ALLIANCE GOVERNMENT RESERVES
ALLIANCE CAPITAL
ANNUAL REPORT
JUNE 30, 1997
STATEMENT OF NET ASSETS
JUNE 30, 1997 ALLIANCE GOVERNMENT RESERVES
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCIES-44.3%
FEDERAL HOME LOAN BANK-14.0%
$ 50,000 5.51%, 9/24/97 FRN 5.51% $ 49,991,500
60,000 5.62%, 12/04/97 FRN 5.40 59,978,918
52,700 5.87%, 1/30/98 5.87 52,700,000
56,000 5.88%, 3/24/98 6.15 55,865,685
14,000 6.00%, 9/24/97 5.57 14,007,438
53,000 6.11%, 4/17/98 6.14 52,987,940
29,365 9/18/97 5.37 29,018,958
26,000 7/24/97 5.45 25,909,469
9,645 7/22/97 5.49 9,614,112
50,000 8/07/97 5.53 49,716,076
24,000 10/22/97 5.58 23,579,640
24,080 12/22/97 5.60 23,428,235
65,000 7/01/97 6.00 65,000,000
17,000 6/30/98 6.00 17,000,000
-------------
528,797,971
FEDERAL NATIONAL MORTGAGE
ASSOCIATION-10.4%
79,500 5.94%, 10/15/97 FRN 5.94 79,502,942
47,000 6.02%, 4/15/98 6.15 46,957,471
2,000 9/10/97 5.37 1,978,818
7,000 7/24/97 5.44 6,975,671
45,000 9/05/97 5.49 44,547,075
20,000 9/18/97 5.51 19,758,172
25,000 9/25/97 5.51 24,670,931
27,110 7/08/97 5.52 27,080,902
27,000 8/11/97 5.53 26,829,953
45,000 8/12/97 5.53 44,709,675
67,000 8/04/97 5.54 66,649,441
-------------
389,661,051
FEDERAL HOME LOAN MORTGAGE CORP.-8.5%
69,000 5.72%, 3/17/98 5.87 68,929,495
46,000 5.84%, 4/08/98 6.04 45,935,193
4,400 7/14/97 5.43 4,391,372
21,000 7/30/97 5.46 20,907,635
28,000 8/04/97 5.46 27,855,614
22,000 8/13/97 5.46 21,856,523
3,845 7/01/97 5.50 3,845,000
19,000 9/03/97 5.50 18,814,222
37,005 7/18/97 5.51 36,908,715
23,000 8/15/97 5.57 22,839,863
46,500 7/01/97 6.00 46,500,000
318,783,632
FEDERAL FARM CREDIT BANK-7.7%
72,000 5.36%, 10/01/97 FRN 5.36% 71,979,737
80,000 5.39%, 6/01/98 FRN 5.39 79,986,379
75,000 5.43%, 5/01/98 FRN 5.43 75,000,000
30,000 5.60%, 11/03/97 5.60 29,992,122
2,520 9/10/97 5.37 2,493,311
8,000 9/15/97 5.37 7,909,307
24,000 11/19/97 5.60 23,473,600
-------------
290,834,456
STUDENT LOAN MARKETING
ASSOCIATION-3.7%
20,000 5.18%, 11/24/97 FRN 5.18 19,998,126
32,500 5.20%, 9/03/97 FRN 5.20 32,496,699
32,000 5.31%, 2/17/98 FRN 5.31 31,984,429
8,300 5.36%, 1/21/98 FRN 5.36 8,298,667
48,000 5.44%, 12/19/97 5.94 47,888,378
-------------
140,666,299
Total U.S. Government and Agencies
(amortized cost $1,668,743,409) 1,668,743,409
REPURCHASE AGREEMENTS-55.3%
CHASE SECURITIES, INC.
50,000 5.53%, dated 6/11/97,
due 7/14/97 in the amount of
$50,253,458 (cost $50,000,000;
collateralized by $40,000,000
FN 317618, value $30,234,010,
$12,305,000 FN 303814,
value $11,145,491 and
$11,560,000 FN 313040,
value $10,752,908)(a) 5.53 50,000,000
CHASE SECURITIES, INC.
