ALLIANCE
BALANCED
SHARES
SEMI-ANNUAL
REPORT
JANUARY 31, 1995
<PAGE>
LETTER TO SHAREHOLDERS ALLIANCE BALANCED SHARES
March 10, 1995
Dear Shareholder:
The investment climate remained challenging over the last six months of the
Fund's January 31, 1995, fiscal year. Prior to January, interest rates
continued to rise, causing further declines in the Fund's bond holdings, and
stock prices were relatively flat. January rallies in both markets permitted
the Fund's Class A shares to show a very modest positive total return for the
six months (+0.09% based on the net asset value). Class B and Class C shares
each declined 0.32% over the same period. (Additional performance data may be
found on page 2.)
The rally in stocks and bonds continued in February and March giving the Fund a
good start for the new year. As we anticipated last fall, albeit a bit early,
the Federal Reserve, by aggressively increasing short-term interest rates,
convinced bond market participants that inflationary pressures would not get
out of control. The Fed's effort were reinforced by evidence that the economy
has begun to slow to a more sustainable growth path. Thus, bond yields fell
across all maturities, with 30 year Treasuries declining from over 8% to around
7.35%. The decline in yields coupled with continued optimism on corporate
profits enabled common stocks to continue their January rally, too - surpassing
4000 on the Dow and breaking $500 on the S&P 500.
Looking ahead, we remain reasonably optimistic on the outlook for financial
assets. Bonds may give up some of their recent gains if, as we expect, the
economy continues to show solid growth and inflationary pressures gradually
build, in part because of the decline in the dollar. But, we don't expect more
than a modest correction given our belief that the inflation peak for this
business cycle will be under 4%.
The stock market outlook also remains favorable. Valuation is at or above
historic norms, which introduces a note of caution. But, corporate
fundamentals remain very strong. Earnings are growing, and corporate
managements are using excess cash to buy in their own shares.
Overall, we plan to remain just below out target exposure of 60% in equities.
We are becoming somewhat more conservative in fixed income portfolios in the
wake of the recent rally and the cautionary notes sounded above; but, we
continue to underweight cash relative to our target exposures. (See page 3.)
We appreciate your investment in Alliance Balanced Shares and look forward to
reporting its progress to you in the coming months.
Sincerely,
John D. Carifa
Chairman and President
Bruce W. Calvert
Executive Vice President
1<PAGE>
ALLIANCE BALANCED SHARES
INVESTMENT RESULTS
Average Annual Total Return as of January 31, 1995
CLASS A SHARES
Without Sales Charge With Sales Charge
----------------------------------------
. One Year -5.83% -9.83%
. Five Years +7.35 +6.42
. Ten Years +10.40 +9.92
CLASS B SHARES
Without Sales Charge With Sales Charge
----------------------------------------
. One Year -6.56% -10.21%
. Since Inception +3.82 +5.58
CLASS C SHARES
. One Year -6.56%
. Since Inception* +0.94
The average annual total returns reflect investment of dividends and/or capital
gains distributions in additional shares-with and without the effect of the
4.25% maximum front-end sales charge for Class A or applicable contingent
deferred sales charge for Class B (4% year 1, 3% year 2, 2% year 3, 1% year 4);
Class C shares are not subject to front-end or contingent deferred sales
charges. Past performance does not guarantee future results. Investment
return and principal value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
*Inception: 2/4/91, Class B; 5/3/93, Class C.
SEMI-ANNUAL INVESTMENT RESULTS
The table below compares your Fund's investment results over the six-month
reporting period with the U.S. stock market, represented by the unmanaged S&P
500-stock Index; with the U.S. bond market, represented by the unmanaged
Lehman Brothers Government/Corporate Bond Index; and with the U.S. Treasury
market, represented by the unmanaged Salomon Brothers 1-Year Treasury Index.
Six Months Ended January 31, 1995
Total Ending
Return NAV
Alliance Balanced Shares
Class A +0.09% $13.16
Class B -0.32% $13.00
Class C -0.32% $13.01
S&P 500 Index 4.14%
Lehman Brothers Government/
Corporate Bond Index 0.79%
Salomon Brothers 1-Year
Treasury Index 0.92%
2<PAGE>
ALLIANCE BALANCED SHARES...
SEEKING TO PROVIDE CURRENT INCOME FOR TODAY AND
GROWTH OF CAPITAL FOR THE FUTURE
Alliance Balanced Shares is a conservative investment that seeks to provide a
competitive total return.
For some investors, the Fund may be considered a comprehensive investment
vehicle. It strives to achieve higher returns and lower volatility than a
benchmark portfolio comprised of 60% stocks, 25% government and corporate
bonds, and 15% Treasury bills.
