- --------------------------------------------------------------------------------
Alliance
Government
Reserves
Alliance Capital [LOGO](R)
Annual Report
June 30, 1999
- --------------------------------------------------------------------------------
<PAGE>
STATEMENT OF NET ASSETS
June 30, 1999 Alliance Government Reserves
================================================================================
Principal
Amount
(000) Security Yield Value
- --------------------------------------------------------------------------------
U.S. GOVERNMENT
AGENCIES-84.2%
FEDERAL HOME
LOAN MORTGAGE
CORP.-37.9%
$ 160,000 7/13/99................. 4.78% $ 159,748,267
94,000 8/23/99................. 4.79 93,348,188
45,500 7/09/99................. 4.80 45,451,871
91,000 8/10/99................. 4.80 90,522,756
94,000 8/13/99................. 4.80 93,470,049
102,500 8/20/99................. 4.80 101,828,055
69,500 7/06/99................. 4.81 69,454,149
94,000 9/13/99................. 4.81 93,089,924
53,395 7/06/99................. 4.83 53,359,663
46,000 7/09/99................. 4.83 45,951,444
74,000 7/14/99................. 4.83 73,871,733
8,500 7/16/99................. 4.83 8,483,142
25,500 7/01/99................. 4.84 25,500,000
100,000 9/10/99................. 4.84 99,065,167
91,406 7/09/99................. 4.85 91,309,211
41,500 8/06/99................. 4.85 41,302,668
70,000 10/01/99................ 4.86 69,152,067
90,500 7/09/99................. 4.87 90,402,260
140,000 9/02/99................. 4.97 138,789,700
100,000 9/15/99................. 5.03 98,950,778
100,000 9/16/99................. 5.03 98,936,972
30,000 7/23/99................. 5.05 29,907,783
89,000 8/03/99................. 5.06 88,588,820
18,000 9/17/99................. 5.07 17,804,610
42,500 9/23/99................. 5.08 42,002,183
35,000 9/10/99................. 5.09 34,652,790
66,500 9/10/99................. 5.12 65,835,055
30,000 9/09/99................. 5.13 29,703,667
128,000 9/23/99................. 5.13 126,485,760
--------------
2,116,968,732
--------------
FEDERAL HOME
LOAN BANK-19.2%
25,000 4.75%, 7/13/99.......... 4.87 24,960,417
18,000 4.82%, 8/12/99 FRN...... 5.33 17,989,519
36,000 4.95%, 2/17/00.......... 5.07 35,973,571
57,500 4.95%, 2/18/00.......... 5.07 57,457,604
154,000 5.00%, 2/10/00.......... 5.00 153,997,238
10,000 5.02%, 3/03/00.......... 5.03 9,997,900
20,000 5.03%, 7/23/99.......... 5.05 19,938,522
30,000 5.03%, 2/25/00.......... 5.00 29,990,767
35,000 5.05%, 3/03/00.......... 5.15 34,995,799
64,000 5.05%, 3/03/00.......... 5.05 64,000,000
96,400 5.10%, 3/03/00.......... 5.17 96,366,412
91,000 5.10%, 5/17/00.......... 5.17 90,947,325
41,000 5.14%, 3/17/00.......... 5.12 41,000,000
91,000 5.15%, 5/19/00.......... 5.25 90,931,737
91,000 5.16%, 3/08/00.......... 5.23 90,953,195
120,000 5.30%, 8/18/99 FRN...... 5.35 119,992,110
91,100 5.41%, 6/14/00.......... 5.45 91,068,206
--------------
1,070,560,322
--------------
STUDENT LOAN
