MULTI-SECTOR FIXED INCOME
[GRAPHIC OMITTED]
Alliance North
American Government
Income Trust
Semi-Annual Report
May 31, 2000
AllianceCapital [LOGO](R)
The Investment Professional's Choice
<PAGE>
Investment Products Offered
---------------------------
o Are Not FDIC Insured
o May Lose Value
o Are Not Bank Guaranteed
---------------------------
<PAGE>
----------------------
LETTER TO SHAREHOLDERS
----------------------
LETTER TO SHAREHOLDERS
July 11, 2000
Dear Shareholder:
We are pleased to report to you on our strategy, performance and outlook for
Alliance North American Government Income Trust (the "Fund") for the semi-annual
reporting period ended May 31, 2000.
Investment Objectives and Policies
The Fund 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 that is available from a portfolio of
debt securities issued or guaranteed by the governments of the United States,
Canada or Mexico, their political subdivisions (including Canadian Provinces but
excluding states of the United States) agencies, instrumentalities or
authorities. The Fund also invests significantly in debt securities issued by
Argentine government entities.
Investment Results
The following table shows how the Fund performed over the six- and 12-month
periods ended May 31, 2000. For comparison, we have included the Lehman Brothers
Aggregate Bond Index, a standard measure of the performance of the overall U.S.
bond market, and the Lehman Brothers Intermediate-Term Government Bond Index,
which measures the performance of U.S. bonds in the one- to 10-year maturity
range.
We are pleased to report to you that the Fund outperformed both the Lehman
Brothers Aggregate Bond Index and the Lehman Brothers Intermediate-Term
Government Bond Index for both the six- and 12-month periods ended May 31, 2000.
(Neither index holds emerging market debt.) Overall, performance was enhanced by
our use of longer-dated maturity U.S. Treasury securities. Our holdings in
Mexico, Argentina and Canada also helped to enhance performance.
INVESTMENT RESULTS*
Periods Ended May 31, 2000
-------------------
Total Returns
-------------------
6 Months 12 Months
-----------------------------------
Alliance
North American
Government
Income Trust
Class A 6.01% 11.02%
-----------------------------------
Class B 5.50% 10.06%
-----------------------------------
Class C 5.50% 10.06%
-----------------------------------
Lehman Brothers
Aggregate
Bond Index 1.38% 2.11%
-----------------------------------
Lehman Brothers
Intermediate-Term
Government
Bond Index 1.55% 3.00%
-----------------------------------
* The Fund's investment results are total returns for the periods shown and
are based on the net asset value of each class of shares as of May 31,
2000. All fees and expenses related to the operation of the Fund have been
deducted, but no adjustment has been made for sales charges that may apply
when shares are purchased or redeemed. Past performance is no guarantee of
future results.
The unmanaged Lehman Brothers Aggregate Bond Index is composed of the
Lehman Brothers Mortgage-Backed Securities Index, the Lehman Brothers
Asset-Backed Securities Index and the Lehman
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ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST o 1
<PAGE>
----------------------
LETTER TO SHAREHOLDERS
----------------------
Brothers Government/Corporate Bond Index. The unmanaged Lehman Brothers
Intermediate-Term Government Bond Index measures performance of bonds in
the one- to 10-year maturity range. An investor cannot invest directly in
an index, and its results are not indicative of the performance for any
specific investment, including Alliance North American Government Income
Trust.
Additional investment results appear on pages 5 - 8.
Market Overview
The global macroeconomic outlook continued to brighten during the reporting
period. In the U.S., the economy grew 7.3% during the final quarter of 1999 and
5.5% during the first quarter of 2000. Consumer spending remained strong and
unemployment reached historic lows. The rise in commodity prices, led by oil,
temporarily spiked U.S. inflation in March on a year-over-year basis, however
non-energy prices remained relatively tame through April. Strong U.S. economic
activity has prompted the Federal Reserve to increase official interest rates to
6.50%.
In aggregate, the U.S. bond market posted a return of 1.38%, as represented by
the Lehman Brothers U.S. Aggregate Index for the six-month period. Among the
sectors of the U.S. bond market, the U.S. Government sector recorded the
strongest performance of 2.46%, according to the index, followed by
mortgage-backed securities which returned 1.25%. The corporate and high yield
sectors, recording -0.37% and -2.09% respectively, according to the index, had
the weakest performance. Government securities outperformed as equity markets
became more volatile and investors focused on the Treasury buy-back program.
(The Treasury buy-back program is part of a long term government plan to lower
outstanding debt while there is a government budget surplus.) Two-year Treasury
yields rose from 5.78% to 6.67%, while 30-year Treasury yields fell from 6.16%
to 5.96%.
Emerging market debt posted a return of 8.45%, as measured by the J.P. Morgan
Emerging Markets Bond Index Plus (JPM EMBI+) during the six-month period under
review. Monetary tightening in the U.S., combined with political and fiscal
uncertainties in several emerging markets and volatility in the domestic equity
markets, hurt performance in this sector. Early in the period, stronger global
growth outweighed the effects of tighter U.S. monetary policy. However, toward
the end of the period, U.S. rate hikes dampened performance in this sector.
Russia posted the largest gains, recording 53.89% as measured by the JPM EMBI+
weightings. With a recovering economy and a new government in place, the Russian
government is now able to focus on enacting economic reforms, resurrecting
International Monetary Fund (IMF) negotiations, and progressing on restructuring
negotiations with debt holders.
Other outperformers in the Latin American region were Brazil, with gains of
8.08%, Venezuela, 6.88%, Mexico, 5.89% and Argentina, 4.12%. Brazil outperformed
all the Latin American countries as a result of bet-
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2 o ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST
<PAGE>
----------------------
LETTER TO SHAREHOLDERS
----------------------
ter-than-expected fiscal performance, export growth and conservative money
management by the government. The worst performing individual countries in the
region were Ecuador, -9.54% and Colombia, -7.64%. Pending discussions on the
restructuring of its outstanding external debt, continued weakness of its
banking industry and anti-dollarization protests contributed to Ecuador's weak
performance.
During the past six months, Mexico benefited from an upgrade to investment
grade. The upgrade reflects Mexico's lower foreign currency debt burden
underpinned by a well-integrated export sector. The country's progress toward a
multiparty democracy, and the widespread consensus in the government on the
importance of sound financial policies, also contributed to its upgrade. The
truly significant progress was in the banking sector reform of the past few
months. Even though tightening by the U.S. Federal Reserve has taken some steam
out of the Mexican economy, it has been offset by not only the healing of the
banking sector, but also by robust oil prices and sound fiscal policy. The Latin
American region is certainly the most vulnerable to policy changes implemented
by the U.S. Federal Reserve, and Argentina is probably the country most affected
by higher U.S. interest rates. Rising U.S. interest rates have delayed
Argentina's economic recovery and impeded its growth prospects as a result of
the country's heavy dependence on external financing, constrained fiscal policy
and rigid exchange rate policy.
