ALLIANCE
STRATEGIC
BALANCED
FUND
ANNUAL REPORT
JULY 31, 1995
LETTER TO SHAREHOLDERS ALLIANCE STRATEGIC BALANCED FUND
- -------------------------------------------------------------------------------
September 1, 1995
Dear Shareholder:
We are pleased to provide you with an update of Alliance Strategic Balanced
Fund's performance and investment activity for the fiscal year ended July 31,
1995. This period, beginning with the summer of 1994, was marked by increasing
concern in the equity market that economic activity was accelerating at an
inflationary pace. Consequently, the Federal Reserve continued to increase
short-term interest rates through November. By July of this year, however, the
pronounced slowdown in economic growth led the Fed to reverse policy and reduce
interest rates by 0.25%. The equity and bond markets both rallied strongly in
response.
ECONOMIC OUTLOOK
Our outlook envisions a modest reacceleration in economic activity through the
end of 1995. Inflation remains well behaved, benefiting from moderate worldwide
economic growth, intense global competition, aggressive cost cutting and
significant technology capital investment. The Federal Reserve could lower
rates very cautiously over the next 6-8 months provided the "soft landing"
scenario continues. Corporate profitability has been strong as well, not only
in absolute terms but also relative to investors' expectations. In this
environment of a slowing economy and restrained inflation, the financial
markets through August have experienced positive returns for eight consecutive
months. This phenomenon should continue to support stock prices, though to a
lesser degree, through the end of the year.
PORTFOLIO STRATEGY
Over the nearer term, the broad market averages may consolidate while the
number of advancing issues, especially smaller capitalization ones, increase.
In that context, selective stock picking should be rewarded. While growth
stocks are emphasized in the portfolio, we also see potential in economically
sensitive companies with the ability and intention to benefit from this period
of high corporate profitability.
Your Fund's well diversified portfolio currently reflects the following
investment themes: media, reinsurance, selected health care, tobacco and
industrial restructurings. Technology remains a point of tactical focus. Across
industries, we continue to invest in companies of widely varying market
capitalizations.
INVESTMENT PERFORMANCE
The following table compares Alliance Strategic Balanced Fund's total returns
over the twelve- and six-month periods ended July 31, 1995, with that of the
broad U.S. stock market, represented by the S&P 500-stock Index, and with the
U.S. bond market, represented by the Lehman Brothers (LB) Government/Corporate
Bond Index:
Twelve Months Six Months
Through July 31, 1995
----------------------------
ALLIANCE STRATEGIC BALANCED FUND
Class A +12.40% +14.45%
Class B +11.63% +13.99%
Class C +11.62% +13.98%
S&P 500 +26.03% +21.02%
LB GOV'T/CORP. BOND INDEX +10.55% +9.68%
The Fund's total returns are based on the net asset values of each class of
shares as of July 31; additional investment results and complete descriptions
of the Fund's benchmarks, both unmanaged, appear on pages 2 and 3.
On a note concerning your Fund's portfolio management, we are pleased to
announce that going forward Alliance Strategic Balanced Fund will be managed by
Kevin O'Brien. Mr. O'Brien joined the firm in 1988 and is a senior vice
president of Alliance. He received his B.A. degree from Amherst College and an
M.A. and Ph.D. from Cornell University, and has 16 years of investment
experience.
Thank you for your investment in Alliance Strategic Balanced Fund. We look
forward to reporting its progress to you early in 1996.
Sincerely,
John D. Carifa
Chairman and President
1
INVESTMENT RESULTS ALLIANCE STRATEGIC BALANCED FUND
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AVERAGE ANNUAL TOTAL RETURN AS OF JULY 31, 1995
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
---------------------------
. One Year +12.40% +7.63%
. Since Inception* +12.29 +11.29
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
---------------------------
. One Year +11.63% +7.63%
. Five Years +9.56 +9.56
. Since Inception* +12.08 +12.08
CLASS C SHARES
. One Year +11.62%
. Since Inception* +4.68
The average annual total returns reflect investment of dividends and/or capital
gains distributions in additional shares-with and without the effect of the
4.25% maximum front-end sales charge for Class A or applicable contingent
deferred sales charge for Class B (4% year 1, 3% year 2, 2% year 3, 1% year 4);
Class C shares are not subject to front-end or contingent deferred sales
charges. Past performance does not guarantee future results. Investment return
and principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
* Inception: 9/4/90, Class A; 10/23/87, Class B; 8/2/93, Class C.
