ALLIANCE BALANCED SHARES
ANNUAL REPORT
JULY 31, 1998
ALLIANCE CAPITAL
LETTER TO SHAREHOLDERS ALLIANCE BALANCED SHARES
_______________________________________________________________________________
September 25, 1998
Dear Shareholder:
This annual report provides an update of Alliance Balanced Shares' investment
results and portfolio strategy for the period ended July 31, 1998.
INVESTMENT RESULTS
As you can see from the following chart, Alliance Balanced Shares Class A
shares underperformed its composite benchmark for the six months ended July 31,
1998, but slightly outperformed the benchmark over the 12-month period.
The Fund underperformed its benchmark for the prior six-month period due to a
value bias in our stock selection. The first half of 1998 was the most extreme
in at least the past twenty years in terms of richly-valued stocks
outperforming their more modestly valued counterparts. Your Fund outperformed
its benchmark during the past 12-month period due to various positive stock
selection factors in the first six months, including strong returns to oil
services and waste management holdings.
INVESTMENT RESULTS*
Periods Ended July 31, 1998
TOTAL RETURNS
6 MONTHS 12 MONTHS
---------- -----------
ALLIANCE BALANCED SHARES
Class A 8.42% 14.99%
Class B 7.94% 14.13%
Class C 7.92% 14.09%
S&P 500 STOCK INDEX 15.20% 19.31%
LEHMAN BROTHERS GOVERNMENT/
CORPORATE BOND INDEX 2.81% 8.06%
SALOMON BROTHERS 1-YEAR TREASURY
BOND INDEX 2.66% 5.71%
COMPOSITE:
60% S&P 500/25% LB Gov't/
Corp. Bond Index/15% SB 1-Year
Treasury Bond Index 10.22% 14.46%
* THE FUND'S INVESTMENT RESULTS REPRESENT TOTAL RETURNS AND ARE BASED ON NET
ASSET VALUE AS OF JULY 31, 1998. ALL FEES AND EXPENSES RELATED TO THE OPERATION
OF THE FUND HAVE BEEN DEDUCTED, BUT NO ADJUSTMENT HAS BEEN MADE FOR SALES
CHARGES THAT MAY APPLY WHEN SHARES ARE PURCHASED OR REDEEMED. RETURNS FOR THE
FUND INCLUDE THE REINVESTMENT OF ANY DISTRIBUTIONS PAID DURING THE PERIOD.
TOTAL RETURNS FOR ADVISOR CLASS SHARES WILL DIFFER DUE TO DIFFERENT EXPENSES
ASSOCIATED WITH THAT CLASS. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
THE STANDARD & POOR'S 500 STOCK INDEX IS AN UNMANAGED INDEX OF 500 U.S.
COMPANIES, AND IS A COMMON MEASURE OF THE PERFORMANCE OF THE OVERALL U.S. STOCK
MARKET. THE LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/ CORPORATE BOND INDEX IS A
BROAD MEASURE OF THE PERFORMANCE OF INTERMEDIATE (ONE TO TEN YEAR) GOVERNMENT
AND CORPORATE FIXED-RATE DEBT ISSUES. THE SALOMON BROTHERS 1-YEAR TREASURY BOND
INDEX REPRESENTS PERFORMANCE OF U.S. TREASURY BILLS WITH ONE-YEAR MATURITIES.
THE COMPOSITE REPRESENTS A BLENDED INDEX, AS INDICATED. ALL COMPARATIVE INDICES
ARE UNMANAGED AND REFLECT NO FEES OR EXPENSES. AN INVESTOR CANNOT INVEST
DIRECTLY IN AN INDEX.
ADDITIONAL INVESTMENT RESULTS APPEAR ON PAGE 3.
Your Fund outperformed its peer group, as represented by the Lipper Balanced
Funds Average, over the past six-and 12-month periods, mainly due to good stock
selection.
TOTAL RETURNS FOR THE PERIODS
ENDED JULY 31, 1998
6 MONTHS 1 YEAR 5 YEARS 10 YEARS
---------- ---------- ---------- ----------
ALLIANCE BALANCED SHARES
Class A Shares 8.42% 14.99% 13.35% 11.38%
LIPPER BALANCED FUNDS
AVERAGE 6.70% 9.75% 13.54% 12.71%
* THE SIX-MONTH AND ONE-YEAR RETURNS ARE BASED ON NON-ANNUALIZED TOTAL
RETURNS WHILE THE FIVE- AND 10-YEAR RETURNS
1
ALLIANCE BALANCED SHARES
_______________________________________________________________________________
ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIOD ENDED JULY 31, 1998.
THE LIPPER BALANCED FUNDS AVERAGE (LIPPER AVERAGE) REPRESENTS FUNDS WITH
GENERALLY SIMILAR INVESTMENT OBJECTIVES TO YOUR FUND, ALTHOUGH INVESTMENT
POLICIES FOR THE VARIOUS FUNDS MAY DIFFER. THE LIPPER RETURNS ARE BASED ON
TOTAL RETURNS AT NET ASSET VALUE, WITHOUT THE IMPOSITION OF SALES CHARGES,
WHICH WOULD REDUCE TOTAL RETURN FIGURES. THE TOTAL NUMBER OF FUNDS IN THE
LIPPER AVERAGE FOR EACH TIME FRAME LISTED ABOVE IS: SIX MONTHS, 410 FUNDS; ONE
YEAR, 379 FUNDS; FIVE YEARS, 134 FUNDS; AND 10 YEARS, 51 FUNDS. PAST
PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.
PORTFOLIO STRATEGY
The stock market continues to navigate between a very strong domestic economy,
with almost no inflation, and a weak situation in Asia. Equities are priced as
if these forces will continue in balance and allow for decent earnings growth
with low interest rates. If this occurs, it would extend the nearly perfect
economic conditions of the last few years.
The risk to the stock market is the possibility that global growth will
continue to slow, threatening the health of the domestic economy. We would
expect to see corporate earnings suffer under such circumstances, which would
be negative for stocks. To account for this possibility we have decreased our
equity weighting from 60% to 55% of your Fund.
It would appear to us that the downside risks of the market reside with those
companies that are major exporters to third world and emerging nations.
Therefore, we remain cautious about multinational firms whose stock prices do
not reflect the possibility of serious slowdowns in their overseas markets for
technology, capital goods and consumer products.
Recent volatility in the global markets resulted in sharply negative
performance for most equity funds during the month of August, and your Fund's
Class A shares returned a negative 10.14% during that period, offsetting the
Fund's July 31 calendar year-to-date return of 8.35%. As of September 23, the
Fund's calendar year-to-date return was 4.62%. We continue to seek out the
stocks of companies with primarily secular growth potential plus a reasonable
valuation. We rely on Alliance Capital's very substantial research capabilities
in helping us to select stocks that we expect to deliver superior performance.
