ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST
SEMI-ANNUAL REPORT
MAY 31, 1997
ALLIANCE CAPITAL
LETTER TO SHAREHOLDERS ALLIANCE NORTH AMERICAN
GOVERNMENT INCOME TRUST
_______________________________________________________________________________
July 1, 1997
Dear Shareholder:
Since our last report, the U.S. bond market has posted modest returns. After
rallying at the end of 1996, the market reversed direction in early 1997 and
gave up some of its earlier gains. Data indicating resurgent strength in the
economy, particularly within the labor market, renewed concerns about inflation
and pushed the bond market lower during the first quarter. In response to
continued strong growth, and what were perceived as potential inflationary
imbalances, the Federal Reserve raised interest rates in March, further eroding
bond market returns.
More recently, however, the bond market has been able to recapture most of its
earlier 1997 losses. The market rallied on data showing signs of a slowing
economy and well behaved inflation. Expectations of additional interest rate
increases by the Federal Reserve waned.
Debt prices in Argentina and Mexico have continued to rise as sound economic
policies and solid fundamentals promoted growth. Inflationary pressures remain
benign.
INVESTMENT RESULTS*
TOTAL RETURNS FOR PERIODS ENDED
MAY 31, 1997
6 MONTHS 12 MONTHS
---------- -----------
ALLIANCE NORTH AMERICAN GOVERNMENT
INCOME TRUST
Class A 5.91% 23.74%
Class B 5.44 22.64
Class C 5.44 22.63
LEHMAN BROTHERS AGGREGATE BOND INDEX 0.94 8.32
LEHMAN BROTHERS INTERMEDIATE-TERM
GOVERNMENT BOND INDEX 1.34 7.12
* THE TRUST'S INVESTMENT RESULTS ARE CUMULATIVE TOTAL RETURNS FOR THE PERIODS
AND ARE BASED ON NET ASSET VALUES AS OF 5/31/97. ALL FEES AND EXPENSES RELATED
TO THE OPERATION OF THE TRUST HAVE BEEN DEDUCTED, BUT NO ADJUSTMENT HAS BEEN
MADE FOR SALES CHARGES THAT MAY APPLY WHEN SHARES ARE PURCHASED OR REDEEMED.
RETURNS FOR THE TRUST AND ITS COMPARATIVE INDICES INCLUDE THE REINVESTMENT OF
ANY DISTRIBUTIONS PAID DURING THE PERIOD. THE LEHMAN BROTHERS INDICES ARE
UNMANAGED AND DO NOT REFLECT FEES OR EXPENSES.
We are pleased to report that Alliance North American Government Income Trust
posted solid returns over the most recent period. At left are the returns for
the Trust as well as for the overall bond market, represented by the Lehman
Brothers Aggregate Index, and the Lehman Brothers Intermediate-Term Government
Bond Index, which measures performance of bonds in the 1-10 year maturity
range. The Trust significantly outperformed both indices for both the 6- and
12-month periods. This was largely due to the trust's non-U.S. holdings.
ECONOMIC ENVIRONMENT
Following GDP growth of 3.8% in 1996, the economic pace in the U.S. continued
to accelerate in the first quarter of 1997, buoyed by continued growth in the
labor market. In the first five months of the year, monthly job growth averaged
229,000, higher than last year's monthly average of approximately 162,000 new
jobs. The production side of the economy also showed considerable strength.
First quarter industrial production was up by 4.9% over levels from a year
earlier and total hours worked increased by 3.8% over the same time period.
Overall, GDP growth jumped to 5.9% during the first three months of 1997--its
fastest rate of increase in nearly ten years.
During the second quarter, the bond market rallied as signs of a slowing
economy and benign inflation accumulated and expectations for another Federal
Reserve tightening were lowered. The rally was fueled by weak retail sales and
durable goods reports. The unemployment rate edged down to 4.8% in May, its
lowest level for twenty-three years, and wages increased very modestly. Despite
the strong growth, inflation remained well behaved.
MARKET REVIEW AND OUTLOOK
U.S. fixed income returns were subdued for the first five months of the year,
as gains in January and February were erased by higher interest rates in March.
U.S. economic growth has continued at a pace considered above the long-term,
non-inflationary rate. However, the most recent data indicate the economy is
slowing sharply from its first quarter pace and we expect the U.S. economy to
gradually slow over the next several quarters to a more sustainable growth
rate. We anticipate this slowing will occur before any substantial inflationary
pressures mate-
1
ALLIANCE NORTH AMERICAN
GOVERNMENT INCOME TRUST
_______________________________________________________________________________
rialize. Given the potential for further interest rate increases in the
near-term, the market will be particularly vulnerable to daily economic news
which may put upward pressure on yields. While we expect the Federal Reserve to
be preemptive in its fight against inflation, we do not expect the Federal
Reserve to step ahead of the market by increasing rates.
