ALLIANCE INCOME BUILDER FUND
ANNUAL REPORT
OCTOBER 31, 1996
LETTER TO SHAREHOLDERS ALLIANCE INCOME BUILDER FUND, INC.
_______________________________________________________________________________
November 27, 1996
Dear Shareholder:
We are pleased to review Alliance Income Builder Fund performance and
investment activity for the fiscal year ended October 31, 1996. The last twelve
months were characterized by moderate economic growth, low inflation, volatile
bond markets and rising stock prices. As presented below, your Fund continued
to meet its objectives in outperforming its benchmark, a composite of the
Lehman Brothers Government/Corporate Bond Index, weighted 60%, and the S&P
500-Stock Index, weighted 40%. As you can see below, for the twelve months
ended October 31, 1996, Class A Shares had a 14.82% total return vs. a
blended/composite of 12.84%.
TOTAL RETURN
PERIOD ENDED OCTOBER 31, 1996
6 MONTHS 12 MONTHS
---------- -----------
ALLIANCE INCOME BUILDER FUND
Class A 8.02% 14.82%
Class B 7.60% 13.92%
Class C 7.62% 13.96%
LB GOV'T/CORP.
BOND INDEX 5.35% 5.39%
S&P 500 9.03% 24.02%
60/40 COMPOSITE:
LB GOV'T/CORP.
BOND INDEX/S&P 500 6.82% 12.84%
TOTAL RETURNS ARE BASED ON THE NET ASSET VALUES OF EACH CLASS OF SHARES AS OF
OCTOBER 31, 1996; ADDITIONAL INVESTMENT RESULTS APPEAR ON PAGE 3. THE FUND'S
BENCHMARKS ARE UNMANAGED.
MARKET OVERVIEW
Moderate, but progressive, economic growth trends continued in 1996 allowing
short-term interest rates to stabilize. After disappointing political progress
in balancing the U.S. fiscal budget early in the year reduced bond prices,
continued lack of inflationary pressures and the November election results
supported a strong bond rally. Volatility was pronounced in the late spring and
early summer months with 30-year Treasury rates peaking at 7.2% on June 12,
1996, 86 basis points higher than at the
end of October, 1995 and 75 basis points higher than the 6.4% recorded on
November 26, 1996. The November 1996 rally reflects investor expectations of
continued moderate earnings growth, lower interest rates, and favorable
prospects for balancing the U.S. fiscal budget. Strong cash flow generation
continues to fund higher dividends and increased stock repurchase programs.
This moderate economic environment will enable us to continue to underpin our
investments in common stocks with growing dividend rates and fixed income
securities with attractive total return profiles.
FIXED INCOME INVESTMENTS
As interest rates declined in late 1995 and bond prices rallied, we sold some
longer dated bonds. Proceeds were later reinvested at higher yields after the
market declined earlier this year. While not immune to lower bond prices early
in the year, we benefited from the improved spread contraction on several of
our corporate bonds. Our ability to select improving credit situations helped
minimize price declines during the weaker bond market. As yields rose in
mid-year, we repositioned the portfolio toward longer dated corporate
securities allowing us to maximize the benefits of the recent bond rally.
Sector allocation also enhanced results as spreads on surplus notes, issued by
insurance companies, narrowed significantly in 1996. Additionally, selected
preferred stocks proved less sensitive to interest rate swings and added
attractive yields to our book. We continued to research turnaround stories
exemplified by our investment in
K-Mart bonds, purchased after the refinancing of their bank facilities was
announced. This investment has performed well, reflecting the market's
favorable view of the company's new senior management and increased balance
sheet liquidity. As the current economic expansion matures, we will continue to
balance credit quality, yield and the total return potential of alternative
investments.
EQUITY INVESTMENTS
The Fund's equity assets fully benefited from the stock market's continuing
rally and its preference for high quality equities. In fact, our equities
outperformed the S&P 500 for both the six months and the full year (up over 30%
compared to the S&P 500's 24%). Our two largest sector investments, financials
and consumer staples, did especially well, with the former benefiting from
declining interest rates and the latter from the market's
1
ALLIANCE INCOME BUILDER FUND, INC.