Thank you for your continued interest in Alliance Balanced Shares. We look
forward to reporting to you on your Fund's investment results and portfolio
strategy in the coming periods.
Sincerely,
John D. Carifa
Chairman and President
Paul Rissman
Senior Vice President
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, GUARANTEED OR ENDORSED
BY, ANY BANK; FURTHER, SUCH SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
2
INVESTMENT OBJECTIVE AND POLICIES ALLIANCE BALANCED SHARES
_______________________________________________________________________________
Alliance Balanced Shares seeks a high return through a combination of current
income and capital appreciation. It invests principally in a diversified
portfolio of equity and fixed income securities such as common and preferred
stocks, U.S. Government and agency obligations, bonds and senior debt
securities.
INVESTMENT RESULTS
NAV AND SEC AVERAGE ANNUAL TOTAL RETURNS AS OF JULY 31, 1998
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 14.99% 10.09%
Five Years 13.35% 12.38%
Ten Years 11.38% 10.90%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 14.13% 10.20%
Five Years 12.46% 12.46%
Since Inception* 11.63% 11.63%
CLASS C SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 14.09% 13.11%
Five Years 12.49% 12.49%
Since Inception* 12.46% 12.46%
SEC AVERAGE ANNUAL TOTAL RETURNS AS OF THE MOST RECENT QUARTER-END
(JUNE 30, 1998)
CLASS A CLASS B CLASS C
--------- --------- ---------
1 Year 19.71% 20.03% 22.97%
5 Years 12.53% 12.62% 12.63%
10 Years 10.54% n/a n/a
The Fund's investment results represent average annual total returns. The NAV
and SEC returns reflect reinvestment of dividends and/or capital gains
distributions in additional shares without (NAV) and with (SEC) 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);
and for Class C shares (1% year 1). Returns for Class A shares do not reflect
the imposition of the 1 year 1% contingent deferred sales charge for accounts
over $1,000,000. Total return for Advisor Class shares will differ due to
different expenses associated with that class.
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: 6/8/32, Class A; 2/4/91, Class B; 5/3/93, Class C.
n/a: not applicable.
3
ALLIANCE BALANCED SHARES
_______________________________________________________________________________
ALLIANCE BALANCED SHARES
GROWTH OF A $10,000 INVESTMENT
7/31/88 TO 7/31/98
$45,000
$39,000
$33,000
$27,000
$21,000
$15,000
$10,000
$9,000
7/31/88 7/31/89 7/31/90 7/31/91 7/31/92 7/31/93 7/31/94
7/31/95 7/31/96 7/31/97 7/31/98
BALANCED SHARES CLASS A: $28,127
COMPOSITE: 60% S&P500, 25% LB GOV'T/CORP. BOND INDEX,
15% SALOMON BROTHERS 1-YEAR TREASURY INDEX: $41,461
This chart illustrates the total value of an assumed $10,000 investment in
Alliance Balanced Shares Class A shares (from 7/31/88 to 7/31/98) as compared
to the performance of an appropriate broad-based index. The chart reflects the
deduction of the maximum 4.25% sales charge from the initial $10,000 investment
in the Fund and assumes the reinvestment of dividends and capital gains.
Performance for Class B, Class C and Advisor Class shares will vary from the
results shown above due to differences in expenses charged to those classes.
Past performance is not indicative of future results, and is not representative
of future gain or loss in capital value or dividend income.
The Fund's composite benchmark is comprised of 60% S&P500 Stock Index, 25%
Lehman Brothers Government/Corporate Bond Index and 15% Salomon Brothers 1-Year
Treasury Index.
The unmanaged Standard &Poor's 500 Stock Index includes 500 U.S. stocks and is
a common measure of the performance of the overall U.S. stock market.
The unmanaged Lehman Brothers Government/Corporate Bond Index represents a
combination of the Government Bond Index and the Corporate Bond Index.
The Salomon Brothers 1-Year Treasury Index represents performance of Treasury
bills with 1-year maturities. Of course, Treasury bills are guaranteed as to
principal and interest if held to maturity whereas the net asset value of the
Fund will fluctuate.
When comparing Alliance Balanced Shares to the composite shown above, you
should note that no charges or expenses are reflected in the performance of the
composite.
Balanced Shares
Composite: 60% Standard &Poor's 500 Stock Index, 25% LB Government/
Corporate Bond Index, 15% Salomon Brothers 1-Year Treasury Index
4
ALLIANCE BALANCED SHARES
_______________________________________________________________________________
ALLIANCE BALANCED SHARES...
SEEKING TO PROVIDE CURRENT INCOME FOR TODAY AND GROWTH OF CAPITAL FOR THE FUTURE
Alliance Balanced Shares seeks high total return through a combination of
current income and capital appreciation.
The Fund 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 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 generally comprise about 60% of the portfolio under normal market
conditions. At times, however, stocks may make up to 75% of the portfolio. At
least 25% of the portfolio will normally be comprised of fixed-income
securities.
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 generally 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. The Fund may
also invest up to 15% in foreign equity and fixed-income securities.
