AllianceBernstein Income Fund, Inc.

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM N-CSR

 

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-05207

 

 

ALLIANCEBERNSTEIN INCOME FUND, INC.

(Exact name of registrant as specified in charter)

 

 

1345 Avenue of the Americas, New York, New York 10105

(Address of principal executive offices) (Zip code)

 

 

Joseph J. Mantineo

AllianceBernstein L.P.

1345 Avenue of the Americas

New York, New York 10105

(Name and address of agent for service)

 

 

Registrant’s telephone number, including area code: (800) 221-5672

Date of fiscal year end: December 31, 2014

Date of reporting period: June 30, 2014

 

 

 


ITEM 1. REPORTS TO STOCKHOLDERS.


SEMI-ANNUAL REPORT

 

AllianceBernstein

Income Fund

(NYSE: ACG)

 

June 30, 2014

 

Semi-Annual Report

 

LOGO


 

 

Investment Products Offered

 

• Are Not FDIC Insured

• May Lose Value

• Are Not Bank Guaranteed

You may obtain a description of the Fund’s proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Simply visit AllianceBernstein’s website at www.alliancebernstein.com, or go to the Securities and Exchange Commission’s (the “Commission”) website at www.sec.gov, or call AllianceBernstein® at (800) 227-4618.

The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-Q may also be reviewed and copied at the Commission’s Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330.

AllianceBernstein Investments, Inc. (ABI) is the distributor of the AllianceBernstein family of mutual funds. ABI is a member of FINRA and is an affiliate of AllianceBernstein L.P., the manager of the funds.

AllianceBernstein® and the AB Logo are registered trademarks and service marks used by permission of the owner, AllianceBernstein L.P.


August 15, 2014

 

Semi-Annual Report

This report provides management’s discussion of fund performance for AllianceBernstein Income Fund (the “Fund”) for the semi-annual reporting period ended June 30, 2014. The Fund is a closed-end fund that trades on the New York Stock Exchange.

Investment Objective and Policies

The investment objective of the Fund is high current income consistent with preservation of capital.

The Fund normally invests at least 80% of its net assets in income-producing securities. The Fund’s Board previously approved, and submitted for shareholder approval at the Fund’s Annual Meeting of Stockholders on March 27, 2014 (the “March 27 Meeting”), a proposal to eliminate the Fund’s fundamental policy to invest at least 65% of its assets in U.S. government securities and repurchase agreements relating to such securities (the “Proposal”). The Board also approved changes to certain non-fundamental policies of the Fund, including eliminating a policy limiting investments in foreign government securities to 35% of the Fund’s assets, whose effectiveness were contingent upon stockholder approval of the Proposal. Details including the rationale for the changes in investment policies are set forth in the Fund’s Proxy Statement dated February 20, 2014. At the March 27 Meeting, the stockholders did not approve the Proposal and accordingly the investment policies remain unchanged.

The Fund normally invests at least 65% of its total assets in securities issued or

guaranteed by the U.S. government, its agencies or instrumentalities, and repurchase agreements pertaining to U.S. government securities. The Fund may also invest up to 35% of its assets in other fixed-income securities, including those issued by nongovernmental issuers in the U.S. and those issued by foreign governments. The Fund may invest up to 35% of its net assets in below investment-grade securities. Additionally, the Fund may utilize other investment instruments, including options, swaps, forwards and futures, and may employ leverage. For more information regarding the Fund’s risks, please see “A Word About Risk” on pages 4-5 and “Note E—Risks Involved in Investing in the Fund” of the Notes to Financial Statements on pages 65-67.

Share Repurchase Program

On June 25, 2014, the Fund announced that its Board of Directors had authorized the Fund’s discretionary repurchase of up to 15% of its then outstanding shares of common stock (valued at up to approximately $306 million as of June 24, 2014 based on Fund total net assets of approximately $2.04 billion) in open market transactions over a one-year period. This share repurchase program is intended to benefit long-term Fund stockholders by the repurchase of Fund shares at a discount to their net asset value. Such repurchases may moderate the discount at which the Fund’s shares currently trade. Repurchases will be made from time to time when they are believed to be in the best interests of the Fund.

The Board of Directors authorized the share repurchase program upon the

 

ALLIANCEBERNSTEIN INCOME FUND       1   


recommendation of the Fund’s investment adviser, AllianceBernstein L.P., after concluding that repurchases of Fund shares at a discount to their net asset value may at times represent attractive investment opportunities for the Fund.

There is no assurance that the Fund will repurchase its shares at any specific discount level or in any specific amounts, or that the market price of the Fund’s shares, either absolutely or relative to their net asset value, will increase as a result of any share repurchases.

Through August 15, 2014, the Fund had repurchased 2,881,000 of its shares of common stock in open market transactions (approximately 1.19% of its outstanding shares as of June 25, 2014).

Investment Results

The table on page 6 provides performance data for the Fund and its benchmark, the Barclays U.S. Aggregate Bond Index, for the six- and 12-month periods ended June 30, 2014.

The Fund outperformed its benchmark for both periods; sector and security selection contributed positively for both periods, while currency exposure detracted. Within sector allocation, exposure to high-yield, emerging-market corporates and non-agency mortgages contributed positively for both periods. Exposure to bank loans also contributed for the 12-month period. Offsetting some of those gains for both periods was an underweight allocation to investment-grade corporates and overweight to U.S. Treasuries. Security selection

within the Fund’s investment-grade corporate holdings contributed for both periods, along with selection within the Fund’s commercial mortgage-backed securities (“CMBS”) holdings.

For both periods, interest rate swaps and Treasury futures were utilized to manage overall interest rate risk and yield curve positioning. For the six-month period, yield curve positioning was a substantive positive contributor due to the Fund’s overweight in the 10-year area of the yield curve, where interest rates declined. For the 12-month period, overall yield curve positioning was a modest positive as an overweight in the 10-year area of the curve was partially offset by underweights in shorter and longer maturities.

The Fund also utilized currency forwards during both periods for hedging and investment purposes to manage the Fund’s currency exposure; overall currency positioning detracted for both periods. The Fund utilized leverage through reverse repurchase agreements at favorable rates, and was able to reinvest the proceeds into higher-yielding securities; leverage contributed positively for both periods, as fixed-income markets provided solid returns. Credit default swaps were used as both a hedge against cash and to gain high-yield exposure, which had an immaterial impact for the six-month period and contributed to returns for the 12-month period. Purchased options for hedging purposes detracted for both periods, while written options for hedging purposes had an immaterial impact during the six-month period and added to returns for the 12-month period.

 

2     ALLIANCEBERNSTEIN INCOME FUND


Market Review and Investment Strategy

Early in 2014, volatility increased as the U.S. Federal Reserve (the “Fed”) began to taper its asset purchase program and investors worried about higher interest rates. Fixed-income markets stabilized however, and bond fund flows turned positive once again as U.S. economic data cooled in the first quarter, blamed mostly on weather events. Geopolitical concerns, specifically the conflict between Ukraine and Russia, as well as sectarian violence in Iraq, contributed to a safe haven rally in U.S. Treasuries. Interest rates actually declined, which was contrary to expectations at the beginning of the six-month period ended June 30, 2014. Further easing by the European Central Bank (the “ECB”), as inflation fell below target levels, also helped anchor U.S. yields.

Markets remained heavily focused on central bank actions, with hints of divergence among developed markets appearing late in the period. In response to low inflation, the ECB exceeded market expectations by implementing a negative deposit rate, announcing targeted long-term refinancing operations and discussing targeted quantitative easing through asset-backed securities. Despite stronger labor market data and a modest uptick in inflation, Fed Chair Janet Yellen reiterated that U.S. interest rates would stay relatively low. Conversely, the Bank of England surprised markets when Governor Mark Carney

made comments suggesting that as markets recover, a rate hike could come sooner than expected, causing the front end of the UK curve to sell off dramatically.

Fixed-income sectors benefited from the general decline in yields as all major U.S. fixed-income sectors posted positive returns with non-government sectors outperforming. Corporate sectors, both investment-grade and high-yield, posted the strongest returns as corporate spreads continued to compress, and corporate fundamentals, as well as earnings, remained favorable.

The Fund continues to be positioned for yield although its earning power is impacted by the current low level of market interest rates. The Fund remains overweight high-yield corporates to help achieve income. The Fund’s yield curve positioning remains concentrated in 10-year maturities, where the U.S. yield curve is steepest. Within the Fund, notable underweight positions in agency mortgages were held, where the Fund’s investment management team views valuations to be stretched, and the Fed poised to taper purchases. The Fund remains overweight asset-backed securities and CMBS, where fundamentals remain favorable. Within the Fund’s investment-grade corporate allocation, financials are still favored over industrials due to their better fundamentals. Within financials, subordinated debt (banks and insurance in Europe and the U.S.) is favored over senior debt.

 

ALLIANCEBERNSTEIN INCOME FUND       3   


DISCLOSURES AND RISKS

AllianceBernstein Income Fund Shareholder Information

Weekly comparative net asset value (“NAV”) and market price information about the Fund is published each Saturday in Barron’s and in other newspapers in a table called “Closed End Funds”. Daily NAV and market price information, and additional information regarding the Fund, is available at www.alliancebernstein.com and www.nyse.com. For additional shareholder information regarding this Fund, please see pages 71-72.

Benchmark Disclosure

The unmanaged Barclays U.S. Aggregate Bond Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Barclays U.S. Aggregate Bond Index represents the performance of securities within the U.S. investment grade fixed-rate bond market, with index components for government and corporate securities, mortgage pass-through securities, asset-backed securities, and commercial mortgage backed securities. The Index is not leveraged, whereas the Fund utilizes leverage. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including the Fund.

A Word About Risk

Until May 22, 2009, the Fund participated in a credit facility for the purpose of utilizing investment leverage. The Fund continues to utilize leverage through engaging in reverse repurchase agreements and may also utilize other techniques such as dollar rolls. In addition, the Fund may borrow money in the future through participation in credit facilities, direct bank borrowings, or otherwise. Reverse repurchase agreements involve sales by the Fund of portfolio assets concurrently with an agreement by the Fund to repurchase the same assets at a later date at a fixed price. Generally, the effect of such a transaction 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 only advantageous if the interest cost to the Fund of the reverse repurchase agreement transaction is less than the return on the leveraged portion of the Fund’s investment portfolio. The Fund may enter into dollar rolls in which the Fund sells securities for delivery in the current month and simultaneously contracts 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. The 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 the interest earned on the cash proceeds of the initial sale. Reverse repurchase agreements and dollar rolls are speculative techniques and are considered borrowings by the Fund.

Leverage may result in higher returns to the Fund than if the Fund were not leveraged, but may also adversely affect returns, particularly if the market is declining. The risks of leverage also include potentially a higher volatility of the NAV of the Fund’s shares, potentially more volatility in the market value of the Fund’s shares, and the relatively greater effect on the NAV of the Fund’s shares caused by favorable or adverse changes in portfolio security values or currency exchange rates. In addition, changes in the interest rate environment can increase or decrease shareholder returns. The Fund maintains asset coverage of at least 300% with respect to borrowings.

To the extent that the current interest rate on the Fund’s indebtedness approaches the net return on the leveraged portion of the Fund’s investment portfolio, then the benefit to the shareholders will be reduced. If the rate payable by the Fund on indebtedness were to exceed the net return on the same portion of the portfolio, then this would result in a lower rate of return for the shareholders. Similarly, the use of

 

(Disclosures, Risks and Note about Historical Performance continued on next page)

 

4     ALLIANCEBERNSTEIN INCOME FUND

Disclosures and Risks


DISCLOSURES AND RISKS

(continued from previous page)

 

leverage in a declining market can advance the decrease of the Fund’s NAV more so than if the Fund were not leveraged, which would likely be reflected in a greater decline in the market price for shares of the Fund than if the Fund were not leveraged. In extreme cases, if the Fund’s current investment income were not sufficient to meet interest payments on indebtedness or if the Fund failed to maintain the asset coverage required by the 1940 Act, then it could be necessary for the Fund to liquidate certain investments at a time when it may be disadvantageous to do so.

Part of the Fund’s assets will be invested in foreign securities. A significant portion of the Fund’s investments in foreign securities is in emerging markets. Since the Fund invests in foreign currency denominated securities, fluctuations in NAV may be magnified by changes in foreign exchange rates. The Fund also 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. Foreign markets can be more volatile than the U.S. market due to increased risks of adverse issuer, political, regulatory, market or economic developments. The Fund may invest in high yield bonds or below investment-grade securities (“junk bonds”). High yield bonds involve a greater risk of default and price volatility than other bonds. While the Fund invests principally in fixed-income securities, in order to achieve its investment objectives, the Fund may at times use certain types of investment derivatives, such as options, futures, forwards and swaps. These instruments involve risks different from, and in certain cases, greater than, the risks presented by more traditional investments. These risks 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, and the risk that the counterparty will not perform its obligation. Certain derivatives may have a leverage component and involve leverage risk. 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).

The Fund may invest in mortgage-backed and/or other asset-backed securities, including securities backed by mortgages and assets with an international or emerging markets origination and securities backed by non-performing loans at the time of investment. Investments in mortgage-backed and other asset-backed securities are subject to certain additional risks. The value of these securities may be particularly sensitive to changes in interest rates. These risks include “extension risk”, which is the risk that, in periods of rising interest rates, issuers may delay the payment of principal, and “prepayment risk”, which is the risk that, in periods of falling interest rates, issuers may pay principal sooner than expected, exposing the Fund to a lower rate of return upon reinvestment of principal. Mortgage-backed securities offered by nongovernmental issuers and other asset-backed securities may be subject to other risks, such as higher rates of default in the mortgages or assets backing the securities or risks associated with the nature and servicing of mortgages or assets backing the securities.

An Important Note About Historical Performance

The performance on the following page represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown. All fees and expenses related to the operation of the Fund have been deducted. Performance assumes reinvestment of distributions and does not account for taxes.

 

ALLIANCEBERNSTEIN INCOME FUND       5   

Disclosures and Risks


HISTORICAL PERFORMANCE

 

        
THE FUND VS. ITS BENCHMARK
PERIODS ENDED JUNE 30, 2014 (unaudited)
  Returns      
  6 Months        12 Months       
AllianceBernstein Income Fund (NAV)     6.50%           7.18%     

 

Barclays U.S. Aggregate Bond Index     3.93%           4.37%     

 

The Fund’s market price per share on June 30, 2014 was $7.52. The Fund’s NAV price per share on June 30, 2014 was $8.42. For additional Financial Highlights, please see pages 69-70.
        

 

 

 

 

See Disclosures, Risks and Note about Historical Performance on pages 4-5.

 

6     ALLIANCEBERNSTEIN INCOME FUND

Historical Performance


PORTFOLIO SUMMARY

June 30, 2014 (unaudited)

 

PORTFOLIO STATISTICS

Net Assets ($mil): $2,045.1

 

LOGO

 

*   All data are as of June 30, 2014. The Fund’s security type breakdown is expressed as a percentage of total investments and may vary over time. The Fund also enters into derivative transactions, which may be used for hedging or investment purposes (see “Portfolio of Investments” section of the report for additional details).“Other” security type weightings represent 0.5% or less in the following types: Common Stocks, Emerging Markets—Sovereigns, Governments—Sovereign Agencies, Options Purchased—Calls and Whole Loan Trusts.

 

ALLIANCEBERNSTEIN INCOME FUND       7   

Portfolio Summary


PORTFOLIO SUMMARY

June 30, 2014 (unaudited)

 

LOGO

 

*   All data are as of June 30, 2014. The Fund’s country breakdown is expressed as a percentage of total investments and may vary over time. The Fund also enters into derivative transactions, which may be used for hedging or investment purposes (see “Portfolio of Investments” section of the report for additional details). “Other” country weightings represent 0.2% or less in the following countries: Australia, Barbados, Belgium, Chile, China, Colombia, Dominican Republic, El Salvador, Guatemala, India, Italy, Jamaica, Japan, Kenya, Morocco, Netherlands, Norway, Pakistan, Portugal, Russia, Singapore, South Africa, Spain, Sri Lanka, Turkey and Venezuela.

 

8     ALLIANCEBERNSTEIN INCOME FUND

Portfolio Summary


PORTFOLIO OF INVESTMENTS

June 30, 2014 (unaudited)

 

        Principal
Amount
(000)
     U.S. $ Value  

 

 
      

GOVERNMENTS – TREASURIES – 90.1%

      

Brazil – 0.4%

    

Brazil Notas do Tesouro Nacional
Series F
10.00%, 1/01/17

  BRL     19,288       $ 8,443,307   
      

 

 

 

United States – 89.7%

    

U.S. Treasury Bonds
5.375%, 2/15/31

  U.S.$     1,961         2,574,732   

6.00%, 2/15/26(a)

      333,000         445,075,146   

6.375%, 8/15/27(a)

      260,000         363,715,560   

6.50%, 11/15/26(a)

      183,000         256,342,923   

8.75%, 8/15/20

      39,500         55,229,019   

U.S. Treasury Notes
1.125%, 3/31/20

      13,000         12,493,208   

2.125%, 8/31/20(a)

      150,000         151,546,800   

2.125%, 8/15/21

      21,000         20,986,875   

2.625%, 11/15/20(a)

      67,250         69,855,938   

3.125%, 5/15/21

      95,000         101,419,910   

3.50%, 5/15/20

      27,608         30,185,455   

3.625%, 2/15/21(a)(b)(c)

      295,000         324,684,375   
      

 

 

 
         1,834,109,941   
      

 

 

 

Total Governments – Treasuries
(cost $1,796,910,349)

         1,842,553,248   
      

 

 

 
      

CORPORATES – NON-INVESTMENT GRADES – 15.2%

      

Industrial – 11.9%

    

Basic – 1.0%

    

AK Steel Corp.
7.625%, 5/15/20(a)

      847         872,410   

ArcelorMittal

      

5.75%, 8/05/20(a)

      2,417         2,598,275   

7.25%, 3/01/41

      54         57,375   

7.50%, 10/15/39

      1,376         1,513,600   

Arch Coal, Inc.
7.00%, 6/15/19(a)

      2,100         1,590,750   

Commercial Metals Co.
6.50%, 7/15/17

      1,993         2,219,704   

7.35%, 8/15/18

      2,644         3,027,380   

NOVA Chemicals Corp.
5.25%, 8/01/23(d)

      2,243         2,450,477   

Novelis, Inc./GA
8.75%, 12/15/20

      837         929,070   

SPCM SA
6.00%, 1/15/22(d)

      617         658,648   

Steel Dynamics, Inc.
7.625%, 3/15/20

      3,000         3,213,750   

 

ALLIANCEBERNSTEIN INCOME FUND       9   

Portfolio of Investments


        Principal
Amount
(000)
     U.S. $ Value  

 

 
      

TPC Group, Inc.
8.75%, 12/15/20(d)

  U.S.$     900       $ 996,750   
      

 

 

 
         20,128,189   
      

 

 

 

Capital Goods – 1.3%

    

B/E Aerospace, Inc.
6.875%, 10/01/20

      2,000         2,172,500   

BC Mountain LLC/BC Mountain Finance, Inc.
7.00%, 2/01/21(d)

      3,205         3,100,837   

Bombardier, Inc.
4.75%, 4/15/19(d)

      3,450         3,510,375   

6.00%, 10/15/22(d)

      1,650         1,691,250   

Building Materials Corp. of America
7.00%, 2/15/20(d)

      635         673,100   

7.50%, 3/15/20(d)

      2,498         2,660,370   

Clean Harbors, Inc.
5.25%, 8/01/20

      1,200         1,237,500   

Huntington Ingalls Industries, Inc.
7.125%, 3/15/21

      690         753,825   

Sealed Air Corp.
6.875%, 7/15/33(d)

      1,486         1,545,440   

8.125%, 9/15/19(d)

      1,127         1,241,109   

8.375%, 9/15/21(d)

      1,157         1,324,765   

SPX Corp.
6.875%, 9/01/17

      2,900         3,262,500   

Summit Materials LLC/Summit Materials Finance Corp.
10.50%, 1/31/20

      1,599         1,794,878   

United Rentals North America, Inc.
5.75%, 7/15/18

      2,550         2,696,625   
      

 

 

 
         27,665,074   
      

 

 

 

Communications - Media – 1.4%

    

CCO Holdings LLC/CCO Holdings Capital Corp.
5.25%, 9/30/22

      2,079         2,110,185   

Clear Channel Worldwide Holdings, Inc.
6.50%, 11/15/22

      1,312         1,400,560   

Series B
6.50%, 11/15/22

      3,688         3,973,820   

CSC Holdings LLC
6.75%, 11/15/21

      5,000         5,500,000   

Cumulus Media Holdings, Inc.
7.75%, 5/01/19

      678         714,443   

Nielsen Co. Luxembourg SARL (The)
5.50%, 10/01/21(d)

