ALLIANCE SHORT-TERM
U.S. GOVERNMENT FUND
ANNUAL REPORT
AUGUST 31, 1996
ALLIANCE
INVESTING WITHOUT THE MYSTERY.
LETTER TO SHAREHOLDERS ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
October 30, 1996
Dear Shareholder:
The Alliance Short-Term U.S. Government Fund's annual reporting period closed
on August 31, 1996. Although U.S. bond market returns have generally been
constrained this year as interest rates have risen, we are pleased to report
that your Fund's returns have placed it near the top of all similarly managed
funds tracked by Lipper.
INVESTMENT RESULTS
The following table shows how your Fund performed in the periods ended August
31. For comparison, we have shown returns for the Lehman Brothers (LB) 1-3 Year
Index and for the LB 3-Month Treasury Bill Index. Over the most recent
reporting period, your fund out performed the Lehman Brothers 1-3 Year
Government Bond Index as demand for short duration securities outstripped
supply, driving prices higher. The 1-3 Year Index provides an appropriate
broad-based comparison for the Short-Term U.S. Government Fund due to the
Fund's conservative investment objectives. The 3-Month Treasury Index is a good
narrow-based benchmark given its short-term orientation.
THROUGH AUGUST 31, 1996
SIX MONTHS TWELVE MONTHS
---------- -------------
ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
Class A +1.79% +4.71%
Class B +1.39% +3.89%
Class C +1.39% +3.90%
LB 1-3 YEAR GOV'T BOND INDEX +1.74% +5.22%
LB 3-MONTH TREASURY BELLWETHER INDEX +2.54% +5.21%
ECONOMIC REVIEW
Rebounding from a slowdown at the end of 1995, the U.S. economy gathered steam
as 1996 progressed. During the first quarter, real growth was 2.0% while final
demand increased by a healthy 3.3%. Moreover, consumer confidence improved,
debt service burdens remained at manageable levels and retail sales continued
to climb. Payroll gains, including February's strong increase of 705,000,
ignited concerns over higher inflation, but the 12-month comparisons showed
employment rose a moderate 1.5% and hours worked increased 1.6% compared to the
first quarter of last year. The economic resurgence gained strength in the
second quarter, led by a rapidly improving labor market. Employment gains
averaged 265,000 per month, and total hours worked climbed by an annualized
5.6% over the second quarter of 1995. Consumer confidence remained elevated,
and real household spending continued to grow at a healthy clip. These factors
combined to produce overall Gross Domestic Product (GDP) growth of 4.7% for the
second quarter.
The most recent data point to an economy that is slowing from its strong first
half pace. Retail sales have essentially remained flat and both housing starts
and new building permits have fallen sharply from their springtime highs.
Furthermore, the August home builders survey posted a decline for the fourth
month in a row.
Inflation was boosted this past spring by rising food and energy prices.
However, after briefly touching 3% (annualized) in July, Consumer Price Index
(CPI) inflation retreated to 2.9% in August while core CPI (which excludes the
volatile food and energy components), estimated at 2.7%, hovered near a 30-year
low. The Federal Reserve has been in a holding pattern since January and is
expected to maintain that stance for the foreseeable future.
BOND MARKET REVIEW
The bond market performed much better during the first six months of the
reporting period than it did during the most recent six months. In the first
half of the reporting period, the U.S. bond market enjoyed a sustained
broad-based rally, due in large part to lower interest rates. In this
environment, long duration sectors posted strong returns which contributed to
the superior performance of the corporate sector. The high yield sector, in
particular, experienced significant spread tightening (and hence, price
appreciation). Mortgage-backed securities (MBS) also outperformed on a duration
adjusted basis.
During the most recent six month period, domestic bond market returns have
generally been negative. The market has been reacting to stronger than expected
data on the
1
ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
U.S. economy and the belief that the Federal Reserve may raise interest rates
to reduce inflationary pressures. Although Treasury obligations showed a
negative return during the period, mortgage securities were able to post a gain
as prepayment expectations declined. Shorter-duration securities outperformed
longer-duration securities as interest rates increased in reaction to the
strong economic data.
