ALLIANCE INCOME BUILDER FUND
ANNUAL REPORT
OCTOBER 31, 1995
ALLIANCE
MUTUAL FUNDS WITHOUT THE MYSTERY.
LETTER TO SHAREHOLDERS ALLIANCE INCOME BUILDER FUND, INC.
_______________________________________________________________________________
December 4, 1995
Dear Shareholder:
We are pleased to provide you with an update of Alliance Income Builder Fund's
performance and investment activity for the fiscal year ended October 31, 1995.
In the table below, your Fund's performance is compared with that of the
overall U.S. stock market, represented by the S&P 500-stock Index, and with the
U.S. Government/investment grade bond market, represented by the Lehman
Brothers Government/Corporate Bond Index (complete descriptions of these
unmanaged benchmarks appear on page 4):
Twelve Months Ended October 31, 1995
Total Return Net Asset Value
------------ ---------------
ALLIANCE INCOME BUILDER FUND
Class A +16.22% $10.70
Class B +15.55% $10.70
Class C +15.47% $10.67
S&P 500 +26.36%
LB GOV'T/CORP. BOND INDEX +18.43%
The Fund's total returns are based on the net asset values of each class of
shares as of October 31; additional investment results appear on page 3. Also
provided on page 4 is a chart that shows the performance of a hypothetical
$10,000 initial investment in Alliance Income Builder Fund Class C shares from
inception through the end of October.
MARKET OVERVIEW
As expected a year ago, the Federal Reserve's monetary tightening that began
early in 1994 ended as economic growth moderated to more sustainable levels.
Short-term interest rates stabilized following the late December 1994 Mexican
peso crisis and the well-advertised federal funds rate increase in February of
1995. Longer-term interest rates declined sharply in April as evidence of a
slowing, but still healthy, economy mounted and inflationary fears receded.
Lower interest rates combined with significant corporate earnings growth has
supported a strong rally in stocks and corporate bonds for most of 1995.
Inflation remains at very low levels and progress is underway in Washington to
balance the U.S. fiscal budget. In this low interest rate environment, we
expect continued corporate earnings progress, albeit expanding at a slower pace
than we have recently enjoyed. Upgrades in corporate debt ratings are also
moderating-a reflection of increased dividends and stock repurchase programs
supported by strong cash flow generation. Continued cash flow improvements
accompanied by a moderate and sustainable economic environment will continue to
underpin our investment strategy of seeking stocks that we believe will sustain
growing dividend rates, and fixed income securities that have attractive total
return profiles.
FIXED-INCOME INVESTMENTS
Looking back over the Fund's fiscal year, we relish some successes and review
some painful lessons. We accurately identified improving situations that led to
satisfying profits in issues of Citicorp, Time Warner and UAL Corp. Citicorp
was upgraded by all major rating agencies in 1995; Time Warner's bonds also
performed well; and UAL preferred stock and bonds rose following improved
operating fundamentals and the company's employee buy out. We were timely in
selling K-Mart and Westinghouse bonds before they each encountered price
weakness. However, the Fund did have exposure to emerging market debt
(currently representing 7% of Fund assets, down from 15% a year ago), where
prices declined significantly following Mexico's near default late last year.
(Emerging market debt has recovered moderately since March.) Half of the Fund's
current Mexican corporate exposure is to Hylsa, a leading steel producer with
strong fundamentals. We expect the Mexican economy to rebound modestly in 1996,
which would support higher future valuations of these positions. Most recently,
and more indicative of our strategy of buying what we view as underpriced
securities with good upside, we sold the Fund's UAL 10.25% debentures, due
7/15/21, at $119.2 (we bought at $111.7).
Investment-grade securities exhibiting improving fundamentals and above-average
total return prospects include issues from James River Corp.,
Tele-Communications,
1
ALLIANCE INCOME BUILDER FUND, INC.
_______________________________________________________________________________
Inc. and New York Life. Non-investment grade securities with attractive yields
and favorable fundamentals include issues from three financial firms that are
all potential acquisition candidates: California Federal Bank ('CalFed'),
Greater New York Savings Bank and Riggs National.
