ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
SEMI-ANNUAL REPORT
FEBRUARY 28, 1998
ALLIANCE CAPITAL
LETTER TO SHAREHOLDERS ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
April 27, 1998
Dear Shareholder:
The Alliance Short-Term U.S. Government Fund's semi-annual reporting period
closed on February 28, 1998. Since our last report dated August 31, 1997, the
U.S. bond market posted solid returns. Early in the period, the bond market
rallied on data indicating strong domestic growth and low inflation. Toward
year-end, financial turmoil which began in Southeast Asia, created a ripple
effect that spread to other global bond markets and caused an increase in
volatility.
INVESTMENT RESULTS
The following table shows how your Fund performed during the six-month period
ended February 28, 1998. For comparison purposes, we have shown returns for the
Lehman Brothers (LB) 1-3 Year Government Bond 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.
For the six-month period ended February 28, 1998 your Fund's performance
trailed that of its benchmarks. This underperformance relative to the Lehman
Brothers 1-3 Year Government Bond Index is primarily attributable to the more
conservative duration structure of the Fund. Throughout the period, longer
duration securities outperformed as interest rates declined significantly and
the yield curve flattened. In addition, lower interest rates increased
expectations of higher prepayments which detracted from mortgage returns, thus
causing the Fund to underperform the Lehman Brothers 3-Month Treasury
Bellwether Index which excludes mortgages.
INVESTMENT RESULTS*
Periods Ended February 28, 1998
TOTAL RETURNS
6 MONTHS 12 MONTHS
-------- ---------
ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
Class A 2.01% 4.34%
Class B 1.82% 3.71%
Class C 1.82% 3.72%
LB 1-3 YEAR GOVERNMENT BOND INDEX 3.52% 7.00%
LB 3-MONTH TREASURY BELLWETHER INDEX 2.63% 5.53%
* 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,
1998. 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.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
ALL COMPARATIVE INDICES ARE UNMANAGED AND REFLECT NO FEES OR EXPENSES. THE
LEHMAN BROTHERS 1-3 YEAR GOVERNMENT BOND INDEX IS COMPOSED OF U.S. GOVERNMENT
AGENCY AND TREASURY SECURITIES WITH MATURITIES OF ONE TO THREE YEARS. THE
LEHMAN BROTHERS 3-MONTH TREASURY BELLWEATHER INDEX MEASURES PERFORMANCE OF
3-MONTH TREASURY BILLS. U.S. TREASURY SECURITIES ARE GUARANTEED AS TO PRINCIPAL
AND INTEREST IF HELD TO MATURITY WHEREAS THE VALUE OF THE FUND'S SHARES WILL
FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN
THEIR ORIGINAL COST. AN INVESTOR CANNOT INVEST DIRECTLY IN THE INDICES.
ADDITIONAL INVESTMENT RESULTS APPEAR ON PAGE 3.
ECONOMIC REVIEW
The U.S. economy continued to be fundamentally strong and grew at a solid pace
over the past six months. Total growth, as measured by the Gross Domestic
Product (GDP), accelerated to 3.7% for the fourth quarter of 1997, following
the third quarter's 3.1% pace. Overall, GDP growth for 1997 was 3.8%, the
strongest growth recorded since 1988. Continued strength in the labor market
fueled economic growth and pushed the unemployment rate to its lowest level in
24 years.
1
ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
Inflation news continues to be favorable, with wage pressures remarkably absent
in such a tight labor market. Through February 1998, consumer prices increased
a modest 1.4% from year earlier levels, while producer prices were down 1.7%
for the same period.
The Federal Reserve made no change to monetary policy during the period,
despite growth remaining above trend levels. Improving inflation fundamentals,
a strong dollar, and currency devaluations in Southeast Asia, argued against an
increase in official U.S. interest rates.
BOND MARKET REVIEW
Since our last report, interest rates fell substantially, with the exception of
the shortest maturities. Inflationary pressures continued to remain benign,
fueling the bond market rally. Early in the period, yield-oriented securities
posted the largest gains. However, yield spreads widened during the fourth
quarter as investors shunned corporate issuers, particularly those with
exposure to Asia, in favor of U.S Treasury securities. Despite falling interest
rates, mortgages performed well as prepayments remained tame and volatility
declined. Performance in the short duration market was consistent with
increased supply and credit spread widening.
