ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST
ANNUAL REPORT
NOVEMBER 30, 1995
ALLIANCE NORTH AMERICAN
LETTER TO SHAREHOLDERS GOVERNMENT INCOME TRUST, INC.
_______________________________________________________________________________
January 17, 1996
Dear Shareholder:
The U.S. bond market continued its broad-based rally over the past six months.
Despite stronger economic growth, the rally strengthened, as restrained
inflationary pressures and a more accommodative monetary policy buoyed investor
confidence. In Canada, aggregate bond prices rose despite uncertainty regarding
the Quebec separatist movement. In both Mexico and Argentina, debt prices
continued the rebound that began in March.
ECONOMIC REVIEW
While the U.S. economy slowed in the first half of 1995, growth reaccelerated
in the third quarter due to larger than expected increases in residential
housing, government spending and business inventories. Fourth quarter economic
growth appears less robust, however. Retail sales remain weak despite
significant discounting during the holiday season. Gains in real disposable
income have slowed and personal debt levels continue to escalate. Growth also
remains sluggish in the manufacturing sector. The National Association of
Purchasing Management (NAPM) Index rose modestly to 47.3% in November but has
remained below 50% for five consecutive months. (A reading below 50% signals a
slowdown in manufacturing output.)
Inflation data remain very favorable for the bond market. Broad price indices
such as the Consumer Price Index and Producer Price Index have risen very
modestly and labor costs remain under control. The benign inflation outlook and
the chance of a significant federal government deficit reduction package may
allow the Federal Reserve to cut interest rates further in the months ahead.
BOND MARKET REVIEW
Since we last reported, the U.S. bond market continued to post significant
gains across nearly all fixed income sectors. The rally was fueled largely by
the aforementioned economic developments. U.S. Treasurys outperformed mortgages
during the period as mortgage returns were tempered by higher prepayment
activity. Across all major sectors of the U.S. fixed income market,
longer-duration securities outperformed shorter-duration securities as interest
rates for all maturities declined.
Outside the U.S., emerging market debt prices continued the upward trend that
began in March. The rebound is due, in part, to the favorable U.S. interest
rate environment and improvement in the Mexican and Argentine economic
outlooks. One year after the economic crisis began in Mexico, the country's
economy is showing initial signs of growth though its banking sector remains
strained.
The Argentine economy also appears to have recovered from its brief recession.
The Argentine government's adherence to sound fiscal and monetary policies has
helped stabilize the currency, restrain inflation and boost investor
confidence.
INVESTMENT OUTLOOK
It is our view that U.S. economic growth will remain modest in the period
ahead. Our forecast calls for a fixed based year GDP growth rate of 2.0% in the
first six months of the year ('fixed based year' refers to the government's
traditional GDP measure versus the new 'chain-weighted' measure). With few
inflationary pressures on the horizon, we expect the Federal Reserve to cut
interest rates further to stimulate consumer expenditures and investment. If
our forecast proves correct, the result should be further gains in U.S. bond
prices.
We expect lower volatility in the Canadian bond market as the Quebec separatist
movement failed to win its referendum. We also expect economic growth in Canada
to remain moderate with continued weakness in both consumer spending and
industrial production. Inflation remains well contained, which should allow the
Bank of Canada to follow the Federal Reserve's lead and cut interest rates if
growth slows further.
In emerging markets, we expect Argentina to outperform over the next several
months. The Argentine government is implementing a plan to increase federal
revenues, improve the fiscal position of the provincial governments and obtain
new financing from domestic and international markets. These prudent economic
policies combined with Argentina's stable political environment should support
higher bond prices despite the country's recent economic difficulties.
As we mentioned there has been a recent improvement in the Mexican economy, but
the longer-term outlook
1
ALLIANCE NORTH AMERICAN
GOVERNMENT INCOME TRUST, INC.
_______________________________________________________________________________
remains uncertain. While the worst news is probably over, sustained economic
growth has not yet been achieved. The peso has reached what we believe is a
sustainable exchange rate level versus the U.S. dollar and we expect further
currency stability in the months ahead.
