ACM GOVERNMENT OPPORTUNITY FUND
SEMI-ANNUAL REPORT
JANUARY 31, 1996
LETTER TO SHAREHOLDERS ACM GOVERNMENT OPPORTUNITY FUND, INC.
_______________________________________________________________________________
March 8, 1996
Dear Shareholder:
ACM Government Opportunity Fund's primary investment objective is to provide
high current income, and its secondary objective is growth of capital. The
Fund invests at least 65% of its assets in U.S. Government and agency
securities and has the flexibility to invest the remaining 35% in selected
foreign government securities and up to 20% in equity
securities.
For the semi-annual period ended January 31, 1996, the Fund provided very
favorable investment results. Over the six-month period, the Fund returned
+13.01% on a net asset value basis, and for the one-year period had a total
return of +27.13%. From the initial public offering in August of 1988 through
January 31, 1996, the Fund has provided shareholders with an average annual
total return of +11.36% on a net asset value basis.
ECONOMIC REVIEW
The U.S. economy survived an inventory scare in 1995 and entered 1996 in a
relatively balanced and healthy condition. The latest economic data show the
U.S. economy's "soft landing" is still intact. February's shocking +705,000
payroll gain grabbed headlines, but the 12-month comparisons-payrolls up
+145,000 per month, employment rising 1.5% year on year (YoY), hours worked
up 1.6% YoY-were all numbers that support a soft landing. Consumer confidence
has bounced back, debt service burdens are still manageable, and February
retail sales climbed 5% YoY-their best showing since last summer.
Manufacturing is likely to remain a soft spot, although new orders for
durable goods are showing hidden strength and unfilled orders continue to
rise. Revised data show the much-feared slowdown in capital spending has
already occurred. A gradual restrengthening in the U.S. economy is in
prospect over the next 6-12 months.
Measured inflation at the consumer and producer levels remains well-behaved
and the U.S. economy continues to operate in the inflation "safe zone."
However, recent increases in unit labor costs and commodity prices warn
against complacency. Federal Reserve policy has moved into a holding pattern.
Chances for a meaningful deficit reduction plan have receded as politicians
increasingly turn their attention to the 1996 election campaign.
BOND MARKET REVIEW
Throughout 1995, the U.S. bond market enjoyed a sustained broad-based rally.
However, the market experienced a setback in the month of February 1996. The
market reacted to the stronger-than-expected job growth in the U.S. and the
belief that the Federal Reserve will not ease rates further.
For the six-month period ending February 29, 1996, corporate and high-yield
securities outperformed Treasuries and mortgages, with all sectors providing
strong positive returns. 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.
In this forecasted interest rate environment, we would expect to maintain our
current allocation among Treasury and mortgage securities. Outside the U.S.,
our long-term outlook for foreign debt remains positive. We anticipate
maintaining the Fund's positions in non-U.S. government securities to
capitalize on the potential price appreciation in those markets. The Fund
currently owns bonds from Australia, Canada and Spain.
EQUITY INVESTMENT REVIEW
U.S. stocks provided extraordinary returns in 1995, well above the most
bullish investment forecasts of a year ago.
A number of positive fundamentals came together during the course of the year
to drive equity valuations steadily higher, the most important being rising
corporate profits and falling interest rates. Corporate profit performance
consistently exceeded expectations as companies benefited from economic
expansion and major cost cutting initiatives and accelerating free cash flow
supported share repurchase programs. Also benefiting the market
1
ACM GOVERNMENT OPPORTUNITY FUND, INC.
_______________________________________________________________________________
was a record level of merger and acquisition activity and a record $120
billion net inflow into U.S. equity mutual funds.
Investments in financial services, health care and technology stocks
contributed positively to the Fund's total returns over the period. While some
investors have now turned to defensive holdings such as utilities as a "safe"
haven in an uncertain marketplace, we believe that the current environment of
benign inflation and modest economic growth is more supportive of growth
stocks. We will continue to overweight select names in the technology and
financial services sectors and to underweight capital goods and energy. We
also expect that an eventual government compromise on the budget could help
to calm the bond market and in turn boost financial stocks.