PORTFOLIO REVIEW
In response to the heavy supply of new issues, we added some asset-backed
securities to your Fund's portfolio at the wider spread levels. The Fund's
former Cost-of-Funds Index adjustable rate mortgage position was sold as its
price performance exceeded expectations, and the proceeds were reinvested in
Treasuries. To increase portfolio yield, cash was reinvested in floating rate
collateralized mortgage obligations.
INVESTMENT OUTLOOK
Our outlook for the U.S. remains optimistic. We expect domestic growth to slow
from its 1997 pace to a more sustainable 2.5% rate in 1998. The economic
slowing in Asia will further temper U.S. growth during the year, as exports to
that region curtail. Meanwhile, the recent decline in interest rates should
offset the anticipated economic slowdown and provide stimulus to the economy to
ensure domestic demand and continued growth. Inflation will remain subdued due
to the slowing economy, and the strength of the dollar will keep imports in
demand. The Federal Reserve is unlikely to change monetary policy in light of
the likelihood of slowing growth, the desire to keep global liquidity at high
levels, and until the economic impact from Asia becomes clearer.
Thank you for your continued interest and investment in the 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 the future.
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, 1998
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 4.34% -0.10%
Five Years 3.83% 2.94%
Since Inception* 4.51% 3.74%
SEC Yield** 5.88%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 3.71% 0.74%
Five Years 3.10% 3.10%
Since Inception* 3.76% 3.76%
SEC Yield** 5.28%
CLASS C SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 3.72% 2.73%
Since Inception* 2.86% 2.86%
SEC Yield** 5.27%
SEC AVERAGE ANNUAL TOTAL RETURNS AS OF THE MOST RECENT QUARTER-END
(DECEMBER 31, 1997)
CLASS A CLASS B CLASS C
------- ------- -------
1 Year 0.09% 0.94% 2.94%
5 Year 3.21% 3.41% n/a
Since Inception* 3.71% 3.75% 2.81%
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. SEC average annual total returns for the period
shown reflect reinvestment of all distributions and deduction of the maximum
4.25% front-end sales charge 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: 5/4/92, Class A and Class B; 8/2/93, Class C.
** Yields are for the 30 days ended February 28, 1998.
n/a: not applicable
3
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 1998 (UNAUDITED) ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) VALUE
- -------------------------------------------------------------------------------
MORTGAGE-RELATED SECURITIES-100.5%
COLLATERALIZED MORTGAGE OBLIGATIONS-52.7%
FIXED RATE-27.1%
CMC Securities Corp.
Series 1993-E Cl. ES4
5.75%, 11/25/08 $ 486 $ 483,652
Federal Home Loan Mortgage Corp.
Series 1163 Cl. H
7.50%, 12/15/19 85 85,002
Series 1289 Cl. PK
7.50%, 5/15/18 420 420,337
Series 1960 Cl. A
7.50%, 4/15/22 573 574,736
Series 1946 Cl. H
7.60%, 11/15/24 417 417,947
Federal National Mortgage Association
Series 1993-8 Cl. PD
5.75%, 4/25/13 47 46,643
ICI Funding Corp.
Series 1997-1 Cl. A2
9.00%, 3/25/28 616 634,459
Series 1997-2 Cl. 1A9
9.50%, 7/25/28 338 345,490
Imperial CMB Trust
Series 1997-2 Cl. M1
6.19%, 12/25/27 584 585,172
Prudential Home Mortgage
Securities Co., Inc.
Series 1992-29 Cl. A7
8.00%, 10/25/22 298 298,442
Residential Funding Mortgage Securities Co.
Series 1992-S31 Cl. A4
7.50%, 9/25/06 353 354,386
------------
4,246,266
ADJUSTABLE RATE-25.6%
Bear Stearns Mortgage Securities, Inc.
Series 1996-8 Cl. A7
6.16%, 11/25/27 (a) 228 227,968
Commercial Loan Funding Trust
Series I Cl. A
5.83%, 8/15/05 (a) (b) 269 268,881
Federal Home Loan Mortgage Corp.
