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, 2015

Date of reporting period: December 31, 2015

 

 

 

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ITEM 1.

REPORTS TO STOCKHOLDERS.

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DEC    ^12.31.15

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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 AB’s website at www.abglobal.com, or go to the Securities and Exchange Commission’s (the “Commission”) website at www.sec.gov, or call AB 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 AB family of mutual funds. ABI is a member of FINRA and is an affiliate of AllianceBernstein L.P., the Adviser of the funds.

The [A/B] logo is a registered service mark of AllianceBernstein and AllianceBernstein^® is a registered service mark used by permission of the owner, AllianceBernstein L.P.

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February 10, 2016

 

 

ALLIANCEBERNSTEIN INCOME FUND  •			1

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2		•  ALLIANCEBERNSTEIN INCOME FUND

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ALLIANCEBERNSTEIN INCOME FUND  •			3

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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.abglobal.com and www.nyse.com. For additional shareholder information regarding this Fund, please see pages 76-77.

Benchmark Disclosure

The unmanaged Barclays US Aggregate Bond Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Barclays US Aggregate Bond Index represents the performance of securities within the US 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

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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 US 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

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HISTORICAL PERFORMANCE

 

THE FUND VS. ITS BENCHMARK PERIODS ENDED DECEMBER 31, 2015 (unaudited)		Returns
		6 Months				12 Months
AllianceBernstein Income Fund (NAV)			-1.32%				0.70%
Barclays US Aggregate Bond Index			0.65%				0.55%
The Fund’s market price per share on December 31, 2015 was $7.67. The Fund’s NAV price per share on December 31, 2015 was $7.86. For additional Financial Highlights, please see pages 72-73.

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

 

6		•  ALLIANCEBERNSTEIN INCOME FUND

Historical Performance

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PORTFOLIO SUMMARY

December 31, 2015 (unaudited)

 

PORTFOLIO STATISTICS

Net Assets ($mil): $1,696.0

 

 

*

All data are as of December 31, 2015. 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 0.3% or less in the following types: Asset-Backed Securities, Bank Loans, Governments – Soverign Bonds, Investment Companies, Local Governments – Municipal Bonds and Mortgage Pass-Throughs.

 

ALLIANCEBERNSTEIN INCOME FUND  •			7

Portfolio Summary

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PORTFOLIO SUMMARY

December 31, 2015 (unaudited)

 

 

*

All data are as of December 31, 2015. 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: Angola, Australia, Barbados, Belgium, Dominican Republic, El Salvador, Ghana, Guatemala, Italy, Ivory Coast, Jamaica, Kenya, Morocco, Netherlands, Norway, Pakistan, Peru, South Africa, Sri Lanka, Sweden, Venezuela and Zambia.

 

8		•  ALLIANCEBERNSTEIN INCOME FUND

Portfolio Summary

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PORTFOLIO OF INVESTMENTS

December 31, 2015

 

				Principal Amount (000)				U.S. $ Value
GOVERNMENTS – TREASURIES – 107.1%
Brazil – 2.0%
Brazil Notas do Tesouro Nacional Series F 10.00%, 1/01/17-1/01/25		BRL			148,570			$	33,756,131
United States – 105.1%
U.S. Treasury Bonds 3.125%, 8/15/44		U.S.$			76,388				78,067,925
5.375%, 2/15/31					1,961				2,659,224
6.25%, 5/15/30(a)					217,135				314,837,282
6.375%, 8/15/27(a)					223,224				313,551,145
6.50%, 11/15/26(a)					183,000				256,049,940
8.00%, 11/15/21					27,000				36,052,371
8.75%, 8/15/20					39,500				51,726,474
U.S. Treasury Notes 1.25%, 1/31/20					33,000				32,492,097
1.75%, 9/30/22					35,000				34,305,460
2.125%, 8/31/20(a)					150,000				152,419,950
2.125%, 9/30/21					34,672				35,037,686
2.375%, 12/31/20					23,080				23,730,025
3.125%, 5/15/21					95,000				101,034,020
3.50%, 5/15/20(a)					27,608				29,680,753
3.625%, 2/15/21(a)(b)					295,000				320,662,640
									1,782,306,992
Total Governments – Treasuries (cost $1,779,130,549)									1,816,063,123
CORPORATES – NON-INVESTMENT GRADE – 14.3%
Industrial – 11.9%
Basic – 0.7%
ArcelorMittal 6.125%, 6/01/18					181				165,615
8.00%, 10/15/39					1,846				1,259,895
Cliffs Natural Resources, Inc. 8.25%, 3/31/20(c)					1,759				1,341,237
Commercial Metals Co. 7.35%, 8/15/18					2,644				2,782,942
Lundin Mining Corp. 7.50%, 11/01/20(c)					659				617,813
7.875%, 11/01/22(c)					1,307				1,202,440
Magnetation LLC/Mag Finance Corp. 11.00%, 5/15/18(d)(e)					1,407				140,700
Novelis, Inc. 8.375%, 12/15/17					1,197				1,164,082
8.75%, 12/15/20					837				767,948

 

ALLIANCEBERNSTEIN INCOME FUND  •			9

Portfolio of Investments

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				Principal Amount (000)				U.S. $ Value
Teck Resources Ltd. 4.50%, 1/15/21		U.S.$			3,550			$	1,810,500
Thompson Creek Metals Co., Inc. 7.375%, 6/01/18					4,398				835,620
Univar USA, Inc. 6.75%, 7/15/23(c)					572				521,950
									12,610,742
Capital Goods – 0.7%
American Builders & Contractors Supply Co., Inc. 5.75%, 12/15/23(c)					880				886,600
Apex Tool Group LLC 7.00%, 2/01/21(c)					1,955				1,505,350
Berry Plastics Corp. 5.125%, 7/15/23					1,536				1,493,760
Bombardier, Inc. 4.75%, 4/15/19(c)					3,450				2,837,625
7.50%, 3/15/25(c)					2,438				1,706,600
Owens-Brockway Glass Container, Inc. 5.875%, 8/15/23(c)					1,157				1,174,355
Sealed Air Corp. 6.875%, 7/15/33(c)					1,486				1,519,435
									11,123,725
Communications - Media – 1.9%
CCO Holdings LLC/CCO Holdings Capital Corp. 5.25%, 9/30/22					2,079				2,099,790
CCOH Safari LLC 5.75%, 2/15/26(c)					1,770				1,774,425
DISH DBS Corp. 5.875%, 11/15/24					3,303				2,939,670
Hughes Satellite Systems Corp. 7.625%, 6/15/21					3,111				3,297,660
Intelsat Jackson Holdings SA 7.25%, 4/01/19					4,231				3,881,942
Nielsen Co. Luxembourg SARL (The) 5.50%, 10/01/21(c)					3,243				3,324,075
Quebecor Media, Inc. 5.75%, 1/15/23					2,145				2,161,088
Time, Inc. 5.75%, 4/15/22(c)					2,285				2,090,775
Unitymedia GmbH 6.125%, 1/15/25(c)					2,749				2,716,424
Univision Communications, Inc. 5.125%, 5/15/23(c)					3,295				3,171,438
UPCB Finance IV Ltd. 5.375%, 1/15/25(c)					2,700				2,544,750

 

10		•  ALLIANCEBERNSTEIN INCOME FUND

Portfolio of Investments

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				Principal Amount (000)				U.S. $ Value
Virgin Media Finance PLC 5.25%, 2/15/22		U.S.$			2,246			$	2,077,550
									32,079,587
Communications - Telecommunications – 0.9%
Altice Luxembourg SA 7.75%, 5/15/22(c)					1,342				1,211,155
Columbus International, Inc. 7.375%, 3/30/21(c)					3,872				3,847,800
Frontier Communications Corp. 6.25%, 9/15/21					3,000				2,542,500
Level 3 Financing, Inc. 5.375%, 1/15/24(c)					750				753,750
Numericable-SFR SAS 6.25%, 5/15/24(c)					766				739,190
Sable International Finance Ltd. 6.875%, 8/01/22(c)					657				634,005
Sprint Corp. 7.625%, 2/15/25					2,635				1,923,550
T-Mobile USA, Inc. 6.50%, 1/15/26					1,452				1,465,780
Windstream Services LLC 7.50%, 4/01/23(a)					2,000				1,504,600
7.75%, 10/01/21					1,070				841,956
									15,464,286
Consumer Cyclical - Automotive – 0.4%
Affinia Group, Inc. 7.75%, 5/01/21					238				242,236
Exide Technologies Series AI 7.00%, 4/30/25(f)(g)(h)(i)					2,341				1,779,181
11.00%, 4/30/20(i)(j)					5,354				4,390,387
									6,411,804
Consumer Cyclical - Entertainment – 0.2%
AMC Entertainment, Inc. 5.75%, 6/15/25					1,692				1,700,460
ClubCorp Club Operations, Inc. 8.25%, 12/15/23(c)					863				845,740
									2,546,200
Consumer Cyclical - Other – 0.6%
Beazer Homes USA, Inc. 5.75%, 6/15/19					1,765				1,623,800
International Game Technology PLC 6.25%, 2/15/22(c)					2,605				2,435,675
6.50%, 2/15/25(c)					1,923				1,687,432

 

ALLIANCEBERNSTEIN INCOME FUND  •			11

Portfolio of Investments

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				Principal Amount (000)				U.S. $ Value
MGM Resorts International 6.625%, 12/15/21		U.S.$			744			$	761,670
6.75%, 10/01/20					1,700				1,746,750
Shea Homes LP/Shea Homes Funding Corp. 6.125%, 4/01/25(c)					697				716,168
Taylor Morrison Communities, Inc./Monarch Communities, Inc. 5.875%, 4/15/23(c)					2,018				1,992,775
									10,964,270
Consumer Cyclical - Retailers – 0.7%
American Tire Distributors, Inc. 10.25%, 3/01/22(c)					2,632				2,408,280
Argos Merger Sub, Inc. 7.125%, 3/15/23(c)					2,017				1,999,856
Dollar Tree, Inc. 5.75%, 3/01/23(c)					2,475				2,561,625
Dufry Finance SCA 4.50%, 8/01/23(c)		EUR			1,373				1,566,489
Neiman Marcus Group Ltd. LLC 8.75% (8.75% Cash or 9.50% PIK), 10/15/21(c)(i)		U.S.$			1,702				1,055,240
Party City Holdings, Inc. 6.125%, 8/15/23(a)(c)					1,090				1,057,300
Sally Holdings LLC/Sally Capital, Inc. 5.625%, 12/01/25					1,523				1,538,230
									12,187,020
Consumer Non-Cyclical – 2.6%
Air Medical Merger Sub Corp. 6.375%, 5/15/23(c)					2,965				2,638,850
BI-LO LLC/BI-LO Finance Corp. 8.625% (8.625% Cash or 9.375% PIK), 9/15/18(c)(i)					780				663,000
CHS/Community Health Systems, Inc. 6.875%, 2/01/22					3,286				3,117,592
ConvaTec Finance International SA 8.25% (8.25% Cash or 9.00% PIK), 1/15/19(c)(i)					3,860				3,589,800
Endo Ltd./Endo Finance LLC/Endo Finco, Inc. 6.00%, 7/15/23-2/01/25(c)					3,254				3,235,600
Hill-Rom Holdings, Inc. 5.75%, 9/01/23(c)					408				416,160
Holding Medi-Partenaires SAS 7.00%, 5/15/20(c)		EUR			1,750				2,015,598
IASIS Healthcare LLC/IASIS Capital Corp. 8.375%, 5/15/19		U.S.$			2,256				2,075,520

 

12		•  ALLIANCEBERNSTEIN INCOME FUND

Portfolio of Investments

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				Principal Amount (000)				U.S. $ Value
Jaguar Holding Co. II/Pharmaceutical Product Development LLC 6.375%, 8/01/23(c)		U.S.$			1,200			$	1,170,000
Kinetic Concepts, Inc./KCI USA, Inc. 10.50%, 11/01/18					4,000				3,900,000
LifePoint Health, Inc. 5.875%, 12/01/23					2,148				2,180,220
Mallinckrodt International Finance SA/Mallinckrodt CB LLC 5.50%, 4/15/25(c)					653				600,760
MEDNAX, Inc. 5.25%, 12/01/23(c)					690				693,450
Post Holdings, Inc. 6.00%, 12/15/22(c)					869				851,620
7.375%, 2/15/22					705				734,963
7.75%, 3/15/24(c)					1,069				1,119,778
8.00%, 7/15/25(c)					1,066				1,129,960
PRA Holdings, Inc. 9.50%, 10/01/23(c)					2,231				2,426,212
Smithfield Foods, Inc. 5.875%, 8/01/21(c)					2,597				2,674,910
Spectrum Brands, Inc. 5.75%, 7/15/25(c)					2,897				2,969,425
Sterigenics-Nordion Holdings LLC 6.50%, 5/15/23(c)					384				366,720
Team Health, Inc. 7.25%, 12/15/23(c)					889				920,115
Valeant Pharmaceuticals International, Inc. 4.50%, 5/15/23(c)		EUR			1,800				1,696,960
5.875%, 5/15/23(c)		U.S.$			1,130				1,011,350
6.125%, 4/15/25(c)					2,277				2,032,222
									44,230,785
Energy – 2.2%
Antero Resources Corp. 5.125%, 12/01/22					1,625				1,235,000
5.375%, 11/01/21					792				633,600
6.00%, 12/01/20					1,686				1,407,810
Berry Petroleum Co. LLC 6.375%, 9/15/22					3,107				753,448
Bonanza Creek Energy, Inc. 6.75%, 4/15/21					320				193,600
BreitBurn Energy Partners LP/BreitBurn Finance Corp. 7.875%, 4/15/22					1,374				247,320
Carrizo Oil & Gas, Inc. 7.50%, 9/15/20					372				325,035
Denbury Resources, Inc. 4.625%, 7/15/23					2,591				833,991
5.50%, 5/01/22					2,257				749,279

 

ALLIANCEBERNSTEIN INCOME FUND  •			13

Portfolio of Investments

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				Principal Amount (000)				U.S. $ Value
Energy Transfer Equity LP 5.875%, 1/15/24		U.S.$			2,214			$	1,804,410
Energy XXI Gulf Coast, Inc. 11.00%, 3/15/20(c)					2,102				735,700
EP Energy LLC/Everest Acquisition Finance, Inc. 9.375%, 5/01/20					2,524				1,609,050
Golden Energy Offshore Services AS 8.41% (NIBOR 3 Month + 7.25%), 5/28/17(d)(k)		NOK			14,977				676,782
Holly Energy Partners LP/Holly Energy Finance Corp. 6.50%, 3/01/20		U.S.$			2,196				2,174,040
Hornbeck Offshore Services, Inc. 5.875%, 4/01/20					2,737				1,874,845
Legacy Reserves LP/Legacy Reserves Finance Corp. 6.625%, 12/01/21					3,090				648,900
Newfield Exploration Co. 5.625%, 7/01/24					984				838,860
Northern Blizzard Resources, Inc. 7.25%, 2/01/22(c)					1,300				936,000
Offshore Group Investment Ltd. 7.125%, 4/01/23(e)(j)					3,068				678,795
10.00%, 12/31/20(d)(g)					173				167,581
Paragon Offshore PLC 6.75%, 7/15/22(c)					849				118,860
7.25%, 8/15/24(c)					3,230				452,200
Sabine Pass Liquefaction LLC 5.625%, 3/01/25(c)					3,686				3,119,277
SandRidge Energy, Inc. 7.50%, 2/15/23					1,259				136,916
SM Energy Co. 5.625%, 6/01/25					946				624,360
6.125%, 11/15/22					877				644,595
6.50%, 1/01/23					731				537,285
Southern Star Central Corp. 5.125%, 7/15/22(c)					2,000				1,650,000
Targa Resources Partners LP/Targa Resources Partners Finance Corp. 6.75%, 3/15/24(c)					630				537,075
Tervita Corp. 8.00%, 11/15/18(c)					5,077				3,147,740
Transocean, Inc. 7.50%, 4/15/31					2,200				1,254,000
Weatherford International Ltd./Bermuda 7.00%, 3/15/38					2,900				2,022,750
Whiting Petroleum Corp. 5.75%, 3/15/21					1,940				1,414,260
6.25%, 4/01/23(a)					2,947				2,121,840

 

14		•  ALLIANCEBERNSTEIN INCOME FUND

Portfolio of Investments

---

				Principal Amount (000)				U.S. $ Value
WPX Energy, Inc. 5.25%, 9/15/24		U.S.$			329			$	217,140
8.25%, 8/01/23					900				720,000
									37,242,344
Other Industrial – 0.2%
Safway Group Holding LLC/Safway Finance Corp. 7.00%, 5/15/18(c)					3,300				3,291,750
Services – 0.2%
Service Corp. International/US 7.50%, 4/01/27					3,300				3,828,000
Technology – 0.3%
Avaya, Inc. 4.823%, 10/26/17(c)					2,258				1,192,520
Energizer Holdings, Inc. 5.50%, 6/15/25(c)					1,163				1,093,220
Ensemble S Merger Sub, Inc. 9.00%, 9/30/23(c)					1,246				1,203,947
Infor Software Parent LLC/Infor Software Parent, Inc. 7.125% (7.125% Cash or 7.875% PIK), 5/01/21(c)(i)					3,278				2,368,355
									5,858,042
Transportation - Services – 0.3%
Con-way, Inc. 6.70%, 5/01/34					2,134				1,249,952
Hertz Corp. (The) 5.875%, 10/15/20					2,710				2,794,688
LBC Tank Terminals Holding Netherlands BV 6.875%, 5/15/23(c)					558				552,420
XPO Logistics, Inc. 6.50%, 6/15/22(c)					144				133,200
									4,730,260
									202,568,815
Financial Institutions – 1.7%
Banking – 1.4%
Barclays Bank PLC 6.86%, 6/15/32(c)(l)					656				747,840
7.625%, 11/21/22					654				744,743
Citigroup, Inc. 5.95%, 1/30/23(l)					2,055				2,010,817
Series P 5.95%, 5/15/25(l)					1,850				1,772,633
Commerzbank AG 8.125%, 9/19/23(c)					3,610				4,143,233

 

ALLIANCEBERNSTEIN INCOME FUND  •			15

Portfolio of Investments

---

				Principal Amount (000)				U.S. $ Value
Credit Agricole SA 7.589%, 1/30/20(l)		GBP			1,150			$	1,839,433
7.875%, 1/23/24(a)(c)(l)		U.S.$			549				559,431
Credit Suisse Group AG 7.50%, 12/11/23(c)(l)					2,066				2,164,135
Intesa Sanpaolo SpA 5.017%, 6/26/24(c)					2,922				2,874,807
Royal Bank of Scotland Group PLC Series U 7.64%, 9/30/17(l)					2,200				2,299,000
Royal Bank of Scotland PLC (The) 9.50%, 3/16/22(c)					596				644,116
Societe Generale SA 8.00%, 9/29/25(c)(l)					3,750				3,813,881
									23,614,069
Finance – 0.1%
Creditcorp 12.00%, 7/15/18(c)					2,000				1,280,000
Other Finance – 0.1%
ACE Cash Express, Inc. 11.00%, 2/01/19(c)					779				280,440
iPayment, Inc. 9.50%, 12/15/19(c)					88				91,375
Series AI 9.50%, 12/15/19					1,763				1,829,566
									2,201,381
REITS – 0.1%
FelCor Lodging LP 6.00%, 6/01/25					1,018				1,033,270
									28,128,720
Utility – 0.7%
Electric – 0.7%
Calpine Corp. 7.875%, 1/15/23(c)					1,804				1,921,260
Dynegy, Inc. 7.375%, 11/01/22					2,895				2,518,650
7.625%, 11/01/24					1,915				1,636,942
FirstEnergy Corp. Series C 7.375%, 11/15/31					1,552				1,890,310
GenOn Energy, Inc. 7.875%, 6/15/17					2,100				1,827,000
9.50%, 10/15/18					2,087				1,685,941

 

16		•  ALLIANCEBERNSTEIN INCOME FUND

Portfolio of Investments

---

				Principal Amount (000)				U.S. $ Value
Talen Energy Supply LLC 4.60%, 12/15/21		U.S.$			965			$	593,176
									12,073,279
Total Corporates – Non-Investment Grade (cost $288,543,310)									242,770,814
COLLATERALIZED MORTGAGE OBLIGATIONS – 5.9%
GSE Risk Share Floating Rate – 3.9%
Bellemeade Re Ltd. Series 2015-1A, Class M1 2.922% (LIBOR USD 1 Month + 2.50%), 7/25/25(c)(k)					4,488				4,461,450
Federal Home Loan Mortgage Corp. Structured Agency Credit Risk Debt Notes Series 2013-DN1, Class M2 7.572% (LIBOR USD 1 Month + 7.15%), 7/25/23(k)					3,250				3,723,615
Series 2013-DN2, Class M2 4.672% (LIBOR USD 1 Month + 4.25%), 11/25/23(k)					5,605				5,547,421
Series 2014-DN1, Class M2 2.622% (LIBOR USD 1 Month + 2.20%), 2/25/24(k)					4,085				4,057,032
Series 2014-DN1, Class M3 4.922% (LIBOR USD 1 Month + 4.50%), 2/25/24(k)					4,455				4,381,835
Series 2014-DN2, Class M3 4.022% (LIBOR USD 1 Month + 3.60%), 4/25/24(k)					4,170				3,888,192
Series 2014-DN3, Class M3 4.422% (LIBOR USD 1 Month + 4.00%), 8/25/24(k)					5,065				4,851,556
Series 2014-DN4, Class M3 4.972% (LIBOR USD 1 Month + 4.55%), 10/25/24(k)					700				694,428
Series 2014-HQ2, Class M3 4.172% (LIBOR USD 1 Month + 3.75%), 9/25/24(k)					1,010				934,549
Series 2015-DNA1, Class M3 3.722% (LIBOR USD 1 Month + 3.30%), 10/25/27(k)					505				478,694
Series 2015-DNA2, Class M2 3.022% (LIBOR USD 1 Month + 2.60%), 12/25/27(k)					4,856				4,814,529

 

ALLIANCEBERNSTEIN INCOME FUND  •			17

Portfolio of Investments

---

				Principal Amount (000)				U.S. $ Value
Series 2015-DNA3, Class M3 5.122% (LIBOR USD 1 Month + 4.70%), 4/25/28(k)		U.S.$			976			$	961,044
Series 2015-HQA1, Class B 9.222% (LIBOR USD 1 Month + 8.80%), 3/25/28(k)					1,590				1,426,206
Series 2015-HQA1, Class M3 5.122% (LIBOR USD 1 Month + 4.70%) 3/25/28(k)					1,845				1,796,158
Series 2015-HQA2, Class M3 5.222% (LIBOR USD 1 Month + 4.80%), 5/25/28(k)					666				652,479
Federal National Mortgage Association Connecticut Avenue Securities Series 2014-C01, Class M2 4.822% (LIBOR USD 1 Month + 4.40%), 1/25/24(k)					1,606				1,605,178
Series 2014-C04, Class 1M2 5.322% (LIBOR USD 1 Month + 4.90%), 11/25/24(k)					6,100				6,082,479
Series 2015-C01, Class 1M2 4.722% (LIBOR USD 1 Month + 4.30%), 2/25/25(k)					4,520				4,359,552
Series 2015-C02, Class 2M2 4.422% (LIBOR USD 1 Month + 4.00%), 5/25/25(k)					916				867,307
Series 2015-C03, Class 1M2 5.422% (LIBOR USD 1 Month + 5.00%), 7/25/25(k)					1,221				1,215,046
Series 2015-C03, Class 2M2 5.422% (LIBOR USD 1 Month + 5.00%), 7/25/25(k)					2,720				2,701,230
Series 2015-C04, Class 1M2 6.122% (LIBOR USD 1 Month + 5.70%), 4/25/28(k)					1,810				1,843,687
Series 2015-C04, Class 2M2 5.972% (LIBOR USD 1 Month + 5.55%), 4/25/28(k)					2,007				2,018,181
JPMorgan Madison Avenue Securities Trust Series 2014-CH1, Class M2 4.672% (LIBOR USD 1 Month + 4.25%), 11/25/24(c)(k)					1,893				1,866,715
Series 2015-CH1, Class M2 5.922% (LIBOR USD 1 Month + 5.50%), 10/25/25(c)(k)					2,230				2,202,772
									67,431,335

 

18		•  ALLIANCEBERNSTEIN INCOME FUND

Portfolio of Investments

---

						Principal Amount (000)				U.S. $ Value
Non-Agency Fixed Rate – 1.7%
BCAP LLC Trust Series 2009-RR13, Class 17A3 6.026%, 4/26/37(c)		U.S.$					797			$	661,625
BNPP Mortgage Securities LLC Trust Series 2009-1, Class B1 6.00%, 8/27/37(c)							1,219				972,221
CHL Mortgage Pass-Through Trust Series 2007-16, Class A1 6.50%, 10/25/37							1,420				1,305,609
Series 2007-3, Class A30 5.75%, 4/25/37							1,494				1,366,927
Citigroup Mortgage Loan Trust Series 2006-4, Class 2A1A 6.00%, 12/25/35							4,033				3,747,466
Series 2007-AR4, Class 1A1A 5.348%, 3/25/37							607				546,966
Series 2010-3, Class 2A2 7.063%, 8/25/37(c)							722				624,999
Countrywide Alternative Loan Trust Series 2006-19CB, Class A15 6.00%, 8/25/36							233				212,832
Series 2006-19CB, Class A24 6.00%, 8/25/36							149				138,088
Series 2006-24CB, Class A15 5.75%, 6/25/36							2,225				1,985,446
Series 2006-41CB, Class 2A13 5.75%, 1/25/37							1,866				1,669,855
Series 2007-13, Class A2 6.00%, 6/25/47							2,657				2,150,037
Countrywide Home Loan Mortgage Pass-Through Trust Series 2007-HY4, Class 1A1 2.718%, 9/25/47							826				739,994
Credit Suisse Mortgage Trust Series 2009-8R, Class 6A2 6.00%, 1/26/38(c)							171				127,067
Series 2010-13R, Class 1A2 5.50%, 12/26/35(c)							66				61,769
Series 2010-9R, Class 1A5 4.00%, 8/27/37(c)							938				921,103
CSMC Mortgage-Backed Trust Series 2006-7, Class 3A12 6.25%, 8/25/36							1,430				1,240,503
First Horizon Alternative Mortgage Securities Trust Series 2006-AA5, Class A1 2.243%, 9/25/36							2,191				1,790,807

 

ALLIANCEBERNSTEIN INCOME FUND  •			19

Portfolio of Investments

---

				Principal Amount (000)				U.S. $ Value
Morgan Stanley Mortgage Loan Trust Series 2005-10, Class 4A1 5.50%, 12/25/35		U.S.$			936			$	850,318
Series 2007-10XS, Class A2 6.25%, 7/25/47					1,156				832,040
Nomura Resecuritization Trust Series 2010-5RA, Class 1A7 6.50%, 10/26/37(c)					1,889				1,649,826
Wells Fargo Mortgage Backed Securities Trust Series 2007-AR7, Class A1 2.767%, 12/28/37					4,000				3,677,359
Series 2007-AR8, Class A1 2.809%, 11/25/37					1,602				1,409,438
									28,682,295
Agency Fixed Rate – 0.2%
Federal National Mortgage Association REMICs Series 2013-87, Class KI 3.00%, 12/25/37(m)					13,120				1,727,966
Government National Mortgage Association Series 2013-170, Class MI 4.50%, 11/20/43(m)					9,200				1,583,220
									3,311,186
Non-Agency Floating Rate – 0.1%
First Horizon Alternative Mortgage Securities Trust Series 2007-FA2, Class 1A10 0.672% (LIBOR USD 1 Month + 0.25%), 4/25/37(k)					865				450,777
Series 2007-FA2, Class 1A5 0.722% (LIBOR USD 1 Month + 0.30%), 4/25/37(k)					980				514,208
Lehman XS Trust Series 2007-10H, Class 2AIO 6.756% (LIBOR USD 1 Month + 7.00%), 7/25/37(k)(m)					1,083				297,050
									1,262,035
Total Collateralized Mortgage Obligations (cost $100,594,787)									100,686,851
CORPORATES – INVESTMENT GRADE – 5.3%
Industrial – 3.1%
Basic – 0.5%
Braskem Finance Ltd. 6.45%, 2/03/24					1,204				1,035,440

