ALLIANCE STRATEGIC BALANCED FUND
ANNUAL REPORT
JULY 31, 1998
ALLIANCE CAPITAL
LETTER TO SHAREHOLDERS ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
September 25, 1998
Dear Shareholder:
This annual report provides the performance of Alliance Strategic Balanced Fund
for the period ended July 31, 1998. The following table also shows performance
data for the Standard & Poor's 500 Stock Index (S&P 500) and the Lehman
Brothers Government/Corporate Bond Index for the six- and 12-month periods
ended July 31, 1998.
INVESTMENT RESULTS
Alliance Strategic Balanced Fund Class A shares posted a 10.50% return at net
asset value during the 12- month period ending July 31, 1998. Your Fund
outperformed the Lehman Brothers Government/Corporate Bond Index return of
8.06%, but underperformed the S&P 500 gain of 19.31% for the 12-month period.
The performance of your Fund reflects the mix between bonds and equities in the
portfolio.
INVESTMENT RESULTS*
Periods Ended July 31, 1998
TOTAL RETURNS
6 MONTHS 12 MONTHS
-------- ---------
ALLIANCE STRATEGIC BALANCED FUND
Class A 10.20% 10.50%
Class B 9.80% 9.78%
Class C 9.80% 9.78%
S&P 500 STOCK INDEX 15.20% 19.31%
LEHMAN BROTHERS GOVERNMENT/
CORPORATE BOND INDEX 2.81% 8.06%
* THE FUND'S INVESTMENT RESULTS REPRESENT TOTAL RETURNS AND ARE BASED ON THE
NET ASSET VALUE AS OF JULY 31, 1998. ALL FEES AND EXPENSES RELATED TO THE
OPERATION OF THE FUND HAVE BEEN DEDUCTED, BUT NO ADJUSTMENT HAS BEEN MADE FOR
SALES CHARGES THAT MAY APPLY WHEN SHARES ARE PURCHASED OR REDEEMED. RETURNS FOR
THE FUND INCLUDE THE REINVESTMENT OF ANY DISTRIBUTIONS PAID DURING THE PERIOD.
TOTAL RETURNS FOR ADVISOR CLASS SHARES WILL DIFFER DUE TO DIFFERENT EXPENSES
ASSOCIATED WITH THAT CLASS. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
THE S&P 500 STOCK INDEX IS AN UNMANAGED INDEX OF 500 U.S. COMPANIES, AND
IS A COMMON MEASURE OF THE PERFORMANCE OF THE OVERALL U.S. STOCK MARKET. THE
LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/ CORPORATE BOND INDEX IS A BROAD
MEASURE OF THE PERFORMANCE OF INTERMEDIATE (ONE TO 10 YEAR) GOVERNMENT AND
CORPORATE FIXED-RATE DEBT ISSUES. AN INVESTOR CANNOT INVEST DIRECTLY IN AN
INDEX.
ADDITIONAL INVESTMENT RESULTS APPEAR ON PAGE 3.
MARKET REVIEW
The reporting period covers a year of extreme volatility in financial markets.
Through the disorder two trends can be clearly seen: (1) a lowering of
expectations for global growth and inflation manifested in a decline in
developed world bond yields to post-WW II lows and, (2) a dramatic repricing of
risk as emerging market bonds and equities collapsed.
ECONOMIC COMMENTARY
In the report for the six months ended January 31, 1998, we warned of growing
risks in the global environment, highlighting increasing financial stability in
the developing world and drawing attention to the increased reliance on the
U.S. consumer to sustain world economic growth.
Although U.S. demand has so far served to prolong the global expansion, the
time gained has not been effectively utilized to stabilize the Asian situation.
Indeed, smaller Asian economies are contracting at rates not seen since the
Latin American crisis of the early 1980s, and the crisis in the Japanese
financial system continues to deepen. To this is now added a marked
deterioration in the financial and economic performance of commodity producing
countries, and the collapse of Latin American stock markets.
CURRENT REVIEW
Recent volatility in the global markets resulted in sharply negative
performance for most equity funds during the month of August, and your Fund's
Class A shares returned a negative 7.24% during that period, partially
offsetting the Fund's July 31, calendar year-to-date return of 11.64%. As of
September 23, the Fund's calendar year-to-date return was 7.57%. However, this
downturn does not change our basic outlook. We believe that your Fund is
correctly positioned, and that it should perform
1
ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
well over the coming periods. While most world equity markets fell sharply in
August, government bonds rose in price. Over the long term, U.S. equities have
outperformed lower-risk assets, and periods of extreme volatility of this
nature have proved to be short-lived. Alliance Strategic Balanced Fund holds
bonds in its portfolio mix precisely to provide stability during such periods.
PROPOSED ACQUISITION OF FUND
As you have been previously notified, the Trustees of the Alliance Portfolios
have approved the acquisition of your Fund's net assets by Alliance Balanced
Shares, Inc., another Alliance mutual fund with investment policies very
similar to those of your Fund and significantly better performance in recent
years.
The Trustees have called a meeting of shareholders of the Fund to be held on
October 12, 1998, for the purpose of voting on the proposed acquisition.
Shareholders of record on August 14, 1998 should already have received proxy
materials describing the proposed acquisition. If you have not yet received
these materials, or would like another copy, please call Alliance Fund Services
at 1 800 221 5672, Monday through Friday between 8:30 AM and 8:00 PM. If you
are unable to attend the shareholder meeting, and have not already done so,
please complete and return promptly the proxy card enclosed with the materials
in order to spare additional proxy solicitation expenses.
Thank you once again for your participation in Alliance Strategic Balanced Fund.