37,000 5.55%, dated 6/18/97,
due 8/18/97 in the amount of
$37,347,954 (cost $37,000,000;
collateralized by $14,648,945
FN 250911, value $14,408,970,
$19,999,000 FN 30372,
value $18,167,979 and
$6,000,000 FN 379176,
value $5,913,833)(a) 5.55 37,000,000
1
STATEMENT OF NET ASSETS (CONTINUED) ALLIANCE GOVERNMENT RESERVES
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
CHASE SECURITIES, INC.
$ 52,000 5.58%, dated 6/24/97,
due 9/22/97 in the amount of
$52,725,400 (cost $52,000,000;
collateralized by $20,147,603
FN 377532, value $19,821,895,
$17,977,606 FN 377535,
value $17,599,818 and
$17,840,000 FN 313285,
value $17,339,662)(a) 5.58% $52,000,000
FIRST BOSTON CORP.
50,000 5.52%, dated 6/25/97,
due 7/29/97 in the amount of
$50,260,667 (cost $50,000,000;
collateralized by $34,122,984
FN 303983, value $30,822,960
and $27,758,000 FH 00590,
value $26,834,315)(a) 5.52 50,000,000
FIRST BOSTON CORP.
45,000 5.53%, dated 6/17/97,
due 7/18/97 in the amount of
$45,214,228 (cost $45,000,000;
collateralized by $25,639,370
FH 00605, value $24,520,616
and $23,749,000 FN 303983,
value $45,973,476)(a) 5.53 45,000,000
FIRST BOSTON CORP.
50,000 5.53%, dated 6/13/97,
due 7/21/97 in the amount of
$50,291,861 (cost $50,000,000;
collateralized by $26,527,676
FH 00612, value $25,554,119,
$23,735,204 FN 313472,
value 23,142,245 and
$2,630,000 FH 00546,
value $2,474,838)(a) 5.53 50,000,000
FUJI BANK
100,000 5.51%, dated 6/16/97,
due 7/16/97 in the amount of
$100,459,167 (cost $100,000,000;
collateralized by $100,000,000
FNMA 12/22/05, value
$97,791,674, $1,210,000
VA 10/15/01, value $1,254,299
and $2,850,000 FHLMC
6/23/05, value $2,831,967)(a) 5.51 100,000,000
GOLDMAN SACHS & CO.
37,000 5.51%, dated 6/18/97,
due 7/23/97 in the amount of
$37,198,207 (cost $37,000,000;
collateralized by $38,969,000
FM 00672, value $37,875,735)(a) 5.51 37,000,000
GOLDMAN SACHS & CO.
50,000 5.53%, dated 6/04/97,
due 7/08/97 in the amount of
$50,261,139 (cost $50,000,000;
collateralized by $53,833,000
FM 00517, value $51,494,837)(a) 5.53 50,000,000
GOLDMAN SACHS & CO.
50,000 5.53%, dated 6/04/97,
due 7/09/97 in the amount of
$50,268,819 (cost $50,000,000;
collateralized by $30,703,000
FM 00517, value $29,371,093
and $26,426,000 FN 303074,
value $22,013,443)(a) 5.53 50,000,000
GOLDMAN SACHS & CO.
