ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST
SEMI-ANNUAL REPORT
MAY 31, 1995
Alliance
Mutual funds without the Mystery.
cover
ALLIANCE NORTH AMERICAN
LETTER TO SHAREHOLDERS GOVERNMENT INCOME TRUST, INC.
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July 6, 1995
Dear Shareholder:
The U.S. bond market rebounded sharply over the past six months, staging an
impressive rally across nearly all fixed income sectors. The rally was sparked,
in large part, by evidence of a slowing U.S. economy, moderating inflationary
pressures and the Federal Reserve's shift in monetary policy. In Canada,
continued economic growth coupled with restrained inflation benefited bond
market prices over the past six months. However, the devaluation of the Mexican
peso in December negatively affected prices for all emerging market debt.
Mexican and Argentine Brady bonds rebounded sharply from their lows in March
but market performance over the past six months still adversely affected the
net asset values of your Fund.
A SOFT LANDING FOR THE U.S. ECONOMY?
The pronounced economic slowdown in the first six months of the year has
challenged the notion of a 'soft landing' for the U.S. economy. In the second
quarter, gross domestic product (GDP) growth is expected to be below 1.0%,
reflecting declines in industrial production and lower final sales growth.
Without a resurgence in personal consumption, economic growth will likely slow
further. While disposable personal income, consumer spending and new home sales
data all rebounded in May, consumer confidence has softened. If employment data
remains steady or improves, personal consumption expenditures may help support
an economic rebound in the second half of the year. Concerns regarding
inflation have largely subsided with the decline in economic growth. Broad
price indices such as the Consumer Price Index (CPI) and Producer Price Index
(PPI) have shown only moderate acceleration and labor costs remain under
control.
UPDATE: MEXICO AND ARGENTINA
The Mexican government's decision in December to float the peso led to a
significant devaluation in its currency versus the U.S. dollar and sparked an
economic crisis within the country. To halt the devaluation of its currency,
the Mexican government implemented an economic recovery plan designed to rein
in the current account deficit and combat inflation. The preliminary results of
the recovery plan have been encouraging. Mexico's current account deficit has
declined dramatically and inflation and interest rates have fallen after rising
earlier in the year. In response to these developments, investor confidence in
Mexico has improved and bond prices have rebounded. From March 9 to June 30,
1995, the Mexican peso gained 19% versus the U.S. dollar and volatility
declined. Over the same period, Mexican Brady bonds, as measured by the J.P.
Morgan Mexican Brady Bond Index, increased nearly 45% in price. While your Fund
does not invest in Brady bonds, their price movement is indicative of investor
confidence in Mexican debt markets.
Following the Mexican peso devaluation, investor concern regarding the ability
of Argentina to maintain its commitment to the country's currency
convertibility system led to a decline in Argentine bond prices. To address
these concerns, the Argentine government took aggressive, preemptive steps
including the imposition of an economic austerity program. Investors reacted
favorably to the recovery plan and to the reelection in May of its principal
proponent, President Carlos Menem. Local Argentine bond prices rebounded
substantially in response to these events. This had a significant positive
impact on the Fund's net asset values, which rose sharply between early March
and the end of June.
BOND MARKET OUTLOOK
After a tremendous rally in the first half of the year, the outlook for the
U.S. bond markets continues to be favorable. It is our view that the U.S.
economic expansion should moderate to an annual growth rate of 2.0% in the
second half of the year. Slower economic growth would be positive for inflation
and inflationary expectations. We believe that inflationary pressures have
crested and project that CPI inflation will peak near 3.5% in 1995. In tacit
acknowledgment of the weakening U.S. economy, the Federal Reserve recently
lowered interest rates 0.25%. If inflation remains contained, additional easing
of monetary policy should favorably affect bond prices.
Economic fundamentals continue to bolster our outlook for Canadian bonds.
Economic growth has slowed in Canada and inflation and inflationary
expectations remain moderate. Adding to our favorable outlook are the Canadian
government's plans for aggressive deficit reduction and the diminished
likelihood of an electoral success for the Quebec separatist movement.
1
ALLIANCE NORTH AMERICAN
GOVERNMENT INCOME TRUST, INC.
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The outlook for Mexico has recently improved as the government's economic
recovery plan is meeting its initial goals. As interest rates fall in Mexico,
it is our expectation that economic activity will recover. In Argentina, it is
our belief that President Menem will continue to effectively address the
country's economic concerns and maintain its commitment to the currency
convertibility system. While political and social factors are of concern in
both countries, the early achievements of both recovery plans are encouraging.
INVESTMENT RESULTS
Listed below is Alliance North American Government Income Trust's performance
through its semi-annual reporting period ended May 31, 1995. The table shows
your Fund's total returns compared with the overall U.S. bond market,
represented by the unmanaged Lehman Brothers (LB) Aggregate Index, and with the
Lehman Brothers Intermediate-Term Government Bond Index, also unmanaged, which
is composed of U.S. Government agency and Treasury securities with maturities
of one to ten years.
