UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-00134
ALLIANCEBERNSTEIN BALANCED SHARES, INC.
(Exact name of registrant as specified in charter)
1345 Avenue of the Americas, New York, New York 10105
(Address of principal executive offices) (Zip code)
Mark R. Manley
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and address of agent for service)
Registrant's telephone number, including area code: (800) 221-5672
Date of fiscal year end: November 30, 2005
Date of reporting period: November 30, 2005
ITEM 1. REPORTS TO STOCKHOLDERS.
[LOGO] ALLIANCEBERNSTEIN (R)
Investment Research and Management
AllianceBernstein Balanced Shares
Annual Report
November 30, 2005
ANNUAL REPORT
Investment Products Offered
- ---------------------------
o Are Not FDIC Insured
o May Lose Value
o Are Not Bank Guaranteed
- ---------------------------
The investment return and principal value of an investment in the Fund will
fluctuate as the prices of the individual securities in which it invests
fluctuate, so that your shares, when redeemed, may be worth more or less than
their original cost. You should consider the investment objectives, risks,
charges and expenses of the Fund carefully before investing. For a free copy of
the Fund's prospectus, which contains this and other information, visit our web
site at www.alliancebernstein.com or call your financial advisor or
AllianceBernstein at (800) 227-4618. Please read the prospectus carefully
before you invest.
You may obtain performance information current to the most recent month-end by
visiting www.alliancebernstein.com.
This shareholder report must be preceded or accompanied by the Fund's
prospectus for individuals who are not current shareholders of the Fund.
You may obtain a description of the Fund's proxy voting policies and
procedures, and information regarding how the Fund voted proxies relating to
portfolio securities during the most recent 12-month period ended June 30,
without charge. Simply visit AllianceBernstein's web site at
www.alliancebernstein.com, or go to the Securities and Exchange Commission's
(the "Commission") web site at www.sec.gov, or call AllianceBernstein at (800)
227-4618.
The Fund files its complete schedule of portfolio holdings with the Commission
for the first and third quarters of each fiscal year on Form N-Q. The Fund's
Forms N-Q are available on the Commission's web site at www.sec.gov. The Fund's
Forms N-Q may also be reviewed and copied at the Commission's Public Reference
Room in Washington, DC; information on the operation of the Public Reference
Room may be obtained by calling (800) SEC-0330. AllianceBernstein publishes
full portfolio holdings for the Fund monthly at www.alliancebernstein.com.
AllianceBernstein Investment Research and Management, Inc. is an affiliate of
Alliance Capital Management L.P., the manager of the funds, and is a member of
the NASD.
January 26, 2006
Annual Report
This report provides management's discussion of fund performance for
AllianceBernstein Balanced Shares (the "Fund") for the annual reporting period
ended November 30, 2005.
Investment Objective and Policies
This open-end fund seeks a high return through a combination of current income
and capital appreciation. It invests principally in a diversified portfolio of
equity and fixed-income securities such as common and preferred stocks, U.S.
government and agency obligations, bonds and senior debt securities.
Investment Results
The table on page 4 shows the Fund's performance compared to a composite
benchmark (the "Composite"), a 60%/40% blend of the Russell 1000 Value Index
and the LB Government/Credit Index, respectively, for the six- and 12-month
periods ended November 30, 2005. Also included in the table are returns for the
Fund's peer group, as represented by the Lipper Balanced Funds Average (the
"Lipper Average"). Funds in the Lipper Average have generally similar
investment objectives to the Fund, although some may have different investment
policies and sales and management fees.
The Fund's Class A shares modestly underperformed the Composite for the
12-month period ended November 30, 2005, but marginally outperformed it for the
six-month period ended November 30, 2005. For both the six-and 12-month
periods, the Fund's fixed-income investments outperformed with duration and
duration structure being the largest contributors.
An emphasis on large-cap, high quality stocks and an overweight position in
consumer services stocks contributed to the Fund's underperformance on the
equity side during both the six- and 12-month periods under review. In
addition, an emphasis on large-cap, high quality stocks with high return on
equity (ROE) and attractive growth expectations hindered performance, as
smaller capitalization and lower-quality stocks continued to be market leaders
during the periods under review.
On the fixed-income side of the Fund's investment portfolio, corporate security
selection and sector allocation overall added only marginally to returns.
Compromising performance was the Fund's underweight position in the U.S.
government agency sector, which performed better-than-expected due to
substantial foreign buying by non-valuation based investors. The Fund remained
underweight duration to varying degrees throughout both the six- and 12-month
periods under review. Of note, as the 12-month period progressed, the Fund's
underweight duration structure became more concentrated in the one- to
five-year duration bucket. This proved very effective as the yield curve
pivoted around the 10-year part of the curve, with most of the yield rise
coming inside of five years.
Market Review and Investment Strategy
Although rising oil prices and higher interest rates are a concern to most
investors, corporate profitability and
_______________________________________________________________________________
ALLIANCEBERNSTEIN BALANCED SHARES o 1
cash flow continue to be better-than-expected. Despite the devastation and
dislocation caused by several storms in late summer of 2005, economic growth
has continued to be strong and inflation continues to be well-behaved.
The rally in smaller-cap value stocks since 2000 has been so strong that
larger-cap higher quality growth stocks now look extremely attractive from a
relative valuation perspective. The Fund's equity portfolio is heavily invested
in such companies in order to capture this valuation anomaly. The Fund's top
holdings (which can be found on page 7) are dominant industry players that have
high returns on equity and are exhibiting strong earnings growth.
The debt markets were distinguished by a sharp flattening of the government
yield curve as the yield spread between three-month Treasury bills and 30-year
government bonds went from about 278 basis points to 76 basis points. The
flattening was driven by the U.S. Federal Reserve (the "Fed") to remove excess
liquidity by lifting the Federal Funds rate 200 basis points over the 12-month
period ended November 30, 2005. The flattening of the yield curve was not
unexpected given the expectation for the Fed to raise interest rates, but the
degree of flattening and the manner by which the curve flattened was very
unusual. Generally, in the early stages of a monetary policy cycle, short rates
and long rates rise in tandem, with short rates rising faster. This time, rates
longer than 10 years actually fell as long-term inflation expectations remained
subdued, and foreign demand for U.S. debt remained surprisingly robust. The
Balanced Shares Investment Team (the "Team") maintained the Fund's underweight
duration throughout the reporting period and improved the structure of the
Fund's duration short by concentrating in the short-end of the yield curve.
The other notable feature of the debt markets was the historically low
dispersion of returns inter- and intra-sector. Valuations started and ended the
period at historically rich levels across all primary market sectors.
Accordingly, there was limited opportunity to add value through sector
rotation. In the corporate sector, avoiding negative credit events was a
primary focus. As is to be expected as the credit and economic cycle matures, a
small number of companies releveraged their balance sheets through leveraged
buyouts, mergers & acquisitions, or leveraged recaps. The return impact of
these negative credit events was meaningful in a low return environment. The
Team experienced a few of these hard-to-forecast events, but fortunately
avoided most of them through credit research and risk budgeting.
As the risk of releveraging events increased throughout the past year, the Team
moved the Fund from a market weight to underweight exposure in credit,
maintaining diversification, and avoiding large exposures to single names in
the industrial space, which is more prone to releveraging events than
financials, utilities, or real estate investment trusts.
_______________________________________________________________________________
2 o ALLIANCEBERNSTEIN BALANCED SHARES
HISTORICAL PERFORMANCE
An Important Note About the Value of Historical Performance
The performance shown on the following pages represents past performance and
does not guarantee future results. Current performance may be lower or higher
than the performance information shown. You may obtain performance information
current to the most recent month-end by visiting www.alliancebernstein.com.
The investment return and principal value of an investment in the Fund will
fluctuate, so that your shares, when redeemed, may be worth more or less than
their original cost. You should consider the investment objectives, risks,
charges and expenses of the Fund carefully before investing. For a free copy of
the Fund's prospectus, which contains this and other information, visit our web
site at www.alliancebernstein.com or call your financial advisor or
AllianceBernstein at (800) 227-4618. You should read the prospectus carefully
before you invest.
Returns are annualized for periods longer than one year. All fees and expenses
related to the operation of the Fund have been deducted. NAV returns do not
reflect sales charges; if sales charges were reflected, the Fund's quoted
performance would be lower. SEC returns reflect the applicable sales charges
for each share class: a 4.25% maximum front-end sales charge for Class A
shares; the applicable contingent deferred sales charge for Class B shares (4%
year 1, 3% year 2, 2% year 3, 1% year 4); a 1% 1 year contingent deferred sales
charge for Class C shares. Returns for Advisor Class, Class R, Class K and
Class I shares will vary due to different expenses associated with these
classes. Performance assumes reinvestment of distributions and does not account
for taxes.
Benchmark Disclosure
Neither the Russell 1000 Value Index nor the Lehman Brothers (LB)
Government/Credit Index reflects fees and expenses associated with the active
management of a mutual fund portfolio. The unmanaged Russell 1000 Value Index
contains those securities in the Russell 1000 Index with a less-than-average
growth orientation. The unmanaged Russell 1000 Index is comprised of 1000 of
the largest capitalized companies that are traded in the United States. The
unmanaged Lehman Brothers (LB) Government/Credit Index represents a combination
of two indices: the LB Government Index which is composed of the LB Treasury
Index and the LB Agency Index, and the LB Credit Index which includes
investment-grade bonds issued by corporations and non-corporate entities. The
composite benchmark represents a 60% / 40% blend of the Russell 1000 Value
Index and the LB Government/Credit Index, respectively. For the six- and
12-month periods ended November 30, 2005, the Lipper Balanced Funds Average
consisted of 686 and 651 funds, respectively. These funds have generally
similar investment objectives to AllianceBernstein Balanced Shares, although
some may have different investment policies and sales and management fees. An
investor cannot invest directly in an index or average, and their results are
not indicative of the performance for any specific investment, including the
Fund.
A Word About Risk
The Fund is a "balanced" fund and must invest at least 25% of its total assets
in fixed-income securities. The value of fixed-income securities will change as
the general level of interest rates fluctuates. The Fund can invest in foreign
securities, which may magnify fluctuations due to changes in foreign exchange
rates and the possibility of substantial volatility due to political and
economic uncertainties in foreign countries. In order to achieve its investment
objectives, the Fund may at times use certain types of investment derivatives,
such as options, futures, forwards and swaps. These instruments involve risks
different from, and in certain cases, greater than, the risks presented by more
traditional investments. These risks are fully discussed in the Fund's
prospectus.
(Historical Performance continued on next page)
_______________________________________________________________________________
ALLIANCEBERNSTEIN BALANCED SHARES o 3
HISTORICAL PERFORMANCE
(continued from previous page)
Returns
THE FUND VS. ITS BENCHMARK -------------------------
PERIODS ENDED NOVEMBER 30, 2005 6 Months 12 Months
- -------------------------------------------------------------------------------
AllianceBernstein Balanced Shares
Class A 3.31% 6.55%
- -------------------------------------------------------------------------------
Class B 2.97% 5.82%
- -------------------------------------------------------------------------------
Class C 2.96% 5.80%
- -------------------------------------------------------------------------------
Advisor Class 3.50% 6.89%
- -------------------------------------------------------------------------------
Class R 3.24% 6.36%
- -------------------------------------------------------------------------------
Class K** 3.36% 2.68%*
- -------------------------------------------------------------------------------
Class I** 3.55% 2.93%*
- -------------------------------------------------------------------------------
Russell 1000 Value Index 5.72% 9.98%
- -------------------------------------------------------------------------------
Lehman Brothers Government/Credit Index -0.66% 2.48%
- -------------------------------------------------------------------------------
Composite: 60% Russell 1000 Value Index /
40% Lehman Brothers Government/Credit Index 3.17% 6.98%
- -------------------------------------------------------------------------------
Lipper Balanced Funds Average 4.28% 6.47%
- -------------------------------------------------------------------------------
* Since Inception. (See inception dates below.)
** Please note that this is a new share class offering for investors
purchasing shares through institutional pension plans. The inception date for
Class K and Class I shares is 3/1/05.
GROWTH OF A $10,000 INVESTMENT IN THE FUND
11/30/95 TO 11/30/05
AllianceBernstein Balanced Shares Class A: $23,374
Composite: $24,503
Russell 1000 Value Index: $28,787
LB Government/Credit Index: $18,295
[THE FOLLOWING DATA WAS REPRESENTED BY A MOUNTAIN CHART IN THE PRINTED MATERIAL]
AllianceBernstein
Balanced Russell 1000 LB Government/
Shares Class A Composite Value Index Credit Index
- -----------------------------------------------------------------------------------------
11/30/95 $ 9,575 $ 10,000 $ 10,000 $ 10,000
11/30/96 $ 10,671 $ 11,803 $ 12,631 $ 10,560
11/30/97 $ 13,126 $ 14,254 $ 16,379 $ 11,342
11/30/98 $ 14,892 $ 16,134 $ 18,850 $ 12,516
11/30/99 $ 16,063 $ 17,063 $ 20,824 $ 12,352
11/30/00 $ 17,480 $ 17,924 $ 21,324 $ 13,467
11/30/01 $ 18,532 $ 18,413 $ 20,654 $ 15,018
11/30/02 $ 17,101 $ 17,890 $ 18,669 $ 16,117
11/30/03 $ 19,451 $ 20,189 $ 21,873 $ 17,147
11/30/04 $ 21,937 $ 22,904 $ 26,175 $ 17,852
11/30/05 $ 23,374 $ 24,503 $ 28,787 $ 18,295
This chart illustrates the total value of an assumed $10,000 investment in
AllianceBernstein Balanced Shares Class A shares (from 11/30/95 to 11/30/05) as
compared to the performance of its composite benchmark, a 60% / 40% blend of
the Russell 1000 Value Index and the LB Government/Credit Index, respectively,
as well as each index separately. 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.
See Historical Performance and Benchmark disclosures on previous page.
(Historical Performance continued on next page)
_______________________________________________________________________________
4 o ALLIANCEBERNSTEIN BALANCED SHARES
HISTORICAL PERFORMANCE
(continued from previous page)
AVERAGE ANNUAL RETURNS AS OF NOVEMBER 30, 2005
- --------------------------------------------------------------
NAV Returns SEC Returns
Class A Shares
1 Year 6.55% 2.00%
5 Years 5.99% 5.06%
10 Years 9.34% 8.86%
Class B Shares
1 Year 5.82% 1.82%
5 Years 5.21% 5.21%
10 Years(a) 8.68% 8.68%
Class C Shares
1 Year 5.80% 4.80%
5 Years 5.20% 5.20%
10 Years 8.53% 8.53%
Advisor Class Shares
1 Year 6.89%
5 Years 6.28%
Since Inception* 9.93%
Class R Shares
1 Year 6.36%
Since Inception* 9.19%
Class K Shares+
Since Inception* 2.68%
Class I Shares+
Since Inception* 2.93%
SEC AVERAGE ANNUAL RETURNS (WITH SALES CHARGES)
AS OF THE MOST RECENT CALENDAR QUARTER-END (DECEMBER 31, 2005)
- --------------------------------------------------------------
Class A Shares
1 Year -0.41%
5 Years 4.13%
10 Years 8.80%
Class B Shares
1 Year -0.67%
5 Years 4.27%
10 Years(a) 8.61%
Class C Shares
1 Year 2.28%
5 Years 4.26%
10 Years 8.46%
(a) Assumes conversion of Class B shares into Class A shares after eight years.
* Inception dates: 10/1/96 for Advisor Class shares; 11/3/03 for Class R
shares; 3/1/05 for Class K and Class I shares.
+ Please note that this is a new share class offering for investors purchasing
shares through institutional pension plans. The inception dates for these share
classes are listed above.
See Historical Performance disclosures on page 3.
_______________________________________________________________________________
ALLIANCEBERNSTEIN BALANCED SHARES o 5
FUND EXPENSES
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments, contingent
deferred sales charges on redemptions and (2) ongoing costs, including
management fees; distribution (12b-1) fees; and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period as indicated below.
Actual Expenses
The table below provides information about actual account values and actual
expenses. You may use the information, together with the amount you invested,
to estimate the expenses that you paid over the period. Simply divide your
account value by $1,000 (for example, an $8,600 account value divided by $1,000
= 8.6), then multiply the result by the number under the heading entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
Hypothetical Example for Comparison Purposes
The table below also provides information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an assumed
annual rate of return of 5% before expenses, which is not the Fund's actual
return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds by comparing this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), or contingent deferred sales charges on redemptions.
Therefore, the hypothetical example is useful in comparing ongoing costs only,
and will not help you determine the relative total costs of owning different
funds. In addition, if these transactional costs were included, your costs
would have been higher.
Beginning Ending
Account Value Account Value Expenses Paid
June 1, 2005 November 30, 2005 During Period*
------------------------------- ------------------------------- ---------------------------
Actual Hypothetical Actual Hypothetical** Actual Hypothetical
----------- ----------------- ----------- ----------------- ----------- -------------
Class A $1,000 $1,000 $1,033.05 $1,019.35 $5.81 $5.77
- ---------------------------------------------------------------------------------------------------------------
Class B $1,000 $1,000 $1,029.68 $1,015.74 $9.46 $9.40
- ---------------------------------------------------------------------------------------------------------------
Class C $1,000 $1,000 $1,029.57 $1,015.74 $9.46 $9.40
- ---------------------------------------------------------------------------------------------------------------
Advisor
Class $1,000 $1,000 $1,035.01 $1,020.86 $4.29 $4.26
- ---------------------------------------------------------------------------------------------------------------
Class R $1,000 $1,000 $1,032.37 $1,018.20 $6.98 $6.93
- ---------------------------------------------------------------------------------------------------------------
Class K $1,000 $1,000 $1,033.60 $1,019.45 $5.71 $5.67
- ---------------------------------------------------------------------------------------------------------------
Class I $1,000 $1,000 $1,035.46 $1,021.01 $4.13 $4.10
- ---------------------------------------------------------------------------------------------------------------
* Expenses are equal to the classes' annualized expense ratios of 1.14%,
1.86%, 1.86%, 0.84%, 1.37%, 1.12% and 0.81%, respectively, multiplied by the
average account value over the period, multiply by the number of days in the
period/365.