In Canada, the unexpected strong performance of Canadian government bonds
relative to other markets in January and February, stalled in late March due to
the volatility in the equity markets. Headline inflation fell to 2.1% from 3.0%
in April as a result of the drop in crude oil prices. However, this decline did
not ease the Bank of Canada's fears of rising inflation. In May, the Bank of
Canada followed in the Federal Reserve's footsteps by increasing interest rates
by 50 basis points from 5.25% to 5.75%.
Investment Strategy
The Fund continues to be invested in government debt of the following countries:
Mexico, Argentina, Canada and the U.S. Over the six-month period under review,
we reduced the Fund's exposure to Argentina, Mexico and to a lesser extent,
Canada, in favor of the U.S. We increased the U.S. Treasury exposure to
effectively capitalize on the Treasury buy-back program and the inversion of the
yield curve. Even though we currently hold a positive outlook on Mexico, we
reduced our exposure to Mexican debt because of the pending presidential
election, which took place on July 2 and also due to further U.S. Federal
Reserve tightening. We also reduced our exposure to Argentina due to the
country's difficulty in meeting the government's 4.0% growth prospects' target
and the fiscal goals set by the IMF.
Outlook
In the period ahead, we expect the U.S. economy to remain relatively strong and
the global economy to continue to strengthen. Higher borrowing costs and a less
exuberant stock market should help to cool overheated U.S. domestic demand. With
strong economic
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ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST o 3
<PAGE>
----------------------
LETTER TO SHAREHOLDERS
----------------------
growth and upward inflation pressure, we expect the Federal Reserve to continue
tightening monetary policy until signs of moderation in domestic demand appear.
Short-term interest rates will rise and the Treasury buy-back program will
further exacerbate the yield curve inversion.
Stronger global growth and increasing commodity prices will provide the
environment necessary for emerging countries to further improve their credit
profiles. The Latin American region should continue its recovery momentum. We
expect this region to grow 4% with moderate inflation over the next year. We
believe that ongoing reforms and a favorable economic backdrop should make the
emerging market sector the best performing fixed income sector in 2000.
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 Fund's investment results in the coming periods.
Sincerely,
/s/ John D. Carifa
John D. Carifa
Chairman and President
/s/ Wayne D. Lyski
Wayne D. Lyski
Senior Vice President
[PHOTO John D.
OMITTED] Carifa
[PHOTO Wayne D.
OMITTED] Lyski
Mr. Lyski, Chairman and Chief Investment Officer of Alliance Capital Fixed
Income Investors, has over 26 years of investment experience. He oversees
fixed-income investment at Alliance and manages assets in both domestic and
international markets.
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4 o ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST
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------------------
PERFORMANCE UPDATE
------------------
PERFORMANCE UPDATE
ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST
GROWTH OF A $10,000 INVESTMENT
3/31/92* TO 5/31/00
[The following table was depicted as a mountain chart in the printed material.]
<PLOT POINTS TO COME>
Alliance North American Government Income Trust Class A: $19,008
Lehman Brothers Aggregate Bond Index: $17,136
Lehman Brothers Intermediate-Term Gov't Bond Index: $16,357
This chart illustrates the total value of an assumed $10,000 investment in
Alliance North American Government Income Trust Class A shares (from 3/31/92 to
5/31/00) as compared to the performance of appropriate broad-based indices. The
chart reflects the deduction of the maximum 4.25% sales charge from the initial
$10,000 investment in the Fund and assumes the reinvestment of dividends and
capital gains. Performance for Class B and Class C shares will vary from the
results shown above due to differences in expenses charged to these classes.
Past performance is not indicative of future results, and is not representative
of future gain or loss in capital value or dividend income.
The unmanaged Lehman Brothers (LB) Aggregate Bond Index is composed of the LB
Mortgage-Backed Securities Index, the LB Asset-Backed Securities Index and the
LB Government/Corporate Bond Index.
The unmanaged Lehman Brothers Intermediate-Term Government Bond Index measures
performance of bonds in the one- to 10-year maturity range.
When comparing Alliance North American Government Income Trust to the indices
shown above, you should note that no charges or expenses are reflected in the
performance of the indices. An investor cannot invest directly in an index and
its results are not indicative of any specific investment, including Alliance
North American Government Income Trust.
* Closest month-end after Fund's Class A share inception date of 3/27/92.
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ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST o 5
<PAGE>
------------------
PERFORMANCE UPDATE
------------------
PERFORMANCE UPDATE
ALLIANCE NORTH AMERICAN INCOME TRUST
HISTORY OF RETURNS
YEARLY PERIODS ENDED 5/31
[BAR CHART OMITTED]
Alliance North American Government Income Trust -
Yearly Periods Ended 5/31
--------------------------------------------------------------------------------
Alliance North American Lehman Brothers
Government Income Trust Aggregate Bond Index
--------------------------------------------------------------------------------
5/31/92* 1.28% 2.62%
5/31/93 11.89% 11.30%
5/31/94 2.37% 0.71%
5/31/95 -12.39% 11.48%
5/31/96 20.22% 4.38%
5/31/97 23.74% 8.32%
5/31/98 11.06% 10.91%
5/31/99 6.58% 4.35%
5/31/00 11.02% 2.11%
Past performance is no guarantee of future results. The Fund's investment
results represent total returns for Class A shares and are based on the net
asset value. All fees and expenses related to the operation of the Fund have
been deducted. Returns for the Fund include the reinvestment of any
distributions paid during the period.
The unmanaged Lehman Brothers Aggregate Bond Index is comprised of the Lehman
Brothers Mortgage-Backed Securities Index, the Lehman Brothers Asset-Backed
Securities Index and the Lehman Brothers Government/Corporate Bond Index. The
unmanaged Lehman Brothers Intermediate-Term Government Bond Index measures
performance of bonds in the one- to 10-year maturity range. An investor cannot
invest directly in an index, and its results are not indicative of any specific
investment, including Alliance North American Government Income Trust.
* The Fund return for the period ended 5/31/92 is from the Fund's inception
date of 3/27/92 through 5/31/92. The benchmark return for the period ended
5/31/92 is from 3/31/92 through 5/31/92.
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6 o ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST
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PORTFOLIO SUMMARY
-----------------
PORTFOLIO SUMMARY
May 31, 2000
INCEPTION DATE PORTFOLIO STATISTICS
(Class A shares) Assets ($mil): $1,936.1
3/27/92
COUNTRY BREAKDOWN
57.66% United States
21.30% Argentina [PIE CHART OMITTED]
19.94% Mexico
1.10% Canada
All data as of May 31, 2000. The Fund's country breakdown may vary over time.
This breakdown is expressed as a percentage of total investments.