Outside the U.S., emerging debt prices continued to rise, although at a slower
pace than in the past two years. Higher U.S. interest rates negatively impacted
emerging market debt prices. However, bond markets in Mexico and Argentina
continued to outperform the U.S., due to strong economic growth and benign
inflationary pressures.
GEOGRAPHIC DIVERSIFICATION OF PORTFOLIO HOLDINGS
as of May 31, 1997
ARGENTINA 23.76%
U.S. 36.91%
MEXICO 23.76%
CANADA 15.57%
The Mexican economy continues to experience significant expansion, led by
strong growth in investment and exports. Growth is expected to remain strong at
around 4% in 1997, and inflation and interest rates should both decline during
the upcoming year.
In Canada, the economy is showing signs of sustainable growth. This should
enable the Bank of Canada to move towards a tighter monetary policy. We expect
that interest rates will increase during 1997 and, consequently, we anticipate
reducing our holdings in Canada for the short term and look for opportunities
in other markets. We expect that inflation will not increase beyond 2%, which
should keep yields for domestic long-term bonds in the 6% to 6.9% range.
In Argentina, the economy is gaining momentum and is on track for at least 5%
growth this year, after 4.4% growth in 1996. The recent decision by Standard &
Poor's to raise many Argentine corporate debt ratings underscores the economic
progress being made in this country.
Thank you for your continued interest and investment in Alliance North American
Government Income Trust. We look forward to reporting to you again on market
activity and the Trust's investment results.
Sincerely,
John D. Carifa
Chairman
Wayne D. Lyski
Chief Investment Officer
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, GUARANTEED OR ENDORSED
BY, ANY BANK; FURTHER, SUCH SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
2
INVESTMENT OBJECTIVE AND POLICIES ALLIANCE NORTH AMERICAN
GOVERNMENT INCOME TRUST
_______________________________________________________________________________
Alliance North American Government Income Trust is an open-end, non-diversified
investment company with an investment objective of seeking the highest level of
current income, consistent with what we believe to be prudent investment risk,
from a portfolio of debt securities issued or guaranteed by the governments of
the United States, Canada, and Mexico. The Trust's investment policies provide
that the Trust expects to maintain at least 25% of its assets in
U.S.-dollar-denominated securities and may invest up to 25% of its total assets
in debt securities issued by governmental entities in Argentina.
INVESTMENT RESULTS
AVERAGE ANNUAL TOTAL RETURNS AS OF MAY 31, 1997
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 23.74% 18.55%
Five Years 8.35% 7.41%
Since Inception* 8.31% 7.41%
SEC Yield** 9.99%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 22.64% 19.64%
Five Years 7.42% 7.42%
Since Inception* 7.39% 7.39%
SEC Yield** 9.71%
CLASS C SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 22.63% 21.63%
Since Inception* 6.49% 6.49%
SEC Yield** 9.72%
Average annual total returns reflect reinvestment of dividends and/or capital
gain distributions in additional shares, with and without the effect of the
4.25% maximum front-end sales charge for Class A or an 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 1 year 1% contingent deferred sales charge for accounts over
$1,000,000. Total returns for Advisor Class shares will differ due to different
expenses associated with that class.
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: 3/27/92, Class A and Class B; 5/3/93, Class C.
** SEC Yields are for the 30 days ended May 31, 1997.
3
PORTFOLIO OF INVESTMENTS ALLIANCE NORTH AMERICAN
MAY 31, 1997 (UNAUDITED) GOVERNMENT INCOME TRUST
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------------
ARGENTINA-29.0%
GOVERNMENT OBLIGATIONS-29.0%
Republic of Argentina
Pensioner-Bocon Pre III FRN
3.58%, 9/01/02 (a) 144,625 $ 119,777,957
Supplier-Bocon Pro I FRN
3.51%, 4/01/07 ARS 618,306 469,691,662
Total Argentinian Securities
(cost $479,390,464) 589,469,619
CANADA-19.0%
GOVERNMENT/AGENCY OBLIGATIONS-19.0%
Government of Canada
8.00%, 6/01/27 (b) CA$ 64,500 52,297,802
Province of British Columbia
7.88%, 11/30/23 (b) 36,000 27,346,392
8.00%, 9/08/23 (b) 24,600 19,434,882
9.00%, 8/23/24 (b) 25,000 21,914,262
Province of Manitoba
7.75%, 12/22/25 (b) 60,200 46,688,294
Province of Ontario