EQUITY INVESTMENTS
The Fund's equity assets performed well in the most recent six months,
appreciating by more than 12% and bringing the gain for the fiscal year to over
25%. As was the case in the first half, the good performance was broad based,
with virtually all industries contributing with the exception of real estate
investment trusts (REITs) and energy stocks. Interestingly, these two
industries-each representing about 5% of equity holdings-were essentially
unchanged in price for the last six months, but provided the Fund with some of
its best dividend income (over 7% annualized in the case of the REITs). Due to
price appreciation, the income return from the equity securities declined to
slightly above 3%, which is still about 25% higher than the dividend yield for
the S&P 500. Additionally, the dividends on the Fund's equity holdings continue
to grow at an above-average rate. To enhance the overall income return of the
Fund, we took advantage of market value appreciation and rebalanced the
portfolio from almost 45% equities at the end of April to slightly less than
39% at the end of October (40% in equities is the long-term average). This is a
good example of how capital appreciation from equities is reinvested to build
the Fund's income-earning capabilities.
The industry diversification of the equity holdings has remained relatively
unchanged in the last six months. Financial stocks continue to represent the
heaviest sector exposure at about 22%. This sector has produced strong results,
but still is characterized by below average valuations and good growth
prospects, especially in an environment of stable or declining interest rates.
Consumer staples is the second largest sector at about 15% of equity assets; we
added Campbell Soup to the portfolio as it has lagged the market despite its
strong franchise. We are pleased that the Fund performed well overall despite a
relatively modest exposure to technology stocks (currently about 12%). Many
issues in the technology industry do not fit our income requirements.
The high quality of the Fund's equity holdings continues to be reflected in
several of its largest positions. In descending market value, these include:
Philip Morris, General Electric, Intel Corp., American International Group,
Travelers Group, GTE Corp., Pfizer, Inc., Oracle Systems (convertible
preferred), Procter & Gamble, Health Care Properties, Allied Signal and Chevron
Corp. Most of these issues have been held since the Fund's inception and nine
of the 12 we've named were among the largest holdings at mid year. In
aggregate, these positions represent over 35% of total equities. The overall
equity portfolio has a price-earnings ratio of about 16x 1995's estimated
earnings (slightly less than that of the S&P 500), and has expected earnings
growth of about 13% per annum for the next five years-well in excess of the
expectations for the S&P 500.
We remain committed to our investment approach and look forward to this
strategy, over time, producing superior results for shareholders of Alliance
Income Builder Fund. Thank you for your continued interest and investment in
the Fund.
Sincerely,
John D. Carifa
Chairman and President
Thomas M. Perkins
Senior Vice President
Andrew M. Aran
Vice President
2
INVESTMENT RESULTS ALLIANCE INCOME BUILDER FUND, INC.
_______________________________________________________________________________
AVERAGE ANNUAL TOTAL RETURN AS OF OCTOBER 31, 1995
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
. One Year +16.22% +11.28%
. Since Inception* +9.48% +6.57%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
. One Year +15.55% +11.55%
. Since Inception* +8.77% +6.98%
CLASS C SHARES
. One Year +15.47%
. Since Inception* +6.09%
The average annual total returns reflect investment of dividends and/or capital
gains distributions in additional shares-with and without the effect of the
4.25% maximum front-end sales charge for Class A or applicable contingent
deferred sales charge for Class B (4% year 1, 3% year 2, 2% year 3, 1% year 4);
Class C shares are not subject to front-end or contingent deferred sales
charges. Past performance does not guarantee future results. Investment return
and principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
* Inception: 3/25/94, Class A and Class B; 10/25/91, Class C.
3
ALLIANCE INCOME BUILDER FUND, INC.
_______________________________________________________________________________
ALLIANCE INCOME BUILDER FUND
$10,000 INVESTMENT OVER LIFE OF FUND:
10/25/91 TO 10/31/95
$17,000
$16,000
$15,000
$14,000
$13,000
S&P 500 Income Builder Fund
Class C: $12,684
Lehman Gov't Corp
$12,000
$11,000
$10,000
10/25/91 10/31/95
This chart illustrates the total value of an assumed investment in Alliance
Income Builder Fund Class C shares (since inception) with dividends and capital
gains reinvested. Class C shares are not subject to front-end or contingent
deferred sales charges, therefore, a sales charge is not reflected in this
illustration. Class A shares are subject to a maximum 4.25% front-end sales
charge; Class B shares are subject to a maximum 4% contingent deferred sales
charge. Performance for Class A and Class B shares will vary from the results
shown above due to differences in expenses charged to those classes, as well as
their more-recent inception date of March 25, 1994. Past performance is not
indicative of future results, and is not representative of future gain or loss
in capital value or dividend income.
The unmanaged Standard and Poor's 500-stock index includes 500 U.S. stocks. It
is a common measure of the performance of the overall U.S. stock market.
