<PAGE>
Letter To Shareholders ACM Government Opportunity Fund, Inc.
March 9, 1995
Dear Shareholder:
The past year was one of the worst on record for investors in fixed income
markets and proved to be a particularly challenging period for most equity
investors. Beginning last February, strong anti-inflationary posturing by the
Federal Reserve led to higher interest rates, which put downward pressure on
bond and equity prices. Since our last report, yields on two-year and 30-year
Treasurys continued their ascent, peaking in December and November,
respectively. Even though general measures of bond and equity prices advanced
this January, these gains were not enough to offset earlier price declines. For
the six months ended January 31, 1995, ACM Government Opportunity Fund had a
total return of -4.27% based on the net asset value. While difficult market
conditions have led to unfavorable performance over the six-month reporting
period, economic and market data now suggest that the factors that have led to
the recent rally in bond and equity markets may continue in 1995.
A SOFT LANDING FOR THE ECONOMY?
By increasing short-term interest rates, the Federal Reserve is attempting to
slow GDP growth to below 2.5% while maintaining very low levels of inflation.
Indeed, while the U.S. economy continued its impressive expansion in the second
half of 1994, initial signs of a slowdown have begun to appear. Recently
released U.S. economic data have shown smaller than expected rises in retail
sales and manufacturing output with continued weakness in the automobile and
housing sectors. However, the U.S. economy remains fundamentally strong and
despite recent signs of moderation, the economy should continue to expand in
1995, albeit at a slower pace.
Supporting U.S. economic growth will likely be continued high levels of consumer
(excluding automobiles and housing) and business spending. Real gains in
personal income, higher corporate earnings and easier access to credit are
expected to keep aggregate U.S. consumption at high levels in the months ahead.
While an increase in overall price levels is expected this year, the inflation
outlook appears generally favorable. Broad price indices such as the Consumer
Price Index (CPI) and Producer Price Index (PPI) have shown few signs of
acceleration and labor costs remain steady. However, with the U.S. economy
believed to be at or near full capacity utilization, concern regarding inflation
is still warranted. Commodity prices and core intermediate goods in the PPI have
risen sharply over the past 12 months and recent economic data indicate an
increase in service sector prices. If the economy slows, as expected, the upward
pressure on prices should ease somewhat due to less demand for resources.
BOND MARKET OVERVIEW
We have revised our investment outlook to reflect the growing evidence that
higher interest rates have begun to slow the U.S. economy, reducing the
likelihood of significant short-term interest rate increases by the Federal
Reserve. The economic expansion should continue throughout 1995 with GDP
moderating to 2.5% for the year. While inflation momentum may be building, it is
our view that prices will not spiral ahead dramatically. We expect CPI inflation
to crest around 4% in the second half of 1995. If inflation or inflationary
expectations move higher, we expect the Federal Reserve to raise short-term
interest rates an additional one-half percent, to 6.5%, by year end.
<PAGE>
ACM Government Opportunity Fund, Inc.
In an effort to protect ACM Government Opportunity Fund from rising interest
rates, we strengthened the defensive stance of its fixed income portfolio over
the past six months. We accentuated the Fund's barbell structure by adding to
short- and long-term maturity positions and reducing holdings of intermediate-
term bonds. This positioning allowed the Fund to benefit as the yield curve
flattened. More recently, the Fund's positioning has been amended to reflect our
view that U.S. economic growth is moderating and that the yield curve is likely
to steepen.
EQUITY MARKET OVERVIEW
U.S. stocks, as measured by the S&P 500, advanced 1.3% in 1994. The weighted
averages masked the deterioration in the broad market, however, and a majority
of stocks underperformed. The ratio of advancing versus declining stocks in 1994
was converse to the previous two years, with the number of declining issues
considerably outpacing advancing issues:
Stocks Traded on the New York Stock Exchange
--------------------------------------------
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Advanced 881 2012 1811
Declined 2261 890 831
</TABLE>
More significant, 56% of the 6,000 actively traded stocks (both NYSE and NASDAQ)
declined 20% or more from their highs reached in early 1994.
For the second year in a row, stock price volatility, as measured low to high on
the S&P 500, remained below 10%. Strong money flows into equity mutual funds
helped support stock prices, but substantial net liquidation of fixed income
mutual funds added to fixed income market pressure. Investor concern over rising
interest rates was initially negative for utilities and financial stocks, then
later affected consumer durables, and finally, late in the year, caution spread
to the basic industries. Defensive growth issues, such as consumer non-durables
and health care, regained positive performance in the third and fourth quarters.