SECTOR COMMENTARY
Over the past six months, your Fund reduced its allocation to Treasuries and
increased its exposure to the yield-oriented mortgage sector. The MBS market
produced strong returns on both an absolute and duration-adjusted basis. In
addition to the favorable market environment for mortgages, the sector also
benefited from a low supply during a period when investor demand for yield
remained high. Yield spreads for current coupon MBS versus ten-year Treasury
notes traded in a nine basis point range and ended the period five basis points
tighter.
The short duration sector continued to post strong returns relative to their
short market exposures. Demand in the short end of the market remained unabated
and supply was quickly bought by investors. The adjustable rate mortgage (ARM)
market was one of the best performing sectors in the fixed income markets.
Within the ARM sector, conventional CMT ARMs performed particularly well as
prepayments remained stable and supply low.
INVESTMENT OUTLOOK
For the remainder of the year, we expect U.S. economic growth to slow from its
strong first half pace. As this occurs, recent upward pressures on inflation
should subside. Meanwhile, concerns about inflation will keep interest rates
within their recent range. In this environment, credit trends should remain
positive and prepayments should be stable. We will maintain the portfolio's
exposure to yield oriented sectors, particularly ARMs and floating-rate asset
backed securities, which tend to outperform other asset classes in an
environment of stable interest rates.
Thank you for your continued interest and investment in Alliance Short-Term
U.S. Government Fund. We look forward to reporting to you again on market
activity and the Fund's investment results in coming periods.
Sincerely,
John D. Carifa
Chairman and President
Patricia J. Young
Senior Vice President
Paul A. Ullman
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 RESULTS ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
AVERAGE ANNUAL TOTAL RETURN AS OF AUGUST 31, 1996
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
. One Year 4.71% 0.26%
. Since Inception* 4.38% 3.34%
SEC Yield 4.38%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
. One Year 3.89% 0.90%
. Since Inception* 3.60% 3.60%
SEC Yield 3.80%
CLASS C SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
. One Year 3.90% 2.90%
. Since Inception* 2.22% 2.22%
SEC Yield 3.80%
The average annual total returns reflect investment of dividends and/or capital
gains distributions in additional shares-with and without the effect of the
4.25% maximum front-end sales charge for Class A or applicable contingent
deferred sales charge for Class B (3% year 1, 2% year 2, 1% year 3, 0% year 4);
Class C shares purchased prior to July 1, 1996 are not subject to front-end or
contingent deferred sales charges. Class C shares purchased on or after July 1,
1996 are subject to a contingent deferred sales charge of 1% on redemptions
made within the first year after purchase. 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. Yields are for the 30 days ended August 31, 1996.
* Inception: 5/4/92, Class A and Class B; 8/2/93, Class C.
3
ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
GROWTH OF A $10,000 INVESTMENT:
5/31/92 TO 8/31/96
$13,000
$12,500
$12,000
$11,500
$11,000
$10,500
$10,000
5/31/92 8/31/96
LB GOVERNMENT: $12,883
LB 1-3 YEAR GOVERNMENT: $12,500
LB 3-MONTH TREASURY: $11,956
SHORT-TERM U.S. GOVERNMENT FUND
CLASS A: $11,431
This chart illustrates the total value of an assumed investment in Alliance
Short-Term U.S. Government Fund Class A shares (since inception) after
deducting the maximum 4.25% sales charge, and with dividends and capital gains
reinvested. Performance for Class B and Class C shares will vary from the
results shown above due to differences in expenses charged to those classes.
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 Lehman Brothers Government Index is composed of the Treasury Bond
and Agency Bond Indexes, the 1-3 Year Government Index and the 20+ Year
Treasury Index.
The unmanaged Lehman Brothers 1-3 Year Government Index is composed of U.S.
government agency and Treasury securities with maturities of one to three years.
