ALLIANCE INCOME BUILDER FUND
SEMI-ANNUAL REPORT
APRIL 30, 1998
ALLIANCE CAPITAL
LETTER TO SHAREHOLDERS ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
June 26, 1998
Dear Shareholder:
This semi-annual shareholder report contains investment results and market
activity for Alliance Income Builder Fund for the period ended April 30, 1998.
INVESTMENT RESULTS
The following table shows your Fund's investment results, based on net asset
value (NAV), for the six and 12-month periods ended April 30, 1998. Since your
Fund is balanced between stocks and bonds, the Fund's performance is compared
with a blended composite of two indices. This benchmark is a 60/40 Composite
composed of 60% of the Lehman Brothers Government/Corporate Bond Index (LB Bond
Index) and 40% of the S&P 500 Stock Index (S&P 500). As you can see from the
chart, on an NAV basis, your Fund's Class A shares gained 12.55% and 24.03% for
the six and 12-month periods ended April 30, 1998, respectively. Your Fund
outperformed the 60/40 Composite for both the six and 12-month durations.
The outperformance of your Fund versus its benchmark was primarily attributed
to the Fund having approximately 42% of its portfolio invested in stocks for
most of the period, combined with the outperformance of the Fund's fixed income
investments relative to the LB Bond Index.
INVESTMENT RESULTS*
Periods Ended April 30, 1998
TOTAL RETURNS
6 MONTHS 12 MONTHS
-------- ---------
ALLIANCE INCOME BUILDER FUND
Class A 12.55% 24.03%
Class B 12.20% 23.13%
Class C 12.24% 23.22%
LEHMAN BROTHERS GOVERNMENT/
CORPORATE BOND INDEX 3.64% 11.33%
S&P 500 STOCK INDEX 22.50% 41.06%
60/40 COMPOSITE:
Lehman Brothers Government/
Corporate Bond Index/
S&P 500 Stock Index 11.18% 23.22%
* THE FUND'S INVESTMENT RESULTS ARE TOTAL RETURNS FOR THE PERIODS AND ARE
BASED ON THE NET ASSET VALUE OF EACH CLASS OF SHARES. ALL FEES AND EXPENSES
RELATED TO THE OPERATION OF THE FUND HAVE BEEN DEDUCTED, BUT NO ADJUSTMENT HAS
BEEN MADE FOR SALES CHARGES THAT MAY APPLY WHEN SHARES ARE PURCHASED OR
REDEEMED. TOTAL RETURN FOR ADVISOR CLASS SHARES WILL DIFFER DUE TO DIFFERENT
EXPENSES ASSOCIATED WITH THAT CLASS. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE
RESULTS.
THE LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX (LB BOND INDEX) IS AN
UNMANAGED INDEX THAT IS DESIGNED TO REPRESENT 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 S&P 500 STOCK
INDEX (S&P 500) IS AN UNMANAGED INDEX OF 500 U.S. COMPANIES AND IS A COMMON
MEASURE OF THE PERFORMANCE OF THE OVERALL U.S. STOCK MARKET. THE 60/40
COMPOSITE IS A BLEND OF BOTH THE S&P 500 AND THE LB BOND INDEX WITH A 60%/40%
WEIGHTING, RESPECTIVELY. AN INVESTOR CANNOT INVEST DIRECTLY IN THE INDICES.
MARKET OVERVIEW
Starting in the middle of December 1997, the 30-year long bond rallied through
6% reaching a low of 5.7% in January. Investors thought the Fed was considering
easing interest rates when the Asian crisis appeared particularly intense in
January 1998, but there were two main conflicting forces that kept the Treasury
bond market in trading range since that time. The strength of the
1
ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
economy caused many domestic investors to sell, while the economic slowdown in
Asia and Japan caused many foreigners to buy, reflecting a flight-to-quality.
Strong employment growth, a boom in new home sales and healthy consumer
spending contributed to a stronger than expected economic environment with
first quarter Gross Domestic Product (GDP) at 4.2%. Furthermore, unemployment
continues to decline, and the stock market continues to be strong. At the end
of April 1998, the U.S. economy showed no signs of slowing, and the yield on
the long bond had risen to 6%. With inflation running at a very low level
(consumer prices rose 1.4% in the 12-month period ended in April 1998) and the
continuing troubles in Asia, the Federal Open Market Committee left monetary
policy unchanged in May 1998 with the Federal Funds Rate at 5.5%.