The unmanaged Lehman Brothers Government/Corporate Bond Index is composed of
the Treasury Bond Index, the Agency Bond Index, 1-3 Year Government Index, the
20+ Year Index, and the Index of all publicly issued non-convertible investment
grade corporate debts.
4
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995 ALLIANCE INCOME BUILDER FUND, INC.
_______________________________________________________________________________
COMPANY SHARES U.S. $VALUE
- ----------------------------------------------------------------------
COMMON & PREFERRED STOCKS-42.6%
UNITED STATES INVESTMENTS-38.2%
COMMON STOCKS-28.7%
FINANCIAL SERVICES-7.3%
BANKING-0.3%
BankAmerica Corp. 3,000 $ 172,500
BROKERAGE & MONEY MANAGEMENT-0.9%
Legg Mason, Inc. 9,192 264,270
Merrill Lynch & Co., Inc. 4,000 222,000
486,270
INSURANCE-2.4%
American International Group, Inc. 8,250 696,094
Travelers Corp. 12,000 606,000
1,302,094
MORTGAGE BANKING-0.8%
Federal National Mortgage Assn. 4,000 419,500
REALTY-1.8%
Avalon Properties, Inc. 9,000 175,500
Federal Realty Investment Trust 11,000 222,750
General Growth Properties, Inc. 7,000 140,875
JP Realty Inc. 2,000 41,000
Spieker Properties, Inc. 7,500 181,875
Weingarten Realty Investors, Inc. 6,000 207,000
969,000
OTHER-1.1%
American Express Co. 8,000 325,000
Student Loan Marketing Assn. 5,000 294,375
619,375
3,968,739
CAPITAL GOODS-6.0%
ELECTRICAL EQUIPMENT-2.3%
Emerson Electric Co. 5,000 356,250
General Electric Co. 14,000 885,500
1,241,750
MACHINERY-0.9%
Allied Signal, Inc. 11,000 467,500
TECHNOLOGY-2.2%
Intel Corp. 12,000 838,500
Motorola, Inc. 5,500 360,938
1,199,438
MULTI-INDUSTRY COMPANY-0.6%
ITT Corp. 3,000 367,500
3,276,188
CONSUMER PRODUCTS & SERVICES-5.3%
BROADCASTING & CABLE-0.5%
Comcast Corp. Cl. A. 14,120 252,395
DRUGS, HOSPITALS, SUPPLIES &
MEDICAL SERVICES-3.8%
Abbott Laboratories 7,000 278,250
Health Care Property Investors, Inc. 14,000 474,250
Merck & Co., Inc. 7,000 402,500
Pfizer, Inc. 9,000 516,375
Schering-Plough Corp. 7,000 375,375
Transport Holdings Inc. Cl. A. 60 2,355
2,049,105
ENTERTAINMENT & LEISURE-0.5%
Eastman Kodak Co. 4,000 250,500
U.S. Industries, Inc.* 950 14,250
264,750
5
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE INCOME BUILDER FUND, INC.
_______________________________________________________________________________
COMPANY SHARES U.S. $VALUE
- ----------------------------------------------------------------------
RETAILING-0.5%
May Department Stores Co. 7,000 $ 274,750
2,841,000
CONSUMER STAPLES-5.3%
COSMETICS-1.0%
Avon Products, Inc. 2,000 142,250
Gillette Co. 8,000 387,000
529,250
FOODS, BEVERAGES & TOBACCO-3.4%
Campbell Soup Co. 5,000 261,875
Heinz (H.J.) Co. 6,000 279,000
Philip Morris Cos., Inc. 12,000 1,014,000
Sara Lee Corp. 10,000 293,750
1,848,625
HOUSEHOLD PRODUCTS-0.9%
Proctor & Gamble Co. 6,000 486,000
2,863,875
BASIC INDUSTRIES-1.8%
CHEMICAL-1.8%
Monsanto Co. 4,000 419,000
Morton International, Inc. 8,000 244,000
Rohm & Haas Co. 6,000 331,500
994,500
UTILITIES-1.4%
TELEPHONE UTILITY-1.4%
GTE Corp. 12,715 524,494
Southern New England Telecommunications,
Inc. Cl. A. 7,000 252,875
777,369
ENERGY-0.9%
INTERNATIONAL-0.9%
Chevron Corp. 10,000 467,500
TRANSPORTATION-0.5%
RAILROADS-0.5%
Conrail, Inc. 4,000 275,000
AEROSPACE & DEFENSE-0.2%
AEROSPACE-0.2%
Rockwell International Corp. 3,000 133,499
Total Common Stocks (cost $11,788,364) 15,597,670
PREFERRED STOCKS-9.5%
BANKING & FINANCE-8.2%
Banesto Holdings Series A, pfd. (a) 40,000 1,186,000
California Federal Bank F.S.B. Series B, pfd. 10,000 1,080,000
First Bank System, Inc. Series A, cv. pfd. 4,500 386,438
Greater New York Savings Bank Series B,
pfd. 12.00% 45,000 1,282,500
Salomon, Inc. Oracle (ELKS) cv. pfd.,
$2.30, 7.25%, 11,100 503,662
4,438,600
INDUSTRIAL-1.3%
General Motors Corp. cv. pfd. 6,000 402,000
Kaufman & Broad Home Corp. Series B, cv. pfd. 10,000 120,000
Snyder Oil Corp. cv. pfd. $4.00 11,000 204,875
726,875
Total Preferred Stocks (cost $4,524,383) 5,165,475
Total United States Investments
(cost $16,312,747) 20,763,145
FOREIGN INVESTMENTS-4.4%
CANADA-0.2%
Magna International, Inc. Cl. A. 2,000 86,500
IRELAND-2.4%
Allied Irish Banks Plc. (ADR) 50,000 1,331,250
6
ALLIANCE INCOME BUILDER FUND, INC.