 

20		•  ALLIANCEBERNSTEIN INCOME FUND

Portfolio of Investments

---

				Principal Amount (000)				U.S. $ Value
GTL Trade Finance, Inc. 5.893%, 4/29/24(c)		U.S.$			2,711			$	1,924,810
7.25%, 4/16/44(c)					274				176,730
Minsur SA 6.25%, 2/07/24(c)					285				262,455
Southern Copper Corp. 7.50%, 7/27/35					5,107				4,773,983
									8,173,418
Capital Goods – 0.3%
General Electric Co. Series B 4.10%, 12/15/22(l)					1,166				1,163,085
Odebrecht Finance Ltd. 4.375%, 4/25/25(c)					6,760				3,582,800
5.25%, 6/27/29(c)					2,103				1,014,698
									5,760,583
Communications - Telecommunications – 0.8%
Qwest Corp. 6.875%, 9/15/33					1,275				1,223,485
Telefonica Emisiones SAU 7.045%, 6/20/36					5,000				6,008,740
Verizon Communications, Inc. 4.522%, 9/15/48					6,159				5,507,975
									12,740,200
Consumer Cyclical - Retailers – 0.2%
Kohl’s Corp. 4.25%, 7/17/25					2,522				2,459,323
Consumer Non-Cyclical – 0.3%
Kraft Heinz Foods Co. 2.80%, 7/02/20(c)					2,700				2,693,018
3.50%, 7/15/22(c)					2,294				2,309,817
Reynolds American, Inc. 5.70%, 8/15/35					650				712,282
									5,715,117
Energy – 0.7%
Halliburton Co. 3.375%, 11/15/22					2,215				2,179,857
5.00%, 11/15/45					2,215				2,189,623
Kinder Morgan, Inc./DE 5.55%, 6/01/45					1,468				1,145,965
Series G 7.75%, 1/15/32					1,367				1,297,164
Noble Energy, Inc. 5.875%, 6/01/24					1,322				1,265,002

 

ALLIANCEBERNSTEIN INCOME FUND  •			21

Portfolio of Investments

---

				Principal Amount (000)				U.S. $ Value
Reliance Holding USA, Inc. 5.40%, 2/14/22(c)		U.S.$			3,568			$	3,855,184
									11,932,795
Technology – 0.2%
Hewlett Packard Enterprise Co. 6.35%, 10/15/45(c)					3,670				3,484,085
Transportation - Airlines – 0.1%
Delta Air Lines Pass-Through Trust Series 2007-1A 6.821%, 8/10/22					1,284				1,478,560
									51,744,081
Financial Institutions – 2.0%
Banking – 0.5%
Credit Suisse AG 6.50%, 8/08/23(c)					3,900				4,182,851
JPMorgan Chase & Co. Series S 6.75%, 2/01/24(l)					2,998				3,245,335
Nordea Bank AB 6.125%, 9/23/24(c)(l)					596				581,964
Standard Chartered PLC 6.409%, 1/30/17(c)(l)					300				300,300
									8,310,450
Insurance – 1.5%
AIG Life Holdings, Inc. 8.125%, 3/15/46(c)					509				671,880
American International Group, Inc. 8.175%, 5/15/58					2,525				3,320,375
Fairfax Financial Holdings Ltd. 8.30%, 4/15/26					5,000				6,124,795
Great-West Life & Annuity Insurance Capital LP II 7.153%, 5/16/46(c)					2,707				2,734,070
Humana, Inc. 8.15%, 6/15/38					1,650				2,242,309
MetLife, Inc. 6.40%, 12/15/36					3,345				3,654,412
Series C 5.25%, 6/15/20(l)					1,799				1,830,483
Pacific Life Insurance Co. 9.25%, 6/15/39(c)					1,500				2,178,988
Transatlantic Holdings, Inc. 8.00%, 11/30/39					2,122				2,726,276
									25,483,588
									33,794,038

 

22		•  ALLIANCEBERNSTEIN INCOME FUND

Portfolio of Investments

---

				Principal Amount (000)				U.S. $ Value
Utility – 0.2%
Electric – 0.2%
ComEd Financing III 6.35%, 3/15/33		U.S.$			3,462			$	3,533,047
Total Corporates – Investment Grade (cost $88,786,563)									89,071,166
AGENCIES – 4.2%
Agency Debentures – 4.2%
Federal Home Loan Banks 5.50%, 7/15/36					8,695				11,294,649
Federal Home Loan Mortgage Corp. 6.25%, 7/15/32					15,000				20,853,675
Residual Funding Corp. Principal Strip Zero Coupon, 7/15/20					42,045				38,404,996
Total Agencies (cost $68,558,138)									70,553,320
COMMERCIAL MORTGAGE-BACKED SECURITIES – 3.8%
Non-Agency Fixed Rate CMBS – 3.6%
Banc of America Commercial Mortgage Trust Series 2007-3, Class AJ 5.558%, 6/10/49					1,517				1,536,859
Citigroup Commercial Mortgage Trust Series 2013-GC17, Class D 5.105%, 11/10/46(c)					6,525				5,842,125
Series 2014-GC21, Class D 4.835%, 5/10/47(c)					6,052				5,110,988
Series 2014-GC23, Class D 4.507%, 7/10/47(c)					1,323				1,099,034
Commercial Mortgage Trust Series 2013-CR10, Class D 4.791%, 8/10/46(c)					3,219				2,967,135
Series 2014-LC17, Class D 3.687%, 10/10/47(c)					3,549				2,757,183
Series 2014-UBS5, Class D 3.495%, 9/10/47(c)					1,041				754,169
Series 2015-DC1, Class D 4.354%, 2/10/48(c)					2,730				2,223,729
Csail Commercial Mortgage Trust Series 2015-C2, Class D 4.213%, 6/15/57					4,091				3,164,848
GS Mortgage Securities Trust Series 2012-GC6, Class D 5.631%, 1/10/45(c)					2,652				2,610,296

 

ALLIANCEBERNSTEIN INCOME FUND  •			23

Portfolio of Investments

---

				Principal Amount (000)				U.S. $ Value
Series 2013-GC13, Class D 4.069%, 7/10/46(c)		U.S.$			9,440			$	8,218,209
JPMBB Commercial Mortgage Securities Trust Series 2015-C32, Class C 4.669%, 11/15/48					1,300				1,145,569
JPMorgan Chase Commercial Mortgage Securities Trust Series 2012-CBX, Class E 5.238%, 6/15/45(c)					1,863				1,796,055
LB-UBS Commercial Mortgage Trust Series 2007-C7, Class AJ 6.242%, 9/15/45					1,750				1,802,499
Merrill Lynch/Countrywide Commercial Mortgage Trust Series 2006-4, Class AJ 5.239%, 12/12/49					6,667				6,607,507
Morgan Stanley Bank of America Merrill Lynch Trust Series 2014-C19, Class D 3.25%, 12/15/47(c)					1,194				874,517
Wells Fargo Commercial Mortgage Trust Series 2014-LC18, Class D 3.957%, 12/15/47(c)					3,781				2,965,086
Series 2015-LC20, Class D 4.366%, 4/15/50(c)					4,000				3,202,419
WF-RBS Commercial Mortgage Trust Series 2012-C8, Class E 4.875%, 8/15/45(c)					4,000				3,856,671
Series 2014-C23, Class D 3.992%, 10/15/57(c)					2,699				2,206,402
									60,741,300
Non-Agency Floating Rate CMBS – 0.2%
Great Wolf Trust Series 2015-WOLF, Class A 1.781% (LIBOR 1 Month + 1.45%), 5/15/34(c)(k)					4,138				4,078,864
Indus Eclipse PLC Series 2007-1X, Class B 0.831% (LIBOR GBP 3 Month + 0.25%), 1/25/20(c)(k)		GBP			7				9,850
									4,088,714

 

24		•  ALLIANCEBERNSTEIN INCOME FUND

Portfolio of Investments

---

				Principal Amount (000)				U.S. $ Value
Agency CMBS – 0.0%
Government National Mortgage Association Series 2006-32, Class XM 0.02%, 11/16/45(m)		U.S.$			482			$	427
Total Commercial Mortgage-Backed Securities (cost $68,483,619)									64,830,441
WHOLE LOAN TRUSTS – 1.6%
Performing Asset – 1.6%
Alpha Credit Debt Fund LLC 15.00%, 12/31/17(g)(h)					1,401				1,400,913
16.00%, 1/01/21(g)(h)		MXN			32,620				1,892,715
AlphaCredit Capital, SA de CV
17.25%, 7/19/19(g)(h)					14,126				819,652
Cara Aircraft Leasing 28548, Inc. 8.00%, 12/02/19(g)(h)		U.S.$			265				265,353
Cara Aircraft Leasing 28563, Inc. 8.00%, 6/11/19(g)(h)					390				389,990
Cara Aircraft Leasing 28868, Inc. 8.00%, 12/02/19(g)(h)					308				307,810
Deutsche Bank Mexico SA 8.00%, 10/31/34(g)(h)(n)		MXN			46,272				1,869,469
8.00%, 10/31/34(g)(h)					28,938				1,169,144
Ede Del Este SA (DPP) 12.00%, 3/31/16(g)(h)		U.S.$			308				309,546
Ede Del Este SA (ITABO) 12.00%, 3/31/16(g)(h)					304				305,790
Flexpath Wh l LLC Series B 12.00%, 4/01/21(g)(h)					486				471,744
Recife Funding Ltd. Zero Coupon, 11/05/29(g)(h)					2,884				3,016,125
Sheridan Auto Loan Holdings I LLC 10.00%, 12/31/20(g)(h)					1,199				1,160,774
10.00%, 3/31/21(g)(h)					1,221				1,220,783
Sheridan Consumer Finance Trust 10.86% (LIBOR USD1 Month + 10.86%), 4/01/20(g)(h)(k)					12,472				12,350,952
Total Whole Loan Trusts (cost $28,325,506)									26,950,760
EMERGING MARKETS – CORPORATE BONDS – 1.4%
Industrial – 1.4%
Basic – 0.2%
Elementia SAB de CV 5.50%, 1/15/25(c)					1,039				950,685

 

ALLIANCEBERNSTEIN INCOME FUND  •			25

Portfolio of Investments

---

				Principal Amount (000)				U.S. $ Value
Vedanta Resources PLC 6.00%, 1/31/19(c)		U.S.$			855			$	541,161
8.25%, 6/07/21(a)(c)					1,943				1,127,612
9.50%, 7/18/18(a)(c)					610				451,370
									3,070,828
Capital Goods – 0.4%
Cemex SAB de CV 7.25%, 1/15/21(c)					2,376				2,283,930
Grupo Cementos de Chihuahua SAB de CV 8.125%, 2/08/20(c)					1,954				2,002,850
Servicios Corporativos Javer SAPI de CV 9.875%, 4/06/21(c)					2,185				2,239,625
									6,526,405
Communications - Telecommunications – 0.2%
Comcel Trust via Comunicaciones Celulares SA 6.875%, 2/06/24(c)					2,016				1,552,320
Digicel Ltd. 6.00%, 4/15/21(c)					1,500				1,263,750
6.75%, 3/01/23(c)					385				321,475
									3,137,545
Consumer Cyclical - Retailers – 0.1%
Office Depot de Mexico SA de CV 6.875%, 9/20/20(c)					2,350				2,367,625
Consumer Non-Cyclical – 0.4%
Cosan Luxembourg SA 5.00%, 3/14/23(c)					1,361				1,117,721
9.50%, 3/14/18(c)		BRL			3,117				620,446
Marfrig Overseas Ltd. 9.50%, 5/04/20(c)		U.S.$			4,151				4,067,980
Minerva Luxembourg SA 7.75%, 1/31/23(c)					877				824,380
Tonon Luxembourg SA 7.25%, 1/24/20(c)(e)(i)					2,354				235,436
Virgolino de Oliveira Finance SA 10.50%, 1/28/18(d)(e)					4,738				124,609
10.875%, 1/13/20(d)(e)					750				142,500
11.75%, 2/09/22(d)(e)					1,690				44,447
									7,177,519
Transportation - Airlines – 0.1%
TAM Capital 3, Inc. 8.375%, 6/03/21(c)					2,843				2,248,813
Total Emerging Markets – Corporate Bonds (cost $35,513,160)									24,528,735

 

26		•  ALLIANCEBERNSTEIN INCOME FUND

Portfolio of Investments

---

Company				Shares				U.S. $ Value
COMMON STOCKS – 1.3%
Consumer Discretionary – 0.1%
Auto Components – 0.0%
Exide Technologies(h)(j)(o)					45,970			$	131,474
Media – 0.1%
Ion Media Networks, Inc. – Class A(g)(h)(o)					2,512				927,230
									1,058,704
Financials – 1.2%
Diversified Financials – 0.0%
iPayment, Inc.(o)					110,385				695,425
Insurance – 1.2%
Mt Logan Re Ltd. (Preference Shares)(j)(o)(p)(q)					15,000				15,986,832
Mt Logan Re Ltd. (Preference Shares)(j)(o)(p)(r)					4,476				4,813,591
									20,800,423
									21,495,848
Total Common Stocks (cost $20,685,633)									22,554,552
				Principal Amount (000)
EMERGING MARKETS – SOVEREIGNS – 1.3%
Angola – 0.1%
Angolan Government International Bond 9.50%, 11/12/25(c)		U.S.$			2,615				2,418,875
Dominican Republic – 0.1%
Dominican Republic International Bond 7.45%, 4/30/44(c)					1,873				1,887,048
El Salvador – 0.3%
El Salvador Government International Bond 7.65%, 6/15/35(c)					5,957				5,078,342
Ghana – 0.1%
Ghana Government International Bond 10.75%, 10/14/30(c)					1,406				1,444,665
Ivory Coast – 0.1%
Ivory Coast Government International Bond 6.375%, 3/03/28(c)					2,440				2,220,595

 

ALLIANCEBERNSTEIN INCOME FUND  •			27

Portfolio of Investments

---

				Principal Amount (000)				U.S. $ Value
Jamaica – 0.1%
Jamaica Government International Bond 7.875%, 7/28/45		U.S.$			1,954			$	1,900,265
Kenya – 0.2%
Kenya Government International Bond 5.875%, 6/24/19(c)					2,715				2,558,887
Pakistan – 0.1%
Pakistan Government International Bond 7.25%, 4/15/19(c)					1,700				1,731,426
Sri Lanka – 0.1%
Sri Lanka Government International Bond 6.00%, 1/14/19(c)					1,236				1,211,043
Zambia – 0.1%
Zambia Government International Bond 8.50%, 4/14/24(c)					1,553				1,231,374
Total Emerging Markets – Sovereigns (cost $21,930,732)									21,682,520
QUASI-SOVEREIGNS – 1.1%
Quasi-Sovereign Bonds – 1.1%
Indonesia – 0.4%
Majapahit Holding BV 7.875%, 6/29/37(c)					6,188				6,683,040
Mexico – 0.4%
Petroleos Mexicanos 5.625%, 1/23/46(c)					4,710				3,604,092
6.50%, 6/02/41					4,900				4,236,050
									7,840,142
South Africa – 0.1%
Eskom Holdings SOC Ltd. 7.125%, 2/11/25(a)(c)					1,070				925,550
Venezuela – 0.2%
Petroleos de Venezuela SA 5.25%, 4/12/17(c)					7,500				3,768,000
Total Quasi-Sovereigns (cost $23,263,142)									19,216,732
				Shares
PREFERRED STOCKS – 0.8%
Financial Institutions – 0.6%
Banking – 0.3%
US Bancorp Series F 6.50%					180,000				5,166,000

 

28		•  ALLIANCEBERNSTEIN INCOME FUND

Portfolio of Investments

---

Company				Shares				U.S. $ Value
REITS – 0.3%
Digital Realty Trust, Inc. 6.35%					100,000			$	2,568,000
National Retail Properties, Inc. Series E 5.70%					26,000				645,060
Public Storage Series W 5.20%					28,475				711,590
Public Storage Series X 5.20%					2,000				50,300
									3,974,950
									9,140,950
Industrial – 0.2%
Consumer Non-Cyclical – 0.2%
Ventas Realty LP/Ventas Capital Corp. 5.45%					139,500				3,642,345
Total Preferred Stocks (cost $11,627,365)									12,783,295
				Principal Amount (000)
GOVERNMENTS – SOVEREIGN AGENCIES – 0.5%
Brazil – 0.2%
Petrobras Global Finance BV 5.375%, 1/27/21		U.S.$			5,000				3,725,000
Morocco – 0.1%
OCP SA 5.625%, 4/25/24(c)					1,148				1,164,933
United Kingdom – 0.2%
Royal Bank of Scotland Group PLC 8.00%, 8/10/25(a)(l)					3,065				3,241,238
Total Governments – Sovereign Agencies (cost $9,361,646)									8,131,171
LOCAL GOVERNMENTS – MUNICIPAL BONDS – 0.4%
United States – 0.4%
State of Illinois Series 2010 7.35%, 7/01/35					3,330				3,649,813

 

ALLIANCEBERNSTEIN INCOME FUND  •			29

Portfolio of Investments

---

				Principal Amount (000)				U.S. $ Value
Texas Transportation Commission State Highway Fund Series 2010B 5.178%, 4/01/30		U.S.$			2,560			$	3,013,555
Total Local Governments – Municipal Bonds (cost $5,917,164)									6,663,368
BANK LOANS – 0.2%
Industrial – 0.2%
Basic – 0.1%
FMG Resources (August 2006) Pty LTD (FMG America Finance, Inc.) 4.25% (LIBOR USD 3 Month + 3.25%), 6/30/19(k)					919				679,254
Magnetation LLC 12.00%, 3/07/16(g)(h)(i)					1,603				1,081,966
									1,761,220
Communications - Media – 0.1%
TWCC Holding Corp. 7.00% (LIBOR USD 1 Month + 6.00%), 6/26/20(k)					1,550				1,543,707
Other Industrial – 0.0%
Unifrax Holding Co. 4.50% (EURIBOR 3 Month + 3.50%), 11/28/18(k)		EUR			747				804,274
Technology – 0.0%
Avaya, Inc. 4.82% (LIBOR USD 3 Month + 4.50%), 10/26/17(k)		U.S.$			154				117,789
Total Bank Loans (cost $5,221,009)									4,226,990
ASSET-BACKED SECURITIES – 0.2%
Autos - Fixed Rate – 0.1%
Hertz Vehicle Financing LLC Series 2013-1A, Class B2 2.48%, 8/25/19(c)					2,169				2,082,810
Other ABS - Fixed Rate – 0.1%
Atlas 2014-1 Limited 6.875%, 12/15/39					1,771				1,744,238
Total Asset-Backed Securities (cost $3,900,700)									3,827,048

 

30		•  ALLIANCEBERNSTEIN INCOME FUND

Portfolio of Investments

---

Company				Shares				U.S. $ Value
INVESTMENT COMPANIES – 0.1%
Funds and Investment Trusts – 0.1%
OCL Opportunities Fund II(g)(h) (cost $899,964)					6,916			$	1,050,272
				Principal Amount (000)
GOVERNMENTS – SOVEREIGN BONDS – 0.1%
Indonesia – 0.1%
Indonesia Government International Bond 8.50%, 10/12/35(c) (cost $906,673)		U.S.$			801				996,241
MORTGAGE PASS-THROUGHS – 0.0%
Agency Fixed Rate 30-Year – 0.0%
Federal National Mortgage Association Series 1999 7.50%, 11/01/29					26				30,146
Series 1998 8.00%, 6/01/28					19				21,446
Total Mortgage Pass-Throughs (cost $44,555)									51,592
				Shares
SHORT-TERM INVESTMENTS – 4.6%
Investment Companies – 4.6%
AB Fixed Income Shares, Inc. – Government STIF Portfolio, 0.30%(s)(t) (cost $78,337,553)					78,337,553				78,337,553
Total Investments – 154.2% (cost $2,640,031,768)									2,614,976,544
Other assets less liabilities – (54.2)%									(919,020,265	)
Net Assets – 100.0%								$	1,695,956,279

FUTURES (see Note C)

 

Type		Number of Contracts				Expiration Month				Original Value				Value at December 31, 2015				Unrealized Appreciation/ (Depreciation)
Sold Contracts
EURO-BOBL Futures			455				March 2016			$	65,199,592			$	64,612,547			$	587,045
U.S. Long Bond (CBT) Futures			2,097				March 2016				322,033,757				322,413,750				(379,993	)

 

ALLIANCEBERNSTEIN INCOME FUND  •			31

Portfolio of Investments

---

Type		Number of Contracts				Expiration Month				Original Value				Value at December 31, 2015				Unrealized Appreciation/ (Depreciation)
U.S. T-Note 5 Yr (CBT) Futures			483				March 2016			$	57,287,594			$	57,148,711			$	138,883
U.S. T-Note 10 Yr (CBT) Futures			2,670				March 2016				336,922,472				336,169,687				752,785
																		$	1,098,720

FORWARD CURRENCY EXCHANGE CONTRACTS (see Note C)

 

Counterparty		Contracts to Deliver (000)				In Exchange For (000)				Settlement Date				Unrealized Appreciation/ (Depreciation)
Barclays Bank PLC		INR	293,684			USD	4,399				1/22/16			$	(27,075	)
Barclays Bank PLC		USD	17,369			INR	1,164,317				1/22/16				177,456
BNP Paribas SA		USD	704			NZD	1,050				1/15/16				14,144
BNP Paribas SA		INR	867,003			USD	12,991				1/22/16				(75,651	)
BNP Paribas SA		EUR	32,163			USD	35,033				1/27/16				60,831
BNP Paribas SA		GBP	13,676			USD	20,748				1/28/16				585,714
Brown Brothers Harriman & Co.		NZD	1,050			USD	696				1/15/16				(21,640	)
Citibank		MXN	65,547			USD	3,893				1/15/16				92,764
Credit Suisse International		GBP	6,495			EUR	9,137				1/27/16				359,990
Goldman Sachs Bank USA		TWD	125,389			USD	3,794				6/21/16				(3,785	)
HSBC Bank USA		BRL	149,921			USD	38,394				1/05/16				499,305
HSBC Bank USA		USD	37,763			BRL	149,921				1/05/16				131,248
HSBC Bank USA		NZD	980			USD	628				1/15/16				(41,596	)
HSBC Bank USA		USD	8,488			CNY	55,595				1/21/16				26,382
HSBC Bank USA		BRL	149,921			USD	37,363				2/02/16				(159,087	)
HSBC Bank USA		USD	62,055			JPY	7,562,720				2/10/16				912,112
Royal Bank of Scotland PLC		BRL	149,921			USD	39,970				1/05/16				2,075,684
Royal Bank of Scotland PLC		USD	38,394			BRL	149,921				1/05/16				(499,305	)
Royal Bank of Scotland PLC		EUR	38,511			USD	40,963				1/27/16				(912,161	)
Royal Bank of Scotland PLC		TWD	575,616			USD	17,598				1/29/16				159,439
Royal Bank of Scotland PLC		AUD	2,683			USD	1,927				2/05/16				(25,644	)
Standard Chartered Bank		SGD	73,701			USD	52,376				1/08/16				403,225
Standard Chartered Bank		USD	13,722			SGD	19,480				1/08/16				14,765
Standard Chartered Bank		USD	11,875			SGD	16,829				1/08/16				(8,242	)
Standard Chartered Bank		USD	8,638			CNY	56,609				1/21/16				31,611
Standard Chartered Bank		TWD	1,003,089			USD	30,429				6/21/16				50,552
State Street Bank & Trust Co.		NOK	9,702			USD	1,136				1/07/16				40,257
State Street Bank & Trust Co.		USD	38			NOK	334				1/07/16				(693	)
State Street Bank & Trust Co.		MXN	32,111			USD	1,946				1/15/16				83,743
State Street Bank & Trust Co.		USD	64			MXN	1,070				1/15/16				(1,656	)
UBS AG		CAD	12,073			USD	9,068				1/14/16				342,616
UBS AG		GBP	16,252			EUR	22,859				1/27/16				894,682
														$	5,179,985

 

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 December 31, 2015				Notional Amount (000)				Market Value				Unrealized Appreciation/ (Depreciation)
Buy Contracts
Morgan Stanley & Co. LLC/(INTRCONX)
CDX-NAHY Series 24, 5 Year Index, 6/20/20*			(5.00	)%			4.04	%		$	1,663			$	(64,565	)		$	21,693
Sale Contracts
Citigroup Global Markets, Inc./(INTRCONX)
CDX-NAHY Series 21, 5 Year Index, 12/20/18*			5.00				3.14				12,323				653,852				63,696
CDX-NAHY Series 24, 5 Year Index, 6/20/20*			5.00				4.04				8,404				326,242				(47,599	)
CDX-NAHY Series 25, 5 Year Index, 12/20/20*			5.00				4.73				2,248				28,819				24,544
CDX-NAHY Series 25, 5 Year Index, 12/20/20*			5.00				4.73				2,248				28,818				27,536
CDX-NAHY Series 25, 5 Year Index, 12/20/20*			5.00				4.73				2,250				28,844				32,908
CDX-NAHY Series 25, 5 Year Index, 12/20/20*			5.00				4.73				1,556				19,948				23,646
CDX-NAHY Series 25, 5 Year Index, 12/20/20*			5.00				4.73				1,555				19,934				26,295
CDX-NAHY Series 25, 5 Year Index, 12/20/20*			5.00				4.73				1,555				19,934				22,155
CDX-NAHY Series 25, 5 Year Index, 12/20/20*			5.00				4.73				2,248				28,819				26,895
Morgan Stanley & Co. LLC/ (INTRCONX)
CDX-NAHY Series 25, 5 Year Index, 12/20/20*			5.00				4.73				1,555				19,935				(19,471	)
														$	1,110,580			$	202,298

 

*

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)
Citigroup Global Markets, Inc./(CME Group)		CAD	91,930				3/10/17			0.973%		3 Month CDOR		$	(189,116	)
Citigroup Global Markets, Inc./(CME Group)		AUD	115,610				3/11/17			2.140%		3 Month BBSW			66,081
Citigroup Global Markets, Inc./(CME Group)		CAD	149,400				6/05/17			1.054%		3 Month CDOR			(418,733	)
Citigroup Global Markets, Inc./(CME Group)		AUD	208,120				6/09/17			2.200%		3 Month BBSW			(50,089	)
Citigroup Global Markets, Inc./(CME Group)		NZD	157,680				6/09/17			3.368%		3 Month BKBM			(892,468	)

 