** Assumes 5% return before expenses.
_______________________________________________________________________________
6 o ALLIANCEBERNSTEIN BALANCED SHARES
PORTFOLIO SUMMARY
November 30, 2005
PORTFOLIO STATISTICS
Net Assets ($mil): $1,809.8
SECURITY TYPE BREAKDOWN*
72.2% Common Stock
10.6% U.S Government &
Government Sponsored
Agency Obligations
7.7% Corporate Debt Obligations
3.3% Collateralized Mortgage
Obligations [PIE CHART OMITTED]
0.5% Sovereign Debt Obligations
0.1% Municipal Obligations
0.1% Preferred Stock0
5.4% Short-Term
TEN LARGEST HOLDINGS
November 30, 2005
Percent of
Company Value Net Assets
_______________________________________________________________________________
U.S. Treasury Notes $125,831,962 7.0%
- -------------------------------------------------------------------------------
General Electric Co. 62,263,532 3.4
- -------------------------------------------------------------------------------
Citigroup, Inc. 62,235,954 3.4
- -------------------------------------------------------------------------------
American International Group, Inc. 60,909,408 3.4
- -------------------------------------------------------------------------------
U.S. Treasury Bonds 53,059,917 2.9
- -------------------------------------------------------------------------------
Fannie Mae (Common Stocks and Bonds) 52,804,799 2.9
- -------------------------------------------------------------------------------
Microsoft Corp. 52,410,694 2.9
- -------------------------------------------------------------------------------
J.P. Morgan Chase & Co. 48,511,251 2.7
- -------------------------------------------------------------------------------
The Home Depot, Inc. 41,851,026 2.3
- -------------------------------------------------------------------------------
Time Warner, Inc. 37,930,608 2.1
- -------------------------------------------------------------------------------
$597,809,151 33.0%
* All data are as of November 30, 2005. The Fund's security type breakdown is
expressed as a percentage of total investments (excluding security lending
collateral) and may vary over time.
_______________________________________________________________________________
ALLIANCEBERNSTEIN BALANCED SHARES o 7
PORTFOLIO OF INVESTMENTS
November 30, 2005
Company Shares U.S. $ Value
- -------------------------------------------------------------------------------
COMMON STOCKS-71.6%
Finance-18.8%
Banking - Money Centers-3.6%
J.P. Morgan Chase & Co. 1,268,268 $ 48,511,251
Wachovia Corp. 306,400 16,361,760
--------------
64,873,011
--------------
Banking-Regional-1.8%
Bank of America Corp. 717,850 32,942,136
--------------
Brokerage & Money Management-1.9%
Goldman Sachs Group, Inc.* 112,500 14,508,000
Merrill Lynch & Co., Inc.* 301,600 20,032,272
--------------
34,540,272
--------------
Insurance-5.9%
ACE, Ltd. 553,500 30,719,250
American International Group, Inc. 907,200 60,909,408
Axis Capital Holdings, Ltd. 494,400 14,970,432
--------------
106,599,090
--------------
Mortgage Banking-2.2%
Fannie Mae 818,700 39,338,535
--------------
Miscellaneous-3.4%
Citigroup, Inc.* 1,281,894 62,235,954
--------------
340,528,998
--------------
Consumer Services-11.7%
Broadcasting & Cable-6.1%
Comcast Corp. Cl.A(a)* 421,806 11,135,679
Comcast Corp. Cl.A Special(a)* 191,500 4,986,660
News Corp. Cl.A 1,659,300 24,574,233
Time Warner, Inc. 2,109,600 37,930,608
Viacom, Inc. Cl.B 815,300 27,231,020
Westwood One, Inc. 260,600 4,727,284
--------------
110,585,484
--------------
Entertainment & Leisure-1.1%
Carnival Corp. 244,600 13,328,254
Royal Caribbean Cruises, Ltd.* 147,300 6,755,178
--------------
20,083,432
--------------
Restaurants & Lodging-1.4%
Hilton Hotels Corp. 301,600 6,611,072
McDonald's Corp. 524,800 17,764,480
--------------
24,375,552
--------------
Retail - General Merchandise-3.1%
Lowes Cos., Inc.* 218,500 14,744,380
The Home Depot, Inc. 1,001,700 41,851,026
--------------
56,595,406
--------------
211,639,874
--------------
_______________________________________________________________________________
8 o ALLIANCEBERNSTEIN BALANCED SHARES
Company Shares U.S. $ Value
- -------------------------------------------------------------------------------
Energy-8.1%
Domestic Producers-1.0%
Noble Energy, Inc. 502,000 $ 18,759,740
--------------
International-3.7%
BP Plc (ADR) 195,900 12,898,056
Chevron Corp. 450,600 25,823,886
Exxon Mobil Corp. 477,300 27,697,719
--------------
66,419,661
--------------
Oil Service-2.0%
Baker Hughes, Inc. 376,700 21,603,745
Nabors Industries, Ltd.(a)* 213,100 14,919,131
--------------
36,522,876
--------------
Miscellaneous-1.4%
ConocoPhillips 415,700 25,154,007
--------------
146,856,284
--------------
Capital Goods-6.9%
Electrical Equipment-0.8%
Emerson Electric Co.* 198,000 14,970,780
--------------
Machinery-0.4%
Ingersoll-Rand Co. Cl.A 158,600 6,285,318
--------------
Miscellaneous-5.7%
General Electric Co. 1,743,100 62,263,532
Illinois Tool Works, Inc. 78,100 6,893,887
United Technologies Corp. 630,400 33,940,736
--------------
103,098,155
--------------
124,354,253
--------------
Technology-6.8%
Communication Equipment-0.3%
Juniper Networks, Inc.(a)* 223,100 5,017,519
--------------
Computer Hardware/Storage-1.0%
EMC Corp.(a) 443,800 6,182,134
International Business Machines Corp. 140,500 12,490,450
--------------
18,672,584
--------------
Computer Services-0.8%
Fiserv, Inc.(a)* 321,700 14,640,567
--------------
Semiconductor Components-0.4%
Texas Instruments, Inc.* 225,600 7,327,488
--------------
Software-4.3%
McAfee, Inc.(a)* 135,900 3,779,379
Microsoft Corp. 1,891,400 52,410,694
Oracle Corp.(a) 1,744,800 21,932,136
--------------
78,122,209
--------------
123,780,367
--------------
_______________________________________________________________________________
ALLIANCEBERNSTEIN BALANCED SHARES o 9
Company Shares U.S. $ Value
- -------------------------------------------------------------------------------
Health Care-5.6%
Biotechnology-0.2%
Applera Corp.-Applied Biosystem Group 105,900 $ 2,920,722
--------------
Drugs-0.8%
Eli Lilly & Co. 171,200 8,645,600
Pfizer, Inc. 297,200 6,300,640
--------------
14,946,240
--------------
Medical Products-1.5%
Boston Scientific Corp.(a) 763,700 20,222,776
Zimmer Holdings, Inc.(a) 121,800 7,633,206
--------------
27,855,982
--------------
Medical Services-3.1%
Health Management Associates, Inc. Cl.A* 567,700 13,295,534
UnitedHealth Group, Inc.* 117,100 7,009,606
WellPoint, Inc.(a) 471,400 36,217,662
--------------
56,522,802
--------------
102,245,746
--------------
Consumer Staples-4.6%
Cosmetics-0.4%
Avon Products, Inc. 256,080 7,003,788
--------------
Household Products-1.8%
Colgate-Palmolive Co. 247,800 13,510,056
Procter & Gamble Co.* 348,300 19,919,277
--------------
33,429,333
--------------
Tobacco-1.7%
Altria Group, Inc.* 353,200 25,709,428
Reynolds American, Inc.* 60,500 5,385,710
--------------
31,095,138
--------------
Miscellaneous-0.7%
Fortune Brands, Inc.* 153,700 11,982,452
--------------
83,510,711
--------------
Utilities-3.5%
Electric & Gas Utility-0.5%
FirstEnergy Corp. 213,600 10,030,656
--------------
Telephone Utility-3.0%
AT&T, Inc.* 971,900 24,210,029
BellSouth Corp.* 478,200 13,035,732
Verizon Communications, Inc.* 518,000 16,565,640
--------------
53,811,401
--------------
63,842,057
--------------
Basic Industry-2.7%
Chemicals-2.4%
Air Products & Chemicals, Inc. 541,300 32,028,721
E.I. du Pont de Nemours & Co. 158,500 6,775,875
Rohm & Haas Co.* 110,000 4,818,000
--------------
43,622,596
--------------
_______________________________________________________________________________
10 o ALLIANCEBERNSTEIN BALANCED SHARES
Shares or
Principal
Amount
Company (000) U.S. $ Value
- -------------------------------------------------------------------------------
Mining & Metals-0.3%
Alcoa, Inc. 162,000 $ 4,440,420
--------------
48,063,016
--------------
Transportation-2.2%
Air Freight-1.4%
United Parcel Service, Inc. CI.B* 321,200 25,021,480
--------------
Railroad-0.8%
Union Pacific Corp. 187,300 14,335,942
--------------
39,357,422
--------------
Consumer Manufacturing-0.7%
Building & Related-0.7%
American Standard Cos., Inc. 248,700 9,470,496
Pulte Homes, Inc. 64,400 2,680,972
--------------
12,151,468
--------------
Total Common Stocks
(cost $1,115,540,457) 1,296,330,196
--------------
DEBT OBLIGATIONS-22.1%
U.S. Government & Government
Sponsored Agency Obligations-10.6%
Federal National Mortgage Association
5.00%, 4/15/15* $ 1,050 1,057,172
6.625%, 10/15/07 12,000 12,409,092
U.S. Treasury Bonds
5.375%, 2/15/31* 30,607 33,629,441
8.125%, 8/15/19* 3,815 5,100,327
9.875%, 11/15/15* 1,000 1,417,812
11.25%, 2/15/15* 8,628 12,912,337
U.S. Treasury Notes
1.625%, 1/15/15 2,503 2,398,512
1.875%, 12/31/05* 10,000 9,979,690
3.00%, 11/15/07-2/15/09* 18,385 17,864,897
3.125%, 4/15/09* 3,975 3,815,225
3.25%, 8/15/08* 10,000 9,707,810
3.625%, 5/15/13* 13,975 13,227,114
3.875%, 5/15/10 400 391,016
4.00%, 11/15/12* 3,000 2,913,750
4.125%, 5/15/15* 4,681 4,531,793
4.25%, 8/15/13-8/15/15* 27,600 27,076,131
5.00%, 2/15/11 1,900 1,950,319
5.625%, 5/15/08* 4,145 4,261,416
6.00%, 8/15/09* 3,480 3,666,779
6.125%, 8/15/07* 23,395 24,047,510
--------------
Total U.S. Government & Government
Sponsored Agency Obligations
(cost $190,556,850) 192,358,143
--------------
_______________________________________________________________________________
ALLIANCEBERNSTEIN BALANCED SHARES o 11
Principal
Amount
Company (000) U.S. $ Value
- -------------------------------------------------------------------------------
Corporate Debt Obligations-7.6%
Aerospace/Defense-0.1%
Raytheon Co.
4.85%, 1/15/11 $ 1,200 $ 1,183,871
--------------
Automotive-0.4%
Daimlerchrysler North America
4.875%, 6/15/10* 2,450 2,382,630
Ford Motor Credit Co.
4.95%, 1/15/08 4,750 4,330,826
7.875%, 6/15/10 400 374,881
--------------
7,088,337
--------------
Banking-1.7%
ABN Amro
6.523%, 11/08/12(b) 1,000 1,060,156
Barclays Bank Plc
8.55%, 6/15/11(b) 1,000 1,154,672
BB&T Corp.
6.50%, 8/01/11 1,000 1,069,292
Capital One Bank
6.50%, 6/13/13 1,600 1,683,053
Chase Manhattan Corp.
7.00%, 11/15/09 1,000 1,069,681
DBS Group Holdings, Ltd.
7.125%, 5/15/11(b) 950 1,034,490
Dresdner Funding Trust I
8.151%, 6/30/31(b) 2,625 3,134,767
Fuji JGB Investment
9.87%, 6/30/08(b) 2,000 2,216,176
HBOS Plc
5.375%, 11/01/13(b) 2,100 2,082,314
HSBC Bank USA
5.875%, 11/01/34 2,500 2,457,182
Ing Capital Funding Trust III
8.439%, 12/31/10 1,000 1,135,707
Northern Rock Plc
5.60%, 4/30/49(b) 2,975 2,971,478
Royal Bank of Scotland Group Plc
7.648%, 8/31/49 1,000 1,181,968
Sanwa Bank, Ltd.
7.40%, 6/15/11 1,600 1,762,117
SB Treasury Co., Llc
9.40%, 6/30/08(b) 2,008 2,202,667
Sovereign Bancorp, Inc.
4.80%, 9/01/10(b) 1,000 976,920
Sumitomo Mitsui Banking Corp.
5.625%, 10/15/15(b) 550 543,746
The Chuo Mitsui Trust & Banking Co., Ltd.
5.506%, 4/15/15(b) 1,745 1,678,161
UBS Preferred Funding Trust II
7.247%, 6/26/11 1,000 1,095,353
_______________________________________________________________________________
12 o ALLIANCEBERNSTEIN BALANCED SHARES
Principal
Amount
Company (000) U.S. $ Value
- -------------------------------------------------------------------------------
UFJ Finance Aruba AEC
6.75%, 7/15/13 $ 800 $ 868,370
--------------
31,378,270
--------------
Broadcasting/Media-0.5%
BSKYB Finance Plc
5.625%, 10/15/15(b) 680 674,725
News America Holdings
9.25%, 2/01/13 500 606,409
News America, Inc.
5.30%, 12/15/14* 1,500 1,480,563
Time Warner Entertainment Co.
8.375%, 3/15/23 2,000 2,355,036
Time Warner, Inc.
6.875%, 5/01/12* 2,725 2,926,631
WPP Finance Corp.
5.875%, 6/15/14 1,000 1,008,311
--------------
9,051,675
--------------
Building/Real Estate-0.3%
CRH America, Inc.
6.95%, 3/15/12 750 812,593
EOP Operating LP
5.875%, 1/15/13 225 227,885
7.875%, 7/15/31 1,000 1,160,586
iStar Financial, Inc.
5.70%, 3/01/14 900 886,864
Regency Centers LP
5.25%, 8/01/15 1,800 1,749,411
--------------
4,837,339
--------------
Cable-0.1%
British Sky Broadcasting Group Plc
8.20%, 7/15/09 350 382,980
Comcast Corp.
7.05%, 3/15/33* 500 532,049
Continental Cablevision, Inc.
9.00%, 9/01/08 500 547,439
--------------
1,462,468
--------------
Chemicals-0.1%
Eastman Chemical Co.
7.25%, 1/15/24 800 874,941
Lubrizol Corp.
5.50%, 10/01/14 1,450 1,437,900
--------------
2,312,841
--------------
Communications-0.3%
AT&T Corp.
7.30%, 11/15/11 1,255 1,392,662
Centaur Funding Corp.
9.08%, 4/21/20(b) 1,200 1,530,750
Sprint Capital Corp.
6.875%, 11/15/28 2,000 2,148,106
_______________________________________________________________________________
ALLIANCEBERNSTEIN BALANCED SHARES o 13
Principal
Amount
Company (000) U.S. $ Value
- -------------------------------------------------------------------------------
TPSA Finance BV
7.75%, 12/10/08 $ 200 $ 214,780
--------------
5,286,298
--------------
Communications - Fixed-0.1%
GTE Northwest, Inc.
5.55%, 10/15/08 800 797,310
--------------
Communications - Mobile-0.2%
AT&T Wireless Services, Inc.
8.75%, 3/01/31* 1,250 1,637,795
Nextel Communications, Inc. Series F
5.95%, 3/15/14 1,335 1,334,995
Telus Corp.
7.50%, 6/01/07 400 413,773
8.00%, 6/01/11 600 673,976
--------------
4,060,539
--------------
Conglomerate/Miscellaneous-0.0%
Hutchison Whampoa International, Ltd.
7.45%, 11/24/33(b) 500 566,360
--------------
Containers-0.1%
Packaging Corp. of America
4.375%, 8/01/08 1,800 1,744,177
--------------
Electric & Gas Utility-0.1%
FirstEnergy Corp.
7.375%, 11/15/31* 2,000 2,300,602
--------------
Energy-0.4%
Devon Financing Corp.
7.875%, 9/30/31 700 865,745
Enterprise Products Operating L.P. Series B
5.60%, 10/15/14* 1,850 1,833,324
Petronas Capital, Ltd.
7.00%, 5/22/12(b) 850 933,160
Valero Energy Corp
4.75%, 6/15/13 1,000 965,135
XTO Energy, Inc.
7.50%, 4/15/12 1,400 1,563,657
--------------
6,161,021
--------------
Financial-0.8%
CIT Group, Inc.
7.375%, 4/02/07* 2,000 2,062,832
Countrywide Funding Corp.
4.25%, 12/19/07 1,500 1,478,106
General Electric Capital Corp.
5.00%, 6/15/07 1,500 1,504,548
5.875%, 2/15/12 2,250 2,355,194
_______________________________________________________________________________
14 o ALLIANCEBERNSTEIN BALANCED SHARES
Principal
Amount
Company (000) U.S. $ Value
- -------------------------------------------------------------------------------
Goldman Sachs Group, Inc.
6.65%, 5/15/09 $ 800 $ 840,625
Household Finance Corp.
5.75%, 1/30/07 800 807,502
6.50%, 1/24/06 425 426,138
iStar Financial, Inc.
6.00%, 12/15/10 800 810,706
Lehman Brothers Holdings, Inc.
7.875%, 8/15/10 850 946,611
Merrill Lynch & Co., Inc.
6.00%, 2/17/09 2,000 2,060,092
Rabobank Capital Fund II
5.26%, 12/31/13(b) 1,100 1,093,785
Resona Preferred Global Securities
7.191%, 7/30/15(b) 525 546,802
--------------
14,932,941
--------------
Food/Beverage-0.2%
Imperial Tobacco Overseas BV
7.125%, 4/01/09 1,000 1,056,375
Kellogg Co. Series B
6.60%, 4/01/11 700 748,563
Kraft Foods, Inc.
5.25%, 10/01/13 1,200 1,196,229
--------------
3,001,167
--------------
Health Care-0.1%
Wyeth
6.50%, 2/01/34 2,250 2,434,073
--------------
Industrial-0.2%
Inco, Ltd
7.75%, 5/15/12 800 889,075
Tyco International Group, SA
6.375%, 2/15/06-10/15/11 2,020 2,086,547
Waste Management, Inc.