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
7/31/97
U.S. GOVERNMENT & MORTGAGES: 21.3%
CORPORATE BONDS: 13.9%
CASH: 3.1%
STOCKS: 61.7%
1/31/98
U.S. GOVERNMENT & MORTGAGES: 25.0%
CORPORATE BONDS: 9.1%
CASH: 6.2%
FOREIGN GOVERNMENT: 1.6%
STOCKS: 58.1%
7/31/98
U.S. GOVERNMENT & MORTGAGES: 23.8%
CORPORATE BONDS: 9.6%
CASH: 13.0%
STOCKS: 53.6%
5
TEN LARGEST HOLDINGS
JULY 31, 1998 ALLIANCE BALANCED SHARES
_______________________________________________________________________________
PERCENT OF
COMPANY VALUE NET ASSETS
- -------------------------------------------------------------------------------
U.S. Treasury Notes $21,560,487 11.7%
U.S. Treasury Bonds 13,124,251 7.1
Chase Manhattan Corp. (common stock and
corporate bond) 6,699,730 3.6
Federal National Mortgage Association
(common stock and U.S. government
agency bond) 5,210,619 2.8
Bristol-Myers Squibb Co. 4,967,675 2.7
Citicorp 4,811,000 2.6
Tyson Foods, Inc. Cl.A 4,562,875 2.5
WorldCom, Inc. 3,977,067 2.2
MBNA Corp. 3,957,188 2.2
Government National Mortgage Association 3,885,217 2.1
$72,756,109 39.5%
MAJOR PORTFOLIO CHANGES
SIX MONTHS ENDED JULY 31, 1998
_______________________________________________________________________________
SHARES OR PRINCIPAL
- -------------------------------------------------------------------------------
HOLDINGS
PURCHASES BOUGHT 7/31/98
- -------------------------------------------------------------------------------
Auburn Hills Trust, 12.00%, 5/01/20 $1,250,000 $1,250,000
Bristol-Myers Squibb Co. 43,600 43,600
Columbia/HCA Healthcare Corp. 80,000 80,000
Dresser Industries, Inc. 56,000 56,000
Federal National Mortgage Association 36,000 36,000
Federal National Mortgage Association,
7.00%, 5/01/28 $2,937,320 $2,937,320
Government National Mortgage Association,
7.00%, 3/15/28 $2,848,867 $2,848,867
Tyson Foods, Inc. Cl.A 165,000 211,000
U.S. Treasury Bond, 6.375%, 8/15/27 $3,740,000 $3,740,000
William Hill Finance Plc, 10.625%, 4/30/08 $1,300,000 $1,300,000
HOLDINGS
SALES SOLD 7/31/98
- -------------------------------------------------------------------------------
Cisco Systems, Inc. 27,000 -0-
Commonwealth of Australia, 10.00%, 10/15/07 $2,750,000 -0-
Home Depot, Inc. 27,900 -0-
Merck & Co., Inc. 20,800 -0-
MGIC Investment Corp. 49,000 -0-
Morgan Stanley, Dean Witter and Co. 26,000 -0-
Tele-Communications, Inc., 9.80%, 2/01/12 $1,650,000 -0-
Turner Broadcasting Systems, Inc.,
8.375%, 7/01/13 $2,040,000 -0-
U.S. Treasury Note, 6.25%, 4/30/01 $2,775,000 $8,925,000
U.S. Treasury Note, 6.50%, 8/31/01 $3,250,000 $3,650,000
6
PORTFOLIO OF INVESTMENTS
JULY 31, 1998 ALLIANCE BALANCED SHARES
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
COMMON STOCKS-53.6%
FINANCE-10.6%
BANKING-MONEY CENTER-5.4%
Chase Manhattan Corp. 68,000 $ 5,142,500
Citicorp 28,300 4,811,000
------------
9,953,500
INSURANCE-0.7%
Travelers Group, Inc. 18,086 1,211,762
MORTGAGE BANKING-1.2%
Federal National Mortgage Association 36,000 2,232,000
MISCELLANEOUS-3.3%
Associates First Capital Corp. Cl.A 13,500 1,048,781
Household International, Inc. 23,700 1,179,075
MBNA Corp. 118,125 3,957,188
------------
6,185,044
------------
19,582,306
HEALTH CARE-7.4%
BIOTECHNOLOGY-0.6%
Centocor, Inc. (a) 16,000 563,000
Genzyme Corp. (a) 15,000 472,031
------------
1,035,031
DRUGS-2.7%
Bristol-Myers Squibb Co. 43,600 4,967,675
MEDICAL PRODUCTS-0.9%
Abbott Laboratories 42,000 1,745,625
MEDICAL SERVICES-3.2%
Columbia/HCA Healthcare Corp. 80,000 2,280,000
PacifiCare Health Systems, Inc. Cl.B (a) 25,300 1,827,925
United Healthcare Corp. 30,600 1,728,900
------------
5,836,825
------------
13,585,156
CONSUMER STAPLES-6.8%
COSMETICS-0.7%
Avon Products, Inc. 15,000 1,297,500
FOOD-3.7%
Campbell Soup Co. 23,200 1,252,800
General Mills, Inc. 15,000 929,062
Tyson Foods, Inc. Cl.A 211,000 4,562,875
------------
6,744,737
HOUSEHOLD PRODUCTS-0.6%
Viad Corp. 48,000 1,155,000
TOBACCO-1.8%
Loews Corp. 10,000 806,250
Philip Morris Cos., Inc. 11,500 503,844
RJR Nabisco Holdings Corp. 84,000 2,052,750
------------
3,362,844
------------
12,560,081
TECHNOLOGY-6.8%
COMMUNICATIONS EQUIPMENT-1.5%
Nokia Corp. (ADR) (b) 32,000 2,788,000
COMPUTER HARDWARE-0.8%
Compaq Computer Corp. 44,800 1,472,800
COMPUTER SERVICES-1.9%
Electronic Data Systems Corp. 27,700 974,694
First Data Corp. 86,400 2,500,200
------------
3,474,894
COMPUTER SOFTWARE-0.6%
Oracle Corp. (a) 40,000 1,061,250
SEMI-CONDUCTOR COMPONENTS-1.3%
Altera Corp. (a) 25,500 929,953
Atmel Corp. (a) 51,300 532,238
Xilinx, Inc. (a) 27,000 1,011,656
------------
2,473,847
MISCELLANEOUS-0.7%
Solectron Corp. (a) 26,800 1,286,400
------------
12,557,191
7
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE BALANCED SHARES
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
ENERGY-5.6%
DOMESTIC INTEGRATED-1.6%
USX-Marathon Group 87,000 $ 2,968,875
DOMESTIC PRODUCERS-1.3%
Apache Corp. 39,500 1,046,750
Enron Oil & Gas Co. 24,000 381,000
Murphy Oil Corp. 15,000 664,687
Union Pacific Resources Group, Inc. 20,000 280,000
------------
2,372,437
OIL SERVICE-2.4%
Dresser Industries, Inc. 56,000 1,977,500
Nabors Industries, Inc. (a) 33,900 578,419
Noble Drilling Corp. (a) 56,500 1,066,437
Santa Fe International Corp. 20,500 471,500
Transocean Offshore, Inc. 9,800 386,488
------------
4,480,344
MISCELLANEOUS-0.3%
AES Corp. (a) 9,400 430,638
------------
10,252,294
UTILITIES-5.3%
ELECTRIC & GAS UTILITY-2.5%
Consolidated Edison, Inc. 23,400 990,112
FPL Group, Inc. 50,000 3,040,625
Pinnacle West Capital Corp. 12,000 513,000
------------
4,543,737
TELEPHONE UTILITY-2.8%
AT&T Corp. 19,897 1,206,256
WorldCom, Inc. 75,350 3,977,067
------------
5,183,323
------------
9,727,060
CONSUMER SERVICES-5.2%
AIRLINES-0.2%
Northwest Airlines Corp. CI.A (a) 10,800 354,375
APPAREL-0.4%
Nautica Enterprises, Inc. (a) 31,000 799,219
BROADCASTING & CABLE-0.7%
A.H. Belo Corp. Series A 57,000 1,197,000