We do not focus on short-term performance, nor do we strive to outperform other
balanced funds, many of which are much more aggressively structured.
As the charts illustrate, Alliance Balanced Shares' asset allocation shifts
with changing market conditions. The changes, however, should be neither
dramatic nor frequent, and should not involve significant risk relative to the
benchmark noted above.
Stocks will now typically comprise about 60% of the portfolio. At times,
however, stocks may range from 50% to 70% of the portfolio.
Within the equity portion of the portfolio, we seek to outperform the stock
market without taking undue risk. Stock selection emphasizes investments with
attractive expected return - but always within the context of a diversified
portfolio. Further, a preponderance of the portfolio will always be invested in
high-quality, financially strong, dividend-paying companies.
The balance of the portfolio is comprised of U.S. Government and government
agency securities mixed with high-quality asset-backed and corporate bonds. Our
primary objectives in the fixed-income portfolio are to generate a high, steady
income stream and to provide stability for the net asset value.
We believe that this investment policy will serve the Fund's investors very
well over time.
SIX-MONTH SNAPSHOTS: THE COMPOSITION OF YOUR FUND'S PORTFOLIO
1/31/94 7/31/94 1/31/95
U.S. Governments &Mortgages: 22.1%
Corporate Bonds: 14.0%
Cash: 4.8%
Stocks: 59.1%
U.S. Governments
&Mortgages: 18.0%
Corporate Bonds: 21.0%
Cash: 14.4%
Stocks: 46.6%
U.S. Governments &Mortgages: 22.5%
Corporate Bonds: 11.6%
Cash: 12.3%
Stocks: 53.6%
3<PAGE>
TEN LARGEST HOLDINGS
JANUARY 31, 1995 (UNAUDITED) ALLIANCE BALANCED SHARES
PERCENT OF
COMPANY VALUE NET ASSETS
Government National Mortgage Association $20,273,492 12.3%
U.S. Treasury Notes 12,949,904 7.9
Merck & Co., Inc. 4,025,000 2.4
Lehman Brothers Index Notes, Floating Rate, 8.00%, 2/10/96 3,800,000 2.3
Province of Ontario, 5.812%, 8/17/99 3,683,720 2.2
Philip Morris Cos., Inc. 3,577,500 2.2
Chevron Corp. 3,346,875 2.0
General Electric Co. 3,090,000 1.9
Abbey National, Plc., 6.375%, 3/10/99 2,983,500 1.8
U.S. Treasury Bond, 8.125%, 8/15/19 2,895,816 1.8
$60,625,807 36.8%
MAJOR PORTFOLIO CHANGES
SIX MONTHS ENDED JANUARY 31, 1995 (UNAUDITED)
SHARES OR PRINCIPAL
--------------------
HOLDINGS
PURCHASES BOUGHT 1/31/95
Conrail, Inc. 40,000 40,000
Government National Mortgage Association, 7.00%, 6/15/24 $5,483,855 $5,483,855
G.T. Greater Europe Fund 130,000 130,000
May Department Stores Co. 80,000 80,000
Philip Morris Cos., Inc. 30,000 60,000
Rohm & Haas Co. 30,000 50,000
Stone Container Corp., 9.875%, 2/01/01 $3,000,000 $3,000,000
U.S. Treasury Bond, 8.125%, 8/15/19 $2,800,000 2,800,000
U.S. Treasury Note, 4.25%, 1/31/95 $3,000,000 $3,000,000
U.S. Treasury Note, 7.125%, 9/30/99 $8,000,000 $8,000,000
HOLDINGS
SALES SOLD 1/31/95
Citicorp, 4.75%, 8/14/11 FRN $2,900,000 -0-
Citicorp, 6.75%, 8/15/05 $3,000,000 -0-
Empresas la Moderna, S.A. de C.V., 10.25%, 11/12/97 $2,000,000 -0-
Ford Motor Credit Co., 5.00%, 7/15/01 $3,860,000 -0-
General Motors Acceptance Corp., 7.125%, 6/01/99 $3,500,000 -0-
Mexican Pars, Series B, 6.25%, 12/31/19 $5,000,000 -0-
MGIC Investment Corp. 70,000 -0-
Republic of Argentina, 8.375%, 12/20/03 $2,500,000 -0-
U.S. Treasury Bond, 7.125%, 2/15/23 $2,300,000 -0-
U.S. Treasury Notes, 5.50%, 7/31/97 $3,050,000 -0-
4<PAGE>
PORTFOLIO OF INVESTMENTS
JANUARY 31, 1995 (UNAUDITED) ALLIANCE BALANCED SHARES
COMPANY SHARES VALUE
COMMON STOCKS-56.0%
CONSUMER PRODUCTS
& SERVICES-24.5%
AIRLINES-0.3%
Southwest Airlines Co. 25,000 $ 484,375
AUTO & RELATED-2.3%
Chrysler Corp. 35,000 1,575,000
General Motors Corp. 40,000 1,550,000
PACCAR, Inc. 15,000 641,250
3,766,250
BROADCASTING &
CABLE-0.9%
Comcast Corp.