_______________________________________________________________________________
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $VALUE
- ----------------------------------------------------------------------
UNITED KINGDOM-1.8%
Hanson Plc. (ADR) 19,000 $ 294,500
Shell Transport & Trading Co. New (ADR) 5,000 356,250
Vodafone Group Plc. (ADR) 8,000 327,000
977,750
Total Foreign Investments (cost $2,338,502) 2,395,500
Total Common & Preferred Stocks
(cost $18,651,249) 23,158,645
CORPORATE DEBT OBLIGATIONS-46.7%
BANKING & FINANCE-19.9%
Centerbank Waterbury Conn
8.375%, 10/01/02 $1,000 1,012,740
Farmers Insurance Exchange Surplus
8.625%, 5/01/24 (a) 1,500 1,446,488
Home Holdings, Inc.
8.625%, 12/15/03 2,000 1,555,000
M.D.C. Holdings, Inc.
6.64%, 4/01/98 2,540 2,260,600
New York Life Insurance
7.50%, 6/15/23 (a) 1,130 1,107,400
Renaissance Hotel
8.875%, 10/01/05 500 509,600
Riggs National Bank Corp.
9.65%, 6/15/09 750 862,500
Saul (B.F.) Real Estate Investment Trust Series B
11.625%, 4/01/02 (a) 2,000 2,060,000
10,814,328
INDUSTRIAL-17.6%
Borden Inc.
7.875%, 2/15/23 1,000 961,760
Centex Corp.
7.38%, 6/01/05 1,000 990,140
Duty Free International
7.00%, 1/15/04 2,000 1,867,500
Eli Lilly & Co.
7.125%, 6/01/25 1,000 1,011,400
Galaxy Telecom L.P.
12.38%, 10/01/05 300 293,250
James River Corp.
7.75%, 11/15/23 2,000 2,025,160
Magna International Inc.
5.00%, 10/15/02 300 308,460
Tele-Communications, Inc.
9.25%, 1/15/23 1,000 1,066,600
Viacom, Inc.
7.75%, 6/01/05 1,000 1,032,500
9,556,770
YANKEE BONDS-7.0%
Grupo Mexico De Desarrollo
8.25%, 2/17/01 1,500 553,125
Hylsa S.A. DE
11.00%, 2/23/98 2,000 1,930,000
Mc-Cuernavaca Trust
9.25%, 7/25/01 (a) 1,795 1,314,896
3,798,021
TRANSPORTATION-2.2%
United Air Lines, Inc.
10.25%, 7/15/21 1,000 1,201,500
Total Corporate Debt Obligations
(cost $26,124,774) 25,370,619
CONVERTIBLE BONDS-3.5%
General Instrument Corp.
5.00%, 6/15/00 250 252,500
Hasbro Inc.
6.00%, 11/15/98 250 274,375
Investec O/S Finance
6.38%, 11/30/02 (a) 1,000 1,000,000
Wendy's International, Inc.
7.00%, 4/01/06 200 350,000
Total Convertible Bonds (cost $1,868,463) 1,876,875
7
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE INCOME BUILDER FUND, INC.
_______________________________________________________________________________
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $VALUE
- ----------------------------------------------------------------------
COMMERCIAL PAPER-2.1%
Ford Motor Corp.
