N-30D 1 edg7566.txt ALLIANCE BOND FUND CORPORATE BOND -------------------------------------------------------------------------------- CORPORATE FIXED INCOME -------------------------------------------------------------------------------- Alliance Bond Fund Corporate Bond Portfolio Semi-Annual Report December 31, 2001 Alliance Capital [LOGO](R) The Investment Professional's Choice Investment Products Offered --------------------------- o Are Not FDIC Insured o May Lose Value o Are Not Bank Guaranteed --------------------------- This shareholder report must be preceded or accompanied by the Fund's prospectus for individuals who are not current shareholders of the Fund. Alliance Fund Distributors, Inc., the principal underwriter of the Alliance mutual funds and an affiliate of Alliance Capital Management L.P., the manager of the funds, is a member of the NASD. ---------------------- LETTER TO SHAREHOLDERS ---------------------- LETTER TO SHAREHOLDERS February 19, 2002 Dear Shareholder: This report contains investment results, strategy and outlook for Alliance Bond Fund Corporate Bond Portfolio (the "Portfolio") for the semi-annual reporting period ended December 31, 2001. Investment Objectives and Policies The primary objective of this open-end fund is to maximize income over the long-term, to the extent consistent with providing reasonable safety in the value of each shareholder's investment. As a secondary objective, the Portfolio seeks capital appreciation. To achieve its objectives, the Portfolio invests primarily in corporate bonds. The Portfolio may also hold debt securities issued by the U.S. and foreign governments. Where the Portfolio invests primarily in investment-grade securities (currently 65%), it may also invest a significant amount of its assets in lower-rated debt securities. Investment Results The following table shows how the Portfolio performed over the past six- and 12-month periods ended December 31, 2001. For comparison, we have included the Lehman Brothers (LB) Long BAA U.S. Credit Index, a measure of the performance of a basket of unmanaged corporate debt securities. We have also included the performance for the Lipper Corporate Debt BBB Rated Funds Average, the average performance of a group of similar corporate bond funds. INVESTMENT RESULTS* Periods Ended December 31, 2001 ----------------------- Total Returns ----------------------- 6 Months 12 Months -------------------------------------------------------------------------------- Alliance Bond Fund Corporate Bond Portfolio Class A 3.75% 8.34% -------------------------------------------------------------------------------- Class B 3.32% 7.53% -------------------------------------------------------------------------------- Class C 3.32% 7.53% -------------------------------------------------------------------------------- Lehman Brothers Long BAA U.S. Credit Index 5.17% 12.50% -------------------------------------------------------------------------------- Lipper Corporate Debt BBB Rated Funds Average 3.57% 7.41% -------------------------------------------------------------------------------- * The Portfolio's investment results are total returns for the periods shown and are based on the net asset value (NAV) of each class of shares as of December 31, 2001. All fees and expenses related to the operation of the Portfolio have been deducted, but no adjustment has been made for sales charges that may apply when shares are purchased or redeemed. Returns for the Portfolio include the reinvestment of any distributions paid during each period. Past performance is no guarantee of future results. The unmanaged Lehman Brothers Long BAA U.S. Credit Index is a measure of corporate and non-corporate fixed-income securities that are rated investment grade (Baa by Moody's Investors Service or BBB by Standard & Poor's) and have at least 10 years to final maturity. The unmanaged Lipper Corporate Debt BBB Rated Funds Average (the -------------------------------------------------------------------------------- ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO o 1 ---------------------- LETTER TO SHAREHOLDERS ---------------------- "Lipper Average") is based on the performance of a universe of funds that invest at least 65% of their assets in corporate or government debt issues rated in the top four grades. For the six- and 12-month periods ended December 31, 2001, the Lipper Average consisted of 155 and 151 funds, respectively. An investor cannot invest directly in an index or an average, and its results are not indicative of any particular investment, including Alliance Bond Fund Corporate Bond Portfolio. Additional investment results appear on pages 6-10. During the six- and 12-month periods under review the Portfolio underperformed the LB Long BAA U.S. Credit Index. The Portfolio however, outperformed the Lipper Corporate Debt BBB Rated Funds Average, an average of similarly managed funds. Security selection, particularly in the high yield corporate arena, was the primary source of the Portfolio's underperformance relative to its benchmark, the LB Long BAA U.S. Credit Index. Continued weakness in the high yield sector, caused by declines in the equity market and investors' aversion to risk, negatively affected performance. Particular holdings that detracted from the Portfolio's performance included Marconi Corp. Plc, and Global Crossing Holdings, Ltd. in the communications sector, and Finova Group, Inc. in the financial sector. In addition, the Portfolio's overweighting in the utility sector detracted from performance, while the industrial and utility security selection contributed positively to the Portfolio's performance. The Portfolio's emerging market securities had an overall positive effect. The Portfolio's relatively small position in Argentina (which was sold by the end of October) detracted from perfomance. However, the Portfolio's larger position in Russia contributed positively to performance as economic reforms continued and their geopolitical importance grew. The Portfolio's Treasury allocation modestly detracted from performance as Treasuries generally underperformed corporate securities. Market Overview Global economic growth continued to decelerate in the second half of 2001. In the U.S., declining business investment, weaker export performance, lower equity valuations and a drop in consumer confidence combined to significantly slow the economy during the period. The events of September 11 further undermined the economy and delayed any prospects of recovery to 2002. In response, the U.S. Federal Reserve continued to aggressively lower interest rates, ending the year with the lowest rates seen in four decades. Gross domestic product (GDP), which is the official measure of growth of the U.S. economy, declined from 0.8% in the first half of the year to -0.6% in the second half. In December however, a deceleration in the job-loss rate and signs of a turnaround in manufacturing ac- -------------------------------------------------------------------------------- 2 o ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO ---------------------- LETTER TO SHAREHOLDERS ---------------------- tivity suggested the economy had reached the bottom and could be set for a recovery early in 2002. Individual sectors of the fixed income markets all posted positive returns during the period under review. Within the credit sensitive sectors, asset-backed securities posted the highest return at 5.17%. The broader corporate market returned 4.76%, with higher rated corporates outperforming lower rated corporates. Along the maturity spectrum, longer-dated corporate securities generally outperformed shorter-dated corporate securities. Within the government sector, Treasury securities posted a return of 4.71%, underperforming corporates for the period. At year-end, returns on Treasury securities were modestly dampened by prospects of an economic recovery in 2002. The emerging market sector was the poorest performing sector during the period, returning -5.98% as measured by the J.P. Morgan Emerging Markets Bond Index Plus (EMBI+). Although most emerging market countries posted positive returns, the overall performance of the sector was significantly dampened by Argentina. Investment Strategy and Outlook During the six-month period under review, we increased the Portfolio's exposure to long duration Treasury securities and generally maintained its corporate bond exposure with modifications to specific sectors and security holdings. Within the corporate sector, we reduced the Portfolio's overall holdings in the banking and communications industries and increased its position in more defensive sectors such as energy, metals/mining and petroleum products. We also continued to diversify the Portfolio's corporate holdings by adding positions in the automotive, chemical and industrial sectors. Within the emerging market arena, we added opportunistic positions in Argentine debt during the period based on our view that valuations had grown cheap relative to our outlook for the country. As concerns of a possible foreign debt default rose, we sold the Portfolio's Argentine position, as noted above. We currently maintain no Argentine holdings. We also added a position in Brazil and maintained the Portfolio's holding