Series 1928 Cl. F
6.19%, 12/15/24 (a) 491 493,029
Federal National Mortgage Association
Series 1993-639 Cl. F
6.01%, 8/25/16 (a) 573 574,336
Series 1997-20 Cl. F
6.15%, 3/25/27 (a) 814 811,204
Series 1992-204 Cl. FA
6.41%, 10/25/22 (a) 672 681,432
Salomon Brothers Mortgage Securities VII, Inc.
Series 1996-AFF1 Cl. A1
6.33%, 1/25/26 (a) 494 494,541
Sears Mortgage Securities Corp.
Series 1992-16B Cl. A2
7.26%, 9/25/22 (a) 457 458,940
------------
4,010,331
Total Collateralized Mortgage Obligations
(cost $8,275,918) 8,256,597
FEDERAL NATIONAL MORTGAGE ASSOCIATION-35.8%
7.34%, 12/01/24 389 397,016
7.53%, 1/01/27 (c) 397 404,252
7.71%, 7/01/25 (c) 1,364 1,404,829
7.73%, 1/01/25 574 588,588
4
ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) VALUE
- -------------------------------------------------------------------------------
7.76%, 10/01/24 (c) $ 481 $ 495,523
7.79%, 6/01/26 549 567,021
8.00%, 10/01/99 528 531,595
12.00%, 3/01/13-5/01/15 1,061 1,221,148
Total Federal National Mortgage Association
(cost $5,600,607) 5,609,972
FEDERAL HOME LOAN MORTGAGE CORP.-8.2%
7.87%, 2/01/26 (a) (c) 1,001 1,028,678
12.00%, 2/01/14 228 260,993
Total Federal Home Loan Mortgage Corp.
(cost $1,299,296) 1,289,671
FEDERAL HOME LOAN BANK-3.8%
6.07%, 12/23/02
(cost $600,187) 600 597,372
Total Mortgage-Related Securities
(cost $15,776,008) 15,753,612
ASSET BACKED SECURITIES-10.5%
Advanta Credit Card Master Trust
Series 96-C Cl. A
6.06%, 11/15/03 (a) 350 350,000
Equicon Home Equity Loan Trust Mortgage Loan
Series 1994-2 Cl. A7
6.24%, 11/18/25 (a) 405 405,404
Firstplus Home Loan Trust
Series 1997-2 Cl. A2
6.31%, 4/10/23 320 319,781
ITT Federal Bank, fsb
Series 1994 P1 Cl. A1
7.85%, 6/25/24 (a) (b) 322 327,040
The Money Store Home Equity Trust
Series 1997-C Cl. AF1
6.36%, 10/15/03 247 246,674
Total Asset Backed Securities
(cost $1,648,327) 1,648,899
U.S. GOVERNMENT OBLIGATIONS-9.9%
U.S. TREASURY NOTES-9.9%
5.38%, 1/31/00 (c) 1,000 996,560
5.63%, 10/31/99 550 550,429
Total U.S. Government Obligations
(cost $1,548,075) 1,546,989
TOTAL INVESTMENTS-120.9%
(cost $18,972,410) 18,949,500
Other assets less liabilities-(20.9%) (3,272,559)
NET ASSETS-100% $ 15,676,941
(a) Adjustable rate mortgages; stated interest rate in effect at February 28,
1998.
(b) 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 February 28, 1998,
these securities amounted to $595,921 or 3.8% of net assets.
(c) Securities, or a portion thereof, with an aggregate market value of
$3,464,466 have been segregated to collateralize reverse repurchase agreements.
See notes to financial statements.