FIXED INCOME INVESTMENTS
Interest rates declined and bond prices rallied in January 1998. Consequently,
we sold some longer-dated bonds, and later reinvested the proceeds at higher
yields after the Treasury market declined in April. Additionally, selected
preferred stocks proved less sensitive to interest rate swings and added
attractive yields to your Fund's book.
Continued evidence of a growing economy, combined with generally positive
earnings, has fueled persistent demand for corporate bonds. Our success in
selecting improving credits, such as OpTel, Inc., continues to help us
outperform the bond market. OpTel is primarily engaged in cable and telephony
services. We also continue to research turnaround stories exemplified by our
investment in Riverwood International Corp., a domestic paper company. This
investment has also performed well, reflecting the market's favorable view of
the company's new management and improving financial performance. As the
current economic expansion matures, we will continue to balance credit quality,
yield, and total return potential of alternative investments.
EQUITY INVESTMENTS
During the most recent six-month reporting period ended April 30, 1998, the
Fund's equity assets had substantial appreciation, but slightly underperformed
the S&P 500. Fortunately this underperformance was more than counterbalanced by
our having been modestly overweighted in equities as a result of our discipline
of buying into the stock market's weakness in the fourth quarter of calendar
1997. In recent months, we have exercised a similar discipline of selling
stocks into strength, so that by the end of the period, the portfolio was back
to its usual 40% equity exposure. Our strategy of re-allocating equity
appreciation into higher yielding fixed income assets also enhances your Fund's
income earning capability. Incidentally, despite our shortfall in relative
performance over the last six months, the Fund's equities have outpaced the S&P
500 over the life of the Fund.
The largest sectors within your Fund's equity portfolio continue to be in the
financial and consumer areas. Financials remain one of the strongest areas of
the market as earnings trends are very strong, and the stocks sell at
valuations that are at a discount to the average stock price. In keeping with
our normal practice, we slightly reduced our commitment to this area by
selectively selling into its extraordinary strength (such as Morgan Stanley,
Dean Witter Discover & Co., and American Express Co.). Even with this moderate
selling, we are still overweighted in financials, with over 20% of our equities
in this sector. During the same period, consumer stocks were mixed, with more
aggressive segments such as retailers and entertainment performing very well,
while more defensive staples such as foods underperformed. The primary
underperforming segments of the portfolio were high yielding real estate
investment trusts (REITs), and energy stocks. We maintained our positions in
REITs, but slightly reduced our relatively small energy holdings, as oil prices
have been unusually weak. We continue to be significantly underweighted in
technology stocks primarily because relatively few of them have dividends.
We continue to concentrate our equity investments in high-quality issues that
have a history of increasing dividends. In that vein, your Fund's 10 largest
equity holdings as of April 30, 1998, are: General Electric Co., Merck & Co.,
Inc., Philip Morris Cos., Inc., Travelers Group, Inc., Schering-Plough Corp.,
Royal Dutch Petroleum Co., Chevron Corp., Bristol-Myers Squibb Co., Inc., Exxon
Corp., and Gillette Co. Of these largest holdings, only Bristol-Myers Squibb
Co. is new to the portfolio within the last six months. In total, your Fund's
equities' dividend yield is over 25% more than that of the S&P 500.
2
ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
Thank you for your continued support in Alliance Income Builder Fund. We look
forward to reporting to you on market activity and your Fund's investment
results in the coming periods.
Sincerely,
John D. Carifa
Chairman and President
Andrew M. Aran
Senior 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.
