ALLIANCE INCOME BUILDER FUND
ANNUAL REPORT
OCTOBER 31, 1997
ALLIANCE CAPITAL
LETTER TO SHAREHOLDERS ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
November 24, 1997
Dear Shareholder:
We are pleased to provide you with an update of your Fund's performance and
investment activity for Alliance Income Builder Fund for the period ended
October 31, 1997.
INVESTMENT RESULTS
As you can see from the following chart, your Fund's Class A shares achieved a
total return of 10.20% at net asset value (NAV) for the six month period and a
19.36% return at NAV for the 12 month period ended October 31, 1997. Since your
Fund is balanced between stocks and bonds, we compare its performance to a
blended composite of two indices, a 60/40 Composite composed of 60% of the
Lehman Brothers Government/Corporate Bond Index and 40% of the S&P 500 Stock
Index. For the period ended October 31, 1997, your Fund slightly underperformed
the 60/40 Composite for the six month period and outperformed the index for the
12 month period. The underperformance was primarily a result of an
underweighting in technology stocks, which had exceptionally strong returns in
the last six months of the period. The outperformance for the year was
primarily attributed to good bond performance, coupled with equity performance
slightly less than that of the S&P 500.
INVESTMENT RESULTS*
Period Ended October 31, 1997
TOTAL RETURN
6 MONTHS 12 MONTHS
---------- ----------
ALLIANCE INCOME BUILDER FUND
Class A 10.20% 19.36%
Class B 9.75% 18.53%
Class C 9.78% 18.50%
LEHMAN BROTHERS GOVERNMENT/
CORPORATE BOND INDEX 7.42% 8.81%
S&P 500 STOCK INDEX 15.16% 32.10%
60/40 COMPOSITE:
Lehman Brothers Government/
Corporate Bond Index/
S&P 500 Stock Index 10.51% 18.13%
* THE FUND'S INVESTMENT RESULTS ARE CUMULATIVE TOTAL RETURNS FOR THE PERIOD
AND ARE BASED ON THE NET ASSET VALUE OF EACH CLASS OF SHARES AS OF OCTOBER 31,
1997. TOTAL RETURNS FOR ADVISOR CLASS SHARES WILL DIFFER DUE TO DIFFERENT
EXPENSES ASSOCIATED WITH THAT CLASS. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE
RESULTS.
THE UNMANAGED S&P 500 STOCK INDEX INCLUDES 500 U.S. STOCKS AND IS A COMMON
MEASURE OF THE PERFORMANCE OF THE OVERALL U.S. STOCK MARKET. THE UNMANAGED
LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX REPRESENTS A COMBINATION OF THE
GOVERNMENT BOND INDEX AND THE CORPORATE BOND INDEX AND INCLUDES U.S. GOVERNMENT
TREASURY AND AGENCY SECURITIES, CORPORATE BONDS AND YANKEE BONDS. THE 60/40
COMPOSITE IS A BLEND OF BOTH INDICES WITH A 60/40 WEIGHTING. AN INVESTOR CANNOT
INVEST DIRECTLY IN THE INDICES.
ADDITIONAL INVESTMENT RESULTS APPEAR ON PAGE 3.
MARKET OVERVIEW
During the past six months, U.S. Treasuries rallied with the yield on 30-year
bonds declining by nearly 80 basis points to 6.15%. In October, turmoil in the
Asian financial markets, and the subsequent increased volatility in both the
U.S. stock and bond markets resulted in the flight to quality by many
investors. As a result, Treasury prices rose to their highest levels of the
year. From September 30, 1997 to October 31, 1997 alone, the 30-year Treasury
rallied 25 basis points.
U.S. Gross Domestic Product (GDP) grew at a reasonably high annual rate of 3.5%
in the third quarter. Slower
1
ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
consumer spending and weaker trade performance might slow economic growth in
the fourth quarter of 1997 and early into 1998. We believe that the current
volatility and uncertainty in the markets will likely remain for the near term.
FIXED INCOME INVESTMENTS
With the loss of consumer confidence in the market triggered by weaknesses in
Asia, the domestic corporate market reached a turning point in October as
spreads widened by 15 basis points, on average. Up until that time, strong
economic performance, combined with generally positive earnings, kept demand
for corporate bonds high. Prior to the weakness in the markets, we raised cash
by paring back the Fund's Yankee bond (dollar denominated securities issued by
non U.S. companies) exposure. This more defensive posture not only reduced the
Fund's downside, but also allowed the Fund to take advantage of some good
buying opportunities after the initial sell-off. All the cash was reinvested in
domestic companies with businesses less affected by market volatility.