The unmanaged Lehman Brothers 3-Month Treasury Index measures performance of
3-month U.S. Treasury bills.
When comparing Alliance Short-Term U.S. Government Fund to the indices shown
above, you should note that the Fund's performance reflects the maximum sales
charge of 4.25%, while no such charges are reflected in the performance of the
indices.
Short-Term U.S. Government Fund
LBGovernment
LB 1-3 Year Government
LB3-Month Treasury
4
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1996 ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) VALUE
- -------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS-49.1%
FIXED RATE-41.9%
Federal Home Loan Mortgage Corp.
Series 1561 Cl. B
5.00%, 4/15/03 $ 786 $ 778,521
Series 1398 Cl. D
5.50%, 3/15/02 750 745,822
Series 1800 Cl. A
7.00%, 10/15/10 707 708,881
Series 1163 Cl. H
7.50%, 12/15/19 359 361,382
Federal National Mortgage Assn.
Series 1993-167 Cl. C
5.00%, 7/25/11 701 695,085
Series 1993-G13 Cl. D
6.00%, 7/25/15 750 746,925
Series 1992-25 Cl. E
6.75%, 11/25/03 2,292 2,291,040
-----------
6,327,656
ADJUSTABLE RATE-7.2%
Household Revolving Home Equity Loan Trust
Series 1996-1 Cl. A
5.638%, 7/20/17 (a) 298 298,449
Prudential Home Mortgage Securities
Company, Inc.
Series 1993-46 Cl. A1
8.035%, 11/25/23 (a) 768 783,335
-----------
1,081,784
Total Collateralized Mortgage Obligation
(cost $7,417,787) 7,409,440
FEDERAL AGENCY OBLIGATIONS-30.4%
Federal Home Loan Mortgage Corp.
7.86%, 9/01/23 (a) 752 781,004
12.00%, 2/01/14 365 413,465
Federal National Mortgage Assn.
7.267%, 12/01/21 (a) 844 868,241
7.438%, 9/01/25 (a) 740 766,818
12.00%, 3/01/13-5/01/15 1,553 1,765,516
Total Federal Agency Obligations
(cost $4,589,325) 4,595,044
ASSET BACKED SECURITIES-14.9%
AT&T Universal Card Master Trust
Series 1996-2 Cl. A
5.633%, 6/18/01 (a) 800 800,000
ITT Federal Bank, fsb Series 1994 P1 Cl. A1
7.554%, 6/25/24 (a) 686 693,284
Nellie Mae Education Loan Trust
Series 1996 Cl. A1
5.674%, 12/15/04 (a) 750 750,120
Total Asset Backed Securities
(cost $2,243,660) 2,243,404
5
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) VALUE
- -------------------------------------------------------------------------
REPURCHASE AGREEMENT-19.0%
State Street Bank and Trust Co.
5.25%, dated 8/30/96,
due 9/03/96 collateralized by
$2,975,000 U.S. Treasury Bond,
7.25%, 8/15/22,
(cost $2,864,000) $2,864 $ 2,864,000
TOTAL INVESTMENTS-113.4%
(cost $17,114,772) $17,111,888
Other assets less liabilities-(13.4%) (2,025,993)
NET ASSETS-100% $15,085,895
(a) Adjustable rate securities; stated interest rates in effect at August 31,
1996.
See notes to financial statements.