Sincerely,
John D. Carifa
Chairman and President
Nicholas D. Carn
Vice President
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, GUARANTEED OR ENDORSED
BY, ANY BANK; FURTHER, SUCH SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
2
INVESTMENT OBJECTIVE AND POLICIES ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
Alliance Strategic Balanced Fund seeks a high long-term total return by
investing in a combination of equity and debt securities. It invests
principally in a diversified portfolio of dividend-paying common stocks and
fixed-income securities, and also in equity-type securities such as warrants,
preferred stocks and convertible debt instruments.
INVESTMENT RESULTS
NAV AND SEC AVERAGE ANNUAL TOTAL RETURNS AS OF JULY 31, 1998
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 10.50% 5.80%
Five Years 10.54% 9.59%
Since Inception* 12.91% 12.29%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 9.78% 5.86%
Five Years 9.79% 9.79%
Ten Years 11.72% 11.72%
CLASS C SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 9.78% 8.80%
Since Inception* 9.69% 9.69%
SEC AVERAGE ANNUAL TOTAL RETURNS AS OF THE MOST RECENT QUARTER-END
(JUNE 30, 1998)
CLASS A CLASS B CLASS C
1 Year 11.52% 11.57% 14.57%
5 Years 9.94% 10.13% 9.81%**
10 Years 12.40%** 11.59% n/a
The Fund's investment results represent average annual total returns. The NAV
and SEC returns reflect reinvestment of dividends and/or capital gains
distributions in additional shares without (NAV) and with (SEC) the effect of
the 4.25% maximum front-end sales charge for Class A or applicable contingent
deferred sales charge for Class B (4% year 1, 3% year 2, 2% year 3, 1% year 4);
and for Class C shares (1% year 1). Returns for Class A shares do not reflect
the imposition of the 1 year 1% contingent deferred sales charge for accounts
over $1,000,000. Total return for Advisor Class shares will differ due to
different expenses associated with that class.
Past performance does not guarantee future results. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
* Inception: 9/4/90 Class A; 8/2/93 Class C.
** Since Inception
n/a: not applicable.
3
ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
ALLIANCE STRATEGIC BALANCED FUND
GROWTH OF A $10,000 INVESTMENT
9/30/90* TO 7/31/98
$45,000
$39,000
$33,000
$27,000
$21,000
$15,000
$10,000
$ 9,000
S&P 500: $44,772
STRATEGIC BALANCED FUND CLASS A: $25,484
LEHMAN BROTHERS GOV'T/CORP. BOND INDEX: $19,750
9/30/90 7/31/91 7/31/92 7/31/93 7/31/94 7/31/95 7/31/96 7/31/97 7/31/98
This chart illustrates the total value of an assumed $10,000 investment in
Alliance Strategic Balanced Fund Class A shares (from 9/30/90 to 7/31/98) as
compared to the performance of an appropriate broad-based index. The chart
reflects the deduction of the maximum 4.25% sales charge from the initial
$10,000 investment in the Fund and assumes the reinvestment of dividends and
capital gains. Performance for Class B, Class C and Advisor Class shares will
vary from the results shown above due to differences in expenses charged to
those classes. Past performance is not indicative of future results, and is not
representative of future gain or loss in capital value or dividend income.
The 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 Lehman Government Bond Index and the Lehman Corporate Bond
Index.
When comparing Alliance Strategic Balanced Fund to the indices shown above, you
should note that no charges or expenses are reflected in the performance of the
indices.
Strategic Balanced Fund
Standard & Poor's 500 Stock Index
Lehman Brothers Gov't/Corp. Bond Index
* Closest month-end after Fund's Class A share inception date of 9/4/90.
4
TEN LARGEST HOLDINGS
JULY 31, 1998 ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
PERCENT OF
COMPANY VALUE NET ASSETS
- -------------------------------------------------------------------------------
U.S. Treasury Notes $ 7,724,919 14.5%
Federal National Mortgage Association 4,128,527 7.8
U.S. Treasury Bond, 6.125%, 11/15/27 3,070,672 5.8
Government National Mortgage Association 2,000,833 3.8
Chase Manhattan Corp. (common stock
and bond) 1,301,417 2.4
Bristol-Myers Squibb Co. 911,500 1.7
St. George Bank, Ltd., 7.15%, 10/15/05 879,231 1.7
Harley-Davidson, Inc. 871,750 1.6
Federal Home Loan Bank, 7.00%, 9/01/11 792,862 1.5
Tele-Communications, Inc.--
Liberty Media Group Cl.A 788,750 1.5
$22,470,461 42.3%
MAJOR PORTFOLIO CHANGES
SIX MONTHS ENDED JULY 31, 1998
SHARES OR PRINCIPAL*
- -------------------------------------------------------------------------------
HOLDINGS
PURCHASES BOUGHT 7/31/98
- -------------------------------------------------------------------------------
BankAmerica Corp. 7,000 7,000
Bristol-Myers Squibb Co. 8,000 8,000
Chase Manhattan Corp., 6.75%, 8/15/08 $530,000 $530,000
Computer Associates International, Inc.,
6.375%, 4/15/05 $650,000 $650,000
Federal National Mortgage Association,
7.00%, 12/01/27 $1,022,000 $1,022,000
Government National Mortgage Association,
7.00%, 2/15/28 $1,086,000 $1,086,000
Government National Mortgage Association,
7.50%, 6/15/27 $597,000 $597,000
Home Depot, Inc. 16,000 16,000
U.S. Treasury Bond, 6.125%, 11/15/27 $610,000 $2,905,000
U.S. Treasury Note, 6.875%, 5/15/06 $695,000 $775,000
- -------------------------------------------------------------------------------
HOLDINGS
SALES SOLD 7/31/98
- -------------------------------------------------------------------------------
BJ Services Co. 8,000 -0-
Caliber Systems, Inc., 7.80%, 8/01/06 $800,000 -0-
Government National Mortgage Association,
7.00%, 1/21/28 $1,100,000 -0-
PMI Group, Inc. 6,900 -0-
Railcar Leasing LLC, 7.125%, 1/15/13 $625,000 -0-
Schering-Plough Corp. 12,000 -0-
U.S. Treasury Note, 6.00%, 8/15/00 $1,125,000 -0-
U.S. Treasury Note, 6.375%, 5/15/99 $800,000 $3,200,000
U.S. Treasury Note, 6.50%, 5/31/02 $700,000 $410,000
WorldCom, Inc. 10,000 10,000
* Adjusted for stock splits.