in Russia throughout the period. Market Outlook Accelerating liquidity, improving consumer confidence, a deceleration in the job loss rate and signs of a turnaround in manufacturing activity all point to a recovery in the U.S. economy in early 2002. We expect economic growth to advance throughout the year, with GDP reaching a 3.5% annualized pace by the fourth quarter. We believe the U.S. Federal Reserve's monetary policy will remain largely unchanged for the first half of 2002 with tighter policy expected in the latter half of the year. In this environment, interest rates should gradually trend higher and the yield curve should flatten somewhat. -------------------------------------------------------------------------------- ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO o 3 ---------------------- LETTER TO SHAREHOLDERS ---------------------- Most of the elements that supported corporate bond returns in 2001 are still in place as we begin 2002, which are namely low nominal rates, a steep yield curve and substantive market liquidity. New-issue supply should moderate as corporations rein in capital expenditures and modest economic recovery ensues. As we begin 2002, we favor the telecommunications, bank and automotive sectors. Debt restructuring is a priority for the telecommunications sector, and with capital spending expected to be down from the levels of 2001, credit profiles should improve. Spread levels in the industry remain attractive. A positively sloped yield curve and strong capitalization levels will continue to support credit quality in the banking sector. The Treasury market has a number of significant issues to deal with in 2002. Evidence is mounting that the U.S. economy is already recovering. Given the huge amount of fiscal and monetary stimulus, chances are high that the economic rebound will be faster than expected. Treasury issuance will increase and may come earlier than anticipated. We expect the federal budget position to swing from a $127 billion surplus in fiscal year 2001 to a deficit of $85 billion in fiscal year 2002. We expect growth to accelerate in all emerging market economies as the demand for imports increases in developed economies and global risk aversion begins to subside. The crisis in Argentina had muted effects on other emerging market countries, which we find an encouraging sign that countries within the asset class have de-coupled. -------------------------------------------------------------------------------- 4 o ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO ---------------------- LETTER TO SHAREHOLDERS ---------------------- Thank you for your continued interest and investment in Alliance Bond Fund Corporate Bond Portfolio. We look forward to reporting its progress to you in coming months. Sincerely, /s/ John D. Carifa John D. Carifa Chairman and President /s/ Wayne D. Lyski Wayne D. Lyski Senior Vice President John D. Carifa [PHOTO] Wayne D. Lyski [PHOTO] Wayne D. Lyski, Portfolio Manager, has over 27 years of investment experience. -------------------------------------------------------------------------------- ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO o 5 ------------------ PERFORMANCE UPDATE ------------------ PERFORMANCE UPDATE ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO GROWTH OF A $10,000 INVESTMENT 12/31/91 TO 12/31/01 Alliance Bond Fund Corporate Bond Portfolio Class A: $23,316 Lehman Brothers Long BAA U.S. Credit Index: $22,175 Lipper Corporate Debt BBB Rated Funds Average: $20,243 [The following table was depicted as a mountain chart in the printed material.] Alliance Lehman Brothers Lipper Bond Fund Long BAA Corporate Debt Corporate Bond US Credit BBB-Rated Funds Portfolio Index Average ------------------------------------------------------------------------------- 12/31/1991 $ 9,575 $10,000 $10,000 12/31/1992 $10,847 $10,988 $10,898 12/31/1993 $14,219 $12,505 $12,442 12/31/1994 $12,406 $11,898 $11,843 12/31/1995 $15,878 $15,187 $14,358 12/31/1996 $17,470 $15,711 $15,119 12/31/1997 $19,532 $17,917 $16,741 12/31/1998 $19,527 $19,134 $17,710 12/31/1999 $19,905 $18,397 $17,572 12/31/2000 $21,522 $19,711 $18,847 12/31/2001 $23,316 $22,175 $20,243 This chart illustrates the total value of an assumed $10,000 investment in Alliance Bond Fund Corporate Bond Portfolio Class A shares (from 12/31/91 to 12/31/01) as compared to the performance of appropriate broad-based index and the Lipper Corporate Debt BBB Rated Funds Average. The chart reflects the deduction of the maximum 4.25% sales charge from the initial $10,000 investment in the Portfolio and assumes the reinvestment of dividends and capital gains. Performance for Class B and Class C shares will vary from the results shown above due to differences in expenses charged to these classes. Past performance is not indicative of future results, and is not representative of future gain or loss in capital value or dividend income. The unmanaged Lehman Brothers Long BAA U.S.Credit Index is a measure of corporate and non-corporate fixed income securities that are rated investment grade (Baa by Moody's Investors Service or BBB by Standard & Poor's) and have at least 10 years to final maturity. The unmanaged Lipper Corporate Debt BBB Rated Funds Average reflects performance of 23 funds (based on the number of funds in the average from 12/31/91 to 12/31/01). These funds have generally similar investment objectives to Alliance Bond Fund Corporate Bond Portfolio, although the investment policies of some funds included in the average may vary. When comparing Alliance Bond Fund Corporate Bond Portfolio to the index and average shown above, you should note that no charges or expenses are reflected in the performance of the index. Lipper results include fees and expenses. An investor cannot invest directly in an index or an average and its results are not indicative of any specific investment, including Alliance Bond Fund Corporate Bond Portfolio. -------------------------------------------------------------------------------- 6 o ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO ------------------ PERFORMANCE UPDATE ------------------ PERFORMANCE UPDATE ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO HISTORY OF RETURNS YEARLY PERIODS ENDED 12/31 [The following table was depicted as a bar chart in the printed material.] Alliance Bond Fund Corporate Bond Portfolio--Yearly Periods Ended 12/31 -------------------------------------------------------------------------------- Alliance Lehman Brothers Lipper Corporate Bond Fund Long Debt BBB Corporate Bond BAA U.S. Rated Funds Portfolio Credit Index Average -------------------------------------------------------------------------------- 12/31/92 13.28% 9.88% 9.02% 12/31/93 31.09% 13.81% 14.13% 12/31/94 -12.75% -4.86% -5.19% 12/31/95 27.98% 27.65% 21.02% 12/31/96 10.03% 3.45% 4.55% 12/31/97 11.81% 14.04% 10.27% 12/31/98 -0.02% 6.79% 6.09% 12/31/99 1.94% -3.84% -1.84% 12/31/00 8.12% 7.14% 8.00% 12/31/01 8.34% 12.50% 7.41% Past performance is no guarantee of future results. The Portfolio's investment results represent total returns for Class A shares and are based on the net asset value (NAV). Total returns for Class B and Class C shares will vary due to different expenses associated with these classes. All fees and expenses related to the operation of the Portfolio have been deducted, but no adjustment has been made for sales charges that may apply when shares are purchased or redeemed. Returns for the Portfolio include the reinvestment of any distributions paid during each period. The unmanaged Lehman Brothers Long BAA U.S. Credit Index is a measure of corporate and non-corporate fixed-income securities that are rated investment grade (Baa by Moody's Investors Service or BBB by Standard & Poor's) and have at least 10 years to final maturity. The unmanaged Lipper Corporate Debt BBB Rated Funds Average (the Lipper Average) is based on the performance of a universe of funds that invest at least 65% of their assets in corporate or government debt issues rated in the top four grades. For the 10-year period from 12/31/91 to 12/31/01, the Lipper Average consisted of 23 funds. An investor cannot invest directly in an index or average, and its results are not indicative of any specific investment, including Alliance Bond Fund Corporate Bond Portfolio. -------------------------------------------------------------------------------- ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO o 7 ----------------- PORTFOLIO SUMMARY ----------------- PORTFOLIO SUMMARY December 31, 2001 (unaudited) INCEPTION DATES PORTFOLIO STATISTICS Class A Shares Net Assets ($mil): $1,322.0 3/11/74 Class B Shares 1/8/93 Class C Shares 5/3/93 SECURITY TYPE 8.8% U.S. Treasury 4.8% Preferred Stock 4.7% Sovereign Debt [PIE CHART] Corporate 21.2% Communications 18.2% Public Utilities-Electric and Gas 6.0% Petroleum Products 5.0% Energy 4.7% Broadcasting/Media 4.6% Communications-Mobile 3.9% Banking 3.8% Cable 2.9% Supermarket/Drug 2.3% Industrial 2.1% Aerospace & Defense 1.7% Automotive 1.5% Public Utilities-Gas 1.4% Chemicals 1.2% Financial 0.7% Metals/Mining 0.5% Short-Term All data as of December 31, 2001. The Portfolio's security type, holding type and country breakdowns are expressed as a percentage of total