6
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1996 ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $17,114,772) $17,111,888
Cash 31,989
Interest receivable 80,034
Receivable for shares of beneficial interest sold 42,291
Receivable due from adviser 13,801
Deferred organization expense 4,671
Total assets 17,284,674
LIABILITIES
Payable for investments purchased 1,927,950
Payable for shares of beneficial interest redeemed 124,600
Dividend payable 21,587
Distribution fee payable 11,023
Accrued expenses 113,619
Total liabilities 2,198,779
NET ASSETS $15,085,895
COMPOSITION OF NET ASSETS
Shares of beneficial interest, at par $ 15
Additional paid-in capital 15,798,577
Distributions in excess of net investment income (46,504)
Accumulated net realized loss (658,693)
Net unrealized depreciation of investments (7,500)
$15,085,895
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($3,454,526/
357,715 shares of beneficial interest issued and outstanding) $ 9.66
Sales charge-4.25% of public offering price .43
Maximum offering price $10.09
CLASS B SHARES
Net asset value and offering price per share ($6,781,068/
694,222 shares of beneficial interest issued and outstanding) $ 9.77
CLASS C SHARES
Net asset value and offering price per share ($4,850,301/
497,119 shares of beneficial interest issued and outstanding) $ 9.76
See notes to financial statements.
7
STATEMENT OF OPERATIONS
YEAR ENDED AUGUST 31, 1996 ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
INVESTMENT INCOME
Interest $960,863
EXPENSES
Advisory fee $ 83,317
Distribution fee - Class A 9,293
Distribution fee - Class B 68,386
Distribution fee - Class C 52,123
Custodian 81,931
Audit and legal 73,869
Registration 46,182
Printing 37,880
Transfer agency 35,178
Trustees' fees 23,130
Amortization of organization expenses 11,039
Miscellaneous 2,521
Total expenses 524,849
Less: expenses waived and reimbursed by adviser
(See Note B) (228,412)
Net expenses 296,437
Interest expense 18,720
Total expenses including interest expense 315,157
Net investment income 645,706
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss on investments (13,066)
Net change in unrealized appreciation of investments (30,800)
Net loss on investments (43,866)
NET INCREASE IN NET ASSETS FROM OPERATIONS $601,840
See notes to financial statements.
8
STATEMENTS OF CHANGES
IN NET ASSETS ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
AUGUST 31, AUGUST 31,
1996 1995
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 645,706 $ 547,800
Net realized loss on investments (13,066) (26,997)
Net change in unrealized appreciation
(depreciation) of investments (30,800) 71,312
Net increase in net assets from operations 601,840 592,115
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (156,805) (117,047)
Class B (288,818) (210,021)
Class C (220,224) (196,348)
Distributions in excess of net investment income
Class A -0- (9,973)
Class B -0- (17,854)
Class C -0- (16,698)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase (decrease) 592,950 (1,148,386)
Total increase (decrease) 528,943 (1,124,212)
NET ASSETS
Beginning of year 14,556,952 15,681,164
End of year $15,085,895 $14,556,952
See notes to financial statements.
9
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1996 ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Short-Term U.S. Government Fund (the "Fund"), a series of The Alliance
Portfolios (the "Trust") which was organized as a Massachusetts Business Trust
on March 29, 1987, is registered under the Investment Company Act of 1940, as a
diversified, open-end management investment company. The Fund offers Class A,
Class B and Class C shares. Class A shares are sold with a front-end sales
charge of up to 4.25%. Class B shares are sold with a contingent deferred sales
charge which declines from 3.0% to zero depending on the period of time the
shares are held. Class B shares will automatically convert to Class A shares
six 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% on redemptions made within the first year after purchase. All
three classes of shares have identical voting, dividend, liquidation and other
rights with respect to its distribution plan. The following is a summary of
significant accounting policies followed by the Fund.
1. SECURITY VALUATION
Portfolio securities traded on national securities exchanges are valued at the
last reported sales price on such exchange. Listed securities not traded and
securities traded in the over-the-counter market, including listed debt
securities whose primary market is believed to be over-the-counter, are valued
at the mean of the closing bid and asked price as obtained from a recognized
pricing service and brokers. Securities for which bid and asked price
quotations are not readily available are valued in good faith at fair value
using methods determined by the Board of Trustees. Securities which mature in
60 days or less are valued at amortized cost, which approximates market value.
2. ORGANIZATION EXPENSES
Organization expenses of approximately $50,000 have been deferred and are being
amortized on a straight-line basis through May, 1997.
