ALLIANCE BALANCED SHARES
ANNUAL REPORT
JULY 31, 1999
ALLIANCE CAPITAL
LETTER TO SHAREHOLDERS ALLIANCE BALANCED SHARES
_______________________________________________________________________________
September 28, 1999
Dear Shareholder:
We are pleased to report to you on the performance, investment strategy, and
outlook for Alliance Balanced Shares (the "Fund") for the annual reporting
period ended July 31, 1999.
INVESTMENT RESULTS
During the six-month period ended July 31, 1999, your Fund's return exceeded
that of its unmanaged benchmark, a composite blend of 60% Standard and Poor's
500 (S&P 500) Stock Index, 25% Lehman Brothers (LB) Government/Corporate Bond
Index, and 15% Salomon Brothers 1-year Treasury Bond Index. The Fund's
outperformance versus its benchmark was largely due to stock selection, as was
the Fund's underperformance versus its benchmark for the 12-month period under
review. By way of explanation, 1998 and the first quarter of 1999 were
characterized by the very strong performance of large capitalization growth
stocks, which have forecast rapid earnings growth rates accompanied by high
price-to-earnings (P/E) ratios. These stocks drove the performance of the S&P
500 to the detriment of any other category of equities. Our stock selection
discipline is a valuation-based process that has led us to avoid these types of
securities. Thus, our underweighting of large growth stocks generated our lower
relative performance for the first half of our fiscal year.
By April of 1999, however, the overwhelming superiority of large growth stock
returns began to erode, and more valuation-sensitive equities (such as those
comprising the bulk of your Fund) started to outperform these large growth
stocks. This reversal was related to growing perceptions that global economic
growth had begun to reaccelerate after dipping to very low levels in 1998. From
April through the end of July, value stocks led the market, allowing your Fund
to outperform its benchmark for the latter half of the fiscal year.
INVESTMENT RESULTS*
Periods Ended July 31, 1999
TOTAL RETURNS
6 MONTHS 12 MONTHS
-------- ---------
ALLIANCE BALANCED SHARES
Class A 3.49% 11.44%
Class B 3.13% 10.56%
Class C 3.12% 10.60%
S&P 500 STOCK INDEX 4.50% 20.20%
LEHMAN BROTHERS GOVERNMENT/
CORPORATE BOND INDEX -3.24% 2.33%
SALOMON BROTHERS 1-YEAR TREASURY
BOND INDEX 2.31% 5.24%
60%/25%/15% COMPOSITE:
60% S&P 500 Stock Index/
25% Lehman Brothers Government/
Corporate Bond Index/
15% Salomon Brothers 1-year
Treasury Bond Index 2.24% 13.49%
* THE FUND'S INVESTMENT RESULTS REPRESENT TOTAL RETURNS AND ARE BASED ON THE
NET ASSET VALUE OF AS OF JULY 31, 1999. 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 AND 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 GOVERNMENT/CORPORATE BOND INDEX IS A BROAD MEASURE
OF THE PERFORMANCE OF INTERMEDIATE (ONE TO 10 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.
1
ALLIANCE BALANCED SHARES
_______________________________________________________________________________
Your Fund outperformed its peer group, the Lipper Balanced Funds Average, over
the six- and 12-month periods under review primarily due to good stock
selection.
TOTAL RETURNS FOR THE PERIODS ENDED
JULY 31, 1999*
6 MONTHS 1 YEAR 5 YEARS 10 YEARS
-------- ------ ------- --------
ALLIANCE BALANCED SHARES
Class A Shares 3.49% 11.44% 15.86% 10.40%
LIPPER BALANCED FUNDS
AVERAGE 2.00% 9.57% 15.19% 11.60%
* THE SIX-MONTH RETURN IS A NON-ANNUALIZED TOTAL RETURN WHILE THE FIVE- AND
10-YEAR RETURNS ARE AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIOD ENDED JULY 31,
1999. 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 AVERAGE 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, 452 FUNDS; ONE
YEAR, 426 FUNDS; FIVE YEARS, 188 FUNDS; AND 10 YEARS, 60 FUNDS. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
MARKET OVERVIEW
During the second quarter of 1999, the U.S. gross domestic product (GDP) growth
rate slowed to only 2.3%. This is in comparison to the exceptional 6% GDP
growth rate the U.S. economy experienced during the fourth quarter of 1998.
Additionally, the United States' weakness in foreign trade continued to
increase, with an additional widening of the real trade deficit by
approximately $20 billion. Despite these signs, we still believe that U.S. GDP
growth will exceed 3% in the second half of 1999, sustaining our target rate of
3.5% without any adverse inflationary results.
The Federal Reserves' two recent interest rate hikes have had a much more
immediate impact on the U.S. economy. The return to a neutral bias, as well as
Federal Reserve chairman Alan Greenspan's testimony to congress, has led many
to believe that the Federal Reserve may potentially adopt a tightening bias.
Our view, however, is that the recent increase in rates is only a reaction to
last fall's easing.
INVESTMENT STRATEGY
Recognizing the high levels of equity valuations, we are currently slightly
underweighted in equities versus our benchmark of 60%. In the equities area, we
will maintain our focus on securities that have the most attractive valuations,
while also maintaining a well-diversified portfolio with a high degree of
sector and industry diversification.
OUTLOOK
Central banks around the world commenced an easing cycle in September 1998 in
response to global financial turmoil. The increase in liquidity has allowed
economies in the Far East and Europe to begin recovery from a very sluggish
1998. The United States may slow somewhat due to the influence of recent
Federal Reserve tightening, but we believe domestic economic growth will remain
quite adequate.