2
Alliance Strategic Balanced Fund
- -------------------------------------------------------------------------------
ALLIANCE STRATEGIC BALANCED FUND
GROWTH OF A $10,000 INVESTMENT:
10/31/87 TO 7/31/95
$30,000
$28,000
$26,000
$24,000
$22,000
$20,000
$18,000
$16,000
$14,000
$12,000
$10,000
10/31/87
7/31/95
S&P 500
STRATEGIC
BALANCED FUND CLASS B: $24,277
LB GOV'T./CORP. BOND INDEX
This chart illustrates the total value of an assumed investment in Alliance
Strategic Balanced Fund Class B shares (since inception) with dividends and
capital gains reinvested. A contingent deferred sales charge (CDSC) is not
reflected in this illustration since the hypothetical investment exists for a
period beyond which a CDSC would be applicable. Class A shares are subject to a
maximum 4.25% front-end sales charge; Class C shares are not subject to
front-end sales charges or a CDSC. Performance for Class A and Class C 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 unmanaged Standard and 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.
Strategic Balanced Fund
S&P 500
LB Gov't./Corp. Bond Index
3
TEN LARGEST HOLDINGS
JULY 31, 1995 ALLIANCE STRATEGIC BALANCED FUND
- -------------------------------------------------------------------------------
PERCENT OF
COMPANY VALUE NET ASSETS
- -------------------------------------------------------------------------------
U.S. Treasury Notes $ 8,126,482 15.5%
ITT Corp. 2,688,000 5.1
Philip Morris Cos., Inc. 1,898,062 3.6
Eastman Kodak Co. 1,815,187 3.5
U.S. Treasury Bonds 1,652,335 3.2
Federal National Mortgage Association,
6.00%, 12/01/09 1,357,158 2.6
Ceridian Corp. 1,319,863 2.5
Warner Lambert Co. 1,302,000 2.5
Boeing Corp. 1,206,000 2.3
Monsanto Co. 1,192,000 2.3
$22,557,087 43.1%
MAJOR PORTFOLIO CHANGES
SIX MONTHS ENDED JULY 31, 1995
SHARES OR PRINCIPAL
PURCHASES BOUGHT HOLDINGS 7/31/95
- -------------------------------------------------------------------------------
Ceridian Corp. 31,900 31,900
Eastman Kodak Co. 31,500 31,500
Federal National Mortgage Association,
6.00%, 12/01/09 $1,421,000 $1,410,620
ITT Corp. 22,400 22,400
Philip Morris Cos., Inc. 26,500 26,500
Transatlantic Holdings, Inc. 18,000 18,000
Upjohn Co. 30,000 30,000
U.S. Treasury Note, 7.75%, 1/31/00 $5,000,000 $5,000,000
U.S. Treasury Note, 6.125%, 5/15/98 $2,000,000 $2,000,000
Warner Lambert Co. 15,500 15,500
SALES SOLD HOLDINGS 7/31/95
Anadarko Petroleum Corp. 16,200 -0-
General Instrument Corp. cv., 5.00%, 6/15/00 $ 720,000 -0-
Illinois Central Corp. 55,000 -0-
Mercury Finance Co. 51,000 -0-
Mylan Laboratories, Inc. 41,400 -0-
Nabisco Holdings Corp. Cl.A 40,000 -0-
Sensormatic Electronics Corp. 50,750 -0-
Thermo Instrument Systems, Inc. 31,800 -0-
U.S. Treasury Bond, 6.25%, 8/15/23 $7,450,000 $1,400,000
Wrigley Wm. Jr., Co. 16,900 -0-
4
PORTFOLIO OF INVESTMENTS
JULY 31, 1995 ALLIANCE STRATEGIC BALANCED FUND
- -------------------------------------------------------------------------------
COMPANY SHARES VALUE
- ----------------------------------------------------------------------
COMMON STOCKS-74.3%
TECHNOLOGY-21.4%
AEROSPACE & DEFENSE-2.7%
Boeing Co. 18,000 $1,206,000
Coltec Industries, Inc.* 15,000 228,750
1,434,750
COMPUTERS-5.5%
Bay Networks, Inc.* 25,000 1,121,875
Ceridian Corp.* 31,900 1,319,863
Compuware Corp.* 17,000 429,250
2,870,988
ELECTRONICS-1.5%
Applied Materials, Inc.* 5,000 517,500
National Semiconductor Corp.* 10,000 270,000
787,500
TELECOMMUNICATIONS-6.6%
AirTouch Communications, Inc.* 15,300 481,950
Cox Communications, Inc* 35,000 708,750
General Instrument Corp.* 12,000 442,500
