U.S. GOVERNMENT FIXED INCOME
[GRAPHIC OMITTED]
Alliance Short-Term
U.S. Government
Fund
Semi-Annual Report
February 29, 2000 (unaudited)
AllianceCapital[LOGO](R)
The Investment Professional's Choice
<PAGE>
Investment Products Offered
---------------------------
o Are Not FDIC Insured
o May Lose Value
o Are Not Bank Guaranteed
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LETTER TO SHAREHOLDERS
LETTER TO SHAREHOLDERS
April 13, 2000
Dear Shareholder:
This report provides the performance for the Alliance Short-Term U.S. Government
Fund (the "Fund").
Investment Performance
The following table provides performance for your Fund as well as its benchmark
indexes, as represented by the Lehman Brothers 1-3 Year Government Bond Index
(broad-based index) and the Lehman Brothers 3-Month Treasury Bellwether Index
(narrow-based index), for the six- and twelve-month periods ended February 29,
2000.
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INVESTMENT RESULTS*
Periods Ended February 29, 2000
-----------------------
Total Returns
-----------------------
6 months 12 months
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Alliance Short-Term
U.S. Government
Fund
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Class A 2.30% 3.66%
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Class B 1.97% 2.80%
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Class C 1.98% 2.81%
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Lehman Brothers
1-3 Year
Government
Bond Index 1.87% 3.72%
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Lehman Brothers
3-Month Treasury
Bellwether
Index 2.62% 5.10%
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* The Fund's investment results represent total returns and are based on the
net asset value as of February 29, 2000. 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 include the reinvestment of any
distributions paid during the period. Past performance is no guarantee of
future results.
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 Bellwether 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 pages 3-7.
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During the six-month period ended February 29, 2000, your Fund outperformed the
Lehman Brothers 1-3 Year Government Bond Index as shorter duration securities
outperformed during the period due to rising interest rates. Our decision to
shorten the duration of the Fund and stronger performance from our use of
mortgage-backed and asset-backed securities (non-benchmark securities) allowed
us to outperform the longer duration benchmark. However, the Fund underperformed
the shorter duration Lehman Brothers 3-Month Treasury Bellwether Index during
the six-month period. Short term Treasuries outperformed spread sectors due to
the prospect of further interest rate increases by the U.S. Federal Reserve.
During the twelve-month period, your Fund underper-
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ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND o 1
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LETTER TO SHAREHOLDERS
[PHOTO OMITTED] [PHOTO OMITTED]
John D. Carifa Jeffrey S. Phlegar
Portfolio Manager, Jeffrey S. Phlegar, is a vice president with over 14 years of
investment experience.
formed both benchmarks as a result of the Fund's exposure to non-Treasury
securities. The weak performance in non-Treasury securities early in the period
reflected a marked increase in the risk premium that investors demanded to own
assets other than U.S. Treasuries. The combination of higher interest rates,
large new supply and Y2K concerns created an environment where spread products
widened as investors sat on the sidelines anticipating market stability.
Sincerely,
/s/ John D. Carifa
John D. Carifa
Chairman and President
/s/ Jeffrey S. Phlegar
Jeffrey S. Phlegar
Vice President
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2 o ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
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PERFORMANCE UPDATE
PERFORMANCE UPDATE
ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
GROWTH OF A $10,000 INVESTMENT
5/31/92* TO 2/29/00
[LINE CHART OMITTED]
This chart illustrates the total value of an assumed $10,000 investment in
Alliance Short-Term U.S. Government Fund Class A shares (from 5/31/92 to
2/29/00) as compared to the performance of an appropriate broad-based index and
a narrow-based index. The chart reflects the deduction of the maximum 4.25%
sales charge from the initial $10,000 investment in the Fund and assumes the
reinvestment of dividends and capital gains. 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 3-Month Treasury Bellwether Index measures
performance of 3-month U.S. 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.
The unmanaged 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.
When comparing Alliance Short-Term U.S. Government Fund to the indices shown
above, you should note that no charges or expenses are reflected in the
performance of the indices.
* Closest month-end after Fund's Class A share inception date of 5/4/92.
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ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND o 3
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PERFORMANCE UPDATE
PERFORMANCE UPDATE
ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
HISTORY OF RETURNS
YEARLY PERIODS ENDED 2/29
[BAR CHART OMITTED]
Past performance is no guarantee of future results. The Fund's investment
results represent total returns for Class A shares and are based on net asset
value. All fees and expenses related to the operation of the Fund have been
deducted. Returns for the Fund include the reinvestment of any distributions
paid during the period. The Lehman Brothers 3-Month Treasury Bellwether 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. The index is unmanaged and reflects
no fees or expenses. An investor cannot invest directly in an index, and its
results are not indicative of any specific investment, including the Alliance
Short-Term U.S. Government Fund.
* Fund returns for the period ended 2/28/93 are from the Fund's inception
date of 5/4/92 through 2/28/93. Benchmark returns for the period ended
2/28/93 are from 4/30/92 through 2/28/93.
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4 o ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
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PORTFOLIO SUMMARY
PORTFOLIO SUMMARY
February 29, 2000 (unaudited)
INCEPTION DATE PORTFOLIO STATISTICS
5/4/92 Assets ($mil): $33.1
[The following table was depicted as a pie chart in the printed materials.]
SECURITY TYPE BREAKDOWN
o 36.75% CMO/ABS
o 20.55% FHLMC/CMO
o 17.19% FNMA
o 14.28% FHLMC
o 6.83% FNMA/CMO
o 2.87% GNMA
o 1.25% USGOVT
o 0.28% REPO
All data as of February 29, 2000. Security type breakdown may vary over time.
This breakdown is expressed as a percentage of total investments.
