<PAGE>
LETTER TO SHAREHOLDERS ACM GOVERNMENT SECURITIES FUND, INC.
===============================================================================
February 12, 1996
Dear Shareholder:
The U.S. bond market continued its impressive, broad-based rally over the past
six months. Despite stronger economic growth, the rally strengthened, as
restrained inflationary pressures and a more accommodative monetary policy
buoyed investor confidence. Treasury and mortgage obligations both performed
well, though mortgage returns were tempered by higher prepayment activity.
Across all major sectors of the U.S. fixed income market, longer-duration
securities outperformed shorter-duration securities as interest rates for all
maturities declined. Outside the U.S., emerging market and other foreign debt
prices rose sharply as positive developments in Latin America and Central
Europe encouraged foreign investors.
FUND PERFORMANCE
For the twelve months ended December 31, 1995, ACM Government Securities Fund
achieved a total return of +29.28% on a net asset value basis, and over the last
six months, returned +13.65%. Since its initial public offering in January of
1988, the Fund has provided shareholders with an average annual total return of
+10.30% on a net asset value basis.
ECONOMIC REVIEW
While the U.S. economy slowed in the first half of 1995, growth reaccelerated in
the third quarter due to larger than expected increases in residential housing,
government spending and business inventories. Fourth quarter economic growth
appears to have been less robust, however. Retail sales remained weak despite
significant discounting during the holiday season. Gains in real disposable
income have slowed and personal debt levels continue to escalate. Growth also
remains sluggish in the manufacturing sector. The National Association of
Purchasing Management (NAPM) Index was steady at 46% in December but has
remained below 50% for five consecutive months. (A reading below 50% signals a
slowdown in manufacturing output.)
Inflation data remain very favorable to the bond market. Broad price indices
such as the Consumer Price Index and Producer Price Index have risen very
modestly and labor costs remain under control. The benign inflation outlook and
the chance of a significant federal government deficit reduction package may
allow the Federal Reserve to further cut interest rates in the months ahead.
INVESTMENT OUTLOOK
It is our view that U.S. economic growth will remain modest in the period ahead.
Our forecast calls for a fixed base year GDP growth rate of 2.0% in the first
six months of the year ("fixed based year" refers to the government's
traditional GDP measure versus the new "chain-weighted" measure). With few
inflationary pressures on the horizon, we expect the Federal Reserve to cut
interest rates further to stimulate consumer expenditures and investment. If
our forecast proves correct, the result should be further gains in U.S. bond
prices.
In our forecasted interest rate environment, we would expect to maintain a
greater percentage of the Fund's assets in Treasury securities than mortgage
securities. Treasury securities typically outperform mortgage securities in a
declining interest rate environment due to the existence of prepayment risk in
the mortgage market. Prepayment risk is the risk that homeowners will refinance
their mortgages, forcing mortgage investors to reinvest the proceeds at lower
interest rates.
1
<PAGE>
ACM Government Securities Fund, Inc.
===============================================================================
Outside the U.S., our long-term outlook for foreign debt remains positive. In
emerging markets, we believe risk premiums are still too high and will narrow in
many countries where economic prospects are improving. We anticipate maintaining
the Fund's positions in non-U.S. government securities to capitalize on the
potential price appreciation in those markets.
Thank you for your continued interest and investment in ACM Government
Securities Fund.
Sincerely,
/s/John D. Carifa
John D. Carifa
Chairman
/s/ Wayne D. Lyski
Wayne D. Lyski
President
2
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS
December 31, 1995 ACM Government Securities Fund, Inc.
======================================================================================
Principal
Amount
(000) U.S. $ Value
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. GOVERNMENT AND AGENCY
OBLIGATIONS--88.7%
U.S. TREASURY
SECURITIES--72.0%
U.S. Treasury Bonds
Zero coupon, 5/15/09 US$ 15,440 $ 7,050,985
Zero coupon, 5/15/10 235,760 100,546,925
Zero coupon, 11/15/21 23,600 4,808,972
6.875%, 8/15/25 (a) 350 394,734
7.125%, 2/15/23 (a) 33,000 37,733,520
7.625%, 2/15/25 (a) 83,680 102,324,741
11.875%, 11/15/03 (a) 18,400 25,705,352
12.375%, 5/15/04 (a) 43,320 62,719,129
12.50%, 8/15/14 (a) 20,300 32,768,666
14.00%, 11/15/11 (a) 52,340 86,810,601
U.S. Treasury Notes
6.50%, 8/15/05 (a) 650 692,452
7.125%, 9/30/99 (a) 900 954,279
7.875%, 11/15/04 (a) 54,450 63,025,875
----------
Total U.S. Treasury Securities
(cost $505,353,949) 525,536,231
FEDERAL AGENCY
SECURITIES--16.7%
Federal National Mortgage
Association
Zero coupon, 10/09/19 70,000 15,104,600
Small Business Administration
Loan Pools (I/O)
8.25%, 8/15/19 (b) 23,630 22,712,893
Student Loan Marketing
Association
15.00%, 9/17/96 78,690 83,878,819
----------
Total Federal Agency Securities
(cost $123,842,374) 121,696,312
-----------
Total U.S. Government and
Agency Obligations
(cost $629,196,323) 647,232,543
-----------
SOVEREIGN DEBT
OBLIGATIONS--40.1%
ALGERIA--1.1%
Algeria Loan Assignment
7.775%, 12/21/96
(cost $12,658,237) FRF 103,786 7,841,682
---------
AUSTRALIA--10.0%
Commonwealth of Australia
7.00%, 4/15/00 AU$ 650 $ 471,823
10.00%, 10/15/07 86,600 72,580,120
----------
Total Australian Securities
(cost $72,339,215) 73,051,943
----------
BELGIUM--0.0%
Kingdom of Belgium
6.50%, 3/31/05
(cost $167,494) BEF 5,000 167,652
---------
BULGARIA--5.8%
Republic of Bulgaria
IAB, FRN
6.75%, 7/28/11 (c)
(cost $40,803,637) US$ 91,800 42,514,875
----------
CANADA--0.0%
Canadian Government
9.00%, 12/01/04
(cost $201,424) CA$ 250 206,243
----------
DENMARK--0.1 %
Kingdom of Denmark
8.00%, 11/15/01 DKK 1,000 192,796
9.00%, 11/15/98 2,000 392,364
----------
Total Danish Securities
(cost $580,695) 585,160
----------
ECUADOR--2.7%
Republic of Ecuador
Discount Bond, FRN
6.8125%, 2/28/25 (c)
(cost $19,414,097) US$ 38,250 19,435,781
----------
FINLAND--0.0%
Republic of Finland
9.50%, 3/15/04
(cost $259,227) FIM 1,000 260,500
----------
FRANCE--0.0%
Government of France
7.75%, 10/25/05
(cost $424,523) FRF 2,000 439,861
----------
GERMANY--0.1%
Federal Republic of Germany
8.00%, 1/21/02
(cost $430,549) DEM 550 432,102
----------
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Portfolio Of Investments (continued)
December 31, 1995 ACM Government Securities Fund, Inc.