Scientific-Atlanta, Inc.* 30,600 657,900
Tele-Communications, Inc. Cl.A* 15,000 375,000
Vodafone Group Plc (ADR)(a) 20,700 815,062
3,481,162
MISCELLANEOUS-5.1%
ITT Corp. 22,400 2,688,000
11,262,400
CONSUMER NONCYCLICALS-11.6%
DRUGS-7.4%
Glaxo Wellcome Plc (ADR)(a) 30,000 720,000
Lilly (Eli) & Co. 9,000 704,250
Upjohn Co. 30,000 1,155,000
Warner-Lambert Co. 15,500 1,302,000
3,881,250
HOSPITAL SUPPLIES & SERVICES-0.6%
AMSCO International Inc.* 15,000 $279,375
TOBACCO-3.6%
Philip Morris Cos., Inc. 26,500 1,898,062
6,058,687
BUSINESS SERVICES-9.9%
BROADCASTING-3.5%
Cablevision Systems Corp.* 16,500 1,132,312
Comcast Corp. Cl.A SPL 35,000 708,750
1,841,062
ENVIRONMENTAL CONTROL-2.1%
WMX Technologies, Inc 35,000 1,093,750
PAPER & FOREST PRODUCTS-1.5%
Champion International Corp. 14,000 789,250
PRINTING, PUBLISHING & BROADCASTING-2.8%
Clear Channel Communications, Inc.* 8,000 535,000
Infinity Broadcasting Corp. Cl.A* 25,000 925,000
1,460,000
5,184,062
CONSUMER CYCLICALS-9.5%
AUTOS & TRUCKS-0.5%
General Motors Corp. 6,000 255,000
LEISURE RELATED-6.8%
Cyrk International Inc.* 30,900 351,488
Eastman Kodak Co. 31,500 1,815,187
Gaylord Entertainment Co. Cl.A* 12,915 353,548
Loews Corp. 5,000 601,875
Time Warner, Inc. 10,000 428,750
3,550,848
5
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE STRATEGIC BALANCED FUND
- -------------------------------------------------------------------------------
COMPANY SHARES VALUE
- ----------------------------------------------------------------------
RETAIL - GENERAL-2.2%
Fingerhut Cos., Inc. 69,300 $1,160,775
4,966,623
BASIC MATERIALS-8.5%
CHEMICALS-6.4%
Hercules, Inc. 20,000 1,072,500
IMC Fertilizer Group, Inc. 18,000 1,084,500
Monsanto Co. 12,800 1,192,000
3,349,000
ENVIRONMENTAL CONTROL-2.1%
Wellman, Inc. 41,500 1,115,313
METALS & MINING-0.0%
Nord Resources Corp.* 812 2,639
4,466,952
CREDIT SENSITIVE-8.0%
INSURANCE-6.4%
Aetna Life & Casualty Co. 6,000 371,250
American International Group, Inc. 10,650 798,750
Life Re Corp. 30,000 536,250
TIG Holdings, Inc. 18,100 447,975
Transatlantic Holdings, Inc. 18,000 1,188,000
3,342,225
UTILITY - TELEPHONE-1.6%
Telephone and Data Systems, Inc. 21,800 844,750
4,186,975
ENERGY-3.5%
OIL & GAS-3.5%
Atlantic Richfield Co. 5,000 576,250
Louis Dreyfus Natural Gas Corp.* 12,200 164,700
Louisiana Land &
Exploration Co. 10,000 397,500
Occidental Petroleum Corp. 30,000 675,000
1,813,450
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- ----------------------------------------------------------------------
CAPITAL GOODS-1.2%
MACHINERY-1.2%
Trinity Industry, Inc. 11,000 $ 368,500
York International Corp. 5,500 253,688
622,188
COMMERCIAL SERVICES-0.7%
Ideon Group, Inc. 35,200 369,600
Total Common Stocks (cost $35,336,818) 38,930,937
LONG-TERM DEBT SECURITIES-24.0%
U.S. GOVERNMENT AND AGENCY OBLIGATIONS-21.3%
Federal National Mortgage Association
6.00%, 12/01/09 $1,411 1,357,158
U.S. Treasury Bonds
6.25%, 8/15/23 1,400 1,284,934
7.625%, 2/15/25 335 367,401
U.S. Treasury Notes
6.125%, 5/15/98 2,000 2,006,240
6.50%, 5/15/05 815 818,692
7.75%, 1/31/00 5,000 5,301,550
11,135,975
MISCELLANEOUS-2.7%
BCH Cayman Islands
8.25%, 6/15/04 450 467,397
Liberty Mutual Insurance Co.
8.50%, 5/15/25(b) 525 528,659
Republic of Italy
6.875%, 9/27/23 500 436,715
1,432,771
6
ALLIANCE STRATEGIC BALANCED FUND
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- ----------------------------------------------------------------------
Total Long-Term Debt Securities
(cost $12,291,581) $12,568,746
SHORT-TERM DEBT
SECURITIES-2.5%
Federal Home Loan Mortgage Corp.