This incipient global upturn helps value stocks in two ways. First, value
stocks tend to be economically sensitive, and their financial results therefore
often improve in this type of climate. Second, growth stock valuations are
strongly affected by interest rates, such that during periods of tightening in
the bond market, growth stock P/E ratios tend to contract. If global growth
continues to accelerate, we would expect the value stocks that we hold to
benefit.
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
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, 1999
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 11.44% 6.70%
Five Years 15.86% 14.86%
10 Years 10.40% 9.93%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 10.56% 6.67%
Five Years 14.95% 14.95%
Since Inception* (a) 11.56% 11.56%
CLASS C SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 10.60% 9.62%
Five Years 14.97% 14.97%
Since Inception* 12.16% 12.16%
SEC AVERAGE ANNUAL TOTAL RETURNS AS OF THE MOST RECENT QUARTER-END (JUNE 30,
1999)
CLASS A CLASS B CLASS C
------- ------- -------
1 Year 8.44% 8.37% 11.44%
5 Years 15.86% 15.95% 15.97%
10 Years 10.55% 11.97%* 12.76%*
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: 2/4/91, Class B; 5/3/93, Class C.
(a) Assumes conversion of Class B shares into Class A shares after 8 years.
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.
3
ALLIANCE BALANCED SHARES
_______________________________________________________________________________
ALLIANCE BALANCED SHARES
GROWTH OF A $10,000 INVESTMENT 7/31/89 TO 7/31/99
$39,000
$29,000
$19,000
$10,000
$9,000
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 7/31/99
Composite: 60% S&P 500, 25% Lb Gov't/Corp. Bond Index, 15% Salomon Brothers
1-Year Treasury Index: $37,791
Lipper Balanced Funds Average: $30,271
Balanced Shares Class A: $25,762
This chart illustrates the total value of an assumed $10,000 investment in
Alliance Balanced Shares Class A shares (from 7/31/89 to 7/31/99) 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&P 500 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.
The Lipper Balanced Funds Average reflects performance of 60 funds (based on
the number of funds in the average from 7/31/89 to 7/31/99). These funds have
generally similar investment objectives to Alliance Balanced Shares, although
the investment policies of some funds included in the average may differ.
When comparing Alliance Balanced Shares to the composite and average shown
above, you should note that no charges or expenses are reflected in the
performance of the composite. Lipper results include fees and expenses.
Alliance Balanced Shares
Lipper Balanced Funds Average
Composite: 60% Standard & Poor's 500 Stock Index, 25% Lehman Brothers
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*
7/31/98
U.S. GOVERNMENT & MORTGAGES: 23.8%
CORPORATE BONDS: 9.6%
SHORT-TERM INVESTMENTS: 13.0%
STOCKS: 53.6%
1/31/99
U.S. GOVERNMENT & AGENCY OBLIGATIONS: 24.4%
CORPORATE BONDS: 12.1%
SHORT-TERM INVESTMENTS: 8.7%
STOCKS: 54.8%
7/31/99
U.S. GOVERNMENT & AGENCY OBLIGATIONS: 21.9%
CORPORATE BONDS: 11.4%
SHORT-TERM INVESTMENTS: 13.1%
STOCKS: 53.6%
* Expressed as a percentage of total investments.
5
TEN LARGEST HOLDINGS
JULY 31, 1999 ALLIANCE BALANCED SHARES
_______________________________________________________________________________
PERCENT OF
COMPANY VALUE NET ASSETS
- -------------------------------------------------------------------------------
U.S. Treasury Notes $ 64,529,656 16.4%
U.S. Treasury Bonds 22,523,952 5.7
BankAmerica Corp. 10,236,684 2.6
Bank One Corp. 7,777,720 2.0
USX-Marathon Group. 7,478,325 1.9
Tyco International, Ltd. 7,463,325 1.9
Household International, Inc. 7,071,806 1.8
Bristol-Myers Squibb Co. 6,596,800 1.7
Noble Drilling Corp. 6,504,506 1.7
Citigroup, Inc. 6,255,550 1.6
$146,438,324 37.3%
MAJOR PORTFOLIO CHANGES
SIX MONTHS ENDED JULY 31, 1999
SHARES OR PRINCIPAL
- -------------------------------------------------------------------------------
PURCHASES BOUGHT HOLDINGS 7/31/99
- -------------------------------------------------------------------------------
BankAmerica Corp. 69,999 154,225
Philip Morris Cos., Inc. 95,000 159,500
Saks, Inc. 153,000 176,600
Schering-Plough Corp. 109,000 93,000
U.S. Treasury Bond, 5.25%, 2/15/29 $ 6,600000 $ 5,110,000
U.S. Treasury Bond, 6.125%, 11/15/27 $5,315,000 $ 6,765,000
U.S. Treasury Bond, 8.125%, 8/15/19 $4,900,000 $ 4,900,000
U.S. Treasury Note, 6.50%, 8/31/01 $8,250,000 $18,700,000
U.S. Treasury Note, 6.875%, 5/15/06 $7,100,000 $ 7,325,000
U.S. Treasury Note, 7.25%, 5/15/04 $ 3,700000 $ 3,700,000
SALES SOLD HOLDINGS 7/31/99
- -------------------------------------------------------------------------------
Apache Corp. 79,500 -0-
BJ Svcs. Co. 105,000 -0-
Campbell Soup Co. 49,900 -0-
Comcast Cable Communications, 6.20%,
11/15/08 $ 2,500,000 -0-
Dayton Hudson Corp. 53,600 22,900
Harley-Davidson, Inc. 57,100 -0-
U.S. Treasury Bond, 5.25%, 11/15/28 $ 6,125,000 $2,365,000
U.S. Treasury Bond, 5.50%, 8/15/28 $ 4,385,000 $ -0-
U.S. Treasury Note, 5.25%, 8/15/03 $2,050,,000 -0-
U.S. Treasury Note, 5.75%, 8/15/03 $ 9,020,000 -0-
6
PORTFOLIO OF INVESTMENTS
JULY 31, 1999 ALLIANCE BALANCED SHARES
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
COMMON STOCKS & OTHER INVESTMENTS-54.3%
FINANCE-12.2%
BANKING - MONEY CENTER-1.1%
Chase Manhattan Corp. 56,400 $ 4,335,750
BANKING - REGIONAL-4.9%
Bank One Corp. 125,100 6,825,769
BankAmerica Corp. 154,225 10,236,684
Wells Fargo & Co. 53,000 2,067,000
------------
19,129,453
INSURANCE-2.2%
Citigroup, Inc. 140,377 6,255,550
PMI Group, Inc. 16,000 1,023,000
Travelers Property Casualty Corp. Cl.A 34,800 1,374,600
------------
8,653,150
MISCELLANEOUS-4.0%
Associates First Capital Corp. Cl.A 34,800 1,333,275
Household International, Inc. 164,700 7,071,806
MBNA Corp. 197,187 5,619,829
Newcourt Credit Group, Inc. (Canada) 29,000 447,688
The CIT Group, Inc. Cl.A 41,600 1,112,800
------------
15,585,398
------------
47,703,751
TECHNOLOGY-8.3%
COMMUNICATIONS EQUIPMENT-1.4%
Firstcom Corp.