======================================================================================
Principal
Amount
(000) U.S. $ Value
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
ITALY--0.1%
Republic of Italy
8.50%, 8/1/99
(cost $392,750) LIRA 700,000 $ 418,336
JAPAN--0.1%
Government of Japan
4.40%, 3/21/05 (Yen) 15,000 160,140
4.90%, 9/22/08 20,000 223,186
6.40%, 3/20/00 25,000 287,845
Total Japanese Securities
(cost $705,316) 671,171
MEXICO--5.6%
Mexican Cetes
36.72%, 1/11/96 (d) MXP 12,500 1,593,322
36.65%, 1/18/96 (d) 64,940 8,204,246
36.70%, 1/25/96 (d) 91,671 11,479,675
United Mexican States
LIBOR/ Cetes Index Notes
46.40%, 11/27/96 (d)(e)(h) US$ 19,000 19,344,375
Total Mexican Securities
(cost $46,071,582) 40,621,618
POLAND--6.1%
Republic of Poland PDI
3.75%, 10/27/14 (f)
(cost $43,354,768) 68,700 44,740,875
RUSSIA--2.3%
Vneshekonombank
Loan Assignment (g) DEM 25,000 6,611,624
Loan Assignment (g) US$ 30,000 10,293,750
Total Russian Securities
(cost $16,346,578) 16,905,374
SPAIN--5.9 %
Government of Spain
10.00%, 2/28/05 ESP 5,000,000 41,797,610
Kingdom of Spain
12.25%, 3/25/00 95,000 856,182
Total Spanish Securities
(cost $41,518,639) 42,653,792
SWEDEN--0.0%
Kingdom of Sweden
6.00%, 2/09/05
(cost $100,933) SEK 800 102,090
<CAPTION>
======================================================================================
Principal
Amount
(000) U.S. $ Value
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
UNITED KINGDOM--0.2%
Treasury Gilts
6.00%, 8/10/99 GBP 450 $ 684,233
7.00%, 11/06/01 365 567,567
Total United Kingdom Securities
(cost $1,238,192) 1,251,800
Total Sovereign Debt Obligations
(cost $297,007,856) 292,300,855
NON-U.S. FIXED INCOME
SECURITIES--3.4%
Consortio G Grupo Dina
10.50%, 11/18/97 US$ 5,000 3,050,000
Mesa Capital Corp
12.75%, 6/30/98 15,250 13,496,250
Tribasa Toll Road Trust 1
10.50%, 12/01/11 (h) 11,200 8,400,000
Total Non-U.S. Fixed
Income Securities
(cost $28,428,681) 24,946,250
OTHER SOVEREIGN
DEBT RELATED--0.4%
Bayerische Landesbank Spread Notes--
U.S. Treasury Bond
7.625%, 2/15/25
versus Brazil Par Bond
4.25%, 4/15/24 (i)
9.125%, 3/28/96 1,000 1,036,590
9.125%, 4/12/96 1,000 1,092,390
Morgan Guaranty Trust Co.
Linked to US$ Unrestructured
Ivory Coast Loan Assignment
9.00%, 2/20/96 (j) 1,002 997,793
Total Other Sovereign
Debt Related
(cost $3,001,700) 3,126,773
TIME DEPOSIT--0.4 %
State Street Bank & Trust Co.,
Grand Cayman Islands
5.50% 1/02/96
(cost $2,792,000) 2,792 2,792,000
TOTAL INVESTMENTS--133.0%
(cost $960,426,560) 970,398,421
Other assets less liabilities--(33.0%) (241,030,037)
NET ASSETS--100% $729,368,384
</TABLE>
4
<PAGE>
ACM Government Securities Fund, Inc.
================================================================================
(a) Security, or portion thereof, has been segregated to collateralize forward
exchange currency contracts. Total value of segregated securities amounted
to $413,129,349 at December 31, 1995.
(b) Illiquid security. Security, having a cost of $23,629,839 was acquired on
June 14, 1994, and represents 3.11% of net assets at December 31,1995.