5.75%, 8/01/95
(amortized cost $1,300,000) $1,300 1,300,000
VALUE
- ----------------------------------------------------------------------
TOTAL INVESTMENTS-100.8%
(cost $48,928,399) $52,799,683
Other assets less liabilities-(0.8%) (433,753)
NET ASSETS-100% $52,365,930
* Non-income producing security.
(a) Country of origin - United Kingdom.
(b) Security exempt from registration under Rule 144A of the Securities Act of
1933. This security may be resold in transactions exempt from registration,
normally to certain qualified institutional buyers. At July 31, 1995, this
security amounted to $528,659 representing 1.0% of net assets.
Glossary:
ADR - American Depository Receipt
See notes to financial statements.
7
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1995 ALLIANCE STRATEGIC BALANCED FUND
- -------------------------------------------------------------------------------
ASSETS
Investments in securities, at value (cost $48,928,399) $52,799,683
Cash 92,758
Receivable for shares of beneficial interest sold 515,449
Receivable for investment securities sold 370,648
Receivable due from adviser 50,370
Interest and dividends receivable 147,697
Deferred organization expenses 951
Total assets 53,977,556
LIABILITIES
Payable for investment securities purchased 1,010,660
Payable for shares of beneficial interest redeemed 410,779
Distribution fee payable 37,926
Accrued expenses 152,261
Total liabilities 1,611,626
NET ASSETS $52,365,930
COMPOSITION OF NET ASSETS
Shares of beneficial interest, at par $ 33
Additional paid-in capital 47,481,990
Undistributed net investment income 482,409
Accumulated net realized gain on investments 541,071
Net unrealized appreciation on investments and other assets 3,860,427
$52,365,930
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($10,952,356/609,269
shares of beneficial interest issued and outstanding) $17.98
Sales charge-4.25% of public offering price .80
Maximum offering price $18.78
CLASS B SHARES
Net asset value and offering price per share ($37,300,701/2,397,785
shares of beneficial interest issued and outstanding) $15.56
CLASS C SHARES
Net asset value, redemption and offering price per share($4,112,873/
264,193 shares of beneficial interest issued and outstanding) $15.57
See notes to financial statements.
8
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1995 ALLIANCE STRATEGIC BALANCED FUND
- -------------------------------------------------------------------------------
INVESTMENT INCOME
Interest $1,339,107
Dividends (net of foreign taxes withheld of $4,918) 517,597
$1,856,704
EXPENSES
Advisory fee 400,593
Distribution fee - Class A 29,183
Distribution fee - Class B 395,190
Distribution fee - Class C 41,658
Transfer agency 123,873
Custodian 81,778
Registration 65,206
Audit and legal 60,406
Trustees' fees 28,000
Printing 22,117
Amortization of organization expenses 7,300
Miscellaneous 9,670
Total expenses 1,264,974
Less: expenses waived and assumed by adviser
(see Note B) (211,406)
Net expenses 1,053,568
Net investment income 803,136
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments 1,585,794
Net change in unrealized appreciation of investments 3,225,074
Net gain on investments 4,810,868
NET INCREASE IN NET ASSETS FROM OPERATIONS $5,614,004
See notes to financial statements.
9
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE STRATEGIC BALANCED FUND
- -------------------------------------------------------------------------------
YEAR ENDED MAY 1, 1994 YEAR ENDED
JULY 31, TO JULY 31, APRIL 30,
1995 1994* 1994
------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment income $ 803,136 $ 151,149 $ 509,064
Net realized gain (loss) on
investments 1,585,794 (279,249) 1,846,056
Net change in unrealized appreciation
of investments 3,225,074 (677,270) (1,190,672)
Net increase (decrease) in net assets
from operations 5,614,004 (805,370) 1,164,448
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Class A (128,387) -0- (104,771)
Class B (351,616) -0- (329,947)
Class C (36,666) -0- (5,749)
Net realized gain on investments
Class A (20,950) -0- (507,212)
Class B (105,192) -0- (2,851,133)
Class C (10,969) -0- (47,095)
TRANSACTIONS IN SHARES OF BENEFICIAL
INTEREST
Net increase (decrease) (10,129,045) 612,180 15,616,965
Total increase (decrease) (5,168,821) (193,190) 12,935,506
NET ASSETS
Beginning of period 57,534,751 57,727,941 44,792,435
End of period (including undistributed
net investment income of $482,409,
$159,778 and $8,629, respectively) $52,365,930 $57,534,751 $57,727,941
* The Fund changed its fiscal year end from April 30 to July 31.