MARKETING
ASSOCIATION-15.6%
84,000 5.48%, 2/14/00 FRN...... 5.54 83,969,178
140,000 5.50%, 12/03/99 FRN..... 5.54 139,976,219
184,000 5.51%, 2/04/00 FRN...... 5.59 183,978,493
189,000 5.53%, 11/24/99 FRN..... 5.56 188,977,320
84,000 5.57%, 9/30/99 FRN...... 5.57 84,000,000
189,000 5.58%, 11/09/99 FRN..... 5.61 188,959,979
--------------
869,861,189
--------------
FEDERAL NATIONAL
MORTGAGE
ASSOCIATION-11.1%
18,000 4.32%, 9/22/99 FRN...... 5.17 17,966,600
29,237 4.74%, 9/22/99.......... 4.85 28,917,488
27,700 4.76%, 7/30/99.......... 4.84 27,593,786
99,500 4.76%, 9/17/99.......... 4.88 98,473,823
176,000 5.00%, 7/20/99.......... 5.04 175,535,556
90,200 5.00%, 5/05/00 MTN...... 5.10 90,111,663
40,000 5.01%, 9/22/99.......... 5.07 39,537,967
50,000 5.03%, 7/20/99.......... 5.04 49,867,264
63,900 5.04%, 4/06/00 MTN...... 5.10 63,863,092
31,000 5.09%, 12/08/99......... 5.21 30,298,711
--------------
622,165,950
--------------
FEDERAL FARM
CREDIT BANK-0.4%
6,000 4.87%, 9/01/99.......... 4.98 5,998,556
14,000 5.43%, 8/02/99 MTN...... 4.96 14,004,172
--------------
20,002,728
--------------
Total U.S. Government
Agencies
(amortized cost
$4,699,558,921)......... 4,699,558,921
--------------
1
<PAGE>
STATEMENT OF NET ASSETS (continued) Alliance Government Reserves
================================================================================
Principal
Amount
(000) Security Yield Value
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS-17.2%
ABN Amro
$ 245,000 4.90%, dated 6/30/99,
due 7/01/99 in the
amount of $245,033,347
(cost $245,000,000;
collateralized by
$100,000,000 FHLMC,
6.18%, 6/14/02,
value $99,742,725,
$100,000,000 FFCB 31331H,
4.77%, 8/02/99,
value $100,695,628 and
$49,987,000 FMC
Discount Note, 9/09/99,
value $49,404,214)...... 4.90% $ 245,000,000
Lehman Brothers, Inc.
50,000 5.00%, dated 6/30/99,
due 7/01/99 in the
amount of $50,006,944
(cost $50,000,000;
collateralized by
$58,447,000 FNMA 15 Year
8.00%, 3/01/11,
value $26,537,561 and
$26,099,363 FHLMC
Gold PC 15 Year,
6.00%, 5/01/14,
value $25,035,475)...... 5.00 50,000,000
Paine Webber, Inc.
245,000 5.02%, dated 6/30/99,
due 7/08/99 in the
amount of $245,273,311
(cost $245,000,000;
collateralized by
$20,931,993 GNMA I 780947,
value $23,661,174,
$40,000,000 GNMA I 780886,
value $37,913,361,
$18,889,426 FHLMC C25626,
value $18,651,844,
$28,239,000 FNMA 190635,
value $15,055,165,
$30,000,000 FNMA 313819,
value $23,660,594,
$30,000,000 FNMA 413213,
value $27,950,982,
$18,748,000 GNMA I 780886,
value $14,338,833,
$50,000,000 FNMA 313294,
value $31,897,294,
$50,000,000 FNMA 252571,
value $50,000,000 and
$49,993,974 FNMA 303295,
value $13,360,300) (a).. 5.02 245,000,000
Paribas Corp.
100,000 5.00%, dated 6/30/99,
due 7/01/99 in the
amount of $100,013,889
(cost $100,000,000;
collateralized by
$50,000,000 FFCB,
4.875%, 9/01/99,
value $50,147,747 and
$51,855,000 FHLB,
5.48%, 6/21/00,
value $51,837,647)...... 5.00 100,000,000
Prudential Securities, Inc.