Six Months Ended May 31, 1995
Total Return Ending NAV
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ALLIANCE NORTH AMERICAN
GOVERNMENT INCOME TRUST
Class A -7.18% $6.98
Class B -7.81% $6.98
Class C -7.69% $6.98
LB AGGREGATE 13.38%
LB INTERMEDIATE-TERM GOV'T 8.70%
The Fund's total returns are based on the net asset values of each class of
shares as of May 31; additional investment results appear on page 3.
We appreciate your investment in Alliance North American Government Income
Trust and look forward to reporting its progress to you in the coming months.
Sincerely,
John D. Carifa
Chairman and President
Wayne D. Lyski
Senior Vice President
2
INVESTMENT RESULTS
ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST, INC.
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AVERAGE ANNUAL TOTAL RETURN AS OF MAY 31, 1995
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year -12.39% -16.07%
Since Inception* +0.53 -0.83
SEC Yield 13.46%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year -13.34% -15.63%
Since Inception* -0.27 -0.27
SEC Yield 13.36%
CLASS C SHARES
One Year -13.24%
Since Inception* -5.61
SEC Yield 13.37%
The average annual total returns reflect investment of dividends and/or capital
gains distributions in additional shares-with and without the effect of the
4.25% maximum front-end sales charge for Class A or applicable contingent
deferred sales charge for Class B (3% year 1, 2% year 2, 1% year 3, 0% year 4);
Class C shares are not subject to front-end or 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. Yields are for the 30 days
ended May 31, 1995.
* Inception: 3/27/92, Class A and Class B; 5/3/93, Class C.
3
PORTFOLIO OF INVESTMENTS ALLIANCE NORTH AMERICAN
MAY 31, 1995 (UNAUDITED) GOVERNMENT INCOME TRUST, INC.
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PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
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ARGENTINA-33.3%
GOVERNMENT OBLIGATIONS-33.3%
Bonos De Inversion y Crecimiento
25.22%, 5/01/01
(FRN) ARS 125,746 $141,192,578
Republic of Argentina
Pensioner-Bocon Series I
4.00%, 4/01/01 (FRN) 184,341 102,605,130
Pensioner-Bocon Series II
4.00%, 9/01/02 (FRN) 83,556 36,330,417
Supplier-Bocon
4.00%, 4/01/07 (FRN) 688,954 260,975,779
Total Argentina Securities
(cost $742,491,070) 541,103,904
CANADA-26.5%
GOVERNMENT/AGENCY-26.5%
Government of Alberta Telephone Co.
9.60%, 7/07/98 CAS 4,500 3,475,010
Government of Canada
6.25%, 2/01/98 7,000 4,986,455
7.50%, 7/01/97 9,950 7,308,025
7.50%, 12/01/03 100,000 71,373,809
8.00%, 6/01/23 153,570 108,487,441
9.00%, 6/01/25 Series A 50,000 39,337,739
Hydro-Quebec
7.00%, 6/01/04 50,000 32,897,667
Ontario Hydro
10.00%, 3/19/01 50,000 39,867,110
11.00%, 10/01/97 1,500 1,175,642
Province of Alberta
7.75%, 2/04/98 20,000 14,712,862
Province of British Columbia
9.00%, 8/23/24 25,000 19,086,718
Province of Manitoba
9.38%, 11/15/04 30,000 23,477,785
11.00%, 8/15/00 20,000 16,545,581
Province of Ontario
8.75%, 4/16/97 4,500 3,359,680
Province of Quebec
8.50%, 4/01/97 9,500 7,057,282
Province of Saskatchewan
8.125%, 2/04/97 CA$ 10,000 $7,376,145
9.00%, 12/11/96 8,000 5,968,676
9.50%, 8/16/04 20,000 15,662,079
11.00%, 1/09/01 10,000 8,277,170
Total Canadian Securities
(cost $439,772,199) 430,432,876
MEXICO-21.8%
GOVERNMENT/AGENCY-21.8%
Bankers Acceptances
Nacional Financiera
S.N.C.