5.71%, 11/01/95(b) $ 193 $ 193,000
5.76%, 11/02/95(b) 947 946,848
Total Commercial Paper
(amortized cost $1,139,848) 1,139,848
U.S. GOVERNMENT OBLIGATION-3.8%
U.S. Treasury Note
6.50%, 8/15/05
(cost $2,067,500) 2,000 2,060,000
TIME DEPOSIT-1.1%
Societe Generale
5.88%, 11/01/95
(cost $600,000) 600 600,000
TOTAL INVESTMENTS-99.9%
(cost $50,451,834) 54,205,987
Other assets less liabilities-0.1% 68,673
NET ASSETS-100% $54,274,660
* Non-income producing.
(a) Securities are exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At October 31, 1995,
these securities amounted to $8,114,784 or 12.3% of net assets.
(b) Annualized yield to maturity at purchase date.
Glossary of Terms:
ADR - American Depository Receipt.
ELKS - Equity Linked Security.
See notes to financial statements.
8
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995 ALLIANCE INCOME BUILDER FUND, INC.
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $50,451,834) $54,205,987
Cash 409,740
Interest and dividends receivable 678,489
Receivable for investment securities sold 286,539
Receivable for capital stock sold 34,563
Deferred organization expenses and other assets 33,507
Total assets 55,648,825
LIABILITIES
Payable for investment securities purchased 1,000,000
Payable for capital stock redeemed 150,748
Distribution fee payable 45,800
Advisory fee payable 34,797
Accrued expenses 142,820
Total liabilities 1,374,165
NET ASSETS $54,274,660
COMPOSITION OF NET ASSETS
Capital stock, at par $ 5,084
Additional paid-in capital 49,798,597
Undistributed net investment income 498,395
Accumulated net realized gain on investments 218,431
Net unrealized appreciation of investments 3,754,153
$54,274,660
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($1,398,110/
130,652 shares of capital stock issued and outstanding) $10.70
Sales charge-4.25% of public offering price .47
Maximum offering price $11.17
CLASS B SHARES
Net asset value and offering price per share ($3,769,324/
352,293 shares of capital stock issued and outstanding) $10.70
CLASS C SHARES
Net asset value, redemption and offering price per share($49,107,226/
4,601,128 shares of capital stock issued and outstanding) $10.67
See notes to financial statements.
9
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995 ALLIANCE INCOME BUILDER FUND, INC.
_______________________________________________________________________________
INVESTMENT INCOME
Interest (net of foreign taxes withheld of $20,989) $2,967,361
Dividend income 1,563,101 $4,530,462
EXPENSES
Advisory fee 433,843
Distribution fee - Class A 3,457
Distribution fee - Class B 28,977
Distribution fee - Class C 537,875
Audit and legal 170,166
Administrative 147,729
Registration 111,999
Transfer agency 104,766
Custodian 93,507
Printing 46,735
Amortization of organization expenses 32,850
Directors' fees 22,295
Miscellaneous 8,345
Total expenses 1,742,544
Net investment income. 2,787,918
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investment transactions 496,977
Net change in unrealized depreciation of investments 4,570,602
Net gain on investments 5,067,579
NET INCREASE IN NET ASSETS FROM OPERATIONS $7,855,497
See notes to financial statements.
10
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE INCOME BUILDER FUND, INC.
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1995 1994
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 2,787,918 $ 3,144,639
Net realized gain on investments 496,977 860,146
Net change in unrealized appreciation
(depreciation) of investments 4,570,602 (7,040,971)
Net increase (decrease) in net assets from
operations 7,855,497 (3,036,186)
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (58,469) (463)
Class B (129,550) (3,090)
Class C (2,380,051) (704,557)
Tax return of capital
Class A -0- (136)
Class B -0- (722)
Class C -0- (148,353)
Net realized gain on investments
Class A -0- (2,049)
Class B -0- (10,246)
Class C -0- (2,960,981)
CAPITAL STOCK TRANSACTIONS
Net decrease (17,637,805) (32,542,144)
Total decrease (12,350,378) (39,408,927)
NET ASSETS
Beginning of year 66,625,038 106,033,965
End of year (including undistributed net investment
income of $498,395 at October 31, 1995) $54,274,660 $66,625,038
See notes to financial statements.
11
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1995 ALLIANCE INCOME BUILDER FUND, INC.