Overall, very solid profit growth in 1994 helped offset the valuation damage to
the market that might have been expected given the dramatic increase in interest
rates. The S&P 500 is currently trading at a price earnings multiple of 14.5
times our 1995 estimate of $33.75 per share (an increase of 7% from 1994), which
is at the lower end of the 14--18x range that has prevailed in similar economic
environments of the past.
EQUITY INVESTMENT STRATEGY
Individual stock selection, rather than theme identification, drives our equity
emphasis. The Fund is invested in what we believe are attractive growth stocks
across industry groups. Many have international growth opportunities that should
help support growth rates even with a slowing U.S. economy. All of the Fund's
holdings in entertainment, consumer non-durables and technology have important
international business operations. In the financial area, our emphasis is with
selected insurance holdings-AIG, General Re-where a combination of global
presence, specialty products, and strong balance sheets is leading to excellent
premium growth and earnings performance. Superior growth rates also appear
sustainable for the mortgage agencies, and valuations here are very reasonable
as well.
While the Clinton health care reform proposals have been discarded, pressure
remains on cost containment, and pricing flexibility is very limited. But
because of the market's size as well as the aging population we believe there is
still great opportunity for growth in selected companies offering quality care
with innovative, cost effective products or services.
<PAGE>
ACM Government Opportunity Fund, Inc.
The stocks performed strongly in the second half of 1994, but we look for
continued strong growth rates from health care holdings over the next several
years.
Cyclical holdings in rails and basic industry generally met or exceeded profit
expectations in 1994, although stock prices have corrected significantly from
their highs. Growing concerns of recession, leading to a peak in profit
momentum, led to the correction as the year ended. Given current low valuations
and our expectation for excellent fourth quarter reports, we expect better near-
term performance from many cyclical stocks. While we want to hold some
economically sensitive stocks that have an international demand side to their
businesses, we expect to shift increasingly towards secular growth, as opposed
to cyclical, as the year progresses. Our focus is shifting to the 1995-1999
profit growth outlook, a period where the cyclical corporate profit recovery
will be decelerating to an important degree.
We appreciate your continued interest in ACM Government Opportunity Fund and
look forward to reporting improved performance in the coming period.
Sincerely,
/s/ John D. Carifa
John D. Carifa
Chairman and President
/s/ Wayne D. Lyski
Wayne D. Lyski
Senior Vice President
<PAGE>
Portfolio of Investments
January 31, 1995 (unaudited) ACM Government Opportunity Fund, Inc.
<TABLE>
<CAPTION>
Principal
Amount
(000) U.S. $ Value
--------- ------------
<S> <C> <C>
U.S. GOVERNMENT AND AGENCY
OBLIGATIONS 78.0%
U.S. TREASURY
SECURITIES-45.7%
U.S. Treasury Bonds
11.875%, 11/15/03........... US$ 1,700 $ 2,153,152
12.375%, 5/15/04*........... 6,050 7,917,937
U.S. Treasury Notes
7.50%, 11/15/24............. 1,500 1,464,135
7.75%, 11/30/99............. 8,500 8,570,380
8.875%, 11/15/98............ 11,400 11,920,068
U.S. Treasury Strips
Zero coupon, 2/15/15........ 47,765 10,073,161
Zero coupon, 8/15/20........ 13,500 1,891,755
------------
Total U.S. Treasury Securities
(cost $45,447,199).......... 43,990,588
------------
MORTGAGE-RELATED
SECURITIES-21.8%
Federal Home Loan
Mortgage Corp.