15.00%, 8/13/98(b) MXP 80,180 5,028,506
16.50%, 12/26/03(b) 414,125 22,772,853
16.95%, 12/24/03(b) 81,401 4,478,239
17.50%, 12/11/03(b) 55,253 3,048,090
52.25%, 10/11/95(b) 70,000 9,518,862
52.25%, 10/31/95(b) 69,000 9,188,780
52.30%, 11/16/95(b) 57,600 7,528,273
52.75%, 10/26/95(b) 112,405 15,058,628
Mexican Ajustabonos
5.07%, 11/28/96 (a) 31,500 6,532,055
Mexican Treasury Bills
11.10%, 1/11/96(b) 38,741 4,828,256
13.11%, 10/05/95(b) 150,000 20,671,146
13.85%, 8/10/95(b) 191,006 28,168,981
14.00%, 6/01/95(b) 209,260 33,976,927
14.56%, 12/07/95(b) 149,129 19,105,885
14.97%, 12/14/95(b) 69,082 8,857,814
15.29%, 6/08/95(b) 196,553 31,594,793
15.58%, 6/15/95(b) 172,011 27,376,044
15.80%, 6/22/95(b) 134,740 21,234,170
35.38%, 7/27/95(b) 136,513 20,508,636
35.99%, 2/15/96(b) 114,862 13,943,689
38.01%, 8/17/95(b) 158,281 23,130,645
46.50%, 11/16/95(b) 61,302 8,042,344
48.90%, 11/09/95(b) 35,000 4,628,759
53.13%, 8/03/95(b) 40,000 5,953,678
Total Mexican Securities
(cost $587,139,431) 355,176,053
4
ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST, INC.
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PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
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UNITED STATES-39.9%
U.S. TREASURY SECURITIES-27.6%
U.S. Treasury Bond
12.00%, 5/15/05 US$ 28,000 $39,510,625
14.00%, 11/15/11 13,900 22,257,375
U.S. Treasury Notes
5.875%, 2/15/04 90,000 87,440,625
6.50%, 5/15/05 55,413 56,304,803
6.75%, 4/30/00 15,000 15,426,563
6.875%, 2/28/97 5,000 5,082,813
7.25%,2/15/98 15,000 15,485,156
7.50%, 2/15/05 5,000 5,421,875
9.375%, 4/15/96 113,500 116,763,125
10.50%, 8/15/95 13,000 13,117,813
U.S. Treasury Strips
Zero coupon, 2/15/15 192,620 51,136,372
Zero coupon, 8/15/20 14,400 2,639,434
Zero coupon, 11/15/21 115,100 19,397,688
449,984,267
MORTGAGE BACKED SECURITIES-5.1%
Government National
Mortgage Association
7.00%, 8/15/23 11,906 11,734,381
8.00%, 2/15/23 15,672 16,077,848
8.00%,7/15/23 12,053 12,362,094
8.00%, 2/15/24 11,168 11,453,742
9.00%, 9/15/24 12,755 13,376,305
9.75%, 6/15/24 16,569 17,645,731
82,650,101
COLLATERALIZED MORTGAGE
OBLIGATIONS-1.6%
Federal Home Loan Mortgage Corp.
Ser 1663 Trust PV (I/O)
7.00%, 5/15/21 (d) US$ 33,436 $5,872,165
Federal National Mortgage
Association
Ser. '93 Trust-149 SD (I/O)
1.00%, 8/25/98 (d) 212,694 3,988,009
Ser. '94 Trust-19 SE
3.938%, 1/25/24 (d) 6,666 1,473,822
Ser. '93 Trust-121 PH (I/O)
7.00%, 1/25/19 (d) 72,133 10,707,204
Ser. '93 Trust-141 PJ (I/O)
7.00%, 6/25/19 (d) 17,779 2,672,394
U.S. Veterans Affair
Trust 1992-2 (I/O)
10.00%, 9/15/22 (d) 29,944 1,542,091
26,255,685
STRIPPED MORTGAGE
BACKED SECURITIES-3.3%
Federal National
Mortgage Association
Zero coupon, 10/09/19 329,105 53,642,331
FEDERAL AGENCY SECURITIES-2.3%
Small Business Administration
BS92-5A (I/O)
2.383%, 11/15/17
(c)(d) FRN 40,712 4,491,029
BS92-1G (I/O)
2.62%, 4/15/17
(c)(d) FRN 11,915 1,483,973
5
ALLIANCE NORTH AMERICAN
PORTFOLIO OF INVESTMENTS (CONT.) GOVERNMENT INCOME TRUST, INC.
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PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------
Student Loan Marketing
Association
15.00%, 9/13/95 US$ 30,320 $ 31,132,576
37,107,578
Total United States Securities
(cost $648,020,183) 649,639,962
TOTAL INVESTMENTS -121.5%
(cost $ 2,417,422,883) $1,976,352,795
Other assets less liabilities-(21.5%) (349,715,985)
NET ASSETS-100% $1,626,636,810
(a) Interest payment adjusted quarterly based on Mexico's inflation rate on
the date of interest payment.
(b) Annualized yield to maturity at purchase date.
(c) Illiquid security, valued at fair value (see Notes A & G).
(d) Interest rate represents yield to maturity.
Glossary of terms:
FRN - Floating Rate Note, states interest rate in effect at May 31, 1995.
(I/O) - Interest only.
See notes to financial statements.
6
STATEMENT OF ASSETS AND LIABILITIES ALLIANCE NORTH AMERICAN
MAY 31, 1995 (UNAUDITED) GOVERNMENT INCOME TRUST, INC.