Interest rate represents yield to maturity, principal amount represents
amortized cost.
(c) Coupon will fluctuate based upon an interest rate index. Stated interest
rate in effect at December 31, 1995.
(d) Stated rate is the annualized yield to maturity at the purchase date.
(e) Principal amount represents par value at purchase date. The redemption
value of this security is based on the greater of a one year LIBOR return
formula and an indexing formula based on the cetes yield and the Mexican
peso exchange rate.
(f) Coupon increases periodically based upon a predetermined schedule. Stated
interest rate in effect at December 31, 1995.
(g) Security is in default and is non-income producing.
(h) Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At December
31,1995, these securities amounted to $27,744,375 or 3.8% of net assets.
(i) Principal amount represents par value at purchase date. The redemption
value of these securities is indexed to the spread between the referenced
treasury yield and the referenced emerging market debt yield.
(j) Principal amount represents par value at purchase date. The redemption
value of this security is linked to the change in the bid price of the
referenced emerging market debt.
Glossary of Terms:
FRN--Floating Rate Notes.
IAB--Interest Arrears Bonds.
I/O--Interest Only.
LIBOR--London Interbank Offered Rate.
PDI--Past Due Interest Bond.
See notes to financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
Statement Of Assets And Liabilities
December 31, 1995 ACM Government Securities Fund, Inc.
==============================================================================================================
<S> <C>
ASSETS
Investments in securities, at value (cost $960,426,560)........................ $ 970,398,421
Cash........................................................................... 895,752
Receivable for investment securities sold...................................... 48,374,212
Interest receivable............................................................ 22,255,167
Net unrealized appreciation of forward
exchange currency contracts................................................... 559,052
-------------
Total assets................................................................... 1,042,482,604
-------------
LIABILITIES
Payable for investment securities
purchased..................................................................... 200,225,169
Loan payable................................................................... 110,000,000
Dividend payable............................................................... 1,557,014
Advisory fee payable........................................................... 565,258
Loan interest payable.......................................................... 347,187
Administrative fee payable..................................................... 102,025
Accrued expenses............................................................... 317,567
-------------
Total liabilities.............................................................. 313,114,220
NET ASSETS..................................................................... $ 729,368,384
==============
COMPOSITION OF NET ASSETS
Capital stock, at par.......................................................... $ 778,507
Additional paid-in capital..................................................... 833,998,021
Distributions in excess of net investment
income........................................................................ (472,031)
Accumulated net realized loss on
investments and foreign currency
transactions.................................................................. (115,635,341)
Net unrealized appreciation of investments and foreign currency
denominated assets and liabilities............................................ 10,699,228
--------------
$ 729,368,384
==============
NET ASSET VALUE PER SHARE (based on
77,850,706 shares outstanding)................................................ $9.37
=====
See notes to financial statements.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Statement Of Operations
Year Ended December 31, 1995 ACM Government Securities Fund, Inc.
===================================================================================================================================
<S> <C> <C>
INVESTMENT INCOME
Interest (net of foreign withholding taxes of $3,274)....................... $ 89,611,687
EXPENSES
Advisory fee................................................................ $ 6,168,981
Administrative fee.......................................................... 1,135,334
Custodian................................................................... 373,038
Transfer agency............................................................. 279,970
Reports and notices to shareholders......................................... 246,579
Audit and legal............................................................. 124,457
Registration fee............................................................ 70,465
Taxes....................................................................... 45,675
Directors' fees............................................................. 30,000
Miscellaneous............................................................... 46,438
------------
Total expenses before interest.............................................. 8,520,937
Interest expense............................................................ 4,874,766
------------
Total expenses.............................................................. 13,395,703
Net investment income....................................................... 76,215,984
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
OPTIONS WRITTEN AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain on investments............................................. 4,899,126
Net realized loss on options written......................................... (6,807,456)
Net realized loss on foreign currency transactions........................... (2,587,402)
Net change in unrealized depreciation of:
Investments............................................................. 88,789,674
Options written......................................................... 8,815,103
Foreign currency denominated assets and liabilities..................... 1,261,762
----------
Net realized and unrealized gain on investments, options written and foreign
currency
transactions................................................................. 94,370,807
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS................................... $170,586,791
============
STATEMENT OF CHANGES IN NET ASSETS
==================================================================================================================================
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income......................................................... $ 76,215,984 $ 69,989,411
Net realized loss on investments, options written and foreign currency
transactions................................................................. (4,495,732) (122,008,321)
Net change in unrealized appreciation (depreciation) of investments,
options written and foreign currency denominated assets and
liabilities.................................................................. 98,866,539 (82,625,863)
----------- -------------
Net increase (decrease) in net assets from operations......................... 170,586,791 (134,644,773)
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income.......................................... (74,099,857) (60,766,175)
Tax return of capital distribution............................................ -0- (16,716,842)
COMMON STOCK TRANSACTIONS
Reinvestment of dividends resulting in issuance of Common Stock............... 2,361,078 12,936,298
---------- ------------
Total increase (decrease)..................................................... 98,848,012 (199,191,492)
NET ASSETS
Beginning of year............................................................. 630,520,372 829,711,864
----------- -------------
End of year................................................................... $729,368,384 $ 630,520,372
============ =============
- -----------------------------------------------------------------------------------------------------------------------------------
See notes to financial statements.
</TABLE>
7
<PAGE>
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1995 ACM GOVERNMENT SECURITIES FUND, INC.