5
INDUSTRY DIVERSIFICATION
JULY 31, 1998 ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
- -------------------------------------------------------------------------------
PERCENT OF
U.S. $ VALUE NET ASSETS
- -------------------------------------------------------------------------------
Capital Goods $479,063 0.9%
Consumer Manufacturing 442,347 0.8
Consumer Services 5,571,763 10.5
Consumer Staples 2,889,882 5.5
Energy 1,279,391 2.4
Finance 5,296,491 10.0
Health Care 2,814,499 5.3
Multi Industry 815,000 1.5
Technology 3,200,748 6.0
Utilities 965,952 1.8
U.S. Government & Agencies 17,717,813 33.3
Corporate Debt Obligations 2,300,864 4.3
Yankee Bond 879,231 1.7
Total Investments* 44,653,044 84.0
Cash and receivables, net of
liabilities 8,529,612 16.0
Net Assets $53,182,656 100.0%
* Excludes short-term obligations.
6
PORTFOLIO OF INVESTMENTS
JULY 31, 1998 ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
COMMON & PREFERRED STOCKS-44.6%
UNITED STATES INVESTMENTS-33.8%
FINANCE-8.3%
BANKING-MONEY CENTER-2.6%
BankAmerica Corp. 7,000 $ 628,250
Chase Manhattan Corp. 10,000 756,250
------------
1,384,500
BROKERAGE & MONEY MANAGEMENT-2.2%
Merrill Lynch & Co., Inc. 7,600 741,000
Morgan Stanley, Dean Witter & Co. 5,000 435,313
------------
1,176,313
INSURANCE-2.3%
American International Group, Inc. 4,500 678,656
Travelers Group, Inc. 8,000 536,067
------------
1,214,723
MISCELLANEOUS-1.2%
MBNA Corp. 20,000 670,000
------------
4,445,536
CONSUMER SERVICES-8.3%
BROADCASTING & CABLE-3.2%
Cox Communications, Inc. Cl.A (a) 9,000 439,875
Scripps E.W. Co. Cl.A 9,000 473,625
Tele-Communications, Inc. -
Liberty Media Group Cl.A (a) 20,000 788,750
------------
1,702,250
ENTERTAINMENT & LEISURE-2.6%
Harley-Davidson, Inc. 22,000 871,750
Walt Disney Co. 15,000 516,562
------------
1,388,312
RETAIL-GENERAL MERCHANDISE-2.5%
Dayton Hudson Corp. 14,000 669,375
Home Depot, Inc. 16,000 670,000
------------
1,339,375
------------
4,429,937
TECHNOLOGY-4.6%
COMMUNICATION EQUIPMENT-0.6%
Tellabs, Inc. (a) 4,000 301,125
COMPUTER HARDWARE-0.9%
Compaq Computer Corp. 15,000 493,125
COMPUTER SOFTWARE-0.6%
Microsoft Corp. (a) 3,000 329,812
NETWORKING SOFTWARE-1.2%
Cisco Systems, Inc. (a) 7,000 670,250
SEMI-CONDUCTOR COMPONENTS-1.3%
Altera Corp. (a) 7,000 255,281
Intel Corp. 5,000 422,188
------------
677,469
------------
2,471,781
CONSUMER STAPLES-4.0%
COSMETICS-1.4%
Gillette Co. 8,200 429,475
The Estee Lauder Co., Inc. Cl.A 5,000 321,250
------------
750,725
RETAIL-FOOD & DRUG-1.3%
Kroger Co. (a) 15,000 709,687
7
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
TOBACCO-1.3%
Philip Morris Cos., Inc. 15,000 $ 657,188
------------
2,117,600
HEALTH CARE-3.7%
DRUGS-3.1%
Bristol-Myers Squibb Co. 8,000 911,500
Merck & Co., Inc. 6,000 739,875
------------
1,651,375
MEDICAL PRODUCTS-0.6%
Medtronic, Inc. 5,000 309,687
------------
1,961,062
ENERGY-1.9%
DOMESTIC PRODUCERS-0.3%
Apache Corp. 6,000 159,000
OIL SERVICES-1.6%
Halliburton Co. 10,000 363,125
Noble Drilling Corp. (a) 25,000 471,875
------------
835,000
------------
994,000
MULTI INDUSTRY COMPANIES-1.1%
Tyco International, Ltd. 6,000 371,625
U.S. Industries, Inc. 10,000 192,500
------------
564,125
UTILITIES-1.0%
TELEPHONE UTILITY-1.0%
WorldCom, Inc. 10,000 528,750
CAPITAL GOODS-0.9%
MISCELLANEOUS-0.9%
United Technologies Corp. 5,000 479,063
Total United States Investments
(cost $12,950,782) 17,991,854
FOREIGN INVESTMENTS-10.8%
BRAZIL-0.5%
Telebras, SA (ADR) 2,000 242,125
DENMARK-0.4%
Ratin A/S Series B 1,200 229,004
FINLAND-1.6%
Nokia AB OY Corp. Series A 7,000 614,875
Orion-Yhtymae OY Cl.B 7,000 214,883
------------
829,758
FRANCE-0.9%
Seita 4,000 180,303
Total, SA Cl.B 2,500 285,391
------------
465,694
GERMANY-0.6%
Adidas AG 900 130,530
ProSieben Media AG pfd. 4,000 213,615
------------
344,145
HONG KONG-0.2%
Hutchison Whampoa, Ltd. 20,000 96,019
JAPAN-0.6%
Canon, Inc. 5,000 114,092
Honda Motor Co. 6,000 223,621
------------
337,713
NETHERLANDS-2.5%
Akzo Nobel NV 8,000 407,608
ING NV 6,000 453,773
Wolters Kluwer NV 3,000 450,183
------------
1,311,564
SPAIN-0.7%
Tabacalera, SA Series A 8,000 176,548
Telefonica, SA 4,000 195,077
------------
371,625
SWEDEN-0.4%
Astra AB Series A 12,000 230,946
8
ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------
SWITZERLAND-1.5%
Nestle, SA 200 $ 415,431
Zurich Versicherungs-gesellschaft 500 397,182
------------
812,613
UNITED KINGDOM-0.9%
BPB Plc 40,000 218,726
Tomkins Plc 30,000 154,856
United News & Media Plc 9,000 118,494
------------
492,076
Total Foreign Investments
(cost $4,613,091) 5,763,282
Total Common & Preferred Stocks
(cost $17,563,873) 23,755,136
DEBT OBLIGATIONS-39.3%