investments and may vary over time. -------------------------------------------------------------------------------- 8 o ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO ----------------- PORTFOLIO SUMMARY ----------------- PORTFOLIO SUMMARY December 31, 2001 (unaudited) HOLDING TYPE 94.7% Fixed Income [PIE CHART] 4.8% Equity 0.5% Short-Term Securities COUNTRY BREAKDOWN 83.5% United States [PIE CHART] 7.0% United Kingdom 4.8% Cayman Islands 4.1% Russia 0.6% Brazil All data as of December 31, 2001. The Portfolio's security type, holding type and country breakdowns are expressed as a percentage of total investments and may vary over time. -------------------------------------------------------------------------------- ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO o 9 ------------------ INVESTMENT RESULTS ------------------ INVESTMENT RESULTS AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 2001 CLASS A -------------------------------------------------------------------------------- Without Sales Charge With Sales Charge 1 Year 8.34% 3.76% 5 Years 5.94% 5.03% 10 Years 9.31% 8.83% SEC Yield** 6.66% CLASS B -------------------------------------------------------------------------------- Without Sales Charge With Sales Charge 1 Year 7.53% 4.53% 5 Years 5.20% 5.20% Since Inception* 8.39% 8.39% SEC Yield** 6.24% CLASS C -------------------------------------------------------------------------------- Without Sales Charge With Sales Charge 1 Year 7.53% 6.53% 5 Years 5.20% 5.20% Since Inception* 7.03% 7.03% SEC Yield** 6.25% The Portfolio's investment results represent average annual total returns. The returns reflect reinvestment of dividends and/or capital gains distributions in additional shares without and with the effect of the 4.25% maximum front-end sales charge for Class A or applicable contingent deferred sales charge for Class B (3% year 1, 2% year 2, 1% year 3, 0% year 4); and for Class C shares (1% year 1). Returns for Class A shares do not reflect the imposition of the 1 year, 1% contingent deferred sales charge for accounts over $1,000,000. The Portfolio invests a portion of its assets in foreign securities which may magnify fluctuations, particularly in emerging markets. Price fluctuations may also be caused by changes in interest rates or bond credit quality ratings. These changes have a greater effect on bonds with longer maturities than on those with shorter maturities. Past performance does not guarantee future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original costs. * Since inception: 1/8/93 Class B; 5/3/93 Class C. ** SEC yields are based on SEC guidelines and are calculated on 30 days ended December 31, 2001. -------------------------------------------------------------------------------- 10 o ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO ------------------------ PORTFOLIO OF INVESTMENTS ------------------------ PORTFOLIO OF INVESTMENTS December 31, 2001 (unaudited) Standard & Principal Poor's Amount Ratings (000) U.S. $ Value -------------------------------------------------------------------------------- Corporate Debt Obligations-79.8% Aerospace & Defense-2.0% BBB- Northrop Grumman Corp. 7.75%, 2/15/31 ..................... $ 25,000 $ 27,155,950 -------------- Automotive-1.7% BBB+ General Motors Acceptance Corp. 8.00%, 11/01/31 .................... 22,000 22,455,422 -------------- Banking-3.8% A- Royal Bank of Scotland Group Plc 7.648%, 8/31/49(a) ................. 30,000 30,371,400 AA- UBS Preferred Funding Trust II 7.247%, 6/26/49(a) ................. 20,000 20,529,900 -------------- 50,901,300 -------------- Broadcasting/Media-4.6% BBB- News America, Inc. 7.30%, 4/30/28 ..................... 35,000 32,700,010 BBB+ Time Warner, Inc. 8.375%, 3/15/23 .................... 25,000 27,941,500 -------------- 60,641,510 -------------- Cable-5.5% B+ Charter Communications Holdings LLC Zero coupon, 5/15/11(a) ............ 7,000 4,340,000 10.00%, 5/15/11 .................... 5,720 5,848,700 10.75%, 10/01/09 ................... 15,235 16,149,100 BBB Comcast Cable Communications 8.875%, 5/01/17 .................... 20,000 23,083,840 BB+ CSC Holdings, Inc. 7.875%, 2/15/18 .................... 23,950 23,371,153 -------------- 72,792,793 -------------- Chemicals-1.4% BB Lyondell Chemical Co. 9.50%, 12/15/08(b) ................. 18,250 18,158,750 -------------- -------------------------------------------------------------------------------- ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO o 11 ------------------------ PORTFOLIO OF INVESTMENTS ------------------------ Standard & Principal Poor's Amount Ratings (000) U.S. $ Value -------------------------------------------------------------------------------- Communications-19.2% BBB+ AT&T Corp. 8.00%, 11/15/31(b) ................. $ 30,000 $ 31,507,050 A- British Telecommunications Plc 8.875%, 12/15/30 ................... 45,000 52,017,075 BBB Citizens Communications Co. 9.00%, 8/15/31(b) .................. 44,000 47,911,820 B- Marconi Corp. Plc 8.375%, 9/15/30 .................... 17,845 8,214,125 AA- Singapore Telecommunications, Ltd. 7.375%, 12/01/31(b) ................ 15,000 15,334,095 BBB+ Sprint Capital Corp. 6.875%, 11/15/28 ................... 55,000 50,693,665 BBB+ WorldCom, Inc. - MCI Group 8.25%, 5/15/31 ..................... 45,000 47,703,510 -------------- 253,381,340 -------------- Communications - Mobile-4.6% BBB AT&T Wireless Services, Inc. 8.75%, 3/01/31 ..................... 23,000 26,142,490 B Nextel Communications, Inc. Zero coupon, 2/15/08 ............... 3,300 2,277,000 9.375%, 11/15/09 ................... 40,200 31,858,500 -------------- 60,277,990 -------------- Energy-5.7% BBB- DPL, Inc. 8.125%, 9/01/31(b) ................. 35,000 32,545,065 B Lone Star Technologies, Inc. 9.00%, 6/01/11 ..................... 3,000 2,535,000 BBB PG&E National Energy Group, Inc. 10.375%, 5/16/11 ................... 10,500 11,091,192 BBB Williams Cos., Inc. 7.875%, 9/01/21 .................... 29,000 29,525,103 -------------- 75,696,360 -------------- Financial-1.2% NR Finova Group, Inc. 7.50%, 11/15/09 .................... 36,000 15,300,000 -------------- Industrial-2.2% BBB El Paso Corp. 7.00%, 5/15/11 ..................... 30,000 29,755,590 -------------- -------------------------------------------------------------------------------- 12 o ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO ------------------------ PORTFOLIO OF INVESTMENTS ------------------------ Standard & Principal Poor's Amount Ratings (000) U.S. $ Value -------------------------------------------------------------------------------- Metals / Mining-0.7% BB United States Steel LLC 10.75%, 8/01/08(b) ................. $ 9,500 $ 8,930,000 -------------- Petroleum Products-5.9% BBB Amerada Hess Corp. 7.30%, 8/15/31 ..................... 20,000 20,202,440 BBB Devon Financing Corp. 7.875%, 9/30/31(b) ................. 15,000 15,225,735 BBB Kerr-McGee Corp. 7.875%, 9/15/31 .................... 40,000 42,276,360 -------------- 77,704,535 -------------- Public Utilities - Electric & Gas-17.0% BBB- Calenergy Co., Inc. 8.48%, 9/15/28 ..................... 30,000 32,514,900 BB+ Calpine Corp. 8.50%, 2/15/11 ..................... 30,000 26,100,000 BBB- Dominion Resources Capital Trust III 8.40%, 1/15/31 ..................... 44,000 46,270,796 BBB- FirstEnergy Corp. 7.375%, 11/15/31 ................... 50,000 48,958,750 BBB- NRG Energy, Inc. 8.625%, 4/01/31 .................... 38,000 35,259,820 BBB- PSE&G Energy Holdings, Inc. 8.50%, 6/15/11(b) .................. 26,000 25,476,334 BB+ South Point Energy 9.825%, 5/30/19(b) ................. 12,000 10,440,000 -------------- 225,020,600 -------------- Public Utilities - Gas-1.4% BBB Coastal Corp. 7.42%, 2/15/37 ..................... 20,700 19,068,695 -------------- Supermarket / Drug-2.9% BBB- Delhaize America, Inc. 9.00%, 4/15/31(b) .................. 31,600 37,987,845 -------------- Total Corporate Debt Obligations (cost $1,048,522,449) .............. 1,055,228,680 -------------- U.S. Government Obligations-8.7% AAA U.S. Treasury Bonds 5.375%, 2/15/31 .................... 67,750 66,765,592 AAA U.S. Treasury Strips 6.00%, 11/15/21 .................... 65,000 19,947,850 8.75%, 5/15/17 ..................... 70,000 28,030,800 -------------- Total U.S. Government Obligations (cost $113,933,000) ................ 114,744,242 -------------- -------------------------------------------------------------------------------- ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO o 13 ------------------------ PORTFOLIO OF INVESTMENTS ------------------------ Shares or Standard & Principal Poor's Amount Ratings (000) U.S. $ Value -------------------------------------------------------------------------------- Preferred Stock-4.7% Communications-4.7% BBB+ Centaur Funding Corp. Series B(b) (cost $58,320,875) ................. 57,000 $ 62,454,330 -------------- Sovereign Debt Obligations-4.7% Brazil-0.6% BB- Republic of Brazil 11.00%, 8/17/40 .................... $ 10,000 7,675,000 -------------- Russia-4.1% B+ Russian Federation 5.00%, 3/31/30(b) .................. 92,500 53,765,625 -------------- Total Sovereign Debt Obligations (cost $47,480,970) ................. 61,440,625 -------------- Short-Term Investment-0.5% Repurchase Agreement-0.5% A-1+ State Street Bank and Trust Co. ....... 