================================================================================
INCREASE (DECREASE) IN CASH FROM OPERATING ACTIVITIES:
Interest received.............................. $ 67,847,412
Interest expense paid.......................... (4,700,209)
Operating expenses paid........................ (8,565,050)
-------------
Net increase in cash from operating activities. $ 54,582,153
INVESTING ACTIVITIES:
Purchases of long-term portfolio investments... (3,106,970,289)
Proceeds from disposition of long-term
portfolio investments......................... 3,107,429,846
Purchases of short-term portfolio
investments -- net............................ (48,803,200)
-------------
Net decrease in cash from investing activities. (48,343,643)
FINANCING ACTIVITIES*:
Cash dividends paid............................ (70,181,765)
Increase in bank borrowings.................... 55,000,000
-----------
Net decrease in cash from financing activities. (15,181,765)
-----------
Net decrease in cash........................... (8,943,255)
Increase in appreciation of foreign currency... 943
Cash at beginning of year...................... 9,838,064
----------
Cash at end of year............................ $ 895,752
===============
- --------------------------------------------------------------------------------
RECONCILIATION OF NET INCREASE IN NET ASSETS FROM
OPERATIONS TO NET INCREASE IN CASH FROM OPERATING
ACTIVITIES:
Net increase in net assets from operations..... $ 170,586,791
ADJUSTMENTS:
Increase in interest receivable................ $ (5,751,459)
Accretion of bond discount..................... (16,012,816)
Increase in accrued expenses................... 130,444
Net gain on investments........................ (94,370,807)
-------------
Total adjustments.............................. (116,004,638)
-----------
NET INCREASE IN CASH FROM OPERATING ACTIVITIES. $ 54,582,153
=============
* Non-cash financing activities not included herein consist of reinvestment of
dividends.
See notes to financial statements.
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 ACM GOVERNMENT SECURITIES FUND, INC.
===============================================================================
NOTE A: Significant Accounting Policies
ACM Government Securities Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as a non-diversified, closed-end management
investment company. The following is a summary of significant accounting
policies followed by the Fund.
1. Security Valuation
Portfolio securities traded on a national securities exchange are valued at the
last sale price on such exchange on the day of valuation or, if there was no
sale on such day, the last bid price quoted on such day. Listed securities not
traded and securities traded in the over-the-counter market, including listed
debt securities whose primary market is believed to be over-the-counter, are
valued at the mean between the most recently quoted bid and asked price provided
by the principal market makers. The U.S. dollar value of forward exchange
currency contracts is determined using forward currency exchange rates supplied
by a quotation service. Options are valued at market value or fair value using
methods determined by the Board of Directors. Securities for which market
quotations are not readily available and restricted securities which are subject
to limitations as to their resale are valued in good faith at fair value using
methods determined by the Board of Directors. Readily marketable fixed-income
securities are valued on the basis of prices provided by a pricing service when
such prices are believed by Alliance Capital Management (the "Adviser") to
reflect the fair value of such securities. Securities which mature in 60 days or
less are valued at amortized cost, which approximates market value, unless this
method does not represent fair value.
2. Taxes
It is the Fund'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 applicable, to
shareholders. Therefore, provisions for federal income or excise taxes are not
required.
3. Investment Income and Investment Transactions
Interest income is accrued daily. Investment transactions are accounted for on a
trade date basis. Investment gains and losses are determined on the identified
cost basis. The Fund accretes discounts as adjustments to interest income.
4. Currency Translation
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the mean
of the quoted bid and asked price of such currencies against the U.S. dollar.
Purchases and sales of portfolio securities are translated into U.S. dollars at
the rates of exchange prevailing when such securities were acquired or sold.
Income and expenses are translated into U.S. dollars at the rates of exchange
prevailing when accrued. Net realized loss on foreign currency transactions
represents foreign exchange gains and losses from sales and maturities of
foreign securities, holding of foreign currencies, options on foreign securities
and currencies, closed forward exchange currency contracts, exchange gains and
losses realized between the trade and settlement dates on foreign security
transactions and the difference between the amounts of interest and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of
the amounts actually received or paid. Net currency gains and losses from
valuing foreign currency denominated assets and liabilities at year end exchange
rates are reflected as a component of net unrealized appreciation of investments
and foreign currency denominated assets and liabilities.
5. Dividends and Distributions
Dividends and distributions to shareholders are recorded on the ex-dividend date
and are determined in accordance with federal income tax regulations.
Distributions in excess of net investment income result from timing differences
in the treatment of dividends paid between federal income tax and accounting
purposes.
6. Reclassification of Components of Net Assets
Due to permanent differences between the accounting and tax classifications of
foreign currency transactions, a $2,587,402 foreign currency loss was
reclassified from accumulated net realized loss on investments and foreign
currency transactions to distributions in excess of net investment income. This
reclassification had no effect on net assets.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONT) ACM GOVERNMENT SECURITIES FUND, INC.
===============================================================================
NOTE B: Advisory and Administrative Fees
Under the terms of an Investment Advisory Agreement, the Fund pays the Adviser a
monthly advisory fee in an amount equal to the sum of the annualized rate of .30
of 1% of the Fund's average weekly net assets up to $250 million, .25 of 1% of
the Fund's average weekly net assets in excess of $250 million, and 5.25% of the
daily gross income (i.e., income other than gains from the sale of securities
and foreign currency transactions or gains realized from options and futures
contracts less interest on money borrowed by the Fund) accrued by the Fund
during the month. However, such monthly advisory fee shall not exceed in the
aggregate 1/12th of 1% of the Fund's average weekly net assets during the month
(approximately 1% on an annual basis).