IN SUMMARY
With the broad market approximately one-third higher than a year ago, our
fundamental analysis, allowing for changes in magnitude, has changed little.
We've had a good start in 1996 and we think that the market's prospects for
the remainder of the year are quite good for a number of reasons: the U.S.
is in a strong technology leadership position; companies continue to reap
the benefits from many years of corporate cost-cutting; the dollar remains
at a competitive level; the economy is restrained; inflation is repressed;
the cost of money is reasonable; corporate profits have peaked; supply/demand
for equities is still healthy; and finally, corporate profitability is at
multi-decade highs.
The continuing challenge this year will be to identify equities that will
perform well in what may be a period of declining profits. Growth at a
reasonable price, at any capitalization level, is becoming ever rarer. As we
search for those situations, our expectation is that some smaller or
mid-sized companies may be added to the Fund's portfolio. At the same time,
importantly, it will remain very well diversified across industry
categories as we perceive no wide valuation differentials among industry
sectors.
Thank you for your interest in ACM Government Opportunity Fund. We look
forward to reporting to you again on market activity and the Fund's
investment results in coming periods.
Sincerely,
John D. Carifa
Chairman and President
Wayne D. Lyski
Senior Vice President
2
PORTFOLIO OF INVESTMENTS
JANUARY 31, 1996 (UNAUDITED) ACM GOVERNMENT OPPORTUNITY FUND, INC.
_______________________________________________________________________________
SHARES OR
PRINCIPAL
AMOUNT
(000) U.S. $VALUE
- ------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS80.6%
U.S. TREASURY SECURITIES70.5%
U.S. Treasury Bonds
11.875%, 11/15/03(a) US$ 1,700 $ 2,376,280
12.375%, 5/15/04(a) 6,050 8,759,263
12.75%, 11/15/10(a) 2,800 4,259,500
14.00%, 11/15/11(a) 11,800 19,543,750
U.S. Treasury Notes
6.50%, 8/15/05(a) 2,750 2,929,605
7.75%, 1/31/00(a) 12,000 13,095,000
8.875%, 11/15/98(a) 9,500 10,429,214
U.S. Treasury Strips
Zero coupon, 2/15/15 47,765 14,718,021
Zero coupon, 8/15/20 13,500 2,911,707
Total U.S. Treasury Securities
(cost $77,382,996) 79,022,340
FEDERAL AGENCY SECURITIES10.1%
Federal National Mortgage Association
Zero coupon, 10/09/19 12,100 2,647,262
Student Loan Marketing Association
15.00%, 9/17/96 5,490 5,818,286
Small Business Administration
BS92-5B(I/O)(b)(d) 8.15%, 11/15/17 2,765 2,788,964
Total Federal Agency
Securities (cost $11,310,873) 11,254,512
Total U.S. Government and Agency Obligations
(cost $88,693,869) 90,276,852
COMMON STOCKS23.5%
CONSUMER STAPLES4.2%
Avon Products, Inc. 4,500 355,500
Gillette Co. 11,000 589,875
Kimberly-Clark Corp. 6,500 524,062
McDonalds Corp. 14,000 703,500
Nabisco Holdings 5,000 173,750
PepsiCo, Inc. 14,000 834,750
Philip Morris Cos., Inc. 11,000 1,023,000
Procter & Gamble Co. 6,500 546,000
4,750,437
SHARES U.S. $VALUE
- ------------------------------------------------------------------------
TECHNOLOGY3.4%
Applied Materials, Inc. 11,000 $ 407,000
cisco Systems, Inc.(c) 8,000 666,000
Compaq Computer Corp.(c) 11,000 518,375
General Motors, Class E 6,000 333,000
Intel Corp. 14,000 773,280