Credit research is an integral part of our investment process and this has
helped us to outperform the market during the past six and 12 months ending
October 31, 1997. Basic fundamental analysis has led the Fund to invest in
companies such as Hyperion Telecommunications which rose nearly 10 points in
price since September of 1997.
EQUITY INVESTMENTS
During the most recent six month period, the Fund's equity assets had
substantial appreciation, but underperformed the S&P 500. This was due in large
part to our underweighting (6% of the portfolio) in the technology sector, one
of the strongest areas of the market during this time. As has been described in
previous reports, technology stocks have been consistently underrepresented in
the Fund's portfolio because most do not have adequate dividends. Our two
largest equity sector investments are consumer products and services and
financial services. Financials did extremely well, reflecting strong earnings
and reasonable valuations. Our high quality consumer staples stocks had good
absolute returns, but trailed the market--more recently they have caught up as
the market has stalled. Despite our shortfall in relative performance over the
last six months, our full year equity return was within 1% of the S&P 500. Over
the life of the Fund, our equities have outperformed the S&P 500.
Stocks still comprise about 40% of total Fund assets. In October, for the first
time in several quarters, the Fund was a net buyer of stocks as the market
decline reduced our equity exposure to below 40%. Our strategy of maintaining a
relatively constant 40% in equities generally leads to the discipline of
selling stocks into strength, and buying equities when the market is weaker.
This strategy also enhances the Fund's income earning capability.
We continue to concentrate our equity investments in high quality issues that
have a history of increasing dividends. In that vein, our 10 largest holdings
as of October 31, 1997 are: General Electric Co., Merck & Co., Philip Morris
Cos., Inc., Royal Dutch Petroleum - NY, Chevron Corp., Intel Corp., The
Travelers Group, Inc., Schering Plough Corp., Abbott Laboratories and Health
Care Property Investors, Inc. The only new name added to the list from last
year is Abbott Laboratories. In total, our equities' dividend yield is over 25%
more than that of the S&P 500. The resilience of this high quality portfolio
has been apparent, as it has performed well during the stormy October market.
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
Senior Vice President
2
INVESTMENT OBJECTIVE AND POLICIES ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
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 RETURNS AS OF OCTOBER 31, 1997
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 19.36% 14.32%
Since Inception* 13.59% 12.25%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 18.53% 14.53%
Since Inception* 12.80% 12.60%
CLASS C SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 18.50% 17.50%
Five Years 10.75% 10.75%
Since Inception* 9.35% 9.35%
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 shares (1% year 1). Returns for Class A shares do not reflect
the imposition of the 1 year 1% contingent deferred sales charge for accounts
over $1,000,000. Total return for Advisor Class shares will differ due to
different expenses associated with that class.
Past performance does not guarantee future results. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
* Inception: 3/25/94, Class A and Class B; 10/25/91, Class C.
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.
3
ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
ALLIANCE INCOME BUILDER FUND
GROWTH OF A $10,000 INVESTMENT
10/31/91* TO 10/31/97
$28,000
$25,000
$22,000
$19,000
$16,000
$13,000
$10,000
10/31/91 10/31/92 10/31/93 10/31/94 10/31/95 10/31/96 10/31/97
S&P 500: $27,187
INCOME BUILDER FUND CLASS C: $17,110
LEHMAN BROTHERS GOV'T/CORP. BOND INDEX:$15,954
This chart illustrates the total value of an assumed $10,000 investment in
Alliance Income Builder Fund Class C shares (from 10/31/91 to 10/31/97) as
compared to the performance of an appropriate broad-based index. The chart
assumes the reinvestment of dividends and capital gains. 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. Performance for Class A, Class B and Advisor Class
shares will vary from the results shown above due to differences in expenses
charged to those classes. 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. Past performance is not indicative of future results,
and is not representative of future gain or loss in capital value or dividend
income.
The unmanaged Standard & Poor's 500 Stock Index includes 500 U.S. stocks and is
a common measure of the performance of the overall U.S. stock market.
The unmanaged Lehman Brothers Government/Corporate Bond Index represents a
combination of the Government Bond Index and the Corporate Bond Index and
includes U.S. Government Treasury and agency securities, corporate bonds and
Yankee bonds.