6.375%, 11/15/12 675 714,748
--------------
3,690,370
--------------
Insurance-0.6%
Liberty Mutual Group
5.75%, 3/15/14(b) 1,600 1,568,933
Mangrove Bay PassThru Trust
6.102%, 7/15/33(b) 1,600 1,577,152
North Front PassThrough Trust
5.81%, 12/15/24(b) 2,213 2,199,470
Royal & Sun Alliance Insurance Group Plc
8.95%, 10/15/29* 2,642 3,289,189
Zurich Capital Trust I
8.376%, 6/01/37(b) 1,950 2,106,965
--------------
10,741,709
--------------
_______________________________________________________________________________
ALLIANCEBERNSTEIN BALANCED SHARES o 15
Principal
Amount
Company (000) U.S. $ Value
- -------------------------------------------------------------------------------
Metals / Mining-0.0%
Ispat Inland Ulc
9.75%, 4/01/14 $ 500 $ 563,750
--------------
Non-Air Transportation-0.1%
CSX Corp.
5.50%, 8/01/13 400 406,039
6.75%, 3/15/11 1,400 1,499,368
--------------
1,905,407
--------------
Petroleum Products-0.1%
Amerada Hess Corp.
7.30%, 8/15/31* 1,650 1,881,548
Tengizchevroil Finance Co.
6.124%, 11/15/14(b) 610 617,625
--------------
2,499,173
--------------
Public Utilities - Electric & Gas-0.7%
American Electric Power Co., Inc. Series C
5.375%, 3/15/10* 1,200 1,208,042
CenterPoint Energy Resources Corp. Series B
7.875%, 4/01/13 2,300 2,618,212
Consumers Energy Co.
5.375%, 4/15/13* 1,700 1,677,257
NiSource Finance Corp.
7.875%, 11/15/10 1,000 1,106,521
Progress Energy, Inc.
5.85%, 10/30/08 1,700 1,731,105
Texas Eastern Transmission Corp.
7.30%, 12/01/10 1,700 1,852,764
TXU Australia Holdings Pty, Ltd.
6.15%, 11/15/13(b) 1,200 1,281,581
Xcel Energy, Inc.
7.00%, 12/01/10 775 832,582
Yorkshire Power Finance Ltd Series B
6.496%, 2/25/08 750 769,807
--------------
13,077,871
--------------
Public Utilities - Telephone-0.1%
Telecom Italia Capital
4.00%, 11/15/08 1,000 969,163
Telefonos de Mexico S.A. de C.V.
4.75%, 1/27/10 1,175 1,152,013
--------------
2,121,176
--------------
Supermarket/Drug-0.3%
Kroger Co.
6.80%, 4/01/11 1,500 1,557,039
Safeway, Inc.
4.95%, 8/16/10* 2,000 1,932,290
5.80%, 8/15/12 1,240 1,234,710
--------------
4,724,039
--------------
_______________________________________________________________________________
16 o ALLIANCEBERNSTEIN BALANCED SHARES
Shares or
Principal
Amount
Company (000) U.S. $ Value
- -------------------------------------------------------------------------------
Technology-0.0%
Motorola, Inc.
7.625%, 11/15/10 $ 302 $ 335,834
--------------
Total Corporate Debt Obligations
(cost $137,714,451) 138,258,618
--------------
Collateralized Mortgage Obligations-3.3%
Banc of America Commercial Mortgage, Inc.
Series 2005-1, Class A3
4.877%, 11/10/42 10,450 10,351,143
Bear Stearns Commercial Mortgage Securities,
Inc.
Series 2005-PWR9, Class A4A
4.871%, 9/11/42 8,000 7,742,160
CS First Boston Mortgage Securities Corp.
Series 2004-C5, Class A2
4.183%, 11/15/37 12,500 12,077,125
Greenwich Capital Commercial Funding Corp.
Series 2003-C2, Class A3
4.533%, 1/05/36 5,000 4,851,050
Series 2005-GG3, Class A4
4.799%, 8/10/42 10,100 9,753,570
JP Morgan Chase Commercial Mortgage
Securities Corp.
Series 2005-LDP3, Class A2
4.851%, 8/15/42 8,500 8,389,755
LB-UBS Commercial Mortgage Trust
Series 2004-C7, Class A2
3.992%, 10/15/29 1,095 1,053,697
Morgan Stanley Capital I
Series 2004-T13, Class A2
3.94%, 9/13/45 4,685 4,478,485
--------------
Total Collateralized Mortgage Obligations
(cost $59,650,181) 58,696,985
--------------
Sovereign-0.5%
Korea Development Bank
5.75%, 9/10/13 800 823,040
Republic of South Africa
7.375%, 4/25/12 3,000 3,330,000
United Mexican States
6.375%, 1/16/13 4,000 4,236,000
--------------
Total Sovereign
(cost $7,805,457) 8,389,040
--------------
_______________________________________________________________________________
ALLIANCEBERNSTEIN BALANCED SHARES o 17
Shares or
Principal
Amount
Company (000) U.S. $ Value
- -------------------------------------------------------------------------------
Municipal Obligation-0.1%
Dallas-Fort Worth Texas International
7.07%, 11/01/24
(cost $2,045,544) 2,000 $ 2,141,820
--------------
Total Debt Obligations
(cost $397,772,483) 399,844,606
--------------
Preferred Stocks-0.1%
Banking-0.0%
Royal Bank of Scotland Group Plc
5.75%, 9/30/09 50,000 1,165,500
--------------
Public Utilities - Electric & Gas-0.1%
DTE Energy Trust I
7.80%, 2/01/32 60,000 1,522,800
--------------
Total Preferred Stocks
(cost $2,750,000) 2,688,300
--------------
Short-Term Investments-5.4%
Time Deposit-1.5%
State Street Euro Dollar
3.35%, 12/01/05 27,441 27,441,000
--------------
U.S. Treasury Bill-3.9%
U.S. Treasury Bill
3.63%, 2/23/06* 71,000 70,391,589
--------------
Total Short-Term Investments
(cost $97,832,589) 97,832,589
--------------
Total Investments Before
Security Lending Collateral
(cost $1,613,895,529) 1,796,695,691
--------------
INVESTMENT OF CASH COLLATERAL FOR
SECURITIES LOANED-25.2%
Short-Term Investments
Aspen Funding
4.06%, 12/09/05 $25,000 24,893,389
Banco Bilbao Vizcaya
4.22%, 1/25/06 25,000 24,753,264
Deutsche Bank
4.145%, 2/26/06 30,000 30,018,850
Goldman Sachs
4.10%, 1/18/06 50,000 50,000,000
Gotham Funding
4.02%, 12/01/05 25,000 24,974,875
K2
3.99%, 2/14/06 39,500 38,719,195
_______________________________________________________________________________
18 o ALLIANCEBERNSTEIN BALANCED SHARES
Principal
Amount
Company (000) U.S. $ Value
- -------------------------------------------------------------------------------
KBC
4.11%, 12/27/05 $ 21,250 $ 21,115,133
Lexington
4.20%, 1/18/06 50,000 49,549,333
Market Street Finance
4.04%, 12/01/05 47,000 46,994,725
Morgan Stanley
4.07%-4.08%, 1/06/06-7/10/06 129,000 129,000,000
Sigma Funding
4.10%, 3/06/06 13,000 13,080,447
--------------
453,099,211
--------------
Shares
--------------
UBS Private Money Market Fund, LLC 3.95% 2,351,940 2,351,940
--------------
Total Investment of Cash Collateral for
Securities Loaned
(cost $455,451,151) 455,451,151
--------------
Total Investments-124.4%
(cost $2,069,346,680) 2,252,146,842
Other assets less liabilities-(24.4%) (442,368,947)
--------------
Net Assets-100% $1,809,777,895
==============
* Represents entire or partial securities out on loan. See Note E for
securities lending information.
(a) Non-income producing security.
(b) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. These securities are considered liquid and may be resold in
transactions exempt from registration, normally to quailified institutional
buyers. At November 30, 2005, the aggregate market value of these securities
amounted to $33,752,855 or 1.9% of net assets.
Glossary:
ADR - American Depositary Receipt.
See notes to financial statements.
_______________________________________________________________________________
ALLIANCEBERNSTEIN BALANCED SHARES o 19
STATEMENT OF ASSETS & LIABILITIES
November 30, 2005
ASSETS
Investments in securities, at value (cost $2,069,346,680--
including investment of cash collateral for securities
loaned of $455,451,151) $2,252,146,842(a)
Cash 405
Receivable for investment securities sold 16,196,913
Dividends and interest receivable 7,740,085
Receivable for capital stock sold 2,862,004
--------------
Total assets 2,278,946,249
--------------
LIABILITIES
Payable for collateral received on securities loaned 455,451,151
Payable for capital stock redeemed 5,892,694
Payable for investment securities purchased 4,565,245
Distribution fee payable 841,226
Advisory fee payable 642,709
Transfer Agent fee payable 200,135
Administrative fee payable 475
Accrued expenses and other liabilities 1,574,719
--------------
Total liabilities 469,168,354
--------------
Net Assets $1,809,777,895
==============
COMPOSITION OF NET ASSETS
Capital stock, at par $ 1,049,653
Additional paid-in capital 1,527,870,286
Undistributed net investment income 3,945,620
Accumulated net realized gain on investment transactions 94,128,545
Net unrealized appreciation of investments and foreign
currency denominated assets and liabilities 182,783,791
--------------
$1,809,777,895
==============
Calculation of Maximum Offering Price Per Share
Net Asset Value and:
---------------------------- Maximum
Shares Offering Redemption Offering
Class Net Assets Outstanding Price Price Price*
- -------------------------------------------------------------------------------------------------
A $935,414,257 53,137,685 -- $17.60 $18.38
- -------------------------------------------------------------------------------------------------
B $571,213,644 34,128,138 $16.74 -- --
- -------------------------------------------------------------------------------------------------
C $181,745,893 10,816,161 $16.80 -- --
- -------------------------------------------------------------------------------------------------
Advisor $115,873,135 6,568,905 $17.64 $17.64 --
- -------------------------------------------------------------------------------------------------
R $1,393,215 79,270 $17.58 $17.58 --
- -------------------------------------------------------------------------------------------------
K $10,250 582.42 $17.60 $17.60 --
- -------------------------------------------------------------------------------------------------
I $4,127,501 234,581 $17.60 $17.60 --
- -------------------------------------------------------------------------------------------------
* The maximum offering price per share for Class A shares includes a sales
charge of 4.25%.
(a) Includes securities on loan with a value of $437,830,336 (see Note E).
See notes to financial statements.
_______________________________________________________________________________
20 o ALLIANCEBERNSTEIN BALANCED SHARES
STATEMENT OF OPERATIONS
Year Ended November 30, 2005
INVESTMENT INCOME
Dividends (net of foreign taxes withheld
of $56,254) $ 24,305,490
Interest 22,543,636 $ 46,849,126
------------
EXPENSES
Advisory fee 7,608,035
Distribution fee--Class A 2,502,002
Distribution fee--Class B 5,900,919
Distribution fee--Class C 1,792,018
Distribution fee--Class R 4,831
Distribution fee--Class K 19
Transfer agency 3,624,941
Printing 1,086,629
Custodian 394,489
Registration 180,861
Administrative 95,041
Legal 87,184
Audit 62,944
Directors' fees 28,140
Miscellaneous 83,010
------------
Total expenses 23,451,063
Less: expense offset arrangement
(see Note B) (19,740)
------------
Net expenses 23,431,323
------------
Net investment income 23,417,803
------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT AND FOREIGN
CURRENCY TRANSACTIONS
Net realized gain on investment
transactions 153,206,851
Net change in unrealized
appreciation/depreciation of:
Investments (70,504,645)
Foreign currency denominated assets
and liabilities (2,606)
------------
Net gain on investment and foreign
currency transactions 82,699,600
------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS $106,117,403
============
See notes to financial statements.
_______________________________________________________________________________
ALLIANCEBERNSTEIN BALANCED SHARES o 21
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
November 30, November 30,
2005 2004
============== ==============
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income $ 23,417,803 $ 24,931,819
Net realized gain on investment
transactions 153,206,851 37,546,008
Net change in unrealized
appreciation/depreciation of
investments and foreign
currency denominated assets
and liabilities (70,507,251) 114,691,645
-------------- --------------
Net increase in net assets from
operations 106,117,403 177,169,472
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income
Class A (14,865,937) (10,171,842)
Class B (6,743,336) (4,775,552)
Class C (2,015,582) (1,410,293)
Advisor Class (2,367,824) (1,978,377)
Class R (13,689) (1,822)
Class K (115) -0-
Class I (7,667) -0-
CAPITAL STOCK TRANSACTIONS
Net increase 63,648,673 115,064,822
-------------- --------------
Total increase 143,751,926 273,896,408
NET ASSETS
Beginning of period 1,666,025,969 1,392,129,561
-------------- --------------
End of period (including undistributed
net investment income of $3,945,620
and $5,775,707, respectively) $1,809,777,895 $1,666,025,969
============== ==============
See notes to financial statements.
_______________________________________________________________________________
22 o ALLIANCEBERNSTEIN BALANCED SHARES
NOTES TO FINANCIAL STATEMENTS
November 30, 2005
NOTE A
Significant Accounting Policies
AllianceBernstein Balanced Shares, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company. The Fund offers Class A, Class B, Class C, Advisor Class, Class R,
Class K and Class I shares. Class A shares are sold with a front-end sales
charge of up to 4.25% for purchases not exceeding $1,000,000. With respect to
purchases of $1,000,000 or more, Class A shares redeemed within one year of
purchase may be subject to a contingent deferred sales charge of 1%. Class B
shares are currently sold with a contingent deferred sales charge which
declines from 4% to zero depending on the period of time the shares are held.
Class B shares will automatically convert to Class A shares eight years after
the end of the calendar month of purchase. Class C shares are subject to a
contingent deferred sales charge of 1% on redemptions made within the first
year after purchase. Class R and Class K shares are sold without an initial or
contingent deferred sales charge. Advisor Class and Class I shares are sold
without an initial or contingent deferred sales charge and are not subject to
ongoing distribution expenses. All seven 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 U.S. 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. Additional information about some of the items discussed
in these Notes to Financial Statements is contained in the Fund's Statement of
Additional Information, which is available upon request. The following is a
summary of significant accounting policies followed by the Fund.
1. Security Valuation
Portfolio securities are valued at their current market value determined on the
basis of market quotations or, if market quotations are not readily available
or are deemed unreliable, at "fair value" as determined in accordance with
procedures established by and under the general supervision of the Fund's Board
of Directors.
In general, the market value of securities which are readily available and
deemed reliable are determined as follows. Securities listed on a national
securities exchange or on a foreign securities exchange are valued at the last
sale price at the close of the exchange or foreign securities exchange. If
there has been no sale on such day, the securities are valued at the mean of
the closing bid and asked prices on such day. Securities listed on more than
one exchange are valued by reference to the principal exchange on which the
securities are traded; securities not listed on an exchange but traded on The
NASDAQ Stock Market, Inc. ("NASDAQ")
_______________________________________________________________________________
ALLIANCEBERNSTEIN BALANCED SHARES o 23
are valued in accordance with the NASDAQ Official Closing Price; listed put or
call options are valued at the last sale price. If there has been no sale on
that day, such securities will be valued at the closing bid prices on that day;
open futures contracts and options thereon are valued using the closing
settlement price or, in the absence of such a price, the most recent quoted bid
price. If there are no quotations available for the day of valuation, the last
available closing settlement price is used; securities traded in the
over-the-counter market, ("OTC") (but excluding securities traded on NASDAQ)
are valued at the mean of the current bid and asked prices as reported by the
National Quotation Bureau or other comparable sources; U.S. Government
securities and other debt instruments having 60 days or less remaining until
maturity are valued at amortized cost if their original maturity was 60 days or
less; or by amortizing their fair value as of the 61st day prior to maturity if
their original term to maturity exceeded 60 days; fixed-income securities,
including mortgage backed and asset backed securities, may be valued on the
basis of prices provided by a pricing service or at a price obtained from one
or more of the major broker/dealers. In cases where broker/dealer quotes are
obtained, Alliance Capital Management, L.P. (the "Adviser") may establish
procedures whereby changes in market yields or spreads are used to adjust, on a
daily basis, a recently obtained quoted price on a security; and OTC and other
derivatives are valued on the basis of a quoted bid price or spread from a
major broker/dealer in such security.
Securities for which market quotations are not readily available (including
restricted securities) or are deemed unreliable are valued at fair value.
Factors considered in making this determination may include, but are not
limited to, information obtained by contacting the issuer, analysts, analysis
of the issuer's financial statements or other available documents. In addition,
the Fund may use fair value pricing for securities primarily traded in non-U.S.
markets because, most foreign markets close well before the Fund values its
securities at 4:00 p.m., Eastern Time. The earlier close of these foreign
markets gives rise to the possibility that significant events, including broad
market moves, may have occurred in the interim and may materially affect the
value of those securities. To account for this, the Fund may frequently value
many of its foreign equity securities using fair value prices based on third
party vendor modeling tools to the extent available.
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.
_______________________________________________________________________________
24 o ALLIANCEBERNSTEIN BALANCED SHARES
Net realized gain or loss on foreign currency transactions represents foreign
exchange gains and losses from sales and maturities of foreign fixed income
investments, foreign currency exchange contracts, holding of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on foreign investment transactions, and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent amounts actually received or paid.
Net unrealized currency gains and losses from valuing foreign currency
denominated assets and liabilities at period end exchange rates are reflected
as a component of net unrealized appreciation or depreciation of investments
and foreign currency denominated assets and liabilities.
3. Taxes
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required. The Fund may be subject to taxes imposed by countries in which it
invests. Such taxes are generally based on income and/or capital gains earned
or repatriated. Taxes are accrued and applied to net investment income, net
realized gains and net unrealized appreciation/depreciation as such income
and/or gains are earned.
4. Investment Income and Investment Transactions
Dividend income is recorded on the ex-dividend date or as soon as the Fund is
informed of the dividend. Interest income is accrued daily. Investment
transactions are accounted for on the trade date securities are purchased or
sold. Investment gains and losses are determined on the identified cost basis.
The Fund amortizes premiums and accretes discounts as adjustments to interest
income.
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 for class
specific expense which are allocated to the respective class.
6. Dividends and Distributions
Dividends and distributions to shareholders, if any, 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 U.S. 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.
_______________________________________________________________________________
ALLIANCEBERNSTEIN BALANCED SHARES o 25
NOTE B
Advisory Fee and Other Transactions With Affiliates
Under the terms of the investment advisory agreement, the Fund pays the Adviser
an advisory fee at an annual rate of .60% of the first $200 million, .50% of
the next $200 million and .40% in excess of $400 million of the Fund's average
daily net assets. Prior to September 7, 2004, the Fund paid the Adviser an
advisory fee at an annual rate of .625% of the first $200 million, .50% of the
next $200 million and .45% in excess of $400 million of the Fund's average
daily net assets. The fee is accrued daily and paid monthly.
