ACM GOVERNMENT OPPORTUNITY FUND
SEMI-ANNUAL REPORT
JANUARY 31, 1998
ALLIANCE CAPITAL
LETTER TO SHAREHOLDERS ACM GOVERNMENT OPPORTUNITY FUND
_______________________________________________________________________________
March 27, 1998
Dear Shareholder:
This semi-annual report contains ACM Government Opportunity Fund investment
results and market activity for the period ended January 31, 1998.
MARKET REVIEW
The U.S. bond market posted solid returns over the six month period ending
January 31, 1998. Early in the period, interest rates had been relatively
stable and investor demand for yield oriented securities, corporates and
mortgage-backed securities (MBS), was high. In spite of strong U.S. economic
growth, inflation was almost nonexistent, further increasing demand in the bond
market. Toward year-end, financial turmoil which began in Southeast Asia,
spilled over into other global bond markets, including the U.S. The resulting
"flight to quality" spurred a year-end rally in U.S. Treasury securities while
negatively impacting returns in the corporate, mortgage and non-U.S. bond
sectors.
Interest rates on most maturities fell dramatically over the past six months.
The decreasing likelihood that the Federal Reserve would have to raise rates to
slow economic growth, coupled with the year-end rally in the Treasury market,
helped push interest rates to new lows. Overall, the 30-year Treasury bond,
which was yielding 6.30% at the beginning of the period, fell to 5.81% at the
end of the period; 5-year note yields fell from 5.90% to 5.38%.
In most developed markets outside of the U.S., growth remained positive while
inflation troughed or declined. All developed bond markets posted solid
positive returns on a hedged basis. In most emerging markets, however, the long
run of strong positive bond market performance was interrupted in the fourth
quarter by the Asian crisis.
INVESTMENT RESULTS
For the six month period ended January 31, 1998, we are pleased to report that
ACM Government Opportunity Fund returned 6.11% at net asset value (NAV) versus
4.90% for the Lehman Brothers Aggregate Bond Index. The Fund's strong
performance versus the benchmark can be attributed to the Fund's U.S. holdings.
The Fund's heavy exposure to the U.S. Government bond sector was the main
driver of performance, along with the Fund's exposure to longer dated
maturities. When the Treasury market rallied in the fourth quarter, spurred by
the investor "flight to quality," the Fund was well positioned. In addition,
the Fund's ownership of Government securities, both U.S. and foreign, helped
mitigate the negative impact felt in most other sectors as events in Southeast
Asia unfolded. For the 12 months ended January 31, 1998, your Fund also
outperformed the benchmark, returning 12.97% versus 10.72% for the Lehman
Brothers Aggregate Bond Index.
INVESTMENT RESULTS*
Periods Ended January 31, 1998
TOTAL RETURNS
6 MONTHS 12 MONTHS
--------- ---------
ACM GOVERNMENT OPPORTUNITY FUND 6.11% 12.97%
LEHMAN BROTHERS AGGREGATE BOND INDEX 4.90% 10.72%
* THE FUND'S INVESTMENT RESULTS ARE CUMULATIVE TOTAL RETURNS FOR THE PERIOD
AND ARE BASED ON THE NET ASSET VALUE AS OF JANUARY 31, 1998. ALL FEES AND
EXPENSES RELATED TO THE OPERATION OF THE FUND HAVE BEEN DEDUCTED, BUT NO
ADJUSTMENT HAS BEEN MADE FOR SALES CHARGES THAT MAY APPLY WHEN SHARES ARE
PURCHASED OR REDEEMED. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
THE LEHMAN BROTHERS AGGREGATE BOND INDEX IS COMPOSED OF THE MORTGAGE
BACKED AND ASSET BACKED SECURITIES INDICES, AND THE GOVERNMENT/CORPORATE BOND
INDEX. RETURNS FOR THE FUND AND ITS COMPARATIVE INDEX INCLUDE THE REINVESTMENT
OF ANY DISTRIBUTIONS PAID DURING THE PERIOD. THE INDEX IS UNMANAGED AND
REFLECTS NO FEES OR EXPENSES. AN INVESTOR CANNOT INVEST DIRECTLY IN THE INDEX.
