-----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, AoqF9+kmTj3zYUbjqWMCGDF0scHaJ6NivzWPJCq9AK+s1KhsYIXgpvggU3Xt4DOA XmERLxS2hVM1jDYU4cip7Q== 0000936772-05-000219.txt : 20051208 0000936772-05-000219.hdr.sgml : 20051208 20051208162841 ACCESSION NUMBER: 0000936772-05-000219 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20050930 FILED AS OF DATE: 20051208 DATE AS OF CHANGE: 20051208 EFFECTIVENESS DATE: 20051208 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLIANCEBERNSTEIN BOND FUND INC CENTRAL INDEX KEY: 0000003794 IRS NUMBER: 132754393 FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-02383 FILM NUMBER: 051252720 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 edg11455_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: 811-02383 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, 2005 Date of reporting period: September 30, 2005 ITEM 1. REPORTS TO STOCKHOLDERS. [LOGO] ALLIANCEBERNSTEIN (R) Investment Research and Management AllianceBernstein Bond Fund Corporate Bond Portfolio Annual Report September 30, 2005 - --------------------------- Investment Products Offered o Are Not FDIC Insured o May Lose Value o Are Not Bank Guaranteed - --------------------------- The investment return and principal value of an investment in the Fund will fluctuate as the prices of the individual securities in which it invests fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. You should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. For a free copy of the Fund's prospectus, which contains this and other information, visit our web site at www.alliancebernstein.com or call your financial advisor or AllianceBernstein at (800) 227-4618. Please read the prospectus carefully before you invest. You may obtain performance information current to the most recent month-end by visiting www.alliancebernstein.com. This shareholder report must be preceded or accompanied by the Fund's prospectus for individuals who are not current shareholders of the Fund. You may obtain a description of the Fund's proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Simply visit AllianceBernstein's web site at www.alliancebernstein.com, or go to the Securities and Exchange Commission's (the "Commission") web site at www.sec.gov, or call AllianceBernstein at (800) 227-4618. The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q are available on the Commission's web site at www.sec.gov. The Fund's Forms N-Q may also be reviewed and copied at the Commission's Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330. AllianceBernstein Investment Research and Management, Inc. is an affiliate of Alliance Capital Management L.P., the manager of the funds, and is a member of the NASD. November 22, 2005 Annual Report This report provides management's discussion of fund performance for AllianceBernstein Bond Fund Corporate Bond Portfolio (the "Portfolio") for the annual reporting period ended September 30, 2005. Investment Objective and Policies The primary objective of this open-end Portfolio is to maximize income over the long-term, to the extent consistent with providing reasonable safety in the value of each shareholder's investment. As a secondary objective, the Portfolio seeks capital appreciation. To achieve its objectives, the Portfolio invests primarily in corporate bonds. The Portfolio may also hold debt securities issued by the U.S. and foreign governments. While the Portfolio invests primarily in investment-grade debt securities (currently 65%), it may also invest a significant amount of its assets in lower-rated debt securities. Investment Results The table on page 4 shows the Portfolio's performance compared to its benchmark, the Lehman Brothers (LB) Long Baa U.S. Credit Index, for the six- and 12-month periods ended September 30, 2005. We have also included performance for the Lipper Corporate Debt Funds BBB-Rated Funds Average. Funds in the Lipper Average have generally similar investment objectives to the Portfolio, although some may have different investment policies and sales and management fees. For the 12-month period ended September 30, 2005, the Portfolio underperformed its benchmark, the Lehman Brothers Long Baa U.S. Credit Index, and outperformed the Lipper Corporate Debt BBB-rated Funds Average, a peer group average of similarly managed funds. The Portfolio's shorter-than-benchmark duration detracted from its performance versus its benchmark as longer maturity corporates outperformed for the annual reporting period. The benchmark carried a duration of 11.1 years as compared to the Fund's credit duration of 6.7 years. The Fund's duration, however, exceeded the duration of the Lipper Average by approximately 1.5 to 2 years. This duration helped the Portfolio to outperform its peer universe for the year. Contributing positively to the Portfolio's relative performance was its allocation to high yield which outperformed investment-grade corporates for the annual reporting period. Also contributing positively was the Fund's underweight position in the automotive industry which performed poorly during the year. The Portfolio's overweight position in the financial industry, specifically in banking and property and casualty, also helped performance. Market Review and Investment Strategy Investment-grade fixed-income returns were moderate during the annual reporting period, reflecting generally higher interest rates, a significant flattening of the yield curve and modest spread movement. As measured by the Lehman Brothers Long Baa U.S. Credit Index, the corporate market posted a return of 5.13% for the reporting period despite the headwinds of continued rate increases by the Federal Reserve. Beginning in June 2004, the Federal Reserve hiked the ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 1 Fed Funds benchmark rate 12 times for a total of 300 basis points, bringing the Fed Funds target from its all-time low of 1% to 4%. Corporate securities continued to benefit from favorable liquidity, investor demand and strong corporate earnings. Most industries posted positive returns with airlines, aerospace/defense and media/cable outperforming, while the automotive industry underperformed. The auto industry took another tumble in the third quarter after Moody's Investors Service cut the credit ratings of General Motors and Ford Motor Company to non-investment grade, reflecting financial losses and declining U.S. market share. The sector has also been hurt by higher energy prices, which are causing consumers to defer purchases or shift from large sport utility vehicles to smaller utility vehicles and sedans, which are generally less profitable. During the annual reporting period, high yield debt outperformed the investment-grade sectors which are more sensitive to rising interest rates. High yield securities returned 6.71%, as represented by the Lehman Brothers High Yield Index. A similar combination of factors also supported the high yield market throughout the year including a strong investor demand for yield, limited supply and strong corporate earnings. Liquidity in the high yield market also remained ample with default rates near all-time lows. In September, however, returns were dampened somewhat as the sector posted its first negative monthly return since April. Investor sentiment turned more cautious as the post-Hurricane Katrina energy price shock weighed on consumers and equity investors. High yield spreads, according to Credit Suisse First Boston, were 377 basis points over Treasuries at the end of the reporting period, representing a tightening of 53 basis points during the annual period. Most of the tightening occurred early in the reporting period. During the period under review, the Portfolio was positioned for interest rates to rise. Accordingly, the overall duration of the Portfolio was shorter than that of the benchmark to help protect against the negative effect of rising interest rates. Additionally, as credit spreads reached historic lows and the Federal Reserve signaled it would continue to raise interest rates, the Portfolio's U.S. Investment Grade Corporate Bond and U.S. High Yield Investment Team moved to reduce the overall risk of the Portfolio to downward moves in the market. Consequently, the Team significantly reduced the Portfolio's credit risk by upgrading the Fund's overall credit quality profile. The Portfolio's high yield component was also significantly reduced. The Portfolio's reduced exposure to the high yield market reflected the lack of attractive yield compensation relative to credit risk. With fairly negligible spread differentials between industries, security selection was emphasized over industry selection. The Portfolio was overweight in some industries such as insurance (property and casualty), banking and communications, and underweight in airlines, aerospace/defense and energy. 2 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO HISTORICAL PERFORMANCE An Important Note About the Value of Historical Performance The performance shown on the following pages represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by visiting www.alliancebernstein.com. The investment return and principal value of an investment in the Portfolio will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. You should consider the investment objectives, risks, charges and expenses of the Portfolio carefully before investing. For a free copy of the Portfolio's prospectus, which contains this and other information, visit our web site at www.alliancebernstein.com or call your financial advisor or AllianceBernstein at (800) 227-4618. You should read the prospectus carefully before you invest. Returns are annualized for periods longer than one year. All fees and expenses related to the operation of the Portfolio have been deducted. NAV returns do not reflect sales charges; if sales charges were reflected, the Portfolio's quoted performance would be lower. SEC returns reflect the applicable sales charges for each share class: a 4.25% maximum front-end sales charge for Class A shares; the applicable contingent deferred sales charge for Class B shares (3% year 1, 2% year 2, 1% year 3, 0% year 4); a 1% 1 year contingent deferred sales charge for Class C shares. Returns for Advisor Class, Class R, Class K and Class I shares will vary due to different expenses associated with these classes. Performance assumes reinvestment of distributions and does not account for taxes. Benchmark Disclosure The unmanaged Lehman Brothers (LB) Long Baa U.S. Credit Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Index is a measure of corporate and non-corporate fixed income securities that are rated investment grade (Baa by Moody's Investors Service or BBB by Standard & Poor's) and have at least 10 years to final maturity. The unmanaged Lipper Corporate Debt BBB-Rated Funds Average (the "Lipper Average") is based on the performance of a universe of funds that invest at least 65% of their assets in corporate or government debt issues rated in the top four grades. For the six- and 12-month periods ended September 30, 2005, the Lipper Average consisted of 160 and 155 funds, respectively. Investors cannot invest directly in an index or an average, and their results are not indicative of the performance for any specific investment, including the Portfolio. A Word About Risk The Portfolio can invest in foreign securities, including emerging markets, which may magnify fluctuations due to changes in foreign exchange rates and the possibility of substantial volatility due to political and economic uncertainties in foreign countries. Price fluctuation in the Portfolio's securities may be caused by changes in the general level of interest rates or changes in bond credit quality ratings. Please note, as interest rates rise, existing bond prices fall and can cause the value of an investment in the Portfolio to decline. Changes in interest rates have a greater effect on bonds with longer maturities than on those with shorter maturities. High yield bonds involve a greater risk of default and price volatility than other bonds. Investing in non-investment grade securities presents special risks, including credit risk. Investments in the Portfolio are not guaranteed because of fluctuation in the net asset value of the underlying fixed-income related investments. Similar to direct bond ownership, bond funds have the same interest rate, inflation and credit risks that are associated with the underlying bonds owned by the Portfolio. Portfolio purchasers should understand that, in contrast to owning individual bonds, there are ongoing fees and expenses associated with owning shares of bond funds. While the Portfolio invests principally in bonds and other fixed-income securities, in order to achieve its investment objectives, the Portfolio may at times use certain types of investment derivatives, such as options, futures, forwards and swaps. These instruments involve risks different from, and in certain cases, greater than, the risks presented by more traditional investments. These risks are fully discussed in the Portfolio's prospectus. (Historical Performance continued on next page) ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 3 HISTORICAL PERFORMANCE (continued from previous page) Returns THE PORTFOLIO VS. ITS BENCHMARK ----------------------------- PERIODS ENDED SEPTEMBER 30, 2005 6 Months 12 Months - ------------------------------------------------------------------------------- AllianceBernstein Bond Fund Corporate Bond Portfolio Class A 1.09% 3.86% Class B 0.82% 3.13% Class C 0.82% 3.14% Advisor Class 1.33% 4.10% Class R** 1.04% 3.71% Class K** 1.11% -0.89%* Class I** 1.28% -0.70%* Lehman Brothers Long Baa U.S. Credit Index 3.22% 5.13% Lipper Corporate Debt BBB-Rated Funds Average 2.29% 3.19% * Since Inception. The Class K and Class I share inception date is 3/1/05. ** Please note that this is a new share class offering for investors purchasing shares through institutional pension plans. The inception date for Class R shares is 11/3/03. The inception date for Class K and Class I shares is listed above. GROWTH OF A $10,000 INVESTMENT IN THE PORTFOLIO 9/30/95 TO 9/30/05 [THE FOLLOWING DATA WAS REPRESENTED BY A MOUNTAIN CHART IN THE PRINTED MATERIAL] AllianceBernstein Lehman Brothers Bond Fund Corporate Bond Long Baa U.S. Credit Portfolio Class A Index - ------------------------------------------------------------------------------- 9/30/95 $ 9,575 $10,000 9/30/96 $10,624 $10,403 9/30/97 $12,556 $11,896 9/30/98 $12,031 $13,197 9/30/99 $12,411 $12,767 9/30/00 $13,407 $13,361 9/30/01 $14,427 $14,924 9/30/02 $13,782 $15,821 9/30/03 $16,696 $19,124 9/30/04 $18,033 $20,662 9/30/05 $18,726 $21,722 AllianceBernstein Bond Fund Corporate Bond Portfolio Class A: $18,726 Lehman Brothers Long Baa U.S. Credit Index: $21,722 This chart illustrates the total value of an assumed $10,000 investment in AllianceBernstein Bond Fund Corporate Bond Portfolio Class A shares (from 9/30/95 to 9/30/05) as compared to the performance of its benchmark. 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. See Historical Performance and Benchmark disclosures on previous page. (Historical Performance continued on next page) 4 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO HISTORICAL PERFORMANCE (continued from previous page) AVERAGE ANNUAL RETURNS AS OF SEPTEMBER 30, 2005 - ------------------------------------------------------------------------------- NAV Returns SEC Returns Class A Shares 1 Year 3.86% -0.55% 5 Years 6.92% 5.99% 10 Years 6.94% 6.48% SEC Yield** 4.23% Class B Shares 1 Year 3.13% 0.17% 5 Years 6.15% 6.15% 10 Years(a) 6.49% 6.49% SEC Yield ** 3.70% Class C Shares 1 Year 3.14% 2.16% 5 Years 6.19% 6.19% 10 Years 6.19% 6.19% SEC Yield** 3.70% Advisor Class Shares 1 Year 4.10% Since Inception* 12.17% SEC Yield ** 4.72% Class R Shares+ 1 Year 3.71% Since Inception* 6.14% SEC Yield** 4.19% Class K Shares+ Since Inception* -0.89% SEC Yield ** 4.55% Class I Shares+ Since Inception* -0.70% SEC Yield ** 4.84% SEC AVERAGE ANNUAL RETURNS (WITH SALES CHARGES) AS OF THE MOST RECENT CALENDAR QUARTER-END (SEPTEMBER 30, 2005) - ------------------------------------------------------------------------------- Class A Shares 1 Year -0.55% 5 Years 5.99% 10 Years 6.48% Class B Shares 1 Year 0.17% 5 Years 6.15% 10 Years(a) 6.49% Class C Shares 1 Year 2.16% 5 Years 6.19% 10 Years 6.19% (a) Assumes conversion of Class B shares into Class A shares after six years. * Inception Date: 8/8/02 for Advisor Class shares; 11/3/03 for Class R shares; 3/1/05 for Class K and Class I shares. ** SEC yields are calculated based on SEC guidelines for the 30-day period ended September 30, 2005. + Please note that this is a new share class offering for investors purchasing shares through institutional pension plans. The inception date for these share classes is listed above. See Historical Performance disclosures on page 3. ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 5 FUND EXPENSES As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below. Actual Expenses The table below provides information about actual account values and actual expenses. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the hypothetical example is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Ending Account Value Account Value Expenses Paid April 1, 2005 September 30, 2005 During Period* --------------------------------------------------------------------------------------- Actual Hypothetical Actual Hypothetical** Actual Hypothetical --------------------------------------------------------------------------------------- Class A $1,000 $1,000 $1,010.93 $1,019.35 $5.75 $5.77 Class B $1,000 $1,000 $1,008.18 $1,015.74 $9.36 $9.40 Class C $1,000 $1,000 $1,008.21 $1,015.79 $9.31 $9.35 Advisor Class $1,000 $1,000 $1,013.31 $1,020.81 $4.29 $4.31 Class R $1,000 $1,000 $1,010.43 $1,017.85 $7.26 $7.28 Class K $1,000 $1,000 $1,011.07 $1,019.45 $5.65 $5.67 Class I $1,000 $1,000 $1,012.83 $1,021.06 $4.04 $4.05
* Expenses are equal to the classes' annualized expense ratios of 1.14%, 1.86%, 1.85%, 0.85%, 1.44%, 1.12% and 0.80%, respectively, multiplied by the average account value over the period, multiply by the number of days in the period/365. ** Assumes 5% return before expenses. 6 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO PORTFOLIO SUMMARY September 30, 2005 PORTFOLIO STATISTICS Net Assets ($mil): $761.8 [PIE CHART OMITTED] SECURITY TYPE BREAKDOWN* [ ] 6.9% Preferred Stock [ ] 6.1% U.S. Government & Government Sponsored Agency Obligations [ ] 1.3% Asset Backed Securities [PIE CHART OMITTED] CORPORATE DEBT OBLIGATIONS* [ ] 13.9% Public Utilities-- Electric & Gas [ ] 10.3% Banking [ ] 8.9% Insurance [ ] 7.4% Communications [ ] 5.3% Broadcasting/Media [ ] 4.9% Financial [ ] 4.6% Cable [ ] 4.0% Petroleum Products [ ] 3.6% Paper/Packaging [ ] 3.3% Building/Real Estate [ ] 2.6% Non-Air Transportation [ ] 2.5% Metals/Mining [ ] 2.5% Communications--Mobile [ ] 2.4% Health Care [ ] 9.3% Other [ ] 0.2% Short-Term * All data are as of September 30, 2005. The Portfolio's security type breakdown is expressed as a percentage of total investments (excluding security lending collateral) and may vary over time. "Other" represents less than 2.4% weightings in automotive, chemicals, energy, food & beverages, industrial, public utilities-telephone, retail and supermarket/drug. ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 7 PORTFOLIO OF INVESTMENTS September 30, 2005 Principal Amount (000) U.S. $ Value - ------------------------------------------------------------------------------- CORPORATE DEBT OBLIGATIONS-85.3% Automotive-2.0% DaimlerChrysler North America 4.875%, 6/15/10* $ 3,150 $ 3,087,060 Ford Motor Credit Co. 7.875%, 6/15/10 10,000 9,731,100 General Motors Corp. 7.75%, 3/15/36(a) 10,000 2,550,000 ------------ 15,368,160 ------------ Banking-10.3% CA Preferred Funding Trust 7.00%, 1/30/49 9,000 9,337,500 Dime Capital Trust I Series A 9.33%, 5/06/27 9,028 9,993,138 Dresdner Funding Trust I 8.151%, 6/30/31(b) 10,000 12,209,700 Great Western Financial Trust II 8.206%, 2/01/27 14,456 15,567,580 Lloyds Bank Plc (United Kingdom) 6.90%, 11/22/07 5,000 5,156,500 Mizuho Finance Group (Cayman Islands) 8.375%, 4/27/09 14,000 15,155,000 RBS Capital Trust I 4.709%, 7/01/13 10,000 9,647,720 Russian Standard Finance (Luxembourg) 7.50%, 10/07/10(b) 1,314 1,319,913 ------------ 78,387,051 ------------ Broadcasting/Media-5.3% News America, Inc. 5.30%, 12/15/14* 12,000 11,974,260 Time Warner, Inc. 6.875%, 5/01/12 15,000 16,393,290 7.70%, 5/01/32* 10,000 11,839,240 ------------ 40,206,790 ------------ Building/Real Estate-3.4% D.R. Horton, Inc. 6.875%, 5/01/13 7,000 7,334,152 EOP Operating L.P. 4.75%, 3/15/14 5,000 4,815,475 ERP Operating L.P. 5.125%, 3/15/16 8,800 8,668,378 KB HOME 5.875%, 1/15/15* 5,000 4,731,640 ------------ 25,549,645 ------------ 8 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO Principal Amount (000) U.S. $ Value - ------------------------------------------------------------------------------- Cable-4.5% AT&T Broadband Corp. 9.455%, 11/15/22 $20,420 $27,501,411 DirecTV Holdings LLC 6.375%, 6/15/15(b) 5,155 5,116,337 Insight Midwest LP 9.75%, 10/01/09 2,000 2,045,000 ------------ 34,662,748 ------------ Chemicals-0.7% Union Carbide Corp. 7.75%, 10/01/96* 5,000 5,258,085 ------------ Communications-7.3% America Movil SA de C.V. (Mexico) 5.75%, 1/15/15 5,000 5,017,325 AT&T Corp. 9.05%, 11/15/11 10,000 11,262,500 British Telecommunications Plc (United Kingdom) 8.375%, 12/15/10* 15,000 17,367,810 Deutsche Telekom International Finance BV 8.00%, 6/15/10 5,000 5,668,625 Sprint Capital Corp. 7.625%, 1/30/11* 10,000 11,190,050 TCI Communications Financing III 9.65%, 3/31/27 5,000 5,475,605 ------------ 55,981,915 ------------ Communications-Mobile-2.5% AT&T Wireless Services, Inc. 8.125%, 5/01/12 11,500 13,485,763 Nextel Communications, Inc. Series E 6.875%, 10/31/13* 5,000 5,307,265 ------------ 18,793,028 ------------ Energy-0.8% Ras Laffan LNG III Series B (Qatar) 5.838%, 9/30/27(b) 6,200 6,213,206 ------------ Financial-4.9% AFC Capital Trust I Series B 8.207%, 2/03/27 10,000 10,835,840 Farmers Insurance Exchange 8.625%, 5/01/24(b) 8,000 9,555,720 iStar Financial, Inc. 6.00%, 12/15/10 4,505 4,624,364 ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 9 Principal Amount (000) U.S. $ Value - ------------------------------------------------------------------------------- National Capital Trust II 5.486%, 12/29/49(b) $10,000 $10,042,040 Resona Global Securities (Cayman Islands) 7.191%, 12/29/49(b) 2,300 2,381,103 ------------ 37,439,067 ------------ Food & Beverage-1.1% ConAgra Foods, Inc. 6.75%, 9/15/11 1,740 1,870,968 7.875%, 9/15/10 5,560 6,221,429 ------------ 8,092,397 ------------ Healthcare-2.4% AmerisourceBergen Corp. 5.625%, 9/15/12(b) 5,000 4,925,000 Coventry Health Care, Inc. 5.875%, 1/15/12 1,660 1,684,900 6.125%, 1/15/15 2,815 2,885,375 Wyeth 6.50%, 2/01/34 7,500 8,429,220 ------------ 17,924,495 ------------ Industrial-0.4% Inco, Ltd. (Canada) 5.70%, 10/15/15 2,905 2,976,265 ------------ Insurance-8.9% Liberty Mutual Group 5.75%, 3/15/14(b) 10,000 9,771,240 Mangrove Bay PassThru Trust 6.102%, 7/15/33(b) 20,000 20,000,200 Markel Capital Trust I Series B 8.71%, 1/01/46 2,400 2,552,081 North Front Pass Through Trust 5.81%, 12/15/24(b) 5,000 5,028,505 Ohio Casualty Corp. 7.30%, 6/15/14* 6,650 7,167,523 Willis Group 5.125%, 7/15/10 2,500 2,498,160 W.R. Berkley Corp. 5.60%, 5/15/15 7,500 7,493,940 Zurich Capital Trust I 8.376%, 6/01/37(b) 12,500 13,356,025 ------------ 67,867,674 ------------ Metals/Mining-2.5% International Steel Group, Inc. 6.50%, 4/15/14 2,565 2,539,350 Ispat Inland ULC (Canada) 9.75%, 4/01/14 6,000 6,960,000 Teck Cominco, Ltd. (Canada) 6.125%, 10/01/35 10,000 9,806,270 ------------ 19,305,620 ------------ 10 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO Principal Amount (000) U.S. $ Value - ------------------------------------------------------------------------------- Non-Air Transportation-2.6% CSX Corp. 6.75%, 3/15/11 $ 5,622 $6,091,757 CSX Transportation, Inc. 9.75%, 6/15/20 5,200 7,270,323 Union Pacific Corp. 5.375%, 5/01/14 6,000 6,122,214 ------------ 19,484,294 ------------ Paper/Packaging-3.6% Georgia-Pacific Corp. 9.375%, 2/01/13 2,500 2,787,500 Packaging Corp. of America 5.75%, 8/01/13 8,850 8,561,729 Weyerhaeuser Co. 6.75%, 3/15/12* 15,000 16,208,295 ------------ 27,557,524 ------------ Petroleum Products-4.0% Amerada Hess Corp. 6.65%, 8/15/11 6,000 6,482,940 Enterprise Products Operating L.P. 5.00%, 3/01/15(b)* 10,000 9,488,260 6.65%, 10/15/34 8,000 8,208,552 Tengizchevroil LLP (Kazakhstan) 6.124%, 11/15/14(b) 6,215 6,354,838 ------------ 30,534,590 ------------ Public Utilities-Electric & Gas-13.8% Aquila, Inc. 14.875%, 7/01/12* 4,435 6,053,775 Calenergy Co., Inc. 8.48%, 9/15/28 6,000 7,733,982 Dominion Resources Capital Trust III 8.40%, 1/15/31 7,000 8,619,541 Duke Capital LLC 6.75%, 2/15/32 6,000 6,546,198 8.00%, 10/01/19 9,000 10,927,962 FirstEnergy Corp. Series B 6.45%, 11/15/11 7,250 7,719,546 7.375%, 11/15/31 12,230 14,344,176 Indiantown Cogeneration L.P. Series A-9 9.26%, 12/15/10 7,535 8,197,140 Kansas Gas & Electric Co. 5.647%, 3/29/21(b) 5,000 4,948,200 Pacific Gas & Electric Co. 4.80%, 3/01/14 10,000 9,777,830 Potomac Edison Co. 5.35%, 11/15/14 3,500 3,538,014 Progress Energy, Inc. 7.10%, 3/01/11* 6,000 6,522,594 ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 11 Shares or Principal Amount (000) U.S. $ Value - ------------------------------------------------------------------------------- TECO Energy, Inc. 7.00%, 5/01/12 $ 5,000 $ 5,275,000 7.20%, 5/01/11 5,000 5,300,000 ------------ 105,503,958 ------------ Public Utilities-Telephone-1.9% Telecom Italia Capital (Luxembourg) 4.00%, 1/15/10 5,000 4,801,075 5.25%, 10/01/15 5,000 4,913,150 6.00%, 9/30/34 5,000 4,899,720 ------------ 14,613,945 ------------ Retail-0.7% GSC Holdings Corp. 8.00%, 10/01/12(b)* 5,000 5,000,000 Supermarket/Drug-1.7% Delhaize America, Inc. 9.00%, 4/15/31 7,000 8,080,387 The Kroger Co. 4.95%, 1/15/15* 5,250 5,008,883 ------------ 13,089,270 ------------ Total Corporate Debt Obligations (cost $637,271,694) 649,809,727 ------------ PREFERRED STOCKS-6.9% Banking-2.0% CoBank Series B(b) 100 5,139,500 Royal Bank of Scotland Group PLC (United Kingdom) Series N 400 10,164,000 ------------ 15,303,500 ------------ Building/Real Estate-0.7% Equity Residential Series N* 200 4,978,000 ------------ Communications-3.5% Centaur Funding Corp. (Cayman Islands) Series B(b) 20 26,452,725 ------------ Insurance-0.7% AmerUs Group Co. 225 5,582,790 ------------ Total Preferred Stocks (cost $45,896,250) 52,317,015 ------------ 12 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO Shares or Principal Amount (000) U.S. $ Value - ------------------------------------------------------------------------------- U.S. GOVERNMENT & GOVERNMENT SPONSORED AGENCY OBLIGATIONS-6.1% Federal Home Loan Mortgage Corporation-3.9% 4.50%, 8/01/35 $30,932 $ 29,431,752 ------------ U.S. Treasury Bond-0.5% 5.375%, 2/15/31 3,475 3,893,084 ------------ U.S. Treasury Note-1.7% 2.50%, 10/31/06(c) 13,000 12,778,090 ------------ Total U.S. Government & Government Sponsored Agency Obligations (cost $46,558,667) 46,102,926 ------------ ASSET BACKED SECURITIES-1.3% Chase Issuance Trust Series 2005-A7, Cl.A7 4.55%, 3/15/13 (cost $10,047,516) 10,000 9,971,875 ------------ SHORT-TERM INVESTMENT-0.2% Time Deposit-0.2% State Street Euro Dollar 3.10%, 10/03/05 (cost $1,857,000) 1,857 1,857,000 ------------ Total Investments Before Security Lending Collateral-99.8% (cost $741,631,127) 760,058,543 ------------ INVESTMENT OF CASH COLLATERAL FOR SECURITIES LOANED-10.3% Short-Term Investments Deutsche Bank 3.88%, 2/26/06 10,000 10,062,333 Gotham Funding 3.80%, 10/19/05 30,000 29,927,359 Morgan Stanley 3.89%, 1/20/06 10,000 10,000,000 ------------ 49,989,692 ------------ UBS Private Money Market Fund, LLC 3.65% 28,746,236 28,746,236 ------------ Total Investment of Cash Collateral for Securities Loaned (cost $78,735,928) 78,735,928 ------------ ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 13 U.S. $ Value - ------------------------------------------------------------------------------- Total Investments-110.1% (cost $820,367,055) $838,794,471 Other assets less liabilities-(10.1%) (76,948,542) ------------ Net Assets-100% $761,845,929 ------------ CREDIT DEFAULT SWAP CONTRACTS (see Note D) Notional Swap Counterparty & Amount Interest Termination Unrealized Referenced Obligation(s) (000) Rate Date Appreciation - ------------------------------------------------------------------------------- Sell: Lehman Brothers 10,000 1.58% 9/20/07 $4,775 AvalonBay Communities, Inc., Series H, Preferred Stock CIT Group, Inc., Series A, Preferred Stock Duke Energy Corp., Series C, Preferred Stock Merrill Lynch & Co., Inc., Series 1, Preferred Stock MetLife, Inc., Series B, Preferred Stock Royal Bank of Scotland Group plc, Series M, Preferred Stock Washington Mutual, Inc., Series A Lehman Brothers 10,000 0.77% 12/20/10 12,001 Simon Property Group, Inc. Series F, Preferred Stock INTEREST RATE SWAP CONTRACT (see Note D)