5
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1998 (UNAUDITED) ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $18,972,410) $ 18,949,500
Cash 94,262
Interest receivable 128,127
Receivable due from Adviser 10,096
Receivable for shares of beneficial interest sold 3,800
Total assets 19,185,785
LIABILITIES
Reverse repurchase agreement 3,404,530
Dividends payable 20,119
Distribution fee payable 10,037
Payable for shares of beneficial interest redeemed 2,448
Accrued expenses 71,710
Total liabilities 3,508,844
NET ASSETS $ 15,676,941
COMPOSITION OF NET ASSETS
Shares of beneficial interest, at par $ 16
Additional paid-in capital 16,432,803
Distributions in excess of net investment income (49,727)
Accumulated net realized loss on investment transactions (675,187)
Net unrealized depreciation of investments and other assets (30,964)
$ 15,676,941
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($5,039,137/
527,200 shares of beneficial interest issued and outstanding) $9.56
Sales charge--4.25% of public offering price .42
Maximum offering price $9.98
CLASS B SHARES
Net asset value and offering price per share ($5,929,813/
611,946 shares of beneficial interest issued and outstanding) $9.69
CLASS C SHARES
Net asset value and offering price per share ($4,707,991/
486,415 shares of beneficial interest issued and outstanding) $9.68
See notes to financial statements.
6
STATEMENT OF OPERATIONS
SIX MONTHS ENDED FEBRUARY 28, 1998 (UNAUDITED)
ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
INVESTMENT INCOME
Interest $ 578,486
EXPENSES
Advisory fee $ 46,385
Distribution fee - Class A 8,662
Distribution fee - Class B 32,174
Distribution fee - Class C 23,289
Custodian 47,827
Transfer agency 19,443
Registration 18,772
Audit and legal 17,584
Printing 12,063
Trustees' fees 9,531
Miscellaneous 782
Total expenses 236,512
Less: expenses waived and reimbursed
by Adviser (See Note B) (79,615)
Net expenses 156,897
Interest expense 17,961
Total expenses including interest expense 174,858
Net investment income 403,628
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss on investment transactions (58,382)
Net change in unrealized depreciation of
investments and other assets (29,206)
Net loss on investments (87,588)
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 316,040
See notes to financial statements.
7
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
SIX MONTHS ENDED YEAR ENDED
FEB. 28, 1998 AUG. 31,
(UNAUDITED) 1997
---------------- ------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 403,628 $ 712,010
Net realized gain (loss) on
investment transactions (58,382) 41,888
Net change in unrealized depreciation
of investments and other assets (29,206) 5,742
Net increase in net assets from operations 316,040 759,640
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (155,209) (175,837)
Class B (150,470) (293,780)
Class C (109,054) (234,511)
Tax return of capital
Class A -0- (25,833)
Class B -0- (43,161)
Class C -0- (34,454)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase 403,907 333,768
Total increase 305,214 285,832
NET ASSETS
Beginning of year 15,371,727 15,085,895
End of period $ 15,676,941 $ 15,371,727
See notes to financial statements.
8
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1998 (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 3% 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 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, 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 are valued at the
last sale price on such exchange on the day of valuation or, 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 are valued at the
mean of the closing bid and asked prices 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 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. 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 discount 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 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 than Class A. Expenses of the Trust are
charged to each Fund in proportion to settled shares.
5. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date.
Income and capital gains distributions are determined in accordance with
federal tax regulations and may differ from those determined in accordance with
generally accepted accounting principles. To the extent these differences are
permanent, such amounts are reclassified within the capital accounts based on
their federal tax basis treatment; temporary differences, do not require such
reclassification.
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 "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 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, 1998, such
reimbursement amounted to $79,615.
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 $10,875 for the six months ended February 28, 1998.
Alliance Fund Distributors, Inc., (the "Distributor"), a wholly-owned
subsidiary of the Adviser, serves as the Distributor of the Fund's shares. The
Distributor received front-end sales charges of $3,433 from the sales of Class
A shares and $68,787, $11,715, and $1,867 in contingent deferred sales charges
imposed upon redemptions by shareholders of Class A, Class B and Class C
shares, respectively, for the six months ended February 28, 1998.
Accrued expenses includes $12,310 owed to a Trustee 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 Plans, 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 Fund is not obligated under the Plans to pay any distribution services fee
in excess of the amounts set forth above. The purpose of the payments to the
Distributor under the Plans is to compensate the Distributor for its
distribution services with respect to the sale of the Fund's 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 Plans are characterized by the
staff of the Commission as being of the "compensation" variety.