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ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND o 5
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INVESTMENT OBJECTIVE & POLICIES
and INVESTMENT RESULTS
INVESTMENT OBJECTIVE & POLICIES
Alliance Short-Term U.S. Government Fund seeks high current income consistent
with the preservation of capital and invests primarily in a diversified
portfolio of U.S. government securities.
INVESTMENT RESULTS
NAV AND SEC AVERAGE ANNUAL TOTAL RETURNS
AS OF FEBRUARY 29, 2000
Class A Shares
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Without Sales Charge With Sales Charge
1 Year 3.66% -0.78%
5 Years 4.56% 3.65%
Since Inception* 4.32% 3.74%
SEC Yield** 5.34%
Class B Shares
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Without Sales Charge With Sales Charge
1 Year 2.80% -0.14%
5 Years 3.81% 3.81%
Since Inception*(a) 3.73% 3.73%
SEC Yield** 4.98%
Class C Shares
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Without Sales Charge With Sales Charge
1 Year 2.81% 1.83%
5 Years 3.79% 3.79%
Since Inception* 2.89% 2.89%
SEC Yield** 4.96%
The Fund's investment results represent average annual total returns. The NAV
and SEC returns reflect reinvestment of dividends and/or capital gains
distributions in additional shares without (NAV) and with (SEC) the effect of
the 4.25% maximum front-end sales charge for Class A or applicable contingent
deferred sales charge for Class B (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.
** SEC yields are based on SEC guidelines and are calculated on 30 days ended
February 29, 2000.
(a) Assumes conversion of Class B shares into Class A shares after six years.
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6 o ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
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INVESTMENT RESULTS
SEC AVERAGE ANNUAL TOTAL RETURNS
AS OF THE MOST RECENT QUARTER-END
(MARCH 31, 2000)
Class A Class B Class C
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1 Year -0.99% -0.36% 1.61%
5 Years 3.60% 3.78% 3.76%
Since Inception* 3.73% 3.72%(a) 2.89%
The Fund's investment results represent average annual total returns. The NAV
and SEC returns reflect reinvestment of dividends and/or capital gains
distributions in additional shares without (NAV) and with (SEC) the effect of
the 4.25% maximum front-end sales charge for Class A or applicable contingent
deferred sales charge for Class B (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.
(a) Assumes conversion of Class B shares into Class A shares after six years.
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ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND o 7
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PORTFOLIO OF INVESTMENTS
PORTFOLIO OF INVESTMENTS
February 29, 2000 (unaudited)
Principal
Amount
(000) U.S. $ Value
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Mortgage Related Securities-90.3%
Collateralized Mortgage Obligations-48.8%
Fixed Rate-30.6%
Federal Home Loan Mortgage Corp. .............
Series 1997-80 Cl. DA 6.50%, 3/18/24 ...... $ 1,199 $ 1,164,706
Series 2047 Cl. WA 6.80%, 8/15/26 ......... 722 693,004
Series 2012 Cl. A 6.90%, 4/15/26 .......... 1,143 1,105,836
Series 1445 Cl. J 7.00%, 9/15/06-3/15/25 . 3,286 3,253,118
Series 2072 Cl. CA 7.50%, 10/15/27 ........ 350 340,846
Series 2194 Cl. CQ 8.00%, 12/15/27 ........ 970 960,427
12.00%, 10/01/09-6/01/10 .................. 526 567,169
Federal National Mortgage Association
Series 1996-68 Cl. B 6.50%, 5/18/17 ....... 186 185,093
Series 1997-24 Cl. C 7.00%, 9/18/22-5/18/25 1,011 992,967
Fireman's Fund Mortgage Corp. ................
Series 1988-2 Cl. Z 9.40%, 7/01/18 ........ 818 854,969
ICI Funding Corp. ............................
Series 1997-2 Cl. 1A9 9.50%, 7/25/28 ...... 20 20,390
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10,138,525
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Adjustable Rate-18.2%
Commercial Loan Funding Trust
Series I Cl. A 6.30%, 8/15/05(a)(b) ........ 72 71,555
Credit Suisse First Boston Mortgage
Series 1998-FL2AC Cl. C 7.03%, 8/15/01(a) .. 1,200 1,198,128
Federal Home Loan Mortgage Corp. ..............
Series 1928 Cl. F 6.44%, 12/15/24(a) ....... 123 122,904
Federal National Mortgage Association
Series 1993-639 Cl. F 6.22%, 8/25/16(a) .... 203 203,151
Series 1992-204 Cl. FA 6.63%, 10/25/22(a) .. 307 310,126
Federal National Mortgage Association Remic
Series 1993-95 Cl. FA 6.63%, 6/25/08(a) .... 1,028 1,035,691
Imperial CMB Trust
Series 1997-2 Cl. M1 6.38%, 12/25/27(a) .... 119 118,161
Mall Asset Realty Trust
Series 1999-1A Cl. A 6.26%, 12/13/01(a)(b) . 900 900,279
Merrill Lynch Mortgage Investors, Inc. ........
Series 1998-ASP1 Cl. B 6.70%, 10/01/03(a)(b) 900 901,971
Salomon Brothers Mortgage Securities VII, Inc.