15.00%, 9/01/95-9/07/95..... 6,600 7,010,438
Federal National
Mortgage Association
Zero coupon, 10/09/19....... 12,100 1,668,953
Government National
Mortgage Association
7.00%, 12/15/23-5/15/24..... 13,457 12,309,412
------------
Total Mortgage-Related
Securities
(cost $22,376,065).......... 20,988,803
------------
FEDERAL AGENCY
SECURITIES-8.0%
Small Business Administration
BS92-5B(I/O)(a)
8.15%, 11/15/17............. 3,173 3,128,486
BS92-1H(I/O)(a)
9.00%, 4/15/17.............. 4,691 4,608,263
------------
Total Federal Agency
Securities
(cost $7,864,386)........... 7,736,749
------------
<CAPTION>
Shares or
Principal
Amount
(000) U.S. $ Value
--------- ------------
<S> <C> <C>
COLLATERALIZED MORTGAGE
OBLIGATION-2.5%
Vendee Mortgage Trust
10.00%, 9/15/22 (I/O)
(cost $2,411,936)........... US$ 2,412 $ 2,407,889
------------
Total U.S. Government
and Agency Obligations
(cost $78,099,586).......... 75,124,029
------------
COMMON STOCKS-18.9%
AUTO & RELATED-0.4%
Magna International,
Inc. Cl.A................... 10,000 360,000
------------
BASIC INDUSTRIES-0.7%
Plum Creek Timber
Co., L.P.................... 15,000 343,125
Weyerhaeuser Co.................. 7,500 284,062
------------
627,187
------------
CAPITAL GOODS-1.7%
Allied Signal, Inc............... 10,000 357,500
Coltec Industries, Inc. (b)...... 16,800 260,400
General Electric Co.............. 20,000 1,030,000
------------
1,647,900
------------
CHEMICALS-1.1%
Dow Chemical Co.................. 3,300 205,837
Lyondell Petrochemical Co........ 11,500 254,437
Monsanto Co...................... 3,000 220,500
Morton International, Inc........ 15,000 420,000
------------
1,100,774
------------
CONSUMER STAPLES-2.1%
Avon Products, Inc............... 8,400 479,850
Gillette Co...................... 7,500 576,563
PepsiCo, Inc..................... 7,000 258,125
Philip Morris Cos., Inc.......... 12,000 715,500
------------
2,030,038
------------
ENERGY-1.6%
Amoco Corp....................... 4,000 232,000
</TABLE>
<PAGE>
ACM Government Opportunity Fund, Inc.
<TABLE>
<CAPTION>
Shares U.S. $ Value
--------- ------------
<S> <C> <C>
British Petroleum Plc.
(ADR)....................... 5,500 $ 426,938
Royal Dutch Petroleum Co.
NY.......................... 3,000 335,625
Shell Transportation &
Trading Co. (ADR)........... 4,500 300,938
Texaco, Inc...................... 4,000 246,500
------------
1,542,001
------------
FINANCIAL SERVICES-2.3%
American Express Co.............. 9,000 283,500
American International
Group, Inc.................. 5,000 520,625
Edwards (A.G.), Inc.............. 13,750 249,219
Federal National Mortgage
Association................. 5,000 357,500
First Bank System, Inc........... 9,000 325,125
General Re Corp.................. 2,000 258,250
NationsBank Corp................. 5,000 232,500
------------
2,226,719
------------
HEALTHCARE-2.7%
Abbott Laboratories.............. 16,000 566,000
ASTRA, AB
Series A.................... 8,000 202,000
Series B.................... 10,000 247,500
Columbia/HCA Healthcare
Corp........................ 8,000 321,000
Health Care Property
Investments, Inc............ 6,000 171,000
Pfizer, Inc...................... 4,000 327,000
Schering-Plough Corp............. 4,000 314,000
United Healthcare Corp........... 10,000 485,000
------------
2,633,500
------------
LEISURE &
ENTERTAINMENT-0.8%
Walt Disney Co................... 15,500 788,563
------------
<CAPTION>
Shares U.S. $ Value
--------- ------------
<S> <C> <C>
REAL ESTATE-0.8%
Chelsea GCA Realty, Inc.......... 12,300 $ 310,575
Federal Realty Investments
Trust, Inc.................. 10,000 208,750
