended September 30, 2003 and the year ended June 30, 2003. - -------------------------------------------------------------------------------- 18 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO Notes to Financial Statements - -------------------------------------------------------------------------------- The Portfolio compensates Alliance Global Investor Services, Inc. (AGIS), a wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for providing personnel and facilities to perform transfer agency services for the Portfolio. Such compensation amounted to $584,436 and $2,495,897, respectively, for the period ended September 30, 2003 and the year ended June 30, 2003. For the period ended September 30, 2003 and the year ended June 30, 2003, the Portfolio's expenses were reduced by $94 and $2,955, respectively, under an expense offset arrangement with AGIS. AllianceBernstein Investment Research and Management, Inc. (the "Distributor"), a wholly-owned subsidiary of the Adviser, serves as the distributor of the Portfolio's shares. The Distributor has advised the Portfolio that it has retained front-end sales charges of $3,507 and $48,272 from the sales of Class A shares and received $3,972 and $108,249; $329,394 and $1,116,604; and $9,534 and $64,753, respectively, in contingent deferred sales charges imposed upon redemptions by shareholders of Class A, Class B and Class C shares, respectively, for the period ended September 30, 2003 and the year ended June 30, 2003. NOTE C Distribution Services Agreement The Portfolio has adopted a Distribution Services Agreement (the "Agreement") pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the Agreement, the Portfolio pays distribution and servicing fees to the Distributor at an annual rate of up to .30 of 1% of the Portfolio's average daily net assets attributable to Class A shares and 1% of the average daily net assets attributable to both Class B and Class C shares. There are no distribution and servicing fees on the Advisor Class shares. The fees are accrued daily and paid monthly. The Agreement provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities. The Distributor has advised the Portfolio that it has incurred expenses in excess of the distribution costs reimbursed by the Portfolio in the amount of $6,164,859, and $5,929,811 for Class B and Class C shares, respectively; such costs may be recovered from the Portfolio in future periods as long as the Agreement is in effect. In accordance with the Agreement, there is no provision for recovery of unreimbursed distribution costs incurred by the Distributor beyond the current fiscal year for Class A shares. The Agreement also provides that the Adviser may use its own resources to finance the distribution of the Portfolio's shares. - -------------------------------------------------------------------------------- ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 19 Notes to Financial Statements - -------------------------------------------------------------------------------- NOTE D Investment Transactions Purchases and sales of investment securities (excluding short-term investments) for the period ended September 30, 2003, were as follows: Purchases Sales ============== ============== Investment securities (excluding U.S. government securities) ...... $ 88,727,945 $ 58,133,915 U.S. government securities ......... 4,552,554,045 4,198,939,429 The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation (excluding the written option and futures) are as follows: Cost ..................................................... $ 2,483,734,387 =============== Gross unrealized appreciation ............................ $ 35,215,614 Gross unrealized depreciation ............................ (15,521,576) --------------- Net unrealized appreciation .............................. $ 19,694,038 =============== 1. Financial Futures Contracts The Portfolio may buy or sell financial futures contracts for the purpose of hedging its portfolio against adverse effects of anticipated movements in the market. The Portfolio bears the market risk that arises from changes in the value of these financial instruments and the imperfect correlation between movements in the price of the futures contracts and movements in the price of the securities hedged or used for cover. At the time the Portfolio enters into a futures contract, the Portfolio deposits and maintains as collateral an initial margin as required by the exchange on which the transaction is affected. Pursuant to the contract, the Portfolio agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as variation margin and are recorded by the Portfolio as unrealized gains or losses. Risks may arise from the potential inability of a counterparty to meet the terms of the contract. When the contract is closed, the Portfolio records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the time it was closed. 2. Swap Agreements The Portfolio may enter into interest rate swaps to protect itself from interest rate fluctuations on the underlying debt instruments. A swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices or rates for a specified amount of an underlying asset. The payment flows are usually netted against each other, with the difference being paid by one party to the other. - -------------------------------------------------------------------------------- 20 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO Notes to Financial Statements - -------------------------------------------------------------------------------- Risks may arise as a result of the failure of the counterparty to the swap contract to comply with the terms of the swap contract. The loss incurred by the failure of a counterparty is generally limited to the net interest payment to be received by the Portfolio, and/or the termination value at the end of the contract. Therefore, the Portfolio considers the creditworthiness of each counterparty to a swap contract in evaluating potential credit risk. Additionally, risks may arise from unanticipated movements in interest rates or in the value of the underlying securities. The Portfolio records a net receivable or payable on a daily basis for the net interest income or expense expected to be received or paid in the interest period. Net interest received or paid on these contracts is recorded as interest income (or as an offset to interest income). Fluctuations in the value of swap contracts are recorded for financial statement purposes as a component of net change in unrealized appreciation/depreciation of investments. Realized gains and losses from terminated swaps are included in net realized gains or losses on investment transactions. 3. Option Transactions For hedging and investment purposes, the Portfolio may purchase and write (sell) put and call options on U.S. and foreign government securities and foreign currencies that are traded on U.S. and foreign securities exchanges and over-the-counter markets. The risk associated with purchasing an option is that the Portfolio pays a premium whether or not the option is exercised. Additionally, the Portfolio bears the risk of loss of premium and change in market value should the counterparty not perform under the contract. Put and call options purchased are accounted for in the same manner as portfolio securities. The cost of securities acquired through the exercise of call options is increased by premiums paid. The proceeds from securities sold through the exercise of put options are decreased by the premiums paid. When the Portfolio writes an option, the premium received by the Portfolio is recorded as a liability and is subsequently adjusted to the current market value of the option written. Premiums received from written options which expire unexercised are recorded by the Portfolio on the expiration date as realized gains from options written. The difference between the premium received and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium received is less than the amount paid for the closing purchase transaction, as a realized loss. If a call option is exercised, the premium received is added to the proceeds from the sale of the underlying security in determining whether the Portfolio has realized a gain or loss. If a put option is exercised, the premium received reduces the cost basis of the security purchased by the Portfolio. In writing an option, the - -------------------------------------------------------------------------------- ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 21 Notes to Financial Statements - -------------------------------------------------------------------------------- Portfolio bears the market risk of an unfavorable change in the price of the security underlying the written option. Exercise of an option written by the Portfolio could result in the Portfolio selling or buying a security at a price different from the current market value. Transactions in options written for the period ended September 30, 2003 were as follows: Number of Premiums Contracts Received =========== ============= Options outstanding at beginning of the period ........................ -0- $ -0- Options written ...................... 2,250 1,072,265 Options terminated in closing purchase transactions ...................... -0- -0- Options exercised .................... -0- -0- ----------- ------------- Options outstanding at September 30, 2003 ................ 2,250 $ 1,072,265 =========== ============= 4. Reverse Repurchase Agreements Under a reverse repurchase agreement, the Portfolio sells securities and agrees to repurchase them at a mutually agreed upon date and price. At the time the Portfolio enters into a reverse repurchase agreement, it will establish a segregated account with the custodian containing liquid assets having a value at least equal to the repurchase price. For the period from July 1, 2003 to September 30, 2003, the average amount of reverse repurchase agreements outstanding was $126,781,942 and the daily weighted average annualized interest rate was 1.05%. NOTE E Securities Lending The Portfolio has entered into a securities lending agreement with AG Edwards & Sons, Inc. (the "Lending Agent"). Under the terms of the agreement, the Lending Agent, on behalf of the Portfolio, administers the lending of portfolio securities to certain broker-dealers. In return, the Portfolio receives fee income from the lending transactions or it retains a portion of interest on the investment of any cash received as collateral. The Portfolio also continues to receive dividends or interest on the securities loaned. Unrealized gain or loss on the value of the securities loaned that may occur during the term of the loan will be reflected in the accounts of the Portfolio. All loans are continuously secured by collateral exceeding the value of the securities loaned. All collateral consists of either cash or U.S. government securities. The Lending Agent may invest the cash collateral received in accordance with the investment restrictions of the Portfolio in one or more of the following investments: U.S. government or U.S. government agency obligations, bank obligations, corporate debt obligations, asset-backed securities, - -------------------------------------------------------------------------------- 22 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO Notes to Financial Statements - -------------------------------------------------------------------------------- investment funds, structured products, repurchase agreements and an eligible money market fund. The Lending Agent will indemnify the Portfolio for any loss resulting from a borrower's failure to return a loaned security when due. As of September 30, 2003, the Portfolio had loaned securities with a value of $559,066,809 and received cash collateral which was invested in short-term securities valued at $564,733,238 as included in the accompanying portfolio of investments. For the period ended September 30, 2003 and the year ended June 30, 2003, the Portfolio earned fee income of $595,892 and $1,412,548, respectively, which is included in interest income in the accompanying statement of operations. NOTE F Capital Stock There are 12,000,000,000 shares of $.001 par value capital stock authorized, divided into four classes, designated Class A, Class B, Class C and Advisor Class shares. Each class consists of 3,000,000,000 authorized shares. Transactions in capital stock were as follows:
--------------------------------------------------------- Shares --------------------------------------------------------- July 1, 2003 to Year Ended Year Ended September 30, June 30, June 30, 2003(a) 2003 2002 --------------------------------------------------------- Class A Shares sold 7,081,876 99,871,241 147,432,112 - ------------------------------------------------------------------------------------------ Shares issued in reinvestment of dividends 842,226 3,397,687 4,167,873 - ------------------------------------------------------------------------------------------ Shares converted from Class B 623,756 2,638,670 3,136,090 - ------------------------------------------------------------------------------------------ Shares redeemed (15,589,912) (107,352,732) (158,502,944) - ------------------------------------------------------------------------------------------ Net decrease (7,042,054) (1,445,134) (3,766,869) ========================================================================================== Class B Shares sold 1,785,384 41,363,192 39,137,935 - ------------------------------------------------------------------------------------------ Shares issued in reinvestment of dividends 384,985 1,747,439 1,616,781 - ------------------------------------------------------------------------------------------ Shares converted to Class A (623,756) (2,666,482) (3,546,194) - ------------------------------------------------------------------------------------------ Shares redeemed (12,799,293) (29,791,395) (20,377,516) - ------------------------------------------------------------------------------------------ Net increase (decrease) (11,252,680) 10,652,754 16,831,006 ========================================================================================== Class C Shares sold 743,732 17,523,866 19,154,718 - ------------------------------------------------------------------------------------------ Shares issued in reinvestment of dividends 147,804 741,897 910,419 - ------------------------------------------------------------------------------------------ Shares redeemed (5,091,572) (19,058,320) (15,734,751) - ------------------------------------------------------------------------------------------ Net increase (decrease) (4,200,036) (792,557) 4,330,386 ==========================================================================================
(a) The Portfolio changed its fiscal year end from June 30 to September 30. - -------------------------------------------------------------------------------- ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 23 Notes to Financial Statements - --------------------------------------------------------------------------------
------------------------------------------------------------- Shares ------------------------------------------------------------- July 1, 2003 to Year Ended Year Ended September 30, June 30, June 30, 2003(a) 2003 2002 ------------------------------------------------------------- Advisor Class Shares sold 1,553,934 5,728,180 20,316,829 - ------------------------------------------------------------------------------------------------ Shares issued in reinvestment of dividends 332,740 1,166,739 818,898 - ------------------------------------------------------------------------------------------------ Shares redeemed (186,666) (5,229,251) (264,735) - ------------------------------------------------------------------------------------------------ Net increase 1,700,008 1,665,668 20,870,992 ================================================================================================
(a) The Portfolio changed its fiscal year end from June 30 to September 30.