Under the terms of an Administrative Agreement, the Fund pays its Administrator,
Mitchell Hutchins Asset Management Inc., a monthly fee equal to the annualized
rate of .20 of 1% of the Fund's average weekly net assets up to $100 million,
.18 of 1% of the Fund's next $200 million of average weekly net assets, and .16
of 1% of the Fund's average weekly net assets in excess of $300 million. The
Administrator prepares financial and regulatory reports for the Fund and
provides other clerical services.
- -------------------------------------------------------------------------------
NOTE C: Investment Transactions
Purchases and sales of investment securities (excluding short-term investments)
aggregated $3,173,430,715 and $3,138,836,440, respectively, for the year ended
December 31, 1995.
At December 31, 1995, the cost of investments for federal income tax purposes
was $961,014,910. Accordingly, gross unrealized appreciation of investments was
$26,074,848 and gross unrealized depreciation of investments was $16,691,337
resulting in net unrealized appreciation of $9,383,511 (excluding foreign
currency) on a federal income tax basis.
At December 31, 1995, the Fund had a capital loss carryforward of $114,078,129
of which $75,448,218 expires in the year 2002 and $38,629,911 expires in the
year 2003. Capital and foreign currency losses incurred after October 31 within
the fiscal year are deemed to arise on the first business day of the Fund's next
fiscal year. In accordance with the Internal Revenue Code, the Fund may elect to
defer foreign currency and capital losses of approximately $2,992,000 and
$1,399,000, respectively, until fiscal 1996.
1. Forward Exchange Currency Contracts
The Fund enters into forward exchange currency contracts for investments
purposes and in order to hedge its exposure to changes in foreign currency
exchange rates on its foreign portfolio holdings and to hedge certain firm
purchase and sale commitments denominated in foreign currencies. A forward
exchange currency contract is a commitment to purchase or sell a foreign
currency at a future date at a negotiated forward rate. The gain or loss arising
from the difference between the original contract and the closing of such
contract is included in net realized gain or loss on foreign currency
transactions.
Fluctuations in the value of open forward exchange currency contracts are
recorded for financial reporting purposes as unrealized gains or losses.
The Fund's custodian will place and maintain cash not available for investment
or U.S. Government securities in a separate account of the Fund having a value
equal to the aggregate amount of the Fund's commitments under forward exchange
currency contracts entered into with respect to position hedges.
Risks may arise from the potential inability of a counterparty to meet the terms
of a contract and from unanticipated movements in the value of foreign
currencies relative to the U.S. dollar. The value on origination date, in U.S.
dollars, as reflected in the following table, reflects the total exposure the
Fund has in that particular currency contract.
10
<PAGE>
ACM GOVERNMENT SECURITIES FUND, INC.
================================================================================
At December 31, 1995, the Fund had outstanding
forward exchange currency contracts as follows:
<TABLE>
<CAPTION>
Value on U.S.$ Unrealized
Settlement Contract Origination Current Appreciation
Foreign Currency Buy Contracts Date Amount Date Value (Depreciation)
- ------------------------------ ---------- -------- ----------- -------- --------------
<S> <C> <C> <C> <C> <C>
Belgian Francs...................... 1/16/96 8,000,000 $ 271,223 $ 272,108 $ 885
Canadian Dollars.................... 1/16/96 275,000 199,413 201,385 1,972
Danish Kroner....................... 1/16/96 1,073,622 192,883 193,445 562
Deutsche Marks...................... 1/16/96-1/17/96 103,655,738 74,473,903 72,332,403 (2,141,500)
Finnish Marks....................... 1/16/96 1,124,974 260,351 258,863 (1,488)
French Francs....................... 1/16/96 1,537,390 311,402 314,065 2,663
Italian Liras....................... 2/08/96 200,000,000 124,552 125,248 696
Japanese Yen........................ 1/16/96 50,342,222 495,901 488,855 (7,046)
Swedish Kronor...................... 1/16/96 1,193,601 182,499 179,487 (3,012)
Foreign Currency Sale Contracts
- -------------------------------
Australian Dollars.................. 1/16/96 300,000 224,205 222,776 1,429
Belgian Francs...................... 1/16/96 5,000,000 169,918 170,068 (150)
British Pounds...................... 1/16/96 577,475 883,538 896,453 (12,915)
Canadian Dollars.................... 1/16/96 275,000 200,124 201,385 (1,261)
Danish Kroner....................... 1/16/96 3,586,600 645,072 646,231 (1,159)
Deutsche Marks...................... 1/16/96-3/22/96 216,596,433 152,975,806 151,315,114 1,660,692
Finnish Marks....................... 1/16/96 1,124,974 263,398 258,863 4,535
French Francs....................... 1/16/96 633,682 127,681 129,451 (1,770)
Japanese Yen........................ 2/06/96-9/17/96 3,700,000,000 37,728,046 36,664,988 1,063,058
Spanish Pesetas..................... 1/16/96-2/08/96 86,603,584 705,330 712,324 (6,994)
Swedish Kronor...................... 1/16/96 710,453 106,689 106,834 (145)
-----------
$ 559,052
===========
</TABLE>
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONT.) ACM GOVERNMENT SECURITIES FUND, INC.
===============================================================================
2. Option Transactions
For hedging purposes, the Fund purchases and writes (sells) put and call options
on U.S. and foreign government securities and foreign currencies that are traded
on U.S. and foreign securities exchanges and over-the-counter markets.
