ALLIANCE GOVERNMENT RESERVES
ALLIANCE CAPITAL
SEMI-ANNUAL REPORT
DECEMBER 31, 1997
(UNAUDITED)
STATEMENT OF NET ASSETS
DECEMBER 31, 1997 (UNAUDITED) ALLIANCE GOVERNMENT RESERVES
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
U.S. GOVERNMENT & AGENCIES-72.8%
FEDERAL NATIONAL MORTGAGE
ASSOCIATION-33.1%
$ 90,000 5.89%, 10/20/98 FRN 5.89% $ 89,968,680
180,000 5.94%, 11/04/98 FRN 5.94 179,912,015
47,000 6.02%, 4/15/98 6.15 46,984,642
24,000 6.41%, 7/17/98 6.41 24,081,782
29,000 1/21/98 5.64 28,909,778
47,000 3/02/98 5.64 46,564,467
119,697 3/24/98 5.66 118,172,925
135,000 3/23/98 5.67 133,302,037
106,000 3/26/98 5.67 104,617,407
22,000 4/28/98 5.67 21,602,460
92,000 3/27/98 5.68 90,783,556
12,000 3/27/98 5.69 11,841,050
6,000 2/05/98 5.70 5,966,925
23,000 2/11/98 5.70 22,852,001
16,000 2/12/98 5.70 15,894,533
69,000 2/23/98 5.70 68,427,070
35,000 3/06/98 5.70 34,650,311
90,000 3/09/98 5.70 89,059,487
11,000 2/25/98 5.71 10,905,049
38,000 2/27/98 5.71 37,660,660
50,000 3/10/98 5.71 49,468,278
45,000 3/12/98 5.71 44,507,375
45,000 3/13/98 5.71 44,500,337
45,000 4/22/98 5.73 44,221,613
35,000 1/27/98 5.88 34,852,125
---------------
1,399,706,563
FEDERAL HOME LOAN MORTGAGE CORP.-20.7%
69,000 5.72%, 3/17/98 5.87 68,979,584
46,000 5.84%, 4/08/98 6.04 45,977,629
44,000 3/13/98 5.67 43,514,044
46,000 2/11/98 5.70 45,704,003
68,000 2/12/98 5.70 67,551,767
112,000 2/13/98 5.70 111,241,898
92,000 3/10/98 5.70 91,022,500
76,000 2/19/98 5.71 75,415,539
90,000 2/20/98 5.71 89,293,750
10,000 3/09/98 5.71 9,895,219
95,000 2/18/98 5.72 94,283,067
40,000 3/17/98 5.73 39,530,000
85,000 1/30/98 5.74 84,609,708
10,000 1/29/98 5.76 9,955,511
---------------
876,974,219
FEDERAL HOME LOAN BANK-14.4%
22,000 5.71%, 3/24/98 5.70 21,996,330
52,700 5.87%, 1/30/98 5.87 52,700,000
90,000 6.00%, 12/30/98 6.00 90,000,000
53,000 6.11%, 4/17/98 5.75 52,995,592
76,000 3/18/98 5.66 75,103,116
25,000 3/25/98 5.67 24,677,222
80,100 3/30/98 5.67 79,005,478
45,000 3/25/98 5.68 44,420,037
25,000 2/25/98 5.71 24,784,201
145,000 2/18/98 5.72 143,903,800
---------------
609,585,776
FEDERAL FARM CREDIT BANK-3.7%
80,000 5.51%, 6/01/98 FRN 5.51 79,993,861
75,000 5.55%, 5/01/98 FRN 5.55 75,000,000
---------------
154,993,861
STUDENT LOAN MARKETING ASSOCIATION-0.9%
32,000 5.73%, 2/17/98 FRN 5.73 31,996,832
8,300 5.78%, 1/21/98 FRN 5.78 8,299,869
---------------
40,296,701
Total U.S. Government &Agencies
(amortized cost $3,081,557,120) 3,081,557,120
REPURCHASE AGREEMENTS-27.0%
CHASE SECURITIES, INC.
68,000 5.85%, dated 12/22/97,
due 1/23/98 in the amount of
$68,353,600 (cost $68,000,000;
collateralized by $66,417,977
FH 00826, value $66,883,114
and $3,840,069 FN 358499,
value $3,731,001) (a) 5.85 68,000,000
CHASE SECURITIES, INC.