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ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST o 7
<PAGE>
------------------
INVESTMENT RESULTS
------------------
INVESTMENT RESULTS
NAV AND SEC AVERAGE ANNUAL TOTAL RETURNS
AS OF MAY 31, 2000
Class A Shares
--------------------------------------------------------------------------------
Without Sales Charge With Sales Charge
1 Year 11.02% 6.27%
5 Years 14.34% 13.35%
Since Inception* 8.76% 8.18%
SEC Yield** 8.15%
Class B Shares
--------------------------------------------------------------------------------
Without Sales Charge With Sales Charge
1 Year 10.06% 7.10%
5 Years 13.39% 13.39%
Since Inception*(a) 8.10% 8.10%
SEC Yield** 7.78%
Class C Shares
--------------------------------------------------------------------------------
Without Sales Charge With Sales Charge
1 Year 10.06% 9.07%
5 Years 13.39% 13.39%
Since Inception* 7.43% 7.43%
SEC Yield** 7.78%
SEC AVERAGE ANNUAL TOTAL RETURNS
AS OF THE MOST RECENT QUARTER-END (MARCH 31, 2000)
Class A Class B Class C
--------------------------------------------------------------------------------
1 Year 7.00% 8.04% 10.02%
5 Years 18.36% 18.41% 18.41%
Since Inception* 8.71% 8.62%(a) 8.05%
The Fund's investment results represent average annual total returns. The NAV
and SEC returns reflect reinvestment of dividends and/or capital gains
distributions in additional shares without (NAV) and with (SEC) the effect of
the 4.25% maximum front-end sales charge for Class A or applicable contingent
deferred sales charge for Class B (3% year 1, 2% year 2, 1% year 3, 0% year 4);
and for Class C shares (1% year 1). Returns for Class A shares do not reflect
the imposition of the 1 year 1% contingent deferred sales charge for accounts
over $1,000,000. The Fund invests in a significant amount of its assets in
foreign securities and emerging markets which could result in substantial
volatility due to political and economic uncertainty.
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, 2000.
(a) Assumes conversion of Class B shares into Class A shares after six years.
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8 o ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST
<PAGE>
------------------------
PORTFOLIO OF INVESTMENTS
------------------------
PORTFOLIO OF INVESTMENTS
May 31, 2000 (unaudited)
Principal
Amount
(000) U.S. $ Value
---------------------------------------------------------------------------
Argentina - 26.0%
Government Obligations - 26.0%
Republic of Argentina
Pro 1 Series M1
3.09%, 4/01/07(a).............. ARS 636,121 $ 431,537,769
Supplier-Bocon
Pre III Series 2 FRN
3.15%, 9/01/02(a).............. 82,546 72,101,238
--------------
Total Argentinian Securities
(cost $535,951,742)............ 503,639,007
--------------
Canada - 1.3%
Government/Agency Obligation - 1.3%
Quebec Hydro
Zero coupon, 8/15/20(a)(b)
(cost $29,859,554)............. CA$ 150,000 26,055,426
--------------
Mexico - 24.4%
Government/Agency Obligations - 24.4%
Bankers Acceptances
Nacional Financiera S.N.C.
22.00%, 5/20/02(a)(c).......... MXP 580,000 64,823,888
Mexican Treasury Bills
15.65%, 2/22/01(a)(d).......... 202,121 18,881,727
16.65%, 4/19/01(a)(d).......... 341,269 31,109,250
16.70%, 7/27/00(a)(d).......... 400,000 41,068,237
16.95%, 1/25/01(a)(d).......... 562,562 53,174,543
17.75%, 3/22/01(a)(d).......... 288,828 26,632,561
21.90%, 10/12/00(a)(d)......... 233,902 23,166,388
22.44%, 9/07/00(a)(d).......... 802,421 80,950,793
25.73%, 7/13/00(a)(d).......... 577,717 59,678,986
Mexican Bonos
14.25%, 5/12/05(a)............. 210,000 20,171,084
15.65%, 1/23/03(a)............. 534,480 51,938,808
--------------
Total Mexican Securities
(cost $477,934,041)............ 471,596,265
--------------
United States - 70.4%
Government/Agency Obligation - 5.1%
FNMA 30 Year TBA
8.00%, 6/25/29................. US$ 100,000 99,219,000
--------------
Government Obligations - 63.2%
U.S. Treasury Bonds
6.13%, 8/15/29(a).............. 100,000 99,531,000
8.13%, 8/15/19(a).............. 249,350 296,257,722
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ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST o 9
<PAGE>
------------------------
PORTFOLIO OF INVESTMENTS
------------------------
Principal
Amount
(000) U.S. $ Value
---------------------------------------------------------------------------
8.75%, 8/15/20(a).............. US$ $199,000 $ 251,547,940
8.88%, 8/15/17(a).............. 72,500 90,794,650
11.75%, 11/15/14(a)............ 64,000 86,739,840
12.50%, 8/15/14(a)............. 123,000 171,719,070
13.25%, 5/15/14(a)............. 34,000 48,901,520
14.00%, 11/15/11(a)............ 11,900 16,382,968
U.S Treasury Strips
Zero coupon, 5/15/13........... 244,000 106,813,440
Zero coupon, 5/15/17........... 80,000 27,652,800
Zero coupon, 2/15/19........... 90,000 28,026,900
--------------
1,224,367,850
--------------
Repurchase Agreement - 2.1%
Greenwich Capital Tri-Party Repo
6.50%, dated 5/31/00, due 6/1/00
(collateralized by: $11,922,000
Federal National Mortgage
Association 5.25%, 1/15/09 and
$32,000,000 Federal Home Loan
Mortgage Corp. 6.63%, 7/15/09). 40,000 40,000,000
--------------
Total United States Securities
(cost $1,378,550,422).......... 1,363,586,850
--------------
Total Investments - 122.1%
(cost $2,422,295,759).......... 2,364,877,548
Other assets less liabilities
- (22.1)%..................... (428,783,229)
--------------
Net Assets - 100%................. $1,936,094,319
==============
(a) Securities, or a portion thereof, with an aggregate market value of
$2,050,372,982 have been segregated to collateraize forward exchange
currency contracts.
(b) Private Placement.
(c) Securities are exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At May 31, 2000,
these securities amounted to $64,823,888 or 3.3% of net assets.
(d) Interest rate represents annualized yield to maturity at purchase date.
Glossary of Terms:
FRN - Floating Rate Note.
TBA - To Be Announced.
See notes to financial statements.