7.75%, 12/08/03 (b) 20,000 15,619,682
8.00%, 6/02/26 (b) 91,250 72,222,926
Province of Quebec
9.375%, 1/16/23 (b) 88,600 78,177,414
Province of Saskatchewan
9.60%, 2/04/22 (b) 24,600 22,685,905
Quebec Hydro
8.77%, 8/15/20 (c)(d) 250,000 29,870,741
Total Canadian Securities
(cost $353,863,887) 386,258,300
MEXICO-29.0%
GOVERNMENT/AGENCY OBLIGATIONS-29.0%
Bankers Acceptances
Nacional Financiera S.N.C. (d)
15.00%, 8/13/98 MXP 80,180 7,859,762
16.50%, 12/26/03 414,125 11,383,470
16.95%, 12/24/03 81,401 2,238,987
17.50%, 12/11/03 55,253 1,526,277
Mexican Treasury Bills (d)
21.42%, 11/13/97 MXP 75,081 $ 8,637,298
22.15%, 12/04/97 197,089 22,411,180
23.16%, 5/07/98 774,729 80,647,895
23.50%, 3/05/98 204,792 22,121,474
23.86%, 4/02/98 593,548 65,090,603
23.90%, 2/04/98 66,126 7,251,648
24.58%, 7/17/97 84,320 10,382,677
25.47%, 12/31/97 157,216 17,628,647
26.54%, 11/06/97 712,219 82,248,374
26.70%, 10/02/97 257,958 30,360,531
27.90%, 6/05/97 516,971 65,193,492
29.10%, 7/31/97 753,658 92,086,224
30.85%, 7/03/97 216,194 26,880,629
32.09%, 9/04/97 295,743 35,443,512
Total Mexican Securities
(cost $677,310,320) 589,392,680
UNITED STATES-44.9%
U.S. GOVERNMENT/AGENCY OBLIGATIONS-44.9%
Government National Mortgage Association
9.75%, 6/15/24 US$ 16,355 17,230,309
U.S. Treasury Bonds
6.625%, 2/15/27 78,000 75,148,086
6.75%, 8/15/26 55,000 53,539,035
12.00%, 8/15/13 66,200 92,493,779
12.375%, 5/15/04 41,200 54,216,604
12.50%, 8/15/14 19,000 27,710,303
14.00%, 11/15/11 31,900 47,810,125
U.S. Treasury Notes
6.125%, 8/31/98 18,500 18,534,688
6.25%, 10/31/01 60,000 59,437,500
6.25%, 2/15/07 89,000 86,496,875
6.625%, 3/31/02 88,900 89,316,674
6.625%, 4/30/02 34,000 34,159,358
6.75%, 4/30/00 46,100 46,575,383
4
ALLIANCE NORTH AMERICAN
GOVERNMENT INCOME TRUST
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------------
U.S. Treasury Strips
Zero Coupon, 5/15/09 US$ 52,430 $ 23,226,543
Zero Coupon, 5/15/10 384,970 158,514,477
Zero Coupon, 2/15/11 70,000 27,264,930
Zero Coupon, 5/15/14 13,400 4,106,577
Total United States Securities
(cost $934,273,271) 915,781,246
TOTAL INVESTMENTS-121.9%
(cost $2,444,837,942) $2,480,901,845
Other assets less liabilities-(21.9)% (446,033,109)
NET ASSETS-100% $2,034,868,736
(a) Interest is compounded monthly and capitalized until October 1, 1998,
after which the security holder will receive monthly paydowns of principal and
interest until maturity.
(b) Securities, or portion thereof, with an aggregate market value of
$356,387,559 have been segregated to collateralize forward exchange currency
contracts.
(c) Private Placement, valued at fair value. (see Note A.)
(d) Interest rate represents annualized yield to maturity at purchase date.
Glossary:
FRN - Floating rate note
See notes to financial statements.
5
STATEMENT OF ASSETS AND LIABILITIES ALLIANCE NORTH AMERICAN
MAY 31, 1997 (UNAUDITED) GOVERNMENT INCOME TRUST
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $2,444,837,942) $2,480,901,845
Cash 62,293
Receivable for investment securities sold 24,488,203
Interest receivable 23,654,858
Receivable for capital stock sold 8,724,465
Unrealized appreciation of forward exchange
currency contracts 3,117,372
Other assets 115,702
Total assets 2,541,064,738
LIABILITIES
Loan payable 250,000,000
Payable for investment securities purchased 234,205,157
Dividend payable 10,174,932
Payable for capital stock redeemed 4,501,322
Loan interest payable 2,935,695
Advisory fee payable 1,292,360
Distribution fee payable 472,561
Accrued expenses 2,613,975
Total liabilities 506,196,002
NET ASSETS $2,034,868,736
COMPOSITION OF NET ASSETS
Capital stock, at par $ 255,059
Additional paid-in capital 2,269,877,106
Distribution in excess of net investment income (13,450,333)
Accumulated net realized loss on investments and
foreign currency transactions (261,157,400)
Net unrealized appreciation of investments and foreign
currency denominated assets and liabilities 39,344,304
$2,034,868,736
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share
($430,757,638 / 54,004,060 shares of capital stock
issued and outstanding) $7.98
Sales charge--4.25% of public offering price .35
Maximum offering price $8.33
CLASS B SHARES
Net asset value and offering price per share
($1,342,657,356 / 168,285,191 shares of capital stock
issued and outstanding) $7.98
CLASS C SHARES
Net asset value and offering price per share
($261,453,742 / 32,769,335 shares of capital stock
issued and outstanding) $7.98
See notes to financial statements.