3
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
NAV AND SEC AVERAGE ANNUAL TOTAL RETURNS AS OF APRIL 30, 1998
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 24.03% 18.73%
Since Inception* 15.15% 13.95%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 23.13% 19.13%
Since Inception* 14.36% 14.36%
CLASS C SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 23.22% 22.22%
Five Years 12.29% 12.29%
Since Inception* 10.54% 10.54%
SEC AVERAGE ANNUAL TOTAL RETURNS
AS OF THE MOST RECENT QUARTER-END (MARCH 31, 1998)
CLASS A CLASS B CLASS C
------- ------- -------
1 Year 22.06% 22.63% 25.51%
5 Years n/a n/a 12.07%
Since Inception* 14.20 14.64 10.67
The Fund's investment results represent average annual total returns. The NAV
and SEC returns reflect reinvestment of dividends and/or capital gains
distributions in additional shares without (NAV) and with (SEC) the effect of
the 4.25% maximum front-end sales charge for Class A or applicable contingent
deferred sales charge for Class B (4% year 1, 3% year 2, 2% year 3, 1% year 4);
and for Class C shares (1% year 1). Returns for Class A shares do not reflect
the imposition of the 1 year 1% contingent deferred sales charge for accounts
over $1,000,000. Total return for Advisor Class shares will differ due to
different expenses associated with that class.
SEC average annual total returns for the periods shown reflect reinvestment of
all distributions and deduction of the maximum 4.25% front-end sales charges
and applicable 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; 3/25/94 Class B; 10/25/91 Class C.
n/a: not applicable.
4
PORTFOLIO OF INVESTMENTS
APRIL 30, 1998 (UNAUDITED) ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- ---------------------------------------------------------------------------
CORPORATE DEBT OBLIGATIONS-45.8%
BANKING & FINANCE-6.0%
Advanta Capital Trust 8.99%, 12/17/26 $ 1,000 $ 801,250
Arkwright CSN TR 9.63%, 8/15/26 (a) 1,000 1,148,258
DTI Holdings, Inc., Units 12.50%, 3/01/08 1,000 572,500
FBOP Capital Trust 10.20%, 2/06/27 (a) 1,000 1,078,746
------------
3,600,754
CONSUMER PRODUCTS & SERVICES-3.5%
OpTel Inc., Series B 13.00%, 2/15/05 (b) 1,000 1,122,500
TCI Communications, Inc. 7.13%, 2/15/28 1,000 991,778
------------
2,114,278
INDUSTRIAL-20.8%
American Banknote Corp. 11.25%, 12/01/07 (a) 1,000 1,007,500
American Mobile Units 12.25%, 4/01/08 1,000 1,020,000
Caliber Systems, Inc. 7.80%, 8/01/06 1,000 1,075,578
Econophone, Inc. Zero Coupon, 2/15/08 (a) 2,000 1,140,000
Facilicom International
10.50%, 1/15/08 (a) 500 517,500
Firstworld Communication Units
13.00%, 4/15/08 (a) 1,000 510,000
Insilco Corp. 10.25%, 8/15/07 500 527,500
Interamericas Units 14.00%, 10/27/07 400 409,000
Iridium LLC Capital Corp. Series B
14.00%, 7/15/05 1,000 1,140,000
KMC Telecom Holdings, Inc. Units
12.50%, 2/15/08 (a) 1,000 610,000
Long Distance International Units
12.25%, 4/15/08 (a) 1,000 1,005,000
Louis Dreyfus Natural Gas 6.88%,
12/01/07 1,000 988,120
Riverwood International Corp. 10.63%, 8/01/07 1,000 1,057,500
Southwest Royalties, Inc. Series B
10.50%, 10/15/04 1,000 900,000
Viatel, Inc. Units 12.50%, 4/15/08 1,000 610,000
------------
12,517,698
UTILITIES-3.4%
Calenergy Co., Inc. 7.63%, 10/15/07 1,000 1,002,179
Comed Financing II Series B 8.50%, 1/15/27 1,000 1,068,723
------------
2,070,902
YANKEE BONDS-10.4%
Acindar Industries 11.25%, 2/15/04 1,000 1,052,500
Dao Heng Bank, Ltd. 7.75%, 1/24/07 (a) 500 440,625
Empresa Electrica Del Norte Grande, SA
7.75%, 3/15/06 (a) 1,685 1,492,472
Mc-Cuernavaca Trust 9.25%, 7/25/01 (a) 1,237 1,181,332
Perez Companc, SA 9.00%, 1/30/04 (a) 500 510,000
Tevecap, SA 12.63%, 11/26/04 1,000 1,017,500
Vicap, SA 11.38%, 5/15/07 (a) 500 550,000
------------
6,244,429
5
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------
OTHER-1.7%
SB Treasury Co. LLC Series A, pfd.
