ALLIANCE GOVERNMENT RESERVES
ALLIANCECAPITAL
ANNUAL REPORT
JUNE 30, 1996
STATEMENT OF NET ASSETS
JUNE 30, 1996 ALLIANCE GOVERNMENT RESERVES
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY+ YIELD VALUE
- ------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCIES-98.2%
FEDERAL NATIONAL MORTGAGE
ASSOCIATION-32.4%
$ 50,000 10/30/96 4.91% $ 49,174,847
21,010 7/12/96 5.00 20,977,901
25,000 7/24/96 5.19 24,917,104
25,000 7/12/96 5.20 24,960,278
7,000 7/23/96 5.20 6,977,755
34,000 7/30/96 5.20 33,857,578
100,000 8/23/96 5.21 99,232,972
36,000 7/18/96 5.22 35,911,260
97,000 7/10/96 5.25 96,872,688
22,800 8/06/96 5.25 22,680,414
50,000 8/08/96 5.25 49,722,917
6,000 7/30/96 5.26 5,974,577
20,000 9/12/96 5.27 19,786,475
25,000 5.27%, 7/05/96 FRN 5.36 24,999,811
50,000 5.28%, 10/01/96 FRN 5.33 49,993,868
25,000 5.30%, 12/26/96 5.30 24,991,732
81,000 5.40%, 4/04/97 FRN 5.50 80,971,231
10,000 5.41%, 9/27/96 FRN 5.41 10,000,000
12,000 5.41%, 10/04/96 FRN 5.43 11,998,385
90,000 5.45%, 10/15/96 FRN 5.52 89,981,853
50,000 5.55%, 6/11/97 FRN 5.60 49,977,112
79,500 5.56%, 10/15/97 FRN 5.57 79,513,075
50,000 5.62%, 7/02/96 5.62 50,000,617
20,000 5.64%, 10/02/96 5.85 19,989,531
40,000 5.76%, 9/03/96 5.76 40,019,686
15,000 8.00%, 7/10/96 5.31 15,009,346
--------------
1,038,493,013
FEDERAL HOME LOAN MORTGAGE CORP.-16.5%
25,000 7/03/96 5.20 24,992,778
10,000 8/21/96 5.20 9,926,333
11,432 8/12/96 5.24 11,362,112
25,000 7/10/96 5.25 24,967,219
25,000 8/13/96 5.25 24,843,229
79,900 7/15/96 5.27 79,736,249
105,588 7/18/96 5.28 105,324,734
24,266 7/19/96 5.28 24,201,938
115,849 7/22/96 5.28 115,492,185
9,000 7/22/96 5.29 8,972,228
25,000 9/17/96 5.34 24,710,750
73,100 7/01/96 5.52 73,100,000
--------------
527,629,755
FEDERAL FARM CREDIT BANK-15.5%
10,725 7/15/96 5.29% 10,702,936
25,000 4.95%, 3/03/97 5.00 24,990,242
40,000 5.30%, 8/01/96 5.26 39,997,368
53,000 5.36%, 9/03/96 FRN 5.36 53,000,000
50,000 5.37%, 5/20/97 FRN 5.49 49,948,364
80,000 5.38%, 6/01/98 FRN 5.40 79,971,539
150,000 5.50%, 6/26/97 FRN 5.65 149,928,986
14,000 5.60%, 7/01/96 5.60 14,000,000
75,000 5.71%, 5/01/98 FRN 5.71 75,000,000
--------------
497,539,435
FEDERAL HOME LOAN BANK-15.3%
20,000 7/19/96 5.00 19,950,000
15,400 10/23/96 5.19 15,146,901
20,000 10/16/96 5.21 19,690,294
25,000 11/05/96 5.22 24,539,625
15,000 11/12/96 5.25 14,706,875
5,300 7/19/96 5.46 5,285,531
69,000 7/01/96 5.52 69,000,000
25,000 4.86%, 2/07/97 4.95 24,984,603
25,000 5.03%, 2/21/97 5.04 24,998,395
25,000 5.09%, 2/13/97 5.10 24,998,449
47,500 5.21%, 8/05/96 FRN 5.42 47,493,605
30,000 5.27%, 11/13/96 FRN 5.34 29,992,488
27,000 5.29%, 2/06/97 5.31 26,997,566
45,000 5.30%, 10/16/96 FRN 5.43 44,983,986
25,000 5.30%, 3/05/97 5.30 25,000,000
50,000 5.32%, 3/27/97 FRN 5.42 49,965,446
24,000 5.38%, 3/14/97 5.63 23,939,402
--------------
491,673,166
STUDENT LOAN MARKETING
ASSOCIATION-11.5%
20,000 5.41%, 11/24/97 FRN 5.43 19,993,442
94,400 5.45%, 12/20/96 FRN 5.45 94,400,000
49,300 5.46%, 4/18/97 FRN 5.50 49,285,281
100,000 5.49%, 8/04/97 FRN 5.49 100,000,000
32,000 5.54%, 2/17/98 FRN 5.62 31,959,824