INVESTMENT RESULTS
Listed below are your Fund's total returns for the fiscal year ended November
30, 1995. Also shown are the returns for the overall U.S. bond market,
represented by the Lehman Brothers (LB) Aggregate Index, and the Lehman
Brothers Intermediate-Term (LBIT) Government Bond Index, which measures
performance of bonds in the one- to 10-year maturity range. (Complete
descriptions of these unmanaged benchmarks appear on page 4):
Total Return as of November 30, 1995
12 Months 6 Months
--------- --------
ALLIANCE NORTH AMERICAN
GOVERNMENT INCOME TRUST
Class A -3.59% +3.86%
Class B -4.63% +3.33%
Class C -4.63% +3.33%
LB AGGREGATE +17.64% +5.60%
LBIT GOV'T +13.66% +4.58%
The Fund's total returns are based on the net asset values of each class of
shares as of November 30; additional investment results appear on page 3. Also
provided on page 4 is a chart that shows the performance of a hypothetical
$10,000 initial investment in Alliance North American Government Income Trust
Class A shares from inception through the end of November.
The Fund significantly lagged the U.S. fixed income market benchmarks over the
twelve months due primarily to the difficult conditions that existed in late
1994 and early 1995 in the emerging bond markets in particular. The Fund's
performance (shown at left) has improved over the more-recent six months in
line with an overall improvement in the markets in which your Fund invests.
Thank you for your continued interest and investment in Alliance North American
Government Income Trust. We 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
ALLIANCE NORTH AMERICAN
INVESTMENT RESULTS GOVERNMENT INCOME TRUST, INC.
_______________________________________________________________________________
AVERAGE ANNUAL TOTAL RETURN AS OF NOVEMBER 30, 1995
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
----------------------------
. One Year -3.59% -7.68%
. Since Inception* +1.49% +0.31%
SEC Yield 15.35%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
----------------------------
. One Year -4.63% -7.12%
. Since Inception* +0.66% +0.66%
SEC Yield 15.34%
CLASS C SHARES
. One Year -4.63%
. Since Inception* -3.34%
SEC Yield 15.32%
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 November 30, 1995.
* Inception: 3/27/92, Class A and Class B; 5/3/93, Class C.
3
ALLIANCE NORTH AMERICAN
GOVERNMENT INCOME TRUST, INC.
_______________________________________________________________________________
ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST
$10,000 INVESTMENT OVER LIFE OF FUND:
3/31/92 TO 11/30/95
$14,000
$13,000
$12,000
$11,000
$10,000
$9,000
$8,000
$7,000
LB INTERMEDIATE-TERM GOVERNMENT
LB AGGREGATE
NORTH AMERICAN GOVERNMENT INCOME TRUST
CLASS A: $10,103
This chart illustrates the total value of an assumed $10,000 investment in
Alliance North American Government Income Trust Class A shares (since
inception) after deducting the maximum 4.25% sales charge, and with dividends
and capital gains reinvested. Performance for Class B and Class C shares will
vary from the results shown above due to differences in expenses charged to
those classes. Results should not be considered representative of future gain
or loss in capital value or dividend income.
The Lehman Brothers Aggregate Index is composed of the Mortgage Backed
Securities Index, the Asset Backed Securities Index and the combination
Government/Corporate Bond Index.
The Lehman Brothers Intermediate-Term Government Index is composed of U.S.
government agency and Treasury securities with maturities of one to ten years.
When comparing Alliance North American Government Income Trust to the indices
shown above, you should note that the Fund's performance reflects the maximum
sales charge of 4.25% while no such charges are reflected in the performance of
the indices.
North American Government Income Trust
LB Aggregate
LB Intermediate-Term Government
4
PORTFOLIO OF INVESTMENTS ALLIANCE NORTH AMERICAN
NOVEMBER 30, 1995 GOVERNMENT INCOME TRUST, INC.