U.S. GOVERNMENT & AGENCY OBLIGATIONS-33.3%
Federal Home Loan Bank
7.00%, 9/01/11 $ 775 792,862
Federal National Mortgage Association
6.00%, 4/01/11 323 319,170
6.50%, 5/01/11 523 526,171
6.50%, 6/01/11 590 593,831
6.50%, 9/01/11 363 365,961
7.00%, 5/01/26 847 859,569
7.00%, 5/01/27 422 427,701
7.00%, 12/01/27 1,022 1,036,124
Government National Mortgage Association
6.50%, 3/15/28 284 282,678
7.00%, 2/15/28 1,086 1,103,348
7.50%, 6/15/27 597 614,807
U.S. Treasury Bond
6.125%, 11/15/27 2,905 3,070,672
U.S. Treasury Notes
6.25%, 4/30/01 1,900 1,934,143
6.375%, 5/15/99 3,200 3,220,992
6.50%, 8/31/01 1,250 1,283,013
6.50%, 5/31/02 410 423,005
6.625%, 5/15/07 25 26,766
6.875%, 5/15/06 775 837,000
------------
17,717,813
CORPORATE DEBT OBLIGATIONS-4.3%
BANKING-1.0%
Chase Manhattan Corp.
6.75%, 8/15/08 530 545,167
ELECTRIC & GAS UTILITY-0.8%
Texas Utilities Co. Series C
6.375%, 1/01/08 425 416,170
INDUSTRIAL-2.5%
Computer Associates
International, Inc.
6.375%, 4/15/05 (b) 650 644,955
Time Warner, Inc.
8.375%, 3/15/23 600 694,572
------------
1,339,527
------------
2,300,864
YANKEE BOND-1.7%
St. George Bank, Ltd.
7.15%, 10/15/05 (b) 850 879,231
Total Debt Obligations
(cost $20,529,344) 20,897,908
9
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------
SHORT-TERM INVESTMENT-13.0%
Federal Home Loan Mortgage Corp.
5.637%, 8/03/98 (amortized cost
$6,897,869) $6,900 $ 6,897,869
TOTAL INVESTMENTS -96.9%
(cost $44,991,086) 51,550,913
Other assets less liabilities-3.1% 1,631,743
------------
NET ASSETS-100% $53,182,656
(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 institutional buyers. At July 31,
1998, these securities amounted to $1,524,186 representing 2.9% of net assets.
Glossary:
ADR - American Depositary Receipt
See notes to financial statements.
10
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1998 ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $44,991,086) $51,550,913
Cash, at value (cost $720,561) 720,697
Receivable for investment securities sold 908,915
Receivable for shares of beneficial interest sold 343,568
Interest and dividends receivable 279,094
Foreign taxes receivable 14,879
Total assets 53,818,066
LIABILITIES
Payable for shares of beneficial interest redeemed 347,024
Distribution fee payable 30,289
Advisory fee payable 19,408
Accrued expenses 238,689
Total liabilities 635,410
NET ASSETS $53,182,656
COMPOSITION OF NET ASSETS
Shares of beneficial interest, at par $ 30
Additional paid-in capital 44,068,493
Undistributed net investment income 267,635
Accumulated net realized gain on investments and foreign
currency transactions 2,313,879
Net unrealized appreciation of investments and foreign
currency denominated assets and liabilities 6,532,619
$53,182,656
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share
($25,948,583 / 1,312,956 shares of beneficial
interest issued and outstanding) $19.76
Sales charge--4.25% of public offering price .88
Maximum offering price $20.64
CLASS B SHARES
Net asset value and offering price per share
($24,032,385 / 1,478,926 shares of beneficial
interest issued and outstanding) $16.25
CLASS C SHARES
Net asset value and offering price per share
($3,201,305 / 197,016 shares of beneficial
interest issued and outstanding) $16.25
ADVISOR CLASS SHARES
Net asset value, redemption and offering price per share
($383 / 19.47 shares of beneficial interest issued and
outstanding) $19.67
See notes to financial statements.
11
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1998 ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
INVESTMENT INCOME
Interest $1,491,470
Dividends (net of foreign taxes
withheld of $25,950) 308,962 $1,800,432
EXPENSES
Advisory fee 385,597
Distribution fee - Class A 67,585
Distribution fee - Class B 258,610
Distribution fee - Class C 30,232
Custodian 171,227
Transfer agency 128,960
Audit and legal 55,340
Printing 36,308
Registration 34,524
Trustees' fees 25,000
Miscellaneous 20,031
Total expenses 1,213,414
Less: expenses waived and assumed
by adviser (see Note B) (281,633)
Less: expense offset arrangement
(see Note B) (9,811)
Net expenses 921,970
Net investment income 878,462
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS
Net realized gain on investment transactions 4,599,652
Net realized loss on foreign currency
transactions (63,722)
Net realized loss on futures transactions (251,706)
Net change in unrealized appreciation
(depreciation) of:
Investments (146,989)
Foreign currency denominated assets
and liabilities (24,586)
Net gain on investments and foreign
currency transactions 4,112,649
NET INCREASE IN NET ASSETS FROM OPERATIONS $4,991,111
See notes to financial statements.
