<PAGE>
LETTER TO SHAREHOLDERS ACM Government Spectrum Fund
================================================================================
August 13, 1997
Dear Shareholder:
The U.S. bond market posted modest gains through the first half of 1997. After
trading lower during the first quarter on fears that too-strong growth would
ignite inflation, the market rebounded in the second quarter. Data released
during the quarter indicated that the economy had slowed from its unsustainable
first quarter pace and inflation remained dormant, thus easing investor concerns
and pushing the market higher.
Interest rates, which peaked in late spring following the Fed's decision to
raise the Fed Funds rate, ended the period lower on all maturities. Among
investment-grade bonds, mortgage-backed securities were the best performing
followed by corporates, asset-backed and government securities.
Outside the U.S., low inflation throughout the world helped emerging markets to
continue their strong performance. In many developed markets, however, low
inflation was offset by improving growth prospects.
INVESTMENT RESULTS*
Total Returns for the Periods Ended 6/30/97
<TABLE>
<CAPTION>
6 Months 12 Months
-------- ---------
<S> <C> <C>
ACM Government
Spectrum Fund 2.24% 11.12%
Lehman Brothers
Aggregate Bond Index 3.09 8.15
</TABLE>
*Total returns are based on net asset value.
ECONOMIC REVIEW
The U.S. economy continued its strong performance in early 1997, led by
continued strength in the labor market. The unemployment rate dropped to
twenty-year lows and wages continued to climb. In response to the continued
economic strength and what were viewed as mounting inflationary pressures, the
Federal Reserve Bank raised short-term interest rates in March. Overall,
economic growth which had risen to 3.8% at the end of 1996, further accelerated
to 4.9% during the first quarter of 1997.
More recent data shows that the economy slowed sharply during the second
quarter, led by a decline in consumer spending. Retail sales of merchandise
declined 3.8% in the second quarter while real construction spending fell 2.0%
during April and May. Overall, GDP growth slowed to 2.2% for the quarter.
In spite of an increase in wage pressures, inflation remained very well behaved
during the first half of 1997. Consumer prices increased at a 1.4% annual rate
in the first six months of the year and are up 2.3% from the same period last
year. Meanwhile, producer prices dropped for six months in a row through June.
In Germany and France, deteriorating fiscal conditions increased the probability
of a broader, more inclusive European Monetary Union and heightened concerns
that the new Euro currency will be weaker than the German deutschmark.
Throughout Europe, the economic recovery has struggled to gain strength and
unemployment has persisted at post-war highs. In Canada, strong growth and
currency weakness prompted official interest rate increases late in the period.
Meanwhile, official interest rates went down in Australia and New Zealand as
inflation fell.
The emerging market economies, benefiting from generally stable worldwide
interest rates, moved into their second year of healthy growth and low
inflation. With sustained strength in export markets, the benefits of reform
have begun to penetrate deeper into the emerging market economies. Declining
unemployment has relieved some political pressures and strengthened commitment
to the ongoing process of reform and revitalization.
--
1
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<PAGE>
ACM Government Spectrum Fund
================================================================================
INVESTMENT OUTLOOK
We expect economic activity to accelerate somewhat in the third quarter.
Consumer confidence has reached new highs, real income is growing solidly and
the labor market remains strong, with unemployment at 5.0%. We expect this
re-acceleration to be moderate, with economic growth averaging 3.0% to 3.5% for
1997. With multi-quarter growth trending above the level historically considered
to be non-inflationary, Federal Reserve policymakers will continue to closely
monitor inflationary pressures with a bias towards increasing rates at the first
sign of economic overheating.
Outside of the U.S., we expect inflation to be restrained and growth to remain
positive. Despite the occasional comment about postponing European Monetary
Union, we believe it will proceed and the historically weaker markets,
particularly Spain and Italy, will outperform Germany and other core countries.
In the non-U.S. dollar bloc, we continue to find value in New Zealand and
Australia, while believing the Bank of Canada will need to tighten monetary
policy to better reflect improving economic fundamentals. Weaker growth in
Southeast Asia is likely to affect the Australian and New Zealand economies, and
we expect a further relaxing of monetary conditions in New Zealand.