ALLIANCEBERNSTEIN INCOME FUND  •			33

Portfolio of Investments

---

										Rate Type
Clearing Broker/ (Exchange)		Notional Amount (000)				Termination Date				Payments made by the Fund		Payments received by the Fund		Unrealized Appreciation/ (Depreciation)
Citigroup Global Markets, Inc./(CME Group)		GBP	17,170				6/05/20			6 Month LIBOR		1.651%		$	160,625
Citigroup Global Markets, Inc./(CME Group)			12,260				6/05/20			6 Month LIBOR		1.644%			109,527
Citigroup Global Markets, Inc./(CME Group)		$	42,130				2/10/25			2.034%		3 Month LIBOR			(7,394	)
Citigroup Global Markets, Inc./(CME Group)		CAD	11,800				3/10/25			3 Month CDOR		2.019%			203,685
Citigroup Global Markets, Inc./(CME Group)		AUD	18,170				3/11/25			6 Month BBSW		2.973%			(32,398	)
Citigroup Global Markets, Inc./(CME Group)		CAD	19,810				6/05/25			3 Month CDOR		2.281%			598,675
Citigroup Global Markets, Inc./(CME Group)		AUD	27,550				6/09/25			6 Month BBSW		3.384%			558,433
Citigroup Global Markets, Inc./(CME Group)		NZD	18,390				6/09/25			3 Month BKBM		4.068%			368,688
Citigroup Global Markets, Inc./(CME Group)			18,390				6/09/25			3 Month BKBM		4.068%			368,688
Citigroup Global Markets, Inc./(CME Group)		$	8,010				6/09/25			2.489%		3 Month LIBOR			(251,830	)
Citigroup Global Markets, Inc./(CME Group)			6,010				6/09/25			2.491%		3 Month LIBOR			(190,009	)
Citigroup Global Markets, Inc./(CME Group)		NZD	19,500				7/31/25			3.700%		3 Month BKBM			(110,933	)
Citigroup Global Markets, Inc./(CME Group)		$	7,940				7/31/25			3 Month LIBOR		2.365%			223,891
Citigroup Global Markets, Inc./(CME Group)		GBP	2,720				6/05/45			2.394%		6 Month LIBOR			(217,519	)
Citigroup Global Markets, Inc./(LCH Clearnet)			12,000				3/03/19			6 Month LIBOR		1.921%			396,367
Citigroup Global Markets, Inc./(LCH Clearnet)		$	47,150				3/25/24			2.887%		3 Month LIBOR			(3,396,083	)
Citigroup Global Markets, Inc./(LCH Clearnet)			46,860				4/02/24			2.851%		3 Month LIBOR			(3,175,071	)
														$	(5,876,983	)

 

34		•  ALLIANCEBERNSTEIN INCOME FUND

Portfolio of Investments

---

CREDIT DEFAULT SWAPS (see Note C)

 

Swap Counterparty & Referenced Obligation		Fixed Rate (Pay) Receive				Implied Credit Spread at December 31, 2015				Notional Amount (000)				Market Value				Upfront Premiums Paid (Received)				Unrealized Appreciation/ (Depreciation)
Sale Contracts
Barclays Bank PLC
CDX-CMBX.NA., 5/11/63*			5.00	%			5.82	%		$	5,000			$	(213,552	)		$	(136,286	)		$	(77,266	)
Federative Republic of Brazil, 4.25% 1/07/25, 12/20/20*			1.00				4.81				4,450				(724,385	)			(672,457	)			(51,928	)
Federative Republic of Brazil, 4.25% 1/07/25, 12/20/20*			1.00				4.81				4,450				(724,385	)			(646,266	)			(78,119	)
Credit Suisse International
CDX-CMBX.NA., 5/11/63*			5.00				5.82				4,000				(170,841	)			50,978				(221,819	)
CDX-CMBX.NA., 5/11/63*			3.00				3.55				660				(20,414	)			(9,470	)			(10,944	)
Kohl’s Corp., 6.25% 12/15/17, 6/20/19*			1.00				0.83				591				2,850				(5,542	)			8,392
Kohl’s Corp., 6.25% 12/15/17, 6/20/19*			1.00				0.83				238				1,149				(2,234	)			3,383
Kohl’s Corp., 6.25% 12/15/17, 6/20/19*			1.00				0.83				241				1,162				(2,258	)			3,420
Kohl’s Corp., 6.25% 12/15/17, 6/20/19*			1.00				0.83				347				1,672				(2,918	)			4,590
Goldman Sachs International
CDX-CMBX.NA., 5/11/63*			5.00				3.55				5,000				(213,552	)			(136,286	)			(77,266	)
CDX-CMBX.NA., 5/11/63*			3.00				3.55				2,000				(62,194	)			(28,692	)			(33,502	)
CDX-CMBX.NA., 5/11/63*			3.00				3.55				4,400				(135,727	)			(52,682	)			(83,045	)
CDX-CMBX.NA., 5/11/63*			3.00				3.55				2,000				(61,694	)			(28,692	)			(33,002	)
														$	(2,319,911	)		$	(1,672,805	)		$	(647,106	)

 

*

Termination date

 

ALLIANCEBERNSTEIN INCOME FUND  •			35

Portfolio of Investments

---

REVERSE REPURCHASE AGREEMENTS (see Note C)

 

Broker		Interest Rate				Maturity				U.S. $ Value at December 31, 2015
Barclays Capital, Inc.+			(0.75	)%*			—			$	1,074,162
Barclays Capital, Inc.+			(0.50	)%*			—				522,871
Barclays Capital, Inc.+			(0.25	)%*			—				1,551,842
Credit Suisse Securities (USA) LLC+			(0.75	)%*			—				2,464,309
Credit Suisse Securities (USA) LLC+			(0.25	)%*			—				1,630,674
HSBC Bank USA			0.37	%			1/07/16				21,243,353
HSBC Bank USA			0.40	%			1/14/16				52,470,435
HSBC Bank USA			0.40	%			1/20/16				114,571,000
HSBC Bank USA			0.40	%			1/21/16				40,446,081
HSBC Bank USA			0.51	%			2/03/16				77,142,878
HSBC Bank USA			0.55	%			2/11/16				60,539,745
Jefferies & Co., Inc.			0.35	%			1/12/16				97,926,106
Jefferies & Co., Inc.			0.39	%			1/11/16				20,201,997
JPMorgan Chase Bank			0.37	%			1/13/16				50,131,171
JPMorgan Chase Bank			0.37	%			1/27/16				74,574,302
JPMorgan Chase Bank			0.40	%			1/06/16				70,217,121
JPMorgan Chase Bank			0.44	%			2/09/16				247,422,360
JPMorgan Chase Bank			(0.75	)%*			1/07/16				304,130
RBC Capital Markets+			(0.25	)%*			—				1,879,073
										$	936,313,610

 

+

The reverse repurchase agreement matures on demand. Interest rate resets daily and the rate shown is the rate in effect on December 31, 2015.

 

*

Interest payment due from counterparty.

The type of underlying collateral and the remaining maturity of open reverse repurchase agreements in relation to the reverse repurchase agreements on the statements of assets and liabilities is as follows:

Remaining Contracted Maturity of the Agreements

Reverse Repurchase Agreements

 

		Overnight and Continuous				Up to 30 Days				31-90 Days				Greater than 90 Days				Total
Corporates – Non-Investment Grade		$	5,714,485			$	– 0	–		$	– 0	–		$	– 0	–		$	5,714,485
Emerging Markets – Corporate Bonds			478,770				304,130				– 0	–			– 0	–			782,900
Governments – Sovereign Agencies			1,985,539				– 0	–			– 0	–			– 0	–			1,985,539
Governments – Treasuries			– 0	–			541,781,566				385,104,983				– 0	–			926,886,549
Quasi-Sovereigns			944,137				– 0	–			– 0	–			– 0	–			944,137
Total		$	9,122,931			$	542,085,696			$	385,104,983			$	– 0	–		$	936,313,610

 

(a)

Position, or a portion thereof, has been segregated to collateralize reverse repurchase agreements.

 

(b)

Position, or a portion thereof, has been segregated to collateralize margin requirements for open futures contracts.

 

36		•  ALLIANCEBERNSTEIN INCOME FUND

Portfolio of Investments

---

(c)

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 December 31, 2015, the aggregate market value of these securities amounted to $283,023,073 or 16.7% of net assets.

 

(d)

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 December 31, 2015, are considered illiquid and restricted.

 

Restricted Securities		Acquisition Date				Cost				Market Value				Percentage of Net Assets
Golden Energy Offshore Services AS 8.41%, 5/28/17			5/14/14 - 12/04/15			$	1,594,731			$	676,782				0.04	%
Magnetation LLC/Mag Finance Corp. 11.00%, 5/15/18			2/19/15				861,787				140,700				0.01	%
Offshore Group Investment Ltd. 10.00%, 12/31/20			12/16/15				167,581				167,581				0.01	%
Virgolino de Oliveira Finance SA 10.875%, 1/13/20			6/09/14				745,965				142,500				0.01	%
Virgolino de Oliveira Finance SA 10.50%, 1/28/18			6/13/13				3,510,948				124,609				0.01	%
Virgolino de Oliveira Finance SA 11.75%, 2/09/22			1/29/14 - 2/03/14				916,308				44,447				0.00	%

 

(e)

Security is in default and is non-income producing.

 

(f)

Convertible security.

 

(g)

Illiquid security.

 

(h)

Fair valued by the Adviser.

 

(i)

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 December 31, 2015.

 

(j)

Restricted and illiquid security.

 

Restricted Securities		Acquisition Date				Cost				Market Value				Percentage of Net Assets
Exide Technologies Series AI 7.00%, 4/30/25			4/30/15 - 12/01/15			$	4,975,026			$	4,390,387				0.26	%
Exide Technologies			4/30/15				87,194				131,474				0.01	%
Mt Logan Re Ltd. (Preference Shares)(q)			4/01/15				15,000,000				15,986,832				0.94	%
Mt Logan Re Ltd. (Preference Shares)(r)			12/30/15				4,476,000				4,813,591				0.28	%
Offshore Group Investment Ltd. 7.125%, 4/01/23			7/15/13 - 7/22/13				3,095,293				678,795				0.04	%

 

(k)

Floating Rate Security. Stated interest rate was in effect at December 31, 2015.

 

(l)

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

 

(m)

IO – Interest Only

 

(n)

Variable rate coupon, rate shown as of December 31, 2015.

 

(o)

Non-income producing security.

 

ALLIANCEBERNSTEIN INCOME FUND  •			37

Portfolio of Investments

---

 

(p)

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

 

(q)

Effective prepayment date of December 2016.

 

(r)

Effective prepayment date of April 2017.

 

(s)

To obtain a copy of the fund’s financial statements, please go to the Securities and Exchange Commission’s website at www.sec.gov, or call AB at (800) 227-4618.

 

(t)

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

Currency Abbreviations:

AUD – Australian Dollar

BRL – Brazilian Real

CAD – Canadian Dollar

CNY – Chinese Yuan Renminbi

EUR – Euro

GBP – Great British Pound

INR – Indian Rupee

JPY – Japanese Yen

MXN – Mexican Peso

NOK – Norwegian Krone

NZD – New Zealand Dollar

SGD – Singapore Dollar

TWD – New Taiwan Dollar

USD – United States Dollar

Glossary:

BBSW – Bank Bill Swap Reference Rate (Australia)

BKBM – Bank Bill Benchmark (New Zealand)

CBT – Chicago Board of Trade

CDOR – Canadian Dealer Offered Rate

CDX-CMBX.NA – North American Commercial Mortgage-Backed Index

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

CMBS – Commercial Mortgage-Backed Securities

CME – Chicago Mercantile Exchange

EURIBOR – Euro Interbank Offered Rate

GSE – Government-Sponsored Enterprise

INTRCONX – Inter-Continental Exchange

LCH – London Clearing House

LIBOR – London Interbank Offered Rates

NIBOR – Norwegian Interbank Offered Rate

REIT – Real Estate Investment Trust

REMICs – Real Estate Mortgage Investment Conduits

See notes to financial statements.

 

38		•  ALLIANCEBERNSTEIN INCOME FUND

Portfolio of Investments

---

STATEMENT OF ASSETS & LIABILITIES

December 31, 2015

 

Assets
Investments in securities, at value
Unaffiliated issuers (cost $2,561,694,215)		$	2,536,638,991
Affiliated issuers (cost $78,337,553)			78,337,553
Cash			9,801,407
Cash collateral due from broker			8,068,947
Foreign currencies, at value (cost $1,967,392)			1,916,428
Interest and dividends receivable			28,459,907
Unrealized appreciation on forward currency exchange contracts			6,956,520
Receivable for investment securities sold			215,838
Upfront premium paid on credit default swaps			50,978
Unrealized appreciation on credit default swaps			19,785
Total assets			2,670,466,354
Liabilities
Payable for reverse repurchase agreements			936,313,610
Dividends payable			29,367,159
Payable for variation margin on exchange-traded derivatives			2,810,614
Unrealized depreciation on forward currency exchange contracts			1,776,535
Upfront premium received on credit default swaps			1,723,783
Advisory fee payable			791,172
Unrealized depreciation on credit default swaps			666,891
Payable for investment securities purchased			167,581
Administrative fee payable			15,328
Accrued expenses			877,402
Total liabilities			974,510,075
Net Assets		$	1,695,956,279
Composition of Net Assets
Common stock, at par		$	2,158,356
Additional paid-in capital			1,782,459,896
Distributions in excess of net investment income			(3,296,673	)
Accumulated net realized loss on investment and foreign currency transactions			(60,088,958	)
Net unrealized depreciation on investments and foreign currency denominated assets and liabilities			(25,276,342	)
		$	1,695,956,279
Net Asset Value Per Share—300 million shares of common stock authorized, $0.01 par value (based on 215,835,608 shares outstanding)		$	7.86

See notes to financial statements.

 

ALLIANCEBERNSTEIN INCOME FUND  •			39

Statement of Assets & Liabilities

---

STATEMENT OF OPERATIONS

Year Ended December 31, 2015

 

Investment Income
Interest (net of foreign taxes withheld of $11,419)		$	96,143,365
Dividends
Unaffiliated issuers			331,360
Affiliated issuers			72,367
Other income			60,717			$	96,607,809
Expenses
Advisory fee (see Note B)			8,908,641
Printing			883,747
Legal			279,305
Custodian			276,061
Registration fees			217,039
Audit and tax			152,148
Transfer agency			116,242
Administrative			63,721
Directors’ fees			21,161
Miscellaneous			156,482
Total expenses before interest expense			11,074,547
Interest expense			2,622,406
Total expenses							13,696,953
Net investment income							82,910,856
Realized and Unrealized Gain (Loss) on Investment and Foreign Currency Transactions
Net realized gain (loss) on:
Investment transactions							44,482,755
Futures							(22,468,647	)
Options written							647,736
Swaptions written							169,290
Swaps							(12,387,670	)
Foreign currency transactions							14,125,240
Net change in unrealized appreciation/depreciation of:
Investments							(134,192,070	)
Futures							18,118,579
Options written							(44,134	)
Swaps							4,438,126
Foreign currency denominated assets and liabilities							2,371,013
Net loss on investment and foreign currency transactions							(84,739,782	)
Net Decrease in Net Assets from Operations						$	(1,828,926	)

See notes to financial statements.

 

40		•  ALLIANCEBERNSTEIN INCOME FUND

Statement of Operations

---

STATEMENT OF CHANGES IN NET ASSETS

 

		Year Ended December 31, 2015				Year Ended December 31, 2014
Increase (Decrease) in Net Assets from Operations
Net investment income		$	82,910,856			$	100,504,848
Net realized gain (loss) on investment transactions and foreign currency transactions			24,568,704				(14,555,797	)
Net change in unrealized appreciation/depreciation of investments and foreign currency denominated assets and liabilities			(109,308,486	)			60,564,273
Net increase (decrease) in net assets from operations			(1,828,926	)			146,513,324
Dividends and distributions to Shareholders from
Net investment income			(101,719,576	)			(107,988,728	)
Net realized gain on investment transactions			(9,712,602	)			– 0	–
Common Stock Transactions
Repurchase of Shares (12,172,242 and 14,903,847 shares, respectively)			(92,499,158	)			(112,501,549	)
Total decrease			(205,760,262	)			(73,976,953	)
Net Assets
Beginning of period			1,901,716,541				1,975,693,494
End of period (including distributions in excess of net investment income of ($3,296,673) and undistributed net investment income of $1,417,504, respectively)		$	1,695,956,279			$	1,901,716,541

See notes to financial statements.

 

ALLIANCEBERNSTEIN INCOME FUND  •			41

Statement of Changes in Net Assets

---

STATEMENT OF CASH FLOWS

For the Year Ended December 31, 2015

 

Cash flows from operating activities
Net decrease in net assets from operations						$	(1,828,926	)
Reconciliation of Net Decrease in Net Assets from Operations to Net Increase in Cash from Operating Activities:
Decrease in interest and dividends receivable		$	5,651,389
Decrease in receivable for investments sold			3,705,934
Net accretion of bond discount and amortization of bond premium			24,040,678
Decrease in payable for investments purchased			(3,617,016	)
Increase in accrued expenses			281,478
Decrease in cash collateral due from broker			4,024,622
Purchases of long-term investments			(897,044,256	)
Purchases of short-term investments			(1,318,404,399	)
Proceeds from disposition of long-term investments			1,068,574,440
Proceeds from disposition of short-term investments			1,274,145,549
Proceeds from options written, net			511,970
Proceeds from swaptions written, net			169,290
Proceeds on swaps, net			219,597
Payments for exchange-traded derivatives settlements			(7,300,993	)
Decrease in cash collateral due to broker			(377,000	)
Net realized gain on investment transactions and foreign currency transactions			(24,568,704	)
Net change in unrealized appreciation/depreciation of investments and foreign currency denominated assets and liabilities			109,308,486
Total adjustments							239,321,065
Net increase in cash from operating activities						$	237,492,139
Financing Activities:
Repurchase of Shares			(95,906,044	)
Cash dividends paid			(90,495,494	)
Decrease in reverse repurchase agreements			(56,460,595	)
Net decrease in cash from financing activities							(242,862,133	)
Effect of exchange rate on cash							13,985,139
Net increase in cash							8,615,145
Net change in cash
Cash at beginning of year							3,102,690
Cash at end of year						$	11,717,835
Supplemental disclosure of cash flow information:
Interest expense paid during the year		$	2,209,703

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 year.

See notes to financial statements.

 

42		•  ALLIANCEBERNSTEIN INCOME FUND

Statement of Cash Flows

---

NOTES TO FINANCIAL STATEMENTS

December 31, 2015

 

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 Fund is an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. 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 any other debt instruments having 60 days or less remaining until maturity are generally valued at market by an independent pricing vendor, if a market price is available. If a market price is not available, the securities are valued at amortized cost. This methodology is commonly used for short term securities that have an original maturity of 60 days or less, as well as short term securities that had an original term to maturity that exceeded 60 days. In instances when amortized cost is utilized, the Valuation Committee (the “Committee”) must reasonably conclude that the utilization of amortized cost is approximately the same as the fair value of the

 

ALLIANCEBERNSTEIN INCOME FUND  •			43

Notes to Financial Statements

---

 

 

security. Such factors the Committee will consider include, but are not limited to, an impairment of the creditworthiness of the issuer or material changes in interest rates. 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 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)

 

44		•  ALLIANCEBERNSTEIN INCOME FUND

Notes to Financial Statements

---

 

 

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, 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.

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. 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

 

ALLIANCEBERNSTEIN INCOME FUND  •			45

Notes to Financial Statements

---

 

 

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 December 31, 2015:

 

Investments in Securities:

Level 1

Level 2

Level 3

Total

Assets:

Governments – Treasuries

$

– 0

–

$

1,816,063,123

$

– 0

–

$

1,816,063,123

Corporates – Non-Investment Grade

– 0

–

235,756,883

7,013,931

242,770,814

Collateralized Mortgage Obligations

– 0

–

3,311,186

97,375,665

100,686,851

Corporates – Investment Grade

– 0

–

89,071,166

– 0

–

89,071,166

Agencies

– 0

–

70,553,320

– 0

–

70,553,320

Commercial Mortgage-Backed Securities

– 0

–

4,079,291

60,751,150

64,830,441

Whole Loan Trusts

– 0

–

– 0

–

26,950,760

26,950,760

Emerging Markets – Corporate Bonds

– 0

–

24,528,735

– 0

–

24,528,735

Common Stocks

– 0

–

– 0

–

22,554,552

22,554,552

Emerging Markets – Sovereigns

– 0

–

21,682,520

– 0

–

21,682,520

Quasi-Sovereigns

– 0

–

19,216,732

– 0

–

19,216,732

Preferred Stocks

12,783,295

– 0

–

– 0

–

12,783,295

Governments – Sovereign Agencies

– 0

–

8,131,171

– 0

–

8,131,171

Local Governments – Municipal Bonds

– 0

–

6,663,368

– 0

–

6,663,368

Bank Loans

– 0

–

– 0

–

4,226,990

4,226,990

Asset-Backed Securities

– 0

–

2,082,810

1,744,238

3,827,048

Investment Companies

– 0

–

– 0

–

1,050,272

1,050,272

Governments – Sovereign Bonds

– 0

–

996,241

– 0

–

996,241

Mortgage Pass-Throughs

– 0

–

51,592

– 0

–

51,592

Short-Term Investments

78,337,553

– 0

–

– 0

–

78,337,553

Total Investments in Securities

91,120,848

2,302,188,138

221,667,558

2,614,976,544

 

46		•  ALLIANCEBERNSTEIN INCOME FUND

Notes to Financial Statements

---

 

 

Investments in Securities:

Level 1

Level 2

Level 3

Total

Other Financial Instruments*:

Assets:

Futures

$

1,478,713

$

– 0

–

$

– 0

–

$

1,478,713

#

Forward Currency Exchange Contracts

– 0

–

6,956,520

– 0

–

6,956,520

Centrally Cleared Credit Default Swaps

– 0

–

269,368

– 0

–

269,368

#

Centrally Cleared Interest Rate Swaps

– 0

–

3,054,660

– 0

–

3,054,660

#

Credit Default Swaps

– 0

–

19,785

– 0

–

19,785

Liabilities:

Futures

(379,993

)

– 0

–

– 0

–

(379,993

)#

Forward Currency Exchange Contracts

– 0

–

(1,776,535

)

– 0

–

(1,776,535

)

Centrally Cleared Credit Default Swaps

– 0

–

(67,070

)

– 0

–

(67,070

)#

Centrally Cleared Interest Rate Swaps

– 0

–

(8,931,643

)

– 0

–

(8,931,643

)#

Credit Default Swaps

– 0

–

(666,891

)

– 0

–

(666,891

)

Total^

$

92,219,568

$

2,301,046,332

$

221,667,558

$

2,614,933,458

 

*

Other financial instruments are derivative instruments, such as futures, forwards and swaps, which are valued at the unrealized appreciation/depreciation on the instrument.

 

#

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 Level 1 and Level 2 during the reporting period.

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 Grade				Collateralized Mortgage Obligations				Commercial Mortgage-Backed Securities
Balance as of 12/31/14		$	4,961,200			$	87,500,657			$	47,313,294
Accrued discounts/(premiums)			95,628				295,524				140,015
Realized gain (loss)			(9,085	)			379,539				302,008
Change in unrealized appreciation/depreciation			(1,475,411	)			(1,888,805	)			(5,082,621	)
Purchases/Payups			7,452,665				41,232,309				23,185,833
Sales/Paydowns			(2,247,629	)			(30,143,559	)			(5,107,379	)
Transfers in to Level 3			– 0	–			– 0	–			– 0	–
Transfers out of Level 3			(1,763,437	)			– 0	–			– 0	–
Balance as of 12/31/15		$	7,013,931			$	97,375,665			$	60,751,150
Net change in unrealized appreciation/depreciation from investments held as of 12/31/15*		$	(1,446,212	)		$	(1,049,789	)		$	(4,821,430	)

 

ALLIANCEBERNSTEIN INCOME FUND  •			47

Notes to Financial Statements

---

 

 

		Whole Loan Trusts				Common Stocks				Bank Loans
Balance as of 12/31/14		$	16,795,929			$	1,258,032			$	23,689,120
Accrued discounts/(premiums)			38,977				– 0	–			44,864
Realized gain (loss)			(116,589	)			278,102				(290,953	)
Change in unrealized appreciation/depreciation			(1,008,727	)			1,733,326				465,253
Purchases/Payups			20,747,132				19,563,194				1,553,704
Sales/Paydowns			(9,505,962	)			(278,102	)			(19,234,998	)
Transfers in to Level 3			– 0	–			– 0	–			– 0	–
Transfers out of Level 3			– 0	–			– 0	–			(2,000,000	)**
Balance as of 12/31/15		$	26,950,760			$	22,554,552			$	4,226,990
Net change in unrealized appreciation/depreciation from investments held as of 12/31/15*		$	(1,008,728	)		$	2,007,087			$	(718,533	)
		Asset-Backed Securities				Investment Companies				Total
Balance as of 12/31/14		$	– 0	–		$	2,409,198			$	183,927,430
Accrued discounts/(premiums)			– 0	–			– 0	–			615,008
Realized gain (loss)			– 0	–			(331,408	)			211,614
Change in unrealized appreciation/depreciation			(26,562	)			319,145				(6,964,402	)
Purchases/Payups			(62,400	)			403,022				114,075,459
Sales/Paydowns			(166,800	)			(1,749,685	)			(68,434,114	)
Transfers in to Level 3			2,000,000	**			– 0	–			2,000,000
Transfers out of Level 3			– 0	–			– 0	–			(3,763,437	)
Balance as of 12/31/15		$	1,744,238			$	1,050,272			$	221,667,558	+
Net change in unrealized appreciation/depreciation from investments held as of 12/31/15*		$	(26,562	)		$	193,217			$	(6,870,950	)

 

*

The unrealized appreciation/depreciation is included in net change in unrealized appreciation/depreciation on investments and other financial instruments in the accompanying statement of operations.

 

**

Security Type has been changed during the reporting period.

 

+

There were de minimis transfers under 1% of net assets during the reporting period.

 

 

48		•  ALLIANCEBERNSTEIN INCOME FUND

Notes to Financial Statements

---

 

 

The following presents information about significant unobservable inputs related to the Fund’s Level 3 investments at December 31,2015. Securities priced i) at net asset value, ii) by third party vendors, or iii) using prior transaction prices, which approximates fair value, are excluded from the following table.

Quantitative Information about Level 3 Fair Value Measurements

 

Fair Value at 12/31/15

Valuation Technique

Unobservable Input

Range/Weighted Average

Corporates – Non-Investment Grade

$

1,779,181

Discounted Cashflow

Clean Debt Value   Convertible Feature Value

51.50% – 76.0%/ 63.80% 22.20% – 2.20%/ 12.20%

Whole Loan Trusts

471,744

Projected Cashflow

Level Yield

97.03%/ NA

819,652

Recovery Analysis

Delinquency Rate Collateralization

<5%/ NA >1.1X / NA

3,038,613

Projected Cashflow

Level Yield

13.45%/ NA

615,336

Projected Cashflow

Internal Rate of Return

9.97%/ NA

3,016,125

Market- Approach

Underlying NAV of the Collateral

$

104.60/ NA

1,160,774

Recovery Analysis

Cumulative Loss

<17%/ NA

12,350,952

Projected Cashflow

Level Yield

10.23%/ NA

3,293,628

Recovery Analysis

Delinquency Rate

<4% / NA

265,353

Recovery Analysis

Appraisal Value

$

3,376,000 / NA

307,810

Recovery Analysis

Appraisal Value

$

3,200,000 / NA

389,990

Recovery Analysis

Appraisal Value

$

4,560,000 / NA

1,220,783

Recovery Analysis

Cumulative Loss

<15% / NA

Common Stocks

131,474

Option Pricing Model

Enterprise Value

$ $

519.2mil – 603.2Mil/ NA

Exercise Price

$ $

730.4mil – 830.5mil/ NA

Years to Expiration

2.5yr – 4.5yr/ NA

EV Volatility %

22.6% – 26.5%/ NA

Risk Free Rate

1.09% – 1.55%/ NA

927,230

Market- Approach

EBITDA* Projection EBITDA* Multiples

$

179.1MM/ NA 8.1X – 10.1X/ 9.1X

Bank Loans

1,081,966

Market- Approach

EBITDA* EBITDA* Multiple Scrap Value

$   $

28mil – $70mil 6X 154mil

 

*

Earnings before Interest, Taxes, Depreciation and Amortization.

