ALLIANCE GOVERNMENT RESERVES
ALLIANCECAPITAL
ANNUAL REPORT
JUNE 30, 1995
LETTER TO SHAREHOLDERS ALLIANCE GOVERNMENT RESERVES
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August 3, 1995
Dear Shareholder:
On December 31, 1994, James P. Syrett retired as President of Alliance Cash
Management. His seven years as President were very productive and saw Alliance
become the dominant provider of money funds sold through regional brokerage
firms. On January 1, 1995, it was with great pride that I assumed Jim's
responsibilities, and I look forward to maintaining the high standard of
excellence to which you have grown accustomed.
Money fund assets continue to grow despite volatility in the stock and bond
markets. AGR assets have grown 22% to over $2.5 billion in the past year, in
large part because of the effects of T+3-the accelerated settlement of most
security transactions.
Weakness in the fixed income markets has meant significantly higher yields for
money fund investors. The 30 day net yield for Alliance Government Reserves as
of June 30, 1995 was 5.01% vs. 3.13% for the same period ending June 30, 1994.
Alliance has once again demonstrated its dependability. When Orange County filed
for bankruptcy protection last year, Alliance took action to protect the $1.00
per share net asset value of the two Alliance tax-free money market funds
holding positions in Orange County securities: Alliance Municipal Trust -
General Portfolio and ACM Institutional Reserves - Tax Free Portfolio. Alliance
arranged for the issuance of a letter of credit from an unaffiliated bank
assuring the payment in full of principal and interest due to the Funds, to the
extent Orange County defaulted on the payments. Thereafter, on July 19, 1995,
in view of continuing uncertainty regarding Orange County's performance of its
financial obligations, Alliance purchased approximately $21 million of Orange
County securities from the two Alliance money market funds, thus eliminating
all Orange County securities from our Alliance money fund portfolios.
Speaking for myself and the entire division, we at Alliance look forward to
serving you with continued diligence in the future.
Very truly yours,
Ronald M. Whitehill
President
1
STATEMENT OF NET ASSETS
JUNE 30, 1995 ALLIANCE GOVERNMENT RESERVES
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PRINCIPAL
AMOUNT
(000) SECURITY+ YIELD VALUE
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U.S. GOVERNMENT AND AGENCIES-100.5%
FEDERAL NATIONAL MORTGAGE ASSOCIATION-41.8%
$ 15,000 4/29/96 5.49% $14,306,888
18,000 12/08/95 5.63 17,549,600
25,000 8/31/95 5.67 24,759,812
23,000 9/07/95 5.70 22,752,367
50,000 10/05/95 5.75 49,233,333
45,000 10/06/95 5.75 44,302,812
70,000 8/30/95 5.78 69,325,667
25,000 9/12/95 5.78 24,706,986
9,900 8/28/95 5.80 9,807,490
100,000 9/05/95 5.81 98,934,833
85,000 7/28/95 5.86 84,626,425
50,000 7/31/95 5.86 49,755,833
50,000 7/17/95 5.87 49,869,556
9,300 8/14/95 5.87 9,233,278
25,000 7/05/96 FRN 5.87 24,982,750
30,000 7/26/95 5.89 29,877,292
25,000 7/20/95 5.90 24,922,153
3,095 7/25/95 5.90 3,082,826
23,000 8/14/95 5.90 22,834,144
26,000 7/06/95 5.91 25,978,658
32,000 8/04/95 5.91 31,821,387
30,000 9/20/95 5.95 29,598,375
74,300 9/22/95 5.95 73,280,748
10,000 3/18/96 6.13 9,555,575
25,000 3/15/96 6.16 23,896,333
20,000 3/18/96 6.23 19,096,650
81,000 5.53%, 4/04/97 FRN 5.58 80,933,220
15,000 5.71%, 6/10/96 5.73 14,993,296
45,000 5.91%, 10/30/95 FRN 5.96 44,989,016
22,000 6.04%, 7/19/95 FRN 6.07 21,999,675
1,051,006,978
FEDERAL HOME LOAN MORTGAGE CORP.-21.8%
10,560 11/27/95 5.55 10,317,428
15,008 9/07/95 5.79 14,843,863
30,000 9/11/95 5.79 29,652,600