Series 1996-AFF1 Cl. A1 6.34%, 1/25/26(a) .. 217 217,123
Series 1999-NCY Cl. A 6.28%, 9/25/29(a) .... 943 943,029
-----------
6,022,118
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Total Collateralized Mortgage Obligations
(cost $16,437,224) ......................... 16,160,643
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8 o ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
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PORTFOLIO OF INVESTMENTS
Principal
Amount
(000) U.S. $ Value
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Federal National Mortgage Association-20.8%
7.13%, 7/01/25(a) ........................ $ 570 $ 582,676
7.15%, 5/01/27(a) ........................ 41 41,379
7.19%, 6/01/26(a) ........................ 168 171,284
7.31%, 11/01/26(a) ....................... 202 206,952
7.32%, 9/01/27(a) ........................ 151 154,005
7.50%, 3/25/15 ........................... 1,780 1,786,265
8.00%, 3/25/30 ........................... 2,900 2,904,524
10.00%, 10/01/14 ......................... 968 1,018,610
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Total Federal National Mortgage Association
(cost $6,850,755) ........................ 6,865,695
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Federal Home Loan Mortgage Corp.-17.2%
6.76%, 1/01/28(a)(c) ..................... 1,143 1,136,629
7.06%, 2/01/26(a) ........................ 384 392,737
7.10%, 9/01/26(a)(c) ..................... 899 917,267
7.14%, 5/01/24(a)(c) ..................... 1,486 1,515,689
7.97%, 4/01/27(a) ........................ 1,600 1,636,000
12.00%, 2/01/14 .......................... 94 103,361
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Total Federal Home Loan Mortgage Corp. ......
(cost $5,735,422) ........................ 5,701,683
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Government National Mortgage Association-3.5%
6.13%, 11/20/26-12/20/26
(cost $1,154,569) ........................ 1,139 1,147,408
-----------
Total Mortgage-Related Securities
(cost $30,177,970) ....................... 29,875,429
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Asset Backed Securities-28.6%
Aames Mortgage Trust
Series 1999-1 Cl. AV 6.28%, 7/15/29(a) ... 895 894,375
Access Financial Mortgage Loan Trust
Series 1997-3 Cl. A7 6.08%, 10/18/27(a) .. 137 136,026
Advanta Credit Card Master Trust
Series 1996-C Cl. A 6.24%, 11/15/03(a) ... 350 350,000
Advanta Mortgage Loan Trust
Series 1998-1 Cl. A7 6.09%, 3/25/28(a) ... 349 348,283
Amresco Residential Securities Mortgage
Loan Trust
Series 1998-3 Cl. A7 6.12%, 7/25/28(a) ... 393 391,821
Bear Stearns Mortgage Securities, Inc. ......
Series 1999-1 Cl. AV1 6.24%, 4/25/29(a) .. 999 998,752
Contimortgage Home Equity Loan Trust
Series 1998-2 Cl. A3 6.13%, 3/15/13 ...... 935 930,787
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ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND o 9
<PAGE>
PORTFOLIO OF INVESTMENTS
Principal
Amount
(000) U.S. $ Value
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Countrywide Home Equity Loan Trust
Series 1998-Cl. CTFS 6.07%, 10/15/24(a) ..... $ 282 $ 280,515
IMC Home Equity Loan Trust
Series 1998-3 Cl. A3 6.16%, 5/20/14 ......... 436 432,747
ITT Federal Bank, FSB
Series 1994-P1 Cl. A1 7.02%, 6/25/24(a)(b) .. 93 93,190
Ocwen Mortgage Loan Certificates
Series 1998-OFS3 Cl. A 6.25%, 10/25/29(a) ... 671 670,803
Onyx Acceptance Owner Trust
Series 1999-C Cl. A1 5.65%, 9/15/00 ......... 27 26,812
Peco Energy Transition Trust
Series 1999-A Cl. A5 6.09%, 3/01/09(a) ...... 800 797,000
Residential Accredit Loan, Inc. ................
Series 1997-QS10 Cl. A1 7.25%, 10/25/27 ..... 920 914,598
Residential Funding Mortgage Securities I
Series 1997-HS2 Cl. A 6.03%, 9/20/22(a) ..... 341 339,276
Saxon Asset Securities Trust
Series 1998-2 Cl. AV1 6.04%, 2/25/28(a) ..... 346 344,703
SLM Student Loan Trust
Series 2000-1 Cl. A11 6.17%, 10/27/08 ....... 1,500 1,500,000
------------
Total Asset Backed Securities
(cost $9,469,574) ........................... 9,449,688
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U.S. Government Obligation-1.5%
U.S. Treasury Note
6.38%, 1/31/02
(cost $497,556) ............................. 500 498,280
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Repurchase Agreement-0.3%
State Street Bank and Trust Co. ................
5.72%, dated 2/29/00, $111,018 due 3/1/00,
collateralized by $115,000, FNMA
6.00%, 9/24/01
(cost $111,000) ............................. 111 111,000
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Total Investments-120.7%
(cost $40,256,100) .......................... 39,934,397
Other assets less liabilities-(20.7%) .......... (6,842,876)
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Net Assets-100% ................................ $ 33,091,521
------------
(a) Adjustable rate mortgages; stated interest rate in effect at February 29,
2000.
(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 29,
2000, these securities amounted to $1,966,995 or 5.9% of net assets.
(c) Securities, or a portion thereof, with an aggregate market value of
$3,569,585 have been segregated to collateralize reverse repurchase
agreement. See notes to financial statements.
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10 o ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
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STATEMENT OF ASSETS & LIABILITIES
STATEMENT OF ASSETS & LIABILITIES
February 29, 2000 (unaudited)
Assets
Investments in securities, at value (cost $40,145,100) .. $ 39,823,397
Repurchase agreement (cost $111,000) .................... 111,000
Cash .................................................... 474
Receivable for shares of beneficial interest sold ....... 673,998
Interest receivable ..................................... 337,784
Initial margin deposit on futures contracts ............. 60,750
Receivable for investment securities sold ............... 14,977
Variation margin receivable on futures contracts ........ 3,797
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Total assets ............................................ 41,026,177
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Liabilities
Payable for investment securities purchased ............. 4,678,290
Reverse repurchase agreement ............................ 2,831,755
Payable for shares of beneficial interest redeemed ...... 311,293
Dividends payable ....................................... 34,426
Distribution fee payable ................................ 22,455
Management fee payable .................................. 2,019
Accrued expenses ........................................ 54,418
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Total liabilities ....................................... 7,934,656
------------
Net Assets .............................................. $ 33,091,521
============
Composition of Net Assets
Shares of beneficial interest, at par ................... $ 36
Additional paid-in capital .............................. 34,776,475
Distributions in excess of net investment income ........ (96,227)
Accumulated net realized loss on investments,
futures and options transactions ..................... (1,255,253)
Net unrealized depreciation of investments,
futures transactions, and other liabilities .......... (333,510)
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$ 33,091,521
============
Calculation of Maximum Offering Price
Class A Shares
Net asset value and redemption price per share
($9,545,553 / 1,035,224 shares of beneficial interest
issued and outstanding) .............................. $ 9.22
Sales charge-4.25% of public offering price ............. .41
------------
Maximum offering price .................................. $ 9.63
============
Class B Shares
Net asset value and offering price per share
($17,960,953 / 1,917,648 shares of beneficial interest
issued and outstanding) .............................. $ 9.37
============
Class C Shares
Net asset value and offering price per share
($5,585,015 / 597,523 shares of beneficial interest
issued and outstanding) .............................. $ 9.35
============
See notes to financial statements.