9.40%, 12/29/49 (a) $1,000 $ 1,016,978
Total Corporate Debt Obligations
(cost $27,045,168) 27,565,039
COMMON STOCKS & OTHER INVESTMENTS-41.9%
COMMON STOCKS-39.2%
CONSUMER PRODUCTS & SERVICES-10.8%
BROADCASTING & CABLE-0.4%
Comcast Corp. Cl. A 7,120 254,985
DRUGS, HOSPITALS, SUPPLIES &
MEDICAL SERVICES-5.2%
Abbott Laboratories 5,000 365,625
Becton, Dickinson & Co. 2,000 139,250
Bristol-Myers Squibb Co. 6,000 635,250
Health Care Property Investors, Inc. 14,000 472,500
Merck & Co., Inc. 7,000 843,500
Schering-Plough Corp. 8,500 681,062
------------
3,137,187
ENTERTAINMENT & LEISURE-1.5%
Carnival Corp. Cl. A 5,000 347,812
Walt Disney Co. 4,500 559,406
------------
907,218
MULTI-INDUSTRY-0.3%
Canadian Pacific, Ltd. 5,000 147,188
PACKAGING-0.3%
Crown Cork & Seal, Inc. 3,500 182,219
RETAILING-1.7%
Dayton Hudson Corp. 5,000 436,563
Gap, Inc. 1,500 77,156
May Department Stores Co. 1,500 92,531
Wal-Mart Stores, Inc. 8,000 404,500
------------
1,010,750
OTHER-1.4%
Jostens, Inc. 14,700 348,206
Newell Co. 5,000 241,563
Donnelley (R.R.) & Sons Co. 5,500 242,344
------------
832,113
------------
6,471,660
FINANCIAL SERVICES-8.2%
BANKING & FINANCE-2.3%
BankAmerica Corp. 4,000 340,000
Chase Manhattan Corp. 3,500 484,969
NationsBank Corp. 7,000 530,250
------------
1,355,219
BROKERAGE & MONEY MANAGEMENT-1.9%
Legg Mason, Inc. 4,256 251,104
Merrill Lynch & Co., Inc. 4,500 394,875
Morgan Stanley, Dean Witter & Co. 6,500 512,687
------------
1,158,666
INSURANCE-2.6%
American International Group, Inc. 4,200 552,562
Progressive Corp. 2,000 270,875
Travelers Group, Inc. 12,249 749,486
------------
1,572,923
REALTY-1.2%
Excel Legacy Corp. (c) 4,988 26,187
Excel Realty Trust, Inc. 4,988 133,429
IRT Property Co. 9,000 104,625
6
ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
JP Realty, Inc. 8,000 $ 193,500
Storage USA, Inc. 3,000 113,625
Weingarten Realty Investors, Inc. 4,000 170,500
------------
741,866
OTHER-0.2%
American Banknote Corp.