ECONOMIC REVIEW
The U.S. economy continued to be fundamentally strong and grew at a solid pace
over the past six months. Total growth, as measured by the Gross Domestic
Product (GDP), was 3.9% annualized for the fourth quarter, following third
quarter's 3.1% pace. 1997 GDP was 3.8%, the strongest growth recorded since
1988. As it has all year, the labor market remained tight and fueled economic
growth. The unemployment rate remained at 4.7% in January and hovered near
20-year lows throughout most of the period. For the year, the U.S. economy
created 3.2 million new jobs with over one million jobs
1
ACM GOVERNMENT OPPORTUNITY FUND
_______________________________________________________________________________
added in the fourth quarter alone. Inflation remained remarkably absent for
this late in an expansion. Through January, producer prices were down 1.9% from
year earlier levels while consumer prices posted a modest 1.6% gain for the
same period.
In Europe, attention centered on which countries will qualify for European
Monetary Union and at what currency level. During the period under review,
growth was moderate and dominated by exports, while inflation dropped from the
peak levels reached during the summer. Late in the period, the German
Bundesbank raised official interest rates. This move was viewed largely as an
action by the Bundesbank to assume the role of the European Central Bank.
Meanwhile, Spain and Italy lowered short term rates, bringing them closer to
other European levels.
In Canada, growth remained strong, inflation was stable and the Central Bank
raised rates to support the weakening Canadian dollar. Meanwhile, the
precarious recovery in Japan was further jeopardized by the deepening economic
and financial turmoil in Asia.
Developments in Southeast Asia roiled the world's financial markets. Economic
problems, which began in Thailand, quickly spread to Malaysia, Indonesia, the
Philippines and South Korea. Fast growth, fueled by strong capital inflows and
overvalued currencies combined to produce large external trade deficits,
property and stock market bubbles, and overextended banking systems. Immediate
policy responses in the affected countries were often inadequate and/or poorly
articulated. This resulted in additional volatility which spread to other
markets in the region and created a ripple effect felt from Japan to the U.S.
and Europe. In many cases, fundamental analysis temporarily took a back seat to
market psychology. However, as appropriate policy responses are implemented in
the affected countries, we are confident that economic fundamentals will
eventually reassert themselves.
INVESTMENT OUTLOOK
Our outlook for the U.S. remains optimistic. We expect domestic growth to slow
from its 1997 pace to a more sustainable 2.5% rate in 1998. The economic
slowing in Southeast Asia should further temper U.S. growth in the upcoming
year as exports to that region curtail. Meanwhile, the recent decline in
interest rates should moderate the anticipated slowing and provide stimulus to
the economy to ensure continued growth. The Federal Reserve is unlikely to
raise interest rates in the short term in light of the likelihood of slowing
growth and the desire to keep global liquidity at high levels. Until the
repercussions of events in Southeast Asia are fully understood, we expect
interest rate volatility to remain elevated.
Outside of the U.S., global growth should be slower and inflation pressures
should be reduced as Asia exports cheaper goods to the world and imports less
from abroad. Among the major economic blocs, the greatest impact will be felt
in Japan where weaker domestic demand will only be partially offset by a
widening trade surplus. Economic activity in Australia and New Zealand will
also be dramatically lower because of the substantial trading relationships
with Asia.
In Europe, the primary theme will continue to be European Monetary Union and
the convergence of interest rates across the continent. With high unemployment,
low inflation and weak domestic demand, short term rates should converge around
4.0%, lower than previously expected. This should enable Italy and Spain to
trim rates further.
Thank you for your continued interest and investment in ACM Government
Opportunity Fund. We look forward to reporting its progress to you in the
coming months.