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10 o ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST
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---------------------------------
STATEMENT OF ASSETS & LIABILITIES
---------------------------------
STATEMENT OF ASSETS & LIABILITIES
May 31, 2000 (unaudited)
Assets
Investments in securities, at value (cost $2,422,295,759) .. $ 2,364,877,548
Cash ....................................................... 57,887
Foreign cash, at value (cost $68,881) ...................... 21,031
Receivable for investment securities sold .................. 129,040,370
Interest receivable ........................................ 25,700,524
Receivable for capital stock sold .......................... 3,881,960
Unrealized appreciation of forward exchange
currency contract ....................................... 71,649
Other assets ............................................... 125,639
---------------
Total assets ............................................... 2,523,776,608
---------------
Liabilities
Loan payable ............................................... 250,000,000
Payable for investment securities purchased ................ 317,612,067
Dividend payable ........................................... 11,117,189
Loan interest payable ...................................... 3,917,875
Payable for capital stock redeemed ......................... 3,188,653
Advisory fee payable ....................................... 1,198,278
Distribution fee payable ................................... 361,430
Accrued expenses and other liabilities ..................... 286,797
---------------
Total liabilities .......................................... 587,682,289
---------------
Net Assets ................................................. $ 1,936,094,319
===============
Composition Of Net Assets
Capital stock, at par ...................................... $ 265,201
Additional paid-in capital ................................. 2,224,449,335
Distributions in excess of net investment income ........... (31,540,241)
Accumulated net realized loss on investments and
foreign currency transactions ........................... (200,041,460)
Net unrealized depreciation of investments and
foreign currency denominated assets and liabilities ..... (57,038,516)
---------------
$ 1,936,094,319
===============
Calculation Of Maximum Offering Price
Class A Shares
Net asset value and redemption price per share
($853,147,156 / 117,108,182 shares of capital stock
issued and outstanding) ................................. $7.29
Sales Charge--4.25% of public offering price ............... 0.32
-----
Maximum offering price ..................................... $7.61
=====
Class B Shares
Net asset value and offering price per share
($834,098,223 / 114,062,280 shares of capital stock
issued and outstanding) ................................. $7.31
=====
Class C Shares
Net asset value and offering price per share
($248,848,940 / 34,030,556 shares of capital stock
issued and outstanding) ................................. $7.31
=====
See notes to financial statements.
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ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST o 11
<PAGE>
-----------------------
STATEMENT OF OPERATIONS
-----------------------
STATEMENT OF OPERATIONS
Six Months Ended May 31, 2000 (unaudited)
Investment Income
Interest (net of foreign taxes withheld
of $73,609).......................... $ 124,863,613
Expenses
Advisory fee............................ $ 7,231,608
Distribution fee - Class A.............. 1,207,543
Distribution fee - Class B.............. 4,574,530
Distribution fee - Class C.............. 1,275,876
Transfer agency......................... 1,286,865
Custodian............................... 1,030,024
Printing................................ 122,497
Administrative.......................... 66,720
Audit and legal......................... 62,196
Registration............................ 62,137
Directors' fees......................... 12,531
Miscellaneous........................... 29,318
---------------
Total expenses before interest.......... 16,961,845
Interest expense........................ 8,386,962
---------------
Total expenses.......................... 25,348,807
---------------
Net investment income................... 99,514,806
---------------
Realized and Unrealized Gain (Loss)
on Investments and Foreign Currency
Transactions
Net realized loss on investment
transactions......................... (82,768,305)
Net realized gain on foreign currency
transactions......................... 130,862
Net change in unrealized
appreciation / depreciation of:
Investments.......................... 93,623,181
Foreign currency denominated
assets and liabilities............. (77,543)
---------------
Net gain on investments................. 10,908,195
---------------
Net Increase In Net Assets
From Operations...................... $ 110,423,001
===============
See notes to financial statements.
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12 o ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST
<PAGE>
----------------------------------
STATEMENT OF CHANGES IN NET ASSETS
----------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
May 31, 2000 November 30,
(unaudited) 1999
--------------- ---------------
<S> <C> <C>
Increase (Decrease) in Net Assets
from Operations
Net investment income ....................... $ 99,514,806 $ 235,237,271
Net realized loss on investments and
foreign currency transactions ............ (82,637,443) (38,327,501)
Net change in unrealized
appreciation / depreciation of investments
and foreign currency denominated assets
and liabilities .......................... 93,545,638 (36,624,938)
--------------- ---------------
Net increase in net assets from operations .. 110,423,001 160,284,832
Dividends and Distributions
to Shareholders from:
Net investment income
Class A .................................. (46,048,412) (55,301,588)
Class B .................................. (48,845,652) (95,738,434)
Class C .................................. (13,649,897) (21,442,440)
Distributions in excess of
net investment income
Class A .................................. -0- (9,084,333)
Class B .................................. -0- (15,726,851)
Class C .................................. -0- (3,522,327)
Tax return of captial
Class A .................................. -0- (15,397,175)
Class B .................................. -0- (26,655,679)
Class C .................................. -0- (5,970,046)
Capital Stock Transactions
Net decrease ................................ (66,344,081) (227,545,571)
--------------- ---------------
Total decrease .............................. (64,465,041) (316,099,612)
Net Assets
Beginning of period ......................... 2,000,559,360 2,316,658,972
--------------- ---------------
End of period ............................... $ 1,936,094,319 $ 2,000,559,360
=============== ===============
</TABLE>
See notes to financial statements.
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ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST o 13
<PAGE>
-----------------------
STATEMENT OF CASH FLOWS
-----------------------
STATEMENT OF CASH FLOWS
Six Months Ended May 31, 2000 (unaudited)
Increase (Decrease) in Cash from:
Operating Activities:
Interest received....................... $ 63,577,733
Interest paid........................... (8,202,901)
Operating expenses paid................. (19,000,004)
---------------
Net increase in cash from operating
activities........................... $ 36,374,828
Investing Activities:
Proceeds from sale of short-term
portfolio investments, net........... 227,851,761
Purchases of long-term portfolio
investments.......................... (2,706,198,690)
Proceeds from disposition of long-term
portfolio investments................ 2,549,779,429
---------------
Net increase in cash from investing
activities........................... 71,432,500
Financing Activities*:
Redemptions of capital stock, net....... (67,896,070)
Cash dividends paid..................... (103,577,601)
---------------
Net decrease in cash from financing
activities........................... (171,473,671)
Effect of exchange rate on cash......... 63,745,261
---------------
Net increase in cash.................... 78,918
Cash at beginning of period............. -0-
---------------
Cash at end of period................................ $ 78,918
===============
--------------------------------------------------------------------------------
Reconciliation of Net Increase in Net
Assets from Operations to Net Increase
in Cash from Operating Activities:
Net increase in net assets from operations $ 110,423,001
Adjustments:
Decrease in interest receivable......... $ 4,088,178
Net realized loss on investment
transactions......................... 82,768,305
Net change in unrealized
appreciation / depreciation.......... (93,545,638)
Accretion of bond discount.............. (65,374,060)
Decrease in accrued expenses and
other liabilities.................... (1,854,096)
Net realized gain on foreign currency
transactions......................... (130,862)
---------------
(74,048,173)
---------------
Net increase in cash from operating
activities........................... $ 36,374,828
===============
* Non-cash financing activities not included herein consist of reinvestment
of dividends.