Effective January 1, 2004 through September 6, 2004, in contemplation of the
final agreement with the Office of New York Attorney General ("NYAG"), the
Adviser began waiving a portion of its advisory fee so as to charge the Fund at
the reduced annual rate discussed above. For a more complete discussion of the
Adviser's settlement with the NYAG, please see "Legal Proceedings" below.
Pursuant to the advisory agreement, the Fund paid $95,041 to the Adviser
representing the cost of certain legal and accounting services provided to the
Fund by the Adviser for the year ended November 30, 2005.
The Fund compensates Alliance Global Investor Services, Inc. (AGIS), 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. AGIS may make payments to intermediaries that provide omnibus account
services, sub-accounting services and/or networking services. Such compensation
retained by AGIS amounted to $1,199,512 for the year ended November 30, 2005.
For the year ended November 30, 2005, the Fund's expenses were reduced by
$19,740 under an expense offset arrangement with AGIS.
AllianceBernstein Investment Research and Management, Inc., (the
"Distributor"), a wholly-owned subsidiary of the Adviser, serves as the
distributor of the Fund's shares. The Distributor has advised the Fund that it
has retained front-end sales charges of $89,483 from the sale of Class A shares
and received $23,986, $692,676 and $23,848, respectively, in contingent
deferred sales charges imposed upon redemptions by shareholders of Class A,
Class B and Class C shares, respectively, for the year ended November 30, 2005.
Brokerage commissions paid on investment transactions for the year ended
November 30, 2005 amounted to $1,407,191, of which $92,195 and $0,
respectively, was paid to Sanford C. Bernstein & Co. LLC and Sanford C.
Bernstein Limited, affiliates of the Adviser.
Accrued expenses includes $13,205 owed to a Director under the Director's
deferred compensation plan.
_______________________________________________________________________________
26 o ALLIANCEBERNSTEIN BALANCED SHARES
NOTE C
Distribution Services Agreement
The Fund has adopted a Distribution Services Agreement (the "Agreement")
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the
Agreement, the Fund pays distribution and servicing fees to the Distributor at
an annual rate of up to .30% of the Fund's average daily net assets
attributable to the Class A shares, 1% of the Fund's average daily net assets
attributable to the Class B and Class C shares, .50% of the average daily net
assets attributable to Class R shares and .25% of the Fund's average daily net
assets attributable to Class K shares. There are no distribution and servicing
fees on the Advisor Class and Class I shares. The fees are accrued daily and
paid monthly. The Agreement provides that the Distributor will use such
payments in their entirety for distribution assistance and promotional
activities. The Distributor has incurred expenses in excess of the distribution
costs reimbursed by the Fund in the amount of $10,923,759, $2,305,844, $18,212
and $0, for Class B and Class C shares, Class R and Class K shares
respectively; such costs may be recovered from the Fund in future periods as
long as the Agreement is in effect. In accordance with the Agreement, there is
no provision for recovery of unreimbursed distribution costs incurred by the
Distributor beyond the current fiscal year for Class A and Class R shares. The
Agreement also provides that the Adviser may use its own resources to finance
the distribution of the Fund's shares.
NOTE D
Investment Transactions
Purchases and sales of investment securities (excluding short-term investments)
for the year ended November 30, 2005, were as follows:
Purchases Sales
============== ==============
Investment securities (excluding
U.S Government securities) $ 856,948,245 $ 725,563,777
U.S Government securities 113,751,857 216,734,331
The cost of investments for federal income tax purpose, gross unrealized
appreciation and unrealized depreciation (excluding foreign currency
transactions) are as follows:
Cost $2,074,311,123
--------------
Gross unrealized appreciation $ 218,716,197
Gross unrealized depreciation (40,880,477)
--------------
Net unrealized appreciation $ 177,835,720
==============
_______________________________________________________________________________
ALLIANCEBERNSTEIN BALANCED SHARES o 27
1. Forward Exchange Currency Contracts
The Fund may enter into forward exchange currency contracts in order to hedge
its exposure to changes in foreign currency exchange rates on its foreign
portfolio holdings, to hedge certain firm purchase and sales commitments
denominated in foreign currencies and for investment purposes. A forward
exchange currency contract is a commitment to purchase or sell a foreign
currency on a future date at a negotiated forward rate. The gain or loss
arising from the difference between the original contract and the closing of
such contract would be included in net realized gain or loss on foreign
currency transactions.
Fluctuations in the value of open forward exchange currency contracts are
recorded for financial reporting purposes as net unrealized appreciation or
depreciation 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 at
least 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 the counterparty to meet the
terms of a contract and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar. The face or contract amount, in U.S.
dollars reflects the total exposure the Fund has in that particular currency
contract.
2. Option Transactions
For hedging and investment purposes, the Fund may purchase and write (sell) put
and call options on U.S. and foreign government securities and foreign
currencies that are traded on U.S. and foreign securities exchanges and
over-the-counter markets.
The risk associated with purchasing an option is that the Fund pays a premium
whether or not the option is exercised. Additionally, the Fund bears the risk
of loss of premium and change in market value should the counterparty not
perform under the contract. Put and call options purchased are accounted for in
the same manner as portfolio securities. The cost of securities acquired
through the exercise of call options is increased by premiums paid. The
proceeds from securities sold through the exercise of put options are decreased
by the premiums paid.
When the Fund writes an option, the premium received by the Fund is recorded as
a liability and is subsequently adjusted to the current market value of the
option written. Premiums received from writing options which expire unexercised
are recorded by the Fund on the expiration date as realized gains from
_______________________________________________________________________________
28 o ALLIANCEBERNSTEIN BALANCED SHARES
options written. The difference between the premium received and the amount
paid on effecting a closing purchase transaction, including brokerage
commissions, is also treated as a realized gain, or if the premium received is
less than the amount paid for the closing purchase transaction, as a realized
loss. If a call option is exercised, the premium received is added to the
proceeds from the sale of the underlying security or currency in determining
whether the Fund has realized a gain or loss. If a put option is exercised, the
premium received reduces the cost basis of the security or currency purchased
by the Fund. In writing an option, the Fund bears the market risk of an
unfavorable change in the price of the security or currency underlying the
written option. Exercise of an option written by the Fund could result in the
Fund selling or buying a security or currency at a price different from the
current market value.
NOTE E
Securities Lending
The Fund has entered into a securities lending agreement with AG Edwards &
Sons, Inc. (the "Lending Agent"). Under the terms of the agreement, the Lending
Agent, on behalf of the Fund, administers the lending of portfolio securities
to certain broker-dealers. In return, the Fund receives fee income from the
lending transactions or it retains a portion of interest on the investment of
any cash received as collateral. The Fund also continues to receive dividends
or interest on the securities loaned. Unrealized gain or loss on the value of
the securities loaned that may occur during the term of the loan will be
reflected in the accounts of the Fund. All loans are continuously secured by
collateral exceeding the value of the securities loaned. All collateral
consists of either cash or U.S. government securities. The Lending Agent may
invest the cash collateral received in accordance with the investment
restrictions of the Fund in one or more of the following investments: U.S.
government or U.S. government agency obligations, bank obligations, corporate
debt obligations, asset-backed securities, investment funds, structured
products, repurchase agreements and an eligible money market fund. The Lending
Agent will indemnify the Fund for any loss resulting from a borrower's failure
to return a loaned security when due. As of November 30, 2005, the Fund had
loaned securities with a value of $437,830,336 and received cash collateral
which was invested in short-term securities valued at $455,451,151 as included
in the accompanying portfolio of investments. For the year ended November 30,
2005, the Fund earned fee income of $586,859 which is included in interest
income in the accompanying statement of operations.
_______________________________________________________________________________
ALLIANCEBERNSTEIN BALANCED SHARES o 29
NOTE F
Capital Stock
There are 21,000,000,000 shares of $.01 par value capital stock authorized,
divided into seven classes, designated Class A, Class B, Class C, Advisor
Class, Class R, Class K and Class I shares. Each class consists of
3,000,000,000 authorized shares. Transactions in capital stock were as follows:
Shares Amount
--------------------------- ------------------------------
Year Ended Year Ended Year Ended Year Ended
November 30, November 30, November 30, November 30,
2005 2004 2005 2004
------------ ------------ -------------- --------------
Class A
Shares sold 17,463,904 17,693,504 $300,064,143 $284,538,223
- -------------------------------------------------------------------------------
Shares issued in
reinvestment of
dividends 803,946 577,319 13,752,794 9,237,937
- -------------------------------------------------------------------------------
Shares converted
from Class B 920,998 786,827 15,853,043 12,711,147
- -------------------------------------------------------------------------------
Shares redeemed (12,976,574) (10,964,434) (222,887,076) (176,677,049)
- -------------------------------------------------------------------------------
Net increase 6,212,274 8,093,216 $106,782,904 $129,810,258
===============================================================================
Class B
Shares sold 5,179,394 7,795,058 $ 84,451,744 $119,601,050
- -------------------------------------------------------------------------------
Shares issued in
reinvestment of
dividends 349,087 257,118 5,685,944 3,920,206
- -------------------------------------------------------------------------------
Shares converted
to Class A (967,585) (824,336) (15,853,043) (12,711,147)
- -------------------------------------------------------------------------------
Shares redeemed (7,371,203) (7,389,018) (120,475,015) (113,185,302)
- -------------------------------------------------------------------------------
Net decrease (2,810,307) (161,178) $(46,190,370) $ (2,375,193)
===============================================================================
Class C
Shares sold 2,115,105 2,427,381 $ 34,634,040 $ 37,362,446
- -------------------------------------------------------------------------------
Shares issued in
reinvestment of
dividends 89,626 65,120 1,465,461 996,672
- -------------------------------------------------------------------------------
Shares redeemed (2,226,881) (2,867,474) (36,513,508) (44,034,262)
- -------------------------------------------------------------------------------
Net decrease (22,150) (374,973) $ (414,007) $ (5,675,144)
===============================================================================
Advisor Class
Shares sold 1,274,566 1,122,218 $ 21,860,052 $ 18,085,882
- -------------------------------------------------------------------------------
Shares issued in
reinvestment of
dividends 131,516 120,204 2,252,530 1,924,488
- -------------------------------------------------------------------------------
Shares redeemed (1,491,939) (1,676,266) (25,700,439) (27,046,466)
- -------------------------------------------------------------------------------
Net decrease (85,857) (433,844) $ (1,587,857) $ (7,036,096)
===============================================================================
_______________________________________________________________________________
30 o ALLIANCEBERNSTEIN BALANCED SHARES
Shares Amount
--------------------------- ------------------------------
Year Ended Year Ended Year Ended Year Ended
November 30, November 30, November 30, November 30,
2005 2004 2005 2004
------------ ------------ -------------- --------------
Class R
Shares sold 122,380 23,926 $ 2,105,975 $ 381,785
- -------------------------------------------------------------------------------
Shares issued in
reinvestment of
dividends 243 49 4,151 792
- -------------------------------------------------------------------------------
Shares redeemed (65,414) (2,577) (1,127,587) (41,580)
- -------------------------------------------------------------------------------
Net increase 57,209 21,398 $ 982,539 $ 340,997
===============================================================================
March 1, 2005(a) March 1, 2005(a)
to November 30, to November 30,
2005 2005
------------ --------------
Class K
Shares sold 582 $ 10,100
- -------------------------------------------------------------------------------
Net increase 582 $ 10,100
===============================================================================
Class I
Shares sold 254,160 $ 4,405,677
- -------------------------------------------------------------------------------
Shares issued in
reinvestment of
dividends 438 7,528
- -------------------------------------------------------------------------------
Shares redeemed (20,017) (347,841)
- -------------------------------------------------------------------------------
Net increase 234,581 $ 4,065,364
===============================================================================
(a) Commencement of distribtution.
NOTE G
Risks Involved in Investing in the Fund
Interest Rate Risk and Credit Risk-- Interest rate risk is the risk that
changes in interest rates will affect the value of the Fund's investments in
fixed-income debt securities such as bonds or notes. Increases in interest
rates may cause the value of the Fund's investments to decline. Credit risk is
the risk that the issuer or guarantor of a debt security, or the counterparty
to a derivative contract, will be unable or unwilling to make timely principal
and/or interest payments, or to otherwise honor its obligations. The degree of
risk for a particular security may be reflected in its credit risk rating.
Credit risk is greater for medium quality and lower-rated securities.
Lower-rated debt securities and similar unrated securities (commonly known as
"junk bonds") have speculative elements or are predominantly speculative risks.
Foreign Securities Risk--Investing in securities of foreign companies or
foreign governments involves special risks which include revaluation of
currencies and the possibility of future political and economic developments
which could adversely affect the value of such securities. Moreover, securities
of many foreign companies or foreign governments may be less liquid and their
prices more
_______________________________________________________________________________
ALLIANCEBERNSTEIN BALANCED SHARES o 31
volatile than those of comparable United States companies or of the United
States Government.
Indemnification Risk--In the ordinary course of business, the Fund enters into
contracts that contain a variety of indemnifications. The Fund's maximum
exposure under these arrangements is unknown. However, the Fund has not had
prior claims or losses pursuant to these indemnification provisions and expects
the risk of loss thereunder to be remote.
NOTE H
Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the Fund,
participate in a $250 million revolving credit facility (the "Facility")
intended to provide short-term financing if necessary, subject to certain
restrictions, in connection with abnormal redemption activity. Commitment fees
related to the Facility are paid by the participating funds and are included in
the miscellaneous expenses in the statement of operations. The Fund did not
utilize the Facility during the year ended November 30, 2005.
NOTE I
Distributions to Shareholders
The tax character of distributions paid during the fiscal periods ended
November 30, 2005 and November 30, 2004 were as follows:
November 30, November 30,
2005 2004
============== ==============
Distributions paid from:
Ordinary income $ 26,014,150 $ 18,337,886
-------------- --------------
Total taxable distributions 26,014,150 18,337,886
-------------- --------------
Total distributions paid $ 26,014,150 $ 18,337,886
============== ==============
As of November 30, 2005, the components of accumulated earnings (deficit) on a
tax basis were as follows:
Accumulated capital losses and other losses $ 97,173,658(a)
Undistributed ordinary income 5,878,157
Unrealized appreciation/(depreciation) 177,819,348(b)
--------------
Total accumulated earnings/(deficit) $ 280,871,163(c)
==============
(a) During the fiscal year, the Fund utilized capital loss carryforwards of
$55,423,079.
(b) The difference between book-basis and tax-basis unrealized
appreciation/(depreciation) is attributed primarily to the tax deferral of
losses on wash sales and the difference between book tax amortization methods
for bond premium and return of capital from an underlying investment.
(c) The difference between book-basis and tax-basis components of accumulated
earnings/deficit is attributable primarily to deferred compensation.
_______________________________________________________________________________
32 o ALLIANCEBERNSTEIN BALANCED SHARES
During the current fiscal year, permanent differences, primarily due to the tax
treatment of bond premium, return of capital received from an investment and
reclassification of tender offer, resulted in a decrease in accumulated net
realized gain on investment transactions and a corresponding increase in
undistributed net investment income. This reclassification had no effect on net
assets.
NOTE J
Legal Proceedings
As has been previously reported, the staff of the U.S. Securities and Exchange
Commission ("SEC") and the NYAG have been investigating practices in the mutual
fund industry identified as "market timing" and "late trading" of mutual fund
shares. Certain other regulatory authorities have also been conducting
investigations into these practices within the industry and have requested that
the Adviser provide information to them. The Adviser has been cooperating and
will continue to cooperate with all of these authorities.
On December 18, 2003, the Adviser confirmed that it had reached terms with the
SEC and the NYAG for the resolution of regulatory claims relating to the
practice of "market timing" mutual fund shares in some of the AllianceBernstein
Mutual Funds. The agreement with the SEC is reflected in an Order of the
Commission ("SEC Order"). The agreement with the NYAG is memorialized in an
Assurance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the
key provisions of these agreements are the following:
(i) The Adviser agreed to establish a $250 million fund (the "Reimbursement
Fund") to compensate mutual fund shareholders for the adverse effects of market
timing attributable to market timing relationships described in the SEC Order.
According to the SEC Order, the Reimbursement Fund is to be paid, in order of
priority, to fund investors based on (i) their aliquot share of losses suffered
by the fund due to market timing, and (ii) a proportionate share of advisory
fees paid by such fund during the period of such market timing;
(ii) The Adviser agreed to reduce the advisory fees it receives from some of
the AllianceBernstein long-term, open-end retail funds until December 31, 2008;
and
(iii) The Adviser agreed to implement changes to its governance and compliance
procedures. Additionally, the SEC Order and the NYAG Order contemplate that the
Adviser's registered investment company clients, including the Fund, will
introduce governance and compliance changes.
In anticipation of final, definitive documentation of the NYAG Order and
effective January 1, 2004, the Adviser began waiving a portion of its advisory
fee. On September 7, 2004, the Fund's investment advisory agreement was amended
to
_______________________________________________________________________________
ALLIANCEBERNSTEIN BALANCED SHARES o 33
reflect the reduced advisory fee. For more information on this waiver and
amendment to the Fund's investment advisory agreement , please see "Advisory
Fee and Other Transactions with Affiliates" above.
A special committee of the Adviser's Board of Directors, comprised of the
members of the Adviser's Audit Committee and the other independent member of
the Adviser's Board, is continuing to direct and oversee an internal
investigation and a comprehensive review of the facts and circumstances
relevant to the SEC's and the NYAG's investigations.
In addition, the Independent Directors of the Fund ("the Independent
Directors") have initiated an investigation of the above-mentioned matters with
the advice of an independent economic consultant and independent counsel. The
Independent Directors have formed a special committee to supervise the
investigation.
On October 2, 2003, a purported class action complaint entitled Hindo, et al.
v. AllianceBernstein Growth & Income Fund, et al. ("Hindo Complaint") was filed
against the Adviser, Alliance Capital Management Holding L.P. ("Alliance
Holding"), Alliance Capital Management Corporation, AXA Financial, Inc., the
AllianceBernstein Funds, certain officers of the Adviser ("Alliance
defendants"), and certain other defendants not affiliated with the Adviser, as
well as unnamed Doe defendants. The Hindo Complaint was filed in the United
States District Court for the Southern District of New York by alleged
shareholders of two of the AllianceBernstein Funds. The Hindo Complaint alleges
that certain of the Alliance defendants failed to disclose that they improperly
allowed certain hedge funds and other unidentified parties to engage in "late
trading" and "market timing" of AllianceBernstein Fund securities, violating
Sections 11 and 15 of the Securities Act, Sections 10(b) and 20(a) of the
Exchange Act and Sections 206 and 215 of the Advisers Act. Plaintiffs seek an
unspecified amount of compensatory damages and rescission of their contracts
with the Adviser, including recovery of all fees paid to the Adviser pursuant
to such contracts.