      3,243         3,348,397   

Quebecor Media, Inc.
5.75%, 1/15/23

      2,145         2,203,988   

Univision Communications, Inc.
5.125%, 5/15/23(d)

      3,295         3,488,581   

 

10     ALLIANCEBERNSTEIN INCOME FUND

Portfolio of Investments


        Principal
Amount
(000)
     U.S. $ Value  

 

 
      

Videotron Ltd.
5.00%, 7/15/22

  U.S.$     2,255       $ 2,317,012   

Virgin Media Finance PLC
5.25%, 2/15/22

      2,246         2,201,080   

Virgin Media Secured Finance PLC
5.25%, 1/15/21

      1,629         1,718,595   
      

 

 

 
         28,976,661   
      

 

 

 

Communications -
Telecommunications – 1.5%

    

Altice SA
7.75%, 5/15/22(d)

      1,342         1,432,585   

Columbus International, Inc.
7.375%, 3/30/21(d)

      3,872         4,184,521   

Crown Castle International Corp.
4.875%, 4/15/22

      2,920         3,018,550   

Frontier Communications Corp.
8.125%, 10/01/18

      2,000         2,340,000   

Hughes Satellite Systems Corp.
7.625%, 6/15/21

      3,111         3,562,095   

Intelsat Jackson Holdings SA
7.25%, 4/01/19

      4,231         4,500,726   

SBA Telecommunications, Inc.
5.75%, 7/15/20

      875         927,500   

Sirius XM Radio, Inc.
5.875%, 10/01/20(d)

      2,026         2,142,495   

Sprint Communications, Inc.
9.00%, 11/15/18(d)

      2,065         2,503,812   

Sunrise Communications International SA
7.00%, 12/31/17(d)

  EUR     1,585         2,284,284   

tw telecom holdings, Inc.
6.375%, 9/01/23

  U.S.$     1,239         1,409,363   

Windstream Corp.
7.50%, 4/01/23

      2,000         2,165,000   

7.75%, 10/01/21

      1,070         1,168,975   
      

 

 

 
         31,639,906   
      

 

 

 

Consumer Cyclical - Automotive – 0.2%

    

Affinia Group, Inc.
7.75%, 5/01/21

      238         250,495   

Goodyear Tire & Rubber Co. (The)
8.75%, 8/15/20

      3,000         3,555,000   

LKQ Corp.
4.75%, 5/15/23

      908         895,288   
      

 

 

 
         4,700,783   
      

 

 

 

Consumer Cyclical -
Entertainment – 0.2%

    

Pinnacle Entertainment, Inc.
8.75%, 5/15/20

      841         916,690   

 

ALLIANCEBERNSTEIN INCOME FUND       11   

Portfolio of Investments


        Principal
Amount
(000)
     U.S. $ Value  

 

 
      

Time, Inc.
5.75%, 4/15/22(d)

  U.S.$     2,285       $ 2,307,850   
      

 

 

 
         3,224,540   
      

 

 

 

Consumer Cyclical - Other – 0.3%

    

Choice Hotels International, Inc.
5.75%, 7/01/22

      195         209,286   

MGM Resorts International
8.625%, 2/01/19

      2,145         2,555,231   

Royal Caribbean Cruises Ltd.
7.50%, 10/15/27

      1,100         1,254,000   

Shea Homes LP/Shea Homes Funding Corp.
8.625%, 5/15/19

      1,188         1,294,920   
      

 

 

 
         5,313,437   
      

 

 

 

Consumer Cyclical - Retailers – 0.8%

    

Burlington Coat Factory Warehouse Corp.
10.00%, 2/15/19

      401         437,591   

Chinos Intermediate Holdings A, Inc.
7.75% (7.75% Cash or
8.50% PIK), 5/01/19(a)(d)(e)

      1,559         1,562,898   

L Brands, Inc.
6.90%, 7/15/17

      3,621         4,109,835   

Men’s Wearhouse, Inc. (The)
7.00%, 7/01/22(d)

      2,749         2,845,215   

New Look Bondco I PLC
8.375%, 5/14/18(d)

      2,000         2,142,600   

Rite Aid Corp.
8.00%, 8/15/20

      3,200         3,520,000   

Toys R US - Delaware, Inc.
7.375%, 9/01/16(a)(d)

      2,311         2,126,120   
      

 

 

 
         16,744,259   
      

 

 

 

Consumer Non-Cyclical – 1.7%

    

Aramark Services, Inc.
5.75%, 3/15/20

      1,001         1,058,558   

Boparan Finance PLC
9.875%, 4/30/18(a)(d)

  GBP     2,400         4,419,930   

CHS/Community Health Systems, Inc.
6.875%, 2/01/22(d)

  U.S.$     3,286         3,483,160   

7.125%, 7/15/20

      1,717         1,858,652   

HCA Holdings, Inc.
7.75%, 5/15/21

      1,700         1,863,625   

Holding Medi-Partenaires SAS
7.00%, 5/15/20(d)

  EUR     1,750         2,572,689   

Jaguar Holding Co. II/Jaguar
Merger Sub, Inc.
9.50%, 12/01/19(d)

  U.S.$     2,000         2,185,000   

Kinetic Concepts, Inc./KCI USA, Inc.
10.50%, 11/01/18

      4,000         4,520,000   

 

12     ALLIANCEBERNSTEIN INCOME FUND

Portfolio of Investments


        Principal
Amount
(000)
     U.S. $ Value  

 

 
      

Pinnacle Merger Sub, Inc.
9.50%, 10/01/23(d)

  U.S.$     3,719       $ 4,132,739   

Post Holdings, Inc.
6.00%, 12/15/22(d)

      869         886,380   

7.375%, 2/15/22

      705         762,281   

Smithfield Foods, Inc.
5.875%, 8/01/21(d)

      2,597         2,746,327   

6.625%, 8/15/22

      1,678         1,837,410   

Valeant Pharmaceuticals International
6.875%, 12/01/18(d)

      2,145         2,244,206   
      

 

 

 
         34,570,957   
      

 

 

 

Energy – 1.9%

    

Antero Resources Finance Corp.
5.375%, 11/01/21

      792         821,700   

Athlon Holdings LP/Athlon Finance Corp.
7.375%, 4/15/21(d)

      4,204         4,582,360   

Berry Petroleum Co. LLC
6.375%, 9/15/22

      3,107         3,308,955   

Bonanza Creek Energy, Inc.
6.75%, 4/15/21

      188         201,160   

Chesapeake Energy Corp.
6.625%, 8/15/20

      2,435         2,800,250   

Denbury Resources, Inc.
5.50%, 5/01/22

      3,772         3,856,870   

Golden Energy Offshore Services AS
9.09%, 5/28/17(f)(g)(h)

  NOK     5,000         815,149   

Hornbeck Offshore Services, Inc.
5.875%, 4/01/20

  U.S.$     2,737         2,846,480   

Linn Energy LLC/Linn Energy Finance Corp.
6.25%, 11/01/19

      2,275         2,383,062   

Northern Blizzard Resources, Inc.
7.25%, 2/01/22(d)

      2,000         2,060,000   

Offshore Group Investment Ltd.
7.125%, 4/01/23

      4,656         4,725,840   

Rosetta Resources, Inc.
5.875%, 6/01/24

      1,322         1,374,880   

SandRidge Energy, Inc.
7.50%, 2/15/23

      1,259         1,366,015   

SESI LLC
7.125%, 12/15/21

      2,834         3,195,335   

Tervita Corp.
8.00%, 11/15/18(d)

      3,547         3,688,880   
      

 

 

 
         38,026,936   
      

 

 

 

Other Industrial – 0.2%

    

Safway Group Holding LLC/Safway Finance Corp.
7.00%, 5/15/18(d)

      3,525         3,736,500   
      

 

 

 

 

ALLIANCEBERNSTEIN INCOME FUND       13   

Portfolio of Investments


        Principal
Amount
(000)
     U.S. $ Value  

 

 
      

Services – 0.4%

    

ADT Corp. (The)
4.125%, 4/15/19(a)

  U.S.$     2,383       $ 2,397,894   

Sabre GLBL, Inc.
8.50%, 5/15/19(d)

      1,200         1,332,000   

Service Corp. International/US
7.50%, 4/01/27

      3,300         3,646,500   
      

 

 

 
         7,376,394   
      

 

 

 

Technology – 0.9%

    

Amkor Technology, Inc.
6.625%, 6/01/21

      3,000         3,195,000   

Avaya, Inc.
10.50%, 3/01/21(d)

      1,543         1,423,417   

Brightstar Corp.
9.50%, 12/01/16(d)

      1,600         1,716,000   

CDW LLC/CDW Finance Corp.
8.50%, 4/01/19

      5,000         5,412,500   

Infor Software Parent LLC/Infor Software Parent, Inc.
7.125% (7.125% Cash or
7.875% PIK), 5/01/21(a)(d)(e)

      3,278         3,351,755   

Numericable Group SA
6.00%, 5/15/22(d)

      3,000         3,120,000   

6.25%, 5/15/24(d)

      766         799,513   
      

 

 

 
         19,018,185   
      

 

 

 

Transportation - Services – 0.1%

    

LBC Tank Terminals Holding
Netherlands BV
6.875%, 5/15/23(d)

      1,789         1,887,395   
      

 

 

 
         243,009,216   
      

 

 

 

Financial Institutions – 2.0%

      

Banking – 1.1%

    

ABN AMRO Bank NV
4.31%, 3/10/16(i)

  EUR     3,790         5,293,441   

Bank of America Corp.
Series U
5.20%, 6/01/23(i)

  U.S.$     1,703         1,630,622   

Barclays Bank PLC
7.625%, 11/21/22

      654         746,541   

7.75%, 4/10/23

      3,545         3,945,585   

Barclays PLC
8.00%, 12/15/20(i)

  EUR     896         1,336,087   

Citigroup, Inc.
5.95%, 1/30/23(i)

  U.S.$     2,300         2,323,000   

Commerzbank AG
8.125%, 9/19/23(d)

      3,610         4,380,771   

Credit Agricole SA
7.875%, 1/23/24(a)(d)(i)

      549         602,528   

 

14     ALLIANCEBERNSTEIN INCOME FUND

Portfolio of Investments


        Principal
Amount
(000)
     U.S. $ Value  

 

 
      

Credit Suisse Group AG
7.50%, 12/11/23(d)(i)

  U.S.$     2,066       $ 2,288,095   
      

 

 

 
         22,546,670   
      

 

 

 

Finance – 0.5%

    

Aviation Capital Group Corp.
6.75%, 4/06/21(d)

      4,235         4,764,057   

Creditcorp
12.00%, 7/15/18(d)

      2,000         2,100,000   

Milestone Aviation Group Ltd. (The)
8.625%, 12/15/17(d)

      2,000         2,182,500   
      

 

 

 
         9,046,557   
      

 

 

 

Insurance – 0.1%

    

American Equity Investment Life Holding Co.
6.625%, 7/15/21

      2,432         2,644,496   

Pearl Group Holdings No. 1 Ltd.
6.586%, 4/25/16(i)

  GBP     43         70,771   
      

 

 

 
         2,715,267   
      

 

 

 

Other Finance – 0.1%

    

ACE Cash Express, Inc.
11.00%, 2/01/19(d)

  U.S.$     779         636,832   

iPayment, Inc.
10.25%, 5/15/18

      2,475         2,227,500   
      

 

 

 
         2,864,332   
      

 

 

 

REITS – 0.2%

    

SL Green Realty Corp./SL Green Operating Partnership/Reckson Operating Partnership
7.75%, 3/15/20

      2,514         3,043,795   
      

 

 

 
         40,216,621   
      

 

 

 

Utility – 1.3%

      

Electric – 0.6%

    

AES Corp./VA
8.00%, 10/15/17

      487         567,355   

Calpine Corp.
6.00%, 1/15/22(d)

      1,000         1,078,750   

EDP Finance BV
4.90%, 10/01/19(d)

      255         269,688   

6.00%, 2/02/18(d)

      3,490         3,838,965   

FirstEnergy Corp.
Series C
7.375%, 11/15/31

      1,552         1,834,217   

GenOn Energy, Inc.
7.875%, 6/15/17

      2,100         2,231,250   

9.50%, 10/15/18

      2,087         2,290,483   
      

 

 

 
         12,110,708   
      

 

 

 

Natural Gas – 0.7%

    

El Paso LLC
Series G
7.75%, 1/15/32

      4,650         5,091,750   

 

ALLIANCEBERNSTEIN INCOME FUND       15   

Portfolio of Investments


        Principal
Amount
(000)
     U.S. $ Value  

 

 
      

Holly Energy Partners LP/Holly Energy
Finance Corp.
6.50%, 3/01/20

  U.S.$     2,196       $ 2,366,190   

Regency Energy Partners LP/Regency Energy Finance Corp.
4.50%, 11/01/23

      2,500         2,475,000   

Sabine Pass Liquefaction LLC
5.75%, 5/15/24(d)

      3,046         3,175,455   

Southern Star Central Corp.
5.125%, 7/15/22(d)

      2,000         2,015,000   
      

 

 

 
         15,123,395   
      

 

 

 
         27,234,103   
      

 

 

 

Total Corporates – Non-Investment Grades
(cost $288,700,716)

         310,459,940   
      

 

 

 
      

CORPORATES – INVESTMENT
GRADES – 10.7%

      

Industrial – 6.4%

      

Basic – 1.1%

      

Braskem Finance Ltd.
6.45%, 2/03/24

      1,204         1,286,775   

GTL Trade Finance, Inc.
5.893%, 4/29/24(d)

      2,924         3,067,276   

LyondellBasell Industries NV
5.75%, 4/15/24

      3,300         3,893,640   

Minsur SA
6.25%, 2/07/24(d)

      1,764         1,913,738   

Southern Copper Corp.
7.50%, 7/27/35

      5,107         5,945,187   

Weyerhaeuser Co.
7.375%, 3/15/32

      2,000         2,702,338   

Yamana Gold, Inc.
4.95%, 7/15/24(d)

      3,367         3,389,138   
      

 

 

 
         22,198,092   
      

 

 

 

Capital Goods – 0.9%

    

Legrand France SA
8.50%, 2/15/25

      10         13,897   

Odebrecht Finance Ltd.
4.375%, 4/25/25(d)

      6,760         6,594,820   

5.25%, 6/27/29(d)

      2,103         2,093,537   

Owens Corning
9.00%, 6/15/19

      3,000         3,772,296   

Republic Services, Inc.
5.25%, 11/15/21

      6,098         6,948,439   
      

 

 

 
         19,422,989   
      

 

 

 

Communications - Media – 0.2%

    

Myriad International Holdings BV
6.00%, 7/18/20(d)

      3,089         3,412,597   
      

 

 

 

 

16     ALLIANCEBERNSTEIN INCOME FUND

Portfolio of Investments


        Principal
Amount
(000)
     U.S. $ Value  

 

 
      

Communications -
Telecommunications – 1.8%

      

AT&T, Inc.
4.30%, 12/15/42

  U.S.$     72       $ 68,156   

6.50%, 9/01/37

      4,433         5,479,503   

Deutsche Telekom International Finance BV
4.875%, 3/06/42(d)

      4,719         4,936,065   

ENTEL Chile SA
4.875%, 10/30/24(d)

      3,015         3,139,643   

Globo Comunicacao e Participacoes SA
5.307%, 5/11/22(d)(j)

      1,162         1,231,720   

Oi SA
5.75%, 2/10/22(d)

      5,500         5,513,303   

Qwest Corp.
6.75%, 12/01/21

      2,000         2,315,480   

6.875%, 9/15/33

      1,500         1,508,976   

Sirius XM Radio, Inc.
5.25%, 8/15/22(d)

      412         443,930   

Telefonica Emisiones SAU
7.045%, 6/20/36

      5,000         6,377,455   

Verizon Communications, Inc.
6.90%, 4/15/38

      4,500         5,793,336   
      

 

 

 
         36,807,567   
      

 

 

 

Consumer Cyclical - Automotive – 0.0%

    

Ford Motor Co.
7.45%, 7/16/31

      650         869,004   
      

 

 

 

Consumer Cyclical - Entertainment – 0.2%

    

Time Warner, Inc.
7.70%, 5/01/32

      2,500         3,471,610   
      

 

 

 

Consumer Cyclical - Other – 0.1%

      

Wyndham Worldwide Corp.
4.25%, 3/01/22

      2,200         2,261,118   
      

 

 

 

Consumer Cyclical - Retailers – 0.3%

      

CVS Caremark Corp.
5.75%, 5/15/41

      4,700         5,635,427   
      

 

 

 

Consumer Non-Cyclical – 0.5%

      

Bunge Ltd. Finance Corp.
8.50%, 6/15/19

      2,600         3,267,220   

Grupo Bimbo SAB de CV
4.50%, 1/25/22(d)

      1,699         1,794,370   

SABMiller Holdings, Inc.
4.95%, 1/15/42(d)

      5,500         5,943,366   
      

 

 

 
         11,004,956   
      

 

 

 

Energy – 0.8%

      

Nabors Industries, Inc.
5.10%, 9/15/23

      3,500         3,821,328   

 

ALLIANCEBERNSTEIN INCOME FUND       17   

Portfolio of Investments


        Principal
Amount
(000)
     U.S. $ Value  

 

 
      

Reliance Holding USA, Inc.
5.40%, 2/14/22(d)

  U.S.$     3,568       $ 3,839,382   

Rio Oil Finance Trust
Series 2014-1
6.25%, 7/06/24(d)

      2,683         2,810,443   

Transocean, Inc.
7.50%, 4/15/31

      2,200         2,661,639   

Weatherford International Ltd./Bermuda
7.00%, 3/15/38

      2,900         3,601,710   
      

 

 

 
         16,734,502   
      

 

 

 

Technology – 0.3%

      

Applied Materials, Inc.
5.85%, 6/15/41

      4,621         5,400,946   

Baidu, Inc.
2.75%, 6/09/19

      1,279         1,283,982   
      

 

 

 
         6,684,928   
      

 

 

 

Transportation - Airlines – 0.1%

      

Delta Air Lines Pass-Through Trust
Series 2007-1A
6.821%, 8/10/22

      1,437         1,695,878   
      

 

 

 

Transportation - Services – 0.1%

      

Asciano Finance Ltd.
4.625%, 9/23/20(d)

      1,080         1,153,009   
      

 

 

 
         131,351,677   
      

 

 

 

Financial Institutions – 3.6%

      

Banking – 1.8%

    

Barclays Bank PLC
6.86%, 6/15/32(d)(i)

      656         741,280   

BNP Paribas SA
5.186%, 6/29/15(d)(i)

      2,691         2,741,456   

Credit Agricole SA
7.589%, 1/30/20(i)

  GBP     1,150         2,194,442   

Credit Suisse AG
6.50%, 8/08/23(d)

  U.S.$     3,900         4,425,086   

HSBC Capital Funding LP/Jersey
10.176%, 6/30/30(d)(i)

      884         1,319,370   

Intesa Sanpaolo SpA
5.017%, 6/26/24(d)

      2,922         2,956,523   

JPMorgan Chase & Co.
Series S
6.75%, 2/01/24(i)

      3,997         4,286,783   

Mizuho Financial Group Cayman 3 Ltd.
4.60%, 3/27/24(d)

      4,802         5,061,467   

Royal Bank of Scotland PLC (The)
9.50%, 3/16/22(d)

      2,106         2,469,285   

Turkiye Garanti Bankasi AS
4.75%, 10/17/19(d)

      1,313         1,330,990   

 

18     ALLIANCEBERNSTEIN INCOME FUND

Portfolio of Investments


        Principal
Amount
(000)
     U.S. $ Value  

 

 
      

UBS AG/Stamford CT
7.50%, 7/15/25

  U.S.$     1,394       $ 1,760,657   

7.625%, 8/17/22

      2,492         3,000,547   

Wells Fargo Bank NA Series BKN1
6.18%, 2/15/36

      3,168         3,834,199   
      

 

 

 
         36,122,085   
      

 

 

 

Finance – 0.1%

      

GE Capital Trust II
5.50%, 9/15/67(d)

  EUR     1,000         1,469,601   

General Electric Capital Corp.
Series G
6.875%, 1/10/39

  U.S.$     1,254         1,684,471   
      

 

 

 
         3,154,072   
      

 

 

 

Insurance – 1.3%

      

AIG Life Holdings Inc
8.125%, 3/15/46(d)

      509         704,581   

American International Group, Inc.
8.175%, 5/15/58

      2,525         3,478,187   

Fairfax Financial Holdings Ltd.
8.30%, 4/15/26

      5,000         6,193,765   

Great-West Life & Annuity Insurance
Capital LP II
7.153%, 5/16/46(d)