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
Standard &Poor's 500 Stock Index
Lehman Brothers Government/Corporate Bond Index
*Month-end nearest to Fund's Class C share inception date of 10/25/91.
4
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1997 ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------
CORPORATE DEBT OBLIGATIONS-47.2%
BANKING & FINANCE-6.7%
Arkwright CSN Trust
9.625%, 8/15/26 (a) $1,000 $ 1,158,827
FBOP Capital Trust
10.20%, 2/06/27 (a) 1,000 1,056,131
Greenpoint Capital Trust I Sub Cap
9.10%, 6/01/27 1,000 1,084,050
Renaissance Capital Trust Ser. B
8.54%, 3/01/27 500 520,625
------------
3,819,633
CONSUMER PRODUCTS & SERVICES-7.4%
BTI Telecom Corp.
10.50%, 9/15/07 (a) 1,000 1,015,000
Calenergy Co., Inc.
7.63%, 10/15/07 1,000 999,442
OpTel Inc. Ser. B
13.00%, 2/15/05 1,000 1,035,000
Time Warner, Inc.
9.15%, 2/01/23 1,000 1,191,829
------------
4,241,271
INDUSTRIAL-18.5%
Anchor Glass Corp.
11.25%, 4/01/05 (a) 1,000 1,090,000
Caliber Systems, Inc.
7.80%, 8/01/06 1,000 1,066,442
Chrysler Corp.
7.45%, 3/01/27 1,000 1,044,817
Hyperion Telecommunications, Inc.
12.25%, 9/01/04 (a) 500 532,500
Insilco Corp.
10.25%, 8/15/07 (a) 500 525,000
Interamericas Units
14.00%, 10/27/07 400 381,000
Intermedia Communications, Inc. Ser. B
Zero coupon, 7/15/07 1,000 660,000
Iridium LLC Capital Corp. Ser. B
14.00%, 7/15/05 2,000 2,110,000
Knology Holding, Inc. Units
11.88%, 10/15/07 1,000 535,000
Metronet Communications Units/Priv Pl
12.00%, 8/15/07 500 562,500
Riverwood International Corp.
10.625%, 8/01/07 (a) 1,000 1,041,250
Southwest Royalties, Inc.
10.50%, 10/15/04 (a) 1,000 997,500
------------
10,546,009
YANKEE BONDS-14.5%
Acindar Industries
11.25%, 2/15/04 1,000 1,000,000
Empresa Electrica Del Norte Grande, SA
7.75%, 3/15/06 (a) 1,685 1,584,743
Inversora de Electrica
9.00%, 9/16/04 (a) 1,000 940,000
Mc-Cuernavaca Trust
9.25%, 7/25/01 (a) 1,383 1,272,039
OPP Petroquica
11.00%, 10/29/04 1,000 920,000
Perez Companc, SA
9.00%, 1/30/04 (a) 1,000 980,000
RAS Laffan Liquid Natural Gas
8.29%, 3/15/14 (a) 1,000 1,050,756
Vicap, SA
11.375%, 5/15/07 (a) 500 515,000
------------
8,262,538
Total Corporate Debt Obligations
(cost $26,263,787) 26,869,451
5
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
COMMON & PREFERRED STOCKS-42.7%
COMMON STOCKS-40.1%
CONSUMER PRODUCTS & SERVICES-10.6%
BROADCASTING & CABLE-0.9%
Comcast Corp. Cl. A. 10,120 $ 278,300
Vodafone Group Plc. (ADR) 4,000 219,500
------------
497,800
DRUGS, HOSPITALS, SUPPLIES &
MEDICAL SERVICES-4.7%
Abbott Laboratories 9,000 551,812
Health Care Property Investors, Inc. 14,000 537,250
Merck & Co., Inc. 10,500 937,125
Schering-Plough Corp. 12,000 672,750
------------
2,698,937
ENTERTAINMENT & LEISURE-1.6%
Carnival Corp. Cl. A. 7,000 339,500
Eastman Kodak Co. 3,200 191,600
Walt Disney Co. 4,500 370,125
------------
901,225
FOODS, BEVERAGES & TOBACCO-0.2%
McDonald's Corp. 2,500 112,031
HOUSEHOLD PRODUCTS-0.2%
Crown Cork & Seal, Inc. 3,500 157,719
MULTI-INDUSTRY-0.5%
Canadian Pacific, Ltd. 9,000 268,312
RETAILING-1.7%
Dayton Hudson Corp. 7,000 439,687
Gap, Inc. 5,000 265,937
May Department Stores Co. 4,800 258,600
------------
964,224
OTHER-0.8%
Jostens, Inc. 11,200 261,100
Newell Co. 5,000 191,875
------------
452,975
------------
6,053,223