Spieker Properties, Inc.......... 12,000 243,000
------------
762,325
------------
RETAIL-0.3%
May Department Stores Co......... 9,000 316,125
------------
TECHNOLOGY-2.3%
cisco Systems, Inc.(b)........... 10,000 333,750
Compaq Computer Corp.(b)......... 8,000 286,000
Intel Corp....................... 10,000 693,750
Microsoft Corp.(b)............... 5,500 326,562
Xerox Corp....................... 5,100 557,813
------------
2,197,875
------------
TELECOMMUNICATIONS
& MULTIMEDIA-1.5%
BCE Inc.......................... 4,000 120,000
Compania de Telefonos
de Chile (ADR)............... 3,000 220,125
MCI Communications
Corp........................ 20,000 367,500
Sprint Corp...................... 8,000 228,000
Viacom, Inc., Cl.B.(b)........... 5,000 230,625
Vodafone Group PLC
(ADR)....................... 7,500 228,750
------------
1,395,000
------------
TRANSPORTATION-0.6%
Conrail, Inc..................... 4,500 240,750
Southern Pacific Rail
Corporation (b)............. 20,000 360,000
------------
600,750
------------
Total Common Stocks
(cost $15,929,817).......... 18,228,757
------------
</TABLE>
<PAGE>
Portfolio Of Investments (cont.) ACM Government Opportunity Fund, Inc.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) U.S. $ Value
--------- ------------
<S> <C> <C>
SOVEREIGN DEBT OBLIGATIONS-9.4%
COLLATERALIZED BRADY BOND-2.1%
ECUADOR-2.1%
Republic of Ecuador
FRN, 2/28/25(c)
(cost $2,485,000)........... US$ 7,000 $ 2,012,500
------------
LOAN ASSIGNMENTS-2.8%
ALGERIA-0.8%
Algeria Refinanced Trust
Loan Assignment
7.025%, 12/21/96............ FRF 15,333 725,323
ECUADOR-1.4%
Republic of Ecuador
Consolidated Loan
Assignment (b).............. US$ 2,500 1,380,688
RUSSIA-0.6%
Vneshekonombank
Loan Assignment (b)......... DEM 3,500 526,589
------------
Total Loan Assignments
(cost $4,903,292)........... 2,632,600
------------
OTHER SOVEREIGN DEBT
OBLIGATIONS-4.5%
BULGARIA-2.0%
Republic of Bulgaria
PDI/IAB, FRN
6.0625%, 7/28/11............ US$ 5,000 1,937,500
POLAND-2.5%
Republic of Poland FRN
3.25%, 10/27/14............. 5,800 2,443,250
------------
Total Other Sovereign Debt
Obligations
(cost $4,964,646)........... 4,380,750
------------
Total Sovereign Debt
Obligations
(cost $12,352,938).......... 9,025,850
------------
<CAPTION>
Shares or
Principal
Amount
(000) U.S. $ Value
--------- ------------
<S> <C> <C>
FOREIGN SECURITY-4.3%
ARGENTINA-4.3%
Bonos de Consolidacion FRN
3.50%, 4/01/07
(cost $7,104,089)........... ARP17,543 $ 4,136,822
------------
CONVERTIBLE BONDS-3.2%
Cetus Corp.
5.25%, 5/21/02.............. US$ 285 239,400
Convex Computer Co.
6.00%, 3/01/12.............. 300 183,000
General Instrument Corp.
5.00%, 6/15/00.............. 250 316,370
Jones Intercable, Inc.
7.50%, 6/01/07.............. 400 408,000
Legg Mason, Inc.
7.00%, 6/15/11.............. 300 316,740
Liebert (Emerson) Corp.
8.00%, 11/15/10............. 225 526,500
Price Co.
6.75%, 3/01/01.............. 250 228,750
Wendy's International,
Inc.
7.00%, 4/01/06.............. 300 417,000
Western Co. of North
America
7.25%, 1/15/15.............. 450 469,125
------------
Total Convertible Bonds
(cost $2,618,543)........... 3,104,885
------------
PREFERRED STOCK-0.5%
Prime Retail, Inc., Series A
(cost $617,500)............. 24,700 494,000
------------
CONVERTIBLE PREFERRED
STOCK-0.3%
Citicorp, $1.217
(cost $264,390)............. 15,000 292,500
------------
</TABLE>
<PAGE>
ACM Government Opportunity Fund, Inc.
<TABLE>
<CAPTION>
Contracts or
Principal
Amount
(000) U.S. $ Value
------------ ------------
CERTIFICATES OF DEPOSIT-2.4%
Morgan Guaranty Trust Co.