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ASSETS
Investments in securities, at value (cost $2,417,422,883) $1,976,352,795
Cash, at value (cost $16,290,961) 16,302,284
Receivable for securities sold 48,128,670
Interest receivable 26,361,569
Receivable for capital stock sold 5,976,485
Deferred organization expenses 122,247
Other assets 102,361
Total assets 2,073,346,411
LIABILITIES
Loan payable 250,000,000
Payable for investment securities purchased 172,312,491
Payable for capital stock redeemed 8,984,109
Dividend payable 8,937,093
Loan interest payable 3,250,417
Advisory fee payable 1,001,017
Distribution fee payable 281,422
Accrued expenses 1,943,052
Total liabilities 446,709,601
NET ASSETS $1,626,636,810
COMPOSITION OF NET ASSETS
Capital stock, at par $ 233,130
Additional paid-in capital 2,496,470,642
Undistributed net investment income 5,569,140
Accumulated net realized loss on investments and foreign
currency transactions 435,019,261)
Net unrealized depreciation of investments and foreign
currency denominated assets and liabilities (440,616,841)
$1,626,636,810
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share($236,421,082/
33,886,992 shares of capital stock issued and outstanding) $6.98
Sales charge-4.25% of public offering price .31
Maximum offering price $7.29
CLASS B SHARES
Net asset value and offering price per share($1,157,639,007/
165,900,087 shares of capital stock issued and outstanding) $6.98
CLASS C SHARES
Net asset value, redemption and offering price per share($232,576,721
/33,342,592 shares of capital stock issued and outstanding) $6.98
See notes to financial statements.
7
STATEMENT OF OPERATIONS ALLIANCE NORTH AMERICAN
SIX MONTHS ENDED MAY 31, 1995 (UNAUDITED) GOVERNMENT INCOME TRUST, INC.
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INVESTMENT INCOME
Interest (net of foreign taxes withheld of $629,080) $ 151,505,731
EXPENSES
Advisory fee 5,768,923
Distribution fee-Class A 317,577
Distribution fee-Class B 5,436,393
Distribution fee-Class C 1,133,767
Interest expense 8,811,841
Transfer agency 1,751,349
Custodian 1,487,905
Taxes 106,017
Registration 97,273
Administrative 77,331
Audit and legal 75,263
Printing 72,597
Amortization of organization expenses 33,503
Directors' fees 15,338
Miscellaneous 24,494
Total expenses 25,209,571
Net investment income 126,296,160
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY
Net realized loss on investment transactions (78,158,070)
Net realized loss on foreign currency transactions (250,101,037)
Net change in unrealized depreciation of investments (42,650,378)
Net change in unrealized depreciation of foreign currency
denominated assets and liabilities 520,005
Net loss on investments (370,389,480)
NET DECREASE IN NET ASSETS FROM OPERATIONS $(244,093,320)
See notes to financial statements.
8
ALLIANCE NORTH AMERICAN
STATEMENT OF CHANGES IN NET ASSETS GOVERNMENT INCOME TRUST, INC.
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Six Months Ended Year Ended
MAY 31, 1995 NOVEMBER 30,
(UNAUDITED) 1994
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INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $126,296,160 $ 255,422,163
Net realized loss on investments and
foreign currency transactions (328,259,107) (172,464,342)
Net change in unrealized depreciation of
investments and foreign currency
denominated assets and liabilities (42,130,373) (418,790,066)
Net decrease in net assets from operations (244,093,320) (335,832,245)
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (16,193,139) (31,066,379)
Class B (77,133,481) (153,207,280)
Class C (16,140,892) (38,260,122)
Return of capital
Class A -0- (6,559,363)
Class B -0- (32,407,917)
Class C -0- (7,957,809)
CAPITAL STOCK TRANSACTIONS
Net increase (decrease) (332,656,354) 1,026,091,221
Total increase (decrease) (686,217,186) 420,800,106
NET ASSETS
Beginning of year 2,312,853,996 1,892,053,890
End of period (including undistributed
net investment income of $5,569,140 for
the six months ended May 31,1995) $1,626,636,810 $2,312,853,996
See notes to financial statements.
9
STATEMENT OF CASH FLOWS ALLIANCE NORTH AMERICAN
SIX MONTHS ENDED MAY 31, 1995 (UNAUDITED) GOVERNMENT INCOME TRUST, INC.