FINANCIAL SERVICES-8.3%
BANKING & FINANCE-3.4%
BankAmerica Corp. 4,000 286,000
Morgan Stanley, Chase Manhattan Corp. 4,000 461,500
Morgan Stanley, Dean Witter Discover & Co. 10,000 490,000
First Union Corp. 5,000 245,312
Household International, Inc. 1,000 113,250
NationsBank Corp. 6,000 359,250
------------
1,955,312
BROKERAGE & MONEY MANAGEMENT-0.8%
Legg Mason, Inc. 4,256 208,810
Merrill Lynch & Co., Inc. 4,000 270,500
------------
479,310
INSURANCE-2.4%
American International Group, Inc. 4,200 428,662
Progressive Corp. 2,000 208,500
Travelers Group, Inc. 10,166 711,620
------------
1,348,782
REALTY-1.0%
IRT Property Co. 9,000 110,250
JP Realty, Inc. 8,000 195,000
Storage USA, Inc. 3,000 113,812
Weingarten Realty Investors, Inc. 4,000 159,250
------------
578,312
OTHER-0.7%
American Express Co. 5,000 390,000
------------
4,751,716
6
ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
CAPITAL GOODS-6.7%
ELECTRICAL EQUIPMENT-2.6%
Emerson Electric Co. 8,000 $ 419,500
General Electric Co. 16,000 1,033,000
------------
1,452,500
MACHINERY-1.2%
Allied Signal, Inc. 11,000 396,000
United Technologies Corp. 4,500 315,000
------------
711,000
TECHNOLOGY-2.9%
Boeing Co. 6,000 287,250
Hewlett Packard Co. 4,500 277,594
Intel Corp. 10,000 770,000
Texas Instruments, Inc. 3,000 320,063
------------
1,654,907
------------
3,818,407
CONSUMER STAPLES-6.6%
COSMETICS-1.2%
Avon Products, Inc. 3,000 196,500
Gillette Co. 5,500 489,844
------------
686,344
FOODS, BEVERAGES & TOBACCO-4.6%
Anheuser Busch, Inc. 5,000 199,688
Campbell Soup Co. 6,500 335,156
General Mills, Inc. 3,000 198,000
Heinz (H.J.) Co. 7,000 325,063
Hershey Foods Corp. 5,000 276,250
Philip Morris Cos., Inc. 21,300 844,013
Sara Lee Corp. 8,000 409,000
------------
2,587,170
HOUSEHOLD PRODUCTS-0.8%
Proctor & Gamble Co. 7,000 476,000
------------
3,749,514
ENERGY-4.3%
OIL & GAS-4.3%
Chevron Corp. 10,000 829,375
Exxon Corp. 8,000 491,500
Royal Dutch Petroleum Co. 16,000 842,000
Shell Transport & Trading Co. (ADR) 6,000 256,125
------------
2,419,000
UTILITIES-2.0%
ELECTRIC-0.6%
FPL Group, Inc. 5,000 258,438
Houston Industries, Inc. 5,000 108,750
------------
367,188
TELECOMMUNICATION-1.4%
GTE Corp. 9,715 412,280
Southern New England
Telecommunications, Inc. Cl. A 6,000 257,250
U.S. West Communications Group 3,000 119,438
------------
788,968
------------
1,156,156
BASIC INDUSTRIES-0.8%
CHEMICAL-0.8%
Du Pont (EI) De Nemours 6,000 341,250
Monsanto Co. 3,000 128,250
------------
469,500
TRANSPORTATION-0.5%
Knightsbridge Tankers, Ltd. 10,000 300,000
INDUSTRIAL-0.3%
Waste Management, Inc. 6,000 140,250
Total Common Stocks
(cost $15,953,673) 22,857,766
7
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
PREFERRED STOCKS-2.6%
CONSUMER PRODUCTS & SERVICES-0.1%
Cablevision
pfd., 11.13% 300 $ 33,075
INSURANCE-0.5%
Penncorp Financial Group
pfd., 6.75% 4,000 301,000
REALTY-2.0%
Excel Realty Trust
pfd., 2.13% 5,200 150,800
Pinto Totta International Finance
Cl. A., pfd. (a) 1,000 1,021,482
------------
1,172,282
Total Preferred Stocks
(cost $1,432,632) 1,506,357
Total Common & Preferred Stocks
(cost $17,386,305) 24,364,123
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------
CONVERTIBLE BONDS-3.1%
Global Telesystems
8.75%, 6/30/00 $1,000 $ 1,010,000
IRT Property Co.