Rate Type --------------------------- Notional Payments Payments Swap Amount Termination made by the received by Unrealized Counterparty (000) Date Portfolio the Portfolio Depreciation - --------------------------------------------------------------------------------------- J. P. Morgan+ 200,000 3/15/15 5.218% 3 Month LIBOR++ $(5,857,310)
+ Represents a forward interest rate swap whose effective date for the exchange of cash flows is March 15, 2006. ++ LIBOR (London Interbank Offered Rate) * Represents entire or partial securities out on loan. See Note E for securities lending information. (a) Indicates security that has a zero coupon that remains in effect until a predetermined date at which time the stated coupon rate becomes effective. (b) Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities are considered liquid and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At September 30, 2005, the aggregate market value of these securities amounted to $157,302,512 or 20.6% of net assets. (c) Represents entire or partial position segregated as collateral for interest rate swaps. See notes to financial statements. 14 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO STATEMENT OF ASSETS & LIABILITIES September 30, 2005 Assets Investments in securities, at value (cost $820,367,055--including investment of cash collateral for securities loaned of $78,735,928) $838,794,471(a) Cash 864 Interest and dividends receivable 11,577,119 Receivable for capital stock sold 2,645,634 Unrealized appreciation of swap contracts 16,776 ------------ Total assets 853,034,864 ------------ Liabilities Payable for collateral on securities loaned 78,735,928 Unrealized depreciation of swap contracts 5,857,310 Payable for capital stock redeemed 3,375,999 Payable for investment securities purchased 1,314,000 Dividends payable 852,326 Distribution fee payable 350,967 Advisory fee payable 318,006 Transfer agent fee payable 102,174 Accrued expenses 282,225 ------------ Total liabilities 91,188,935 ------------ Net Assets $761,845,929 ------------ Composition of Net Assets Capital stock, at par $63,435 Additional paid-in capital 1,033,508,723 Undistributed net investment income 520,578 Accumulated net realized loss on investment transactions (284,833,689) Net unrealized appreciation of investments 12,586,882 ------------ $761,845,929 ------------ Calculation of Maximum Offering Price Per Share Net Asset Value and: -------------------- Maximum Shares Offering Redemption Offering Class Net Assets Outstanding Price Price Price* - ------------------------------------------------------------------------------- A $483,168,629 40,217,146 -- $12.01 $12.54 - ------------------------------------------------------------------------------- B $162,973,115 13,582,565 $12.00 -- -- - ------------------------------------------------------------------------------- C $110,680,312 9,217,333 $12.01 -- -- - ------------------------------------------------------------------------------- Advisor $ 4,971,345 413,994 $12.01 $12.01 -- - ------------------------------------------------------------------------------- R $ 32,903 2,738 $12.02 $12.02 -- - ------------------------------------------------------------------------------- K $ 9,806 816.2 $12.01 $12.01 -- - ------------------------------------------------------------------------------- I $ 9,819 817.3 $12.01 $12.01 -- - ------------------------------------------------------------------------------- * The maximum offering price per share for Class A shares includes a sales charge of 4.25%. (a) Includes securities on loan with a value of $75,327,864 (see Note E). See notes to financial statements. ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 15 STATEMENT OF OPERATIONS Year Ended September 30, 2005 Investment Income Interest $ 50,299,937 Dividends (net of foreign taxes withheld of $22,124) 3,829,344 $ 54,129,281 Expenses Advisory fee 4,195,799 Distribution fee--Class A 1,518,380 Distribution fee--Class B 2,092,750 Distribution fee--Class C 1,202,567 Distribution fee--Class R 113 Distribution fee--Class K 15 Transfer agency 1,371,717 Printing 350,774 Custodian 255,798 Registration fees 96,300 Administrative 92,000 Audit 69,929 Legal 52,128 Directors' fees 25,351 Miscellaneous 45,111 Total expenses before interest expense 11,368,732 Interest expense 51,728 Total expenses 11,420,460 Less: expense offset arrangement (see Note B) (8,679) Net expenses 11,411,781 Net investment income 42,717,500 Realized and Unrealized Gain (Loss) on Investment Transactions Net realized gain (loss) on: Investment transactions 37,594,639 Written options (239,000) Swap contracts 393,720 Net change in unrealized appreciation/depreciation of: Investments (43,608,232) Written options 5,000 Swap contracts (5,538,825) Net loss on investment transactions (11,392,698) Net Increase in Net Assets from Operations $ 31,324,802 See notes to financial statements. 16 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS Year Ended Year Ended September 30, September 30, 2005 2004 --------------- -------------- Increase (Decrease) in Net Assets from Operations Net investment income $ 42,717,500 $ 57,826,732 Net realized gain on investment transactions 37,749,359 32,602,855 Net change in unrealized appreciation/depreciation of investments (49,142,057) (19,242,237) Net increase in net assets from operations 31,324,802 71,187,350 Dividends to Shareholders from Net investment income Class A (26,331,894) (30,964,784) Class B (9,462,753) (16,743,588) Class C (5,421,178) (7,389,724) Advisor Class (186,170) (203,931) Class R (1,090) (534) Class K (292) -0- Class I (312) -0- Capital Stock Transactions Net decrease (118,487,269) (205,155,519) Total decrease (128,566,156) (189,270,730) Net Assets Beginning of period 890,412,085 1,079,682,815 End of period (including undistributed net investment income of $520,578 and $359,434, respectively) $ 761,845,929 $ 890,412,085 See notes to financial statements. ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 17 NOTES TO FINANCIAL STATEMENTS September 30, 2005 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 Corporate Bond Portfolio. The Corporate Bond Portfolio (the "Portfolio") offers Class A, Class B, Class C, Advisor Class, Class R, Class K and Class I shares. Class A shares are sold with a front-end sales charge of up to 4.25% for purchases not exceeding $1,000,000. With respect to purchases of $1,000,000 or more, Class A shares redeemed within one year of purchase may be subject to a contingent deferred sales charge of 1%. Class B shares are currently sold with a contingent deferred sales charge which declines from 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. Class R and Class K shares are sold without an initial or contingent deferred sales charge. Advisor Class and Class I shares are sold without an initial or contingent deferred sales charge and are not subject to ongoing distribution expenses. All seven classes of shares have identical voting, dividend, liquidation and other rights, except that 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 U.S. generally accepted accounting principles which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. 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 Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at "fair value" as determined in accordance with procedures established by and under the general supervision of the Fund's Board of Directors. In general, the market value of securities which are readily available and deemed reliable are determined as follows. Securities listed on a national securities exchange or on a foreign securities exchange are valued at the last sale price at the 18 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the mean of the closing bid and asked prices on such day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities 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 valuation, the last available closing settlement price is used; securities traded in the over-the-counter market, ("OTC") (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, Alliance Capital Management, L.P. (the "Adviser") may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security; and OTC and other derivatives are valued on the basis of a quoted bid price or spread from a major broker/dealer in such security. Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer's financial statements or other available documents. In addition, the Portfolio may use fair value pricing for securities primarily traded in non-U.S. markets because most foreign markets close well before the Portfolio values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. 2. Taxes It is the policy of the Portfolio to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Portfolio may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatri- ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 19 ated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned. 3. Investment Income and Investment Transactions Dividend income is recorded on the ex-dividend date or as soon as the Portfolio is informed of the dividend. 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 and amortizes premiums as adjustments to interest income. 4. Income and Expenses All income earned and expenses incurred by the Portfolio are borne on a pro-rata basis by each settled class of shares, based on proportionate interest in the Portfolio represented by the net assets of such class, except that the Portfolio's Class B and Class C shares bear higher distribution and transfer agent fees than Class A, Advisor Class, Class R, Class K and Class I shares. Advisor Class and Class I 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 U.S. generally accepted accounting principles. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. NOTE B Advisory Fee and Other Transactions with Affiliates Under the terms of the investment advisory agreement, the Portfolio pays the Adviser an advisory fee at an annual rate of .50% of the first $2.5 billion, ..45% of the next $2.5 billion and .40% in excess of $5 billion, of the Portfolio's average daily net assets. Prior to September 7, 2004, the Portfolio paid the Adviser an advisory fee at an annual rate of .625% of the first $500 million and .50% in excess of $500 million of the Portfolio's average daily net assets. The fee is accrued daily and paid monthly. Effective January 1, 2004 through September 6, 2004, in contemplation of the final agreement with the Office of New York Attorney General ("NYAG"), the Adviser began waiving a portion of its advisory fee so as to charge the Portfolio at the reduced annual rate discussed above. For a more complete discussion of the Adviser's settlement with the NYAG, please see "Legal Proceedings" below. 20 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO Pursuant to the advisory agreement, the Portfolio paid $92,000 to the Adviser representing the cost of certain legal and accounting services provided to the Portfolio by the Adviser for the year ended September 30, 2005. The Fund compensates Alliance Global Investor Services, Inc. (AGIS), a wholly owned subsidiary of the Advisor, under a Transfer Agency Agreement for providing personnel and facilities to perform transfer agency services for the Fund. AGIS may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. Such compensation retained by AGIS amounted to $651,716 for the year ended June 30, 2005. For the year ended September 30, 2005, the Portfolio's expenses were reduced by $8,679 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 $21,699 from the sales of Class A shares and received $9,210, $151,258 and $13,877, respectively, in contingent deferred sales charges imposed upon redemptions by shareholders of Class A, Class B and Class C shares, respectively, for the year ended September 30, 2005. 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 the Portfolio's average daily net assets attributable to Class A shares, 1% of the Portfolio's average daily net assets attributable to both Class B and Class C shares, .50% of the Portfolio's average daily net assets attributable to Class R shares and .25% of the Portfolio's average daily net assets attributable to Class K shares. There are no distribution and servicing fees on the Advisor Class and Class I shares. The fees are accrued daily and paid monthly. The Agreement provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities. The Distributor has incurred expenses in excess of the distribution costs reimbursed by the Portfolio in the amounts of $10,981,689, $5,575,481, $1,744 and $0 for Class B, Class C, Class R and Class K shares, respectively. Such costs may be recovered from the Portfolio in future periods so long as the Agreement is in effect. In accordance with the Agreement, there is no provision for recovery of unreimbursed distribution costs incurred by the Distributor beyond the current fiscal year for Class A shares. The Agreement also provides that the Adviser may use its own resources to finance the distribution of the Portfolio's shares. ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 21 NOTE D Investment Transactions Purchases and sales of investment securities (excluding short-term investments) for the year ended September 30, 2005, were as follows: Purchases Sales ------------- --------------- Investment securities (excluding U.S. government securities) $ 884,414,688 $ 1,044,712,203 U.S. government securities 162,604,506 115,852,449 The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation (excluding swaps) are as follows: Cost $ 820,749,218 Gross unrealized appreciation $ 23,806,601 Gross unrealized depreciation (5,761,348) Net unrealized appreciation $ 18,045,253 1. Option Transactions For hedging and investment purposes, the Portfolio may purchase and write (sell) put and call options on debt securities that are traded on U.S. and foreign securities exchanges and over-the-counter markets and swap agreements (commonly referred to as swaptions). 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 Portfolio bears the market risk of an unfavorable change in the price of the security 22 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO 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 swaptions for the year ended September 30, 2005 were as follows: Number of Premiums Contracts Received ----------- ----------- Swaptions outstanding at September 30, 2004 35 $ 119,500 Swaptions terminated in closing purchase transactions (35) (119,500) Swaptions outstanding at September 30, 2005 -0- $ -0- 2. Swap Agreements The Portfolio may enter into swaps to hedge its exposure to interest rates and credit risk or for investment purposes. 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. 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 interim 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. As of October 1, 2003, the Portfolio has adopted the method of accounting for interim payments on swap contracts in accordance with Financial Accounting Standards Board Statement No. 133. The Portfolio accrues for the interim payments on swap contracts on a daily basis, with the net amount recorded within unrealized appreciation/depreciation of swap contracts on the statement of assets and liabilities. Once the interim payments are settled in cash, the net amount is recorded as realized gain/loss on swaps, in addition to realized gain/loss recorded upon termination of swap contracts on the statement of operations. Prior to October 1, 2003, these interim payments were reflected within interest income/expense in the statement of operations. Fluctuations in the value of swap contracts are recorded as a component of net change in unrealized appreciation/depreciation of investments. ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 23 The Portfolio may enter into credit default swaps. The Portfolio may purchase credit protection on the referenced obligation of the credit default swap ("Buy Contract") or provide credit protection on the referenced obligation of the credit default swap ("Sale Contract"). A sale/(buy) in a credit default swap provides upon the occurrence of a credit event, as defined in the swap agreement, for the Portfolio to buy/(sell) from/(to) the counterparty at the notional amount (the "Notional Amount") and receive/(deliver) the principal amount of the referenced obligation. If a credit event occurs, the maximum payout amount for a Sale Contract is limited to the Notional Amount of the swap contract ("Maximum Payout Amount"). During the term of the swap agreement, the Portfolio receives/(pays) semi-annual fixed payments from/(to) the respective counterparty, calculated at the agreed upon interest rate applied to the Notional Amount. These interim payments are recorded within unrealized appreciation/depreciation of swap contracts on the statement of assets and liabilities. Credit default swaps may involve greater risks than if a Portfolio had invested in the referenced obligation directly. Credit default swaps are subject to general market risk, liquidity risk, counterparty risk and credit risk. If the Portfolio is a buyer and no credit event occurs, it will lose its investment. In addition, if the Portfolio is a seller and a credit event occurs, the value of the referenced obligation received by the Portfolio coupled with the periodic payments previously received, may be less than the Maximum Payout Amount it pays to the buyer, resulting in a loss to the Portfolio. At September 30, 2005, the Portfolio had Sale Contracts outstanding with Maximum Payout Amounts aggregating $20,000,000, with net unrealized appreciation of $16,776, and terms ranging from 2 years to 5 years, as reflected in the portfolio of investments. In certain circumstances, the Portfolio may hold Sale Contracts on the same referenced obligation and with the same counterparty it has purchased credit protection, which may reduce its obligation to make payments on Sale Contracts, if a credit event occurs. 3. 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 year ended September 30, 2005, the average amount of reverse repurchase agreements outstanding was $2,039,096 and the daily weighted average annualized interest rate was 2.46%. 24 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO 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, 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, 2005, the Portfolio had loaned securities with a value of $75,327,864 and received cash collateral which was invested in short-term securities valued at $78,735,928 as included in the accompanying portfolio of investments. For the year ended September 30, 2005, the Portfolio earned fee income of $45,526 which is included in interest income in the accompanying statement of operations. NOTE F Capital Stock There are 21,000,000,000 shares of $.001 par value capital stock authorized, divided into seven classes, designated Class A, Class B, Class C, Advisor Class, Class R, Class K and Class I shares. Each class consists of 3,000,000,000 authorized shares. Transactions in capital stock were as follows: Shares Amount --------------------------- ------------------------------ Year Ended Year Ended Year Ended Year Ended September 30, September 30, September 30, September 30, 2005 2004 2005 2004 ------------ ------------ -------------- -------------- Class A Shares sold 4,610,455 4,461,502 $ 56,557,019 $ 53,778,453 Shares issued in reinvestment of dividends 1,569,512 1,701,230 19,213,947 20,476,419 Shares converted from Class B 3,336,050 5,004,729 40,930,028 60,239,503 Shares redeemed (11,359,866) (13,829,610) (139,267,023) (166,068,888) Net decrease (1,843,849) (2,662,149) $(22,566,029) $(31,574,513) ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 25 Shares Amount --------------------------- ------------------------------ Year Ended Year Ended Year Ended Year Ended September 30, September 30, September 30, September 30, 2005 2004 2005 2004 ------------ ------------ -------------- -------------- Class B Shares sold 1,237,626 2,154,985 $ 15,172,576 $ 25,956,985 Shares issued in reinvestment of dividends 534,444 832,039 6,538,548 10,006,532 Shares converted to Class A (3,340,339) (5,000,439) (40,930,028) (60,239,503) Shares redeemed (5,490,400) (9,436,877) (67,252,868) (113,115,838) Net decrease (7,058,669) (11,450,292) $ (86,471,772) $(137,391,824) Class C Shares sold 947,050 1,532,581 $ 11,613,928 $ 18,454,991 Shares issued in reinvestment of dividends 272,247 316,396 3,331,569 3,805,919 Shares redeemed (2,404,933) (4,628,642) (29,473,603) (55,668,836) Net decrease (1,185,636) (2,779,665) $ (14,528,106) $ (33,407,926) Advisor Class Shares sold 438,090 101,095 $ 5,414,629 $ 1,220,358 Shares issued in reinvestment of dividends 14,875 17,041 181,546 204,868 Shares redeemed (46,049) (351,762) (561,245) (4,216,532) Net increase (decrease) 406,916 (233,626) $ 5,034,930 $ (2,791,306) November 3, November 3, Year Ended 2003(a) to Year Ended 2003(a) to September 30, September 30, September 30, September 30, 2005 2004 2005 2004 ------------ ------------ -------------- -------------- Class R Shares sold 2,982 846 $ 36,622 $ 10,050 Shares issued in reinvestment of dividends 46 -0- 559 -0- Shares redeemed (1,136) -0- (13,859) -0- Net increase 1,892 846 $ 23,322 $ 10,050 26 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO Shares Amount --------------------------- ------------------------------ March 1, March 1, 2005(a) to 2005(a) to September 30, September 30, 2005 2005 ------------- ------------- Class K Shares sold 816 $ 10,186 Net increase 816 $ 10,186 Class I Shares sold 817 $ 10,200 Net increase 817 $ 10,200 (a) Commencement of distribution. NOTE G Joint Credit Facility A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $250 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 year ended September 30, 2005. NOTE H Risks Involved in Investing in the Portfolio Interest Rate Risk and Credit Risk--Interest rate risk is the risk that changes in interest rates will affect the value of the Portfolio's investments in fixed-income debt securities such as bonds or notes. Increases in interest rates may cause the value of the Portfolio's investments to decline. Credit risk is the risk that the issuer or guarantor of a debt security, or the counterparty to a derivative contract, will be unable or unwilling to make timely principal and/or interest payments, or to otherwise honor its obligations. The degree of risk for a particular security may be reflected in its credit risk rating. Credit risk is greater for medium quality and lower-rated securities. Lower-rated debt securities and similar unrated securities (commonly known as "junk bonds") have speculative elements or are predominantly speculative risks. Foreign Securities Risk--Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign exchange rates and the possibility of future political and economic developments which could adversely affect the value of such securities. Moreover, securities of many foreign companies or foreign governments and their markets may be less liquid and their prices more volatile than those of comparable United States companies or of the United States government. ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 27 Indemnification Risk--In the ordinary course of business, the Portfolio enters into contracts that contain a variety of indemnifications. The Portfolio's maximum exposure under these arrangements is unknown. However, the Portfolio has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. NOTE I Distributions to Shareholders The tax character of distributions paid during the fiscal years ended September 30, 2005 and September 30, 2004 were as follows: September 30, September 30, 2005 2004 ------------- ------------- Distributions paid from: Ordinary income $ 41,403,689 $ 55,302,561 Total taxable distributions 41,403,689 55,302,561 Total distributions paid $ 41,403,689 $ 55,302,561 As of September 30, 2005, the components of accumulated earnings/(deficit) on a tax basis were as follows: Undistributed ordinary income $ 1,751,193 Accumulated capital and other losses (284,813,037)(a) Unrealized appreciation/(depreciation) 12,187,943(b) Total accumulated earnings/(deficit) $ (270,873,901)(c) (a) On September 30, 2005, the Portfolio had a net capital loss carryforward for federal income tax purposes of $284,813,037 of which $43,560,309 expires in the year 2007, $54,554,000 expires in the year 2008, $52,066,319 expires in the year 2009 and $134,632,409 expires in the year 2010. To the extent future capital gains are offset by capital loss carryforwards, such gains will not be distributed. During the fiscal year, the Portfolio utilized capital loss carryforwards of $38,843,019. (b) The differences between book-basis and tax-basis unrealized appreciation/(depreciation) are attributable primarily to the tax deferral of losses on wash sales, the difference between book and tax treatment of swap income and the difference between book and tax amortization methods for premium. (c) The difference between book-basis and tax-basis components of accumulated earnings/(deficit) is attributable to dividends payable. During the current fiscal year, permanent differences primarily due to the tax treatment of bond premium and the tax treatment of swap income, resulted in a net decrease in undistributed net investment income and a net decrease in accumulated net realized loss on investment transactions. This reclassification had no effect on net assets. 