See notes to financial statements.
10
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1995 ALLIANCE STRATEGIC BALANCED FUND
- -------------------------------------------------------------------------------
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Strategic Balanced Fund, formerly Alliance Balanced Fund (the "Fund"),
a series of The Alliance Portfolios (the "Trust"), is registered under the
Investment Company Act of 1940, as a diversified, open-end investment company.
Prior to August 2, 1993, the Trust was known as The Equitable Funds, and the
Fund was known as The Equitable Balanced Fund. Class A shares are sold with a
front-end sales charge of up to 4.25%. Class B shares are sold with a
contingent deferred sales charge which declines from 4% to zero depending on
the period of time the shares are held. Shares purchased before August 2, 1993
and redeemed within six years of purchase are subject to different rates than
shares purchased after that date. Class C shares are sold without an initial or
contingent deferred sales charge. The shares also bear different distribution
fees. All three classes of shares have identical voting, dividend, liquidation
and other rights with respect to its distribution plan. The following is a
summary of significant accounting policies followed by the Fund.
1. SECURITY VALUATION
Portfolio securities traded on national securities exchanges are valued at the
last sales price or, if no sale occurred, at the mean of the bid and asked
price at the regular close of the New York Stock Exchange. Securities traded
on the over-the-counter market are valued at the mean of the closing bid and
asked price. Securities for which current market quotations are not readily
available (including investments which are subject to limitations as to their
sale) are valued at their fair value as determined in good faith by the Board
of Trustees. The Board of Trustees has further determined that the value of
certain portfolio debt securities, other than temporary investments in short
term securities, be determined by reference to valuations obtained from a
pricing service. Restricted securities are valued at fair value as determined
by the Board of Trustees. Securities which mature in 60 days or less are valued
at amortized cost, which approximates market value. The ability of issuers of
debt securities held by the Fund to meet their obligations may be affected by
economic developments in a specific industry or region.
2. ORGANIZATION EXPENSES
Organization expenses of approximately $30,000 have been deferred and are being
amortized on a straight-line basis through September, 1995.
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 applicable, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
4. INVESTMENT INCOME AND SECURITY TRANSACTIONS
Dividend income is recorded on the ex-dividend date. Interest income is
accrued daily. Security transactions are accounted for on the date securities
are purchased or sold. Security gains and losses are determined on the
identified cost basis. The Fund accretes discounts and amortizes premiums as
adjustments to interest income.
5. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date. Income dividends and capital gain distributions are determined in
accordance with income tax regulations, which may differ from generally
accepted accounting principles.
6. 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 shares of such class, except that the Funds'
Class B and Class C shares bear higher distribution and transfer agent fees.
Expenses attributable to the Fund are charged to the Fund. Expenses of the
Trust are charged to the Fund in proportion to net assets.
11
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE STRATEGIC BALANCED FUND
- -------------------------------------------------------------------------------
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Prior to July 22, 1993, Equitable Capital Management Corporation (Equitable
Capital) served as the investment adviser to the Trust. On July 22, 1993,
Alliance Capital Management, L.P. (Alliance) acquired the business and
substantially all of the assets of Equitable Capital and became the investment
adviser to the Trust.
Under the terms of an investment advisory agreement, the Fund pays Alliance an
advisory fee at an annual rate of .75% of the Fund's average daily net assets.
Under the old agreement the fee charge was the same. Such fee is accrued daily
and paid monthly. The Investment Adviser has agreed, under the terms of the
investment advisory agreement, to voluntarily waive its fees and bear certain
expenses so that total expenses do not exceed on an annual basis 1.40%, 2.10%
and 2.10% of average net assets, respectively, for the Class A, Class B and
Class C shares. Prior to August 2, 1993, the annual expense cap for Class B
Shares was 2.15%. For the year ended July 31, 1995, such reimbursement amounted
to $211,406. In addition to these voluntary arrangements, the Investment
Adviser will reduce its compensation, to the extent that expenses of the Fund
for any fiscal year (not including any distribution expenses paid by the Fund)
exceed the lowest applicable expense limitation prescribed by any state in
which the Fund's shares are qualified for sale. The Fund believes that the most
restrictive expense ratio limitation imposed by any state in which the Fund has
qualified its shares for sale is 2.5% of the first $30 million of the Fund's
average daily net assets, 2% of the next $70 million of its average daily net
assets and 1.5% of its average daily net assets in excess of $100 million.
The Fund has a Services Agreement with Alliance Fund Services, Inc. (a
wholly-owned subsidiary of the Adviser) to provide personnel and facilities to
perform transfer agency services for the Fund. Compensation under this
agreement amounted to $89,368 for the year ended July 31, 1995.