7.30%, 8/15/03 200 218,000
Liberty Property
8.20%, 7/01/01 200 277,750
Magna International, Inc.
5.00%, 10/15/02 200 256,000
Total Convertible Bonds
(cost $1,634,500) 1,761,750
TIME DEPOSIT-8.4%
Dresdner Bank
5.65%, 11/03/97
(cost $4,700,000) 4,700 4,700,000
TOTAL INVESTMENTS -101.4%
(cost $49,984,592) 57,695,324
Other assets less liabilities-(1.4%) (770,284)
NET ASSETS-100% $ 56,925,040
(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, 1997,
these securities amounted to $14,780,228 or 26.0% of net assets.
Glossary:
ADR - American Depositary Receipt
See notes to financial statements
8
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1997 ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $49,984,592) $ 57,695,324
Receivable for investment securities sold 2,166,693
Interest and dividends receivable 520,806
Receivable for capital stock sold 210,712
Total assets 60,593,535
LIABILITIES
Due to custodian 1,880,004
Payable for investment securities purchased 1,463,906
Payable for capital stock redeemed 89,301
Distribution fee payable 48,505
Advisory fee payable 37,494
Accrued expenses 149,285
Total liabilities 3,668,495
NET ASSETS $ 56,925,040
COMPOSITION OF NET ASSETS
Capital stock, at par $ 4,553
Additional paid-in capital 43,865,909
Undistributed net investment income 306,225
Accumulated net realized gain on investments 5,037,621
Net unrealized appreciation of investments 7,710,732
$ 56,925,040
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($2,367,158/
188,377 shares of capital stock issued and outstanding) $12.57
Sales charge--4.25% of public offering price .56
Maximum offering price $13.13
CLASS B SHARES
Net asset value and offering price per share ($8,712,837/
695,180 shares of capital stock issued and outstanding) $12.53
CLASS C SHARES
Net asset value and offering price per share ($45,765,096/
3,663,171 shares of capital stock issued and outstanding) $12.49
ADVISOR CLASS SHARES
Net asset value, redemption and offering price per share
($79,949/6,364 shares of capital stock issued
and outstanding) $12.56
See notes to financial statements.
9
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1997 ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
INVESTMENT INCOME
Interest (net of foreign taxes
withheld of $9,994) $ 2,817,674
Dividends 659,528 $ 3,477,202
EXPENSES
Advisory fee 414,735
Distribution fee - Class A 6,194
Distribution fee - Class B 75,635
Distribution fee - Class C 454,253
Administrative 132,000
Custodian 128,528
Audit and legal 102,246
Transfer agency 88,248
Registration 80,731
Directors' fees 23,500
Printing 13,172
Amortization of organization expenses 657
Miscellaneous 11,307
Total expenses 1,531,206
Net investment income 1,945,996
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investment transactions 5,081,676
Net change in unrealized appreciation
of investments 2,282,273
Net gain on investments 7,363,949
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 9,309,945
See notes to financial statements.
10
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
OCTOBER 31 OCTOBER 31,
1997 1996
------------ ------------
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income $ 1,945,996 $ 2,199,994
Net realized gain on investments 5,081,676 3,052,921
Net change in unrealized appreciation
of investments 2,282,273 1,674,306
Net increase in net assets from operations 9,309,945 6,927,221
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (86,312) (76,978)
Class B (271,520) (201,924)
Class C (1,648,855) (2,021,377)
Advisor Class (13,598) -0-
Net realized gain on investments
Class A (100,177) (14,802)
Class B (327,329) (42,369)
Class C (2,292,629) (508,039)
Advisor Class (3,688) -0-
CAPITAL STOCK TRANSACTIONS
Net increase (decrease) 86,769 (6,063,958)
Total increase (decrease) 4,652,606 (2,002,226)
NET ASSETS
Beginning of year 52,272,434 54,274,660
End of year (including undistributed net
investment income of $306,225 and $378,639,
respectively) $ 56,925,040 $ 52,272,434
See notes to financial statements.