12
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
JULY 31, JULY 31,
1998 1997
----------- ------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income $ 878,462 $ 1,040,800
Net realized gain on investments and
foreign currency transactions 4,284,224 2,147,164
Net change in unrealized appreciation
(depreciation) of investments and
foreign currency denominated assets
and liabilities (171,575) 7,395,205
Net increase in net assets
from operations 4,991,111 10,583,169
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Class A (483,384) (368,073)
Class B (516,031) (450,279)
Class C (57,310) (53,257)
Advisor Class (9) -0-
Net realized gain on investments
Class A (1,572,349) (2,227,559)
Class B (2,315,766) (3,959,058)
Class C (257,187) (468,257)
Advisor Class (26) -0-
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST
Net increase (decrease) 1,999,566 (1,640,718)
Total increase 1,788,615 1,415,968
NET ASSETS
Beginning of year 51,394,041 49,978,073
End of year (including undistributed
net investment income of $267,635
and $509,629, respectively) $53,182,656 $51,394,041
See notes to financial statements.
13
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1998 ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Strategic Balanced Fund (the "Fund"), formerly Alliance Balanced 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.
The Fund offers Class A, Class B, Class C and Advisor Class shares. Class A
shares are sold with a front-end sales charge of up to 4.25% for purchases not
exceeding $1,000,000. With respect to purchases of $1,000,000 or more, Class A
shares redeemed within one year of purchase will be subject to a contingent
deferred sales charge of 1%. Class B shares are currently sold with a
contingent deferred sales charge which declines from 4% to zero depending on
the period of time the shares are held. 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 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 sales 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 Fund's Trustees.
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 prices of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated into U.S.
dollars at the rates of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated into U.S. dollars at rates of
exchange prevailing when accrued.
Net realized foreign currency gains and losses represent foreign exchange gains
and losses from sales and maturities of debt securities and foreign exchange
currency contracts, currency gains and losses realized between the trade and
settlement dates on security transactions, and the difference between the
amounts of foreign 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.
14
ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
3. TAXES
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
4. INVESTMENT INCOME AND 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.
Expenses attributable to the Fund are charged to the Fund. Expenses of the
Trust are charged to the Fund in proportion to net assets.
6. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date.
Income dividends and capital gains distributions are determined in accordance
with federal tax regulations and may differ from those determined in accordance
with generally accepted accounting principles. To the extent these differences
are permanent, such amounts are reclassified within the capital accounts based
on their federal tax basis treatment; temporary differences, do not require
such reclassification. During the current fiscal year, permanent differences,
primarily due to foreign currency transactions, resulted in a net decrease in
undistributed net investment income and a corresponding increase in accumulated
net realized gain on investments and foreign currency transactions. This
reclassification had no effect on net assets.
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of an investment advisory agreement, the Fund pays Alliance
Capital Management L.P. (the "Adviser"), an advisory fee at an annual rate of
.75 of 1% of the average daily net assets of the Fund. Such fee is accrued
daily and paid monthly. The Adviser has agreed to voluntarily waive its fees
and bear certain expenses so that total expenses do not exceed on an annual
basis 1.40%, 2.10%, 2.10% and 1.10% of average daily net assets, respectively,
for the Class A, Class B, Class C and Advisor Class shares. Prior to August 2,
1993, the annual expense cap for Class B Shares was 2.15%. For the year ended
July 31, 1998, such reimbursement amounted to $281,633.
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 $82,954 for the year ended July 31, 1998.
In addition, for the year ended July 31, 1998, the Fund's expenses were reduced
by $9,811 under an expense offset arrangement with Alliance Fund Services.
Transfer Agency fees reported in the statement of operations exclude these
credits.
Alliance Fund Distributors, Inc., (the "Distributor"), a wholly-owned
subsidiary of the Adviser, serves as the Distributor of the Fund's shares. The
Distributor received front-end sales charges of $4,211 from the sales of Class
A shares, $30,890 and $2,019 in contingent deferred sales charges imposed upon
redemptions by shareholders of Class B and Class C shares, respectively, for
the year ended July 31, 1998.
Brokerage commissions paid on investment transactions for the year ended July
31, 1998 amounted to $93,166, none of which was paid to Donaldson, Lufkin &
Jenrette Securities Corp., an affiliate of the Adviser.
Accrued expenses includes $57,596 owed to a Trustee and a former Trustee under
the Trust's deferred compensation plan.
15
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
NOTE C: DISTRIBUTION PLANS
The Trust has adopted a plan of distribution for each class of shares of the
Fund, except the Advisor Class, pursuant to Rule 12b-1 under the Investment
Company Act of 1940 (each a "Plan" and collectively the "Plans"). Under the
Plans, the Fund pays a distribution fee to the Distributor at an annual rate of
up to .50 of 1% 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 fees are accrued daily and paid monthly. The Trustees
currently limit payments under the Class A plan to .30 of 1% of the Fund's
average daily net assets attributable to Class A shares. The Plans provide that
the Distributor will use such payments in their entirety for distribution
assistance and promotional activities.