42,000 5.85%, dated 12/19/97,
due 1/22/98 in the amount of
$42,232,050 (cost $42,000,000;
collateralized by $43,570,000
FN 3T3644, value $43,466,514) (a) 5.85 42,000,000
1
STATEMENT OF NET ASSETS (CONTINUED) ALLIANCE GOVERNMENT RESERVES
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
GOLDMAN SACHS & CO.
$ 104,000 5.83%, dated 12/22/97,
due 1/26/98 in the amount of
$104,589,478 (cost $104,000,000;
collateralized by $106,127,000
FG 00762, value $106,617,968) (a) 5.83% $104,000,000
GOLDMAN SACHS & CO.
93,000 6.75%, dated 12/31/97,
due 1/02/98 in the amount of
$93,034,875 (cost $93,000,000;
collateralized by $94,147,407
FMAC 7.00%, 7/01/27,
value $95,461,548) (a) 6.75 93,000,000
MORGAN STANLEY GROUP, INC.
50,000 5.66%, dated 12/01/97,
due 1/28/98 in the amount of
$50,455,944 (cost $50,000,000;
collateralized by $24,500,000
FN 347625, value $19,398,958,
$21,900,000 FG 00544,
value $18,501,506, $30,304,000
FN 50693, value $13,009,556
and $970,000 TB 6.25%, 8/15/23,
value $995,918) (a) 5.66 50,000,000
MORGAN STANLEY GROUP, INC.
40,000 5.94%, dated 12/26/97,
due 1/16/98 in the amount of
$40,138,600 (cost $40,000.000;
collateralized by $22,800,000
FN 367852, value $22,272,225
and $20,885,000 FN 313116,
value $18,852,702) (a) 5.94 40,000,000
MORGAN STANLEY GROUP, INC.
94,000 6.73%, dated 12/31/97,
due 1/02/98 in the amount of
$94,035,146 (cost $94,000,000;
collateralized by $76,363,050
FNMA 284483, 5.50%, 4/01/09,
value $74,112,027 and
$22,990,016 PC Gold
C9 0045, 6.50%, 1/01/14,
value $22,999,890) (a) 6.73 94,000,000
PAINE WEBBER GROUP, INC.
19,000 5.85%, dated 12/19/97,
due 1/20/98 in the amount of
$19,098,800 (cost $19,000,000;
collateralized by $19,438,000
FG 00748, value $19,490,245) (a) 5.85 19,000,000
PAINE WEBBER GROUP, INC.
68,000 5.90%, dated 12/24/97,
due 1/16/98 in the amount of
$68,256,322 (cost $68,000,000;
collateralized by $50,000,000
FN 190831, value $34,448,608,
$45,000,000 FN 303116,
value $31,385,082 and
$6,435,000 FN 190830,
value $4,412,205) (a) 5.90 68,000,000
PAINE WEBBER GROUP, INC.
50,000 5.94%, dated 12/26/97,
due 1/16/98 in the amount of
$50,173,250 (cost $50,000,000;
collateralized by $34,593,851
FN 344406, value $28,627,957
and $23,989,000 FN 250888,
value $22,704,380) (a) 5.94 50,000,000
PRUDENTIAL SECURITIES, INC.
92,000 5.76%, dated 12/23/97,
due 2/06/98 in the amount of
$92,662,400 (cost $92,000,000;
collateralized by $89,867,000
FG 00557, value $90,908,104
and $3,380,000 FG 83426,
value $3,423,412) (a) 5.76 92,000,000
SBC WARBURG
135,000 6.75%, dated 12/31/97,
due 1/02/98 in the amount of
$135,050,625 (cost $135,000,000;
collateralized by $138,157,000
FHLM G00761, 7.00%, 9/01/27,
value $138,540,734) (a) 6.75 135,000,000
SMITH BARNEY
115,000 5.85%, dated 12/23/97,
due 1/22/98 in the amount of
$115,560,625 (cost $115,000,000;
collateralized by $117,444,325
FG 00761, value $117,843,145) (a) 5.85 115,000,000
STATE STREET BANK AND TRUST CO.
37,700 5.75%, dated 12/31/97,
due 1/02/1998 in the amount of
$37,712,043 (cost $37,700,000;
collateralized by $38,200,000
U.S. Treasury Note, 6.00%,
5/31/98,value $40,492,000) (a) 5.75 37,700,000
2
ALLIANCE GOVERNMENT RESERVES
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
UBS FINANCE, INC.