 

ALLIANCEBERNSTEIN INCOME FUND  •			49

Notes to Financial Statements

---

 

 

The Adviser established the Committee to oversee 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).

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

 

50		•  ALLIANCEBERNSTEIN INCOME FUND

Notes to Financial Statements

---

 

 

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.

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.

 

ALLIANCEBERNSTEIN INCOME FUND  •			51

Notes to Financial Statements

---

 

 

NOTE B

Advisory Fee and Other Transactions with Affiliates

Under the terms of the investment 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 year ended December 31, 2015, 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 year ended December 31, 2015, the reimbursement for such services amounted to $63,721.

The Fund may invest in the AB 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 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 year ended December 31, 2015 is as follows:

 

Market Value December 31, 2014 (000)		Purchases at Cost (000)				Sales Proceeds (000)				Market Value December 31, 2015 (000)				Dividend Income (000)
$    28,409		$	1,266,832			$	1,216,903			$	78,338			$	72

Brokerage commissions paid on investment transactions for the year ended December 31, 2015 amounted to $79,389, of which $0 and $0, respectively, was paid to Sanford C. Bernstein & Co. LLC and Sanford C. Bernstein Limited, affiliates of the Adviser.

 

52		•  ALLIANCEBERNSTEIN INCOME FUND

Notes to Financial Statements

---

 

 

NOTE C

Investment Transactions

Purchases and sales of investment securities (excluding short-term investments) for the year ended December 31, 2015 were as follows:

 

		Purchases				Sales
Investment securities (excluding U.S. government securities)		$	371,819,076			$	286,488,093
U.S. government securities			534,986,280				768,709,749

The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation (excluding futures, foreign currency, written options and swap transactions) are as follows:

 

Cost		$	2,641,667,066
Gross unrealized appreciation		$	71,756,448
Gross unrealized depreciation			(98,446,970	)
Net unrealized depreciation		$	(26,690,522	)

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 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 cash collateral 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

 

ALLIANCEBERNSTEIN INCOME FUND  •			53

Notes to Financial Statements

---

 

 

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 year ended December 31, 2015, 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 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 year ended December 31, 2015, 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

 

54		•  ALLIANCEBERNSTEIN INCOME FUND

Notes to Financial Statements

---

 

 

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.

During the year ended December 31, 2015, the Fund held purchased options for hedging and non-hedging purposes. During the year ended December 31, 2015, the Fund held written options for hedging and non-hedging purposes.

For the year ended December 31, 2015, the Fund had the following transactions in written options:

 

		Number of Contracts				Premiums Received
Options written outstanding as of 12/31/14			2,325,000,000			$	92,175
Options written			228,650,000				851,895
Options expired			(127,235,000	)			(548,722	)
Options bought back			(2,426,415,000	)			(395,348	)
Options exercised			– 0	–			– 0	–
Options written outstanding as of 12/31/15			– 0	–		$	– 0	–

 

ALLIANCEBERNSTEIN INCOME FUND  •			55

Notes to Financial Statements

---

 

 

		Notional Amount				Premiums Received
Swaptions written outstanding as of 12/31/14			– 0	–		$	– 0	–
Swaptions written			18,000,000				178,200
Swaptions expired			– 0	–			– 0	–
Swaptions bought back			(18,000,000	)			(178,200	)
Swaptions exercised			– 0	–			– 0	–
Swaptions written outstanding as of 12/31/15			– 0	–		$	– 0	–

 

•

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 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.

 

56		•  ALLIANCEBERNSTEIN INCOME FUND

Notes to Financial Statements

---

 

 

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 clearinghouse on which the transaction is effected. Such amount is shown as cash collateral 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 centrally cleared swaps is generally less than non-centrally cleared swaps, since the clearinghouse, which is the issuer or counterparty to each centrally cleared 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 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).

 

ALLIANCEBERNSTEIN INCOME FUND  •			57

Notes to Financial Statements

---

 

 

During the year ended December 31, 2015, the Fund held interest rate swaps for hedging and non-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.

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 December 31, 2015, the Fund did not have Buy Contracts outstanding with respect to the same referenced obligation and counterparty as certain Sale Contracts outstanding.

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.

During the year ended December 31, 2015, the Fund held credit default swaps for hedging purposes.

Implied credit spreads over U.S. Treasuries of comparable maturity 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

 

58		•  ALLIANCEBERNSTEIN INCOME FUND

Notes to Financial Statements

---

 

 

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.

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 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 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 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. For additional details, please refer to netting arrangements by counterparty tables below.

 

ALLIANCEBERNSTEIN INCOME FUND  •			59

Notes to Financial Statements

---

 

 

At December 31, 2015, 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 exchange-traded derivatives

$

4,533,373

*

Receivable/Payable for variation margin on exchange-traded derivatives

$

9,311,636

*

Credit contracts

Receivable/Payable for variation margin on exchange-traded derivatives

269,368

*

Receivable/Payable for variation margin on exchange-traded derivatives

67,070

*

Foreign exchange contracts

Unrealized appreciation on forward currency exchange contracts

6,956,520

Unrealized depreciation on forward currency exchange contracts

1,776,535

Credit contracts

Unrealized appreciation on credit default swaps

19,785

Unrealized depreciation on credit default swaps

666,891

Total

$

11,779,046

$

11,822,132

 

*

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 year ended December 31, 2015:

 

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		$	(22,468,647	)		$	18,118,579
Foreign exchange contracts		Net realized gain (loss) on foreign currency transactions; Net change in unrealized appreciation/depreciation of foreign currency denominated assets and liabilities			10,293,151				2,511,114

 

60		•  ALLIANCEBERNSTEIN INCOME FUND

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 investment transactions; Net change in unrealized appreciation/depreciation of investments		$	329,152			$	(18,853	)
Credit contracts		Net realized gain (loss) on investment transactions; Net change in unrealized appreciation/depreciation of investments			(80,190	)			– 0	–
Foreign exchange contracts		Net realized gain (loss) on options written; Net change in unrealized appreciation/depreciation of options written			647,736				(44,134	)
Credit contracts		Net realized gain (loss) on swaptions written; Net change in unrealized appreciation/depreciation of swaptions written			169,290				– 0	–
Interest rate contracts		Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps			(14,316,671	)			6,091,062
Credit contracts		Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps			1,929,001				(1,652,936	)
Total				$	(23,497,178	)		$	25,004,832

The following table represents the average monthly volume of the Fund’s derivative transactions during the year ended December 31, 2015:

 

Futures:
Average original value of sale contracts		$	831,933,287
Forward Currency Exchange Contracts:
Average principal amount of buy contracts		$	176,854,283
Average principal amount of sale contracts		$	310,273,490

 

ALLIANCEBERNSTEIN INCOME FUND  •			61

Notes to Financial Statements

---

 

 

Purchased Options:
Average monthly cost		$	167,268	(a)
Interest Rate Swaps:
Average notional amount		$	76,036,128	(a)
Centrally Cleared Interest Rate Swaps:
Average notional amount		$	699,794,830
Credit Default Swaps:
Average notional amount of buy contracts		$	10,218,064	(b)
Average notional amount of sale contracts		$	12,894,385
Centrally Cleared Credit Default Swaps:
Average notional amount of buy contracts		$	2,373,910	(c)
Average notional amount of sale contracts		$	35,726,392

 

(a)

Positions were open for three months during the year.

 

(b)

Positions were open for less than one month during the year.

 

(c)

Positions were open for four months during the year.

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 December 31, 2015:

 

Counterparty		Derivative Assets Subject to a MA				Derivative Available for Offset				Cash Collateral Received				Security Collateral Received				Net Amount of Derivatives Assets
OTC Derivatives:
Barclays Bank PLC		$	177,456			$	(177,456	)		$	– 0	–		$	– 0	–		$	– 0	–
BNP Paribas SA			660,689				(75,651	)			– 0	–			– 0	–			585,038
Citibank			92,764				– 0	–			– 0	–			– 0	–			92,764
Credit Suisse International			366,823				(191,255	)			– 0	–			– 0	–			175,568
HSBC Bank USA			1,569,047				(200,683	)			– 0	–			(892,082	)			476,282
Royal Bank of Scotland PLC			2,235,123				(1,437,110	)			– 0	–			– 0	–			798,013
Standard Chartered Bank			500,153				(8,242	)			– 0	–			– 0	–			491,911
State Street Bank & Trust Co.			124,000				(2,349	)			– 0	–			– 0	–			121,651
UBS AG			1,237,298				– 0	–			– 0	–			– 0	–			1,237,298
Total		$	6,963,353			$	(2,092,746	)		$	– 0	–		$	(892,082	)		$	3,978,525	^

 

62		•  ALLIANCEBERNSTEIN INCOME FUND

Notes to Financial Statements

---

 

 

 

Counterparty

Derivative Liabilities Subject to a MA

Derivative Available for Offset

Cash Collateral Pledged*

Security Collateral Pledged*

Net Amount of Derivatives Liabilities

Exchange-Traded Derivatives:

Citigroup Global Markets, Inc.**

$

814,708

$

– 0

–

$

(814,708

)

$

– 0

–

$

– 0

–

Morgan Stanley & Co. LLC**

1,995,906

– 0

–

– 0

–

(1,995,906

)

– 0

–

Total

$

2,810,614

$

– 0

–

$

(814,708

)

$

(1,995,906

)

$

– 0

–

OTC Derivatives:

Barclays Bank PLC

$

1,689,397

$

(177,456

)

$

– 0

–

$

– 0

–

$

1,511,941

BNP Paribas SA

75,651

(75,651

)

– 0

–

– 0

–

– 0

–

Brown Brothers Harriman & Co.

21,640

– 0

–

– 0

–

– 0

–

21,640

Credit Suisse International

191,255

(191,255

)

– 0

–

– 0

–

– 0

–

Goldman Sachs Bank USA/ Goldman Sachs International

476,952

– 0

–

– 0

–

– 0

–

476,952

HSBC Bank USA

200,683

(200,683

)

– 0

–

– 0

–

– 0

–

Royal Bank of Scotland PLC

1,437,110

(1,437,110

)

– 0

–

– 0

–

– 0

–

Standard Chartered Bank

8,242

(8,242

)

– 0

–

– 0

–

– 0

–

State Street Bank & Trust Co.

2,349

(2,349

)

– 0

–

– 0

–

– 0

–

Total

$

4,103,279

$

(2,092,746

)

$

– 0

–

$

– 0

–

$

2,010,533

^

 

*

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

 

**

Cash and/or securities have been posted for initial margin requirements for exchange traded derivatives outstanding at December 31, 2015.

 

^

Net amount represents the net receivable/payable that would be due from/to the counterparty in the event of default or termination. The net amount from OTC financial derivative instruments can only be netted across transactions governed under the same master agreement with the same counterparty.

See Note C.4 for additional disclosure of netting arrangements regarding reverse repurchase agreements.

 

ALLIANCEBERNSTEIN INCOME FUND  •			63

Notes to Financial Statements

---

 

 

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. TBA and Dollar Rolls

The Fund may invest in TBA mortgage-backed securities. A TBA, or “To Be Announced”, trade represents a contract for the purchase or sale of mortgage-backed securities to be delivered at a future agree-upon date; however, the specific mortgage pool numbers or the number of pools that will be delivered to fulfill the trade obligation or terms of the contract are unknown at the time of the trade. Mortgage pools (including fixed-rate or variable-rate mortgages) guaranteed by the Government National Mortgage Association, or GNMA, the Federal National Mortgage Association, or FNMA, or the Federal Home Loan Mortgage Corporation, or FHLMC, are subsequently allocated to the TBA transactions.

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 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. During the year ended December 31, 2015, 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,

 

64		•  ALLIANCEBERNSTEIN INCOME FUND

Notes to Financial Statements

---

 

 

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 year ended December 31, 2015, the average amount of reverse repurchase agreements outstanding was $1,031,682,404 and the daily weighted average interest rate was 0.24%. At December 31, 2015, the Fund had reverse repurchase agreements outstanding in the amount of $936,313,610 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 December 31, 2015:

 

Counterparty		RVP Liabilities Subject to a MRA				Securities Collateral Pledged†*				Net Amount of RVP Liabilities
Barclays Capital, Inc.		$	3,148,875			$	(3,134,255	)		$	14,620
Credit Suisse Securities (USA) LLC			4,094,983				(4,094,983	)			– 0	–
HSBC Bank USA			366,413,492				(366,413,492	)			– 0	–
JPMorgan Chase Bank			442,649,084				(442,649,084	)			– 0	–
Jefferies & Co., Inc.			118,128,103				(117,216,980	)			911,123
RBC Capital Markets			1,879,073				(1,471,250	)			407,823
Total		$	936,313,610			$	(934,980,044	)		$	1,333,566

 

†

Including accrued interest.

 

*

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

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

 

ALLIANCEBERNSTEIN INCOME FUND  •			65

Notes to Financial Statements

---

 

 

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, may receive a commitment fee based on the amount of the commitment. Under these arrangements, the Fund may 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.

As of December 31, 2015, the Fund had the following unfunded loan commitments which could be extended at the option of the borrower pursuant to the respective loan agreement.

 

Borrower		Unfunded Loan Commitment
Flexpath Wh I LLC Series B 12.00%, 4/01/21		$	827,014

During the year ended December 31, 2015, the Fund received commitment fees or additional funding fees in the amount of $44,093.

NOTE D

Common Stock

During the year ended December 31, 2015 and the year ended December 31, 2014, 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 time when they are believed to be in the best interests of the Fund. During the year ended December 31, 2015 and the year ended December 31, 2014, the Fund repurchased 12,172,242 and 14,903,847 shares, respectively, at an average discount of 10.45% and 10.09%, respectively, from net asset value. The share repurchase program expired on June 25, 2015.

 

66		•  ALLIANCEBERNSTEIN INCOME FUND

Notes to Financial Statements

---

 

 

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%.

Liquidity Risk—Liquidity risk exists when particular investments are difficult to purchase or sell, possibly preventing the Fund from selling out of these illiquid or relatively less liquid securities at an advantageous price. Causes of liquidity risk may include low trading volume, lack of a market maker, a large position, or legal restrictions that limit or prevent a Fund from selling securities or closing derivative positions at desirable prices or opportune times. Over recent years, the capacity of dealers to make markets in fixed income securities has been outpaced by the growth in the size of the fixed income markets. Liquidity risk may be magnified in a rising interest rate environment, where the value and liquidity of fixed income securities generally go down. Derivatives and securities involving substantial market and credit risk tend to involve greater liquidity risk. Illiquid securities and relatively less liquid securities may also be difficult to value.

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.

 

ALLIANCEBERNSTEIN INCOME FUND  •			67

Notes to Financial Statements

---

 

 

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.

Foreign (Non-U.S.) Risk—Investments in securities of non-U.S. issuers may involve more risk than those of U.S. issuers. These securities may fluctuate more widely in price and may be less liquid due to adverse market, economic, political, regulatory or other factors. Risks relating to investments in securities of non- U.S. issuers may be heightened with respect to investments in emerging-market countries, where there may be: greater social, economic and political uncertainty and instability; more substantial governmental involvement in the economy; less governmental supervision and regulation; unavailability of currency hedging techniques; companies that are newly organized and small; differences in auditing and financial reporting standards, which may result in unavailability of material information about issuers; and less developed. Foreign investment in the securities markets of certain foreign countries is restricted or controlled to varying degrees. These restrictions or controls may at times limit or preclude investment in certain securities and may increase the costs and expenses of the Fund.

Currency Risk—Fluctuations in currency exchange rates may negatively affect the value of the Fund’s investments or reduce its returns.

Leverage Risk—When the Fund borrows money or otherwise leverages its investments, its performance may be volatile because leverage tends to exaggerate the effect of any increase or decrease in the value of the Fund’s investments. The Fund may create leverage through the use of reverse repurchase arrangements, forward currency exchange contracts, forward commitments, dollar rolls or futures or by borrowing money. 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.

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.

 

68		•  ALLIANCEBERNSTEIN INCOME FUND

Notes to Financial Statements

---

 

 

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 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 paid during the fiscal years ended December 31, 2015 and December 31, 2014 were as follows:

 

		2015				2014
Distributions paid from:
Ordinary income		$	107,568,721			$	107,988,728
Net long-term capital gains			3,863,457				– 0	–
Total taxable distributions paid		$	111,432,178			$	107,988,728

As of December 31, 2015, the components of accumulated earnings/(deficit) on a tax basis were as follows:

 

Undistributed ordinary income		$	3,104,336
Accumulated capital and other losses			(58,811,757	)(a)
Unrealized appreciation/(depreciation)			(31,209,241	)(b)
Total accumulated earnings/(deficit)		$	(86,916,662	)(c)

 

(a)

As of December 31, 2015, the Fund’s cumulative deferred loss on straddles was $49,588,327. At December 31, 2015, the Fund had a net post-October long-term capital loss deferral of $9,223,430 which is deemed to arise on January 1, 2016.

 

(b)

The differences between book-basis and tax-basis unrealized appreciation/(depreciation) are attributable primarily to the tax deferral of losses on wash sales, the tax treatment of swaps and partnership investments, the realization for tax purposes of gains/losses on certain derivative instruments, and the tax treatment of passive foreign investment companies (PFICs).

 

ALLIANCEBERNSTEIN INCOME FUND  •			69

Notes to Financial Statements

---

 

 

 

(c)

The differences between book-basis and tax-basis components of accumulated earnings/(deficit) are attributable primarily to dividends payable and the tax treatment of defaulted securities.

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 for an indefinite period, and such losses will retain their character as either short-term or long-term capital losses. As of December 31, 2015, the Fund did not have any capital loss carryforwards.

During the current fiscal year, permanent differences primarily due to the redesignation of dividends, foreign currency reclassifications, the tax treatment of swaps and swap clearing fees, paydown gain/loss reclassifications, and the tax treatment of proceeds from the sale of defaulted securities resulted in a net decrease in distributions in excess of net investment income and a net increase in accumulated net realized loss on investment and foreign currency transactions. These reclassifications had no effect on net assets.

NOTE G

New Accounting Pronouncement

In May 2015, the Financial Accounting Standards Board issued an Accounting Standards Update, ASU 2015-07 (the “ASU”) which removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. The ASU also removes the requirement to make certain disclosures for investments that are eligible to be measured at fair value using the net asset value per share practical expedient but do not utilize that practical expedient. The ASU is effective for annual periods beginning after December 15, 2015 and interim periods within those annual periods. At this time, management is evaluating the implications of these changes on the financial statements.

NOTE H

Proposed Acquisition of the Assets of the Fund by an Open-End Fund

On August 6, 2015, the Fund announced that its Board had approved a proposed acquisition of its assets, and the assumption of its liabilities, by AB Income Fund (“Income Fund”), a newly-formed series of AB Bond Fund, Inc., an open-end registered investment company (the “Acquisition”). The Acquisition requires the approval of the Fund’s shareholders and a Special Meeting of Shareholders of the Fund (the “Special Meeting”) was convened in connection with this matter as scheduled on February 1, 2016, but has been adjourned until March 1, 2016, to allow additional time for the solicitation of proxies. Only stockholders of record on November 4, 2015 will be entitled to vote at the reconvened Special Meeting on March 1, 2016.

Each of the Fund and Income Fund is advised by the Adviser. Income Fund will have the same investment objective as the Fund. Like the Fund, Income Fund

 

70		•  ALLIANCEBERNSTEIN INCOME FUND

Notes to Financial Statements

---

 

 

will normally invest at least 80% of its net assets in income-producing securities. The most significant difference between the Fund and Income Fund is that while the Fund invests at least 65% of its assets in securities issued by the U.S. government, Income Fund will invest at least 65% of its assets in securities of U.S. and foreign governments. The broader investment policy of the Income Fund should provide the investment flexibility to better manage duration and credit risk. In an effort to limit the risk of this broader investment policy, the Income Fund will have an additional policy to invest at least 65% of its assets in securities denominated in U.S. dollars.

The acquisition is expected to be treated as a tax-free exchange to the shareholders of the Fund for federal income tax purposes.

If the Acquisition is approved by the Fund’s shareholders, the Fund’s assets will be acquired, and its liabilities will be assumed, by Income Fund, and shareholders will receive Advisor Class shares of Income Fund which will have an aggregate net asset value equal to the aggregate net asset value of the shareholder’s holding in the Fund. The Fund would then be dissolved. A redemption fee of 0.75% will be imposed on redemptions of Advisor Class shares for three months after the Acquisition to defray the costs of increased redemptions expected to occur after the Acquisition.

Note I

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.

 

ALLIANCEBERNSTEIN INCOME FUND  •			71

Notes to Financial Statements

---

FINANCIAL HIGHLIGHTS

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

 

		Year Ended December 31,
		2015				2014				2013				2012				2011
Net asset value, beginning of period			$  8.34				$  8.13				$  8.89				$  8.93				$  8.75
Income From Investment Operations
Net investment income(a)			.38				.42				.40				.40				.44
Net realized and unrealized gain (loss) on investment and foreign currency transactions			(.41	)			.19				(.71	)			.57				.31
Contributions from affiliates			– 0	–			– 0	–			– 0	–			.00	(b)			– 0	–
Net increase (decrease) in net asset value from operations			(.03	)			.61				(.31	)			.97				.75
Less: Dividends and Distributions
Dividends from net investment income			(.46	)			(.45	)			(.41	)			(.48	)			(.57	)
Distributions from net realized gain on investment transactions			(.05	)			– 0	–			(.04	)			(.53	)			– 0	–
Total dividends and distributions			(.51	)			(.45	)			(.45	)			(1.01	)			(.57	)
Anti-Dilutive Effect of Share Repurchase Program			.06				.05				– 0	–			– 0	–			– 0	–
Net asset value, end of period			$  7.86				$  8.34				$  8.13				$  8.89				$  8.93
Market value, end of period			$  7.67				$  7.47				$  7.13				$  8.10				$  8.07
Discount, end of period			(2.42	)%			(10.43	)%			(12.30	)%			(8.89	)%			(9.63	)%
Total Return
Total investment return based on:(c)
Market value			9.71	%			11.28	%			(6.50	)%			13.08	%			9.36	%
Net asset value			.70	%			8.96	%			(2.86	)%			12.15	%			9.67	%
Ratios/Supplemental Data
Net assets, end of period (000,000’s omitted)			$1,696				$1,902				$1,976				$2,159				$2,168
Ratio to average net assets of:
Expenses(d)			.75	%			.67	%			.63	%			.64	%			.64	%
Net investment income			4.57	%			5.02	%			4.74	%			4.34	%			5.00	%
Portfolio turnover rate.			34	%			32	%			107	%			58	%			67	%

See footnote summary on page 73.

 

72		•  ALLIANCEBERNSTEIN INCOME FUND

Financial Highlights

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(a)

Based on average shares outstanding.

 

(b)

Amount is less than $.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 are .61%, .61%, .57%, .55% and .58%, respectively.

 

See notes to financial statements.

 

ALLIANCEBERNSTEIN INCOME FUND  •			73

Financial Highlights

---

REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

AllianceBernstein Income Fund, Inc.:

We have audited the accompanying statement of assets and liabilities of AllianceBernstein Income Fund, Inc. (the “Fund”), including the portfolio of investments, as of December 31, 2015, and the related statements of operations and cash flows for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2015, by correspondence with the custodian and others, or by other appropriate auditing procedures where replies from others were not received. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AllianceBernstein Income Fund, Inc. at December 31, 2015, the results of its operations and its cash flows for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.

 

New York, New York

February 26, 2016

 

74		•  ALLIANCEBERNSTEIN INCOME FUND

Report of Independent Registered Public Accounting Firm

---

2015 FEDERAL TAX INFORMATION

(unaudited)

For Federal income tax purposes, the following information is furnished with respect to the distributions paid by the Fund during the taxable year ended December 31, 2015. For foreign shareholders, 61.93% of ordinary dividends paid may be considered to be qualifying to be taxed as interest-related dividends.

 

ALLIANCEBERNSTEIN INCOME FUND  •			75

---

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

 

76		•  ALLIANCEBERNSTEIN INCOME FUND

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.

 

ALLIANCEBERNSTEIN INCOME FUND  •			77

Additional Information

---

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 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 Bank and Trust Company 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 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 May 18, 2015, 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.

 

78		•  ALLIANCEBERNSTEIN INCOME FUND

Board of Directors

---

MANAGEMENT OF THE FUND

 

Board of Directors Information

The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund’s Directors is set forth below.