Given our expectations for relatively stable growth, inflation and monetary
policy worldwide, the developing markets should provide investment opportunities
as the process of reform and integration continues. However, the generic risk
premiums for these countries are more rationally aligned with economic
fundamentals than they have been for some time and caution is warranted. We
believe that, going forward, country selection will be more critical than in the
last several quarters.
Thank you for your continued interest and investment in ACM Government Spectrum
Fund. We look forward to reporting its progress to you in the coming months.
Sincerely,
/s/ John D. Carifa
John D. Carifa
Chairman
/s/ Wayne D. Lyski
Wayne D. Lyski
President
- --
2
- --
<PAGE>
PORTFOLIO OF INVESTMENTS
June 30, 1997 (unaudited) ACM Government Spectrum Fund
================================================================================
<TABLE>
<CAPTION>
Principal
Amount
(000) U.S. $ Value
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT AND AGENCY
OBLIGATIONS-89.0%
U.S. TREASURY BONDS-41.8%
Zero coupon, 2/15/15...... US$ 90,630 $ 26,909,860
8.125%, 8/15/19 (a)....... 22,000 25,097,160
10.75%, 8/15/05 (a)....... 11,250 14,189,062
12.75%, 11/15/10 (a)...... 9,250 12,835,855
14.00%, 11/15/11 (a)...... 19,300 29,085,679
------------
108,117,616
------------
U.S. TREASURY NOTES-30.4%
6.25%, 10/31/01 (a)....... 12,490 12,431,422
6.50%, 8/15/05 (a)........ 30,075 29,990,489
7.00%, 7/15/06 (a)........ 7,500 7,715,625
7.875%, 11/15/04 (a)...... 17,000 18,346,740
8.875%, 11/15/97 (a)...... 10,000 10,115,600
------------
78,599,876
------------
MORTGAGE-RELATED
SECURITIES-10.1%
Government National
Mortgage Association TBA
7.50%, 1/15/99............ 8,000 8,022,480
8.00%, 12/15/99........... 17,500 17,904,600
------------
25,927,080
------------
FEDERAL AGENCY
SECURITY-6.7%
Student Loan Marketing
Association
15.00%, 9/23/97........... 17,000 17,353,260
------------
Total U.S. Government and
Agency Obligations
(cost $232,057,765)....... 229,997,832
------------
SOVEREIGN DEBT
OBLIGATIONS-26.5%
AUSTRALIA-4.6%
Commonwealth of Australia
8.75%, 8/15/08............ AU$ 14,000 $ 11,867,617
------------
ITALY-1.8%
Republic of Italy
6.25%, 3/01/02............ ITL 8,000,000 4,725,901
------------
NEW ZEALAND-6.5%
Government of New Zealand
10.00%, 3/15/02........... NZ$ 22,000 16,823,392
------------
PORTUGAL-4.9%
Government of Portugal
8.75%, 3/23/01............ PTE 2,000,000 12,620,873
------------
SOUTH AFRICA-0.4%
International Bank for
Reconstruction and
Development
Zero coupon, 7/14/27...... ZAR 150,000 1,057,968
------------
SPAIN-5.3%
Government of Spain
11.30%, 1/15/02........... ESP 1,650,000 13,743,094
------------
SWEDEN-3.0%
Kingdom of Sweden
5.50%, 4/12/02............ SEK 60,000 7,672,678
------------
Total Sovereign
Debt Obligations
(cost $68,882,337)........ 68,511,523
------------
</TABLE>
--
3
--
<PAGE>
PORTFOLIO OF INVESTMENTS
June 30, 1997 (unaudited) (cont.) ACM Government Spectrum Fund
================================================================================
<TABLE>
<CAPTION>
Principal
Amount
(000) U.S. $ Value
- --------------------------------------------------------------------------------
<S> <S> <C>
OTHER SOVEREIGN
DEBT OBLIGATIONS-6.7%
New Zealand Treasury Bill
Zero coupon, 7/16/97
(cost $17,499,366)........ NZ$ 25,440 $ 17,233,225
------------
TIME DEPOSIT-4.7%
State Street Bank & Trust Co.,
Cayman Islands
5.25%, 7/01/97
(cost $12,245,000)........ US$ 12,245 12,245,000
------------
<CAPTION>
Contracts or
Principal
Amount
(000) U.S. $ Value
- --------------------------------------------------------------------------------
<S> <C> <C>
CALL OPTION
PURCHASED-0.0%
GBP-vs.-DEM Spread Option
expiring 7/16/97 @ DEM 1.44 (b)
(cost $125,100)........... 129 $ 54,180
------------
TOTAL INVESTMENTS-126.9%
(cost $330,809,568)....... 328,041,760
Other assets less
liabilities--(26.9%)....... (69,518,993)
------------
NET ASSETS-100%........... $258,522,767
============
- --------------------------------------------------------------------------------
</TABLE>
(a) Securities, or portion thereof, have been segregated to collateralize open
forward exchange currency contracts and the TBA securities. Total value of
segregated securities amounted to $159,807,632 at June 30, 1997.