6
STATEMENT OF OPERATIONS ALLIANCE NORTH AMERICAN
SIX MONTHS ENDED MAY 31, 1997 (UNAUDITED) GOVERNMENT INCOME TRUST
_______________________________________________________________________________
INVESTMENT INCOME
Interest (net of foreign taxes
withheld of $139,545) $ 159,846,662
EXPENSES
Advisory fee $ 7,225,442
Distribution fee - Class A 599,144
Distribution fee - Class B 6,594,818
Distribution fee - Class C 1,270,676
Custodian 1,698,666
Transfer agency 1,511,642
Printing 149,247
Audit and legal 95,927
Administrative 86,231
Taxes 53,459
Registration 48,760
Amortization of organization expenses 21,187
Directors' fees 13,212
Miscellaneous 48,036
Total expenses before interest 19,416,447
Interest expense 7,978,235
Total expenses 27,394,682
Net investment income 132,451,980
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain on investment
transactions 8,287,846
Net realized gain on foreign
currency transactions 9,348,758
Net change in unrealized appreciation of:
Investments (40,000,874)
Foreign currency denominated assets
and liabilities (1,831,228)
Net loss on investments (24,195,498)
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 108,256,482
See notes to financial statements.
7
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE NORTH AMERICAN
GOVERNMENT INCOME TRUST
_______________________________________________________________________________
SIX MONTHS ENDED YEAR ENDED
MAY 31, 1997 NOVEMBER 30,
(UNAUDITED) 1996
---------------- ---------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income $ 132,451,980 $ 253,011,440
Net realized gain (loss) on investments
and foreign currency transactions 17,636,604 (166,940,464)
Net change in unrealized appreciation
(depreciation) of investments and
foreign currency denominated assets and
liabilities (41,832,102) 435,674,111
Net increase in net assets from operations 108,256,482 521,745,087
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (24,664,019) (31,636,818)
Class B (75,476,918) (115,651,793)
Class C (14,548,983) (22,209,685)
Tax return of capital
Class A -0- (9,263,080)
Class B -0- (33,862,188)
Class C -0- (6,502,870)
CAPITAL STOCK TRANSACTIONS
Net increase 75,123,522 68,868,628
Total increase 68,690,084 371,487,281
NET ASSETS
Beginning of year 1,966,178,652 1,594,691,371
End of period $2,034,868,736 $1,966,178,652
See notes to financial statements.
8
STATEMENT OF CASH FLOWS ALLIANCE NORTH AMERICAN
SIX MONTHS ENDED MAY 31, 1997 (UNAUDITED) GOVERNMENT INCOME TRUST
_______________________________________________________________________________
INCREASE (DECREASE) IN CASH FROM:
OPERATING ACTIVITIES:
Interest received $ 52,650,220
Interest paid (7,990,805)
Operating expenses paid (18,051,766)
Net increase in cash from operating
activities $ 26,607,649
INVESTING ACTIVITIES:
Proceeds from disposition of short-term
portfolio investments, net 50,699,578
Purchases of long-term portfolio
investments (1,411,149,599)
Proceeds from disposition of long-term
portfolio investments 1,351,063,250
Net decrease in cash from investing
activities (9,386,771)
FINANCING ACTIVITIES*:
Subscriptions of capital stock, net 70,032,662
Cash dividends paid (110,745,358)
Net decrease in cash from financing
activities (40,712,696)
Effect of exchange rate on cash 16,355,934
Net decrease in cash (7,135,884)
Cash at beginning of year 7,198,177
Cash at end of period $ 62,293
RECONCILIATION OF NET INCREASE IN NET ASSETS
FROM OPERATIONS TO NET INCREASE IN CASH FROM
OPERATING ACTIVITIES:
Net increase in net assets from operations $ 108,256,482
ADJUSTMENTS:
Decrease in interest receivable $ 984,655
Net realized gain on investment transactions (8,287,846)
Net change in unrealized appreciation of
investments and foreign currency
denominated assets and liabilities 41,832,102
Accretion of bond discount (108,181,096)
Increase in accrued expenses and other
liabilities 1,352,110
Net realized gain on foreign currency
transactions (9,348,758)
(81,648,833)
Net increase in cash from operating activities $ 26,607,649
* Non-cash financing activities not included herein consist of reinvestment
of dividends.
See notes to financial statements.