11
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1997 ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Income Builder Fund, Inc. (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. Class A shares are sold with a front-end sales charge of up to 4.25%
for purchases not exceeding $1,000,000. With respect to purchases of $1,000,000
or more, Class A shares redeemed within one year of purchase will be subject to
a contingent deferred sales charge of 1.00%. Class B shares are currently 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 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 and are not subject to an ongoing distribution expense. Advisor Class
shares are offered solely to investors participating in certain fee based
programs and retirement plans. 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.
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.
2. 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.
3. 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 an adjustment to
interest income.
4. INCOME AND EXPENSES
All income earned and expenses incurred by the Fund are borne on a pro-rata
basis by each outstanding class of shares, based on the proportionate interest
in the Fund represented by the shares of such class, except that the Fund's
Class B and Class C shares bear higher distribution and transfer agent fees
than Class A shares and the Advisory Class shares have no distribution fees.
5. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date.
Income and capital gains distributions are determined in accordance with
federal tax regulations and may differ from those determined in accordance with
generally accepted accounting principles. To the extent these differences are
permanent, such amounts are reclassified within the capital accounts based on
their federal tax basis treatment; temporary differences do not require such
reclassification. During the current fiscal year, permanent differences
resulted in a net increase in undistributed net investment income and a
corresponding decrease in additional paid-in capital. This reclassification had
no effect on net assets.
12
ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
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 may reimburse the Adviser for
certain legal and accounting services provided to the Fund by the Adviser. For
the year ended October 31, 1997, the Fund reimbursed the Adviser for $132,000
of such expenses.
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 $35,806 for the year ended October 31, 1997.
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 $876 from the sale of Class A shares and $13,978 and
$689 in contingent deferred sales charges imposed upon redemptions by
shareholders of Class B and Class C shares, respectively, for the year ended
October 31, 1997.
Brokerage commissions paid on securities transactions for the year ended
October 31, 1997 amounted to $21,506, 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 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
$1,096,845 and $1,904,160 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 $77,643,776 and $81,297,657 respectively,
for the year ended October 31, 1997. There were purchases of $5,112,344 and
sales of $5,065,547 of U.S. government and government agency obligations for
the year ended October 31, 1997.
At October 31, 1997, the cost of investments for federal income tax purposes
was $49,989,792. Accordingly, gross unrealized appreciation of investments was
$8,382,815, and gross unrealized depreciation of investments was $677,283
resulting in net unrealized appreciation of $7,705,532.
13
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
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. Transactions in
capital stock were as follows:
SHARES AMOUNT
--------------------------- ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCT. 31, OCT. 31, OCT. 31, OCT. 31,
1997 1996 1997 1996
------------ ------------ -------------- --------------
CLASS A
Shares sold 36,302 71,054 $ 548,745 $ 780,984
Shares issued in
reinvestment of
dividends and
distributions 11,880 6,505 137,199 70,930
Shares converted
from Class B 22,644 3,979 163,914 44,062
Shares redeemed (60,181) (34,458) (704,898) (385,149)
Net increase 10,645 47,080 $ 144,960 $ 510,827
CLASS B
Shares sold 288,703 186,705 $ 3,468,817 $ 2,057,991
Shares issued in
reinvestment of
dividends and
distributions 36,947 14,453 427,310 157,642
Shares converted
to Class A (22,677) (3,979) (163,914) (44,062)
Shares redeemed (107,669) (49,596) (1,420,340) (546,791)
Net increase 195,304 147,583 $ 2,311,873 $ 1,624,780
CLASS C
Shares sold 262,637 151,540 $ 3,110,877 $ 1,653,774
Shares issued in
reinvestment of
dividends and
distributions 138,731 90,197 1,592,491 980,210
Shares redeemed (595,288) (985,774) (7,083,061) (10,833,549)
Net decrease (193,920) (744,037) $ (2,379,693) $ (8,199,565)
NOV. 1, 1996* NOV. 1, 1996*
TO TO
OCT. 31, 1997 OCT. 31, 1997
------------- --------------
ADVISOR CLASS
Shares sold 82,970 $ 974,826
Shares issued in
reinvestment of
dividends and
distributions 950 11,604
Shares redeemed (77,556) (976,801)
Net increase 6,364 $ 9,629
* Commencement of distribution
14
FINANCIAL HIGHLIGHTS ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------
MARCH 25,
1994(A)
YEAR ENDED OCTOBER 31, TO
------------------------------------- OCTOBER 31,
1997 1996 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $11.57 $10.70 $ 9.69 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .50(b) .56(b) .93(b) .96
Net realized and unrealized gain (loss)
on investments and foreign
currency transactions 1.62 .98 .59 (1.02)
Net increase (decrease) in net asset
value from operations 2.12 1.54 1.52 (.06)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.51) (.55) (.51) (.04)
Tax return of capital -0- -0- -0- (.01)
Distributions from net realized gains (.61) (.12) -0- (.20)
Total dividends and distributions (1.12) (.67) (.51) (.25)
Net asset value, end of period $12.57 $11.57 $10.70 $ 9.69
TOTAL RETURN
Total investment return based on net
asset value(c) 19.36% 14.82% 16.22% (.54)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $2,367 $2,056 $1,398 $600
Ratio of expenses to average net assets 2.09% 2.20% 2.38% 2.52%(d)
Ratio of net investment income to
average net assets 4.18% 4.92% 5.44% 6.11%(d)
Portfolio turnover rate 159% 108% 92% 126%
Average commission rate (e) $.0513 $.0600 -- --
</TABLE>
See footnote summary on page 18.