30,000 8/25/95 5.80 29,734,167
50,000 9/25/95 5.80 49,307,222
8,000 9/05/95 5.81 7,914,787
20,448 8/25/95 5.82 20,266,183
10,000 7/19/95 5.88 9,970,600
60,800 7/24/95 5.88 60,571,595
10,000 7/27/95 5.88 9,957,533
45,000 7/28/95 5.88 44,801,550
18,000 5/01/96 5.88 17,103,300
16,000 7/19/95 5.89 15,952,880
21,652 8/21/95 5.89 21,471,332
24,157 8/18/95 5.90 23,966,965
35,000 10/23/95 5.91 34,344,975
12,129 8/10/95 5.93 12,049,083
18,000 3/29/96 5.97 17,188,080
12,095 12/29/95 5.98 11,731,350
9,600 7/05/95 6.00 9,593,600
9,086 7/07/95 6.00 9,076,914
50,000 7/03/95 6.10 49,983,056
25,000 5.91%, 8/10/95 FRN 6.01 24,997,260
12,750 6.45%, 4/08/96 6.52 12,743,338
547,539,661
STUDENT LOAN MARKETING ASSOCIATION-18.4%
40,000 9/20/95 5.72 39,485,200
20,000 5.68%, 11/24/97 FRN 5.70 19,988,745
10,000 5.69%, 5/14/96 FRN 5.63 10,004,967
94,400 5.72%, 12/20/96 FRN 5.72 94,400,000
49,300 5.72%, 4/18/97 FRN 5.76 49,266,768
48,500 5.73%, 4/16/96 FRN 5.72 48,502,082
30,880 5.86%, 11/20/97 FRN 5.83 30,899,604
70,000 5.89%, 12/01/95 FRN 6.01 69,963,148
40,000 5.91%, 1/23/97 FRN 5.72 40,128,382
40,000 5.94%, 2/14/97 FRN 5.70 40,152,464
20,000 5.96%, 8/22/96 FRN 5.86 20,007,499
462,798,859
FEDERAL HOME LOAN BANK-11.6%
33,000 7/06/95 5.92 32,972,867
28,555 11/01/95 5.98 27,971,574
25,000 9/27/95 5.99 24,633,944
25,500 7/05/95 6.00 25,483,000
8,000 9/27/95 6.00 7,882,667
25,000 9/05/95 6.08 24,721,333
6,000 2/14/96 6.20 5,764,400
47,500 5.81%, 8/05/96 FRN 5.96 47,426,734
15,600 5.85%, 6/03/96 FRN 6.00 15,577,640
29,500 5.92%, 8/21/95 5.87 29,496,609
15,000 5.92%, 8/24/95 5.88 14,998,274
10,000 5.98%, 10/20/95 FRN 6.07 9,997,565
10,000 6.00%, 10/06/95 6.07 9,998,339
15,000 6.85%, 2/28/96 6.83 15,004,662
291,929,608
2
ALLIANCE GOVERNMENT RESERVES
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PRINCIPAL
AMOUNT
(000) SECURITY+ YIELD VALUE
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FEDERAL FARM CREDIT BANK-6.0%
$ 10,000 7/05/95 5.86% $ 9,993,489
3,000 8/17/95 5.86 2,977,048
5,900 7/17/95 5.92 5,884,477
40,000 6/20/96 FRN 5.94 39,980,601
15,000 3/05/96 6.19 14,360,367
14,000 5.60%, 7/01/96 5.69 13,986,392
10,000 5.70%, 9/01/95 5.87 9,996,981
44,000 6.04%, 5/24/96 FRN 6.08 43,992,070
10,000 6.76%, 2/28/96 6.70 10,001,864
151,173,289
U.S. TREASURY NOTES-0.4%
10,000 3.88%, 8/31/95 5.67 9,971,162
AGENCY FOR INTERNATIONAL
DEVELOPMENT HOUSING-0.4%
9,645 6.00%, 1/01/97 6.02 9,644,762
OVERSEAS PRIVATE INVESTMENT CORP.-0.1%
2,500 6.21%, 6/10/97 FRN 6.21 2,500,000
TOTAL INVESTMENTS-100.5%
(amortized cost
$2,526,564,319) 2,526,564,319
Other assets less
liabilities-(0.5%) (12,256,116)
NET ASSETS-100%
(offering and redemption
price of $1.00 per share;
2,515,245,616 shares
outstanding) $2,514,308,203
+ All securities either mature or their interest rate changes in one year or
less.
Glossary of terms:
FRN - Floating Rate Note
See notes to financial statements.
3
STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1995 ALLIANCE GOVERNMENT RESERVES
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INVESTMENT INCOME
Interest $118,368,624
EXPENSES
Advisory fee (Note B) $10,694,803
Distribution assistance and administrative
service (Note C) 7,017,099
Transfer agency 3,996,332
Registration fees 454,221
Custodian fees 323,650
Printing 300,704
Audit and legal fees 66,386
Trustees' fees 17,620
Miscellaneous 39,947
Total expenses 22,910,762
Less: expense reimbursement and fee waiver (1,074,234)
21,836,528
Net investment income 96,532,096
REALIZED LOSS ON INVESTMENTS
Net realized loss on investments (551,975)
NET INCREASE IN NET ASSETS FROM OPERATIONS $95,980,121
See notes to financial statements.