      2,707         2,801,745   

Humana, Inc.
8.15%, 6/15/38

      2,900         4,204,156   

MetLife, Inc.
6.40%, 12/15/36

      3,345         3,738,037   

Pacific Life Insurance Co.
9.25%, 6/15/39(d)

      1,500         2,307,494   

Transatlantic Holdings, Inc.
8.00%, 11/30/39

      2,122         2,943,123   
      

 

 

 
         26,371,088   
      

 

 

 

REITS – 0.4%

      

EPR Properties
7.75%, 7/15/20

      3,308         3,942,001   

HCP, Inc.
5.375%, 2/01/21

      3,468         3,944,691   
      

 

 

 
         7,886,692   
      

 

 

 
         73,533,937   
      

 

 

 

Non Corporate Sectors – 0.4%

      

Agencies - Not Government
Guaranteed – 0.4%

      

OCP SA
5.625%, 4/25/24(d)

      1,148         1,203,965   

Oleoducto Central SA
4.00%, 5/07/21(d)

      1,940         1,944,850   

Petrobras International Finance Co.
5.375%, 1/27/21

      5,000         5,211,150   
      

 

 

 
         8,359,965   
      

 

 

 

 

ALLIANCEBERNSTEIN INCOME FUND       19   

Portfolio of Investments


        Principal
Amount
(000)
     U.S. $ Value  

 

 
      

Utility – 0.3%

      

Electric – 0.3%

      

ComEd Financing III
6.35%, 3/15/33

  U.S.$     3,462       $ 3,470,655   

Duquesne Light Holdings, Inc.
6.40%, 9/15/20(d)

      2,140         2,540,957   
      

 

 

 
         6,011,612   
      

 

 

 

Total Corporates – Investment Grades
(cost $199,802,736)

         219,257,191   
      

 

 

 
      

AGENCIES – 6.6%

      

Agency Debentures – 3.3%

      

Federal Home Loan Banks
5.50%, 7/15/36

      8,695         11,125,105   

Federal Home Loan Mortgage Corp.
6.25%, 7/15/32

      15,000         20,687,145   

Residual Funding Corp. Principal Strip
Zero Coupon, 7/15/20

      42,045         36,847,733   
      

 

 

 
         68,659,983   
      

 

 

 

Agency Subordinated – 3.3%

      

Federal National Mortgage Association
5.375%, 6/12/17

      59,222         66,899,422   
      

 

 

 

Total Agencies
(cost $127,476,264)

         135,559,405   
      

 

 

 
      

COLLATERALIZED MORTGAGE OBLIGATIONS – 4.3%

      

Non-Agency Fixed Rate – 2.0%

      

Citigroup Mortgage Loan Trust
Series 2006-4, Class 2A1A
6.00%, 12/25/35

      5,311         4,986,448   

Series 2007-AR4, Class 1A1A
5.508%, 3/25/37

      855         825,355   

Countrywide Alternative Loan Trust
Series 2006-24CB, Class A15
5.75%, 6/25/36

      2,761         2,421,922   

Series 2006-41CB, Class 2A13
5.75%, 1/25/37

      2,297         1,971,909   

Series 2007-13, Class A2
6.00%, 6/25/47

      3,271         2,688,486   

Countrywide Home Loan Mortgage Pass-Through Trust
Series 2007-HY4, Class 1A1
2.666%, 9/25/47

      1,007         897,941   

Credit Suisse Mortgage-Backed Trust
Series 2006-7, Class 3A12
6.25%, 8/25/36

      1,927         1,695,892   

 

20     ALLIANCEBERNSTEIN INCOME FUND

Portfolio of Investments


        Principal
Amount
(000)
     U.S. $ Value  

 

 
      

First Horizon Alternative Mortgage Securities Trust
Series 2006-AA5, Class A1
2.253%, 9/25/36

  U.S.$     2,605       $ 2,080,358   

Series 2006-AA7, Class A1
2.208%, 1/25/37

      4,320         3,510,985   

Morgan Stanley Mortgage Loan Trust
Series 2005-10, Class 4A1
5.50%, 12/25/35

      1,212         1,111,886   

Series 2007-10XS, Class A2
6.25%, 7/25/47

      1,368         1,014,477   

Residential Accredit Loans, Inc.
Series 2005-QA7, Class A21
2.922%, 7/25/35

      1,579         1,457,100   

Series 2005-QS14, Class 3A1
6.00%, 9/25/35

      3,348         3,121,136   

Series 2006-QA1, Class A21
3.732%, 1/25/36

      952         780,542   

Series 2006-QS2, Class 1A8
6.00%, 2/25/36

      5,429         4,554,798   

Wells Fargo Mortgage Backed Securities Trust
Series 2007-AR7, Class A1
2.635%, 12/28/37

      4,976         4,606,112   

Series 2007-AR8, Class A1
6.118%, 11/25/37

      2,105         1,940,535   
      

 

 

 
         39,665,882   
      

 

 

 

GSE Risk Share Floating Rate – 1.5%

      

Fannie Mae Connecticut Avenue Securities
Series 2013-C01, Class M2
5.402%, 10/25/23(h)

      1,700         2,045,904   

Series 2014-C01, Class M2
4.552%, 1/25/24(h)

      1,606         1,830,658   

Structured Agency Credit Risk Debt Notes
Series 2013-DN1, Class M2
7.302%, 7/25/23(h)

      3,250         4,276,706   

Series 2013-DN2, Class M2
4.402%, 11/25/23(h)

      5,605         6,223,668   

Series 2014-DN1, Class M2
2.352%, 2/25/24(h)

      4,950         5,109,810   

Series 2014-DN1, Class M3
4.652%, 2/25/24(h)

      4,665         5,346,250   

Series 2014-DN2, Class M3
3.752%, 4/25/24(h)

      5,000         5,361,730   
      

 

 

 
         30,194,726   
      

 

 

 

 

ALLIANCEBERNSTEIN INCOME FUND       21   

Portfolio of Investments


        Principal
Amount
(000)
     U.S. $ Value  

 

 
      

Non-Agency Floating Rate – 0.8%

      

First Horizon Alternative Mortgage Securities Trust
Series 2007-FA2, Class 1A10
0.402%, 4/25/37(h)

  U.S.$     1,100       $ 650,262   

Series 2007-FA2, Class 1A5
0.452%, 4/25/37(h)

      1,246         740,235   

Lehman XS Trust
Series 2007-10H, Class 2AIO
6.849%, 7/25/37(h)(k)

      1,354         278,872   

Residential Accredit Loans, Inc.
Series 2006-QA4, Class A
0.332%, 5/25/36(h)

      3,737         2,926,305   

Series 2006-QS18, Class 2A2
6.398%, 12/25/36(h)(k)

      18,138         3,984,247   

Washington Mutual Alternative Mortgage Pass-Through Certificates
Series 2007-OA4, Class A1A
0.883%, 4/25/47(h)

      5,690         4,319,953   

Washington Mutual Mortgage Pass-Through Certificates
Series 2007-OA1, Class A1A
0.823%, 2/25/47(h)

      4,918         4,054,623   
      

 

 

 
         16,954,497   
      

 

 

 

Total Collateralized Mortgage Obligations
(cost $81,787,282)

         86,815,105   
      

 

 

 
      

COMMERCIAL MORTGAGE – BACKED SECURITIES – 3.9%

      

Non-Agency Fixed Rate CMBS – 3.8%

      

Banc of America Commercial Mortgage Trust
Series 2007-3, Class AJ
5.775%, 6/10/49

      1,517         1,583,638   

Series 2007-4, Class A1A
5.774%, 2/10/51

      3,317         3,701,791   

Citigroup Commercial Mortgage Trust
Series 2013-GC17, Class D
5.262%, 11/10/46(d)

      6,525         6,305,936   

Series 2014-GC21, Class D
4.996%, 5/10/47(d)

      6,052         5,758,348   

Commercial Mortgage Trust
Series 2014-CR15, Class XA
1.514%, 2/10/47

      4,008         304,713   

DB-UBS Mortgage Trust
Series 2011-LC2A, Class D
5.625%, 7/10/44(d)

      1,450         1,519,468   

GMAC Commercial Mortgage Securities, Inc.
Series 2006-C1, Class AJ
5.349%, 11/10/45

      2,250         2,194,396   

 

22     ALLIANCEBERNSTEIN INCOME FUND

Portfolio of Investments


        Principal
Amount
(000)
     U.S. $ Value  

 

 
      

GS Mortgage Securities Trust
Series 2011-GC5, Class C
5.474%, 8/10/44(d)

  U.S.$     5,651       $ 6,298,366   

Series 2013-GC13, Class D
4.208%, 7/10/46(d)

      9,440         8,569,292   

JPMorgan Chase Commercial Mortgage Securities Trust
Series 2006-CB14, Class AJ
5.673%, 12/12/44

      8,000         7,880,920   

Series 2006-LDP7, Class AJ
6.057%, 4/15/45

      6,500         6,746,655   

Series 2008-C2, Class A1A
5.998%, 2/12/51

      1,044         1,165,026   

LB-UBS Commercial Mortgage Trust
Series 2006-C1, Class AJ
5.276%, 2/15/41

      1,317         1,364,883   

Series 2007-C2, Class AM
5.493%, 2/15/40

      2,000         2,149,424   

Series 2007-C7, Class AJ
6.456%, 9/15/45

      1,750         1,861,526   

LSTAR Commercial Mortgage Trust
Series 2014-2, Class A1
1.519%, 1/20/41(d)

      9,070         9,077,995   

Merrill Lynch/Countrywide Commercial Mortgage Trust
Series 2006-4, Class AJ
5.239%, 12/12/49

      6,667         6,802,543   

WF-RBS Commercial Mortgage Trust
Series 2012-C8, Class E
5.04%, 8/15/45(d)

      4,000         4,029,292   
      

 

 

 
         77,314,212   
      

 

 

 

Non-Agency Floating Rate CMBS – 0.1%

      

Eclipse Ltd.
Series 2007-1X, Class B
0.779%, 1/25/20(d)(h)

  GBP     59         91,992   

PFP III 2014-1 Ltd.
Series 2014-1, Class A
1.322%, 6/14/31(d)(h)

  U.S.$     3,063         3,070,296   
      

 

 

 
         3,162,288   
      

 

 

 

Agency CMBS – 0.0%

      

Government National Mortgage Association
Series 2006-32, Class XM
0.077%, 11/16/45(k)

      894         3,926   
      

 

 

 

Total Commercial Mortgage-Backed Securities
(cost $76,722,065)

         80,480,426   
      

 

 

 

 

ALLIANCEBERNSTEIN INCOME FUND       23   

Portfolio of Investments


        Principal
Amount
(000)
     U.S. $ Value  

 

 
      

EMERGING MARKETS – CORPORATE BONDS – 2.4%

      

Industrial – 2.4%

      

Basic – 0.2%

      

Vedanta Resources PLC
6.00%, 1/31/19(a)(d)

  U.S.$     3,402       $ 3,518,174   
      

 

 

 

Capital Goods – 0.4%

      

Cemex SAB de CV
7.25%, 1/15/21(a)(d)

      2,376         2,601,720   

Grupo Cementos de Chihuahua SAB de CV
8.125%, 2/08/20(d)

      1,954         2,149,400   

Servicios Corporativos Javer SAPI de CV
9.875%, 4/06/21(d)

      2,185         2,376,187   
      

 

 

 
         7,127,307   
      

 

 

 

Communications - Telecommunications – 0.4%

      

Comcel Trust
6.875%, 2/06/24(d)

      2,016         2,177,280   

Digicel Ltd.
6.00%, 4/15/21(d)

      1,500         1,548,750   

Mobile Telesystems OJSC via MTS International Funding Ltd.
8.625%, 6/22/20(a)(d)

      4,100         4,849,890   
      

 

 

 
         8,575,920   
      

 

 

 

Consumer Cyclical - Retailers – 0.2%

      

Office Depot de Mexico SA de CV
6.875%, 9/20/20(d)

      4,000         4,270,000   
      

 

 

 

Consumer Non-Cyclical – 0.8%

      

Cosan Luxembourg SA
5.00%, 3/14/23(d)

      1,361         1,296,620   

9.50%, 3/14/18(d)

  BRL     3,117         1,271,770   

Marfrig Holding Europe BV
8.375%, 5/09/18(d)

  U.S.$     900         957,105   

Marfrig Overseas Ltd.
9.50%, 5/04/20(d)

      4,151         4,462,325   

Minerva Luxembourg SA
7.75%, 1/31/23(d)

      877         938,390   

Tonon Bioenergia SA
9.25%, 1/24/20(a)(d)

      2,272         2,164,080   

Virgolino de Oliveira Finance Ltd.
11.75%, 2/09/22(d)

      1,690         1,335,100   

Virgolino de Oliveira Finance SA
10.50%, 1/28/18(d)

      4,738         3,790,400   

10.875%, 1/13/20(f)(g)

      750         742,500   
      

 

 

 
         16,958,290   
      

 

 

 

 

24     ALLIANCEBERNSTEIN INCOME FUND

Portfolio of Investments


        Principal
Amount
(000)
     U.S. $ Value  

 

 
      

Energy – 0.2%

      

Pacific Rubiales Energy Corp.
7.25%, 12/12/21(a)(d)

  U.S.$     4,300       $ 4,773,000   
      

 

 

 

Transportation - Airlines – 0.2%

      

TAM Capital 2, Inc.
9.50%, 1/29/20(d)

      751         805,448   

TAM Capital 3, Inc.
8.375%, 6/03/21(d)

      2,843         3,084,655   
      

 

 

 
         3,890,103   
      

 

 

 

Total Emerging Markets – Corporate Bonds
(cost $46,273,608)

         49,112,794   
      

 

 

 
        Shares         

PREFERRED STOCKS – 1.8%

      

Financial Institutions – 1.7%

      

Banking – 0.7%

      

Goldman Sachs Group, Inc. (The)
Series J
5.50%

      130,350         3,193,575   

Morgan Stanley
6.875%

      137,675         3,740,630   

State Street Corp.
Series D
5.90%

      70,725         1,852,995   

US Bancorp/MN
Series F
6.50%

      180,000         5,086,800   
      

 

 

 
         13,874,000   
      

 

 

 

Insurance – 0.1%

      

Hartford Financial Services Group, Inc. (The)
7.875%

      84,000         2,514,960   
      

 

 

 

REITS – 0.9%

      

Apartment Investment & Management Co.
6.875%

      205,000         5,274,650   

DDR Corp.
Series K
6.25%

      5,000         119,500   

Health Care REIT, Inc.
Series J
6.50%

      65,100         1,652,238   

Kilroy Realty Corp.
Series G
6.875%

      32,200         831,887   

Series H
6.375%

      4,000         95,840   

 

ALLIANCEBERNSTEIN INCOME FUND       25   

Portfolio of Investments


Company      

Shares

     U.S. $ Value  

 

 
      

Kimco Realty Corp.
Series I
6.00%

      39,725       $ 983,194   

Series K
5.625%

      17,850         415,013   

National Retail Properties, Inc.
Series D
6.625%

      32,000         808,320   

Series E
5.70%

      67,075         1,531,993   

Public Storage
Series W
5.20%

      28,475         630,436   

Series X
5.20%

      2,000         44,518   

Sabra Health Care REIT, Inc.
Series A
7.125%

      194,150         4,871,223   

Vornado Realty Trust
Series K
5.70%

      16,175         380,274   
      

 

 

 
         17,639,086   
      

 

 

 
         34,028,046   
      

 

 

 

Industrial – 0.1%

      

Consumer Non-Cyclical – 0.1%

      

Ventas Realty LP/Ventas Capital Corp.
5.45%

      139,500         3,335,445   
      

 

 

 

Total Preferred Stocks
(cost $35,266,011)

         37,363,491   
      

 

 

 
      
        Principal
Amount
(000)
        

MORTGAGE PASS-THROUGHS – 1.8%

      

Agency Fixed Rate 30-Year – 1.2%

      

Federal Home Loan Mortgage Corp. Gold
Series 2006
6.00%, 9/01/36

  U.S.$     5,224         5,912,073   

Federal National Mortgage Association
Series 1998
8.00%, 6/01/28

      24         27,447   

Series 1999
7.50%, 11/01/29

      35         40,904   

Series 2014
4.00%, 2/01/44

      17,311         18,473,797   
      

 

 

 
         24,454,221   
      

 

 

 

Agency ARMs – 0.6%

      

Federal Home Loan Mortgage Corp.
Series 2007
2.563%, 3/01/37(h)

      3,655         3,859,018   

 

26     ALLIANCEBERNSTEIN INCOME FUND

Portfolio of Investments


        Principal
Amount
(000)
     U.S. $ Value  

 

 
      

2.795%, 3/01/37(h)

  U.S.$     1,604       $ 1,693,323   

2.815%, 2/01/37(h)

      6,265         6,766,972   
      

 

 

 
         12,319,313   
      

 

 

 

Total Mortgage Pass-Throughs
(cost $35,266,027)

         36,773,534   
      

 

 

 
      

LOCAL GOVERNMENTS – MUNICIPAL BONDS – 1.3%

      

United States – 1.3%

      

Buckeye OH Tobacco Settlement Fin Auth
Series 2007A-2
5.875%, 6/01/47

      1,950         1,545,258   

California GO
7.95%, 3/01/36

      3,955         4,821,145   

Golden St Tobacco Securitization CA
Series 2007A-1
5.125%, 6/01/47

      4,390         3,192,671   

Illinois GO
7.35%, 7/01/35

      3,330         4,032,097   

Texas Transp Comm (Texas St Hwy Fund First Tier)
Series 2010B
5.178%, 4/01/30

      2,560         3,008,768   

Tobacco Settlement Auth IA
Series 2005C
5.625%, 6/01/46

      3,430         2,911,144   

Tobacco Settlement Fin Corp. MI
Series 2007A
6.00%, 6/01/48

      5,915         4,878,219   

Tobacco Settlement Fin Corp. NJ
Series 2007-1A
5.00%, 6/01/41

      1,750         1,298,150   

Tobacco Settlement Fin Corp. VA
Series 2007B1
5.00%, 6/01/47

      1,850         1,294,593   
      

 

 

 

Total Local Governments – Municipal Bonds
(cost $26,511,802)

         26,982,045   
      

 

 

 
      

BANK LOANS – 1.3%

      

Industrial – 1.3%

      

Basic – 0.1%

      

FMG Resources (August 2006) Pty Ltd. (FMG America Finance, Inc.)
3.75%, 6/28/19(h)

      933         933,801   

Unifrax Holding Co.
5.25%, 11/28/18(h)

  EUR     761         1,047,887   
      

 

 

 
         1,981,688   
      

 

 

 

Communications - Media – 0.1%

      

Clear Channel Communications, Inc.
3.80%, 1/29/16(h)

  U.S.$     310         307,604   

 

ALLIANCEBERNSTEIN INCOME FUND       27   

Portfolio of Investments


        Principal
Amount
(000)
     U.S. $ Value  

 

 
      

TWCC Holding Corp.
7.00%, 6/26/20(h)

  U.S.$     1,550       $ 1,534,981   
      

 

 

 
         1,842,585   
      

 

 

 

Consumer Cyclical - Automotive – 0.3%

      

Exide Technologies
9.00%, 10/09/14

      5,868         5,896,846   

TI Group Automotive Systems LLC
5.50%, 3/28/19(h)

      384         384,028   
      

 

 

 
         6,280,874   
      

 

 

 

Consumer Cyclical - Other – 0.1%

      

New HB Acquisition LLC
6.75%, 4/09/20(h)

      1,596         1,653,855   
      

 

 

 

Consumer Non-Cyclical – 0.4%

      

Air Medical Group Holdings, Inc.
5.00%, 6/30/18(h)

      1,356         1,361,272   

Air Medical Holding LLC
7.63%, 5/31/18

      4,000         4,000,000   

Catalent Pharma Solutions, Inc. (fka Cardinal Health 409, Inc.)
6.50%, 12/31/17(h)

      2,300         2,317,250   

Par Pharmaceutical Companies, Inc. (Par Pharmaceutical, Inc.)
4.00%, 9/30/19(h)

      550         548,725   
      

 

 

 
         8,227,247   
      

 

 

 

Energy – 0.0%

      

CITGO Petroleum Corp.
9.00%, 6/24/17(h)

      294         297,169   
      

 

 

 

Other Industrial – 0.2%

      

Accudyne Industries Borrower S.C.A./Accudyne Industries LLC (fka Silver II US Holdings LLC)
4.00%, 12/13/19(h)

      1,197         1,193,219   

Veyance Technologies, Inc.
5.25%, 9/08/17(h)

      2,642         2,643,084   
      

 

 

 
         3,836,303   
      

 

 

 

Technology – 0.1%

      

Avaya, Inc.
4.73%, 10/26/17(h)

      235         230,257   

MMI International Ltd. (MMI International (Delaware) LLC)
7.25%, 11/20/18(h)

      1,206         1,188,156   
      

 