15
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------
MARCH 25,
1994(A)
YEAR ENDED OCTOBER 31, TO
------------------------------------- OCTOBER 31,
1997 1996 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $11.55 $10.70 $ 9.68 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .42(b) .47(b) .63(b) .88
Net realized and unrealized gain (loss)
on investments and foreign
currency transactions 1.61 .98 .83 (.98)
Net increase (decrease) in net asset
value from operations 2.03 1.45 1.46 (.10)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.44) (.48) (.44) (.05)
Tax return of capital -0- -0- -0- (.01)
Distributions from net realized gains (.61) (.12) -0- (.16)
Total dividends and distributions (1.05) (.60) (.44) (.22)
Net asset value, end of period $12.53 $11.55 $10.70 $ 9.68
TOTAL RETURN
Total investment return based on
net asset value(c) 18.53% 13.92% 15.55% (.99)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $8,713 $5,775 $3,769 $1,998
Ratio of expenses to average net assets 2.80% 2.92% 3.09% 3.09%(d)
Ratio of net investment income to
average net assets 3.48% 4.19% 4.73% 5.07%(d)
Portfolio turnover rate 159% 108% 92% 126%
Average commission rate (e) $.0513 $.0600 -- --
</TABLE>
See footnote summary on page 18.
16
ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
CLASS C
---------------------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $11.52 $10.67 $ 9.66 $10.47 $ 9.80
INCOME FROM INVESTMENT OPERATIONS
Net investment income .42(b) .46(b) .40(b) .50 .52
Net realized and unrealized gain (loss)
on investments and foreign
currency transactions 1.60 .99 1.05 (.85) .51
Net increase (decrease) in net asset
value from operations 2.02 1.45 1.45 (.35) 1.03
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.44) (.48) (.44) (.09) (.36)
Tax return of capital -0- -0- -0- (.02) -0-
Distributions from net realized gains (.61) (.12) -0- (.35) -0-
Total dividends and distributions (1.05) (.60) (.44) (.46) (.36)
Net asset value, end of year $12.49 $11.52 $10.67 $ 9.66 $10.47
TOTAL RETURN
Total investment return based on
net asset value(c) 18.50% 13.96% 15.47% (3.44)% 10.65%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $45,765 $44,441 $49,107 $64,027 $106,034
Ratio of expenses to average net assets 2.80% 2.93% 3.02% 2.67% 2.32%
Ratio of net investment income to
average net assets 3.49% 4.13% 4.81% 3.82% 6.85%
Portfolio turnover rate 159% 108% 92% 126% 101%
Average commission rate (e) $.0513 $.0600 -- -- --
</TABLE>
See footnote summary on page 18.
17
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING FOR THE PERIOD
ADVISOR CLASS
---------------------
NOVEMBER 1, 1996(A)
TO
OCTOBER 31, 1997
---------------------
Net asset value, beginning of period $11.57
INCOME FROM INVESTMENT OPERATIONS
Net investment income .61(b)
Net realized and unrealized gain (loss) on investments
and foreign currency transactions 1.53
Net increase (decrease) in net asset value
from operations 2.14
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.54)
Distributions from net realized gains (.61)
Total dividends and distributions (1.15)
Net asset value, end of period $12.56
TOTAL RETURN
Total investment return based on net asset value(c) 19.62%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $80
Ratio of expenses to average net assets 1.68%
Ratio of net investment income to average net assets 4.55%
Portfolio turnover rate 159%
Average commission rate (e) $.0513
(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 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. This amount includes commissions paid to foreign
brokers which may materially affect the rate shown. Amounts paid in foreign
currencies have been converted into US dollars using the prevailing exchange
rate on the date of the transaction.