30,880 5.59%, 11/20/97 FRN 5.56 30,891,385
8,300 5.59%, 1/21/98 FRN 5.62 8,296,283
20,000 5.69%, 8/22/96 FRN 5.59 20,000,933
15,000 6.13%, 6/30/97 FRN 5.90 15,008,596
369,835,744
1
STATEMENT OF NET ASSETS (CONTINUED) ALLIANCE GOVERNMENT RESERVES
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY+ YIELD VALUE
- ------------------------------------------------------------------------
U.S. TREASURY NOTES-6.0%
$ 25,000 6.13%, 5/31/97 5.69% $ 25,092,251
10,000 6.50%, 9/30/96 5.09 10,033,728
22,000 6.50%, 5/15/97 5.68 22,153,372
50,000 6.63%, 3/31/97 5.14 50,502,831
20,000 6.75%, 5/31/97 5.77 20,167,649
25,000 6.88%, 3/31/97 5.48 25,251,248
40,000 7.50%, 1/31/97 5.09-5.12 40,531,826
--------------
193,732,905
U.S. TREASURY BILL-0.8%
25,000 3/06/97 4.98 24,142,390
AGENCY FOR INTERNATIONAL
DEVELOPMENT HOUSING-0.2%
4,998 5.90%, 1/01/97 FRN 5.90 4,998,202
OVERSEAS PRIVATE INVESTMENT CORP.-0.0%
1,250 5.94%, 6/10/97 FRN 5.94 1,250,000
Total U.S. Government and Agencies
(amortized cost $3,149,294,610) 3,149,294,610
REPURCHASE AGREEMENT-0.8%
Morgan Stanley Group, Inc.
25,000 5.15%, dated 6/28/96, due 7/01/96
in the amount of $25,010,729 (cost
$25,000,000; collateralized by
$24,215,000, U.S. Treasury 7.5%,
11/15/01, value $26,150,255)
(amortized cost $25,000,000) 5.15% 25,000,000
TOTAL INVESTMENTS-99.0%
(amortized cost $3,174,294,610) 3,174,294,610
Other assets less liabilities-1.0% 30,724,515
NET ASSETS-100%
(offering and redemption price
of $1.00 per share; 3,205,936,475
shares outstanding) $3,205,019,125
+ All securities either mature or their interest rate changes in one year or
less.
Glossary:
FRN - Floating Rate Note
See notes to financial statements.
2
STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1996 ALLIANCE GOVERNMENT RESERVES
_______________________________________________________________________________
INVESTMENT INCOME
Interest $164,742,651
EXPENSES
Advisory fee (Note B) $14,176,991
Distribution assistance and administrative
service (Note C) 9,126,005
Transfer agency (Note B) 4,877,711
Registration fees 746,678
Custodian fees 385,833
Printing 293,941
Audit and legal fees 54,042
Trustees' fees 15,140
Miscellaneous 58,529
Total expenses 29,734,870
Less: fee waiver (328,362)
29,406,508
Net investment income 135,336,143
REALIZED GAIN ON INVESTMENTS
Net realized gain on investments 20,063
NET INCREASE IN NET ASSETS FROM OPERATIONS $135,356,206
STATEMENTS OF CHANGES IN NET ASSETS
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
JUNE 30,1996 JUNE 30,1995
--------------- ---------------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment income $ 135,336,143 $96,532,096
Net realized gain (loss) on investments 20,063 (551,975)
Net increase in net assets from operations 135,356,206 95,980,121
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (135,336,143) (96,532,096)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase (Note E) 690,690,859 453,818,535
Total increase 690,710,922 453,266,560
NET ASSETS
Beginning of year 2,514,308,203 2,061,041,643
End of year $3,205,019,125 $2,514,308,203
See notes to financial statements.