_______________________________________________________________________________
anticipation of a slowing economy. Good earnings comparisons characterized both
of these groups as well as our portfolio in general. Primarily due to superior
appreciation, our exposure to financials increased to 27% and consumer staples
to 18% (as some of the undervaluation has been removed from financials, we plan
to modestly reduce our weighting). The technology sector declined to 6% of the
Fund's equities as its position in Oracle convertibles matured and we continue
to have difficulty finding good dividend paying technology companies. Consumer
services also declined to 6% as our holdings in restaurant stocks were
eliminated, reflecting the difficult competitive environment.
Stocks still represent slightly less than 40% of total Fund assets since we
continue to reinvest some of our equity gains into fixed income securities in
order to enhance the Fund's income earning capabilities. Our equity investments
are concentrated in high quality issues that demonstrate a pattern of
increasing dividends. Reflective of that quality, our ten largest stock
holdings are: General Electric Co., Intel Corp., Merck & Co., Philip Morris
Cos., Inc., Gillette Co., Travelers Group, Inc., American International Group,
Inc., Exxon Corp., Health Care Property Investors Inc., and Penncorp Financial
Group cv. pfd. All ten of these stocks have paid more in dividends in each of
the past five years.
We believe that the quality of our equities and the growth in their dividends
should continue to serve the Fund well in most market environments.
Thank you for your continued interest in Alliance Income Builder Fund. We look
forward to reporting to you again on market activity and the Fund's investment
results in the coming period.
Sincerely,
John D. Carifa
Chairman and President
Thomas M. Perkins
Senior Vice President
Andrew M. Aran
Vice President
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, GUARANTEED OR ENDORSED
BY, ANY BANK; FURTHER, SUCH SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
2
INVESTMENT OBJECTIVE AND POLICIES ALLIANCE INCOME BUILDER FUND, INC.
_______________________________________________________________________________
Alliance Income Builder Fund seeks both an attractive level of current income
and long-term growth of income and capital. The Fund invests principally in a
non-diversified portfolio of fixed income securities and dividend-paying common
stocks. Alliance currently expects to maintain approximately 60% of the Fund's
net assets in fixed-income securities and 40% in equity securities.
INVESTMENT RESULTS
_______________________________________________________________________________
AVERAGE ANNUAL TOTAL RETURN AS OF OCTOBER 31, 1996
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
. One Year 14.82% 9.99%
. Since Inception* 11.46% 9.64%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
. One Year 13.92% 9.92%
. Since Inception* 10.68% 10.03%
CLASS C SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
. One Year 13.96% 12.96%
. Since Inception* 7.62% 7.62%
The average annual total returns reflect reinvestment 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); and for Class C (1% year 1). 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 10/31/96
$22,000
$20,000
$18,000
$16,000
$14,000
$12,000
$10,000
S&P 500
LEHMAN GOV'T/CORP
INCOME BUILDER FUND CLASS C: $14,455
10/25/91 10/31/96
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 sales charges,
therefore, a sales charge is not reflected in this illustration. Class C shares
are subject to a maximum 1.00% contingent deferred sales charge. 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, the 1-3 Year Government Index,
the 20+ Year Index, and the Index of all publicly issued non-convertible
investment grade corporate debts.
When comparing Alliance Income Builder Fund to the indices shown above, you
should note that no charges or expenses are reflected in the performance of the
indices.
Income Builder Fund
S&P 500
Lehman Gov't/Corp.
4
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1996 ALLIANCE INCOME BUILDER FUND, INC.