The Fund is not obligated under the Plans to pay any distribution services fee
in excess of the amounts set forth above. The purpose of the payments to the
Distributor under the Plans is to compensate the Distributor for its
distribution services with respect to the sale of the Fund's shares. Since the
Distributor's compensation is not directly tied to its expenses, the amount of
compensation received by it under the Plans during any year may be more or less
than its actual expenses. For this reason, the Plans are characterized by the
staff of the Commission as being of the "compensation" variety.
In the event that a Plan is terminated or not continued, no distribution
services fees (other than current amounts accrued but not yet paid) would be
owed by the Fund to the Distributor with respect to the relevant class.
The Plans also provide 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 $26,635,947 and $40,074,668,
respectively, for the year ended July 31, 1998. There were purchases of
$18,804,186 and sales of $16,425,221 of U.S. government and government agency
obligations for the year ended July 31, 1998.
At July 31, 1998, the cost of investments for federal income tax purposes was
substantially the same as the cost for financial reporting purposes. Gross
unrealized appreciation of investments was $7,050,653 and gross unrealized
depreciation of investments was $490,826 resulting in net unrealized
appreciation of $6,559,827 excluding foreign currency transactions.
The Fund incurred and elected to defer post October currency losses of $30,518
for the year ended July 31, 1998. To the extent that any post October losses
are used to offset future capital gains, it is probable that these gains will
not be distributed to shareholders.
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.
At July 31, 1998, the Fund had no outstanding forward exchange currency
contracts.
16
ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
2. FINANCIAL FUTURES CONTRACTS
The Fund may buy or sell financial futures contracts for the purpose of hedging
its portfolio against adverse affects of anticipated movements in the market.
The Fund bears the market risk that arises from changes in the value of these
financial instruments. The Fund's activities in domestic futures contracts are
conducted through regulated exchanges which do not result in counterparty
credit risk.
At the time the Fund enters into a futures contract, the Fund deposits and
maintains with its custodian as collateral an initial margin as required by the
exchange on which the transaction is effected. Pursuant to the contract, the
Fund agrees to receive from or pay to the broker an amount of cash equal to the
daily fluctuation in the value of the contract.
Such receipts or payments are known as variation margin and are recorded by the
Fund as unrealized gains or losses. When the contract is closed, the Fund
records a realized gain or loss equal to the difference between the value of
the contract at the time it was opened and the time it was closed. At July 31,
1998, the Fund had no outstanding futures contracts.
NOTE E: SHARES OF BENEFICIAL INTEREST
There are an unlimited number of $0.00001 par value shares of beneficial
interest authorized, divided into four classes, designated Class A, Class B,
Class C and Advisor Class shares. Transactions in shares of beneficial interest
were as follows:
SHARES AMOUNT
--------------------------- ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JULY 31, JULY 31, JULY 31, JULY 31,
1998 1997 1998 1997
------------ ------------ -------------- --------------
CLASS A
Shares sold 106,566 44,362 $ 2,050,647 $ 813,717
Shares issued in
reinvestment of
dividends and
distributions 107,795 140,204 1,920,917 2,424,151
Shares converted
from Class B 275,088 134,087 5,210,668 2,479,067
Shares redeemed (203,105) (283,790) (3,866,878) (5,240,141)
Net increase 286,344 34,863 $ 5,315,354 $ 476,794
CLASS B
Shares sold 304,735 249,874 $ 4,808,290 $ 3,910,285
Shares issued in
reinvestment of
dividends and
distributions 177,592 271,011 2,614,182 3,946,629
Shares converted
to Class A (332,736) (158,380) (5,210,668) (2,479,067)
Shares redeemed (360,569) (465,417) (5,714,963) (7,252,359)
Net decrease (210,978) (102,912) $ (3,503,159) $(1,874,512)
CLASS C
Shares sold 75,156 54,856 $ 1,171,128 $ 860,802
Shares issued in
reinvestment of
dividends and
distributions 20,673 28,201 304,309 410,610
Shares redeemed (82,325) (98,217) (1,288,398) (1,514,680)
Net increase
(decrease) 13,504 (15,160) $ 187,039 $ (243,268)
17
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
SHARES AMOUNT
--------------------------- ----------------------------
YEAR ENDED OCT. 2, 1996(A) YEAR ENDED OCT. 2,1996(A)
JULY 31, TO JULY 31, TO
1998 JULY 31, 1997 1998 JULY 31, 1997
------------ ------------ -------------- --------------
ADVISOR CLASS
Shares sold 15 1,460 $ 300 $ 26,057
Shares issued in
reinvestment of
dividends and
distributions 2 -0- 32 -0-
Shares redeemed -0- (1,457) -0- (25,789)
Net increase 17 3 $ 332 $ 268
NOTE F: PLAN OF REORGANIZATION
On July 16, 1998, the Fund's Trustees agreed, subject to shareholder approval
at a special meeting of Fund shareholders scheduled for October 12, 1998, to
the transfer pursuant to a plan of reorganization and liquidation of the net
assets of the Fund to Alliance Balanced Shares, Inc. ("Balanced Shares"), an
open-end investment company also managed by the Adviser. The transfer is
expected to be accomplished through a tax-free exchange of the Fund's shares
for the shares of Balanced Shares and is expected to occur in October 1998.
NOTE G: BANK BORROWING
A number of open-end mutual funds managed by the Adviser, including the Fund,
participate in a $750 million revolving credit facility (the "Facility") to
provide for short-term financing if necessary, subject to certain restrictions,
in connection with abnormal redemption activity. Commitment fees related to the
facility are paid by the participating funds and are included in the
miscellaneous expenses in the statement of operations. The Fund did not utilize
the facility during the year ended July 31, 1998.
(a) Commencement of distribution.