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INCREASE (DECREASE) IN CASH FROM:
OPERATING ACTIVITIES:
Interest received $ 77,004,844
Interest expense paid (8,185,660)
Operating expenses paid (17,783,035)
Net increase in cash from operating activities $ 51,036,149
INVESTING ACTIVITIES:
Proceeds of short-term portfolio investments,
net 375,863,670
Purchase of long-term portfolio investments (1,080,628,287)
Proceeds from disposition of long-term
portfolio investments1, 159,708,586
Net increase in cash from investing activities 454,943,969
FINANCING ACTIVITIES*:
Net redemptions from capital stock transactions (377,059,587)
Cash dividends paid (67,553,068)
Net decrease in cash from financing activities (444,612,655)
Effect of exchange rate on cash (45,065,179)
Net increase in cash 16,302,284
Cash at beginning of year -0-
Cash at end of period $16,302,284
RECONCILIATION OF NET DECREASE IN NET ASSETS
FROM OPERATIONS TO NET INCREASE IN CASH FROM
OPERATING ACTIVITIES:
Net decrease in net assets resulting from operations $(244,093,320)
ADJUSTMENTS:
Increase in interest receivable $ (369,317)
Net realized loss on securities 78,158,070
Net change in unrealized depreciation 42,130,373
Accretion of bond discount (74,760,650)
Decrease in accrued expenses and other liabilities (130,044)
Net realized loss on foreign currency transactions 250,101,037
Total adjustments 295,129,469
Net increase in cash from operating activiites $ 51,036,149
* Non-cash financing activities not included herein consist of reinvestment
of dividends.
See notes to financial statements.
10
NOTES TO FINANCIAL STATEMENTS ALLIANCE NORTH AMERICAN
MAY 31, 1995 (UNAUDITED) GOVERNMENT INCOME TRUST, INC.
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NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance North American Government Income Trust, Inc. (the 'Fund'), was
incorporated in the State of Maryland on February 3, 1992 as a non-diversified,
open-end investment company. On February 23, 1993, the creation of a third
class of shares, Class C, was approved by the Board of Directors. The Fund
currently offers three classes of shares, Class A, Class B and Class C shares.
Class A shares are sold with a front-end sales charge of up to 4.25%. Class B
shares are sold with a contingent deferred sales charge which declines from 3%
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 sold without an initial or
contingent deferred sales charge. All three classes of shares have identical
voting, dividend, liquidation and other rights and the same terms and
conditions, except that each class bears different distribution expenses and
has exclusive voting rights with respect to its distribution plan. Distribution
of Class C shares commenced on May 3, 1993. The following is a summary of
significant accounting policies followed by the Fund.
1. SECURITY VALUATION
Investments are stated at value. 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. Securities traded on the over the counter market are valued
at the mean of the closing bid and asked price provided by the principal market
makers. Securities for which market quotations are not readily available are
valued in good faith at fair value using methods determined by the Board of
Directors. Securities which mature in 60 days or less are valued at amortized
cost, which approximates market value, unless this method does not represent
fair value.
2. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward foreign exchange currency contracts are translated into U.S. dollars at
the mean of the quoted bid and asked price of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated at the rates
of exchange prevailing when such securities were acquired or sold. Income and
expenses are translated at rates of exchange prevailing when accrued.
Net foreign exchange losses of $250,101,037 represents foreign exchange gains
and losses from sales and maturities of securities, holding of foreign
currencies, exchange gains and losses realized between the trade and settlement
dates on security transactions, and the difference between the amounts of
interest recorded on the Fund's books and the U.S. dollar equivalent amounts
actually received or paid. Net unrealized currency gains and losses from
valuing foreign currency denominated assets and liabilities at period end
exchange rates are reflected as a component of unrealized depreciation of
investments and foreign currency denominated assets and liabilities.
3. ORGANIZATION EXPENSES
Organization expenses of approximately $331,965 have been deferred and are
being amortized on a straight-line basis through March, 1997.
4. TAXES
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if applicable, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
5. INVESTMENT INCOME AND SECURITY TRANSACTIONS
Interest income is accrued daily. Security transactions are accounted for on
the date securities are purchased or sold. Security gains and losses are
determined on the identified cost basis. The Fund accretes discounts as
adjustments to interest income.
6. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date. Distributions in excess of net investment income represent distributions
recognized in accordance with generally accepted accounting principles but
recognized in future periods for tax purposes.
11
ALLIANCE NORTH AMERICAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED) GOVERNMENT INCOME TRUST, INC.
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7. CONCENTRATION OF RISK
The investments in Emerging Markets may involve greater risks than investments
in more developed markets and the prices of such investments may be volatile.
The consequences of political, social or economic changes in these markets may
have disruptive effects on the market prices of the funds' investments and the
income they generate, as well as the funds' ability to repatriate such amounts.
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
.65 of 1% of the average adjusted daily net assets of the Fund. Such fee is
accrued daily and paid monthly.
The Adviser has agreed under the terms of the advisory agreement, to reimburse
the Fund to the extent that its aggregate expenses (exclusive of interest,
taxes, brokerage, distribution fee, and extraordinary expenses) exceed the
limits prescribed by any state in which the Fund's shares are qualified for
sale. The Fund believes that the most restrictive expense ratio limitation
currently imposed by any state is 2 1/2% of the first $30 million of the Fund's
average daily net assets, 2% of the next $70 million of its average daily net
assets and 1 1/2% of its average daily net assets in excess of $100 million. No
such reimbursement was required for the six months ended May 31, 1995.
