-----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, Rlbj41leDt98kD0vpFUqVTf/MMa1AcDO9FJft59TT82jnNOp3rtcTtvgJUF43L3Q p168LopoKUMfJYyEoPsHuQ== 0000919574-09-001236.txt : 20090128 0000919574-09-001236.hdr.sgml : 20090128 20090128170757 ACCESSION NUMBER: 0000919574-09-001236 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20090128 DATE AS OF CHANGE: 20090128 EFFECTIVENESS DATE: 20090130 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLIANCEBERNSTEIN DIVERSIFIED YIELD FUND INC CENTRAL INDEX KEY: 0001002718 IRS NUMBER: 000000000 FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 033-63797 FILM NUMBER: 09552071 BUSINESS ADDRESS: STREET 1: ALLIANCEBERNSTEIN LP STREET 2: 1345 AVENUE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10105 BUSINESS PHONE: 2129692124 MAIL ADDRESS: STREET 1: ALLIANCEBERNSTEIN LP STREET 2: 1345 AVENUE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10105 FORMER COMPANY: FORMER CONFORMED NAME: ALLIANCEBERNSTEIN GLOBAL STRATEGIC INCOME TRUST INC DATE OF NAME CHANGE: 20030319 FORMER COMPANY: FORMER CONFORMED NAME: ALLIANCE GLOBAL STRATEGIC INCOME TRUST INC DATE OF NAME CHANGE: 19951025 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLIANCEBERNSTEIN DIVERSIFIED YIELD FUND INC CENTRAL INDEX KEY: 0001002718 IRS NUMBER: 000000000 FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-07391 FILM NUMBER: 09552072 BUSINESS ADDRESS: STREET 1: ALLIANCEBERNSTEIN LP STREET 2: 1345 AVENUE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10105 BUSINESS PHONE: 2129692124 MAIL ADDRESS: STREET 1: ALLIANCEBERNSTEIN LP STREET 2: 1345 AVENUE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10105 FORMER COMPANY: FORMER CONFORMED NAME: ALLIANCEBERNSTEIN GLOBAL STRATEGIC INCOME TRUST INC DATE OF NAME CHANGE: 20030319 FORMER COMPANY: FORMER CONFORMED NAME: ALLIANCE GLOBAL STRATEGIC INCOME TRUST INC DATE OF NAME CHANGE: 19951025 0001002718 S000010071 ALLIANCEBERNSTEIN DIVERSIFIED YIELD FUND, INC C000027870 Class A AGSAX C000027871 Class B AGSBX C000027872 Class C AGCCX C000027873 Advisor Class AGSIX C000027874 Class R AGSRX C000027875 Class K AGSKX C000027876 Class I AGLIX 485BPOS 1 d953765_485-b.txt As filed with the Securities and Exchange Commission on January 28, 2009 File Nos. 33-63797 811-7391 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------------------- FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Pre-Effective Amendment No. Post-Effective Amendment No. 25 X and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Amendment No. 26 X ------------------------------- ALLIANCEBERNSTEIN DIVERSIFIED YIELD FUND, INC. (Exact Name of Registrant as Specified in Charter) 1345 Avenue of the Americas, New York, New York 10105 (Address of Principal Executive Office) (Zip Code) Registrant's Telephone Number, including Area Code: (800) 221-5672 EMILIE D. WRAPP AllianceBernstein L.P. 1345 Avenue of the Americas New York, New York 10105 (Name and address of agent for service) Copies of communications to: KATHLEEN K. CLARKE Seward & Kissel LLP 1200 G Street, NW, Suite 350 Washington, DC 20005 It is proposed that this filing will become effective (check appropriate box) [_] immediately upon filing pursuant to paragraph (b) [X] on January 30, 2009 pursuant to paragraph (b) [_] 60 days after filing pursuant to paragraph (a)(1) [_] on (date) pursuant to paragraph (a)(1) [_] 75 days after filing pursuant to paragraph (a)(2) [_] on (date) pursuant to paragraph (a)(2) of Rule 485. If appropriate, check the following box: [_]This post-effective amendment designates a new effective date for a previously filed post-effective amendment. BOND FUNDS -- (A, B, C AND ADVISOR CLASS SHARES) PROSPECTUS | JANUARY 30, 2009 The AllianceBernstein Bond Funds Stability Absolute Return [GRAPHIC] AllianceBernstein Short [GRAPHIC] AllianceBernstein Duration Portfolio Diversified Yield Fund Core High Income [GRAPHIC] AllianceBernstein [GRAPHIC] AllianceBernstein High Intermediate Bond Portfolio Income Fund [GRAPHIC] AllianceBernstein Global Bond Fund
The AllianceBernstein Bond Funds provide a broad selection of investment alternatives to investors. The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this Prospectus. Any representation to the contrary is a criminal offense. [LOGO] AB ALLIANCEBERNSTEIN Investments Investment Products Offered .. Are Not FDIC Insured .. May Lose Value .. Are Not Bank Guaranteed TABLE OF CONTENTS - --------------------------------------------------------------------------------
Page SUMMARY INFORMATION..................................................... 4 STABILITY............................................................... 8 AllianceBernstein Short Duration Portfolio............................ 8 CORE.................................................................... 12 AllianceBernstein Intermediate Bond Portfolio......................... 12 AllianceBernstein Global Bond Fund.................................... 14 ABSOLUTE RETURN......................................................... 16 AllianceBernstein Diversified Yield Fund.............................. 16 HIGH INCOME............................................................. 18 AllianceBernstein High Income Fund.................................... 18 RISKS SUMMARY........................................................... 21 FEES AND EXPENSES OF THE FUNDS.......................................... 24 INVESTING IN THE FUNDS.................................................. 28 How to Buy Shares..................................................... 28 The Different Share Class Expenses.................................... 30 Sales Charge Reduction Programs....................................... 32 CDSC Waivers and Other Programs....................................... 34 The "Pros" and "Cons" of Different Share Classes...................... 35 Payments to Financial Advisors and Their Firms........................ 36 How to Exchange Shares................................................ 38 How to Sell or Redeem Shares.......................................... 39 Frequent Purchases and Redemptions of Fund Shares..................... 40 How the Funds Value Their Shares...................................... 42 MORE INFORMATION ABOUT THE FUNDS AND THEIR INVESTMENTS.................. 44 MANAGEMENT OF THE FUNDS................................................. 58 DIVIDENDS, DISTRIBUTIONS AND TAXES...................................... 65 GENERAL INFORMATION..................................................... 67 GLOSSARY OF INVESTMENT TERMS............................................ 68 FINANCIAL HIGHLIGHTS.................................................... 69 APPENDIX A--BOND RATINGS................................................ A-1 APPENDIX B--HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION............. B-1
SUMMARY INFORMATION - -------------------------------------------------------------------------------- This Prospectus begins with a summary of key information about each of the AllianceBernstein(R) Bond Funds offered in this Prospectus. The Summary describes a Fund's objectives, investment strategies, principal risks, and fees. You will find additional information about the Funds and their investments beginning on page 44. PERFORMANCE INFORMATION This Summary includes a table for each Fund showing its average annual returns before and after taxes and a bar chart showing its annual returns. The table and the bar chart provide an indication of the historical risk of an investment in each Fund by showing: .. how the Fund's average annual returns for one, five, and ten years (or over the life of the Fund) compare to those of a broad-based securities market index; and .. how the Fund's performance changed from year to year over ten years (or over the life of the Fund). PLEASE NOTE A Fund's past performance before and after taxes, of course, does not necessarily indicate how it will perform in the future. As with all investments you may lose money by investing in the Funds. RISK WHY IS RISK IMPORTANT? You should consider risk carefully when investing in a Fund. You could put your money in investments that have very little risk (for example, certificates of deposit issued by a bank), but these investments may typically have a lower return than a riskier investment. In other words, you may get a higher return if your investments have more risk. For your information, bond funds generally, but not always, are less risky than stock funds. The bar chart for each Fund also gives an indication of a Fund's overall risk. A fund with a higher variability of returns is a riskier investment. This Summary lists the principal risks for each Fund followed by an explanation of these risks. Generally, each Fund has broad risks that apply to all funds, such as market risk, interest rate risk, and credit risk, as well as specific risks of investing in a particular type of fixed-income securities, such as emerging market debt risk, high yield securities risk, foreign (non-U.S.) risk or currency risk. The risks of a Fund may be increased by the use of borrowing techniques or derivatives, such as futures, forwards, options and swaps. WHAT IS MARKET RISK? Market risk is the risk that factors affecting the securities markets generally will cause a possibly adverse change in the value of the fixed-income securities owned by a Fund. The value of these securities may decline simply because of economic changes or other events that impact large portions of the market. The factors include real or perceived unfavorable market conditions, increases in the rate of inflation, and changes in the general outlook for consumer spending, home sales and mortgage rates, or corporate earnings. Each of the Funds is subject to this risk. 4 WHAT IS INTEREST RATE RISK? Changes in interest rates affect the value of fixed-income securities. If interest rates rise, the prices of these securities fall because to earn the higher rate the fixed principal amount has to be lower. In other words, fixed-income securities' prices and interest rates move in opposite directions. Increases in interest rates will cause a Fund's net asset value to decline and, at least in the near term, this decrease in value will not be offset by higher interest income from new investments. This risk is higher for fixed-income securities with longer maturities. Shorter and intermediate-term securities are less sensitive to interest rate changes. The opposite side of the effect of changes in interest rates is that if interest rates fall, the prices of fixed-income securities will increase. You, as an investor, would benefit from decreases in interest rates because your Fund's net asset value would increase. WHAT IS CREDIT RISK? The issuers of fixed-income securities may default by failing to make interest payments or to repay principal in a timely manner. This is referred to as credit risk. To illustrate, credit risk is virtually non-existent for securities issued by the U.S. Government as well as other major non-U.S. countries. Credit risk is higher for fixed-income securities issued by corporations. The degree of credit risk is reflected in credit ratings described below. Securities with higher credit risks (and lower ratings), often referred to as high yield securities, generally pay a higher interest rate to compensate investors for the additional risk. WHAT IS THE DIFFERENCE BETWEEN MATURITY AND DURATION? The maturity of a fixed-income security is the date at which the principal amount of the security is payable. Fixed-income securities with longer maturities tend to be more volatile because they are more sensitive to interest rates. To compensate for the increase in risk, however, these securities generally have a higher yield. Duration measures a bond or portfolio's sensitivity to interest rate changes. It is expressed as a number of years. The higher the number, the greater the risk. Under normal circumstances, for example, if a portfolio has a duration of four years, its value will change by approximately 4% if rates change by 1%; a duration of two years will result in an approximate 2% change in value, and so on. Thus, shorter duration bonds result in lower expected volatility. CREDIT RATINGS Credit ratings of fixed-income securities measure an issuer's expected ability to pay principal and interest over time. Credit ratings are determined by ratings organizations, such as S&P, Moody's or Fitch. A lower rating means there is a greater chance that an issuer will fail to meet its payment obligation or default. The following terms are generally used to describe the credit quality of debt securities depending on the security's credit rating or, if unrated, credit quality as determined by the Funds' Adviser: .. investment grade or .. below investment grade ("high yield securities" or "junk bonds"). For a further description of credit ratings, see "Appendix A--Bond Ratings." As noted in Appendix A, the credit rating organizations may modify their ratings of securities to show relative standing within a rating category, with the addition of numerical modifiers (1, 2 or 3) in the case of Moody's, with the addition of a plus (+) or minus (-) sign in the case of S&P and Fitch, and with the addition of "high" or "low" in the case of Dominion. A 5 Fund may purchase a security, regardless of any rating modification, provided the security is rated at or above the Fund's minimum rating category. For example, a Fund may purchase a security rated B1 by Moody's, or B- by S&P, provided the Fund may purchase securities rated B. Any reference to ratings by S&P or Moody's includes equivalent ratings by other rating agencies. OTHER INFORMATION .. The Funds' investment adviser is AllianceBernstein L.P., or the Adviser, a global investment manager providing diversified services to institutions and individuals through a broad line of investments, including approximately 105 mutual funds. .. References to "net assets" mean the assets of a Fund after liabilities, plus any borrowings used for investment purposes. In other words, net assets reflect the value of a Fund's investments. .. Funds that have a policy to invest at least 80% of their net assets in securities indicated by their name, such as Intermediate Bond, will not change these policies without 60 days' prior written notice to shareholders. 6 (This page intentionally left blank.) 7 STABILITY - -------------------------------------------------------------------------------- Designed to seek a high level of safety of principal and a moderate level of income/total return consistent with that level of principal stability. AllianceBernstein Short Duration Portfolio - -------------------------------------------------------------------------------- OBJECTIVE AND PRINCIPAL STRATEGIES: The Fund seeks to provide safety of principal and a moderate rate of return that is subject to taxes. The Fund invests at least 80% of its total assets in securities rated A or better by national ratings agencies (or, if unrated, determined by the Adviser to be of comparable quality) and comparably rated commercial paper and notes. The Fund may purchase many types of fixed-income securities, including corporate bonds, notes, U.S. Government and agency securities, asset-backed securities, mortgage-related securities, inflation-protected securities, loan participations and preferred stock, as well as others. The Fund also may invest up to 20% of its total assets in foreign fixed-income securities in developed or emerging market countries. The Fund also may invest up to 20% of its total assets in fixed-income securities rated BB or B by national rating agencies, which are not investment grade. The Fund seeks to maintain an effective duration of one to three years under normal market conditions. The Fund may use interest rate forecasting to determine the best level of interest rate risk at a given time. The Fund may moderately shorten its average duration when the Adviser expects interest rates to rise and modestly lengthen its average duration when the Adviser anticipates that rates will fall. To solve the complex problems of bond valuation, the Adviser devotes considerable resources to research. The Adviser's business is investment research and management, and it has developed proprietary and innovative means of improving investment decision-making. To minimize the emotional aspects of decision-making under uncertainty, the Adviser strives to apply its valuation tools in a consistent and disciplined fashion. Investment decision-making is disciplined, centralized and highly systematic. To identify attractive bonds for the Fund, the Adviser evaluates securities and sectors to identify the most attractive securities in the market at a given time--those offering the highest expected return in relation to their risks. In addition, the Adviser may analyze the yield curve to determine the optimum combination of duration for given degrees of interest rate risk. Finally, the Adviser may use interest rate forecasting to determine the best level of interest rate risk at a given time, within specified limits for the Fund. The Fund may invest, without limit, in derivatives, such as options, futures, forwards and swaps. The Fund also may invest up to 20% of its assets in structured instruments, which have characteristics of futures, options, currencies, and securities. The Fund also may: .. purchase or sell securities on a forward commitment basis; .. invest in variable, floating and inverse floating rate investments; .. invest in zero coupon and interest-only or principal-only securities; and .. invest in obligations of supranational entities. 8 PRINCIPAL RISKS: ..Market Risk .Currency Risk ..Interest Rate Risk .Prepayment Risk ..Credit Risk .Derivatives Risk ..Inflation Risk .Leverage Risk ..Foreign (non-U.S.) Risk .Liquidity Risk
Please see "Risks Summary" for a description of these and other risks of investing in the Fund. The table and bar chart below provide an indication of the historical risk of an investment in the Fund. PERFORMANCE TABLE Average Annual Total Returns* (For the periods ended December 31, 2008)
Since 1 Years 5 Years Inception** - ---------------------------------------------------------------------------------------- Class A*** Return Before Taxes -8.25% 0.08% 0.21% ------------------------------------------------ ------- ------- ----------- Return After Taxes on Distributions -9.36% -1.12% -0.94% ------------------------------------------------ ------- ------- ----------- Return After Taxes on Distributions and Sale of Fund Shares -5.35% -0.61% -0.47% - ---------------------------------------------------------------------------------------- Class B Return Before Taxes -7.55% 0.26% 0.30% - ---------------------------------------------------------------------------------------- Class C Return Before Taxes -5.78% 0.24% 0.28% - ---------------------------------------------------------------------------------------- Merrill Lynch 1-3 Year Treasury Index+ 6.61% 4.06% 3.75% - ----------------------------------------------------------------------------------------
* Average annual total returns reflect imposition of the maximum front-end or contingent deferred sales charges as well as conversion of Class B shares to Class A shares after the applicable period. ** Inception date for Class A, Class B and Class C shares: 5/21/03. ***After-tax returns: -Are shown for Class A shares only and will vary for Class B and Class C shares because these Classes have different expense ratios; -Are an estimate, which is based on the highest historical individual federal marginal income tax rates and do not reflect the impact of state and local taxes; actual after-tax returns depend on an individual investor's tax situation and are likely to differ from those shown; and -Are not relevant to investors who hold Portfolio shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts. + Reflects no deduction for fees, expenses, or taxes. 9 BAR CHART The annual returns in the bar chart are for the Fund's Class A shares and do not reflect sales loads. If sales loads were reflected, returns would be less than those shown. Calendar Year End (%) [CHART] 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 - ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- na na na na na 0.92% 1.02% 3.75% 3.50% -4.18% You should consider an investment in the Fund as a long-term investment. The Fund's returns will fluctuate over long and short periods. For example, during the period shown in the bar chart, the Fund's: Best Quarter was up 1.85% in the 3rd quarter, 2006; and Worst Quarter was down - -1.79% in the 1st quarter, 2008. 10 (This page intentionally left blank.) 11 CORE - -------------------------------------------------------------------------------- Designed to seek a "balance" between safety of principal and income generation/total return. AllianceBernstein Intermediate Bond Portfolio - -------------------------------------------------------------------------------- OBJECTIVE AND PRINCIPAL STRATEGIES: The Fund's investment objective is to generate income and price appreciation without assuming what the Adviser considers undue risk. The Fund invests, under normal circumstances, at least 80% of its net assets in fixed-income securities. The Fund expects to invest in readily marketable fixed-income securities with a range of maturities from short- to long-term and relatively attractive yields that do not involve undue risk of loss of capital. The Fund expects to invest in fixed-income securities with a dollar-weighted average maturity of generally between three to ten years and an average duration of three to six years. The Fund may invest up to 25% of its net assets in below investment grade bonds. The Fund may use leverage for investment purposes. The Fund may invest without limit in U.S. Dollar-denominated foreign fixed-income securities and may invest up to 25% of its assets in non-U.S. Dollar-denominated foreign fixed-income securities. These investments may include, in each case, developed and emerging market debt securities. The Fund may invest in mortgage-related and other asset-backed securities, loan participations, inflation-protected securities, structured securities, variable, floating, and inverse floating rate instruments and preferred stock, and may use other investment techniques. The Fund intends, among other things, to enter into transactions such as reverse repurchase agreements and dollar rolls. The Fund may invest, without limit, in derivatives, such as options, futures, forwards, or swap agreements. The Fund expects to engage in active and frequent trading of portfolio securities to achieve its principal investment strategies. A higher rate of portfolio turnover increases transaction expenses, which may negatively affect the Fund's performance. High portfolio turnover also may result in the realization of substantial net short-term capital gains, which, when distributed, are taxable to shareholders. PRINCIPAL RISKS: ..Market Risk .Emerging Market Risk ..Interest Rate Risk .Currency Risk ..Credit Risk .Prepayment Risk ..Inflation Risk .Derivatives Risk ..Foreign (non-U.S.) Risk .Leverage Risk
Please see "Risks Summary" for a description of these and other risks of investing in the Fund. 12 The table and bar chart below provide an indication of the historical risk of an investment in the Fund. PERFORMANCE TABLE Average Annual Total Returns* (For the periods ended December 31, 2008)
Since 1 Year 5 Years Inception** - --------------------------------------------------------------------------------------------- Class A*** Return Before Taxes -12.17% 0.36% 3.35% ----------------------------------------------------- ------- ------- ----------- Return After Taxes on Distributions -13.68% -1.07% 1.54% ----------------------------------------------------- ------- ------- ----------- Return After Taxes on Distributions and Sale of Fund Shares -7.86% -0.49% 1.78% - --------------------------------------------------------------------------------------------- Class B Return Before Taxes -11.52% 0.63% 3.36% - --------------------------------------------------------------------------------------------- Class C Return Before Taxes -9.79% 0.55% 3.08% - --------------------------------------------------------------------------------------------- Advisor Class Return Before Taxes -7.98% 1.56% 3.83% - --------------------------------------------------------------------------------------------- Barclays Capital U.S. Aggregate Index+ 5.24% 4.65% 6.09% - ---------------------------------------------------------------------------------------------
* Average annual total returns reflect imposition of the maximum front-end or contingent deferred sales charges as well as conversion of Class B shares to Class A shares after the applicable period. ** Inception dates for Class A, Class B and Class C shares: 7/1/99, and Advisor Class shares: 10/9/00. Performance information for periods prior to the inception of Advisor Class shares is the performance of the Fund's Class A shares adjusted to reflect the lower expense ratio of Advisor Class shares. ***After-tax Returns: -Are shown for Class A shares only and will vary for Class B, Class C and Advisor Class shares because these Classes have different expense ratios. -Are an estimate, which is based on the highest historical individual federal marginal income tax rates and do not reflect the impact of state and local taxes; actual after-tax returns depend on an individual investor's tax situation and are likely to differ from those shown; and -Are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts. + Reflects no deduction for fees, expenses, or taxes. BAR CHART The annual returns in the bar chart are for the Fund's Class A shares and do not reflect sales loads. If sales loads were reflected, returns would be less than those shown. Calendar Year End (%) [CHART] 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 - ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- na 11.25% 7.36% 7.67% 3.69% 3.48% 1.94% 3.97% 5.68% -8.26% You should consider an investment in the Fund as a long-term investment. The Fund's returns will fluctuate over long and short periods. For example, during the period shown in the bar chart, the Fund's: Best Quarter was up 4.56% in the 3rd quarter, 2001; and Worst Quarter was down - -4.57% in the 3rd quarter, 2008. 13 AllianceBernstein Global Bond Fund - -------------------------------------------------------------------------------- OBJECTIVE AND PRINCIPAL STRATEGIES: The Fund's investment objective is to generate current income consistent with preservation of capital. The Fund invests, under normal circumstances, at least 80% of its net assets in fixed-income securities. The Fund may invest in a broad range of fixed-income securities in both developed and emerging markets. The Fund may invest across all fixed-income sectors, including U.S. and non-U.S. government and corporate debt securities. The Fund's investments may be denominated in local currency or U.S. Dollar-denominated. The Fund may invest in debt securities with a range of maturities from short- to long-term. The Fund may use borrowings or other leverage for investment purposes. The Adviser will actively manage the Fund's assets in relation to market conditions and general economic conditions and adjust the Fund's investments in an effort to best enable the Fund to achieve its investment objective. Thus, the percentage of the Fund's assets invested in a particular country or denominated in a particular currency will vary in accordance with the Adviser's assessment of the relative yield and appreciation potential of such securities and the relationship of the country's currency to the U.S. Dollar. Under normal circumstances, the Fund invests at least 75% of its net assets in fixed-income securities rated investment grade at the time of investment and may invest up to 25% of its net assets in below investment grade fixed-income securities. The Fund may invest in mortgage-related and other asset-backed securities, loan participations, inflation-protected securities, structured securities, variable, floating, and inverse floating rate instruments and preferred stock, and may use other investment techniques. The Fund intends, among other things, to enter into transactions such as reverse repurchase agreements and dollar rolls. The Fund may invest, without limit, in derivatives, such as options, futures, forwards, or swap agreements. PRINCIPAL RISKS: ..Market Risk .Emerging Market Risk ..Interest Rate Risk .Currency Risk ..Credit Risk .Diversification Risk ..Inflation Risk .Derivatives Risk ..Foreign (non-U.S.) Risk .Leverage Risk
Please see "Risks Summary" for a description of these and other risks of investing in the Fund. 14 The table and bar chart below provide an indication of the historical risk of an investment in the Fund. PERFORMANCE TABLE Average Annual Total Returns* (For the periods ended December 31, 2008)
1 Year 5 Years 10 Years - ----------------------------------------------------------------------------------------- Class A** Return Before Taxes -14.50% 3.27% 6.72% ----------------------------------------------------- ------- ------- -------- Return After Taxes on Distributions -16.56% 1.06% 3.83% ----------------------------------------------------- ------- ------- -------- Return After Taxes on Distributions and Sale of Fund Shares -9.35% 1.53% 3.98% - ----------------------------------------------------------------------------------------- Class B Return Before Taxes -13.84% 3.42% 6.70% - ----------------------------------------------------------------------------------------- Class C Return Before Taxes -12.25% 3.42% 6.42% - ----------------------------------------------------------------------------------------- Advisor Class*** Return Before Taxes -10.55% 4.45% 8.07% - ----------------------------------------------------------------------------------------- Barclays Capital Global Aggregate Index (U.S. hedged)+ 5.58% 4.74% 5.33% - -----------------------------------------------------------------------------------------
* Average annual total returns reflect imposition of the maximum front-end or contingent deferred sales charges as well as conversion of Class B shares to Class A shares after the applicable period. ** After-tax Returns: -Are shown for Class A shares only and will vary for Class B and Class C shares because these Classes have higher expense ratios; -Are an estimate, which is based on the highest historical individual federal marginal income tax rates and do not reflect the impact of state and local taxes; actual after-tax returns depend on an individual investor's tax situation and are likely to differ from those shown; and -Are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts. ***Inception date of Advisor Class shares: 11/05/07. Performance information for periods prior to the inception of Advisor Class shares is the performance of the Fund's Class A shares adjusted to reflect the lower expense ratio of Advisor Class shares. + Reflects no deduction for fees, expenses, or taxes. BAR CHART The annual returns in the bar chart are for the Fund's Class A shares and do not reflect sales loads. If sales loads were reflected, returns would be less than those shown. Calendar Year End (%) [CHART] 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 - ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- 7.86% 18.47% 0.31% 10.69% 15.13% 6.87% 9.72% 6.57% 9.90% -10.71% You should consider an investment in the Fund as a long-term investment. The Fund's returns will fluctuate over long and short periods. For example, during the period shown in the bar chart, the Fund's: Best Quarter was up 9.59% in the 2nd quarter, 2003; and Worst Quarter was down - -5.57% in the 4th quarter, 2008. 15 ABSOLUTE RETURN - -------------------------------------------------------------------------------- Designed to seek a return premium over cash across market cycles, with moderate average volatility or risk, by employing a dynamic risk allocation. AllianceBernstein Diversified Yield Fund - -------------------------------------------------------------------------------- OBJECTIVE AND PRINCIPAL STRATEGIES: The Fund's investment objective is to generate current income consistent with preservation of capital. The Fund employs a dynamic risk allocation, meaning that the Fund's risk profile may vary significantly over time based upon market conditions. The Fund invests in a portfolio of fixed-income securities of U.S. and non-U.S. companies and U.S. and non-U.S. government securities and supranational entities, including lower-rated securities. The Fund limits its investments in the securities of any one foreign government to 25% of its total assets. The Fund may invest in debt securities with a range of maturities from short- to long-term. The Fund typically maintains at least 50% of its net assets in investment grade securities. The Fund may invest up to 50% of its net assets in below investment grade securities, such as corporate high yield fixed-income securities, sovereign debt obligations and fixed-income securities of issuers located in emerging markets. The Fund may also invest in mortgage-related and other asset-backed securities, loan participations, inflation-protected securities, structured securities, variable, floating, and inverse floating rate instruments and preferred stock, and may use other investment techniques. The Fund may make short sales of securities or currencies or maintain a short position. The Fund may use borrowings or other leverage for investment purposes. The Fund intends, among other things, to enter into transactions such as reverse repurchase agreements and dollar rolls. The Fund may invest, without limit, in derivatives, such as options, futures, forwards, or swap agreements. PRINCIPAL RISKS: ..Market Risk .Emerging Market Risk ..Interest Rate Risk .Currency Risk ..Credit Risk .Prepayment Risk ..Inflation Risk .Derivatives Risk ..Foreign (non-U.S.) Risk .Leverage Risk
Please see "Risks Summary" for a description of these and other risks of investing in the Fund. 16 The table and bar chart below provide an indication of the historical risk of an investment in the Fund. PERFORMANCE TABLE Average Annual Total Returns* (For the periods ended December 31, 2008)
1 Year 5 Years 10 Years - ----------------------------------------------------------------------------------------- Class A** Return Before Taxes -20.03% -0.24% 2.76% ----------------------------------------------------- ------- ------- -------- Return After Taxes on Distributions -21.24% -1.95% 0.37% ----------------------------------------------------- ------- ------- -------- Return After Taxes on Distributions and Sale of Fund Shares -12.93% -1.11% 0.92% - ----------------------------------------------------------------------------------------- Class B Return Before Taxes -20.40% -0.10% 2.78% - ----------------------------------------------------------------------------------------- Class C Return Before Taxes -17.90% -0.08% 2.48% - ----------------------------------------------------------------------------------------- Advisor Class Return Before Taxes -16.17% 0.93% 3.51% - ----------------------------------------------------------------------------------------- Barclays Capital Global Aggregate Index (U.S. hedged)+ 5.58% 4.74% 5.33% - ----------------------------------------------------------------------------------------- Merrill Lynch 3-Month T-Bill Index 2.06% 3.25% 3.45% - -----------------------------------------------------------------------------------------
* Average annual total returns reflect imposition of the maximum front-end or contingent deferred sales charges as well as conversion of Class B shares to Class A shares after the applicable period. **After-tax Returns: -Are shown for Class A shares only and will vary for Class B, Class C and Advisor Class shares because these Classes have different expense ratios. -Are an estimate, which is based on the highest historical individual federal marginal income tax rates and do not reflect the impact of state and local taxes; actual after-tax returns depend on an individual investor's tax situation and are likely to differ from those shown; and -Are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts. + Reflects no deduction for fees, expenses, or taxes. BAR CHART The annual returns in the bar chart are for the Fund's Class A shares and do not reflect sales loads. If sales loads were reflected, returns would be less than those shown. Calendar Year End (%) [CHART] 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 - ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- 7.63% 4.57% -2.81% 5.04% 15.61% 6.13% 4.82% 4.47% 6.38% -16.52% You should consider an investment in the Fund as a long-term investment. The Fund's returns will fluctuate over long and short periods. For example, during the period shown in the bar chart, the Fund's: Best Quarter was up 7.36% in the 4th quarter, 2002; and Worst Quarter was down - -9.62% in the 4th quarter, 2008. 17 HIGH INCOME - -------------------------------------------------------------------------------- Designed to seek a higher/more aggressive level of income and potential for total return than the broad bond market. Consistent with this approach, volatility and potential for principal loss is expected to be commensurately higher as well. AllianceBernstein High Income Fund - -------------------------------------------------------------------------------- OBJECTIVE AND PRINCIPAL STRATEGIES: The Fund's investment objective is to seek to maximize total returns from price appreciation and income. The Fund pursues income opportunities from government, corporate, emerging market and high yield sources. It has the flexibility to invest in a broad range of fixed-income securities in both developed and emerging market countries. The Fund's investments may include U.S. and non-U.S. corporate debt securities and sovereign debt securities. The Fund may invest, without limitation, in either U.S. Dollar-denominated or non-U.S. Dollar-denominated fixed-income securities. The Fund may invest in debt securities with a range of maturities from short- to long-term. Substantially all of the Fund's assets may be invested in lower-rated securities, which may include securities having the lowest rating for non-subordinated debt instruments (i.e., rated C by Moody's or CCC+ or lower by S&P and Fitch) and unrated securities of equivalent investment quality. The Fund also may invest in investment grade securities and unrated securities. The Fund may also make short sales of securities or maintain a short position. The Fund is non-diversified, meaning it may invest more of its assets in a fewer number of issuers. The Fund may invest in mortgage-related and other asset-backed securities, loan participations, inflation-protected securities, structured securities, variable, floating, and inverse floating rate instruments and preferred stock, and may use other investment techniques. The Fund may use borrowings or other leverage for investment purposes. The Fund intends, among other things, to enter into transactions such as reverse repurchase agreements and dollar rolls. The Fund may invest, without limit, in derivatives, such as options, futures, forwards, or swap agreements. PRINCIPAL RISKS: ..Market Risk .Emerging Market Risk ..Interest Rate Risk .Currency Risk ..Credit Risk .Diversification Risk ..Inflation Risk .Derivatives Risk ..Foreign (non-U.S.) Risk .Leverage Risk
Please see "Risks Summary" for a description of these and other risks of investing in the Fund. 18 The table and bar chart below provide an indication of the historical risk of an investment in the Fund. PERFORMANCE TABLE Average Annual Total Returns* (For the periods ended December 31, 2008)
1 Year 5 Years 10 Years - ----------------------------------------------------------------------------------------- Class A** Return Before Taxes -29.64% 0.65% 10.08% ----------------------------------------------------- ------- ------- -------- Return After Taxes on Distributions -31.81% -2.16% 6.17% ----------------------------------------------------- ------- ------- -------- Return After Taxes on Distributions and Sale of Fund Shares -18.99% -0.70% 6.48% - ----------------------------------------------------------------------------------------- Class B Return Before Taxes -29.16% 0.73% 10.01% - ----------------------------------------------------------------------------------------- Class C Return Before Taxes -27.87% 0.73% 9.68% - ----------------------------------------------------------------------------------------- Advisor Class*** Return Before Taxes -26.25% 1.85% 10.90% - ----------------------------------------------------------------------------------------- JPMorgan Emerging Markets Bond Index Global ("EMBI Global") (U.S. Dollar-denominated)+ -10.91% 5.18% 10.17% - ----------------------------------------------------------------------------------------- JPMorgan Government Bond Index-Emerging Markets ("GBI-EM") (local currency-denominated)+ -6.93% 8.94% N/A - ----------------------------------------------------------------------------------------- Barclays Capital High Yield Index (2% Constrained) ("BC High Yield")+ -25.88% -0.84% 2.28% - ----------------------------------------------------------------------------------------- Composite Benchmark (equal weighted blend of EMBI Global, GBI-EM and BC High Yield) -14.79% 4.47% N/A - -----------------------------------------------------------------------------------------
* Average annual total returns reflect imposition of the maximum front-end or contingent deferred sales charges as well as conversion of Class B shares to Class A shares after the applicable period. ** After-tax Returns: -Are shown for Class A shares only and will vary for Class B and Class C shares because these Classes have higher expense ratios; -Are an estimate, which is based on the highest historical individual federal marginal income tax rates and do not reflect the impact of state and local taxes; actual after-tax returns depend on an individual investor's tax situation and are likely to differ from those shown; and -Are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts. ***Inception date for Advisor Class shares: 1/28/08. Performance information for periods prior to the inception of Advisor Class shares is the performance of the Fund's Class A shares adjusted to reflect the lower expense ratio of Advisor Class shares. + Reflects no deduction for fees, expenses, or taxes. 19 BAR CHART The annual returns in the bar chart are for the Fund's Class A shares and do not reflect sales loads. If sales loads were reflected, returns would be less than those shown. Calendar Year End (%) [CHART] 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- 26.71% 14.47% 6.10% 18.69% 38.42% 11.09% 10.16% 11.85% 7.29% -26.52% You should consider an investment in the Fund as a long-term investment. The Fund's returns will fluctuate over long and short periods. For example, during the period shown in the bar chart, the Fund's: Best Quarter was up 18.35% in the 4th quarter, 2002; and Worst Quarter was down - -17.75% in the 4th quarter, 2008. 20 RISKS SUMMARY - -------------------------------------------------------------------------------- In this Summary, we describe the principal and other risks that may affect a Fund's portfolio as a whole. This Prospectus has additional descriptions of risks applicable to specific investments in the discussions below under "More Information About the Funds and Their Investments." MARKET RISK This is the risk that the value of a Fund's investments will fluctuate as the bond markets fluctuate and that prices overall will decline over short or long-term periods. INTEREST RATE RISK Changes in interest rates will affect the value of a Fund's investments in fixed-income securities. When interest rates rise, the value of a Fund's investments tends to fall and this decrease in value may not be offset by higher interest income from new investments. Interest rate risk is generally greater for Funds that invest in fixed-income securities with longer maturities or durations. CREDIT RISK This is the risk that the issuer or the guarantor of a fixed-income security, or the counterparty to a derivatives or other contract, will be unable or unwilling to make timely payments of interest or principal, or to otherwise honor its obligations. The issuer or guarantor may default, causing a loss of the full principal amount of a security and any accrued interest. The degree of risk for a particular security may be reflected in its credit rating. There is the possibility that the credit rating of a fixed-income security may be downgraded after purchase of the security, which may adversely affect the value of the security. Investments in fixed-income securities with lower ratings tend to have a higher probability that an issuer will default or fail to meet its payment obligations. INFLATION RISK This is the risk that the value of assets or income from investments will be less in the future as inflation decreases the value of money. As inflation increases, the value of each Fund's assets can decline as can the value of the Fund's distributions. This risk is significantly greater for those Funds that invest a significant portion of their assets in fixed-income securities with longer maturities. FOREIGN (NON-U.S.) RISK A Fund's investments in securities of non-U.S. issuers may experience more rapid and extreme changes in value than investments in securities of U.S. issuers. The securities markets of many non-U.S. countries are relatively small, with a limited number of companies representing a small number of securities. Non-U.S. issuers usually are not subject to the same degree of regulation as U.S. issuers. Reporting, accounting, and auditing standards of countries differ, in some cases significantly, from U.S. standards. Nationalization, expropriation or confiscatory taxation, currency blockage, political changes, or diplomatic developments could adversely affect a Fund's investments in a country other than the U.S. To the extent a Fund invests in a particular country or geographic region, the Fund may have more significant risk due to market changes or other factors affecting that country or region, including political instability and unpredictable economic conditions. CURRENCY RISK This is the risk that changes in foreign (non-U.S.) currency exchange rates may negatively affect the value of a Fund's investments or reduce the returns of a Fund. For example, the value of a Fund's investments in foreign stocks or currencies may decrease if the U.S. Dollar is strong (i.e., gaining value relative to other currencies) and other currencies are weak (i.e., losing value relative to the U.S. Dollar). Currency markets generally are not as regulated as securities markets. 21 EMERGING MARKET RISK Foreign investment risk may be particularly high to the extent a Fund invests in emerging market securities of issuers based in countries with developing economies. These securities may present market, credit, currency, liquidity, legal, political and other risks different from, or greater than, the risks of investing in developed foreign (non-U.S.) countries. PREPAYMENT RISK The value of mortgage-related or asset-backed securities may be particularly sensitive to changes in prevailing interest rates. Early payments of principal on some mortgage-related securities may occur during periods of falling mortgage interest rates and expose a Fund to a lower rate of return upon reinvestment of principal. Early payments associated with mortgage-related securities cause these securities to experience significantly greater price and yield volatility than is experienced by traditional fixed-income securities. During periods of rising interest rates, a reduction in prepayments may increase the effective life of mortgage-related securities, subjecting them to greater risk of decline in market value in response to rising interest rates. If the life of a mortgage-related security is inaccurately predicted, a Fund may not be able to realize the rate of return it expected. DIVERSIFICATION RISK A Fund may have more risk if it is "non-diversified," meaning that it can invest more of its assets in a smaller number of issuers. DERIVATIVES RISK This is the risk of investments in derivatives. These investments may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses for a Fund, and subject to counterparty risk to a greater degree than more traditional investments. LEVERAGE RISK When a Fund borrows money or otherwise leverages its portfolio, it may be volatile because leverage tends to exaggerate the effect of any increase or decrease in the value of a Fund's investments. A Fund may create leverage through the use of reverse repurchase arrangements, forward currency exchange contracts, forward commitments, dollar rolls or futures contracts or by borrowing money. LIQUIDITY RISK Liquidity risk exists when particular investments are difficult to purchase or sell, possibly preventing a Fund from selling out of these illiquid securities at an advantageous time or price. Derivative-based securities and privately-issued mortgage-related securities and other asset-backed securities, which do not have a government or government-sponsored entity guarantee, that are subject to substantial market and credit risk may have greater liquidity risk. 22 MANAGEMENT RISK Each Fund is subject to management risk because it is an actively managed investment fund. The Adviser will apply its investment techniques and risk analyses in making investment decisions for each Fund, but there is no guarantee that its techniques will produce the intended results.
- ------------------------------------------------------------------------------------------------------------------------------- Foreign Interest (Non- Emerging Prepay- Diversifi- Deriva- Lever- Liquid- Manage- Market Rate Credit Inflation U.S.) Currency Market ment cation tives age ity ment Fund Risk Risk Risk Risk Risk Risk Risk Risk Risk Risk Risk Risk Risk - ------------------------------------------------------------------------------------------------------------------------------- AllianceBernstein . . . . . . . . . . . Short Duration - ------------------------------------------------------------------------------------------------------------------------------- AllianceBernstein . . . . . . . . . . . Intermediate Bond - ------------------------------------------------------------------------------------------------------------------------------- AllianceBernstein . . . . . . . . . . . Global Bond - ------------------------------------------------------------------------------------------------------------------------------- AllianceBernstein . . . . . . . . . . . Diversified Yield - ------------------------------------------------------------------------------------------------------------------------------- AllianceBernstein . . . . . . . . . . . High Income - -------------------------------------------------------------------------------------------------------------------------------
23 FEES AND EXPENSES OF THE FUNDS - -------------------------------------------------------------------------------- WHY ARE FUND FEES AND EXPENSES IMPORTANT? Fees and expenses reduce the investment performance of a Fund. The information provided below is intended to help you understand what these fees and expenses are and provide examples of the dollar amount of these costs to help you make comparisons with other funds. Some of these fees are paid directly by you at the time of investment (for example, a front-end sales charge) or, under certain circumstances, at the time you redeem or sell your shares back to the Fund. You pay other fees and expenses indirectly because they are deducted from a Fund's assets and reduce the value of your shares. These fees include management fees, distribution and/or service (Rule 12b-1) fees, and operating expenses. SHAREHOLDER FEES (fees paid directly from your investment)
Class A Class B Class B Class C Advisor Class Shares Shares(a) Shares(b) Shares Shares - -------------------------------------------------------------------------------------------- Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) 4.25%(c) None None None None - -------------------------------------------------------------------------------------------- Maximum Deferred Sales Charge (Load) (as a percentage of offering purchase price or redemption proceeds, whichever is lower) None(c) 3.00%(c)* 4.00%(c)** 1.00%(c)*** None - -------------------------------------------------------------------------------------------- Exchange Fee None None None None None
(a)For all Funds except AllianceBernstein Diversified Yield. (b)For AllianceBernstein Diversified Yield. (c)Class A sales charges may be reduced or eliminated in certain circumstances, typically for large purchases. In some cases, however, a 1%, 1-year contingent deferred sales charge or CDSC may apply. CDSCs for Class A, Class B, and Class C shares may also be subject to waiver in certain circumstances. See "Investing in the Funds--CDSC Waivers and Other Programs" in this Prospectus and "Purchase of Shares" in the Statement of Additional Information, or SAI. * Class B shares automatically convert to Class A shares after 6 years. The CDSC decreases over time. For Class B shares, the CDSC decreases 1.00% annually to 0% after the 3rd year. ** Class B shares automatically convert to Class A shares after 8 years. The CDSC decreases over time. For Class B shares, the CDSC decreases 1.00% annually to 0% after the 4th year. ***For Class C shares, the CDSC is 0% after the first year. ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) AND EXAMPLES The Examples are intended to help you compare the cost of investing in a Fund with the cost of investing in other funds. They assume that you invest $10,000 in a Fund for the time periods indicated and then redeem all of your shares at the end of those periods. They also assume that your investment has a 5% return each year, that the Fund's operating expenses stay the same, and that all dividends and distributions are reinvested. Although your actual costs may be higher or lower, based on these assumptions your costs as reflected in the Examples would be: 24 AllianceBernstein Short Duration Portfolio Operating Expenses
Class A Class B Class C - ----------------------------------------------------------------- Management Fees .45% .45% .45% Distribution and/or Service (12b-1) Fees .30% 1.00% 1.00% Other Expenses Transfer Agent .11% .11% .11% Other Expenses .10% .10% .10% ---- ----- ----- Total Other Expenses .21% .21% .21% ---- ----- ----- Total Fund Operating Expenses .96% 1.66% 1.66% ==== ===== ===== - -----------------------------------------------------------------
Examples
Class A Class B+ Class B++ Class C+ Class C++ - ------------------------------------------------------------- After 1 year $ 519 $ 469 $ 169 $ 269 $ 169 After 3 years $ 718 $ 623 $ 523 $ 523 $ 523 After 5 years $ 933 $ 902 $ 902 $ 902 $ 902 After 10 years $1,533 $1,608 $1,608 $1,965 $1,965 - -------------------------------------------------------------
AllianceBernstein Intermediate Bond Portfolio Operating Expenses
Advisor Class A Class B Class C Class - ------------------------------------------------------------------------- Management Fees .45% .45% .45% .45% Distribution and/or Service (12b-1) Fees .30% 1.00% 1.00% None Other Expenses Transfer Agent .19% .23% .20% .20% Other Expenses .15% .15% .15% .15% ------ ------ ------ ------ Total Other Expenses .34% .38% .35% .35% ------ ------ ------ ------ Total Fund Operating Expenses 1.09% 1.83% 1.80% .80% ====== ====== ====== ====== Waiver and/or Expense Reimbursement (a) (.24)% (.28)% (.25)% (.25)% ------ ------ ------ ------ Net Expenses .85% 1.55% 1.55% .55% ====== ====== ====== ====== - -------------------------------------------------------------------------
Examples
Advisor Class A Class B+ Class B++ Class C+ Class C++ Class - ------------------------------------------------------------------------ After 1 year $ 508 $ 458 $ 158 $ 258 $ 158 $ 56 After 3 years+++ $ 734 $ 648 $ 548 $ 542 $ 542 $230 After 5 years+++ $ 978 $ 964 $ 964 $ 952 $ 952 $420 After 10 years+++ $1,677 $1,752 $1,752 $2,095 $2,095 $967 - ------------------------------------------------------------------------
Please refer to the footnotes on page 27. 25 AllianceBernstein Global Bond Fund Operating Expenses
Advisor Class A Class B Class C Class - ------------------------------------------------------------------------- Management Fees .50% .50% .50% .50% Distribution and/or Service (12b-1) Fees .30% 1.00% 1.00% None Interest Expense .14% .15% .15% .14% Other Expenses Transfer Agent .10% .12% .11% .13% Other Expenses .11% .11% .10% .11% ------ ------ ------ ------ Total Other Expenses .21% .23% .21% .24% ------ ------ ------ ------ Total Fund Operating Expenses 1.15% 1.88% 1.86% .88% ====== ====== ====== ====== Waiver and/or Expense Reimbursement (a) (.11)% (.13)% (.11)% (.14)% ------ ------ ------ ------ Net Expenses (b) 1.04% 1.75% 1.75% .74% ====== ====== ====== ====== - -------------------------------------------------------------------------
Examples
Advisor Class A Class B+ Class B++ Class C+ Class C++ Class - ------------------------------------------------------------------------ After 1 year $ 527 $ 478 $ 178 $ 278 $ 178 $ 76 After 3 years+++ $ 765 $ 679 $ 579 $ 574 $ 574 $ 267 After 5 years+++ $1,021 $1,005 $1,005 $ 996 $ 996 $ 474 After 10 years+++ $1,755 $1,827 $1,827 $2,173 $2,173 $1,073 - ------------------------------------------------------------------------
AllianceBernstein Diversified Yield Fund Operating Expenses
Advisor Class A Class B Class C Class - ------------------------------------------------------------------------- Management Fees .50% .50% .50% .50% Distribution and/or Service (12b-1) Fees .30% 1.00% 1.00% None Other Expenses Transfer Agent .12% .20% .14% .12% Other Expenses .73% .71% .72% .71% ------ ------ ------ ------ Total Other Expenses .85% .91% .86% .83% ------ ------ ------ ------ Total Fund Operating Expenses 1.65% 2.41% 2.36% 1.33% ====== ====== ====== ====== Waiver and/or Expense Reimbursement (a) (.75)% (.81)% (.76)% (.73)% ------ ------ ------ ------ Net Expenses .90% 1.60% 1.60% .60% ====== ====== ====== ====== - -------------------------------------------------------------------------
Examples
Advisor Class A Class B+ Class B++ Class C+ Class C++ Class - ------------------------------------------------------------------------ After 1 year $ 513 $ 563 $ 163 $ 263 $ 163 $ 61 After 3 years+++ $ 855 $ 877 $ 677 $ 667 $ 667 $ 351 After 5 years+++ $1,221 $1,220 $1,220 $1,198 $1,198 $ 663 After 10 years+++ $2,248 $2,512 $2,512 $2,655 $2,655 $1,548 - ------------------------------------------------------------------------
Please refer to the footnotes on page 27. 26 AllianceBernstein High Income Fund Operating Expenses
Advisor Class A Class B Class C Class - --------------------------------------------------------------------------- Management Fees .50% .50% .50% .50% Distribution and/or Service (12b-1) Fees .30% 1.00% 1.00% None Interest Expense .06% .06% .07% .04% Other Expenses Transfer Agent .12% .16% .13% .12% Other Expenses .15% .14% .14% .14% ------ ------ ------ ------ Total Other Expenses .27% .30% .27% .26% ------ ------ ------ ------ Total Fund Operating Expenses 1.13% 1.86% 1.84% .80% ====== ====== ====== ====== Waiver and/or Expense Reimbursement (a)(c) (.12)% (.15)% (.12)% (.11)% ------ ------ ------ ------ Net Expenses (b)(c) 1.01% 1.71% 1.72% .69% ====== ====== ====== ====== - ---------------------------------------------------------------------------
Examples
Advisor Class A Class B+ Class B++ Class C+ Class C++ Class - ------------------------------------------------------------------------ After 1 year $ 524 $ 474 $ 174 $ 275 $ 175 $ 70 After 3 years+++ $ 758 $ 671 $ 571 $ 567 $ 567 $245 After 5 years+++ $1,010 $ 993 $ 993 $ 985 $ 985 $434 After 10 years+++ $1,732 $1,803 $1,803 $2,151 $2,151 $980 - ------------------------------------------------------------------------
+ Assumes redemption at end of period and, with respect to shares held 10 years, conversion of Class B shares to Class A shares after 6 years, and for AllianceBernstein Diversified Yield, 8 years. ++ Assumes no redemption at end of period and, with respect to shares held 10 years, conversion of Class B shares to Class A shares after 6 years, and for AllianceBernstein Diversified Yield, 8 years. +++These examples assume that the Adviser's agreement to waive management fees and/or bear Fund expenses is not extended beyond its initial term. (a)Reflects the Adviser's contractual waiver of a portion of its advisory fee and/or reimbursement of a portion of the Fund's operating expenses. This waiver extends through the Fund's current fiscal year and then may be extended by the Adviser for additional one-year terms. (b)If interest expenses were excluded, net expenses would be as follows:
Class A Class B Class C Advisor Class - -------------------------------------------------------------------- AllianceBernstein Global Bond .90% 1.60% 1.60% .60% AllianceBernstein High Income .95% 1.65% 1.65% .65%
(c)Revised to reflect current contractual waivers. 27 INVESTING IN THE FUNDS - -------------------------------------------------------------------------------- This section discusses how to buy, sell or redeem, or exchange different classes of shares in a Fund that are offered in this Prospectus (except that the sale of Class B shares is limited as described below). AllianceBernstein Intermediate Bond, AllianceBernstein Diversified Yield, AllianceBernstein Global Bond and AllianceBernstein High Income offer four classes of shares and AllianceBernstein Short Duration offers three classes of shares through this Prospectus (except that the sale of Class B shares is currently limited as noted below). Retirement shares of AllianceBernstein Intermediate Bond, AllianceBernstein Diversified Yield, AllianceBernstein Global Bond and AllianceBernstein High Income are available through a separate prospectus. The Board of Directors of the AllianceBernstein Short Duration Portfolio is continuing to explore alternatives to simplify the current multiple class structure of this Portfolio. This could result in future changes, including, but not limited to, the suspension of sales of one or more classes of the Portfolio's shares or other changes. Each share class represents an investment in the same portfolio of securities, but the classes may have different sales charges and bear different ongoing distribution expenses. For additional information on the differences between the different classes of shares and factors to consider when choosing among them, please see "The Different Share Class Expenses" and "The 'Pros' and 'Cons' of Different Share Classes" below. Keep in mind that only Class A shares offer Quantity Discounts on sales charges, as described more fully under "Sales Charge Reduction Programs" below. Also, you can learn more about payments to brokers, financial planners, banks, insurance companies, registered investment advisors or other "financial intermediaries" who distribute shares of the Funds and your individual financial advisor under "Payments to Financial Advisors and Their Firms." HOW TO BUY SHARES Class A, Class B and Class C Shares Effective January 31, 2009, sales of Class B shares of the Funds to new investors were suspended. Class B shares are only issued (i) upon the exchange of Class B shares from another AllianceBernstein Fund, (ii) for purposes of dividend reinvestment, (iii) through the Funds' Automatic Investment Program for accounts that established the Program prior to January 31, 2009, and (iv) for purchases of additional Class B shares by Class B shareholders as of January 31, 2009. The ability to establish a new Automatic Investment Program for accounts containing Class B shares was suspended as of January 31, 2009. You may purchase a Fund's Class A, Class B, or Class C shares through financial intermediaries, such as broker-dealers or banks. You also may purchase shares directly from the Funds' principal underwriter, AllianceBernstein Investments, Inc., or ABI. Purchase Minimums and Maximums Minimums:* - --Initial: $2,500 - --Subsequent: $ 50
*These purchase minimums may not apply to some accounts established in connection with the Automatic Investment Program and to some retirement-related investment programs. Please see "Automatic Investment Program" and "Tax-Deferred Accounts and Employee Benefit Plans" below. Additionally, these investment minimums do not apply to persons participating in a fee-based program sponsored and maintained by a registered broker-dealer or other financial intermediary and approved by ABI. Maximum Individual Purchase Amount: - --Class A shares None - --Class B shares $ 100,000 - --Class C shares $1,000,000
28 Your broker or financial advisor must receive your purchase request by 4:00 p.m., Eastern time, and submit it to the Fund by a pre-arranged time for you to receive the next-determined net asset value or NAV, less any applicable initial sales charge. If you are an existing Fund shareholder and you have completed the appropriate section of the Mutual Fund Application, you may purchase additional shares by telephone with payment by electronic funds transfer in amounts not exceeding $500,000. AllianceBernstein Investor Services, Inc., or ABIS, must receive and confirm telephone requests before 4:00 p.m., Eastern time, to receive that day's public offering price. Call 800-221-5672 to arrange a transfer from your bank account. Advisor Class Shares You may purchase Advisor Class shares through your financial advisor at NAV. Advisor Class shares may be purchased and held solely: .. through accounts established under a fee-based program, sponsored and maintained by a registered broker-dealer or other financial intermediary and approved by ABI; .. through a defined contribution employee benefit plan (e.g., a 401(k) plan) that has at least $10,000,000 in assets and that purchases shares directly without the involvement of a financial intermediary; and .. by investment advisory clients of, and certain other persons associated with, the Adviser and its affiliates or the Funds. If required by a Fund's Multi-Class Plan, all Advisor Class shares held by a shareholder may convert automatically to Class A shares of the same Fund if a holder of the shares (i) ceases to participate in a fee-based program or plan or (ii) is otherwise no longer eligible to purchase Advisor Class shares. The Fund will provide the shareholder with at least 30 days' advance notice of such a conversion. The conversion would occur on the basis of the relative NAV of the two classes and without the imposition of any sales load, fee or other charge. Class A shares have a higher expense ratio, may pay lower dividends and may have a lower NAV than Advisor Class shares. The Funds' SAIs have more detailed information about who may purchase and hold Advisor Class shares. The Funds' SAIs have more detailed information about who may purchase and hold Advisor Class shares. Retirement Plans, Tax-Deferred Accounts and Employee Benefit Plans Special eligibility rules apply to some employee benefit plans. Except as indicated, there are no investment minimums for the plans listed below. Class A shares are available to: .. Traditional and Roth IRAs (the minimums listed in the table above apply); .. SEPs, SAR-SEPs, SIMPLE IRAs, and individual 403(b) plans; .. AllianceBernstein-sponsored Coverdell Education Savings Accounts ($2,000 initial investment minimum, $150 Automatic Investment Program monthly minimum); .. AllianceBernstein Link, AllianceBernstein Individual 401(k), and AllianceBernstein SIMPLE IRA plans; and .. certain defined contribution retirement plans that do not have plan level or omnibus accounts on the books of the Fund. Group retirement plans that selected Class B shares as an investment alternative under their plan before September 2, 2003 may continue to purchase Class B shares. Class C shares are available to AllianceBernstein Link, AllianceBernstein Individual 401(k), AllianceBernstein SIMPLE IRA plans with less than $250,000 in plan assets and 100 employees, and to group retirement plans with plan assets of less than $1,000,000. 29 Required Information A Fund is required by law to obtain, verify, and record certain personal information from you or persons on your behalf in order to establish an account. Required information includes name, date of birth, permanent residential address and taxpayer identification number (for most investors, your social security number). A Fund may also ask to see other identifying documents. If you do not provide the information, the Fund will not be able to open your account. If a Fund is unable to verify your identity, or that of another person(s) authorized to act on your behalf, or if the Fund believes it has identified potential criminal activity, the Fund reserves the right to take action it deems appropriate or as required by law, which may include closing your account. If you are not a U.S. citizen or resident alien, your account must be affiliated with a Financial Industry Regulatory Authority, or FINRA, member firm. A Fund is required to withhold 28% of taxable dividends, capital gains distributions, and redemptions paid to any shareholder who has not provided the Fund with his or her certified taxpayer identification number. To avoid this, you must provide your correct tax identification number (social security number for most investors) on your Mutual Fund Application. General ABI may refuse any order to purchase shares. Each Fund reserves the right to suspend the sale of its shares to the public in response to conditions in the securities markets or for other reasons. THE DIFFERENT SHARE CLASS EXPENSES This section describes the different expenses of investing in each class and explains factors to consider when choosing a class of shares. The expenses can include distribution and/or service (Rule 12b-1) fees, initial sales charges and/or CDSCs. Please see below for a discussion of how CDSCs are calculated. If you are not eligible to buy Advisor Class shares, you will need to choose among Class A, Class B (subject to the limitations on sales of Class B shares described above) and Class C shares. Only Class A shares offer Quantity Discounts, as described below under "Sales Charge Reduction Programs." WHAT IS A RULE 12b-1 FEE? A Rule 12b-1 fee is a fee deducted from a Fund's assets that is used to pay for personal service, maintenance of shareholder accounts and distribution costs, such as advertising and compensation of financial intermediaries. The amount of each share class's Rule 12b-1 fee, if any, is disclosed below and in the relevant Fund's fee table near the front of this Prospectus. Asset-Based Sales Charges or Distribution and/or Service (Rule 12b-1) Fees Each Fund has adopted plans under Securities and Exchange Commission ("Commission") Rule 12b-1 that allow the Fund to pay asset-based sales charges or distribution and/or service (Rule 12b-1) fees for the distribution and sale of its shares. The amount of these fees for each class of the Fund's shares is up to:
Distribution and/or Service (Rule 12b-1) Fee (As a Percentage of Aggregate Average Daily Net Assets) ------------------------------------------ Class A .30% Class B 1.00% Class C 1.00% Advisor Class None
Because these fees are paid out of a Fund's assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types 30 of sales fees. Class B and Class C shares are subject to higher Rule 12b-1 fees than Class A shares. Class B shares are subject to these higher fees for a period of six years, after which they convert to Class A shares (except for AllianceBernstein Diversified Yield Class B shares, which convert to Class A shares after eight years). The higher fees mean a higher expense ratio, so Class B and Class C shares pay correspondingly lower dividends and may have a lower NAV (and returns) than Class A shares. All or some of these fees may be paid to financial intermediaries, including your financial advisor's firm. Class A Shares - Initial Sales Charge Alternative You can purchase Class A shares at their public offering price (or cost), which is NAV plus an initial sales charge of up to 4.25% of the offering price. Purchases of Class A shares in the amount of $1,000,000 or more are not subject to a sales charge but, if redeemed within one year, may be subject to a CDSC of up to 1%. When a non-AllianceBernstein sponsored group retirement plan terminates a Fund as an investment option, all investments in Class A shares of that Fund through the plan are subject to a 1%, 1-year CDSC upon redemption. In addition, when a group retirement plan ceases to participate in an AllianceBernstein-sponsored group retirement plan program within one year, investments in the Fund's Class A shares through the plan are subject to a 1% CDSC upon redemption. Class B Shares - Deferred Sales Charge Alternative Effective January 31, 2009, sales of Class B shares of the Funds to new investors were suspended. Class B shares are only issued (i) upon the exchange of Class B shares from another AllianceBernstein Fund, (ii) for purposes of dividend reinvestment, (iii) through the Fund's Automatic Investment Program for accounts that established the Program prior to January 31, 2009, and (iv) for purchases of additional Class B shares by Class B shareholders as of January 31, 2009. The ability to establish a new Automatic Investment Program for accounts containing Class B shares was suspended as of January 31, 2009. You can purchase Class B shares at NAV (subject to the limitations on sales of Class B shares described above) without an initial sales charge. This means that the full amount of your purchase is invested in the Fund. Your investment, however, is subject to a CDSC if you redeem shares within three years (four years in the case of AllianceBernstein Diversified Yield) of purchase. The CDSC varies depending on the number of years you hold the shares. The CDSC amounts for Class B shares are: AllianceBernstein Diversified Yield:
Year Since Purchase CDSC --------------------------- First 4.0% Second 3.0% Third 2.0% Fourth 1.0% Fifth and thereafter None
All Other Funds:
Year Since Purchase CDSC ---------------------------- First 3.0% Second 2.0% Third 1.0% Fourth and thereafter None
If you exchange your shares for the Class B shares of another AllianceBernstein Mutual Fund, the CDSC also will apply to the Class B shares received. If you redeem your shares and directly invest the proceeds in units of CollegeBoundfund, the CDSC will apply to the units of the CollegeBoundfund. The CDSC period begins with the date of your original purchase, not the date of exchange for the other Class B shares or purchase of CollegeBoundfund units. 31 Class B shares purchased for cash automatically convert to Class A shares six years after the end of the month of your purchase (except for Class B shares of AllianceBernstein Diversified Yield, which automatically convert to Class A shares eight years after the end of the month of your purchase). If you purchase shares by exchange for the Class B shares of another AllianceBernstein Mutual Fund, the conversion period runs from the date of your original purchase. Class C Shares - Asset-Based Sales Charge Alternative You can purchase Class C shares at NAV without an initial sales charge. This means that the full amount of your purchase is invested in the Fund. Your investment, however, is subject to a 1% CDSC if you redeem your shares within 1 year. If you exchange your shares for the Class C shares of another AllianceBernstein Mutual Fund, the 1% CDSC also will apply to the Class C shares received. The 1-year period for the CDSC begins with the date of your original purchase, not the date of the exchange for the other Class C shares. Class C shares do not convert to any other class of shares of the Fund. HOW IS THE CDSC CALCULATED? The CDSC is applied to the lesser of NAV at the time of redemption or the original cost of shares being redeemed (or, as to Fund shares acquired through an exchange, the cost of the AllianceBernstein Mutual Fund shares originally purchased for cash). This means that no sales charge is assessed on increases in NAV above the initial purchase price. Shares obtained from dividend or distribution reinvestment are not subject to the CDSC. In determining the CDSC, it will be assumed that the redemption is, first, of any shares not subject to a CDSC and, second, of shares held the longest. Advisor Class Shares - Fee-Based Program Alternative You may purchase Advisor Class shares through your financial advisor. Advisor Class shares are not subject to any initial or contingent sales charges. However, when you purchase Advisor Class shares through your financial advisor, your financial advisor may charge a fee. Advisor Class shares are not available to everyone. See "How to Buy Shares" above. SALES CHARGE REDUCTION PROGRAMS This section includes important information about sales charge reduction programs available to investors in Class A shares and describes information or records you may need to provide to a Fund or your financial intermediary in order to be eligible for sales charge reduction programs. Information about sales charge reduction programs also is available free of charge and in a clear and prominent format on our website at www.AllianceBernstein.com (click on "US Investors & Financial Advisors" then "Investment Insights--Investor Education" then "Sales Charge Reduction Programs"). More information on Breakpoints and other sales charge waivers is available in each Fund's SAI. Required Shareholder Information and Records In order for shareholders to take advantage of sales charge reductions, a shareholder or his or her financial intermediary must notify the Fund that the shareholder qualifies for a reduction. Without notification, the Fund is unable to ensure that the reduction is applied to the shareholder's account. A shareholder may have to provide information or records to his or her financial intermediary or a Fund to verify eligibility for breakpoint privileges or other sales charge waivers. This may include information or records, including account statements, regarding shares of the Fund or other AllianceBernstein Mutual Funds held in: .. all of the shareholder's accounts at the Funds or a financial intermediary; 32 .. any account of the shareholder at another financial intermediary; and .. accounts of related parties of the shareholder, such as members of the same family, at any financial intermediary. You Can Reduce Sales Charges When Buying Class A Shares. Breakpoints or Quantity Discounts Offered by the Funds The Funds offer investors the benefit of discounts on the sales charges that apply to purchases of Class A shares in certain circumstances. These discounts, which are also known as Breakpoints, can reduce or, in some cases, eliminate the initial sales charges that would otherwise apply to your Class A investment. Mutual funds are not required to offer breakpoints and different mutual fund groups may offer different types of breakpoints. Breakpoints or Quantity Discounts allow larger investments in Class A shares to be charged lower sales charges. A shareholder investing more than $100,000 in Class A shares of a Fund is eligible for a reduced sales charge. Initial sales charges are eliminated completely for purchases of $1,000,000 or more, although a 1%, 1-year CDSC may apply. The sales charge schedule of Class A share Quantity Discounts is as follows:
Initial Sales Charge ------------------ As % of As % of Net Amount Offering Amount Purchased Invested Price ----------------------------------------------- Up to $100,000 4.44% 4.25% $100,000 up to $250,000 3.36 3.25 $250,000 up to $500,000 2.30 2.25 $500,000 up to $1,000,000 1.78 1.75 $1,000,000 and above 0.00 0.00
Rights of Accumulation To determine if a new investment in Class A shares is eligible for a Quantity Discount, a shareholder can combine the value of the new investment in a Fund with the value of existing investments in the Fund, any other AllianceBernstein Mutual Fund, AllianceBernstein Institutional Funds and certain CollegeBoundfund accounts for which the shareholder, his or her spouse or domestic partner, or child under the age of 21 is the participant. The AllianceBernstein Mutual Funds use the current NAV of your existing investments when combining them with your new investment. Combined Purchase Privileges A shareholder may qualify for a Quantity Discount by combining purchases of shares of a Fund into a single "purchase." A "purchase" means a single purchase or concurrent purchases of shares of a Fund or any other AllianceBernstein Mutual Fund, including AllianceBernstein Institutional Funds, by: .. an individual, his or her spouse or domestic partner, or the individual's children under the age of 21 purchasing shares for his, her or their own account(s), including certain CollegeBoundfund accounts; .. a trustee or other fiduciary purchasing shares for a single trust, estate or single fiduciary account with one or more beneficiaries involved; .. the employee benefit plans of a single employer; or .. any company that has been in existence for at least six months or has a purpose other than the purchase of shares of the Fund. Letter of Intent An investor may not immediately invest a sufficient amount to reach a Quantity Discount, but may plan to make one or more additional investments over a period of time 33 that, in the end, would qualify for a Quantity Discount. For these situations, the Funds offer a Letter of Intent, which permits the investor to express the intention, in writing, to invest at least $100,000 in Class A shares of the Fund or any AllianceBernstein Mutual Fund within 13 months. The Fund will then apply the Quantity Discount to each of the investor's purchases of Class A shares that would apply to the total amount stated in the Letter of Intent. If an investor fails to invest the total amount stated in the Letter of Intent, the Fund will retroactively collect the sales charges otherwise applicable by redeeming shares in the investor's account at their then current NAV. Investors qualifying for a Combined Purchase Privilege may purchase shares under a single Letter of Intent. Other Programs Class A shareholders may be able to purchase additional Class A shares with a reduced or eliminated sales charge through the following AllianceBernstein programs: Dividend Reinvestment Program, Dividend Direction Plan and Reinstatement Privilege. These additional programs are described under "CDSC Waivers and Other Programs" below. Class A Shares - Sales at NAV The Funds may sell their Class A shares at NAV without an initial sales charge to some categories of investors, including: .. AllianceBernstein Link, AllianceBernstein Individual 401(k), and AllianceBernstein SIMPLE IRA plans with at least $250,000 in plan assets or 100 employees; .. investment management clients of the Adviser or its affiliates, including clients and prospective clients of the Adviser's AllianceBernstein Institutional Investment Management Division; .. plan participants who roll over amounts distributed from employer maintained retirement plans to AllianceBernstein-sponsored IRAs where the plan is a client of or serviced by AllianceBernstein's Institutional Investment Management or Bernstein Global Wealth Management Divisions, including subsequent contributions to those IRAs; .. present or retired full-time employees and former employees (for subsequent investment in accounts established during the course of their employment) of the Adviser, ABI, ABIS and their affiliates or their spouses or domestic partners, siblings, direct ancestors or direct descendants or any trust, individual retirement account or retirement plan account for the benefit of such person; .. officers, directors and present full-time employees of selected dealers or agents, their spouses or domestic partners, or any trust, individual retirement account or retirement plan account for the benefit of such person; or .. persons participating in a fee-based program, sponsored and maintained by a registered broker-dealer or other financial intermediary and approved by ABI, under which persons pay an asset-based fee for services in the nature of investment advisory or administrative services. CDSC WAIVERS AND OTHER PROGRAMS Here Are Some Ways To Avoid Or Minimize Charges On Redemption. CDSC Waivers The Funds will waive the CDSCs on redemptions of shares in the following circumstances, among others: .. permitted exchanges of shares; .. following the death or disability of a shareholder; 34 .. if the redemption represents a minimum required distribution from an IRA or other retirement plan to a shareholder who has attained the age of 70 1/2; .. if the proceeds of the redemption are invested directly in a CollegeBoundfund account; or .. if the redemption is necessary to meet a plan participant's or beneficiary's request for a distribution or a loan from a group retirement plan or to accommodate a plan participant's or beneficiary's direction to reallocate his or her plan account among other investment alternatives available under a group retirement plan. Dividend Reinvestment Program Shareholders may elect to have all income and capital gains distributions from their account paid to them in the form of additional shares of the same class of a Fund under the Fund's Dividend Reinvestment Program. There is no initial sales charge or CDSC imposed on shares issued pursuant to the Dividend Reinvestment Program. Dividend Direction Plan A shareholder who already maintains accounts in more than one AllianceBernstein Mutual Fund may direct the automatic investment of income dividends and/or capital gains by one Fund, in any amount, without the payment of any sales charges, in shares of the same class of one or more other AllianceBernstein Mutual Fund(s). Automatic Investment Program The Automatic Investment Program allows investors to purchase shares of a Fund through pre-authorized transfers of funds from the investor's bank account. Under the Automatic Investment Program, an investor may (i) make an initial purchase of at least $2,500 and invest at least $50 monthly or (ii) make an initial purchase of less than $2,500 and commit to a monthly investment of $200 or more until the investor's account balance is $2,500 or more. Shareholders who committed to monthly investments of $25 or more through the Automatic Investment Program by October 15, 2004 will be able to continue their program despite the $50 monthly minimum discussed above. As of January 31, 2009, the Automatic Investment Program is available for purchase of Class B shares only if a shareholder was enrolled in the Program prior to January 31, 2009. Please see the Funds' SAIs for more details. Reinstatement Privilege A shareholder who has redeemed all or any portion of his or her Class A or Class B shares may reinvest all or any portion of the proceeds from the redemption in Class A shares of any AllianceBernstein Mutual Fund at NAV without any sales charge, if the reinvestment is made within 120 calendar days after the redemption date, and, for Class B shares, a CDSC has been paid and ABI has approved, at its discretion, the reinstatement of the shares. The reinstatement privilege for Class B shares is not available after January 31, 2009. Systematic Withdrawal Plan The Funds offer a systematic withdrawal plan that permits the redemption of Class A, Class B or Class C shares without payment of a CDSC. Under this plan, redemptions equal to 1% a month, 2% every two months or 3% a quarter of the value of a Fund account would be free of a CDSC. Shares would be redeemed so that Class B shares not subject to a CDSC (such as shares acquired with reinvested dividends or distributions) would be redeemed first and Class B shares that are held the longest would be redeemed next. For Class A and Class C shares, shares held the longest would be redeemed first. THE "PROS" AND "CONS" OF DIFFERENT SHARE CLASSES The decision as to which class of shares is most beneficial to you depends on the amount and intended length of your investment. If you are making a large investment that qualifies for a 35 reduced sales charge, you might consider purchasing Class A shares. Class A shares, with their lower Rule 12b-1 fees, are designed for investors with a long-term investing time frame. Although investors in Class B shares do not pay an initial sales charge, Class B shares can be more costly than Class A shares before they convert to Class A shares due to their substantially higher Rule 12b-1 fees. Class B shares redeemed within three years (four years for AllianceBernstein Diversified Yield) of purchase are also subject to a CDSC. Class B shares are designed for investors with an intermediate-term investing time frame. Class C shares should not be considered as a long-term investment because they do not convert to Class A shares and are subject to a higher distribution fee indefinitely. Class C shares do not, however, have an initial sales charge or a CDSC so long as the shares are held for one year or more. Class C shares are designed for investors with a short-term investing time frame. Your financial intermediary may receive differing compensation for selling Class A, Class B, or Class C shares. See "Payments to Financial Advisors and their Firms" below. Other A transaction, service, administrative or other similar fee may be charged by your broker-dealer, agent, or other financial intermediary, with respect to the purchase, sale, or exchange of Class A, Class B, Class C, or Advisor Class shares made through your financial advisor. The financial intermediaries or your fee-based program also may impose requirements on the purchase, sale, or exchange of shares that are different from, or in addition to, those imposed by the Funds, including requirements as to the minimum initial and subsequent investment amounts. You should consult your financial advisor for assistance in choosing a class of Fund shares. PAYMENTS TO FINANCIAL ADVISORS AND THEIR FIRMS Financial intermediaries market and sell shares of the Funds. These financial intermediaries employ financial advisors and may receive compensation for selling shares of the Funds. This compensation is paid from various sources, including any sales charge, CDSC, and/or Rule 12b-1 fee that you or the Funds may pay. Your individual financial advisor may receive some or all of the amounts paid to the financial intermediary that employs him or her. WHAT IS A FINANCIAL INTERMEDIARY? A financial intermediary is a firm that receives compensation for selling shares of the Funds offered in this Prospectus and/or provides services to the Funds' shareholders. Financial intermediaries may include, among others, your broker, your financial planner or advisor, banks, and insurance companies. Financial intermediaries may employ financial advisors who deal with you and other investors on an individual basis. In the case of Class A shares, all or a portion of the initial sales charge that you pay may be paid by ABI to financial intermediaries selling Class A shares. ABI may also pay these financial intermediaries a fee of up to 1% on purchases of $1,000,000 or more for AllianceBernstein Link, AllianceBernstein SIMPLE IRA plans with more than $250,000 in assets or for purchases made by certain other retirement plans. Additionally, up to 100% of the Rule 12b-1 fees applicable to Class A shares each year may be paid to financial intermediaries, including your financial intermediary, that sell Class A shares. In the case of Class B shares, ABI may pay, at the time of your purchase, a commission to financial intermediaries selling Class B shares in an amount up to 4% of your investment. 36 Additionally, up to 30% of the Rule 12b-1 fees applicable to Class B shares each year may be paid to financial intermediaries, including your financial intermediary, that sell Class B shares. In the case of Class C shares, ABI may pay, at the time of your purchase, a commission to firms selling Class C shares in an amount equal to 1% of your investment. Additionally, up to 100% of the Rule 12b-1 fee applicable to Class C shares each year may be paid to financial intermediaries, including your financial intermediary, that sell Class C shares. In the case of Advisor Class shares, your financial advisor may charge ongoing fees or transactional fees. Your financial advisor's firm receives compensation from the Funds, ABI, and/or the Adviser in several ways from various sources, which include some or all of the following: - upfront sales commissions; - Rule 12b-1 fees; - additional distribution support; - defrayal of costs for educational seminars and training; and - payments related to providing shareholder recordkeeping and/or transfer agency services. Please read the Prospectus carefully for information on this compensation. Other Payments for Distribution Services and Educational Support In addition to the commissions paid to financial intermediaries at the time of sale and the fees described under "Asset-Based Sales Charges or Distribution and/or Service (Rule 12b-1) Fees," some or all of which may be paid to financial intermediaries (and, in turn, to your financial advisor), ABI, at its expense, currently provides additional payments to firms that sell shares of the AllianceBernstein Mutual Funds. Although the individual components may be higher and the total amount of payments made to each qualifying firm in any given year may vary, the total amount paid to a financial intermediary in connection with the sale of shares of the AllianceBernstein Mutual Funds will generally not exceed the sum of (a) 0.25% of the current year's fund sales by that firm and (b) 0.10% of average daily net assets attributable to that firm over the year. These sums include payments to reimburse directly or indirectly the costs incurred by these firms and their employees in connection with educational seminars and training efforts about the AllianceBernstein Mutual Funds for the firms' employees and/or their clients and potential clients. The costs and expenses associated with these efforts may include travel, lodging, entertainment, and meals. ABI may pay a portion of "ticket" or other transactional charges. For 2009, ABI's additional payments to these firms for distribution services and educational support related to the AllianceBernstein Mutual Funds is expected to be approximately .04% of the average monthly assets of the AllianceBernstein Mutual Funds, or approximately $21 million. In 2008, ABI paid approximately 0.04% of the average monthly assets of the AllianceBernstein Mutual Funds or approximately $21 million for distribution services and educational support related to the AllianceBernstein Mutual Funds. A number of factors are considered in determining the additional payments, including each firm's AllianceBernstein Mutual Fund sales, assets and redemption rates, and the willingness and ability of the firm to give ABI access to its financial advisors for educational and marketing purposes. In some cases, firms will include the AllianceBernstein Mutual Funds on a "preferred list." ABI's goal is to make the financial advisors who interact with current and prospective investors and shareholders more knowledgeable about the AllianceBernstein Mutual Funds so that they can provide suitable information and advice about the funds and related investor services. 37 The Funds and ABI also make payments for sub-accounting or shareholder servicing to financial intermediaries that sell AllianceBernstein Mutual Fund shares. Please see "Management of the Funds--Transfer Agency and Retirement Plan Services" below. These expenses paid by the Funds are included in "Other Expenses" under "Fees and Expenses of the Funds--Annual Fund Operating Expenses" above. If one mutual fund sponsor makes greater distribution assistance payments than another your financial advisor and his or her firm may have an incentive to recommend one fund complex over another. Similarly if your financial advisor or his or her firm receives more distribution assistance for one share class versus another then they may have an incentive to recommend that class. Please speak with your financial advisor to learn more about the total amounts paid to your financial advisor and his or her firm by the Funds, the Adviser, ABI, and by sponsors of other mutual funds he or she may recommend to you. You should also consult disclosures made by your financial advisor at the time of purchase. As of the date of this Prospectus, ABI anticipates that the firms that will receive additional payments for distribution services and/or educational support include: AIG Advisor Group Ameriprise Financial Services AXA Advisors Bank of America Cadaret, Grant & Co. CCO Investment Services Corp. Chase Investment Services Citigroup Global Markets Commonwealth Financial Network Donegal Securities ING Advisors Network LPL Financial Corporation Merrill Lynch Morgan Stanley Raymond James RBC Capital Markets Corporation Robert W. Baird UBS AG UBS Financial Services Wachovia Securities Wells Fargo Investments Although the Funds may use brokers and dealers who sell shares of the Funds to effect portfolio transactions, the Funds do not consider the sale of AllianceBernstein Mutual Fund shares as a factor when selecting brokers or dealers to effect portfolio transactions. HOW TO EXCHANGE SHARES You may exchange your Fund shares for shares of the same class of other AllianceBernstein Mutual Funds (including AllianceBernstein Exchange Reserves, a money market fund managed by the Adviser). Exchanges of shares are made at the next-determined NAV, without sales or service charges. All exchanges are subject to the minimum investment requirements set forth in the prospectus for the AllianceBernstein Mutual Fund whose shares are being acquired. You may request an exchange by mail or telephone. In order to receive 38 a day's NAV, ABIS must receive and confirm your telephone exchange request by 4:00 p.m., Eastern time, on that day. The Funds may modify, restrict, or terminate the exchange privilege on 60 days' written notice. Please see the Funds' SAI for more details. HOW TO SELL OR REDEEM SHARES You may "redeem" your shares (i.e., sell your shares to a Fund) on any day the New York Stock Exchange ("Exchange") is open, either directly or through your financial intermediary. Your sale price will be the next-determined NAV, less any applicable CDSC, after the Fund receives your redemption request in proper form. Normally, redemption proceeds are sent to you within seven days. If you recently purchased your shares by check or electronic funds transfer, your redemption payment may be delayed until the Fund is reasonably satisfied that the check or electronic funds transfer has been collected (which may take up to 15 days). For Advisor Class shares, if you are in doubt about what procedures or documents are required by your fee-based program or employee benefit plan to sell your shares, you should contact your financial advisor. Selling Shares Through Your Broker or Other Financial Advisor Your broker or financial advisor must receive your sales request by 4:00 p.m., Eastern time, and submit it to the Fund by a pre-arranged time for you to receive the next-determined NAV, less any applicable CDSC. Your broker or financial advisor is responsible for submitting all necessary documentation to the Fund and may charge you a fee for this service. Selling Shares Directly to the Fund By Mail: .. Send a signed letter of instruction or stock power, along with certificates, to: AllianceBernstein Investor Services, Inc. P.O. Box 786003 San Antonio, TX 78278-6003 .. For certified or overnight deliveries, send to: AllianceBernstein Investor Services, Inc. 8000 IH 10 W, 4th floor San Antonio, TX 78230 .. For your protection, a bank, a member firm of a national stock exchange or another eligible guarantor institution must guarantee signatures. Stock power forms are available from your financial intermediary, ABIS, and many commercial banks. Additional documentation is required for the sale of shares by corporations, intermediaries, fiduciaries, and surviving joint owners. If you have any questions about these procedures, contact ABIS. By Telephone: .. You may redeem your shares for which no stock certificates have been issued by telephone request. Call ABIS at 800-221-5672 with instructions on how you wish to receive your sale proceeds. .. ABIS must receive and confirm a telephone redemption request by 4:00 p.m., Eastern time, for you to receive that day's NAV, less any applicable CDSC. .. For your protection, ABIS will request personal or other information from you to verify your identity and will generally record the calls. Neither the Fund nor the Adviser, ABIS, ABI or other Fund agent will be liable for any loss, injury, damage or expense as a result of acting upon telephone instructions purporting to be on your behalf that ABIS reasonably believes to be genuine. .. If you have selected electronic funds transfer in your Mutual Fund Application, the redemption proceeds will be sent directly to your bank. Otherwise, the proceeds will be mailed to you. 39 .. Redemption requests by electronic funds transfer or check may not exceed $100,000 per Fund account per day. .. Telephone redemption is not available for shares held in nominee or "street name" accounts, retirement plan accounts, or shares held by a shareholder who has changed his or her address of record within the previous 30 calendar days. FREQUENT PURCHASES AND REDEMPTIONS OF FUND SHARES Each Fund's Board of Directors (the "Board") has adopted policies and procedures designed to detect and deter frequent purchases and redemptions of Fund shares or excessive or short-term trading that may disadvantage long-term Fund shareholders. These policies are described below. Each Fund reserves the right to restrict, reject, or cancel, without any prior notice, any purchase or exchange order for any reason, including any purchase or exchange order accepted by any shareholder's financial intermediary. Risks Associated With Excessive Or Short-term Trading Generally. While the Funds will try to prevent market timing by utilizing the procedures described below, these procedures may not be successful in identifying or stopping excessive or short-term trading in all circumstances. By realizing profits through short-term trading, shareholders that engage in rapid purchases and sales or exchanges of a Fund's shares dilute the value of shares held by long-term shareholders. Volatility resulting from excessive purchases and sales or exchanges of Fund shares, especially involving large dollar amounts, may disrupt efficient portfolio management. In particular, a Fund may have difficulty implementing its long-term investment strategies if it is forced to maintain a higher level of its assets in cash to accommodate significant short-term trading activity. Excessive purchases and sales or exchanges of a Fund's shares may force the Fund to sell portfolio securities at inopportune times to raise cash to accommodate short-term trading activity. In addition, a Fund may incur increased expenses if one or more shareholders engage in excessive or short-term trading. For example, a Fund may be forced to liquidate investments as a result of short-term trading and incur increased brokerage costs and realization of taxable capital gains without attaining any investment advantage. Similarly, a Fund may bear increased administrative costs due to asset level and investment volatility that accompanies patterns of short-term trading activity. All of these factors may adversely affect Fund performance. Funds that may invest significantly in foreign equity securities may be particularly susceptible to short-term trading strategies. This is because foreign securities are typically traded on markets that close well before the time a Fund calculates its NAV at 4:00 p.m., Eastern time, which gives rise to the possibility that developments may have occurred in the interim that would affect the value of these securities. The time zone differences among international stock markets can allow a shareholder engaging in a short-term trading strategy to exploit differences in Fund share prices that are based on closing prices of foreign securities established some time before the Fund calculates its own share price (referred to as "time zone arbitrage"). The Funds have procedures, referred to as fair value pricing, designed to adjust closing market prices of foreign securities to reflect what is believed to be the fair value of those securities at the time the Fund calculates its NAV. While there is no assurance, the Funds expect that the use of fair value pricing, in addition to the short-term trading policies discussed below, will significantly reduce a shareholder's ability to engage in time zone arbitrage to the detriment of other Fund shareholders. This risk is generally not applicable to the Funds because they do not invest in foreign equity securities. A shareholder engaging in a short-term trading strategy may also target a Fund that does not invest primarily in foreign securities. Any Fund that invests in securities that are, among other things, thinly traded, traded infrequently or relatively illiquid has the risk that the current market price for the securities may not accurately reflect current market values. A shareholder may seek to engage in short-term trading to take advantage of these pricing differences (referred to as "price arbitrage"). All Funds may be adversely affected by price arbitrage. 40 Policy Regarding Short-term Trading. Purchases and exchanges of shares of the Funds should be made for investment purposes only. The Funds seek to prevent patterns of excessive purchases and sales or exchanges of Fund shares. The Funds will seek to prevent such practices to the extent they are detected by the procedures described below. The Funds reserve the right to modify this policy, including any surveillance or account blocking procedures established from time to time to effectuate this policy, at any time without notice. .. Transaction Surveillance Procedures. The Funds, through their agents, ABI and ABIS, maintain surveillance procedures to detect excessive or short-term trading in Fund shares. This surveillance process involves several factors, which include scrutinizing transactions in Fund shares that exceed certain monetary thresholds or numerical limits within a specified period of time. Generally, more than two exchanges of Fund shares during any 90-day period or purchases of shares followed by a sale within 90 days will be identified by these surveillance procedures. For purposes of these transaction surveillance procedures, the Funds may consider trading activity in multiple accounts under common ownership, control, or influence. Trading activity identified by either, or a combination, of these factors, or as a result of any other information available at the time, will be evaluated to determine whether such activity might constitute excessive or short-term trading. These surveillance procedures may be modified from time to time, as necessary or appropriate to improve the detection of excessive or short-term trading or to address specific circumstances, such as for certain retirement plans, to conform to plan exchange limits or U.S. Department of Labor regulations, or for certain automated or pre-established exchange, asset allocation or dollar cost averaging programs, or omnibus account arrangements. .. Account Blocking Procedures. If the Funds determine, in their sole discretion, that a particular transaction or pattern of transactions identified by the transaction surveillance procedures described above is excessive or short-term trading in nature, the relevant Fund account(s) will be immediately "blocked" and no future purchase or exchange activity will be permitted. However, sales of Fund shares back to a Fund or redemptions will continue to be permitted in accordance with the terms of the Fund's current Prospectus. In the event an account is blocked, certain account-related privileges, such as the ability to place purchase, sale and exchange orders over the internet or by phone, may also be suspended. A blocked account will generally remain blocked unless and until the account holder or the associated broker, dealer or other financial intermediary provides evidence or assurance acceptable to the Fund that the account holder did not or will not in the future engage in excessive or short-term trading. .. Applications of Surveillance Procedures and Restrictions to Omnibus Accounts. Omnibus account arrangements are common forms of holding shares of the Funds, particularly among certain brokers, dealers and other financial intermediaries, including sponsors of retirement plans and variable insurance products. The Funds apply their surveillance procedures to these omnibus account arrangements. As required by Commission rules, the Funds have entered into agreements with all of their financial intermediaries that require the financial intermediaries to provide the Funds, upon the request of the Funds or their agents, with individual account level information about their transactions. If the Funds detect excessive trading through their monitoring of omnibus accounts, including trading at the individual account level, the financial intermediaries will also execute instructions from the Funds to take actions to curtail the activity, which may include applying blocks to accounts to prohibit future purchases and exchanges of Fund shares. For certain retirement plan accounts, the Funds may request that the retirement plan or other intermediary revoke the relevant participant's privilege to effect transactions in Fund shares via the internet or telephone, in which case the relevant participant must submit future transaction orders via the U.S. Postal Service (i.e., regular mail). 41 Risks to Shareholders Resulting From Imposition of Account Blocks in Response to Excessive Short-term Trading Activity. A shareholder identified as having engaged in excessive or short-term trading activity whose account is "blocked" and who may not otherwise wish to redeem his or her shares effectively may be "locked" into an investment in a Fund that the shareholder did not intend to hold on a long-term basis or that may not be appropriate for the shareholder's risk profile. To rectify this situation, a shareholder with a "blocked" account may be forced to redeem Fund shares, which could be costly if, for example, these shares have declined in value, the shareholder recently paid an initial sales charge or the shares are subject to a CDSC, or the sale results in adverse tax consequences to the shareholder. To avoid this risk, a shareholder should carefully monitor the purchases, sales, and exchanges of Fund shares and avoid frequent trading in Fund shares. Limitations on Ability to Detect and Curtail Excessive Trading Practices. Shareholders seeking to engage in excessive short-term trading activities may deploy a variety of strategies to avoid detection and, despite the efforts of the Funds and their agents to detect excessive or short duration trading in Fund shares, there is no guarantee that the Funds will be able to identify these shareholders or curtail their trading practices. In particular, the Funds may not be able to detect excessive or short-term trading in Fund shares attributable to a particular investor who effects purchase and/or exchange activity in Fund shares through omnibus accounts. Also, multiple tiers of these entities may exist, each utilizing an omnibus account arrangement, which may further compound the difficulty of detecting excessive or short duration trading activity in Fund shares. HOW THE FUNDS VALUE THEIR SHARES Each Fund's NAV is calculated at the close of regular trading on the Exchange (ordinarily, 4:00 p.m., Eastern time), only on days when the Exchange is open for business. To calculate NAV, a Fund's assets are valued and totaled, liabilities are subtracted, and the balance, called net assets, is divided by the number of shares outstanding. If a Fund invests in securities that are primarily traded on foreign exchanges that trade on weekends or other days when the Fund does not price its shares, the NAV of the Fund's shares may change on days when shareholders will not be able to purchase or redeem their shares in the Fund. The Funds value their securities at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are unreliable, at "fair value" as determined in accordance with procedures established by and under the general supervision of each Fund's Board. When a Fund uses fair value pricing, it may take into account any factors it deems appropriate. A Fund may determine fair value based upon developments related to a specific security and/or U.S. sector or broader stock market indices. The prices of securities used by the Fund to calculate its NAV may differ from quoted or published prices for the same securities. Fair value pricing involves subjective judgments and it is possible that the fair value determined for a security is materially different than the value that could be realized upon the sale of that security. Securities for which market quotations are not readily available or deemed unreliable (including restricted securities) are valued at fair market value. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer or analysts, or by analysis of the issuer's financial statements. The Funds may use fair value pricing more frequently for foreign securities because, among other things, most foreign markets close well before the Funds value their securities at 4:00 p.m., Eastern time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of these foreign securities. The Funds may value these securities using fair value prices based on independent pricing services or third party vendor tools to the extent available. 42 Subject to the Board's oversight, each Fund's Board has delegated responsibility for valuing a Fund's assets to the Adviser. The Adviser has established a Valuation Committee, which operates under the policies and procedures approved by the Board, to value the Fund's assets on behalf of the Fund. The Valuation Committee values Fund assets as described above. Your order for purchase, sale, or exchange of shares is priced at the next-determined NAV after your order is received in proper form by the Fund. 43 MORE INFORMATION ABOUT THE FUNDS AND THEIR INVESTMENTS - -------------------------------------------------------------------------------- This section of the Prospectus provides additional information about the Funds' investment practices and risks. Most of these investment practices are discretionary, which means that the Adviser may or may not decide to use them. This Prospectus does not describe all of a Fund's investment practices and additional descriptions of each Fund's strategies, investments, and risks can be found in the Fund's SAI. Derivatives Derivatives are financial contracts whose value depends on, or is derived from, the value of an underlying asset, reference rate or index. Each Fund may, but is not required to, use derivatives for risk management purposes or as part of its investment strategies to earn income and enhance returns, to hedge or adjust the risk profile of a portfolio, to replace more traditional direct investments and to obtain exposure to otherwise inaccessible markets. The four principal types of derivatives in which the Funds invest are options, futures, forwards and swaps, which are described below. Derivatives may be (i) standardized, exchange-traded contracts or (ii) customized, privately negotiated contracts, generally referred to as over-the-counter derivatives. Exchange-traded derivatives tend to be more liquid and subject to less credit risk than those that are privately negotiated. From the four principal types of derivative instruments, virtually any type of derivative transaction can be created. A Fund's use of derivatives may involve risks that are different from, or possibly greater than, the risks associated with investing directly in securities or other more traditional instruments. These risks include the risk that the value of a derivative instrument may not correlate perfectly, or at all, with the value of the assets, reference rates, or indices that they are designed to track. Other risks include: the possible absence of a liquid secondary market for a particular instrument and possible exchange-imposed price fluctuation limits, either of which may make it difficult or impossible to close out a position when desired; the risk that adverse price movements in an instrument can result in a loss substantially greater than the Fund's initial investment in that instrument (in some cases, the potential loss is unlimited); and the risk that the counterparty will not perform its obligations. The Funds may use the following types of derivatives. .. Forward Contracts--A forward contract is a customized, privately negotiated agreement for one party to buy, and the other party to sell, a specific quantity of an underlying commodity or other tangible asset for an agreed upon price at a future date. A forward contract is either settled by physical delivery of the commodity or tangible asset to an agreed-upon location at a future date, rolled forward into a new forward contract or, in the case of a non-deliverable forward, by a cash payment at maturity. The Funds' investments in forward contracts include the following: - Forward Currency Exchange Contracts. A Fund may purchase or sell forward currency exchange contracts for hedging purposes to minimize the risk from adverse changes in the exchange rates between the U.S. Dollar and other currencies or for non-hedging purposes as a means of making direct investments in foreign currencies as described below under "Currency Transactions". A Fund may enter into a forward contract as transaction hedge (to "lock in" the U.S. Dollar price of a non-U.S. Dollar security), as position hedge (to protect the value of securities the Fund owns that are denominated in a foreign currency against substantial changes in the value of the foreign currency) or as cross-hedge (to protect the value of securities the Fund owns that are denominated in a foreign currency against substantial changes in the value of that foreign currency by entering into a forward contract for a different foreign currency that is expected to change in the same direction as the currency in which the securities are denominated). 44 .. Futures Contracts and Options on Futures Contracts--A futures contract is an agreement that obligates the buyer to buy and the seller to sell a specified quantity of an underlying asset (or settle for cash the value of a contract based on an underlying asset, rate or index) at a specific price on the contract maturity date. Futures contracts are standardized exchange traded-instruments and are fungible, meaning they are considered to be perfect substitutes for each other. This fungibility allows futures contracts to be readily offset or cancelled through the acquisition of equal but opposite positions, which is the primary method by which futures contracts are liquidated. A cash-settled futures contract does not require physical delivery of the underlying asset, but instead is settled for cash equal to the difference between the values of the contract on the date it is entered into and its maturity date. Options on futures contracts are options that call for the delivery of futures contracts upon exercise. A Fund may purchase or sell futures contracts and options thereon to hedge against changes in interest rates, securities (through index futures or options) or currencies. A Fund may also purchase or sell futures contracts for foreign currencies or options thereon for non-hedging purposes as a means of making direct investments in foreign currencies, as described below under "Currency Transactions". .. Options--An option (which may be standardized and exchange-traded or customized and privately negotiated) is an agreement that, for a premium payment or fee, gives the option holder (the buyer) the right but not the obligation to buy (a "call option") or sell (a "put option") the underlying asset (or settle for cash an amount based on an underlying asset, rate or index) at a specified price (the exercise price) during a period of time or on a specified date. Investments in options are considered speculative. A Fund may lose the premium paid for them if the price of the underlying security or other asset decreased or remained the same (in the case of a call option) or increased or remained the same (in the case of a put option). If a put or call option purchased by a Fund were permitted to expire without being sold or exercised, its premium would represent a loss to the Fund. The Funds' investments in options include the following: - Options on Foreign Currencies. A Fund may invest in options on foreign currencies that are privately negotiated or traded on U.S. or foreign exchanges for hedging purposes to protect against declines in the U.S. Dollar value of foreign currency denominated securities held by a Fund and against increases in the U.S. Dollar cost of securities to be acquired. The purchase of an option on a foreign currency may constitute an effective hedge against fluctuations in exchange rates, although if rates move adversely, a Fund may forfeit the entire amount of the premium plus related transaction costs. A Fund may also invest in options on foreign currencies for non-hedging purposes as a means of making direct investments in foreign currencies, as described below under "Currency Transactions." - Options on Securities. A Fund may purchase or write a put or call option on securities. The Fund will only exercise an option it purchased if the price of the security was less (in the case of a put option) or more (in the case of a call option) than the exercise price. If the Fund does not exercise an option, the premium it paid for the option will be lost. Normally, a Fund will write only "covered" options, which means writing an option for securities the Fund owns, but may write an uncovered call option for cross-hedging purposes. - Options on Securities Indices. An option on a securities index is similar to an option on a security except that, rather than taking or making delivery of a security at a specified price, an option on a securities index gives the holder the right to receive, upon exercise of the option, an amount of cash if the closing level of the chosen index is greater than (in the case of a call) or less than (in the case of a put) the exercise price of the option. 