Since October 2, 2003, numerous additional lawsuits making factual allegations
generally similar to those in the Hindo Complaint were filed in various federal
and state courts against the Adviser and certain other defendants, and others
may be filed. The plaintiffs in such lawsuits have asserted a variety of
theories for recovery including, but not limited to, violations of the
Securities Act, the Exchange Act, the Advisers Act, the Investment Company Act,
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
certain state securities laws and common law. On February 20, 2004, the
Judicial Panel on Multidistrict Litigation transferred all federal actions, and
removed all state court actions, to the United States District Court for the
District of Maryland (the "Mutual Fund MDL"). The plaintiffs in the removed
actions have since moved for remand, and that motion is pending.
_______________________________________________________________________________
34 o ALLIANCEBERNSTEIN BALANCED SHARES
On September 29, 2004, plaintiffs filed consolidated amended complaints with
respect to four claim types: mutual fund shareholder claims; mutual fund
derivative claims; derivative claims brought on behalf of Alliance Holding; and
claims brought under ERISA by participants in the Profit Sharing Plan for
Employees of the Adviser. All four complaints include substantially identical
factual allegations, which appear to be based in large part on the SEC Order
and the NYAG Order. The claims in the mutual fund derivative consolidated
amended complaint are generally based on the theory that all fund advisory
agreements, distribution agreements and 12b-1 plans between the Adviser and the
AllianceBernstein Funds should be invalidated, regardless of whether market
timing occurred in each individual fund, because each was approved by fund
trustees on the basis of materially misleading information with respect to the
level of market timing permitted in funds managed by the Adviser. The claims
asserted in the other three consolidated amended complaints are similar to
those that the respective plaintiffs asserted in their previous federal
lawsuits. All of these lawsuits seek an unspecified amount of damages. The
Alliance defendants have moved to dismiss the complaints, and those motions are
pending.
On February 10, 2004, the Adviser received (i) a subpoena duces tecum from the
Office of the Attorney General of the State of West Virginia and (ii) a request
for information from West Virginia's Office of the State Auditor, Securities
Commission (the "West Virginia Securities Commission") (together, the
"Information Requests"). Both Information Requests require the Adviser to
produce documents concerning, among other things, any market timing or late
trading in the Adviser's sponsored mutual funds. The Adviser responded to the
Information Requests and has been cooperating fully with the investigation.
On April 11, 2005, a complaint entitled The Attorney General of the State of
West Virginia v. AIM Advisors, Inc., et al. ("WVAG Complaint") was filed
against the Adviser, Alliance Holding, and various other defendants not
affiliated with the Adviser. The WVAG Complaint was filed in the Circuit Court
of Marshall County, West Virginia by the Attorney General of the State of West
Virginia. The WVAG Complaint makes factual allegations generally similar to
those in the Hindo Complaint. On May 31, 2005, defendants removed the WVAG
Complaint to the United States District Court for the Northern District of West
Virginia. On July 12, 2005, plaintiff moved to remand. On October 19, 2005, the
WVAG Complaint was transferred to the Mutual Fund MDL.
On August 30, 2005, the deputy commissioner of securities of the West Virginia
Securities Commission signed a "Summary Order to Cease and Desist, and Notice
of Right to Hearing" addressed to the Adviser and Alliance Holding. The Summary
Order claims that the Adviser and Alliance Holding violated the West Virginia
Uniform Securities Act, and makes factual allegations generally similar to
those in the Commission Order and the NYAGOrder. The Adviser intends to
vigorously defend against the allegations in the WVAG Complaint.
_______________________________________________________________________________
ALLIANCEBERNSTEIN BALANCED SHARES o 35
On June 22, 2004, a purported class action complaint entitled Aucoin, et al. v.
Alliance Capital Management L.P., et al. ("Aucoin Complaint") was filed against
the Adviser, Alliance Capital Management Holding L.P., Alliance Capital
Management Corporation, AXA Financial, Inc., AllianceBernstein Investment
Research & Management, Inc., certain current and former directors of the
AllianceBernstein Mutual Funds, and unnamed Doe defendants. The Aucoin
Complaint names certain of the AllianceBernstein mutual funds as nominal
defendants. The Aucoin Complaint was filed in the United States District Court
for the Southern District of New York by an alleged shareholder of an
AllianceBernstein mutual fund. The Aucoin Complaint alleges, among other
things, (i) that certain of the defendants improperly authorized the payment of
excessive commissions and other fees from fund assets to broker-dealers in
exchange for preferential marketing services, (ii) that certain of the
defendants misrepresented and omitted from registration statements and other
reports material facts concerning such payments, and (iii) that certain
defendants caused such conduct as control persons of other defendants. The
Aucoin Complaint asserts claims for violation of Sections 34(b), 36(b) and
48(a) of the Investment Company Act, Sections 206 and 215 of the Advisers Act,
breach of common law fiduciary duties, and aiding and abetting breaches of
common law fiduciary duties. Plaintiffs seek an unspecified amount of
compensatory damages and punitive damages, rescission of their contracts with
the Adviser, including recovery of all fees paid to the Adviser pursuant to
such contracts, an accounting of all fund-related fees, commissions and soft
dollar payments, and restitution of all unlawfully or discriminatorily obtained
fees and expenses.
Since June 22, 2004, numerous additional lawsuits making factual allegations
substantially similar to those in the Aucoin Complaint were filed against the
Adviser and certain other defendants, and others may be filed. On October 19,
2005, the District Court granted in part, and denied in part, defendants'
motion to dismiss the Aucoin Complaint and as a result the only claim remaining
was plaintiffs' Section 36(b) claim. On January 11, 2006, the District Court
dismissed the remaining claim.
It is possible that these matters and/or other developments resulting from
these matters could result in increased redemptions of the AllianceBernstein
Mutual Funds' shares or other adverse consequences to the AllianceBernstein
Mutual Funds. This may require the AllianceBernstein Mutual Funds to sell
investments held by those funds to provide for sufficient liquidity and could
also have an adverse effect on the investment performance of the
AllianceBernstein Mutual Funds. However, the Adviser believes that these
matters are not likely to have a material adverse effect on its ability to
perform advisory services relating to the AllianceBernstein Mutual Funds.
_______________________________________________________________________________
36 o ALLIANCEBERNSTEIN BALANCED SHARES
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class A
----------------------------------------------------------------------------
Year Ended August 1,
November 30, 2003 to Year Ended July 31,
------------------------ November -------------------------------------
2005 2004 30, 2003(a) 2003 2002(b) 2001
----------- ----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $16.81 $15.13 $14.54 $13.26 $15.96 $15.53
INCOME FROM INVESTMENT
OPERATIONS
Net investment income(c) .28 .31(d) .09 .28 .35 .39
Net realized and unrealized
gain (loss) on investment
transactions .81 1.61 .58 1.32 (2.35) 1.16
Net increase (decrease) in net
asset value from operations 1.09 1.92 .67 1.60 (2.00) 1.55
LESS: DIVIDENDS AND
DISTRIBUTIONS
Dividends from net
investment income (.30) (.24) (.08) (.29) (.34) (.38)
Distributions from
net realized gain
on investment
transactions -0- -0- -0- -0- (.36) (.74)
Tax return of capital -0- -0- -0- (.03) -0- -0-
Total dividends and
distributions (.30) (.24) (.08) (.32) (.70) (1.12)
Net asset value,
end of period $17.60 $16.81 $15.13 $14.54 $13.26 $15.96
TOTAL RETURN
Total investment
return based on
net asset value(e) 6.55% 12.78% 4.62% 12.29% (12.91)% 10.42%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $935,414 $788,685 $587,685 $525,637 $384,212 $282,874
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements 1.04% .97% 1.07%(f) 1.12% 1.10% 1.17%
Expenses, before waivers/
reimbursements 1.04% 1.00% 1.07%(f) 1.12% 1.10% 1.17%
Net investment income 1.64% 1.93%(d) 1.84%(f) 2.04% 2.36% 2.46%
Portfolio turnover rate 57% 58% 29% 62% 79% 63%
See footnote summary on page 43.
_______________________________________________________________________________
ALLIANCEBERNSTEIN BALANCED SHARES o 37
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class B
----------------------------------------------------------------------------
Year Ended August 1,
November 30, 2003 to Year Ended July 31,
------------------------ November -------------------------------------
2005 2004 30, 2003(a) 2003 2002(b) 2001
----------- ----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $16.00 $14.41 $13.87 $12.68 $15.31 $14.96
INCOME FROM INVESTMENT
OPERATIONS
Net investment income(c) .15 .19(d) .05 .17 .23 .26
Net realized and unrealized
gain (loss) on investment
transactions .78 1.53 .55 1.26 (2.25) 1.12
Net increase (decrease) in net
asset value from operations .93 1.72 .60 1.43 (2.02) 1.38
LESS: DIVIDENDS AND
DISTRIBUTIONS
Dividends from net investment
income (.19) (.13) (.06) (.22) (.25) (.29)
Distributions from net realized
gain on investment
transactions -0- -0- -0- -0- (.36) (.74)
Tax return of capital -0- -0- -0- (.02) -0- -0-
Total dividends and
distributions (.19) (.13) (.06) (.24) (.61) (1.03)
Net asset value,
end of period $16.74 $16.00 $14.41 $13.87 $12.68 $15.31
TOTAL RETURN
Total investment return based
on net asset value(e) 5.82% 11.97% 4.33% 11.44% (13.53)% 9.63%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $571,214 $590,890 $534,752 $488,365 $385,868 $277,138
Ratio to average net assets of:
Expenses net of waivers/
reimbursements 1.76% 1.70% 1.81%(f) 1.86% 1.84% 1.93%
Expenses, before waivers/
reimbursements 1.76% 1.73% 1.81%(f) 1.86% 1.84% 1.93%
Net investment income .90% 1.22%(d) 1.14%(f) 1.30% 1.61% 1.70%
Portfolio turnover rate 57% 58% 29% 62% 79% 63%
See footnote summary on page 43.
_______________________________________________________________________________
38 o ALLIANCEBERNSTEIN BALANCED SHARES
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class C
----------------------------------------------------------------------------
Year Ended August 1,
November 30, 2003 to Year Ended July 31,
------------------------ November -------------------------------------
2005 2004 30, 2003(a) 2003 2002(b) 2001
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, beginning
of period $16.06 $14.47 $13.92 $12.72 $15.36 $15.01
INCOME FROM INVESTMENT
OPERATIONS
Net investment income(c) .15 .19(d) .05 .17 .23 .26
Net realized and unrealized
gain (loss) on investment
transactions .78 1.53 .56 1.27 (2.26) 1.12
Net increase (decrease)
in net asset value from
operations .93 1.72 .61 1.44 (2.03) 1.38
LESS: DIVIDENDS AND
DISTRIBUTIONS
Dividends from net investment
income (.19) (.13) (.06) (.22) (.25) (.29)
Distributions from net realized
gain on investment
transactions -0- -0- -0- -0- (.36) (.74)
Tax return of capital -0- -0- -0- (.02) -0- -0-
Total dividends and distributions (.19) (.13) (.06) (.24) (.61) (1.03)
Net asset value, end of period $16.80 $16.06 $14.47 $13.92 $12.72 $15.36
TOTAL RETURN
Total investment return based on
net asset value(e) 5.80% 11.92% 4.39% 11.49% (13.55)% 9.59%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $181,746 $174,040 $162,243 $150,188 $131,761 $109,592
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements 1.76% 1.69% 1.80%(f) 1.85% 1.84% 1.93%
Expenses, before waivers/
reimbursements 1.76% 1.73% 1.80%(f) 1.85% 1.84% 1.93%
Net investment income .91% 1.23%(d) 1.15%(f) 1.32% 1.61% 1.71%
Portfolio turnover rate 57% 58% 29% 62% 79% 63%
See footnote summary on page 43.
_______________________________________________________________________________
ALLIANCEBERNSTEIN BALANCED SHARES o 39
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Advisor Class
----------------------------------------------------------------------------
Year Ended August 1,
November 30, 2003 to Year Ended July 31,
------------------------ November -------------------------------------
2005 2004 30, 2003(a) 2003 2002(b) 2001
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, beginning
of period $16.84 $15.16 $14.56 $13.28 $15.98 $15.54
INCOME FROM INVESTMENT
OPERATIONS
Net investment income(c) .33 .35(d) .10 .32 .37 .44
Net realized and unrealized
gain (loss) on investment
transactions .82 1.61 .59 1.32 (2.34) 1.16
Net increase (decrease)
in net asset value from
operations 1.15 1.96 .69 1.64 (1.97) 1.60
LESS: DIVIDENDS AND
DISTRIBUTIONS
Dividends from net investment
income (.35) (.28) (.09) (.32) (.37) (.42)
Distributions from net realized
gain on investment
transactions -0- -0- -0- -0- (.36) (.74)
Tax return of capital -0- -0- -0- (.04) -0- -0-
Total dividends and distributions (.35) (.28) (.09) (.36) (.73) (1.16)
Net asset value, end of period $17.64 $16.84 $15.16 $14.56 $13.28 $15.98
TOTAL RETURN
Total investment return based on
net asset value(e) 6.89% 13.07% 4.75% 12.57% (12.67)% 10.75%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $115,873 $112,040 $107,440 $105,567 $101,017 $5,446
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements .74% .67% .78%(f) .83% .85% .91%
Expenses, before waivers/
reimbursements .74% .71% .78%(f) .83% .85% .91%
Net investment income 1.92% 2.19%(d) 2.11%(f) 2.36% 2.79% 2.75%
Portfolio turnover rate 57% 58% 29% 62% 79% 63%
See footnote summary on page 43.
_______________________________________________________________________________
40 o ALLIANCEBERNSTEIN BALANCED SHARES
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class R
-------------------------------------
Year Ended November 3
November 30, 2003(g) to
------------------------ November
2005 2004 30, 2003
----------- ----------- -----------
Net asset value, beginning of period $16.80 $15.13 $15.09
INCOME FROM INVESTMENT OPERATIONS
Net investment income(c) .24 .30(d) .02
Net realized and unrealized gain on
investment transactions .82 1.58 .02
Net increase in net asset value from
Operations 1.06 1.88 .04
LESS: DIVIDENDS
Dividends from net investment income (.28) (.21) -0-
Net asset value, end of period $17.58 $16.80 $15.13
TOTAL RETURN
Total investment return based on net
asset value(e) 6.36% 12.52% .27%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $1,393 $371 $10
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements 1.33% 1.19% 1.34%(f)
Expenses, before waivers/
reimbursements 1.33% 1.22% 1.34%(f)
Net investment income 1.39% 1.94%(d) 1.70%(f)
Portfolio turnover rate 57% 58% 29%
See footnote summary on page 43.
_______________________________________________________________________________
ALLIANCEBERNSTEIN BALANCED SHARES o 41
Selected Data For A Share Of Capital Stock Outstanding Throughout The Period
Class K
------------
March 1,
2005(g) to
November
30, 2005
------------
Net asset value, beginning of period $17.34
INCOME FROM INVESTMENT OPERATIONS
Net investment income(c) .22
Net realized and unrealized gain on investment transactions .24
Net increase in net asset value from operations .46
LESS: DIVIDENDS
Dividends from net investment income (.20)
Net asset value, end of period $17.60
TOTAL RETURN
Total investment return based on net asset value(e) 2.68%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $10
Ratio to average net assets of:
Expenses(f) 1.01%
Net investment income(f) 1.69%
Portfolio turnover rate 57%
See footnote summary on page 43.
_______________________________________________________________________________
42 o ALLIANCEBERNSTEIN BALANCED SHARES
Selected Data For A Share Of Capital Stock Outstanding Throughout The Period
Class I
------------
March 1,
2005(g) to
November
30, 2005
------------
Net asset value, beginning of period $17.34
INCOME FROM INVESTMENT OPERATIONS
Net investment income(c) .24
Net realized and unrealized gain on investment transactions .26
Net increase in net asset value from operations .50
LESS: DIVIDENDS
Dividends from net investment income (.24)
Net asset value, end of period $17.60
TOTAL RETURN
Total investment return based on net asset value(e) 2.93%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $4,128
Ratio to average net assets of:
Expenses(f) .81%
Net investment income(f) 2.41%
Portfolio turnover rate 57%
(a) The Fund changed its fiscal year end from July 31 to November 30.
(b) As required, effective August 1, 2001, the Fund has adopted the provisions
of the AICPA Audit and Accounting Guide, Audits of Investment Companies and
began amortizing premium on debt securities for financial statement purposes
only. For the year ended July 31, 2002, the effect of this change to Class A,
Class B and Class C was to decrease net investment income by $.01 and decrease
Advisor Class by $.02 per share, increase net unrealized gains and losses by
$.01 for Class A, Class B and Class C; and increase Advisor Class by $.02 per
share. Consequently, the ratio of net investment income to average net assets
was decreased from 2.46% to 2.36% for Class A, 1.71% to 1.61% for Class B,
1.71% to 1.61% for Class C and from 2.89% to 2.79% for Advisor Class on an
annualized basis. Per share, ratios and supplemental data prior to August 1,
2001 have not been restated to reflect this change in presentation.
(c) Based on average shares outstanding.
(d) Net of expenses waived by the Adviser and Transfer Agent.
(e) 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 return does not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares. Total
investment return calculated for a period of less than one year is not
annualized.
(f) Annualized.
(g) Commencement of distribution.
_______________________________________________________________________________
ALLIANCEBERNSTEIN BALANCED SHARES o 43
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of AllianceBernstein Balanced
Shares, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AllianceBernstein Balanced Shares,
Inc., (the "Fund") at November 30, 2005, 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 accounting principles generally accepted in the
United States of America. 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 the standards of the Public Company
Accounting Oversight Board (United States). Those standards 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 November 30, 2005 by correspondence with the custodian,
provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
January 23, 2006
TAX INFORMATION (unaudited)
For the fiscal year ended November 30, 2005 certain dividends paid by the Fund
may be subject to a maximum tax rate of 15%, as provided for by the Jobs and
Growth Tax Relief Reconciliation Act of 2003. The Fund designates a maximum
amount of $24,912,154 as qualified dividend income which is taxed at a maximum
rate of 15%.