Pursuant to the advisory agreement, the Fund paid to the Adviser $77,331
representing the cost of certain legal and accounting services provided to
the Fund by the Adviser.
The Fund compensates Alliance Fund Services, Inc. (a wholly-owned subsidiary of
the Adviser) for providing personnel and facilities to perform transfer agency
services for the Fund. Such compensation amounted to $1,112,657for the six
months ended May 31, 1995.
Alliance Fund Distributors, Inc. (a wholly-owned subsidiary of the Adviser)
serves as the Distributor of the Fund's shares. The Distributor received
front-end sales charges of $71,099from the sale of Class A shares and
$2,729,839 in contingent deferred sales charges imposed upon redemptions by
shareholders of Class B shares for the six months ended May 31, 1995.
NOTE C: DISTRIBUTION SERVICES AGREEMENT
The Fund has adopted a Distribution Services Agreement (the 'Agreement')
pursuant to Rule 12b-1 under the Investment Company Act of 1940 for Class A,
Class B and Class C shares. Under the Agreement the Fund pays a distribution
fee to the Distributor at an annual rate of up to .30% of the average daily net
assets attributable to the Class A shares and 1% of the average daily net
assets attributable to Class B and Class C shares. Such fee is accrued daily
and paid monthly. The Agreement provides that the Distributor will use such
payments in their entirety for distribution assistance and promotional
activities. The Distributor has incurred expenses in excess of the distribution
costs reimbursed by the Fund in the amount of $32,955,669and $2,568,090for
Class B and C shares, respectively; such costs may be recovered from the Fund
in future periods so long as the Agreement is in effect. In accordance with the
Agreement, there is no provision for recovery of unreimbursed distribution
costs, incurred by the Distributor, beyond the current year for Class A shares.
The Agreement also provides that the Adviser may use its own resources to
finance the distribution of the Fund's shares.
12
ALLIANCE NORTH AMERICAN
GOVERNMENT INCOME TRUST, INC.
- -------------------------------------------------------------------------------
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments)
aggregated $1,080,628,287 and $1,159,708,586, respectively, for the six months
ended May 31, 1995. At May 31, 1995, the cost of investments for federal income
tax purposes was $2,425,554,079. Accordingly, gross unrealized appreciation of
investments was $8,361,019 and gross unrealized depreciation of investments was
$457,562,303, resulting in the net unrealized depreciation of $449,201,284. At
May 31, 1995 the Fund had a capital loss carry-forward of $70,618,925, which
expires in the year 2002.
NOTE E: BANK BORROWING
The Fund entered into a Revolving Credit Agreement with Credit Lyonnais of New
York on June 29, 1994. The maximum credit available under the renewed credit
facility is $250,000,000 and requires no collateralization. The loan
outstanding, under the renewed Credit Agreement at May 31, 1995 was
$250,000,000 with a related weighted average annualized coupon rate of 6.095%.
Interest payments on current borrowings are based on the London Interbank
Offered Rate. The Fund is also obligated to pay Credit Lyonnaise of New York a
commitment fee, computed at the rate 5/16 of 1% per annum on the daily average
unused portion of the revolving credit. The average monthly amount of the loan
outstanding during the six months ended May 31, 1995 was approximately $166,667
with a weighted average annualized interest rate of 6.8%. The maximum amount of
such a loan outstanding at any time during the year was $250,000,000.
NOTE F: CAPITAL STOCK
There are 9,000,000,000 shares of $.001 par value capital stock authorized,
divided into three classes, designated Class A, Class B and Class C shares.
Each class consists of 3,000,000,000 authorized shares. Transactions in capital
stock were as follows:
SHARES AMOUNT
-------------------------- -----------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
MAY 31, 1995 NOVEMBER 30, MAY 31,1995 NOVEMBER 30,
(UNAUDITED) 1994 (UNAUDITED) 1994
------------ ------------ ------------- --------------
CLASS A
Shares sold 6,929,512 21,946,095 $43,550,076 $209,028,752
Shares issued in
reinvestment
of dividends and
distributions 1,076,266 2,295,482 6,497,937 21,111,814
Shares redeemed (11,469,291) (12,811,114) (72,571,998) (116,080,684)
Net increase
(decrease) (3,463,513) 11,430,463 $(22,523,985) $114,059,882
CLASS B
Shares sold 15,376,370 102,755,123 $98,147,329 $ 992,033,470
Shares issued in
reinvestment of
dividends and
distributions 4,722,769 9,573,189 29,073,541 87,838,691
Shares redeemed (55,763,799) (37,684,580) (356,522,189) (335,913,399)
Net increase
(decrease) (35,664,660) 74,643,732 $(229,301,319) $743,958,762
CLASS C
Shares sold 3,461,853 48,593,915 $21,754,285 $476,032,862
Shares issued in
reinvestment
of dividends and
distributions 1,360,527 3,227,731 8,473,416 29,684,779
Shares redeemed (16,961,977) (36,333,163) (111,058,751) (337,645,064)
Net increase
(decrease) (12,139,597) 15,488,483 $(80,831,050) $ 168,072,577
13
ALLIANCE NORTH AMERICAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED) GOVERNMENT INCOME TRUST, INC.