ENTERTAINMENT & LEISURE-1.0%
Harley-Davidson, Inc. 35,000 1,386,875
Mirage Resorts, Inc. (a) 20,000 430,000
------------
1,816,875
PRINTING & PUBLISHING-0.7%
Gannett Co., Inc. 19,000 1,214,812
RETAIL-GENERAL MERCHANDISE-2.2%
Dayton Hudson Corp. 40,700 1,945,969
Federated Department Stores, Inc. (a) 40,800 2,159,850
------------
4,105,819
------------
9,488,100
MULTI INDUSTRY COMPANIES-2.2%
Tyco International, Ltd. 56,000 3,468,500
U.S. Industries, Inc. 33,000 635,250
------------
4,103,750
CAPITAL GOODS-1.4%
MISCELLANEOUS-1.4%
Allied-Signal, Inc. 23,000 1,000,500
United Technologies Corp. 17,300 1,657,556
------------
2,658,056
BASIC INDUSTRIES-1.1%
CHEMICALS-1.1%
Dow Chemical Co. 11,000 998,250
Praxair, Inc. 21,600 1,063,800
------------
2,062,050
8
ALLIANCE BALANCED SHARES
_______________________________________________________________________________
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- -------------------------------------------------------------------------
AEROSPACE & DEFENSE-0.9%
AEROSPACE-0.9%
General Dynamics Corp. 34,200 $ 1,626,637
CONSUMER MANUFACTURING-0.3%
TEXTILE PRODUCTS-0.3%
Tommy Hilfiger Corp. (a) 9,000 504,563
Total Common Stocks
(cost $83,485,031) 98,707,244
DEBT OBLIGATIONS-33.4%
U.S. GOVERNMENT & AGENCY OBLIGATIONS-23.8%
Federal Home Loan Bank
7.00%, 9/01/11 $2,269 2,320,572
Federal National Mortgage Association
7.00%, 5/01/28 2,937 2,978,619
Government National Mortgage Association
6.50%, 3/15/28 995 991,851
7.00%, 3/15/28 2,849 2,893,366
U.S. Treasury Bonds
6.125%, 11/15/27 8,575 9,064,032
6.375%, 8/15/27 3,740 4,060,219
U.S. Treasury Notes
6.125%, 8/15/07 60 62,260
6.25%, 4/30/01 8,925 9,085,382
6.50%, 8/31/01 3,650 3,746,397
6.50%, 5/31/02 8,400 8,666,448
------------
43,869,146
CORPORATE DEBT OBLIGATIONS-7.1%
AUTOMOTIVE-0.8%
Federal Mogul Corp.
7.75%, 7/01/06 1,500 1,514,430
BANKING-0.8%
Chase Manhattan Corp.
6.375%, 4/01/08 1,555 1,557,230
COMMUNICATIONS-1.0%
Clearnet Communications, Inc.
Zero Coupon, 5/15/08 (c)(d) CAD 3,000 1,211,199
ICG Services, Inc.
Zero Coupon, 5/01/08 (e)(f) $ 975 589,875
------------
1,801,074
FINANCIAL-1.2%
William Hill Finance Plc
10.625%, 4/30/08 (d)(e)(f) GBP 1,300 2,118,243
INDUSTRIAL-3.3%
Aramark Services, Inc.
7.00%, 7/15/06 $ 575 587,253
Auburn Hills Trust
12.00%, 5/01/20 1,250 2,036,189
Beckman Instruments, Inc.
7.45%, 3/04/08 (e) 1,500 1,516,606
The Williams Cos., Inc.
6.125%, 2/01/01 2,000 1,995,480
------------
6,135,528
------------
13,126,505
YANKEE BOND-2.5%
Australian Gas Light Co.
6.40%, 4/15/08 (e) 2,000 2,015,552
Fuji JGB INV LLC
9.87%, 12/31/49 (e) 1,200 1,045,856
Reliance Industries, Ltd.
10.375%, 6/24/16 (e) 1,650 1,533,431
------------
4,594,839
Total Debt Obligations
(cost $61,583,250) 61,590,490
9
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE BALANCED SHARES
_______________________________________________________________________________
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- -------------------------------------------------------------------------
SHORT-TERM INVESTMENTS-13.0%
COMMERCIAL PAPER-12.6%
Ford Motor Credit Corp.
5.54%, 8/10/98 $ 525 $ 524,273
5.61%, 8/06/98 10,000 9,992,208
Prudential Funding Corp.
5.64%, 8/05/98 12,800 12,791,979
------------
23,308,460
TIME DEPOSIT-0.4%
State Street Cayman Islands
5.25%, 8/03/98 646 646,000
Total Short-Term Investments
(cost $23,954,460) 23,954,460
TOTAL INVESTMENTS-100.0%
(cost $169,022,741) 184,252,194
Other assets less liabilities-0.0% 33,646
NET ASSETS-100% $ 184,285,840
(a) Non-income producing security.
(b) Country of origin--Finland.
(c) Country of origin--Canada.
(d) Securities, or portion thereof, with aggregate market value of $3,329,442
have been segregated to collateralize forward exchange currency contracts.
(e) Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to certain qualified buyers. At July 31, 1998, the
aggregate market value of these securities amounted to $8,819,563 representing
4.8% of net assets.
(f) Country of origin--United Kingdom.
Glossary:
ADR - American Depositary Receipt
See notes to financial statements.
10
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1998 ALLIANCE BALANCED SHARES
_______________________________________________________________________________
ASSETS
Investments in securities, at value
(cost $169,022,741) $ 184,252,194
Cash 232
Receivable for investment securities sold 2,022,031
Dividends and interest receivable 993,036
Receivable for capital stock sold 912,062
Unrealized appreciation of forward exchange
currency contracts 34,020
Total assets 188,213,575
LIABILITIES
Payable for investment securities purchased 2,978,750
Payable for capital stock redeemed 457,051
Advisory fee payable 98,019
Unclaimed dividends 90,989
Distribution fee payable 74,154
Accrued expenses 228,772
Total liabilities 3,927,735
NET ASSETS $ 184,285,840
COMPOSITION OF NET ASSETS
Capital stock, at par $ 116,381
Additional paid-in capital 149,990,639
Undistributed net investment income 492,883
Accumulated net realized gain on investments and
foreign currency transactions 18,422,783
Net unrealized appreciation of investments and foreign
currency denominated assets and liabilities 15,263,154
$ 184,285,840
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($123,623,147/
7,740,130 shares of capital stock issued and outstanding) $15.97
Sales charge--4.25% of public offering price .71
Maximum offering price $16.68
CLASS B SHARES
Net asset value and offering price per share ($47,727,908/
3,070,678 shares of capital stock issued and outstanding) $15.54
CLASS C SHARES
Net asset value and offering price per share ($10,855,291/
697,098 shares of capital stock issued and outstanding) $15.57
ADVISOR CLASS SHARES
Net asset value, redemption and offering price per share
($2,079,494/130,151 shares of capital stock issued and
outstanding) $15.98
See notes to financial statements.