50,000 5.53%, dated 6/04/97,
due 7/10/97 in the amount of
$50,276,500 (cost $50,000,000;
collateralized by $53,830,000
FM 00536, value $51,543,354)(a) 5.53 50,000,000
LEHMAN BROTHERS
40,000 5.50%, dated 6/20/97,
due 7/21/97 in the amount of
$40,189,444 (cost $40,000,000;
collateralized by $20,000,000
FN 303187, value $14,243,380,
$26,713,415 FN 050643,
value $10,644,559 and
$16,765,000 FN 337174,
value $15,962,946)(a) 5.50 40,000,000
2
ALLIANCE GOVERNMENT RESERVES
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
LEHMAN BROTHERS
$ 87,000 5.50%, dated 6/19/97,
due 7/23/97 in the amount of
$87,451,917 (cost $87,000,000;
collateralized by $10,000,000
GN 002122, value $8,057,247,
$24,750,000 FN 250937,
value $24,861,261, $37,017,733
FN 050579, value $10,095,395,
$35,967,747 FN 303187,
value $25,614,584 and
$82,000,000 FN 124852,
value $199,628,789)(a) 5.50% $87,000,000
LEHMAN BROTHERS
40,000 5.50%, dated 6/20/97,
due 7/24/97 in the amount of
$40,207,778 (cost $40,000,000;
collateralized by $29,368,023
FN 303187, value $20,914,972,
$27,839,578 FN 124463,
value $8,064,631 and
$21,184,921 FN 124677,
value $11,947,272)(a) 5.50 40,000,000
LEHMAN BROTHERS
22,000 6.10%, dated 6/30/97,
due 7/01/97 in the amount of
$22,003,728 (cost $22,000,000;
collateralized by $23,526,361
GNMA 780560 6.50%, 5/15/24,
value $22,459,775) 6.10 22,000,000
MORGAN STANLEY GROUP, INC.
60,000 5.49%, dated 6/19/97,
due 7/15/97 in the amount of
$60,237,900 (cost $60,000,000;
collateralized by $17,969,000
FN 250327, value $14,481,919,
$14,500,000 FN 303707,
value $12,260,650, $23,000,000
FG 00236, value $14,286,915
and $21,564,000 FN 313017,
value $20,485,312)(a) 5.49 60,000,000
MORGAN STANLEY GROUP, INC.
79,000 5.51%, dated 6/26/97,
due 7/10/97 in the amount of
$79,169,279 (cost $79,000,000;
collateralized by $10,812,000
FN 250055, value $7,915,300,
$21,000,000 FN 66772,
value $18,140,254 and
$55,535,000 FN 77433,
value $54,982,733)(a) 5.51 79,000,000
MORGAN STANLEY GROUP, INC.
50,000 5.55%, dated 5/02/97,
due 7/01/97 in the amount of
$50,462,500 (cost $50,000,000;
collateralized by $52,292,000
GN 780410, value
$51,433,317)(a) 5.55 50,000,000
NIKKO SECURITIES CO.
40,000 5.52%, dated 6/10/97,
due 7/09/97 in the amount of
$40,177,867 (cost $40,000,000;
collateralized by $41,700,000
FH 00522, value $41,136,284)(a) 5.52 40,000,000
NIKKO SECURITIES CO.
37,000 5.52%, dated 6/17/97,
due 7/17/97 in the amount of
$37,170,200 (cost $37,000,000;
collateralized by $14,912,058
FH 80177, value $14,710,370,
$14,934,224 FH 80685,
value $14,742,866 and
$8,715,000 FH 79859,
value $8,597,358)(a) 5.52 37,000,000
NIKKO SECURITIES CO.
12,000 5.52%, dated 6/24/97,
due 7/24/97 in the amount of
$12,055,200 (cost $12,000,000;
collateralized by $13,066,000
FG 41068, value $12,275,321)(a) 5.52 12,000,000
NIKKO SECURITIES CO.
50,000 5.52%, dated 6/19/97,
due 7/25/97 in the amount of
$50,276,000 (cost $50,000,000;
collateralized by $30,000,000
FH 79503, value $29,560,751,
$10,000,000 FH 78691,
value $9,766,832 and
$12,285,000 FH 79186,
value $12,090,172)(a) 5.52 50,000,000
3
STATEMENT OF NET ASSETS (CONTINUED) ALLIANCE GOVERNMENT RESERVES
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
NIKKO SECURITIES CO.
$ 50,000 5.53%, dated 6/13/97,
due 7/11/97 in the amount of
$50,215,056 (cost $50,000,000;
collateralized by $25,323,911
FH 00512, value $24,946,963,
$19,251,102 FH 00497,
value $18,900,733 and
$7,700,000 FH 00504,
value $7,571,504)(a) 5.53% $50,000,000
PAINE WEBBER GROUP, INC.