Cl.A (SPL) 100,000 1,487,500
COSMETICS-1.1%
Gillette Co. 25,000 1,921,875
DRUGS, HOSPITAL
SUPPLIES & MEDICAL
Services-7.8%
AB Astra 30,000 759,942
Abbott Laboratories 70,000 2,476,250
Columbia HCA
Healthcare Corp. 35,000 1,404,375
Merck & Co., Inc. 100,000 4,025,000
Pfizer, Inc. (b) 15,000 1,226,250
United HealthCare Corp. 50,000 2,425,000
US Healthcare, Inc 10,000 456,250
12,773,067
ENTERTAINMENT &
LEISURE TIME-1.5%
Walt Disney Co. 50,000 2,543,750
FOOD & BEVERAGES-2.9%
Coca-Cola Co. 25,000 1,312,500
McDonald's Corp. 80,000 2,610,000
PepsiCo, Inc. 22,000 811,250
4,733,750
HOUSEHOLD PRODUCTS-0.6%
Colgate-Palmolive Co. 15,000 $ 943,125
PRINTING &
PUBLISHING-0.6%
Gannett Co., Inc. 20,000 1,017,500
RETAILING-4.3%
May Department Stores Co. 80,000 2,810,000
Toys 'R' Us, Inc.* 50,000 1,462,500
Wal-Mart Stores,Inc 120,000 2,760,000
7,032,500
TOBACCO-2.2%
Philip Morris Cos., Inc. 60,000 3,577,500
40,281,192
FINANCIAL SERVICES-8.8%
BANKING & CREDIT-3.6%
BankAmerica Corp. 50,000 2,156,250
Federal National Mortgage
Association 25,000 1,787,500
MBNA Corp. 40,000 1,020,000
NationsBank Corp. 20,000 930,000
5,893,750
BROKERAGE-0.5%
Morgan Stanley Group, Inc. 15,000 901,875
INSURANCE-4.7%
American International
Group, Inc. 25,000 2,603,125
General Re Corp. 10,000 1,291,250
NAC Re Corp. 40,000 1,310,000
Travelers, Inc 70,000 2,581,250
7,785,625
14,581,250
BASIC INDUSTRIES-7.0%
CHEMICALS-2.8%
Morton International, Inc.* 70,000 1,960,000
Rohm & Haas Co 50,000 2,712,500
4,672,500
5<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE BALANCED SHARES
COMPANY SHARES VALUE
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
ELECTRICAL EQUIPMENT-1.9%
General Electric Co. 60,000 $ 3,090,000
MACHINERY-0.7%
Coltec Industries, Inc.* 70,000 1,085,000
OTHER-1.6%
AlliedSignal, Inc. 75,000 2,681,250
11,528,750
SCIENCE & TECHNOLOGY-5.7%
COMMUNICATION
EQUIPMENT-0.6%
General Instrument Corp.* 40,000 1,090,000
COMPUTER HARDWARE-0.6%
Hewlett-Packard Co. 10,000 1,005,000
COMPUTER SOFTWARE-1.6%
General Motors Corp. Cl.E 50,000 1,931,250
Informix Corp.* 20,000 642,500
2,573,750
SEMI-CONDUCTORS &
RELATED-2.9%
Intel Corp. 30,000 2,077,500
Motorola, Inc. (b) 45,000 2,660,625
4,738,125
9,406,875
ENERGY-3.7%
DOMESTIC
PRODUCERS-0.5%
Snyder Oil Corp. 62,500 859,375
INTERNATIONAL
PRODUCERS-2.0%
Chevron Corp. 75,000 3,346,875
OIL & GAS
SERVICES-1.2%
Enron Corp. 50,000 1,456,250
Renaissance Energy, Ltd.* 30,000 529,518
1,985,768
6,192,018
PUBLIC UTILITIES-2.2%
TELEPHONE-2.2%
MCI Communications
Corp. 75,000 $ 1,373,438
Sprint Corp. 80,000 2,280,000
3,653,438
TRANSPORTATION-1.3%
RAILROAD-1.3%
Conrail, Inc. 40,000 2,140,000
OTHER-2.8%
France Growth
Fund, Inc. 130,000 1,202,500
G.T. Greater Europe Fund 130,000 1,592,500
Mexico Fund, Inc. 50,000 975,000
Scudder New Asia
Fund, Inc.* 50,000 837,500
4,607,500
Total Common Stocks
(cost $88,840,939) 92,391,023
CORPORATE BONDS-12.1%
FINANCIAL-3.0%
Goldman Sachs
Group, L.P.