Informix Corp. (c) 5,000 166,875
Microsoft Corp.(c) 3,000 277,500
Oracle Corp. (c) 14,000 668,500
3,810,530
FINANCIAL SERVICES3.4%
American International Group, Inc. 6,000 581,250
Citicorp 5,373 396,930
Federal National Mortgage Association 16,000 552,000
First Bank System, Inc. 5,000 262,500
First Chicago NBD Corp. 8,000 311,000
General Re Corp. 2,000 306,000
Legg Mason, Inc. 9,788 294,864
Merrill Lynch & Company, Inc. 2,000 113,750
The PMI Group, Inc. 7,000 350,875
The Travelers Group, Inc. 9,000 591,750
3,760,919
HEALTHCARE2.8%
ASTRA, AB Series B 10,000 400,862
Columbia/HCA Healthcare 10,000 556,250
Health Care Property Investments, Inc. 6,000 213,000
Merck & Co., Inc. 9,000 632,250
Pfizer, Inc. 8,000 550,000
Schering-Plough Corp. 7,000 378,875
United Healthcare Corp. 6,000 377,250
3,108,487
TELECOMMUNICATIONS & MULTIMEDIA2.1%
Airtouch Communications (c) 10,000 282,500
AT&T Corp. 11,000 735,625
Cox Communications, Inc., Class A 14,000 292,250
Nokia Corp. (ADR) 5,000 186,875
Tele-Communications Liberty Media 11,000 301,125
3
PORTFOLIO OF INVESTMENTS (CONTINUED) ACM GOVERNMENT OPPORTUNITY FUND, INC.
_______________________________________________________________________________
SHARES U.S. $VALUE
- ------------------------------------------------------------------------
Tele-Communications TCI Class A 16,300 $ 344,338
Vodafone Group PLC (ADR) 5,000 178,750
2,321,463
LEISURE & ENTERTAINMENT1.8%
Carnival Corp. 10,000 270,000
Eastman Kodak Co. 6,000 440,250
ITT Corp. 5,000 277,500
La Quinta Inns, Inc. 5,000 133,750
Time Warner, Inc. 6,000 249,000
Walt Disney Co. 10,000 642,500
2,013,000
CAPITAL GOODS1.4%
Allied Signal, Inc. 11,000 548,625
General Electric Co. 12,000 921,000
ITT Industries 4,000 104,000
1,573,625
CHEMICALS0.9%
Monsanto Co. 5,000 651,250
Morton International, Inc. 11,000 407,000
1,058,250
RETAIL0.9%
Autozone, Inc. (c) 5,000 120,625
Federated Department Stores, Inc. (c) 10,000 270,000
Home Depot Inc. 10,000 460,000
Lowe's Companies, Inc. 6,000 186,750
1,037,375
ENERGY0.6%
Shell Transportation & Trading Co. (ADR) 4,500 354,937
Texaco, Inc. 4,000 323,500
678,437
TRANSPORTATION0.6%
Burlington Northern Santa Fe 4,500 368,437
Union Pacific Corp. 2,000 133,250
Xtra Corp. 4,000 170,500
672,187
SHARES OR
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- ------------------------------------------------------------------------
BASIC INDUSTRIES0.6%
Aluminum Company of America 4,000 $ 222,000
Plum Creek Timber Co., L.P. 15,000 391,875
613,875
BIOTECHNOLOGY0.4%
Amgen Inc. (c) 8,000 481,000
AEROSPACE0.3%
Boeing Co. 4,500 349,313
AUTO & RELATED0.1%
Magna International, Inc. C1.A 4,000 165,500
Total Common Stocks (cost $19,038,904) 26,394,398
FOREIGN SECURITIES8.6%
AUSTRALIA2.6%
Australian Government, 10.00%, 10/15/07
(cost $2,891,031) AUS 3,500 2,951,644
CANADA2.4%
Canadian Government, 8.75%, 12/01/05
(cost $2,688,917) CAN 3,250 2,648,841
SPAIN3.6%
Bonos Y Obligaciones Del Estado, 10.00%, 2/28/05
(cost $4,099,612) ESP 5,000 4,054,000
Total Foreign Securities
(cost $9,679,560) 9,654,485
CORPORATE BONDS0.6%
General Instrument Corp., 5.00%, 6/15/00 US$ 250 271,250
Wendy's International, 7.00%, 4/01/06 250 415,000
Total Corporate Bonds (cost $630,465) 686,250
4
ACM GOVERNMENT OPPORTUNITY FUND, INC.