Sincerely,
John D. Carifa
Chairman and President
Wayne D. Lyski
Senior Vice President
2
PORTFOLIO OF INVESTMENTS
JANUARY 31, 1998 (UNAUDITED) ACM GOVERNMENT OPPORTUNITY FUND
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS-85.6%
U.S. TREASURY NOTES-37.3%
6.25%, 10/31/01 (a) US$ 9,530 $ 9,806,970
6.50%, 5/31/02(a) 11,250 11,721,105
6.50%, 8/15/05 (a) 7,950 8,419,551
7.875%, 11/15/04 (a) 7,000 7,927,507
12.75%, 11/15/10(a) 3,250 4,692,191
------------
42,567,324
U.S. TREASURY BONDS-29.2%
6.625%, 2/15/27(a) 1,000 1,105,626
8.125%, 8/15/19 (a) 8,250 10,474,926
10.75%, 8/15/05 (a) 4,000 5,266,252
14.00%, 11/15/11 (a) 10,500 16,507,974
------------
33,354,778
U.S. TREASURY STRIPS-13.8%
Zero coupon, 11/15/09 9,750 4,908,920
Zero coupon, 5/15/15 30,000 10,836,180
------------
15,745,100
MORTGAGE RELATED SECURITY-5.3%
Government National
Mortgage Association
7.00%, 1/14/28 TBA 6,000 6,090,000
Total U.S. Government and
Agency Obligations
(cost $94,087,727) 97,757,202
SOVEREIGN DEBT OBLIGATIONS-23.7%
AUSTRALIA-4.4%
Australian Government
10.00%, 10/15/07 AU$ 5,600 4,995,746
GERMANY-2.7%
Deutschland Republic
8.00%, 7/22/02 DEM 5,000 3,116,283
NEW ZEALAND-4.6%
International Bank for
Reconstruction and Development
Zero coupon, 8/20/07 NZ$ 7,700 2,367,948
New Zealand Government
8.00%, 11/15/06 4,500 2,848,919
------------
5,216,867
NORWAY-3.0%
Norwegian Government
9.00%, 1/31/99 NOK 25,000 3,445,888
RUSSIA-1.7%
Russia - IAN FRN
6.71875%, 12/15/15 (b) US$ 3,000 1,943,438
SOUTH AFRICA-2.0%
Development Bank of South Africa
Zero coupon, 12/31/27 ZAR 70,000 375,734
International Bank for
Reconstruction and Development
Zero coupon, 12/29/17 100,000 1,746,000
Zero coupon, 2/17/26 25,000 194,957
------------
2,316,691
SWEDEN-5.3%
Swedish Government
10.25%, 5/05/03 SEK 40,000 6,030,686
Total Sovereign Debt Obligations
(cost $27,437,560) 27,065,599
TIME DEPOSIT-5.6%
Bank of New York
5.0625%, 2/02/98
(cost $6,451,000) US$ 6,451 6,451,000
TOTAL INVESTMENTS-114.9%
(cost $127,976,287) 131,273,801
Other assets less liabilities-(14.9%) (17,068,782)
NET ASSETS-100% $114,205,019
(a) Securities or portion thereof, with an aggregate market value of
$75,922,102, have been segregated to collateralize forward exchange currency
contracts and TBA securities.
(b) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. This security may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At January 31, 1998, this security
amounted to $1,943,438 or 1.7% of net assets.
Glossary of Terms:
FRN - Floating Rate Note
IAN - Interest Arrears Note
TBA - To Be Announced
See notes to financial statements.
3
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 1998 (UNAUDITED) ACM GOVERNMENT OPPORTUNITY FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $127,976,287) $ 131,273,801
Cash 15,062
Receivable for investment securities sold 14,198,451
Interest receivable 2,431,030
Other assets 3,107
Total assets 147,921,451
LIABILITIES
Payable for investment securities purchased 33,002,247
Net unrealized depreciation of forward exchange
currency contracts 445,868
Advisory fee payable 73,199
Administration fee payable 28,522
Accrued expenses 166,596
Total liabilities 33,716,432
NET ASSETS $ 114,205,019
COMPOSITION OF NET ASSETS
Capital stock, at par $ 130,719
Additional paid-in capital 112,964,051
Undistributed net investment income 262,273
Accumulated net realized loss on investments and
foreign currency transactions (1,977,711)
Net unrealized appreciation on investments and foreign
currency denominated assets and liabilities 2,825,687
$ 114,205,019
NET ASSET VALUE PER SHARE (based on 13,071,872 shares outstanding) $8.74
See notes to financial statements.