See notes to financial statements.
--------------------------------------------------------------------------------
14 o ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST
<PAGE>
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
NOTES TO FINANCIAL STATEMENTS
May 31, 2000 (unaudited)
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 may 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 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 financial statements have been prepared in
conformity with accounting principles generally accepted in the United States,
which require management to make certain estimates and assumptions that affect
the reported amounts of assets and liabilities in the financial statements and
amounts of income and expenses during the reporting period. Actual results could
differ from those estimates. The following is a summary of significant
accounting policies followed by the Fund.
1. Security Valuation
Portfolio securities traded on a national securities exchange or on a foreign
securities exchange (other than foreign securities exchanges whose operations
are similar to those of the United States over-the-counter market) are generally
valued at the last reported sale price or, if there was no sale on such day, the
last bid price quoted on such day. If no bid prices are quoted, then the
security is valued at the mean of the bid and asked prices as obtained on that
day from one or more dealers regularly making a market in that security.
Securities traded on the over-the-counter market, securities listed on a foreign
securities exchange whose operations are similar to the United States
over-the-counter market, and securities listed on a national securities exchange
whose primary market is believed to be over-the-counter are valued at the mean
of the closing bid and asked price provided by two or more dealers regularly
making a market in such securities. U.S. government securities and other debt
securities which mature in 60 days or less are valued at amortized cost unless
this method does not represent fair value. Securities for which market
quotations are not readily available are valued at fair value as determined in
good faith by, or in accordance with procedures approved by, the Board of
Directors. Fixed income securities may be valued on the basis of prices provided
by a pricing service when such prices are believed to reflect the fair market
value of such securities.
2. Currency Translation
Asset and liabilities denominated in foreign currencies and commitments
--------------------------------------------------------------------------------
ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST o 15
<PAGE>
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
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 portfolios 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 gain or loss on foreign currency transactions represents foreign
exchange gains and losses from sales and maturities of investments and foreign
currency contracts, the holding of foreign currencies, currency gains or losses
realized between the trade and settlement dates on foreign security
transactions, and the difference between the amounts of dividends, interest and
foreign taxes receivable recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net realized 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 (depreciation) of investments and foreign currency denominated
assets and liabilities.
3. Taxes
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
4. 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.
5. Income and Expenses
All income earned and expenses incurred by the Fund are borne on a pro-rata
basis by each settled class of shares, based on the proportionate interest in
the Fund represented by the shares of such class, except that the Fund's Class B
and Class C shares bear higher distribution and transfer agent fees than Class A
shares.
6. Dividends and Distributions
Dividends and distributions to shareholders are recorded on the ex-dividend
date. Income and capital gains distributions are determined in accordance with
federal tax regulations and may differ from those determined in accordance with
accounting principles generally accepted in the United States. Based on the
operations of the Fund as of the semi-annual date, and its distribution policy,
the Fund may have a tax return of capital at year end. At this time, the amount
of this tax return of capital is not estimable.
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
--------------------------------------------------------------------------------
16 o ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST
<PAGE>
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
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 $66,720
representing the cost of certain legal and accounting services provided to the
Fund by the Adviser for the six months ended May 31, 2000.
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 $865,983 for the six months ended May 31, 2000.
For the six months ended May 31, 2000, the Fund's expenses were reduced by
$59,363 under an expense offset arrangement with Alliance Fund Services, Inc.
Alliance Fund Distributors, Inc. (the "Distributor"), a wholly-owned subsidiary
of the Adviser serves as the Distributor of the Fund's shares. The Distributor
has advised the Fund that it has received front-end sales charges of $73,157
from the sale of Class A shares and $61,289, $813,875 and $46,858 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, 2000.
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 distribution and servicing fees to the Distributor at
an annual rate of up to .30 of 1% of the Fund's average daily net assets
attributable to Class A shares and 1% of the average daily net assets
attributable to both Class B and Class C shares. 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 advised the Fund that it has incurred expenses in excess of the
distribution costs reimbursed by the Fund in the amount of $33,290,817 and
$5,378,971 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 $393,770,160 and $557,545,751,
respectively, for the six months ended May 31, 2000. There were purchases of
$2,545,999,565 and sales of $2,176,826,106 of U.S. government and government
agency obligations for the six months ended May 31, 2000.
--------------------------------------------------------------------------------
ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST o 17
<PAGE>
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
At May 31, 2000, the cost of investments for federal income tax purposes was
substantially the same as the cost for financial reporting purposes.
Accordingly, gross unrealized appreciation of investments was $17,575,800 and
gross unrealized depreciation of investments was $74,994,011 resulting in net
unrealized depreciation of $57,418,211 excluding foreign currency transactions.
At November 30, 1999, the Fund had a capital loss carryforward totaling
$82,167,141 of which $42,670,032 expires in the year 2003, $39,497,109 expires
in the year 2004.
Forward Exchange Currency Contracts
The Fund enters into forward exchange currency contracts to hedge its exposure
to changes in foreign currency exchange rates on its foreign portfolio holdings,
to hedge certain firm purchase and sales commitments denominated in foreign
currencies and for investment purposes. 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 assets 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, reflects the total exposure of the Fund in that particular currency
contract.
At May 31, 2000, the Fund had outstanding forward exchange currency contracts,
as follows:
<TABLE>
<CAPTION>
U.S. $
Contract Value on U.S. $ Unrealized
Amount Origination Current Appreciation
(000) Date Value (Depreciation)
----------------------------------------------------------
<S> <C> <C> <C> <C>
Forward Exchange Currency
Buy Contract
Argentine Peso,
settling 10/25/00 20,000 $20,000,000 $20,071,649 $71,649
</TABLE>
--------------------------------------------------------------------------------
18 o ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST
<PAGE>
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
NOTE E
Bank Borrowing
The Fund entered into a Revolving Credit Agreement with Deutsche Bank AG, New
York Branch on June 4, 1998. 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, 2000
was $250,000,000 with a related weighted average interest rate at period end of
6.53% and a weighted average annualized interest rate of 6.42%. The $250,000,000
balance will mature on June 8, 2000. Interest payments on current borrowings are
based on the European Euro margin plus the applicable European Euro rate. The
Fund is also obligated to pay Deutsche Bank AG, New York Branch a facility fee
computed at the rate of .10% per annum on the daily amount of the total
commitment as in effect.