3
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996 ALLIANCE GOVERNMENT RESERVES
_______________________________________________________________________________
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. As a matter of
fundamental policy, each Portfolio pursues its objectives by maintaining a
portfolio of high-quality money market securities all of which, at the time of
investment, have remaining maturities of 397 days or less. 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. No reimbursement was required
for the year ended June 30, 1996. 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 $3,186,714 for the year ended June 30, 1996.
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, 1996, the distribution fee amounted to $7,351,627 of which
$328,362 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, 1996, such payments by the Portfolio
amounted to $1,774,378 of which $163,000 was paid to the Adviser.
4
ALLIANCE GOVERNMENT RESERVES
_______________________________________________________________________________
NOTE D: INVESTMENT TRANSACTIONS
At June 30, 1996, the cost of portfolio securities for federal income tax
purposes was the same as the cost for financial reporting purposes. At June 30,
1996 the Portfolio had a capital loss carryforward of $917,350, of which
$128,701 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,
1996, capital paid-in aggregated $3,205,936,475. Transactions, all at $1.00 per
share, were as follows:
YEAR ENDED YEAR ENDED
JUNE 30, 1996 JUNE 30, 1995
---------------- ---------------
Shares sold 13,672,251,535 9,487,236,684
Shares issued on reinvestments of dividends 135,336,143 96,532,096
Shares redeemed (13,116,896,819) (9,129,950,245)
Net increase 690,690,859 453,818,535
NOTE F: FINANCIAL HIGHLIGHTS
Selected data for a share outstanding throughout each year.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .0461 .0439 .0244 .0256 .0421
Net realized gain on investments -0- -0- -0- .0001 -0-
Net increase in net assets from
operations .0461 .0439 .0244 .0257 .0421
LESS: DISTRIBUTIONS
Dividends from net investment income (.0461) (.0439) (.0244) (.0256) (.0421)
Distributions from net realized gains -0- -0- -0- (.0001) -0-
Total dividends and distributions (.0461) (.0439) (.0244) (.0257) (.0421)
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURNS
Total investment return based on:
net asset value (a) 4.72% 4.48% 2.48% 2.60% 4.30%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year(in millions) $3,205 $2,514 $2,061 $1,783 $1,572
Ratio to average net assets of:
Expenses, net of waivers and
reimbursements 1.00% 1.00% 1.00% 1.00% .95%
Expenses, before waivers and
reimbursements 1.01% 1.05% 1.04% 1.02% .97%
Net investment income (b) 4.60% 4.42% 2.46% 2.55% 4.17%
</TABLE>
(a) 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.
(b) Net of expenses reimbursed or waived by the Adviser.
5
INDEPENDENT AUDITOR'S REPORT ALLIANCE GOVERNMENT RESERVES
_______________________________________________________________________________
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS ALLIANCE GOVERNMENT RESERVES PORTFOLIO
We have audited the accompanying statement of net assets of Alliance Government
Reserves Portfolio as of June 30, 1996 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 Portfolio'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, 1996, 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 Portfolio as of June 30, 1996, 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.
McGladrey & Pullen, LLP
New York, New York
July 26, 1996
6
ALLIANCE GOVERNMENT RESERVES
_______________________________________________________________________________
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
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
WILLIAM J. FAGAN, VICE PRESIDENT
JOSEPH R. LASPINA, VICE PRESIDENT
LINDA D. NEIL, 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
7
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.
GOVAR