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
COMMON & PREFERRED STOCKS-46.6%
COMMON STOCKS-36.0%
FINANCIAL SERVICES-8.9%
BANKING & FINANCE-1.7%
BankAmerica Corp. 3,000 $ 274,500
Chase Manhattan Corp. 3,200 274,400
Dean Witter Discover & Co. 2,000 117,750
First Union Corp. 3,000 218,250
------------
884,900
BROKERAGE & MONEY MANAGEMENT-1.0%
Legg Mason, Inc. 9,192 296,442
Merrill Lynch & Co., Inc. 3,000 210,750
------------
507,192
INSURANCE-2.7%
American International Group, Inc. 5,000 543,125
Progressive Corp. 4,000 275,000
Travelers Group, Inc. 10,500 569,625
------------
1,387,750
MORTGAGE BANKING-0.7%
Federal National Mortgage Assn. 9,000 352,125
REALTY-2.1%
Bay Apartment Communities 5,000 150,000
Duke Realty Investments 10,000 345,000
JP Realty, Inc. 7,000 159,250
Patriot American Hospitality 2,000 70,250
Security Capital Industry Trust 5,000 90,625
Spieker Properties, Inc. 2,500 76,875
Weingarten Realty Investors, Inc. 6,000 230,250
------------
1,122,250
OTHER-0.7%
American Express Co. 8,000 376,000
------------
4,630,217
CONSUMER STAPLES-6.7%
COSMETICS-1.5%
Avon Products, Inc. 4,000 217,000
Gillette Co. 8,000 598,000
------------
815,000
FOODS, BEVERAGES & TOBACCO-4.3%
American Brands, Inc. 8,000 382,000
Anheuser Busch, Inc. 6,000 231,000
Campbell Soup Co. 4,000 320,000
Heinz (H.J.) Co. 7,000 248,500
Philip Morris Cos., Inc. 8,000 741,000
Sara Lee Corp. 10,000 355,000
------------
2,277,500
HOUSEHOLD PRODUCTS-0.9%
Procter & Gamble Co. 4,500 445,500
------------
3,538,000
CAPITAL GOODS-6.3%
ELECTRICAL EQUIPMENT-2.4%
Emerson Electric Co. 5,000 445,000
General Electric Co. 8,500 822,375
------------
1,267,375
ELECTRICAL UTILITY-0.8%
Cinergy Corp. 9,000 298,125
Houston Industries, Inc. 5,000 114,375
------------
412,500
MACHINERY-0.8%
Allied Signal, Inc. 6,000 393,000
5
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE INCOME BUILDER FUND, INC.
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
TECHNOLOGY-2.3%
Electronic Data Systems Corp. 6,446 $ 290,070
Intel Corp. 7,000 769,125
Texas Instruments, Inc. 3,000 144,375
------------
1,203,570
------------
3,276,445
CONSUMER PRODUCTS & SERVICES-6.3%
BROADCASTING & CABLE-0.7%
Comcast Corp. Cl. A. 10,120 149,270
Vodafone Group Plc. (ADR) 6,000 231,750
------------
381,020
DRUGS, HOSPITALS, SUPPLIES & MEDICAL
SERVICES-3.8%
Health Care Property Investors, Inc. 14,000 491,750
Merck & Co., Inc. 10,000 741,250
Pfizer, Inc. 3,500 289,625
Schering-Plough Corp. 4,500 288,000
Smithkline Beecham Plc. (ADR) 3,000 187,875
------------
1,998,500
ENTERTAINMENT & LEISURE-0.5%
Eastman Kodak Co. 3,000 239,250
MULTI-INDUSTRY-0.6%
Canadian Pacific, Ltd. 12,000 303,000
RETAILING-0.4%
May Department Stores Co. 4,800 227,400
OTHER-0.4%
Newell Co. 8,000 227,000
------------
3,376,170
BASIC INDUSTRIES-2.0%
CHEMICAL-2.0%
Du Pont (Ei) De Nemours 4,000 371,000
Monsanto Co. 10,500 416,063
Morton International, Inc. 7,000 275,625
------------
1,062,688
ENERGY-2.1%
OIL & GAS-2.1%
Chevron Corp. 6,000 394,500
Exxon Corp. 6,000 531,750
Shell Transport & Trading Co. (ADR) 2,000 196,000
------------
1,122,250
UTILITIES-1.5%
TELECOMMUNICATION-1.5%
GTE Corp. 10,715 451,369
Southern New England Telecommunications,
Inc. Cl. A. 6,000 223,500
U.S. West Communications Group 3,000 91,125
------------
765,994
TRANSPORTATION-0.6%
Union Pacific Corp. 5,500 308,688
INDUSTRIAL-0.4%
WMX Technologies, Inc. 6,700 230,312
Total Common Stocks (cost $12,366,216) 18,310,764
PREFERRED STOCKS-11.6%
BANKING & FINANCE-9.5%
Central Hispano Financial Services B,
pfd., 9.43% 52,000 1,397,500
Credit Lyonnais Capital SCA, pfd.,
9.50% (ADR) (a) 40,000 970,000
Penncorp Financial Group
cv. pfd., 3.50% 6,000 486,000
SI Financing Trust I
pfd., 9.50% 80,000 2,070,000
------------
4,923,500
6
ALLIANCE INCOME BUILDER FUND, INC.