 

NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**)		PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS***		PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR				OTHER PUBLIC COMPANY DIRECTORSHIPS CURRENTLY HELD BY DIRECTOR
INTERESTED DIRECTOR
Robert M. Keith, # 1345 Avenue of the Americas New York, NY 10105 55 (2010)		Senior Vice President of AllianceBernstein L.P. (the “Adviser”) and the head of AllianceBernstein Investments, Inc. (“ABI”) since July 2008; Director of ABI and President of the AB Mutual Funds. Previously, he served as Executive Managing Director of ABI from December 2006 to June 2008. Prior to joining ABI in 2006, Executive Managing Director of Bernstein Global Wealth Management, and prior thereto, Senior Managing Director and Global Head of Client Service and Sales of the Adviser’s institutional investment management business since 2004. Prior thereto, he was Managing Director and Head of North American Client Service and Sales in the Adviser’s institutional investment management business, with which he had been associated since prior to 2004.			110			None

 

ALLIANCEBERNSTEIN INCOME FUND  •			79

Management of the Fund

---

 

NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**)		PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS***		PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR				OTHER PUBLIC COMPANY DIRECTORSHIPS CURRENTLY HELD BY DIRECTOR
DISINTERESTED DIRECTORS
Marshall C. Turner, Jr., ## Chairman of the Board 74 (2005)		Private Investor since prior to 2011. Former Chairman and CEO of Dupont Photomasks, Inc. (components of semi-conductor manufacturing). He has extensive operating leadership and venture capital investing experience, including five interim or full-time CEO roles, and prior service as general partner of institutional venture capital partnerships. He also has extensive non-profit board leadership experience, and currently serves on the boards of two education and science-related non-profit organizations. He has served as a director of one AB Fund since 1992, and director or trustee of multiple AB Funds since 2005. He has been Chairman of the AB Funds since January 2014, and the Chairman of the Independent Directors Committees of such AB Funds since February 2014.			110			Xilinx, Inc. (programmable logic semi-conductors) since 2007
John H. Dobkin, ## 74 (1992)		Independent Consultant since prior to 2011. Formerly, President of Save Venice, Inc. (preservation organization) from 2001–2002; Senior Advisor from June 1999-June 2000 and President of Historic Hudson Valley (historic preservation) from December 1989-May 1999. Previously, Director of the National Academy of Design. He has served as a director or trustee of various AB Funds since 1992, and as Chairman of the Audit Committees of a number of such AB Funds from 2001-2008.			110			None

 

80		•  ALLIANCEBERNSTEIN INCOME FUND

Management of the Fund

---

 

NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**)		PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS***		PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR				OTHER PUBLIC COMPANY DIRECTORSHIPS CURRENTLY HELD BY DIRECTOR
DISINTERESTED DIRECTORS (continued)
Michael J. Downey, ## 72 (2005)		Private Investor since prior to 2011. Formerly, managing partner of Lexington Capital, LLC (investment advisory firm) from December 1997 until December 2003. He served as a Director of The Merger Fund (registered investment company) since prior to 2011 until 2013. He also served as a Director of Prospect Acquisition Corp. (financial services) from 2007 until 2009. From 1987 until 1993, Chairman and CEO of Prudential Mutual Fund Management, director of the Prudential mutual funds, and member of the Executive Committee of Prudential Securities Inc. He has served as a director or trustee of the AB Funds since 2005 and is a director and Chairman of one other registered investment company.			110			Asia Pacific Fund, Inc. (registered investment company) since prior to 2011
William H. Foulk, Jr., ## 83 (1990)		Investment Adviser and an Independent Consultant since prior to 2011. Previously, he was Senior Manager of Barrett Associates, Inc., a registered investment adviser. He was formerly Deputy Comptroller and Chief Investment Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. He has served as a director or trustee of various AB Funds since 1983, and was Chairman of the Independent Directors Committees of the AB Funds from 2003 until early February 2014. He served as Chairman of such AB Funds from 2003 through December 2013. He is also active in a number of mutual fund related organizations and committees.			110			None

 

ALLIANCEBERNSTEIN INCOME FUND  •			81

Management of the Fund

---

 

NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**)		PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS***		PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR				OTHER PUBLIC COMPANY DIRECTORSHIPS CURRENTLY HELD BY DIRECTOR
DISINTERESTED DIRECTORS (continued)
D. James Guzy, ## 79 (2005)		Chairman of the Board of SRC Computers, Inc. (semi-conductors), with which he has been associated since prior to 2011. He served as Chairman of the Board of PLX Technology (semi-conductors) since prior to 2011 until November 2013. He was a Director of Cirrus Logic Corporation (semi-conductors) from 1984 until July 2011. He was a director of Intel Corporation (semi-conductors) from 1969 until 2008, and served as Chairman of the Finance Committee of such company for several years until May 2008. He has served as a director or trustee of one or more of the AB Funds since 1982.			110			None
Nancy P. Jacklin, ## 67 (2006)		Professorial Lecturer at the Johns Hopkins School of Advanced International Studies (2008-2015). U.S. Executive Director of the International Monetary Fund (which is responsible for ensuring the stability of the international monetary system), (December 2002-May 2006); Partner, Clifford Chance (1992-2002); Sector Counsel, International Banking and Finance, and Associate General Counsel, Citicorp (1985-1992); Assistant General Counsel (International), Federal Reserve Board of Governors (1982-1985); and Attorney Advisor, U.S. Department of the Treasury (1973-1982). Member of the Bar of the District of Columbia and of New York; and member of the Council on Foreign Relations. She has served as a director or trustee of the AB Funds since 2006 and has been Chairman of the Governance and Nominating Committees of the AB Funds since August 2014.			110			None

 

82		•  ALLIANCEBERNSTEIN INCOME FUND

Management of the Fund

---

 

NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**)		PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS***		PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR				OTHER PUBLIC COMPANY DIRECTORSHIPS CURRENTLY HELD BY DIRECTOR
DISINTERESTED DIRECTORS (continued)
Garry L. Moody, ## 63 (2008)		Independent Consultant. Formerly, Partner, Deloitte & Touche LLP (1995-2008) where he held a number of senior positions, including Vice Chairman, and U.S. and Global Investment Management Practice Managing Partner; President, Fidelity Accounting and Custody Services Company (1993-1995); and Partner, Ernst & Young LLP (1975-1993), where he served as the National Director of Mutual Fund Tax Services and Managing Partner of its Chicago Office Tax department. He is a member of the Trustee Advisory Board of BoardIQ, a biweekly publication focused on issues and news affecting directors of mutual funds. He has served as a director or trustee, and as Chairman of the Audit Committees, of the AB Funds since 2008.			110			None
Earl D. Weiner, ## 76 (2007)		Of Counsel, and Partner prior to January 2007, of the law firm Sullivan & Cromwell LLP and is a former member of the ABA Federal Regulation of Securities Committee Task Force to draft editions of the Fund Director’s Guidebook. He also serves as a director or trustee of various non-profit organizations and has served as Chairman or Vice Chairman of a number of them. He has served as a director or trustee of the AB Funds since 2007 and served as Chairman of the Governance and Nominating Committees of the AB Funds from 2007 until August 2014.			110			None

 

*

The address for each of the Fund’s disinterested Directors is c/o AllianceBernstein L.P., Attention: Philip L. Kirstein, 1345 Avenue of the Americas, New York, NY 10105

 

**

There is no stated term of office for the Fund’s Directors.

 

***

The information above includes each Director’s principal occupation during the last five years and other information relating to the experience, attributes, and skills relevant to each Director’s qualifications to serve as a Director, which led to the conclusion that each Director should serve as a Director for the Fund.

 

#

Mr. Keith is an “interested person” of the Fund, as defined in the 1940 Act, due to this position as a Senior Vice President of the Adviser.

 

##

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

 

ALLIANCEBERNSTEIN INCOME FUND  •			83

Management of the Fund

---

 

Officer Information

Certain information concerning the Fund’s Officers is listed below.

 

NAME, ADDRESS* AND AGE		POSITION(S) HELD WITH FUND		PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
Robert M. Keith 55		President and Chief Executive Officer		See biography above.
Philip L. Kirstein 70		Senior Vice President and Independent Compliance Officer		Senior Vice President and Independent Compliance Officer of the AB Funds, with which he has been associated since October 2004. Prior thereto, he was Of Counsel to Kirkpatrick & Lockhart, LLP from October 2003 to October 2004, and General Counsel of Merrill Lynch Investment Managers, L .P. since prior to March 2003.
Paul J. DeNoon 53		Vice President		Senior Vice President of the Adviser**, with which he has been associated since prior to 2011
Gershon M. Distenfeld 40		Vice President		Senior Vice President of the Adviser**, with which he has been associated since prior to 2011
Douglas J. Peebles 50		Vice President		Senior Vice President of the Adviser**, with which he has been associated since prior to 2011
Matthew S. Sheridan 40		Vice President		Senior Vice President of the Adviser**, with which he has been associated since prior to 2011
Emilie D. Wrapp 60		Secretary		Senior Vice President, Assistant General Counsel and Assistant Secretary of ABI**, with which she has been associated since prior to 2011
Joseph J. Mantineo 56		Treasurer and Chief Financial Officer		Senior Vice President of AllianceBernstein Investor Services, Inc. (“ABIS”**), with which he has been associated since prior to 2011
Phyllis J. Clarke 55		Controller		Vice President of ABIS**, with which she has been associated since prior to 2011
Vincent S. Noto 51		Chief Compliance Officer		Senior Vice President since 2015 and Mutual Fund Chief Compliance Officer of the Adviser** since 2014. Prior thereto, he was Vice President and Director of Mutual Fund Compliance of the Adviser**, since prior to 2011

 

*

The address for each of the Fund’s Officers is 1345 Avenue of the Americas, New York, NY 10105.

 

**

The Adviser, ABI and ABIS are affiliates of the Fund.

 

 

84		•  ALLIANCEBERNSTEIN INCOME FUND

Management of the Fund

---

 

 

Information Regarding the Review and Approval of the Fund’s Advisory and Administration Agreements

The disinterested directors (the “directors”) of AllianceBernstein Income Fund, Inc. (the “Fund”) unanimously approved the continuance of the Fund’s Advisory Agreement with the Adviser and the continuance of the Fund’s Administration Agreement with the Adviser (in such capacity, the “Administrator”) at a meeting held on November 3-5, 2015.

Prior to approval of the continuance of the Advisory Agreement and the Administration Agreement, the directors had requested from the Adviser, and received and evaluated, extensive materials. They reviewed the proposed continuance of the Advisory Agreement and the Administration Agreement with the Adviser and with experienced counsel who are independent of the Adviser, who advised on the relevant legal standards. The directors also discussed the proposed continuances in private sessions with counsel and the Fund’s Senior Officer (who is also the Fund’s Independent Compliance Officer). The directors noted that they had approved the acquisition of the assets and assumption of the liabilities of the Fund by AB Income Fund, a series of a AB Bond Fund, Inc. (the “Acquisition”) pursuant to an Agreement and Plan of Acquisition and Dissolution (the “Plan”) at a meeting held on August 4-5, 2015. The Special Meeting of Shareholders regarding the Plan scheduled for February 1, 2016 was adjourned until March 1, 2016 to permit more time for shareholders to vote. If the Plan is approved by the Fund’s shareholders on March 1, 2016, the Acquisition is expected to occur later in the first quarter or during the second quarter of 2016 and the Fund will be wound up.

The directors considered their knowledge of the nature and quality of the services provided by the Adviser to the Fund gained from their experience as directors or trustees of most of the registered investment companies advised by the Adviser, their overall confidence in the Adviser’s integrity and competence they have gained from that experience, the Adviser’s initiative in identifying and raising potential issues with the directors and its responsiveness, frankness and attention to concerns raised by the directors in the past, including the Adviser’s willingness to consider and implement organizational and operational changes designed to improve investment results and the services provided to the AB Funds. The directors noted that they have four regular meetings each year, at each of which they receive presentations from the Adviser on the investment results of the Fund and review extensive materials and information presented by the Adviser.

The directors also considered all other factors they believed relevant, including the specific matters discussed below. In their deliberations, the directors did not identify any particular information that was all-important or controlling, and different directors may have attributed different weights to the various factors. The directors determined that the selection of the Adviser to manage the Fund and the Administrator to provide administrative services to the Fund and the

 

ALLIANCEBERNSTEIN INCOME FUND  •			85

---

 

 

overall arrangements (i) between the Fund and the Adviser, as provided in the Advisory Agreement, including the advisory fee and (ii) between the Fund and the Administrator, as provided in the Administration Agreement, including the administration fee, were fair and reasonable in light of the services performed, expenses incurred and such other matters as the directors considered relevant in the exercise of their business judgment. The material factors and conclusions that formed the basis for the directors’ determinations included the following:

Nature, Extent and Quality of Services Provided

The directors considered the scope and quality of services provided by the Adviser under the Advisory Agreement and by the Administrator under the Administration Agreement, including the quality of the investment research capabilities of the Adviser and the other resources it has dedicated to performing services for the Fund and the resources the Administrator has devoted to providing services to the Fund. They noted the professional experience and qualifications of the Fund’s portfolio management team and other senior personnel of the Adviser. The quality of administrative and other services, including the Adviser’s role in coordinating the activities of the Fund’s other service providers, also were considered. The directors concluded that, overall, they were satisfied with the nature, extent and quality of services provided to the Fund under the Advisory Agreement and the Administration Agreement.

Costs of Services Provided and Profitability

The directors reviewed a schedule of the revenues and expenses and related notes indicating the profitability of the Fund to the Adviser (including in its capacity as Administrator) for calendar years 2013 and 2014 that had been prepared with an expense allocation methodology arrived at in consultation with an independent consultant retained by the Fund’s Senior Officer. The directors noted the assumptions and methods of allocation used by the Adviser in preparing fund-specific profitability data and understood that there are a number of potentially acceptable allocation methodologies for information of this type. The directors noted that the profitability information reflected all revenues and expenses of the Adviser’s relationship with the Fund, including those relating to its subsidiary that provides shareholder services to the Fund. The directors recognized that it is difficult to make comparisons of profitability of the Advisory Agreement with advisory contracts for unaffiliated funds because comparative information is not generally publicly available and is affected by numerous factors. The directors focused on the profitability of the Adviser’s relationship with the Fund before taxes. The directors concluded that they were satisfied that the Adviser’s level of profitability from its relationship with the Fund was not unreasonable.

Fall-Out Benefits

The directors considered the other benefits to the Adviser and its affiliates from their relationships with the Fund, including, but not limited to, benefits relating

 

86		•  ALLIANCEBERNSTEIN INCOME FUND

---

 

 

to shareholder servicing fees paid by the Fund to a wholly owned subsidiary of the Adviser. The directors recognized that the Adviser’s profitability would be somewhat lower without these benefits. The directors understood that the Adviser also might derive reputational and other benefits from its association with the Fund.

Investment Results

In addition to the information reviewed by the directors in connection with the meeting, the directors receive detailed performance information for the Fund at each regular Board meeting during the year. At the November 2015 meeting, the directors reviewed information prepared by Broadridge showing the performance of the Fund as compared with that of a group of similar funds selected by Broadridge (the “Performance Group”) and information prepared by the Adviser showing performance of the Fund as compared with the Barclays U.S. Aggregate Bond Index (the “Index”), in each case for the 1-, 3-, 5- and 10-year periods ended July 31, 2015 and (in the case of comparisons with the Index) the since inception period (August 1987 inception). The directors noted that the Fund was in the 1st quintile of the Performance Group for the 1-year period, in the 5th quintile of the Performance Group for the 3-year period, in the 4th quintile of the Performance Group for the 5-year period, and in the 2nd quintile of the Performance Group for the 10-year period. The Fund outperformed the Index in all periods. The directors recognized that the Fund’s relatively unusual investment style, which differs from that of the other funds in the Performance Group and from the Index, and the fact that there are only a small number of other funds in the Fund’s Broadridge category, made performance comparisons of limited utility. The directors also noted the Fund’s absolute return over time. Based on their review, the directors concluded that the Fund’s reported relative performance was acceptable.

Advisory Fees and Other Expenses

The directors considered the latest fiscal year actual management fee rate paid by the Fund (advisory fees paid to the Adviser and the administration fees currently paid to the Administrator) and information prepared by Broadridge concerning advisory fee rates paid by other funds in the same Broadridge category as the Fund. They compared the combined advisory and administration fees paid by the Fund to the advisory fees of other funds where there is no separate administrator. The directors recognized that it is difficult to make comparisons of advisory fees because there are variations in the services that are included in the fees paid by other funds.

The directors noted that the Fund’s latest fiscal year total management fee rate of 52.0 basis points (combined advisory fee paid to the Adviser plus the administration fee paid to the Administrator) was lower than the Expense Group and the Expense Universe medians. The directors were cognizant of the Fund’s unusual advisory fee structure, which includes a fee based on average weekly net

 

ALLIANCEBERNSTEIN INCOME FUND  •			87

---

 

 

assets and a fee based on the Fund’s daily gross income, subject to an overall maximum fee rate. The directors noted that the Advisory Agreement reflected reductions in the fee rate calculated based on the Fund’s daily gross income and the maximum fee rate requested by the directors in the past.

The Adviser informed the directors that there were no institutional products managed by it that have a substantially similar investment style. The directors reviewed the relevant advisory fee information from the Adviser’s Form ADV and noted that the Adviser charged institutional clients lower fees for advising comparably sized institutional accounts using strategies that differ from those of the Fund but which invest in fixed-income taxable securities.

The Adviser reviewed with the directors the significantly greater scope of the services it provides to the Fund relative to institutional clients. In light of the substantial differences in services rendered by the Adviser to institutional clients as compared to funds such as the Fund, the directors considered these fee comparisons inapt and did not place significant weight on them in their deliberations.

The directors also considered the total expense ratio of the Fund in comparison to the fees and expenses of funds within two comparison groups created by Broadridge: an Expense Group and an Expense Universe. Broadridge described an Expense Group as a representative sample of funds comparable to the Fund and an Expense Universe as a broader group than the Expense Group, consisting of all funds in the Fund’s investment classification/objective. The expense ratio of the Fund was based on the Fund’s latest fiscal year. The directors noted that it was likely that the expense ratios of some of the other funds in the Fund’s Broadridge category were lowered by waivers or reimbursements by those funds’ investment advisers, which in some cases might be voluntary or temporary. The directors view the expense ratio information as relevant to their evaluation of the Adviser’s services because the Adviser is responsible for coordinating services provided to the Fund by others.

The directors noted that the Fund’s total expense ratio was lower than the Expense Group and the Expense Universe medians. The directors concluded that the Fund’s expense ratio was satisfactory.

Economies of Scale

The directors noted that the advisory fee schedule for the Fund contains a breakpoint and that the Fund’s net assets were in excess of the breakpoint level. Accordingly, the Fund’s current effective advisory fee rate reflects a reduction due to the effect of the breakpoint. The directors concluded that the Fund’s breakpoint arrangements were acceptable and provide a means for sharing of any economies of scale.

 

88		•  ALLIANCEBERNSTEIN INCOME FUND

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SUMMARY OF GENERAL INFORMATION

 

 

ALLIANCEBERNSTEIN INCOME FUND  •			89

Summary of General Information

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

AB FAMILY OF FUNDS

 

We also offer Exchange Reserves, which serves as the money market fund exchange vehicle for the AB 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.abglobal.com or contact your AB representative. Please read the prospectus and/or summary prospectus carefully before investing.

 

90		•  ALLIANCEBERNSTEIN INCOME FUND

AB Family of Funds

---

NOTES

 

 

ALLIANCEBERNSTEIN INCOME FUND  •			91

---

NOTES

 

 

92		•  ALLIANCEBERNSTEIN INCOME FUND

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Privacy Policy Statement

AllianceBernstein and its affiliates (collectively “AllianceBernstein”) understand the importance of maintaining the confidentiality of their 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 a variety of sources, including: (1) account documentation, including applications or other forms, which may include information such as a client’s name, address, phone number, social security number, assets, income and other household information, (2) client 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 (collectively “clients”), except to our affiliates, or to others as permitted or required by law. From time to time, we may disclose nonpublic personal information that we collect about our clients to non-affiliated third parties, including those that perform transaction processing or servicing functions, those that provide marketing services for us or on our behalf pursuant to a joint marketing agreement or those that provide professional services to us under a professional services agreement, all of which require the third party provider to adhere to our privacy policy. We have policies and procedures to safeguard nonpublic personal information about our clients that include restricting access to nonpublic personal information and maintaining physical, electronic and procedural safeguards which comply with applicable standards.

It is also our policy to prohibit the sharing of our clients’ personal information among our affiliated group of investment, brokerage, service and insurance companies for the purpose of marketing their products or services to clients, except as permitted by law. This information includes, but is not limited to, a client’s income and account history.

We have policies and procedures to ensure that certain conditions are met before an AllianceBernstein affiliated company may use information obtained from another affiliate to solicit clients for marketing purposes.

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ALLIANCEBERNSTEIN INCOME FUND

1345 Avenue of the Americas

New York, NY 10105

800.221.5672

 

ACMI-0151-1215                

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ITEM 2.

CODE OF ETHICS.

(a) The registrant has adopted a code of ethics that applies to its principal executive officer, principal financial officer and principal accounting officer. A copy of the registrant’s code of ethics is filed herewith as Exhibit 12(a)(1).

(b) During the period covered by this report, no material amendments were made to the provisions of the code of ethics adopted in 2(a) above.

(c) During the period covered by this report, no implicit or explicit waivers to the provisions of the code of ethics adopted in 2(a) above were granted.

 

ITEM 3.

AUDIT COMMITTEE FINANCIAL EXPERT.

The registrant’s Board of Directors has determined that independent directors Garry L. Moody, William H. Foulk, Jr. and Marshall C. Turner, Jr. qualify as audit committee financial experts.

 

ITEM 4.

PRINCIPAL ACCOUNTANT FEES AND SERVICES.

(a) - (c) The following table sets forth the aggregate fees billed by the independent registered public accounting firm Ernst & Young LLP, for the Fund’s last two fiscal years for professional services rendered for: (i) the audit of the Fund’s annual financial statements included in the Fund’s annual report to stockholders; (ii) assurance and related services that are reasonably related to the performance of the audit of the Fund’s financial statements and are not reported under (i), which include advice and education related to accounting and auditing issues and quarterly press release review (for those Funds that issue quarterly press releases), and preferred stock maintenance testing (for those Funds that issue preferred stock); and (iii) tax compliance, tax advice and tax return preparation.

 

						Audit Fees				Audit – Related Fees				Tax Fees
AB Income			2014			$	102,946			$	8,000			$	30,899
			2015			$	106,065			$	11,000			$	28,216

(d) Not applicable.

(e) (1) Beginning with audit and non-audit service contracts entered into on or after May 6, 2003, the Fund’s Audit Committee policies and procedures require the pre-approval of all audit and non-audit services provided to the Fund by the Fund’s independent registered public accounting firm. The Fund’s Audit Committee policies and procedures also require pre-approval of all audit and non-audit services provided to the Adviser and Service Affiliates to the extent that these services are directly related to the operations or financial reporting of the Fund.

(e) (2) All of the amounts for Audit Fees, Audit-Related Fees and Tax Fees in the table under Item 4 (a) – (c) are for services pre-approved by the Fund’s Audit Committee.

(f) Not applicable.

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(g) The following table sets forth the aggregate non-audit services provided to the Fund, the Fund’s Adviser and entities that control, are controlled by or under common control with the Adviser that provide ongoing services to the Fund:

 

						All Fees for Non-Audit Services Provided to the Portfolio, the Adviser and Service Affiliates				Total Amount of Foregoing Column Pre- approved by the Audit Committee (Portion Comprised of Audit Related Fees) (Portion Comprised of Tax Fees)
AB Income			2014			$	444,504			$	38,899
										$	(8,000	)
										$	(30,899	)
			2015			$	454,461			$	39,216
										$	(11,000	)
										$	(28,216	)

(h) The Audit Committee of the Fund has considered whether the provision of any non-audit services not pre-approved by the Audit Committee provided by the Fund’s independent registered public accounting firm to the Adviser and Service Affiliates is compatible with maintaining the auditor’s independence.

 

ITEM 5.

AUDIT COMMITTEE OF LISTED REGISTRANTS.

The registrant has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. The audit committee members are as follows:

 

John H. Dobkin Michael J. Downey William H. Foulk, Jr D. James Guzy		Nancy P. Jacklin Garry L. Moody Marshall C. Turner, Jr. Earl D. Weiner

 

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.

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Statement of Policies and Procedures for

Proxy Voting

INTRODUCTION

 

•

As an investment adviser, we are shareholder advocates and have a fiduciary duty to make investment decisions that are in our clients’ best interests by maximizing the value of their shares. Proxy voting is an integral part of this process, through which we support strong corporate governance structures, shareholder rights, and transparency.

 

•

We have an obligation to vote proxies in a timely manner and we apply the principles in this policy to our proxy decisions. We believe a company’s environmental, social and governance (“ESG”) practices may have a significant effect on the value of the company, and we take these factors into consideration when voting. For additional information regarding our ESG policies and practices, please refer to our firm’s Statement of Policy Regarding Responsible Investment (“RI Policy”).

 

•

This Proxy Voting Policy (“Proxy Voting Policy” or “Policy”), which outlines our policies for proxy voting and includes a wide range of issues that often appear on proxies, applies to all of AB’s investment management subsidiaries and investment services groups investing on behalf of clients globally. It is intended for use by those involved in the proxy voting decision-making process and those responsible for the administration of proxy voting (“Proxy Managers”), in order to ensure that our proxy voting policies and procedures are implemented consistently.

 

•

We sometimes manage accounts where proxy voting is directed by clients or newly-acquired subsidiary companies. In these cases, voting decisions may deviate from this Policy.

RESEARCH UNDERPINS DECISION MAKING

 

•

As a research-driven firm, we approach our proxy voting responsibilities with the same commitment to rigorous research and engagement that we apply to all of our investment activities. The different investment philosophies utilized by our investment teams may occasionally result in different conclusions being drawn regarding certain proposals and, in turn, may result in the Proxy Manager making different voting decisions on the same proposal. Nevertheless, the Proxy Manager votes proxies with the goal of maximizing the value of the securities in client portfolios.

 

•

In addition to our firm-wide proxy voting policies, we have a Proxy Committee, which provides oversight and includes senior investment professionals from Equities, Legal personnel and Operations personnel. It is the responsibility of the Proxy Committee to evaluate and maintain proxy voting procedures and guidelines, to evaluate proposals and issues not covered by these guidelines, to consider changes in policy, and to review the Proxy Voting Policy no less frequently than annually. In addition, the Proxy Committee meets at least three times a year and as necessary to address special situations.

RESEARCH SERVICES

 

•

We subscribe to the corporate governance and proxy research services of Institutional Shareholder Services Inc. (“ISS”). All our investment professionals can access these materials via the Proxy Manager and/or Proxy Committee.

ENGAGEMENT

 

•

In evaluating proxy issues and determining our votes, we welcome and seek out the points of view of various parties. Internally, the Proxy Manager may consult the Proxy Committee, Chief Investment Officers, Directors of Research, and/or Research Analysts across our equities platforms, and Portfolio Managers in whose managed accounts a stock is held. Externally, we may engage with companies in advance of their Annual General Meeting, and throughout the year. We believe engagement provides the opportunity to share our philosophy, our corporate governance values, and more importantly, affect positive change. Also, these meetings often are joint efforts between the investment professionals, who are best positioned to comment on company-specific details, and the Proxy Manager(s), who offer a more holistic view of governance practices and relevant trends. In addition, we engage with shareholder proposal proponents and other stakeholders to understand different viewpoints and objectives.

PROXY VOTING GUIDELINES

 

•

Our proxy voting guidelines are both principles-based and rules-based. We adhere to a core set of principles that are described in this Proxy Voting Policy. We assess each proxy proposal in light of these principles. Our proxy voting “litmus test” will always be what we view as most likely to maximize long-term shareholder value. We believe that authority and accountability for setting and executing corporate policies, goals and compensation generally should rest with the board of directors and senior management. In return, we support strong investor rights that allow shareholders to hold directors and management accountable if they fail to act in the best interests of shareholders.

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•

With this as a backdrop, our proxy voting guidelines pertaining to specific issues are set forth below. We generally vote proposals in accordance with these guidelines but, consistent with our “principles-based” approach to proxy voting, we may deviate from the guidelines if warranted by the specific facts and circumstances of the situation (i.e., if, under the circumstances, we believe that deviating from our stated policy is necessary to help maximize long-term shareholder value). In addition, these guidelines are not intended to address all issues that may appear on all proxy ballots. We will evaluate on a case-by-case basis any proposal not specifically addressed by these guidelines, whether submitted by management or shareholders, always keeping in mind our fiduciary duty to make voting decisions that, by maximizing long-term shareholder value, are in our clients’ best interests.

 

1.1	BOARD AND DIRECTOR PROPOSALS

 

Board Diversity (SHP)		CASE-BY-CASE

 

•

Board diversity is increasingly an important topic. In a number of European countries, legislation requires a quota of female directors. Other European countries have a comply-or-explain policy. We believe diversity is broader than gender and should also take into consideration factors such as business experience, ethnicity, tenure and nationality. We evaluate these proposals on a case-by-case basis while examining if there are other general governance concerns.

 

Establish New Board Committees and Elect Board Members with Specific Expertise (SHP)		CASE-BY-CASE

 

•

We believe that establishing committees should be the prerogative of a well-functioning board of directors. However, we may support shareholder proposals to establish additional board committees to address specific shareholder issues, including ESG issues. We consider on a case-by-case basis proposals that require the addition of a board member with a specific area of expertise.

 

Changes in Board Structure and Amending the Articles of Incorporation		FOR

 

•

Companies may propose various provisions with respect to the structure of the board of directors, including changing the manner in which board vacancies are filled, directors are nominated and the number of directors. Such proposals may require amending the charter or by-laws or may otherwise require shareholder approval. When these proposals are not controversial or meant as an anti-takeover device, which is generally the case, we vote in their favor. However, if we believe a proposal is intended as an anti-takeover device and diminishes shareholder rights, we generally vote against.

 

•

We may vote against directors for amending by-laws without seeking shareholder approval and/or restricting or diminishing shareholder rights.

 

Classified Boards		AGAINST

 

•

A classified board typically is divided into three separate classes. Each class holds office for a term of two or three years. Only a portion of the board can be elected or replaced each year. Because this type of proposal has fundamental anti-takeover implications, we oppose the adoption of classified boards unless there is a justifiable financial reason or an adequate sunset provision exists. However, where a classified board already exists, we will not oppose directors who sit on such boards for that reason. We will vote against directors that fail to implement shareholder approved proposals to declassify boards.