warrants, expiring 10/27/07, (a)(b) 14,000 73,500
Lucent Technologies, Inc. 31,680 2,061,180
Nokia Corp. (ADR) (Finland) 38,000 3,232,375
Optel, Inc.
warrants, expiring 12/30/04, (a)(b) 1,000 10
Viatel, Inc.
warrants, expiring 4/30/09, (a) 4,090 151,330
------------
5,518,395
COMPUTER HARDWARE-0.2%
Compaq Computer Corp. 40,300 967,200
COMPUTER PERIPHERALS-0.3%
Seagate Technology, Inc. (a) 39,000 1,048,125
COMPUTER SERVICES-3.1%
Computer Sciences Corp. 62,700 4,036,312
Electronic Data Systems Corp. 42,000 2,533,125
First Data Corp. 112,100 5,555,956
------------
12,125,393
COMPUTER SOFTWARE-0.5%
Oracle Corp. (a) 49,950 1,902,783
SEMI-CONDUCTOR COMPONENTS-1.1%
Altera Corp. (a) 55,000 1,992,031
Atmel Corp. (a) 82,800 2,465,888
------------
4,457,919
MISCELLANEOUS-1.7%
Sanmina Corp. (a) 49,600 3,237,950
Solectron Corp. (a) 53,600 3,453,850
------------
6,691,800
------------
32,711,615
CONSUMER STAPLES-6.2%
BEVERAGES-0.8%
Coca-Cola Enterprises, Inc. 74,400 2,171,550
Pepsi Bottling Group, Inc. 42,000 992,250
------------
3,163,800
7
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE BALANCED SHARES
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
COSMETICS-0.3%
Avon Products, Inc. 21,800 $ 991,900
FOOD-2.1%
General Mills, Inc. 13,200 1,093,125
Heinz (H.J.) Co. 21,400 1,008,475
Nabisco Group Holding Corp. 97,000 1,818,750
Tyson Foods, Inc. Cl.A 229,900 4,296,256
------------
8,216,606
HOUSEHOLD PRODUCTS-0.4%
Viad Corp. 48,000 1,587,000
RETAIL - FOOD & DRUG-0.9%
Kroger Co. (a) 133,000 3,499,563
TOBACCO-1.7%
Philip Morris Cos., Inc. 159,500 5,941,375
RJR Tobacco Holdings Corp. (a) 32,333 885,116
------------
6,826,491
------------
24,285,360
CONSUMER SERVICES-6.0%
AIRLINES-0.7%
Continental Airlines, Inc.
Cl.B, (a) 67,500 2,868,750
BROADCASTING & CABLE-0.8%
A.H. Belo Corp. Series A 73,100 1,475,706
CSC Holdings, Inc. Pfd. 360 39,150
Scripps E.W. Co. Cl.A 9,000 468,000
Vodafone AirTouch Plc (ADR)
(United Kingdom) 5,300 1,115,650
------------
3,098,506
ENTERTAINMENT & LEISURE-0.9%
Royal Caribbean Cruises, Ltd. 43,600 2,049,200
Time Warner, Inc. 23,000 1,656,000
------------
3,705,200
PRINTING & PUBLISHING-0.9%
American Banknote Corp.