Alliance Fund Distributors, Inc. (a wholly owned subsidiary of the Adviser)
serves as the Distributor of the Fund's shares. The Distributor received
front-end sales charges of $1,814 from the sale of Class A shares and $85,826
in contingent deferred sales charges imposed upon redemptions by shareholders
of Class B shares for the year ended July 31, 1995.
Brokerage commissions paid on securities transactions for the year ended July
31, 1995 amounted to $196,452, of which $240 was paid to brokers utilizing the
services of the Pershing Division of Donaldson, Lufkin & Jenrette Securities
Corp. ("DLJ"), an affiliate of the Adviser.
Accrued expenses includes amounts owed to two of the Trustees under a deferred
compensation plan, of $37,972.
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 .50% of the Fund's average daily net assets attributable to Class
A shares and 1% of the average daily net assets attributable to both Class B
and Class C shares. The Trustees currently limit payments under the Class A
plan to .30% of the Fund's average daily net assets attributable to Class A
shares. Prior to August 2, 1993, Equico Securities served as the distributor of
the Fund. The Fund paid a distribution fee to the distributor of .25% of the
Funds average daily net assets attributed to Class A shares. The Agreement
provides that the Distributor will use such payments in their entirety for
distribution assistance and promotional activities. The Distributor has
incurred expenses in excess of the distribution costs reimbursed by the Fund in
the amount of $759,314 and $219,442 for Class B and C shares, respectively;
such costs may be recovered from the Fund in future periods so 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.
12
ALLIANCE STRATEGIC BALANCED FUND
- -------------------------------------------------------------------------------
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments)
aggregated $76,930,163 and $75,103,749, respectively, for the year ended July
31, 1995. There were purchases of $18,087,684 and sales of $15,054,315 of U.S.
Government and government agency obligations for the year ended July 31, 1995.
At July 31, 1995, the cost of securities for federal income tax purposes was
the same as the cost for financial reporting purposes. Accordingly, gross
unrealized appreciation of investments was $4,429,309 and gross unrealized
depreciation of investments was $558,025 resulting in net unrealized
appreciation of $3,871,284.
The Fund fully utilized its capital loss carryover of $765,373 to offset gain
realized during the year ended July 31, 1995.
NOTE E: SHARES OF BENEFICIAL INTEREST
There is an unlimited number of $0.00001 par value shares of beneficial
interest authorized divided into three classes, designated Class A, Class B and
Class C shares. Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
SHARES AMOUNT
----------------------------------------- ----------------------------------------
MAY 1, 1994 MAY 1, 1994
YEAR ENDED TO YEAR ENDED YEAR ENDED TO YEAR ENDED
JULY 31, JULY 31, APRIL 30, JULY 31, JULY 31, APRIL 30,
1995 1994** 1994 1995 1994** 1994
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Shares sold 215,830 49,331 276,843 $ 3,566,155 $ 798,528 $ 4,797,182
Shares issued in reinvestment of
dividends and distributions 8,938 -0- 34,373 138,715 -0- 589,070
Shares redeemed (208,409) (53,073) (223,556) (3,417,256) (861,885) (3,785,573)
Net increase (decrease) 16,359 (3,742) 87,660 $ 287,614 $ (63,357) $ 1,600,679
CLASS B
Shares sold 323,750 185,371 916,638 $ 4,608,223 $ 2,621,004 $13,826,031
Shares issued in reinvestment of
dividends and distributions 30,603 -0- 202,615 412,834 -0- 3,027,444
Shares redeemed (1,047,251) (144,019) (493,204) (14,853,928) (2,029,917) (7,402,027)
Net increase (decrease) (692,898) 41,352 626,049 $(9,832,871) $ 591,087 $ 9,451,448
</TABLE>
<TABLE>
<CAPTION>
SHARES AMOUNT
------------------------------------------ -----------------------------------------
MAY 1, 1994 AUGUST 2, MAY 1, 1994 AUGUST 2,
YEAR ENDED TO 1993* YEAR ENDED TO 1993*
JULY 31, JULY 31, TO JULY 31, JULY 31, TO
1995 1994** APRIL 30,1994 1995 1994** APRIL 30,1994
------------- ------------ ------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
CLASS C
Shares sold 88,024 42,010 357,421 $1,241,321 $594,022 $5,401,615
Shares issued in reinvestment of
dividends and distributions 3,015 -0- 2,365 40,701 -0- 35,078
Shares redeemed (132,830) (35,791) (60,021) (1,865,810) (509,572) (871,855)
Net increase (decrease) (41,791) 6,219 299,765 $(583,788) $84,450 $4,564,838
</TABLE>
* Commencement of distribution.