warrants, expiring 12/01/02 (a)(c) 1,000 1,000
American Express Co. 1,000 102,000
------------
103,000
------------
4,931,674
CAPITAL GOODS-6.5%
AEROSPACE-0.4%
Boeing Co. 4,000 200,250
ELECTRICAL EQUIPMENT-2.6%
Emerson Electric Co. 6,200 394,475
General Electric Co. 14,000 1,191,750
------------
1,586,225
MACHINERY-1.4%
Allied Signal, Inc. 11,000 481,938
United Technologies Corp. 3,500 344,531
------------
826,469
POLLUTION CONTROL-0.3%
Waste Management, Inc. 6,000 201,000
TECHNOLOGY-1.8%
Hewlett Packard Co. 4,500 338,906
Intel Corp. 7,000 565,687
Texas Instruments, Inc. 3,000 192,188
------------
1,096,781
------------
3,910,725
CONSUMER STAPLES-6.5%
COSMETICS-1.5%
Avon Products, Inc. 4,000 328,750
Gillette Co. 5,000 577,187
------------
905,937
FOODS, BEVERAGES & TOBACCO-4.1%
Campbell Soup Co. 8,000 $410,500
Heinz (H.J.) Co. 6,000 327,000
Hershey Foods Corp. 5,000 366,250
McDonald's Corp. 2,500 154,688
Philip Morris Cos., Inc. 21,300 794,756
Sara Lee Corp. 7,000 416,938
------------
2,470,132
HOUSEHOLD PRODUCTS-0.9%
Proctor & Gamble Co. 6,500 534,219
------------
3,910,288
ENERGY-4.1%
OIL & GAS-3.6%
Chevron Corp. 8,000 661,500
Exxon Corp. 8,000 583,500
Royal Dutch Petroleum Co. 12,000 678,750
Shell Transport & Trading Co. (ADR) 6,000 266,625
------------
2,190,375
TRANSPORTATION-0.5%
Knightsbridge Tankers, Ltd. 10,000 287,500
------------
2,477,875
UTILITIES-2.4%
ELECTRIC-0.7%
FPL Group, Inc. 5,000 310,312
Houston Industries, Inc. 5,000 145,313
------------
455,625
TELECOMMUNICATIONS-1.7%
GTE Corp. 9,715 567,720
Southern New England Telecommunications,
Inc. Cl. A 4,000 280,000
U.S. West Communications Group 3,000 158,250
------------
1,005,970
------------
1,461,595
7
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
BASIC INDUSTRIES-0.7%
CHEMICAL-0.7%
Du Pont (Ei) De Nemours 4,000 $ 291,250
Praxair, Inc. 3,000 150,938
------------
442,188
Total Common Stocks
(cost $14,475,534) 23,606,005
PREFERRED STOCKS-2.7%
BANKING & FINANCE-0.6%
NB Capital Trust I pfd., 7.84% 15,000 383,437
INDUSTRIAL-0.1%
CSC Holdings, Inc., pfd., Series M 11.13% 316 36,340
INSURANCE-0.3%
Penncorp Financial Group pfd., 3.38% 3,000 180,750
REALTY-1.7%
Pinto Totta International Finance
Cl. A, pfd. (a) 1,000 1,019,890
Total Preferred Stocks
(cost $1,619,638) 1,620,417
Total Common Stocks & Other Investments
(cost $16,095,172) 25,226,422
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------
GOVERNMENT OBLIGATION-1.6%
Republic of Colombia 8.63%, 4/01/08
(cost $998,554) $1,000 $ 1,000,000
CONVERTIBLE BONDS-1.2%
IRT Property Co. 7.30%, 8/15/03 200 206,500
Liberty Property 8.20%, 7/01/01 200 257,500
Magna International, Inc. 5.00%, 10/15/02 200 277,250
Total Convertible Bonds (cost $624,500) 741,250
TIME DEPOSIT-8.8%
Rabobank 5.44%, 5/01/98 (cost $5,300,000) 5,300 5,300,000
TOTAL INVESTMENTS-99.3%
(cost $50,063,394) 59,832,711
Other assets less liabilities-0.7% 396,842
NET ASSETS-100% $ 60,229,553
(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 April 30, 1998,
these securities amounted to $13,229,301 or 22.0% of net assets.
(b) Consists of $1,000,000 senior notes and 1,000 shares of common stock.
(c) Non-income producing security.
Glossary:
ADR - American Depositary Receipt
See notes to financial statements.