In the event that a Plan is terminated or not continued, no distribution
services fees (other than current amounts accrued but not yet paid) would be
owed by the Fund to the Distributor with respect to the relevant class.
The Plans also provide 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 $3,463,106 and $2,020,564,
respectively, for the six months ended February 28, 1998. There were purchases
of $12,468,867 and sales of $9,396,193 of U.S. government and government agency
obligations for the six months ended February 28, 1998.
At February 28, 1998, the cost of investments for federal income tax purposes
was the same as the cost for financial reporting purposes. Accordingly, gross
unrealized appreciation of investments was $32,079 and gross unrealized
depreciation of investments was $54,989 resulting in net unrealized
depreciation of $22,910.
At August 31, 1997, the Fund had net capital loss carryforward of $616,804 of
which $44,110 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
10
ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
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.
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, 1998 AUGUST 31, FEB. 28, 1998 AUGUST 31,
(UNAUDITED) 1997 (UNAUDITED) 1997
------------ ------------ -------------- --------------
CLASS A
Shares sold 2,270,810 271,217 $ 21,799,931 $ 2,618,771
Shares issued in
reinvestment of
dividends 9,375 15,376 89,933 148,473
Shares converted
from Class B 18,733 16,392 179,617 158,206
Shares redeemed (2,177,004) (255,414) (20,890,917) (2,466,879)
Net increase 121,914 47,571 $ 1,178,564 $ 458,571
CLASS B
Shares sold 400,444 658,962 $ 3,890,639 $ 6,439,331
Shares issued in
reinvestment of
dividends 11,224 24,392 109,102 238,244
Shares converted
to Class A (18,492) (16,203) (179,617) (158,206)
Shares redeemed (444,296) (698,307) (4,315,029) (6,822,354)
Net decrease (51,120) (31,156) $ (494,905) $ (302,985)
CLASS C
Shares sold 198,803 434,159 $ 1,929,608 $ 4,238,239
Shares issued in
reinvestment of
dividends 9,685 18,955 94,018 184,964
Shares redeemed (237,191) (435,115) (2,303,378) (4,245,021)
Net increase (decrease) (28,703) 17,999 $ (279,752) $ 178,182
11
NOTES TO FINANCIAL STATEMENTS (CONT.)
ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
NOTE F: 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 February 28, 1998, the Fund had entered into the following reverse
repurchase agreements:
AMOUNT BROKER INTEREST RATE MATURITY
- ------------ --------------- ------------- -------------
$ 17,730,000 Morgan Stanley 5.78% March 2, 1998
$180,273,500 Lehman Brothers 5.40% March 3, 1998
$107,415,000 Morgan Stanley 5.70% March 5, 1998
For the six months ended February 28, 1998, the maximum amount of reverse
repurchase agreements outstanding was $3,134,125, the average amount
outstanding was approximately $1,492,389, and the daily weighted average
interest rate was 5.63%.
12
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 MAY 4,
ENDED MAY 1, 1994 1992(B)
FEB. 28, YEAR ENDED AUGUST 31, THROUGH YEAR ENDED TO
1998 ------------------------------------ AUG. 31, APRIL 30, APRIL 30,
(UNAUDITED) 1997 1996 1995 1994(A) 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.63 $ 9.66 $ 9.70 $ 9.67 $ 9.77 $10.22 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c) .25(d) .47(d) .47 .42 .14 .35 .46
Net realized and unrealized gain (loss)
on investment transactions (.06) .03 (.02) .05 (.09) (.29) .34
Net increase in net asset value
from operations .19 .50 .45 .47 .05 .06 .80
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.26) (.46) (.49) (.41) (.12) (.42) (.46)
Dividends in excess of net
investment income -0- -0- -0- (.03) -0- (.01) -0-
Tax return of capital -0- (.07) -0- -0- (.03) (.08) -0-
Distributions from net realized gains -0- -0- -0- -0- -0- -0- (.12)
Total dividends and distributions (.26) (.53) (.49) (.44) (.15) (.51) (.58)
Net asset value, end of period $ 9.56 $ 9.63 $ 9.66 $ 9.70 $ 9.67 $ 9.77 $10.22
TOTAL RETURN
Total investment return based on
net asset value (e) 2.01% 5.29% 4.71% 5.14% .53% .52% 8.20%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $5,039 $3,901 $3,455 $2,997 $2,272 $2,003 $6,081
Ratios to average net assets of:
Expenses, net of waivers/reimbursements 1.40%(f) 1.40% 1.40% 1.40% 1.40%(f) 1.27% 1.00%(f)
Interest expense on reverse
repurchase agreements .21%(f) .01% .13% -0- -0- -0- -0-
Expenses, before waivers/reimbursements 2.34%(f) 2.42% 3.04% 3.71% 2.95%(f) 2.17% 2.20%(f)
Net investment income 4.91%(f) 4.90% 4.85% 4.56% 3.98%(f) 4.41% 4.38%(f)
Portfolio turnover rate 68% 65% 110% 15% 144% 55% 294%
</TABLE>
See footnotes on page 15.