 

Director Liability and Indemnification		CASE-BY-CASE

 

•

Some companies argue that increased indemnification and decreased liability for directors are important to ensure the continued availability of competent directors. However, others argue that the risk of such personal liability minimizes the propensity for corruption and recklessness.

 

•

We generally support indemnification provisions that are consistent with the local jurisdiction in which the company has been formed. We vote in favor of proposals adopting indemnification for directors with respect to acts conducted in the normal course of business. We also vote in favor of proposals that expand coverage for directors and officers where, despite an unsuccessful legal defense, we believe the director or officer acted in good faith and in the best interests of the company. We oppose indemnification for gross negligence.

 

Disclose CEO Succession Plan (SHP)		FOR

 

•

Proposals like these are often suggested by shareholders of companies with long-tenured CEOs and/or high employee turnover rates. Even though some markets might not require the disclosure of a CEO succession plan, we do think it is good business practice and will support these proposals.

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Election of Directors		FOR

 

•

The election of directors is an important vote. We expect directors to represent shareholder interests at the company and maximize shareholder value. We generally vote in favor of the management-proposed slate of directors while considering a number of factors, including local market best practice. We believe companies should have a majority of independent directors and independent key committees. However, we will incorporate local market regulation and corporate governance codes into our decision making. We may support more progressive requirements than those implemented in a local market if we believe more progressive requirements may improve corporate governance practices. We will generally regard a director as independent if the director satisfies the criteria for independence (i) espoused by the primary exchange on which the company’s shares are traded, or (ii) set forth in the code we determine to be best practice in the country where the subject company is domiciled. We consider the election of directors who are “bundled” on a single slate on a case-by-case basis considering the amount of information available and an assessment of the group’s qualifications.

 

•

In addition:

We believe that directors have a duty to respond to shareholder actions that have received significant shareholder support. We may vote against directors (or withhold votes for directors if plurality voting applies) who fail to act on key issues, such as failure to implement proposals to declassify boards, failure to implement a majority vote requirement, failure to submit a rights plan to a shareholder vote and failure to act on tender offers where a majority of shareholders have tendered their shares (provided we supported, or would have supported, the original proposal).

We oppose directors who fail to attend at least 75% of board meetings within a given year without a reasonable excuse.

We may consider the number of boards on which a director sits and/or their length of service on a particular board.

We may abstain or vote against (depending on a company’s history of disclosure in this regard) directors of issuers where there is insufficient information about the nominees disclosed in the proxy statement.

We may vote against directors for poor compensation practices.

We may vote against directors for not representing shareholder interests and maximizing long-term shareholder value

 

•

We also may consider engaging company management (by phone, in writing and in person), until any issues have been satisfactorily resolved.

 

Controlled Company Exemption		CASE-BY-CASE

In certain markets, a different standard for director independence may be applicable for controlled companies, which are companies where more than 50% of the voting power is held by an individual, group or another company, or as otherwise defined by local market standards. We may take these local standards into consideration when determining the appropriate level of independence required for the board and key committees.

Exchanges in certain jurisdictions do not have a controlled company exemption (or something similar). In such a jurisdiction, if a company has a majority shareholder or group of related majority shareholders with a majority economic interest, we generally will not oppose that company’s directors simply because the board does not include a majority of independent members, although we may take local standards into consideration when determining the appropriate level of independence required for the board and key committees. We will, however, consider these directors in a negative light if the company has a history of violating the rights of minority shareholders.

 

Voting for Director Nominees in a Contested Election		CASE-BY-CASE

Votes in a contested election of directors are evaluated on a case-by-case basis with the goal of maximizing shareholder value.

 

Independent Lead Director (SHP)		FOR

 

•

We support shareholder proposals that request a company to amend its by-laws to establish an independent lead director, if the positions of chairman and CEO are not separated. We view the existence of a strong independent lead director, whose role is robust and includes clearly defined duties and responsibilities, such as the authority to call meetings and approve agendas, as a good example of the sufficient counter-balancing governance. If a company has such an independent lead director in place, we will generally oppose a proposal to separate the positions of chairman and CEO, barring any additional board leadership concerns.

 

Limit Term of Directorship (SHP)		CASE-BY-CASE

 

•

These proposals seek to limit the term during which a director may serve on a board to a set number of years.

 

•

Accounting for local market practice, we generally consider a number of factors, such as overall level of board independence, director qualifications, tenure, board diversity and board effectiveness in representing our interests as shareholders, in assessing whether limiting directorship terms is in shareholders’ best interests. Accordingly, we evaluate these items case-by-case.

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Majority of Independent1 Directors (SHP)		FOR

 

•

Each company’s board of directors has a duty to act in the best interest of the company’s shareholders at all times. We believe that these interests are best served by having directors who bring objectivity to the company and are free from potential conflicts of interests. Accordingly, we support proposals seeking a majority of independent directors on the board while taking into consideration local market regulation and corporate governance codes.

 

Majority of Independent Directors on Key Committees (SHP)		FOR

 

•

In order to ensure that those who evaluate management’s performance, recruit directors and set management’s compensation are free from conflicts of interests, we believe that the audit2, nominating/governance, and compensation committees should be composed of a majority of independent directors while taking into consideration local market regulation and corporate governance codes.

 

Majority Votes for Directors (SHP)		FOR

 

•

We believe that good corporate governance requires shareholders to have a meaningful voice in the affairs of the company. This objective is strengthened if directors are elected by a majority of votes cast at an annual meeting rather than by the plurality method commonly used. With plurality voting a director could be elected by a single affirmative vote even if the rest of the votes were withheld.

 

•

We further believe that majority voting provisions will lead to greater director accountability. Therefore, we support shareholder proposals that companies amend their by-laws to provide that director nominees be elected by an affirmative vote of a majority of the votes cast, provided the proposal includes a carve-out to provide for plurality voting in contested elections where the number of nominees exceeds the number of directors to be elected.

 

Removal of Directors Without Cause (SHP)		FOR

 

•

Company by-laws sometimes define cause very narrowly, including only conditions of criminal indictment, final adverse adjudication that fiduciary duties were breached or incapacitation, while also providing shareholders with the right to remove directors only upon “cause”.

 

•

We believe that the circumstances under which shareholders have the right to remove directors should not be limited to those traditionally defined by companies as “cause”. We also believe that shareholders should have the right to conduct a vote to remove directors who fail to perform in a manner consistent with their fiduciary duties or representative of shareholders’ best interests. And, while we would prefer shareholder proposals that seek to broaden the definition of “cause” to include situations like these, we generally support proposals that would provide shareholders with the right to remove directors without cause.

 

Require Independent Board Chairman (SHP)		CASE-BY-CASE

 

•

We believe there can be benefits to having the positions of chairman and CEO combined as well as split. When the position is combined the company must have sufficient counter-balancing governance in place, generally through a strong independent lead director. Also, for companies with smaller market capitalizations, separate chairman and CEO positions may not be practical.

 

Require Two Candidates for Each Board Seat (SHP)		AGAINST

 

•

We believe that proposals like these are detrimental to a company’s ability to attract highly qualified candidates. Accordingly, we oppose them.

 

1	For purposes of this Policy, generally, we will consider a director independent if the director satisfies the independence definition set forth in the listing standards of the exchange on which the common stock is listed. However, we may deem local independence classification criteria insufficient.

2	Pursuant to the SEC rules, adopted pursuant to the Sarbanes-Oxley Act of 2002, as of October 31, 2004, each U.S. listed issuer must have a fully independent audit committee.

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1.2	COMPENSATION PROPOSALS

 

Elimination of Single-Trigger Change in Control Agreements (SHP)		FOR

 

•

Companies sometimes include single trigger change in control provisions (e.g., a provision stipulating that an employee’s unvested equity awards become fully vested upon a change in control of the company without any additional requirement) in employment agreements and compensation plans.

 

•

We may oppose directors who establish these provisions, or we may oppose compensation plans that include them. We will support shareholder proposals calling for future employment agreements and compensation plans to include double trigger change in control provisions (e.g., a provision stipulating that an employee’s unvested equity awards become fully vested only after a change in control of the company and termination of employment).

 

Pro Rata Vesting of Equity Compensation Awards-Change in Control (SHP)		CASE-BY-CASE

 

•

We examine proposals on the treatment of equity awards in the event of a change in control on a case-by-case basis. If a change in control is accompanied by termination of employment, often referred to as a double-trigger, we generally support accelerated vesting of equity awards. If, however, there is no termination agreement in connection with a change in control, often referred to as a single-trigger, we generally prefer pro rata vesting of outstanding equity awards.

 

Adopt Policies to Prohibit any Death Benefits to Senior Executives (SHP)		AGAINST

 

•

We view these bundled proposals as too restrictive and conclude that blanket restrictions on any and all such benefits, including the payment of life insurance premiums for senior executives, could put a company at a competitive disadvantage.

 

Advisory Vote to Ratify Directors’ Compensation (SHP)		FOR

 

•

Similar to advisory votes on executive compensation, shareholders may request a non-binding advisory vote to approve compensation given to board members. We generally support this item.

 

Amend Executive Compensation Plan Tied to Performance (Bonus Banking) (SHP)		AGAINST

 

•

These proposals seek to force a company to amend executive compensation plans such that compensation awards tied to performance are deferred for shareholder specified and extended periods of time. As a result, awards may be adjusted downward if performance goals achieved during the vesting period are not sustained during the added deferral period.

 

•

We believe that most companies have adequate vesting schedules and clawbacks in place. Under such circumstances, we will oppose these proposals. However, if a company does not have what we believe to be adequate vesting and/or clawback requirements, we decide these proposals on a case-by-case basis.

 

Approve Remuneration for Directors and Auditors		CASE-BY-CASE

 

•

We will vote on a case-by-case basis where we are asked to approve remuneration for directors or auditors. However, where disclosure relating to the details of such remuneration is inadequate or provided without sufficient time for us to consider our vote, we may abstain or vote against, depending on the adequacy of the company’s prior disclosures in this regard and the local market practice.

 

Approve Remuneration Reports and Policies		CASE-BY-CASE

 

•

In certain markets, (e.g., Australia, Canada, Germany and the United States), publicly traded issuers are required by law to submit their company’s remuneration report to a non-binding shareholder vote. The report contains, among other things, the nature and amount of the compensation of the directors and certain executive officers as well as a discussion of the company’s performance. In other markets, remuneration policy resolutions are binding.

 

•

We evaluate remuneration reports and policies on a case-by-case basis, taking into account the reasonableness of the company’s compensation structure and the adequacy of the disclosure. Where a compensation plan permits retesting of performance-based awards, we will consider the specific terms of the plan, including the volatility of the industry and the number and duration of the retests. We may abstain or vote against a plan if disclosure of the remuneration details is inadequate or the report is not provided to shareholders with sufficient time prior to the meeting to consider its terms.

 

•

In markets where remuneration reports are not required for all companies, we will support shareholder proposals asking the board to adopt a policy (i.e., “say on pay”) that the company’s shareholders be given the opportunity to vote on an advisory resolution to approve the compensation committee’s report. Although say on pay votes are by nature only broad indications of shareholder views, they do lead to more compensation-related dialogue between management and shareholders and help ensure that management and shareholders meet their common objective: maximizing the value of the company.

---

Approve Retirement Bonuses for Directors (Japan and South Korea)		CASE-BY-CASE

 

•

Retirement bonuses are customary in Japan and South Korea. Companies seek approval to give the board authority to grant retirement bonuses for directors and/or auditors and to leave the exact amount of bonuses to the board’s discretion. We will analyze such proposals on a case-by-case basis, considering management’s commitment to maximizing long-term shareholder value. However, when the details of the retirement bonus are inadequate or undisclosed, we may abstain or vote against.

 

Approve Special Payments to Continuing Directors and Auditors (Japan)		CASE-BY-CASE

 

•

In conjunction with the abolition of a company’s retirement allowance system, we will generally support special payment allowances for continuing directors and auditors if there is no evidence of their independence becoming impaired. However, when the details of the special payments are inadequate or undisclosed, we may abstain or vote against.

 

Disclose Executive and Director Pay (SHP)		CASE-BY-CASE

 

•

In December 2006 and again in February 2010, the SEC adopted rules requiring increased and/or enhanced compensation-related and corporate governance-related disclosure in proxy statements and Forms 10-K. Similar steps have been taken by regulators in foreign jurisdictions. We believe the rules enacted by the SEC and various foreign regulators generally ensure more complete and transparent disclosure. Therefore, while we will consider them on a case-by-case basis (analyzing whether there are any relevant disclosure concerns), we generally vote against shareholder proposals seeking additional disclosure of executive and director compensation, including proposals that seek to specify the measurement of performance-based compensation, if the company is subject to SEC rules or similar rules espoused by a regulator in a foreign jurisdiction. Similarly, we generally support proposals seeking additional disclosure of executive and director compensation if the company is not subject to any such rules.

 

Executive and Employee Compensation Plans		CASE-BY-CASE

 

•

Executive and employee compensation plans (“Compensation Plans”) usually are complex and are a major corporate expense, so we evaluate them carefully and on a case-by-case basis. In all cases, however, we assess each proposed Compensation Plan within the framework of four guiding principles, each of which ensures a company’s Compensation Plan helps to align the long-term interests of management with shareholders:

Valid measures of business performance tied to the firm’s strategy and shareholder value creation, which are clearly articulated and incorporate appropriate time periods, should be utilized;

Compensation costs should be managed in the same way as any other expense;

Compensation should reflect management’s handling, or failure to handle, any recent social, environmental, governance, ethical or legal issue that had a significant adverse financial or reputational effect on the company; and

In granting compensatory awards, management should exhibit a history of integrity and decision-making based on logic and well thought out processes.

 

•

Where disclosure relating to the details of Compensation Plans is inadequate or provided without sufficient time for us to consider our vote, we may abstain or vote against, depending on the adequacy of the company’s prior disclosures in this regard. Where appropriate, we may raise the issue with the company directly or take other steps.

 

Limit Executive Pay (SHP)		CASE-BY-CASE

 

•

We believe that management and directors, within reason, should be given latitude in determining the mix and types of awards offered to executive officers. We vote against shareholder proposals seeking to limit executive pay if we deem them too restrictive. Depending on our analysis of the specific circumstances, we are generally against requiring a company to adopt a policy prohibiting tax gross up payments to senior executives.

 

Mandatory Holding Periods (SHP)		AGAINST

 

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We generally vote against shareholder proposals asking companies to require a company’s executives to hold stock for a specified period of time after acquiring that stock by exercising company-issued stock options (i.e., precluding “cashless” option exercises), unless we believe implementing a mandatory holding period is necessary to help resolve underlying problems at a company that have hurt, and may continue to hurt, shareholder value.

 

Performance-Based Stock Option Plans (SHP)		CASE-BY-CASE

 

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These shareholder proposals require a company to adopt a policy that all or a portion of future stock options granted to executives be performance-based. Performance-based options usually take the form of indexed options (where the option sale price is linked to the company’s stock performance versus an industry index), premium priced options (where the strike price is significantly above the market price at the time of the grant) or performance vesting options (where

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options vest when the company’s stock price exceeds a specific target). Proponents argue that performance-based options provide an incentive for executives to outperform the market as a whole and prevent management from being rewarded for average performance. We believe that management, within reason, should be given latitude in determining the mix and types of awards it offers. However, we recognize the benefit of linking a portion of executive compensation to certain types of performance benchmarks. While we will not support proposals that require all options to be performance-based, we will generally support proposals that require a portion of options granted to senior executives be performance-based. However, because performance-based options can also result in unfavorable tax treatment and the company may already have in place an option plan that sufficiently ties executive stock option plans to the company’s performance, we will consider such proposals on a case-by-case basis.

 

Prohibit Relocation Benefits to Senior Executives (SHP)		AGAINST

 

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We do not consider such perquisites to be problematic pay practices as long as they are properly disclosed. Therefore we will vote against shareholder proposals asking to prohibit relocation benefits.

 

Recovery of Performance-Based Compensation (SHP)		FOR

 

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We generally support shareholder proposals requiring the board to seek recovery of performance-based compensation awards to senior management and directors in the event of a financial restatement (whether for fraud or other reasons) that resulted in their failure to achieve past performance targets. In deciding how to vote, we consider the adequacy of existing company clawback policy, if any.

 

Submit Golden Parachutes/Severance Plans to a Shareholder Vote (SHP)		FOR

 

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Golden Parachutes assure key officers of a company lucrative compensation packages if the company is acquired and/or if the new owners terminate such officers. We recognize that offering generous compensation packages that are triggered by a change in control may help attract qualified officers. However, such compensation packages cannot be so excessive that they are unfair to shareholders or make the company unattractive to potential bidders, thereby serving as a constructive anti-takeover mechanism. Accordingly, we support proposals to submit severance plans (including supplemental retirement plans), to a shareholder vote, and we review proposals to ratify or redeem such plans retrospectively on a case-by-case basis.

 

Submit Golden Parachutes/Severance Plans to a Shareholder Vote Prior to Their Being Negotiated by Management (SHP)		CASE-BY-CASE

 

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We believe that in order to attract qualified employees, companies must be free to negotiate compensation packages without shareholder interference. However, shareholders must be given an opportunity to analyze a compensation plan’s final, material terms in order to ensure it is within acceptable limits. Accordingly, we evaluate proposals that require submitting severance plans and/or employment contracts for a shareholder vote prior to being negotiated by management on a case-by-case basis.

 

Submit Survivor Benefit Compensation Plan to Shareholder Vote (SHP)		FOR

 

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Survivor benefit compensation plans, or “golden coffins”, can require a company to make substantial payments or awards to a senior executive’s beneficiaries following the death of the senior executive. The compensation can take the form of unearned salary or bonuses, accelerated vesting or the continuation in force of unvested equity grants, perquisites and other payments or awards. This compensation would not include compensation that the senior executive chooses to defer during his or her lifetime.

 

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We recognize that offering generous compensation packages that are triggered by the passing of senior executives may help attract qualified officers. However, such compensation packages cannot be so excessive that they are unfair to shareholders or make the company unattractive to potential bidders, thereby serving as a constructive anti-takeover mechanism.

 

1.3	CAPITAL CHANGES AND ANTI-TAKEOVER PROPOSALS

 

Amend Exclusive Forum Bylaw (SHP)		AGAINST

 

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We will generally oppose proposals that ask the board to repeal the company’s exclusive forum bylaw. Such bylaws require certain legal action against the company to take place in the state of the company’s incorporation. The courts within the state of incorporation are considered best suited to interpret that state’s laws.

 

Amend Net Operating Loss (“NOL”) Rights Plans		FOR

 

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NOL Rights Plans are established to protect a company’s net operating loss carry forwards and tax credits, which can be used to offset future income. We believe this is a reasonable strategy for a company to employ. Accordingly, we will vote in favor of NOL Rights Plans unless we believe the terms of the NOL Rights Plan may provide for a long-term anti-takeover device.

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Authorize Share Repurchase		FOR

 

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We generally support share repurchase proposals that are part of a well-articulated and well-conceived capital strategy. We assess proposals to give the board unlimited authorization to repurchase shares on a case-by-case basis. Furthermore, we would generally support the use of derivative instruments (e.g., put options and call options) as part of a share repurchase plan absent a compelling reason to the contrary. Also, absent a specific concern at the company, we will generally support a repurchase plan that could be continued during a takeover period.

 

Blank Check Preferred Stock		AGAINST

 

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Blank check preferred stock proposals authorize the issuance of certain preferred stock at some future point in time and allow the board to establish voting, dividend, conversion and other rights at the time of issuance. While blank check preferred stock can provide a corporation with the flexibility needed to meet changing financial conditions, it also may be used as the vehicle for implementing a “poison pill” defense or some other entrenchment device.

 

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We are concerned that, once this stock has been authorized, shareholders have no further power to determine how or when it will be allocated. Accordingly, we generally oppose this type of proposal.

 

Corporate Restructurings, Merger Proposals and Spin-Offs		CASE-BY-CASE

 

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Proposals requesting shareholder approval of corporate restructurings, merger proposals and spin-offs are determined on a case-by-case basis. In evaluating these proposals and determining our votes, we are singularly focused on meeting our goal of maximizing long-term shareholder value.

 

Elimination of Preemptive Rights		CASE-BY-CASE

 

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Preemptive rights allow the shareholders of the company to buy newly-issued shares before they are offered to the public in order to maintain their percentage ownership. We believe that, because preemptive rights are an important shareholder right, careful scrutiny must be given to management’s attempts to eliminate them. However, because preemptive rights can be prohibitively expensive to widely-held companies, the benefit of such rights will be weighed against the economic effect of maintaining them.

 

Expensing Stock Options (SHP)		FOR

 

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US generally-accepted accounting principles require companies to expense stock options, as do the accounting rules in many other jurisdictions (including those jurisdictions that have adopted IFRS — international financial reporting standards). If a company is domiciled in a jurisdiction where the accounting rules do not already require the expensing of stock options, we will support shareholder proposals requiring this practice and disclosing information about it.

 

Fair Price Provisions		CASE-BY-CASE

 

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A fair price provision in the company’s charter or by laws is designed to ensure that each shareholder’s securities will be purchased at the same price if the corporation is acquired under a plan not agreed to by the board. In most instances, the provision requires that any tender offer made by a third party must be made to all shareholders at the same price.

 

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Fair pricing provisions attempt to prevent the “two tiered front loaded offer” where the acquirer of a company initially offers a premium for a sufficient percentage of shares of the company to gain control and subsequently makes an offer for the remaining shares at a much lower price. The remaining shareholders have no choice but to accept the offer. The two tiered approach is coercive as it compels a shareholder to sell his or her shares immediately in order to receive the higher price per share. This type of tactic has caused many states to adopt fair price provision statutes to restrict this practice.

 

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We consider fair price provisions on a case-by-case basis. We oppose any provision where there is evidence that management intends to use the provision as an anti-takeover device as well as any provision where the shareholder vote requirement is greater than a majority of disinterested shares (i.e., shares beneficially owned by individuals other than the acquiring party).

 

Increase Authorized Common Stock		CASE-BY-CASE

 

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In general we regard increases in authorized common stock as serving a legitimate corporate purpose when used to: implement a stock split, aid in a recapitalization or acquisition, raise needed capital for the firm, or provide for employee savings plans, stock option plans or executive compensation plans. That said, we may oppose a particular proposed increase if we consider the authorization likely to lower the share price (this would happen, for example, if the firm were proposing to use the proceeds to overpay for an acquisition, to invest in a project unlikely to earn the firm’s cost of capital, or to compensate employees well above market rates). We oppose increases in authorized common stock where there is evidence that the shares are to be used to implement a “poison pill” or another form of anti-takeover device, or if the issuance of new shares would, in our judgment, excessively dilute the value of the outstanding shares upon issuance. In addition, a satisfactory explanation of a company’s intentions—going beyond the standard “general corporate purposes”—

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must be disclosed in the proxy statement for proposals requesting an increase of greater than 100% of the shares outstanding. We view the use of derivatives, particularly warrants, as legitimate capital-raising instruments and apply these same principles to their use as we do to the authorization of common stock. Under certain circumstances where we believe it is important for shareholders to have an opportunity to maintain their proportional ownership, we may oppose proposals requesting shareholders approve the issuance of additional shares if those shares do not include preemptive rights.

 

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In Hong Kong, it is common for companies to request board authority to issue new shares up to 20% of outstanding share capital. The authority typically lapses after one year. We may vote against plans that do not prohibit issuing shares at a discount, taking into account whether a company has a history of doing so.

 

Issuance of Equity Without Preemptive Rights		FOR

 

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We are generally in favor of issuances of equity without preemptive rights of up to 30% of a company’s outstanding shares unless there is concern that the issuance will be used in a manner that could hurt shareholder value (e.g., issuing the equity at a discount from the current market price or using the equity to help create a “poison pill” mechanism).

 

Issuance of Stock with Unequal Voting Rights		CASE-BY-CASE

 

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Unequal voting rights plans are designed to reduce the voting power of existing shareholders and concentrate a significant amount of voting power in the hands of management. In the majority of instances, they serve as an effective deterrent to takeover attempts. These structures, however, may be beneficial, allowing management to focus on longer-term value creation, which benefits all shareholders. We evaluate these proposals on a case-by-case basis and take into consideration the alignment of management incentives with appropriate performance, metrics, and the effectiveness of the company’s strategy.

 

Net Long Position Requirement		FOR

 

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We support proposals that require the ownership level needed to call a special meeting to be based on the net long position of a shareholder or shareholder group. This standard ensures that a significant economic interest accompanies the voting power.

 

Reincorporation		CASE-BY-CASE

 

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There are many valid business reasons a corporation may choose to reincorporate in another jurisdiction. We perform a case-by-case review of such proposals, taking into consideration management’s stated reasons for the proposed move.

 

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Careful scrutiny also will be given to proposals that seek approval to reincorporate in countries that serve as tax havens. When evaluating such proposals, we consider factors such as the location of the company’s business, the statutory protections available in the country to enforce shareholder rights and the tax consequences of the reincorporation to shareholders.

 

Reincorporation to Another Jurisdiction to Permit Majority Voting or Other Changes in Corporate Governance (SHP)		CASE-BY-CASE

 

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If a shareholder proposes that a company move to a jurisdiction where majority voting (among other shareholder-friendly conditions) is permitted, we will generally oppose the move notwithstanding the fact that we favor majority voting for directors. Our rationale is that the legal costs, taxes, other expenses and other factors, such as business disruption, in almost all cases would be material and outweigh the benefit of majority voting. If, however, we should find that these costs are not material and/or do not outweigh the benefit of majority voting, we may vote in favor of this kind of proposal. We will evaluate similarly proposals that would require reincorporation in another state to accomplish other changes in corporate governance.

 

Stock Splits		FOR

 

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Stock splits are intended to increase the liquidity of a company’s common stock by lowering the price, thereby making the stock seem more attractive to small investors. We generally vote in favor of stock split proposals.

 

Submit Company’s Shareholder Rights Plan to Shareholder Vote (SHP)		FOR

 

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Most shareholder rights plans (also known as “poison pills”) permit the shareholders of a target company involved in a hostile takeover to acquire shares of the target company, the acquiring company, or both, at a substantial discount once a “triggering event” occurs. A triggering event is usually a hostile tender offer or the acquisition by an outside party of a certain percentage of the target company’s stock. Because most plans exclude the hostile bidder from the purchase, the effect in most instances is to dilute the equity interest and the voting rights of the potential acquirer once the plan is triggered. A shareholder rights plan is designed to discourage potential acquirers from acquiring shares to make a bid for the issuer. We believe that measures that impede takeovers or entrench management not only infringe on the rights of shareholders but also may have a detrimental effect on the value of the company.

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We support shareholder proposals that seek to require the company to submit a shareholder rights plan to a shareholder vote. We evaluate on a case-by-case basis proposals to implement or eliminate a shareholder rights plan.

 

Transferrable Stock Options		CASE-BY-CASE

 

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In cases where a compensation plan includes a transferable stock option program, we will consider the plan on a case-by-case basis.

 

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These programs allow stock options to be transferred to third parties in exchange for cash or stock. In effect, management becomes insulated from the downside risk of holding a stock option, while the ordinary shareholder remains exposed to downside risk. This insulation may unacceptably remove management’s exposure to downside risk, which significantly misaligns management and shareholder interests. Accordingly, we generally vote against these programs if the transfer can be executed without shareholder approval, is available to executive officers or non-employee directors, or we consider the available disclosure relating to the mechanics and structure of the program to be insufficient to determine the costs, benefits and key terms of the program.

 

1.4	AUDITOR PROPOSALS

 

Appointment of Auditors		FOR

 

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We believe that the company is in the best position to choose its accounting firm, and we generally support management’s recommendation.