warrants, expiring 12/01/02, (a)(b) 1,000 1,000
Donnelley (R.R.) & Sons Co. 5,500 192,500
Gannett Co., Inc. 47,200 3,410,200
------------
3,603,700
RETAIL - GENERAL MERCHANDISE-2.2%
Dayton Hudson Corp. 22,900 1,481,344
Saks, Inc. (a) 176,600 4,061,800
Tommy Hilfiger Corp. (a) 79,400 2,932,838
------------
8,475,982
MISCELLANEOUS-0.5%
Newell Rubbermaid, Inc. 43,000 1,859,750
------------
23,611,888
ENERGY-5.6%
DOMESTIC INTEGRATED-2.6%
Kerr-McGee Corp. 53,900 2,775,850
USX-Marathon Group 246,200 7,478,325
------------
10,254,175
DOMESTIC PRODUCERS-0.3%
Murphy Oil Corp. 15,000 742,500
Union Pacific Resources Group, Inc. 20,000 356,250
------------
1,098,750
INTERNATIONAL-0.6%
Total Fina, SA (ADR) (France) 37,000 2,354,125
8
ALLIANCE BALANCED SHARES
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
OIL SERVICE-1.9%
Noble Drilling Corp. (a) 286,700 $ 6,504,506
Transocean Offshore, Inc. 24,800 761,050
------------
7,265,556
MISCELLANEOUS-0.2%
AES Corp. (a) 15,700 942,000
------------
21,914,606
HEALTH CARE-5.3%
BIOTECHNOLOGY-0.0%
Genzyme Corp. (a) 1,861 9,857
DRUGS-2.9%
Bristol-Myers Squibb Co. 99,200 6,596,800
Schering-Plough Corp. 93,000 4,557,000
------------
11,153,800
MEDICAL SERVICES-2.4%
Columbia HCA/Healthcare Corp. 96,800 2,153,800
Lifepoint Hospitals, Inc. (a) 5,094 50,622
Pacificare Health Systems (a) 25,300 1,724,353
Tenet Healthcare Corp. (a) 305,000 5,470,937
Triad Hospitals, Inc. (a) 5,094 54,124
------------
9,453,836
------------
20,617,493
UTILITIES-3.8%
ELECTRIC & GAS UTILITY-2.3%
CMS Energy Corp. 47,300 1,767,838
Consolidated Edison, Inc. 52,200 2,270,700
FPL Group, Inc. 23,900 1,289,106
GPU, Inc. 47,000 1,803,625
Pinnacle West Capital Corp. 50,000 1,996,875
------------
9,128,144
TELEPHONE UTILITY-1.5%
AT&T Corp. 59,845 3,108,199
MCI WorldCom, Inc. (a) 33,950 2,801,936
------------
5,910,135
MISCELLANEOUS-0.0%
Long Distance International, Inc.
warrants, expiring 4/13/08, (a) 1,000 2,500
------------
15,040,779
MULTI-INDUSTRY COMPANIES-3.0%
Honeywell, Inc. 27,600 3,306,825
Tyco International, Ltd. 76,400 7,463,325
U.S. Industries, Inc. 72,300 1,183,913
------------
11,954,063
CAPITAL GOODS-2.2%
POLLUTION CONTROL-0.6%
Republic Services Inc.
Class A, (a) 120,000 2,422,500
MISCELLANEOUS-1.6%
Allied-Signal, Inc. 34,000 2,199,375
United Technologies Corp. 60,600 4,041,263
------------
6,240,638
------------
8,663,138
BASIC INDUSTRIES-1.4%
CHEMICALS-1.4%
Dow Chemical Co. 11,000 1,364,000
Eastman Chemical Co. 22,400 1,157,800
Lyondell Chemical Co. 52,000 949,000
Praxair, Inc. 32,200 1,485,225
Solutia, Inc. 31,500 673,313
------------
5,629,338
CONSUMER MANUFACTURING-0.3%
BUILDING & RELATED-0.3%
Masco Corp. 38,000 1,130,500
Total Common Stocks & Other Investments
(cost $176,234,935) 213,262,531
9
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE BALANCED SHARES
_______________________________________________________________________________
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- -------------------------------------------------------------------------
DEBT OBLIGATIONS-33.7%
U.S. GOVERNMENT & AGENCY OBLIGATIONS-22.2%
U.S. Treasury Bonds
5.25%, 11/15/28 $ 2,365 $ 2,063,463
5.25%, 2/15/29 5,110 4,512,743
6.125%, 11/15/27 6,765 6,627,603
6.25%, 8/15/23 3,500 3,467,730
8.125%, 8/15/19 4,900 5,852,413
U.S. Treasury Notes
5.50%, 5/15/09 400 388,000
5.625%, 2/28/01 1,250 1,251,562
5.625%, 5/15/08 1,200 1,165,872
6.25%, 4/30/01 17,000 17,183,260
6.50%, 8/31/01 18,700 18,998,078
6.50%, 5/31/02 12,060 12,289,864
6.625%, 5/15/07 25 25,824
6.875%, 5/15/06 7,325 7,651,182
7.00%, 7/15/06 575 604,291
7.25%, 5/15/04 3,700 3,902,353
7.50%, 2/15/05 1,000 1,069,370
------------
87,053,608
CORPORATE DEBT OBLIGATIONS-9.7%
AEROSPACE & DEFENSE-0.3%
Raytheon Co.
5.70%, 11/01/03 1,000 962,715
AIR TRANSPORTATION-0.2%
Northwest Airlines, Inc.
8.52%, 4/07/04 850 816,904
AUTOMOTIVE-0.5%
Borg-Warner Automotive, Inc.
6.50%, 2/15/09 750 700,306
Federal Mogul Corp.
7.75%, 7/01/06 1,500 1,429,302
------------
2,129,608
BANKING-1.1%
Bank One Corp.
5.625%, 2/17/04 1,000 951,951
Bank United Corp.
8.875%, 5/01/07 1,350 1,343,536
Chase Manhattan Corp.
6.00%, 2/15/09 1,850 1,688,501
Citicorp
6.375%, 11/15/08 500 470,870
------------
4,454,858
BROADCASTING/MEDIA-0.3%
Westinghouse Electric Corp.
8.625%, 8/01/12 1,000 1,056,371
CABLE-0.2%
Cox Communication, Inc.
6.85%, 1/15/18 750 684,706
CHEMICALS-0.6%
ICI North America, Inc.
8.875%, 11/15/06 850 913,587
Lyondell Chemical Co.