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) U.S. $VALUE
- ----------------------------------------------------------------------
ARGENTINA30.2%
GOVERNMENT OBLIGATIONS30.2%
Republic of Argentina
Pensioner-Bocon Series I
3.50%, 4/01/01 (FRN) ARS 284,755 $160,983,808
Pensioner-Bocon Series II
3.50%, 9/01/02 (FRN) 87,861 38,265,806
Supplier-Bocon
3.50%, 4/01/07 (FRN) 749,578 282,985,749
Total Argentinian Securities
(cost $692,442,990) 482,235,363
CANADA35.8%
GOVERNMENT/AGENCY35.8%
Government of Alberta Telephone Co.
9.60%, 7/07/98 CA$ 4,500 3,561,969
Government of Canada
8.00%, 6/01/23 (a) 121,070 93,230,184
9.00%, 6/01/25
Series A (c) 177,000 151,544,889
Ontario Hydro
10.00%, 3/19/01 (a) 50,000 41,473,111
11.00%, 10/01/97 1,500 1,194,832
Province of Alberta
7.75%, 2/04/98 20,000 15,143,372
Province of British Columbia
9.00%, 8/23/24 25,000 20,773,365
Province of Manitoba
9.375%, 11/15/04(a) 30,000 24,958,958
11.00%, 8/15/00 20,000 17,126,661
Province of Ontario
8.25%, 12/01/05 85,000 66,174,035
8.75%, 4/16/97 4,500 3,426,473
Province of Quebec
9.375%, 1/16/23 115,000 94,080,134
Province of Saskatchewan
8.125%, 2/04/97 10,000 7,527,515
9.00%, 12/11/96 8,000 6,057,349
9.50%, 8/16/04 20,000 16,646,667
11.00%, 1/09/01 10,000 8,602,347
Total Canadian Securities
(cost $536,370,076) 571,521,861
MEXICO22.4%
GOVERNMENT/AGENCY22.4%
Bankers Acceptances
Nacional Financiera
S.N.C.(b)
15.00%, 8/13/98 MXP 80,180 4,108,479
16.50%, 12/26/03 414,125 9,559,233
16.95%, 12/24/03 81,401 1,879,944
17.50%, 12/11/03 55,253 1,280,760
Mexican Ajustabonos
6.83%, 11/28/96(c) 31,500 6,479,761
Mexican Treasury Bills(b)
34.39%, 3/20/96 159,016 18,260,349
35.80%, 9/05/96 46,539 4,422,202
35.80%, 9/12/96 35,616 3,360,444
42.50%, 1/25/96 361,636 44,466,489
14.56%, 12/07/95 149,129 19,597,110
14.97%, 12/14/95 69,082 8,977,352
34.65%, 1/04/96 173,225 21,903,329
34.65%, 12/21/95 192,562 24,817,370
35.25%, 2/15/96 305,051 36,502,675
35.91%, 2/08/96 225,675 27,248,133
36.20%, 9/19/96 60,000 5,621,486
36.25%, 9/26/96 30,000 2,791,202
36.49%, 3/07/96 262,832 30,665,826
36.99%, 8/15/96 46,098 4,475,624
38.48%, 1/18/96 149,300 18,528,041
41.52%, 1/11/96 188,741 23,641,883
42.05%, 3/28/96 138,096 15,705,483
45.25%, 7/18/96 35,500 3,549,708
53.00%, 2/01/96 56,000 6,823,030
54.00%, 2/29/96 100,000 11,755,807
Total Mexican Securities
(cost $546,676,634) 356,421,720
UNITED STATES35.7%
U.S. TREASURY SECURITIES29.7%
U.S. Treasury Bonds
12.375%, 5/15/04 US$ 50,000 71,757,813
12.50%, 8/15/14 31,000 49,178,594
14.00%, 11/15/11 38,900 63,716,984
5
ALLIANCE NORTH AMERICAN
PORTFOLIO OF INVESTMENTS (CONTINUED) GOVERNMENT INCOME TRUST, INC.