------------------------------------------------------------- Amount ------------------------------------------------------------- July 1, 2003 to Year Ended Year Ended September 30, June 30, June 30, 2003(a) 2003 2002 ------------------------------------------------------------- Class A Shares sold $ 51,268,823 $ 738,562,949 $ 1,062,360,414 - ------------------------------------------------------------------------------------------------ Shares issued in reinvestment of dividends 6,086,303 25,217,655 30,124,250 - ------------------------------------------------------------------------------------------------ Shares converted from Class B 4,387,602 19,834,712 24,883,707 - ------------------------------------------------------------------------------------------------ Shares redeemed (112,373,614) (794,926,312) (1,143,883,509) - ------------------------------------------------------------------------------------------------ Net decrease $ (50,630,886) $ (11,310,996) $ (26,515,138) ================================================================================================ Class B Shares sold $ 12,927,847 $ 305,612,817 $ 285,085,120 - ------------------------------------------------------------------------------------------------ Shares issued in reinvestment of dividends 2,781,869 12,971,394 11,691,662 - ------------------------------------------------------------------------------------------------ Shares converted to Class A (4,387,602) (19,834,712) (24,883,707) - ------------------------------------------------------------------------------------------------ Shares redeemed (92,309,168) (221,190,959) (148,144,475) - ------------------------------------------------------------------------------------------------ Net increase (decrease) $ (80,987,054) $ 77,558,540 $ 123,748,600 ================================================================================================ Class C Shares sold $ 5,399,978 $ 129,704,727 $ 139,438,986 - ------------------------------------------------------------------------------------------------ Shares issued in reinvestment of dividends 1,069,553 5,512,251 6,592,467 - ------------------------------------------------------------------------------------------------ Shares redeemed (36,840,779) (141,500,884) (113,989,182) - ------------------------------------------------------------------------------------------------ Net increase (decrease) $ (30,371,248) $ (6,283,906) $ 32,042,271 ================================================================================================ Advisor Class Shares sold $ 11,241,378 $ 42,725,185 $ 146,617,899 - ------------------------------------------------------------------------------------------------ Shares issued in reinvestment of dividends 2,407,372 8,673,997 5,898,085 - ------------------------------------------------------------------------------------------------ Shares redeemed (1,347,836) (38,496,136) (1,907,859) - ------------------------------------------------------------------------------------------------ Net increase $ 12,300,914 $ 12,903,046 $ 150,608,125 ================================================================================================
(a) The Portfolio changed its fiscal year end from June 30 to September 30. - -------------------------------------------------------------------------------- 24 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO Notes to Financial Statements - -------------------------------------------------------------------------------- NOTE G Joint Credit Facility A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $500 million revolving credit facility (the "Facility") to provide short-term financing if necessary, in connection with abnormal redemption activity. Commitment fees related to the Facility are paid by the participating funds and are included in the miscellaneous expenses in the statement of operations. The Portfolio did not utilize the Facility during the period ended September 30, 2003. NOTE H Distributions to Shareholders The tax character of distributions paid during the period ended September 30, 2003, and the fiscal years ended June 30, 2003 and June 30, 2002 were as follows:
July 1, 2003 to Year Ended Year Ended September 30, June 30, June 30, 2003* 2003 2002 =============== =========== =========== Distributions paid from: Ordinary income ..... $18,227,208 $80,099,077 $82,835,463 ----------- ----------- ----------- Total taxable distributions ....... 18,227,208 80,099,077 82,835,463 Tax return of capital ........... -0- -0- 5,174,446 ----------- ----------- ----------- Total distributions paid ................ $18,227,208 $80,099,077 $88,009,909(a) =========== =========== ===========
As of September 30, 2003, the components of accumulated earnings/(deficit) on a tax basis were as follows: Accumulated capital and other losses .............. $(158,051,293)(b) Unrealized appreciation/(depreciation) ............ 16,844,419(c) ------------- Total accumulated earnings/(deficit) .............. $(141,206,874) ============= * The Portfolio changed its fiscal year end from June 30 to September 30. - -------------------------------------------------------------------------------- ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 25 Notes to Financial Statements - -------------------------------------------------------------------------------- (a) Total distributions paid differ from the Statement of Changes in Net Assets because for tax purposes dividends are recognized when actually paid. (b) On September 30, 2003, the Fund had a net capital loss carryforward for federal income tax purposes of $153,542,290 (of which $5,207,458 and $21,956,032 were attributable to the purchase of net assets of Alliance Limited Maturity Government Income Fund, Inc. and Alliance Mortgage Securities Income Fund, Inc., respectively, by the Fund in December of 2000), of which $51,829,521 expires in the year 2004, $6,928,773 expires in the year 2005, $16,083,708 expires in the year 2006, $48,732,137 expires in the year 2007, $6,470,420 expires in the year 2008 and $23,497,731 expires in the year 2011. To the extent future capital gains are offset by capital loss carryforwards, such gains will not be distributed. During the fiscal year ended September 30, 2003, $64,973,014 of capital loss carryforward expired. Based on certain provision in the Internal Revenue Code, various limitations regarding the future utilization of these carryforwards, brought forward as a result of the Portfolio's merger with Alliance Limited Maturity Government, Inc. may apply. For the year ended September 30, 2003 the Fund deferred losses on straddles of $4,509,003. (c) 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. During the current fiscal period, permanent differences, primarily due to a tax distribution in excess of earnings, tax character of paydown losses, expiration of capital loss carryforwards and the tax treatment of bond premium, resulted in a net decrease in distributions in excess of net investment income, a net decrease in accumulated net realized loss on investments and a decrease in additional paid-in capital. This reclassification had no effect on net assets. NOTE I Legal Proceedings Alliance Capital Management L.P. ("Alliance Capital"), the Fund's Adviser, is currently under investigation by the Office of the New York State Attorney General ("NYAG") and the United States Securities and Exchange Commission ("SEC") in connection with their investigation of practices in the mutual fund industry identified as "market timing" and "late trading" of mutual fund shares. Certain other regulatory authorities are also conducting investigations into these practices within the industry and have requested that Alliance Capital provide information to them. Alliance Capital has been cooperating with all of these authorities and has been conducting its own internal investigation into these matters. In addition, Alliance Capital's Board of Directors authorized a special committee, comprised of the members of Alliance Capital's Audit Committee and the other independent member of the Board, to direct and oversee a comprehensive review of the facts and circumstances relevant to the SEC's and the NYAG's investigations. On October 2, 2003, a putative class action complaint entitled Hindo et al. v. AllianceBernstein Growth & Income Fund et al. (the "Hindo Complaint") was filed against Alliance Capital; Alliance Capital Management Holding L.P.; Alliance Capital Management Corporation; AXA Financial, Inc.; certain of the AllianceBernstein Mutual Funds, including the Fund; Gerald Malone; Charles Schaffran (collectively, the "Alliance Capital defendants"); and certain