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 SECURITY TRANSACTIONS
Interest income is accrued daily. Security transactions are accounted for on
the date securities are purchased or sold. Security gains and losses are
determined on the identified cost basis. The Fund accretes discounts as
adjustments to interest income.
5. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date. Income dividends and capital gain distributions are determined in
accordance with income tax regulations, which may differ from generally
accepted accounting principles.
6. INCOME AND EXPENSES
All income earned and expenses incurred by the Fund are borne on a pro-rata
basis by each settled 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 fees and, in the case of Class B
shares, higher transfer agent fees. Expenses of the Trust are charged to each
Fund in proportion to net assets.
7. REPURCHASE AGREEMENT
The Fund's custodian takes possession of collateral pledged for investments in
repurchase agreements, the market value of which is required to be at least
102% of the resale amount at the time of purchase. The value of the collateral
is marked-to-market on a daily basis and additional collateral is requested
from the counterparty, as necessary, to ensure that its value is at least equal
at all times to the total amount of the repurchase obligation, including
interest. If the seller defaults and the value of the collateral declines or if
bankruptcy proceedings commence with the respect to the seller of the security,
realization of the collateral by the Fund may be delayed or limited.
8. RECLASSIFICATION OF NET ASSETS
To reflect reclassifications arising from permanent book/tax differences for
the year ended August 31, 1996, $18,162 was reclassified from additional paid
in capital to distributions in excess of net investment income.
10
ALLIANCE SHORT-TERM U.S. GOVERNMENT 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 "Investment Adviser"), an advisory fee at an
annual rate of .55 of 1% of the Fund's average daily net assets. Such fee is
accrued daily and paid monthly. The Investment Adviser has agreed, under the
terms of the investment advisory agreement, to voluntarily waive its fees and
bear certain expenses so that total expenses do not exceed on an annual basis
1.40%, 2.10% and 2.10% of the daily average net assets for the Class A, Class B
and Class C shares, respectively. For the year ended August 31, 1996, such
reimbursement amounted to $228,412. In addition to these voluntary
arrangements, the Investment Adviser will reduce its compensation, to the
extent that expenses of the Fund for any fiscal year (not including any
distribution expenses paid by the Fund) exceed the lowest applicable expense
limitation prescribed by any state in which the Fund's shares are qualified for
sale. The Investment Adviser believes that the most restrictive expense ratio
limitation imposed by any state in which the Fund has qualified its shares for
sale is 2.5% of the first $30 million of the Fund's average daily net assets,
2% of the next $70 million of its average daily net assets and 1.5% of its
average daily net assets in excess of $100 million. The Fund has a Services
Agreement with Alliance Fund Services, Inc. (a wholly-owned subsidiary of the
Investment Adviser) to provide personnel and facilities to perform transfer
agency services for the Fund. Compensation under this agreement amounted to
$19,818 for the year ended August 31, 1996. Alliance Fund Distributors, Inc. (a
wholly-owned subsidiary of the Investment Adviser) serves as the distributor,
(the "Distributor"), of the Fund's shares. The Distributor received front-end
sales charges of $2,924 from the sale of Class A shares and $34,008 in
contingent deferred sales charges imposed upon redemptions by shareholders of
Class B shares for the year ended August 31, 1996.
Accrued expenses includes an amount owed to two of the Trustees under a
deferred compensation plan of $24,830.