 

 
         1,418,413   
      

 

 

 

Total Bank Loans
(cost $25,316,436)

         25,538,134   
      

 

 

 
      

 

28     ALLIANCEBERNSTEIN INCOME FUND

Portfolio of Investments


        Principal
Amount
(000)
     U.S. $ Value  

 

 
      

QUASI-SOVEREIGNS – 1.2%

      

Quasi-Sovereign Bonds – 1.2%

      

Indonesia – 0.3%

      

Majapahit Holding BV
7.875%, 6/29/37(d)

  U.S.$     6,188       $ 7,178,080   
      

 

 

 

Mexico – 0.6%

      

Comision Federal de Electricidad
5.75%, 2/14/42(d)

      5,750         6,109,375   

Petroleos Mexicanos
6.50%, 6/02/41

      4,900         5,696,250   
      

 

 

 
         11,805,625   
      

 

 

 

Venezuela – 0.3%

      

Petroleos de Venezuela SA
5.25%, 4/12/17(d)

      7,500         6,333,750   
      

 

 

 

Total Quasi-Sovereigns
(cost $22,617,045)

         25,317,455   
      

 

 

 
      

GOVERNMENTS – SOVEREIGN
BONDS – 0.8%

      

Hungary – 0.6%

      

Hungary Government International Bond
5.375%, 2/21/23-3/25/24

      5,147         5,530,176   

5.75%, 11/22/23

      1,488         1,646,100   

6.375%, 3/29/21

      5,000         5,700,000   
      

 

 

 
         12,876,276   
      

 

 

 

Indonesia – 0.2%

      

Indonesia Government International Bond
5.875%, 1/15/24(d)

      1,995         2,201,981   

6.625%, 2/17/37(d)

      720         799,200   

8.50%, 10/12/35(d)

      801         1,061,325   
      

 

 

 
         4,062,506   
      

 

 

 

Total Governments – Sovereign Bonds
(cost $14,828,394)

         16,938,782   
      

 

 

 
      

EMERGING MARKETS –
SOVEREIGNS – 0.7%

      

Dominican Republic – 0.1%

      

Dominican Republic International Bond
7.45%, 4/30/44(d)

      1,873         1,998,491   
      

 

 

 

El Salvador – 0.2%

      

El Salvador Government International Bond
7.65%, 6/15/35(d)

      5,957         6,442,495   
      

 

 

 

 

ALLIANCEBERNSTEIN INCOME FUND       29   

Portfolio of Investments


        Principal
Amount
(000)
     U.S. $ Value  

 

 
      

Kenya – 0.1%

      

Kenya Government International Bond
5.875%, 6/24/19(d)

  U.S.$     1,025       $ 1,046,013   
      

 

 

 

Pakistan – 0.1%

      

Pakistan Government International Bond
7.25%, 4/15/19(d)

      1,700         1,738,250   
      

 

 

 

Sri Lanka – 0.1%

      

Sri Lanka Government International Bond
6.00%, 1/14/19(d)

      1,236         1,300,890   
      

 

 

 

Zambia – 0.1%

      

Zambia Government International Bond
8.50%, 4/14/24(d)

      1,553         1,720,025   
      

 

 

 

Total Emerging Markets – Sovereigns
(cost $11,938,377)

         14,246,164   
      

 

 

 
        Shares         

COMMON STOCKS – 0.7%

      

Gallery Media(f)(l)(m)

      697         1,010,650   

Ion Media Networks, Inc. Class A(f)(m)(n)

      2,512         731,343   

Mt. Logan Re Ltd.
(Preference Shares)(l)(m)^

      10,550         11,584,625   
      

 

 

 

Total Common Stocks
(cost $11,396,476)

         13,326,618   
      

 

 

 
        Principal
Amount
(000)
        

WHOLE LOAN TRUSTS – 0.5%

      

Performing Asset – 0.5%

      

Financial Claims – 0.5%

      

Aeroservicios Especializados
10.75%, 3/19/18(f)(n)

  U.S.$     3,934         3,933,543   

Alpha Credit Debt Fund LLC
15.00%, 1/15/18(f)(n)

      2,446         2,445,660   

Ede Del Este SA (DPP)
12.00%, 3/31/16(f)(n)

      1,745         1,805,956   

Ede Del Este SA (ITABO)
12.00%, 3/31/16(f)(n)

      1,672         1,730,634   
      

 

 

 

Total Whole Loan Trusts
(cost $9,864,450)

         9,915,793   
      

 

 

 
      

 

30     ALLIANCEBERNSTEIN INCOME FUND

Portfolio of Investments


        Principal
Amount
(000)
     U.S. $ Value  

 

 
      

GOVERNMENTS – SOVEREIGN
AGENCIES – 0.2%

      

Norway – 0.2%

      

Eksportfinans ASA
2.00%, 9/15/15

  U.S.$     315       $ 314,685   

2.375%, 5/25/16

      3,728         3,728,000   
      

 

 

 

Total Governments – Sovereign Agencies
(cost $3,747,504)

         4,042,685   
      

 

 

 
        Contracts         

OPTIONS PURCHASED – CALLS – 0.0%

      

Options on Indices – 0.0%

      

CBOE Volatility Index
Expiration: Jul 2014,
Exercise Price: $ 16.00(m)(o)
(premiums paid $294,000)

      300,000         55,410   
      

 

 

 
        Shares         

SHORT-TERM INVESTMENTS – 1.9%

      

Investment Companies – 0.9%

      

AllianceBerstein Fixed-Income
Shares Inc. –
Government STIF Portfolio, 0.07%(p)
(cost $17,688,385)

      17,688,385         17,688,385   
      

 

 

 
        Principal
Amount
(000)
        

GOVERNMENTS – TREASURIES – 1.0%

      

Bank Negara Malaysia Monetary Notes
Series 2614
Zero Coupon, 9/04/14

  MYR     33,400         10,347,292   

Series 5513
Zero Coupon, 9/09/14

      33,500         10,377,044   
      

 

 

 

Total Governments – Treasuries
(cost $20,529,985)

         20,724,336   
      

 

 

 

Total Short-Term Investments
(cost $38,218,370)

         38,412,721   
      

 

 

 

Total Investments – 145.4%
(cost $2,852,937,912)

         2,973,150,941   

Other assets less liabilities – (45.4)%

         (928,070,111
      

 

 

 

Net Assets – 100.0%

       $ 2,045,080,830   
      

 

 

 

 

ALLIANCEBERNSTEIN INCOME FUND       31   

Portfolio of Investments


 

 

FUTURES (see Note C)

 

Type   Number of
Contracts
    Expiration
Month
   

Original

Value

   

Value at

June 30,

2014

    Unrealized
Appreciation/
(Depreciation)
 

Sold Contracts

         

U.S. Long Bond (CBT)
Futures

    2,363        September 2014      $     321,770,320      $     324,174,063      $ (2,403,743

U.S. T-Note 5 Yr (CBT)
Futures

    158        September 2014        18,791,994        18,874,828        (82,834

U.S. T-Note 10 Yr (CBT)
Futures

    3,949        September 2014        493,587,753        494,303,734        (715,981
         

 

 

 
          $     (3,202,558
         

 

 

 

FORWARD CURRENCY EXCHANGE CONTRACTS (see Note C)

 

Counterparty   Contracts to
Deliver (000)
   

In Exchange

For

(000)

    Settlement
Date
    Unrealized
Appreciation/
(Depreciation)
 

Barclays Bank PLC

    EUR          9,467        USD            12,881        7/11/14      $ (82,473

Barclays Bank PLC

    USD        10,226        IDR  121,070,736        8/08/14        (66,847

BNP Paribas SA

    USD        41,008        CAD            44,416        7/11/14        607,255   

BNP Paribas SA

    GBP          1,074        USD              1,822        8/21/14        (15,449

Citibank, NA

    PLN     121,618        USD            39,708        7/10/14        (317,879

Credit Suisse International

    USD        39,791        PLN          121,277        7/10/14        122,788   

Credit Suisse International

    CAD        44,285        USD            40,744        7/11/14        (749,202

Credit Suisse International

    JPY   2,096,687        USD            20,565        7/11/14        (132,798

Credit Suisse International

    EUR        15,028        USD            20,451        7/15/14        (128,875

Credit Suisse International

    USD        20,451        NOK          122,422        7/15/14        (501,649

Credit Suisse International

    AUD        21,469        USD            19,994        7/18/14        (226,270

Deutsche Bank AG

    CAD        44,494        USD            40,652        7/11/14        (1,036,679

Deutsche Bank AG

    JPY   4,125,418        USD            40,661        7/11/14        (64,709

Deutsche Bank AG

    AUD        22,833        USD            20,998        7/18/14        (508,287

Goldman Sachs Bank USA

    BRL        47,587        USD            21,606        7/02/14        68,451   

Goldman Sachs Bank USA

    USD        21,340        BRL            47,587        7/02/14        197,267   

Goldman Sachs Bank USA

    USD             255        MXN              3,334        7/24/14        1,095   

Goldman Sachs Bank USA

    BRL        20,481        USD              9,174        8/04/14        (8,433

Morgan Stanley & Co., Inc.

    USD        20,146        PEN          56,539        7/16/14        27,009   

Standard Chartered Bank

    USD        20,423        KRW   20,982,955        7/11/14        308,742   

State Street Bank & Trust Co.

    NOK          5,000        USD               838        7/15/14        22,766   

UBS AG

    BRL        47,587        USD          20,922        7/02/14            (615,494

UBS AG

    USD        21,606        BRL          47,587        7/02/14        (68,451
       

 

 

 
        $     (3,168,122
       

 

 

 

CALL OPTIONS WRITTEN (see Note C)

 

Description   Contracts
(000)
    Exercise
Price
    Expiration
Month
    Premiums
Received
    U.S. $ Value  

CBOE Volatility Index(n)

    300      $     20.00        July 2014      $     135,000      $     (12,146

 

32     ALLIANCEBERNSTEIN INCOME FUND

Portfolio of Investments


 

 

CENTRALLY CLEARED CREDIT DEFAULT SWAPS (see Note C)

 

Clearing Broker/
(Exchange) & Referenced
Obligation
  Fixed
Rate
(Pay)
Receive
    Implied
Credit
Spread at
June 30,
2014
    Notional
Amount
(000)
   

Market

Value

    Unrealized
Appreciation/
(Depreciation)
 

Sale Contracts

         

Morgan Stanley & Co. LLC/(INTRCONX):

         

CDX-NAHY Series 21, 5 Year Index, 6/20/19*

    5.00     3.00   $     31,860      $ 2,817,324      $ 635,127   

CDX-NAHY Series 21, 5 Year Index, 12/20/18*

    5.00        2.71        12,708        1,184,960        273,072   
       

 

 

   

 

 

 
        $     4,002,284      $     908,199   
       

 

 

   

 

 

 

 

*   Termination date

CENTRALLY CLEARED INTEREST RATE SWAPS (see Note C)

 

                Rate Type      
Clearing Broker/
(Exchange)
  Notional
Amount
(000)
    Termination
Date
    Payments
made by the
Fund
  Payments
received
by the
Fund
  Unrealized
Appreciation/
(Depreciation)
 

Morgan Stanley & Co. LLC/(CME Group)

    NZD  36,700        4/28/19      3 Month BKBM   4.565%   $ 50,705   

Morgan Stanley & Co. LLC/(LCH Clearnet)

    AUD  45,000        1/13/17      3 Month BBSW   3.170%     388,842   

Morgan Stanley & Co. LLC/(LCH Clearnet)

    AUD  40,500        2/13/17      3 Month BBSW   3.250%     417,980   

Morgan Stanley & Co. LLC/(LCH Clearnet)

    NZD  48,000        3/04/17      3 Month BKBM   4.108%     209,145   

Morgan Stanley & Co. LLC/(LCH Clearnet)

    GBP  12,000        3/03/19      6 Month LIBOR   1.921%     (93,479

Morgan Stanley & Co. LLC/(LCH Clearnet)

    USD  11,850        1/14/24      2.976%   3 Month LIBOR     (588,827

Morgan Stanley & Co. LLC/(LCH Clearnet)

    60,150        1/21/24      2.948%   3 Month LIBOR     (2,791,488

Morgan Stanley & Co. LLC/(LCH Clearnet)

    11,000        2/14/24      2.865%   3 Month LIBOR     (401,296

Morgan Stanley & Co. LLC/(LCH Clearnet)

    47,150        3/25/24      2.887%   3 Month LIBOR     (1,635,400

Morgan Stanley & Co. LLC/(LCH Clearnet)

    46,860        4/02/24      2.851%   3 Month LIBOR     (1,407,350

Morgan Stanley & Co. LLC/(LCH Clearnet)

    40,500        4/08/24      2.909%   3 Month LIBOR     (1,406,948
         

 

 

 
          $     (7,258,116
         

 

 

 

 

ALLIANCEBERNSTEIN INCOME FUND       33   

Portfolio of Investments


 

 

CREDIT DEFAULT SWAPS (see Note C)

 

Swap Counterparty
& Referenced
Obligation
  Fixed
Rate
(Pay)
Receive
    Implied
Credit
Spread at
June 30,
2014
    Notional
Amount
(000)
    Market
Value
    Upfront
Premiums
Paid
(Received)
    Unrealized
Appreciation/
(Depreciation)
 

Buy Contracts

           

Bank of America, NA:

           

Russian Federation,
7.50%, 3/31/30*

    (1.00 )%      1.64   $     6,800      $     199,229      $     343,373      $     (144,144

Citibank, NA:

           

Russian Federation,
7.50%, 3/31/30*

    (1.00     1.70        9,040        300,723        557,238        (256,515

Goldman Sachs Bank USA:

           

Russian Federation,
7.50%, 3/31/30*

    (1.00     1.70        11,380        378,560        695,776        (317,216

Sale Contracts

           

Barclays Bank PLC:

           

Dish DBS Corp.,
6.75%, 6/01/21, 6/20/19*

    5.00        1.59        1,781        285,642        272,615        13,027   

Dish DBS Corp.,
6.75%, 6/01/21, 6/20/19*

    5.00        1.59        919        147,391        135,909        11,482   

Dish DBS Corp.,
6.75%, 6/01/21, 6/20/19*

    5.00        1.59        1,781        285,643        281,795        3,848   

Credit Suisse International:

           

CMBX NA, BB,
7.00%, 1/17/47*

    5.00        4.91        4,000        28,533        (131,461     159,994   

Kohl’s Corp.,
6.25%, 12/15/17, 6/20/19*

    1.00        1.14        2,148        (16,335     (28,890     12,555   

Kohl’s Corp.,
6.25%, 12/15/17, 6/20/19*

    1.00        1.14        1,260        (9,581     (15,202     5,621   

Kohl’s Corp.,
6.25%, 12/15/17, 6/20/19*

    1.00        1.14        875        (6,653     (11,767     5,114   

Kohl’s Corp.,
6.25%, 12/15/17, 6/20/19*

    1.00        1.14        868        (6,604     (11,673     5,069   

Morgan Stanley Capital Services LLC:

           

CDX-NAHY Series 15,
5 Year Index, 12/20/15*

    5.00        1.45        20,330        1,087,842        141,171        946,671   
       

 

 

   

 

 

   

 

 

 
        $     2,674,390      $     2,228,884      $     445,506   
       

 

 

   

 

 

   

 

 

 

 

*   Termination date

 

34     ALLIANCEBERNSTEIN INCOME FUND

Portfolio of Investments


 

 

REVERSE REPURCHASE AGREEMENTS (see Note C)

 

Broker  

Principal
Amount

(000’s)

    Currency     Interest Rate     Maturity     U.S. $
Value at
June 30, 2014
 

Barclays Capital, Inc.

    2,271        USD        (1.50 )%*           $ 2,250,490   

Barclays Capital, Inc.

    1,717        USD        (1.25 )%*             1,714,187   

Barclays Capital, Inc.

    2,404        USD        (0.75 )%*             2,403,501   

Barclays Capital, Inc.

    1,295        USD        (0.50 )%*             1,294,053   

Barclays Capital, Inc.

    4,446        GBP        (0.35 )%*             4,444,705   

Barclays Capital, Inc.

    2,592        USD        (0.05 )%*             2,591,930   

BNP Paribas

    10,445        USD        0.13     8/07/14        10,448,338   

Credit Suisse Securities (USA) LLC

    2,575        USD        (0.50 )%*             2,573,963   

Credit Suisse Securities (USA) LLC

    3,636        USD        (0.25 )%*             3,635,158   

Credit Suisse Securities (USA) LLC

    2,134        USD        (0.15 )%*             2,133,742   

Credit Suisse Securities (USA) LLC

    5,441        USD        0.00     6/16/14        5,441,060   

HSBC Bank USA

    47,381        USD        0.08     7/29/14        47,385,672   

HSBC Bank USA

    25,500        USD        0.09     8/05/14        25,501,849   

HSBC Bank USA

    78,120        USD        0.10     7/02/14        78,133,671   

HSBC Bank USA

    50,319        USD        0.11     7/15/14        50,331,358   

HSBC Bank USA

    109,005        USD        0.11     8/18/14        109,013,993   

HSBC Bank USA

    60,913        USD        0.11     9/04/14        60,917,525   

HSBC Bank USA

    19,705        USD        0.16     7/24/14        19,706,051   

ING Bank NV

    657        USD        (1.00 )%*             655,626   

ING Bank NV

    458        USD        (0.25 )%*             458,371   

JPMorgan Chase Bank, NA

    67,250        USD        0.08     8/13/14        67,258,518   

JPMorgan Chase Bank, NA

    73,975        USD        0.08     8/20/14        73,983,219   

JPMorgan Chase Bank, NA

    45,981        USD        0.10     7/08/14        45,992,617   

JPMorgan Chase Bank, NA

    44,055        USD        0.10     7/22/14        44,064,545   

JPMorgan Chase Bank, NA

    104,813        USD        0.11     9/10/14        104,818,905   

JPMorgan Chase Bank, NA

    208,556        USD        0.12     8/27/14        208,556,250   
         

 

 

 
          $     975,709,297   
         

 

 

 

 

  The reverse repurchase agreement matures on demand. Interest rate resets daily and the rate shown is the rate in effect on June 30, 2014

 

*   Interest payment due from counterparty.

 

(a)   Position, or a portion thereof, has been segregated to collateralize reverse repurchase agreements. The market value of the collateral amounted to $970,845,327.

 

(b)   Position, or a portion thereof, has been segregated to collateralize margin requirements for open futures contracts. The market value of the collateral amounted to $15,683,906.

 

(c)   Position, or a portion thereof, has been segregated to collateralize OTC derivatives outstanding. The aggregate market value of these securities amounted to $1,129,241.

 

(d)   Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities are considered liquid and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2014, the aggregate market value of these securities amounted to $344,239,512 or 16.8% of net assets.

 

(e)   Pay-In-Kind Payments (PIK). The issuer may pay cash interest and/or interest in additional debt securities. Rates shown are the rates in effect at June 30, 2014.

 

(f)   Fair valued by the Adviser.

 

ALLIANCEBERNSTEIN INCOME FUND       35   

Portfolio of Investments


 

 

 

(g)   Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities, which represent 0.08% of net assets as of June 30, 2014, are considered illiquid and restricted.

 

Restricted Securities   Acquisition
Date
    Cost     Market
Value
    Percentage of
Net Assets
 

Golden Energy Offshore Services AS
9.09%, 5/28/17

    5/28/14      $     843,554      $     815,149        0.04

Virgolino de Oliveira Finance SA
10.875%, 1/13/20

    6/13/14        745,992        742,500        0.04

 

(h)   Floating Rate Security. Stated interest rate was in effect at June 30, 2014.

 

(i)   Securities are perpetual and, thus, do not have a predetermined maturity date. The date shown, if applicable, reflects the next call date.

 

(j)   Coupon rate adjusts periodically based upon a predetermined schedule. Stated interest rate in effect at June 30, 2014.

 

(k)   IO – Interest Only

 

(l)   Restricted and illiquid security.

 

Restricted Securities   Acquisition
Date
    Cost    

Market

Value

    Percentage of
Net Assets
 

Gallery Media

    9/03/10      $ – 0  –    $ 1,010,650        0.05

Mt. Logan Re (Preference Shares)

    7/01/13            10,550,000            11,584,625        0.57

 

(m)   Non-income producing security.
(n)   Illiquid security.

 

(o)   One contract relates to 1 share.

 

(p)   Investment in affiliated money market mutual fund. The rate shown represents the 7-day yield as of period end.

 

^   The security is subject to a 12 month lock-up period, after which semi-annual redemptions are permitted.