Linked to Peru
Non-Citibank Loans(d)
9.00%, 5/30/95.............. US$ 2,072 $ 1,934,510
9.00%, 6/19/95.............. 518 353,349
------------
Total Certificates of Deposit
(cost $2,589,375)........... 2,287,859
------------
CALL OPTIONS PURCHASED-0.1%
Argentinian Floating Rate Bond
6.50%, 3/31/05
expiring April '95
@ $72.50.................... 60 37,200
Mexican Par Bonds
6.25%, 12/31/19
expiring April '95
@ $63.31.................... 70 67,900
------------
Total Call Options Purchased
(cost $259,000)............. 105,100
------------
TOTAL INVESTMENTS-117.1%
(cost $119,835,238)......... 112,799,802
------------
<CAPTION>
Contracts U.S. $ Value
--------- ------------
<S> <C> <C>
PUT OPTIONS WRITTEN-(1.3%)
Argentinian Floating Rate Bond
6.50%, 3/31/05
expiring April '95
@ $68.50.................... 60 $ (618,600)
Mexican Par Bonds
6.25%, 12/31/19
expiring April '95
@ $60.31.................... 70 (644,700)
------------
Total Put Options Written
(premiums received $202,000) (1,263,300)
------------
TOTAL INVESTMENTS,
NET OF OUTSTANDING PUT
OPTIONS WRITTEN-115.8%...... 111,536,502
Other assets less liabilities-(15.8%) (15,213,220)
------------
NET ASSETS-100%.................. $ 96,323,282
============
</TABLE>
----------
* Security, or portion thereof, has been segregated to collateralize a
forward exchange currency contract.
(a) Illiquid security, valued at fair market value (see Notes A & F).
(b) Non-income producing.
(c) Security is traded on a "when issued" basis.
(d) The redemption value of these securities is linked to the change in the bid
price of the referenced emerging market debt.
Glossary of Terms:
ADR-American Depository Receipt.
FRN-Floating Rate Note. Stated interest rate in effect at January 31, 1995.
IAB-Interest Arrears Bond.
(I/O)-Interest Only. Interest accrued based on yield to maturity.
PDI-Past Due Interest.
See notes to financial statements.
<PAGE>
Statement Of Assets And Liabilities
January 31, 1995 (unaudited) ACM Government Opportunity Fund, Inc.
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost $119,835,238)............................................ $112,799,802
Receivable for investment securities sold.......................................................... 1,972,857
Dividends and interest receivable.................................................................. 1,810,916
Other assets....................................................................................... 118,140
------------
Total assets....................................................................................... 116,701,715
------------
LIABILITIES
Due to custodian................................................................................... 163,235
Outstanding put options written, at value (premium received $202,000).............................. 1,263,300
Payable for investment securities purchased........................................................ 17,712,156
Dividend payable................................................................................... 866,012
Unrealized depreciation of forward exchange currency contract...................................... 136,189
Advisory fee payable............................................................................... 59,801
Administration fee payable......................................................................... 11,960
Accrued expenses and other liabilities............................................................. 165,780
------------
Total liabilities.................................................................................. 20,378,433
------------
NET ASSETS (equivalent to $7.37 per share, based on 13,071,872 shares outstanding)................... $ 96,323,282
============
COMPOSITION OF NET ASSETS
Capital stock, at par.............................................................................. $ 130,719
Additional paid-in capital......................................................................... 116,454,943
Distribution in excess of net investment income.................................................... (2,022,521)
Accumulated net realized loss...................................................................... (10,004,047)
Net unrealized depreciation on investments and foreign currency denominated assets and liabilities. (8,235,812)
------------
$ 96,323,282
============
NET ASSET VALUE PER SHARE............................................................................ $7.37
=====
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
Statement Of Operations
Six Months Ended January 31, 1995 (unaudited) ACM Government Opportunity Fund, Inc.