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) U.S. $VALUE
- ----------------------------------------------------------------------
U.S. Treasury Notes
5.875%, 8/15/98 US$ 2,000 $ 2,022,500
6.75%, 4/30/00 11,300 11,824,391
7.875% 11/15/04 99,700 113,969,563
9.375%, 4/15/96 26,500 26,864,375
U.S. Treasury Strips
Zero Coupon, 5/15/10 250,400 102,286,647
Zero Coupon, 8/15/20 130,700 28,624,084
Zero Coupon, 11/15/21 15,500 3,143,555
473,388,506
FEDERAL AGENCY SECURITIES4.9%
Federal National Mortgage Association
Zero Coupon, 10/09/19 235,025 48,363,738
Student Loan Marketing Association
15.00%, 9/17/96 US$ 27,450 29,464,830
77,828,568
MORTGAGE BACKED SECURITIES1.1%
Government National Mortgage Association
9.75%, 6/15/24 16,519 17,708,704
Total United States Securities
(cost $562,233,515) 568,925,778
TOTAL INVESTMENTS-124.1%
(cost $2,337,723,215) 1,979,104,722
Other assets less liabilities-(24.1)% (384,413,351)
NET ASSETS100% $1,594,691,371
(a) Security, or portion thereof, has been segregated to collateralize forward
exchange currency contracts. This collateral has a total market value of
$52,458,884 at November 30, 1995.
(b) Interest rate represents annualized yield to maturity at purchase date.
(c) Interest payment adjusted quarterly based on Mexico's inflation rate on
the date of interest payment.
Glossary:
FRN - Floating Rate Note; stated interest rate in effect at November 30,
1995.
See notes to financial statements.
6
STATEMENT OF ASSETS AND LIABILITIES ALLIANCE NORTH AMERICAN
NOVEMBER 30, 1995 GOVERNMENT INCOME TRUST, INC.
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $2,337,723,215) $1,979,104,722
Cash 100,487
Receivable for investment securities sold 55,647,469
Interest receivable 25,115,964
Receivable for capital stock sold 4,984,007
Unrealized appreciation of forward exchange currency contracts 3,917,322
Deferred organization expenses 88,560
Other assets 90,560
Total assets 2,069,049,091
LIABILITIES
Loan payable 250,000,000
Payable for investment securities purchased 208,625,208
Dividend payable 5,983,746
Payable for capital stock redeemed 3,883,823
Loan interest payable 2,990,451
Advisory fee payable 942,190
Distribution fee payable 114,838
Accrued expenses 1,817,464
Total liabilities 474,357,720
NET ASSETS $1,594,691,371
COMPOSITION OF NET ASSETS
Capital stock, at par $ 236,244
Additional paid-in capital 2,175,099,026
Distributions in excess of net investment income (14,205,188)
Accumulated net realized loss on investments and
foreign currency transactions (211,941,006)
Net unrealized depreciation of investments and foreign
currency denominated assets and liabilities (354,497,705)
---------------
$1,594,691,371
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share($252,608,360/
37,423,618 shares of capital stock issued and outstanding) $6.75
Sales charge-4.25% of public offering price .30
Maximum offering price $7.05
CLASS B SHARES
Net asset value and offering price per share($1,123,074,263/
166,376,320 shares of capital stock issued and outstanding) $6.75
CLASS C SHARES
Net asset value, redemption and offering price per share($219,008,748
/32,443,629 shares of capital stock issued and outstanding) $6.75
See notes to financial statements.
7
STATEMENT OF OPERATIONS ALLIANCE NORTH AMERICAN
YEAR ENDED NOVEMBER 30, 1995 GOVERNMENT INCOME TRUST, INC.