245,000 4.95%, dated 6/30/99,
due 7/07/99 in the
amount of $245,033,688
(cost $245,000,000;
collateralized by
$44,705,000 FNMA 323436,
6.00%, 11/01/28
value $40,834,053,
$99,487,938 FNMA 323362,
6.00%, 11/01/28,
value $90,840,049,
$135,938,292 FNMA 323549,
7.50%, 10/01/28,
value $119,721,736 and
$49,704,000 FNMA 323461,
7.50%, 10/01/13,
value $38,983,143)...... 4.95 245,000,000
State Street Bank &
Trust Co.
20,000 4.65%, dated 6/30/99,
due 7/01/99 in the
amount of $20,002,583
(cost $20,000,000;
collateralized by
$20,275,000
U.S. Treasury Note,
5.00%, 2/28/01,
value $20,402,003)...... 4.65 20,000,000
2
<PAGE>
Alliance Government Reserves
================================================================================
Principal
Amount
(000) Security Yield Value
- --------------------------------------------------------------------------------
State Street Bank &
Trust Co.
$ 55,100 4.80%, dated 6/30/99,
due 7/01/99 in the
amount of $55,107,347
(cost $55,100,000;
collateralized by
$55,855,000
U.S. Treasury Note,
5.00%, 2/28/01,
value $56,204,876)...... 4.80% $ 55,100,000
--------------
Total Repurchase
Agreements
(amortized cost
$960,100,000)........... 960,100,000
--------------
TOTAL INVESTMENTS-101.4%
(amortized cost
$5,659,658,921)......... 5,659,658,921
Other assets less
liabilities-(1.4%)...... (76,593,224)
--------------
NET ASSETS-100%
(offering and redemption
price of $1.00 per share;
5,583,900,617 shares
outstanding)............ 5,583,065,697
==============
- --------------------------------------------------------------------------------
(a) Repurchase agreements which are terminable within 7 days.
Glossary of Terms:
FRN Floating Rate Note
FFCB Federal Farm Credit Bank
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
GNMA Government National Mortgage Association
MTN Medium Term Note
See notes to financial statements.
3
<PAGE>
STATEMENT OF OPERATIONS
Year Ended June 30, 1999 Alliance Government Reserves
================================================================================
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest .................................................. $ 296,475,357
EXPENSES
Advisory fee (Note B) ..................................... $ 26,712,495
Distribution assistance and administrative service (Note C) 24,783,052
Transfer agency (Note B) .................................. 4,835,345
Registration fees ......................................... 747,902
Printing .................................................. 598,094
Custodian fees ............................................ 488,926
Audit and legal fees ...................................... 107,193
Trustees' fees ............................................ 13,897
Miscellaneous ............................................. 86,994
--------------
Total expenses ............................................ 58,373,898
Less: expense reimbursement ............................... (1,123,076)
--------------
Net expenses .............................................. 57,250,822
--------------
Net investment income ..................................... 239,224,535
REALIZED GAIN ON INVESTMENTS
Net realized gain on investment transactions .............. 33,882
--------------
NET INCREASE IN NET ASSETS FROM OPERATIONS ................... $ 239,258,417
==============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
================================================================================
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1999 June 30, 1998
-------------- --------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income ..................................... $ 239,224,535 $198,248,141
Net realized gain on investment transactions .............. 33,882 2,080
-------------- --------------
Net increase in net assets from operations ................ 239,258,417 198,250,221
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income ..................................... (239,224,535) (198,248,141)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase (Note E) ..................................... 674,320,941 1,146,223,601
-------------- --------------
Total increase ............................................ 674,354,823 1,146,225,681
NET ASSETS
Beginning of year ......................................... 4,908,710,874 3,762,485,193
-------------- --------------
End of year ............................................... $5,583,065,697 $4,908,710,874
============== ==============
</TABLE>
- --------------------------------------------------------------------------------
See notes to financial statements.