1.70%, dated 12/31/01, due 1/02/02 in the amount of $6,800,642 (cost $6,800,000; collateralized by $7,080,000 FNMA, 6.072%, 3/01/33, value $6,938,400) (amortized cost $6,800,000) ........ 6,800 6,800,000 -------------- Total Investments-98.4% (cost $1,275,057,294) .............. 1,300,667,877 Other assets less liabilities-1.6% .... 21,329,552 -------------- Net Assets-100% ....................... $1,321,997,429 ============== (a) Coupon increases periodically based upon a predetermined schedule. Stated interest rate in effect at December 31, 2001. (b) Securities exempt from Registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified buyers. At December 31, 2001, these securities amounted to $359,736,649 or 27.2% of net assets. Glossary: FNMA - Federal National Mortgage Association. See notes to financial statements. -------------------------------------------------------------------------------- 14 o ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO --------------------------------- STATEMENT OF ASSETS & LIABILITIES --------------------------------- STATEMENT OF ASSETS & LIABILITIES December 31, 2001 (unaudited) Assets Investments in securities, at value (cost $1,275,057,294) .. $ 1,300,667,877 Cash ....................................................... 187,449 Receivable for investment securities sold .................. 51,488,047 Interest receivable ........................................ 22,894,858 Receivable for capital stock sold .......................... 3,862,823 --------------- Total assets ............................................... 1,379,101,054 --------------- Liabilities Payable for investment securities purchased ................ 48,781,572 Dividends payable .......................................... 5,447,614 Payable for capital stock redeemed ......................... 1,088,757 Distribution fee payable ................................... 771,301 Advisory fee payable ....................................... 605,662 Accrued expenses ........................................... 408,719 --------------- Total liabilities .......................................... 57,103,625 --------------- Net Assets ................................................. $ 1,321,997,429 =============== Composition of Net Assets Capital stock, at par ...................................... $ 107,947 Additional paid-in capital ................................. 1,559,447,930 Accumulated net investment loss ............................ (2,932,438) Accumulated net realized loss on investments, swap contracts and options transactions ................. (260,236,593) Net unrealized appreciation of investments ................. 25,610,583 --------------- $ 1,321,997,429 =============== Calculation of Maximum Offering Price Class A Shares Net asset value and redemption price per share ($571,237,621 / 46,642,959 shares of capital stock issued and outstanding) ................................. $12.25 Sales charge--4.25% of public offering price ............... .54 ------ Maximum offering price ..................................... $12.79 ====== Class B Shares Net asset value and offering price per share ($549,711,847 / 44,887,840 shares of capital stock issued and outstanding) ................................. $12.25 ====== Class C Shares Net asset value and offering price per share ($201,047,961 / 16,416,563 shares of capital stock issued and outstanding) ................................. $12.25 ====== See notes to financial statements. -------------------------------------------------------------------------------- ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO o 15 ----------------------- STATEMENT OF OPERATIONS ----------------------- STATEMENT OF OPERATIONS Six Months Ended December 31, 2001 (unaudited) Investment Income Interest ................................... $55,409,969 Dividends .................................. 2,587,800 ----------- $ 57,997,769 Expenses Advisory fee ............................... 3,544,495 Distribution fee--Class A .................. 836,763 Distribution fee--Class B .................. 2,697,319 Distribution fee--Class C .................. 972,323 Transfer agency ............................ 946,468 Custodian .................................. 125,931 Printing ................................... 107,649 Audit and legal ............................ 63,632 Administrative ............................. 62,500 Registration ............................... 51,886 Directors' fees ............................ 7,870 Miscellaneous .............................. 17,387 ----------- Total expenses before interest ............. 9,434,223 Interest expense ........................... 177,692 ----------- Total expenses ............................. 9,611,915 ------------ Net investment income ...................... 48,385,854 ------------ Realized and Unrealized Gain (Loss) on Investments Net realized loss on investment transactions ............................ (44,405,421) Net change in unrealized appreciation/depreciation of investments .......................... 39,237,694 ------------ Net loss on investments .................... (5,167,727) ------------ Net Increase in Net Assets from Operations ......................... $ 43,218,127 ============ See notes to financial statements. -------------------------------------------------------------------------------- 16 o ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO ---------------------------------- STATEMENT OF CHANGES IN NET ASSETS ---------------------------------- STATEMENT OF CHANGES IN NET ASSETS Six Months Ended December 31, 2001 Year Ended (unaudited) June 30, 2001 =============== =============== Increase (Decrease) in Net Assets from Operations Net investment income ..................... $ 48,385,854 $ 88,364,167 Net realized loss on investments and options transactions ................... (44,405,421) (24,601,317) Net change in unrealized appreciation/depreciation of investments 39,237,694 62,106,834 --------------- --------------- Net increase in net assets from operations ........................ 43,218,127 125,869,684 Dividends and Distributions to Shareholders from: Net investment income Class A ................................ (22,103,775) (39,852,341) Class B ................................ (19,557,210) (35,363,025) Class C ................................ (7,043,795) (13,148,801) Distributions in excess of net investment income Class A ................................ -0- (166,305) Class B ................................ -0- (147,571) Class C ................................ -0- (54,870) Tax return of capital Class A ................................ -0- (1,345,179) Class B ................................ -0- (1,193,647) Class C ................................ -0- (443,826) Capital Stock Transactions Net increase .............................. 102,063,665 63,615,261 --------------- --------------- Total increase ............................ 96,577,012 97,769,380 Net Assets Beginning of period ....................... 1,225,420,417 1,127,651,037 --------------- --------------- End of period ............................. $ 1,321,997,429 $ 1,225,420,417 =============== =============== See notes to financial statements. -------------------------------------------------------------------------------- ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO o 17 ----------------------------- NOTES TO FINANCIAL STATEMENTS ----------------------------- NOTES TO FINANCIAL STATEMENTS December 31, 2001 (unaudited) NOTE A Significant Accounting Policies Alliance Bond Fund, Inc. (the "Fund") is registered under the Investment Company Act of 1940 as a diversified, open-end management investment company. The Fund, which is a Maryland corporation, operates as a series company currently comprised of three portfolios: the Corporate Bond Portfolio, the Quality Bond Portfolio and the U.S. Government Portfolio. Each series is considered to be a separate entity for financial reporting and tax purposes. The accompanying financial statements and notes include the operations of the Corporate Bond Portfolio (the "Portfolio") only. The Portfolio offers three classes of shares: Class A, Class B and Class C shares. Class A shares are sold with a front-end sales charge of up to 4.25% for purchases not exceeding $1,000,000. With respect to purchases of $1,000,000 or more, Class A shares redeemed within one year of purchase may be subject to a contingent deferred sales charge of 1%. Class B shares are currently sold with a contingent deferred sales charge which declines from 3% to zero depending on the period of time the shares are held. Class B shares will automatically convert to Class A shares six years after the end of the calendar month of purchase. Class C shares are subject to a contingent deferred sales charge of 1% on redemptions made within the first year after purchase. All three classes of shares have identical voting, dividend, liquidation and other rights, except that each class bears different distribution expenses and has exclusive voting rights with respect to its distribution plan. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States, which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Portfolio. 