 

Currency Abbreviations:

 

AUD – Australian Dollar

BRL – Brazilian Real

CAD – Canadian Dollar

EUR – Euro

GBP – Great British Pound

IDR – Indonesian Rupiah

JPY – Japanese Yen

 

KRW – South Korean Won

MXN – Mexican Peso

MYR – Malaysian Ringgit

NOK – Norwegian Krone

NZD – New Zealand Dollar

PEN – Peruvian Nuevo Sol

PLN – Polish Zloty

USD – United States Dollar

Glossary:

ARMs – Adjustable Rate Mortgages

BBSW – Bank Bill Swap Reference Rate (Australia)

BKBM – Bank Bill Benchmark (New Zealand)

CBOE – Chicago Board Options Exchange

CBT – Chicago Board of Trade

CDX-NAHY – North American High Yield Credit Default Swap Index

CMBS – Commercial Mortgage-Backed Securities

CME – Chicago Mercantile Exchange

GO – General Obligation

GSE – Government-Sponsored Enterprise

INTRCONX – Inter-Continental Exchange

LCH – London Clearing House

LIBOR – London Interbank Offered Rates

OJSC – Open Joint Stock Company

REIT – Real Estate Investment Trust

See notes to financial statements.

 

36     ALLIANCEBERNSTEIN INCOME FUND

Portfolio of Investments


STATEMENT OF ASSETS & LIABILITIES

June 30, 2014 (unaudited)

 

Assets   

Investments in securities, at value

  

Unaffiliated issuers (cost $2,835,249,527)

   $ 2,955,462,556   

Affiliated issuers (cost $17,688,385)

     17,688,385 (a) 

Cash

     2,184,437   

Due from broker

     13,056,987 (b) 

Foreign currencies, at value (cost $416,352)

     417,867   

Interest and dividends receivable

     35,261,046   

Receivable for investment securities sold

     2,659,587   

Upfront premium paid on credit default swaps

     2,427,877   

Unrealized appreciation on forward currency exchange contracts

     1,355,373   

Unrealized appreciation on credit default swaps

     1,163,381   

Prepaid expenses

     108,379   
  

 

 

 

Total assets

     3,031,785,875   
  

 

 

 
Liabilities   

Options written, at value (premiums received $135,000)

     12,146   

Payable for reverse repurchase agreements

     975,709,297   

Unrealized depreciation on forward currency exchange contracts

     4,523,495   

Payable for investment securities purchased

     1,950,750   

Collateral received from broker

     1,128,140   

Payable for variation margin on futures

     984,219   

Advisory fee payable

     846,976   

Unrealized depreciation on credit default swaps

     717,875   

Payable for variation margin on centrally cleared interest rate swaps

     453,824   

Upfront premium received on credit default swaps

     198,993   

Payable for variation margin on centrally cleared credit default swaps

     49,591   

Administrative fee payable

     34,760   

Dividends payable

     20,196   

Interest expense payable

     2,911   

Accrued expenses

     71,872   
  

 

 

 

Total liabilities

     986,705,045   
  

 

 

 

Net Assets

   $     2,045,080,830   
  

 

 

 
Composition of Net Assets   

Common stock, at par

   $ 2,429,117   

Additional paid-in capital

     1,986,400,117   

Distributions in excess of net investment income

     (5,015,026

Accumulated net realized loss on investment and foreign currency transactions

     (46,768,133

Net unrealized appreciation on investments and foreign currency denominated assets and liabilities

     108,034,755   
  

 

 

 
   $ 2,045,080,830   
  

 

 

 

Net Asset Value Per Share—300 million shares of common stock authorized, $0.01 par value (based on 242,911,697 shares outstanding)

   $ 8.42   
  

 

 

 

 

(a)   Includes investment of cash collateral of $1,128,140 received from broker for OTC derivatives outstanding at June 30, 2014.

 

(b)   Represents amount on deposit at the broker as collateral for open derivative contracts.

See notes to financial statements.

 

ALLIANCEBERNSTEIN INCOME FUND       37   

Statement of Assets & Liabilities


STATEMENT OF OPERATIONS

Six Months Ended June 30, 2014 (unaudited)

 

Investment Income      

Interest (net of foreign taxes withheld of $7,551)

   $     55,285,252      

Dividends

     

Unaffiliated issuers

     2,335,873      

Affiliated issuers

     12,909      

Consent fee income

     64,255       $ 57,698,289   
  

 

 

    
Expenses      

Advisory fee (see Note B)

     5,243,649      

Printing

     307,970      

Custodian

     131,370      

Registration fees

     106,233      

Legal

     100,595      

Transfer agency

     51,354      

Audit

     42,743      

Administrative

     34,514      

Directors’ fees

     31,119      

Miscellaneous

     74,906      
  

 

 

    

Total expenses before interest expense

     6,124,453      

Interest expense

     507,042      
  

 

 

    

Total expenses

        6,631,495   
     

 

 

 

Net investment income

        51,066,794   
     

 

 

 
Realized and Unrealized Gain (Loss) on Investment and Foreign Currency Transactions      

Net realized gain (loss) on:

     

Investment transactions

        15,016,532   

Futures

        (28,634,490

Options written

        166,391   

Swaps

        1,008,302   

Foreign currency transactions

        (3,447,482

Net change in unrealized appreciation/depreciation of:

     

Investments

        114,719,763   

Futures

        (18,856,872

Options written

        122,854   

Swaps

        (8,059,417

Foreign currency denominated assets and liabilities

        (3,359,444
     

 

 

 

Net gain on investment and foreign currency transactions

        68,676,137   
     

 

 

 

Net Increase in Net Assets from Operations

      $     119,742,931   
     

 

 

 

See notes to financial statements.

 

38     ALLIANCEBERNSTEIN INCOME FUND

Statement of Operations


STATEMENT OF CHANGES IN NET ASSETS

 

 

     Six Months Ended
June 30, 2014
(unaudited)
    Year Ended
December 31,
2013
 
Increase (Decrease) in Net Assets from Operations     

Net investment income

   $ 51,066,794      $ 98,320,912   

Net realized gain (loss) on investment and foreign currency transactions

     (15,890,747     20,690,035   

Net change in unrealized appreciation/depreciation of investments and foreign currency denominated assets and liabilities

     84,566,884        (192,374,242
  

 

 

   

 

 

 

Net increase (decrease) in net assets from operations

     119,742,931        (73,363,295
Dividends and Distributions to Shareholders from     

Net investment income

     (50,355,595     (101,524,944

Net realized gain on investment transactions

     – 0 –      (8,841,986
  

 

 

   

 

 

 

Total increase (decrease)

     69,387,336        (183,730,225
Net Assets     

Beginning of period

     1,975,693,494        2,159,423,719   
  

 

 

   

 

 

 

End of period (including distributions in excess of net investment income of ($5,015,026) and ($5,726,225), respectively)

   $     2,045,080,830      $     1,975,693,494   
  

 

 

   

 

 

 

 

See notes to financial statements.

 

ALLIANCEBERNSTEIN INCOME FUND       39   

Statement of Changes in Net Assets


STATEMENT OF CASH FLOWS

For the Six Months Ended June 30, 2014 (unaudited)

 

Cash flows from operating activities    

Net increase in net assets from operations

    $   119,742,931   
Reconciliation of Net Increase in Net Assets from Operations to Net Increase
in Cash from Operating Activities:
   

Decrease in interest and dividends receivable

  $ 84,072     

Increase in receivable for investments sold

    (1,783,793  

Net accretion of bond discount and amortization of bond premium

    9,874,380     

Increase in payable for investments purchased

    1,950,750     

Decrease in accrued expenses

    (160,422  

Decrease in due from broker

    (10,743,681  

Purchases of long-term investments

      (1,226,743,507  

Purchases of short-term investments

    (428,246,226  

Proceeds from disposition of long-term investments

    1,203,854,584     

Proceeds from disposition of short-term investments

    447,516,333     

Proceeds from written options, net

    178,537     

Proceeds on swaps, net

    (795,996  

Payments for futures settlements

    (44,643,502  

Variation margin received on futures

    984,219     

Variation margin received on centrally cleared swaps

    503,415     

Decrease in cash collateral received from broker

    (540,000  

Net realized gain on investment and foreign currency transactions

    15,890,747     

Net change in unrealized appreciaton/depreciation of investments and foreign currency denominated assets and liabilities

    (84,566,884  
 

 

 

   

Total adjustments

        (117,386,974
   

 

 

 

Net increase in cash from operating activities

    $ 2,355,957   
   

 

 

 
Financing Activities:    

Cash dividends paid (net of dividend reinvestments)

    (60,460,254  

Increase in reverse repurchase agreements

    66,902,985     
 

 

 

   

Net increase in cash from financing activities

      6,442,731   

Effect of exchange rate on cash

      (6,806,926
   

 

 

 

Net increase in cash

      1,991,762   

Cash at beginning of period

      610,542   
   

 

 

 

Cash at end of period

    $ 2,602,304   
   

 

 

 

Supplemental disclosure of cash flow information:

   

Interest expense paid during the period

    504,487     

In accordance with U.S. GAAP, the Fund has included a Statement of Cash Flows as a result of its significant investments in reverse repurchase agreements throughout the period.

See notes to financial statements.

 

40     ALLIANCEBERNSTEIN INCOME FUND

Statement of Cash Flows


NOTES TO FINANCIAL STATEMENTS

June 30, 2014 (unaudited)

 

NOTE A

Significant Accounting Policies

AllianceBernstein Income Fund, Inc. (the “Fund”) is registered under the Investment Company Act of 1940 as a diversified, closed-end management investment company. The financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Fund.

1. Security Valuation

Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at “fair value” as determined in accordance with procedures established by and under the general supervision of the Fund’s Board of Directors (the “Board”).

In general, the market values of securities which are readily available and deemed reliable are determined as follows: securities listed on a national securities exchange (other than securities listed on the NASDAQ Stock Market, Inc. (“NASDAQ”)) or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the last traded price from the previous day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities listed only on NASDAQ are valued in accordance with the NASDAQ Official Closing Price; listed or over the counter (“OTC”) market put or call options are valued at the mid level between the current bid and ask prices. If either a current bid or current ask price is unavailable, AllianceBernstein L.P. (the “Adviser”) will have discretion to determine the best valuation (e.g. last trade price in the case of listed options); open futures are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; 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. If the original term to maturity exceeded 60 days, the securities are valued by a pricing service, if a market price is available. If a market price is not available, the securities are valued by using amortized cost as of the 61st day prior to maturity. Fixed-income securities, including mortgage-backed and asset-backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker-dealers. In cases where broker-dealer quotes are obtained, the Adviser may establish procedures whereby changes in market yields or spreads are used to

 

ALLIANCEBERNSTEIN INCOME FUND       41   

Notes to Financial Statements


 

 

adjust, on a daily basis, a recently obtained quoted price on a security. Swaps and other derivatives are valued daily, primarily using independent pricing services, independent pricing models using market inputs, as well as third party broker-dealers or counterparties. Investment companies are valued at their net asset value each day.

Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer’s financial statements or other available documents. In addition, the Fund may use fair value pricing for securities primarily traded in non-U.S. markets because most foreign markets close well before the Fund values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities.

2. Fair Value Measurements

In accordance with U.S. GAAP regarding fair value measurements, fair value is defined as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a framework for measuring fair value, and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability (including those valued based on their market values as described in Note A.1 above). Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-tier hierarchy of inputs is summarized below.

 

   

Level 1—quoted prices in active markets for identical investments

   

Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)

   

Level 3—significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

The fair value of debt instruments, such as bonds, and over-the-counter derivatives is generally based on market price quotations, recently executed market transactions (where observable) or industry recognized modeling techniques and are generally classified as Level 2. Pricing vendor inputs to Level 2 valuations may include quoted prices for similar investments in active markets,

 

42     ALLIANCEBERNSTEIN INCOME FUND

Notes to Financial Statements


 

 

interest rate curves, coupon rates, currency rates, yield curves, option adjusted spreads, default rates, credit spreads and other unique security features in order to estimate the relevant cash flows which are then discounted to calculate fair values. If these inputs are unobservable and significant to the fair value, these investments will be classified as Level 3. In addition, non-agency rated investments are classified as Level 3.

Where readily available market prices or relevant bid prices are not available for certain equity investments, such investments may be valued based on similar publicly traded investments, movements in relevant indices since last available prices or based upon underlying company fundamentals and comparable company data (such as multiples to earnings or other multiples to equity). Where an investment is valued using an observable input, such as another publicly traded security, the investment will be classified as Level 2. If management determines that an adjustment is appropriate based on restrictions on resale, illiquidity or uncertainty, and such adjustment is a significant component of the valuation, the investment will be classified as Level 3. An investment will also be classified as Level 3 where management uses company fundamentals and other significant inputs to determine the valuation.

Options and warrants are valued using market-based inputs to models, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency, where such inputs and models are available. Alternatively the values may be obtained through unobservable management determined inputs and/or management’s proprietary models. Where models are used, the selection of a particular model to value an option or a warrant depends upon the contractual terms of, and specific risks inherent in, the option or warrant as well as the availability of pricing information in the market. Valuation models require a variety of inputs, including contractual terms, market prices, measures of volatility and correlations of such inputs. Exchange traded options generally will be classified as Level 2. For options or warrants that do not trade on exchange but trade in liquid markets, inputs can generally be verified and model selection does not involve significant management judgment. Options and warrants are classified within Level 2 on the fair value hierarchy when all of the significant inputs can be corroborated to market evidence. Otherwise such instruments are classified as Level 3.

Valuations of mortgage-backed or other asset-backed securities, by pricing vendors, are based on both proprietary and industry recognized models and discounted cash flow techniques. Significant inputs to the valuation of these instruments are value of the collateral, the rates and timing of delinquencies, the rates and timing of prepayments, and default and loss expectations, which are driven in part by housing prices for residential mortgages. Significant inputs are determined based on relative value analyses, which incorporate comparisons to instruments with similar collateral and risk profiles, including relevant indices.

 

ALLIANCEBERNSTEIN INCOME FUND       43   

Notes to Financial Statements


 

 

Mortgage and asset-backed securities for which management has collected current observable data through pricing services are generally categorized within Level 2. Those investments for which current observable data has not been provided are classified as Level 3.

Bank loan prices are provided by third party pricing services and consist of a composite of the quotes received by the vendor into a consensus price. Bank loans are classified as Level 3, as significant input used in the fair value measurement of these instruments is the market quotes that are received by the vendor and these inputs are not observable.

Other fixed income investments, including non-U.S. government and corporate debt, are generally valued using quoted market prices, if available, which are typically impacted by current interest rates, maturity dates and any perceived credit risk of the issuer. Additionally, in the absence of quoted market prices, these inputs are used by pricing vendors to derive a valuation based upon industry or proprietary models which incorporate issuer specific data with relevant yield/spread comparisons with more widely quoted bonds with similar key characteristics. Those investments for which there are observable inputs are classified as Level 2. Where the inputs are not observable, the investments are classified as Level 3.

The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of June 30, 2014:

 

Investments in
Securities:

  Level 1     Level 2     Level 3     Total  

Assets:

       

Governments – Treasuries

  $ – 0 –    $   1,842,553,248      $ – 0 –    $   1,842,553,248   

Corporates – Non-Investment Grades

    – 0 –      307,391,520        3,068,420        310,459,940   

Corporates – Investment Grades

    – 0 –      219,257,191        – 0 –      219,257,191   

Agencies

    – 0 –      135,559,405        – 0 –      135,559,405   

Collateralized Mortgage Obligations

    – 0 –      – 0 –        86,815,105        86,815,105   

Commercial Mortgage-Backed Securities

    – 0 –      16,158,721        64,321,705        80,480,426   

Emerging Markets – Corporate Bonds

    – 0 –      49,112,794        – 0 –      49,112,794   

Preferred Stocks

      37,363,491        – 0 –      – 0 –      37,363,491   

Mortgage Pass-Throughs

    – 0 –      36,773,534        – 0 –      36,773,534   

Local Governments – Municipal Bonds

    – 0 –      26,982,045        – 0 –      26,982,045   

Bank Loans

    – 0 –      – 0 –      25,538,134        25,538,134   

Quasi-Sovereigns

    – 0 –      25,317,455        – 0 –      25,317,455   

Governments – Sovereign Bonds

    – 0 –      16,938,782        – 0 –      16,938,782   

 

44     ALLIANCEBERNSTEIN INCOME FUND

Notes to Financial Statements


 

 

Investments in
Securities:

  Level 1     Level 2     Level 3     Total  

Emerging Markets – Sovereigns

  $ – 0  –    $ 14,246,164      $ – 0  –    $ 14,246,164   

Common Stocks

    – 0  –      – 0  –      13,326,618        13,326,618   

Whole Loan Trusts

    – 0  –      – 0  –      9,915,793        9,915,793   

Governments – Sovereign Agencies

    – 0  –      4,042,685        – 0  –      4,042,685   

Options Purchased – Calls

    – 0  –      55,410        – 0  –      55,410   

Short-Term Investments:

       

Investment Companies

    17,688,385        – 0  –      – 0  –      17,688,385   

Governments – Treasuries

    – 0  –      20,724,336        – 0  –      20,724,336   
 

 

 

   

 

 

   

 

 

   

 

 

 

Total Investments in Securities

    55,051,876        2,715,113,290        202,985,775        2,973,150,941   

Other Financial Instruments*:

       

Assets:

       

Forward Currency Exchange Contracts

    – 0  –      1,355,373        – 0  –      1,355,373   

Centrally Cleared Credit Default Swaps

    – 0  –      908,199        – 0  –      908,199

Centrally Cleared Interest Rate Swaps

    – 0  –      1,066,672        – 0  –      1,066,672

Credit Default Swaps

    – 0  –      1,163,381        – 0  –      1,163,381   

Liabilities:

       

Futures

    (3,202,558     – 0  –      – 0  –      (3,202,558 )# 

Forward Currency Exchange Contracts

    – 0  –      (4,523,495     – 0  –      (4,523,495

Call Options Written

    – 0  –      (12,146     – 0  –      (12,146

Centrally Cleared Interest Rate Swaps

    – 0  –      (8,324,788     – 0  –      (8,324,788 )# 

Credit Default Swaps

    – 0  –      (717,875     – 0  –      (717,875
 

 

 

   

 

 

   

 

 

   

 

 

 

Total+

  $   51,849,318      $   2,706,028,611      $   202,985,775      $   2,960,863,704   
 

 

 

   

 

 

   

 

 

   

 

 

 

 

*   Other financial instruments are derivative instruments, such as futures, forwards and swaps, which are valued at the unrealized appreciation/depreciation on the instrument. Other financial instruments may also include options written which are valued at market value.

 

#   Only variation margin receivable/payable at period end is reported within the statement of assets and liabilities. This amount reflects cumulative appreciation/(depreciation) of exchange-traded derivatives as reported in the portfolio of investments.

 

+   There were no transfers between any levels during the reporting period.

 

ALLIANCEBERNSTEIN INCOME FUND       45   

Notes to Financial Statements


 

 

The Fund recognizes all transfers between levels of the fair value hierarchy assuming the financial instruments were transferred at the beginning of the reporting period.

The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining fair value.

 

      Corporates -
Non-Investment
Grades
    Collateralized
Mortgage
Obligations
    Commercial
Mortgage -
Backed
Securities
 

Balance as of 12/31/13

   $ 61,229      $   64,909,110      $   36,857,033   

Accrued discounts/(premiums)

     (14,436     240,685        44,521   

Realized gain (loss)

     – 0 –      1,033,943        225,587   

Change in unrealized appreciation/depreciation

     25,573        2,416,724        2,038,144   

Purchases

     2,996,054        30,844,256        28,616,949   

Sales

     – 0 –      (12,629,613     (3,460,529

Transfers in to Level 3

     – 0 –      – 0 –      – 0 – 

Transfers out of Level 3

     – 0 –      – 0 –      – 0 – 
  

 

 

   

 

 

   

 

 

 

Balance as of 6/30/14

   $   3,068,420      $   86,815,105      $   64,321,705   
  

 

 

   

 

 

   

 

 

 

Net change in unrealized appreciation/depreciation from Investments held as of 6/30/14*

   $ 25,573      $ 3,247,853      $ 2,122,799   
  

 

 

   

 

 

   

 

 

 
      Emerging
Markets -

Corporate
Bonds
    Bank Loans^     Common
Stocks
 

Balance as of 12/31/13

   $ 1,741,990      $ 29,926,235      $ 14,265,067   

Accrued discounts/(premiums)

     (60,127     26,755        – 0 – 

Realized gain (loss)

     (164,739     (257,613     – 0 – 

Change in unrealized appreciation/depreciation

     336,057        332,292        (938,449

Purchases

     – 0 –      6,154,943        – 0 – 

Sales

     (1,853,181     (10,644,478     – 0 – 

Transfers in to Level 3

     – 0 –      – 0 –      – 0 – 

Transfers out of Level 3

     – 0 –      – 0 –      – 0 – 
  

 

 

   

 

 

   

 

 

 

Balance as of 6/30/14

   $ – 0 –    $ 25,538,134      $ 13,326,618   
  

 

 

   

 

 

   

 

 

 

Net change in unrealized appreciation/depreciation from Investments held as of 6/30/14*

   $ – 0 –    $ 2,660      $ (938,449
  

 

 

   

 

 

   

 

 

 

 

46     ALLIANCEBERNSTEIN INCOME FUND

Notes to Financial Statements


 

 

      Whole Loan
Trusts
    Total      

Balance as of 12/31/13

   $ 7,238,193      $ 154,998,857     

Accrued discounts/(premiums)

     (16,810     220,588     

Realized gain (loss)

     (14,125     823,053     

Change in unrealized appreciation/depreciation

     45,833        4,256,174     

Purchases

     3,469,308        72,081,510     

Sales

     (806,606     (29,394,407  

Transfers in to Level 3

     – 0 –      – 0 –   

Transfers out of Level 3

     – 0 –      – 0 –   
  

 

 

   

 

 

   

Balance as of 6/30/14

   $ 9,915,793      $ 202,985,775     
  

 

 

   

 

 

   

Net change in unrealized appreciation/depreciation from Investments held as of 6/30/14*

   $ 45,833      $ 4,506,269     
  

 

 

   

 

 

   

 

*   The unrealized appreciation/depreciation is included in net change in unrealized appreciation/depreciation of investments in the accompanying statement of operations.