** The Fund changed its fiscal year end from April 30 to July 31.
13
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE STRATEGIC BALANCED FUND
- -------------------------------------------------------------------------------
NOTE F: RECLASSIFICATION OF COMPONENTS OF NET ASSETS
In accordance with Statement of Position 93-2 Determination, Disclosure, and
Financial Statement Presentation of Income, Capital Gain, and Return of Capital
Distributions by Investment Companies, permanent book and tax differences,
relating to shareholder distributions have been reclassified to additional
paid-in capital. As of July 31, 1995, the cumulative effect of such differences
totaling $36,164 was reclassified from undistributed net investment income to
additional paid in capital. Net investment income, net realized gains and net
assets were not affected by this change.
14
FINANCIAL HIGHLIGHTS ALLIANCE STRATEGIC BALANCED FUND
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------------
MAY 1,1994
YEAR ENDED TO YEAR ENDED APRIL 30,
JULY 31, JULY 31, ------------------------------------------
1995 1994** 1994 1993 1992 1991(A)
----------- ---------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $16.26 $16.46 $16.97 $17.06 $14.48 $12.51
INCOME FROM INVESTMENT OPERATIONS
Net investment income * .34 .07 .16 .39 .27 .34
Net realized and unrealized gain (loss)
on investments 1.64 (.27) .74 .59 2.80 1.66
Net increase (decrease) in net asset
value from operations 1.98 (.20) .90 .98 3.07 2.00
LESS: DISTRIBUTIONS
Dividends from net investment income (.22) -0- (.24) (.42) (.17) (.03)
Distributions from net realized gains (.04) -0- (1.17) (.65) (.32) -0-
Total dividends and distributions (.26) -0- (1.41) (1.07) (.49) (.03)
Net asset value, end of period $17.98 $16.26 $16.46 $16.97 $17.06 $14.48
TOTAL RETURN
Total investment return based on
net asset value (b) 12.40% (1.22)% 5.06% 5.85% 20.96% 16.00%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period(000's omitted) $10,952 $9,640 $9,822 $8,637 $6,843 $443
Ratios to average net assets of:
Expenses, net of waivers/
reimbursements 1.40% 1.40%(c) 1.40% 1.40% 1.40% 1.40%(c)
Expenses, before waivers/
reimbursements 1.81% 1.94%(c) 1.70% 1.85% 2.05% 11.59%(c)
Net investment income 2.07% 1.63%(c) 1.67% 2.29% 1.92% 3.54%(c)
Portfolio turnover rate 172% 21% 139% 98% 103% 137%
</TABLE>
See footnote summary on page 17.
15
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE STRATEGIC BALANCED FUND
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
CLASS B
--------------------------------------------------------------
MAY 1, 1994
YEAR ENDED TO YEAR ENDED APRIL 30,
JULY 31, JULY 31, --------------------------------------
1995 1994** 1994 1993 1992 1991
---------- ----------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $14.10 $14.30 $14.92 $15.51 $13.96 $12.40
INCOME FROM INVESTMENT OPERATIONS
Net investment income * .22 .03 .06 .23 .22 .43
Net realized and unrealized gain (loss)
on investments 1.40 (.23) .63 .53 2.70 1.60
Net increase (decrease) in net asset
value from operations 1.62 (.20) .69 .76 2.92 2.03
LESS: DISTRIBUTIONS
Dividends from net investment income (.12) -0- (.14) (.25) (.29) (.47)
Distributions from net realized gains (.04) -0- (1.17) (1.10) (1.08) -0-
Total dividends and distributions (.16) -0- (1.31) (1.35) (1.37) (.47)
Net asset value, end of period $15.56 $14.10 $14.30 $14.92 $15.51 $13.96
TOTAL RETURN
Total investment return based on
net asset value (b) 11.63% (1.40)% 4.29% 4.96% 20.14% 16.73%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period(000's omitted) $37,301 $43,578 $43,616 $36,155 $31,842 $22,552
Ratios to average net assets of:
Expenses, net of waivers/
reimbursements 2.10% 2.10%(c) 2.10% 2.15% 2.15% 2.10%
Expenses, before waivers/
reimbursements 2.49% 2.64%(c) 2.42% 2.56% 2.70% 2.93%
Net investment income 1.38% .92%(c) .93% 1.55% 1.34% 3.23%
Portfolio turnover rate 172% 21% 139% 98% 103% 137%
</TABLE>
See footnote summary on page 17.