6.375%, 2/23/98(a) $1,200 1,188,000
Lehman Brothers
Index Notes,
Floating Rate
8.00%, 2/10/96 3,800 3,800,000
4,988,000
INDUSTRIAL-5.0%
Paramount Communications, Inc.
8.25%, 8/01/22 3,250 2,748,623
Stone Container Corp.
9.875%, 2/01/01 3,000 2,812,500
Time Warner Entertainment
8.375%, 3/15/23 3,250 2,724,898
8,286,021
6<PAGE>
ALLIANCE BALANCED SHARES
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
PUBLIC UTILITIES-4.1%
Abbey National, Plc.
6.375%, 3/10/99 $3,000 $ 2,983,500
Province of Ontario
5.812%, 8/17/99 3,700 3,683,720
6,667,220
Total Corporate Bonds
(cost $20,044,674) 19,941,241
MORTGAGE RELATED
SECURITIES-12.3%
Government National
Mortgage Association
7.00%, 6/15/23-6/15/24 15,819 14,439,230
7.50%, 10/15/23 - 12/15/23 6,182 5,834,262
Total Mortgage Related
Securities
(cost $20,978,136) 20,273,492
U.S. GOVERNMENT
OBLIGATIONS-11.3%
U.S. Treasury Bond
8.125%, 8/15/19 2,800 2,895,816
U.S. Treasury Notes
4.25%, 1/31/95 3,000 3,000,000
6.75%, 5/31/99 1,100 1,068,034
7.125%, 9/30/99 8,000 7,870,000
7.875%, 4/15/98 1,000 1,011,870
U.S. Treasury Strips
Zero coupon,
2/15/13 - 2/15/15 12,500 2,689,300
Total U.S. Government
Obligations
(cost $19,063,836) 18,535,020
CONTRACTS(c) OR
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
COMMERCIAL PAPER-12.8%
Ford Motor Credit Co.
5.60%, 2/01/95 $6,880 $ 6,880,000
Merrill Lynch & Co.
5.85%, 2/01/95 8,000 8,000,000
Prudential Funding Corp.
5.75%, 2/02/95 6,281 6,279,997
Total Commercial Paper
(amortized cost $21,159,997) 21,159,997
TOTAL INVESTMENTS-104.5%
(cost $170,087,582) 172,300,773
OUTSTANDING CALL OPTIONS
WRITTEN-(0.0%)
Motorola, Inc.
expiring February '95
@ $55 50 (22,500)
Pfizer, Inc.
expiring February '95
@ $80 70 (11,813)
Total Outstanding Call Options Written
(Premiums received $31,827) (34,313)
TOTAL INVESTMENTS NET
OF OUTSTANDING CALL
OPTIONS WRITTEN-104.5% 172,266,460
Other assets less
liabilities-(4.5%) (7,386,432)
NET ASSETS-100% $164,880,028
* Non-income producing.
(a) Security exempt from Registration under Rule 144A of the Securities Act of
1933. This security may be resold in transactions exempt from registration,
normally to certain qualified buyers. At January 31, 1995 the aggregate market
value of this security amounted to $1,188,00 representing 0.7% of net assets.
(b) Security on which options are written (shares subject to call have an
aggregate market value of $3,886,875).
(c) One contract relates to 100 shares.
See notes to financial statements.
7<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 1995 (UNAUDITED) ALLIANCE BALANCED SHARES
ASSETS
Investments in securities, at value (cost $170,087,582) $172,300,773
Cash 584,066
Dividends and interest receivable 1,065,509
Receivable for capital stock sold 76,639
Prepaid expenses and other assets 12,307
Total assets 174,039,294
LIABILITIES
Outstanding options written, at value (premiums received $31,827) 34,313
Payable for investment securities purchased 8,770,315
Payable for capital stock redeemed 94,636
Advisory fee payable 86,288
Distribution fee payable 44,652
Accrued expenses and other liabilities 129,062
Total liabilities 9,159,266
NET ASSETS $164,880,028
COMPOSITION OF NET ASSETS
Capital stock, at par $125,446
Additional paid-in capital 162,927,978
Undistributed net investment income 647,111
Accumulated net realized loss (1,031,212)
Net unrealized appreciation of investments and options 2,210,705
$164,880,028
CALCULATION OF MAXIMUM OFFERING PRICE
Class A Shares
Net asset value and redemption price per share ($146,839,785/11,157,284 shares
of capital stock issued and outstanding) $13.16
Sales charge-4.25% of public offering price 0.58
Maximum offering price $13.74
Class B Shares
Net asset value and offering price per share ($13,350,460/1,026,794 shares
of capital stock issued and outstanding) $13.00
Class C Shares
Net asset value, redemption and offering price per share
($4,689,783/360,566 shares of capital stock issued and outstanding) $13.01
See notes to financial statements.