9.875%, 5/01/07 (b) 1,350 1,370,250
------------
2,283,837
COMMUNICATIONS-0.5%
Long Distance International, Inc.
12.25%, 4/15/08 1,000 553,750
News America Holdings, Inc.
9.50%, 7/15/24 1,250 1,413,697
------------
1,967,447
ELECTRIC & GAS UTILITY-1.4%
Arizona Public Service Co.
5.875%, 2/15/04 1,250 1,203,936
CalEnergy Co., Inc.
8.48%, 9/15/28 500 522,681
Connecticut Light & Power Co.
6.125%, 2/01/04 1,700 1,634,635
10
ALLIANCE BALANCED SHARES
_______________________________________________________________________________
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- -------------------------------------------------------------------------
Niagara Mohawk Power Co.
7.75%, 10/01/08 $ 1,000 $ 1,015,468
Public Service Co.
7.10%, 8/01/05 1,000 970,570
------------
5,347,290
ENERGY-0.2%
Conoco, Inc.
5.90%, 4/15/04 850 821,233
FINANCIAL-0.6%
China Development Bank
8.25%, 5/15/09 400 390,000
Household Finance Corp.
6.50%, 11/15/08 1,000 941,540
Merrill Lynch & Co., Inc.
6.00%, 2/17/09 1,000 912,014
------------
2,243,554
INDUSTRIAL-0.4%
Delphi Automotive Systems Corp.
7.125%, 5/01/29 900 815,693
Rohm and Haas Co.
7.40%, 7/15/09 850 861,168
------------
1,676,861
INSURANCE-1.0%
Arkwright CSN Trust
9.625%, 8/15/26 (b) 1,000 1,047,434
Frank Russell & Co.
5.625%, 1/15/09 (b) 1,000 903,807
Prudential Insurance Co.
8.30%, 7/01/25 (b) 2,000 2,141,144
------------
4,092,385
NON-AIR
TRANSPORTATION-0.5%
ERAC USA Finance Co.
6.625%, 5/15/06 (b) 900 899,100
Union Pacific Corp.
6.625%, 2/01/08 1,100 1,050,138
------------
1,949,238
PAPER / PACKAGING-0.1%
Kappa Beheer BV
10.625%, 7/15/09 (b) 400 422,306
PETROLEUM PRODUCTS-0.6%
Apache Finance PTY, Ltd.
6.50%, 12/15/07 1,250 1,188,466
Temple-Inland, Inc.
6.75%, 3/01/09 1,250 1,182,318
------------
2,370,784
PUBLISHING-0.3%
Knight Ridder, Inc.
6.875%, 3/15/29 1,250 1,116,444
RETAIL-0.2%
Kohls Corp.
7.25%, 6/01/29 (b) 850 810,982
TELEPHONE UTILITY-0.7%
MCI Worldcom, Inc.
6.95%, 8/15/28 1,350 1,260,880
Qwest Communications
International, Inc.
7.25%, 11/01/08 (b) 1,465 1,466,831
------------
2,727,711
------------
37,935,234
YANKEE BONDS-1.8%
Abbey National Plc
6.70%, 6/29/49 1,440 1,317,433
Corporacion Andina De Fomento
7.75%, 3/01/04 400 387,319
Deutsche Capital Bank
7.872%, 12/29/49 (b) 900 838,440
Empresa Electrica Del Norte, SA
7.75%, 3/15/06 (b) 1,685 897,262
11
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE BALANCED SHARES
_______________________________________________________________________________
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- -------------------------------------------------------------------------
Fuji LLC Pfd.
9.87%, 12/31/49 (b)(c) $ 500 $ 443,546
Laidlaw, Inc.
7.65%, 5/15/06 1,350 1,302,838
Metronet Communications Corp.
1.00%, 6/15/08 850 650,250
Province of Quebec
7.00%, 1/30/07 1,000 996,020
TPSA Finance BV
7.75%, 12/10/08 (b) 500 482,985
------------
7,316,093
Total Debt Obligations
(cost $139,109,569) 132,304,935
SHORT-TERM INVESTMENT-13.3%
TIME DEPOSIT-13.3%
State Street Cayman Islands
4.75%, 8/02/99
(amortized cost $52,167,000) 52,167 52,167,000
TOTAL INVESTMENTS-101.3%
(cost $367,511,504) 397,734,466
Other assets less liabilities-(1.3%) (5,253,637)
NET ASSETS-100% $392,480,829
(a) Non-income producing security.
(b) Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to certain qualified buyers. At July 31, 1999, the
aggregate market value of these securities amounted to $11,798,597 representing
3.0% of net assets.
(c) Coupon increases periodically based upon a predetermined schedule. Stated
interest rate in effect at July 31, 1999.
Glossary:
ADR - American Depositary Receipt.
See notes to financial statements.
12
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1999 ALLIANCE BALANCED SHARES
_______________________________________________________________________________
ASSETS
Investments in securities, at value
(cost $367,511,504) $397,734,466
Cash 654
Dividends and interest receivable 2,826,780
Receivable for capital stock sold 1,478,110
Receivable for investment securities sold 996,820
Total assets 403,036,830
LIABILITIES
Payable for investment securities purchased 9,196,745
Payable for capital stock redeemed 531,151
Distribution fee payable 211,132
Advisory fee payable 190,499
Unclaimed dividends 90,989
Unrealized depreciation of forward exchange
currency contract 7,876
Accrued expenses 327,609
Total liabilities 10,556,001
NET ASSETS $392,480,829
COMPOSITION OF NET ASSETS
Capital stock, at par $ 255,433
Additional paid-in capital 344,861,767
Undistributed net investment income 298,965
Accumulated net realized gain on investments and
foreign currency transactions 16,856,146
Net unrealized appreciation of investments and
foreign currency denominated assets and liabilities 30,208,518
$392,480,829
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share
($189,952,921 / 12,155,693 shares of capital stock
issued and outstanding) $15.63
Sales charge--4.25% of public offering price .69
Maximum offering price $16.32
CLASS B SHARES
Net asset value and offering price per share
($136,384,129 / 9,026,990 shares of capital stock
issued and outstanding) $15.11
CLASS C SHARES
Net asset value and offering price per share
($63,516,803 / 4,192,645 shares of capital stock
issued and outstanding) $15.15
ADVISOR CLASS SHARES
Net asset value, redemption and offering price per share
($2,626,976 / 168,003 shares of capital stock
issued and outstanding) $15.64
See notes to financial statements.