45 .. Swap Transactions--A swap is a customized, privately negotiated agreement that obligates two parties to exchange a series of cash flows at specified intervals (payment dates) based upon or calculated by reference to changes in specified prices or rates (interest rates in the case of interest rate swaps, currency exchange rates in the case of currency swaps) for a specified amount of an underlying asset (the "notional" principal amount). Except for currency swaps, the notional principal amount is used solely to calculate the payment stream, but is not exchanged. The Funds' investments in swap transactions include the following: - Interest Rate Swaps. Interest rate swaps involve the exchange by a Fund with another party of their respective commitments to pay or receive interest (e.g., an exchange of floating rate payments for fixed rate payments). Interest rate swaps are entered into on a net basis (i.e., the two payment streams are netted out, with the Fund receiving or paying, as the case may be, only the net amount of the two payments). - Swaptions, Caps, and Floors. An option on a swap agreement, also called a "swaption," is an option that gives the buyer the right, but not the obligation, to enter into a swap on a future date in exchange for paying a market-based "premium." A receiver swaption gives the owner the right to receive the total return of a specified asset, reference rate, or index. A payer swaption gives the owner the right to pay the total return of a specified asset, reference rate, or index. Swaptions also include options that allow an existing swap to be terminated or extended by one of the counterparties. The purchase of an interest rate cap entitles the purchaser, to the extent that a specified index exceeds a predetermined interest rate, to receive payments of interest on a contractually-based principal amount from the party selling the interest rate cap. The purchase of an interest rate floor entitles the purchaser, to the extent that a specified index falls below a predetermined interest rate, to receive payments of interest on an agreed principal amount from the party selling the interest rate floor. Caps and floors may be less liquid than swaps. Interest rate swap, cap, and floor transactions may be used to preserve a return or spread on a particular investment or a portion of a Fund's portfolio or to protect against an increase in the price of securities a Fund anticipates purchasing at a later date. These transactions do not involve the delivery of securities or other underlying assets or principal. Unless there is a counterparty default, the risk of loss to a Fund from interest rate transactions is limited to the net amount of interest payments that the Fund is contractually obligated to make. If the counterparty to an interest rate transaction defaults, the Fund's risk of loss consists of the net amount of interest payments that the Fund contractually is entitled to receive. - Credit Default Swap Agreements. The "buyer" in a credit default swap contract is obligated to pay the "seller" a periodic stream of payments over the term of the contract in return for a contingent payment upon the occurrence of a credit event with respect to an underlying reference obligation. Generally, a credit event means bankruptcy, failure to pay, obligation acceleration or modified restructuring. A Fund may be either the buyer or seller in the transaction. If a Fund is a seller, the Fund receives a fixed rate of income throughout the term of the contract, which typically is between one month and five years, provided that no credit event occurs. If a credit event occurs, a Fund typically must pay the contingent payment to the buyer, which is typically the "par value" (full notional value) of the reference obligation. The contingent payment may be a cash settlement or by physical delivery of the reference obligation in return for payment of the face amount of the obligation The value of the reference obligation received by a Fund coupled with the periodic payments 46 previously received may be less than the full notional value it pays to the buyer, resulting in a loss of value to the Fund. If the reference obligation is a defaulted security, physical delivery of the security will cause a Fund to hold a defaulted security. If a Fund is a buyer and no credit event occurs, the Fund will lose its periodic stream of payments over the term of the contract. However, if a credit event occurs, the buyer typically receives full notional value for a reference obligation that may have little or no value. Credit default swaps may involve greater risks than if a Fund had invested in the reference obligation directly. Credit default swaps are subject to general market risk, liquidity risk and credit risk. - Currency Swaps. A Fund may invest in currency swaps for hedging purposes to protect against adverse changes in exchange rates between the U.S. Dollar and other currencies or for non-hedging purposes as a means of making direct investments in foreign currencies, as described below under "Currency Transactions." Currency swaps involve the individually negotiated exchange by a Fund with another party of a series of payments in specified currencies. Actual principal amounts of currencies may be exchanged by the counterparties at the initiation, and again upon the termination, of the transaction. Therefore, the entire principal value of a currency swap is subject to the risk that the swap counterparty will default on its contractual delivery obligations. If there is a default by the counterparty to the transaction, the Fund will have contractual remedies under the transaction agreements. .. Other Derivatives and Strategies-- - Eurodollar Instruments. Eurodollar instruments are essentially U.S. Dollar-denominated futures contracts or options that are linked to the London Interbank Offered Rate (LIBOR). Eurodollar futures contracts enable purchasers to obtain a fixed rate for the lending of funds and sellers to obtain a fixed rate for borrowings. - Structured Instruments. As part of its investment program and to maintain greater flexibility, each Fund may invest in structured instruments. Structured instruments, including indexed or structured securities, combine the elements of futures contracts or options with those of debt, preferred equity or a depository instrument. Generally, a structured instrument will be a debt security, preferred stock, depository share, trust certificate, certificate of deposit or other evidence of indebtedness on which a portion of or all interest payments, and/or the principal or stated amount payable at maturity, redemption or retirement, is determined by reference to prices, changes in prices, or differences between prices, of securities, currencies, intangibles, goods, articles or commodities (collectively "Underlying Assets") or by another objective index, economic factor or other measure, such as interest rates, currency exchange rates, commodity indices, and securities indices (collectively, "Benchmarks"). Thus, structured instruments may take a variety of forms, including, but not limited to, debt instruments with interest or principal payments or redemption terms determined by reference to the value of a currency or commodity or securities index at a future point in time, preferred stock with dividend rates determined by reference to the value of a currency, or convertible securities with the conversion terms related to a particular commodity. Structured instruments are potentially more volatile and carry greater market risks than traditional debt instruments. Depending on the structure of the particular structured instrument, changes in a Benchmark may be magnified by the terms of the structured instrument and have an even more dramatic and substantial effect upon the value of the structured instrument. Also, the prices of the structured instrument and the Benchmark or Underlying Asset may not move in the same direction or at the same time. 47 Structured instruments can have volatile prices and limited liquidity, and their use by a Fund may not be successful. The risk of these investments can be substantial; possibly all of the principal is at risk. No Fund will invest more than 20% of its total assets in these investments. - Currency Transactions. A Fund may invest in non-U.S. Dollar-denominated securities on a currency hedged or un-hedged basis. The Adviser may actively manage a Fund's currency exposures and may seek investment opportunities by taking long or short positions in currencies through the use of currency-related derivatives, including forward currency exchange contracts, futures and options on futures, swaps and options. The Adviser may enter into transactions for investment opportunities when it anticipates that a foreign currency will appreciate or depreciate in value but securities denominated in that currency are not held by a Fund and do not present attractive investment opportunities. Such transactions may also be used when the Adviser believes that it may be more efficient than a direct investment in a foreign currency-denominated security. A Fund may also conduct currency exchange contracts on a spot basis (i.e., for cash at the spot rate prevailing in the currency exchange market for buying or selling currencies). Forward Commitments Forward commitments for the purchase or sale of securities may include purchases on a when-issued basis or purchases or sales on a delayed delivery basis. In some cases, a forward commitment may be conditioned upon the occurrence of a subsequent event, such as approval and consummation of a merger, corporate reorganization or debt restructuring or approval of a proposed financing by appropriate authorities (i.e., a "when, as and if issued" trade). The Funds may invest significantly in TBA-mortgage-backed securities. A TBA or "To Be Announced" trade represents a contract for the purchase or sale of mortgage-backed securities to be delivered at a future agreed-upon date; however, the specific mortgage pool numbers or the number of pools that will be delivered to fulfill the trade obligation or terms of the contract are unknown at the time of the trade. Mortgage pools (including fixed rate or variable rate mortgages) guaranteed by the Government National Mortgage Association, or GNMA, the Federal National Mortgage Association, or FNMA, or the Federal Home Loan Mortgage Corporation, or FHLMC, are subsequently allocated to the TBA transactions. When forward commitments with respect to fixed-income securities are negotiated, the price, which is generally expressed in yield terms, is fixed at the time the commitment is made, but payment for and delivery of the securities take place at a later date. Securities purchased or sold under a forward commitment are subject to market fluctuation and no interest or dividends accrue to the purchaser prior to the settlement date. The use of forward commitments helps a Fund to protect against anticipated changes in interest rates and prices. Illiquid Securities Under current Commission guidelines, the Funds limit their investments in illiquid securities to 15% of their net assets. The term "illiquid securities" for this purpose means securities that cannot be disposed of within seven days in the ordinary course of business at approximately the amount a Fund has valued the securities. A Fund that invests in illiquid securities may not be able to sell such securities and may not be able to realize their full value upon sale. Restricted securities (securities subject to legal or contractual restrictions on resale) may be illiquid. Some restricted securities (such as securities issued pursuant to Rule 144A under the Securities Act of 1933 (the "Securities Act") or certain commercial paper) may be treated as liquid, although they may be less liquid than registered securities traded on established secondary markets. 48 Indexed Commercial Paper Indexed commercial paper may have its principal linked to changes in foreign currency exchange rates whereby its principal amount is adjusted upwards or downwards (but not below zero) at maturity to reflect changes in the referenced exchange rate. A Fund will receive interest and principal payments on such commercial paper in the currency in which such commercial paper is denominated, but the amount of principal payable by the issuer at maturity will change in proportion to the change (if any) in the exchange rate between the two specified currencies between the date the instrument is issued and the date the instrument matures. While such commercial paper entails the risk of loss of principal, the potential for realizing gains as a result of changes in foreign currency exchange rates enables a Fund to hedge (or cross-hedge) against a decline in the U.S. Dollar value of investments denominated in foreign currencies while providing an attractive money market rate of return. A Fund will purchase such commercial paper for hedging purposes only, not for speculation. Inflation-Protected Securities Inflation-protected securities, or IPS, are fixed-income securities whose principal value is periodically adjusted according to the rate of inflation. If the index measuring inflation falls, the principal value of these securities will be adjusted downward, and consequently the interest payable on these securities (calculated with respect to a smaller principal amount) will be reduced. Inflation-protected securities tend to react to changes in real interest rates. In general, the price of an inflation-protected security can fall when real interest rates rise, and can rise when real interest rates fall. Interest payments on inflation-protected securities can be unpredictable and will vary as the principal and/or interest is adjusted for inflation. Investment in Other Investment Companies The Funds (except for AllianceBernstein Short Duration Portfolio) may invest in other investment companies as permitted by the Investment Company Act of 1940 (the "1940 Act") or the rules and regulations thereunder. The Funds intend to invest uninvested cash balances in an affiliated money market fund as permitted by Rule 12d1-1 under the 1940 Act. If a Fund acquires shares in investment companies, shareholders would bear, indirectly, the expenses of such investment companies (which may include management and advisory fees), which are in addition to the Fund's expenses. A Fund may also invest in exchange traded funds, subject to the restrictions and limitations of the 1940 Act. Loan Participations The Funds may invest in corporate loans either by participating as co-lender at the time the loan is originated or by buying an interest in the loan in the secondary market from a financial institution or institutional investor. The financial status of an institution interposed between a Fund and a borrower may affect the ability of the Fund to receive principal and interest payments. The success of a Fund may depend on the skill with which an agent bank administers the terms of the corporate loan agreements, monitors borrower compliance with covenants, collects principal, interest and fee payments from borrowers and, where necessary, enforces creditor remedies against borrowers. Agent banks typically have broad discretion in enforcing loan agreements. Mortgage-Related and Other Asset-Backed Securities Each Fund may invest in mortgage-related or other asset-backed securities. Mortgage-related securities include mortgage pass-through securities, collateralized mortgage obligations ("CMOs"), commercial mortgage-backed securities, mortgage dollar rolls, CMO residuals, stripped mortgage-backed securities ("SMBSs") and other securities that directly or indirectly represent a participation in or are secured by and payable from mortgage 49 loans on real property. These securities may be issued or guaranteed by the U.S. Government or one of its sponsored entities or may be issued by private organizations. The value of mortgage-related or asset-backed securities may be particularly sensitive to changes in prevailing interest rates. Early payments of principal on some mortgage-related securities may occur during periods of falling mortgage interest rates and expose a Fund to a lower rate of return upon reinvestment of principal. Early payments associated with mortgage-related securities cause these securities to experience significantly greater price and yield volatility than is experienced by traditional fixed-income securities. During periods of rising interest rates, a reduction in prepayments may increase the effective life of mortgage-related securities, subjecting them to greater risk of decline in market value in response to rising interest rates. If the life of a mortgage-related security is inaccurately predicted, a Fund may not be able to realize the rate of return it expected. One type of SMBS has one class receiving all of the interest from the mortgage assets (the interest-only, or "IO" class), while the other class will receive all of the principal (the principal-only, or "PO" class). The yield to maturity on an IO class is extremely sensitive to the rate of principal payments (including prepayments) on the underlying mortgage assets, and a rapid rate of principal payments may have a material adverse effect on a Fund's yield to maturity from these securities. Each Fund may invest in collateralized debt obligations ("CDOs"), which include collateralized bond obligations ("CBOs"), collateralized loan obligations ("CLOs"), and other similarly structured securities. CBOs and CLOs are types of asset-backed securities. A CBO is a trust that is backed by a diversified pool of high-risk, below investment grade fixed-income securities. A CLO is a trust typically collateralized by a pool of loans, which may include, among others, domestic and foreign senior secured loans, senior unsecured loans, and subordinate corporate loans, including loans that may be rated below investment grade or equivalent unrated loans. The Funds may invest in other asset-backed securities that have been offered to investors. Other Asset-Backed Securities The Funds may invest in other asset-backed securities. The securitization techniques used to develop mortgage-related securities are being applied to a broad range of financial assets. Through the use of trusts and special purpose corporations, various types of assets, including automobile loans and leases, credit card receivables, home equity loans, equipment leases and trade receivables, are being securitized in structures similar to the structures used in mortgage securitizations. Repurchase Agreements and Buy/Sell Back Transactions Each Fund may enter into repurchase agreements in which a Fund purchases a security from a bank or broker-dealer, which agrees to repurchase the security from the Fund at an agreed-upon future date, normally a day or a few days later. The purchase and repurchase obligations are transacted under one agreement. The resale price is greater than the purchase price, reflecting an agreed-upon interest rate for the period the buyer's money is invested in the security. Such agreements permit a Fund to keep all of its assets at work while retaining "overnight" flexibility in pursuit of investments of a longer-term nature. If the bank or broker-dealer defaults on its repurchase obligation, a Fund would suffer a loss to the extent that the proceeds from the sale of the security were less than the repurchase price. Each Fund may enter into buy/sell back transactions, which are similar to repurchase agreements. In this type of transaction, a Fund enters a trade to buy securities at one price and simultaneously enters a trade to sell the same securities at another price on a specified date. Similar to a repurchase agreement, the repurchase price is higher than the sale price and reflects current interest rates. Unlike a repurchase agreement, however, the buy/sell back transaction is considered two separate transactions. 50 Reverse Repurchase Agreements, Dollar Rolls and Other Borrowings Each Fund may enter into reverse purchase agreements and dollar rolls, subject to the Fund's limitations on borrowings. A reverse repurchase agreement or dollar roll involves the sale of a security by a Fund and its agreement to repurchase the instrument at a specified time and price, and may be considered a form of borrowing for some purposes. Reverse repurchase agreements, dollar rolls and other forms of borrowings may create leveraging risk for a Fund. In addition, reverse repurchase agreements and dollar rolls involve the risk that the market value of the securities a Fund is obligated to repurchase may decline below the purchase price. Dollar rolls involve sales by a Fund of securities for delivery in the current month and the Fund's simultaneously contracting to repurchase substantially similar (same type and coupon) securities on a specified future date. During the roll period, a Fund forgoes principal and interest paid on the securities. A Fund is compensated by the difference between the current sales price and the lower forward price for the future purchase (often referred to as the "drop") as well as by the interest earned on the cash proceeds of the initial sale. Reverse repurchase agreements and dollar rolls involve the risk that the market value of the securities a Fund is obligated to repurchase under the agreement may decline below the repurchase price. In the event the buyer of securities under a reverse repurchase agreement or dollar roll files for bankruptcy or becomes insolvent, a Fund's use of the proceeds of the agreement may be restricted pending a determination by the other party, or its trustee or receiver, whether to enforce the Fund's obligation to repurchase the securities. Rights and Warrants Rights and warrants are option securities permitting their holders to subscribe for other securities. Rights are similar to warrants except that they have a substantially shorter duration. Rights and warrants do not carry with them dividend or voting rights with respect to the underlying securities, or any rights in the assets of the issuer. As a result, an investment in rights and warrants may be considered more speculative than certain other types of investments. In addition, the value of a right or a warrant does not necessarily change with the value of the underlying securities, and a right or a warrant ceases to have value if it is not exercised prior to its expiration date. Short Sales The Funds (except for AllianceBernstein Short Duration Portfolio) may make short sales as a part of overall portfolio management or to offset a potential decline in the value of a security. A short sale involves the sale of a security that a Fund does not own, or if the Fund owns the security, is not to be delivered upon consummation of the sale. When the Fund makes a short sale of a security that it does not own, it must borrow from a broker-dealer the security sold short and deliver the security to the broker-dealer upon conclusion of the short sale. A short sale of a security involves the risk that, instead of declining, the price of the security sold short will rise. If the price of the securities sold short increases between the time of a short sale and the time a Fund replaces the borrowed security, the Fund will incur a loss; conversely, if the price declines, the Fund will realize a gain. The potential for the price of a fixed-income security sold short to rise is a function of both the remaining maturity of the obligation, its creditworthiness and its yield. Unlike short sales of equities or other instruments, potential for the price of a fixed-income security to rise may be limited due to the fact that the security will be no more than par at maturity. However, the short sale of other instruments or securities generally, including fixed-income securities convertible into equities or other instruments, a fixed-income security trading at a deep discount from par or that pays a coupon that is high in relative and/or absolute terms, or that is denominated in a currency other than the U.S. Dollar, involves the possibility of 51 a theoretically unlimited loss since there is a theoretically unlimited potential for the market price of the security sold short to increase. Standby Commitment Agreements Standby commitment agreements are similar to put options that commit a Fund, for a stated period of time, to purchase a stated amount of a security that may be issued and sold to the Fund at the option of the issuer. The price and coupon of the security are fixed at the time of the commitment. At the time of entering into the agreement, the Fund is paid a commitment fee, regardless of whether the security ultimately is issued. The Funds will enter into such agreements only for the purpose of investing in the security underlying the commitment at a yield and price considered advantageous to the Fund and unavailable on a firm commitment basis. There is no guarantee that a security subject to a standby commitment will be issued. In addition, the value of the security, if issued, on the delivery date may be more or less than its purchase price. Since the issuance of the security is at the option of the issuer, a Fund will bear the risk of capital loss in the event the value of the security declines and may not benefit from an appreciation in the value of the security during the commitment period if the issuer decides not to issue and sell the security to the Fund. Structured Securities and Basket Securities The Funds may invest in various types of structured securities and basket securities. Structured securities are securities issued in structured financing transactions, which generally involve aggregating types of debt assets in a pool or special purpose entity and then issuing new securities. Types of structured financings include securities described elsewhere in this Prospectus, such as mortgage-related and other asset-backed securities. The Funds' investments include investments in structured securities that represent interests in entities organized and operated solely for the purpose of restructuring the investment characteristics of particular debt obligations. This type of restructuring involves the deposit with or purchase by an entity, such as a corporation or trust, of specified instruments (such as commercial bank loans or high yield bonds) and the issuance by that entity of one or more classes of structured securities backed by, or representing interests in, the underlying instruments. The cash flow on the underlying instruments may be apportioned among the newly issued structured securities to create securities with different investment characteristics such as varying maturities, payment priorities and interest rate provisions, and the extent of the payments made with respect to structured securities is dependent on the extent of the cash flow from the underlying instruments. Structured securities of a given class may be either subordinated or unsubordinated to the payment of another class. Subordinated structured securities typically have higher yields and present greater risks than unsubordinated structured securities. Basket securities in which a Fund may invest may consist of entities organized and operated for the purpose of holding a basket of other securities. Baskets involving debt obligations may be designed to represent the characteristics of some portion of the debt securities market or the entire debt market. Variable, Floating and Inverse Floating Rate Instruments Variable and floating rate securities pay interest at rates that are adjusted periodically, according to a specified formula. A "variable" interest rate adjusts at predetermined intervals (e.g., daily, weekly or monthly), while a "floating" interest rate adjusts whenever a specified benchmark rate (such as the bank prime lending rate) changes. The Funds may also invest in inverse floating rate debt instruments ("inverse floaters"). The interest rate on an inverse floater resets in the opposite direction from the market rate of interest to which the inverse floater is indexed. An inverse floater may have greater volatility in market value, in that, during periods of rising interest rates, the market values of inverse floaters will tend to decrease more rapidly than those of fixed rate securities. 52 Zero Coupon and Principal-Only Securities Zero coupon securities and principal-only (PO) securities are debt securities that have been issued without interest coupons or stripped of their unmatured interest coupons, and include receipts or certificates representing interests in such stripped debt obligations and coupons. Such a security pays no interest to its holder during its life. Its value to an investor consists of the difference between its face value at the time of maturity and the price for which it was acquired, which is generally an amount significantly less than its face value. Such securities usually trade at a deep discount from their face or par value and are subject to greater fluctuations in market value in response to changing interest rates than debt obligations of comparable maturities and credit quality that make current distributions of interest. On the other hand, because there are no periodic interest payments to be reinvested prior to maturity, these securities eliminate reinvestment risk and "lock in" a rate of return to maturity. Foreign (Non-U.S.) Securities Investing in foreign securities involves special risks and considerations not typically associated with investing in U.S. securities. The securities markets of many foreign countries are relatively small, with the majority of market capitalization and trading volume concentrated in a limited number of companies representing a small number of industries. A Fund that invests in foreign fixed-income securities may experience greater price volatility and significantly lower liquidity than a portfolio invested solely in securities of U.S. companies. These markets may be subject to greater influence by adverse events generally affecting the market, and by large investors trading significant blocks of securities, than is usual in the United States. Securities registration, custody, and settlement may in some instances be subject to delays and legal and administrative uncertainties. Foreign investment in the securities markets of certain foreign countries is restricted or controlled to varying degrees. These restrictions or controls may at times limit or preclude investment in certain securities and may increase the cost and expenses of a Fund. In addition, the repatriation of investment income, capital or the proceeds of sales of securities from certain countries is controlled under regulations, including in some cases the need for certain advance government notification or authority, and if a deterioration occurs in a country's balance of payments, the country could impose temporary restrictions on foreign capital remittances. A Fund also could be adversely affected by delays in, or a refusal to grant, any required governmental approval for repatriation, as well as by the application to it of other restrictions on investment. Investing in local markets may require a Fund to adopt special procedures or seek local governmental approvals or other actions, any of which may involve additional costs to a Fund. These factors may affect the liquidity of a Fund's investments in any country and the Adviser will monitor the effect of any such factor or factors on a Fund's investments. Transaction costs, including brokerage commissions for transactions both on and off the securities exchanges, in many foreign countries are generally higher than in the United States. Issuers of securities in foreign jurisdictions are generally not subject to the same degree of regulation as are U.S. issuers with respect to such matters as insider trading rules, restrictions on market manipulation, shareholder proxy requirements, and timely disclosure of information. The reporting, accounting, and auditing standards of foreign countries may differ, in some cases significantly, from U.S. standards in important respects, and less information may be available to investors in foreign securities than to investors in U.S. securities. Substantially less information is publicly available about certain non-U.S. issuers than is available about most U.S. issuers. The economies of individual foreign countries may differ favorably or unfavorably from the U.S. economy in such respects as growth of gross domestic product or gross national 53 product, rate of inflation, capital reinvestment, resource self-sufficiency, and balance of payments position. Nationalization, expropriation or confiscatory taxation, currency blockage, political changes, government regulation, political or social instability, revolutions, wars or diplomatic developments could affect adversely the economy of a foreign country. In the event of nationalization, expropriation, or other confiscation, a Fund could lose its entire investment in securities in the country involved. In addition, laws in foreign countries governing business organizations, bankruptcy and insolvency may provide less protection to security holders such as the Fund than that provided by U.S. laws. Investments in securities of companies in emerging markets involve special risks. There are approximately 100 countries identified by the World Bank as Low Income, Lower Middle Income and Upper Middle Income countries that are generally regarded as Emerging Markets. Emerging market countries that the Adviser currently considers for investment are listed below. Countries may be added to or removed from this list at any time. Algeria Hong Kong Poland Argentina Hungary Qatar Belize India Romania Brazil Indonesia Russia Bulgaria Israel Singapore Chile Jamaica Slovakia China Jordan Slovenia Colombia Kazakhstan South Africa Costa Rica Lebanon South Korea Cote D'Ivoire Malaysia Taiwan Croatia Mexico Thailand Czech Republic Morocco Trinidad & Tobago Dominican Republic Nigeria Tunisia Ecuador Pakistan Turkey Egypt Panama Ukraine El Salvador Peru Uruguay Guatemala Philippines Venezuela Investing in emerging market securities imposes risks different from, or greater than, risks of investing in domestic securities or in foreign, developed countries. These risks include: smaller market capitalization of securities markets, which may suffer periods of relative illiquidity; significant price volatility; restrictions on foreign investment; and possible repatriation of investment income and capital. In addition, foreign investors may be required to register the proceeds of sales; future economic or political crises could lead to price controls, forced mergers, expropriation or confiscatory taxation, seizure, nationalization, or creation of government monopolies. The currencies of emerging market countries may experience significant declines against the U.S. Dollar, and devaluation may occur subsequent to investments in these currencies by a Fund. Inflation and rapid fluctuations in inflation rates have had, and may continue to have, negative effects on the economies and securities markets of certain emerging market countries. Additional risks of emerging market securities may include: greater social, economic and political uncertainty and instability; more substantial governmental involvement in the economy; less governmental supervision and regulation; unavailability of currency hedging techniques; companies that are newly organized and small; differences in auditing and financial reporting standards, which may result in unavailability of material information about issuers; and less developed legal systems. In addition, emerging securities markets may have different clearance and settlement procedures, which may be unable to keep pace with the volume of securities transactions or otherwise make it difficult to engage in such transactions. Settlement problems may cause a Fund to miss attractive investment opportunities, hold a portion of its assets in cash pending investment, or be delayed in disposing of a portfolio security. Such a delay could result in possible liability to a purchaser of the security. 54 Foreign (Non-U.S.) Currencies A Fund that invests some portion of its assets in securities denominated in, and receives revenues in, foreign currencies will be adversely affected by reductions in the value of those currencies relative to the U.S. Dollar. Foreign currency exchange rates may fluctuate significantly. They are determined by supply and demand in the foreign exchange markets, the relative merits of investments in different countries, actual or perceived changes in interest rates, and other complex factors. Currency exchange rates also can be affected unpredictably by intervention (or the failure to intervene) by U.S. or foreign governments or central banks or by currency controls or political developments. In light of these risks, a Fund may engage in certain currency hedging transactions, as described above, which involve certain special risks. A Fund may also invest directly in foreign currencies for non-hedging purposes directly on a spot basis (i.e., cash) or through derivative transactions, such as forward currency exchange contracts, futures and options thereon, swaps and options as described above. These investments will be subject to the same risks. In addition, currency exchange risks may fluctuate significantly over short periods of time, causing a Fund's NAV to fluctuate. Borrowing and Leverage The Funds may use borrowings for investment purposes subject to the limit imposed by the 1940 Act, which is up to 33- 1/3% of a Fund's assets. Borrowings by a Fund result in leveraging of the Fund's shares. The Funds may also use leverage for investment transactions by entering into transactions such as reverse repurchase agreements, forward contracts and dollar rolls. This means that a Fund uses cash made available during the term of these transactions to make investments in other fixed-income securities. Utilization of leverage, which is usually considered speculative, involves certain risks to a Fund's shareholders. These include a higher volatility of the net asset value of a Fund's shares and the relatively greater effect on the net asset value of the shares. So long as a Fund is able to realize a net return on its investment portfolio that is higher than the interest expense paid on borrowings or the carrying costs of leveraged transactions, the effect of leverage will be to cause the Fund's shareholders to realize a higher current net investment income than if the Fund were not leveraged. If the interest expense on borrowings or the carrying costs of leveraged transactions approaches the net return on a Fund's investment portfolio, the benefit of leverage to the Fund's shareholders will be reduced. If the interest expense on borrowings or the carrying costs of leveraged transactions were to exceed the net return to shareholders, a Fund's use of leverage would result in a lower rate of return. Similarly, the effect of leverage in a declining market could be a greater decrease in net asset value per share. In an extreme case, if a Fund's current investment income were not sufficient to meet the interest expense on borrowing or the carrying costs of leveraged transactions, it could be necessary for the Fund to liquidate certain of its investments, thereby reducing the net asset value of a Fund's shares. A Fund may also reduce the degree to which it is leveraged by repaying amounts borrowed. Investment in Below Investment Grade Fixed-Income Securities Investments in securities rated below investment grade may be subject to greater risk of loss of principal and interest than higher-rated securities. These securities are also generally considered to be subject to greater market risk than higher-rated securities. The capacity of issuers of these securities to pay interest and repay principal is more likely to weaken than is that of issuers of higher-rated securities in times of deteriorating economic conditions or rising interest rates. In addition, below investment grade securities may be more susceptible to real or perceived adverse economic conditions than investment grade securities. The market for these securities may be thinner and less active than that for higher-rated securities, which can adversely affect the prices at which these securities can be sold. To the extent that there is no established secondary market for these securities, a Fund may experience difficulty in valuing such securities and, in turn, the Fund's assets. 55 Unrated Securities A Fund may invest in unrated securities when the Adviser believes that the financial condition of the issuers of such securities, or the protection afforded by the terms of the securities themselves, limits the risk to the Fund to a degree comparable to that of rated securities that are consistent with the Fund's objective and policies. Sovereign Debt Obligations No established secondary markets may exist for many sovereign debt obligations. Reduced secondary market liquidity may have an adverse effect on the market price and a Fund's ability to dispose of particular instruments when necessary to meet its liquidity requirements or in response to specific economic events such as a deterioration in the creditworthiness of the issuer. Reduced secondary market liquidity for certain sovereign debt obligations may also make it more difficult for a Fund to obtain accurate market quotations for the purpose of valuing its portfolio. Market quotations are generally available on many sovereign debt obligations only from a limited number of dealers and may not necessarily represent firm bids of those dealers or prices for actual sales. By investing in sovereign debt obligations, the Funds will be exposed to the direct or indirect consequences of political, social, and economic changes in various countries. Political changes in a country may affect the willingness of a foreign government to make or provide for timely payments of its obligations. The country's economic status, as reflected in, among other things, its inflation rate, the amount of its external debt and its gross domestic product, will also affect the government's ability to honor its obligations. The Funds are permitted to invest in sovereign debt obligations that are not current in the payment of interest or principal or are in default so long as the Adviser believes it to be consistent with the Funds' investment objectives. The Funds may have limited legal recourse in the event of a default with respect to certain sovereign debt obligations they hold. For example, remedies from defaults on certain sovereign debt obligations, unlike those on private debt, must, in some cases, be pursued in the courts of the defaulting party itself. Legal recourse therefore may be significantly diminished. Bankruptcy, moratorium, and other similar laws applicable to issuers of sovereign debt obligations may be substantially different from those applicable to issuers of private debt obligations. The political context, expressed as the willingness of an issuer of sovereign debt obligations to meet the terms of the debt obligation, for example, is of considerable importance. In addition, no assurance can be given that the holders of commercial bank debt will not contest payments to the holders of securities issued by foreign governments in the event of default under commercial bank loan agreements. Future Developments A Fund may take advantage of other investment practices that are not currently contemplated for use by the Fund, or are not available but may yet be developed, to the extent such investment practices are consistent with the Fund's investment objective and legally permissible for the Fund. Such investment practices, if they arise, may involve risks that exceed those involved in the activities described above. Changes in Investment Objectives and Policies A Fund's Board may change a Fund's investment objective without shareholder approval. The Fund will provide shareholders with 60 days' prior written notice of any change to the Fund's investment objective. Unless otherwise noted, all other investment policies of a Fund may be changed without shareholder approval. Portfolio Turnover The portfolio turnover rate for each Fund is included in the Financial Highlights section. The Funds are actively managed and, in some cases in response to market conditions or otherwise as disclosed in this Prospectus, a Fund's portfolio turnover may exceed 100%. A higher rate of portfolio turnover increases transaction costs and other expenses, which 56 must be borne by the Fund and its shareholders. High portfolio turnover also may result in the realization of substantial net short-term capital gains, which, when distributed, are taxable to shareholders. Temporary Defensive Position For temporary defensive purposes in an attempt to respond to adverse market, economic, political or other conditions, each Fund may invest in certain types of short-term, liquid, investment grade or high quality (depending on the Fund) debt securities. While a Fund is investing for temporary defensive purposes, it may not meet its investment objectives. Portfolio Holdings A description of each Fund's policies and procedures with respect to the disclosure of the Fund's portfolio securities is available in the Fund's SAI. 57 MANAGEMENT OF THE FUNDS - -------------------------------------------------------------------------------- INVESTMENT ADVISER Each Fund's adviser is AllianceBernstein L.P., 1345 Avenue of the Americas, New York, New York 10105. The Adviser is a leading international investment adviser supervising client accounts with assets as of September 30, 2008, totaling approximately $590 billion (of which approximately $81 billion represented assets of investment companies). As of September 30, 2008, the Adviser managed retirement assets for many of the largest public and private employee benefit plans (including 53 of the nation's FORTUNE 100 companies), for public employee retirement funds in 38 states, for investment companies, and for foundations, endowments, banks and insurance companies worldwide. The 36 registered investment companies managed by the Adviser, comprising 105 separate investment portfolios, currently have approximately 4.2 million accounts. The Adviser provides investment advisory services and order placement facilities for each of the Funds. For these advisory services, each of the Funds paid the Adviser during its most recent fiscal year as a percentage of average daily net assets:
Fee as a percentage of average daily Fiscal Year Fund net assets Ended -------------------------------------------------------------- AllianceBernstein Short Duration .45% 9/30/08 AllianceBernstein Intermediate Bond .22%* 10/31/08 AllianceBernstein Global Bond .40%* 9/30/08 AllianceBernstein Diversified Yield .00%* 10/31/08 AllianceBernstein High Income .40%* 10/31/08
*Fee stated net of any waivers and/or reimbursements. See "Fees and Expenses of the Funds" at the beginning of the Prospectus for more information about fee waivers. A discussion regarding the basis for the Board's approval of each Fund's investment advisory agreement is available in the Fund's semi-annual report to shareholders. The Adviser may act as an investment adviser to other persons, firms, or corporations, including investment companies, hedge funds, pension funds, and other institutional investors. The Adviser may receive management fees, including performance fees, that may be higher or lower than the advisory fees it receives from the Funds. Certain other clients of the Adviser may have investment objectives and policies similar to those of a Fund. The Adviser may, from time to time, make recommendations that result in the purchase or sale of a particular security by its other clients simultaneously with a Fund. If transactions on behalf of more than one client during the same period increase the demand for securities being purchased or the supply of securities being sold, there may be an adverse effect on price or quantity. It is the policy of the Adviser to allocate advisory recommendations and the placing of orders in a manner that is deemed equitable by the Adviser to the accounts involved, including a Fund. When two or more of the clients of the Adviser (including a Fund) are purchasing or selling the same security on a given day from the same broker-dealer, such transactions may be averaged as to price. PORTFOLIO MANAGERS The management of, and investment decisions for, the Funds' portfolios are made by certain Investment Policy Teams. Each Investment Policy Team relies heavily on the fundamental analysis and research of the Adviser's large internal research staff. No one person is principally responsible for coordinating each Fund's investments. 58 The following table lists the Investment Policy Teams, the person within each Investment Policy Team with the most significant responsibility for day-to-day management of the Fund's portfolio, the length of time that each person has been jointly and primarily responsible for the Fund, and each person's principal occupation during the past five years: Principal Occupation(s) During the Fund and Responsible Team Employee; Year; Title Past Five (5) Years ----------------------------------------------------------------------------- AllianceBernstein Short Douglas J. Peebles; Executive Vice President Duration Portfolio since January 2009; of the Adviser, with Executive Vice President which he has been U.S. Investment Grade: of the Adviser, and associated in a Liquid Chief Investment Officer substantially similar Markets/Structured and Head of Fixed-Income capacity to his current Products Investment Team position since prior to 2004. Alison M. Martier; since Senior Vice President of January 2009; Senior the Adviser, with which Vice President of the she has been associated Adviser and Director of in a substantially the Fixed-Income Senior similar capacity to her Portfolio Management Team current position since prior to 2004. Jon P. Denfeld; since Vice President of the May 2008; Vice President Adviser, with which he of the Adviser has been associated in a substantially similar capacity to his current position since May 2008. Prior thereto, he was a Senior U.S. Portfolio Manager for UBS Global Asset Management from 2006 to 2007. Prior thereto, he served as a Portfolio Manager for Shay Asset Management since prior to 2004. Michael S. Canter; since Senior Vice President of September 2008; Senior the Adviser, with which Vice President of the he has been associated Adviser in a substantially similar capacity to his current position since 2007. Prior thereto, he was President of ACE Principal Finance, a division of ACE Limited, since prior to 2004. Shawn E. Keegan; since Vice President of the October 2005; Vice Adviser, with which he President of the Adviser has been associated in a substantially similar capacity to his current position since prior to 2004. Greg J. Wilensky; since Senior Vice President of January 2009; Senior the Adviser, with which Vice President of the he has been associated Adviser and Director of in a substantially Stable Value Investments similar capacity to his current position since prior to 2004. AllianceBernstein Alison M. Martier; since (see above) Intermediate Bond May 2005; (see above) Portfolio U.S. Investment Grade Greg J. Wilensky; since (see above) Core Fixed Income Team October 2005; (see above) Shawn E. Keegan; since (see above) October 2005; (see above) Joran Laird; since Vice President of the October 2005; Vice Adviser, with which he President of the Adviser has been associated in a substantially similar capacity to his current position since prior to 2004. Douglas J. Peebles; (see above) since November 2007; (see above) Paul J. DeNoon; since Senior Vice President of January 2009; Senior the Adviser, with which Vice President of the he has been associated Adviser and Director of in a substantially Emerging Market Debt similar capacity to his current position since prior to 2004. 59 Principal Occupation(s) During the Fund and Responsible Team Employee; Year; Title Past Five (5) Years ----------------------------------------------------------------------------- AllianceBernstein Global Paul J. DeNoon; since (see above) Bond Fund August 2002; (see above) Global Fixed Income Investment Team Douglas J. Peebles; (see above) since inception; (see above) Scott DiMaggio; since Senior Vice President of August 2005; Senior Vice the Adviser, with which President of the Adviser he has been associated and Director of Canada in a substantially Fixed Income similar capacity to his current position since prior to 2004. Matthew S. Sheridan; Vice President of the since January 2007; Vice Adviser, with which he President of the Adviser has been associated in a substantially similar capacity to his current position since prior to 2004. Fernando Grisales; since Assistant Vice President January 2007; Assistant of the Adviser, with Vice President of the which he has been Adviser associated in a substantially similar capacity since prior to 2004. Michael L. Mon; since Vice President of the September 2003; Vice Adviser, with which he President of the Adviser has been associated in a substantially similar capacity to his current position since prior to 2004. AllianceBernstein Douglas J. Peebles; (see above) Diversified Yield Fund since inception; (see above) Global Fixed Income Paul J. DeNoon; since (see above) Investment Team and October 2005; (see above) Global Credit Investment Team Greg J. Wilensky; since (see above) June 2008; (see above) Joran Laird; since (see above) January 2009; (see above) Matthew S. Sheridan; (see above) since April 2006; (see above) AllianceBernstein High Paul J. DeNoon; since (see above) Income Fund August 2002; (see above) Global Fixed Income Team Gershon Distenfeld; Vice President of the and Global Credit since February 2008; Adviser, with which he Investment Team Vice President of the has been associated in a Adviser substantially similar capacity to his current position since prior to 2004. Douglas J. Peebles; (see above) since August 2002; (see above) Matthew S. Sheridan; (see above) since October 2005; (see above) Additional information about the portfolio managers may be found in the Funds' SAIs. PERFORMANCE OF A SIMILARLY MANAGED PORTFOLIO The investment teams employed by the Adviser to manage AllianceBernstein High Income Fund and AllianceBernstein Intermediate Bond Portfolio have substantial experience in managing discretionary accounts of institutional clients, pooled investment vehicles and/or other registered investment companies and portions thereof (the "Historical Accounts") that have substantially the same investment objectives and policies and are managed in accordance with essentially the same investment strategies as the Funds. The Historical Accounts that are not registered investment companies are not subject to certain limitations, diversification requirements and other restrictions imposed under the 1940 Act and the Internal Revenue Code (the "Code") to which the Funds, as 60 registered investment companies, are subject and which, if applicable to the Historical Accounts, may have adversely affected the performance of the Historical Accounts. With respect to AllianceBernstein High Income Fund, the Historical Accounts performance information is representative solely of the performance of a pooled investment vehicle that is not offered for sale in the United States. Set forth below is performance data provided by the Adviser relating to the Historical Accounts managed by the investment team that manages each Fund's assets. Performance data is shown for the period during which the investment team of the Adviser managed the Historical Accounts through December 31, 2008. The aggregate assets for the Historical Accounts managed by the High Income investment team and the Intermediate Bond investment team as of December 31, 2008 were approximately $9.3 billion and $15.4 billion, respectively. The investment teams' Historical Accounts have a nearly identical composition of representative investment holdings and related percentage weightings. The performance data is net of all fees (including any portfolio transaction costs) charged to the Historical Accounts, calculated on a monthly basis. The highest fee payable for the Historical Accounts is 1.99% of assets for AllianceBernstein High Income Fund and 0.85% of assets for AllianceBernstein Intermediate Bond Portfolio, annually. Net-of-fee performance figures reflect the compounding effect of such fees. The data has not been adjusted to reflect any fees that will be payable by the Funds, which may be higher than the fees imposed on the Historical Accounts, and will reduce the returns of the Funds. Expenses associated with the distribution of Class A, Class B and Class C shares of the Funds in accordance with the plans adopted by the Boards of the Funds under Commission Rule 12b-1 are also excluded. Except as noted, the performance data has also not been adjusted for corporate or individual taxes, if any, payable by account owners. The Adviser has calculated the investment performance of the Historical Accounts on a trade-date basis. Income has been accrued daily and cash flows weighted daily. Composite investment performance for the Funds has been determined on an asset weighted basis. New accounts are included in the composite investment performance computations at the beginning of the quarter following the initial contribution. The total returns set forth below are calculated using a method that links the monthly return amounts for the disclosed periods, resulting in a time-weighted rate of return. Other methods of computing the investment performance of the Historical Accounts may produce different results, and the results for different periods may vary. A composite benchmark, comprised of the JPMorgan Emerging Markets Bond Index Global ("EMBI Global"), the JPMorgan Government Bond Index-Emerging Markets ("GBI-EM") and the Barclays Capital High Yield Index (2% Constrained) ("BC High Yield") on an equal weighted basis (the "High Income Composite Benchmark") is used by AllianceBernstein High Income Fund and its Historical Account, for purposes of this example, as a benchmark to measure its relative performance. EMBI Global tracks total returns for traded external debt instruments in the emerging markets, GBI-EM tracks total returns for local currency government bonds issued by emerging markets, and BC High Yield tracks the U.S. Dollar-denominated, non-investment grade, fixed-rate, taxable corporate bond market. The Barclays Capital Aggregate Index ("BC Aggregate Index") is used by AllianceBernstein Intermediate Bond Portfolio as a benchmark to measure its relative performance and is composed of securities from Barclays Capital Government/Corporate Bond Index, Mortgage-Backed Securities Index, and the Asset-Backed Securities Index. The index's total return consists of price appreciation/depreciation plus income as a percentage of the original investment. Indices are rebalanced monthly by market capitalization. 61 To the extent the investment teams utilize investment techniques such as swaps, futures or options, the performance of the High Income Composite Benchmark and the BC Aggregate Index may not be substantially comparable to the performance of the investment teams' Historical Accounts. The High Income Composite Benchmark and the BC Aggregate Index do not reflect the deduction of any fees or expenses associated with the active management of a mutual fund. The performance data below is provided solely to illustrate the investment teams' performance in managing the Historical Accounts as measured against a broad based market index. The performance of the Funds will be affected by the performance of the investment team managing the Funds' assets. If the investment team were to perform relatively poorly, the performance of the Funds would suffer. Investors should not rely on the performance data of the Historical Accounts as an indication of future performance of the Funds. The investment performance for the periods presented may not be indicative of future rates of return. The performance was not calculated pursuant to the methodology established by the Commission that will be used to calculate the Funds' performance. The use of methodology different from that used to calculate performance could result in different performance data. SCHEDULE OF HISTORICAL PERFORMANCE - HISTORICAL ACCOUNTS*
High Income High Income Historical Account Composite BC High Total Return** Benchmark EMBI Global*** GBI-EM Yield Index*** - --------------------------------------------------------------------------------------------------------- Year Ended December 31: 2008 (32.27)% (14.78)% (10.91)% (11.79)% (25.88)% 2007 5.91% 8.91% 6.26% 16.27% 2.27% 2006 12.56% 10.91% 9.87% 11.97% 10.75% 2005 7.99% 5.39% 10.73% 2.86% 2.76% 2004 11.11% 15.65% 11.73% 23.14% 11.14% 2003 36.36% 23.60% 25.66% 17.79% 28.78% 2002 5.26% 13.99% 13.11% 29.10% (0.24)% 2001 (10.44)% N/A 1.36% N/A 5.46% 2000 (4.25)% N/A 14.41% N/A 5.79% 1999 18.76% N/A 24.18% N/A 2.39% 1998 (15.60)% N/A (11.54)% N/A 1.87% Cumulative total return for the period December 22, 1997 (inception of Historical Account) to December 31, 2008 1.59% N/A 7.99%*** N/A 4.30%***
* Total return is a measure of investment performance that is based upon the change in value of an investment from the beginning to the end of a specified period and assumes reinvestment of all dividends and other distributions. The basis of presentation of this data is described in the preceding discussion. ** Net of all fees. ***Net inception cumulative index returns are from December 31, 1997.
Intermediate Bond BC U.S. Historical Accounts Aggregate Total Return** Index - ------------------------------------------------------------------------------------------------------------ Year Ended December 31: 2008 (5.40)% 5.24% 2007 5.60% 6.97% 2006 5.26% 4.33% 2005 3.22% 2.43% 2004 5.48% 4.34% 2003 8.45% 4.10% 2002 7.93% 10.26% Cumulative total return for the period June 30, 2001 (inception of Historical Accounts) to December 31, 2008 4.58% 5.63%
* Total return is a measure of investment performance that is based upon the change in value of an investment from the beginning to the end of a specified period and assumes reinvestment of all dividends and other distributions. The basis of presentation of this data is described in the preceding discussion. **Net of all fees. 62 AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 2008
Since 1 Year 3 Years 5 Years 10 Years Inception ------------------------------------------------------------------------------ High Income Historical Account (32.27)% (6.88)% (0.63)% 3.54% 1.59%* High Income Composite Benchmark (14.78)% 0.76% 4.47% N/A N/A EMBI Global (10.91)% 1.32% 5.18% 10.17% 7.99%** GBI-EM (11.79)% 4.72% 7.78% N/A N/A BC High Yield (25.88)% (5.67)% (0.84)% 2.28% 4.30%**
* Inception date of Historical Account is December 22, 1997 **Since inception average annual total returns are from December 31, 1997.
Since 1 Year 3 Years Inception ---------------------------------------------------------------- Intermediate Bond Historical Accounts (5.40)% 1.69% 4.58%* BC U.S. Aggregate Index 5.28% 5.51% 5.63%*
*Inception date of Historical Accounts is June 30, 2001. LEGAL PROCEEDINGS On October 2, 2003, a purported class action complaint entitled Hindo et al. v. AllianceBernstein Growth & Income Fund et al. (the "Hindo Complaint") was filed against the Adviser; AllianceBernstein Holding L.P. ("Holding"); AllianceBernstein Corporation; AXA Financial, Inc.; the AllianceBernstein Mutual Funds, certain officers of the Adviser ("AllianceBernstein defendants"); and certain other unaffiliated defendants, as well as unnamed Doe defendants. The Hindo Complaint was filed in the United States District Court for the Southern District of New York by alleged shareholders of two of the AllianceBernstein Mutual Funds. The Hindo Complaint alleges that certain of the AllianceBernstein defendants failed to disclose that they improperly allowed certain hedge funds and other unidentified parties to engage in "late trading" and "market timing" of AllianceBernstein Mutual Fund securities, violating Sections 11 and 15 of the Securities Act, Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Sections 206 and 215 of the Investment Advisers Act of 1940. Plaintiffs seek an unspecified amount of compensatory damages and rescission of their contracts with the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts. Following October 2, 2003, additional lawsuits making factual allegations generally similar to those in the Hindo Complaint were filed in various federal and state courts against the Adviser and certain other defendants. On September 29, 2004, plaintiffs filed consolidated amended complaints with respect to four claim types: mutual fund shareholder claims; mutual fund derivative claims; derivative claims brought on behalf of Holding; and claims brought under ERISA by participants in the Profit Sharing Plan for Employees of the Adviser. All four complaints include substantially identical factual allegations, which appear to be based in large part on the Order of the Commission dated December 18, 2003 as amended and restated January 15, 2004 and the New York State Attorney General Assurance of Discontinuance dated September 1, 2004. On April 21, 2006, the Adviser and attorneys for the plaintiffs in the mutual fund shareholder claims, mutual fund derivative claims, and ERISA claims entered into a confidential memorandum of understanding containing their agreement to settle these claims. The agreement will be documented by a stipulation of settlement and will be submitted for court approval at a later date. The settlement amount ($30 million), which the Adviser previously accrued and disclosed, has been disbursed. The derivative claims brought on behalf of Holding, in which plaintiffs seek an unspecified amount of damages, remain pending. It is possible that these matters and/or other developments resulting from these matters could result in increased redemptions of the affected fund's shares or other adverse consequences to those funds. This may require those funds to sell investments to provide for 63 sufficient liquidity and could also have an adverse effect on the investment performance of the Funds. However, the Adviser believes that these matters are not likely to have a material adverse effect on its ability to perform advisory services relating to those funds or the Funds. TRANSFER AGENCY AND RETIREMENT PLAN SERVICES ABIS acts as the transfer agent for the Funds. ABIS, an indirect wholly-owned subsidiary of the Adviser, registers the transfer, issuance, and redemption of Fund shares and disburses dividends and other distributions to Fund shareholders. Many Fund shares are owned by financial intermediaries for the benefit of their customers. Retirement plans also may hold Fund shares in the name of the plan, rather than the participant. In those cases, the Fund often does not maintain an account for you. Thus, some or all of the transfer agency functions for these and certain other accounts are performed by the financial intermediaries and plan recordkeepers. The Funds, ABI and/or the Adviser pay to these financial intermediaries and recordkeepers, including those that sell shares of the AllianceBernstein Mutual Funds, fees for sub-accounting or shareholder servicing in amounts ranging up to $19 per customer fund account per annum and/or up to 0.25% per annum of the average daily assets held through the intermediary. To the extent any of these payments for recordkeeping services or transfer agency services are made by the Fund, they are included in the amount appearing opposite the caption "Other Expenses" found in the Fund expense tables under "Fees and Expenses of the Funds." In addition, financial intermediaries may be affiliates of entities that receive compensation from the Adviser or ABI for maintaining retirement plan "platforms" that facilitate trading by affiliated and non-affiliated financial intermediaries and recordkeeping for retirement plans. Because financial intermediaries and plan recordkeepers may be paid varying amounts per class for sub-accounting or shareholder servicing, the service requirements of which may also vary by class, this may create an additional incentive for financial intermediaries and their financial advisors to favor one fund complex over another or one class of shares over another. 64 DIVIDENDS, DISTRIBUTIONS AND TAXES - -------------------------------------------------------------------------------- Each Fund's income dividends and capital gains distributions, if any, declared by a Fund on its outstanding shares will, at the election of each shareholder, be paid in cash or in additional shares of the same class of shares of that Fund. If paid in additional shares, the shares will have an aggregate net asset value as of the close of business on the declaration date of the dividend or distribution equal to the cash amount of the dividend or distribution. You may make an election to receive dividends and distributions in cash or in shares at the time you purchase shares. Your election can be changed at any time prior to a record date for a dividend. There is no sales or other charge in connection with the reinvestment of dividends or capital gains distributions. Cash dividends may be paid by check, or at your election, electronically via the ACH network. If you receive an income dividend or capital gains distribution in cash you may, within 120 days following the date of its payment, reinvest the dividend or distribution in additional shares of that Fund without charge by returning to the Adviser, with appropriate instructions, the check representing the dividend or distribution. Thereafter, unless you otherwise specify, you will be deemed to have elected to reinvest all subsequent dividends and distributions in shares of that Fund. While it is the intention of each Fund to distribute to its shareholders substantially all of each fiscal year's net income and net realized capital gains, if any, the amount and timing of any dividend or distribution will depend on the realization by the Fund of income and capital gains from investments. There is no fixed dividend rate and there can be no assurance that a Fund will pay any dividends or realize any capital gains. The final determination of the amount of a Fund's return of capital distributions for the period will be made after the end of each calendar year. You will normally have to pay federal income tax, and any state or local income taxes, on the distributions you receive from a Fund, whether you take the distributions in cash or reinvest them in additional shares. Distributions of net capital gains from the sale of investments that a Fund owned for more than one year and that are properly designated as capital gain dividends are taxable as long-term capital gains. For taxable years beginning on or before December 31, 2010, distributions of dividends to a Fund's non-corporate shareholders may be treated as "qualified dividend income," which is taxed at reduced rates, if such distributions are derived from, and designated by a Fund as, "qualified dividend income" and provided that holding period and other requirements are met by both the shareholder and the Fund. "Qualified dividend income" generally is income derived from dividends from U.S. corporations and "qualified foreign corporations." Other distributions by a Fund are generally taxable to you as ordinary income. Dividends declared in October, November, or December and paid in January of the following year are taxable as if they had been paid the previous December. A Fund will notify you as to how much of the Fund's distributions, if any, qualify for these reduced tax rates. Investment income received by a Fund from sources within foreign countries may be subject to foreign income taxes withheld at the source. To the extent that a Fund is liable for foreign income taxes withheld at the source, the Fund intends, if possible, to operate so as to meet the requirements to "pass through" to the Fund's shareholders for foreign income taxes paid (or to permit shareholders to claim a deduction for such foreign taxes), but there can be no assurance that any Fund will be able to do so, and Funds that invest primarily in U.S. securities will not do so. Furthermore, a shareholder's ability to claim a foreign tax credit or deduction for foreign taxes paid by a Fund may be subject to certain limitations imposed by the Internal Revenue Code, as a result of which a shareholder may not be permitted to claim a credit or deduction for all or a portion of the amount of such taxes. Under certain circumstances, if a Fund realizes losses (e.g., from fluctuations in currency exchange rates) after paying a dividend, all or a portion of the dividend may subsequently be characterized as a return of capital. Returns of capital are generally nontaxable, but will 65 reduce a shareholder's basis in shares of a Fund. If that basis is reduced to zero (which could happen if the shareholder does not reinvest distributions and returns of capital are significant), any further returns of capital will be taxable as a capital gain. If you buy shares just before a Fund deducts a distribution from its NAV, you will pay the full price for the shares and then receive a portion of the price back as a taxable distribution. The sale or exchange of Fund shares is a taxable transaction for federal income tax purposes. Each year shortly after December 31, each Fund will send its shareholders tax information stating the amount and type of all its distributions for the year. Consult your tax adviser about the federal, state, and local tax consequences in your particular circumstances. NON-U.S. SHAREHOLDERS If you are a nonresident alien individual or a foreign corporation for federal income tax purposes, please see the Funds' SAIs for information on how you will be taxed as a result of holding shares in a Fund. 66 GENERAL INFORMATION - -------------------------------------------------------------------------------- Under unusual circumstances, a Fund may suspend redemptions or postpone payment for up to seven days or longer, as permitted by federal securities law. The Funds reserve the right to close an account that has remained below $500 for 90 days. During drastic economic or market developments, you might have difficulty reaching ABIS by telephone, in which event you should issue written instructions to ABIS. ABIS is not responsible for the authenticity of telephone requests to purchase, sell, or exchange shares. ABIS will employ reasonable procedures to verify that telephone requests are genuine, and could be liable for losses resulting from unauthorized transactions if it failed to do so. Dealers and agents may charge a commission for handling telephone requests. The telephone service may be suspended or terminated at any time without notice. Shareholder Services. ABIS offers a variety of shareholder services. For more information about these services or your account, call ABIS's toll-free number, 800-221-5672. Some services are described in the Mutual Fund Application. Householding. Many shareholders of the AllianceBernstein Mutual Funds have family members living in the same home who also own shares of the same Funds. In order to reduce the amount of duplicative mail that is sent to homes with more than one Fund account and to reduce expenses of the Funds, all AllianceBernstein Mutual Funds will, until notified otherwise, send only one copy of each prospectus, shareholder report and proxy statement to each household address. This process, known as "householding", does not apply to account statements, confirmations, or personal tax information. If you do not wish to participate in householding, or wish to discontinue householding at any time, call ABIS at 1-800-221-5672. We will resume separate mailings for your account within 30 days of your request. 67 GLOSSARY OF INVESTMENT TERMS - -------------------------------------------------------------------------------- Bonds are interest-bearing or discounted government or corporate securities that obligate the issuer to pay the bond holder a specified sum of money, usually at specified intervals, and to repay the principal amount of the loan at maturity. Fixed-income securities are investments, such as bonds, that pay a fixed rate of return. Preferred stock is a class of capital stock that pays dividends at a specified rate and that has preference over common stock, but not debt securities of the same issuer, in the payment of dividends and the liquidation of assets. Sovereign debt obligations are foreign government debt securities, loan participations between foreign governments and financial institutions, and interests in entities organized and operated for the purpose of restructuring the investment characteristics of foreign government securities. Supranational entities are international organizations formed by two or more governments. Examples of supranational entities include the International Bank for Reconstruction and Development, the Inter-American Development Bank, the Asian Development Bank, the African Development Bank, the International Finance Corporation and the European Bank for Reconstruction and Development. U.S. Government securities are securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities, including obligations that are issued by private issuers that are guaranteed as to principal or interest by the U.S. Government, its agencies or instrumentalities, or by certain government-sponsored entities (entities chartered by or sponsored by Act of Congress). These securities include securities backed by the full faith and credit of the United States, those supported by the right of the issuer to borrow from the U.S. Treasury, and those backed only by the credit of the issuing agency or entity itself. The first category includes U.S. Treasury securities (which are U.S. Treasury bills, notes, and bonds) and certificates issued by GNMA. U.S. Government securities not backed by the full faith and credit of the United States or a right to borrow from the U.S. Treasury include certificates issued by FNMA and FHLMC. The Merrill Lynch 3-Month T-Bill Index is an unmanaged index that measures returns of three-month Treasury Bills. The Merrill Lynch 1-3 Year Treasury Index is an unmanaged index consisting of all public U.S. Treasury obligations having maturities from 1 to 2.99 years and reflects total return. This unmanaged index does not reflect fees and expenses and is not available for direct investment. The Barclays Capital U.S. Aggregate Index is a broad-based bond index comprised of government, corporate, mortgage and asset-backed issues, rated investment grade or higher, and having at least one year to maturity. The Barclays Capital Global Aggregate Index is a macro index of global government and corporate bond markets, and is composed of various indices calculated by Lehman Brothers Inc., including the U.S. Aggregate Index, the Pan-European Aggregate Index, the Global Treasury Index, the Asian-Pacific Aggregate Index, the Eurodollar Index and the U.S. Investment-Grade 144A Index. The Barclays Capital High Yield Index is an unmanaged index generally representative of corporate bonds rated below investment grade. The JPMorgan Emerging Markets Bond Index Global is a broad-based, unmanaged index which tracks total return for external currency denominated debt in emerging markets. The JPMorgan Government Bond Index-Emerging Markets is a definitive local emerging markets debt benchmark that tracks local currency government bonds issued by emerging markets. 68 FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The financial highlights table is intended to help you understand each Fund's financial performance for the past five years. Certain information reflects financial results for a single share of a class of each Fund. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the Fund (assuming reinvestment of all dividends and distributions). This information has been audited by Ernst & Young LLP, the independent registered public accounting firm for all Funds, except AllianceBernstein Short Duration, whose independent registered public accounting firm is PricewaterhouseCoopers LLP, whose reports, along with each Fund's financial statements, are included in each Fund's Annual Report, which is available upon request. 69
Income from Investment Operations Less: Dividends and Distributions ---------------------------------------- -------------------------------- Net Asset Net Realized Net Increase Dividends Distributions Value, Net and Unrealized (Decrease) in from Net from Net Fiscal Year or Beginning Investment Gain (Loss) Net Asset Value Investment Realized Gain Period of Period Income (a) on Investments from Operations Income on Investments - ------------------------------------------------------------------------------------------------------------- Short Duration Class A Year Ended 9/30/08 $12.24 $.43 $ (.77) $ (.34) $(.44) $0.00 Year Ended 9/30/07 12.31 .51 (.05) .46 (.53) 0.00 Year Ended 9/30/06 12.39 .45 (.06) .39 (.47) 0.00 Year Ended 9/30/05 12.67 .33 (.24) .09 (.36) (.01) Year Ended 9/30/04 12.84 .27 (.13) .14 (.29) (.02) Class B Year Ended 9/30/08 $12.24 $.34 $ (.77) $ (.43) $(.36) $0.00 Year Ended 9/30/07 12.31 .43 (.06) .37 (.44) 0.00 Year Ended 9/30/06 12.39 .36 (.05) .31 (.39) 0.00 Year Ended 9/30/05 12.67 .24 (.24) .00 (.27) (.01) Year Ended 9/30/04 12.84 .17 (.12) .05 (.20) (.02) Class C Year Ended 9/30/08 $12.23 $.34 $ (.76) $ (.42) $(.36) $0.00 Year Ended 9/30/07 12.30 .43 (.06) .37 (.44) 0.00 Year Ended 9/30/06 12.38 .36 (.05) .31 (.39) 0.00 Year Ended 9/30/05 12.66 .24 (.24) .00 (.27) (.01) Year Ended 9/30/04 12.84 .17 (.13) .04 (.20) (.02) Intermediate Bond Class A Year Ended 10/31/08 $10.24 $.50(f) $(1.49) $ (.99)(l) $(.48) $0.00 Year Ended 10/31/07 10.18 .42(f) .06 .48 (.42) 0.00 Year Ended 10/31/06 10.15 .41(f) .04 .45 (.42) 0.00 Year Ended 10/31/05 10.43 .37(f) (.28) .09 (.37) 0.00 Year Ended 10/31/04 10.56 .33(f) .15 .48 (.38) (.23) Class B Year Ended 10/31/08 $10.23 $.42(f) $(1.47) $(1.05)(l) $(.41) $0.00 Year Ended 10/31/07 10.18 .35(f)(g) .05 .40 (.35) 0.00 Year Ended 10/31/06 10.15 .38(f)(g) .04 .42 (.39) 0.00 Year Ended 10/31/05 10.42 .29(f) (.25) .04 (.31) 0.00 Year Ended 10/31/04 10.55 .27(f) .14 .41 (.31) (.23) Class C Year Ended 10/31/08 $10.22 $.43(f) $(1.49) $(1.06)(l) $(.41) $0.00 Year Ended 10/31/07 10.16 .35(f) .06 .41 (.35) 0.00 Year Ended 10/31/06 10.13 .34(f) .04 .38 (.35) 0.00 Year Ended 10/31/05 10.40 .29(f) (.26) .03 (.30) 0.00 Year Ended 10/31/04 10.53 .27(f) .14 .41 (.31) (.23) Advisor Class Year Ended 10/31/08 $10.24 $.50(f) $(1.45) $ (.95)(l) $(.51) $0.00 Year Ended 10/31/07 10.18 .45(f) .06 .51 (.45) 0.00 Year Ended 10/31/06 10.15 .44(f) .04 .48 (.45) 0.00 Year Ended 10/31/05 10.43 .39(f) (.26) .13 (.41) 0.00 Year Ended 10/31/04 10.55 .36(f) .16 .52 (.41) (.23) - -------------------------------------------------------------------------------------------------------------
Please refer to the footnotes on pages 76 through 77. 70
Less Distributions Ratios/Supplemental Data - ----------------------------------- ------------------------------------------------------ Total Ratio of Net Investment Net Assets, Ratio of Investment Total Divi- Net Asset Return Based End of Period Expenses Income Portfolio dends and Value, End on Net (000's to Average to Average Turnover Distributions of Period Asset Value (b) Omitted) Net Assets Net Assets Rate - ------------------------------------------------------------------------------------------------ $(.44) $11.46 (2.83)%(c) $ 33,197 .96% 3.60% 116% (.53) 12.24 3.80 40,444 .98 4.21 127 (.47) 12.31 3.23 37,595 1.03(d) 3.63(d) 157 (.37) 12.39 .77 42,602 1.02 2.61 220 (.31) 12.67 1.03 58,793 1.03 2.06 359 $(.36) $11.45 (3.59)%(c) $ 9,125 1.66% 2.91% 116% (.44) 12.24 3.09 10,791 1.68 3.48 127 (.39) 12.31 2.55 16,899 1.73(d) 2.91(d) 157 (.28) 12.39 .05 27,964 1.72 1.90 220 (.22) 12.67 .32 44,281 1.75 1.34 359 $(.36) $11.45 (3.52)%(c) $ 16,176 1.66% 2.89% 116% (.44) 12.23 3.09 14,772 1.69 3.49 127 (.39) 12.30 2.54 18,923 1.74(d) 2.93(d) 157 (.28) 12.38 .05 24,096 1.72 1.90 220 (.22) 12.66 .25 39,581 1.74(e) 1.35 359 $(.48) $ 8.77 (10.15)%(c) $360,606 .85%(h) 4.68%(f) 184% (.42) 10.24 4.79(c) 41,696 .98(h) 4.13(f) 173 (.42) 10.18 4.51 44,409 .98(d)(h) 4.08(d)(f) 446 (.37) 10.15 .90 52,430 .98(h) 3.53(f) 935 (.61) 10.43 4.66 56,778 .98(h) 3.21(f) 658 $(.41) $ 8.77 (10.69)%(c) $ 31,207 1.55%(h) 3.95%(f) 184% (.35) 10.23 3.96(c) 20,157 1.66(h) 3.46(f)(g) 173 (.39) 10.18 4.20 30,154 1.33(d)(h) 3.75(d)(f)(g) 446 (.31) 10.15 .30 44,944 1.68(h) 2.82(f) 935 (.54) 10.42 3.93 66,635 1.68(h) 2.59(f) 658 $(.41) $ 8.75 (10.80)%(c) $ 51,708 1.55%(h) 3.99%(f) 184% (.35) 10.22 4.07(c) 9,404 1.68(h) 3.45(f) 173 (.35) 10.16 3.80 9,874 1.68(d)(h) 3.40(d)(f) 446 (.30) 10.13 .30 15,689 1.68(h) 2.84(f) 935 (.54) 10.40 3.93 19,008 1.68(h) 2.60(f) 658 $(.51) $ 8.78 (9.78)%(c) $ 33,139 .55%(h) 4.98%(f) 184% (.45) 10.24 5.11(c) 32,375 .68(h) 4.44(f) 173 (.45) 10.18 4.83 29,966 .68(d)(h) 4.38(d)(f) 446 (.41) 10.15 1.20 29,576 .68(h) 3.72(f) 935 (.64) 10.43 5.08 309,690 .68(h) 3.47(f) 658 - ------------------------------------------------------------------------------------------------
71
Income from Investment Operations Less: Dividends and Distributions ------------------------------------- -------------------------------- Net Asset Net Realized Net Increase Dividends Distributions Value, Net and Unrealized (Decrease) in from Net from Net Fiscal Year or Beginning Investment Gain (Loss) Net Asset Value Investment Realized Gain Period of Period Income (a) on Investments from Operations Income on Investments - ---------------------------------------------------------------------------------------------------------- Global Bond Class A Year Ended 9/30/08 $8.07 $.42 $ (.70) $ (.28) $(.40) $0.00 Year Ended 9/30/07 7.54 .40 .52 .92 (.39) 0.00 Year Ended 9/30/06 7.69 .44 (.15) .29 (.44) 0.00 Year Ended 9/30/05 7.35 .50 .34 .84 (.50) 0.00 Year Ended 9/30/04(i) 7.54 .50(f) (.16) .34 (.53) 0.00 Class B Year Ended 9/30/08 $8.07 $.36 $ (.70) $ (.34) $(.34) $0.00 Year Ended 9/30/07 7.54 .34 .52 .86 (.33) 0.00 Year Ended 9/30/06 7.68 .38 (.14) .24 (.38) 0.00 Year Ended 9/30/05 7.35 .44 .33 .77 (.44) 0.00 Year Ended 9/30/04(i) 7.54 .45(f) (.16) .29 (.48) 0.00 Class C Year Ended 9/30/08 $8.09 $.36 $ (.70) $ (.34) $(.34) $0.00 Year Ended 9/30/07 7.56 .34 .52 .86 (.33) 0.00 Year Ended 9/30/06 7.71 .38 (.15) .23 (.38) 0.00 Year Ended 9/30/05 7.38 .44 .34 .78 (.45) 0.00 Year Ended 9/30/04(i) 7.57 .45(f) (.16) .29 (.48) 0.00 Advisor Class 11/5/07(j) to 9/30/08 $8.14 $.41 $ (.78) $ (.37) $(.39) $0.00 Diversified Yield Class A Year Ended 10/31/08 $9.02 $.36 $(1.63) $(1.27)(l) $(.36) $0.00 Year Ended 10/31/07 8.62 .34 .40 .74 (.34) 0.00 Year Ended 10/31/06 8.70 .34 .14 .48 (.34) (.22) Year Ended 10/31/05 8.63 .39 .09 .48 (.41) 0.00 Year Ended 10/31/04(i) 8.65 .48(f) .02 .50 (.52) 0.00 Class B Year Ended 10/31/08 $9.03 $.30 $(1.64) $(1.34)(l) $(.29) $0.00 Year Ended 10/31/07 8.63 .26 .41 .67 (.27) 0.00 Year Ended 10/31/06 8.70 .28 .14 .42 (.27) (.22) Year Ended 10/31/05 8.63 .32 .10 .42 (.35) 0.00 Year Ended 10/31/04(i) 8.65 .41(f) .02 .43 (.45) 0.00 Class C Year Ended 10/31/08 $9.02 $.29 $(1.61) $(1.32)(l) $(.30) $0.00 Year Ended 10/31/07 8.63 .27 .39 .66 (.27) 0.00 Year Ended 10/31/06 8.71 .28 .14 .42 (.28) (.22) Year Ended 10/31/05 8.64 .33 .09 .42 (.35) 0.00 Year Ended 10/31/04(i) 8.65 .40(f) .04 .44 (.45) 0.00 Advisor Class Year Ended 10/31/08 $9.02 $.38 $(1.63) $(1.25)(l) $(.38) $0.00 Year Ended 10/31/07 8.62 .37 .39 .76 (.36) 0.00 Year Ended 10/31/06 8.70 .36 .14 .50 (.36) (.22) Year Ended 10/31/05 8.63 .47 .04 .51 (.44) 0.00 Year Ended 10/31/04(i) 8.65 .47(f) .05 .52 (.54) 0.00 - ----------------------------------------------------------------------------------------------------------
Please refer to the footnotes on pages 76 through 77. 72
Less Distributions Ratios/Supplemental Data - ----------------------------------- ----------------------------------------------------- Total Ratio of Net Investment Net Assets, Ratio of Investment Total Divi- Net Asset Return Based End of Period Expenses Income Portfolio dends and Value, End on Net (000's to Average to Average Turnover Distributions of Period Asset Value (b) Omitted) Net Assets Net Assets Rate - ----------------------------------------------------------------------------------------------- $(.40) $7.39 (3.75)% $1,425,649 1.04%(e)(h) 5.19% 140% (.39) 8.07 12.47 1,071,398 1.80(e) 5.09 170 (.44) 7.54 3.90 935,901 1.04(d) 5.81(d) 104 (.50) 7.69 11.83 957,697 1.05 6.78 66 (.53) 7.35 4.72 956,690 1.25(e)(h) 6.80(f) 76 $(.34) $7.39 (4.44)% $ 137,926 1.75%(e)(h) 4.52% 140% (.33) 8.07 11.65 171,078 2.53(e) 4.36 170 (.38) 7.54 3.28 277,450 1.76(d) 5.10(d) 104 (.44) 7.68 11.04 373,923 1.77 5.82 66 (.48) 7.35 3.98 476,171 1.98(e)(h) 6.07(f) 76 $(.34) $7.41 (4.42)% $ 492,541 1.75%(e)(h) 4.46% 140% (.33) 8.09 11.65 307,616 2.50(e) 4.37 170 (.38) 7.56 3.15 256,047 1.74(d) 5.07(d) 104 (.45) 7.71 10.87 251,752 1.76 5.88 66 (.48) 7.38 3.97 251,666 1.96(e)(h) 6.07(f) 76 $(.39) $7.38 (4.83)% $ 89,152 0.74%(e)(h)(k) 5.37%(k) 140% $(.36) $7.39 (14.57)%(c) $ 39,639 0.90%(h) 4.13% 81% (.34) 9.02 8.60(c) 48,542 1.47 3.81 134 (.56) 8.62 5.61 25,348 1.78(d)(e) 3.93(d) 169 (.41) 8.70 5.67 24,250 1.54 4.65 98 (.52) 8.63 5.89 29,465 1.43(h) 5.83(f) 106 $(.29) $7.40 (15.15)%(c) $ 13,666 1.60%(h) 3.43% 81% (.27) 9.03 7.77(c) 27,303 2.28 2.93 134 (.49) 8.63 4.96 40,136 2.50(d)(e) 3.24(d) 169 (.35) 8.70 4.92 59,513 2.25 3.94 98 (.45) 8.63 5.13 84,385 2.15(h) 5.12(f) 106 $(.30) $7.40 (15.05)%(c) $ 11,245 1.60%(h) 3.44% 81% (.27) 9.02 7.69(c) 15,208 2.20 3.03 134 (.50) 8.63 4.86 11,040 2.49(d)(e) 3.22(d) 169 (.35) 8.71 4.93 11,492 2.25 3.94 98 (.45) 8.64 5.25 14,094 2.14(h) 5.14(f) 106 $(.38) $7.39 (14.31)%(c) $ 3,756 0.60%(h) 4.42% 81% (.36) 9.02 8.89(c) 5,529 1.14 4.00 134 (.58) 8.62 5.94 2,494 1.49(d)(e) 4.17(d) 169 (.44) 8.70 6.01 1,594 1.26 4.93 98 (.54) 8.63 6.21 900 1.13(h) 6.15(f) 106 - -----------------------------------------------------------------------------------------------
73
Income from Investment Operations Less: Dividends and Distributions ------------------------------------- -------------------------------- Net Asset Net Realized Net Increase Dividends Distributions Value, Net and Unrealized (Decrease) in from Net from Net Fiscal Year or Beginning Investment Gain (Loss) Net Asset Value Investment Realized Gain Period of Period Income (a) on Investments from Operations Income on Investments - ---------------------------------------------------------------------------------------------------------- High Income Class A Year Ended 10/31/08 $9.02 $.61(f) $(2.87) $(2.26)(l) $(.68) $(.23) Year Ended 10/31/07 8.97 .56 .41 .97 (.57) (.35) Year Ended 10/31/06 8.70 .55 .43 .98 (.57) (.14) Year Ended 10/31/05 8.38 .53 .34 .87 (.55) 0.00 Year Ended 10/31/04(i) 8.00 .49(f) .50 .99 (.61) 0.00 Class B Year Ended 10/31/08 $9.09 $.55(f) $(2.89) $(2.34)(l) $(.62) $(.23) Year Ended 10/31/07 9.05 .49 .41 .90 (.51) (.35) Year Ended 10/31/06 8.77 .49 .44 .93 (.51) (.14) Year Ended 10/31/05 8.45 .47 .34 .81 (.49) 0.00 Year Ended 10/31/04(i) 8.07 .62(f) .32 .94 (.56) 0.00 Class C Year Ended 10/31/08 $9.11 $.55(f) $(2.89) $(2.34)(l) $(.62) $(.23) Year Ended 10/31/07 9.07 .49 .41 .90 (.51) (.35) Year Ended 10/31/06 8.79 .49 .44 .93 (.51) (.14) Year Ended 10/31/05 8.47 .47 .34 .81 (.49) 0.00 Year Ended 10/31/04(i) 8.09 .45(f) .49 .94 (.56) 0.00 Advisor Class 1/28/08(j) to 10/31/08 $8.52 $.52(f) $(2.69) $(2.17)(l) $(.49) $0.00 - ----------------------------------------------------------------------------------------------------------
Please refer to the footnotes on pages 76 through 77. 74
Less Distributions Ratios/Supplemental Data - ----------------------------------- -------------------------------------------------------------- Total Ratio of Net Investment Net Assets, Ratio of Investment Total Divi- Net Asset Return Based End of Period Expenses Income Portfolio dends and Value, End on Net (000's to Average to Average Turnover Distributions of Period Asset Value (b) Omitted) Net Assets Net Assets Rate - -------------------------------------------------------------------------------------------------------- $(.91) $5.85 (27.49)%(c) $450,517 1.03%(d)(e)(h) 7.65%(d)(f) 74% (.92) 9.02 11.54 281,677 1.41(d)(e) 6.24(d) 67 (.71) 8.97 11.87 235,763 1.48(e) 6.32 75 (.55) 8.70 10.70 213,652 1.20(e) 6.14 100 (.61) 8.38 12.82 156,469 1.23(e) 6.04(f) 173 $(.85) $5.90 (28.03)%(c) $ 54,724 1.74%(d)(e)(h) 6.83%(d)(f) 74% (.86) 9.09 10.51 35,058 2.14(d)(e) 5.45(d) 67 (.65) 9.05 11.11 45,133 2.18(e) 5.55 75 (.49) 8.77 9.81 53,629 1.89(e) 5.39 100 (.56) 8.45 12.02 61,715 1.94(e) 7.57(f) 173 $(.85) $5.92 (27.95)%(c) $112,508 1.75%(d)(e)(h) 6.82%(d)(f) 74% (.86) 9.11 10.50 86,525 2.11(d)(e) 5.47(d) 67 (.65) 9.07 11.10 88,046 2.17(e) 5.54 75 (.49) 8.79 9.81 91,662 1.89(e) 5.38 100 (.56) 8.47 12.00 82,876 1.92(e) 5.51(f) 173 $(.49) $5.86 (26.77)%(c) $ 6,095 .69%(d)(e)(h)(k) 8.16%(d)(f)(k) 74% - --------------------------------------------------------------------------------------------------------
75 (a)Based on average shares outstanding. (b)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 the net asset value during the period, and a redemption on the last day of the period. Initial sales charge or contingent deferred sales charge, if applicable, is not reflected in the calculation of total investment return. Total investment return does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Total investment returns calculated for periods of less than one year are not annualized. (c)Includes the impact of proceeds received and credited to the Fund resulting from the WorldCom class action settlement, which enhanced the performance of each share class by:
For Fiscal Year Ended - ---------------------------------------------------------------- AllianceBernstein Short Duration September 30, 2008 .05% AllianceBernstein Intermediate Bond October 31, 2008 .21% October 31, 2007 .61% AllianceBernstein Diversified Yield October 31, 2008 .81% October 31, 2007 4.31% AllianceBernstein High Income October 31, 2008 .41%
(d)The ratio includes expenses attributable to costs of proxy solicitation. (e)Includes interest expense. If the following Funds had borne all expenses, excluding interest expense, the ratio of expenses to average net assets would have been as follows:
2008 2007 2006 2005 2004 - ---------------------------------------------------------------------------- AllianceBernstein Short Duration Portfolio Class A 1.01% Class B 1.73% Class C 1.72% AllianceBernstein Diversified Yield Class A 1.72%* Class B 2.45%* Class C 2.44%* Advisor Class 1.44%* AllianceBernstein Global Bond Class A 1.01% 1.05% 1.04%* 1.05% 1.27% Class B 1.73% 1.77% 1.76%* 1.77% 1.99% Class C 1.71% 1.75% 1.74%* 1.76% 1.97% Advisor Class .74% AllianceBernstein High Income Class A 1.07%* 1.14%* 1.14% 1.19% 1.21% Class B 1.80%* 1.87%* 1.85% 1.89% 1.92% Class C 1.77%* 1.85%* 1.84% 1.88% 1.90% Advisor Class .76%*
- -------- * The ratio includes expenses attributable to costs of proxy solicitation. (f)Net of fees waived and expenses reimbursed by the Adviser. (g)Net of fees and expenses waived by the distributor. 76 (h)Net of fees waived by the Adviser. If the following Funds had borne all expenses for the respective year ends, the expense ratios would have been as follows:
2008 2007 2006 2005 2004 - ------------------------------------------------------------------- AllianceBernstein Intermediate Bond Class A 1.09% 1.54% 1.34%* 1.31% 1.26% Class B 1.83% 2.29% 2.10%* 2.02% 2.00% Class C 1.80% 2.27% 2.07%* 2.03% 1.99% Advisor Class .80% 1.25% 1.02%* .84% .96% AllianceBernstein Diversified Yield Class A 1.65% 1.60% Class B 2.41% 2.32% Class C 2.36% 2.31% Advisor Class 1.33% 1.30% AllianceBernstein Global Bond Class A 1.15% 1.41% Class B 1.88% 2.15% Class C 1.86% 2.12% Advisor Class .88% AllianceBernstein High Income Class A 1.13% 1.40% Class B 1.86% 2.11% Class C 1.84% 2.09% Advisor Class .80%
- -------- * The ratio includes expenses attributable to costs of proxy solicitation. (i)The Funds have 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 the effective dates noted below, these interim payments were reflected within interest income/expense on the statement of operations. For each Fund, the effective date and impact of this change to each class of shares is as follows:
Increase Increase Increase (Decrease) in (Decrease) to (Decrease) in Net Realized Ratios of Net Net Investment and Unrealized Investment Income Effective Income Per Gain (Loss) to Average Net Date Share Per Share Assets - ---------------------------------------------------------------------------------------------- AllianceBernstein Diversified Yield 11/1/03 Class A $ (0.001) $ 0.001 (0.20)% Class B (0.001) 0.001 (0.20)% Class C (0.001) 0.001 (0.20)% Advisor Class (0.001) 0.001 (0.20)% AllianceBernstein Global Bond 10/1/03 Class A $(0.0002) $0.0002 (0.003)% Class B (0.0002) 0.0002 (0.003)% Class C (0.0002) 0.0002 (0.003)% AllianceBernstein High Income 11/1/03 Class A $ (0.05) $ 0.05 (0.56)% Class B (0.04) 0.04 (0.57)% Class C (0.05) 0.05 (0.55)%
(j)Commencement of distribution. (k)Annualized. (l)Amount includes contribution from Advisor of less than $ .01. 77 APPENDIX A - -------------------------------------------------------------------------------- BOND RATINGS Moody's Investors Service, Inc. Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa--Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than the Aaa securities. A--Bonds which are rated A possess many favorable investment attributes and are to be considered as upper-medium-grade obligations. Factors giving security to principal and interest are considered adequate but elements may be present which suggest a susceptibility to impairment some time in the future. Baa--Bonds which are rated Baa are considered as medium-grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Ba--Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as well-assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B--Bonds which are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Caa--Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest. Ca--Bonds which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings. C--Bonds which are rated C are the lowest rated class of bonds and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. Absence of Rating--When no rating has been assigned or where a rating has been suspended or withdrawn, it may be for reasons unrelated to the quality of the issue. Should no rating be assigned, the reason may be one of the following: 1. An application for rating was not received or accepted. 2. The issue or issuer belongs to a group of securities or companies that are unrated as a matter of policy. 3. There is a lack of essential data pertaining to the issue or issuer. 4. The issue was privately placed, in which case the rating is not published in Moody's publications. Suspension or withdrawal may occur if new and material circumstances arise, the effects of which preclude satisfactory analysis; if there is no longer available reasonable up-to-date data to permit a judgment to be formed; if a bond is called for redemption; or for other reasons. A-1 Note--Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating classification from Aa through Caa in its corporate bond rating system. The modifier 1 indicates that the security ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the issue ranks in the lower end of its generic rating category. Standard & Poor's Ratings Services AAA--Debt rated AAA has the highest rating assigned by S&P. Capacity to pay interest and repay principal is extremely strong. AA--Debt rated AA has a very strong capacity to pay interest and repay principal and differs from the highest rated issues only in small degree. A--Debt rated A has a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories. BBB--Debt rated BBB normally exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher rated categories. BB, B, CCC, CC, C--Debt rated BB, B, CCC, CC or C is regarded as having significant speculative characteristics. BB indicates the lowest degree of speculation and C the highest. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major exposures to adverse conditions. BB--Debt rated BB is less vulnerable to nonpayment than other speculative debt. However, it faces major ongoing uncertainties or exposure to adverse business, financial or economic conditions which could lead to an inadequate capacity to pay interest and repay principal. B--Debt rated B is more vulnerable to nonpayment than debt rated BB, but there is capacity to pay interest and repay principal. Adverse business, financial or economic conditions will likely impair the capacity or willingness to pay principal or repay interest. CCC--Debt rated CCC is currently vulnerable to nonpayment, and is dependent upon favorable business, financial and economic conditions to pay interest and repay principal. In the event of adverse business, financial or economic conditions, there is not likely to be capacity to pay interest or repay principal. CC--Debt rated CC is currently highly vulnerable to nonpayment. C--The C rating may be used to cover a situation where a bankruptcy petition has been filed or similar action has been taken, but payments are being continued. D--The D rating, unlike other ratings, is not prospective; rather, it is used only where a default has actually occurred. Plus (+) or Minus (-)--The ratings from AA to CCC may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories. NR--Not rated. Fitch Ratings AAA--Bonds considered to be investment grade and of the highest credit quality. The obligor has an exceptionally strong ability to pay interest and repay principal, which is unlikely to be affected by reasonably foreseeable events. AA--Bonds considered to be investment grade and of very high credit quality. The obligor's ability to pay interest and repay principal is very strong, although not quite as strong A-2 as bonds rated AAA. Because bonds rated in the AAA and AA categories are not significantly vulnerable to foreseeable future developments, short-term debt of these issuers is generally rated F1+. A--Bonds considered to be investment grade and of high credit quality. The obligor's ability to pay interest and repay principal is considered to be strong, but may be more vulnerable to adverse changes in economic conditions and circumstances than bonds with higher ratings. BBB--Bonds considered to be investment grade and of satisfactory credit quality. The obligor's ability to pay interest and repay principal is considered to be adequate. Adverse changes in economic conditions and circumstances, however, are more likely to have adverse impact on these bonds, and therefore impair timely payment. The likelihood that the ratings of these bonds will fall below investment grade is higher than for bonds with higher ratings. BB--Bonds are considered speculative. The obligor's ability to pay interest and repay principal may be affected over time by adverse economic changes. However, business and financial alternatives can be identified which could assist the obligor in satisfying its debt service requirements. B--Bonds are considered highly speculative. While bonds in this class are currently meeting debt service requirements, the probability of continued timely payment of principal and interest reflects the obligor's limited margin of safety and the need for reasonable business and economic activity throughout the life of the issue. CCC--Bonds have certain identifiable characteristics which, if not remedied, may lead to default. The ability to meet obligations requires an advantageous business and economic environment. CC--Bonds are minimally protected. Default in payment of interest and/or principal seems probable over time. C--Bonds are in imminent default in payment of interest or principal. DDD, DD, D--Bonds are in default on interest and/or principal payments. Such bonds are extremely speculative and should be valued on the basis of their ultimate recovery value in liquidation or reorganization of the obligor. DDD represents the highest potential for recovery on these bonds, and D represents the lowest potential for recovery. Plus (+) Minus (-)--Plus and minus signs are used with a rating symbol to indicate the relative position of a credit within the rating category. Plus and minus signs, however, are not used in the AAA category or in categories below CCC. NR--Indicates that Fitch does not rate the specific issue. Dominion Bond Rating Service Limited Each rating category is denoted by the subcategories "high" and "low". The absence of either a "high" or "low" designation indicates the rating is in the "middle" of the category. The AAA and D categories do not utilize "high", "middle", and "low" as differential grades. AAA--Long-term debt rated AAA is of the highest credit quality, with exceptionally strong protection for the timely repayment of principal and interest. Earnings are considered stable, the structure of the industry in which the entity operates is strong, and the outlook for future profitability is favorable. There are few qualifying factors present that would detract from the performance of the entity. The strength of liquidity and coverage ratios is unquestioned and the entity has established a credible track record of superior performance. Given the extremely high standard that Dominion has set for this category, few entities are able to achieve a AAA rating. A-3 AA--Long-term debt rated AA is of superior credit quality, and protection of interest and principal is considered high. In many cases they differ from long-term debt rated AAA only to a small degree. Given the extremely restrictive definition Dominion has for the AAA category, entities rated AA are also considered to be strong credits, typically exemplifying above-average strength in key areas of consideration and unlikely to be significantly affected by reasonably foreseeable events. A--Long-term debt rated A is of satisfactory credit quality. Protection of interest and principal is still substantial, but the degree of strength is less than that of AA rated entities. While A is a respectable rating, entities in this category are considered to be more susceptible to adverse economic conditions and have greater cyclical tendencies than higher-rated securities. BBB--Long-term debt rated BBB is of adequate credit quality. Protection of interest and principal is considered acceptable, but the entity is fairly susceptible to adverse changes in financial and economic conditions, or there may be other adverse conditions present which reduce the strength of the entity and its rated securities. BB--Long-term debt rated BB is defined to be speculative and non-investment grade, where the degree of protection afforded interest and principal is uncertain, particularly during periods of economic recession. Entities in the BB range typically have limited access to capital markets and additional liquidity support. In many cases, deficiencies in critical mass, diversification, and competitive strength are additional negative considerations. B--Long-term debt rated B is considered highly speculative and there is a reasonably high level of uncertainty as to the ability of the entity to pay interest and principal on a continuing basis in the future, especially in periods of economic recession or industry adversity. CCC, CC and C--Long-term debt rated in any of these categories is very highly speculative and is in danger of default of interest and principal. The degree of adverse elements present is more severe than long-term debt rated B. Long-term debt rated below B often have features which, if not remedied, may lead to default. In practice, there is little difference between these three categories, with CC and C normally used for lower ranking debt of companies for which the senior debt is rated in the CCC to B range. D--A security rated D implies the issuer has either not met a scheduled payment of interest or principal or that the issuer has made it clear that it will miss such a payment in the near future. In some cases, Dominion may not assign a D rating under a bankruptcy announcement scenario, as allowances for grace periods may exist in the underlying legal documentation. Once assigned, the D rating will continue as long as the missed payment continues to be in arrears, and until such time as the rating is suspended, discontinued, or reinstated by Dominion. A-4 APPENDIX B - -------------------------------------------------------------------------------- HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION The settlement agreement between the Adviser and the New York State Attorney General requires the Funds to include the following supplemental hypothetical investment information, which provides additional information calculated and presented in a manner different from expense information found under "Fees and Expenses of the Funds" in this Prospectus about the effect of a Fund's expenses, including investment advisory fees and other Fund costs, on each Fund's returns over a 10-year period. The chart shows the estimated expenses that would be charged on a hypothetical investment of $10,000 in Class A shares of each Fund assuming a 5% return each year, including an initial sales charge of 4.25%. Except as otherwise indicated, the chart also assumes that the current annual expense ratio stays the same throughout the 10-year period. The current annual expense ratio for each Fund is the same as stated under "Financial Highlights." If you wish to obtain hypothetical investment information for other classes of shares of each Fund, please refer to the "Mutual Fund Fees & Expenses Calculators" on www.AllianceBernstein.com. Your actual expenses may be higher or lower. AllianceBernstein Short Duration Portfolio - --------------------------------------------------------------------------------
Hypothetical Investment Annual Hypothetical Hypothetical Performance After Expense Hypothetical Ending Year Investment Earnings Returns Ratio Expenses Investment ----------------------------------------------------------------------------- 1 $10,000.00 $ 478.75 $10,053.75 0.96% $ 521.52 $ 9,957.23 2 9,957.23 497.86 10,455.10 0.96 100.37 10,354.73 3 10,354.73 517.74 10,872.46 0.96 104.38 10,768.09 4 10,768.09 538.40 11,306.49 0.96 108.54 11,197.95 5 11,197.95 559.90 11,757.85 0.96 112.88 11,644.97 6 11,644.97 582.25 12,227.22 0.96 117.38 12,109.84 7 12,109.84 605.49 12,715.33 0.96 122.07 12,593.26 8 12,593.26 629.66 13,222.93 0.96 126.94 13,095.99 9 13,095.99 654.80 13,750.79 0.96 132.01 13,618.78 10 13,618.78 680.94 14,299.72 0.96 137.28 14,162.44 ----------------------------------------------------------------------------- Total $5,745.79 $1,583.35
AllianceBernstein Intermediate Bond Portfolio - --------------------------------------------------------------------------------
Hypothetical Investment Annual Hypothetical Hypothetical Performance After Expense Hypothetical Ending Year Investment Earnings Returns Ratio Expenses* Investment ----------------------------------------------------------------------------- 1 $10,000.00 $ 478.75 $10,053.75 0.85% $ 510.46 $ 9,968.29 2 9,968.29 498.41 10,466.70 1.09 114.09 10,352.61 3 10,352.61 517.63 10,870.24 1.09 118.49 10,751.75 4 10,751.75 537.59 11,289.34 1.09 123.05 11,166.29 5 11,166.29 558.31 11,724.60 1.09 127.80 11,596.80 6 11,596.80 579.84 12,176.64 1.09 132.73 12,043.91 7 12,043.91 602.20 12,646.11 1.09 137.84 12,508.27 8 12,508.27 625.41 13,133.68 1.09 143.16 12,990.52 9 12,990.52 649.53 13,640.05 1.09 148.68 13,491.37 10 13,491.37 674.57 14,165.94 1.09 154.41 14,011.53 ----------------------------------------------------------------------------- Total $5,722.24 $1,710.71
B-1 AllianceBernstein Global Bond Fund - --------------------------------------------------------------------------------
Hypothetical Annual Hypothetical Hypothetical Performance Investment Expense Hypothetical Ending Year Investment Earnings After Returns Ratio Expenses* Investment - -------------------------------------------------------------------------------- 1 $10,000.00 $ 478.75 $10,053.75 1.04% $ 529.56 $ 9,949.19 2 9,949.19 497.46 10,446.65 1.15 120.14 10,326.51 3 10,326.51 516.33 10,842.84 1.15 124.69 10,718.15 4 10,718.15 535.91 11,254.06 1.15 129.42 11,124.64 5 11,124.64 556.23 11,680.87 1.15 134.33 11,546.54 6 11,546.54 577.33 12,123.87 1.15 139.42 11,984.45 7 11,984.45 599.22 12,583.67 1.15 144.71 12,438.96 8 12,438.96 621.95 13,060.91 1.15 150.20 12,910.71 9 12,910.71 645.54 13,556.25 1.15 155.90 13,400.35 10 13,400.35 670.02 14,070.37 1.15 161.81 13,908.56 - -------------------------------------------------------------------------------- Total $5,698.74 $1,790.18
AllianceBernstein Diversified Yield Fund - --------------------------------------------------------------------------------
Hypothetical Annual Hypothetical Hypothetical Performance Investment Expense Hypothetical Ending Year Investment Earnings After Returns Ratio Expenses* Investment - -------------------------------------------------------------------------------- 1 $10,000.00 $ 478.75 $10,053.75 0.90% $ 515.48 $ 9,963.27 2 9,963.27 498.16 10,461.43 1.65 172.61 10,288.82 3 10,288.82 514.44 10,803.26 1.65 178.25 10,625.01 4 10,625.01 531.25 11,156.26 1.65 184.08 10,972.18 5 10,972.18 548.61 11,520.79 1.65 190.09 11,330.70 6 11,330.70 566.54 11,897.24 1.65 196.30 11,700.94 7 11,700.94 585.05 12,285.99 1.65 202.72 12,083.27 8 12,083.27 604.16 12,687.43 1.65 209.34 12,478.09 9 12,478.09 623.90 13,101.99 1.65 216.18 12,885.81 10 12,885.81 644.29 13,530.10 1.65 223.25 13,306.85 - -------------------------------------------------------------------------------- Total $5,595.15 $2,288.30
AllianceBernstein High Income Fund - --------------------------------------------------------------------------------
Hypothetical Annual Hypothetical Hypothetical Performance Investment Expense Hypothetical Ending Year Investment Earnings After Returns Ratio Expenses* Investment - -------------------------------------------------------------------------------- 1 $10,000.00 $ 478.75 $10,053.75 1.01% $ 526.54 $ 9,952.21 2 9,952.21 497.61 10,449.82 1.13 118.08 10,331.74 3 10,331.74 516.59 10,848.33 1.13 122.59 10,725.74 4 10,725.74 536.29 11,262.03 1.13 127.26 11,134.77 5 11,134.77 556.74 11,691.51 1.13 132.11 11,559.40 6 11,559.40 577.97 12,137.37 1.13 137.15 12,000.22 7 12,000.22 600.01 12,600.23 1.13 142.38 12,457.85 8 12,457.85 622.89 13,080.74 1.13 147.81 12,932.93 9 12,932.93 646.65 13,579.58 1.13 153.45 13,426.13 10 13,426.13 671.31 14,097.44 1.13 159.30 13,938.14 - -------------------------------------------------------------------------------- Total $5,704.81 $1,766.67
*Expenses are net of any fee waiver or expense waiver for the first year. Thereafter, the expense ratio reflects the Fund's operating expenses as reflected under "Fees and Expenses of the Funds" before waiver. B-2 PRIVACY NOTICE (This information is not part of the prospectus.) AllianceBernstein L.P., the AllianceBernstein Family of Funds and AllianceBernstein Investments, Inc. (collectively, "AllianceBernstein" or "we") understand the importance of maintaining the confidentiality of our clients' nonpublic personal information. Nonpublic personal information is personally identifiable financial information about our clients who are natural persons. To provide financial products and services to our clients, we may collect information about our clients from sources including: (1) account documentation, including applications or other forms, which may contain information such as a client's name, address, phone number, social security number, assets, income and other household information, (2) clients' transactions with us and others, such as account balances and transactions history, and (3) information from visitors to our websites provided through online forms, site visitorship data and online information collecting devices known as "cookies". It is our policy not to disclose nonpublic personal information about our clients (or former clients) except to our affiliates, or to others as permitted or required by law. From time to time, AllianceBernstein may disclose nonpublic personal information that we collect about our clients (or former clients), as described above, to non-affiliated third parties, including those that perform processing or servicing functions and those that provide marketing services for us or on our behalf pursuant to a joint marketing agreement that requires the third party provider to adhere to AllianceBernstein's privacy policy. We have policies and procedures to safeguard nonpublic personal information about our clients (and former clients) that include restricting access to such nonpublic personal information and maintaining physical, electronic and procedural safeguards, which comply with applicable federal standards, to safeguard such nonpublic personal information. For more information about the Funds, the following documents are available upon request: .. Annual/Semi-Annual Reports to Shareholders The Funds' annual and semi-annual reports to shareholders contain additional information on the Funds' investments. In the annual report, you will find a discussion of the market conditions and investment strategies that significantly affected a Fund's performance during its last fiscal year. .. Statement of Additional Information (SAI) The Funds have an SAI, which contains more detailed information about the Funds, including their operations and investment policies. The Funds' SAI and the independent registered public accounting firms' reports and financial statements in each Fund's most recent annual report to shareholders are incorporated by reference into (and are legally part of ) this Prospectus. You may request a free copy of the current annual/semi-annual report or the SAI, or make inquiries concerning the Funds, by contacting your broker or other financial intermediary, or by contacting the Adviser: By Mail/Phone: AllianceBernstein Investor Services, Inc. For Information: (800) 221-5672 P.O. Box 786003 For Literature: (800) 227-4618 San Antonio, TX 78278-6003
Or you may view or obtain these documents from the Commission: .. Call the Commission at 1-202-551-8090 for information on the operation of the Public Reference Room. .. Reports and other information about a Fund are available on the EDGAR Database on the Commission's Internet site at http://www.sec.gov. .. Copies of the information may be obtained, after paying a duplicating fee, by electronic request at publicinfo@sec.gov, or by writing the Commission's Public Reference Section, Washington, DC 20549-0102. You also may find these documents and more information about the Adviser and the Funds on the Internet at: www.AllianceBernstein.com. AllianceBernstein and the AB Logo are registered trademarks and service marks used by permission of the owner, AllianceBernstein L.P.