(b) Non-income producing security.
Glossary:
TBA--To be announced
See notes to financial statements.
- --
4
- --
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997 (unaudited) ACM Government Spectrum Fund
=================================================================================================================================
<S> <C>
ASSETS
Investments in securities, at value (cost $330,809,568)................................................ $328,041,760
Cash (including foreign currency of $21,830 with a cost of $21,851).................................... 58,447
Receivable for investment securities sold.............................................................. 7,706,594
Interest receivable.................................................................................... 6,003,152
Net unrealized appreciation of swap contracts.......................................................... 535,900
Net unrealized appreciation of forward exchange currency contracts..................................... 437,188
Prepaid expenses....................................................................................... 29,983
------------
Total assets........................................................................................... 342,813,024
------------
LIABILITIES
Payable for investment securities purchased............................................................ 83,868,526
Advisory fee payable................................................................................... 158,556
Administrative fee payable............................................................................. 40,405
Accrued expenses....................................................................................... 222,770
------------
Total liabilities...................................................................................... 84,290,257
------------
NET ASSETS............................................................................................... $258,522,767
============
COMPOSITION OF NET ASSETS
Capital stock, at par.................................................................................. $ 370,280
Additional paid-in capital............................................................................. 329,390,331
Dividends in excess of net investment income .......................................................... (2,025,085)
Accumulated net realized loss on investments and foreign currency transactions......................... (67,633,056)
Net unrealized depreciation of investments and foreign currency denominated assets and liabilities..... (1,579,703)
------------
$258,522,767
============
NET ASSET VALUE PER SHARE (based on 37,028,027 shares outstanding)....................................... $6.98
=====
</TABLE>
- --------------------------------------------------------------------------------
See notes to financial statements.
--
5
--
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Six Months Ended June 30, 1997 (unaudited) ACM Government Spectrum Fund
==================================================================================================================================
<S> <C> <C>
INVESTMENT INCOME
Interest............................................................................. $11,238,515
EXPENSES
Advisory fee......................................................................... $971,534
Administrative fee................................................................... 241,769
Custodian............................................................................ 113,722
Reports and notices to shareholders.................................................. 60,255
Transfer agency...................................................................... 41,255
Audit and legal...................................................................... 34,725
Directors' fee ...................................................................... 15,928
Registration fee..................................................................... 14,323
Taxes................................................................................ 7,717
Miscellaneous........................................................................ 3,957
--------
Total expenses....................................................................... 1,505,185
-----------
Net investment income................................................................ 9,733,330
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized loss on investment transactions......................................... (3,951,110)
Net realized gain on foreign currency transactions................................... 659,744
Net change in unrealized appreciation (depreciation) of:
Investments........................................................................ (901,348)
Foreign currency denominated assets and liabilities................................ (324,475)
-----------
Net realized and unrealized loss on investments and
foreign currency transactions...................................................... (4,517,189)
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS............................................. $ 5,216,141
===========
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
====================================================================================================================================
Six Months Ended
June 30, 1997 Year Ended
(unaudited) December 31, 1996
---------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income................................................................ $ 9,733,330 $ 21,192,869
Net realized gain (loss) on investments and foreign currency transactions............ (3,291,366) 196,837
Net change in unrealized appreciation (depreciation) of investments
and foreign currency denominated assets and liabilities ........................... (1,225,823) (7,231,330)
------------ ------------
Net increase in net assets from operations .......................................... 5,216,141 14,158,376
DIVIDENDS TO SHAREHOLDERS
Dividends from net investment income ................................................ (9,916,229) (21,192,869)
Dividends in excess of net investment income ........................................ (2,025,085) (4,355,974)
------------ ------------
Total decrease ...................................................................... (6,725,173) (11,390,467)
NET ASSETS
Beginning of year ................................................................... 265,247,940 276,638,407
------------ ------------
End of period (including undistributed net investment income of $182,899 at
December 31, 1996)................................................................. $258,522,767 $265,247,940
============ ============
</TABLE>
- --------------------------------------------------------------------------------
See notes to financial statements.