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 B
------------------------------------------------------------------------------------------
SIX MONTHS MAY 4,
ENDED MAY 1, 1994 1992(B)
FEB. 28, YEAR ENDED AUGUST 31, THROUGH YEAR ENDED TO
1998 ------------------------------------ AUG. 31, APRIL 30, APRIL 30,
(UNAUDITED) 1997 1996 1995 1994(A) 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.74 $ 9.77 $ 9.81 $ 9.78 $ 9.88 $10.31 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c) .23(d) .41(d) .41 .36 .10 .40 .38
Net realized and unrealized gain (loss)
on investment transactions (.05) .02 (.03) .04 (.07) (.39) .33
Net increase in net asset value
from operations .18 .43 .38 .40 .03 .01 .71
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.23) (.39) (.42) (.34) (.11) (.35) (.38)
Dividends in excess of net
investment income -0- -0- -0- (.03) -0- (.01) -0-
Tax return of capital -0- (.07) -0- -0- (.02) (.08) -0-
Distributions from net realized gains -0- -0- -0- -0- -0- -0- (.02)
Total dividends and distributions (.23) (.46) (.42) (.37) (.13) (.44) (.40)
Net asset value, end of period $ 9.69 $ 9.74 $ 9.77 $ 9.81 $ 9.78 $ 9.88 $10.31
TOTAL RETURN
Total investment return based on
net asset value (e) 1.82% 4.45% 3.89% 4.32% .28% .03% 7.22%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $5,930 $6,458 $6,781 $6,380 $6,281 $7,184 $1,292
Ratios to average net assets of:
Expenses, net of waivers/reimbursements 2.10%(f) 2.10% 2.10% 2.10% 2.10%(f) 2.05% 1.75%(f)
Interest expense on reverse
repurchase agreements .21%(f) .01% .13% -0- -0- -0- -0-
Expenses, before waivers/reimbursements 3.04%(f) 3.10% 3.74% 4.33% 3.60%(f) 3.21% 4.81%(f)
Net investment income 4.21%(f) 4.13% 4.11% 3.82% 3.22%(f) 3.12% 3.36%(f)
Portfolio turnover rate 68% 65% 110% 15% 144% 55% 294%
</TABLE>
See footnotes on page 15.
14
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(G)
FEB. 28, YEAR ENDED AUG. 31, THROUGH TO
1998 ------------------------------------ AUG. 31, APRIL 30,
(UNAUDITED) 1997 1996 1995 1994(A) 1994
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.73 $ 9.76 $ 9.80 $ 9.77 $ 9.87 $10.34
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c) .22(d) .41(d) .40 .34 .10 .26
Net realized and unrealized gain (loss)
on investment transactions (.04) .02 (.02) .06 (.07) (.42)
Net increase (decrease) in net asset value
from operations .18 .43 .38 .40 .03 (.16)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.23) (.39) (.42) (.34) (.11) (.25)
Dividends in excess of net
investment income -0- -0- -0- (.03) -0- (.01)
Tax return of capital -0- (.07) -0- -0- (.02) (.05)
Total dividends and distributions (.23) (.46) (.42) (.37) (.13) (.31)
Net asset value, end of period $ 9.68 $ 9.73 $ 9.76 $ 9.80 $ 9.77 $ 9.87
TOTAL RETURN
Total investment return based on
net asset value (e) 1.82% 4.45% 3.90% 4.33% .28% (1.56)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $4,708 $5,012 $4,850 $5,180 $7,128 $8,763
Ratios to average net assets of:
Expenses, net of waivers/reimbursements 2.10%(f) 2.10% 2.10% 2.10% 2.10%(f) 2.10%(f)
Interest expense on reverse
repurchase agreements .21%(f) .01% .12% -0- -0- -0-
Expenses, before waivers/reimbursements 3.06%(f) 3.09% 3.72% 4.23% 3.64%(f) 3.10%(f)
Net investment income 4.21%(f) 4.15% 4.11% 3.80% 3.26%(f) 2.60%(f)
Portfolio turnover rate 68% 65% 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) 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.