1. Security Valuation Portfolio securities traded on a national securities exchange or on a foreign securities exchange (other than foreign securities exchanges whose operations are similar to those of the United States over-the-counter market) are generally valued at the last reported sale price, or if there was no sale on such day, the last bid price quoted on such day. If no bid prices are quoted, then the security is valued at the mean of the bid and asked prices as obtained on that day from one or more dealers regularly making a market in that security. Securities traded on the over-the-counter market, securities listed on a foreign securities exchange whose operations are similar to the United States over-the-counter market, and securities listed on a national securities exchange whose primary market is believed to be over-the-counter are valued at the mean of the closing bid and asked prices provided by two or more dealers regularly making a market in such securities. U.S. government securities and other debt securities which mature in 60 days or less are valued at amortized cost unless -------------------------------------------------------------------------------- 18 o ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO ----------------------------- NOTES TO FINANCIAL STATEMENTS ----------------------------- this method does not represent fair value. Securities for which market quotations are not readily available are valued at fair value as determined in good faith by, or in accordance with procedures approved by, the Board of Directors. 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. 2. Taxes It is the policy of the Portfolio to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. 3. Investment Income and Investment Transactions Dividend income is recorded on ex-dividend date. Interest income is accrued daily. Investment transactions are accounted for on the trade date securities are purchased or sold. The Portfolio accretes discounts as adjustments to interest income. Investment gains and losses are determined on the identified cost basis. 4. Income and Expenses All income earned and expenses incurred by the Portfolio are borne on a pro-rata basis by each settled class of shares, based on proportionate interest in the Portfolio represented by the net assets of such class, except that the Portfolio's Class B and Class C shares bear higher distribution and transfer agent fees than Class A shares. 5. Dividends and Distributions Dividends and distributions to shareholders are recorded on the ex-dividend date. Income dividends and capital gains distributions are determined in accordance with federal tax regulations and may differ from those determined in accordance with accounting principles generally accepted in the United States. Based on the operations of the Portfolio as of the semi-annual date, and its distribution policy, the Portfolio may have a tax return of capital at year end. At this time, the amount of this tax return of capital is not estimable. 6. Change in Accounting Principle As required, effective July 1, 2001, the Portfolio has adopted the provisions of the AICPA Audit and Accounting Guide, Audits of Investment Companies, and began amortizing premium on debt securities for financial statement reporting purposes only. This change will have no impact on the net assets of the Portfolio. Prior to July 1, 2001, the Portfolio did not amortize premiums on debt securities. The cumulative effect of this accounting change resulted in a $42,672 reduction in cost of investments and a corresponding $42,672 increase in net unrealized appreciation/depreciation, based on investments owned by the Portfolio on July 1, 2001. The effect of this change for the period ended December 31, 2001, was to decrease net investment income by $125,622, increase net unrealized appreciation by $70,643 and decrease net realized losses by $54,979. The statement of changes in net assets and financial highlights for prior periods -------------------------------------------------------------------------------- ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO o 19 ----------------------------- NOTES TO FINANCIAL STATEMENTS ----------------------------- have not been restated to reflect the change in accounting principle. NOTE B Advisory Fee and Other Transactions with Affiliates Under the terms of an investment advisory agreement, the Portfolio pays Alliance Capital Management L.P. (the "Adviser"), an advisory fee at an annual rate of .625 of 1% of the first $500 million and .50 of 1% in excess of $500 million of the Portfolio's average daily net assets. The fee is accrued daily and paid monthly. Pursuant to the advisory agreement, the Portfolio paid $62,500 to the Adviser representing the cost of certain legal and accounting services provided to the Portfolio by the Adviser for the six months ended December 31, 2001. The Portfolio compensates Alliance Global Investor Services, Inc. (AGIS), (formerly Alliance Fund Services, Inc.), a wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for providing personnel and facilities to perform transfer agency services for the Portfolio. Such compensation amounted to $676,315 for the six months ended December 31, 2001. For the six months ended December 31, 2001, the Portfolio's expenses were reduced by $8,162 under an expense offset arrangement with AGIS. Alliance Fund Distributors, Inc. (the "Distributor"), a wholly-owned subsidiary of the Adviser, serves as the distributor of the Portfolio's shares. The Distributor has advised the Portfolio that it has received front-end sales charges of $72,886 from the sales of Class A shares and $10,860, $224,698 and $18,827 in contingent deferred sales charges imposed upon redemptions by shareholders of Class A, Class B and Class C shares, respectively, for the six months ended December 31, 2001. NOTE C Distribution Services Agreement The Portfolio has adopted a Distribution Services Agreement (the "Agreement") pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the Agreement, the Portfolio pays distribution and servicing fees to the Distributor at an annual rate of up to .30 of 1% of the Portfolio's average daily net assets attributable to Class A shares and 1% of the average daily net assets attributable to both Class B and Class C shares. The fees are accrued daily and paid monthly. The Agreement provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities. The Distributor has advised the Portfolio that it has incurred expenses in excess of the distribution costs reimbursed by the Portfolio in the amount of $15,696,758 and $4,729,268 for Class B and Class C shares, respectively. Such costs may be recovered from the Portfolio in future periods so long as the Agreement is in effect. In accordance with the Agreement, there is no provision for recovery of unreimbursed distribution costs incurred by the Distributor beyond the current fiscal year for Class A shares. The Agreement also provides that the -------------------------------------------------------------------------------- 20 o ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO ----------------------------- NOTES TO FINANCIAL STATEMENTS ----------------------------- Adviser may use its own resources to finance the distribution of the Portfolio's shares. NOTE D Investment Transactions Purchases and sales of investment securities (excluding short-term investments and U.S. government securities) aggregated $939,814,437 and $942,502,974, respectively, for the six months ended December 31, 2001. There were purchases of $803,154,363 and sales of $712,890,882 of U.S. government and government agency obligations for the six months ended December 31, 2001. At December 31, 2001, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes. Accordingly, gross unrealized appreciation of investments was $59,823,296 and gross unrealized depreciation of investments was $34,212,713 resulting in net unrealized appreciation of $25,610,583. At June 30, 2001, the Portfolio had a net capital loss carryforward for federal income tax purposes of $195,352,782, of which $2,817,216 expires in the year 2003, $3,517,339 expires in the year 2004, $8,737,781 expires in 2007, $125,726,446 expires in 2008 and $54,554,000 expires in 2009. Capital losses incurred after October 31 ("post October" losses) within the taxable year are deemed to arise on the first business day of the Portfolio's next taxable year. The Portfolio incurred and elected to defer post October losses of $20,064,304 for the period ended June 30, 2001. These carryover losses may be used to offset future capital gains. To the extent they are so used, future capital gains will not be distributed to shareholders until they exceed available capital loss carryovers. 