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest.............................................................................. $4,464,476
Dividends (net of foreign taxes withheld of $3,825)................................... 279,534 $ 4,744,010
----------
EXPENSES
Advisory fee.......................................................................... 380,090
Administration fee.................................................................... 93,487
Transfer agency....................................................................... 76,593
Audit and legal....................................................................... 41,268
Printing.............................................................................. 27,325
Custodian............................................................................. 14,904
Directors' fees....................................................................... 14,000
Registration.......................................................................... 11,357
Taxes................................................................................. 3,207
Miscellaneous......................................................................... 59,565
----------
Total expenses........................................................................ 721,796
-----------
Net investment income................................................................. 4,022,214
-----------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
AND FOREIGN CURRENCY DENOMINATED ASSETS AND LIABILITIES
Net realized loss on investment transactions.......................................... (2,421,235)
Net realized loss option transactions................................................. (204,795)
Net realized loss on foreign currency transactions.................................... (266,175)
Net change in unrealized appreciation (depreciation) of:
Investments........................................................................ (3,700,642)
Foreign currency denominated assets and liabilities................................ (1,207,430)
-----------
Net loss on investments............................................................... (7,800,277)
-----------
NET DECREASE IN NET ASSETS FROM OPERATIONS.............................................. $(3,778,063)
===========
</TABLE>
<TABLE>
<CAPTION>
Statement Of Changes In Net Assets
--------------------------------------------------------------------------------------------------------------------
Six Months Ended
January 31, 1995 Year Ended
(unaudited) July 31, 1994
---------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income.............................................................. $ 4,022,214 $ 8,693,244
Net realized loss on investments, options and foreign currency transactions........ (2,892,205) (4,722,393)
Net change in unrealized appreciation (depreciation) of investments and
foreign currency denominated assets and liabilities............................. (4,908,072) (6,927,768)
------------ ------------
Net decrease in net assets from operations......................................... (3,778,063) (2,956,917)
DIVIDENDS AND DISTRIBUTION TO SHAREHOLDERS
Dividends from net investment income............................................... (6,044,735) (9,022,883)
Distribution from net realized gain................................................ --0-- (7,057,281)
Tax return of capital distribution................................................. --0-- (3,854,849)
COMMON STOCK TRANSACTIONS
Reinvestment of dividends resulting in the issuance of common stock................ 316,507 6,221,638
------------ ------------
Total decrease..................................................................... (9,506,291) (16,670,292)
NET ASSETS
Beginning of year.................................................................. 105,829,573 122,499,865
------------ ------------
End of period...................................................................... $ 96,323,282 $105,829,573
============ ============
---------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
<PAGE>
Notes To Financial Statements
January 31, 1995 (unaudited) ACM Government Opportunity Fund, Inc.
NOTE A: Significant Accounting Policies
ACM Government Opportunity 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. List 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. 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 illiquid 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 may be valued on the basis of prices provided by a pricing service
when such prices are believed by 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, no provision for federal income or excise taxes are
required. Foreign taxes have been provided for on interest income earned on
foreign investment in accordance with the applicable country's tax rates and to
the extent unrecoverable are recorded as a reduction of investment income.
3. Investment Income and Security Transactions
Interest income is accrued daily. Dividend income is recorded on the ex-dividend
date. Security transactions are accounted for on the date securities are
purchased or sold. Security 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 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 rate 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 loss on foreign currency transactions of $266,175 represent foreign
exchange gains and losses from sales and maturities of foreign securities,
holding of foreign currencies, options on foreign securities and foreign
currencies, exchange gains or 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 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. Income dividends and capital gains distributions are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles.
<PAGE>
ACM Government Opportunity Fund, Inc.
NOTE B: Advisory Administrative Fees and Other Affiliated Transactions
Under the terms of an Investment Advisory Agreement, the Fund pays its Adviser,
Alliance Capital Management L.P., (the "Adviser"), a monthly advisory fee in an
amount equal to .0625 of 1% of the average weekly net assets of the Fund during
the month (approximately .75 of 1% on an annual basis).
Effective October 1, 1994, the Fund approved a new administrative agreement,
which replaced the administrative agreement between the Fund and the Shareholder
Services Group, Inc. ("TSSG"). Pursuant to the new agreement, the Fund will pay
its new administrator, Alliance Capital Management, L.P., a monthly fee equal to
an annualized rate of .15 of 1% of the Fund's average weekly net assets.
Under the terms of the Administrative Agreement in effect prior to October 1,
1994, the Fund paid TSSG a monthly fee equal to the annualized rate of .25 of 1%
of the Fund's average weekly net assets.
Brokerage commissions paid for the six months ended January 31, 1995 on
securities transactions amounted to $15,126 none of which was paid to affiliated
brokers.
--------------------------------------------------------------------------------
NOTE C: Investment Transactions
Purchases and sales of investment securities (excluding short-term investments
and options) aggregated $116,498,116 and $107,869,108, respectively, for the six
months ended January 31, 1995.
At January 31, 1995, the cost of investments for federal income tax purpose was
$119,835,238. Accordingly, gross unrealized appreciation of investments was
$3,697,242 and gross unrealized depreciation of investments was $10,732,678
resulting in net unrealized depreciation of $7,035,436 (excluding foreign
currency).