- -------------------------------------------------------------------------------
NOTE G: ILLIQUID SECURITIES
SECURITY DATE ACQUIRED COST
Small Business Administration
BS92-1G (1/O)
2.62%, 4/15/17 FRN 7/22/92 $1,435,444
BS92-5A (I/O)
2.383%, 11/15/17 FRN 10/02/92 4,569,084
The securities shown above are illiquid and have been valued at fair value in
accordance with the procedures described in Note A. The value of these
securities at May 31, 1995 was $5,975,002 representing 0.4% of net assets.
NOTE H: REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements, pertaining to the types of
securities in which it invests with member banks of the Federal Reserve System
and with broker dealers who are recognized as primary dealers in U.S.
government securities by the Federal Reserve Bank of New York. The Fund's Board
of Directors has established procedures which are periodically reviewed by the
Board to monitor the creditworthiness of the dealers with which the Fund enters
into repurchase agreement transactions. The Fund always requires continual
maintenance by its custodian for its account in the Federal Reserve Treasury
Book Entry System of collateral in an amount equal to or in excess of the
resale price in each agreement.
In the event a vendor defaults on its repurchase obligation, the Fund might
suffer a loss to the extent that the proceeds from the sale of the collateral
were less than the repurchase price.
NOTE I: SUBSEQUENT EVENTS
LITIGATION
Subsequent to November 30, 1994 several complaints, seeking class-action status
on behalf of certain of the Fund's shareholders, have been filed against the
Fund, the Adviser and others. The actions allege violations of federal
securities laws, fraud, negligence, negligent misrepresentations and omissions,
breach of fiduciary duty and breach of contract in connection with the Fund's
investments in Mexican and Argentine securities and seek unspecified damages
and costs. The ultimate effect on the fund, if any, of these actions is not
determinable at this time.
14
ALLIANCE NORTH AMERICAN
FINANCIAL HIGHLIGHTS GOVERNMENT INCOME TRUST, INC.
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS A
-----------------------------------------------
SIX MONTHS YEAR YEAR MAR.27,
ENDED ENDED ENDED 1992* TO
MAY 31, 1995 NOV.30, NOV.30, NOV.30,
(UNAUDITED) 1994 1993 1992
------------ ----------- ------ --------------
Net asset value, beginning
of period $8.13 $10.35 $9.70 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .54 1.02 1.09 . 69(a)
Net realized and unrealized gain
(loss) on investments and
foreign currency transactions (1.21) (2.12) .66 (.31)
Net increase (decrease) in net
asset value from operations (.67) (1.10) 1.75 .38
LESS: DISTRIBUTIONS
Dividends from net investment
income (.48) (.91) (1.09) (.68)
Return of capital -0- (.21) -0- -0-
Distribution from net realized gains -0- -0- (.01) -0-
Total dividends and distributions (.48) (1.12) (1.10) (.68)
Net asset value, end of period $6.98 $8.13 $10.35 9.70
TOTAL RETURN
Total investment return based on
net asset value (d) (7.18)% (11.32)% 18.99% 3.49%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $236,421 $303,538 $268,233 $61,702
Ratio of expenses to average
net assets 2.70%(b) 1.70% 1.61% 2.45%(b)(c)
Ratio of expenses to average net
assets excluding interest
expense (see Note E) 1.54%(b) 1.37% 1.33% 1.66%(b)
Ratio of net investment income
to average net assets 17.21%(b) 11.22% 10.77% 10.93%(b)(c)
Portfolio turnover rate 60% 131% 254% 86%
See footnote summary on page 17.
15
ALLIANCE NORTH AMERICAN
FINANCIAL HIGHLIGHTS (CONT.) GOVERNMENT INCOME TRUST, INC.
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS B
--------------------------------------------------
SIX MONTHS YEAR YEAR MAR. 27,
ENDED ENDED ENDED 1992* to
MAY 31, 1995 NOV. 30, NOV. 30, NOV. 30,
(UNAUDITED) 1994 1993 1992
------------ --------- ----------- --------------
Net asset value, beginning
of period $8.13 $10.35 $9.70 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .51 . 96 1.01 .64(a)
Net realized and unrealized gain
(loss) on investments and
foreign currency transactions (1.21) (2.13) .67 (.31)
Net increase (decrease) in net
asset value from operations (.70) (1.17) 1.68 .33
LESS: DISTRIBUTIONS
Dividends from net
investment income (.45) (.84) (1.02) (.63)
Return of capital -0- (.21) -0- -0-
Distribution from net
realized gains -0- -0- (.01) -0-
Total dividends and
distributions (.45) (1.05) (1.03 ) (.63)
Net asset value, end of period $6.98 $8.13 $10.35 $9.70
TOTAL RETURN
Total investment return based
on net asset value (d) (7.81)% (11.89)% 18.15% 3.30%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $1,157,639 $1,639,602 $1,313,591 $216,317
Ratio of expenses to
average net assets 3.40%(b) 2.41% 2.31% 3.13%(b)(c)
Ratio of expenses to average
net assets excluding interest
expense (see Note E) 2.25%(b) 2.07% 2.04% 2.35%(b)
Ratio of net investment income
to average net assets 16.44%(b) 10.53% 10.01% 10.16%(b)(c)
Portfolio turnover rate 60% 131% 254% 86%
See footnote summary on page 17.