1. Options Transactions For hedging and investment purposes, the Portfolio purchases and writes (sells) put and call options on debt securities that are traded on U.S. and foreign securities exchanges and over-the-counter markets. The risk associated with purchasing an option is that the Portfolio pays a premium whether or not the option is exercised. Additionally, the Portfolio bears the risk of loss of premium and change in market value should the counterparty not perform under the contract. Put and call options purchased are accounted for in the same manner as portfolio securities. The cost of securities acquired through the exercise of call options is increased by premiums paid. The proceeds from securities sold through the exercise of put options are decreased by the premiums paid. When the Portfolio writes an option, the premium received by the Portfolio is recorded as a liability and is subsequently adjusted to the current market value of the option written. Premiums received from writing options which expire unexercised are recorded by the Portfolio on the expiration date as realized gains from option transactions. -------------------------------------------------------------------------------- ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO o 21 ----------------------------- NOTES TO FINANCIAL STATEMENTS ----------------------------- The difference between the premium received and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium received is less than the amount paid for the closing purchase transaction, as a realized loss. If a call option is exercised, the premium received is added to the proceeds from the sale of the underlying security in determining whether the Portfolio has realized a gain or loss. If a put option is exercised, the premium received reduces the cost basis of the security purchased by the Portfolio. The risk involved in writing an option is that, if the option was exercised the underlying security could then be purchased or sold by the Portfolio at a disadvantageous price. For the six months ended December 31, 2001, the Portfolio did not engage in written options transactions. 2. Swap Agreements The Portfolio enters into swaps on sovereign debt obligations to protect itself from interest rate fluctuations on the underlying debt instruments and for investment purposes. A swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices or rates for a specified amount of an underlying asset. The payment flows are usually netted against each other, with the difference being paid by one party to the other. Risks may arise as a result of the failure of the counterparty to the swap contract to comply with the terms of the swap contract. The loss incurred by the failure of a counterparty is generally limited to the net interest payment to be received by the Portfolio, and/or the termination value at the end of the contract. Therefore, the Portfolio considers the creditworthiness of each counterparty to a swap contract in evaluating potential credit risk. Additionally, risks may arise from unanticipated movements in interest rates or in the value of the underlying securities. The Portfolio records a net receivable or payable on a daily basis for the net interest income or expense expected to be received or paid during the interest period. Net interest received or paid on these contracts is recorded as interest income (or as an offset to interest income). Fluctuations in the value of swap contracts are recorded for financial statement purposes as a component of net change in unrealized appreciation/depreciation of investments and swap contracts. At December 31, 2001, the Portfolio had no outstanding swap agreements. NOTE E Capital Stock There are 9,000,000,000 shares of $.001 par value capital stock authorized, divided into three classes, designated Class A, Class B and Class C shares. -------------------------------------------------------------------------------- 22 o ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO ----------------------------- NOTES TO FINANCIAL STATEMENTS ----------------------------- Each class consists of 3,000,000,000 authorized shares. Transactions in capital stock were as follows: ------------------------------- -------------------------------- Shares Amount ------------------------------- -------------------------------- Six Months Ended Six Months Ended December 31, Year Ended December 31, Year Ended 2001 June 30, 2001 June 30, (unaudited) 2001 (unaudited) 2001 ---------------------------------------------------------------- Class A Shares sold 7,891,249 15,779,556 $ 97,079,954 $ 193,640,456 ------------------------------------------------------------------------------- Shares issued in reinvestment of dividends and distributions 1,123,371 1,982,252 13,751,435 24,235,882 ------------------------------------------------------------------------------- Shares converted from Class B 1,075,265 2,054,121 13,311,926 25,189,831 ------------------------------------------------------------------------------- Shares redeemed (6,595,118) (16,430,350) (81,045,138) (201,080,837) ------------------------------------------------------------------------------- Net increase 3,494,767 3,385,579 $ 43,098,177 $ 41,985,332 =============================================================================== Class B Shares sold 8,145,914 10,673,860 $ 100,279,899 $ 131,715,027 ------------------------------------------------------------------------------- Shares issued in reinvestment of dividends and distributions 908,449 1,572,516 11,119,356 19,234,682 ------------------------------------------------------------------------------- Shares converted to Class A (1,075,265) (2,053,240) (13,311,926) (25,189,831) ------------------------------------------------------------------------------- Shares redeemed (4,567,556) (8,761,626) (55,985,172) (107,233,710) ------------------------------------------------------------------------------- Net increase 3,411,542 1,431,510 $ 42,102,157 $ 18,526,168 =============================================================================== Class C Shares sold 3,231,520 4,521,923 $ 39,744,800 $ 55,950,266 ------------------------------------------------------------------------------- Shares issued in reinvestment of dividends and distributions 352,443 662,673 4,313,412 8,103,794 ------------------------------------------------------------------------------- Shares redeemed (2,214,375) (4,978,199) (27,194,881) (60,950,299) ------------------------------------------------------------------------------- Net increase 1,369,588 206,397 $ 16,863,331 $ 3,103,761 =============================================================================== NOTE F Reverse Repurchase Agreements Under a reverse repurchase agreement, the Portfolio sells securities and agrees to repurchase them at a mutually agreed upon date and price. At the time the Portfolio enters into a reverse repurchase agreement, it will establish a segregated account with the custodian containing liquid assets having a value at least equal to the repurchase price. For the six months ended December 31, 2001, the average amount of reverse -------------------------------------------------------------------------------- ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO o 23 ----------------------------- NOTES TO FINANCIAL STATEMENTS ----------------------------- repurchase agreements outstanding was approximately $14,464,620, and the daily weighted average interest rate was 2.40%. At December 31, 2001, the Portfolio had no outstanding reverse repurchase agreements. NOTE G Bank Borrowing A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $750 million revolving credit facility (the "Facility") to provide short-term financing if necessary, in connection with abnormal redemption activity. Commitment fees related to the Facility are paid by the participating funds and are included in the miscellaneous expenses in the statement of operations. The Portfolio did not utilize the Facility during the six months ended December 31, 2001. NOTE H Concentration of Risk Investing in securities of foreign companies and foreign governments involves special risks which include the possibility of future political and economic developments which could adversely affect the value of such securities. Moreover, securities of many foreign companies and foreign governments and their markets may be less liquid and their prices more volatile than those of comparable U.S. companies and the United States Government. -------------------------------------------------------------------------------- 24 o ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO -------------------- FINANCIAL HIGHLIGHTS -------------------- FINANCIAL HIGHLIGHTS Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