4
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JANUARY 31, 1998 (UNAUDITED) ACM GOVERNMENT OPPORTUNITY FUND
_______________________________________________________________________________
INVESTMENT INCOME
Interest $ 4,525,507
EXPENSES
Advisory fee $ 418,978
Administrative fee 83,792
Custodian 69,022
Audit and legal 28,129
Transfer agency 19,000
Directors' fees 16,555
Printing 11,129
Miscellaneous 17,611
Total expenses 664,216
Net investment income 3,861,291
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain on investment transactions 1,906,081
Net realized gain on foreign currency transactions 698,799
Net change in unrealized appreciation of:
Investments 1,115,737
Foreign currency denominated assets and liabilities (1,164,437)
Net gain on investments and foreign currency transactions 2,556,180
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 6,417,471
See notes to financial statements.
5
STATEMENT OF CHANGES IN NET ASSETS ACM GOVERNMENT OPPORTUNITY FUND
_______________________________________________________________________________
SIX MONTHS ENDED YEAR ENDED
JAN. 31, 1998 JULY 31,
(UNAUDITED) 1997
-------------- -------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income $ 3,861,291 $ 7,592,291
Net realized gain on investments and
foreign currency transactions 2,604,880 8,956,209
Net change in unrealized appreciation of
investments and foreign currency
denominated assets and liabilities (48,700) (1,346,581)
Net increase in net assets from operations 6,417,471 15,201,919
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (4,117,642) (7,843,128)
Total increase 2,299,829 7,358,791
NET ASSETS
Beginning of year 111,905,190 104,546,399
End of period (including undistributed
net investment income of $262,273 and
$518,624, respectively) $114,205,019 $111,905,190
See notes to financial statements.
6
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1998 (UNAUDITED) ACM GOVERNMENT OPPORTUNITY FUND
_______________________________________________________________________________
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 financial statements have been prepared in conformity
with generally accepted accounting principles which require management to make
certain estimates and assumptions that affect the reported amounts of assets
and liabilities in the financial statements and amounts of income and expenses
during the reporting period. Actual results could differ from those estimates.
The following is a summary of significant accounting policies followed by the
Fund.
1. SECURITY VALUATION
Portfolio securities traded on a national securities exchange or on a foreign
securities exchange (other than foreign securities exchanges whose operations
are similar to those of the United States over-the-counter market) are
generally valued at the last reported sale price or, if there was no sale on
such day, the last bid price quoted on such day. If no bid prices are quoted,
then the security is valued at the mean of the bid and asked prices as obtained
on that day from one or more dealers regularly making a market in that
security. Securities traded on the over-the-counter market, and securities
listed on a foreign securities market whose operations are similar to the
United States over-the-counter market and securities listed on a national
securities exchange whose primary market is believed to be over-the-counter are
valued at the mean of the closing bid and asked price provided by two or more
dealers regularly making a market in such securities. U.S. government
securities and other debt securities which mature in 60 days or less are valued
at amortized cost unless this method does not represent fair value. Securities
for which market quotations are not readily available are valued at fair value
as determined in good faith by, or in accordance with procedures approved by,
the Board of Directors. Fixed income securities may be valued on the basis of
prices provided by a pricing service when such prices are believed to reflect
the fair value of such securities. Listed put and call options purchased by the
Fund are valued at the last sale price. If there has been no sale on that day,
such securities will be valued at the closing bid prices on that day.
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 any, to
shareholders. Therefore, no provision for federal income or excise taxes is
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 INVESTMENT TRANSACTIONS
Interest income is accrued daily. Dividend income is recorded on the
ex-dividend date. Investment transactions are accounted for on a trade date
basis. Investment gains and losses are determined on the identified cost basis.
The Fund accretes discounts as adjustments to interest income.
4. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the
mean of the quoted bid and asked price of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated into U.S.
dollars at the 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 earned or accrued.
Net realized gain or loss on foreign currency transactions represents foreign
exchange gains and losses from sales and maturities of foreign investments,
closed forward exchange currency contracts, holdings of foreign currencies,
exchange gains and losses realized between the trade and settlement dates on
foreign investment transactions and the difference between the amounts of
interest and foreign withholding taxes recorded on the Fund's books and the
U.S. dollar equivalent of the amounts actually received or paid. Net currency
gains and losses from valuing foreign currency denominated assets and
liabilities at year end exchange rates are reflected as a component of net
unrealized appreciation on investments and foreign currency denominated assets
and liabilities.