Fund SEC File No. ------------------------------- Short Duration 811-05555 Intermediate Bond 811-02383 Global Bond 811-06554 Diversified Yield 811-07391 High Income 811-08188
ALLIANCEBERNSTEIN BOND FUNDS 1345 Avenue of the Americas New York, NY 10105 LOGO PRO-0115-0109 [GRAPHIC]
BOND FUNDS -- RETIREMENT SHARES -- (CLASS A, R, K AND I SHARES) PROSPECTUS | JANUARY 30, 2009 The AllianceBernstein Bond Funds Core High Income AllianceBernstein Intermediate Bond AllianceBernstein High Income Fund Portfolio AllianceBernstein Global Bond Fund
Absolute Return AllianceBernstein Diversified Yield Fund
The AllianceBernstein Bond Funds provide a broad selection of investment alternatives to investors. The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this Prospectus. Any representation to the contrary is a criminal offense. [LOGO] AB ALLIANCE BERNSTEIN Investments Investment Products Offered .. Are Not FDIC Insured .. May Lose Value .. Are Not Bank Guaranteed TABLE OF CONTENTS - --------------------------------------------------------------------------------
Page SUMMARY INFORMATION......................................... 4 CORE........................................................ 8 AllianceBernstein Intermediate Bond Portfolio............. 8 AllianceBernstein Global Bond Fund........................ 10 ABSOLUTE RETURN............................................. 12 AllianceBernstein Diversified Yield Fund.................. 12 HIGH INCOME................................................. 14 AllianceBernstein High Income Fund........................ 14 RISKS SUMMARY............................................... 16 FEES AND EXPENSES OF THE FUNDS.............................. 18 INVESTING IN THE FUNDS...................................... 21 How to Buy Shares......................................... 21 The Different Share Class Expenses........................ 22 Distribution Arrangements for Group Retirement Plans...... 22 Payments to Financial Intermediaries...................... 23 How to Exchange Shares.................................... 25 How to Sell or Redeem Shares.............................. 25 Frequent Purchases and Redemptions of Fund Shares......... 25 How the Funds Value Their Shares.......................... 27 MORE INFORMATION ABOUT THE FUNDS AND THEIR INVESTMENTS...... 29 MANAGEMENT OF THE FUNDS..................................... 43 DIVIDENDS, DISTRIBUTIONS AND TAXES.......................... 50 GENERAL INFORMATION......................................... 52 GLOSSARY OF INVESTMENT TERMS................................ 53 FINANCIAL HIGHLIGHTS........................................ 55 APPENDIX A--BOND RATINGS.................................... A-1 APPENDIX B--HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION. B-1
SUMMARY INFORMATION - -------------------------------------------------------------------------------- This Prospectus begins with a summary of key information about each of the AllianceBernstein(R) Bond Funds offered in this Prospectus. The Summary describes a Fund's objectives, investment strategies, principal risks, and fees. You will find additional information about the Funds and their investments beginning on page 29. PERFORMANCE INFORMATION This Summary includes a table for each Fund showing its average annual returns and a bar chart showing its annual returns. The table and the bar chart provide an indication of the historical risk of an investment in each Fund by showing: .. how the Fund's average annual returns for one, five, and ten years (or over the life of the Fund) compare to those of a broad-based securities market index; and .. how the Fund's performance changed from year to year over ten years (or over the life of the Fund). PLEASE NOTE A Fund's past performance before and after taxes, of course, does not necessarily indicate how it will perform in the future. As with all investments, you may lose money by investing in the Funds. RISK WHY IS RISK IMPORTANT? You should consider risk carefully when investing in a Fund. You could put your money in investments that have very little risk (for example, certificates of deposit issued by a bank), but these investments may typically have a lower return than a riskier investment. In other words, you may get a higher return if your investments have more risk. For your information, bond funds generally, but not always, are less risky than stock funds. The bar chart for each Fund also gives an indication of a Fund's overall risk. A fund with a higher variability of returns is a riskier investment. This Summary lists the principal risks for each Fund followed by an explanation of these risks. Generally, each Fund has broad risks that apply to all funds, such as market risk, interest rate risk, and credit risk, as well as specific risks of investing in a particular type of fixed-income securities, such as emerging market debt risk, high yield securities risk, foreign (non-U.S.) risk or currency risk. The risks of a Fund may be increased by the use of borrowing techniques or derivatives, such as futures, forwards, options and swaps. WHAT IS MARKET RISK? Market risk is the risk that factors affecting the securities markets generally will cause a possibly adverse change in the value of the fixed-income securities owned by a Fund. The value of these securities may decline simply because of economic changes or other events that impact large portions of the market. The factors include real or perceived unfavorable market conditions, increases in the rate of inflation, and changes in the general outlook for consumer spending, home sales and mortgage rates, or corporate earnings. 4 WHAT IS INTEREST RATE RISK? Changes in interest rates affect the value of fixed-income securities. If interest rates rise, the prices of these securities fall because to earn the higher rate the fixed principal amount has to be lower. In other words, fixed-income securities' prices and interest rates move in opposite directions. Increases in interest rates will cause a Fund's net asset value to decline and, at least in the near term, this decrease in value will not be offset by higher interest income from new investments. This risk is higher for fixed-income securities with longer maturities. Shorter and intermediate-term securities are less sensitive to interest rate changes. The opposite side of the effect of changes in interest rates is that if interest rates fall, the prices of fixed-income securities will increase. You, as an investor, would benefit from decreases in interest rates because your Fund's net asset value would increase. WHAT IS CREDIT RISK? The issuers of fixed-income securities may default by failing to make interest payments or to repay principal in a timely manner. This is referred to as credit risk. To illustrate, credit risk is virtually non-existent for securities issued by the U.S. Government as well as other major non-U.S. countries. Credit risk is higher for fixed-income securities issued by corporations. The degree of credit risk is reflected in credit ratings described below. Securities with higher credit risks (and lower ratings), often referred to as high yield securities, generally pay a higher interest rate to compensate investors for the additional risk. WHAT IS THE DIFFERENCE BETWEEN MATURITY AND DURATION? The maturity of a fixed-income security is the date at which the principal amount of the security is payable. Fixed-income securities with longer maturities tend to be more volatile because they are more sensitive to interest rates. To compensate for the increase in risk, however, these securities generally have a higher yield. Duration measures a bond or portfolio's sensitivity to interest rate changes. It is expressed as a number of years. The higher the number, the greater the risk. Under normal circumstances, for example, if a portfolio has a duration of four years, its value will change by approximately 4% if rates change by 1%; a duration of two years will result in an approximate 2% change in value, and so on. Thus, shorter duration bonds result in lower expected volatility. CREDIT RATINGS Credit ratings of fixed-income securities measure an issuer's expected ability to pay principal and interest over time. Credit ratings are determined by ratings organizations, such as S&P, Moody's or Fitch. A lower rating means there is a greater chance that an issuer will fail to meet its payment obligation or default. The following terms are generally used to describe the credit quality of debt securities depending on the security's credit rating or, if unrated, credit quality as determined by the Funds' Adviser: .. investment grade or .. below investment grade ("high yield securities" or "junk bonds"). For a further description of credit ratings, see "Appendix A--Bond Ratings." As noted in Appendix A, the credit rating organizations may modify their ratings of securities to show relative standing within a rating category, with the addition of numerical modifiers (1, 2 or 3) in the case of Moody's, with the addition of a plus (+) or minus (-) sign in the case of 5 S&P and Fitch, and with the addition of "high" or "low" in the case of Dominion. A Fund may purchase a security, regardless of any rating modification, provided the security is rated at or above the Fund's minimum rating category. For example, a Fund may purchase a security rated B1 by Moody's, or B- by S&P, provided the Fund may purchase securities rated B. Any reference to ratings by S&P or Moody's includes equivalent ratings by other rating agencies. OTHER INFORMATION .. The Fund's investment adviser is AllianceBernstein L.P., or the Adviser, a global investment manager providing diversified services to institutions and individuals through a broad line of investments, including approximately 105 mutual funds. .. References to "net assets" mean the assets of a Fund after liabilities, plus any borrowings used for investment purposes. In other words, net assets reflect the value of a Fund's investments. .. Funds that have a policy to invest at least 80% of their net assets in securities indicated by their name, such as Intermediate Bond, will not change these policies without 60 days' prior written notice to shareholders. 6 (This page intentionally left blank.) 7 CORE - -------------------------------------------------------------------------------- Designed to seek a "balance" between safety of principal and income generation/total return. AllianceBernstein Intermediate Bond Portfolio - -------------------------------------------------------------------------------- OBJECTIVE AND PRINCIPAL STRATEGIES: The Fund's investment objective is to generate income and price appreciation without assuming what the Adviser considers undue risk. The Fund invests, under normal circumstances, at least 80% of its net assets in fixed-income securities. The Fund expects to invest in readily marketable fixed-income securities with a range of maturities from short- to long-term and relatively attractive yields that do not involve undue risk of loss of capital. The Fund expects to invest in fixed-income securities with a dollar-weighted average maturity of generally between three to ten years and an average duration of three to six years. The Fund may invest up to 25% of its net assets in below investment grade bonds. The Fund may use leverage for investment purposes. The Fund may invest without limit in U.S. Dollar-denominated foreign fixed-income securities and may invest up to 25% of its assets in non-U.S. Dollar-denominated foreign fixed-income securities. These investments may include, in each case, developed and emerging market debt securities. The Fund may invest in mortgage-related and other asset-backed securities, loan participations, inflation-protected securities, structured securities, variable, floating, and inverse floating rate instruments and preferred stock, and may use other investment techniques. The Fund intends, among other things, to enter into transactions such as reverse repurchase agreements and dollar rolls. The Fund may invest, without limit, in derivatives, such as options, futures, forwards, or swap agreements. The Fund expects to engage in active and frequent trading of portfolio securities to achieve its principal investment strategies. A higher rate of portfolio turnover increases transaction expenses, which may negatively affect the Fund's performance. High portfolio turnover also may result in the realization of substantial net short-term capital gains, which, when distributed, are taxable to shareholders. PRINCIPAL RISKS: ..Market Risk .Emerging Market Risk ..Interest Rate Risk .Currency Risk ..Credit Risk .Prepayment Risk ..Inflation Risk .Derivatives Risk ..Foreign (non-U.S.) Risk .Leverage Risk
Please see "Risks Summary" for a description of these and other risks of investing in the Fund. 8 The table and bar chart below provide an indication of the historical risk of an investment in the Fund. PERFORMANCE TABLE Average Annual Total Returns (For the periods ended December 31, 2008)
Since 1 Year** 5 Years** Inception** ---------------------------------------------------------------------- Class A* -9.26% 1.23% 3.82% ---------------------------------------------------------------------- Class R -8.46% 1.05% 3.61% ---------------------------------------------------------------------- Class K -8.20% 1.30% 3.88% ---------------------------------------------------------------------- Class I -7.88% 1.56% 4.14% ---------------------------------------------------------------------- Barclays Capital U.S. Aggregate Index+ 5.24% 4.65% 6.09% ----------------------------------------------------------------------
* Average annual total returns reflect imposition of the maximum contingent deferred sales charges. **Inception Dates for Class A shares: 7/1/99, Class R shares: 11/03/03, and Class K and Class I shares: 3/1/05. Performance information for periods prior to the inception of Class R, Class K and Class I shares is the performance of the Fund's Class A shares adjusted to reflect the higher expense ratio of Class R shares and the lower expense ratio of Class K and Class I shares, respectively. + Reflects no deduction for fees, expenses, or taxes. BAR CHART The annual returns in the bar chart are for the Fund's Class A shares and do not reflect sales loads. If sales loads were reflected, returns would be less than those shown. [CHART] Calendar Year End (%) 99 00 01 02 03 04 05 06 07 08 - ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- na 11.25 7.36 7.67 3.69 3.48 1.94 3.97 5.68 -8.26 You should consider an investment in the Fund as a long-term investment. The Fund's returns will fluctuate over long and short periods. For example, during the period shown in the bar chart, the Fund's: Best Quarter was up 4.56% in the 3rd quarter, 2001; and Worst Quarter was down - -4.57% in the 3rd quarter, 2008. 9 AllianceBernstein Global Bond Fund - -------------------------------------------------------------------------------- OBJECTIVE AND PRINCIPAL STRATEGIES: The Fund's investment objective is to generate current income consistent with preservation of capital. The Fund invests, under normal circumstances, at least 80% of its net assets in fixed-income securities. The Fund may invest in a broad range of fixed-income securities in both developed and emerging markets. The Fund may invest across all fixed-income sectors, including U.S. and non-U.S. government and corporate debt securities. The Fund's investments may be denominated in local currency or U.S. Dollar-denominated. The Fund may invest in debt securities with a range of maturities from short- to long-term. The Fund may use borrowings or other leverage for investment purposes. The Adviser will actively manage the Fund's assets in relation to market conditions and general economic conditions and adjust the Fund's investments in an effort to best enable the Fund to achieve its investment objective. Thus, the percentage of the Fund's assets invested in a particular country or denominated in a particular currency will vary in accordance with the Adviser's assessment of the relative yield and appreciation potential of such securities and the relationship of the country's currency to the U.S. Dollar. Under normal circumstances, the Fund invests at least 75% of its net assets in fixed-income securities rated investment grade at the time of investment and may invest up to 25% of its net assets in below investment grade fixed-income securities. The Fund may invest in mortgage-related and other asset-backed securities, loan participations, inflation-protected securities, structured securities, variable, floating, and inverse floating rate instruments and preferred stock, and may use other investment techniques. The Fund intends, among other things, to enter into transactions such as reverse repurchase agreements and dollar rolls. The Fund may invest, without limit, in derivatives, such as options, futures, forwards, or swap agreements. PRINCIPAL RISKS: ..Market Risk .Emerging Market Risk ..Interest Rate Risk .Currency Risk ..Credit Risk .Diversification Risk ..Inflation Risk .Derivatives Risk ..Foreign (non-U.S.) Risk .Leverage Risk
Please see "Risks Summary" for a description of these and other risks of investing in the Fund. 10 The table and bar chart below provide an indication of the historical risk of an investment in the Fund. PERFORMANCE TABLE Average Annual Total Returns (For the periods ended December 31, 2008)
1 Year** 5 Years** 10 Years** - ------------------------------------------------------------------------------------- Class A* -11.71% 4.16% 7.19% - ------------------------------------------------------------------------------------- Class R -10.85% 3.96% 6.98% - ------------------------------------------------------------------------------------- Class K -10.77% 4.19% 7.23% - ------------------------------------------------------------------------------------- Class I -10.55% 4.45% 7.50% - ------------------------------------------------------------------------------------- Barclays Capital Global Aggregate Index (U.S. hedged)+ 5.58% 4.74% 5.33% - -------------------------------------------------------------------------------------
* Average annual total returns reflect imposition of the maximum contingent deferred sales charges. **Inception dates for Class R, Class K and Class I shares: 11/5/07. Performance information for periods prior to the inception of Class R, Class K and Class I shares is the performance of the Fund's Class A shares adjusted to reflect the higher expense ratio of Class R shares and the lower expense ratio of Class K and Class I shares, respectively. + Reflects no deduction for fees, expenses, or taxes. BAR CHART The annual returns in the bar chart are for the Fund's Class A shares and do not reflect sales loads. If sales loads were reflected, returns would be less than those shown. [CHART] Calendar Year End (%) 99 00 01 02 03 04 05 06 07 08 - ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- 7.86 18.47 0.31 10.69 15.13 6.87 9.72 6.57 9.90 -10.71 You should consider an investment in the Fund as a long-term investment. The Fund's returns will fluctuate over long and short periods. For example, during the period shown in the bar chart, the Fund's: Best Quarter was up 9.59% in the 2nd quarter, 2003; and Worst Quarter was down - -5.57% in the 4th quarter, 2008. 11 ABSOLUTE RETURN - -------------------------------------------------------------------------------- Designed to seek a return premium over cash across market cycles, with moderate average volatility or risk, by employing a dynamic risk allocation. AllianceBernstein Diversified Yield Fund - -------------------------------------------------------------------------------- OBJECTIVE AND PRINCIPAL STRATEGIES: The Fund's investment objective is to generate current income consistent with preservation of capital. The Fund employs a dynamic risk allocation, meaning that the Fund's risk profile may vary significantly over time based upon market conditions. The Fund invests in a portfolio of fixed-income securities of U.S. and non-U.S. companies and U.S. and non-U.S. government securities and supranational entities, including lower-rated securities. The Fund limits its investments in the securities of any one foreign government to 25% of its total assets. The Fund may invest in debt securities with a range of maturities from short- to long-term. The Fund typically maintains at least 50% of its net assets in investment grade securities. The Fund may invest up to 50% of its net assets in below investment grade securities, such as corporate high yield fixed-income securities, sovereign debt obligations and fixed-income securities of issuers located in emerging markets. The Fund may also invest in mortgage-related and other asset-backed securities, loan participations, inflation-protected securities, structured securities, variable, floating, and inverse floating rate instruments and preferred stock, and may use other investment techniques. The Fund may make short sales of securities or currencies or maintain a short position. The Fund may use borrowings or other leverage for investment purposes. The Fund intends, among other things, to enter into transactions such as reverse repurchase agreements and dollar rolls. The Fund may invest, without limit, in derivatives, such as options, futures, forwards, or swap agreements. PRINCIPAL RISKS: ..Market Risk .Emerging Market Risk ..Interest Rate Risk .Currency Risk ..Credit Risk .Prepayment Risk ..Inflation Risk .Derivatives Risk ..Foreign (non-U.S.) Risk .Leverage Risk
Please see "Risks Summary" for a description of these and other risks of investing in the Fund. 12 The table and bar chart below provide an indication of the historical risk of an investment in the Fund. PERFORMANCE TABLE Average Annual Total Returns (For the periods ended December 31, 2008)
1 Year** 5 Years** 10 Years** - ------------------------------------------------------------------------------------- Class A* -17.52% 0.63% 3.21% - ------------------------------------------------------------------------------------- Class R -16.61% 0.38% 2.97% - ------------------------------------------------------------------------------------- Class K -16.23% 0.69% 3.26% - ------------------------------------------------------------------------------------- Class I -16.28% 0.93% 3.51% - ------------------------------------------------------------------------------------- Barclays Capital Global Aggregate Index (U.S. hedged)+ 5.58% 4.74% 5.33% - ------------------------------------------------------------------------------------- Merrill Lynch 3-Month T-Bill Index 2.06% 3.25% 3.45% - -------------------------------------------------------------------------------------
* Average annual total returns reflect imposition of the maximum contingent deferred sales charges. **Inception Dates for Class R, Class K and Class I shares: 3/1/05. Performance information for periods prior to the inception of Class R, Class K and Class I shares is the performance of the Fund's Class A shares adjusted to reflect the higher expense ratio of Class R shares and the lower expense ratio of Class K and Class I shares, respectively. + Reflects no deduction for fees, expenses, or taxes. BAR CHART The annual returns in the bar chart are for the Fund's Class A shares and do not reflect sales loads. If sales loads were reflected, returns would be less than those shown. [CHART] Calendar Year End (%) 99 00 01 02 03 04 05 06 07 08 - ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- 7.63 4.57 -2.81 5.04 15.61 6.13 4.82 4.47 6.38 -16.52 You should consider an investment in the Fund as a long-term investment. The Fund's returns will fluctuate over long and short periods. For example, during the period shown in the bar chart, the Fund's: Best Quarter was up 7.36% in the 4th quarter, 2002; and Worst Quarter was down - -9.62% in the 4th quarter, 2008. 13 HIGH INCOME - -------------------------------------------------------------------------------- Designed to seek a higher/more aggressive level of income and potential for total return than the broad bond market. Consistent with this approach, volatility and potential for principal loss is expected to be commensurately higher as well. AllianceBernstein High Income Fund - -------------------------------------------------------------------------------- OBJECTIVE AND PRINCIPAL STRATEGIES: The Fund's investment objective is to seek to maximize total returns from price appreciation and income. The Fund pursues income opportunities from government, corporate, emerging market and high yield sources. It has the flexibility to invest in a broad range of fixed-income securities in both developed and emerging market countries. The Fund's investments may include U.S. and non-U.S. corporate debt securities and sovereign debt securities. The Fund may invest, without limitation, in either U.S. Dollar-denominated or non-U.S. Dollar-denominated fixed-income securities. The Fund may invest in debt securities with a range of maturities from short- to long-term. Substantially all of the Fund's assets may be invested in lower-rated securities, which may include securities having the lowest rating for non-subordinated debt instruments (i.e., rated C by Moody's or CCC+ or lower by S&P and Fitch) and unrated securities of equivalent investment quality. The Fund also may invest in investment grade securities and unrated securities. The Fund may also make short sales of securities or maintain a short position. The Fund is non-diversified, meaning it may invest more of its assets in a fewer number of issuers. The Fund may invest in mortgage-related and other asset-backed securities, loan participations, inflation-protected securities, structured securities, variable, floating, and inverse floating rate instruments and preferred stock, and may use other investment techniques. The Fund may use borrowings or other leverage for investment purposes. The Fund intends, among other things, to enter into transactions such as reverse repurchase agreements and dollar rolls. The Fund may invest, without limit, in derivatives, such as options, futures, forwards, or swap agreements. PRINCIPAL RISKS: ..Market Risk .Emerging Market Risk ..Interest Rate Risk .Currency Risk ..Credit Risk .Diversification Risk ..Inflation Risk .Derivatives Risk ..Foreign (non-U.S.) Risk .Leverage Risk
Please see "Risks Summary" for a description of these and other risks of investing in the Fund. 14 The table and bar chart below provide an indication of the historical risk of an investment in the Fund. PERFORMANCE TABLE Average Annual Total Returns (For the periods ended December 31, 2008)
1 Year** 5 Years** 10 Years** - --------------------------------------------------------------------------------------- Class A* -27.52% 1.53% 10.56% - --------------------------------------------------------------------------------------- Class R -26.65% 1.34% 10.34% - --------------------------------------------------------------------------------------- Class K -26.45% 1.59% 10.62% - --------------------------------------------------------------------------------------- Class I -26.31% 1.83% 10.81% - --------------------------------------------------------------------------------------- JPMorgan Emerging Markets Bond Index Global ("EMBI Global") (U.S. Dollar-denominated)+ -10.91% 5.18% 10.17% - --------------------------------------------------------------------------------------- JPMorgan Government Bond Index Emerging Markets ("GBI-EM") (local currency-denominated)+ -6.93% 8.94% N/A - --------------------------------------------------------------------------------------- Barclays Capital High Yield Index (2% Constrained) ("BC High Yield")+ -25.88% -0.84% 2.28% - --------------------------------------------------------------------------------------- Composite Benchmark (equal weighted blend of EMBI Global, GBI-EM and BC High Yield) -14.79% 4.47% N/A - ---------------------------------------------------------------------------------------
* Average annual total returns reflect imposition of the maximum contingent deferred sales charges. **Inception date for Class R, Class K and Class I shares: 1/28/08. Performance information for periods prior to the inception of Class R Class K and Class I shares is the performance of the Class A shares adjusted to reflect the higher expense ratio of Class R shares and the lower expense ratio of Class K and Class I shares, respectively. + Reflects no deduction for fees, expenses, or taxes. BAR CHART The annual returns in the bar chart are for the Fund's Class A shares and do not reflect sales loads. If sales loads were reflected, returns would be less than those shown. [CHART] Calendar Year End (%) 99 00 01 02 03 04 05 06 07 08 - ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- 26.71 14.47 6.10 18.69 38.42 11.09 10.16 11.85 7.29 -26.52 You should consider an investment in the Fund as a long-term investment. The Fund's returns will fluctuate over long and short periods. For example, during the period shown in the bar chart, the Fund's: Best Quarter was up 18.35% in the 4th quarter, 2002; and Worst Quarter was down - -17.75% in the 4th quarter, 2008. 15 RISKS SUMMARY - -------------------------------------------------------------------------------- In this Summary, we describe the principal and other risks that may affect a Fund's portfolio as a whole. This Prospectus has additional descriptions of risks applicable to specific investments in the discussions below under "More Information About the Funds and Their Investments." MARKET RISK This is the risk that the value of a Fund's investments will fluctuate as the bond markets fluctuate and that prices overall will decline over short- or long-term periods. INTEREST RATE RISK Changes in interest rates will affect the value of a Fund's investments in fixed-income securities. When interest rates rise, the value of a Fund's investments tends to fall and this decrease in value may not be offset by higher interest income from new investments. Interest rate risk is generally greater for Funds that invest in fixed-income securities with longer maturities or durations. CREDIT RISK This is the risk that the issuer or the guarantor of a fixed-income security, or the counterparty to a derivatives or other contract, will be unable or unwilling to make timely payments of interest or principal, or to otherwise honor its obligations. The issuer or guarantor may default, causing a loss of the full principal amount of a security and any accrued interest. The degree of risk for a particular security may be reflected in its credit rating. There is a possibility that the credit rating of a fixed-income securities may be downgraded after the purchase of the security, which may adversely affect the value of the security. Investments in fixed-income securities with lower ratings tend to have a higher probability that an issuer will default or fail to meet its payment obligations. INFLATION RISK This is the risk that the value of assets or income from investments will be less in the future as inflation decreases the value of money. As inflation increases, the value of each Fund's assets can decline as can the value of the Fund's distributions. This risk is significantly greater for those Funds that invest a significant portion of their assets in fixed-income securities with longer maturities. FOREIGN (NON-U.S.) RISK A Fund's investments in securities of non-U.S. issuers may experience more rapid and extreme changes in value than investments in securities of U.S. issuers. The securities markets of many non-U.S. countries are relatively small, with a limited number of companies representing a small number of securities. Non-U.S. issuers usually are not subject to the same degree of regulation as U.S. issuers. Reporting, accounting, and auditing standards of countries differ, in some cases significantly, from U.S. standards. Nationalization, expropriation or confiscatory taxation, currency blockage, political changes, or diplomatic developments could adversely affect a Fund's investments in a country other than the U.S. To the extent a Fund invests in a particular country or geographic region, the Fund may have more significant risk due to market changes or other factors affecting that country or region, including political instability and unpredictable economic conditions. CURRENCY RISK This is the risk that changes in foreign (non-U.S.) currency exchange rates may negatively affect the value of a Fund's investments or reduce the returns of a Fund. For example, the value of a Fund's investments in foreign stocks or currencies may decrease if the U.S. Dollar is strong (i.e., gaining value relative to other currencies) and other currencies are weak (i.e., losing value relative to the U.S. Dollar). Currency markets generally are not as regulated as securities markets. 16 EMERGING MARKET RISK Foreign investment risk may be particularly high to the extent a Fund invests in emerging market securities of issuers based in countries with developing economies. These securities may present market, credit, currency, liquidity, legal, political and other risks different from, or greater than, the risks of investing in developed foreign (non-U.S.) countries. PREPAYMENT RISK The value of mortgage-related or asset-backed securities may be particularly sensitive to changes in prevailing interest rates. Early payments of principal on some mortgage-related securities may occur during periods of falling mortgage interest rates and expose a Fund to a lower rate of return upon reinvestment of principal. Early payments associated with mortgage-related securities cause these securities to experience significantly greater price and yield volatility than is experienced by traditional fixed-income securities. During periods of rising interest rates, a reduction in prepayments may increase the effective life of mortgage-related securities, subjecting them to greater risk of decline in market value in response to rising interest rates. If the life of a mortgage-related security is inaccurately predicted, a Fund may not be able to realize the rate of return it expected. DIVERSIFICATION RISK A Fund may have more risk if it is "non-diversified," meaning that it can invest more of its assets in a smaller number of issuers. DERIVATIVES RISK This is the risk of investments in derivatives. These investments may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses for a Fund, and subject to counterparty risk to a greater degree than more traditional investments. LEVERAGE RISK When a Fund borrows money or otherwise leverages its portfolio, it may be volatile because leverage tends to exaggerate the effect of any increase or decrease in the value of a Fund's investments. A Fund may create leverage through the use of reverse repurchase arrangements, forward currency exchange contracts, forward commitments, dollar rolls or futures contracts, or by borrowing money. MANAGEMENT RISK Each Fund is subject to management risk because it is an actively managed investment fund. The Adviser will apply its investment techniques and risk analyses in making investment decisions for each Fund, but there is no guarantee that its techniques will produce the intended results.
- ------------------------------------------------------------------------------------------------------------------------ Foreign Emer- Interest (Non- ging Prepay- Diversi- Deriva- Lever- Manage- Market Rate Credit Inflation U.S.) Currency Market ment fication tives age ment Fund Risk Risk Risk Risk Risk Risk Risk Risk Risk Risk Risk Risk - ------------------------------------------------------------------------------------------------------------------------ AllianceBernstein . . . . . . . . . . . Intermediate Bond - ------------------------------------------------------------------------------------------------------------------------ AllianceBernstein . . . . . . . . . . . Global Bond - ------------------------------------------------------------------------------------------------------------------------ AllianceBernstein . . . . . . . . . . . Diversified Yield - ------------------------------------------------------------------------------------------------------------------------ AllianceBernstein High . . . . . . . . . . . Income - ------------------------------------------------------------------------------------------------------------------------
17 FEES AND EXPENSES OF THE FUNDS - -------------------------------------------------------------------------------- WHY ARE FUND FEES AND EXPENSES IMPORTANT? Fees and expenses reduce the investment performance of a Fund. The information provided below is intended to help you understand what these fees and expenses are and provide examples of the dollar amount of these costs to help you make comparisons with other funds. Some of these fees are paid directly by you at the time of investment (for example, a front-end sales charge) or, under certain circumstances, at the time you redeem or sell your shares back to the Fund. You pay other fees and expenses indirectly because they are deducted from a Fund's assets and reduce the value of your shares. These fees include management fees, distribution and/or service (Rule 12b-1) fees, and operating expenses. SHAREHOLDER FEES (fees paid directly from your investment)
Class A Class R Class K Class I Shares Shares Shares Shares - --------------------------------------------------------------------------------------------- Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) None None None None - --------------------------------------------------------------------------------------------- Maximum Deferred Sales Charge (Load) (as a percentage of offering purchase price or redemption proceeds, whichever is lower) None(a) None None None - --------------------------------------------------------------------------------------------- Exchange Fee None None None None
(a)In some cases, a 1%, 1-year contingent deferred sales charge or CDSC may apply for Class A shares. CDSCs for Class A shares may also be subject to waiver in certain circumstances. See "Purchase of Shares" in the Statement of Additional Information, or SAI. ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) AND EXAMPLES The Examples are intended to help you compare the cost of investing in a Fund with the cost of investing in other funds. They assume that you invest $10,000 in a Fund for the time periods indicated and then redeem all of your shares at the end of those periods. They also assume that your investment has a 5% return each year, that the Fund's operating expenses stay the same, and that all dividends and distributions are reinvested. Although your actual costs may be higher or lower, based on these assumptions your costs as reflected in the Examples would be: AllianceBernstein Intermediate Bond Portfolio Operating Expenses
Class A Class R Class K Class I - ------------------------------------------------------------------------- Management Fees .45% .45% .45% .45% Distribution and/or Service (12b-1) Fees .30% .50% .25% None Other Expenses: Transfer Agent .19% .15% .17% .04% Other Expenses .15% .15% .15% .15% ------ ------ ------ ------ Total Other Expenses .34% .30% .32% .19% ------ ------ ------ ------ Total Fund Operating Expenses 1.09% 1.25% 1.02% .64% ====== ====== ====== ====== Waiver and/or Expense Reimbursement (a) (.24)% (.20)% (.22)% (.09)% ------ ------ ------ ------ Net Expenses .85% 1.05% .80% .55% ====== ====== ====== ====== - -------------------------------------------------------------------------
Please refer to the footnotes on page 20. 18 Examples
Class A Class R Class K Class I ------------------------------------------------ After 1 year $ 87 $ 107 $ 82 $ 56 After 3 years+ $ 323 $ 377 $ 303 $196 After 5 years+ $ 578 $ 667 $ 542 $348 After 10 years+ $1,307 $1,494 $1,228 $790 ------------------------------------------------
AllianceBernstein Diversified Yield Fund Operating Expenses
Class A Class R Class K Class I - ------------------------------------------------------------------------- Management Fees .50% .50% .50% .50% Distribution and/or Service (12b-1) Fees .30% .50% .25% None Other Expenses: Transfer Agent .12% .12% .09% .03% Other Expenses .73% .76% .69% .75% ------ ------ ------ ------ Total Other Expenses .85% .88% .78% .78% ------ ------ ------ ------ Total Fund Operating Expenses 1.65% 1.88% 1.53% 1.28% ====== ====== ====== ====== Waiver and/or Expense Reimbursement (a) (.75)% (.78)% (.68)% (.68)% ------ ------ ------ ------ Net Expenses .90% 1.10% .85% .60% ====== ====== ====== ====== - -------------------------------------------------------------------------
Examples
Class A Class R Class K Class I - ------------------------------------------------ After 1 year $ 92 $ 112 $ 87 $ 61 After 3 years+ $ 449 $ 517 $ 418 $ 340 After 5 years+ $ 831 $ 949 $ 774 $ 640 After 10 years+ $1,904 $2,152 $1,776 $1,494 - ------------------------------------------------
AllianceBernstein Global Bond Fund Operating Expenses
Class A Class R Class K Class I - ------------------------------------------------------------------------- Management Fees .50% .50% .50% .50% Distribution and/or Service (12b-1) Fees .30% .50% .25% None Interest Expense .14% .14% .14% .14% Other Expenses: Transfer Agent .10% .23% .11% .03% Other Expenses .11% .11% .09% .10% ------ ------ ------ ------ Total Other Expenses .21% .34% .20% .13% ------ ------ ------ ------ Total Fund Operating Expenses 1.15% 1.48% 1.09% .77% ====== ====== ====== ====== Waiver and/or Expense Reimbursement (a) (.11)% (.24)% (.10)% (.03)% ------ ------ ------ ------ Net Expenses (b) 1.04% 1.24% .99% .74% ====== ====== ====== ====== - -------------------------------------------------------------------------
Please refer to the footnotes on page 20. 19 Examples
Class A Class R Class K Class I - ------------------------------------------------ After 1 year $ 106 $ 126 $101 $ 76 After 3 years+ $ 355 $ 445 $337 $243 After 5 years+ $ 623 $ 787 $592 $425 After 10 years+ $1,389 $1,751 $131 $952 - ------------------------------------------------
AllianceBernstein High Income Fund Operating Expenses
Class A Class R Class K Class I - --------------------------------------------------------------------------- Management Fees .50% .50% .50% .50% Distribution and/or Service (12b-1) Fees .30% .50% .25% None Interest Expense .06% .04% .03% .04% Other Expenses: Transfer Agent .12% .25% .18% .11% Other Expenses .15% .14% .16% .14% ------ ------ ------ ------ Total Other Expenses .27% .39% .34% .25% ------ ------ ------ ------ Total Fund Operating Expenses 1.13% 1.43% 1.12% .79% ====== ====== ====== ====== Waiver and/or Expense Reimbursement (a)(c) (.12)% (.24)% (.19)% (.10)% ------ ------ ------ ------ Net Expense (b)(c) 1.01% 1.19% .93% .69% ====== ====== ====== ====== - ---------------------------------------------------------------------------
Examples
Class A Class R Class K Class I - ------------------------------------------------ After 1 year $ 103 $ 121 $ 95 $ 70 After 3 years+ $ 347 $ 429 $ 337 $242 After 5 years+ $ 611 $ 760 $ 599 $429 After 10 years+ $1,365 $1,696 $1,348 $969 - ------------------------------------------------
+ These examples assume that the Adviser's agreement to waive management fees and/or bear Fund expenses is not extended beyond its initial term. (a)Reflects the Adviser's contractual waiver of a portion of its advisory fee and/or reimbursement of a portion of the Fund's operating expenses. This waiver extends through the Fund's current fiscal year and then may be extended by the Adviser for additional one-year terms. (b)If interest expenses were excluded, net expenses would be as follows:
Class A Class R Class K Class I - -------------------------------------------------------------- AllianceBernstein Global Bond .90% 1.10% .85% .60% AllianceBernstein High Income .95% 1.15% .90% .65%
(c)Revised to reflect current contractual fee waivers. 20 INVESTING IN THE FUNDS - -------------------------------------------------------------------------------- This section discusses how to buy, sell or redeem, or exchange different classes of shares in a Fund that are offered in this Prospectus. The Funds offer four classes of shares through this Prospectus. Each share class represents an investment in the same portfolio of securities, but the classes may have different sales charges and bear different ongoing distribution expenses. For additional information on the differences between the different classes of shares and factors to consider when choosing among them, please see "The Different Share Class Expenses" below. Also, you can learn more about payments to brokers, financial planners, banks, insurance companies, registered investment advisors, pension plan consultants or other "financial intermediaries" who distribute shares of the Funds and your individual financial advisor under "Payments to Financial Intermediaries." HOW TO BUY SHARES Class A, Class R, Class K and Class I shares are available at net asset value, or NAV, without an initial sales charge, to 401(k) plans, 457 plans, employer-sponsored 403(b) plans, profit-sharing and money purchase pension plans, defined benefit plans, and non-qualified deferred compensation plans where plan level or omnibus accounts are held on the books of a Fund ("group retirement plans"), as follows: Class A shares offered through this Prospectus are designed for group retirement plans with assets in excess of $10,000,000. Class A shares are also available at NAV to the AllianceBernstein Link, AllianceBernstein Individual 401(k) and AllianceBernstein SIMPLE IRA plans with at least $250,000 in plan assets or 100 employees. Class R shares are designed for group retirement plans with plan assets up to $10,000,000. Class K shares are designed for group retirement plans with at least $1,000,000 in plan assets. Class I shares are designed for group retirement plans with at least $10,000,000 in plan assets and certain related group retirement plans described in the SAI. Class I shares also are available to certain institutional clients of the Adviser who invest at least $2 million in a Fund. Class A, Class R, Class K and Class I shares are also available to certain AllianceBernstein-sponsored group retirement plans. Class R, Class K and Class I shares generally are not available to retail non-retirement accounts, traditional and Roth IRAs, Coverdell Education Savings Accounts, SEPs, SAR-SEPs, SIMPLE IRAs, and individual 403(b) plans. Effective October 19, 2005, Class I shares were no longer available to AllianceBernstein-sponsored group retirement programs known as the "Informed Choice" programs. Required Information A Fund is required by law to obtain, verify, and record certain personal information from you or persons on your behalf in order to establish an account. Required information includes name, date of birth, permanent residential address and taxpayer identification number (for most investors, your social security number). A Fund may also ask to see other identifying documents. If you do not provide the information, the Fund will not be able to open your account. If a Fund is unable to verify your identity, or that of another person(s) authorized to act on your behalf, or if the Fund believes it has identified potential criminal activity, the Fund reserves the right to take action it deems appropriate or as required by law, which may include closing your account. If you are not a U.S. citizen or resident alien, your account must be affiliated with a Financial Industry Regulatory Authority, or FINRA, member firm. General AllianceBernstein Investments, Inc., or ABI, may refuse any order to purchase shares. Each Fund reserves the right to suspend the sale of its shares to the public in response to conditions in the securities markets or for other reasons. 21 THE DIFFERENT SHARE CLASS EXPENSES This section describes the different expenses of investing in each class and explains factors to consider when choosing a class of shares. The expenses can include distribution and/or service (Rule 12b-1) fees or CDSCs. WHAT IS A RULE 12B-1 FEE? A Rule 12b-1 fee is a fee deducted from a Fund's assets that is used to pay for personal service, maintenance of shareholder accounts and distribution costs, such as advertising and compensation of financial intermediaries. The amount of each share class's Rule 12b-1 fee, if any, is disclosed below and in the relevant Fund's fee table near the front of this Prospectus. Asset-Based Sales Charges or Distribution and/or Service (Rule 12b-1) Fees Each Fund has adopted plans under Securities and Exchange Commission ("Commission") Rule 12b-1 that allow the Fund to pay asset-based sales charges or distribution and/or service (Rule 12b-1) fees for the distribution and sale of its shares. The amount of these fees for each class of the Fund's shares is up to:
Distribution and/or Service (Rule 12b-1) Fee (As a Percentage of Aggregate Average Daily Net Assets) ------------------------------------ Class A .30% Class R .50% Class K .25% Class I None
Because these fees are paid out of a Fund's assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales fees. Class R shares are subject to higher Rule 12b-1 fees than Class A shares. The higher fees mean a higher expense ratio, so Class R shares pay correspondingly lower dividends and may have a lower NAV (and returns) than Class A shares. Conversely, Class K and Class I shares have a lower or no Rule 12b-1 fee. Therefore, Class K and Class I shares have a lower expense ratio and may have a higher NAV (and returns) than Class A or Class R shares. All or some of these fees may be paid to financial intermediaries, including your financial intermediary. Class A Shares Class A shares offered through this Prospectus do not have an initial sales charge. Class A shares may be subject to a CDSC of up to 1%. When a non-AllianceBernstein-sponsored group retirement plan terminates a Fund as an investment option, all investments in Class A shares of that Fund through the plan are subject to a 1%, 1-year CDSC upon redemption. In addition, when a group retirement plan ceases to participate in an AllianceBernstein-sponsored group retirement plan program, investments in the Fund's Class A shares through the plan are subject to a 1%, 1-year CDSC upon redemption. The CDSC is applied to the lesser of NAV at the time of redemption of shares or the original cost of shares being redeemed. Class R, K and I Shares Class R, K and I shares do not have an initial sales charge or CDSC. DISTRIBUTION ARRANGEMENTS FOR GROUP RETIREMENT PLANS Each Fund offers distribution arrangements for group retirement plans. However, plan sponsors, plan fiduciaries and other financial intermediaries may establish requirements for the group retirement plans as to the purchase, sale or exchange of shares of a Fund, including maximum and minimum initial investment requirements, that are different from those 22 described in this Prospectus and the Funds' SAI. Therefore, plan sponsors or fiduciaries may not impose the same share class parameters as set forth in this Prospectus and the Funds' SAI. Group retirement plans also may not offer all classes of shares of a Fund. A Fund is not responsible for, and has no control over, the decision of any plan sponsor or fiduciary to impose such differing requirements. PAYMENTS TO FINANCIAL INTERMEDIARIES Financial intermediaries market and sell shares of the Funds. These financial intermediaries may receive compensation for selling shares of the Funds. This compensation is paid from various sources, including any CDSC, and/or Rule 12b-1 fee that you may pay. WHAT IS A FINANCIAL INTERMEDIARY? A financial intermediary is a firm that receives compensation for selling shares of the Funds offered in this Prospectus and/or provides services to the Funds' shareholders. Financial intermediaries may include, among others, brokers, financial planners or advisors, banks, pension plan consultants and insurance companies. Financial intermediaries employ financial advisors who deal with you and other investors on an individual basis. In the case of Class A shares, the Fund's principal underwriter, ABI, may pay financial intermediaries a fee of up to 1%. Additionally, up to 100% of the Rule 12b-1 fees applicable to Class A shares each year may be paid to financial intermediaries, including your financial intermediary, that sell Class A shares. In the case of Class R and Class K shares, up to 100% of the Rule 12b-1 fee applicable to Class R and Class K shares each year may be paid to financial intermediaries, including your financial intermediary, that sell Class R and Class K shares. Your financial advisor's firm receives compensation from the Funds, ABI, and/or the Adviser in several ways from various sources, which include some or all of the following: - Rule 12b-1 fees; - additional distribution support; - defrayal of costs for educational seminars and training; and - payments related to providing shareholder recordkeeping and/or transfer agency services. Please read the Prospectus carefully for information on this compensation. Other Payments for Distribution Services and Educational Support In addition to the Rule 12b-1 fees described under "Asset-Based Sales Charges or Distribution and/or Service (Rule 12b-1) Fees", some or all of which may be paid to financial intermediaries, ABI, at its expense, currently provides additional payments to firms that sell shares of the AllianceBernstein Mutual Funds. Although the individual components may be higher and the total amount of payments made to each qualifying firm in any given year may vary, the total amount paid to a financial intermediary in connection with the sale of shares of the AllianceBernstein Mutual Funds will generally not exceed the sum of (a) 0.25% of the current year's fund sales by that firm and (b) 0.10% of average daily net assets attributable to that firm over the year. These sums include payments to reimburse directly or indirectly the costs incurred by these firms and their employees in connection with educational seminars and training efforts about the AllianceBernstein Mutual Funds for the firms' employees and/or their clients and potential clients. The costs and expenses associated with these efforts may include travel, lodging, entertainment, and meals. ABI may pay a portion of "ticket" or other transactional charges. 23 For 2009, ABI's additional payments to these firms for distribution services and educational support related to the AllianceBernstein Mutual Funds is expected to be approximately 0.04% of the average monthly assets of the AllianceBernstein Mutual Funds, or approximately $21 million. In 2008, ABI paid approximately 0.04% of the average monthly assets of the AllianceBernstein Mutual Funds or approximately $21 million for distribution services and educational support related to the AllianceBernstein Mutual Funds. A number of factors are considered in determining the additional payments, including each firm's AllianceBernstein Mutual Fund sales, assets and redemption rates, and the willingness and ability of the firm to allow ABI to provide information for educational and marketing purposes. ABI's goal is to make the financial intermediaries who interact with current and prospective investors and shareholders more knowledgeable about the AllianceBernstein Mutual Funds so that they can provide suitable information and advice about the Funds. The Funds and ABI also make payments for sub-accounting or shareholder servicing to financial intermediaries that sell AllianceBernstein Mutual Fund shares. Please see "Management of the Funds--Transfer Agency and Retirement Plan Services" below. These expenses paid by the Funds are included in "Other Expenses" under "Fees and Expenses of the Funds--Annual Fund Operating Expenses" above. If one mutual fund sponsor makes greater distribution assistance payments than another, a financial intermediary and his or her firm may have an incentive to recommend one fund complex over another. Similarly, if a financial intermediary receives more distribution assistance for one share class versus another, then the financial intermediary may have an incentive to recommend that class. As of the date of this Prospectus, ABI anticipates that the firms that will receive additional payments for distribution services and/or educational support include: AIG Advisor Group Ameriprise Financial Services AXA Advisors Bank of America Cadaret, Grant & Co. CCO Investment Services Corp. Chase Investment Services Citigroup Global Markets Commonwealth Financial Network Donegal Securities ING Advisors Network LPL Financial Corporation Merrill Lynch Morgan Stanley Raymond James RBC Capital Markets Corporation Robert W. Baird UBS AG UBS Financial Services Wachovia Securities Wells Fargo Investments Although the Funds may use brokers and dealers or other financial intermediaries who sell shares of the Funds to effect portfolio transactions, the Funds do not consider the sale of 24 AllianceBernstein Mutual Fund shares as a factor when selecting brokers or dealers to effect portfolio transactions. HOW TO EXCHANGE SHARES You may exchange your Fund shares for shares of the same class of other AllianceBernstein Mutual Funds (including AllianceBernstein Exchange Reserves, a money market fund managed by the Adviser). Exchanges of shares are made at the next-determined NAV, without sales or service charges. All exchanges are subject to the minimum investment requirements set forth in the prospectus for the AllianceBernstein Mutual Fund whose shares are being acquired. You may request an exchange through your financial intermediary. In order to receive a day's NAV, your financial intermediary must receive and confirm your telephone exchange request by 4:00 p.m., Eastern time, on that day. The Funds may modify, restrict, or terminate the exchange privilege on 60 days' written notice. Please see the Funds' SAI for more details. HOW TO SELL OR REDEEM SHARES You may "redeem" your shares (i.e., sell your shares to a Fund) on any day the New York Stock Exchange ("Exchange") is open. Your sale price will be the next-determined NAV, less any applicable CDSC, after the Fund receives your redemption request in proper form. Normally, redemption proceeds are sent to you within seven days. If you recently purchased your shares by check or electronic funds transfer, your redemption payment may be delayed until the Fund is reasonably satisfied that the check or electronic funds transfer has been collected (which may take up to 15 days). Your financial intermediary must receive your sales request by 4:00 p.m., Eastern time, and submit it to the Fund by a pre-arranged time for you to receive the next-determined NAV, less any applicable CDSC. Your financial intermediary is responsible for submitting all necessary documentation to the Fund and may charge you a fee for this service. FREQUENT PURCHASES AND REDEMPTIONS OF FUND SHARES Each Fund's Board of Directors (the "Board") has adopted policies and procedures designed to detect and deter frequent purchases and redemptions of Fund shares or excessive or short-term trading that may disadvantage long-term Fund shareholders. These policies are described below. Each Fund reserves the right to restrict, reject, or cancel, without any prior notice, any purchase or exchange order for any reason, including any purchase or exchange order accepted by any shareholder's financial intermediary. Risks Associated With Excessive Or Short-term Trading Generally. While the Funds will try to prevent market timing by utilizing the procedures described below, these procedures may not be successful in identifying or stopping excessive or short-term trading in all circumstances. By realizing profits through short-term trading, shareholders that engage in rapid purchases and sales or exchanges of a Fund's shares dilute the value of shares held by long-term shareholders. Volatility resulting from excessive purchases and sales or exchanges of Fund shares, especially involving large dollar amounts, may disrupt efficient portfolio management. In particular, a Fund may have difficulty implementing its long-term investment strategies if it is forced to maintain a higher level of its assets in cash to accommodate significant short-term trading activity. Excessive purchases and sales or exchanges of a Fund's shares may force the Fund to sell portfolio securities at inopportune times to raise cash to accommodate short-term trading activity. In addition, a Fund may incur increased expenses if one or more shareholders engage in excessive or short-term trading. For example, a Fund may be forced to liquidate investments as a result of short-term trading and incur increased brokerage costs and realization of taxable capital gains without attaining any investment advantage. Similarly, a Fund may bear increased administrative costs due to asset level and investment volatility that accompanies patterns of short-term trading activity. All of these factors may adversely affect Fund performance. 25 Funds that may invest significantly in foreign equity securities may be particularly susceptible to short-term trading strategies. This is because foreign securities are typically traded on markets that close well before the time a Fund calculates its NAV at 4:00 p.m., Eastern time, which gives rise to the possibility that developments may have occurred in the interim that would affect the value of these securities. The time zone differences among international stock markets can allow a shareholder engaging in a short-term trading strategy to exploit differences in Fund share prices that are based on closing prices of foreign securities established some time before the Fund calculates its own share price (referred to as "time zone arbitrage"). The Funds have procedures, referred to as fair value pricing, designed to adjust closing market prices of foreign securities to reflect what is believed to be the fair value of those securities at the time the Fund calculates its NAV. While there is no assurance, the Funds expect that the use of fair value pricing, in addition to the short-term trading policies discussed below, will significantly reduce a shareholder's ability to engage in time zone arbitrage to the detriment of other Fund shareholders. This risk is generally not applicable to the Funds because they do not invest in foreign equity securities. A shareholder engaging in a short-term trading strategy may also target a Fund that does not invest primarily in foreign securities. Any Fund that invests in securities that are, among other things, thinly traded, traded infrequently or relatively illiquid, has the risk that the current market price for the securities may not accurately reflect current market values. A shareholder may seek to engage in short-term trading to take advantage of these pricing differences (referred to as "price arbitrage"). All Funds may be adversely affected by price arbitrage. Policy Regarding Short-term Trading. Purchases and exchanges of shares of the Funds should be made for investment purposes only. The Funds seek to prevent patterns of excessive purchases and sales or exchanges of Fund shares. The Funds will seek to prevent such practices to the extent they are detected by the procedures described below. The Funds reserve the right to modify this policy, including any surveillance or account blocking procedures established from time to time to effectuate this policy, at any time without notice. .. Transaction Surveillance Procedures. The Funds, through their agents, ABI and AllianceBernstein Investor Services, Inc., or ABIS, maintain surveillance procedures to detect excessive or short-term trading in Fund shares. This surveillance process involves several factors, which include scrutinizing transactions in Fund shares that exceed certain monetary thresholds or numerical limits within a specified period of time. Generally, more than two exchanges of Fund shares during any 90-day period or purchases of shares followed by a sale within 90 days will be identified by these surveillance procedures. For purposes of these transaction surveillance procedures, the Funds may consider trading activity in multiple accounts under common ownership, control, or influence. Trading activity identified by either, or a combination, of these factors, or as a result of any other information available at the time, will be evaluated to determine whether such activity might constitute excessive or short-term trading. These surveillance procedures may be modified from time to time, as necessary or appropriate to improve the detection of excessive or short-term trading or to address specific circumstances, such as for certain retirement plans, to conform to plan exchange limits or U.S. Department of Labor regulations, or for certain automated or pre-established exchange, asset allocation or dollar cost averaging programs, or omnibus account arrangements. .. Account Blocking Procedures. If the Funds determine, in their sole discretion, that a particular transaction or pattern of transactions identified by the transaction surveillance procedures described above is excessive or short-term trading in nature, the relevant Fund account(s) will be immediately "blocked" and no future purchase or exchange activity will be permitted. However, sales of Fund shares back to a Fund or 26 redemptions will continue to be permitted in accordance with the terms of the Fund's current Prospectus. In the event an account is blocked, certain account-related privileges, such as the ability to place purchase, sale and exchange orders over the internet or by phone, may also be suspended. A blocked account will generally remain blocked unless and until the account holder or the associated broker, dealer or other financial intermediary provides evidence or assurance acceptable to the Fund that the account holder did not or will not in the future engage in excessive or short-term trading. .. Applications of Surveillance Procedures and Restrictions to Omnibus Accounts. Omnibus account arrangements are common forms of holding shares of the Funds, particularly among certain brokers, dealers and other financial intermediaries, including sponsors of retirement plans and variable insurance products. The Funds apply their surveillance procedures to these omnibus account arrangements. As required by Commission rules, the Funds have entered into agreements with all of their financial intermediaries that require the financial intermediaries to provide the Funds, upon the request of the Funds or their agents, with individual account level information about their transactions. If the Funds detect excessive trading through their monitoring of omnibus accounts, including trading at the individual account level, the financial intermediaries will also execute instructions from the Funds to take actions to curtail the activity, which may include applying blocks to accounts to prohibit future purchases and exchanges of Fund shares. For certain retirement plan accounts, the Funds may request that the retirement plan or other intermediary revoke the relevant participant's privilege to effect transactions in Fund shares via the internet or telephone, in which case the relevant participant must submit future transaction orders via the U.S. Postal Service (i.e., regular mail). Risks to Shareholders Resulting From Imposition of Account Blocks in Response to Excessive Short-term Trading Activity. A shareholder identified as having engaged in excessive or short-term trading activity whose account is "blocked" and who may not otherwise wish to redeem his or her shares effectively may be "locked" into an investment in a Fund that the shareholder did not intend to hold on a long-term basis or that may not be appropriate for the shareholder's risk profile. To rectify this situation, a shareholder with a "blocked" account may be forced to redeem Fund shares, which could be costly if, for example, these shares have declined in value or the sale results in adverse tax consequences to the shareholder. To avoid this risk, a shareholder should carefully monitor the purchases, sales, and exchanges of Fund shares and avoid frequent trading in Fund shares. Limitations on Ability to Detect and Curtail Excessive Trading Practices. Shareholders seeking to engage in excessive short-term trading activities may deploy a variety of strategies to avoid detection and, despite the efforts of the Funds and their agents to detect excessive or short duration trading in Fund shares, there is no guarantee that the Funds will be able to identify these shareholders or curtail their trading practices. In particular, the Funds may not be able to detect excessive or short-term trading in Fund shares attributable to a particular investor who effects purchase and/or exchange activity in Fund shares through omnibus accounts. Also, multiple tiers of these entities may exist, each utilizing an omnibus account arrangement, which may further compound the difficulty of detecting excessive or short duration trading activity in Fund shares. HOW THE FUNDS VALUE THEIR SHARES Each Fund's NAV is calculated at the close of regular trading on the Exchange (ordinarily, 4:00 p.m., Eastern time), only on days when the Exchange is open for business. To calculate NAV, a Fund's assets are valued and totaled, liabilities are subtracted, and the balance, called net assets, is divided by the number of shares outstanding. If a Fund invests in securities that are primarily traded on foreign exchanges that trade on weekends or other days when the Fund does not price its shares, the NAV of the Fund's shares may change on days when shareholders will not be able to purchase or redeem their shares in the Fund. 27 The Funds value their securities at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are unreliable, at "fair value" as determined in accordance with procedures established by and under the general supervision of each Fund's Board. When a Fund uses fair value pricing, it may take into account any factors it deems appropriate. A Fund may determine fair value based upon developments related to a specific security and/or U.S. sector or broader stock market indices. The prices of securities used by the Fund to calculate its NAV may differ from quoted or published prices for the same securities. Fair value pricing involves subjective judgments and it is possible that the fair value determined for a security is materially different than the value that could be realized upon the sale of that security. Securities for which market quotations are not readily available or deemed unreliable (including restricted securities) are valued at fair market value. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer or analysts, or by analysis of the issuer's financial statements. The Funds may use fair value pricing more frequently for foreign securities because, among other things, most foreign markets close well before the Funds value their securities at 4:00 p.m., Eastern time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of these foreign securities. The Funds may value these securities using fair value prices based on independent pricing services or third party vendor tools to the extent available. Subject to the Board's oversight, each Fund's Board has delegated responsibility for valuing a Fund's assets to the Adviser. The Adviser has established a Valuation Committee, which operates under the policies and procedures approved by the Board, to value the Fund's assets on behalf of the Fund. The Valuation Committee values Fund assets as described above. Your order for purchase, sale, or exchange of shares is priced at the next-determined NAV after your order is received in proper form by the Fund. 28 MORE INFORMATION ABOUT THE FUNDS AND THEIR INVESTMENTS - -------------------------------------------------------------------------------- This section of the Prospectus provides additional information about the Funds' investment practices and risks. Most of these investment practices are discretionary, which means that the Adviser may or may not decide to use them. This Prospectus does not describe all of a Fund's investment practices and additional descriptions of each Fund's strategies, investments, and risks can be found in the Funds' SAI. Derivatives Derivatives are financial contracts whose value depends on, or is derived from, the value of an underlying asset, reference rate or index. Each Fund may, but is not required to, use derivatives for risk management purposes or as part of its investment strategies to earn income and enhance returns, to hedge or adjust the risk profile of a portfolio, to replace more traditional direct investments and to obtain exposure to otherwise inaccessible markets. The four principal types of derivatives in which the Funds invest are options, futures, forwards and swaps, which are described below. Derivatives may be (i) standardized, exchange-traded contracts or (ii) customized, privately negotiated contracts, generally referred to as over-the-counter derivatives. Exchange-traded derivatives tend to be more liquid and subject to less credit risk than those that are privately negotiated. From the four principal types of derivative instruments, virtually any type of derivative transaction can be created. A Fund's use of derivatives may involve risks that are different from, or possibly greater than, the risks associated with investing directly in securities or other more traditional instruments. These risks include the risk that the value of a derivative instrument may not correlate perfectly, or at all, with the value of the assets, reference rates, or indices that they are designed to track. Other risks include: the possible absence of a liquid secondary market for a particular instrument and possible exchange-imposed price fluctuation limits, either of which may make it difficult or impossible to close out a position when desired; the risk that adverse price movements in an instrument can result in a loss substantially greater than the Fund's initial investment in that instrument (in some cases, the potential loss is unlimited); and the risk that the counterparty will not perform its obligations. The Funds may use the following types of derivatives. .. Forward Contracts--A forward contract is a customized, privately negotiated agreement for one party to buy, and the other party to sell, a specific quantity of an underlying commodity or other tangible asset for an agreed upon price at a future date. A forward contract is either settled by physical delivery of the commodity or tangible asset to an agreed upon location at a future date, rolled forward into a new forward contract or, in the case of a non-deliverable forward, by a cash payment at maturity. The Funds' investments in forward contracts include the following: - Forward Currency Exchange Contracts. A Fund may purchase or sell forward currency exchange contracts for hedging purposes to minimize the risk from adverse changes in the exchange rates between the U.S. Dollar and other currencies or for non-hedging purposes as a means of making direct investments in foreign currencies, as described below under "Currency Transactions". A Fund may enter into a forward contract as transaction hedge (to "lock in" the U.S. Dollar price of a non-U.S. Dollar security), as position hedge (to protect the value of securities the Fund owns that are denominated in a foreign currency against substantial changes in the value of the foreign currency) or as cross-hedge (to protect the value of securities the Fund owns that are denominated in a foreign currency against substantial changes in the value of that foreign currency by entering into a forward contract for a different foreign currency that is expected to change in the same direction as the currency in which the securities are denominated). .. Futures Contracts and Options on Futures Contracts--A futures contract is an agreement that obligates the buyer to buy and the seller to sell a specified quantity of an 29 underlying asset (or settle for cash the value of a contract based on an underlying asset, rate or index) at a specific price on the contract maturity date. Futures contracts are standardized exchange-traded instruments and are fungible, meaning they are considered to be perfect substitutes for each other. This fungibility allows futures contracts to be readily offset or cancelled through the acquisition of equal but opposite positions, which is the primary method by which futures contracts are liquidated. A cash-settled futures contract does not require physical delivery of the underlying asset, but instead is settled for cash equal to the difference between the values of the contract on the date it is entered into and its maturity date. Options on futures contracts are options that call for the delivery of futures contracts upon exercise. A Fund may purchase or sell futures contracts and options thereon to hedge against changes in interest rates, securities (through index futures or options) or currencies. A Fund may also purchase or sell futures contracts for foreign currencies or options thereon for non-hedging purposes as a means of making direct investments in foreign currencies, as described below under "Currency Transactions". .. Options--An option (which may be standardized and exchange-traded or customized and privately negotiated) is an agreement that, for a premium payment or fee, gives the option holder (the buyer) the right but not the obligation to buy (a "call option") or sell (a "put option") the underlying asset (or settle for cash an amount based on an underlying asset, rate or index) at a specified price (the exercise price) during a period of time or on a specified date. Investments in options are considered speculative. A Fund may lose the premium paid for them if the price of the underlying security or other asset decreased or remained the same (in the case of a call option) or increased or remained the same (in the case of a put option). If a put or call option purchased by a Fund were permitted to expire without being sold or exercised, its premium would represent a loss to the Fund. The Funds' investments in options include the following: - Options on Foreign Currencies. A Fund may invest in options on foreign currencies that are privately negotiated or traded on U.S. or foreign exchanges for hedging purposes to protect against declines in the U.S. Dollar value of foreign currency denominated securities held by a Fund and against increases in the U.S. Dollar cost of securities to be acquired. The purchase of an option on a foreign currency may constitute an effective hedge against fluctuations in exchange rates, although if rates move adversely, a Fund may forfeit the entire amount of the premium plus related transaction costs. A Fund may also invest in options on foreign currencies for non-hedging purposes as a means of making direct investments in foreign currencies, as described below under "Currency Transactions". - Options on Securities. A Fund may purchase or write a put or call option on securities. The Fund will only exercise an option it purchased if the price of the security was less (in the case of a put option) or more (in the case of a call option) than the exercise price. If the Fund does not exercise an option, the premium it paid for the option will be lost. Normally, a Fund will write only "covered" options, which means writing an option for securities the Fund owns, but may write an uncovered call option for cross-hedging purposes. - Options on Securities Indices. An option on a securities index is similar to an option on a security except that, rather than taking or making delivery of a security at a specified price, an option on a securities index gives the holder the right to receive, upon exercise of the option, an amount of cash if the closing level of the chosen index is greater than (in the case of a call) or less than (in the case of a put) the exercise price of the option. .. Swap Transactions--A swap is a customized, privately negotiated agreement that obligates two parties to exchange a series of cash flows at specified intervals (payment 30 dates) based upon or calculated by reference to changes in specified prices or rates (interest rates in the case of interest rate swaps, currency exchange rates in the case of currency swaps) for a specified amount of an underlying asset (the "notional" principal amount). Except for currency swaps, the notional principal amount is used solely to calculate the payment stream, but is not exchanged. The Funds' investments in swap transactions include the following: - Interest Rate Swaps. Interest rate swaps involve the exchange by a Fund with another party of their respective commitments to pay or receive interest (e.g., an exchange of floating rate payments for fixed rate payments). Interest rate swaps are entered into on a net basis (i.e., the two payment streams are netted out, with the Fund receiving or paying, as the case may be, only the net amount of the two payments). - Swaptions, Caps and Floors. An option on a swap agreement, also called a "swaption," is an option that gives the buyer the right, but not the obligation, to enter into a swap on a future date in exchange for paying a market-based "premium." A receiver swaption gives the owner the right to receive the total return of a specified asset, reference rate, or index. A payer swaption gives the owner the right to pay the total return of a specified asset, reference rate, or index. Swaptions also include options that allow an existing swap to be terminated or extended by one of the counterparties. The purchase of an interest rate cap entitles the purchaser, to the extent that a specified index exceeds a predetermined interest rate, to receive payments of interest on a contractually-based principal amount from the party selling the interest rate cap. The purchase of an interest rate floor entitles the purchaser, to the extent that a specified index falls below a predetermined interest rate, to receive payments of interest on an agreed principal amount from the party selling the interest rate floor. Caps and floors may be less liquid than swaps. Interest rate swap, cap, and floor transactions may be used to preserve a return or spread on a particular investment or a portion of a Fund's portfolio or to protect against an increase in the price of securities a Fund anticipates purchasing at a later date. These transactions do not involve the delivery of securities or other underlying assets or principal. Unless there is a counterparty default, the risk of loss to a Fund from interest rate transactions is limited to the net amount of interest payments that the Fund is contractually obligated to make. If the counterparty to an interest rate transaction defaults, the Fund's risk of loss consists of the net amount of interest payments that the Fund contractually is entitled to receive. - Credit Default Swap Agreements. The "buyer" in a credit default swap contract is obligated to pay the "seller" a periodic stream of payments over the term of the contract in return for a contingent payment upon the occurrence of a credit event with respect to an underlying reference obligation. Generally, a credit event means bankruptcy, failure to pay, obligation acceleration or modified restructuring. A Fund may be either the buyer or seller in the transaction. If a Fund is a seller, the Fund receives a fixed rate of income throughout the term of the contract, which typically is between one month and five years, provided that no credit event occurs. If a credit event occurs, a Fund typically must pay the contingent payment to the buyer, which is typically the "par value" (full notional value) of the reference obligation. The contingent payment may be a cash settlement or by physical delivery of the reference obligation in return for payment of the face amount of the the obligation, The value of the reference obligation received by a Fund coupled with the periodic payments previously received may be less than the full notional value it pays to the buyer, resulting in a loss of value to the Fund. If the reference obligation is a defaulted security, physical delivery of the security will cause a Fund to hold a defaulted security. 31 If a Fund is a buyer and no credit event occurs, the Fund will lose its periodic stream of payments over the term of the contract. However, if a credit event occurs, the buyer typically receives full notional value for a reference obligation that may have little or no value. Credit default swaps may involve greater risks than if a Fund had invested in the reference obligation directly. Credit default swaps are subject to general market risk, liquidity risk and credit risk. - Currency Swaps. A Fund may invest in currency swaps for hedging purposes to protect against adverse changes in exchange rates between the U.S. Dollar and other currencies or for non-hedging purposes as a means of making direct investments in foreign currencies, as described below under "Currency Transactions". Currency swaps involve the individually negotiated exchange by a Fund with another party of a series of payments in specified currencies. Actual principal amounts of currencies may be exchanged by the counterparties at the initiation, and again upon the termination, of the transaction. Therefore, the entire principal value of a currency swap is subject to the risk that the swap counterparty will default on its contractual delivery obligations. If there is a default by the counterparty to the transaction, the Fund will have contractual remedies under the transaction agreements. .. Other Derivatives and Strategies-- - Eurodollar Instruments. Eurodollar instruments are essentially U.S. Dollar-denominated futures contracts or options that are linked to the London Interbank Offered Rate (LIBOR). Eurodollar futures contracts enable purchasers to obtain a fixed rate for the lending of funds and sellers to obtain a fixed rate for borrowings. - Structured Instruments. As part of its investment program and to maintain greater flexibility, each Fund may invest in structured instruments. Structured instruments, including indexed or structured securities, combine the elements of futures contracts or options with those of debt, preferred equity or a depository instrument. Generally, a structured instrument will be a debt security, preferred stock, depository share, trust certificate, certificate of deposit or other evidence of indebtedness on which a portion of or all interest payments, and/or the principal or stated amount payable at maturity, redemption or retirement, is determined by reference to prices, changes in prices, or differences between prices, of securities, currencies, intangibles, goods, articles or commodities (collectively "Underlying Assets") or by another objective index, economic factor or other measure, such as interest rates, currency exchange rates, commodity indices, and securities indices (collectively, "Benchmarks"). Thus, structured instruments may take a variety of forms, including, but not limited to, debt instruments with interest or principal payments or redemption terms determined by reference to the value of a currency or commodity or securities index at a future point in time, preferred stock with dividend rates determined by reference to the value of a currency, or convertible securities with the conversion terms related to a particular commodity. Structured instruments are potentially more volatile and carry greater market risks than traditional debt instruments. Depending on the structure of the particular structured instrument, changes in a Benchmark may be magnified by the terms of the structured instrument and have an even more dramatic and substantial effect upon the value of the structured instrument. Also, the prices of the structured instrument and the Benchmark or Underlying Asset may not move in the same direction or at the same time. Structured instruments can have volatile prices and limited liquidity, and their use by a Fund may not be successful. The risk of these investments can be substantial; possibly all of the principal is at risk. No Fund will invest more than 20% of its total assets in these investments. 