4
<PAGE>
NOTES TO FINANCIAL STATEMENTS
June 30, 1999 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. Certain illiquid securities containing
unconditional puts at par value are also valued at amortized cost.
2. Taxes
It is the Portfolio'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 its
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
3. Dividends
The Portfolio declares dividends daily from net investment income 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 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% on the first $1.25 billion of average daily net
assets; .49% on the next $.25 billion; .48% on the next $.25 billion; .47% on
the next $.25 billion; .46% 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 annual 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, 1999, the reimbursement amounted to $1,123,076.
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 $1,828,098 for the year ended June 30, 1999.
For the year ended June 30, 1999, the Fund's expenses were reduced by $8,024
under an expense offset arrangement with Alliance Fund Services.
5
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued) Alliance Government Reserves
================================================================================
NOTE C: Distribution Assistance and Administrative Services Plan
Under this Plan, the Portfolio pays Alliance Fund Distributors, Inc. (the
"Distributor"), a wholly-owned subsidiary of the Adviser, a distribution fee at
the annual rate of .25% of the average daily value of the Portfolio's net
assets. The Plan provides that the Distributor will use such payments in their
entirety for distribution assistance and promotional activities. For the year
ended June 30, 1999, the distribution fee amounted to $14,312,497. 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, 1999, such payments by the Portfolio amounted to
$10,470,555 of which $169,000 was paid to the Adviser.
- --------------------------------------------------------------------------------
NOTE D: Investment Transactions
At June 30, 1999, the cost of investments for federal income tax purposes was
the same as the cost for financial reporting purposes. At June 30, 1999 the Port
folio had a capital loss carryforward of $834,920, of which $46,271 expires in
2001, $236,674 expires in 2002 and $551,975 expires in the year 2003.
- --------------------------------------------------------------------------------
NOTE E: Transactions in Shares of Beneficial Interest
An unlimited number of shares ($.001 par value) are authorized. At June 30,
1999, capital paid-in aggregated $5,583,900,617. Transactions, all at $1.00 per
share, were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, June 30,
1999 1998
------------- --------------
<S> <C> <C>
Shares sold ............................... 5,844,469,091 13,439,392,768
Shares issued on reinvestments of dividends 239,224,535 198,248,141
Shares redeemed ........................... (5,409,372,685) (12,491,417,308)
------------- --------------
Net increase .............................. 674,320,941 1,146,223,601
============= ==============
</TABLE>
6
<PAGE>
FINANCIAL HIGHLIGHTS Alliance Government Reserves
================================================================================
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each
Year
<TABLE>
<CAPTION>
Year Ended June 30,
-----------------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<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 ................................ .0419(a) .0463(a) .0443 .0461(a) .0439(a)
-------- -------- -------- -------- --------
Less: Dividends
Dividends from net investment income ................. (.0419) (.0463) (.0443) (.0461) (.0439)
-------- -------- -------- -------- --------
Net asset value, end of year ......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Return
Total investment return based on net asset value (b) . 4.27% 4.74% 4.53% 4.72% 4.48%
Ratios/Supplemental Data
Net assets, end of year (in millions) ................ $ 5,583 $ 4,909 $ 3,762 $ 3,205 $ 2,514
Ratios 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 ....... 1.02% 1.01% 1.00% 1.01% 1.05%
Net investment income ............................. 4.18%(a) 4.63%(a) 4.44% 4.60%(a) 4.42%(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.
7
<PAGE>
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, 1999 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, 1999, 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, 1999, 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.
/s/ McGladrey & Pullen, LLP
McGladrey & Pullen, LLP
New York, New York
July 23, 1999
8
<PAGE>
(This page left intentionally blank.)
<PAGE>
(This page left intentionally blank.)
<PAGE>
(This page left intentionally blank.)
<PAGE>
-----------------
BULK RATE
U.S. POSTAGE
PAID
New York, NY
Permit No. 7131
-----------------
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 [LOGO](R)
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.