_______________________________________________________________________________
INVESTMENT INCOME
Interest(net of foreign taxes withheld of $1,227,390) $ 322,539,943
EXPENSES
Advisory fee $11,774,101
Distribution fee - Class A 679,389
Distribution fee - Class B 11,098,575
Distribution fee - Class C 2,250,854
Transfer agency 3,261,011
Custodian 2,683,022
Printing 440,846
Audit and legal 213,842
Taxes 181,500
Administrative 162,064
Registration 115,183
Amortization of organization expenses 67,189
Directors' fees 32,366
Miscellaneous 44,509
Total expenses before interest 33,004,451
Interest expense 17,414,235
Total expenses 50,418,686
Net investment income 272,121,257
REALIZED AND UNREALIZED GAIN/LOSS ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized loss on investment transactions (104,982,523)
Net realized loss on foreign currency transactions (402,718,795)
Net change in unrealized depreciation of investments 39,801,217
Net change in unrealized depreciation of foreign
currency denominated assets and liabilities 4,187,546
Net loss on investments (463,712,555)
NET DECREASE IN NET ASSETS FROM OPERATIONS $(191,591,298)
See notes to financial statements.
8
ALLIANCE NORTH AMERICAN
STATEMENT OF CHANGES IN NET ASSETS GOVERNMENT INCOME TRUST, INC.
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30,
1995 1994
------------- ---------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $272,121,257 $ 255,422,163
Net realized loss on investments and foreign
currency transactions (507,701,318) (172,464,342)
Net change in unrealized appreciation
(depreciation) of investments and foreign
currency denominated assets and liabilities 43,988,763 (418,790,066)
Net decrease in net assets from operations (191,591,298) (335,832,245)
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A -0- (31,066,379)
Class B -0- (153,207,280)
Class C -0- (38,260,122)
Tax return of capital
Class A (33,426,216) (6,559,363)
Class B (152,169,130) (32,407,917)
Class C (30,951,612) (7,957,809)
CAPITAL STOCK TRANSACTIONS
Net increase (decrease) (310,024,369) 1,026,091,221
Total increase (decrease) (718,162,625) 420,800,106
NET ASSETS
Beginning of year 2,312,853,996 1,892,053,890
End of year $1,594,691,371 $2,312,853,996
See notes to financial statements.
9
STATEMENT OF CASH FLOWS ALLIANCE NORTH AMERICAN
YEAR ENDED NOVEMBER 30, 1995 GOVERNMENT INCOME TRUST, INC.
_______________________________________________________________________________
INCREASE (DECREASE) IN CASH FROM:
OPERATING ACTIVITIES:
Interest received $ 141,413,766
Interest expense paid (17,048,020)
Operating expenses paid (34,044,485)
Net increase in cash from operating activities $ 90,321,261
INVESTING ACTIVITIES:
Purchases of short-term portfolio investments,
net (85,655,086)
Purchases of long-term portfolio investments (2,640,643,093)
Proceeds from disposition of long-term
portfolio investments 3,210,520,528
Net increase in cash from investing activities 484,222,349
FINANCING ACTIVITIES*:
Redemptions of capital stock, net (314,392,569)
Cash dividends paid (221,728,702)
Net decrease in cash from financing activities (536,121,271)
Effect of exchange rate on cash (38,321,852)
Net increase in cash 100,487
Cash at beginning of year -0-
Cash at end of year $ 100,487
_______________________________________________________________________________
RECONCILIATION OF NET DECREASE IN NET ASSETS
FROM OPERATIONS TO NET INCREASE IN CASH FROM
OPERATING ACTIVITIES:
Net decrease in net assets from operations $(191,591,298)
ADJUSTMENTS:
Decrease in interest receivable $ 866,288
Net realized loss on securities 104,982,523
Net change in unrealized appreciation (43,988,763)
Accretion of bond discount (182,217,630)
Decrease in accrued expenses and other
liabilities (448,654)
Net realized loss on foreign currency
transactions 402,718,795
281,912,559
-------------
Net increase in cash from operating activities $ 90,321,261
* 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
NOVEMBER 30, 1995 GOVERNMENT INCOME TRUST, INC.