18
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
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, 1997, 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, 1997, 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, 1997, 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.
New York, New York
December 10, 1997
19
ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
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)
OFFICERS
ANDREW M. ARAN, SENIOR VICE PRESIDENT
KATHLEEN A. CORBET, SENIOR VICE PRESIDENT
WAYNE D. LYSKI, SENIOR VICE PRESIDENT
THOMAS M. PERKINS, SENIOR VICE PRESIDENT
CORINNE MOLOF HILL, VICE PRESIDENT
VITA M. PIKE, 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.
20
THE ALLIANCE FAMILY OF MUTUAL FUNDS
_______________________________________________________________________________
FIXED INCOME
Alliance Bond Fund
U.S. Government Portfolio
Corporate Bond Portfolio
Alliance Global Dollar Government Fund
Alliance Global Strategic Income Trust
Alliance High Yield Fund
Alliance Mortgage Securities Income Fund
Alliance Limited Maturity Government Fund
Alliance Multi-Market Strategy Trust
Alliance North American Government Income Trust
Alliance Short-Term Multi-Market Trust
Alliance Short-Term U.S. Government Fund
Alliance World Income Trust
TAX-FREE INCOME
Alliance Municipal Income Fund
California Portfolio
Insured California Portfolio
Insured National Portfolio
National Portfolio
New York Portfolio
Alliance Municipal Income Fund II
Arizona Portfolio
Florida Portfolio
Massachusetts Portfolio
Michigan Portfolio
Minnesota Portfolio
New Jersey Portfolio
Ohio Portfolio
Pennsylvania Portfolio
Virginia Portfolio
MONEY MARKET
AFD Exchange Reserves
GROWTH
The Alliance Fund
Alliance Global Environment Fund
Alliance Global Small Cap Fund
Alliance Growth Fund
Alliance Premier Growth Fund
Alliance/Regent Sector Opportunity Fund
GROWTH & INCOME
Alliance Strategic Balanced Fund
Alliance Balanced Shares
Alliance Conservative Investors Fund
Alliance Growth & Income Fund
Alliance Growth Investors Fund
Alliance Income Builder Fund
Alliance Real Estate Investment Fund
Alliance Utility Income Fund
AGGRESSIVE GROWTH
Alliance Quasar Fund
Alliance Technology Fund
INTERNATIONAL
Alliance All-Asia Investment Fund
Alliance Greater China '97 Fund
Alliance International Fund
Alliance New Europe Fund
Alliance Worldwide Privatization Fund
CLOSED-END FUNDS
Alliance All-Market Advantage Fund
ACM Government Income Fund
ACM Government Opportunity Fund
ACM Government Securities Fund
ACM Government Spectrum Fund
ACM Managed Dollar Income Fund
ACM Managed Income Fund
ACM Municipal Securities Income Fund
Alliance World Dollar Government Fund
Alliance World Dollar Government Fund II
The Austria Fund
The Korean Investment Fund
The Spain Fund
The Southern Africa Fund
CASH MANAGEMENT SERVICES
ACM Institutional Reserves
Government Portfolio
Prime Portfolio
Tax-Free Portfolio
Trust Portfolio
Alliance Capital Reserves
Alliance Government Reserves
Alliance Insured Account
Alliance Money Reserves
Alliance Municipal Trust
California Portfolio
Connecticut Portfolio
Florida Portfolio
General Portfolio
Massachusetts Portfolio
New Jersey Portfolio
New York Portfolio
Virginia Portfolio
Alliance Treasury Reserves
Alliance Money Market Fund
Prime Portfolio
Government Portfolio
General Municipal Portfolio
21
ALLIANCE INCOME BUILDER FUND
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
ALLIANCE CAPITAL
THIS REPORT IS INTENDED SOLELY FOR DISTRIBUTION TO CURRENT SHAREHOLDERS
OF THE FUND.
R THESE REGISTERED SERVICE MARKS USED UNDER LICENSE FROM THE OWNER,
ALLIANCE CAPITAL MANAGEMENT L.P.
IBFAR