For corporate shareholders, 91% of the total ordinary income distribution paid
during the current fiscal year ended November 30, 2005 qualifies for the
corporate dividends received deduction.
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 2006.
_______________________________________________________________________________
44 o ALLIANCEBERNSTEIN BALANCED SHARES
RESULTS OF SHAREHOLDERS MEETING
(unaudited)
A Special Meeting of the Stockholders of the AllianceBernstein Balanced Shares
(the "Fund") was held on November 15, 2005 and adjourned until December 6,
2005, December 19, 2005, December 21, 2005 and December 22, 2005. At the
November 15, 2005 Meeting, with respect to the first item of business, the
election of Directors, the required number of outstanding shares were voted in
favor of the proposal, and the proposal was approved. At the December 6, 2005
Meeting, with respect to the third item of business, the amendment,
elimination, or reclassification as non-fundamental of the fundamental
investment restrictions, and the fourth item of business, the reclassification
of the Fund's fundamental investment objective as non-fundamental with changes
to the Fund's investment objective, the required number of outstanding shares
voted in favor of each proposal, and each proposal was approved. With respect
to the second item of business, to amend and restate the charter of the Fund
which will repeal in its entirety all currently existing provisions and
substitute in lieu thereof new provisions set forth in the Form of Articles of
Amendment and Restatement as attached to the Proxy Statement as Appendix D, an
insufficient number of required outstanding shares voted in favor of the
proposal, and therefore the proposal was not approved. A description of each
proposal and number of shares voted at the Meetings are as follows (the
proposal numbers shown below correspond to the proposal numbers in the Fund's
proxy statement):
1. To elect eight Directors of the Fund, each such Director to hold office
until his or her successor is duly elected and qualified.
Withheld
Voted For Authority
-------------------------------------------
Ruth Block 55,784,133 1,507,871
David H. Dievler 55,814,171 1,477,833
John H. Dobkin 55,850,908 1,441,096
Michael J. Downey 55,861,191 1,430,814
William H. Foulk, Jr. 55,750,194 1,541,811
D. James Guzy 55,339,474 1,952,530
Marc O. Mayer 55,853,232 1,438,772
Marshall C. Turner, Jr. 55,820,810 1,471,194
2. To amend and restate the charter of the Fund which will repeal in its
entirety all currently existing charter provisions and substitute in lieu
thereof new provisions set forth in the Form of Articles of Amendment and
Restatement.
Voted
Voted For Against Abstained
- -----------------------------------------------------------------------------
46,595,520 1,038,185 3,885,648
_______________________________________________________________________________
ALLIANCEBERNSTEIN BALANCED SHARES o 45
3. To amend, eliminate, or reclassify as non-fundamental, of the fundamental
investment restrictions regarding:
Voted Broker
Voted For Against Abstained Non-Votes
-------------------------------------------------------------
3.A. Diversification 42,414,237 1,810,204 2,133,811 13,322,960
3.B. Issuing Senior Securities 42,301,445 1,897,153 2,159,653 13,322,960
and Borrowing Money
3.C. Underwriting Securities 42,487,202 1,712,440 2,158,609 13,322,960
3.D. Concentration of 42,396,826 1,826,593 2,134,832 13,322,960
Investments
3.E. Real Estate and 42,343,730 1,842,302 2,172,219 13,322,960
Companies That Deal
In Real Estate
3.F. Commodity Contracts 42,234,318 1,964,333 2,159,600 13,322,960
and Futures Contracts
3.G. Loans 42,455,140 1,752,346 2,150,765 13,322,960
3.I. Exercising Control 42,557,464 1,642,088 2,158,699 13,322,960
3.J. Other Investment 42,481,138 1,716,871 2,160,242 13,322,960
Companies
3.K. Oil, Gas and Other 42,571,925 1,636,685 2,149,641 13,322,960
Types of Minerals or
Mineral Leases
3.L. Purchase of Securities 42,199,154 2,033,154 2,125,944 13,322,960
on Margin
3.M. Short Sales 42,178,950 2,023,691 2,155,610 13,322,960
3.N. Pledging, Hypothecating, 42,173,895 2,009,561 2,174,795 13,322,960
Mortgaging, or Otherwise
Encumbering Assets
3.P. Warrants 42,426,474 1,742,875 2,188,902 13,322,960
3.Q. Unseasoned Companies 42,164,802 2,040,551 2,152,898 13,322,960
3.R. Requirement to Invest 42,330,284 1,868,469 2,159,499 13,322,960
in Specific Investments
3.S. Securities of Issuers in 42,149,158 2,062,864 2,146,229 13,322,960
which Officers or Directors/
Partners Have an Interest
3.Z.1 Investment Grade 42,589,412 1,643,733 2,125,106 13,322,960
Securities
4. The reclassification of 40,875,355 1,935,485 3,547,411 13,322,960
the Fund's fundamental
investment objective as non-
fundamental with changes
to the Fund's investment
objective.
_______________________________________________________________________________
46 o ALLIANCEBERNSTEIN BALANCED SHARES
BOARD OF DIRECTORS
William H. Foulk, Jr.(1), Chairman
Marc O. Mayer, President
Ruth Block(1)
David H. Dievler(1)
John H. Dobkin(1)
Michael J. Downey(1)
D. James Guzy(1)
Marshall C. Turner, Jr.(1)
OFFICERS(2)
Philip L. Kirstein, Senior Vice President and Independent Compliance Officer
Paul C. Rissman, Senior Vice President
Thomas J. Bardong, Vice President
Frank V. Caruso, Vice President
John J. Kelley, Vice President
Stephen W. Pelensky, Vice President
Emilie D. Wrapp, Secretary
Mark D. Gersten, Treasurer and Chief Financial Officer
Vincent S. Noto, Controller
Custodian
State Street Bank & Trust Company
225 Franklin Street
Boston, MA 02110
Principal Underwriter
AllianceBernstein Investment Research and Management, Inc.
1345 Avenue of the Americas
New York, NY 10105
Legal Counsel
Seward & Kissel LLP
One Battery Park Plaza
New York, NY 10004
Transfer Agent
Alliance Global Investor Services, Inc.
P.O. Box 786003
San Antonio, TX78278-6003
Toll-Free (800) 221-5672
Independent Registered Public Accounting Firm
PricewaterhouseCoopers LLP
300 Madison Avenue
New York, NY 10017
(1) Member of the Audit Committee, the Governance and Nominating Committee and
the Independent Directors Committee.
(2) The management of and investment decisions for the Fund are made by the
Balanced Shares Investment Team, comprised of senior members of the Relative
Value Investment Team and senior members of the Global Credit Research Team.
Mr. Stephen Pelensky is the investment professional with the most significant
responsibility for the day-to-day management of the equity component of the
Fund's portfolio and Mr. John Kelley is the investment professional with the
most significant responsibility for the day-to-day management of the debt
component of the Fund's portfolio.
_______________________________________________________________________________
ALLIANCEBERNSTEIN BALANCED SHARES o 47
MANAGEMENT OF THE FUND
Board of Directors Information
The business and affairs of the Fund are managed under the direction of the
Board of Directors. Certain information concerning the Fund's Directors is set
forth below.
PORTFOLIOS
IN FUND OTHER
NAME, DATE OF BIRTH, PRINCIPAL COMPLEX DIRECTORSHIPS
ADDRESS AND OCCUPATION(S) OVERSEEN BY HELD BY
(FIRST YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR
- ------------------------------------------------------------------------------------------------------------------
DISINTERESTED DIRECTORS
William H. Foulk, Jr.,#,+ Investment adviser and an 108 None
2 Sound View Drive, independent consultant. He was
Suite 100 formerly Senior Manager of Barrett
Greenwich, CT 06830 Associates, Inc., a registered
Chairman of the Board investment adviser, with which he
9/7/32 had been associated since prior
(1992) to 2001. He was formerly Deputy
Comptroller and Chief Investment
Officer of the State of New York
and, prior thereto, Chief Investment
Officer of the New York Bank
for Savings.
Ruth Block, #,** Formerly an Executive Vice 106 None
500 SE Mizner Blvd. President and Chief Insurance
Boca Raton, FL 33432 Officer of The Equitable Life
11/7/30 Assurance Society of the United
(1986) States; Chairman and Chief
Executive Officer of Evlico (insurance);
a Director of Avon, BP (oil and gas),
Ecolab Incorporated (specialty
chemicals), Tandem Financial Group
and Donaldson, Lufkin & Jenrette
Securities Corporation; Governor
at Large, National Association of
Securities Dealers, Inc.
David H. Dievler, # Independent consultant. Until 107 None
P.O. Box 167 December 1994 he was Senior
Spring Lake, NJ 07762 Vice President of Alliance Capital
10/23/29 Management Corporation ("ACMC")
(1987) responsible for mutual fund
administration. Prior to joining
ACMC in 1984, he was Chief
Financial Officer of Eberstadt
Asset Management since 1968.
Prior to that, he was a Senior
Manager at Price Waterhouse & Co.
Member of American Institute of
Certified Public Accountants
since 1953.
_______________________________________________________________________________
48 o ALLIANCEBERNSTEIN BALANCED SHARES
PORTFOLIOS
IN FUND OTHER
NAME, DATE OF BIRTH, PRINCIPAL COMPLEX DIRECTORSHIPS
ADDRESS AND OCCUPATION(S) OVERSEEN BY HELD BY
(FIRST YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR
- ------------------------------------------------------------------------------------------------------------------
DISINTERESTED DIRECTORS
(continued)
John H. Dobkin, # Consultant. Formerly President 106 None
P.O. Box 12 of Save Venice, Inc. (preservation
Annandale, NY 12504 organization) from 2001-2002,
2/19/42 Senior Advisor from June 1999 -
(1992) June 2000 and President of
Historic Hudson Valley (historic
preservation) from December 1989-
May 1999. Previously, Director of
the National Academy of Design
and during 1988-1992, Director and
Chairman of the Audit Committee of
ACMC.
Michael J. Downey, # Consultant since January 2004. 106 Asia Pacific
c/o Alliance Capital Formerly managing partner of Fund, Inc.;
Management L.P. Lexington Capital, LLC (investment) and The
Attention: advisory firm) from December 1997 Merger Fund
Philip L. Kirstein until December 2003. Prior thereto,
1345 Avenue of the he was Chairman and CEO of
Americas Prudential Mutual Fund Management
New York, NY 10105s from 1987 to 1993.
1/24/44
(2005)
D. James Guzy, # Chairman of the Board of PLX 106 Intel Corporation,
P.O. Box 128 Technology (semi-conductors) and Cirrus Logic
Glenbrook, NV 89413 of SRC Computers Inc., with which Corporation,
3/7/36 he has been associated since prior Novellus Cor-
(2005) to 2001. He is also President of poration, Micro
the Arbor Company (private family Component Tech-
investments). nology, the Davis
Selected Advisors
Group of Mutual
Funds and
LogicVision
Marshall C. Turner, Jr., # Principal of Turner Venture 106 Toppan Photo-
220 Montgomery Street Associates (venture capital and masks, Inc., the
Penthouse 10 consulting) since prior to 2001. George Lucas
San Francisco, CA 94104 He is Chairman and CEO, DuPont Educational
10/10/41 Photomasks, Inc., Austin, Texas, Foundation and
(2005) 2003-2005, and President and Chairman of the
CEOsince company acquired, Board of the
and name changed to Toppan Smithsonian's
Photomasks, Inc. in 2005 (semi- National Museum
conductor manufacturing services). of Natural History
_______________________________________________________________________________
ALLIANCEBERNSTEIN BALANCED SHARES o 49
PORTFOLIOS
IN FUND OTHER
NAME, DATE OF BIRTH, PRINCIPAL COMPLEX DIRECTORSHIPS
ADDRESS AND OCCUPATION(S) OVERSEEN BY HELD BY
(FIRST YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR
- ------------------------------------------------------------------------------------------------------------------
INTERESTED DIRECTOR
Marc O. Mayer, ++ Executive Vice President of ACMC 106 SCB Partners,
1345 Avenue of the since 2001 and Chairman of the Inc.; and
Americas Board of AllianceBernstein SCB, Inc.
New York, NY 10105 Investment Research and
10/2/57 Management, Inc. ("ABIRM") since
(2003) 2000; prior thereto, Chief Executive
Officer of Sanford C. Bernstein & Co.,
LLC (institutional research and
brokerage arm of Bernstein and Co.,
LLC ("SCB & Co.")) and its
predecessor since prior to 2001.
* There is no stated term of office for the Fund's Directors.
** Ms. Block was an "interested person", as defined in the 1940 Act, from July
22, 1992 until October 21, 2004 by reason of her ownership of equity securities
of a control person of the Adviser. Ms. Block received shares of The Equitable
Companies Incorporated ("Equitable") as part of the demutualization of The
Equitable Life Assurance Society of the United States in 1992. Ms. Block's
Equitable shares were subsequently converted through a corporate action into
American Depositary Shares of AXA, which were sold for approximately $2,400 on
October 21, 2004. Equitable and AXA are control persons of the Adviser.
++ Mr. Mayer is an "interested person", as defined in the 1940 Act, due to his
position as an Executive Vice President of ACMC.
# Member of the Audit Committee, the Governance and Nominating Committee and
the Independent Directors Committee.
+ Member of the Fair Value Pricing Committee.
_______________________________________________________________________________
50 o ALLIANCEBERNSTEIN BALANCED SHARES
Officer Information
Certain information concerning the Fund's Officers is set forth below.
NAME, ADDRESS* POSITION(S) PRINCIPAL OCCUPATION
AND DATE OF BIRTH HELD WITH FUND DURING PAST 5 YEARS**
- --------------------------------------------------------------------------------------------------------------
Marc O. Mayer President See biography above.
10/2/57
Philip L. Kirstein Senior Vice President Senior Vice President and Independent
5/29/1945 and Independent Compliance Officer of the Alliance-
Compliance Officer Bernstein Funds, with which he has
been associated since October 2004.
Prior thereto, he was Of Counsel
to Kirkpatrick & Lockhart, LLP from
October 2003 to October 2004, and
General Counsel of Merrill Lynch
Investment Managers, L.P. since
prior to 2001 until March 2003.
Paul C. Rissman Senior Vice Executive Vice President of ACMC**,
11/10/56 President with which he has been associated
since prior to 2001.
Thomas J. Bardong Vice President Senior Vice President of ACMC**, with
4/28/45 which he has been associated since
prior to 2001.
Frank V. Caruso Vice President Senior Vice President of ACMC**, with
10/28/56 which he has been associated since
prior to 2001.
John J. Kelley Vice President Senior Vice President of ACMC**, with
2/29/60 which he has been associated since
prior to 2001.
Stephen W. Pelensky Vice President Senior Vice President of ACMC**,
9/8/55 with which he has been associated
since prior to 2001.
Emilie D. Wrapp Secretary Senior Vice President, Assistant
11/13/55 General Counsel and Assistant
Secretary of ABIRM**, with which she
has been associated since prior to
2001.
Mark D. Gersten Treasurer and Chief Senior Vice President of Alliance
10/4/50 Financial Officer Global Investor Services, Inc. ("AGIS")**
and a Vice President of ABIRM**, with
which he has been associated since
prior to 2001.
Vincent S. Noto Controller Vice President of AGIS**, with which he
12/14/64 has been associated since prior to 2001.
* The address for each of the Fund's Officers is 1345 Avenue of the Americas,
New York, NY 10105.
** ACMC, ABIRM, AGIS and SCB & Co. are affiliates of the Fund.
The Fund's Statement of Additional Information ("SAI") has additional
information about the Fund's Directors and Officers and is available without
charge upon request. Contact your financial representative or Alliance Capital
at (800) 227-4618 for a free prospectus or SAI.
_______________________________________________________________________________
ALLIANCEBERNSTEIN BALANCED SHARES o 51
Information Regarding the Review and Approval of the Fund's Advisory Agreement
The Fund's disinterested directors (the "directors") unanimously approved the
continuance of the Advisory Agreement between the Fund and the Adviser at a
meeting held on September 14 and 16, 2005.
In preparation for the meeting, the directors had requested from the Adviser
and evaluated extensive materials, including performance and expense
information for other investment companies with similar investment objectives
as the Fund derived from data compiled by Lipper Inc. ("Lipper"), which is not
affiliated with the Adviser. The directors also reviewed an independent
evaluation from the Fund's Senior Officer (who is also the Fund's Independent
Compliance Officer) of the reasonableness of the advisory fees in the Fund's
Advisory Agreement (as contemplated by the Assurance of Discontinuance between
the Adviser and the New York Attorney General) wherein the Senior Officer
concluded that such fees were reasonable. In addition, the directors received
a presentation from the Adviser and had an opportunity to ask representatives
of the Adviser various questions relevant to the proposed approval. The
directors noted that the Senior Officer's evaluation considered the following
factors: management fees charged to institutional and other clients of the
Adviser for like services; management fees charged by other mutual fund
companies for like services; cost to the Adviser and its affiliates of
supplying services pursuant to the Advisory Agreement, excluding any
intra-corporate profit; profit margins of the Adviser and its affiliates from
supplying such services; possible economies of scale as the Fund grows larger;
and nature and quality of the Adviser's services including the performance of
the Fund.
Prior to voting, the directors reviewed the proposed continuance of the
Advisory Agreement with management and with experienced counsel who are
independent of the Adviser and received a memorandum from such counsel
discussing the legal standards for their consideration of the proposed
continuance. The directors also discussed the proposed continuance in four
private sessions at which only the directors, their independent counsel and the
Fund's Independent Compliance Officer were present. In reaching their
determinations relating to continuance of the Advisory Agreement, the directors
considered all factors they believed relevant, including the following:
1. information comparing the performance of the Fund to other investment
companies with similar investment objectives and to an index;
2. the nature, extent and quality of investment, compliance, administrative
and other services rendered by the Adviser;
3. payments received by the Adviser from all sources in respect of the Fund
and all investment companies in the AllianceBernstein Funds complex;
_______________________________________________________________________________
52 o ALLIANCEBERNSTEIN BALANCED SHARES
4. the costs borne by, and profitability of, the Adviser and its affiliates in
providing services to the Fund and to all investment companies in the
AllianceBernstein Funds complex;
5. comparative fee and expense data for the Fund and other investment
companies with similar investment objectives;
6. the extent to which economies of scale would be realized to the extent the
Fund grows and whether fee levels reflect any economies of scale for the
benefit of investors;
7. the Adviser's policies and practices regarding allocation of portfolio
transactions of the Fund, including the extent to which the Adviser benefits
from soft dollar arrangements;
8. information about "revenue sharing" arrangements that the Adviser has
entered into in respect of the Fund;
9. portfolio turnover rates for the Fund compared to other investment
companies with similar investment objectives;
10. fall-out benefits which the Adviser and its affiliates receive from their
relationships with the Fund;
11. The Adviser's representation that it does not advise other clients with
substantially similar investment objectives and strategies as the Fund;
12. The Senior Officer's evaluation of the reasonableness of the fee payable
to the Adviser in the Advisory Agreement.