_______________________________________________________________________________
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. 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 with
respect to its distribution plan. 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 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 realized losses on foreign currency transactions of $402,718,795 represent
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 of the 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 net
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 and are determined in accordance with income tax regulations.
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 Fund's investments and the
income they generate, as well as the Fund's ability to repatriate such amounts.
11
ALLIANCE NORTH AMERICAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED) GOVERNMENT INCOME TRUST, INC.
_______________________________________________________________________________
8. RECLASSIFICATION OF COMPONENTS OF NET ASSETS
Due to permanent differences between the accounting and tax classifications of
foreign currency transactions a $402,718,795 foreign currency loss was
reclassified from accumulated net realized loss on investments and foreign
currency transactions to distributions in excess of net investment income. In
addition, the permanent accounting and tax difference occurring as a result of
the return of capital of $221,630,755 was reclassified from distributions in
excess of net investment income to additional paid-in capital. Net investment
income, net realized gains, and net assets were not affected by these
reclassifications.
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 fees, 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 its
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 year ended November 30, 1995. Pursuant
to the advisory agreement, the Fund paid the Adviser $162,064 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 $2,093,295 for the year
ended November 30, 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 $167,547 from the sale of Class A shares and
$3,776,823 in contingent deferred sales charges imposed upon redemptions by
shareholders of Class B shares for the year ended November 30, 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 Fund's average
daily net assets attributable to Class A shares and 1% of the average daily net
assets attributable to the 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 $36,368,974 and $2,736,736 for
Class B and Class 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 $2,756,624,158 and $2,913,661,548, respectively, for the year ended
November 30, 1995.
The Fund enters into forward exchange currency contracts in order to hedge its
exposure to changes in foreign currency exchange rates on its foreign portfolio
holdings and to hedge certain firm purchase and sale commitments denominated in
foreign currencies. A forward exchange currency contract is a commitment to
purchase or sell a foreign currency at a future date at a negotiated forward
rate. The gain or loss arising from the difference between the original
contract and the closing of such contract is included in realized gains or
losses from foreign currency transactions.
Fluctuations in the value of forward exchange currency contracts are recorded
for financial reporting purposes as unrealized gains or losses by the Fund. The
Fund's custodian will place and maintain cash not available for investment or
securities in a separate account of the Fund having a value equal to the
aggregate amount of the Fund's commitments under forward exchange currency
contracts entered into with respect to position hedges.
Risks may arise from the potential inability of a counterparty to meet the
terms of a contract and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar. At November 30, 1995, the Fund had
outstanding forward exchange currency contracts, as follows:
CONTRACT VALUE ON U.S.$
AMOUNT ORIGINATION CURRENT UNREALIZED
(000) DATE VALUE APPRECIATION
------- ------------ ------------ ------------
FOREIGN CURRENCY SALE CONTRACTS
Canadian Dollars,
expiring 12/18/95-2/28/96 722,989 $536,021,197 $532,103,875 $3,917,322
At November 30, 1995, the cost of investments for federal income tax purposes
was $2,344,663,826. Accordingly, gross unrealized appreciation of investments
was $45,171,851 and gross unrealized depreciation of investments was
$410,730,955 resulting in net unrealized depreciation of $365,559,104. At
November 30, 1995, the Fund had a capital loss carry-forward totaling
$205,000,395, of which $70,618,925 expires in the year 2002 and $134,381,470
expires in the year 2003.
NOTE E: BANK BORROWING
The Fund entered into a Revolving Credit Agreement with Credit Lyonnais of New
York on June 27, 1995. 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 November 30, 1995 was
$250,000,000 with a related weighted average interest rate of 6.095%. The
$250,000,000 balance will mature on March 25, 1996. 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 1/4 of 1% per annum on the daily average unused portion of the
revolving credit. The average monthly amount of the loan outstanding during the
year ended November 30, 1995 was approximately $250,000,000 with a weighted
average annualized interest rate of 6.8%. The maximum amount of such loan
outstanding at any time during the year was $250,000,000.
13
ALLIANCE NORTH AMERICAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED) GOVERNMENT INCOME TRUST, INC.