8<PAGE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JANUARY 31, 1995 (UNAUDITED) ALLIANCE BALANCED SHARES
INVESTMENT INCOME
Interest $2,740,657
Dividends 1,166,666 $ 3,907,323
EXPENSES
Advisory fee 528,991
Distribution fee-Class A 180,492
Distribution fee-Class B 68,311
Distribution fee-Class C 26,019
Transfer agency 138,308
Administrative 79,364
Registration 35,216
Custodian 25,304
Audit and legal 18,644
Printing 15,752
Directors' fees 10,980
Taxes 4,170
Miscellaneous 9,552
Total expenses 1,141,103
Net investment income 2,766,220
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on security transactions (575,513)
Net realized gain on options transactions 113,966
Net change in unrealized appreciation of:
Securities (2,337,324)
Options (2,486)
Net loss on investments (2,801,357)
NET DECREASE IN NET ASSETS FROM OPERATIONS $ (35,137)
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED OCTOBER 1, 1993
JANUARY 31,1995 THROUGH
(UNAUDITED) JULY 31, 1994
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 2,766,220 $ 3,727,437
Net realized gain (loss) on investments (461,547) 1,521,330
Net change in unrealized appreciation of investments (2,339,810) (11,401,870)
Net decrease in net assets from operations (35,137) (6,153,103)
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income
Class A (2,287,057) (3,328,864)
Class B (166,027) (209,253)
Class C (62,691) (94,432)
Net realized gain on investments
Class A (264,823) (3,450,935)
Class B (24,748) (236,079)
Class C (8,499) (106,940)
CAPITAL STOCK TRANSACTIONS
Net increase (decrease) (10,510,111) 5,057,935
Total decrease (13,359,093) (8,521,671)
NET ASSETS
Beginning of period 178,239,121 186,760,792
End of period (including undistributed net investment income
of $647,111 and $396,666, respectively) $164,880,028 $178,239,121
Statement Of Changes In Net Assets
*The Fund changed its fiscal year end from September 30 to July 31.
See notes to financial statements.
9<PAGE>
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1995 (UNAUDITED) ALLIANCE BALANCED SHARES
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Balanced Shares, Inc. (the "Fund") is registered under the Investment
Company Act of 1940, as a diversified, open end management investment company.
The Fund offers Class A, Class B and Class C shares. Class A shares are sold
with a front end sales charge of up to 4.25%. Class B shares are sold with a
contingent deferred sales charge which declines from 4% to zero depending on
the period of time the shares are held. Class B shares will automatically
convert to Class A shares eight years after the end of the calendar month of
purchase. Class C shares are sold without an initial or contingent deferred
sales charge. All three classes of shares have identical voting, dividend,
liquidation and other rights, except that each class bears different
distribution expenses and has exclusive voting rights with respect to its
distribution plan. The following is a summary of significant accounting
policies followed by the Fund.
1. SECURITY VALUATION
Portfolio securities traded on national securities exchanges are valued at the
last sales price or, if no sale occurred, at the mean of the bid and asked
price at the regular close of the New York Stock Exchange. Securities traded
on the over the counter market are valued at the mean of the closing bid and
asked price. Securities for which current market quotations are not readily
available (including investments which are subject to limitations as to their
sale) are valued at their fair value as determined in good faith by the Board
of Directors. The Board of Directors has further determined that the value of
certain portfolio debt securities, other than temporary investments in short
term securities, be determined by reference to valuations obtained from a
pricing service. Securities which mature in 60 days or less are valued at
amortized cost, which approximates market value. The ability of issuers of
debt securities held by the Fund to meet their obligations may be affected by
economic developments in a specific industry or region.
2. OPTIONS TRANSACTIONS
For hedging purposes, the Fund purchases and writes (sells) put and call
options on U.S. securities that are traded on U.S. securities exchanges and
over-the-counter markets.
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 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 writing options which expire unexercised
are recorded by the Fund on the expiration date as realized gains from option
transactions. The difference between the premium and the amount paid on
effecting a closing purchase transaction, including brokerage commissions, is
also treated as a realized gain, or if the premium is less than the amount paid
for the closing purchase transaction, as a realized loss. If a call option is
exercised, the premium 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 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.