_______________________________________________________________________________
SHARES OR
PRINCIPAL
AMOUNT
(000) U.S. $VALUE
- -------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCK0.3%
Penncorp, $3.375 (cost $261,240) 4,000 $ 292,500
TIME DEPOSITS1.8%
Bank of New York 5.50%, 2/01/96
(cost $2,006,000) US$ 2,006 2,006,000
TOTAL INVESTMENTS115.4%
(cost $120,310,038) $129,310,485
Other assets less liabilities(15.4%) (17,240,923)
NET ASSETS100% $112,069,562
(a) Security, or portion thereof, has been segregated to collateralize a
forward exchange currency contract.
(b) Illiquid security, valued at fair market value (see Notes A & E).
(c) Non-income producing.
(d) Interest rate represents yield to maturity, and principal amount represents
amortized cost.
Glossary of Terms:
ADR - American Depository Receipt.
(I/O) - Interest Only. Interest accrued based on yield to maturity.
See notes to financial statements.
5
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 1996 (UNAUDITED) ACM GOVERNMENT OPPORTUNITY FUND, INC.
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $120,310,038) $129,310,485
Cash 111,092
Receivable for investment securities sold 18,914,729
Dividends and interest receivable 1,760,351
Unrealized appreciation of forward exchange currency contracts 592,662
Other assets 28,316
Total assets 150,717,635
LIABILITIES
Payable for investment securities purchased 37,730,833
Dividend payable 718,953
Advisory fee payable 69,371
Administration fee payable 13,874
Accrued expenses and other liabilities 115,042
Total liabilities 38,648,073
NET ASSETS $112,069,562
COMPOSITION OF NET ASSETS
Capital stock, at par $ 130,719
Additional paid-in capital 112,390,697
Distribution in excess of net investment income (1,122,653)
Accumulated net realized loss (8,911,229)
Net unrealized appreciation on investments and foreign
currency denominated assets and liabilities 9,582,028
$112,069,562
NET ASSET VALUE PER SHARE(based on 13,071,872 shares outstanding) $8.57
See notes to financial statements.
6
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JANUARY 31, 1996 (UNAUDITED)
ACM GOVERNMENT OPPORTUNITY FUND, INC.
_______________________________________________________________________________
INVESTMENT INCOME
Interest $4,003,596
Dividends(net of foreign withholding taxes of $1,980) 212,095 $4,215,691
EXPENSES
Advisory fee 404,087
Administrative fee 80,817
Custodian 50,626
Transfer agency 50,359
Audit and legal 33,486
Printing 18,310
Directors' fees 14,974
Registration 12,647
Miscellaneous 16,948
Total expenses 682,254
Net investment income 3,533,437
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FOREIGN CURRENCY
Net realized gain on investment transactions 3,276,141
Net realized gain on foreign currency transactions 486,356
Net change in unrealized appreciation of:
Investments 4,733,430
Foreign currency denominated assets and liabilities 795,931
Net gain on investments 9,291,858
NET INCREASE IN NET ASSETS FROM OPERATIONS $12,825,295
See notes to financial statements.
7
STATEMENT OF CHANGES IN NET ASSETS ACM GOVERNMENT OPPORTUNITY FUND, INC.
_______________________________________________________________________________
SIX MONTHS ENDED YEAR ENDED
JANUARY 31,1996 JULY 31,
(UNAUDITED) 1995
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 3,533,437 $ 7,684,277
Net realized gain (loss) on investments,
options and foreign currency transactions 3,762,497 (7,294,317)
Net change in unrealized appreciation of
investments and foreign currency denominated
assets and liabilities 5,529,361 7,380,407
Net increase in net assets from operations 12,825,295 7,770,367
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (4,313,722) (6,304,236)
Tax return of capital distribution -0- (4,054,223)
COMMON STOCK TRANSACTIONS
Reinvestment of dividends resulting in the
issuance of common stock -0- 316,508
Total increase (decrease) 8,511,573 (2,271,584)
NET ASSETS
Beginning of period 103,557,989 105,829,573
End of period $112,069,562 $103,557,989
See notes to financial statements.