The risk associated with purchasing an option is that the Fund pays a premium
whether or not the option is exercised. Additionally, the Fund bears the risk of
loss of premium and change in market value should the counterparty not perform
under the contract. Put and call options purchased are accounted for in the same
manner as portfolio securities. The cost of securities acquired through the
exercise of call options is increased by premiums paid. The proceeds from
securities sold through the exercise of put options are decreased by the
premiums paid.
When the Fund writes an option, the premium received by the Fund is recorded as
a liability and is subsequently adjusted to the current market value of the
option written. Premiums received from writing options which expire unexercised
are recorded by the Fund on the expiration date as a realized gain from options
written. The difference between the premium received and the amount paid on
effecting a closing purchase transaction, including brokerage commissions, is
also treated as a realized gain, or if the premium is less than the amount paid
for the closing purchase transaction, as a realized loss. If a call option is
exercised, the premium is added to the proceeds from the sale of the underlying
security or currency in determining whether the Fund has realized a gain or
loss. If a put option is exercised, the premium reduces the cost basis of the
security or currency purchased by the Fund. In writing an option, the Fund bears
the market risk of an unfavorable change in the price of the security or
currency underlying the written option. Exercise of an option written by the
Fund could result in the Fund selling or buying a security or currency at a
price different from the current market value.
Transactions in options written for the year ended December 31, 1995 were as
follows:
<TABLE>
<CAPTION>
Number of
Contracts Premiums
---------- -------------
<S> <C> <C>
Options outstanding at
beginning of year 3 $ 2,381,500
Options written 7 15,562,016
Options expired (1) (1,430)
Options terminated in
closing purchase
transactions (8) (17,072,586)
Options exercised (1) (869,500)
-----------
Options outstanding at
end of year -0- $ -0-
=== ===========
</TABLE>
- --------------------------------------------------------------------------------
NOTE D: Capital Stock
- --------------------------------------------------------------------------------
There are 300,000,000 shares of $0.01 par value common stock authorized. Of the
77,850,706 shares outstanding at December 31, 1995, the Adviser owned 9,000
shares. During the years ended December 31, 1995 and 1994, the Fund Issued
300,524 and 1,273,764 shares, respectively, in connection with the Fund's
dividend reinvestment plan.
- --------------------------------------------------------------------------------
NOTE E: Bank Borrowing
- --------------------------------------------------------------------------------
The Fund has a Revolving Credit Agreement with Morgan Guaranty Trust Company of
New York ("Morgan Guaranty"). The maximum credit available is $110,000,000 and
the average amount of the loan outstanding for the year ended December 31, 1995
was approximately $71,400,000.
The renewable credit facility of $110,000,000 will mature on March 14, 1996 and
requires no collateralization.
Interest payments on current borrowings are based on the London Interbank
Offered Rate plus a premium. The weighted average interest rate for the year
ended December 31, 1995 was 6.83%. The interest rate at December 31, 1995 was
6.3125%. The Fund is obligated to pay Morgan Guaranty a commitment fee computed
at the rate of .25 of 1% per annum on the average daily unused portion of the
revolving credit.
12
<PAGE>
<TABLE>
<CAPTION>
ACM GOVERNMENT SECURITIES FUND, INC.
====================================================================================================================================
NOTE F: Quarterly Results of Operations (unaudited)
Net Realized
and Unrealized
Gain (Loss) Net Increase
on Investments, (Decrease)
Options Written and in Net Assets
Net Investment Foreign Currency Resulting from Market Price
Income Transactions Operations on NYSE
------------------------- ----------------------- ----------------- ------------------
Total Per Total Per Total Per
Quarter Ended (000) Share (000) Share (000) Share High Low
- ------------- -------- ---------- ---------- ----------- --------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
December 31, 1995 $20,351 $.26 $ 30,668 $ .40 $ 51,019 $ .66 $ 8.750 $ 8.250
September 30, 1995 19,530 .25 17,400 .22 36,930 .47 $ 8.750 $ 8.000
June 30, 1995 18,523 .24 73,996 .95 92,519 1.19 $ 8.500 $ 7.250
March 31, 1995 17,812 .23 (27,693) (.36) (9,881) (.13) $ 8.625 $ 7.250
------- ---- --------- ------ -------- -----
$76,216 $.98 $ 94,371 $ 1.21 $170,587 $ 2.19
======= ==== ========= ======= ======== ======
December 31, 1994 $17,463 $.22 $ (58,064) $ (.75) $(40,601) $ (.53) $ 8.875 $ 7.625
September 30, 1994 18,131 .23 16,282 .21 34,413 .44 $ 9.750 $ 8.375
June 30, 1994 15,592 .21 (45,886) (.59) (30,294) (.38) $10.500 $ 9.125
March 31, 1994 18,803 .24 (116,966) (1.52) (98,163) (1.28) $12.000 $10.000
------- ---- --------- ------ -------- -----
$69,989 $.90 $(204,634) $ (2.65) $(134,645) $(1.75)
======= ==== ========= ======= ======== ======
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS ACM GOVERNMENT SECURITIES FUND, INC.