8
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998 (UNAUDITED) ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $50,063,394) $ 59,832,711
Cash 129,841
Receivable for investment securities sold 5,365,303
Interest and dividends receivable 618,152
Receivable for capital stock sold 64,501
Other assets 3,675
Total assets 66,014,183
LIABILITIES
Payable for investment securities purchased 5,364,992
Payable for capital stock redeemed 191,667
Distribution fee payable 47,944
Advisory fee payable 37,287
Accrued expenses 142,740
Total liabilities 5,784,630
NET ASSETS $ 60,229,553
COMPOSITION OF NET ASSETS
Capital stock, at par $ 4,784
Additional paid-in capital 46,405,681
Undistributed net investment income 268,536
Accumulated net realized gain on investments 3,781,235
Net unrealized appreciation of investments 9,769,317
$ 60,229,553
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share
($3,008,588 / 237,487 shares of capital stock
issued and outstanding) $12.67
Sales charge--4.25% of public offering price 0.56
Maximum offering price $13.23
CLASS B SHARES
Net asset value and offering price per share
($11,131,907 / 881,916 shares of capital stock
issued and outstanding) $12.62
CLASS C SHARES
Net asset value and offering price per share
($45,988,045 / 3,656,122 shares of capital stock
issued and outstanding) $12.58
ADVISOR CLASS SHARES
Net asset value, redemption and offering price per share
($101,013 / 7,975 shares of capital stock
issued and outstanding) $12.67
See notes to financial statements.
9
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1998 (UNAUDITED) ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
INVESTMENT INCOME
Interest $ 1,488,697
Dividends (net of foreign taxes
withheld of $889) 287,185 $ 1,775,882
EXPENSES
Advisory fee 216,552
Distribution fee - Class A 3,955
Distribution fee - Class B 48,675
Distribution fee - Class C 226,449
Custodian 78,100
Administrative 63,235
Registration 49,848
Audit and legal 45,886
Transfer agency 19,583
Directors' fees 16,916
Printing 9,264
Miscellaneous 18,038
Total expenses 796,501
Net investment income 979,381
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investment transactions 3,660,643
Net change in unrealized appreciation of investments 2,058,585
Net gain on investments 5,719,228
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 6,698,609
See notes to financial statements.
10
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1998 OCTOBER 31,
(UNAUDITED) 1997
---------------- -----------
INCREASE IN NET ASSETS
FROM OPERATIONS
Net investment income $979,381 $1,945,996
Net realized gain on
investment transactions 3,660,643 5,081,676
Net change in unrealized appreciation
of investments 2,058,585 2,282,273
Net increase in net assets
from operations 6,698,609 9,309,945
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Class A (52,626) (86,312)
Class B (170,009) (271,520)
Class C (792,604) (1,648,855)
Advisor Class (1,831) (13,598)
Net realized gain on investments
Class A (209,838) (100,177)
Class B (797,991) (327,329)
Class C (3,902,121) (2,292,629)
Advisor Class (7,079) (3,688)
CAPITAL STOCK TRANSACTIONS
Net increase 2,540,003 86,769
Total increase 3,304,513 4,652,606
NET ASSETS
Beginning of year 56,925,040 52,272,434
End of period (including
undistributed net investment
income of $268,536 and $306,225,
respectively) $60,229,553 $56,925,040
See notes to financial statements.
11
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1998 (UNAUDITED) 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 to investors participating in fee based programs and to
certain retirement plan accounts. All four classes of shares have identical
voting, dividend, liquidation and other rights 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. The
financial statements have been prepared in conformity with generally accepted
accounting principles which require management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities in the
financial statements and amounts of income and expenses during the reporting
period. Actual results could differ from those estimates. The following is a
summary of significant accounting policies followed by the Fund.
1. SECURITY VALUATION
Portfolio securities traded on a national securities exchange or on a foreign
securities exchange (other than foreign securities exchanges whose operations
are similar to those of the United States over-the-counter market) are
generally valued at the last reported sale price, if there was no sale on such
day, the last bid price quoted on such day. If no bid prices are quoted, then
the security is valued at the mean of the bid and asked prices as obtained on
that day from one or more dealers regularly making a market in that security.
Securities traded on the over-the-counter market, securities listed on a
foreign securities exchange whose operations are similar to the United States
over-the-counter market and securities listed on a national securities exchange
whose primary market is believed to be over-the-counter are valued at the mean
of the closing bid and asked price provided by two or more dealers regularly
making a market in such securities. U.S. government securities and other debt
securities which mature in 60 days or less are valued at amortized cost unless
this method does not represent fair value. Securities for which market
quotations are not readily available are valued at fair value as determined in
good faith by, or in accordance with procedures approved by, the Board of
Directors. Fixed income securities may be valued on the basis of prices
provided by a pricing service when such prices are believed to reflect the fair
market value of such securities.
