ALLIANCE SHORT-TERM
U.S. GOVERNMENT FUND
SEMI-ANNUAL REPORT
FEBRUARY 28, 1997
ALLIANCE CAPITAL
LETTER TO SHAREHOLDERS
ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
April 4, 1997
Dear Shareholder:
The Alliance Short-Term U.S. Government Fund's semi-annual reporting period
closed on February 28, 1997. Since our last report, the U.S. bond market has
posted solid returns. The market rallied toward the end of 1996, only to see
some of those gains eroded more recently as continuing strength in the U.S.
labor market reignited concerns about inflation and pushed the bond market
lower.
INVESTMENT RESULTS
The following table shows how your Fund performed in the periods ended February
28, 1997. For comparison, we have shown returns for the Lehman Brothers (LB)
1-3 Year Index and the LB 3-Month Treasury Bellwether Index. The 1-3 Year Index
provides a broad-based comparison for the Short-Term U.S. Government Fund while
the 3-Month Treasury Index is a good narrow-based benchmark given its
short-term orientation.
Since our last report to you dated August 31, 1996, we are happy to report that
your Fund outperformed its LB 3-Month Treasury benchmark due to the strong
relative performance of the mortgage-backed holdings of the Portfolio. Your
Fund's performance trailed that of the LB 1-3 Year Government Index due to that
benchmark's longer duration (relative to your Fund's) during a period when
longer duration securities outperformed those with shorter durations.
INVESTMENT RESULTS*
Period Ended February 28, 1997
TOTAL RETURN
6 MONTHS 12 MONTHS
---------- ---------
ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
Class A 2.95% 4.79%
Class B 2.54% 3.96%
Class C 2.54% 3.96%
LB 1-3 YEAR GOVERNMENT BOND INDEX 3.56% 5.36%
LB 3-MONTH TREASURY BELLWETHER INDEX 2.67% 5.38%
* 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 FEBRUARY 28,
1997. 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. RETURNS FOR THE FUND AND ITS COMPARATIVE
INDICES INCLUDE THE REINVESTMENT OF ANY DISTRIBUTIONS PAID DURING THE PERIOD.
ALL COMPARATIVE INDICES ARE UNMANAGED AND REFLECT NO FEES OR EXPENSES. THE
LEHMAN BROTHERS 1-3 YEAR GOVERNMENT BOND INDEX IS COMPOSED OF AGENCY AND
TREASURY SECURITIES WITH MATURITIES OF ONE TO THREE YEARS. THE LEHMAN BROTHERS
3-MONTH TREASURY BELLWETHER INDEX IS COMPOSED OF TREASURY SECURITIES WITH
MATURITIES OF THREE MONTHS.
ADDITIONAL INVESTMENT RESULTS APPEAR ON PAGE 3.
ECONOMIC REVIEW
The U.S. economy finished 1996 on a strong note. After moderating in the third
quarter, the economy picked up speed as the year came to a close, led by a
rebound in consumer spending. The annualized gain in retail sales jumped to
4.8% in the fourth quarter, up from only 0.9% in the third quarter. An
unexpected surge in export growth also added to year-end Gross Domestic Product
(GDP) growth. The production side of the economy showed strength too.
Industrial production grew at an annualized pace of 6% and payroll growth
increased to 217,000 new jobs per month, up from third quarter's average of
171,000 new jobs per month. In all, growth in aggregate output, as measured by
the GDP, which dipped to 2.1% in the third quarter, accelerated to 3.8% during
the last quarter of 1996.
1
ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
Recently released data indicated that the economic strength at the end of 1996
carried over into 1997, buoyed by continued strength in the labor markets.
Non-farm payrolls grew by a larger-than-expected 293,000 new jobs in February
and the unemployment rate edged down to 5.3%. Retail sales figures remained
strong during the first two months of 1997 and consumer confidence remained
elevated. Overall, GDP growth is likely to be 3% or more in the first quarter.
The inflation news continues to be generally favorable. After moving slightly
higher at the end of 1996, consumer and producer price gains both retreated in
early 1997. Through February 1997, consumer prices were up 3.0% compared to
February of 1996, while producer prices were up just 2.2% for the same period.