===================================================================================================================================
Selected Data For A Share Of Common Stock Outstanding Throughout Each Year
Year Ended December 31,
----------------------
1995 1994 1993 1992 1991
----------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year......................................... $ 8.13 $ 10.88 $ 10.47 $ 10.55 $ 10.16
--------------------------------------------------
Income From Investment Operations
Net investment income (a).................................................. .98 .90 1.13 1.03 1.17
Net realized and unrealized gain
(loss) on investments, options written
and foreign currency transactions......................................... 1.21 (2.65) 1.26 (.07) .48
--------------------------------------------------
Net increase (decrease) in net asset
value from operations..................................................... 2.19 (1.75) 2.39 .96 1.65
--------------------------------------------------
Dividends and Distributions
Dividends from net investment income....................................... (.95) (.78) (1.13) (1.04) (1.26)
Distributions from net realized gains...................................... -0- -0- (.62) -0- -0-
Tax return of capital distribution......................................... -0- (.22) -0- -0- -0-
--------------------------------------------------
Total dividends and distribution........................................... (.95) (1.00) (1.75) (1.04) (1.26)
--------------------------------------------------
Capital Share Transactions
Dilutive effect of rights offering......................................... -0- -0- (.22) -0- -0-
Offering costs charged to additional
paid-in capital........................................................... -0- -0- (.01) -0- -0-
Total capital share transactions........................................... -0- -0- (.23) -0- -0-
--------------------------------------------------
Net asset value, end of year............................................... $ 9.37 $ 8.13 $ 10.88 $ 10.47 $ 10.55
==================================================
Market value, end of year.................................................. $8.250 $ 8.125 $ 11.875 $ 10.625 $ 10.625
==================================================
Total Return
Total investment return based on:(b)
Market value.......................................................... 13.93% (23.69)% 30.25% 10.39% 20.01%
==================================================
Net asset value....................................................... 29.28% (16.66)% 21.10% 9.56% 17.33%
==================================================
Ratios/Supplemental Data
Net assets, end of year (000's omitted).................................... $729,368 $630,520 $829,712 $707,998 $707,043
Ratio of expenses to average net assets.................................... 2.03% 1.52% 1.43% 1.52% 1.83%
Ratio of expenses to average net assets
excluding interest expense................................................ 1.29% 1.14% 1.16% 1.16% 1.28%
Ratio of net investment income to
average net assets........................................................ 11.55% 9.83% 9.83% 9.83% 11.59%
Portfolio turnover rate.................................................... 393% 319% 443% 497% 480%
</TABLE>
(a) Based on average shares outstanding.
(b) Total investment return is calculated assuming a purchase of common stock
on the opening of the first day and a sale on the closing of the last day
of each year reported. Dividends and distributions, if any, are assumed for
purposes of this calculation, to be reinvested at prices obtained under the
Fund's dividend reinvestment plan. Generally, total investment return based
on net asset value will be higher than total investment return based on
market value in years where there is an increase in the discount or a
decrease in the premium of the market value to the net asset value from the
beginning to the end of such years. Conversely, total investment return
based on net asset value will be lower than total investment return based
on market value in years where there is a decrease in the discount or an
increase in the premium of the market value to the net asset value from the
beginning to the end of such years.
14
<PAGE>
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS ACM GOVERNMENT SECURITIES FUND, INC.
===============================================================================
To the Shareholders and Board of Directors
ACM Government Securities Fund, Inc.
We have audited the accompanying statement of assets and liabilities of ACM
Government Securities Fund, Inc., including the portfolio of investments, as of
December 31, 1995, and the related statements of operations and cash flows for
the year then ended, the statement of changes in net assets for each of the two
years in the period then ended and the financial highlights for each of the
periods indicated therein. These financial statements and financial highlights
are the responsibility of the Fund'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
December 31, 1995, 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 ACM
Government Securities Fund, Inc. at December 31, 1995, the results of its
operations and its cash flows for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for each of the indicated periods, in conformity with generally
accepted accounting principles.
Ernst & Young LLP
New York, New York
February 14, 1996
15
<PAGE>
ADDITIONAL INFORMATION ACM GOVERNMENT SECURITIES FUND, INC.
===============================================================================
Shareholders whose shares are registered in their own names may elect to be
participants in the Dividend Reinvestment and Cash Purchase Plan (the "Plan"),
pursuant to which dividends and capital gain distributions to shareholders will
be reinvested in additional shares of the Fund. State Street Bank and Trust
Company (the "Agent") will act as agent for participants under the Plan.
Shareholders whose shares are held in the name of a broker or nominee should
contact such broker or nominee to determine whether or how they may participate
in the Plan.
If the Board declares an income distribution or determines to make a capital
gain distribution payable either in shares or in cash, as holders of the Common
Stock may have elected, non-participants in the Plan will receive cash and
participants in the Plan will receive the equivalent in shares of Common Stock
of the Fund valued as follows:
(i) If the shares of Common Stock are trading at net asset value or at a premium
above net asset value at the time of valuation, the Fund will issue new shares
at the greater of net asset value or 95% of the then-current market price.
(ii) If the shares of Common Stock are trading at a discount from net asset
value at the time of valuation, the Agent will receive the dividend or
distribution in cash and apply it to the purchase of the Fund's shares of Common
Stock in the open market on the New York Stock Exchange or elsewhere, for the
participants' accounts. Such purchases will be made on or shortly after the
payment date for such dividend or distribution and in no event more than 30 days
after such date except where temporary curtailment or suspension of purchase is
necessary to comply with Federal securities laws. If, before the Agent has
completed its purchases, the market price exceeds the net asset value of a share
of Common Stock, the average purchase price per share paid by the Agent may
exceed the net asset value of the Fund's shares of Common Stock, resulting in
the acquisition of fewer shares than if the dividend or distribution had been
paid in shares issued by the Fund.
The Agent will maintain all shareholders' accounts in the Plan and furnish
written confirmation of all transactions in the account, including information
needed by shareholders for tax records. Shares in the account of each Plan
participant will be held by the Agent in non-certificate form in the name of the
participant, and each shareholder's proxy will include those shares purchased or
received pursuant to the Plan.