- --
6
- --
<PAGE>
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 (unaudited) ACM Government Spectrum Fund
================================================================================
NOTE A: Significant Accounting Policies
ACM Government Spectrum 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 prices
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 L.P. (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
the date securities are purchased or sold. 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 prices 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 rates of exchange
prevailing when accrued. Net realized gain on foreign currency transactions
represent foreign exchange gains and losses from sales and maturities of foreign
securities, holdings of foreign currencies, options on foreign 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 foreign currency gains and losses from valuing
foreign currency denominated assets and liabilities at period end exchange rates
are reflected as a component of net unrealized depreciation 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.
For federal income tax purposes, the Fund's distributions of income and capital
gains are subject to recharacterization, which may include a tax return of
capital, at the end of the year to reflect the final investment results for the
year.
--
7
--
<PAGE>
ACM Government Spectrum Fund
================================================================================
NOTE B: Advisory and Administrative Fees
Under the terms of an Investment Advisory Agreement, the Fund pays its Adviser a
monthly advisory fee in an amount equal to the sum of 1/12th of .30% of the
Fund's average weekly net assets up to $250 million, 1/12th of .25% 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) 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 a Shareholder Inquiry Agency Agreement with Alliance Fund
Services, Inc. ("AFS"), an affiliate of the Adviser, the Fund reimburses AFS for
costs relating to servicing phone inquires on behalf of the Fund. During the six
months ended June 30, 1997, there was no reimbursement paid to AFS.
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
and U.S. government securities) aggregated $206,814,456 and $189,190,305,
respectively, for the six months ended June 30, 1997. There were purchases of
$440,719,197 and sales of $446,755,899 of U.S.
government and government agency obligations during the six months ended June
30, 1997.
At June 30, 1997, the cost of investments for federal income tax purposes was
$334,033,416. Accordingly, gross unrealized appreciation of investments was
$655,428 and gross unrealized depreciation was $6,647,084, resulting in net
unrealized depreciation of $5,991,656 (excluding foreign currency transactions)
on a federal income tax basis.
At December 31, 1996, the Fund had a capital loss carryforward of $61,892,155 of
which $27,163,499 expires in the year 2002, $32,047,923 expires in the year 2003
and $2,680,733 expires in the year 2004.
1. Forward Exchange Currency Contracts
The Fund enters into forward exchange currency contracts for investment 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
reflected for financial reporting purposes as a component of net unrealized
depreciation of investments and foreign currency denominated assets and
liabilities.
The Fund's custodian will place and maintain liquid assets 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.
- --
8
- --
<PAGE>
NOTES TO FINANCIAL STATEMENTS (cont.) ACM Government Spectrum Fund
================================================================================
At June 30, 1997, the Fund had outstanding
forward exchange currency contracts as follows:
<TABLE>
<CAPTION>
Contract Value on U.S. $ Unrealized
Settlement Amount Origination Current Appreciation
Foreign Currency Buy Contracts Date(s) (000) Date Value (Depreciation)
--------------- -------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Deutsche Marks........................... 7/2/97 - 9/4/97 13,000 $ 7,550,350 $ 7,471,993 $(78,357)
New Zealand Dollars...................... 7/9/97 6,500 4,489,550 4,413,965 (75,585)
Foreign Currency Sale Contracts
Australian Dollars....................... 7/9/97 - 8/29/97 16,250 12,209,413 12,286,213 (76,800)
Deutsche Marks........................... 7/2/97 - 8/12/97 23,300 13,693,913 13,390,368 303,545
Italian Lira............................. 7/21/97 21,811,984 12,839,113 12,824,521 14,592
New Zealand Dollars...................... 7/9/97 23,684 16,246,921 16,082,829 164,092
Swedish Krona............................ 7/28/97 58,378 7,601,259 7,555,147 46,112
Swiss Francs............................. 7/2/97 - 9/4/97 10,812 7,574,630 7,435,041 139,589
--------
$437,188
========
</TABLE>
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 a realized 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 option written. 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.