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 Advisor Class shares have no distribution fees.
5. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date.
12
ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
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.
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 six months ended April 30, 1998, the Fund reimbursed the Adviser for
$63,235 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 $19,704 for the six months ended April 30, 1998.
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 $1,282 from the sale of Class A shares and $12,540
and $3,521 in contingent deferred sales charges imposed upon redemptions by
shareholders of Class B and Class C shares, respectively, for the six months
ended April 30, 1998.
Brokerage commissions paid on securities transactions for the six months ended
April 30, 1998 amounted to $8,953 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
$1,964,822 and $1,358,381 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 $19,949,612 and $24,194,633 respectively,
for the six months ended April 30, 1998. There were purchases of $1,589,453 and
sales of $1,605,820 of U.S. government and government agency obligations for
the six months ended April 30, 1998.
At April 30, 1998, the cost of investments for federal income tax purposes was
substantially the same as the cost for financial reporting purposes.
Accordingly, gross unrealized appreciation of investments was $10,217,575 and
gross unrealized depreciation of investments was $448,258 resulting in net
unrealized appreciation of $9,769,317.
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
--------------------------- ------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1998 OCTOBER 31, APRIL 30, 1998 OCTOBER 31,
(UNAUDITED) 1997 (UNAUDITED) 1997
------------ ------------ -------------- --------------
CLASS A
Shares sold 38,151 36,302 $ 599,942 $ 548,745
Shares issued in
reinvestment of
dividends and
distributions 15,685 11,880 185,538 137,199
Shares converted
from Class B 18,854 22,644 100,015 163,914
Shares redeemed (23,580) (60,181) (294,541) (704,898)
Net increase 49,110 10,645 $590,954 $144,960
CLASS B
Shares sold 219,686 288,703 $ 2,714,861 $ 3,468,817
Shares issued in
reinvestment of
dividends and
distributions 60,149 36,947 709,031 427,310
Shares converted
to Class A (18,876) (22,677) (100,015) (163,914)
Shares redeemed (74,223) (107,669) (1,053,975) (1,420,340)
Net increase 186,736 195,304 $ 2,269,902 $ 2,311,873
CLASS C
Shares sold 212,270 262,637 $ 2,511,429 $ 3,110,877
Shares issued in
reinvestment of
dividends and
distributions 167,811 138,731 1,971,096 1,592,491
Shares redeemed (387,130) (595,288) (4,823,152) (7,083,061)
Net decrease (7,049) (193,920) $(340,627) $ (2,379,693)
NOVEMBER 1, 1996* NOVEMBER 1, 1996*
TO TO
OCTOBER 31, 1997 OCTOBER 31, 1997
------------ ------------ -------------- --------------
ADVISOR CLASS
Shares sold 1,437 82,970 $ 17,709 $ 974,826
Shares issued in
reinvestment of
dividends and
distributions 174 950 2,065 11,604
Shares redeemed -0- (77,556) -0- (976,801)
Net increase 1,611 6,364 $ 19,774 $ 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,
SIX MONTHS 1994(A)
ENDED YEAR ENDED OCTOBER 31, TO
APRIL 30,1998 ------------------------------------- OCTOBER 31,
(UNAUDITED) 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $12.57 $11.57 $10.70 $ 9.69 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .38(b) .50(b) .56(b) .93(b) .96
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions 1.08 1.62 .98 .59 (1.02)
Net increase (decrease) in net asset
value from operations 1.46 2.12 1.54 1.52 (.06)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.25) (.51) (.55) (.51) (.04)
Tax return of capital -0- -0- -0- -0- (.01)
Distributions from net realized gains (1.11) (.61) (.12) -0- (.20)
Total dividends and distributions (1.36) (1.12) (.67) (.51) (.25)
Net asset value, end of period $12.67 $12.57 $11.57 $10.70 $ 9.69
TOTAL RETURN
Total investment return based on net