42,000 5.52%, dated 6/06/97,
due 7/15/97 in the amount of
$42,251,160 (cost $42,000,000;
collateralized by $45,065,000
FG 00595, value $43,430,457)(a) 5.52 42,000,000
PAINE WEBBER GROUP, INC.
38,000 5.55%, dated 6/03/97,
due 7/03/97 in the amount of
$38,175,750 (cost $38,000,000;
collateralized by $50,000,000
FN 190830, value $36,167,606
and $3,715,000 FN 303116,
value $2,728,153)(a) 5.55 38,000,000
PAINE WEBBER GROUP, INC.
30,000 5.56%, dated 6/25/97,
due 7/02/97 in the amount of
$30,032,433 (cost $30,000,000;
collateralized by $31,897,000
FG 00585, value $30,730,343) 5.56 30,000,000
PAINE WEBBER GROUP, INC.
49,000 5.56%, dated 6/24/97,
due 7/03/97 in the amount of
$49,068,110 (cost $49,000,000;
collateralized by $50,000,000
FN 190831, value $35,978,677
and $14,650,000 FG 00584,
value $14,138,024)(a) 5.56 49,000,000
PAINE WEBBER GROUP, INC.
30,000 6.05%, dated 6/30/97,
due 7/01/97 in the amount of
$30,005,042 (cost $30,000,000;
collateralized by $42,815,000
FN 190831 6.50%, 4/01/09,
value $30,808,541) 6.05 30,000,000
PRUDENTIAL SECURITIES, INC.
52,000 5.50%, dated 6/19/97,
due 7/17/97 in the amount of
$52,222,444 (cost $52,000,000;
collateralized by $24,266,680
FN 303714, value $18,938,228,
$19,600,000 FN 231651,
value $12,668,987 and
$26,690,000 FG 00279,
value $21,579,019)(a) 5.50 52,000,000
PRUDENTIAL SECURITIES, INC.
42,000 5.50%, dated 6/24/97,
due 7/28/97 in the amount of
$42,218,167 (cost $42,000,000;
collateralized by $20,620,000
FG 00272, value $17,027,430,
$20,427,808 FH 00678,
value $16,736,215 and
$11,967,000 FH 00377,
value $9,228,899)(a) 5.50 42,000,000
PRUDENTIAL SECURITIES, INC.
45,000 5.53%, dated 6/17/97,
due 7/02/97 in the amount of
$45,103,688 (cost $45,000,000;
collateralized by $14,333,000
FG 51185, value $11,605,511,
$5,122,846 FG 00188,
value $10,202,080 and
$25,669,923 FH 555317,
value $24,475,501)(a) 5.53 45,000,000
PRUDENTIAL SECURITIES, INC.
10,000 5.55%, dated 6/26/97,
due 7/03/97 in the amount of
$10,010,792 (cost $10,000,000;
collateralized by $13,053,000
FN 303675, value $10,253,190) 5.55 10,000,000
PRUDENTIAL SECURITIES, INC.