There will be no charges with respect to shares issued directly by the Fund to
satisfy the dividend reinvestment requirements. However, each participant will
pay a pro rata share of brokerage commissions incurred with respect to the
Agent's open market purchases of shares. In each case, the cost per share of
shares purchased for each shareholder's account will be the average cost,
including brokerage commissions, of any shares purchased in the open market plus
the cost of any shares issued by the Fund.
The automatic reinvestment of dividends and distributions will not relieve
participants of any income taxes that may be payable (or required to be
withheld) on dividends and distributions.
Experience under the Plan may indicate that changes are desirable. Accordingly,
the Fund reserves the right to amend or terminate the Plan as applied to any
voluntary cash payments made and any dividend or distribution paid subsequent to
written notice of the change sent to participants in the Plan at least 90 days
before the record date for such dividend or distribution. The Plan may also be
amended or terminated by the Agent on at least 90 days' written notice to
participants in the Plan. All correspondence concerning the Plan should be
directed to the Agent at State Street Bank and Trust Company, P.O. Box 366,
Boston, Massachusetts 02101.
Since the filing of the most recent amendment to the Fund's registration
statement with the Securities and Exchange Commission, there have been (i) no
material changes in the Fund's investment objective or policies, (ii) no changes
to the Fund's charter or by-laws that would delay or prevent a change of control
of the Fund, (iii) no material changes in the principal risk factors associated
with investment in the Fund, and (iv) no change in the person primarily
responsible for the day-to-day management of the Fund's portfolio, who is Wayne
D. Lyski, the President of the Fund.
16
<PAGE>
ACM GOVERNMENT SECURITIES FUND, INC.
===============================================================================
Supplemental Proxy Information
The Annual Meeting of Shareholders of The ACM Government Securities Fund, Inc.
was held on Thursday, May 25, 1995. The description of each proposal and number
of shares voted at the meeting are as follows:
<TABLE>
<CAPTION>
Shares Shares Voted
Voted For Without Authority
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. To elect directors: Class One Directors
(term expires in 1998)
James R. Greene 68,488,242 1,816,340
Clifford L. Michel 68,585,650 1,718,932
<CAPTION>
Shares Shares Voted Shares Voted
Voted For Against Abstain
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
2. To ratify the selection of Ernst & Young LLP
as the Fund's independent auditors for the
Fund's fiscal year ending December 31, 1995: 69,074,095 437,586 792,901
</TABLE>
17
<PAGE>
ACM GOVERNMENT SECURITIES FUND, INC.
===============================================================================
Board Of Directors
John D. Carifa, Chairman
Ruth Block
David H. Dievler
James R. Greene
Dr. James M. Hester
Hon. James D. Hodgson
Clifford L. Michel
Robert C. White
Officers
Wayne D. Lyski, President
Paul J. DeNoon, Vice President
Susan Peterson, Vice President
Edmund P. Bergan, Jr., Secretary
Mark D. Gersten, Treasurer & Chief Financial Officer
Joseph J. Mantineo, Controller
Administrator
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, NY 10019
CUSTODIAN, DIVIDEND PAYING AGENT, TRANSFER AGENT AND REGISTRAR
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
INDEPENDENT AUDITORS
Ernst & Young LLP
787 Seventh Avenue
New York, NY 10019
- -------------------------------------------------------------------------------
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that the Fund may purchase from time to time at market
prices shares of its Common Stock in the open market.
This report, including the financial statements herein, is transmitted to
shareholders of ACM Government Securities Fund, Inc., for their information.
The financial information included herein is taken from the records of the Fund.
This is not a prospectus, circular or representation intended for use in the
purchase of shares of the Fund or any securities mentioned in this report.
18
<PAGE>
[This page intentionally left blank]
<PAGE>
ACM Government Securities Fund, Inc.
Summary of General Information
The Fund
ACM Government Securities Fund, Inc. is a closed-end investment company whose
shares trade on the New York Stock Exchange. The Fund seeks to provide high
current income consistent with preservation of capital. The Fund invests
principally in U.S. Government obligations. The Fund may also invest up to 35%
of its assets in other fixed-income securities, including those issued by stable
foreign governments. Additionally, the Fund may utilize other investment
techniques, including options and futures. The investment adviser of the Fund is
Alliance Capital Management L.P.
Shareholder Information
Daily market prices for the Fund's shares are published in the New York Stock
Exchange Composite Transaction Section of newspapers under the designation
"ACMSc". The Fund's NYSE trading symbol is "GSF". Weekly comparative net asset
value (NAV) and market price information about the Fund is published each Monday
in The Wall Street Journal, each Sunday in The New York Times and each Saturday
in Barron's and other newspapers in a table called "Closed-End Bond Funds."
Dividend Reinvestment Plan
A Dividend Reinvestment Plan is available to shareholders in the Fund, which
provides automatic reinvestment of dividends and capital gain distributions in
additional Fund shares. The Plan also allows you to make optional cash
investments in Fund shares through the Plan Agent. A brochure describing the
Plan is available from the Plan Agent, State Street Bank and Trust Company, by
calling 1-800-219-4218.
If you wish to participate in the Plan and your shares are held in your name,
simply complete and mail the enrollment form in the brochure. If your shares are
held in the name of your brokerage firm, bank or other nominee, you should ask
them whether or how you can participate in the Plan.
ACM Government Securities Fund, Inc.
1345 Avenue of the Americas
New York, New York 10105
Alliance Capital [LOGO]
(R)These registered service marks used under license from the owner,
Alliance Capital Management L.P.
SECAR