BOND MARKET REVIEW
Since our last report, the U.S. bond market posted solid gains. The market
rallied during the second half of 1996, pushing 1996 year-to-date returns into
positive territory for the first time since January. Data released during the
period temporarily eased investors' concerns about accelerating economic growth
and interest rates on all maturities fell. In December, however, the market
reversed direction and gave up some of its earlier gains. Data indicating
resurgent strength in the economy, particularly within the labor market,
renewed concerns about inflation and pushed bond yields higher. Fed Chairman
Greenspan's Congressional testimony warning of "irrational exuberance," which
set the stage for a preemptive rate hike, added to weakness in the fixed-income
market. Overall, mortgages and corporates were the best performing sectors of
the market, driven by strong investor demand for yield-oriented securities.
AREAS OF THE MARKET
Over the past six months, your Fund's sector allocations remained relatively
stable. The core positions continue to be Constant Maturity Treasury (CMT)
Adjustable Rate Mortgages (ARMs) and Asset-Backed Security (ABS) floaters. The
CMT ARMs are generally seasoned ARMs which exhibit stable prepayment levels.
The asset-backed floaters are indexed to one-month or three-month London
Interbank Offer Rate (LIBOR) with favorable cap features.
The short duration sector posted strong duration-adjusted returns during the
period. ARMs performed particularly well, benefiting from a stabilizing outlook
for prepayments and a decline in supply. Asset-backed securities maintained
their yield spreads in spite of large supply, as investor demand for these
securities remained strong. The yield spreads for both short fixed-rate and
floating-rate Collateralized Mortgage Obligations (CMOs) narrowed based on
strong supply/demand fundamentals.
INVESTMENT OUTLOOK
Our outlook for the U.S. economy assumes that while economic growth accelerated
at the end of 1996, it will moderate throughout 1997. As this occurs, potential
upward pressures on inflation should dissipate. Until clear signs of a slowing
economy emerge, concerns about inflation will keep U.S. interest rates near the
upper end of their recent range. The Fed remains vigilant against signs of
accelerating inflation and additional rate increases cannot be ruled out.
However, such developments would only facilitate the economic slowing we see
later in 1997.
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
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, GUARANTEED OR ENDORSED
BY, ANY BANK; FURTHER, SUCH SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
2
INVESTMENT OBJECTIVE AND POLICIES
ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
Alliance Short-Term U.S. Government Fund seeks high current income consistent
with preservation of capital and invests primarily in a diversified portfolio
of U.S. Government securities.
INVESTMENT RESULTS
_______________________________________________________________________________
AVERAGE ANNUAL TOTAL RETURNS AS OF FEBRUARY 28, 1997
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 4.79% 0.36%
Since Inception* 4.55% 3.62%
SEC Yield** 5.19%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 3.96% 0.98%
Since Inception* 3.77% 3.77%
SEC Yield** 4.62%
CLASS C SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 3.96% 2.97%
Since Inception* 2.62% 2.62%
SEC Yield** 4.64%
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 (3% year 1, 2% year 2, 1% year 3,
0% 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.
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: 5/4/92, Class A and Class B; 8/2/93, Class C.
** Yields are for the 30 days ended February 28, 1997.
3
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 1997 (UNAUDITED)
ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) VALUE
- --------------------------------------------------------------------------
FEDERAL AGENCY SECURITIES-32.9%
FIXED RATE-17.2%
Federal Home Loan Mortgage Corp.
12.00%, 2/01/14 $ 342 $ 390,981
Federal National Mortgage Association
8.00%, 10/01/99 751 761,701
12.00%, 3/01/13-5/01/15 1,450 1,672,353
2,825,035
ADJUSTABLE RATE-15.7%
Federal Home Loan Mortgage Corp.
7.77%, 2/01/24 743 765,864
Federal National Mortgage Association
7.564%, 3/01/25 1,150 1,175,920
8.052%, 10/01/24 610 633,841
-----------
2,575,625
Total Federal Agency Securities
(cost $5,376,698) 5,400,660
COLLATERALIZED MORTGAGE OBLIGATIONS-30.0%
FIXED RATE-18.7%
Federal Home Loan Mortgage Corp.