13. the professional experience and qualifications of the Fund's portfolio
management team and other senior personnel of the Adviser; and
14. the terms of the Advisory Agreement.
The directors also considered their knowledge of the nature and quality of the
services provided by the Adviser to the Fund gained from their experience as
directors or trustees of most of the funds advised by the Adviser, their
overall confidence in the Adviser's integrity and competence they have gained
from that experience and the Adviser's responsiveness to concerns raised by
them in the past, including the Adviser's willingness to consider and implement
organizational and operational changes designed to improve investment results
and the services provided to the AllianceBernstein Funds.
_______________________________________________________________________________
ALLIANCEBERNSTEIN BALANCED SHARES o 53
In their deliberations, the directors did not identify any particular
information that was all-important or controlling, and each director attributed
different weights to the various factors.
The directors determined that the overall arrangements between the Fund and the
Adviser, as provided in the Advisory Agreement, were fair and reasonable in
light of the services performed, expenses incurred and such other matters as
the directors considered relevant in the exercise of their business judgment.
The material factors and conclusions that formed the basis for the directors
reaching their determinations to approve the continuance of the Advisory
Agreement (including their determinations that the Adviser should continue to
be the investment adviser for the Fund, and that the fees payable to the
Adviser pursuant to the Advisory Agreement are appropriate) were separately
discussed by the directors.
Nature, extent and quality of services provided by the Adviser
The directors noted that, under the Advisory Agreement, the Adviser, subject to
the control of the directors, administers the Fund's business and other
affairs. The Adviser manages the investment of the assets of the Fund,
including making purchases and sales of portfolio securities consistent with
the Fund's investment objective and policies. Under the Advisory Agreement,
the Adviser also provides the Fund with such office space, administrative and
other services (exclusive of, and in addition to, any such services provided by
any others retained by the Fund) and executive and other personnel as are
necessary for the Fund's operations. The Adviser pays all of the compensation
of directors of the Fund who are affiliated persons of the Adviser and of the
officers of the Fund.
The directors also considered that the Advisory Agreement provides that the
Fund will reimburse the Adviser for the cost of certain clerical, accounting,
administrative and other services provided at the Fund's request by employees
of the Adviser or its affiliates. Requests for these "at no more than cost"
reimbursements are approved by the directors on a quarterly basis and (to the
extent requested and paid) result in a higher rate of total compensation from
the Fund to the Adviser than the fee rates stated in the Fund's Advisory
Agreement.
The directors considered the scope and quality of services provided by the
Adviser under the Advisory Agreement and noted that the scope of services
provided by advisers of funds had expanded over time as a result of regulatory
and other developments. The directors noted, for example, that the Adviser is
responsible for maintaining and monitoring its own and, to varying degrees, the
Fund's compliance programs, and that these compliance programs have recently
been refined and enhanced in light of new regulatory requirements. The
directors considered the quality of the in-house investment research
capabilities of the Adviser and the other resources it has dedicated to
performing services for the
_______________________________________________________________________________
54 o ALLIANCEBERNSTEIN BALANCED SHARES
Fund. The quality of administrative and other services, including the
Adviser's role in coordinating the activities of the Fund's other service
providers, also were considered. The directors also considered the Adviser's
response to recent regulatory compliance issues affecting a number of the
investment companies in the AllianceBernstein Funds complex. The directors
concluded that, overall, they were satisfied with the nature, extent and
quality of services provided to the Fund under the Advisory Agreement.
Costs of Services Provided and Profitability to the Adviser
The directors reviewed a schedule of the revenues, expenses and related notes
indicating the profitability of the Fund to the Adviser for calendar years 2003
and 2004. The directors reviewed the assumptions and methods of allocation
used by the Adviser in preparing fund-specific profitability data, and noted
the Adviser's representation to them that it believed that the methods of
allocation used in preparing the profitability information were reasonable and
appropriate and that the Adviser had previously discussed with the directors
that there is no generally accepted allocation methodology for information of
this type. The directors also noted that the methodology for preparing
fund-by-fund profitability information was being reviewed and that it was
expected that an updated methodology would be used in 2005, and that it would
differ in various respects from the methodology used in 2004 and in prior years.
The directors recognized that it is difficult to make comparisons of
profitability from fund advisory contracts because comparative information is
not generally publicly available and is affected by numerous factors, including
the structure of the particular adviser, the types of funds it manages, its
business mix, numerous assumptions regarding allocations and the adviser's
capital structure and cost of capital. In considering profitability
information, the directors considered the effect of fall-out benefits on the
Adviser's expenses, as well as the "revenue sharing" arrangements the Adviser
has entered into with certain entities that distribute shares of the Fund. The
directors focused on the profitability of the Adviser's relationship with the
Fund before taxes and distribution expenses. The directors recognized that the
Adviser should generally be entitled to earn a reasonable level of profits for
the services it provides to the Fund and, based on their review, concluded that
they were satisfied that the Adviser's level of profitability from its
relationship with the Fund was not excessive.
Fall-Out Benefits
The directors considered that the Adviser benefits from soft dollar
arrangements whereby it receives brokerage and research services from many of
the brokers and dealers that execute purchases and sales of securities on
behalf of its clients on an agency basis. They noted that the Adviser makes
presentations to the directors regarding its trading practices and brokerage
allocation policies, including its policies with respect to soft dollar
arrangements, from time to time and had made a special presentation to the
directors in May 2005 on this subject. The directors
_______________________________________________________________________________
ALLIANCEBERNSTEIN BALANCED SHARES o 55
noted that the Adviser has represented to them that all of its soft dollar
arrangements are consistent with applicable legal requirements including the
achievement of best execution. At the special presentation, the directors
received and reviewed information concerning the Adviser's soft dollar
arrangements, which included a description of the Adviser's policies and
procedures with respect to allocating portfolio transactions for brokerage and
research services, data on the dollar amount of commissions allocated for
third-party research and brokerage services and for proprietary research and
brokerage services, and a list of firms providing third-party research and
brokerage to the Adviser.
The directors also considered that the Distributor, which is a wholly-owned
subsidiary of the Adviser: receives 12b-1 fees from the Fund in respect of
classes of shares of the Fund that are subject to the Fund's 12b-1 plan;
retains a portion of the 12b-1 fees from the Fund; and receives all or a
portion of the sales charges on sales or redemptions of certain classes of
shares. The directors also noted that certain affiliates of the Adviser
distribute shares of the Fund and receive compensation in that connection, that
a subsidiary of the Adviser provides transfer agency services to the Fund and
receives compensation from the Fund for such services and that brokers who are
affiliated with the Adviser are permitted to execute brokerage transactions for
the Fund subject to satisfaction of certain requirements and receive brokerage
commissions from the Fund and liquidity rebates from electronic communication
networks ("ECNs") in connection with such transactions. The directors noted
that the Adviser had made a recent presentation to the directors detailing
liquidity rebates that Sanford C. Bernstein & Co. LLC receives in respect of
transactions effected through ECNs.
The directors recognized that the Adviser's profitability would be somewhat
lower if the Adviser's affiliates did not receive the other benefits described
above. The directors also believe that the Adviser derives reputational and
other benefits from its association with the Fund.
Investment Result
In addition to the information reviewed by the directors in connection with the
meeting, the directors receive detailed comparative performance information for
the Fund at each regular Board meeting during the year. At the meeting, the
directors reviewed information from a report prepared by Lipper showing
performance of the Class A Shares of the Fund as compared to a group of 11 to 9
funds (depending on the year) in its Lipper category selected by Lipper (the
"Performance Group") and as compared to a Performance Universe of 134 to 49
funds (depending on the year) in its Lipper category selected by Lipper (the
"Performance Universe") for periods ended May 31, 2005 over the 1-, 3-, 5- and
10-year periods. The directors also received information prepared by the
Adviser based on information obtained from Lipper showing performance of the
Class A Shares of the Fund as compared to a composite index (consisting of a
60%/40% blend of the Russell 1000 Value Index and the Lehman Brothers
_______________________________________________________________________________
56 o ALLIANCEBERNSTEIN BALANCED SHARES
Government/Credit Index, respectively) for periods ending May 31, 2005 over the
year to date ("YTD"), 1-, 3-, 5- and 10-year periods. The directors noted that
in the Performance Group and Performance Universe comparisons the Fund was in
the first quintile in all periods reviewed. The comparative information showed
that the Fund underperformed its composite index in all periods reviewed except
in the 10-year period when it outperformed its composite index. Based on their
review, the directors concluded that the Fund's relative performance over time
was satisfactory.
Advisory Fees and Other Expenses
The directors considered the advisory fee rate paid by the Fund to the Adviser
and information prepared by Lipper concerning fee rates paid by other funds in
the same Lipper category as the Fund at a common asset level. The directors
recognized that it is difficult to make comparisons of advisory fees because
there are variations in the services that are included in the fees paid by
other funds.
The directors reviewed information in the Adviser's Form ADV and noted that it
charged institutional clients lower fees for advising comparably sized accounts
using strategies that differ from those of the Fund but which involve
investments in equity securities. They had previously received an oral
presentation from the Adviser that supplemented the information in the Form ADV.
The Adviser reviewed with the directors the significant differences in the
scope of services it provides to institutional clients and to the Fund. For
example, the Advisory Agreement requires the Adviser to provide, in addition to
investment advice, office facilities and officers (including officers to
provide required certifications). The Adviser also coordinates the provision
of services to the Fund by non-affiliated service providers and is responsible
for the compensation of the Fund's Independent Compliance Officer and certain
related expenses. The provision of these non-advisory services involves costs
and exposure to liability. The Adviser explained that many of these services
normally are not provided to non-investment company clients, and that fees
charged to the Fund reflect the costs and risks of the additional obligations.
The Adviser also noted that since the Fund is constantly issuing and redeeming
its shares, it is more difficult to manage than an institutional account, where
the assets are relatively stable. In light of these facts, the directors did
not place significant weight on these fee comparisons.
The directors also considered the total expense ratio of the Class A shares of
the Fund in comparison to the fees and expenses of funds within two comparison
groups of funds in the same Lipper category created by Lipper: an Expense
Group and an Expense Universe. Lipper described an Expense Group as a
representative sample of comparable funds and an Expense Universe as a broader
group, consisting of all funds in the Fund's investment
classification/objective with a similar load type as the Fund. The Class A
expense ratio of the Fund was
_______________________________________________________________________________
ALLIANCEBERNSTEIN BALANCED SHARES o 57
based on the Fund's latest fiscal year expense ratio. The directors recognized
that the expense ratio information for the Fund potentially reflected on the
Adviser's provision of services, as the Adviser is responsible for coordinating
services provided to the Fund by others. The directors noted that it was
likely that the expense ratios of some funds in the Fund's Lipper category also
were lowered by waivers or reimbursements by those funds' investment advisers,
which in some cases were voluntary and perhaps temporary.
The information reviewed by the directors showed that the Fund's at approximate
current size contractual effective fee rate of 43.5 basis points was materially
lower than the median for the Expense Group. The directors noted that the
latest fiscal year administrative expense reimbursement by the Fund pursuant to
the Advisory Agreement was 1 basis point. The directors also noted that the
Fund's total expense ratio was somewhat lower than the median for the Expense
Group and significantly lower than the median for the Expense Universe. The
directors concluded that the Fund's expense ratio was satisfactory.
Economies of Scale
The directors noted that the advisory fee schedule for the Fund contains
breakpoints so that, if assets were to increase over the breakpoint levels, the
fee rates would be reduced on the incremental assets. The directors also
considered a presentation by an independent consultant discussing economies of
scale issues in the mutual fund industry. The directors believe that economies
of scale are realized (if at all) by the Adviser across a variety of products
and services, and not only in respect of a single fund. The directors noted
that there is no uniform methodology for establishing breakpoints that give
effect to fund-specific services provided by the Adviser and to the economies
of scale that the Adviser may realize in its overall mutual fund business or
those components of it which directly or indirectly affect the Fund's
operations. The directors observed that in the mutual fund industry as a
whole, as well as among funds similar to the Fund, there is no uniformity or
pattern in the fees and asset levels at which breakpoints (if any) apply.
Depending on the age and size of a particular fund and its adviser's cost
structure, different conclusions can be drawn as to whether there are economies
of scale to be realized at any particular level of assets, notwithstanding the
intuitive conclusion that such economies exist, or will be realized at some
level of total assets. Moreover, because different advisers have different
cost structures and service models, it is difficult to draw meaningful
conclusions from the comparison of a fund's advisory fee breakpoints with those
of comparable funds. The directors also noted that the advisory agreements for
many funds do not have breakpoints at all. Having taken these factors into
account, the directors concluded that the Fund's breakpoint arrangements would
result in a sharing of economies of scale in the event of a very significant
increase in the Fund's net assets.
_______________________________________________________________________________
58 o ALLIANCEBERNSTEIN BALANCED SHARES
ALLIANCEBERNSTEIN FAMILY OF FUNDS
- --------------------------------------------
Wealth Strategies Funds
- --------------------------------------------
Balanced Wealth Strategy
Wealth Appreciation Strategy
Wealth Preservation Strategy
Tax-Managed Balanced Wealth Strategy
Tax-Managed Wealth Appreciation Strategy
Tax-Managed Wealth Preservation Strategy
- --------------------------------------------
Blended Style Funds
- --------------------------------------------
U.S. Large Cap Portfolio
International Portfolio
Tax-Managed International Portfolio
- --------------------------------------------
Growth Funds
- --------------------------------------------
Domestic
Growth Fund
Mid-Cap Growth Fund
Large Cap Growth Fund
Small Cap Growth Portfolio
Global & International
Global Health Care Fund
Global Research Growth Fund
Global Technology Fund
Greater China '97 Fund
International Growth Fund*
International Research Growth Fund*
- --------------------------------------------
Value Funds
- --------------------------------------------
Domestic
Balanced Shares
Focused Growth & Income Fund
Growth & Income Fund
Real Estate Investment Fund
Small/Mid Cap Value Fund*
Utility Income Fund
Value Fund
Global & International
Global Value Fund
International Value Fund
- --------------------------------------------
Taxable Bond Funds
- --------------------------------------------
Americas Government Income Trust*
Corporate Bond Portfolio
Emerging Market Debt Fund
Global Strategic Income Trust
High Yield Fund
Multi-Market Strategy Trust
Quality Bond Portfolio*
Short Duration Portfolio
U.S. Government Portfolio
- --------------------------------------------
Municipal Bond Funds
- --------------------------------------------
National
Insured National
Arizona
California
Insured California
Florida
Massachusetts
Michigan
Minnesota
New Jersey
New York
Ohio
Pennsylvania
Virginia
- --------------------------------------------
Intermediate Municipal Bond Funds
- --------------------------------------------
Intermediate California
Intermediate Diversified
Intermediate New York
- --------------------------------------------
Closed-End Funds
- --------------------------------------------
All-Market Advantage Fund
ACM Income Fund
ACM Government Opportunity Fund
ACM Managed Dollar Income Fund
ACM Managed Income Fund
ACM Municipal Securities Income Fund
California Municipal Income Fund
National Municipal Income Fund
New York Municipal Income Fund
The Spain Fund
World Dollar Government Fund
World Dollar Government Fund II
We also offer Exchange Reserves,** which serves as the money market fund
exchange vehicle for the AllianceBernstein mutual funds.
For more complete information on any AllianceBernstein mutual fund, including
investment objectives and policies, sales charges, expenses, risks and other
matters of importance to prospective investors, visit our web site at
www.alliancebernstein.com or call us at (800) 227-4618 for a current
prospectus. You should read the prospectus carefully before you invest.
* Prior to February 1, 2005, Small/Mid Cap Value Fund was named Small Cap
Value Fund. Prior to May 16, 2005, International Growth Fund was named
Worldwide Privatization Fund and International Research Growth Fund was named
International Premier Growth Fund. On June 24, 2005, All-Asia Investment Fund
merged into International Research Growth Fund. On July 8, 2005, New Europe
Fund merged into International Research Growth Fund. On February 1, 2006,
Americas Government Income Trust will be renamed Global Government Income Trust
and Quality Bond Portfolio will be renamed Intermediate Bond Portfolio.
** An investment in the Fund is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the Fund seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the Fund.
_______________________________________________________________________________
ALLIANCEBERNSTEIN BALANCED SHARES o 59
THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS.
SUMMARY OF SENIOR OFFICER'S EVALUATION OF INVESTMENT ADVISORY AGREEMENT(1)
The following is a summary of the evaluation of the investment advisory
agreement between Alliance Capital Management L.P., (the "Adviser") and the
AllianceBernstein Balanced Shares, Inc. (the "Fund"), prepared by Philip L.
Kirstein, the Senior Officer, for the independent directors of the Fund, as
required by the Assurance of Discontinuance between the New York State Attorney
General and the Adviser. The Senior Officer's evaluation of the investment
advisory agreement is not meant to diminish the responsibility or authority of
the Board of Directors to perform its duties pursuant to Section 15 of the
Investment Company Act of 1940 (the "40 Act") and applicable state law. The
purpose of the summary is to provide shareholders with a synopsis of the
independent evaluation of the reasonableness of the advisory fees which was
provided to the independent directors in connection with their review of the
proposed continuance of the investment advisory agreement. The Senior Officer's
evaluation considered the following factors:
1. Management fees charged to institutional and other clients of the Adviser
for like services.
2. Management fees charged by other mutual fund companies for like services.
3. Costs to the Adviser and its affiliates of supplying services pursuant to
the advisory agreements, excluding any intra-corporate profit.
4. Profit margins of the Adviser and its affiliates from supplying such
services.
5. Possible economies of scale as the Fund grows larger.
6. Nature and quality of the Adviser's services including the performance of
the Fund.
FUND ADVISORY FEES, EXPENSE REIMBURSEMENTS & RATIOS
The table below describes the Fund's advisory fee pursuant to the Investment
Advisory Agreement. The fee schedule reflects amendments made in January 2004
as a result of the settlement between the Adviser and the New York State
Attorney General.