32 - Currency Transactions. A Fund may invest in non-U.S. Dollar-denominated securities on a currency hedged or un-hedged basis. The Adviser may actively manage a Fund's currency exposures and may seek investment opportunities by taking long or short positions in currencies through the use of currency-related derivatives, including forward currency exchange contracts, futures and options on futures, swaps and options. The Adviser may enter into transactions for investment opportunities when it anticipates that a foreign currency will appreciate or depreciate in value but securities denominated in that currency are not held by the Fund and do not present attractive investment opportunities. Such transactions may also be used when the Adviser believes that it may be more efficient than a direct investment in a foreign currency-denominated security. A Fund may also conduct currency exchange contracts on a spot basis (i.e., for cash at the spot rate prevailing in the currency exchange market for buying or selling currencies). Forward Commitments Forward commitments for the purchase or sale of securities may include purchases on a when-issued basis or purchases or sales on a delayed delivery basis. In some cases, a forward commitment may be conditioned upon the occurrence of a subsequent event, such as approval and consummation of a merger, corporate reorganization or debt restructuring or approval of a proposed financing by appropriate authorities (i.e., a "when, as and if issued" trade). The Funds may invest significantly in TBA--mortgage-backed securities. A TBA or "To Be Announced" trade represents a contract for the purchase or sale of mortgage-backed securities to be delivered at a future agreed-upon date; however, the specific mortgage pool numbers or the number of pools that will be delivered to fulfill the trade obligation or terms of the contract are unknown at the time of the trade. Mortgage pools (including fixed rate or variable rate mortgages) guaranteed by the Government National Mortgage Association, or GNMA, the Federal National Mortgage Association, or FNMA, or the Federal Home Loan Mortgage Corporation, or FHLMC, are subsequently allocated to the TBA transactions. When forward commitments with respect to fixed-income securities are negotiated, the price, which is generally expressed in yield terms, is fixed at the time the commitment is made, but payment for and delivery of the securities take place at a later date. Securities purchased or sold under a forward commitment are subject to market fluctuation and no interest or dividends accrue to the purchaser prior to the settlement date. The use of forward commitments helps a Fund to protect against anticipated changes in interest rates and prices. Illiquid Securities Under current Commission guidelines, the Funds limit their investments in illiquid securities to 15% of their net assets. The term "illiquid securities" for this purpose means securities that cannot be disposed of within seven days in the ordinary course of business at approximately the amount a Fund has valued the securities. A Fund that invests in illiquid securities may not be able to sell such securities and may not be able to realize their full value upon sale. Restricted securities (securities subject to legal or contractual restrictions on resale) may be illiquid. Some restricted securities (such as securities issued pursuant to Rule 144A under the Securities Act of 1933 (the "Securities Act") or certain commercial paper) may be treated as liquid, although they may be less liquid than registered securities traded on established secondary markets. Indexed Commercial Paper Indexed commercial paper may have its principal linked to changes in foreign currency exchange rates whereby its principal amount is adjusted upwards or downwards (but not below zero) at maturity to reflect changes in the referenced exchange rate. A Fund will receive interest and principal payments on such commercial paper in the currency in which such commercial paper is denominated, but the amount of principal payable by the issuer at maturity will change in proportion to the change (if any) in the exchange rate 33 between the two specified currencies between the date the instrument is issued and the date the instrument matures. While such commercial paper entails the risk of loss of principal, the potential for realizing gains as a result of changes in foreign currency exchange rates enables a Fund to hedge (or cross-hedge) against a decline in the U.S. Dollar value of investments denominated in foreign currencies while providing an attractive money market rate of return. A Fund will purchase such commercial paper for hedging purposes only, not for speculation. Inflation-Protected Securities Inflation-protected securities, or IPS, are fixed-income securities whose principal value is periodically adjusted according to the rate of inflation. If the index measuring inflation falls, the principal value of these securities will be adjusted downward, and consequently the interest payable on these securities (calculated with respect to a smaller principal amount) will be reduced. Inflation-protected securities tend to react to changes in real interest rates. In general, the price of an inflation-protected security can fall when real interest rates rise, and can rise when real interest rates fall. Interest payments on inflation-protected securities can be unpredictable and will vary as the principal and/or interest is adjusted for inflation. Investment in Other Investment Companies The Funds may invest in other investment companies as permitted by the Investment Company Act of 1940 (the "1940 Act") or the rules and regulations thereunder. The Funds intend to invest uninvested cash balances in an affiliated money market fund as permitted by Rule 12d1-1 under the 1940 Act. If a Fund acquires shares in investment companies, shareholders would bear, indirectly, the expenses of such investment companies (which may include management and advisory fees), which are in addition to the Fund's expenses. A Fund may also invest in exchange-traded funds, subject to the restrictions and limitations of the 1940 Act. Loan Participations The Funds may invest in corporate loans either by participating as co-lender at the time the loan is originated or by buying an interest in the loan in the secondary market from a financial institution or institutional investor. The financial status of an institution interposed between a Fund and a borrower may affect the ability of the Fund to receive principal and interest payments. The success of a Fund may depend on the skill with which an agent bank administers the terms of the corporate loan agreements, monitors borrower compliance with covenants, collects principal, interest and fee payments from borrowers and, where necessary, enforces creditor remedies against borrowers. Agent banks typically have broad discretion in enforcing loan agreements. Mortgage-Related and Other Asset-Backed Securities Each Fund may invest in mortgage-related or other asset-backed securities. Mortgage-related securities include mortgage pass-through securities, collateralized mortgage obligations ("CMOs"), commercial mortgage-backed securities, mortgage dollar rolls, CMO residuals, stripped mortgage-backed securities ("SMBSs") and other securities that directly or indirectly represent a participation in or are secured by and payable from mortgage loans on real property. These securities may be issued or guaranteed by the U.S. Government or one of its sponsored entities or may be issued by private organizations. The value of mortgage-related or asset-backed securities may be particularly sensitive to changes in prevailing interest rates. Early payments of principal on some mortgage-related securities may occur during periods of falling mortgage interest rates and expose a Fund to a lower rate of return upon reinvestment of principal. Early payments associated with mortgage-related securities cause these securities to experience significantly greater 34 price and yield volatility than is experienced by traditional fixed-income securities. During periods of rising interest rates, a reduction in prepayments may increase the effective life of mortgage-related securities, subjecting them to greater risk of decline in market value in response to rising interest rates. If the life of a mortgage-related security is inaccurately predicted, a Fund may not be able to realize the rate of return it expected. One type of SMBS has one class receiving all of the interest from the mortgage assets (the interest-only, or "IO" class), while the other class will receive all of the principal (the principal-only, or "PO" class). The yield to maturity on an IO class is extremely sensitive to the rate of principal payments (including prepayments) on the underlying mortgage assets, and a rapid rate of principal payments may have a material adverse effect on a Fund's yield to maturity from these securities. Each Fund may invest in collateralized debt obligations ("CDOs"), which include collateralized bond obligations ("CBOs"), collateralized loan obligations ("CLOs"), and other similarly structured securities. CBOs and CLOs are types of asset-backed securities. A CBO is a trust that is backed by a diversified pool of high-risk, below investment grade fixed-income securities. A CLO is a trust typically collateralized by a pool of loans, which may include, among others, domestic and foreign senior secured loans, senior unsecured loans, and subordinate corporate loans, including loans that may be rated below investment grade or equivalent unrated loans. The Funds may invest in other asset-backed securities that have been offered to investors. Other Asset-Backed Securities The Funds may invest in other asset-backed securities. The securitization techniques used to develop mortgage-related securities are being applied to a broad range of financial assets. Through the use of trusts and special purpose corporations, various types of assets, including automobile loans and leases, credit card receivables, home equity loans, equipment leases and trade receivables, are being securitized in structures similar to the structures used in mortgage securitizations. Repurchase Agreements and Buy/Sell Back Transactions Each Fund may enter into repurchase agreements in which a Fund purchases a security from a bank or broker-dealer, which agrees to repurchase the security from the Fund at an agreed-upon future date, normally a day or a few days later. The purchase and repurchase obligations are transacted under one agreement. The resale price is greater than the purchase price, reflecting an agreed-upon interest rate for the period the buyer's money is invested in the security. Such agreements permit a Fund to keep all of its assets at work while retaining "overnight" flexibility in pursuit of investments of a longer-term nature. If the bank or broker-dealer defaults on its repurchase obligation, a Fund would suffer a loss to the extent that the proceeds from the sale of the security were less than the repurchase price. Each Fund may enter into buy/sell back transactions, which are similar to repurchase agreements. In this type of transaction, a Fund enters a trade to buy securities at one price and simultaneously enters a trade to sell the same securities at another price on a specified date. Similar to a repurchase agreement, the repurchase price is higher than the sale price and reflects current interest rates. Unlike a repurchase agreement, however, the buy/sell back transaction is considered two separate transactions. Reverse Repurchase Agreements, Dollar Rolls and Other Borrowings Each Fund may enter into reverse purchase agreements and dollar rolls, subject to the Fund's limitations on borrowings. A reverse repurchase agreement or dollar roll involves the sale of a security by a Fund and its agreement to repurchase the instrument at a specified time and price, and may be considered a form of borrowing for some purposes. Reverse repurchase agreements, dollar rolls and other forms of borrowings may create leveraging risk for a Fund. In addition, reverse repurchase agreements and dollar rolls 35 involve the risk that the market value of the securities a Fund is obligated to repurchase may decline below the purchase price. Dollar rolls involve sales by a Fund of securities for delivery in the current month and the Fund's simultaneously contracting to repurchase substantially similar (same type and coupon) securities on a specified future date. During the roll period, a Fund forgoes principal and interest paid on the securities. A Fund is compensated by the difference between the current sales price and the lower forward price for the future purchase (often referred to as the "drop") as well as by the interest earned on the cash proceeds of the initial sale. Reverse repurchase agreements and dollar rolls involve the risk that the market value of the securities a Fund is obligated to repurchase under the agreement may decline below the repurchase price. In the event the buyer of securities under a reverse repurchase agreement or dollar roll files for bankruptcy or becomes insolvent, a Fund's use of the proceeds of the agreement may be restricted pending a determination by the other party, or its trustee or receiver, whether to enforce the Fund's obligation to repurchase the securities. Rights and Warrants Rights and warrants are option securities permitting their holders to subscribe for other securities. Rights are similar to warrants except that they have a substantially shorter duration. Rights and warrants do not carry with them dividend or voting rights with respect to the underlying securities, or any rights in the assets of the issuer. As a result, an investment in rights and warrants may be considered more speculative than certain other types of investments. In addition, the value of a right or a warrant does not necessarily change with the value of the underlying securities, and a right or a warrant ceases to have value if it is not exercised prior to its expiration date. Short Sales The Funds may make short sales as a part of overall portfolio management or to offset a potential decline in the value of a security. A short sale involves the sale of a security that a Fund does not own, or if the Fund owns the security, is not to be delivered upon consummation of the sale. When the Fund makes a short sale of a security that it does not own, it must borrow from a broker-dealer the security sold short and deliver the security to the broker-dealer upon conclusion of the short sale. A short sale of a security involves the risk that, instead of declining, the price of the security sold short will rise. If the price of the securities sold short increases between the time of a short sale and the time a Fund replaces the borrowed security, the Fund will incur a loss; conversely, if the price declines, the Fund will realize a gain. The potential for the price of a fixed-income security sold short to rise is a function of both the remaining maturity of the obligation, its creditworthiness and its yield. Unlike short sales of equities or other instruments, potential for the price of a fixed-income security to rise may be limited due to the fact that the security will be no more than par at maturity. However, the short sale of other instruments or securities generally, including fixed-income securities convertible into equities or other instruments, a fixed-income security trading at a deep discount from par or that pays a coupon that is high in relative and/or absolute terms, or that is denominated in a currency other than the U.S. Dollar, involves the possibility of a theoretically unlimited loss since there is a theoretically unlimited potential for the market price of the security sold short to increase. Standby Commitment Agreements Standby commitment agreements are similar to put options that commit a Fund, for a stated period of time, to purchase a stated amount of a security that may be issued and sold to the Fund at the option of the issuer. The price and coupon of the security are fixed at the time of the commitment. At the time of entering into the agreement, the Fund is paid a commitment fee regardless of whether the security ultimately is issued. The Funds will 36 enter into such agreements only for the purpose of investing in the security underlying the commitment at a yield and price considered advantageous to the Fund and unavailable on a firm commitment basis. There is no guarantee a security subject to a standby commitment will be issued. In addition, the value of the security, if issued, on the delivery date may be more or less than its purchase price. Since the issuance of the security is at the option of the issuer, a Fund will bear the risk of capital loss in the event the value of the security declines and may not benefit from an appreciation in the value of the security during the commitment period if the issuer decides not to issue and sell the security to the Fund. Structured Securities and Basket Securities The Funds may invest in various types of structured securities and basket securities. Structured securities are securities issued in structured financing transactions, which generally involve aggregating types of debt assets in a pool or special purpose entity and then issuing new securities. Types of structured financings include securities described elsewhere in this Prospectus, such as mortgage-related and other asset-backed securities. The Funds' investments include investments in structured securities that represent interests in entities organized and operated solely for the purpose of restructuring the investment characteristics of particular debt obligations. This type of restructuring involves the deposit with or purchase by an entity, such as a corporation or trust, of specified instruments (such as commercial bank loans or high yield bonds) and the issuance by that entity of one or more classes of structured securities backed by, or representing interests in, the underlying instruments. The cash flow on the underlying instruments may be apportioned among the newly issued structured securities to create securities with different investment characteristics such as varying maturities, payment priorities and interest rate provisions, and the extent of the payments made with respect to structured securities is dependent on the extent of the cash flow from the underlying instruments. Structured securities of a given class may be either subordinated or unsubordinated to the payment of another class. Subordinated structured securities typically have higher yields and present greater risks than unsubordinated structured securities. Basket securities in which a Fund may invest may consist of entities organized and operated for the purpose of holding a basket of other securities. Baskets involving debt obligations may be designed to represent the characteristics of some portion of the debt securities market or the entire debt market. Variable, Floating and Inverse Floating Rate Instruments Variable and floating rate securities pay interest at rates that are adjusted periodically, according to a specified formula. A "variable" interest rate adjusts at predetermined intervals (e.g., daily, weekly or monthly), while a "floating" interest rate adjusts whenever a specified benchmark rate (such as the bank prime lending rate) changes. The Funds may also invest in inverse floating rate debt instruments ("inverse floaters"). The interest rate on an inverse floater resets in the opposite direction from the market rate of interest to which the inverse floater is indexed. An inverse floater may have greater volatility in market value, in that, during periods of rising interest rates, the market values of inverse floaters will tend to decrease more rapidly than those of fixed rate securities. Zero Coupon and Principal-Only Securities Zero coupon securities and principal-only (PO) securities are debt securities that have been issued without interest coupons or stripped of their unmatured interest coupons, and include receipts or certificates representing interests in such stripped debt obligations and coupons. Such a security pays no interest to its holder during its life. Its value to an investor consists of the difference between its face value at the time of maturity and the price for which it was acquired, which is generally an amount significantly less than its face value. Such securities usually trade at a deep discount from their face or par value and are subject to greater 37 fluctuations in market value in response to changing interest rates than debt obligations of comparable maturities and credit quality that make current distributions of interest. On the other hand, because there are no periodic interest payments to be reinvested prior to maturity, these securities eliminate reinvestment risk and "lock in" a rate of return to maturity. Foreign (Non-U.S.) Securities Investing in foreign securities involves special risks and considerations not typically associated with investing in U.S. securities. The securities markets of many foreign countries are relatively small, with the majority of market capitalization and trading volume concentrated in a limited number of companies representing a small number of industries. A Fund that invests in foreign fixed-income securities may experience greater price volatility and significantly lower liquidity than a portfolio invested solely in securities of U.S. companies. These markets may be subject to greater influence by adverse events generally affecting the market, and by large investors trading significant blocks of securities, than is usual in the United States. Securities registration, custody, and settlement may in some instances be subject to delays and legal and administrative uncertainties. Foreign investment in the securities markets of certain foreign countries is restricted or controlled to varying degrees. These restrictions or controls may at times limit or preclude investment in certain securities and may increase the cost and expenses of a Fund. In addition, the repatriation of investment income, capital or the proceeds of sales of securities from certain countries is controlled under regulations, including in some cases the need for certain advance government notification or authority, and if a deterioration occurs in a country's balance of payments, the country could impose temporary restrictions on foreign capital remittances. A Fund also could be adversely affected by delays in, or a refusal to grant, any required governmental approval for repatriation, as well as by the application to it of other restrictions on investment. Investing in local markets may require a Fund to adopt special procedures or seek local governmental approvals or other actions, any of which may involve additional costs to a Fund. These factors may affect the liquidity of a Fund's investments in any country and the Adviser will monitor the effect of any such factor or factors on a Fund's investments. Transaction costs, including brokerage commissions for transactions both on and off the securities exchanges, in many foreign countries are generally higher than in the United States. Issuers of securities in foreign jurisdictions are generally not subject to the same degree of regulation as are U.S. issuers with respect to such matters as insider trading rules, restrictions on market manipulation, shareholder proxy requirements, and timely disclosure of information. The reporting, accounting, and auditing standards of foreign countries may differ, in some cases significantly, from U.S. standards in important respects, and less information may be available to investors in foreign securities than to investors in U.S. securities. Substantially less information is publicly available about certain non-U.S. issuers than is available about most U.S. issuers. The economies of individual foreign countries may differ favorably or unfavorably from the U.S. economy in such respects as growth of gross domestic product or gross national product, rate of inflation, capital reinvestment, resource self-sufficiency, and balance of payments position. Nationalization, expropriation or confiscatory taxation, currency blockage, political changes, government regulation, political or social instability, revolutions, wars or diplomatic developments could affect adversely the economy of a foreign country. In the event of nationalization, expropriation, or other confiscation, a Fund could lose its entire investment in securities in the country involved. In addition, laws in foreign countries governing business organizations, bankruptcy and insolvency may provide less protection to security holders such as the Fund than that provided by U.S. laws. 38 Investments in securities of companies in emerging markets involve special risks. There are approximately 100 countries identified by the World Bank as Low Income, Lower Middle Income and Upper Middle Income countries that are generally regarded as Emerging Markets. Emerging market countries that the Adviser currently considers for investment are listed below. Countries may be added to or removed from this list at any time. Algeria Hong Kong Poland Argentina Hungary Qatar Belize India Romania Brazil Indonesia Russia Bulgaria Israel Singapore Chile Jamaica Slovakia China Jordan Slovenia Colombia Kazakhstan South Africa Costa Rica Lebanon South Korea Cote D'Ivoire Malaysia Taiwan Croatia Mexico Thailand Czech Republic Morocco Trinidad & Tobago Dominican Republic Nigeria Tunisia Ecuador Pakistan Turkey Egypt Panama Ukraine El Salvador Peru Uruguay Guatemala Philippines Venezuela
Investing in emerging market securities imposes risks different from, or greater than, risks of investing in domestic securities or in foreign, developed countries. These risks include: smaller market capitalization of securities markets, which may suffer periods of relative illiquidity; significant price volatility; restrictions on foreign investment; and possible repatriation of investment income and capital. In addition, foreign investors may be required to register the proceeds of sales; future economic or political crises could lead to price controls, forced mergers, expropriation or confiscatory taxation, seizure, nationalization, or creation of government monopolies. The currencies of emerging market countries may experience significant declines against the U.S. Dollar, and devaluation may occur subsequent to investments in these currencies by a Fund. Inflation and rapid fluctuations in inflation rates have had, and may continue to have, negative effects on the economies and securities markets of certain emerging market countries. Additional risks of emerging market securities may include: greater social, economic and political uncertainty and instability; more substantial governmental involvement in the economy; less governmental supervision and regulation; unavailability of currency hedging techniques; companies that are newly organized and small; differences in auditing and financial reporting standards, which may result in unavailability of material information about issuers; and less developed legal systems. In addition, emerging securities markets may have different clearance and settlement procedures, which may be unable to keep pace with the volume of securities transactions or otherwise make it difficult to engage in such transactions. Settlement problems may cause a Fund to miss attractive investment opportunities, hold a portion of its assets in cash pending investment, or be delayed in disposing of a portfolio security. Such a delay could result in possible liability to a purchaser of the security. Foreign (Non-U.S.) Currencies A Fund that invests some portion of its assets in securities denominated in, and receives revenues in, foreign currencies will be adversely affected by reductions in the value of those currencies relative to the U.S. Dollar. Foreign currency exchange rates may fluctuate significantly. They are determined by supply and demand in the foreign exchange markets, the relative merits of investments in different countries, actual or perceived changes in interest rates, and other complex factors. Currency exchange rates also can be affected unpredictably by intervention (or the failure to intervene) by U.S. or foreign governments or 39 central banks or by currency controls or political developments. In light of these risks, a Fund may engage in certain currency hedging transactions, as described above, which involve certain special risks. A Fund may also invest directly in foreign currencies for non-hedging purposes directly on a spot basis (i.e., cash) or through derivative transactions, such as forward currency exchange contracts, futures and options thereon, swaps and options as described above. These investments will be subject to the same risks. In addition, currency exchange risks may fluctuate significantly over short periods of time, causing a Fund's NAV to fluctuate. Borrowing and Leverage The Funds may use borrowings for investment purposes subject to the limit imposed by the 1940 Act, which is up to 33 1/3% of a Fund's assets. Borrowings by a Fund result in leveraging of the Fund's shares. The Funds may also use leverage for investment transactions by entering into transactions such as reverse repurchase agreements, forward contracts and dollar rolls. This means that a Fund uses cash made available during the term of these transactions to make investments in other fixed-income securities. Utilization of leverage, which is usually considered speculative, involves certain risks to a Fund's shareholders. These include a higher volatility of the net asset value of a Fund's shares and the relatively greater effect on the net asset value of the shares. So long as a Fund is able to realize a net return on its investment portfolio that is higher than the interest expense paid on borrowings or the carrying costs of leveraged transactions, the effect of leverage will be to cause the Fund's shareholders to realize a higher current net investment income than if the Fund were not leveraged. If the interest expense on borrowings or the carrying costs of leveraged transactions approaches the net return on a Fund's investment portfolio, the benefit of leverage to the Fund's shareholders will be reduced. If the interest expense on borrowings or the carrying costs of leveraged transactions were to exceed the net return to shareholders, a Fund's use of leverage would result in a lower rate of return. Similarly, the effect of leverage in a declining market could be a greater decrease in net asset value per share. In an extreme case, if a Fund's current investment income were not sufficient to meet the interest expense on borrowing or the carrying costs of leveraged transactions, it could be necessary for the Fund to liquidate certain of its investments, thereby reducing the net asset value of a Fund's shares. A Fund may also reduce the degree to which it is leveraged by repaying amounts borrowed. Investment in Below Investment Grade Fixed-Income Securities Investments in securities rated below investment grade may be subject to greater risk of loss of principal and interest than higher-rated securities. These securities are also generally considered to be subject to greater market risk than higher-rated securities. The capacity of issuers of these securities to pay interest and repay principal is more likely to weaken than is that of issuers of higher-rated securities in times of deteriorating economic conditions or rising interest rates. In addition, below investment grade securities may be more susceptible to real or perceived adverse economic conditions than investment grade securities. The market for these securities may be thinner and less active than that for higher-rated securities, which can adversely affect the prices at which these securities can be sold. To the extent that there is no established secondary market for these securities, a Fund may experience difficulty in valuing such securities and, in turn, the Fund's assets. Unrated Securities A Fund may invest in unrated securities when the Adviser believes that the financial condition of the issuers of such securities, or the protection afforded by the terms of the securities themselves, limits the risk to the Fund to a degree comparable to that of rated securities that are consistent with the Fund's objective and policies. 40 Sovereign Debt Obligations No established secondary markets may exist for many sovereign debt obligations. Reduced secondary market liquidity may have an adverse effect on the market price and a Fund's ability to dispose of particular instruments when necessary to meet its liquidity requirements or in response to specific economic events such as a deterioration in the creditworthiness of the issuer. Reduced secondary market liquidity for certain sovereign debt obligations may also make it more difficult for a Fund to obtain accurate market quotations for the purpose of valuing its portfolio. Market quotations are generally available on many sovereign debt obligations only from a limited number of dealers and may not necessarily represent firm bids of those dealers or prices for actual sales. By investing in sovereign debt obligations, the Funds will be exposed to the direct or indirect consequences of political, social, and economic changes in various countries. Political changes in a country may affect the willingness of a foreign government to make or provide for timely payments of its obligations. The country's economic status, as reflected in, among other things, its inflation rate, the amount of its external debt and its gross domestic product, will also affect the government's ability to honor its obligations. The Funds are permitted to invest in sovereign debt obligations that are not current in the payment of interest or principal or are in default so long as the Adviser believes it to be consistent with the Funds' investment objectives. The Funds may have limited legal recourse in the event of a default with respect to certain sovereign debt obligations they hold. For example, remedies from defaults on certain sovereign debt obligations, unlike those on private debt, must, in some cases, be pursued in the courts of the defaulting party itself. Legal recourse therefore may be significantly diminished. Bankruptcy, moratorium, and other similar laws applicable to issuers of sovereign debt obligations may be substantially different from those applicable to issuers of private debt obligations. The political context, expressed as the willingness of an issuer of sovereign debt obligations to meet the terms of the debt obligation, for example, is of considerable importance. In addition, no assurance can be given that the holders of commercial bank debt will not contest payments to the holders of securities issued by foreign governments in the event of default under commercial bank loan agreements. Future Developments A Fund may take advantage of other investment practices that are not currently contemplated for use by the Fund, or are not available but may yet be developed, to the extent such investment practices are consistent with the Fund's investment objective and legally permissible for the Fund. Such investment practices, if they arise, may involve risks that exceed those involved in the activities described above. Changes in Investment Objectives and Policies A Fund's Board may change a Fund's investment objective without shareholder approval. The Fund will provide shareholders with 60 days' prior written notice of any material change to the Fund's investment objective. Unless otherwise noted, all other investment policies of a Fund may be changed without shareholder approval. Portfolio Turnover The portfolio turnover rate for each Fund is included in the Financial Highlights section. The Funds are actively managed and, in some cases in response to market conditions or otherwise as disclosed in this Prospectus, a Fund's portfolio turnover may exceed 100%. A higher rate of portfolio turnover increases transaction costs and other expenses, which must be borne by the Fund and its shareholders. High portfolio turnover also may result in the realization of substantial net short-term capital gains, which, when distributed, are taxable to shareholders. 41 Temporary Defensive Position For temporary defensive purposes in an attempt to respond to adverse market, economic, political or other conditions, each Fund may invest in certain types of short-term, liquid, investment grade or high quality (depending on the Fund) debt securities. While a Fund is investing for temporary defensive purposes, it may not meet its investment objectives. Portfolio Holdings A description of each Fund's policies and procedures with respect to the disclosure of the Fund's portfolio securities is available in the Funds' SAI. 42 MANAGEMENT OF THE FUNDS - -------------------------------------------------------------------------------- INVESTMENT ADVISER Each Fund's adviser is AllianceBernstein L.P., 1345 Avenue of the Americas, New York, New York 10105. The Adviser is a leading international investment adviser supervising client accounts with assets as of September 30, 2008, totaling approximately $590 billion (of which more than $81 billion represented assets of investment companies). As of September 30, 2008, the Adviser managed retirement assets for many of the largest public and private employee benefit plans (including 53 of the nation's FORTUNE 100 companies), for public employee retirement funds in 38 states, for investment companies, and for foundations, endowments, banks and insurance companies worldwide. The 36 registered investment companies managed by the Adviser, comprising 105 separate investment portfolios, currently have approximately 4.2 million retail accounts. The Adviser provides investment advisory services and order placement facilities for each of the Funds. For these advisory services, each of the Funds paid the Adviser during its most recent fiscal year as a percentage of average daily net assets:
Fee as a Percentage of Average Daily Fiscal Year Fund Net Assets Ended -------------------------------------------------------------- AllianceBernstein Intermediate Bond .22%* 10/31/08 AllianceBernstein Global Bond .40% 9/30/08 AllianceBernstein Diversified Yield .00%* 10/31/08 AllianceBernstein High Income .40% 10/31/08
*Fee stated net of any waivers and/or reimbursements. See "Fees and Expenses of the Funds" at the beginning of the Prospectus for more information about fee waivers. A discussion regarding the basis for the Board's approval of each Fund's investment advisory agreement is available in the Fund's semi-annual report to shareholders. The Adviser may act as an investment adviser to other persons, firms, or corporations, including investment companies, hedge funds, pension funds, and other institutional investors. The Adviser may receive management fees, including performance fees, that may be higher or lower than the advisory fees it receives from the Funds. Certain other clients of the Adviser may have investment objectives and policies similar to those of a Fund. The Adviser may, from time to time, make recommendations that result in the purchase or sale of a particular security by its other clients simultaneously with a Fund. If transactions on behalf of more than one client during the same period increase the demand for securities being purchased or the supply of securities being sold, there may be an adverse effect on price or quantity. It is the policy of the Adviser to allocate advisory recommendations and the placing of orders in a manner that is deemed equitable by the Adviser to the accounts involved, including a Fund. When two or more of the clients of the Adviser (including a Fund) are purchasing or selling the same security on a given day from the same broker-dealer, such transactions may be averaged as to price. PORTFOLIO MANAGERS The management of, and investment decisions for, the Funds' portfolios are made by certain Investment Policy Teams. Each Investment Policy Team relies heavily on the fundamental analysis and research of the Adviser's large internal research staff. No one person is principally responsible for coordinating each Fund's investments. 43 The following table lists the Investment Policy Teams, the person within each Investment Policy Team with the most significant responsibility for day-to-day management of the Fund's portfolio, the length of time that each person has been jointly and primarily responsible for the Fund, and each person's principal occupation during the past five years: Principal Occupation(s) During Fund and Responsible Team Employee; Year; Title the Past Five (5) Years ----------------------------------------------------------------------------- AllianceBernstein Alison M. Martier; since Senior Vice President of Intermediate Bond May 2005; Senior Vice the Adviser, with which Portfolio President of the Adviser she has been associated and Director of the in a substantially U.S. Investment Grade Fixed-Income Senior similar capacity to her Core Fixed Income Team Portfolio Management Team current position since prior to 2004. Greg J. Wilensky; Senior Vice President of since October 2005; the Adviser, with which Senior Vice President of he has been associated the Adviser and Director in a substantially of Stable Value similar capacity to his Investments current position since prior to 2004. Shawn E. Keegan; since Vice President of the October 2005; Vice Adviser, with which he President of the Adviser has been associated in a substantially similar capacity to his current position since prior to 2004. Joran Laird; since Vice President of the October 2005; Vice Adviser, with which he President of the Adviser has been associated in a substantially similar capacity to his current position since prior to 2004. Douglas J. Peebles; Executive Vice President since November 2007; of the Adviser, with Executive Vice President which he has been of the Adviser; and associated in a Chief Investment Officer substantially similar and Head of Fixed-Income capacity to his current position since prior to 2004. Paul J. DeNoon; since Senior Vice President of January 2009; Senior the Adviser, with which Vice President of the he has been associated Adviser and Director of in a substantially Emerging Market Debt similar capacity to his current position since prior to 2004. AllianceBernstein Global Paul J. DeNoon; since (see above) Bond Fund August 2002; (see above) Global Fixed Income Investment Team Douglas J. Peebles; (see above) since inception; (see above) Scott DiMaggio; since Senior Vice President of August 2005; Senior Vice the Adviser, with which President of the Adviser he has been associated and Director of Canada in a substantially Fixed Income similar capacity to his current position since prior to 2004. Matthew S. Sheridan; Vice President of the since January 2007; Vice Adviser, with which he President of the Adviser has been associated in a substantially similar capacity to his current position since prior to 2004. Fernando Grisales; since Assistant Vice President January 2007; Assistant of the Adviser, with Vice President of the which he has been Adviser associated in a substantially similar capacity to his current position since prior to 2004. Michael L. Mon; since Vice President of the September 2003; Vice Adviser, with which he President of the Adviser has been associated in a substantially similar capacity to his current position since prior to 2004. 44 Principal Occupation(s) During Fund and Responsible Team Employee; Year; Title the Past Five (5) Years ----------------------------------------------------------------------------- AllianceBernstein Douglas J. Peebles; (see above) Diversified Yield Fund since inception; (see above) Global Fixed Income (see above) Investment Team and Global Credit Investment Paul J. DeNoon; since Team October 2005; (see above) Greg J. Wilensky; since (see above) June 2008; (see above) Joran Laird; since (see above) January 2009; (see above) Matthew S. Sheridan; (see above) since April 2006; (see above) AllianceBernstein High Paul J. DeNoon; since (see above) Income Fund August 2002; (see above) Global Fixed Income Team Gershon Distenfeld; Vice President of the and Global Credit since February 2008; Adviser, with which he Investment Team Vice President of the has been associated in a Adviser substantially similar capacity to his current position since prior to 2004. Douglas J. Peebles; (see above) since August 2002; (see above) Matthew S. Sheridan; (see above) since October 2005; (see above) Additional information about the portfolio managers may be found in the Funds' SAI. PERFORMANCE OF A SIMILARLY MANAGED PORTFOLIO The investment teams employed by the Adviser to manage AllianceBernstein High Income Fund and AllianceBernstein Intermediate Bond Portfolio have substantial experience in managing discretionary accounts of institutional clients, pooled investment vehicles and/or other registered investment companies and portions thereof (the "Historical Accounts") that have substantially the same investment objectives and policies and are managed in accordance with essentially the same investment strategies as the Funds. The Historical Accounts that are not registered investment companies are not subject to certain limitations, diversification requirements and other restrictions imposed under the 1940 Act and the Internal Revenue Code (the "Code") to which the Funds, as registered investment companies, are subject and which, if applicable to the Historical Accounts, may have adversely affected the performance of the Historical Accounts. With respect to AllianceBernstein High Income Fund, the Historical Accounts performance information is representative solely of the performance of a pooled investment vehicle that is not offered for sale in the United States. Set forth below is performance data provided by the Adviser relating to the Historical Accounts managed by the investment team that manages each Fund's assets. Performance data is shown for the period during which the investment teams of the Adviser managed the Historical Accounts through December 31, 2008. The aggregate assets for the Historical Accounts managed by the High Income investment team and the Intermediate Bond investment team as of December 31, 2008 were approximately $9.3 billion and $15.4 billion, respectively. The investment teams' Historical Accounts have a nearly identical composition of representative investment holdings and related percentage weightings. The performance data is net of all fees (including any portfolio transaction costs) charged to the Historical Accounts, calculated on a monthly basis. The highest fee payable for the Historical Accounts is 1.99% of assets for AllianceBernstein High Income Fund and 0.85% of assets for AllianceBernstein Intermediate Bond Portfolio, annually. Net-of-fee performance figures reflect the compounding effect of such fees. 45 The data has not been adjusted to reflect any fees that will be payable by the Funds, which may be higher than the fees imposed on the Historical Accounts, and will reduce the returns of the Funds. Expenses associated with the distribution of Class A, Class R and Class K shares of the Funds in accordance with the plans adopted by the Boards of the Funds under Commission Rule 12b-1 are also excluded. Except as noted, the performance data has also not been adjusted for corporate or individual taxes, if any, payable by account owners. The Adviser has calculated the investment performance of the Historical Accounts on a trade-date basis. Income has been accrued daily and cash flows weighted daily. Composite investment performance for the Funds has been determined on an asset weighted basis. New accounts are included in the composite investment performance computations at the beginning of the quarter following the initial contribution. The total returns set forth below are calculated using a method that links the monthly return amounts for the disclosed periods, resulting in a time-weighted rate of return. Other methods of computing the investment performance of the Historical Accounts may produce different results, and the results for different periods may vary. A composite benchmark, comprised of the JPMorgan Emerging Markets Bond Index Global ("EMBI Global"), the JPMorgan Government Bond Index-Emerging Markets ("GBI-EM") and the Barclays Capital High Yield Index (2% Constrained) ("BC High Yield") on an equal weighted basis (the "High Income Composite Benchmark") is used by High Income and its Historical Account, for purposes of this example, as a benchmark to measure its relative performance. EMBI Global tracks total returns for traded external debt instruments in the emerging markets, GBI-EM tracks total returns for local currency government bonds issued by emerging markets, and BC High Yield tracks the U.S. Dollar-denominated, non-investment grade, fixed-rate, taxable corporate bond market. The Barclays Capital Aggregate Index ("BC Aggregate Index") is used by Intermediate Bond as a benchmark to measure its relative performance and is composed of securities from Barclays Capital Government/Corporate Bond Index, Mortgage-Backed Securities Index, and the Asset-Backed Securities Index. The index's total return consists of price appreciation/depreciation plus income as a percentage of the original investment. Indices are rebalanced monthly by market capitalization. To the extent the investment teams utilize investment techniques such as swaps, futures or options, the performance of the High Income Composite Benchmark and the BC Aggregate Index may not be substantially comparable to the performance of the investment teams' Historical Accounts. The High Income Composite Benchmark and the BC Aggregate Index do not reflect the deduction of any fees or expenses associated with the active management of a mutual fund. The performance data below is provided solely to illustrate the investment teams' performance in managing the Historical Accounts as measured against a broad based market index. The performance of the Funds will be affected by the performance of the investment teams managing the Funds' assets. If the investment teams were to perform relatively poorly, the performance of the Funds would suffer. Investors should not rely on the performance data of the Historical Accounts as an indication of future performance of the Funds. The investment performance for the periods presented may not be indicative of future rates of return. The performance was not calculated pursuant to the methodology established by the Commission that will be used to calculate the Funds' performance. The use of methodology different from that used to calculate performance could result in different performance data. 46 SCHEDULE OF HISTORICAL PERFORMANCE - HISTORICAL ACCOUNTS*
High Income High Income Historical Account Composite BC High Total Return** Benchmark EMBI Global*** GBI-EM Yield Index*** - ------------------------------------------------------------------------------------------------------------- Year Ended December 31: 2008 (32.27)% (14.78)% (10.91)% (11.79)% (25.88)% 2007 5.91% 8.91% 6.26% 16.27% 2.27% 2006 12.56% 10.91% 9.87% 11.97% 10.75% 2005 7.99% 5.39% 10.73% 2.86% 2.76% 2004 11.11% 15.65% 11.73% 23.14% 11.14% 2003 36.36% 23.60% 25.66% 17.79% 28.78% 2002 5.26% 13.99% 13.11% 29.10% (0.24)% 2001 (10.44)% N/A 1.36% N/A 5.46% 2000 (4.25)% N/A 14.41% N/A 5.79% 1999 18.76% N/A 24.18% N/A 2.39% 1998 (15.60)% N/A (11.54)% N/A 1.87% Cumulative total return for the period December 22, 1997 (inception of Historical Account) to December 31, 2008 1.59% N/A 7.99%*** N/A 4.30%***
* Total return is a measure of investment performance that is based upon the change in value of an investment from the beginning to the end of a specified period and assumes reinvestment of all dividends and other distributions. The basis of presentation of this data is described in the preceding discussion. ** Net of all fees. ***Net inception cumulative index returns are from December 31, 1997.
Intermediate Bond BC U.S. Historical Accounts Aggregate Total Return** Index - ------------------------------------------------------------------------------------------------------------ Year Ended December 31: 2008 (5.40)% 5.24% 2007 5.60% 6.97% 2006 5.26% 4.33% 2005 3.22% 2.43% 2004 5.48% 4.34% 2003 8.45% 4.10% 2002 7.93% 10.26% Cumulative total return for the period June 30, 2001 (inception of Historical Accounts) to December 31, 2008 4.58% 5.63%
* Total return is a measure of investment performance that is based upon the change in value of an investment from the beginning to the end of a specified period and assumes reinvestment of all dividends and other distributions. The basis of presentation of this data is described in the preceding discussion. **Net of all fees. AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 2008
Since 1 Year 3 Years 5 Years 10 Years Inception ---------------------------------------------------------------------------- High Income Historical Account (32.27)% (6.88)% (0.63)% 3.54% 1.59%* High Income Composite Benchmark (14.78)% 0.76% 4.47% N/A N/A EMBI Global (10.91)% 1.32% 5.18% 10.17% 7.99%** GBI-EM (11.79)% 4.72% 7.78% N/A N/A BC High Yield (25.88)% (5.67)% (0.84)% 2.28% 4.30%**
* Inception date of Historical Account is December 22, 1997. **Since inception average annual total returns are from December 31, 1997.
Since 1 Year 3 Years Inception ---------------------------------------------------------------- Intermediate Bond Historical Accounts (5.40)% 1.69% 4.58%* BC U.S. Aggregate Index 5.28% 5.51% 5.63%
*Inception date of Historical Accounts is June 30, 2001. 47 LEGAL PROCEEDINGS On October 2, 2003, a purported class action complaint entitled Hindo et al. v. AllianceBernstein Growth & Income Fund et al. (the "Hindo Complaint") was filed against the Adviser; AllianceBernstein Holding L.P. ("Holding"); AllianceBernstein Corporation; AXA Financial, Inc.; the AllianceBernstein Mutual Funds, certain officers of the Adviser ("AllianceBernstein defendants"); and certain other unaffiliated defendants, as well as unnamed Doe defendants. The Hindo Complaint was filed in the United States District Court for the Southern District of New York by alleged shareholders of two of the AllianceBernstein Mutual Funds. The Hindo Complaint alleges that certain of the AllianceBernstein defendants failed to disclose that they improperly allowed certain hedge funds and other unidentified parties to engage in "late trading" and "market timing" of AllianceBernstein Mutual Fund securities, violating Sections 11 and 15 of the Securities Act, Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Sections 206 and 215 of the Investment Advisers Act of 1940. Plaintiffs seek an unspecified amount of compensatory damages and rescission of their contracts with the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts. Following October 2, 2003, additional lawsuits making factual allegations generally similar to those in the Hindo Complaint were filed in various federal and state courts against the Adviser and certain other defendants. On September 29, 2004, plaintiffs filed consolidated amended complaints with respect to four claim types: mutual fund shareholder claims; mutual fund derivative claims; derivative claims brought on behalf of Holding; and claims brought under ERISA by participants in the Profit Sharing Plan for Employees of the Adviser. All four complaints include substantially identical factual allegations, which appear to be based in large part on the Order of the Commission dated December 18, 2003 as amended and restated January 15, 2004 and the New York State Attorney General Assurance of Discontinuance dated September 1, 2004. On April 21, 2006, the Adviser and attorneys for the plaintiffs in the mutual fund shareholder claims, mutual fund derivative claims, and ERISA claims entered into a confidential memorandum of understanding containing their agreement to settle these claims. The agreement will be documented by a stipulation of settlement and will be submitted for court approval at a later date. The settlement amount ($30 million), which the Adviser previously accrued and disclosed, has been disbursed. The derivative claims brought on behalf of Holding, in which plaintiffs seek an unspecified amount of damages, remain pending. It is possible that these matters and/or other developments resulting from these matters could result in increased redemptions of the affected fund's shares or other adverse consequences to those funds. This may require those funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the Funds. However, the Adviser believes that these matters are not likely to have a material adverse effect on its ability to perform advisory services relating to those funds or the Funds. TRANSFER AGENCY AND RETIREMENT PLAN SERVICES ABIS acts as the transfer agent for the Funds. ABIS, an indirect wholly-owned subsidiary of the Adviser, registers the transfer, issuance, and redemption of Fund shares and disburses dividends and other distributions to Fund shareholders. Retirement plans may hold Fund shares in the name of the plan, rather than the participant. Plan recordkeepers, who may have affiliated financial intermediaries who sell shares of the Funds, may be paid for each participant fund account in amounts up to $19 per customer fund account per annum and/or up to 0.25% per annum of the average daily assets held in the plan. To the extent any of these payments for recordkeeping services, transfer agency services or retirement plan services are made by the Funds, they are 48 included in the amount appearing opposite the caption "Other Expenses" found in the Fund expense tables under "Fees and Expenses of the Funds." In addition, financial intermediaries may be affiliates of entities that receive compensation from the Adviser or ABI for maintaining retirement plan "platforms" that facilitate trading by affiliated and non-affiliated financial intermediaries and recordkeeping for retirement plans. Because financial intermediaries and plan recordkeepers may be paid varying amounts per class for sub-accounting or shareholder servicing, the service requirements of which may also vary by class, this may create an additional incentive for financial intermediaries and their financial advisors to favor one fund complex over another or one class of shares over another. 49 DIVIDENDS, DISTRIBUTIONS AND TAXES - -------------------------------------------------------------------------------- Each Fund's income dividends and capital gains distributions, if any, declared by a Fund on its outstanding shares will, at the election of each shareholder, be paid in cash or in additional shares of the same class of shares of that Fund. If paid in additional shares, the shares will have an aggregate net asset value as of the close of business on the declaration date of the dividend or distribution equal to the cash amount of the dividend or distribution. You may make an election to receive dividends and distributions in cash or in shares at the time you purchase shares. Your election can be changed at any time prior to a record date for a dividend. There is no sales or other charge in connection with the reinvestment of dividends or capital gains distributions. Cash dividends may be paid by check, or at your election, electronically via the ACH network. If you receive an income dividend or capital gains distribution in cash you may, within 120 days following the date of its payment, reinvest the dividend or distribution in additional shares of that Fund without charge by returning to the Adviser, with appropriate instructions, the check representing the dividend or distribution. Thereafter, unless you otherwise specify, you will be deemed to have elected to reinvest all subsequent dividends and distributions in shares of that Fund. While it is the intention of each Fund to distribute to its shareholders substantially all of each fiscal year's net income and net realized capital gains, if any, the amount and timing of any dividend or distribution will depend on the realization by the Fund of income and capital gains from investments. There is no fixed dividend rate and there can be no assurance that a Fund will pay any dividends or realize any capital gains. The final determination of the amount of a Fund's return of capital distributions for the period will be made after the end of each calendar year. You will normally have to pay federal income tax, and any state or local income taxes, on the distributions you receive from a Fund, whether you take the distributions in cash or reinvest them in additional shares. Distributions of net capital gains from the sale of investments that a Fund owned for more than one year and that are properly designated as capital gain dividends are taxable as long-term capital gains. For taxable years beginning on or before December 31, 2010, distributions of dividends to a Fund's non-corporate shareholders may be treated as "qualified dividend income," which is taxed at reduced rates, if such distributions are derived from, and designated by a Fund as, "qualified dividend income" and provided that holding period and other requirements are met by both the shareholder and the Fund. "Qualified dividend income" generally is income derived from dividends from U.S. corporations and "qualified foreign corporations." Other distributions by a Fund are generally taxable to you as ordinary income. Dividends declared in October, November, or December and paid in January of the following year are taxable as if they had been paid the previous December. A Fund will notify you as to how much of the Fund's distributions, if any, qualify for these reduced tax rates. Investment income received by a Fund from sources within foreign countries may be subject to foreign income taxes withheld at the source. To the extent that a Fund is liable for foreign income taxes withheld at the source, the Fund intends, if possible, to operate so as to meet the requirements to "pass through" to the Fund's shareholders for foreign income taxes paid (or to permit shareholders to claim a deduction for such foreign taxes), but there can be no assurance that any Fund will be able to do so, and Funds that invest primarily in U.S. securities will not do so. Furthermore, a shareholder's ability to claim a foreign tax credit or deduction for foreign taxes paid by a Fund may be subject to certain limitations imposed by the Internal Revenue Code, as a result of which a shareholder may not be permitted to claim a credit or deduction for all or a portion of the amount of such taxes. Under certain circumstances, if a Fund realizes losses (e.g., from fluctuations in currency exchange rates) after paying a dividend, all or a portion of the dividend may subsequently be characterized as a return of capital. Returns of capital are generally nontaxable, but will 50 reduce a shareholder's basis in shares of a Fund. If that basis is reduced to zero (which could happen if the shareholder does not reinvest distributions and returns of capital are significant), any further returns of capital will be taxable as a capital gain. If you buy shares just before a Fund deducts a distribution from its NAV, you will pay the full price for the shares and then receive a portion of the price back as a taxable distribution. The sale or exchange of Fund shares is a taxable transaction for federal income tax purposes. Each year shortly after December 31, each Fund will send its shareholders tax information stating the amount and type of all its distributions for the year. Consult your tax adviser about the federal, state, and local tax consequences in your particular circumstances. NON-U.S. SHAREHOLDERS If you are a nonresident alien individual or a foreign corporation for federal income tax purposes, please see the Funds' SAI for information on how you will be taxed as a result of holding shares in a Fund. 51 GENERAL INFORMATION - -------------------------------------------------------------------------------- Under unusual circumstances, a Fund may suspend redemptions or postpone payment for up to seven days or longer, as permitted by federal securities law. The Funds reserve the right to close an account that has remained below $500 for 90 days. During drastic economic or market developments, you might have difficulty reaching ABIS by telephone, in which event you should issue written instructions to ABIS. ABIS is not responsible for the authenticity of telephone requests to purchase, sell, or exchange shares. ABIS will employ reasonable procedures to verify that telephone requests are genuine, and could be liable for losses resulting from unauthorized transactions if it failed to do so. Dealers and agents may charge a commission for handling telephone requests. The telephone service may be suspended or terminated at any time without notice. Shareholder Services. ABIS offers a variety of shareholder services. For more information about these services or your account, call ABIS's toll-free number, 800-221-5672. Some services are described in the Mutual Fund Application. Householding. Many shareholders of the AllianceBernstein Mutual Funds have family members living in the same home who also own shares of the same Funds. In order to reduce the amount of duplicative mail that is sent to homes with more than one Fund account and to reduce expenses of the Funds, all AllianceBernstein Mutual Funds will, until notified otherwise, send only one copy of each prospectus, shareholder report and proxy statement to each household address. This process, known as "householding", does not apply to account statements, confirmations, or personal tax information. If you do not wish to participate in householding, or wish to discontinue householding at any time, call ABIS at 1-800-221-5672. We will resume separate mailings for your account within 30 days of your request. 52 GLOSSARY OF INVESTMENT TERMS - -------------------------------------------------------------------------------- Bonds are interest-bearing or discounted government or corporate securities that obligate the issuer to pay the bond holder a specified sum of money, usually at specified intervals, and to repay the principal amount of the loan at maturity. Fixed-income securities are investments, such as bonds, that pay a fixed rate of return. Preferred stock is a class of capital stock that pays dividends at a specified rate and that has preference over common stock, but not debt securities of the same issuer, in the payment of dividends and the liquidation of assets. Sovereign debt obligations are foreign government debt securities, loan participations between foreign governments and financial institutions, and interests in entities organized and operated for the purpose of restructuring the investment characteristics of foreign government securities. Supranational entities are international organizations formed by two or more governments. Examples of supranational entities include the International Bank for Reconstruction and Development, the Inter-American Development Bank, the Asian Development Bank, the African Development Bank, the International Finance Corporation and the European Bank for Reconstruction and Development. U.S. Government securities are securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities, including obligations that are issued by private issuers that are guaranteed as to principal or interest by the U.S. Government, its agencies or instrumentalities, or by certain government-sponsored entities (entities chartered by or sponsored by Act of Congress). These securities include securities backed by the full faith and credit of the United States, those supported by the right of the issuer to borrow from the U.S. Treasury, and those backed only by the credit of the issuing agency or entity itself. The first category includes U.S. Treasury securities (which are U.S. Treasury bills, notes, and bonds) and certificates issued by GNMA. U.S. Government securities not backed by the full faith and credit of the United States or a right to borrow from the U.S. Treasury include certificates issued by FNMA and FHLMC. The Merrill Lynch 3-Month T-Bill Index is an unmanaged index that measures returns of three-month Treasury Bills. The Barclays Capital U.S. Aggregate Index is a broad-based bond index comprised of government, corporate, mortgage and asset-backed issues, rated investment grade or higher, and having at least one year to maturity. The Barclays Capital Global Aggregate Index is a macro index of global government and corporate bond markets, and is composed of various indices calculated by Lehman Brothers Inc., including the U.S. Aggregate Index, the Pan-European Aggregate Index, the Global Treasury Index, the Asian-Pacific Aggregate Index, the Eurodollar Index and the U.S. Investment-Grade 144A Index. The Barclays Capital High Yield Index is an unmanaged index generally representative of corporate bonds rated below investment grade. The JPMorgan Emerging Markets Bond Index Global is a broad-based, unmanaged index which tracks total return for external currency denominated debt in emerging markets. The JPMorgan Government Bond Index-Emerging Markets is a definitive local emerging markets debt benchmark that tracks local currency government bonds issued by emerging markets. 53 (This page intentionally left blank.) 54 FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The financial highlights table is intended to help you understand each Fund's financial performance for the past five years (or, if shorter, the period of the Fund's operations). Certain information reflects financial results for a single share of a class of each Fund. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the Fund (assuming reinvestment of all dividends and distributions). This information has been audited by Ernst & Young LLP, the independent registered public accounting firm for all Funds, whose reports, along with each Fund's financial statements, are included in each Fund's Annual Report, which is available upon request. 55
Income from Investment Operations Less: Dividends and Distributions ----------------------------------- -------------------------------- Net Increase Net Asset Net Realized (Decrease) Dividends Distributions Value, Net and Unrealized in Net Asset from Net from Net Fiscal Year or Beginning Investment Gain (Loss) on Value from Investment Realized Gain Period of Period Income (a) Investments Operations Income on Investments - ---------------------------------------------------------------------------------------------------------- Intermediate Bond Class A Year Ended 10/31/08 $10.24 $.50(c) $(1.49) $ (.99)(k) $(.48) $0.00 Year Ended 10/31/07 10.18 .42(c) .06 .48 (.42) 0.00 Year Ended 10/31/06 10.15 .41(c) .04 .45 (.42) 0.00 Year Ended 10/31/05 10.43 .37(c) (.28) .09 (.37) 0.00 Year Ended 10/31/04 10.56 .33(c) .15 .48 (.38) (.23) Class R Year Ended 10/31/08 $10.24 $.46(c) $(1.47) $(1.01)(k) $(.46) $0.00 Year Ended 10/31/07 10.18 .44(c) .02 .46 (.40) 0.00 Year Ended 10/31/06 10.15 .39(c) .04 .43 (.40) 0.00 Year Ended 10/31/05 10.42 .34(c) (.26) .08 (.35) 0.00 11/3/03(g) to 10/31/04 10.53 .33(c) .15 .48 (.36) (.23) Class K Year Ended 10/31/08 $10.25 $.48(c) $(1.47) $ (.99)(k) $(.48) $0.00 Year Ended 10/31/07 10.19 .42(c) .06 .48 (.42) 0.00 Year Ended 10/31/06 10.16 .42(c) .03 .45 (.42) 0.00 3/1/05(g) to 10/31/05 10.34 .26(c) (.17) .09 (.27) 0.00 Class I Year Ended 10/31/08 $10.24 $.50(c) $(1.45) $ (.95)(k) $(.51) $0.00 Year Ended 10/31/07 10.18 .45(c) .06 .51 (.45) 0.00 Year Ended 10/31/06 10.16 .44(c) .03 .47 (.45) 0.00 3/1/05(g) to 10/31/05 10.34 .27(c) (.17) .10 (.28) 0.00 Diversified Yield Class A Year Ended 10/31/08 $ 9.02 $.36 $(1.63) $(1.27)(k) $(.36) $0.00 Year Ended 10/31/07 8.62 .34 .40 .74 (.34) 0.00 Year Ended 10/31/06 8.70 .34 .14 .48 (.34) (.22) Year Ended 10/31/05 8.63 .39 .09 .48 (.41) 0.00 Year Ended 10/31/04(i) 8.65 .48(c) .02 .50 (.52) 0.00 Class R Year Ended 10/31/08 $ 8.99 $.34 $(1.62) $(1.28)(k) $(.34) $0.00 Year Ended 10/31/07 8.61 .35 .34 .69 (.31) 0.00 Year Ended 10/31/06 8.69 .31 .14 .45 (.31) (.22) 3/1/05(g) to 10/31/05 8.85 .25 (.15) .10 (.26) 0.00 Class K Year Ended 10/31/08 $ 9.00 $.38 $(1.63) $(1.25)(k) $(.36) $0.00 Year Ended 10/31/07 8.61 .32 .40 .72 (.33) 0.00 Year Ended 10/31/06 8.69 .29 .19 .48 (.34) (.22) 3/1/05(g) to 10/31/05 8.85 .27 (.15) .12 (.28) 0.00 Class I Year Ended 10/31/08 $ 9.00 $.38 $(1.62) $(1.24)(k) $(.38) $0.00 Year Ended 10/31/07 8.61 .36 .40 .76 (.37) 0.00 Year Ended 10/31/06 8.69 .37 .14 .51 (.37) (.22) 3/1/05(g) to 10/31/05 8.85 .29 (.15) .14 (.30) 0.00 Global Bond Class A Year Ended 9/30/08 $ 8.07 $.42 $ (.70) $ (.28) $(.40) $0.00 Year Ended 9/30/07 7.54 .40 .52 .92 (.39) 0.00 Year Ended 9/30/06 7.69 .44 (.15) .29 (.44) 0.00 Year Ended 9/30/05 7.35 .50 .34 .84 (.50) 0.00 Year Ended 9/30/04(i) 7.54 .50(c) (.16) .34 (.53) 0.00 Class R 11/5/07(g) to 9/30/08 $ 8.14 $.35 $ (.75) $ (.40) $(.35) $0.00 Class K 11/5/07(g) to 9/30/08 $ 8.14 $.36 $ (.75) $ (.39) $(.37) $0.00 Class I 11/5/07(g) to 9/30/08 $ 8.14 $.47 $ (.83) $ (.36) $(.39) $0.00
Please refer to the footnotes on pages 60 through 61. 56
Less Distributions Ratios/Supplemental Data - ---------------------------------- ------------------------------------------------------- Total Ratio of Net Investment Net Assets, Ratio of Investment Total Net Asset Return Based End of Period Expenses Income Portfolio Dividends and Value, End on Net Asset (000's to Average to Average Turnover Distributions of Period Value (b) omitted) Net Assets Net Assets Rate - ------------------------------------------------------------------------------------------------ $(.48) $ 8.77 (10.15)%(d) $ 360,606 .85%(e) 4.68%(c) 184% (.42) 10.24 4.79(d) 41,696 .98(e) 4.13(c) 173 (.42) 10.18 4.51 44,409 .98(e)(f) 4.08(c)(f) 446 (.37) 10.15 .90 52,430 .98(e) 3.53(c) 935 (.61) 10.43 4.66 56,778 .98(e) 3.21(c) 658 $(.46) $ 8.77 (10.33)%(d) $ 73 1.05%(e) 4.45%(c) 184% (.40) 10.24 4.57(d) 577 1.18(e) 3.97(c) 173 (.40) 10.18 4.31 13 1.18(e)(f) 3.89(c)(f) 446 (.35) 10.15 .81 13 1.18(e) 3.31(c) 935 (.59) 10.42 4.63 16 1.18(e)(h) 2.98(c)(h) 658 $(.48) $ 8.78 (10.09)%(d) $ 3,784 .80%(e) 4.69%(c) 184% (.42) 10.25 4.84(d) 7,222 .93(e) 4.39(c) 173 (.42) 10.19 4.54 10 .93(e)(f) 4.13(c)(f) 446 (.27) 10.16 .82 10 .93(e)(h) 3.76(c)(h) 935 $(.51) $ 8.78 (9.78)%(d) $ 5,115 .55%(e) 4.98%(c) 184% (.45) 10.24 5.10(d) 5,368 .68(e) 4.44(c) 173 (.45) 10.18 4.71 5,913 .68(e)(f) 4.37(c)(f) 446 (.28) 10.16 .97 10 .68(e)(h) 3.98(c)(h) 935 $(.36) $ 7.39 (14.57)%(d) $ 39,639 .90%(e) 4.13% 81% (.34) 9.02 8.60(d) 48,542 1.47 3.81 134 (.56) 8.62 5.61 25,348 1.78(f)(j) 3.93(f) 169 (.41) 8.70 5.67 24,250 1.54 4.65 98 (.52) 8.63 5.89 29,465 1.43(e) 5.83(c) 106 $(.34) $ 7.37 (14.65)%(d) $ 252 1.10%(e) 3.98% 81% (.31) 8.99 8.15(d) 187 1.58 4.08 134 (.53) 8.61 5.32 20 2.03(f) 3.64(f) 169 (.26) 8.69 1.17 10 1.94(h) 4.25(h) 98 $(.36) $ 7.39 (14.28)%(d) $ 21 .85%(e) 4.02% 81% (.33) 9.00 8.46(d) 57 1.59 3.47 134 (.56) 8.61 5.61 141 1.80(f) 3.63(f) 169 (.28) 8.69 1.36 10 1.63(h) 4.55(h) 98 $(.38) $ 7.38 (14.21)%(d) $ 8 .60%(e) 4.45% 81% (.37) 9.00 8.92(d) 10 1.14 4.06 134 (.59) 8.61 5.95 10 1.46(f) 4.25(f) 169 (.30) 8.69 1.58 10 1.30(h) 4.88(h) 98 $(.40) $ 7.39 (3.75)% $1,425,649 1.04%(e)(j) 5.19% 140% (.39) 8.07 12.47 1,071,398 1.80(j) 5.09 170 (.44) 7.54 3.90 935,901 1.04(f)(j) 5.81(f) 104 (.50) 7.69 11.83 957,697 1.05(j) 6.78 66 (.53) 7.35 4.72 956,690 1.25(e)(j) 6.80(c) 76 $(.35) $ 7.39 (5.15)% $ 122 1.24%(e)(h)(j) 4.92% 140% $(.37) $ 7.38 (5.07)% $ 59 .99%(e)(h)(j) 5.06% 140% $(.39) $ 7.39 (4.72)% $ 67 .74%(e)(h)(j) 5.45% 140%
57
Income from Investment Operations Less: Dividends and Distributions ----------------------------------- -------------------------------- Net Increase Net Asset Net Realized (Decrease) Dividends Distributions Value, Net and Unrealized in Net Asset from Net from Net Fiscal Year or Beginning Investment Gain (Loss) on Value from Investment Realized Gain Period of Period Income (a) Investments Operations Income on Investments - -------------------------------------------------------------------------------------------------------- High Income Class A Year Ended 10/31/08 $9.02 $.61(c) $(2.87) $(2.26)(k) $(.68) $(.23) Year Ended 10/31/07 8.97 .56 .41 .97 (.57) (.35) Year Ended 10/31/06 8.70 .55 .43 .98 (.57) (.14) Year Ended 10/31/05 8.38 .53 .34 .87 (.55) 0.00 Year Ended 10/31/04(i) 8.00 .49(c) .50 .99 (.61) 0.00 Class R 1/28/08(g) to 10/31/08 $8.52 $.46 $(2.66) $(2.20)(k) $(.47) $0.00 Class K 1/28/08(g) to 10/31/08 $8.52 $.47 $(2.66) $(2.19)(k) $(.48) $0.00 Class I 1/28/08(g) to 10/31/08 $8.52 $.49 $(2.67) $(2.18)(k) $(.49) $0.00 - --------------------------------------------------------------------------------------------------------
Please refer to the footnotes on pages 60 through 61. 58
Less Distributions Ratios/Supplemental Data - ---------------------------------- -------------------------------------------------------------- Total Ratio of Net Investment Net Assets, Ratio of Investment Total Net Asset Return Based End of Period Expenses Income Portfolio Dividends and Value, End on Net Asset (000's to Average to Average Turnover Distributions of Period Value (b) omitted) Net Assets Net Assets Rate - ------------------------------------------------------------------------------------------------------- $(.91) $5.85 (27.49)%(d) $450,517 1.03%(e)(f)(j) 7.65%(f) 74% (.92) 9.02 11.54 281,677 1.41(f)(j) 6.24(f) 67 (.71) 8.97 11.87 235,763 1.48(j) 6.32 75 (.55) 8.70 10.70 213,652 1.20(j) 6.14 100 (.61) 8.38 12.82 156,469 1.23(j) 6.04(c) 173 $(.47) $5.85 (27.09)%(d) $ 1,443 1.18%(e)(f)(h)(j) 7.62%(c)(f)(h) 74% $(.48) $5.85 (26.94)%(d) $ 753 .93%(e)(f)(h)(j) 8.01%(c)(f)(h) 74% $(.49) $5.85 (26.84)%(d) $ 165 .69%(e)(f)(h)(j) 8.09%(c)(f)(h) 74% - -------------------------------------------------------------------------------------------------------
59 (a)Based on average shares outstanding. (b)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 the net asset value during the period, and a redemption on the last day of the period. Initial sales charges or contingent deferred sales charges, if applicable, are not reflected in the calculation of total investment return. Total investment return does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Total investment returns calculated for periods of less than one year are not annualized. (c)Net of fees waived and expenses reimbursed by the Adviser. (d)Includes the impact of proceeds received and credited to the Fund resulting from the WorldCom class action settlement, which enhanced the performance of each share class by:
For Fiscal Year Ended ---------------------------------------------------------------- AllianceBernstein Intermediate Bond October 31, 2008 0.21% October 31, 2007 0.61% AllianceBernstein Diversified Yield October 31, 2008 0.81% October 31, 2007 4.31% AllianceBernstein High Income October 31, 2008 0.41%
(e)Net of expenses assumed and/or waived/reimbursed. If the following Funds had borne all expenses for the respective years ended, the expense ratios would have been as follows:
2008 2007 2006 2005 2004 - ---------------------------------------------------------------------- AllianceBernstein Intermediate Bond Class A 1.09% 1.54% 1.34%** 1.31% 1.26% Class R 1.25% 1.74% 1.57%** 1.40% 1.45%* Class K 1.02% 1.53% 1.27%** 1.15%* Class I .64% 1.09% .88%** 0.89%* AllianceBernstein Diversified Yield Class A 1.65% 1.60% Class R 1.88% Class K 1.53% Class I 1.28% AllianceBernstein Global Bond Class A 1.15% 1.41% Class R 1.48% Class K 1.09% Class I .77% AllianceBernstein High Income Class A 1.13% Class R 1.43% Class K 1.12% Class I .79%
- -------- *Annualized. **The ratio includes expenses attributable to costs of proxy solicitation. (f)The ratio includes expenses attributable to costs of proxy solicitation. (g)Commencement of distribution. (h)Annualized. 60 (i)The Funds have 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 the effective dates noted below, these interim payments were reflected within interest income/expense on the statement of operations. For the Funds listed below, the effective date and impact of this change to each class of shares is as follows:
Increase Increase Increase (Decrease) in (Decrease) to (Decrease) in Net Realized Ratios of Net Net Investment and Unrealized Investment Income Effective Income per Gain (Loss) to Average Net Date Share per Share Assets - ---------------------------------------------------------------------------------------------- AllianceBernstein Global Bond Class A 10/1/03 $(0.0002) $0.0002 (0.003)% AllianceBernstein Diversified Yield Class A 11/1/03 $ (0.001) $ 0.001 (0.20)% AllianceBernstein High Income Class A 11/1/03 $ (0.05) $ 0.05 (0.56)%
(j)Includes interest expense. If the following Funds had borne all expenses, excluding interest expense, the ratio of expenses to average net assets would have been as follows:
2008 2007 2006 2005 2004 - -------------------------------------------------------------------- AllianceBernstein Diversified Yield Class A 1.72% AllianceBernstein Global Bond Class A 1.01% 1.05% 1.04% 1.05% 1.27% Class R 1.34% Class K .95% Class I .63% AllianceBernstein High Income Class A 1.07%* 1.14%* 1.14% 1.19% 1.21% Class R 1.40%* Class K 1.09%* Class I .75%*
- -------- *The ratio includes expenses attributable to costs of proxy solicitation. (k)Amount includes contribution from the Adviser of less than $.01. 61 APPENDIX A - -------------------------------------------------------------------------------- BOND RATINGS Moody's Investors Service, Inc. Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa--Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than the Aaa securities. A--Bonds which are rated A possess many favorable investment attributes and are to be considered as upper-medium-grade obligations. Factors giving security to principal and interest are considered adequate but elements may be present which suggest a susceptibility to impairment some time in the future. Baa--Bonds which are rated Baa are considered as medium-grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Ba--Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as well-assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B--Bonds which are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Caa--Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest. Ca--Bonds which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings. C--Bonds which are rated C are the lowest rated class of bonds and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. Absence of Rating--When no rating has been assigned or where a rating has been suspended or withdrawn, it may be for reasons unrelated to the quality of the issue. Should no rating be assigned, the reason may be one of the following: 1. An application for rating was not received or accepted. 2. The issue or issuer belongs to a group of securities or companies that are unrated as a matter of policy. 3. There is a lack of essential data pertaining to the issue or issuer. 4. The issue was privately placed, in which case the rating is not published in Moody's publications. Suspension or withdrawal may occur if new and material circumstances arise, the effects of which preclude satisfactory analysis; if there is no longer available reasonable up-to-date data to permit a judgment to be formed; if a bond is called for redemption; or for other reasons. A-1 Note--Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating classification from Aa through Caa in its corporate bond rating system. The modifier 1 indicates that the security ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the issue ranks in the lower end of its generic rating category. Standard & Poor's Ratings Services AAA--Debt rated AAA has the highest rating assigned by S&P. Capacity to pay interest and repay principal is extremely strong. AA--Debt rated AA has a very strong capacity to pay interest and repay principal and differs from the highest rated issues only in small degree. A--Debt rated A has a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories. BBB--Debt rated BBB normally exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher rated categories. BB, B, CCC, CC, C--Debt rated BB, B, CCC, CC or C is regarded as having significant speculative characteristics. BB indicates the lowest degree of speculation and C the highest. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major exposures to adverse conditions. BB--Debt rated BB is less vulnerable to nonpayment than other speculative debt. However, it faces major ongoing uncertainties or exposure to adverse business, financial or economic conditions which could lead to an inadequate capacity to pay interest and repay principal. B--Debt rated B is more vulnerable to nonpayment than debt rated BB, but there is capacity to pay interest and repay principal. Adverse business, financial or economic conditions will likely impair the capacity or willingness to pay principal or repay interest. CCC--Debt rated CCC is currently vulnerable to nonpayment, and is dependent upon favorable business, financial and economic conditions to pay interest and repay principal. In the event of adverse business, financial or economic conditions, there is not likely to be capacity to pay interest or repay principal. CC--Debt rated CC is currently highly vulnerable to nonpayment. C--The C rating may be used to cover a situation where a bankruptcy petition has been filed or similar action has been taken, but payments are being continued. D--The D rating, unlike other ratings, is not prospective; rather, it is used only where a default has actually occurred. Plus (+) or Minus (-)--The ratings from AA to CCC may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories. NR--Not rated. Fitch Ratings AAA--Bonds considered to be investment grade and of the highest credit quality. The obligor has an exceptionally strong ability to pay interest and repay principal, which is unlikely to be affected by reasonably foreseeable events. AA--Bonds considered to be investment grade and of very high credit quality. The obligor's ability to pay interest and repay principal is very strong, although not quite as strong A-2 as bonds rated AAA. Because bonds rated in the AAA and AA categories are not significantly vulnerable to foreseeable future developments, short-term debt of these issuers is generally rated F1+. A--Bonds considered to be investment grade and of high credit quality. The obligor's ability to pay interest and repay principal is considered to be strong, but may be more vulnerable to adverse changes in economic conditions and circumstances than bonds with higher ratings. BBB--Bonds considered to be investment grade and of satisfactory credit quality. The obligor's ability to pay interest and repay principal is considered to be adequate. Adverse changes in economic conditions and circumstances, however, are more likely to have adverse impact on these bonds, and therefore impair timely payment. The likelihood that the ratings of these bonds will fall below investment grade is higher than for bonds with higher ratings. BB--Bonds are considered speculative. The obligor's ability to pay interest and repay principal may be affected over time by adverse economic changes. However, business and financial alternatives can be identified which could assist the obligor in satisfying its debt service requirements. B--Bonds are considered highly speculative. While bonds in this class are currently meeting debt service requirements, the probability of continued timely payment of principal and interest reflects the obligor's limited margin of safety and the need for reasonable business and economic activity throughout the life of the issue. CCC--Bonds have certain identifiable characteristics which, if not remedied, may lead to default. The ability to meet obligations requires an advantageous business and economic environment. CC--Bonds are minimally protected. Default in payment of interest and/or principal seems probable over time. C--Bonds are in imminent default in payment of interest or principal. DDD, DD, D--Bonds are in default on interest and/or principal payments. Such bonds are extremely speculative and should be valued on the basis of their ultimate recovery value in liquidation or reorganization of the obligor. DDD represents the highest potential for recovery on these bonds, and D represents the lowest potential for recovery. Plus (+) Minus (-)--Plus and minus signs are used with a rating symbol to indicate the relative position of a credit within the rating category. Plus and minus signs, however, are not used in the AAA category or in categories below CCC. NR--Indicates that Fitch does not rate the specific issue. Dominion Bond Rating Service Limited Each rating category is denoted by the subcategories "high" and "low". The absence of either a "high" or "low" designation indicates the rating is in the "middle" of the category. The AAA and D categories do not utilize "high", "middle", and "low" as differential grades. AAA--Long-term debt rated AAA is of the highest credit quality, with exceptionally strong protection for the timely repayment of principal and interest. Earnings are considered stable, the structure of the industry in which the entity operates is strong, and the outlook for future profitability is favorable. There are few qualifying factors present that would detract from the performance of the entity. The strength of liquidity and coverage ratios is unquestioned and the entity has established a credible track record of superior performance. Given the extremely high standard that Dominion has set for this category, few entities are able to achieve a AAA rating. A-3 AA--Long-term debt rated AA is of superior credit quality, and protection of interest and principal is considered high. In many cases they differ from long-term debt rated AAA only to a small degree. Given the extremely restrictive definition Dominion has for the AAA category, entities rated AA are also considered to be strong credits, typically exemplifying above-average strength in key areas of consideration and unlikely to be significantly affected by reasonably foreseeable events. A--Long-term debt rated A is of satisfactory credit quality. Protection of interest and principal is still substantial, but the degree of strength is less than that of AA rated entities. While A is a respectable rating, entities in this category are considered to be more susceptible to adverse economic conditions and have greater cyclical tendencies than higher-rated securities. BBB--Long-term debt rated BBB is of adequate credit quality. Protection of interest and principal is considered acceptable, but the entity is fairly susceptible to adverse changes in financial and economic conditions, or there may be other adverse conditions present which reduce the strength of the entity and its rated securities. BB--Long-term debt rated BB is defined to be speculative and non-investment grade, where the degree of protection afforded interest and principal is uncertain, particularly during periods of economic recession. Entities in the BB range typically have limited access to capital markets and additional liquidity support. In many cases, deficiencies in critical mass, diversification, and competitive strength are additional negative considerations. B--Long-term debt rated B is considered highly speculative and there is a reasonably high level of uncertainty as to the ability of the entity to pay interest and principal on a continuing basis in the future, especially in periods of economic recession or industry adversity. CCC, CC and C--Long-term debt rated in any of these categories is very highly speculative and is in danger of default of interest and principal. The degree of adverse elements present is more severe than long-term debt rated B. Long-term debt rated below B often have features which, if not remedied, may lead to default. In practice, there is little difference between these three categories, with CC and C normally used for lower ranking debt of companies for which the senior debt is rated in the CCC to B range. D--A security rated D implies the issuer has either not met a scheduled payment of interest or principal or that the issuer has made it clear that it will miss such a payment in the near future. In some cases, Dominion may not assign a D rating under a bankruptcy announcement scenario, as allowances for grace periods may exist in the underlying legal documentation. Once assigned, the D rating will continue as long as the missed payment continues to be in arrears, and until such time as the rating is suspended, discontinued, or reinstated by Dominion. A-4 APPENDIX B - -------------------------------------------------------------------------------- HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION The settlement agreement between the Adviser and the New York State Attorney General requires the Funds to include the following supplemental hypothetical investment information, which provides additional information calculated and presented in a manner different from expense information found under "Fees and Expenses of the Funds" in this Prospectus about the effect of a Fund's expenses, including investment advisory fees and other Fund costs, on each Fund's returns over a 10-year period. The chart shows the estimated expenses that would be charged on a hypothetical investment of $10,000 in Class A shares of each Fund assuming a 5% return each year. Except as otherwise indicated, the chart also assumes that the current annual expense ratio stays the same throughout the 10-year period. The current annual expense ratio for each Fund is the same as stated under "Financial Highlights." If you wish to obtain hypothetical investment information for other classes of shares of each Fund, please refer to the "Mutual Fund Fees & Expenses Calculators" on www.AllianceBernstein.com. Your actual expenses may be higher or lower. AllianceBernstein Intermediate Bond Portfolio - --------------------------------------------------------------------------------
Hypothetical Investment Annual Hypothetical Hypothetical Performance After Expense Hypothetical Ending Year Investment Earnings Returns Ratio Expenses* Investment ----------------------------------------------------------------------------- 1 $10,000.00 $ 500.00 $10,500.00 0.85% $ 89.25 $10,410.75 2 10,410.75 520.54 10,931.29 1.09% 119.15 10,812.14 3 10,812.14 540.61 11,352.75 1.09% 123.74 11,229.01 4 11,229.01 561.45 11,790.46 1.09% 128.52 11,661.94 5 11,661.94 583.10 12,245.04 1.09% 133.47 12,111.57 6 12,111.57 605.58 12,717.15 1.09% 138.62 12,578.53 7 12,578.53 628.93 13,207.46 1.09% 143.96 13,063.50 8 13,063.50 653.18 13,716.68 1.09% 149.51 13,567.17 9 13,567.17 678.36 14,245.53 1.09% 155.28 14,090.25 10 14,090.25 704.51 14,794.76 1.09% 161.26 14,633.50 ----------------------------------------------------------------------------- Total $5,976.26 $1,342.76
AllianceBernstein Global Bond Fund - --------------------------------------------------------------------------------
Hypothetical Investment Annual Hypothetical Hypothetical Performance After Expense Hypothetical Ending Year Investment Earnings Returns Ratio Expenses* Investment ----------------------------------------------------------------------------- 1 $10,000.00 $ 500.00 $10,500.00 1.04% $ 109.20 $10,390.80 2 10,390.80 519.54 10,910.34 1.15% 125.47 10,784.87 3 10,784.87 539.24 11,324.11 1.15% 130.23 11,193.88 4 11,193.88 559.69 11,753.57 1.15% 135.17 11,618.40 5 11,618.40 580.92 12,199.32 1.15% 140.29 12,059.03 6 12,059.03 602.95 12,661.98 1.15% 145.61 12,516.37 7 12,516.37 625.82 13,142.19 1.15% 151.14 12,991.05 8 12,991.05 649.55 13,640.60 1.15% 156.87 13,483.73 9 13,483.73 674.19 14,157.92 1.15% 162.82 13,995.10 10 13,995.10 699.76 14,694.86 1.15% 168.99 14,525.87 ----------------------------------------------------------------------------- Total $5,951.66 $1,425.79
B-1 AllianceBernstein Diversified Yield Fund - --------------------------------------------------------------------------------
Hypothetical Investment Annual Hypothetical Hypothetical Performance After Expense Hypothetical Ending Year Investment Earnings Returns Ratio Expenses* Investment ----------------------------------------------------------------------------- 1 $10,000.00 $ 500.00 $10,500.00 0.90% $ 94.50 $10,405.50 2 10,405.50 520.28 10,925.78 1.65% 180.28 10,745.50 3 10,745.50 537.28 11,282.78 1.65% 186.17 11,096.61 4 11,096.61 554.83 11,651.44 1.65% 192.25 11,459.19 5 11,459.19 572.96 12,032.15 1.65% 198.53 11,833.62 6 11,833.62 591.68 12,425.30 1.65% 205.02 12,220.28 7 12,220.28 611.01 12,831.29 1.65% 211.72 12,619.57 8 12,619.57 630.98 13,250.55 1.65% 218.63 13,031.92 9 13,031.92 651.60 13,683.52 1.65% 225.78 13,457.74 10 13,457.74 672.89 14,130.63 1.65% 233.16 13,897.47 ----------------------------------------------------------------------------- Total $5,843.51 $1,946.04
AllianceBernstein High Income Fund - --------------------------------------------------------------------------------
Hypothetical Investment Annual Hypothetical Hypothetical Performance After Expense Hypothetical Ending Year Investment Earnings Returns Rate Expenses* Investment ----------------------------------------------------------------------------- 1 $10,000.00 $ 500.00 $10,500.00 1.01% $ 106.05 $10,393.95 2 10,393.95 519.70 10,913.65 1.13% 123.32 10,790.33 3 10,790.33 539.52 11,329.85 1.13% 128.03 11,201.82 4 11,201.82 560.09 11,761.91 1.13% 132.91 11,629.00 5 11,629.00 581.45 12,210.45 1.13% 137.98 12,072.47 6 12,072.47 603.62 12,676.09 1.13% 143.24 12,532.85 7 12,532.85 626.64 13,159.49 1.13% 148.70 13,010.79 8 13,010.79 650.54 13,661.33 1.13% 154.37 13,506.96 9 13,506.96 675.35 14,182.31 1.13% 160.26 14,022.05 10 14,022.05 701.10 14,723.15 1.13% 166.37 14,556.78 ----------------------------------------------------------------------------- Total $5,958.01 $1,401.23
* Expenses are net of any fee waiver or expense waiver for the first year. Thereafter, the expense ratio reflects the Fund's operating expenses as reflected under "Fees and Expenses of the Funds" before waiver. B-2 PRIVACY NOTICE (This information is not part of the prospectus.) AllianceBernstein L.P., the AllianceBernstein Family of Funds and AllianceBernstein Investments, Inc. (collectively, "AllianceBernstein" or "we") understand the importance of maintaining the confidentiality of our clients' nonpublic personal information. Nonpublic personal information is personally identifiable financial information about our clients who are natural persons. To provide financial products and services to our clients, we may collect information about our clients from sources including: (1) account documentation, including applications or other forms, which may contain information such as a client's name, address, phone number, social security number, assets, income, and other household information, (2) clients' transactions with us and others such as account balances and transactions history, and (3) information from visitors to our websites provided through online forms, site visitorship data, and online information collecting devices known as "cookies." It is our policy not to disclose nonpublic personal information about our clients (or former clients) except to our affiliates, or to others as permitted or required by law. From time to time, AllianceBernstein may disclose nonpublic personal information that we collect about our clients (or former clients), as described above, to non-affiliated third party providers, including those that perform processing or servicing functions and those that provide marketing services for us or on our behalf pursuant to a joint marketing agreement that requires the third party provider to adhere to AllianceBernstein's privacy policy. We have policies and procedures to safeguard nonpublic personal information about our clients (and former clients) that include restricting access to such nonpublic personal information and maintaining physical, electronic and procedural safeguards, which comply with applicable federal standards, to safeguard such nonpublic personal information. For more information about the Funds, the following documents are available upon request: .. Annual/Semi-Annual Reports to Shareholders The Funds' annual and semi-annual reports to shareholders contain additional information on the Funds' investments. In the annual report, you will find a discussion of the market conditions and investment strategies that significantly affected a Fund's performance during its last fiscal year. .. Statement of Additional Information (SAI) The Funds have an SAI, which contains more detailed information about the Funds including their operations and investment policies. The Funds' SAI and independent registered public accounting firms' reports and financial statements in each Fund's most recent annual report to shareholders are incorporated by reference into (and are legally part of) this Prospectus. You may request a free copy of the current annual/semi-annual report or the SAI, or make inquiries concerning the Funds, by contacting your broker or other financial intermediary, or by contacting the Adviser: By Mail/Phone: AllianceBernstein Investor Services, Inc. For Information: (800) 221-5672 P.O. Box 786003 For Literature: (800) 227-4618 San Antonio, TX 78278-6003
Or you may view or obtain these documents from the Commission: .. Call the Commission at 1-202-551-8090 for information on the operation of the Public Reference Room. .. Reports and other information about a Fund are available on the EDGAR Database on the Commission's Internet site at http://www.sec.gov. .. Copies of the information may be obtained, after paying a duplicating fee, by electronic request at publicinfo@sec.gov, or by writing the Commission's Public Reference Section, Wash. DC 20549-0102. You also may find these documents and more information about the Adviser and the Funds on the Internet at: www.AllianceBernstein.com. AllianceBernstein and the AB logo are registered trademarks and service marks used by permission of the owner, AllianceBernstein L.P.