other - -------------------------------------------------------------------------------- 26 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO Notes to Financial Statements - -------------------------------------------------------------------------------- defendants not affiliated with Alliance Capital. The Hindo Complaint was filed in the United States District Court for the Southern District of New York by alleged shareholders of two of the AllianceBernstein Mutual Funds. The Hindo Complaint alleges that certain of the Alliance Capital 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 compensatory damages and rescission of their contracts with Alliance Capital, including recovery of all fees paid to Alliance Capital pursuant to such contracts. Between October 3 and November 13, 2003, twenty-one additional lawsuits making factual allegations similar to those in the Hindo Complaint were filed against Alliance Capital and certain other defendants. All of these lawsuits seek an unspecified amount of damages. Through November 14, 2003, Alliance Capital's internal investigation has revealed that Alliance Capital maintained relationships with certain investors who were permitted to engage in market timing trades in certain AllianceBernstein Mutual Funds in return for or in connection with making investments (which were not actively traded) in other Alliance Capital products, including hedge funds and mutual funds, for which Alliance Capital receives advisory fees ("Market Timing Relationships"). Alliance Capital believes that these Market Timing Relationships created conflicts of interest and that certain of the trades made pursuant to these relationships had an adverse effect on some shareholders of the AllianceBernstein Mutual Funds. These matters are the subject of the ongoing internal investigation by Alliance Capital. As a result of Alliance Capital's involvement in market timing or for other reasons, investors in the AllianceBernstein Mutual Funds may choose to redeem their investments. 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. Any resolution of Alliance Capital's involvement in market timing and the related SEC and NYAG investigations and private lawsuits is likely to include, but not be limited to, sanctions, penalties, appropriate restitution to mutual fund shareholders and structural changes in the governance of Alliance Capital's mutual fund business. Alliance Capital is committed to full restitution of the adverse effects that inappropriate market timing transactions allowed by Alliance Capital had on the shareholders of the AllianceBernstein Mutual Funds. - -------------------------------------------------------------------------------- ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 27 Financial Highlights - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
============================================================================================= Class A ============================================================================================= July 1, 2003 to Year Ended June 30, September 30, ---------------------------------------------------------------------- 2003(a) 2003 2002(b) 2001 2000 1999 --------------------------------------------------------------------------------------------- Net asset value, beginning of period .............. $ 7.49 $ 7.21 $ 7.14 $ 6.99 $ 7.19 $ 7.57 --------------------------------------------------------------------------------------------- Income From Investment Operations Net investment income(c) ........... .06 .27 .37 .47 .50 .52 Net realized and unrealized gain (loss) on investment transactions ..................... (.20) .35 .13 .17 (.20) (.37) --------------------------------------------------------------------------------------------- Net increase (decrease) in net asset value from operations ...... (.14) .62 .50 .64 .30 .15 --------------------------------------------------------------------------------------------- Less: Dividends and Distributions Dividends from net investment income ........................... (.08) (.34) (.37) (.47) (.49) (.52) Distributions in excess of net investment income ............ -0- -0- (.03) (.01) -0- (.01) Tax return of capital .............. -0- -0- (.03) (.01) (.01) -0- --------------------------------------------------------------------------------------------- Total dividends and distributions .. (.08) (.34) (.43) (.49) (.50) (.53) --------------------------------------------------------------------------------------------- Net asset value, end of period ..... $ 7.27 $ 7.49 $ 7.21 $ 7.14 $ 6.99 $ 7.19 ============================================================================================= Total Return Total investment return based on net asset value(d) ............ (1.80)% 8.82% 7.11% 9.30% 4.41% 1.83% Ratios/Supplemental Data Net assets, end of period (000's omitted) .................. $ 811,376 $ 889,115 $ 865,739 $ 884,574 $ 430,895 $ 426,167 Ratio to average net assets of: Expenses ......................... 1.18%(e) 1.10% 1.23% 2.11% 2.14% 1.17% Expenses, excluding interest expense ........................ 1.11%(e) 1.09% 1.09% 1.13% 1.12% 1.08% Net investment income ............ 3.43%(e) 3.64% 5.15% 6.57% 7.13% 6.86% Portfolio turnover rate ............ 241% 976% 1,009% 712% 398% 320%
See footnote summary on page 31. - -------------------------------------------------------------------------------- 28 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
============================================================================================= Class B ============================================================================================= July 1, 2003 to Year Ended June 30, September 30, ---------------------------------------------------------------------- 2003(a) 2003 2002(b) 2001 2000 1999 --------------------------------------------------------------------------------------------- Net asset value, beginning of period .............. $ 7.49 $ 7.21 $ 7.14 $ 7.00 $ 7.20 $ 7.57 --------------------------------------------------------------------------------------------- Income From Investment Operations Net investment income(c) ........... .05 .22 .32 .42 .44 .46 Net realized and unrealized gain (loss) on investment transactions ..................... (.20) .35 .13 .16 (.19) (.36) --------------------------------------------------------------------------------------------- Net increase (decrease) in net asset value from operations ...... (.15) .57 .45 .58 .25 .10 --------------------------------------------------------------------------------------------- Less: Dividends and Distributions Dividends from net investment income ........................... (.07) (.29) (.32) (.42) (.44) (.46) Distributions in excess of net investment income ............ -0- -0- (.03) (.01) -0- (.01) Tax return of capital .............. -0- -0- (.03) (.01) (.01) -0- --------------------------------------------------------------------------------------------- Total dividends and distributions .. (.07) (.29) (.38) (.44) (.45) (.47) --------------------------------------------------------------------------------------------- Net asset value, end of period ..... $ 7.27 $ 7.49 $ 7.21 $ 7.14 $ 7.00 $ 7.20 ============================================================================================= Total Return Total investment return based on net asset value(d) ............ (1.98)% 8.07% 6.36% 8.39% 3.64% 1.22% Ratios/Supplemental Data Net assets, end of period (000's omitted) .................. $ 399,040 $ 495,606 $ 400,221 $ 276,308 $200,283 $ 338,310 Ratio to average net assets of: Expenses ......................... 1.90%(e) 1.82% 1.93% 2.90% 2.80% 1.87% Expenses, excluding interest expense ........................ 1.83%(e) 1.81% 1.80% 1.83% 1.83% 1.79% Net investment income ............ 2.75%(e) 2.95% 4.41% 5.95% 6.28% 6.13% Portfolio turnover rate ............ 241% 976% 1,009% 712% 398% 320%
See footnote summary on page 31. - -------------------------------------------------------------------------------- ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 29 Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
