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Alliance
Government
Reserves
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AllianceCapital [LOGO](R)
Semi-Annual Report
December 31, 1998
(unaudited)
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<PAGE>
STATEMENT OF NET ASSETS
December 31, 1998 (unaudited) Alliance Government Reserves
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Principal
Amount
(000) Security(a) Yield Value
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U.S. GOVERNMENT
AND AGENCIES-93.5%
FEDERAL NATIONAL
MORTGAGE
ASSOCIATION-38.3%
$ 18,000 4.70%, 9/22/99 FRN...... 5.55% $ 17,893,764
150,000 4.73%, 6/18/99 ......... 4.85 146,689,000
102,650 4.74%, 6/10/99 ......... 4.85 100,487,507
195,000 4.77%, 1/25/99 ......... 4.83 194,379,900
92,000 4.80%, 5/17/99 ......... 4.90 90,331,733
146,000 4.80%, 6/10/99 ......... 4.92 142,885,333
95,300 4.83%, 5/05/99 ......... 4.93 93,714,526
41,800 4.84%, 5/07/99 ......... 4.94 41,091,908
142,500 4.87%, 4/20/99 ......... 4.95 140,398,798
64,000 4.88%, 4/15/99 ......... 4.95 63,098,667
92,000 4.88%, 4/16/99 ......... 4.96 90,690,533
29,800 4.90%, 4/05/99 ......... 4.98 29,418,726
70,000 4.92%, 2/19/99 ......... 4.98 69,531,233
41,800 4.92%, 4/05/99 ......... 5.00 41,263,009
56,773 4.96%, 3/01/99 ......... 5.02 56,311,499
91,300 4.96%, 3/19/99 ......... 5.02 90,331,408
51,973 4.96%, 3/23/99 ......... 5.02 51,392,981
45,000 4.97%, 3/15/99 ......... 5.03 44,546,488
142,500 4.97%, 3/18/99 ......... 5.03 141,004,858
138,500 4.98%, 5/21/99 FRN...... 5.06 138,456,818
49,700 4.99%, 3/03/99 ......... 5.05 49,279,773
92,000 5.03%, 3/03/99 FRN...... 5.07 91,994,074
45,700 5.04%, 2/04/99 ......... 5.09 45,482,468
47,000 5.07%, 2/18/99 ......... 5.14 46,682,280
93,000 5.08%, 2/16/99 ......... 5.15 92,396,327
94,000 5.08%, 2/19/99 ......... 5.15 93,350,042
93,000 5.14%, 4/28/99 FRN...... 5.19 92,984,783
90,000 5.52%, 3/05/99 MTN...... 5.62 89,992,233
35,000 5.84%, 3/29/99 MTN...... 5.69 35,011,081
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2,421,091,750
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FEDERAL HOME
LOAN MORTGAGE
CORP.-29.0%
26,500 5.60%, 4/21/99 ......... 4.95 26,545,199
75,000 3/04/99 ................ 4.87 74,376,125
13,000 4/23/99 ................ 4.97 12,802,631
95,000 2/12/99 ................ 4.98 94,454,700
50,000 4/07/99 ................ 4.98 49,346,667
67,500 4/09/99 ................ 4.98 66,600,544
42,700 4/05/99 ................ 5.00 42,152,005
37,000 4/09/99 ................ 5.00 36,505,454
5,800 4/12/99 ................ 5.00 5,720,103
30,000 4/01/99 ................ 5.01 29,628,750
10,000 4/13/99 ................ 5.01 9,860,033
192,500 3/30/99 ................ 5.02 190,170,750
141,100 3/10/99 ................ 5.04 139,772,719
93,600 3/26/99 ................ 504 92,516,736
138,600 1/29/99 ................ 5.06 138,051,751
8,000 2/03/99 ................ 5.07 7,963,186
91,300 2/22/99 ................ 5.07 90,637,974
98,500 2/23/99 ................ 5.07 97,770,580
95,000 1/22/99 ................ 5.09 94,721,808
69,600 2/11/99 ................ 5.09 69,200,496
18,819 2/26/99 ................ 5.09 18,671,166
95,000 3/12/99 ................ 5.09 94,074,542
150,000 1/28/99 ................ 5.11 149,434,125
31,500 1/25/99 ................ 5.15 31,392,900
65,500 1/26/99 ................ 5.15 65,268,021
44,000 2/25/99 ................ 5.16 43,658,511