16
ALLIANCE STRATEGIC BALANCED FUND
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
CLASS C
-----------------------------------
MAY 1,1994 AUGUST 2,
YEAR ENDED TO 1993(D)
JULY 31, JULY 31, TO
1995 1994** APRIL 30,1994
--------- --------- -------------
Net asset value, beginning of period $14.11 $14.31 $15.64
INCOME FROM INVESTMENT OPERATIONS
Net investment income * .16 .03 .15
Net realized and unrealized loss
on investments 1.46 (.23) (.17)
Net increase (decrease) in net asset
value from operations 1.62 (.20) (.02)
LESS: DISTRIBUTIONS
Dividends from net investment income (.12) -0- (.14)
Distributions from net realized gains (.04) -0- (1.17)
Total dividends and distributions (.16) -0- (1.31)
Net asset value, end of period $15.57 $14.11 $14.31
TOTAL RETURN
Total investment return based on
net asset value (b) 11.62% (1.40)% .45%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $4,113 $4,317 $4,289
Ratios to average net assets of:
Expenses, net of waivers/
reimbursements 2.10% 2.10%(c) 2.10%(c)
Expenses, before waivers/
reimbursements 2.50% 2.64%(c) 2.07%(c)
Net investment income 1.38% .93%(c) .69%(c)
Portfolio turnover rate 172% 21% 139%
* Net of fee waived and expenses reimbursed by the Adviser.
** The Fund changed its fiscal year end from April 30 to July 31.
(a) For the period September 4, 1990 (commencement of operations) to April 30,
1991.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales charges or contingent
deferred sales charges is not reflected in the calculation of total investment
return. Total investment return calculated for a period of less than one year
is not annualized.
(c) Annualized.
(d) Commencement of distribution.
Prior to July 22, 1993, Equitable Capital Management Corporation (Equitable
Capital) served as investment adviser to the Trust. On July 22, 1993, Alliance
Capital Management L.P. acquired the business and substantially all of the
assets of Equitable Capital and became investment adviser for the Trust.
17
REPORT OF INDEPENDENT ACCOUNTANTS ALLIANCE STRATEGIC BALANCED FUND
- -------------------------------------------------------------------------------
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF ALLIANCE STRATEGIC BALANCED FUND
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, 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 Strategic Balanced Fund
(one of the portfolios of The Alliance Portfolios, hereafter referred to as the
"Fund") at July 31, 1995, the results of its operations for the year then
ended, the changes in its net assets for the year then ended, for the period
May 1, 1994 to July 31, 1994, and for the year ended April 30, 1994, 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 mangement, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at July 31, 1995 by
correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
September 27, 1995
18
ALLIANCE STRATEGIC BALANCED FUND
BOARD OF TRUSTEES
JOHN D. CARIFA, CHAIRMAN AND PRESIDENT
ALBERTA B. ARTHURS (1)
RUTH BLOCK (1)
RICHARD W. COUPER (1)
BRENTON W. HARRIES (1)
DONALD J. ROBINSON (1)
OFFICERS
BRUCE CALVERT, VICE PRESIDENT
KATHLEEN A. CORBET, VICE PRESIDENT
FRANKLIN KENNEDY III, VICE PRESIDENT
WAYNE D. LYSKI, VICE PRESIDENT
BARBARA J. KRUMSIEK, VICE PRESIDENT - MARKETING
EDMUND P. BERGAN, JR., CLERK
MARK D. GERSTEN, TREASURER & CHIEF FINANCIAL OFFICER
PATRICK J. FARRELL, CONTROLLER & CHIEF ACCOUNTING OFFICER
CUSTODIAN
STATE STREET BANK & TRUST COMPANY
225 Franklin Street
Boston, MA 02110
PRINCIPAL UNDERWRITER
ALLIANCE FUND DISTRIBUTORS, INC.
1345 Avenue of the Americas
New York, NY 10105
LEGAL COUNSEL
ROPES & GRAY
One International Place
Boston, MA 02110-2624
TRANSFER AGENT
ALLIANCE FUND SERVICES, INC.
P.O. Box 1520
Secaucus, NJ 07096-1520
Toll-Free 1-(800) 221-5672
INDEPENDENT ACCOUNTANTS
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, NY 10036-2798
(1) Member of the Audit Committee.
19
ALLIANCE STRATEGIC BALANCED FUND
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
ALLIANCECAPITAL
MUTUAL FUNDS WITHOUT THE MYSTERY.SM
THIS REPORT IS DISTRIBUTED SOLELY TO SHAREHOLDERS OF THE FUND
AND IS NOT TO BE USED AS SALES LITERATURE.
R THESE REGISTERED SERVICE MARKS USED UNDER LICENSE FROM THE OWNER,
ALLIANCE CAPITAL MANAGEMENT L.P.
ASBAR