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ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND o 11
<PAGE>
STATEMENT OF OPERATIONS
STATEMENT OF OPERATIONS
Six Months Ended February 29, 2000 (unaudited)
Investment Income
Interest ................................ $ 1,310,018
Expenses
Advisory fee ............................ $ 107,595
Distribution fee - Class A .............. 14,997
Distribution fee - Class B .............. 105,013
Distribution fee - Class C .............. 40,622
Custodian ............................... 44,157
Transfer agency ......................... 40,361
Audit and legal ......................... 32,295
Registration ............................ 15,178
Printing ................................ 10,025
Trustees' fees .......................... 5,375
Miscellaneous ........................... 2,605
-----------
Total expenses .......................... 418,223
Less: expenses waived by Adviser
(see Note B) ......................... (42,365)
-----------
Net expenses ............................ 375,858
Interest expense ........................ 26,545
-----------
Total expenses including interest expense 402,403
-----------
Net investment income ................... 907,615
-----------
Realized and Unrealized Gain (Loss)
on Investments
Net realized loss on investment
transactions ......................... (236,777)
Net realized gain on futures transactions 94,586
Net realized gain on options transactions 2,968
Net change in unrealized
appreciation/depreciation of:
Investments ........................ 49,175
Futures transactions ............... (33,079)
Other liabilities .................. 1,591
-----------
Net loss on investments ................. (121,536)
-----------
Net Increase in Net Assets
from Operations ...................... $ 786,079
===========
See notes to financial statements.
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12 o ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
STATEMENT OF CHANGES
IN NET ASSETS
Six Months Ended Year Ended
February 29, 2000 August 31,
(unaudited) 1999
------------- ------------
Increase (Decrease) in Net Assets
from Operations
Net investment income ........................ $ 907,615 $ 1,374,073
Net realized loss on investments, futures
and options transactions .................. (139,223) (365,395)
Net change in unrealized
appreciation/depreciation of investments,
futures transactions, and other liabilities 17,687 (320,750)
------------ ------------
Net increase in net assets from operations ... 786,079 687,928
Dividends and Distributions to
Shareholders from:
Net investment income
Class A ................................... (266,441) (380,166)
Class B ................................... (481,293) (687,009)
Class C ................................... (187,500) (306,898)
Tax return of capital
Class A ................................... -0- (16,138)
Class B ................................... -0- (29,164)
Class C ................................... -0- (13,028)
Transactions in Shares of
Beneficial Interest
Net increase (decrease) ...................... (4,079,631) 16,628,915
------------ ------------
Total increase (decrease) .................... (4,228,786) 15,884,440
Net Assets
Beginning of year ............................ 37,320,307 21,435,867
------------ ------------
End of period ................................ $ 33,091,521 $ 37,320,307
============ ============
See notes to financial statements.
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ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND o 13
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS
February 29, 2000 (unaudited)
NOTE A
Significant Accounting Policies
Alliance Short-Term U.S. Government Fund (the "Fund"), a series of The Alliance
Portfolios (the "Trust"), 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 may 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 ex change 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 mean of the bid and asked prices on that day's closing.
Securities traded on the over-the-counter market are valued at the mean of the
current bid and asked prices reported by NASDAQ, the National Quotation Bureau
or other comparable sources deemed appropriate to reflect the fair market value
thereof. 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 the Trustees. Fixed income
securities may be valued on the basis of prices provided by a pricing service
when such prices are believed to reflect the fair market value of such
securities.
Mortgage backed and asset backed securities may be valued at prices obtained
from a bond pricing service or at a price obtained from one or more of the major
broker/dealers in such securities. In cases where broker/dealer quotes are
obtained, the Adviser may establish procedures whereby changes in market yields
or spreads are used to adjust, on a daily basis, a recently obtained quoted bid
price on a security.
- --------------------------------------------------------------------------------
14 o ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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. The Fund accretes discount as an
adjustment to interest income. In vestment gains and losses are determined on
the identified cost basis.
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 shares. 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 dividends 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.
6. 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
equal to 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.
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 waive its fees and bear certain expenses
to the extent necessary to limit total operating expenses on an annual basis to
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
- --------------------------------------------------------------------------------
ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND o 15
<PAGE>
NOTES TO FINANCIAL STATEMENTS
months ended February 29, 2000, such waiver amounted to $42,365.
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 $22,580 for the six months ended February 29, 2000.
For the six months ended February 29, 2000, the Fund's expenses were reduced by
$999 under an expense offset arrangement with Alliance Fund Services, Inc.
Alliance Fund Distributors, Inc., (the "Distributor"), a wholly-owned subsidiary
of the Adviser, serves as the Distributor of the Fund's shares. The Distributor
has advised the Fund that it has received $62,936, and $9,244 in contingent
deferred sales charges imposed upon redemptions by share holders of Class B and
Class C shares, respectively, for the six months ended February 29, 2000.