 

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We recognize that there may be inherent conflicts when a company’s independent auditors perform substantial non-audit related services for the company. Therefore, in reviewing a proposed auditor, we will consider the amount of fees paid for non-audit related services performed compared to the total audit fees paid by the company to the auditing firm, and whether there are any other reasons for us to question the independence or performance of the firm’s auditor such as, for example, tenure. We generally will deem as excessive the non-audit fees paid by a company to its auditor if those fees account for 50% or more of total fees paid. In the UK market, which utilizes a different calculation, we adhere to a non-audit fee cap of 100% of audit fees. Under these circumstances, we generally vote against the auditor and the directors, in particular the members of the company’s audit committee. In addition, we generally vote against authorizing the audit committee to set the remuneration of such auditors. We exclude from this analysis non-audit fees related to IPOs, bankruptcy emergence, and spin-offs and other extraordinary events. We may vote against or abstain due to a lack of disclosure of the name of the auditor while taking into account local market practice.

 

Approval of Financial Statements		FOR

 

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In some markets, companies are required to submit their financial statements for shareholder approval. This is generally a routine item and, as such, we will vote for the approval of financial statements unless there are appropriate reasons to vote otherwise. We may vote against if the information is not available in advance of the meeting.

 

Approval of Internal Statutory Auditors		FOR

 

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Some markets (e.g., Japan) require the annual election of internal statutory auditors. Internal statutory auditors have a number of duties, including supervising management, ensuring compliance with the articles of association and reporting to a company’s board on certain financial issues. In most cases, the election of internal statutory auditors is a routine item and we will support management’s nominee provided that the nominee meets the regulatory requirements for serving as internal statutory auditors. However, we may vote against nominees who are designated independent statutory auditors who serve as executives of a subsidiary or affiliate of the issuer or if there are other reasons to question the independence of the nominees.

 

Limitation of Liability of External Statutory Auditors (Japan)		CASE-BY-CASE

 

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In Japan, companies may limit the liability of external statutory auditors in the event of a shareholder lawsuit through any of three mechanisms: (i) submitting the proposed limits to shareholder vote; (ii) setting limits by modifying the company’s articles of incorporation; and (iii) setting limits in contracts with outside directors, outside statutory auditors and external audit firms (requires a modification to the company’s articles of incorporation). A vote by 3% or more of shareholders can nullify a limit set through the second mechanism. The third mechanism has historically been the most prevalent.

 

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We review proposals to set limits on auditor liability on a case-by-case basis, considering whether such a provision is necessary to secure appointment and whether it helps to maximize long-term shareholder value.

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Separating Auditors and Consultants (SHP)		CASE-BY-CASE

 

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We believe that a company serves its shareholders’ interests by avoiding potential conflicts of interest that might interfere with an auditor’s independent judgment. SEC rules adopted as a result of the Sarbanes-Oxley Act of 2002 attempted to address these concerns by prohibiting certain services by a company’s independent auditors and requiring additional disclosure of others services.

 

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We evaluate on a case-by-case basis proposals that go beyond the SEC rules or other local market standards by prohibiting auditors from performing other non-audit services or calling for the board to adopt a policy to ensure auditor independence.

 

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We take into consideration the policies and procedures the company already has in place to ensure auditor independence and non-audit fees as a percentage of total fees paid to the auditor are not excessive.

 

1.5	SHAREHOLDER ACCESS AND VOTING PROPOSALS

 

A Shareholder’s Right to Call Special Meetings (SHP)		FOR

 

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Most state corporation statutes (though not Delaware, where many US issuers are domiciled) allow shareholders to call a special meeting when they want to take action on certain matters that arise between regularly-scheduled annual meetings. This right may apply only if a shareholder, or a group of shareholders, owns a specified percentage, often 10% of the outstanding shares.

 

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We recognize the importance of the right of shareholders to remove poorly-performing directors, respond to takeover offers and take other actions without having to wait for the next annual meeting. However, we also believe it is important to protect companies and shareholders from nuisance proposals. We further believe that striking a balance between these competing interests will maximize shareholder value. We believe that encouraging active share ownership among shareholders generally is beneficial to shareholders and helps maximize shareholder value. Accordingly, we will generally support a proposal to call a special meeting if the proposing shareholder owns, or the proposing shareholders as a group own, 5% or more of the outstanding voting equity of the company.

 

Adopt Cumulative Voting (SHP)		CASE-BY-CASE

 

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Cumulative voting is a method of electing directors that enables each shareholder to multiply the number of his or her shares by the number of directors being considered. A shareholder may then cast the total votes for any one director or a selected group of directors. For example, a holder of 10 shares normally casts 10 votes for each of 12 nominees to the board thus giving the shareholder 120 (10 × 12) votes. Under cumulative voting, the shareholder may cast all 120 votes for a single nominee, 60 for two, 40 for three, or any other combination that the shareholder may choose.

 

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We believe that encouraging activism among shareholders generally is beneficial to shareholders and helps maximize shareholder value. Cumulative voting supports the interests of minority shareholders in contested elections by enabling them to concentrate their votes and dramatically increase their chances of electing a dissident director to a board. Accordingly, we generally will support shareholder proposals to restore or provide for cumulative voting and we generally will oppose management proposals to eliminate cumulative voting. However, we may oppose cumulative voting if a company has in place both proxy access, which allows shareholders to nominate directors to the company’s ballot, and majority voting (with a carve-out for plurality voting in situations where there are more nominees than seats), which requires each director to receive the affirmative vote of a majority of votes cast and, we believe, leads to greater director accountability to shareholders.

 

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Also, we support cumulative voting at controlled companies regardless of any other shareholder protections that may be in place.

 

Adopt Cumulative Voting in Dual Shareholder Class Structures (SHP)		FOR

 

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In dual class structures (such as A&B shares) where the shareholders with a majority economic interest have a minority voting interest, we generally vote in favor of cumulative voting for those shareholders.

 

Early Disclosure of Voting Results (SHP)		AGAINST

 

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These proposals seek to require a company to disclose votes sooner than is required by the local market. In the US, the SEC requires disclosure in the first periodic report filed after the company’s annual meeting which we believe is reasonable. We do not support requests that require disclosure earlier than the time required by the local regulator.

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Limiting a Shareholder’s Right to Call Special Meetings		AGAINST

 

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Companies contend that limitations on shareholders’ rights to call special meetings are needed to prevent minority shareholders from taking control of the company’s agenda. However, such limits also have anti-takeover implications because they prevent a shareholder or a group of shareholders who have acquired a significant stake in the company from forcing management to address urgent issues, such as the potential sale of the company. Because most states prohibit shareholders from abusing this right, we see no justifiable reason for management to eliminate this fundamental shareholder right. Accordingly, we generally will vote against such proposals.

 

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In addition, if the board of directors, without shareholder consent, raises the ownership threshold a shareholder must reach before the shareholder can call a special meeting, we will vote against those directors.

 

Permit a Shareholder’s Right to Act by Written Consent (SHP)		FOR

 

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Action by written consent enables a large shareholder or group of shareholders to initiate votes on corporate matters prior to the annual meeting. We believe this is a fundamental shareholder right and, accordingly, will support shareholder proposals seeking to restore this right. However, in cases where a company has a majority shareholder or group of related majority shareholders with majority economic interest, we will oppose proposals seeking to restore this right as there is a potential risk of abuse by the majority shareholder or group of majority shareholders.

 

Proxy Access for Annual Meetings (SHP) (Management)		FOR

 

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These proposals allow “qualified shareholders” to nominate directors. We generally vote in favor of management and shareholder proposals for proxy access that employ guidelines reflecting the SEC framework for proxy access (adopted by the US Securities and Exchange Commission (“SEC”) in 2010, but vacated by the DC Circuit Court of Appeals in 2011), which would have allowed a single shareholder, or group of shareholders, who hold at least 3% of the voting power for at least three years continuously to nominate up to 25% of the current board seats, or two directors, for inclusion in the subject company’s annual proxy statement alongside management nominees.

 

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We will generally vote against proposals that use requirements that are more strict than the SEC’s framework and against individual board members, or entire boards, who exclude from their ballot properly submitted shareholder proxy access proposals or compete against shareholder proxy access proposals with stricter management proposals on the same ballot. We may vote against individual directors or entire boards who a) exclude from their ballot properly submitted shareholder proxy access proposals; b) compete against shareholder proxy access proposals with stricter management proposals on the same ballot.

 

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We will evaluate on a case-by-case basis proposals with less stringent requirements than the vacated SEC framework.

 

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From time to time we may receive requests to join with other shareholders to support a shareholder action. We may, for example, receive requests to join a voting block for purposes of influencing management. If the third parties requesting our participation are not affiliated with us and have no business relationships with us, we will consider the request on a case-by-case basis. However, where the requesting party has a business relationship with us (e.g., the requesting party is a client or a significant service provider), agreeing to such a request may pose a potential conflict of interest. As a fiduciary we have an obligation to vote proxies in the best interest of our clients (without regard to our own interests in generating and maintaining business with our other clients) and given our desire to avoid even the appearance of a conflict, we will generally decline such a request.

 

Reduce Meeting Notification from 21 Days to 14 Days (UK)		FOR

 

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Companies in the United Kingdom may, with shareholder approval, reduce the notice period for extraordinary general meetings from 21 days to 14 days.

 

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A reduced notice period expedites the process of obtaining shareholder approval of additional financing needs and other important matters. Accordingly, we support these proposals.

 

Shareholder Proponent Engagement Process (SHP)		FOR

 

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We believe that proper corporate governance requires that proposals receiving support from a majority of shareholders be considered and implemented by the company. Accordingly, we support establishing an engagement process between shareholders and management to ensure proponents of majority-supported proposals, have an established means of communicating with management.

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Supermajority Vote Requirements		AGAINST

 

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A supermajority vote requirement is a charter or by-law requirement that, when implemented, raises the percentage (higher than the customary simple majority) of shareholder votes needed to approve certain proposals, such as mergers, changes of control, or proposals to amend or repeal a portion of the Articles of Incorporation.

 

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In most instances, we oppose these proposals and support shareholder proposals that seek to reinstate the simple majority vote requirement.

 

1.6	ENVIRONMENTAL, SOCIAL AND DISCLOSURE PROPOSALS

 

Animal Welfare (SHP)		CASE-BY-CASE

 

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These proposals may include reporting requests on items such as pig gestation crates and animal welfare in the supply chain, or policy adoption requests on items such as dehorning cattle and animal testing.

 

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For proposals requesting companies to adopt a policy, we will carefully consider existing policies and the company’s incorporation of national standards and best practices. In addition, we will evaluate the potential enactment of new regulations, as well as any investment risk related to the specific issue.

 

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We generally support shareholder proposals calling for reports and disclosure while taking into account existing policies and procedures of the company and whether the proposed information is of added benefit to shareholders.

 

Climate Change (SHP)		CASE-BY-CASE

 

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Proposals addressing climate change concerns are plentiful and their scope varies. Climate change increasingly receives investor attention as a potentially critical and material risk to the sustainability of a wide range of business-specific activities.

 

Carbon Accounting (SHP)		FOR

These proposals may include greenhouse gas emissions (GHG) standards or reduction targets and/or methane reduction targets. Companies also may be asked to set quantitative goals, which may pertain to the company’s operations or product development and distribution. We generally support these proposals, while taking into account whether the proposed information is of added benefit to shareholders and the degree to which this issue is material to the company and the industry in which the company operates.

 

Carbon Risk		FOR

This set of proposals focusses on the risks associated with climate change. It may include proposals on GHG emission and finance, hydraulic fracturing/shale risk, offshore oil wells, oil and gas transport risk, and coal ash risk.

For proposals requesting companies to adopt a policy, we will carefully consider existing policies and the company’s incorporation of national standards and best practices. In addition, we will evaluate the potential enactment of new regulations, as well as any investment risk related to the specific issue.

 

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We generally support shareholder proposals calling for reports and disclosure while taking into account existing policies and procedures of the company and whether the proposed information is of added benefit to shareholders.

 

Charitable Contributions (SHP) (MGMT)		CASE-BY-CASE

 

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Proposals relating to charitable contributions may be sponsored by either management or shareholders.

 

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Management proposals may ask to approve the amount for charitable contributions.

 

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We generally support shareholder proposals calling for reports and disclosure while taking into account existing policies and procedures of the company and whether the proposed information is of added benefit to shareholders.

 

Environmental Proposals (SHP)		CASE-BY-CASE

 

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These proposals can include reporting and policy adoption requests in a wide variety of areas, including, but not limited to, (nuclear) waste, deforestation, packaging and recycling, renewable energy, toxic material, palm oil and water.

 

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For proposals requesting companies to adopt a policy, we will carefully consider existing policies and the company’s incorporation of national standards and best practices. In addition, we will evaluate the potential enactment of new regulations, as well as any investment risk related to the specific issue.

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We generally support shareholder proposals calling for reports while taking into account existing policies and procedures of the company and whether the proposed information is of added benefit to shareholders.

 

Genetically Altered or Engineered Food and Pesticides (SHP)		CASE-BY-CASE

 

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These proposals may include reporting requests on pesticides monitoring/use and Genetically Modified Organism (GMO) as well as GMO labeling.

 

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For proposals requesting companies to adopt a policy, we will carefully consider existing policies and the company’s incorporation of national standards and best practices. In addition, we will evaluate the potential enactment of new regulations, as well as any investment risk related to the specific issue.

 

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We generally support shareholder proposals calling for reports while taking into account existing policies and procedures of the company and whether the proposed information is of added benefit to shareholders.

 

Health Proposals (SHP)		CASE-BY-CASE

 

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These proposals may include reports on pharmaceutical pricing, the link between fast food and childhood obesity, and tobacco products. We generally support shareholder proposals calling for reports while taking into account the current reporting policies of the company and whether the proposed information is of added benefit to shareholders.

 

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Proposals relating to tobacco issues are wide-ranging. They include proposals to have a company issue warnings on the environmental risks of tobacco smoke and the risks of smoking-related diseases, as well as proposals to link executive compensation with reductions in teen smoking.

 

End Production of Tobacco Products		AGAINST

These proposals seek to phase-out all production, promotion and marketing of tobacco products by a specified date. When evaluating these resolutions, we must consider the company’s risks and liabilities associated with those lines of business, and evaluate the overall strategic business plans and how those plans will serve to maximize long-term shareholder value.

Because phasing out all tobacco-related operations by a tobacco company is very likely to result in the end of the company, which clearly is not in the best interests of shareholders, we will generally oppose these proposals.

 

Spin-Off Tobacco-Related Business		CASE-BY-CASE

Proponents seek for the subject company to phase-out all production, promotion and marketing of tobacco products by a specified date, citing health risks and tobacco companies’ systemic failure to honestly inform the public about these health risks until recently. Unlike the type of proposal cited above in (a), which would be put to a company that derives most, if not all, of its revenues from tobacco-related operations, a spin-off proposal would request that a company that derives only a portion (often a substantial portion) of its revenues from tobacco-related operations spin-off its tobacco-related operating segment / subsidiary.

When evaluating resolutions requesting a company divest itself from one or more lines of business, we must consider the company’s risks and liabilities associated with those lines of business, evaluate the overall strategic business plans and determine how those plans will serve to maximize long-term shareholder value.

 

Pharmaceutical Pricing (US)		CASE-BY-CASE

These proposals seek to require a company to report on the risk of high specialty drug prices in the US.

For proposals requesting companies to adopt a policy, we will carefully consider existing policies and the company’s incorporation of national standards and best practices. In addition, we will evaluate the potential enactment of new regulations, as well as any investment risk related to the specific issue.

 

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We generally support shareholder proposals calling for reports and disclosure while taking into account existing policies and procedures of the company and whether the proposed information is of added benefit to shareholders.

 

Human Rights Policies and Reports (SHP)		CASE-BY-CASE

 

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These proposals may include reporting requests on human rights risk assessment, humanitarian engagement policies, adopting policies on supply chain worker fees and expanding existing policies in these areas. We recognize that many companies have complex supply chains which have led to increased awareness of supply chain issues as an investment risk.

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•

For proposals requesting companies to adopt a policy, we will carefully consider existing policies and the company’s incorporation of national standards and best practices. In addition, we will evaluate the potential enactment of new regulations, as well as any investment risk related to the specific issue.

 

•

We generally support shareholder proposals calling for reports and disclosure while taking into account existing policies and procedures of the company and whether the proposed information is of added benefit to shareholders.

 

Include Sustainability as a Performance Measure (SHP)		CASE-BY-CASE

 

•

We believe management and directors should be given latitude in determining appropriate performance measurements. While doing so, consideration should be given to how long-term sustainability issues might affect future company performance. Therefore, we will evaluate on a case-by-case basis proposals requesting companies to consider incorporating specific, measurable, practical goals consisting of sustainability principles and environmental impacts as metrics for incentive compensation and how they are linked with our objectives as long-term shareholders.

 

Lobbying and Political Spending (SHP)		FOR

 

•

We generally vote in favor of proposals requesting increased disclosure of political contributions and lobbying expenses, including those paid to trade organizations and political action committees, whether at the federal, state, or local level. These proposals may increase transparency.

 

Other Business		AGAINST

 

•

In certain jurisdictions, these proposals allow management to act on issues that shareholders may raise at the annual meeting. Because it is impossible to know what issues may be raised, we will vote against these proposals.

 

Reimbursement of Shareholder Expenses (SHP)		AGAINST

 

•

These shareholder proposals would require companies to reimburse the expenses of shareholders who submit proposals that receive a majority of votes cast or the cost of proxy contest expenses. We generally vote against these proposals, unless reimbursement occurs only in cases where management fails to implement a majority passed shareholder proposal, in which case we may vote in favor.

 

Sustainability Report (SHP)		FOR

 

•

We generally support shareholder proposals calling for reports and disclosure while taking into account existing policies and procedures of the company and whether the proposed information is of added benefit to shareholders.

 

Work Place: Diversity (SHP)		FOR

 

•

Work place diversity reports generally fall in two categories: Disclosing EEO Data and Adopting Sexual Orientation/Gender Identification (ID) policies.

 

•

We generally support shareholder proposals calling for reports and disclosure while taking into account existing policies and procedures of the company and whether the proposed information is of added benefit to shareholders.

 

•

We generally support proposals requiring a company to amend its Equal Employment Opportunity policies to specifically reference sexual orientation and gender ID.

 

Work Place: Pay Disparity (SHP)		CASE-BY-CASE

 

•

A report on pay disparity compares the total compensation of a company’s executive officers with that of the company’s lowest paid workers and/or between genders, including statistics and rationale pertaining to changes in the size of the gap, information on whether executive compensation is “excessive”, and information on whether greater oversight is needed over certain aspects of the company’s compensation policies.

 

•

In the US, the SEC, in August 2015, adopted a rule requiring US issuers, for fiscal years ending on or after January 1, 2017, to contrast CEO pay with median employee pay. This rule, however, does not address all of the issues addressed by pay disparity reports. Accordingly, we will continue to evaluate these proposals on a case-by-case basis, taking into account the specific metrics and scope of the information requested and whether the SEC’s rule renders the proposal unnecessary.

 

2.	CONFLICTS OF INTEREST

 

2.1	INTRODUCTION

 

•

As a fiduciary, we always must act in our clients’ best interests. We strive to avoid even the appearance of a conflict that may compromise the trust our clients have placed in us, and we insist on strict adherence to fiduciary standards and compliance with all applicable federal and state securities laws. We have adopted a comprehensive Code of Business Conduct and Ethics (“Code”) to help us meet these obligations. As part of this responsibility and as expressed throughout the Code, we place the interests of our clients first and attempt to avoid any perceived or actual conflicts of interest.

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•

AllianceBernstein L.P. (“AB””) recognizes that there may be a potential material conflict of interest when we vote a proxy solicited by an issuer that sponsors a retirement plan we manage (or administer), that distributes AB-sponsored mutual funds, or with which AB or one or more of our employees have another business or personal relationship that may affect how we vote on the issuer’s proxy. Similarly, we may have a potential material conflict of interest when deciding how to vote on a proposal sponsored or supported by a shareholder group that is a client. In order to avoid any perceived or actual conflict of interest, the procedures set forth below in sections 4.2 through 4.8 have been established for use when we encounter a potential conflict to ensure that our voting decisions are based on our clients’ best interests and are not the product of a conflict.

 

2.2	ADHERENCE TO STATED PROXY VOTING POLICIES

 

•

Votes generally are cast in accordance with this policy3. In situations where our policy is case-by-case, this Manual often provides criteria that will guide our decision. In situations where our policy on a particular issue is case-by-case and the vote cannot be clearly decided by an application of our stated policy, a member of the Proxy Committee or his/her designee will make the voting decision in accordance with the basic principle of our policy to vote proxies with the intention of maximizing the value of the securities in our client accounts. In these situations, the voting rationale must be documented either on the voting platform of ISS, by retaining relevant emails or another appropriate method. Where appropriate, the views of investment professionals are considered. All votes cast contrary to our stated voting policy on specific issues must be documented. On an annual basis, the Proxy Committee will receive a report of all such votes so as to confirm adherence of the policy.

 

2.3	DISCLOSURE OF CONFLICTS

 

•

When considering a proxy proposal, members of the Proxy Committee or investment professionals involved in the decision-making process must disclose to the Proxy Committee any potential conflict (including personal relationships) of which they are aware and any substantive contact that they have had with any interested outside party (including the issuer or shareholder group sponsoring a proposal) regarding the proposal. Any previously unknown conflict will be recorded on the Potential Conflicts List (discussed below). If a member of the Proxy Committee has a conflict of interest, he or she must also remove himself or herself from the decision-making process.

 

2.4	POTENTIAL CONFLICTS LIST

 

•

No less frequently than annually, a list of companies and organizations whose proxies may pose potential conflicts of interest is compiled by the Legal and Compliance Department (the “Potential Conflicts List”). The Potential Conflicts List includes:

Publicly-traded Clients from the Russell 3000 Index, the Morgan Stanley Capital International (“MSCI”) Europe Australia Far East Index (MSCI EAFE), the MSCI Canada Index and the MSCI Emerging Markets Index;

Publicly-traded companies that distribute AB mutual funds;

Bernstein private clients who are directors, officers or 10% shareholders of publicly traded companies;

Clients who sponsor, publicly support or have material interest in a proposal upon which we will be eligible to vote;

Publicly-traded affiliated companies;

Companies where an employee of AB or AXA Financial, Inc., a parent company of AB, has identified an interest;

Any other conflict of which a Proxy Committee member becomes aware⁴.

 

•

We determine our votes for all meetings of companies on the Potential Conflicts List by applying the tests described in Section 4.5 below. We document all instances when the independent compliance officer determines our vote.

 

2.5	DETERMINE EXISTENCE OF CONFLICT OF INTEREST

 

•

When we encounter a potential conflict of interest, we review our proposed vote using the following analysis to ensure our voting decision does not generate a conflict of interest:

If our proposed vote is consistent with our Proxy Voting Policy, no further review is necessary.

 

3	From time to time a client may request that we vote their proxies consistent with AFL-CIO guidelines or the policy of the National Association of Pension Funds. In those situations, AB reserves the right to depart from those policies if we believe it to be in the client’s best interests.

4	The Proxy Committee must notify the Legal and Compliance Department promptly of any previously unknown conflict.

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If our proposed vote is contrary to our Proxy Voting Policy and our client’s position on the proposal, no further review is necessary.

If our proposed vote is contrary to our Proxy Voting Policy or is not covered herein, is consistent with our client’s position, and is also consistent with the views of ISS, no further review is necessary.

If our proposed vote is contrary to our Proxy Voting Policy or is not covered herein, is consistent with our client’s position and is contrary to the views of ISS, the vote will be presented to an independent compliance officer (“ICO”). The ICO will determine whether the proposed vote is reasonable. If the ICO cannot determine that the proposed vote is reasonable, the ICO may instruct AB to refer the votes back to the client(s) or take other actions as the ICO deems appropriate. The ICO’s review will be documented using a Proxy Voting Conflict of Interest Form (a copy of which is attached hereto).

 

2.6	REVIEW OF THIRD PARTY RESEARCH SERVICE CONFLICTS OF INTEREST

 

•

We consider the research of ISS, so the Proxy Committee takes reasonable steps to verify that ISS is, in fact, independent based on all of the relevant facts and circumstances. This includes reviewing ISS’s conflict management procedures on an annual basis. When reviewing these conflict management procedures, we will consider, among other things, whether ISS (i) has the capacity and competency to adequately analyze proxy issues; and (ii) can offer research in an impartial manner and in the best interests of our clients.

 

2.7	CONFIDENTIAL VOTING

 

•

It is AB’s policy to support confidentiality before the actual vote has been cast. Employees are prohibited from revealing how we intend to vote except to (i) members of the Proxy Committee; (ii) Portfolio Managers who hold the security in their managed accounts; (iii) the Research Analyst(s) who cover(s) the security; (iv) clients, upon request, for the securities held in their portfolios; and (v) clients who do not hold the security or for whom AB does not have proxy voting authority, but who provide AB with a signed a Non-Disclosure Agreement. Once the votes have been cast, they are made public in accordance with mutual fund proxy vote disclosures required by the SEC, and we generally post all votes to our public website the quarter after the vote has been cast.

 

•

We may participate in proxy surveys conducted by shareholder groups or consultants so long as such participation does not compromise our confidential voting policy. Specifically, prior to our required SEC disclosures each year, we may respond to surveys asking about our proxy voting policies, but not any specific votes. After our mutual fund proxy vote disclosures required by the SEC each year have been made public and/or votes have been posted to our public website, we may respond to surveys that cover specific votes in addition to our voting policies.

 

•

On occasion, clients for whom we do not have proxy voting authority may ask us for advice on proxy votes that they cast. A member of the Proxy Committee or a Proxy Manager may offer such advice subject to an understanding with the client that the advice shall remain confidential.

 

•

Any substantive contact regarding proxy issues from the issuer, the issuer’s agent or a shareholder group sponsoring a proposal must be reported to the Proxy Committee if such contact was material to a decision to vote contrary to this Policy. Routine administrative inquiries from proxy solicitors need not be reported.

 

2.8	A NOTE REGARDING AB’S STRUCTURE

 

•

AB and AllianceBernstein Holding L.P. (“AB Holding”) are Delaware limited partnerships. As limited partnerships, neither company is required to produce an annual proxy statement or hold an annual shareholder meeting. In addition, the general partner of AB and AB Holding, AllianceBernstein Corporation, is a wholly-owned subsidiary of AXA, a French holding company for an international group of insurance and related financial services companies.

 

•

As a result, most of the positions we express in this Proxy Voting Policy are inapplicable to our business. For example, although units in AB Holding are publicly traded on the New York Stock Exchange (“NYSE”), the NYSE Listed Company Manual exempts limited partnerships and controlled companies from compliance with various listing requirements, including the requirement that our board have a majority of independent directors.

 

3.	VOTING TRANSPARENCY

 

•

We publish our voting records on our website quarterly, 30 days after the end of the previous quarter. Many clients have requested that we provide them with periodic reports on how we voted their proxies. Clients may obtain information about how we voted proxies on their behalf by contacting their Advisor. Alternatively, clients may make a written request to the Chief Compliance Officer.

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4.	RECORDKEEPING

 

•

All of the records referenced below will be kept in an easily accessible place for at least the length of time required by local regulation and custom, and, if such local regulation requires that records are kept for less than five years from the end of the fiscal year during which the last entry was made on such record, we will follow the US rule of five years. We maintain the vast majority of these records electronically. We will keep paper records, if any, in one of our offices for at least two years.

 

4.1	PROXY VOTING POLICY

 

•

The Proxy Voting Policy shall be maintained in the Legal and Compliance Department and posted on our company intranet and the AB website (https://www.abglobal.com).