40,000 6.00%, dated 6/30/97,
due 7/01/97 in the amount of
$40,006,667 (cost $40,000,000;
collateralized by $42,920,000
FG G00629, 7.00%, 12/01/25,
value $40,957,702) 6.00 40,000,000
4
ALLIANCE GOVERNMENT RESERVES
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
SBC WARBURG
$ 65,000 5.50%, dated 6/06/97,
due 7/07/97 in the amount of
$65,307,847 (cost $65,000,000;
collateralized by $24,439,000
FN 367910, value $23,530,032,
$21,038,000 FN 341537,
value $16,162,180 and
$30,760,000 FN 304033,
value $26,966,137)(a) 5.50% $65,000,000
SBC WARBURG
25,000 5.50%, dated 6/05/97,
due 7/07/97 in the amount of
$25,122,222 (cost $25,000,000;
collateralized by $15,957,000
FN 368920, value $15,177,348
and $16,146,000 FN 190044,
value $10,461,399)(a) 5.50 25,000,000
SBC WARBURG
26,000 5.50%, dated 6/10/97,
due 7/10/97 in the amount of
$26,119,167 (cost $26,000,000;
collateralized by $21,143,000
FH 00678, value $20,154,286
and $6,872,000 FH 00378,
value $6,550,644)(a) 5.50 26,000,000
SBC WARBURG
71,000 5.50%, dated 6/19/97,
due 7/25/97 in the amount of
$71,390,500 (cost $71,000,000;
collateralized by $36,140,000
FN 050993, value $29,306,266,
$35,882,000 FH 00678,
value $34,204,044 and
$10,380,049 FH 00377,
value $8,981,673)(a) 5.50 71,000,000
SMITH BARNEY
50,000 5.54%, dated 6/03/97,
due 7/07/97 in the amount of
$50,261,611 (cost $50,000,000;
collateralized by $19,800,000
FN 250373, value $20,080,558,
$25,300,765 FH 00517,
value $24,203,434 and
$8,850,000 FN 250029,
value $7,273,940)(a) 5.54 50,000,000
SMITH BARNEY
87,000 5.54%, dated 6/17/97,
due 7/22/97 in the amount of
$87,468,592 (cost $87,000,000;
collateralized by $92,500,000
FH 00612, value $89,075,595)(a) 5.54 87,000,000
SMITH BARNEY
50,000 6.15%, dated 6/30/97,
due 7/01/97 in the amount of
$50,008,542 (cost $50,000,000;
collateralized by $14,604,175
FG C00525 8.00%, 6/01/27
value $15,040,396, $10,978,657
FG D80372 8,00%, 6/01/27
value 11,306,044, $16,181,883
FG G10353 8.00%, 4/01/10
value $9,194,079, $8,419,059
FG D80442 8.00%, 6/01/27
value $8,670,577, $14,100,000
FG L80008 6.50%, 1/01/00
value $7,266,676 and $5,980,000
FN 313568 8.00%, 12/01/17
value $6,077,595) 6.15 50,000,000
UBS FINANCE, INC.
49,000 5.50%, dated 6/24/97,
due 7/14/97 in the amount of
$49,149,722 (cost $49,000,000;
collateralized by $52,111,000
FH 00647, value $46,996,575)(a) 5.50 49,000,000
UBS FINANCE, INC.
65,000 5.50%, dated 6/18/97,
due 7/18/97 in the amount of
$65,297,917 (cost $65,000,000;
collateralized by $50,000,000
FN 250550, value $45,864,009
and $22,123,000 FN 339326,
value $20,581,937)(a) 5.50 65,000,000
UBS FINANCE, INC.
50,000 5.62%, dated 4/29/97,
due 7/30/97 in the amount of
$50,718,111 (cost $50,000,000;
collateralized by $53,885,000
FGG 00647, value $51,665,491)(a) 5.62 50,000,000
5
STATEMENT OF NET ASSETS (CONTINUED) ALLIANCE GOVERNMENT RESERVES
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
UBS FINANCE, INC.
$ 25,000 5.65%, dated 4/17/97,
due 7/16/97 in the amount of
$25,353,125 (cost $25,000,000;
collateralized by $26,899,000
FHG 00647, value $25,799,201)(a) 5.65% $ 25,000,000
Total Repurchase Agreements
(amortized cost $2,079,000,000) 2,079,000,000
TOTAL INVESTMENTS-99.6%
(amortized cost $3,747,743,409) $3,747,743,409
Other assets less liabilities-0.4% 14,741,784
NET ASSETS-100%
(offering and redemption
price of $1.00 per share;
3,763,356,075 shares outstanding) $3,762,485,193
# All securities either mature or their interest rate changes in one year or
less.
(a) Repurchase agreements which are terminable within 7 days.
Glossary:
FRN - Floating rate note
See notes to financial statements.
6
STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1997 ALLIANCE GOVERNMENT RESERVES
_______________________________________________________________________________
INVESTMENT INCOME
Interest $198,976,472
EXPENSES
Advisory fee (Note B) $17,412,020
Distribution assistance and administrative
service (Note C) 11,456,089
Transfer agency (Note B) 5,917,904
Registration fees 815,160
Printing 424,268
Custodian fees 420,291
Audit and legal fees 58,410
Trustees' fees 14,637
Miscellaneous 63,489
Total expenses 36,582,268
Net investment income 162,394,204
REALIZED GAIN ON INVESTMENTS
Net realized gain on investment transactions 46,468
NET INCREASE IN NET ASSETS FROM OPERATIONS $162,440,672
See notes to financial statements.