Advisory Fee Based on % of
Fund Average Daily Net Assets
- -------------------------------------------------------------------------------
AllianceBernstein Balanced Shares, Inc. First $200 million 0.60%
Next $200 million 0.55%
Excess of $400 million 0.40%
(1) It should be noted that the information in the fee summary was completed
on September 2, 2005 and presented to the Board of Directors on September 14,
2005 in accordance with the Assurance of Discontinuance between the New York
State Attorney General and the Adviser. It also should be noted that references
in the fee summary pertaining to performance and expense ratios refer to Class
A shares of the Fund.
_______________________________________________________________________________
60 o ALLIANCEBERNSTEIN BALANCED SHARES
The Adviser is reimbursed as specified in the Investment Advisory Agreement for
certain clerical, legal, accounting, administrative and other services provided
to the Fund as indicated below:
As a %
of average
Fund Amount daily net assets
- -------------------------------------------------------------------------------
AllianceBernstein Balanced Shares, Inc. $88,606 0.01
The table below shows the Fund's expense ratio calculated from the beginning of
the Fund's current fiscal year through May 31, 2005.
Expense
Fund Ratio(2),(3),(4) Fiscal Year End
- -------------------------------------------------------------------------------
AllianceBernstein Balanced Shares, Inc. Advisor - 0.64% November 30
Class A - 0.94%
Class B - 1.67%
Class C - 1.66%
Class R - 1.21%
Class K - 0.78%
Class I - 0.51%
I. MANAGEMENT FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS
The management fees charged to investment companies which the Adviser manages
and sponsors is normally higher than those charged to similar sized
institutional accounts, including pension plans and sub-advised investment
companies. The fee differential reflects, among other things, different
services provided to such clients, and different liabilities assumed. Services
provided by the Adviser to the Fund that are not provided to non-investment
company clients include providing office space and personnel to serve as Fund
Officers, who among other responsibilities make the certifications required
under the Sarbanes-Oxley Act of 2002, and coordinating with and monitoring the
Fund's third party service providers such as Fund counsel, auditors,
custodians, transfer agents and pricing services. The accounting,
administrative, legal and compliance requirements for the Fund are more costly
than those for institutional assets due to the greater complexities and time
required for investment companies, although as previously noted, a portion of
these expenses are reimbursed by the Fund to the Adviser. In addition, managing
the cash flow of an investment company may be more difficult than that of a
stable pool of assets, such as an institutional account with little cash
movement in either direction, particularly, if the Fund is in net redemption
(2) This is the expense ratio calculated from the beginning of the Fund's
current fiscal year through May 31, 2005.
(3) The expense ratios assume that the new Class R, K and I fee schedule had
been in place since the beginning of the Fund's fiscal year.
(4) For Class K and Class I shares the expense ratios do not reflect the
administrative services fee for third party record keeping services of 0.15%
and 0.10% respectively.
_______________________________________________________________________________
ALLIANCEBERNSTEIN BALANCED SHARES o 61
and the Adviser is frequently forced to sell securities to raise cash for
redemptions. However, managing a fund with positive cash flow may be easier at
times than managing a stable pool of assets. Finally, in recent years,
investment advisers have been sued by institutional clients and have suffered
reputational damage both by the attendant publicity and outcomes other than
complete victories. Accordingly, the legal and reputational risks associated
with institutional accounts are greater than previously thought, although still
not equal to those related to the mutual fund industry.
Notwithstanding the Adviser's view that managing an investment company is not
comparable to managing other institutional accounts because the services
provided are different, it is worth considering information regarding the
advisory fees charged to institutional accounts with substantially similar
investment styles as the Fund. However, with respect to the Fund the Adviser
represented that there are no institutional products which have a substantially
similar investment style as the Fund.The Adviser represented that it does not
sub-advise any registered investment companies with a similar investment style
as the Fund.
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES.
Lipper, Inc., an analytical service that is not affiliated with the Adviser,
compared the fees charged to the Fund with fees charged to other investment
companies for similar services by other investment advisers. Lipper's analysis
included the Fund's ranking with respect to the proposed management fees
relative to the Lipper group median at the approximate current asset level of
the Fund.(5)
Fund Effective Lipper
Management Group
Fee(6) Median Rank
- -------------------------------------------------------------------------------
AllianceBernstein Balanced Shares, Inc. 0.435 0.529 3/11
(5) It should be noted that "effective management fee" is calculated by Lipper
using the Fund's contractual management fee rate at a hypothetical asset level.
The hypothetical asset level is based on the combined net assets of all classes
of the Fund, rounded up to the next $25 million. Lipper's total expense ratio
information is based on the most recent annual report except as otherwise
noted. A ranking of "1" means that the AllianceBernstein Fund has the lowest
effective fee rate in the Lipper peer group.
(6) It should be noted that the "effective management fee" rate for the Fund
does not reflect the payments by the Fund to the Adviser for certain clerical,
legal, accounting, administrative and other services. The dollar amount and
basis point impact of such payments on the Fund is discussed in Section I.
_______________________________________________________________________________
62 o ALLIANCEBERNSTEIN BALANCED SHARES
Lipper also analyzed the expense ratio of the Fund in comparison to its Lipper
Expense Group(7) and Lipper Expense Universe(8). Lipper describes a Lipper
Expense Group as a representative sample of comparable funds, consisting of all
funds in the investment classification/objective with a similar load type as
the subject Fund. The Lipper Expense Universe is a broader collection of funds.
The results of that analysis are set forth below:
Lipper Lipper Lipper Lipper
Expense Universe Universe Group Group
Fund Ratio(9) Median Rank Median Rank
- -------------------------------------------------------------------------------------------------------
AllianceBernstein Balanced
Shares, Inc. 0.979 1.247 9/83 1.055 2/11
Although the Fund has a more favorable ranking on a total expense ratio basis
than on an advisory fee basis the directors are still interested in lowering
non-management expenses.
III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO
THE MANAGEMENT FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.
The profitability information for the Fund prepared by the Adviser for the
Board of Directors was reviewed by the Senior Officer. An independent
consultant is working with the Adviser's personnel on a new system to produce
profitability information at the Fund level which will reflect the Adviser's
management reporting approach. It is possible that future Fund profitability
information may differ from previously reviewed information due to changes in
methodologies and allocations. See Section IV for additional discussion.
IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH
SERVICES.
The Adviser's profitability from providing investment advisory services to the
Fund decreased during calendar 2004 relative to 2003.
In addition to the Adviser's direct profits from managing the Fund, certain of
the Adviser's affiliates have business relationships with the Fund and may earn
a profit from providing other services to the Fund. The courts have referred to
this type of business opportunity as "fall-out benefits" to the Adviser and
indicated
(7) Lipper uses the following criteria in screening funds to be included in
the Fund's Expense Group: fund type, investment classification/objective, load
type and similar 12b-1/non-12b-1 service fees, asset (size) comparability, and
expense components and attributes. An Expense Group will typically consist of
seven to twenty funds.
(8) Except for asset (size) comparability and load type, Lipper uses the same
criteria for selecting an Expense Group when selecting an Expense Universe.
Unlike an Expense Group, an Expense Universe allows for the same adviser to be
represented by more than just one fund.
(9) Most recent fiscal year end Class A share expense ratio.
_______________________________________________________________________________
ALLIANCEBERNSTEIN BALANCED SHARES o 63
that they should be factored into the evaluation of the total relationship
between the Fund and the Adviser. Neither case law nor common business practice
precludes the Adviser's affiliates from earning a reasonable profit on this
type of relationship. These affiliates provide transfer agent, distribution,
and brokerage related services to the Fund and receive transfer agent fees,
Rule 12b-1 payments, front-end sales loads, contingent deferred sales charges
("CDSC") and commissions for providing brokerage services. In addition, the
Adviser benefits from soft dollar arrangements which offset expenses the
Adviser would otherwise incur. Additional information regarding distribution
related fees can be found in the prospectus of the Fund.
The Adviser's affiliate, AllianceBernstein Investment Research and Management,
Inc. ("ABIRM"), is the Fund's principal underwriter. ABIRM and the Adviser have
disclosed in the Fund's prospectus that they may make payments(10) from their
own resources, in addition to resources derived from sales loads and Rule 12b-1
fees, to firms that sell shares of the Fund. In 2004, ABIRM paid approximately
0.04% of the average monthly assets of the AllianceBernstein Mutual Funds for
distribution services and educational support. For 2005, it is anticipated,
ABIRM will pay approximately 0.04% of the average monthly assets of the Fund
for such purposes.
After payments to third party intermediaries, ABIRM retained the following
amount in Class A front-end load sales charge from sales of the Fund's shares
in the Fund's most recent fiscal year.
Fund Amount Received
- -------------------------------------------------------------------------------
AllianceBernstein Balanced Shares, Inc. $98,896
ABIRM received the amounts set forth below in Rule 12b-1 fees and CDSC for the
Fund during the Fund's most recent fiscal year. A significant percentage of
such amounts were paid out to third party intermediaries by ABIRM.
12b-1 Fees
Fund Received CDSC Received
- -------------------------------------------------------------------------------
AllianceBernstein Balanced Shares, Inc. $9,431,335 $992,027
Fees and reimbursements for out of pocket expenses charged by Alliance Global
Investor Services, Inc. ("AGIS"), the affiliated transfer agent, are based on
the level of the network account and the class of share held by the account.
AGIS also receives a fee per shareholder sub-account for each account
maintained by an intermediary on an omnibus basis. AGIS' after-tax
profitability decreased in 2004 in comparison to 2003.
(10) The total amount paid to the financial intermediary in connection with
the sale of shares will generally not exceed the sum of (a) 0.25% of the
current year's Fund sales by that firm and (b) 0.10% of the average daily net
assets attributable to that firm over the year.
_______________________________________________________________________________
64 o ALLIANCEBERNSTEIN BALANCED SHARES
AGIS received the following fee from the Fund in the most recent fiscal year:
Fund AGIS Fee
- -----------------------------------------------------------------------------
AllianceBernstein Balanced Shares, Inc. $1,456,292
The Fund effected brokerage transactions through the Adviser's affiliate,
Sanford C. Bernstein & Co. LLC ("SCB"), and paid commissions during the Fund's
recent fiscal year. The Adviser represented that SCB's profitability from
business conducted with the Fund is comparable to the profitability of SCB's
dealings with other similar third party clients. In the ordinary course of
business, SCB receives and pays liquidity rebates from electronic
communications networks ("ECNs") derived from trading for its clients,
including the Funds. These credits and charges are not being passed on to any
SCB client.
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that the breakpoints in the fee schedule in the
Investment Advisory Agreement reflect a sharing of economies of scale to the
extent the breakpoints are reached. Based on some of the professional
literature that has considered economies of scale in the mutual fund industry
it is thought that to the extent economies of scale exist, they may more often
exist across a fund family as opposed to a specific fund. This is because the
costs incurred by the Adviser, such as investment research or technology for
trading or compliance systems can be spread across a greater asset base as the
fund family increases in size. It is also possible that as the level of
services required to operate a successful investment company has increased over
time, and advisory firms have made such investments in their business to
provide improved services, there may be a sharing of economies of scale without
a reduction in advisory fees.
An independent consultant made a presentation to the Board of Directors and the
Senior Officer regarding possible economies of scale or scope in the mutual
fund industry. Based on the presentation, it was evident that fund management
companies benefit from economies of scale. However, due to lack of cost data,
researchers had to infer facts about the costs from the behavior of fund
expenses; there was a lack of consensus among researchers as to whether
economies of scale were being passed on to the shareholders. It is contemplated
that additional work will be performed to determine if the benefits of
economies of scale or scope are being passed to shareholders by the Adviser. In
the meantime, it is clear that to the extent the Fund's assets exceed the
initial breakpoint its shareholders benefit from a lower fee rate.
VI. NATURE AND QUALITY OF THE ADVISER'S SERVICES INCLUDING THE PERFORMANCE OF
THE FUND.
With assets under management of $516 billion as of June 30, 2005, the Adviser
has the investment experience to manage and provide non-investment services
(described in Section II) to the Fund.
_______________________________________________________________________________
ALLIANCEBERNSTEIN BALANCED SHARES o 65
The information prepared by Lipper showed the 1, 3, 5 and 10 year performance
ranking of the Fund(11) relative to its Lipper group and universe for the
periods ended May 31, 2005:
AllianceBernstein Balanced Shares, Inc. Group Universe
- --------------------------------------------------------------------------
1 year 2/11 11/134
3 year 1/11 3/96
5 year 1/11 5/84
10 year 1/9 5/49
Set forth below are the 1, 3, 5, 10 year and since inception performance
returns of the Fund (in bold)(12) versus its benchmarks(13).
Periods Ending May 31, 2005
Annualized Performance
- -------------------------------------------------------------------------------
1 3 5 10 Since
Funds Year Year Year Year Inception
- -------------------------------------------------------------------------------
AllianceBernstein Balanced
Shares, Inc. 9.66 7.55 5.58 10.13 9.45
Russell 1000 Value Index 15.49 8.44 5.34 12.06 N/A
S&P 500 Index 8.23 5.29 -1.92 10.17 N/A
Lehman Brothers Gov't/
Credit Bond Index 7.00 6.48 8.00 6.91 N/A
Composite (60% R1000,
40% LB G/C Bond Ind) 12.09 7.66 6.40 10.00 N/A
CONCLUSION:
Based on the factors discussed above the Senior Officer's conclusion is that
the proposed fee for the Fund is reasonable and within the range of what would
have been negotiated at arms-length in light of all the surrounding
circumstances. This conclusion in respect of the Fund is based on an evaluation
of all of these factors and no single factor was dispositive.
Dated: October 12, 2005
(11) The performance rankings are for the Class A shares of the Fund.
(12) The Fund's performance returns are for the Class A shares of the Fund.
(13) The Adviser provided Fund and benchmark performance return information
for periods through May 31, 2005 in order to maintain consistency with Lipper's
performance rankings in the analysis.
_______________________________________________________________________________
66 o ALLIANCEBERNSTEIN BALANCED SHARES
NOTES
_______________________________________________________________________________
ALLIANCEBERNSTEIN BALANCED SHARES o 67
NOTES
_______________________________________________________________________________
68 o ALLIANCEBERNSTEIN BALANCED SHARES
ALLIANCEBERNSTEIN BALANCED SHARES
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
[LOGO] ALLIANCEBERNSTEIN (R)
Investment Research and Management
BALAR1105
ITEM 2. CODE OF ETHICS.
(a) The registrant has adopted a code of ethics that applies to its principal
executive officer, principal financial officer and principal accounting
officer. A copy of the registrant's code of ethics is filed herewith as
Exhibit 12(a)(1).
(b) During the period covered by this report, no material amendments were made
to the provisions of the code of ethics adopted in 2(a) above.
(c) During the period covered by this report, no implicit or explicit waivers
to the provisions of the code of ethics adopted in 2(a) above were granted.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Directors has determined that independent directors
David H. Dievler and William H. Foulk, Jr. qualify as audit committee financial
experts.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) - (c) The following table sets forth the aggregate fees billed by the
independent registered public accounting firm PricewaterhouseCoopers LLP, for
the Fund's last two fiscal years for professional services rendered for: (i)
the audit of the Fund's annual financial statements included in the Fund's
annual report to stockholders; (ii) assurance and related services that are
reasonably related to the performance of the audit of the Fund's financial
statements and are not reported under (i), which include advice and education
related to accounting and auditing issues and quarterly press release review
(for those Funds which issue press releases), and preferred stock maintenance
testing (for those Funds that issue preferred stock); and (iii) tax compliance,
tax advice and tax return preparation.
Audit Audit-Related Tax
Fees Fees Fees
--------- ------------- --------
2004 $40,000 $3,175 $18,400
2005 $42,000 $2,680 $18,075
(d) Not applicable.
(e) (1) Beginning with audit and non-audit service contracts entered into on
or after May 6, 2003, the Fund's Audit Committee policies and procedures
require the pre-approval of all audit and non-audit services provided to the
Fund by the Fund's independent registered public accounting firm. The Fund's
Audit Committee policies and procedures also require pre-approval of all audit
and non-audit services provided to the Adviser and Service Affiliates to the
extent that these services are directly related to the operations or financial
reporting of the Fund.
(e) (2) All of the amounts for Audit Fees, Audit-Related Fees and Tax Fees in
the table under Item 4 (a) - (c) are for services pre-approved by the Fund's
Audit Committee.
(f) Not applicable.
(g) The following table sets forth the aggregate non-audit services provided
to the Fund, the Fund's Adviser and entities that control, are controlled by or
under common control with the Adviser that provide ongoing services to the
Fund, which include conducting an annual internal control report pursuant to
Statement on Auditing Standards No. 70 ("Service Affiliates"):
Total Amount of
Foregoing Column Pre-
approved by the Audit
All Fees for Committee
Non-Audit Services (Portion Comprised of
Provided to the Audit Related Fees)
Portfolio, the Adviser (Portion Comprised of
and Service Affiliates Tax Fees)
- -------------------------------------------------------------------------------------------------------------
2004 $ 771,777 [ $21,575 ]
( $ 3,175 )
( $18,400 )
2005 $1,137,144 [ $20,755 ]
( $ 2,680 )
( $18,075 )
(h) The Audit Committee of the Fund has considered whether the provision of
any non-audit services not pre-approved by the Audit Committee provided by the
Fund's independent registered public accounting firm to the Adviser and Service
Affiliates is compatible with maintaining the auditor's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to the registrant.
ITEM 6. SCHEDULE OF INVESTMENTS.
Please see Schedule of Investments contained in the Report to Shareholders
included under Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the registrant.
TEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the registrant.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable to the registrant.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the Fund's Board of Directors since the Fund last
provided disclosure in response to this item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial
officer have concluded that the registrant's disclosure controls and procedures
(as defined in Rule 30a-2(c) under the Investment Company Act of 1940, as
amended) are effective at the reasonable assurance level based on their
evaluation of these controls and procedures as of a date within 90 days of the
filing date of this document.
(b) There were no changes in the registrant's internal controls over financial
reporting that occurred during the second fiscal quarter of the period that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
The following exhibits are attached to this Form N-CSR:
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
12 (a) (1) Code of Ethics that is subject to the disclosure of Item 2
hereof
12 (b) (1) Certification of Principal Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
12 (b) (2) Certification of Principal Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
12 (c) Certification of Principal Executive Officer and Principal
Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant): AllianceBernstein Balanced Shares, Inc.
By: /s/ Marc O. Mayer
-----------------
Marc O. Mayer
President
Date: January 27, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Marc O. Mayer
-----------------
Marc O. Mayer
President
Date: January 27, 2006
By: /s/ Mark D. Gersten
-------------------
Mark D. Gersten
Treasurer and Chief Financial Officer
Date: January 27, 2006