Series 1561 Cl. B
5.00%, 4/15/03 517 513,770
Series 1398 Cl. D
5.50%, 3/15/02 495 493,346
Series 1163 Cl. H
7.50%, 12/15/19 273 275,776
Federal National Mortgage Association
Series 1993-167 Cl. C
5.00%, 7/25/11 396 394,191
Series 1992-25 Cl. E
6.75%, 11/25/03 1,394 1,393,115
-----------
3,070,198
ADJUSTABLE RATE-11.3%
Federal Home Loan Mortgage Corp.
Series 1465 Cl. FA
6.14%, 2/15/08 651 654,864
Prudential Home Mortgage Securities Co., Inc.
Series 1993-46 Cl. A1
8.509%, 11/25/23 597 612,020
Sears Mortgage Securities Corp.
Series 1992-16B Cl. A2
7.097%, 9/25/22 592 598,406
-----------
1,865,290
Total Collateralized Mortgage Obligations
(cost $4,934,976) 4,935,488
ASSET BACKED SECURITIES-17.8%
AT&T Universal Card Master Trust
Series 1996-2 Cl. A
5.63%, 6/18/01 (a) 800 800,248
Series 1996-1 Cl. A
5.69%, 4/17/03 (a) 500 500,625
Household Revolving Home Equity Loan Trust
Series 1996-2 Cl. A
5.59%, 2/20/18 (a) 298 298,460
4
ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) VALUE
- -------------------------------------------------------------------------
ITT Federal Bank, fsb
Series 1994 P1 Cl. A1
7.554%, 6/25/24 (a) (b) $ 587 $ 597,704
Nellie Mae Education Loan Trust
Series 1996 Cl. A1
5.775%, 12/15/04 (a) 719 719,723
Total Asset Backed Securities
(cost $2,911,583) 2,916,760
REPURCHASE AGREEMENT-18.8%
Prudential-Bache Securities, Inc.
5.34%, dated 2/28/97,
due 3/03/97 collateralized by
$6,011,177 FNMA, 7.60%, 4/01/24,
(cost $ 3,094,000) 3,094 3,094,000
TOTAL INVESTMENTS-99.5%
(cost $16,317,257) 16,346,908
Other assets less liabilities-0.5% 82,062
NET ASSETS-100% $16,428,970
(a) Adjustable rate mortgages; stated interest rate in effect at February 28,
1997.
(b) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. This security may be resold in transactions exempt from registration
normally to qualified institutional buyers. At February 28, 1997, the security
amounted to $ 597,704 or 3.6 % of net assets.
See notes to financial statements.
5
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1997 (UNAUDITED)
ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $16,317,257) $16,346,908
Interest receivable 143,390
Receivable for shares of beneficial interest sold 42,308
Receivable due from adviser 175
Total assets 16,532,781
LIABILITIES
Due to custodian 17,819
Dividend payable 18,945
Distribution fee payable 10,742
Payable for shares of beneficial interest redeemed 1,196
Accrued expenses 55,109
Total liabilities 103,811
NET ASSETS $16,428,970
COMPOSITION OF NET ASSETS
Shares of beneficial interest, at par $17
Additional paid-in capital 17,107,929
Distributions in excess of net investment income (63,454)
Accumulated net realized loss (635,549)
Net unrealized appreciation of investments 20,027
$16,428,970
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($3,658,170/
378,082 shares of beneficial interest issued and outstanding) $ 9.68
Sales charge--4.25% of public offering price .43
Maximum offering price $10.11
CLASS B SHARES
Net asset value and offering price per share ($6,890,598/
703,898 shares of beneficial interest issued and outstanding) $ 9.79
CLASS C SHARES
Net asset value and offering price per share ($5,880,202/
601,373 shares of beneficial interest issued and outstanding) $ 9.78
See notes to financial statements.