Accrued expenses includes $16,033 owed to a Trustee under the Trust's deferred
compensation plan.
NOTE C
Distribution Plans
The Trust has adopted a plan of distribution 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 1% 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 1% 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 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 Securities and Exchange 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
- --------------------------------------------------------------------------------
16 o ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
<PAGE>
NOTES TO FINANCIAL STATEMENTS
securities (excluding short-term in vestments and U.S. government securities)
aggregated $6,323,208 and $1,000,313, respectively, for the six months ended
February 29, 2000. There were purchases of $40,520,779 and sales of $39,088,552
of U.S. government and government agency obligations for the six months ended
February 29, 2000.
At February 29, 2000, the cost of investments for federal income tax purposes
was substantially the same as the cost for financial reporting purposes.
Accordingly, gross unrealized appreciation of investments was $36,519 and gross
unrealized depreciation of investments was $358,222 resulting in net unrealized
depreciation of $321,703.
At August 31, 1999, the Fund had net capital loss carryforward of $741,247 of
which $44,111 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,
$14,141 expires in the fiscal year ending 2004, $14,331 expires in the fiscal
year ending 2006 and $110,111 expires in the fiscal year ending 2007. 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 to the
extent provided by the regulations.
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 post October losses of $345,589 for the year ended
August 31, 1999.
1. Financial Futures Contracts
The Fund may buy or sell financial futures contracts for the purpose of hedging
its portfolio against adverse affects of anticipated movements in the market.
The Fund bears the market risk that arises from changes in the value of these
financial instruments.
At the time the Fund enters into a futures contract, the Fund deposits and
maintains as collateral an initial margin as required by the exchange on which
the transaction is effected. Pursuant to the contract, the Fund agrees to
receive from or pay to the broker an amount of cash equal to the daily
fluctuation in the value of the contract. Such receipts or payments are known as
variation margin and are recorded by the Fund as unrealized gains or losses.
When the contract is closed, the Fund records a realized gain or loss equal to
the difference between the value of the contract at the time it was opened and
the time it was closed. At February 29, 2000, the Fund had outstanding futures
contracts, as follows:
<TABLE>
<CAPTION>
Value at Unrealized
Number of Expiration Original February 29, Appreciation/
Type Contracts Position Month Value 2000 Depreciation
- --------- ---------- -------- ---------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury
Note 2 Yr Future 30 Short March 2000 $5,924,619 $5,933,906 $(9,287)
U.S. Treasury
Note 5 Yr Future 61 Short March 2000 $5,954,808 $5,949,406 5,402
</TABLE>
- --------------------------------------------------------------------------------
ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND o 17
<PAGE>
NOTES TO FINANCIAL STATEMENTS
2. Options Transactions
For hedging and investment purposes, the Portfolio purchases and writes (sells)
put and call options on debt securities that are traded on U.S. and foreign
securities exchanges and over-the-counter markets.
The risk associated with purchasing an option is that the Portfolio pays a
premium whether or not the option is exercised. Additionally, the Portfolio
bears the risk of loss of premium and change in market value should the
counterparty not perform under the contract. Put and call options purchased are
accounted for in the same manner as portfolio securities. The cost of securities
acquired through the exercise of call options is increased by premiums paid. The
proceeds from securities sold through the exercise of put options are decreased
by the premiums paid.
When the Portfolio writes an option, the premium received by the Portfolio is
recorded as a liability and is subsequently adjusted to the current market value
of the option written. Premiums received from writing options which expire
unexercised are recorded by the Portfolio on the expiration date as realized
gains from option transactions. The difference between the premium received and
the amount paid on effecting a closing purchase transaction, including brokerage
commissions, is also treated as a realized gain, or if the premium received is
less than the amount paid for the closing purchase transaction, as a realized
loss. If a call option is exercised, the premiuim received is added to the
proceeds from the sale of the underlying security in determining whether the
Portfolio has realized a gain or loss. If a put option is exercised, the premium
received reduces the cost basis of the security purchased by the Portfolio. The
risk involved in writing an option is that, if the option was exercised the
underlying security could then be purchased or sold by the Portfolio at a
disadvantageous price.
Transactions in options written for the six months ended February 29, 2000 were
as follows:
Number of
Contracts Premiums
------------ ------------
Options outstanding at beginning of year......... -0- $ -0-
Options written.................................. 20 5,469
Options terminated in closing purchase transactions (20) (5,469)
--- --------
Options outstanding at February 29, 2000......... -0- $ -0-
=== ========
- --------------------------------------------------------------------------------
18 o ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE E
Shares of Beneficial Interest
There are 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 Six Months Ended
February 29, Year Ended February 29, Year Ended
2000 August 31, 2000, August 31,
(unaudited) 1999 (unaudited) 1999
---------------------------------------------------------------
Class A
Shares sold 4,080,225 3,659,787 $ 37,722,915 $ 34,303,722
- -------------------------------------------------------------------------------
Shares issued in
reinvestment of
dividends and
distributions 21,895 32,432 202,503 304,354
- -------------------------------------------------------------------------------
Shares converted
from Class B 9,251 33,384 85,454 313,617
- -------------------------------------------------------------------------------
Shares redeemed (4,089,429) (3,296,064) (37,801,086) (30,889,860)
- -------------------------------------------------------------------------------
Net increase 21,942 429,539 $ 209,786 $ 4,031,833
===============================================================================
Class B
Shares sold 2,431,315 3,739,933 $ 22,827,933 $ 35,665,911
- -------------------------------------------------------------------------------
Shares issued in
reinvestment of
dividends and
distributions 34,298 56,923 322,109 542,390
- -------------------------------------------------------------------------------
Shares converted
to Class A (9,110) (32,876) (85,454) (313,617)
- -------------------------------------------------------------------------------
Shares redeemed (2,726,732) (2,701,167) (25,592,585) (25,765,478)
- -------------------------------------------------------------------------------
Net increase
(decrease) (270,229) 1,062,813 $ (2,527,997) $ 10,129,206
===============================================================================
Class C
Shares sold 1,187,493 1,506,231 $ 11,138,145 $ 14,351,027
- -------------------------------------------------------------------------------
Shares issued in
reinvestment of
dividends and
distributions 13,287 26,480 124,574 252,113
- -------------------------------------------------------------------------------
Shares redeemed (1,389,404) (1,274,620) (13,024,139) (12,135,264)
- -------------------------------------------------------------------------------
Net increase
(decrease) (188,624) 258,091 $ (1,761,420) $ 2,467,876
===============================================================================
- --------------------------------------------------------------------------------
ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND o 19
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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 29, 2000, the Fund had entered into the following reverse
repurchase agreements:
Date Entered Amount Broker Interest Rate Maturity
- -------------- ------------- -------------- --------------- ------------
February 24, 2000 $2,829,000 Paine Webber, Inc. 5.84% March 2, 2000
For the six months ended February 29, 2000, the maximum amount of reverse
repurchase agreements was $5,474,500, the average amount outstanding was
approximately $920,696, and the daily weighted average interest rate was 5.703%.