$135,000 6.75%, dated 12/31/97,
due 1/02/98 in the amount of
$135,050,625 (cost $135,000,000;
collateralized by $137,005,000
FHLM G00815, 7.00%, 12/01/27,
value $138,627,142) (a) 6.75% $ 135,000,000
Total Repurchase Agreements
(amortized cost $1,142,700,000) 1,142,700,000
TOTAL INVESTMENTS-99.8%
(amortized cost $4,224,257,120) $4,224,257,120
Other assets less liabilities-0.2% 9,954,032
NET ASSETS-100%
(offering and redemption
price of $1.00 per share;
4,235,081,925 shares outstanding) $4,234,211,152
# 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.
3
STATEMENT OF OPERATIONS
SIX MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED) ALLIANCE GOVERNMENT RESERVES
_______________________________________________________________________________
INVESTMENT INCOME
Interest $114,045,168
EXPENSES
Advisory fee (Note B) $9,600,764
Distribution assistance and administrative
service (Note C) 6,397,023
Transfer agency (Note B) 3,331,586
Registration fees 482,980
Custodian fees 202,500
Printing 192,735
Audit and legal fees 33,135
Trustees' fees 7,421
Miscellaneous 22,655
Total expenses 20,270,799
Net investment income 93,774,369
REALIZED GAIN ON INVESTMENTS
Net realized gain on investment transactions 109
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 93,774,478
See notes to financial statements.
4
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE GOVERNMENT RESERVES
_______________________________________________________________________________
SIX MONTHS ENDED
DEC. 31, 1997 YEAR ENDED
(UNAUDITED) JUNE 30, 1997
--------------- ---------------
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income $ 93,774,369 $ 162,394,204
Net realized gain on investment transactions 109 46,468
Net increase in net assets from operations 93,774,478 162,440,672
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (93,774,369) (162,394,204)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase (Note E) 471,725,850 557,419,600
Total increase 471,725,959 557,466,068
NET ASSETS
Beginning of period 3,762,485,193 3,205,019,125
End of period $4,234,211,152 $3,762,485,193
See notes to financial statements.
5
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 (UNAUDITED) 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 of which is considered to be
a separate entity for financial reporting and tax purposes. 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 financial statements have been prepared in conformity
with generally accepted accounting principles 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
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, pursuant to the
advisory agreement, 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 six months ended December
31, 1997.
The Portfolio 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 Portfolio.
Such compensation amounted to $1,724,064 for the six months ended December 31,
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 six
months ended December 31, 1997, the distribution fee amounted to $5,067,700. 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 six months ended December 31, 1997, such payments by the
Portfolio amounted to $1,329,323 of which $82,500 was paid to the Adviser.
6
ALLIANCE GOVERNMENT RESERVES
_______________________________________________________________________________
NOTE D: INVESTMENT TRANSACTIONS
At December 31, 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 December 31,
1997, capital paid-in aggregated $4,235,081,925. Transactions, all at $1.00 per
share, were as follows:
SIX MONTHS ENDED YEAR ENDED
DEC. 31, 1997 JUNE 30,
(UNAUDITED) 1997
---------------- ----------------
Shares sold 10,855,055,280 16,812,712,717
Shares issued on reinvestments of dividends 93,774,369 162,394,204
Shares redeemed (10,477,103,799) (16,417,687,321)
Net increase 471,725,850 557,419,600
7
FINANCIAL HIGHLIGHTS ALLIANCE GOVERNMENT RESERVES
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
1997 ---------------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
------------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .0233 .0443 .0461(a) .0439(a) .0244(a) .0256(a)
Net realized gain on investment
transactions -0- -0- -0- -0- -0- .0001
Net increase in net assets from
operations .0233 .0443 .0461 .0439 .0244 .0257
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.0233) (.0443) (.0461) (.0439) (.0244) (.0256)
Distributions from net realized gains -0- -0- -0- -0- -0- (.0001)
Total dividends and distributions (.0233) (.0443) (.0461) (.0439) (.0244) (.0257)
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURNS
Total investment return based on net
asset value (b) 4.68%(c) 4.53% 4.72% 4.48% 2.48% 2.60%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $4,234 $3,762 $3,205 $2,514 $2,061 $1,783
Ratio to average net assets of:
Expenses, net of waivers and
reimbursements 1.00%(c) 1.00% 1.00% 1.00% 1.00% 1.00%
Expenses, before waivers and
reimbursements 1.00%(c) 1.00% 1.01% 1.05% 1.04% 1.02%
Net investment income 4.63%(c) 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.
(c) Annualized.
8
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.
GOVSR