Transactions in options written for the six months ended January 31, 1995 were
as follows:
NUMBER OF
CONTRACTS PREMIUMS
Options outstanding at
beginning of period -0- $ -0-
Options written 670 114,812
Options terminated in closing
purchase transactions -0- -0-
Options expired (550) (82,985)
Options exercised -0- -0-
Options outstanding at
end of period 120 $ 31,827
10<PAGE>
ALLIANCE BALANCED SHARES
3. 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.
4. INVESTMENT INCOME AND SECURITY TRANSACTIONS
Dividend income is recorded on the ex dividend date. Interest income is
accrued daily. Security transactions are accounted for on the date securities
are purchased or sold. Security gains and losses are determined on the
identified cost basis. The Fund accretes discounts as adjustments to interest
income.
5. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex dividend
date. Income dividends and capital gain distributions are determined in
accordance with income tax regulations, which may differ from generally
accepted accounting principles.
6. CHANGE OF YEAR END
The Fund changed its fiscal year end from September 30, to July 31.
Accordingly, the statements of changes in net assets and per share data and
ratios reflect the period from October 1, 1993 to July 31, 1994.
7. CHANGES IN ACCOUNTING FOR DISTRIBUTION TO
SHAREHOLDERS
Effective July 31, 1994 the Fund adopted Statement of Position 93-2:
Determination, Disclosure and Financial Statement Presentation of Income,
Capital Gain and Return of Capital Distributions by Investment Companies. As a
result, the Fund changed the classification of distributions to shareholders to
better disclose the differences between financial statement amounts and
distributions determined in accordance with income tax regulations.
NOTE B: FEE AND OTHER TRANSACTIONS WITH
AFFILIATES ADVISORY
Under the terms of an investment advisory agreement, the Fund pays its Adviser,
Alliance Capital Management L.P., an advisory fee at an annual rate of .625% of
the first $200 million, .50% of the next $200 million and .45% of the excess
over $400 million of the average daily net assets of the Fund. Such fee is
accrued daily and paid monthly. The Adviser has agreed, under the terms of the
investment advisory agreement, to reimburse the Fund to the extent that its
aggregate expenses (exclusive of interest, taxes, brokerage, distribution fees
and extraordinary expenses) exceed the limits prescribed by any state in which
the Fund's shares are qualified for sale. The Adviser believes that the most
restrictive expense ratio limitation imposed by any state is 2.5% of the first
$30 million of its average daily net assets, 2% of the next $70 million of its
average daily net assets and 1.5% of its average daily net assets in excess of
$100 million. No reimbursement was required for the six months ended January
31, 1995.
Pursuant to the Advisory Agreement, the Fund reimburses the Adviser for the
cost of certain legal and accounting services provided to the Fund by the
Adviser. For the six months ended January 31, 1995, such reimbursement
amounted to $79,364.
The Fund compensates Alliance Fund Services, Inc. (a wholly-owned subsidiary of
the Adviser) in accordance with a Services Agreement for providing personnel
and facilities to perform transfer agency services for the Fund. Such
compensation amounted to $106,416 for the six months ended January 31, 1995.
Alliance Fund Distributors, Inc. (a wholly owned subsidiary of the Adviser)
serves as the Distributor of the Fund's shares. The Distributor received front
end sales charges of $2,044 from the sale of Class A shares and $39,271 in
contingent deferred sales charges imposed upon redemptions by shareholders of
Class B shares for the six months ended January 31, 1995.
Brokerage commissions paid on securities transactions for the six months ended
January 31, 1995 amounted to $126,752, none of which was paid to brokers
utilizing the services of the Pershing Division of Donaldson, Lufkin & Jenrette
Securities Corp. ("DLJ"), an affiliate of the Adviser, nor to DLJ directly.
11<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE BALANCED SHARES
NOTE C: DISTRIBUTION SERVICES AGREEMENT
The Fund has adopted a Distribution Services Agreement (the "Agreement")
pursuant to Rule 12b 1 under the Investment Company Act of 1940. Under the
Agreement, the Fund pays a distribution fee to the Distributor at an annual
rate of up to .30% of the Fund's average daily net assets attributable to
the Class A shares and 1% of the average daily net assets attributable to
both Class B shares and Class C shares. The Agreement provides that the
Distributor will use such payments in their entirety for distribution
assistance and promotional activities. The Distributor has incurred expenses
in excess of the distribution costs reimbursed by the Fund in the amount of
$881,684 and $222,541, for Class B and C shares, respectively; such costs may
be recovered from the Fund in future periods. In accordance with the
Agreement, there is no provision for recovery of unreimbursed distribution
costs incurred by the Distributor, beyond the current fiscal year for Class A
shares. The Agreement also provides that the Adviser may use its own resources
to finance the distribution of the Fund's shares.