64,133 2/25/99 ................ 5.17 63,634,277
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1,834,931,753
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STUDENT LOAN
MARKETING
ASSOCIATION-17.5%
187,000 5.00%, 11/04/99 ........ 5.00 187,000,000
84,000 5.28%, 6/30/99 FRN...... 5.30 83,995,921
45,000 5.29%, 6/17/99 FRN...... 5.29 45,000,000
140,000 5.29%, 12/03/99 FRN..... 5.33 139,948,449
189,000 5.31%, 11/24/99 FRN..... 5.34 188,949,203
84,000 5.32%, 9/30/99 FRN...... 5.32 84,000,000
184,000 5.34%, 2/04/00 ......... 5.36 183,960,637
189,000 5.39%, 11/09/99 FRN..... 5.45 188,904,682
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1,101,758,892
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FEDERAL HOME
LOAN BANK-8.7%
50,000 4.75%, 6/30/99 ......... 4.87 48,812,500
25,000 4.75%, 7/13/99 ......... 4.87 24,363,368
20,000 4.80%, 2/24/99 ......... 4.84 19,856,000
140,000 5.00%, 10/27/99 ........ 5.00 140,000,000
57,000 5.02%, 2/24/99 ......... 5.06 56,570,790
50,000 5.03%, 11/05/99 ........ 5.03 50,000,000
18,000 5.08%, 8/12/99 FRN...... 5.59 17,944,351
120,000 5.10%, 8/18/99 FRN...... 5.15 119,962,356
73,000 5.56%, 3/25/99 ......... 5.71 72,977,700
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550,487,065
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Total U.S. Government
and Agencies
(amortized cost
$5,908,269,460)......... 5,908,269,460
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1
<PAGE>
STATEMENT OF NET ASSETS (continued) Alliance Government Reserves
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Principal
Amount
(000) Security(a) Yield Value
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REPURCHASE AGREEMENTS-6.3%
ABN Amro
$ 200,000 5.10%, dated 12/31/98,
due 1/04/99 in the
amount of $200,113,333
(cost $200,000,000;
collateralized by
$50,000,000 FFCB 31331R,
value $51,575,111,
$50,000,000 FFCB 31331R,
value $51,575,111,
$50,000,000 FHLB3133M6,
value $50,145,971 and
$49,830,000 FHLB 3133M6,
value $49,975,475) (b) ... 5.10% $ 200,000,000
Paine Webber, Inc.
50,000 4.80%, dated 12/31/98,
due 1/29/99 in the
amount of $50,193,333
(cost $50,000,000;
collateralized by
$36,354,000 FNCL 440831,
value $35,905,304 and
$15,581,000 FNCL 440831,
value $16,388,693) (b) ... 4.80 50,000,000
Paine Webber, Inc.
$ 150,000 5.10%, dated 11/18/98,
due 1/19/99 in the
amount of $151,317,500
(cost$150,000,000;
collateralized by
$56,206,000 FNCI 190831,
value $57,582,848,
$23,357,000 FNCI 402301,
value $23,924,040,
$17,040,000 FNCT 323034,
value $17,447,937 and
$53,397,000 FNCI 303116M,
value $54,708,617) (b) ... 5.10% $ 150,000,000
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Total Repurchase
Agreements
(amortized cost
$400,000,000)............. 400,000,000
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TOTAL INVESTMENTS-99.8%
(amortized cost
$6,308,269,460)........... 6,308,269,460
Other assets less
liabilities-0.2%.......... 13,259,264
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NET ASSETS-100%
(offering and redemption
price of $1.00 per share;
6,322,375,574 shares
outstanding).............. $6,321,528,724
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(a) All securities either mature or their interest rate changes in one year or
less.
(b) Repurchase agreements which are terminable within 7 days.
Glossary of Terms:
FRN Floating Rate Note
MTN Medium Term Note
See notes to financial statements.