11
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1998 ALLIANCE BALANCED SHARES
_______________________________________________________________________________
INVESTMENT INCOME
Interest $ 4,343,312
Dividends (net of foreign taxes withheld
of $3,195) 1,083,546 $ 5,426,858
EXPENSES
Advisory fee 1,005,730
Distribution fee - Class A 286,647
Distribution fee - Class B 322,348
Distribution fee - Class C 74,332
Transfer agency 229,619
Administrative 116,562
Custodian 111,711
Audit and legal 81,286
Registration 65,561
Printing 59,060
Directors' fees 27,000
Miscellaneous 15,155
Total expenses 2,395,011
Less: expense offset arrangement (see Note B) (21,492)
Net expenses 2,373,519
Net investment income 3,053,339
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY
Net realized gain on investment transactions 29,301,602
Net realized gain on foreign currency
transactions 30,587
Net change in unrealized appreciation
(depreciation) of:
Investments (10,827,338)
Foreign currency denominated assets and
liabilities 33,701
Net gain on investments and foreign currency
transactions 18,538,552
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 21,591,891
See notes to financial statements.
12
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE BALANCED SHARES
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
JULY 31, JULY 31,
1998 1997
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 3,053,339 $ 2,595,635
Net realized gain on investments and foreign
currency transactions 29,332,189 8,481,507
Net change in unrealized appreciation
(depreciation) of investments and foreign
currency denominated assets and liabilities (10,793,637) 27,536,311
Net increase in net assets from operations 21,591,891 38,613,453
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (2,363,867) (2,308,924)
Class B (490,313) (341,037)
Class C (113,289) (102,618)
Advisor Class (39,763) (10,350)
Net realized gain on investments
Class A (14,565,359) (12,582,512)
Class B (3,474,566) (2,409,113)
Class C (778,193) (793,084)
Advisor Class (200,006) (19,832)
CAPITAL STOCK TRANSACTIONS
Net increase (decrease) 37,952,547 (335,371)
Total increase 37,519,082 19,710,612
NET ASSETS
Beginning of year 146,766,758 127,056,146
End of year (including undistributed net
investment income of $492,883 and $384,796,
respectively) $ 184,285,840 $ 146,766,758
See notes to financial statements.
13
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1998 ALLIANCE BALANCED SHARES
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Balanced Shares (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, Class C and Advisor Class shares. Class A
shares are sold with a front-end sales charge of up to 4.25% for purchases not
exceeding $1,000,000. With respect to purchases of $1,000,000 or more, Class A
shares redeemed within one year of purchase will be subject to a contingent
deferred sales charge of 1%. Class B shares are currently sold with a
contingent deferred sales charge which declines from 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 subject to a contingent deferred sales charge of
1% on redemptions made within the first year after purchase. Advisor Class
shares are sold without an initial or contingent deferred sales charge and are
not subject to ongoing distribution expenses. Advisor Class shares are offered
to investors participating in fee-based programs and to certain retirement plan
accounts. All four classes of shares have identical voting, dividend,
liquidation and other rights, except that each class bears different
distribution expenses and has exclusive voting rights with respect to its
distribution plan. The financial statements have been prepared in conformity
with generally accepted accounting principles which require management to make
certain estimates and assumptions that affect the reported amounts of assets
and liabilities in the financial statements and amounts of income and expenses
during the reporting period. Actual results could differ from those estimates.
The following is a summary of significant accounting policies followed by the
Fund.
1. SECURITY VALUATION
Portfolio securities traded on a national securities exchange or on a foreign
securities exchange (other than foreign securities exchanges whose operations
are similar to those of the United States over-the-counter market) are
generally valued at the last reported sale price or if no sale occurred, at the
mean of the closing bid and asked prices on that day. Readily marketable
securities traded in the over-the-counter market, securities listed on a
foreign securities exchange whose operations are similar to the U.S.
over-the-counter market, and securities listed on a national securities
exchange whose primary market is believed to be over-the-counter, are valued at
the mean of the current bid and asked prices. Fixed income securities which
mature in 60 days or less are valued at amortized cost, unless this method does
not represent fair value. Securities for which current market quotations are
not readily available are valued at their fair value as determined in good
faith by, or in accordance with procedures adopted by, the Board of Directors.
Fixed income securities may be valued on the basis of prices obtained from a
pricing service when such prices are believed to reflect the fair market value
of such securities.
2. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the
mean of the quoted bid and asked price 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 foreign currency gains and losses represent foreign exchange gains
and losses from sales and maturities of debt securities, and foreign exchange
currency contracts and currency gains and losses realized between the trade and
settlement dates on security transactions, and the difference between the
amounts of foreign currency denominated dividends and interest recorded on the
Fund's books and the U.S. dollar equivalent amounts actually received or paid.
The Fund does not isolate the effect of fluctuations in foreign currency
exchange rates when determining the gain or loss upon the sale of equity
securities. Net currency gains and losses from valuing foreign currency
denominated assets and liabilities at year end exchange rates are reflected as
a component of net unrealized appreciation of investments and foreign currency
denominated assets and liabilities.
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.
14
ALLIANCE BALANCED SHARES
_______________________________________________________________________________
4. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Dividend income is recorded on the ex-dividend date. Interest income is accrued
daily. Investment transactions are accounted for on the trade date securities
are purchased or sold. The Fund accretes discounts and amortizes premiums as
adjustments to interest income. Investment gains and losses are determined on
the identified cost basis.
5. INCOME AND EXPENSES
All income earned and expenses incurred by the Fund are borne on a pro-rata
basis by each outstanding class of shares, based on the proportionate interest
in the Fund represented by the net assets of such class, except that the Fund's
Class B and Class C shares bear higher distribution and transfer agent fees
than Class A shares and the Advisor Class shares have no distribution fees.
6. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date.
Income dividends and capital gains distributions are determined in accordance
with federal tax regulations and may differ from those determined in accordance
with generally accepted accounting principles. 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. During the current fiscal year, permanent differences,
primarily due to foreign currency transactions, resulted in a net increase in
undistributed net investment income and a corresponding decrease in accumulated
net realized gain on investments and foreign currency transactions. This
reclassification had no effect on net assets.