For the six months ended June 30, 1997, the Fund did not have any written option
transactions.
--
9
--
<PAGE>
ACM Government Spectrum Fund
================================================================================
3. Interest Rate Swap Agreements
The Fund enters into swaps on sovereign debt obligations to protect itself from
interest rate fluctuations on the underlying debt instruments and for investment
purposes. A swap is an agreement that obligates two parties to exchange a series
of cash flows at specified intervals based upon or calculated by reference to
changes in specified prices or rates for a specified amount of an underlying
asset. The payment flows are usually netted against each other, with the
difference being paid by one party to the other.
Risks may arise as a result of the failure of another party to the swap contract
to comply with the terms of the swap contract. The loss incurred by the failure
of a counterparty is generally limited to the net interest payment to be
received by the Fund, and/or the termination value at the end of the contract.
Therefore, the Fund considers the creditworthiness of each counterparty to a
swap contract in evaluating potential credit risk. Additionally, risks may arise
from unanticipated movements in interest rates or in the value of the underlying
securities.
The Fund records a net receivable or payable on a daily basis for the net
interest income or expense expected to be received or paid in the interest
period. Net interest received or paid on these contracts is recorded as interest
income (or as an offset to interest income). Fluctuations in the value of swap
contracts are recorded for financial statement purposes as net change in
unrealized depreciation on investments.
At June 30, 1997, the Fund had outstanding interest rate swap contracts with the
following terms:
<TABLE>
<CAPTION>
Rate Type
--------------------------------------- Unrealized
Swap Notional Amount Termination Payments made Payments received Appreciation
Counterparty (000) Date by the Fund by the Fund (Depreciation)
------------ --------------- ----------- ------------- ----------------- --------------
<S> <C> <C> <C> <C> <C>
Morgan Guaranty
Trust Co. ITL 23,000,000 4/30/01 LIBOR* 9.18% $1,261,260
Morgan Guaranty
Trust Co. ITL 23,000,000 4/30/01 7.98% LIBOR* (725,360)
---------
$ 535,900
=========
</TABLE>
* LIBOR - London Interbank Offered Rate.
- --------------------------------------------------------------------------------
NOTE D: Capital Stock
There are 300,000,000 shares of $0.01 par value common stock authorized, of
which 37,028,027 shares were outstanding at June 30, 1997. During the six months
ended June 30, 1997 and the year ended December 31, 1996, the Fund did not issue
shares in connection with the dividend reinvestment plan.
- --
10
- --
<PAGE>
FINANCIAL HIGHLIGHTS ACM Government Spectrum Fund
================================================================================
Selected Data For A Share Of Common Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Six Months
Ended Year Ended December 31,
June 30, 1997 --------------------------------------------------------------
(unaudited) 1996 1995 1994 1993 1992
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year............ $ 7.16 $ 7.47 $ 6.89 $ 9.49 $ 8.89 $ 9.15
------ ------ ------ ------ ------ ------
Income From Investment Operations
- ---------------------------------
Net investment income......................... .26 .57 .70(a) .74(a) .95(a) .87(a)
Net realized and unrealized gain
(loss) on investments, options written
and foreign currency transactions.......... (.12) (.19) .66 (2.46) 1.19 (.27)
------ ------ ------ ------ ------ ------
Net increase (decrease) in net asset
value from operations...................... .14 .38 1.36 (1.72) 2.14 .60
------ ------ ------ ------ ------ ------
Less: Dividends and Distributions
- ---------------------------------
Dividends from net investment income.......... (.27) (.57) (.70) (.70) (.96) (.86)
Dividends in excess of net
investment income.......................... (.05) (.12) (.01) -0- -0- -0-
Distributions from net realized gains......... -0- -0- -0- -0- (.35) -0-
Tax return of capital distribution............ -0- -0- (.07) (.18) -0- -0-
------ ------ ------ ------ ------ ------
Total dividends and distributions............. (.32) (.69) (.78) (.88) (1.31) (.86)
------ ------ ------ ------ ------ ------
Capital Share Transactions