13
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1999 ALLIANCE BALANCED SHARES
_______________________________________________________________________________
INVESTMENT INCOME
Interest $8,083,122
Dividends (net of foreign taxes
withheld of $10,528) 2,113,566
$10,196,688
EXPENSES
Advisory fee 1,699,074
Distribution fee - Class A 387,575
Distribution fee - Class B 888,051
Distribution fee - Class C 449,485
Transfer agency 510,344
Administrative 163,500
Custodian 141,119
Printing 79,161
Audit and legal 77,139
Registration 75,359
Directors' fees 22,000
Miscellaneous 33,475
Total expenses 4,526,282
Less: expense offset arrangement
(see Note B) (35,750)
Net expenses 4,490,532
Net investment income 5,706,156
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain on investment
transactions 19,692,107
Net realized loss on foreign currency
transactions (118,118)
Net change in unrealized appreciation of:
Investments 5,062,714
Foreign currency denominated assets
and liabilities (48,145)
Net gain on investments and foreign
currency transactions 24,588,558
NET INCREASE IN NET ASSETS FROM OPERATIONS $30,294,714
See notes to financial statements.
14
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE BALANCED SHARES
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
JULY 31, JULY 31,
1999 1998
----------- ----------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income $5,706,156 $3,053,339
Net realized gain on investments
and foreign currency transactions 19,573,989 29,332,189
Net change in unrealized appreciation
(depreciation) of investments and
foreign currency denominated assets
and liabilities 5,014,569 (10,793,637)
Net increase in net assets from
operations 30,294,714 21,591,891
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income
Class A (3,352,299) (2,363,867)
Class B (1,515,215) (490,313)
Class C (803,428) (113,289)
Advisor Class (55,237) (39,763)
Net realized gain on investments
Class A (12,911,989) (14,565,359)
Class B (6,058,584) (3,474,566)
Class C (1,928,529) (778,193)
Advisor Class (212,403) (200,006)
CAPITAL STOCK TRANSACTIONS
Net increase 204,737,959 37,952,547
Total increase 208,194,989 37,519,082
NET ASSETS
Beginning of year 184,285,840 146,766,758
End of year (including undistributed
net investment income of $298,965
and $492,883, respectively) $392,480,829 $184,285,840
See notes to financial statements.
15
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1999 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 may be subject to a contingent
deferred sales charge of 1%. Class B shares are currently sold with a
contingent deferred sales charge which declines from 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.
16
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 net foreign currency losses and merger
adjustments, resulted in a net decrease in undistributed net investment income
and accumulated net realized gain on investments and foreign currency
transactions and a corresponding increase in additional paid-in capital. 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 $163,500 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, 1999.
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 $360,260 for the year ended July 31, 1999.
For the year ended July 31, 1999, the Fund's expenses were reduced by $35,750
under an expense offset arrangement with Alliance Fund Services, Inc.
Alliance Fund Distributors, Inc., (the "Distributor"), a wholly-owned
subsidiary of the Adviser, serves as the Distributor of the Fund's shares. The
Distributor has advised the Fund that it has received front-end sales charges
of $116,358 from the sales of Class A shares and $104, $146,053 and $14,920 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,
1999.
Brokerage commissions paid on investment transactions for the year ended July
31, 1999, amounted to $327,916, of which $1,500 was paid to brokers utilizing
the services of the Pershing Division of Donaldson, Lufkin & Jenrette
Securities Corp. ("DLJ"), an affiliate of the Adviser and $4,902 was paid to
DLJ directly.
Accrued expenses includes $24,074 owed to a Director and a former Director
under the Director's deferred compensation plan.
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
17
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE BALANCED SHARES
_______________________________________________________________________________
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 distribution assistance and promotional
activities. The Distributor has advised the Fund that it has incurred expenses
in excess of the distribution costs reimbursed by the Fund in the amount of
$4,987,374 and $796,521, 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 $210,529,416 and $162,704,650,
respectively, for the year ended July 31, 1999. There were purchases of
$121,060,221 and sales of $107,515,049 of U.S. government and government agency
obligations for the year ended July 31, 1999.
At July 31, 1999, 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 $46,491,749 and gross unrealized
depreciation of investments was $16,268,787 resulting in net unrealized
appreciation of $30,222,962 excluding foreign currency transactions.
Capital and foreign currency losses incurred after October 31, within the
Fund's fiscal year are deemed to arise on the first business day of the
following fiscal year. The Fund incurred and elected to defer post October
foreign currency losses of $174,635 for the fiscal year ended July 31, 1999.
In connection with the acquisition of Alliance Income Builder Fund (see Note
F), the Fund acquired a capital loss carryforward of $233,465. The Fund
utilized $52,106 of that capital loss carryforward during the year ended July
31, 1999. At July 31, 1999 the Fund had a remaining capital loss carryforward
of $181,359 expiring July 31, 2006 which may be used to offset future gains
subject to certain limitations.