15
ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
BOARD OF TRUSTEES
JOHN D. CARIFA, CHAIRMAN AND PRESIDENT
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
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.
16
THE ALLIANCE FAMILY OF MUTUAL FUNDS
_______________________________________________________________________________
FIXED INCOME
Alliance Bond Fund
U.S. Government Portfolio
Corporate Bond Portfolio
Alliance Global Dollar Government Fund
Alliance Global Strategic Income Trust
Alliance High Yield Fund
Alliance Mortgage Securities Income Fund
Alliance Limited Maturity Government Fund
Alliance Multi-Market Strategy Trust
Alliance North American Government Income Trust
Alliance Short-Term Multi-Market Trust
Alliance Short-Term U.S. Government Fund
Alliance World Income Trust
TAX-FREE INCOME
Alliance Municipal Income Fund
California Portfolio
Insured California Portfolio
Insured National Portfolio
National Portfolio
New York Portfolio
Alliance Municipal Income Fund II
Arizona Portfolio
Florida Portfolio
Massachusetts Portfolio
Michigan Portfolio
Minnesota Portfolio
New Jersey Portfolio
Ohio Portfolio
Pennsylvania Portfolio
Virginia Portfolio
MONEY MARKET
AFD Exchange Reserves
GROWTH
The Alliance Fund
Alliance Global Environment Fund
Alliance Growth Fund
Alliance Premier Growth Fund
Alliance/Regent Sector Opportunity Fund
GROWTH & INCOME
Alliance Strategic Balanced Fund
Alliance Balanced Shares
Alliance Conservative Investors Fund
Alliance Growth & Income Fund
Alliance Growth Investors Fund
Alliance Income Builder Fund
Alliance Real Estate Investment Fund
Alliance Utility Income Fund
AGGRESSIVE GROWTH
Alliance Global Small Cap Fund
Alliance Quasar Fund
Alliance Technology Fund
INTERNATIONAL
Alliance All-Asia Investment Fund
Alliance Greater China '97 Fund
Alliance International Fund
Alliance New Europe Fund
Alliance Worldwide Privatization Fund
CLOSED-END FUNDS
Alliance All-Market Advantage Fund
ACM Government Income Fund
ACM Government Opportunity Fund
ACM Government Securities Fund
ACM Government Spectrum Fund
ACM Managed Dollar Income Fund
ACM Managed Income Fund
ACM Municipal Securities Income Fund
Alliance World Dollar Government Fund
Alliance World Dollar Government Fund II
The Austria Fund
The Korean Investment Fund
The Spain Fund
The Southern Africa Fund
CASH MANAGEMENT SERVICES
ACM Institutional Reserves
Government Portfolio
Prime Portfolio
Tax-Free Portfolio
Trust Portfolio
Alliance Capital Reserves
Alliance Government Reserves
Alliance Insured Account
Alliance Money Reserves
Alliance Municipal Trust
California Portfolio
Connecticut Portfolio
Florida Portfolio
General Portfolio
Massachusetts Portfolio
New Jersey Portfolio
New York Portfolio
Virginia Portfolio
Alliance Treasury Reserves
Alliance Money Market Fund
Prime Portfolio
Government Portfolio
General Municipal Portfolio
17
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