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 .50% of the Fund's average daily net assets attributable to Class
A shares and 1% of the average daily net assets attributable to both Class B
and Class C shares. For the year ended August 31, 1996, the Fund paid a
distribution fee to the Distributor at an annual rate of .30% of the Fund's
average daily net assets attributable to Class A shares. The Trustees currently
limit payments under the Class A plan to .30% of the Fund's aggregate average
daily net assets attributable to Class A shares. The Agreement provides that
the Distributor will use such payments in their entirety for distribution
assistance and promotional activities. The Distributor has incurred since
inception expenses in excess of the distribution costs reimbursed by the Fund
in the amount of $468,418 and $686,992 for Class B and C shares, respectively;
such costs may be recovered from the Fund in future periods. 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 Investment Adviser may use its own
resources to finance the distribution of the Fund's shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments
and U.S. Government securities) aggregated $10,827,628 and $1,532,069,
respectively, for the year ended August 31, 1996. There were purchases of
$6,968,559 and sales of $13,789,789 of U.S. Government and government agency
obligations for the year ended August 31, 1996. At August 31, 1996 the cost of
securities for federal income tax purposes was the same as the cost for
financial reporting purposes. Accordingly gross unrealized appreciation of
investments was $12,643 and gross unrealized depreciation of investments was
$15,527 resulting in net unrealized depreciation of $2,884.
11
NOTES TO FINANCIAL STATEMENTS (CONT.)
ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
NOTE E: SHARES OF BENEFICIAL INTEREST
There is an unlimited number of $0.00001 par value shares of beneficial
interest authorized divided into three classes, designated Class A, Class B and
Class C shares. Transactions in shares of beneficial interest were as follows:
SHARES AMOUNT
--------------------------- ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
1996 1995 1996 1995
------------ ------------ -------------- --------------
Shares sold 247,602 424,619 $ 2,403,892 $ 4,020,889
Shares issued in
reinvestment of
dividends 8,915 8,027 86,515 77,235
Shares converted
from Class B 16,994 -0- 166,372 -0-
Shares redeemed (224,741) (358,681) (2,182,378) (3,383,335)
Net increase 48,770 73,965 $ 474,401 $ 714,789
CLASS B
Shares sold 686,744 591,993 $ 6,747,952 $ 5,759,616
Shares issued in
reinvestment of
dividends 16,716 13,420 164,023 130,566
Shares converted
to Class A (17,183) -0- (166,372) -0-
Shares redeemed (642,638) (597,126) (6,315,168) (5,807,282)
Net increase 43,639 8,287 $ 430,435 $ 82,900
CLASS C
Shares sold 434,234 275,893 $ 4,258,011 $ 2,678,828
Shares issued in
reinvestment of
dividends 11,782 12,237 115,471 118,917
Shares redeemed (477,627) (488,878) (4,685,368) (4,743,820)
Net decrease (31,611) (200,748) $ (311,886) $(1,946,075)
NOTE F: FEDERAL INCOME TAX STATUS
At August 31, 1996, the Fund had net capital loss carryforward of $645,627 of
which $72,933 expires in the fiscal year ending 2001, $36,136 in the fiscal
year ending 2002, $522,417 in the fiscal year ending 2003, and $14,141 in the
fiscal year ending 2004 to the extent provided by the regulations. To the
extent that this loss carryforward is used to offset future capital gains, it
is probable that the gains so offset will not be distributed to shareholders.
Capital losses incurred after October 31, within the Fund's fiscal year are
deemed to arise on the first business day of the following fiscal year. The
Fund incurred and elected to defer a post October net capital loss of $13,066.
12
ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
NOTE G: REVERSE REPURCHASE AGREEMENTS
Under a reverse repurchase agreement, the Fund sells securities and agrees to
repurchase them at a mutually agreed upon date and price. At the time the Fund
enters into a reverse repurchase agreement, it will establish a segregated
account with the custodian containing cash, cash equivalents or liquid
high-grade debt securities having a value at least equal to the repurchase
price.
As of August 31, 1996, the Fund had no reverse repurchase agreements
outstanding.
For the year ended August 31, 1996, the maximum amount of reverse repurchase
agreements outstanding was $2,939,750, the average amount outstanding was
approximately $1,416,516, and the daily weighted average interest rate was
5.44%.