 

^   The Fund held a security with zero market value that was sold during the reporting period.

The following presents information about significant unobservable inputs related to the Fund with material categories of Level 3 investments at June 30, 2014:

 

     Quantitative Information about Level 3
Fair Value Measurements
     Fair Value
at 6/30/14
  Valuation
Technique
  Unobservable Input  

Range/

Weighted

Average

Corporates–Non-Investment
Grades

 

 

$2,253,271

 

 

Third Party Vendor

 

 

Evaluated
Quotes

 

 

$109.13 – $166.52/ $110.93

  $815,149   Indicative Market
Quotations
  Broker
Quote
  $16.30/N/A

Collateralized Mortgage Obligations

 

 

 

$86,815,105

 

 

 

Third Party Vendor

 

 

 

Evaluated
Quotes

 

 

 

$20.59 – $131.59/ $91.88

Commercial Mortgage-Backed Securities

 

 

 

$64,321,705

 

 

 

Third Party Vendor

 

 

 

Evaluated
Quotes

 

 

 

$90.78 – $156.59/ $100.55

Bank Loans

  $25,538,134   Third Party Vendor   Vendor
Quotes
  $97.83 – $137.79/ $101.83

 

ALLIANCEBERNSTEIN INCOME FUND       47   

Notes to Financial Statements


 

 

     Quantitative Information about Level 3
Fair Value Measurements
     Fair Value
at 6/30/14
  Valuation
Technique
  Unobservable Input  

Range/

Weighted

Average

Common Stocks

  $1,010,650   Indicative Market
Quotations
  Broker
Quote
  $1,450.00/N/A
  $11,584,625   Practical
Expedient
  NAV   $1,098.07/N/A
  $731,343   Market Approach   EBITDA
Projection*
  $169.2 million

Whole Loan Trusts

  $6,379,203   Qualitative
Assessment
  Transaction
Price
  $100.00/ $100.00
  $3,536,590   Market Approach   Internal Rate
of Return
  Benchmark & 500 bp

 

*   Earnings before Interest, Taxes, Depreciation and Amortization.

The Adviser has established a Valuation Committee (the “Committee”) which is responsible for overseeing the pricing and valuation of all securities held in the Fund. The Committee operates under pricing and valuation policies and procedures established by the Adviser and approved by the Board, including pricing policies which set forth the mechanisms and processes to be employed on a daily basis to implement these policies and procedures. In particular, the pricing policies describe how to determine market quotations for securities and other instruments. The Committee’s responsibilities include: 1) fair value and liquidity determinations (and oversight of any third parties to whom any responsibility for fair value and liquidity determinations is delegated), and 2) regular monitoring of the Adviser’s pricing and valuation policies and procedures and modification or enhancement of these policies and procedures (or recommendation of the modification of these policies and procedures) as the Committee believes appropriate.

The Committee is also responsible for monitoring the implementation of the pricing policies by the Adviser’s Pricing Group (the “Pricing Group”) and a third party which performs certain pricing functions in accordance with the pricing policies. The Pricing Group is responsible for the oversight of the third party on a day-to-day basis. The Committee and the Pricing Group perform a series of activities to provide reasonable assurance of the accuracy of prices including: 1) periodic vendor due diligence meetings, review of methodologies, new developments and processes at vendors, 2) daily comparison of security valuation versus prior day for all securities that exceeded established thresholds, and 3) daily review of unpriced, stale, and variance reports with exceptions reviewed by senior management and the Committee.

In addition, several processes outside of the pricing process are used to monitor valuation issues including: 1) performance and performance attribution reports are monitored for anomalous impacts based upon benchmark performance, and 2) portfolio managers review all portfolios for performance and analytics (which are generated using the Adviser’s prices).

 

48     ALLIANCEBERNSTEIN INCOME FUND

Notes to Financial Statements


 

 

3. Currency Translation

Assets and liabilities denominated in foreign currencies and commitments under forward currency exchange contracts are translated into U.S. dollars at the mean of the quoted bid and ask prices of such currencies against the U.S. dollar. Purchases and sales of portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities were acquired or sold. Income and expenses are translated into U.S. dollars at rates of exchange prevailing when accrued.

Net realized gain or loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed income investments, foreign currency exchange contracts, holding of foreign currencies, currency gains or losses realized between the trade and settlement dates on foreign investment transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation or depreciation of foreign currency denominated assets and liabilities.

4. Taxes

It is the Fund’s policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned.

In accordance with U.S. GAAP requirements regarding accounting for uncertainties in income taxes, management has analyzed the Fund’s tax positions taken or expected to be taken on federal and state income tax returns for all open tax years (the current and the prior three tax years) and has concluded that no provision for income tax is required in the Fund’s financial statements.

5. Investment Income and Investment Transactions

Dividend income is recorded on the ex-dividend date or as soon as the Fund is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the date the securities are purchased or sold. Investment gains or losses are determined on the identified cost basis. The Fund amortizes premiums and accretes discounts as adjustments to interest income.

 

ALLIANCEBERNSTEIN INCOME FUND       49   

Notes to Financial Statements


 

 

6. Dividends and Distributions

Dividends and distributions to shareholders, if any, are recorded on the ex-dividend date. Income dividends and capital gains distributions are determined in accordance with federal tax regulations and may differ from those determined in accordance with U.S. GAAP. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification.

7. Repurchase Agreements

It is the Fund’s policy that its custodian or designated subcustodian take control of securities as collateral under repurchase agreements and to determine on a daily basis that the value of such securities are sufficient to cover the value of the repurchase agreements. If the seller defaults and the value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of collateral by the Fund may be delayed or limited.

NOTE B

Advisory Fee and Other Transactions with Affiliates

Under the terms of the investment advisory agreement (the “Advisory Agreement”), the Fund pays the Adviser a monthly advisory fee in an amount equal to the sum of 1/12th of .30 of 1% of the Fund’s average weekly net assets up to $250 million, 1/12th of .25 of 1% of the Fund’s average weekly net assets in excess of $250 million, and 4.75% of the Fund’s daily gross income (i.e., income other than gains from the sale of securities and foreign currency transactions or gains realized from options, futures and swaps, less interest on money borrowed by the Fund) accrued by the Fund during the month. However, such monthly advisory fee shall not exceed in the aggregate 1/12th of .80% of the Fund’s average weekly net assets during the month (approximately .80% on an annual basis).

Under the terms of the Shareholder Inquiry Agency Agreement with AllianceBernstein Investor Services, Inc. (“ABIS”), a wholly-owned subsidiary of the Adviser, the Fund reimburses ABIS for costs relating to servicing phone inquiries on behalf of the Fund. During the six months ended June 30, 2014, there was no reimbursement paid to ABIS.

Pursuant to the investment advisory agreement, the Fund may reimburse the Adviser for certain legal and accounting services provided to the Fund by the Adviser. For the six months ended June 30, 2014, the reimbursement for such services amounted to $34,514.

The Fund may invest in the AllianceBernstein Fixed-Income Shares, Inc. – Government STIF Portfolio (“Government STIF Portfolio”), an open-end management investment company managed by the Adviser. The Government STIF Portfolio is offered as a cash management option to mutual funds and other institutional accounts of the Adviser, and is not available for direct purchase by

 

50     ALLIANCEBERNSTEIN INCOME FUND

Notes to Financial Statements


 

 

members of the public. The Government STIF Portfolio pays no investment management fees but does bear its own expenses. A summary of the Fund’s transactions in shares of the Government STIF Portfolio for the six months ended June 30, 2014 is as follows:

 

Market Value

December 31, 2013

(000)

  Purchases
at Cost
(000)
    Sales
Proceeds
(000)
    Market Value
June 30, 2014
(000)
    Dividend
Income
(000)
 
$    47,067   $     408,002      $     437,381      $     17,688      $     13   

Brokerage commissions paid on investment transactions for the six months ended June 30, 2014 amounted to $61,811, of which $0 and $0, respectively, was paid to Sanford C. Bernstein & Co. LLC and Sanford C. Bernstein Limited, affiliates of the Adviser.

NOTE C

Investment Transactions

Purchases and sales of investment securities (excluding short-term investments) for the six months ended June 30, 2014 were as follows:

 

     Purchases      Sales  

Investment securities (excluding
U.S. government securities)

   $     240,053,117       $     244,798,352   

U.S. government securities

     250,424,197         225,563,262   

The cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes. Accordingly, gross unrealized appreciation and unrealized depreciation (excluding futures, foreign currency, written options and swap transactions) are as follows:

 

Gross unrealized appreciation

   $     126,663,171   

Gross unrealized depreciation

     (6,450,142
  

 

 

 

Net unrealized appreciation

   $ 120,213,029   
  

 

 

 

1. Derivative Financial Instruments

The Fund may use derivatives in an effort to earn income and enhance returns, to replace more traditional direct investments, to obtain exposure to otherwise inaccessible markets (collectively, “investment purposes”), or to hedge or adjust the risk profile of its portfolio.

The principal types of derivatives utilized by the Fund, as well as the methods in which they may be used are:

 

   

Futures

The Fund may buy or sell futures for investment purposes or for the purpose of hedging its portfolio against adverse effects of potential movements in the market. The Fund bears the market risk that arises from

 

ALLIANCEBERNSTEIN INCOME FUND       51   

Notes to Financial Statements


 

 

changes in the value of these instruments and the imperfect correlation between movements in the price of the futures and movements in the price of the assets, reference rates or indices which they are designed to track. Among other things, the Fund may purchase or sell futures for foreign currencies or options thereon for non-hedging purposes as a means of making direct investment in foreign currencies, as described below under “Currency Transactions”.

At the time the Fund enters into futures, the Fund deposits and maintains as collateral an initial margin with the broker, as required by the exchange on which the transaction is effected. Such amount is shown as due from broker on the statement of assets and liabilities. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized gains or losses. Risks may arise from the potential inability of a counterparty to meet the terms of the contract. The credit/counterparty risk for exchange-traded futures is generally less than privately negotiated futures, since the clearinghouse, which is the issuer or counterparty to each exchange-traded future, has robust risk mitigation standards, including the requirement to provide initial and variation margin. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the time it was closed.

Use of long futures subjects the Fund to risk of loss in excess of the amounts shown on the statement of assets and liabilities, up to the notional value of the futures. Use of short futures subjects the Fund to unlimited risk of loss. Under some circumstances, futures exchanges may establish daily limits on the amount that the price of futures can vary from the previous day’s settlement price, which could effectively prevent liquidation of unfavorable positions.

During the six months ended June 30, 2014, the Fund held futures for hedging purposes.

 

   

Forward Currency Exchange Contracts

The Fund may enter into forward currency exchange contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings, to hedge certain firm purchase and sale commitments denominated in foreign currencies and for non-hedging purposes as a means of making direct investments in foreign currencies, as described below under “Currency Transactions”.

A forward currency exchange contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. The gain or loss arising from the difference between the original contract and the closing of such contract would be included in net realized gain or loss on

 

52     ALLIANCEBERNSTEIN INCOME FUND

Notes to Financial Statements


 

 

foreign currency transactions. Fluctuations in the value of open forward currency exchange contracts are recorded for financial reporting purposes as unrealized appreciation and/or depreciation by the Fund. Risks may arise from the potential inability of a counterparty to meet the terms of a contract and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar.

During the six months ended June 30, 2014, the Fund held forward currency exchange contracts for hedging and non-hedging purposes.

 

   

Option Transactions

For hedging and investment purposes, the Fund may purchase and write (sell) put and call options on U.S. and foreign securities, including government securities, and foreign currencies that are traded on U.S. and foreign securities exchanges and over-the-counter markets. Among other things, the Fund may use options transactions for non-hedging purposes as a means of making direct investments in foreign currencies, as described below under “Currency Transactions” and may use options strategies involving the purchase and/or writing of various combinations of call and/or put options, for hedging and investment purposes.

The risk associated with purchasing an option is that the Fund pays a premium whether or not the option is exercised. Additionally, the Fund bears the risk of loss of the 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 Fund writes an option, the premium received by the Fund is recorded as a liability and is subsequently adjusted to the current market value of the option written. Premiums received from written options which expire unexercised are recorded by the Fund on the expiration date as realized gains from options written. The difference between the premium received and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium received is less than the amount paid for the closing purchase transaction, as a realized loss. If a call option is exercised, the premium received is added to the proceeds from the sale of the underlying security or currency in determining whether the Fund has realized a gain or loss. If a put option is exercised, the premium received reduces the cost basis of the security or currency purchased by the Fund. In writing an option, the Fund bears the market risk of an unfavorable change in the price of the security or currency underlying the written option. Exercise of an option written by the Fund could result in the Fund selling or buying a security or currency at a price different from the current market value.

 

ALLIANCEBERNSTEIN INCOME FUND       53   

Notes to Financial Statements


 

 

During the six months ended June 30, 2014, the Fund held purchased options for hedging purposes. During the six months ended June 30, 2014, the Fund held written options for hedging purposes.

For the six months ended June 30, 2014, the Fund had the following transactions in written options:

 

      Number of
Contracts
    Premiums
Received
 

Options written outstanding as of 12/31/13

     – 0  –    $ – 0  – 

Options written

     40,600,000        313,679   

Options expired

     (400,000     (80,000

Options bought back

     (39,900,000     (98,679

Options exercised

     – 0  –      – 0  – 
  

 

 

   

 

 

 

Options written outstanding as of 6/30/14

     300,000      $     135,000   
  

 

 

   

 

 

 

At June 30, 2014, the maximum loss for the written call options was unknown with a fair value of $12,146 expiring July 2014, as reflected in the Portfolio of Investments. In certain circumstances maximum loss amounts may be partially offset by upfront premium received upon entering into the contract.

 

   

Swaps

The Fund may enter into swaps to hedge its exposure to interest rates, credit risk, or currencies. The Fund may also enter into swaps for non-hedging purposes as a means of gaining market exposures, including by making direct investments in foreign currencies, as described below under “Currency Transactions”. 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. In addition, collateral may be pledged or received by the Fund in accordance with the terms of the respective swaps to provide value and recourse to the Fund or its counterparties in the event of default, bankruptcy or insolvency by one of the parties to the swap.

Risks may arise as a result of the failure of the counterparty to the swap to comply with the terms of the swap. The loss incurred by the failure of a counterparty is generally limited to the net interim payment to be received by the Fund, and/or the termination value at the end of the contract. Therefore, the Fund considers the creditworthiness of each counterparty to a swap in evaluating potential counterparty risk. This risk is mitigated by having a netting arrangement between the Fund and the counterparty and by the posting of collateral by the counterparty to the Fund to cover the Fund’s exposure to the counterparty. Additionally, risks may arise from unanticipated movements in interest rates or in the value of the underlying securities. The Fund accrues for the interim payments on swaps on a daily

 

54     ALLIANCEBERNSTEIN INCOME FUND

Notes to Financial Statements


 

 

basis, with the net amount recorded within unrealized appreciation/depreciation of swaps on the statement of assets and liabilities, where applicable. Once the interim payments are settled in cash, the net amount is recorded as realized gain/(loss) on swaps on the statement of operations, in addition to any realized gain/(loss) recorded upon the termination of swaps. Upfront premiums paid or received are recognized as cost or proceeds on the statement of assets and liabilities and are amortized on a straight line basis over the life of the contract. Amortized upfront premiums are included in net realized gain/(loss) from swaps on the statement of operations. Fluctuations in the value of swaps are recorded as a component of net change in unrealized appreciation/depreciation of swaps on the statement of operations.

Certain standardized swaps, including certain interest rate swaps and credit default swaps, are (or soon will be) subject to mandatory central clearing. Cleared swaps are transacted through futures commission merchants (“FCMs”) that are members of central clearinghouses, with the clearinghouse serving as central counterparty, similar to transactions in futures contracts. Centralized clearing will be required for additional categories of swaps on a phased-in basis based on requirements published by the Securities and Exchange Commission and Commodity Futures Trading Commission.

At the time the Fund enters into a centrally cleared swap, the Fund deposits and maintains as collateral an initial margin with the broker, as required by the exchange on which the transaction is effected. Such amount is shown as due from broker on the statement of assets and liabilities. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized gains or losses. Risks may arise from the potential inability of a counterparty to meet the terms of the contract. The credit/counterparty risk for exchange-traded swaps is generally less than privately negotiated swaps, since the clearinghouse, which is the issuer or counterparty to each exchange-traded swap, has robust risk mitigation standards, including the requirement to provide initial and variation margin. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the time it was closed.

Interest Rate Swaps:

The Fund is subject to interest rate risk exposure in the normal course of pursuing its investment objectives. Because the Fund holds fixed rate bonds, the value of these bonds may decrease if interest rates rise. To help hedge against this risk and to maintain its ability to generate income at prevailing market rates, the Fund may enter into interest rate swaps. Interest rate swaps are agreements between two parties to exchange cash

 

ALLIANCEBERNSTEIN INCOME FUND       55   

Notes to Financial Statements


 

 

flows based on a notional amount. The Fund may elect to pay a fixed rate and receive a floating rate, or, receive a fixed rate and pay a floating rate on a notional amount.

In addition, the Fund may also enter into interest rate swap transactions to preserve 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. 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).

During the six months ended June 30, 2014, the Fund held interest rate swaps for hedging purposes.

Credit Default Swaps:

The Fund may enter into credit default swaps, including to manage its exposure to the market or certain sectors of the market, to reduce its risk exposure to defaults by corporate and sovereign issuers held by the Fund, or to create exposure to corporate or sovereign issuers to which it is not otherwise exposed. The Fund may purchase credit protection (“Buy Contract”) or provide credit protection (“Sale Contract”) on the referenced obligation of the credit default swap. During the term of the swap, the Fund receives/(pays) fixed payments from/(to) the respective counterparty, calculated at the agreed upon rate applied to the notional amount. If the Fund is a buyer/(seller) of protection and a credit event occurs, as defined under the terms of the swap, the Fund will either (i) receive from the seller/(pay to the buyer) of protection an amount equal to the notional amount of the swap (the “Maximum Payout Amount”) and deliver/(take delivery of) the referenced obligation or (ii) receive/(pay) a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation.

Credit default swaps may involve greater risks than if a Fund had invested in the referenced obligation directly. Credit default swaps are subject to general market risk, liquidity risk, counterparty risk and credit risk. If the Fund is a buyer of protection and no credit event occurs, it will lose the payments it made to its counterparty. If the Fund is a seller of protection and a credit event occurs, the value of the referenced obligation received by the Fund coupled with the periodic payments previously received, may be less than the Maximum Payout Amount it pays to the buyer, resulting in a net loss to the Fund.

 

56     ALLIANCEBERNSTEIN INCOME FUND

Notes to Financial Statements


 

 

During the six months ended June 30, 2014, the Fund held credit default swaps for hedging and non-hedging purposes.

Implied credit spreads utilized in determining the market value of credit default swaps on issuers as of period end are disclosed in the portfolio of investments. The implied spreads serve as an indicator of the current status of the payment/performance risk and typically reflect the likelihood of default by the issuer of the referenced obligation. The implied credit spread of a particular reference obligation also reflects the cost of buying/selling protection and may reflect upfront payments required to be made to enter into the agreement. Widening credit spreads typically represent a deterioration of the referenced obligation’s credit soundness and greater likelihood of default or other credit event occurring as defined under the terms of the agreement. A credit spread identified as “Defaulted” indicates a credit event has occurred for the referenced obligation.