Fund SEC File No. ------------------------------- Intermediate Bond 811-02383 Diversified Yield 811-07391 Global Bond 811-06554 High Income 811-08188
ALLIANCEBERNSTEIN BOND FUNDS 1345 Avenue of the Americas New York, NY 10105 [LOGO] PRO-RTMT-0115-0109 [GRAPHIC]
[LOGO] ALLIANCEBERNSTEIN BOND FUND, INC. - ALLIANCEBERNSTEIN INTERMEDIATE BOND PORTFOLIO ALLIANCEBERNSTEIN DIVERSIFIED YIELD FUND, INC. ALLIANCEBERNSTEIN HIGH INCOME FUND, INC. ALLIANCEBERNSTEIN GLOBAL BOND FUND, INC. - -------------------------------------------------------------------------------- c/o AllianceBernstein Investor Services, Inc. P. O. Box 786003, San Antonio, Texas 78278-6003 Toll Free: (800) 221-5672 For Literature: Toll Free (800) 227-4618 - -------------------------------------------------------------------------------- STATEMENT OF ADDITIONAL INFORMATION January 30, 2009 - -------------------------------------------------------------------------------- This Statement of Additional Information ("SAI") is not a prospectus but supplements and should be read in conjunction with the current prospectus, dated January 30, 2009, for the AllianceBernstein Intermediate Bond Portfolio ("Intermediate Bond") of AllianceBernstein Bond Fund, Inc., AllianceBernstein Diversified Yield Fund, Inc. ("Diversified Yield"), AllianceBernstein Global Bond Fund, Inc. ("Global Bond") and AllianceBernstein High Income Fund, Inc. ("High Income") (each a "Fund" and collectively, the "Funds") that offers Class A, Class B, Class C and Advisor Class shares of the Funds and the prospectus, dated January 30, 2009, of the Funds that offers Class A, Class R, Class K and Class I shares of the Funds (each a "Prospectus" and together, the "Prospectuses"). Financial statements for Intermediate Bond, Diversified Yield and High Income for the year ended October 31, 2008, and financial statements for Global Bond for the year ended September 30, 2008, are included in each Fund's annual report to shareholders and are incorporated into the SAI by reference. Copies of the Prospectuses and each Fund's annual report may be obtained by contacting AllianceBernstein Investor Services, Inc., ("ABIS") at the address or the "For Literature" telephone number shown above. TABLE OF CONTENTS ----------------- Page ---- Description of the Funds.................................................. Management of the Funds................................................... Expenses of the Funds..................................................... Purchase of Shares........................................................ Redemption and Repurchase of Shares....................................... Shareholder Services...................................................... Net Asset Value........................................................... Fund Transactions......................................................... Dividends, Distributions and Taxes General Information....................................................... Financial Statements and Report of Independent Registered Public Accounting Firm........................................................... - ---------- AllianceBernstein(R) and the AB Logo are registered trademarks and service marks used by permission of the owner, AllianceBernstein L.P. - -------------------------------------------------------------------------------- DESCRIPTION OF THE FUNDS - -------------------------------------------------------------------------------- Introduction to the Funds - ------------------------- AllianceBernstein Bond Fund, Inc.'s shares are offered in separate series referred to as portfolios. Intermediate Bond is a separate pool of assets constituting, in effect, a separate open-end management investment company with its own investment objective policies. Each shareholder of Intermediate Bond will be entitled to his or her pro-rata share of all dividends and distributions arising from Intermediate Bond's assets and, upon redeeming shares of Intermediate Bond, the shareholder will receive the then current net asset value ("NAV") of Intermediate Bond represented by the redeemed shares. Except as otherwise indicated, the Funds' investment objectives and policies are not designated "fundamental policies" and, therefore, may be changed by the Board of Directors without a shareholder vote. There is no guarantee that a Fund will achieve its investment objective. Whenever any investment policy or restriction states a percentage of a Fund's assets that may be invested in any security or other asset, it is intended that such percentage limitation be determined immediately after and as a result of the Fund's acquisition of such securities or other assets. Accordingly, any later increases or decreases in percentage beyond the specified limitation resulting from a change in values or net assets will not be considered a violation of this percentage limitation. The term "net assets," as used in this SAI, means net assets plus any borrowings. Additional Investment Policies and Practices - -------------------------------------------- The following additional investment policies supplement those set forth in the Prospectuses. Derivatives - ----------- Derivatives are financial contracts whose value depend on, or are derived from, the value of an underlying asset, reference rate or index. A Fund may, but is not required to, use derivatives for risk management purposes or as part of its investment practices. These assets, rates, and indices may include bonds, stocks, mortgages, commodities, interest rates, currency exchange rates, bond indices and stock indices. Derivatives may be (i) standardized, exchange-traded contracts or (ii) customized, privately-negotiated contracts. Exchange-traded derivatives tend to be more liquid and subject to less credit risk than those that are privately negotiated. A Fund may use derivatives to earn income and enhance returns, to hedge or adjust the risk profile of a portfolio and either to replace more traditional direct investments or to obtain exposure to otherwise inaccessible markets. The four principal types of derivatives, which include options, futures, forwards and swaps, as well as the methods in which they may be used by a Fund, are described below. From the four principal types of derivative instruments, virtually any type of derivative transaction can be created. Forward Contracts. A forward contract is a customized, privately negotiated agreement for one party to buy, and the other party to sell, a specific quantity of an underlying commodity or other tangible asset for an agreed-upon price at a future date. A forward contract generally is settled by physical delivery of the commodity or other tangible asset underlying the forward contract to an agreed upon location at a future date (rather than settled by cash) or will be rolled forward into a new forward contract. Non-deliverable forward ("NDFs") specify a cash payment upon maturity. NDFs are normally used when the market for physical settlement of the currency is underdeveloped, heavily regulated or highly taxed. Futures Contracts and Options on Futures Contracts. A futures contract is an agreement that obligates the buyer to buy and the seller to sell a specified quantity of an underlying asset (or settle for cash the value of a contract based on an underlying asset, rate or index) at a specific price on the contract maturity date. Options on futures contracts are options that call for the delivery of futures contracts upon exercise. Futures contracts are standardized, exchange-traded instruments and are fungible (i.e., considered to be perfect substitutes for each other). This fungibility allows futures contracts to be readily offset or cancelled through the acquisition of equal but opposite positions, which is the primary method in which futures contracts are liquidated. A cash-settled futures contract does not require physical delivery of the underlying asset but instead is settled for cash equal to the difference between the values of the contract on the date it is entered into and its maturity date. Options. An option, which may be standardized and exchange-traded, or customized and privately negotiated, is an agreement that, for a premium payment or fee, gives the option holder (the buyer) the right but not the obligation to buy (a "call") or sell (a "put") the underlying asset (or settle for cash an amount based on an underlying asset, rate or index) at a specified price (the exercise price) during a period of time or on a specified date. Likewise, when an option is exercised the writer of the option is obligated to sell (in the case of a call option) or to purchase (in the case of a put option) the underlying asset (or settle for cash an amount based on an underlying asset, rate or index). Investments in options are considered speculative. A Fund may lose the premium paid for them if the price of the underlying security or other asset decreased or remained the same (in the case of a call option) or increased or remained the same (in the case of a put option). If a put or call option purchased by the Fund were permitted to expire without being sold or exercised, its premium would represent a loss to the Fund. Swaps. A swap is a customized, privately negotiated agreement that obligates two parties to exchange a series of cash flows at specified intervals (payment dates) based upon or calculated by reference to changes in specified prices or rates (interest rates in the case of interest rate swaps, currency exchange rates in the case of currency swaps) for a specified amount of an underlying asset (the "notional" principal amount). The payment flows are netted against each other, with the difference being paid by one party to the other. Except for currency swaps, the notional principal amount is used solely to calculate the payment streams but is not exchanged. With respect to currency swaps, actual principal amounts of currencies may be exchanged by the counterparties at the initiation, and again upon the termination, of the transaction. Swap transactions also include credit default swaps in which one party pays a periodic fee, typically expressed in basis points on a notational amount, in return for a contingent payment by the counterparty following a credit event in a specific debt obligation or obligations. A credit event is typically a default and the contingent payment may be a cash settlement or by physical delivery of the reference obligation in return for payment of its face amount. Risks of Derivatives. Investment techniques employing such derivatives involve risks different from, and, in certain cases, greater than, the risks presented by more traditional investments. Following is a general discussion of important risk factors and issues concerning the use of derivatives. -- Market Risk. This is the general risk attendant to all investments that the value of a particular investment will change in a way detrimental to a Fund's interest. -- Management Risk. Derivative products are highly specialized instruments that require investment techniques and risk analyses different from those associated with stocks and bonds. The use of a derivative requires an understanding not only of the underlying instrument but also of the derivative itself, without the benefit of observing the performance of the derivative under all possible market conditions. In particular, the use and complexity of derivatives require the maintenance of adequate controls to monitor the transactions entered into, the ability to assess the risk that a derivative adds to a Fund's investment portfolio, and the ability to forecast price, interest rate or currency exchange rate movements correctly. -- Credit Risk. This is the risk that a loss may be sustained by a Fund as a result of the failure of another party to a derivative (usually referred to as a "counterparty") to comply with the terms of the derivative contract. The credit risk for exchange-traded derivatives is generally less than for privately negotiated derivatives, since the clearinghouse, which is the issuer or counterparty to each exchange-traded derivative, provides a guarantee of performance. This guarantee is supported by a daily payment system (i.e., margin requirements) operated by the clearinghouse in order to reduce overall credit risk. For privately negotiated derivatives, there is no similar clearing agency guarantee. Therefore, a Fund considers the creditworthiness of each counterparty to a privately negotiated derivative in evaluating potential credit risk. -- Liquidity Risk. Liquidity risk exists when a particular instrument is difficult to purchase or sell. If a derivative transaction is particularly large or if the relevant market is illiquid (as is the case with many privately negotiated derivatives), it may not be possible to initiate a transaction or liquidate a position at an advantageous price. -- Leverage Risk. Since many derivatives have a leverage component, adverse changes in the value or level of the underlying asset, rate or index can result in a loss substantially greater than the amount invested in the derivative itself. In the case of swaps, the risk of loss generally is related to a notional principal amount, even if the parties have not made any initial investment. Certain derivatives have the potential for unlimited loss, regardless of the size of the initial investment. -- Other Risks. Other risks in using derivatives include the risk of mispricing or improper valuation of derivatives and the inability of derivatives to correlate perfectly with underlying assets, rates and indices. Many derivatives, in particular privately negotiated derivatives, are complex and often valued subjectively. Improper valuations can result in increased cash payment requirements to counterparties or a loss of value to a Fund. Derivatives do not always perfectly or even highly correlate or track the value of the assets, rates or indices they are designed to closely track. Consequently, a Fund's use of derivatives may not always be an effective means of, and sometimes could be counterproductive to, furthering the Fund's investment objective. Use of Options, Futures, Forwards and Swaps by a Fund. ------------------------------------------------------ - Forward Currency Exchange Contracts. A forward currency exchange contract is an obligation by one party to buy, and the other party to sell, a specific amount of a currency for an agreed upon price at a future date. Forward currency exchange contracts are customized, privately negotiated agreements designed to satisfy the objectives of each party. A forward currency exchange contract usually results in the delivery of the underlying asset upon maturity of the contract in return for the agreed upon payment. NDFs specify a cash payment upon maturity. NDFs are normally used when the market for physical settlement of the currency is underdeveloped, heavily regulated or highly taxed. A Fund may enter into forward currency exchange contracts to attempt to minimize the risk to the Fund from adverse changes in the relationship between the U.S. Dollar and other currencies. A Fund may purchase or sell forward currency exchange contracts for hedging purposes similar to those described below in connection with its transactions in foreign currency futures contracts. A Fund may also purchase or sell forward currency exchange contracts for non-hedging purposes as a means of making direct investments in foreign currencies, as described below under "Currency Transactions". If a hedging transaction in forward currency exchange contracts is successful, the decline in the value of portfolio securities or the increase in the cost of securities to be acquired may be offset, at least in part, by profits on the forward currency exchange contract. Nevertheless, by entering into such forward currency exchange contracts, a Fund may be required to forego all or a portion of the benefits which otherwise could have been obtained from favorable movements in exchange rates. A Fund may also use forward currency exchange contracts to seek to increase total return when the Adviser anticipates that a foreign currency will appreciate or depreciate in value but securities denominated in that currency are not held by the Fund and do not present attractive investment opportunities. For example, a Fund may enter into a foreign currency exchange contract to purchase a currency if the Adviser expects the currency to increase in value. The Fund would recognize a gain if the market value of the currency is more than the contract value of the currency at the time of settlement of the contract. Similarly, a Fund may enter into a foreign currency exchange contract to sell a currency if the Adviser expects the currency to decrease in value. The Fund would recognize a gain if the market value of the currency is less than the contract value of the currency at the time of settlement of the contract. The cost of engaging in forward currency exchange contracts varies with such factors as the currencies involved, the length of the contract period and the market conditions then prevailing. Since transactions in foreign currencies are usually conducted on a principal basis, no fees or commissions are involved. A Fund will segregate and mark to market liquid assets in an amount at least equal to the Fund's obligations under any forward currency exchange contracts. - Options on Securities. A Fund may write and purchase call and put options on securities. In purchasing an option on securities, a Fund would be in a position to realize a gain if, during the option period, the price of the underlying securities increased (in the case of a call) or decreased (in the case of a put) by an amount in excess of the premium paid; otherwise the Fund would experience a loss not greater than the premium paid for the option. Thus, a Fund would realize a loss if the price of the underlying security declined or remained the same (in the case of a call) or increased or remained the same (in the case of a put) or otherwise did not increase (in the case of a put) or decrease (in the case of a call) by more than the amount of the premium. If a put or call option purchased by a Fund were permitted to expire without being sold or exercised, its premium would represent a loss to the Fund. A Fund may write a put or call option in return for a premium, which is retained by the Fund whether or not the option is exercised. A Fund will not write uncovered call or put options on securities. A call option written by a Fund is "covered" if the Fund owns the underlying security, has an absolute and immediate right to acquire that security upon conversion or exchange of another security it holds, or holds a call option on the underlying security with an exercise price equal to or less than of the call option it has written. A put option written by a Fund is covered if the Fund holds a put option on the underlying securities with an exercise price equal to or greater than of the put option it has written. A Fund may also write combinations of put and call options on the same security, known as "straddles," with the same exercise and expiration date. By writing a straddle, the Fund undertakes a simultaneous obligation to sell and purchase the same security in the event that one of the options is exercised. If the price of the security subsequently rises above the exercise price, the call will likely be exercised and the Fund will be required to sell the underlying security at or below market price. This loss may be offset, however, in whole or part, by the premiums received on the writing of the two options. Conversely, if the price of the security declines by a sufficient amount, the put will likely be exercised. The writing of straddles will likely be effective, therefore, only where the price of the security remains stable and neither the call nor the put is exercised. In those instances where one of the options is exercised, the loss on the purchase or sale of the underlying security may exceed the amount of the premiums received. By writing a call option, a Fund limits its opportunity to profit from any increase in the market value of the underlying security above the exercise price of the option. By writing a put option, a Fund assumes the risk that it may be required to purchase the underlying security for an exercise price above its then current market value, resulting in a capital loss unless the security subsequently appreciates in value. Where options are written for hedging purposes, such transactions constitute only a partial hedge against declines in the value of portfolio securities or against increases in the value of securities to be acquired, up to the amount of the premium. A Fund may purchase put options to hedge against a decline in the value of portfolio securities. If such decline occurs, the put options will permit the Fund to sell the securities at the exercise price or to close out the options at a profit. By using put options in this way, the Fund will reduce any profit it might otherwise have realized on the underlying security by the amount of the premium paid for the put option and by transaction costs. A Fund may purchase call options to hedge against an increase in the price of securities that the Fund anticipates purchasing in the future. If such increase occurs, the call option will permit the Fund to purchase the securities at the exercise price, or to close out the options at a profit. The premium paid for the call option plus any transaction costs will reduce the benefit, if any, realized by the Fund upon exercise of the option, and, unless the price of the underlying security rises sufficiently, the option may expire worthless to the Fund and the Fund will suffer a loss on the transaction to the extent of the premium paid. A Fund may purchase or write options on securities of the types in which it is permitted to invest in privately negotiated (i.e., over-the-counter) transactions. A Fund will effect such transactions only with investment dealers and other financial institutions (such as commercial banks or savings and loan institutions) deemed creditworthy by the Adviser, and the Adviser has adopted procedures for monitoring the creditworthiness of such entities. --Options on Securities Indices. An option on a securities index is similar to an option on a security except that, rather than taking or making delivery of a security at a specified price, an option on a securities index gives the holder the right to receive, upon exercise of the option, an amount of cash if the closing level of the chosen index is greater than (in the case of a call) or less than (in the case of a put) the exercise price of the option. A Fund may write (sell) call and put options and purchase call and put options on securities indices. If a Fund purchases put options on securities indices to hedge its investments against a decline in the value of portfolio securities, it will seek to offset a decline in the value of securities it owns through appreciation of the put option. If the value of the Fund's investments does not decline as anticipated, or if the value of the option does not increase, the Fund's loss will be limited to the premium paid for the option. The success of this strategy will largely depend on the accuracy of the correlation between the changes in value of the index and the changes in value of the Fund's security holdings. The purchase of call options on securities indices may be used by a Fund to attempt to reduce the risk of missing a broad market advance, or an advance in an industry or market segment, at a time when the Fund holds uninvested cash or short-term debt securities awaiting investment. When purchasing call options for this purpose, the Fund will also bear the risk of losing all or a portion of the premium paid if the value of the index does not rise. The purchase of call options on stock indices when a Fund is substantially fully invested is a form of leverage, up to the amount of the premium and related transaction costs, and involves risks of loss and of increased volatility similar to those involved in purchasing call options on securities the Fund owns. --Options on Foreign Currencies. A Fund may purchase and write options on foreign currencies for hedging purposes. For example, a decline in the dollar value of a foreign currency in which portfolio securities are denominated will reduce the dollar value of such securities, even if their value in the foreign currency remains constant. In order to protect against such diminutions in the value of portfolio securities, the Fund may purchase put options on the foreign currency. If the value of the currency does decline, the Fund will have the right to sell such currency for a fixed amount in dollars and could thereby offset, in whole or in part, the adverse effect on its portfolio which otherwise would have resulted. Conversely, where a rise in the dollar value of a currency in which securities to be acquired are denominated is projected, thereby increasing the cost of such securities, a Fund may purchase call options thereon. The purchase of such options could offset, at least partially, the effects of the adverse movements in exchange rates. As in the case of other types of options, however, the benefit to the Fund from purchases of foreign currency options will be reduced by the amount of the premium and related transaction costs. In addition, where currency exchange rates do not move in the direction or to the extent anticipated, the Fund could sustain losses on transactions in foreign currency options which would require it to forego a portion or all of the benefits of advantageous changes in such rates. A Fund may write options on foreign currencies for hedging purposes or to increase return. For example, where a Fund anticipates a decline in the dollar value of foreign-denominated securities due to adverse fluctuations in exchange rates it could, instead of purchasing a put option, write a call option on the relevant currency. If the expected decline occurs, the option will most likely not be exercised, and the diminution in value of portfolio securities could be offset by the amount of the premium received. Similarly, instead of purchasing a call option to hedge against an anticipated increase in the dollar cost of securities to be acquired, a Fund could write a put option on the relevant currency, which, if rates move in the manner projected, will expire unexercised and allow the Fund to hedge such increased cost up to the amount of the premium. As in the case of other types of options, however, the writing of a foreign currency option will constitute only a partial hedge up to the amount of the premium, and only if rates move in the expected direction. If this does not occur, the option may be exercised and the Fund will be required to purchase or sell the underlying currency at a loss which may not be offset by the amount of the premium. Through the writing of options on foreign currencies, the Fund also may be required to forego all or a portion of the benefits that might otherwise have been obtained from favorable movements in exchange rates. In addition to using options for the hedging purposes described above, a Fund may also invest in options on foreign currencies for non-hedging purposes as a means of making direct investments in foreign currencies. A Fund may use options on currency to seek to increase total return when the Adviser anticipates that a foreign currency will appreciate or depreciate in value but securities denominated in that security are not held by the Fund and do not present attractive investment opportunities. For example, the Fund may purchase call options in anticipation of an increase in the market value of a currency. A Fund would ordinarily realize a gain if, during the option period, the value of such currency exceeded the sum of the exercise price, the premium paid and transactions costs. Otherwise, the Fund would realize no gain or a loss on the purchase of the call option. Put options may be purchased by a Fund for the purpose of benefiting from a decline in the value of a currency that the Fund does not own. A Fund would normally realize a gain if, during the option period, the value of the underlying currency decreased below the exercise price sufficiently to more than cover the premium and transaction costs. Otherwise, the Fund would realize no gain or loss on the purchase of the put option. For additional information on the use of options on foreign currencies for non-hedging purposes, see "Currency Transactions" below. Special Risks Associated with Options on Currency. An exchange traded options position may be closed out only on an options exchange that provides a secondary marker for an option of the same series. Although a Fund will generally purchase or sell options for which there appears to be an active secondary market, there is no assurance that a liquid secondary market on an exchange will exist for any particular option, or at any particular time. For some options, no secondary market on an exchange may exist. In such event, it might not be possible to effect closing transactions in particular options, with the result that the Fund would have to exercise its options in order to realize any profit and would incur transaction costs un the sale of the underlying currency. --Futures Contracts and Options on Futures Contracts. Futures contracts that a Fund may buy and sell may include futures contracts on fixed-income or other securities, and contracts based on interest rates, foreign currencies or financial indices, including any index of U.S. Government securities. A Fund may purchase or sell futures contracts and options thereon to hedge against changes in interest rates, securities (through index futures or options) or currencies. Interest rate futures contracts are purchased or sold for hedging purposes to attempt to protect against the effects of interest rate changes on a Fund's current or intended investments in fixed-income securities. For example, if a Fund owned long-term bonds and interest rates were expected to increase, that Fund might sell interest rate futures contracts. Such a sale would have much the same effect as selling some of the long-term bonds in that Fund's portfolio. However, since the futures market is more liquid than the cash market, the use of interest rate futures contracts as a hedging technique allows a Fund to hedge its interest rate risk without having to sell its portfolio securities. If interest rates were to increase, the value of the debt securities in the portfolio would decline, but the value of that Fund's interest rate futures contracts would be expected to increase at approximately the same rate, thereby keeping the net asset value of that Fund from declining as much as it otherwise would have. On the other hand, if interest rates were expected to decline, interest rate futures contracts could be purchased to hedge in anticipation of subsequent purchases of long-term bonds at higher prices. Because the fluctuations in the value of the interest rate futures contracts should be similar to those of long-term bonds, a Fund could protect itself against the effects of the anticipated rise in the value of long-term bonds without actually buying them until the necessary cash becomes available or the market has stabilized. At that time, the interest rate futures contracts could be liquidated and that Fund's cash reserves could then be used to buy long-term bonds on the cash market. A Fund may purchase and sell foreign currency futures contracts for hedging purposes in order to protect against fluctuations in currency exchange rates. Such fluctuations could reduce the dollar value of portfolio securities denominated in foreign currencies, or increase the cost of foreign-denominated securities to be acquired, even if the value of such securities in the currencies in which they are denominated remains constant. A Fund may sell futures contracts on a foreign currency, for example, when it holds securities denominated in such currency and it anticipates a decline in the value of such currency relative to the dollar. If such a decline were to occur, the resulting adverse effect on the value of foreign-denominated securities may be offset, in whole or in part, by gains on the futures contracts. However, if the value of the foreign currency increases relative to the dollar, a Fund's loss on the foreign currency futures contract may or may not be offset by an increase in the value of the securities because a decline in the price of the security stated in terms of the foreign currency may be greater than the increase in value as a result of the change in exchange rates. Conversely, a Fund could protect against a rise in the dollar cost of foreign-denominated securities to be acquired by purchasing futures contracts on the relevant currency, which could offset, in whole or in part, the increased cost of such securities resulting from a rise in the dollar value of the underlying currencies. When a Fund purchases futures contracts under such circumstances, however, and the price in dollars of securities to be acquired instead declines as a result of appreciation of the dollar, the Fund will sustain losses on its futures position which could reduce or eliminate the benefits of the reduced cost of portfolio securities to be acquired. A Fund may also engage in currency "cross hedging" when, in the opinion of the Adviser, the historical relationship among foreign currencies suggests that a Fund may achieve protection against fluctuations in currency exchange rates similar to that described above at a reduced cost through the use of a futures contract relating to a currency other than the U.S. Dollar or the currency in which the foreign security is denominated. Such "cross hedging" is subject to the same risks as those described above with respect to an unanticipated increase or decline in the value of the subject currency relative to the U.S. Dollar. A Fund may also use foreign currency futures contracts and options on such contracts for non-hedging purposes. Similar to options on currencies described above, a Fund may use foreign currency futures contracts and options on such contracts to seek to increase total return when the Adviser anticipates that a foreign currency will appreciate or depreciate in value but securities denominated in that security are not held by the Fund and do not present attractive investment opportunities. The risks associated with foreign currency futures contracts and options on futures are similar to those associated with options on foreign currencies, as described above. For additional information on the use of options on foreign currencies for non-hedging purposes, see "Currency Transactions" below. Purchases or sales of stock or bond index futures contracts are used for hedging purposes to attempt to protect a Fund's current or intended investments from broad fluctuations in stock or bond prices. For example, a Fund may sell stock or bond index futures contracts in anticipation of or during a market decline to attempt to offset the decrease in market value of the Fund's portfolio securities that might otherwise result. If such decline occurs, the loss in value of portfolio securities may be offset, in whole or part, by gains on the futures position. When a Fund is not fully invested in the securities market and anticipates a significant market advance, it may purchase stock or bond index futures contracts in order to gain rapid market exposure that may, in whole or in part, offset increases in the cost of securities that the Fund intends to purchase. As such purchases are made, the corresponding positions in stock or bond index futures contracts will be closed out. Each Fund has claimed an exclusion from the definition of the term "commodity pool operator" under the Commodity Exchange Act and therefore is not subject to registration or regulation as a pool operator under that Act. Options on futures contracts are options that call for the delivery of futures contracts upon exercise. Options on futures contracts written or purchased by a Fund will be traded on U.S. exchanges. The writing of a call option on a futures contract constitutes a partial hedge against declining prices of the securities in a Fund's portfolio. If the futures price at expiration of the option is below the exercise price, the Fund will retain the full amount of the option premium, which provides a partial hedge against any decline that may have occurred in the Fund's portfolio holdings. The writing of a put option on a futures contract constitutes a partial hedge against increasing prices of the securities or other instruments required to be delivered under the terms of the futures contract. If the futures price at expiration of the put option is higher than the exercise price, the Fund will retain the full amount of the option premium, which provides a partial hedge against any increase in the price of securities which the Fund intends to purchase. If a put or call option a Fund has written is exercised, the Fund will incur a loss which will be reduced by the amount of the premium it receives. Depending on the degree of correlation between changes in the value of its portfolio securities and changes in the value of its options on futures positions, a Fund's losses from exercised options on futures may to some extent be reduced or increased by changes in the value of portfolio securities. A Fund may purchase options on futures contracts for hedging purposes instead of purchasing or selling the underlying futures contracts. For example, where a decrease in the value of portfolio securities is anticipated as a result of a projected market-wide decline or changes in interest or exchange rates, a Fund could, in lieu of selling futures contracts, purchase put options thereon. In the event that such decrease were to occur, it may be offset, in whole or part, by a profit on the option. If the anticipated market decline were not to occur, the Fund will suffer a loss equal to the price of the put. Where it is projected that the value of securities to be acquired by a Fund will increase prior to acquisition due to a market advance or changes in interest or exchange rates, a Fund could purchase call options on futures contracts, rather than purchasing the underlying futures contracts. If the market advances, the increased cost of securities to be purchased may be offset by a profit on the call. However, if the market declines, the Fund will suffer a loss equal to the price of the call, but the securities that the Fund intends to purchase may be less expensive. - Credit Default Swap Agreements. The "buyer" in a credit default swap contract is obligated to pay the "seller" a periodic stream of payments over the term of the contract in return for a contingent payment upon the occurrence of a credit event with respect to an underlying reference obligation. Generally, a credit event means bankruptcy, failure to pay, obligation acceleration or modified restructuring. A Fund may be either the buyer or seller in the transaction. As a seller, the Fund receives a fixed rate of income throughout the term of the contract, which typically is between one month and five years, provided that no credit event occurs. If a credit event occurs, the Fund typically must pay the contingent payment to the buyer, which is typically the "par value" (full notional value) of the reference obligation. The contingent payment may be a cash settlement or by physical delivery of the reference obligation in return for payment of the face amount of the obligation. The value of the reference obligation received by the Fund as a seller if a credit event occurs, coupled with the periodic payments previously received, may be less than the full notional value it pays to the buyer, resulting in a loss of value to the Fund. If the reference obligation is a defaulted security, physical delivery of the security will cause the Funds to hold a defaulted security. If the Fund is a buyer and no credit event occurs, the Fund will lose its periodic stream of payments over the term of the contract. However, if a credit event occurs, the buyer typically receives full notional value for a reference obligation that may have little or no value. Credit default swaps may involve greater risks than if a Fund had invested in the reference obligation directly. Credit default swaps are subject to general market risk, liquidity risk and credit risk. - Currency Swaps. A Fund may enter into currency swaps for hedging purposes to protect against adverse changes in exchange rates between the U.S. Dollar and other currencies for non-hedging purposes as a means of making direct investments in foreign currencies, as described below under "Currency Transactions". Currency swaps involve the exchange by the Fund with another party of a series of payments in specified currencies. Actual principal amounts of currencies may be exchanged by the counterparties at the initiation, and again upon the termination of the transaction. Since currency swaps are individually negotiated, the Fund expects to achieve an acceptable degree of correlation between its portfolio investments and its currency swaps positions. Therefore the entire principal value of a currency swap is subject to the risk that the other party to the swap will default on its contractual delivery obligations. The net amount of the excess, if any, of the Fund's obligations over its entitlements with respect to each currency swap will be accrued on a daily basis and an amount of liquid assets having an aggregate net asset value ("NAV") at least equal to the accrued excess will be maintained in a segregated account by the Fund's custodian. With respect to Intermediate Bond, the Fund will not enter into any currency swap unless the credit quality of the unsecured senior debt or the claims-paying ability of the other party thereto is rated in the highest rating category of at least one nationally recognized rating organization at the time of entering into the transaction. If there is a default by the other party to such a transaction, the Fund will have contractual remedies pursuant to the agreements related to the transactions. --Swaps: Interest Rate Transactions. A Fund may enter into interest rate swap, cap or floor transactions, which may include preserving a return or spread on a particular investment or portion of its portfolio or protecting against an increase in the price of securities the Fund anticipates purchasing at a later date. A Fund also may invest in interest rate transaction futures. Interest Rate Swaps. Interest rate swaps involve the exchange by a Fund with another party of their respective commitments to pay or receive interest (e.g., an exchange of floating rate payments for fixed rate payments) computed based on a contractually-based principal (or "notional") amount. Interest rate swaps are entered into on a net basis (i.e., the two payment streams are netted out, with the Fund receiving or paying, as the case may be, only the net amount of the two payments). Interest Rate Caps and Floors. Interest rate caps and floors are similar to options in that the purchase of an interest rate cap or floor entitles the purchaser, to the extent that a specified index exceeds (in the case of a cap) or falls below (in the case of a floor) a predetermined interest rate, to receive payments of interest on a notional amount from the party selling the interest rate cap or floor. The swap market has grown substantially in recent years, with a large number of banks and investment banking firms acting both as principals and as agents utilizing standardized swap documentation. As a result, the swap market has become well established and relatively liquid. Caps and floors are less liquid than swaps. These transactions do not involve the delivery of securities or other underlying assets or principal. Accordingly, unless there is a counterparty default, the risk of loss to a Fund from interest rate transactions is limited to the net amount of interest payments that the Fund is contractually obligated to make. A Fund will enter into interest rate swap, cap or floor transactions only with counterparties who have credit ratings of at least A- (or the equivalent) from any one NRSRO or counterparties with guarantors with debt securities having such a rating. - Eurodollar Instruments. Eurodollar instruments are essentially U.S. Dollar-denominated futures contracts or options thereon that are linked to the London Interbank Offered Rate and are subject to the same limitations and risks as other futures contracts and options. - Currency Transactions. A Fund may invest in non-U.S. Dollar-denominated securities on a currency hedged or un-hedged basis. The Adviser will actively manage the Fund's currency exposures and may seek investment opportunities by taking long or short positions in currencies through the use of currency-related derivatives, including forward currency exchange contracts, futures and options on futures, swaps and options. The Adviser may enter into transactions for investment opportunities when it anticipates that a foreign currency will appreciate or depreciate in value but securities denominated in that currency are not held by the Fund and do not present attractive investment opportunities. Such transactions may also be used when the Adviser believes that it may be more efficient than a direct investment in a foreign currency-denominated security. A Fund may also conduct currency exchange contracts on a spot basis (i.e., for cash at the spot rate prevailing in the currency exchange market for buying or selling currencies). Forward Commitments and When-Issued and Delayed Delivery Securities - ------------------------------------------------------------------- Forward commitments for the purchase or sale of securities may include purchases on a "when-issued" basis or purchases or sales on a "delayed delivery" basis. In some cases, a forward commitment may be conditioned upon the occurrence of a subsequent event, such as approval and consummation of a merger, corporate reorganization or debt restructuring (i.e., a "when, as and if issued" trade). When forward commitment transactions are negotiated, the price is fixed at the time the commitment is made, a Fund does not pay for the securities until they are received, and a Fund is required to create a segregated account with its custodian and to maintain in that account liquid assets in an amount equal to or greater than, on a daily basis, the amount of the Fund's forward commitments and "when-issued" or "delayed delivery" commitments. Forward commitments include "To be announced" ("TBA") mortgage-backed securities, which are contracts for the purchase or sale of mortgage-backed securities to be delivered at a future agreed-upon date, whereby the specific mortgage pool numbers or the number of pools that will be delivered to fulfill the trade obligation or terms of the contract are unknown at the time of the trade. Subsequent to the time of the trade, a mortgage pool or pools guaranteed by the Government National Mortgage Association, or GNMA, the Federal National Mortgage Association, or FNMA, or the Federal Home Loan Mortgage Corporation, or FHLMC (including fixed rate or variable rate mortgages) are allocated to the TBA mortgage-backed securities transactions. The use of forward commitments enables a Fund to protect against anticipated changes in exchange rates, interest rates and/or prices. For instance, a Fund may enter into a forward contract when it enters into a contract for the purchase or sale of a security denominated in a foreign currency in order to "lock in" the U.S. Dollar price of the security ("transaction hedge"). In addition, when the Fund believes that a foreign currency may suffer a substantial decline against the U.S. Dollar, it may enter into a forward sale contract to sell an amount of that foreign currency approximating the value of some or all of that Fund's securities denominated in such foreign currency, or when the Fund believes that the U.S. Dollar may suffer a substantial decline against a foreign currency, it may enter into a forward purchase contract to buy that foreign currency for a fixed dollar amount ("position hedge"). If the Adviser were to forecast incorrectly the direction of exchange rate movements, the Fund might be required to complete such when-issued or forward transactions at prices inferior to the then current market values. When-issued securities and forward commitments may be sold prior to the settlement date, but the Fund enters into when-issued and forward commitments only with the intention of actually receiving securities or delivering them, as the case may be. If the Fund chooses to dispose of the right to acquire a when-issued security prior to its acquisition or dispose of its right to deliver or receive against a forward commitment, it may incur a gain or loss. Any significant commitment of Fund assets to the purchase of securities on a "when, as and if issued" basis may increase the volatility of the Fund's net asset value. At the time the Fund intends to enter into a forward commitment, it will record the transaction and thereafter reflect the value of the security purchased or, if a sale, the proceeds to be received, in determining its net asset value. Any unrealized appreciation or depreciation reflected in such valuation of a "when, as and if issued" security would be canceled in the event that the required conditions did not occur and the trade was canceled. A Fund will enter into forward commitments and make commitments to purchase securities on a "when-issued" or "delayed delivery" basis only with the intention of actually acquiring the securities. However, the Fund may sell these securities before the settlement date if, in the opinion of the Adviser, it is deemed advisable as a matter of investment strategy. Although the Funds do not intend to enter into forward commitments for speculative purposes and the Funds intend to adhere to the provisions of the Securities and Exchange Commission (the "Commission") policies, purchases of securities on such bases may involve more risk than other types of purchases. For example, by committing to purchase securities in the future, a Fund subjects itself to a risk of loss on such commitments as well as on its portfolio securities. Also, a Fund may have to sell assets which have been set aside in order to meet redemptions. In addition, if a Fund determines it is advisable as a matter of investment strategy to sell the forward commitment or "when-issued" or "delayed delivery" securities before delivery, that Fund may incur a gain or loss because of market fluctuations since the time the commitment to purchase such securities was made. Any such gain or loss would be treated as a capital gain or loss for tax purposes. When the time comes to pay for the securities to be purchased under a forward commitment or on a "when-issued" or "delayed delivery" basis, the Fund will meet its obligations from the then available cash flow or the sale of securities, or, although it would not normally expect to do so, from the sale of the forward commitment or "when-issued" or "delayed delivery" securities themselves (which may have a value greater or less than the Fund's payment obligation). In addition, no interest or dividends accrue to the purchaser prior to the settlement date for securities purchased or sold under a forward commitment. Governmental Obligations - ------------------------ The ability of governments to make timely payments on their obligations is likely to be influenced strongly by the issuer's balance of payments, including export performance, and its access to international credits and investments. To the extent that a country receives payment for its exports in currencies other than U.S. Dollars, its ability to make debt payments denominated in U.S. Dollars could be adversely affected. To the extent that a country develops a trade deficit, it will need to depend on continuing loans from foreign governments, multi-lateral organizations or private commercial banks, aid payments from foreign governments and on inflows of foreign investment. The access of a country to these forms of external funding may not be certain, and a withdrawal of external funding could adversely affect the capacity of a government to make payments on its obligations. In addition, the cost of servicing debt obligations can be affected by a change in international interest rates since the majority of these obligations carry interest rates that are adjusted periodically based upon international rates. Illiquid Securities - ------------------- Each Fund will limit its investments in illiquid securities to no more than 15% of its net assets or such other amount permitted by guidance regarding the Investment Company Act of 1940, as amended (the "1940 Act"). For this purpose, illiquid securities include, among others, (a) direct placements or other securities which are subject to legal or contractual restrictions on resale or for which there is no readily available market (e.g., trading in the security is suspended or, in the case of unlisted securities, market makers do not exist or will not entertain bids or offers), (b) options purchased by the Fund over-the-counter and the cover for options written by the Fund over-the-counter, and (c) repurchase agreements not terminable within seven days. Securities that have legal or contractual restrictions on resale but have a readily available market are not deemed illiquid for purposes of this limitation. Mutual funds do not typically hold a significant amount of restricted securities (securities that are subject to restrictions on resale to the general public) or other illiquid securities because of the potential for delays on resale and uncertainty in valuation. Limitations on resale may have an adverse effect on the marketability of portfolio securities and a mutual fund might be unable to dispose of restricted or other illiquid securities promptly or at reasonable prices and might thereby experience difficulty satisfying redemptions within seven days. A mutual fund may also have to take certain steps or wait a certain amount of time in order to remove the transfer restrictions for such restricted securities in order to dispose of them, resulting in additional expense and delay. Rule 144A under the Securities Act allows a broader institutional trading market for securities otherwise subject to restriction on resale to the general public. Rule 144A establishes a "safe harbor" from the registration requirements of the Securities Act for resales of certain securities to qualified institutional buyers. An insufficient number of qualified institutional buyers interested in purchasing certain restricted securities held by a Fund, however, could affect adversely the marketability of such portfolio securities and the Fund might be unable to dispose of such securities promptly or at reasonable prices. The Adviser, acting under the supervision of the Board of Directors, will monitor the liquidity of restricted securities in a Fund that are eligible for resale pursuant to Rule 144A. In reaching liquidity decisions, the Adviser will consider, among others, the following factors: (1) the frequency of trades and quotes for the security; (2) the number of dealers issuing quotations to purchase or sell the security; (3) the number of other potential purchasers of the security; (4) the number of dealers undertaking to make a market in the security; (5) the nature of the security (including its unregistered nature) and the nature of the marketplace for the security (e.g., the time needed to dispose of the security, the method of soliciting offers and the mechanics of the transfer); and (6) any applicable Commission interpretation or position with respect to such type of securities. Investments in Other Investment Companies - ----------------------------------------- A Fund may invest in securities of other investment companies, including exchange-traded funds, to the extent permitted under the 1940 Act or the rules and regulations thereunder (as such statute, rules or regulations may be amended from time to time) or by guidance regarding, interpretations of, or exemptive orders under, the 1940 Act or the rules or regulations thereunder published by appropriate regulatory authorities. The Funds intend to invest uninvested cash balances in an affiliated money market fund as permitted by Rule 12d1-1 under the 1940 Act. Lending of Fund Securities - -------------------------- A Fund may seek to increase income by lending portfolio securities. A principal risk in lending portfolio securities, as with other extensions of credit, consists of the possible loss of rights in the collateral should the borrower fail financially. In addition, the Fund may be exposed to the risk that the sale of any collateral realized upon the borrower's default will not yield proceeds sufficient to replace the loaned securities. In determining whether to lend securities to a particular borrower, the Adviser will consider all relevant facts and circumstances, including the creditworthiness of the borrower. The loans would be made only to firms deemed by the Adviser to be of good standing, and when, in the judgment of the Adviser, the consideration that can be earned currently from securities loans of this type justifies the attendant risk. A Fund may lend portfolio securities to the extent permitted under the 1940 Act or the rules and regulations thereunder (as such statute, rules or regulations may be amended from time to time) or by guidance regarding, interpretations of, or exemptive orders under, the 1940 Act. Under present regulatory policies, including those of the Board of Governors of the Federal Reserve System and the Commission, such loans may be made only to member firms of the New York Stock Exchange (the "Exchange") and will be required to be secured continuously by collateral in cash, cash equivalents, or U.S. Treasury Bills maintained on a current basis at an amount at least equal to the market value of the securities loaned. A Fund will have the right to call a loan and obtain the securities loaned at any time on five days' notice. While securities are on loan, the borrower will pay the Fund any income from the securities. A Fund may invest any cash collateral in portfolio securities and earn additional income or receive an agreed-upon amount of income from a borrower who has delivered equivalent collateral. Any such investment of cash collateral will be subject to the Fund's investment risks. A Fund will not, however, have the right to vote any securities having voting rights during the existence of the loan. A Fund will have the right to regain record ownership of loaned securities or equivalent securities in order to exercise ownership rights such as voting rights, subscription rights and rights to dividends, interest, or distributions. A Fund may pay reasonable finders', administrative, and custodial fees in connection with a loan. Loan Participations and Assignments - ----------------------------------- A Fund may invest in fixed or floating rate corporate loans ("Loans" and each, a "Loan") either by participating as co-lender at the time the loan is originated ("Participations") or by buying an interest in the loan in the secondary market from a financial institution or institutional investor ("Assignments"). The financial status of an institution interposed between a Fund and a borrower may affect the ability of the Fund to receive principal and interest payments. The success of a Fund may depend on the skill with which an agent bank administers the terms of the corporate loan agreements, monitors borrower compliance with covenants, collects principal, interest and fee payments from borrowers and, where necessary, enforces creditor remedies against borrowers. Agent banks typically have broad discretion in enforcing loan agreements. A Fund's investment in Participations typically will result in the Fund having a contractual relationship only with the financial institution arranging the Loan with the borrower (the "Lender") and not with the borrower directly. A Fund will have the right to receive payments of principal, interest and any fees to which it is entitled only from the Lender selling the Participation and only upon receipt by the Lender of the payments from the borrower. In connection with purchasing Participations, the Fund generally will have no right to enforce compliance by the borrower with the terms of the loan agreement relating to the Loan, nor any rights of set-off against the borrower, and the Fund may not directly benefit from any collateral supporting the Loan in which it has purchased the Participation. As a result, the Fund may be subject to the credit risk of both the borrower and the Lender that is selling the Participation. In the event of the insolvency of the Lender selling a Participation, the Fund may be treated as a general creditor of the Lender and may not benefit from any set-off between the Lender and the borrower. Certain Participations may be structured in a manner designed to avoid purchasers of Participations being subject to the credit risk of the Lender with respect to the Participation; but even under such a structure, in the event of the Lender's insolvency, the Lender's servicing of the Participation may be delayed and the assignability of the Participation impaired. A Fund will acquire Participations only if the Lender interpositioned between the Fund and the borrower is a Lender having total assets of more than $25 billion and whose senior unsecured debt is rated investment grade (i.e., Baa3 or higher by Moody's or BBB- or higher by S&P) or higher. When a Fund purchases Assignments from Lenders it will acquire direct rights against the borrower on the Loan. Because Assignments are arranged through private negotiations between potential assignees and potential assignors, however, the rights and obligations acquired by the Fund as the purchaser of an assignment may differ from, and be more limited than, those held by the assigning Lender. The assignability of certain obligations is restricted by the governing documentation as to the nature of the assignee such that the only way in which the Fund may acquire an interest in a Loan is through a Participation and not an Assignment. A Fund may have difficulty disposing of Assignments and Participations because to do so it will have to assign such securities to a third party. Because there is no liquid market for such securities, the Fund anticipates that such securities could be sold only to a limited number of institutional investors. The lack of a liquid secondary market may have an adverse impact on the value of such securities and the Fund's ability to dispose of particular Assignments or Participations when necessary to meet the Fund's liquidity needs in response to a specific economic event such as a deterioration in the creditworthiness of the borrower. The lack of a liquid secondary market for Assignments and Participations also may make it more difficult for the Fund to assign a value to these securities for purposes of valuing the Fund's portfolio and calculating its asset value. Mortgage-Related Securities and Other Asset-Backed Securities - ------------------------------------------------------------- The mortgage-related securities in which a Fund may invest typically are securities representing interests in pools of mortgage loans made by lenders such as savings and loan associations, mortgage bankers and commercial banks and are assembled for sale to investors (such as the Funds) by governmental, government-related or private organizations. Private organizations include commercial banks, savings associations, mortgage companies, investment banking firms, finance companies, special purpose finance entities (called special purpose vehicles or SPVs) and other entities that acquire and package loans for resales as mortgage-related securities. Specifically, these securities may include pass-through mortgage-related securities, collateralized mortgage obligations ("CMOs"), CMO residuals, adjustable-rate mortgage securities ("ARMS"), stripped mortgage-backed securities ("SMBSs"), commercial mortgage-backed securities, "to be announced" ("TBA") mortgage-backed securities, mortgage dollar rolls, collateralized obligations and other securities that directly or indirectly represent a participation in or are secured by and payable from mortgage loans on real property and other assets. Pass-Through Mortgage-Related Securities. Interests in pools of mortgage-related securities differ from other forms of debt securities, which normally provide for periodic payment of interest in fixed amounts with principal payments at maturity or specified call dates. Instead, these securities provide a monthly payment consisting of both interest and principal payments. In effect, these payments are a "pass-through" of the monthly payments made by the individual borrowers on their residential mortgage loans, net of any fees paid to the issuer or guarantor of such securities. Additional payments are caused by repayments of principal resulting from the sale of the underlying residential property, refinancing or foreclosure, net of fees or costs that may be incurred. Some mortgage-related securities, such as securities issued by GNMA, are described as "modified pass-through." These securities entitle the holder to receive all interest and principal payments owed on the mortgage pool, net of certain fees, regardless of whether or not the mortgagor actually makes the payment. The average life of pass-through pools varies with the maturities of the underlying mortgage instruments. In addition, a pool's term may be shortened by unscheduled or early payments of principal and interest on the underlying mortgages. The occurrence of mortgage prepayments is affected by factors including the level of interest rates, general economic conditions, the location and age of the mortgage and other social and demographic conditions. As prepayment rates of individual pools vary widely, it is not possible to accurately predict the average life of a particular pool. For pools of fixed-rate 30-year mortgages, common industry practice is to assume that prepayments will result in a 12-year average life. Pools of mortgages with other maturities or different characteristics will have varying average life assumptions. The assumed average life of pools of mortgages having terms of less than 30 years, is less than 12 years, but typically not less than 5 years. Yields on pass-through securities are typically quoted by investment dealers and vendors based on the maturity of the underlying instruments and the associated average life assumption. In periods of falling interest rates, the rate of prepayment tends to increase, thereby shortening the actual average life of a pool of mortgage-related securities. Conversely, in periods of rising interest rates the rate of prepayment tends to decrease, thereby lengthening the actual average life of the pool. Historically, actual average life has been consistent with the 12-year assumption referred to above. Actual prepayment experience may cause the yield to differ from the assumed average life yield. Reinvestment of prepayments may occur at higher or lower interest rates than the original investment, thus affecting the yield of the Fund. The compounding effect from reinvestment of monthly payments received by the Fund will increase the yield to shareholders compared with bonds that pay interest semi-annually. The principal governmental (i.e., backed by the full faith and credit of the United States Government) guarantor of mortgage-related securities is GNMA. GNMA is a wholly-owned United States Government corporation within the Department of Housing and Urban Development. GNMA is authorized to guarantee, with the full faith and credit of the United States Government, the timely payment of principal and interest on securities issued by institutions approved by GNMA (such as savings and loan institutions, commercial banks and mortgage bankers) and backed by pools of FHA-insured or VA-guaranteed mortgages. Government-related (i.e., not backed by the full faith and credit of the United States Government) guarantors include FNMA and FHLMC. FNMA is a government-sponsored corporation owned entirely by private stockholders. It is subject to general regulation and oversight by the Office of Federal Housing Enterprise Oversight ("OFHEO"). FNMA purchases residential mortgages from a list of approved seller/servicers which include state and federally-chartered savings and loan associations, mutual savings banks, commercial banks and credit unions and mortgage bankers. Pass-through securities issued by FNMA are guaranteed as to timely payment of principal and interest by FNMA but are not backed by the full faith and credit of the United States Government. FHLMC is a corporate instrumentality of the United States Government whose stock is owned by private stockholders. Participation certificates issued by FHLMC, which represent interests in mortgages from FHLMC's national portfolio, are guaranteed by FHLMC as to the timely payment of interest and ultimate collection of principal but are not backed by the full faith and credit of the United States Government. Commercial banks, savings and loan associations, private mortgage insurance companies, mortgage bankers and other secondary market issuers create pass-through pools of conventional residential mortgage loans. Securities representing interests in pools created by non-governmental private issuers generally offer a higher rate of interest than securities representing interests in pools created by governmental issuers because there are no direct or indirect governmental guarantees of the underlying mortgage payments. However, private issuers sometimes obtain committed loan facilities, lines of credit, letters of credit, surety bonds or other forms of liquidity and credit enhancement to support the timely payment of interest and principal with respect to their securities if the borrowers on the underlying mortgages fail to make their mortgage payments. The ratings of such non-governmental securities are generally dependent upon the ratings of the providers of such liquidity and credit support and would be adversely affected if the rating of such an enhancer were downgraded. The structuring of the pass-through pool may also provide credit enhancement. Examples of such credit support arising out of the structure of the transaction include the issue of senior and subordinated securities (e.g., the issuance of securities by a SPV in multiple classes or "tranches", with one or more classes being senior to other subordinated classes as to payment of principal and interest, with the result that defaults on the underlying mortgage loans are borne first by the holders of the subordinated class); creation of "reserve funds" ( in which case cash or investments sometimes funded from a portion of the payments on the underlying mortgage loans, are held in reserve against future losses); and "overcollateralization" (in which case the scheduled payments on, or the principal amount of, the underlying mortgage loans exceeds that required to make payment of the securities and pay any servicing or other fees). There can be no guarantee the credit enhancements, if any will be sufficient to prevent losses in the event of defaults on the underlying mortgage loans. In addition, mortgage-related securities that are issued by private issuers are not subject to the underwriting requirements for the underlying mortgages that are applicable to those mortgage-related securities that have a government or government-sponsored entity guaranteed. As a result, the mortgage loans underlying private mortgage-related securities may, and frequently do, have less favorable collateral, credit risk or other underwriting characteristics than government or government-sponsored mortgage-related securities and have wider variances in a number of terms, including interest rate, term, size, purposes and borrower characteristics. Privately issued pools more frequently include second mortgages, high loan-to-value mortgages and manufactured housing loans. The coupon rates and maturities of the underlying mortgage loans in a private-label mortgage-related pool may vary to a greater extent than those included in a government guaranteed pool, and the pool may include subprime mortgage loans. Subprime loans refer to loans made to borrowers with weakened credit histories or with a lower capacity to make timely payments on their loans. For these reasons, the loans underlying these securities have had in many cases higher default rates than those loans that meet government underwriting requirements. Collateralized Mortgage Obligations. Another form of mortgage-related security is a "pay-through" security, which is a debt obligation of the issuer secured by a pool of mortgage loans pledged as collateral that is legally required to be paid by the issuer, regardless of whether payments are actually made on the underlying mortgages. CMOs are the predominant type of "pay-through" mortgage-related security. In a CMO, a series of bonds or certificates is issued in multiple classes. Each class of a CMO, often referred to as a "tranche," is issued at a specific coupon rate and has a stated maturity or final distribution date. Principal prepayments on collateral underlying a CMO may cause one or more tranches of the CMO to be retired substantially earlier than the stated maturities or final distribution dates of the collateral. Although payment of the principal of, and interest on, the underlying collateral securing privately issued CMOs may be guaranteed by GNMA, FNMA or FHLMC, these CMOs represent obligations solely of the private issuer and are not insured or guaranteed by GNMA, FNMA, FHLMC, any other governmental agency or any other person or entity. Adjustable-Rate Mortgage Securities. Another type of mortgage-related security, known as adjustable-rate mortgage securities ("ARMS"), bears interest at a rate determined by reference to a predetermined interest rate or index. ARMS may be secured by fixed-rate mortgages or adjustable-rate mortgages. ARMS secured by fixed-rate mortgages generally have lifetime caps on the coupon rates of the securities. To the extent that general interest rates increase faster than the interest rates on the ARMS, these ARMS will decline in value. The adjustable-rate mortgages that secure ARMS will frequently have caps that limit the maximum amount by which the interest rate or the monthly principal and interest payments on the mortgages may increase. These payment caps can result in negative amortization (i.e., an increase in the balance of the mortgage loan). Furthermore, since many adjustable-rate mortgages only reset on an annual basis, the values of ARMS tend to fluctuate to the extent that changes in prevailing interest rates are not immediately reflected in the interest rates payable on the underlying adjustable-rate mortgages. Stripped Mortgage-Related Securities. Stripped mortgage-related securities (SMRS) are mortgage related securities that are usually structured with separate classes of securities collateralized by a pool of mortgages or a pool of mortgage backed bonds or pass-through securities, with each class receiving different proportions of the principal and interest payments from the underlying assets. A common type of SMRS has one class of interest-only securities (IOs) receiving all of the interest payments from the underlying assets and one class of principal-only securities (POs) receiving all of the principal payments from the underlying assets. IOs and POs are extremely sensitive to interest rate changes and are more volatile than mortgage-related securities that are not stripped. IOs tend to decrease in value as interest rates decrease and are extremely sensitive to the rate of principal payments (including prepayments) on the related underlying mortgage assets, and a rapid rate of principal prepayments may have a material adverse effect on the yield to maturity of the IO class. POs generally increase in value as interest rates decrease. If prepayments of the underlying mortgages are greater than anticipated, the amount of interest earned on the overall pool will decrease due to the decreasing principal balance of the assets. Due to their structure and underlying cash flows, SMRS may be more volatile than mortgage-related securities that are not stripped. Changes in the values of IOs and POs can be substantial and occur quickly, such as occurred in the first half of 1994 when the value of many POs dropped precipitously due to increases in interest rates. A Fund will only invest in SMRS that are issued by the U.S. Government, its agencies or instrumentalities and supported by the full faith and credit of the United States. Although SMRS are purchased and sold by institutional investors through several investment banking firms acting as brokers or dealers, the complexity of these instruments and the smaller number of investors in the sector can lend to illiquid markets in the sector. Commercial Mortgage-Backed Securities. Commercial mortgage-backed securities are securities that represent an interest in, or are secured by, mortgage loans secured by multifamily or commercial properties, such as industrial and warehouse properties, office buildings, retail space and shopping malls, and cooperative apartments, hotels and motels, nursing homes, hospitals and senior living centers. Commercial mortgage-backed securities have been issued in public and private transactions by a variety of public and private issuers using a variety of structures, some of which were developed in the residential mortgage context, including multi-class structures featuring senior and subordinated classes. Commercial mortgage-backed securities may pay fixed or floating-rates of interest. The commercial mortgage loans that underlie commercial mortgage-related securities have certain distinct risk characteristics. Commercial mortgage loans generally lack standardized terms, which may complicate their structure, tend to have shorter maturities than residential mortgage loans and may not be fully amortizing. Commercial properties themselves tend to be unique and are more difficult to value than single-family residential properties. In addition, commercial properties, particularly industrial and warehouse properties, are subject to environmental risks and the burdens and costs of compliance with environmental laws and regulations. "To Be Announced" Mortgaged-Backed Securities. TBA mortgage-backed securities are described in "Derivatives--Forward Commitments and When-Issued and Delayed Delivery Securities" above. Certain Risks. The value of mortgage-related securities is affected by a number of factors. Unlike traditional debt securities, which have fixed maturity dates, mortgage-related securities may be paid earlier than expected as a result of prepayments of underlying mortgages. Such prepayments generally occur during periods of falling mortgage interest rates. If property owners make unscheduled prepayments of their mortgage loans, these prepayments will result in the early payment of the applicable mortgage-related securities. In that event, the Fund may be unable to invest the proceeds from the early payment of the mortgage-related securities in investments that provide as high a yield as the mortgage-related securities. Early payments associated with mortgage-related securities cause these securities to experience significantly greater price and yield volatility than is experienced by traditional fixed-income securities. The level of general interest rates, general economic conditions and other social and demographic factors affect the occurrence of mortgage prepayments. During periods of falling interest rates, the rate of mortgage prepayments tends to increase, thereby tending to decrease the life of mortgage-related securities. Conversely, during periods of rising interest rates, a reduction in prepayments may increase the effective life of mortgage-related securities, subjecting them to greater risk of decline in market value in response to rising interest rates. If the life of a mortgage-related security is inaccurately predicted, the Fund may not be able to realize the rate of return it expected. As with other fixed-income securities, there is also the risk of nonpayment of mortgage-related securities, particularly for those securities that are backed by mortgage pools that contain subprime loans. Market factors adversely affecting mortgage loan repayments include a general economic downturn, high unemployment, a general slowdown in the real estate market, a drop in the market prices of real estate, or higher mortgage payments required to be made by holders of adjustable rate mortgages due to scheduled increases or increases due to higher interest rates. Subordinated mortgage-related securities may have additional risks. The subordinated mortgage-related security may serve as credit support for the senior securities purchased by other investors. In addition, the payments of principal and interest on these subordinated securities generally will be made only after payments are made to the holders of securities senior to the subordinated securities. Therefore, if there are defaults on the underlying mortgage loans, the holders of subordinated mortgage-related securities will be less likely to receive payments of principal and interest and will be more likely to suffer a loss. Commercial mortgage-related securities, like all fixed-income securities, generally decline in value as interest rates rise. Moreover, although generally the value of fixed-income securities increases during periods of falling interest rates, this inverse relationship is not as marked in the case of single-family residential mortgage-related securities, due to the increased likelihood of prepayments during periods of falling interest rates, and may not be as marked in the case of commercial mortgage-related securities. The process used to rate commercial mortgage-related securities may focus on, among other factors, the structure of the security, the quality and adequacy of collateral and insurance, and the creditworthiness of the originators, servicing companies and providers of credit support. Although the market for mortgage-related securities is becoming increasingly liquid, those issued by certain private organizations may not be readily marketable there may be a limited market for these securities, especially when there is a perceived weakness in the mortgage and real estate market sectors. In particular, the secondary markets for CMOs, IOs and POs may be more volatile and less liquid than those for other mortgage-related securities, thereby potentially limiting a Fund's ability to buy or sell those securities at any particular time. Without an active trading market, mortgage-related securities held in a Fund's portfolio may be particularly difficult to value because of the complexities involved in the value of the underlying mortgages. In addition, the rating agencies may have difficulties in rating commercial mortgage-related securities through different economic cycles and in monitoring such ratings on a longer-term basis. As with fixed-income securities generally, the value of mortgage-related securities can also be adversely affected by increases in general interest rates relative to the yield provided by such securities. Such an adverse effect is especially possible with fixed-rate mortgage securities. If the yield available on other investments rises above the yield of the fixed-rate mortgage securities as a result of general increases in interest rate levels, the value of the mortgage-related securities will decline. Other Asset-Backed Securities. A Fund may invest in other asset-backed securities. The securitization techniques used to develop mortgage-related securities are being applied to a broad range of financial assets. Through the use of trusts and special purpose corporations, various types of assets, including automobile loans and leases, credit card receivables, home equity loans, equipment leases and trade receivables, are being securitized in structures similar to the structures used in mortgage securitizations. For example, the Fund may invest in collateralized debt obligations ("CDOs"), which include collateralized bond obligations ("CBOs"), collateralized loan obligations ("CLOs"), and other similarly structured securities. CBOs and CLOs are types of asset-backed securities. A CBO is a trust, which is backed by a diversified pool of high-risk, below investment grade fixed-income securities. A CLO is a trust typically collateralized by a pool of loans, which may include, among others, domestic and foreign senior secured loans, senior unsecured loans, and subordinate corporate loans, including loans that may be rated below investment grade or equivalent unrated loans. These asset-backed securities are subject to risks associated with changes in interest rates, prepayment of underlying obligations and defaults similar to the risks of investment in mortgage-related securities discussed above. Each type of asset-backed security also entails unique risks depending on the type of assets involved and the legal structure used. For example, credit card receivables are generally unsecured obligations of the credit card holder and the debtors are entitled to the protection of a number of state and federal consumer credit laws, many of which give such debtors the right to set off certain amounts owed on the credit cards, thereby reducing the balance due. There have also been proposals to cap the interest rate that a credit card issuer may charge. In some transactions, the value of the asset-backed security is dependent on the performance of a third party acting as credit enhancer or servicer. Furthermore, in some transactions (such as those involving the securitization of vehicle loans or leases) it may be administratively burdensome to perfect the interest of the security issuer in the underlying collateral and the underlying collateral may become damaged or stolen. Preferred Stock - --------------- A Fund may invest in preferred stock. Preferred stock is an equity security that has features of debt because it generally entitles the holder to periodic payments at a fixed rate of return. Preferred stock is subordinated to any debt the issuer has outstanding but has liquidation preference over common stock. Accordingly, preferred stock dividends are not paid until all debt obligations are first met. Preferred stock may be subject to more fluctuations in market value, due to changes in market participants' perceptions of the issuer's ability to continue to pay dividends, than debt of the same issuer. Repurchase Agreements and Buy/Sell Back Transactions - ---------------------------------------------------- A repurchase agreement is an agreement by which a Fund purchases a security and obtains a simultaneous commitment from the seller to repurchase the security at an agreed upon price and date, normally one day or a few days later. The purchase and repurchase obligations are transacted under one document. The resale price is greater than the purchase price, reflecting an agreed-upon "interest rate" that is effective for the period of time the buyer's money is invested in the security, and which is related to the current market rate of the purchased security rather than its coupon rate. During the term of the repurchase agreement, the Fund monitors on a daily basis the market value of the securities subject to the agreement and, if the market value of the securities falls below the resale amount provided under the repurchase agreement, the seller under the repurchase agreement is required to provide additional securities or cash equal to the amount by which the market value of the securities falls below the resale amount. Because a repurchase agreement permits a Fund to invest temporarily available cash on a fully-collateralized basis, repurchase agreements permit the Fund to earn a return on temporarily available cash while retaining "overnight" flexibility in pursuit of investments of a longer-term nature. Repurchase agreements may exhibit the characteristics of loans by the Fund. The obligation of the seller under the repurchase agreement is not guaranteed, and there is a risk that the seller may fail to repurchase the underlying security, whether because of the seller's bankruptcy or otherwise. In such event, the Fund would attempt to exercise its rights with respect to the underlying security, including possible sale of the securities. A Fund may incur various expenses in the connection with the exercise of its rights and may be subject to various delays and risks of loss, including (a) possible declines in the value of the underlying securities, (b) possible reduction in levels of income and (c) lack of access to the securities (if they are held through a third-party custodian) and possible inability to enforce the Fund's rights. A Fund's Board of Directors has established procedures, which are periodically reviewed by the Board, pursuant to which the Adviser monitors the creditworthiness of the dealers with which the Fund enters into repurchase agreement transactions. A Fund may enter into repurchase agreements pertaining to the types of securities in which it invests with member banks of the Federal Reserve System or "primary dealers" (as designated by the Federal Reserve Bank of New York) in such securities. There is no percentage restriction on the Fund's ability to enter into repurchase agreements. Currently, the Fund intends to enter into repurchase agreements only with its custodian and such primary dealers. A Fund may enter into buy/sell back transactions, which are similar to repurchase agreements. In this type of transaction, the Fund enters a trade to buy securities at one price and simultaneously enters a trade to sell the same securities at another price on a specified date. Similar to a repurchase agreement, the repurchase price is higher than the sale price and reflects current interest rates. Unlike a repurchase agreement, however, the buy/sell transaction, though done simultaneously, is two separate legal agreements. A buy/sell transaction also differs from a repurchase agreement in that the seller is not required to provide margin payments if the value of the securities falls below the repurchase price because the transaction is two separate transactions. A Fund has the risk of changes in the value of the purchased security during the terms of the buy/sell agreement although these agreements typically provide for the repricing of the original transaction at a new market price if the value of the security changes by a specific amount. Reverse Repurchase Agreements and Dollar Rolls - ---------------------------------------------- Reverse repurchase agreements are identical to repurchase agreements except that rather than buying securities for cash subject to their repurchase by the seller, the Fund sells portfolio assets concurrently with an agreement by the Fund to repurchase the same assets at a later date at a fixed price slightly higher than the sale price. During the reverse repurchase agreement period, the Fund continues to receive principal and interest payments on these securities. Generally, the effect of a reverse repurchase agreement is that the Fund can recover all or most of the cash invested in the portfolio securities involved during the term of the reverse repurchase agreement, while it will be able to keep the interest income associated with those portfolio securities. Such transactions are advantageous only if the "interest cost" to the Fund of the reverse repurchase transaction, i.e., the difference between the sale and repurchase price for the securities, is less than the cost of otherwise obtaining the cash. Dollar rolls involve sales by a Fund of securities for delivery in the current month and the Fund's simultaneously contracting to repurchase substantially similar (same type and coupon) securities on a specified future date. During the roll period, the Fund forgoes principal and interest paid on the securities. A Fund is compensated by the difference between the current sales price and the lower forward price for the future purchase (often referred to as the "drop") as well as by the interest earned on the cash proceeds of the initial sale. Reverse repurchase agreements and dollar rolls involve the risk that the market value of the securities the Fund is obligated to repurchase under the agreement may decline below the repurchase price. In the event the buyer of securities under a reverse repurchase agreement or dollar roll files for bankruptcy or becomes insolvent, the Fund's use of the proceeds of the agreement may be restricted pending a determination by the other party, or its trustee or receiver, whether to enforce the Fund's obligation to repurchase the securities. In addition, the use of these investments results in leveraging the Fund's common stocks because the Fund uses the proceeds to make investments in other fixed-income securities. Use of leverage is considered speculative and has, among other things, the risk that the Fund's NAV may be more volatile. Securities Ratings - ------------------ The ratings of fixed-income securities by Moody's, S&P, and Fitch Ratings ("Fitch"), Dominion Bond Rating Service Ltd. and A.M. Best Company are a generally accepted barometer of credit risk. They are, however, subject to certain limitations from an investor's standpoint. The rating of an issuer is heavily weighted by past developments and does not necessarily reflect probable future conditions. There is frequently a lag between the time a rating is assigned and the time it is updated. In addition, there may be varying degrees of difference in credit risk of securities within each rating category. Securities rated Baa BBB+, BBB, or BBB_ by S&P or Baa1, Baa2 or Baa3 by Moody's are considered by Moody's to have speculative characteristics. Sustained periods of deteriorating economic conditions or rising interest rates are more likely to lead to a weakening in the issuer's capacity to pay interest and repay principal than in the case of higher-rated securities. Non-rated securities will also be considered for investment by a Fund when the Adviser believes that the financial condition of the issuers of such securities, or the protection afforded by the terms of the securities themselves, limits the risk to the Fund to a degree comparable to that of rated securities which are consistent with the Fund's objectives and policies. The Adviser generally uses ratings issued by S&P, Moody's, Fitch and Dominion Bond Rating Service Ltd. Some securities are rated by more than one of these ratings agencies, and the ratings assigned to the security by the rating agencies may differ. In such an event and for purposes of determining compliance with restrictions on investments for the Fund, if a security is rated by two or more rating agencies, the Adviser will deem the security to be rated at the highest rating. For example, if a security is rated by Moody's and S&P only, with Moody's rating the security as Ba and S&P as BBB, the Adviser will deem the security to be rated as the equivalent of BBB (i.e., Baa by Moody's and BBB by S&P). Or, if a security is rated by Moody's, S&P and Fitch, with Moody's rating the security as Ba, S&P as BBB and Fitch as BB, the Adviser will deem the security to be rated as the equivalent of BBB (i.e., Ba1 by Moody's, BBB by S&P and BBB by Fitch). The Adviser will try to reduce the risk inherent in the Fund's investment approach through credit analysis, diversification and attention to current developments and trends in interest rates and economic conditions. However, there can be no assurance that losses will not occur. In considering investments for Funds that invest in high-yielding securities, the Adviser will attempt to identify those high-yielding securities whose financial condition is adequate to meet future obligations, has improved, or is expected to improve in the future. The Adviser's analysis focuses on relative values based on such factors as interest or dividend coverage, asset coverage, earnings prospects, and the experience and managerial strength of the issuer. In the event that the credit rating of a security held by the Fund is downgraded, the credit quality deteriorates after purchase, or the security defaults, the Fund will not be obligated to dispose of that security and may continue to hold the security if, in the opinion of the Adviser, such investment is appropriate in the circumstances. Unless otherwise indicated, references to securities ratings by one rating agency in this SAI shall include the equivalent rating by another rating agency. Short Sales - ----------- A Fund may make short sales of securities or maintain a short position only for the purpose of deferring realization of gain or loss for U.S. federal income tax purposes, provided that at all times when a short position is open the Fund owns an equal amount of such securities of the same issue as, and equal in amount to, the securities sold short. In addition, the Fund may not make a short sale if more than 10% of the Fund's net assets (taken at market value) is held as collateral for short sales at any one time. A short sale of a security involves the risk that, instead of declining, the price of the security sold short will rise. If the price of the securities sold short increases between the time of a short sale and the time a Fund replaces the borrowed security, the Fund will incur a loss; conversely, if the price declines, the Fund will realize a gain. The potential for the price of a fixed-income security sold short to rise is a function of both the remaining maturity of the obligation, its creditworthiness and its yield. Unlike short sales of equities or other instruments, potential for the price of a fixed-income security to rise may be limited due to the fact that the security will be no more than par at maturity. However, the short sale of other instruments or securities generally, including fixed-income securities convertible into equities or other instruments, a fixed-income security trading at a deep discount from par or which pays a coupon that is high in relative or absolute terms, or which is denominated in a currency other than the U.S. Dollar, involves the possibility of a theoretically unlimited loss since there is a theoretically unlimited potential for the market price of the security sold short to increase. See "Dividends, Distributions and Taxes-Tax Straddles" for a discussion of certain special federal income tax considerations that may apply to short sales which are entered into by the Fund. Structured Securities - --------------------- A Fund may invest securities issued in structured financing transactions, which generally involve aggregating types of debt assets in a pool or special purpose entity and then issuing new securities. Types of structured financings include, for example, mortgage-related and other asset-backed securities. A Fund's investments include investments in structured securities that represent interests in entities organized and operated solely for the purpose of restructuring the investment characteristics of debt obligations. This type of restructuring involves the deposit with or purchase by an entity, such as a corporation or trust, of specified instruments (such as commercial bank loans) and the issuance by that entity of one or more classes of securities ("Structured Securities") backed by, or representing interests in, the underlying instruments. The cash flow on the underlying instruments may be apportioned among the newly issued Structured Securities to create securities with different investment characteristics such as varying maturities, payment priorities and interest rate provisions, and the extent of the payments made with respect to Structured Securities is dependent on the extent of the cash flow on the underlying instruments. Because Structured Securities of the type in which the Fund anticipates it will invest typically involve no credit enhancement, their credit risk generally will be equivalent to that of the underlying instruments. A Fund is permitted to invest in a class of Structured Securities that is either subordinated or unsubordinated to the right of payment of another class. Subordinated Structured Securities typically have higher yields and present greater risks than unsubordinated Structured Securities. Under the terms of subordinated securities, payments that would be made to their holders may be required to be made to the holders of more senior securities and/or the subordinated or junior securities may have junior liens, if they have any rights at all, in any collateral (meaning proceeds of the collateral are required to be paid first to holders of more senior securities). As a result, subordinated or junior securities will be disproportionately affected by a default or even a perceived decline in the creditworthiness of the issuer. U.S. Government Securities - -------------------------- U.S. Government securities may be backed by the full faith and credit of the United States, supported only by the right of the issuer to borrow from the U.S. Treasury or backed only by the credit of the issuing agency itself. These securities include: (i) the following U.S. Treasury securities, which are backed by the full faith and credit of the United States and differ only in their interest rates, maturities and times of issuance: U.S. Treasury bills (maturities of one year or less with no interest paid and hence issued at a discount and repaid at full face value upon maturity), U.S. Treasury notes (maturities of one to ten years with interest payable every six months) and U.S. Treasury bonds (generally maturities of greater than ten years with interest payable every six months); (ii) obligations issued or guaranteed by U.S. Government agencies and instrumentalities that are supported by the full faith and credit of the U.S. Government, such as securities issued by GNMA, the Farmers Home Administration, the Department of Housing and Urban Development, the Export-Import Bank, the General Services Administration and the Small Business Administration and including obligations that are issued by private issuers that are guaranteed as to principal or interest by the U.S. Government, its agencies or institutions; and (iii) obligations issued or guaranteed by U.S. government agencies and instrumentalities that are not supported by the full faith and credit of the U.S. Government or a right to borrow from the U.S. Treasury, such as securities issued by the FNMA and FHLMC, and governmental collateralized mortgage obligations ("CMOs"). The maturities of the U.S. Government securities listed in paragraphs (i) and (ii) above usually range from three months to 30 years. Such securities, except GNMA certificates, normally provide for periodic payments of interest in fixed amount with principal payments at maturity or specified call dates. U.S. Government securities also include zero coupon securities and principal-only securities and certain stripped mortgage-related securities. Zero coupon securities are described in more detail in "Zero Coupon Securities" below, and stripped mortgage-related securities and principal-only securities are described in more detail in "Mortgage-Related Securities and Other Asset-Backed Securities -Stripped Mortgage-Related Securities" above. In addition, other U.S. Government agencies and instrumentalities have issued stripped securities that are similar to SMRS. Inflation-protected securities, or IPS, such as Treasury Inflation-Protected Securities, or TIPS, are fixed income securities whose principal value is periodically adjusted according to the rate of inflation. If the index measuring inflation falls, the principal value of these securities will be adjusted downward, and consequently the interest payable on these securities (calculated with respect to a smaller principal amount) will be reduced. Repayment of the original bond principal upon maturity (as adjusted for inflation) is guaranteed in the case of U.S. Treasury inflation-protected securities. For bonds that do not provide a similar guarantee, the adjusted principal value of the bond repaid at maturity may be less than the original principal. Inflation-protected securities tend to react to changes in real interest rates. In general, the price of an inflation-protected debt security can fall when real interest rates rise, and can rise when real interest rates fall. Interest payments on inflation-protected debt securities can be unpredictable and will vary as the principal and/or interest is adjusted for inflation. TIPS, which are issued by the U.S Treasury, use the Consumer Price Index for Urban Consumers, or the CPI, as the inflation measure. The principal of a TIPS increases with inflation and decreases with deflation, as measured by the CPI. When a TIPS matures, the holder is paid the adjusted principal or original principal, whichever is greater. TIPS pay interest twice a year, at a fixed rate, which is determined by auction at the time the TIPS are issued. The rate is applied to the adjusted principal; so, like the principal, interest payments rise with inflation and fall with deflation. TIPS are issued in terms of 5, 10, and 20 years. Guarantees of securities by the U.S. Government or its agencies or instrumentalities guarantee only the payment of principal and interest on the securities, and do not guarantee the securities' yield or value or the yield or value of the shares of the Fund that holds the securities. U.S. Government securities are considered among the safest of fixed-income investments. As a result, however, their yields are generally lower than the yields available from other fixed-income securities. Variable, Floating and Inverse Floating Rate Securities - ------------------------------------------------------- These securities have interest rates that are reset at periodic intervals, usually by reference to some interest rate index or market interest rate. Some of these securities are backed by pools of mortgage loans. Although the rate adjustment feature may act as a buffer to reduce sharp changes in the value of these securities, they are still subject to changes in value based on changes in market interest rates or changes in the issuer's creditworthiness. Because the interest rate is reset only periodically, changes in the interest rate on these securities may lag behind changes in prevailing market interest rates. Also, some of these securities (or the underlying mortgages) are subject to caps or floors that limit the maximum change in the interest rate during a specified period or over the life of the security. Zero Coupon Securities - ---------------------- A zero coupon security pays no interest to its holder during its life. An investor acquires a zero coupon security at a discounted price from the face value of the security, which is generally based upon its present value, and which, depending upon the time remaining until maturity, may be significantly less than its face value (sometimes referred to as a "deep discount" price). Upon maturity of the zero coupon security, the investor receives the face value of the security. A Fund may invest in zero coupon Treasury securities, which consist of Treasury bills or the principal components of U.S. Treasury bonds or notes. A Fund may also invest in zero coupon securities issued by U.S. Government agencies or instrumentalities that are supported by the full faith and credit of the United States, which consist of the principal components of securities of U.S. Government agencies or instrumentalities. Currently, the only U.S. Treasury security issued without coupons is the Treasury bill. The zero coupon securities purchased by the Fund may consist of principal components held in STRIPS form issued through the U.S. Treasury's STRIPS program, which permits the beneficial ownership of the component to be recorded directly in the Treasury book-entry system. In addition, in the last few years a number of banks and brokerage firms have separated ("stripped") the principal portions ("corpus") from the coupon portions of the U.S. Treasury bonds and notes and sold them separately in the form of receipts or certificates representing undivided interests in these instruments (which instruments are generally held by a bank in a custodial or trust account). Because zero coupon securities trade at a discount from their face or par value but pay no periodic interest, they are subject to greater fluctuations of market value in response to changing interest rates than debt obligations of comparable maturities which make periodic distributions of interest. Current federal tax law requires that a holder (such as the Fund) of a zero coupon security accrue a portion of the discount at which the security was purchased as income each year even though the holder receives no interest payment in cash on the security during the year (generally referred to as "original issue discount" or "OID"). As a result, in order to make the distributions necessary for the Fund not to be subject to federal income or excise taxes, the Fund may be required to pay out as an income distribution each year an amount, obtained by liquidation of portfolio securities or borrowings if necessary, greater than the total amount of cash that the Fund has actually received as interest during the year. A Fund believes, however, that it is highly unlikely that it would be necessary to liquidate portfolio securities or borrow money in order to make such required distributions or to meet its investment objective. Certain Risk Considerations - --------------------------- The value of the Funds' shares will be influenced by the factors that generally affect securities, such as the economic and political outlook, earnings, dividends and the supply and demand for various classes of securities. There can be, of course, no assurance that a Fund's investment objective will be achieved. Investments in Lower-Rated and Unrated Instruments. Certain Funds may invest in lower-rated securities (Global Bond), some substantially (High Income), which may include securities having the lowest rating for non-subordinated debt securities (i.e., rated C by Moody's or CCC or lower by S&P & Fitch) and unrated securities of equivalent investment quality. Debt securities with such a rating are considered by the rating organizations to be subject to greater risk of loss of principal and interest than higher-rated securities and are considered to be predominantly speculative with respect to the issuer's capacity to pay interest and repay principal, which may in any case decline during sustained periods of deteriorating economic conditions or rising interest rates. These securities are considered to have extremely poor prospects of ever attaining any real investment standing, to have a current identifiable vulnerability to default, to be unlikely to have the capacity to pay interest and repay principal when due in the event of adverse business, financial or economic conditions, and/or to be in default or not current in the payment of interest or principal. Lower-rated securities generally are considered to be subject to greater market risk than higher-rated securities in times of deteriorating economic conditions. In addition, lower-rated securities may be more susceptible to real or perceived adverse economic and competitive industry conditions than investment grade securities, although the market values of securities rated below investment grade and comparable unrated securities tend to react less to fluctuations in interest rate levels than do those of higher-rated securities. The market for lower-rated securities may be thinner and less active than that for higher-quality securities, which can adversely affect the prices at which these securities can be sold. To the extent that there is no established secondary market for lower-rated securities, the Adviser may experience difficulty in valuing such securities and, in turn, the Fund's assets. In addition, adverse publicity and investor perceptions about lower-rated securities, whether or not based on fundamental analysis, may tend to decrease the market value and liquidity of such lower-rated securities. Transaction costs with respect to lower-rated securities may be higher, and in some cases information may be less available, than is the case with investment grade securities. Many fixed-income securities, including certain U.S. corporate fixed-income securities in which the Fund may invest, contain call or buy-back features that permit the issuer of the security to call or repurchase it. Such securities may present risks based on payment expectations. If an issuer exercises such a "call option" and redeems the security, the Fund may have to replace the called security with a lower yielding security, resulting in a decreased rate of return for the Fund. In seeking to achieve the Fund's investment objectives, there will be times, such as during periods of rising interest rates, when depreciation and realization of capital losses on securities in the Fund's portfolio will be unavoidable. Moreover, medium and lower rated securities and non-rated securities of comparable quality may be subject to wider fluctuations in yield and market values than higher-rated securities under certain market conditions. Such fluctuations after a security is acquired do not affect the cash income received from that security but are reflected in the NAV of the Fund. U.S. Corporate Fixed-Income Securities. The U.S. corporate fixed-income securities in which High Income will invest may include securities issued in connection with corporate restructurings such as takeovers or leveraged buyouts, which may pose particular risks. Securities issued to finance corporate restructurings may have special credit risks due to the highly leveraged conditions of the issuer. In addition, such issuers may lose experienced management as a result of the restructuring. Finally, the market price of such securities may be more volatile to the extent that expected benefits from the restructuring do not materialize. A Fund may also invest in U.S. corporate fixed-income securities that are not current in the payment of interest or principal or are in default, so long as the Adviser believes such investment is consistent with the Fund's investment objectives. A Fund's rights with respect to defaults on such securities will be subject to applicable U.S. bankruptcy, moratorium and other similar laws. Risks of Investments in Foreign Securities. Foreign issuers are subject to accounting and financial standards and requirements that differ, in some cases significantly, from those applicable to U.S. issuers. In particular, the assets and profits appearing on the financial statements of a foreign issuer may not reflect its financial position or results of operations in the way they would be reflected had the financial statement been prepared in accordance with U.S. generally accepted accounting principles. In addition, for an issuer that keeps accounting records in local currency, inflation accounting rules in some of the countries in which the Fund may invest require, for both tax and accounting purposes, that certain assets and liabilities be restated on the issuer's balance sheet in order to express items in terms of currency of constant purchasing power. Inflation accounting may indirectly generate losses or profits. Consequently, financial data may be materially affected by restatements for inflation and may not accurately reflect the real condition of those issuers and securities markets. Substantially less information is publicly available about certain non-U.S. issuers than is available about U.S. issuers. Expropriation, confiscatory taxation, nationalization, political, economic or social instability or other similar developments, such as military coups, have occurred in the past in countries in which the Fund may invest and could adversely affect the Fund's assets should these conditions or events recur. Foreign investment in certain foreign securities is restricted or controlled to varying degrees. These restrictions or controls may at times limit or preclude foreign investment in certain foreign securities and increase the costs and expenses of the Fund. Certain countries in which the Fund may invest require governmental approval prior to investments by foreign persons, limit the amount of investment by foreign persons in a particular issuer, limit the investment by foreign persons only to a specific class of securities of an issuer that may have less advantageous rights than the classes available for purchase by domiciliaries of the countries and/or impose additional taxes on foreign investors. Certain countries other than those on which the Fund may focus its investments may require governmental approval for the repatriation of investment income, capital or the proceeds of sales of securities by foreign investors. In addition, if a deterioration occurs in a country's balance of payments, the country could impose temporary restrictions on foreign capital remittances. Income from certain investments held by the Fund could be reduced by foreign income taxes, including withholding taxes. It is impossible to determine the effective rate of foreign tax in advance. A Fund's NAV may also be affected by changes in the rates or methods of taxation applicable to the Fund or to entities in which the Fund has invested. The Adviser generally will consider the cost of any taxes in determining whether to acquire any particular investments, but can provide no assurance that the tax treatment of investments held by the Fund will not be subject to change. Foreign Currency Transactions. A Fund may invest, sometimes substantially, in securities denominated in foreign currencies and a corresponding portion of the Fund's revenues will be received in such currencies. In addition, a Fund may conduct foreign currency transactions for hedging and non-hedging purposes on a spot (i.e., cash) basis or through the use of derivatives transactions, such as forward currency exchange contracts, currency futures and options thereon, and options on currencies as described above. The dollar equivalent of the Fund's net assets and distributions will be adversely affected by reductions in the value of certain foreign currencies relative to the U.S. Dollar. Such changes will also affect the Fund's income. A Fund will, however, have the ability to attempt to protect itself against adverse changes in the values of foreign currencies by engaging in certain of the investment practices listed above. While the Fund has this ability, there is no certainty as to whether, and to what extent, the Fund will engage in these practices. Currency exchange rates may fluctuate significantly over short periods of time causing, along with other factors, the Fund's NAV to fluctuate. Currency exchange rates generally are determined by the forces of supply and demand in the foreign exchange markets and the relative merits of investments in different countries, actual or anticipated changes in interest rates and other complex factors, as seen from an international perspective. Currency exchange rates also can be affected unpredictably by the intervention of U.S. or foreign governments or central banks, or the failure to intervene, or by currency controls or political developments in the United States or abroad. To the extent the Fund's total assets adjusted to reflect the Fund's net position after giving effect to currency transactions is denominated or quoted in the currencies of foreign countries, the Fund will be more susceptible to the risk of adverse economic and political developments within those countries. A Fund will incur costs in connection with conversions between various currencies. A Fund may hold foreign currency received in connection with investments when, in the judgment of the Adviser, it would be beneficial to convert such currency into U.S. Dollars at a later date, based on anticipated changes in the relevant exchange rate. If the value of the foreign currencies in which the Fund receives its income falls relative to the U.S. Dollar between receipt of the income and the making of Fund distributions, the Fund may be required to liquidate securities in order to make distributions if the Fund has insufficient cash in U.S. Dollars to meet distribution requirements. Similarly, if an exchange rate declines between the time the Fund incurs expenses in U.S. Dollars and the time cash expenses are paid, the amount of the currency required to be converted into U.S. Dollars in order to pay expenses in U.S. Dollars could be greater than the equivalent amount of such expenses in the currency at the time they were incurred. If the value of the foreign currencies in which the Fund receives income falls relative to the U.S. Dollar between receipt of the income and the making of Fund distributions, the Fund may be required to liquidate securities in order to make distributions if the Fund has insufficient cash in U.S. Dollars to meet the distribution requirements that the Fund must satisfy to qualify as a regulated investment company for federal income tax purposes. Similarly, if the value of a particular foreign currency declines between the time the Fund incurs expenses in U.S. Dollars and the time cash expenses are paid, the amount of the currency required to be converted into U.S. Dollars in order to pay expenses in U.S. Dollars could be greater than the equivalent amount of such expenses in the currency at the time they were incurred. In light of these risks, the Fund may engage in certain currency hedging transactions, which themselves, involve certain special risks. See "Additional Investment Policies and Practices," above. Additional Risks of Options on Forward Currency Exchange Contracts and Options on Foreign Currencies - ------------------------------------------------------------------------------ Unlike transactions entered into by a Fund in futures contracts, options on foreign currencies and forward currency exchange contracts are not traded on contract markets regulated by the CFTC or (with the exception of certain foreign currency options) by the Commission. To the contrary, such instruments are traded through financial institutions acting as market-makers, although foreign currency options are also traded on certain national securities exchanges, such as the Philadelphia Stock Exchange and the Chicago Board Options Exchange, subject to Commission regulation. Similarly, options on currencies may be traded over-the-counter. In an over-the-counter trading environment, many of the protections afforded to exchange participants will not be available. For example, there are no daily price fluctuation limits, and adverse market movements could therefore continue to an unlimited extent over a period of time. Although the purchaser of an option cannot lose more than the amount of the premium plus related transaction costs, this entire amount could be lost. Moreover, the option writer and a trader of forward currency exchange contracts could lose amounts substantially in excess of their initial investments, due to the margin and collateral requirements associated with such positions. Options on foreign currencies traded on national securities exchanges are within the jurisdiction of the Commission, as are other securities traded on such exchanges. As a result, many of the protections provided to traders on organized exchanges will be available with respect to such transactions. In particular, all foreign currency option positions entered into on a national securities exchange are cleared and guaranteed by the Options Clearing Corporation ("OCC"), thereby reducing the risk of counterparty default. Further, a liquid secondary market in options traded on a national securities exchange may be more readily available than in the over-the-counter market, potentially permitting the Fund to liquidate open positions at a profit prior to exercise or expiration, or to limit losses in the event of adverse market movements. The purchase and sale of exchange-traded foreign currency options, however, is subject to the risks of the availability of a liquid secondary market described above, as well as the risks regarding adverse market movements, margining of options written, the nature of the foreign currency market, possible intervention by governmental authorities and the effects of other political and economic events. In addition, exchange-traded options on foreign currencies involve certain risks not presented by the over-the-counter market. For example, exercise and settlement of such options must be made exclusively through the OCC, which has established banking relationships in applicable foreign countries for this purpose. As a result, the OCC may, if it determines that foreign governmental restrictions or taxes would prevent the orderly settlement of foreign currency option exercises, or would result in undue burdens on the OCC or its clearing member, impose special procedures on exercise and settlement, such as technical changes in the mechanics of delivery of currency, the fixing of dollar settlement prices or prohibitions, on exercise. In addition, options on U.S. Government Securities, futures contracts, options on futures contracts, forward currency exchange contracts and options on foreign currencies may be traded on foreign exchanges. Such transactions are subject to the risk of governmental actions affecting trading in or the prices of foreign currencies or securities. The value of such positions also could be adversely affected by (i) other complex foreign political and economic factors, (ii) lesser availability than in the United States of data on which to make trading decisions, (iii) delays in the Fund's ability to act upon economic events occurring in foreign markets during nonbusiness hours in the United States, (iv) the imposition of different exercise and settlement terms and procedures and margin requirements than in the United States, and (v) lesser trading volume period. Sovereign Debt Obligations. No established secondary markets may exist for many of the Sovereign Debt Obligations in which a Fund will invest. Reduced secondary market liquidity may have an adverse effect on the market price and the Fund's ability to dispose of particular instruments when necessary to meet its liquidity requirements or in response to specific economic events such as a deterioration in the creditworthiness of the issuer. Reduced secondary market liquidity for certain Sovereign Debt Obligations may also make it more difficult for the Fund to obtain accurate market quotations for the purpose of valuing its portfolio. Market quotations are generally available on many Sovereign Debt Obligations only from a limited number of dealers and may not necessarily represent firm bids of those dealers or prices for actual sales. By investing in Sovereign Debt Obligations, the Fund will be exposed to the direct or indirect consequences of political, social and economic changes in various countries. Political changes in a country may affect the willingness of a foreign government to make or provide for timely payments of its obligations. The country's economic status, as reflected, among other things, in its inflation rate, the amount of its external debt and its gross domestic product, will also affect the government's ability to honor its obligations. Many countries providing investment opportunities for the Fund have experienced substantial, and in some periods extremely high, rates of inflation for many years. Inflation and rapid fluctuations in inflation rates have had and may continue to have adverse effects on the economies and securities markets of certain of these countries. In an attempt to control inflation, wage and price controls have been imposed in certain countries. Investing in Sovereign Debt Obligations involves economic and political risks. The Sovereign Debt Obligations in which the Fund will invest in most cases pertain to countries that are among the world's largest debtors to commercial banks, foreign governments, international financial organizations and other financial institutions. In recent years, the governments of some of these countries have encountered difficulties in servicing their external debt obligations, which led to defaults on certain obligations and the restructuring of certain indebtedness. Restructuring arrangements have included, among other things, obtaining new credit to finance interest payments. Certain governments have not been able to make payments of interest on or principal of Sovereign Debt Obligations as those payments have come due. Obligations arising from past restructuring agreements may affect the economic performance and political and social stability of those issuers. Central banks and other governmental authorities which control the servicing of Sovereign Debt Obligations may not be willing or able to permit the payment of the principal or interest when due in accordance with the terms of the obligations. As a result, the issuers of Sovereign Debt Obligations may default on their obligations. Defaults on certain Sovereign Debt Obligations have occurred in the past. Holders of certain Sovereign Debt Obligations may be requested to participate in the restructuring and rescheduling of these obligations and to extend further loans to the issuers. The interests of holders of Sovereign Debt Obligations could be adversely affected in the course of restructuring arrangements or by certain other factors referred to below. Furthermore, some of the participants in the secondary market for Sovereign Debt Obligations may also be directly involved in negotiating the terms of these arrangements and may therefore have access to information not available to other market participants. The ability of governments to make timely payments on their obligations is likely to be influenced strongly by the issuer's balance of payments, including export performance, and its access to international credits and investments. A country whose exports are concentrated in a few commodities could be vulnerable to a decline in the international prices of one or more of those commodities. Increased protectionism on the part of a country's trading partners could also adversely affect the country's exports and diminish its trade account surplus, if any. To the extent that a country receives payment for its exports in currencies other than dollars, its ability to make debt payments denominated in dollars could be adversely affected. To the extent that a country develops a trade deficit, it will need to depend on continuing loans from foreign governments, multilateral organizations or private commercial banks, aid payments from foreign governments and on inflows of foreign investment. The access of a country to these forms of external funding may not be certain, and a withdrawal of external funding could adversely affect the capacity of a government to make payments on its obligations. In addition, the cost of servicing debt obligations can be affected by a change in international interest rates since the majority of these obligations carry interest rates that are adjusted periodically based upon international rates. Another factor bearing on the ability of a country to repay Sovereign Debt Obligations is the level of the country's international reserves. Fluctuations in the level of these reserves can affect the amount of foreign exchange readily available for external debt payments and, thus, could have a bearing on the capacity of the country to make payments in its Sovereign Debt Obligations. A Fund is permitted to invest in Sovereign Debt Obligations that are not current in the payment of interest or principal or are in default, so long as the Adviser believes it to be consistent with the Fund's investment objectives. A Fund may have limited legal recourse in the event of a default with respect to certain Sovereign Debt Obligations it holds. For example, remedies from defaults on certain Sovereign Debt Obligations, unlike those on private debt, must, in some cases, be pursued in the courts of the defaulting party itself. Legal recourse therefore may be significantly diminished. Bankruptcy, moratorium and other similar laws applicable to issuers of Sovereign Debt Obligations may be substantially different from those applicable to issuers of private debt obligations. The political context, expressed as the willingness of an issuer of Sovereign Debt Obligations to meet the terms of the debt obligation, for example, is of considerable importance. In addition, no assurance can be given that the holders of commercial bank debt will not contest payments to the holders of securities issued by foreign governments in the event of default under commercial bank loan agreements. Effects of Borrowing and Use of Leverage - ---------------------------------------- Certain of the Funds (Diversified Yield, Global Bond and High Income) may use borrowings for investment purposes. A Fund may maintain borrowings from banks or as otherwise permitted under Commission rules or exemptive orders with the Fund or the Adviser in an amount of money representing approximately one-third of the Fund's total assets less liabilities (other than the amount borrowed). A Fund's loan agreements provide for additional borrowings and for repayments and reborrowings from time to time, and the Fund expects to effect borrowings and repayments at such times and in such amounts as will maintain investment leverage in an amount approximately equal to its borrowing target. The loan agreements provide for a selection of interest rates that are based on the bank's short-term funding costs in the U.S. and London markets. Borrowings by the Fund result in leveraging of the Fund's shares of common stock. The proceeds of such borrowings will be invested in accordance with the Fund's investment objective and policies. The Adviser anticipates that the difference between the interest expense paid by the Fund on borrowings and the rates received by the Fund from its investment portfolio issuers will provide the Fund's shareholders with a potentially higher yield. Utilization of leverage, which is usually considered speculative, however, involves certain risks to the Fund's shareholders. These include a higher volatility of the NAV of the Fund's shares of common stock and the relatively greater effect on the NAV of the shares caused by favorable or adverse changes in currency exchange rates. So long as the Fund is able to realize a net return on the leveraged portion of its investment portfolio that is higher than the interest expense paid on borrowings, the effect of leverage will be to cause the Fund's shareholders to realize higher current net investment income than if the Fund were not leveraged. However, to the extent that the interest expense on borrowings approaches the net return on the leveraged portion of the Fund's investment portfolio, the benefit of leverage to the Fund's shareholders will be reduced, and if the interest expense on borrowings were to exceed the net return to shareholders, the Fund's use of leverage would result in a lower rate of return than if the Fund were not leveraged. Similarly, the effect of leverage in a declining market could be a greater decrease in NAV per share than if the Fund were not leveraged. In an extreme case, if the Fund's current investment income were not sufficient to meet the interest expense on borrowings, it could be necessary for the Fund to liquidate certain of its investments, thereby reducing the NAV of the Fund's shares. The Funds may also use leverage for investment purposes by entering into transactions such as reverse repurchase agreements, forward contracts and dollar rolls. This means that the Fund uses the cash proceeds made available during the term of these transactions to make investments in other fixed-income securities. The use of leverage is considered speculative and involves certain risks to the Fund's shareholders. These include a higher volatility of the Fund's NAV and the relatively greater effect on the NAV caused by favorable or adverse changes in market conditions or interest rates. So long as the Fund is able to realize a net return on its investment portfolio that is higher than the carrying costs of these transactions, the effect of leverage will be to cause the Fund's shareholders to realize higher current net income than if the Fund were not leveraged. To the extent that the carrying costs of these transactions approaches the net return on the Fund's investment portfolio, or exceed it, the benefit to the Fund's shareholders will be reduced or result in a lower rate of return than if the Fund were not leveraged. Under the 1940 Act, the Fund is not permitted to borrow unless immediately after such borrowing there is "asset coverage," as that term is defined and used in the 1940 Act, of at least 300% for all borrowings of the Fund. In addition, under the 1940 Act, in the event asset coverage falls below 300%, the Fund must within three days reduce the amount of its borrowing to such an extent that the asset coverage of its borrowings is at least 300%. Assuming, for example, outstanding borrowings representing not more than one-third of the Fund's total assets less liabilities (other than such borrowings), the asset coverage of the Fund's portfolio would be 300%; while outstanding borrowings representing of the Fund's portfolio 25% of the Fund's total assets less liabilities (other than such borrowings), the asset coverage of the Fund's portfolio would be 400%. A Fund will maintain asset coverage of outstanding borrowings of at least 300% and if necessary will, to the extent possible, reduce the amounts borrowed by making repayments from time to time in order to do so. Such repayments could require the Fund to sell portfolio securities at times considered disadvantageous by the Adviser and such sales could cause the Fund to incur related transaction costs and to realize taxable gains. Fundamental Investment Policies - ------------------------------- The following investment restrictions may not be changed without approval of the vote of a majority of a Fund's outstanding voting securities, which means the affirmative vote of (1) 67% or more of the shares of the Fund represented at a meeting at which more than 50% of the outstanding shares are present in person or by proxy or (2) more than 50% of the outstanding shares of the Fund, whichever is less. As a matter of fundamental policy, a Fund may not: 1. concentrate investments in an industry, as concentration may be defined under the 1940 Act or the rules and regulations thereunder (as such statute, rules or regulations may be amended from time to time) or by guidance regarding, interpretations of, or exemptive orders under, the 1940 Act or the rules or regulations thereunder published by appropriate regulatory authorities; 2. issue any senior security (as that term is defined in the 1940 Act) or borrow money, except to the extent permitted by the 1940 Act or the rules and regulations thereunder (as such statute, rules or regulations may be amended from time to time) or by guidance regarding, or interpretations of, or exemptive orders under, the 1940 Act or the rules or regulations thereunder published by appropriate regulatory authorities. For the purposes of this restriction, margin and collateral arrangements, including, for example, with respect to permitted borrowings, options, futures contracts, options on futures contracts and other derivatives such as swaps, are not deemed to be the issuance of a senior security; 3. make loans except through (i) the purchase of debt obligations in accordance with its investment objective and policies; (ii) the lending of portfolio securities; (iii) the use of repurchase agreements; or (iv) the making of loans to affiliated funds as permitted under the 1940 Act, the rules and regulations thereunder (as such statutes, rule or regulations may be amended from time to time), or by guidance regarding, and interpretations of, or exemptive orders under, the 1940 Act; 4. purchase or sell real estate except that it may dispose of real estate acquired as a result of the ownership of securities or other instruments. This restriction does not prohibit the Fund from investing in securities or other instruments backed by real estate or in securities of companies engaged in the real estate business; 5. purchase or sell commodities regulated by the Commodity Futures Trading Commission under the Commodity Exchange Act or commodities contracts except for futures contracts and options on futures contracts; or 6. act as an underwriter of securities, except that the Fund may acquire restricted securities under circumstances in which, if such securities were sold, the Fund might be deemed to be an underwriter for purposes of the Securities Act. As a matter of fundamental policy, each of Diversified Yield and Intermediate Bond is diversified (as that term is defined in the 1940 Act). This means that at least 75% of the Fund's assets consist of: o Cash or cash items; o Government securities; o Securities of other investment companies; and o Securities of any one issuer that represent not more than 10% of the outstanding voting securities of the issuer of the securities and not more than 5% of the total assets of the Fund. As a matter of fundamental policy, each of Global Bond and High Income is a "non-diversified" investment company, which means the Fund is not limited in the proportion of its assets that may be invested in the securities of a single issuer. This policy may be changed without a shareholder vote. However, the Fund intends to limit its investments so as to qualify to be taxed as a "regulated investment company" for purposes of the Internal Revenue Code of 1986, as amended (the "Code"), which will relieve the Fund of any liability for federal income tax to the extent its earnings are distributed to shareholders. See "Dividends, Distributions and Taxes." To so qualify, among other requirements, the Fund will limit its investment so that, at the close of each quarter of the taxable year, (i) not more than 25% of the Fund's total assets will be invested in the securities of a single issuer, and (ii) with respect to 50% of its total assets, not more than 5% of its total assets will be invested in the securities of a single issuer and the Fund will not own more than 10% of the outstanding voting securities of a single issuer. A Fund's investments in U.S. Government securities are not subject to these limitations. Because High Income is a non-diversified investment company, it may invest in a smaller number of individual issuers than a diversified investment company, and an investment in such Fund may, under certain circumstances, present greater risk to an investor than an investment in a diversified investment company. Foreign government securities are not treated like U.S. Government securities for purposes of the diversification tests described in the preceding paragraph, but instead are subject to these tests in the same manner as the securities of non-governmental issuers. In this regard sovereign debt obligations issued by different issuers located in the same country are often treated as issued by a single issuer for purposes of these diversification tests. Certain issuers of structured securities and loan participations may be treated as separate issuers for the purposes of these tests. Non-Fundamental Investment Policy - --------------------------------- The following is a description of an operating policy that the Fund has adopted but that is not fundamental and is subject to change without shareholder approval. A Fund may not purchase securities on margin, except (i) as otherwise provided under rules adopted by the Commission under the 1940 Act or by guidance regarding the 1940 Act, or interpretations thereof, and (ii) that the Fund may obtain such short-term credits as are necessary for the clearance of portfolio transactions, and the Fund may make margin payments in connection with futures contracts, options, forward contracts, swaps, caps, floors, collars and other financial instruments. - -------------------------------------------------------------------------------- MANAGEMENT OF THE FUNDS - -------------------------------------------------------------------------------- Board of Directors Information - ------------------------------ The business and affairs of each Fund is managed under the direction of each Fund's Board, which is composed of the same Directors. Certain information concerning the Funds' Directors is set forth below.