7
NOTES TO FINANCIAL STATEMENTS (CONT.) ACM GOVERNMENT OPPORTUNITY FUND
_______________________________________________________________________________
5. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date. Income and capital gains distributions are determined in accordance with
federal tax regulations and may differ from those determined in accordance with
generally accepted accounting principles. To the extent these differences are
permanent, such amounts are reclassified within the capital accounts based on
their federal tax basis treatment; temporary differences, do not require such
reclassification.
NOTE B: ADVISORY, ADMINISTRATIVE FEES AND OTHER AFFILIATED TRANSACTIONS
Under the terms of an Investment Advisory Agreement, the Fund pays Alliance
Capital Management L.P. (the "Adviser") a monthly fee equal to .0625 of 1% of
the Fund's average weekly net assets during the month (equal to an annual fee
of approximately .75 of 1% of the average weekly net assets).
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 related to servicing phone inquiries for the Fund. The Fund reimbursed
AFS $605 during the six months ended January 31, 1998.
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.
NOTE C: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments
and U.S. government securities) aggregated $53,247,043 and $53,256,182,
respectively, for the six months ended January 31, 1998. There were purchases
of $136,786,230 and sales of $137,402,700 of U.S. government and government
agency obligations for the six months ended January 31, 1998.
At January 31, 1998, the cost of investments for federal income tax purposes
was the same as the cost for financial reporting purposes. Accordingly, gross
unrealized appreciation of investments was $3,935,761 and gross unrealized
depreciation of investments was $638,247 resulting in net unrealized
appreciation of $3,297,514 (excluding foreign currency transactions).
For federal income tax purposes, the Fund had a capital loss carryforward at
July 31, 1997 of $2,071,084, which if not utilized will expire in 2004.
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.
Fluctuations in the value of open 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 liquid assets in a separate
account of the Fund having a value at least 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.
8
ACM GOVERNMENT OPPORTUNITY FUND
_______________________________________________________________________________
At January 31, 1998, the Fund had outstanding forward exchange currency
contracts as follows:
CONTRACT VALUE ON U.S. $ UNREALIZED
AMOUNT ORIGINATION CURRENT APPRECIATION
(000) DATE VALUE (DEPRECIATION)
-------- ----------- ---------- --------------
FORWARD EXCHANGE CURRENCY
BUY CONTRACTS
- -------------------------
New Zealand Dollars,
settling 2/13/98 6,034 $3,540,064 $3,526,274 $ (13,790)
Swedish Krona,
settling 2/05/98 26,000 3,350,515 3,206,937 (143,578)
FORWARD EXCHANGE CURRENCY
SALE CONTRACTS
- -------------------------
Australian Dollars,
settling 2/13/98 7,183 4,571,438 4,927,665 (356,227)
German Deutsche Marks,
settling 2/18/98-4/21/98 12,834 7,175,778 7,038,160 137,618
New Zealand Dollars,
settling 2/13/98-2/23/98 15,747 8,917,053 9,201,494 (284,441)
Swedish Krona,
settling 2/05/98-4/21/98 77,892 9,833,555 9,619,005 214,550
$ (445,868)
2. OPTIONS TRANSACTIONS
For hedging purposes, the Fund purchases and writes (sells) put and call
options on 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 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 received is less that the
amount paid for the closing purchase transaction, as a realized loss. If a call
option is exercised, the premium received is added to the proceeds from the
sale of the underlying currency in determining whether the Fund has a realized
a gain or loss. If a put option is exercised, the premium received reduces the
cost basis of the security or currency purchased by the Fund. The risk involved
in writing an option is that, if the option were exercised, the underlying
security would then be purchased or sold by the Fund at a disadvantageous price.
There were no transactions in options written for the six months ended January
31, 1998.
9
NOTES TO FINANCIAL STATEMENTS (CONT.) ACM GOVERNMENT OPPORTUNITY FUND
_______________________________________________________________________________
NOTE D: CAPITAL STOCK
There are 300,000,000 shares of $.01 par value common stock authorized, of
which 13,071,872 shares were outstanding at January 31, 1998. During the six
months ended January 31, 1998 and the year ended July 31, 1997, the Fund did
not issue shares in connection with the dividend reinvestment plan.