13
FINANCIAL HIGHLIGHTS ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------------
MAY 1,1994 MAY 4,1992(B)
YEAR ENDED AUGUST 31, THROUGH YEAR ENDED TO
------------------------- AUGUST 31, APRIL 30, APRIL 30,
1996 1995 1994(A) 1994 1993
------------ ----------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $9.70 $9.67 $9.77 $10.22 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c) .47 .42 .14 .35 .46
Net realized and unrealized gain (loss) (.02) .05 (.09) (.29) .34
Net increase in net asset value from
operations .45 .47 .05 .06 .80
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.49) (.41) (.12) (.42) (.46)
Dividends in excess of net investment income -0- (.03) -0- (.01) -0-
Return of capital -0- -0- (.03) (.08) -0-
Distributions from net realized gains -0- -0- -0- -0- (.12)
Total dividends and distributions (.49) (.44) (.15) (.51) (.58)
Net asset value, end of period $9.66 $9.70 $9.67 $ 9.77 $10.22
TOTAL RETURN
Total investment return based on net
asset value (d) 4.71% 5.14% .53% .52% 8.20%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $3,455 $2,997 $2,272 $2,003 $6,081
Ratio to average net assets of:
Expenses, net of waivers/reimbursements 1.53%(e) 1.40% 1.40%(f) 1.27% 1.00%(f)
Expenses, before waivers/reimbursements 3.04%(e) 3.71% 2.95%(f) 2.17% 2.20%(f)
Net investment income 4.85% 4.56% 3.98%(f) 4.41% 4.38%(f)
Portfolio turnover rate 110% 15% 144% 55% 294%
</TABLE>
See footnotes on page 16.
14
ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
CLASS B
-----------------------------------------------------------------
MAY 1,1994 MAY 4,1992(B)
YEAR ENDED AUGUST 31, THROUGH YEAR ENDED TO
------------------------- AUGUST 31, APRIL 30, APRIL 30,
1996 1995 1994(A) 1994 1993
------------ ----------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $9.81 $9.78 $9.88 $10.31 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c) .41 .36 .10 .40 .38
Net realized and unrealized gain (loss) (.03) .04 (.07) (.39) .33
Net increase in net asset value from
operations .38 .40 .03 .01 .71
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.42) (.34) (.11) (.35) (.38)
Dividends in excess of net investment income -0- (.03) -0- (.01) -0-
Return of capital -0- -0- (.02) (.08) -0-
Distributions from net realized gains -0- -0- -0- -0- (.02)
Total dividends and distributions (.42) (.37) (.13) (.44) (.40)
Net asset value, end of period $9.77 $9.81 $9.78 $ 9.88 $10.31
TOTAL RETURN
Total investment return based on net
asset value (d) 3.89% 4.32% .28% .03% 7.22%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $6,781 $6,380 $6,281 $7,184 $1,292
Ratios of average net assets of:
Expenses, net of waivers/reimbursements 2.23%(e) 2.10% 2.10%(f) 2.05% 1.75%(f)
Expenses, before waivers/reimbursements 3.74%(e) 4.33% 3.60%(f) 3.21% 4.81%(f)
Net investment income 4.11% 3.82% 3.22%(f) 3.12% 3.36%(f)
Portfolio turnover rate 110% 15% 144% 55% 294%
</TABLE>
See footnotes on page 16.
15
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
CLASS C
----------------------------------------------------
AUGUST 2,
MAY 1,1994 1993(G)
YEAR ENDED AUGUST 31, THROUGH TO
------------------------- AUGUST 31, APRIL 30,
1996 1995 1994(A) 1994
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $9.80 $9.77 $9.87 $10.34
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c) .40 .34 .10 .26
Net realized and unrealized gain (loss) (.02) .06 (.07) (.42)
Net increase (decrease) in net asset value
from operations .38 .40 .03 (.16)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.42) (.34) (.11) (.25)
Dividends in excess of net investment income -0- (.03) -0- (.01)
Return of capital -0- -0- (.02) (.05)
Distributions from net realized gains -0- -0- -0- -0-
Total dividends and distributions (.42) (.37) (.13) (.31)
Net asset value, end of period $9.76 $9.80 $9.77 $ 9.87
TOTAL RETURN
Total investment return based on net
asset value (d) 3.90% 4.33% .28% (1.56)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $4,850 $5,180 $7,128 $8,763
Ratios of average net assets of:
Expenses, net of waivers/reimbursements 2.22%(e) 2.10% 2.10%(f) 2.10%(f)
Expenses, before waivers/reimbursements 3.72%(e) 4.23% 3.64%(f) 3.10%(f)
Net investment income 4.11% 3.80% 3.26%(f) 2.60%(f)
Portfolio turnover rate 110% 15% 144% 55%
</TABLE>
(a) The Fund changed its fiscal year end from April 30 to August 31.