9
NOTES TO FINANCIAL STATEMENTS ALLIANCE NORTH AMERICAN
MAY 31, 1997 (UNAUDITED) GOVERNMENT INCOME TRUST
_______________________________________________________________________________
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 management investment company. The Fund offers Class A, Class B and
Class C shares. Class A shares are sold with a front-end sales charge of up to
4.25% for purchases not exceeding $1,000,000. With respect to purchases of
$1,000,000 or more, Class A shares redeemed within one year of purchase will be
subject to a contingent deferred sales charge of 1%. Class B shares are 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 purchased on or after July 1, 1996, are
subject to a contingent deferred sales charge of 1% on redemptions made within
the first year after purchase. All three classes of shares have identical
voting, dividend, liquidation and other rights with respect to its distribution
plan. The following is a summary of significant accounting policies followed by
the Fund.
1. SECURITY VALUATION
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. However, readily marketable portfolio securities may be
valued on the basis of prices provided by a pricing service when such prices
are believed by the Adviser to reflect the fair value of such securities.
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
which mature in 60 days or less are valued at amortized cost, which
approximates market value, unless this method does not represent fair value.
Securities for which market quotations are not readily available and restricted
securities are valued in good faith at fair value using methods determined by
the Board of Directors. In determining fair value, consideration is given to
cost, operating and other financial data.
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 gains on foreign currency transactions represent foreign exchange
gains and losses from sales and maturities of foreign securities and foreign
exchange currency contracts, holding of foreign currencies, exchange gains or
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 appreciation of investments and
foreign currency denominated assets and liabilities.
3. ORGANIZATION EXPENSES
Organization expenses of approximately $331,965 have been deferred and were
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 INVESTMENT TRANSACTIONS
Interest income is accrued daily. Investment transactions are accounted for on
the date securities are purchased or sold. Investment gains and losses are
determined on the identified cost basis. The Fund accretes discount as an
adjustment to interest income.
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.
10
ALLIANCE NORTH AMERICAN
GOVERNMENT INCOME TRUST
_______________________________________________________________________________
For federal income tax purposes, the Fund's distributions of income and capital
gains are subject to recharacterization, which may include a tax return of
capital, at the end of the year to reflect the final investment results for
that year.
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.
Pursuant to the advisory agreement, the Fund paid the Adviser $86,231
representing the cost of certain legal and accounting services provided to the
Fund by the Adviser for the six months ended May 31, 1997.
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 $765,752 for the six months ended May 31, 1997.
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 $125,629 from the sale of Class A shares and $138,
$733,762 and $34,273 in contingent deferred sales charges imposed upon
redemptions by shareholders of Class A, Class B and Class C shares,
respectively, for the six months ended May 31, 1997.
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. 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 both 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 $35,369,373 and $3,674,920 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.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments
and U.S. government securities) aggregated $174,315,031 and $291,214,110,
respectively, for the six months ended May 31, 1997. There were purchases of
$1,197,484,037 and sales of $1,030,012,099 of U.S. government and government
agency obligations for the six months ended May 31, 1997.
At May 31, 1997, the cost of investments for federal income tax purposes was
$2,466,032,158. Accordingly, gross unrealized appreciation of investments was
$148,246,231 and gross unrealized depreciation of investments was $133,376,544
resulting in net unrealized appreciation of $14,869,687. At November 30, 1996,
the Fund had a capital loss carryforward totaling $244,497,492, of which
$70,618,925 expires in the year 2002, $134,381,470 expires in the year 2003,
and $39,497,097 expires in the year 2004.
FORWARD EXCHANGE CURRENCY CONTRACTS
The Fund enters into forward foreign exchange currency contracts for investment
purposes and to hedge its exposure to changes in foreign currency exchange
rates on its foreign portfolio holdings and to hedge certain firm
11
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE NORTH AMERICAN
GOVERNMENT INCOME TRUST
_______________________________________________________________________________
purchase and sales 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 contracts and the closing of
such contracts 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 other liquid high quality debt 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 the 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. The face or contract amount, in U.S.
dollars, as reflected in the following table, reflects the total exposure of
the Fund in that particular currency contract.
At May 31, 1997, 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 CONTRACT
Canadian Dollars
expiring
6/02/97-6/30/97 481,507,607 $352,163,665 $349,046,293 $3,117,372
NOTE E: BANK BORROWING
The Fund entered into a Revolving Credit Agreement with Deutsche Bank AG, New
York Branch on June 25, 1996. The maximum credit available under the credit
facility is $250,000,000 and requires no collateralization. The loan
outstanding, under the Credit Agreement for the six months ended May 31, 1997
was $250,000,000 with a related weighted average interest rate at period end of
6.08% and a weighted average annualized interest rate of 6.25%. The
$250,000,000 balance will mature on June 24, 1997. Interest payments on current
borrowings are based on the Eurodollar margin plus the applicable Eurodollar
rate. The Fund is also obligated to pay Deutsche Bank AG, New York Branch a
facility fee computed at the rate of .15% per annum on the daily amount of the
total commitment as in effect.