At June 30, 2014, the Fund had Sale Contracts outstanding with Maximum Payout Amounts aggregating $78,527,820, with net unrealized appreciation of $2,071,580, and terms of less than 33 years, as reflected in the portfolio of investments.

In certain circumstances Maximum Payout Amounts may be partially offset by recovery values of the respective referenced obligations, upfront premium received upon entering into the agreement, or net amounts received from settlement of buy protection credit default swaps entered into by the Fund for the same reference obligation with the same counterparty. As of June 30, 2014, the Fund did not have Buy Contracts outstanding with respect to the same referenced obligation and same counterparty for its Sale Contracts outstanding.

The Fund typically enters into International Swaps and Derivatives Association, Inc. Master Agreements (“ISDA Master Agreement”) or similar master agreements (collectively, “Master Agreements”) with its OTC derivative contract counterparties in order to, among other things, reduce its credit risk to counterparties. ISDA Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under an ISDA Master Agreement, the Fund typically may offset with the counterparty certain derivative financial instrument’s payables and/or receivables with collateral held and/or posted and create one single net payment (close-out netting) in the event of default or termination.

Various Master Agreements govern the terms of certain transactions with counterparties, including transactions such as exchange-traded derivative transactions, repurchase and reverse repurchase agreements. These Master Agreements typically attempt to reduce the counterparty risk associated with such transactions by specifying credit protection mechanisms and providing standardization that improves legal certainty. Cross-termination provisions under Master Agreements

 

ALLIANCEBERNSTEIN INCOME FUND       57   

Notes to Financial Statements


 

 

typically provide that a default in connection with one transaction between the Fund and a counterparty gives the non-defaulting party the right to terminate any other transactions in place with the defaulting party to create one single net payment due to/due from the defaulting party. In the event of a default by a Master Agreements counterparty, the return of collateral with market value in excess of the Fund’s net liability, held by the defaulting party, may be delayed or denied.

The Fund’s Master Agreements may contain provisions for early termination of OTC derivative transactions in the event the net assets of the Fund decline below specific levels (“net asset contingent features”). If these levels are triggered, the Fund’s counterparty has the right to terminate such transaction and require the Fund to pay or receive a settlement amount in connection with the terminated transaction. As of June 30, 2014, the Fund had OTC derivatives with contingent features in net liability positions in the amount of $3,949,568. The fair value of assets pledged as collateral by the Fund for such derivatives was $1,129,241. If a trigger event had occurred at June 30, 2014, for those derivatives in a net liability position, an amount of $2,820,327 would be required to be posted by the Fund.

At June 30, 2014, the Fund had entered into the following derivatives:

 

    

Asset Derivatives

   

Liability Derivatives

 

Derivative Type

 

Statement of

Assets and
Liabilities

Location

  Fair Value    

Statement of
Assets and
Liabilities
Location

  Fair Value  

Interest rate contracts

     

Receivable/Payable for variation margin on futures

 

$

3,202,558

Foreign exchange contracts

 

Unrealized appreciation on forward currency exchange contracts

 

$

1,355,373

  

 

Unrealized depreciation on forward currency exchange contracts

 

 

4,523,495

  

Equity contracts

  Investments in securities, at value     55,410       

Equity contracts

      Options written, at value     12,146   

Interest rate contracts

 

Receivable/Payable for variation margin on centrally cleared interest rate swaps

 

 

1,066,672

 

Receivable/Payable for variation margin on centrally cleared interest rate swaps

 

 

8,324,788

Credit contracts

  Unrealized appreciation on credit default swaps     1,163,381      Unrealized depreciation on credit default swaps     717,875   

 

58     ALLIANCEBERNSTEIN INCOME FUND

Notes to Financial Statements


 

 

    

Asset Derivatives

   

Liability Derivatives

 

Derivative Type

 

Statement of

Assets and
Liabilities

Location

  Fair Value    

Statement of
Assets and
Liabilities
Location

  Fair Value  

Credit contracts

  Receivable/Payable for variation margin on centrally cleared credit default swaps   $ 908,199    
   

 

 

     

 

 

 

Total

    $   4,549,035        $   16,780,862   
   

 

 

     

 

 

 

 

*   Only variation margin receivable/payable at period end is reported within the statement of assets and liabilities. This amount reflects cumulative appreciation/(depreciation) of exchange-traded derivatives as reported in the portfolio of investments.

The effect of derivative instruments on the statement of operations for the six months ended June 30, 2014:

 

Derivative Type

 

Location of Gain

or (Loss) on
Derivatives

  Realized Gain
or (Loss) on
Derivatives
    Change in
Unrealized
Appreciation or
(Depreciation)
 

Interest rate contracts

  Net realized gain (loss) on futures; Net change in unrealized appreciation/depreciation of futures     $  (28,634,490)      $   (18,856,872

Foreign exchange contracts

  Net realized gain (loss) on foreign currency transactions; Net change in unrealized appreciation/depreciation of foreign currency denominated assets and liabilities  

 

  (1,675,126

 

 

(3,350,712

Foreign exchange contracts

  Net realized gain (loss) on investment transactions; Net change in unrealized appreciation/depreciation of investments  

 

(73,159

 

 

– 0

– 

Equity contracts

  Net realized gain (loss) on investment transactions; Net change in unrealized appreciation/depreciation of investments     (260,000     (238,590

 

ALLIANCEBERNSTEIN INCOME FUND       59   

Notes to Financial Statements


 

 

Derivative Type

 

Location of Gain

or (Loss) on
Derivatives

  Realized Gain
or (Loss) on
Derivatives
    Change in
Unrealized
Appreciation or
(Depreciation)
 

Foreign exchange contracts

  Net realized gain (loss) on options written; Net change in unrealized appreciation/depreciation of options written   $ 86,391      $ – 0 – 

Equity contracts

  Net realized gain (loss) on options written; Net change in unrealized appreciation/depreciation of options written     80,000        122,854   

Interest rate contracts

  Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps     (133,734     (7,258,116

Credit contracts

  Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps     1,142,036        (801,301
   

 

 

   

 

 

 

Total

    $   (29,468,082   $   (30,382,737
   

 

 

   

 

 

 

The following table represents the volume of the Fund’s derivative transactions during the six months ended June 30, 2014:

 

Futures:

  

Average original value of sale contracts

   $     978,456,487   

Forward Currency Exchange Contracts:

  

Average principal amount of buy contracts

   $ 83,795,834   

Average principal amount of sale contracts

   $ 179,763,009   

Purchased Options:

  

Average monthly cost

   $ 246,045 (a) 

Centrally Cleared Interest Rate Swaps:

  

Average notional amount

   $ 300,178,228   

Credit Default Swaps:

  

Average notional amount of buy contracts

   $ 12,230,000 (a) 

Average notional amount of sale contracts

   $ 24,768,636   

Centrally Cleared Credit Default Swaps:

  

Average notional amount of buy contracts

   $ 31,644,000 (b) 

Average notional amount of sale contracts

   $ 49,179,377   

 

(a)   Positions were open for five months during the period.

 

(b)   Positions were open for one month during the period.

 

60     ALLIANCEBERNSTEIN INCOME FUND

Notes to Financial Statements


 

 

For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the statement of assets and liabilities.

All derivatives held at period end were subject to netting arrangements. The following table presents the Fund’s derivative assets and liabilities by counterparty net of amounts available for offset under Master Agreements (“MA”) and net of the related collateral received/ pledged by the Fund as of June 30, 2014:

 

Counterparty

  Derivative
Assets
Subject
to MA
    Derivative
Available
for Offset
    Cash
Collateral
Received
    Securities
Collateral
Received
    Net Amount
of Derivatives
Assets
 

Bank of America, NA

  $ 199,229      $ – 0  –    $ – 0 –    $ (129,229   $ 70,000   

Barclays Bank PLC

    718,676        (149,320     – 0 –       (569,356 )*      – 0 – 

BNP Paribas SA

    607,255        (15,449     – 0  –      – 0 –      591,806   

Citibank, NA

    300,723        (300,025     – 0 –      – 0 –      698   

Exchange-Traded Citibank**

    55,410        – 0 –      – 0 –      – 0 –      55,410   

Credit Suisse International

    151,321        (151,321     – 0 –      – 0 –      – 0 – 

Goldman Sachs Bank USA

    645,373        (8,433     – 0 –      (612,027     24,913   

Morgan Stanley & Co., Inc.

    27,009        – 0 –      – 0 –      – 0 –      27,009   

Morgan Stanley Capital Services LLC

    1,087,842        – 0 –      – 0 –      (1,087,842 )*      – 0 – 

Standard Chartered Bank

    308,742        – 0  –      – 0 –      – 0 –      308,742   

State Street
Bank & Trust
Co.

    22,766        – 0 –      – 0 –      – 0 –      22,766   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 4,124,346      $ (624,548   $ – 0 –    $ (2,398,454   $ 1,101,344   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

ALLIANCEBERNSTEIN INCOME FUND       61   

Notes to Financial Statements


 

 

Counterparty

  Derivative
Liabilities
Subject to
a MA
    Derivatives
Available for
Offset
    Cash
Collateral
Pledged
    Securities
Collateral
Pledged
    Net Amount
of Derivatives
Liabilities
 

Barclays Bank PLC

  $ 149,320      $ (149,320   $ – 0 –    $ – 0 –    $ – 0 – 

BNP Paribas SA

    15,449        (15,449     – 0 –      – 0 –      – 0 – 

Citibank, NA

    330,025        (300,025     – 0 –      – 0 –      30,000   

Credit Suisse International

    1,777,967        (151,321     – 0 –      – 0 –      1,626,646   

Deutsche Bank AG

    1,609,675        – 0 –      – 0 –      (1,129,241     480,434   

Goldman Sachs Bank USA

    8,433        (8,433     – 0 –      – 0 –      – 0 – 

Exchange-Traded Morgan Stanely & Co., LLC**

    503,415        – 0 –      (503,415     – 0 –      – 0 – 

Exchange-Traded New Edge USA, LLC**

    984,219        – 0 –      – 0 –      – 0 –      984,219   

UBS AG

    683,945        – 0 –      – 0 –      – 0 –      683,945   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 6,062,448      $ (624,548   $ (503,415   $ (1,129,241   $ 3,805,244   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

*   The actual collateral received/pledged may be more than the amount reported due to overcollateralization.

 

**   Cash and securities have been posted for initial margin requirements for exchange-traded derivatives outstanding at June 30, 2014.

2. Currency Transactions

The Fund may invest in non-U.S. dollar securities on a currency hedged or unhedged basis. The Fund 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 other options. The Fund 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. The 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).

3. Dollar Rolls

The Fund may enter into dollar rolls. Dollar rolls involve sales by the Fund of securities for delivery in the current month and the Fund’s simultaneously

 

62     ALLIANCEBERNSTEIN INCOME FUND

Notes to Financial Statements


 

 

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. The 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. 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. Dollar rolls are speculative techniques and may be considered to be borrowings by the Fund. For the six months ended June 30, 2014, the Fund had no transactions in dollar rolls.

4. Reverse Repurchase Agreements

The Fund may enter into reverse repurchase transactions (“RVP”) in accordance with the terms of a Master Repurchase Agreement (“MRA”), under which the Fund sells securities and agrees to repurchase them at a mutually agreed upon date and price. At the time the Fund enters into a reverse repurchase agreement, it will establish a segregated account with the custodian containing liquid assets having a value comparable to the repurchase price. Under the MRA and other Master Agreements, the Fund is permitted to offset payables and/or receivables with collateral held and/or posted to the counterparty and create one single net payment due to or from the Fund in the event of a default. In the event of a default by a MRA counterparty, the Fund may be considered an unsecured creditor with respect to any excess collateral (collateral with a market value in excess of the repurchase price) held by and/or posted to the counterparty, and as such the return of such excess collateral may be delayed or denied. For the six months ended June 30, 2014, the average amount of reverse repurchase agreements outstanding was $1,065,099,700 and the daily weighted average interest rate was 0.08%. At June 30, 2014, The Fund had reverse repurchase agreements outstanding in the amount of $975,709,297 as reported on the statement of assets and liabilities.

The following table presents the Fund’s RVP liabilities by counterparty net of the related collateral pledged by the Fund as of June 30, 2014:

 

Counterparty

  RVP Liabilities
Subject to MA
    Assets
Available
for Offset
    Securities
Collateral
Pledged*
    Net Amount of
RVP

Liabilities
 

Barclays Capital, Inc.

  $ 14,698,866      $ – 0  –    $ (14,698,866   $ – 0  – 

BNP Paribas

    10,448,338        – 0  –      (10,421,026     27,312   

Credit Suisse
Securities (USA) LLC

    13,783,923        – 0  –      (13,752,045     31,878   

HSBC Bank USA

    390,990,119        – 0  –      (390,990,119     – 0  – 

ING Bank NV

    1,113,997        – 0  –      (1,111,976     2,021   

JPMorgan Chase Bank, NA

    544,674,054        – 0  –      (544,674,054     – 0  – 
 

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $   975,709,297      $   – 0  –    $   (975,648,086   $   61,211   
 

 

 

   

 

 

   

 

 

   

 

 

 

 

  Including accrued interest.

 

*   The actual collateral pledged may be more than the amount reported due to overcollateralization.

 

ALLIANCEBERNSTEIN INCOME FUND       63   

Notes to Financial Statements


 

 

5. Loan Participations and Assignments

The Fund may invest in direct debt instruments which are interests in amounts owed to lenders or lending syndicates by corporate, governmental, or other borrowers, either in the form of participations 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”). A loan is often administered by a bank or other financial institution (the “Lender”) that acts as agent for all holders. The agent administers the term of the loan as specified in the loan agreement. When investing in Participations, the Fund generally has no right to enforce compliance with the terms of the loan agreement with the borrower. In addition, when investing in Participations, the Fund has the right to receive payments of principal, interest and any fees to which it is entitled only from the Lender and only upon receipt of payments by the Lender from the borrower. As a result, the Fund may be subject to the credit risk of both the borrower and the Lender. When the Fund purchases Assignments from Lenders, it will typically acquire direct rights against the borrower on the loan. These loans may include participations in “bridge loans”, which are loans taken out by borrowers for a short period (typically less than six months) pending arrangement of more permanent financing through, for example, the issuance of bonds, frequently high-yield bonds issued for the purpose of acquisitions. The Fund may also participate in unfunded loan commitments, which are contractual obligations for investing in future Participations, and receive a commitment fee based on the amount of the commitment. Under these arrangements, the Fund will receive a fixed rate commitment fee and, if and to the extent the borrower borrows under the facility, the Fund may receive an additional funding fee.

Unfunded loan commitments and funded loans are marked to market daily.

During the six months ended June 30, 2014, the Fund had no commitments outstanding and did not receive commitment fees.

NOTE D

Common Stock

During the six months ended June 30, 2014 and the year ended December 31, 2013, the Fund did not issue any shares in connection with the Fund’s dividend reinvestment plan.

On June 25, 2014, the Fund announced a share repurchase program for the Fund’s discretionary repurchase of up to 15% of its then outstanding shares of common stock (valued at up to approximately $306 million as of June 24, 2014 based on Fund total net assets of approximately $2.04 billion) in open market transactions over a one-year period. This share repurchase program is intended to benefit long-term Fund stockholders by the repurchase of Fund shares at a discount to their net asset value. Such repurchases may moderate the discount at which the Fund’s shares currently trade. Repurchases will be made from time to

 

64     ALLIANCEBERNSTEIN INCOME FUND

Notes to Financial Statements


 

 

time when they are believed to be in the best interests of the Fund. During the six months ended June 30, 2014, the Fund had no share repurchases.

NOTE E

Risks Involved in Investing in the Fund

Interest Rate Risk and Credit Risk—Interest rate risk is the risk that changes in interest rates will affect the value of the Fund’s investments in fixed-income debt securities such as bonds or notes. Increases in interest rates may cause the value of the Fund’s investments to decline. Credit risk is the risk that the issuer or guarantor of a debt security, or the counterparty to a derivative contract, will be unable or unwilling to make timely principal and/or interest payments, or to otherwise honor its obligations. The degree of risk for a particular security may be reflected in its credit rating. Credit risk is greater for medium quality and lower-rated securities. Lower-rated debt securities and similar unrated securities (commonly known as “junk bonds”) have speculative elements or are predominantly speculative risks.

Duration Risk—Duration is the measure that relates the expected price volatility of a fixed-income security to changes in interest rates. The duration of a fixed-income security may be shorter than or equal to full maturity of a fixed-income security. Fixed-income securities with longer durations have more risk and will decrease in price as interest rates rise. For example, a fixed-income security with a duration of three years will decrease in value by approximately 3% if interest rates increase by 1%.

Mortgage-Backed and/or Other Asset-Backed Securities Risk—Investments in mortgage-backed and other asset-backed securities are subject to certain additional risks. The value of these securities may be particularly sensitive to changes in interest rates. These risks include “extension risk”, which is the risk that, in periods of rising interest rates, issuers may delay the payment of principal, and “prepayment risk”, which is the risk that in periods of falling interest rates, issuers may pay principal sooner than expected, exposing the Fund to a lower rate of return upon reinvestment of principal. Mortgage-backed securities offered by non-governmental issuers and other asset-backed securities may be subject to other risks, such as higher rates of default in the mortgages or assets backing the securities or risks associated with the nature and servicing of mortgages or assets backing the securities.

Derivatives Risk—The Fund may enter into derivative transactions such as forwards, options, futures and swaps. Derivatives may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses for the Fund, and subject to counterparty risk to a greater degree than more traditional investments. Derivatives may result in significant losses, including losses that are far greater than the value of the derivatives reflected in the statement of assets and liabilities.

 

ALLIANCEBERNSTEIN INCOME FUND       65   

Notes to Financial Statements


 

 

Foreign Securities Risk—Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign currency exchange rates and the possibility of future political and economic developments which could adversely affect the value of such securities. Moreover, securities of many foreign companies or foreign governments and their markets may be less liquid and their prices more volatile than those of comparable U.S. companies or of the U.S. government.

The Fund invests in the sovereign debt obligations of countries that are considered emerging market countries at the time of purchase. Therefore, the Fund is susceptible to governmental factors and economic and debt restructuring developments adversely affecting the economics of these emerging market countries. In addition, these debt obligations may be less liquid and subject to greater volatility than debt obligations of more developed countries.

Currency Risk—This is the risk that changes in foreign currency exchange rates may negatively affect the value of the Fund’s investments or reduce the returns of the Fund. For example, the value of the Fund’s investments in foreign currency-denominated securities 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 are generally not as regulated as securities markets. Independent of the Fund’s investments denominated in foreign currencies, the Fund’s positions in various foreign currencies may cause the Fund to experience investment losses due to the changes in exchange rates and interest rates.

Leverage Risk—The Fund utilizes leverage through the investment techniques of reverse repurchase agreements and dollar rolls. In addition, the Fund may borrow money in the future, through participation in credit facilities, direct bank borrowings, or otherwise. Reverse repurchase agreements and dollar rolls are speculative techniques and are considered borrowings by the Fund. The use of derivative instruments by the Fund, such as forwards, futures, options and swaps, may also result in a form of leverage.

Leverage may result in higher returns to the Fund than if the Fund were not leveraged, but may also adversely affect returns, particularly if the market is declining. The risks of leverage also include potentially a higher volatility of the NAV of the common stock, potentially more volatility in the market value of the common stock and the relatively greater effect on the NAV of the common stock caused by favorable or adverse changes in portfolio security values or currency exchange rates. In addition, changes in the interest rate environment can increase or decrease shareholder returns. The Fund maintains asset coverage of at least 300% with respect to borrowings.

To the extent that the current interest rate on the Fund’s indebtedness approaches the net return on the leveraged portion of the Fund’s investment

 

66     ALLIANCEBERNSTEIN INCOME FUND

Notes to Financial Statements


 

 

portfolio, then the benefit to the shareholders will be reduced. If the rate on indebtedness were to exceed the net return on the same portion of the portfolio, then this would result in a lower rate of return for the shareholders. Similarly, the use of leverage in a declining market can advance the decrease of the Fund’s NAV more so than if the Fund were not leveraged, which would likely be reflected in a greater decline in the market price for shares of common stock than if the Fund were not leveraged. In extreme cases, if the Fund’s current investment income were not sufficient to meet interest payments on indebtedness or if the Fund failed to maintain the asset coverage required by the 1940 Act, then it could be necessary for the Fund to liquidate certain investments at a time when it may be disadvantageous to do so.

Indemnification Risk—In the ordinary course of business, the Fund enters into contracts that contain a variety of indemnifications. The Fund’s maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. Therefore, the Fund has not accrued any liability in connection with these indemnification provisions.