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.
18
ALLIANCE BALANCED SHARES
_______________________________________________________________________________
At July 31, 1999, the Fund had an outstanding forward exchange currency
contract, to sell foreign currency against the U.S. dollar, as follows:
US $
CONTRACT VALUE ON US $
AMOUNT ORIGINATION CURRENT UNREALIZED
(000) DATE VALUE DEPRECIATION
-------- ----------- ------- ------------
FORWARD EXCHANGE CURRENCY
SALE CONTRACT
Euro,
settling 8/20/99 400 $420,680 $428,556 $7,876
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, 1999, the Fund did not engage in any option
transactions.
19
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE BALANCED SHARES
_______________________________________________________________________________
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,
1999 1998 1999 1998
------------ ------------ -------------- --------------
CLASS A
Shares sold 2,825,403 783,081 $43,311,421 $12,635,293
Shares issued in
connection with
acquisition of
Alliance Income
Builder Fund 200,888 -0- 2,918,932 -0-
Shares issued in
connection with
acquisition of
Alliance Strategic
Balanced Fund 1,915,535 -0- 29,102,502 -0-
Shares issued in
reinvestment of
dividends and
distributions 894,028 944,535 13,148,824 13,941,229
Shares converted
from Class B 198,695 50,090 3,063,821 801,099
Shares redeemed (1,618,986) (1,181,568) (24,811,731) (18,857,650)
Net increase 4,415,563 596,138 $66,733,769 $ 8,519,971
CLASS B
Shares sold 4,838,812 1,722,326 $71,823,741 $26,664,861
Shares issued in
connection with
acquisition of
Alliance Income
Builder Fund 654,701 -0- 9,211,701 -0-
Shares issued in
connection with
acquisition of
Alliance Strategic
Balanced Fund 1,560,740 -0- 22,957,076 -0-
Shares issued in
reinvestment of
dividends and
distributions 434,625 257,589 6,202,323 3,707,795
Shares converted
to Class A (205,216) (51,381) (3,063,821) (801,099)
Shares redeemed (1,327,350) (385,826) (19,586,581) (5,962,038)
Net increase 5,956,312 1,542,708 $87,544,439 $23,609,519
CLASS C
Shares sold 1,253,402 444,670 $18,314,705 $ 6,856,999
Shares issued in
connection with
acquisition of
Alliance Income
Builder Fund 2,591,244 -0- 36,542,673 -0-
Shares issued in
connection with
acquisition of
Alliance Strategic
Balanced Fund 322,665 -0- 4,758,655 -0-
Shares issued in
reinvestment of
dividends and
distributions 146,312 55,815 2,101,413 805,036
Shares redeemed (818,076) (150,879) (11,825,765) (2,339,536)
Net increase 3,495,547 349,606 $49,891,681 $ 5,322,499
20
ALLIANCE BALANCED SHARES
_______________________________________________________________________________
SHARES AMOUNT
--------------------------- ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JULY 31, JULY 31, JULY 31, JULY 31,
1999 1998 1999 1998
------------ ------------ -------------- --------------
ADVISOR CLASS
Shares sold 42,519 28,502 $ 650,647 $ 441,571
Shares issued in
connection with
acquisition of
Alliance Income
Builder Fund 5,223 -0- 75,890 -0-
Shares issued in
reinvestment of
dividends and
distributions 18,020 16,203 264,964 239,736
Shares redeemed (27,910) (11,315) (423,431) (180,749)
Net increase 37,852 33,390 $ 568,070 $ 500,558
NOTE F: ACQUISITION OF ALLIANCE INCOME BUILDER FUND
On November 13, 1998 the Fund acquired all of the net assets of Alliance Income
Builder Fund pursuant to a plan of reorganization approved by Alliance Income
Builder Fund shareholders on November 2, 1998. The acquisition was accomplished
by a tax-free exchange of 3,452,056 shares of the Fund for 4,944,621 shares of
Alliance Income Builder Fund on November 13, 1998. The aggregate net assets of
the Fund and Alliance Income Builder Fund immediately before the acquisition
were $191,606,941 and $48,749,196, respectively (including unrealized
appreciation in Alliance Income Builder Fund of $1,438,262). Immediately after
the acquisition the combined net assets of the Fund amounted to $240,356,137.
NOTE G: ACQUISITION OF ALLIANCE STRATEGIC BALANCED FUND
On February 1, 1999 the Fund acquired all of the net assets of Alliance
Strategic Balanced Fund pursuant to a plan of reorganization approved by
Alliance Strategic Balanced Fund shareholders on December 18, 1998. The
acquisition was accomplished by a tax-free exchange of 3,798,940 shares of the
Fund for 3,232,951 shares of Alliance Strategic Balanced Fund on February 1,
1999. The aggregate net assets of the Fund and Alliance Strategic Balanced Fund
immediately before the acquisition were $281,968,797 and $56,818,233,
respectively (including unrealized appreciation in Alliance Strategic Balanced
Fund of $8,492,533). Immediately after the acquisition the combined net assets
of the Fund amounted to $338,787,033.
NOTE H: 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")
intended 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, 1999.