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:
<TABLE>
<CAPTION>
--------------------------------- ---------------------------------
Shares Amount
--------------------------------- ---------------------------------
Six Months Ended Year Ended Six Months Ended Year Ended
May 31, 2000 November 30, May 31, 2000 November 30,
(unaudited) 1999 (unaudited) 1999
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold 7,249,436 16,598,781 $ 53,746,847 $ 123,458,324
---------------------------------------------------------------------------------------
Shares issued in
reinvestment of
dividends 2,213,157 3,527,038 16,300,953 26,110,820
---------------------------------------------------------------------------------------
Shares converted
from Class B 22,324,351 30,085,478 164,779,328 220,797,037
---------------------------------------------------------------------------------------
Shares redeemed (15,008,934) (47,381,426) (110,765,344) (353,021,863)
---------------------------------------------------------------------------------------
Net increase 16,778,010 2,829,871 $ 124,061,784 $ 17,344,318
=======================================================================================
Class B
Shares sold 10,582,921 26,632,531 $ 78,463,105 $ 198,604,722
---------------------------------------------------------------------------------------
Shares issued in
reinvestment of
dividends 2,140,871 5,591,905 15,812,200 41,603,715
---------------------------------------------------------------------------------------
Shares converted
to Class A (22,263,654) (29,974,756) (164,779,328) (220,797,037)
---------------------------------------------------------------------------------------
Shares redeemed (14,813,394) (34,769,876) (109,785,418) (257,969,562)
---------------------------------------------------------------------------------------
Net decrease (24,353,256) (32,520,196) $(180,289,441) $(238,558,162)
=======================================================================================
</TABLE>
--------------------------------------------------------------------------------
ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST o 19
<PAGE>
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
<TABLE>
<CAPTION>
--------------------------------- ---------------------------------
Shares Amount
--------------------------------- ---------------------------------
Six Months Ended Year Ended Six Months Ended Year Ended
May 31, 2000 November 30, May 31, 2000 November 30,
(unaudited) 1999 (unaudited) 1999
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class C
Shares sold 3,151,627 10,104,131 $ 23,351,240 $ 75,431,739
---------------------------------------------------------------------------------------
Shares issued in
reinvestment of
dividends 836,076 1,583,383 6,178,645 11,747,610
---------------------------------------------------------------------------------------
Shares redeemed (5,357,837) (12,569,473) (39,646,309) (93,511,076)
---------------------------------------------------------------------------------------
Net decrease (1,370,134) (881,959) $ (10,116,424) $ (6,331,727)
=======================================================================================
</TABLE>
NOTE G
Litigation
On July 25, 1995, a Consolidated and Supplemental Class Action Complaint
("Original Complaint") was filed against the Fund, Alliance and certain other
defendants affiliated with Alliance alleging violations of federal securities
laws, fraud and breach of fiduciary duty in connection with the Fund's
investments in Mexican and Argentine securities. On September 26, 1996, the
United States District Court for the Southern District of New York ("District
Court") granted the defendants' motion to dismiss all counts of the Original
Complaint, and on July 15, 1997, the District Court denied plaintiffs' motion
for leave to file an amended complaint.
On October 15, 1998, the United States Court of Appeals for the Second Circuit
affirmed the District Court's decision denying plaintiffs' leave to file an
amended complaint in all respects except reversed with respect to plaintiffs'
claim that defendants had misrepresented the Fund's ability to hedge against
currency risk. On February 12, 1999, plaintiffs filed a Corrected First Amended
Consolidated Complaint ("Complaint") alleging that defendants violated the
federal securities laws by misrepresenting the Fund's ability to hedge against
currency risk. On December 1, 1999, the Court granted summary judgment for
defendants with respect to all of plaintiffs' claims in the Complaint.
On March 17, 2000, the parties executed a Memorandum of Understanding ("MOU")
preliminarily resolving the litigation. Under the proposed settlement, Alliance
would issue to settling class members certificates entitling them to invest up
to an aggregate of $250 million in Class A shares of any Alliance-managed fund
offering Class A shares without paying an initial sales charge as described in
the prospectuses for those funds. In addition, defendants agreed to pay
attorneys' fees and expenses to plaintiffs' counsel in an amount not to exceed
approximately $4.1 million. On March 22, 2000, the District Court preliminarily
approved the settlement as set forth in the MOU, subject to its subsequent full
review and final approval of the proposed settlement.
On May 8, 2000, the parties executed a Stipulation and Agreement of Settlement
("Settlement Agreement") detail
--------------------------------------------------------------------------------
20 o ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST
<PAGE>
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
ing the terms of the settlement as set forth in the MOU. On May 12, 2000, the
District Court preliminarily approved the Settlement Agreement. The District
Court will hold a hearing to make a final determination on the fairness and
reasonableness of the settlement on August 3, 2000.
The Fund and Alliance believe that the allegations in the Consolidated
Complaint, the Amended Complaint, and the Corrected Complaint are without merit
and are entering into the proposed settlement solely to avoid the costs, burdens
and risks of litigation. The Fund and Alliance do not believe that the
settlement, if approved as set forth in the MOU, will have a material adverse
effect on the Fund or Alliance. In the event the settlement is approved, the
Fund shall not bear any liability or cost of the settlement.
NOTE H
Concentration of Risk
Investing in securities of foreign governments involves special risks which
include changes in foreign exchange rates and the possibility of future
political and economic developments which could adversely affect the value of
such securities. 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.
--------------------------------------------------------------------------------
ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST o 21
<PAGE>
--------------------
FINANCIAL HIGHLIGHTS
--------------------
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
Class A
------------------------------------------------------------------------------------------------
Six
Months
Ended
May 31, Year Ended November 30,
2000 ---------------------------------------------------------------------------
(unaudited) 1999 1998 1997 1996 1995
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period ..................... $7.28 $7.59 $8.02 $8.01 $6.75 $8.13
------------------------------------------------------------------------------------------------
Income From Investment
Operations
Net investment income(a) ..... .39 .87 .87 1.03 1.09 1.18
Net realized and unrealized
gain (loss) on investments
and foreign currency
transactions ............... .04 (.25) (.33) (.05) 1.14 (1.59)
------------------------------------------------------------------------------------------------
Net increase (decrease) in net
asset value from operations .43 .62 .54 .98 2.23 (.41)
------------------------------------------------------------------------------------------------
Less: Dividends and
Distributions
Dividends from net investment
income ..................... (.42) (.64) (.87) (.97) (.75) -0-
Distributions in excess of net
investment income .......... -0- (.11) (.07) -0- -0- -0-
Tax return of capital ........ -0- (.18) (.03) -0- (.22) (.97)
------------------------------------------------------------------------------------------------
Total dividends and
distributions .............. (.42) (.93) (.97) (.97) (.97) (.97)
------------------------------------------------------------------------------------------------
Net asset value, end of period $7.29 $7.28 $7.59 $8.02 $8.01 $6.75
================================================================================================
Total Return
Total investment return based
on net asset value(b) ..... 6.01% 8.56% 7.14% 12.85% 35.22% (3.59)%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) ............ $853,147 $730,468 $740,066 $511,749 $385,784 $252,608
Ratio of expenses to average
net assets ................. 2.17%(c) 2.09% 2.04% 2.15% 2.34% 2.62%
Ratio of expenses to average
net assets excluding
interest expense(d) ........ 1.31%(c) 1.38% 1.36% 1.38% 1.41% 1.51%
Ratio of net investment income
to average net assets ...... 10.48%(c) 11.72% 11.17% 12.78% 14.82% 18.09%
Portfolio turnover rate ...... 273% 158% 175% 118% 166% 180%
</TABLE>
See footnote summary on page 25.