1. Forward Exchange Currency Contracts
The Fund enters into forward exchange currency contracts 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.
Fluctuation in the value of forward exchange currency contracts are recorded for
financial reporting purposes as unrealized gains or losses by the Fund.
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.
Risk 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.
At January 31, 1995, the Fund had an outstanding forward exchange currency
contract with Chase Manhattan Bank to sell 6,600,000 German Deutsche Marks
expiring on March 6, 1995 with a cost of $4,192,957. The market value of the
forward exchange currency contract at January 31, 1995 was $4,329,146 resulting
in an unrealized depreciation of $136,189.
2. Options Transactions
For hedging purposes, the Fund purchase and writes (sells) put and call options
on U.S. and foreign
<PAGE>
Note To Financial Statements (Cont.) ACM Government Opportunity Fund, Inc.
------------------------------------------------------------------------------
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 realized gains from option
transactions. The difference between the premium 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 six months ended January 31, 1995 were
as follows:
<TABLE>
<CAPTION>
Number
of Contracts Premium
------------ ---------
<S> <C> <C>
Options outstanding at
beginning of year -0- $ -0-
Options written 179 243,950
Options terminated in
closing purchase
transactions (49) (41,950)
--- --------
Options outstanding at
January 31, 1995 130 $202,000
=== ========
</TABLE>
--------------------------------------------------------------------------------
NOTE D: Capital Stock
There are 300,000,000 shares of $.01 par value common stock authorized. Of the
13,071,872 shares outstanding at January 31, 1995, the Adviser owned 10,753
shares.
During the six months ended January 31, 1995 and year ended July 31, 1994, the
Fund issued 43,657 and 682,327 shares, respectively, in connection with the
Fund's Dividend Reinvestment Plan.
<PAGE>
ACM Government Opportunity Fund, Inc.
NOTE E: Quarterly Results of Operations
<TABLE>
<CAPTION>
Net Realized and
Unrealized Gain Net Increase
(Loss) on (Decrease)
Investments 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>
January 31, 1995....................$2,091 $.16 $ (5,195) $ (.40) $ (3,104) $ (.24) $ 7.500 $6.875
October 31, 1994.................... 1,931 .15 (2,605) (.20) (674) (.05) $ 8.375 $7.000
------ ---- -------- ------ -------- ------
$4,022 $.31 $ (7,800) $ (.60) $ (3,778) $ (.29)
====== ==== ======== ====== ======== ======
July 31, 1994.......................$1,899 $.14 $ (594) $ (.05) $ 1,305 $ .09 $ 8.375 $8.125
April 30, 1994...................... 1,952 .15 (16,761) (1.30) (14,809) (1.15) $ 8.625 $7.875
January 31, 1994.................... 2,546 .20 (506) (.04) 2,040 .16 $10.125 $9.250
October 31, 1993.................... 2,296 .19 6,211 .50 8,507 .69 $10.125 $9.625
------ ---- -------- ------ -------- ------
$8,693 $.68 $(11,650) $ (.89) $ (2,957) $ (.21)
====== ==== ======== ====== ======== ======
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
Note F: Illiquid Securities
Date
Security Acquired U.S. $ Cost
-------- -------- -----------
<S> <C> <C>
Small Business Administration
BS92-5B (I/0)
8.15%, 11/15/17............................................................................... 10/02/92 $3,173,248
BS92-1H (I/0)
9.00%, 4/15/17................................................................................ 7/16/92 4,691,138
</TABLE>
The securities shown above are illiquid and have been valued at fair value in
accordance with the procedures described in Note A.
The value of these securities at January 31, 1995 was $7,736,749, representing
8.0% of net assets.
<PAGE>
Financial Highlights ACM Government Opportunity Fund, Inc.