- --------------------------
Dilutive effect of rights offering............ -0- -0- -0- -0- (.22) -0-
Offering costs charged to additional
paid-in capital............................ -0- -0- -0- -0- (.01) -0-
------ ------ ------ ------ ------ ------
Total capital share transactions.............. -0- -0- -0- -0- (.23) -0-
------ ------ ------ ------ ------ ------
Net asset value, end of period................ $ 6.98 $ 7.16 $ 7.47 $ 6.89 $ 9.49 $ 8.89
====== ====== ====== ====== ====== ======
Market value, end of period................... $6.313 $6.375 $6.625 $7.125 $10.00 $ 9.00
====== ====== ====== ====== ====== ======
Total Investment Return
- -----------------------
Total investment return based on:(b)
Market value.................................. 3.85% 6.55% 4.32% (20.44)% 26.88% 10.17%
Net asset value............................... 2.24% 6.13% 21.64% (18.93)% 21.90% 7.04%
Ratios/Supplemental Data
- ------------------------
Net assets, end of period (000's omitted)..... $258,523 $265,248 $276,638 $254,616 $345,547 $282,282
Ratio of expenses to average net assets....... 1.18%(c) 1.17% 1.31% 1.21% 1.21% 1.27%
Ratio of net investment income to
average net assets......................... 7.62%(c) 8.10% 10.07% 9.58% 9.77% 9.79%
Portfolio turnover rate....................... 218% 453% 377% 294% 445% 471%
</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 period 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 periods 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 periods. Conversely, total investment return
based on net asset value will be lower than total investment return based
on market value in periods 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 periods. Total investment return for a period
of less than one year is not annualized.
(c) Annualized.
--
11
--
<PAGE>
ADDITIONAL INFORMATION ACM Government Spectrum Fund
================================================================================
Supplemental Proxy Information
The Annual Meeting of Shareholders of the ACM Government Spectrum Fund, was held
on Thursday, July 10, 1997. 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 Three Directors
(term expires in 2000)
Ruth Block 32,735,078 722,016
John D. Carifa 32,719,713 737,381
Robert C. White 32,684,881 772,213
Class One Director
(term expires in 1998)
Donald J. Robinson 32,732,364 724,730
<CAPTION>
Shares Shares Shares Voted
Voted For Voted Against Abstain
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2. To ratify the selection of Ernst & Young LLP
as the Fund's independent auditors for the
fiscal year ending December 31, 1997: 32,848,038 187,349 421,707
</TABLE>
- --
12
- --
<PAGE>
ACM Government Spectrum Fund
================================================================================
BOARD OF DIRECTORS
John D. Carifa, Chairman
Ruth Block (1)
David H. Dievler (1)
James R. Greene (1)
Dr. James M. Hester (1)
Donald J. Robinson (1)
Clifford L. Michel (1)
Robert C. White (1)
OFFICERS
Wayne D. Lyski, President
Kathleen A. Corbet, Senior Vice President
Paul J. DeNoon, Vice President
Christian G. Wilson, 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
LEGAL COUNSEL
Seward & Kissel
One Battery Park Plaza
New York, NY 10004
- --------------------------------------------------------------------------------
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 the
shareholders of ACM Government Spectrum Fund for their information. This
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.
(1) Member of the Audit Committee.
--
13
--
<PAGE>
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<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ACM Government Spectrum Fund
Summary of General Information
THE FUND
ACM Government Spectrum Fund 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
securities of 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
"ACMSP". The Fund's NYSE trading symbol is "SI". 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."
Additional information about the Fund is available by calling 1-800-221-5672.
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 Spectrum Fund
1345 Avenue of the Americas
New York, New York 10105
[LOGO OF ALLIANCE CAPITAL]
(R)These registered service marks used under license from the owner, Alliance
Capital Management L.P.
ACM
------------------
GOVERNMENT
------------------
SPECTRUM
------------------
FUND
------------------
Semi-Annual
Report
June 30, 1997
Alliance