6
STATEMENT OF OPERATIONS
SIX MONTHS ENDED FEBRUARY 28, 1997 (UNAUDITED)
ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
INVESTMENT INCOME
Interest $544,881
EXPENSES
Advisory fee $ 45,581
Distribution fee--Class A 5,490
Distribution fee--Class B 35,998
Distribution fee--Class C 28,576
Custodian 46,122
Registration 22,262
Transfer agency 19,943
Audit and legal 17,272
Printing 11,388
Trustees' fees 6,631
Amortization of organization expenses 4,671
Miscellaneous 3,978
Total expenses 247,912
Less: expenses waived and reimbursed by adviser
(See Note B) (86,687)
Net expenses 161,225
Net investment income 383,656
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments 23,144
Net change in unrealized depreciation of investments 27,527
Net gain on investments 50,671
NET INCREASE IN NET ASSETS FROM OPERATIONS $434,327
See notes to financial statements.
7
STATEMENT OF CHANGES IN NET ASSETS
ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
SIX MONTHS ENDED
FEB. 28,1997 YEAR ENDED
(UNAUDITED) AUG. 31,1996
------------- ------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 383,656 $ 645,706
Net realized gain (loss) on investments 23,144 (13,066)
Net change in unrealized appreciation
(depreciation) of investments 27,527 (30,800)
Net increase in net assets from operations 434,327 601,840
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income
Class A (99,899) (156,805)
Class B (167,441) (288,818)
Class C (133,266) (220,224)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase 1,309,354 592,950
Total increase 1,343,075 528,943
NET ASSETS
Beginning of year 15,085,895 14,556,952
End of period $16,428,970 $15,085,895
See notes to financial statements.
8
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1997 (UNAUDITED)
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% 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%. Class B
shares are currently sold with a contingent deferred sales charge which
declines from 4% to zero depending on the period of time the shares are held.
Class B shares will automatically convert to Class A shares eight years after
the end of the calendar month of purchase. Class C shares 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 INVESTMENT TRANSACTIONS
Interest income is accrued daily. Investment transactions are accounted for on
the date securities are purchased or sold. Investment gains and losses are
determined on the identified cost basis. The Fund accretes discounts as
adjustments to interest income.
5. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date. 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.
9
NOTES TO FINANCIAL STATEMENTS (CONT.)
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 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 six months ended
February 28, 1997, the advisory fee of $45,581 has been waived and in addition,
$41,106 has been reimbursed by the Adviser.
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 $9,476 for the six months ended February 28, 1997.
Alliance Fund Distributors, Inc., (the "Distributor"), a wholly-owned
subsidiary of the Investment Adviser serves as the distributor of the Fund's
shares. The Distributor received front-end sales charges of $1,044 from the
sale of Class A shares and $23,387 and $2,556 in contingent deferred sales
charges imposed upon redemptions by shareholders of Class B and Class C shares,
respectively, for the six months ended February 28, 1997.
Accrued expenses includes $7,880 owed to the Trustees under the Trust's
deferred compensation plan.
NOTE C: DISTRIBUTION PLANS
The Trust has adopted a Plan for each class of shares of the Fund pursuant to
Rule 12b-1 under the Investment Company Act of 1940 (each a "Plan" and
collectively the "Plans"). Under the Plan, 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. 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 Plan provides that the
Distributor will use such payments in their entirety for distribution
assistance and promotional activities. The Fund is not obligated under the Plan
to pay any distribution services fees in excess of the amounts set forth above.
The purpose of the payments to the Distributor under the Plan is to compensate
the Distributor for its distribution services with respect to the sale of the
Funds' shares. Since the Distributor's compensation is not directly tied to its
expenses, the amount of compensation received by it under the Plan during any
year may be more or less than its actual expenses. For this reason, the Plan is
characterized by the staff of the Commission as being of the "compensation"
variety.
In the event that a Plan is terminated or not continued, (i) no distribution
services fees (other than current amounts accrued but not yet paid) would be
owed by the Funds to AFD with respect to the relevant class and (ii) the Funds
would not be obligated to pay AFD for any amounts expended by AFD not
previously recovered by AFD from distribution services fees in respect of
shares of such class or, in the case of Class B shares, recovered through
deferred sales charges.