_______________________________________________________________________________
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- -------------------------------------------------------------------------
INDUSTRIAL-2.1%
Time Warner Inc. Series K.
pfd., 10.25% (a) 1,048 $ 1,114,810
Total Preferred Stocks (cost $5,718,117) 6,038,310
Total Common & Preferred Stocks
(cost $18,599,969) 24,349,074
CORPORATE DEBT OBLIGATIONS-45.8%
BANKING & FINANCE-15.6%
Arkwright CSN TR 9.625%, 8/15/26 (a) $ 1,000 1,087,410
Contifinancial 8.375%, 8/15/03 1,000 1,020,190
Firstbank Puerto Rico 7.625%, 12/15/05 1,500 1,500,000
Homeside, Inc. 11.25%, 5/15/03 (a) 500 546,875
John Hancock 7.375%, 2/15/24 (a) 1,000 969,960
Saul (B.F.) Real Estate Investment Trust
Series B 11.625%, 4/01/02 2,000 2,150,000
Structured Asset Securities 7.75%, 02/25/28(a) 1,000 891,250
------------
8,165,685
CONSUMER PRODUCTS & SERVICES-11.7%
Home Holdings, Inc. 8.625%, 12/15/03 2,000 690,000
K-Mart Corp. 8.25%, 1/01/22 2,500 2,012,500
M.D.C. Holdings, Inc. 6.64%, 4/01/98 2,540 2,349,500
New York Life Insurance 7.50%, 12/15/23 (a) 1,130 1,085,331
------------
6,137,331
INDUSTRIAL-13.7%
Eli Lilly & Co. 7.125%, 6/01/25 1,000 993,783
Financiera Energy 9.375%, 6/15/06 1,000 1,018,940
Freeport-McMoran Res. 7.00%, 2/15/08 500 485,223
Millicom International Cellular
13.50%, 06/01/06 (a) 1,000 570,000
Reliance Industries, Ltd. 10.38%, 06/24/16 (a) 1,500 1,602,900
Tele-Communications, Inc. 9.25%, 1/15/23 1,000 945,504
USX Corp. 8.50%, 3/01/23 500 529,289
Viacom, Inc. 7.75%, 6/01/05 1,000 974,045
------------
7,119,684
YANKEE BONDS-3.8%
Mc-Cuernavaca Trust 9.25%, 7/25/01 (a) 1,626 1,455,084
United Mexican States 11.50%, 05/15/26 500 497,250
------------
1,952,334
TECHNOLOGY-1.0%
Sprint Spectrum Lp. 11.00%, 8/15/06 500 510,000
Total Corporate Debt Obligations
(cost $24,260,217) 23,885,034
7
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE INCOME BUILDER FUND, INC.
_______________________________________________________________________________
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- -------------------------------------------------------------------------
CONVERTIBLE BONDS-1.6%
Hasbro, Inc. 6.00%, 11/15/98 $ 250 $ 332,812
Liberty Property 8.00%, 07/01/01 200 216,000
Magna International, Inc. 5.00%, 10/15/02 300 330,000
Total Convertible Bonds (cost $824,275) 878,812
COMMERCIAL PAPER-5.0%
American Express Co. 5.30%, 11/01/96 1,744 1,744,000
Ford Motor Credit Co. 5.37%, 11/04/96 914 913,591
Total Commercial Paper
(amortized cost $2,657,591) 2,657,591
TOTAL INVESTMENTS-99.0%
(cost $46,342,052) 51,770,511
Other assets less liabilities-1.0% 501,923
NET ASSETS-100% $52,272,434
(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, 1996,
these securities amounted to $10,293,620 or 19.69% of net assets.