--------------------------------------------------------------------------------
22 o ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST
<PAGE>
--------------------
FINANCIAL HIGHLIGHTS
--------------------
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
Class B
--------------------------------------------------------------------------------------------------
Six
Months
Ended
May 31, Year Ended November 30,
2000 --------------------------------------------------------------------------------
(unaudited) 1999 1998 1997 1996 1995
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period ..................... $7.31 $7.61 $8.02 $8.01 $6.75 $8.13
--------------------------------------------------------------------------------------------------
Income From Investment
Operations
Net investment income(a) ..... .36 .81 .81 .98 1.04 1.13
Net realized and unrealized
gain (loss) on investments
and foreign currency
transactions ............... .04 (.25) (.32) (.07) 1.12 (1.61)
--------------------------------------------------------------------------------------------------
Net increase (decrease) in net
asset value from operations .40 .56 .49 .91 2.16 (.48)
--------------------------------------------------------------------------------------------------
Less: Dividends and
Distributions
Dividends from net investment
income ..................... (.40) (.59) (.81) (.90) (.69) -0-
Distributions in excess of net
investment income .......... -0- (.10) (.06) -0- -0- -0-
Tax return of capital ........ -0- (.17) (.03) -0- (.21) (.90)
--------------------------------------------------------------------------------------------------
Total dividends and
distributions .............. (.40) (.86) (.90) (.90) (.90) (.90)
--------------------------------------------------------------------------------------------------
Net asset value, end of period $7.31 $7.31 $7.61 $8.02 $8.01 $6.75
==================================================================================================
Total Return
Total investment return based
on net asset value(b) ..... 5.50% 7.79% 6.46% 11.88% 33.96% (4.63)%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) ............ $834,098 $1,011,395 $1,300,519 $1,378,407 $1,329,719 $1,123,074
Ratio of expenses to average
net assets ................. 2.84%(c) 2.78% 2.75% 2.86% 3.05% 3.33%
Ratio of expenses to average
net assets excluding
interest expense(d) ........ 1.99%(c) 2.08% 2.07% 2.09% 2.12% 2.22%
Ratio of net investment income
to average net assets ...... 9.81%(c) 10.97% 10.44% 12.15% 14.20% 17.31%
Portfolio turnover rate ...... 273% 158% 175% 118% 166% 180%
</TABLE>
See footnote summary on page 25.
--------------------------------------------------------------------------------
ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST o 23
<PAGE>
--------------------
FINANCIAL HIGHLIGHTS
--------------------
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
Class C
-----------------------------------------------------------------------------------------------
Six
Months
Ended
May 31, Year Ended November 30,
2000 ----------------------------------------------------------------------------
(unaudited) 1999 1998 1997 1996 1995
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period ..................... $7.31 $7.61 $8.02 $8.01 $6.75 $8.13
-----------------------------------------------------------------------------------------------
Income From Investment
Operations
Net investment income(a) ..... .36 .81 .82 .98 1.05 1.13
Net realized and unrealized
gain (loss) on investments
and foreign currency
transactions ............... .04 (.25) (.33) (.07) 1.11 (1.61)
-----------------------------------------------------------------------------------------------
Net increase (decrease) in net
asset value from operations .40 .56 .49 .91 2.16 (.48)
-----------------------------------------------------------------------------------------------
Less: Dividends and
Distributions
Dividends from net investment
income ..................... (.40) (.59) (.82) (.90) (.69) -0-
Distributions in excess of net
investment income .......... -0- (.10) (.05) -0- -0- -0-
Tax return of capital ........ -0- (.17) (.03) -0- (.21) (.90)
-----------------------------------------------------------------------------------------------
Total dividends and
distributions .............. (.40) (.86) (.90) (.90) (.90) (.90)
-----------------------------------------------------------------------------------------------
Net asset value, end of period $7.31 $7.31 $7.61 $8.02 $8.01 $6.75
===============================================================================================
Total Return
Total investment return based
on net asset value(b) ..... 5.50% 7.79% 6.46% 11.88% 33.96% (4.63)%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) ............ $248,849 $258,696 $276,073 $283,483 $250,676 $219,009
Ratio of expenses to average
net assets ................. 2.85%(c) 2.78% 2.74% 2.85% 3.04% 3.33%
Ratio of expenses to average
net assets excluding
interest expense(d) ........ 2.00%(c) 2.08% 2.06% 2.08% 2.12% 2.21%
Ratio of net investment income
to average net assets ...... 9.77%(c) 10.98% 10.45% 12.14% 14.22% 17.32%
Portfolio turnover rate ...... 273% 158% 175% 118% 166% 180%
</TABLE>
See footnote summary on page 25.
--------------------------------------------------------------------------------
24 o ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST
<PAGE>
--------------------
FINANCIAL HIGHLIGHTS
--------------------
(a) Based on average shares outstanding.
(b) 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.
(c) Annualized.
(d) Net of interest expense of .85%, .70%, .68%, .77%, .93% and 1.11%
respectively, on loan agreement. (See Note E).
--------------------------------------------------------------------------------
ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST o 25
<PAGE>
----------------------------
GLOSSARY OF INVESTMENT TERMS
----------------------------
GLOSSARY OF INVESTMENT TERMS
benchmark
A standard by which a fund's performance can be measured. A benchmark is usually
an unmanaged index, such as the Standard & Poor's 500 Stock Index or the Lehman
Brothers Aggregate Bond Index.
bond
Bonds are issued by governments or corporations when they need to raise cash.
Bonds are sold, or issued, to investors and have a maturity date, which is the
date the issuer is obligated to repay the investor for the principal, or face
amount, of the bond. Bonds also pay interest until maturity. Bonds are also
called fixed-income securities.
common stock
A type of security that represents ownership in a public company.