12
ALLIANCE NORTH AMERICAN
GOVERNMENT INCOME TRUST
_______________________________________________________________________________
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 shares.
Each class consists of 3,000,000,000 authorized shares. Transactions in capital
stock were as follows:
SHARES AMOUNT
--------------------------- ------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
MAY 31, 1997 NOV. 30, MAY 31, 1997 NOV. 30,
(UNAUDITED) 1996 (UNAUDITED) 1996
------------ ------------ -------------- --------------
CLASS A
Shares sold 7,559,094 18,944,431 $ 59,743,145 $ 140,393,513
Shares issued in
reinvestment of
dividends and
distributions 1,078,828 2,057,846 8,545,088 15,163,942
Shares converted
from Class B 3,260,835 2,279,998 25,803,742 16,873,171
Shares redeemed (6,079,686) (12,520,904) (48,022,034) (93,408,830)
Net increase 5,819,071 10,761,371 $ 46,069,941 $ 79,021,796
CLASS B
Shares sold 19,796,121 35,540,009 $ 156,743,536 $ 262,230,157
Shares issued in
reinvestment of
dividends and
distributions 2,739,951 6,054,943 21,711,684 44,586,197
Shares converted
to Class A (3,260,835) (2,279,998) (25,803,742) (16,873,171)
Shares redeemed (17,073,736) (39,607,584) (135,078,618) (291,766,451)
Net increase
(decrease) 2,201,501 (292,630) $ 17,572,860 $ (1,823,268)
CLASS C
Shares sold 5,255,370 8,095,161 $ 41,520,461 $ 59,728,484
Shares issued in
reinvestment of
dividends and
distributions 572,205 1,232,338 4,535,019 9,077,697
Shares redeemed (4,367,984) (10,461,384) (34,574,759) (77,136,081)
Net increase
(decrease) 1,459,591 (1,133,885) $ 11,480,721 $ (8,329,900)
NOTE G: LITIGATION
On July 25, 1995, a Consolidated and Supplemental Class Action Complaint
("Complaint"), styled IN RE NORTH AMERICAN GOVERNMENT INCOME TRUST, INC.
SECURITIES LITIGATION, was filed in the U.S. District Court for the Southern
District of New York against the Fund, the Adviser, Alliance Capital Management
Corporation ("ACMC"), Alliance Fund Distributors, Inc. ("AFD"), The Equitable
Companies Incorporated ("The Equitable"), a parent of the Adviser, and certain
current and former officers and directors of the Fund and ACMC, alleging
violations of the federal securities laws, fraud and breach of fiduciary duty
in connection with the Fund's investments in Mexican and Argentine securities.
The Complaint sought certification of a plaintiff class of all persons who
purchased or owned Class A, B or C shares of the Fund from March 27, 1992
through December 23, 1994. On September 26, 1996, the District Court granted
defendants' motion to dismiss the Complaint as to all claims.
On October 29, 1996, plaintiffs filed a motion for leave to file an amended
complaint. In the proposed amended complaint ("Amended Complaint"), plaintiffs
asserted claims against the Fund, the Adviser, ACMC, AFD, The Equitable, and
certain current and former officers and directors of the Fund and ACMC alleging
violations of federal securities laws, fraud and breach of fiduciary duty. The
principal allegations of the Amended Complaint related to (i) the Fund's
hedging practices, (ii) the
13
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE NORTH AMERICAN
GOVERNMENT INCOME TRUST
_______________________________________________________________________________
Fund's investments in certain mortgage-backed securities, and (iii) the risks
and objectives of the Fund as described in the Fund's marketing materials. The
Amended Complaint made similar requests for class certification as the
Complaint. On July 15, 1997, the District Court denied plaintiffs' motion for
leave to file the Amended Complaint and ordered that the case be dismissed.
Plaintiffs have 30 days from the time a final judgement is entered in the case
to file an appeal from the District Court's decision. The Fund and the Adviser
believe that the allegations in the Complaint and the Amended Complaint are
without merit and intend to defend vigorously against these claims.
NOTE H: CONCENTRATION OF RISK
Investing in securities of foreign governments involves special risks which
include revaluation of currencies and the possibility of future adverse
political and economic developments. Moreover, securities of many foreign
governments and their markets may be less liquid and their prices more volatile
than those of the United States government. The Fund may invest in the
sovereign debt obligations of countries that are considered emerging market
countries at the time of purchase. Therefore, the Fund is susceptible to
governmental factors and economic and debt restructuring developments adversely
affecting the economies of these emerging market countries. In addition, these
debt obligations may be less liquid and subject to greater volatility than debt
obligations of more developed countries.