18
FINANCIAL HIGHLIGHTS ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------------------------
MAY 1,
1994
YEAR ENDED JULY 31, TO YEAR ENDED
-------------------------------------------------- JULY 31, APRIL 30,
1998 1997 1996 1995 1994(A) 1994
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $19.79 $18.48 $17.98 $16.26 $16.46 $16.97
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .41(c) .47(c) .35(c) .34 .07 .16
Net realized and unrealized gain (loss)
on investment transactions 1.46 3.56 1.08 1.64 (.27) .74
Net increase (decrease) in net asset
value from operations 1.87 4.03 1.43 1.98 (.20) .90
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.45) (.39) (.32) (.22) -0- (.24)
Distributions from net realized gains (1.45) (2.33) (.61) (.04) -0- (1.17)
Total dividends and distributions (1.90) (2.72) (.93) (.26) -0- (1.41)
Net asset value, end of period $19.76 $19.79 $18.48 $17.98 $16.26 $16.46
TOTAL RETURN
Total investment return based on net
asset value (d) 10.50% 23.90% 8.05% 12.40% (1.22)% 5.06%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $25,949 $20,312 $18,329 $10,952 $9,640 $9,822
Ratios to average net assets of:
Expenses, net of waivers/
reimbursements 1.42%(e) 1.41%(e) 1.40% 1.40% 1.40%(f) 1.40%
Expenses, before waivers/
reimbursements 1.95%(e) 2.06% 1.76% 1.81% 1.94%(f) 1.70%
Net investment income (b) 2.12%(e) 2.50% 1.78% 2.07% 1.63%(f) 1.67%
Portfolio turnover rate 94%(e) 170% 173% 172% 21% 139%
</TABLE>
See footnote summary on page 22.
19
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 JULY 31, TO YEAR ENDED
-------------------------------------------------- JULY 31, APRIL 30,
1998 1997 1996 1995 1994(A) 1994
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $16.59 $15.89 $15.56 $14.10 $14.30 $14.92
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .22(c) .28(c) .16(c) .22 .03 .06
Net realized and unrealized gain (loss)
on investment transactions 1.21 3.02 .98 1.40 (.23) .63
Net increase (decrease) in net asset
value from operations 1.43 3.30 1.14 1.62 (.20) .69
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.32) (.27) (.20) (.12) -0- (.14)
Distributions from net realized gains (1.45) (2.33) (.61) (.04) -0- (1.17)
Total dividends and distributions (1.77) (2.60) (.81) (.16) -0- (1.31)
Net asset value, end of period $16.25 $16.59 $15.89 $15.56 $14.10 $14.30
TOTAL RETURN
Total investment return based on net
asset value (d) 9.78% 23.01% 7.41% 11.63% (1.40)% 4.29%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $24,032 $28,037 $28,492 $37,301 $43,578 $43,616
Ratios to average net assets of:
Expenses, net of waivers/
reimbursements 2.12%(e) 2.12%(e) 2.10% 2.10% 2.10%(f) 2.10%
Expenses, before waivers/
reimbursements 2.68% 2.76% 2.47% 2.49% 2.64%(f) 2.42%
Net investment income (b) 1.39% 1.78% .99% 1.38% .92%(f) .93%
Portfolio turnover rate 94% 170% 173% 172% 21% 139%
</TABLE>
See footnote summary on page 22.
20
ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
CLASS C
------------------------------------------------------------------------------
MAY 1, AUGUST 2,
1994 1993(G)
YEAR ENDED JULY 31, TO TO
-------------------------------------------------- JULY 31, APRIL 30,
1998 1997 1996 1995 1994(A) 1994
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $16.59 $15.89 $15.57 $14.11 $14.31 $15.64
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .22(c) .28(c) .14(c) .16 .03 .15
Net realized and unrealized gain (loss)
on investment transactions 1.21 3.02 .99 1.46 (.23) (.17)
Net increase (decrease) in net asset
value from operations 1.43 3.30 1.13 1.62 (.20) (.02)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.32) (.27) (.20) (.12) -0- (.14)
Distributions from net realized gains (1.45) (2.33) (.61) (.04) -0- (1.17)
Total dividends and distributions (1.77) (2.60) (.81) (.16) -0- (1.31)
Net asset value, end of period $16.25 $16.59 $15.89 $15.57 $14.11 $14.31
TOTAL RETURN
Total investment return based on net
asset value (d) 9.78% 23.01% 7.34% 11.62% (1.40)% .45%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $3,201 $3,045 $3,157 $4,113 $4,317 $4,289
Ratios to average net assets of:
Expenses, net of waivers/
reimbursements 2.12%(e) 2.12%(e) 2.10% 2.10% 2.10%(f) 2.10%(f)
Expenses, before waivers/
reimbursements 2.68% 2.76% 2.48% 2.50% 2.64%(f) 2.07%(f)
Net investment income (b) 1.40% 1.78% .99% 1.38% .93%(f) .69%(f)
Portfolio turnover rate 94% 170% 173% 172% 21% 139%
</TABLE>
See footnote summary on page 22.
21
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
ADVISOR CLASS
-------------------------
OCTOBER 2,
1996(G)
YEAR ENDED TO
JULY 31, JULY 31,
1998 1997
----------- -----------
Net asset value, beginning of period $19.79 $19.49
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b)(c) .47 .42
Net realized and unrealized gain (loss)
on investment transactions 1.36 (.12)
Net increase in net asset
value from operations 1.83 .30
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.50) -0-
Distributions from net realized gains (1.45) -0-
Total dividends and distributions (1.95) -0-
Net asset value, end of period $19.67 $19.79
TOTAL RETURN
Total investment return based on net
asset value (d) 10.32% 1.54%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period $383 $50
Ratios to average net assets of:
Expenses, net of waivers/
reimbursements (e) 1.12%(e) 1.10%(f)
Expenses, before waivers/
reimbursements 1.12% 2.35%(f)
Net investment income (b) 2.39% 3.40%(f)
Portfolio turnover rate 94% 170%
(a) The Fund changed its fiscal year end from April 30 to July 31.