 

4.2	PROXY STATEMENTS RECEIVED REGARDING CLIENT SECURITIES

 

•

For US Securities5, AB relies on the SEC to maintain copies of each proxy statement we receive regarding client securities. For Non-US Securities, we rely on ISS, our proxy voting agent, to retain such proxy statements.

 

4.3	RECORDS OF VOTES CAST ON BEHALF OF CLIENTS

 

•

Records of votes cast by AB are retained electronically by our proxy voting agent, ISS.

 

4.4	RECORDS OF CLIENTS REQUESTS FOR PROXY VOTING INFORMATION

 

•

Copies of written requests from clients for information on how AB voted their proxies shall be maintained by the Legal and Compliance Department. Responses to written and oral requests for information on how we voted clients’ proxies will be kept in the Client Group.

 

4.5	DOCUMENTS PREPARED BY AB THAT ARE MATERIAL TO VOTING DECISIONS

 

•

The Proxy Committee is responsible for maintaining documents prepared by the Committee or any AB employee that were material to a voting decision. Therefore, where an investment professional’s opinion is essential to the voting decision, the recommendation from investment professionals must be made in writing to the Proxy Manager.

 

5.	PROXY VOTING PROCEDURES

 

5.1	VOTE ADMINISTRATION

 

•

In an effort to increase the efficiency of voting proxies, AB uses ISS to act as its voting agent for our clients’ holdings globally.

 

•

Issuers initially send proxy information to the custodians of our client accounts. We instruct these custodian banks to direct proxy related materials to ISS’s offices. ISS provides us with research related to each resolution. A Proxy Manager reviews the ballots via ISS’s web platform, ProxyExchange. Using ProxyExchange, the Proxy Manager submits our voting decision. ISS then returns the proxy ballot forms to the designated returnee for tabulation. Clients may request that, when voting their proxies, we utilize an ISS recommendation or ISS’s Taft-Hartley Voting Policy.

 

•

If necessary, any paper ballots we receive will be voted online using ProxyVote or via mail or fax.

 

5.2	SHARE BLOCKING

 

•

Proxy voting in certain countries requires “share blocking.” Shareholders wishing to vote their proxies must deposit their shares shortly before the date of the meeting (usually one week) with a designated depositary. During this blocking period, shares that will be voted at the meeting cannot be sold until the meeting has taken place and the shares are returned to the clients’ custodian banks. We may determine that the value of exercising the vote is outweighed by the detriment of not being able to sell the shares during this period. In cases where we want to retain the ability to trade shares, we may abstain from voting those shares.

 

•

We seek to vote all proxies for securities held in client accounts for which we have proxy voting authority. However, in some markets administrative issues beyond our control may sometimes prevent us from voting such proxies. For example, we may receive meeting notices after the cut-off date for voting or without enough time to fully consider the proxy. Similarly, proxy materials for some issuers may not contain disclosure sufficient to arrive at a voting decision, in which cases we may abstain from voting. Some markets outside the US require periodic renewals of powers of attorney that local agents must have from our clients prior to implementing our voting instructions.

 

5	US securities are defined as securities of issuers required to make reports pursuant to §12 of the Securities Exchange Act of 1934, as amended. Non-US securities are defined as all other securities.

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5.3	LOANED SECURITIES

 

•

Many of our clients have entered into securities lending arrangements with agent lenders to generate additional revenue. We will not be able to vote securities that are on loan under these types of arrangements. However, under rare circumstances, for voting issues that may have a significant impact on the investment, we may request that clients or custodians recall securities that are on loan if we determine that the benefit of voting outweighs the costs and lost revenue to the client or fund and the administrative burden of retrieving the securities.

PROXY COMMITTEE MEMBERS

 

•

The members of the Proxy Committee establish general proxy policies for AB and consider specific proxy voting matters as necessary. Members include senior investment personnel and representatives of the Legal and Compliance Department and the Operations Department. The Proxy Committee is chaired by Linda Giuliano, Senior Vice President, Chief Administrative Officer-Equities, and Head of Responsible Investment. If you have questions or desire additional information about this Policy, please contact the Proxy Team at: ProxyTeam@ABGlobal.com.

PROXY COMMITTEE

Vincent DuPont, SVP—Equities

Linda Giuliano, SVP—Equities

Saskia Kort-Chick, VP—Equities

David Lesser, VP—Legal

James MacGregor, SVP—Equities

Mark Manley, SVP—Legal

Ryan Oden, AO—Equities

Anthony Rizzi, VP—Operations

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PROXY VOTING GUIDELINE SUMMARY

 

Shareholder Proposal				For		Against		Case-by- Case
		Board and Director Proposals
+		Board Diversity						+
+		Establish New Board Committees and Elect Board Members with Specific Expertise						+
		Changes in Board Structure and Amending the Articles of Incorporation		+
		Classified Boards				+
		Director Liability and Indemnification						+
+		Disclose CEO Succession Plan		+
		Election of Directors		+
		Controlled Company Exemption						+
		Voting for Director Nominees in a Contested Election						+
+		Independent Lead Director		+
+		Limit Term of Directorship						+
+		Majority of Independent Directors		+
+		Majority of Independent Directors on Key Committees		+
+		Majority Votes for Directors		+
+		Removal of Directors Without Cause		+
+		Require Independent Board Chairman						+
+		Require Two Candidates for Each Board Seat				+
		Compensation Proposals
+		Elimination of Single Trigger Change-in-Control Agreements		+
+		Pro Rata Vesting of Equity Compensation Awards-Change of Control						+
+		Adopt Policies to Prohibit any Death Benefits to Senior Executives				+
+		Advisory Vote to Ratify Directors’ Compensation		+
+		Amend Executive Compensation Plan Tied to Performance (Bonus Banking)				+
		Approve Remuneration for Directors and Auditors						+
		Approve Remuneration Reports						+
		Approve Retirement Bonuses for Directors (Japan and South Korea)						+
		Approve Special Payments to Continuing Directors and Auditors (Japan)						+
+		Disclose Executive and Director Pay						+
+		Exclude Pension Income from Performance-Based Compensation		+
		Executive and Employee Compensation Plans						+
+		Limit Dividend Payments to Executives				+
+		Limit Executive Pay						+
+		Mandatory Holding Periods				+
+		Performance-Based Stock Option Plans						+
+		Prohibit Relocation Benefits to Senior Executives				+

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Shareholder Proposal				For		Against		Case-by- Case
+		Recovery of Performance-Based Compensation		+
+		Submit Golden Parachutes/Severance Plans to a Shareholder Vote				+
+		Submit Golden Parachutes/Severance Plans to a Shareholder Vote prior to their being Negotiated by Management						+
+		Submit Survivor Benefit Compensation Plans to a Shareholder Vote		+
		Capital Changes and Anti-Take Over Proposals
+		Amend Exclusive Forum Bylaw				+
		Amend Net Operating Loss (“NOL”) Rights Plans		+
		Authorize Share Repurchase		+
		Blank Check Preferred Stock				+
		Corporate Restructurings, Merger Proposals and Spin-Offs						+
		Elimination of Preemptive Rights						+
+		Expensing Stock Options		+
		Fair Price Provisions						+
		Increase Authorized Common Stock						+
		Issuance of Equity without Preemptive Rights		+
		Issuance of Stock with Unequal Voting Rights						+
		Net Long Position Requirement		+
		Reincorporation						+
+		Reincorporation to Another jurisdiction to Permit Majority Voting or Other Changes in Corporate Governance						+
		Stock Splits		+
+		Submit Company’s Shareholder Rights Plan to a Shareholder Vote		+
		Transferrable Stock Options						+
		Auditor Proposals
		Appointment of Auditors		+
		Approval of Financial Statements		+
		Approval of Internal Statutory Auditors		+
+		Limit Compensation Consultant Services				+
		Limitation of Liability of External Statutory Auditors (Japan)						+
+		Separating Auditors and Consultants						+
		Shareholder Access & Voting Proposals
+		A Shareholder’s Right to Call Special Meetings		+
+		Adopt Cumulative Voting						+
+		Adopt Cumulative Voting in Dual Shareholder Class Structures		+
+		Early Disclosure of Voting Results				+
+		Implement Confidential Voting		+
		Limiting a Shareholder’s Right to Call Special Meetings				+
+		Permit a Shareholder’s Right to Act by Written Consent		+
+		Proxy Access for Annual Meetings		+
		Reduce Meeting Notification from 21 Days to 14 Days (UK)		+

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Shareholder Proposal				For		Against		Case-by- Case
+		Rotation of Locale for Annual Meeting				+
+		Shareholder Proponent Engagement Process		+
		Supermajority Vote Requirements				+
		Environmental & Social, Disclosure Proposals
+		Animal Welfare						+
+		Climate Change						+
+		Carbon Accounting		+
+		Carbon Risk		+
+		Charitable Contributions						+
+		Environmental Proposals						+
+		Genetically Altered or Engineered Food and Pesticides						+
+		Health Proposals						+
+		End Production of Tobacco Products				+
+		Spin-Off Tobacco-Related Business						+
+		Pharmaceutical Pricing (US)						+
+		Human Rights Policies and Reports						+
+		Include Sustainability as a Performance Measure (SHP)						+
+		Lobbying and Political Spending		+
+		Other Business				+
+		Reimbursement of Shareholder Expenses				+
+		Sustainability Report						+
+		Work Place: Diversity		+
+		Work Place: Pay Disparity						+

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PROXY VOTING CONFLICT OF INTEREST FORM

 

Name of Security						Date of Shareholder Meeting

 

Short Description of the conflict (client, mutual fund distributor, etc.):

 

1.      Is our proposed vote on all issues consistent with our stated proxy voting policy?		¨ Yes ¨ No
If yes, stop here and sign below as no further review is necessary.
2.      Is our proposed vote contrary to our client’s position?		¨ Yes ¨ No
If yes, stop here and sign below as no further review is necessary.
3.      Is our proposed vote consistent with the views of Institutional Shareholder Services?		¨ Yes ¨ No
If yes, stop here and sign below as no further review is necessary.

 

•

Please attach a memo containing the following information and documentation supporting the proxy voting decision:

A list of the issue(s) where our proposed vote is contrary to our stated policy (director election, cumulative voting, compensation)

A description of any substantive contact with any interested outside party and a proxy voting committee or an AB investment professional that was material to our voting decision. Please include date, attendees, titles, organization they represent and topics discussed. If there was no such contact, please note as such.

If the Independent Compliance Officer has NOT determined that the proposed vote is reasonable, please explain and indicate what action has been, or will be taken.

 

Independent Compliance Officer Approval (if necessary. Email approval is acceptable.):				Prepared by:
I hereby confirm that the proxy voting decision referenced on this form is reasonable.
				Print Name:
Phillip Kirstein				Date:
Date:

 

•

Please return this completed form and all supporting documentation to the Conflicts Officer in the Legal and Compliance Department and keep a copy for your records.

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STATEMENT OF POLICY REGARDING RESPONSIBLE INVESTMENT

PRINCIPLES FOR RESPONSIBLE INVESTMENT, ESG AND SOCIALLY RESPONSIBLE INVESTMENT

Introduction

 

•

AllianceBernstein L.P. (“AB” or “we”) is appointed by our clients as an investment manager with a fiduciary responsibility to help them achieve their investment objectives over the long term. Generally, our clients’ objective is to maximize the financial return of their portfolios within appropriate risk parameters. AB has long recognized that environmental, social and governance (“ESG”) issues can impact the performance of investment portfolios. Accordingly, we have sought to integrate ESG factors into our investment process to the extent that the integration of such factors is consistent with our fiduciary duty to help our clients achieve their investment objectives and protect their economic interests.

 

•

Our policy draws a distinction between how the Principles for Responsible Investment (“PRI” or “Principles”), and Socially Responsible Investing (“SRI”) incorporate ESG factors. PRI is based on the premise that, because ESG issues can affect investment performance, appropriate consideration of ESG issues and engagement regarding them is firmly within the bounds of a mainstream investment manager’s fiduciary duties to its clients. Furthermore, PRI is intended to be applied only in ways that are consistent with those mainstream fiduciary duties.

 

•

SRI, which refers to a spectrum of investment strategies that seek to integrate ethical, moral, sustainability and other non-financial factors into the investment process, generally involves exclusion and/or divestment, as well as investment guidelines that restrict investments. AB may accept such guideline restrictions upon client request.

Approach to ESG

 

•

Our long-standing policy has been to include ESG factors in our extensive fundamental research and consider them carefully when we believe they are material to our forecasts and investment decisions. If we determine that these aspects of an issuer’s past, current or anticipated behavior are material to its future expected returns, we address these concerns in our forecasts, research reviews, investment decisions and engagement. In addition, we have well-developed proxy voting policies that incorporate ESG issues and engagement.

Commitment to the PRI

 

•

In recent years, we have gained greater clarity on how the PRI initiative, based on information from PRI Advisory Council members and from other signatories, provides a framework for incorporating ESG factors into investment research and decision-making. Furthermore, our industry has become, over time, more aware of the importance of ESG factors. We acknowledge these developments and seek to refine what has been our process in this area.

 

•

After careful consideration, we determined that becoming a PRI signatory would enhance our current ESG practices and align with our fiduciary duties to our clients as a mainstream investment manager. Accordingly, we became a signatory, effective November 1, 2011.

 

•

In signing the PRI, AB as an investment manager publicly commits to adopt and implement all six Principles, where consistent with our fiduciary responsibilities, and to make progress over time on implementation of the Principles.

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•

The six Principles are:

1. We will incorporate ESG issues into investment research and decision-making processes.

AB Examples: ESG issues are included in the research analysis process. In some cases, external service providers of ESG-related tools are utilized; we have conducted proxy voting training and will have continued and expanded training for investment professionals to incorporate ESG issues into investment analysis and decision-making processes across our firm.

2. We will be active owners and incorporate ESG issues into our ownership policies and practices.

AB Examples: We are active owners through our proxy voting process (for additional information, please refer to our Statement of Policies and Procedures for Proxy Voting Manual); we engage issuers on ESG matters in our investment research process (we define “engagement” as discussions with management about ESG issues when they are, or we believe they are reasonably likely to become, material).

3. We will seek appropriate disclosure on ESG issues by the entities in which we invest.

AB Examples: Generally, we support transparency regarding ESG issues when we conclude the disclosure is reasonable. Similarly, in proxy voting, we will support shareholder initiatives and resolutions promoting ESG disclosure when we conclude the disclosure is reasonable.

4. We will promote acceptance and implementation of the Principles within the investment industry.

AB Examples: By signing the PRI, we have taken an important first step in promoting acceptance and implementation of the six Principles within our industry.

5. We will work together to enhance our effectiveness in implementing the Principles.

AB Examples: We will engage with clients and participate in forums with other PRI signatories to better understand how the PRI are applied in our respective businesses. As a PRI signatory, we have access to information, tools and other signatories to help ensure that we are effective in our endeavors to implement the PRI.

6. We will report on our activities and progress towards implementing the Principles.

AB Examples: We will respond to the 2012 PRI questionnaire and disclose PRI scores from the questionnaire in response to inquiries from clients and in requests for proposals; we will provide examples as requested concerning active ownership activities (voting, engagement or policy dialogue).

4. RI Committee

Our firm’s RI Committee provides AB stakeholders, including employees, clients, prospects, consultants and service providers alike, with a resource within our firm on which they can rely for information regarding our approach to ESG issues and how those issues are incorporated in different ways by the PRI and SRI. Additionally, the RI Committee is responsible for assisting AB personnel to further implement our firm’s RI policies and practices, and, over time, to make progress on implementing all six Principles.

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The RI Committee has a diverse membership, including senior representatives from investments, distribution/sales and legal. The Committee is chaired by Linda Giuliano, Senior Vice President and Chief Administrative Officer-Equities.

If you have questions or desire additional information about this Policy, we encourage you to contact the RI Committee at RIinquiries@alliancebernstein.com

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ITEM 8.

PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

The day-to-day management of and investment decisions for the Fund are made by a team of investment professionals consisting of Messrs. Paul J. DeNoon, Gershon M. Distenfeld, Douglas J. Peebles and Matthew S. Sheridan.

The following table sets forth when each person became involved in the management of the Fund, and each person’s principal occupation during the past five years:

 

Employee; Year; Title		Principal Occupation During the Past Five (5) Years
Paul J. DeNoon; since 2002–Senior Vice President of the Adviser and Director of Emerging Market Debt		Senior Vice President of the Adviser, with which he has been associated in a substantially similar capacity to his current position since prior to 2006 and Director of Emerging Market Debt.
Gershon M. Distenfeld; since 2006–Vice President of the Adviser		Senior Vice President of the Adviser, with which he has been associated in a substantially similar capacity to his current position since prior to 2006 and Director of High Yield.
Douglas J. Peebles; since 2002–Executive Vice President of the Adviser, Chief Investment Officer and Head of Fixed-Income		Senior Vice President of the Adviser, with which he has been associated in a substantially similar capacity to his current position since prior to 2006 and Chief Investment Officer and Head of Fixed Income.
Matthew S. Sheridan; since 2008–Vice President of the Adviser		Vice President of the Adviser, with which he has been associated in a substantially similar capacity to his current position since prior to 2006.

(a) (2) The following tables provide information regarding registered investment companies other than the Fund, other pooled investment vehicles and other accounts over which the Fund’s portfolio managers also have day-to-day management responsibilities. The tables provide the numbers of such accounts, the total assets in such accounts and the number of accounts and total assets whose fees are based on performance. The information is provided as of the Fund’s fiscal year ended December 31, 2015.

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REGISTERED INVESTMENT COMPANIES

(excluding the Fund)

 

Portfolio Manager

Total Number of Registered Investment Companies Managed

Total Assets of Registered Investment Companies Managed

Number of Registered Investment Companies Managed with Performance- based Fees

Total Assets of Registered Investment Companies Managed with Performance-based Fees

Paul J. DeNoon

16

7,059,000,000

None

None

Gershon M. Distenfeld

17

6,958,000,000

None

None

Douglas J. Peebles

32

11,893,000,000

None

None

Matthew S. Sheridan

38

13,461,000,000

None

None

POOLED INVESTMENT VEHICLES

 

Portfolio Manager

Total Number of Pooled Investment Vehicles Managed

Total Assets of Pooled Investment Vehicles Managed

Number of Pooled Investment Vehicles Managed with Performance-based Fees

Total Assets of Pooled Investment Vehicles Managed with Performance- based Fees

Paul J. DeNoon

36

26,706,000,000

None

None

Gershon M. Distenfeld

36

25,996,000,000

None

None

Douglas J. Peebles

47

5,742,000,000

None

None

Matthew S. Sheridan

52

25,736,000,000

None

None

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OTHER ACCOUNTS

 

Portfolio Manager		Total Number of Other Accounts Managed				Total Assets of Other Accounts Managed				Number of Other Accounts Managed with Performance- based Fees				Total Assets of Other Accounts with Performance- based Fees
Paul J. DeNoon			15				10,100,000,000				2				1,449,000,000
Gershon M. Distenfeld			11				2,464,000,000				None				None
Douglas J. Peebles			85				26,758,000,000				4				2,405,000,000
Matthew S. Sheridan			47				22,138,000,000				4				2,405,000,000

Investment Professional Conflict of Interest Disclosure

As an investment adviser and fiduciary, the Adviser owes its clients and shareholders an undivided duty of loyalty. The Advisor recognizes that conflicts of interest are inherent in its business and accordingly have developed policies and procedures (including oversight monitoring) reasonably designed to detect, manage and mitigate the effects of actual or potential conflicts of interest in the area of employee personal trading, managing multiple accounts for multiple clients, including AB Mutual Funds, and allocating investment opportunities. Investment professionals, including portfolio managers and research analysts, are subject to the above-mentioned policies and oversight monitoring to ensure that all clients are treated equitably. The Advisor places the interests of its clients first and expect all of our employees to meet their fiduciary duties.

Employee Personal Trading. The Adviser has adopted a Code of Business Conduct and Ethics that is designed to detect and prevent conflicts of interest when investment professionals and other personnel of the Adviser own, buy or sell securities which may be owned by, or bought or sold for, clients. Personal securities transactions by an employee may raise a potential conflict of interest when an employee owns or trades in a security that is owned or considered for purchase or sale by a client, or recommended for purchase or sale by an employee to a client. Subject to the reporting requirements and other limitations of its Code of Business Conduct and Ethics, the Adviser permits its employees to engage in personal securities transactions, and also allows them to acquire investments in certain Funds managed by the Adviser. The Adviser’s Code of Business Conduct and Ethics requires disclosure of all personal accounts and maintenance of brokerage accounts with designated broker-dealers approved by the Adviser. The Code of Business Conduct and Ethics also requires preclearance of all securities transactions (except transactions in U.S. Treasuries and open-end mutual funds) and imposes a 60-day holding period for securities purchased by employees to discourage short-term trading.

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Managing Multiple Accounts for Multiple Clients. The Adviser has compliance policies and oversight monitoring in place to address conflicts of interest relating to the management of multiple accounts for multiple clients. Conflicts of interest may arise when an investment professional has responsibilities for the investments of more than one account because the investment professional may be unable to devote equal time and attention to each account. The investment professional or investment professional teams for each client may have responsibilities for managing all or a portion of the investments of multiple accounts with a common investment strategy, including other registered investment companies, unregistered investment vehicles, such as hedge funds, pension plans, separate accounts, collective trusts and charitable foundations. Among other things, the Adviser’s policies and procedures provide for the prompt dissemination to investment professionals of initial or changed investment recommendations by analysts so that investment professionals are better able to develop investment strategies for all accounts they manage. In addition, investment decisions by investment professionals are reviewed for the purpose of maintaining uniformity among similar accounts and ensuring that accounts are treated equitably. Investment professional compensation reflects a broad contribution in multiple dimensions to long-term investment success for clients of the Advisor and is generally not tied specifically to the performance of any particular client’s account, nor is it generally tied directly to the level or change in level of assets under management.

Allocating Investment Opportunities. The investment professionals at the Adviser routinely are required to select and allocate investment opportunities among accounts. The Adviser has adopted policies and procedures intended to address conflicts of interest relating to the allocation of investment opportunities. These policies and procedures are designed to ensure that information relevant to investment decisions is disseminated promptly within its portfolio management teams and investment opportunities are allocated equitably among different clients. The policies and procedures require, among other things, objective allocation for limited investment opportunities (e.g., on a rotational basis), and documentation and review of justifications for any decisions to make investments only for select accounts or in a manner disproportionate to the size of the account. Portfolio holdings, position sizes, and industry and sector exposures tend to be similar across similar accounts, which minimize the potential for conflicts of interest relating to the allocation of investment opportunities. Nevertheless, access to portfolios funds or other investment opportunities may be allocated differently among accounts due to the particular characteristics of an account, such as size of the account, cash position, tax status, risk tolerance and investment restrictions or for other reasons.

The Adviser’s procedures are also designed to address potential conflicts of interest that may arise when the Adviser has a particular financial incentive, such as a performance-based management fee, relating to an account. An investment professional may perceive that he or she has an incentive to devote more time to developing and analyzing investment strategies and opportunities or allocating securities preferentially to accounts for which the Adviser could share in investment gains.

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Portfolio Manager Compensation

The Adviser’s compensation program for portfolio managers is designed to align with clients’ interests, emphasizing each portfolio manager’s ability to generate long-term investment success for the Adviser’s clients, including the Funds. The Adviser also strives to ensure that compensation is competitive and effective in attracting and retaining the highest caliber employees.

Portfolio managers receive a base salary, incentive compensation and contributions to AllianceBernstein’s 401(k) plan. Part of the annual incentive compensation is generally paid in the form of a cash bonus, and part through an award under the firm’s Incentive Compensation Award Plan (ICAP). The ICAP awards vest over a four-year period. Deferred awards are paid in the form of restricted grants on the firm’s Master Limited Partnership Units, and award recipients have the ability to receive a portion of their awards in deferred cash. The amount of contributions to the 401(k) plan is determined at the sole discretion of the Adviser. On an annual basis, the Adviser endeavors to combine all of the foregoing elements into a total compensation package that considers industry compensation trends and is designed to retain its best talent.

The incentive portion of total compensation is determined by quantitative and qualitative factors. Quantitative factors, which are weighted more heavily, are driven by investment performance. Qualitative factors are driven by contributions to the investment process and client success.

The quantitative component includes measures of absolute, relative and risk-adjusted investment performance. Relative and risk-adjusted returns are determined based on the benchmark in the Fund’s prospectus and versus peers over one-, three- and five-year calendar periods, with more weight given to longer-time periods. Peer groups are chosen by Chief Investment Officers, who consult with the product management team to identify products most similar to our investment style and most relevant within the asset class. Portfolio managers of the Funds do not receive any direct compensation based upon the investment returns of any individual client account, and compensation is not tied directly to the level or change in level of assets under management.

Among the qualitative components considered, the most important include thought leadership, collaboration with other investment colleagues, contributions to risk-adjusted returns of other portfolios in the firm, efforts in mentoring and building a strong talent pool and being a good corporate citizen. Other factors that can play a role in determining portfolio managers’ compensation, such as the complexity of investment strategies managed, volume of assets managed and experience.

The Adviser emphasizes four behavioral competencies—relentlessness, ingenuity, team orientation and accountability—that support its mission to be the most trusted advisor to its clients. Assessments of investment professionals are formalized in a year-end review process that includes 360-degree feedback from other professionals from across the investment teams and the Adviser.

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(a) (4) The dollar range of the Fund’s equity securities owned directly or beneficially by the Fund’s portfolio managers as of the Fund’s fiscal year ended December 31, 2015 is set forth below:

 

		DOLLAR RANGE OF EQUITY SECURITIES IN THE FUND
Paul J. DeNoon		$	30,000
Gershon Distenfeld			None
Douglas J. Peebles		$	100,000
Matthew S. Sheridan			None

 

ITEM 9.

PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.

Registrant Purchases of Equity Series*

 

Period		Total Number of Shares Purchased				Average Price Paid Per Share				Total Number of Shares Purchased as Part of Publicly Announced Program				Maximum Number of Shares that May Yet Be Purchased Under the Program
7/1/2014 - 7/31/2014			1,825,993			$	7.50				1,825,993				34,610,762
8/1/2014 - 8/31/2014			1,925,007			$	7.51				1,925,007				32,685,755
9/1/2014 - 9/30/2014			2,326,633			$	7.50				2,326,633				30,359,122
10/1/2014 - 10/31/2014			2,343,867			$	7.54				2,343,867				28,015,255
11/1/2014 - 11/30/2014			2,845,690			$	7.59				2,845,690				25,169,565
12/1/2014 - 12/31/2014			3,636,657			$	7.52				3,636,657				21,532,908
1/1/2015 - 1/31/2015			1,927,552			$	7.51				1,927,552				19,605,356
2/1/2015 - 2/28/2015			3,724,466			$	7.49				3,724,466				15,880,890
3/1/2015 - 3/31/2015			3,790,290			$	7.58				3,790,290				12,090,600
4/1/2015 - 4/30/2015			2,509,434			$	7.75				2,509,434				9,581,166
5/1/2015 - 5/31/2015			220,500			$	7.79				220,500				9,360,666
6/1/2015 - 6/30/2015			0				N/A				0				9,360,666
Total			27,076,089			$	7.55				27,076,089

 

*

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.

 

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-3(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.

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ITEM 12.

EXHIBITS.

The following exhibits are attached to this Form N-CSR:

 

EXHIBIT NO.		DESCRIPTION OF EXHIBIT
12 (a) (1)		Code of Ethics that is subject to the disclosure of Item 2 hereof
12 (b) (1)		Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
12 (b) (2)		Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
12 (c)		Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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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: February 23, 2016

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: February 23, 2016

 

By:		/s/ Joseph J. Mantineo
		Joseph J. Mantineo
		Treasurer and Chief Financial Officer

Date: February 23, 2016