14
FINANCIAL HIGHLIGHTS ALLIANCE NORTH AMERICAN
GOVERNMENT INCOME TRUST
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------------------------
SIX MONTHS MARCH 27,
ENDED 1992(A)
MAY 31, YEAR ENDED NOVEMBER 30, TO
1997 -------------------------------------------------- NOV. 30,
(UNAUDITED) 1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.01 $ 6.75 $ 8.13 $10.35 $ 9.70 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .55(b) 1.09(b) 1.18(b) 1.02 1.09 .69(c)
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions (.09) 1.14 (1.59) (2.12) .66 (.31)
Net increase (decrease) in net asset
value from operations .46 2.23 (.41) (1.10) 1.75 .38
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.49) (.75) -0- (.91) (1.09) (.68)
Tax return of capital -0- (.22) (.97) (.21) -0- -0-
Distributions from net realized gains -0- -0- -0- -0- (.01) -0-
Total dividends and distributions (.49) (.97) (.97) (1.12) (1.10) (.68)
Net asset value, end of period $ 7.98 $ 8.01 $ 6.75 $ 8.13 $10.35 $ 9.70
TOTAL RETURN
Total investment return based on net
asset value(d) 5.91% 35.22% (3.59)% (11.32)% 18.99% 3.49%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $430,758 $385,784 $252,608 $303,538 $268,233 $61,702
Ratio of expenses to average net assets 2.23%(e) 2.34% 2.62% 1.70% 1.61% 2.45%(e)(f)
Ratio of expenses to average net assets
excluding interest expense (g) 1.41%(e) 1.41% 1.51% 1.37% 1.33% 1.66%(e)
Ratio of net investment income to
average net assets 14.06%(e) 14.82% 18.09% 11.22% 10.77% 10.93%(e)
Portfolio turnover rate 142% 166% 180% 131% 254% 86%
</TABLE>
See footnote summary on page 17.
15
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE NORTH AMERICAN
GOVERNMENT INCOME TRUST
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS B
------------------------------------------------------------------------------
SIX MONTHS MARCH 27,
ENDED 1992(A)
MAY 31, YEAR ENDED NOVEMBER 30, TO
1997 -------------------------------------------------- NOV. 30,
(UNAUDITED) 1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.01 $ 6.75 $ 8.13 $10.35 $ 9.70 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .53(b) 1.04(b) 1.13(b) .96 1.01 .64(c)
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions (.11) 1.12 (1.61) (2.13) .67 (.31)
Net increase (decrease) in net asset
value from operations .42 2.16 (.48) (1.17) 1.68 .33
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.45) (.69) -0- (.84) (1.02) (.63)
Tax return of capital -0- (.21) (.90) (.21) -0- -0-
Distributions from net realized gains -0- -0- -0- -0- (.01) -0-
Total dividends and distributions (.45) (.90) (.90) (1.05) (1.03) (.63)
Net asset value, end of period $ 7.98 $ 8.01 $ 6.75 $ 8.13 $10.35 $ 9.70
TOTAL RETURN
Total investment return based on net
asset value(d) 5.44% 33.96% (4.63)% (11.89)% 18.15% 3.30%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $1,342,657 $1,329,719 $1,123,074 $1,639,602 $1,313,591 $216,317
Ratio of expenses to average net assets 2.94%(e) 3.05% 3.33% 2.41% 2.31% 3.13%(e)(f)
Ratio of expenses to average net assets
excluding interest expense (g) 2.12%(e) 2.12% 2.22% 2.07% 2.04% 2.35%(e)
Ratio of net investment income to
average net assets 13.36%(e) 14.20% 17.31% 10.53% 10.01% 10.16%(e)
Portfolio turnover rate 142% 166% 180% 131% 254% 86%
</TABLE>
See footnote summary on page 17.
16
ALLIANCE NORTH AMERICAN
GOVERNMENT INCOME TRUST
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS C
-----------------------------------------------------------------
SIX MONTHS MAY 3,
ENDED 1993(H)
MAY 31, YEAR ENDED NOVEMBER 30, TO
1997 ------------------------------------- NOV. 30,
(UNAUDITED) 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.01 $ 6.75 $ 8.13 $10.34 $10.04
INCOME FROM INVESTMENT OPERATIONS
Net investment income .53(b) 1.05(b) 1.13(b) .96 .58
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions (.11) 1.11 (1.61) (2.12) .30
Net increase (decrease) in net asset
value from operations .42 2.16 (.48) (1.16) .88
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.45) (.69) -0- (.84) (.58)
Tax return of capital -0- (.21) (.90) (.21) -0-
Total dividends and distributions (.45) (.90) (.90) (1.05) (.58)
Net asset value, end of period $ 7.98 $ 8.01 $ 6.75 $ 8.13 $10.34
TOTAL RETURN
Total investment return based on net
asset value(d) 5.44% 33.96% (4.63)% (11.89)% 9.00%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $261,454 $250,676 $219,009 $369,714 $310,230
Ratio of expenses to average net assets 2.93%(e) 3.04% 3.33% 2.39% 2.21%(e)
Ratio of expenses to average net assets
excluding interest expense (g) 2.12%(e) 2.12% 2.21% 2.06% 2.04%(e)
Ratio of net investment income to
average net assets. 13.37%(e) 14.22% 17.32% 10.46% 9.74%(e)
Portfolio turnover rate 142% 166% 180% 131% 254%
</TABLE>
(a) Commencement of operations.