============================================================================================= Class C ============================================================================================= July 1, 2003 to Year Ended June 30, September 30, ---------------------------------------------------------------------- 2003(a) 2003 2002(b) 2001 2000 1999 --------------------------------------------------------------------------------------------- Net asset value, beginning of period ............... $ 7.50 $ 7.22 $ 7.15 $ 7.00 $ 7.20 $ 7.57 --------------------------------------------------------------------------------------------- Income From Investment Operations Net investment income(c) ............ .05 .22 .32 .43 .45 .46 Net realized and unrealized gain (loss) on investment transactions ...................... (.20) .35 .13 .16 (.20) (.36) --------------------------------------------------------------------------------------------- Net increase (decrease) in net asset value from operations ....... (.15) .57 .45 .59 .25 .10 --------------------------------------------------------------------------------------------- Less: Dividends and Distributions Dividends from net investment income ............................ (.07) (.29) (.32) (.43) (.44) (.46) Distributions in excess of net investment income ............. -0- -0- (.03) (.01) -0- (.01) Tax return of capital ............... -0- -0- (.03) -0- (.01) -0- --------------------------------------------------------------------------------------------- Total dividends and distributions ... (.07) (.29) (.38) (.44) (.45) (.47) --------------------------------------------------------------------------------------------- Net asset value, end of period ...... $ 7.28 $ 7.50 $ 7.22 $ 7.15 $ 7.00 $ 7.20 ============================================================================================= Total Return Total investment return based on net asset value(d) ............. (1.98)% 8.06% 6.35% 8.54% 3.64% 1.22% Ratios/Supplemental Data Net assets, end of period (000's omitted) ................... $ 167,359 $ 204,006 $ 202,030 $ 169,213 $112,808 $ 144,145 Ratio to average net assets of: Expenses .......................... 1.89%(e) 1.81% 1.93% 2.89% 2.82% 1.87% Expenses, excluding interest expense ......................... 1.83%(e) 1.80% 1.79% 1.83% 1.83% 1.78% Net investment income ............. 2.76%(e) 2.96% 4.42% 5.94% 6.35% 6.13% Portfolio turnover rate ............. 241% 976% 1,009% 712% 398% 320%
See footnote summary on page 31. - -------------------------------------------------------------------------------- 30 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
================================================================= Advisor Class ================================================================= July 1, 2003 October 6 to Year Ended June 30, 2000(f) to September 30, ------------------------------ June 30, 2003(a) 2003 2002(b) 2001 ----------------------------------------------------------------- Net asset value, beginning of period ............... $ 7.50 $ 7.21 $ 7.14 $ 7.05 ----------------------------------------------------------------- Income From Investment Operations Net investment income(c) ............ .07 .29 .39 .34 Net realized and unrealized gain (loss) on investment transactions ........... (.20) .37 .13 .12 ----------------------------------------------------------------- Net increase (decrease) in net asset value from operations ................... (.13) .66 .52 .46 ----------------------------------------------------------------- Less: Dividends and Distributions Dividends from net investment income ............... ............ (.09) (.37) (.39) (.34) Distributions in excess of net investment income ... ......... -0- -0- (.03) (.02) Tax return of capital ............... -0- -0- (.03) (.01) ----------------------------------------------------------------- Total dividends and distributions ..................... (.09) (.37) (.45) (.37) ----------------------------------------------------------------- Net asset value, end of period ............................ $ 7.28 $ 7.50 $ 7.21 $ 7.14 ================================================================= Total Return Total investment return based on net asset value(d) ................ (1.72)% 9.29% 7.41% 6.65% Ratios/Supplemental Data Net assets, end of period (000's omitted) ................... $ 204,108 $ 197,649 $ 177,834 $ 27,154 Ratio to average net assets of: Expenses .......................... .89%(e) .81% .89% 1.38%(e) Expenses, excluding interest expense ................ .81%(e) .80% .81% .81%(e) Net investment income ............. 3.72%(e) 3.96% 5.41% 6.74%(e) Portfolio turnover rate ............. 241% 976% 1,009% 712%
(a) The Portfolio changed its fiscal year end from June 30 to September 30. (b) As required, effective July 1, 2001, the Portfolio 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. The effect of this change for the year ended June 30, 2002 was to decrease net investment income per share by $.03, increase net realized and unrealized gain on investment transactions per share by $.03, and decrease the ratio of net investment income to average net assets from 5.56% to 5.15% for Class A, from 4.82% to 4.41% for Class B, from 4.83% to 4.42% for Class C and from 5.81% to 5.41% for Advisor Class. Per share, ratios and supplemental data for periods prior to July 1, 2001 have not been restated to reflect this change in presentation. (c) Based on average shares outstanding. (d) Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption on the last day of the period. Initial sales charges or contingent deferred sales charges are not reflected in the calculation of total investment return. Total investment return 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. (e) Annualized. (f) Commencement of distribution. - -------------------------------------------------------------------------------- ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 31 Report of Ernst & Young LLP, Independent Auditors - -------------------------------------------------------------------------------- REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS To the Shareholders and Board of Directors of AllianceBernstein Bond Fund, Inc. U.S. Government Portfolio We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the U.S. Government Portfolio (the "Portfolio"), one of the portfolios constituting the AllianceBernstein Bond Fund, Inc., as of September 30, 2003, and the related statement of operations for the period from July 1, 2003 to September 30, 2003 and for the year ended June 30, 2003, the statement of changes in net assets for the period from July 1, 2003 to September 30, 2003 and for each of the two years in the period ended June 30, 2003, and the financial highlights for the period from July 1, 2003 to September 30, 2003 and for each of the five years in the period ended June 30, 2003. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of September 30, 2003, by correspondence with the custodian and others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the U.S. Government Portfolio of the AllianceBernstein Bond Fund, Inc. at September 30, 2003, the results of its operations for the period from July 1, 2003 to September 30, 2003 and for the year ended June 30, 2003, the changes in its net assets for the period from July 1, 2003 to September 30, 2003 and for each of the two years in the period ended June 30, 2003, and the financial highlights for the period from July 1, 2003 to September 30, 2003 and for each of the five years in the period ended June 30, 2003, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP New York, New York November 14, 2003 - -------------------------------------------------------------------------------- 32 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO BOARD OF DIRECTORS William H. Foulk, Jr.(1), Chairman Marc O. Mayer, President Ruth Block(1) David H. Dievler(1) John H. Dobkin(1) Clifford L. Michel(1) Donald J. Robinson(1) OFFICERS Kathleen A. Corbet, Senior Vice President Matthew D.W. Bloom, Vice President Paul J. DeNoon, Vice President S. Sean Kelleher(2), Vice President Jeffrey S. Phlegar, Vice President Kewjin Yuoh, Vice President Mark D. Gersten, Treasurer & Chief Financial Officer Vincent S. Noto, Controller Custodian State Street Bank & Trust Company 225 Franklin Street Boston, MA 02110 Principal Underwriter AllianceBernstein Investment Research and Management, Inc. 1345 Avenue of the Americas New York, NY 10105 Transfer Agent Alliance Global Investor Services, Inc. P.O. Box 786003 San Antonio, Texas 78278-6003 Toll-Free (800) 221-5672 Independent Auditors Ernst & Young LLP 5 Times Square New York, NY 10036 Legal Counsel Seward & Kissel LLP One Battery Park Plaza New York, NY 10004 (1) Member of the Audit Committee. (2) Mr. Kelleher is the person primarily responsible for the day-to-day management of the Portfolio's investment portfolio. - -------------------------------------------------------------------------------- ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 33 MANAGEMENT OF THE FUND Board of Directors Information The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund's Directors is set forth below.