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of an investment advisory agreement, the Fund pays Alliance
Capital Management L.P. (the "Adviser"), an advisory fee at an annual rate of
.625 of 1% of the first $200 million, .50 of 1% of the next $200 million and
.45 of 1% of the excess over $400 million of the average daily net assets of
the Fund. Such fee is accrued daily and paid monthly.
Pursuant to the advisory agreement, the Fund paid $116,562 to the Adviser
representing the cost of certain legal and accounting services provided to the
Fund by the Adviser for the year ended July 31, 1998.
The Fund compensates Alliance Fund Services, Inc., a wholly-owned subsidiary of
the Adviser, under a Transfer Agency Agreement for providing personnel and
facilities to perform transfer agency services for the Fund. Such compensation
amounted to $147,663 for the year ended July 31, 1998.
In addition, for the year ended July 31, 1998, the Fund's expenses were reduced
by $21,492 under an expense offset arrangement with Alliance Fund Services,
Inc. Transfer agency fees reported in the statement of operations exclude these
credits.
Alliance Fund Distributors, Inc., (the "Distributor"), a wholly-owned
subsidiary of the Adviser, serves as the Distributor of the Fund's shares. The
Distributor received front-end sales charges of $15,193 from the sales of Class
A shares and $794, $44,906 and $2,754 in contingent deferred sales charges
imposed upon redemptions by shareholders of Class A, Class B and Class C
shares, respectively, for the year ended July 31, 1998.
Brokerage commissions paid on investment transactions for the year ended July
31, 1998 amounted to $214,102, of which $1,645 was paid to Donaldson, Lufkin &
Jenrette Securities Corp., an affiliate of the Adviser.
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 1% 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 and Class C shares. There is no distribution fee on the Advisor Class
shares. The fees are accrued daily and paid monthly. The Agreement provides
that the Distributor will use such payments in their entirety for
15
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE BALANCED SHARES
_______________________________________________________________________________
distribution assistance and promotional activities. The Distributor has
incurred expenses in excess of the distribution costs reimbursed by the Fund in
the amount of $2,579,772 and $608,865, for Class B and Class C shares,
respectively; such costs may be recovered from the Fund in future periods as
long as the Agreement is in effect. In accordance with the Agreement, there is
no provision for recovery of unreimbursed distribution costs incurred by the
Distributor beyond the current fiscal year for Class A shares. The Agreement
also provides that the 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
and U.S. government securities) aggregated $123,377,329 and $137,613,603,
respectively, for the year ended July 31, 1998. There were purchases of
$94,025,726 and sales of $79,631,664 of U.S. government and government agency
obligations for the year ended July 31, 1998.
At July 31, 1998, the cost of investments for federal income tax purposes was
substantially the same as the cost for financial reporting purposes. Gross
unrealized appreciation of investments was $19,760,383 and gross unrealized
depreciation of investments was $4,530,930 resulting in net unrealized
appreciation of $15,229,453 excluding foreign currency transactions.
1. FORWARD EXCHANGE CURRENCY CONTRACTS
The Fund enters into forward exchange currency contracts in order to hedge its
exposure to changes in foreign currency exchange rates on foreign portfolio
holdings and to hedge certain firm purchase and sale commitments denominated in
foreign currencies. A forward exchange currency 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
contracts and the closing of such contracts is included in net realized gain or
loss on foreign currency transactions.
Fluctuations in the value of forward exchange currency contracts are recorded
for financial reporting purposes as unrealized gains or losses by the Fund.
The Fund's custodian will place and maintain cash not available for investment
or other liquid assets in a separate account of the Fund having a value equal
to the aggregate amount of the Fund's commitments under forward exchange
currency contracts entered into with respect to position hedges.
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. The face or contract amount, in U.S.
dollars, as reflected in the following table, reflects the total exposure the
Fund has in that particular currency contract.
At July 31, 1998, the Fund had outstanding forward exchange currency contracts,
to sell foreign currencies against the U.S. dollar, as follows:
<TABLE>
<CAPTION>
U.S. $
CONTRACT VALUE ON U.S. $
AMOUNT ORIGINATION CURRENT UNREALIZED
(000) DATE VALUE APPRECIATION
--------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
FORWARD EXCHANGE CURRENCY
SALE CONTRACTS
Canadian Dollar,
settling 8/17/98 1,803 $1,220,095 $1,193,885 $ 26,210
British Pounds,
settling 8/17/98 1,300 2,129,400 2,121,590 7,810
------------
$ 34,020
</TABLE>
16
ALLIANCE BALANCED SHARES
_______________________________________________________________________________
2. OPTION TRANSACTIONS
For hedging and investment 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 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 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. The
risk involved in writing an option is that, if the option was exercised the
underlying security could then be purchased or sold by the Fund at a
disadvantageous price.
For the year ended July 31, 1998, the Fund did not engage in any option
transactions.
NOTE E: CAPITAL STOCK
There are 12,000,000,000 shares of $.01 par value capital stock authorized,
divided into four classes, designated Class A, Class B, Class C and Advisor
Class shares. Each class consists of 3,000,000,000 authorized shares.
Transactions in capital stock were as follows:
SHARES AMOUNT
--------------------------- ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JULY 31, JULY 31, JULY 31, JULY 31,
1998 1997 1998 1997
------------ ------------ -------------- --------------
CLASS A
Shares sold 783,081 308,965 $ 12,635,293 $ 4,417,304
Shares issued in
reinvestment of
dividends and
distributions 944,535 872,819 13,941,229 12,031,921
Shares converted
from Class B 50,090 37,939 801,099 545,801
Shares redeemed (1,181,568) (1,394,620) (18,857,650) (19,984,934)
Net increase
(decrease) 596,138 (174,897) $ 8,519,971 $ (2,989,908)
CLASS B
Shares sold 1,722,326 414,263 $ 26,664,861 $ 5,850,511
Shares issued in
reinvestment of
dividends and
distributions 257,589 168,175 3,707,795 2,274,998
Shares converted
to Class A (51,381) (38,679) (801,099) (545,801)
Shares redeemed (385,826) (349,522) (5,962,038) (4,922,989)
Net increase 1,542,708 194,237 $ 23,609,519 $ 2,656,719
17
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE BALANCED SHARES
_______________________________________________________________________________
SHARES AMOUNT
--------------------------- ------------------------------
YEAR ENDED OCT. 2, 1996(A) YEAR ENDED OCT. 2, 1996(A)
JULY 31, TO, JULY 31, TO
1998 JULY 31, 1997 1998 JULY 31, 1997
------------ ------------ -------------- --------------
CLASS C
Shares sold 444,670 116,909 $ 6,856,999 $ 1,671,934
Shares issued in
reinvestment of
dividends and
distributions 55,815 50,995 805,036 690,495
Shares redeemed (150,879) (261,860) (2,339,536) (3,718,421)
Net increase
(decrease) 349,606 (93,956) $ 5,322,499 $ (1,355,992)
ADVISOR CLASS
Shares sold 28,502 99,609 $ 441,571 $ 1,393,347
Shares issued in
reinvestment of
dividends and
distributions 16,203 2,157 239,736 30,179
Shares redeemed (11,315) (5,005) (180,749) (69,716)
Net increase 33,390 96,761 $ 500,558 $ 1,353,810
NOTE F: BANK BORROWING
A number of open-end mutual funds managed by the Adviser, including the Fund,
participate in a $750 million revolving credit facility (the "Facility") to
provide short-term financing if necessary, subject to certain restrictions, in
connection with abnormal redemption activity. Commitment fees related to the
Facility are paid by the participating funds and are included in the
miscellaneous expenses in the statement of operations. The Fund did not utilize
the Facility during the year ended July 31, 1998.