(b) Based on average shares outstanding.
(c) Net of expenses waived by the Adviser.
(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) Annualized.
(f) 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.
(g) Net of interest expense of .82%, .93%, 1.11%, .33%, .28% and .79%,
respectively, since inception on loan agreement (see Note E).
(h) Commencement of distribution.
17
ALLIANCE NORTH AMERICAN
GOVERNMENT INCOME TRUST
_______________________________________________________________________________
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)
DONALD J. ROBINSON (1)
OFFICERS
KATHLEEN A. CORBET, SENIOR VICE PRESIDENT
WAYNE D. LYSKI, SENIOR VICE PRESIDENT
EDMUND P. BERGAN, JR., SECRETARY
MARK D. GERSTEN, TREASURER & CHIEF FINANCIAL OFFICER
JUAN J. RODRIGUEZ, 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
THE ALLIANCE FAMILY OF MUTUAL FUNDS
_______________________________________________________________________________
FIXED INCOME
Alliance Bond Fund
U.S. Government Portfolio
Corporate Bond Portfolio
Alliance Global Dollar Government Fund
Alliance Global Strategic Income Trust
Alliance High Yield Fund
Alliance Mortgage Securities Income Fund
Alliance Limited Maturity Government Fund
Alliance Multi-Market Strategy Trust
Alliance North American Government Income Trust
Alliance Short-Term Multi-Market Trust
Alliance Short-Term U.S. Government Fund
Alliance World Income Trust
TAX-FREE INCOME
Alliance Municipal Income Fund
California Portfolio
Insured California Portfolio
Insured National Portfolio
National Portfolio
New York Portfolio
Alliance Municipal Income Fund II
Arizona Portfolio
Florida Portfolio
Massachusetts Portfolio
Michigan Portfolio
Minnesota Portfolio
New Jersey Portfolio
Ohio Portfolio
Pennsylvania Portfolio
Virginia Portfolio
MONEY MARKET
AFD Exchange Reserves
GROWTH
The Alliance Fund
Alliance Global Small Cap Fund
Alliance Growth Fund
Alliance Premier Growth Fund
Alliance/Regent Sector Opportunity Fund
GROWTH & INCOME
Alliance Strategic Balanced Fund
Alliance Balanced Shares
Alliance Conservative Investors Fund
Alliance Growth & Income Fund
Alliance Growth Investors Fund
Alliance Income Builder Fund
Alliance Real Estate Investment Fund
Alliance Utility Income Fund
AGGRESSIVE GROWTH
Alliance Quasar Fund
Alliance Technology Fund
INTERNATIONAL
Alliance All-Asia Investment Fund
Alliance International Fund
Alliance New Europe Fund
Alliance Worldwide Privatization Fund
CLOSED-END FUNDS
Alliance All-Market Advantage Fund
Alliance Global Environment Fund
ACM Government Income Fund
ACM Government Opportunity Fund
ACM Government Securities Fund
ACM Government Spectrum Fund
ACM Managed Dollar Income Fund
ACM Managed Income Fund
ACM Municipal Securities Income Fund
Alliance World Dollar Government Fund
Alliance World Dollar Government Fund II
The Austria Fund
The Korean Investment Fund
The Spain Fund
The Southern Africa Fund
CASH MANAGEMENT SERVICES
ACM Institutional Reserves
Government Portfolio
Prime Portfolio
Tax-Free Portfolio
Trust Portfolio
Alliance Capital Reserves
Alliance Government Reserves
Alliance Insured Account
Alliance Money Reserves
Alliance Municipal Trust
California Portfolio
Connecticut Portfolio
Florida Portfolio
General Portfolio
Massachusetts Portfolio
New Jersey Portfolio
New York Portfolio
Virginia Portfolio
Alliance Treasury Reserves
Alliance Money Market Fund
Prime Portfolio
Government Portfolio
General Municipal Portfolio
19
ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
ALLIANCE CAPITAL
THIS REPORT IS INTENDED SOLELY FOR DISTRIBUTION TO CURRENT SHAREHOLDERS
OF THE FUND.
R THESE REGISTERED SERVICE MARKS USED UNDER LICENSE FROM THE OWNER,
ALLIANCE CAPITAL MANAGEMENT L.P.
NAGSR