(b) Net of fees waived and expenses reimbursed by the Adviser.
(c) Based on average shares outstanding.
(d) 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.
(e) Ratio reflects expenses grossed up for expense offset arrangement with the
transfer agent. For the years ended July 31, 1998 and the year ended July 31,
1997, the ratios of expenses net of waivers/reimbursements would have been
1.40%, 2.10%, 2.10% and 1.10% for Class A, B, C and Advisor Class shares,
respectively.
(f) Annualized.
(g) Commencement of distribution.
22
REPORT OF INDEPENDENT ACCOUNTANTS ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
TO THE TRUSTEES AND SHAREHOLDERS OF
ALLIANCE STRATEGIC BALANCED FUND
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 Strategic Balanced Fund
(one of the portfolios of The Alliance Portfolios, hereafter referred to as the
"Fund") at July 31, 1998, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods presented, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities at July 31, 1998 by correspondence with the custodian and brokers,
provide a reasonable basis for the opinion expressed above.
As explained in Note F, the Trustees have agreed, subject to shareholder
approval, to the transfer of the net assets of the Fund to Alliance Balanced
Shares, Inc.
PricewaterhouseCoopers LLP
New York, New York
September 14, 1998
TAX INFORMATION (UNAUDITED)
In order to meet certain requirements of the Internal Revenue Code we are
advising you that $803,977 and $1,089,075 of the capital gain distributions
paid by the Fund during the fiscal year July 31, 1998 are subject to the
maximum tax rates of 28% and 20% respectively.
Shareholders should not use the above information to prepare their tax returns.
The information necessary to complete your income tax returns will be included
with your Form 1099 DIV which will be sent to you separately in January 1999.
23
ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
BOARD OF TRUSTEES
JOHN D. CARIFA, CHAIRMAN AND PRESIDENT
RUTH BLOCK (1)
RICHARD W. COUPER (1)
WILLIAM H. FOULK, JR. (1)
BRENTON W. HARRIES (1)
DONALD J. ROBINSON (1)
OFFICERS
BRUCE CALVERT, SENIOR VICE PRESIDENT
KATHLEEN A. CORBET, SENIOR VICE PRESIDENT
WAYNE D. LYSKI, SENIOR VICE PRESIDENT
NICHOLAS D.P. CARN, VICE PRESIDENT
EDMUND P. BERGAN, JR., CLERK
MARK D. GERSTEN, TREASURER & CHIEF FINANCIAL OFFICER
VINCENT S. NOTO, 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
PRICEWATERHOUSECOOPERS LLP
1177 Avenue of the Americas
New York, NY 10036
(1) Member of the Audit Committee.
24
THE ALLIANCE FAMILY OF MUTUAL FUNDS
_______________________________________________________________________________
FIXED INCOME
Alliance Bond Fund
U.S. Government Portfolio
Corporate Bond Portfolio
Alliance Global Dollar Government Fund
Alliance Global Strategic Income Trust
Alliance High Yield Fund
Alliance Mortgage Securities Income Fund
Alliance Limited Maturity Government Fund
Alliance Multi-Market Strategy Trust
Alliance North American Government Income Trust
Alliance Short-Term Multi-Market Trust
Alliance Short-Term U.S. Government Fund
Alliance World Income Trust
TAX-FREE INCOME
Alliance Municipal Income Fund
California Portfolio
Insured California Portfolio
Insured National Portfolio
National Portfolio
New York Portfolio
Alliance Municipal Income Fund II
Arizona Portfolio
Florida Portfolio
Massachusetts Portfolio
Michigan Portfolio
Minnesota Portfolio
New Jersey Portfolio
Ohio Portfolio
Pennsylvania Portfolio
Virginia Portfolio
MONEY MARKET
AFD Exchange Reserves
GROWTH
The Alliance Fund
Alliance Global Environment Fund
Alliance Growth Fund
Alliance Premier Growth Fund
Alliance/Regent Sector Opportunity Fund
GROWTH & INCOME
Alliance Balanced Shares
Alliance Conservative Investors Fund
Alliance Growth & Income Fund
Alliance Growth Investors Fund
Alliance Income Builder Fund
Alliance Real Estate Investment Fund
Alliance Strategic Balanced Fund
Alliance Utility Income Fund
AGGRESSIVE GROWTH
Alliance Global Small Cap Fund
Alliance Quasar Fund
Alliance Technology Fund
INTERNATIONAL
Alliance All-Asia Investment Fund
Alliance Greater China '97 Fund
Alliance International Fund
Alliance International Premier Growth Fund
Alliance New Europe Fund
Alliance Worldwide Privatization Fund
CLOSED-END FUNDS
Alliance All-Market Advantage Fund
ACM Government Income Fund
ACM Government Opportunity Fund
ACM Government Securities Fund
ACM Government Spectrum Fund
ACM Managed Dollar Income Fund
ACM Managed Income Fund
ACM Municipal Securities Income Fund
Alliance World Dollar Government Fund
Alliance World Dollar Government Fund II
The Austria Fund
The Korean Investment Fund
The Spain Fund
The Southern Africa Fund
CASH MANAGEMENT SERVICES
ACM Institutional Reserves
Government Portfolio
Prime Portfolio
Tax-Free Portfolio
Trust Portfolio
Alliance Capital Reserves
Alliance Government Reserves
Alliance Insured Account
Alliance Money Reserves
Alliance Municipal Trust
California Portfolio
Connecticut Portfolio
Florida Portfolio
General Portfolio
Massachusetts Portfolio
New Jersey Portfolio
New York Portfolio
Virginia Portfolio
Alliance Treasury Reserves
Alliance Money Market Fund
Prime Portfolio
Government Portfolio
General Municipal Portfolio
25
ALLIANCE STRATEGIC BALANCED FUND
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.
ASBAR