(a) Commencement of distribution.
18
FINANCIAL HIGHLIGHTS ALLIANCE BALANCED SHARES
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------------
OCTOBER 1,
1993
YEAR ENDED JULY 31, THROUGH
-------------------------------------------------- JULY 31,
1998 1997 1996 1995 1994(A)
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $16.17 $14.01 $15.08 $13.38 $14.40
INCOME FROM INVESTMENT OPERATIONS
Net investment income .33(b) .31(b) .37 .46 .29
Net realized and unrealized gain (loss)
on investment transactions 1.86 3.97 .45 1.62 (.74)
Net increase (decrease) in net asset
value from operations 2.19 4.28 .82 2.08 (.45)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.32) (.32) (.41) (.36) (.28)
Distributions from net realized gains (2.07) (1.80) (1.48) (.02) (.29)
Total dividends and distributions (2.39) (2.12) (1.89) (.38) (.57)
Net asset value, end of period $15.97 $16.17 $14.01 $15.08 $13.38
TOTAL RETURN
Total investment return based on net
asset value (c) 14.99% 33.46% 5.23% 15.99% (3.21)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $123,623 $115,500 $102,567 $122,033 $157,637
Ratio of expenses to average net assets 1.30%(d) 1.47%(d) 1.38% 1.32% 1.27%(e)
Ratio of net investment income to
average net assets 2.07% 2.11% 2.41% 3.12% 2.50%(e)
Portfolio turnover rate 145% 207% 227% 179% 116%
</TABLE>
See footnote summary on page 22.
19
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE BALANCED SHARES
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS B
-----------------------------------------------------------------
OCTOBER 1,
1993
YEAR ENDED JULY 31, THROUGH
-------------------------------------------------- JULY 31,
1998 1997 1996 1995 1994(A)
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $15.83 $13.79 $14.88 $13.23 $14.27
INCOME FROM INVESTMENT OPERATIONS
Net investment income .21(b) .19(b) .28 .30 .22
Net realized and unrealized gain (loss)
on investment transactions 1.81 3.89 .42 1.65 (.75)
Net increase (decrease) in net asset
value from operations 2.02 4.08 .70 1.95 (.53)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.24) (.24) (.31) (.28) (.22)
Distributions from net realized gains (2.07) (1.80) (1.48) (.02) (.29)
Total dividends and distributions (2.31) (2.04) (1.79) (.30) (.51)
Net asset value, end of period $15.54 $15.83 $13.79 $14.88 $13.23
TOTAL RETURN
Total investment return based on net
asset value (c) 14.13% 32.34% 4.45% 15.07% (3.80)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $47,728 $24,192 $18,393 $15,080 $14,347
Ratio of expenses to average net assets 2.06%(d) 2.25%(d) 2.16% 2.11% 2.05%(e)
Ratio of net investment income to
average net assets 1.34% 1.32% 1.61% 2.30% 1.73%(e)
Portfolio turnover rate 145% 207% 227% 179% 116%
</TABLE>
See footnote summary on page 22.
20
ALLIANCE BALANCED SHARES
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS C
-----------------------------------------------------------------
OCTOBER 1,
1993
YEAR ENDED JULY 31, THROUGH
-------------------------------------------------- JULY 31,
1998 1997 1996 1995 1994(A)
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $15.86 $13.81 $14.89 $13.24 $14.28
INCOME FROM INVESTMENT OPERATIONS
Net investment income .21(b) .20(b) .26 .30 .24
Net realized and unrealized gain (loss)
on investment transactions 1.81 3.89 .45 1.65 (.77)
Net increase (decrease) in net asset
value from operations 2.02 4.09 .71 1.95 (.53)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.24) (.24) (.31) (.28) (.22)
Distributions from net realized gains (2.07) (1.80) (1.48) (.02) (.29)
Total dividends and distributions (2.31) (2.04) (1.79) (.30) (.51)
Net asset value, end of period $15.57 $15.86 $13.81 $14.89 $13.24
TOTAL RETURN
Total investment return based on net
asset value (c) 14.09% 32.37% 4.52% 15.06% (3.80)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $10,855 $5,510 $6,096 $5,108 $6,254
Ratio of expenses to average net assets 2.05%(d) 2.23%(d) 2.15% 2.09% 2.03%(e)
Ratio of net investment income to
average net assets 1.36% 1.37% 1.63% 2.32% 1.81%(e)
Portfolio turnover rate 145% 207% 227% 179% 116%
</TABLE>
See footnote summary on page 22.
21
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE BALANCED SHARES
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
ADVISOR CLASS
-----------------------------
OCTOBER 2,
1996(F)
YEAR ENDED TO
JULY 31, JULY 31,
1998 1997
----------- -----------
Net asset value, beginning of period $16.17 $14.79
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .37 .23
Net realized and unrealized gain
on investment transactions 1.87 3.22
Net increase in net asset value
from operations 2.24 3.45
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.36) (.27)
Distributions from net realized gains (2.07) (1.80)
Total dividends and distributions (2.43) (2.07)
Net asset value, end of period $15.98 $16.17
TOTAL RETURN
Total investment return based on net
asset value (c) 15.32% 25.96%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $2,079 $1,565
Ratio of expenses to average net assets 1.06%(d) 1.30%(d)(e)
Ratio of net investment income to
average net assets 2.33% 2.15%(e)
Portfolio turnover rate 145% 207%
(a) The Fund changed its fiscal year end from September 30 to July 31.
(b) Based on average shares outstanding.
(c) 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.