28 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO NOTE J Legal Proceedings As has been previously reported, the staff of the U.S. Securities and Exchange Commission ("SEC") and the NYAG have been investigating practices in the mutual fund industry identified as "market timing" and "late trading" of mutual fund shares. Certain other regulatory authorities have also been conducting investigations into these practices within the industry and have requested that the Adviser provide information to them. The Adviser has been cooperating and will continue to cooperate with all of these authorities. On December 18, 2003, the Adviser confirmed that it had reached terms with the SEC and the NYAG for the resolution of regulatory claims relating to the practice of "market timing" mutual fund shares in some of the AllianceBernstein Mutual Funds. The agreement with the SEC is reflected in an Order of the Commission ("SEC Order"). The agreement with the NYAG is memorialized in an Assurance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the key provisions of these agreements are the following: (i) The Adviser agreed to establish a $250 million fund (the "Reimbursement Fund") to compensate mutual fund shareholders for the adverse effects of market timing attributable to market timing relationships described in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be paid, in order of priority, to fund investors based on (i) their aliquot share of losses suffered by the fund due to market timing, and (ii) a proportionate share of advisory fees paid by such fund during the period of such market timing; (ii) The Adviser agreed to reduce the advisory fees it receives from some of the AllianceBernstein long-term, open-end retail funds until December 31, 2008; and (iii) The Adviser agreed to implement changes to its governance and compliance procedures. Additionally, the SEC Order and the NYAG Order contemplate that the Adviser's registered investment company clients, including the Fund, will introduce governance and compliance changes. In anticipation of final, definitive documentation of the NYAG Order and effective January 1, 2004, the Adviser began waiving a portion of its advisory fee. On September 7, 2004, the Fund's investment advisory agreement was amended to reflect the reduced advisory fee. For more information on this waiver and amendment to the Fund's investment advisory agreement, please see "Advisory Fee and Other Transactions with Affiliates" above. A special committee of the Adviser's Board of Directors, comprised of the members of the Adviser's Audit Committee and the other independent member of the Adviser's Board, is continuing to direct and oversee an internal investigation and ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 29 a comprehensive review of the facts and circumstances relevant to the SEC's and the NYAG's investigations. In addition, the Independent Directors of the Fund ("the Independent Directors") have initiated an investigation of the above-mentioned matters with the advice of an independent economic consultant and independent counsel. The Independent Directors have formed a special committee to supervise the investigation. On October 2, 2003, a purported class action complaint entitled Hindo, et al. v. AllianceBernstein Growth & Income Fund, et al. ("Hindo Complaint") was filed against the Adviser, Alliance Capital Management Holding L.P. ("Alliance Holding"), Alliance Capital Management Corporation, AXA Financial, Inc., the AllianceBernstein Funds, certain officers of the Adviser ("Alliance defendants"), and certain other defendants not affiliated with the Adviser, as well as unnamed Doe defendants. The Hindo Complaint was filed in the United States District Court for the Southern District of New York by alleged shareholders of two of the AllianceBernstein Funds. The Hindo Complaint alleges that certain of the Alliance defendants failed to disclose that they improperly allowed certain hedge funds and other unidentified parties to engage in "late trading" and "market timing" of AllianceBernstein Fund securities, violating Sections 11 and 15 of the Securities Act, Sections 10(b) and 20(a) of the Exchange Act and Sections 206 and 215 of the Advisers Act. Plaintiffs seek an unspecified amount of compensatory damages and rescission of their contracts with the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts. Since October 2, 2003, numerous additional lawsuits making factual allegations generally similar to those in the Hindo Complaint were filed in various federal and state courts against the Adviser and certain other defendants, and others may be filed. The plaintiffs in such lawsuits have asserted a variety of theories for recovery including, but not limited to, violations of the Securities Act, the Exchange Act, the Advisers Act, the Investment Company Act, the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), certain state securities laws, and common law. On February 20, 2004, the Judicial Panel on Multidistrict Litigation transferred all federal actions, and removed all state court actions, to the United States District Court for the District of Maryland (the "Mutual Fund MDL"). The plaintiffs in the removed actions have since moved for remand, and that motion is pending. On September 29, 2004, plaintiffs filed consolidated amended complaints with respect to four claim types: mutual fund shareholder claims; mutual fund derivative claims; derivative claims brought on behalf of Alliance Holding; and claims brought under ERISA by participants in the Profit Sharing Plan for Employees of the Adviser. All four complaints include substantially identical factual allegations, which appear to be based in large part on the SEC Order and the 30 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO NYAG Order. The claims in the mutual fund derivative consolidated amended complaint are generally based on the theory that all fund advisory agreements, distribution agreements and 12b-1 plans between the Adviser and the AllianceBernstein Funds should be invalidated, regardless of whether market timing occurred in each individual fund, because each was approved by fund trustees on the basis of materially misleading information with respect to the level of market timing permitted in funds managed by the Adviser. The claims asserted in the other three consolidated amended complaints are similar to those that the respective plaintiffs asserted in their previous federal lawsuits. All of these lawsuits seek an unspecified amount of damages. The Alliance defendants have moved to dismiss the complaints, and those motions are pending. On February 10, 2004, the Adviser received (i) a subpoena duces tecum from the Office of the Attorney General of the State of West Virginia and (ii) a request for information from West Virginia's Office of the State Auditor, Securities Commission (the "West Virginia Securities Commission") (together, the "Information Requests"). Both Information Requests require the Adviser to produce documents concerning, among other things, any market timing or late trading in the Adviser's sponsored mutual funds. The Adviser responded to the Information Requests and has been cooperating fully with the investigation. On April 11, 2005, a complaint entitled The Attorney General of the State of West Virginia v. AIM Advisors, Inc., et al. ("WVAG Complaint") was filed against the Adviser, Alliance Holding, and various other defendants not affiliated with the Adviser. The WVAG Complaint was filed in the Circuit Court of Marshall County, West Virginia by the Attorney General of the State of West Virginia. The WVAG Complaint makes factual allegations generally similar to those in the Hindo Complaint. On May 31, 2005, defendants removed the WVAG Complaint to the United States District Court for the Northern District of West Virginia. On July 12, 2005, plaintiff moved to remand. On October 19, 2005, the WVAG Complaint was transferred to the Mutual Fund MDL. On August 30, 2005, the deputy commissioner of securities of the West Virginia Securities Commission signed a "Summary Order to Cease and Desist, and Notice of Right to Hearing" addressed to the Adviser and Alliance Holding. The Summary Order claims that the Adviser and Alliance Holding violated the West Virginia Uniform Securities Act, and makes factual allegations generally similar to those in the Commission Order and the NYAG Order. The Adviser intends to vigorously defend against the allegations in the WVAG Complaint. As a result of the matters discussed above, 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. ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 31 On June 22, 2004, a purported class action complaint entitled Aucoin, et al. v. Alliance Capital Management L.P., et al. ("Aucoin Complaint") was filed against the Adviser, Alliance Capital Management Holding L.P., Alliance Capital Management Corporation, AXA Financial, Inc., AllianceBernstein Investment Research & Management, Inc., certain current and former directors of the AllianceBernstein Mutual Funds, and unnamed Doe defendants. The Aucoin Complaint names certain of the AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was filed in the United States District Court for the Southern District of New York by an alleged shareholder of an AllianceBernstein mutual fund. The Aucoin Complaint alleges, among other things, (i) that certain of the defendants improperly authorized the payment of excessive commissions and other fees from fund assets to broker-dealers in exchange for preferential marketing services, (ii) that certain of the defendants misrepresented and omitted from registration statements and other reports material facts concerning such payments, and (iii) that certain defendants caused such conduct as control persons of other defendants. The Aucoin Complaint asserts claims for violation of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206 and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding and abetting breaches of common law fiduciary duties. Plaintiffs seek an unspecified amount of compensatory damages and punitive damages, rescission of their contracts with the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts, an accounting of all fund-related fees, commissions and soft dollar payments, and restitution of all unlawfully or discriminatorily obtained fees and expenses. Since June 22, 2004, numerous additional lawsuits making factual allegations substantially similar to those in the Aucoin Complaint were filed against the Adviser and certain other defendants, and others may be filed. On October 19, 2005, the District Court granted in part, and denied in part, defendants' motion to dismiss the Aucoin Complaint and as a result the only claim remaining is plaintiffs' Section 36(b) claim. It is possible that these matters and/or other developments resulting from these matters could result in increased redemptions of the AllianceBernstein Mutual Funds' shares or other adverse consequences to the AllianceBernstein Mutual Funds. However, the Adviser believes that these matters are not likely to have a material adverse effect on its ability to perform advisory services relating to the AllianceBernstein Mutual Funds. 32 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO FINANCIAL HIGHLIGHTS Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class A ------------------------------------------------------------------------------ Year Ended July 1, September 30, 2003 to Year Ended June 30, ------------------------ Sept. 30, ------------------------------------ 2005 2004(a) 2003(b) 2003 2002(c) 2001 ----------- ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $12.18 $11.97 $12.03 $10.70 $12.29 $11.91 Income From Investment Operations Net investment income(d) .66 .75(e) .18 .77 .94 .97 Net realized and unrealized gain (loss) on investment transactions (.19) .18 (.06) 1.35 (1.55) .42 Net increase (decrease) in net asset value from operations .47 .93 .12 2.12 (.61) 1.39 Less: Dividends and Distributions Dividends from net investment income (.64) (.72) (.18) (.76) (.94) (.97) Distributions in excess of net investment income -0- -0- -0- -0- -0- (.01) Tax return of capital -0- -0- -0- (.03) (.04) (.03) Total dividends and distributions (.64) (.72) (.18) (.79) (.98) (1.01) Net asset value, end of period $12.01 $12.18 $11.97 $12.03 $10.70 $12.29 Total Return Total investment return based on net asset value(f) 3.86% 8.01% 1.06% 20.75% (5.51)% 12.03% Ratios/Supplemental Data Net assets, end of period (000's omitted) $483,169 $512,458 $535,318 $555,979 $520,984 $530,446 Ratio to average net assets of: Expenses, net of waivers/ reimbursements 1.08% 1.16% 1.20%(g) 1.16% 1.12% 1.31% Expenses, before waivers/ reimbursements 1.08% 1.20% 1.20%(g) 1.16% 1.12% 1.31% Expenses, before waivers/ reimbursements, excluding interest expense 1.08% 1.12% 1.15%(g) 1.13% 1.09% 1.09% Net investment income 5.38% 6.25%(e) 6.18%(g) 6.96% 7.79% 7.95% Portfolio turnover rate 127% 230% 65% 171% 276% 340%
See footnote summary on page 40. ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 33 Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class B ------------------------------------------------------------------------------ Year Ended July 1, September 30, 2003 to Year Ended June 30, ------------------------ Sept. 30, ------------------------------------- 2005 2004(a) 2003(b) 2003 2002(c) 2001 ----------- ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $12.17 $11.96 $12.02 $10.70 $12.30 $11.92 Income From Investment Operations Net investment income(d) .57 .66(e) .16 .69 .85 .88 Net realized and unrealized gain (loss) on investment transactions (.19) .19 (.06) 1.35 (1.55) .42 Net increase (decrease) in net asset value from operations .38 .85 .10 2.04 (.70) 1.30 Less: Dividends and Distributions Dividends from net investment income (.55) (.64) (.16) (.70) (.85) (.88) Distributions in excess of net investment income -0- -0- -0- -0- (.01) (.01) Tax return of capital -0- -0- -0- (.02) (.04) (.03) Total dividends and distributions (.55) (.64) (.16) (.72) (.90) (.92) Net asset value, end of period $12.00 $12.17 $11.96 $12.02 $10.70 $12.30 Total Return Total investment return based on net asset value(f) 3.13% 7.26% .88% 19.85% (6.23)% 11.24% Ratios/Supplemental Data Net assets, end of period (000's omitted) $162,973 $251,173 $383,763 $418,095 $458,394 $509,953 Ratio to average net assets of: Expenses, net of waivers/ reimbursements 1.80% 1.89% 1.92%(g) 1.88% 1.83% 2.03% Expenses, before waivers/ reimbursements 1.80% 1.93% 1.92%(g) 1.88% 1.83% 2.03% Expenses, before waivers/ reimbursements, excluding interest expense 1.79% 1.84% 1.87%(g) 1.85% 1.80% 1.81% Net investment income 4.65% 5.55%(e) 5.48%(g) 6.27% 7.05% 7.18% Portfolio turnover rate 127% 230% 65% 171% 276% 340%
See footnote summary on page 40. 34 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class C ------------------------------------------------------------------------------ Year Ended July 1, September 30, 2003 to Year Ended June 30, ------------------------ Sept. 30, ------------------------------------- 2005 2004(a) 2003(b) 2003 2002(c) 2001 ----------- ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $12.18 $11.96 $12.02 $10.70 $12.30 $11.91 Income From Investment Operations Net investment income(d) .57 .67(e) .16 .69 .85 .89 Net realized and unrealized gain (loss) on investment transactions (.19) .19 (.06) 1.35 (1.55) .42 Net increase (decrease) in net asset value from operations .38 .86 .10 2.04 (.70) 1.31 Less: Dividends and Distributions Dividends from net investment income (.55) (.64) (.16) (.70) (.85) (.89) Distributions in excess of net investment income -0- -0- -0- -0- (.01) -0- Tax return of capital -0- -0- -0- (.02) (.04) (.03) Total dividends and distributions (.55) (.64) (.16) (.72) (.90) (.92) Net asset value, end of period $12.01 $12.18 $11.96 $12.02 $10.70 $12.30 Total Return Total investment return based on net asset value(f) 3.14% 7.35% .88% 19.85% (6.23)% 11.33% Ratios/Supplemental Data Net assets, end of period (000's omitted) $110,680 $126,685 $157,719 $168,123 $179,418 $185,022 Ratio to average net assets of: Expenses, net of waivers/ reimbursements 1.79% 1.87% 1.91%(g) 1.87% 1.82% 2.03% Expenses, before waivers/ reimbursements 1.79% 1.92% 1.91%(g) 1.87% 1.82% 2.03% Expenses, before waivers/ reimbursements, excluding interest expense 1.78% 1.84% 1.86%(g) 1.84% 1.79% 1.81% Net investment income 4.65% 5.55%(e) 5.49%(g) 6.28% 7.07% 7.22% Portfolio turnover rate 127% 230% 65% 171% 276% 340%
See footnote summary on page 40. ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 35 Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Advisor Class ------------------------------------------------- Year Ended July 1, August 8, September 30, 2003 to, 2002(h) to ------------------------ Sept. 30, June 30, 2005 2004(a) 2003(b) 2003 ----------- ----------- ----------- ---------- Net asset value, beginning of period $12.19 $11.98 $12.03 $10.21 Income From Investment Operations Net investment income(d) .68 .84(e) .19 .69 Net realized and unrealized gain (loss) on investment transactions (.18) .13 (.05) 1.85 Net increase in net asset value from operations .50 .97 .14 2.54 Less: Dividends and Distributions Dividends from net investment income (.68) (.76) (.19) (.70) Tax return of capital -0- -0- -0- (.02) Total dividends and distributions (.68) (.76) (.19) (.72) Net asset value, end of period $12.01 $12.19 $11.98 $12.03 Total Return Total investment return based on net asset value(f) 4.10% 8.34% 1.22% 25.70% Ratios/Supplemental Data Net assets, end of period (000's omitted) $4,971 $86 $2,883 $2,298 Ratio to average net assets of: Expenses, net of waivers/ reimbursements .83% .88% .91%(g) .88%(g) Expenses, before waivers/ reimbursements .83% .92% .91%(g) .88%(g) Expenses, before waivers/ reimbursements, excluding interest expense .82% .83% .86%(g) .85%(g) Net investment income 5.62% 6.52%(e) 6.51%(g) 6.90%(g) Portfolio turnover rate 127% 230% 65% 171%
See footnote summary on page 40. 36 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period Class R --------------------------- November 3, Year Ended 2003(h) to September 30, September 30, 2005 2004(a) ----------- ------------- Net asset value, beginning of period $12.18 $11.88 Income From Investment Operations Net investment income(d) .60 .66(e) Net realized and unrealized gain (loss) on investment transactions (.15) .27 Net increase in net asset value from operations .45 .93 Less: Dividends Dividends from net investment income (.61) (.63) Net asset value, end of period $12.02 $12.18 Total Return Total investment return based on net asset value(f) 3.71% 8.04% Ratios/Supplemental Data Net assets, end of period (000's omitted) $33 $10 Ratio to average net assets of: Expenses, net of waivers/reimbursements 1.39% 1.34%(g) Expenses, before waivers/reimbursements 1.39% 1.39%(g) Expenses, before waivers/reimbursements, excluding interest expense 1.38% 1.31%(g) Net investment income 5.02% 6.04%(e)(g) Portfolio turnover rate 127% 230% See footnote summary on page 40. ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 37 Selected Data For A Share Of Capital Stock Outstanding Throughout The Period Class K ------------ March 1, 2005(h) to September 30, 2005 ------------ Net asset value, beginning of period $12.48 Income From Investment Operations Net investment income(d) .37 Net realized and unrealized loss on investment transactions (.48) Net decrease in net asset value from operations (.11) Less: Dividends Dividends from net investment income. (.36) Net asset value, end of period $12.01 Total Return Total investment return based on net asset value(f) (.89)% Ratios/Supplemental Data Net assets, end of period (000's omitted) $10 Ratio to average net assets of: Expenses(g) 1.10% Expenses, excluding interest expense(g) 1.10% Net investment income(g) 5.25% Portfolio turnover rate 127% See footnote summary on page 40. 38 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO Selected Data For A Share Of Capital Stock Outstanding Throughout The Period Class I ------------ March 1, 2005(h) to September 30, 2005 ------------ Net asset value, beginning of period $12.48 Income From Investment Operations Net investment income(d) .40 Net realized and unrealized loss on investment transactions (.49) Net decrease in net asset value from operations (.09) Less: Dividends Dividends from net investment income (.38) Net asset value, end of period $12.01 Total Return Total investment return based on net asset value(f) (.70)% Ratios/Supplemental Data Net assets, end of period (000's omitted) $10 Ratio to average net assets of: Expenses(g) .79% Expenses, excluding interest expense(g) .79% Net investment income(g) 5.59% Portfolio turnover rate 127% See footnote summary on page 40. ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 39 (a) As of October 1, 2003, the Portfolio has adopted the method of accounting for interim payments on swap contracts in accordance with Financial Accounting Standards Board Statement No. 133. These interim payments are reflected within net realized and unrealized gain (loss) on swap contracts, however, prior to October 1, 2003, these interim payments were reflected within interest income/expense on the statement of operations. The effect of this change for the year ended September 30, 2004, was to increase net investment income per share by $.02 for Class A, B, C, Advisor Class and Class R and decrease net realized and unrealized gain on investment transactions per share by $.02 for Classs A, B, C, Advisor Class and Class R. Consequently, the ratios of net investment income to average net assets increased by 0.18%, 0.16%, 0.16%, 0.18% and 0.17% for Class A, B, C, Advisor Class and Class R, respectively. (b) The Portfolio changed its fiscal year end from June 30 to September 30. (c) 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 and net realized and unrealized loss on investments per share by less than $.01 for Class A, Class B and Class C, respectively, and decrease the ratio of net investment income to average net assets from 7.82% to 7.79% for Class A, from 7.08% to 7.05% for Class B and from 7.10% to 7.07% for Class C. Per share, ratios and supplemental data for periods prior to July 1, 2001 have not been restated to reflect this change in presentation. (d) Based on average shares outstanding. (e) Net of expenses waived and reimbursed by the Adviser. (f) Total investment return is calculated assuming an initial investment is 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 Portfolio distributions or the redemption of Portfolio shares. Total investment return calculated for a period of less than one year is not annualized. (g) Annualized. (h) Commencement of distribution. 40 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors of AllianceBernstein Bond Fund, Inc. Corporate Bond Portfolio We have audited the accompanying statement of assets and liabilities of Corporate Bond Portfolio (the "Portfolio") one of the Portfolios constituting the AllianceBernstein Bond Fund, Inc., including the portfolio of investments, as of September 30, 2005, and the related statement of operations for the year then ended, the statement of changes in net assets applicable to common shareholders for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. 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 the standards of the Public Company Accounting Oversight Board (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. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of September 30, 2005 by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. 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 Corporate Bond Portfolio at September 30, 2005, the results of its operations for the year then ended, the changes in its net assets applicable to common shareholders for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young - ------------------ New York, New York November 16, 2005 ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 41 BOARD OF DIRECTORS William H. Foulk, Jr.(1), Chairman Marc O. Mayer, President Ruth Block(1) David H. Dievler(1) John H. Dobkin(1) Michael J. Downey(1) D. James Guzy Marshall C. Turner, Jr. OFFICERS Philip L. Kirstein, Senior Vice President and Independent Compliance Officer Jeffrey S. Phlegar, Vice President Lawrence J. Shaw(2), Vice President Michael A. Snyder(2), Vice President Emilie D. Wrapp, Secretary Mark D. Gersten, Treasurer and 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, TX 78278-6003 Toll-Free (800) 221-5672 Independent Registered Public Accounting Firm 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, Governance and Nominating Committee and Independent Directors Committee. (2) The day-to-day management of and investment decisions for the Portfolio are made by the U.S. Investment Grade: Corporate Bond and U.S. High Yield Investment Team. Messrs. Shaw and Snyder are the investment professionals with the most significant responsibility for the day-to-day management of the Portfolio. 42 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO 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, PRINCIPAL COMPLEX DIRECTORSHIPS ADDRESS, DATE OF BIRTH OCCUPATION(S) OVERSEEN BY HELD BY (FIRST YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR - ----------------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS William H. Foulk, Jr. #, + Investment Adviser and an 108 None 2 Sound View Drive independent consultant. He was Suite 100 formerly Senior Manager of Barrett Greenwich, CT 06830 Associates, Inc., a registered 9/7/32 investment adviser, with which (1998) he had been associated since Chairman of the Board prior to 2000. 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 #, ** Formerly Executive Vice President 106 None 500 SE Mizner Blvd. and Chief Insurance Officer of The Boca Raton, FL 33432 Equitable Life Assurance Society 11/7/30 of the United States; Chairman and (1987) Chief Executive Officer of Evlico (insurance); Director of Avon, BP (oil and gas), Ecolab Incorporated (specialty chemicals), Tandem Financial Group and Donaldson, Lufkin & Jenrette Securities Corporation; Governor at Large, National Association of Securities Dealers, Inc. David H. Dievler # Independent consultant. Until 107 None P.O. Box 167 December 1994, he was Senior Spring Lake, NJ 07762 Vice President of Alliance Capital 10/23/29 Management Corporation ("ACMC") (1987) 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 American Institute of Certified Public Accountants since 1953. John Dobkin # Consultant. Formerly President 106 None P.O. Box 12 of Save Venice, Inc. (preservation Annandale, NY 12504 organization) from 2001 - 2002, Senior 2/19/42 Advisor from June 1999 - June 2000 (1998) and President of Historic Hudson Valley (historic preservation) from December 1989 - May 1999. Previously, Director of the National Academy of Design and during 1988-1992, Director and Chairman of the Audit Committee of ACMC.
ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 43
PORTFOLIOS IN FUND OTHER NAME, PRINCIPAL COMPLEX DIRECTORSHIPS ADDRESS, DATE OF BIRTH OCCUPATION(S) OVERSEEN BY HELD BY (FIRST YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR - ----------------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS (continued) Michael J. Downey # Consultant since January 81 Asia Pacific c/o Alliance Capital 2004. Formerly managing Fund, Inc.; Management L.P. partner of Lexington Capital, and The 1345 Avenue of the Americas LLC (investment advisory firm) Merger Fund. New York, NY 10105 from December 1997 until Attention: Phil Kirstein December 2003. Prior thereto, 1/26/44 Chairman and CEO of Prudential (2005) Mutual Fund Management from 1987 to 1993. D. James Guzy Chairman of the Board of PLX 58 Intel Corporation, P.O. Box 128 Technology (semi-conductors) Cirrus Logic Glenbrook, NV 89413 and of SRC Computers Inc., Corporation, 3/7/36 with which he has been associated Novellus (2005) since prior to 2000. He is also Corporation, President of the Arbor Company Micro Component (private family investments). Technology, the Davis Selected Advisers Group of Mutual Funds and LogicVision. Marshall C. Turner, Jr. Principal of Turner Venture 58 Toppan 220 Montgomery Street Associates (venture capital and Photomasks, Inc., Penthouse 10 consulting) since prior to 2000. the George Lucas San Francisco, Chairman and CEO, DuPont Educational CA 94104 Photomasks, Inc., Austin, Texas, Foundation, 10/10/41 2003-2005, and President and Chairman of the (2005) CEO since company acquired, Board of the and name changed to Toppan Smithsonian's Photomasks, Inc. in 2005 National Museum (semiconductor manufacturing of Natural History. services). INTERESTED DIRECTOR Marc O. Mayer++ Executive Vice President of 81 SCB Partners, 1345 Avenue of the Americas ACMC since 2001; prior thereto, Inc.; and New York, NY 10105 Chief Executive Officer of SCB Inc. 10/2/57 Sanford C. Bernstein &Co., (2003) LLC (institutional research and brokerage arm of Bernstein & Co., LLC) ("SCB & Co.") and its predecessor since prior to 2000.
See footnote summary on page 45. 44 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO * There is no stated term of office for the Fund's directors. ** Ms.Block was an "interested person", as defined in the 1940 Act, from July 22, 1992 until October 21, 2004 by reason of her ownership of securities of a control person of the Adviser. Ms. Block received shares of The Equitable Companies Incorporated ('Equitable") as part of the demutualization of The Equitable Life Assurance Society of the United States in 1992. Ms. Block's Equitable shares were subsequently converted through a corporate action into American Depositary Shares of AXA, which were sold for approximately $2,400 on October 21, 2004. Equitable and AXA are control persons of the Adviser. # Member of the Audit Committee, Governance and Nominating Committee and Independent Directors Committee. + Member of the Fair Value Pricing Commitee. ++ Mr.Mayer is an "interested director", as defined in the 1940 Act, due to his position as an Executive Vice President of ACMC. ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 45 Officer Information Certain information concerning the Fund's Officers is set forth below.
PRINCIPAL NAME, ADDRESS*, POSITION(S) PRINCIPAL OCCUPATION AND DATE OF BIRTH HELD WITH FUND DURING PAST 5 YEARS - ------------------------------------------------------------------------------------------------- Marc O. Mayer President and Chief See biography above. 10/2/1957 Executive Officer Philip L. Kirstein Senior Vice President Senior Vice President and Independent 5/29/1945 & Independent Compliance Officer of the Compliance Officer AllianceBernstein Funds, with which he has been associated since October 2004. Prior thereto, he was Of Counsel to Kirkpatrick & Lockhart, LLP from October 2003 to October 2004, and General Counsel of Merrill Lynch Investment Managers L.P. since prior to 2000 until March 2003. Jeffrey S. Phlegar Vice President Executive Vice President of ACMC**, 6/28/1966 with which he has been associated since prior to 2000. Lawrence J. Shaw Vice President Senior Vice President of ACMC**, with 2/9/1951 which he has been associated since prior to 2000. Michael A. Snyder Vice President Senior Vice President of ACMC** since 4/18/1962 May 2001. Prior thereto, he was a Managing Director in the high yield asset group at Donaldson, Lufkin & Jenrette Corporation since prior to 2000. Emilie D. Wrapp Secretary Senior Vice President, Assistant 11/13/55 General Counsel and Assistant Secretary of AllianceBernstein Investment Research and Management, Inc. ("ABIRM")**, with which she has been associated since prior to 2000.
46 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO
PRINCIPAL NAME, ADDRESS*, POSITION(S) PRINCIPAL OCCUPATION AND DATE OF BIRTH HELD WITH FUND DURING PAST 5 YEARS - ------------------------------------------------------------------------------------------------- Mark D. Gersten Treasurer and Chief Senior Vice President of Alliance Global 10/4/1950 Financial Officer Investor Services,Inc. ("AGIS")** and Vice President of ABIRM**, with which he has been associated since prior to 2000. Vincent S. Noto Controller Vice President of AGIS**, with which 12/14/1964 he has been associated since prior to 2000.