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Income Builder Fund (the 'Fund'), is registered under the Investment
Company Act of 1940, as a non-diversified, open-end investment company. Prior
to March 22, 1994, the Fund was known as Alliance Multi- Market Income & Growth
Trust, Inc. which offered one class of shares. On March 22, 1994, the Board of
Directors approved the creation of three classes of shares. The Fund's previous
shares have been converted into Class C shares. The Fund offers Class A, Class
B and Class C shares. Class A shares are sold with front-end sales charge of
4.25%. Class B shares are sold with a contingent deferred sales charge which
declines from 4% to zero depending on the period of time the shares are held.
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 sold without
initial or contingent deferred sales charge. All three classes of shares have
identical voting, dividend, liquidation and other rights and the same terms and
conditions, except that each class bears different distribution expenses and
has exclusive voting rights with respect to its distribution plan. Distribution
of Class A and Class B shares commenced on March 25, 1994. The following is a
summary of significant accounting policies followed by the Fund.
1. SECURITY VALUATION
Investments are stated at value. Portfolio securities traded on a national
securities exchange are valued at the last sale price, or if no sale occurred,
the mean of the bid and asked price at the regular close of the New York Stock
Exchange. Investments for which market quotations are readily available are
valued at the closing price on the day of valuation, which are obtained through
market makers. Securities for which market quotations are not readily available
are valued in good faith at fair value using methods determined by the Board of
Directors. Securities which mature in 60 days or less are valued at amortized
cost which approximates market value, unless this method does not represent
fair value. Restricted securities are valued at fair value as determined by the
Board of Directors. In determining fair value, consideration is given to cost,
operating and other financial data.
2. ORGANIZATION EXPENSES
Organization expenses of approximately $165,000 have been deferred and are
being amortized on a straight-line basis through October, 1996.
3. TAXES
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if applicable, to
shareholders. Therefore, no provision for federal income or excise taxes is
required.
4. INVESTMENT INCOME AND SECURITY TRANSACTIONS
Interest income is accrued daily. Dividend income is recorded on the
ex-dividend date. Security transactions are accounted for on the date
securities are purchased or sold. Security gains and losses are determined on
the identified cost basis. The Fund accretes discounts as adjustments to
interest income.
5. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date and are determined in accordance with income tax regulations.
6. RECLASSIFICATIONS OF NET ASSETS
As of October 31, 1995, differences totalling $278,546 was reclassified from
accumulated net realized loss on investments to undistributed net investment
income. This reclass was the result of permanent book to tax differences due to
short term capital gains which are treated as ordinary income for tax purposes
and had no effect on net investment income, net realized gains and losses and
net assets.
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of an investment advisory agreement, the Fund pays Alliance
Capital Management L.P., (the 'Adviser'), an advisory fee at an annual rate of
.75 of 1% of the average daily net assets of the Fund. Such fee is accrued
daily and paid monthly.
12
ALLIANCE INCOME BUILDER FUND, INC.
_______________________________________________________________________________
The Adviser has agreed under the terms of the advisory agreement, to reimburse
the Fund to the extent that its aggregate expenses (exclusive of interest,
taxes, brokerage, distribution fees, and extraordinary expenses) exceed the
limits prescribed by any state in which the Fund's shares are qualified for
sale. The Fund believes that the most restrictive expense ratio limitation
currently imposed by any state is 2 1/2% of the first $30 million of the Fund's
average daily net assets, 2% of the next $70 million of its average daily net
assets and 1 1/2% of its average daily net assets in excess of $100 million. No
reimbursement was required by the Adviser for the year ended October 31, 1995.
Pursuant to the advisory agreement, the Fund also paid $147,729 to the Adviser
representing the cost of certain legal and accounting services provided to the
Fund by the Adviser for the year ended October 31, 1995.
The Fund compensates Alliance Fund Services, Inc. (a wholly-owned subsidiary of
the Adviser) under a Transfer Agency Agreement for providing personnel and
facilities to perform transfer agency services for the Fund. Such compensation
amounted to $104,766 for the year ended October 31, 1995.
Alliance Fund Distributors, Inc. (a wholly-owned subsidiary of the Adviser)
serves as the Distributor of the Fund's shares. The Distributor received
front-end sales charges of $290 from the sale of Class A shares and $7,453 in
contingent deferred sales charges imposed upon redemptions by shareholders of
Class B for the year ended October 31, 1995.
Brokerage commissions paid on securities transactions for the year ended
October 31, 1995 amounted to $31,374, of which $70 was paid to Barings
Securities, a broker utilizing the services of the Pershing Division of
Donaldson, Lufkin & Jenrette Securities Corp., an affiliate of the Adviser.