(d) Ratio reflects expenses grossed up for expense offset arrangement with the
transfer agent. For the year ended July 31, 1998 and the year ended July 31,
1997, the net expense ratio would have been 1.29%, 2.05%, 2.04% and 1.05% and
1.46%, 2.24%, 2.22% and 1.29% for Class A, B, C and Advisor Class shares,
respectively.
(e) Annualized.
(f) Commencement of distribution.
22
REPORT OF INDEPENDENT ACCOUNTANTS ALLIANCE BALANCED SHARES
_______________________________________________________________________________
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
ALLIANCE BALANCED SHARES, INC.
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Alliance Balanced Shares, Inc.
(the Fund) at July 31, 1998, the results of its operations 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 periods presented, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities at July 31, 1998 by correspondence with the custodian and brokers,
provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
September 14, 1998
TAX INFORMATION (UNAUDITED)
_______________________________________________________________________________
In order to meet certain requirements of the Internal Revenue Code we are
advising you that $5,635,679 and $4,295,600 of the capital gain distributions
paid by the fund during the fiscal year July 31, 1998 are subject to the
maximum tax rates of 28% and 20% respectively.
Shareholders should not use the above information to prepare their tax returns.
The information necessary to complete your income tax returns will be included
with your Form 1099 DIV which will be sent to you separately in January 1999.
23
ALLIANCE BALANCED SHARES
_______________________________________________________________________________
BOARD OF DIRECTORS
JOHN D. CARIFA, CHAIRMAN AND PRESIDENT
RUTH BLOCK (1)
DAVID H. DIEVLER (1)
JOHN H. DOBKIN (1)
WILLIAM H. FOULK, JR. (1)
DR. JAMES M. HESTER (1)
CLIFFORD L. MICHEL (1)
DONALD J. ROBINSON (1)
OFFICERS
BRUCE W. CALVERT, EXECUTIVE VICE PRESIDENT
KATHLEEN A. CORBET, SENIOR VICE PRESIDENT
PAUL C. RISSMAN, SENIOR VICE PRESIDENT
THOMAS J. BARDONG, VICE PRESIDENT
MATTHEW D.W. BLOOM, VICE PRESIDENT
DANIEL V. PANKER, VICE PRESIDENT
EDMUND P. BERGAN, JR., SECRETARY
MARK D. GERSTEN, TREASURER & CHIEF FINANCIAL OFFICER
VINCENT S. NOTO, CONTROLLER
CUSTODIAN
STATE STREET BANK & TRUST COMPANY
225 Franklin Street
Boston, MA 02110
DISTRIBUTOR
ALLIANCE FUND DISTRIBUTORS, INC.
1345 Avenue of the Americas
New York, NY 10105
LEGAL COUNSEL
SEWARD & KISSEL
One Battery Park Plaza
New York, NY 10004
TRANSFER AGENT
ALLIANCE FUND SERVICES, INC.
P.O. Box 1520
Secaucus, NJ 07096-1520
Toll-Free 1-(800) 221-5672
INDEPENDENT ACCOUNTANTS
PRICEWATERHOUSECOOPERS LLP
1177 Avenue of the Americas
New York, NY 10036
(1) Member of the Audit Committee.
24
THE ALLIANCE FAMILY OF MUTUAL FUNDS
_______________________________________________________________________________
FIXED INCOME
Alliance Bond Fund
U.S. Government Portfolio
Corporate Bond Portfolio
Alliance Global Dollar Government Fund
Alliance Global Strategic Income Trust
Alliance High Yield Fund
Alliance Mortgage Securities Income Fund
Alliance Limited Maturity Government Fund
Alliance Multi-Market Strategy Trust
Alliance North American Government Income Trust
Alliance Short-Term Multi-Market Trust
Alliance Short-Term U.S. Government Fund
Alliance World Income Trust
TAX-FREE INCOME
Alliance Municipal Income Fund
California Portfolio
Insured California Portfolio
Insured National Portfolio
National Portfolio
New York Portfolio
Alliance Municipal Income Fund II
Arizona Portfolio
Florida Portfolio
Massachusetts Portfolio
Michigan Portfolio
Minnesota Portfolio
New Jersey Portfolio
Ohio Portfolio
Pennsylvania Portfolio
Virginia Portfolio
MONEY MARKET
AFD Exchange Reserves
GROWTH
The Alliance Fund
Alliance Global Environment Fund
Alliance Growth Fund
Alliance Premier Growth Fund
Alliance/Regent Sector Opportunity Fund
GROWTH & INCOME
Alliance Balanced Shares
Alliance Conservative Investors Fund
Alliance Growth & Income Fund
Alliance Growth Investors Fund
Alliance Income Builder Fund
Alliance Real Estate Investment Fund
Alliance Strategic Balanced Fund
Alliance Utility Income Fund
AGGRESSIVE GROWTH
Alliance Global Small Cap Fund
Alliance Quasar Fund
Alliance Technology Fund
INTERNATIONAL
Alliance All-Asia Investment Fund
Alliance Greater China '97 Fund
Alliance International Fund
Alliance International Premier Growth Fund
Alliance New Europe Fund
Alliance Worldwide Privatization Fund
CLOSED-END FUNDS
Alliance All-Market Advantage Fund
ACM Government Income Fund
ACM Government Opportunity Fund
ACM Government Securities Fund
ACM Government Spectrum Fund
ACM Managed Dollar Income Fund
ACM Managed Income Fund
ACM Municipal Securities Income Fund
Alliance World Dollar Government Fund
Alliance World Dollar Government Fund II
The Austria Fund
The Korean Investment Fund
The Spain Fund
The Southern Africa Fund
CASH MANAGEMENT SERVICES
ACM Institutional Reserves
Government Portfolio
Prime Portfolio
Tax-Free Portfolio
Trust Portfolio
Alliance Capital Reserves
Alliance Government Reserves
Alliance Insured Account
Alliance Money Reserves
Alliance Municipal Trust
California Portfolio
Connecticut Portfolio
Florida Portfolio
General Portfolio
Massachusetts Portfolio
New Jersey Portfolio
New York Portfolio
Virginia Portfolio
Alliance Treasury Reserves
Alliance Money Market Fund
Prime Portfolio
Government Portfolio
General Municipal Portfolio
25
ALLIANCE BALANCED SHARES
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
ALLIANCE CAPITAL
THIS REPORT IS INTENDED SOLELY FOR DISTRIBUTION TO CURRENT SHAREHOLDERS OF THE
FUND
R THESE REGISTERED SERVICE MARKS USED UNDER LICENSE FROM THE OWNER, ALLIANCE
CAPITAL MANAGEMENT L.P.
BALAR