PORTFOLIOS IN FUND OTHER NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIPS ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY (YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR - --------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS William H. Foulk, Jr., #+, 71 Investment Adviser and an 113 None 2 Sound View Drive independent consultant. He was Suite 100 formerly Senior Manager of Barrett Greenwich, CT 06830 Associates, Inc., a registered (5) investment adviser, with which Chairman of the Board he had been associated since prior to 1998. He was formerly Deputy Comptroller and Chief Investment Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. Ruth Block, #+, 73 Formerly Executive Vice 96 None 500 SE Mizner Blvd. President and Chief Insurance Boca Raton, FL 33432 Officer of The Equitable Life (15) Assurance Society of the United States; Chairman and Chief Executive Officer of Evlico; Director of Avon, BP (oil and gas), Ecolab Incorporated (specialty chemicals), Tandem Financial Group, and Donaldson, Lufkin & Jenrette Securities Corporation; former Governor at Large National Association of Securities Dealers, Inc. David H. Dievler, #+, 74 Independent consultant. Until 100 None P.O. Box 167 December 1994, he was Senior Spring Lake, NJ 07762 Vice President of Alliance Capital (15) Management Corporation ("ACMC") responsible for mutual fund administration. Prior to joining ACMC in 1984, he was Chief Financial Officer of Eberstadt Asset Management since 1968. Prior to that, he was Senior Manager at Price Waterhouse & Co. Member of the American Institute of Certified Public Accountants since 1953.
- -------------------------------------------------------------------------------- 34 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO Management of the Fund - --------------------------------------------------------------------------------
PORTFOLIOS IN FUND OTHER NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIPS ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY (YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR - ------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS (continued) John H. Dobkin, #+, 61 Consultant. Formerly President of 98 None P.O. Box 12, Save Venice, Inc. from 2001-2002, Annandale, NY 12504 Senior Advisor from June 1999 - (5) June 2000 and President of Historic Hudson Valley (historic preservation) from December 1989-May 1999. Previously, Director of the National Academy of Design. During 1988-92, he was Director and Chairman of the Audit Committee of ACMC. Clifford L. Michel, #+, 64 Senior Counsel of the law firm of 97 Placer Dome, Inc. 15 St. Bernard's Road Cahill Gordon & Reindel since Gladstone, NJ 07934 February 2001 and a partner of (15) that firm for more than twenty-five years prior thereto. He is President and Chief Executive Officer of Wenonah Development Company (investments) and a Director of the Placer Dome, Inc. (mining). Donald J. Robinson, #+, 69 Senior Counsel to the law firm of 96 None 98 Hell's Peak Road Orrick, Herrington & Sutcliffe LLP Weston, VT 05161 since prior to 1998. Formerly a (6) senior partner and a member of the Executive Committee of that firm. He was also a member and Chairman of the Municipal Securities Rulemaking Board and a Trustee of the Museum of the City of New York. INTERESTED DIRECTOR Marc O. Mayer, ++, 46 Executive Vice President of ACMC 68 None 1345 Avenue of the since 2001; prior thereto, Chief Americas Executive Officer of Sanford C. New York, NY 10105 Bernstein & Co., LLC and its (1 month) predecessor since prior to 1998.
* There is no stated term of office for the Fund's Directors. # Member of the Audit Committee. + Member of the Nominating Committee. ++ Mr. Mayer is an "interested director", as defined in the 1940 Act, due to his position as Executive Vice President of ACMC. - -------------------------------------------------------------------------------- ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 35 Management of the Fund - -------------------------------------------------------------------------------- Officer Information Certain information concerning the Fund's Officers is set forth below.
NAME, POSITION(S) PRINCIPAL OCCUPATION ADDRESS* AND AGE HELD WITH FUND DURING PAST 5 YEARS** - --------------------------------------------------------------------------------------------------------- Marc O. Mayer, (46) President See biography above. Kathleen A. Corbet, (43) Senior Vice President Executive Vice President of Alliance Capital Management Corporation (ACMC),** with which she has been associated since prior to 1998. Matthew D.W. Bloom, (47) Vice President Senior Vice President of ACMC,** with which he has been associated since prior to 1998. Paul J. DeNoon, (41) Vice President Senior Vice President of ACMC,** with which he has been associated since prior to 1998. S. Sean Kelleher, (42) Vice President Senior Vice President of ACMC** since 1999; prior thereto worked in fixed income research at Merrill Lynch since prior to 1998. Jeffrey S. Phlegar, (37) Vice President Vice President of ACMC,** with which he has been associated since prior to 1998. Kewjin Yuoh, (32) Vice President Vice President of ACMC** since March 2003. Previously, he was a Vice President of Credit Suisse Asset Management from 2000 to 2002 and a Vice President of Brundage, Story & Rose from 1998 to 2000. Prior thereto, he was a Portfolio Manager of Sanford C. Bernstein & Co. since prior to 1998. Mark D. Gersten, (53) Treasurer and Chief Senior Vice President of Alliance Global Financial Officer Investor Services, Inc. ("AGIS")** and Vice President of AllianceBernstein Investment Research and Management, Inc. ("ABIRM")**, with which he has been associated since prior to 1998. Vincent S. Noto (39) Controller Vice President of AGIS,** with which he has been associated since prior to 1998.