Glossary of terms:
ADR - American Depository Receipt
See notes to financial statements
8
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1996 ALLIANCE INCOME BUILDER FUND, INC.
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $46,342,052) $51,770,511
Cash 297,456
Interest and dividends receivable 609,957
Receivable for investment securities sold 218,243
Receivable for capital stock sold 59,733
Deferred organization expenses 657
Total assets 52,956,557
LIABILITIES
Payable for investment securities purchased 298,200
Payable for capital stock redeemed 145,457
Distribution fee payable 42,790
Advisory fee payable 33,005
Accrued expenses 164,671
Total liabilities 684,123
NET ASSETS $52,272,434
COMPOSITION OF NET ASSETS
Capital stock, at par $ 4,535
Additional paid-in capital 43,781,033
Undistributed net investment income 378,639
Accumulated net realized gain on investments 2,679,768
Net unrealized appreciation of investments 5,428,459
$52,272,434
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($2,055,819/
177,732 shares of capital stock issued and outstanding) $11.57
Sales charge--4.25% of public offering price .51
Maximum offering price $12.08
CLASS B SHARES
Net asset value and offering price per share ($5,775,117/
499,876 shares of capital stock issued and outstanding) $11.55
CLASS C SHARES
Net asset value and offering price per share ($44,441,498/
3,857,091 shares of capital stock issued and outstanding) $11.52
See notes to financial statements.
9
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1996 ALLIANCE INCOME BUILDER FUND, INC.
_______________________________________________________________________________
INVESTMENT INCOME
Interest (net of foreign taxes withheld of $7,049) $2,801,601
Dividends 931,628 $3,733,229
EXPENSES
Advisory fee 396,063
Distribution fee - Class A 4,820
Distribution fee - Class B 47,291
Distribution fee - Class C 464,732
Custodian 160,901
Administrative 142,656
Audit and legal 99,914
Transfer agency 75,821
Registration 40,925
Printing 38,878
Amortization of organization expenses 32,850
Directors' fees 23,392
Miscellaneous 4,992
Total expenses 1,533,235
Net investment income 2,199,994
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investment transactions 3,052,921
Net change in unrealized appreciation of investments 1,674,306
Net gain on investments 4,727,227
NET INCREASE IN NET ASSETS FROM OPERATIONS $6,927,221
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,
1996 1995
------------ ------------
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income $ 2,199,994 $ 2,787,918
Net realized gain on investments 3,052,921 496,977
Net change in unrealized appreciation of
investments 1,674,306 4,570,602
Net increase in net assets from operations 6,927,221 7,855,497
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (76,978) (58,469)
Class B (201,924) (129,550)
Class C (2,021,377) (2,380,051)
Net realized gain on investments
Class A (14,802) -0-
Class B (42,369) -0-
Class C (508,039) -0-
CAPITAL STOCK TRANSACTIONS
Net decrease (6,063,958) (17,637,805)
Total decrease (2,002,226) (12,350,378)
NET ASSETS
Beginning of year 54,274,660 66,625,038
End of year (including undistributed net
investment income of $378,639 and $498,395,
respectively) $52,272,434 $54,274,660
See notes to financial statements.
11
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1996 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 management investment
company. The Fund offers Class A, Class B, Class C and Advisor Class shares.
Distribution of Advisor Class shares commenced on October 2, 1996. Class A
shares are sold with a front-end sales charge of 4.25%. Class B shares are sold
with a contingent deferred sales charge which declines from 4.00% 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 purchased on or after July 1, 1996
are subject to a contingent deferred sales charge of 1.00% on redemptions made
within the first year after purchase. Advisor Class shares are sold without an
initial or contingent deferred sales charge. All four 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 Advisor Class shares commenced on October 1, 1996. 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 day of valuation, which are obtained through
market makers. 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. Securities for which market quotations are not readily
available and restricted securities are valued in good faith at fair value
using methods 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 were
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 provisions for federal income or excise taxes are
required.
4. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Interest income is accrued daily. Dividend income is recorded on the
ex-dividend date. Investment transactions are accounted for on the date
securities are purchased or sold. Investment 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. RECLASSIFICATION OF NET ASSETS
As of October 31, 1996, the Fund reclassified certain components of net assets.
The reclassifications resulted in a net increase to additional paid in capital
of 45,845, and a net decrease to undistributed net investment income and
accumulated capital gains of $19,471 and $26,374, respectively. These
reclassifications were the result of permanent book to tax differences. Net
assets were not affected by the reclassifications.
12
ALLIANCE INCOME BUILDER FUND, INC.
_______________________________________________________________________________
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.
Pursuant to the advisory agreement, the Fund paid $142,656 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, 1996.
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 $75,821 for the year ended October 31, 1996.
Alliance Fund Distributors, Inc. (a wholly-owned subsidiary of the Adviser)
serves as the Distributor of the Fund's shares. The Distributor received
front-end sales charges of $1,756 from the sale of Class A shares and $4,000 in
contingent deferred sales charges imposed upon redemptions by shareholders of
Class B shares for the year ended October 31, 1996.
Brokerage commissions paid on securities transactions for the year ended
October 31, 1996 amounted to $33,301, none of which was paid to affiliated
brokers.
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. There is no distribution fee on the Advisor Class 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
$748,972 and $1,789,259 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 and U.S.
Government obligations) aggregated $46,913,003 and $53,264,672 respectively,
for the year ended October 31, 1996. There were purchases of $7,421,986 and
sales of $9,432,305 of U.S. Government and government agency obligations for
the year ended October 31, 1996.
At October 31, 1996, the cost of investments for federal income tax purposes
was $46,347,252. Accordingly, gross unrealized appreciation of investments was
$6,639,044, and gross unrealized depreciation of investments was $1,215,785
resulting in net unrealized appreciation of $5,423,259.
13
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE INCOME BUILDER FUND, INC.
_______________________________________________________________________________
NOTE E: CAPITAL STOCK
There are 8,000,000,000 shares of $0.001 par value capital stock authorized,
divided into four classes, designated Class A, Class B, Class C and Advisor
Class. Each class consists of 2,000,000,000 authorized shares. There were no
transactions for the Advisor Class shares. Transactions in capital stock were
as follows:
SHARES AMOUNT
--------------------------- ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1996 1995 1996 1995
------------ ------------ -------------- --------------
Shares sold 71,054 76,113 $ 780,984 $ 727,101
Shares issued in
reinvestment of
dividends and
distributions 6,505 4,962 70,930 49,223
Shares converted
from Class B 3,979 -0- 44,062 -0-
Shares redeemed (34,458) (12,379) (385,149) (124,785)
Net increase 47,080 68,696 $ 510,827 $ 651,539
CLASS B
Shares sold 186,705 196,028 $ 2,057,991 $ 1,941,263
Shares issued in
reinvestment of
dividends and
distributions 14,453 9,101 157,642 90,325
Shares converted
to Class A (3,979) -0- (44,062) -0-
Shares redeemed (49,596) (59,179) (546,791) (592,437)
Net increase 147,583 145,950 $ 1,624,780 $ 1,439,151
CLASS C
Shares sold 151,540 184,418 $ 1,653,774 $ 1,804,787
Shares issued in
reinvestment of
dividends and
distributions 90,197 121,055 980,210 1,170,782
Shares redeemed (985,774) (2,329,518) (10,833,549) (22,704,064)
Net decrease (744,037) (2,024,045) $ (8,199,565) $(19,728,495)
14
FINANCIAL HIGHLIGHTS ALLIANCE INCOME BUILDER FUND, INC.