_______________________________________________________________________________
NOTE F: CAPITAL STOCK
There are 9,000,000,000 shares of $0.001 par value capital stock authorized,
divided into three classes, designated Class A, Class B and Class C. Each class
consists of 3,000,000,000 authorized shares. Transactions in capital stock were
as follows:
SHARES AMOUNT
-------------------------- ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1995 1994 1995 1994
------------ ------------ -------------- --------------
CLASS A
Shares sold 14,452,683 21,946,095 $ 94,352,169 $ 209,028,752
Shares issued in
reinvestment of
dividends and
distributions 2,314,466 2,295,482 14,875,359 21,111,814
Shares redeemed (16,694,036) (12,811,114) (107,647,756) (116,080,684)
Net increase 73,113 11,430,463 $ 1,579,772 $ 114,059,882
CLASS B
Shares sold 29,670,771 102,755,123 $ 194,645,827 $ 992,033,470
Shares issued in
reinvestment of
dividends and
distributions 9,031,497 9,573,189 58,268,585 87,838,691
Shares redeemed (73,890,695) (37,684,580) (477,796,460) (335,913,399)
Net increase
(decrease) (35,188,427) 74,643,732 $(224,882,048) $ 743,958,762
CLASS C
Shares sold 6,692,492 48,593,915 $ 43,465,432 $ 476,032,862
Shares issued in
reinvestment of
dividends and
distributions 2,381,481 3,227,731 15,394,839 29,684,779
Shares redeemed (22,112,533) (36,333,163) (145,582,364) (337,645,064)
Net increase
(decrease) (13,038,560) 15,488,483 $ (86,722,093) $ 168,072,577
NOTE G: LITIGATION
In the first three months of 1995, thirteen purported class actions were filed
in federal district court against the Fund, the Adviser and others. In May
1995, these cases were consolidated into a single proceeding in United States
District Court. This action alleges violations of federal securities laws,
fraud, and breach of fiduciary duty in connection with the Fund's investments
in Mexican and Argentine securities and seeks 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
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------
YEAR ENDED NOVEMBER 30, MARCH 27, 1992*
---------------------------------- TO
1995 1994 1993 NOV. 30,1992
----------- ---------- --------- --------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.13 $10.35 $ 9.70 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 1.18(e) 1.02 1.09 .69(a)
Net realized and unrealized gain (loss) on
investment and foreign currency transactions (1.59) (2.12) .66 (.31)
Net increase (decrease) in net asset value
from operations (.41) (1.10) 1.75 .38
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income -0- (.91) (1.09) (.68)
Tax return of capital (.97) (.21) -0- -0-
Distributions from net realized gains -0- -0- (.01) -0-
Total dividends and distributions (.97) (1.12) (1.10) (.68)
Net asset value, end of period $ 6.75 $ 8.13 $10.35 $ 9.70
TOTAL RETURN
Total investment return based on net asset
value(d) (3.59)% (11.32)% 18.99% 3.49%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $252,608 $303,538 $268,233 $61,702
Ratio of expenses to average net assets 2.62% 1.70% 1.61% 2.45%(b)(c)
Ratio of expenses to average net assets
excluding interest expense (see Note E) 1.51% 1.37% 1.33% 1.66%(b)
Ratio of net investment income to average
net assets 18.09% 11.22% 10.77% 10.93%(b)
Portfolio turnover rate 180% 131% 254% 86%
</TABLE>
See footnote summary on page 17.
15
ALLIANCE NORTH AMERICAN
FINANCIAL HIGHLIGHTS (CONTINUED) GOVERNMENT INCOME TRUST, INC.