21
FINANCIAL HIGHLIGHTS ALLIANCE BALANCED SHARES
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------------
YEAR ENDED JULY 31,
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $15.97 $16.17 $14.01 $15.08 $13.38
INCOME FROM INVESTMENT OPERATIONS
Net investment income .36(a) .33(a) .31(a) .37 .46
Net realized and unrealized gain on
investment transactions 1.29 1.86 3.97 .45 1.62
Net increase in net asset value from
operations 1.65 2.19 4.28 .82 2.08
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.34) (.32) (.32) (.41) (.36)
Distributions from net realized gains (1.65) (2.07) (1.80) (1.48) (.02)
Total dividends and distributions (1.99) (2.39) (2.12) (1.89) (.38)
Net asset value, end of year $15.63 $15.97 $16.17 $14.01 $15.08
TOTAL RETURN
Total investment return based on net
asset value (b) 11.44% 14.99% 33.46% 5.23% 15.99%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $189,953 $123,623 $115,500 $102,567 $122,033
Ratio of expenses to average net assets 1.22%(c) 1.30%(c) 1.47%(c) 1.38% 1.32%
Ratio of net investment income to
average net assets 2.31% 2.07% 2.11% 2.41% 3.12%
Portfolio turnover rate 105% 145% 207% 227% 179%
</TABLE>
See footnote summary on page 25.
22
ALLIANCE BALANCED SHARES
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
CLASS B
-----------------------------------------------------------------
YEAR ENDED JULY 31,
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $15.54 $15.83 $13.79 $14.88 $13.23
INCOME FROM INVESTMENT OPERATIONS
Net investment income .23(a) .21(a) .19(a) .28 .30
Net realized and unrealized gain on
investment transactions 1.25 1.81 3.89 .42 1.65
Net increase in net asset value from
operations 1.48 2.02 4.08 .70 1.95
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.26) (.24) (.24) (.31) (.28)
Distributions from net realized gains (1.65) (2.07) (1.80) (1.48) (.02)
Total dividends and distributions (1.91) (2.31) (2.04) (1.79) (.30)
Net asset value, end of year $15.11 $15.54 $15.83 $13.79 $14.88
TOTAL RETURN
Total investment return based on net
asset value (b) 10.56% 14.13% 32.34% 4.45% 15.07%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $136,384 $47,728 $24,192 $18,393 $15,080
Ratio of expenses to average net assets 1.97%(c) 2.06%(c) 2.25%(c) 2.16% 2.11%
Ratio of net investment income to
average net assets 1.56% 1.34% 1.32% 1.61% 2.30%
Portfolio turnover rate 105% 145% 207% 227% 179%
</TABLE>
See footnote summary on page 25.
23
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE BALANCED SHARES
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
CLASS C
-----------------------------------------------------------------
YEAR ENDED JULY 31,
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $15.57 $15.86 $13.81 $14.89 $13.24
INCOME FROM INVESTMENT OPERATIONS
Net investment income .24(a) .21(a) .20(a) .26 .30
Net realized and unrealized gain on
investment transactions 1.25 1.81 3.89 .45 1.65
Net increase in net asset value from
operations 1.49 2.02 4.09 .71 1.95
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.26) (.24) (.24) (.31) (.28)
Distributions from net realized gains (1.65) (2.07) (1.80) (1.48) (.02)
Total dividends and distributions (1.91) (2.31) (2.04) (1.79) (.30)
Net asset value, end of year $15.15 $15.57 $15.86 $13.81 $14.89
TOTAL RETURN
Total investment return based on net
asset value (b) 10.60% 14.09% 32.37% 4.52% 15.06%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $63,517 $10,855 $5,510 $6,096 $5,108
Ratio of expenses to average net assets 1.96%(c) 2.05%(c) 2.23%(c) 2.15% 2.09%
Ratio of net investment income to
average net assets 1.57% 1.36% 1.37% 1.63% 2.32%
Portfolio turnover rate 105% 145% 207% 227% 179%
</TABLE>
See footnote summary on page 25.
24
ALLIANCE BALANCED SHARES
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
ADVISOR CLASS
------------------------------------
OCTOBER 2,
1996(D)
YEAR ENDED JULY 31, TO
------------------ JULY 31,
1999 1998 1997
----------- ----------- ----------
Net asset value, beginning of period $15.98 $16.17 $14.79
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a) .39 .37 .23
Net realized and unrealized gain on
investment transactions 1.29 1.87 3.22
Net increase in net asset value from
operations 1.68 2.24 3.45
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.37) (.36) (.27)
Distributions from net realized gains (1.65) (2.07) (1.80)
Total dividends and distributions (2.02) (2.43) (2.07)
Net asset value, end of period $15.64 $15.98 $16.17
TOTAL RETURN
Total investment return based on net
asset value (b) 11.71% 15.32% 25.96%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $2,627 $2,079 $1,565
Ratio of expenses to average net assets (c .97% 1.06% 1.30%(e)
Ratio of net investment income to
average net assets 2.56% 2.33% 2.15%(e)
Portfolio turnover rate 105% 145% 207%
(a) Based on average shares outstanding.
(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) Ratios reflect expenses grossed up for expense offset arrangement with the
Transfer Agent. For the periods shown below, the net expense ratios were as
follows:
YEAR ENDED JULY 31,
------------------------
1999 1998 1997
---- ---- ----
Class A 1.21% 1.29% 1.46%
Class B 1.96% 2.05% 2.24%
Class C 1.94% 2.04% 2.22%
Advisor Class .96% 1.05% 1.29%
(d) Commencement of distribution.
(e) Annualized.
25
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, 1999, 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, 1999 by correspondence with the custodian and brokers,
provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
September 24, 1999
TAX INFORMATION (UNAUDITED)
In order to meet certain requirements of the Internal Revenue Code we are
advising you that the Fund paid $9,822,733 of long term capital gain
distributions during the fiscal year ended July 31, 1999.
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 DIVwhich will be sent to you separately in January 2000.
26
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
CORINNE MOLOF HILL, 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 LLP
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.
27
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.
BALAR799