PORTFOLIOS IN FUND OTHER NAME, ADDRESS*, COMPLEX DIRECTORSHIPS AGE AND PRINCIPAL OCCUPATION(S) OVERSEEN HELD (YEAR FIRST ELECTED**) DURING PAST 5 YEARS BY DIRECTOR BY DIRECTOR - ---------------------- ----------------------- ----------- ------------- INTERESTED DIRECTOR Marc O. Mayer,*** Executive Vice President of the 91 SCB Partners, Inc. 1345 Avenue of the Americas, Adviser since 2000 and Chief and SCB, Inc. New York, NY 10105 Investment Officer of Blend 51 Solutions since June 2008. (2003) Previously, Executive Managing Director of AllianceBernstein Investments, Inc. ("ABI") since 2003; prior thereto, he was head of AllianceBernstein Institutional Investments, a unit of the Adviser from 2001-2003. Prior to 2001, Chief Executive Officer of Sanford C. Bernstein & Co., LLC (institutional research and brokerage arm of Bernstein & Co. LLC) ("SCB & Co.") and its predecessor. DISINTERESTED DIRECTORS Chairman of the Board William H. Foulk, Jr., +, # Investment Adviser and an 93 None 76 Independent Consultant. (1998) Previously, he was Senior Manager of Barrett Associates, Inc., a registered investment adviser, with which he had been associated since prior to 2004. He was formerly Deputy Comptroller and Chief Investment Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. John H. Dobkin, # Consultant. Formerly, President 91 None 66 of Save Venice, Inc. (1998) (preservation organization) from 2001 - 2002, Senior Advisor from June 1999 - June 2000 and President of Historic Hudson Valley (historic preservation) from December 1989 - May 1999. Previously, Director of the National Academy of Design. Michael J. Downey, # Private Investor since January 91 Asia Pacific Fund, 65 2004. Formerly, managing partner Inc., The Merger (2005) of Lexington Capital, LLC Fund and Prospect (investment advisory firm) from Acquisition Corp. December 1997 until December (financial services) 2003. From 1987 until 1993, Chairman and CEO of Prudential Mutual Fund Management. D. James Guzy, # Chairman of the Board of PLX 91 Intel Corporation 72 Technology (semi-conductors) and (semi-conductors) (2005) of SRC Computers Inc., with and Cirrus Logic which he has been associated Corporation since prior to 2004. (semi-conductors) Nancy P. Jacklin, # Professorial Lecturer at the 91 None 60 Johns Hopkins School of Advanced (2006) International Studies and Adjunct Professor at Georgetown University Law Center in the 2008-2009 academic year. Formerly, U.S. Executive Director of the International Monetary Fund (December 2002-May 2006); Partner, Clifford Chance (1992-2002); Sector Counsel, International Banking and Finance, and Associate General Counsel, Citicorp (1985-1992); Assistant General Counsel (International), Federal Reserve Board of Governors (1982-1985); and Attorney Advisor, U.S. Department of the Treasury (1973-1982). Member of the Bar of the District of Columbia and New York; and member of the Council on Foreign Relations. Garry L. Moody, # Formerly, Partner, Deloitte & 90 None 55 Touche LLP, Vice Chairman, and (2008) U.S. and Global Managing Partner, Investment Management Services Group 1995 - 2008. Marshall C. Turner, Jr., # Interim CEO of MEMC Electronic 91 Xilinx, Inc. 67 Materials, Inc. (semi-conductor (programmable logic (2005) and solar cell substrates) since semi-conductors) and November 2008. He was Chairman MEMC Electronic and CEO of Dupont Photomasks, Materials, Inc. Inc. (components of semi-conductor manufacturing), 2003-2005, and President and CEO, 2005-2006, after the company was renamed Toppan Photomasks, Inc. Earl D. Weiner, # Of Counsel, and Partner prior to 91 None 69 January 2007, of the law firm (2007) Sullivan & Cromwell LLP; member of ABA Federal Regulation of Securities Committee Task Force on Fund Director's Guidebook; member of Advisory Board of Sustainable Forestry Management Limited.
- ---------- * The address for each of the Fund's disinterested Directors is c/o AllianceBernstein L.P., Attn: Philip L. Kirstein, 1345 Avenue of the Americas, New York, NY 10105. ** There is no stated term of office for the Funds' Directors. *** Mr. Mayer is an "interested person", as defined in the 1940 Act, due to his position as Executive Vice President of the Adviser. + Member of the Fair Value Pricing Committee. # Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee. Each Fund's Board of Directors has four standing committees of the Board -- an Audit Committee, a Governance and Nominating Committee, a Fair Value Pricing Committee and an Independent Directors Committee. The members of the Audit and Governance, Nominating, Fair Value Pricing and Independent Directors Committees are identified above. The function of the Audit Committee is to assist the Board of Directors in its oversight of the Fund's financial reporting process. The Audit Committee of Intermediate Bond, Diversified Yield, Global Bond and High Income met twice, twice, twice and twice, respectively, during the Fund's most recently completed fiscal year. The function of the Governance and Nominating Committee includes the nomination of persons to fill any vacancies or newly created positions on the Board of Directors. The Governance and Nominating Committee of Intermediate Bond, Diversified Yield, Global Bond and High Income met four, four, four and four times, respectively, during the Fund's most recently completed fiscal year. The Governance and Nominating Committee has a charter and, pursuant to the charter, the Governance and Nominating Committee will consider candidates for nomination as a director submitted by a shareholder or group of shareholders who have beneficially owned at least 5% of the Fund's common stock or shares of beneficial interest for at least two years at the time of submission and who timely provide specified information about the candidates and the nominating shareholder or group. To be timely for consideration by the Governance and Nominating Committee, the submission, including all required information, must be submitted in writing to the attention of the Secretary at the principal executive offices of the Fund not less than 120 days before the date of the proxy statement for the previous year's annual meeting of shareholders. If the Fund did not hold an annual meeting of shareholders in the previous year, the submission must be delivered or mailed and received within a reasonable amount of time before the Fund begins to print and mail its proxy materials. Public notice of such upcoming annual meeting of shareholders may be given in a shareholder report or other mailing to shareholders or by other means deemed by the Governance and Nominating Committee or the Board to be reasonably calculated to inform shareholders. Shareholders submitting a candidate for consideration by the Governance and Nominating Committee must provide the following information to the Governance and Nominating Committee: (i) a statement in writing setting forth (A) the name, date of birth, business address and residence address of the candidate; (B) any position or business relationship of the candidate, currently or within the preceding five years, with the shareholder or an associated person of the shareholder as defined below; (C) the class or series and number of all shares of the Fund owned of record or beneficially by the candidate; (D) any other information regarding the candidate that is required to be disclosed about a nominee in a proxy statement or other filing required to be made in connection with the solicitation of proxies for election of Directors pursuant to Section 20 of the 1940 Act and the rules and regulations promulgated thereunder; (E) whether the shareholder believes that the candidate is or will be an "interested person" of the Fund (as defined in the 1940 Act) and, if believed not to be an "interested person," information regarding the candidate that will be sufficient for the Fund to make such determination; and (F) information as to the candidate's knowledge of the investment company industry, experience as a director or senior officer of public companies, directorships on the boards of other registered investment companies and educational background; (ii) the written and signed consent of the candidate to be named as a nominee and to serve as a Director if elected; (iii) the written and signed agreement of the candidate to complete a directors' and officers' questionnaire if elected; (iv) the shareholder's consent to be named as such by the Fund; (v) the class or series and number of all shares of each portfolio of the Fund owned beneficially and of record by the shareholder and any associated person of the shareholder and the dates on which such shares were acquired, specifying the number of shares owned beneficially but not of record by each, and stating the names of each as they appear on the Fund's record books and the names of any nominee holders for each; and (vi) a description of all arrangements or understandings between the shareholder, the candidate and/or any other person or persons (including their names) pursuant to which the recommendation is being made by the shareholder. "Associated Person of the shareholder" means any person who is required to be identified under clause (vi) of this paragraph and any other person controlling, controlled by or under common control with, directly or indirectly, (a) the shareholder or (b) the associated person of the shareholder. The Governance and Nominating Committee may require the shareholder to furnish such other information as it may reasonably require or deem necessary to verify any information furnished pursuant to the nominating procedures described above or to determine the qualifications and eligibility of the candidate proposed by the shareholder to serve on the Board. If the shareholder fails to provide such other information in writing within seven days of receipt of written request from the Governance and Nominating Committee, the recommendation of such candidate as a nominee will be deemed not properly submitted for consideration, and will not be considered, by the Committee. The Governance and Nominating Committee will consider only one candidate submitted by such a shareholder or group for nomination for election at an annual meeting of shareholders. The Governance and Nominating Committee will not consider self-nominated candidates. The Governance and Nominating Committee will consider and evaluate candidates submitted by shareholders on the basis of the same criteria as those used to consider and evaluate candidates submitted from other sources. These criteria include the candidate's relevant knowledge, experience, and expertise, the candidate's ability to carry out his or her duties in the best interests of the Fund, the candidate's ability to qualify as a disinterested Director and such other criteria as the Governance and Nominating Committee determines to be relevant in light of the existing composition of the Board and any anticipated vacancies or other factors. The function of the Fair Value Pricing Committee is to consider, in advance if possible, any fair valuation decision of the Adviser's Valuation Committee relating to a security held by the Fund made under unique or highly unusual circumstances not previously addressed by the Valuation Committee that would result in a change in the Fund's NAV by more than $0.01 per share. The Fair Value Pricing Committee did not meet during the Fund's most recently completed fiscal year. The function of the Independent Directors Committee is to consider and take action on matters that the Board or Committee believes should be addressed in executive session of the disinterested Directors, such as review and approval of the Advisory and Distribution Services Agreements. The Independent Directors Committee of Intermediate Bond, Diversified Yield, Global Bond and High Income met six, six, six and six times, respectively, during the Fund's most recently completed fiscal year. The dollar range of each Fund's securities owned by each Director and the aggregate dollar range of securities in all the registered investment companies to which the Adviser provides investment advisory services (collectively, the "AllianceBernstein Fund Complex") owned by each Director are set forth below. ALLIANCEBERNSTEIN INTERMEDIATE BOND PORTFOLIO AGGREGATE DOLLAR RANGE OF EQUITY DOLLAR RANGE OF SECURITIES IN THE EQUITY SECURITIES IN ALLIANCEBERNSTEIN THE PORTFOLIO AS OF FUND COMPLEX AS OF DECEMBER 31, 2008 DECEMBER 31, 2008 ----------------- ----------------- Marc O. Mayer None Over $100,000 John H. Dobkin None Over $100,000 Michael J. Downey None Over $100,000 William H. Foulk, Jr. None Over $100,000 D. James Guzy None $50,001-$100,000 Nancy P. Jacklin None Over $100,000 Garry L. Moody None Over $100,000 Marshall C. Turner, Jr. None Over $100,000 Earl D. Weiner None Over $100,000 ALLIANCEBERNSTEIN DIVERSIFIED YIELD FUND, INC. AGGREGATE DOLLAR RANGE OF EQUITY DOLLAR RANGE OF SECURITIES IN THE EQUITY SECURITIES IN ALLIANCEBERNSTEIN THE FUND AS OF FUND COMPLEX AS OF DECEMBER 31, 2008 DECEMBER 31, 2008 ----------------- ----------------- Marc O. Mayer None Over $100,000 John H. Dobkin None Over $100,000 Michael J. Downey None Over $100,000 William H. Foulk, Jr. None Over $100,000 D. James Guzy None $50,001-$100,000 Nancy P. Jacklin $10,001-$50,000 Over $100,000 Garry L. Moody None Over $100,000 Marshall C. Turner, Jr. None Over $100,000 Earl D. Weiner None Over $100,000 ALLIANCEBERNSTEIN GLOBAL BOND FUND, INC. AGGREGATE DOLLAR RANGE OF EQUITY DOLLAR RANGE OF SECURITIES IN THE EQUITY SECURITIES IN ALLIANCEBERNSTEIN THE FUND AS OF FUND COMPLEX AS OF DECEMBER 31, 2008 DECEMBER 31, 2008 ----------------- ----------------- Marc O. Mayer None Over $100,000 John H. Dobkin None Over $100,000 Michael J. Downey None Over $100,000 William H. Foulk, Jr. None Over $100,000 D. James Guzy None $50,001-$100,000 Nancy P. Jacklin None Over $100,000 Garry L. Moody None Over $100,000 Marshall C. Turner, Jr. None Over $100,000 Earl D. Weiner None Over $100,000 ALLIANCEBERNSTEIN HIGH INCOME FUND, INC. AGGREGATE DOLLAR RANGE OF EQUITY DOLLAR RANGE OF SECURITIES IN THE EQUITY SECURITIES IN ALLIANCEBERNSTEIN THE FUND AS OF FUND COMPLEX AS OF DECEMBER 31, 2008 DECEMBER 31, 2008 ----------------- ----------------- Marc O. Mayer None Over $100,000 John H. Dobkin None Over $100,000 Michael J. Downey $10,001-$50,000 Over $100,000 William H. Foulk, Jr. None Over $100,000 D. James Guzy None $50,001-$100,000 Nancy P. Jacklin None Over $100,000 Garry L. Moody None Over $100,000 Marshall C. Turner, Jr. None Over $100,000 Earl D. Weiner None Over $100,000 Officer Information - ------------------- Certain information concerning each Fund's officers is set forth below. NAME, ADDRESS,* POSITION(S) PRINCIPAL OCCUPATION AND AGE HELD WITH FUND DURING PAST 5 YEARS - ------- -------------- ------------------- Robert M. Keith,** President and Executive Vice President of the 48 Chief Executive Adviser*** since July 2008; Officer Director of ABI*** since 2006 and the head of ABI since July 2008. Prior to joining ABI in 2006, Executive Managing Director of Bernstein Global Wealth Management, and prior thereto, Senior Managing Director and Global Head of Client Service and Sales of AllianceBernstein's institutional investment management business since 2004. Prior thereto, he was a Managing Director and Head of North American Client Service and Sales in AllianceBernstein's institutional investment management business, with which he has been associated since prior to 2004. Philip L. Kirstein, Senior Vice Senior Vice President and 63 President and Independent Compliance Officer of Independent the AllianceBernstein Funds, with Compliance Officer 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 2004. Douglas J. Peebles, Senior Vice Executive Vice President of the 43 President Adviser,*** with which he has been associated since prior to 2004. Paul J. DeNoon, Vice President Senior Vice President of the 46 Adviser,*** with which he has been associated since prior to 2004. Scott DiMaggio, Vice President Senior Vice President of the 37 Adviser,*** with which he has been associated since prior to 2004. Gershon M. Distenfeld, Vice President Vice President of the Adviser,*** 33 with which he has been associated since prior to 2004. Fernando Grisales, Vice President Assistant Vice President of the 29 Adviser,*** with which he has been associated since prior to 2004. Arif Husain, Vice President Senior Vice President of the 36 Adviser,*** with which he has been associated since prior to 2004. Shawn E. Keegan, Vice President Vice President of the Adviser,*** 37 with which he has been associated in a substantially similar capacity to his current position since prior to 2004. Joran Laird, Vice President Vice President of the Adviser,*** 33 with which he has been associated in a substantially similar capacity to his current position since prior to 2004. Alison M. Martier, Vice President Senior Vice President of the 52 Adviser,*** with which she has been associated since prior to 2004. Joel J. McKoan, Vice President Senior Vice President of the 51 Adviser,*** with which he has been associated since prior to 2004. Michael L. Mon, Vice President Vice President of the Adviser,*** 39 with which he has been associated since prior to 2004. Matthew S. Sheridan, Vice President Vice President of the Adviser,*** 33 with which he has been associated since prior to 2004. Greg J. Wilensky, Vice President Senior Vice President of the 41 Adviser,*** and Director of Stable Value Investments, with which he has been associated since prior to 2004. Emilie D. Wrapp, Secretary Senior Vice President, 53 Assistant General Counsel and Assistant Secretary of ABI,*** with which she has been associated since prior to 2004. Joseph J. Mantineo, Treasurer and Chief Senior Vice President of 49 Financial Officer ABIS,*** with which he has been associated since prior to 2004. Phyllis J. Clarke, Controller Assistant Vice President of 48 ABIS,*** with which she has been associated since prior to 2004. - ---------- * The address for each of the Fund's Officers is 1345 Avenue of the Americas, New York, NY 10105. ** Mr. Keith was elected as President and Chief Executive Officer of each Fund as of September 23, 2008. *** The Adviser, ABI, ABIS and SCB & Co. are affiliates of each Fund. The Funds do not pay any fees to, or reimburse expenses of, their Directors who are considered "interested persons" of the Funds. The aggregate compensation paid by a Fund to each of the Directors during its fiscal year, the aggregate compensation paid to each of the Directors during calendar year 2008 by the AllianceBernstein Fund Complex, and the total number of registered investment companies (and separate investment portfolios within the companies) in the AllianceBernstein Fund Complex with respect to which each of the Directors serves as a director or trustee are set forth below. Neither the Funds nor any other fund in the AllianceBernstein Fund Complex provides compensation in the form of pension or retirement benefits to any of its directors or trustees. Each of the Directors is a director or trustee of one or more other registered investment companies in the AllianceBernstein Fund Complex. ALLIANCEBERNSTEIN INTERMEDIATE BOND PORTFOLIO
Total Number of Total Number of Investment Investment Funds Companies in the within the AllianceBernstein AllianceBernstein Fund Complex, Fund Complex, Aggregate Total Compensation Including the Including the Compensation from from the Fund, as to which Fund, as to which the Fund for the AllianceBernstein the Director is a the Director is a Fiscal Year Ended Fund Complex, Director or Director or Name of Director 10/31/08 Including the Fund Trustee Trustee - ---------------- -------- ------------------ ------- ------- Marc O. Mayer $0 $0 33 91 John H. Dobkin $6,146 $245,470 33 91 Michael J. Downey $5,949 $243,300 33 91 William H. Foulk, Jr. $11,316 $486,700 35 93 D. James Guzy $5,949 $243,300 33 91 Nancy P. Jacklin $5,949 $244,500 33 91 Garry L. Moody $4,670 $269,230 32 90 Marshall C. Turner $5,949 $243,300 33 91 Earl D. Weiner $6,284 $261,300 33 91
As of January 5, 2009, the Directors and officers of the Fund as a group owned less than 1% of the shares of the Fund. ALLIANCEBERNSTEIN DIVERSIFIED YIELD FUND, INC.
Total Number of Total Number of Investment Investment Funds Companies in the within the AllianceBernstein AllianceBernstein Fund Complex, Fund Complex, Aggregate Total Compensation Including the Including the Compensation from from the Fund, as to which Fund, as to which the Fund for the AllianceBernstein the Director is a the Director is a Fiscal Year Ended Fund Complex, Director or Director or Name of Director 10/31/08 Including the Fund Trustee Trustee - ---------------- -------- ------------------ ------- ------- Marc O. Mayer $0 $0 33 91 John H. Dobkin $5,170 $245,470 33 91 Michael J. Downey $4,973 $243,300 33 91 William H. Foulk, Jr. $9,384 $486,700 35 93 D. James Guzy $4,973 $243,300 33 91 Nancy P. Jacklin $4,973 $244,500 33 91 Garry L. Moody $4,670 $269,230 32 90 Marshall C. Turner $4,973 $243,300 33 91 Earl D. Weiner $5,288 $261,300 33 91
As of January 5, 2009, the Directors and officers of the Fund as a group owned less than 1% of the shares of the Fund. ALLIANCEBERNSTEIN GLOBAL BOND FUND, INC.
Total Number of Total Number of Investment Investment Funds Companies in the within the AllianceBernstein AllianceBernstein Fund Complex, Fund Complex, Aggregate Total Compensation Including the Including the Compensation from from the Fund, as to which Fund, as to which the Fund for the AllianceBernstein the Director is a the Director is a Fiscal Year Ended Fund Complex, Director or Director or Name of Director 9/30/08 Including the Fund Trustee Trustee - ---------------- -------- ------------------ ------- ------- Marc O. Mayer $0 $0 33 91 John H. Dobkin $5,262 $245,470 33 91 Michael J. Downey $5,065 $243,300 33 91 William H. Foulk, Jr. $9,474 $486,700 35 93 D. James Guzy $5,065 $243,300 33 91 Nancy P. Jacklin $5,065 $244,500 33 91 Garry L. Moody $4,670 $269,230 32 90 Marshall C. Turner $5,065 $243,300 33 91 Earl D. Weiner $5,400 $261,300 33 91
As of January 5, 2009, the Directors and officers of the Fund as a group owned less than 1% of the shares of the Fund. ALLIANCEBERNSTEIN HIGH INCOME FUND, INC.
Total Number of Total Number of Investment Investment Funds Companies in the within the AllianceBernstein AllianceBernstein Fund Complex, Fund Complex, Aggregate Total Compensation Including the Including the Compensation from from the Fund, as to which Fund, as to which the Fund for the AllianceBernstein the Director is a the Director is a Fiscal Year Ended Fund Complex, Director or Director or Name of Director 10/31/08 Including the Fund Trustee Trustee - ---------------- -------- ------------------ ------- ------- Marc O. Mayer $0 $0 33 91 John H. Dobkin $5,170 $245,470 33 91 Michael J. Downey $4,973 $243,300 33 91 William H. Foulk, Jr. $9,384 $486,700 35 93 D. James Guzy $4,973 $243,300 33 91 Nancy P. Jacklin $4,973 $244,500 33 91 Garry L. Moody $4,670 $269,230 32 90 Marshall C. Turner $4,973 $243,300 33 91 Earl D. Weiner $5,288 $261,300 33 91
As of January 5, 2009, the Directors and officers of the Fund as a group owned less than 1% of the shares of the Fund. Investment Adviser - ------------------ The Adviser, a Delaware limited partnership with principal offices at 1345 Avenue of the Americas, New York, New York 10105, has been retained under an investment advisory agreement (the "Advisory Agreement") to provide investment advice and, in general, to conduct the management and investment program of each of the Funds under the supervision of the Fund's Board of Directors (see "Management of the Funds" in the Prospectuses). The Adviser is a leading global investment management firm supervising client accounts with assets as of September 30, 2008, totaling approximately $590 billion. The Adviser provides management services for many of the largest U.S. public and private employee benefit plans, endowments, foundations, public employee retirement funds, banks, insurance companies and high net worth individuals worldwide. The Adviser is also one of the largest mutual fund sponsors, with a diverse family of globally distributed mutual fund portfolios. As one of the world's leading global investment management organizations, the Adviser is able to compete for virtually any portfolio assignment in any developed capital market in the world. The Adviser is a registered investment adviser under the Investment Advisers Act of 1940, as amended. As of September 30, 2008, AllianceBernstein Holding, L.P. ("Holding"), a Delaware limited partnership, owned approximately 33.2% of the issued and outstanding units of limited partnership interest in the Adviser ("AllianceBernstein Units"). Units representing assignments of beneficial ownership of limited partnership interests in Holding ("Holding Units") trade publicly on the New York Stock Exchange ("Exchange") under the ticker symbol "AB." AllianceBernstein Units do not trade publicly and are subject to significant restrictions on transfer. AllianceBernstein Corporation ("AB Corp.") is the general partner of both the Adviser and Holding. AB Corp. owns 100,000 general partnership units in Holding and a 1% general partnership interest in the Adviser. AB Corp. is an indirect wholly-owned subsidiary of AXA Financial, Inc. ("AXA Financial"), a Delaware corporation. As of September 30, 2008, AXA, AXA Financial, AXA Equitable Life Insurance Company ("AXA Equitable") and certain subsidiaries of AXA Equitable collectively beneficially owned approximately 62.4% of the issued and outstanding AllianceBernstein Units and approximately 1.6% of the issued and outstanding Holding Units which, including the general partnership interests in the Adviser and Holding, represent an economic interest of approximately 63.0% in the Adviser. As of September 30, 2008, SCB Partners Inc., a wholly-owned subsidiary of SCB, Inc., beneficially owned approximately 3.1% of the issued and outstanding AllianceBernstein Units. AXA, a French company, is the holding company for an international group of companies and a worldwide leader in financial protection and wealth management. AXA operates primarily in Western Europe, North America and the Asia/Pacific region and, to a lesser extent, in other regions including the Middle East, Africa and South America. AXA has five operating business segments: life and savings, property and casualty insurance, international insurance (including reinsurance), asset management and other financial services. AXA Financial is a wholly-owned subsidiary of AXA. AXA Equitable is an indirect wholly-owned subsidiary of AXA Financial. Under each Fund's Advisory Agreement, the Adviser provides investment advisory services and order placement facilities for the Fund and pays all compensation of Directors and officers of the Fund who are affiliated persons of the Adviser. The Adviser or an affiliate also furnishes the Fund, without charge, management supervision and assistance and office facilities and provides persons satisfactory to the Fund's Board of Directors to serve as the Fund's officers. The Adviser is, under each Fund's Advisory Agreement, responsible for certain expenses incurred by the Fund, including, for example, office facilities and certain administrative services, and any expenses incurred in promoting the sale of Fund shares (other than the portion of the promotional expenses borne by the Fund in accordance with an effective plan pursuant to Rule 12b-1 under the 1940 Act, and the costs of printing Fund prospectuses and other reports to shareholders and fees related to registration with the Commission and with state regulatory authorities). ALLIANCEBERNSTEIN INTERMEDIATE BOND PORTFOLIO For services rendered by the Adviser under the Advisory Agreement, the Fund paid the Adviser a fee effective September 7, 2004 of .45 of 1% of the first $2.5 billion of the Fund's average net assets and .40 of 1% of the excess of $2.5 billion up to 5 billion and .35 of 1% of the excess over $5 billion as a percentage of aggregate daily net assets (for the year 2004, the Fund's previously effective advisory fee was waived to this amount by the Adviser after January 1, 2004). The fee is accrued daily and paid monthly. The Adviser has contractually agreed through the Fund's fiscal year ending October 31, 2009 to waive its fee and bear certain expenses so that total expenses do not exceed on an annual basis .85%, 1.55%, 1.55%, 1.05%, .80%, .55% and .55% of aggregate average net assets, respectively, for Class A, Class B, Class C, Class R, Class K, Class I and Advisor Class shares. This contractual agreement automatically extends each year unless the Adviser provides the Fund written notice 60 days prior to the Fund's fiscal year end. For the fiscal years ended October 31, 2006, 2007 and 2008 the Adviser received under the Advisory Agreement the amount of $590,341, $531,653 and $2,586,786, respectively, as advisory fees from the Fund. Under the expense limitation undertaking, $265,636, $436,894 and $1,313,293 were waived and/or reimbursed by the Adviser for the fiscal years ended October 31, 2006, 2007, and 2008 respectively. The Fund has, under the Advisory Agreement, assumed the obligation for payment of all of its other expenses. As to the obtaining of services other than those specifically provided to the Fund by the Adviser, the Fund may employ its own personnel. For such services it may also utilize personnel employed by the Adviser or its affiliates and, in such event, the services will be provided to the Fund at cost and the payments therefore must be specifically approved by the Fund's Board of Directors. For the fiscal year ended October 31, 2008, the cost of certain legal and accounting services amounting to $99,500 provided to the Fund by the Adviser was waived. The Advisory Agreement became effective with respect to the Fund on July 1, 1999. The Advisory Agreement was approved by the unanimous vote, cast in person, of the Fund's Directors, including the Directors who are not parties to the Advisory Agreement or "interested persons" as defined in the 1940 Act of any such party, at a meeting called for such purpose and held on September 11, 1991. The Advisory Agreement continues in effect provided that such continuance is specifically approved at least annually by a vote of a majority of the Fund's outstanding voting securities or by the Fund's Board of Directors, and in either case, by a majority of the Directors who are not parties to the Advisory Agreement or interested persons of any such party. Most recently, continuance of the Advisory Agreement for an additional annual term was approved by vote, cast in person, by the Board of Directors, including a majority of the Directors who are not "interested persons" as defined in the 1940 Act, at their meeting held on November 4-6, 2008. ALLIANCEBERNSTEIN DIVERSIFIED YIELD FUND, INC. For the services rendered by the Adviser under the Advisory Agreement, the Fund paid the Adviser effective September 7, 2004 a fee at the annual rate of .50 of 1% for the first $2.5 billion, .45 of 1% of the excess of $2.5 billion up to $5 billion and .40 of 1% of the excess over $5 billion as a percentage of the Fund's average daily net assets (for the year 2004, the Fund's previously effective advisory fee rate was waived to this amount after January 1, 2004). The fee is accrued daily and paid monthly. The Adviser has contractually agreed through the Fund's fiscal year ending October 31, 2009 to waive its fee and bear certain expenses so that total expenses do not exceed on an annual basis .90%, 1.60%, 1.60%, 1.10%, .85%, .60% and .60% of aggregate daily net assets, respectively, for Class A, Class B, Class C, Class R, Class K, Class I and Advisor Class shares. This contractual agreement automatically extends each year unless the Adviser provides written notice 60 days prior to the Fund's fiscal year end. For the fiscal years ended October 31, 2006, 2007 and 2008, the Adviser received from the Fund advisory fees of $437,130, $418,174 and $455,521, respectively. Under the expense limitation undertaking, $685,508 was waived and/or reimbursed by the Adviser for the fiscal year ended 2008. The Fund has, under the Advisory Agreement, assumed the obligation for payment of all of its other expenses. As to the obtaining of services other than those specifically provided to the Fund by the Adviser, the Fund may employ its own personnel. For such services, it may also utilize personnel employed by the Adviser or its affiliates and, in such event, the services will be provided to the Fund at cost and the payments will be specifically approved by the Fund's Board of Directors. For the fiscal year ended October 31, 2008, the Fund paid to the Adviser a total of $120,778 with respect to such services. The Advisory Agreement became effective on January 2, 1996. The Advisory Agreement will continue in effect provided that such continuance is specifically approved at least annually by a vote of a majority of the Fund's outstanding voting securities or by the Fund's Board of Directors, including in either case approval by a majority of the Directors who are not parties to the Advisory Agreement or "interested persons," as defined by the 1940 Act, of any such party. Most recently, the Advisory Agreement was approved for an additional annual term by the Board of Directors, including majority of the Directors who are not parties to the Advisory Agreement or interested periods of any such party, at their meetings held on November 4-6, 2008. ALLIANCEBERNSTEIN GLOBAL BOND FUND, INC. For the services rendered by the Adviser under the Advisory Agreement, the Fund paid the Adviser a fee effective September 7, 2004 at an annual rate of ..50 of 1% for the first $2.5 billion, .45 of 1% of the excess of $2.5 billion up to $5 billion and .40 of 1% of the excess over $5 billion up to $5 billion as a percentage of the Fund's average daily net assets (for the year 2004, the Fund's previously effective advisory fee rate was waived to this amount after January 1, 2004). The fee is accrued daily and paid monthly. The Adviser has contractually agreed through the Fund's fiscal year ending September 30, 2009 to waive its fee and bear certain expenses so that total expenses do not exceed on an annual basis .90%, 1.60%, 1.60%, .60%, 1.10%, .85%, and .60% of aggregate daily net assets, respectively, for Class A, Class B, Class C, Advisor Class, Class R, Class K, and Class I shares. This contractual agreement automatically extends each year unless the Adviser provides written notice 60 days prior to the Fund's fiscal year end. For the fiscal years of the Fund ended September 30, 2006, 2007, and 2008, the Adviser received from the Fund advisory fees of $7,679,406, $7,324,605, and $10,057,085. Under the expense limitation undertaking $2,051,161 was waived and/or reimbursed by the Adviser for the fiscal year ended 2008. The Fund has, under the Advisory Agreement, assumed the obligation for payment of all of its other expenses. As to the obtaining of services other than those specifically provided to the Fund by the Adviser, the Fund may employ its own personnel. For such services it may also utilize personnel employed by the Adviser or its affiliates and, in such event, the services will be provided to the Fund at cost and the payments will be specifically approved by the Fund's Board of Directors. During the Fund's fiscal year ended September 30, 2008, the Fund paid to the Adviser a total of $109,575 with respect to such services. The Advisory Agreement became effective on July 22, 1992. The Advisory Agreement was approved by the unanimous vote, cast in person, by the Fund's Directors (including the Directors who are not parties to the Advisory Agreement or "interested persons", as defined in the 1940 Act, of any such party) at a meeting called for that purpose held on February 21, 1992, and by the Fund's sole shareholder on February 21, 1992. The Advisory Agreement continues in effect provided that such continuance is specifically approved at least annually by the Fund's Directors or by a majority vote of the holders of the outstanding voting securities of the Fund, and, in either case, by a majority of the Directors who are not parties to the Advisory Agreement or "interested persons" as defined in the 1940 Act of any such party. Most recently the Advisory Agreement was approved for an additional annual term by a vote, cast in person, of the Directors, including a majority of the Directors who are not parties to the Advisory Agreement or interested persons of any such party, at their meeting held on November 4-6, 2008. ALLIANCEBERNSTEIN HIGH INCOME FUND, INC. For the services rendered by the Adviser under the Advisory Agreement, the Fund paid the Adviser a fee effective September 7, 2004 at an annual rate of ..50 of 1% for the first $2.5 billion, .45 of 1% of the excess of $2.5 billion up to $5 billion, and .40 of 1% of the excess over $5 billion of the Fund's average daily net assets (for the year 2004, the Fund's previously effective advisory fee was waived to this amount after January 1, 2004). The fee is accrued daily and paid monthly. The Adviser has contractually agreed through the Fund's fiscal year ending October 31, 2009 to waive its fee and bear certain expenses so that total expenses do not exceed on an annual basis .95%, 1.65%, 1.65%, .65%, 1.15%, .90%, and .65% of aggregate daily net assets, respectively, for Class A, Class B, Class C, Advisor Class, Class R, Class K, and Class I shares. This contractual agreement automatically extends each year unless the Adviser provides written notice 60 days prior to the Fund's fiscal year end. For the fiscal years ended October 31, 2006, 2007 and 2008, the Adviser received from the Fund advisory fees of $1,864,259, $1,948,219, and $4,026,514, respectively. Under the expense limitation undertaking $805,944 was waived and/or reimbursed by the Adviser for the fiscal year ended 2008. The Fund has, under the Advisory Agreement, assumed the obligation for payment of all of its other expenses. As to the obtaining of services other than those specifically provided to the Fund by the Adviser, the Fund may employ its own personnel. For such services, it may also utilize personnel employed by the Adviser or its affiliates and, in such event, the services will be provided to the Fund at cost and the payments will be specifically approved by the Fund's Board of Directors. The Fund paid to the Adviser a total of $83,733 in respect of such services during the Fund's fiscal year ended October 31, 2008. The Advisory Agreement became effective on February 1, 1994 having been approved by the unanimous vote, cast in person, of the Fund's Directors, including the Directors who are not parties to the Advisory Agreement or interested persons as defined in the 1940 Act of any such party, at a meeting called for that purpose and held on December 7, 1993, and by the Fund's initial shareholder on January 28, 1994. The Advisory Agreement continues in effect provided that such continuance is approved at least annually by a vote of a majority of the Fund's outstanding voting securities or by the Fund's Board of Directors, including in either case, approval by a majority of the Directors who are not parties to the Advisory Agreement or interested persons of any such party as defined by the Act. Most recently, continuance of the Advisory Agreement was approved for an additional annual term by the Board of Directors, including a majority of the Directors who are not "interested persons" as defined in the 1940 Act, at their meetings held on November 4-6, 2008. The Advisory Agreement is terminable without penalty on 60 days' written notice, by a vote of a majority of the Fund's outstanding voting securities or by a vote of a majority of the Fund's Directors or by the Adviser on 60 days' written notice, and will automatically terminate in the event of its assignment. The Advisory Agreement provides that in the absence of willful misfeasance, bad faith or gross negligence on the part of the Adviser, or of reckless disregard of its obligations thereunder, the Adviser shall not be liable for any action or failure to act in accordance with its duties thereunder. The Adviser may act as an investment adviser to other persons, firms or corporations, including investment companies, and is the investment adviser to the following registered investment companies: AllianceBernstein Balanced Shares, Inc., AllianceBernstein Blended Style Series, Inc., AllianceBernstein Cap Fund, Inc., AllianceBernstein Corporate Shares, AllianceBernstein Diversified Yield Fund, Inc., AllianceBernstein Exchange Reserves, AllianceBernstein Fixed-Income Shares, Inc., AllianceBernstein Focused Growth & Income Fund, Inc., AllianceBernstein Global Bond Fund, Inc., AllianceBernstein Global Growth Fund, Inc., Inc., AllianceBernstein Global Thematic Growth Fund, Inc., AllianceBernstein Greater China '97 Fund, Inc., AllianceBernstein Growth and Income Fund, Inc., AllianceBernstein High Income Fund, Inc., AllianceBernstein Institutional Funds, Inc., AllianceBernstein International Growth Fund, Inc., AllianceBernstein Large Cap Growth Fund, Inc., AllianceBernstein Municipal Income Fund, Inc., AllianceBernstein Municipal Income Fund II, AllianceBernstein Small/Mid Cap Growth Fund, Inc., AllianceBernstein Trust, AllianceBernstein Utility Income Fund, Inc., AllianceBernstein Variable Products Series Fund, Inc., Sanford C. Bernstein Fund, Inc., Sanford C. Bernstein Fund II, Inc., The AllianceBernstein Pooling Portfolios and The AllianceBernstein Portfolios, all registered open-end investment companies; and to AllianceBernstein Global High Income Fund, Inc., AllianceBernstein Income Fund, Inc., AllianceBernstein National Municipal Income Fund, Inc., ACM Managed Dollar Income Fund, Inc., Alliance California Municipal Income Fund, Inc., Alliance New York Municipal Income Fund, Inc., and The Spain Fund, Inc., all registered closed-end investment companies. Additional Information About the Funds' Portfolio Managers - ---------------------------------------------------------- ALLIANCEBERNSTEIN INTERMEDIATE BOND PORTFOLIO The management of and investment decisions for the Fund's portfolio are made by the U.S. Investment Grade: Core Fixed Income Investment Team. Mr. Paul J. DeNoon*, Mr. Shawn E. Keegan, Mr. Joran Laird, Ms. Alison M. Martier and Mr. Greg J. Wilensky are the investment professionals(1) with the most significant responsibility for the day-to-day management of the Fund's portfolio. For additional information about the portfolio management of the Fund, see "Management of the Fund - Fund Managers" in the Fund's prospectuses. - ---------- * Effective January 30, 2009, Paul J. DeNoon replaced Jeffrey S. Phlegar as one of the investment professionals with the most significant responsibility for the day-to-day management of the Fund's portfolio. (1) Investment professionals at the Adviser include portfolio managers and research analysts. Investment professionals are part of investment groups (or teams) that service individual fund portfolios. The number of investment professionals assigned to a particular fund will vary from fund to fund. The dollar ranges of the Fund's equity securities owned directly or beneficially by the Fund's portfolio manager as of October 31, 2008 are set forth below: DOLLAR RANGE OF EQUITY SECURITIES IN THE FUND(2) ------------------------------------------------ Mr. Paul J. DeNoon [None] Mr. Shawn E. Keegan [None] Mr. Joran Laird [None] Ms. Alison M. Martier [None] Mr. Douglas J. Peebles [None] Mr. Greg J. Wilensky [None] - ---------- (2) The ranges presented above include any vested shares awarded under the Adviser's Partners Compensation Plan and/or the Profit Sharing/401(k) Plan (the "Plans"). As of October 31, 2008, the Adviser's employees had approximately $444,296,683 invested in shares of all AllianceBernstein Mutual Funds (excluding AllianceBernstein money market funds) through their interests in certain deferred compensation plans, including the Partners Compensation Plan, including both vested and unvested amounts. The following tables provide information regarding registered investment companies other than the Fund, other pooled investment vehicles and other accounts over which the Fund's portfolio managers also have day-to-day management responsibilities. The tables provide the numbers of such accounts, the total assets in such accounts and the number of accounts and total assets whose fees are based on performance. The information is provided as of October 31, 2008. - -------------------------------------------------------------------------------- REGISTERED INVESTMENT COMPANIES (excluding the Fund) - -------------------------------------------------------------------------------- Total Number of Assets of Total Total Registered Registered Number of Assets of Investment Investment Registered Registered Companies Companies Investment Investment Managed with Managed with Companies Companies Performance- Performance- Portfolio Manager Managed Managed based Fees based Fees - -------------------------------------------------------------------------------- Mr. Paul J. DeNoon 17 $16,776,000,000 1 $10,000,000 - -------------------------------------------------------------------------------- Mr. Shawn E. Keegan 4 $9,464,000,000 None None - -------------------------------------------------------------------------------- Mr. Joran Laird 4 $9,464,000,000 None None - -------------------------------------------------------------------------------- Ms. Alison M. Martier 4 $9,464,000,000 None None - -------------------------------------------------------------------------------- Mr. Douglas J. Peebles 36 $18,245,000,000 1 $10,000,000 - -------------------------------------------------------------------------------- Mr. Greg J. Wilensky 12 $12,585,000,000 1 $10,000,000 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- OTHER POOLED INVESTMENT VEHICLES - -------------------------------------------------------------------------------- Total Number of Assets Total Total Pooled of Pooled Number Assets Investment Investment of Pooled of Pooled Vehicles Vehicles Investment Investment Managed with Managed with Vehicles Vehicles Performance- Performance- Portfolio Manager Managed Managed based Fees based Fees - -------------------------------------------------------------------------------- Mr. Paul J. DeNoon 35 $9,838,000,000 1 $148,000,000 - -------------------------------------------------------------------------------- Mr. Shawn E. Keegan 6 $256,000,000 None None - -------------------------------------------------------------------------------- Mr. Joran Laird 6 $256,000,000 None None - -------------------------------------------------------------------------------- Ms. Alison M. Martier 6 $256,000,000 None None - -------------------------------------------------------------------------------- Mr. Douglas J. Peebles 73 $11,817,000,000 1 $148,000,000 - -------------------------------------------------------------------------------- Mr. Greg J. Wilensky 23 $3,435,000,000 3 $437,000,000 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- OTHER ACCOUNTS - -------------------------------------------------------------------------------- Total Number of Assets of Total Other Other Number of Accounts Accounts Other Total Assets of Managed with Managed with Accounts Other Accounts Performance- Performance- Portfolio Manager Managed Managed based Fees based Fees - -------------------------------------------------------------------------------- Mr. Paul J. DeNoon 106 $17,914,000,000 7 $2,431,000,000 - -------------------------------------------------------------------------------- Mr. Shawn E. Keegan 188 $9,106,000,000 4 $617,000,000 - -------------------------------------------------------------------------------- Mr. Joran Laird 187 $9,051,000,000 4 $617,000,000 - -------------------------------------------------------------------------------- Ms. Alison M. Martier 187 $9,051,000,000 4 $617,000,000 - -------------------------------------------------------------------------------- Mr. Douglas J. Peebles 336 $31,205,000,000 11 $3,048,000,000 - -------------------------------------------------------------------------------- Mr. Greg J. Wilensky 1,160 $17,765,000,000 5 $1,190,000,000 - -------------------------------------------------------------------------------- ALLIANCEBERNSTEIN DIVERSIFIED YIELD FUND, INC. The management of and investment decisions for the Fund's portfolio are made by the Global Fixed Income Investment Team and the Global Credit Investment Team and Global Credit Investment Team. Mr. Paul J. DeNoon, Mr. Arif Husain, Mr. Joel J. McKoan, Mr. Douglas J. Peebles and Mr. Greg J. Wilensky are the investment professionals(3) with the most significant responsibility for the day-to-day management of the Fund's portfolio. For additional information about the portfolio management of the Fund, see "Management of the Fund - Portfolio Managers" in the Fund's prospectuses. - ---------- (3) Investment professionals at the Adviser include portfolio managers and research analysts. Investment professionals are part of investment groups (or teams) that service individual fund portfolios. The number of investment professionals assigned to a particular fund will vary from fund to fund. The dollar ranges of the Fund's equity securities owned directly or beneficially by the Fund's portfolio managers are set forth below: DOLLAR RANGE OF EQUITY SECURITIES IN THE FUND(4) As of December 31, 2008 Mr. Paul J. DeNoon None Mr. Arif Husain None Mr. Joel J. McKoan None Mr. Douglas J. Peebles Over $100,000 Mr. Greg J. Wilensky None - ---------- (4) The ranges presented above include any vested shares awarded under the Adviser's Partners Compensation Plan and/or the Profit Sharing/401(k) Plan (the "Plans"). The following tables provide information regarding registered investment companies other than the Fund, other pooled investment vehicles and other accounts over which the Fund's portfolio managers also have day-to-day management responsibilities. The tables provide the numbers of such accounts, the total assets in such accounts and the number of accounts and total assets whose fees are based on performance. The information is provided as of October 31, 2008. - -------------------------------------------------------------------------------- REGISTERED INVESTMENT COMPANIES (excluding the Fund) - -------------------------------------------------------------------------------- Total Number of Assets of Total Total Registered Registered Number of Assets of Investment Investment Registered Registered Companies Companies Investment Investment Managed with Managed with Companies Companies Performance- Performance- Portfolio Manager Managed Managed based Fees based Fees - -------------------------------------------------------------------------------- Mr. Paul J. DeNoon 16 $6,707,000,000 1 $10,000,000 - -------------------------------------------------------------------------------- Mr. Arif Husain 15 $6,616,000,000 1 $10,000,000 - -------------------------------------------------------------------------------- Mr. Joel J. McKoan 11 $411,000,000 None None - -------------------------------------------------------------------------------- Mr. Douglas J. Peebles 36 $18,663,000,000 1 $10,000,000 - -------------------------------------------------------------------------------- Mr. Greg J. Wilensky 12 $13,002,000,000 1 $10,000,000 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- OTHER POOLED INVESTMENT VEHICLES - -------------------------------------------------------------------------------- Total Number of Assets of Total Total Pooled Pooled Number Assets Investment Investment of Pooled of Pooled Vehicles Vehicles Investment Investment Managed with Managed with Vehicles Vehicles Performance- Performance- Portfolio Manager Managed Managed based Fees based Fees - -------------------------------------------------------------------------------- Mr. Paul J. DeNoon 35 $9,838,000,000 1 $148,000,000 - -------------------------------------------------------------------------------- Mr. Arif Husain 33 $8,968,000,000 1 $148,000,000 - -------------------------------------------------------------------------------- Mr. Joel J. McKoan 31 $1,472,000,000 None None - -------------------------------------------------------------------------------- Mr. Douglas J. Peebles 73 $11,817,000,000 1 $148,000,000 - -------------------------------------------------------------------------------- Mr. Greg J. Wilensky 23 $3,435,000,000 3 $437,000,000 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- OTHER ACCOUNTS - -------------------------------------------------------------------------------- Total Number of Assets of Total Other Other Number of Accounts Accounts Other Total Assets of Managed with with Accounts Other Accounts Performance- Performance- Portfolio Manager Managed Managed based Fees based Fees - -------------------------------------------------------------------------------- Mr. Paul J. DeNoon 106 $17,914,000,000 7 $2,431,000,000 - -------------------------------------------------------------------------------- Mr. Arif Husain 102 $16,282,000,000 7 $2,431,000,000 - -------------------------------------------------------------------------------- Mr. Joel J. McKoan 6 $12,850,000,000 None None - -------------------------------------------------------------------------------- Mr. Douglas J. Peebles 336 $31,205,000,000 11 $3,048,000,000 - -------------------------------------------------------------------------------- Mr. Greg J. Wilensky 1,160 $17,765,000,000 5 $1,190,000,000 - -------------------------------------------------------------------------------- ALLIANCEBERNSTEIN GLOBAL BOND FUND, INC. The management of and investment decisions for the Fund's portfolio are made by the Global Fixed Income Investment Team. Mr. Paul J. DeNoon, Mr. Scott DiMaggio, Mr. Michael L. Mon, Mr. Douglas J. Peebles, Mr. Matthew S. Sheridan and Mr. Fernando Grisales are the investment professionals(5) with the most significant responsibility for the day-to-day management of the Fund's portfolio. For additional information about the portfolio management of the Fund, see "Management of the Fund - Portfolio Managers" in the Fund's prospectuses. - ---------- (5) Investment professionals at the Adviser include portfolio managers and research analysts. Investment professionals are part of investment groups (or teams) that service individual fund portfolios. The number of investment professionals assigned to a particular fund will vary from fund to fund. The dollar ranges of the Fund's equity securities owned directly or beneficially by the Fund's portfolio managers are set forth below: DOLLAR RANGE OF EQUITY SECURITIES IN THE FUND As of September 30, 2008 Mr. Paul J. DeNoon None Mr. Scott DiMaggio None Mr. Michael L. Mon None Mr. Douglas J. Peebles None Mr. Matthew S. Sheridan None Mr. Fernando Grisales None As of September 30, 2008, employees of the Adviser had approximately $552,642,414 invested in shares of all AllianceBernstein Mutual Funds (excluding AllianceBernstein money market funds) through their interests in certain deferred compensation plans, including the Partners Compensation Plan, including both vested and unvested amounts. The following tables provide information regarding registered investment companies other than the Fund, other pooled investment vehicles and other accounts over which the Fund's portfolio managers also have day-to-day management responsibilities. The tables provide the numbers of such accounts, the total assets in such accounts and the number of accounts and total assets whose fees are based on performance. The information is provided as of September 30, 2008. - -------------------------------------------------------------------------------- REGISTERED INVESTMENT COMPANIES (excluding the Fund) - -------------------------------------------------------------------------------- Total Number of Assets of Total Total Registered Registered Number of Assets of Investment Investment Registered Registered Companies Companies Investment Investment Managed with Managed with Companies Companies Performance- Performance- Portfolio Manager Managed Managed based Fees based Fees - -------------------------------------------------------------------------------- Mr. Paul J. DeNoon 15 $5,870,000,000 1 $12,000,000 - -------------------------------------------------------------------------------- Mr. Scott DiMaggio 15 $7,561,000,000 None None - -------------------------------------------------------------------------------- Mr. Michael L. Mon 12 $5,729,000,000 None None - -------------------------------------------------------------------------------- Mr. Douglas J. Peebles 35 $19,379,000,000 1 $12,000,000 - -------------------------------------------------------------------------------- Mr. Matthew S. Sheridan 12 $5,729,000,000 None None - -------------------------------------------------------------------------------- Mr. Fernando Grisales 12 $5,729,000,000 None None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- OTHER POOLED INVESTMENT VEHICLES - -------------------------------------------------------------------------------- Total Number of Assets of Total Total Pooled Pooled Number Assets Investment Investment of Pooled of Pooled Vehicles Vehicles Investment Investment Managed with Managed with Vehicles Vehicles Performance- Performance- Portfolio Manager Managed Managed based Fees based Fees - -------------------------------------------------------------------------------- Mr. Paul J. DeNoon 36 $13,607,000,000 1 $171,000,000 - -------------------------------------------------------------------------------- Mr. Scott DiMaggio 25 $11,403,000,000 None None - -------------------------------------------------------------------------------- Mr. Michael L. Mon 26 $12,534,000,000 None None - -------------------------------------------------------------------------------- Mr. Douglas J. Peebles 67 $15,857,000,000 1 $171,000,000 - -------------------------------------------------------------------------------- Mr. Matthew S. Sheridan 26 $12,534,000,000 None None - -------------------------------------------------------------------------------- Mr. Fernando Grisales 26 $12,534,000,000 None None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- OTHER ACCOUNTS - -------------------------------------------------------------------------------- Total Number of Assets of Total Other Other Number of Accounts Accounts Other Total Assets of Managed with Managed with Accounts Other Accounts Performance- Performance- Portfolio Manager Managed Managed based Fees based Fees - -------------------------------------------------------------------------------- Mr. Paul J. DeNoon 105 $19,207,000,000 5 $2,600,000,000 - -------------------------------------------------------------------------------- Mr. Scott DiMaggio 130 $20,567,000,000 5 $2,600,000,000 - -------------------------------------------------------------------------------- Mr. Michael L. Mon 100 $18,368,000,000 5 $2,600,000,000 - -------------------------------------------------------------------------------- Mr. Douglas J. Peebles 331 $34,171,000,000 9 $3,246,000,000 - -------------------------------------------------------------------------------- Mr. Matthew S. Sheridan 100 $18,368,000,000 5 $2,600,000,000 - -------------------------------------------------------------------------------- Mr. Fernando Grisales 100 $18,368,000,000 5 $2,600,000,000 - -------------------------------------------------------------------------------- ALLIANCEBERNSTEIN HIGH INCOME FUND, INC. The management of and investment decisions for the Fund's portfolio are made by the Global Fixed Income Team and Global Credit Investment Team. Mr. Paul DeNoon, Mr. Fernando Grisales, Mr. Gershon Distenfeld, Mr. Douglas Peebles and Mr. Matthew Sheridan are the investment professionals(6) with the most significant responsibility for the day-to-day management of the Fund's portfolio. For additional information about the portfolio management of the Fund, see "Management of the Fund - Portfolio Managers" in the Fund's prospectus. - ---------- (6) Investment professionals at the Adviser include portfolio managers and research analysts. Investment professionals are part of investment groups (or teams) that service individual fund portfolios. The number of investment professionals assigned to a particular fund will vary from fund to fund. The dollar ranges of the Fund's equity securities owned directly or beneficially by the Fund's portfolio managers are set forth below: DOLLAR RANGE OF EQUITY SECURITIES IN THE FUND(7) ------------------------------------------------ Mr. Paul J. DeNoon None Mr. Fernando Grisales None Mr. Gershon Distenfeld None Mr. Douglas J. Peebles None Mr. Matthew S. Sheridan None - ---------- (7) The ranges presented above include any vested shares awarded under the Adviser's Partners Compensation Plan (the "Plan"). The following tables provide information regarding registered investment companies other than the Fund, other pooled investment vehicles and other accounts over which the Fund's portfolio managers also has day-to-day management responsibilities. The tables provide the numbers of such accounts, the total assets in such accounts and the number of accounts and total assets whose fees are based on performance. The information is provided as of October 31, 2008. - -------------------------------------------------------------------------------- REGISTERED INVESTMENT COMPANIES (excluding the Fund) - -------------------------------------------------------------------------------- Total Number of Assets of Total Total Registered Registered Number of Assets of Investment Investment Registered Registered Companies Companies Investment Investment Managed with Managed with Companies Companies Performance- Performance- Portfolio Manager Managed Managed based Fees based Fees - -------------------------------------------------------------------------------- Mr. Paul J. DeNoon 16 $6,149,000,000 1 $10,000,000 - -------------------------------------------------------------------------------- Mr. Fernando Grisales 1 $91,000,000 None None - -------------------------------------------------------------------------------- Mr. Gershon Distenfeld 15 $2,005,000,000 None None - -------------------------------------------------------------------------------- Mr. Douglas J. Peebles 36 $18,105,000,000 1 $10,000,000 - -------------------------------------------------------------------------------- Mr. Matthew S. Sheridan 13 $6,029,000,000 None None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- OTHER POOLED INVESTMENT VEHICLES - -------------------------------------------------------------------------------- Total Number of Assets of Total Total Pooled Pooled Number Assets Investment Investment of Pooled of Pooled Vehicles Vehicles Investment Investment Managed with Managed with Vehicles Vehicles Performance- Performance- Portfolio Manager Managed Managed based Fees based Fees - -------------------------------------------------------------------------------- Mr. Paul J. DeNoon 35 $9,838,000,000 1 $148,000,000 - -------------------------------------------------------------------------------- Mr. Fernando Grisales 2 $870,000,000 None None - -------------------------------------------------------------------------------- Mr. Gershon Distenfeld 29 $296,000,000 None None - -------------------------------------------------------------------------------- Mr. Douglas J. Peebles 73 $11,817,000,000 1 $148,000,000 - -------------------------------------------------------------------------------- Mr. Matthew S. Sheridan 26 $8,895,000,000 None None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- OTHER ACCOUNTS - -------------------------------------------------------------------------------- Total Number of Assets of Total Other Other Number of Accounts Accounts Other Total Assets of Managed with Managed with Accounts Other Accounts Performance- Performance- Portfolio Manager Managed Managed based Fees based Fees - -------------------------------------------------------------------------------- Mr. Paul J. DeNoon 106 $17,914,000,000 7 $2,431,000,000 - -------------------------------------------------------------------------------- Mr. Fernando Grisales 4 $1,632,000,000 None None - -------------------------------------------------------------------------------- Mr. Gershon Distenfeld 42 $4,185,000,000 None None - -------------------------------------------------------------------------------- Mr. Douglas J. Peebles 336 $31,205,000,000 11 $3,048,000,000 - -------------------------------------------------------------------------------- Mr. Matthew S. Sheridan 101 $17,220,000,000 7 $2,431,000,000 - -------------------------------------------------------------------------------- Investment Professional Conflict of Interest Disclosure - ------------------------------------------------------- As an investment adviser and fiduciary, the Adviser owes its clients and shareholders an undivided duty of loyalty. We recognize that conflicts of interest are inherent in our business and accordingly have developed policies and procedures (including oversight monitoring) reasonably designed to detect, manage and mitigate the effects of actual or potential conflicts of interest in the area of employee personal trading, managing multiple accounts for multiple clients, including AllianceBernstein Mutual Funds, and allocating investment opportunities. Investment professionals, including portfolio managers and research analysts, are subject to the above-mentioned policies and oversight monitoring to ensure that all clients are treated equitably. We place the interests of our clients first and expect all of our employees to meet their fiduciary duties. Employee Personal Trading. The Adviser has adopted a Code of Business Conduct and Ethics that is designed to detect and prevent conflicts of interest when investment professionals and other personnel of the Adviser own, buy or sell securities which may be owned by, or bought or sold for, clients. Personal securities transactions by an employee may raise a potential conflict of interest when an employee owns or trades in a security that is owned or considered for purchase or sale by a client, or recommended for purchase or sale by an employee to a client. Subject to the reporting requirements and other limitations of its Code of Business Conduct and Ethics, the Adviser permits its employees to engage in personal securities transactions, and also allows them to acquire investments in the AllianceBernstein Mutual Funds through direct purchase and/or notionally in connection with deferred incentive compensation awards. The Adviser's Code of Ethics and Business Conduct requires disclosure of all personal accounts and maintenance of brokerage accounts with designated broker-dealers approved by the Adviser. The Code also requires preclearance of all securities transactions (except transactions in open-end mutual funds) and imposes a one-year holding period for securities purchased by employees to discourage short-term trading. Managing Multiple Accounts for Multiple Clients. The Adviser has compliance policies and oversight monitoring in place to address conflicts of interest relating to the management of multiple accounts for multiple clients. Conflicts of interest may arise when an investment professional has responsibilities for the investments of more than one account because the investment professional may be unable to devote equal time and attention to each account. The investment professional or investment professional teams for each client may have responsibilities for managing all or a portion of the investments of multiple accounts with a common investment strategy, including other registered investment companies, unregistered investment vehicles, such as hedge funds, pension plans, separate accounts, collective trusts and charitable foundations. Among other things, the Adviser's policies and procedures provide for the prompt dissemination to investment professionals of initial or changed investment recommendations by analysts so that investment professionals are better able to develop investment strategies for all accounts they manage. In addition, investment decisions by investment professionals are reviewed for the purpose of maintaining uniformity among similar accounts and ensuring that accounts are treated equitably. No investment professional that manages client accounts carrying performance fees is compensated directly or specifically for the performance of those accounts. Investment professional compensation reflects a broad contribution in multiple dimensions to long-term investment success for our clients and is not tied specifically to the performance of any particular client's account, nor is it directly tied to the level or change in level of assets under management. Allocating Investment Opportunities. The Adviser has policies and procedures intended to address conflicts of interest relating to the allocation of investment opportunities. These policies and procedures are designed to ensure that information relevant to investment decisions is disseminated promptly within its portfolio management teams and investment opportunities are allocated equitably among different clients. The investment professionals at the Adviser routinely are required to select and allocate investment opportunities among accounts. Fund holdings, position sizes, and industry and sector exposures tend to be similar across similar accounts, which minimizes the potential for conflicts of interest relating to the allocation of investment opportunities. Nevertheless, investment opportunities may be allocated differently among accounts due to the particular characteristics of an account, such as size of the account, cash position, tax status, risk tolerance and investment restrictions or for other reasons. The Adviser's procedures are also designed to prevent potential conflicts of interest that may arise when the Adviser has a particular financial incentive, such as a performance-based management fee, relating to an account. An investment professional may perceive that he or she has an incentive to devote more time to developing and analyzing investment strategies and opportunities or allocating securities preferentially to accounts for which the Adviser could share in investment gains. To address these conflicts of interest, the Adviser's policies and procedures require, among other things, the prompt dissemination to investment professionals of any initial or changed investment recommendations by analysts; the aggregation of orders to facilitate best execution for all accounts; price averaging for all aggregated orders; objective allocation for limited investment opportunities (e.g., on a rotational basis) to ensure fair and equitable allocation among accounts; and limitations on short sales of securities. These procedures also require documentation and review of justifications for any decisions to make investments only for select accounts or in a manner disproportionate to the size of the account. Fund Manager Compensation - ------------------------- The Adviser's compensation program for investment professionals is designed to be competitive and effective in order to attract and retain the highest caliber employees. The compensation program for investment professionals is designed to reflect their ability to generate long-term investment success for our clients, including shareholders of the AllianceBernstein Mutual Funds. Investment professionals do not receive any direct compensation based upon the investment returns of any individual client account, nor is compensation tied directly to the level or change in level of assets under management. Investment professionals' annual compensation is comprised of the following: (i) Fixed base salary: This is generally the smallest portion of compensation. The base salary is a relatively low, fixed salary within a similar range for all investment professionals. The base salary is determined at the outset of employment based on level of experience, does not change significantly from year-to-year and hence, is not particularly sensitive to performance. (ii) Discretionary incentive compensation in the form of an annual cash bonus: The Adviser's overall profitability determines the total amount of incentive compensation available to investment professionals. This portion of compensation is determined subjectively based on qualitative and quantitative factors. In evaluating this component of an investment professional's compensation, the Adviser considers the contribution to his/her team or discipline as it relates to that team's overall contribution to the long-term investment success, business results and strategy of the Adviser. Quantitative factors considered include, among other things, relative investment performance (e.g., by comparison to competitor or peer group funds or similar styles of investments, and appropriate, broad-based or specific market indices), and consistency of performance. There are no specific formulas used to determine this part of an investment professional's compensation and the compensation is not tied to any pre-determined or specified level of performance. The Adviser also considers qualitative factors such as the complexity and risk of investment strategies involved in the style or type of assets managed by the investment professional; success of marketing/business development efforts and client servicing; seniority/length of service with the firm; management and supervisory responsibilities; and fulfillment of the Adviser's leadership criteria. (iii) Discretionary incentive compensation in the form of awards under the Adviser's Partners Compensation Plan ("deferred awards"): The Adviser's overall profitability determines the total amount of deferred awards available to investment professionals. The deferred awards are allocated among investment professionals based on criteria similar to those used to determine the annual cash bonus. There is no fixed formula for determining these amounts. Deferred awards, for which there are various investment options, vest over a four-year period and are generally forfeited if the employee resigns or the Adviser terminates his/her employment. Investment options under the deferred awards plan include many of the same AllianceBernstein Mutual Funds offered to mutual fund investors, thereby creating a close alignment between the financial interests of the investment professionals and those of the Adviser's clients and mutual fund shareholders with respect to the performance of those mutual funds. The Adviser also permits deferred award recipients to allocate up to 50% of their award to investments in the Adviser's publicly traded equity securities.(8) - ---------- (8) Prior to 2002, investment professional compensation also included discretionary long-term incentive in the form of restricted grants of the Adviser's Master Limited Partnership Units. (iv) Contributions under the Adviser's Profit Sharing/401(k) Plan: The contributions are based on the Adviser's overall profitability. The amount and allocation of the contributions are determined at the sole discretion of the Adviser. - -------------------------------------------------------------------------------- EXPENSES OF THE FUNDS - -------------------------------------------------------------------------------- Distribution Services Agreement - ------------------------------- Each Fund has entered into a Distribution Services Agreement (the "Agreement") with ABI, the Fund's principal underwriter, to permit ABI to distribute the Fund's shares and to permit the Fund to pay distribution services fees to defray expenses associated with distribution of its Class A shares, Class B shares, Class C shares, Class R shares and Class K shares in accordance with a plan of distribution that is included in the Agreement and that has been duly adopted and approved in accordance with Rule 12b-1 adopted by the Commission under the 1940 Act (the "Rule 12b-1 Plan"). During the fiscal year ended October 31, 2008 for Intermediate Bond, Diversified Yield and High Income and during the fiscal year ended September 30, 2008 for Global Bond, with respect to Class A shares, the distribution services fees for expenditures payable to ABI amounted to $1,259,146, $150,264, $1,708,659 and $4,165,831, respectively, which constituted .30%, ,30%, .30% and ..30%, annually, of the respective Fund's aggregate average daily net assets attributable to Class A shares during the fiscal year. The Adviser made payments from its own resources aggregating $871,559, $555,682, $1,093,382 and $2,336,510, respectively. For the fiscal year ended October 31, 2008 for Intermediate Bond, Diversified Yield and High Income and during the fiscal year ended September 30, 2008 for Global Bond, expenses incurred by each Fund and costs allocated to each Fund in connection with activities primarily intended to result in the sale of Class A shares were as follows: Category of Intermediate Diversified Global Bond High Income Expense Bond Yield Advertising $ 0 $ 0 $ 0 $ 0 Printing and Mailing of Prospectuses to Persons Other Than Current Shareholders $ 7,943 $ 2,618 $ 19,495 $ 10,780 Compensation to Broker-Dealers and Other Financial Intermediaries (excluding ABI) $ 1,321,665 $ 283,355 $ 4,154,820 $ 1,722,312 Compensation to ABI $ 369,278 $ 188,510 $ 651,144 $ 452,467 Compensation to Sales Personnel $ 28,050 $ 25,997 $ 963,272 $ 95,150 Other (includes printing of sales literature, travel, entertainment, due diligence and other promotional expenses) $ 403,779 $ 205,466 $ 713,610 $ 521,332 Totals $ 2,130,705 $ 705,946 $ 6,502,341 $ 2,802,041 During the fiscal year ended October 31, 2008 for Intermediate Bond, Diversified Yield and High Income and during the fiscal year ended September 30, 2008 for Global Bond, with respect to Class B shares, the distribution services fees for expenditures payable to ABI amounted to $478,630, $214,969, $781,900 and $1,585,541, respectively, which constituted 1.0%, 1.0%, 1.0% and 1.0%, annually, of the respective Fund's aggregate average daily net assets attributable to Class B shares during the fiscal year. The Adviser made payments from its own resources aggregating $0, $0, $3,018,557 and $0, respectively. For Intermediate Bond, Diversified Yield, and Global Bond, $263,836, $63,250, $78,292, respectively, were used to offset the distribution services fees paid in prior years. For the fiscal year ended October 31, 2008 for Intermediate Bond, Diversified Yield and High Income and during the fiscal year ended September 30, 2008 for Global Bond, expenses incurred by each Fund and costs allocated to each Fund in connection with activities primarily intended to result in the sale of Class B shares were as follows: Category of Intermediate Diversified Expense Bond Yield Global Bond High Income Advertising $ 0 $ 0 $ 0 $ 0 Printing and Mailing of Prospectuses to Persons Other Than Current Shareholders $ 1,857 $ 622 $ 2,910 $ 1,583 Compensation to Broker-Dealers and Other Financial Intermediaries (excluding ABI) $ 153,343 $ 112,041 $ 1,389,411 $ 3,784,314 Compensation to ABI $ 27,500 $ 14,825 $ 34,046 $ 4,937 Compensation to Sales Personnel $ 1,455 $ 2,099 $ 44,041 $ 2,118 Interest on Financing $ 0 $ 0 $ 0 $ 0 Other (includes printing of sales literature, travel, entertainment, due diligence and other promotional expenses) $ 30,639 $ 22,132 $ 36,841 $ 7,505 Totals $ 214,794 $ 151,719 $ 1,507,249 $ 3,800,457 During the fiscal year ended October 31, 2008 for Intermediate Bond, Diversified Yield and High Income and during the fiscal year ended September 30, 2008 for Global Bond, with respect to Class C shares, the distribution services fees for expenditures payable to ABI amounted to $585,483, $137,893, $1,481,266 and $4,376,726, respectively, which constituted 1.0%, 1.0%, 1.0% and 1.0%, annually, of the respective Fund's aggregate average daily net assets attributable to Class C shares during the fiscal year. The Adviser made payments from its own resources aggregating $38,020, $42,731, $134,017 and $1,489,967, respectively. For the fiscal year ended October 31, 2008 for Intermediate Bond, Diversified Yield and High Income and during the fiscal year ended September 30, 2008 for Global Bond, expenses incurred by each Fund and costs allocated to each Fund in connection with activities primarily intended to result in the sale of Class C shares were as follows: Category of Intermediate Diversified Expense Bond Yield Global Bond High Income Advertising $ 0 $ 0 $ 0 $ 0 Printing and Mailing of Prospectuses to Persons Other Than Current Shareholders $ 897 $ 568 $ 5,729 $ 1,146 Compensation to Broker-Dealers and Other Financial Intermediaries (excluding ABI) $ 564,343 $ 131,853 $ 5,033,043 $ 1,554,382 Compensation to ABI $ 24,216 $ 20,816 $ 243,788 $ 19,732 Compensation to Sales Personnel $ 1,284 $ 1,662 $ 324,918 $ 10,463 Interest on Financing $ 0 $ 0 $ 0 $ 0 Other (includes printing of sales literature, travel, entertainment, due diligence and other promotional expenses) $ 32,763 $ 25,725 $ 259,215 $ 29,560 Totals $ 623,503 $ 180,624 $ 5,866,693 $ 1,615,283 During the fiscal year ended October 31, 2008 for Intermediate Bond, Diversified Yield and High Income and during the fiscal year ended September 30, 2008 for Global Bond, with respect to Class R shares, the distribution services fees for expenditures payable to ABI amounted to $3,213, $1,104, $7,505 and $185, respectively, which constituted .50%, .50%, .50% and .50%, annually, of the respective Fund's aggregate average daily net assets attributable to Class R shares during the fiscal year. The Adviser made payments from its own resources aggregating $4,856, $7,212, $2,342 and $90, respectively. For the fiscal year ended October 31, 2008 for Intermediate Bond, Diversified Yield and High Income and during the fiscal year ended September 30, 2008 for Global Bond, expenses incurred by each Fund and costs allocated to each Fund in connection with activities primarily intended to result in the sale of Class R shares were as follows: Category of Intermediate Diversified Expense Bond Yield Global Bond High Income Advertising $ 0 $ 0 $ 0 $ 0 Printing and Mailing of Prospectuses to Persons Other Than Current Shareholders $ 69 $ 23 $ 0 $ 0 Compensation to Broker-Dealers and Other Financial Intermediaries (excluding ABI) $ 3,819 $ 2,910 $ 167 $ 7,906 Compensation to ABI $ 1,846 $ 1,933 $ 35 $ 237 Compensation to Sales Personnel $ 197 $ 199 $ 0 $ 1,042 Interest on Financing $ 0 $ 0 $ 0 $ 0 Other (includes printing of sales literature, travel, entertainment, due diligence and other promotional expenses) $ 2,138 $ 3,251 $ 73 $ 662 Totals $ 8,069 $ 8,316 $ 275 $ 9,847 During the fiscal year ended October 31, 2008 for Intermediate Bond, Diversified Yield and High Income and during the fiscal year ended September 30, 2008 for Global Bond, with respect to Class K shares, the distribution services fees for expenditures payable to ABI amounted to $16,625, $279, $1,391 and $40, respectively, which constituted .25%, .25%, .25% and .25%, annually, of the respective Fund's aggregate average daily net assets attributable to Class K shares during the fiscal year. The Adviser made payments from its own resources aggregating $15,962, $584, $1,316 and $17, respectively. For the fiscal year ended October 31, 2008 for Intermediate Bond, Diversified Yield and High Income and during the fiscal year ended September 30, 2008 for Global Bond, expenses incurred by each Fund and costs allocated to each Fund in connection with activities primarily intended to result in the sale of Class K shares were as follows: Category of Intermediate Diversified Expense Bond Yield Global Bond High Income Advertising $ 0 $ 0 $ 0 $ 0 Printing and Mailing of Prospectuses to Persons Other Than Current Shareholders $ 43 $ 5 $ 0 $ 0 Compensation to Broker-Dealers and Other Financial Intermediaries (excluding ABI) $ 25,548 $ 378 $ 31 $ 1,758 Compensation to ABI $ 5,197 $ 207 $ 10 $ 162 Compensation to Sales Personnel $ 445 $ 41 $ 0 $ 330 Interest on Financing $ 0 $ 0 $ 0 $ 0 Other (includes printing of sales literature, travel, entertainment, due diligence and other promotional expenses) $ 6,551 $ 232 $ 16 $ 457 Totals $ 32,587 $ 863 $ 57 $ 2,707 Distribution services fees are accrued daily and paid monthly and charged as expenses of each Fund as accrued. The distribution services fees attributable to the Class B, Class C, Class R and Class K shares are designed to permit an investor to purchase such shares through broker-dealers without the assessment of an initial sales charge and at the same time to permit ABI to compensate broker-dealers in connection with the sale of such shares. In this regard the purpose and function of the combined contingent deferred sales charge ("CDSC") and respective distribution services fee on the Class B shares and Class C shares and distribution services fees on the Class R shares and the Class K shares are the same as those of the initial sales charge and distribution services fee with respect to the Class A shares in that in each case the sales charge and/or distribution services fee provide for the financing of the distribution of the relevant class of the Fund's shares. With respect to Class A shares of each Fund, distribution expenses accrued by ABI in one fiscal year may not be paid from distribution services fees received from the Fund in subsequent fiscal years. ABI's compensation with respect to Class B, Class C, Class R and Class K shares under the Rule 12b-1 Plan is directly tied to the expenses incurred by ABI. Actual distribution expenses for Class B, Class C, Class R and Class K shares for any given year, however, will probably exceed the distribution services fees payable under the Rule 12b-1 Plan with respect to the class involved and, in the case of Class B and Class C shares, payments received from CDSCs. The excess will be carried forward by ABI and reimbursed from distribution services fees payable under the Rule 12b-1 Plan with respect to the class involved and, in the case of Class B and Class C shares, payments subsequently received through CDSCs, so long as the Rule 12b-1 Plan is in effect. For the fiscal year ended October 31, 2008 for Intermediate Bond, Diversified Yield and High Income and during the fiscal year ended September 30, 2008 for Global Bond, unreimbursed distribution expenses incurred and carried over of reimbursement in future years in respect of the Class B, Class C, Class R and Class K shares of each Fund were as follows:
Intermediate Diversified Class Bond Yield Global Bond High Income Class B $ 36,818,700 $ 8,496,687 $ 27,858,582 $ 33,876,921 (% of the net assets of Class B) 117.98% 62.17% 20.20% 61.90% Class C $ 6,997,456 $ 1,810,545 $ 11,386,920 $ 11,085,776 (% of the net assets of Class C) 13.53% 16.10% 2.31% 9.85% Class R $ 69,749 $ 12,453 $ 94 $ 32,504 (% of the net assets of Class R) 96.02% 4.94% .08% 2.25% Class K $ 18,191 $ 12,922 $ 18 $ 6,435 (% of the net assets of Class K) 0.48% 60.60% .03% .85%
The Rule 12b-1 Plan is in compliance with rules of the Financial Industry Regulatory Authority ("FINRA"), which effectively limit the annual asset-based sales charges and service fees that a mutual fund may pay on a class of shares to .75% and .25%, respectively, of the average annual net assets attributable to that class. The rules also limit the aggregate of all front-end, deferred and asset-based sales charges imposed with respect to a class of shares by a mutual fund that also charges a service fee to 6.25% of cumulative gross sales of shares of that class, plus interest at the prime rate plus 1% per annum. In approving the Rule 12b-1 Plan, the Directors of each Fund determined that there was a reasonable likelihood that the Rule 12b-1 Plan would benefit the Funds and its shareholders. The distribution services fee of a particular class will not be used to subsidize the provision of distribution services with respect to any other class. The Adviser may from time to time and from its own funds or such other resources as may be permitted by rules of the Commission make payments for distribution services to ABI; the latter may in turn pay part or all of such compensation to brokers or other persons for their distribution assistance. The Agreement will continue in effect provided that such continuance is specifically approved at least annually by the Directors of the Funds or by vote of the holders of a majority of the outstanding voting securities (as defined in the 1940 Act) of that class, and in either case, by a majority of the Directors of the Funds who are not parties to this Agreement or interested persons, as defined in the 1940 Act, of any such party (other than as directors of the Fund) and who have no direct or indirect financial interest in the operation of the Rule 12b-1 Plan or any agreement related thereto. Most recently the Directors approved the continuance of the Agreement for an additional annual term at their meetings held on November 4-6, 2008. All material amendments to the Agreement will become effective only upon approval as provided in the preceding paragraph, and the 12b-1 Plan may not be amended in order to increase materially the costs that the Fund may bear pursuant to the Agreement without the approval of a majority of the holders of the outstanding voting shares of the Fund or the class or classes of the Fund affected. The Agreement may be terminated (a) by the Fund without penalty at any time by a majority vote of the holders of the Fund's outstanding voting securities, voting separately by class, or by a majority vote of the disinterested Directors or (b) by ABI. To terminate the Agreement, any party must give the other parties 60 days' written notice; to terminate the Rule 12b-1 Plan only, the Fund is not required to give prior notice to ABI. The Agreement will terminate automatically in the event of its assignment. In the event that the Rule 12b-1 Plan is terminated by either party or not continued with respect to the Class A, Class B, Class C, Class R or Class K shares, (i) no distribution services fees (other than current amounts accrued but not yet paid) would be owed by the Fund to ABI with respect to that class and (ii) the Fund would not be obligated to pay ABI for any amounts expended under the Agreement not previously recovered by ABI from distribution services fees in respect of shares of such class or through deferred sales charges. Transfer Agency Agreement - ------------------------- ABIS, an indirect wholly-owned subsidiary of the Adviser, located principally at 8000 IH 10 W, 4th Floor, San Antonio, Texas 78230, acts as the Fund's registrar, transfer agent and dividend-disbursing agent for a fee based upon the number of account holders for each of the Class A, Class B, Class C, Class R, Class K, Class I and Advisor Class shares of the Funds plus reimbursement for out-of-pocket expenses. The transfer agency fee with respect to the Class B shares and Class C shares is higher than the transfer agency fee with respect to the Class A, Class R, Class K, Class I and Advisor Class shares. For the fiscal year ended October 31, 2008 for Intermediate Bond, Diversified Yield and High Income and for the fiscal year ended September 30, 2008 for Global Bond, the Fund paid ABIS $618,770, $55,155, $607,506 and $954,060, respectively, for transfer agency services. ABIS acts as the transfer agent for each Fund. ABIS registers the transfer, issuance and redemption of Fund shares and disburses dividends and other distributions to Fund shareholders. Many Fund shares are owned by selected dealers or selected agents (as defined below), financial intermediaries or other financial representatives ("financial intermediaries") for the benefit of their customers. In those cases, the Funds often do not maintain an account for you. Thus, some or all of the transfer agency functions for these accounts are performed by the financial intermediaries. Each Fund, ABI and/or the Adviser pay to these financial intermediaries, including those that sell shares of the AllianceBernstein Mutual Funds, fees for sub-accounting or shareholder servicing in amounts ranging up to $[_____] per customer fund account per annum. Retirement plans may also hold Fund shares in the name of the plan, rather than the participant. Plan recordkeepers, who may have affiliated financial intermediaries who sell shares of the Fund, may be paid for each plan participant fund account in amounts up to $[_____] per account per annum and/or up to [________]% per annum of the average daily assets held in the plan. To the extent any of these payments for sub-accounting or shareholder servicing or retirement plan accounts are made by the Fund, they are included in your Prospectus in the Fund expense tables under "Fees and Expenses of the Funds." In addition, financial intermediaries may be affiliates of entities that receive compensation from the Adviser or ABI for maintaining retirement plan "platforms" that facilitate trading by affiliated and non-affiliated financial intermediaries and recordkeeping for retirement plans. Because financial intermediaries and plan recordkeepers may be paid varying amounts per class for sub-accounting or shareholder servicing, the service requirements of which may also vary by class, this may create an additional incentive for financial intermediaries and their financial advisors to favor one fund complex over another or one class of shares over another. Code of Ethics and Proxy Voting and Procedures - ---------------------------------------------- The Funds, the Adviser and ABI have each adopted codes of ethics pursuant to Rule 17j-1 of the 1940 Act. These codes of ethics permit personnel subject to the codes to invest in securities, including securities that may be purchased or held by the Fund. Information regarding how each Fund voted proxies related to portfolio securities during the most recent 12-month period ended June 30, 2008 is available (1) without charge, upon request, by calling (800) 277-4618; or on or through the Fund's website at www.AllianceBernstein.com; or both; and (2) on the Commission's website at www.sec.gov. - -------------------------------------------------------------------------------- PURCHASE OF SHARES - -------------------------------------------------------------------------------- The following information supplements that set forth in your Prospectus under "Investing in the Fund." Effective January 31, 2009, sales of Class B shares of the Funds to new investors were suspended. Class B shares are only issued (i) upon the exchange of Class B shares from another AllianceBernstein Fund, (ii) for purposes of dividend reinvestment, (iii) through the Fund's Automatic Investment Program for accounts that established the Program prior to January 31, 2009, and (iv) for purchases of additional Class B shares by Class B shareholders as of January 31, 2009. The ability to establish a new Automatic Investment Program for accounts containing Class B shares will be suspended as of January 31, 2009. General - ------- Shares of the Funds are offered on a continuous basis at a price equal to their NAV plus an initial sales charge at the time of purchase ("Class A shares"), with a CDSC ("Class B shares"), or without any initial sales charge and, as long as the shares are held for one year or more, without any CDSC ("Class C shares"), to group retirement plans, as defined below, eligible to purchase Class R shares, without any initial sales charge or CDSC ("Class R shares"), to group retirement plans eligible to purchase Class K shares, without any initial sales charge or CDSC ("Class K shares"), to group retirement plans and certain investment advisory clients of, and certain other persons associated with, the Adviser and its affiliates eligible to purchase Class I shares, without any initial sales charge or CDSC ("Class I shares"), or to investors eligible to purchase Advisor Class shares, without any initial sales charge or CDSC ("Advisor Class shares"), in each case as described below. "Group retirement plans" are defined as 401(k) plans, 457 plans, employer-sponsored 403(b) plans, profit sharing and money purchase pension plans, defined benefit plans, and non-qualified deferred compensation plans where plan level or omnibus accounts are held on the books of the Fund. All of the classes of shares of the Funds, except the Class I and Advisor Class shares, are subject to Rule 12b-1 asset-based sales charges. Shares of the Funds that are offered subject to a sales charge are offered through (i) investment dealers that are members of FINRA and have entered into selected dealer agreements with ABI ("selected dealers"), (ii) depository institutions and other financial intermediaries or their affiliates, that have entered into selected agent agreements with ABI ("selected agents") and (iii) ABI. Investors may purchase shares of the Funds either through financial intermediaries or directly through ABI. A transaction, service, administrative or other similar fee may be charged by your financial intermediary with respect to the purchase, sale or exchange of shares made through the financial intermediary. Such financial intermediary may also impose requirements with respect to the purchase, sale or exchange of shares that are different from, or in addition to, those imposed by the Fund, including requirements as to the classes of shares available through that financial intermediary and the minimum initial and subsequent investment amounts. A Fund is not responsible for, and has no control over, the decision of any financial intermediary to impose such differing requirements. Sales personnel of selected dealers and agents distributing the Fund's shares may receive differing compensation for selling different classes of shares. In order to open your account, the Fund or your financial intermediary is required to obtain certain information from you for identification purposes. This information may include name, date of birth, permanent residential address and social security/taxpayer identification number. It will not be possible to establish your account without this information. If the Fund or your financial intermediary is unable to verify the information provided, your account may be closed, and other appropriate action may be taken as permitted by law. A Fund's Board of Directors has adopted policies and procedures designed to detect and deter frequent purchases and redemptions of Fund shares or excessive or short-term trading that may disadvantage long-term Fund shareholders. These policies are described below. A Fund reserves the right to restrict, reject or cancel, without any prior notice, any purchase or exchange order for any reason, including any purchase or exchange order accepted by any shareholder's financial intermediary. Risks Associated With Excessive Or Short-Term Trading Generally. While the Funds will try to prevent market timing by utilizing the procedures described below, these procedures may not be successful in identifying or stopping excessive or short-term trading in all circumstances. By realizing profits through short-term trading, shareholders that engage in rapid purchases and sales or exchanges of the Fund's shares dilute the value of shares held by long-term shareholders. Volatility resulting from excessive purchases and sales or exchanges of Fund shares, especially involving large dollar amounts, may disrupt efficient portfolio management. In particular, a Fund may have difficulty implementing its long-term investment strategies if it is forced to maintain a higher level of its assets in cash to accommodate significant short-term trading activity. Excessive purchases and sales or exchanges of the Fund's shares may force the Fund to sell portfolio securities at inopportune times to raise cash to accommodate short-term trading activity. In addition, the Fund may incur increased expenses if one or more shareholders engage in excessive or short-term trading. For example, the Fund may be forced to liquidate investments as a result of short-term trading and incur increased brokerage costs and realization of taxable capital gains without attaining any investment advantage. Similarly, the Fund may bear increased administrative costs due to asset level and investment volatility that accompanies patterns of short-term trading activity. All of these factors may adversely affect Fund performance. Significant investments in foreign securities may be particularly susceptible to short-term trading strategies. This is because foreign securities are typically traded on markets that close well before the time each Fund calculates its NAV at 4:00 p.m., Eastern time, which gives rise to the possibility that developments may have occurred in the interim that would affect the value of these securities. The time zone differences among international stock markets can allow a shareholder engaging in a short-term trading strategy to exploit differences in Fund share prices that are based on closing prices of foreign securities established some time before the Fund calculates its own share price (referred to as "time zone arbitrage"). A Fund has procedures, referred to as fair value pricing, designed to adjust closing market prices of foreign securities to reflect what is believed to be the fair value of those securities at the time the Fund calculates its NAV. While there is no assurance, the Funds expect that the use of fair value pricing, in addition to the short-term trading policies discussed below, will significantly reduce a shareholder's ability to engage in time zone arbitrage to the detriment of other Fund shareholders. Investments in other types of securities may also be susceptible to short-term trading strategies. These investments include securities that are, among other things, thinly traded, traded infrequently, or relatively illiquid, which have the risk that the current market price for the securities may not accurately reflect current market values. A shareholder may seek to engage in short-term trading to take advantage of these pricing differences (referred to as "price arbitrage"). All Funds may be adversely affected by price arbitrage trading strategies. Policy Regarding Short-Term Trading. Purchases and exchanges of shares of the Fund should be made for investment purposes only. A Fund seeks to prevent patterns of excessive purchases and sales or exchanges of Fund shares. A Fund will seek to prevent such practices to the extent they are detected by the procedures described below. A Fund reserves the right to modify this policy, including any surveillance or account blocking procedures established from time to time to effectuate this policy, at any time without notice. o Transaction Surveillance Procedures. Each Fund, through its agents, ABI and ABIS, maintains surveillance procedures to detect excessive or short-term trading in Fund shares. This surveillance process involves several factors, which include scrutinizing transactions in Fund shares that exceed certain monetary thresholds or numerical limits within a specified period of time. Generally, more than two exchanges of Fund shares during any 90-day period or purchases of shares followed by a sale within 90 days will be identified by these surveillance procedures. For purposes of these transaction surveillance procedures, the Fund may consider trading activity in multiple accounts under common ownership, control, or influence. Trading activity identified by either, or a combination, of these factors, or as a result of any other information available at the time, will be evaluated to determine whether such activity might constitute excessive or short-term trading. These surveillance procedures may be modified from time to time, as necessary or appropriate to improve the detection of excessive or short-term trading or to address specific circumstances, such as for certain retirement plans, to conform to plan exchange limits or U.S. Department of Labor regulations, or for certain automated or pre-established exchange, asset allocation or dollar cost averaging programs, or omnibus account arrangements. o Account Blocking Procedures. If a Fund determines, in its sole discretion, that a particular transaction or pattern of transactions identified by the transaction surveillance procedures described above is excessive or short-term trading in nature, the relevant Fund account(s) will be immediately "blocked" and no future purchase or exchange activity will be permitted. However, sales of Fund shares back to the Fund or redemptions will continue to be permitted in accordance with the terms of the Fund's current Prospectuses. In the event an account is blocked, certain account-related privileges, such as the ability to place purchase, sale and exchange orders over the internet or by phone, may also be suspended. A blocked account will generally remain blocked unless and until the account holder or the associated financial intermediary provides evidence or assurance acceptable to the Fund that the account holder did not or will not in the future engage in excessive or short-term trading. o Applications of Surveillance Procedures and Restrictions to Omnibus Accounts. Omnibus account arrangements are common forms of holding shares of a Fund, particularly among certain brokers, dealers and other financial intermediaries, including sponsors of retirement plans and variable insurance products. A Fund applies it surveillance procedures to these omnibus account arrangements. As required by Commission rules, the Fund has entered into agreements with all of its financial intermediaries that require the financial intermediaries to provide the Fund, upon the request of the Fund or its agents, with individual account level information about their transactions. If the Fund detects excessive trading through its monitoring of omnibus accounts, including trading at the individual account level, the financial intermediaries will also execute instructions from the Fund to take actions to curtail the activity, which may include applying blocks to accounts to prohibit future purchases and exchanges of Fund shares. For certain retirement plan accounts, the Fund may request that the retirement plan or other intermediary revoke the relevant participant's privilege to effect transactions in Fund shares via the internet or telephone, in which case the relevant participant must submit future transaction orders via the U.S. Postal Service (i.e., regular mail). Risks to Shareholders Resulting From Imposition of Account Blocks in Response to Excessive Short-Term Trading Activity. A shareholder identified as having engaged in excessive or short-term trading activity whose account is "blocked" and who may not otherwise wish to redeem his or her shares effectively may be "locked" into an investment in the Fund that the shareholder did not intend to hold on a long-term basis or that may not be appropriate for the shareholder's risk profile. To rectify this situation, a shareholder with a "blocked" account may be forced to redeem Fund shares, which could be costly if, for example, these shares have declined in value, the shareholder recently paid a front-end sales charge or the shares are subject to a CDSC, or the sale results in adverse tax consequences to the shareholder. To avoid this risk, a shareholder should carefully monitor the purchases, sales, and exchanges of Fund shares and avoid frequent trading in Fund shares. Limitations on Ability to Detect and Curtail Excessive Trading Practices. Shareholders seeking to engage in excessive short-term trading activities may deploy a variety of strategies to avoid detection and, despite the efforts of the Fund and its agents to detect excessive or short duration trading in Fund shares, there is no guarantee that the Fund will be able to identify these shareholders or curtail their trading practices. In particular, the Fund may not be able to detect excessive or short-term trading in Fund shares attributable to a particular investor who affects purchase and/or exchange activity in Fund shares through omnibus accounts. Also, multiple tiers of these entities may exist, each utilizing an omnibus account arrangement, which may further compound the difficulty of detecting excessive or short duration trading activity in Fund shares. A Fund reserves the right to suspend the sale of its shares to the public in response to conditions in the securities markets or for other reasons. If the Fund suspends the sale of its shares, shareholders will not be able to acquire its shares, including through an exchange. The public offering price of shares of a Fund is their NAV, plus, in the case of Class A shares, a sales charge. On each Fund business day on which a purchase or redemption order is received by the Fund and trading in the types of securities in which the Fund invests might materially affect the value of Fund shares, the NAV is computed as of the next close of regular trading on the Exchange (currently 4:00 p.m., Eastern time) by dividing the value of the Fund's total assets, less its liabilities, by the total number of its shares then outstanding. A Fund business day is any day on which the Exchange is open for trading. The respective NAVs of the various classes of shares of the Fund are expected to be substantially the same. However, the NAVs of the Class B, Class C and Class R shares will generally be slightly lower than the NAVs of the Class A, Class K, Class I and Advisor Class shares as a result of the differential daily expense accruals of the higher distribution and, in some cases, transfer agency fees applicable with respect to those classes of shares. A Fund will accept unconditional orders for shares to be executed at the public offering price equal to their NAV next determined (plus applicable Class A sales charges), as described below. Orders received by ABI prior to the close of regular trading on the Exchange on each day the Exchange is open for trading are priced at the NAV computed as of the close of regular trading on the Exchange on that day (plus applicable Class A sales charges). In the case of orders for purchase of shares placed through financial intermediaries, the applicable public offering price will be the NAV so determined, but only if the financial intermediary receives the order prior to the close of regular trading on the Exchange. The financial intermediary is responsible for transmitting such orders by a prescribed time to the Fund or its transfer agent. If the financial intermediary fails to do so, the investor will not receive that day's NAV. If the financial intermediary receives the order after the close of regular trading on the Exchange, the price received by the investor will be based on the NAV determined as of the close of regular trading on the Exchange on the next day it is open for trading. Following the initial purchase of Fund shares, a shareholder may place orders to purchase additional shares by telephone if the shareholder has completed the appropriate portion of the Mutual Fund Application or an "Autobuy" application obtained by calling the "For Literature" telephone number shown on the cover of this SAI. Except with respect to certain omnibus accounts, telephone purchase orders with payment by electronic funds transfer may not exceed $500,000. Payment for shares purchased by telephone can be made only by electronic funds transfer from a bank account maintained by the shareholder at a bank that is a member of the National Automated Clearing House Association ("NACHA"). Telephone purchase requests must be received before 4:00 p.m., Eastern time, on a Fund business day to receive that day's public offering price. Telephone purchase requests received after 4:00 p.m., Eastern time, are automatically placed the following Fund business day, and the applicable public offering price will be the public offering price determined as of the close of business on such following business day. Full and fractional shares are credited to a shareholder's account in the amount of his or her subscription. As a convenience, and to avoid unnecessary expense to the Fund, the Fund will not issue stock certificates representing shares of the Fund. Ownership of the Fund's shares will be shown on the books of the Fund's transfer agent. Lost certificates will not be replaced with another certificate, but will be shown on the books of the Fund's transfer agent. This facilitates later redemption and relieves the shareholder of the responsibility for and inconvenience of lost or stolen certificates. Each class of shares of the Funds represent an interest in the same portfolio of investments of the Fund, have the same rights and are identical in all respects, except that (i) Class A shares bear the expense of the initial sales charge (or CDSC, when applicable) and Class B and Class C shares bear the expense of the CDSC, (ii) Class B shares, Class C and Class R shares each bear the expense of a higher distribution services fee than that borne by Class A shares and Class K shares, and Class I shares and Advisor Class shares do not bear such a fee, (iii) Class B and Class C shares bear higher transfer agency costs than that borne by Class A, Class R, Class K, Class I and Advisor Class shares, (iv) Class B and Advisor Class shares are subject to a conversion feature and will convert to Class A shares under certain circumstances, and (v) each of Class A, Class B, Class C, Class R and Class K shares has exclusive voting rights with respect to provisions of the Rule 12b-1 Plan pursuant to which its distribution services fee is paid and other matters for which separate class voting is appropriate under applicable law, provided that, if the Fund submits to a vote of the Class A shareholders, an amendment to the Rule 12b-1 Plan that would materially increase the amount to be paid thereunder with respect to the Class A shares, then such amendment will also be submitted to the Class B and Advisor Class shareholders because the Class B and Advisor Class shares convert to Class A shares under certain circumstances, and the Class A, the Class B and the Advisor Class shareholders will vote separately by class. Each class has different exchange privileges and certain different shareholder service options available. The Directors of the Funds have determined that currently no conflict of interest exists between or among the classes of shares of the Fund. On an ongoing basis, the Directors of the Funds, pursuant to their fiduciary duties under the 1940 Act and state law, will seek to ensure that no such conflict arises. Alternative Purchase Arrangements - --------------------------------- Classes A, B and C Shares. Class A, Class B and Class C shares have the following alternative purchase arrangements: Class A shares are generally offered with an initial sales charge, Class B shares are generally offered with a CDSC and Class C shares are sold to investors choosing the asset-based sales charge alternative. Special purchase arrangements are available for Group Retirement Plans. See "Alternative Purchase Arrangements - Group Retirement Plans and Tax-Deferred Accounts" below. These alternative purchase arrangements permit an investor to choose the method of purchasing shares that is most beneficial given the amount of the purchase, the length of time the investor expects to hold the shares and other circumstances. Investors should consider whether, during the anticipated life of their investment in the Fund, the accumulated distribution services fee and CDSCs on Class B shares prior to conversion, or the accumulated distribution services fee and CDSCs on Class C shares, would be less than the initial sales charge and accumulated distribution services fee on Class A shares purchased at the same time, and to what extent such differential would be offset by the higher return of Class A shares. Class A shares will normally be more beneficial than Class B shares to the investor who qualifies for reduced initial sales charges on Class A shares, as described below. In this regard, ABI will reject any order (except orders from certain group retirement plans) for more than $100,000 for Class B shares (see "Alternative Purchase Arrangements - Group Retirement Plans and Tax-Deferred Accounts"). Class C shares will normally not be suitable for the investor who qualifies to purchase Class A shares at NAV. For this reason, ABI will reject any order for more than $1,000,000 for Class C shares. Class A shares are subject to a lower distribution services fee and, accordingly, pay correspondingly higher dividends per share than Class B shares or Class C shares. However, because initial sales charges are deducted at the time of purchase, most investors purchasing Class A shares would not have all their funds invested initially and, therefore, would initially own fewer shares. Investors not qualifying for reduced initial sales charges who expect to maintain their investment for an extended period of time might consider purchasing Class A shares because the accumulated continuing distribution charges on Class B shares or Class C shares may exceed the initial sales charge on Class A shares during the life of the investment. Again, however, such investors must weigh this consideration against the fact that, because of such initial sales charges, not all their funds will be invested initially. Other investors might determine, however, that it would be more advantageous to purchase Class B shares or Class C shares in order to have all their funds invested initially, although remaining subject to higher continuing distribution charges and being subject to a CDSC for a three-year (four-year for Intermediate Bond) and one-year period, respectively. For example, based on current fees and expenses, an investor subject to the 4.25% initial sales charge would have to hold his or her investment approximately seven years for the Class C distribution services fee to exceed the initial sales charge plus the accumulated distribution services fee of Class A shares. In this example, an investor intending to maintain his or her investment for a longer period might consider purchasing Class A shares. This example does not take into account the time value of money, which further reduces the impact of the Class C distribution services fees on the investment, fluctuations in NAV or the effect of different performance assumptions. Those investors who prefer to have all of their funds invested initially but may not wish to retain Fund shares for the three-year (four-year for Intermediate Bond) period during which Class B shares are subject to a CDSC may find it more advantageous to purchase Class C shares. During the fiscal years ended October 31, 2006, 2007 and 2008, the aggregate amount of underwriting commission payable with respect to shares of Intermediate Bond was $68,699, $93,302, and $264,102, respectively. Of that amount ABI received amounts of $3,334, $2,081, and $11,175, respectively, representing that portion of the sales charges paid on shares of the Fund sold during the year which was not re-allowed to selected dealers (and was, accordingly, retained by ABI). During the Fund's fiscal years ended October 31, 2006, 2007 and 2008. ABI received CDSCs of $1,943, $11,417, and $6,007, respectively, on Class A shares, $18,006, $10,306, and $29,523, respectively, on Class B shares, and $1,356, $2,996 and $4,072, respectively, on Class C shares. During the fiscal years ended October 31, 2006, 2007 and 2008, the aggregate amount of underwriting commission payable with respect to shares of Diversified Yield was $36,457, $142,676 and $119,895, respectively. Of that amount, ABI received the amounts of $2,866, $10,095 and $4,524, respectively, representing that portion of the sales charges paid on shares of the Fund sold during the year which was not re-allowed to selected dealers (and was, accordingly, retained by ABI). During the Fund's fiscal years ended October 31, 2006, 2007 and 2008, ABI received contingent deferred sales charges of $243, $512 and $11,438, respectively, on Class A shares, $27,402, $18,745 and $18,401, respectively, on Class B shares, and $2,385, $2,454 and $4,380, respectively, on Class C shares. During the fiscal years ended September 30, 2006, 2007 and 2008, the aggregate amount of underwriting commission payable with respect to shares of Global Bond was $1,540,615, $1,493,581 and $3,619,264 respectively. Of those amounts, ABI received the amounts of $110,658, $84,878 and $219,813, respectively, representing that portion of the sales charges paid on shares of the Fund sold during the year which was not re-allowed to selected dealers (and was, accordingly, retained by ABI). During the Fund's fiscal years ended September 30, 2006, 2007 and 2008, ABI received CDSCs of $1,666, $14,519 and $44,147, respectively, on Class A shares, $200,837, $119,221 and $132,810, respectively, on Class B shares and $62,354, $43,902 and $134,516, respectively, on Class C shares. During the fiscal years ended October 31, 2006, 2007 and 2008, the aggregate amount of underwriting commission payable with respect to shares of High Income was $416,240, $476,389 and $562,420 respectively. Of that amount, ABI received the amounts of $25,959, $26,725 and $33,817 respectively, representing that portion of the sales charges paid on shares of the Fund sold during the year which was not re-allowed to selected dealers (and was, accordingly, retained by ABI). During the Fund's fiscal years ended October 31, 2006, 2007 and 2008, ABI received CDSCs of $22,963, $402,963 and $8,355, respectively, on Class A shares, $63,155, $35,449 and $50,423, respectively, on Class B shares, and $32,431, $13,305 and $21,648, respectively, on Class C shares. Class A Shares - -------------- The public offering price of Class A shares is the NAV plus a sales charge, as set forth below. Sales Charge ------------ Discount or Commission to Dealers or As % of Net As % of the Agents of up Amount Public to % of Amount of Purchase Invested Offering Price Offering Price ------------------ -------- -------------- -------------- Up to $100,000............. 