The Plans also provides that the Adviser may use its own resources to finance
the distribution of the Fund's shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments
and U.S. government securities) aggregated $2,270,361 and $1,437,824,
respectively, for the six months ended February 28, 1997. There were purchases
of $4,894,083 and sales of $4,719,066 of U.S. government and government agency
obligations for the six months ended February 28, 1997. At February 28, 1997,
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 $47,013 and gross unrealized depreciation of investments was
$17,362 resulting in net unrealized appreciation of $29,651.
10
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
---------------------------- ------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
FEB. 28, 1997 AUGUST 31, FEB. 28, 1997 AUGUST 31,
(UNAUDITED) 1996 (UNAUDITED) 1996
------------- ------------ -------------- --------------
CLASS A
Shares sold 166,679 247,602 $ 1,611,166 $ 2,403,892
Shares issued in
reinvestment of
dividends 6,783 8,915 65,597 86,515
Shares converted
from Class B 6,400 16,994 61,884 166,372
Shares redeemed (159,495) (224,741) (1,541,984) (2,182,378)
Net increase 20,367 48,770 $ 196,663 $ 474,401
CLASS B
Shares sold 362,779 686,744 $ 3,548,203 $ 6,747,952
Shares issued in
reinvestment of
dividends 10,861 16,716 106,230 164,023
Shares converted
to Class A (6,329) (17,183) (61,884) (166,372)
Shares redeemed (357,635) (642,638) (3,498,138) (6,315,168)
Net increase 9,676 43,639 $ 94,411 $ 430,435
CLASS C
Shares sold 324,408 434,234 $ 3,168,491 $ 4,258,011
Shares issued in
reinvestment of
dividends 8,995 11,782 87,897 115,471
Shares redeemed (229,149) (477,627) (2,238,108) (4,685,368)
Net increase (decrease) 104,254 (31,611) $ 1,018,280 $ (311,886)
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 expires in the
fiscal year ending 2002, $522,417 expires in the fiscal year ending 2003, and
$14,141 expires 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 $13,111.
11
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
-------------------------------------------------------------------------------
SIX MONTHS
ENDED MAY 1, 1994 MAY 4,1992(b)
FEBRUARY 28, YEAR ENDED AUGUST 31, THROUGH YEAR ENDED TO
1997 ------------------------ AUGUST 31, APRIL 30, APRIL 30,
(UNAUDITED) 1996 1995 1994(a) 1994 1993
------------ ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $9.66 $9.70 $9.67 $9.77 $10.22 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c) .25(d) .47 .42 .14 .35 .46
Net realized and unrealized gain (loss) .03 (.02) .05 (.09) (.29) .34
Net increase in net asset value from
operations .28 .45 .47 .05 .06 .80
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.26) (.49) (.41) (.12) (.42) (.46)
Dividends in excess of net investment
income -0- -0- (.03) -0- (.01) -0-
Return of capital -0- -0- -0- (.03) (.08) -0-
Distributions from net realized gains -0- -0- -0- -0- -0- (.12)
Total dividends and distributions (.26) (.49) (.44) (.15) (.51) (.58)
Net asset value, end of period $9.68 $9.66 $9.70 $9.67 $ 9.77 $10.22
TOTAL RETURN
Total investment return based on net
asset value (e) 2.95% 4.71% 5.14% .53% .52% 8.20%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $3,658 $3,455 $2,997 $2,272 $2,003 $6,081
Ratio to average net assets of:
Expenses, net of waivers/reimbursements 1.40%(f) 1.53%(g) 1.40% 1.40%(f) 1.27% 1.00%(f)
Expenses, before waivers/reimbursements 2.46%(f) 3.04%(g) 3.71% 2.95%(f) 2.17% 2.20%(f)
Net investment income 5.22%(f) 4.85% 4.56% 3.98%(f) 4.41% 4.38%(f)
Portfolio turnover rate 41% 110% 15% 144% 55% 294%
</TABLE>
See footnotes on page 14.