* The address for each of the Fund's Officers is 1345 Avenue of the Americas, New York, NY 10105. ** ACMC, ABIRM, AGIS and SCB & Co. 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 1-800-227-4618 for a free prospectus or SAI. ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 47 Information Regarding the Review and Approval of the Fund's Investment Advisory Contract In this disclosure, the term "Fund" refers to AllianceBernstein Bond Fund, Inc., and the term "Portfolio" refers to Corporate Bond Portfolio. The Fund's disinterested directors (the "directors") unanimously approved the continuance of the Investment Advisory Contract (the "Advisory Agreement") between the Fund and the Adviser in respect of the Portfolio at a meeting held on June 15, 2005. In preparation for the meeting, the directors had requested from the Adviser and evaluated extensive materials, including performance and expense information for other investment companies with similar investment objectives derived from data compiled by Lipper Inc. ("Lipper"), which is not affiliated with the Adviser. The directors also reviewed an independent evaluation from the Fund's Senior Officer (who is also the Fund's Independent Compliance Officer) of the reasonableness of the advisory fees in the Advisory Agreement in respect of the Portfolio (as contemplated by the Assurance of Discontinuance between the Adviser and the New York Attorney General) wherein the Senior Officer concluded that such fees were reasonable. In addition, the directors received a presentation from the Adviser and had an opportunity to ask representatives of the Adviser various questions relevant to the proposed approval. The directors noted that the Senior Officer's evaluation considered the following factors: management fees charged to institutional and other clients of the Adviser for like services; management fees charged by other mutual fund companies for like services; cost to the Adviser and its affiliates of supplying services pursuant to the Advisory Agreement, excluding any intra-corporate profit; profit margins of the Adviser and its affiliates from supplying such services; possible economies of scale as the Portfolio grows larger; and nature and quality of the Adviser's services including the performance of the Portfolio. Prior to voting, the directors reviewed the proposed continuance of the Advisory Agreement in respect of the Portfolio with management and with experienced counsel who are independent of the Adviser and received a memorandum from such counsel discussing the legal standards for their consideration of the proposed continuance. The directors also discussed the proposed continuance in three private sessions at which only the directors, their independent counsel and the Fund's Independent Compliance Officer were present. In reaching their determinations relating to continuance of the Advisory Agreement in respect of the Portfolio, the directors considered all factors they believed relevant, including the following: 1. information comparing the performance of the Portfolio to other investment companies with similar investment objectives and to an index; 48 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO 2. the nature, extent and quality of investment, compliance, administrative and other services rendered by the Adviser; 3. payments received by the Adviser from all sources in respect of the Portfolio and all investment companies in the AllianceBernstein Funds complex; 4. the costs borne by, and profitability of, the Adviser and its affiliates in providing services to the Portfolio and to all investment companies in the AllianceBernstein Funds complex; 5. comparative fee and expense data for the Portfolio and other investment companies with similar investment objectives; 6. the extent to which economies of scale would be realized to the extent the Portfolio grows and whether fee levels reflect any economies of scale for the benefit of investors; 7. the Adviser's policies and practices regarding allocation of portfolio transactions of the Portfolio; 8. information about "revenue sharing" arrangements that the Adviser has entered into in respect of the Portfolio; 9. portfolio turnover rates for the Portfolio compared to other investment companies with similar investment objectives; 10. fall-out benefits which the Adviser and its affiliates receive from their relationships with the Portfolio; 11. the Adviser's representation that it does not advise other clients with substantially similar investment objectives and strategies as the Portfolio; 12. the Senior Officer's evaluation of the reasonableness of the fee payable to the Adviser in the Advisory Agreement; 13. the professional experience and qualifications of the Portfolio's portfolio management team and other senior personnel of the Adviser; and 14. the terms of the Advisory Agreement. The directors also considered their knowledge of the nature and quality of the services provided by the Adviser to the Portfolio gained from their experience as directors or trustees of most of the funds advised by the Adviser, their overall ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 49 confidence in the Adviser's integrity and competence they have gained from that experience and the Adviser's responsiveness to concerns raised by them in the past, including the Adviser's willingness to consider and implement organizational and operational changes designed to improve investment results and the services provided to the AllianceBernstein Funds. In their deliberations, the directors did not identify any particular information that was all-important or controlling, and each director attributed different weights to the various factors. The directors determined that the overall arrangements between the Portfolio and the Adviser, as provided in the Advisory Agreement, were fair and reasonable in light of the services performed, expenses incurred and such other matters as the directors considered relevant in the exercise of their business judgment. The material factors and conclusions that formed the basis for the directors reaching their determinations to approve the continuance of the Advisory Agreement in respect of the Portfolio (including their determinations that the Adviser should continue to be the investment adviser for the Portfolio, and that the fees payable to the Adviser pursuant to the Advisory Agreement are appropriate) were separately discussed by the directors. Nature, extent and quality of services provided by the Adviser The directors noted that, under the Advisory Agreement, the Adviser, subject to the control of the directors, administers the Portfolio's business and other affairs. The Adviser manages the investment of the assets of the Portfolio, including making purchases and sales of portfolio securities consistent with the Portfolio's investment objective and policies. Under the Advisory Agreement, the Adviser also provides the Portfolio with such office space, administrative and other services (exclusive of, and in addition to, any such services provided by any others retained by the Portfolio) and executive and other personnel as are necessary for the Portfolio's operations. The Adviser pays all of the compensation of directors of the Fund who are affiliated persons of the Adviser and of the officers of the Portfolio. The directors also considered that the Advisory Agreement provides that the Portfolio will reimburse the Adviser for the cost of certain clerical, accounting, administrative and other services provided at the Portfolio's request by employees of the Adviser or its affiliates. Requests for these "at no more than cost" reimbursements are approved by the directors on a quarterly basis and (to the extent requested and paid) result in a higher rate of total compensation from the Portfolio to the Adviser than the stated fee rates in the Portfolio's Advisory Agreement. 50 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO The directors considered the scope and quality of services provided by the Adviser under the Advisory Agreement and noted that the scope of services provided by advisers of funds had expanded over time as a result of regulatory and other developments. The directors noted, for example, that the Adviser is responsible for maintaining and monitoring its own and, to varying degrees, the Portfolio's compliance programs, and that these compliance programs have recently been refined and enhanced in light of new regulatory requirements. The directors considered the quality of the in-house investment research capabilities of the Adviser and the other resources it has dedicated to performing services for the Portfolio. The quality of administrative and other services, including the Adviser's role in coordinating the activities of the Portfolio's other service providers, also were considered. The directors also considered the Adviser's response to recent regulatory compliance issues affecting a number of the investment companies in the AllianceBernstein Funds complex. The directors concluded that, overall, they were satisfied with the nature, extent and quality of services provided to the Portfolio under the Advisory Agreement. Costs of Services Provided and Profitability to the Adviser The directors reviewed a schedule of the revenues, expenses and related notes indicating the profitability of the Portfolio to the Adviser for calendar years 2003 and 2004. The directors reviewed the assumptions and methods of allocation used by the Adviser in preparing fund-specific profitability data, and noted the Adviser's representation to them that it believed that the methods of allocation used in preparing the profitability information were reasonable and appropriate and that the Adviser had previously discussed with the directors that there is no generally accepted allocation methodology for information of this type. The directors also noted that the methodology for preparing fund-by-fund profitability information was being reviewed and that it was expected that an updated methodology would be implemented later in the year, and that it would differ in various respects from the methodology used previously. The directors recognized that it is difficult to make comparisons of profitability from fund advisory contracts because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numerous assumptions regarding allocations and the adviser's capital structure and cost of capital. In considering profitability information, the directors considered the effect of fall-out benefits on the Adviser's expenses, as well as the "revenue sharing" arrangements the Adviser has entered into with certain entities that distribute shares of the Portfolio. The directors focused on the profitability of the Adviser's relationship with the Portfolio before taxes and distribution expenses. The directors recognized that the Adviser should generally be entitled to earn a reasonable level of profits for the services it provides to the Portfolio and, based on their review, concluded that they were satisfied that the Adviser's level of profitability from its relationship with the Portfolio was not excessive. ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 51 Fall-Out Benefits The directors considered that the Adviser benefits from soft dollar arrangements whereby it receives brokerage and research services from many of the brokers and dealers that execute purchases and sales of securities on behalf of its clients on an agency basis. Since the Portfolio does not normally engage in brokerage transactions, the Adviser does not receive soft dollar benefits in respect of portfolio transactions of the Portfolio. The directors also considered that the Distributor, which is a wholly-owned subsidiary of the Adviser: receives 12b-1 fees from the Portfolio in respect of classes of shares of the Portfolio that are subject to the Fund's 12b-1 plan; retains a portion of the 12b-1 fees from the Portfolio; and receives all or a portion of the sales charges on sales or redemptions of certain classes of shares. The directors also noted that certain affiliates of the Adviser distribute shares of the Portfolio and receive compensation in that connection and that a subsidiary of the Adviser provides transfer agency services to the Portfolio and receives compensation from the Portfolio for such services. The directors recognized that the Adviser's profitability would be somewhat lower if the Adviser's affiliates did not receive the benefits described above. The directors also believe that the Adviser derives reputational and other benefits from its association with the Portfolio. Investment Results In addition to the information reviewed by the directors in connection with the meeting, the directors receive detailed comparative performance information for the Portfolio at each regular Board meeting during the year. At the meeting, the directors reviewed information prepared by the Adviser based on information obtained from Lipper showing performance for Class A shares of the Portfolio as compared to other funds in the Lipper Corporate Debt BBB-Rated Funds Average for periods ending March 31, 2005 over the year to date, 1-, 3-, 5- and 10-year and since inception periods (inception March 1974) and for each of the last ten calendar years and compared to the Lehman Brothers Long BAA U.S. Credit Index. The directors also reviewed information from a report prepared by Lipper showing performance for Class A shares of the Portfolio as compared to a group of 9 to 7 funds (depending on the year) in its Lipper category selected by Lipper (the "Performance Group") and as compared to a universe of 35 to 10 funds (depending on the year) in its Lipper category selected by Lipper (the "Performance Universe") for periods ended March 31, 2005 over the 1-, 3-, 5- and 10-year periods. The directors noted that the Lipper category data showed the Portfolio's performance for the periods ending March 31, 2005 was somewhat above the Lipper median for the 5-year period and significantly above the Lipper medians for all other periods reviewed, and that the Fund's performance for calendar years 2002, 1998 and 1994 was significantly below the Lipper medians, close to the Lipper median for calendar year 2000 and significantly 52 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO above the Lipper medians for all other calendar year periods reviewed. The directors further noted that in the Performance Universe comparison, the Portfolio was in the third quintile in the 5-year period but in the first or second quintile in the Performance Group and Performance Universe comparisons for all other periods reviewed. Based on their review, the directors concluded that the Portfolio's relative performance over time was satisfactory. Advisory Fees and Other Expenses The directors considered the advisory fee rate paid by the Portfolio to the Adviser and information prepared by Lipper concerning fee rates paid by other funds in the same Lipper category as the Portfolio at a common asset level. The directors recognized that it is difficult to make comparisons of advisory fees because there are variations in the services that are included in the fees paid by other funds. The directors also considered the total expense ratio of the Class A shares of the Portfolio in comparison to the fees and expenses of funds within two comparison groups created by Lipper: an Expense Group and an Expense Universe. Lipper described an Expense Group as a representative sample of comparable funds and an Expense Universe as a broader group, consisting of all funds in the investment classification/objective with a similar load type as the subject Portfolio. The Class A expense ratio of the Portfolio was based on the Portfolio's latest fiscal year expense ratio. The directors recognized that the expense ratio information for the Portfolio potentially reflected on the Adviser's provision of services, as the Adviser is responsible for coordinating services provided to the Portfolio by others. The directors noted that it was likely that the expense ratios of some funds in the Portfolio's Lipper category also were lowered by waivers or reimbursements by those funds' investment advisers, which in some cases were voluntary and perhaps temporary. The directors noted that the Portfolio's at approximate current size contractual effective fee rate of 50 basis points was slightly higher than the median for the Expense Group. The directors noted that the latest fiscal year administrative expense reimbursement by the Portfolio pursuant to the Advisory Agreement was one basis point. As a result, the Adviser's total compensation pursuant to the Fund's Advisory Agreement was at a rate that slightly exceeded the median for the Expense Group. The directors also noted that the Portfolio's total expense ratio was somewhat above the median for the Expense Group and the median for the Expense Universe. The directors concluded that the Fund's expense ratio was acceptable. Economies of Scale The directors noted that the advisory fee schedule for the Portfolio contains breakpoints so that, if assets were to increase over the breakpoint levels, the fee rates would be reduced on the incremental assets. The directors also considered ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 53 a presentation by an independent consultant discussing economies of scale issues in the mutual fund industry. The directors believe that economies of scale are realized (if at all) by the Adviser across a variety of products and services, and not only in respect of a single fund. The directors noted that there is no uniform methodology for establishing breakpoints that give effect to fund-specific services provided by the Adviser and to the economies of scale that the Adviser may realize in its overall mutual fund business or those components of it which directly or indirectly affect the Portfolio's operations. The directors observed that in the mutual fund industry as a whole, as well as among funds similar to the Portfolio, there is no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. Depending on the age and size of a particular fund and its adviser's cost structure, different conclusions can be drawn as to whether there are economies of scale to be realized at any particular level of assets, notwithstanding the intuitive conclusion that such economies exist, or will be realized at some level of total assets. Moreover, because different advisers have different cost structures and service models, it is difficult to draw meaningful conclusions from the comparison of a fund's advisory fee breakpoints with those of comparable funds. The directors also noted that the advisory agreements for many funds do not have breakpoints at all. Having taken these factors into account, the directors concluded that the Portfolio's breakpoint arrangements would result in a sharing of economies of scale in the event of a very significant increase in the Portfolio's net assets. 54 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO ALLIANCEBERNSTEIN FAMILY OF FUNDS - ------------------------------------------- Wealth Strategies Funds - ------------------------------------------- Balanced Wealth Strategy Wealth Appreciation Strategy Wealth Preservation Strategy Tax-Managed Balanced Wealth Strategy Tax-Managed Wealth Appreciation Strategy Tax-Managed Wealth Preservation Strategy - ------------------------------------------- Blended Style Funds - ------------------------------------------- U.S. Large Cap Portfolio International Portfolio Tax-Managed International Portfolio - ------------------------------------------- Growth Funds - ------------------------------------------- Domestic Growth Fund Mid-Cap Growth Fund Large Cap Growth Fund* Small Cap Growth Portfolio Global & International Global Health Care Fund* Global Research Growth Fund Global Technology Fund* Greater China '97 Fund International Growth Fund* International Research Growth Fund* - ------------------------------------------- Value Funds - ------------------------------------------- Domestic Balanced Shares Focused Growth & Income Fund* Growth & Income Fund Real Estate Investment Fund Small/Mid-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. You should read the prospectus carefully before you invest. * Prior to December 15, 2004, these Funds were named as follows: Global Health Care Fund was Health Care Fund; Large Cap Growth Fund was Premier Growth Fund; Global Technology Fund was Technology Fund; and Focused Growth & Income Fund was Disciplined Value Fund. Prior to February 1, 2005, Small/Mid-Cap Value Fund was named Small Cap Value Fund. Prior to May 16, 2005, International Growth Fund was named Worldwide Privatization Fund and International Research Growth Fund was named International Premier Growth Fund. On June 24, 2005, All-Asia Investment Fund merged into International Research GrowthFund. On July 8, 2005, New Europe Fund merged into International Research Growth Fund. ** An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 55 THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS SUMMARY OF SENIOR OFFICER'S EVALUATION OF INVESTMENT ADVISORY AGREEMENT* The following is a summary of the evaluation of the investment advisory agreement between Alliance Capital Management L.P., (the "Adviser") and the AllianceBernstein Corporate Bond Portfolio, the AllianceBernstein Quality Bond Portfolio and the AllianceBernstein U.S. Government Portfolio of AllianceBernstein Bond Fund, Inc. (the "Funds"), prepared by Philip L. Kirstein, the Senior Officer, for the independent directors of the Funds, as required by the Assurance of Discontinuance between the New York State Attorney General and the Adviser. The Senior Officer's evaluation of the investment advisory agreement is not meant to diminish the responsibility or authority of the Boards of Directors to perform their duties pursuant to Section 15 of the Investment Company Act of 1940 (the "40 Act") and applicable state law. The purpose of the summary is to provide shareholders with a synopsis of the independent evaluation of the reasonableness of the advisory fees which was provided to the independent directors in connection with their review of the proposed continuance of the investment advisory agreement. The Senior Officer's evaluation considered the following factors: 1. Management fees charged to institutional and other clients of the Adviser for like services. 2. Management fees charged by other mutual fund companies for like services. 3. Costs to the Adviser and its affiliates of supplying services pursuant to the advisory agreement, excluding any intra-corporate profit. 4. Profit margins of the Adviser and its affiliates from providing such services. 5. Possible economies of scale as the Funds grow larger. 6. Nature and quality of the Adviser's services, including the performance of the Funds. * It should be noted that the information in the fee summary was completed on June 8, 2005 and presented to the Board of Directors and Trustees on June 15, 2005 in accordance with the Assurance of Discontinuance with the New York State Attorney General. It also should be noted that references in the fee summary pertaining to performance and expense ratios refer to Class A shares of the Fund. 56 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO FUND ADVISORY FEES, EXPENSE REIMBURSEMENTS, CAPS & RATIOS The table below describes the Funds' advisory fees pursuant to the Investment Advisory Agreement. This is the fee schedule the Adviser implemented in January 2004 as a result of the settlement with the New York State Attorney General. Advisory Fee Based on % of Fund Average Daily Net Assets - ------------------------------------------------------------------------------- AllianceBernstein Corporate Bond Portfolio Monthly fee of First $2.5 billion 1/12 of .50% Next $2.5 billion 1/12 of .45% Excess of $5 billion 1/12 of .40% AllianceBernstein Quality Bond Portfolio Monthly fee of First $2.5 billion 1/12 of .45% Next $2.5 billion 1/12 of .40% Excess of $5 billion 1/12 of .35% AllianceBernstein U.S. Government Portfolio Quarterly fee of First $2.5 billion .1125% Next $2.5 billion .10% Excess over $5 billion .0875% The Adviser is reimbursed as specified in the Investment Advisory Agreement for certain clerical, legal, accounting, administrative and other services provided to the Funds as indicated below: Latest Fiscal Year As % of Average Fund Amount Daily Net Assets - ------------------------------------------------------------------------------- AllianceBernstein Corporate Bond Portfolio $ 98,000.00 .01 AllianceBernstein Quality Bond Portfolio* 0 .0 AllianceBernstein U.S. Government Portfolio $ 97,728.00 .01 The Adviser has agreed to waive that portion of its management fees and/or reimburse the Quality Bond Portfolio for that portion of its total operating expenses to the degree necessary to limit the Fund's expense ratios to the levels set forth below for that Fund's current fiscal year. That waiver agreement is terminable by the Adviser at the end of the Fund's fiscal year upon at least 60 days written notice. Pro-forma expense ratio information for each Fund is also set forth below. * For the most recently completed fiscal year, with respect to the Quality Bond Portfolio, the Adviser waived $89,000 (or .02% of average daily net assets). ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 57 Expense Cap pursuant to Expense Limitation Pro-Forma Fiscal Fund Undertaking Expense Ratio* Year End - ------------------------------------------------------------------------------- AllianceBernstein Advisor-0.68% .79% October 31, Quality Bond Portfolio Class A-0.98% 1.10% 2004 Class B-1.68% 1.83% Class C-1.68% 1.82% Class R-1.18% 1.30% Pro-Forma Fiscal Fund Expense Ratio* Year End - ------------------------------------------------------------------------------- AllianceBernstein Corporate Bond Portfolio Advisor-0.73% September Class A-1.00% 30, 2004 Class B-1.72% Class C-1.71% Class R-1.21% AllianceBernstein U.S. Government Portfolio Advisor-0.71% September Class A-1.01% 30, 2004 Class B-1.74% Class C-1.73% Class R-1.27% I. MANAGEMENT FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS OF THE ADVISER The management fees charged to investment companies which the Adviser manages and sponsors may be higher than those charged to institutional accounts, including pension plans and sub-advised investment companies. The fee differential reflects, among other things, different services provided to such clients, and different liabilities assumed. Services provided by the Adviser to the Funds that are not provided to non-investment company clients include providing office space and personnel to serve as Fund Officers and coordinating with and monitoring the Funds' third party service providers such as Fund counsel, auditors, custodians, transfer agents and pricing services. The accounting, administrative and legal/compliance requirements for the Funds are more costly than those for institutional assets due to the greater complexities and time required for investment companies. A portion of the expenses related to these services are reimbursed by the Funds to the Adviser. Managing the cash flow of an investment company may be more difficult than for other accounts, particularly if a Fund is in net redemptions, as the Adviser is forced to sell securities to meet redemptions. Notwithstanding the Adviser's view that managing an investment company is not comparable to managing other institutional accounts because the services provided are different, the Senior Officer believes it is worth noting the information * This pro-forma expense ratio information shows what would have been each Fund's expense ratio in the indicated fiscal year had the current fee been in effect throughout the fiscal year. 58 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO from the Adviser's ADV regarding the advisory fees charged to institutional accounts in the same asset class as the Quality Bond Portfolio. The Adviser represented that there is no category set forth in its Form ADV for institutional products which have a substantially similar investment style as the Corporate Bond Portfolio or the U.S. Government Portfolio. Total Net Assets 03/31/05 Alliance Institutional Fund ($MIL) Fee Schedule - ------------------------------------------------------------------------------- AllianceBernstein Quality Bond Portfolio 571 U.S. Core High-Grade Fixed Income 40 bp on 1st $20 m 25 bp on next $80 m 20 bp on next $100 m 15 bp on the balance Minimum account size $20 m The Adviser also manages and sponsors retail fixed income mutual funds which are organized in jurisdictions outside the United States, generally Luxembourg, and sold to non-United States investors. The Adviser charges the following fee for offshore mutual funds with similar investment styles as the Funds: Asset Class Fee - --------------------------------------------------------------- Fixed Income .65% The Adviser represented that it does not sub-advise any registered investment companies with similar investment styles as the Funds. II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES. Lipper, Inc., an analytical service that is not affiliated with the Adviser, compared the fees charged to the Funds with fees charged to other investment companies for similar services by other investment advisers. Lipper's analysis included the Funds' ranking with respect to the proposed advisory fees relative to the Lipper group median at the approximate current asset levels for the Funds.* Lipper Group Fund Fee Median Rank - ------------------------------------------------------------------------------- AllianceBernstein Corporate Bond Portfolio 0.500 0.488 6/9 AllianceBernstein Quality Bond Portfolio 0.450 0.616 1/12 AllianceBernstein U.S. Government Portfolio 0.450 0.544 2/10 * A ranking of "1" means that the AllianceBernstein Fund has the lowest effective fee rate in the Lipper peer group. ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 59 Lipper also analyzed the expense ratios of each Fund in comparison to its Lipper Expense Group* and Lipper Expense Universe**. Lipper describes a Lipper Expense Group as a representative sample of comparable funds and a Lipper Universe as a broader group, consisting of all funds in the investment classification/objective with a similar load type as the subject Fund. The results of that analysis are set forth below:
Lipper Lipper Lipper Expense Universe Universe Lipper Group Fund Ratio Median Rank Group Rank Median - ------------------------------------------------------------------------------------------ AllianceBernstein Corporate Bond Portfolio 1.078 1.026 14/25 6/9 .984 AllianceBernstein Quality Bond Portfolio 0.979 0.955 39/67 2/12 1.066 AllianceBernstein U.S. Government Portfolio 1.046 0.985 24/38 8/10 .996