Selected Data For A Share Of Common Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Six Months Ended Year Ended July 31,
January 31, 1995 ---------------------------------------------------------
(unaudited) 1994 1993 1992 1991 1990
------------- ------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of year.............................. $ 8.12 $ 9.92 $ 9.66 $ 9.02 $ 9.01 $ 9.59
------ ------ ------ ------ ------ ------
Income From Investment Operations
---------------------------------
Net investment income..................... .31 .68 .79 .69 .90 .92
Net realized and unrealized gain
(loss) on investments and
foreign currency transactions........ (.60) (.89) .68 .89 .17 (.46)
------ ------ ------ ------ ------ ------
Net increase (decrease) in net asset
value from operations................ (.29) (.21) 1.47 1.58 1.07 .46
------ ------ ------ ------ ------ ------
Less: Distributions
-------------------
Dividends from net investment
income............................... (.46) (.68) (.80) (.90) (1.06) (1.01)
Distributions from net realized
gain................................. --0-- (.61) (.41) (.04) --0-- (.03)
Tax return of capital distribution........ --0-- (.30) --0-- --0-- --0-- --0--
------ ------ ------ ------ ------ ------
Total dividends and distributions......... (.46) (1.59) (1.21) (.94) (1.06) (1.04)
------ ------ ------ ------ ------ ------
Net asset value, end of period............ $ 7.37 $ 8.12 $ 9.92 $ 9.66 $ 9.02 $ 9.01
====== ====== ====== ====== ====== ======
Market value, end of period............... $ 7.25 $8.125 $9.875 $ 9.75 $9.375 $ 8.50
====== ====== ====== ====== ====== ======
<CAPTION>
Total Return
------------
<S> <C> <C> <C> <C> <C> <C>
Total investment return based on: (a)
Market value......................... (5.88)% (2.66)% 14.94% 14.84% 24.29% .23%
Net asset value...................... (4.27)% (3.16)% 16.30% 18.26% 12.81% 5.25%
Ratios/Supplemental Data
------------------------
Net assets, end of period
(000's omitted)...................... $96,323 $105,830 $122,500 $115,831 $105,936 $104,121
Ratio of expenses to average
net assets........................... 1.41%(b) 1.20% 1.19% 1.22% 1.22% 1.24%
Ratio of net investment
income to average net assets......... 7.87%(b) 7.50% 8.27% 7.31% 9.97% 10.08%
Portfolio turnover rate................... 93% 297% 588% 505% 365% 287%
</TABLE>
(a) 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 the 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 return for a period of
less than one year is not annualized.
(b) Annualized.
<PAGE>
ACM Government Opportunity Fund, Inc.
Board Of Directors
John D. Carifa, Chairman and President
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, Senior Vice President
Bruce W. Calvert, Senior Vice President
Thomas Perkins, Senior Vice President
Paul J. DeNoon, Vice President
Thomas Bardong, Vice President
Edmund P. Bergan, Jr., Secretary
Mark D. Gersten, Treasurer & Chief Financial Officer
Joseph J. Mantineo, Controller
Administrator
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, NY 10105
DIVIDEND PAYING AGENT, TRANSFER
AGENT AND REGISTRAR
The Shareholder Services Group, Inc.
One Exchange Plaza
Boston, MA 02109
CUSTODIAN
Bank of New York
48 Wall Street
New York, NY 10286
INDEPENDENT ACCOUNTANTS
Ernst & Young LLP
787 Seventh Avenue
New York, NY 10019
<PAGE>
ACM Government Opportunity Fund, Inc.
Summary of General Information
The Fund
ACM Government Opportunity 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. Its secondary objective is capital appreciation. The Fund
invests principally in U.S. Government obligations. The Fund also has the
flexibility to invest its assets in securities of selected foreign governments
(maximum 35%) and dividend-paying equity securities (maximum 20%). Additionally,
the Fund may use certain other investment techniques, including options and
futures contracts. 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 each day, under the
designation "ACM OppFd". The Fund's NYSE trading symbol is "AOF". Weekly
comparative net asset value (NAV) and market price information about the Fund
is published each Monday in The Wall Street Journal and each Saturday in The New
York Times and 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 provides automatic reinvestment of dividends and
capital gains in additional Fund shares. For a copy of the Plan Brochure, please
write to the Plan Agent, The Shareholder Services Group, Inc., P.O. Box 1376,
Boston, MA 02104.
ACM Government Opportunity Fund, Inc.
1345 Avenue of the Americas
New York, New York 10105
AllianceCapital [logo]
(R)These registered service marks used under license from the owner,
Alliance Capital Management L.P.
OPPSR
ACM
Government
Opportunity
Fund
Semi-Annual
Report
January 31, 1995
Alliance(R)
Mutual funds without the Mystery/SM/.