* The address for each of the Fund's Officers is 1345 Avenue of the Americas, New York, NY 10105. ** ACMC, ABIRM, and AGIS are affiliates of the Fund. The Fund's Statement of Additional Information ("SAI") has additional information about the Fund's Directors and officers and is available without charge upon request. Contact your financial representative or Alliance Capital at 800-227-4618 for a free prospectus or SAI. - -------------------------------------------------------------------------------- 36 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO AllianceBernstein Family of Funds - -------------------------------------------------------------------------------- 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 Series U.S. Large Cap Portfolio Growth Funds Domestic Growth Fund Health Care Fund Mid-Cap Growth Fund Premier Growth Fund Small Cap Growth Fund+ Technology Fund Global & International All-Asia Investment Fund Global Small Cap Fund Greater China '97 Fund International Premier Growth Fund New Europe Fund Worldwide Privatization Fund Select Investor Series Biotechnology Portfolio Premier Portfolio Technology Portfolio Value Funds Domestic Balanced Shares Disciplined Value Fund Growth & Income Fund Real Estate Investment Fund Small Cap Value Fund Utility Income Fund Value Fund Global & International Global Value Fund International Value Fund Taxable Bond Funds Americas Government Income Trust Corporate Bond Portfolio Emerging Market Debt Fund Global Strategic Income Trust High Yield Fund Multi-Market Strategy Trust Quality Bond Portfolio Short Duration Portfolio U.S. Government Portfolio Municipal Bond Funds National Insured National Arizona California Insured California Florida Massachusetts Michigan Minnesota New Jersey New York Ohio Pennsylvania Virginia Intermediate Municipal Bond Funds Intermediate California Intermediate Diversified Intermediate New York Closed-End Funds All-Market Advantage Fund ACM Income Fund ACM Government Opportunity Fund ACM Managed Dollar Income Fund ACM Managed Income Fund ACM Municipal Securities Income Fund California Municipal Income Fund National Municipal Income Fund New York Municipal Income Fund The Spain Fund World Dollar Government Fund World Dollar Government Fund II We also offer Exchange Reserves,++ which serves as the money market fund exchange vehicle for the AllianceBernstein mutual funds. For more complete information on any AllianceBernstein mutual fund, including investment objectives and policies, sales charges, expenses, risks and other matters of importance to prospective investors, visit our web site at www.alliancebernstein.com or call us at (800) 227-4618 for a current prospectus. Please read the prospectus carefully before you invest or send money. * Formerly Growth Investors Fund. ** Formerly Conservative Investors Fund. + Quasar Fund changed its name to Small Cap Growth Fund on 11/3/03. ++ 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. - -------------------------------------------------------------------------------- ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 37 ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO 1345 Avenue of the Americas New York, NY 10105 (800) 221-5672 [LOGO] ALLIANCEBERNSTEIN(SM) Investment Research and Management (SM) This service mark used under license from the owner, Alliance Capital Management L.P. USGAR0903 ITEM 2. CODE OF ETHICS. (a) The registrant has adopted a code of ethics that applies to its principal executive officer, principal financial officer and principal accounting officer. A copy of the registrant's code of ethics is filed herewith as Exhibit 10(a)(1). (b) During the period covered by this report, no amendments were made to the provisions of the code of ethics adopted in 2(a) above. (c) During the period covered by this report, no implicit or explicit waivers to the provisions of the code of ethics adopted in 2(a) above were granted. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. The registrant's Board of Directors has determined that independent directors David H. Dievler and William H. Foulk, Jr. qualify as audit committee financial experts. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Form N-CSR disclosure requirement not yet effective with respect to the registrant. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable to the registrant. ITEM 6. [RESERVED] ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable to the registrant. ITEM 8. [RESERVED] ITEM 9. 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 significant changes in the registrant's internal controls that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. ITEM 10. EXHIBITS. The following exhibits are attached to this Form N-CSR: Exhibit No. DESCRIPTION OF EXHIBIT 10 (a) (1) Code of ethics that is subject to the disclosure of Item 2 hereof 10 (b) (1) Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 10 (b) (2) Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 10 (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 Bond Fund, Inc. By: /s/Marc O. Mayer ----------------------------------- Marc O. Mayer President Date: November 25, 2003 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: November 25, 2003 By: /s/Mark D. Gersten ------------------------------ Mark D. Gersten Treasurer and Chief Financial Officer Date: November 25, 2003 EX-99.CERT 3 edg9542_ex10b-302.txt Exhibit 10(b)(1) CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER I, Marc O. Mayer, certify that: 1. I have reviewed this report on Form N-CSR (the "Report") of AllianceBernstein Bond Fund, Inc. (the "Fund"); 2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report; 3. Based on my knowledge, the financial statements and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the Fund as of, and for, the periods presented in this Report; 4. The Fund's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act) for the Fund and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Fund, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared; b) evaluated the effectiveness of the Fund's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this Report based on such evaluation; and c) disclosed in this Report any change in the Fund's internal control over financial reporting that occurred during the Fund's most recent fiscal half-year [or second fiscal half-year in the case of an annual report] that has materially affected, or is reasonably likely to materially affect, the Fund's internal control over financial reporting; and 5. The Fund's other certifying officer and I have disclosed to the Fund's auditors and the audit committee of the Fund's board of directors: a) all significant deficiencies in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Fund's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Fund's internal controls. Date: November 25, 2003 /s/Marc O. Mayer --------------------------- Marc O. Mayer President Exhibit 10(b)(2) CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER I, Mark D. Gersten, certify that: 1. I have reviewed this report on Form N-CSR (the "Report") of AllianceBernstein Bond Fund, Inc. (the "Fund"); 2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report; 3. Based on my knowledge, the financial statements and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the Fund as of, and for, the periods presented in this Report; 4. The Fund's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act) for the Fund and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Fund, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared; b) evaluated the effectiveness of the Fund's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this Report based on such evaluation; and c) disclosed in this Report any change in the Fund's internal control over financial reporting that occurred during the Fund's most recent fiscal half-year [or second fiscal half-year in the case of an annual report] that has materially affected, or is reasonably likely to materially affect, the Fund's internal control over financial reporting; and 5. The Fund's other certifying officer and I have disclosed to the Fund's auditors and the audit committee of the Fund's board of directors: a) all significant deficiencies in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Fund's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Fund's internal controls. Date: November 25, 2003 /s/Mark D. Gersten --------------------------- Mark D. Gersten Treasurer and Chief Financial Officer EX-99.906 CERT 4 edg9542_ex10c-906.txt Exhibit 10(c) CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT Pursuant to 18 U.S.C. 1350, each of the undersigned, being the Principal Executive Officer and Principal Financial Officer of AllianceBernstein Bond Fund, Inc. (the "Registrant"), hereby certifies that the Registrant's report on Form N-CSR for the period ended September 30, 2003 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Date: November 25, 2003 By: /s/Marc O. Mayer ----------------------------------- Marc O. Mayer President By: /s/Mark D. Gersten ----------------------------------- Mark D. Gersten Treasurer and Chief Financial Officer This certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and is not being filed as part of the Report or as a separate disclosure document. A signed original of this written statement required by Section 906 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request. EX-99.CODE ETH 5 edg9542-ethics.txt Exhibit 10(a)(1) CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS I. Covered Officers/Purpose of the Code The AllianceBernstein Mutual Fund Complex's code of ethics (this "Code") for the investment companies within the complex (collectively, the "Funds" and each, a "Company") applies to each Company's Principal Executive Officer, Principal Financial and Accounting Officer and Controller (the "Covered Officers," each of whom is set forth in Exhibit A) for the purpose of promoting: o honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; o full, fair, accurate, timely and understandable disclosure in reports and documents that a registrant files with, or submits to, the Securities and Exchange Commission ("SEC") and in other public communications made by the Company; o compliance with applicable laws and governmental rules and regulations; o the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and o accountability for adherence to the Code. Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest. II. Covered Officers Should Handle Ethically Actual and Apparent Conflicts of Interest Overview. A "conflict of interest" occurs when a Covered Officer's private interest interferes with the interests of, or his service to, the Company. For example, a conflict of interest would arise if a Covered Officer, or a member of his family, receives improper personal benefits as a result of his position with the Company. For the purposes of this Code, members of the Covered Officer's family include his or her spouse, children, stepchildren, financial dependents, parents and stepparents. Certain conflicts of interest arise out of the relationships between Covered Officers and the Company and already are subject to conflict of interest provisions in the Investment Company Act of 1940 ("Investment Company Act") and the Investment Advisers Act of 1940 ("Investment Advisers Act"). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Company because of their status as "affiliated persons" of the Company. The Company's and the investment adviser's compliance programs and procedures are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside of the parameters of this Code. Although typically not presenting an opportunity for improper personal benefit, conflicts arise from, or as a result of, the contractual relationship between the Company and the investment adviser of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for the Company or for the adviser, or for both), be involved in establishing policies and implementing decisions that will have different effects on the adviser and the Company. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Company and the adviser and is consistent with the performance by the Covered Officers of their duties as officers of the Company. Thus, if performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically. In addition, it is recognized by the Company's Board of Directors or Trustees (the "Directors") that the Covered Officers may also be officers or employees of one or more of the other Funds or of other investment companies covered by this or other codes. Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Company. Each Covered Officer must: o not use his personal influence or personal relationships improperly to influence investment decisions or financial reporting by the Company whereby the Covered Officer would benefit personally to the detriment of the Company; o not cause the Company to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit of the Company; o not use material non-public knowledge of portfolio transactions made or contemplated for the Company to trade personally or cause others to trade personally in contemplation of the market effect of such transactions; There are some conflict of interest situations, whether involving a Covered Officer directly or a member of his family, that should always be discussed with the General Counsel of AllianceBernstein Investment Research and Management, Inc.(the "General Counsel"), if material. Examples of these include: o service as a director on the board of directors or trustees of any public or private company (other than a not-for-profit organization); o the receipt of any non-nominal gifts; o the receipt of any entertainment from any company with which the Company has current or prospective business dealings unless such entertainment is business-related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety; o any ownership interest in, or any consulting or employment relationship with, any of the Company's service providers, other than its investment adviser, principal underwriter, administrator or any affiliated person thereof; o a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Company for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer's employment, such as compensation or equity ownership. III. Disclosure and Compliance o Each Covered Officer should familiarize himself with the disclosure requirements and disclosure controls and procedures generally applicable to the Company; o each Covered Officer should not knowingly misrepresent, or cause others to misrepresent, facts about the Company to others, whether within or outside the Company, including to the Company's directors and auditors, and to governmental regulators and self-regulatory organizations; o each Covered Officer should, to the extent appropriate within his area of responsibility, consult with other officers and employees of the Funds and the adviser with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Funds file with, or submit to, the SEC and in other public communications made by the Funds; and o it is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. IV. Reporting and Accountability Each Covered Officer must: o upon adoption of the Code (or thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the General Counsel that he has received, read, and understands the Code; o annually thereafter affirm to the General Counsel that he has complied with the requirements of the Code; o complete at least annually a questionnaire relating to affiliations or other relationships that may give rise to conflicts of interest; o not retaliate against any other Covered Officer or any employee of the Company or their affiliated persons for reports of potential violations that are made in good faith; and o notify the General Counsel promptly if he knows of any violation of this Code. Failure to do so is itself a violation of this Code. The General Counsel is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation. However, waivers sought by a Covered Officer will be considered by the Company's Audit Committee (the "Committee"). The Company will follow these procedures in investigating and enforcing this Code: o the General Counsel will take all appropriate action to investigate any potential violations reported to him; o if, after such investigation, the General Counsel believes that no material violation has occurred, the General Counsel is not required to take any further action; o any matter that the General Counsel believes is a material violation will be reported to the Committee; o if the Committee concurs that a material violation has occurred, it will inform and make a recommendation to the Directors, who will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the investment adviser or its board; or a recommendation to dismiss the Covered Officer; o the Committee will be responsible for granting waivers, as appropriate; and o any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules. V. Other Policies and Procedures This Code shall be the sole code of ethics adopted by the Company for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Company, the Company's adviser, principal underwriter, or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, it is understood that this Code is in all respects separate and apart from, and operates independently of, any such policies and procedures. In particular, the Company's and its investment adviser's and principal underwriter's codes of ethics under Rule 17j-l under the Investment Company Act are separate requirements applying to the Covered Officers and others, and are not part of this Code. VI. Amendments Any amendments to this Code, other than amendments to Exhibit A, must be approved or ratified by a majority vote of the Directors, including a majority of independent directors. VII. Confidentiality All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the Directors, the investment adviser, their counsel, counsel to the Company and, if deemed appropriate by the Directors of the Company, to the Directors of the other Funds. VIII. Internal Use The Code is intended solely for internal use by the Funds and does not constitute an admission, by or on behalf of any Company, as to any fact, circumstance, or legal conclusion. Date: July 22, 2003 Exhibit A Persons Covered by this Code of Ethics John Carifa, Principal Executive Officer Mark Gersten, Principal Financial and Accounting Officer Vince Noto, Controller -----END PRIVACY-ENHANCED MESSAGE-----