Based on this analysis, the Funds have a more favorable ranking on an advisory fee basis than they do on a total expense ratio basis. This has resulted in a variety of efforts by the Adviser to lower non-management expenses. III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO THE ADVISORY AGREEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT. The profitability information for the Funds prepared by the Adviser for the Board of the Directors was reviewed by the Senior Officer. An independent consultant is working with the Adviser's personnel on a new system to produce profitability information at the Fund level which will reflect the Adviser's management reporting approach. It is possible that future Fund profitability information may differ from previously reviewed information due to changes in methodologies and allocations. See Section IV for additional discussion. IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH SERVICES. With the exception of the Quality Bond Portfolio, the pre-tax profitability margin of the Adviser decreased during calendar year 2004 relative to 2003 primarily as a result of the reduction in the advisory fee schedule implemented early * Lipper uses the following criteria in screening funds to be included in each Fund's expense group: fund type, investment classification/objective, load type and similar 12b-1/non-12b-1 service fees, asset (size) comparability, and expense components and attributes. An expense group will typically consist of seven to twenty funds. ** Except for asset (size) comparability, Lipper uses the same criteria for selecting an expense group when selecting an expense universe. Unlike an expense group, an expense universe allows for the same advisor to be represented by more than just one fund. 60 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO in 2004. For the Quality Bond Portfolio, it appears that the Adviser's profit margin increased in 2004, as a result of the reduction in fee waivers and expense reimbursements. In addition to the Adviser's direct profits from managing the Funds pursuant to the investment advisory agreement, certain of the Adviser's affiliates have business relationships with the Funds and may earn a profit from providing other services to the Funds. These affiliates provide transfer agency and distribution related services and receive transfer agent fees, Rule 12b-1 payments, front-end sales loads, contingent deferred sales charges ("CDSC") and commissions for providing brokerage services. In addition, the Adviser benefits from soft dollar arrangements which offset expenses the Adviser would otherwise incur. Additional information regarding distribution related fees can be found in the prospectus of the Funds. Different classes of shares are charged different types of distribution fees. The Adviser's affiliate, AllianceBernstein Investment Research and Management Inc. ("ABIRM"), is the Funds' principal underwriter. ABIRM and the Adviser may make payments* from their own resources, in addition to sales loads and Rule 12b-1 fees, to firms that sell shares of the Funds. In 2004, ABIRM paid from its own resources approximately .04% of the average monthly assets of the Funds for distribution services and educational support. For 2005, it is anticipated that ABIRM will pay approximately .04% of average monthly assets of each Fund for such purposes. After payments to third party intermediaries, ABIRM retained the following amounts in Class A front-end load sales charges from sales of each Fund's shares in the Funds' most recent fiscal year: Fund Amount Received - ------------------------------------------------------------------------------- AllianceBernstein Corporate Bond Portfolio $21,917 AllianceBernstein Quality Bond Portfolio $ 4,297 AllianceBernstein U.S. Government Portfolio $11,758 * The total amount paid to the financial intermediary in connection with the sale of shares will generally not exceed the sum of (a) .25% of the current year's Fund sales by that firm and (b) .10% of the average daily net assets attributable to that firm over the year. ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 61 ABIRM received the amounts set forth below in Rule 12b-1 fees and CDSC for each Fund during the Funds' most recent fiscal year. A significant percentage of such amounts were paid out to third party intermediaries by ABIRM. 12b-1 Fee Fund Received* CDSC Received - ------------------------------------------------------------------------------- AllianceBernstein Corporate Bond Portfolio $ 6,124,397 $ 54,108 AllianceBernstein Quality Bond Portfolio $ 1,177,056 $ 178,196 AllianceBernstein U.S. Government Portfolio $ 6,317,922 $ 685,181 Fees and reimbursements for out of pocket expenses charged by Alliance Global Investor Services, Inc. ("AGIS"), the affiliated transfer agent, are based on the level of the network account and the class of share held by the account. AGIS also receives a fee per shareholder sub-account for each account maintained by an intermediary on an omnibus basis. AGIS' after-tax profitability decreased in 2004 in comparison to 2003. AGIS received the following fees from the Funds in the most recent fiscal year: Fund AGIS Fee - ------------------------------------------------------------------------------- AllianceBernstein Corporate Bond Portfolio $ 1,082,000 AllianceBernstein Quality Bond Portfolio $ 1,083,000 AllianceBernstein U.S. Government Portfolio $ 2,010,000 V. POSSIBLE ECONOMIES OF SCALE The Adviser has indicated that the breakpoints in the fee schedules for the Funds reflect a sharing of economies of scale to the extent they exist. Based on some of the professional literature that has considered economies of scale in the mutual fund industry it is thought that to the extent economies of scale exist, they may more often exist across a fund family as opposed to a specific fund. This is because the costs incurred by the Adviser, such as investment research or technology for trading or compliance systems can be spread across a greater asset base as the fund family increases in size. It is also possible that as the level of services required to operate a successful investment company has increased over time, and advisory firms have made such investments in their business to provide improved services, there may be a sharing of economies of scale without a reduction in advisory fees. An independent consultant made a presentation to the Board of Directors and the Senior Officer regarding possible economies of scale or scope in the mutual fund industry. Based on the presentation, it was evident that fund management companies benefit from economies of scale. However, due to the lack of cost data * 12b-1 amounts are gross amounts paid to ABIRM. 62 o ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO which forced the researchers to infer facts about the costs from the behavior of fund expenses, there was a lack of consensus among researchers as to whether economies of scale were being passed on to the shareholders. It is contemplated that additional work will be performed to determine if the benefits of economies of scale or scope are being passed to shareholders by the Adviser. In the meantime, it is clear that to the extent a Fund's assets exceed the initial breakpoint its shareholders benefit from a lower fee rate. VI. NATURE AND QUALITY OF THE ADVISER'S SERVICES INCLUDING PERFORMANCE OF THE FUND. With assets under management of $534.4 billion as of March 31, 2005, the Adviser has the investment experience and resources necessary to effectively manage the Funds and provide non-investment services (described in Section II) to the Funds. The information prepared by Lipper showed the 1, 3, 5 and 10 year performance ranking of the Funds relative to its Lipper universe: Performance Year Rank in Performance Universe for Periods Ended March 31, 2005 - ------------------------------------------------------------------------------- Fund 1 3 5 10 - ------------------------------------------------------------------------------- AllianceBernstein Corporate Bond Portfolio 3/35 6/27 10/21 1/10 AllianceBernstein Quality Bond Portfolio 58/80 48/66 30/47 N/A AllianceBernstein U.S. Government Portfolio 32/44 35/41 32/38 31/32 CONCLUSION: Based on the factors discussed above the Senior Officer's conclusion is that the proposed fee for each of the Funds is reasonable and within the range of what would have been negotiated at arms-length in light of all the surrounding circumstances. This conclusion in respect of each Fund is based on an evaluation of all of these factors and no single factor was dispositive. Dated: July 22, 2005 ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO o 63 ALLIANCEBERNSTEIN BOND FUND CORPORATE BOND PORTFOLIO 1345 Avenue of the Americas New York, NY 10105 (800) 221-5672 CBPAR0905 [LOGO] ALLIANCEBERNSTEIN (R) Investment Research and Management AllianceBernstein Bond Fund U.S. Government Portfolio ANNUAL REPORT September 30, 2005 Investment Products Offered o Are Not FDIC Insured o May Lose Value o Are Not Bank Guaranteed The investment return and principal value of an investment in the Fund will fluctuate as the prices of the individual securities in which it invests fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. You should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. For a free copy of the Fund's prospectus, which contains this and other information, visit our web site at www.alliancebernstein.com or call your financial advisor or AllianceBernstein at (800) 227-4618. Please read the prospectus carefully before you invest. You may obtain performance information current to the most recent month-end by visiting www.alliancebernstein.com. This shareholder report must be preceded or accompanied by the Fund's prospectus for individuals who are not current shareholders of the Fund. You may obtain a description of the Fund's proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Simply visit AllianceBernstein's web site at www.alliancebernstein.com, or go to the Securities and Exchange Commission's (the "Commission") web site at www.sec.gov, or call AllianceBernstein at (800) 227-4618. The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q are available on the Commission's web site at www.sec.gov. The Fund's Forms N-Q may also be reviewed and copied at the Commission's Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330. AllianceBernstein Investment Research and Management, Inc. is an affiliate of Alliance Capital Management L.P., the manager of the funds, and is a member of the NASD. November 17, 2005 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, 2005. 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 in U.S. government securities, repurchase agreements and forward contracts relating to U.S. government securities. Investment Results The table on page 4 shows the Portfolio's performance compared to its benchmark, the Lehman Brothers (LB) Government Index, which represents the U.S. government bond market, for the six- and 12-month periods ended September 30, 2005. We have also included performance for the Lipper General U.S. Government Funds Average (the "Lipper Average"). Funds in the Lipper Average have generally similar investment objectives to the Portfolio, although some may have different investment policies and sales and management fees. The Portfolio modestly underperformed its benchmark, the LB Government Index, and matched the Lipper Average, for the 12-month period ended September 30, 2005. Contributing positively to the Portfolio's relative performance was its shorter-than-benchmark duration as well as its yield curve positioning during a period of rising interest rates. During the annual period under review, the yield curve flattened by 189 basis points as yields on short and intermediate maturity Treasuries rose, while longer maturities remained stable, or actually declined. Specifically, two-year and five-year yields rose by 156 basis points and 82 basis points, respectively. Ten-year yields rose more modestly by 20 basis points while longer 30-year maturity Treasuries actually declined by 32 basis points. Additionally, the Portfolio's non-government holdings also contributed positively to relative performance. Detracting from the Portfolio's performance for the 12-month period was its long mortgage position versus a short agency position. During the year, mortgage securities underperformed agency securities on a duration-adjusted basis. Mortgage issue selection, however, was positive as the Portfolio's allocation to 15-year pass-through securities outperformed 30-year pass through securities. Market Review and Investment Strategy Investment-grade fixed-income returns were moderate during the annual reporting period reflecting generally higher interest rates, a significant flattening of the yield curve, and modest spread movement in the non-Treasury sectors of the market. The U.S. Treasury market, as measured by the Lehman Brothers Treasury Index, posted a return of 2.48% for the reporting period, despite the headwinds of continued rate increases by the Federal Reserve. Beginning in June 2004, the Federal Reserve hiked the ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 1 Fed Funds benchmark rate 12 times for a total of 300 basis points, bringing the Fed Funds target from its all-time low of 1% to 4%. With rates rising, Treasury Inflation-Protected Securities (TIPS) outperformed conventional Treasuries at 3.84%, according to the Lehman Brothers 1-10 Year TIPS Index. Agency securities, as represented by Lehman Brothers, posted a return of 2.41%. Agency spreads tightened during the year, reflecting the scarcity of new issuance and strong foreign demand. Asset-backed securities (ABS) and commercial mortgage-backed securities (CMBS) also posted modest returns of 1.88% and 1.94% and outperformed other benchmark sectors on a duration-adjusted basis. Investors readily absorbed heavy new issuance in the CMBS market. Within the ABS market, manufactured housing outpaced the other sectors, posting a return of 3.34%, followed by home equity loans at 2.78%, utilities at 1.80%, credit cards at 1.54% and autos at 1.49%. ABS securities were helped by limited new supply and a general flight toward floating-rate assets as interest rates continued to climb. Mortgage pass-through securities returned 3.29%, however they underperformed other sectors on a duration-adjusted basis. Heavy supply and the lack of a significant investor base outside of foreign investors negatively impacted the sector. Fifteen-year mortgage pass-through securities outperformed 30-year pass through securities based on limited supply given investor preference for 30-year adjustable rate mortgages over 30-year conventionals. During the reporting period, the Portfolio remained positioned for U.S. interest rates to rise. Accordingly, the Portfolio's U.S. Investment Grade Structured Asset Investment Team kept the Portfolio's overall duration shorter than that of its benchmark. Additionally, the Portfolio was underweight in short and intermediate maturities to help protect against the negative effect of rising short-term interest rates. As a further buffer against rising U.S. interest rates, a portion of the Portfolio was invested in inflation-protected Treasuries and hybrid adjustable-rate mortgage securities. Structured CMO's (Collateralized Mortgage Obligations) were also favored due to their yield advantage and stability in periods of volatility. Additionally, within the Portfolio's mortgage pass-through selection, 15-year mortgages were utilized due to favorable supply technicals and the fact that they are less sensitive to volatility. 2 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO HISTORICAL PERFORMANCE An Important Note About the Value of Historical Performance The performance shown on the following pages represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by visiting www.alliancebernstein.com. The investment return and principal value of an investment in the Portfolio will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. You should consider the investment objectives, risks, charges and expenses of the Portfolio carefully before investing. For a free copy of the Portfolio's prospectus, which contains this and other information, visit our web site at www.alliancebernstein.com or call your financial advisor or AllianceBernstein at (800) 227-4618. You should read the prospectus carefully before you invest. Returns are annualized for periods longer than one year. All fees and expenses related to the operation of the Portfolio have been deducted. NAV returns do not reflect sales charges; if sales charges were reflected, the Portfolio's quoted performance would be lower. SEC returns reflect the applicable sales charges for each share class: a 4.25% maximum front-end sales charge for Class A shares; the applicable contingent deferred sales charge for Class B shares (3% year 1, 2% year 2, 1% year 3, 0% year 4); a 1% 1 year contingent deferred sales charge for Class C shares. Returns for Advisor Class, Class R, Class K and Class I shares will vary due to different expenses associated with these classes. Performance assumes reinvestment of distributions and does not account for taxes. Benchmark Disclosure The unmanaged Lehman Brothers (LB) Government Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Index is composed of the LB Treasury Index and the LB Agency Index. For the six- and 12-month periods ended September 30, 2005, the Lipper General U.S. Government Funds Average consisted of 170 and 164 funds, respectively. These funds have generally similar investment objectives to the Portfolio, although some may have different investment policies and sales and management fees. An investor cannot invest directly in an index or average, and their results are not indicative of the performance for any specific investment, including the Portfolio. A Word About Risk Price fluctuations in the Portfolio's securities may be caused by changes in the general level of interest rates or changes in bond credit quality ratings. Please note, as interest rates rise, existing bond prices fall and can cause the value of an investment in the Portfolio to decline. Changes in interest rates have a greater effect on bonds with longer maturities than on those with shorter maturities. Investments in the Portfolio are not guaranteed because of fluctuation in the net asset value of the underlying fixed-income related investments. Similar to direct bond ownership, bond funds have the same interest rate, inflation and credit risks that are associated with the underlying bonds owned by the Portfolio. Portfolio purchasers should understand that, in contrast to owning individual bonds, there are ongoing fees and expenses associated with owning shares of bond funds. While the Portfolio invests principally in bonds and other fixed-income securities, in order to achieve its investment objectives, the Portfolio may at times use certain types of investment derivatives, such as options, futures, forwards and swaps. These instruments involve risks different from, and in certain cases, greater than, the risks presented by more traditional investments. These risks are fully discussed in the Portfolio's prospectus. (Historical Performance continued on next page) ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 3 HISTORICAL PERFORMANCE (continued from previous page) THE PORTFOLIO VS. ITS BENCHMARK Returns ----------------------- PERIODS ENDED SEPTEMBER 30, 2005 6 Months 12 Months AllianceBernstein Bond Fund U.S. Government Portfolio Class A 1.97% 2.31% Class B 1.60% 1.57% Class C 1.61% 1.58% Advisor Class 2.27% 2.76% Class R** 1.89% 2.14% Class K** 2.04% 1.79%* Class I** 2.20% 1.97%* Lehman Brothers Government Index 2.39% 2.47% Lipper General U.S. Government Funds Average 1.95% 2.31% * Since Inception: see inception dates below. ** Please note that this is a new share class offering for investors purchasing shares through institutional pension plans. The inception date for Class R shares is 11/3/03; the inception date for Class K and Class I shares is 3/1/05. GROWTH OF A $10,000 INVESTMENT IN THE PORTFOLIO 9/30/95 TO 9/30/05 o AllianceBernstein Bond Fund U.S. Government Portfolio Class A o Lehman Brothers Government Index AllianceBernstein Bond Fund U.S. Government Portfolio Class A: $15,705 Lehman Brothers Government Index: $18,494 [THE FOLLOWING DATA WAS REPRESENTED BY A MOUNTAIN CHART IN THE PRINTED MATERIAL] 9/30/95 $ 9,575 $10,000 9/30/96 $ 9,739 $10,442 9/30/97 $10,549 $11,398 9/30/98 $11,855 $12,948 9/30/99 $11,536 $12,727 9/30/00 $12,311 $13,641 9/30/01 $13,743 $15,450 9/30/02 $14,808 $17,001 9/30/03 $14,961 $17,605 9/30/04 $15,354 $18,048 9/30/05 $15,705 $18,494 This chart illustrates the total value of an assumed $10,000 investment in AllianceBernstein Bond Fund U.S. Government Portfolio Class A shares (from 9/30/95 to 9/30/05) as compared to the performance of its benchmark. The chart reflects the deduction of the maximum 4.25% sales charge from the initial $10,000 investment in the Fund and assumes the reinvestment of dividends and capital gains. See Historical Performance and Benchmark disclosures on previous page. (Historical Performance continued on next page) 4 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO HISTORICAL PERFORMANCE (continued from previous page) AVERAGE ANNUAL RETURNS AS OF SEPTEMBER 30, 2005 NAV Returns SEC Returns Class A Shares 1 Year 2.31% -2.10% 5 Years 5.00% 4.10% 10 Years 5.07% 4.62% SEC Yield** 3.69% Class B Shares 1 Year 1.57% -1.38% 5 Years 4.26% 4.26% 10 Years(a) 4.61% 4.61% SEC Yield ** 3.12% Class C Shares 1 Year 1.58% 0.60% 5 Years 4.25% 4.25% 10 Years 4.33% 4.33% SEC Yield** 3.12% Advisor Class Shares 1 Year 2.76% Since Inception* 5.40% SEC Yield ** 4.14% Class R Shares+ 1 Year 2.14% Since Inception* 3.06% SEC Yield** 3.83% Class K Shares+ Since Inception* 1.79% SEC Yield ** 4.18% Class I Shares+ Since Inception* 1.97% SEC Yield ** 4.49% SEC AVERAGE ANNUAL RETURNS (WITH SALES CHARGES) AS OF THE MOST RECENT CALENDAR QUARTER-END (SEPTEMBER 30, 2005) Class A Shares 1 Year -2.10% 5 Years 4.10% 10 Years 4.62% Class B Shares 1 Year -1.38% 5 Years 4.26% 10 Years(a) 4.61% Class C Shares 1 Year 0.60% 5 Years 4.25% 10 Years 4.33% (a) Assumes conversion of Class B shares into Class A shares after six years. * Inception Date: 10/6/00 for Advisor Class shares; 11/3/03 for Class R shares; 3/1/05 for Class K and Class I shares. ** SEC yields are calculated based on SEC guidelines for the 30-day period ended September 30, 2005. + Please note that this is a new share class offering for investors purchasing shares through institutional pension plans. The inception date for these share classes is listed above. See Historical Performance disclosures on page 3. ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 5 FUND EXPENSES As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below. Actual Expenses The table below provides information about actual account values and actual expenses. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the hypothetical example is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Ending Account Value Account Value Expenses Paid April 1, 2005 September 30, 2005 During Period* ------------------------- --------------------------- ------------------------ Actual Hypothetical Actual Hypothetical** Actual Hypothetical -------------------------------------------------------------------------------- Class A $1,000 $1,000 $1,019.74 $1,018.40 $6.73 $6.73 Class B $1,000 $1,000 $1,016.04 $1,014.84 $10.31 $10.30 Class C $1,000 $1,000 $1,016.07 $1,014.84 $10.31 $10.30 Advisor Class $1,000 $1,000 $1,022.69 $1,020.51 $4.61 $4.61 Class R $1,000 $1,000 $1,018.92 $1,017.45 $7.69 $7.69 Class K $1,000 $1,000 $1,020.40 $1,019.10 $6.03 $6.02 Class I $1,000 $1,000 $1,022.00 $1,020.56 $4.56 $4.56
* Expenses are equal to the classes' annualized expense ratios of 1.33%, 2.04%, 2.04%, 0.91%, 1.52%, 1.19% and 0.90%, respectively, multiplied by the average account value over the period, multiply by the number of days in the period/365. ** Assumes 5% return before expenses. 6 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO PORTFOLIO SUMMARY September 30, 2005 PORTFOLIO STATISTICS Net Assets ($mil): $772.7 SECURITY TYPE BREAKDOWN* [ ] 59.2% U.S. Treasury Securities [ ] 13.0% Federal National Mortgage Association [ ] 10.8% Collateralized Mortgage Obligations [ ] 8.8% Federal Home Loan Mortgage Corp. [ ] 2.9% Government National [PIE CHART OMITTED] Mortgage Association [ ] 1.7% Asset Backed Securities [ ] 1.5% Stripped Mortgage Backed Securities [ ] 0.6% Collateralized Mortgage Backed Securities [ ] 1.5% Short-Term * All data are as of September 30, 2005. The Portfolio's security type breakdown is expressed as a percentage of total investments (excluding security lending collateral) and may vary over time. ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 7 PORTFOLIO OF INVESTMENTS September 30, 2005 Principal Amount (000) U.S. $ Value - ------------------------------------------------------------------------------- U.S. GOVERNMENT & GOVERNMENT SPONSORED AGENCY OBLIGATIONS-87.0% U.S. Treasury Bonds-32.3% 6.25%, 8/15/23-5/15/30* $ 66,300 $80,793,648 7.125%, 2/15/23 20,000 25,950,000 7.25%, 5/15/16 20,000 24,741,400 7.50%, 11/15/16 23,000 29,111,169 11.25%, 2/15/15 20,000 30,494,540 12.50%, 8/15/14(a)* 45,150 58,384,594 ------------ 249,475,351 U.S. Treasury Notes-29.1% 2.00%, 7/15/14* 18,338 18,732,777 3.00%, 2/15/09* 25,600 24,636,006 3.25%, 1/15/09* 28,600 27,774,404 3.375%, 11/15/08* 21,750 21,230,893 3.625%, 1/15/10* 7,010 6,848,167 3.875%, 5/15/09 22,545 22,298,403 4.00%, 6/15/09-2/15/14* 81,235 80,295,365 4.75%, 5/15/14* 22,610 23,293,591 ------------ 225,109,606 Federal National Mortgage Association-13.5% 4.58%, 4/01/35 14,644 14,525,378 4.75%, 7/01/35 7,773 7,724,672 4.898%, 9/01/35 2,988 2,984,562 5.00%, 12/01/17-10/25/33 37,614 29,317,460 5.50%, 9/25/17-3/25/33 13,762 13,791,265 6.00%, 12/01/13-2/01/14 9,949 10,235,576 6.50%, 4/25/32-1/25/44 13,420 13,838,861 7.00%, 1/01/21 1,639 1,724,543 7.50%, 12/01/09-4/01/17 4,559 4,781,114 8.50%, 4/01/08 460 463,178 9.00%, 8/01/21 343 371,173 10.00%, 11/01/13-10/01/14 3,581 3,840,123 11.00%, 7/01/16 543 592,479 ------------ 104,190,384 Federal Home Loan Mortgage Corp.-9.1% 5.00%, 4/15/15-6/15/31 54,212 44,033,594 5.50%, 7/15/17 10,795 11,022,019 6.00%, 6/01/20-5/15/35 13,396 13,655,671 7.00%, 12/01/10 1,055 1,080,020 8.00%, 9/01/11 572 579,647 ------------ 70,370,951 8 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO Principal Amount (000) U.S. $ Value - ------------------------------------------------------------------------------- Government National Mortgage Association-3.0% Single Family Homes 6.00%, 7/20/32 $ 2,910 $2,968,200 7.00%, 12/15/26 3,786 4,002,432 7.50%, 12/15/14 9,155 9,667,402 8.00%, 3/15/12 4,246 4,474,587 8.15%, 9/15/20 553 583,034 9.00%, 12/15/09-12/15/19 1,247 1,301,069 ------------ 22,996,724 Total U.S. Government & Government Sponsored Agency Obligations (cost $668,310,934) 672,143,016 COLLATERALIZED MORTGAGE OBLIGATIONS-11.2% ABN Amro Mortgage Corp. Series 2003-5 Cl.A11 4.75%, 4/25/33 6,975 6,901,902 Citicorp Mortgage Securities, Inc. Series 2004-7 Cl.1A1 5.25%, 9/25/34 6,865 6,842,436 Series 2003-8 Cl.A1 5.50%, 8/25/33 7,285 7,334,859 Countrywide Home Loans Series 2004-J9 Cl.2A1 5.25%, 1/25/35 6,630 6,601,849 Series 2005-12 Cl.1A5 5.25%, 5/25/35 8,602 8,558,606 Credit Suisse First Boston Mortgage Securities Corp. Series 2004-R2 Cl.A1 5.05%, 12/28/33(b) 3,934 3,696,209 Series 2004-8 Cl.1A2 5.25%, 12/25/34 6,220 6,193,345 Master Adjustable Rate Mortgages Trust Series 2004-8 Cl.5A1 4.72%, 8/25/34 4,400 4,368,025 Master Asset Securitization Trust Series 2004-9 Cl.3A1 5.25%, 7/25/34 6,863 6,837,511 Merrill Lynch Mortgage Investors, Inc. Series 2005-A5 Cl.A3 4.442%, 6/25/35 8,355 8,267,523 Residential Asset Mortgage Products, Inc. Series 2004-SL2 Cl.A2 6.50%, 10/25/31 6,025 6,096,003 ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 9 Principal Amount (000) U.S. $ Value - ------------------------------------------------------------------------------- Residential Asset Securitization Trust Series 2003-A15 Cl.B2 5.58%, 2/25/34 $ 1,747 $1,691,775 SASCO Net Interest Margin Trust Series 2004-9XS Cl.A 5.25%, 5/28/34(b) 1,589 1,579,373 Structured Asset Securities Corp. Series 2003-6A Cl.B3 5.45%, 3/25/33 2,743 2,717,845 Series 2002-3 Cl.B3 6.50%, 3/25/32 3,409 3,406,715 Wells Fargo Mortgage Backed Securities Trust Series 2005-AR2 Cl.2A1 4.56%, 3/25/35 5,604 5,542,748 ------------ Total Collateralized Mortgage Obligations (cost $87,524,424) 86,636,724 ASSET BACKED SECURITIES-1.8% Fixed Rate-0.2% Countrywide Asset-Backed Certificates Series 2004-2N Cl.N1 5.00%, 2/25/35(b) 1,123 1,122,517 Adjustable Rate-1.6% Long Beach Mortgage Loan Trust Series 2003-1 Cl.M2 5.88%, 3/25/33 6,465 6,538,765 Morgan Stanley ABS Capital I Series 2004-NC3 Cl.M2 4.93%, 3/25/34 6,000 6,050,640 ------------ 12,589,405 ------------ Total Asset Backed Securities (cost $13,777,115) 13,711,922 STRIPPED MORTGAGE BACKED SECURITIES-1.6% Morgan Stanley Capital I Series 2003-IQ4 Cl.X1 0.21%, 5/15/40(b) 98,506 3,830,894 Mortgage Capital Funding, Inc. Series 1996-MC2 Cl.X 2.12%, 12/21/26 32,338 437,208 Prudential Securities Secured Financing Corp. Series 1999-NRF1 Cl.AEC 0.80%, 11/01/31(b) 290,861 7,888,163 ------------ Total Stripped Mortgage Backed Securities (cost $12,729,417) 12,156,265 10 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO Principal Amount (000) U.S. $ Value - ------------------------------------------------------------------------------- COMMERCIAL MORTGAGE BACKED SECURITIES-0.6% Commercial Mortgage Acceptance Corp. Series 1997-ML1 Cl.A2 6.53%, 12/15/30 $ 2,978 $3,020,333 Credit Suisse First Boston Mortgage Series 2001-CK3 Cl.AX 0.98%, 6/15/34(b) 36,588 1,589,037 ------------ Total Commercial Mortgage Backed Securities (cost $4,360,981) 4,609,370 SHORT-TERM INVESTMENTS-1.5% Commercial Paper-1.3% Rabobank USA Financial Corp. 3.88%, 10/03/05 10,400 10,397,758 U.S. Treasury Bill-0.2% Zero coupon, 11/25/05(c) 1,500 1,492,151 ------------ Total Short-Term Investments (amortized cost $11,889,909) 11,889,909 ------------ Total Investments Before Security Lending Collateral (cost $798,592,780) 801,147,206 INVESTMENT OF CASH COLLATERAL FOR SECURITIES LOANED-31.4% Short-Term Investments Deutsche Bank 3.86%, 2/26/06 18,500 18,513,949 Gemini 3.881%, 10/03/05 20,000 19,993,534 Goldman Sachs 3.93%, 12/02/05 25,000 25,000,000 Gotham Funding 3.792%, 10/26/05 29,001 28,909,647 Lexpar 3.901%, 10/03/05 25,000 24,991,875 Morgan Stanley 3.88%-3.89%, 12/13/05-1/20/06 61,000 61,000,000 Sigma Funding 3.73%-4.02%, 3/06/06-7/25/06 38,000 38,244,350 Three Rivers 3.64%, 10/03/05 25,000 24,934,458 ------------ 241,587,813 ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 11 Shares U.S. $ Value - ------------------------------------------------------------------------------- UBS Private Money Market Fund, LLC 3.65% 1,023,935 $1,023,935 ------------ Total Investment of Cash Collateral for Securities Loaned (cost $242,611,748) 242,611,748 ------------ Total Investments-135.1% (cost $1,041,204,528) 1,043,758,954 Other assets less liabilities-(35.1%) (271,027,393) Net Assets-100% $772,731,561 FINANCIAL FUTURES CONTRACTS SOLD (see Note D)
Value at Number of Expiration Original September 30, Unrealized Type Contracts Month Value 2005 Appreciation U.S. Treasury Note 10 Yr Future 350 December 2005 $38,871,876 $38,472,656 $399,220
REVERSE REPURCHASE AGREEMENT (see Note D) Broker Interest Rate Maturity Amount Citigroup Global Markets, Inc. 3.70% 10/04/05 $27,101,137 * Represents entire or partial securities out on loan. See Note E for securities lending information. (a) Positions, or portions thereof, with an aggregate market value of $27,155,625 have been segregated to collateralize reverse repurchase agreements. (b) Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities are considered liquid and may be resold in transactions exempt from registration, normally to qualified buyers. At September 30, 2005, the aggregate market value of these securities amounted to $19,706,193 representing 2.6% of net assets. (c) Position, or a portion thereof, with a market value of $1,492,151 has been segregated to collateralize margin requirements for open futures contracts. See notes to financial statements. 12 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO STATEMENT OF ASSETS & LIABILITIES September 30, 2005 Assets Investments in securities, at value (cost $1,041,204,528-- including investment of cash collateral for securities loaned of $242,611,748) $1,043,758,954(a) Cash 227,358 Interest receivable 7,214,866 Receivable for capital stock sold 2,228,971 Receivable for variation margin on futures contracts 114,844 -------------- Total assets 1,053,544,993 Liabilities Payable for collateral received on securities loaned 242,611,748 Payable for reverse repurchase agreement 27,101,137 Payable for capital stock redeemed 5,201,840 Payable for investment securities purchased 3,001,967 Advisory fee payable 869,323 Dividends payable 865,631 Distribution fee payable 325,778 Transfer Agent fee payable 295,098 Accrued expenses 540,910 Total liabilities 280,813,432 Net Assets $ 772,731,561 Composition of Net Assets Capital stock, at par $110,627 Additional paid-in capital 911,591,828 Distributions in excess of net investment income (6,188,867) Accumulated net realized loss on investment transactions (135,734,289) Net unrealized appreciation of investments 2,952,262 -------------- $ 772,731,561 Calculation of Maximum Offering Price Net Asset Value and: --------------------- Maximum Shares Offering Redemption Offering Class Net Assets Outstanding Price Price Price* - ------------------------------------------------------------------------- A $ 543,546,535 77,828,068 -- $ 6.98 $ 7.29 B $ 138,855,584 19,883,802 $ 6.98 -- -- C $ 84,303,251 12,053,893 $ 6.99 -- -- Advisor $ 5,981,046 854,992 $ 7.00 $ 7.00 -- R $ 25,150 3,601 $ 6.98 $ 6.98 -- K $ 10,048 1,439 $ 6.98 $ 6.98 -- I $ 9,947 1,424.50 $ 6.98 $ 6.98 -- * The maximum offering price per share for Class A shares includes a sales charge of 4.25%. (a) Includes securities on loan with a value of $233,157,231 (see Note E). See notes to financial statements. ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 13 STATEMENT OF OPERATIONS Year Ended September 30, 2005 Investment Income Interest $ 59,675,254 Expenses Advisory fee $ 4,928,939 Distribution fee--Class A 1,750,717 Distribution fee--Class B 1,839,967 Distribution fee--Class C 950,875 Distribution fee--Class R 97 Distribution fee--Class K 15 Transfer agency 2,815,920 Custodian 309,036 Printing 289,104 Registration fees 95,699 Administrative 91,771 Audit 64,386 Legal 32,449 Directors' fees 26,095 Miscellaneous 69,144 Total expenses before interest expense 13,264,214 Interest expense 2,731,570 Total expenses 15,995,784 Less: expense offset arrangement (see Note B) (15,301) Net expenses 15,980,483 Net investment income 43,694,771 Realized and Unrealized Gain (Loss) on Investment Transactions Net realized loss on: Investment transactions (4,816,387) Futures contracts (3,086,147) Net change in unrealized appreciation/depreciation of: Investments (11,171,234) Futures contracts 951,004 Net loss on investment transactions (18,122,764) Net Increase in Net Assets from Operations $ 25,572,007 See notes to financial statements. 14 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS Year Ended Year Ended September 30, September 30, 2005 2004 Increase (Decrease) in Net Assets from Operations Net investment income $ 43,694,771 $ 54,518,687 Net realized loss on investment transactions (7,902,534) (21,127,257) Net change in unrealized appreciation/depreciation of investments (10,220,230) (6,138,651) Net increase in net assets from operations 25,572,007 27,252,779 Dividends to Shareholders from Net investment income Class A (24,186,748) (32,446,874) Class B (6,345,707) (11,746,705) Class C (3,259,002) (4,996,461) Advisor Class (12,695,436) (11,309,550) Class R (760) (529) Class K (238) -0- Class I (254) -0- Capital Stock Transactions Net decrease (416,393,877) (338,594,406) Total decrease (437,310,015) (371,841,746) Net Assets Beginning of period 1,210,041,576 1,581,883,322 End of period (including distributions in excess of net investment income of ($6,188,867) and ($10,925,696), respectively) $ 772,731,561 $ 1,210,041,576 See notes to financial statements. ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 15 NOTES TO FINANCIAL STATEMENTS September 30, 2005 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, Advisor Class, Class R, Class K and Class I shares. Class A shares are sold with a front-end sales charge of up to 4.25% for purchases not exceeding $1,000,000. With respect to purchases of $1,000,000 or more, Class A shares redeemed within one year of purchase may be subject to a contingent deferred sales charge of 1%. Class B shares are currently sold with a contingent deferred sales charge which declines from 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. Class R and Class K shares are sold without an initial or contingent deferred sales charge. Advisor Class and Class I shares are sold without an initial or contingent deferred sales charge and are not subject to ongoing distribution expenses. All seven classes of shares have identical voting, dividend, liquidation and other rights, except that 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 U.S. generally accepted accounting principles which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. 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 Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at "fair value" as determined in accordance with procedures established by and under the general supervision of the Fund's Board of Directors. In general, the market value of securities which are readily available and deemed reliable are determined as follows. Securities listed on a national securities exchange 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 16 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO on such day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities 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 valuation, the last available closing settlement price is used; securities traded in the over-the-counter market, ("OTC") (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, Alliance Capital Management, L.P. (the "Adviser") may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security; and OTC and other derivatives are valued on the basis of a quoted bid price or spread from a major broker/dealer in such security. Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer's financial statements or other available documents. In addition, the Fund may use fair value pricing for securities primarily traded in non-U.S. markets because, most foreign markets close well before the Fund values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. 2. 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. The Portfolio may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned. ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 17 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 and amortizes premiums as adjustments to interest income. 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, Advisor Class, Class R, Class K and Class I shares. Advisor Class and Class I shares have no distribution fees. 5. Dividends and Distributions Dividends and distributions to shareholders, if any, 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 U.S. generally accepted accounting principles. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. 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. NOTE B Advisory Fee and Other Transactions with Affiliates Under the terms of the investment advisory agreement, the Portfolio pays the Adviser an advisory fee at an annual rate of .45% of the first $2.5 billion, ..40% of the next $2.5 billion and .35% in excess of $5 billion, of the Portfolio's net assets valued on the last business day of the previous quarter. Prior to September 7, 2004, the Portfolio paid the Adviser an advisory fee at a quarterly rate of .15% (approximately .60% on an annual basis) of the first $500 million of the Portfolio's net assets and .125% (approximately .50% on an annual basis) of it net assets over $500 million, valued on the last business day of the previous quarter. The fee is accrued daily and paid quarterly. 18 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO Effective January 1, 2004 through September 6, 2004, in contemplation of the final agreement with the Office of New York Attorney General ("NYAG"), the Adviser began waiving a portion of its advisory fee so as to charge the Portfolio at the reduced annual rate discussed above. For a more complete discussion of the Adviser's settlement with the NYAG, please see "Legal Proceedings" below. Pursuant to the advisory agreement, the Portfolio paid $91,771 to the Adviser representing the cost of certain legal and accounting services provided to the Portfolio by the Adviser for the year ended September 30, 2005. 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. AGIS may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. Such compensation retained by AGIS amounted to $ 1,554,400 for the year ended September 30, 2005. For the year ended September 30, 2005, the Portfolio's expenses were reduced by $15,301 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 $9,606 from the sales of Class A shares and received $7,728, $169,513 and $6,312 in contingent deferred sales charges imposed upon redemptions by shareholders of Class A, Class B and Class C shares, respectively, for the year ended September 30, 2005. 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 the Portfolio's average daily net assets attributable to Class A shares, 1% of the average daily net assets attributable to both Class B and Class C shares, .50% of the Portfolio's average daily net assets attributable to Class R shares and .25% of the Portfolio's average daily net assets attributable to Class K shares. There are no distribution and servicing fees on the Advisor Class and Class I shares. The fees are accrued daily and paid monthly. The Agreement provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities. The Distributor has incurred expenses in excess of the distribution costs reimbursed by the Portfolio in the amounts of $2,777,937, $6,056,243, $410 and $0 for Class B, Class C, Class R and Class K shares, respectively; such costs may be recovered from the Portfolio in future pe- ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 19 riods 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. NOTE D Investment Transactions Purchases and sales of investment securities (excluding short-term investments) for the year ended September 30, 2005, were as follows: Purchases Sales Investment securities (excluding U.S. government securities) $ 117,511,723 $ 146,507,432 U.S. government securities 2,051,228,965 2,531,612,922 The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation (excluding future contracts) are as follows: Cost $1,052,593,984 Gross unrealized appreciation $ 1,100,652 Gross unrealized depreciation (9,935,682) Net unrealized depreciation $ (8,835,030) 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. 20 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO 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. 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 interim 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. As of October 1, 2003, the Portfolio has adopted the method of accounting for interim payments on swap contracts in accordance with Financial Accounting Standards Board Statement No. 133. The Portfolio accrues for the interim payments on swap contracts on a daily basis, with the net amount recorded within unrealized appreciation/depreciation of swap contracts on the statement of assets and liabilities. Once the interim payments are settled in cash, the net amount is recorded as realized gain/loss on swaps, in addition to realized gain/loss recorded upon termination of swap contracts on the statement of operations. Prior to October 1, 2003, these interim payments were reflected within interest income/expense in the statement of operations. Fluctuations in the value of swap contracts are recorded as a component of net change in unrealized appreciation/depreciation of investments. 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 unex ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 21 ercised 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 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. 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 year ended September 30, 2005, the average amount of reverse repurchase agreements outstanding was $112,462,350 and the daily weighted average annualized interest rate was 2.40%. 5. Dollar Rolls The Portfolio may enter into dollar rolls. Dollar rolls involve sales by the Portfolio of securities for delivery in the current month and the Portfolio's simultaneously contracting to repurchase substantially similar (same type and coupon) securities on a specified future date. During the roll period, the Portfolio forgoes principal and interest paid on the securities. The Portfolio is compensated by the difference between the current sales price and the lower forward price for the future purchase (often referred to as the "drop") as well as by the interest earned on the cash proceeds of the initial sale. Dollar rolls involve the risk that the market value of the securities the Portfolio is obligated to repurchase under the agreement may decline below the repurchase price. Dollar rolls are speculative techniques and may be considered to be borrowings by the Portfolio. For the year ended September 30, 2005, the Portfolio earned drop income of $1,402,743 which is included in interest income in the accompanying statement of operations. 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 22 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO 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, 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, 2005, the Portfolio had loaned securities with a value of $233,157,231 and received cash collateral which was invested in short-term securities valued at $242,611,748 as included in the accompanying portfolio of investments. For the year ended September 30, 2005, the Portfolio earned fee income of $358,391 which is included in interest income in the accompanying statement of operations. NOTE F Capital Stock There are 21,000,000,000 shares of $.001 par value capital stock authorized, divided into seven classes, designated Class A, Class B, Class C, Advisor Class, Class R, Class K and Class I shares. Each class consists of 3,000,000,000 authorized shares. Transactions in capital stock were as follows: Shares Amount --------------------------- ------------------------------ Year Ended Year Ended Year Ended Year Ended September 30, September 30, September 30, September 30, 2005 2004 2005 2004 ------------ ------------ -------------- -------------- Class A Shares sold 3,126,480 4,218,101 $22,073,490 $30,146,844 Shares issued in reinvestment of dividends 2,261,039 2,862,366 15,978,830 20,389,259 Shares converted from Class B 4,124,189 2,905,427 29,086,145 20,665,943 Shares redeemed (19,738,404) (33,589,991) (139,391,330) (239,197,202) Net decrease (10,226,696) (23,604,097) $(72,252,865) $(167,995,156) ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 23 Shares Amount --------------------------- ------------------------------ Year Ended Year Ended Year Ended Year Ended September 30, September 30, September 30, September 30, 2005 2004 2005 2004 ------------ ------------ -------------- -------------- Class B Shares sold 1,200,396 2,167,866 $8,484,320 $15,470,284 Shares issued in reinvestment of dividends 657,216 1,094,395 4,646,224 7,799,846 Shares converted to Class A (4,124,192) (2,905,568) (29,086,145) (20,665,943) Shares redeemed (10,168,820) (22,962,538) (71,816,023) (163,696,608) Net decrease (12,435,400) (22,605,845) $(87,771,624) $(161,092,421) Class C Shares sold 941,980 1,313,208 $6,658,949 $9,368,581 Shares issued in reinvestment of dividends 301,582 441,096 2,134,703 3,147,594 Shares redeemed (4,215,458) (9,733,170) (29,812,297) (69,513,844) Net decrease (2,971,896) (7,978,866) $(21,018,645) $(56,997,669) Advisor Class Shares sold 20,593,240 6,165,460 $145,526,826 $44,040,465 Shares issued in reinvestment of dividends 1,746,230 1,574,981 12,364,185 11,224,484 Shares redeemed (56,168,512) (1,096,014) (393,271,216) (7,790,298) Net increase (decrease) (33,829,042) 6,644,427 $(235,380,205) $47,474,651 November 3, November 3, Year Ended 2003(a) to Year Ended 2003(a) to September 30, September 30, September 30, September 30, 2005 2004 2005 2004 ------------ ------------ -------------- -------------- Shares sold 1,334 2,258 $9,408 $16,074 Shares issued in reinvestment of dividends 51 16 359 115 Shares redeemed (58) -0- (405) -0- Net increase 1,327 2,274 $9,362 $16,189 (a) Commencement of distribution. 24 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO Shares Amount March 1, March 1, 2005(a) to 2005(a) to September 30, September 30, 2005 2005 -------------- -------------- Class K Shares sold 1,439 $ 10,100 Net increase 1,439 $ 10,100 Class I Shares sold 1,425 $ 10,000 Net increase 1,425 $ 10,000 (a) Commencement of distribution. NOTE G Risks Involved in Investing in the Portfolio Interest Rate Risk and Credit Risk--Interest rate risk is the risk that changes in interest rates will affect the value of the Portfolio's investments in fixed-income debt securities such as bonds or notes. Increases in interest rates may cause the value of the Portfolio's investments to decline. Credit risk is the risk that the issuer or guarantor of a debt security, or the counterparty to a derivative contract, will be unable or unwilling to make timely principal and/or interest payments, or to otherwise honor its obligations. The degree of risk for a particular security may be reflected in its credit risk rating. Credit risk is greater for medium quality and lower-rated securities. Lower-rated debt securities and similar unrated securities (commonly known as "junk bonds") have speculative elements or are predominantly speculative risks. Indemnification Risk--In the ordinary course of business, the Portfolio enters into contracts that contain a variety of indemnifications. The Portfolio's maximum exposure under these arrangements is unknown. However, the Portfolio has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. NOTE H Joint Credit Facility A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $250 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 year ended September 30, 2005. ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 25 NOTE I Distributions to Shareholders The tax character of distributions paid during the fiscal years ended September 30, 2005 and September 30, 2004 were as follows: September 30, September 30, 2005 2004 --------------- --------------- Distributions paid from: Ordinary income $ 46,488,145 $ 60,500,119 Total taxable distributions 46,488,145 60,500,119 Tax return of capital -0- -0- Total distributions paid $ 46,488,145 $ 60,500,119 As of September 30, 2005, the components of accumulated earnings/(deficit) on a tax basis were as follows: Accumulated capital and other losses $ (134,947,393)(a) Undistributed ordinary income 5,678,544 Unrealized appreciation/(depreciation) (8,836,414)(b) Total accumulated earnings/(deficit) $ (138,105,263)(c) (a) On September 30, 2005, the Portfolio had a net capital loss carryforward for federal income tax purposes of $122,518,919 (of which $2,015,062 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 Portfolio in December of 2000), of which $16,083,708 expires in the year 2006, $48,732,137 expires in the year 2007, $6,470,420 expires in the year 2008, $23,497,731 expires in the year 2011 and $27,734,923 expires in the year 2013. 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, 2005, $6,928,773 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. Net capital losses incurred after October 31, and within the taxable year are deemed to arise on the first business day of the Portfolio's next taxable year. For the fiscal year ended September 30, 2005, the Portfolio deferred to October 1, 2005 post-October capital losses of $11,829,620. For the year ended September 30, 2005, the Portfolio deferred losses on straddles of $598,854. (b) The difference between book-basis and tax-basis unrealized appreciation/(depreciation) are attributable primarily to the tax deferral of losses on wash sales, the difference between book and tax amortization methods for premium and the realization for tax purposes of unrealized gains(losses) on certain derivative instruments. (c) The difference between book-basis and tax-basis components of accumulated earnings/(deficit) is attributable primarily to dividends payable. During the current fiscal year, permanent differences primarily due to the tax treatment of bond premium, tax character of paydown gains/losses and the expiration of capital loss carryforward resulted in a net decrease in distributions in excess of net investment income, a net increase in accumulated net realized loss on investment transactions and a net decrease in additional paid-in capital. This reclassification had no effect on net assets. 26 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO NOTE J Legal Proceedings As has been previously reported, the staff of the U.S. Securities and Exchange Commission ("SEC") and the NYAG have been investigating practices in the mutual fund industry identified as "market timing" and "late trading" of mutual fund shares. Certain other regulatory authorities have also been conducting investigations into these practices within the industry and have requested that the Adviser provide information to them. The Adviser has been cooperating and will continue to cooperate with all of these authorities. On December 18, 2003, the Adviser confirmed that it had reached terms with the SEC and the NYAG for the resolution of regulatory claims relating to the practice of "market timing" mutual fund shares in some of the AllianceBernstein Mutual Funds. The agreement with the SEC is reflected in an Order of the Commission ("SEC Order"). The agreement with the NYAG is memorialized in an Assurance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the key provisions of these agreements are the following: (i) The Adviser agreed to establish a $250 million fund (the "Reimbursement Fund") to compensate mutual fund shareholders for the adverse effects of market timing attributable to market timing relationships described in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be paid, in order of priority, to fund investors based on (i) their aliquot share of losses suffered by the fund due to market timing, and (ii) a proportionate share of advisory fees paid by such fund during the period of such market timing; (ii) The Adviser agreed to reduce the advisory fees it receives from some of the AllianceBernstein long-term, open-end retail funds until December 31, 2008; and (iii) The Adviser agreed to implement changes to its governance and compliance procedures. Additionally, the SEC Order and the NYAG Order contemplate that the Adviser's registered investment company clients, including the Fund, will introduce governance and compliance changes. In anticipation of final, definitive documentation of the NYAG Order and effective January 1, 2004, the Adviser began waiving a portion of its advisory fee. On September 7, 2004, the Fund's investment advisory agreement was amended to reflect the reduced advisory fee. For more information on this waiver and amendment to the Fund's investment advisory agreement, please see "Advisory Fee and Other Transactions with Affiliates" above. A special committee of the Adviser's Board of Directors, comprised of the members of the Adviser's Audit Committee and the other independent member of the ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 27 Adviser's Board, is continuing to direct and oversee an internal investigation and a comprehensive review of the facts and circumstances relevant to the SEC's and the NYAG's investigations. In addition, the Independent Directors of the Fund ("the Independent Directors") have initiated an investigation of the above-mentioned matters with the advice of an independent economic consultant and independent counsel. The Independent Directors have formed a special committee to supervise the investigation. On October 2, 2003, a purported class action complaint entitled Hindo, et al. v. AllianceBernstein Growth & Income Fund, et al. ("Hindo Complaint") was filed against the Adviser, Alliance Capital Management Holding L.P. ("Alliance Holding"), Alliance Capital Management Corporation, AXA Financial, Inc., the AllianceBernstein Funds, certain officers of the Adviser ("Alliance defendants"), and certain other defendants not affiliated with the Adviser, as well as unnamed Doe defendants. The Hindo Complaint was filed in the United States District Court for the Southern District of New York by alleged shareholders of two of the AllianceBernstein Funds. The Hindo Complaint alleges that certain of the Alliance defendants failed to disclose that they improperly allowed certain hedge funds and other unidentified parties to engage in "late trading" and "market timing" of AllianceBernstein Fund securities, violating Sections 11 and 15 of the Securities Act, Sections 10(b) and 20(a) of the Exchange Act and Sections 206 and 215 of the Advisers Act. Plaintiffs seek an unspecified amount of compensatory damages and rescission of their contracts with the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts. Since October 2, 2003, numerous additional lawsuits making factual allegations generally similar to those in the Hindo Complaint were filed in various federal and state courts against the Adviser and certain other defendants, and others may be filed. The plaintiffs in such lawsuits have asserted a variety of theories for recovery including, but not limited to, violations of the Securities Act, the Exchange Act, the Advisers Act, the Investment Company Act, the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), certain state securities laws, and common law. On February 20, 2004, the Judicial Panel on Multidistrict Litigation transferred all federal actions, and removed all state court actions, to the United States District Court for the District of Maryland (the "Mutual Fund MDL"). The plaintiffs in the removed actions have since moved for remand, and that motion is pending. On September 29, 2004, plaintiffs filed consolidated amended complaints with respect to four claim types: mutual fund shareholder claims; mutual fund derivative claims; derivative claims brought on behalf of Alliance Holding; and claims brought under ERISA by participants in the Profit Sharing Plan for Employees of the Adviser. All four complaints include substantially identical factual allega- 28 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO tions, which appear to be based in large part on the SEC Order and the NYAG Order. The claims in the mutual fund derivative consolidated amended complaint are generally based on the theory that all fund advisory agreements, distribution agreements and 12b-1 plans between the Adviser and the AllianceBernstein Funds should be invalidated, regardless of whether market timing occurred in each individual fund, because each was approved by fund trustees on the basis of materially misleading information with respect to the level of market timing permitted in funds managed by the Adviser. The claims asserted in the other three consolidated amended complaints are similar to those that the respective plaintiffs asserted in their previous federal lawsuits. All of these lawsuits seek an unspecified amount of damages. The Alliance defendants have moved to dismiss the complaints, and those motions are pending. On February 10, 2004, the Adviser received (i) a subpoena duces tecum from the Office of the Attorney General of the State of West Virginia and (ii) a request for information from West Virginia's Office of the State Auditor, Securities Commission (the "West Virginia Securities Commission") (together, the "Information Requests"). Both Information Requests require the Adviser to produce documents concerning, among other things, any market timing or late trading in the Adviser's sponsored mutual funds. The Adviser responded to the Information Requests and has been cooperating fully with the investigation. On April 11, 2005, a complaint entitled The Attorney General of the State of West Virginia v. AIM Advisors, Inc., et al. ("WVAG Complaint") was filed against the Adviser, Alliance Holding, and various other defendants not affiliated with the Adviser. The WVAG Complaint was filed in the Circuit Court of Marshall County, West Virginia by the Attorney General of the State of West Virginia. The WVAG Complaint makes factual allegations generally similar to those in the Hindo Complaint. On May 31, 2005, defendants removed the WVAG Complaint to the United States District Court for the Northern District of West Virginia. On July 12, 2005, plaintiff moved to remand. On October 19, 2005, the WVAG Complaint was transferred to the Mutual Fund MDL. On August 30, 2005, the deputy commissioner of securities of the West Virginia Securities Commission signed a "Summary Order to Cease and Desist, and Notice of Right to Hearing" addressed to the Adviser and Alliance Holding. The Summary Order claims that the Adviser and Alliance Holding violated the West Virginia Uniform Securities Act, and makes factual allegations generally similar to those in the Commission Order and the NYAG Order. The Adviser intends to vigorously defend against the allegations in the WVAG Complaint. As a result of the matters discussed above, 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 ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 29 provide for sufficient liquidity and could also have an adverse effect on the investment performance of the AllianceBernstein Mutual Funds. On June 22, 2004, a purported class action complaint entitled Aucoin, et al. v. Alliance Capital Management L.P., et al. ("Aucoin Complaint") was filed against the Adviser, Alliance Capital Management Holding L.P., Alliance Capital Management Corporation, AXA Financial, Inc., AllianceBernstein Investment Research & Management, Inc., certain current and former directors of the AllianceBernstein Mutual Funds, and unnamed Doe defendants. The Aucoin Complaint names certain of the AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was filed in the United States District Court for the Southern District of New York by an alleged shareholder of an AllianceBernstein mutual fund. The Aucoin Complaint alleges, among other things, (i) that certain of the defendants improperly authorized the payment of excessive commissions and other fees from fund assets to broker-dealers in exchange for preferential marketing services, (ii) that certain of the defendants misrepresented and omitted from registration statements and other reports material facts concerning such payments, and (iii) that certain defendants caused such conduct as control persons of other defendants. The Aucoin Complaint asserts claims for violation of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206 and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding and abetting breaches of common law fiduciary duties. Plaintiffs seek an unspecified amount of compensatory damages and punitive damages, rescission of their contracts with the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts, an accounting of all fund-related fees, commissions and soft dollar payments, and restitution of all unlawfully or discriminatorily obtained fees and expenses. Since June 22, 2004, numerous additional lawsuits making factual allegations substantially similar to those in the Aucoin Complaint were filed against the Adviser and certain other defendants, and others may be filed. On October 19, 2005, the District Court granted in part, and denied in part, defendants' motion to dismiss the Aucoin Complaint and as a result the only claim pending is plaintiffs' Section 36(b) claim. It is possible that these matters and/or other developments resulting from these matters could result in increased redemptions of the AllianceBernstein Mutual Funds' shares or other adverse consequences to the AllianceBernstein Mutual Funds. However, the Adviser believes that these matters are not likely to have a material adverse effect on its ability to perform advisory services relating to the AllianceBernstein Mutual Funds. 30 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO FINANCIAL HIGHLIGHTS Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class A ---------------------------------------------------------------------------- Year Ended July 1, September 30, 2003 to Year Ended June 30, ------------------------ Sept. 30, ------------------------------------- 2005 2004 2003(a) 2003 2002(b) 2001 ----------- ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $7.11 $7.27 $7.49 $7.21 $7.14 $6.99 Income From Investment Operations Net investment income(c) .28 .30(d) .06 .27 .37 .47 Net realized and unrealized gain (loss) on investment transactions (.12) (.13) (.20) .35 .13 .17 Net increase (decrease) in net asset value from operations .16 .17 (.14) .62 .50 .64 Less: Dividends and Distributions Dividends from net investment income (.29) (.33) (.08) (.34) (.37) (.47) Distributions in excess of net investment income -0- -0- -0- -0- (.03) (.01) Tax return of capital -0- -0- -0- -0- (.03) (.01) Total dividends and distributions (.29) (.33) (.08) (.34) (.43) (.49) Net asset value, end of period $6.98 $7.11 $7.27 $7.49 $7.21 $7.14 Total Return Total investment return based on net asset value(e) 2.31% 2.49% (1.80)% 8.82% 7.11% 9.30% Ratios/Supplemental Data Net assets, end of period (000's omitted) $543,547 $626,183 $811,376 $889,115 $865,739 $884,574 Ratio to average net assets of: Expenses, net of waivers/ reimbursements 1.30% 1.34% 1.18%(f) 1.10% 1.23% 2.11% Expenses, before waivers/ reimbursements 1.30% 1.39% 1.18%(f) 1.10% 1.23% 2.11% Expenses, before waivers/ reimbursements, excluding interest expense 1.06% 1.10% 1.11%(f) 1.09% 1.09% 1.13% Net investment income 3.90% 4.23%(d) 3.43%(f) 3.64% 5.15% 6.57% Portfolio turnover rate 166% 150% 241% 976% 1,009% 712%
See footnote summary on page 38. ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 31 Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class B ---------------------------------------------------------------------------- Year Ended July 1, September 30, 2003 to Year Ended June 30, ------------------------ Sept. 30, ------------------------------------- 2005 2004 2003(a) 2003 2002(b) 2001 ----------- ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $7.11 $7.27 $7.49 $7.21 $7.14 $7.00 Income From Investment Operations Net investment income(c) .23 .25(d) .05 .22 .32 .42 Net realized and unrealized gain (loss) on investment transactions (.12) (.13) (.20) .35 .13 .16 Net increase (decrease) in net asset value from operations .11 .12 (.15) .57 .45 .58 Less: Dividends and Distributions Dividends from net investment income (.24) (.28) (.07) (.29) (.32) (.42) Distributions in excess of net investment income -0- -0- -0- -0- (.03) (.01) Tax return of capital -0- -0- -0- -0- (.03) (.01) Total dividends and distributions (.24) (.28) (.07) (.29) (.38) (.44) Net asset value, end of period $6.98 $7.11 $7.27 $7.49 $7.21 $7.14 Total Return Total investment return based on net asset value(e) 1.57% 1.74% (1.98)% 8.07% 6.36% 8.39% Ratios/Supplemental Data Net assets, end of period (000's omitted) $138,856 $229,823 $399,040 $495,606 $400,221 $276,308 Ratio to average net assets of: Expenses, net of waivers/ reimbursements 2.02% 2.07% 1.90%(f) 1.82% 1.93% 2.90% Expenses, before waivers/ reimbursements 2.02% 2.13% 1.90%(f) 1.82% 1.93% 2.90% Expenses, before waivers/ reimbursements, excluding interest expense 1.78% 1.83% 1.83%(f) 1.81% 1.80% 1.83% Net investment income 3.20% 3.55%(d) 2.75%(f) 2.95% 4.41% 5.95% Portfolio turnover rate 166% 150% 241% 976% 1,009% 712%
See footnote summary on page 38. 32 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class C ---------------------------------------------------------------------------- Year Ended July 1, September 30, 2003 to Year Ended June 30, ------------------------ Sept. 30, ------------------------------------- 2005 2004 2003(a) 2003 2002(b) 2001 ----------- ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $7.12 $7.28 $7.50 $7.22 $7.15 $7.00 Income From Investment Operations Net investment income(c) .23 .25(d) .05 .22 .32 .43 Net realized and unrealized gain (loss) on investment transactions (.12) (.13) (.20) .35 .13 .16 Net increase (decrease) in net asset value from operations .11 .12 (.15) .57 .45 .59 Less: Dividends and Distributions Dividends from net investment income (.24) (.28) (.07) (.29) (.32) (.43) Distributions in excess of net investment income -0- -0- -0- -0- (.03) (.01) Tax return of capital -0- -0- -0- -0- (.03) -0- Total dividends and distributions (.24) (.28) (.07) (.29) (.38) (.44) Net asset value, end of period $6.99 $7.12 $7.28 $7.50 $7.22 $7.15 Total Return Total investment return based on net asset value(e) 1.58% 1.73% (1.98)% 8.06% 6.35% 8.54% Ratios/Supplemental Data Net assets, end of period (000's omitted) $84,303 $107,003 $167,359 $204,006 $202,030 $169,213 Ratio to average net assets of: Expenses, net of waivers/ reimbursements 2.02% 2.06% 1.89%(f) 1.81% 1.93% 2.89% Expenses, before waivers/ reimbursements 2.02% 2.11% 1.89%(f) 1.81% 1.93% 2.89% Expenses, before waivers/ reimbursements, excluding interest expense 1.77% 1.82% 1.83%(f) 1.80% 1.79% 1.83% Net investment income 3.19% 3.56%(d) 2.76%(f) 2.96% 4.42% 5.94% Portfolio turnover rate 166% 150% 241% 976% 1,009% 712%
See footnote summary on page 38. ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 33 Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Advisor Class ---------------------------------------------------------------------------- Year Ended July 1, Year Ended October 6, September 30, 2003 to June 30, 2000(g) to ------------------------ Sept. 30, ------------------------ June 30, 2005 2004 2003(a) 2003 2002(b) 2001 ----------- ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $ 7.12 $7.28 $7.50 $7.21 $7.14 $7.05 Income From Investment Operations Net investment income(c) .30 .32(d) .07 .29 .39 .34 Net realized and unrealized gain (loss) on investment transactions (.11) (.12) (.20) .37 .13 .12 Net increase (decrease) in net asset value from operations .19 .20 (.13) .66 .52 .46 Less: Dividends and Distributions Dividends from net investment income (.31) (.36) (.09) (.37) (.39) (.34) Distributions in excess of net investment income -0- -0- -0- -0- (.03) (.02) Tax return of capital -0- -0- -0- -0- (.03) (.01) Total dividends and distributions (.31) (.36) (.09) (.37) (.45) (.37) Net asset value, end of period $7.00 $7.12 $7.28 $7.50 $7.21 $7.14 Total Return Total investment return based on net asset value(e) 2.76% 2.82% (1.72)% 9.29% 7.41% 6.65% Ratios/Supplemental Data Net assets, end of period (000's omitted) $5,981 $247,020 $204,108 $197,649 $177,834 $27,154 Ratio to average net assets of: Expenses, net of waivers/ reimbursements .94% 1.02% .89%(f) .81% .89% 1.38%(f) Expenses, before waivers/ reimbursements .94% 1.08% .89%(f) .81% .89% 1.38%(f) Expenses, before waivers/ reimbursements, excluding interest expense .72% .79% .81%(f) .80% .81% .81%(f) Net investment income 4.11% 4.52%(d) 3.72%(f) 3.96% 5.41% 6.74%(f) Portfolio turnover rate 166% 150% 241% 976% 1,009% 712%
See footnote summary on page 38. 34 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class R -------------------------------- November 3, Year Ended 2003(g) to September 30, September 30, 2005 2004 ------------- ------------- Net asset value, beginning of period $7.11 $7.14 Income From Investment Operations Net investment income(c) .26 .26(d) Net realized and unrealized gain (loss) on investment transactions (.11) .00 Net increase in net asset value from operations .15 .26 Less: Dividends Dividends from net investment income (.28) (.29) Net asset value, end of period $6.98 $7.11 Total Return Total investment return based on net asset value(e) 2.14% 3.72% Ratios/Supplemental Data Net assets, end of period (000's omitted) $25 $16 Ratio to average net assets of: Expenses, net of waivers/reimbursements 1.49% 1.48%(f) Expenses, before waivers/reimbursements 1.49% 1.54%(f) Expenses, before waivers/reimbursements, excluding interest expense 1.25% 1.27%(f) Net investment income 3.68% 4.08%(d)(f) Portfolio turnover rate 166% 150%