---------------------------------------------------------------------------------- Class A ---------------------------------------------------------------------------------- Six Months Ended December 31, Year Ended June 30, 2001(a) -------------------------------------------------------------- (unaudited) 2001 2000 1999 1998 1997 ---------------------------------------------------------------------------------- Net asset value, beginning of period .......... $12.29 $11.91 $12.49 $14.19 $14.19 $13.29 ---------------------------------------------------------------------------------- Income From Investment Operations Net investment income(b) ........ .49 .97 1.04 1.06 1.08 1.15 Net realized and unrealized gain (loss) on investments, swap contracts and options transactions ................. (.04) .42 (.55) (1.64) .12 .97 ---------------------------------------------------------------------------------- Net increase (decrease) in net asset value from operations .............. .45 1.39 .49 (.58) 1.20 2.12 ---------------------------------------------------------------------------------- Less: Dividends and Distributions Dividends from net investment income ............ (.49) (.97) (1.04) (1.07) (1.08) (1.22) Distributions in excess of net investment income ........ -0- (.01) -0- (.01) (.12) -0- Tax return of capital ........... -0- (.03) (.03) (.04) -0- -0- ---------------------------------------------------------------------------------- Total dividends and distributions (.49) (1.01) (1.07) (1.12) (1.20) (1.22) ---------------------------------------------------------------------------------- Net asset value, end of period .. $12.25 $12.29 $11.91 $12.49 $14.19 $14.19 ================================================================================== Total Return Total investment return based on net asset value(c) ........ 3.75% 12.03% 4.11% (4.08)% 8.66% 16.59% Ratios/Supplemental Data Net assets, end of period (000's omitted) .............. $571,238 $530,446 $473,578 $476,141 $510,397 $370,845 Ratio of expenses to average net assets ................... 1.08%(d) 1.31% 1.12% 1.11% 1.05% 1.12% Ratio of expenses to average net assets, excluding interest expense ............. 1.05%(d) 1.09% 1.11% 1.11% 1.05% 1.12% Ratio of net investment income to average net assets ................... 7.89%(d) 7.95% 8.51% 8.13% 7.52% 8.34% Portfolio turnover rate ......... 129% 340% 302% 281% 244% 307%
See footnote summary on page 28. -------------------------------------------------------------------------------- ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO o 25 -------------------- FINANCIAL HIGHLIGHTS -------------------- Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
---------------------------------------------------------------------------------- Class B ---------------------------------------------------------------------------------- Six Months Ended December 31, Year Ended June 30, 2001(a) -------------------------------------------------------------- (unaudited) 2001 2000 1999 1998 1997 ---------------------------------------------------------------------------------- Net asset value, beginning of period .......... $12.30 $11.92 $12.49 $14.19 $14.19 $13.29 ---------------------------------------------------------------------------------- Income From Investment Operations Net investment income(b) ........ .45 .88 .95 .97 .98 1.05 Net realized and unrealized gain (loss) on investments, swap contracts and options transactions ................. (.05) .42 (.54) (1.64) .13 .98 ---------------------------------------------------------------------------------- Net increase (decrease) in net asset value from operations .............. .40 1.30 .41 (.67) 1.11 2.03 ---------------------------------------------------------------------------------- Less: Dividends and Distributions Dividends from net investment income ............ (.45) (.88) (.95) (.98) (.98) (1.13) Distributions in excess of net investment income ........ -0- (.01) -0- (.01) (.13) -0- Tax return of capital ........... -0- (.03) (.03) (.04) -0- -0- ---------------------------------------------------------------------------------- Total dividends and distributions (.45) (.92) (.98) (1.03) (1.11) (1.13) ---------------------------------------------------------------------------------- Net asset value, end of period .. $12.25 $12.30 $11.92 $12.49 $14.19 $14.19 ================================================================================== Total Return Total investment return based on net asset value(c) ........ 3.32% 11.24% 3.39% (4.77)% 7.95% 15.80% Ratios/Supplemental Data Net assets, end of period (000's omitted) .............. $549,712 $509,953 $477,259 $630,631 $672,374 $480,326 Ratio of expenses to average net assets ................... 1.80%(d) 2.03% 1.83% 1.82% 1.75% 1.82% Ratio of expenses to average net assets, excluding interest expense ............. 1.77%(d) 1.81% 1.83% 1.82% 1.75% 1.82% Ratio of net investment income to average net assets ................... 7.20%(d) 7.18% 7.77% 7.41% 6.80% 7.62% Portfolio turnover rate ......... 129% 340% 302% 281% 244% 307%
See footnote summary on page 28. -------------------------------------------------------------------------------- 26 o ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO -------------------- FINANCIAL HIGHLIGHTS -------------------- Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
---------------------------------------------------------------------------------- Class C ---------------------------------------------------------------------------------- Six Months Ended December 31, Year Ended June 30, 2001(a) -------------------------------------------------------------- (unaudited) 2001 2000 1999 1998 1997 ---------------------------------------------------------------------------------- Net asset value, beginning of period .......... $12.30 $11.91 $12.49 $14.19 $14.19 $13.29 ---------------------------------------------------------------------------------- Income From Investment Operations Net investment income(b) ........ .44 .89 .94 .97 .99 1.04 Net realized and unrealized gain (loss) on investments, swap contracts and options transactions ................. (.04) .42 (.54) (1.64) .12 .99 ---------------------------------------------------------------------------------- Net increase (decrease) in net asset value from operations .............. .40 1.31 .40 (.67) 1.11 2.03 ---------------------------------------------------------------------------------- Less: Dividends and Distributions Dividends from net investment income ............ (.45) (.89) (.95) (.98) (.99) (1.13) Distributions in excess of net investment income ........ -0- -0- -0- (.01) (.12) -0- Tax return of capital ........... -0- (.03) (.03) (.04) -0- -0- ---------------------------------------------------------------------------------- Total dividends and distributions (.45) (.92) (.98) (1.03) (1.11) (1.13) ---------------------------------------------------------------------------------- Net asset value, end of period .. $12.25 $12.30 $11.91 $12.49 $14.19 $14.19 ================================================================================== Total Return Total investment return based on net asset value(c) ........ 3.32% 11.33% 3.30% (4.77)% 7.95% 15.80% Ratios/Supplemental Data Net assets, end of period (000's omitted) .............. $201,048 $185,022 $176,814 $204,271 $254,530 $174,762 Ratio of expenses to average net assets ................... 1.79%(d) 2.03% 1.83% 1.81% 1.75% 1.82% Ratio of expenses to average net assets, excluding interest expense ............. 1.76%(d) 1.81% 1.82% 1.81% 1.75% 1.82% Ratio of net investment income to average net assets ................... 7.17%(d) 7.22% 7.75% 7.37% 6.83% 7.61% Portfolio turnover rate ......... 129% 340% 302% 281% 244% 307%
See footnote summary on page 28. -------------------------------------------------------------------------------- ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO o 27 -------------------- FINANCIAL HIGHLIGHTS -------------------- (a) As required, effective July 1, 2001, the Portfolio has adopted the provisions of the AICPA Audit and Accounting Guide, Audits of Investment Companies, and began amortizing premium on debt securities for financial statement reporting purposes only. For the period ended December 31, 2001, the effect of this change was to decrease net investment income per share and net realized loss on investments per share by less than $.01 for Class A and Class B and $.01 for Class C, respectively. Consequently, the ratio of net investment income to average net assets was decreased from 7.91% to 7.89% for Class A, from 7.21% to 7.20% for Class B and from 7.19% to 7.17% for Class C on an annualized basis. Per share ratios and supplemental data for periods prior to July 1, 2001 have not been restated to reflect this change in presentation. (b) Based on average shares outstanding. (c) Total investment return is calculated assuming an initial investment is made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption on the last day of the period. Initial sales charges or contingent deferred sales charges are not reflected in the calculation of total investment return. Total investment return calculated for a period of less than one year is not annualized. (d) Annualized. -------------------------------------------------------------------------------- 28 o ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO ---------------------------- GLOSSARY OF INVESTMENT TERMS ---------------------------- GLOSSARY OF INVESTMENT TERMS benchmark A standard by which a fund's performance can be measured. A benchmark is usually an unmanaged index, such as the Standard & Poor's 500 Stock Index or the Lehman Brothers Aggregate Bond Index. bond Bonds are issued by governments or corporations when they need to raise cash. Bonds are sold, or issued, to investors and have a maturity date, which is the date the issuer is obligated to repay the investor for the principal, or face amount, of the bond. Bonds also pay interest until maturity. Bonds are also called fixed-income securities. liquidity The ability of an asset to be quickly converted into cash and without penalty. net asset value The value of a mutual fund's total assets, minus its liabilities, divided by the number of shares outstanding. sector A group of securities that are similar with