NOTE D: Investment Transactions
Purchases and sales of investment securities (excluding short term investments)
aggregated $97,143,537 and $99,073,267, respectively, for the six months ended
January 31, 1995. There were purchases of $34,678,537 and sales of $26,647,248
of U.S. Government and government agency obligations for the six months ended
January 31, 1995. At January 31, 1995, the cost of securities for federal
income tax purposes was $170,123,301. Accordingly gross unrealized appreciation
of investments was $9,029,055 and gross unrealized depreciation of investments
was $6,851,583 resulting in net unrealized appreciation of $2,177,472.
NOTE E: Capital Stock
There are 180,000,000 shares of $.01 par value capital stock authorized,
divided into three classes, designated Class A, Class B and Class C shares.
Each class consists of 60,000,000 authorized shares. Prior to February 23,
1993 there were 60,000,000 shares of $1.00 par value capital stock authorized,
divided into two classes designated Class A and Class B shares. Transactions
in capital stock were as follows:
12<PAGE>
ALLIANCE BALANCED SHARES
SHARES AMOUNT
------------------------- -------------------------
SIX MONTHS OCT. 1,1993 SIX MONTHS OCT. 1,1993
ENDED ENDED
JAN. 31,1995 THROUGH JANUARY 31,1995 THROUGH
(UNAUDITED) JULY 31,1994* (UNAUDITED) JULY 31,1994*
Class A
Shares sold 435,940 876,506 $5,719,460 $12,195,964
Shares issued in reinvestment
of dividends 159,735 407,717 2,071,908 5,628,682
Shares redeemed (1,216,453) (1,481,275) (16,078,113) (20,511,243)
Net decrease (620,778) (197,052) $(8,286,745) $(2,686,597)
Class B
Shares sold 125,459 564,263 $ 1,635,777 $ 7,799,514
Shares issued in reinvestment
of dividends 12,428 27,387 159,326 374,239
Shares redeemed (195,416) (403,295) (2,549,580) (5,657,858)
Net increase (decrease) (57,529) 188,355 $ (754,477) $ 2,515,895
Class C
Shares sold 58,107 481,248 $ 758,476 $ 6,765,099
Shares issued in reinvestment
of dividends 3,870 11,554 49,713 157,982
Shares redeemed (173,946) (124,424) (2,277,078) (1,694,444)
Net increase (decrease) (111,969) 368,378 $(1,468,889) $5,228,637
NOTE F: Taxes
Pursuant to Federal income tax regulations, net capital loss of approximately
$5,813,000 realized by the Alliance Balanced Shares, between November 1, 1993
and July 31, 1994 have been deferred to fiscal year 1995. This capital loss is
available in fiscal 1995 to offset capital gains and reduce amounts
distributable to shareholders.
* The Fund changed its fiscal year end from September 30 to July 31.
13<PAGE>
FINANCIAL HIGHLIGHTS ALLIANCE BALANCED SHARES
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS A
-------------------------------------------------------
SIX MONTHS
ENDED OCT.1,93 YEAR ENDED SEPTEMBER 30,
JAN.31,95 THROUGH ----------------------------------
(UNAUDITED) JULY.31,94* 1993 1992 1991 1990
Net asset value, beginning
of period $13.38 $14.40 $13.20 $12.64 $10.41 $14.13
Income From Investment Operations
Net investment income .23 .29 .34 .44 .46 .45
Net realized and unrealized gain
(loss) on investments (.23) (.74) 1.29 .57 2.17 (2.14)
Net increase (decrease) in net asset
value from operations -0- (.45) 1.63 1.01 2.63 (1.69)
Less: Distributions
Dividends from net
investment income (.20) (.28) (.43) (.45) (.40) (.40)
Distributions from net
realized gains (.02) (.29) -0- -0- -0- (1.63)
Total dividends and
distributions (.22) (.57) (.43) (.45) (.40) (2.03)
Net asset value,
end of period $13.16 $13.38 $14.40 $13.20 $12.64 $10.41
Total Return
Total investment return based on net
asset value (b) .09% (3.21)% 12.52% 8.14% 25.52% (13.12)%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $146,840 $157,637 $172,484 $143,883 $154,230 $140,913
Ratio of expenses to average
net assets 1.26%(c) 1.27%(c) 1.35% 1.40% 1.44% 1.36%
Ratio of net investment income to
average net assets 3.36%(c) 2.50%(c) 2.50% 3.26% 3.75% 4.01%
Portfolio turnover rate 61% 116% 188% 204% 70% 169%
See footnote summary on page 16.