NOTE C: DISTRIBUTION SERVICES AGREEMENT
The Fund has adopted a Distribution Services Agreement (the 'Agreement')
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the
Agreement, the Fund pays a distribution fee to the Distributor at an annual
rate of up to .30 of 1% of the average daily net assets attributable to Class A
shares and 1% of the average daily net assets attributable to the Class B and
Class C shares. Such a fee is 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 $526,493 and $1,642,685 for Class B and Class C shares
respectively; such costs may be recovered from the Fund in future periods so
long as the Agreement is in effect. In accordance with the Agreement, there is
no provision for recovery of unreimbursed distribution costs, incurred by the
Distributor, beyond the current fiscal year for Class A shares. The Agreement
also provides that the Adviser may use its own resources to finance the
distribution of the Fund's shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments)
aggregated $46,048,769 and $64,569,744, respectively, for the year ended
October 31, 1995.
At October 31, 1995, the cost of investments for federal income tax purposes
was 50,516,760. Accordingly, gross unrealized appreciation of investments was
$5,452,085 and gross unrealized depreciation of investments was $1,762,858
resulting in net unrealized depreciation of $3,689,227.
13
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE INCOME BUILDER FUND, INC.
_______________________________________________________________________________
NOTE E: CAPITAL STOCK
There are 6,000,000,000 shares of $0.001 par value capital stock authorized,
divided into three classes, designated Class A, Class B and Class C. Each class
consists of 2,000,000,000 authorized shares. Transactions in capital stock were
as follows:
SHARES AMOUNT
------------------------ ----------------------------
YEAR ENDED MARCH 25,1994* YEAR ENDED MARCH 25,1994*
OCTOBER 31, TO OCT. 31, OCT. 31, TO OCT. 31,
1995 1994 1995 1994
---------- ------------ ------------- -------------
CLASS A
Shares sold 76,113 65,917 $ 727,101 $ 642,709
Shares issued in
reinvestment of
dividends 4,962 232 49,223 2,243
Shares redeemed (12,379) (4,193) (124,785) (41,358)
Net increase 68,696 61,956 $ 651,539 $ 603,594
CLASS B
Shares sold 196,028 217,604 $ 1,941,263 $ 2,130,734
Shares issued in
reinvestment of
dividends 9,101 1,074 90,325 10,419
Shares redeemed (59,179) (12,335) (592,437) (122,090)
Net increase 145,950 206,343 $ 1,439,151 $ 2,019,063
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1995 1994 1995 1994
----------- ------------ ------------- -------------
CLASS C
Shares sold. 184,418 204,158 $ 1,804,787 $ 2,039,498
Shares issued in
reinvestment of
dividends and
distributions 121,055 254,364 1,170,782 2,577,285
Shares redeemed (2,329,518) (3,960,260) (22,704,064) (39,781,584)
Net decrease (2,024,045) (3,501,738) $(19,728,495) $(35,164,801)
* Commencement of distribution.
14
FINANCIAL HIGHLIGHTS ALLIANCE INCOME BUILDER FUND, INC.
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS A CLASS B
--------------------- --------------------
MARCH 25, MARCH 25,
1994(A) 1994(A)
YEAR ENDED TO YEAR ENDED TO
OCT. 31, OCT. 31, OCT. 31, OCT. 31,
1995 1994 1995 1994
---------- ---------- -------- -----------
Net asset value, beginning of period $ 9.69 $10.00 $ 9.68 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .93(f) .96 .63(f) .88
Net realized and unrealized gain
(loss) on investments
and foreign currency transactions .59 (1.02) .83 (.98)
Net increase (decrease) in net asset
value from operations 1.52 (.06) 1.46 (.10)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.51) (.04) (.44) (.05)
Tax return of capital -0- (.01) -0- (.01)
Distributions from net realized gains -0- (.20) -0- (.16)
Total dividends and distributions (.51) (.25) (.44) (.22)
Net asset value, end of period $10.70 $ 9.69 $10.70 $ 9.68
TOTAL RETURN
Total investment return based on
net asset value(c) 16.22% (.54)% 15.55% (.99)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $1,398 $600 $3,769 $1,998
Ratio of expenses to average net
assets 2.38% 2.52%(e) 3.09% 3.09%(e)
Ratio of net investment income to
average net assets 5.44% 6.11%(e) 4.73% 5.07%(e)
Portfolio turnover rate 92% 126% 92% 126%
See footnote summary on page 16.
15
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE INCOME BUILDER FUND, INC.