NOTE F

Distributions to Shareholders

The tax character of distributions to be paid for the year ending December 31, 2014 will be determined at the end of the current fiscal year. The tax character of distributions paid during the fiscal years ended December 31, 2013 and December 31, 2012 were as follows:

 

     2013      2012  

Distributions paid from:

     

Ordinary income

   $ 103,758,100       $ 172,030,064   

Net long-term capital gains

     6,608,830         72,994,965   
  

 

 

    

 

 

 

Total taxable distributions paid

   $     110,366,930       $     245,025,029   
  

 

 

    

 

 

 

As of December 31, 2013, the components of accumulated earnings/(deficit) on a tax basis were as follows:

 

Accumulated capital and other losses

   $     (15,223,070 )(a) 

Unrealized appreciation/(depreciation)

     2,065,080 (b) 
  

 

 

 

Total accumulated earnings/(deficit)

   $ (13,157,990 )(c) 
  

 

 

 

 

(a)  

As of December 31, 2013, the Fund had a capital loss carryforward of $15,223,070.

 

(b)  

The differences between book-basis and tax-basis unrealized appreciation/(depreciation) are attributable primarily to the tax treatment of swaps and the realization for tax purposes of gains/losses on certain derivative instruments.

 

(c)  

The differences between book-basis and tax-basis components of accumulated earnings/(deficit) are attributable primarily to the tax deferral of dividend income from real estate investment trust (REIT) securities.

 

ALLIANCEBERNSTEIN INCOME FUND       67   

Notes to Financial Statements


 

 

For tax purposes, net capital losses may be carried over to offset future capital gains, if any. Funds are permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an indefinite period, and such losses will retain their character as either short-term or long-term capital losses. As of December 31, 2013, the Fund had a net capital loss carryforward of $15,223,070 which may be carried forward for an indefinite period.

NOTE G

Subsequent Events

Management has evaluated subsequent events for possible recognition or disclosure in the financial statements through the date the financial statements are issued. Management has determined that there are no material events that would require disclosure in the Fund’s financial statements through this date.

 

68     ALLIANCEBERNSTEIN INCOME FUND

Notes to Financial Statements


FINANCIAL HIGHLIGHTS

Selected Data For A Share Of Common Stock Outstanding Throughout Each Period

 

   

Six Months
Ended
June 30,
2014

(unaudited)

    Year Ended December 31,  
    2013     2012     2011     2010     2009  
 

 

 

 

Net asset value, beginning of period

    $  8.13        $  8.89        $  8.93        $  8.75        $  8.37        $  7.49   
 

 

 

 

Income From Investment Operations

           

Net investment income(a)

    .21        .40        .40        .44        .47        .54   

Net realized and unrealized gain (loss) on investment and foreign currency transactions

    .29        (.71     .57        .31        .40        .89   

Contributions from Adviser

    – 0  –      – 0  –      .00 (b)      – 0  –      – 0  –      – 0  – 
 

 

 

 

Net increase (decrease) in net asset value from operations

    .50        (.31     .97        .75        .87        1.43   
 

 

 

 

Less: Dividends and Distributions

           

Dividends from net investment income

    (.21     (.41     (.48     (.57     (.49     (.55

Distributions from net realized gain on investment transactions

    – 0  –      (.04     (.53     – 0  –      – 0  –      – 0  – 
 

 

 

 

Total dividends and distributions

    (.21     (.45     (1.01     (.57     (.49     (.55
 

 

 

 

Net asset value, end of period

    $  8.42        $  8.13        $  8.89        $  8.93        $  8.75        $  8.37   
 

 

 

 

Market value, end of period

    $  7.52        $  7.13        $  8.10        $  8.07        $  7.93        $  8.25   
 

 

 

 

Discount, end of period

    (10.69 )%      (12.30 )%      (8.89 )%      (9.63 )%      (9.37 )%      (1.43 )% 

Total Return

           

Total investment return based on:(c)

           

Market value

    8.45  %      (6.50 )%      13.08  %      9.36  %      2.10  %      25.09  % 

Net asset value

    6.50  %      (2.86 )%      12.15  %      9.67  %      11.04  %*      19.97  % 

Ratios/Supplemental Data

           

Net assets, end of period
(000,000’s omitted)

    $2,045        $1,976        $2,159        $2,168        $2,126        $2,033   

Ratio to average net assets of:

           

Expenses(d)

    .66  %^      .63  %      .64  %      .64  %      .71  %      .91  % 

Net investment income

    5.11  %^      4.74  %      4.34  %      5.00  %      5.40  %      6.84  % 

Portfolio turnover rate

    16  %      107  %      58  %      67  %      121  %      153  % 

 

See footnote summary on page 70.

 

ALLIANCEBERNSTEIN INCOME FUND       69   

Financial Highlights


(a)   Based on average shares outstanding.

 

(b)   Amount is less than $0.005.

 

(c)   Total investment return is calculated assuming a purchase of common stock on the opening of the first day and a sale on the closing of the last day of each period reported. Dividends and distributions, if any, are assumed for purposes of this calculation, to be reinvested at prices obtained under the Fund’s dividend reinvestment plan. Generally, total investment return based on net asset value will be higher than total investment return based on market value in periods where there is an increase in the discount or a decrease in the premium of the market value to the net asset value from the beginning to the end of such periods. Conversely, total investment return based on net asset value will be lower than total investment return based on market value in periods where there is a decrease in the discount or an increase in the premium of the market value to the net asset value from the beginning to the end of such periods. Total investment return calculated for a period of less than one year is not annualized.

 

(d)   The expense ratios, excluding interest expense and TALF administration fee, if applicable are .61%, .57%, .55%, .58%, .60%, and .68%, respectively. These expense ratios exclude net interest expense on borrowings of .05%, .06%, .09%, .06%, .11%, and .22%, respectively.

 

*   Includes the impact of proceeds received and credited to the Fund resulting from class action settlements, which enhanced the Fund’s performance for the year ended December 31, 2010 by 0.15%.

 

^   Annualized.

 

 

See notes to financial statements.

 

70     ALLIANCEBERNSTEIN INCOME FUND

Financial Highlights


ADDITIONAL INFORMATION

(unaudited)

Dividend Reinvestment and Cash Purchase Plan

Shareholders whose shares are registered in their own names may elect to be participants in the Dividend Reinvestment and Cash Purchase Plan (the “Plan”), pursuant to which dividends and capital gain distributions to shareholders will be paid in or reinvested in additional shares of the Fund (the “Dividend Shares”). Computershare Trust Company, N.A. (the “Agent”) will act as agent for participants under the Plan. The Plan also allows you to make optional cash investments in Fund shares through the Agent. Shareholders whose shares are held in the name of a broker or nominee should contact such broker or nominee to determine whether or how they may participate in the Plan.

If the Board declares an income distribution or determines to make a capital gain distribution payable either in shares or in cash, non-participants in the Plan will receive cash and participants in the Plan will receive the equivalent in shares of common stock of the Fund valued as follows:

 

  (i) If the shares of common stock are trading at net asset value or at a premium above net asset value at the time of valuation, the Fund will issue new shares at the greater of net asset value or 95% of the then current market price.

 

  (ii) If the shares of common stock are trading at a discount from net asset value at the time of valuation, the Plan Agent will receive the dividend or distribution in cash and apply it to the purchase of the Fund’s shares of common stock in the open market on the New York Stock Exchange or elsewhere, for the participants’ accounts. Such purchases will be made on or shortly after the payment date for such dividend or distribution and in no event more than 30 days after such date except where temporary curtailment or suspension of purchase is necessary to comply with Federal securities laws. If, before the Plan Agent has completed its purchases, the market price exceeds the net asset value of a share of common stock, the average purchase price per share paid by the Plan Agent may exceed the net asset value of the Fund’s shares of common stock, resulting in the acquisition of fewer shares than if the dividend or distribution had been paid in shares issued by the Fund.

The Plan Agent will maintain all shareholders’ accounts in the Plan and furnish written confirmation of all transactions in the account, including information needed by shareholders for tax records. Shares in the account of each Plan participant will be held by the Plan Agent in non-certificate form in the name of the participant, and each shareholder’s proxy will include those shares purchased or received pursuant to the Plan.

There will be no charges with respect to shares issued directly by the Fund to satisfy the dividend reinvestment requirements. However, each participant will

 

ALLIANCEBERNSTEIN INCOME FUND       71   

Additional Information


pay a pro-rata share of brokerage commissions incurred with respect to the Plan Agent’s open market purchases of shares.

The automatic reinvestment of dividends and distributions will not relieve participants of any income taxes that may be payable (or required to be withheld) on dividends and distributions.

Experience under the Plan may indicate that changes are desirable. Accordingly, the Fund reserves the right to amend or terminate the Plan as applied to any voluntary cash payments made and any dividend or distribution paid subsequent to written notice of the change sent to participants in the Plan at least 90 days before the record date for such dividend or distribution. The Plan may also be amended or terminated by the Plan Agent on at least 90 days written notice to participants in the Plan. All correspondence concerning the Plan should be directed to the Plan Agent at Computershare Trust Company, N.A., P.O. Box 30170, College Station, TX 77842-3170.

Proof of Share Ownership Required in Connection with Requests for Submission of Open-Ending Proposals to Annual Meetings of Stockholders Pursuant to Charter

The Fund’s charter provides that the Fund is required to submit to its stockholders a proposal to open-end the Fund if (i) the Fund’s shares trade on the NYSE at an average discount of more than 10%, determined on the basis of the discount as of the end of the last trading day in each week, during the last 12 calendar weeks of any calendar year, and (ii) during such year the Fund receives written requests from the holders of at least 10% of the Fund’s outstanding shares that such open-ending proposal be submitted to the Fund’s stockholders. Under Maryland law, requests pursuant to this charter provision must be made by persons that are stockholders of record of the Fund on the date the proposal is submitted. However, if a stockholder submits a request pursuant to the charter provision and is not a record stockholder, the Fund will accept the request provided the stockholder submits, together with its request, proof that the stockholder is the beneficial owner of shares on the date of the request. The Fund may accept as proof a written statement verifying a stockholder’s beneficial ownership from the record holder of the Fund’s shares, such as, for shares held through The Depository Trust Company (“DTC”), a DTC participant that appears as the owner of such shares on DTC’s records. To the extent beneficially owned shares are held through a brokerage firm or other intermediary that is not a DTC participant or a direct record holder of the Fund’s shares, additional documentation demonstrating the chain of ownership to a DTC participant (or to a direct record holder) will be required to establish proof of beneficial ownership. This will normally require provision of two proof of ownership statements – one from the beneficial owner’s intermediary confirming ownership, and another from the DTC participant confirming such intermediary’s ownership. A list of DTC participants can be found at http://www.dtcc.com/client-center/dtc-directories.aspx.

 

72     ALLIANCEBERNSTEIN INCOME FUND

Additional Information


RESULTS OF STOCKHOLDERS MEETING

(unaudited)

The Annual Meeting of Stockholders of AllianceBernstein Income Fund, Inc. (“the Fund”) was held on March 27, 2014. A description of the proposals and number of shares voted at the Meeting are as follows:

 

1. To elect three Directors for a term of three years and until his successor is duly elected and qualifies.

Class Two (term expires 2017)

 

     Voted
For
   Authority
Withheld

Class Two (term expires 2017)

     
Common Shares:      
William H. Foulk, Jr.    137,067,487    37,203,355
D. James Guzy    137,160,752    37,110,090
Robert M. Keith    137,476,737    36,794,106

 

2. To eliminate the Fund’s fundamental investment policy to invest, under normal circumstances, at least 65% of its total assets in U.S. government securities and repurchase agreements relating to U.S. government securities:

 

     

Voted

For

  

Against

  

Abstain

   83,628,347    66,665,025    2,915,966

 

3. To convert the Fund to an open-end investment company:

 

     

Voted

For

   Against    Abstain
   72,276,802    77,494,632    3,437,904

 

ALLIANCEBERNSTEIN INCOME FUND       73   

Results of Stockholders Meeting


BOARD OF DIRECTORS

 

Marshall C. Turner, Jr.(1) , Chairman

John H. Dobkin(1)

Michael J. Downey(1)

  

Nancy P. Jacklin(1)

Robert M. Keith, President and Chief Executive Officer

William H. Foulk, Jr.(1)
D. James Guzy
(1)
  

Garry L. Moody(1)

Earl D. Weiner(1)

OFFICERS

Philip L. Kirstein,

Senior Vice President and Independent Compliance Officer

Paul J. DeNoon(2), Vice President

Gershon M. Distenfeld(2),
Vice President

Michael L. Mon, Vice President

Douglas J. Peebles(2), Vice President

  

Matthew S. Sheridan(2), Vice President

Emilie D. Wrapp, Secretary

Joseph J. Mantineo, Treasurer and Chief Financial Officer

Phyllis J. Clarke, Controller
Vincent S. Noto,
Chief Compliance Officer

 

Administrator

AllianceBernstein L.P.

1345 Avenue of the Americas

New York, NY 10105

 

Dividend Paying Agent, Transfer Agent and Registrar

Computershare Trust Company, N.A.

P.O. Box 30170

College Station, TX 77842-3170

 

Custodian and Accounting Agent

State Street Corporation CCB/5

1 Iron Street

Boston, MA 02210

  

Legal Counsel

Seward & Kissel LLP

One Battery Park Plaza

New York, NY 10004

 

Independent Registered Public Accounting Firm

Ernst & Young LLP

5 Times Square

New York, NY 10036

 

(1)   Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee.

 

(2)   The most significant responsibility for the day-to-day management of, and investment decisions for, the Fund’s portfolio are made by a team of investment professionals consisting of Messrs. DeNoon, Distenfeld, Peebles and Sheridan.

 

     Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940 that the Fund may purchase from time to time at market prices shares of its Common Stock in the open market.

 

     This report, including the financial statements herein, is transmitted to the shareholders of AllianceBernstein Income Fund for their information. The financial information included herein is taken from the records of the Fund. This is not a prospectus, circular or representation intended for use in the purchase of shares of the Fund or any securities mentioned in this report.

 

     Annual Certifications—As required, on April 30, 2014, the Fund submitted to the New York Stock Exchange (“NYSE”) the annual certification of the Fund’s Chief Executive Officer certifying that he is not aware of any violations of the NYSE’s Corporate Governance listing standards. The Fund has also included the certifications of the Fund’s Chief Executive Officer and Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act of 2002 as exhibits to the Fund’s Form N-CSR filed with the Securities and Exchange Commission for the reporting period.

 

74     ALLIANCEBERNSTEIN INCOME FUND

Board of Directors


SUMMARY OF GENERAL INFORMATION

 

Shareholder Information

The daily net asset value of the Fund’s shares is available from the Fund’s Transfer Agent by calling (800) 426-5523. The Fund also distributes its daily net asset value to various financial publications or independent organizations such as Lipper Inc., Morningstar, Inc. and Bloomberg.

Weekly comparative net asset value (NAV) and market price information about the Fund is published each Monday in The Wall Street Journal, each Saturday in Barron’s and other newspapers in a table called “Closed-End Funds.” Daily net asset value and market price information and additional information regarding the Fund is available at www.alliancebernstein.com and at www.nyse.com.

Dividend Reinvestment Plan

A Dividend Reinvestment Plan provides automatic reinvestment of dividends and capital gains distributions in additional Fund shares. The Plan also allows you to make optional cash investments in Fund Shares through the Plan Agent. If you wish to participate in the Plan and your shares are held in your name, simply complete and mail the enrollment form in the brochure. If your shares are held in the name of your brokerage firm, bank or other nominee, you should ask them whether or how you can participate in the Plan.

For questions concerning shareholder account information, or if you would like a brochure describing the Dividend Reinvestment Plan, please call Computershare Trust Company, N.A. at (800) 219-4218.

 

 

ALLIANCEBERNSTEIN INCOME FUND       75   

Summary of General Information


THIS PAGE IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS

ALLIANCEBERNSTEIN FAMILY OF FUNDS

 

US Equity

US Core

Core Opportunities Fund

Select US Equity Portfolio

US Growth

Concentrated Growth Fund

Discovery Growth Fund

Growth Fund

Large Cap Growth Fund

Small Cap Growth Portfolio

US Value

Discovery Value Fund

Equity Income Fund

Growth & Income Fund

Value Fund

International/Global Equity

International/Global Core

Global Equity & Covered Call Strategy Fund

Global Thematic Growth Fund

International Portfolio

Tax-Managed International Portfolio

International/Global Growth

International Growth Fund

International/Global Value

Global Value Fund

International Value Fund

Fixed Income

Municipal

High Income Municipal Portfolio

Intermediate California Portfolio

Intermediate Diversified Portfolio

Intermediate New York Portfolio

Municipal Bond Inflation Strategy

Tax-Aware Fixed Income Portfolio

National Portfolio

Arizona Portfolio

California Portfolio

Massachusetts Portfolio

Michigan Portfolio

Minnesota Portfolio

New Jersey Portfolio

New York Portfolio

Ohio Portfolio

Pennsylvania Portfolio

Virginia Portfolio

Fixed Income (continued)

Taxable

Bond Inflation Strategy

Global Bond Fund

High Income Fund

High Yield Portfolio

Intermediate Bond Portfolio

Limited Duration High Income Portfolio

Short Duration Portfolio

Alternatives

Credit Long/Short Portfolio

Dynamic All Market Fund

Global Real Estate Investment Fund

Global Risk Allocation Fund

Market Neutral Strategy-U.S.

Multi-Manager Alternative Strategies Fund

Real Asset Strategy

Select US Long/Short Portfolio

Unconstrained Bond Fund

Asset Allocation/Multi-Asset

Multi-Asset

Emerging Markets Multi-Asset Portfolio

Retirement Strategies

2000 Retirement Strategy

2005 Retirement Strategy

2010 Retirement Strategy

2015 Retirement Strategy

2020 Retirement Strategy

2025 Retirement Strategy

2030 Retirement Strategy

2035 Retirement Strategy

2040 Retirement Strategy

2045 Retirement Strategy

2050 Retirement Strategy

2055 Retirement Strategy

Wealth Strategies

Balanced Wealth Strategy

Conservative Wealth Strategy

Wealth Appreciation Strategy

Tax-Managed Balanced Wealth Strategy

Tax-Managed Conservative Wealth Strategy

Tax-Managed Wealth Appreciation Strategy

Closed-End Funds

Alliance California Municipal Income Fund

Alliance New York Municipal Income Fund

AllianceBernstein Global High Income Fund

AllianceBernstein Income Fund

AllianceBernstein National Municipal Income Fund

 

We also offer Exchange Reserves, which serves as the money market fund exchange vehicle for the AllianceBernstein mutual funds. An investment in Exchange Reserves is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund.

Investors should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. For copies of our prospectus or summary prospectus, which contain this and other information, visit us online at www.alliancebernstein.com or contact your AllianceBernstein investments representative. Please read the prospectus and/or summary prospectus carefully before investing.

 

76     ALLIANCEBERNSTEIN INCOME FUND

AllianceBernstein Family of Funds


Privacy Notice (This information is not part of the Shareholder Report.)

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 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 under 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, that comply with applicable standards, to safeguard such nonpublic personal information.


ALLIANCEBERNSTEIN INCOME FUND

1345 Avenue of the Americas

New York, NY 10105

800.221.5672

 

LOGO

 

 

ACMI-0152-0614   LOGO


ITEM 2. CODE OF ETHICS.

Not applicable when filing a semi-annual report to shareholders.

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

Not applicable when filing a semi-annual report to shareholders.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Not applicable when filing a semi-annual report to shareholders.

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.

Not applicable when filing a semi-annual report to shareholders.

ITEM 6. SCHEDULE OF INVESTMENTS.

Please see Schedule of Investments contained in the Report to Shareholders included under Item 1 of this Form N-CSR.

ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable when filing a semi-annual report to shareholders.

ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable when filing a semi-annual report to shareholders.

ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.

There have been no purchases of equity securities by the Fund or by affiliated parties for the reporting period.

ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

There have been no material changes to the procedures by which shareholders may recommend nominees to the Fund’s Board of Directors since the Fund last provided disclosure in response to this item.


ITEM 11. CONTROLS AND PROCEDURES.

(a) The registrant’s principal executive officer and principal financial officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940, as amended) are effective at the reasonable assurance level based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this document.

(b) There were no changes in the registrant’s internal controls over financial reporting that occurred during the second fiscal quarter of the period that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

ITEM 12. EXHIBITS.

The following exhibits are attached to this Form N-CSR:

 

EXHIBIT NO.

 

DESCRIPTION OF EXHIBIT

12 (b) (1)   Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
12 (b) (2)   Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
12 (c)   Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

(Registrant): AllianceBernstein Income Fund, Inc.

 

By:  

/s/ Robert M. Keith

  Robert M. Keith
  President
Date:   August 22, 2014

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

By:  

/s/ Robert M. Keith

  Robert M. Keith
  President
Date:   August 22, 2014
By:  

/s/ Joseph J. Mantineo

  Joseph J. Mantineo
  Treasurer and Chief Financial Officer
Date:   August 22, 2014