(b) Commencement of operations.
(c) Net of fees waived and expenses reimbursed by Adviser.
(d) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales charges or contingent
deferred sales charges are not reflected in the calculation of total investment
return. Total investment return calculated for a period of less than one year
is not annualized.
(e) Expense ratio includes interest expense.
(f) Annualized.
(g) Commencement of distribution.
Prior to July 22, 1993, Equitable Capital Management Corporation (Equitable
Capital) served as the investment adviser to the Trust. On July 22, 1993,
Alliance Capital Management L.P. acquired the business and substantially all of
the assets of Equitable Capital and became the investment adviser of the Trust.
16
REPORT OF INDEPENDENT ACCOUNTANTS ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Alliance Short-Term U.S.
Government Fund (one of the portfolios of the Alliance Portfolios, hereafter
referred to as the "Fund") at August 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
periods presented, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities at August 31, 1996 by correspondence with the custodian and brokers
provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
October 16, 1996
17
ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
BOARD OF TRUSTEES
JOHN D. CARIFA, CHAIRMAN AND PRESIDENT
ALBERTA B. ARTHURS (1)
RUTH BLOCK (1)
RICHARD W. COUPER (1)
BRENTON W. HARRIES (1)
DONALD J. ROBINSON (1)
OFFICERS
BRUCE W. CALVERT, VICE PRESIDENT
KATHLEEN A. CORBET, VICE PRESIDENT
WAYNE D. LYSKI, VICE PRESIDENT
BARBARA J. KRUMSIEK, VICE PRESIDENT - MARKETING
EDMUND P. BERGAN, JR., CLERK
MARK D. GERSTEN, TREASURER & CHIEF FINANCIAL OFFICER
VINCENT S. NOTO, CONTROLLER & CHIEF ACCOUNTING OFFICER
CUSTODIAN
STATE STREET BANK & TRUST COMPANY
225 Franklin Street
Boston, MA 02110
PRINCIPAL UNDERWRITER
ALLIANCE FUND DISTRIBUTORS, INC.
1345 Avenue of the Americas
New York, NY 10105
LEGAL COUNSEL
ROPES & GRAY
One International Place
Boston, MA 02110-2624
TRANSFER AGENT
ALLIANCE FUND SERVICES, INC.
P.O. Box 1520
Secaucus, NJ 07096-1520
Toll-Free 1-(800) 221-5672
INDEPENDENT ACCOUNTANTS
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, NY 10036-2798
(1) Member of the Audit Committee.
18
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 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 Small Cap Fund
Alliance Growth Fund
Alliance Premier Growth 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 Utility Income Fund
AGGRESSIVE GROWTH
Alliance Quasar Fund
Alliance Technology Fund
INTERNATIONAL
Alliance All-Asia Investment Fund
Alliance International Fund
Alliance New Europe Fund
Alliance Worldwide Privatization Fund
CLOSED-END FUNDS
Alliance All-Market Advantage Fund
Alliance Global Environment 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
New Jersey Portfolio
New York Portfolio
Virginia Portfolio
Alliance Treasury Reserves
Alliance Money Market Fund
Prime Portfolio
Government Portfolio
General Municipal Portfolio
19
ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
ALLIANCECAPITAL
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.
STMUSGAR