NOTE G
Bank Borrowing
A number of open-end mutual funds managed by the Adviser, including the Fund,
participate in a $750 million revolving credit facility (the "Facility")
intended to provide short-term financing if necessary, subject to certain
restrictions in connection with abnormal redemption activity. Commitment fees
related to the Facility are paid by the participating funds and are included in
the miscellaneous expenses in the statement of operations. The Fund did not
utilize the Facility during the six months ended February 29, 2000.
- --------------------------------------------------------------------------------
20 o ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
<PAGE>
FINANCIAL HIGHLIGHTS
FINANCIAL HIGHLIGHTS
Selected Data For A Share of Beneficial Interest Outstanding Throughout Each
Period
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
CLASS A
-------------------------------------------------------------------------------------------
Six Months
Ended
February 29, Year Ended August 31,
2000 --------------------------------------------------------------------
(unaudited) 1999 1998 1997 1996 1995
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year ............ $ 9.26 $ 9.48 $ 9.63 $ 9.66 $ 9.70 $ 9.67
-------------------------------------------------------------------------------------------
Income From Investment
Operations
Net investment income(a) ....... .24(b) .49(b) .49(b) .47(b) .47 .42
Net realized and unrealized
gain (loss) on investment
transactions ................. (.03) (.19) (.11) .03 (.02) .05
-------------------------------------------------------------------------------------------
Net increase in net asset
value from operations ........ .21 .30 .38 .50 .45 .47
-------------------------------------------------------------------------------------------
Less: Dividends and
Distributions
Dividends from net
investment income ............ (.25) (.50) (.50) (.46) (.49) (.41)
Dividends in excess of net
investment income ............ -0- -0- -0- -0- -0- (.03)
Tax return of capital .......... -0- (.02) (.03) (.07) -0- -0-
-------------------------------------------------------------------------------------------
Total dividends and
distributions ................ (.25) (.52) (.53) (.53) (.49) (.44)
-------------------------------------------------------------------------------------------
Net asset value,
end of period ................ $ 9.22 $ 9.26 $ 9.48 $ 9.63 $ 9.66 $ 9.70
===========================================================================================
Total Return
Total investment return
based on net asset value(c) .. 2.30% 3.18% 4.04% 5.29% 4.71% 5.14%
Ratios/Supplemental
Data
Net assets, end of period
(000's omitted) .............. $ 9,546 $ 9,379 $ 5,535 $ 3,901 $ 3,455 $ 2,997
Ratios to average net assets of:
Expenses, net of waivers/
reimbursements ............. 1.40%(d) 1.40% 1.41%(e) 1.40% 1.40% 1.40%
Interest expense on reverse
repurchase agreements ...... .13%(d) .15% .42% .01% .13% -0-
Expenses, before waivers/
reimbursements ............. 1.73%(d) 2.00% 2.81% 2.42% 3.04% 3.71%
Net investment income ........ 5.11%(d) 5.27% 5.00% 4.90% 4.85% 4.56%
Portfolio turnover rate ........ 103% 209% 206% 65% 110% 15%
</TABLE>
See footnotes on page 23.
- --------------------------------------------------------------------------------
ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND o 21
<PAGE>
FINANCIAL HIGHLIGHTS
Selected Data For A Share of Beneficial Interest Outstanding Throughout Each
Period
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
CLASS B
-----------------------------------------------------------------------------------------------
Six Months
Ended
February 29, Year Ended August 31,
2000 -----------------------------------------------------------------------
(unaudited) 1999 1998 1997 1996 1995
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year ............ $ 9.40 $ 9.62 $ 9.74 $ 9.77 $ 9.81 $ 9.78
-----------------------------------------------------------------------------------------------
Income From Investment
Operations
Net investment income(a) ....... .21(b) .43(b) .42(b) .41(b) .41 .36
Net realized and unrealized
gain (loss) on investment
transactions ................. (.03) (.21) (.08) .02 (.03) .04
-----------------------------------------------------------------------------------------------
Net increase in net asset
value from operations ........ .18 .22 .34 .43 .38 .40
-----------------------------------------------------------------------------------------------
Less: Dividends and
Distributions
Dividends from net
investment income ............ (.21) (.42) (.43) (.39) (.42) (.34)
Dividends in excess of net
investment income ............ -0- -0- -0- -0- -0- (.03)
Tax return of capital .......... -0- (.02) (.03) (.07) -0- -0-
-----------------------------------------------------------------------------------------------
Total dividends and
distributions ................ (.21) (.44) (.46) (.46) (.42) (.37)
-----------------------------------------------------------------------------------------------
Net asset value,
end of period ................ $ 9.37 $ 9.40 $ 9.62 $ 9.74 $ 9.77 $ 9.81
===============================================================================================
Total Return
Total investment return
based on net asset value(c) .. 1.97% 2.35% 3.52% 4.45% 3.89% 4.32%
Ratios/Supplemental
Data
Net assets, end of period
(000's omitted) .............. $ 17,961 $ 20,565 $ 10,827 $ 6,458 $ 6,781 $ 6,380
Ratios to average net assets of:
Expenses, net of waivers/
reimbursements ............. 2.10%(d) 2.10% 2.11%(e) 2.10% 2.10% 2.10%
Interest expense on reverse
repurchase agreements ...... .14%(d) .15% .45% .01% .13% -0-
Expenses, before waivers/
reimbursements ............. 2.47%(d) 2.73% 3.63% 3.10% 3.74% 4.33%
Net investment income ........ 4.48%(d) 4.47% 4.49% 4.13% 4.11% 3.82%
Portfolio turnover rate ........ 103% 209% 206% 65% 110% 15%
</TABLE>
See footnotes on page 23.