asset value (c) 12.55% 19.36% 14.82% 16.22% (.54)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $3,009 $2,367 $2,056 $1,398 $600
Ratio of expenses to average net assets 2.09%(d) 2.09% 2.20% 2.38% 2.52%(d)
Ratio of net investment income to
average net assets 6.17%(d) 4.18% 4.92% 5.44% 6.11%(d)
Portfolio turnover rate 140% 159% 108% 92% 126%
</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,
SIX MONTHS 1994(A)
ENDED YEAR ENDED OCTOBER 31, TO
APRIL 30, 1998 ------------------------------------- OCTOBER 31,
(UNAUDITED) 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $12.53 $11.55 $10.70 $ 9.68 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .38(b) .42(b) .47(b) .63(b) .88
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions 1.04 1.61 .98 .83 (.98)
Net increase (decrease) in net asset
value from operations 1.42 2.03 1.45 1.46 (.10)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.22) (.44) (.48) (.44) (.05)
Tax return of capital -0- -0- -0- -0- (.01)
Distributions from net realized gains (1.11) (.61) (.12) -0- (.16)
Total dividends and distributions (1.33) (1.05) (.60) (.44) (.22)
Net asset value, end of period $12.62 $12.53 $11.55 $10.70 $ 9.68
TOTAL RETURN
Total investment return based on net
asset value (c) 12.20% 18.53% 13.92% 15.55% (.99)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $11,132 $8,713 $5,775 $3,769 $1,998
Ratio of expenses to average net assets 2.79%(d) 2.80% 2.92% 3.09% 3.09%(d)
Ratio of net investment income to
average net assets 6.17%(d) 3.48% 4.19% 4.73% 5.07%(d)
Portfolio turnover rate 140% 159% 108% 92% 126%
</TABLE>
See footnote summary on page 18.
16
ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS C
------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 1998 --------------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $12.49 $11.52 $10.67 $ 9.66 $10.47 $ 9.80
INCOME FROM INVESTMENT OPERATIONS
Net investment income .38(b) .42(b) .46(b) .40(b) .50 .52
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions 1.04 1.60 .99 1.05 (.85) .51
Net increase (decrease) in net asset
value from operations 1.42 2.02 1.45 1.45 (.35) 1.03
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.22) (.44) (.48) (.44) (.09) (.36)
Tax return of capital -0- -0- -0- -0- (.02) -0-
Distributions from net realized gains (1.11) (.61) (.12) -0- (.35) -0-
Total dividends and distributions (1.33) (1.05) (.60) (.44) (.46) (.36)
Net asset value, end of period $12.58 $12.49 $11.52 $10.67 $ 9.66 $10.47
TOTAL RETURN
Total investment return based on net
asset value (c) 12.24% 18.50% 13.96% 15.47% (3.44)% 10.65%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $45,988 $45,765 $44,441 $49,107 $64,027 $106,034
Ratio of expenses to average net assets 2.79%(d) 2.80% 2.93% 3.02% 2.67% 2.32%
Ratio of net investment income to
average net assets 6.15%(d) 3.49% 4.13% 4.81% 3.82% 6.85%
Portfolio turnover rate 140% 159% 108% 92% 126% 101%
</TABLE>
See footnote summary on page 18.
17
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
ADVISOR CLASS
----------------------------
NOVEMBER 1,
SIX MONTHS 1996(A)
ENDED TO
APRIL 30, 1998 OCTOBER 31,
(UNAUDITED) 1997
-------------- ------------
Net asset value, beginning of period $12.56 $11.57
INCOME FROM INVESTMENT OPERATIONS
Net investment income .38(b) .61(b)
Net realized and unrealized gain
on investment transactions 1.11 1.53
Net increase in net asset
value from operations 1.49 2.14
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.27) (.54)
Distributions from net realized gains (1.11) (.61)
Total dividends and distributions (1.38) (1.15)
Net asset value, end of period $12.67 $12.56
TOTAL RETURN
Total investment return based on net
asset value (c) 12.81% 19.62%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $101 $80
Ratio of expenses to average net assets 1.79%(d) 1.68%
Ratio of net investment income to
average net assets 6.18%(d) 4.55%
Portfolio turnover rate 140% 159%
(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.
18
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
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.
19
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.
IBFSR