7
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE GOVERNMENT RESERVES
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
JUNE 30,1997 JUNE 30,1996
--------------- ---------------
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income $ 162,394,204 $ 135,336,143
Net realized gain on investment transactions 46,468 20,063
Net increase in net assets from operations 162,440,672 135,356,206
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (162,394,204) (135,336,143)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase (Note E) 557,419,600 690,690,859
Total increase 557,466,068 690,710,922
NET ASSETS
Beginning of year 3,205,019,125 2,514,308,203
End of year $3,762,485,193 $3,205,019,125
See notes to financial statements.
8
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997 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, the 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. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Interest income is accrued as earned. Investment transactions are recorded on a
trade date basis. Realized gain (loss) from investment transactions is recorded
on the identified cost basis.
5. REPURCHASE AGREEMENTS
It is the Fund'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 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, 1997. 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 $3,969,178 for the year ended June 30, 1997.
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, 1997, the distribution fee amounted to $9,145,567. In addition,
the Portfolio may reimburse certain broker-dealers for administrative costs
incurred in connection with providing shareholder services, and may reimburse
the Adviser for accounting and bookkeeping, and legal and compliance support.
For the year ended June 30, 1997, such payments by the Portfolio amounted to
$2,310,522 of which $164,000 was paid to the Adviser.
9
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE GOVERNMENT RESERVES
_______________________________________________________________________________
NOTE D: INVESTMENT TRANSACTIONS
At June 30, 1997, the cost of portfolio securities for federal income tax
purposes was the same as the cost for financial reporting purposes. At June 30,
1997 the Portfolio had a capital loss carryforward of $870,882, of which
$82,233 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,
1997, capital paid-in aggregated $3,763,356,075. Transactions, all at $1.00 per
share, were as follows:
YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30,
1997 1996
---------------- ----------------
Shares sold 16,812,712,717 13,672,251,535
Shares issued on reinvestments of dividends 162,394,204 135,336,143
Shares redeemed (16,417,687,321) (13,116,896,819)
Net increase 557,419,600 690,690,859
10
FINANCIAL HIGHLIGHTS ALLIANCE GOVERNMENT RESERVES
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
YEAR.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ----------- ----------- ----------- -----------
<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 .0443 .0461(a) .0439(a) .0244(a) .0256(a)
Net realized gain on investments -0- -0- -0- -0- .0001
Net increase in net assets from operations .0443 .0461 .0439 .0244 .0257
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.0443) (.0461) (.0439) (.0244) (.0256)
Distributions from net realized gains -0- -0- -0- -0- (.0001)
Total dividends and distributions (.0443) (.0461) (.0439) (.0244) (.0257)
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 (b) 4.53% 4.72% 4.48% 2.48% 2.60%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in millions) $3,762 $3,205 $2,514 $2,061 $1,783
Ratio to average net assets of:
Expenses, net of waivers and reimbursements 1.00% 1.00% 1.00% 1.00% 1.00%
Expenses, before waivers and reimbursements 1.00% 1.01% 1.05% 1.04% 1.02%
Net investment income 4.44% 4.60%(a) 4.42%(a) 2.46%(a) 2.55%(a)
</TABLE>
(a) Net of expenses reimbursed or waived by the Adviser.
(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.
11
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, 1997 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, 1997, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Alliance Government Reserves Portfolio as of June 30, 1997, 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 29, 1997
12
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
DREW BIEGEL, SENIOR VICE 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
KENNETH T. CARTY, VICE PRESIDENT
JOHN F. CHIODI, JR., VICE PRESIDENT
DORIS T. CILIBERTI, VICE PRESIDENT
MARIA R. CONA, 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
VINCENT S. NOTO, 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
13
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
ALLIANCE CAPITAL
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