- --------------------------------------------------------------------------------
22 o ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
<PAGE>
FINANCIAL HIGHLIGHTS
Selected Data For A Share of Beneficial Interest Outstanding Throughout Each
Period
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
CLASS C
-------------------------------------------------------------------------------------------
Six Months
Ended
February 29, Year Ended August 31,
2000 --------------------------------------------------------------------
(unaudited) 1999 1998 1997 1996 1995
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year ............. $ 9.38 $ 9.61 $ 9.73 $ 9.76 $ 9.80 $ 9.77
-------------------------------------------------------------------------------------------
Income From Investment
Operations
Net investment income(a) ........ .22(b) .43(b) .42(b) .41(b) .40 .34
Net realized and unrealized
gain (loss) on investment
transactions .................. (.04) (.22) (.08) .02 (.02) .06
-------------------------------------------------------------------------------------------
Net increase in net asset
value from operations ......... .18 .21 .34 .43 .38 .40
-------------------------------------------------------------------------------------------
Less: Dividends and
Distributions
Dividends from net
investment income ............. (.21) (.42) (.43) (.39) (.42) (.34)
Dividends in excess of net
investment income ............. -0- -0- -0- -0- -0- (.03)
Tax return of capital ........... -0- (.02) (.03) (.07) -0- -0-
-------------------------------------------------------------------------------------------
Total dividends and distributions (.21) (.44) (.46) (.46) (.42) (.37)
-------------------------------------------------------------------------------------------
Net asset value, end of period .. $ 9.35 $ 9.38 $ 9.61 $ 9.73 $ 9.76 $ 9.80
===========================================================================================
Total Return
Total investment return
based on net asset value(c) ... 1.98% 2.24% 3.53% 4.45% 3.90% 4.33%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) ............... $ 5,585 $ 7,377 $ 5,074 $ 5,012 $ 4,850 $ 5,180
Ratios to average net assets of:
Expenses, net of waivers/
reimbursements .............. 2.10%(d) 2.10% 2.11%(e) 2.10% 2.10% 2.10%
Interest expense on reverse
repurchase agreements ....... .13%(d) .16% .45% .01% .12% -0-
Expenses, before waivers/
reimbursements .............. 2.44%(d) 2.71% 3.58% 3.09% 3.72% 4.23%
Net investment income ......... 4.49%(d) 4.43% 4.48% 4.15% 4.11% 3.80%
Portfolio turnover rate ......... 103% 209% 206% 65% 110% 15%
</TABLE>
(a) Net of fees waived and expenses reimbursed by Adviser.
(b) Based on average shares outstanding.
(c) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales 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.
(d) Annualized.
(e) Ratio reflects expenses grossed up for expense offset arrangement with the
transfer agent. For the year ended August 31, 1998, the ratio of expenses
net of waivers and reimbursements would have been 1.40%, 2.10%, and 2.10%
for Class A, Class B and Class C shares, respectively.
- --------------------------------------------------------------------------------
ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND o 23
<PAGE>
GLOSSARY OF INVESTMENT TERMS
GLOSSARY OF INVESTMENT TERMS
agency securities
Securities issued by U.S. government-related agencies, such as Government
National Mortgage Association, Federal Home Loan Mortgage Corporation, and
Federal National Mortgage Association, that are exempt from state and local
taxes. also called U.S. Government Agency Securities.
Brady bonds
U.S.-dollar-denominated bonds that are issued by emerging markets, particularly
markets in Latin America, and collateralized by U.S. Treasury zero-coupon bonds.
Federal Reserve Board
The seven-member board that oversees Federal Reserve Banks, establishes monetary
policy and monitors the country's economic state.
monetary policy
The regulation of the money supply and interest rates by a central bank with the
purpose of controlling inflation and stabilizing currency.
spread
The price above a benchmark fixed-income yield that an issuer pays to borrow
money.
Treasuries
Negotiable U.S. government debt obli gations, backed by the full faith and
credit of the U.S. government. Trea suries are issued either as bills, notes or
bonds depending on the maturity. Treasuries are exempt from state and local
taxes.
U.S. government agency securities
Securities issued by U.S. government-related agencies, such as Government
National Mortgage Association, Fe deral Home Loan Mortgage Corpo ration, and
Federal National Mortgage Association that are exempt from state and local
taxes. also called agency securities.
- --------------------------------------------------------------------------------
24 o ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
<PAGE>
ALLIANCE CAPTIAL
ALLIANCE CAPITAL
The Investment Professional's Choice
Alliance Capital is a leading global investment management firm with over $368
billion in assets under management. In recognition of our far-reaching
investment capabilities, Alliance Capital has been selected by employee benefit
plans for 31 of the FORTUNE 100 companies and public retirement funds in 31
states as well as by hundreds of foundations, endowments and foreign
institutions. By sharing this institutional money management ex perience with
millions of mutual fund investors as well, Alliance stands out as a "manager of
choice" for thousands of investment professionals around the world.