See footnote summary on page 38. ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 35 Selected Data For A Share Of Capital Stock Outstanding Throughout The Period Class K ---------------- March 1, 2005(g) to September 30, 2005 ---------------- Net asset value, beginning of period $7.02 Income From Investment Operations Net investment income(c) .16 Net realized and unrealized loss on investment transactions (.03) Net increase in net asset value from operations .13 Less: Dividends Dividends from net investment income (.17) Net asset value, end of period $6.98 Total Return Total investment return based on net asset value(e) 1.79% Ratios/Supplemental Data Net assets, end of period (000's omitted) $10 Ratio to average net assets of: Expenses(f) 1.17% Expenses, excluding interest expense(f) .95% Net investment income(f) 3.79% Portfolio turnover rate 166% See footnote summary on page 38. 36 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO Selected Data For A Share Of Capital Stock Outstanding Throughout The Period Class I ---------------- March 1, 2005(g) to September 30, 2005 ---------------- Net asset value, beginning of period $7.02 Income From Investment Operations Net investment income(c) .17 Net realized and unrealized loss on investment transactions (.03) Net increase in net asset value from operations .14 Less: Dividends Dividends from net investment income (.18) Net asset value, end of period $6.98 Total Return Total investment return based on net asset value(e) 1.97% Ratios/Supplemental Data Net assets, end of period (000's omitted) $10 Ratio to average net assets of: Expenses(f) .89% Expenses excluding interest expense(f) .68% Net investment income(f) 4.10% Portfolio turnover rate 166% See footnote summary on page 38. ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 37 (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) Net of expenses waived and reimbursed by the Adviser. (e) Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption on the last day of the period. Initial sales 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. (f) Annualized. (g) Commencement of distribution. 38 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 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, 2005, and the related statements of operations and cash flows for the period then ended, the statement of changes in net assets, and the financial highlights for each of the periods indicated therein. 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 the standards of the Public Company Accounting Oversight Board (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. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of September 30, 2005 by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. 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, 2005, the results of its operations and its cash flows for the year then ended, the changes in its net assets, and the financial highlights for each of the indicated periods, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP New York, New York November 16, 2005 ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 39 BOARD OF DIRECTORS William H. Foulk, Jr.(1), Chairman Marc O. Mayer, President Ruth Block(1) David H. Dievler(1) John H. Dobkin(1) Michael J. Downey(1) D. James Guzy Marshall C. Turner, Jr. OFFICERS Philip L. Kirstein, Senior Vice President and Independent Compliance Officer Jeffrey S. Phlegar, Vice President Kewjin Yuoh(2), Vice President Mark D. Gersten, Treasurer & Chief Financial Officer Vincent S. Noto, Controller Emilie D. Wrapp, Secretary 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 Registered Public Accounting Firm 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, Governance and Nominating Committee and Independent Directors Committee. (2) The day-to-day management of and investment decisions for the portfolio are made by the U.S.Investment Grade: Structured Asset Investment Team. Mr. Yuoh is the investment professional with the most significant responsibility for the day-to-day management of the Portfolio. 40 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO 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, ADDRESS, PRINCIPAL COMPLEX DIRECTORSHIPS DATE OF BIRTH OCCUPATION(S) OVERSEEN BY HELD BY (FIRST YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR - ----------------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS William H. Foulk, Jr., #, + Investment Adviser and an 108 None 2 Sound View Drive independent consultant. He was Suite 100 formerly Senior Manager of Barrett Greenwich, CT 06830 Associates, Inc., a registered 9/7/32 investment adviser, with which (1998) he had been associated since prior Chairman of the Board to 2000. 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, #, ** Formerly Executive Vice 106 None 500 SE Mizner Blvd. President and Chief Insurance Boca Raton, FL 33432 Officer of The Equitable Life 11/7/30 Assurance Society of the United (1987) States; Chairman and Chief Executive Officer of Evlico (insurance); Director of Avon, BP (oil and gas), Ecolab Incorporated (specialty chemi- cals), Tandem Financial Group and Donaldson, Lufkin & Jenrette Securities Corporation; Governor at Large, National Association of Securities Dealers, Inc. David H. Dievler, # Independent consultant. Until 107 None P.O. Box 167 December 1994, he was Senior Spring Lake, NJ 07762 Vice President of Alliance Capital 10/23/29 Management Corporation ("ACMC") (1987) 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.
41 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO
PORTFOLIOS IN FUND OTHER NAME, ADDRESS, PRINCIPAL COMPLEX DIRECTORSHIPS DATE OF BIRTH OCCUPATION(S) OVERSEEN BY HELD BY (FIRST YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR - ----------------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS (continued) John H. Dobkin, # Consultant. Formerly President of 106 None P.O. Box 12, Save Venice, Inc. (preservation Annandale, NY 12504 organization) from 2001-2002, 2/19/42 Senior Advisor from June 1999 - (1998) June 2000 and President of Historic Hudson Valley (historic preservation) from December 1989-May 1999. Previously, Director of the National Academy of Design and during 1988- 1992, Director and Chairman of the Audit Committee of ACMC. Michael J. Downey, # Consultant since January 2004. 81 Asia Pacific c/o Alliance Capital Formerly managing partner of Fund, Inc.; Management L.P. Lexington Capital, LLC (investment and The 1345 Avenue of the advisory firm) from December 1997 Merger Fund. Americas until December 2003. Prior thereto, New York, NY 10105 Chairman and CEO of Prudential Attn: Phil Kirstein Mutual Fund Management from 1/26/44 1987 to 1993. (2005) D. James Guzy Chairman of the Board of PLX 58 Intel Corporation, P.O. Box 128 Technology (semi-conductors) Cirrus Logic Glenbrook, NV 89413 and of SRC Computers, Inc., Corporation, 3/7/36 with which he has been associated Novellus (2005) since prior to 2000. He is also Corporation, President of the Arbor Company Micro Component (private family investments). Technology, the Davis Selected Advisers Group of Mutual Funds and LogicVision. Marshall C. Turner, Jr. Principal of Turner Venture 58 Toppan 220 Montgomery Street Associates (venture capital and Photomasks, Inc., Penthouse 10 consulting) since prior to 2000. the George Lucas San Francisco, Chairman and CEO, DuPont Educational CA 94104 Photomasks, Inc., Austin, Texas, Foundation, 10/10/41 2003-2005, and President and Chairman of the (2005) CEO since company acquired, Board of the and name changed to Toppan Smithsonian's Photomasks, Inc. in 2005 National Museum (semiconductor manufacturing of Natural History. services).
ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 42
PORTFOLIOS IN FUND OTHER NAME, ADDRESS, PRINCIPAL COMPLEX DIRECTORSHIPS DATE OF BIRTH OCCUPATION(S) OVERSEEN BY HELD BY (FIRST YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR - ----------------------------------------------------------------------------------------------------------------------- INTERESTED DIRECTOR Marc O. Mayer,++ Executive Vice President of ACMC 81 SCB Partners, 1345 Avenue of the since 2001; prior thereto, Chief Inc.; and SCB Americas Executive Officer of Sanford C. Inc. New York, NY 10105 Bernstein & Co., LLC (institutional 10/2/57 research and brokerage arm of (2003) Bernstein & Co., LLC) ("SCB & Co.") and its predecessor since prior to 2000.
* There is no stated term of office for the Fund's Directors. ** Ms. Block was an "interested person", as defined in the 1940 Act, from July 22, 1992 until October 21, 2004 by reason of her ownership of securities of a control person of the Adviser. Ms. Block received shares of The Equitable Companies Incorporated ("Equitable") as part of the demutualization of The Equitable Life Assurance Society of the United States in 1992. Ms. Block's Equitable shares were subsequently converted through a corporate action into American Depositary Shares of AXA, which were sold for approximately $2,400 on October 21, 2004. Equitable and AXA are control persons of the Adviser. # Member of the Audit Committee, Governance and Nominating Committee and Independent Directors Committee. + Member of the Fair Value Pricing Committee. ++ Mr. Mayer is an "interested director", as defined in the 1940 Act, due to his position as an Executive Vice President of ACMC. ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 43 Officer Information Certain information concerning the Fund's Officers is set forth below.
NAME, ADDRESS* POSITION(S) PRINCIPAL OCCUPATION AND DATE OF BIRTH HELD WITH FUND DURING PAST 5 YEARS - ------------------------------------------------------------------------------------------------------- Marc O. Mayer President and Chief See biography above. 10/2/57 Executive Officer Philip L. Kirstein Senior Vice President Senior Vice President and Independent 5/29/45 and Independent Compliance Officer of the Compliance Officer AllianceBernstein Funds, with which he has been associated since October 2004. Prior thereto, he was Of Counsel to Kirkpatrick & Lockhart, LLP from October 2003 to October 2004, and General Counsel of Merrill Lynch Investment Managers L.P. since prior to 2000 until March 2003. Jeffrey S. Phlegar Vice President Executive Vice President of ACMC**, 6/28/66 with which he has been associated since prior to 2000. Kewjin Yuoh Vice President Vice President of ACMC** since March 3/11/71 2003. Prior thereto, he was a Vice President of Credit Suisse Asset Management from 2000 to 2002 and a Vice President of Brundage, Story & Rose since prior to 2000. Emilie D. Wrapp Secretary Senior Vice President, Assistant General 11/13/55 Counsel and Assistant Secretary of AllianceBernstein Investment Research and Management, Inc. ("ABIRM")**, with which she has been associated since prior to 2000. Mark D. Gersten Treasurer and Chief Senior Vice President of Alliance Global 10/4/50 Financial Officer Investor Services, Inc. ("AGIS")** and Vice President of ABIRM**, with which he has been associated since prior to 2000. Vincent S. Noto Controller Vice President of AGIS**, with which 12/14/64 he has been associated since prior to 2000.
* The address for each of the Fund's Officers is 1345 Avenue of the Americas, New York, NY 10105. ** ACMC, ABIRM, AGIS and SCB & Co. 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 1-800-227-4618 for a free prospectus or SAI. 44 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO Information Regarding the Review and Approval of the Fund's Investment Advisory Contract In this disclosure, the term "Fund" refers to AllianceBernstein Bond Fund, Inc., and the term "Portfolio" refers to U.S. Government Portfolio. The Fund's disinterested directors (the "directors") unanimously approved the continuance of the Investment Advisory Contract (the "Advisory Agreement") between the Fund and the Adviser in respect of the Portfolio at a meeting held on June 15, 2005. In preparation for the meeting, the directors had requested from the Adviser and evaluated extensive materials, including performance and expense information for other investment companies with similar investment objectives derived from data compiled by Lipper Inc. ("Lipper"), which is not affiliated with the Adviser. The directors also reviewed an independent evaluation from the Fund's Senior Officer (who is also the Fund's Independent Compliance Officer) of the reasonableness of the advisory fees in the Advisory Agreement in respect of the Portfolio (as contemplated by the Assurance of Discontinuance between the Adviser and the New York Attorney General) wherein the Senior Officer concluded that such fees were reasonable. In addition, the directors received a presentation from the Adviser and had an opportunity to ask representatives of the Adviser various questions relevant to the proposed approval. The directors noted that the Senior Officer's evaluation considered the following factors: management fees charged to institutional and other clients of the Adviser for like services; management fees charged by other mutual fund companies for like services; cost to the Adviser and its affiliates of supplying services pursuant to the Advisory Agreement, excluding any intra-corporate profit; profit margins of the Adviser and its affiliates from supplying such services; possible economies of scale as the Portfolio grows larger; and nature and quality of the Adviser's services including the performance of the Portfolio. Prior to voting, the directors reviewed the proposed continuance of the Advisory Agreement in respect of the Portfolio with management and with experienced counsel who are independent of the Adviser and received a memorandum from such counsel discussing the legal standards for their consideration of the proposed continuance. The directors also discussed the proposed continuance in three private sessions at which only the directors, their independent counsel and the Fund's Independent Compliance Officer were present. In reaching their determinations relating to continuance of the Advisory Agreement in respect of the Portfolio, the directors considered all factors they believed relevant, including the following: ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 45 1. information comparing the performance of the Portfolio to other investment companies with similar investment objectives and to an index; 2. the nature, extent and quality of investment, compliance, administrative and other services rendered by the Adviser; 3. payments received by the Adviser from all sources in respect of the Portfolio and all investment companies in the AllianceBernstein Funds complex; 4. the costs borne by, and profitability of, the Adviser and its affiliates in providing services to the Portfolio and to all investment companies in the AllianceBernstein Funds complex; 5. comparative fee and expense data for the Portfolio and other investment companies with similar investment objectives; 6. the extent to which economies of scale would be realized to the extent the Portfolio grows and whether fee levels reflect any economies of scale for the benefit of investors; 7. the Adviser's policies and practices regarding allocation of portfolio transactions of the Portfolio; 8. information about "revenue sharing" arrangements that the Adviser has entered into in respect of the Portfolio; 9. portfolio turnover rates for the Portfolio compared to other investment companies with similar investment objectives; 10. fall-out benefits which the Adviser and its affiliates receive from their relationships with the Portfolio; 11. the Adviser's representation that it does not advise other clients with substantially similar investment objectives and strategies as the Portfolio; 12. the Senior Officer's evaluation of the reasonableness of the fee payable to the Adviser in the Advisory Agreement; 13. the professional experience and qualifications of the Portfolio's portfolio management team and other senior personnel of the Adviser; and 14. the terms of the Advisory Agreement. 46 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO The directors also considered their knowledge of the nature and quality of the services provided by the Adviser to the Portfolio gained from their experience as directors or trustees of most of the funds advised by the Adviser, their overall confidence in the Adviser's integrity and competence they have gained from that experience and the Adviser's responsiveness to concerns raised by them in the past, including the Adviser's willingness to consider and implement organizational and operational changes designed to improve investment results and the services provided to the AllianceBernstein Funds. In their deliberations, the directors did not identify any particular information that was all-important or controlling, and each director attributed different weights to the various factors. The directors determined that the overall arrangements between the Portfolio and the Adviser, as provided in the Advisory Agreement, were fair and reasonable in light of the services performed, expenses incurred and such other matters as the directors considered relevant in the exercise of their business judgment. The material factors and conclusions that formed the basis for the directors reaching their determinations to approve the continuance of the Advisory Agreement in respect of the Portfolio (including their determinations that the Adviser should continue to be the investment adviser for the Portfolio, and that the fees payable to the Adviser pursuant to the Advisory Agreement are appropriate) were separately discussed by the directors. NATURE, EXTENT AND QUALITY OF SERVICES PROVIDED BY THE ADVISER The directors noted that, under the Advisory Agreement, the Adviser, subject to the control of the directors, administers the Portfolio's business and other affairs. The Adviser manages the investment of the assets of the Portfolio, including making purchases and sales of portfolio securities consistent with the Portfolio's investment objective and policies. Under the Advisory Agreement, the Adviser also provides the Portfolio with such office space, administrative and other services (exclusive of, and in addition to, any such services provided by any others retained by the Portfolio) and executive and other personnel as are necessary for the Portfolio's operations. The Adviser pays all of the compensation of directors of the Fund who are affiliated persons of the Adviser and of the officers of the Portfolio. The directors also considered that the Advisory Agreement provides that the Portfolio will reimburse the Adviser for the cost of certain clerical, accounting, administrative and other services provided at the Portfolio's request by employees of the Adviser or its affiliates. Requests for these "at no more than cost" reimbursements are approved by the directors on a quarterly basis and (to the extent requested and paid) result in a higher rate of total compensation from the Portfolio to the Adviser than the stated fee rates in the Portfolio's Advisory Agreement. ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 47 The directors considered the scope and quality of services provided by the Adviser under the Advisory Agreement and noted that the scope of services provided by advisers of funds had expanded over time as a result of regulatory and other developments. The directors noted, for example, that the Adviser is responsible for maintaining and monitoring its own and, to varying degrees, the Portfolio's compliance programs, and that these compliance programs have recently been refined and enhanced in light of new regulatory requirements. The directors considered the quality of the in-house investment research capabilities of the Adviser and the other resources it has dedicated to performing services for the Portfolio. The quality of administrative and other services, including the Adviser's role in coordinating the activities of the Portfolio's other service providers, also were considered. The directors also considered the Adviser's response to recent regulatory compliance issues affecting a number of the investment companies in the AllianceBernstein Funds complex. The directors concluded that, overall, they were satisfied with the nature, extent and quality of services provided to the Portfolio under the Advisory Agreement. COSTS OF SERVICES PROVIDED AND PROFITABILITY TO THE ADVISER The directors reviewed a schedule of the revenues, expenses and related notes indicating the profitability of the Portfolio to the Adviser for calendar years 2003 and 2004. The directors reviewed the assumptions and methods of allocation used by the Adviser in preparing fund-specific profitability data, and noted the Adviser's representation to them that it believed that the methods of allocation used in preparing the profitability information were reasonable and appropriate and that the Adviser had previously discussed with the directors that there is no generally accepted allocation methodology for information of this type. The directors also noted that the methodology for preparing fund-by-fund profitability information was being reviewed and that it was expected that an updated methodology would be implemented later in the year, and that it would differ in various respects from the methodology used previously. The directors recognized that it is difficult to make comparisons of profitability from fund advisory contracts because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numerous assumptions regarding allocations and the adviser's capital structure and cost of capital. In considering profitability information, the directors considered the effect of fall-out benefits on the Adviser's expenses, as well as the "revenue sharing" arrangements the Adviser has entered into with certain entities that distribute shares of the Portfolio. The directors focused on the profitability of the Adviser's relationship with the Portfolio before taxes and distribution expenses. The directors recognized that the Adviser should generally be entitled to earn a reasonable level of profits for the services it provides to the Portfolio and, based on their review, concluded that they were satisfied that the Adviser's level of profitability from its relationship with the Portfolio was not excessive. 48 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO FALL-OUT BENEFITS The directors considered that the Adviser benefits from soft dollar arrangements whereby it receives brokerage and research services from many of the brokers and dealers that execute purchases and sales of securities on behalf of its clients on an agency basis. Since the Portfolio does not normally engage in brokerage transactions, the Adviser does not receive soft dollar benefits in respect of portfolio transactions of the Portfolio. The directors also considered that the Distributor, which is a wholly-owned subsidiary of the Adviser: receives 12b-1 fees from the Portfolio in respect of classes of shares of the Portfolio that are subject to the Fund's 12b-1 plan; retains a portion of the 12b-1 fees from the Portfolio; and receives all or a portion of the sales charges on sales or redemptions of certain classes of shares. The directors also noted that certain affiliates of the Adviser distribute shares of the Portfolio and receive compensation in that connection and that a subsidiary of the Adviser provides transfer agency services to the Portfolio and receives compensation from the Portfolio for such services. The directors recognized that the Adviser's profitability would be somewhat lower if the Adviser's affiliates did not receive the benefits described above. The directors also believe that the Adviser derives reputational and other benefits from its association with the Portfolio. INVESTMENT RESULTS In addition to the information reviewed by the directors in connection with the meeting, the directors receive detailed comparative performance information for the Portfolio at each regular Board meeting during the year. At the meeting, the directors reviewed information prepared by the Adviser based on information obtained from Lipper showing performance for Class A shares of the Portfolio as compared to other funds in the Lipper General U.S. Government Funds Average for periods ending March 31, 2005 over the year to date ("YTD"), 1-, 3-, 5- and 10-year and since inception periods (inception December 1985) and for each of the last ten calendar years and compared to the Lehman Brothers Government Index. The directors also reviewed information from a report prepared by Lipper showing performance for Class A shares of the Portfolio as compared to a group of 10 to 9 funds (depending on the year) in its Lipper category selected by Lipper (the "Performance Group") and as compared to a universe of 44 to 32 funds (depending on the year) in its Lipper category selected by Lipper (the "Performance Universe") for periods ended March 31, 2005 over the 1-, 3-, 5- and 10-year periods. The directors noted that the Lipper category data showed the Fund's performance for the periods ending March 31, 2005 was consistently below the Lipper medians for all periods reviewed except the YTD period when performance was somewhat above the Lipper median, and that the Fund's calendar year performance was somewhat above the Lipper median in 2004, significantly above the Lipper medians in 1998 and 2000 and below the Lipper ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 49 medians for all other calendar year periods reviewed. The directors further noted that in the Fund's Performance Group and Performance Universe comparisons, the Fund was in the fourth or fifth quintile for all periods reviewed. Based on their review and their discussion of the reasons for the Portfolio's underperformance with the Adviser, the directors retained confidence in the Adviser's ability to continue to advise the Portfolio and concluded that the Portfolio's performance was understandable. The directors informed the Adviser that they planned to closely monitor the Fund's performance. ADVISORY FEES AND OTHER EXPENSES The directors considered the advisory fee rate paid by the Portfolio to the Adviser and information prepared by Lipper concerning fee rates paid by other funds in the same Lipper category as the Portfolio at a common asset level. The directors recognized that it is difficult to make comparisons of advisory fees because there are variations in the services that are included in the fees paid by other funds. The directors also considered the total expense ratio of the Class A shares of the Portfolio in comparison to the fees and expenses of funds within two comparison groups created by Lipper: an Expense Group and an Expense Universe. Lipper described an Expense Group as a representative sample of comparable funds and an Expense Universe as a broader group, consisting of all funds in the investment classification/objective with a similar load type as the subject Portfolio. The Class A expense ratio of the Portfolio was based on the Portfolio's latest fiscal year expense ratio. The directors recognized that the expense ratio information for the Portfolio potentially reflected on the Adviser's provision of services, as the Adviser is responsible for coordinating services provided to the Portfolio by others. The directors noted that it was likely that the expense ratios of some funds in the Portfolio's Lipper category also were lowered by waivers or reimbursements by those funds' investment advisers, which in some cases were voluntary and perhaps temporary. The directors noted that the Portfolio's at approximate current size contractual effective fee rate of 45 basis points was significantly lower than the median for the Expense Group. The directors noted that the latest fiscal year administrative expense reimbursement by the Fund pursuant to the Advisory Agreement was one basis point. The directors further noted that the Fund's total expense ratio was slightly above the medians for both the Expense Group and the Expense Universe. The directors concluded that the Fund's expense ratio was acceptable. ECONOMIES OF SCALE The directors noted that the advisory fee schedule for the Portfolio contains breakpoints so that, if assets were to increase over the breakpoint levels, the fee rates would be reduced on the incremental assets. The directors also considered a presentation by an independent consultant discussing economies of scale issues 50 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO in the mutual fund industry. The directors believe that economies of scale are realized (if at all) by the Adviser across a variety of products and services, and not only in respect of a single fund. The directors noted that there is no uniform methodology for establishing breakpoints that give effect to fund-specific services provided by the Adviser and to the economies of scale that the Adviser may realize in its overall mutual fund business or those components of it which directly or indirectly affect the Portfolio's operations. The directors observed that in the mutual fund industry as a whole, as well as among funds similar to the Portfolio, there is no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. Depending on the age and size of a particular fund and its adviser's cost structure, different conclusions can be drawn as to whether there are economies of scale to be realized at any particular level of assets, notwithstanding the intuitive conclusion that such economies exist, or will be realized at some level of total assets. Moreover, because different advisers have different cost structures and service models, it is difficult to draw meaningful conclusions from the comparison of a fund's advisory fee breakpoints with those of comparable funds. The directors also noted that the advisory agreements for many funds do not have breakpoints at all. Having taken these factors into account, the directors concluded that the Portfolio's breakpoint arrangements would result in a sharing of economies of scale in the event of a very significant increase in the Portfolio's net assets. ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 51 ALLIANCEBERNSTEIN FAMILY OF FUNDS - -------------------------------------------------- Wealth Strategies Funds - -------------------------------------------------- Balanced Wealth Strategy Wealth Appreciation Strategy Wealth Preservation Strategy Tax-Managed Balanced Wealth Strategy Tax-Managed Wealth Appreciation Strategy Tax-Managed Wealth Preservation Strategy - -------------------------------------------------- Blended Style Funds - -------------------------------------------------- U.S. Large Cap Portfolio International Portfolio Tax-Managed International Portfolio - -------------------------------------------------- Growth Funds - -------------------------------------------------- Domestic Growth Fund Mid-Cap Growth Fund Large Cap Growth Fund* Small Cap Growth Portfolio Global & International Global Health Care Fund* Global Research Growth Fund Global Technology Fund* Greater China '97 Fund International Growth Fund* International Research Growth Fund* - -------------------------------------------------- Value Funds - -------------------------------------------------- Domestic Balanced Shares Focused Growth & Income Fund* Growth & Income Fund Real Estate Investment Fund Small/Mid-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. You should read the prospectus carefully before you invest. * Prior to December 15, 2004, these Funds were named as follows: Global Health Care Fund was Health Care Fund; Large Cap Growth Fund was Premier Growth Fund; Global Technology Fund was Technology Fund; and Focused Growth & Income Fund was Disciplined Value Fund. Prior to February 1, 2005, Small/Mid-Cap Value Fund was named Small Cap Value Fund. Prior to May 16, 2005, International Growth Fund was named Worldwide Privatization Fund and International Research Growth Fund was named International Premier Growth Fund. On June 24, 2005, All-Asia Investment Fund merged into International Research Growth Fund. On July 8, 2005, New Europe Fund merged into International Research Growth Fund. **An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. 52 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS SUMMARY OF SENIOR OFFICER'S EVALUATION OF INVESTMENT ADVISORY AGREEMENT* The following is a summary of the evaluation of the investment advisory agreement between Alliance Capital Management L.P., (the "Adviser") and the AllianceBernstein Corporate Bond Portfolio, the AllianceBernstein Quality Bond Portfolio and the AllianceBernstein U.S. Government Portfolio of AllianceBernstein Bond Fund, Inc. (the "Funds"), prepared by Philip L. Kirstein, the Senior Officer, for the independent directors of the Funds, as required by the Assurance of Discontinuance between the New York State Attorney General and the Adviser. The Senior Officer's evaluation of the investment advisory agreement is not meant to diminish the responsibility or authority of the Boards of Directors to perform their duties pursuant to Section 15 of the Investment Company Act of 1940 (the "40 Act") and applicable state law. The purpose of the summary is to provide shareholders with a synopsis of the independent evaluation of the reasonableness of the advisory fees which was provided to the independent directors in connection with their review of the proposed continuance of the investment advisory agreement. The Senior Officer's evaluation considered the following factors: 1. Management fees charged to institutional and other clients of the Adviser for like services. 2. Management fees charged by other mutual fund companies for like services. 3. Costs to the Adviser and its affiliates of supplying services pursuant to the advisory agreement, excluding any intra-corporate profit. 4. Profit margins of the Adviser and its affiliates from providing such services. 5. Possible economies of scale as the Funds grow larger. 6. Nature and quality of the Adviser's services, including the performance of the Funds. * It should be noted that the information in the fee summary was completed on June 8, 2005 and presented to the Board of Directors and Trustees on June 15, 2005 in accordance with the Assurance of Discontinuance with the New York State Attorney General. It also should be noted that references in the fee summary pertaining to performance and expense ratios refer to Class A shares of the Fund. ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 53 FUND ADVISORY FEES, EXPENSE REIMBURSEMENTS, CAPS & RATIOS The table below describes the Funds' advisory fees pursuant to the Investment Advisory Agreement. This is the fee schedule the Adviser implemented in January 2004 as a result of the settlement with the New York State Attorney General.