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS A
-----------------------------------
MARCH 25,
1994(a)
YEAR ENDED OCTOBER 31, TO
----------------------- OCTOBER 31,
1996 1995 1994
----------- ---------- -----------
Net asset value, beginning of period $10.70 $9.69 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .56(b) .93(b) .96
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions .98 .59 (1.02)
Net increase (decrease) in net asset
value from operations 1.54 1.52 (.06)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.55) (.51) (.04)
Tax return of capital -0- -0- (.01)
Distributions from net realized gains (.12) -0- (.20)
Total dividends and distributions (.67) (.51) (.25)
Net asset value, end of period $11.57 $10.70 $9.69
TOTAL RETURN
Total investment return based on net
asset value(c) 14.82% 16.22% (.54)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $2,056 $1,398 $600
Ratio of expenses to average net assets 2.20% 2.38% 2.52%(d)
Ratio of net investment income to
average net assets 4.92% 5.44% 6.11%(d)
Portfolio turnover rate 108% 92% 126%
Average commission rate paid (e) $.0600 -- --
See footnote summary on page 17.
15
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE INCOME BUILDER FUND, INC.
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS B
-----------------------------------
MARCH 25,
1994(a)
YEAR ENDED OCTOBER 31, TO
----------------------- OCTOBER 31,
1996 1995 1994
----------- ---------- -----------
Net asset value, beginning of period $10.70 $ 9.68 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .47(b) .63(b) .88
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions .98 .83 (.98)
Net increase (decrease) in net asset
value from operations 1.45 1.46 (.10)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.48) (.44) (.05)
Tax return of capital -0- -0- (.01)
Distributions from net realized gains (.12) -0- (.16)
Total dividends and distributions (.60) (.44) (.22)
Net asset value, end of period $11.55 $10.70 $ 9.68
TOTAL RETURN
Total investment return based on net
asset value(c) 13.92% 15.55% (.99)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $5,775 $3,769 $1,998
Ratio of expenses to average net assets 2.92% 3.09% 3.09%(d)
Ratio of net investment income to
average net assets 4.19% 4.73% 5.07%(d)
Portfolio turnover rate 108% 92% 126%
Average commission rate paid (e) $.0600 -- --
See footnote summary on page 17.
16
ALLIANCE INCOME BUILDER FUND, INC.
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
CLASS C
--------------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $10.67 $ 9.66 $10.47 $ 9.80 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .46(b) .40(b) .50 .52 .55
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions .99 1.05 (.85) .51 (.28)
Net increase (decrease) in net asset
value from operations 1.45 1.45 (.35) 1.03 .27
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.48) (.44) (.09) (.36) (.47)
Tax return of capital -0- -0- (.02) -0- -0-
Distributions from net realized gains (.12) -0- (.35) -0- -0-
Total dividends and distributions (.60) (.44) (.46) (.36) (.47)
Net asset value, end of year $11.52 $10.67 $ 9.66 $10.47 $ 9.80
TOTAL RETURN
Total investment return based on net
asset value(c) 13.96% 15.47% (3.44)% 10.65% 2.70%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $44,441 $49,107 $64,027 $106,034 $152,617
Ratio of expenses to average net assets 2.93% 3.02% 2.67% 2.32% 2.33%
Ratio of net investment income to
average net assets 4.13% 4.81% 3.82% 6.85% 5.47%
Portfolio turnover rate 108% 92% 126% 101% 108%
Average commission rate paid (e) $.0600 -- -- -- --
</TABLE>
(a) Commencement of distribution.
(b) Based on average shares outstanding.
(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) Annualized.
(e) For fiscal years beginning on or after September 1, 1995, a Fund is
required to disclose its average commission rate per share for trades on which
commissions are charged.
17
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, 1996, 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, 1996, 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, 1996, 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 12, 1996
18
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)
DONALD J. ROBINSON (1)
ROBERT C. WHITE (1)
OFFICERS
THOMAS M. PERKINS, SENIOR VICE PRESIDENT
ANDREW M. ARAN, VICE PRESIDENT
EDMUND P. BERGAN, JR., SECRETARY
MARK D. GERSTEN, TREASURER & CHIEF FINANCIAL OFFICER
VINCENT S. NOTO, 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.
19
ALLIANCE INCOME BUILDER FUND
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
ALLIANCE CAPITAL
INVESTING 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