14<PAGE>
ALLIANCE BALANCED SHARES
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS B
---------------------------------------------
SIX MONTHS OCT.1,93
ENDED THROUGH YEAR ENDED SEPTEMBER 30,
JAN.31,95 JULY 31,--------------------------
(UNAUDITED) 1994* 1993 1992 1991(A)
Net asset value, beginning of period $13.23 $14.27 $13.13 $12.61 $11.84
INCOME FROM INVESTMENT OPERATIONS
Net investment income .16 .22 .29 .37 .25
Net realized and unrealized gain (loss) on
investments (.21) (.75) 1.22 .54 .80
Net increase (decrease) in net asset value
from operations (.05) (.53) 1.51 .91 1.05
LESS: DISTRIBUTIONS
Dividends from net investment income (.16) (.22) (.37) (.39) (.28)
Distribution from net realized gains (.02) (.29) -0- -0- -0-
Total dividends and distributions (.18) (.51) (.37) (.39) (.28)
Net asset value, end of period $13.00 $13.23 $14.27 $13.13 $12.61
TOTAL RETURN
Total investment return based on
net asset value (b) (.32)% (3.80)% 11.65% 7.32% 8.96%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $13,350 $14,347 $12,789 $6,499 $1,830
Ratio of expenses to average
net assets 2.04%(c) 2.05%(c) 2.13% 2.16% 2.13%(c)
Ratio of net investment income
to average net assets 2.58%(c) 1.73%(c) 1.72% 2.46% 3.19%(c)
Portfolio turnover rate 61% 116% 188% 204% 70%
See footnote summary on page 16.
15<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE BALANCED SHARES
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS C
----------------------------------------
SIX MONTHS ENDED OCT.1,93 AUG.2,93(D)
JAN. 31,95 TO TO APR.30,
(UNAUDITED) JULY 31,94* 1994
Net asset value, beginning of period $13.24 $14.28 $13.63
INCOME FROM INVESTMENT OPERATIONS
Net investment income .16 .24 .11
Net realized and unrealized gain (loss) on
investments (.21) (.77) .71
Net increase (decrease) in net asset value
from operations (.05) (.53) .82
LESS: DISTRIBUTIONS
Dividends from net investment income (.16) (.22) (.17)
Distributions from net realized gains (.02) (.29) -0-
Total dividends and distributions (.18) (.51) (.17)
Net asset value, end of period $13.01 $13.24 $14.28
TOTAL RETURN
Total investment return based
on net asset value (b) (.32)% (3.80)% 6.01%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $4,690 $6,254 $1,487
Ratios of expenses to average net assets 2.03%(c) 2.03%(c) 2.29%(c)
Ratios of net investment income
to average net assets 2.56%(c) 1.81%(c) 1.47%(c)
Portfolio turnover rate 61% .116% .188%
* The Fund changed its fiscal year end from September 30 to July 31.
(a) For the period February 4, 1991 (commencement of distribution) to September
30, 1991.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales charges or contingent
deferred sales charges are not reflected in the calculation of total investment
return. Total investment return calculated for a period of less than one year
is not annualized.
(c) Annualized.
(d) Commencement of distribution.
16<PAGE>
ALLIANCE BALANCED SHARES
Board Of Directors
John D. Carifa, Chairman and President William H. Foulk, Jr. (1)
Ruth Block (1) Dr. James M. Hester (1)
David H. Dievler Clifford L. Michel (1)
John H. Dobkin (1) Robert C. White (1)
Officers
Bruce W. Calvert, Executive Vice President Edmund P. Bergan, Jr., Secretary
Michael R. Baldwin, Vice President Mark D. Gersten, Treasurer
& Chief Financial Officer
Daniel V. Panker, Vice President Patrick J. Farrell, Controller
Custodian TRANSFER AGENT
State Street Bank & Trust Company Alliance Fund Services, Inc.
225 Franklin Street P.O. Box 1520
Boston, MA 02110 Secaucus, NJ 07096-1520
Toll-Free 1-(800) 221-5672
Distributor INDEPENDENT ACCOUNTANTS
Alliance Fund Distributors, Inc. Price Waterhouse LLP
1345 Avenue of the Americas 1177 Avenue of the Americas
New York, NY 10105 New York, NY 10036-2798
LEGAL COUNSEL
Seward & Kissel
One Battery Park Plaza
New York, NY 10004
(1) Member of the Audit Committee.
The financial information included herein is taken from the records of the Fund
without audit by independent accountants who do not express an opinion thereon.
17<PAGE>