respect to maturity, type, rating, industry and/or coupon. Refers to a distinct part of the economy, for example, the technology sector. Treasuries Negotiable U.S. government debt obligations, backed by the full faith and credit of the U.S. government. Treasuries are issued either as bills, notes or bonds depending on the maturity. Treasuries are exempt from state and local taxes. yield The rate of return on an asset, usually referring to dividend or interest payments, expressed as a percentage of current market price. -------------------------------------------------------------------------------- ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO o 29 ---------------- ALLIANCE CAPITAL ---------------- ALLIANCE CAPITAL The Investment Professional's Choice Alliance Capital is a leading global investment management firm with approximately $455 billion in assets under management. In recognition of our far-reaching investment capabilities, Alliance Capital has been selected by employee benefit plans for 41 of the FORTUNE 100 companies and public retirement funds in 43 states as well as by hundreds of foundations, endowments and foreign institutions. By sharing this institutional money management experience with millions of mutual fund investors as well, Alliance stands out as a "manager of choice" for thousands of investment professionals around the world. At Alliance Capital, we place a premium on investment research. We carefully select securities based on our proprietary research, conducted by over 640 investment professionals in 36 cities and 19 countries. Our commitment to this process means that our mutual fund shareholders have their portfolios managed by the same experienced analysts and portfolio managers who manage the pension funds of some of America's largest institutional investors. All information on Alliance Capital is as of 12/31/01. -------------------------------------------------------------------------------- 30 o ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO -------------------------------- ALLIANCE CAPITAL AT YOUR SERVICE -------------------------------- ALLIANCE CAPITAL AT YOUR SERVICE At Alliance Capital, shareholder satisfaction is among our top priorities. That is why we provide our shareholders with a wide variety of products and time-saving services. o Automatic Reinvestment You may choose to reinvest fund dividend and capital-gains distributions automatically at no charge. o Automatic Investment Program Build your investment account by having money automatically transferred from your bank account on a regular basis. o Dividend Direction Plans You may cross-invest dividends from one fund into the same class of shares in any other fund without incurring a sales charge--a good way to diversify your assets. o Auto Exchange You may choose to automatically exchange money from one Alliance Capital fund to another on a regular basis. This can be a good way to dollar cost average*, helping you to invest with discipline. o Systematic Withdrawals Regular checks for specified amounts can be sent to you or to your brokerage or bank account. o E-Statements and Electronic Delivery Sign up to view your quarterly mutual fund, retirement or CollegeBoundfund(SM) account statements online, rather than wait to receive paper copies in the mail. You may also sign up for electronic delivery of your legal documents so you can receive your semi-annual and annual shareholder reports, prospectuses and prospectus supplements online. It's easy, convenient and saves you time and storage space. Sign up today at www.alliancecapital.com. Simply go to Individual Investor, U.S., Account Access. o A Choice of Purchase Plans Most funds are available in A, B, and C Class shares. Many funds are also available in Advisor Class shares. o Telephone Transaction Purchases, transfers and redemptions can be made by calling (800) 221-5672. Our knowledgeable representatives are available to assist you Monday through Friday from 8:30 a.m. to 8:00 p.m. Eastern Standard Time. o Alliance Answer: 24-Hour Information For your convenience, our computerized audio response system is available to you 24-hours a day by calling (800) 251-0539. Using any touch tone phone, you can hear share prices, get account balances, review details of your last transaction, obtain dividend information, order statements/checkbooks, review fund objectives, and Watchlist information, order additional copies of statements and request additional year-end tax forms (available from February 1 to May 31). o The Alliance Advance A quarterly newsletter discussing investment strategies, economic news and other mutual fund matters. o Our Website at www.alliancecapital.com gives you a broad perspective of Alliance Capital. You can reach Alliance mutual fund and account information more directly from www.investor.alliancecapital.com. Either way, you'll have access to extensive Alliance fund data, answers to frequently asked questions, and financial planning tools and calculators. * Dollar cost averaging does not assure a profit nor protect against loss in a declining market. Since this strategy involves continuous investments in securities, regardless of fluctuating prices, investors should consider their financial ability to invest during periods of low price levels. -------------------------------------------------------------------------------- ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO o 31 ------------------ BOARD OF DIRECTORS ------------------ BOARD OF DIRECTORS John D. Carifa, Chairman and President Ruth Block(1) David H. Dievler(1) John H. Dobkin(1) William H. Foulk, Jr.(1) Clifford L. Michel(1) Donald J. Robinson(1) OFFICERS Kathleen A. Corbet, Senior Vice President Wayne D. Lyski, Senior Vice President Paul J. DeNoon, Senior Vice President Matthew Bloom, Vice President F. Jeanne Goetz, Vice President Sean Kelleher, Vice President Jeffrey S. Phlegar, Vice President Edmund P. Bergan, Jr., Secretary Mark D. Gersten, Treasurer & Chief Financial Officer Vincent S. Noto, Controller Andrew L. Gangolf, Assistant Secretary Custodian State Street Bank & Trust Company 225 Franklin Street Boston, MA 02110 Principal Underwriter Alliance Fund Distributors, Inc. 1345 Avenue of the Americas New York, NY 10105 Transfer Agent Alliance Global Investor Services, Inc. P.O. Box 1520 Secaucus, NJ 07096-1520 Toll-Free (800) 221-5672 Independent Auditors Ernst & Young LLP 787 Seventh Avenue New York, NY 10019 Legal Counsel Seward & Kissel LLP One Battery Park Plaza New York, NY 10004 (1) Member of the Audit Committee. -------------------------------------------------------------------------------- 32 o ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO -------------------------------- ALLIANCE CAPITAL FAMILY OF FUNDS -------------------------------- ALLIANCE CAPITAL FAMILY OF FUNDS Domestic Equity Funds Growth & Income Fund Growth Fund Health Care Fund Mid-Cap Growth Fund* Premier Growth Fund Quasar Fund Technology Fund Global & International Equity Funds All-Asia Investment Fund Global Small Cap Fund Greater China '97 Fund International Fund International Premier Growth Fund The Korean Investment Fund New Europe Fund Worldwide Privatization Fund AllianceBernstein Value Funds Disciplined Value Fund Global Value Fund International Value Fund Real Estate Investment Fund Small Cap Value Fund Utility Income Fund Value Fund Select Investor Series Biotechnology Portfolio Premier Portfolio Small Cap Growth Portfolio Technology Portfolio Asset Allocation Funds Balanced Shares Conservative Investors Fund Growth Investors Fund Fixed Income Funds Americas Government Income Trust** Corporate Bond Portfolio Emerging Market Debt Fund*** Global Strategic Income Trust High Yield Fund Multi-Market Strategy Trust Quality Bond Portfolio U.S. Government Portfolio Municipal Income Funds National Insured National Arizona California Insured California Florida Massachusetts Michigan Minnesota New Jersey New York Ohio Pennsylvania Virginia Closed-End Funds All-Market Advantage Fund The Austria Fund ACM Income Fund ACM Government Opportunity Fund ACM Managed Dollar Income Fund ACM Managed Income Fund ACM Municipal Securities Income Fund The Southern Africa Fund The Spain Fund World Dollar Government Fund World Dollar Government Fund II Alliance also offers AFD Exchange Reserves, which serves as the money market fund exchange vehicle for the Alliance mutual funds. To obtain a prospectus for any Alliance Capital fund, call your investment professional, or call Alliance at (800) 227-4618. * The Alliance Fund changed its name to Alliance Mid-Cap Growth Fund on February 1, 2002. ** Alliance North American Government Income Trust will change its name to Alliance Americas Government Income Trust on March 1, 2002. *** Alliance Global Dollar Government Fund will change its name to Alliance Emerging Market Debt Fund on March 1, 2002. -------------------------------------------------------------------------------- ALLIANCE BOND FUND CORPORATE BOND PORTFOLIO o 33 Alliance Bond Fund Corporate Bond Portfolio 1345 Avenue of the Americas New York, NY 10105 (800) 221-5672 Alliance Capital [LOGO](R) The Investment Professional's Choice (R) These registered service marks used under license from the owner, Alliance Capital Management L.P. CBPSAR1201