Federal Reserve Board
The seven-member board that oversees Federal Reserve Banks, establishes monetary
policy and monitors the country's economic state.
index
A compilation of securities of similar types of companies that is used to
measure the investment performance of securities within that specific market. An
index is often used as a benchmark for a mutual fund. An investor cannot invest
directly in an index.
investment-grade bond
A bond that is rated BBB or higher by a credit agency.
monetary policy
The regulation of the money supply and interest rates by a country's central
bank with the purpose of controlling inflation and stabilizing currency.
mortgage-related security
A security representing an interest in a pool of mortgage loans made to
homeowners. In a mortgage-related security, an issuer's obligation to repay
principal or pay interest on the security is secured by a large pool of
mortgages or mortgage-backed securities. To create a mortgage-related security,
an issuer (such as the government or a private company) will `package" or
assemble a large number of mortgage loans and issue securities which represent
an interest in the income generated by the payments on these mortgages.
net asset value (NAV)
The value of a mutual fund's total assets, minus its liabilities, divided by the
number of shares outstanding.
portfolio
The collection of securities that make up a Fund's or an investor's investments.
yield
The rate of return on an asset, usually referring to dividend or interest
payments, expressed as a percentage of current market price.
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26 o ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST
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ALLIANCE CAPITAL
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Alliance Capital
The Investment Professional's Choice
Alliance Capital is a leading global investment management firm with over $394
billion in assets under management. In recognition of our far-reaching
investment capabilities, Alliance Capital has been selected by employee benefit
plans for 28 of the FORTUNE 100 companies and public retirement funds in 33
states as well as by hundreds of foundations, endowments and foreign
institutions. By sharing this institutional money management experience with
millions of mutual fund investors as well, Alliance stands out as a "manager of
choice" for thousands of investment professionals around the world.
At Alliance Capital, we place a premium on investment research. We carefully
select securities based on our proprietary research, conducted by over 276
investment professionals in 22 investment offices worldwide. Our commitment to
this process means that our mutual fund shareholders have their portfolios
managed by the same experienced analysts and portfolio managers who manage the
pension funds of some of America's largest institutional investors.
All information on Alliance Capital is as of 3/31/00.
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ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST o 27
<PAGE>
--------------------------------
ALLIANCE CAPITAL AT YOUR SERVICE
--------------------------------
Alliance Capital At Your Service
At Alliance Capital, shareholder satisfaction is among our top priorities.
That's why we provide our shareholders with a wide variety of products and
time-saving services to meet their needs.
o Low Minimum Investments
You can begin investing in Alliance Capital funds with as little as $250
(except for Alliance Select Investor Series Premier Portfolio and Alliance
Select Investor Series Technology Portfolio, which generally have a
$10,000 minimum initial investment) and may make subsequent investments of
$50 or more.
o Automatic Reinvestment
You may choose to reinvest fund dividend and capital-gains distributions
automatically at no charge.
o Automatic Investment Program
Build your investment account by having money automatically transferred
from your bank account on a regular basis.
o Dividend Direction Plans
You may cross-invest dividends from one fund into the same class of shares
in any other fund without incurring a sales charge. This can be a good way
to diversify your assets.
o The Alliance Advance
A quarterly newsletter discussing investment strategies, economic news and
other matters that could affect your mutual fund investment.
o Auto Exchange
You may choose to automatically exchange money from one Alliance Capital
fund to another on a regular basis. This can be a good way to dollar cost
average*, helping you to invest with discipline.
o Systematic Withdrawals
Regular checks for specified amounts can be sent to you or to your
brokerage or bank account.
o A Choice of Purchase Plans
Most funds are available in A, B, and C Class shares. Many funds are also
available in Advisor Class shares.
o Telephone Transaction
Purchases, transfers and redemptions can be made by calling (800)
221-5672. Our knowledgeable representatives are available to assist you
Monday through Friday from 8:30 a.m. to 8:00 p.m. Eastern Standard Time.
o Alliance Answer: 24-Hour Information
For your convenience, our computerized audio response system is available
to you 24-hours a day by calling (800) 251-0539. Using any touch tone
phone, you can hear share prices, get account balances, review details of
your last transaction, obtain dividend information, order
statements/checkbooks, review fund objectives, literature and Watchlist
information, order additional copies of statements and request additional
year-end tax forms (available from February 1 to May 31).
o Alliance Capital on the World Wide Web at www.alliancecapital.com. Here,
you can access updated account information, make additional investments,
request more information, exchange between Alliance funds and view fund
performance, press releases and articles.
* Dollar cost averaging does not assure a profit nor protect against loss in
a declining market. Since this strategy involves continuous investments in
securities, regardless of fluctuating prices, investors should consider
their financial ability to invest during periods of low price levels.
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28 o ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST
<PAGE>
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BOARD OF DIRECTORS
------------------
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
Paul J. DeNoon, Vice President
Edmund P. Bergan, Jr., Secretary
Mark D. Gersten, Treasurer & Chief Financial Officer
Juan J. Rodriguez, Controller
Custodian
Brown Brothers Harriman & 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 LLP
One Battery Park Plaza
New York, NY 10004
Transfer Agent
Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, NJ 07096-1520
Toll-Free (800) 221-5672
Independent Auditors
Ernst & Young LLP
787 Seventh Avenue
New York, NY 10019
(1) Member of the Audit Committee.
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ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST o 29
<PAGE>
--------------------------------
ALLIANCE CAPITAL FAMILY OF FUNDS
--------------------------------
ALLIANCE CAPITAL FAMILY OF FUNDS
Domestic Equity Funds
Balanced Shares
Conservative Investors Fund
Disciplined Value Fund
Growth & Income Fund
Growth Fund
Growth Investors Fund
Health Care Fund
Premier Growth Fund
Quasar Fund
Real Estate Investment Fund
Technology Fund
The Alliance Fund
Utility Income Fund
Global & International Equity Funds
All-Asia Investment Fund
Global Small Cap Fund
Greater China '97 Fund
International Fund
International Premier Growth Fund
New Europe Fund
Worldwide Privatization Fund
Select Investor Series
Premier Portfolio
Technology Portfolio
Fixed Income Funds
Corporate Bond Portfolio
Global Dollar Government Fund
Global Strategic Income Trust
High Yield Fund
Limited Maturity Government Fund
Mortgage Securities Income Fund
Multi-Market Strategy Trust
North American Government Income Trust
Quality Bond Portfolio
U.S. Government Portfolio
Municipal Income Funds
National
Insured National
Arizona
California
Insured California
Florida
Massachusetts
Michigan
Minnesota
New Jersey
New York
Ohio
Pennsylvania
Virginia
Alliance also offers AFD Exchange Reserves, which serves as the money market
fund exchange vehicle for the Alliance mutual funds.
To obtain a prospectus for any Alliance Capital fund, call your investment
professional, or call Alliance at (800) 227-4618.
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30 o ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST
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NOTES
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ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST o 31
<PAGE>
NOTES
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32 o ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST
<PAGE>
Alliance North American Government Income Trust ---------------
1345 Avenue of the Americas BULK RATE
New York, NY 10105 U.S. POSTAGE
(800) 221-5672 PAID
New York, NY
Permit No. 7131
---------------
AllianceCapital [LOGO](R)
The Investment Professional's Choice
(R) These registered service marks used under license from the owner, Alliance
Capital Management L.P.
NAGSR500