Advisory Fee Based on % of Fund Average Daily Net Assets - -------------------------------------------------------------------------------------------- AllianceBernstein Corporate Bond Portfolio Monthly fee of First $2.5 billion 1/12 of .50% Next $2.5 billion 1/12 of .45% Excess of $5 billion 1/12 of .40% AllianceBernstein Quality Bond Portfolio Monthly fee of First $2.5 billion 1/12 of .45% Next $2.5 billion 1/12 of .40% Excess of $5 billion 1/12 of .35% AllianceBernstein U.S. Government Portfolio Quarterly fee of First $2.5 billion .1125% Next $2.5 billion .10% Excess over $5 billion .0875%
The Adviser is reimbursed as specified in the Investment Advisory Agreement for certain clerical, legal, accounting, administrative and other services provided to the Funds as indicated below: Latest Fiscal Year As % of Average Fund Amount Daily Net Assets - ------------------------------------------------------------------------------- AllianceBernstein Corporate Bond Portfolio $98,000.00 .01 AllianceBernstein Quality Bond Portfolio * 0 .0 AllianceBernstein U.S. Government Portfolio $97,728.00 .01 The Adviser has agreed to waive that portion of its management fees and/or reimburse the Quality Bond Portfolio for that portion of its total operating expenses to the degree necessary to limit the Fund's expense ratios to the levels set forth below for that Fund's current fiscal year. That waiver agreement is terminable by the Adviser at the end of the Fund's fiscal year upon at least 60 days written notice. Pro-forma expense ratio information for each Fund is also set forth below. * For the most recently completed fiscal year, with respect to the Quality Bond Portfolio, the Adviser waived $89,000 (or .02% of average daily net assets). 54 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO Expense Cap pursuant to Expense Limitation Pro-Forma Fiscal Fund Undertaking Expense Ratio* Year End - ------------------------------------------------------------------------------- AllianceBernstein Quality Advisor-0.68% .79% October 31, Bond Portfolio Class A-0.98% 1.10% 2004 Class B-1.68% 1.83% Class C-1.68% 1.82% Class R-1.18% 1.30% Pro-Forma Fiscal Fund Expense Ratio* Year End - ------------------------------------------------------------------------------- AllianceBernstein Corporate Bond Portfolio Advisor-0.73% September Class A-1.00% 30, 2004 Class B-1.72% Class C-1.71% Class R-1.21% AllianceBernstein U.S. Government Portfolio Advisor-0.71% September Class A-1.01% 30, 2004 Class B-1.74% Class C-1.73% Class R-1.27% I. MANAGEMENT FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS OF THE ADVISER The management fees charged to investment companies which the Adviser manages and sponsors may be higher than those charged to institutional accounts, including pension plans and sub-advised investment companies. The fee differential reflects, among other things, different services provided to such clients, and different liabilities assumed. Services provided by the Adviser to the Funds that are not provided to non-investment company clients include providing office space and personnel to serve as Fund Officers and coordinating with and monitoring the Funds' third party service providers such as Fund counsel, auditors, custodians, transfer agents and pricing services. The accounting, administrative and legal/compliance requirements for the Funds are more costly than those for institutional assets due to the greater complexities and time required for investment companies. A portion of the expenses related to these services are reimbursed by the Funds to the Adviser. Managing the cash flow of an investment company may be more difficult than for other accounts, particularly if a Fund is in net redemptions, as the Adviser is forced to sell securities to meet redemptions. Notwithstanding the Adviser's view that managing an investment company is not comparable to managing other institutional accounts because the services provided are different, the Senior Officer believes it is worth noting the information * This pro-forma expense ratio information shows what would have been each Fund's expense ratio in the indicated fiscal year had the current fee been in effect throughout the fiscal year. ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 55 from the Adviser's ADV regarding the advisory fees charged to institutional accounts in the same asset class as the Quality Bond Portfolio. The Adviser represented that there is no category set forth in its Form ADV for institutional products which have a substantially similar investment style as the Corporate Bond Portfolio or the U.S. Government Portfolio.
Total Net Assets 03/31/05 Alliance Institutional Fund ($MIL) Fee Schedule - ------------------------------------------------------------------------------------ AllianceBernstein Quality Bond Portfolio 571 U.S. Core High-Grade Fixed Income 40 bp on 1st $20 m 25 bp on next $80 m 20 bp on next $100 m 15 bp on the balance Minimum account size $20 m
The Adviser also manages and sponsors retail fixed income mutual funds which are organized in jurisdictions outside the United States, generally Luxembourg, and sold to non-United States investors. The Adviser charges the following fee for offshore mutual funds with similar investment styles as the Funds: Asset Class Fee - ------------------------------------------------------------------------------- Fixed Income .65% The Adviser represented that it does not sub-advise any registered investment companies with similar investment styles as the Funds. II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES. Lipper, Inc., an analytical service that is not affiliated with the Adviser, compared the fees charged to the Funds with fees charged to other investment companies for similar services by other investment advisers. Lipper's analysis included the Funds' ranking with respect to the proposed advisory fees relative to the Lipper group median at the approximate current asset levels for the Funds.* Lipper Group Fund Fee Median Rank - ------------------------------------------------------------------------------- AllianceBernstein Corporate Bond Portfolio 0.500 0.488 6/9 AllianceBernstein Quality Bond Portfolio 0.450 0.616 1/12 AllianceBernstein U.S. Government Portfolio 0.450 0.544 2/10 * A ranking of "1" means that the AllianceBernstein Fund has the lowest effective fee rate in the Lipper peer group. 56 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO Lipper also analyzed the expense ratios of each Fund in comparison to its Lipper Expense Group* and Lipper Expense Universe**. Lipper describes a Lipper Expense Group as a representative sample of comparable funds and a Lipper Universe as a broader group, consisting of all funds in the investment classification/objective with a similar load type as the subject Fund. The results of that analysis are set forth below:
Lipper Lipper Lipper Expense Universe Universe Lipper Group Fund Ratio Median Rank Group Rank Median - ---------------------------------------------------------------------------------------- AllianceBernstein Corporate Bond Portfolio 1.078 1.026 14/25 6/9 .984 AllianceBernstein Quality Bond Portfolio 0.979 0.955 39/67 2/12 1.066 AllianceBernstein U.S. Government Portfolio 1.046 0.985 24/38 8/10 .996
Based on this analysis, the Funds have a more favorable ranking on an advisory fee basis than they do on a total expense ratio basis. This has resulted in a variety of efforts by the Adviser to lower non-management expenses. III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO THE ADVISORY AGREEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT. The profitability information for the Funds prepared by the Adviser for the Board of the Directors was reviewed by the Senior Officer. An independent consultant is working with the Adviser's personnel on a new system to produce profitability information at the Fund level which will reflect the Adviser's management reporting approach. It is possible that future Fund profitability information may differ from previously reviewed information due to changes in methodologies and allocations. See Section IV for additional discussion. IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH SERVICES. With the exception of the Quality Bond Portfolio, the pre-tax profitability margin of the Adviser decreased during calendar year 2004 relative to 2003 primarily as a result of the reduction in the advisory fee schedule implemented early * Lipper uses the following criteria in screening funds to be included in each Fund's expense group: fund type, investment classification/objective, load type and similar 12b-1/non-12b-1 service fees, asset (size) comparability, and expense components and attributes. An expense group will typically consist of seven to twenty funds. ** Except for asset (size) comparability, Lipper uses the same criteria for selecting an expense group when selecting an expense universe. Unlike an expense group, an expense universe allows for the same advisor to be represented by more than just one fund. ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 57 in 2004. For the Quality Bond Portfolio, it appears that the Adviser's profit margin increased in 2004, as a result of the reduction in fee waivers and expense reimbursements. In addition to the Adviser's direct profits from managing the Funds pursuant to the investment advisory agreement, certain of the Adviser's affiliates have business relationships with the Funds and may earn a profit from providing other services to the Funds. These affiliates provide transfer agency and distribution related services and receive transfer agent fees, Rule 12b-1 payments, front-end sales loads, contingent deferred sales charges ("CDSC") and commissions for providing brokerage services. In addition, the Adviser benefits from soft dollar arrangements which offset expenses the Adviser would otherwise incur. Additional information regarding distribution related fees can be found in the prospectus of the Funds. Different classes of shares are charged different types of distribution fees. The Adviser's affiliate, AllianceBernstein Investment Research and Management Inc. ("ABIRM"), is the Funds' principal underwriter. ABIRM and the Adviser may make payments* from their own resources, in addition to sales loads and Rule 12b-1 fees, to firms that sell shares of the Funds. In 2004, ABIRM paid from its own resources approximately .04% of the average monthly assets of the Funds for distribution services and educational support. For 2005, it is anticipated that ABIRM will pay approximately .04% of average monthly assets of each Fund for such purposes. After payments to third party intermediaries, ABIRM retained the following amounts in Class A front-end load sales charges from sales of each Fund's shares in the Funds' most recent fiscal year: Fund Amount Received - ------------------------------------------------------------------------------- AllianceBernstein Corporate Bond Portfolio $21,917 AllianceBernstein Quality Bond Portfolio $4,297 AllianceBernstein U.S. Government Portfolio $11,758 *The total amount paid to the financial intermediary in connection with the sale of shares will generally not exceed the sum of (a) .25% of the current year's Fund sales by that firm and (b) .10% of the average daily net assets attributable to that firm over the year. 58 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO ABIRM received the amounts set forth below in Rule 12b-1 fees and CDSC for each Fund during the Funds' most recent fiscal year. A significant percentage of such amounts were paid out to third party intermediaries by ABIRM. 12b-1Fee Fund Received* CDSC Received - ------------------------------------------------------------------------------- AllianceBernstein Corporate Bond Portfolio $6,124,397 $54,108 AllianceBernstein Quality Bond Portfolio $1,177,056 $178,196 AllianceBernstein U.S. Government Portfolio $6,317,922 $685,181 Fees and reimbursements for out of pocket expenses charged by Alliance Global Investor Services, Inc. ("AGIS"), the affiliated transfer agent, are based on the level of the network account and the class of share held by the account. AGIS also receives a fee per shareholder sub-account for each account maintained by an intermediary on an omnibus basis. AGIS' after-tax profitability decreased in 2004 in comparison to 2003. AGIS received the following fees from the Funds in the most recent fiscal year: Fund AGIS Fee - ------------------------------------------------------------------------------- AllianceBernstein Corporate Bond Portfolio $1,082,000 AllianceBernstein Quality Bond Portfolio $1,083,000 AllianceBernstein U.S. Government Portfolio $2,010,000 V. POSSIBLE ECONOMIES OF SCALE The Adviser has indicated that the breakpoints in the fee schedules for the Funds reflect a sharing of economies of scale to the extent they exist. Based on some of the professional literature that has considered economies of scale in the mutual fund industry it is thought that to the extent economies of scale exist, they may more often exist across a fund family as opposed to a specific fund. This is because the costs incurred by the Adviser, such as investment research or technology for trading or compliance systems can be spread across a greater asset base as the fund family increases in size. It is also possible that as the level of services required to operate a successful investment company has increased over time, and advisory firms have made such investments in their business to provide improved services, there may be a sharing of economies of scale without a reduction in advisory fees. An independent consultant made a presentation to the Board of Directors and the Senior Officer regarding possible economies of scale or scope in the mutual fund industry. Based on the presentation, it was evident that fund management * 12b-1 amounts are gross amounts paid to ABIRM. ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO o 59 companies benefit from economies of scale. However, due to the lack of cost data which forced the researchers to infer facts about the costs from the behavior of fund expenses, there was a lack of consensus among researchers as to whether economies of scale were being passed on to the shareholders. It is contemplated that additional work will be performed to determine if the benefits of economies of scale or scope are being passed to shareholders by the Adviser. In the meantime, it is clear that to the extent a Fund's assets exceed the initial breakpoint its shareholders benefit from a lower fee rate. VI. NATURE AND QUALITY OF THE ADVISER'S SERVICES INCLUDING PERFORMANCE OF THE FUND. With assets under management of $534.4 billion as of March 31, 2005, the Adviser has the investment experience and resources necessary to effectively manage the Funds and provide non-investment services (described in Section II) to the Funds. The information prepared by Lipper showed the 1, 3, 5 and 10 year performance ranking of the Funds relative to its Lipper universe: Performance Year Rank in Performance Universe for Periods Ended March 31, 2005 - ------------------------------------------------------------------------------- Fund 1 3 5 10 - ------------------------------------------------------------------------------- AllianceBernstein Corporate Bond Portfolio 3/35 6/27 10/21 1/10 AllianceBernstein Quality Bond Portfolio 58/80 48/66 30/47 N/A AllianceBernstein U.S. Government Portfolio 32/44 35/41 32/38 31/32 CONCLUSION: Based on the factors discussed above the Senior Officer's conclusion is that the proposed fee for each of the Funds is reasonable and within the range of what would have been negotiated at arms-length in light of all the surrounding circumstances. This conclusion in respect of each Fund is based on an evaluation of all of these factors and no single factor was dispositive. Dated: July 22, 2005 60 o ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT PORTFOLIO ALLIANCEBERNSTEIN BOND FUND U.S. GOVERNMENT 1345 Avenue of the Americas New York, NY 10105 (800) 221-5672 [LOGO] ALLIANCEBERNSTEIN (R) Investment Research and Management USGAR0905 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 12(a)(1). (b) During the period covered by this report, no material 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. (a) - (c) The following table sets forth the aggregate fees billed by the independent registered public accounting firm Ernst & Young LLP, for the Fund's last two fiscal years for professional services rendered for: (i) the audit of the Fund's annual financial statements included in the Fund's annual report to stockholders; (ii) assurance and related services that are reasonably related to the performance of the audit of the Fund's financial statements and are not reported under (i), which include advice and education related to accounting and auditing issues, quarterly press release review (for those Funds that issue press releases), and preferred stock maintenance testing (for those Funds that issue preferred stock); and (iii) tax compliance, tax advice and tax return preparation. Audit-Related Audit Fees Fees Tax Fees ---------- ------------- -------- AllianceBernstein U.S. Government Portfolio 2004 $50,000 $5,250 $22,871 2005 $52,000 $4,117 $13,031 AllianceBernstein Corporate Bond Portfolio 2004 $47,000 $5,145 $25,064 2005 $49,000 $4,012 $19,247 (d) Not applicable. (e) (1) Beginning with audit and non-audit service contracts entered into on or after May 6, 2003, the Fund's Audit Committee policies and procedures require the pre-approval of all audit and non-audit services provided to the Fund by the Fund's independent auditors. The Fund's Audit Committee policies and procedures also require pre-approval of all audit and non-audit services provided to the Adviser and Service Affiliates to the extent that these services are directly related to the operations or financial reporting of the Fund. (e) (2) All of the amounts for Audit Fees, Audit-Related Fees and Tax Fees in the table under Item 4 (a) - (c) are for services pre-approved by the Fund's Audit Committee. (f) Not applicable. (g) The following table sets forth the aggregate non-audit services provided to the Fund, the Fund's Adviser and entities that control, are controlled by or under common control with the Adviser that provide ongoing services to the Fund, which include conducting an annual internal control report pursuant to Statement on Auditing Standards No. 70 ("Service Affiliates"):
Total Amount of Foregoing Column Pre-approved by the All Fees for Audit Committee Non-Audit Services (Portion Comprised of Provided to the Audit Related Fees) Portfolio, the Adviser (Portion Comprised of and Service Affiliates Tax Fees) ---------------------- --------------------- AllianceBernstein U.S. Government Portfolio 2004 $1,229,853 [ $278,121 ] ( $255,250 ) ( $ 22,871 ) 2005 $892,044 [ $184,851 ] ( $171,820 ) ( $ 13,031 ) AllianceBernstein Corporate Bond Portfolio 2004 $1,231,941 [ $280,209 ] ( $255,145 ) ( $ 25,064 ) 2005 $ 898,155 [ $190,962 ] ( $171,715 ) ( $ 19,247 )
(h) The Audit Committee of the Fund has considered whether the provision of any non-audit services not pre-approved by the Audit Committee provided by the Fund's independent auditor to the Adviser and Service Affiliates is compatible with maintaining the auditor's independence. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable to the registrant. ITEM 6. SCHEDULE OF INVESTMENTS. Please see Schedule of Investments contained in the Report to Shareholders included under Item 1 of this Form N-CSR. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable to the registrant. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable to the registrant. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable to the registrant. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have been no material changes to the procedures by which shareholders may recommend nominees to the Fund's Board of Directors since the Fund last provided disclosure in response to this item. ITEM 11. CONTROLS AND PROCEDURES. (a) The registrant's principal executive officer and principal financial officer have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940, as amended) are effective at the reasonable assurance level based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this document. (b) There were no changes in the registrant's internal controls over financial reporting that occurred during the second fiscal quarter of the period that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 12. EXHIBITS. The following exhibits are attached to this Form N-CSR: EXHIBIT NO. DESCRIPTION OF EXHIBIT ----------- ---------------------- 12 (a) (1) Code of Ethics that is subject to the disclosure of Item 2 hereof 12 (b) (1) Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 12 (b) (2) Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 12 (c) Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant): AllianceBernstein Bond Fund, Inc. By: /s/ Marc O. Mayer ------------------- Marc O. Mayer President Date: November 29, 2005 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 29, 2005 By: /s/ Mark D. Gersten ------------------- Mark D. Gersten Treasurer and Chief Financial Officer Date: November 29, 2005 EX-99.CODE ETH 2 edg11455-ethics.txt Exhibit 12(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: * honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; * 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; * compliance with applicable laws and governmental rules and regulations; * the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and * 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: * 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; * 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; * 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 Alliance Capital Management L.P.(the "General Counsel"), if material. Examples of these include: * service as a director on the board of directors or trustees of any public or private company (other than a not-for-profit organization); * the receipt of any non-nominal gifts; * 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; * 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; * 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 * Each Covered Officer should familiarize himself with the disclosure requirements and disclosure controls and procedures generally applicable to the Company; * 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; * 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 * 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: * 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; * annually thereafter affirm to the General Counsel that he has complied with the requirements of the Code; * complete at least annually a questionnaire relating to affiliations or other relationships that may give rise to conflicts of interest; * 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 * 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: * the General Counsel will take all appropriate action to investigate any potential violations reported to him; * 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; * any matter that the General Counsel believes is a material violation will be reported to the Committee; * 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; * the Committee will be responsible for granting waivers, as appropriate; and * 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, as amended March 17, 2004 ---------------------------------------- Exhibit A Persons Covered by this Code of Ethics Marc O. Mayer, Principal Executive Officer Mark Gersten, Principal Financial and Accounting Officer Vince Noto, Controller EX-99.CERT 3 edg11455-ex302b.txt Exhibit 12(b)(1) CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER I, Marc O. Mayer, President of AllianceBernstein Bond Fund, Inc., certify that: 1. I have reviewed this report on Form N-CSR of AllianceBernstein Bond Fund, Inc.; 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 registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, 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) designed such internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrant'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 d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant'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 registrant's internal control over financial reporting. Date: November 29, 2005 /s/ Marc O. Mayer ------------------- Marc O. Mayer President Exhibit 12(b)(2) CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER I, Mark D. Gersten, Treasurer and Chief Financial Officer of AllianceBernstein Bond Fund, Inc., certify that: 1. I have reviewed this report on Form N-CSR of AllianceBernstein Bond Fund, Inc.; 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 registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, 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) designed such internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrant's disclosure controls and procedures 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 d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant'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 registrant's internal control over financial reporting. Date: November 29, 2005 /s/ Mark D. Gersten ------------------- Mark D. Gersten Treasurer and Chief Financial Officer EX-99.906 CERT 4 edg11455-ex906c.txt EXHIBIT 12(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, 2005 (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 29, 2005 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. -----END PRIVACY-ENHANCED MESSAGE-----