4
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE GOVERNMENT RESERVES
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YEAR ENDED YEAR ENDED
JUNE 30,1995 JUNE 30,1994
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INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $96,532,096 $48,029,539
Net realized loss on investments (551,975) (236,674)
Net increase in net assets from operations 95,980,121 47,792,865
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (96,532,096) (48,029,539)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase 453,818,535 278,696,374
Total increase 453,266,560 278,459,700
NET ASSETS
Beginning of year 2,061,041,643 1,782,581,943
End of year $2,514,308,203 $2,061,041,643
See notes to financial statements.
5
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 ALLIANCE GOVERNMENT RESERVES
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NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Government Reserves (the 'Trust') is an open-end diversified
investment company registered under the Investment Company Act of 1940. The
Trust consists of two portfolios: Alliance Government Reserves (the
'Portfolio') and Alliance Treasury Reserves. Each portfolio is considered to be
a separate entity for financial reporting and tax purposes. The following is a
summary of significant accounting policies followed by the Portfolio.
1. VALUATION OF SECURITIES
Securities in which the Portfolio invests are traded primarily in the
over-the-counter market and are valued at amortized cost, under which method a
portfolio instrument is valued at cost and any premium or discount is amortized
on a constant basis to maturity.
2. TAXES
It is the Portfolio's policy to comply with 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 its shareholders. Therefore, no provisions for federal income or excise
taxes are required.
3. DIVIDENDS
The Portfolio declares dividends daily and automatically reinvests such
dividends in additional shares at net asset value. Net realized capital gains
on investments, if any, are expected to be distributed near year end.
4. GENERAL
Interest income is accrued as earned. Security transactions are recorded on a
trade date basis. Security gains and losses are determined on the identified
cost basis. It is the Portfolio's policy to take possession of securities as
collateral under repurchase agreements and to determine on a daily basis that
the value of such securities are sufficient to cover the value of the
repurchase agreements.
NOTE B: ADVISORY FEE AND TRANSACTIONS WITH AN AFFILIATE OF THE ADVISER
The Portfolio pays its Adviser, Alliance Capital Management L.P., an advisory
fee at the annual rate of .50 of 1% on the first $1.25 billion of average daily
net assets; .49 of 1% on the next $.25 billion; .48 of 1% on the next $.25
billion; .47 of 1% on the next $.25 billion; .46 of 1% on the next $1 billion;
and .45% in excess of $3 billion. The Adviser has agreed to reimburse the
Portfolio to the extent that its aggregate expenses (excluding taxes,
brokerage, interest and, where permitted, extraordinary expenses) exceed 1% of
its average daily net assets for any fiscal year. For the year ended June 30,
1995, the reimbursement amounted to $637,503. The Portfolio compensates
Alliance Fund Services, Inc. (a wholly-owned subsidiary of the Adviser) for
providing personnel and facilities to perform transfer agency services for the
Portfolio. Such compensation amounted to $2,640,512 for the year ended June 30,
1995.
NOTE C: DISTRIBUTION ASSISTANCE AND ADMINISTRATIVE SERVICES PLAN
Under this plan, the Portfolio pays the Adviser a distribution fee at the
annual rate of up to .25 of 1% of the average daily value of the Portfolio's
net assets. The Plan provides that the Adviser will use such payments in their
entirety for distribution assistance and promotional activities. For the year
ended June 30, 1995, the distribution fee amounted to $5,459,132 of which
$436,731 was waived. In addition, the Portfolio reimbursed certain
broker-dealers for administrative costs incurred in connection with providing
shareholder services, accounting and bookkeeping, and legal and compliance
support. For the year ended June 30, 1995, such payments by the Portfolio
amounted to $1,557,967 of which $151,500 was paid to the Adviser.
6
ALLIANCE GOVERNMENT RESERVES
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NOTE D: INVESTMENT TRANSACTIONS
At June 30, 1995, the cost of portfolio securities for federal income tax
purposes was the same as the cost for financial reporting purposes. At June 30,
1995 the Portfolio had a capital loss carryforward of $937,413, of which
$148,764 expires in 2001, $236,674 expires in 2002 and $551,975 expires in 2003.