12
ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
CLASS B
-------------------------------------------------------------------------------
SIX MONTHS
ENDED MAY 1, 1994 MAY 4,1992(b)
FEBRUARY 28, YEAR ENDED AUGUST 31, THROUGH YEAR ENDED TO
1997 ------------------------ AUGUST 31, APRIL 30, APRIL 30,
(UNAUDITED) 1996 1995 1994(a) 1994 1993
------------ ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $9.77 $9.81 $9.78 $9.88 $10.31 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c) .22(d) .41 .36 .10 .40 .38
Net realized and unrealized gain (loss) .03 (.03) .04 (.07) (.39) .33
Net increase in net asset value from
operations .25 .38 .40 .03 .01 .71
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.23) (.42) (.34) (.11) (.35) (.38)
Dividends in excess of net investment
income -0- -0- (.03) -0- (.01) -0-
Return of capital -0- -0- -0- (.02) (.08) -0-
Distributions from net realized gains -0- -0- -0- -0- -0- (.02)
Total dividends and distributions (.23) (.42) (.37) (.13) (.44) (.40)
Net asset value, end of period $9.79 $9.77 $9.81 $9.78 $ 9.88 $10.31
TOTAL RETURN
Total investment return based on net
asset value (e) 2.54% 3.89% 4.32% .28% .03% 7.22%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $6,891 $6,781 $6,380 $6,281 $7,184 $1,292
Ratios of average net assets of:
Expenses, net of waivers/reimbursements 2.10%(f) 2.23%(g) 2.10% 2.10%(f) 2.05% 1.75%(f)
Expenses, before waivers/reimbursements 3.15%(f) 3.74%(g) 4.33% 3.60%(f) 3.21% 4.81%(f)
Net investment income 4.45%(f) 4.11% 3.82% 3.22%(f) 3.12% 3.36%(f)
Portfolio turnover rate 41% 110% 15% 144% 55% 294%
</TABLE>
See footnotes on page 14.
13
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
----------------------------------------------------------------
SIX MONTHS AUGUST 2,
ENDED MAY 1,1994 1993(h)
FEBRUARY 28, YEAR ENDED AUGUST 31, THROUGH TO
1997 ------------------------ AUGUST 31, APRIL 30,
(UNAUDITED) 1996 1995 1994(a) 1994
------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $9.76 $9.80 $9.77 $9.87 $10.34
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c) .22(d) .40 .34 .10 .26
Net realized and unrealized gain (loss) .03 (.02) .06 (.07) (.42)
Net increase (decrease) in net asset
value from operations .25 .38 .40 .03 (.16)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.23) (.42) (.34) (.11) (.25)
Dividends in excess of net investment
income -0- -0- (.03) -0- (.01)
Return of capital -0- -0- -0- (.02) (.05)
Distributions from net realized gains -0- -0- -0- -0- -0-
Total dividends and distributions (.23) (.42) (.37) (.13) (.31)
Net asset value, end of period $9.78 $9.76 $9.80 $9.77 $ 9.87
TOTAL RETURN
Total investment return based on net
asset value (e) 2.54% 3.90% 4.33% .28% (1.56)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $5,880 $4,850 $5,180 $7,128 $8,763
Ratios of average net assets of:
Expenses, net of waivers/reimbursements 2.10%(f) 2.22%(g) 2.10% 2.10%(f) 2.10%(f)
Expenses, before waivers/reimbursements 3.13%(f) 3.72%(g) 4.23% 3.64%(f) 3.10%(f)
Net investment income 4.48%(f) 4.11% 3.80% 3.26%(f) 2.60%(f)
Portfolio turnover rate 41% 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) Based on average shares outstanding.
(e) 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.
(f) Annualized.
(g) Includes interest expense of .13% on reverse repurchase agreements.
(h) 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.
14
ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
BOARD OF TRUSTEES
JOHN D. CARIFA, CHAIRMAN AND PRESIDENT
RUTH BLOCK (1)
RICHARD W. COUPER (1)
WILLIAM H. FOULK, JR. (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.
The financial information herein is taken from the records of the Fund
without audit by independent accountants who do not express an opinion thereon.
15
ALLIANCE SHORT-TERM U.S. GOVERNMENT 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.
STMUSGSR