4.44% 4.25% 4.00% $100,000 up to $250,000.... 3.36 3.25 3.00 $250,000 up to $500,000.... 2.30 2.25 2.00 $500,000 up to $1,000,000*. 1.78 1.75 1.50 - ---------- * There is no initial sales charge on transactions of $1,000,000 or more. All or a portion of the initial sales charge may be paid to your financial representative. With respect to purchases of $1,000,000 or more, Class A shares redeemed within one year of purchase may be subject to a CDSC of up to 1%. The CDSC on Class A shares will be waived on certain redemptions, as described below under "--Contingent Deferred Sales Charge." No initial sales charge is imposed on Class A shares issued (i) pursuant to the automatic reinvestment of income dividends or capital gains distributions, (ii) in exchange for Class A shares of other AllianceBernstein Mutual Funds (as that term is defined under "Combined Purchase Privilege" below), except that an initial sales charge will be imposed on Class A shares issued in exchange for Class A shares of AllianceBernstein Exchange Reserves that were purchased for cash without the payment of an initial sales charge and without being subject to a CDSC, or (iii) upon the automatic conversion of Class B or Advisor Class shares as described below under "--Class B Shares--Conversion Feature" and "-- Conversion of Advisor Class Shares to Class A Shares." A Fund receives the entire NAV of its Class A shares sold to investors. ABI's commission is the sales charge shown above less any applicable discount or commission "re-allowed" to selected dealers and agents. ABI will re-allow discounts to selected dealers and agents in the amounts indicated in the table above. In this regard, ABI may elect to re-allow the entire sales charge to selected dealers and agents for all sales with respect to which orders are placed with ABI. A selected dealer who receives re-allowance in excess of 90% of such a sales charge may be deemed to be an "underwriter" under the Securities Act. In addition to the circumstances described above, certain types of investors may be entitled to pay no initial sales charge in certain circumstances described below. Class A Shares - Sales at NAV. A Fund may sell its Class A shares at NAV (i.e., without any initial sales charge) to certain categories of investors including: (i) investment management clients of the Adviser or its affiliates, including clients and prospective clients of the Adviser's AllianceBernstein Institutional Investment Management Division; (ii) officers and present or former Directors of the Fund or other investment companies managed by the Adviser, officers, directors and present or retired full-time employees and former employees (for subsequent investment in accounts established during the course of their employment) of the Adviser, ABI, ABIS and their affiliates; officers, directors and present and full-time employees of selected dealers or agents; or the spouse or domestic partner, sibling, direct ancestor or direct descendant (collectively, "relatives") of any such person; or any trust, individual retirement account or retirement plan account for the benefit of any such person; (iii) the Adviser, ABI, ABIS and their affiliates; certain employee benefit plans for employees of the Adviser, ABI, ABIS and their affiliates; (iv) persons participating in a fee-based program, sponsored and maintained by a registered broker-dealer or other financial intermediary and approved by ABI, under which such persons pay an asset-based fee for service in the nature of investment advisory or administrative services; and (v) certain retirement plan accounts as described under "Alternative Purchase Arrangements - Group Retirement Plans and Tax-Deferred Accounts." Class B Shares - -------------- Effective January 31, 2009, sales of Class B shares of the Funds to new investors were suspended. Class B shares are only issued (i) upon the exchange of Class B shares from another AllianceBernstein Fund, (ii) for purposes of dividend reinvestment, (iii) through the Fund's Automatic Investment Program for accounts that established the Program prior to January 31, 2009, and (iv) for purchases of additional Class B shares by Class B shareholders as of January 31, 2009. The ability to establish a new Automatic Investment Program for accounts containing Class B shares will be suspended as of January 31, 2009. Investors may purchase Class B shares at the public offering price equal to the NAV per share of the Class B shares on the date of purchase without the imposition of a sales charge at the time of purchase. The Class B shares are sold without an initial sales charge so that the Fund will receive the full amount of the investor's purchase payment. Conversion Feature. For Intermediate Bond, Global Bond and High Income, six years after the end of the calendar month in which the shareholder's purchase order was accepted, Class B shares will automatically convert to Class A shares and will no longer be subject to a higher distribution services fee. For Diversified Yield, eight years after the end of the calendar month in which the shareholder's purchase order was accepted, Class B shares will automatically convert to Class A shares and will no longer be subject to a higher distribution services fee. Such conversion will occur on the basis of the relative NAVs of the two classes, without the imposition of any sales load, fee or other charge. The purpose of the conversion feature is to reduce the distribution services fee paid by holders of Class B shares that have been outstanding long enough for ABI to have been compensated for distribution expenses incurred in the sale of the shares. For purposes of conversion to Class A, Class B shares purchased through the reinvestment of dividends and distributions paid in respect of Class B shares in a shareholder's account will be considered to be held in a separate sub-account. Each time any Class B shares in the shareholder's account (other than those in the sub-account) convert to Class A shares, an equal pro-rata portion of the Class B shares in the sub-account will also convert to Class A shares. The conversion of Class B shares to Class A shares is subject to the continuing availability of an opinion of counsel to the effect that the conversion of Class B shares to Class A shares does not constitute a taxable event under federal income tax law. The conversion of Class B shares to Class A shares may be suspended if such an opinion is no longer available at the time such conversion is to occur. In that event, no further conversions of Class B shares would occur, and shares might continue to be subject to the higher distribution services fee for an indefinite period which may extend beyond the period ending six years after the end of the calendar month in which the shareholder's purchase order was accepted. Class C Shares - -------------- Investors may purchase Class C shares at the public offering price equal to the NAV per share of the Class C shares on the date of purchase without the imposition of a sales charge either at the time of purchase or, as long as the shares are held for one year or more, upon redemption. Class C shares are sold without an initial sales charge so that the Fund will receive the full amount of the investor's purchase payment and, as long as the shares are held for one year or more, without a CDSC so that the investor will receive as proceeds upon redemption the entire NAV of his or her Class C shares. The Class C distribution services fee enables the Fund to sell Class C shares without either an initial sales charge or CDSC, as long as the shares are held for one year or more. Class C shares do not convert to any other class of shares of the Fund and incur higher distribution services fees and transfer agency costs than Class A shares and Advisor Class shares, and will thus have a higher expense ratio and pay correspondingly lower dividends than Class A shares and Advisor Class shares. Contingent Deferred Sales Charge. Class B shares that are redeemed within three years of purchase will be subject to a CDSC at the rates set forth below charged as a percentage of the dollar amount subject thereto. Class A share purchases of $1,000,000 or more and Class C shares that are redeemed within one year of purchase will be subject to a CDSC of 1%, as are Class A share purchases by certain group retirement plans (see "alternative Purchase Arrangements--Group Retirement Plans and Tax-Deferred Accounts" below). The charge will be assessed on an amount equal to the lesser of the cost of the shares being redeemed or their NAV at the time of redemption. Accordingly, no sales charge will be imposed on increases in NAV above the initial purchase price. In addition, no charge will be assessed on shares derived from reinvestment of dividends or capital gains distributions. To illustrate, assume that an investor purchased 100 Class B shares at $10 per share (at a cost of $1,000) and in the second year after purchase, the NAV per share is $12 and, during such time, the investor has acquired 10 additional Class B shares upon dividend reinvestment. If at such time the investor makes his or her first redemption of 50 Class B shares (proceeds of $600), 10 Class B shares will not be subject to the charge because of dividend reinvestment. With respect to the remaining 40 Class B shares, the charge is applied only to the original cost of $10 per share and not to the increase in NAV of $2 per share. Therefore, $400 of the $600 redemption proceeds will be charged at a rate of 2.0% (the applicable rate in the second year after purchase as set forth below). For Class B shares, the amount of the CDSC, if any, will vary depending on the number of years from the time of payment for the purchase of Class B shares until the time of redemption of such shares. Contingent Deferred Sales Charge for the Fund as a % of Dollar Year Since Purchase Amount Subject to Charge ------------------- ------------------------ First 3.0% Second 2.0% Third 1.0% Thereafter None In determining the CDSC applicable to a redemption of Class B and Class C shares, it will be assumed that the redemption is, first, of any shares that are not subject to a CDSC (for example, because the shares were acquired upon the reinvestment of dividends or distributions) and, second, of shares held longest during the time they are subject to the sales charge. When shares acquired in an exchange are redeemed, the applicable CDSC and conversion schedules will be the schedules that applied at the time of the purchase of shares of the corresponding class of the AllianceBernstein Mutual Fund originally purchased by the shareholder. If you redeem your shares and directly invest the proceeds in units of CollegeBoundfund, the CDSC will apply to the units of CollegeBoundfund. The CDSC period begins with the date of your original purchase, not the date of exchange for the other Class B shares or purchase of CollegeBoundfund units. Proceeds from the CDSC are paid to ABI and are used by ABI to defray the expenses of ABI related to providing distribution-related services to the Fund in connection with the sale of Fund shares, such as the payment of compensation to selected dealers and agents for selling Fund shares. The combination of the CDSC and the distribution services fee enables the Fund to sell shares without a sales charge being deducted at the time of purchase. The CDSC is waived on redemptions of shares (i) following the death or disability, as defined in the Internal Revenue Code of 1986, as amended (the "Code"), of a shareholder, (ii) to the extent that the redemption represents a minimum required distribution from an individual retirement account or other retirement plan to a shareholder that has attained the age of 70-1/2, (iii) that had been purchased by present or former Directors of the Fund, by the relative of any such person, by any trust, individual retirement account or retirement plan account for the benefit of any such person or relative, or by the estate of any such person or relative, (iv) pursuant to, and in accordance with, a systematic withdrawal plan (see "Sales Charge Reduction Programs--Systematic Withdrawal Plan" below), (v) to the extent that the redemption is necessary to meet a plan participant's or beneficiary's request for a distribution or loan from a group retirement plan or to accommodate a plan participant's or beneficiary's direction to reallocate his or her plan account among other investment alternatives available under a group retirement plan, (vi) for Class C shares, sold through programs offered by financial intermediaries and approved by ABI where such programs offer only shares that are not subject to a CDSC, where the financial intermediary establishes a single omnibus account for the Fund or, in the case of a group retirement plan, a single account for each plan, and where no advance commission is paid to any financial intermediary in connection with the purchase of such shares or (vii) for permitted exchanges of shares. Class R Shares - -------------- Class R shares are offered only to group retirement plans that have plan assets of up to $10 million. Class R shares are not available to retail non-retirement accounts, traditional or Roth IRAs, Coverdell Education Savings Accounts, SEPs, SAR-SEPs, SIMPLE IRAs, individual 403(b) plans and to AllianceBernstein sponsored retirement products. Class R shares incur a .50% distribution services fee and thus have a higher expense ratio than Class A shares, Class K shares and Class I shares and pay correspondingly lower dividends than Class A shares, Class K shares and Class I shares. Class K Shares - -------------- Class K shares are available at NAV to group retirement plans that have plan assets of at least $1 million. Class K shares generally are not available to retail non-retirement accounts, traditional and ROTH IRAs, Coverdell Education Savings Accounts, SEPs, SAR-SEPs, SIMPLE IRAs, individual 403(b) plans and AllianceBernstein sponsored retirement products. Class K shares do not have an initial sales charge or CDSC but incur a .25% distribution services fee and (i) thus have a lower expense ratio than Class R shares and pay correspondingly higher dividends than Class R shares and (ii) have a higher expense ratio than Class I shares and pay correspondingly lower dividends than Class I shares. Class I Shares - -------------- Class I shares are available at NAV to all group retirement plans that have plan assets in excess of $10 million and to certain investment advisory clients of, and certain other persons associated with, the Adviser and its affiliates. Class I shares generally are not available to retail non-retirement accounts, traditional and ROTH IRAs, Coverdell Education Savings Accounts, SEPs, SAR-SEPs, SIMPLE IRAs, individual 403(b) plans and AllianceBernstein sponsored retirement products. Class I shares do not incur any distribution services fees and will thus have a lower expense ratio and pay correspondingly higher dividends than Class R and Class K shares. Advisor Class Shares - -------------------- Advisor Class shares of the Funds may be purchased and held solely (i) through accounts established under fee-based programs, sponsored and maintained by registered broker-dealers or other financial intermediaries and approved by ABI, (ii) through self-directed defined contribution employee benefit plans (e.g., 401(k) plans) that have at least $10 million in assets and are purchased directly by the plan without the involvement of a financial intermediary or (iii) by the categories of investors described in clauses (i) through (iv) under "Class A Shares -- Sales at NAV" (other than officers, directors and present and full-time employees of selected dealers or agents, or relatives of such person, or any trust, individual retirement account or retirement plan account for the benefit of such relative, none of whom is eligible on the basis solely of such status to purchase and hold Advisor Class shares). Generally, a fee-based program must charge an asset-based or other similar fee and must invest at least $250,000 in Advisor Class shares of the Fund in order to be approved by ABI for investment in Advisor Class shares. A transaction fee may be charged by your financial intermediary with respect to the purchase, sale or exchange of Advisor Class shares made through such financial intermediary. Advisor Class shares do not incur any distribution services fees, and will thus have a lower expense ratio and pay correspondingly higher dividends than Class A, Class B, Class C, Class R, or Class K shares. Conversion of Advisor Class Shares to Class A Shares - ---------------------------------------------------- Advisor Class shares may be held solely through the fee-based program accounts, employee benefit plans, qualified state tuition programs and registered investment advisory or other financial intermediary relationships described above under "Purchase of Shares--Advisor Class Shares," and by investment advisory clients of, and by certain other persons associated with, the Adviser and its affiliates or the Fund. If (i) a holder of Advisor Class shares ceases to participate in a fee-based program or plan that satisfies the requirements to purchase shares set forth under "Purchase of Shares--Advisor Class Shares" or (ii) the holder is otherwise no longer eligible to purchase Advisor Class shares as described in the Prospectuses and this SAI (each, a "Conversion Event"), then all Advisor Class shares held by the shareholder will convert automatically to Class A shares of the Fund during the calendar month following the month in which the Fund is informed of the occurrence of the Conversion Event. A Fund will provide the shareholder with at least 30 days' notice of the conversion. The failure of a shareholder of a fee-based program to satisfy the minimum investment requirements to purchase Advisor Class shares will not constitute a Conversion Event. The conversion would occur on the basis of the relative NAVs of the two classes and without the imposition of any sales load, fee or other charge. Class A shares currently bear a .30% distribution services fee. Advisor Class shares do not have any distribution services fee. As a result, Class A shares have a higher expense ratio and may pay correspondingly lower dividends and have a lower NAV than Advisor Class shares. The conversion of Advisor Class shares to Class A shares is subject to the continuing availability of an opinion of counsel to the effect that the conversion of Advisor Class shares to Class A shares does not constitute a taxable event under federal income tax law. The conversion of Advisor Class shares to Class A shares may be suspended if such an opinion is no longer available at the time such conversion is to occur. In that event, the Advisor Class shareholder would be required to redeem his or her Advisor Class shares, which would constitute a taxable event under federal income tax law. Alternative Purchase Arrangements - Group Retirement Plans and Tax-Deferred Accounts - --------------------------------------------------------------------------- A Fund offers special distribution arrangements for group retirement plans. However, plan sponsors, plan fiduciaries and other financial intermediaries may establish requirements as to the purchase, sale or exchange of shares of the Fund, including maximum and minimum initial investment requirements, that are different from those described in this SAI. Group retirement plans also may not offer all classes of shares of the Fund. In order to enable participants investing through group retirement plans to purchase shares of the Fund, the maximum and minimum investment amounts may be different for shares purchased through group retirement plans from those described herein. In addition, the Class A, Class B and Class C CDSCs may be waived for investments made through certain group retirement plans. Therefore, plan sponsors or fiduciaries may not adhere to these share class eligibility standards as set forth in the Prospectuses and this SAI. A Fund is not responsible for, and has no control over, the decision of any plan sponsor or fiduciary to impose such differing requirements. Class A Shares - -------------- Class A shares are available at NAV to all AllianceBernstein sponsored group retirement plans, regardless of size, and to the AllianceBernstein Link, AllianceBernstein Individual 401(k) and AllianceBernstein SIMPLE IRA plans with at least $250,000 in plan assets or 100 or more employees. Effective June 30, 2005, for purposes of determining whether a SIMPLE IRA plan has at least $250,000 in plan assets, all of the SIMPLE IRAs of an employer's employees are aggregated. ABI measures the asset levels and number of employees in these plans once monthly. Therefore, if a plan that is not initially eligible for Class A shares meets the asset level or number of employees required for Class A eligibility, ABI may not initially fill orders with Class A shares if an order is received prior to its monthly measurement of assets and employees. If the plan terminates the Fund as an investment option within one year, then all plan purchases of Class A shares will be subject to a 1%, 1-year CDSC on redemption. Class A shares are also available at NAV to group retirement plans with plan assets in excess of $10 million. The 1%, 1-year CDSC also generally applies. However, the 1%, 1-year CDSC may be waived if the financial intermediary agrees to waive all commissions or other compensation paid in connection with the sale of such shares (typically up to a 1% advance payment for sales of Class A sales at NAV) other than the service fee paid pursuant to the Fund's Rule 12b-1 plan. Class B Shares - -------------- Class B shares are generally not available for purchase by group retirement plans. However, Class B shares may continue to be purchased by group retirement plans that have already selected Class B shares as an investment alternative under their plan prior to September 2, 2003. Class C Shares - -------------- Class C shares are available to AllianceBernstein Link, AllianceBernstein Individual 401(k) and AllianceBernstein SIMPLE IRA plans with less than $250,000 in plan assets and less than 100 employees. Class C shares are also available to group retirement plans with plan assets of less than $1 million. If an AllianceBernstein Link, AllianceBernstein Individual 401(k) or AllianceBernstein SIMPLE IRA plan holding Class C shares becomes eligible to purchase Class A shares at NAV, the plan sponsor or other appropriate fiduciary of such plan may request ABI in writing to liquidate the Class C shares and purchase Class A shares with the liquidation proceeds. Any such liquidation and repurchase may not occur before the expiration of the 1-year period that begins on the date of the plan's last purchase of Class C shares. Class R Shares - -------------- Class R shares are available to certain group retirement plans with plan assets of up to $10 million. Class R shares are not subject to a front-end sales charge or CDSC, but are subject to a .50% distribution fee. Class K Shares - -------------- Class K shares are available to certain group retirement plans with plan assets of at least $1 million. Class K shares are not subject to a front-end sales charge or CDSC, but are subject to a .25% distribution fee. Class I Shares - -------------- Class I shares are available to certain group retirement plans with plan assets of at least $10 million and certain institutional clients of the Adviser who invest at least $2 million in a Fund. Class I shares are not subject to a front-end sales charge, CDSC or a distribution fee. Choosing a Class of Shares for Group Retirement Plans - ----------------------------------------------------- Plan sponsors, plan fiduciaries and other financial intermediaries may establish requirements as to the purchase, sale or exchange of shares of the Fund, including maximum and minimum initial investment requirements, that are different from those described in this SAI. Plan fiduciaries should consider how these requirements differ from the Fund's share class eligibility criteria before determining whether to invest. It is expected that the Funds will eventually offer only Class R, Class K and Class I shares to group retirement plans. Currently, the Funds also make their Class A shares available at NAV to group retirement plans with plan assets in excess of $10 million. Unless waived under the circumstances described above, a 1%, 1-year CDSC applies to the sale of Class A shares by a plan. Because Class K shares have no CDSC and lower 12b-1 distribution fees and Class I shares have no CDSC and Rule 12b-1 distribution fees, plans should consider purchasing Class K or Class I shares, if eligible, rather than Class A shares. In selecting among the Class A, Class K and Class R shares, plans purchasing shares through a financial intermediary that is not willing to waive advance commission payments (and therefore are not eligible for the waiver of the 1%, 1-year CDSC applicable to Class A shares) should weigh the following: o the lower Rule 12b-1 distribution fees (0.30%) and the 1%, 1-year CDSC with respect to Class A shares; o the higher Rule 12b-1 distribution fees (0.50%) and the absence of a CDSC with respect to Class R shares; and o the lower Rule 12b-1 distribution fees (0.25%) and the absence of a CDSC with respect to Class K shares. Because Class A and Class K shares have lower Rule 12b-1 distribution fees than Class R shares, plans should consider purchasing Class A or Class K shares, if eligible, rather than Class R shares. As described above, while Class B shares are generally not available to group retirement plans, Class B shares are available for continuing contributions from plans that have already selected Class B shares as an investment option under their plans prior to September 2, 2003. Plans should weigh the fact that Class B shares will convert to Class A shares after a period of time against the fact that Class A, Class R, Class K and Class I shares have lower expenses, and therefore higher returns, than Class B shares, before determining which class to make available to its plan participants. Sales Charge Reduction Programs - ------------------------------- The AllianceBernstein Mutual Funds offer shareholders various programs through which shareholders may obtain reduced sales charges or reductions in CDSC through participation in such programs. In order for shareholders to take advantage of the reductions available through the combined purchase privilege, rights of accumulation and letters of intent, the Fund must be notified by the shareholder or his or her financial intermediary that they qualify for such a reduction. If the Fund is not notified that a shareholder is eligible for these reductions, the Fund will be unable to ensure that the reduction is applied to the shareholder's account. Combined Purchase Privilege. Shareholders may qualify for the sales charge reductions by combining purchases of shares of a Fund into a single "purchase." By combining such purchases, shareholders may be able to take advantage of the quantity discounts described under "Alternative Purchase Arrangements - Class A Shares." A "purchase" means a single purchase or concurrent purchases of shares of a Fund or any other AllianceBernstein Mutual Fund, including AllianceBernstein Institutional Funds, by (i) an individual, his or her spouse or domestic partner or the individual's children under the age of 21 years purchasing shares for his, her or their own account(s), including certain CollegeBoundfund accounts; (ii) a trustee or other fiduciary purchasing shares for a single trust, estate or single fiduciary account with one or more beneficiaries involved; or (iii) the employee benefit plans of a single employer. The term "purchase" also includes purchases by any "company," as the term is defined in the 1940 Act, but does not include purchases by any such company that has not been in existence for at least six months or that has no purpose other than the purchase of shares of the Fund or shares of other registered investment companies at a discount. The term "purchase" does not include purchases by any group of individuals whose sole organizational nexus is that the participants therein are credit card holders of a company, policy holders of an insurance company, customers of either a bank or broker-dealer or clients of an investment adviser. Currently, the AllianceBernstein Mutual Funds include: AllianceBernstein Balanced Shares, Inc. AllianceBernstein Blended Style Series, Inc. -AllianceBernstein 2000 Retirement Strategy -AllianceBernstein 2005 Retirement Strategy -AllianceBernstein 2010 Retirement Strategy -AllianceBernstein 2015 Retirement Strategy -AllianceBernstein 2020 Retirement Strategy -AllianceBernstein 2025 Retirement Strategy -AllianceBernstein 2030 Retirement Strategy -AllianceBernstein 2035 Retirement Strategy -AllianceBernstein 2040 Retirement Strategy -AllianceBernstein 2045 Retirement Strategy -AllianceBernstein 2050 Retirement Strategy -AllianceBernstein 2055 Retirement Strategy -U.S. Large Cap Fund AllianceBernstein Bond Fund, Inc. -AllianceBernstein Intermediate Bond Fund AllianceBernstein Cap Fund, Inc. -AllianceBernstein Small Cap Growth Fund AllianceBernstein Diversified Yield Fund, Inc. AllianceBernstein Exchange Reserves AllianceBernstein Focused Growth & Income Fund, Inc. AllianceBernstein Global Bond Fund, Inc. AllianceBernstein Global Growth Fund, Inc. AllianceBernstein Global Real Estate Investment Fund, Inc. AllianceBernstein Global Thematic Growth Fund, Inc. AllianceBernstein Greater China '97 Fund, Inc. AllianceBernstein Growth and Income Fund, Inc. AllianceBernstein High Income Fund, Inc. AllianceBernstein International Growth Fund, Inc. AllianceBernstein Large Cap Growth Fund, Inc. AllianceBernstein Municipal Income Fund, Inc. -California Portfolio -National Portfolio II -National Portfolio -New York Portfolio AllianceBernstein Municipal Income Fund II -Arizona Portfolio -Florida Portfolio -Massachusetts Portfolio -Michigan Portfolio -Minnesota Portfolio -New Jersey Portfolio -Ohio Portfolio -Pennsylvania Portfolio -Virginia Portfolio AllianceBernstein Small/Mid Cap Growth Fund, Inc. AllianceBernstein Trust -AllianceBernstein Global Value Fund -AllianceBernstein International Value Fund -AllianceBernstein Small/Mid Cap Value Fund -AllianceBernstein Value Fund AllianceBernstein Utility Income Fund, Inc. The AllianceBernstein Portfolios -AllianceBernstein Balanced Wealth Strategy -AllianceBernstein Growth Fund -AllianceBernstein Tax-Managed Balanced Wealth Strategy -AllianceBernstein Tax-Managed Wealth Appreciation Strategy -AllianceBernstein Tax Managed Wealth Preservation Strategy -AllianceBernstein Wealth Appreciation Strategy -AllianceBernstein Wealth Preservation Strategy Sanford C. Bernstein Fund, Inc. -AllianceBernstein Intermediate California Municipal Fund -AllianceBernstein Intermediate Diversified Municipal Fund -AllianceBernstein Intermediate New York Municipal Fund -AllianceBernstein International Fund -AllianceBernstein Short Duration Fund -AllianceBernstein Tax-Managed International Fund Prospectuses for the AllianceBernstein Mutual Funds may be obtained without charge by contacting ABIS at the address or the "For Literature" telephone number shown on the front cover of this SAI. Cumulative Quantity Discount (Right of Accumulation). An investor's purchase of additional Class A shares of a Fund may be combined with the value of the shareholder's existing accounts, thereby enabling the shareholder to take advantage of the quantity discounts described under "Alternative Purchase Arrangements - Class A Shares." In such cases, the applicable sales charge on the newly purchased shares will be based on the total of: (i) the investor's current purchase; (ii) the NAV (at the close of business on the previous day) of (a) all shares of the Fund held by the investor and (b) all shares held by the investor of any other AllianceBernstein Mutual Fund, including AllianceBerstein Institutional Funds and certain CollegeBoundfund accounts for which the investor, his or her spouse or domestic partner, or child under the age of 21 is the participant; and (iii) the NAV of all shares described in paragraph (ii) owned by another shareholder eligible to combine his or her purchase with that of the investor into a single "purchase" (see above). For example, if an investor owned shares of an AllianceBernstein Mutual Fund worth $200,000 at their then current NAV and, subsequently, purchased Class A shares of a Fund worth an additional $100,000, the initial sales charge for the $100,000 purchase would be at the 2.25% rate applicable to a single $300,000 purchase of shares of the Fund, rather than the 3.25% rate. Letter of Intent. Class A investors may also obtain the quantity discounts described under "Alternative Purchase Arrangements - Class A Shares" by means of a written Letter of Intent, which expresses the investor's intention to invest at least $100,000 in Class A shares of a Fund or any AllianceBerstein Mutual Fund within 13 months. Each purchase of shares under a Letter of Intent will be made at the public offering price or prices applicable at the time of such purchase to a single transaction of the dollar amount indicated in the Letter of Intent. At the investor's option, a Letter of Intent may include purchases of shares of the Fund or any other AllianceBernstein Mutual Fund made not more than 90 days prior to the date that the investor signs the Letter of Intent, in which case the 13-month period during which the Letter of Intent is in effect will begin on the date of that earliest purchase. However, sales changes will not be reduced for purchases made prior to the date the Letter of Intent is signed. Investors qualifying for the Combined Purchase Privilege described above may purchase shares of the AllianceBernstein Mutual Funds under a single Letter of Intent. For example, if at the time an investor signs a Letter of Intent to invest at least $100,000 in Class A shares of the Fund, the investor and the investor's spouse or domestic partner each purchase shares of the Fund worth $20,000 (for a total of $40,000), it will only be necessary to invest a total of $60,000 during the following 13 months in shares of the Fund or any other AllianceBernstein Mutual Fund, to qualify for the 3.25% sales charge on the total amount being invested (the sales charge applicable to an investment of $100,000). The Letter of Intent is not a binding obligation upon the investor to purchase the full amount indicated. The minimum initial investment under a Letter of Intent is 5% of such amount. Shares purchased with the first 5% of such amount will be held in escrow (while remaining registered in the name of the investor) to secure payment of the higher sales charge applicable to the shares actually purchased if the full amount indicated is not purchased, and such escrowed shares will be involuntarily redeemed at their then NAV to pay the additional sales charge, if necessary. Dividends on escrowed shares, whether paid in cash or reinvested in additional Fund shares, are not subject to escrow. When the full amount indicated has been purchased, the escrow will be released. Investors wishing to enter into a Letter of Intent in conjunction with their initial investment in Class A shares of a Fund can obtain a form of Letter of Intent by contacting ABIS at the address or telephone numbers shown on the cover of this SAI. Reinstatement Privilege. A shareholder who has redeemed any or all of his or her Class A or Class B shares may reinvest all or any portion of the proceeds from that redemption in Class A shares of any AllianceBernstein Mutual Fund at NAV without any sales charge, provided that (i) such reinvestment is made within 120 calendar days after the redemption or repurchase date, and (ii) for Class B shares, a CDSC has been paid and ABI has approved, at its discretion, the reinstatement of such shares. The reinstatement privilege for Class B shares is not available after January 31, 2009. Shares are sold to a reinvesting shareholder at the NAV next determined as described above. A reinstatement pursuant to this privilege will not cancel the redemption or repurchase transaction; therefore, any gain or loss so realized will be recognized for federal income tax purposes except that no loss will be recognized to the extent that the proceeds are reinvested in shares of the Fund within 30 calendar days after the redemption or repurchase transaction. Investors may exercise the reinstatement privilege by written request sent to the Fund at the address shown on the cover of this SAI. Dividend Reinvestment Program. Shareholders may elect to have all income and capital gains distributions from their account paid to them in the form of additional shares of the same class of a Fund pursuant to the Fund's Dividend Reinvestment Program. No initial sales charge or CDSC will be imposed on shares issued pursuant to the Dividend Reinvestment Program. Shares issued under this program will have an aggregate NAV as of the close of business on the declaration date of the dividend or distribution equal to the cash amount of the distribution. Investors wishing to participate in the Dividend Reinvestment Program should complete the appropriate section of the Mutual Fund Application. Current shareholders should contact ABIS to participate in the Dividend Reinvestment Program. In certain circumstances where a shareholder has elected to receive dividends and/or capital gain distributions in cash but the account has been determined to be lost due to mail being returned to us by the Postal Service as undeliverable, such shareholder's distributions option will automatically be placed within the Dividend Reinvestment Program for future distributions. No interest will accrue on amounts represented by uncashed distribution checks. Dividend Direction Plan - ----------------------- A shareholder who already maintains accounts in more than one AllianceBernstein Mutual Fund may direct that income dividends and/or capital gains paid by one AllianceBernstein Mutual Fund be automatically reinvested, in any amount, without the payment of any sales or service charges, in shares of the same class of the other AllianceBernstein Mutual Fund(s). Further information can be obtained by contacting ABIS at the address or the "For Literature" telephone number shown on the cover of this SAI. Investors wishing to establish a dividend direction plan in connection with their initial investment should complete the appropriate section of the Mutual Fund Application. Current shareholders should contact ABIS to establish a dividend direction plan. Systematic Withdrawal Plan - -------------------------- General. Any shareholder who owns or purchases shares of a Fund having a current NAV of at least $5,000 may establish a systematic withdrawal plan under which the shareholder will periodically receive a payment in a stated amount of not less than $50 on a selected date. The $5,000 account minimum does not apply to a shareholder owning shares through an individual retirement account or other retirement plan who has attained the age of 70-1/2 who wishes to establish a systematic withdrawal plan to help satisfy a required minimum distribution. Systematic withdrawal plan participants must elect to have their dividends and distributions from the Fund automatically reinvested in additional shares of the Fund. Shares of a Fund owned by a participant in the Fund's systematic withdrawal plan will be redeemed as necessary to meet withdrawal payments and such payments will be subject to any taxes applicable to redemptions and, except as discussed below with respect to Class A, Class B and Class C shares, any applicable CDSC. Shares acquired with reinvested dividends and distributions will be liquidated first to provide such withdrawal payments and thereafter other shares will be liquidated to the extent necessary, and depending upon the amount withdrawn, the investor's principal may be depleted. A systematic withdrawal plan may be terminated at any time by the shareholder or the Fund. Withdrawal payments will not automatically end when a shareholder's account reaches a certain minimum level. Therefore, redemptions of shares under the plan may reduce or even liquidate a shareholder's account and may subject the shareholder to the Fund's involuntary redemption provisions. See "Redemption and Repurchase of Shares -- General." Purchases of additional shares concurrently with withdrawals are undesirable because of sales charges applicable when purchases are made. While an occasional lump-sum investment may be made by a holder of Class A shares who is maintaining a systematic withdrawal plan, such investment should normally be an amount equivalent to three times the annual withdrawal or $5,000, whichever is less. Payments under a systematic withdrawal plan may be made by check or electronically via the Automated Clearing House ("ACH") network. Investors wishing to establish a systematic withdrawal plan in conjunction with their initial investment in shares of a Fund should complete the appropriate portion of the Mutual Fund Application, while current Fund shareholders desiring to do so can obtain an application form by contacting ABIS at the address or the "For Literature" telephone number shown on the cover of this SAI. CDSC Waiver for Class A, Class B Shares and Class C Shares. Under the systematic withdrawal plan, up to 1% monthly, 2% bi-monthly or 3% quarterly of the value at the time of redemption of the Class A, Class B or Class C shares in a shareholder's account may be redeemed free of any CDSC. Class B shares that are not subject to a CDSC (such as shares acquired with reinvested dividends or distributions) will be redeemed first and will count toward the foregoing limitations. Remaining Class B shares that are held the longest will be redeemed next. Redemptions of Class B shares in excess of the foregoing limitations will be subject to any otherwise applicable CDSC. With respect to Class A and Class C shares, shares held the longest will be redeemed first and will count toward the foregoing limitations. Redemptions in excess of those limitations will be subject to any otherwise applicable CDSC. Payments to Financial Advisors and Their Firms - ---------------------------------------------- Financial intermediaries market and sell shares of the Funds. These financial intermediaries employ financial advisors and receive compensation for selling shares of the Fund. This compensation is paid from various sources, including any sales charge, CDSC and/or Rule 12b-1 fee that you or the Fund may pay. Your individual financial advisor may receive some or all of the amounts paid to the financial intermediary that employs him or her. In the case of Class A shares, all or a portion of the initial sales charge that you pay may be paid by ABI to financial intermediaries selling Class A shares. ABI may also pay these financial intermediaries a fee of up to 1% on purchases of $1 million or more. Additionally, up to 100% of the Rule 12b-1 fees applicable to Class A shares each year may be paid to financial intermediaries, including your financial intermediary, that sell Class A shares. In the case of Class B shares, ABI will pay, at the time of your purchase, a commission to financial intermediaries selling Class B shares in an amount equal to 4% of your investment. Additionally, up to 30% of the Rule 12b-1 fees applicable to Class B shares each year may be paid to financial intermediaries, including your financial intermediary, that sell Class B shares. In the case of Class C shares, ABI will pay, at the time of your purchase, a commission to firms selling Class C shares in an amount equal to 1% of your investment. Additionally, up to 100% of the Rule 12b-1 fee applicable to Class C shares each year may be paid to financial intermediaries, including your financial intermediary, that sell Class C shares. In the case of Class R and Class K shares up to 100% of the Rule 12b-1 fee applicable to Class R and Class K shares each year may be paid to financial intermediaries, including your financial intermediary, that sell Class R and Class K shares. In the case of Advisor Class shares, your financial advisor may charge ongoing fees or transactional fees. ABI may pay a portion of "ticket" or other transactional charges. Your financial advisor's firm receives compensation from the Fund, ABI and/or the Adviser in several ways from various sources, which include some or all of the following: o upfront sales commissions; o Rule 12b-1 fees; o additional distribution support; o defrayal of costs for educational seminars and training; and o payments related to providing sub-accounting or shareholder servicing. Please read your Prospectus carefully for information on this compensation. Other Payments for Distribution Services and Educational Support - ---------------------------------------------------------------- In addition to the commissions paid to financial intermediaries at the time of sale and the fees described under "Asset-Based Sales Charges or Distribution and/or Service (Rule 12b-1) Fees," in your Prospectus, some or all of which may be paid to financial intermediaries (and, in turn, to your financial advisor), ABI, at its expense, currently provides additional payments to firms that sell shares of the AllianceBernstein Mutual Funds. Although the individual components may be higher and the total amount of payments made to each qualifying firm in any given year may vary, the total amount paid to a financial intermediary in connection with the sale of shares of the AllianceBernstein Mutual Funds will generally not exceed the sum of (a) 0.25% of the current year's fund sales by that firm and (b) 0.10% of average daily net assets attributable to that firm over the year. These sums include payments to reimburse directly or indirectly the costs incurred by these firms and their employees in connection with educational seminars and training efforts about the AllianceBernstein Mutual Funds for the firms' employees and/or their clients and potential clients. The costs and expenses associated with these efforts may include travel, lodging entertainment and meals. For 2009, ABI's additional payments to these firms for distribution services and educational support related to the AllianceBernstein Mutual Funds is expected to be approximately 0.04% of the average monthly assets of the AllianceBernstein Mutual Funds, or approximately $21 million. In 2008, ABI paid approximately 0.04% of the average monthly assets of the AllianceBernstein Mutual Funds or approximately $21 million for distribution services and educational support related to the AllianceBernstein Mutual Funds. A number of factors are considered in determining the additional payments, including each firm's AllianceBernstein Mutual Fund sales, assets and redemption rates, and the willingness and ability of the firm to give ABI access to its financial advisors for educational and marketing purposes. In some cases, firms will include the AllianceBernstein Mutual Funds on a "preferred list." ABI's goal is to make the financial advisors who interact with current and prospective investors and shareholders more knowledgeable about the AllianceBernstein Mutual Funds so that they can provide suitable information and advice about the funds and related investor services. Each Fund and ABI also make payments for sub-accounting or shareholder servicing to financial intermediaries that sell AllianceBernstein Mutual Fund shares. Please see "Expenses of the Fund - Transfer Agency Agreement" above. These expenses paid by the Fund are included in "Other Expenses" under "Fees and Expenses of the Fund - Annual Fund Operating Expenses" in your Prospectus. If one mutual fund sponsor makes greater distribution assistance payments than another, your financial advisor and his or her firm may have an incentive to recommend one fund complex over another. Similarly, if your financial advisor or his or her firm receives more distribution assistance for one share class versus another, then they may have an incentive to recommend that class. Please speak with your financial advisor to learn more about the total amounts paid to your financial advisor and his or her firm by the Fund, the Adviser, ABI and by sponsors of other mutual funds he or she may recommend to you. You should also consult disclosures made by your financial advisor at the time of purchase. ABI anticipates that the firms that will receive additional payments for distribution services and/or educational support include: AIG Advisor Group Ameriprise Financial Services AXA Advisors Bank of America Cadaret, Grant & Co. CCO Investment Services Corp. Chase Investment Services Citigroup Global Markets Commonwealth Financial Network Donegal Securities ING Advisors Network LPL Financial Corporation Merrill Lynch Morgan Stanley Raymond James RBC Capital Markets Corporation Robert W. Baird UBS AG UBS Financial Services Wachovia Securities Wells Fargo Investments Although a Fund may use brokers and dealers who sell shares of the Fund to effect portfolio transactions, the Fund does not consider the sale of AllianceBernstein Mutual Fund shares as a factor when selecting brokers or dealers to effect portfolio transactions. - -------------------------------------------------------------------------------- REDEMPTION AND REPURCHASE OF SHARES - -------------------------------------------------------------------------------- The following information supplements that set forth in your Prospectus under "Investing in the Funds." If you are an Advisor Class shareholder through an account established under a fee-based program your fee-based program may impose requirements with respect to the purchase, sale or exchange of Advisor Class shares of the Fund that are different from those described herein. A transaction fee may be charged by your financial intermediary with respect to the purchase, sale or exchange of Advisor Class shares made through such financial intermediary. The Fund has authorized one or more brokers to receive on its behalf purchase and redemption orders. Such brokers are authorized to designate other intermediaries to receive purchase and redemption orders on the Fund's behalf. In such cases, orders will receive the NAV next computed after such order is properly received by the authorized broker or designee and accepted by the Fund. Redemption - ---------- Subject only to the limitations described below, each Fund's Charter requires that the Fund redeem the shares of the Fund tendered to it, as described below, at a redemption price equal to their NAV as next computed following the receipt of shares tendered for redemption in proper form. Except for any CDSC which may be applicable to Class A, Class B or Class C shares, there is no redemption charge. Payment of the redemption price normally will be made within seven days after the Fund's receipt of such tender for redemption. If a shareholder is in doubt about what documents are required by his or her fee-based program or employee benefit plan, the shareholder should contact his or her financial intermediary. The right of redemption may not be suspended or the date of payment upon redemption postponed for more than seven days after shares are tendered for redemption, except for any period during which the Exchange is closed (other than customary weekend and holiday closings), or during which the Commission determines that trading thereon is restricted, or for any period during which an emergency (as determined by the Commission) exists as a result of which disposal by the Fund of securities owned by it is not reasonably practicable or as a result of which it is not reasonably practicable for the Fund fairly to determine the value of its net assets, or for such other periods as the Commission may by order permit for the protection of security holders of the Fund. Payment of the redemption price normally will be made in cash but, at the option of the Fund, may be made in kind. No interest will accrue on uncashed redemption checks. The value of a shareholder's shares on redemption or repurchase may be more or less than the cost of such shares to the shareholder, depending upon the market value of the Fund's portfolio securities at the time of such redemption or repurchase. Redemption proceeds on Class A, Class B and Class C shares will reflect the deduction of the CDSC, if any. Payment (either in cash or in portfolio securities) received by a shareholder upon redemption or repurchase of his or her shares, assuming the shares constitute capital assets in his or her hands, will result in long-term or short-term capital gains (or loss) depending upon the shareholder's holding period and basis in respect of the shares redeemed. To redeem shares of the Funds for which no stock certificates have been issued, the registered owner or owners should forward a letter to the Fund containing a request for redemption. A Fund may require the signature or signatures on the letter to be Medallion Signature Guaranteed. Please contact ABIS to confirm whether a Medallion Signature Guarantee is needed. To redeem shares of a Fund represented by stock certificates, the investor should forward the appropriate stock certificate or certificates, endorsed in blank or with blank stock powers attached, to the Fund with the request that the shares represented thereby, or a specified portion thereof, be redeemed. The stock assignment form on the reverse side of each stock certificate surrendered to the Fund for redemption must be signed by the registered owner or owners exactly as the registered name appears on the face of the certificate or, alternatively, a stock power signed in the same manner may be attached to the stock certificate or certificates or, where tender is made by mail, separately mailed to the Fund. The signature or signatures on the assignment form must be guaranteed in the manner described above. Telephone Redemption by Electronic Funds Transfer. Each Fund shareholder is entitled to request redemption by electronic funds transfer (of shares for which no share certificates have been issued) by telephone at (800) 221-5672 if the shareholder has completed the appropriate portion of the Mutual Fund Application or, if an existing shareholder has not completed this portion, by an "Autosell" application obtained from ABIS (except for certain omnibus accounts). A telephone redemption by electronic funds transfer may not exceed $100,000, and must be made by 4:00 p.m., Eastern time, on a Fund business day as defined above. Proceeds of telephone redemptions will be sent by electronic funds transfer to a shareholder's designated bank account at a bank selected by the shareholder that is a member of the NACHA. Telephone Redemption by Check. Each Fund shareholder is eligible to request redemption by check of Fund shares for which no stock certificates have been issued by telephone at (800) 221-5672 before 4:00 p.m., Eastern time, on a Fund business day in an amount not exceeding $50,000. Proceeds of such redemptions are remitted by check to the shareholder's address of record. A shareholder otherwise eligible for telephone redemption by check may cancel the privilege by written instruction to ABIS, or by checking the appropriate box on the Mutual Fund Application. Telephone Redemptions - General. During periods of drastic economic, market or other developments, such as the terrorist attacks on September 11, 2001, it is possible that shareholders would have difficulty in reaching ABIS by telephone (although no such difficulty was apparent at any time in connection with the attacks). If a shareholder were to experience such difficulty, the shareholder should issue written instructions to ABIS at the address shown on the cover of this SAI. A Fund reserves the right to suspend or terminate its telephone redemption service at any time without notice. Telephone redemption by check is not available with respect to shares (i) for which certificates have been issued, (ii) held in nominee or "street name" accounts, (iii) held by a shareholder who has changed his or her address of record within the preceding 30 calendar days or (iv) held in any retirement plan account. Neither the Fund, the Adviser, ABI nor ABIS will be responsible for the authenticity of telephone requests for redemptions that the Fund reasonably believes to be genuine. A Fund will employ reasonable procedures in order to verify that telephone requests for redemptions are genuine, including, among others, recording such telephone instructions and causing written confirmations of the resulting transactions to be sent to shareholders. If the Fund did not employ such procedures, it could be liable for losses arising from unauthorized or fraudulent telephone instructions. Financial intermediaries may charge a commission for handling telephone requests for redemptions. Repurchase - ---------- A Fund may repurchase shares through ABI or financial intermediaries. The repurchase price will be the NAV next determined after ABI receives the request (less the CDSC, if any, with respect to the Class A, Class B and Class C shares), except that requests placed through financial intermediaries before the close of regular trading on the Exchange on any day will be executed at the NAV determined as of such close of regular trading on that day if received by ABI prior to its close of business on that day (normally 5:00 p.m., Eastern time). The financial intermediary is responsible for transmitting the request to ABI by 5:00 p.m., Eastern time (certain financial intermediaries may enter into operating agreements permitting them to transmit purchase information that was received prior to the close of business to ABI after 5:00 p.m., Eastern time, and receive that day's NAV). If the financial intermediary fails to do so, the shareholder's right to receive that day's closing price must be settled between the shareholder and that financial intermediary. A shareholder may offer shares of the Fund to ABI either directly or through a financial intermediary. Neither the Fund nor ABI charges a fee or commission in connection with the repurchase of shares (except for the CDSC, if any, with respect to Class A, Class B and Class C shares). Normally, if shares of the Fund are offered through a financial intermediary, the repurchase is settled by the shareholder as an ordinary transaction with or through that financial intermediary, who may charge the shareholder for this service. The repurchase of shares of the Fund as described above with respect to financial intermediaries is a voluntary service of the Fund, and the Fund may suspend or terminate this practice at any time. General - ------- A Fund reserves the right to close out an account that has remained below $500 for 90 days. No CDSC will be deducted from the proceeds of this redemption. In the case of a redemption or repurchase of shares of the Fund recently purchased by check, redemption proceeds will not be made available until the Fund is reasonably assured that the check has cleared, normally up to 15 calendar days following the purchase date. - -------------------------------------------------------------------------------- SHAREHOLDER SERVICES - -------------------------------------------------------------------------------- The following information supplements that set forth in your Prospectus under "Investing in the Funds." The shareholder services set forth below are applicable to all classes of shares unless otherwise indicated. If you are an Advisor Class shareholder through an account established under a fee-based program or a shareholder in a group retirement program, your fee-based program or retirement program may impose requirements with respect to the purchase, sale or exchange of shares of the Fund that are different from those described herein. Automatic Investment Program - ---------------------------- Investors may purchase shares of a Fund through an automatic investment program utilizing electronic funds transfer drawn on the investor's own bank account. Under such a program, pre-authorized monthly drafts for a fixed amount are used to purchase shares through the financial intermediary designated by the investor at the public offering price next determined after ABI receives the proceeds from the investor's bank. The monthly drafts must be in minimum amounts of either $50 or $200, depending on the investor's initial purchase. If an investor makes an initial purchase of at least $2,500, the minimum monthly amount for pre-authorized drafts is $50. If an investor makes an initial purchase of less than $2,500, the minimum monthly amount for pre-authorized drafts is $200 and the investor must commit to a monthly investment of at least $200 until the investor's account balance is $2,500 or more. In electronic form, drafts can be made on or about a date each month selected by the shareholder. Investors wishing to establish an automatic investment program in connection with their initial investment should complete the appropriate portion of the Mutual Fund Application. As of January 31, 2009, the Automatic Investment Program is available for purchase of Class B shares only if a shareholder was enrolled in the Program prior to January 31, 2009. Current shareholders should contact ABIS at the address or telephone number shown on the cover of this SAI to establish an automatic investment program. Shareholders committed to monthly investments of $25 or more through the Automatic Investment Program by October 15, 2004 are able to continue their program despite the $50 monthly minimum. Exchange Privilege - ------------------ You may exchange your investment in the Fund for shares of the same class of other AllianceBernstein Mutual Funds (including AllianceBernstein Exchange Reserves, a money market fund managed by the Adviser) if the other AllianceBernstein Mutual Fund in which you wish to invest offers shares of the same class. In addition, (i) present officers and full-time employees of the Adviser, (ii) present Directors or Trustees of any AllianceBernstein Mutual Fund and (iii) certain employee benefit plans for employees of the Adviser, ABI, ABIS and their affiliates may, on a tax-free basis, exchange Class A shares of the Fund for Advisor Class shares of the Fund. Exchanges of shares are made at the NAV next determined and without sales or service charges. Exchanges may be made by telephone or written request. In order to receive a day's NAV, ABIS must receive and confirm a telephone exchange request by 4:00 p.m., Eastern time, on that day. Shares will continue to age without regard to exchanges for purposes of determining the CDSC, if any, upon redemption and, in the case of Class B shares, for the purpose of conversion to Class A shares. After an exchange, your Class B shares will automatically convert to Class A shares in accordance with the conversion schedule applicable to the Class B shares of the AllianceBernstein Mutual Fund you originally purchased for cash ("original shares"). When redemption occurs, the CDSC applicable to the original shares is applied. Please read carefully the prospectus of the AllianceBernstein Mutual Fund into which you are exchanging before submitting the request. Call ABIS at (800) 221-5672 to exchange uncertificated shares. Except with respect to exchanges of Class A shares of the Fund for Advisor Class shares of the Fund, exchanges of shares as described above in this section are taxable transactions for federal income tax purposes. The exchange service may be modified, restricted or terminated on 60 days' written notice. All exchanges are subject to the minimum investment requirements and any other applicable terms set forth in the prospectus for the AllianceBernstein Mutual Fund whose shares are being acquired. An exchange is effected through the redemption of the shares tendered for exchange and the purchase of shares being acquired at their respective NAVs as next determined following receipt by the AllianceBernstein Mutual Fund whose shares are being exchanged of (i) proper instructions and all necessary supporting documents as described in such fund's prospectus, or (ii) a telephone request for such exchange in accordance with the procedures set forth in the following paragraph. Exchanges involving the redemption of shares recently purchased by check will be permitted only after the AllianceBernstein Mutual Fund whose shares have been tendered for exchange is reasonably assured that the check has cleared, normally up to 15 calendar days following the purchase date. Exchanges of shares of AllianceBernstein Mutual Funds will generally result in the realization of a capital gain or loss for federal income tax purposes. Each Fund shareholder and the shareholder's financial intermediary are authorized to make telephone requests for exchanges unless ABIS receives written instruction to the contrary from the shareholder, or the shareholder declines the privilege by checking the appropriate box on the Mutual Fund Application. Such telephone requests cannot be accepted with respect to shares then represented by stock certificates. Shares acquired pursuant to a telephone request for exchange will be held under the same account registration as the shares redeemed through such exchange. Eligible shareholders desiring to make an exchange should telephone ABIS with their account number and other details of the exchange at (800) 221-5672 before 4:00 p.m., Eastern time, on a Fund business day as defined above. Telephone requests for exchange received before 4:00 p.m., Eastern time, on a Fund business day will be processed as of the close of business on that day. During periods of drastic economic, market or other developments, such as the terrorist attacks on September 11, 2001, it is possible that shareholders would have difficulty in reaching ABIS by telephone (although no such difficulty was apparent at any time in connection with the attacks). If a shareholder were to experience such difficulty, the shareholder should issue written instructions to ABIS at the address shown on the cover of this SAI. A shareholder may elect to initiate a monthly "Auto Exchange" whereby a specified dollar amount's worth of his or her Fund shares (minimum $25) is automatically exchanged for shares of another AllianceBernstein Mutual Fund. None of the AllianceBernstein Mutual Funds, the Adviser, ABI or ABIS will be responsible for the authenticity of telephone requests for exchanges that the Fund reasonably believes to be genuine. A Fund will employ reasonable procedures in order to verify that telephone requests for exchanges are genuine, including, among others, recording such telephone instructions and causing written confirmations of the resulting transactions to be sent to shareholders. If the Fund did not employ such procedures, it could be liable for losses arising from unauthorized or fraudulent telephone instructions. Financial intermediaries may charge a commission for handling telephone requests for exchanges. The exchange privilege is available only in states where shares of the AllianceBernstein Mutual Fund being acquired may be legally sold. Each AllianceBernstein Mutual Fund reserves the right, at any time on 60 days' written notice to its shareholders, to modify, restrict or terminate the exchange privilege. Statements and Reports - ---------------------- Each shareholder of the Fund receives semi-annual and annual reports which include a portfolio of investments, financial statements and, in the case of the annual report, the report of the Fund's independent registered public accounting firm, Ernst & Young LLP, as well as a confirmation of each purchase and redemption. By contacting his or her financial intermediary or ABIS, a shareholder can arrange for copies of his or her account statements to be sent to another person. Shareholder Services Applicable to Class A and Class C Shareholders Only - ------------------------------------------------------------------------ Checkwriting - ------------ A new Class A or Class C investor may fill out the Signature Card to authorize the Fund to arrange for a checkwriting service through State Street Bank and Trust Company (the "Bank") to draw against Class A or Class C shares of the Fund redeemed from the investor's account. Under this service, checks may be made payable to any payee in any amount not less than $500 and not more than 90% of the NAV of the Class A or Class C shares in the investor's account (excluding for this purpose the current month's accumulated dividends and shares for which certificates have been issued). A Class A or Class C shareholder wishing to establish this checkwriting service subsequent to the opening of his or her Fund account should contact the Fund by telephone or mail. Corporations, fiduciaries and institutional investors are required to furnish a certified resolution or other evidence of authorization. This checkwriting service will be subject to the Bank's customary rules and regulations governing checking accounts, and the Fund and the Bank each reserve the right to change or suspend the checkwriting service. There is no charge to the shareholder for the initiation and maintenance of this service or for the clearance of any checks. When a check is presented to the Bank for payment, the Bank, as the shareholder's agent, causes the Fund to redeem, at the NAV next determined, a sufficient number of full and fractional shares of the Fund in the shareholder's account to cover the check. Because the level of net assets in a shareholder's account constantly changes due, among various factors, to market fluctuations, a shareholder should not attempt to close his or her account by use of a check. In this regard, the Bank has the right to return checks (marked "insufficient funds") unpaid to the presenting bank if the amount of the check exceeds 90% of the assets in the account. Canceled (paid) checks are returned to the shareholder. The checkwriting service enables the shareholder to receive the daily dividends declared on the shares to be redeemed until the day that the check is presented to the Bank for payment. - -------------------------------------------------------------------------------- NET ASSET VALUE - -------------------------------------------------------------------------------- The NAV is computed at the next close of regular trading on the Exchange (ordinarily 4:00 p.m., Eastern time) following receipt of a purchase or redemption order by the Fund on each Fund business day on which such an order is received and on such other days as the Board of Directors deems appropriate or necessary in order to comply with Rule 22c-1 under the 1940 Act. A Fund's NAV is calculated by dividing the value of the Fund's total assets, less its liabilities, by the total number of its shares then outstanding. As noted above, a Fund business day is any weekday on which the Exchange is open for trading. In accordance with applicable rules under the 1940 Act and the Fund's pricing policies and procedures adopted by the Board of Directors (the "Pricing Policies"), portfolio securities are valued at current market value or at fair value as determined in good faith by the Board of Directors. The Board has delegated to the Adviser, subject to the Board's continuing oversight, certain of its duties with respect to the Pricing Policies. With respect to securities for which market quotations are readily available, the market value of a security will be determined as follows: (a) securities listed on the Exchange, other national securities exchanges (other than securities listed on The NASDAQ Stock Market, Inc. ("NASDAQ")) or on a foreign securities exchange are valued at the last sale price reflected on the consolidated tape at the close of the exchange or foreign securities exchange on the business day as of which such value is being determined. If there has been no sale on such day, the securities are valued at the mean of the closing bid and asked prices on such day. If no bid or asked prices are quoted on such day, then the security is valued in good faith at fair value by, or in accordance with procedures established by, the Board of Directors; (b) securities traded on NASDAQ are valued in accordance with the NASDAQ Official Closing Price; (c) securities traded on the Exchange or on a foreign securities exchange and on one or more other national or foreign securities exchanges, and securities not traded on the Exchange but traded on one or more other national or foreign securities exchanges, are valued in accordance with paragraph (a) above by reference to the principal exchange on which the securities are traded; (d) listed put or call options purchased by the Fund are valued at the last sale price. If there has been no sale on that day, such securities will be valued at the closing bid prices on that day; (e) open futures contracts and options thereon will be valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuations, the last available closing settlement price will be used; (f) securities traded in the over-the-counter market, including securities listed on a national securities exchange whose primary market is believed to be over-the-counter are valued at the mean of the current bid and asked prices as reported by the National Quotation Bureau or other comparable sources; (g) U.S. Government securities and other debt instruments having 60 days or less remaining until maturity are valued at amortized cost if their original maturity was 60 days or less, or by amortizing their fair value as of the 61st day prior to maturity if their original term to maturity exceeded 60 days (unless in either case it is determined, in accordance with procedures established by the Board of Directors, that this method does not represent fair value); (h) fixed-income securities may be valued on the basis of prices provided by a pricing service when such prices are believed to reflect the fair market value of such securities. The prices provided by a pricing service take into account many factors, including institutional size, trading in similar groups of securities and any developments related to specific securities. For securities where the Adviser has determined that an appropriate pricing service does not exist, such securities may be valued on the basis of a quoted bid price or spread from a major broker-dealer in such security; (i) mortgage-backed and asset-backed securities may be valued at prices obtained from a bond pricing service or at a price obtained from one or more of the major broker-dealers in such securities when such prices are believed to reflect the fair market value of such securities. In cases where broker-dealer quotes are obtained, the Adviser may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted bid price on a security; (j) OTC and other derivatives are valued on the basis of a quoted bid price or spread from a major broker-dealer in such security; (k) credit default swaps may be valued on the basis of a mid price. A broker-dealer will provide a bid and offer spread, where a mean is calculated and thereafter used to calculate a mid price; and (l) all other securities will be valued in accordance with readily available market quotations as determined in accordance with procedures established by the Board. A Fund values its securities at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are unreliable, at "fair value" as determined in accordance with procedures established by and under the general supervision of the Fund's Board of Directors. When the Fund uses fair value pricing, it may take into account any factors it deems appropriate. A Fund may determine fair value based upon developments related to a specific security, current valuations of foreign stock indices (as reflected in U.S. futures markets) and/or U.S. sector or broader stock market indices. The prices of securities used by the Fund to calculate its NAV may differ from quoted or published prices for the same securities. Fair value pricing involves subjective judgments and it is possible that the fair value determined for a security is materially different than the value that could be realized upon the sale of that security. Securities for which market quotations are not readily available or deemed unreliable (including restricted securities) are valued at fair market value. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer or analysts, or by analysis of the issuer's financial statements. A Fund may use fair value pricing more frequently for foreign securities because, among other things, most foreign markets close well before the Fund values its securities at 4:00 p.m., Eastern time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of these foreign securities. A Fund may value these securities using fair value prices based on independent pricing services or third party vendor tools to the extent available. Subject to the Board's oversight, the Fund's Board has delegated responsibility for valuing the Fund's assets to the Adviser. The Adviser has established a Valuation Committee, which operates under the policies and procedures approved by the Board, to value the Fund's assets on behalf of the Fund. The Valuation Committee values Fund assets as described above. A Fund may suspend the determination of its NAV (and the offering and sale of shares), subject to the rules of the Commission and other governmental rules and regulations, at a time when: (1) the Exchange is closed, other than customary weekend and holiday closings, (2) an emergency exists as a result of which it is not reasonably practicable for the Fund to dispose of securities owned by it or to determine fairly the value of its net assets, or (3) for the protection of shareholders, the Commission by order permits a suspension of the right of redemption or a postponement of the date of payment on redemption. For purposes of determining the Fund's NAV per share, all assets and liabilities initially expressed in a foreign currency will be converted into U.S. Dollars at the mean of the current bid and asked prices of such currency against the U.S. Dollar last quoted by a major bank that is a regular participant in the relevant foreign exchange market or on the basis of a pricing service that takes into account the quotes provided by a number of such major banks. If such quotations are not available as of the close of the Exchange, the rate of exchange will be determined in good faith by, or under the direction of, the Board of Directors. The assets attributable to the Class A shares, Class B shares, Class C shares, Class R shares, Class K shares, Class I shares and Advisor Class shares will be invested together in a single portfolio. The NAV of each class will be determined separately by subtracting the liabilities allocated to that class from the assets belonging to that class in conformance with the provisions of a plan adopted by the Fund in accordance with Rule 18f-3 under the 1940 Act. - -------------------------------------------------------------------------------- PORTFOLIO TRANSACTIONS - -------------------------------------------------------------------------------- Subject to the general oversight of the Board of Directors of a Fund, the Adviser is responsible for the investment decisions and the placing of the orders for portfolio transactions for the Fund. The Adviser determines the broker or dealer to be used in each specific transaction with the objective of negotiating a combination of the most favorable commission (for transactions on which a commission is payable) and the best price obtainable on each transaction (generally defined as best execution). In connection with seeking best price and execution, the Fund does not consider sales of shares of the Fund or other investment companies managed by the Adviser as a factor in the selection of brokers and dealers to effect portfolio transactions and has adopted a policy and procedures reasonably designed to preclude such considerations. When consistent with the objective of obtaining best execution, brokerage may be directed to persons or firms supplying investment information to the Adviser. There may be occasions where the transaction cost charged by a broker may be greater than that which another broker may charge if the Fund determines in good faith that the amount of such transaction cost is reasonable in relation to the value of the brokerage, research and statistical services provided by the executing broker. Neither the Fund nor the Adviser entered into agreements or understandings with any brokers regarding the placement of securities transactions because of research or statistical services they provide. To the extent that such persons or firms supply investment information to the Adviser for use in rendering investment advice to the Fund, such information may be supplied at no cost to the Adviser and, therefore, may have the effect of reducing the expenses of the Adviser in rendering advice to the Fund. While it is impracticable to place an actual dollar value on such investment information, its receipt by the Adviser probably does not reduce the overall expenses of the Adviser to any material extent. The investment information provided to the Adviser is of the type described in Section 28(e)(3) of the Securities Exchange Act of 1934 and is designed to augment the Adviser's own internal research and investment strategy capabilities. Research services furnished by brokers through which the Fund effects securities transactions are used by the Adviser in carrying out its investment management responsibilities with respect to all its client accounts. The extent to which commissions that will be charged by broker-dealers selected by the Fund may reflect an element of value for research cannot presently be determined. To the extent that research services of value are provided by broker-dealers with or through whom the Fund places portfolio transactions, the Adviser may be relieved of expenses which it might otherwise bear. Research services furnished by broker-dealers could be useful and of value to the Adviser in servicing its other clients as well as the Fund; but, on the other hand, certain research services obtained by the Adviser as a result of the placement of portfolio brokerage of other clients could be useful and of value to it in serving the Fund. A Fund may deal in some instances in securities that are not listed on a national stock exchange but are traded in the over-the-counter market. A Fund may also purchase listed securities through the third market, i.e., from a dealer that is not a member of the Exchange on which a security is listed. Where transactions are executed in the over-the-counter market or third market, the Fund will seek to deal with the primary market makers; but when necessary in order to obtain the best price and execution, it will utilize the services of others. In all cases, the Fund will attempt to negotiate best execution. Investment decisions for the Fund are made independently from those for other investment companies and other advisory accounts managed by the Adviser. It may happen, on occasion, that the same security is held in the portfolio of the Fund and one or more of such other companies or accounts. Simultaneous transactions are likely when several funds or accounts are managed by the same Adviser, particularly when a security is suitable for the investment objectives of more than one of such companies or accounts. When two or more companies or accounts managed by the Adviser are simultaneously engaged in the purchase or sale of the same security, the transactions are allocated to the respective companies or accounts both as to amount and price, in accordance with a method deemed equitable to each company or account. In some cases this system may adversely affect the price paid or received by the Fund or the size of the position obtainable for the Fund. Allocations are made by the officers of the Fund or of the Adviser. Purchases and sales of portfolio securities are determined by the Adviser and are placed with broker-dealers by the order department of the Adviser. A Fund's portfolio transactions occur primarily with issuers, underwriters or major dealers acting as principals. Such transactions are normally on a net basis which do not involve payment of brokerage commissions. The cost of securities purchased from an underwriter usually includes a commission paid by the issuer to the underwriter; transactions with dealers normally reflect the spread between bid and asked prices. Premiums are paid with respect to options purchased by the Fund, and brokerage commissions are payable with respect to transactions in exchange-traded interest rate futures contracts. Most transactions for the Fund, including transactions in listed securities, are executed in the over-the-counter market by approximately fifteen (15) principal market maker dealers with whom the Adviser maintains regular contact. Most transactions made by the Fund will be principal transactions at net prices and the Fund will incur little or no brokerage costs. Where possible, securities will be purchased directly from the issuer or from an underwriter or market maker for the securities unless the Adviser believes a better price and execution is available elsewhere. Purchases from underwriters of newly-issued securities for inclusion in the Fund usually will include a concession paid to the underwriter by the issuer, and purchases from dealers serving as market makers will include the spread between the bid and asked price. A Fund has no obligation to enter into transactions in securities with any broker, dealer, issuer, underwriter or other entity. Where best price and execution may be obtained from more than one broker or dealer, the Adviser may, in its discretion, purchase and sell securities through brokers and dealers who provide research, statistical and other information to the Adviser. Such services may be used by the Adviser for all of its investment advisory accounts and, accordingly, not all such services may be used by the Adviser in connection with the Fund. There may be occasions where the transaction cost charged by a broker may be greater than that which another broker may charge if the Fund determines in good faith that the amount of such transaction cost is reasonable in relationship to the value of the brokerage and research and statistical services provided by the executing broker. During the fiscal years ended October 31, 2006, 2007 and 2008 for Intermediate Bond, Diversified Yield and High Income and for the fiscal years ended September 3, 2006, 2007 and 2008 for Global Bond, the Fund incurred no brokerage commissions. A Fund may from time to time place orders for the purchase or sale of securities (including listed call options) with SCB & Co., an affiliate of the Adviser. In such instances, the placement of orders with such brokers would be consistent with the Fund's objective of obtaining best execution and would not be dependent upon the fact that SCB & Co. is an affiliate of the Adviser. With respect to orders placed with SCB & Co. for execution on a national securities exchange, commissions received must conform to Section 17(e)(2)(A) of the 1940 Act and Rule 17e-1 thereunder, which permit an affiliated person of a registered investment company (such as the Fund), or any affiliated person of such person, to receive a brokerage commission from such registered investment company provided that such commission is reasonable and fair compared to the commissions received by other brokers in connection with comparable transactions involving similar securities during a comparable period of time. Disclosure of Fund Holdings - --------------------------- A Fund believes that the ideas of the Adviser's investment staff should benefit the Fund and its shareholders, and does not want to afford speculators an opportunity to profit by anticipating Fund trading strategies or using Fund information for stock picking. However, the Fund also believes that knowledge of the Fund's portfolio holdings can assist shareholders in monitoring their investment, making asset allocation decisions, and evaluating portfolio management techniques. The Adviser has adopted, on behalf of the Fund, policies and procedures relating to disclosure of the Fund's portfolio securities. The policies and procedures relating to disclosure of the Fund's portfolio securities are designed to allow disclosure of portfolio holdings information where necessary to the Fund's operation or useful to the Fund's shareholders without compromising the integrity or performance of the Fund. Except when there are legitimate business purposes for selective disclosure and other conditions (designed to protect the Fund and its shareholders) are met, the Fund does not provide or permit others to provide information about the Fund's portfolio holdings on a selective basis. A Fund includes portfolio holdings information as required in regulatory filings and shareholder reports, discloses portfolio holdings information as required by federal or state securities laws and may disclose portfolio holdings information in response to requests by governmental authorities. In addition, the Adviser posts portfolio holdings information on the Adviser's website (www.AllianceBernstein.com). The Adviser posts on the website a complete schedule of the Fund's portfolio securities, as of the last day of each fiscal calendar month, approximately 30 days after the end of that month. This posted information generally remains accessible on the website for three months. For each portfolio security, the posted information includes its name, the number of shares held by the Fund, the market value of the Fund's holdings, and the percentage of the Fund's assets represented by the portfolio security. In addition to the schedule of portfolio holdings, the Adviser posts information about the number of securities the Fund holds, a summary of the Fund's top ten holdings (including name and the percentage of the Fund's assets invested in each holding), and a percentage breakdown of the Fund's investments by credit risk or securities type, as applicable, approximately [_____] days after the end of the month. The day after portfolio holdings information is publicly available on the website, it may be mailed, e-mailed or otherwise transmitted to any person. The Adviser may distribute or authorize the distribution of information about the Fund's portfolio holdings that is not publicly available, on the website or otherwise, to the Adviser's employees and affiliates that provide services to the Fund. In addition, the Adviser may distribute or authorize distribution of information about the Fund's portfolio holdings that is not publicly available, on the website or otherwise, to the Fund's service providers who require access to the information in order to fulfill their contractual duties relating to the Fund (including, without limitation, pricing services and proxy voting services), and to facilitate the review of the Fund by rating agencies, for the purpose of due diligence regarding a merger or acquisition, or for the purpose of effecting in-kind redemption of securities to facilitate orderly redemption of portfolio assets and minimal impact on remaining Fund shareholders. The Adviser does not expect to disclose information about the Fund's portfolio holdings that is not publicly available to the Fund's individual or institutional investors or to intermediaries that distribute the Fund's shares. Information may be disclosed with any frequency and any lag, as appropriate. Before any non-public disclosure of information about the Fund's portfolio holdings is permitted, however, the Adviser's Chief Compliance Officer (or his designee) must determine that the Fund has a legitimate business purpose for providing the portfolio holdings information, that the disclosure is in the best interests of the Fund's shareholders, and that the recipient agrees or has a duty to keep the information confidential and agrees not to trade directly or indirectly based on the information or to use the information to form a specific recommendation about whether to invest in the Fund or any other security. Under no circumstances may the Adviser or its affiliates receive any consideration or compensation for disclosing the information. The Adviser has established procedures to ensure that the Fund's portfolio holdings information is only disclosed in accordance with these policies. Only the Adviser's Chief Compliance Officer (or his designee) may approve the disclosure, and then only if he or she and a designated senior officer in the Adviser's product management group determines that the disclosure serves a legitimate business purpose of the Fund and is in the best interest of the Fund's shareholders. The Adviser's Chief Compliance Officer (or his designee) approves disclosure only after considering the anticipated benefits and costs to the Fund and its shareholders, the purpose of the disclosure, any conflicts of interest between the interests of the Fund and its shareholders and the interests of the Adviser or any of its affiliates, and whether the disclosure is consistent with the policies and procedures governing disclosure. Only someone approved by the Adviser's Chief Compliance Officer (or his designee) may make approved disclosures of portfolio holdings information to authorized recipients. The Adviser reserves the right to request certifications from senior officers of authorized recipients that the recipient is using the portfolio holdings information only in a manner consistent with the Adviser's policy and any applicable confidentiality agreement. The Adviser's Chief Compliance Officer or another member of the compliance team reports all arrangements to disclose portfolio holdings information to the Fund's Board of Directors on a quarterly basis. If the Board determines that disclosure was inappropriate, the Adviser will promptly terminate the disclosure arrangement. In accordance with these procedures, each of the following third parties have been approved to receive information concerning the Fund's portfolio holdings: (i) the Fund's independent registered public accounting firm, for use in providing audit opinions; (ii) RR Donnelley Financial, Data Communique International and, from time to time, other financial printers, for the purpose of preparing Fund regulatory filings; (iii) the Fund's custodian in connection with its custody of the Fund's assets; (iv) Institutional Shareholder Services, Inc. for proxy voting services; and (v) data aggregators, such as Vestek. Information may be provided to these parties at any time with no time lag. Each of these parties is contractually and ethically prohibited from sharing the Fund's portfolio holdings information unless specifically authorized. - -------------------------------------------------------------------------------- DIVIDENDS, DISTRIBUTIONS AND TAXES - -------------------------------------------------------------------------------- United States Federal Income Taxation of Dividends and Distributions - -------------------------------------------------------------------- General. Each Fund intends for each taxable year to qualify to be taxed as a "regulated investment company" under the Code. To so qualify, a Fund must, among other things, (i) derive at least 90% of its gross income in each taxable year from dividends, interest, payments with respect to securities loans, gains from the sale or other disposition of stock, securities or foreign currency, certain other income (including, but not limited to, gains from options, futures or forward currency exchange contracts) derived with respect to its business of investing in stock, securities or currency or net income derived from interests in certain qualified publicly traded partnerships; and (ii) diversify its holdings so that, at the end of each quarter of its taxable year, the following two conditions are met: (a) at least 50% of the value of the Fund's assets is represented by cash, cash items, U.S. Government Securities, securities of other regulated investment companies and other securities with respect to which the Fund's investment is limited, in respect of any one issuer, to an amount not greater than 5% of the value of the Fund's assets and to not more than 10% of the outstanding voting securities of such issuer and (b) not more than 25% of the value of the Fund's assets is invested in securities of any one issuer (other than U.S. Government Securities or securities of other regulated investment companies), securities (other than securities of other regulated investment companies) of any two or more issuers which the Fund controls and which are engaged in the same or similar trades or businesses or related trades or businesses, or securities of one or more qualified publicly traded partnerships. If a Fund qualifies as a regulated investment company for any taxable year and makes timely distributions to its shareholders of 90% or more of its investment company taxable income for that year (calculated without regard to its net capital gain, i.e., the excess of its net long-term capital gain over its net short-term capital loss) it will not be subject to federal income tax on the portion of its taxable income for the year (including any net capital gain) that it distributes to shareholders. It is the present policy of each Fund to distribute to shareholders all net investment income quarterly and to distribute net realized capital gains, if any, annually. The amount of any such distributions must necessarily depend upon the realization by the Fund of income and capital gains from investments. A Fund will also avoid the 4% federal excise tax that would otherwise apply to certain undistributed income for a given calendar year if it makes timely distributions to shareholders equal to the sum of (i) 98% of its ordinary income for such year, (ii) 98% of its capital gain net income and foreign currency gains for the twelve-month period ending on October 31 of such year; and (iii) any ordinary income or capital gain net income from the preceding calendar year that was not distributed during such year. For this purpose, income or gain retained by the Fund that is subject to corporate income tax will be considered to have been distributed by the Fund during such year. For federal income and excise tax purposes, dividends declared and payable to shareholders of record as of a date in October, November or December but actually paid during the following January will be treated as if paid by the Fund on December 31 of such earlier calendar year, and will be taxable to these shareholders in the year declared, and not in the year in which the shareholders actually receive the dividend. The information set forth in your Prospectus and the following discussion relate solely to the significant United States federal income taxes on dividends and distributions by a Fund and assumes that the Fund qualifies to be taxed as a regulated investment company. An investor should consult his or her own tax advisor with respect to the specific tax consequences of being a shareholder in a Fund, including the effect and applicability of federal, state, local and foreign tax laws to his or her own particular situation and the possible effects of changes therein. Dividends and Distributions. A Fund intends to make timely distributions of the Fund's taxable income (including any net capital gain) so that the Fund will not be subject to federal income and excise taxes. Dividends of the Fund's net ordinary income and distributions of any net realized short-term capital gain are taxable to shareholders as ordinary income. Some or all of the distributions from a mutual fund may be treated as "qualified dividend income," taxable to individuals, trusts and estates at the reduced maximum rate of 15% if paid on or before December 31, 2010 (5% for individuals, trusts and estates in lower tax brackets), provided that both the fund and the shareholder satisfy certain holding period and other requirements. Based upon the investment policies of the Funds, it is expected that only a small portion, if any, of the Funds' distributions would be treated as "qualified dividend income." Distributions of net capital gain are taxable as long-term capital gain, regardless of how long a shareholder has held shares in the Funds. Any dividend or distribution received by a shareholder on shares of a Fund will have the effect of reducing the NAV of such shares by the amount of such dividend or distribution. Furthermore, a dividend or distribution made shortly after the purchase of such shares by a shareholder, although in effect a return of capital to that particular shareholder, would be taxable to him or her as described above. Dividends are taxable in the manner discussed regardless of whether they are paid to the shareholder in cash or are reinvested in additional shares of a Fund. The investment objectives of the Funds is such that only a small portion, if any, of the Funds' distributions is expected to qualify for the dividends-received deduction for corporate shareholders. After the end of the calendar year, a Fund will notify shareholders of the federal income tax status of any distributions made by the Fund to shareholders during such year. Sales and Redemptions. Any gain or loss arising from a sale or redemption of Fund shares generally will be capital gain or loss if a Fund shares are held as a capital asset, and will be long-term capital gain or loss if the shareholder has held such shares for more than one year at the time of the sale or redemption; otherwise it will be short-term capital gain or loss. If a shareholder has held shares in the Fund for six months or less and during that period has received a distribution of net capital gain, any loss recognized by the shareholder on the sale of those shares during the six-month period will be treated as a long-term capital loss to the extent of the distribution. In determining the holding period of such shares for this purpose, any period during which a shareholder's risk of loss is offset by means of options, short sales or similar transactions is not counted. Any loss realized by a shareholder on a sale or exchange of shares of a Fund will be disallowed to the extent the shares disposed of are reacquired within a period of 61 days beginning 30 days before and ending 30 days after the shares are sold or exchanged. For this purpose, acquisitions pursuant to the Dividend Reinvestment Plan would constitute a reacquisition if made within the period. If a loss is so disallowed, then such loss will be reflected in an upward adjustment to the basis of the shares acquired. Qualified Plans. A dividend or capital gains distribution with respect to shares of a Fund held by a tax-deferred or qualified plan, such as an individual retirement account, section 403(b)(7) retirement plan or corporate pension or profit-sharing plan, generally will not be taxable to the plan. Distributions from such plans will be taxable to individual participants under applicable tax rules without regard to the character of the income earned by the qualified plan. Backup Withholding. Any distributions and redemption proceeds payable to a shareholder may be subject to "backup withholding" tax (currently at a rate of 28%) if such shareholder fails to provide a Fund with his or her correct taxpayer identification number, fails to make certain required certifications or is notified by the Internal Revenue Service (the "IRS") that he or she is subject to backup withholding. Certain categories of shareholders, including all corporations, are exempt from such backup withholding. Backup withholding is not an additional tax; rather, a shareholder generally may obtain a refund of any amounts withheld under backup withholding rules that exceed such shareholder's income tax liability by filing a refund claim with the IRS, provided that the required information is furnished to the IRS. Foreign Taxes. Income received by a Fund also may be subject to foreign income taxes, including taxes withheld at the source. The United States has entered into tax treaties with many foreign countries which entitle a Fund to a reduced rate of such taxes or exemption from taxes on such income. It is impossible to determine the effective rate of foreign tax in advance since the amount of a Fund's assets to be invested within various countries is not known. If more than 50% of the value of the Fund's assets at the close of its taxable year consists of stocks or securities of foreign corporations (which for this purpose should include obligations issued by foreign governments), the Fund will be eligible and intends to file an election with the IRS to pass through to its shareholders the amount of foreign taxes paid by the Fund. However, there can be no assurance that a Fund will be able to do so. If a Fund makes this election, a shareholder will be required to (i) include in gross income (in addition to taxable dividends actually received) his or her pro rata share of foreign taxes paid by the Fund, (ii) treat his or her pro rata share of such foreign taxes as having been paid by him and (iii) either deduct such pro rata share of foreign taxes in computing his or her taxable income or treat such foreign taxes as a credit against United States federal income taxes. Shareholders who are not liable for federal income taxes, such as retirement plans qualified under section 401 of the Code, will not be affected by any such pass-through of taxes by a Fund. No deduction for foreign taxes may be claimed by an individual shareholder who does not itemize deductions. In addition, certain shareholders may be subject to rules which limit or reduce their ability to fully deduct, or claim a credit for, their pro rata share of the foreign taxes paid by the Fund. A shareholder's foreign tax credit with respect to a dividend received from a Fund will be disallowed unless the shareholder holds shares in the Fund on the ex-dividend date and for at least 15 other days during the 30-day period beginning 15 days prior to the ex-dividend date. Each shareholder will be notified within 60 days after the close of the Fund's taxable year whether the foreign taxes paid by the Fund will pass through for that year and, if so, such notification will designate (i) the shareholder's portion of the foreign taxes paid to each such country and (ii) the portion of dividends that represents income derived from sources within each such country. The federal income tax status of each year's distributions by the Fund will be reported to shareholders and to the IRS. The foregoing is only a general description of the treatment of foreign taxes under the United States federal income tax laws. Because the availability of a foreign tax credit or deduction will depend on the particular circumstances of each shareholder, potential investors are advised to consult their own tax advisers. United States Federal Income Taxation of the Funds - -------------------------------------------------- The following discussion relates to certain significant United States federal income tax consequences to a Fund with respect to the determination of its "investment company taxable income" each year. This discussion assumes that each Fund will be taxed as a regulated investment company for each of its taxable years. Zero Coupon Treasury Securities. Under current federal tax law, a Fund will receive net investment income in the form of interest by virtue of holding Treasury bills, notes and bonds, and will recognize interest attributable to it under the original issue discount rules of the Code from holding zero coupon Treasury securities. Current federal tax law requires that a holder (such as a Fund) of a zero coupon security accrue a portion of the discount at which the security was purchased as income each year even though the Fund receives no interest payment in cash on the security during the year. Accordingly, a Fund may be required to pay out as an income distribution each year an amount that is greater than the total amount of cash interest the Fund actually received. Such distributions will be made from the cash assets of the Fund or by liquidation of portfolio securities, if necessary. If a distribution of cash necessitates the liquidation of portfolio securities, the Adviser will select which securities to sell. A Fund may realize a gain or loss from such sales. In the event a Fund realizes net capital gains from such transactions, its shareholders may receive a larger capital gain distribution, if any, than they would have in the absence of such transactions. Options, Futures Contracts, and Forward Currency Exchange Contracts. Certain listed options, regulated futures contracts and forward currency exchange contracts are considered "section 1256 contracts" for federal income tax purposes. Section 1256 contracts held by a Fund at the end of each taxable year will be "marked to market" and treated for federal income tax purposes as though sold for fair market value on the last business day of such taxable year. Gain or loss realized by a Fund on section 1256 contracts other than forward currency exchange contracts will be considered 60% long-term and 40% short-term capital gain or loss, although the Fund may elect to have the gain or loss it realizes on certain contracts taxed as "section 988" gain or loss. Gain or loss realized by a Fund on forward currency exchange contracts generally will be treated as section 988 gain or loss and will therefore be characterized as ordinary income or loss and will increase or decrease the amount of the Fund's net investment income available to be distributed to shareholders as ordinary income, as described above. A Fund can elect to exempt its section 1256 contracts which are part of a "mixed straddle" (as described below) from the application of section 1256. With respect to over-the-counter put and call options, gain or loss realized by a Fund upon the lapse or sale of such options held by the Fund will be either long-term or short-term capital gain or loss depending upon the Fund's holding period with respect to such option. However, gain or loss realized upon the lapse or closing out of such options that are written by a Fund will be treated as short-term capital gain or loss. In general, if a Fund exercises an option, or if an option that the Fund has written is exercised, gain or loss on the option will not be separately recognized but the premium received or paid will be included in the calculation of gain or loss upon disposition of the property underlying the option. Gain or loss realized by a Fund on the lapse or sale of put and call options on foreign currencies which are traded over-the-counter or on certain foreign exchanges will be treated as section 988 gain or loss and will therefore be characterized as ordinary income or loss and will increase or decrease the amount of the Fund's net investment income available to be distributed to shareholders as ordinary income, as described above. The amount of such gain or loss shall be determined by subtracting the amount paid, if any, for or with respect to the option (including any amount paid by a Fund upon termination of an option written by the Fund) from the amount received, if any, for or with respect to the option (including any amount received by the Fund upon termination of an option held by the Fund). In general, if a Fund exercises such an option on a foreign currency, or if such an option that the Fund has written is exercised, gain or loss on the option will be recognized in the same manner as if the Fund had sold the option (or paid another person to assume the Fund's obligation to make delivery under the option) on the date on which the option is exercised, for the fair market value of the option. The foregoing rules will also apply to other put and call options which have as their underlying property foreign currency and which are traded over-the-counter or on certain foreign exchanges to the extent gain or loss with respect to such options is attributable to fluctuations in foreign currency exchange rates. Stripped-Mortgage Related Securities. Certain classes of SMRS which are issued at a discount, the payments of which are subject to acceleration by reason of prepayments of the underlying Mortgage Assets securing such classes, are subject to special rules for determining the portion of the discount at which the class was issued which must be accrued as income each year. Under Code section 1272(a)(6), a principal-only class or a class which receives a portion of the interest and a portion of the principal from the underlying Mortgage Assets is subject to rules which require accrual of interest to be calculated and included in the income of a holder (such as a Fund) based on the increase in the present value of the payments remaining on the class, taking into account payments includable in the class's stated redemption price at maturity which are received during the accrual period. For this purpose, the present value calculation is made at the beginning of each accrual period (i) using the yield to maturity determined for the class at the time of its issuance (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period), calculated on the assumption that certain prepayments will occur, and (ii) taking into account any prepayments that have occurred before the close of the accrual period. Since interest included in a Fund's income as a result of these rules will have been accrued and not actually paid, the Fund may be required to pay out as an income distribution each year an amount which is greater than the total amount of cash interest it actually received, with possible results as described above. Currency Fluctuations -- Section 988 Gains and Losses. Under the Code, gains or losses attributable to fluctuations in exchange rates which occur between the time a Fund accrues interest or other receivables or accrues expenses or other liabilities denominated in a foreign currency and the time the Fund actually collects such receivables or pays such liabilities are treated as ordinary income or ordinary loss. Similarly, gains or losses from the disposition of foreign currencies, from the disposition of debt securities denominated in a foreign currency, or from the disposition of a forward currency exchange contract denominated in a foreign currency which are attributable to fluctuations in the value of the foreign currency between the date of acquisition of the asset and the date of disposition also are treated as ordinary income or loss. These gains or losses, referred to under the Code as "section 988" gains or losses, increase or decrease the amount of a Fund's investment company taxable income available to be distributed to its shareholders as ordinary income, rather than increasing or decreasing the amount of the Fund's net capital gain. Because section 988 losses reduce the amount of ordinary dividends a Fund will be allowed to distribute for a taxable year, such section 988 losses may result in all or a portion of prior dividend distributions for such year being recharacterized as a non-taxable return of capital to shareholders, rather than as an ordinary dividend, reducing each shareholder's basis in his or her Fund shares. To the extent that such distributions exceed such shareholder's basis, each will be treated as a gain from the sale of shares. Other Taxation - -------------- A Fund may be subject to other state and local taxes. Taxation of Foreign Shareholders - -------------------------------- The foregoing discussion relates only to United States federal income tax law as it affects shareholders who are United States citizens or residents or United States corporations. The effects of federal income tax law on a shareholder which is a non-resident alien individual or foreign corporation may be substantially different. A foreign investor should therefore consult his or her own tax adviser for further information as to the United States federal income tax consequences of being a shareholder in a Fund. - -------------------------------------------------------------------------------- GENERAL INFORMATION - -------------------------------------------------------------------------------- Capitalization - -------------- ALLIANCEBERNSTEIN INTERMEDIATE BOND Intermediate Bond is a series of AllianceBernstein Bond Fund, Inc., a Maryland Corporation organized in 1973 under the name "Alliance Bond Fund, Inc." The Fund's name became "AllianceBernstein Bond Fund, Inc." on March 31, 2003. The authorized capital stock of AllianceBernstein Bond Fund, Inc. consists of 63,000,000,000 shares of Common Stock having a par value of $.001 per share. All shares of each portfolio participate equally in dividends and distributions from that portfolio, including any distributions in the event of a liquidation and upon redeeming shares, will receive the then current NAV of the portfolio represented by the redeemed shares less any applicable CDSC. Each share of the portfolio is entitled to one vote for all purposes. Shares of the portfolios vote for the election of Directors and on any other matter that affects the portfolios in substantially the same manner as a single class, except as otherwise required by law. As to matters affecting each portfolio differently, such as approval of the Investment Advisory Contract and changes in investment policy, shares of each portfolio would vote as a separate class. There are no conversion or preemptive rights in connection with any shares of the portfolio. All shares of Intermediate Bond when duly issued will be fully paid and non-assessable. The authorized capital stock of Intermediate Bond currently consists of 3,000,000,000 shares of Class A Common Stock, 3,000,000,000 shares of Class B Common Stock, 3,000,000,000 shares of Class C Common Stock, 3,000,000,000 shares of Class R Common Stock, 3,000,000,000 shares of Class K Common Stock, 3,000,000,000 shares of Class I Common Stock and 3,000,000,000 shares of Advisor Class Common Stock, each having a par value of $.001 per share. ALLIANCEBERNSTEIN DIVERSIFIED YIELD FUND, INC. The Fund is a Maryland corporation organized in 1995 under the name of "Alliance Global Strategic Income Trust, Inc." The name became "AllianceBernstein Global Strategic Income Trust, Inc. on March 31, 2003 and became AllianceBernstein Diversified Yield Fund, Inc. on November 5, 2007. The authorized capital stock of the Fund consists of 3,000,000,000 shares of Class A Common Stock, 3,000,000,000 shares of Class B Common Stock, 3,000,000,000 shares of Class C Common Stock, 3,000,000,000 shares of Class R Common Stock, 3,000,000,000 shares of Class K Common Stock, 3,000,000,000 shares of Class I Common Stock, and 3,000,000,000 shares of Advisor Class Common Stock, each having a par value of $.001 per share. All shares of the Fund, when issued, are fully paid and non-assessable. Any issuance of shares of another class or series would be governed by the 1940 Act and the law of the State of Maryland. If shares of another series were issued in connection with the creation of a second portfolio, each share of either portfolio would normally be entitled to one vote for all purposes. Generally, shares of both portfolios would vote as a single series on matters, such as the election of Directors, that affect both portfolios in substantially the same manner. As to matters affecting each portfolio differently, such as approval of the Advisory Agreement and changes in investment policy, shares of each portfolio would vote as separate series. ALLIANCEBERNSTEIN GLOBAL BOND FUND, INC. The Fund is a Maryland corporation organized in 1992 under the name of "Alliance North American Government Income Fund, Inc." The name became "Alliance Americas Government Income Trust, Inc." on March 1, 2002, "AllianceBernstein Americas Government Income Trust, Inc." on March 31, 2003, "AllianceBernstein Global Government Income Trust, Inc." on February 1, 2006, and "AllianceBernstein Global Bond Fund, Inc." on November 5, 2007. The authorized capital stock of the Fund consists of 3,000,000,000 shares of Class A Common Stock, $.001 par value, 3,000,000,000 shares of Class B Common Stock, $.001 par value, 3,000,000,000 shares of Class C Common Stock, $.001 par value, 3,000,000,000 shares of Class R Common Stock, $.001 par value, 3,000,000,000 shares of Class K Common Stock, $.001 par value, 3,000,000,000 shares of Class I Common Stock, $.001 par value, and 3,000,000,000 shares of Advisor Class Common Stock, $.001 par value. All shares of the Fund, when issued, are fully paid and non-assessable. Any issuance of shares of another class or series would be governed by the 1940 Act and the law of the State of Maryland. If shares of another series were issued in connection with the creation of a second portfolio, each share of either portfolio would normally be entitled to one vote for all purposes. Generally, shares of both portfolios would vote as a single series on matters, such as the election of Directors, that affect both portfolios in substantially the same manner. As to matters affecting each portfolio differently, such as approval of the Advisory Agreement and changes in investment policy, shares of each portfolio would vote as separate series. ALLIANCEBERNSTEIN HIGH INCOME FUND, INC. The Fund is a Maryland corporation organized in 1993 under the name of "Alliance Global Dollar Government Fund, Inc." The name became "Alliance Emerging Market Debt Fund, Inc." on March 1, 2002, "AllianceBernstein Emerging Market Debt Fund, Inc." on March 31, 2003, and "AllianceBernstein High Income Fund, Inc." on January 28, 2008. The authorized capital stock of the Fund consists of 3,000,000,000 shares of Class A Common Stock, $.001 par value, 3,000,000,000 shares of Class B Common Stock, $.001 par value, 3,000,000,000 shares of Class C Common Stock, $.001 par value 3,000,000,000 shares of Advisor Class Common Stock, $.001 par value, 3,000,000,000 shares of Class R Common Stock, $.001 per value, 3,000,000,000 shares of Class K Common Stock, $.001 par value, and 3,000,000,000 shares of Class I Common Stock, $.001 par value. All shares of the Fund, when issued, are fully paid and non-assessable. Any issuance of shares of another class or series would be governed by the 1940 Act and the law of the State of Maryland. A shareholder will be entitled to share pro rata with other holders of the same class of shares all dividends and distributions arising from a Fund's assets and, upon redeeming shares, will receive the then current NAV of the Fund represented by the redeemed shares less any applicable CDSC. A Fund is empowered to establish, without shareholder approval, additional portfolios, which may have different investment objectives and policies than those of the Fund, and additional classes of shares within the Fund. If an additional portfolio or class were established in the Fund, each share of the portfolio or class would normally be entitled to one vote for all purposes. Generally, shares of each portfolio and class would vote together as a single class on matters, such as the election of Directors, that affect each portfolio and class in substantially the same manner. Each class of shares of a Fund has the same rights and is identical in all respects except that each class bears its own distribution and transfer agency expenses. Each class of shares of a Fund votes separately with respect to the Fund's Rule 12b-1 Plan and other matters for which separate class voting is appropriate under applicable law. Shares are freely transferable, are entitled to dividends as determined by the Directors and, in liquidation of a Fund, are entitled to receive the net assets of the Fund. Certain additional matters relating to a Fund's organization are discussed in this SAI. It is anticipated that annual shareholder meetings will not be held; shareholder meetings will be held only when required by federal or state law. Shareholders have abailable certain procedures for the removal of directors. Each class of shares of a Fund represents an interest in the same portfolio of investments, and has the same rights and is identical in all respects, except that expenses related to the distribution of each class are borne solely by each class and each class of shares has exclusive voting rights with respect to provisions of the Rule 12b-1 Plan which pertain to a particular class and other matters for which separate class voting is appropriate under applicable law, provided that, if the Fund submits to a vote of the Class A shareholders an amendment to the Rule 12b-1 Plan that would materially increase the amount to be paid thereunder with respect to the Class A shares, then such amendment will also be submitted to the Class B and Advisor Class shareholders, and the Class A shareholders, the Class B shareholders and the Advisor Class shareholders will vote separately by class. A Fund's Board of Directors may, without shareholder approval, increase or decrease the number of authorized but unissued shares of the Fund's Class A, Class B, Class C, Class R, Class K, Class I and Advisor Class Common Stock. The Board of Directors is authorized to reclassify and issue any unissued shares to any number of additional portfolios and classes without shareholder approval. Accordingly, the Directors in the future, for reasons such as the desire to establish one or more additional portfolios with different investment objectives, policies or restrictions, may create additional portfolios of shares. Any issuance of shares of another portfolio would be governed by the 1940 Act and the laws of the State of Maryland. If shares of another portfolio were issued in connection with the creation of a second portfolio, each share of either portfolio would normally be entitled to one vote for all purposes. Generally, shares of both portfolios would vote as a single portfolio for the election of Directors and on any other matter that affected both portfolios in substantially the same manner. As to matters affecting each portfolio differently, such as approval of the Investment Advisory Contract and changes in investment policy, shares of each Fund would vote as separate portfolios. It is anticipated that annual shareholder meetings will not be held; shareholder meetings will be held only when required by federal or state law. As of the close of business on January 5, 2009, each Fund had the following number of shares of common stock outstanding. Fund Class Number of Outstanding Shares of Common Stock Intermediate Bond Class A 39,915,504 Class B 3,283,783 Class C 5,888,675 Advisor Class 3,796,260 Class R 9,738 Class K 442,725 Class I 458,986 Diversified Yield Class A 5,328,230 Class B 1,644,928 Class C 1,459,599 Advisor Class 475,339 Class R 39,605 Class K 2,933 Class I 1,130 Global Bond Class A 177,142,719 Class B 16,626,176 Class C 62,870,798 Advisor Class 11,515,996 Class R 21,969 Class K 8,815 Class I 11,059 High Income Class A 75,172,493 Class B 8,629,666 Class C 18,684,467 Advisor Class 862,704 Class R 308,559 Class K 132,414 Class I 33,508 To the knowledge of each Fund, the following persons owned of record or beneficially, 5% or more of the outstanding shares of the Fund as of January 5, 2009: Class A Shares - -------------- Number of Class % of Class Fund Name and Address A Shares A Shares - ---- ---------------- -------- -------- Intermediate Bond MLPF&S for the Sole Benefit 3,421,510.496 8.58% of its Customers Attn: Fund Administrator 4800 Deer Lake Dr. East, 2nd Floor Jacksonville, FL 32246-6484 Pershing LLC 2,145,630.574 5.38% P.O. Box 2052 Jersey City, NJ 07303-2052 Diversified Yield MLPF&S for the Sole Benefit 357,968.442 6.72% of its Customers Attn: Fund Administrator 4800 Deer Lake Dr. East, 2nd Floor Jacksonville, FL 32246-6484 Citigroup Global Markets 319,057.475 5.99% House Account Attn: Cindy Tempesta 333 W. 34th St Fl 3 New York, NY 10001-2402 Pershing LLC 1,123,384.123 21.08% P.O. Box 2052 Jersey City, NJ 07303-2052 Charles Schwab & Co. 488,092.518 9.16% for the Exclusive Benefit of Customers Mutual Fund Operations 101 Montgomery Street San Francisco, CA 94101-4151 Global Bond First Clearing, LLC 10,780,315.179 6.08% Special Custody Acct for the Exclusive Benefit of Customer 10750 Wheat First Dr. Glen Allen, VA 23060-9243 Pershing LLC 14,182,678.312 8.00% P.O. Box 2052 Jersey City, NJ 07303-2052 Charles Schwab & Co. for 14,270,109.171 8.05% the Exclusive Benefit of Customers Mutual Fund Operations 101 Montgomery Street San Francisco, CA 94104-4151 MLPF&S for the Sole Benefit 22,882,714.278 12.91% of its Customers Attn: Fund Admin 4800 Deer Lake Dr. East, 2nd Floor Jacksonville, FL 32246-6484 High Income MLPF&S for the Sole Benefit 5,920,369.019 7.86% of Its Customers Attn: Fund Admin 4800 Deer Lake Dr. East, 2nd Floor Jacksonville, FL 32246-6484 First Clearing LLC 5,440,455.548 7.23% Special Custody Acct for the Exclusive Benefit of Customer 10750 Wheat First Dr. Glen Allen, VA 23060-9243 Citigroup Global Markets 4,195,538.131 5.57% House Account Attn: Cindy Tempesta 333 W. 34th St. Fl 3 New York, NY 10001-2402 Pershing LLC 5,891,599.270 7.83% P.O. Box 2052 Jersey City, NJ 07303-2052 Class B Shares - -------------- Number of Class % of Class Fund Name and Address B Shares B Shares - ---- ---------------- -------- -------- Intermediate Bond MLPF&S for the Sole Benefit 279,222.983 8.49% of its Customers Attn: Fund Administrator 4800 Deer Lake Dr. East, 2nd Floor Jacksonville, FL 32246-6484 Pershing LLC 255,611.479 7.77% P.O. Box 2052 Jersey City, NJ 07303-2052 First Clearing LLC 264,054.085 8.03% Special Custody Acct for the Exclusive Benefit of Customer 10750 Wheat First Dr. Glen Allen, VA 23060-9245 Diversified Yield First Clearing, LLC 148,792.245 9.05% Special Custody Account for the Exclusive Benefit of Customer 10750 Wheat First Drive Glen Allen, VA 23060-9243 MLPF&S for the Sole Benefit 127,850.342 7.77% of its Customers Attn: Fund Admin 4800 Deer Lake Dr. East, 2nd Floor Jacksonville, FL 32246-6484 Citigroup Global Markets 97,079.667 5.90% House Account Attn: Cindy Tempesta 333 W 34th St. Fl 3 New York, NY 10001-2402 Pershing LLC 180,812.085 10.99% P.O. Box 2052 Jersey City, NJ 07303-2052 Global Bond First Clearing, LLC 1,510,602.613 9.09% Special Custody Acct for the Exclusive Benefit of Customer 10750 Wheat First Dr. Glen Allen, VA 23060-9243 Citigroup Global Markets 1,045,275.425 6.29% House Account Attn: Cindy Tempesta 333 W. 34th St. Fl 3 New York, NY 10001-2402 Pershing LLC 1,793,680.168 10.79% P.O. Box 2052 Jersey City, NJ 07303-2052 MLPF&S for the Sole Benefit 2,452,964.187 14.76% of its Customers Attn: Fund Admin 4800 Deer Lake Dr. East, 2nd Floor Jacksonville, FL 32246-6484 High Income First Clearing, LLC 967,194.242 11.20% Special Custody Acct for the Exclusive Benefit of Customer 10750 Wheat First Dr. Glen Allen, VA 23060-9243 MLPF&S 859,601.087 9.96% For the Sole Benefit of its Customers Attn: Fund Admin 4800 Deer Lake Dr. East, 2nd Floor Jacksonville, FL 32246-6484 Citigroup Global Markets 598,424.789 6.93% House Account Attn: Cindy Tempesta 333 W. 34th St. Fl 3. New York, NY 10001-2402 Pershing LLC 840,511.341 9.73% P.O. Box 2052 Jersey City, NJ 07303-2052 Class C Shares - -------------- Number of Class % of Class Fund Name and Address C Shares C Shares - ---- ---------------- -------- -------- Intermediate Bond MLPF&S for the Sole Benefit 1,706,021.207 28.97% of its Customers Attn: Fund Administrator 4800 Deer Lake Dr. East, 2nd Floor Jacksonville, FL 32246-6484 AG Edwards & Sons Inc 402,208.005 6.83% Omnibus Account One North Jefferson St. Louis, MO 63103-2287 Diversified Yield First Clearing, LLC 140,493.613 9.63% Special Custody Acct for the Exclusive Benefit of Customer 10750 Wheat First Dr. Glen Allen, VA 23060-9243 MLPF&S for the Sole Benefit 304,394.455 20.85% of Its Customers Attn: Fund Admin 4800 Deer Lake Dr. East, 2nd Floor Jacksonville, FL 32246-6484 Citigroup Global Markets 108,074.559 7.40% House Account Attn: Cindy Tempesta 333 W 34th St, Fl. 3 New York, NY 10001-2402 Pershing LLC 131,446.696 9.01% P.O. Box 2052 Jersey City, NJ 07303-2052 Charles Schwab & Co. 109,736.252 7.52% for the Exclusive Benefit of Customers Mutual Fund Operations 101 Montgomery Street San Francisco, CA 94104-4151 Global Bond MLPF&S for the Sole Benefit 21,886,053.954 34.81% of its Customers Attn: Fund Admin 4800 Deer Lake Dr. East, 2nd Floor Jacksonville, FL 32246-6484 Citigroup Global Markets 5,816,492.516 9.25% House Account Attn: Cindy Tempesta 333 W. 34th St, Fl 3 New York, NY 10001-2402 Pershing LLC 3,347,186.069 5.32% P.O. Box 2052 Jersey City, NJ 07303-2052 Morgan Stanley & Co. 3,223,763.749 5.13% Harborside Financial Center Plaza II 3rd Floor Jersey City, NJ 07311 High Income First Clearing, LLC 1,456,359.731 7.78% Special Custody Acct for the Exclusive Benefit of Customer 10750 Wheat First Dr. Glen Allen, VA 23060-9243 MLPF&S for the Sole Benefit 4,547,438.681 24.29% of its Customers Attn: Fund Admin 4800 Deer Lake Dr. East, 2nd Floor Jacksonville, FL 32246-6484 Citigroup Global Markets 1,737,390.939 9.28% House Account Attn: Cindy Tempesta 333 W. 34th St. Fl 3 New York, NY 10001-2402 Pershing LLC 1,201,458.100 6.42% P.O. Box 2052 Jersey City, NJ 07303-2052 Morgan Stanley & Co 1,380,950.791 7.37% Harborside Financial Center Plaza II, 3rd Floor Jersey City, NJ 07311 Advisor Class Shares - -------------------- % of Number of Advisor Advisor Class Class Fund Name and Address Shares Shares - ---- ---------------- ------ ------ Intermediate Bond CollegeBoundfund 3,603,037.568 94.95% CBF-Quality Bond Fund Customized Allocation 529 Plan 1345 Avenue of the Americas New York, NY 10105-0302 Diversified Yield Pershing LLC 46,998.562 9.89% P.O. Box 2052 Jersey City, NJ 07303-2052 NFS LLC FEBO 32,286.191 6.79% Winifred Devlin Living Trust Winifred Devlin TTEE 13500 N Rancho Vistoso Blvd Apt. 237 Tucson, AZ 85755-5959 NFS LLC FEBO 72,369.363 15.22% Adee 2005 Management Trust Marc J. Adee U/A 05/19/2005 13514 Pristine Park Dr. Houston, TX 77041-5505 Global Bond Citigroup Global Markets 4,886,161.127 45.19% House Account Attn: Cindy Tempesta 333 W. 34th St. Fl 3 New York, NY 10001-2402 LPL Financial Services 1,331,105.218 12.31% 9785 Towne Centre Dr. San Diego, CA 92121-1968 Raymond James & Assoc. Inc. 1,771,767.267 16.39% FBO Helios Education Foundation 2415 E. Camelback Rd Ste 500 Phoenix, AZ 85016-9289 High Income PIMS/Prudential Retirement 437,418.404 50.65% As Nominee for the TTEE/CUST Alliance Capital Management 300 International Pkwy, Suite 270 Heathrow, FL 32746-5035 Class R Shares - -------------- Number of Class % of Class Fund Name and Address R Shares R Shares - ---- ---------------- -------- -------- Intermediate Bond Counsel Trust DBA Mid 3,960.827 40.63% Atlantic Trust Company FBO Ohio Agribusiness Association 401K Profit Sharing Plan & Trust 1251 Waterfront Place, Suite 525 Pittsburgh, PA 15222-4228 MG Trust Trustee 634.704 6.51% Shumate Tri-City LLC 700 17th St. Suite 300 Denver, CO 80202-3531 MG Trust Company Cust FBO 620.580 6.37% Lapeer Township 700 17th St. Suite 300 Denver, CO 80202-3531 MG Co Cust 1,901.286 19.50% FBO Cascade Appraisal Group Inc 700 17th St. Suite 300 Denver, CO 80202-3531 Diversified Yield State Street Bank & Trust 5,303.002 13.39% FBO ADP/MSDW Alliance Attn: Ralph Campbell 105 Rosemont Rd Westwood, MA 02090-2318 Citistreet Retirement 12,416.617 31.35% Services Citigroup Institutional Trust 400 Atrium Drive Somerset, NJ 08873-4162 MG Trust Co. Cust FBO 2,043.910 5.16% Shamrock Automation 700 17th St. Suite 300 Denver, CO 80202-3531 MG Trust Company Trustee 14,526.823 36.68% Sanger & EBY Design PS & 401K PL 700 17th St. Suite 300 Denver, CO 80202-3531 MG Trust Company as Agent 3,959.413 10.00% for Frontier Trust Company as Trustee Kamphaus Henning & Hood Sav & Inves P.O. Box 10699 Fargo, ND 58106-0699 Global Bond Alliance Capital Management 1,240.351 5.64% LP Attn: Raymond Cardosi-Seed Acct 1 N. Lexington Ave White Plains, NY 10601-1712 Tim Fraser FBO 9,800.431 44.53% Commonwealth Resources Inc. 401K PSP & Trust 262 Washington St. Boston, MA 02108-4632 Eric Weiss FBO 5,662.501 25.73% Elite Foodservice Equipment Co. 401K Profit Sharing Plan & Trust c/o Oppenheimer 115 Broadhollow Rd Ste 150 Melville, NY 11747-4989 Sigurd Feile/Christina 3,523.664 16.01% Feile FBO Atlantic Nursery & Garden Shop 401K Profit Sharing Plan & Trust 250 Atlantic Ave Freeport, NY 11520-4927 Richard A. Pearl FBO 1,519.796 6.90% Richard A. Pearl, MD PC 401K PSP & Trust 45 Terry Rd Ste A Smithtown, NY 11787-3894 High Income Citistreet Retirement 117,386.276 37.90% Services Citigroup Institutional Trust 400 Atrium Drive Somerset, NJ 08873-4162 MG Trust Co TTEE 27,382.288 8.84% Wadman Corp 401K PS 700 17th St. Suite 300 Denver, CO 80202-3531 Capital Bank & Trust 52,233.070 16.86% Company Cust FBO Advanced Analogic Technologies Inc 401K Plan c/o Planpremier/FASCORE LLC 8515 E. Orchard Rd 2T2 Greenwood Village, CO 80111-5002 Class K Shares - -------------- Number of Class % of Class Fund Name and Address K Shares K Shares - ---- ---------------- -------- -------- Intermediate Bond Orchard Trust Company LLC 23,658.059 5.34% TTEE Cust Karnak Corporation Savings & Investment Plan 8515 E. Orchard Rd 2T2 Greenwood Village, CO 80111-5002 Orchard Trust Company LLC 88,646.627 20.02% TTEE Cust Minnesota Surgical Associates PA 8515 E. Orchard Rd 2T2 Greenwood Village, CO 80111-5002 Orchard Trust Company LLC 35,637.858 8.05% TTEE Cust Wilson Kehoe & Winingham Attorneys 8515 E. Orchard Rd 2T2 Greenwood Village, CO 80111-5002 Orchard Trust Company LLC 132,825.077 30.00% TTEE Cust Muncie Surgical Associates Inc PSP 8515 E. Orchard Rd 2T2 Greenwood Village, CO 80111-5002 Orchard Trust Company LLC 32,025.240 7.23% TTEE Cust Highland Park Medical Assoc PC 8515 E. Orchard Rd 2T2 Greenwood Village, CO 80111-5002 Orchard Trust Company LLC 28,590.945 6.46% TTEE Cust Mansfield Tanick & Cohen PA 401K Profit Sharing Plan 8515 E. Orchard Rd 2T2 Greenwood Village, CO 80111-5002 Diversified Yield Alliance Capital Management 1,129.944 38.53% LP Attn: Raymond Cardosi-Seed Acct 1 N. Lexington Ave White Plains, NY 10601-1712 MG Trust Company as Agent 1,794.735 61.19% for Frontier Trust Co as Trustee Chelus Herdzik Speyer & Monte PC 40 P.O. Box 10699 Fargo, ND 58106-0699 Global Bond Alliance Capital Management 1,241.001 14.07% LP Attn: Raymond Cardosi-Seed Acct 1 N. Lexington Ave White Plains, NY 10601-1712 Providence Ear Nose & 5,091.083 57.72% Throat Assoc Inc. 401K PS Plan Steven W. Fisher TTEE 2112 Providence Ave. Chester, PA 19013-5507 Orchard Trust Co LLC TTEE 1,913.921 21.70% FBO Reitler Brown & Rosenblatt LLC Cash or Deferred Profit Sharing Plan 8515 E. Orchard Rd 2T2 Greenwood Village, CO 80111-5002 High Income MG Trust Co Agent TTEE 11,712.069 8.84% Frontier Trust Co Alexander Nicholson Inc PS P.O. Box 10699 Fargo, ND 58106-0699 Orchard Trust Company LLC 27,559.702 20.81% TTEE CUST TIB Insurance Brokers Inc 401K 8515 E. Orchard Rd 2T2 Greenwood Village, CO 80111-5002 Orchard Trust Company LLC 19,673.083 14.85% TTEE CUST Valensi Rose & Magaram 8515 E. Orchard Rd 2T2 Greenwood Village, CO 80111-5002 Orchard Trust Company LLC 10,763.753 8.13% TTEE CUST Chastang Enterprises Inc 401K PL 8515 E. Orchard Rd 2T2 Greenwood Village, CO 80111 Joseph R. Burlin 401K 17,470.128 13.19% Profit Sharing Plan 1805 North Carolina St. Ste 405 Stockton, CA 95204 Orchard Trust Company LLC 30,204.785 22.81% TTEE CUST Informa Fin Infor Inc Def Comp PL 8515 E. Orchard Rd 2T2 Greenwood Village, CO 80111 Class I Shares - -------------- Number of Class % of Class Fund Name and Address I Shares I Shares - ---- ---------------- -------- --------- Intermediate Bond Orchard Trust Company LLC 375,938.834 81.91% TTEE Cust Associated Radiologist PA 401K PSP 8515 E. Orchard Rd 2T2 Greenwood Village, CO 80111-5002 Orchard Trust Company LLC 73,195.703 15.95% TTEE Cust Muskegon Surgical Associates PC 8515 E. Orchard Rd 2T2 Greenwood Village, CO 80111-5002 Diversified Yield Alliance Capital Management 1,129.944 100.00% LP Attn: Raymond Cardosi-Seed Acct 1 N. Lexington Ave White Plains, NY 10601-1712 Global Bond Alliance Capital Management 1,241.716 11.23% LP Attn: Raymond Cardosi-Seed Acct 1 N. Lexington Ave White Plains, NY 10601-1712 NFS LLC FEBO 7,999.477 72.33% Alerus Financial FBO Alerus EB Accounts P.O. Box 64534 Saint Paul, MN 55164-0534 Ameritrade Inc FBO 1,787.346 16.16% P.O. Box 2226 Omaha, NE 68103-2226 High Income Orchard Trust Company LLC 33,483.351 99,93% TTEE CUST Muskegon Surgical Associates PC 8515 E. Orchard Rd 2T2 Greenwood Village, CO 80111-5002 Custodian and Accounting Agent - ------------------------------ State Street Bank and Trust Company ("State Street"), 225 Franklin Street, Boston, Massachusetts 02110, acts as the Funds' custodian for the assets of the Funds but plays no part in deciding on the purchase or sale of portfolio securities. Subject to the supervision of each Fund's Directors, State Street may enter into subcustodial agreements for the holding of the Fund's foreign securities. Principal Underwriter - --------------------- AllianceBernstein Investments, Inc. ("ABI"), an indirect wholly-owned subsidiary of the Adviser, located at 1345 Avenue of the Americas, New York, New York 10105, is the principal underwriter of shares of the Funds, and as such may solicit orders from the public to purchase shares of the Funds. Under the Distribution Services Agreement, each Fund has agreed to indemnify ABI, in the absence of its willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations thereunder, against certain civil liabilities, including liabilities under the Securities Act. Counsel - ------- Legal matters in connection with the issuance of the shares of a Fund offered hereby are passed upon by Seward & Kissel LLP, New York, New York. Independent Registered Public Accounting Firm - --------------------------------------------- Ernst & Young LLP, 5 Times Square, New York, New York, 10036, has been appointed as the independent registered public accounting firm for the Funds. Additional Information - ---------------------- Any shareholder inquiries may be directed to the shareholder's financial intermediary or to ABIS at the address or telephone numbers shown on the front cover of this SAI. This SAI does not contain all the information set forth in the Registration Statement filed by a Fund with the Commission under the Securities Act. Copies of the Registration Statement may be obtained at a reasonable charge from the Commission or may be examined, without charge, at the offices of the Commission in Washington, D.C. - -------------------------------------------------------------------------------- FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - -------------------------------------------------------------------------------- The financial statements of each of Intermediate Bond, Diversified Yield and High Income for the fiscal year ended October 31, 2008 and the report of Ernst & Young LLP, the independent registered public accounting firm, are incorporated herein by reference to the each Fund's annual report. The annual reports were filed on Form N-CSR with the Commission on January 7, 2009. It is available without charge upon request by calling ABIS at (800) 227-4618. The financial statements of Global Bond for the fiscal year ended September 30, 2008 and the report of Ernst & Young LLP, independent registered public accounting firm, are incorporated herein by reference to the Fund's annual report. The Fund's annual report was filed on Form N-CSR with the Commission on December 5, 2008. The annual report is available without charge upon request by calling ABIS at (800) 227-4618. SK 00250 0157 957622 PART C OTHER INFORMATION ITEM 23. Exhibits (a) (1) Articles of Amendment and Restatement to the Articles of Incorporation of the Registrant, dated February 1, 2006 and filed February 23, 2006 - Incorporated by reference to Exhibit (a) to Post-Effective Amendment No. 23 of the Registrant's Registration Statement on Form N-1A (File Nos. 33-63797 and 811-7391), filed with the Securities and Exchange Commission on January 31, 2007. (2) Articles of Amendment to the Articles of Incorporation of the Registrant, dated October 31, 2007 and filed October 31, 2007 - Incorporated by reference to Exhibit (a)(2) to Post-Effective Amendment No. 24 of the Registrant's Registration Statement on Form N-1A (File Nos. 33-63797 and 811-7397), filed with the Securities and Exchange Commission on January 28, 2008. (b) Amended and Restated By-Laws of the Registrant - Incorporated by reference to Exhibit 99.77Q1 - Other Exhibits of Registrant's Semi-Annual Report on Form NSAR-A (File Ns. 811-7391), filed with the Securities and Exchange Commission on June 29, 2006. (c) Not applicable. (d) Amended Advisory Agreement between the Registrant and AllianceBernstein L.P. - Incorporated by reference to Exhibit (d) to Post-Effective Amendment No. 19 to Registrant's Registration Statement on Form N-1A (File Nos. 33-63797 and 811-7391), filed with the Securities and Exchange Commission on November 30, 2004. (e) (1) Distribution Services Agreement between the Registrant and AllianceBernstein Investments, Inc. (formerly known as Alliance Fund Distributors, Inc.) - Incorporated by reference to Exhibit 6(a) to Post-Effective Amendment No. 5 to Registrant's Registration Statement on Form N-1A (File Nos. 33-63797 and 811-7391), filed with the Securities and Exchange Commission on February 27, 1998. (2) Amendment to Distribution Services Agreement dated June 4, 1996 - Incorporated by reference to Exhibit 6 to Post-Effective Amendment No. 3 to Registrant's Registration Statement on Form N-1A (File Nos. 33-63797 and 811-7391), filed with the Securities and Exchange Commission on February 28, 1997. (3) Form of Amendment to the Distribution Services Agreement between the Registrant and AllianceBernstein Investments, Inc. (formerly known as Alliance Fund Distributors Inc.) - Incorporated by reference to Exhibit (e)(3) to Post-Effective Amendment No. 20 to Registrant's Registration Statement on Form N-1A (File Nos. 33-63797 and 811-7391), filed with the Securities and Exchange Commission on January 31, 2005. (4) Form of Selected Dealer Agreement between AllianceBernstein Investments, Inc. (formerly known as Alliance Fund Distributors, Inc.) and selected dealers offering shares of Registrant - Incorporated by reference to Exhibit (e)(4) to Post-Effective Amendment No. 20 to Registrant's Registration Statement on Form N-1A (File Nos. 33-63797 and 811-7391), filed with the Securities and Exchange Commission on January 31, 2005. (5) Form of Selected Agent Agreement between AllianceBernstein Investments, Inc. (formerly known as Alliance Fund Distributors, Inc.) and selected agents making available shares of Registrant - Incorporated by reference to Exhibit (e)(5) to Post-Effective Amendment No. 20 to Registrant's Registration Statement on Form N-1A (File Nos. 33-63797 and 811-7391), filed with the Securities and Exchange Commission on January 31, 2005. (f) Not applicable. (g) Custodian Agreement between the Registrant and Brown Brothers Harriman & Co. - Incorporated by reference to Exhibit 8 to Post-Effective Amendment No. 5 to Registrant's Registration Statement on Form N-1A (File Nos. 33-63797 and 811-7391), filed with the Securities and Exchange Commission on February 27, 1998. (h) (1) Transfer Agency Agreement between the Registrant and AllianceBernstein Investor Services, Inc. - Incorporated by reference to Exhibit 9 to Post-Effective Amendment No. 5 to Registrant's Registration Statement on Form N-1A (File Nos. 33-63797 and 811-7391), filed with the Securities and Exchange Commission on February 27, 1998. (2) Form of Expense Limitation Undertaking by AllianceBernstein L.P. - Incorporated by reference to Exhibit (h)(2) to Post-Effective Amendment No. 20 to Registrant's Registration Statement on Form N-1A (File Nos. 33-63797 and 811-7391), filed with the Securities and Exchange Commission on January 31, 2005. (i) Opinion and Consent of Seward & Kissel LLP - Filed herewith. (j) Consent of Independent Registered Public Accounting Firm - Filed herewith. (k) Not applicable. (l) Not applicable. (m) Rule 12b-1 Plan - See Exhibit (e)(1) hereto. (n) Form of Amended and Restated Rule 18f-3 Plan - Incorporated by reference to Exhibit (n)(2) to Post-Effective Amendment No. 20 to Registrant's Registration Statement on Form N-1A (File Nos. 33-63797 and 811-7391), filed with the Securities and Exchange Commission on January 31, 2005. (p) (1) Code of Ethics for the Fund - Incorporated by reference to Exhibit (p)(1) to Post-Effective Amendment No. 74 of the Registration Statement on Form N-1A of AllianceBernstein Bond Fund, Inc. (File Nos. 2-48227 and 811-2383), filed with the Securities and Exchange Commission on October 6, 2000, which is substantially identical in all material respects except as to the party which is the Registrant. (2) Code of Ethics for the AllianceBernstein L.P. and AllianceBernstein Investments, Inc. - Incorporated by reference to Exhibit (p)(2) to Post-Effective Amendment No. 4 of the Registration Statement on Form N-1A of The AllianceBernstein Pooling Portfolios (File Nos. 333-120487 and 811-21673), filed with the Securities and Exchange Commission on December 29, 2006. Other Exhibits: Powers of Attorney for: Marc O. Mayer, John H. Dobkin, Michael J. Downey, William H. Foulk, Jr., D. James Guzy, Nancy P. Jacklin, Robert M. Keith, Garry L. Moody, Marshall C. Turner, Jr. and Earl D. Weiner - Filed herewith. ITEM 24. Persons Controlled by or under Common Control with Registrant. None. ITEM 25. Indemnification. It is the Registrant's policy to indemnify its directors and officers, employees and other agents to the maximum extent permitted by Section 2-418 of the General Corporation Law of the State of Maryland, which is incorporated by reference herein, and as set forth in Article EIGHTH of Registrant's Amendment and Restatement of Articles of Incorporation, filed as Exhibit (a) in response to Item 23, Article IX of the Registrant's Amended and Restated By-laws, filed as Exhibit (b) in response to Item 23, and Section 10(a) of the proposed Distribution Services Agreement, filed as Exhibit (e)(1) in response to Item 23, all as set forth below. The liability of the Registrant's directors and officers is dealt with in Article EIGHTH of Registrant's Articles of Amendment and Restatement of Articles of Incorporation, as set forth below. The Adviser's liability for any loss suffered by the Registrant or its shareholders is set forth in Section 4 of the proposed Advisory Agreement, filed as Exhibit (d) in response to Item 23, as set forth below. ARTICLE EIGHTH OF THE REGISTRANT'S ARTICLES OF AMENDMENT AND RESTATEMENT OF ARTICLES OF INCORPORATION READS AS FOLLOWS: (1) To the maximum extent that Maryland law in effect from time to time permits limitation of the liability of directors and officers of a corporation, no present or former director or officer of the Corporation shall be liable to the Corporation or its stockholders for money damages. (2) The Corporation shall have the power, to the maximum extent permitted by Maryland law in effect from time to time, to obligate itself to indemnify, and to pay or reimburse reasonable expenses in advance of final disposition of a proceeding to, (a) any individual who is a present or former director or officer of the Corporation or (b) any individual who, while a director or officer of the Corporation and at the request of the Corporation, serves or has served as a director, officer, partner or trustee of another corporation, real estate investment trust, partnership, joint venture, trust, employee benefit plan or any other enterprise from and against any claim or liability to which such person may become subject or which such person may incur by reason of his status as a present or former director or officer of the Corporation. The Corporation shall have the power, with the approval of the Board of Directors, to provide such indemnification and advancement of expenses to a person who served a predecessor of the Corporation in any of the capacities described in (a) or (b) above and to any employee or agent of the Corporation or a predecessor of the Corporation. (3) The provisions of this Article EIGHTH shall be subject to the limitations of the Investment Company Act. (4) Neither the amendment nor repeal of this Article EIGHTH, nor the adoption or amendment of any other provision of the Charter or Bylaws inconsistent with this Article EIGHTH, shall apply to or affect in any respect the applicability of the preceding sections of this Article EIGHTH with respect to any act or failure to act which occurred prior to such amendment, repeal or adoption. ARTICLE IX OF THE REGISTRANT'S AMENDED AND RESTATED BYLAWS READS AS FOLLOWS: To the maximum extent permitted by Maryland law in effect from time to time, the Corporation shall indemnify and, without requiring a preliminary determination of the ultimate entitlement to indemnification, shall pay or reimburse reasonable expenses in advance of final disposition of a proceeding to (a) any individual who is a present or former director or officer of the Corporation and who is made or threatened to be made a party to the proceeding by reason of his or her service in any such capacity or (b) any individual who, while a director or officer of the Corporation and at the request of the Corporation, serves or has served as a director, officer, partner or trustee of another corporation, real estate investment trust, partnership, joint venture, trust, employee benefit plan or other enterprise and who is made or threatened to be made a party to the proceeding by reason of his or her service in any such capacity. The Corporation may, with the approval of its Board of Directors or any duly authorized committee thereof, provide such indemnification and advance for expenses to a person who served a predecessor of the Corporation in any of the capacities described in (a) or (b) above and to any employee or agent of the Corporation or a predecessor of the Corporation. The termination of any claim, action, suit or other proceeding involving any person, by judgment, settlement (whether with or without court approval) or conviction or upon a plea of guilty or nolo contendere, or its equivalent, shall not create a presumption that such person did not meet the standards of conduct required for indemnification or payment of expenses to be required or permitted under Maryland law, these Bylaws or the Charter. Any indemnification or advance of expenses made pursuant to this Article shall be subject to applicable requirements of the 1940 Act. The indemnification and payment of expenses provided in these Bylaws shall not be deemed exclusive of or limit in any way other rights to which any person seeking indemnification or payment of expenses may be or may become entitled under any bylaw, regulation, insurance, agreement or otherwise. Neither the amendment nor repeal of this Article, nor the adoption or amendment of any other provision of the Bylaws or Charter inconsistent with this Article, shall apply to or affect in any respect the applicability of the preceding paragraph with respect to any act or failure to act which occurred prior to such amendment, repeal or adoption. The proposed Advisory Agreement to be between the Registrant and AllianceBernstein L.P. provides that AllianceBernstein L.P. will not be liable under such agreements for any mistake of judgment or in any event whatsoever except for lack of good faith and that nothing therein shall be deemed to protect AllianceBernstein L.P. against any liability to the Registrant or its security holders to which it would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of its duties thereunder, or by reason of reckless disregard of its duties and obligations thereunder. The proposed Distribution Services Agreement between the Registrant and AllianceBernstein Investments, Inc. (formerly known as Alliance Fund Distributors, Inc.) provides that the Registrant will indemnify, defend and hold AllianceBernstein Investments, Inc., and any person who controls it within the meaning of Section 15 of the Securities Act of 1933, as amended (the "Securities Act"), free and harmless from and against any and all claims, demands, liabilities and expenses which AllianceBernstein Investments, Inc. or any controlling person may incur arising out of or based upon any alleged untrue statement of a material fact contained in the Registrant's Registration Statement, Prospectus or Statement of Additional Information or arising out of, or based upon any alleged omission to state a material fact required to be stated in any one of the foregoing or necessary to make the statements in any one of the foregoing not misleading. The foregoing summaries are qualified by the entire text of Registrant's Articles of Amendment and Restatement of Articles of Incorporation and Amended and Restated By-Laws, the proposed Advisory Agreement between Registrant and AllianceBernstein L.P. and the proposed Distribution Services Agreement between Registrant and AllianceBernstein Investments, Inc. ("ABI")] which are filed herewith as Exhibits (a), (b), (d) and (e)(1), respectively, in response to Item 23 and each of which are incorporated by reference herein. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. In accordance with Release No. IC-11330 (September 2, 1980), the Registrant will indemnify its directors, officers, investment manager and principal underwriters only if (1) a final decision on the merits was issued by the court or other body before whom the proceeding was brought that the person to be indemnified (the "indemnitee") was not liable by reason or willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office ("disabling conduct") or (2) a reasonable determination is made, based upon a review of the facts, that the indemnitee was not liable by reason of disabling conduct, by (a) the vote of a majority of a quorum of the directors who are neither "interested persons" of the Registrant as defined in section 2(a)(19) of the Investment Company Act of 1940 nor parties to the proceeding ("disinterested, non-party trustees"), or (b) an independent legal counsel in a written opinion. The Registrant will advance attorneys fees or other expenses incurred by its directors, officers, investment adviser or principal underwriters in defending a proceeding, upon the undertaking by or on behalf of the indemnitee to repay the advance unless it is ultimately determined that he is entitled to indemnification and, as a condition to the advance, (1) the indemnitee shall provide a security for his undertaking, (2) the Registrant shall be insured against losses arising by reason of any lawful advances, or (3) a majority of a quorum of disinterested, non-party directors of the Registrant, or an independent legal counsel in a written opinion, shall determine, based on a review of readily available facts (as opposed to a full trial-type inquiry), that there is reason to believe that the indemnitee ultimately will be found entitled to indemnification. The Registrant participates in a joint trustees/directors and officers liability insurance policy issued by the ICI Mutual Insurance Company. Coverage under this policy has been extended to directors, trustees and officers of the investment companies managed by AllianceBernstein L.P. Under this policFy, outside trustees and directors are covered up to the limits specified for any claim against them for acts committed in their capacities as trustee or director. A pro rata share of the premium for this coverage is charged to each investment company and to the Adviser. ITEM 26. Business and Other Connections of Investment Adviser. The descriptions of AllianceBernstein L.P. under the captions "Management of the Fund" in the Prospectus and in the Statement of Additional Information constituting Parts A and B, respectively, of this Registration Statement are incorporated by reference herein. The information as to the directors and executive officers of AllianceBernstein Corporation, the general partner of AllianceBernstein L.P., set forth in AllianceBernstein L.P.'s Form ADV filed with the Securities and Exchange Commission on April 21, 1988 (File No. 801-32361) and amended through the date hereof, is incorporated by reference. ITEM 27. Principal Underwriters. (a) ABI is the Registrant's Principal Underwriter in connection with the sale of shares of the Registrant. ABI also acts as Principal Underwriter or Distributor for the following investment companies: AllianceBernstein Balanced Shares, Inc. AllianceBernstein Blended Style Series, Inc. AllianceBernstein Bond Fund, Inc. AllianceBernstein Cap Fund, Inc. AllianceBernstein Corporate Shares AllianceBernstein Exchange Reserves AllianceBernstein Fixed-Income Shares, Inc. AllianceBernstein Focused Growth & Income Fund, Inc. AllianceBernstein Global Bond Fund, Inc. AllianceBernstein Global Growth Fund, Inc. AllianceBernstein Global Real Estate Investment Fund, Inc. AllianceBernstein Global Thematic Growth Fund, Inc. AllianceBernstein Greater China '97 Fund, Inc. AllianceBernstein Growth and Income Fund, Inc. AllianceBernstein High Income Fund, Inc. AllianceBernstein Institutional Funds, Inc. AllianceBernstein Intermediate California Municipal Portfolio(1) AllianceBernstein Intermediate Diversified Municipal Portfolio(1) AllianceBernstein Intermediate New York Municipal Portfolio(1) AllianceBernstein International Portfolio(1) AllianceBernstein International Growth Fund, Inc. AllianceBernstein Large Cap Growth Fund, Inc. AllianceBernstein Municipal Income Fund, Inc. AllianceBernstein Municipal Income Fund II AllianceBernstein Short Duration Portfolio AllianceBernstein Small/Mid Cap Growth Fund, Inc. AllianceBernstein Tax-Managed International Portfolio(1) AllianceBernstein Trust AllianceBernstein Utility Income Fund, Inc. AllianceBernstein Variable Products Series Fund, Inc. Sanford C. Bernstein Fund II, Inc. The AllianceBernstein Pooling Portfolios The AllianceBernstein Portfolios - ---------- (1) This is a retail Portfolio of Sanford C. Bernstein Fund, Inc. (b) The following are the Directors and Officers of ABI, the principal place of business of which is 1345 Avenue of the Americas, New York, New York, 10105. NAME POSITIONS AND POSITIONS AND - ---- OFFICES WITH OFFICES WITH UNDERWRITER REGISTRANT ------------- ------------- Directors Mark R. Manley Director Robert M. Keith Director Ranjani Nagaswami Senior Managing Director and Chief Investment Officer Officers Ranjani Nagaswami Senior Managing Director and Chief Investment Officer Gerald M. Lieberman President and Chief Operating Officer Richard A. Davies Executive Vice President & Managing Director Frank Speno Executive Vice President Andrew L. Gangolf Senior Vice President and Assistant Secretary Assistant General Counsel Emilie D. Wrapp Senior Vice President, Secretary Assistant General Counsel and Assistant Secretary Daniel A. Notto Senior Vice President, Counsel and Assistant Secretary Christopher S. Alpaugh Senior Vice President Audie G. Apple Senior Vice President Steven R. Barr Senior Vice President and Assistant Secretary Amy I. Belew Senior Vice President Susan H. Burton Senior Vice President Peter G. Callahan Senior Vice President Russell R. Corby Senior Vice President John W. Cronin Senior Vice President Robert J. Cruz Senior Vice President Jennifer M. DeLong Senior Vice President John C. Endahl Senior Vice President Adam E. Engelhardt Senior Vice President John Edward English Senior Vice President Edward J. Farrell Senior Vice President and Controller Kenneth L. Haman Senior Vice President Joseph P. Healy Senior Vice President Mary V. Kralis Hoppe Senior Vice President Scott Hutton Senior Vice President Robert H. Joseph, Jr. Senior Vice President and Assistant Treasurer David W. Levi Senior Vice President Eric L. Levinson Senior Vice President Matthew P. Mintzer Senior Vice President Thomas F. Monnerat Senior Vice President Joanna D. Murray Senior Vice President Jeffrey A. Nye Senior Vice President John J. O'Connor Senior Vice President Catherine N. Peterson Senior Vice President Mark A. Pletts Senior Vice President Stephen C. Scanlon Senior Vice President John P. Schmidt Senior Vice President Gregory K. Shannahan Senior Vice President Andrew D. Strauss Senior Vice President Peter J. Szabo Senior Vice President Joseph T. Tocyloski Senior Vice President Craig E. Welch Senior Vice President Mark D. Gersten Vice President and Treasurer Patrick E. Ryan Vice President and Chief Financial Officer Albert J. Angelus Vice President Kenneth F. Barkoff Vice President Peter J. Barron Vice President William G. Beagle Vice President Christopher M. Berenbroick Vice President Chris Boeker Vice President Brandon W. Born Vice President Richard A. Brink Vice President Shaun D. Bromley Vice President Beth P. Bruen Vice President Brian Buehring Vice President Kevin T. Cannon Vice President Daniel W. Carey Vice President Tobin W. Chakeen Vice President Alice L. Chan Vice President Laura A. Channell Vice President Emily A. Chien Vice President Flora Chuang Vice President Kimberly A. Collins (Gorub) Vice President Peter T. Collins Vice President Joseph D. Connell, Jr. Vice President Michael C. Conrath Vice President Dwight P. Cornell Vice President Robert A. Craft Vice President John D. Curry Vice President Walter F. Czaicki Vice President John M. D'Agostino Vice President Brett E. Dearing Vice President Christine M. Dehil Vice President Darren K. DeSimone Vice President Ronald G. Dietrich Vice President Joseph A. DiMauro Vice President Carmela Di Meo Vice President Joseph T. Dominguez Vice President Bernard J. Eng Vice President Daniel Ennis Vice President Michael J. Eustic Vice President Hollie G. Fagan Vice President Matthew G. Fetchko Vice President Michael F. Foy Vice President Kevin T. Gang Vice President Mark A. Gessner Vice President Mark C. Glatley Vice President Brian P. Hanna Vice President John G. Hansen Vice President Shannon R. Harkins Vice President Terry L. Harris Vice President Michael S. Hart Vice President Daniel R. Hemberger Vice President Eric M. Hirschfeld Vice President Anthony D. Ialeggio Vice President Eric S. Indovina Vice President Oscar J. Isoba Vice President Kumar Jagdeo II Vice President Matthew L. Joki Vice President Jung M. Kim Vice President Joseph B. Kolman Vice President Ted R. Kosinski Vice President Scott M. Krauthamer Vice President Jeffrey J. Lamb Vice President Christopher J. Larkin Vice President Laurel E. Lindner Vice President James M. Liptrot Vice President and Assistant Controller Armando C. Llanes Vice President Colleen S. Lorence Vice President Edward R. Lupo Vice President Jennifer L. Magill Vice President George J. Manning Vice President Silvia Manz Vice President Osama Mari Vice President Jay G. McAndrew Vice President Joseph R. McLean Vice President Craig S. McKenna Vice President Bart D. Miller Vice President Troy E. Mosconi Vice President Paul S. Moyer Vice President Wendy Kam Mui Li Vice President Juan Mujica Vice President John F. Multhauf Vice President Robert D. Nelms Vice President Jamie A. Nieradka Vice President Suzanne E. Norman Vice President Alexandria N. Novak Vice President John J. Onofrio Vice President and Assistant Treasurer Ian J. O'Brien-Rupert Vice President Alex E. Pady Vice President David D. Paich Vice President Kimchu Perrington Vice President Leo J. Peters IV Vice President Thomas C. Pfeifer Vice President Andreas Pfunder Vice President Neal B. Picker Vice President Joseph J. Proscia Vice President John D. Prosperi Vice President Carol H. Rappa Vice President Juhi Rathee Vice President Jessie A. Reich Vice President Heidi A. Richardson Vice President James A. Rie Vice President Lauryn A. Rivello Vice President Patricia A. Roberts Vice President Francis W. Ross Vice President Miguel A. Rozensztroch Vice President Cynthia A. Sachs Vice President Kristin M. Seabold Vice President William D. Shockley Vice President Joy R. Seijas Vice President John F. Skahan Vice President Praveen K. Singh Vice President Karen Sirett Vice President Elizabeth M. Smith Vice President Laurie L. Snively Vice President Daniel L. Stack Vice President Ben H. Stairs Vice President Jason P. Stevens Vice President Brian D. Stokes Vice President Kelly P. Sudovar Vice President Scott M. Tatum Vice President John A. Taylor Vice President Asher B. Teigman Vice President Nancy D. Testa Vice President Michael B. Thayer Vice President Jay D. Tini Vice President Keri-Ann S. Toritto Vice President Laura L. Tocchet Vice President Louis L. Tousignant Vice President James R. Van Deventer Vice President Thomas M. Vitale Vice President Christian G. Wilson Vice President Stephen M. Woetzel Vice President Joanna Wong Vice President Tao T. Wu Vice President Joseph Abate Assistant Vice President Kimberly D. Alfano Assistant Vice President Constantin L. Andreae Assistant Vice President DeAnna D. Beedy Assistant Vice President Roy C. Bentzen Assistant Vice President Scott A. Brown Assistant Vice President Judith A. Chin Assistant Vice President Robert M. Couzzo Assistant Vice President Christine M. Crowley Assistant Vice President Jamila Dalia Assistant Vice President Daniel A. Dean Assistant Vice President Ralph A. DiMeglio Assistant Vice President Kilie A. Donahue Assistant Vice President Bradford P. Doninger Assistant Vice President Brian M. Dunkin Assistant Vice President Diana Eriksen Assistant Vice President Jessica M. Fernandez Assistant Vice President Michael J. Ferraro Assistant Vice President Robert A. Fiorentino Assistant Vice President Jose R. Garcia Assistant Vice President Julie E. Gerstmayr Assistant Vice President Michele J. Giangrande Assistant Vice President Adam J. Gilbert Assistant Vice President Raniero J. Gimeno Assistant Vice President Cecilia N. Gomes Assistant Vice President Stefanie M. Gonzalez Assistant Vice President Friederike Grote Assistant Vice President John J. Gulino Assistant Vice President Kelly P. Guter-Sudafer Assistant Vice President Junko Hisamatsu (Cox) Assistant Vice President Arthur F. Hoyt, Jr. Assistant Vice President Gregg L. Jones Assistant Vice President Junko Kimura Assistant Vice President Stephen J. Laffey Assistant Vice President Assistant Secretary and Counsel Jayson W. Leisenring Assistant Vice President Jonathan M. Liang Assistant Vice President Brian C. Lynch Assistant Vice President Mark J. Maier Assistant Vice President Matthew J. Malvey Assistant Vice President Francesco Martello Assistant Vice President Russell B. Martin Assistant Vice President David G. Mitchell Assistant Vice President Jennifer A. Mulhall Assistant Vice President Isabella Nunes Assistant Vice President Brian W. Paulson Assistant Vice President Steven Pavlovic Assistant Vice President Ling Shan E. Phua Assistant Vice President Vinod B. Pittampalli Assistant Vice President Damien J. Porras Assistant Vice President Mark A. Quarno Assistant Vice President Marc S. Reed Assistant Vice President Jennifer R. Rolf Assistant Vice President Kristin M. Sammon Assistant Vice President Justin S. Scheckner Assistant Vice President Kristi F. Smith Assistant Vice President Orlando Soler Assistant Vice President Matthew M. Stebner Assistant Vice President Christopher R. Thabet Assistant Vice President William Tohme Assistant Vice President Ellen Tobin Assistant Vice President Damaris Torres Assistant Vice President Laurence Vandecasteele Assistant Vice President Jennifer L. Vos Assistant Vice President Kellie L. Weil Assistant Vice President Martin J. Zayac Assistant Vice President Thomas M. Zottner Assistant Vice President Mark R. Manley Secretary Colin T. Burke Assistant Secretary (c) Not applicable. ITEM 28. Location of Accounts and Records. The majority of the accounts, books and other documents required to be maintained by Section 31(a) of the Investment Company Act of 1940 and the rules thereunder are maintained as follows: journals, ledgers, securities records and other original records are maintained principally at the offices of AllianceBernstein Investor Services, Inc., P.O. Box 786003, San Antonio, Texas 78278-6003, and at the offices of Brown Brothers Harriman & Co., the Registrant's Custodian, 40 Water Street, Boston, Massachusetts 02109. All other records so required to be maintained are maintained at the offices of AllianceBernstein L.P., 1345 Avenue of the Americas, New York, New York, 10105. ITEM 29. Management Services. Not applicable. ITEM 30. Undertakings. Not applicable. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, the Registrant certifies that it meets all of the requirements for effectiveness to this Amendment to its Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this Post-Effective Amendment No. 25 to the Registration Statement to be signed on its behalf by the undersigned, duly authorized, in the City of New York and State of New York, on the 28th day of January, 2009. ALLIANCEBERNSTEIN DIVERSIFIED YIELD FUND, INC. By: /s/ Robert M. Keith* -------------------- Robert M. Keith President Pursuant to the requirements of the Securities Act of 1933, as amended, this Post-Effective Amendment No. 25 to the Registration Statement has been signed below by the following persons in the capacities and on the date indicated. SIGNATURE TITLE DATE --------- ----- ---- 1. Principal Executive Officer: /s/ Robert M. Keith* President and January 28, 2009 -------------------- Chief Executive Officer Robert M. Keith 2. Principal Financial and Accounting Officer: /s/ Joseph J. Mantineo Treasurer and January 28, 2009 ---------------------- Chief Financial Joseph J. Mantineo Officer 3. Directors: Marc O. Mayer* John H. Dobkin* Michael J. Downey* William H. Foulk, Jr.* D. James Guzy* Nancy P. Jacklin* Garry L. Moody* Marshall C. Turner, Jr.* Earl D. Weiner* *By: /s/ Andrew L. Gangolf January 28, 2009 --------------------- Andrew L. Gangolf (Attorney-in-Fact) Index to Exhibits Exhibit No. Description of Exhibits - ----------- ----------------------- (i) Opinion and Consent of Seward & Kissel LLP (j) Consent of Independent Registered Public Accounting Firm Other Exhibits Powers of Attorney SK 00250 0157 953765 EX-99.I 2 d954980_ex99-i.txt SEWARD & KISSEL LLP 1200 G Street, N.W. Washington, DC 20005 Telephone: (202) 737-8833 Facsimile: (202) 737-5184 www.sewkis.com January 28, 2009 AllianceBernstein Bond Fund, Inc. - AllianceBernstein Intermediate Bond Portfolio AllianceBernstein Diversified Yield Fund, Inc. AllianceBernstein Global Bond Fund, Inc. AllianceBernstein High Income Fund, Inc. 1345 Avenue of the Americas New York, New York 10105 Ladies and Gentlemen: We have acted as counsel for each of the corporations named above (each, a "Company," and collectively, the "Companies") and the individual portfolios of certain of the Companies (each, a "Portfolio"), as applicable, in connection with the registration under the Securities Act of 1933, as amended (the "Securities Act"), of an indefinite number of shares, par value per share as set forth in each Company's Charter, of Class A Common Stock, Class B Common Stock, Class C Common Stock, Class R Common Stock, Class K Common Stock, Class I Common Stock and Advisor Class Common Stock, as applicable (each a "Class" and collectively the "Shares"), of each Company or Portfolio, as applicable. Each Company is a Maryland corporation and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. This opinion is rendered to each Company severally, and not to the Companies jointly. As counsel for a Company, we have participated in the preparation of the Post-Effective Amendment to that Company's Registration Statement on Form N-1A to be filed with the Securities and Exchange Commission (the "Commission") to become effective on January 30, 2009 (as so amended, the "Registration Statement") in which this letter is included as Exhibit (i). We have examined the Charter and By-laws of that Company and any amendments and supplements thereto and have relied upon such corporate records of that Company and such other documents and certificates as to factual matters as we have deemed necessary to render the opinion expressed herein. Based on such examination, we are of the opinion that the Shares of each Company to be offered for sale pursuant to the Registration Statement of that Company are, to the extent of the numbers of Shares of the relevant Classes of each Company authorized to be issued by that Company in its Charter, duly authorized, and, when sold, issued and paid for as contemplated by the Registration Statement, will have been validly issued and will be fully paid and non-assessable under the laws of the State of Maryland. We do not express an opinion with respect to any laws other than the laws of Maryland applicable to the due authorization, valid issuance and non-assessability of shares of common stock of corporations formed pursuant to the provisions of the Maryland General Corporation Law. Accordingly, our opinion does not extend to, among other laws, the federal securities laws or the securities or "blue sky" laws of Maryland or any other jurisdiction. Members of this firm are admitted to the bars of the State of New York and the District of Columbia. We hereby consent to the filing of this opinion with the Commission as an exhibit to the Registration Statement and to the reference to our firm under the caption "General Information--Counsel" in Part B thereof. In giving this consent, we do not thereby admit that we are included in the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission. Very truly yours, /s/ Seward & Kissel LLP SK 00250 0157 954980 EX-99.J 3 d953765_ex99-j.txt CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the references to our firm under the captions "Financial Highlights" within the Prospectus and "Shareholder Services - Statements and Reports," "General Information - Independent Registered Public Accounting Firm" and "Financial Statements and Report of Independent Registered Public Accounting Firm" within the Statement of Additional Information and to the use of our report dated December 29, 2008 relating to AllianceBernstein Diversified Yield Fund, Inc. (formerly, Global Strategic Income Trust Fund, Inc.) for the fiscal year ended October 31, 2008 which is incorporated by reference in this Post Effective Amendment No. 25 Registration Statement (Form N-1A No. 811-07391) of AllianceBernstein Diversified Yield Fund, Inc. ERNST & YOUNG LLP New York, New York January 27, 2009 EX-99 4 d945671_poa-09.txt POWER OF ATTORNEY POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below hereby revokes all prior powers granted by the undersigned to the extent inconsistent herewith and constitutes and appoints Robert M. Keith, Andrew L. Gangolf, Emilie D. Wrapp, Nancy E. Hay, Stephen J. Laffey and Christina A. Morse and each of them, to act severally as attorney-in-fact and agent, with power of substitution and resubstitution, for the undersigned in any and all capacities, solely for the purpose of signing the respective Registration Statements, and any amendments thereto, on Form N-1A of - -AllianceBernstein Balanced Shares, Inc. - -AllianceBernstein Blended Style Series, Inc. - -AllianceBernstein Bond Fund, Inc. - -AllianceBernstein Cap Fund, Inc. - -AllianceBernstein Corporate Shares - -AllianceBernstein Diversified Yield Fund, Inc. - -AllianceBernstein Exchange Reserves - -AllianceBernstein Fixed-Income Shares, Inc. - -AllianceBernstein Focused Growth & Income Fund, Inc. - -AllianceBernstein Global Bond Fund, Inc. - -AllianceBernstein Global Growth Fund, Inc. - -AllianceBernstein Global Real Estate Investment Fund, Inc. - -AllianceBernstein Global Thematic Growth Fund, Inc. - -AllianceBernstein Growth and Income Fund, Inc. - -AllianceBernstein High Income Fund, Inc. - -AllianceBernstein Institutional Funds, Inc. - -AllianceBernstein International Growth Fund, Inc. - -AllianceBernstein Large Cap Growth Fund, Inc. - -AllianceBernstein Small/Mid-Cap Growth Fund, Inc. - -AllianceBernstein Municipal Income Fund, Inc - -AllianceBernstein Municipal Income Fund II - -AllianceBernstein Trust - -AllianceBernstein Utility Income Fund, Inc. - -AllianceBernstein Variable Products Series Fund, Inc. - -The AllianceBernstein Portfolios - -The AllianceBernstein Pooling Portfolios - -Sanford C. Bernstein Fund II, Inc. and filing the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorneys-in-fact, or their substitute or substitutes, may do or cause to be done by virtue hereof. /s/ John H. Dobkin ------------------ John H. Dobkin Dated: November 3, 2008 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below hereby revokes all prior powers granted by the undersigned to the extent inconsistent herewith and constitutes and appoints Robert M. Keith, Andrew L. Gangolf, Emilie D. Wrapp, Nancy E. Hay, Stephen J. Laffey and Christina A. Morse and each of them, to act severally as attorney-in-fact and agent, with power of substitution and resubstitution, for the undersigned in any and all capacities, solely for the purpose of signing the respective Registration Statements, and any amendments thereto, on Form N-1A of - -AllianceBernstein Balanced, Shares, Inc. - -AllianceBernstein Blended Style Series, Inc. - -AllianceBernstein Bond Fund, Inc. - -AllianceBernstein Cap Fund, Inc. - -AllianceBernstein Corporate Shares - -AllianceBernstein Diversified Yield Fund, Inc. - -AllianceBernstein Exchange Reserves - -AllianceBernstein Fixed-Income Shares, Inc. - -AllianceBernstein Focused Growth & Income Fund, Inc. - -AllianceBernstein Global Bond Fund, Inc. - -AllianceBernstein Global Growth Fund, Inc. - -AllianceBernstein Global Real Estate Investment Fund, Inc. - -AllianceBernstein Global Thematic Growth Fund, Inc. - -AllianceBernstein Growth and Income Fund, Inc. - -AllianceBernstein High Income Fund, Inc. - -AllianceBernstein Institutional Funds, Inc. - -AllianceBernstein International Growth Fund, Inc. - -AllianceBernstein Large Cap Growth Fund, Inc. - -AllianceBernstein Small/Mid-Cap Growth Fund, Inc. - -AllianceBernstein Municipal Income Fund, Inc. - -AllianceBernstein Municipal Income Fund II - -AllianceBernstein Trust - -AllianceBernstein Utility Income Fund, Inc. - -AllianceBernstein Variable Products Series Fund, Inc. - -The AllianceBernstein Portfolios - -The AllianceBernstein Pooling Portfolios - -Sanford C. Bernstein Fund II, Inc. and filing the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorneys-in-fact, or their substitute or substitutes, may do or cause to be done by virtue hereof. /s/ Michael J. Downey --------------------- Michael J. Downey Dated: November 3, 2008 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below hereby revokes all prior powers granted by the undersigned to the extent inconsistent herewith and constitutes and appoints Robert M. Keith, Andrew L. Gangolf, Emilie D. Wrapp, Nancy E. Hay, Stephen J. Laffey and Christina A. Morse and each of them, to act severally as attorney-in-fact and agent, with power of substitution and resubstitution, for the undersigned in any and all capacities, solely for the purpose of signing the respective Registration Statements, and any amendments thereto, on Form N-1A of - -AllianceBernstein Balanced Shares, Inc. - -AllianceBernstein Blended Style Series, Inc. - -AllianceBernstein Bond Fund, Inc. - -AllianceBernstein Cap Fund, Inc. - -AllianceBernstein Corporate Shares - -AllianceBernstein Diversified Yield Fund, Inc. - -AllianceBernstein Exchange Reserves - -AllianceBernstein Fixed-Income Shares, Inc. - -AllianceBernstein Focused Growth & Income Fund, Inc. - -AllianceBernstein Global Bond Fund, Inc. - -AllianceBernstein Global Growth Fund, Inc. - -AllianceBernstein Global Real Estate Investment Fund, Inc. - -AllianceBernstein Global Thematic Growth Fund, Inc. - -AllianceBernstein Greater China `97 Fund, Inc. - -AllianceBernstein Growth and Income Fund, Inc. - -AllianceBernstein High Income Fund, Inc. - -AllianceBernstein Institutional Funds, Inc. - -AllianceBernstein International Growth Fund, Inc. - -AllianceBernstein Large Cap Growth Fund, Inc. - -AllianceBernstein Small/Mid-Cap Growth Fund, Inc. - -AllianceBernstein Municipal Income Fund, Inc. - -AllianceBernstein Municipal Income Fund II - -AllianceBernstein Trust - -AllianceBernstein Utility Income Fund, Inc. - -AllianceBernstein Variable Products Series Fund, Inc. - -The AllianceBernstein Portfolios - -The AllianceBernstein Pooling Portfolios - -Sanford C. Bernstein Fund II, Inc. and filing the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorneys-in-fact, or their substitute or substitutes, may do or cause to be done by virtue hereof. /s/ William H. Foulk, Jr. ------------------------- William H. Foulk, Jr. Dated: November 3, 2008 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below hereby revokes all prior powers granted by the undersigned to the extent inconsistent herewith and constitutes and appoints Robert M. Keith, Andrew L. Gangolf, Emilie D. Wrapp, Nancy E. Hay, Stephen J. Laffey and Christina A. Morse and each of them, to act severally as attorney-in-fact and agent, with power of substitution and resubstitution, for the undersigned in any and all capacities, solely for the purpose of signing the respective Registration Statements, and any amendments thereto, on Form N-1A of - -AllianceBernstein Balanced Shares, Inc. - -AllianceBernstein Blended Style Series, Inc. - -AllianceBernstein Bond Fund, Inc. - -AllianceBernstein Cap Fund, Inc. - -AllianceBernstein Corporate Shares - -AllianceBernstein Diversified Yield Fund, Inc. - -AllianceBernstein Exchange Reserves - -AllianceBernstein Fixed-Income Shares, Inc. - -AllianceBernstein Focused Growth & Income Fund, Inc. - -AllianceBernstein Global Bond Fund, Inc. - -AllianceBernstein Global Growth Fund, Inc. - -AllianceBernstein Global Real Estate Investment Fund, Inc. - -AllianceBernstein Global Thematic Growth Fund, Inc. - -AllianceBernstein Growth and Income Fund, Inc. - -AllianceBernstein High Income Fund, Inc. - -AllianceBernstein Institutional Funds, Inc. - -AllianceBernstein International Growth Fund, Inc. - -AllianceBernstein Large Cap Growth Fund, Inc. - -AllianceBernstein Small/Mid-Cap Growth Fund, Inc. - -AllianceBernstein Municipal Income Fund, Inc. - -AllianceBernstein Municipal Income Fund II - -AllianceBernstein Trust - -AllianceBernstein Utility Income Fund, Inc. - -AllianceBernstein Variable Products Series Fund, Inc. - -The AllianceBernstein Portfolios - -The AllianceBernstein Pooling Portfolios - -Sanford C. Bernstein Fund II, Inc. and filing the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorneys-in-fact, or their substitute or substitutes, may do or cause to be done by virtue hereof. /s/ D. James Guzy ----------------- D. James Guzy Dated: November 3, 2008 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below hereby revokes all prior powers granted by the undersigned to the extent inconsistent herewith and constitutes and appoints Robert M. Keith, Andrew L. Gangolf, Emilie D. Wrapp, Nancy E. Hay, Stephen J. Laffey and Christina A. Morse and each of them, to act severally as attorney-in-fact and agent, with power of substitution and resubstitution, for the undersigned in any and all capacities, solely for the purpose of signing the respective Registration Statements, and any amendments thereto, on Form N-lA of - -AllianceBernstein Balanced Shares, Inc. - -AllianceBernstein Blended Style Series, Inc. - -AllianceBernstein Bond Fund, Inc. - -AllianceBernstein Cap Fund, Inc. - -AllianceBernstein Corporate Shares - -AllianceBernstein Diversified Yield Fund, Inc. - -AllianceBernstein Exchange Reserves - -AllianceBernstein Fixed-Income Shares, Inc. - -AllianceBernstein Focused Growth & Income Fund, Inc. - -AllianceBernstein Global Bond Fund, Inc. - -AllianceBernstein Global Growth Fund, Inc. - -AllianceBernstein Global Real Estate Investment Fund, Inc. - -AllianceBernstein Global Thematic Growth Fund, Inc. - -AllianceBernstein Growth and Income Fund, Inc. - -AllianceBernstein High Income Fund, Inc. - -AllianceBernstein Institutional Funds, Inc. - -AllianceBernstein International Growth Fund, Inc. - -AllianceBernstein Large Cap Growth Fund, Inc. - -AllianceBernstein Small/Mid-Cap Growth Fund, Inc. - -AllianceBernstein Municipal Income Fund, Inc. - -AllianceBernstein Municipal Income Fund II - -AllianceBernstein Trust - -AllianceBernstein Utility Income Fund, Inc. - -AllianceBernstein Variable Products Series Fund, Inc. - -The AllianceBernstein Portfolios - -The AllianceBernstein Pooling Portfolios - -Sanford C. Bernstein Fund II, Inc. and filing the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorneys-in-fact, or their substitute or substitutes, may do or cause to be done by virtue hereof. /s/ Nancy P. Jacklin -------------------- Nancy P. Jacklin Dated: November 3, 2008 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below hereby revokes all prior powers granted by the undersigned to the extent inconsistent herewith and constitutes and appoints Robert M. Keith, Andrew L. Gangolf, Emilie D. Wrapp, Nancy E. Hay, Stephen J. Laffey and Christina A. Morse and each of them, to act severally as attorney-in-fact and agent, with power of substitution and resubstitution, for the undersigned in any and all capacities, solely for the purpose of signing the respective Registration Statements, and any amendments thereto, on Form N-1A of - -AllianceBernstein Balanced Shares, Inc. - -AllianceBernstein Blended Style Series, Inc. - -AllianceBernstein Bond Fund, Inc. - -AllianceBernstein Cap Fund, Inc. - -AllianceBernstein Corporate Shares - -AllianceBernstein Diversified Yield Fund, Inc. - -AllianceBernstein Exchange Reserves - -AllianceBernstein Fixed-Income Shares, Inc. - -AllianceBernstein Focused Growth & Income Fund, Inc. - -AllianceBernstein Global Bond Fund, Inc. - -AllianceBernstein Global Growth Fund, Inc. - -AllianceBernstein Global Real Estate Investment Fund, Inc. - -AllianceBernstein Global Thematic Growth Fund, Inc. - -AllianceBernstein Growth and Income Fund, Inc. - -AllianceBernstein High Income Fund, Inc. - -AllianceBernstein Institutional Funds, Inc. - -AllianceBernstein International Growth Fund, Inc. - -AllianceBernstein Large Cap Growth Fund, Inc. - -AllianceBernstein Small/Mid-Cap Growth Fund, Inc. - -AllianceBernstein Municipal Income Fund, Inc. - -AllianceBernstein Municipal Income Fund II - -AllianceBernstein Trust - -AllianceBernstein Utility Income Fund, Inc. - -AllianceBernstein Variable Products Series Fund, Inc. - -The AllianceBernstein Portfolios - -The AllianceBernstein Pooling Portfolios - -Sanford. C. Bernstein Fund II, Inc. and filing the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorneys-in-fact, or their substitute or substitutes, may do or cause to be done by virtue hereof. /s/ Marc O. Mayer ----------------- Marc O. Mayer Dated: November 3, 2008 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below hereby revokes all prior powers granted by the undersigned to the extent inconsistent herewith and constitutes and appoints Robert M. Keith, Andrew L. Gangolf, Emilie D. Wrapp, Nancy E. Hay, Stephen J. Laffey and Christina A. Morse and each of them, to act severally as attorney-in-fact and agent, with power of substitution and resubstitution, for the undersigned in any and all capacities, solely for the purpose of signing the respective Registration Statements, and any amendments thereto, on Form N-lA of - -AllianceBernstein Balanced Shares, Inc. - -AllianceBernstein Blended Style Series, Inc. - -AllianceBernstein Bond Fund, Inc. - -AllianceBernstein Cap Fund, Inc. - -AllianceBernstein Diversified Yield Fund, Inc. - -AllianceBernstein Exchange Reserves - -AllianceBernstein Focused Growth & Income Fund, Inc. - -AllianceBernstein Global Bond Fund, Inc. - -AllianceBernstein Global Growth Fund, Inc. - -AllianceBernstein Global Real Estate Investment Fund, Inc. - -AllianceBernstein Global Thematic Growth Fund, Inc. - -AllianceBernstein Greater China `97 Fund, Inc. - -AllianceBernstein Growth and Income Fund, Inc. - -AllianceBernstein High Income Fund, Inc. - -AllianceBernstein Institutional Funds, Inc. - -AllianceBernstein International Growth Fund, Inc. - -AllianceBernstein Large Cap Growth Fund, Inc. - -AllianceBernstein Small/Mid-Cap Growth Fund, Inc. - -AllianceBernstein Municipal Income Fund, Inc. - -AllianceBernstein Municipal Income Fund II - -AllianceBernstein Trust - -AllianceBernstein Utility Income Fund, Inc. - -AllianceBernstein Variable Products Series Fund, Inc. - -The AllianceBernstein Portfolios - -The AllianceBernstein Pooling Portfolios - -Sanford C. Bernstein Fund II, Inc. and filing the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorneys-in-fact, or their substitute or substitutes, may do or cause to be done by virtue hereof. /s/ Garry L. Moody ------------------ Garry L. Moody Dated: November 3, 2008 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below hereby revokes all prior powers granted by the undersigned to the extent inconsistent herewith and constitutes and appoints Robert M. Keith, Andrew L. Gangolf, Emilie D. Wrapp, Nancy B. Hay, Stephen J. Laffey and Christina A. Morse and each of them, to act severally as attorney-in-fact and agent, with power of substitution and resubstitution, for the undersigned in any and all capacities, solely for the purpose of signing the respective Registration Statements, and any amendments thereto, on Form N-lA of - -AllianceBernstein Balanced Shares, Inc. - -AllianceBernstein Blended Style Series, Inc. - -AllianceBernstein Bond Fund, Inc. - -AllianceBernstein Cap Fund, Inc. - -AllianceBernstein Corporate Shares - -AllianceBernstein Diversified Yield Fund, Inc. - -AllianceBernstein Exchange Reserves - -AllianceBernstein Fixed-Income Shares, Inc. - -AllianceBernstein Focused Growth & Income Fund, Inc. - -AllianceBernstein Global Bond Fund, Inc. - -AllianceBernstein Global Growth Fund, Inc. - -AllianceBernstein Global Real Estate Investment Fund, Inc. - -AllianceBernstein Global Thematic Growth Fund, Inc. - -AllianceBernstein Growth and Income Fund, Inc. - -AllianceBernstein High Income Fund, Inc. - -AllianceBernstein Institutional Funds, Inc. - -AllianceBernstein International Growth Fund, Inc. - -AllianceBernstein Large Cap Growth Fund, Inc. - -AllianceBernstein Small/Mid-Cap Growth Fund, Inc. - -AllianceBernstein Municipal Income Fund, Inc. - -AllianceBernstein Municipal Income Fund II - -AllianceBernstein Trust - -AllianceBernstein Utility Income Fund, Inc. - -AllianceBernstein Variable Products Series Fund, Inc. - -The AllianceBernstein Portfolios - -The AllianceBernstein Pooling Portfolios - -Sanford C. Bernstein Fund II, Inc. and filing the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorneys-in-fact, or their substitute or substitutes, may do or cause to be done by virtue hereof. /s/ Marshall C. Turner, Jr. --------------------------- Marshall C. Turner, Jr. Dated: November 3, 2008 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below hereby revokes all prior powers granted by the undersigned to the extent inconsistent herewith and constitutes and appoints Robert M. Keith, Andrew L. Gangolf, Emilie D. Wrapp, Nancy E. Hay, Stephen J. Laffey and Christina A. Morse and each of them, to act severally as attorney-in-fact and agent, with power of substitution and resubstitution, for the undersigned in any and all capacities, solely for the purpose of signing the respective Registration Statements, and any amendments thereto, on Form N-lA of - -AllianceBernstein Balanced Shares, Inc. - -AllianceBernstein Blended Style Series, Inc. - -AllianceBernstein Bond Fund, Inc. - -AllianceBernstein Cap Fund, Inc. - -AllianceBernstein Corporate Shares - -AllianceBernstein Diversified Yield Fund, Inc. - -AllianceBernstein Exchange Reserves - -AllianceBernstein Fixed-Income Shares, Inc. - -AllianceBernstein Focused Growth & Income Fund, Inc. - -AllianceBernstein Global Bond Fund, Inc. - -AllianceBernstein Global Growth Fund, Inc. - -AllianceBernstein Global Real Estate Investment Fund, Inc. - -AllianceBernstein Global Thematic Growth Fund, Inc. - -AllianceBernstein Growth and Income Fund, Inc. - -AllianceBernstein High Income Fund, Inc. - -AllianceBernstein Institutional Funds, Inc. - -AllianceBernstein International Growth Fund, Inc. - -AllianceBernstein Large Cap Growth Fund, Inc. - -AllianceBernstein Small/Mid-Cap Growth Fund, Inc. - -AllianceBernstein Municipal Income Fund, Inc. - -AllianceBernstein Municipal Income Fund II - -AllianceBernstein Trust - -AllianceBernstein Utility Income Fund, Inc. - -AllianceBernstein Variable Products Series Fund, Inc. - -The AllianceBernstein Portfolios - -The AllianceBernstein Pooling Portfolios - -Sanford C. Bernstein Fund II, Inc. and filing the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorneys-in-fact, or their substitute or substitutes, may do or cause to be done by virtue hereof. /s/ Earl D. Weiner ------------------ Earl D. Weiner Dated: November 3, 2008 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below hereby revokes all prior powers granted by the undersigned to the extent inconsistent herewith and constitutes and appoints Robert M. Keith, Andrew L. Gangolf, Emilie D. Wrapp, Nancy E. Hay, Stephen J. Laffey and Christina A. Morse and each of them, to act severally as attorney-in-fact and agent, with power of substitution and resubstitution, for the undersigned in any and all capacities, solely for the purpose of signing the respective Registration Statements, and any amendments thereto, on Form N-1A and any other filings of: - -AllianceBernstein Balanced Shares, Inc. - -AllianceBernstein Blended Style Series, Inc. - -AllianceBernstein Bond Fund, Inc. - -AllianceBernstein Cap Fund, Inc. - -AllianceBernstein Corporate Shares - -AllianceBernstein Diversified Yield Fund, inc. - -AllianceBernstein Exchange Reserves - -AllianceBernstein Fixed-Income Shares, Inc. - -AllianceBernstein Focused Growth & Income Fund, Inc. - -AllianceBernstein Global Bond Fund, Inc. - -AllianceBernstein Global Growth Fund, Inc. - -AllianceBernstein Global Real Estate Investment Fund, Inc. - -AllianceBernstein Global Thematic Growth Fund, Inc. - -AllianceBernstein Greater China `97 Fund, Inc. - -AllianceBernstein Growth and Income Fund, Inc. - -AllianceBernstein High Income Fund, Inc. - -AllianceBernstein Institutional Funds, Inc. - -AllianceBernstein International Growth Fund, Inc. - -AllianceBernstein Large Cap Growth Fund, Inc. - -AllianceBernstein Small/Mid-Cap Growth Fund, Inc. - -AllianceBernstein Municipal Income Fund, Inc. - -AllianceBernstein Municipal Income Fund II - -AllianceBernstein Trust - -AllianceBernstein Utility Income Fund, Inc. - -AllianceBernstein Variable Products Series Fund, Inc. - -The AllianceBernstein Portfolios - -The AllianceBernstein Pooling Portfolios - -Sanford. C. Bernstein Fund II, Inc. and filing the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorneys-in-fact, or their substitute or substitutes, may do or cause to be done by virtue hereof. /s/ Robert M. Keith ------------------- Robert M. Keith Dated: November 3, 2008 SK 00250 0437 945671 -----END PRIVACY-ENHANCED MESSAGE-----