8
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996 (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. 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. 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 investments 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 gain on foreign currency transactions of $486,356 represent
foreign exchange gains and losses from sales and maturities of foreign
securities, currency hedge transactions, holding of foreign currencies, options
on foreign securities and foreign currencies, 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 period end
exchange rates are reflected as a component of net unrealized appreciation on
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 income tax regulations.
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 fee at an annualized rate
of .75 of 1% of the Fund's average weekly net assets.
Under the terms of an Administrative Agreement, the Fund pays Alliance Capital
Management L.P., (the 'Administrator') a monthly fee equal to the annualized
rate of .15 of 1% of the Fund's average weekly net assets.
9
NOTES TO FINANCIAL STATEMENTS (CONT.) ACM GOVERNMENT OPPORTUNITY FUND, INC.
_______________________________________________________________________________
Brokerage commissions paid for the six months ended January 31, 1996 on
securities transactions amounted to $20,669, 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 $213,058,243 and $203,927,838, respectively, for the
six months ended January 31, 1996. There were purchases of $127,052,630 and
sales of $112,096,154 of U.S. Government and government agency obligations for
the six months ended January 31, 1996.
At January 31, 1996, the cost of investments for federal income tax purposes
was $120,755,391. Accordingly, gross unrealized appreciation of investments was
$9,663,555 and gross unrealized depreciation of investments was $1,108,460
resulting in net unrealized appreciation of $8,555,095 (excluding foreign
currency). For federal income tax purposes, the Fund had a capital loss
carryforward at July 31, 1995 of $5,948,688 which will expire in 2003.
1. FOREIGN 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.
Fluctuations 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.
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 face or contract amount, in U.S.
dollars, as reflected in the following table, reflects the total exposure the
Fund has in that particular currency contract.
At January 31, 1996, the Fund had outstanding forward exchange currency
contracts as follows:
CONTRACT VALUE ON U.S. $ UNREALIZED
AMOUNT ORIGINATION CURRENT APPRECIATION
(000) DATE VALUE (DEPRECIATION)
-------- ----------- ---------- -------------
FOREIGN CURRENCY BUY CONTRACTS
Danish Krona,
expiring 2/8/96 22,423 $3,888,773 $3,894,772 $ 5,999
Deutsche Marks,
expiring 2/23/96 6,916 4,701,042 4,648,769 (52,273)
Italian Lira,
expiring 3/18/96 75,000 4,737,839 4,710,000 (27,839)
Spanish Peseta,
expiring 2/23/96 544,835 4,352,690 4,333,617 (19,073)
FOREIGN CURRENCY SALE CONTRACTS
Canadian Dollars,
expiring 3/8/96 3,600 $2,653,595 $2,621,275 $ 32,320
Danish Krona,
expiring 2/8/96 22,423 3,994,062 3,894,772 99,290
Deutsche Marks,
expiring 2/23/96-3/15/96 23,971 16,477,050 16,116,980 360,070
Japanese Yen,
expiring 2/8/96 500,000 4,763,023 4,675,500 87,523
Italian Lira,
expiring 3/18/96 75,000 4,662,700 4,710,000 (47,300)
Spanish Peseta,
expiring 2/23/96 544,835 4,487,562 4,333,617 153,945
---------
$592,662
10
ACM GOVERNMENT OPPORTUNITY FUND, INC.
_______________________________________________________________________________
2. OPTIONS 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 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, 1996 were
as follows:
NUMBER OF
CONTRACTS PREMIUM
--------- --------
Options outstanding at beginning of year -0- $ -0-
Options written 2 22,800
Options expired (2) (22,800)
Options outstanding at January 31, 1996 -0- $ -0-
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, 1996, the Adviser owned 10,753
shares. During the years ended July 31, 1995 and 1994, the Fund issued 43,657
and 682,327 shares, respectively, in connection with the Fund's Dividend
Reinvestment Plan.