16
ALLIANCE NORTH AMERICAN
GOVERNMENT INCOME TRUST, INC.
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS C
------------------------------------
SIX MONTHS YEAR MAY 3,
ENDED EDNED 1993** to
MAY 31,1995 NOV.30, NOV. 30,
(UNAUDITED) 1994 1993
------------ --------- -------------
Net asset value, beginning of period $8.13 $10.34 $10.04
INCOME FROM INVESTMENT OPERATIONS
Net investment income .51 .96 .58
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions (1.21) (2.12) .30
Net increase (decrease) in net asset
value from operations (.70) (1.16) .88
LESS: DISTRIBUTIONS
Dividends from net investment income (.45) (.84) (.58)
Return of capital -0- (.21) -0-
Total dividends and distributions (.45) (1.05) (.58)
Net asset value, end of period $6.98 $8.13 $10.34
TOTAL RETURN
Total investment return based on
net asset value (d) (7.69)% (11.89)% 9.00%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $232,577 $369,714 $310,230
Ratio of expenses to average net assets 3.40%(b) 2.39% 2.21%(b)
Ratio of expenses to average net assets
excluding interest expense (see Note E) 2.25%(b) 2.06% 2.04%(b)
Ratio of net investment income
to average net assets 16.44%(b) 10.46% 9.74%(b)
Portfolio turnover rate 60% 131% 254%
* Commencement of operations.
** Commencement of distribution.
(a) Net of expenses waived by the Adviser.
(b) Annualized.
(c) If the Fund had borne all expenses, the ratios of expenses to average net
assets would have been 2.49% and 3.16% for Class A and Class B shares,
respectively. The ratios of net investment income to average net assets would
have been 10.89% and 10.12% for Class A and Class B shares, respectively.
(d) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales charges or contingent
deferred sales charges are not reflected in the calculation of total investment
return. Total investment return calculated for a period of less than one year
is not annualized.
17
ALLIANCE NORTH AMERICAN
GOVERNMENT INCOME TRUST, INC.
- -------------------------------------------------------------------------------
BOARD OF DIRECTORS
JOHN D. CARIFA, CHAIRMAN AND PRESIDENT
RUTH BLOCK (1)
DAVID H. DIEVLER (1)
JOHN H. DOBKIN (1)
WILLIAM H. FOULK, JR. (1)
DR. JAMES M. HESTER (1)
CLIFFORD L. MICHEL (1)
ROBERT C. WHITE (1)
OFFICERS
WAYNE D. LYSKI, SENIOR VICE PRESIDENT
ROBERT M. SINCHE, SENIOR VICE PRESIDENT
EDMUND P. BERGAN, JR., SECRETARY
MARK D. GERSTEN, TREASURER & CHIEF FINANCIAL OFFICER
PATRICK J. FARRELL, CONTROLLER
CUSTODIAN
BROWN BROTHERS HARRIMAN AND CO.
40 Water Street
Boston, MA 02109
PRINCIPAL UNDERWRITER
ALLIANCE FUND DISTRIBUTORS, INC.
1345 Avenue of the Americas
New York, NY 10105
LEGAL COUNSEL
SEWARD & KISSEL
One Battery Park Plaza
New York, NY 10004
TRANSFER AGENT
ALLIANCE FUND SERVICES, INC.
P.O. Box 1520
Secaucus, NJ 07096-1520
Toll-Free 1-(800) 221-5672
INDEPENDENT AUDITORS
ERNST & YOUNG LLP
787 Seventh Avenue
New York, NY 10019
(1) Member of the Audit Committee.
18
ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST, INC.
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
Alliance Capital
Mutual funds without the Mystery.
THIS REPORT IS DISTRIBUTED SOLELY TO SHAREHOLDERS OF THE FUND
AND IS NOT TO BE USED AS SALES LITERATURE.
R THESE REGISTERED SERVICE MARKS USED UNDER LICENSE FROM THE OWNER,
ALLIANCE CAPITAL MANAGEMENT L.P.
NAGSR
BULK RATE
U.S. POSTAGE
PAID
New York, NY
Permit No. 7131
20