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS B
-------------------------------------------------------
YEAR ENDED NOVEMBER 30, MARCH 27, 1992*
-------------------------------------- TO
1995 1994 1993 NOV. 30,1992
----------- ------------ ----------- ---------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.13 $10.35 $ 9.70 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 1.13(e) .96 1.01 .64(a)
Net realized and unrealized gain (loss) on
investment and foreign currency transactions (1.61) (2.13) .67 (.31)
Net increase (decrease) in net asset value
from operations (.48) (1.17) 1.68 .33
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income -0- (.84) (1.02) (.63)
Tax return of capital (.90) (.21) -0- -0-
Distributions from net realized gains -0- -0- (.01) -0-
Total dividends and distributions (.90) (1.05) (1.03) (.63)
Net asset value, end of period $ 6.75 $ 8.13 $10.35 $ 9.70
TOTAL RETURN
Total investment return based on net asset
value(d) (4.63)% (11.89)% 18.15% 3.30%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $1,123,074 $1,639,602 $1,313,591 $216,317
Ratio of expenses to average net assets 3.33% 2.41% 2.31% 3.13%(b)(c)
Ratio of expenses to average net assets
excluding interest expense (see Note E) 2.22% 2.07% 2.04% 2.35%(b)
Ratio of net investment income to average
net assets 17.31% 10.53% 10.01% 10.16%(b)
Portfolio turnover rate 180% 131% 254% 86%
</TABLE>
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
-------------------------------------
YEAR ENDED NOVEMBER 30, MAY 3,1993**
----------------------- TO
1995 1994 NOV. 30,1993
----------- ---------- ------------
Net asset value, beginning of period $ 8.13 $10.34 $10.04
INCOME FROM INVESTMENT OPERATIONS
Net investment income 1.13(e) .96 .58
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions (1.61) (2.12) .30
Net increase (decrease) in net asset
value from operations (.48) (1.16) .88
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income -0- (.84) (.58)
Tax return of capital (.90) (.21) -0-
Total dividends and distributions (.90) (1.05) (.58)
Net asset value, end of period $ 6.75 $ 8.13 $10.34
TOTAL RETURN
Total investment return based on net
asset value(d) (4.63)% (11.89)% 9.00%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period(000's omitted) $219,009 $369,714 $310,230
Ratio of expenses to average net assets 3.33% 2.39% 2.21%(b)
Ratio of expenses to average net assets
excluding interest expense(see Note E) 2.21% 2.06% 2.04%(b)
Ratio of net investment income to
average net assets 17.32% 10.46% 9.74%(b)
Portfolio turnover rate 180% 131% 254%
* Commencement of operations.
** Commencement of distribution.
(a) Net of expense 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.
(d) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales charges or contingent
deferred sales charges are not reflected in the calculation of total investment
return. Total investment return calculated for a period of less than one year
is not annualized.
(e) Based on average shares outstanding.
17
REPORT OF ERNST & YOUNG LLP ALLIANCE NORTH AMERICAN
INDEPENDENT AUDITORS GOVERNMENT INCOME TRUST, INC.
_______________________________________________________________________________
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST, INC.
We have audited the accompanying statement of assets and liabilities of
Alliance North American Government Income Trust, Inc. (the 'Fund'), including
the portfolio of investments, as of November 30, 1995, and the related
statements of operations and cash flows for the year then ended, the statement
of changes in net assets for each of the two years in the period then ended and
the financial highlights for each of the periods indicated therein. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
November 30, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Alliance North American Government Income Trust, Inc. at November 30, 1995, the
results of its operations and its cash flows for the year then ended, the
changes in its net assets for each of the two years in the period then ended,
and the financial highlights for each of the indicated periods, in conformity
with generally accepted accounting principles.
New York, New York
January 10, 1996
18
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
KATHLEEN A. CORBET, 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.
ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST, INC.
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
ALLIANCECAPITAL A
MUTUAL FUNDS WITHOUT THE MYSTERY.SM
THIS REPORT IS INTENDED SOLELY FOR DISTRIBUTION TO CURRENT SHAREHOLDERS
OF THE FUND.
R THESE REGISTERED SERVICE MARKS USED UNDER LICENSE FROM THE OWNER,
ALLIANCE CAPITAL MANAGEMENT L.P.
NAGAR