10
FINANCIAL HIGHLIGHTS ACM GOVERNMENT OPPORTUNITY FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF COMMON STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JANUARY 31, YEAR ENDED JULY 31,
1998 -------------------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
------------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.56 $ 8.00 $ 7.92 $ 8.12 $ 9.92 $ 9.66
INCOME FROM INVESTMENT OPERATIONS
Net investment income .30 .58 .53 .59 .68 .79
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions .20 .58 .13 -0- (.89) .68
Net increase (decrease) in net asset
value from operations .50 1.16 .66 .59 (.21) 1.47
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.32) (.60) (.56) (.48) (.68) (.80)
Distributions from net realized gains -0- -0- -0- -0- (.61) (.41)
Tax return of capital distribution -0- -0- (.02) (.31) (.30) -0-
Total dividends and distributions (.32) (.60) (.58) (.79) (1.59) (1.21)
Net asset value, end of period $ 8.74 $ 8.56 $ 8.00 $ 7.92 $ 8.12 $ 9.92
Market value, end of period $ 8.1875 $ 7.875 $ 7.00 $ 7.50 $ 8.125 $ 9.875
TOTAL RETURN
Total investment return based on: (a)
Market value 8.06% 21.95% 1.08% 2.85% (2.66)% 14.94%
Net asset value 6.11% 15.99% 9.40% 8.67% (3.16)% 16.30%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $114,205 $111,905 $104,546 $103,558 $105,830 $122,500
Ratio of expenses to average net assets 1.18%(b) 1.27% 1.28% 1.18% 1.20% 1.19%
Ratio of net investment income to
average net assets 6.85%(b) 7.00% 6.42% 7.62% 7.50% 8.27%
Portfolio turnover rate 151% 407% 375% 228% 297% 588%
Average commission rate paid (c) -- $.0501 -- -- -- --
</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.
(c) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on which
commissions are charged.
11
ACM GOVERNMENT OPPORTUNITY FUND
_______________________________________________________________________________
BOARD OF DIRECTORS
JOHN D. CARIFA, CHAIRMAN AND PRESIDENT
RUTH BLOCK (1)
DAVID H. DIEVLER (1)
JOHN H. DOBKIN (1)
WILLIAM H. FOULK, JR. (1)
DR. JAMES M. HESTER (1)
CLIFFORD L. MICHEL (1)
ROBERT C. WHITE (1)
DONALD J. ROBINSON (1)
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
DANIEL V. PANKER, VICE PRESIDENT
CHRISTIAN G. WILSON, 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.
(formerly The Shareholder Services Group, Inc.)
53 State Street
Boston, MA 02109
LEGAL COUNSEL
SEWARD & KISSEL
One Battery Park Plaza
New York, NY 10004
CUSTODIAN
BANK OF NEW YORK
48 Wall Street
New York, New York 10286
INDEPENDENT AUDITORS
ERNST & YOUNG LLP
787 Seventh Avenue
New York, NY 10019
(1) Member of the Audit Committee.
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that the Fund may purchase at market prices from time to
time shares of its Common Stock in the open market.
This report, including the financial statements herein, is transmitted to
the shareholders of ACM Government Opportunity Fund for their information. The
financial information included herein is taken from the records of the Fund.
This is not a prospectus, circular or representation intended for use in the
purchase of shares of the Fund or any securities mentioned in this report.
12
ACM GOVERNMENT OPPORTUNITY FUND
Summary of General Information
THE FUND
ACM Government Opportunity Fund 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 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, each Sunday in THE NEW
YORK TIMES and each Saturday in BARRON'S and other newspapers in a table called
"Closed-End Bond Funds."
DIVIDEND REINVESTMENT PLAN
A Dividend Reinvestment Plan provides automatic reinvestment of dividends and
capital gains in additional Fund Shares.
For questions concerning shareholder account information or if you would like a
brochure describing the Dividend Reinvestment Plan, please call First Data
Investor Services Group, Inc. at 1-800-331-1710.
ACM GOVERNMENT OPPORTUNITY FUND
1345 Avenue of the Americas
New York, New York 10105
ALLIANCE CAPITAL
R THESE REGISTERED SERVICE MARKS USED UNDER LICENSE FROM THE OWNER, ALLIANCE
CAPITAL MANAGEMENT L.P.
OPPSR