2
<PAGE>
STATEMENT OF OPERATIONS
Six Months Ended December 31, 1998 (unaudited) Alliance Government Reserves
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<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C> <C>
Interest ..................................................... $ 151,876,787
EXPENSES
Advisory fee (Note B) ........................................ $ 13,238,266
Distribution assistance and administrative service (Note C) .. 12,024,706
Transfer agency (Note B) ..................................... 2,283,341
Registration fees ............................................ 262,419
Printing ..................................................... 244,199
Custodian fees ............................................... 239,046
Audit and legal fees ......................................... 42,812
Trustees' fees ...... 5,612
Miscellaneous ................................................ 14,569
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Total expenses ............................................... 28,354,970
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Net investment income ........................................ 123,521,817
REALIZED GAIN ON INVESTMENTS
Net realized gain on investment transactions ................. 21,952
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NET INCREASE IN NET ASSETS FROM OPERATIONS ...................... $ 123,543,769
=============
</TABLE>
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See notes to financial statements.
3
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS Alliance Government Reserves
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<TABLE>
<CAPTION>
Six Months Ended
December 31, 1998 Year Ended
(unaudited) June 30, 1998
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<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income .................................... $ 123,521,817 $ 198,248,141
Net realized gain on investment transactions ............. 21,952 2,080
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Net increase in net assets from operations ............... 123,543,769 198,250,221
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income .................................... (123,521,817) (198,248,141)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase (Note E) .................................... 1,412,795,898 1,146,223,601
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Total increase ........................................... 1,412,817,850 1,146,225,681
NET ASSETS
Beginning of year ........................................ 4,908,710,874 3,762,485,193
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End of period ............................................ $6,321,528,724 $4,908,710,874
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</TABLE>
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See notes to financial statements.
4
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 (unaudited) 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 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 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.
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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. No
reimbursement was required for the six months ended December 31, 1998.
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 $911,053 for the six months ended December 31,
1998.
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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 six
months ended December 31, 1998, the distribution fee amounted to $7,088,534. In
addition, the Portfolio may reimburse certain broker-dealers for administrative
costs incurred in
5
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued) Alliance Government Reserves
================================================================================
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, 1998, such payments by the Portfolio amounted to
$4,936,172 of which $84,500 was paid to the Adviser.
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NOTE D: Investment Transactions
At December 31, 1998, the cost of investments for federal income tax purposes
was the same as the cost for financial reporting purposes. At June 30, 1998 the
Portfolio had a capital loss carryforward of $868,802, of which $80,153 expires
in 2001, $236,674 expires in 2002 and $551,975 expires in the year 2003.
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NOTE E: Transactions in Shares of Beneficial Interest
An unlimited number of shares ($.001 par value) are authorized. At December 31,
1998, capital paid-in aggregated $6,322,375,574. Transactions, all at $1.00 per
share, were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
December 31, 1998 June 30,
(unaudited) 1998
--------------- ---------------
<S> <C> <C>
Shares sold ....................................................................... 3,283,369,935 13,439,392,768
Shares issued on reinvestments of dividends ....................................... 123,521,817 198,248,141
Shares redeemed ................................................................... (1,994,095,854) (12,491,417,308)
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Net increase ...................................................................... 1,412,795,898 1,146,223,601
=============== ===============
</TABLE>
6
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FINANCIAL HIGHLIGHTS Alliance Government Reserves
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Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each
Period
<TABLE>
<CAPTION>
Six Months
Ended
December 31, Year Ended June 30,
1998 -----------------------------------------------------------------------
(unaudited) 1998 1997 1996 1995 1994
------------- ------------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------ ------
Income from Investment Operations
Net investment income.................... .0220 .0463(a) .0443 .0461(a) .0439(a) .0244(a)
------ ------ ------ ------ ------ ------
Less: Dividends
Dividends from net investment income..... (.0220) (.0463) (.0443) (.0461) (.0439) (.0244)
------ ------ ------ ------ ------ ------
Net asset value, end of period........... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ====== ======
Total Return
Total investment return based on net
asset value (b)....................... 4.42%(c) 4.74% 4.53% 4.72% 4.48% 2.48%
Ratios/Supplemental Data
Net assets, end of period (in millions).. $6,322 $4,909 $3,762 $3,205 $2,514 $2,061
Ratios 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) 1.01% 1.00% 1.01% 1.05% 1.04%
Net investment income................. 4.36%(c) 4.63%(a) 4.44% 4.60%(a) 4.42%(a) 2.46%(a)
</TABLE>
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(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.
7
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BULK RATE
Alliance Government Reserves U.S. POSTAGE
1345 Avenue of the Americas, New York, NY 10105 PAID
Toll free 1 (800) 221-5672 New York, NY
Permit No. 7131
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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
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AllianceCapital [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.
GOVSR