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS C
---------------------------------------------------------------
OCTOBER 25,
1991(B)
YEAR ENDED OCTOBER 31, TO
-------------------------------------------- OCTOBER 31,
1995 1994 1993 1992 1991
---------- --------- --------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.66 $10.47 $ 9.80 $10.00 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .40(f) .50 .52 .55 .01
Net realized and unrealized gain (loss) on
investments and foreign currency transactions 1.05 (.85) .51 (.28) -0-
Net increase (decrease) in net asset value
from operations 1.45 (.35) 1.03 .27 .01
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.44) (.09) (.36) (.47) (.01)
Tax return of capital -0- (.02) -0- -0- -0-
Distributions from net realized gains -0- (.35) -0- -0- -0-
Total dividends and distributions (.44) (.46) (.36) (.47) (.01)
Net asset value, end of period $10.67 $ 9.66 $10.47 $ 9.80 $10.00
TOTAL RETURN
Total investment return based on net asset value(c) 15.47% (3.44)% 10.65% 2.70% .11%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $49,107 $64,027 $106,034 $152,617 $41,813
Ratio of expenses to average net assets 3.02% 2.67% 2.32% 2.33% -0-%(e)(d)
Ratio of net investment income to average net
assets 4.81% 3.82% 6.85% 5.47% .94%(e)
Portfolio turnover rate 92% 126% 101% 108% -0-%
</TABLE>
(a) Commencement of distribution.
(b) Commencement of operations.
(c) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales charge or contingent
deferred sales charge is not reflected in the calculation of total investment
return. Total investment return calculated for a period of less than one year
is not annualized.
(d) Net of expenses assumed and waived by the Adviser. If the Fund had borne
all expenses, the expenses ratio would have been 1.99% annualized.
(e) Annualized.
(f) Based on average shares outstanding.
16
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS ALLIANCE INCOME BUILDER FUND, INC.
_______________________________________________________________________________
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
ALLIANCE INCOME BUILDER FUND, INC.
We have audited the accompanying statement of assets and liabilities of
Alliance Income Builder Fund, Inc. (the 'Fund'), including the portfolio of
investments, as of October 31, 1995, and the related statement of operations
for the year then ended, the statement of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of
the periods indicated therein. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Alliance Income Builder Fund, Inc. at October 31, 1995, 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 indicated periods in conformity with generally accepted accounting
principles.
Ernst & Young LLP
New York, New York
December 11, 1995
17
ALLIANCE INCOME BUILDER FUND, INC.
_______________________________________________________________________________
BOARD OF DIRECTORS
JOHN D. CARIFA, CHAIRMAN AND PRESIDENT
RUTH BLOCK (1)
DAVID H. DIEVLER (1)
JOHN H. DOBKIN (1)
WILLIAM H. FOULK, JR. (1)
DR. JAMES M. HESTER (1)
CLIFFORD L. MICHEL (1)
ROBERT C. WHITE (1)
OFFICERS
KATHLEEN A. CORBET, SENIOR VICE PRESIDENT
WAYNE D. LYSKI, SENIOR VICE PRESIDENT
THOMAS M. PERKINS, SENIOR VICE PRESIDENT
ANDREW M. ARAN, VICE PRESIDENT
EDMUND P. BERGAN, JR., SECRETARY
MARK D. GERSTEN, TREASURER & CHIEF FINANCIAL OFFICER
PATRICK J. FARRELL, CONTROLLER
CUSTODIAN
BROWN BROTHERS HARRIMAN & CO.
40 Water Street
Boston, MA 02109
PRINCIPAL UNDERWRITER
ALLIANCE FUND DISTRIBUTORS, INC.
1345 Avenue of the Americas
New York, NY 10105
LEGAL COUNSEL
SEWARD & KISSEL
One Battery Park Plaza
New York, NY 10004
TRANSFER AGENT
ALLIANCE FUND SERVICES, INC.
P.O. Box 1520
Secaucus, NJ 07096-1520
Toll-Free 1 (800) 221-5672
INDEPENDENT AUDITORS
ERNST & YOUNG LLP
787 Seventh Avenue
New York, NY 10019
(1) Member of the Audit Committee.
18
ALLIANCE INCOME BUILDER FUND
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
ALLIANCECAPITAL
MUTUAL FUNDS WITHOUT THE MYSTERY.
THIS REPORT IS INTENDED SOLELY FOR DISTRIBUTION TO CURRENT SHAREHOLDERS
OF THE FUND.
R THESE REGISTERED SERVICE MARKS USED UNDER LICENSE FROM THE OWNER,
ALLIANCE CAPITAL MANAGEMENT L.P.
IBFAR