NOTE E: TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
An unlimited number of shares ($.001 par value) are authorized. At June 30,
1995, capital paid-in aggregated $2,515,245,616. Transactions, all at $1.00
per share, were as follows:
YEAR ENDED YEAR ENDED
JUNE 30, 1995 JUNE 30, 1994
--------------- ---------------
Shares sold 9,487,236,684 7,696,239,666
Shares issued on reinvestments of dividends 96,532,096 47,809,968
Shares redeemed (9,129,950,245) (7,465,353,260)
Net increase 453,818,535 278,696,374
NOTE F: FINANCIAL HIGHLIGHTS
Selected data for a share outstanding throughout each period.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .0439 .0244 .0256 .0421 .0640
Net realized gain on investments -0- -0- .0001 -0- -0-
Net increase in net assets from operations .0439 .0244 .0257 .0421 .0640
LESS: DISTRIBUTIONS
Dividends from net investment income (.0439) (.0244) (.0256) (.0421) (.0640)
Distributions from net realized gains -0- -0- (.0001) -0- -0-
Total dividends and distributions (.0439) (.0244) (.0257) (.0421) (.0640)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURNS
Total investment return based on:
net asset value (a) 4.48% 2.48% 2.60% 4.30% 6.61%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in millions) $2,514 $2,061 $1,783 $1,572 $1,070
Ratio to average net assets of:
Expenses, net of waivers and reimbursements 1.00% 1.00% 1.00% .95% .89%
Expenses, before waivers and reimbursements 1.05% 1.04% 1.02% .97% .93%
Net investment income 4.42% 2.46% 2.55% 4.17% 6.28%
</TABLE>
(a) Total investment return in 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 in the last day of the period.
7
ALLIANCE GOVERNMENT RESERVES
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TO THE BOARD OF TRUSTEES AND SHAREHOLDERS
ALLIANCE GOVERNMENT RESERVES
We have audited the accompanying statement of net assets of Alliance Government
Reserves as of June 30, 1995 and the related statements of operations, changes
in net assets, and financial highlights for the periods indicated in the
accompanying financial statements. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1995 by correspondence with the custodian.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Alliance Government Reserves as of June 30, 1995, and the results of its
operations, changes in its net assets, and its financial highlights for the
periods indicated, in conformity with generally accepted accounting principles.
New York, New York
August 8, 1995
8
ALLIANCE GOVERNMENT RESERVES
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TRUSTEES
DAVE H. WILLIAMS, CHAIRMAN
JOHN D. CARIFA
SAM Y. CROSS
CHARLES H.P. DUELL
WILLIAM H. FOULK, JR.
ELIZABETH J. MCCORMACK
DAVID K. STORRS
SHELBY WHITE
JOHN WINTHROP
OFFICERS
RONALD M. WHITEHILL, PRESIDENT
JOHN R. BONCZEK, SENIOR VICE PRESIDENT
KATHLEEN A. CORBET, SENIOR VICE PRESIDENT
ROBERT I. KURZWEIL, SENIOR VICE PRESIDENT
WAYNE D. LYSKI, SENIOR VICE PRESIDENT
PATRICIA NETTER, SENIOR VICE PRESIDENT
RONALD R. VALEGGIA, SENIOR VICE PRESIDENT
DREW BIEGEL, VICE PRESIDENT
JOHN F. CHIODI, JR., VICE PRESIDENT
DORIS T. CILIBERTI, VICE PRESIDENT
RAYMOND J. PAPERA, VICE PRESIDENT
PAMELA F. RICHARDSON, VICE PRESIDENT
EDMUND P. BERGAN, JR., SECRETARY
MARK D. GERSTEN, TREASURER & CHIEF FINANCIAL OFFICER
JOSEPH J. MANTINEO, CONTROLLER
CUSTODIAN
STATE STREET BANK AND TRUST COMPANY
P.O. Box 1912
Boston, MA 02105
LEGAL COUNSEL
SEWARD & KISSEL
One Battery Park Plaza
New York, NY 10004
AUDITORS
MCGLADREY & PULLEN, LLP
555 Fifth Avenue
New York, NY 10017
TRANSFER AGENT
ALLIANCE FUND SERVICES, INC.
P.O. Box 1520
Secaucus, NJ 07096-1520
DISTRIBUTOR
ALLIANCE FUND DISTRIBUTORS, INC.
1345 Avenue of the Americas
New York, NY 10105
9
ALLIANCE GOVERNMENT RESERVES
1345 Avenue of the Americas, New York, NY 10105
Toll free 1-(800) 221-5672
YIELDS. For current recorded yield information on Alliance
Government Reserves, call on a touch-tone telephone toll-free
(800) 251-0539 and press the following sequence of keys:
1 # 1 # 2 5 #
For non-touch-tone telephones, call toll-free (800) 221-9513
ALLIANCECAPITAL
DISTRIBUTION OF THIS REPORT OTHER THAN TO SHAREHOLDERS MUST
BE PRECEDED OR ACCOMPANIED BY THE FUND'S CURRENT PROSPECTUS,
WHICH CONTAINS FURTHER INFORMATION ABOUT THE FUND.
R THESE REGISTERED SERVICE MARKS USED UNDER LICENSE FROM
THE OWNER, ALLIANCE CAPITAL MANAGEMENT L.P.
ALC 507070
GOVAR