NOTE E: ILLIQUID SECURITY
SECURITY DATE ACQUIRED U.S. $ COST
- ----------------------------- ------------- -----------
Small Business Administration
BS92-5B (I/0)
8.15%, 11/15/17 10/02/92 $2,765,479
The security shown above is illiquid and has been valued at fair value in
accordance with the procedures described in Note A.
The value of this security at January 31, 1996 was $2,788,964, representing
2.5% of net assets.
11
FINANCIAL HIGHLIGHTS ACM GOVERNMENT OPPORTUNITY FUND, INC.
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF COMMON STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JANUARY 31, YEAR ENDED JULY 31,
1996 ------------------------------------------------------
(UNAUDITED) 1995 1994 1993 1992 1991
------------ --------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $7.92 $8.12 $9.92 $9.66 $9.02 $9.01
INCOME FROM INVESTMENT OPERATIONS
Net investment income .27 .59 .68 .79 .69 .90
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions .71 -0- (.89) .68 .89 .17
Net increase (decrease) in net asset
value from operations .98 .59 (.21) 1.47 1.58 1.07
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.33) (.48) (.68) (.80) (.90) (1.06)
Distributions from net realized gains -0- -0- (.61) (.41) (.04) -0-
Tax return of capital distribution -0- (.31) (.30) -0- -0- -0-
Total dividends and distributions (.33) (.79) (1.59) (1.21) (.94) (1.06)
Net asset value, end of period $8.57 $7.92 $8.12 $9.92 $9.66 $9.02
Market value, end of period $7.625 $7.50 $8.125 $9.875 $9.75 $9.375
TOTAL RETURN
Total investment return based on: (a)
Market value 6.27% 2.85% (2.66)% 14.94% 14.84% 24.29%
Net asset value 13.01% 8.67% (3.16)% 16.30% 18.26% 12.81%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $112,070 $103,558 $105,830 $122,500 $115,831 $105,936
Ratio of expenses to average net assets 1.26%(b) 1.18% 1.20% 1.19% 1.22% 1.22%
Ratio of net investment income to
average net assets 6.52%(b) 7.62% 7.50% 8.27% 7.31% 9.97%
Portfolio turnover rate 167% 228% 297% 588% 505% 365%
</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 years.
(b) Annualized.
12
ACM GOVERNMENT OPPORTUNITY FUND, INC.
_______________________________________________________________________________
SUPPLEMENTAL PROXY INFORMATION
The Annual Meeting of Shareholders of the ACMGovernment Opportunity 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:
SHARES SHARES VOTED
VOTED FOR WITHOUT AUTHORITY
_______________________________________________________________________________
1. To elect directors: Class One Directors
(term expires in 1998)
James R. Greene 11,634,521 375,416
Clifford L. Michel 11,648,733 361,204
SHARES SHARES SHARES VOTED
VOTED FOR VOTED AGAINST ABSTAIN
_______________________________________________________________________________
2. To ratify the selection of
Ernst & Young LLP as the Fund's
independent auditors for the Fund's
fiscal year ending July 31, 1995 11,736,708 106,743 166,486
13
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
KATHLEEN A. CORBET, 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
FIRST DATA INVESTOR SERVICES GROUP, INC.
One Exchange Place
Boston, MA 02109
CUSTODIAN
BANK OF NEW YORK
48 Wall Street
New York, New York 10286
INDEPENDENT ACCOUNTANTS
ERNST & YOUNG LLP
787 Seventh Avenue
New York, NY 10019
14
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 equity securities (maximum 20%). Additionally, the Fund may
use certain other investment techniques, including options and futures
contracts. The investment advisor 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
MUTUAL FUNDS WITHOUT THE MYSTERY.
R THESE REGISTERED SERVICE MARKS USED UNDER LICENSE FROM THE OWNER, ALLIANCE
CAPITAL MANAGEMENT L.P.
OPPSR