At Alliance Capital, we place a premium on investment research. We carefully
select securities based on our proprietary research, conducted by over 277
investment professionals in 21 investment offices worldwide. Our commitment to
this process means that our mutual fund shareholders have their portfolios
managed by the same experienced analysts and portfolio managers who manage the
pension funds of some of America's largest institutional investors.
All information on Alliance Capital is as of 12/31/99.
- --------------------------------------------------------------------------------
ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND o 25
<PAGE>
ALLIANCE CAPITAL AT YOUR SERVICE
ALLIANCE CAPITAL AT YOUR SERVICE
At Alliance Capital, shareholder satisfaction is among our top priorities.
That's why we provide our shareholders with a wide variety of products and
time-saving services to meet their needs.
o Low Minimum Investments
You can begin investing in Alliance Capital funds with as little as $250
(except for Alliance Select Investor Series Premier Portfolio and Alliance
Select Investor Series Technology Portfolio, which generally have a
$10,000 minimum initial investment) and may make subsequent investments of
$50 or more.
o Automatic Reinvestment
You may choose to reinvest fund dividend and capital-gains distributions
automatically at no charge.
o Automatic Investment Program
Build your investment account by having money automatically transferred
from your bank account on a regular basis.
o Dividend Direction Plans
You may cross-invest dividends from one fund into the same class of shares
in any other fund without incurring a sales charge. This can be a good way
to diversify your assets.
o The Alliance Advance
A quarterly newsletter discussing investment strategies, economic news and
other matters that could affect your mutual fund investment.
o Auto Exchange
You may choose to automatically exchange money from one Alliance Capital
fund to another on a regular basis. This can be a good way to dollar cost
average*, helping you to invest with discipline.
o Systematic Withdrawals
Regular checks for specified amounts can be sent to you or to your
brokerage or bank account.
o A Choice of Purchase Plans
Most funds are available in A, B, and C Class shares. Many funds are also
available in Advisor Class shares.
o Telephone Transaction
Purchases, transfers and redemptions can be made by calling (800)
221-5672. Our knowledgeable representatives are available to assist you
Monday through Friday from 8:30 a.m. to 8:00 p.m. Eastern Standard Time.
o Alliance Answer: 24-Hour Information
For your convenience, our computerized audio response system is available
to you 24-hours a day by calling (800) 251-0539. Using any touch tone
phone, you can hear share prices, get account balances, review details of
your last transaction, obtain dividend information, order
statements/checkbooks, review fund objectives, literature and Watchlist
information, order additional copies of statements and request additional
year-end tax forms (available from February 1 to May 31).
o Alliance Capital on the World Wide Web at www.alliancecapital.com. Here,
you can access updated account information, make additional investments,
request more information, exchange between Alliance funds and view fund
performance, press releases and articles.
* Dollar cost averaging does not assure a profit nor protect against loss in
a declining market. Since this strategy involves continuous investments in
securities, regardless of fluctuating prices, investors should consider
their financial ability to invest during periods of low price levels.
- --------------------------------------------------------------------------------
26 o ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
<PAGE>
BOARD OF TRUSTEES
BOARD OF TRUSTEES
John D. Carifa, Chairman and President
Ruth Block(1)
David H. Dievler(1)
John H. Dobkin(1)
William H. Foulk, Jr.(1)
Brenton W. Harries(1)
Dr. James M. Hester(1)
Clifford L. Michel(1)
Donald J. Robinson(1)
OFFICERS
Bruce W. Calvert, Senior Vice President
Kathleen A. Corbet, Senior Vice President
Wayne D. Lyski, Senior Vice President
Jeffrey S. Phlegar, 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 (800) 221-5672
Independent Auditors
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036-2798
(1) Member of the Audit Committee.
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ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND o 27
<PAGE>
ALLIANCE CAPITAL FAMILY OF FUNDS
ALLIANCE CAPITAL FAMILY OF FUNDS
Domestic Equity Funds
Balanced Shares
Conservative Investors Fund
Disciplined Value Fund
Growth & Income Fund
Growth Fund
Growth Investors Fund
Health Care Fund
Premier Growth Fund
Quasar Fund
Real Estate Investment Fund
Technology Fund
The Alliance Fund
Utility Income Fund
Global & International Equity Funds
All-Asia Investment Fund
Global Small Cap Fund
Greater China '97 Fund
International Fund
International Premier Growth Fund
New Europe Fund
Worldwide Privatization Fund
Select Investor Series
Premier Portfolio
Technology Portfolio
Fixed Income Funds
Corporate Bond Portfolio
Global Dollar Government Fund
Global Strategic Income Trust
High Yield Fund
Limited Maturity Government Fund
Mortgage Securities Income Fund
Multi-Market Strategy Trust
North American Government Income Trust
Quality Bond Portfolio
U.S. Government Portfolio
Municipal Income Funds
National
Insured National
Arizona
California
Insured California
Florida
Massachusetts
Michigan
Minnesota
New Jersey
New York
Ohio
Pennsylvania
Virginia
Alliance also offers AFD Exchange Reserves, which serves as the money market
fund exchange vehicle for the Alliance mutual funds.
To obtain a prospectus for any Alliance Capital fund, call your investment
professional, or call Alliance at (800) 227-4618.
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28 o ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
<PAGE>
NOTES
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ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND o 29
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Alliance Short-Term U.S. Government Fund BULK RATE
1345 Avenue of the Americas U.S. POSTAGE
New York, NY 10105 PAID
(800) 221-5672 New York, NY
Permit No. 7131
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(R) These registered service marks used under license from the owner, Alliance
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